<PAGE>
As filed with the Securities and Exchange Commission on May 7, 1997
Registration No. 333-23533
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
PRE-EFFECTIVE AMENDMENT
NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
COMMUNITY FIRST BANKING COMPANY
-----------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
GEORGIA 6711 58-2309605
- ---------------------------- ------------------ ------------------------
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Identification No.)
organization) Classification Code
Number)
110 Dixie Street
Carrollton, Georgia 30117
(770) 834-1071
----------------------------
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
GARY D. DORMINEY
110 Dixie Street
Carrollton, Georgia 30117
(770) 834-1071
__________________
(Name, address, including zip code, and
telephone number, including area code, of
agent for service)
Copies to:
WALTER G. MOELING, IV, ESQ. RANDALL A. UNDERWOOD
POWELL, GOLDSTEIN, FRAZER & MURPHY BROOKS, PIERCE, McLENDON,
191 Peachtree Street, N.E. HUMPHREY & LEONARD, LLP
Atlanta, Georgia 30303 2000 Renaissance Plaza
(404) 572-6600 230 North Elm Street
Greensboro, North Carolina 27401
(910) 373-8850
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Title of Each Class of Amount to be Proposed Maximum Proposed Maximum Amount of Registration
Securities to be Registered /(1)/ Offering Price per Aggregate Offering Fee(3)
Registered Share/(2)/ Price/(2)/
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 2,413,562 Shares $20.00 $48,271,240 $14,628
par value
======================================================================================================================
</TABLE>
/(1)/ Includes 314,812 shares that may be issued in the event of an over-
subscription. See "The Conversion and Reorganization-Stock Pricing and
Number of Shares to be Issued."
/(2)/ Estimated solely for the purpose of determining the registration fee.
/(3)/ Previously paid.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
COMMUNITY FIRST BANKING COMPANY
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
Registration Statement Item Number
and Heading Caption in Prospectus
----------- ---------------------
<S> <C>
1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus..... Cover Page; Cross-Reference Sheet;
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus.... Inside Front Cover Page of
Prospectus; Outside Back Cover Page
of Prospectus
3. Summary Information, Risk
Factors and Ratio of Earnings
to Fixed Charges............. Summary; Risk Factors
4. Use of Proceeds................ Use of Proceeds
5. Determination of Offering
Price........................ The Conversion and Reorganization
6. Dilution....................... Not Applicable
7. Selling Security Holders....... Not Applicable
8. Plan of Distribution........... Outside Front Cover Page of
Prospectus; The Conversion and
Reorganization
9. Description of the Securities.. Description of Capital Stock
10. Interests of Named Experts and
Counsel...................... Legal Matters; Experts
11. Information with Respect to the
Registrant................... Prospectus Summary; Risk Factors;
Dividend Policy; Capitalization;
Selected Financial and Other Data;
Community First Banking Company;
Carrollton Federal Bank; CF Mutual
Holdings; Market for Common Stock;
Regulatory Capital; Pro Forma Data;
Management's Discussion and Analysis
of Financial Condition and Results of
Operations; Business of Carrollton
Federal Bank; Regulation; Management
of the Company; Management of the
Savings Bank; Certain Restrictions on
Acquisition of the Company;
Consolidated Financial Statements
12. Disclosure of Commission Position
on Indemnification for
Securities Act Liabilities.... Part II of the Registration Statement
</TABLE>
<PAGE>
PROSPECTUS AND PROXY STATEMENT
COMMUNITY FIRST BANKING COMPANY
(PROPOSED HOLDING COMPANY FOR
CARROLLTON FEDERAL BANK, FSB)
UP TO 2,098,750 SHARES OF COMMON STOCK
(ESTIMATED MAXIMUM)
CF Mutual Holdings, which owns Carrollton Federal Bank, FSB, is
converting from the mutual form to the stock form of organization. As part of
the Conversion and Reorganization, Carrollton Federal Bank, FSB, will become a
wholly owned subsidiary of Community First Banking Company, which was formed in
March 1997. Upon consummation of the Conversion and Reorganization, Community
First Banking Company will own all of the shares of Carrollton Federal Bank,
FSB. The Common Stock of Community First Banking Company is being offered to the
public in the offerings described in this Prospectus and Proxy Statement in
accordance with a Plan of Conversion and Agreement and Plan of Reorganization
that must be approved by the Office of Thrift Supervision and by a majority of
the votes eligible to be cast by members of CF Mutual Holdings. The offerings
will not go forward if CF Mutual Holdings does not receive these approvals or if
Community First Banking Company does not sell at least the minimum number of
shares described below.
SPECIAL MEETING OF MEMBERS
A Special Meeting of Members of CF Mutual Holdings will be held at the
main office of Carrollton Federal Bank, FSB, located at 110 Dixie Street,
Carrollton, Georgia on June ___, 1997 at __:__ ___m. Eastern Time for the
purpose of considering and voting upon the Plan of Conversion which was
unanimously adopted by the Boards of Directors of CF Mutual Holdings and
Carrollton Federal Bank, FSB, and which, if approved by a majority of the total
votes eligible to be cast by the members, will permit CF Mutual Holdings to
convert from a mutual holding company to a stock form of holding company. The
Conversion is contingent upon the Members' approval of the Plan of Conversion at
the Members' Meeting or any adjournment thereof. This document serves as the
Proxy Statement of CF Mutual Holdings with respect to the Members' Meeting, as
well as the Prospectus of Community First Banking Company with respect to the
offerings of Common Stock described herein.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARDS OF DIRECTORS OF CARROLLTON FEDERAL BANK, FSB, AND CF MUTUAL
HOLDINGS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE PLAN OF
CONVERSION. VOTING IN FAVOR OF THE PLAN OF CONVERSION WILL NOT OBLIGATE ANY
PERSON TO PURCHASE STOCK.
OFFERING TERMS
An independent appraiser has estimated the pro forma market value of
Community First Banking Company and Carrollton Federal Bank to be between
$31,025,000 and $41,975,000. As a result of this valuation, between 1,551,250
and 2,098,750 shares are being offered. Subject to Office of Thrift Supervision
approval, up to 2,413,562 shares, which includes an additional 314,812 shares
(15% more than the maximum number of shares) may be offered. Based on these
estimates, Community First Banking Company is offering shares of Common Stock on
the following terms:
<TABLE>
<CAPTION>
<S> <C> <C>
. Price Per Share: $20
. Number of Shares 1,551,250 to 2,098,750
Minimum/Maximum
. Underwriting Fees, Commissions $1,116,890 ($0.72 per share)
and Expenses to
Minimum/Maximum $1,283,111 ($0.61 per share)
. Net Proceeds to Community First $29,908,110 ($19.28 per share)
Banking Company to
. Minimum/Maximum $40,691,889 ($19.39 per share)
</TABLE>
PLEASE REFER TO RISK FACTORS BEGINNING ON PAGE __ OF THIS DOCUMENT.
THESE SECURITIES ARE NOT DEPOSITS OR ACCOUNTS AND ARE NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY GOVERNMENT AGENCY.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION, THE OFFICE OF
THRIFT SUPERVISION, OR ANY OTHER STATE SECURITIES REGULATORS
HAVE APPROVED THE SALE OF THESE SECURITIES OR DETERMINED
THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRE-
SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Company has applied to have its Common Stock quoted on the Nasdaq
National Market under the symbol "CFBC." See "Market for Common Stock."
For information on how to subscribe, call the Stock Information Center
at (770) 834-7355.
TRIDENT SECURITIES, INC.
, 1997
<PAGE>
[MAP]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary............................................................ 0
Selected Financial and Other Data.................................. 0
Risk Factors....................................................... 0
Community First Banking Company.................................... 0
Carrollton Federal Bank............................................ 0
CF Mutual Holdings................................................. 0
Proposed Management................................................ 0
Use of Proceeds.................................................... 0
Dividend Policy.................................................... 0
Market for the Common Stock........................................ 0
Capitalization..................................................... 0
Regulatory Capital................................................. 0
Pro Forma Data..................................................... 0
Management's Discussion and Analysis of
Financial Condition and Results of Operations..................... 0
Business........................................................... 0
Taxation........................................................... 0
Regulation......................................................... 0
Management of the Company.......................................... 0
Management of the Savings Bank..................................... 0
The Conversion and Reorganization.................................. 0
Certain Restrictions on Acquisition of the Company................. 0
Description of Capital Stock....................................... 0
Experts............................................................ 0
Legal Matters...................................................... 0
Additional Information............................................. 0
Glossary........................................................... 0
Index to Consolidated Financial Statements......................... 0
</TABLE>
This document contains forward-looking statements which involve risks
and uncertainties. The Company's actual results may differ significantly from
the results discussed in the forward-looking statements. Factors that might
cause such a difference include, but are not limited to, those discussed in
"Risk Factors" beginning on page __ of this document.
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<PAGE>
SUMMARY
This summary highlights selected information from this document and may
not contain all the information that is important to you. To understand the
Offerings fully, you should read carefully this entire document, including the
consolidated financial statements and the notes to the consolidated financial
statements of CF Mutual Holdings. References to the "Savings Bank" refer to
Carrollton Federal Bank, FSB. References in this document to the "Company" refer
to Community First Banking Company.
Several abbreviated and defined terms appear in this document. To the
extent the abbreviation or definition does not appear with the term, please
refer to the Glossary that begins on page A-1 at the end of this document.
THE COMPANY
Community First Banking Company
110 Dixie Street
Carrollton, Georgia 30117
(770) 834-7355
The Company is not an operating company and has not engaged in any
significant business to date. It was formed in March 1997 as a Georgia stock
corporation to be the holding company for Carrollton Federal Bank after the
Conversion and Reorganization. See "Community First Banking Company."
THE DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY AND THE SAVINGS BANK
BELIEVE THAT IT IS IN THE BEST INTERESTS OF THE SAVINGS BANK, THE COMPANY AND
THE COMPANY'S SHAREHOLDERS FOR THE COMPANY AND THE SAVINGS BANK TO REMAIN
INDEPENDENT, WITH THE OBJECTIVE OF LONG-TERM ENHANCEMENT OF SHAREHOLDER VALUE.
ACCORDINGLY, AN INVESTMENT IN THE COMMON STOCK OF THE COMPANY MAY NOT BE
SUITABLE FOR INVESTORS WHO ARE SEEKING SHORT-TERM RETURNS THROUGH A SALE OF THE
INSTITUTION.
THE SAVINGS BANK
Carrollton Federal Bank, FSB
110 Dixie Street
Carrollton, Georgia 30117
(770) 834-7355
The Savings Bank is a federally chartered stock savings bank organized
on August 1, 1994 and operates in Carrollton, Georgia and neighboring
communities in western Georgia. Prior to that date, the predecessor of the
Savings Bank had operated as a mutual savings bank since 1929. The Savings Bank
conducts business through 12 branch offices in Carroll, Douglas, Coweta,
Fayette, Haralson, Heard, Henry and Paulding Counties in Georgia. At December
31, 1996, the Savings
<PAGE>
Bank had $351 million of total assets, $325 million of total liabilities,
including $308 million of deposits, and $26 million of equity or 7.4% of assets.
See "Carrollton Federal Bank."
THE MUTUAL HOLDING COMPANY
CF Mutual Holdings
110 Dixie Street
Carrollton, Georgia 30117
(770) 834-7355
The Mutual Holding Company is a federally chartered mutual holding
company formed on August 1, 1994. The Mutual Holding Company was not formed to
raise capital, but to provide a corporate structure that would facilitate
entering new lines of business and possible acquisitions of other financial
institutions. Its primary asset is 100 shares of Savings Bank Common Stock,
which represents all of the outstanding shares of such stock. As part of the
Conversion and Reorganization, the Mutual Holding Company will merge into the
Savings Bank and the Mutual Holding Company will cease to exist. All of the
assets of the Mutual Holding Company will pass to the Company by virtue of the
Conversion and Reorganization. See "CF Mutual Holdings."
INFORMATION RELATING TO VOTING AT THE MEMBERS' MEETING
The Board of Directors of the Mutual Holding Company has fixed the close
of business on [____________], 1997 AS THE RECORD DATE (THE "VOTING RECORD
DATE") FOR THE DETERMINATION OF MEMBERS ENTITLED TO NOTICE OF AND TO VOTE AT THE
MEMBERS' MEETING. ALL HOLDERS OF THE SAVINGS BANK'S DEPOSIT OR OTHER AUTHORIZED
ACCOUNTS AND THE SAVINGS BANK'S BORROWERS AS OF JULY 19, 1990 WHOSE BORROWINGS
REMAINED IN EXISTENCE AS OF ___________, 1997 ARE MEMBERS OF THE MUTUAL HOLDING
COMPANY UNDER ITS CURRENT FEDERAL MUTUAL CHARTER. ALL MEMBERS OF RECORD AS OF
THE CLOSE OF BUSINESS ON THE VOTING RECORD DATE WHO CONTINUE AS SUCH UNTIL THE
DATE OF THE MEMBERS' MEETING WILL BE ENTITLED TO VOTE AT THE MEMBERS' MEETING OR
ANY ADJOURNMENT THEREOF.
Each depositor member will be entitled at the Members' Meeting to cast
one vote for each $100, or fraction thereof, of the aggregate withdrawal value
of all of his or her savings accounts in the Savings Bank as of the Voting
Record Date. Borrower members will be entitled to one vote at the Members'
Meeting in addition to any votes such borrower member may have as a result of
being a depositor in the Savings Bank. No member may cast more than 1,000 votes.
Approval of the Plan of Conversion to be presented at the Members'
Meeting will require the affirmative vote of at least a majority of the total
outstanding votes of the Mutual Holding Company's members eligible to be cast at
the Members' Meeting. As of the Voting Record Date for the Members' Meeting,
there were approximately [________] VOTES ELIGIBLE TO BE CAST, OF WHICH
[________] VOTES CONSTITUTE A MAJORITY.
-2-
<PAGE>
Members may vote at the Members' Meeting or any adjournment thereof in
person or by proxy. All properly executed proxies received by the Mutual Holding
Company will be voted in accordance with the instructions indicated thereon by
the members giving such proxies. If no contrary instructions are given, such
proxies will be voted in favor of the Plan of Conversion described herein. If
any other matters are properly presented before the Members' Meeting and may
properly be voted upon, the proxies will be voted on such matters by the proxy
holders named therein as directed by the Board of Directors of the Mutual
Holding Company. Valid, previously executed general proxies, which typically are
obtained from members when they open their accounts at the Savings Bank, will
not be used to vote for approval of the Plan of Conversion, even if the
respective members do not execute another proxy or attend the Members' Meeting
and vote in person. Any member giving a proxy will have the right to revoke his
or her proxy at any time before it is voted by delivering written notice or a
duly executed proxy bearing a later date to the Secretary of the Mutual Holding
Company, provided that such written notice is received by the Secretary prior to
the Members' Meeting or any adjournment thereof, or by attending the Members'
Meeting and voting in person.
FAILURE TO RETURN AN EXECUTED PROXY FOR THE MEMBERS' MEETING OR TO
ATTEND THE MEMBERS' MEETING AND VOTE IN PERSON WOULD HAVE THE SAME EFFECT AS
VOTING AGAINST THE CONVERSION AND REORGANIZATION.
Proxies may be solicited by officers, directors or other employees of
the Mutual Holding Company and/or the Savings Bank, in person, by telephone or
through other forms of communication. Such persons will be reimbursed by the
Mutual Holding Company only for their expenses incurred in connection with such
solicitation.
The proxies solicited hereby will be used only at the Members' Meeting
and at any adjournment thereof; they will not be used at any other meeting.
PURPOSES OF THE CONVERSION AND REORGANIZATION
The stock holding company form of organization has several advantages
over the existing mutual holding company form. For example, as a stock holding
company, the Company and the Savings Bank will be able to diversify their
business activities and will have a larger capital base and greater access to
capital markets. In addition, the Conversion and Reorganization will result in a
public trading market for the Company's common stock. It will also be easier for
the Company and the Savings Bank to acquire other financial institutions and
attract and retain qualified management. See "The Conversion and
Reorganization --Purposes of the Conversion and Reorganization."
-3-
<PAGE>
DESCRIPTION OF THE CONVERSION AND REORGANIZATION
Under the Plan of Conversion, (i) the Mutual Holding Company will
convert to an interim federal stock savings bank ("Interim Mutual") and
simultaneously will merge with and into the Savings Bank, (ii) the Mutual
Holding Company will cease to exist and the 100 shares or 100% of the
outstanding Savings Bank Common Stock held by the Mutual Holding Company will be
cancelled, and (iii) a second interim savings bank ("Interim CFB") formed by the
Company solely for such purpose will then merge with and into the Savings Bank.
As a result of the merger of Interim CFB with and into the Savings Bank, the
Savings Bank will become a wholly owned subsidiary of the Company operating
under the name "Carrollton Federal Bank." See "The Conversion and
Reorganization."
EFFECT OF THE CONVERSION AND REORGANIZATION ON DEPOSITORS AND BORROWERS OF THE
SAVINGS BANK
General. Each depositor in the Savings Bank has a pro rata ownership
interest in the Mutual Holding Company's retained earnings based upon the
balance in his or her deposit account. However, this ownership interest is tied
to the depositor's account and has no tangible market value separate from the
account. Any other depositor who opens a deposit account obtains a pro rata
interest in the Mutual Holding Company's retained earnings without any
additional payment beyond the amount of the deposit. A depositor who reduces or
closes his or her account receives a portion or all of his or her account
balance but nothing for his or her ownership interest, which is lost to the
extent that the balance in the account is reduced.
Consequently, depositors normally do not have a way to realize the value
of their ownership, which has realizable value only in the unlikely event that
the Mutual Holding Company is liquidated. In such event, the depositors of
record at that time, as owners, would share pro rata in any residual retained
earnings after other claims are paid.
Upon completion of the Conversion and Reorganization, permanent
nonwithdrawable capital stock will be created to represent the ownership of the
Company. The stock is separate and apart from deposit accounts and is not and
cannot be insured by the FDIC. Transferable certificates will be issued to
evidence ownership of the stock, which will enable the stock to be sold or
traded, if a purchaser is available, with no effect on any account held in the
Savings Bank. Under the Plan of Conversion, all of the capital stock of the
Savings Bank will be acquired by the Company in exchange for a portion of the
net proceeds from the sale of the Common Stock in the Conversion and
Reorganization. The Common Stock will represent an ownership interest in the
Company and will be issued upon completion of the Conversion and Reorganization
to persons who elect to purchase the shares being offered.
Continuity. During the Conversion and Reorganization process, the Saving
Bank's normal business of accepting deposits and making loans will continue
without interruption. The Savings Bank will continue to be subject to regulation
by the OTS and the FDIC, and FDIC insurance of accounts will continue without
interruption. After the Conversion and Reorganization, the Savings
-4-
<PAGE>
Bank will continue to provide services for depositors and borrowers under
current policies and by its present management and staff.
The Board of Directors serving the Mutual Holding Company at the time of
the Conversion and Reorganization will serve as the Company's Board of
Directors. All of the Saving Bank's directors and officers at the time of the
Conversion and Reorganization will retain their positions after the Conversion
and Reorganization.
Voting Rights. Upon completion of the Conversion and Reorganization,
depositor and borrower members as such will have no voting rights in the
Company, the Mutual Holding Company or the Savings Bank. As a result, they will
not be able to elect directors of any of these institutions or control their
affairs. Currently, these rights are accorded to depositors and certain
borrowers of the Savings Bank who are the members of the Mutual Holding Company.
After the Conversion and Reorganization, only the shareholders of the Company
will have voting rights, and the Company will own all of the stock of the
Savings Bank. Each holder of Common Stock will be entitled to one vote per share
on any matter to be considered by the shareholders of the Company, subject to
the provisions of the Company's Articles of Incorporation.
Deposit Accounts and Loans. SAVINGS BANK DEPOSIT ACCOUNTS, THE BALANCES
OF INDIVIDUAL ACCOUNTS AND EXISTING FEDERAL DEPOSIT INSURANCE COVERAGE WILL NOT
BE AFFECTED BY THE CONVERSION AND REORGANIZATION. FURTHERMORE, THE CONVERSION
AND REORGANIZATION WILL NOT AFFECT THE LOAN ACCOUNTS, THE BALANCES OF THESE
ACCOUNTS AND THE OBLIGATIONS OF THE BORROWERS UNDER THEIR INDIVIDUAL CONTRACTUAL
ARRANGEMENTS WITH THE SAVINGS BANK.
Tax Effects. The Company and the Savings Bank have received an opinion
of counsel indicating that the Conversion and Reorganization will qualify as a
tax-free reorganization for federal and Georgia income tax purposes. See "Risk
Factors -- Possible Adverse Income Tax Consequences of Distribution of
Subscription Rights" and "The Conversion and Reorganization -- Effects of the
Conversion and Reorganization" and "-- Tax Aspects."
Effect on Liquidation Rights. Were the Mutual Holding Company to
liquidate, its creditors' claims would be paid first. Thereafter, if any assets
remained, members of the Mutual Holding Company would receive such remaining
assets, pro rata, based upon the deposit balances in their deposit accounts at
the Savings Bank immediately prior to liquidation. In the unlikely event that
the Savings Bank were to liquidate after the Conversion and Reorganization, all
creditors' claims (including those of depositors, to the extent of their deposit
balances) also would be paid first, followed by distribution of the "liquidation
account" to certain depositors, with any assets remaining thereafter distributed
to the Company as the holder of the Savings Bank's capital stock. Under OTS
regulations, a merger, sale of bulk assets or similar transaction with another
insured savings institution would not be considered a liquidation for this
purpose, and in such a transaction, the surviving institution would be required
to assume the liquidation account. See "The Conversion and Reorganization --
Liquidation Rights."
-5-
<PAGE>
THE OFFERINGS
Between 1,551,250 and 2,098,750 shares of Common Stock are being offered
at $20 per share. As a result of changes in market and financial conditions
prior to completion of the Conversion or to fill the order of the Company's ESOP
and subject to OTS approval, the Company may increase the number of shares being
offered to 2,413,562 without further notice to you. See "The Conversion and
Reorganization -- The Offerings" and "-- Stock Pricing and Number of Shares to
be Issued."
STOCK PURCHASES
The shares of Common Stock will be offered on the basis of priorities.
Depositors and certain borrowers of the Savings Bank will receive subscription
rights to purchase shares in the Subscription Offering. The shares will be
offered first in the Subscription Offering and any remaining shares will be
offered to the general public in a Community Offering and a Syndicated Community
Offering. See "The Conversion and Reorganization -- The Offerings."
PURCHASE LIMITATIONS
The minimum purchase is 25 shares (or $500). The maximum purchase is
24,135 shares (or $482,700). For purposes of calculating your maximum purchase,
your purchase will be grouped together with those of persons or entities who are
your "associates" or with whom you are "acting in concert." Also, when more than
one person or entity is an owner of a particular deposit account or obligor of a
particular loan account, the orders of such persons and entities pursuant to
subscription rights related to those accounts may not exceed $482,700 in the
aggregate. See "The Conversion and Reorganization -- Purchase Limitations."
PAYMENT FOR SUBSCRIPTIONS FOR COMMON STOCK
If you subscribe for Common Stock in the Offerings, you may pay for the
Common Stock in cash, by check or money order or by authorizing a withdrawal
from your deposit account with the Savings Bank. You may not pay for your shares
by wire transfer. Your payment will be deposited in a separate account at the
Savings Bank and will earn interest at the Savings Bank's passbook rate of
interest from the date the Savings Bank receives payment until the Conversion
and Reorganization is completed or terminated. If you pay by authorization of
withdrawal from a deposit account, the funds to be withdrawn will continue to
accrue interest at the contractual rate, but will not be available to you until
completion or termination of the Conversion and Reorganization. See "Conversion
and Reorganization -- Procedure for Purchasing Shares in the Offering."
-6-
<PAGE>
SUBSCRIPTION RIGHTS
You may not transfer or agree to transfer your subscription rights under
the Plan or the shares of Common Stock to be issued upon the exercise of your
subscription rights. If you subscribe for Common Stock, you will be required to
certify that your purchase of Common Stock is solely for your own account and
that there is no agreement or understanding regarding the sale or transfer of
the shares. A false certification on the subscription form may constitute a
federal criminal offense. See "The Conversion and Reorganization --Restrictions
on Transfer of Subscription Rights and Shares."
SUBSCRIPTION RIGHTS ARE NON-TRANSFERABLE AND PERSONS FOUND TO BE
ATTEMPTING TO TRANSFER SUBSCRIPTION RIGHTS WILL BE SUBJECT TO THE FORFEITURE OF
SUCH RIGHTS AND POSSIBLE FURTHER SANCTIONS AND PENALTIES IMPOSED BY THE OFFICE
OF THRIFT SUPERVISION. THE COMPANY AND THE SAVINGS BANK WILL REFER TO THE OFFICE
OF THRIFT SUPERVISION ANY SITUATION THAT THEY BELIEVE MAY INVOLVE A TRANSFER OF
SUBSCRIPTION RIGHTS AND WILL NOT HONOR ORDERS THAT THEY SUSPECT TO INVOLVE THE
TRANSFER OF SUCH RIGHTS. IN ADDITION, REFERRALS WILL BE MADE TO THE OFFICE OF
THE UNITED STATES ATTORNEY.
THE OFFERING RANGE AND DETERMINATION OF THE PRICE PER SHARE
The offering range is based on an independent appraisal of the pro forma
market value of the Common Stock by Ferguson & Company, an appraisal firm
experienced in appraisals of savings institutions. Ferguson has estimated that
in its opinion, as of February 27, 1997, the aggregate pro forma market value of
the Company and the Savings Bank ranged between $31,025,000 and $41,975,000
(with a midpoint of $36,500,000). This range is called the "Valuation Price
Range." The pro forma market value of the Company and the Savings Bank gives
effect to the sale of shares in the Offerings. The appraisal was based in part
upon the Savings Bank's financial condition and operations and the effect of the
additional capital to be raised by the sale of Common Stock in the Offerings.
The $20.00 price per share was determined by the Company's Board of Directors.
The independent appraisal will be updated prior to the consummation of the
Conversion. Subject to OTS approval, the Company may increase or decrease the
Valuation Price Range to reflect changes in market and economic conditions or to
fill the order of the ESOP before completion of the Conversion and
Reorganization. This would result in an increase or decrease in the number of
shares of Common Stock sold. The Company will not resolicit subscribers or
permit them to modify or cancel their subscriptions unless the final appraised
valuation is less than $31,025,000 or more than $48,271,250 (15% above the
maximum of the Valuation Price Range). See "The Conversion and Reorganization --
Stock Pricing and Number of Shares to be Issued."
-7-
<PAGE>
TERMINATION OF THE OFFERINGS
The Subscription Offering will terminate at 12:00 noon, Eastern Time, on
[JUNE 17], 1997 (THE "EXPIRATION DATE"), UNLESS IT IS EXTENDED FOR A PERIOD OF
UP TO 45 DAYS OR, WITH OTS APPROVAL, FOR ADDITIONAL PERIODS NOT BEYOND [JUNE
16], 1999. THE COMMUNITY OFFERING AND/OR ANY SYNDICATED COMMUNITY OFFERING MAY
TERMINATE AT ANY TIME AFTER SUCH OFFERINGS BEGIN BUT MUST BE COMPLETED ON OR
BEFORE [AUGUST 1], 1997, UNLESS EXTENDED WITH OTS APPROVAL. ORDERS SUBMITTED ARE
IRREVOCABLE UNTIL THE COMPLETION OF THE CONVERSION AND REORGANIZATION. HOWEVER,
IF THE CONVERSION AND REORGANIZATION IS NOT COMPLETED ON OR BEFORE [AUGUST 1],
1997 OR EXTENDED BEYOND THAT DATE WITH OTS APPROVAL, THE COMPANY WILL PROMPTLY
RETURN ALL FUNDS TO SUBSCRIBERS WITH INTEREST AND WILL CANCEL ALL WITHDRAWAL
AUTHORIZATIONS.
BENEFITS TO MANAGEMENT FROM THE OFFERINGS
Full-time employees of the Savings Bank and the Company will participate
in the Offerings through purchases of Common Stock by the Company's ESOP, which
is a form of retirement plan. Following the completion of the Conversion and
Reorganization, management intends to implement a stock award plan and a stock
option plan. These plans will benefit directors and key employees. However,
under OTS regulations, the stock award plan and stock option plan may not be
adopted until after the Conversion and are subject to shareholder approval.
Certain members of management also have employment agreements with the Savings
Bank. See "Management of the Company -- Benefits" and "-- Employment Agreements"
and "Risk Factors -- Possible Dilutive Effect of Issuance of Additional Shares."
USE OF PROCEEDS RAISED FROM THE SALE OF COMMON STOCK
The Company will contribute up to 50% of the net proceeds from the
Offerings to the Savings Bank. The balance of the funds will be retained as the
Company's initial capitalization, with a portion of those funds being loaned to
the ESOP to fund its purchase of Common Stock in the Offerings. The Company may
use the funds it retains to support future expansion of operations or
diversification into other banking-related businesses and for other business or
investment purposes, although management has no current plans regarding such
activities. Subject to applicable limitations, the Company may also use
available funds to repurchase shares of Common Stock and for the payment of
dividends. Funds contributed to the Savings Bank will be invested initially in
short-to intermediate-term United States government and agency securities. The
Savings Bank will also use the proceeds to support its lending and investment
activities and to enhance its ability to serve the borrowing and other financial
needs of the communities it serves. See "Use of Proceeds."
-8-
<PAGE>
DIVIDENDS
The Company intends initially to pay quarterly cash dividends on the
Common Stock at an annual rate of at least $0.60 per share (3% of the $20.00 per
share purchase price) after the Conversion and Reorganization. However, the
payment of dividends will be subject to the discretion of the Board of Directors
and to the Company's earnings and financial condition. If the Company's Board of
Directors determines in its discretion that the net income, capital and
financial condition of the Company, the general economy or the best interests of
the Company's shareholders do not support the payment of dividends, the Company
may not pay dividends on the Common Stock. A primary source of income to the
Company will be dividends periodically declared and paid by the Savings Bank on
the Savings Bank common stock held by the Company. The declaration and payment
of dividends by the Savings Bank are subject to the Savings Bank's earnings and
financial condition, general economic conditions and federal restrictions.
Accordingly, dividends may not be paid or, if paid, may be discontinued. See
"Dividend Policy" and "Regulation."
MARKET FOR THE COMMON STOCK
The Company has applied to have the Common Stock listed on Nasdaq under
the symbol "CFBC." No assurance can be given that an active and liquid trading
market will develop or be maintained. Investors should have a long-term
investment intent. Persons purchasing shares may not be able to sell their
shares or at a price equal to or above $20.00. See "Market for Common Stock."
IMPORTANT RISKS IN OWNING COMMON STOCK OF THE COMPANY
Before you decide to purchase Common Stock in the Offerings, you should
read the section of this document entitled "Risk Factors."
-9-
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The following tables set forth certain selected consolidated financial
and other data regarding the Mutual Holding Company and the Savings Bank.
The data at December 31, 1996, 1995 and 1994, and for the years then ended,
have been derived from audited consolidated financial statements of CF
Mutual Holdings and subsidiaries, including the audited Consolidated
Financial Statements and related Notes included elsewhere herein. The data
at December 31, 1993 and 1992 and for the years then ended have been
derived from audited financial statements of the Carrollton Federal Bank,
FSB and subsidiary.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
Balance Sheet Data (Year End) (Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Loans, gross 272,435 273,171 283,476 262,154 256,224
Earning assets 326,443 314,706 330,801 292,047 284,759
Assets 352,532 334,477 353,351 312,109 302,100
Deposits 307,756 289,288 289,328 269,624 270,050
Retained Earnings 25,278 25,030 22,083 19,700 17,261
Statement of Earnings Data
Net interest income 13,409 13,217 13,224 13,418 11,694
Provision for loan losses 1,143 250 99 822 1,061
Noninterest income 3,244 3,118 2,137 2,003 1,864
Noninterest expense(3) 15,276 11,764 12,324 11,168 9,733
Deposit insurance premiums(3) 2,340 636 682 717 605
Net earnings 248 2,947 2,384 2,438 1,803
Asset Quality Ratios
Non-performing assets to total assets(1) 1.82% 0.76% 1.16% 1.45% 1.43%
Net charge-offs to average loans 0.31% 0.13% 0.14% 0.06% 0.19%
Allowance for loan losses to total loans 0.95% 0.84% 0.84% 1.02% 0.79%
[Allowance for loan losses to non- 40.50% 89.74% 58.50% 59.29% 46.77%
performing assets(1)]
Key Performance Ratios
Return on average assets 0.07% 0.86% 0.72% 0.78% 0.59%
Return on average capital 0.99% 12.51% 11.41% 13.19% 11.02%
Net interest margin to earning assets 4.21% 4.07% 4.15% 3.97% 3.74%
Average capital to average assets 7.32% 6.85% 6.28% 6.02% 5.38%
Noninterest expense to average assets(3) 4.45% 3.42% 3.70% 3.64% 3.20%
Noninterest expense to average assets(4) 3.95% 3.42% 3.70% 3.64% 3.20%
Efficiency ratio(2)(3) 91.73% 72.01% 80.23% 72.42% 71.78%
Efficiency ratio(2)(4) 81.39% 72.01% 80.23% 72.42% 71.78%
Other Data
Number of full service offices 12 7 8 8 8
</TABLE>
_________________________
(1) Non-performing assets include nonaccrual loans and other real estate owned.
(2) The efficiency ratio is calculated by dividing noninterest expense by the
sum of net interest income plus noninterest income.
(3) Includes one-time SAIF assessment of $1,722,575 in 1996.
(4) Excludes one-time SAIF assessment of $1,722,575 in 1996.
-10-
<PAGE>
RISK FACTORS
The following factors, in addition to those discussed elsewhere in
this Prospectus, should be carefully considered by investors in deciding
whether to purchase the Common Stock offered hereby.
Ability of Executive Officers and Directors to Control Corporate Action
Directors and executive officers of the Company expect to purchase
approximately 12.1% of the shares of Common Stock issued in the Offerings
based upon the midpoint of the Valuation Price Range. See "Proposed
Management Purchases." Directors, executive officers and employees are
also expected to eventually control the voting of 4% of the shares of
Common Stock issued through the MRP. In addition, 8% of the shares issued
in the Offerings are expected to be acquired by the ESOP. Employees will
vote the shares allocated to them under the ESOP. The ESOP trustees will
vote unallocated shares and allocated shares for which no voting
designation has been made. Accordingly, directors and executive officers
as a group, together with the ESOP and the MRP, may have effective control
over as much as 24.1%, at the midpoint of the Valuation Price Range, of the
Common Stock issued and outstanding at the completion of the Conversion and
Reorganization.
In addition, following the Conversion and Reorganization, executive
officers and directors are expected to be granted options under the Option
Plan to purchase an amount of Common Stock equal to 10% of the shares of
Common Stock issued in the Offerings. If all of the options were issued to
directors and executive officers and exercised, and if the Company did not
issue any additional shares of Common Stock, the shares held by directors
and executive officers and their associates as a group, including (i)
shares purchased outright in the Offerings, (ii) all shares issued by the
MRP and ESOP and (iii) shares purchased pursuant to the exercise of stock
options, would give such persons effective control over as much as 34.1%,
at the midpoint of the Valuation Price Range, of the Common Stock issued
and outstanding. Because the Company's Articles of Incorporation will
require the affirmative vote of 80% of the outstanding shares entitled to
vote in order to approve certain mergers, consolidations or other business
combinations without the prior approval of two-thirds of the Company's
directors, the officers and directors and their associates, as a group,
could effectively block such transactions. See "Certain Restrictions on
Acquisition of the Company-Mergers, Consolidations and Sales of Assets."
Intent to Remain Independent; Unsuitability as Short-Term Investment
The directors and executive officers of the Company and the Savings
Bank believe that it is in the best interests of the Savings Bank, the
Company and the Company's shareholders for the Company and the Savings Bank
to remain independent, with the objective of long-term enhancement of
shareholder value. Accordingly, an investment in the Common Stock of the
Company may not be suitable for investors who are seeking short-term
returns through a sale of the institution.
Provisions Discouraging Transactions that Might Benefit Shareholders
The Articles of Incorporation and Bylaws of the Company and the
Savings Bank contain certain restrictions that are intended to discourage
non-negotiated attempts to acquire control of the Company or Savings Bank.
These provisions, among other things, (i) provide that the Board of
Directors be divided into three classes, with the members of each class
being elected for three-year terms and one class being elected annually;
(ii) provide the authority to issue preferred stock with such terms as are
determined by the Board of Directors; (iii) require a supermajority vote
for certain mergers, acquisitions and similar transactions, as well as for
the removal of a director without cause or a change in the number of
directors; and (iv) state that the Company will be governed by the
"business combination" and "fair price" provisions of the Georgia Business
Corporation Act. The Company's Board of Directors believes that these
provisions encourage potential acquirors to negotiate directly with the
Board of Directors. However, these provisions may discourage an attempt to
acquire control of the Company that a majority of the shareholders might
deem to be in their best interests or in which they might receive a premium
over the then market price of their shares. These provisions may also
render difficult the removal of a
-11-
<PAGE>
director and may deter or delay changes in control that have not received
the requisite approval of the Company's Board of Directors. Other facts,
such as voting control of directors and officers and agreements with
employees, may also have an anti-takeover effect. See "- Voting Control of
Officers and Directors" and "Certain Restrictions on Acquisition of the
Company."
Anticipated Low Return on Equity Following Conversion and Reorganization
At December 31, 1996, the Savings Bank's ratio of capital to assets
was 7.42%. On a pro forma basis at December 31, 1996, assuming the sale of
1,551,250, 1,825,000 and 2,098,750 shares of Common Stock in the Offerings
at the minimum, midpoint and maximum of the Valuation Price Range,
respectively, and the distribution of 50% of the net proceeds to the
Savings Bank, the Savings Bank's ratio of capital to assets would have been
10.93%, 11.58%, and 12.22%, respectively. With its higher capital position
as a result of the Conversion and Reorganization, it is doubtful that the
Company will be able to quickly deploy the capital raised in the Offerings
in loans and other assets in a manner consistent with its business plan and
operating philosophies and in a manner which will generate earnings to
support its high capital position. As a result, it is expected that the
Company's return on equity initially will be below industry norms.
Consequently, investors expecting a return on equity which will meet or
exceed industry norms for the foreseeable future should carefully evaluate
and consider the risk that such returns will not be achieved.
Following the Conversion and Reorganization, management may consider
plans to reduce capital if the opportunities to deploy it are not found.
Such plans may include payment of cash dividends and repurchasing shares.
Any such steps would be taken based on conditions as they exist following
the Conversion and Reorganization, and in compliance with applicable
regulations that limit the Company's ability to pay dividends and
repurchase its stock. See "Use of Proceeds," "Dividend Policy" and
"Regulation."
Potential Adverse Effects of Changes in Interest Rates and the Current
Interest Rate Environment
Effect on Net Interest Income. The operations of the Savings Bank are
substantially dependent on its net interest income, which is the difference
between the interest income earned on its interest-earning assets and the
interest expense paid on its interest-bearing liabilities. Like most
savings institutions, the Savings Bank's earnings are affected by changes
in market interest rates and other economic factors beyond its control. If
an institution's interest-earning assets have longer effective maturities
than its interest-bearing liabilities, the yield on the institution's
interest-earning assets generally will adjust more slowly than the cost of
its interest-bearing liabilities and, as a result, the institution's net
interest income generally would be adversely affected by material and
prolonged increases in interest rates and positively affected by comparable
declines in interest rates. In recent years, the assets of many savings
institutions, including the Savings Bank, have been negatively "gapped" --
which means that the dollar amount of interest-bearing liabilities which
reprice within specific time periods, either through maturity or rate
adjustment, exceeds the dollar amount of interest-earning assets which
reprice within such time periods. As a result, the net interest income of
these savings institutions, including the Savings Bank, would be expected
to be negatively impacted by increases in interest rates.
At December 31, 1996, the Mutual Holding Company's cumulative one year
gap as a percentage of total interest-earning assets was negative 13.06%.
The Mutual Holding Company computes its gap position using certain
prepayment, deposit decay and other assumptions used by the OTS in making
gap computations. The results of the gap computations could
be substantially different if other assumptions were used.
-12-
<PAGE>
The Savings Bank has actively sought to reduce the vulnerability of
its operations to changes in interest rates through an analysis of its
interest rate risk undertaken by measuring changes in the market value of
its portfolio equity ("NPV") and annual net interest income ("NII") for
instantaneous and sustained parallel shifts in market interest rates. These
methods have enabled the Savings Bank to maintain its net interest income
at a relatively constant level of $13.4 million in 1996 as compared to
$13.2 million in each of 1995 and 1994. These strategies have also allowed
improvement in the negative gap as a percentage of interest-earning assets
from (53.18%) at December 31, 1994 to (13.06%) at December 31, 1996.
Pursuant to such analysis, the Savings Bank determined that a theoretical
200 basis point increase in market interest rates as of December 31, 1996
would have resulted in a $2.8 million, or 8%, decrease in the Savings
Bank's NPV and a decrease in NII of $672,000, or 9.3%, while a theoretical
200 basis point decrease in market interest rates would have resulted as of
December 31, 1996 in a $301,000, or 1%, decrease in the Savings Bank's NPV
and an increase in NII of $147,000, or 2%. Computations of an interest rate
gap and computations of the prospective effects of hypothetical interest
rate changes on NPV and NII are based on numerous assumptions, including
relative levels of market interest rates, loan prepayments and deposit
decay and should not be relied upon as indicative of actual results.
Furthermore, the computations do not incorporate any actions management may
undertake in response to changes in interest rates.
Effect on Securities. In addition to affecting interest income and
expenses, changes in interest rates also can affect the value of the
Savings Bank's securities portfolio, which is comprised of fixed and
adjustable-rate instruments. Generally, the value of fixed-rate
instruments fluctuates inversely with changes in interest rates. The
Savings Bank has sought to reduce the vulnerability to changes in interest
rates by managing the nature and composition of its securities portfolio.
As a consequence of the fluctuation in interest rates, the carrying value
of the Savings Bank's held-to-maturity securities can differ from the
market value of such securities. See "Business of Carrollton Federal Bank
- Investment Securities."
Prepayment Risk. Changes in interest rates also can affect the
average life of loans and mortgage-backed securities. Historically low
interest rates in recent periods have resulted in increased prepayments of
loans and mortgage-backed securities, as borrowers refinanced to reduce
borrowing costs. Under these circumstances, the Savings Bank is subject to
reinvestment risk to the extent that it is not able to reinvest such
prepayments at rates which are comparable to the rates on the maturing
loans or securities. In periods of declining interest rates, reinvestment
of these prepayment proceeds can result in a decrease in the weighted
average yield of the loan portfolio. In periods of rising interest rates,
the prepayment speed of loans will decrease (fewer refinances and payoffs),
resulting in a lower volume of dollars to be reinvested by the bank into
higher yielding loans and investments. This situation can also lead to a
lower weighted average yield on the portfolio than can be realized in a
more stable rate environment. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Jumbo Certificates. The inflows and outflows of deposits, which are
the Savings Bank's primary source of funds for lending and other investment
purposes, are significantly influenced by general interest rates and money
market conditions. In order to maintain the Savings Bank's desired level
of deposits, it must offer rates of interest and other terms that its
customers judge to be competitive with those offered by other financial
institutions and viable investment alternatives. While all deposits are
more susceptible to outflow during periods of low market interest rates or
when viable investment alternatives offer higher rates of return,
depositors with larger account balances generally review more thoroughly
the available options and are more likely to withdraw their funds as the
gap between expected returns widens and the perceived risks remain
relatively equal.
As of December 31, 1996, the Savings Bank's total deposit liabilities
included 204 certificates of deposit with principal amounts of $100,000 or
more. These accounts amounted to $47.2 million
-13-
<PAGE>
or 15.3% of the Savings Bank's total deposit liabilities as of that date.
While the holders of these accounts are generally from the Savings Bank's
market area and have had relatively large deposits with the Savings Bank
for several years, a decision by a relatively small number of depositors to
move their deposits to investment alternatives would result in a relatively
large outflow of the Savings Bank's total deposits. Under such
circumstances, in order to maintain the requisite level of funds for
lending and other investment purposes, the Savings Bank would either
increase its deposits by seeking funds outside its primary market area or
by offering higher interest rates and more attractive account terms than
its local competitors. The Savings Bank could also borrow funds from the
Federal Home Loan Bank of Atlanta (the "FHLB") or other sources on a short-
or long-term basis. The use of these alternative sources of funds may
result in an increase in the Savings Bank's total cost of funds which would
decrease its net income.
Risk of Loan Losses from Non-Performing Assets
At December 31, 1996, the Savings Bank's non-performing assets, which
consist of non-accrual loans, accruing loans greater than 90 days
delinquent and real estate acquired through foreclosure or by deed in lieu
thereof, amounted to $6.4 million or 1.82% of the Savings Bank's total
assets. This represents an increase of $3.9 million, or 152%, from non-
performing assets at December 31, 1995. One large commercial relationship,
totaling approximately $4.75 million or 1.35% of total assets, accounted
for this increase. See "Business of Carrollton Federal Bank - Lending
Activities - Non-Performing Assets".
Risk of Loan Losses from Increasing Loan to Deposit Ratio
The Savings Bank's loan to deposit ratio was 88% at December 31, 1996,
as compared to 94% at December 31, 1995. The Savings Bank has
significantly increased its consumer and commercial lending in recent years
and intends to continue to increase the amounts of such loans in the near
future as it continues its transition from a traditional thrift institution
to a community retail bank. Such an increase entails additional loan loss
and other risks relating to the higher proportion of loans issued by the
Savings Bank. See "Business of Carrollton Federal Bank - Lending
Activities."
Risk of Loan Losses from Consumer Lending and Indirect Automobile Lending
At December 31, 1996, approximately $6.7 million, or 2.5%, of the
Savings Bank's loan portfolio consisted of indirect automobile loans
originated by the Savings Bank through a network of automobile dealers in
the Local Community. The Savings Bank initiated its indirect automobile
lending program in 1996 and intends to increase such lending in the future.
Originating indirect automobile loans is a relatively new business activity
for the Savings Bank, and its ability to maintain or expand its indirect
automobile lending business will depend upon the volume of sales of new and
used automobiles and demand by consumers for financing in connection
therewith. These factors are beyond the Savings Bank's control. While the
Savings Bank attempts to employ prudent credit standards in originating
indirect automobile loans, there is an inherent risk that a portion of
these loans will default. In such instances, the repossessed automobile
securing the loan may not be sufficient for repayment of the loan and the
Savings Bank may not be able to collect the remaining deficiency. The
Savings Bank does not have recourse to the automobile dealer in the event
of a default of an indirect automobile loan. Loans secured by assets that
depreciate rapidly, such as automobiles, are generally considered to entail
greater risk than residential mortgage loans. There is one significant
relationship of approximately $500,000 in the consumer portfolio that has
defaulted. This customer has been a borrower from the Savings Bank since
1987. The loan is secured by real estate. No additional loss is anticipated
due to this credit. At December 31, 1996, management was aware of no
material problems associated with the indirect lending program.
In light of these risks, the Savings Bank currently maintains
allowances for loan losses with respect to its indirect automobile loans.
There can be no assurance, however, that the allowance for loan losses will
prove sufficient to cover actual losses on indirect automobile loans or
other loans in the future.
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<PAGE>
Risk of Loan Losses from Commercial Lending
As of December 31, 1996, the Savings Bank had $57.8 million in
outstanding commercial loans, representing 21% of its net loan portfolio.
At December 31, 1996, one significant commercial loan, totalling
approximately $4.75 million, was in default. This loan is secured by
commercial real estate. No significant loss is anticipated. Commercial
loans, whether or not secured by real estate, generally entail significant
additional risks as compared to one-to-four family residential mortgage
lending and carry larger loan balances. The increased credit risk is a
result of several factors, including the concentration of principal in a
smaller number of loans and borrowers, the effects of general economic
conditions on income-producing properties and the increased difficulty of
evaluating and monitoring these types of loans. Furthermore, the repayment
of loans secured by commercial real estate is typically dependent upon the
successful operation of the related property. If the cash flow from the
property is reduced, the borrower's ability to repay the loan may be
impaired. Loans secured by commercial real estate may also involve a
greater degree of environmental risk.
Potential Absence of Active, Liquid Market for Common Stock
The Company and the Savings Bank have never issued capital stock,
other than one share of Common Stock issued in connection with the
incorporation of the Company, and the 100 shares of Savings Bank stock
issued to the Mutual Holding Company in connection with the MHC
Reorganization, which shares will be cancelled upon completion of the
Conversion and Reorganization. Consequently, there is no existing market
for the Common Stock. The Company has applied to have its Common Stock
quoted on Nasdaq under the symbol "CFBC" upon completion of the Conversion
and Reorganization and will seek to encourage and assist at least two
market makers to make a market in its Common Stock. Trident has indicated
that it intends to serve as one of the market makers.
Making a market in securities involves maintaining bid and ask
quotations and being able, as principal, to effect transactions in
reasonable quantities at those quoted prices, subject to various laws and
other regulatory requirements. The development of a public trading market
depends upon the existence of willing buyers and sellers, the presence of
which is not within the control of the Company, the Savings Bank, or any
market maker. Accordingly, there can be no assurance that an active and
liquid trading market for the Common Stock will develop or that purchasers
in the Offering will be able to sell their shares at or above the Purchase
Price. The absence of a liquid and active trading market, or the
discontinuance thereof, may have an adverse effect on both the price and
the liquidity of the Common Stock. See "Market for Common Stock."
Possible Dilutive Effect of Issuance of Additional Shares
Various possible and planned issuances of Common Stock could dilute
the interests of prospective stockholders of the Company or existing
stockholders of the Company following consummation of the Conversion and
Reorganization, as noted below.
The number of shares to be sold in the Conversion and Reorganization
may be increased as a result of an increase in the Valuation Price Range of
up to 15% to reflect changes in market and financial conditions prior to
the completion of the Conversion and Reorganization or to allow the ESOP to
purchase up to 8% of the shares offered in the Offerings. In the event that
the Valuation Price Range is so increased, it is expected that the Company
will issue up to 2,413,562 shares of Common Stock at the Purchase Price for
an aggregate price of up to $48,271,250. An increase in the number of
shares will decrease net income per share and equity per share on a pro
forma basis and will increase the Company's consolidated equity and net
income. See "Capitalization" and "Pro Forma Data."
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<PAGE>
The ESOP intends to purchase 8.0% of the Common Stock to be issued in
the Offerings. In the event that there are insufficient shares available
to fill the ESOP's order due to an oversubscription by Eligible Account
Holders, the Company may issue authorized but unissued shares of Common
Stock to the ESOP in an amount sufficient to fill the ESOP's order and/or
the ESOP may purchase such shares in the open market. In the event that
additional shares of Common Stock are issued to the ESOP to fill its order,
stockholders would experience dilution of their ownership interests (by up
to 7.4% at the maximum of the Valuation Price Range, assuming the ESOP
purchased no shares in the Offerings) and pro forma per share equity and
pro forma per share net income would decrease as a result of an increase in
the number of outstanding shares of Common Stock. See "Management of the
Company - Benefits - Employee Stock Ownership Plan" and "The Conversion and
Reorganization - The Offerings - Subscription Offering" and "- Priority 2:
ESOP."
If the Recognition Plan is approved by stockholders at a special or
annual meeting of the Company's stockholders not earlier than six months
after the completion of the Conversion and Reorganization, an amount of
Common Stock equal to 4.0% of the shares of Common Stock issued in the
Offerings will be reserved under the Recognition Plan. Such shares of
Common Stock may be acquired in the open market or from authorized but
unissued shares of Common Stock. In the event that additional shares of
Common Stock are issued to the Recognition Plan, shareholders would
experience dilution of their ownership interests (by 3.8% at the maximum of
the Valuation Price Range) and pro forma per share equity and pro forma per
share net income would decrease as a result of an increase in the number of
outstanding shares of Common Stock. See "Pro Forma Data" and "Management
of the Company - Benefits - Management Recognition Plan and Trust."
If the Company's Option Plan is approved by stockholders at a special
or annual meeting of the Company's stockholders not earlier than six months
after the completion of the Conversion and Reorganization, the Company will
reserve for future issuance pursuant to such plan a number of authorized
shares of Common Stock equal to an aggregate of 10% of the Common Stock
issued in the Offerings (209,875 shares, based on the maximum of the
Valuation Price Range). Alternatively, the Company could purchase shares
in the open market to be distributed when options are exercised. If
additional shares of Common Stock are issued, shareholders would experience
dilution in their ownership interests (by 9.1% at the maximum of the
Valuation Price Range) and, if all options were exercised at a Purchase
Price of $20.00 per share, pro forma per share equity and pro forma per
share net income would decrease as a result of the increase in the number
of shares outstanding. See "Pro Forma Data" and "Management of the Company
- Benefits - 1997 Stock Option Plan."
Potential Adverse Impact of Changes in Regulation and Legislation
The Savings Bank is subject to regulation by the OTS, as its
chartering authority and by the Federal Deposit Insurance Corporation
("FDIC"), which regulates the Savings Bank and insures its deposits to the
fullest extent provided by law. The Company is regulated by the OTS as a
registered savings and loan holding company. The Savings Bank also is
subject to certain regulation by the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") and is a member of the FHLB of
Atlanta, one of the 12 regional banks which comprise the FHLB System. Such
supervision and regulation establish a comprehensive framework of
activities in which an institution may engage, and are intended primarily
for the protection of the SAIF and depositors. This regulatory structure
also provides the OTS and the FDIC with significant discretion in
connection with their supervisory and enforcement activities. Any change
in such regulation, whether by the OTS or the FDIC or as a result of
legislation subsequently enacted by the Congress of the United States,
could have a substantial impact on the Savings Bank and its operations.
See "Regulation."
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<PAGE>
Competition
The Savings Bank faces significant competition both in making loans
and in attracting deposits principally from national, regional and local
commercial banks, savings banks, savings and loan associations, credit
unions, broker-dealers, mortgage banking companies (including FNMA) and
insurance companies. Its most direct competition for deposits has
historically come from commercial banks, savings banks, savings and loan
associations and credit unions. The Savings Bank faces additional
competition for deposits from short-term money market funds, other
corporate and government securities funds and from other financial
institutions such as brokerage firms and insurance companies. In addition,
the Savings Bank may face additional competition from commercial banks
headquartered outside of the State of Georgia as a result of the enactment
of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994,
which becomes fully effective on June 1, 1997. The "Georgia Interstate
Banking Act," which became effective July 1, 1995, provides that (i)
interstate acquisitions by institutions located in Georgia are permitted in
states which also allow national interstate acquisitions, and (ii)
interstate acquisitions of institutions located in Georgia are permitted by
institutions located in states which also allow national interstate
acquisitions; provided, however, that if the board of directors of a
Georgia savings and loan institution adopts a resolution to except such
thrift or holding company from being acquired pursuant to the provisions of
the Georgia Interstate Banking Act and properly files a certified copy of
such resolution with the Georgia Department, such savings and loan
institution or holding company may not be acquired by an institution
located outside of the State of Georgia.
Possible Adverse Income Tax Consequences of the Distribution of
Subscription Rights
The Primary Parties have received an opinion of Ferguson that
subscription rights granted to Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members have no ascertainable value.
However, this opinion is not binding on the Internal Revenue Service
("IRS"). If the subscription rights granted to Eligible Account Holders,
Supplemental Eligible Account Holders and Other Members are deemed to have
an ascertainable value, receipt of such rights likely would be taxable only
to those Eligible Account Holders, Supplemental Eligible Account Holders
and Other Members who exercise the subscription rights (either as capital
gain or ordinary income) in an amount equal to such value. Whether
subscription rights are considered to have ascertainable value is an
inherently factual determination. See "The Conversion and Reorganization -
Effects of the Conversion and Reorganization" and "- Tax Aspects."
COMMUNITY FIRST BANKING COMPANY
The Company was organized in March 1997 at the direction of the Board
of Directors of the Savings Bank for the purpose of holding all of the
capital stock of the Savings Bank and in order to facilitate the Conversion
and Reorganization. The Company has applied for the approval of the OTS to
become a savings institution holding company and as such will be subject to
regulation by the OTS. After completion of the Conversion and
Reorganization, the Company will conduct business initially as a unitary
savings institution holding company. See "Regulation - The Company." Upon
consummation of the Conversion and Reorganization, the Company will have no
significant assets other than all of the outstanding shares of Savings Bank
Common Stock, the note evidencing the Company's loan to the ESOP and the
portion of the net proceeds from the Offerings retained by the Company, and
the Company will have no significant liabilities. See "Use of Proceeds."
Initially, the management of the Company and the Savings Bank will be
substantially similar and the Company will neither own nor lease any
property, but will instead use the premises, equipment and furniture
-17-
<PAGE>
of the Savings Bank. At the present time, the Company does not intend to
employ any persons other than officers who are also officers of the Savings
Bank, and the Company will utilize the support staff of the Savings Bank
from time to time. Additional employees will be hired as appropriate to
the extent the Company expands or changes its business in the future.
Management believes that the stock holding company structure will
provide the Company with additional flexibility to diversify and expand,
should it decide to do so, its business activities through existing or
newly formed subsidiaries, or through acquisitions of or mergers with other
financial institutions and financial services related companies. Although
there are no current arrangements understandings or agreements regarding
any such opportunities or transactions, the Company will be in a position
after the Conversion and Reorganization, subject to regulatory limitations
and the Company's financial position, to take advantage of any such
acquisition and expansion opportunities that may arise. The initial
activities of the Company are anticipated to be funded by the proceeds to
be retained by the Company and earnings thereon, as well as dividends from
the Savings Bank. See "Dividend Policy."
The directors and executive officers of the Company believe that it is
in the best interests of the Company and its shareholders for the Company
to remain an independent company, and the Articles of Incorporation of the
Company contain a number of provisions that may have an anti-takeover
effect. See "Certain Restrictions on Acquisition of the Company."
The Company's principal executive office is located at the home office
of the Savings Bank at 110 Dixie Street, Carrollton, Georgia 30117, and its
telephone number is (770) 834-7355.
CARROLLTON FEDERAL BANK
Carrollton Federal Bank, a federally chartered stock savings bank that
was organized on August 1, 1994 as a subsidiary of the Mutual Holding
Company, operates in Carrollton, Georgia and neighboring communities in
western Georgia. Prior to that date, the Savings Bank's predecessor, the
Mutual Bank, had operated since 1929. The Savings Bank operates 12 branch
offices in Carroll, Douglas, Coweta, Fayette, Haralson, Heard, Henry and
Paulding counties in Georgia (the "Primary Market Area").
The Savings Bank is primarily engaged in attracting deposits from the
general public and using that and other available sources of funds to
originate mortgage loans primarily located in the counties in which it has
offices and to originate commercial and consumer and other secured and
unsecured loans. At December 31, 1996, mortgage loans amounted to $147
million or 54% of the Savings Bank's total net loan portfolio; commercial
loans amounted to $58 million or 21% of the Savings Bank's total net loan
portfolio; and consumer and other installment loans had a total balance of
$68 million or 25% of the Savings Bank's total net loan portfolio. The
Savings Bank also has an investment portfolio consisting of U.S. Government
and agency obligations, obligations of the State of Georgia and its
political subdivisions and FHLB stock. As of December 31, 1996, the
carrying value of securities that management has the intent and ability to
hold until maturity was $7.8 million, the carrying value of securities that
were available for sale was $33.9 million, and the carrying value of other
investments, including FHLB stock, was $2.5 million. In addition, as of
that same date, the Savings Bank's aggregate cash and interest-bearing
deposits in other banks totaled $14.4 million and federal funds sold
balances were $7.4 million.
The Savings Bank is a community-oriented retail banking institution
that emphasizes customer service and convenience. To enhance its earnings,
the Savings Bank has adopted a business strategy
-18-
<PAGE>
that emphasizes retail lending and deposit products and an increased emphasis on
commercial and consumer lending. The Savings Bank is subject to regulation by
the OTS and by the FDIC, which insures the Savings Bank's deposits up to
applicable limits.
The Mutual Holding Company and the Savings Bank have recently formed
three operating units to engage in new businesses: CFB Securities, CFB
Financial and CFB Insurance. CFB Securities offers traditional brokerage
services and products such as mutual funds, stocks and bonds through an
NASD member firm. CFB Financial services the loan needs of consumers
traditionally associated with small loan companies. CFB Insurance has not
commenced operations, but intends to offer various insurance products,
including property and casualty insurance, to existing customers of the
Savings Bank and to the general public.
CF MUTUAL HOLDINGS
CF Mutual Holdings is a federally chartered mutual holding company
chartered on August 1, 1994 in connection with the MHC Reorganization. The
Mutual Holding Company's primary asset is 100 shares of Savings Bank Common
Stock, which represents 100% of the shares of Savings Bank Common Stock
outstanding as of the date of this Prospectus. The Mutual Holding
Company's other assets consist of a deposit account with the Savings Bank
in the amount of $2,044 and a correspondent bank account and federal funds
sold totalling $1,325,290. The Mutual Holding Company also holds 3,500
shares of West Georgia National Bank (WGNB) stock with a cost basis of
$112,000 or $32 per share. This investment represents less than 1% of the
outstanding common stock of WGNB and is carried at cost. As part of the
MHC Reorganization, the Mutual Holding Company will convert to Interim
Mutual and simultaneously merge into the Savings Bank, with the Savings
Bank being the surviving entity.
PROPOSED MANAGEMENT PURCHASES
The following table sets forth, for each of the Company's directors and
executive officers and for all of the directors and executive officers as a
group, their proposed purchases of Common Stock, assuming sufficient shares are
available to satisfy their subscriptions and in each case assuming that
1,825,000 shares of Common Stock are sold, which is the midpoint of the
Valuation Price Range.
<TABLE>
<CAPTION>
Percentage of
Number of Common Stock
Name Amount Shares to be Held
---- ------ --------- -------------
<S> <C> <C> <C>
T. Aubrey Silvey $ 482,700 24,135 1.32%
Gary M. Bullock 200,000 10,000 .55
Dean B. Talley 482,700 24,135 1.32
Anna L. Berry 150,000 7,500 .41
Michael P. Steed 482,700 24,135 1.32
Thomas S. Upchurch 375,000 18,750 1.03
Jerry L. Clayton 482,700 24,135 1.32
Gary D. Dorminey 482,700 24,135 1.32
T. E. Reeve, Jr. 482,700 24,135 1.32
D. Lane Poston 482,700 24,135 1.32
</TABLE>
-19-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Anyce C. Fox 200,000 10,000 .55
C. Lynn Gable 100,000 5,000 .27
---------- ------- -----
Total $4,403,900 220,195 12.07%
========== ======= =====
</TABLE>
In addition, the ESOP intends to purchase 8.0% of the Common Stock
issued in the Conversion for the benefit of officers and employees. Stock
option and stock grants may also be granted in the future to directors,
officers and employees upon the receipt of stockholder approval of the
Company's proposed stock benefit plans. See "Management of the Company -
Benefits" for a description of these plans.
USE OF PROCEEDS
Although the actual net proceeds from the sale of the Common Stock
cannot be determined until the Offerings are completed, it is presently
anticipated that the net proceeds from the sale of the Common Stock will be
between $29.9 million and $40.7 million ($46.9 million assuming an increase
in the Valuation Price Range by 15%). See "Pro Forma Data" as to the
assumptions used to arrive at such amounts.
While the amount of net proceeds received by the Savings Bank will
further strengthen the Savings Bank's capital position, which already exceeds
all regulatory requirements, it should be noted that the Savings Bank is not
converting primarily to raise capital. After the Conversion and Reorganization,
the Savings Bank's tangible capital ratio (at the midpoint of the Valuation
Price Range) on a pro forma basis at December 31, 1996 is expected to be 11.02%
(after receipt by the Savings Bank of 50% of the net Conversion proceeds).
See "Regulatory Capital." As a result, the Savings Bank will continue to be a
highly capitalized institution. The Savings Bank intends to continue after the
Conversion and Reorganization with its strategy of emphasizing capital strength
and continued growth in assets and earnings.
It is expected that the Company's return on equity will initially be
lower than historical levels as the Company and the Savings Bank deploy the
proceeds from the Offerings. While the Board of Directors and management
recognize this challenge will exist for the foreseeable future, the Company
intends to manage capital through controlled growth, the payment of regular cash
dividends and the possible payment of periodic special dividends. Management
does not expect to pay any dividends that would be characterized as a tax-free
return of capital. The Company may repurchase the Common Stock as market and
regulatory limits permit. However, there can be no assurance that any dividends
will be paid on the Common Stock or that the Company will repurchase any shares.
See "Dividend Policy" and "Regulation."
The Company will purchase all of the capital stock of the Savings Bank
to be issued in the Conversion in exchange for up to 50% of the net Conversion
proceeds, and the Company will retain the remaining 50% of the net proceeds or
more, if permitted. The Company intends to use a portion of the net proceeds
that it retains to make a loan directly to the ESOP to enable the ESOP to
purchase up to 8.0% of the Common Stock. Based upon the issuance of 1,551,250
shares or 2,098,750 shares at the minimum and maximum of the Valuation Price
Range, respectively, the loan to the ESOP would be $2.5 million and $3.4
million, respectively. See "Management of the Company -Benefits- Employee Stock
Ownership Plan." The remaining net proceeds retained by the Company will be
initially used to invest primarily in short-term investment securities and
deposits in or loans to the Savings Bank. The portion of the net proceeds
retained by the Company may ultimately be used to support the Savings Bank's
lending activities, to support the future expansion
-20-
<PAGE>
of operations through establishment of additional branch offices or other
customer facilities, acquisitions of other financial institutions, expansion
into other lending markets or diversification into other banking related
businesses (although no such transactions are specifically being considered at
this time), and for other business and investment purposes, including the
payment of regular cash dividends and possible repurchases of the Common Stock
and special dividends. Management of the Company may consider expanding or
diversifying, should such opportunities become available. Funds contributed to
the Savings Bank will be invested initially in short- to intermediate-term
United States government and agency securities. The proceeds also will be used
to support the Savings Bank's lending and investment activities and thereby
enhance the Savings Bank's capabilities to serve the borrowing and other
financial needs of the communities it serves. Neither the Savings Bank nor the
Company has any specific plans, arrangements, or understandings regarding any
acquisitions or diversification of activities at this time, nor have criteria
been established to identify potential candidates for acquisition.
Following the one-year anniversary of the completion of the Conversion
(or sooner if permitted by the OTS), and based upon then existing facts and
circumstances, the Company's Board of Directors may determine to repurchase
shares of Common Stock, subject to any applicable statutory and regulatory
requirements. Such facts and circumstances may include but are not limited to
(i) market and economic factors such as the price at which the stock is trading
in the market, the volume of trading, the attractiveness of other investment
alternatives in terms of the rate of return and risk involved in the investment,
the ability to increase the book value and/or earnings per share of the
remaining outstanding shares, and an improvement in the Company's return on
equity; (ii) the avoidance of dilution to stockholders by not having to issue
additional shares to cover the exercise of stock options or to fund employee
stock benefit plans; and (iii) any other circumstances in which repurchases
would be in the best interests of the Company and its stockholders. Any stock
repurchases will be subject to the determination of the Company's Board of
Directors that both the Company and the Savings Bank will be capitalized in
excess of all applicable regulatory requirements after any such repurchases and
to receipt of necessary regulatory approvals or non-objections from the OTS. The
payment of dividends or repurchase of stock, however, would be prohibited if
equity would be reduced below the amount required for the liquidation account.
See "Dividend Policy," "Regulation - Bank Regulation - Prompt Corrective
Action -Capital Distributions," and "The Conversion and Reorganization - Certain
Restrictions on Purchase or Transfer of Shares after the Conversion and
Reorganization."
The Company will be a unitary savings and loan holding company which,
under existing laws, would generally not be restricted as to the types of
business activities in which it may engage, provided that the Savings Bank
continues to be a qualified thrift lender ("QTL"). See "Regulation - The
Company" for a description of certain regulations applicable to the Company. Any
portion of the net proceeds in excess of the amount retained by the Company will
be added to the Savings Bank's general funds to be used for general corporate
purposes, including increased lending activities and purchases of investment and
mortgage-backed securities.
The net proceeds may vary because total expenses of the Conversion and
Reorganization may be more or less than those estimated. The net proceeds will
also vary if the number of shares to be issued in the Offerings is adjusted to
reflect a change in the estimated pro forma market value of the Savings Bank.
Payments for shares made through withdrawals from existing deposit accounts at
the Savings Bank will not result in the receipt of new funds for investment by
the Savings Bank but will result in a reduction of the Savings Bank's interest
expense and liabilities as funds are transferred from interest-bearing
certificates or other deposit accounts.
-21-
<PAGE>
DIVIDEND POLICY
Upon completion of the Conversion and Reorganization, the Board of
Directors of the Company will have the authority to declare dividends on the
Common Stock, subject to statutory and regulatory requirements. The Board of
Directors of the Company intends to adopt a policy of paying quarterly cash
dividends on the Common Stock following consummation of the Conversion and
Reorganization at an initial annual rate of not less than 3.0% of the $20.00 per
share purchase price of the Common Stock ($0.60 per share) commencing with the
first full quarter following consummation of the Conversion and Reorganization.
Declarations of dividends by the Board of Directors will depend upon a number of
factors including the amount of net proceeds from the Offerings retained by the
Company, investment opportunities available to the Company or the Savings Bank,
capital requirements, regulatory limitations, the Company's and the Savings
Bank's financial condition and results of operations, tax considerations and
general economic conditions. Consequently, there can be no assurance that
dividends will in fact be paid on the Common Stock or that, if paid, such
dividends will not be reduced or eliminated in future periods.
Dividends from the Company will depend, in part, upon receipt of
dividends from the Savings Bank, because the Company initially will have no
source of income other than dividends from the Savings Bank, earnings from the
investment of the portion of the net proceeds from the sale of Common Stock
retained by the Company, and interest payments with respect to the Company's
loan to the ESOP. A regulation of the OTS imposes limitations on "capital
distributions" by savings institutions, including cash dividends, payments by a
savings institution to repurchase or otherwise acquire its stock, payments to
stockholders of another savings institution in a cash-out merger and other
distributions charged against capital. The regulation establishes a three-tiered
system, with the greatest flexibility being afforded to well-capitalized or Tier
1 savings institutions and the least flexibility being afforded to under-
capitalized or Tier 3 savings institutions. As of December 31, 1996, the Savings
Bank was a Tier I savings institution and is expected to continue to so qualify
immediately following the consummation of the Conversion and Reorganization. See
"Regulation -Bank Regulation - Prompt Corrective Action - Capital
Distributions."
Unlike the Savings Bank, the Company is not subject to the
aforementioned regulatory restrictions on the payment of dividends to its
stockholders, although the source of such dividends will be, in part, dependent
upon dividends from the Savings Bank in addition to the net proceeds retained by
the Company and earnings thereon. The Company is subject, however, to the
requirements of Georgia law which state that a corporation may not pay dividends
if, as a result of the dividend, the corporation would be unable to pay its
debts as they come due in the ordinary course of business or its total assets
would be less than the sum of its total liabilities plus liquidation
preferences.
MARKET FOR COMMON STOCK
The Company has never issued capital stock and consequently there is no
established market for its Common Stock. Therefore, there can be no assurance
that an active and liquid trading market for the Common Stock will develop or if
developed, will be maintained. The Company has applied to have the Common Stock
quoted on Nasdaq under the symbol "CFBC." The Common Stock can be quoted on
Nasdaq if, among other qualifications, the Company has at least 400 stockholders
of record and two market makers. Trident has agreed to act as a market maker for
the Common Stock following the Conversion and Reorganization. The Company
believes that it will meet all of these qualifications.
-22-
<PAGE>
The development of a public market having the desirable characteristics
of depth, liquidity and orderliness depends on the existence of willing buyers
and sellers, the presence of which is not within the control of the Company, the
Savings Bank or any market maker. Since there can be no assurance that an active
and liquid trading market for the Common Stock will develop or that, if
developed, it will continue, investors in the Common Stock could have difficulty
disposing of their shares and should not view the Common Stock as a short-term
investment. The absence of an active and liquid trading market for the Common
Stock could affect the price and liquidity of the Common Stock.
-23-
<PAGE>
CAPITALIZATION
The following table presents the consolidated historical capitalization of
the Mutual Holding Company at December 31, 1996, and the pro forma consolidated
capitalization of the Company after giving effect to the Conversion and
Reorganization based upon the sale of the number of shares shown below and the
other assumptions set forth under "Pro Forma Data."
<TABLE>
<CAPTION>
The Company - Pro Forma Consolidated Capitalization
Based Upon Sale at $20.00 Per Share
-----------------------------------------------------------
The Mutual
Holding Company 1,551,250 1,825,000 2,098,750 2,413,562
- Historical Shares Shares Shares Shares(1)
Consolidated (Minimum of (Midpoint of (Maximum of (15% above
Capitalization Range) Range) Range) Maximum of Range)
-----------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Deposits(2) $ 307,756 $ 307,756 $ 307,756 $ 307,756 $ 307,756
Borrowings 18,295 18,295 18,295 18,295 18,295
---------- ---------- ---------- ---------- ----------
Total deposits and borrowings $ 326,051 $ 326,051 $ 326,051 $ 326,051 $ 326,051
========== ========== ========== ========== ==========
Capital stock:
Preferred stock, no par
value per share: authorized
10,000,000 shares; assumed
outstanding - none $ - $ - $ - $ - $ -
Common Stock, $.01 par value
per share, authorized -
10,000,000 shares; shares to
be outstanding - as shown(3) - 16 18 21 24
Paid-in capital(3) - 29,892 35,282 40,671 46,869
Less:
Common stock acquired
by ESOP(4) - (2,482) (2,920) (3,358) (3,862)
Common Stock attributable
to MRP(5) - (1,241) (1,460) (1,679) (1,931)
Retained earnings - substantially
restricted(6) 25,278 25,278 25,278 25,278 25,278
Net unrealized loss on
available for sale securities (20) (20) (20) (20) (20)
---------- ---------- ---------- ---------- ----------
Total capital(6) $ 25,258 $ 51,443 $ 56,178 $ 60,913 $ 66,358
========== ========== ========== ========== ==========
</TABLE>
- ------------------
(1) As adjusted to give effect to an increase in the number of shares that
could occur due to an increase in the Valuation Price Range of up to 15% to
reflect changes in market and financial conditions prior to the completion
of the Conversion and Reorganization or to fill the order of the ESOP.
(2) Withdrawals from deposit accounts for the purchase of Common Stock have
not been reflected. Any such withdrawals will reduce pro forma deposits by
the amount thereof.
(3) The sum of the par value and paid-in capital accounts equals the net
proceeds from the Offerings. No effect has been given to the issuance of
additional shares of Common Stock pursuant to the Company's proposed Option
Plan. The Company intends to adopt the Option Plan and to submit it to
stockholders at a special or annual meeting no earlier than six months
after the completion of the Conversion and Reorganization. If the Option
Plan is approved by stockholders, an amount equal to 10% of the shares of
Common Stock will be reserved for issuance under the
-24-
<PAGE>
plan. See "Pro Forma Data" and "Management of the Company -Benefits - 1997
Stock Option Plan."
(4) Assumes that 8.0% of the Common Stock sold in the Offerings will be
purchased by the ESOP. The Common Stock acquired by the ESOP is reflected
as a reduction of equity. Assumes the funds used to acquire the ESOP
shares will be borrowed from the Company. See Note 1 to the table set
forth under "Pro Forma Data" and "Management of the Company- Employee Stock
Ownership Plan."
(5) Gives effect to the Recognition Plan, which is expected to be adopted
by the Company following the Conversion and Reorganization and presented to
stockholders for approval at a special or annual meeting of stockholders no
earlier than six months following the Conversion and Reorganization. If
the Recognition Plan is approved by stockholders, it is expected to issue a
number of shares of Common Stock equal to 4.0% of the shares of Common
Stock issued in the Offerings or 62,050, 73,000, 83,950 and 96,542 shares
at the minimum, midpoint, maximum and 15% above the maximum of the
Valuation Price Range. The table assumes that stockholder approval has
been obtained and that shares purchased in the open market will be used to
fund the awards. The Common Stock thus issued by the Recognition Plan is
reflected as a reduction in equity. If the shares are purchased at prices
higher or lower than the Purchase Price, such purchases would have a
greater or lesser impact, respectively, on equity. If the Recognition Plan
utilizes authorized but unissued shares from the Company, such issuance
would dilute the voting interests of existing shareholders by approximately
3.8% if 2,098,750 shares are sold in the Offerings. See "Pro Forma Data"
and "Management of the Company-Benefits - 1997 Management Recognition Plan
and Trust."
(6) The retained earnings of the Savings Bank will be substantially
restricted after the Conversion and Reorganization. See "Dividend Policy"
and "The Conversion and Reorganization - Liquidation Rights."
-25-
<PAGE>
REGULATORY CAPITAL
The following table presents the historical regulatory capital of the
Savings Bank, assuming the merger of the Mutual Holding Company into the Savings
Bank after its conversion to Interim Mutual at December 31, 1996, and the pro
forma regulatory capital of the Savings Bank after giving effect to the
Conversion and Reorganization, based upon the sale of the number of shares shown
below and the other assumptions set forth under "Pro Forma Data."
<TABLE>
<CAPTION>
Historical 1,551,250 Shares 1,825,000 Shares 2,098,750 Shares 2,413,562 Shares
Regulatory Capital Sold at $20.00 Sold at $20.00 Sold at $20.00 Sold at $20.00
at December 31, Per Share Per Share Per Share Per Share
1996(1)(2) (min)(1)(2) (mid)(1)(2) (max)(1)(2) (max)(1)(2)
------------------------------------------------------------------------------------------------------
% of % of % of % of % of
Amount Assets Amount Assets Amount Assets Amount Assets Amount Assets
--------- -------- --------- --------- --------- -------- -------- -------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital under GAAP $25,258 7.16% $40,212 10.93% $42,908 11.58% $45,604 12.22% $48,704 12.94%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Tangible capital $22,946 6.54% $37,900 10.36% $40,596 11.02% $43,292 11.67% $46,392 12.40%
Tangible capital
requirement 5,261 1.50% 5,485 1.50% 5,526 1.50% 5,566 1.50% 5,613 1.50%
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess $17,685 5.04% $32,415 8.86% $35,070 9.52% $37,726 10.17% $40,779 10.90%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Core capital $22,946 6.54% $37,900 10.36% $40,596 11.02% $43,292 11.67% $46,392 12.40%
Core capital requirement(3) 10,522 3.00% 10,971 3.00% 11,052 3.00% 11,133 3.00% 11,226 3.00%
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess $12,424 3.54% $26,929 7.36% $29,544 8.02% $32,159 8.67% $35,166 9.40%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Total risk-based
capital(4)(5) $24,976 10.56% $39,930 16.67% $42,626 17.76% $45,322 18.84% $48,422 20.08%
Total risk-based capital
requirement 18,920 8.00% 19,159 8.00% 19,202 8.00% 19,245 8.00% 19,295 8.00%
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess $ 6,056 2.56% $20,771 8.67% $23,424 9.76% $26,077 10.84% $29,127 12.08%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
- -------------------
(1) Under OTS policy, net unrealized gains or losses on debt securities
classified as available for sale are excluded for purposes of computing
regulatory capital.
(2) Tangible and core capital are computed as a percentage of adjusted total
assets of $351 million prior to the consummation of the Offerings and $366
million, $368 million, $371 million and $374 million following the issuance of
1,551,250, 1,825,000, 2,098,750 and 2,413,562 shares in the Conversion and
Reorganization, respectively. Risk-based capital is computed as a percentage of
adjusted risk-weighted assets of $236 million prior to the consummation of the
Offerings and $239 million, $240 million, $241 million and $241 million
following the issuance of 1,551,250, 1,825,000, 2,098,750 and 2,413,562 shares
in the Conversion and Reorganization, respectively.
(3) Does not reflect, in the case of the core capital requirement, the 4.0%
requirement to be met in order for an institution to be "adequately capitalized"
under applicable laws and regulations. See "Regulation - The Savings Bank -
Prompt Corrective Action."
(4) The pro forma risked-based capital ratios (i) reflect the receipt by the
Savings Bank of the assets held by the Mutual Holding Company and of 50% of the
estimated net proceeds from the Offerings, (ii) assume the investment of the net
remaining proceeds received by the Savings Bank in assets which have a risk-
weight of 20% under applicable regulations, as if such net proceeds had been
received and so applied at December 31, 1996.
(5) Includes the $2.0 million general allowance for loan losses that was
included in risk-based capital as of December 31, 1996.
-26-
<PAGE>
PRO FORMA DATA
The actual net proceeds from the sale of the Common Stock cannot be
determined until the Conversion and Reorganization are completed. However, net
proceeds are currently estimated to be between $29.9 million and $40.7 million
(or $46.9 million in the event the Valuation Price Range is increased by 15%)
based upon the following assumptions: (i) all shares of Common Stock will be
sold in the Subscription Offering and Community Offering; (ii) 22.2%, 20.3%,
18.5% and 17.1% of the Common Stock sold in the Subscription Offering at the
minimum, midpoint, maximum and 15% above the maximum of the Valuation Price
Range will be sold to the ESOP, directors and executive officers and their
associates; (iii) fees will be payable to Trident as set forth in "The
Conversion and Reorganization -Marketing Arrangements;" and (iv) expenses,
excluding the marketing fees paid to Trident, will approximate $699,000. Actual
expenses may vary from those estimated, and the fees paid to Trident will vary
from the amounts estimated if the amount of Common Stock sold in the different
categories varies from the amounts assumed above.
Pro forma net income and equity have been calculated for the year ended
December 31, 1996 as if the Common Stock to be issued in the Offerings had been
sold at the beginning of the period and the net proceeds had been invested at
5.5%, which represents the yield on one-year U.S. Government securities at
December 31, 1996 (which, in light of changes in interest rates in recent
periods, are deemed to more accurately reflect pro forma reinvestment rates than
the arithmetic average method). The effect of withdrawals from deposit accounts
for the purchase of Common Stock has not been reflected. An effective combined
federal and state income tax rate of 38% has been assumed for the period,
resulting in after-tax yield of 3.41% for the year ended December 31, 1996.
Historical and pro forma per share amounts have been calculated by dividing
historical and pro forma amounts by the indicated number of shares of Common
Stock, as adjusted to give effect to the shares purchased by the ESOP. See Note
4 to the tables below. No effect has been given in the pro forma equity
calculations for the assumed earnings on the net proceeds. As discussed under
"Use of Proceeds," the Company intends to contribute up to 50% of the net
proceeds from the Offerings to the Savings Bank.
The following pro forma information may not be representative of the
financial effects of the foregoing transactions at the dates on which such
transactions actually occur and should not be taken as indicative of future
results of operations. Pro forma equity represents the difference between the
stated amount of assets and liabilities of the Company computed in accordance
with generally accepted accounting principles ("GAAP"). The pro forma
stockholders' equity is not intended to represent the fair market value of the
Common Stock and may be different than amounts that would be available for
distribution to stockholders in the event of liquidation. No effect has been
given in the tables to (i) the Company's results of operations after the
Conversion and Reorganization or (ii) the market price of the Common Stock after
the Conversion and Reorganization.
The following tables summarize historical data of the Mutual Holding
Company and consolidated pro forma data of the Company at or for the dates and
periods indicated based on assumptions set forth above and in the tables and
should not be used as a basis for projections of the market value of the Common
Stock following the Conversion and Reorganization.
-27-
<PAGE>
<TABLE>
<CAPTION>
At or For the Year Ended December 31, 1996
-------------------------------------------------------
2,413,562
1,551,250 1,825,000 2,098,750 Shares Sold
Shares Sold Shares Sold Shares Sold at $20.00 Per
at $20.00 at $20.00 at $20.00 Share (15%
Per Share Per Share Per Share above
(Minimum of (Midpoint (Maximum of Maximum of
Range) of Range) Range) Range)(7)
----------- ----------- ----------- -------------
(Dollars in Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Gross proceeds $ 31,025 $ 36,500 $ 41,975 $ 48,271
Less offering expenses and commissions (1,117) (1,200) (1,283) (1,379)
---------- ---------- ---------- ----------
Estimated net Conversion proceeds 29,908 35,300 40,692 46,892
Less Common Stock acquired by ESOP(1) (2,482) (2,920) (3,358) (3,862)
Less Common Stock attributable to
MRP(2) (1,241) (1,460) (1,679) (1,931)
---------- ---------- ---------- ----------
Estimated proceeds available for
investment(3) $ 26,185 $ 30,920 $ 35,655 $ 41,099
========== ========== ========== ==========
Net Earnings
Historical $ 248 $ 248 $ 248 $ 248
Pro Forma adjustments:
Net earnings from proceeds 893 1,054 1,216 1,401
ESOP(1) (220A) (259A) (297A) (342A)
MRP(2) (154A) (181A) (208A) (239A)
---------- ---------- ---------- ----------
Pro forma net earnings $ 767 $ 862 $ 959 $ 1,068
========== ========== ========== ==========
Per share(4)
Historical $ 0.17 $ 0.15 $ 0.13 $ 0.11
Pro Forma Adjustments:
Net income from proceeds 0.62 0.62 0.62 0.62
ESOP(1) (0.15A) (0.15A) (0.15A) (0.15A)
MRP(2) (0.11A) (0.11A) (0.11A) (0.11A)
---------- ---------- ---------- ----------
Pro Forma $ 0.53 $ 0.51 $ 0.49 $ 0.47
========== ========== ========== ==========
Number of shares used in calculating
earnings per share 1,444,879 1,699,857 1,954,836 2,248,061
========== ========== ========== ==========
Stockholders' equity (book value)
Historical(5)(6) $ 25,258 $ 25,258 $ 25,258 $ 25,258
Estimated net Conversion proceeds 29,908 35,300 40,692 46,892
Less common stock acquired
by/attributable to:
ESOP(1) (2,482A) (2,920A) (3,358A) (3,862A)
MRP(2) (1,241A) (1,460A) (1,679A) (1,931A)
---------- ---------- ---------- ----------
Pro Forma(6)(8) $ 51,443 $ 56,178 $ 60,913 $ 66,357
========== ========== ========== ==========
Per Share(4)
Historical $ 16.28 $ 13.84 $ 12.03 $ 10.47
Estimated net Conversion proceeds 19.28 19.34 19.39 19.43
Less common stock acquired
by/attributable to:
ESOP(1) (1.60) (1.60) (1.60) (1.60)
MRP(2) (0.80) (0.80) (0.80) (0.80)
---------- ---------- ---------- ----------
Pro Forma(6)(8) $ 33.16 $ 30.78 $ 29.02 $ 27.50
========== ========== ========== ==========
Pro forma price to book
value(3)(5)(6)(8) 60.3% 65.0% 68.9% 72.7%
========== ========== ========== ==========
Pro forma price to earnings (P/E
ratio) 37.7 39.2 40.8 42.6
========== ========== ========== ==========
Number of shares used in calculating
book value per share(4) 1,551,250 1,825,000 2,098,750 2,413,562
========== ========== ========== ==========
</TABLE>
- ------------------------
(1) It is assumed that 8.0% of the shares of Common Stock issued in the
Conversion and Reorganization will be purchased by the ESOP. For purposes of
this table, the funds used to acquire such shares are assumed to have been
borrowed by the ESOP from the Company. The Company intends to make annual
contributions to the ESOP over a seven-year period in an amount at least equal
to the principal and interest requirement (which interest rate shall be at the
prime rate) of the debt. The pro forma net earnings assumes (i) that the ESOP
expense for each respective period is equivalent to the principal payment for
the respective period and was made at the end of each respective period; (ii)
that 17,729, 20,857, 23,986 and 27,584 shares were committed to be released at
the minimum, midpoint, maximum and 15% above the maximum of the Valuation Price
Range,
-28-
<PAGE>
respectively; and (iii) only ESOP shares committed to be released during
the respective period were considered outstanding for purposes of the net
earnings per share calculations.
(2) The adjustment is based upon the assumed share repurchases to fund
awards under the Recognition Plan of 62,050, 73,000, 83,950 and 96,542
shares at the minimum, midpoint maximum and 15% above the maximum of the
Valuation Price Range, assuming that: (i) stockholder approval of the
Recognition Plan has been received; (ii) the shares were repurchased at the
beginning of the period shown through open market purchases at the Purchase
Price: (iii) the amortized expense for the year ended December 31, 1996 was
20% of the amount contributed; and (iv) the effective tax rate applicable
to such employee compensation expense was 38%. If the Recognition Plan
issues authorized but unissued shares instead of repurchasing shares, the
voting interests of existing stockholders would be diluted by approximately
3.8% and pro forma net earnings per share for the year ended December 31,
1996 would be $0.53, $0.51, $0.50 and $0.48, and pro forma stockholders'
equity per share at December 31, 1996 would be $32.66, $30.37, $28.68 and
$27.21, in each case at the minimum, midpoint, maximum and 15% above the
maximum of the Valuation Price Range, respectively. See "Management of the
Company - Benefits - Management Recognition Plan and Trust."
(3) Estimated proceeds available for investment consist of the estimated
net proceeds from the Offerings less (i) the proceeds attributable to the
purchase by the ESOP and (ii) the value of the shares to be issued by the
Recognition Plan, subject to shareholder approval, after the Conversion and
Reorganization at an assumed purchase price of $20.00 per share.
(4) Net earnings per share computations are determined by taking the number
of shares assumed to be sold in the Conversion and Reorganization and
subtracting the ESOP shares which have not been committed for release
during the respective period. See Note 1 above.
(5) Assumes the merger of the Mutual Holding Company after its conversion
to Interim Mutual into the Savings Bank.
(6) The retained earnings of the Savings Bank will be substantially
restricted after the Conversion by virtue of the liquidation account to be
established in connection with the Conversion and Reorganization. See
"Dividend Policy" and "The Conversion and Reorganization - Liquidation
Rights."
(7) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Valuation Price Range of up to 15% to
reflect changes in market and financial conditions prior to the completion
of the Conversion and Reorganization or to satisfy the subscription of the
ESOP.
(8) No effect has been given to the issuance of additional shares of Common
Stock pursuant to the Option Plan. If the Option Plan is approved by
stockholders, an amount equal to 10% of the Common Stock issued in the
Conversion and Reorganization, or 155,125, 182,500, 209,875 and 241,356
shares at the minimum, midpoint, maximum and 15% above the maximum of the
Valuation Price Range, respectively, will be reserved for future issuance
upon the exercise of options to be granted under the Option Plan.
-29-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
As is the case with most savings institutions, the profitability of
the Savings Bank depends primarily on its net interest income, which is the
difference between interest and dividend income on interest-earning assets,
principally loans and investment securities, and interest expense on
interest-bearing deposits. The Savings Bank's net earnings also are
dependent, to a lesser extent, on the level of provision for loan losses,
its non-interest income and non-interest expenses, such as salaries and
related benefits, occupancy and equipment, deposit insurance premiums, and
miscellaneous other expenses, as well as provisions for federal and state
income tax.
The Savings Bank has historically operated as a traditional savings
and loan, raising money by offering savings products of relatively short
duration and lending this money for the purpose of home financing. As
regulations affecting the savings and loan industry changed, the Savings
Bank began offering primarily adjustable rate mortgages (ARM's) in 1981.
Additional authority for checking accounts and consumer and commercial
loans also allowed the Savings Bank to offer additional services to its
traditional customer bases.
The change from primarily mortgage loans in the 1980s to the current
loan portfolio mix of approximately 54% mortgage and 46%
consumer/commercial has allowed the Savings Bank to better manage its asset
and liability maturities and increase its net interest margin. The
institution's emphasis on shorter term consumer lending and prime rate
based commercial lending, along with one-year ARMs tied to an index, has
dramatically reduced the institution's interest rate risk.
The change from a traditional thrift investing in mortgages to a
financial institution offering a wider array of financial services has also
been necessary to counteract increasing competition from government-
sponsored entities for mortgage loans. The change from mortgage lender to
a financial services provider has lessened the institution's exposure to
any single economic cycle, while at the same time more closely tying the
institution's products and services to the customer's financial needs. At
December 31, 1996, approximately 31.6% of the Savings Bank's deposits were
in the form of transaction accounts and 46% of its net loans are classified
consumer or commercial, thus allowing a balanced source of funds and a
balanced investment opportunity.
Tradition and Market Share
The Savings Bank has operated in its local community since 1929.
Management estimates that the Savings Bank has a 30% market share in
Carroll County, a 20% market share in each of Haralson and Heard Counties,
and a one percent market share in each of Coweta, Douglas, Fayette, Henry
and Paulding Counties.
Interest Rate Risk
The change from primarily providing traditional long-term fixed rate
mortgages to primarily providing a variety of shorter term and interest-
sensitive loan products has resulted in a significant reduction in the risk
associated with vulnerability to changes in interest rates.
-30-
<PAGE>
High Levels of Regulatory Capital and Moderate Growth
The Savings Bank seeks to maintain capital levels that will permit it
to be characterized as "well-capitalized" by regulatory standards in order
to give it maximum flexibility in the changing regulatory environment and
to respond to changes in the market and economic conditions. The Savings
Bank has sought to strengthen its capital position through consistent
earnings. At December 31, 1996, the Savings Bank's tangible, core and
total risk-based capital ratios amounted to 6.9%, 6.9% and 10.9%,
respectively, which exceeded the requirements for a well capitalized
institution of 5%, 5% and 10%, respectively, by $6.1 million, $6.1 million
and $2.0 million, respectively. As a result of the Conversion and
Reorganization, assuming that 1,825,000 shares of Common Stock are sold in
the Offerings, the Savings Bank's pro forma tangible, core and risk-based
capital ratios at December 31, 1996 would be 11.02%, 11.02% and 17.76%,
respectively. See "Regulatory Capital."
Proactive Responses to Economic Changes
Deregulation of financial service providers throughout the United
States has necessitated the expansion of the Savings Bank's products and
services from traditional mortgages to a full array of financial products
and services. Management believes the Savings Bank has the largest deposit
market share of any local institution in the Carroll County, Georgia area.
Accordingly, it has been necessary for the Savings Bank to expand its
service territory in order to attain necessary growth.
These changes in product mix have created a need for more
sophisticated technology and a more labor-intensive service delivery
system. Additionally, the need for expansion to fuel growth has increased
the cost of the delivery system. Now that its infrastructure has been
expensed, management believes the Savings Bank is poised for asset growth
without the necessity of corresponding expenses. While the Savings Bank
has higher non-interest expense than traditional savings institutions, its
noninterest expense ratio compares favorably with that of full service
banking institutions.
Asset Quality
At December 31, 1996, the Savings Bank's non-performing assets, which
consist of non-accrual loans, accruing loans greater than 90 days
delinquent and real estate acquired through foreclosure or by deed in lieu
thereof, amounted to $6.4 million or 1.82% of the Savings Bank's total
assets. The ratio of non-performing assets to total assets at year end has
averaged 1.2% over the last five years. See "Business of Carrollton
Federal Bank - Lending Activities - Asset Quality" and "- Non-Performing
Assets" for an explanation of the increase in non-performing assets.
Asset/Liability Management
The ability to maximize net interest income is largely dependent upon
the achievement of a positive interest rate spread that can be sustained
during fluctuations in prevailing interest rates. Interest rate
sensitivity is a measure of the difference between amounts of interest-
earning assets and interest-bearing liabilities that either reprice or
mature within a given period of time. The difference, or the interest rate
repricing "gap", provides an indication of the extent to which an
institution's interest rate spread will be affected by changes in interest
rates. A gap is considered positive when the amount of interest rate
sensitive assets maturing or repricing within a given period exceeds the
amount of interest rate sensitive liabilities maturing or repricing within
such period, and is considered negative when the amount of interest rate
sensitive liabilities maturing or repricing within a given
-31-
<PAGE>
period exceeds the amount of interest rate sensitive assets maturing or
repricing within such period. Generally, during a period of rising interest
rates, a negative gap within shorter maturities would adversely affect net
interest income, while a positive gap within shorter maturities would result in
an increase in net interest income, and during a period of falling interest
rates, a negative gap within shorter maturities would result in an increase in
net interest income while a positive gap within shorter maturities would have
the opposite effect.
The lending activities of savings associations have historically
emphasized long-term, fixed-rate loans secured by one-to-four family residences,
and the primary source of funds of such institutions has been deposits. The
deposit accounts of savings associations generally bear interest rates that
reflect market rates and largely mature, or are subject to repricing, within a
short period of time. This factor, in combination with substantial investments
in long-term, fixed-rate loans, has historically caused the income earned by
savings associations on their loan portfolios to adjust more slowly to changes
in interest rates than their cost of funds.
The Savings Bank originates consumer, commercial and traditional
mortgage products in its primary service areas. Terms are limited primarily to
five years or less with the emphasis being prime based commercial lending,
consumer loans of five years or less and mortgage loans with terms not to exceed
30 years, repricing annually with the one-year treasury constant maturity.
At December 31, 1996, the Savings Bank had $146.6 million in real
estate mortgage loans, of which $88.1 million were one-year ARMs and $30.8
million were fixed rate loans. In addition, $68.0 million of consumer loans and
$57.8 million of commercial loans were outstanding at December 31, 1996. Both
consumer and commercial loans include some loans secured by real estate, such as
consumer home equity loans and commercial real estate loans.
As market demand for mortgage loans has declined and the Savings Bank
has been unable to replace all of the amortized mortgage portfolio with consumer
or commercial loans, excess funds have been placed in the investment portfolio
with the emphasis being in U.S. government agency obligations, collateralized
mortgage obligations, tax free municipal securities and preferred agency stocks.
Management anticipates continuing its efforts to shorten asset term by
offering a broad array of consumer loans primarily for area families and prime
based commercial loans primarily for small to medium sized community businesses,
as well as residential adjustable rate mortgages. In addition to shortening
asset maturities, the Savings Bank has placed a significant emphasis on changing
its mix of liabilities from almost entirely savings products to a larger number
of transaction based accounts.
The following table sets forth the amounts of interest-earning assets
and interest-bearing liabilities outstanding at December 31, 1996 that are
projected to reprice or mature in each of the future time periods shown. Except
as stated below, the amounts of assets and liabilities shown that reprice or
mature within a particular period were determined in accordance with the
contractual terms of the assets or liability. Loans with adjustable rates are
shown as being due at the end of the next upcoming adjustment period. Passbook
accounts, money market deposit accounts and negotiable order of withdrawal or
other transaction accounts are assumed to be subject to immediate repricing and
depositor availability and have been placed in the shortest period. In making
the gap computations, none of the assumptions sometimes made regarding
prepayment rates and deposit decay rates have been used for any other interest-
earning assets or interest-bearing liabilities. In addition, the table does not
reflect scheduled principal payments that will be received throughout the
32
<PAGE>
lives of the loans. The interest rate sensitivity of the Mutual Holding
Company's assets and liabilities illustrated in the following table would vary
substantially if different assumptions were used or if actual experience differs
from that indicated by such assumptions.
<TABLE>
<CAPTION>
Terms to Repricing at December 31, 1996
-----------------------------------------------------------------------
One Through Four Through
Three Twelve One Through Over
Months Months Five Years Five Years Total
------ ------ ----------- ---------- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Interest earning assets:
Interest bearing deposits and federal funds sold $ 12,036 $ - $ - $ - $ 12,036
Investment securities 9,178 5,303 15,677 11,533 41,691
Other investments 2,000 - - 600 2,600
Loans (including mortgage loans held for sale) 72,166 109,427 66,317 22,207 270,117
Total interest earning assets 95,380 114,730 81,994 34,340 326,444
Interest-bearing liabilities:
Interest-bearing demand and savings deposits 81,365 - - - 81,365
Time deposits 38,864 94,862 76,762 210,488
FHLB advances 10,000 - 3,007 3,288 16,295
Subordinated debentures - - 2,000 - 2,000
Total interest-bearing liabilities 130,229 94,862 81,769 3,288 310,148
Interest sensitivity gap per period (34,849) 19,868 225 31,062 16,296
Cumulative interest sensitivity gap (34,849) (14,981) (14,756) 16,296
Cumulative gap as a percentage of total
interest-earning assets -36.54% -13.06% -18.00% 47.45%
Cumulative interest-earning assets as a percentage
of cumulative interest-bearing liabilities 73.24% 93.34% 95.19% 105.25%
</TABLE>
Presented below, as of December 31, 1996, is an analysis of the
Savings Bank's interest rate risk as measured by changes in net portfolio value
("NPV") and net interest income ("NII") for instantaneous and sustained parallel
shifts in market interest rates. The NPV table also contains the change limits
that the Board of Directors deems advisable in the event of various changes in
interest rates. Such limits have been established with consideration of the
impact of various rate changes and the Savings Bank's current capital position.
33
<PAGE>
Net Portfolio Value
- --------------------------------------------------------------------------------
Estimated
Change in NPV as a
Interest Rates Estimated Percentage Amount Board
(basis points) NPV of Assets of Change Percent Limit
- -------------- --------- ---------- ---------- ------- -----
(Dollars in Thousands)
<TABLE>
<S> <C> <C> <C> <C> <C>
+400 $28,956 7.9% $(7,695) (21)% (75)%
300 31,592 8.6 (5,059) (14) (50)
200 33,896 9.3 (2,755) (8) (30)
100 35,639 9.7 (1,012) (3) (15)
0 36,651 10.0
- -100 36,757 10.0 106 0 (15)
200 36,350 9.9 (301) (1) (30)
300 36,628 10.0 (23) 0 (50)
400 37,824 10.3 1,173 3 (75)
</TABLE>
-34-
<PAGE>
Net Interest Income
<TABLE>
<CAPTION>
Interest 12/31/96 +200 bp 12/31/96 -200 bp
12/31/96 12/31/96 Income Weighted Anticipated Weighted Anticipated
Assets/Liabilities Weighted or Expense Average Interest Average Interest
Repricing with Average Anticipated Rate Income Rate Income
One Year Rate at 12/31/96 +200 bp or Expense -200 bp or Expense
-------- ---- ----------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets (Dollars in thousands)
Cash $ 3,356 5.20% $ 174 7.20% 242 3.20% 107
Fed funds 7,360 5.20 383 7.20 530 3.20 236
Fixed rate investments/(1)/ 11,975 7.13 853 7.13 854 5.13 614
Lagging/(3)/ 66,200 7.50 4,965 9.50 6,289 5.50 3,641
Current/(3)/ 88,472 9.00 7,963 11.00 9,732 7.00 6,193
Colonial/(3)/ 815 8.00 65 10.00 81 6.00 49
Stock 4,506 7.50 338 9.50 428 5.50 248
Fixed Loans 25,571 9.90 2,532 11.90 3,043 7.90 2,020
--------- --------- ------- -------
$ 208,255 $ 17,273 21,199 13,107
Liabilities
Variable rate deposits/(2)/ $ 86,137 2.67% 2,300 4.67% 4,023 1.00% 861
Fixed rate deposits 133,727 5.40 7,221 7.40 9,896 3.40 4,547
Advances 10,000 5.52 552 7.52 752 3.52 352
--------- --------- ------- -------
$ 229,864 10,073 14,671 5,760
Net Interest Income 7,200 6,528 7,347
Change in net interest income from rate shock (672) 147
- -------------------------------
</TABLE>
/(1)/ Fixed rate investments include callable U.S. government agency obligations
that will be called in a falling interest rate environment but will not
increase in rate in a rising rate environment.
/(2)/ A floor of 1.0% is assumed on variable rate deposits.
/(3)/ Variable rate assets and liabilities will reprice up or down within
contractual limits.
-35-
<PAGE>
In May 1996, all regulatory agencies adopted risk-focused safety and
soundness examination procedures that include interest rate risk (now referred
to as "market risk") factors in the regulatory rating of the institution. Each
financial institution is responsible for monitoring changes in net portfolio
value of equity and net interest income from both parallel and non parallel
shifts in the yield curve. The Savings Bank will be subject to these modified
procedures in 1997.
Changes in Financial Condition
At December 31, 1996, the Mutual Holding Company's consolidated assets
totalled $353 million, as compared to $334 million at December 31, 1995. Total
deposits grew $19 million, or 6%, in 1996 as compared to 1995. This increase is
primarily due to the Savings Bank's increased branch expansion and marketing
efforts related thereto. The increase was funded primarily by increases in time
deposits during 1996. Other liabilities and capital grew marginally in 1996.
Total capital at December 31, 1996 was $25.3 million, as compared to $25.0
million at December 31, 1995.
The Savings Bank opened four branch facilities within Wal*Mart
discount stores during 1996. This expansion helped attract approximately $15
million in deposits during the year. Most of these deposits were invested in
medium term U.S. agency and mortgage backed securities designated as available
for sale to maintain liquidity.
36
<PAGE>
Average Balances, Interest Rates and Yields. The following table presents
for the periods indicated the total dollar amount of interest from average
interest-earning assets and the resultant yield, as well as the interest expense
on average interest-bearing liabilities, expressed both in dollars and rates,
and the net interest margin. Dividends received are included as interest income.
All average balances are based on month-end balances. Management believes that
the use of average month balances is representative of its operations.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------------
1996 1995
------------------------------------ ------------------------------------
Average Interest Average Interest
Balances Income/Expense Yield/Rate Balances Income/Expense Yield/Rate
-------- -------------- ---------- -------- -------------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Interest earning
deposits and fed funds sold $ 15,158 822 5.42% $ 7,993 473 5.92%
Investment securities:
Taxable 30,387 2,411 7.93 36,076 2,652 7.35
Nontaxable 1,236 127 10.28 0 0 0
Total investment securities 31,623 2,538 8.03 36,076 2,652 7.35
Loans (including loan fees)(1) 272,786 24,874 9.12 280,613 24,588 8.76
Total interest-earning assets 319,567 28,234 8.84 324,682 27,713 8.54
Allowance for loan losses (2,446) (2,341)
Cash and due from banks 9,005 7,857
Premises and equipment 8,327 7,782
Other assets 9,322 5,649
-------- --------
Total assets $343,775 $343,629
======== ========
Liabilities and capital:
Interest bearing liabilities:
Deposits:
Demand $ 46,821 1,386 2.96% $ 47,566 1,366 2.87%
Savings 32,991 889 2.69 33,280 828 2.49
Time 202,641 11,338 5.60 195,200 10,444 5.35
Other borrowings 18,650 1,169 6.27 30,555 1,858 6.08
Total interest bearing liabilities 301,103 14,782 4.91 306,601 14,496 4.73
Non-interest bearing demand deposits 15,635 11,104
Other liabilities 1,893 2,367
Capital 25,144 23,557
-------- --------
Total liabilities and capital $343,775 $343,629
======== ========
<CAPTION>
Year Ended December 31,
------------------------------------
1994
------------------------------------
Average Interest
Balances Income/Expense Yield/Rate
-------- -------------- ----------
(Dollars in Thousands)
<S> <C> <C> <C>
Assets:
Interest-earning assets:
Interest earning
deposits and fed funds sold $ 11,110 406 3.65%
Investment securities:
Taxable 33,470 2,414 7.21
Nontaxable 0 0 0
Total investment securities 33,470 2,414 7.21
Loans (including loan fees)(1) 274,135 23,000 8.39
Total interest-earning assets 318,715 25,820 8.10
Allowance for loan losses (2,539)
Cash and due from banks 9,121
Premises and equipment 7,625
Other assets 6,961
--------
Total assets $339,883
========
Liabilities and capital:
Interest bearing liabilities:
Deposits:
Demand $ 52,867 1,184 2.24%
Savings 37,892 1,094 2.89
Time 188,343 8,652 4.59
Other borrowings 28,007 1,666 5.95
Total interest bearing liabilities 307,109 12,596 4.10
Non-interest bearing demand deposits 7,137
Other liabilities 4,386
Capital 21,251
--------
Total liabilities and capital $339,883
========
</TABLE>
-37-
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------------
1996 1995
------------------------------------ ------------------------------------
Average Interest Average Interest
Balances Income/Expense Yield/Rate Balances Income/Expense Yield/Rate
-------- -------------- ---------- -------- -------------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Excess of interest-bearing
assets over interest-bearing
liabilities $ 18,464 $ 18,081
Ratio of interest-bearing assets to
interest-bearing liabilities 106.13% 105.90%
Net interest income 13,452 13,217
Net interest rate spread 3.93% 3.81%
Net interest margin (2) 4.21% 4.07%
Tax equivalent adjustments
Investment securities (43) 0
Net interest income 13,409 13,217
<CAPTION>
Year Ended December 31,
------------------------------------
1994
------------------------------------
Average Interest
Balances Income/Expense Yield/Rate
-------- -------------- ----------
(Dollars in Thousands)
<S> <C> <C> <C>
Excess of interest-bearing
assets over interest-bearing
liabilities $ 11,606
Ratio of interest-bearing assets to
interest-bearing liabilities 103.78%
Net interest income 13,224
Net interest rate spread 4.00%
Net interest margin (2) 4.15%
Tax equivalent adjustments
Investment securities 0
Net interest income 13,224
</TABLE>
- -------------------------------
(1) Average balances include nonaccrual loans.
(2) Calculated before provision for loan losses.
-38-
<PAGE>
Rate/Volume Analysis
The banking industry often utilizes two key ratios to measure relative
profitability of net interest income. The net interest rate spread measures
the difference between the average yield on earning assets and the average
rate paid on interest bearing sources of funds. The interest rate spread
eliminates the impact of noninterest bearing deposits and gives a direct
perspective on the effect of market interest rate movements. The net
interest margin is defined as net interest income as a percent of average
total earning assets and takes into account the positive impact of
investing noninterest bearing deposits.
The net interest spread was 3.93% in 1996, 3.81% in 1995 and 4.00% in
1994, while the net interest margin was 4.21% in 1996, 4.07% in 1995 and
4.15% in 1994. The increase in the margin and spread during 1996 was
primarily due to reinvestment of maturing mortgage loans into higher
yielding commercial and consumer loans. The decreases in 1995 were a
result of changes in the overall asset and liability mix. The table below
shows the change in net interest income for the past two years due to
changes in volume and rate.
<TABLE>
<CAPTION>
1996 Compared to 1995 1995 Compared to 1994
--------------------- ---------------------
Increase (decrease) Increase (decrease)
due to changes in due to changes in
---------------------------- ------------------------------
Yield/ Net Yield/ Net
Volume Rate Change Volume Rate Change
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
(In thousands)
Interest income on:
Interest earning deposits
and federal funds sold $ 392 (43) 349 (136) 203 67
Investment securities:
Taxable (439) 198 (241) 190 48 238
Nontaxable 127 - 127 - - -
Loans (including loan fees) (697) 983 286 552 1,036 1,588
----- --- --- --- ----- -----
Total interest-earning assets (617) 1,138 521 606 1,287 1,893
Interest expense on:
Deposits:
Demand (22) 42 20 (128) 310 182
Savings (7) 68 61 (125) (141) (266)
Time 402 492 894 324 1,468 1,792
Other borrowings (745) 56 (689) 155 37 192
----- -- ----- --- -- ---
Total interest bearing
liabilities $ (372) 658 286 226 1,674 1,900
-------- --- --- --- ----- -----
Net interest income (245) 480 235 380 (387) (7)
===== === === === ===== ===
</TABLE>
-39-
<PAGE>
Results of Operations for the Years Ended December 31, 1996, 1995 and 1994
Net earnings totalled approximately $248,000 for 1996, a decrease of
92% from the $2.9 million earned in 1995. Return on average assets and
return on average equity for the year ended December 31, 1996 were .07% and
.99%, respectively, as compared to .86% and 12.5%, respectively, at
December 31, 1995. These decreases are attributable to the $1.7
million increase in deposit insurance premiums during 1996, which was
entirely due to the special one-time SAIF assessment of 65.7 cents per $100
of assessable SAIF deposits effective September 30, 1996. An $893,000
increase in the provision for loan losses during 1996 also contributed to
the reduction in earnings in 1996, as well as additional expenses due to
the opening of four new branch locations during 1996. See "Business of
Carrollton Federal Bank - Allowance for Loan Losses." Net earnings of $2.9
million in 1995 represented a 24% increase over 1994 primarily due to
increases in noninterest income.
Net Interest Income
Net interest income (the difference between interest earned on assets
and the interest paid on deposits and liabilities) is the single largest
component of the Savings Bank's operating income. The Savings Bank actively
manages this income source to provide the largest possible amount of income
while balancing interest rate, credit and liquidity risks.
Net interest income, on a taxable equivalent basis, was $13.4 million
in 1996, compared to $13.2 million in 1995 and 1994. The 2% increase in
1996 was the result of the reinvestment of maturing investments and
mortgage loans into higher yielding investments and commercial and consumer
loans, slightly offset by increases in the cost of funds that were
primarily due to promotions offered as part of the opening of the four new
branches in Wal*Mart stores during 1996. During 1995, increases in the
volumes and rates of interest of earning assets were entirely offset by
rate increases on interest bearing deposits and other liabilities. Total
interest income increased 1.7% and 7.3% in 1996 and 1995, respectively.
Provision for Loan Losses
The Savings Bank's provision for loan losses was $1.1 million during
1996 as compared to $250,000 and $99,400 during 1995 and 1994,
respectively. Provisions for loan losses are charged to earnings to bring
the total loan loss allowance to a level deemed appropriate by management
based on the volume and type of lending conducted by the Savings Bank and
as required by the Savings Bank's loan loss methodology.
The increase in the provision for loan losses over the last two years
is primarily attributable to the increase in non-performing loans to $6.2
million at December 31, 1996 from $2.3 million at December 31, 1995, as
well as the change in the mix of the loan portfolio from mortgage loans to
commercial and consumer loans. See "Business of Carrollton Federal Bank -
Allowance for Loan Losses."
The Savings Bank's methodology for evaluating the adequacy of its
allowance for loan losses conforms with generally accepted accounting
principles and the Interagency Policy Statement on Allowance for Loan and
Lease Losses. The Savings Bank considers collateral valuation, changes in
the loan portfolio mix, the past three years' net charge-offs and other
factors. The methodology also incorporates economic indicators such as
growth in personal income and unemployment rates as well as other economic
indicators affecting the Savings Bank's market area.
-40-
<PAGE>
Noninterest Income
Noninterest income consists primarily of revenues generated from
service charges and fees on deposit accounts, and profits earned through
sales of credit life insurance. In addition, gains or losses realized from
the sale of investment portfolio securities are included in noninterest
income. Total noninterest income for 1996 increased 4% or $126,000 above
that for 1995. Noninterest income for 1995 showed an increase of 46% from
1994. The primary contributor to noninterest income growth in both 1996
and 1995 was the continued growth in service charges on deposits resulting
from an increase in the number of transaction accounts. Approximately 37%
of the 1995 increase is attributable to the increase in sales of securities
available for sale, while the remaining increase was primarily due to
higher service charge revenue.
The growth in noninterest income was the result of management's
continuing efforts to build stable sources of fee income, which includes
service charges on deposits and loans and sales of credit life insurance.
This growth is being accomplished through expansion of the Savings Bank's
locations.
Fee income from service charges on deposit accounts increased over 17%
in 1996 following a 39% increase in 1995. Continued emphasis on low cost
checking account services, appropriate pricing for transaction deposit
accounts and fee collection practices for other deposit services
contributed to the increased levels of income for both years. Increases
during 1996 and 1995 were further influenced by the increase in transaction
deposit accounts.
Net gains on sales of investment securities were $178,000 and
$367,000, respectively, during 1996 and 1995 as management liquidated
certain investment securities to meet loan demand.
Noninterest Expense
Noninterest expense for 1996 increased 30% following a decrease of 5%
in 1995. Salaries and employee benefits increased 21% during 1996 due
primarily to employee additions resulting from the four new branches in
Wal*Mart stores together with increases required to maintain continued
growth. The decrease from 1994 to 1995 was the result of the
reorganization of the loan administration and customer service function
which resulted in staff reductions at the Savings Bank. Net occupancy
expense increased $114,000 or 7.6% in 1996 following a 13.7% increase in
1995. The increases were due primarily to increased depreciation related
to new banking facilities and costs to operate new branches.
Deposit insurance premiums increased $1.7 million as a result of the
September 30, 1996 SAIF assessment. As described earlier, a special one-
time assessment of 65.7 cents per $100 of assessable deposits amounted to
an additional deposit insurance premium of $1,723,000. Other operating
expenses, including advertising, office supplies, and data processing
increased 13.7 % compared to a 5.3% increase in 1995. Management continues
to emphasize the importance of expense management and productivity
throughout the Savings Bank in order to further decrease the cost of
providing expanded banking services to a growing market base.
Income Taxes
An income tax benefit of $13,000 was recognized for the year ended
December 31, 1996. The effective tax rate differed from the expected 34%
federal rate applied to earnings before income taxes primarily due to tax
exempt interest income. Income tax expense in 1995 and 1994 totalled
$1,375,000 and $553,000, respectively, and represented an effective tax
rate of 32%
-41-
<PAGE>
and 18%, respectively. During 1996 and 1995, the effective tax rate
differed from the expected 34% Federal rate primarily due to tax-exempt
interest income. The effective rate in 1994 was further reduced by an
adjustment to the valuation allowance for deferred tax amounts totalling
$272,443. See Note (8) of the Notes to Consolidated Financial Statements.
Liquidity and Capital Resources
The Savings Bank is required under applicable federal regulations to
maintain specified levels of "liquid" investments in qualifying types of
United States Government, federal agency and other investments having
maturities of five years or less. Current OTS regulations require that a
savings association maintain liquid assets of not less than 5% of its
average daily balance of net withdrawable deposit accounts and borrowings
payable in one year or less, of which short-term liquid assets must consist
of not less than 1%. Monetary penalties may be imposed for failure to meet
applicable liquidity requirements. At December 31, 1996, the Savings
Bank's liquidity, as measured for regulatory purposes, was 13.1% or $24.0
million in excess of the minimum OTS requirement.
Cash was generated by the Savings Bank's operating activities during
the years ended December 31, 1996, 1995 and 1994, primarily as a result of
net income. The adjustments to reconcile net income to cash provided by
operating activities during the periods presented consisted primarily of
amortization of premiums and discounts, proceeds from the sale of loans,
and increases or decreases in interest and dividends receivable, prepaid
income taxes, accrued interest payable, and accrued expenses and other
liabilities. The primary investing activity of the Savings Bank is
lending, which is funded with cash provided by operations, as well as
principal collections and maturities on securities, securities available
for sale and mortgage-backed and related securities, and maturities of
interest-bearing deposits in banks. For additional information about cash
flows from the Savings Bank's operating, financing and investing
activities, see the Consolidated Statements of Cash Flows included in the
Consolidated Financial Statements.
At December 31, 1996, the Savings Bank had outstanding $130,000 in
commitments to originate loans, $16.0 million in undisbursed open end
consumer equity lines and credit cards, $4.1 million in commercial lines of
credit and $108,000 in commercial letters of credit. At the same date, the
total amount of certificates of deposit which are scheduled to mature by
December 31, 1997 was $134 million. The Savings Bank believes that it has
adequate resources to fund commitments as they arise and that it can adjust
the rate on savings certificates to retain deposits in changing interest
rate environments. If the Savings Bank requires funds beyond its internal
funding capabilities, advances from the FHLB of Atlanta are available as an
additional source of funds.
The Savings Bank is required to maintain specified amounts of capital
pursuant to the Financial Institutions Reform, Recovery, and Enforcement
Act of 1989 ("FIRREA") and regulations promulgated thereunder by the OTS.
The capital standards generally require the maintenance of regulatory
capital sufficient to meet a tangible capital requirement, a core capital
requirement and a risk-based capital requirement. At December 31, 1996,
the Savings Bank's tangible and core capital totalled $23.6 million, or
6.9% of adjusted total assets, which exceeded the respective minimum
requirements at that date by approximately $18.3 million and $9.6 million,
respectively, or 5.4% and 2.9% of total assets, respectively. The Savings
Bank's risk-based capital totalled $25.6 million at December 31, 1996, or
10.9% of risk-weighted assets, which exceeded the current requirement of
8.0% by approximately $6.7 million, or 2.9% of risk-weighted assets. See
"Regulation - The Savings Bank - Regulatory Capital Requirements."
-42-
<PAGE>
Impact of New Accounting Standards
During 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation." This new standard will
become effective for the Company during 1997 and will require the Company
to disclose the fair value of employee stock options granted in 1997 and
subsequent years. Management does not expect this new standard to have
a material impact on future consolidated financial statements.
During 1996, the Financial Accounting Standards Board issued SFAS No.
125 "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." This new standard will become effective
for the Company January 1, 1997 and will require the Company to make
certain disclosures regarding its servicing assets and liabilities. The
standard may also affect the classification of certain servicing assets and
liabilities. Management does not expect this standard to have a material
impact on future consolidated financial statements.
Impact of Inflation and Changing Prices
The financial statements and related financial data presented herein
have been prepared in accordance with GAAP, which requires the measurement
of financial position and operating results in terms of historical dollars,
without considering changes in relative purchasing power over time due to
inflation.
Unlike most industrial companies, virtually all of the Savings Bank's
assets and liabilities are monetary in nature. As a result, interest rates
generally have a more significant impact on a financial institutions
performance than does the effect of inflation.
-43-
<PAGE>
BUSINESS OF CARROLLTON FEDERAL BANK
General
The Savings Bank is a federally chartered savings bank that was
organized on August 1, 1994 as a subsidiary of the Mutual Holding Company.
Prior to that date, the Savings Bank's predecessors had operated since
1929. At December 31, 1996, the Savings Bank had $351 million of total
assets, $325 million of total liabilities, including $308 million of
deposits, and $26 million of equity or 7.4% of assets.
The Mutual Holding Company and the Savings Bank have recently formed
three new operating units in an effort to broaden the services they offer
to the community. The first such enterprise is CFB Securities, which
offers traditional brokerage services and products such as mutual funds,
stocks and bonds through an NASD member firm. The firm is a wholly owned
subsidiary of the Mutual Holding Company formed in 1996 and is located in
space immediately adjacent to the Savings Bank's main office lobby. CFB
Securities has two full-time employees.
The second unit is CFB Financial, an operating department of the
Savings Bank. This department services the loan needs of consumers
traditionally associated with small loan companies. The group operates
from a branch located in Douglasville, Georgia, has a staff of three full-
time employees and offers a wide range of small loans including loans made
in conformity with the Georgia Industrial Loan Act. Management plans to
open a second location in Villa Rica, Georgia in the future.
The third unit, CFB Insurance, is a wholly owned subsidiary of the
Mutual Hold Company. Formed on December 28, 1995, CFB Insurance has not
begun operations, but management intends to use it as a means of offering
various insurance products, including property and casualty insurance, to
existing Savings Bank customers, as well as the general public.
Market Area
The Savings Bank maintains 12 branch offices in Carroll, Coweta,
Douglas, Fayette, Haralson, Heard, Henry and Paulding counties within the
State of Georgia. In 1996, the Savings Bank opened four branch offices in
Wal*Mart discount stores in Coweta, Henry, Fayette and Paulding counties.
During 1991, the Savings Bank opened a branch office in a Kroger grocery
store in Carroll County and a branch office in a Bruno's grocery store in
Carroll County.
The Savings Bank's main office is located in Carrollton, Georgia, the
county seat of Carroll County, Georgia. Carrollton is located in western
Georgia, approximately 50 miles west of Atlanta, Georgia. Carroll County's
population was 78,000 in 1996, an increase of 1.5% from 1995. Major area
employers that have affected growth are Southwire, Sony, State University
of West Georgia, Tanner Medical Center, Bremen-Bowdon Investment and Gold-
Kist, which collectively employ an aggregate of approximately 6,500
persons. Based on information from the Carroll County Chamber of Commerce,
other factors affecting growth in Carroll County include: (i) an
expected population increase to 83,000 by 2000 and to 105,000 by 2010 due
to migration and birth; (ii) the county's proximity to Atlanta, Georgia;
(iii) commercial and industrial expansion that continue to fuel economic
growth; and (iv) new student enrollment at the State University of West
Georgia, which was recently granted university status.
-44-
<PAGE>
Lending Activities
As a federally chartered savings association, the Savings Bank has
general authority to originate and purchase loans secured by real estate,
secured or unsecured loans for commercial, corporate, business, or
agricultural purposes, loans for personal, family, or household purposes,
and may issue credit cards and extend credit in connection therewith.
Notwithstanding its general lending authority, the Savings Bank may not
make non-real estate commercial purpose loans that exceed 20% of its assets
or non-real estate consumer purpose loans that exceed 35% of its assets.
While not restricted by law, the Savings Bank limits its lending activities
mainly to the counties in which it has offices.
Since the enactment of FIRREA in 1989, a savings association generally
may not make loans to one borrower and related entities in an amount which
exceeds 15% of its unimpaired capital and surplus, although loans in an
amount equal to an additional 10% of unimpaired capital and surplus may be
made to a borrower if the loans are fully secured by readily marketable
securities. See "Regulation - The Savings Bank." At December 31, 1996,
the Savings Bank's loans-to-one borrower limit was $4.0 million and its
five largest loans or groups of loans-to-one borrower, including related
entities, were $3.46 million, $3.08 million, $2.74 million, $1.97 million
and $1.96 million. One of these loans ($1.96 million) is secured by notes
secured by residential real estate and by assignments of the related
security instruments. The other loans are secured by commercial real
estate. One relationship ($4.0 million) was not performing in accordance
with its terms on December 31, 1996. See "- Non-Performing Assets."
Loan Portfolio Composition. The following table sets forth the
composition of the Savings Bank's loan portfolio by type of loan at the
dates indicated.
<TABLE>
<CAPTION>
December 31,
------------
1996 1995 1994 1993 1992
Amount % Amount % Amount % Amount % Amount %
-------- ---- -------- ---- -------- ---- -------- ---- -------- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate mortgage loans $ 146,577 54% $ 175,039 64% $ 196,761 69% $ 195,682 75% $ 199,443 78%
Real estate construction
loans 34 * 2,348 1 1,451 1 866 * 1,632 *
Commercial loans 57,786 21 43,944 16 38,755 14 27,759 11 24,684 10
Consumer(1) and other
installment loans 68,038 25 51,840 18 46,509 16 37,846 14 30,465 12
--------- --- --------- --- --------- --- --------- --- --------- ---
Total loans 272,435 100% 273,171 100% 283,476 100% 262,153 100% 256,224 100%
==== ==== ==== ==== ====
Less: Allowance for loan
losses 2,601 2,291 2,392 2,686 2,027
--------- --------- --------- --------- ---------
Loans, net $ 269,834 $ 270,880 $ 281,084 $ 259,467 $ 254,197
========= ========= ========= ========= =========
</TABLE>
- --------------
* Indicates less than one percent.
(1) Includes home equity loans secured by residential real estate, as well as
other consumer loans.
Contractual Principal Repayments and Interest Rates. The following
table sets forth certain information at December 31, 1996 regarding the
dollar amount of loans maturing or repricing in the Savings Bank's
portfolio based on the contractual terms to maturity, before giving effect
to net items. Demand loans, loans having no stated schedule of repayments
and no stated maturity or repricing and overdrafts are reported as due in
one year.
-45-
<PAGE>
<TABLE>
<CAPTION>
1 year
Less than through Over
Loan Type 1 year 5 years 5 years Total
-----------------------------------------------------
<S> <C> <C> <C> <C>
Mortgage(1):
Adjustable $ 83,593 $ 7,345 $ 0 $ 90,938
Fixed 2,341 8,726 44,572 55,639
Construction 34 0 0 34
Consumer 35,088 30,132 2,818 68,038
Commercial 38,512 14,657 4,617 57,786
-------- ------- ------- --------
Total $159,568 $60,860 $52,007 $272,435
======== ======= ======= ========
</TABLE>
------------------
(1) Includes second mortgage loans on one-to-four family residential
properties of $13,884.
The following table sets forth, as of December 31, 1996, the dollar
amount of all loans, before net items, maturing or repricing after one year
from December 31, 1996 which have fixed interest rates or which have
adjustable interest rates.
<TABLE>
<CAPTION>
Adjustable
Fixed Rates Rates Total
----------- ---------- -------
(In Thousands)
<S> <C> <C> <C>
Mortgage $ 53,298 $7,345 $ 60,643
Construction -- -- --
Consumer 32,950 -- 32,950
Commercial 17,824 1,450 19,274
-------- ------ --------
Total $104,072 $8,795 $112,867
======== ====== ========
</TABLE>
Scheduled contractual amortization of loans does not reflect the
actual term of the Savings Banks loan portfolio. The average life of loans
is substantially less than their contractual terms because of prepayments
and due-on-sale clauses, which give the Savings Bank the right to declare a
conventional loan immediately due and payable in the event, among other
things, that the borrower sells the real property subject to the mortgage.
-46-
<PAGE>
Originations, Purchases, Servicing and Sales of Loans. The lending
activities of the Savings Bank are subject to written, non-discriminatory
underwriting standards and loan origination procedures established by the
Savings Bank's Board of Directors and management. Loan originations are
obtained by a variety of sources including referrals from real estate
brokers, developers, builders, existing customers, newspaper, radio,
periodical advertising and walk-in customers. Loan applications are taken
by lending personnel, and the loan processing department supervises the
acquisition of credit reports, appraisals and other documentation involved
with a loan. Real property valuations are generally prepared for the
Savings Bank by a qualified independent appraiser selected from a list
approved by the Savings Bank's Board of Directors. The Savings Bank
generally relies on an attorney's opinion of title that each loan
collateralized by real property has been properly secured and may obtain
title insurance on such property. Hazard insurance is also required on all
secured property and flood insurance is required if the property is within
a designated flood plain.
The Savings Bank's loan approval process is intended to assess the
borrower's ability to repay the loan, the viability of the loan and the
adequacy of the value of the property that will secure the loan. A loan
application file is first reviewed by a loan officer of the Savings Bank
and is submitted for approval to the Loan Committee if the loan does not
meet certain criteria.
The following table shows total loans originated, loan reductions and
the net increase in Carrollton's loan portfolio during the periods
indicated.
-47-
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1996 1995 1994
-------- -------- --------
(In Thousands)
Loan Originations:
<S> <C> <C> <C>
Mortgage $ 25,629 $ 30,102 $ 41,124
Construction 9,031 6,097 5,741
Commercial 15,532 15,290 15,645
Consumer 43,356 29,575 33,166
-------- ------- --------
Total loans
originated 93,548 81,064 95,676
Purchases:
Loans purchased 0 652 18,470
-------- ------- --------
Total loans
originated
and purchased 93,548 81,716 114,146
Sales and loan
principal
repayments:
Loans sold proceeds 10,882 6,605 13,239
Loan repayments 82,587 85,293 80,252
Total loans sold
proceeds
and loan principal
repayments 93,469 91,898 93,491
======== ======= ========
Loan originations
(repayments), net 79 (10,182) 20,655
======== ======= ========
Increase (decrease)
due to other items,
net (1,125) (22) 962
======== ======= ========
Net increase (decrease)
in net loan portfolio (1,046) (10,204) 21,617
======== ======= ========
</TABLE>
Real Estate Mortgage Loans. The Savings Bank originates real estate
mortgage loans, primarily loans secured by first mortgage liens on one-to-
four family residences. At December 31, 1996, $146.6 million or 54.7% of
the Savings Bank's total net loan portfolio consisted of first mortgage
real estate loans. As of such date the average balance of the Savings
Bank's individual one-to-four family mortgage loans was $43,776.
The loan-to-value ratio, maturity and other provisions of the loans
made by the Savings Bank generally have reflected the policy of making less
than the maximum loan permissible under applicable regulations, in
accordance with sound lending practices, market conditions and underwriting
standards established by the Savings Bank. While it has been the Savings
Bank's practice in most cases to allow a loan-to-value ratio of no more
than 85%, the Savings Bank's lending policy on one-to-four family
residential mortgage loans generally limits the maximum loan-to-value ratio
to 95% of the lesser of the appraised value or purchase price of the
property. In cases where loan-to-value ratios exceed 85%, the Savings Bank
generally requires private mortgage insurance. The loan-to-value ratio for
loans originated for the Savings Bank's portfolio is based on appraised
value.
-48-
<PAGE>
The Savings Bank originates fixed rate mortgages with terms of up to
30 years. These loans are generally made in conformity with Federal
National Mortgage Association ("FNMA") standards and are generally sold to
FNMA with the Savings Bank retaining the servicing rights on these
mortgages. From time to time, certain 15-year fixed rate mortgages will be
retained in the Savings Bank's portfolio. At December 31, 1996, the
Savings Bank was servicing $52.4 million in loans for FNMA. At December
31, 1996, the Savings Bank had $41.2 million in portfolio fixed rate
mortgages.
Since 1981, the Savings Bank has been offering adjustable-rate loans
in order to decrease the vulnerability of its operations to changes in
interest rates. The demand for adjustable-rate loans in the Savings Bank's
primary market area has been a function of several factors, including the
level of interest rates, the expectations of changes in the level of
interest rates and the difference between the interest rates offered for
fixed-rate loans and adjustable-rate loans. The relative amount of fixed-
rate and adjustable-rate residential loans that can be originated at any
time is largely determined by the demand for each in a competitive
environment. As interest rates have fluctuated, the demand for fixed-rate
and adjustable-rate loans has changed as the Savings Bank's customers have
preferred adjustable rates in a high interest-rate environment and fixed-
rate loans as interest rates decreased. In order to continue to increase
and then to maintain a high percentage of adjustable-rate one-to-four
family residential loans, the Savings Bank has offered various forms of
adjustable-rate loans and in some cases has purchased adjustable-rate
mortgage loans. As a result, at December 31, 1996, $107.4 million, or
73.5% of the one-to-four family residential loans in the Savings Bank's
loan portfolio (before net items) consisted of adjustable-rate loans.
The Savings Bank's one-to-four family residential adjustable-rate
loans are fully amortizing loans with contractual maturities of up to 30
years. These loans adjust periodically in accordance with a designated
index. The Savings Bank currently offers an adjustable-rate mortgage with
a 2% limit on the rate adjustment per period and a 6% limit on the rate
adjustment over the life of the loan. The Savings Bank's adjustable-rate
loans are not convertible by their terms into fixed-rate loans, are
assumable with the Savings Bank's approval, do not contain prepayment
penalties and do not produce negative amortization. Due to the generally
lower rates of interest prevailing in recent periods, the Savings Bank's
ability to originate adjustable-rate loans has decreased as consumer
preference for fixed-rate loans has increased.
Adjustable-rate loans decrease the risks associated with changes in
interest rates but involve other risks, primarily because as interest rates
rise, the payment by the borrower rises to the extent permitted by the
terms of the loan, thereby increasing the potential for default. At the
same time, the marketability of the underlying property may be adversely
affected by higher interest rates. The Savings Bank believes that these
risks, which have not had a material adverse effect on the Savings Bank to
date, generally are less than the risks associated with holding fixed-rate
loans in an increasing interest rate environment.
Commercial Loans. At December 31, 1996, $57.8 million, or 21% of the
Savings Bank's total net loan portfolio, consisted of commercial loans.
The vast majority of these loans were secured by existing commercial and
multi-family residential real estate. The Savings Bank's commercial and
multi-family real estate loans include primarily loans secured by small
office buildings, family-owned business establishments and apartment
buildings. The average amount of the Savings Bank's commercial and multi-
family real estate loans was $107,000 at December 31, 1996 and the largest
was $4.0 million. It is anticipated that commercial loans will continue to
be a major component of the Savings Bank's loan portfolio. Originations of
commercial loans amounted to 11.8%, 18.7% and 20.2% of the Savings Bank's
total loan originations in fiscal 1996, 1995 and
-49-
<PAGE>
1994, respectively. The Savings Bank's commercial loans are rarely made
with amortization periods greater than 20 years or interest rate adjustment
periods in excess of five years.
The Savings Bank requires certified appraisals on most real properties
securing commercial loans. In some cases, an evaluation is deemed
adequate. Appraisals are performed by an independent appraiser designated
by the Savings Bank and are reviewed by management. In originating multi-
family residential and commercial real estate loans, the Savings Bank
considers the quality and location of the real estate, the credit of the
borrower, cash flow of the project and the quality of management involved
with the property. Corporate loans generally require the personal guaranty
of the entity's controlling shareholders. Hazard insurance is required as
well as flood insurance if the property is located in a designated flood
zone.
Subject to the restrictions contained in federal laws and regulations,
the Savings Bank is also authorized to make secured and unsecured
commercial business loans for general corporate and agricultural purposes,
including issuing letters of credit. At December 31, 1996, $10.3 million,
or 3.7%, of the Savings Bank's total net loan portfolio, consisted of
commercial business loans, of which $9.7 million were secured by other than
real estate. Commercial business loans accounted for 16.6% of the total
loan originations during the year ended December 31, 1996.
Commercial lending is generally considered to involve a higher degree
of risk than one-to-four family residential lending. Such lending
typically involves large loan balances concentrated in a single borrower or
groups of related borrowers. The payment experience on loans secured by
income-producing properties is typically dependent on the successful
operation of the related real estate project or business and thus may be
subject to a greater extent to adverse conditions in the real estate market
or in the economy generally. In addition, commercial lending generally
requires more complex underwriting and substantially greater oversight
efforts compared to one-to-four family residential real estate lending.
The Savings Bank generally attempts to mitigate the risks associated with
commercial lending by, among other things, lending only in its Primary
Market Area and metropolitan Atlanta and lending only to individuals who
have an established relationship with the Savings Bank and/or who have
substantial ties to the community.
In general, collateral for commercial loans includes real estate and
certain business assets including, but not limited to, equipment,
inventory, furniture, fixtures and accounts receivable. Terms generally
range from three to five years. If real estate is a substantial portion of
the collateral, terms may be extended to 15 years. Commercial loans are
made at both fixed and variable rates. The variable rates primarily adjust
with changes in the prime rate as reported by the Wall Street Journal.
Construction Loans. The Savings Bank makes construction loans to
individuals for the construction of their residences and to developers for
the construction of one-to-four family and multi-family residences.
Construction lending is generally limited to the Savings Bank's Primary
Market Area. At December 31, 1996, construction loans amounted to $34,000
or less than 1% of the Savings Bank's total net loan portfolio.
Construction financing is generally considered to involve a higher degree
of risk of loss than long-term financing on improved, owner-occupied real
estate because of the uncertainties of construction, including possible
delays in completing the structure, the possibility of costs exceeding the
initial estimates and the need to obtain a tenant or purchaser if the
property will not be owner occupied. In the event of a delay in the
completion of the construction, the Savings Bank may grant an extension,
but such extensions are generally conditioned upon the payment of interest
in full for the initial term.
Construction loans to individuals are separate from the permanent
financing on the structure. However, a borrower only qualifies for a
construction loan if he or she has obtained a commitment for a permanent
loan at the end of the construction phase. The term of a construction loan
to an individual generally does not exceed the greater of 180 days or the
term of the permanent loan commitment. Interest rates on construction
loans to individuals are based on current local economic conditions. The
loan-to-value ratio on such loans must be 80% or less of the appraised
value of the completed structure.
-50-
<PAGE>
The majority of construction loans to developers are to selected local
developers with whom the Savings Bank is familiar and are for the
construction of single-family dwellings on a pre-sold or on a speculative
basis. The Savings Bank limits the number of unsold houses which a
developer may have under construction in a project. Construction loans to
developers are generally made for a six-month term depending on the size
and scope of the project. Payment of interest generally is required on at
least a monthly basis, and the amount of a loan is generally based on the
owner's equity in the property but may not exceed 80% of appraised value or
contract price. Loan proceeds are disbursed in stages after inspection of
the project indicates that such disbursements are for expenses which have
already been incurred and which have added to the value of the project.
Consumer Loans. Subject to the restrictions contained in federal laws
and regulations, the Savings Bank also is authorized to make loans for a
wide variety of personal or consumer purposes. The Savings Bank's consumer
loans secured by automobiles totalled $26.4 million at December 31, 1996,
while home equity loans totalled $13.9 million as of that date.
Substantially all of the Savings Bank's consumer loan borrowers reside in
its Primary Market Area. As of December 31, 1996, $68.0 million, or 25%,
of the Savings Bank's total net loan portfolio consisted of consumer loans.
In addition to traditional consumer loans, the Savings Bank initiated
in 1996 a relationship with four new car dealerships within its Primary
Market Area to provide "indirect" financing for customers of the
dealerships. Management intends to increase such lending in the future.
At December 31, 1996, $6.8 million of these loans had been originated. Of
this amount, $97,000 in loans had defaulted and $190,000 in loans were 30
days or more delinquent. The Company does not deal in indirect sub-prime
automobile paper.
Home equity and second mortgage loans are also classified as consumer
loans. These loans, which amounted to $13.9 million, or 5.2%, of the
Savings Bank's total net loan portfolio at December 31, 1996, have variable
rates of interest and maximum terms of 10 years with five-year advance
periods. While these loans are secured by a second mortgage on the subject
property, the borrower is not required to use the proceeds of the loan for
property-related purposes. The Savings Bank only takes a second mortgage
in those equity line loans in which it holds the outstanding first mortgage
loan on the property or where it determines that the value of the
underlying collateral is sufficient to provide adequate security for both
the first and second mortgages. The Savings Bank generally applies a loan-
to-value ratio of 85% or less, less the balance of the first mortgage loan.
As of December 31, 1996, the Savings Bank's consumer loans also
consisted of loans secured by accounts at the Savings Bank which amounted
to $4.2 million or 1.6% of its total net loan portfolio. Such a loan is
structured to have a term that ends on the same date as the maturity date
of the certificate securing it or if secured by a passbook account has a
six-month term with a hold on withdrawals that would result in the balance
being lower than the loan balance. Typically these loans require semi-
annual payments of interest only.
Consumer loans generally involve more credit risk than mortgage loans
because of the type and nature of the collateral. In addition, consumer
lending collections are dependent on the borrower's continuing financial
stability, and thus are more likely to be adversely affected by job loss,
divorce, illness and personal bankruptcy. In many cases, because of its
mobile nature, collateral may not be readily available in the event of a
default. In other cases, repossessed collateral for a defaulted consumer
loan will not provide an adequate source of repayment of the outstanding
loan balance because of improper repair and maintenance or depreciation of
the underlying security. The remaining deficiency often does not warrant
further substantial collection efforts against the borrower.
-51-
<PAGE>
Loan Origination and Other Fees. In addition to interest earned on
loans, the Savings Bank receives loan origination fees or "points" for
originating loans. Loan points are a percentage of the principal amount of
the mortgage loan and are charged to the borrower in connection with the
origination of the loan.
In accordance with SFAS No. 91, which deals with the accounting for
non-refundable fees and costs associated with originating or acquiring
loans, the Savings Bank's loan origination fees and certain related direct
loan origination costs are offset, and the resulting net amount is deferred
and amortized as interest income over the contractual life of the related
loans as an adjustment to the yield of such loans. At December 31, 1996,
the Savings Bank had $433,000 of net loan fees which had been deferred and
are being recognized as income over the estimated maturities of the related
loans. See Note (1) of the Notes to the Consolidated Financial Statements.
-52-
<PAGE>
Asset Quality
Delinquent Loans. The following table sets forth information concerning
delinquent loans at December 31, 1996 in dollar amount and as a percentage of
the Savings Bank's total loan portfolio (before net items). The amounts
presented represent the total outstanding principal balances of the related
loans, rather than the actual payment amounts which are past due.
<TABLE>
<CAPTION>
Mortgage Commercial Consumer Total
------------------- ------------------- ------------------- -------------------
Amount Percentage Amount Percentage Amount Percentage Amount Percentage
------ ----------- ------ ----------- ------ ----------- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands)
Loans delinquent 90 days and over $943 0.37% $3,900 1.54% $1,296 0.51% $6,139 2.42%
</TABLE>
Loans delinquent more than 90 days totalled $2.3 million at December 31, 1995
and $3.2 million at December 31, 1994. The increase in 1996 was due to one large
commercial relationship.
-53-
<PAGE>
Non-Performing Assets. The Savings Bank has adopted a policy under which
all loans are reviewed on a regular basis and are placed on a non-accrual status
when, in the opinion of management, the collection of additional interest is
deemed insufficient to warrant further accrual. Generally, the Savings Bank
places all loans more than 90 days past due on non-accrual status. When a loan
is placed on non-accruing status, total interest accrued to date and not
collected is charged to earnings. Subsequent payments are either applied to the
outstanding principal balance or recorded as interest income, depending on the
assessment of the ultimate collectibility of the loan. A loan is returned to
accrual status when, in management's judgment, the borrower's ability to make
periodic interest and principal payments is in accordance with the terms of the
loan agreement.
Real estate acquired by the Savings Bank by foreclosure is classified as
real estate owned until such time as it is sold. When such property is acquired
it is recorded at the lower of the recorded investment in the loan or fair
value, less estimated costs of disposition. The recorded investment is the sum
of the outstanding principal loan balance plus any accrued interest which has
not been received and acquisition costs associated with the property. Any excess
of the recorded investment in the loan over the fair value of the underlying
property, less estimated costs of disposition, is charged to the allowance for
loan losses at the time of the loan foreclosure. Costs relating to improvement
of property incurred subsequent to the acquisition are capitalized, whereas
costs relating to holding the property are expensed. Valuations are periodically
performed by management and a provision for estimated losses on real estate
owned is charged to earnings when losses are anticipated.
As of December 31, 1996, the Savings Bank's total non-performing loans
amounted to $6.2 million, or 2.31%, of total net loans, compared to $2.3
million, or 0.85% of total net loans, at December 31, 1995. The 1996 increase
was due to one large commercial relationship totalling approximately $4.0
million or 1.4% of net loans.
The following table sets forth the amounts and categories of the Savings
Bank's non-performing assets at the dates indicated. The Savings Bank had no
troubled debt restructuring during the periods shown on the table below.
<TABLE>
<CAPTION>
December 31,
------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Non-accruing loans:
Mortgage $ 943 $1,203 $1,411 $2,239 $1,354
Construction 0 0 0 0 0
Commercial 3,900 582 245 39 261
Consumer 1,400 515 1,465 1,451 1,391
Accruing loans greater
than 90 days delinquent:
Mortgage 0 0 0 0 0
Construction 0 0 0 0 0
Commercial 0 0 0 0 0
Consumer 0 0 0 0 0
------ ------ ------ ------ ------
Total non-performing loans 6,243 2,300 3,121 3,729 3,006
</TABLE>
-54-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Real estate owned(1) 180 253 968 801 1,328
------ ------ ------ ------ ------
Total non-performing
assets 6,423 2,553 4,089 4,530 4,334
Total non-performing loans
as a percentage of total
net loans 2.31% 0.85% 1.11% 1.72% 1.44%
Total non-performing
assets as a percentage of
total assets 1.82% 0.76% 1.16% 1.45% 1.43%
- ----------------------------
</TABLE>
(1) Consists of real estate acquired by foreclosure.
Interest income foregone on non-accrual loans in 1996, 1995 and 1994 was
$554,867, $122,336 and $114,829, respectively.
Classified Assets. Federal regulations require that each insured savings
association classify its assets on a regular basis. In addition, in connection
with examinations of insured institutions, federal examiners have authority to
identify problem assets and, if appropriate, classify them. There are three
classifications for problem assets: "substandard," "doubtful" and "loss."
Substandard assets have one or more defined weaknesses and are characterized by
the distinct possibility that the insured institution will sustain some loss if
the deficiencies are not corrected. Doubtful assets have the weaknesses of
substandard assets with the additional characteristic that the weaknesses make
collection or liquidation in full on the basis of currently existing facts,
conditions and values questionable, and there is a high possibility of loss. A
loss classified asset is considered uncollectible and of such little value that
continuance as an asset of the institution is not warranted. Another category
designated "special mention" also must be established and maintained for assets
which do not currently expose an insured institution to a sufficient degree of
risk to warrant classification as substandard, doubtful or loss. Assets
classified as substandard or doubtful require the institution to establish
general allowances for loan losses. If an asset or portion thereof is classified
loss, the insured institution must either establish specific allowances for loan
losses in the amount of 100% of the portion of the asset classified loss, or
charge-off such amount. General loss allowances established to cover possible
losses related to assets classified substandard or doubtful may be included in
determining an institution's regulatory capital, while specific valuation
allowances for loan losses do not qualify as regulatory capital.
The Savings Bank's problem assets at December 31, 1996 consisted of $8.5
million of loans classified as substandard and $1.4 million of loans classified
as doubtful or loss. As of December 31, 1996, total classified assets amounted
to 2.8% of total assets. In addition, at December 31, 1996, the Savings Bank had
$4.2 million of loans classified as special mention.
-55-
<PAGE>
The following table sets forth the Savings Bank's problem assets at
the dates indicated.
<TABLE>
<CAPTION>
December 31,
------------
1996 1995 1994 1993 1992
----- ----- ----- ------ ------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Classification:
Substandard 8,529 6,128 5,308 9,038 10,467
Doubtful 1,431 1,126 1,421 1,308 1,986
Loss 0 55 5 669 5
Total classified assets 9,960 7,309 6,734 11,015 12,458
</TABLE>
Allowance for Loan Losses. It is management's policy to maintain an
allowance for estimated loan losses at a level which management considers
adequate to absorb losses inherent in the loan portfolio at each reporting
date. Management's estimation of this amount includes a review of all
loans for which full collectibility is not reasonably assured and
considers, among other factors, prior years' loss experience, distribution
of portfolio loans by risk class and the estimated value of underlying
collateral. Although management believes the current allowance for loan
losses to be adequate, ultimate losses may vary from their estimates;
however, estimates are reviewed periodically and, as adjustments become
necessary, they are reported in earnings in periods in which they become
known. At December 31, 1996, the allowance for loan loss was increased due
to one large commercial relationship and a change in the portfolio mix
toward higher risk consumer and commercial loans. See "- Asset Quality -
Non-Performing Assets."
At December 31, 1996, the Savings Bank's allowance for loan losses was
$2.6 million compared to $2.3 million at December 31, 1995. As of December
31, 1996, the Savings Bank's general valuation allowance totalled $2.0
million and specific reserves totalled $577,000.
The following table sets forth the activity in the Savings Bank's
allowance for loan losses during the periods indicated.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Allowance at beginning of period $ 2,291 $ 2,392 $ 2,687 $ 2,027 $ 1,464
Provisions 1,143 250 99 822 1,061
Charge-offs
Mortgage Loans 32 82 277 166 260
Commercial loans 117 59 0 0 117
Consumer loans 776 308 181 88 339
Total charge-offs 925 449 458 254 716
Recoveries
Mortgage loans 25 8 40 66 71
Commercial loans 0 0 0 0 13
Consumer loans 67 90 24 25 134
Total Recoveries 92 98 64 91 218
Net charge-offs 833 351 394 163 498
</TABLE>
-56-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Allowance at end of period 2,601 2,291 2,392 2,686 2,027
Allowance for loan losses to
total non-performing loans
at end of period 41.66% 99.61% 76.64% 72.03% 67.43%
Allowance for loan losses to
average loans at end of period 0.95% 0.82% 0.88% 1.04% 0.78%
Net charge-offs to average
loans outstanding during
the period 0.31% 0.13% 0.14% 0.06% 0.19%
Average gross loans(1) $272,803 $278,323 $272,815 $259,189 $258,872
</TABLE>
- -----------------------
(1) Beginning and ending annual period balances were used to calculate
average gross loans.
-57-
<PAGE>
The following table sets forth the composition of the allowance for
loan losses by type of loan at the date indicated. The allowance is
allocated to specific categories of loans for statistical purposes only and
may be applied to loan losses in any loan category.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
--------------------- ---------------------- ---------------------- -------------------- ---------------------
% of Loans % of Loans % of Loans % of Loans % of Loans
in Each in Each in Each in Each in Each
Category to Category to Category to Category to Category to
Amount Total Loans Amount Total Loans Amount Total Loans Amount Total Loans Amount Total Loans
--------- ----------- ---------- ----------- ---------- ----------- -------- ----------- --------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans $ 441 54% $ 423 65% $ 222 70% $ 373 79% $ 224 82%
Commercial 1,170 21 1,158 16 1,150 14 1,364 12 1,094 11
Consumer loans 996 25 710 19 1,020 11 949 9 709 7
------ --- ------ --- ------ ------ ------ ------ ------ ------
Total allowance for
loan losses 2,607 100% 2,291 100% 2,392 100% 2,686 100% 2,027 100%
====== ==== ====== ==== ====== ==== ====== ==== ====== ====
</TABLE>
-58-
<PAGE>
Investment Securities
The Company classifies its securities in one of three categories:
trading, available for sale or held to maturity. There were no trading
securities at December 31, 1996 and 1995. Securities held to maturity are
those securities for which the Savings Bank has the ability and intent to
hold to maturity. All other securities are classified as available for
sale.
Available for sale securities consist of investment securities not
classified as trading securities or held to maturity securities and are
recorded at fair value. Held to maturity securities are recorded at cost,
adjusted for the amortization or accretion of premiums or discounts.
Unrealized holding gains and losses, net of the related tax effect, on
securities available for sale are excluded from earnings and are reported
as a separate component of stockholders' equity until realized. Transfers
of securities between categories are recorded at fair value at the date of
transfer. Unrealized holding gains or losses associated with transfers of
securities from held to maturity to available for sale are recorded as a
separate component of stockholders' equity. See Note (1) of the Notes to
Consolidated Financial Statements.
Federally chartered savings institutions such as the Savings Bank also
have authority to invest in various types of liquid assets, including
United States Treasury obligations, securities of various Federal agencies
and of state and municipal governments, certificates of deposit at
federally insured banks and savings and loan associations, certain bankers'
acceptances and Federal funds. Subject to various restrictions, federally
chartered savings institutions may also invest a portion of their assets in
commercial paper, corporate debt securities and mutual funds, the assets of
which conform to the investments that federally chartered savings
institutions are otherwise authorized to make directly. As of December 31,
1996, the Savings Bank had utilized this investment authority to invest in
U.S. government and agency obligations, obligations of the State of Georgia
and political subdivisions, domestic corporate obligations and mutual
funds, equity securities including FHLB stock and FNMA stock.
At December 31, 1996, approximately 11% of the Savings Bank's
securities portfolio was comprised of mortgage-backed securities that are
insured or guaranteed by the Federal Home Loan Mortgage Corporation (FHLMC)
or FNMA. Collateralized Mortgage Obligations (CMOs) not insured or
guaranteed by FHLMC, FNMA or GNMA comprised 20% of the investment
portfolio. U.S. government agency obligations comprised 51%, preferred
stock of FNMA comprised 4%, FHLB stock comprised 5% and municipal
securities comprised 5% of such portfolio at December 31, 1996. Other
investments, primarily treasury securities, are also included.
The Savings Bank's securities portfolio is managed in accordance with
the Savings Bank's Investment Policy adopted by the Board of Directors and
administered by the Asset/Liability Committee, which consists of an outside
director, the President and Chief Executive Officer, Chief Financial
Officer, Chief Operating Officer, Senior Vice President, Vice President-
Commercial Lending and Assistant Controller of the Savings Bank. The policy
lists specific areas of permissible investments consistent with the Savings
Bank's investment strategy. Under the Savings Bank's policy, at the time of
purchase of an investment or mortgage-backed security or CMO, management
designates the security as either held for maturity or available for sale
based on the Savings Bank's investment objectives, operational needs and
intent. The Savings Bank maintains no trading account portfolio. Investment
activities are monitored to ensure that they are consistent with
established guidelines and objectives.
The following table sets forth certain information regarding the
classifications of Savings Bank's investment securities at December 31,
1996, 1995 and 1994. Securities classified as available
-59-
<PAGE>
for sale are carried at their estimated fair value at December 31, 1996.
There were no securities available for sale at December 31, 1995 or 1994.
Securities held to maturity are carried at amortized cost at all respective
dates. There were no trading securities at December 31, 1996, 1995 or
1994.
Securities available for sale:
<TABLE>
<CAPTION>
1996
----
<S> <C> <C> <C>
U.S. Treasuries $ --
U.S. Government agencies 18,830
State, county and municipals 2,231
Mortgage-backed securities 12,866
-------
$33,927
-------
Securities held to maturity:
1996 1995 1994
---- ---- ----
U.S. Treasuries $ 500 1,251 1,257
U.S. Government agencies 6,216 7,142 31,805
State, county and municipals 115 115 0
Mortgage-backed securities 933 1,870 12,204
------- ------- -------
$ 7,764 $10,378 $45,266
------- ------- -------
Total investment securities $41,691 $10,378 $45,266
======= ======= =======
</TABLE>
-60-
<PAGE>
The following table presents the expected maturity of the total investment
securities portfolio by maturity date and average yields based upon amortized
cost, (for all obligations on a fully taxable basis assuming a 34% tax rate) at
December 31, 1996. It should be noted that the composition and
maturity/repricing distribution of the investment portfolio is subject to change
depending upon rate sensitivity, capital needs and liquidity needs.
Expected Maturity of Investment Securities
<TABLE>
<CAPTION>
After one After five
Within one year but within five years but within ten years After ten years
Amount Yield Amount Yield Amount Yield Amount Yield Totals
------ ----- ------ ----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Securities held to maturity:
U.S. Treasury Securities 500 5.60% - - - - - - 500
U.S. Government Agencies 582 7.22% 2,634 6.57% 3,000 7.39% - - 6,216
State, county and municipals - - 115 4.55% - - - - 115
Mortgage-backed securities 533 5.45% 239 6.05% 11 7.25% 150 7.21% 933
----- ---- ----- ---- ------ ---- ------ ---- ------
1,615 6.13% 2,988 6.46% 3,011 7.39% 150 7.21% 7,764
===== ==== ===== ==== ====== ==== ====== ==== ======
Securities available for sale:
U.S. Treasury Securities - - - - - - - - -
U.S. Government Agencies - - 3,000 6.88% 11,849 8.93% 4,018 7.12% 18,867
State, county and municipals - - - - - - 2,199 7.27% 2,199
Mortgage-backed securities - - 2,038 6.75% 1,946 6.86% 8,908 7.18% 12,892
----- ---- ----- ---- ------ ---- ------ ---- ------
5,038 6.83% 13,795 8.64% 15,125 7.18% 33,958
===== ==== ===== ==== ====== ==== ====== ==== ======
</TABLE>
-61-
<PAGE>
Cash and Interest-Bearing Deposits in Other Banks
The Savings Bank had cash on hand and cash due from and on deposit
with other banks amounting to $14.4 million and $16.4 million at December
31, 1996 and December 31, 1995, respectively.
Sources of Funds
General. Deposits are the primary source of the Savings Bank's funds
for lending and other investment purposes. In addition to deposits, the
Savings Bank derives funds from loan principal repayments, principal,
interest and dividend payments on investments and other sources. Loan
repayments are a relatively stable source of funds, while deposit inflows
and outflows are significantly influenced by general interest rates and
money market conditions. Borrowings may be used on a short-term basis to
compensate for reductions in the availability of funds from other sources.
They may also be used on a longer term basis for general business purposes.
Deposits. The Savings Bank's deposits are attracted principally from
within the Savings Bank's primary market area through the offering of a
wide selection of deposit instruments, including NOW accounts, money market
accounts, regular savings accounts, and term certificate accounts.
Included among these deposit products are individual retirement account
certificates of approximately $47 million at December 31, 1996. Deposit
account terms vary, with the principal differences being the minimum
balance required, the time periods the funds must remain on deposit and the
interest rate. As of December 31, 1996, the 204 certificates of deposit
with principal amounts of $100,000 or more totalled $47.2 million.
Interest rates paid, maturity terms, service fees and withdrawal
penalties are established by the Savings Bank on a periodic basis.
Determination of rates and terms are predicated on funds acquisition and
liquidity requirements, rates paid by competitors, growth goals and federal
regulations.
The Savings Bank does not advertise for deposits outside its local
market area or utilize the services of deposit brokers. A listing on the
Internet has been established primarily for people relocating to the
Savings Bank's Primary Market Area.
-62-
<PAGE>
The following table sets forth the dollar amount of deposits in the
various types of deposit programs offered by the Savings Bank at the dates
indicated.
<TABLE>
<CAPTION>
December 31,
1996 1995 1994
------------------------ ------------------------ ------------------------
Weighted Weighted Weighted
Average Average Average
Amount Interest Rate Amount Interest Rate Amount Interest Rate
-------- -------------- -------- -------------- -------- --------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Time deposits $210,488 5.6% $198,870 5.6% $188,735 4.7%
Savings accounts 34,077 3.0 31,737 2.6 36,593 2.5
Transaction accounts
NOW and money
market accounts 47,288 2.6 46,626 2.5% 53,624 2.6
Non-interest
bearing accounts 15,903 -- 12,055 -- 10,376 --
-------- -------- --------
Total transaction
accounts 63,191 58,681 64,000
-------- -------- --------
Total deposits $307,756 $289,288 $289,328
======== ======== ========
</TABLE>
The following table sets forth the maturities of the Savings Bank's
certificates of deposit having principal amounts of $100,000 or more at
December 31, 1996.
<TABLE>
<CAPTION>
Certificates of deposit
maturing in: (In Thousands)
-----------------------
<S> <C>
Less than three months $ 8,011
Three to six months 6,866
Six to 12 months 11,680
Over 12 months 20,673
-------
Total certificates of deposit with
balances of $100,000 or more 47,230
=======
</TABLE>
The following table sets forth the amount and maturities of the
Savings Bank's certificates of deposit at December 31, 1996.
<TABLE>
<CAPTION>
2001 and
1997 1998 1999 2000 thereafter
---- ---- ---- ---- ----------
Over One Year Over Two Over Three
One Year Through Years Through Years Through Over Four
Or less Two Years Three Years Four Years Years Totals
--------- ------------- ------------- ------------- --------- ------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
2.00% to 2.99% -- -- -- -- -- --
3.00% to 3.99% 672 -- -- -- -- 672
4.00% to 5.99% 113,286 41,654 4,685 1,613 783 162,021
6.00% to 7.99% 19,741 12,747 7,000 3,573 4,193 47,254
8.00% to 9.99% 165 243 -- 133 -- 541
-------- ------- ------- ------ ------ --------
$133,864 $54,644 $11,685 $5,319 $4,976 $210,488
======== ======= ======= ====== ====== ========
</TABLE>
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<PAGE>
Borrowings. The Savings Bank may obtain advances from the FHLB of
Atlanta upon the security of its FHLB of Atlanta stock and certain of the
Savings Bank's residential mortgage loans, provided certain standards
related to creditworthiness have been met. Such advances are made pursuant
to several credit programs, each of which has its own interest rate and
range of maturities. Such advances are generally available to meet seasonal
and other withdrawals of deposit accounts and to permit increased lending.
See "Regulation - The Savings Bank - Federal Home Loan Bank System."
The Savings Bank had $16.3 million FHLB advances outstanding at
December 31, 1996. Of the advances, $10 million were at an adjustable rate
with a weighted average rate of 5.49%. The remaining $6.3 million fixed
rate advances had a weighted average rate of 5.68%.
The following table sets forth the maximum month-end balance and
average balance of Carrollton's FHLB advances during the periods indicated.
See also Note (6) to the Consolidated Financial Statements.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------
1996 1995 1994
---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
Maximum balance $20,236 $40,277 $37,770
Average balance 16,514 28,257 28,163
Weighted average interest
rate during year 5.56% 6.81% 6.50%
Balance outstanding at
year-end $16,295 $15,595 $37,770
Weighted average interest
rate at year-end 5.90% 6.05% 5.86%
</TABLE>
The following table sets forth certain information as to Carrollton's
long-term (terms to maturity in excess of 90 days) and short-term (terms to
maturity of 90 days or less) FHLB advances at the dates indicated.
<TABLE>
<CAPTION>
December 31,
------------
1996 1995 1994
---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
FHLB long-term advances $ 6,295 $7,095 $11,270
Weighted average interest
rate 5.68% 5.64% 6.13%
FHLB short-term advances $10,000 $8,500 $26,500
Weighted average interest
rate 5.49% 7.78% 6.65%
</TABLE>
Employees. The Savings Bank had 162 full-time employees and 30 part-
time employees at December 31, 1996. CFB Securities had two full-time and
no part-time employees at December 31, 1996, while CFB Insurance had no
employees as of that date. None of these employees is
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represented by a collective bargaining agreement, and management believes
that it enjoys good relations with its personnel.
Properties. The following table sets forth certain information with
respect to the Company's properties at December 31, 1996.
<TABLE>
<CAPTION>
Leased/ Net Book Value
Description/Address Owned of Property Deposits
------------------- ------- -------------- --------
<S> <C> <C> <C>
(In Thousands)
Main Office 110 Dixie St. Carrollton, GA Owned 2,743 159,346
640 W. Bankhead Hwy, Villa Rica, GA Owned 943 32,197
207 W. College St., Bowdon, GA Owned 303 32,453
501 Alabama Ave., Bremen, GA Leased 50,295
505 Bankhead Hwy., Carrollton, GA
(Grocery Store Branch) Leased 4,787
1355 South Park St., Carrollton, Ga
(Grocery Store Branch) Leased 4,427
9060 Hwy. 27, Franklin, GA Owned 276 10,120
2212 Atlanta Hwy, Hiram, GA (Wal*Mart
Branch) Leased 5,019
5600 N. Henry Blvd. Suite A,
Stockbridge, GA (Wal*Mart Branch) Leased 3,825
1025-A Bullsboro Dr., Newnan, GA
(Wal*Mart Branch) Leased 2,243
125 Pavilion Parkway, Fayetteville, GA
(Wal*Mart Branch) Leased 2,998
3218 Highway 5, Douglasville, GA Leased
</TABLE>
Legal Proceedings
The Savings Bank is involved in routine legal proceedings occurring in
the ordinary course of business which, in the aggregate, are believed by
management to be immaterial to the financial condition of the Savings Bank.
Competition
The Savings Bank has operated in its local community since 1929.
Management estimates that the Savings Bank has a 30% market share in
Carroll County, a 20% market share in each of Haralson and Heard Counties,
and a one percent market share in each of Coweta, Douglas, Fayette, Henry
and Paulding Counties.
The Savings Bank faces significant competition both in making loans
and in attracting deposits principally from national, regional and local
commercial banks, savings banks, savings and loan associations, credit
unions, broker-dealers, mortgage banking companies (including FNMA) and
insurance companies. Its most direct competition for deposits has
historically come from commercial banks, savings banks, savings and loan
associations and credit unions. The Savings Bank faces additional
competition for deposits from short-term money market funds, other
corporate and government securities funds and from other financial
institutions such as brokerage firms and insurance companies. In addition,
the Savings Bank may face additional competition from commercial banks
headquartered outside of the State of Georgia as a result of the enactment
of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994,
which becomes fully effective on June 1, 1997. The "Georgia Interstate
Banking Act," which became effective July 1, 1995, provides that (i)
interstate acquisitions by institutions located in Georgia are permitted in
states which also allow national interstate acquisitions, and (ii)
interstate acquisitions of institutions located in Georgia are permitted by
institutions located in states which also allow national interstate
acquisitions; provided, however, that if the board of directors of a
Georgia savings and loan institution adopts a resolution to except such
thrift or holding company from being acquired pursuant to the provisions of
the Georgia Interstate Banking Act and properly files a certified copy of
such resolution with the Georgia Department, such savings and loan
institution or holding company may not be acquired by an institution
located outside of the State of Georgia.
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<PAGE>
The Savings Bank experiences strong competition for real estate loans
principally from other savings associations, commercial banks, and mortgage
banking companies. The Savings Bank competes for loans principally through
the interest rates and loan fees it charges and the efficiency and quality
of services it provides borrowers. Competition may increase as a result of
the continuing reduction of restrictions on the interstate operations of
financial institutions.
REGULATION
Savings and loan holding companies and federal savings banks are
extensively regulated under both Federal and state law. The following is a
brief summary of certain statutes and rules and regulations that affect or
will affect the Company and the Bank. This summary is qualified in its
entirety by reference to the particular statute and regulatory provision
referred to below and is not intended to be an exhaustive description of
the statutes or regulations applicable to the business of the Company and
the Bank. Supervision, regulation and examination of the Company and the
Bank by the regulatory agencies are intended primarily for the protection
of depositors rather than shareholders of the Company. The terms savings
association, federal savings bank and thrift are used interchangeably in
this section.
Savings and Loan Holding Company Regulation
The Company will be a registered holding company under both the
Savings and Loan Holding Company Act (the "SLHCA") set forth in Section 10
of the Home Owners Loan Act ("HOLA") and the Financial Institutions Code of
Georgia ("FICG"). The Company will be regulated under such acts by the
Office of Thrift Supervision (the "OTS") and by the Department of Banking
and Finance (the "Georgia Department"), respectively. As a savings and
loan holding company, the Company will be required to file with the OTS an
annual report and such additional information as the OTS may require
pursuant to the SLHCA. The OTS will also conduct examinations of the
Company and each of its subsidiaries.
Savings and loan holding companies and their subsidiaries are
prohibited from engaging in any activity or rendering any services for or
on behalf of their savings institution subsidiaries for the purpose or with
the effect of evading any law or regulation applicable to the institution.
This restriction is designed to prevent the use of holding company
affiliates to evade requirements of the SLHCA that are designed to protect
the holding company's savings institution subsidiaries. A unitary holding
company, that is, a holding company that owns only one insured institution
whose subsidiary institution satisfies the qualified thrift lender test
(discussed below), is not restricted to any statutorily prescribed list of
permissible activities, and the SLHCA and the FICG imposes no limits on
direct or indirect non-savings institution subsidiary operations.
The SLHCA and the FICG makes it unlawful for any savings and loan
holding company, directly or indirectly, or through one or more
subsidiaries or one or more transactions, to acquire control of another
savings association or another savings and loan holding company without
prior approval from the OTS and the Georgia Department, respectively. An
acquisition by merger, consolidation or purchase of assets of such an
institution or holding company or of substantially all of the assets of
such an institution or holding company is also prohibited without prior OTS
or Georgia Department approval. When considering an application for such
an acquisition, the OTS and the Georgia Department take into consideration
the financial and managerial resources and future prospects of the
prospective acquiring company and the institution involved. This includes
consideration of the competence, experience and integrity of the officers,
directors and principal
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<PAGE>
shareholders of the acquiring company and savings institution. In
addition, the OTS and the Georgia Department consider the effect of the
acquisition on the institution, the insurance risk to the Savings
Association Insurance Fund ("SAIF") and the convenience and needs of the
community to be served.
The OTS may not approve an acquisition that would result in the
formation of certain types of interstate holding company networks. The OTS
is precluded from approving an acquisition that would result in the
formation of a multiple holding company controlling institutions in more
than one state unless the acquiring company or one of its savings
institution subsidiaries is authorized to acquire control of an institution
or to operate an office in the additional state pursuant to a supervisory
acquisition authorized under Section 13(k) of the Federal Deposit Insurance
Act or unless the statutes of the state in which the institution to be
acquired is located permits such an acquisition.
Savings and loan holding companies are allowed to acquire or to retain
as much as 5% of the voting shares of a savings institution or savings and
loan holding company without regulatory approval.
Bank Regulation
General. The Savings Bank is a federal savings bank organized under
the laws of the United States subject to examination by the OTS. The OTS
regulates all areas of the Savings Bank's banking operations including
reserves, loans, mergers, payment of dividends, interest rates,
establishment of branches, and other aspects of operations. OTS
regulations generally provide that federal savings banks must be examined
no less frequently than every 12 months, unless the federal savings bank
(i) has assets of less than $250 million; (ii) is well capitalized; (iii)
was found to be well managed and its composite condition was found to be
outstanding (or good, if the bank had total assets of not more than
$100,000) during its last examination; (iv) is not subject to a formal
enforcement proceeding or an order from the Federal Deposit Insurance
Corporation ("FDIC") or another banking agency; and (v) has not undergone a
change of control during the previous 12-month period. Federal savings
banks must be examined no less frequently than every 18 months. The
Savings Bank also is subject to assessments by the OTS to cover the costs
of such examinations.
The Savings Bank is also insured and regulated by the FDIC. The major
functions of the FDIC with respect to insured federal savings banks include
paying depositors to the extent provided by law in the event an insured
bank is closed without adequately providing for payment of the claims of
depositors and preventing the continuance or development of unsound and
unsafe banking practices.
Subsidiary institutions of a savings and loan holding company, such as
the Savings Bank, are subject to certain restrictions imposed by the
Federal Reserve Act on any extension of credit to the holding company or
any of its subsidiaries, on investment in the stock or other securities
thereof, and on the taking of such stock or securities as collateral for
loans to any borrower. In addition, a holding company and its subsidiaries
are prohibited from engaging in certain tying arrangements in connection
with any extension of credit or provision of any property or services.
Capital Requirements. OTS regulations require that federal savings
banks maintain (i) "tangible capital" in an amount of not less than 1.5% of
total assets, (ii) "core capital" in an amount not less than 3.0% of total
assets, and (iii) a level of risk-based capital equal to 8% of risk-
weighted assets. Under OTS regulations, the term "core capital" generally
includes common stockholders' equity, noncumulative perpetual preferred
stock and related surplus, and minority interests in the equity accounts of
consolidated subsidiaries less unidentifiable intangible assets (other
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<PAGE>
than certain amounts of supervisory goodwill) and certain investments in
certain subsidiaries plus 90% of the fair market value of readily
marketable purchased mortgage servicing rights ("PMSRs") and purchased
credit card relationships (subject to certain conditions). "Tangible
capital" generally is defined as core capital minus intangible assets and
investments in certain subsidiaries, except PMSRs.
In determining total risk-weighted assets for purposes of the risk-
based requirement, (i) each off-balance sheet asset must be converted to
its on-balance sheet credit equivalent amount by multiplying the face
amount of each such item by a credit conversion factor ranging from 0% to
100% (depending upon the nature of the asset), (ii) the credit equivalent
amount of each off-balance sheet asset and each on-balance sheet asset must
be multiplied by a risk factor ranging from 0% to 200% (again depending
upon the nature of the asset) and (iii) the resulting amounts are added
together and constitute total risk-weighted assets. "Total capital," for
purposes of the risk-based capital requirement equals the sum of core
capital plus supplementary capital (which, as defined, includes the sum of,
among other items, perpetual preferred stock not counted as core capital,
limited life preferred stock, subordinated debt, and general loan and lease
loss allowances up to 1.25% of risk-weighted assets) less certain
deductions. The amount of supplementary capital that may be counted
towards satisfaction of the total capital requirement may not exceed 100%
of core capital, and OTS regulations require the maintenance of a minimum
ratio of core capital to total risk-weighted assets of 4%.
OTS regulations have been amended to include an interest-rate risk
component to the risk-based capital requirement. Under this regulation, an
institution is considered to have excess interest rate-risk if, based upon
a 200-basis point change in market interest rates, the market value of an
institution's capital changes by more than 2%. This new requirement is not
expected to have any material effect on the ability of the Savings Bank to
meet the risk-based capital requirement. The OTS also revised its risk-
based capital standards to ensure that its standards provide adequately for
concentration of credit risk, risk from nontraditional activities and
actual performance and expected risk of loss on multi-family mortgages.
Capital requirements higher than the generally applicable minimum
requirement may be established for a particular savings association if the
OTS determines that the institution's capital was or may become inadequate
in view of its particular circumstances.
Additionally, the Georgia Department requires that savings and loan
holding companies, such as the Company, must maintain a 5% Tier 1 leverage
ratio on a consolidated basis.
Prompt Corrective Action. The Federal Deposit Insurance Corporation
Improvement Act of 1991 (the "FDIC Act") imposes a regulatory matrix which
requires the federal banking agencies, which include the OTS, the FDIC, the
Office of the Comptroller of Currency (the "OCC"), and the Federal Reserve
Board, to take prompt corrective action to deal with depository
institutions that fail to meet their minimum capital requirements or are
otherwise in a troubled condition. The prompt corrective action provisions
require undercapitalized institutions to become subject to an increasingly
stringent array of restrictions, requirements and prohibitions, as their
capital levels deteriorate and supervisory problems mount. Should these
corrective measures prove unsuccessful in recapitalizing the institution
and correcting its problems, the FDIC Act mandates that the institution be
placed in receivership.
Pursuant to regulations promulgated under the FDIC Act, the corrective
actions that the banking agencies either must or may take are tied
primarily to an institution's capital levels. In
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<PAGE>
accordance with the framework adopted by the FDIC Act, the banking agencies
have developed a classification system, pursuant to which all banks and
thrifts will be placed into one of five categories: well-capitalized
institutions, adequately capitalized institutions, undercapitalized
institutions, significantly undercapitalized institutions and critically
undercapitalized institutions. The capital thresholds established for each
of the categories are as follows:
<TABLE>
<CAPTION>
================================================================================
Tier 1
Tier 1 Risk-Based Risk-Based
Capital Category Capital Capital Capital Other
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Well-Capitalized 5% or more 10% or more 6% or more Not
subject
to a
capital
directive
- --------------------------------------------------------------------------------
Adequately Capitalized 4% or more 8% or more 4% or more ---
- --------------------------------------------------------------------------------
Undercapitalized less than less than 8% less than 4% ---
4%
- --------------------------------------------------------------------------------
Significantly less than less than 6% less than 3% ---
Undercapitalized 3%
- --------------------------------------------------------------------------------
Critically Undercapitalized 2% or --- --- ---
less
tangible
equity
================================================================================
</TABLE>
The undercapitalized, significantly undercapitalized and critically
undercapitalized categories overlap; therefore, a critically
undercapitalized institution would also be an undercapitalized institution
and a significantly undercapitalized institution. This overlap ensures
that the remedies and restrictions prescribed for undercapitalized
institutions will also apply to institutions in the lowest two categories.
The down-grading of an institution's category is automatic in two
situations: (i) whenever an otherwise well-capitalized institution is
subject to any written capital order or directive, and (ii) where an
undercapitalized institution fails to submit or implement a capital
restoration plan or has its plan disapproved. The federal banking agencies
may treat institutions in the well-capitalized, adequately capitalized and
undercapitalized categories as if they were in the next lower capital level
based on safety and soundness considerations relating to factors other than
capital levels.
The FDIC Act prohibits all insured institutions regardless of their
level of capitalization from paying any dividend or making any other kind
of capital distribution or paying any management fee to any controlling
person if following the payment or distribution the institution would be
undercapitalized. While the prompt corrective action provisions of the
FDIC Act contain no requirements or restrictions aimed specifically at
adequately capitalized institutions, other provisions of the FDIC Act and
the agencies' regulations relating to deposit insurance assessments,
brokered deposits and interbank liabilities treat adequately capitalized
institutions less favorably than those that are well-capitalized.
A depository institution that is not well capitalized is prohibited
from accepting deposits through a deposit broker. However, an adequately
capitalized institution can apply for a waiver to accept brokered deposits.
Institutions that receive a waiver are subject to limits on the rates of
interest they may pay on brokered deposits.
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<PAGE>
Capital Distributions. An OTS rule imposes limitations on all capital
---------------------
distributions by savings associations (including dividends, stock
repurchases and cash-out mergers). Under the current rule, a savings
association is classified based on its level of regulatory capital both
before and after giving effect to a proposed capital distribution. Under a
proposed rule, the OTS would conform its three classifications to the five
capital classifications set forth under the prompt corrective action
regulations. Under the proposal, institutions that are at least adequately
capitalized would still be required to provide prior notice. Well
capitalized institutions could make capital distributions without prior
regulatory approval in specified amounts in any calendar year.
An institution that both before and after a proposed capital
distribution has net capital equal to or in excess of its capital
requirements may, subject to any otherwise applicable statutory or
regulatory requirements or agreements entered into with the regulators,
make capital distributions in any calendar year up to 100% of its net
income to date during the calendar year plus the amount that would reduce
by one-half its "surplus capital ratio" (i.e., the percentage by which the
association's capital-to-assets ratio exceeds the ratio of its fully
phased-in capital requirement to its assets) at the beginning of the
calendar year. No regulatory approval of the capital distribution is
required, but prior notice must be given to the OTS.
An institution that either before or after a proposed capital
distribution fails to meet its then applicable minimum capital requirement
or that has been notified that it needs more than normal supervision may
not make any capital distributions without the prior written approval of
the OTS. In addition, the OTS may prohibit a proposed capital
distribution, which would otherwise be permitted by the regulation, if the
OTS determines that such distribution would constitute an unsafe or unsound
practice.
Liquidity. Under applicable federal regulations, savings associations
---------
are required to maintain an average daily balance of liquid assets
(including cash, certain time deposits, certain bankers' acceptances,
certain corporate debt securities and highly rated commercial paper,
securities of certain mutual funds and specified United States government,
state or federal agency obligations) equal to a monthly average of not less
than a specified percentage of the average daily balance of the savings
association's net withdrawable deposits plus short-term borrowings. Under
HOLA, this liquidity requirement may be changed from time to time by the
OTS to any amount within the range of 4% to 10% depending upon economic
conditions and the deposit flows of member institutions, and currently is
5%. Savings institutions also are required to maintain an average daily
balance of short-term liquid assets at a specified percentage (currently
1%) of the total of the average daily balance of its net withdrawable
deposits and short-term borrowings.
Equity Investments. The OTS has revised its risk-based capital
regulation to modify the treatment of certain equity investments and to
clarify the treatment of other equity investments. Equity investments that
are permissible for both savings banks and national banks will no longer be
deducted from savings associations' calculations of total capital over a
five-year period. Instead, permissible equity investments will be placed
in the 100% risk-weight category, mirroring the capital treatment
prescribed for those investments when made by national banks under the
regulations of the OCC. Equity investments held by savings associations
that are not permissible for national banks must still be deducted from
assets and total capital.
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<PAGE>
Qualified Thrift Lender Requirement. A federal savings bank is deemed
to be a "qualified thrift lender" ("QTL") as long as its "qualified thrift
investments" equal or exceed 65% of its "portfolio assets" on a monthly
average basis in nine out of every 12 months. Qualified thrift investments
generally consist of (i) various housing related loans and investments
(such as residential construction and mortgage loans, home improvement
loans, mobile home loans, home equity loans and mortgage-backed
securities), (ii) certain obligations of the FDIC and (iii) shares of stock
issued by any FHLB, the FHLMC or the FNMA. In addition, the following
assets may be categorized as qualified thrift investments in an amount not
to exceed 20% in the aggregate of portfolio assets: (i) 50% of the dollar
amount of residential mortgage loans originated and sold within 90 days of
origination; (ii) investments in securities of a service corporation that
derives at least 80% of its income from residential housing finance; (iii)
200% of loans and investments made to acquire, develop or construct starter
homes or homes in credit needy areas (subject to certain conditions); (iv)
loans for the purchase or construction of churches, schools, nursing homes
and hospitals; and (v) consumer loans (in an amount up to 20% of portfolio
assets). For purposes of the QTL test, the term "portfolio assets" means
the savings institution's total assets minus goodwill and other intangible
assets, the value of property used by the savings institution to conduct
its business, and liquid assets held by the savings institution in an
amount up to 20% of its total assets.
OTS regulations provide that any savings association that fails to
meet the definition of a QTL must either convert to a national bank charter
or limit its future investments and activities (including branching and
payments of dividends) to those permitted for both savings associations and
national banks. Further, within one year of the loss of QTL status, a
holding company of a savings association that does not convert to a bank
charter must register as a bank holding company and will be subject to all
statutes applicable to bank holding companies. In order to exercise the
powers granted to federally chartered savings associations and maintain
full access to FHLB advances, the Savings Bank must meet the definition of
a QTL.
Loans to One Borrower Limitations. HOLA generally requires savings
associations to comply with the loans to one borrower limitations
applicable to national banks. National banks generally may make loans to a
single borrower in amounts up to 15% of their unimpaired capital and
surplus, plus an additional 10% of capital and surplus for loans secured by
readily marketable collateral. HOLA provides exceptions under which a
savings association may make loans to one borrower in excess of the
generally applicable national bank limits. A savings association may make
loans to one borrower in excess of such limits under one of the following
circumstances: (i) for any purpose, in any amount not to exceed $500,000;
or (ii) to develop domestic residential housing units, in an amount not to
exceed the lesser of $30 million or 30% of the savings association's
unimpaired capital and unimpaired surplus, provided other conditions are
satisfied. The Federal Institutions Reform, Recovery, and Enforcement Act
of 1989 provided that a savings association could make loans to one
borrower to finance the sale of real property acquired in satisfaction of
debts previously contracted in good faith in amounts up to 50% of the
savings association's unimpaired capital and unimpaired surplus. The OTS,
however, has modified this standard by limiting loans to one borrower to
finance the sale of real property acquired in satisfaction of debts to 15%
of unimpaired capital and surplus. That rule provides, however, that
purchase money mortgages received by a savings association to finance the
sale of such real property do not constitute "loans" (provided no new funds
are advanced and the savings association is not placed in a more
detrimental position holding the note than holding the real estate) and,
therefore, are not subject to the loans to one borrower limitations.
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<PAGE>
Commercial Real Property Loans. HOLA limits the aggregate amount of
commercial real estate loans that a federal savings association may make to
an amount not in excess of 400% of the savings association's capital.
Community Reinvestment. Under the Community Reinvestment Act (the
"CRA") and the implementing OTS regulations, federal savings banks have a
continuing and affirmative obligation to help meet the credit needs of its
local community, including low and moderate-income neighborhoods,
consistent with the safe and sound operation of the institution. The CRA
requires the board of directors of financial institutions, such as the
Savings Bank, to adopt a CRA statement for each assessment area that, among
other things, describes its efforts to help meet community credit needs and
the specific types of credit that the institution is willing to extend.
The regulations promulgated pursuant to CRA contain three evaluation tests:
(i) a lending test which will compare the institution's market share of
loans in low- and moderate-income areas to its market share of loans in its
entire service area and the percentage of a bank's outstanding loans to
low- and moderate-income areas or individuals, (ii) a services test which
will evaluate the provision of services that promote the availability of
credit to low- and moderate-income areas, and (iii) an investment test,
which will evaluate an institution's record of investments in organizations
designed to foster community development, small- and minority-owned
businesses and affordable housing lending, including state and local
government housing or revenue bonds.
Fair Lending. Congress and various federal agencies (including, in
addition to the bank regulatory agencies, the Department of Housing and
Urban Development, the Federal Trade Commission and the Department of
Justice) (collectively the "Federal Agencies") responsible for implementing
the nation's fair lending laws have been increasingly concerned that
prospective home buyers and other borrowers are experiencing discrimination
in their efforts to obtain loans. In recent years, the Department of
Justice has filed suit against financial institutions that it determined
had discriminated, seeking fines and restitution for borrowers who
allegedly suffered from discriminatory practices. Most, if not all, of
these suits have been settled (some for substantial sums) without a full
adjudication on the merits.
On March 8, 1994, the Federal Agencies, in an effort to clarify what
constitutes lending discrimination and to specify the factors the agencies
will consider in determining if lending discrimination exists, announced a
joint policy statement detailing specific discriminatory practices
prohibited under the Equal Credit Opportunity Act and the Fair Housing Act.
In the policy statement, three methods of proving lending discrimination
were identified: (i) overt evidence of discrimination, when a lender
blatantly discriminates on a prohibited basis, (ii) evidence of disparate
treatment, when a lender treats applicants differently based on a
prohibited factor even where there is no showing that the treatment was
motivated by prejudice or a conscious intention to discriminate against a
person, and (iii) evidence of disparate impact, when a lender applies a
practice uniformly to all applicants, but the practice has a discriminatory
effect, even where such practices are neutral on their face and are applied
equally, unless the practice can be justified on the basis of business
necessity.
FDIC Insurance Assessments. Federal deposit insurance is required for
all federally chartered savings associations. Deposits at the Savings Bank
are insured to a maximum of $100,000 for each depositor by Savings
Association Insurance Fund (the "SAIF"). As a SAIF-insured institution,
the Bank is subject to regulation and supervision by the FDIC, to the
extent deemed necessary by the FDIC to ensure the safety and soundness of
the SAIF. The FDIC is entitled to have access to reports of examination of
the Bank made by the OTS and all reports of condition filed by the Bank
with the OTS. The FDIC also may require the Bank to file such additional
reports as
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<PAGE>
it determines to be advisable for insurance purposes. Additionally, the
FDIC may determine by regulation or order that any specific activity poses
a serious threat to the SAIF and that no SAIF member may engage in the
activity directly.
Insurance premiums are paid in semiannual assessments. Under a risk-
based assessment system, the FDIC is required to calculate a savings
association's semiannual assessment based on (i) the probability that the
insurance fund will incur a loss with respect to the institution (taking
into account the institution's asset and liability concentration), (ii) the
potential magnitude of any such loss, and (iii) the revenue and reserve
needs of the insurance fund. The semiannual assessment imposed on the
Savings Bank may be higher depending on the SAIF revenue and expense
levels, and the risk classification applied to the Savings Bank.
The deposit insurance assessment rate charged to each institution
depends on the assessment risk classification assigned to each institution.
Under the risk-classification system, each SAIF member is assigned to one
of three capital groups: "well capitalized," "adequately capitalized," or
"less than adequately capitalized," as such terms are defined under the
OTS's prompt corrective action regulation (discussed above), except that
"less than adequately capitalized" includes any institution that is not
well capitalized or adequately capitalized. Within each capital group,
institutions are assigned to one of three supervisory subgroups--"healthy"
(institutions that are financially sound with only a few minor weaknesses),
"supervisory concern" (institutions with weaknesses which, if not corrected
could result in significant deterioration of the institution and increased
risk to the SAIF) or "substantial supervisory concern" (institutions that
pose a substantial probability of loss to the SAIF unless corrective action
is taken). The FDIC will place each institution into one of nine
assessment risk classifications based on the institution's capital group
and supervisory subgroup classification.
Until recently, SAIF premiums had been equivalent to deposit insurance
premiums paid by banks on deposits to the Bank Insurance Fund ("BIF").
Deposit insurance premiums were set to facilitate each fund achieving its
designated reserve ratios. As each fund achieves its designated reserve
ratio, however, the FDIC has the authority to lower the premium assessments
for that fund to a rate that would be sufficient to maintain the designated
reserve ratio. In August 1995, the FDIC determined that the BIF had
achieved its designated reserve ratio and approved lower BIF premium rates
for deposit insurance by the BIF for all but the riskiest institutions. On
November 14, 1995, the FDIC determined that BIF deposit insurance premiums
for well capitalized banks would be further reduced to the then-statutory
minimum of $2,000 per institution per year, effective January 1, 1996.
Because the SAIF remained significantly below its designated reserve ratio,
insurance premiums for assessable SAIF deposits were not reduced in either
FDIC action.
The current financial condition of the SAIF resulted in the adoption
of the Deposit Insurance Funds Act of 1996 ("DIFA"), which was enacted on
September 30, 1996 as part of the Omnibus Consolidated Appropriations Act.
Under DIFA, a special one-time assessment of 65.7 cents per $100 of
assessable SAIF deposits was collected on November 27, 1996 and applied
retroactively to SAIF deposits as of March 31, 1995. DIFA provides that
special assessments will be deductible under Section 162 of the Internal
Revenue Code in the year in which the assessment is paid. After collection
of the special assessment, it is expected that the SAIF would achieve its
designated reserve ratio and SAIF premium rates would then become the same
as BIF rates. DIFA further provides that BIF and SAIF are to be merged,
creating the "Deposit Insurance Fund," on January 1, 1999, provided that
bank and savings association charters are combined by that date. The
Treasury Department is preparing a report to be submitted to Congress by
March 31, 1997 on the development
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of a common charter for all insured depository institutions. See
"Supervision and Regulation -Elimination of Federal Savings Charter."
DIFA further assesses premiums for Financing Corporation Bond debt
service ("FICO"). Beginning January 1, 1997, FICO premiums for BIF and
SAIF will be 1.3 and 6.4 basis points, respectively. Full pro rata sharing
of FICO will begin no later than January 1, 2000.
Effective January 1, 1997, SAIF members will have the same risk-based
assessment schedule as BIF members, which is 0 to 27 cents per $100 of
deposits. FICO assessments of 1.3 cents for BIF deposits and 6.4 cents per
$100 of deposits for SAIF deposits will be added to the BIF-assessable base
and SAIF assessable base, respectively, until December 31, 1999.
Thereafter, approximately 2.4 cents per $100 of deposits would be added to
each regular assessment for all insured depositors, thereby achieving full
pro rata FICO sharing.
The SAIF-assessable base previously was assessed at a rate of 23 to 31
basis points for the fourth quarter as part of the regular annual deposit
insurance assessment. Following the enaction of DIFA, the special
assessment was booked as an asset by the FDIC effective October 1, 1996,
fully capitalizing SAIF as of that date. Consequently, the proposed
regular assessment rate for SAIF-member savings associations has been
lowered retroactively to 18 to 27 basis points effective October 1, 1996,
which represents the amount necessary to cover FICO obligations.
Until January 1, 1997, under the FDIC's interpretation of existing
law, FICO payments can be met only from assessments on SAIF-member savings
associations. Overpayment of fourth quarter assessments from such
institutions, estimated at approximately 1.25 cents per $100 of deposits,
will be refunded or credited, with interest, using regular quarterly
payment procedures.
The federal banking agencies are required to take action to prevent
insured institutions from facilitating or encouraging the shifting of SAIF
deposits to BIF deposits for purposes of evading the assessments imposed on
SAIF-assessable deposits.
Insurance of deposits may be terminated by the FDIC after notice and
hearing, upon a finding by the FDIC that the savings association has
engaged in unsafe or unsound practices, is in an unsafe or unsound
condition to continue operations, or has violated any applicable law, rule,
regulation, order or condition imposed by, or written agreement with, the
FDIC. Additionally, if insurance termination proceedings are initiated
against a savings association, the FDIC may temporarily suspend insurance
on new deposits received by an institution under certain circumstances.
Federal Home Loan Bank System. The FHLB System consists of 12
regional FHLBs, each subject to supervision and regulation by the Federal
Housing Finance Board (the "FHFB"). The FHLBs provide a central credit
facility for member savings associations. The maximum amount that the FHLB
of Atlanta will advance fluctuates from time to time in accordance with
changes in policies of the FHFB and the FHLB of Atlanta, and the maximum
amount generally is reduced by borrowings from any other source. In
addition, the amount of FHLB advances that a savings association may obtain
will be restricted in the event the institution fails to constitute a QTL.
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Federal Reserve System. The Federal Reserve Board has adopted
regulations that require savings associations to maintain nonearning
reserves against their transaction accounts (primarily NOW and regular
checking accounts). These reserves may be used to satisfy liquidity
requirements imposed by the OTS. Because required reserves must be
maintained in the form of cash or a non-interest-bearing account at a
Federal Reserve Bank, the effect of this reserve requirement is to reduce
the amount of the Savings Bank's interest-earning assets.
Savings institutions also have the authority to borrow from the
Federal Reserve "discount window." Federal Reserve Board regulations,
however, require savings associations to exhaust all FHLB sources before
borrowing from a Federal Reserve bank.
Transactions with Affiliates Restrictions. Transactions engaged in by
a savings association or one of its subsidiaries with affiliates of the
savings association generally are subject to the affiliate transaction
restrictions contained in Sections 23A and 23B of the Federal Reserve Act
in the same manner and to the same extent as such restrictions apply to
transactions engaged in by a member bank or one of its subsidiaries with
affiliates of the member bank. Section 23A of the Federal Reserve Act
imposes both quantitative and qualitative restrictions on transactions
engaged in by a member bank or one of its subsidiaries with an affiliate,
while Section 23B of the Federal Reserve Act requires, among other things
that all transactions with affiliates be on terms substantially the same,
and at least as favorable to the member bank or its subsidiary, as the
terms that would apply to, or would be offered in, a comparable transaction
with an unaffiliated party. Exemptions from, and waivers of, the
provisions of Sections 23A and 23B of the Federal Reserve Act may be
granted only by the Federal Reserve Board. The HOLA and OTS regulations
promulgated thereunder contain other restrictions on loans and extension of
credit to affiliates, and the OTS is authorized to impose additional
restrictions on transactions with affiliates if it determines such
restrictions are necessary to ensure the safety and soundness of any
savings association. Current OTS regulations are similar to Sections 23A
and 23B of the Federal Reserve Act.
Future Requirements. Statutes and regulations are regularly
introduced which contain wide-ranging proposals for altering the
structures, regulations and competitive relationships of financial
institutions. It cannot be predicted whether or what form any proposed
statute or regulation will be adopted or the extent to which the business
of the Company and the Savings Bank may be affected by such statute or
regulation.
Elimination of Federal Savings Association Charter
Legislation that would eliminate the federal savings association
charter is under discussion. If such legislation is enacted, the Bank
would be required to convert its federal savings bank charter to either a
national bank charter or to a state depository institution charter.
Pending legislation also may provide relief as to recapture of the bad debt
deduction for federal tax purposes that otherwise would be applicable if
the Savings Bank converted its charter, provided that the Savings Bank
meets a proposed residential loan origination requirement. Various
legislative proposals also may result in the restructuring of federal
regulatory oversight, including, for example, consolidation of the OTS into
another agency, or creation of a new Federal banking agency to replace the
various such agencies which presently exist. The Savings Bank is unable to
predict whether such legislation will be enacted or, if enacted, whether it
will contain relief as to bad debt deductions previously taken.
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TAXATION
Federal Taxation
General. The Company and the Savings Bank are subject to the
generally applicable corporate tax provisions of the Code, and the Savings
Bank is subject to certain additional provisions of the Code which apply to
thrift and other types of financial institutions. The following discussion
of federal taxation is intended only to summarize certain pertinent federal
income tax matters and is not a comprehensive discussion of the tax rules
applicable to the Company and the Savings Bank.
Tax Returns. The Savings Bank files a federal income tax return on
the basis of a fiscal year ending on December 31. Consolidated returns
have the effect of eliminating intercompany distributions, including
dividends, from the computation of consolidated taxable income for the
taxable year in which such distributions occur. However, based upon the
best interests of the Company, the Savings Bank and its stockholders, and
on other conditions, the Company may elect not to file consolidated
returns.
Bad Debt Reserves. Savings institutions such as the Savings Bank are
subject to the taxing provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), for corporations, as modified by certain provisions
specifically applicable to financial or thrift institutions. Income is
reported using the accrual method of accounting. The maximum corporate
federal income tax rate is 35%.
For fiscal years beginning prior to December 31, 1995, thrift
institutions that qualified under certain definitional tests and other
conditions of the Code were permitted certain favorable provisions
regarding their deductions from taxable income for annual additions to
their bad debt reserve. A reserve could be established for bad debts on
qualifying real property loans (generally loans secured by interests in
real property improved or to be improved) under (i) a method based on a
percentage of the institution's taxable income, as adjusted (the
"percentage of taxable income method") or (ii) a method based on actual
loss experience (the "experience method").
In 1996, the Code was amended to repeal the foregoing methods of
establishing a bad debt reserve. Effective January 1, 1996, the Savings
Bank now computes its bad debt reserves for tax purposes under the rules
promulgated pursuant to Code Section 585, which applies to commercial
banks. In the years prior to 1996, the Savings Bank obtained bad debt
deductions approximating $5.8 million in excess of its financial statement
allowance for loan losses for which no provision for federal income tax was
made. These amounts were then subject to federal income tax in future
years pursuant to the provisions of prior Code Section 593 if they were
used for purposes other than to absorb bad debt losses. As of January 1,
1996, approximately $1.0 million of the excess reserve was no longer
subject to recapture under any circumstances and approximately $4.8 million
of the excess reserve was subject to recapture only if the Savings Bank
ceased to operate as a bank pursuant to the provisions of Code Section 585.
Minimum Tax. The Code imposes an alternative minimum tax at a rate of
20%. The alternative minimum tax generally applies to a base of regular
taxable income plus certain tax preferences ("alternative minimum taxable
income" or "AMTI") and is payable to the extent such AMTI is in excess of
an exemption amount. The Code provides that an item of tax preference is
the excess of the bad debt deduction allowable for a taxable year pursuant
to the percentage of taxable income method over the amount allowable under
the experience method. Other items of tax preference that constitute AMTI
include (a) tax-exempt interest on newly issued (generally, issued
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on or after August 8, 1986) private activity bonds other than certain
qualified bonds and (b) 75% of the excess (if any) of (i) adjusted current
earnings as defined in the Code, over (ii) AMTI (determined without regard
to this preference and prior to reduction by net operating losses).
Net Operating Loss Carryovers. A financial institution may carry back
net operating losses ("NOLs") to the preceding three taxable years and
forward to the succeeding 15 taxable years. This provision applies to
losses incurred in taxable years beginning after 1986. The Savings Bank
has no NOL carryforwards for federal income tax purposes.
Capital Gains and Corporate Dividends-Received Deduction. Corporate
net capital gains are taxed at a maximum rate of 35%. The corporate
dividends-received deduction is 80% in the case of dividends received from
corporations with which a corporate recipient does not file a consolidated
tax return, and corporations which own less than 20% of the stock of a
corporation distributing a dividend may deduct only 70% of dividends
received or accrued on their behalf. However, a corporation may deduct
100% of dividends from a member of the same affiliated group of
corporations.
Other Matters. Federal legislation is introduced from time to time
that would limit the ability of individuals to deduct interest paid on
mortgage loans. Individuals are currently not permitted to deduct interest
on consumer loans. Significant increases in tax rates or further
restrictions on the deductibility of mortgage interest could adversely
affect the Savings Bank.
The Savings Bank's federal income tax returns for the tax years ended
December 31, 1996, 1995 and 1994 are open under the statute of limitations
and are subject to review by the IRS.
Georgia Taxation. The Company and the Savings Bank are both subject
to Georgia corporate income tax and franchise tax to the extent they are
engaged in business in the State of Georgia or have income that is
generated in the State of Georgia. For Georgia income tax purposes,
savings institutions are presently taxed at a rate equal to 6.0% of income,
which is calculated based on federal taxable income, subject to certain
adjustments. The State of Georgia also imposes franchise and privilege
taxes on savings institutions, which in the case of the Savings Bank do not
constitute significant tax items.
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MANAGEMENT OF THE COMPANY
Directors and Executive Officers
The Board of Directors is divided into three classes, each of which
contains approximately one-third of the Board. The Bylaws of the Company
currently authorize nine directors. The directors shall be elected by the
stockholders of the Company for staggered three-year terms, or until their
successors are elected and qualified. One class of directors, consisting
of Gary M. Bullock, Jerry L. Clayton and Dean B. Talley will have a term
expiring at the Company's first annual meeting of stockholders; a second
class of directors, consisting of Thomas E. Reeve, Jr., Michael P. Steed
and Thomas S. Upchurch will have a term of office expiring at the second
annual meeting; and a third class of directors, consisting of T. Aubrey
Silvey, Gary D. Dorminey and Anna L. Berry, will have a term of office
expiring at the third annual meeting. Their names and biographical
information are set forth under "Management of the Savings Bank -
Directors."
The following individuals are executive officers of the Company and
hold the offices set forth below opposite their names. Their biographical
information is set forth under "Management of the Savings Bank - Directors"
and "- Executive Officers Who Are Not Directors."
Name Position(s) with the Company
---- ----------------------------
Gary D. Dorminey President and Chief Executive Officer
D. Lane Poston Executive Vice President and Chief Operating Officer
C. Lynn Gable Chief Financial Officer
Anyce C. Fox Senior Vice President
The executive officers of the Company are elected annually and hold
office until their respective successors have been elected and qualified or
until death, retirement, resignation or removal by the Board of Directors.
Since the formation of the Company, none of the executive officers,
directors or other personnel of the Company has received remuneration from
the Company. In the event that any employee of the Savings Bank provides
services to the Company, the Company has agreed to reimburse the Savings
Bank for any costs related to such services. Information concerning the
principal occupations and employment of the directors and officers of the
Company during the past five years is set forth under "Management of the
Savings Bank - Directors" and "- Executive Officers Who Are Not Directors."
Directors and executive officers of the Company initially will not be
compensated by the Company but will serve and be compensated by the Savings
Bank. The Company does not currently nor does it plan to obtain "key
person" insurance on any of its employees. See "Management of the Savings
Bank - Executive Compensation."
Board Meetings and Committees of the Board of Directors
Regular meetings of the Board of Directors of the Company will be held
on a quarterly basis, with special meetings being held from time to time as
needed. Upon consummation of the Offerings, the Company will have an
Executive Committee, Compensation Committee and Audit Committee. The
Executive Committee will have the power and authority to act on behalf of
the Board of Directors on important matters between scheduled director
meetings unless specific Board action is required or unless otherwise
restricted by the Company's Articles of Incorporation or Bylaws or by
action of its Board of Directors. The Compensation Committee will
establish and review executive
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compensation and administer executive compensation programs. The Audit
Committee will recommend to the Board of Directors the independent public
accountants to be selected to audit the Company's annual financial
statements and to approve any special assignments given to such
accountants. The Audit Committee will also review the planned scope of the
annual audit, any changes in accounting principles and the effectiveness
and efficiency of the Company's internal accounting staff. The
Compensation Committee and the Audit Committee will be composed solely of
non-employee directors.
Benefits
1997 Stock Option Plan. The Board of Directors of the Company intends
to adopt the Option Plan and to submit the Option Plan to stockholders at a
special or annual meeting of stockholders no earlier than six months after
the completion of the Conversion and Reorganization. No options will be
awarded under the Option Plan unless stockholder approval is obtained. The
Company intends to reserve for future issuance pursuant to the Option Plan
a number of authorized shares of Common Stock equal to 10% of the Common
Stock issued in the Offerings (or 209,875 shares at the maximum of the
Valuation Price Range). Shares issued pursuant to the Option Plan may be
authorized but unissued shares or treasury shares repurchased by the
Company, or both.
The Option Plan will be designed to attract and retain qualified
personnel in key positions, provide directors, officers and key employees
with a proprietary interest in the Company as an incentive to contribute to
the success of the Company and reward such persons for performance and the
attainment of targeted goals. The Option Plan will provide for the grant
of incentive stock options intended to comply with the requirements of
Section 422 of the Code ("incentive stock options") and non-incentive or
compensatory stock options (collectively "Awards"). Awards will be granted
to directors and key employees of the Savings Bank and/or the Company and
any subsidiaries, except that non-employee directors will not be eligible
to receive incentive stock options. If shareholder approval is obtained,
it is expected that options to acquire shares of Common Stock will be
awarded to key employees of the Company or its subsidiaries and directors
of the Company or the Savings Bank with an exercise price equal to the fair
market value of the Common Stock on the date of the grant. If the Option
Plan is submitted for shareholder approval within one year after the
consummation of the Conversion and Reorganization, under current OTS
regulations, unless the Regional Director of the OTS permits otherwise, no
individual member of management may receive more than 25% of the options
that may be issued and directors who are not employees may not receive more
than 5% of such options individually and more than 30% of such options in
the aggregate. No decision has yet been made as to anticipated grants to
individuals under the Option Plan.
The Option Plan will be administered and interpreted by a committee
(the "Committee") of disinterested directors satisfying standards under
both Rule 16b-3 under the Exchange Act and Section 162(m) of the Code. The
Option Plan will have an indefinite term except that incentive stock
options may not be granted more than ten years from its adoption by the
Board of Directors. Under the Option Plan, the Committee will determine
which directors, officers and key employees will be granted options,
whether such options will be incentive or compensatory options, the number
of shares subject to each option, the exercise price of each compensatory
option, the forms of payment of the exercise price and when such options
become exercisable. The per share exercise price of an incentive stock
option shall at least equal the fair market value of a share of Common
Stock on the date the option is granted. In the event of a merger,
consolidation, extraordinary cash or stock dividend, reorganization or
other change in corporate structure or tender offer, the number of shares
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of Common Stock under the Option Plan, the number of shares to which any Award
relates and the exercise price per share under any option shall be adjusted to
reflect such event.
Stock options shall become vested and exercisable in the manner
specified by the Committee. However, current OTS regulations require that stock
options granted pursuant to a plan approved by shareholders within one year of
consummation of a mutual-to-stock conversion not vest at a rate in excess of 20%
per year. Stock options are non-transferable except by will or the laws of
descent and distribution.
Pursuant to the Option Plan, compensatory stock options for 30% of the
shares of Common Stock to be reserved for issuance pursuant to the Option Plan
will be available for grants to non-employee directors of the Company and the
Savings Bank upon approval of the Option Plan by shareholders. The exercise
price for such options will be the fair market value of the Common Stock at the
date of grant. Each stock option or portion thereof shall be exercisable at any
time on or after it vests and is exercisable until ten years after its date of
grant or three months after the date on which the optionee's employment
terminates. An option will fully vest in the event of the optionee's death or
disability. An option granted to directors will be exercisable until ten years
after its date of grant. However, if an optionee dies while serving as a non-
employee director or within three years following the termination of the
optionee's service as a non-employee director as a result of retirement or
resignation without having fully exercised his or her options, the optionee's
executors, administrators, legatees or distributees of his or her estate shall
have the right to exercise such options during the twelve-month period following
such death, provided no option will be exercisable within six months after the
date of grant or more than ten years from the date it was granted.
Pursuant to the Option Plan, stock options for 70% of the shares of
Common Stock to be reserved for issuance pursuant to the Option Plan will be
available for grant to personnel of the Company and its subsidiaries other than
outside directors of the Company and the Savings Bank. Upon receipt of
shareholder approval of the Option Plan, the Company plans to grant compensatory
stock options for shares of Common Stock to executive officers and other key
personnel of the Company and its subsidiaries. The exercise price for such
options will be the fair market value of the Common Stock at the date of grant.
Grants will be made by the Committee primarily based on performance, although
the Committee will be able to consider other factors determined to be relevant
in its sole discretion. Under the terms of the Option Plan, no employee of the
Company may be granted options for more than 100,000 shares of Common Stock in a
given fiscal year. Each stock option or portion thereof shall be exercisable at
any time on or after it vests and is exercisable until ten years after its date
of grant or three months after the date on which the optionee's employment
terminates. An option will fully vest in the event of the optionee's death or
disability.
Under current provisions of the Code, the federal income tax treatment
of incentive stock options and compensatory stock options is different. As to
incentive stock options, an optionee who meets certain holding period
requirements will not recognize income at the time the option is granted or at
the time the option is exercised (although a tax preference item subject to the
alternative minimum tax may result upon exercise), and a federal income tax
deduction generally will not be available to the Company at any time as a result
of such grant or exercise. With respect to compensatory stock options, the
difference between the fair market value on the date of exercise and the option
exercise price generally will be treated as ordinary income upon exercise, and
the Company will be entitled to a deduction in the amount of income so
recognized by the optionee.
Management Recognition Plan. The Board of Directors of the Company
intends to adopt the Recognition Plan for directors and selected officers and
employees and to submit such plan to
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stockholders at a special or annual meeting of stockholders no earlier than six
months after the completion of the Conversion and Reorganization. The objective
of the Recognition Plan will be to enable the Company to provide directors,
officers and employees of the Company and the Savings Bank with a proprietary
interest in the Company as an incentive to contribute to its success.
The Recognition Plan will be administered by the same committee that
administers the Option Plan. A number of shares equal to 4.0% of the Common
Stock (73,000 shares, based on the sale of 1,825,000 shares will be reserved
under the Recognition Plan). Shares of Common Stock granted pursuant to the
Recognition Plan generally will be in the form of restricted stock that vests
over a period specified by the Committee and will be issued at no cost to the
recipient. For accounting purposes, compensation expense in the amount of the
fair market value of the Common Stock at the date of the grant to the recipient
will be recognized pro rata over the number of years during which the shares
vest. The shares, while restricted, may not be sold, pledged or otherwise
disposed of. If a recipient terminates employment for reasons other than death
or disability, the recipient will forfeit all rights to the shares under
restriction. If the recipient's termination is caused by death or disability,
all restrictions will expire and all allocated shares will become unrestricted.
Common Stock required for distribution pursuant to the Recognition Plan will be
issued from authorized but unissued shares or from treasury shares repurchased
by the Company, or both. The Board of Directors of the Company may terminate the
Recognition Plan at any time.
Under current OTS regulations, if the Recognition Plan is submitted for
shareholder approval within one year after the consummation of the Conversion
and Reorganization, unless the Regional Director of the OTS permits otherwise,
no individual member of management may receive more than 25% of the shares which
may be issued pursuant to a stock plan and directors who are not employees may
not receive more than 5% of such shares individually and more than 30% of such
shares in the aggregate. If the Recognition Plan is submitted for shareholder
approval within one year after the consummation of the Conversion and
Reorganization, shares granted pursuant to the Recognition Plan will vest at the
rate of 20% per year over the five years following the date of grant. Recipients
of grants under the Recognition Plan will not be required to make any payment at
the time of grant or when the underlying shares of Common Stock become vested.
Upon receipt of stockholder approval of the Recognition Plan, the
Company anticipates granting stock awards for shares of Common Stock to
directors, executive officers and other key personnel. A total of 70% of the
Common Stock to be issued pursuant to the Recognition Plan will be available for
the award of shares of Common Stock to executive officers and key employees of
the Savings Bank. It is currently anticipated that stock awards will be made to
officers and key personnel by the committee primarily based on performance,
although the committee will be able to consider other factors determined to be
relevant in its sole discretion. In addition, pursuant to the Recognition Plan,
30% of the shares of Common Stock authorized to be awarded by the Recognition
Plan will be available to be awarded to outside directors of the Company. It is
currently anticipated that stock awards will be granted to each of the non-
employee directors. All of the stock awards will be granted at no cost to the
recipients. No decision has yet been made as to anticipated grants to
individuals under the Recognition Plan. See "Risk Factors - Possible Dilutive
Effect of Issuance of Additional Shares" and "Management of the Company -
Benefits."
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Employee Stock Ownership Plan
The Company will establish an Employee Stock Ownership Plan for
employees age 21 or older who have at least one year of credited service with
the Savings Bank or any affiliate (including years of service with the mutual
predecessor of the Savings Bank). The ESOP will be funded by the Company, the
Savings Bank and any other adopting affiliate with contributions made in cash
(which primarily will be invested in Common Stock) or Common Stock. Benefits may
be paid either in shares of Common Stock or in cash.
It is anticipated that the ESOP will borrow funds which are sufficient
to purchase 8% of the Common Stock issued in the Offerings or 167,900 shares,
based on the issuance of the maximum 2,098,750 shares in the Offerings. The ESOP
plans to obtain a loan from the Company which will permit the ESOP to purchase
such shares. The initial interest rate on the loan is expected to equal the
prime rate, which is currently 8.25%. The Savings Bank will make scheduled
discretionary cash contributions to the ESOP sufficient to amortize the
principal and interest on the loan, which is anticipated to have a maturity of
five years. The Savings Bank may, in any plan year, make additional
discretionary contributions for the benefit of plan participants in either cash
or shares of Common Stock, which may be acquired through the purchase of
outstanding shares in the market or from individual stockholders, upon the
original issuance of additional shares by the Company or upon the sale of
Treasury shares by the Company. Such purchases, if made, would be funded through
additional borrowings by the ESOP or additional contributions. The timing,
amount and manner of future contributions to the ESOP will be affected by
various factors, including prevailing regulatory policies, the requirements of
applicable laws and regulations and market conditions.
Shares purchased by the ESOP with the proceeds of the loan will be held
in a loan suspense account and released on a pro rata basis as debt service
payments are made. Discretionary contributions to the ESOP and shares released
from the suspense account will be allocated among participants on the basis of
compensation. A participant becomes vested in his or her ESOP account upon
completing five years of service with the Savings Bank or any affiliate.
Forfeitures will be reallocated among remaining participating employees.
Benefits may be payable upon retirement or separation from service. The Savings
Bank's contributions to the ESOP are not fixed, so benefits payable under the
ESOP cannot be estimated.
The Savings Bank will administer the ESOP and Lisa Lawson, Thomas E.
Reeve, Jr. Steve McCord and Anna L. Berry will act as trustees of the related
trust. Under the ESOP, the trustees must vote all allocated shares held in the
ESOP in accordance with the instructions of the participating employees, and
allocated shares for which employees do not give instructions will be voted
generally by the ESOP trustees on any matter as to those shares for which
instructions are given. Unallocated shares held in the ESOP will be voted
generally by the ESOP trustees.
The ESOP will be subject to the requirements of the Employee Retirement
Income Security Act of 1974, as amended, the Code and the regulations of the IRS
and the Department of Labor promulgated thereunder.
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MANAGEMENT OF THE SAVINGS BANK
Directors
The direction and control of the Savings Bank is vested in its Board of
Directors. Pursuant to the Bylaws of the Savings Bank, its Board of Directors
shall be divided into three classes which are as equal in size as is possible,
and one of such classes shall be elected annually by the stockholders of the
Savings Bank for three-year terms.
The following table sets forth certain information with respect to the persons
who currently serve as directors of the Savings Bank. There are no arrangements
or understandings between the Savings Bank and any such person pursuant to which
such person may be elected a director of the Savings Bank, and no such director
is related to any other director or executive officer by blood, marriage or
adoption.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Age as of
Name and Position(s) December Principal Employment Director Term
with the Savings Bank 31, 1996 for the Past Five Years Since Expires
- --------------------------------------------------------------------------------
T. Aubrey Silvey 59 Chairman and Chief 1982 1997
Chairman of the Board Executive Officer of
Aubrey Silvey
Enterprises, an
electrical
substation contractor
Gary D. Dorminey 50 Chief Executive 1990 1997
Chief Executive Officer, Officer, President
President and Director and Director of the
Savings Bank
Anna L. Berry 47 Treasurer of 1996 1997
Director Southwire Company, a
major manufacturer
of wire products
Gary M. Bullock 54 President and Chief 1988 1998
Vice Chairman of the Board Executive Officer of
Carroll Electric
Membership Corp.
Jerry L. Clayton 54 Owner of Clayton 1992 1998
Director Pharmacy
Thomas E. Reeve, Jr. 76 Retired Physician 1990 1999
Director
Michael P. Steed 52 President and Owner 1990 1999
Director of the Steed Company,
a manufacturer of
fabric labels
Dean B. Talley 54 Physician 1986 1998
Director
Thomas S. Upchurch 57 President of Georgia 1991 1999
Director Partnership for
Excellence in
Education
</TABLE>
83
<PAGE>
Executive Officers Who Are Not Directors
The following table sets forth certain information with respect to the
persons who currently serve as executive officers of the Savings Bank and who
initially will serve as executive officers of the Company and who are not, and
will not be, directors. There are no arrangements or understandings between the
Savings Bank and/or the Company and any such person pursuant to which such
person was or will be elected an executive officer of the Savings Bank or the
Company and no such officer is related to any director or other officer of the
Savings Bank or the Company by blood, marriage or adoption.
<TABLE>
<CAPTION>
Name and Position(s) with Age as of Principal Employment
the Savings Bank December 31, 1996 for the Past Five Years
- --------------------------------------------------------------------------------
<S> <C> <C>
D. Lane Poston 47 Executive Vice President and
Executive Vice President Chief Operating Officer of the
and Chief Operating Savings Bank
Officer
C. Lynn Gable 44 Chief Financial Officer of the
Chief Financial Officer Savings Bank since February
1997; prior thereto, President
of Gable Financial Group, Inc.
Anyce C. Fox 50 Senior Vice President of the
Senior Vice President Savings Bank since 1990.
</TABLE>
Board Meetings and Committees of the Board of Directors
Regular meetings of the Board of Directors of the Savings Bank are held
on at least a monthly basis and special meetings of the Board of Directors of
the Savings Bank are held from time to time as needed. There were 13 meetings of
the Board of Directors of the Savings Bank held during the fiscal year ended on
December 31, 1996. No director attended fewer than 75% of the total number of
meetings of the Board of Directors of the Savings Bank held during fiscal 1996
and the total number of meetings held by all committees of the Board on which
the director served during such year.
The Board of Directors of the Savings Bank has established various
committees, including an Executive Committee, a Compensation Committee and an
Audit Committee.
The Executive Committee generally has the power and authority to act on
behalf of the Board of Directors on important matters between scheduled director
meetings unless specific Board of Directors action is required or unless
otherwise restricted by the Savings Bank's charter or bylaws or its Board of
Directors. The Executive Committee currently is chaired by T. Aubrey Silvey,
with Gary M. Bullock, Gary D. Dorminey and Michael P. Steed as members. The
Executive Committee met 40 times during fiscal 1996.
The Compensation Committee establishes and reviews executive
compensation and administers executive compensation programs. Gary M. Bullock
serves as Chairman of the Compensation Committee and Michael P. Steed and Thomas
S. Upchurch serve as members. The Compensation Committee met four times during
fiscal 1996.
84
<PAGE>
The Audit Committee recommends to the Board of Directors the independent
public accountants to be selected to audit the Savings Bank's annual financial
statements and to approve any special assignments given to such accountants. The
Audit Committee also reviews the planned scope of the annual audit, any changes
in accounting principles and the effectiveness and efficiency of the Savings
Bank's internal accounting staff. Thomas S. Upchurch serves as Chairman of the
Audit Committee and Dean B. Talley, Thomas E. Reeve and Anna L. Berry serve as
members. The Audit Committee met four times during fiscal 1996.
Other Committees
In addition to committees of the Board of Directors, the Savings Bank
has also established an Asset/Liability Committee, Asset Review Committee,
Marketing/Public Relations Committee, Loan Committee, C.R.A. Committee, 401(k)
Administrative and Investment Committee and Commercial Loan Committee. These
Committees are composed of directors, officers and key personnel of the Savings
Bank.
Executive Compensation
The following table sets forth the compensation paid by the Savings Bank
for services rendered in all capacities during the fiscal year ended December
31, 1996 to the Savings Bank's chief executive officer and all other executive
officers whose total salary and bonus during such year exceeded $100,000. None
of the named executive officers received or held any stock options in 1996.
Summary Compensation Table
<TABLE>
<CAPTION>
Other All
Name and Principal Annual Long-Term Other
Position Year Salary Bonus Compensation(1) Compensation Compensation
<S> <C> <C> <C> <C> <C> <C>
Gary D. Dorminey 1996 $139,000 $31,650 0 0 0
President and Chief 1995 129,250 42,342 0 0 0
Executive Officer 1994 117,500 24,675 0 0 0
D. Lane Poston 1996 105,000 24,182 0 0 0
Executive Vice 1995 99,500 24,875 0 0 0
President and Chief 1994 95,520 19,830 0 0 0
Operating Officer
</TABLE>
(1) Does not include amounts attributable to miscellaneous benefits received by
executive officers, including automobiles owned by the Savings Bank. The costs
to the Savings Bank of providing such benefits to any individual executive
officer during any of the years reported did not exceed the lesser of $50,000 or
10% of the total annual salary and bonus reported for the individual.
Board Fees
Following the Conversion and Reorganization, the directors of the
Company will not receive compensation solely for their services as directors of
the Company. Each member of the Board of Directors of the Savings Bank is paid a
fee of $575 per Board meeting attended, $750 per month for Executive Committee
members other than the Chairman ($1,000 per month in the case of the Chairman of
the committee) and $200 per meeting for all other committees.
85
<PAGE>
Directors' Retirement Plan
In December 1995, the Savings Bank initiated a defined contribution
post-retirement benefit plan to provide retirement benefits to its directors and
to provide death benefits for the designated beneficiary. In connection with the
plan's establishment, the Savings Bank purchased a whole life insurance contract
on the life of each director and entered into a split dollar arrangement with
each director. The increase in cash surrender value of the contract, less the
Bank's cost of funds, determines each director's annual benefit. In the event
the insurance contract fails to produce positive returns, the Savings Bank has
no separate obligation to contribute to the Plan. At December 31, 1996, the cash
surrender value of the insurance contract was approximately $969,000. See Note
(9) of Notes to Consolidated Financial Statements.
Employment Agreements
Mr. Dorminey currently has an employment agreement with the Savings
Bank that provides him with (a) an annual salary that has been increased
annually by the Board of Directors in accordance with the terms of the agreement
to the salary shown in "--Executive Compensation--Summary Compensation Table;"
(b) an incentive bonus determined each year by the Compensation Committee of the
Board of Directors; (c) participation in employee benefit programs maintained
for employees of the Savings Bank; (d) reimbursement of the dues and cost of
club membership; and (e) use of an automobile. The agreement further provides
that in the event of termination following a change in control of the Savings
Bank, Mr. Dorminey shall be entitled to a payment equal to the greater of (i)
the payments due under the remaining term of the agreement, or (ii) 2.99 times
his average annual compensation over the five years preceding such termination.
The Savings Bank and the Company (collectively, the "Employer") and
Mr. Dorminey have agreed to terminate Mr. Dorminey's current employment
agreement as of June 1, 1997 and to replace it with a new agreement with regard
to Mr. Dorminey's continued service as President and Chief Executive Officer of
the Company and the Savings Bank. During the term of this agreement, Mr.
Dorminey will receive (a) an annual salary of $165,000, which is subject to
discretionary annual increases by the Savings Bank's Board of Directors; (b) an
incentive bonus determined each year by the Compensation Committee of the
Savings Bank's Board of Directors based upon the achievement of certain
performance criteria to be determined annually by the Board of Directors; (c)
benefits under such other programs as are maintained for employees of the
Savings Bank or the Company generally; (d) reimbursement for reasonable business
expenses, club dues and business-related costs of club memberships; (e) use of
an automobile; and (f) such other medical, dental and other healthcare benefits
as are extended to other management personnel. The agreement has an initial term
of three years and will automatically renew on each day after its effective date
so that the term remains a three-year term. Automatic renewal may be terminated
by either Mr. Dorminey or the Employer by giving written notice to the other
party of such termination, in which event the term will end on the third
anniversary of the thirtieth day following the date the written notice is
received. If the agreement is terminated by the Employer for cause (as defined
in the agreement) or by Mr. Dorminey without good reason (as defined in the
agreement), Mr. Dorminey will receive only such salary and bonus amounts as are
due and owed to him on the effective date of the termination. If he is
terminated without cause or upon permanent disability, or if he terminates his
employment with good reason, 60 days' prior written notice of intent to
terminate is required and Mr. Dorminey will receive a termination payment equal
to his Average Monthly Compensation (as defined below) for the remaining term of
the agreement. Average Monthly Compensation means the quotient determined by
dividing (a) the greater of (1) Mr. Dorminey's then current base salary, or (2)
the average of his base salary and incentive bonus for the most recent three
consecutive 12-month periods during which he was employed by the Employer
immediately prior to the effective date of the termination that produced the
highest average by (b) twelve (12). This payment may be reduced if necessary to
comply with certain provisions of the Internal Revenue Code. In addition, Mr.
Dorminey has agreed not to engage in the community banking business within a 20-
mile radius of any office or facility of the Employer for a period of 36 months
following his termination by the Employer for cause or by Mr. Dorminey for good
reason or following a change in control of the Employer as defined in the
agreement, and not to solicit the Employer's customers or employees within the
same geographic area for the same period of time.
Messrs. Poston and Gable and Ms. Fox have also entered into employment
agreements with the Employer that contain essentially identical terms and
conditions, except that the base salaries set forth in such agreements are
$115,000, $90,000 and $65,600, respectively. Their employment agreements will
become effective as of June 1, 1997.
Retirement Plan
The Savings Bank has a defined benefit pension plan ("Retirement Plan" )
for all employees who have attained the age of 21 years and have completed one
year of service with the Savings Bank In general, the Retirement Plan provides
for annual benefits payable monthly upon retirement at age 65 in an amount equal
to approximately one percent of the "Average Compensation" of the employee
(which is equal to the average of the compensation paid to him or her during the
five successive calendar years within the final ten calendar years of service
affording the highest average, excluding bonuses, overtime pay and other special
compensation) for each year of service, not in excess of 40 years. Under the
Retirement Plan, an employee's benefits are fully vested after five years of
qualifying service. A year of service is any year in which an employee works a
minimum of 1,000 hours. The Retirement Plan provides for an early retirement
option with reduced benefits for participants who are 55.
86
<PAGE>
The following table illustrates annual pension benefits for retirement
at age 65 under various levels of compensation and years of service. The
figures in the table assume that the Retirement Plan continues in its
present form and that the participants elect a straight life annuity form
of benefit.
<TABLE>
<CAPTION>
Five Year
Average 10 Years of 15 Years of 20 Years of 25 Years of 30 Years of 35 Years of
Compensation Service Service Service Service Service Service
- ------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
$ 40,000 $ 4,000 $ 6,000 $ 8,000 $10,000 $12,000 $14,000
50,000 5,000 7,500 10,000 12,500 15,000 17,500
60,000 6,000 9,000 12,000 15,000 18,000 21,000
70,000 7,000 10,500 14,000 17,500 21,000 24,500
80,000 8,000 12,000 16,000 20,000 24,000 28,000
90,000 9,000 13,500 18,000 22,500 27,000 31,500
100,000 10,000 15,000 20,000 25,000 30,000 35,000
110,000 11,000 16,500 22,000 27,500 33,000 38,500
120,000 12,000 18,000 24,000 30,000 36,000 42,000
130,000 13,000 19,500 26,000 32,500 39,000 45,500
140,000 14,000 21,000 28,000 35,000 42,000 49,000
150,000 15,000 22,500 30,000 37,500 45,000 52,500
160,000 16,000 24,000 32,000 40,000 48,000 56,000
</TABLE>
The Savings Bank did not contribute to the Retirement Plan for fiscal
1996. At December 31, 1996, Mr. Dorminey had 8.67 years of credited
service under the Retirement Plan and total accrued funds in the Retirement
Plan of $6,721, and Mr. Poston had 5.58 years of credited service under the
Retirement Plan and total accrued funds in the Retirement Plan of $5,289.
The Savings Bank will continue to maintain the Retirement Plan
following the Conversion and Reorganization.
401(k) Plan
The Savings Bank maintains a 401(k) retirement savings plan (the
"401(k) Plan") for employees who satisfy minimum age and service
requirements and makes matching contributions to this plan equal to 50% of
an eligible employee's salary deferrals (not in excess of 10% of his or her
compensation). Under the 401(k) Plan, each employee may elect to reduce
his or her current gross salary by up to 15% of his or her compensation,
not to exceed certain limits specified in the Code, and have the amount of
the reduction contributed to the 401(k) Plan. Upon termination of
employment, a participant may elect to receive a lump sum distribution.
Indebtedness of Management
As a result of FIRREA's application of Section 22(h) of the Federal
Reserve Act to savings institutions, any credit extended by a savings
association, such as the Savings Bank to its executive officers, directors
and, to the extent otherwise permitted, principal stockholder(s), or any
related interest of the foregoing, must be (i) on substantially the same
terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions by the savings association with non-
affiliated parties and (ii) not involve more than the normal risk of
repayment or present other unfavorable features. In the normal course of
business, the Savings Bank makes loans to directors,
-87-
<PAGE>
officers and employees on substantially the same terms, including interest
rates and collateral, as those prevailing for comparable transactions with
others.
-88-
<PAGE>
THE CONVERSION AND REORGANIZATION
The Boards of Directors of the Mutual Holding Company, the Savings
Bank and the Company have approved the Plan of Conversion, as has the OTS,
subject to approval by the Members of the Mutual Holding Company entitled
to vote on the matter and the Mutual Holding Company, as the sole
shareholder of the Savings Bank, and the satisfaction of certain other
conditions. Such OTS approval, however, does not constitute a
recommendation or endorsement of the Plan by such agency.
General
The Boards of Directors of the Mutual Holding Company and the Savings
Bank unanimously adopted the Plan on February 11, 1997. The Plan has been
approved by the OTS, subject to, among other things, approval of the Plan
by the Members and by the Mutual Holding Company, as the sole stockholder
of the Savings Bank. The Members Meeting and the Stockholders Meeting have
been called for this purpose on _____________, 1997.
The following is a brief summary of pertinent aspects of the Plan and
the Conversion and Reorganization. The summary is qualified in its
entirety by reference to the provisions of the Plan, which is available for
inspection at the office of the Savings Bank and at the offices of the OTS.
The Plan also is filed as an exhibit to the Registration Statement of which
this Prospectus is a part, copies of which may be obtained from the SEC.
See "Additional Information."
Purposes of the Conversion and Reorganization
The Mutual Holding Company, as a federally chartered mutual holding
company, does not have stockholders and has no authority to issue capital
stock. As a result of the Conversion and Reorganization, the Company will
be structured in the form used by holding companies of commercial banks,
most business entities and a growing number of savings institutions. The
stock holding company form of organization will provide the Company with
the ability to diversify the Company's and the Savings Bank's business
activities through acquisition of or mergers with both stock savings
institutions and commercial banks, as well as other companies. Although
there are no current arrangements, understandings or agreements regarding
any such opportunities, the Company will be in a position after the
Conversion and Reorganization, subject to regulatory limitations and the
Company's financial position, to take advantage of any such opportunities
that may arise. Management believes it will be in the best interests of
the Company, the Savings Bank and the Company's stockholders for the
Company to remain an independent company.
In their decision to pursue the Conversion and Reorganization, the
Mutual Holding Company and the Savings Bank considered various regulatory
uncertainties associated with the mutual holding company structure,
including the ability to waive dividends in the future as well as the
general uncertainty regarding a possible elimination of the federal savings
bank charter.
The Conversion and Reorganization also will be important to the future
growth and performance of the holding company organization by providing a
larger capital base to support the operations of the Savings Bank and
Company and by enhancing their future access to capital markets, ability to
diversify into other financial services related activities, and ability to
provide additional services to the public. Although the Savings Bank
currently has the ability to raise additional capital through the sale of
additional shares of Savings Bank Common Stock, that ability is limited by
the
-89-
<PAGE>
mutual holding company structure which, among other things, requires that
the Mutual Holding Company hold a majority of the outstanding shares of
Savings Bank Common Stock. Therefore, only a minority could be sold to
depositors and other members of the public.
As a result, the Conversion and Reorganization also will likely result
in a larger number of stockholders following the Conversion and
Reorganization as compared to the number of outstanding stockholders of
Savings Bank Common Stock that would be outstanding if the Savings Bank had
determined to pursue a public offering of Savings Bank Common Stock within
the mutual holding company structure. The larger number of stockholders
will increase the likelihood of the development of an active and liquid
trading market for the Common Stock. See "Market for Common Stock."
In light of the foregoing, the Boards of Directors of the Savings Bank
and the Mutual Holding Company believe that the Conversion and
Reorganization is in the best interests of such companies and their
respective stockholders and Members.
Description of the Conversion and Reorganization
On February 11, 1997, the Boards of Directors of the Savings Bank and
the Mutual Holding Company adopted the Plan and in March 1997 the Savings
Bank incorporated the Company under Georgia law as a first-tier wholly
owned subsidiary of the Savings Bank. Pursuant to the Plan, (i) the Mutual
Holding Company will convert to Interim Mutual and simultaneously will
merge with and into the Savings Bank, pursuant to which the Mutual Holding
Company will cease to exist and the shares of Savings Bank Common Stock
held by the Mutual Holding Company will be cancelled, and (ii) Interim CFB
will then merge with and into the Savings Bank. As a result of the merger
of Interim CFB with and into the Savings Bank, the Savings Bank will become
a wholly owned subsidiary of the Company operating under the name
"Carrollton Federal Bank."
-90-
<PAGE>
The following diagram outlines the current organizational structure
and the parties ownership interests:
------------------------------------
CF Mutual
Holdings
------------------------------------
|
| 100%
|
------------------------------------
Carrollton Federal Bank
------------------------------------
|
| 100%
|
------------------------------------
Community First Banking
Company
------------------------------------
|
| 100%
|
------------------------------------
Interim CFB
Savings Bank
------------------------------------
-91-
<PAGE>
The following diagram reflects the Conversion and Reorganization,
including (i) the merger of the mutual Holding Company (following its
conversion to Interim Mutual) with and into the Savings Bank, (ii) the
merger of Interim CFB with and into the Savings Bank, and (iii) the
offering of Common Stock.
------------------------------------
Purchasers of Common Stock
------------------------------------
|
| 100%
|
------------------------------------
Community First
Banking Company
------------------------------------
|
| 100%
|
------------------------------------
Carrollton Federal Bank
------------------------------------
Pursuant to OTS regulations, consummation of the Conversion and
Reorganization (including the offering of Common Stock in the Offerings, as
described below) is conditioned upon the approval of the Plan by (1) the
OTS, (2) at least a majority of the total number of votes eligible to be
cast by members of the Mutual Holding Company at the Members' Meeting, and
(3) holders of at least two-thirds of the shares of the outstanding Savings
Bank Common Stock at the Stockholders' Meeting. The OTS has conditionally
approved the Plan. One hundred percent of the Savings Bank's Common Stock
is owned by the Mutual Holding Company and the Mutual Holding Company
intends to vote its shares of Savings Bank Common Stock in favor of the
Plan at the Stockholders' Meeting.
Effects of the Conversion and Reorganization
General. Prior to the Conversion and Reorganization, each depositor
in the Savings Bank has both a deposit account in the institution and a pro
rata ownership interest in the net worth of the Mutual Holding Company
based upon the balance in his account, which interest may only be realized
in the event of a liquidation of the Mutual Holding Company. However, this
ownership interest is tied to the depositor's account and has no tangible
market value separate from such deposit account. A depositor who reduces
or closes his or her account receives a portion or all of the balance in
the account but nothing for his or her ownership interest in the net worth
of the Mutual Holding Company, which is lost to the extent that the balance
in the account is reduced.
Consequently, the depositors of the Savings Bank normally have no way
to realize the value of their ownership interest in the Mutual Holding
Company, which has realizable value only in the unlikely event that the
Mutual Holding Company is liquidated. In such event, the depositors of
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<PAGE>
record at that time, as owners, would share pro rata in any residual
surplus and reserves of the Mutual Holding Company after other claims are
paid.
Upon consummation of the Conversion and Reorganization, permanent
nonwithdrawable capital stock will be created to represent the ownership of
the net worth of the Company. The Common Stock of the Company is separate
and apart from deposit accounts and cannot be and is not insured by the
FDIC or any other governmental agency. Certificates are issued to evidence
ownership of the permanent stock. The stock certificates are transferable,
and therefore the stock may be sold or traded if a purchaser is available
with no effect on any account the seller may hold in the Savings Bank.
Continuity. While the Conversion and Reorganization is being
accomplished, the normal business of the Savings Bank of accepting deposits
and making loans will continue without interruption. The Savings Bank will
continue to be subject to regulation by the OTS and the FDIC. After the
Conversion and Reorganization, the Savings Bank will continue to provide
services for depositors and borrowers under current policies by its present
management and staff.
The directors and officers of the Savings Bank at the time of the
Conversion and Reorganization will continue to serve as directors and
officers of the Savings Bank after the Conversion and Reorganization. The
directors and officers of the Company consist of individuals currently
serving as directors and officers of the Mutual Holding Company and the
Savings Bank, and they generally will retain their positions in the Company
after the Conversion and Reorganization.
Effect on Deposit Accounts. Under the Plan, each depositor in the
Savings Bank at the time of the Conversion and Reorganization will
automatically continue as a depositor after the Conversion and
Reorganization, and each such deposit account will remain the same with
respect to deposit balance, interest rate and other terms, except to the
extent that funds in the account are withdrawn to purchase Common Stock to
be issued in the Offerings. Each such account will be insured by the FDIC
to the same extent as before the Conversion and Reorganization. Depositors
will continue to hold their existing certificates, passbooks and other
evidences of their accounts.
Effect on Loans. No loan outstanding from the Savings Bank will be
affected by the Conversion and Reorganization, and the amount, interest
rate, maturity and security for each loan will remain as they were
contractually fixed prior to the Conversion and Reorganization.
Effect on Voting Rights of Members. At present, all depositors of the
Savings Bank and certain borrowers (those having borrowings as of July 19,
1990 that are still in existence) are members of, and have voting rights
in, the Mutual Holding Company as to all matters requiring membership
action. Upon completion of the Conversion and Reorganization, depositors
and such borrowers will cease to be members and will no longer be entitled
to vote at meetings of the Mutual Holding Company. Upon completion of the
Conversion and Reorganization, all voting rights in the Savings Bank will
be vested in the Company as the sole stockholder of the Savings Bank.
Exclusive voting rights with respect to the Company will be vested in the
holders of Common Stock. Depositors of the Savings Bank will not have
voting rights in the Company after the Conversion and Reorganization,
except to the extent that they become stockholders of the Company.
Tax Effects. Consummation of the Conversion and Reorganization is
conditioned on prior receipt by the Primary Parties of rulings or opinions
with regard to federal and Georgia income taxation which indicate that the
adoption and implementation of the Plan of Conversion set forth
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<PAGE>
herein will not be taxable for federal or Georgia income tax purposes to
the Primary Parties or the Savings Bank's Eligible Account Holders,
Supplemental Eligible Account Holders or Other Members, except as discussed
below. See "- Tax Aspects" below.
Effect on Liquidation Rights. Were the Mutual Holding Company to
liquidate, all claims of the Mutual Holding Company's creditors would be
paid first. Thereafter, if there were any assets remaining, members of the
Mutual Holding Company would receive such remaining assets, pro rata, based
upon the deposit balances in their deposit accounts at the Savings Bank
immediately prior to liquidation. In the unlikely event that the Savings
Bank were to liquidate after the Conversion and Reorganization, all claims
of creditors (including those of depositors, to the extent of their deposit
balances) also would be paid first, followed by distribution of the
"liquidation account" to certain depositors (see "-Liquidation Rights"
below), with any assets remaining thereafter distributed to the Company as
the holder of the Savings Bank's capital stock. Pursuant to the rules and
regulations of the OTS, a merger, consolidation, sale of bulk assets or
similar combination or transaction with another insured savings institution
would not be considered a liquidation for this purpose and, in such a
transaction, the liquidation account would be required to be assumed by the
surviving institution.
The Offerings
Subscription Offering. In accordance with the Plan of Conversion,
rights to subscribe for the purchase of Common Stock have been granted
under the Plan of Conversion to the following persons in the following
order of descending priority: (1) Eligible Account Holders; (2) the ESOP;
(3) Supplemental Eligible Account Holders; and (4) Other Members. All
subscriptions received will be subject to the availability of Common Stock
after satisfaction of all subscriptions of all persons having prior rights
in the Subscription Offering and to the maximum and minimum purchase
limitations set forth in the Plan of Conversion and as described below
under "- Limitations on Common Stock Purchase." Pursuant to the Plan and
OTS policy and regulations, subscription rights will be allocated based on
a subscriber's account relationship with the Savings Bank. No person
holding subscription rights may exceed any otherwise applicable purchase
limitation by submitting multiple orders for Common Stock in the Offerings.
Multiple orders are subject to adjustment on a pro rata basis and deposit
balances will be divided equally among such orders in allocating shares in
the event of an oversubscription. The beneficial owners of individual
retirement accounts, Keogh savings accounts and similar retirement accounts
shall receive the subscription rights with respect to those deposit
accounts.
Priority 1: Eligible Account Holders. Each Eligible Account Holder
will receive, without payment therefor, first priority, nontransferable
subscription rights to subscribe for in the Subscription Offering up to the
greater of (i) $482,700 of Common Stock, (ii) one-tenth of one percent
(.10%) of the total offering of shares of Common Stock in the Subscription
Offering or (iii) 15 times the product (rounded down to the next whole
number) obtained by multiplying the total number of shares of Common Stock
offered in the Subscription Offering by a fraction, of which the numerator
is the amount of the Eligible Account Holder's qualifying deposit and the
denominator of which is the total amount of qualifying deposits of all
Eligible Account Holders, in each case as of the close of business on
December 31, 1995 (the "Eligibility Record Date"), subject to the overall
purchase limitations. See "- Limitations on Common Stock Purchases."
If there are not sufficient shares available to satisfy all
subscriptions in this category, shares will first be allocated so as to
permit each subscribing Eligible Account Holder to purchase a number of
shares sufficient to make his or her total allocation equal to the lesser
of the number of shares subscribed for or 100 shares. Thereafter,
unallocated shares will be allocated to subscribing Eligible
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<PAGE>
Account Holders whose subscriptions remain unfilled in the proportion that
the amounts of their respective eligible deposits bear to the total amount
of eligible deposits of all subscribing Eligible Account Holders whose
subscriptions remain unfilled, provided that no fractional shares shall be
issued. If the amount so allocated exceeds the amount subscribed for by
any one or more Eligible Account Holders, the excess shall be reallocated
(one or more times as necessary) among those Eligible Account Holders whose
subscriptions are not fully satisfied on the same principle described above
until all available shares have been allocated or subscriptions satisfied.
The subscription rights of Eligible Account Holders who are also directors
or executive officers of the Mutual Holding Company or the Savings Bank and
their associates will be subordinated to the subscription rights of other
Eligible Account Holders to the extent attributable to increased deposits
in the year preceding December 31, 1995.
Priority 2: ESOP. The ESOP will receive, without payment therefor,
second priority, nontransferable subscription rights to purchase, in the
aggregate, up to 10% of the Common Stock, including any increase in the
number of shares of Common Stock after the date hereof as a result of an
increase of up to 15% in the maximum of the Valuation Price Range. The
ESOP intends to purchase 8.0% of the shares of Common Stock, or 167,900
shares based on the maximum of the Valuation Price Range. Subscriptions by
the ESOP will not be aggregated with shares of Common Stock purchased
directly by or which are otherwise attributable to any other participants
in the Subscription and Community Offerings, including subscriptions of any
of the Savings Bank's directors, officers, employees or associates thereof.
See "Management of the Company - Benefits - Employee Stock Ownership Plan."
In the event that the number of shares of Common Stock issued in the
Conversion and Reorganization exceeds the number of shares that would be
issued at the maximum of the Valuation Price Range (the "Maximum Shares"),
the ESOP will have the first priority right to purchase any shares of
Common Stock issued in excess of the Maximum Shares (up to an aggregate of
10% of the Common Stock issued in the Conversion, including any shares of
Common Stock to be issued in the Conversion and Reorganization as a result
of an increase in the Valuation Price Range after commencement of the
Subscription Offering and prior to completion of the Conversion and
Reorganization). In the event that there is an oversubscription for shares
of Common Stock, and as a result, the ESOP is unable to purchase in the
Conversion and Reorganization the amounts subscribed for (up to the 10%
limitation described above), then, upon receipt of all necessary regulatory
approvals, the Boards of Directors of the Company and the Savings Bank
shall be authorized to (i) issue additional shares of Common Stock directly
to the ESOP at the Purchase Price or (ii) approve the purchase by the ESOP
in the open market after the Conversion and Reorganization, of such shares
as are necessary for the ESOP to purchase the amounts subscribed for. In
making such purchases, the ESOP would use funds contributed by the Company
or the Savings Bank and/or borrowed from the Company or an independent
financial institution. Purchases of additional shares of Common Stock from
the Company would dilute the interest of other stockholders. See "-
Limitations on Common Stock Purchases" and "Risk Factors - Possible
Dilutive Effect of Issuance of Additional Shares."
Priority 3: Supplemental Eligible Account Holders. Each Supplemental
Eligible Account Holder will receive, without payment therefor, third
priority, nontransferable subscription rights to subscribe for the
Subscription Offering up to the greater of (i) $482,700 of Common Stock,
(ii) one-tenth of one percent (.10%) of the total offering of shares of
Common Stock in the Subscription Offering and (iii) 15 times the product
(rounded down to the next whole number) obtained by multiplying the total
number of shares of Common stock offered in the Subscription Offering by a
fraction, of which the numerator is the amount of the Supplemental Eligible
Account
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Holder's qualifying deposit and the denominator of which is the total
amount of qualifying deposits of all Supplemental Eligible Account Holders,
in each case as of the close of business on [March 31], 1997 (the
"Supplemental Eligibility Record Date"), subject to the overall purchase
limitations. See "- Limitations on Common Stock Purchases."
If there are not sufficient shares available to satisfy all
subscriptions in this category, shares first will be allocated so as to
permit each subscribing Supplemental Eligible Account Holder to purchase a
number of shares sufficient to make his or her total allocation equal to
the lesser of the number of shares subscribed for or 100 shares.
Thereafter, unallocated shares will be allocated to subscribing
Supplemental Eligible Account Holders whose subscriptions remain unfilled
in the proportion that the amounts of their respective eligible deposits
bear to the total amount of eligible deposits of all such subscribing
Supplemental Eligible Account Holders whose subscriptions remain unfilled,
provided that no fractional shares shall be issued. If the amount so
allocated exceeds the amount subscribed for by any one or more Supplemental
Eligible Account Holders, the excess shall be reallocated (one or more
times as necessary) among those Supplemental Eligible Account Holders whose
subscriptions are not fully satisfied until all available shares have been
allocated or subscriptions satisfied.
Priority 4: Other Members. To the extent that there are sufficient
shares remaining after satisfaction of subscriptions by Eligible Account
Holders, the ESOP and Supplemental Eligible Account Holders, each Other
Member will receive, without payment therefor, fourth priority,
nontransferable subscription rights to subscribe for Common Stock in the
Subscription Offering up to the greater of (i) $482,700 of Common Stock, or
(ii) one-tenth of one percent (.10%) of the total offering of shares of
Common Stock in the Subscription Offering, subject to the overall purchase
limitations. See "- Limitations on Common Stock Purchases."
In the event the Other Members subscribe for a number of shares which,
when added to the shares subscribed for by Eligible Account Holders, the
ESOP and Supplemental Eligible Account Holders, is in excess of the total
number of shares of Common Stock offered in the Subscription Offering,
shares first will be allocated so as to permit each subscribing Other
Member to purchase a number of shares sufficient to make his or her total
allocation equal to the lesser of the number of shares subscribed for or
100 shares. Thereafter, any remaining shares will be allocated among
subscribing Other Members on a pro rata basis in the same proportion as
each Other Member's subscription bears to the total subscriptions of all
subscribing Other Members, provided that no fractional shares shall be
issued.
Expiration Date for the Subscription Offering. The Subscription
Offering will expire at 12:00 noon, Eastern Time, on [June 17], 1997,
unless extended by the Primary Parties for up to 45 days or, with the
approval of the OTS, for additional periods by the Primary Parties. Such
extension may not be beyond [June 16,] 1999. Subscription rights which
have not been exercised prior to the Expiration Date will become void.
The Primary Parties will not execute orders until at least the minimum
number of shares of Common Stock (25 shares) have been subscribed for or
otherwise sold. If all shares have not been subscribed for or sold within
45 days after the Expiration Date, unless such period is extended with the
consent of the OTS, all funds delivered to the Savings Bank pursuant to the
Subscription Offering will be returned promptly to the subscribers with
interest and all withdrawal authorizations will be cancelled. If an
extension beyond the 45-day period following the Expiration Date is
granted, the Primary Parties will notify subscribers of the extension of
time and of any rights of subscribers to modify or rescind their
subscriptions.
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Community Offering. To the extent that shares remain available for
purchase after satisfaction of all subscriptions of Eligible Account
Holders, the ESOP, Supplemental Eligible Account Holders and Other Members,
the Primary Parties have determined to offer shares pursuant to the Plan to
certain members of the general public, with preference given to natural
persons residing in the Local Community (such natural persons referred to
as "Preferred Subscribers"). Such persons, together with associates of and
persons acting in concert with such persons, may purchase up to $482,700 of
Common Stock in the Community Offering. See "- Limitations on Common Stock
Purchases." This amount may be increased at the sole discretion of the
Primary Parties up to 5% of the total offering of shares in the
Subscription Offering. The opportunity to subscribe for shares of Common
Stock in the Community Offering category is subject to the right of the
Primary Parties, in their sole discretion, to accept or reject any such
orders in whole or in part either at the time of receipt of an order or as
soon as practicable following the completion of the Community Offering.
If there are not sufficient shares available to fill the orders of
Preferred Subscribers after completion of the Subscription and Community
Offerings, such stock will be allocated first to each Preferred Subscriber
whose order is accepted by the Primary Parties, in an amount equal to the
lesser of 100 shares or the number of shares subscribed for by each such
Preferred Subscriber, if possible. Thereafter, unallocated shares will be
allocated among the Preferred Subscribers whose orders remain unsatisfied
in the same proportion that the unfilled subscription of each (up to 2.0%
of the total offering) bears to the total unfilled subscriptions of all
Preferred Subscribers whose subscription remains unsatisfied. If there are
any shares remaining, shares will be allocated to other members of the
general public who subscribe in the Community Offering applying the same
allocation described above for Preferred Subscribers.
The Primary Parties may commence the Community Offering concurrently
with, at any time during, or as soon as practicable after the end of the
Subscription Offering. The Community Offering may terminate at any time
after it is commenced, but must be completed within 45 days after the
completion of the Subscription Offering, unless extended by the Primary
Parties with the consent of the OTS.
Syndicated Community Offering. The Plan provides that, if feasible,
all shares of Common Stock not purchased in the Subscription and Community
Offerings, if any, may be offered for sale to the general public in a
Syndicated Community Offering through a syndicate of registered broker-
dealers to be formed or through an underwritten public offering. No person
will be permitted to subscribe in the Syndicated Community Offering for
more than $482,700 of Common Stock. The maximum amount of Common Stock
that may be purchased in the aggregate in the Syndicated Community Offering
by any person or entity, together with associates of and persons acting in
concert with such person or entity, shall not exceed an aggregate purchase
price of $482,700 of Common Stock. This amount may be increased to up to
5% of the total offering of shares in the Subscription Offering, provided
that orders for Common Stock in the Syndicated Community Offering will
first be filled to a maximum of $482,700 of the total number of shares of
Common Stock sold in the Conversion. Thereafter, any remaining shares will
be allocated on an equal number of shares basis per order until all orders
have been filled. The Primary Parties have the right to reject orders in
whole or part in their sole discretion in the Syndicated Community
Offering. Neither Trident nor any registered broker-dealer shall have any
obligation to take or purchase any shares of Common Stock in the Syndicated
Community Offering; however, Trident has agreed to use its best efforts in
the sale of shares in the Syndicated Community Offering.
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In addition to the foregoing, if a syndicate of broker-dealers
("selected dealers") is formed to assist in the Syndicated Community
Offering, during the Syndicated Community Offering, selected dealers may
only solicit indications of interest from their customers to place orders
with the Savings Bank as of a certain date (the "Order Date") for the
purchase of shares of Common Stock. When and if Trident and the Savings
Bank believe that enough indications and orders have been received in the
Offerings to consummate the Conversion and Reorganization, Trident will
request, as of the Order Date, selected dealers to submit orders to
purchase shares for which they have received indications of interest from
their customers. Selected dealers will send confirmations of the orders to
such customers on the next business day after the Order Date. Selected
dealers will debit the accounts of their customers on a date which will be
three business days from the Order Date ("Debit Date"). Customers who
authorize selected dealers to debit their brokerage accounts are required
to have the funds for payment in their account on but not before the Debit
Date. On the next business day following the Debit Date, selected dealers
will remit funds to the account that the Savings Bank established for each
selected dealer. After payment has been received by the Savings Bank from
selected dealers, funds will earn interest at the Savings Bank's passbook
savings rate until the consummation of the Conversion and Reorganization.
In the event the Conversion and Reorganization are not consummated as
described above, funds with interest will be returned promptly to the
selected dealers, who, in turn, will promptly credit their customers'
brokerage accounts.
The Syndicated Community Offering will terminate no more than 45 days
following the Expiration date, unless extended by the Primary Parties with
the approval of the OTS. See "- Stock Pricing and Number of Shares to be
Issued" below for a discussion of rights of subscribers, if any, in the
event an extension is granted.
Stock Pricing and Number of Shares to be Issued
The Plan of Conversion requires that the purchase price of the Common
Stock must be based on the appraised pro forma market value of the Company
and the Savings Bank, as determined on the basis of an independent
valuation. The Primary Parties have retained Ferguson to make such
valuation. For its services in making such appraisal and for the
preparation of a business plan, Ferguson will receive a maximum fee of
$27,500 plus out of pocket expenses not to exceed $5,000. The Primary
Parties have agreed to indemnify Ferguson and its employees and affiliates
against certain losses (including any losses in connection with claims
under the federal securities laws) arising out of its services as
appraiser, except where Ferguson's liability results from its negligence or
a failure to exercise due diligence or in circumstances in which it had
knowledge of certain material facts.
The Appraisal has been prepared by Ferguson in reliance upon the
information contained in this Prospectus, including the Consolidated
Financial Statements. Ferguson also considered the following factors,
among others: the present and projected operating results and financial
condition of the Primary Parties and the economic and demographic
conditions in the Savings Bank's existing market area; certain historical,
financial and other information relating to the Savings Bank; a comparative
evaluation of the operating and financial statistics of the Savings Bank; a
comparative evaluation of the operating and financial statistics of the
Savings Bank with those of other similarly situated publicly traded
companies located in Georgia and other regions of the United States; the
aggregate size of the offering of the Common Stock; the impact of the
Conversion and Reorganization on the Savings Bank's net worth and earnings
potential; the proposed dividend policy of the Company and the Savings
Bank; and the trading market for the securities of comparable companies and
general conditions in the market for such securities.
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On the basis of the foregoing, Ferguson has advised the Primary
Parties that in its opinion, the estimated pro forma market value of the
Savings Bank and the Company on a combined basis was $36,500,000 as of
February 27, 1997. As a result, the Valuation Price Range, from 15% below
such value to 15% above such value, is from a minimum of $31,025,000 to a
maximum of $41,975,000. The Boards of Directors of the Primary Parties
determined that the Common Stock would be sold at $20.00 per share,
resulting in a range of 1,551,250 to 2,098,750 shares of Common Stock being
offered. The Boards of Directors of the Primary Parties reviewed
Ferguson's appraisal report, including the methodology and the assumptions
used by Ferguson, and determined that the Valuation Price Range was
reasonable and adequate. The Valuation Price Range may be amended with the
approval of the OTS, if required, or if necessitated by subsequent
developments in the financial condition of any of the Primary Parties or
market conditions generally. In the event the Appraisal is updated and
changed below $31,025,000 or above $48,271,250 (the maximum of the
Valuation Price Range, as increased by 15%), such Appraisal will be filed
with the SEC by post-effective amendment.
Based upon current market and financial conditions and recent
practices and policies of the OTS, in the event the Company receives orders
for Common Stock in excess of $41,975,000 (the maximum of the Valuation
Price Range), the Company may be required by the OTS to accept all such
orders up to $48,271,250 (15% above the maximum of the Valuation Price
Range). No assurances, however, can be made that the Company will receive
orders for Common Stock in any amount or that, if such orders are received,
all such orders will be accepted because the Company's final valuation and
number of shares to be issued are subject to the receipt of an updated
Appraisal from Ferguson and the approval of such updated Appraisal by the
OTS. There is no obligation or understanding on the part of management to
take and/or pay for any shares of Common Stock in order to complete the
Offerings.
Ferguson's valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing shares of
Common Stock. Ferguson did not independently verify the Consolidated
Financial Statements and other information provided by the Savings Bank,
the Company and the Mutual Holding Company, nor did Ferguson value
independently the assets or liabilities of the Savings Bank, the Company or
the Mutual Holding Company. The valuation considers the Savings Bank and
the Mutual Holding Company as going concerns and should not be considered
as an indication of the liquidation value of the Savings Bank and the
Company. Moreover, because such valuation is necessarily based upon
estimates and projections of a number of matters, all of which are subject
to change from time to time, no assurance can be given that persons
purchasing Common Stock in the Conversion and Reorganization will
thereafter be able to sell such shares at prices at or above the Purchase
Price or in the range of the foregoing valuation of the pro forma market
value thereof.
No sale of shares of Common Stock may be consummated unless prior to
such consummation Ferguson confirms that nothing of a material nature has
occurred which, taking into account all relevant factors, would cause it to
conclude that the Purchase Price is materially incompatible with the
estimate of the pro forma market value of the Savings Bank and the Company
upon consummation of the Conversion and Reorganization. If such is not the
case, a new Valuation Price Range may be set and a new Subscription and
Community Offering and/or Syndicated Community Offering may be held or such
other action may be taken as the Primary Parties shall determine and the
OTS may permit or require.
Prior to the completion of the Conversion and Reorganization, the
total number of shares of Common Stock to be issued in the Offerings may be
increased or decreased to reflect changes in
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market or financial conditions or to fill the order of the ESOP without a
resolicitation of subscribers, provided that the product of the total
number of shares times the Purchase Price is not below the minimum or more
than 15% above the maximum of the Valuation Price Range (exclusive of a
number of shares equal to up to an additional 8.0% of the Common Stock
which may be issued to the ESOP out of authorized but unissued shares of
Common Stock to the extent such shares are not purchased in the Offerings
due to an oversubscription). In the event market or financial conditions
change so as to cause the aggregate Purchase Price of the shares to be
below the minimum of the Valuation Price Range or more than 15% above the
maximum of such range (exclusive of additional shares that may be issued to
the ESOP), purchasers will be resolicited (i.e., permitted to continue,
modify or rescind their orders, in which case they will need to
affirmatively reconfirm their subscriptions prior to the expiration of the
resolicitation offering or their subscription funds will be promptly
refunded with interest at the Savings Bank's passbook rate of interest).
Any change in the Valuation Price Range must be approved by the OTS.
An increase in the number of shares of Common Stock, either as a
result of an increase in the appraisal of the estimated pro forma market
value or due to the purchase by the ESOP of authorized but unissued shares
(see "- the Offerings - Subscription Offering" and " - Priority 2: ESOP"),
would decrease both a subscriber's ownership interest and the Company's pro
forma net income and equity on a per share basis while increasing pro forma
net income and equity on an aggregate basis. A decrease in the number of
shares of Common Stock would increase both a subscriber's ownership
interest and the Company's pro forma net income and equity on a per share
basis while decreasing pro forma net income and equity on an aggregate
basis. See "Risk Factors - Possible Dilutive Effect of Issuance of
Additional Shares" and "Pro Forma Data."
The appraisal report of Ferguson has been filed as an exhibit to the
Registration Statement and Application for Conversion of which this
Prospectus is a part and is available for inspection in the manner set
forth under "Additional Information."
Persons in Nonqualified States or Foreign Countries
The Primary Parties will make reasonable efforts to comply with the
securities laws of all states in the United States in which persons
entitled to subscribe for stock pursuant to the Plan reside. However, the
Primary Parties are not required to offer stock in the Subscription
Offering to any person who resides in a foreign country or resides in a
state of the United States with respect to which all of the following
apply: (a) the number of persons otherwise eligible to subscribe for
shares under the Plan who reside in such jurisdiction is small; (b) the
granting of subscription rights or the offer or sale of shares of Common
Stock to such persons would require any of the Primary Parties or their
officers, directors or employees, under the laws of such jurisdiction, to
register as a broker, dealer, salesman or selling agent or to register or
otherwise qualify its securities for sale in such jurisdiction or to
qualify as a foreign corporation or file a consent to service of process in
such jurisdiction; and (c) such registration, qualification or filing in
the judgment of the Primary Parties would be impracticable or unduly
burdensome for reasons of costs or otherwise. Where the number of persons
eligible to subscribe for shares in one state is small, the Primary Parties
will base their decision as to whether or not to offer the Common Stock in
such state on a number of factors, including but not limited to the size of
accounts held by account holders in the state, the cost of registering or
qualifying the shares or the need to register the Company, its officers,
directors or employees as brokers, dealers or salesmen.
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Limitations on Common Stock Purchases
The Plan incudes the following limitations on the number of shares of
Common Stock which may be purchased:
(1) No less than 25 shares of Common Stock may be purchased, to
the extent such shares are available;
(2) The ESOP may purchase in the aggregate up to 10% of the shares
of Common Stock to be issued in the Offerings, including any
additional shares issued in the event of an increase in the Valuation
Price Range, although at this time the ESOP intends to purchase only
8.0% of such shares;
(3) The maximum amount of Common Stock subscribed for in all
categories by any person or entity, together with associates of and
persons acting in concert with such person or entity, shall not exceed
$482,700. In addition, where more than one person or entity is an
owner of a particular deposit account or an obligor of a particular
loan account, the orders of such persons pursuant to subscription
rights related to such joint accounts collectively may not exceed the
maximum purchase limitation; and
(4) No more than 28.5% of the total number of shares sold in the
Offerings may be purchased by directors and certain specified officers
of the Mutual Holding Company and the Savings Bank and their
associates in the aggregate, excluding purchases by the ESOP.
Subject to any required regulatory approval and the requirements of
applicable laws and regulations, but without further approval of the
Members or the Mutual Holding Company, as the sole stockholder of the
Savings Bank, the overall purchase limitation may be increased up to a
maximum of 5% of the total shares of Common Stock to be issued in the
Conversion and Reorganization or decreased to not less than 1% of the total
shares of Common Stock to be issued at the maximum of the Valuation Price
Range, at the discretion of the Primary Parties. If the individual amount
is decreased, subscribers' orders for the maximum amount will be adjusted
without a resolicitation of such subscribers.
In the event of an increase in the total number of shares of Common
Stock offered in the Conversion due to an increase in the Valuation Price
Range of up to 15% (the "Adjusted Maximum"), the additional shares will be
allocated in the following order of priority in accordance with the Plan:
(i) to fill the ESOP's subscription of 8.0% of the Adjusted Maximum number
of shares; (ii) in the event that there is an oversubscription by Eligible
Account Holders, to fill unfulfilled subscriptions of Eligible Account
Holders, up to the Adjusted Maximum; (iii) in the event that there is an
oversubscription by Supplemental Eligible Account Holders, to fill
unfulfilled subscriptions of Supplemental Eligible Account Holders, up to
the Adjusted Maximum; (iv) in the event that there is an oversubscription
by Other Members, to fill unfulfilled subscriptions of Other Members, up to
the Adjusted Maximum; (v) to fill unfulfilled subscriptions by Preferred
Subscribers in the Community Offering to the extent possible, up to the
Adjusted Maximum; and (vi) to fill unfulfilled subscriptions in the
Community Offering other than from Preferred Subscribers, up to the
Adjusted Maximum.
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The term "associate" of a person is defined to mean (i) any
corporation or other organization (other than the Primary Parties or a
majority-owned subsidiary of the Company or the Savings Bank) of which such
person is a director, officer or partner or is directly or indirectly the
beneficial owner of 10% or more of any class of equity securities; (ii) any
trust or other estate in which such person has a substantial beneficial
interest or as to which such person serves as trustee or in a similar
fiduciary capacity, provided, however, that such term shall not include any
tax-qualified employee stock benefit plan of the Primary Parties in which
such person has a substantial beneficial interest or serves as a trustee or
in a similar fiduciary capacity; and (iii) any relative or spouse of such
person, or any relative of such spouse, who either has the same home as
such person or who is a director or officer of one of the Primary Parties
or any of their subsidiaries.
The term "resident" as used herein means any person who, on the date
designated for that category of subscriber in the Plan, maintained a bona
fide residence within the Local Community. To the extent the person is a
corporation or other business entity, the principal place of business or
headquarters must be within the Local Community. To the extent the person
is a personal benefit plan, the circumstances of the beneficiary shall
apply with respect to this definition. In the case of all other benefit
plans, circumstances of the trustee shall be examined for purposes of this
definition. The Savings Bank may utilize deposit or loan records or such
other evidence provided to it to make a determination as to whether a
person is a bona fide resident of the Local Community. Subscribers in the
Community Offering who are natural persons also will have a purchase
preference if they were residents of the Local Community. In all cases,
however, such determination shall be in the sole discretion of the Savings
Bank.
The term "acting in concert" means (i) knowing participation in a
joint activity or interdependent conscious parallel action towards a common
goal, whether or not pursuant to an express agreement, with respect to the
purchase, ownership, voting or sale of Common Stock; (ii) a combination or
pooling of voting or other interests in the securities of the Company for a
common purpose pursuant to any contract, understanding, relationship,
agreement or other arrangement, whether written or otherwise. The Company
and the Savings Bank may presume that certain persons are acting in concert
based upon, among other things, joint account relationships and the fact
that such persons have filed joint Schedules 13D with the SEC with respect
to other companies.
Marketing Arrangements
The Primary Parties have engaged Trident as a financial advisor and
marketing agent in connection with the offering of the Common Stock, and
Trident has agreed to use its best efforts to solicit subscriptions and
purchase orders for shares of Common Stock in the Offerings. Trident is a
member of the National Association of Securities Dealers, Inc. (the "NASD")
and a broker-dealer which is registered with the SEC. Trident is
headquartered in Raleigh, North Carolina, and its telephone number is (919)
781-8900. Trident will provide various services, including but not limited
to (i) training and educating the Savings Bank's directors, officers and
employees regarding the mechanics and regulatory requirements of the stock
sales process: (2) providing its employees to staff the Stock Information
Center to assist the Savings Bank's customers and internal stock purchasers
and to keep records of orders for shares of Common Stock: (3) targeting the
Company's sales efforts, including preparation of marketing materials: and
(4) assisting in the solicitation of proxies of members for use at the
Members' Meeting. Based upon negotiations between the Company and the
Savings Bank and Trident concerning fee structure, Trident will receive a
management fee of $40,000 and a fee equal to 1.65% of the aggregate dollar
amount of capital stock sold by Trident in the Subscription and Community
Offerings (excluding the amounts sold to the ESOP, to directors and
executive officers of the Savings Bank and to associates of such directors
and executive officers). In the event that a selected dealers agreement is
entered into in connection with a Syndicated Community Offering, the
Savings Bank will pay a fee
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in an amount to be agreed upon jointly between Trident and the Savings Bank
based on the aggregate Purchase Price of Common Stock sold by an NASD
member firm pursuant to a selected dealers agreement. Fees to Trident and
to any other broker dealer may be deemed to be underwriting fees, and
Trident and such broker/dealers may be deemed to be underwriters. Trident
will also be reimbursed for its reasonable out-of-pocket expenses including
legal fees of which Trident has already received $10,000. No fees will be
paid to Trident on subscriptions by any director or executive officer or
associates of directors and executive officers or by the ESOP. The Primary
Parties have agreed to indemnify Trident for reasonable costs and expenses
in connection with certain claims or liabilities, including certain
liabilities under the Securities Act for misrepresentations or certain
untrue or alleged untrue statements of material fact or the omission or
alleged omission of a material facts required to be stated or necessary to
make not misleading certain statements contained in this Prospectus.
Directors and executive officers of the Primary Parties may
participate in the solicitation of offers to purchase Common Stock. Other
employees of the Savings Bank may participate in the Offerings in
ministerial capacities or providing clerical work in effecting a sales
transaction. Such other employees have been instructed not to solicit
offers to purchase Common Stock or provide advice regarding the purchase of
Common Stock. Questions of prospective purchasers will be directed to
executive officers or registered representatives. The Company will rely on
Rule 3a4-1 under the Exchange Act, and sales of Common Stock will be
conducted within the requirements of Rule 3a4-1, so as to permit officers,
directors and employees to participate in the sale of Common Stock. No
officer, director or employee of the Primary Parties will be compensated in
connection with his or her solicitations or other participation in the
Offerings by the payment of commissions or other remuneration based either
directly or indirectly on transactions in the Common Stock.
Procedure for Purchasing Shares in the Offerings
To ensure that each purchaser receives a Prospectus at least 48 hours
before the date the Offerings terminate in accordance with Rule 15c2-8 of
the Exchange Act, no Prospectus will be mailed any later than five days
prior to such date or hand delivered any later than two days prior to such
date. Execution of the order form will confirm receipt or delivery of the
Prospectus in accordance with Rule 15c2-8. Order forms will only be
distributed with a Prospectus.
To purchase shares in the Subscription Offering, an executed order
form with the required payment for each share subscribed for, or with
appropriate authorization for withdrawal from a deposit account at the
Savings Bank (which may be given by completing the appropriate blanks in
the order form), must be received by the Savings Bank at any of its offices
by 12:00 noon, Eastern Time, on the Expiration Date, unless such date is
extended. To purchase shares in the Community Offering, an executed order
form with the required payment, or appropriate withdrawal authorization,
must be received by the Savings Bank at any of its offices prior to the
time the Community Offering terminates, which may be at any time after it
begins. In addition, the Primary Parties will require a prospective
purchaser to execute a certification in connection with any sale of Common
Stock and will not accept order forms unless such a certification is
executed. Order forms which (i) are not received by such time, (ii) are
improperly completed or executed, (iii) are received without full payment
(or appropriate withdrawal instructions), or (iv) are submitted by a person
whose representations the Primary Parties believe to be false or who they
otherwise believe, either alone, or acting in concert with others, is
violating, evading or circumventing, or intends to violate, evade or
circumvent, the terms and conditions of the Plan, are not required to be
accepted. In addition, the Savings Bank will not accept photocopied or
facsimiled order forms or order forms unaccompanied by an executed
certification form. The Primary Parties have the right to waive or permit
the correction of incomplete or improperly executed forms, but do not
represent that they will do so. Once received, an executed order form may
not be modified, amended or rescinded without the consent of the Primary
Parties, unless the
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Offerings have not been completed within 45 days after the end of the
Subscription Offering unless such period has been extended with the consent
of the OTS.
In order to ensure that Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members are properly identified as to
their stock purchase priority, depositors as of the close of business on
the Eligibility Record Date (December 31, 1995) or the Supplemental
Eligibility Record Date (_______________) and depositors and borrowers as
of the close of business on the Voting Record Date (______________, 19___)
must list on the order form all accounts in which they have an interest,
giving all names in each account and the account numbers.
Payment for subscriptions may be made (i) in cash if delivered in
person at any office of the Savings Bank, (ii) by check or money order or
(iii) by authorization of withdrawal from deposit accounts maintained with
the Savings Bank. The Primary Parties will not accept payment for shares
of Common Stock by wired funds. Funds will be deposited in a segregated
account at the Savings Bank and interest will be paid on funds made by
cash, check or money order at the Savings Bank's passbook rate of interest
from the date payment is received until completion or termination of the
Conversion and Reorganization. If payment is made by authorization of
withdrawal from deposit accounts, the funds authorized to be withdrawn from
a deposit account will continue to accrue interest at the contractual rates
until completion or termination of the Conversion and Reorganization, but a
hold will be placed on such funds, thereby making them unavailable to the
depositor until completion or termination of the Conversion and
Reorganization.
If a subscriber authorizes the Savings Bank to withdraw the aggregate
amount of the purchase price from a deposit account, the Savings Bank will
do so as of the effective date of the Conversion and Reorganization. The
Savings Bank will waive any applicable penalties for early withdrawal from
certificate accounts. If the remaining balance in a certificate account is
reduced below the applicable minimum balance requirement at the time that
the funds actually are transferred under the authorization, the certificate
will be cancelled at the time of the withdrawal without penalty and the
remaining balance will earn interest at the passbook rate.
The ESOP will not be required to pay for the shares subscribed for at
the time it subscribes, but rather may pay for such shares of Common Stock
subscribed for by it at the Purchase Price upon consummation of the
Offerings, provided that there is in force from the time of its
subscription until such time, a loan commitment from an unrelated financial
institution or the Company to lend to the ESOP, at such time, the aggregate
Purchase Price of the shares for which it subscribed.
Owners of self-directed Individual Retirement Accounts ("IRAs") may
use the assets of such IRAs to purchase shares of Common Stock in the
Offerings, provided that such IRAs are not maintained at the Savings Bank.
Persons with IRAs maintained at the Savings Bank must have their accounts
transferred to a broker to purchase shares of Common Stock in the
Subscription and Community Offerings. In addition, ERISA provisions and IRS
regulations require that officers, directors and 10% stockholders who use
self-directed IRA funds to purchase shares of Common Stock in the
Subscription and Community Offerings make such purchases for the exclusive
benefit of the IRAs. Any parties wishing to use IRA funds for stock
purchases must visit the Stock Information Center on or before
_______________, 1997 so that the necessary forms may be forwarded for
execution and returned prior to the Expiration Date.
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Restrictions on Transfer of Subscription Rights and Shares
Pursuant to the rules and regulations of the OTS, no person with
subscription rights may transfer or enter into any agreement or
understanding to transfer the legal or beneficial ownership of the
subscription rights issued under the Plan or the shares of Common Stock to
be issued upon their exercise. Such rights may be exercised only by the
person to whom they are granted and only for his or her account. Each
person exercising such subscription rights will be required to certify that
he or she is purchasing shares solely for his or her own account and that
he or she has no agreement or understanding regarding the sale or transfer
of such shares. Federal regulations also prohibit any person from offering
or making an announcement of an offer or intent to make an offer to
purchase such subscription rights or shares of Common Stock prior to the
completion of the Conversion.
The Primary Parties will pursue any and all legal and equitable
remedies in the event they become aware of the transfer of subscription
rights and will not honor orders known by them to involve the transfer of
such rights.
Liquidation Rights
In the unlikely event of a complete liquidation of the Mutual Holding
Company in its present mutual form, each depositor of the Savings Bank
would receive his or her pro rata share of any assets of the Mutual Holding
Company remaining after payment of claims of all creditors. Each
depositor's pro rata share of such remaining assets would be in the same
proportion as the value of his or her deposit account was to the total
value of all deposit accounts in the Savings Bank at the time of
liquidation. After the Conversion and Reorganization, each depositor, in
the event of a complete liquidation of the Savings Bank, would have a claim
as a creditor of the same general priority as the claims of all other
general creditors of the Savings Bank. However, except as described below,
his or her claim would be solely in the amount of the balance in his or her
deposit account plus accrued interest. He or she would not have an
interest in the value or assets of the Savings Bank or the Company above
that amount.
The Plan provides for the establishment, upon the completion of the
Conversion and Reorganization, of a special "liquidation account" for the
benefit of Eligible Account Holders and Supplemental Eligible Account
Holders in an amount equal to the Savings Bank's net worth as reflected in
its latest balance sheet contained in the final Prospectus utilized in the
Offerings. Each Eligible Account Holder and Supplemental Eligible Account
Holder, if he or she were to continue to maintain his or her deposit
account at the Savings Bank, would be entitled, upon a complete liquidation
of the Savings Bank after the Conversion and Reorganization, to an interest
in the liquidation account prior to any payment to the Company as the sole
stockholder of the Savings Bank. Each Eligible Account Holder and
Supplemental Eligible Account Holder would have an initial interest in such
liquidation account for each deposit account, including passbook accounts,
transaction accounts such as checking accounts, money market deposit
accounts and certificates of deposit, held in the Savings Bank at the close
of business on December 31, 1995 or _______________, as the case may be.
Each Eligible Account Holder and Supplemental Eligible Account Holder will
have a pro rata interest in the total liquidation account for each of his
or her deposit accounts based on the proportion that the balance of each
such deposit account on the December 31, 1995 Eligibility Record Date (or
the _______________ Supplemental Eligibility Record Date, as the case may
be) bore to the balance of all deposit accounts in the Savings Bank on such
date.
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If, however, on any annual closing date thereafter, the amount in any
deposit account is less than the amount in such deposit account on December
31, 1995 or _______________, as the case may be, or any other annual
closing date, then the interest in the liquidation account relating to such
deposit account would be reduced by the proportion of any such reduction,
and such interest will cease to exist if such deposit account is closed.
In addition, no interest in the liquidation account would ever be increased
despite any subsequent increase in the related deposit account. Any assets
remaining after the above liquidation rights of Eligible Account Holders
and Supplemental Eligible Account Holders are satisfied would be
distributed to the Company as the sole stockholder of the Savings Bank.
Tax Aspects
Consummation of the Conversion and Reorganization is expressly
conditioned upon prior receipt of either a ruling from the IRS or an
opinion of counsel with respect to applicable federal tax laws, and either
a ruling from the State of Georgia or an opinion of counsel with respect to
Georgia tax laws, concerning certain federal and State of Georgia income
tax consequences.
Prior to consummation of the Conversion and Reorganization, Powell,
Goldstein, Frazer & Murphy LLP will issue an opinion to the Company, the
Mutual Holding Company and the Savings Bank to the effect that, for federal
and State of Georgia income tax purposes:
1. The merger of the Mutual Holding Company with and into the Savings
Bank will qualify as a reorganization pursuant to Section
368(a)(1)(A) of the Code;
2. No gain or loss will be recognized by the Mutual Holding Company or
the Savings Bank as a consequence of the merger (except for
deferred gain or loss recognized pursuant to Section 1502 of the
Code in the event that the Mutual Holding Company consolidated
group is not considered to survive as a result of the Conversion
and Reorganization and the resulting Company group does not elect
to file a consolidated return for federal income tax purposes);
3. The merger of Interim CFB with and into the Savings Bank will be
disregarded for federal income tax purposes and will be treated as
the transfer of an amount of proceeds received in the Offerings by
the Company to the Savings Bank in exchange for Savings Bank Common
Stock;
4. No gain or loss will be recognized by the Savings Bank upon receipt
of the contributed offering proceeds in exchange for Savings Bank
Common Stock; and
5. No gain or loss will be recognized by the Company upon receipt of
the offering proceeds in exchange for Company Common Stock.
In the opinion of Ferguson, which opinion is not binding on the IRS,
the subscription rights do not have any ascertainable value, based on the
fact that such rights are acquired by the recipients without cost, are
nontransferable and of short duration, and afford the recipients the right
only to purchase the Common Stock at a price equal to its estimated fair
market value. which will be the same price as the Purchase Price for the
unsubscribed shares of Common Stock. If the subscription rights granted to
eligible subscribers are deemed to have an ascertainable value, receipt of
such rights likely would be taxable only to those eligible subscribers who
exercise the subscription rights (either as a capital gain or ordinary
income) in an amount equal to such value, and the Primary Parties could
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recognize gain on such distribution. Eligible subscribers are encouraged
to consult with their own tax advisor as to the tax consequences in the
event that such subscription rights are deemed to have an ascertainable
value.
Unlike private rulings, an opinion is not binding on the IRS and the
IRS could disagree with conclusions reached therein. In the event of such
disagreement, there can be no assurance that the IRS would not prevail in a
judicial or administrative proceeding.
Delivery of Certificates
Certificates representing Common Stock issued in connection with the
Offerings will be mailed by the Company's transfer agent to the persons
entitled thereto at the addresses of such persons appearing on the stock
order form for Common Stock as soon as practicable following consummation
of the Conversion and Reorganization. Any certificates returned as
undeliverable will be held by the Company until claimed by persons legally
entitled thereto or otherwise disposed of in accordance with applicable
law. Until certificates for Common Stock are available and delivered to
subscribers, subscribers may not be able to sell the shares of Common Stock
for which they have subscribed, even though trading of Common Stock may be
commenced.
Required Approvals
Various approvals of the OTS are required in order to consummate the
Conversion and Reorganization. The OTS has approved the Plan of
Conversion, subject to approval by the Mutual Holding Company's Members and
the Mutual Holding Company as the Savings Bank's sole stockholder. In
addition, consummation of the Conversion and Reorganization is subject to
OTS approval of the Company's application to acquire all of the to-be-
outstanding Savings Bank Common Stock and the applications with respect to
the merger of the Mutual Holding Company (following its conversion to
Interim Mutual) into the Savings Bank and the merger of Interim CFB into
the Savings Bank, with the Savings Bank being the surviving entity in both
mergers. Applications for these approvals have been filed and are
currently pending. There can be no assurances that the requisite OTS
approvals will be received in a timely manner, in which event the
consummation of the Conversion and Reorganization may be delayed beyond the
expiration of the Offerings.
Pursuant to OTS regulations, the Plan of Conversion also must be
approved by (1) at least a majority of the total number of votes eligible
to be cast by Members of the Mutual Holding Company at the Members'
Meeting, and (2) holders of at least two-thirds of the outstanding Savings
Bank Common Stock at the Stockholders' Meeting. As of the date of this
Prospectus, the Mutual Holding Company holds 100% of all outstanding stock
of the Savings Bank Common Stock and intends to vote those shares at the
Stockholders' Meeting to approve the Plan of Conversion.
Certain Restrictions on Purchase or Transfer of Shares after the Conversion
and Reorganization
All shares of Common Stock purchased in connection with the Conversion
and Reorganization by a director or certain specified officers of the
Primary Parties identified in the Plan of Conversion will be subject to a
restriction that the shares not be sold for a period of one year following
the Conversion and Reorganization, except in the event of the death of such
director or executive officer or pursuant to a merger or similar
transaction approved by the OTS. Each certificate for restricted shares
will bear a legend giving notice of this restriction on transfer, and
appropriate stop-transfer instructions will be issued to the Company's
transfer agent. Any shares of Common Stock issued
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within this one-year period as a stock dividend, stock split or otherwise
with respect to such restricted stock will be subject to the same
restrictions. The directors and certain specified officers of the Company
will also be subject to the insider trading rules promulgated pursuant to
the Exchange Act.
Purchases of Common Stock of the Company by directors, certain
officers specified in the Plan of Conversion and their associates during
the three-year period following completion of the Conversion and
Reorganization may be made only through a broker or dealer registered with
the SEC, except with the prior written approval of the OTS. This
restriction does not apply, however, to negotiated transactions involving
more than 1.0% of the Company's outstanding Common Stock or to the purchase
of stock pursuant to any tax-qualified employee stock benefit plan, such as
the ESOP, or by any non-tax-qualified employee stock benefit plan.
Pursuant to OTS regulations, the Company will generally be prohibited
from repurchasing any shares of Common Stock within one year following
consummation of the Conversion and Reorganization. During the second and
third years following consummation of the Conversion and Reorganization,
the Company may not repurchase any shares of its Common Stock other than
pursuant to (i) an offer to all stockholders on a pro rata basis which is
approved by the OTS; (ii) the repurchase of qualifying shares of a
director, if any; (iii) purchases in the open market by a tax-qualified or
non-tax-qualified employee stock benefit plan in an amount reasonable and
appropriate to fund the plan; or (iv) purchases that are part of an open-
market program not involving more than 5% of its outstanding capital stock
during a 12-month period, if the repurchases do not cause the Savings Bank
to become undercapitalized and the Savings Bank provides to the Regional
Director of the OTS no later than ten days prior to the commencement of a
repurchase program written notice containing a full description of the
program to be undertaken and such program is not disapproved by the
Regional Director. However, the Regional Director has authority to permit
repurchases during the first year following consummation of the Conversion
and Reorganization and to permit repurchases in excess of 5% during the
second and third years upon the establishment of exceptional circumstances
(i.e., where such repurchases would be in the best interests of the
institution and its stockholders).
Amendment or Termination of the Plan
If deemed necessary or desirable by the Board of Directors of the
Primary Parties, the Plan may be amended at any time prior to the
solicitation of proxies from members and stockholders to vote on the Plan
and at any time thereafter with the concurrence of the OTS. Unless the OTS
requires otherwise, any amendment to the Plan made after approval by the
members and stockholders with OTS concurrence will not necessitate further
approval by the members or stockholders. The Plan will terminate if the
sale of all of the shares of Common Stock in the Offerings is not completed
within 24 months after the date of shareholder approval of the Plan.
Before the Plan is approved by the Mutual Holding Company or its members,
whichever is earlier, the Plan may be terminated by the Boards of Directors
of the Primary Parties without OTS approval. Thereafter, the respective
Boards of Directors may terminate the Plan only with OTS approval.
CERTAIN RESTRICTIONS ON ACQUISITION OF THE COMPANY
Certain provisions of the Company's Articles of Incorporation and
Bylaws which deal with matters of corporate governance and rights of
shareholders might be deemed to have a potential anti-takeover effect.
These provisions provide, among other things, (i) that the Board of
Directors
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of the Company shall be divided into three classes as nearly equal in
number as possible and that the members of each class shall be elected for
a term of three years, with one class being elected annually; (ii) the
authority to issue shares of authorized but unissued Common Stock and
Preferred Stock and to establish the terms of any one or more series of
Preferred Stock, including voting rights; and (iii) that certain mergers,
acquisitions and similar transactions involving the Company must be
approved by 80% of the shareholder votes entitled to be cast unless two-
thirds of the members of the Board of Directors approves the transaction;
(iv) that 80% of the shareholder votes entitled to be cast will be required
to remove a director without cause; (v) that 80% of the shareholder votes
entitled to be cast will be required to change the number of directors
unless two-thirds of the members of the Board of Directors approve the
change; (vi) that the Board of Directors may consider factors other than
price when evaluating an offer from another party to acquire the Company;
and (vii) that 80% of the shareholder votes entitled to be cast will be
required to amend the foregoing provisions of the Articles of Incorporation
unless two-thirds of the members of the Board of Directors approve the
amendment. In addition to the foregoing, and described below the Georgia
Business Corporation Act (the "GBCA") generally restricts "business
combinations" between the Company or a subsidiary and an "interested
shareholder" within the five-year period after the person or entity becomes
an interested shareholder. These provisions are described in more detail
below.
The foregoing provisions of the Articles of Incorporation and Bylaws
of the Company and Georgia law could have the effect of discouraging an
acquisition of the Company or stock purchases in furtherance of an
acquisition, and could accordingly, under certain circumstances, discourage
transactions which might otherwise have a favorable effect on the price of
the Common Stock.
In addition, the employment agreements between the Company and its
executive officers provide for certain termination payments in the event of
a change in control of the Company. See "Management of the Savings Bank-
Consulting Arrangements and Employment Agreements." The foregoing provision
may make it more costly for companies or persons to acquire control of the
Company.
The Board of Directors believes that the provisions described above
are prudent and will reduce vulnerability to takeover attempts and certain
other transactions that are not negotiated with and approved by the Board
of Directors of the Company. The Board of Directors believes that these
provisions are in the best interests of the Company and its future
shareholders. In the Board of Directors' judgment, the Board of Directors
is in the best position to determine the true value of the Company and to
negotiate more effectively for what may be in the best interests of its
shareholders. Accordingly, the Board of Directors believes that it is in
the best interests of the Company and its future shareholders to encourage
potential acquirors to negotiate directly with the Board of Directors and
that these provisions will encourage such negotiations and discourage
hostile takeover attempts. It is also the Board of Directors' view that
these provisions should not discourage persons from proposing a merger or
other transaction at prices reflective of the true value of the Company and
where the transaction is in the best interests of all shareholders.
Board of Directors
The Articles of Incorporation and Bylaws of the Company require that
the Board of Directors be divided into three classes as nearly equal in
number as possible and that the members of each class shall be elected for
a term of three years and until their successors are elected and qualified,
with one class being elected annually. The vote of the holders of at least
80% of the shares entitled
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to vote is required to change the size of the Board of Directors unless
two-thirds of the directors agree to the change. Under the Company's
Bylaws, any vacancy occurring in the Board of Directors, including any
vacancy created by reason of an increase in the number of directors, may be
filled by the remaining directors, and any director so chosen shall hold
office for the remainder of the term to which the director has been elected
and until his or her successor is elected and qualified. In addition, the
Company's Bylaws provide that any director may be removed for cause by the
holders of a majority of the outstanding voting shares of the Company, but
may only be removed without cause by the holders of 80% of the outstanding
voting shares of the Company. All of these provisions make it more
difficult to force an immediate change in the composition of the Board and
would therefore render more difficult an attempt to gain control of the
Company.
Limitations on Liability
Section 14-2-202 of the GBCA currently provide that directors (but not
officers) of corporations that have adopted a provision in their Articles
of Incorporation eliminating their personal liability to the Corporation or
its shareholders for monetary damages for breach of duty as a director will
not be so liable, except (i) for any breach of the director's duty of
loyalty to the corporation or its shareholders, (ii) for acts or omissions
not in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) for the payment of certain unlawful dividends and
the making of certain stock purchases or redemptions or (iv) for any
transaction from which the director derived an improper personal benefit.
This provision would absolve directors of personal liability for negligence
in the performance of their duties, including gross negligence. It would
not permit a director to be exculpated, however, for liability for actions
involving conflicts of interest or breaches of the traditional "duty of
loyalty" to the Company and its shareholders, and it would not affect the
availability of injunctive or other equitable relief as a remedy.
The Company's Articles of Incorporation eliminate the personal
liability of the directors of the Company to the extent permitted by the
GBCA, except that the Articles of Incorporation provide that liability of
the Directors will be eliminated for the breach of any duty and have
modified subsection (iv) of the GBCA provision described in the preceding
paragraph to retain liability only for an improper "material tangible"
personal benefit. Should any portion of the Articles of Incorporation be
deemed to be unenforceable, the Articles of Incorporation provide that
nothing shall limit the enforceability of any other portion of the Articles
of Incorporation.
Currently the scope of the provision in the Company's Articles of
Incorporation limiting the personal liability of directors is uncertain
because of the absence of judicial precedent interpreting similar
provisions. In addition, the SEC takes the position that similar
provisions added to other corporations' charters would not protect those
corporations' directors from liability for violations of the federal
securities laws. Federal banking regulators also may take the same
position with respect to violations of federal banking laws and
regulations.
The provision limiting the personal liability of the Company's
directors does not eliminate or alter the duty of the Company's directors:
it merely limits personal liability for monetary damages to the maximum
extent now or hereafter permitted by the GBCA. Moreover, it currently
applies only to claims against a director arising out of his or her role as
a director; it currently does not apply to claims arising out of his or her
role as an officer (if he or she is also an officer) or arising out of any
other capacity in which he or she serves because Section 14-2-202 of the
GBCA does not authorize such a limitation of liability.
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The provision in the Company's Articles of Incorporation which limits
the personal liability of directors is designed to ensure that the ability
of the Company's directors to exercise their best business judgment in
managing the Company's affairs is not unreasonably impeded by exposure to
the potentially high personal costs or other uncertainties of litigation.
The nature of the tasks and responsibilities undertaken by directors of
publicly-held corporations often require such persons to make difficult
judgments of great importance which can expose such persons to personal
liability, but from which they will acquire no personal benefit. In recent
years, litigation against publicly held corporations and their directors
and officers challenging good faith business judgments and involving no
allegations of personal wrongdoing has become common. Such litigation
regularly involves damage claims in huge amounts which bear no relationship
to the amount of compensation received by the directors or officers,
particularly in the case of directors who are not employees of the
corporation. The expense of such litigation, whether it is well founded or
not, can be enormous. The provision of the Articles of Incorporation
relating to director liability is intended to reduce in appropriate cases,
the risk incident to serving as a director and to enable the Company to
elect and retain the persons most qualified to serve as directors.
Mergers, Consolidations and Sales of Assets
The Company's Articles of Incorporation require the approval of the
holders of 80% of the outstanding stock of the Company entitled to vote
thereon for mergers or consolidations, and for sales, leases or exchanges
of all or substantially all of the Company's assets unless the transaction
is approved by two-thirds of the members of the Boards of Directors. This
provision could tend to make the acquisition of the Company more difficult
to accomplish without the cooperation or favorable recommendation of the
Company's Board of Directors.
As holder of all of the outstanding Savings Bank Common Stock after
consummation of the Conversion and Reorganization, the Company generally
will be able to authorize a merger, consolidation or other business
combination involving the Savings Bank without the approval of the
shareholders of the Company.
Business Combinations with Interested Shareholders
Section 14-2-1132 of the GBCA imposes certain restrictions on business
combinations between the Company and large shareholders. Specifically, the
GBCA generally prohibits a "business combination" (as defined in the GBCA,
generally including mergers, sales and leases of assets, issuances of
securities and similar transactions) between the Company or a subsidiary
and an "interested shareholder" (as defined in Section 14-2-1110 of the
GBCA, generally the beneficial owner of 10% or more of the Common Stock)
within five years after the person or entity becomes an interested
shareholder, unless (i) prior to the person or entity becoming an
interested shareholder, the business combination or the transaction
pursuant to which such person or entity became an interested shareholder
shall have been approved by the Company's Board of Directors, (ii) upon
consummation of the transaction in which the interested shareholder became
such, the interested shareholder holds at least 90% of the Common Stock
(excluding "insider") shares held by persons who are both officers and
directors and shares held by certain employee benefit plans), or (iii)
after the shareholder becomes an interested shareholder, he or she acquires
additional shares resulting in ownership of at least 90% of the outstanding
Common Stock and obtains the approval of the holders of a majority of the
remaining shares, excluding "insider" shares as described above.
One of the effects of the Act may be to prevent highly leveraged
takeovers, which depend upon obtaining access to the acquired corporation's
assets to support or repay acquisition
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indebtedness and certain coercive acquisition tactics. The Act may prevent
any interested shareholder from taking advantage of its position as a
substantial, if not controlling, shareholder and engaging in transactions
with the Company that may not be fair to the Company's other shareholders
or that may otherwise not be in the best interests of the Company, its
shareholders and other constituencies.
For similar reasons, however, these provisions may make more difficult
or discourage an acquisition of the Company, or the acquisition of control
of the Company by a principal shareholder, and thus the removal of
incumbent management. In addition, to the extent that the Act discourages
takeovers that would result in the change of the Company's management, such
a change may be less likely to occur.
Neither the Savings Bank's Charter and Bylaws nor federal laws and
regulations contain a provision which restricts business combinations
between the Savings Bank and interested shareholders in the manner set
forth in the Act.
Fair Price Provisions
Under Sections 14-2-1111 and -1112 of the GBCA, business combinations
with "interested shareholders" (as defined in Section 14-2-1110 of the GBCA
and described in the preceding section of this Prospectus) must meet one of
three criteria designed to protect minority shareholders: (i) the
transaction must be unanimously approved by the "continuing directors" of
the Company (generally directors who serve prior to the time the interested
shareholder acquired 10% beneficial ownership of the Company and who are
unaffiliated with the interested shareholder); (ii) the transaction must be
approved by two-thirds of the continuing directors and a majority of shares
held by shareholders other than the interested shareholder; or (iii) the
terms of the transaction must meet specified fair pricing criteria and
certain other tests that are intended to ensure that all shareholders
receive a fair price and equivalent consideration for their shares
regardless of when they sell their shares to an acquiring party. This
provision is designed to protect shareholders against the inequities of
certain tactics that have been used in hostile takeover attempts. For
example, in "two-tier" transactions, the acquiring party usually tenders in
cash at a substantial premium for a major stock interest in the target
corporation. After acquiring this initial interest in the corporation, the
acquiring party may acquire total ownership of the corporation by effecting
a "freeze-out" merger that forces minority shareholders to receive cash or
other consideration for their shares of the acquired corporation. As a
result, minority shareholders who do not participate in the initial tender
may receive a lower price or less desirable form of consideration than was
received by shareholders that tendered. The "fair price" provisions of the
GBCA are designed to discourage transactions of this kind and to encourage
negotiated acquisitions in which all shareholders will be more likely to
receive equal treatment.
Dissenters' Rights of Appraisal
After the Conversion and Reorganization, the rights of appraisal of
dissenting shareholders of the Company will be governed by the GBCA.
Pursuant thereto, a shareholder of a Georgia corporation generally, has the
right to dissent from any merger or consolidation involving the corporation
or the sale of all or substantially all of the corporation's assets,
subject to specified procedural requirements. However, no such appraisal
rights are available for the shares of any class or series of a
corporation's capital stock if (i) as of the record date fixed to determine
the shareholders entitled to receive notice of and to vote at the meeting
of shareholders to act upon the agreement of merger or consolidation, such
shares were either listed on a national securities exchange or designated
as a national market system security on an interdealer quotation system by
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the NASD or held of record by more than 2,000 shareholders, or (ii) the
corporation is the surviving corporation of a merger and the merger did not
require the approval of the corporation's shareholders, unless in either
case, the holders of such stock are required by an agreement of merger or
consolidation to accept for that stock something other than: (a) shares of
stock of the corporation surviving or resulting from the merger or
consolidation; (b) shares of stock of any other corporation that, at the
effective date of the merger, will be listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the NASD or held of record by more than
2,000 shareholders; (c) cash in lieu of fractional shares of a corporation
described in clause (a) or (b) above; or (d) any combination of the shares
of stock and cash in lieu of fractional shares described in clauses (a)
through (c) above.
Amendment of Governing Instruments
The Articles of Incorporation of the Company provide that any
amendment of the provisions of the Articles of Incorporation or Bylaws:
(i) requiring a classified board of directors; (ii) requiring a
supermajority vote of the shareholders to change the number of directors of
the Company, remove a director without cause or approve a merger or sale of
the Company; (iii) eliminating the personal liability of directors; or (iv)
allowing the Board to consider factors in addition to price when evaluating
acquisition offers requires the affirmative vote of the holders of at least
80% of the issued and outstanding shares of Common Stock unless two-thirds
of the Board of Directors approves the amendment.
Regulatory Restrictions
The Change in Bank Control Act provides that no person, acting
directly or indirectly or through or in concert with one or more other
persons, may acquire control of a savings institution unless the OTS has
been given 60 days' prior written notice. The HOLA provides that no
company may acquire "control" of a savings institution without the prior
approval of the OTS. Any company that acquires such control becomes a
savings institution holding company subject to registration, examination
and regulation by the OTS. Pursuant to federal regulations, control of a
savings institution is conclusively deemed to have been acquired by, among
other things, the acquisition of more than 25% of any class of voting stock
of the institution or the ability to control the election of a majority of
the directors of an institution. Moreover, control is presumed to have
been acquired, subject to rebuttal, upon the acquisition of more than 10%
of any class of voting stock, or of more than 25% of any class of stock, of
a savings institution where certain enumerated "control factors" are also
present in the acquisition. The OTS may prohibit an acquisition if (i) it
would result in a monopoly or substantially lessen competition, (ii) the
financial condition of the acquiring person might jeopardize the financial
stability of the institution, or (iii) the competence, experience or
integrity of the acquiring person indicates that it would not be in the
interest of the depositors or of the public to permit the acquisition of
control by such person. The foregoing restrictions do not apply to the
acquisition of a savings institution's capital stock by one or more tax-
qualified employee stock benefit plans of the Company or the Savings Bank,
provided that the plan or plans do not have beneficial ownership in the
aggregate of more than 25% of any class of equity security of the savings
institution.
For three years following the Conversion and Reorganization, OTS
regulations prohibit any person from acquiring, either directly or
indirectly, or making an offer to acquire more than 10% of the stock of any
converted savings institution, without the prior written approval of the
OTS, except for (i) any offer with a view toward public resale made
exclusively to the institution or to underwriters or a selling group acting
on its behalf, (ii) offers that if consummated would not result
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in the acquisition by such person during the preceding 12-month period of
more than one percent of such stock, (iii) offers in the aggregate for up
to 24.9% by the ESOP or other tax-qualified plans of the Company or the
Savings Bank, and (iv) an offer to acquire or acquisition of beneficial
ownership of more than 10% of the common stock of the savings institution
by a corporation whose ownership is or will be substantially the same as
the ownership of the savings institution, provided that the offer or
acquisition is made more than one year following the date of completion of
the conversion. Such prohibition also is applicable to the acquisition of
the Common Stock. In the event that any person, directly or indirectly,
violates this regulation, the securities beneficially owned by such person
in excess of 10% shall not be counted as shares entitled to vote and shall
not be voted by any person or counted as voting shares in connection with
any matters submitted to a vote of shareholders. The definition of
beneficial ownership for this regulation extends to persons holding
revocable or irrevocable proxies for an institution's stock under
circumstances that give rise to a conclusive or rebuttable determination of
control under OTS regulations.
In addition to the foregoing, the Plan prohibits any person, prior to
the completion of the Conversion and Reorganization, from offering, or
making an announcement of an intent to make an offer, to purchase
subscription rights or Common Stock. See "The Conversion and
Reorganization - Restrictions on Transfer of Subscription Rights and
Shares."
Issuance of Capital Stock
Pursuant to applicable laws and regulations, the Mutual Holding
Company is required to own not less than a majority of the outstanding
Savings Bank Common Stock. There will be no such restriction applicable to
the Company following consummation of the Conversion and Reorganization.
Neither the Charter of the Savings Bank nor the Articles of
Incorporation of the Company contain a restriction on the issuance of
shares of capital stock to directors, officers or controlling persons of
the Company and the Savings Bank, respectively. Thus, stock-related
compensation plans such as stock option plans could be adopted by the
Company and the Savings Bank without shareholder approval and shares of
Company capital stock and Savings Bank capital stock could be issued
directly to directors, officers or controlling persons without shareholder
approval. The Bylaws of the NASD, however, generally require corporations
with securities which are quoted on the Nasdaq National Market to obtain
shareholder approval of most stock compensation plans for directors,
officers and key employees of the corporation. Moreover, although
generally not required, shareholder approval of stock-related compensation
plans may be sought in certain instances in order to qualify such plans for
favorable federal income tax and securities law treatment under current
laws and regulations.
Neither the Articles of Incorporation nor Bylaws of the Company
provide for pre-emptive rights to shareholders in connection with the
issuance of capital stock.
Voting Rights
The Articles of Incorporation and Bylaws of the Company do not
authorize cumulative voting in elections of directors. Elimination of
cumulative voting will help to ensure continuity and stability of the
Company's Board of Directors and the policies adopted by it by making it
more difficult for the holders of a relatively small amount of the Savings
Bank Common Stock to elect their nominees to the Board of Directors and
possibly by delaying, deterring or discouraging proxy contests. The
Articles of Incorporation of the Company do not specify or limit the
circumstances under which separate class voting rights may be provided to a
particular class or series of Preferred Stock.
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DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
General
The Company is authorized to issue 10,000,000 shares of Common Stock
having a par value of $.01 per share and 10,000,000 shares of preferred stock
with no par value (the "Preferred Stock"). The Company currently expects to
issue up to a maximum of 2,098,750 shares of Common Stock and no shares of
Preferred Stock in the Conversion and Reorganization. Each share of the
Company's Common Stock will have the same relative rights as and will be
identical in all respects with each other share of Common Stock. Upon payment of
the Purchase Price for the Common Stock in accordance with the Plan of
Conversion, all such stock will be duly authorized, fully paid and
nonassessable.
The Common Stock of the Company will represent nonwithdrawable
capital, will not be an account of an insurable type, and will not be insured by
the FDIC.
Common Stock
Dividends. The Company can pay dividends if, as and when declared by
its Board of Directors, subject to compliance with limitations which are imposed
by law. See "Dividend Policy." The holders of Common Stock of the Company will
be entitled to receive and share equally in such dividends as may be declared by
the Board of Directors of the Company out of funds legally available therefor.
If the Company issues Preferred Stock, the holders thereof may have a priority
over the holders of the Common Stock with respect to dividends.
Voting Rights. Upon completion of the Conversion and Reorganization,
the holders of Common Stock of the Company will possess exclusive voting rights
in the Company. They will elect the Company's Board of Directors and act on such
other matters as are required to be presented to them under Georgia law or the
Company's Articles of Incorporation or as are otherwise presented to them by the
Board of Directors. Except as discussed in "Restrictions on Acquisition of the
Company," each holder of Common Stock will be entitled to one vote per share and
will not have any right to cumulate votes in the election of directors. If the
Company issues Preferred Stock, holders of the Preferred Stock may also possess
voting rights.
Liquidation. In the event of any liquidation, dissolution or winding
up of the Company, the holders of its Common Stock would be entitled to receive,
after payment or provision for payment of all its debts and liabilities, all of
the assets of the Company available for distribution. If Preferred Stock is
issued, the holders thereof may have a priority over the holders of the Common
Stock in the event of liquidation or dissolution.
Preemptive Rights. Holders of the Common Stock of the Company will not
be entitled to preemptive rights with respect to any shares which may be issued.
The Common Stock is not subject to redemption.
Preferred Stock
None of the shares of the Company's authorized Preferred Stock will be
issued in the Conversion and Reorganization. Such stock may be issued with such
preferences and designations as the Board of Directors may from time to time
determine. The Board of Directors can, without
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stockholder approval, issue preferred stock with voting, dividend, liquidation
and conversion rights which could dilute the voting strength of the holders of
the Common Stock and may assist management in impeding an unfriendly takeover or
attempted change in control.
EXPERTS
The audited consolidated financial statements of the Mutual Holding
Company at December 31, 1996 and 1995, and for each of the years in the three-
year period ended December 31, 1996 included in this Prospectus and elsewhere in
the registration statement on Form S-1 filed with the SEC and the Application
for Conversion filed with the OTS, have been audited by Porter Keadle Moore LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included in reliance upon the authority of said firm as experts
in giving said reports.
Ferguson has consented to the publication herein of the summary of its
report to the Company and the Savings Bank setting forth its opinion as to the
estimated pro forma market value of the Company and the Savings Bank to be
outstanding upon completion of the Conversion and Reorganization and its opinion
with respect to subscription rights.
LEGAL MATTERS
The legality of the Common Stock and the federal and Georgia income
tax consequences of the Conversion and Reorganization will be passed upon for
the Company, Mutual Holding Company and Carrollton by Powell, Goldstein, Frazer
& Murphy LLP, Atlanta, Georgia. Certain legal matters will be passed upon for
Trident by Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., Greensboro,
North Carolina.
ADDITIONAL INFORMATION
The Company has filed with the SEC a Registration Statement under the
Securities Act with respect to the Common Stock offered hereby. As permitted by
the rules and regulations of the SEC, this Prospectus does not contain all the
information set forth in the Registration Statement. Such information can be
examined without charge at the public reference facilities of the SEC located at
450 Fifth Street, N.W., Washington, D.C. 20549, and copies of such material can
be obtained from the SEC at prescribed rates. In addition, the SEC maintains a
World Wide Web site that contains reports, proxy statements, information
statements and other information regarding registrants that file electronically
with the SEC, including the Company. The address is (http://www.sec.gov.). The
statements contained in this Prospectus as to the contents of any contract or
other document filed as an exhibit to the Registration Statement are, of
necessity, brief descriptions thereof and are not necessarily complete; each
such statement is qualified by reference to such contract or document.
The Mutual Holding Company has filed an Application for Conversion
with the OTS with respect to the Conversion and Reorganization. This Prospectus
omits certain information contained in that application. The application may be
examined at the principal office of the OTS, 1700 G Street, N.W., Washington,
D.C. 20552, and at the Southeast Regional Office of the OTS located at 1475
Peachtree Street, N.E., Atlanta, Georgia 30309.
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<PAGE>
In Connection with the Conversion and Reorganization, the Company will
register its Common Stock with the SEC under Section 12(g) of the Exchange Act,
and upon such registration, the Company and the holders of its stock will become
subject to the proxy solicitation rules, reporting requirements and restrictions
on stock purchases and sales by directors, officers and greater than 10%
stockholders, the annual and periodic reporting requirements and certain other
requirements of the Exchange Act. Under the Plan, the Company has undertaken
that it will not terminate such registration for a period of at least three
years following the Conversion and Reorganization.
A copy of the Articles of Incorporation and the Bylaws of the Company
are available without charge from the Company.
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GLOSSARY
Appraisal Independent appraisal prepared by Ferguson &
Company dated February 27, 1997
BIF Bank Insurance Fund of the FDIC
Code Internal Revenue Code of 1986, as amended
Common Stock The common stock, $0.01 par value per share, of
Community First Banking Company
Community Offering Offering for sale to certain members of the
general public of any shares of Common Stock not
subscribed for in the Subscription Offering,
including the possible offering of Common Stock in
a Syndicated Community Offering
Company Community First Banking Company, a Georgia
corporation
Conversion and The conversion of CF Mutual Holdings to stock
Reorganization form, the issuance of Carrollton Federal Bank,
FSB's outstanding common stock to Community First
Banking Company and Community First Banking
Company's offer and sale of Common Stock in the
Offerings
Eligible Account Holders Deposit account holders of Carrollton Federal
Bank, FSB with account balances of at least $50 as
of the close of business on December 31, 1995
ESOP The Company's Employee Stock Ownership Plan
Exchange Act Securities Exchange Act of 1934, as amended
Expiration Date 12:00 noon, Eastern Time, on [JUNE 17,] 1997,
unless extended
FASB Financial Accounting Standards Board
FDIC Federal Deposit Insurance Corporation
Ferguson Ferguson & Company
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
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<PAGE>
FNMA Federal National Mortgage Association
IRA Individual retirement account or arrangement
IRS Internal Revenue Service
Local Community Carroll, Coweta, Douglas, Fayette, Haralson,
Heard, Henry and Paulding counties within the
State of Georgia
Members Members of CF Mutual Holdings
Members' Meeting Special meeting of members of CF Mutual Holdings
called for the purpose of approving the Plan
MRP, or Recognition Plan Plan pursuant to which a number of shares up to
4.0% of the Common Stock to be sold in the
Offerings will be distributed to directors and
selected employees
Mutual Holding Company CF Mutual Holdings, a federally chartered mutual
holding company
NASD National Association of Securities Dealers, Inc.
Nasdaq Nasdaq National Market System
NII Net interest income
NOW account Negotiable order of withdrawal account
NPV Net portfolio value
Offerings Subscription, Community and Syndicated Community
Offerings, collectively
Option Plan Stock option plan pursuant to which options to
purchase a number of shares of Common Stock up to
10% of the shares to be sold in the Offerings will
be issued to directors and selected employees
Other Members Depositors of the Savings Bank as of the close of
business on ___________, 19___ and borrowers of
the Savings Bank as of July 19, 1990 whose
borrowings were still in existence as of the close
of business on ___________, 1997. Does not
include Eligible Account Holders or Supplemental
Account Holders.
OTS Office of Thrift Supervision
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Plan, or Plan of Plan between CF Mutual Holdings and Carrollton
Conversion Federal Bank, FSB dated as of February 11, 1997,
as amended, pursuant to which (i) CF Mutual
Holdings will convert to an interim federal stock
savings bank and simultaneously merge with and
into the Savings Bank, (ii) a second interim
savings bank formed by the Company solely for such
purpose will then merge into the Savings Bank,
(iii) the Savings Bank will issue all of its
outstanding capital stock to the Company and
become the wholly-owned subsidiary of the Company
and (iv) the Company will offer shares of its
Common Stock in the Offerings.
Primary Parties Community First Banking Company, CF Mutual
Holdings and Carrollton Federal Bank, FSB
Prospectus This Prospectus and Proxy Statement
Purchase Price The $20.00 per share purchase price of the Common
Stock
QTI Qualified thrift investment
QTL Qualified thrift lender
Retirement Plan Retirement Plan of Carrollton Federal Bank, FSB
SAIF Savings Association Insurance Fund of the FDIC
Savings Bank Carrollton Federal Bank, FSB
Savings Bank Common Stock The common stock, $0.01 par value per share, of
Carrollton Federal Bank, FSB
SEC Securities and Exchange Commission
Securities Act Securities Act of 1933, as amended
SFAS Statement of Financial Accounting Standards
adopted by FASB
Subscription Offering Offering of non-transferable rights to subscribe
for the Common Stock, in order of priority, to
Eligible Account Holders, the ESOP, Supplemental
Eligible Account Holders and Other Members
Supplemental Eligible Depositors, who are not Eligible Account Holders,
Account Holders of Carrollton Federal Bank, FSB with account
balances of at least $50 on [MARCH 31,] 1997
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<PAGE>
Syndicated Community Offering of shares of Common Stock remaining after
Offering the Subscription Offering and undertaken prior to
the end and as part of the Community Offering, and
which may, at our discretion be made to the
general public on a best efforts basis by a
selling group of broker-dealers
Trident Trident Securities, Inc.
Valuation Price Range Estimated pro forma market value of the Company
and the Savings Bank ranging from $31,025,000 to
$41,975,000, as it may be amended pursuant to the
Plan
Voting Record Date The close of business on _____________________,
1997, the date for determining members entitled to
vote at the Members' Meeting
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<PAGE>
CF MUTUAL HOLDINGS AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(WITH INDEPENDENT ACCOUNTANTS' REPORT THEREON)
<PAGE>
[LOGO APPEARS HERE]
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
CF Mutual Holdings
We have audited the accompanying consolidated balance sheets of CF Mutual
Holdings and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of earnings, capital, and cash flows for each of the
three years in the period ended December 31, 1996. The consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CF Mutual Holdings
and subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
PORTER KEADLE MOORE, LLP
/s/ Peter Keadle Moore, LLP
Successor to the practice of
Evans, Porter, Bryan & Co.
Atlanta, Georgia
February 4, 1997, except for note 15,
as to which the date is February 11, 1997
<PAGE>
CF MUTUAL HOLDINGS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
Assets
------
1996 1995
----------- -----------
<S> <C> <C>
Cash and due from banks, including reserve requirements
of $1,658,000 and $1,050,000 $ 11,061,383 6,947,747
Interest-bearing deposits in financial institutions 3,355,586 9,494,437
Federal funds sold 8,680,000 17,615,000
----------- -----------
Cash and cash equivalents 23,096,969 34,057,184
Securities available for sale 33,927,243 -
Securities held to maturity 7,764,058 10,377,578
Other investments 2,599,741 3,247,341
Mortgage loans held for sale 282,488 3,091,269
Loans, net 269,834,098 270,880,011
Premises and equipment, net 9,288,592 7,365,297
Accrued interest receivable 2,687,472 2,397,423
Other assets 3,050,849 3,061,143
----------- -----------
$ 352,531,510 334,477,246
=========== ===========
Liabilities and Capital
-----------------------
Deposits:
Demand $ 15,903,005 12,055,514
Interest-bearing demand 47,288,356 46,625,670
Savings 34,076,732 31,736,434
Time 163,257,956 155,228,432
Time, over $100,000 47,230,149 43,641,462
----------- -----------
Total deposits 307,756,198 289,287,512
Federal Home Loan Bank advances 16,295,186 15,595,341
Subordinated debentures 2,000,000 2,000,000
Accrued interest payable and other liabilities 1,222,603 2,564,148
----------- -----------
Total liabilities 327,273,987 309,447,001
Commitments
Capital:
Retained earnings 25,278,036 25,030,245
Net unrealized loss on securities available for sale, net of tax (20,513) -
----------- -----------
Total capital 25,257,523 25,030,245
----------- -----------
$ 352,531,510 334,477,246
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
-2-
<PAGE>
CF MUTUAL HOLDINGS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ---------- ----------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $ 24,874,119 24,587,915 23,000,495
Interest-bearing deposits and federal funds sold 822,139 473,124 406,144
Interest and dividends on investment securities:
U.S. Treasury 43,805 56,716 60,930
U.S. Government agencies and mortgage-backed 2,132,908 2,326,932 2,155,765
State, county and municipals 83,541 - -
Other 233,927 268,434 196,558
---------- ---------- ----------
Total interest income 28,190,439 27,713,121 25,819,892
---------- ---------- ----------
Interest expense:
Interest on deposits:
Demand 1,385,726 1,365,946 1,183,901
Savings 889,267 828,348 1,094,354
Time 11,337,831 10,443,910 8,651,930
---------- ---------- ----------
13,612,824 12,638,204 10,930,185
Interest on FHLB advances and subordinated debentures 1,168,634 1,857,531 1,666,171
---------- ---------- ----------
Total interest expense 14,781,458 14,495,735 12,596,356
---------- ---------- ----------
Net interest income 13,408,981 13,217,386 13,223,536
Provision for loan losses 1,142,987 250,000 99,400
---------- ---------- ----------
Net interest income after provision for loan losses 12,265,994 12,967,386 13,124,136
---------- ---------- ----------
Other income:
Service charges on deposits 2,349,522 2,005,839 1,443,041
Gains on sales of securities available for sale 178,487 366,903 -
Miscellaneous 716,379 745,755 693,621
---------- ---------- ----------
Total other income 3,244,388 3,118,497 2,136,662
---------- ---------- ----------
Other expenses:
Salaries and employee benefits 6,453,278 5,346,917 6,255,624
Occupancy and equipment 1,607,963 1,493,728 1,313,795
Deposit insurance premiums 2,339,616 635,932 682,110
Other operating 4,875,135 4,287,652 4,072,090
---------- ---------- ----------
Total other expenses 15,275,992 11,764,229 12,323,619
---------- ---------- ----------
Earnings before income tax (benefit) expense 234,390 4,321,654 2,937,179
Income tax (benefit) expense (13,401) 1,374,627 553,488
---------- ---------- ----------
Net earnings $ 247,791 2,947,027 2,383,691
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
CF MUTUAL HOLDINGS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
Net Unrealized
Loss on Securities
Retained Available for Sale,
Earnings Net of Tax Total
-------- ------------------- -----------
<S> <C> <C> <C>
Balance, December 31, 1993 $ 19,699,527 - 19,699,527
Net earnings 2,383,691 - 2,383,691
---------- ---------- ----------
Balance, December 31, 1994 22,083,218 - 22,083,218
Net earnings 2,947,027 - 2,947,027
---------- ---------- ----------
Balance, December 31, 1995 25,030,245 - 25,030,245
Net earnings 247,791 - 247,791
Change in unrealized loss on
securities available
for sale, net of tax - (20,513) (20,513)
---------- ---------- ----------
Balance, December 31, 1996 $ 25,278,036 (20,513) 25,257,523
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
CF MUTUAL HOLDINGS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 247,791 2,947,027 2,383,691
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation, amortization and accretion 1,117,487 1,019,631 713,689
Provision for loan losses 1,142,987 250,000 99,400
FHLB stock dividend - - (39,700)
Deferred income tax benefit (946,505) (244,431) (110,918)
Gains on sales of securities available for sale (178,487) (366,903) -
Gains on sales of premises and equipment, net (66,641) (403,674) (73,181)
Change in:
Mortgage loans held for sale 2,808,781 (3,091,269) 2,890,726
Accrued interest receivable (290,050) 74,144 (816,556)
Other assets (87,809) (635,687) 62,808
Accrued interest payable (241,316) 214,526 244,020
Accrued expenses and other liabilities (143,158) 424,857 (770,982)
----------- ----------- -----------
Net cash provided by operating activities 3,363,080 188,221 4,582,997
----------- ----------- -----------
Cash flows from investing activities:
Net maturities of interest-bearing deposits - - 23,000
Proceeds from sales of securities available for sale 4,917,934 19,418,935 -
Proceeds from sales of other investments 759,600 - -
Proceeds from maturities of securities available
for sale 239,984 - -
Proceeds from maturities of securities held to maturity 2,664,499 15,969,894 3,234,583
Proceeds from maturities of other investments - 10,000,053 -
Purchases of other investments (112,000) (10,056,194) -
Purchases of securities available for sale (38,902,740) - -
Purchases of securities held to maturity - (115,000) (37,602,333)
Net change in loans (79,190) 10,181,757 (20,654,713)
Proceeds from sales of real estate 80,220 461,746 119,132
Proceeds from sales of premises and equipment 301,607 1,328,519 103,894
Purchases of premises and equipment (3,361,740) (1,130,516) (1,982,085)
Organization costs - - (212,319)
Cash received in branch acquisition - - 18,949,593
----------- ----------- -----------
Net cash provided (used) by investing
activities (33,491,826) 46,059,194 (38,021,248)
----------- ----------- -----------
Cash flows from financing activities:
Net change in demand and savings deposits 6,850,475 (10,175,766) 2,079,617
Net change in time deposits 11,618,211 10,135,548 (3,503,991)
Proceeds from FHLB advances 10,000,000 5,000,000 26,500,000
Payments of FHLB advances (9,300,155) (27,175,156) (8,675,155)
Proceeds from subordinated debentures - - 2,000,000
----------- ----------- -----------
Net cash provided (used) by financing 19,168,531 (22,215,374) 18,400,471
activities ----------- -----------
Net change in cash and cash equivalents (10,960,215) 24,032,041 (15,037,780)
Cash and cash equivalents at beginning of year 34,057,184 10,025,143 25,062,923
----------- ----------- -----------
Cash and cash equivalents at end of year $ 23,096,969 34,057,184 10,025,143
=========== =========== ===========
</TABLE>
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<PAGE>
CF MUTUAL HOLDINGS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 15,022,774 14,281,209 12,336,651
Income taxes $ 935,000 1,175,000 822,500
Supplemental schedule of noncash investing and financing activities:
Real estate acquired through foreclosure $ 401,866 428,182 665,532
Loans to facilitate sales of real estate $ 419,750 608,769 429,792
Transfer of securities held to maturity to available for sale $ - 19,052,032 -
</TABLE>
In connection with the 1994 branch acquisition, assets were acquired and
liabilities were assumed as follows:
<TABLE>
<S> <C>
Fair value of assets acquired $(1,124,185)
Liabilities assumed 21,186,730
Premium paid for core deposit intangible (1,112,952)
-----------
Cash received in connection with branch acquisition $18,949,593
===========
</TABLE>
See accompanying notes to consolidated financial statements.
-6-
<PAGE>
CF MUTUAL HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
------------
Prior to August 1, 1994, CF Mutual Holdings (the "Company") conducted its
activities pursuant to a federal mutual savings bank charter ("Mutual
Bank") and Carroll Services and Development Corporation ("Service")
operated as its wholly owned subsidiary. Effective August 1, 1994, the
operations of the Mutual Bank were transferred to a federally chartered
stock savings bank, Carrollton Federal Bank, FSB ("Bank").
Contemporaneously, Mutual Bank amended its mutual savings bank charter and
by-laws to conform to the requirements applicable to a federally chartered
mutual holding company and changed its name to CF Mutual Holdings. The
August 1, 1994 reorganization transactions were accounted for in a manner
similar to a pooling of interests.
The Company has no capital stock. All holders of the savings, demand or
other authorized accounts of the Bank are members of the Company
("Members"). With respect to all questions requiring action by the Members,
each holder of an account at the Bank is permitted to cast one vote for
each $100, or fraction thereof, of the withdrawal value of the Member's
accounts. In addition, certain borrowers from the Mutual Bank as of July
19, 1990 are entitled to one vote during the period such borrowings are in
existence. No Member has the right to cast more than one thousand votes.
The Company may distribute its net earnings to account holders of the Bank
on such a basis and in accordance with such terms and conditions as may
from time to time be authorized by the Office of Thrift Supervision
("OTS"). All account holders are entitled to equal distribution of the
assets of the Company, pro rata to the value of their accounts in the Bank,
in the event of a voluntary or involuntary liquidation, dissolution or
winding up of the Company.
The Bank is primarily regulated by the OTS and the Federal Deposit
Insurance Corporation and undergoes periodic examinations by these
regulatory authorities. The Bank primarily provides a full range of
customary banking services throughout Carroll, Coweta, Douglas, Fayette,
Heard, Haralson, Paulding and Henry counties in Georgia. Service is
primarily involved in the sale of real estate previously developed for
sale.
Basis of Presentation and Reclassification
------------------------------------------
The consolidated financial statements include the accounts of the Company,
the Bank, Service, CFB Insurance, Inc. and CFB Securities, Inc. All
significant intercompany accounts and transactions have been eliminated in
consolidation. Certain prior year amounts have been reclassified to conform
to the current year presentation.
The accounting principles followed by the Company and its subsidiaries, and
the methods of applying these principles, conform with generally accepted
accounting principles ("GAAP") and with general practices within the thrift
industry. In preparing financial statements in conformity with GAAP,
management is required to make estimates and assumptions that affect the
reported amounts in the financial statements. Actual results could differ
significantly from those estimates. Material estimates common to the thrift
industry that are particularly susceptible to significant change in the
near term include, but are not limited to, the determination of the
allowance for loan losses, the valuation of real estate acquired in
connection with or in lieu of foreclosure on loans, the valuation allowance
for mortgage servicing rights and valuation allowances associated with the
realization of deferred tax assets which are based on future taxable
income.
Cash and Cash Equivalents
-------------------------
Cash equivalents include amounts due from banks, interest-bearing deposits
in financial institutions and federal funds sold. Generally, federal funds
are sold for one-day periods.
-7-
<PAGE>
CF MUTUAL HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Investment Securities
---------------------
The Company classifies its securities in one of three categories: trading,
available for sale, or held to maturity. There were no trading securities
at December 31, 1996 and 1995. Securities held to maturity are those
securities for which the Bank has the ability and intent to hold to
maturity. All other securities are classified as available for sale.
Available for sale securities consist of investment securities not
classified as trading securities or held to maturity securities and are
recorded at fair value. Held to maturity securities are recorded at cost,
adjusted for the amortization or accretion of premiums or discounts.
Unrealized holding gains and losses, net of the related tax effect, on
securities available for sale are excluded from earnings and are reported
as a separate component of stockholders' equity until realized. Transfers
of securities between categories are recorded at fair value at the date of
transfer. Unrealized holding gains or losses associated with transfers of
securities from held to maturity to available for sale are recorded as a
separate component of stockholders' equity.
A decline in the market value of any available for sale or held to maturity
investment below cost that is deemed other than temporary is charged to
earnings and establishes a new cost basis for the security.
Premiums and discounts are amortized or accreted over the life of the
related security as an adjustment to the yield. Realized gains and losses
are included in earnings and the cost of securities sold are derived using
the specific identification method.
Other Investments
-----------------
Other investments include Federal Home Loan Bank ("FHLB") stock and other
equity securities with no readily determinable fair value. An investment in
FHLB stock is required by law for a federally insured savings bank. These
investment securities are carried at cost and include stock dividends.
Interest Rate Cap Agreement
---------------------------
Interest rate cap agreements ("Caps"), which are principally used by the
Company in the management of interest rate exposure, are accounted for on
an accrual basis. Premiums paid for purchased Caps are being amortized to
interest expense over the terms of the Caps. Unamortized premiums are
included in other assets in the consolidated balance sheet. Amounts to be
received under the Caps are accounted for on an accrual basis, and are
recognized as a reduction of interest expense.
Mortgage Loans Held for Sale
----------------------------
Mortgage loans originated and intended for sale in the secondary market are
carried at the lower of aggregate cost or market value. The amount by which
cost exceeds market value is accounted for as a valuation allowance.
Changes, if any, in the valuation allowance are included in the
determination of net earnings in the period in which the change occurs.
Gains and losses from the sale of loans are determined using the specific
identification method.
Loans, Loan Fees and Interest Income
------------------------------------
Loans that management has the intent and ability to hold for the
foreseeable future or until maturity are reported at their outstanding
unpaid principal balances, net of the allowance for loan losses, deferred
fees or costs on originated loans and unamortized premiums or discounts on
purchased loans.
Loan fees and certain direct loan origination costs are deferred, and the
net fee or cost is recognized in interest income using the level-yield
method over the contractual lives of the loans, adjusted for estimated
prepayments based on the Bank's historical prepayment experience.
Commitment fees and costs relating to commitments whose likelihood of
exercise is remote are recognized over the commitment period on a straight-
line basis. If the commitment is subsequently exercised during the
commitment period, the remaining unamortized commitment fee at the time of
exercise is recognized over the life of the loan as an adjustment to the
yield. Premiums and discounts on purchased loans are amortized over the
remaining lives of the loans using the level-yield method. Fees arising
from servicing loans for others are recognized as earned.
-8-
<PAGE>
CF MUTUAL HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Loans, Loan Fees and Interest Income, continued
-----------------------------------------------
The Bank accounts for impaired loans in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 114, "Accounting by Creditors
for Impairment of a Loan" amended for SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and Disclosure." A
loan is impaired when, based on current information and events, it is
probable that all amounts due according to the contractual terms of the
loan agreement will not be collected. Impaired loans are measured based on
the present value of expected future cash flows, discounted at the loan's
effective interest rate or at the loan's observable market price, or the
fair value of the collateral of the loan if the loan is collateral
dependent. Interest income from impaired loans is recognized using a cash
basis method of accounting during the time within that period in which the
loans were impaired.
Allowance for Loan Losses
-------------------------
The allowance for loan losses is established through provisions for loan
losses charged to expense. Loans are charged against the allowance for loan
losses when management believes that the collection of the principal is
unlikely. The allowance is an amount which, in management's judgment, will
be adequate to absorb losses on existing loans that may become
uncollectible. The allowance is established through consideration of such
factors as changes in the nature and volume of the portfolio, adequacy of
collateral, delinquency trends, loan concentrations, specific problem
loans, and economic conditions that may affect the borrower's ability to
pay.
Management believes that the allowance for loan losses is adequate. While
management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral part
of their examination process, periodically review the Bank's allowance for
loan losses. Such agencies may require the Bank to recognize additions to
the allowance based on their judgments about information available to them
at the time of their examination.
Real Estate
-----------
Real estate acquired through foreclosure is carried at the lower of cost
(defined as fair value at foreclosure) or fair value less estimated costs
to dispose. Generally accepted accounting principles define fair value as
the amount that is expected to be received in a current sale between a
willing buyer and seller other than in a forced or liquidation sale. Fair
values at foreclosure are based on appraisals. Losses arising from the
acquisition of foreclosed properties are charged against the allowance for
loan losses. Subsequent writedowns are provided by a charge to operations
through the allowance for losses on other real estate in the period in
which the need arises.
Real estate held for sale is carried at the lower of cost or fair value
less estimated selling costs. Interest and other carrying charges relating
to properties under development are capitalized as construction costs
during the construction period. Valuations are periodically performed by
management, and provisions for losses through an allowance are established
with a charge to operations if the carrying value of a property exceeds its
estimated net realizable value.
Premises and Equipment
----------------------
Premises and equipment are stated at cost less accumulated depreciation.
Major additions and improvements are charged to the asset accounts while
maintenance and repairs that do not improve or extend the useful lives of
the assets are expensed currently. When assets are retired or otherwise
disposed of, the cost and related accumulated depreciation are removed from
the accounts, and any gain or loss is reflected in earnings for the period.
Depreciation expense is computed using the straight-line method over the
following estimated useful lives:
Land improvements 15-40 years
Buildings and improvements 15-40 years
Furniture and equipment 5-10 years
-9-
<PAGE>
CF MUTUAL HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Mortgage Servicing Rights
-------------------------
Effective January 1, 1996, the Bank adopted the provisions of SFAS No. 122
"Accounting for Mortgage Servicing Rights." SFAS No. 122 amends SFAS No.
65, "Accounting for Certain Mortgage Banking Activities." SFAS No. 122
requires a mortgage banking enterprise to recognize as a separate asset,
the rights to service mortgage loans regardless of whether the servicing
rights are acquired through either purchase or origination. Prior to SFAS
No. 122, SFAS No. 65 prohibited the capitalization of mortgage servicing
rights except where the rights to service loans were acquired from another
organization. Additionally, the new standard requires an impairment
analysis of mortgage servicing rights regardless of whether purchased or
originated.
The Bank's mortgage servicing rights represent the unamortized cost of
purchased and originated contractual rights to service mortgages for others
in exchange for a servicing fee and ancillary loan administration income.
Mortgage servicing rights are amortized over the period of estimated net
servicing income and are periodically adjusted for actual and anticipated
prepayments of the underlying mortgage loans. An impairment analysis is
performed after stratifying the rights by interest rate. Impairment,
defined as the excess of the asset's carrying value over its current fair
value, is recognized through a valuation allowance. At December 31, 1996,
no valuation allowances were required for the mortgage servicing rights.
Core Deposit Intangible
-----------------------
During 1994, the Bank entered into a Purchase and Assumption agreement with
First Union National Bank of Georgia to acquire certain loans, deposits and
other liabilities of a branch in Bremen, Georgia ("branch acquisition") for
a net purchase price approximating $1,113,000. The purchased core deposit
intangible is amortized using the straight-line method over the estimated
average life of the deposit base acquired and is included as a component of
other assets. Amortization expense approximated $74,000, $74,000 and
$69,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
Income Taxes
------------
Deferred tax assets and liabilities are recorded for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases. Future tax benefits, such as net operating loss carryforwards,
are recognized to the extent that realization of such benefits is more
likely than not. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
the assets and liabilities are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income tax expense in the period that includes the enactment
date.
In the event the future tax consequences of differences between the
financial reporting bases and the tax bases of the Company's assets and
liabilities results in deferred tax assets, the standard requires an
evaluation of the probability of being able to realize the future benefits
indicated by such assets. A valuation allowance is provided when it is more
likely than not that some portion or all of the deferred tax asset will not
be realized. In assessing the realizability of the deferred tax assets,
management considers the scheduled reversals of deferred tax liabilities,
projected future taxable income, and tax planning strategies.
A deferred tax liability is not recognized for portions of the allowance
for loan losses for income tax purposes in excess of the financial
statement balance, as described in note 8. Such a deferred tax liability
will only be recognized when it becomes apparent that those temporary
differences will reverse in the foreseeable future.
-10-
<PAGE>
CF MUTUAL HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(2) INVESTMENT SECURITIES
Investment securities at December 31, 1996 and 1995 are summarized as
follows:
<TABLE>
<CAPTION>
December 31, 1996
---------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
SECURITIES AVAILABLE FOR SALE Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Government agencies $ 18,867,304 46,835 83,706 18,830,433
State, county and municipals 2,198,615 34,404 2,222 2,230,797
Mortgage-backed securities 12,892,403 24,853 51,243 12,866,013
---------- ------- ------- ----------
$ 33,958,322 106,092 137,171 33,927,243
========== ======= ======= ==========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996
---------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
SECURITIES HELD TO MATURITY Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 499,819 25 - 499,844
U.S. Government agencies 6,216,029 34,795 90,755 6,160,069
State, county and municipals 115,000 1,206 - 116,206
Mortgage-backed securities 933,210 1,845 12,631 922,424
---------- ------- ------- ----------
$ 7,764,058 37,871 103,386 7,698,543
========== ======= ======= ==========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995
--------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
SECURITIES HELD TO MATURITY Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 1,250,810 4,531 - 1,255,341
U.S. Government agencies 7,141,626 117,391 13,044 7,245,973
State, county and municipals 115,000 541 - 115,541
Mortgage-backed securities 1,870,142 5,277 16,093 1,859,326
---------- ------- ------- ----------
$ 10,377,578 127,740 29,137 10,476,181
========== ======= ======= ==========
</TABLE>
-11-
<PAGE>
CF MUTUAL HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(2) INVESTMENT SECURITIES, CONTINUED
The amortized cost and estimated fair value of securities available for
sale and securities held to maturity at December 31, 1996, by contractual
maturity, are shown below. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Securities Available Securities Held
for Sale to Maturity
--------------------------- ------------------------
Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury securities:
Within 1 year $ - - 499,819 499,844
========== ========== ========= =========
U.S. Government agencies:
Within 1 year $ - - 581,727 585,437
1 to 5 years 2,999,824 3,014,464 2,634,302 2,660,813
5 to 10 years 11,849,330 11,839,589 3,000,000 2,913,819
More than 10 years 4,018,150 3,976,380 - -
---------- ---------- --------- ---------
$ 18,867,304 18,830,433 6,216,029 6,160,069
========== ========== ========= =========
State, county and municipals:
1 to 5 years $ - - 115,000 116,206
More than 10 years 2,198,615 2,230,797 - -
---------- ---------- --------- ---------
$ 2,198,615 2,230,797 115,000 116,206
========== ========== ========= =========
Total securities other than mortgage-backed:
Within 1 year $ - - 1,081,546 1,085,281
1 to 5 years 2,999,824 3,014,464 2,749,302 2,777,019
5 to 10 years 11,849,330 11,839,589 3,000,000 2,913,819
More than 10 years 6,216,765 6,207,177 - -
Mortgage-backed securities 12,892,403 12,866,013 933,210 922,424
---------- ---------- --------- ---------
$ 33,958,322 33,927,243 7,764,058 7,698,543
========== ========== ========= =========
</TABLE>
During 1995 the Bank used the one-time reassessment provisions of the
"Special Report - A Guide to Implementation of SFAS No. 115 on Accounting
for Certain Investments in Debt and Equity Securities" to transfer a
portion of its held to maturity securities portfolio which had an amortized
cost of $19,052,032 and a net unrealized gain of $366,903 to the available
for sale category. The special report allowed the Company to reassess the
appropriateness of its classifications of all investment securities prior
to December 31, 1995 without calling into question the Company's intent to
hold investment securities to maturity in the future.
There were no sales of securities held to maturity during 1996, 1995 and
1994. Proceeds from sales of securities available for sale during 1996 and
1995 totalled $4,917,934 and $19,418,935. Gross gains of $178,487 and
$366,903 were realized on those sales.
Securities and interest-bearing deposits with a carrying value of
approximately $2,517,000 and $3,626,000 at December 31, 1996 and 1995,
respectively, were pledged to secure U.S. government and other public
deposits.
-12-
<PAGE>
CF MUTUAL HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(3) LOANS
Major classifications of loans at December 31, 1996 and 1995 are summarized
as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Real estate mortgage loans $ 146,577,235 175,038,710
Real estate construction loans 33,681 2,348,532
Commercial loans 57,785,878 43,943,791
Consumer and other installment loans 68,038,424 51,839,952
----------- -----------
Total loans 272,435,218 273,170,985
Less: Allowance for loan losses 2,601,120 2,290,974
----------- -----------
Loans, net $ 269,834,098 270,880,011
=========== ===========
</TABLE>
The Bank concentrates its lending activities in the origination of
permanent residential mortgage loans, commercial mortgage loans, commercial
business loans, and consumer installment loans. The majority of the Bank's
real estate loans are secured by real property located in Carroll County,
Georgia and surrounding counties.
The Bank has recognized impaired loans of approximately $5,680,000 and
$1,918,000 at December 31, 1996 and 1995. The total allowance for loan
losses related to these loans was $243,000 and $381,000 at December 31,
1996 and 1995, respectively. Interest income on impaired loans of
approximately $68,000 and $100,000 was recognized for cash payments
received in 1996 and 1995, respectively.
Activity in the allowance for loan losses is summarized as follows for the
years ended December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $ 2,290,974 2,391,920 2,686,508
Provisions charged to operations 1,142,987 250,000 99,400
Loans charged off (924,670) (448,484) (457,826)
Recoveries on loans previously
charged off 91,829 97,538 63,838
----------- --------- ---------
Balance at end of year $ 2,601,120 2,290,974 2,391,920
=========== ========= =========
</TABLE>
Mortgage loans serviced for others are not included in the accompanying
consolidated financial statements. Unpaid principal balances of these loans
at December 31, 1996 and 1995 approximate $53,061,000 and $48,036,000,
respectively.
(4) PREMISES AND EQUIPMENT
Premises and equipment at December 31, 1996 and 1995 are summarized as
follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Land and land improvements $ 1,131,003 1,136,802
Buildings and improvements 5,581,884 5,031,011
Furniture and equipment 7,935,857 6,368,621
Construction in progress 114,720 275,784
---------- ----------
14,763,464 12,812,218
Less: Accumulated depreciation 5,474,872 5,446,921
---------- ----------
$ 9,288,592 7,365,297
========== ==========
</TABLE>
Depreciation expense approximated $1,203,000, $1,038,000 and $889,000 at
December 31, 1996, 1995 and 1994, respectively.
-13-
<PAGE>
CF MUTUAL HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(5) TIME DEPOSITS
At December 31, 1996, contractual maturities of time deposits are
summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1997 $ 133,863,983
1998 54,643,630
1999 11,684,852
2000 5,319,281
2001 and thereafter 4,976,359
--------------
$ 210,488,105
==============
</TABLE>
(6) FHLB ADVANCES
The interest rates for FHLB advances at December 31, 1996 and 1995 ranged
from 4.55% to 7.75%, respectively. FHLB advances are collateralized by FHLB
stock and first mortgage loans. Advances from FHLB outstanding at December
31, 1996 mature as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1997 $ 10,800,155
1998 2,550,155
1999 600,156
2000 600,156
2001 and Thereafter 1,744,564
-------------
$ 16,295,186
=============
</TABLE>
(7) SUBORDINATED DEBENTURES
During 1994, the Company issued Series A fixed rate subordinated debentures
to various executive officers and members of the Board of Directors in an
aggregate principal amount of $2,000,000. The subordinated debentures bear
interest at a simple interest rate per annum of 7.25%, which is payable
quarterly, and mature on September 30, 1999. The payment of the principal
and interest is subordinate and junior in right of payment to the claims of
creditors of the Company. The entire proceeds of the offering were used to
increase the capitalization of the Bank.
(8) INCOME TAXES
The following is an analysis of the components of income tax expense for
the years ended December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
--------- ---------- ---------
<S> <C> <C> <C>
Current $ 933,104 1,619,058 664,406
Deferred (946,505) (477,858) 81,555
Utilization of state operating loss
carryforwards - 233,427 79,970
Adjustment to valuation allowance - - (272,443)
----------- --------- --------
Income tax (benefit) expense $ (13,401) 1,374,627 553,488
=========== ========= ========
</TABLE>
-14-
<PAGE>
CF MUTUAL HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(8) INCOME TAXES, CONTINUED
The differences between income tax (benefit)expense and the amount computed
by applying the statutory federal income tax rate to earnings before taxes
for the years ended December 31, 1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- --------- --------
<S> <C> <C> <C>
Pretax income at statutory rate $ 79,693 1,469,362 998,641
Add (deduct):
Tax-exempt interest income (91,076) (83,920) (61,445)
Adjustment to valuation allowance - - (272,443)
Other (2,018) (10,815) (111,265)
-------- --------- --------
Income tax (benefit) expense $(13,401) 1,374,627 553,488
======== ========= ========
</TABLE>
The following summarizes the net deferred tax asset (liability). The net
deferred tax asset (liability) is included as a component of other assets
and accrued interest payable and other liabilities at December 31, 1996 and
1995, respectively.
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $ 515,105 310,999
Allowance for real estate held for 123,689 100,913
development and sale
Deferred compensation 76,968 57,158
Other 53,300 24,957
State tax credits 232,055 234,170
Unrealized loss on securities available
for sale 10,568 -
---------- ---------
Total gross deferred tax assets 1,011,685 728,197
Deferred tax liabilities:
Net deferred loan fees 363,706 727,411
FHLB stock 226,697 515,041
Premises and equipment 335,224 330,762
Other 2,110 28,108
--------- ---------
Total gross deferred tax liabilities 927,737 1,601,322
--------- ---------
Net deferred tax asset (liability) $ 83,948 (873,125)
========== =========
</TABLE>
The Internal Revenue Code ("IRC") was amended during 1996 and the IRC
section 593 reserve method for loan losses for thrift institutions was
repealed. Effective January 1, 1996, the Bank now computes its tax bad debt
reserves under the rules of IRC section 585, which apply to commercial
banks. In years prior to 1996, the Bank obtained tax bad debt deductions
approximating $5.8 million in excess of its financial statement allowance
for loan losses for which no provision for federal income tax was made.
These amounts were then subject to federal income tax in future years
pursuant to the prior IRC section 593 provisions if used for purposes other
than to absorb bad debt losses. Effective January 1, 1996, approximately
$1.0 million of the excess reserve is no longer subject to recapture under
any circumstances and approximately $4.8 million of the excess reserve is
subject to recapture only if the Bank ceases to qualify as a bank pursuant
to the provisions of IRC section 585.
-15-
<PAGE>
CF MUTUAL HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(9) EMPLOYEE AND DIRECTOR BENEFIT PLANS
All qualifying employees of the Bank are included in a qualified
multiemployer noncontributory defined benefit pension plan sponsored by
the Financial Institutions Retirement Fund. The Bank's policy is to fund
pension costs accrued. No pension expense was incurred during 1996 or
1995. The Bank's pension expense for 1994 was approximately $104,000. At
June 30, 1996, the date of the latest actuarial valuation, the market
value of the plan's net assets exceeded the actuarially computed value of
accumulated plan benefits.
Effective January 1, 1993, the Bank established a retirement plan
qualified pursuant to Internal Revenue Code section 401(k) ("Plan"). The
Plan allows eligible employees to defer a portion of their income by
making contributions into the Plan on a pretax basis. The Bank adopted a
matching formula which vests based on length of service. The Bank matches
50% of employee contributions up to 6% of the employees' compensation.
During the years ended December 31, 1996, 1995 and 1994, the Bank
recognized $94,000, $92,000 and $84,000 in expense related to its
obligations under the Plan.
During 1995, the Bank initiated a defined contribution postretirement
benefit plan to provide retirement benefits to its Board of Directors and
to provide death benefits for their designated beneficiaries. Under the
plan, the Bank purchased split-dollar whole life insurance contracts on
the lives of each Director. The increase in cash surrender value of the
contracts, less the Bank's cost of funds, constitutes the Bank's
contribution to the plan each year. In the event the insurance contracts
fail to produce positive returns, the Bank has no obligation to contribute
to the Plan. At December 31, 1996 and 1995, the cash surrender value of
the insurance contracts was approximately $969,000 and $890,000 and is
included as a component of other assets. Expenses incurred for benefits
were approximately $14,000 during 1996. No expenses were incurred during
1995.
(10) REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could
have a direct material effect on the Bank's financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific capital guidelines that
involve quantitative measures of the Bank's assets, liabilities, and
certain off-balance sheet items as calculated under regulatory accounting
practices. The Bank's capital amounts and classification are also subject
to qualitative judgements by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios of total and Tier
I capital (as defined) to risk-weighted assets (as defined), and of Tier I
capital (as defined) to average assets (as defined) and of Tangible
capital to average assets. Management believes, as of December 31, 1996
and 1995, that the Bank meets all capital adequacy requirements to which
it is subject.
As of December 31, 1996 and 1995, the most recent notification from the
OTS categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well
capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-
based and Tier 1 leverage ratios as set forth in the following table.
There are no conditions or events since that notification that management
believes have changed the institution's category.
-16-
<PAGE>
CF MUTUAL HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(10) REGULATORY MATTERS, CONTINUED
The Bank's actual capital amounts and ratios are presented below.
Consolidated amounts do not materially differ from Bank-only capital
amounts and ratios.
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
------------------ ------------------------- --------------------------
Amount Ratio Amount Ratio Amount Ratio
---------- ------ ----------------- ------ ----------------- -------
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1996:
Total Capital
(to Risk Weighted Assets) $ 25,612,075 10.9% 18,889,301 >8.0% 23,611,627 >10.0%
-
Tier 1 Capital
(to Risk Weighted Assets) $ 23,587,913 10.0% 9,444,651 >4.0% 14,166,976 > 6.0%
Tier 1 Capital - -
(to Adjusted Assets) $ 23,587,913 6.9% 13,972,080 >4.0% 17,465,100 > 5.0%
Tangible Capital
(to Tangible Assets) $ 23,587,913 6.9% 5,239,530 >1.5% N/A N/A
-
AS OF DECEMBER 31, 1995:
Total Capital
(to Risk Weighted Assets) $ 26,914,471 12.2% 17,588,987 >8.0% 21,986,233 >10.0%
- -
Tier 1 Capital
(to Risk Weighted Assets) $ 25,015,649 11.4% 8,794,493 >4.0% 13,191,740 > 6.0%
- -
Tier 1 Capital
(to Adjusted Assets) $ 25,015,649 7.5% 13,335,941 >4.0% 16,669,926 > 5.0%
- -
Tangible Capital
(to Tangible Assets) $ 25,015,649 7.5% 5,000,978 >1.5% N/A N/A
</TABLE>
Thrift regulations limit the amount of dividends the Bank can pay to the
Company without prior regulatory approval. These limitations are a
function of excess regulatory capital and net earnings in the year the
dividend is declared. In 1997, the Bank can pay dividends totalling
approximately $3,661,000 plus net earnings during 1997.
(11) COMMITMENTS
The Bank leases certain banking facilities under operating lease
arrangements expiring through 2012. Future minimum payments required for
all operating leases with remaining terms in excess of one year are
presented below:
<TABLE>
<CAPTION>
Year Ending December 31,
------------------------
<S> <C>
1997 $ 243,839
1998 241,492
1999 223,172
2000 197,228
2001 147,729
Thereafter 773,855
---------
$ 1,827,315
=========
</TABLE>
Total rent expense was approximately $229,000, $127,000 and $101,000 for the
years ended December 31, 1996, 1995 and 1994.
-17-
<PAGE>
CF MUTUAL HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(11) COMMITMENTS, CONTINUED
The Bank is a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its
customers and to manage its cost of funds. These financial instruments
include commitments to extend credit, standby letters of credit and an
interest rate cap agreement. These instruments involve, to varying
degrees, elements of credit risk in excess of the amounts recognized in
the consolidated statements of financial condition. The contract amounts
of these instruments reflect the extent of involvement the Bank has in
particular classes of financial instruments.
Commitments to originate first mortgage loans and to extend credit are
agreements to lend to a customer as long as there is no violation of any
condition established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a
fee. Since many of the commitments are expected to expire without being
drawn upon, the total commitment amounts do not necessarily represent
future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Bank upon extension of credit, is
based on management's credit evaluation of the counterparty. The Bank's
loans are primarily collateralized by residential and other real
properties, automobiles, savings deposits, accounts receivable, inventory
and equipment located in Carroll County, Georgia and surrounding counties.
Standby letters of credit are written conditional commitments issued by
the Bank to guarantee the performance of a customer to a third party.
Those guarantees are primarily issued to support public and private
borrowing arrangements. Most letters of credit extend for less than one
year. The credit risk involved in issuing letters of credit is essentially
the same as that involved in extending loan facilities to customers.
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit
and standby letters of credit is represented by the contractual amount of
those instruments. The Bank uses the same credit policies in making
commitments and conditional obligations as it does for on-balance sheet
instruments. All standby letters of credit are secured at December 31,
1996 and 1995.
On July 20, 1995, the Company entered into a Cap to reduce the potential
impact of increases in interest rates on its interest-bearing liabilities.
The agreement entitles the Company to receive from a counterparty, on a
quarterly basis, the amounts, if any, by which the 3-month LIBOR rate
exceeds the Cap rate of 7% on a notional amount of $25,000,000. The Cap
agreement expires on July 20, 1997.
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Financial instruments whose contract
amounts represent credit risk:
Commitments to originate first mortgage loans $ 128,000 485,000
Commitments to extend credit $ 20,840,000 20,764,000
Standby letters of credit $ 108,000 71.000
Cap agreement $ 27,000 76,000
</TABLE>
(12) MISCELLANEOUS OPERATING EXPENSES
Components of other operating expenses in excess of 1% of interest and
other income for the years ended December 31, 1996, 1995 and 1994 are as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Advertising $ 470,273 225,317 228,482
Data processing expense $ 648,853 506,908 455,108
Office supplies $ 329,246 213,787 235,714
</TABLE>
-18-
<PAGE>
CF MUTUAL HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(13) CF MUTUAL HOLDINGS (PARENT COMPANY ONLY) FINANCIAL INFORMATION
Balance Sheets
December 31, 1996 and 1995
Assets
------
<TABLE>
<CAPTION>
1996 1995
---- ----
Cash and cash equivalents $ 1,327,334 752,189
Investment in subsidiaries 25,873,579 26,350,395
Other assets 222,850 152,662
---------- ----------
$ 27,423,763 27,255,246
========== ==========
Liabilities and Capital
-----------------------
Subordinated debentures $ 2,000,000 2,000,000
Accounts payable and accrued expenses 166,240 225,001
---------- ----------
Total liabilities 2,166,240 2,225,001
Capital 25,257,523 25,030,245
---------- ----------
$ 27,423,763 27,255,246
========== ==========
Statements of Earnings
For the Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Income:
Dividend income from the Bank $ 814,000 752,000 82,700
Interest income 30,290 - -
Other 2,240 - -
---------- ---------- ---------
Total income 846,530 752,000 82,700
---------- ---------- ---------
Operating expenses:
Interest expense 145,397 147,134 19,000
Other 54,801 50,791 17,765
---------- ---------- ---------
Total operating expenses 200,198 197,925 36,765
---------- ---------- ---------
Earnings before income tax benefit
and equity in
undistributed earnings of 646,332 554,075 45,935
subsidiaries
Income tax benefit 58,762 67,440 12,500
---------- ---------- ---------
Earnings before equity in
undistributed earnings of
subsidiaries or dividends
received in excess of earnings
of subsidiaries 705,094 621,515 58,435
Dividends received in excess of (457,303) - -
earnings of subsidiaries
Equity in undistributed earnings of - 2,325,512 2,325,256
subsidiaries ---------- ---------- ---------
Net earnings $ 247,791 2,947,027 2,383,691
========== ========== =========
</TABLE>
-19-
<PAGE>
CF MUTUAL HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(13) CF MUTUAL HOLDINGS (PARENT COMPANY ONLY) FINANCIAL INFORMATION, CONTINUED
Statements of Cash Flows
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 247,791 2,947,027 2,383,691
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Amortization 42,464 42,464 17,765
Dividends received in excess of earnings of
subsidiaries 457,303 - -
Equity in undistributed earnings of subsidiaries - (2,325,512) (2,325,256)
Change in other assets and liabilities (172,413) (4,340) 228,769
---------- ---------- ----------
Net cash provided by operating activities 575,145 659,639 304,969
---------- ---------- ----------
Cash flows from investing activities:
Purchase of capital stock of Bank upon reorganization - - (100)
Contributions of capital to the Bank - - (2,000,000)
Organization costs - - (212,319)
---------- ---------- ---------
Net cash used in investing activities - - (2,212,419)
---------- ---------- ----------
Net cash provided by financing activities, consisting of - - 2,000,000
proceeds from subordinated debentures ---------- ---------- ----------
Net increase in cash 575,145 659,639 92,550
Cash at beginning of year 752,189 92,550 -
---------- ---------- ----------
Cash at end of year $1,327,334 752,189 92,550
========== ========== ==========
</TABLE>
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments",
requires disclosure of fair value information about financial instruments,
whether or not recognized on the face of the balance sheet, for which it is
practicable to estimate that value. The assumptions used in the estimation
of the fair value of the Company's financial instruments are detailed
below. Where quoted prices are not available, fair values are based on
estimates using discounted cash flows and other valuation techniques. The
use of discounted cash flows can be significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. The following disclosures should not be considered a surrogate of
the liquidation value of the Company or its subsidiaries, but rather a
good-faith estimate of the increase or decrease in value of financial
instruments held by the Company since purchase, origination or issuance.
-20-
<PAGE>
CF MUTUAL HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
Cash and Cash Equivalents
-------------------------
For cash, due from banks, federal funds sold and interest-bearing
deposits with other banks, the carrying amount is a reasonable estimate
of fair value.
Securities Held to Maturity and Securities Available for Sale
-------------------------------------------------------------
Fair values for securities held to maturity and securities available
for sale are based on quoted market prices.
Other investments
-----------------
The carrying value of other investments approximates fair value.
Loans and Mortgage Loans Held for Sale
--------------------------------------
The fair value of fixed rate loans is estimated by discounting the
future cash flows using the current rates at which similar loans would
be made to borrowers with similar credit ratings. For variable rate
loans, the carrying amount is a reasonable estimate of fair value.
Deposits
--------
The fair value of demand deposits, savings accounts, NOW accounts and
certain money market deposits is the amount payable on demand at the
reporting date. The fair value of fixed maturity certificates of
deposit is estimated by discounting the future cash flows using the
rates currently offered for deposits of similar remaining
maturities.
FHLB Advances
-------------
The fair value of the FHLB fixed rate borrowings are estimated using
discounted cash flows, based on the current incremental borrowing rates
for similar types of borrowing arrangements.
Subordinated Debentures
-----------------------
Rates currently available to the Company for debt with similar terms
and remaining maturities are used to estimate fair value of existing
debt.
Commitments to Originate First Mortgage Loans, Commitments to Extend
--------------------------------------------------------------------
Credit and Standby Letters of Credit
------------------------------------
Because commitments to originate first mortgage loans, commitments to
extend credit and standby letters of credit are made using variable
rates, the contract value is a reasonable estimate of fair value.
Limitations
-----------
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. These estimates do not reflect any premium or discount that
could result from offering for sale at one time the Company's entire
holdings of a particular financial instrument. Because no market exists
for a significant portion of the Company's financial instruments, fair
value estimates are based on many judgments. These estimates are
subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on and off-balance sheet
financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities
that are not considered financial instruments. Significant assets and
liabilities that are not considered financial instruments include the
mortgage banking operation, deferred income taxes, premises and
equipment and purchased core deposit intangible. In addition, the tax
ramifications related to the realization of the unrealized gains and
losses can have a significant effect on fair value estimates and have
not been considered in the estimates.
-21-
<PAGE>
CF MUTUAL HOLDINGS AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
The carrying amount and estimated fair values of the Company's financial
instruments at December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------ ------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents $ 23,096,969 23,096,969 34,057,184 34,057,184
Securities available for sale 33,927,243 33,927,423 - -
Securities held to maturity 7,764,058 7,698,543 10,377,578 10,476,181
Other investments 2,599,741 2,599,741 3,247,341 3,247,341
Loans, net 269,834,098 270,434,962 270,880,011 272,897,692
Mortgage loans held for sale 282,488 282,488 3,091,269 3,091,269
Liabilities:
Deposits 307,756,198 308,234,690 289,287,512 288,616,298
FHLB advances 16,295,186 15,854,660 15,595,341 15,534,613
Subordinated debentures 2,000,000 1,947,000 2,000,000 1,910,000
Unrecognized financial instruments:
Commitments to originate first
mortgage loans 128,000 128,000 485,000 485,000
Commitments to extend credit 20,840,000 20,840,000 20,764,000 20,764,000
Standby letters of credit 108,000 108,000 71,000 71,000
</TABLE>
(15) SUBSEQUENT EVENT
On February 11, 1997, the Board of Directors of the Company adopted a Plan
of Conversion and Reorganization pursuant to which the Company would be
converted from a federally chartered mutual holding company to a federally
chartered stock savings bank holding company. The Plan of Conversion is
subject to approval of applicable regulatory authorities and by
affirmative vote of the majority of the Company's Members. The conversion
of the Company to a stock savings bank holding company will be accounted
for at historical cost in a manner similar to a pooling of interests.
The Company will form a new entity known as Community First Banking
Company ("Community First"), which will become the holding company for the
Bank upon consummation of the Conversion and Reorganization. Community
First will in turn form a new wholly owned subsidiary known as Interim CFB
Association ("Interim CFB"). The existing Company will convert to an
interim federal savings bank and will simultaneously merge with and into
the Bank, pursuant to which the Company will cease to exist and a
"liquidation account" will be established by the Bank for the benefit of
depositor members as of specified dates. Interim CFB will then merge with
and into the Bank, pursuant to which the Bank will become a wholly owned
subsidiary of Community First.
-22-
<PAGE>
CF MUTUAL HOLDINGS AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
(15) SUBSEQUENT EVENT, CONTINUED
The Plan of Conversion provides for the establishment, upon the completion
of the conversion, of a special "liquidation account" for the benefit of
"Eligible Account Holders and Supplemental Eligible Account Holders"
("Holders") in an amount equal to the Company's retained earnings as of
the date of its latest statement of financial condition contained in the
final prospectus for the sale of the common stock. Each Holder, if he or
she continues to maintain a deposit account at the Bank, would be entitled
on a complete liquidation of the Company after conversion, to an interest
in the liquidation account prior to any payment to stockholders of
Community First. Each eligible account Holder would have an initial
interest in such liquidation account for each deposit account held in the
Company on the qualifying date, December 31, 1995. Each Supplemental
Eligible Account Holder would have a similar interest at a separate
qualifying date, which has not yet been determined. The interest as to
each deposit account would be in the same proportion of the total
liquidation account as the balance of the deposit account on the
qualifying dates was to the aggregate balance in all the deposit accounts
of Holders on such qualifying dates. However, if the amount in the deposit
account on any annual closing date of the Company is less than the amount
in such account on the respective qualifying dates, then the interest in
this special liquidation account would be reduced from time to time by an
amount proportionate to any such reduction, and the interest would cease
to exist if such deposit account were closed. The interest in the special
liquidation account will never be increased despite any increase in the
related deposit account after the respective qualifying dates.
Under the Plan of Conversion, up to 2,098,750 shares of the common stock
of the Company will be offered for sale by Community First, subject to
adjustment. As part of the Plan of Conversion, Community First will
conduct a subscription offering of the common stock for holders of
subscription rights in the following order of priority: (i) depositors of
the Company as of December 31, 1995 with deposits of at least $50
(Eligible Account Holders); (ii) tax-qualified employee benefit plans of
the Company (the Company currently plans to implement an ESOP); (iii)
other depositors of the Company as of December 31, 1995 with deposits of
at least $50 (Supplemental Eligible Account Holders); and (iv) depositors
who are neither Eligible Account Holders nor Supplemental Eligible Account
Holders and certain borrowers, subject to the provisions of the Plan.
The Company may offer shares of common stock in a community offering to
the general public in Georgia and other states with a preference to
natural persons residing in Carroll, Coweta, Douglas, Fayette, Haralson,
Heard, Paulding and Henry counties, Georgia, subject to the prior rights
of holders of subscription rights. The Company has the right, in its sole
discretion, to accept or reject, in whole or in part, any orders to
purchase shares of the common stock received in the community offering.
At December 31, 1996, no costs have been incurred related to the
aforementioned Plan of Conversion. Upon consummation of the Plan of
Conversion and related stock offering, any amounts incurred will be netted
against the proceeds from the stock offering and result in a reduction of
paid-in capital. Should the Plan of Conversion and stock offering not be
consummated, such costs will be charged to expense in 1997.
-23-
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesman or any other person has been authorized to give any
information or to make any representation other than as contained in this
Prospectus in connection with the offering made hereby, and, if given or made,
such other information or representation must not be relied upon as having been
authorized by the Company, the Mutual Holding Company, the Savings Bank or
Trident Securities, Inc. This Prospectus does not constitute an offer to sell or
a solicitation of an offer to buy any of the securities offered hereby to any
person in any jurisdiction in which such offer or solicitation is not authorized
or in which the person making such offer or solicitation is not qualified to do
so, or to any person to whom it is unlawful to make such offer or solicitation
in such jurisdiction. Neither the delivery of this Prospectus nor any sale
hereunder shall under any circumstances create any implication that there has
been no change in the affairs of the Company or the Savings Bank since any of
the dates as of which information is furnished herein or since the date hereof.
-----------------
TABLE OF CONTENTS
-----------------
Page
----
Summary.....................................................................
Selected Consolidated Financial and Other Data..............................
Risk Factors................................................................
Community First Banking Company.............................................
Carrollton Federal Bank.....................................................
CF Mutual Holdings..........................................................
Proposed Management Purchases...............................................
Use of Proceeds.............................................................
Dividend Policy.............................................................
Market for Common Stock.....................................................
Capitalization..............................................................
Regulatory Capital..........................................................
Pro Forma Data..............................................................
Management's Discussion and Analysis of Financial...........................
Condition and Results of Operations.........................................
Business....................................................................
Taxation....................................................................
Regulation..................................................................
Management of the Company...................................................
Management of the Savings Bank..............................................
The Conversion and Reorganization...........................................
Certain Restrictions on Acquisition
of the Company..............................................................
Description of Capital Stock................................................
Experts.....................................................................
Legal Matters...............................................................
Additional Information......................................................
Glossary....................................................................
Index to Consolidated Financial Statements..................................
Until ____________, 1997 or 25 days after commencement of the Syndicated
Community Offering, if any, whichever is later, all dealers effecting
transactions in the registered securities, whether or not participating in this
distribution, may be required to deliver a Prospectus. This is in addition to
the obligation of dealers to deliver a Prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2,098,750 Shares
(Estimated Maximum)
COMMUNITY FIRST BANKING COMPANY
(Proposed Holding Company for
Carrollton Federal Bank, FSB)
COMMON STOCK
----------
PROSPECTUS
----------
TRIDENT SECURITIES, INC.
, 1997
-------- --
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following are the estimated expenses, other than underwriting
discounts and commissions, to be borne by the Company in connection with the
issuance and distribution of the Common Stock being registered.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee $ 14,628
OTS filing fees 8,400
National Association of Securities Dealers, Inc. Filing Fee 5,328
Nasdaq Stock Market Listing Fee 17,068
Blue Sky Fees and Expenses 10,000
Legal Fees and Expenses 300,000
Accounting Fees and Expenses 60,000
Printing and Engraving Expenses 150,000
Marketing agent expenses 70,000
Appraiser's fees and expenses 32,500
Transfer Agent and Registrar Fee 3,000
Miscellaneous 28,076
-------
TOTAL $699,000
=======
</TABLE>
Item 14. Indemnification of Directors and Officers.
The Company's Bylaws contain certain indemnification provisions
providing that directors, officers, and employees or agents of the Company will
be indemnified against expenses actually and reasonably incurred by them if they
are successful on the merits of a claim or proceeding.
When a case or dispute is not ultimately determined on its merits (i.e.,
it is settled), the indemnification provisions provide that the Company will
indemnify directors when they meet the applicable standard of conduct. The
applicable standard of conduct is met if the director acted in good faith and in
a manner he or she reasonably believed to be in or not opposed to the best
interests of the Company, and with respect to an employee benefit plan, for a
purpose the director believed in good faith to be in the interests of the
participants and beneficiaries of the plan. The standard of conduct with respect
to any criminal action or proceeding is met if the director had no reasonable
cause to believe his or her conduct was unlawful. Whether the applicable
standard of conduct has been met is determined by the Board of Directors, the
shareholders or independent legal counsel in each specific case.
The Company can also provide for greater indemnification than that set
forth in the Bylaws if it chooses to do so, subject to approval by the Company's
shareholders. The Company may not, however, indemnify a director for liability
arising out of circumstances which constitute exceptions to limitation of a
director's liability for monetary damages. See "--Limitation of Liability".
II-1
<PAGE>
The Company may purchase and maintain insurance on behalf of any
director against any liability asserted against such person and incurred by
him or her in any such capacity, whether or not the Company would have had
the power to indemnify against such liability.
In addition, Article 11 of the Company's Articles of Incorporation,
subject to certain exceptions, eliminates the potential personal liability
of a director for monetary damages to the Company and to the shareholders
of the Company for breach of any duty as a director. There is no
elimination of liability for (a) a breach of duty involving appropriation
of a business opportunity of the Company, (b) an act or omission not in
good faith or involving intentional misconduct or a knowing violation of
law, (c) a transaction from which the director derives an improper material
tangible personal benefit, or (d) as to any payment of a dividend or
approval of a stock repurchase that is illegal under the Georgia Business
Corporation Code. The Articles of Incorporation do not eliminate or limit
the right of the Company or its shareholders to seek injunctive or other
equitable relief not involving monetary damages.
Item 15. Recent Sales of Unregistered Securities.
The only securities to be sold by the Registrant prior to effectiveness
of this registration statement will be of 10 shares of common stock to be
issued to its sole shareholder, Carrollton Federal Bank, FSB, for $20.00
per share, which shares will be cancelled upon consummation of the
Conversion and Reorganization. Because the shares will be sold to only one
entity and were sold only to facilitate the organization of the Registrant,
the sale will be exempt from registration under the Securities Act of 1933
pursuant to Section 4(2) thereof.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
1.1 Form of Agency Agreement
2.1 Plan of Conversion and Agreement and Plan of Reorganization, as
amended
3.1 Articles of Incorporation of the Registrant*
3.2 Bylaws of the Registrant*
4.1 Specimen Stock Certificate of the Registrant
4.2 See Exhibits 3.1 and 3.2 for provisions of the Registrant's
Articles of Incorporation and Bylaws governing the rights of
holders of securities of the Registrant*
5.1 Opinion of Powell, Goldstein, Frazer & Murphy LLP regarding the
legality of the securities to be issued
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
8.1 Opinion of Powell, Goldstein, Frazer & Murphy LLP regarding income
tax consequences
10.1 Form of 1997 Stock Option Plan, assuming the Plan is submitted to
the Company's shareholders for approval within 12 months after the
Conversion*
10.2 Form of Management Recognition Plan, assuming the Plan is
submitted to the Company's shareholders for approval within 12
months after the Conversion*
10.3 Form of Employee Stock Ownership Plan and Trust*
10.4 Form of Employee Stock Ownership Plan Trust Agreement*
10.5(a) Employment Agreement between Gary D. Dorminey and the Registrant
dated September 1, 1994, with the first and second amendments
thereto dated September 1, 1995 and September 1, 1996,
respectively*
10.5(b) Form of Employment Agreement between Gary D. Dorminey, the
Company and the Savings Bank dated as of June 1, 1997
10.5(c) Form of Employment Agreement between D. Lane Poston, the
Company and the Savings Bank dated as of June 1, 1997
10.5(d) Form of Employment Agreement between C. Lynn Gable, the
Company and the Savings Bank dated as of June 1, 1997
10.5(e) Form of Employment Agreement between Anyce C. Fox, the
Company and the Savings Bank dated as of June 1, 1997
10.6 Retirement Plan
10.7 401(k) Retirement Plan
23.1 Consent of Porter Keadle Moore LLP
23.2 Consent of Powell, Goldstein, Frazer & Murphy LLP (included in its
opinions filed as Exhibits 5.1 and 8.1)
23.3 Consent of Ferguson & Co. L.L.P.
24.1 Power of Attorney (appears on the signature page to this
Registration Statement)*
27.1 Financial Data Schedule (for SEC use only)*
99.1 Appraisal Report of Ferguson & Co. L.L.P.
99.2 Stock Order Form (including form of proxy for solicitation of
members of CF Mutual Holdings)
99.3 Marketing Materials
</TABLE>
II-3
<PAGE>
(b) Financial Statement Schedules
The financial statement schedules for which provision is made in the
applicable accounting regulations of the Commission are either not required
under the related instructions or are inapplicable and have therefore been
omitted.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any Prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
---- ----
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the Offerings.
The undersigned Registrant hereby undertakes to furnish stock
certificates to or in accordance with the instructions of the respective
purchasers of the Common Stock, so as to make delivery to each purchaser
promptly following the closing under the Plan of Conversion.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Atlanta, State of Georgia on May 5, 1997.
COMMUNITY FIRST BANKING COMPANY
By: /s/ Gary D. Dorminey
-----------------------------------------------
Gary D. Dorminey
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Position Date
---- -------- ----
<S> <C> <C>
* Chairman of the Board May 5, 1997
- ---------------------- ---------------
T. Aubrey Silvey
/s/ Gary D. Dorminey Chief Executive Officer, May 5, 1997
- ---------------------- President and Director ---------------
Gary D. Dorminey (principal executive officer)
</TABLE>
[Signatures continued on following page]
II-5
<PAGE>
[Signatures continued from previous page]
<TABLE>
<CAPTION>
Name Position Date
---- -------- ----
<S> <C> <C>
* Vice Chairman of the Board May 5, 1997
- ---------------------- -------------
Gary M. Bullock
* Director May 5, 1997
- ---------------------- -------------
Anna L. Berry
* Director May 5, 1997
- ---------------------- -------------
Jerry L. Clayton
* Director May 5, 1997
- ---------------------- -------------
Thomas E. Reeve, Jr.
* Director May 5, 1997
- ---------------------- -------------
Michael P. Steed
* Director May 5, 1997
- ---------------------- -------------
Dean B. Talley
* Director May 5, 1997
- ---------------------- -------------
Thomas S. Upchurch
* Chief Financial Officer May 5, 1997
- ----------------------- (principal financial and -------------
C. Lane Gable accounting officer)
</TABLE>
* By: /s/ Gary D. Dorminey
--------------------
Gary D. Dorminey
Attorney-in-Fact
II-6
<PAGE>
INDEX OF EXHIBITS
Exhibit Sequential
Number Description Page
------ ----------- ----
1.1 Form of Agency Agreement
2.1 Plan of Conversion and Agreement and Plan of Reorganization,
as amended
3.1 Articles of Incorporation of the Registrant*
3.2 Bylaws of the Registrant*
4.1 Specimen Stock Certificate of the Registrant
4.2 See Exhibits 3.1 and 3.2 for provisions of the Registrant's
Articles of Incorporation and Bylaws governing the rights of
holders of securities of the Registrant*
5.1 Opinion of Powell, Goldstein, Frazer & Murphy LLP regarding
the legality of the securities to be issued
8.1 Opinion of Powell, Goldstein, Frazer & Murphy LLP regarding
income tax consequences
10.1 Form of 1997 Stock Option Plan, assuming the Plan is submitted
to the Company's shareholders for approval within 12 months
after the Conversion*
10.2 Form of Management Recognition Plan, assuming the Plan is
submitted to the Company's shareholders for approval within 12
months after the Conversion*
10.3 Form of Employee Stock Ownership Plan and Trust*
10.4 Form of Employee Stock Ownership Plan Trust Agreement*
10.5(a) Employment Agreement between Gary D. Dorminey and the
Registrant dated September 1, 1994, with the first and second
amendments thereto dated September 1, 1995 and September 1,
1996, respectively*
10.5(b) Form of Employment Agreement between Gary D. Dorminey,
the Company and the Savings Bank dated as of June 1, 1997
10.5(c) Form of Employment Agreement between D. Lane Poston,
the Company and the Savings Bank dated as of June 1, 1997
10.5(d) Form of Employment Agreement between C. Lynn Gable, the
Company and the Savings Bank dated as of June 1, 1997
10.5(e) Form of Employment Agreement between Anyce C. Fox, the
Company and the Savings Bank dated as of June 1, 1997
10.6 Retirement Plan
10.7 401(k) Retirement Plan
23.1 Consent of Porter Keadle Moore LLP
II-7
<PAGE>
23.2 Consent of Powell, Goldstein, Frazer & Murphy LLP (included
in its opinions filed as Exhibits 5.1 and 8.1)
23.3 Consent of Ferguson & Co. L.L.P.
24.1 Power of Attorney (appears on the signature page to this
Registration Statement)*
27.1 Financial Data Schedule (for SEC use only)*
99.1 Appraisal Report of Ferguson & Co. L.L.P.
99.2 Stock Order Form (including form of proxy for solicitation of
members of CF Mutual Holdings)
99.3 Marketing Materials
II-8
<PAGE>
EXHIBIT 1.1
COMMUNITY FIRST BANKING COMPANY
1,551,250 TO 2,098,750 SHARES
COMMON STOCK
($.01 PAR VALUE PER SHARE)
$20.00 PER SHARE
SALES AGENCY AGREEMENT
----------------------
Trident Securities, Inc.
4601 Six Forks Road, Suite 400
Raleigh, North Carolina 27609
Dear Sirs:
Community First Banking Company, a Georgia corporation (the "Company"), CF
Mutual Holdings, a federally chartered mutual holding company (the "Mutual
Holding Company") and Carrollton Federal Bank, FSB, a federally-chartered and
federally-insured stock savings bank (the "Savings Bank"), hereby confirm their
respective agreements with Trident Securities, Inc. ("Trident"), a broker-dealer
registered with the Securities and Exchange Commission ("Commission") and a
member of the National Association of Securities Dealers, Inc. ("NASD"), as
follows:
1. Introduction. Pursuant to an Agreement and Plan of Reorganization
------------
adopted by the Mutual Holding Company and Savings Bank on February 11, 1997, as
amended (the "Plan"), the Savings Bank will form a first-tier, wholly owned
subsidiary known as Community First Banking Company (the "Company"). The
Company will in turn from a new wholly owned subsidiary known as CFB Interim
Savings Bank ("Interim CFB"). The Mutual Holding Company will convert to an
interim federal savings bank ("Interim Mutual") and will simultaneously merge
with and into the Savings Bank pursuant to which the Mutual Holding Company will
cease to exist and a liquidation account will be established by the Savings Bank
for the benefit of certain depositors of the Savings Bank. Interim CFB will
then merge with and into the Savings Bank, the Savings Bank will become the
wholly owned subsidiary of the Company and all outstanding shares of common
stock of the Savings Bank will be canceled. In accordance with the Plan, the
Company is offering shares of its common stock, $.01 par value per share (the
"Shares" and the "Common Stock", respectively), pursuant to nontransferable
subscription rights in a subscription offering (the "Subscription Offering") to
certain depositors and borrowers of the Savings Bank and the Company's Employee
Stock Ownership Plan (the "ESOP"). If necessary, the Company is offering Shares
not subscribed for in the Subscription Offering to the general public in a
community offering with preference being given to natural persons residing in
Carroll, Coweta, Douglas, Fayette, Heralson, Heard, Henry and Paulding counties
in Georgia (the "Community Offering"). If necessary, Shares not purchased in
the Subscription and Community Offerings will be offered to the general public
by a syndicate of registered broker-dealers as selected dealers to be formed
<PAGE>
and managed by Trident (the "Syndicated Community Offering"). (The Subscription
Offering, the Community Offering, if any, and the Syndicated Community Offering,
if any, are collectively referred to as the "Offerings.") The Company will then
invest up to 50% of the net proceeds of the Offerings in the Savings Bank in
exchange for all outstanding shares of capital stock of the Savings Bank.
The transactions described above taken in accordance with the Plan,
including, without limitation, (i) the formation of the Company, (ii) the
formation of Interim CFB, (iii) the conversion of the Mutual Holding Company
into Interim Mutual and the merger of such Interim Mutual with and into the
Savings Bank, (iv) the merger of Interim CFB with and into the Savings Bank
pursuant to which the Savings Bank will become the wholly owned subsidiary of
the Company and all outstanding common stock of the Savings Bank will be
canceled, (v) the sale of the Shares in the Offerings and (vi) the Company's
investment of proceeds of the Offerings into the Savings Bank in exchange for
all outstanding capital stock of the Savings Bank, are hereinafter collectively
referred to as the "Conversion and Reorganization."
In the Offerings, the Company is offering between 1,551,250 and 2,098,750
Shares. Under certain circumstances described in the Plan, the number of Shares
to be offered may be increased to 2,413,562.
The Company, the Mutual Holding Company and the Savings Bank have been
advised by Trident that it desires to use its best efforts to assist the Company
with the sale of the Shares in the Offerings.
2. Representations and Warranties. A. The Company, the Mutual Holding
------------------------------
Company and the Savings Bank jointly and severally represent and warrant to
Trident that:
(a) The Company has filed with the Commission a registration
statement, including exhibits, and an amendment or amendments thereto, on
Form S-1 (No. 333-23533), including the Prospectus (as hereinafter
defined), for the registration of the Shares under the Securities Act of
1933, as amended (the "Act"); and such registration statement has become
effective under the Act and no stop order has been issued with respect
thereto and no proceedings therefor have been initiated or, to the
knowledge of the Company, the Mutual Holding Company and the Savings Bank,
threatened by the Commission. Such registration statement, as amended or
supplemented, on file with the Commission at the time the registration
statement became effective, including the Prospectus, financial statements,
schedules, exhibits and all other documents filed as part thereof, as
amended and supplemented, is herein called the "Registration Statement" and
the prospectus and proxy statement, as amended or supplemented, on file
with the Commission at the time the Registration Statement became effective
is herein called the "Prospectus," except that if the prospectus filed by
the Company with the Commission pursuant to Rule 424(b) of the general
rules and regulations of the Commission under the Act (the "Regulations")
differs from the form of prospectus on file at the time the Registration
Statement
2
<PAGE>
became effective, the term "Prospectus" shall refer to the Rule 424(b)
prospectus and proxy statement from and after the time it is filed with or
mailed for filing to the Commission and shall include any amendments or
supplements thereto from and after their dates of effectiveness or use,
respectively.
(b) In order to obtain approval of the Conversion and Reorganization,
the Mutual Holding Company has filed a Form AC, Application for Approval of
Conversion and Reorganization, including exhibits (as amended or
supplemented, the "Conversion Application"), with the Office of Thrift
Supervision (the "OTS") under the Home Owners Loan Act, as amended (the
"HOLA"), which has been approved by the OTS; and the Prospectus and proxy
statement included as part of the Conversion Application have been approved
for use by the OTS. No order has been issued by the OTS preventing or
suspending the use of the Prospectus; and no action by or before the OTS
revoking such approvals is pending or, to the knowledge of the Company, the
Mutual Holding Company or the Savings Bank, threatened. The Company has
filed a holding company application, including exhibits (as amended or
supplemented, the "Holding Company Application"), with the OTS, which has
been approved by it. No action by or before the OTS revoking such approval
is pending or, to the knowledge of the Company, the Mutual Holding Company
or the Savings Bank, threatened.
(c) As of the date the Registration Statement or any amendment thereto
became effective, (i) the Registration Statement and the Prospectus
complied with the Act and the Regulations in all material respects and (ii)
the Registration Statement did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
Representations or warranties in this subsection shall not apply to
statements or omissions made in reliance upon and in conformity with
written information furnished to the Company relating to Trident by or on
behalf of Trident expressly for use in the Registration Statement or
Prospectus. As of the date the Prospectus or any amendment thereto was
mailed by the Mutual Holding Company, the Prospectus complied in all
material respects with the rules and regulations of the OTS (the "OTS
Regulations").
(d) As of the date of the Prospectus and at all times subsequent
thereto through and including the Closing Date (as hereinafter defined),
the Prospectus did not contain any untrue statement of material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading. Representations or warranties in this
subsection shall not apply to statements or omissions made in reliance upon
and in conformity with written information furnished to the Company
relating to Trident by or on behalf of Trident expressly for use in the
Registration Statement or Prospectus.
(e) The Company has been duly organized as a Georgia corporation, the
Mutual Holding Company has been duly organized as a mutual holding company
under the laws of the
3
<PAGE>
United States, and the Savings Bank has been duly organized as a stock
savings and loan association under the laws of the United States, and each
of them is validly existing and in good standing under the laws of the
jurisdiction of its organization with full power and authority to own its
property and conduct its business as described in the Registration
Statement and Prospectus; the Savings Bank is a member in good standing of
the Federal Home Loan Bank of Atlanta; and the deposit accounts of the
Savings Bank are insured by the Savings Association Insurance Fund ("SAIF")
administered by the Federal Deposit Insurance Corporation ("FDIC") up to
the applicable limits. Neither the Company, the Mutual Holding Company, nor
the Savings Bank is required to be qualified to do business as a foreign
corporation in any jurisdiction where it is not so qualified and where non-
qualification would have a material adverse effect on the condition
(financial or otherwise), operations, business, assets, earnings, prospects
or properties of the Company, the Mutual Holding Company and the Savings
Bank, taken as a whole ("Material Adverse Effect"). The Savings Bank has no
subsidiary corporations other than Carroll Services and Development
Corporation, a Georgia corporation, and does not own equity securities of
or an equity interest in any other business enterprise except as described
in the Prospectus. The Mutual Holding Company has no subsidiary corporation
other than the Savings Bank, CFB Securities, Inc. and CFB Insurance, Inc.
and does not own equity securities of or as equity interest in any other
business enterprise except as described in the Prospectus. Upon completion
of the Conversion and Reorganization, (i) the Savings Bank will be a
federally chartered stock savings bank with full power and authority to own
its property and conduct its business as described in the Prospectus, (ii)
all of the authorized and outstanding capital stock of the Savings Bank
will be owned of record and beneficially by the Company, and (iii) the
Company will have no direct subsidiaries other than the Savings Bank, CFB
Securities, Inc. and CFB Insurance, Inc.
(f) The Savings Bank and the Mutual Holding Company have good and
marketable title to all assets material to their businesses and to those
assets described in the Prospectus as owned by them, free and clear of all
material liens, charges, encumbrances or restrictions, except as described
in the Prospectus and except as could not in the aggregate have a Material
Adverse Effect; and all of the leases and subleases under which either of
them holds properties, including those described in the Prospectus, are in
full force and effect as described therein.
(g) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
authorized by all necessary actions on the part of each of the Company, the
Mutual Holding Company, the Savings Bank, Interim CFB and Interim Mutual,
and this Agreement is a valid and binding obligation of each of the
Company, the Mutual Holding Company and the Savings Bank, enforceable in
accordance with its terms (except as the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium, reorganization or similar
laws relating to or affecting the enforcement or creditors'
4
<PAGE>
rights generally or the rights of creditors of savings and loan holding
companies the accounts of whose subsidiaries are insured by the FDIC or by
general equity principles, regardless of whether such enforceability is
considered in a proceeding in equity or at law, and except to the extent
that the provisions of Sections 8 and 9 hereof may be unenforceable as
against public policy).
(h) There is no litigation or governmental proceeding pending or, to
the knowledge of the Company, the Mutual Holding Company or the Savings
Bank, threatened against or involving the Company, the Mutual Holding
Company or the Savings Bank or any of their respective assets which
individually or in the aggregate would reasonably be expected to have a
Material Adverse Effect.
(i) The Company, the Mutual Holding Company and the Savings Bank have
received the opinion of Powell, Goldstein, Frazer & Murphy LLP to the
effect that the Conversion and Reorganization will constitute a tax-free
reorganization under the Internal Revenue Code of 1986, as amended. The
Company, the Mutual Holding Company and the Savings Bank have received the
opinion of Powell, Goldstein, Frazer and Murphy LLP to the effect that the
income tax consequences of the Conversion and Reorganization for the
Company, the Mutual Holding Company and the Savings Bank under the income
tax laws of Georgia will be substantially the same as the consequences for
federal income tax purposes. The facts relied upon in such opinions are
accurate and complete.
(j) Each of the Company, the Mutual Holding Company and the Savings
Bank, has all such corporate power, authority, authorizations, approvals
and orders as may be required to enter into this Agreement and to carry out
the provisions and conditions hereof. The Company, as of the Closing Date,
will have all such approvals and orders necessary to issue and sell the
Shares to be sold by the Company as provided herein, and the Savings Bank,
as of the Closing Date, will have all such approvals and orders necessary
to issue and sell the shares of its capital stock to be sold to the Company
as provided in the Plan. The Company, the Mutual Holding Company, the
Savings Bank, Interim CFB and Interim Mutual, as of the Closing Date, will
have all approvals and orders necessary to consummate the Conversion and
Reorganization.
(k) Neither the Company, the Mutual Holding Company, nor the Savings
Bank is in violation of any rule or regulation of the OTS or the FDIC that
could reasonably be expected to result in any enforcement action against
the Company, the Mutual Holding Company or the Savings Bank, or their
officers or directors that might have a Material Adverse Effect.
(l) The consolidated financial statements and any related notes or
schedules which are included in the Registration Statement and the
Prospectus fairly present the financial condition, results of operations,
retained earnings and cash flows of the Mutual Holding Company and the
Savings Bank at the respective dates thereof and for the respective periods
5
<PAGE>
covered thereby and comply as to form with the applicable accounting
requirements of the Regulations and the applicable accounting requirements
of the OTS Regulations. Such financial statements have been prepared in
accordance with generally accepted accounting principles consistently
applied throughout the periods involved, and such financial statements are
consistent in all material respects with financial statements and other
reports filed by the Mutual Holding Company and the Savings Bank with
supervisory and regulatory authorities except as such generally accepted
accounting principles may otherwise require. The tables in the Prospectus
accurately present the information purported to be shown thereby at the
respective dates thereof and for the respective periods therein.
(m) There has been no material change in the condition (financial or
otherwise), results of operations, prospects or business, including assets
and properties, of the Company, the Mutual Holding Company or the Savings
Bank since the latest date as of which such condition is set forth in the
Prospectus, except as is set forth therein; and the capitalization, assets,
properties and business of the Company, the Mutual Holding Company and the
Savings Bank conform in all material respects to the descriptions thereof
contained in the Prospectus. Neither the Company, the Mutual Holding
Company nor the Savings Bank has any material liabilities of any kind,
contingent or otherwise, except as set forth in the Prospectus.
(n) No material default exists, and no event has occurred which, with
notice or lapse of time or both, would constitute a material default, on
the part of the Company, the Mutual Holding Company or the Savings Bank in
the due performance and observance of any term, covenant or condition of
any agreement which is material to the condition (financial or otherwise),
results of operations, prospects or business of the Company, the Mutual
Holding Company and the Savings Bank, taken as a whole; said agreements are
in full force and effect; and to the knowledge of the Company, the Mutual
Holding Company and the Savings Bank, no other party to any such agreement
has instituted or threatened any action or proceeding wherein the Company,
the Mutual Holding Company or the Savings Bank would or might be alleged to
be in default thereunder.
(o) Neither the Company, the Mutual Holding Company nor the Savings
Bank is in violation of its respective charter, articles of incorporation
or bylaws or in default in any material respect in the performance of any
obligation, agreement or condition contained in any bond, debenture, note
or any other evidence of indebtedness. The execution and delivery of this
Agreement, the fulfillment of the terms set forth herein and the
consummation of the transactions contemplated hereby shall not violate or
conflict with the respective charter, articles of incorporation or bylaws
of the Company, the Mutual Holding Company or the Savings Bank or violate,
conflict with or constitute a breach of, or default (or an event which,
with notice or lapse of time, or both, would constitute a default) under,
any material agreement, indenture or
6
<PAGE>
other instrument by which either the Company, the Mutual Holding Company or
the Savings Bank is bound, or under any governmental license or permit or
any law, administrative regulation or authorization, approval, order, court
decree, injunction or order, subject to the satisfaction of certain
conditions imposed by the OTS in connection with its approvals of the
Conversion Application and the Holding Company Application.
(p) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, except as otherwise may
be indicated or contemplated therein, neither the Company, the Mutual
Holding Company nor the Savings Bank has issued any securities which will
remain issued at the Closing Date or incurred any liability or obligation,
direct or contingent, or borrowed money, except borrowings in the ordinary
course of business, or entered into any other transaction not in the
ordinary course of business and consistent with prior practices which is
material in light of the businesses of the Company, the Mutual Holding
Company and the Savings Bank, taken as a whole.
(q) Upon consummation of the Conversion and Reorganization, the
authorized, issued and outstanding equity capital of the Company shall be
as set forth in the Prospectus under the caption "Capitalization," and no
equity or debt securities of the Company shall be outstanding immediately
prior to the Closing Date; the issuance and the sale of the Shares of the
Company have been duly authorized by all necessary action of the Company
and approved by the OTS and, when issued in accordance with the terms of
the Plan and paid for, shall be validly issued, fully paid and
nonassessable and shall conform to the description thereof contained in the
Prospectus; the issuance of the Shares is not subject to preemptive rights;
and good title to the Shares will be transferred upon issuance thereof
against payment therefor, free and clear of all claims, encumbrances,
security interests and liens except such liens as may be created as a
result of actions or inaction of the purchasers of such Shares. The
certificates representing the Shares will conform with the requirements of
applicable laws and regulations. The issuance and sale of the capital
stock of the Savings Bank to the Company has been duly authorized by all
necessary action of the Savings Bank and the Company and appropriate
regulatory authorities, and such capital stock, when issued in accordance
with the terms of the Plan in exchange for the consideration described in
the Prospectus, will be fully paid and nonassessable and will conform to
any description thereof contained in the Prospectus.
(r) No further approval of any regulatory or supervisory or other
public authority is required in connection with the execution and delivery
of this Agreement or the issuance of the Shares, except as shall have been
previously obtained.
(s) All contracts and other documents required to be filed as exhibits
to the Registration Statement, the Conversion Application and the Holding
Company Application have been filed with the Commission or the OTS, as the
case may be.
7
<PAGE>
(t) Porter Keadle Moore, LLP, which has audited the financial
statements of the Mutual Holding Company at December 31, 1996 and 1995 and
for the years in the three year period ended December 31, 1996, included in
the Prospectus, is an independent public accountant within the meaning of
the Act, the Regulations, the OTS Regulations, the Code of Professional
Ethics of the American Institute of Certified Public Accountants and other
applicable regulatory requirements.
(u) Ferguson & Company ("Ferguson"), which prepared the Conversion and
Reorganization appraisal dated as of February 27, 1997, described in the
Prospectus, is independent with respect to the Company, the Mutual Holding
Company and the Savings Bank within the meaning of the OTS Regulations, is
believed by the Company, the Mutual Holding Company and the Savings Bank to
be experienced and expert in rendering corporate appraisals of thrift
institutions, and the Company, the Mutual Holding Company and the Savings
Bank believe that Ferguson has prepared the pricing information set forth
in the Prospectus in accordance with the requirements of the OTS
Regulations.
(v) The Company, the Mutual Holding Company and the Savings Bank have
timely filed all required federal, state and local franchise tax returns,
and no deficiency has been asserted with respect to such returns by any
taxing authorities, and the Company, the Mutual Holding Company and the
Savings Bank have paid all taxes that have become due and, to their
knowledge, have made adequate reserves for similar future tax liabilities.
(w) All of the loans represented as assets on the most recent
financial statements of the Mutual Holding Company included in the
Prospectus meet or are exempt from all requirements of federal, state or
local law pertaining to lending, including, without limitation, usury laws,
truth in lending, real estate settlement procedures, consumer credit
protection, equal credit opportunity and all disclosure laws applicable to
such loans, except for violations which, if asserted, would not have a
Material Adverse Effect.
(x) The records of account holders, depositors, borrowers and other
members of the Mutual Holding Company delivered to Trident by the Mutual
Holding Company or its agent for use during the Conversion and
Reorganization are reliable and accurate, and Trident shall have no
liability to any person relating to the reliability, accuracy or
completeness of such records or for any denial or allocation of
subscription rights to purchase Shares based upon such records.
(y) Neither the Company, the Mutual Holding Company nor the Savings
Bank has, to its knowledge made any payment of funds of the Company, the
Mutual Holding Company or the Savings Bank prohibited by law. No funds of
the Company, the Mutual Holding Company or the Savings Bank have been set
aside to be used for any payment prohibited by law.
8
<PAGE>
(z) To their knowledge, the Company, the Mutual Holding Company and
the Savings Bank are in compliance with all laws, rules and regulations
relating to environmental protection, and neither the Company, the Mutual
Holding Company nor the Savings Bank has any reason to believe that it is
subject to liability under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, or any other federal,
state or local law regulating hazardous materials or wastes or relating to
environmental protection. There are no actions, suits, regulatory
investigations or other proceedings pending or, to the knowledge of the
Company, the Mutual Holding Company or the Savings Bank, threatened against
the Company, the Mutual Holding Company or the Savings Bank relating to
environmental protection. No disposal, release or discharge of hazardous
or toxic substances, pollutants or contaminants, including petroleum and
gas products, as any of such terms may be defined under federal, state or
local law, has been caused by the Company, the Mutual Holding Company or
the Savings Bank or, to the knowledge of the Company, the Mutual Holding
Company or the Savings Bank has occurred on, in, at or about any of the
facilities or properties of the Company, the Mutual Holding Company or the
Savings Bank except such disposal, release or discharge, which if
discovered, would not have a Material Adverse Effect.
(aa) The Company, the Mutual Holding Company and the Savings Bank have
obtained all licenses, permits and other governmental authorizations
currently required for the conduct of their respective businesses except
where the failure to obtain such licenses, permits and governmental
authorizations would not have a Material Adverse Effect; all such licenses,
permits and other governmental authorizations are in full force and effect,
and the Company, the Mutual Holding Company and the Savings Bank are
complying therewith in all material respects.
(bb) At the Closing Date, the Company, the Mutual Holding Company, the
Savings Bank, Interim CFB and Interim Mutual will have completed the
conditions precedent to, and shall have conducted the Conversion and
Reorganization in all material respects in accordance with, the Plan and
all other applicable laws, regulations, decisions and orders; and, all
terms, conditions, requirements and provisions relating to the Conversion
and Reorganization imposed by the OTS have been or, with respect to any
future OTS conditions, will be complied with by the Company, the Mutual
Holding Company, the Savings Bank, Interim CFB and Interim Mutual or
appropriate waivers have been or will be obtained.
B. Trident represents and warrants to the Company, the Mutual Holding
Company and the Savings Bank that:
(i) Trident is registered as a broker-dealer with the Commission, and
is in good standing with the Commission and the NASD.
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(ii) Trident is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, with full corporate
power and authority to provide the services to be furnished to the Company,
the Mutual Holding Company and the Savings Bank hereunder.
(iii) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary action on the part of Trident, and this
Agreement is a legal, valid and binding obligation of Trident, enforceable
in accordance with its terms (except as the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium, reorganization or similar
laws relating to or affecting the enforcement of creditors' rights
generally or the rights of creditors of registered broker-dealers the
accounts of whom may be protected by the Securities Investor Protection
Corporation or by general equity principles, regardless of whether such
enforceability is considered in a proceeding in equity or at law, and
except to the extent that the provisions of Sections 8 and 9 hereof may be
unenforceable as against public policy).
(iv) Each of Trident and, to Trident's knowledge, its employees,
agents and representatives who shall perform any of the services required
hereunder to be performed by Trident, shall be duly authorized and shall
have all licenses, approvals and permits necessary to perform such
services, and Trident is a registered selling agent, and will remain a
registered selling agent, in such jurisdictions in which the Company is
relying on such registration for the sale of the Shares, until the
Conversion and Reorganization is consummated or terminated.
(v) The execution and delivery of this Agreement by Trident, the
fulfillment of the terms set forth herein and the consummation of the
transactions contemplated hereby shall not violate or conflict with the
corporate charter or bylaws of Trident or violate, conflict with or
constitute a breach of, or default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, any material
agreement, indenture or other instrument by which Trident is bound or under
any governmental license or permit or any law, administrative regulation,
authorization, approval or order or court decree, injunction or order by
which Trident is bound.
(vi) To Trident's knowledge, there is not now pending or threatened
against Trident any action or proceeding before the Commission, the NASD,
any state securities commission or any state or federal court concerning
Trident's activities as a broker-dealer and which could reasonably be
expected to have a material and adverse impact upon Trident's ability to
perform its obligations under this Agreement.
3. Employment of Trident; Sale and Delivery of the Shares. On the basis
------------------------------------------------------
of the representations and warranties herein contained, but subject to the terms
and conditions herein set forth, the Company, the Mutual Holding Company and the
Savings Bank hereby employ Trident as their financial advisor and agent to use
its best efforts in assisting the Company's sale of the Shares in the
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Offerings. The employment of Trident hereunder shall terminate (a) forty-five
(45) days after the Subscription Offering closes, unless the Company, the Mutual
Holding Company and the Savings Bank, with the approval of the OTS, are
permitted to extend such period of time, or (b) upon consummation of the
Conversion and Reorganization, whichever date shall first occur.
In the event the Company is unable to sell a number of shares sufficient to
produce aggregate gross proceeds equal to the pro forma appraised value of the
Company and the Savings Bank established for the Conversion and Reorganization
within the period herein provided, unless the parties agree otherwise with the
consent of the OTS, this Agreement shall terminate, and the Company, the Mutual
Holding Company and the Savings Bank shall refund promptly to any persons who
have subscribed for any of the Shares, the full amount received from them,
together with interest as provided in the Prospectus, and no party to this
Agreement shall have any obligation to any other party hereunder, except as set
forth in Sections 3(b), 6, 8 and 9 hereof. Appropriate arrangements for placing
the funds received from subscriptions for Shares in one or more special
interest-bearing accounts with the Savings Bank until all Shares are sold and
paid for were made prior to the commencement of the Subscription Offering, with
provision for prompt refund to the purchasers as set forth above, or for
delivery to the Company if the required number of Shares is sold.
If all conditions precedent to the consummation of the Conversion and
Reorganization are satisfied, including the sale of all Shares required by the
Plan to be sold, the Company agrees to issue or have issued such Shares and to
release for delivery certificates for such Shares to subscribers on the Closing
Date against payment to the Company by any means authorized pursuant to the
Prospectus, at the principal office of the Savings Bank at 110 Dixie Street,
Carrollton, Georgia, or at such other place as shall be agreed upon between the
parties hereto. On such date (the "Closing Date"), Trident shall also be paid
the amounts described below in next day funds to Trident in Raleigh, North
Carolina.
In the event this Agreement terminates as set forth above or in the event
the Conversion and Reorganization are terminated or fails to close within forty-
five (45) days after the close of the Subscription Offering, unless such period
is extended by the Company, the Mutual Holding Company and the Savings Bank with
the approval of the OTS, then the amounts described below in paragraph (b) shall
be paid to Trident within ten (10) days after Trident's written request
therefor.
In addition to the expenses specified in Section 6 hereof, Trident shall
receive the following compensation and reimbursements for its services
hereunder:
(a) (i) a management fee of Forty Thousand Dollars ($40,000.00) and
(ii) a commission equal to one and sixty-five one hundredths of one percent
(1.65%) of the aggregate dollar amount of any Shares sold in both the
Subscription Offering and Community Offering (excluding any shares sold to
the Savings Bank's directors, executive officers and their "associates," as
such term is defined in the Plan, or to the ESOP). For stock sold by other
NASD
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member firms under selected dealer's agreements, the commission payable
shall equal the agreed-upon fee to be paid to the selected dealers, as
approved by the Company and the Savings Bank. All such fees are to be
payable in next day funds to Trident in Raleigh, North Carolina, on the
Closing Date.
(b) Trident shall be reimbursed for all allocable expenses, including
legal fees, incurred by it whether or not the Conversion and Reorganization
are consummated. Full payment of Trident's allocable expenses, including
legal fees, shall be made in next day funds on the Closing Date or, if the
Conversion and Reorganization are not completed or are terminated for any
reason, within ten (10) calendar days of receipt by the Bank of the
detailed listing from Trident of its allocable expenses. Trident
acknowledges receipt of a $10,000 advance payment from the Savings Bank
which shall be credited against the total reimbursement due Trident
hereunder.
The Company and the Savings Bank shall pay any stock issue and transfer
taxes which may be payable with respect to the sale of the Shares. The Company
and the Savings Bank shall also pay all expenses of the Conversion and
Reorganization including but not limited to their attorneys' fees, NASD filing
fees, all attorneys' fees and other costs relating to any required "blue sky" or
state securities laws research and filings, telephone charges, air freight,
rental equipment, supplies, transfer agent charges, fees relating to auditing
and accounting and costs of printing and mailing all documents necessary in
connection with the Conversion and Reorganization.
4. Offering. Subject to the provisions of Section 7 hereof, Trident is
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acting as financial advisor and assisting the Company, the Mutual Holding
Company and the Savings Bank on a best efforts basis in the Company's offering
of a minimum of 1,551,250 and a maximum of 2,098,750 Shares, with the
possibility of the Company increasing such number of Shares to 2,413,562, in the
Subscription Offering, and, if necessary, any shares which remain unsubscribed
at the conclusion of the Subscription Offering, in the Community Offering. Any
shares which remain unsubscribed at the conclusion of the Subscription and
Community Offerings will be offered in the Syndicated Community Offering to the
general public through a syndicate of broker-dealers to be formed and managed by
Trident. The Shares are to be offered to the public at the price set forth on
the cover page of the Prospectus and the first page of this Agreement.
5. Further Agreements. The Company, the Mutual Holding Company and the
------------------
Savings Bank jointly and severally covenant and agree that:
(a) If any Shares remain unsubscribed following completion of the
Offerings, the Company, to the extent required by the Act or the
Regulations, will promptly file with the Commission a post-effective
amendment to the Registration Statement relating to the results of the
Offerings and any additional information required with respect to the
proposed plan of distribution and any revised pricing information.
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<PAGE>
(b) The Company and the Mutual Holding Company shall deliver to
Trident, from time to time, such number of copies of the Prospectus as
Trident reasonably may request. The Company and the Mutual Holding Company
authorize Trident to use the Prospectus in any lawful manner in connection
with the offer and sale of the Shares and the Conversion and
Reorganization.
(c) The Company and the Mutual Holding Company will notify Trident or
its counsel immediately upon discovery, and confirm the notice in writing,
(i) when any post-effective amendment to the Registration Statement becomes
effective or any supplement or amendment to the Prospectus has been filed,
(ii) of the issuance by the Commission of any stop order relating to the
Registration Statement or of the initiation or the threat of any
proceedings for that purpose, (iii) of the receipt of any notice with
respect to the suspension of the qualification of the Shares for offering
or sale in any jurisdiction, (iv) of the receipt of any comments from the
staff of the Commission relating to the Registration Statement or from the
OTS relating to the Conversion Application, and (v) of the issuance by the
OTS of any stop order relating to the Conversion and Reorganization or the
use of the Prospectus or the threat of any proceedings for that purpose.
If the Commission enters a stop order relating to the Registration
Statement at any time, the Company will make every reasonable effort to
obtain the lifting of such order at the earliest possible moment.
(d) During the time when a prospectus is required to be delivered
under the Act, the Company will comply so far as it is able with all
requirements imposed upon it by the Act, as now in effect and hereafter
amended, and by the Regulations, as from time to time in force, so far as
necessary to permit the continuance of offers and sales of or dealings in
the Shares in accordance with the provisions hereof and the Prospectus.
If, during the period when the Prospectus is required to be delivered in
connection with the offer and sale of the Shares, any event relating to or
affecting the Company, the Mutual Holding Company, the Savings Bank,
Interim CFB or Interim Mutual shall occur as a result of which it is
necessary, in the opinion of counsel for Trident, to amend or supplement
the Prospectus in order to make the Prospectus not false or misleading in
any material respect in light of the circumstances existing at the time it
is delivered to a purchaser of the Shares, the Company forthwith shall
prepare and furnish to Trident a reasonable number of copies of an
amendment or amendments or of a supplement or supplements to the Prospectus
(in form and substance reasonably satisfactory to counsel for Trident)
which shall amend or supplement the Prospectus so that, as amended or
supplemented, the Prospectus shall not contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make
the statements therein, in light of the circumstances existing at the time
the Prospectus is delivered to a purchaser of the Shares, not misleading.
The Company will not file or use any amendment or supplement to the
Registration Statement or the
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Prospectus of which Trident has not first been furnished a copy or to which
Trident shall reasonably object after having been furnished such copy. For
the purposes of this subsection, the Company, the Mutual Holding Company
and the Savings Bank shall furnish such information with respect to
themselves as Trident from time to time may reasonably request.
(e) The Company has taken or will take all necessary action to
qualify or register the Shares for offer and sale by the Company under the
securities or blue sky laws of such jurisdictions as Trident and either the
Company or its counsel may agree upon; provided, however, that the Company
shall not be obligated to qualify as a foreign corporation to do business
under the laws of any such jurisdiction. In each jurisdiction where such
qualification or registration shall be effected, the Company, unless
Trident agrees that such action is not necessary or advisable in connection
with the distribution of the Shares, shall file and make such statements or
reports as are, or reasonably may be, required by the laws of such
jurisdiction.
(f) Appropriate entries will be made in the financial records of the
Savings Bank sufficient to establish a liquidation account for the benefit
of Eligible Account Holders and Supplemental Eligible Account Holders (as
defined in the Plan) in accordance with the requirements of the OTS.
(g) The Company will file a registration statement for the Common
Stock under Section 12(g) of the Exchange Act prior to completion of the
Conversion and Reorganization pursuant to the Plan and shall request that
such registration statement be effective upon or before completion of the
Conversion and Reorganization. The Company shall use its best efforts to
maintain the effectiveness of such registration for a minimum period of
three years or for such shorter period as may be required by the OTS in its
approval of the Conversion Application or in accordance with applicable
law.
(h) For a period of three (3) years from the date of this Agreement
(unless the Common Stock shall have been deregistered under the Exchange
Act), the Company will furnish to Trident, as soon as publicly available
after the end of each fiscal year, a copy of its annual report to
shareholders for such year; and the Company will furnish to Trident (i) as
soon as publicly available, a copy of each report or definitive proxy
statement of the Company filed with the Commission under the Exchange Act
or mailed to shareholders, and (ii) from time to time, such other public
information concerning the Company as Trident may reasonably request.
(i) The Company and the Savings Bank shall use the net proceeds from
the sale of the Shares in the manner set forth in the Prospectus.
(j) The Company shall not deliver the Shares until each and every
condition set forth in Section 7 hereof has been satisfied, unless such
condition is waived in writing by Trident.
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<PAGE>
(k) The Mutual Holding Company or its agent shall provide Trident with
records of account holders and borrowers of the Savings Bank and other
members of the Mutual Holding Company and shall advise Trident, as to the
allocation of deposits and votes and, in the event of an oversubscription,
as to the allocation of the Shares and shall provide Trident final
instructions as to the allocation of the Shares in such event, and such
information shall be accurate, reliable and complete. Trident shall be
entitled to rely exclusively on such instructions and shall have no
liability to any person for or related to any denial or grant of a
subscription for Shares. The Company, the Mutual Holding Company and the
Savings Bank shall indemnify and hold Trident harmless for any liability
arising out of such instructions or any records of account holders,
depositors and borrowers of the Savings Bank and other members of the
Mutual Holding Company delivered to Trident by the Company, the Mutual
Holding Company or the Savings Bank or their agents for use during the
Offerings and the Conversion and Reorganization.
(l) The Company, the Mutual Holding Company and the Savings Bank will
take such actions and furnish such information as are reasonably requested
by Trident in order for Trident to ensure compliance with the NASD's
"Interpretation Relating to Free-Riding and Withholding."
(m) The Company will not sell or issue, contract to sell or otherwise
dispose of, for a period of 90 days after the Closing Date, without
Trident's prior written consent, any shares of capital stock other than as
described in the Prospectus.
(n) The Company will use its best efforts to obtain approval for and
maintain a quotation of the shares on the Nasdaq National Market effective
on or prior to the Closing Date.
(o) The Company, the Mutual Holding Company and the Savings Bank will
maintain appropriate arrangements for depositing all funds received from
persons mailing subscriptions for or orders to purchase Common Stock in the
Subscription Offering and Community Offering on an interest bearing basis
at the rate described in the Prospectus until the Closing Date and
satisfaction of all conditions precedent to consummation of the Conversion
and Reorganization or until refunds of such funds have been made to the
persons entitled thereto in accordance with the Plan and as described in
the Prospectus.
(p) The Company, the Mutual Holding Company and the Savings Bank shall
conduct the Conversion and Reorganization in accordance with the Plan, the
OTS Regulations and all other applicable laws, regulations, decisions and
orders, including all terms, conditions, requirements and provisions
precedent to the Conversion and Reorganization.
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<PAGE>
6. Payment of Expenses. Whether or not the Conversion and Reorganization
-------------------
is consummated, the Company, the Mutual Holding Company and the Savings Bank
shall pay or reimburse Trident for (a) all filing fees paid or incurred by
Trident in connection with all filings with the NASD with respect to the
Offerings and (b) allocable expenses incurred by Trident relating to the
Offerings as provided in Section 3 hereof.
7. Conditions of Trident's Obligations. Except as may be waived by
-----------------------------------
Trident, the obligations of Trident as provided herein shall be subject to the
accuracy of the representations and warranties contained in Section 2.A hereof
as of the date hereof and as of the Closing Date, to the accuracy of the
statements of officers of the Company, the Mutual Holding Company and Savings
Bank made pursuant to the provisions hereof, to the performance by the Company,
the Mutual Holding Company and Savings Bank of their obligations hereunder and
to the following conditions:
(a) At the Closing Date, Trident shall receive the favorable opinion
of Powell, Goldstein, Frazer & Murphy LLP, special counsel for the Company,
the Mutual Holding Company and the Savings Bank dated as of the Closing
Date, addressed to Trident, in form and substance reasonably satisfactory
to counsel for Trident and to the effect that:
(i) the Company and Interim CFB have been incorporated and are
validly existing as corporations in good standing under the laws of
the State of Georgia, the Mutual Holding Company is a validly existing
mutual holding company with a corporate existence under the laws of
the United States, Interim Mutual is a mutual savings association with
a corporate existence under the laws of the United States, and the
Savings Bank is validly existing as a stock savings association with a
corporate existence under the laws of the United States, each with
full power and authority to own its properties and conduct its
business as such properties and businesses are described in the
Prospectus;
(ii) each of the Company, the Mutual Holding Company and the
Savings Bank has been duly qualified to do business in Georgia and
Alabama, which are, to such counsel's knowledge, the only states in
which they are doing business;
(iii) The Savings Bank is a member of the Federal Home Loan Bank
of Atlanta, and the deposit accounts of the Savings Bank are insured
by the SAIF up to the applicable limits and, to such counsel's
knowledge, no actions or proceedings are pending or threatened to
suspend or revoke such membership or insurance coverage;
(iv) the Company, the Mutual Holding Company and the Savings Bank
have obtained all licenses, permits and other governmental
authorizations currently required for the conduct of their respective
businesses of which such counsel has knowledge, except where the
failure to obtain such licenses, permits and governmental
16
<PAGE>
authorizations would not have a Material Adverse Effect, and to such
counsel's knowledge, all such licenses, permits and other governmental
authorizations are in full force and effect, except where the failure
to hold such licenses, permits or other governmental authorizations
would not have a Material Adverse Effect;
(v) the Plan complies with, and the Conversion and Reorganization
have been effected in all material respects in accordance with, the
HOLA and the OTS Regulations; all of the terms, conditions,
requirements and provisions with respect to the Plan and the
Conversion and Reorganization, except with respect to satisfaction of
the post-Conversion and Reorganization conditions in the approvals of
the Conversion Application and the Holding Company Application have
been complied with by the Company, the Mutual Holding Company, the
Savings Bank, Interim CFB and Interim Mutual; and, to such counsel's
knowledge, no person has sought to obtain regulatory or judicial
review of the final action of the OTS in approving the Plan or the
Conversion and Reorganization;
(vi) the Company and the Savings Bank have authorized common
stock as set forth in the Registration Statement and the Prospectus,
and the descriptions of such common stock in the Registration
Statement and Prospectus are accurate and complete in all material
respects;
(vii) the issuance and sale of the Shares have been duly and
validly authorized by all necessary corporate action on the part of
the Company; the Shares, upon receipt of payment and issuance in
accordance with the terms of the Plan and this Agreement, will be
validly issued, fully paid, nonassessable and free of preemptive
rights, and purchasers of the Shares from the Company, upon issuance
thereof against payment therefor, will acquire such shares free and
clear of all claims, encumbrances, security interests and liens
whatsoever created or suffered to be created by the Company;
(viii) the certificates for the Shares are in due and proper
form and comply with Georgia law;
(ix) the issuance and sale of the capital stock of the Savings
Bank to the Company have been duly authorized by all necessary
corporate action of the Savings Bank and the Company and have received
the approval of the OTS, and such capital stock, upon receipt of
payment and issuance in accordance with the terms of the Plan, will be
validly issued, fully paid and nonassessable and owned of record and,
to such counsel's knowledge, beneficially by the Company;
(x) subject to the satisfaction of the post-Conversion and
Reorganization conditions in the approvals of the Conversion
Application and the Holding Company
17
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Application, no approval, authorization, consent or other order of any
public board or body not previously received is required in connection
with the execution and delivery of this Agreement, the issuance of the
Shares and the consummation of the Conversion and Reorganization;
(xi) the execution and delivery of this Agreement and the
consummation of the Conversion and Reorganization have been duly and
validly authorized by all necessary action, corporate or otherwise, on
the part of each of the Company, the Mutual Holding Company, the
Savings Bank, Interim CFB and Interim Mutual; and this Agreement is a
legal, valid and binding obligation of the Company, the Mutual Holding
Company and the Savings Bank, enforceable in accordance with its
terms, except (a) as may be limited by bankruptcy, insolvency,
reorganization, moratorium, receivership, conservatorship or similar
laws affecting the enforceability of creditors' rights generally or
the rights of creditors of federally chartered savings and loan
holding companies, the accounts of whose subsidiaries are insured by
the FDIC and subject, (b) as to the enforcement of equitable remedies,
including the remedy of specific performance and injunctive and other
forms of equitable relief which may be subject to certain equitable
defenses and to the discretion of the court before which any
proceedings may be brought, to general principles of equity regardless
of whether the enforceability is considered in a proceeding at law or
in equity, and (c) to the extent that the obligations of the Company,
the Mutual Holding Company and the Savings Bank under the
indemnification and contribution provisions of Section 8 and 9 of this
Agreement may be limited by federal or state securities laws, or
unenforceable as against public policy;
(xii) the statements in the Prospectus under the captions
"Dividend Policy," "Regulation," "Taxation," "The Conversion and
Reorganization," "Certain Restrictions on Acquisition of the Company"
and "Description of Capital Stock," insofar as they are, or refer to,
statements of law or legal conclusions, have been prepared or reviewed
by such counsel and are correct in all material respects;
(xiii) the OTS has approved the Conversion Application and the
Conversion and Reorganization, and the Prospectus has been authorized
for use by the OTS; the Registration Statement and any post-effective
amendment thereto has been declared effective by the Commission; the
Holding Company Application has been approved by the OTS; the
Company's registration statement under Section 12(g) of the Exchange
Act has been declared effective by the Commission; and to such
counsel's knowledge, no proceedings are pending by or before the
Commission or the OTS seeking to revoke or rescind the orders
declaring the Registration Statement or Exchange Act registration
statement effective or approving the Conversion Application, the
Conversion and Reorganization or the Holding Company Application, and
to such counsel's knowledge, no such proceedings are contemplated or
threatened;
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(xiv) the Conversion Application, including the Prospectus, at
the time it was approved; and the Registration Statement, including
the Prospectus, at the time it became effective, in each case as
amended, complied as to form in all material respects with the
requirements of the Act and all rules, regulations, decisions and
orders of the OTS and the Commission, as the case may be (except as to
information with respect to Trident included therein and financial
statements, notes to financial statements, financial tables, pro forma
and other financial and statistical data, including the appraisal,
included therein, as to which an opinion need not be expressed); all
exhibits required to be filed with the Conversion Application and the
Registration Statement have been so filed; and the descriptions in the
Conversion Application and the Registration Statement of such
documents and exhibits are accurate in all material respects; except
as set forth in the Prospectus, to such counsel's knowledge (a) there
are no legal or governmental proceedings pending or threatened against
or involving the assets of the Company, Mutual Holding Company or the
Savings Bank required to be disclosed in the Prospectus, (b) there are
not any statutes, regulations, contracts or other documents required
to be described or disclosed in the Prospectus which are not so
described or disclosed, and (c) the description in the Prospectus of
the statutes, regulations, contracts and other documents therein
described are in all material respects accurate summaries and fairly
present the information required to be shown;
(xv) the execution and delivery of this Agreement, the incurrence
of the obligations herein set forth and the consummation of the
transactions contemplated hereby shall not conflict with nor result in
a breach of the Articles of Incorporation, Charter or bylaws of the
Company, the Mutual Holding Company or the Savings Bank, nor, to such
counsel's knowledge, constitute a breach of or default in any material
respect (or an event which, with notice or lapse of time or both,
would constitute a default in any material respect) under, nor give
rise to any right of termination, cancellation or acceleration
contained in, or result in the creation or imposition or any material
lien, charge or other encumbrance upon any of the properties or assets
of the Company, the Mutual Holding Company or the Savings Bank
pursuant to any of the terms, provisions or conditions of, any
material agreement, contract, indenture, bond, debenture, note,
instrument or obligation to which the Company, the Mutual Holding
Company or the Savings Bank is a party or by which it or its assets or
properties may be bound or is subject, or any governmental license or
permit, which in any such event would result in a Material Adverse
Effect; nor will any of such actions, to such counsel's knowledge,
violate any law, administrative regulation or order or court order,
writ, injunction or decree to the extent such violation would result
in a Material Adverse Effect;
(xvi) to such counsel's knowledge, there has been no breach of
the Articles of Incorporation, Charter or bylaws of the Company, the
Mutual Holding Company or the
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<PAGE>
Savings Bank, or material breach or material default (or the
occurrence of any event which, with the lapse of time or action, or
both, by a third party, would result in a material breach or a
material default), under any material agreement, contract, indenture,
bond, debenture, note, instrument or obligation to which the Company,
the Mutual Holding Company or the Savings Bank is a party or by which
any of them or any of their respective assets or properties may be
bound, or any governmental license or permit, or a violation of any
law, administrative regulation or order, or court order, writ,
injunction or decree which in any such event would have a Material
Adverse Effect.
In rendering such opinion, such counsel may rely as to matters of fact
on certificates of officers and directors of the Company, the Mutual
Holding Company or the Savings Bank and certificates of public officials.
For purposes of such opinion, any litigation or governmental proceeding is
not considered to be "threatened" unless the potential litigant or
governmental authority has manifested to the management of the Company, the
Mutual Holding Company or the Savings Bank or to their counsel, a present
intention to initiate such litigation or proceeding.
(b) At the Closing Date, Trident shall receive the letter of Powell,
Goldstein, Frazer & Murphy, LLP, counsel for the Company, the Mutual
Holding Company and the Savings Bank dated the Closing Date, addressed to
Trident, in form and substance reasonably satisfactory to counsel for
Trident and to the effect that based upon such counsel's participation in
conferences with representatives of the Company, the Mutual Holding Company
and the Savings Bank, their counsel, the independent appraiser and the
independent public accountants for the Company, the Mutual Holding Company
and the Savings Bank, Trident and Trident's counsel, review of various
documents, such counsel's understanding of applicable law (including the
requirements of Form S-1 and the character of the Registration Statement
contemplated thereby) and the experience such counsel has gained in its
practice under the Act, nothing has come to such counsel's attention that
would lead such counsel to believe (i) that the Registration Statement
(except as to the financial statements, notes to financial statements,
appraisal, financial tables, pro forma and other financial and statistical
data contained therein, which such counsel need not address), at the time
it became effective and at the time any post-effective amendment thereto
became effective, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements made therein not misleading or (ii) that the
Prospectus (except as to financial statements, notes to financial
statements, appraisal, financial tables, pro forma and other financial and
statistical data contained therein, which such counsel need not address),
as of its date and as of the Closing Date, contained any untrue statement
of a material fact or omitted to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
(c) Counsel for Trident shall have been furnished such documents as it
reasonably may require for the purpose of enabling it to review or pass
upon the matters required by
20
<PAGE>
Trident, and for the purpose of evidencing the accuracy, completeness or
satisfaction of any of the representations, warranties or conditions herein
contained, including but not limited to, resolutions of the Board of
Directors of the Company, the Mutual Holding Company and the Savings Bank
regarding the authorization of this Agreement and the transactions
contemplated hereby.
(d) Prior to and at the Closing Date, in the reasonable opinion of
Trident, (i) there shall have been no material change in the condition,
financial or otherwise, business, prospects or results of operations of the
Company, the Mutual Holding Company or the Savings Bank taken as a whole
since the latest date as of which such condition is set forth in the
Prospectus, except as referred to therein; (ii) there shall have been no
transaction entered into by the Company, the Mutual Holding Company or the
Savings Bank after the latest date as of which the financial condition of
the Mutual Holding Company and Savings Bank is set forth in the Prospectus
other than transactions referred to or contemplated therein, transactions
in the ordinary course of business, and transactions which are not material
to the Company, the Mutual Holding Company and the Savings Bank, taken as a
whole; (iii) neither the Company, the Mutual Holding Company nor the
Savings Bank shall have received from the OTS, the Commission or any other
governmental agency or authority any direction (oral or written) to make
any change in the method of conducting their respective businesses which is
material to the business of the Company, the Mutual Holding Company and the
Savings Bank, taken as a whole, with which they have not complied; (iv) no
action, suit or proceeding, at law or in equity or before or by any federal
or state commission, board or other administrative agency, shall be pending
or threatened against the Company, the Mutual Holding Company or the
Savings Bank or affecting any of their respective assets, wherein an
unfavorable decision, ruling or finding would have a material adverse
effect on the business, operations, prospects, financial condition or
income of the Company, the Mutual Holding Company and the Savings Bank,
taken as a whole; and (v) the Shares shall have been qualified or
registered for offering and sale by the Company under the securities or
blue sky laws of such jurisdictions as Trident and the Company shall have
agreed upon.
(e) At the Closing Date, Trident shall receive a certificate of the
President and the principal financial officer of each of the Company, the
Mutual Holding Company and the Savings Bank, dated the Closing Date, to the
effect that: (i) they have examined the Prospectus, and, at the time the
Prospectus became authorized for final use, the Prospectus did not contain
an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; (ii) since the
date the Prospectus became authorized for final use, no event has occurred
which should have been set forth in an amendment or supplement to the
Prospectus which has not been so set forth, including specifically, but
without limitation, any material change in the business, condition
(financial or otherwise), prospects or results of operations of the
Company, the Mutual Holding Company or the Savings Bank, and the conditions
set forth
21
<PAGE>
in clauses (i) through (v) inclusive of subsection (d) of this Section 7
have been satisfied; (iii) to the best knowledge of such officers, no order
has been issued by the Commission or the OTS to suspend the Subscription
Offering or the Community Offering or the effectiveness of the Registration
Statement or the right of the Company or the Mutual Holding Company to use
or distribute the Prospectus, and no action for any of such purposes has
been instituted or threatened by the Commission or the OTS; (iv) to the
knowledge of such officers, no person has sought to obtain review of the
final actions of the OTS approving the Plan and the Conversion and
Reorganization; and (v) all of the representations and warranties contained
in Section 2 of this Agreement are true and correct, with the same force
and effect as though expressly made on the Closing Date.
(f) At the Closing Date, Trident shall receive, among other documents,
(i) copies of the letters from the OTS approving the Conversion Application
and the Holding Company Application and authorizing the use of the
Prospectus, (ii) if available, a copy of the order of the Commission
declaring the Registration Statement effective; (iii) if available, a copy
of the order of the Commission declaring effective the registration
statement filed under the Exchange Act, (iv) copies of the letters from the
OTS evidencing the corporate existence of the Mutual Holding Company,
Savings Bank and Interim Mutual; (v) a copy of the letter from the Georgia
Secretary of State evidencing the good standing of the Company and Interim
CFB; and (vi) copies of the charters of the Company and Interim CFB,
certified by the Georgia Secretary of State.
(h) Concurrently with the execution of this Agreement, Trident shall
have received a letter from Porter Keadle Moore, LLP, independent certified
public accountants, dated the date hereof and addressed to Trident, in
substance and form satisfactory to counsel for Trident, with respect to the
financial statements and certain financial information contained in the
Prospectus, to the effect that (i) they are independent certified public
accountants with respect to the Company, the Mutual Holding Company and the
Savings Bank within the meaning of the Act, the Regulations and the Code of
Professional Ethics of the American Institute of Certified Public
Accountants; (ii) in their opinion, the financial statements and schedules
audited by them and included in the Registration Statement and the
Prospectus comply as to form in all material respects with the applicable
accounting requirements of the Act and the Regulations; and (iii) in
addition to the audits referred to in their report included in the
Prospectus and on the basis of certain other limited procedures, including
an inspection of the minute books of the Mutual Holding Company and the
Savings Bank since the date of the latest audited financial statements
included in the Prospectus, inquiries of officials of the Mutual Holding
Company and the Savings Bank responsible for financial and accounting
matters and such other inquiries and procedures as may be specified in such
letter, they have carried out certain specified procedures, not
constituting an audit, in accordance with generally accepted auditing
standards, with respect to certain amounts, percentages and financial
information specified by counsel to Trident which
22
<PAGE>
are derived from the general accounting records of the Mutual Holding
Company and the Savings Bank, which appear in the Prospectus or in exhibits
and schedules to the Registration Statement, and have compared certain of
such amounts, percentages and financial information with the accounting
records of the Mutual Holding Company and the Savings Bank and have found
them to be in agreement.
(j) At the Closing Date, Trident shall receive a letter in form and
substance satisfactory to counsel for Trident from Porter Keadle Moore,
LLP, independent certified public accountants, dated the Closing Date and
addressed to Trident, confirming the statements made by it in the letter
delivered by it pursuant to the preceding subsection as of a specified date
not more than five (5) business days prior to the Closing Date.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are, in the opinion of
Trident and its counsel, satisfactory to Trident and its counsel. Any
certificates signed by an officer or director of the Company, the Mutual Holding
Company or Savings Bank prepared for Trident's reliance and delivered to Trident
or to counsel for Trident shall be deemed a representation and warranty by the
Company, the Mutual Holding Company and the Savings Bank to Trident as to the
statements made therein. If any condition to Trident's obligations hereunder to
be fulfilled prior to or at the Closing Date is not so fulfilled, Trident may
terminate this Agreement or, if Trident so elects, may waive any such conditions
which have not been fulfilled, or may extend the time of their fulfillment. If
Trident terminates this Agreement as aforesaid, the Company, the Mutual Holding
Company and the Savings Bank shall reimburse Trident for its allocable expenses
as provided in Sections 3(b) and 6 hereof.
8. Indemnification.
----------------
(a) The Company, the Mutual Holding Company and the Savings Bank
jointly and severally agree to indemnify and hold harmless Trident, its
officers, directors and employees and each person, if any, who controls
Trident within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against any and all loss, liability, claim, damage and
expense whatsoever and shall further promptly reimburse such persons for
any legal or other expenses reasonably incurred by each or any of them in
investigating, preparing to defend or defending against any such action,
proceeding or claim (whether commenced or threatened) arising out of or
based upon (A) any misrepresentation by the Company, the Mutual Holding
Company or the Savings Bank in this Agreement or any breach of warranty by
the Company, the Mutual Holding Company or the Savings Bank with respect to
this Agreement or arising out of or based upon any untrue or alleged untrue
statement of a material fact or the omission or alleged omission of a
material fact required to be stated or necessary to make not misleading any
statements contained in (i) the Registration Statement or the Prospectus or
(ii) any application (including the Conversion Application and the Holding
Company Application or other document or communication (in this Section 8
collectively called "Application") prepared or executed by or
23
<PAGE>
on behalf of the Company, the Mutual Holding Company, the Savings Bank,
Interim CFB or Interim Mutual or based upon written information furnished
by or on behalf of the Company, the Mutual Holding Company, the Savings
Bank, Interim CFB or Interim Mutual, whether or not filed in any
jurisdiction, to effect the Conversion and Reorganization or qualify the
Shares under the securities laws thereof or filed with the OTS or
Commission, unless such statement or omission was made in reliance upon and
in conformity with written information furnished to the Company, the Mutual
Holding Company or the Savings Bank with respect to Trident by or on behalf
of Trident expressly for use in the Prospectus or any amendment or
supplement thereof or in any Application, as the case may be, or (iii) any
unwritten statement made to a purchaser of the Shares by any director or
officer or any person employed by or associated with the Company, the
Mutual Holding Company or the Savings Bank other than Trident, its
officers, directors, employees or agents, (B) the participation by Trident
in the Conversion and Reorganization, or (C) any business practice of the
Company, the Mutual Holding Company or the Savings Bank. This indemnity
shall be in addition to any liability the Company, the Mutual Holding
Company or the Savings Bank may have to Trident otherwise.
(b) The Company, the Mutual Holding Company and the Savings Bank shall
jointly and severally indemnify and hold Trident harmless for any liability
whatsoever, including without limitation any liability to any person for or
related to any denial or grant of a subscription in whole or in part,
arising out of or related to (i) any instructions given by the Company, the
Mutual Holding Company or the Savings Bank to Trident with respect to the
allocation of the Shares among subscribers pursuant to Section 6(k) or (ii)
any records of account holders, depositors and borrowers of the Savings
Bank and other members of the Mutual Holding Company delivered to Trident
by the Company, the Mutual Holding Company or the Savings Bank or their
agents for use during the Conversion and Reorganization.
(c) Trident agrees to indemnify and hold harmless the Company, the
Mutual Holding Company and the Savings Bank, their officers, directors and
employees and each person, if any, who controls the Company and the
Association within the meaning of Section 15 of the Act or Section 20(a) of
the Exchange Act, to the same extent as the foregoing indemnity from the
Company and the Association to Trident set forth in Section 8(a) above, but
only with respect to (i) statements or omissions, if any, made in the
Prospectus or any amendment or supplement thereof, or in any Application in
reliance upon, and in conformity with, written information furnished to the
Company, the Mutual Holding Company or the Saving Bank with respect to
Trident by or on behalf of Trident expressly for use in the Prospectus or
in any Application, or (ii) any misrepresentation by Trident in Section
2.B. of this Agreement.
(d) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not
24
<PAGE>
relieve it from any liability which it may have to any indemnified party
otherwise than under this Section 8. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to
such indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than the reasonable cost of investigation except as
otherwise provided herein. In the event the indemnifying party elects to
assume the defense of any such action and retain counsel acceptable to the
indemnified party, the indemnified party may retain additional counsel, but
shall bear the fees and expenses of such counsel unless (i) the
indemnifying party shall have specifically authorized the indemnified party
to retain such counsel or (ii) the parties to such suit include such
indemnifying party and the indemnified party, and such indemnified party
shall have been advised by counsel that one or more material legal defenses
may be available to the indemnified party which may not be available to the
indemnifying party, in which case the indemnifying party shall not be
entitled to assume the defense of such suit notwithstanding the
indemnifying party's obligation to bear the fees and expenses of such
counsel. An indemnifying party against whom indemnity may be sought shall
not be liable to indemnify an indemnified party under this Section 8 if any
settlement of any such action is effected without such indemnifying party's
consent.
(e) To the extent applicable, this Section 8 is subject to and limited
by the provisions of Section 23A of the Federal Reserve Act.
9. Contribution. In order to provide for just and equitable contribution
------------
in circumstances in which the indemnity agreement provided for in Section 8
above is for any reason held to be unavailable to Trident, the Company, the
Mutual Holding Company or the Savings Bank other than in accordance with its
terms, the Company, the Mutual Holding Company and the Savings Bank, on the one
hand, and Trident, on the other hand, shall contribute to the aggregate losses,
liabilities, claims, damages, and expenses of the nature contemplated by said
indemnity agreement incurred by the Company, the Mutual Holding Company and the
Savings Bank, on the one hand, and Trident, on the other hand, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, the Mutual Holding Company and the Savings Bank, on the one hand, and
Trident, on the other hand, from the offering of the Shares or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above, but also the relative fault of the Company, the
Mutual Holding Company and the Savings Bank, on the one hand, and Trident, on
the other hand, in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations. The relative benefits received by the
Company, the Mutual Holding Company and the Savings Bank, on the one hand, and
Trident, on the other hand, shall
25
<PAGE>
be deemed to be in the same proportion as the total gross proceeds received by
the Company from the Offerings bears to the total fees received by Trident under
this Agreement. The relative fault of the Company, the Mutual Holding Company
and the Savings Bank, on the one hand, and Trident, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company, the Mutual
Holding Company or the Savings Bank or by Trident and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company, the Mutual Holding Company and the Savings Bank, and Trident
agree that it would not be just and equitable if contribution pursuant to this
Section 9 were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in the immediately preceding paragraph. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, liabilities or
judgments referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by the indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 9, Trident shall not be required to contribute any amount in excess of
the amount by which fees owed Trident pursuant to this Agreement exceed the
amount of any damages which Trident has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation.
To the extent applicable, this Section 9 is subject to and limited by the
provisions of Section 23A of the Federal Reserve Act.
10. Survival of Agreements, Representations and Indemnities. The
-------------------------------------------------------
respective indemnities of the Company, the Mutual Holding Company and the
Savings Bank and Trident and the representations and warranties of the Company,
the Mutual Holding Company and the Savings Bank, and Trident set forth in or
made pursuant to this Agreement shall remain in full force and effect,
regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of Trident or the Company, the Mutual Holding
Company and the Savings Bank, or any controlling person or indemnified party
referred to in Section 8 hereof, and shall survive any termination or
consummation of this Agreement and/or the issuance of the Shares, and any legal
representative of Trident, the Company, the Mutual Holding Company or the
Savings Bank, and any controlling persons described in Section 8 above shall be
entitled to the benefit of the respective agreements, indemnities, warranties
and representations.
26
<PAGE>
11. Termination.
------------
(a) Trident may terminate this Agreement by giving the notice
indicated below in this Section at any time after this Agreement becomes
effective, as follows: If any domestic or international event or act or
occurrence has materially disrupted the United States securities markets
such as to make it, in Trident's opinion, impracticable to proceed with the
offering of the Shares; or if trading on the New York Stock Exchange shall
have suspended; or if the United States shall have become involved in a war
or major hostilities; or if a general banking moratorium has been declared
by a state or federal authority which has material effect on the Company,
the Mutual Holding Company, the Savings Bank or the Conversion and
Reorganization; or if a moratorium in foreign exchange trading by major
international banks or persons has been declared; or if there shall have
been a material change in the capitalization, condition, prospects or
business of the Company, the Mutual Holding Company or the Savings Bank, or
if the Company, the Mutual Holding Company or the Saving Bank shall have
sustained a material or substantial loss by fire, flood, accident,
hurricane, earthquake, theft, sabotage or other calamity or malicious act,
whether or not said loss shall have been insured; or if there shall be
material breach of this Agreement by the Company, the Mutual Holding
Company or the Savings Bank.
(b) If Trident elects to terminate this Agreement as provided in
subsection (a) above, the Company, the Mutual Holding Company and the
Savings Bank shall be notified promptly by telephone or telegram, confirmed
by letter.
(c) In addition to the other provisions set forth herein with respect
to payments due upon termination, if this Agreement is terminated by
Trident for any of the reasons set forth in subsection (a) above, and to
fulfill its obligations, if any, pursuant to Sections 3(b), 6, 8 and 9 of
this Agreement and upon demand, the Company, the Mutual Holding Company or
the Savings Bank shall pay Trident the full amount so owing thereunder.
(d) The Mutual Holding Company may terminate the Conversion and
Reorganization in accordance with the terms of the Plan. Such termination
shall be without liability to any party, except that the Company, the
Mutual Holding Company and the Savings Bank shall be required to (i) pay
Trident the amounts due under Sections 3(b) and 6 hereof, without any
reduction because the Conversion and Reorganization was not consummated,
and (ii) perform their obligations which are set forth in Sections 8 and 9
hereof.
12. Notices. All communications hereunder, except as herein otherwise
-------
specifically provided, shall be in writing and if sent to Trident shall be
mailed, delivered or telegraphed and confirmed to Trident Securities, Inc., 4601
Six Forks Road, Suite 400, Raleigh, North Carolina 27609, Attention: Timothy E.
Lavelle (with a copy to Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P.,
230 North Elm Street, 2000 Renaissance Plaza, P.O. Box 26000, Greensboro, North
Carolina
27
<PAGE>
27420, Attention: Randall A. Underwood, Esquire) and if sent to the Company,
shall be mailed, delivered or telegraphed and confirmed to Community First
Banking Company, CF Mutual Holdings and Carrollton Federal Bank, FSB, 110 Dixie
Street, P. O. Box 250, Carrollton, Georgia 30117, Attention: Gary D. Dorminey
(with a copy to Powell, Goldstein, Frazer & Murphy LLP, 16th Floor, 191
Peachtree Street, N.E., Atlanta, Georgia 30303, Attention: Walter G. Moeling,
IV, Esq.). The Company, the Mutual Holding Company and the Savings Bank shall be
entitled to act and rely on any request, notice, consent, waiver or agreement
purportedly given on behalf of Trident when the same shall have been given by
the undersigned or any other officer of Trident. Trident shall be entitled to
act and rely on any request, notice, consent, waiver or agreement purportedly
given on behalf of the Company, the Mutual Holding Company or the Savings Bank,
when the same shall have been given by the undersigned or any other officer of
the Company, the Mutual Holding Company or the Savings Bank.
13. Parties. This Agreement shall inure solely to the benefit of, and
-------
shall be binding upon, Trident, the Company, the Mutual Holding Company and the
Savings Bank and the controlling and other persons referred to in Section 8
hereof, and their respective successors, legal representatives and assigns, and
no other person shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this Agreement or any
provision herein contained.
14. Partial Invalidity. In the event that any term, provision or covenant
------------------
herein or the application thereof to any circumstance or situation shall be
invalid or unenforceable, in whole or in part, the remainder hereof and the
application of said term, provision or covenant to any other circumstance or
situation shall not be affected thereby, and each term, provision or covenant
herein shall be valid and enforceable to the full extent permitted by law.
15. Amendment. This Agreement may be amended only by a subsequent writing
---------
signed by all parties hereto.
16. Construction. Unless governed by preemptive federal law, this
------------
Agreement shall be governed by and construed in accordance with the substantive
laws of North Carolina. Note: our opinion will assume the agreement is
governed by Georgia law.
17. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute but one and the same instrument.
Please acknowledge your agreement to the foregoing by signing below and
returning one copy of this letter to the Company.
28
<PAGE>
COMMUNITY FIRST BANKING COMPANY CF MUTUAL HOLDINGS
By: /s/ Gary D. Dorminey By: /s/ Gary D. Dorminey
---------------------------- ---------------------------------
Gary D. Dorminey Gary D. Dorminey
President President
Date: , 1997 Date: , 1997
-------------------- -----------------------------
CARROLLTON FEDERAL BANK, FSB
By: /s/ Gary D. Dorminey
----------------------------
Gary D. Dorminey
President
Date: , 1997
--------------------
AGREED TO AND ACCEPTED:
TRIDENT SECURITIES, INC.
By: /s/ Timothy E. Lavelle
----------------------------
Timothy E. Lavelle
President
Date: , 1997
--------------------
29
<PAGE>
PLAN OF CONVERSION
OF
CF MUTUAL HOLDINGS
AND
AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
COMMUNITY FIRST BANKING COMPANY
AND
CARROLLTON FEDERAL BANK
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION
NUMBER PAGE
- ------ ----
<S> <C>
1. INTRODUCTION.................................................. 1
2. DEFINITIONS................................................... 3
3. GENERAL PROCEDURE FOR CONVERSION AND REORGANIZATION........... 8
4. TOTAL NUMBER OF SHARES AND PURCHASE PRICE OF
CONVERSION STOCK.............................................. 10
5. SUBSCRIPTION RIGHTS OF ELIGIBLE ACCOUNT HOLDERS............... 11
6. SUBSCRIPTION RIGHTS OF THE TAX-QUALIFIED EMPLOYEE STOCK
BENEFIT PLANS................................................. 12
7. SUBSCRIPTION RIGHTS OF SUPPLEMENTAL ELIGIBLE ACCOUNT
HOLDERS....................................................... 13
8. SUBSCRIPTION RIGHTS OF OTHER MEMBERS.......................... 13
9. COMMUNITY OFFERING, SYNDICATED COMMUNITY OFFERING
AND OTHER OFFERINGS........................................... 14
10. LIMITATIONS ON SUBSCRIPTIONS AND PURCHASES OF
CONVERSION STOCK.............................................. 16
11. TIMING OF SUBSCRIPTION OFFERING; MANNER OF EXERCISING
SUBSCRIPTION RIGHTS AND ORDER FORMS........................... 17
12. PAYMENT FOR CONVERSION STOCK.................................. 19
13. ACCOUNT HOLDERS IN NONQUALIFIED STATES OR FOREIGN
COUNTRIES..................................................... 20
14. VOTING RIGHTS OF STOCKHOLDERS................................. 20
15. LIQUIDATION ACCOUNT........................................... 21
16. TRANSFER OF DEPOSIT ACCOUNTS.................................. 22
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SECTION
NUMBER PAGE
- ------ ----
<S> <C>
17. REQUIREMENTS FOLLOWING CONVERSION AND REORGANIZATION
FOR REGISTRATION, MARKET MAKING AND STOCK EXCHANGE
LISTING....................................................... 22
18. DIRECTORS AND OFFICERS OF THE BANK............................ 23
19. REQUIREMENTS FOR STOCK PURCHASE BY DIRECTORS AND
OFFICERS FOLLOWING THE CONVERSION AND REORGANIZATION.......... 23
20. RESTRICTIONS ON TRANSFER OF STOCK............................. 23
21. RESTRICTIONS ON ACQUISITION OF STOCK OF COMMUNITY
FIRST......................................................... 24
22. TAX RULINGS OR OPINIONS....................................... 24
23. STOCK COMPENSATION PLANS...................................... 25
24. PAYMENT OF FEES TO BROKERS.................................... 25
25. EFFECTIVE DATE................................................ 25
26. AMENDMENT OR TERMINATION OF THE PLAN.......................... 26
27. INTERPRETATION OF THE PLAN.................................... 26
</TABLE>
Annex A - Plan of Merger between the Mutual Holding Company (following its
conversion) and the Bank
Annex B - Plan of Merger between the Bank and Interim CFB
<PAGE>
1. INTRODUCTION.
For purposes of this section, all capitalized terms have the meanings
ascribed to them in Section 2.
BACKGROUND.
- ----------
On August 1, 1994, Carrollton Federal Bank, FSB, a federally chartered
mutual savings bank reorganized into the mutual holding company form of
organization. To accomplish this transaction, the Bank organized a federally
chartered, stock savings bank (Carrollton Federal Bank) as a wholly owned
subsidiary. The mutual Bank then transferred substantially all of its assets
and liabilities to the stock Bank in exchange for 100 shares of Bank Common
Stock, and reorganized itself into a federally chartered mutual holding company
known as CF Mutual Holdings. No other Bank Common Stock was issued in
connection with the mutual holding company reorganization or thereafter and, as
a consequence, CF Mutual Holdings holds 100% of the outstanding Bank Common
Stock.
The Boards of Directors of the Mutual Holding Company and the Bank believe
that a conversion of the Mutual Holding Company to stock form and reorganization
of the Bank pursuant to this Plan of Conversion is in the best interests of the
Mutual Holding Company and the Bank, as well as the best interests of their
respective Members and Stockholders. The Boards of Directors determined that
this Plan of Conversion equitably provides for the interests of Members through
the granting of subscription rights and the establishment of a liquidation
account. The Conversion and Reorganization will result in the Bank's being
wholly owned by a stock holding company, which is a more common structure and
form of ownership than a mutual holding company. In addition, the Conversion
and Reorganization will result in the raising of additional capital for the Bank
and Community First.
Subsequent to the formation of the Mutual Holding Company, there have been
certain changes in the policies of the OTS relating to mutual holding companies.
In addition, market conditions for the stocks of savings institutions and their
holding companies have improved. In light of the foregoing, the Boards of
Directors of the Mutual Holding Company and the Bank believe that it is in the
best interests of such companies and their respective Members and Stockholders
to raise additional capital at this time, and that the most feasible way to do
so is through the Conversion and Reorganization.
SUMMARY OF TRANSACTION.
- ----------------------
Implementation of the Conversion and Reorganization will require a number
of steps and transactions, as described in greater detail in Section 3 hereof.
The Bank will form a new first-tier, wholly owned subsidiary known as Community
First Banking Company ("Community First"), which will become the holding company
for the Bank upon consummation of the Conversion and Reorganization. Community
First will in turn form a new wholly owned subsidiary known as CFB Interim
Savings Bank ("Interim CFB"). The Mutual Holding Company will convert to an
interim federal savings bank and will simultaneously merge with and into the
Bank pursuant to the Plan of Merger included as Annex A hereto, pursuant to
which
<PAGE>
the Mutual Holding Company will cease to exist and a liquidation account will be
established by the Bank for the benefit of depositor Members as of specified
dates, and Interim CFB will then merge with and into the Bank pursuant to the
Plan of Merger included as Annex B hereto, pursuant to which the Bank will
become a wholly owned subsidiary of Community First and, in connection
therewith, each share of Bank Common Stock outstanding immediately prior to the
effective time thereof shall be automatically cancelled.
SUMMARY OF THE OFFERING.
- -----------------------
In connection with the Conversion and Reorganization, Community First will
offer shares of Conversion Stock in the Offerings as provided herein. Shares of
Conversion Stock will be offered in a Subscription Offering in descending order
of priority to Eligible Account Holders, Tax-Qualified Employee Stock Benefit
Plans, Supplemental Eligible Account Holders and Other Members. Any shares of
Conversion Stock remaining unsold after the Subscription Offering will be
offered for sale to the public through a Community Offering and/or Syndicated
Community Offering, as determined by the Boards of Directors of Community First
and the Bank in their sole discretion.
OTHER FACTORS.
- -------------
The Conversion and Reorganization are intended to provide a larger capital
base to support the Bank's lending and investment activities and thereby enhance
the Bank's capabilities to serve the borrowing and other financial needs of the
communities it serves. Community First will provide opportunities for greater
organizational flexibility and diversification than is presently available
through the Mutual Holding Company.
This Plan was adopted by the Boards of Directors of the Mutual Holding
Company and the Bank on February 11, 1997.
This Plan is subject to the approval of the OTS and must be adopted by (1)
at least a majority of the total number of votes eligible to be cast by Voting
Members of the Mutual Holding Company at the Special Meeting and (2) holders of
at least two-thirds of the outstanding Bank Common Stock at the Stockholders'
Meeting. All of the outstanding Bank Common Stock is owned by the Mutual
Holding Company, which will vote to approve the Plan.
After the Conversion and Reorganization, the Bank will continue to be
regulated by the OTS, as its chartering authority, and by the FDIC, which
insures the Bank's deposits. In addition, the Bank will continue to be a member
of the Federal Home Loan Bank System and all insured savings deposits will
continue to be insured by the FDIC up to the maximum provided by law.
2
<PAGE>
2. DEFINITIONS.
-----------
As used in this Plan, the terms set forth below have the following meaning:
2.1. Purchase Price means the price per share at which the Conversion
--------------
Stock is ultimately sold by Community First in the Offerings in accordance with
the terms hereof .
2.2. Acting in Concert means (i) knowing participation in a joint
-----------------
activity or interdependent conscious parallel action towards a common goal,
whether or not pursuant to an express agreement, with respect to the purchase,
ownership, voting or sale of Common Stock; (ii) a combination or pooling of
voting or other interests in the securities of Community First for a common
purpose pursuant to any contract, understanding, relationship, agreement or
other arrangement, whether written or otherwise. Community First and the Bank
may presume that certain persons are acting in concert based upon, among other
things, joint account relationships and the fact that such persons have filed
joint Schedules 13D with the SEC with respect to other companies.
2.3. Affiliate means a Person who, directly or indirectly, through one or
---------
more intermediaries, controls or is controlled by or is under common control
with the Person specified.
2.4. Associate, when used to indicate a relationship with any Person,
---------
means (i) a corporation or organization (other than the Mutual Holding Company,
the Bank, a majority-owned subsidiary of the Bank or Community First) of which
such Person is a director, officer or partner or is, directly or indirectly, the
beneficial owner of 10% or more of any class of equity securities, (ii) any
trust or other estate in which such Person has a substantial beneficial interest
or as to which such Person serves as trustee or in a similar fiduciary capacity,
provided, however, that such term shall not include any Tax-Qualified Employee
Stock Benefit Plan or Non-Tax-Qualified Employee Stock Benefits Plan of
Community First or the Bank in which such Person has a substantial beneficial
interest or serves as a trustee or in a similar fiduciary capacity, and (iii)
any relative or spouse of such Person, or any relative of such spouse, who has
the same home as such Person or who is a director or officer of Community First,
the Mutual Holding Company or the Bank or any of the subsidiaries of the
foregoing.
2.5. Bank means Carrollton Federal Bank, FSB in its mutual form prior to
----
the formation of the Mutual Holding Company; Carrollton Federal Bank in its
present stock form; or Carrollton Federal Bank in its stock form following
consummation of the Conversion and Reorganization, as the sense of the reference
indicates.
2.6. Bank Common Stock means the common stock of the Bank, par value
-----------------
$1.00 per share, which stock is not and will not be insured by the FDIC or any
other governmental authority.
3
<PAGE>
2.7. Bank Merger means the merger of Interim CFB with and into the Bank
-----------
pursuant to the Plan of Merger included as Annex B hereto.
2.8. Code means the Internal Revenue Code of 1986, as amended.
----
2.9. Community First means Community First Banking Company, a Georgia
---------------
corporation which will be organized as a first-tier, wholly owned subsidiary of
the Bank, and which will, upon completion of the Conversion and Reorganization,
hold all of the issued and outstanding stock of the Bank.
2.10. Community First Common Stock means the common stock of Community
----------------------------
First, par value $1.00 per share, which stock cannot and will not be insured by
the FDIC or any other governmental authority.
2.11. Community Offering means the offering for sale by Community First of
------------------
any shares of Conversion Stock not subscribed for in the Subscription Offering
to (i) natural persons residing in the Local Community, and (ii) such other
Persons within or without the State of Georgia as may be selected by Community
First and the Bank within their sole discretion.
2.12. Control (including the terms "controlling," "controlled by," and
-------
"under common control with") means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
2.13. Conversion and Reorganization means (i) the conversion of the Mutual
-----------------------------
Holding Company to an interim federal savings bank and the subsequent merger
with the Bank, pursuant to which the Mutual Holding Company will cease to exist,
(ii) the Bank Merger, pursuant to which the Bank will become a wholly owned
subsidiary of Community First and, in connection therewith, each share of Bank
Common Stock outstanding immediately prior to the effective time thereof shall
automatically be cancelled, and (iii) the issuance of Conversion Stock by
Community First in the Offerings as provided herein, which will increase the
number of shares of Community First Common Stock outstanding and the
capitalization of Community First and the Bank.
2.14. Conversion Stock means the Community First Common Stock to be issued
----------------
and sold in the Offerings pursuant to the Plan of Conversion.
2.15. Deposit Account means savings and demand accounts, including
---------------
passbook accounts, money market deposit accounts and negotiable order of
withdrawal accounts, and certificates of deposit and other authorized accounts
of the Bank held by a Member.
2.16. Director, Officer and Employee means the terms as applied
------------------------------
respectively to any person who is a director, officer or employee of the Mutual
Holding Company, the Bank or any subsidiary thereof.
4
<PAGE>
2.17. Eligible Account Holder means any Person holding a Qualifying
-----------------------
Deposit on the Eligibility Record Date for purposes of determining Subscription
Rights and establishing subaccount balances in the liquidation account to be
established pursuant to Section 15 hereof with the beneficial owner of
individual retirement accounts, Keogh savings accounts and similar retirement
accounts being deemed the holder thereof.
2.18. Eligibility Record Date means the date for determining Qualifying
-----------------------
Deposits of Eligible Account Holders and is the close of business on December
31, 1995.
2.19. Estimated Price Range means the range of the estimated aggregate pro
---------------------
forma market value of the total number of shares of Conversion Stock to be
issued in the Offerings, as determined by the Independent Appraiser in
accordance with Section 4 hereof.
2.20. FDIC means the Federal Deposit Insurance Corporation or any
----
successor thereto.
2.21. Independent Appraiser means the independent investment banking or
---------------------
financial consulting firm retained by Community First and the Bank to prepare an
appraisal of the estimated aggregate pro forma market value of Community First
and the Bank.
2.22. Interim Mutual means Interim Mutual Holdings, an interim federal
--------------
savings bank, which will be formed as a result of the conversion of CF Mutual
Holdings into the stock form of organization.
2.23. Interim CFB means CFB Interim Savings Bank, which will be formed as
-----------
a first-tier, wholly owned subsidiary of Community First to facilitate the Bank
Merger.
2.24. Local Community means Carroll County, the Georgia county in which
---------------
the Bank has its home office and the Georgia counties of Coweta, Douglas,
Fayette, Haralson, Heard, Henry and Paulding.
2.25. Maximum Shares means the number of shares of Conversion Stock which
--------------
would be issued at the maximum of the Estimated Price Range.
2.26. Member means any Person qualifying as a member of the Mutual Holding
------
Company in accordance with its mutual charter and bylaws and the laws of the
United States.
2.27. MHC Merger means the merger of Interim Mutual with and into the Bank
----------
pursuant to the Plan of Merger included as Annex A hereto.
2.28. Mutual Holding Company means CF Mutual Holdings prior to its
----------------------
conversion into an interim federal savings bank.
2.29. Offerings means the Subscription Offering, the Community Offering
---------
and the Syndicated Community Offering.
5
<PAGE>
2.30. Officer means the chairman of the board of directors, president,
-------
vice-president, secretary, treasurer or principal financial officer, comptroller
or principal accounting officer and any other person performing similar
functions with respect to any organization whether incorporated or
unincorporated.
2.31. Order Form means the form or forms provided by Community First,
----------
containing all such terms and provisions as set forth in Section 12 hereof, to a
Participant or other Person by which Conversion Stock may be ordered in the
Offerings.
2.32. Other Member means a Voting Member who is not an Eligible Account
------------
Holder or a Supplemental Eligible Account Holder.
2.33. OTS means the Office of Thrift Supervision or any successor thereto.
---
2.34. Participant means any Eligible Account Holder, Tax-Qualified
-----------
Employee Stock Benefit Plan, Supplemental Eligible Account Holder and Other
Member as of the Voting Record Date.
2.35. Person means an individual, a corporation, a partnership, an
------
association, a joint stock company, a trust, an unincorporated organization or a
government or any political subdivision thereof.
2.36. Plan or Plan of Conversion means collectively this Plan of
--------------------------
Conversion of CF Mutual Holdings and Agreement and Plan of Reorganization as
adopted by the Boards of Directors of the Mutual Holding Company and the Bank
and any amendment hereto approved as provided herein. The Board of Directors of
Community First shall adopt this Plan as soon as practicable following its
organization, and the Board of Directors of Interim CFB shall adopt the Plan of
Merger included as Annex B hereto as soon as practicable following its
organization.
2.37. Primary Parties mean the Mutual Holding Company, the Bank and
---------------
Community First.
2.38. Prospectus means the one or more documents to be used in offering
----------
the Conversion Stock in the Offerings.
2.39. Proxy Statement means the definitive proxy statement forwarded to
---------------
Voting Members in connection with the Special Meeting.
2.40. Qualifying Deposits means the aggregate balance of all Deposit
-------------------
Accounts in the Bank of (i) an Eligible Account Holder at the close of business
on the Eligibility Record Date, provided such aggregate balance is not less than
$50, and (ii) a Supplemental Eligible Account Holder at the close of business on
the Supplemental Eligibility Record Date, provided such aggregate balance is not
less than $50.
6
<PAGE>
2.41. Resident means any Person who, on the date designated for that
--------
category of subscriber in the Plan, maintained a bona fide residence within the
Local Community. To the extent the Person is a corporation or other business
entity, the principal place of business or headquarters shall be within the
Local Community. To the extent the Person is a personal benefit plan, the
circumstances of the beneficiary shall apply with respect to this definition.
In the case of all other benefit plans, circumstances of the trustee shall be
examined for purposes of this definition. The Bank may utilize deposit or loan
records or such other evidence provided to it to make a determination as to
whether a Person is a bona fide resident of the Local Community. Subscribers in
the Community Offering who are natural persons also will have a purchase
preference if they were residents of the Local Community on December 31, 1996.
In all cases, however, such determination shall be in the sole discretion of the
Bank.
2.42. SEC means the Securities and Exchange Commission.
---
2.43. Special Meeting means the Special Meeting of Members of the Mutual
---------------
Holding Company called for the purpose of submitting this Plan to the Members
for their approval, including any adjournments of such meeting.
2.44. Stockholders mean the Mutual Holding Company, the sole Person who
------------
owns shares of Bank Common Stock.
2.45. Stockholders' Meeting means the special meeting of the sole
---------------------
Stockholder of the Bank called for the purpose of submitting this Plan to the
sole Stockholder for its approval, including any adjournments of such meeting.
2.46. Subscription Offering means the offering of the Conversion Stock to
---------------------
Participants.
2.47. Subscription Rights means nontransferable rights to subscribe for
-------------------
Conversion Stock granted to Participants pursuant to the terms of this Plan.
2.48. Supplemental Eligible Account Holder means any Person, except
------------------------------------
Directors and Officers of the Bank and their Associates, holding a Qualifying
Deposit at the close of business on the Supplemental Eligibility Record Date
with the beneficial owner of individual retirement accounts, Keogh savings
accounts and similar retirement accounts being deemed the holder thereof.
2.49. Supplemental Eligibility Record Date, if applicable, means the date
------------------------------------
for determining Qualifying Deposits of Supplemental Eligible Account Holders and
shall be required if the Eligibility Record Date is more than 15 months prior to
the date of the latest amendment to the Application for Conversion filed by the
Mutual Holding Company prior to approval of such application by the OTS. If
applicable, the Supplemental Eligibility Record Date shall be the last day of
the calendar quarter preceding OTS approval of the Application for Conversion
submitted by the Mutual Holding Company pursuant to this Plan of Conversion.
7
<PAGE>
2.50. Syndicated Community Offering means the offering for sale by a
-----------------------------
syndicate of broker-dealers to the general public of shares of Conversion Stock
not purchased in the Subscription Offering and the Community Offering.
2.51. Tax-Qualified Employee Stock Benefit Plan means any defined benefit
-----------------------------------------
plan or defined contribution plan, such as an employee stock ownership plan,
stock bonus plan, profit-sharing plan or other plan, which is established for
the benefit of the employees of Community First and the Bank and which, with its
related trust, meets the requirements to be "qualified" under Section 401 of the
Code as from time to time in effect. A "Non-Tax-Qualified Employee Stock
Benefit Plan" is any defined benefit plan or defined contribution stock benefit
plan which is not so qualified.
2.52. Voting Member means a Person who at the close of business on the
-------------
Voting Record Date is entitled to vote as a Member of the Mutual Holding Company
in accordance with its mutual charter and bylaws.
2.53. Voting Record Date means the date or dates for determining the
------------------
eligibility of Members to vote at the Special Meeting and sole Stockholder to
vote at the Stockholders' Meeting, as applicable.
3. GENERAL PROCEDURE FOR CONVERSION AND REORGANIZATION.
---------------------------------------------------
(a) After the Bank's organization of Community First, and the receipt of
all requisite regulatory approvals, Community First will form Interim CFB as a
first-tier, wholly owned subsidiary of Community First, and the Board of
Directors of Interim CFB shall adopt the Plan of Merger included as Annex B
hereto by at least a two-thirds vote. In addition, Community First shall approve
such Plan of Merger in its capacity as the sole Stockholder of Interim CFB.
(b) An application for the Conversion and Reorganization, including the
Plan and all other requisite material (the "Application for Conversion"), shall
be submitted to the OTS for approval. The Mutual Holding Company and the Bank
also will cause notice of the adoption of the Plan by the Boards of Directors of
the Mutual Holding Company and the Bank to be given by publication in a
newspaper having general circulation in each community in which an office of the
Bank is located; and will cause copies of the Plan to be made available at each
office of the Mutual Holding Company and the Bank for inspection by Members and
the sole Stockholder. After receipt of notice from the OTS to do so, the Mutual
Holding Company and the Bank will post the notice of the filing of the
Application for Conversion in each of their offices and will again cause to be
published, in accordance with the requirements of applicable regulations of the
OTS, a notice of the filing with the OTS of an application to convert the Mutual
Holding Company from mutual to stock form.
8
<PAGE>
(c) Promptly following receipt of requisite approval of the OTS, this Plan
will be submitted to the Members for their consideration and approval at the
Special Meeting. The Mutual Holding Company shall mail to all Voting Members, at
their last known address appearing on the records of the Mutual Holding Company
and the Bank, a Proxy Statement in either long or summary form describing the
Plan which will be submitted to a vote of the Members at the Special Meeting.
Community First also shall mail to all such Members (as well as other
Participants) either a Prospectus and Order Form for the purchase of Conversion
Stock or a letter informing them of their right to receive a Prospectus and
Order Form and a postage prepaid card to request such materials. In addition,
all such Members may request a copy of the articles of incorporation and bylaws
of Community First. The Plan must be approved by the affirmative vote of at
least a majority of the total number of votes eligible to be cast by Voting
Members at the Special Meeting.
(d) Subscription Rights to purchase shares of Conversion Stock will be
issued without payment therefor to Eligible Account Holders, Tax-Qualified
Employee Stock Benefit Plans, Supplemental Eligible Account Holders, if any, and
Other Members, as set forth in Sections 5, 6, 7 and 8 hereof.
(e) The Bank shall file preliminary proxy materials with the OTS in order
to seek the approval of the Plan by its Stockholders. Promptly following
clearance of such proxy materials and the receipt of any other requisite
approval of the OTS, the Bank will mail definitive proxy materials to the Mutual
Holding Company, its sole stockholder as of the Voting Record Date, at its
address appearing on the records of the Bank, for its consideration and approval
of this Plan at the Stockholders' Meeting. The Plan must be approved by the
holders of at least two-thirds of the outstanding Bank Common Stock as of the
Voting Record Date, and the Mutual Holding Company intends to vote to approve
the Plan.
(f) Community First shall submit or cause to be submitted an Application H-
(e)1 or H-(e)1-S to the OTS for approval of the acquisition of the Bank. Such
application also shall include applications to form Interim Mutual and Interim
CFB. In addition, an application to merge Interim Mutual and the Bank and an
application to merge Interim CFB and the Bank shall be filed with the OTS,
either as an exhibit to the Application H-(e)1 or H-(e)1-S or separately. All
notices required to be published in connection with such applications shall be
published at the times required.
(g) Community First shall file a Registration Statement with the SEC to
register Community First Common Stock to be issued in the Conversion and
Reorganization under the Securities Act of 1933, as amended, and shall register
such Community First Common Stock under any applicable state securities laws.
Upon registration and after the receipt of all required regulatory approvals,
the Conversion Stock shall be offered for sale in a Subscription Offering to
Eligible Account Holders, Tax-Qualified Employee Stock Benefit Plans and
Supplemental Eligible Account Holders, if any, and Other Members as of the
Voting Record Date. It is anticipated that any shares of Conversion Stock
remaining unsold after the Subscription Offering will be sold through a
Community Offering and/or a Syndicated Community Offering. The
9
<PAGE>
purchase price per share for the Conversion Stock shall be a uniform price
determined in accordance with Section 4 hereof. Community First shall
contribute to the Bank an amount of the net proceeds received by Community First
from the sale of Conversion Stock as shall be determined by the Boards of
Directors of Community First and the Bank and as shall be approved by the OTS.
(h) The effective date of the Conversion and Reorganization shall be the
date set forth in Section 26 hereof. Upon the effective date, the following
transactions shall occur:
(i) The Mutual Holding Company shall convert into an interim stock
savings bank, Interim Mutual, and Interim Mutual shall simultaneously merge
with and into the Bank in the MHC Merger, with the Bank being the surviving
institution. As a result of the MHC Merger, (x) the shares of Bank Common
Stock currently held by the Mutual Holding Company shall be extinguished
and (y) Members of the Mutual Holding Company will be granted interests in
the liquidation account to be established by the Bank pursuant to Section
15 hereof.
(ii) Interim CFB shall merge with and into the Bank pursuant to the
Bank Merger, with the Bank being the surviving institution. As a result of
the Bank Merger, (x) the shares of Community First Common Stock held by the
Bank shall be extinguished; and (y) the shares of common stock of Interim
CFB held by Community First shall be converted into shares of Bank Common
Stock on a one-for-one basis, with the result that the Bank shall become a
wholly owned subsidiary of Community First.
(iii) Community First shall sell the Conversion Stock in the
Offerings, as provided herein.
(i) The Primary Parties may retain and pay for the services of financial
and other advisors and investment bankers to assist in connection with any or
all aspects of the Conversion and Reorganization, including in connection with
the Offerings, the payment of fees to brokers and investment bankers for
assisting Persons in completing and/or submitting Order Forms. All fees,
expenses, retainers and similar items shall be reasonable.
4. TOTAL NUMBER OF SHARES AND PURCHASE PRICE OF CONVERSION STOCK.
-------------------------------------------------------------
(a) The aggregate price at which shares of Conversion Stock shall be sold
in the Offerings shall be based on a pro forma valuation of the aggregate market
value of Community First and the Bank prepared by the Independent Appraiser.
The valuation shall be based on financial information relating to the Primary
Parties, market, financial and economic conditions, a comparison of the Primary
Parties with selected publicly held financial institutions and holding companies
and with comparable financial institutions and holding companies and such other
factors as the Independent Appraiser may deem to be important. The valuation
shall be stated
10
<PAGE>
in terms of an Estimated Price Range, the maximum of which shall generally be no
more than 15% above the estimated aggregate pro forma value and the minimum of
which shall generally be no more than 15% below the estimated aggregate pro
forma value. The valuation shall be updated during the Conversion and
Reorganization as market and financial conditions warrant and as may be required
by the OTS.
(b) Based upon the independent valuation, the Boards of Directors of the
Primary Parties shall fix the Purchase Price and the number (or range) of shares
of Conversion Stock to be offered in the Subscription Offering, Community
Offering and/or Syndicated Community Offering. The total number of shares of
Conversion Stock to be issued in the Offerings shall be determined by the Boards
of Directors of the Primary Parties upon conclusion of the Offerings in
consultation with the Independent Appraiser and any financial advisor or
investment banker retained by the Primary Parties in connection therewith.
(c) Subject to the approval of the OTS, the Estimated Price Range may be
increased or decreased to reflect market, financial and economic conditions
prior to completion of the Conversion and Reorganization, or to enable Tax-
Qualified Employee Stock Benefit Plans to purchase up to 10% of the Conversion
Stock, and under such circumstances the Primary Parties may increase or decrease
the total number of shares of Conversion Stock to be issued in the Conversion
and Reorganization to reflect any such change. Notwithstanding anything to the
contrary contained in this Plan, no resolicitation of subscribers shall be
required and subscribers shall not be permitted to modify or cancel their
subscriptions unless the gross proceeds from the sale of the Conversion Stock
issued in the Conversion and Reorganization are less than the minimum or more
than 15% above the maximum of the Estimated Price Range set forth in the
Prospectus. In the event of an increase in the total number of shares offered
in the Conversion and Reorganization due to an increase in the Estimated Price
Range, the priority of share allocation shall be as set forth in this Plan.
5. SUBSCRIPTION RIGHTS OF ELIGIBLE ACCOUNT HOLDERS.
-----------------------------------------------
(a) Each Eligible Account Holder shall receive, without payment,
Subscription Rights to purchase up to the greater of (i) $375,000 of Conversion
Stock, (ii) one-tenth of 1% of the total offering of shares of Conversion Stock
in the Subscription Offering, and (iii) 15 times the product (rounded down to
the next whole number) obtained by multiplying the total number of shares of
Conversion Stock offered in the Subscription Offering by a fraction, of which
the numerator is the amount of the Qualifying Deposits of the Eligible Account
Holder and the denominator is the total amount of all Qualifying Deposits of all
Eligible Account Holders, subject to Section 13 hereof.
(b) In the event of an oversubscription for shares of Conversion Stock
pursuant to Section 5(a), available shares shall be allocated among subscribing
Eligible Account Holders so as to permit each Eligible Account Holder, to the
extent possible, to purchase a number of shares which will make his or her total
allocation equal to the lesser of the number of shares subscribed for or 100
shares. Any available shares remaining after each subscribing Eligible
11
<PAGE>
Account Holder has been allocated the lesser of the number subscribed for or 100
shares shall be allocated among the subscribing Eligible Account Holders in the
proportion which the Qualifying Deposits of each such subscribing Eligible
Account Holder bears to the total Qualifying Deposits of all such subscribing
Eligible Account Holders, provided that no fractional shares shall be issued.
If the amount so allocated exceeds the amount subscribed for by any one or more
Eligible Account Holders, the excess shall be reallocated (one or more times as
necessary) among those Eligible Account Holders whose subscriptions are not
fully satisfied on the same principle described above until all available shares
have been allocated or subscriptions satisfied. Subscription Rights of Eligible
Account Holders who are also Directors or Officers and their Associates shall be
subordinated to those of other Eligible Account Holders to the extent that they
are attributable to increased deposits during the one-year period preceding the
Eligibility Record Date.
6. SUBSCRIPTION RIGHTS OF THE TAX-QUALIFIED EMPLOYEE STOCK BENEFIT PLANS.
---------------------------------------------------------------------
Notwithstanding the purchase limitations discussed below, Tax-Qualified
Employee Stock Benefit Plans of Community First and the Bank shall receive,
without payment, Subscription Rights to purchase in the aggregate up to 10% of
the Conversion Stock, including any shares of Conversion Stock to be issued in
the Conversion and Reorganization as a result of an increase in the Estimated
Price Range after commencement of the Subscription Offering and prior to
completion of the Conversion and Reorganization. Consistent with applicable
laws and regulations and policies and practices of the OTS, Tax-Qualified
Employee Stock Benefit Plans may use funds contributed by Community First or the
Bank and/or borrowed from an independent financial institution to exercise such
Subscription Rights, and Community First and the Bank may make scheduled
discretionary contributions thereto, provided that such contributions do not
cause Community First or the Bank to fail to meet any applicable regulatory
capital requirement. Notwithstanding anything to the contrary set forth in this
Plan of Conversion, in the event that the number of shares of Conversion Stock
issued in the Conversion Reorganization exceeds the Maximum Shares, such Tax-
Qualified Employee Stock Benefit Plans shall have the first priority right to
purchase any shares of Conversion Stock issued exceeding the Maximum Shares (up
to an aggregate of 10% of Conversion Stock, including any shares of Conversion
Stock to be issued in the Conversion and Reorganization as a result of an
increase in the Estimated Price Range after commencement of the Subscription
Offering and prior to completion of the Conversion Reorganization). In the
event that there is an oversubscription for shares of Conversion Stock, and as a
result, Tax-Qualified Employee Stock Benefit Plans of Community First and the
Bank are unable to purchase in the Conversion and Reorganization the amount they
subscribe for (up to the 10% limitation described above), then, upon receipt of
all necessary regulatory approvals, the Boards of Directors of Community First
and the Bank shall be authorized to (i) issue from authorized, unissued shares
at the purchase price paid by subscribers in the Offering or (ii) approve the
purchase by such Tax-Qualified Employee Stock Benefit Plans in the open market
after the Conversion and Reorganization, of such shares as are necessary for
such Tax-Qualified Employee Stock Benefit Plans to purchase the amount
12
<PAGE>
subscribed for, using funds contributed by Community First or the Bank and/or
borrowed from Community First or an independent financial institution.
7. SUBSCRIPTION RIGHTS OF SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS.
------------------------------------------------------------
(a) In the event that the Eligibility Record Date is more than 15 months
prior to the date of the latest amendment to the Application for Conversion
filed prior to OTS approval, then, and only in that event, a Supplemental
Eligibility Record Date shall be set and each Supplemental Eligible Account
Holder shall receive, without payment, Subscription Rights to purchase up to the
greater of (i) $375,000 of Conversion Stock, (ii) one-tenth of 1% of the total
offering of shares of Conversion Stock in the Subscription Offering, and (iii)
15 times the product (rounded down to the next whole number) obtained by
multiplying the total number of shares of Conversion Stock offered in the
Subscription Offering by a fraction, of which the numerator is the amount of the
Qualifying Deposits of the Supplemental Eligible Account Holder and the
denominator is the total amount of all Qualifying Deposits of all Supplemental
Eligible Account Holders, subject to Section 13 hereof and the availability of
shares of Conversion Stock for purchase after taking into account the shares of
Conversion Stock purchased by Eligible Account Holders and Tax-Qualified
Employee Stock Benefit Plans through the exercise of Subscription Rights under
Sections 5 and 6 hereof.
(b) In the event of an oversubscription for shares of Conversion Stock
pursuant to Section 7(a), available shares shall be allocated among subscribing
Supplemental Eligible Account Holders so as to permit each Supplemental Eligible
Account Holder, to the extent possible, to purchase a number of shares which
will make his or her total allocation (including the number of shares, if any,
allocated in accordance with Section 5(a)) equal to the lesser of the number of
shares subscribed for or 100 shares. Any available shares remaining after each
subscribing Supplemental Eligible Account Holder has been allocated the lesser
of the number subscribed for or 100 shares shall be allocated among the
subscribing Supplemental Eligible Account Holders in the proportion which the
Qualifying Deposits of each such subscribing Supplemental Eligible Account
Holder bears to the total Qualifying Deposits of all such subscribing
Supplemental Eligible Account Holders, provided that no fractional shares shall
be issued. If the amount so allocated exceeds the amount subscribed for by any
one or more Supplemental Eligible Account Holders, the excess shall be
reallocated (one or more times as necessary) among those Supplemental Eligible
Account Holders whose subscriptions are not fully satisfied on the same
principle described above until all available shares have been allocated or
subscriptions satisfied.
8. SUBSCRIPTION RIGHTS OF OTHER MEMBERS.
------------------------------------
(a) Each Other Member shall receive, without payment, Subscription Rights
to purchase up to the greater of (i) $375,000 of Conversion Stock, and (ii) one-
tenth of 1% of the total offering of shares of Conversion Stock in the
Subscription Offering, in each case subject to Section 13 hereof and the
availability of shares of Conversion Stock for purchase after taking
13
<PAGE>
into account the shares of Conversion Stock purchased by Eligible Account
Holders, Tax-Qualified Employee Stock Benefit Plans, and Supplemental Eligible
Account Holders, if any, through the exercise of Subscription Rights under
Sections 5, 6 and 7 hereof.
(b) If, pursuant to this Section 8, Other Members subscribe for a number of
shares of Conversion Stock in excess of the total number of shares of Conversion
Stock remaining, available shares shall be allocated among subscribing Other
Members so as to permit each such Other Member, to the extent possible, to
purchase a number of shares which will make his or her total allocation equal to
the lesser of the number of shares subscribed for or 100 shares. Any remaining
shares shall be allocated among subscribing Other Members on a pro rata basis in
the same proportion as each such Other Member's subscription bears to the total
subscriptions of all subscribing Other Members, provided that no fractional
shares shall be issued.
9. COMMUNITY OFFERING, SYNDICATED COMMUNITY OFFERING AND OTHER OFFERINGS.
---------------------------------------------------------------------
(a) If less than the total number of shares of Conversion Stock are sold in
the Subscription Offering, it is anticipated that all remaining shares of
Conversion Stock shall, if practicable, be sold in a Community Offering and/or a
Syndicated Community Offering. Subject to the requirements set forth herein,
the manner in which the Conversion Stock is sold in the Community Offering
and/or the Syndicated Community Offering shall have as the objective the
achievement of the widest possible distribution of such stock.
(b) In the event of a Community Offering, all shares of Conversion Stock
which are not subscribed for in the Subscription Offering shall be offered for
sale by means of a direct community marketing program, which may provide for the
use of brokers, dealers or investment banking firms experienced in the sale of
financial institution securities. Any available shares in excess of those not
subscribed for in the Subscription Offering will be available for purchase by
members of the general public to whom a Prospectus is delivered by Community
First or on its behalf, with preference given to natural persons residing in the
Local Community ("Preferred Subscribers").
(c) A Prospectus and Order Form shall be furnished to such Persons as the
Primary Parties may select in connection with the Community Offering, and each
order for Conversion Stock in the Community Offering shall be subject to the
absolute right of the Primary Parties to accept or reject any such order in
whole or in part either at the time of receipt of an order or as soon as
practicable following completion of the Community Offering. Available shares
will be allocated first to each Preferred Subscriber whose order is accepted in
an amount equal to the lesser of 100 shares or the number of shares subscribed
for by each such Preferred Subscriber, if possible. Thereafter, unallocated
shares shall be allocated among the Preferred Subscribers whose accepted orders
remain unsatisfied in the same proportion that the unfilled order of each (up to
2% of the total offering) bears to the total unfilled orders of all Preferred
Subscribers whose accepted orders remain unsatisfied, provided that no
fractional shares shall be issued. If there are any shares remaining after all
accepted orders by Preferred Subscribers
14
<PAGE>
have been satisfied, any remaining shares shall be allocated to other members of
the general public who purchase in the Community Offering, applying the same
allocation described above for Preferred Subscribers.
(d) The amount of Conversion Stock that any Person may purchase in the
Community Offering shall not exceed $375,000 of Conversion Stock; provided,
however, that this amount may be increased to up to 5% of the total offering of
shares in the Conversion and Reorganization, subject to any required regulatory
approval but without the further approval of Members of the Mutual Holding
Company or the Stockholders of the Bank; and provided further that, subject to
the provisions set forth in Section 9(b) and (c) of this Plan and to the extent
applicable, orders for Conversion Stock in the Community Offering shall first be
filled to a maximum of 2% of the total number of shares of Conversion Stock sold
in the Offerings and thereafter any remaining shares shall be allocated on an
equal number of shares basis per order until all orders have been filled. The
Primary Parties may commence the Community Offering concurrently with, at any
time during, or as soon as practicable after the end of, the Subscription
Offering, and the Community Offering must be completed within 45 days after the
completion of the Subscription Offering, unless extended by the Primary Parties
with any required regulatory approval.
(e) Subject to such terms, conditions and procedures as may be determined
by the Primary Parties, all shares of Conversion Stock not subscribed for in the
Subscription Offering or ordered in the Community Offering may be sold by a
syndicate of broker-dealers to the general public in a Syndicated Community
Offering. Each order for Conversion Stock in the Syndicated Community Offering
shall be subject to the absolute right of the Primary Parties to accept or
reject any such order in whole or in part either at the time of receipt of an
order or as soon as practicable after completion of the Syndicated Community
Offering. The amount of Conversion Stock that any Person may purchase in the
Syndicated Community Offering shall not exceed $375,000 of Conversion Stock;
provided, however, that this amount may be increased to up to 5% of the total
offering of shares in the Conversion and Reorganization, subject to any required
regulatory approval but without the further approval of Members or the Mutual
Holding Company, as the sole stockholder of the Bank; and provided further that,
to the extent applicable, orders for Conversion Stock in the Syndicated
Community Offering shall first be filled to a maximum of 2% of the total number
of shares of Conversion Stock sold in the Offerings and thereafter any remaining
shares shall be allocated on an equal number of shares basis per order until all
orders have been filled. The Primary Parties may commence the Syndicated
Community Offering concurrently with, at any time during, or as soon as
practicable after the end of, the Subscription Offering and/or Community
Offering, and the Syndicated Community Offering must be completed within 45 days
after the completion of the Subscription Offering, unless extended by the
Primary Parties with any required regulatory approval.
(f) If for any reason a Syndicated Community Offering of shares of
Conversion Stock not sold in the Subscription Offering and the Community
Offering cannot be effected, or in the event that any insignificant residue of
shares of Conversion Stock is not sold in the Subscription Offering, Community
Offering or Syndicated Community Offering, the Primary Parties shall use
15
<PAGE>
their best efforts to obtain other purchasers for such shares in such manner and
upon such conditions as may be satisfactory to the OTS.
10. LIMITATIONS ON SUBSCRIPTIONS AND PURCHASES OF CONVERSION STOCK.
--------------------------------------------------------------
(a) The maximum number of shares of Conversion Stock which may be purchased
in the Conversion by Tax-Qualified Employee Stock Benefit Plans shall not exceed
10% of the total number of shares of Conversion Stock sold in the Offerings,
including any shares which may be issued in the event of an increase in the
maximum of the Estimated Price Range to reflect changes in market, financial and
economic conditions after commencement of the Subscription Offering and prior to
completion of the Offerings.
(b) Except in the case of Tax-Qualified Employee Stock Benefit Plans in the
aggregate, as set forth in Section 10(a) hereof, and in addition to the other
restrictions and limitations set forth herein, the maximum number of shares of
Conversion Stock which any Person together with any Associate or group of
Persons acting in concert may, directly or indirectly, subscribe for or purchase
in the Conversion and Reorganization shall not exceed $375,000. In addition,
where more than one Person is an owner of a particular deposit account or an
obligor of a particular loan account, the orders of such Persons pursuant to
Subscription Rights related to such joint accounts collectively may not exceed
the maximum purchase limitation.
(c) The number of shares of Conversion Stock which Directors and Officers
and their Associates may purchase in the aggregate in the Offerings shall not
exceed 28.5% of the total number of shares of Conversion Stock sold in the
Offerings, including any shares which may be issued in the event of an increase
in the maximum of the Estimated Price Range to reflect changes in market,
financial and economic conditions after commencement of the Subscription
Offering and prior to completion of the Offerings.
(d) For purposes of the foregoing limitations and the determination of
Subscription Rights, (i) Directors, Officers and Employees shall not be deemed
to be Associates or a group acting in concert solely as a result of their
capacities as such, (ii) shares purchased by Tax-Qualified Employee Stock
Benefit Plans shall not be attributable to the individual trustees or
beneficiaries of any such plan for purposes of determining compliance with the
maximum purchase limitations set forth herein, and (iii) shares purchased by
Tax-Qualified Employee Stock Benefit Plans shall not be attributable to the
individual trustees or beneficiaries of any such plan for purposes of
determining compliance with the limitation set forth in Section 10(c) hereof.
(e) No Person may purchase fewer than shares of Conversion Stock in the
Offerings, to the extent such shares are available; provided, however, that if
the Purchase Price is greater than $20.00 per share, such minimum number of
shares shall be adjusted so that the aggregate Purchase Price for such minimum
shares will not exceed $500.00.
16
<PAGE>
(f) Subject to any required regulatory approval and the requirements of
applicable laws and regulations, but without further approval of the Members of
the Mutual Holding Company or the Stockholders of the Bank, the Primary Parties
may increase or decrease any of the individual or aggregate purchase limitations
set forth herein to a percentage which does not exceed 5% of the total offering
of shares of Community First Common Stock in the Conversion and Reorganization
whether prior to, during or after the Subscription Offering, Community Offering
and/or Syndicated Community Offering. In the event that an individual purchase
limitation is increased after commencement of the Subscription Offering or any
other offering, the Primary Parties shall permit any Person who subscribed for
the maximum number of shares of Conversion Stock to purchase an additional
number of shares, so that such Person shall be permitted to subscribe for the
then maximum number of shares permitted to be subscribed for by such Person,
subject to the rights and preferences of any Person who has priority
Subscription Rights. In the event that an individual purchase limitation is
decreased after commencement of the Subscription Offering or any other offering,
the orders of any Person who subscribed for more than the new purchase
limitation shall be decreased by the minimum amount necessary so that such
Person shall be in compliance with the then maximum number of shares permitted
to be subscribed for by such Person.
(g) The Primary Parties shall have the right to take all such action as
they may, in their sole discretion, deem necessary, appropriate or advisable in
order to monitor and enforce the terms, conditions, limitations and restrictions
contained in this Section 10 and elsewhere in this Plan and the terms,
conditions and representations contained in the Order Form, including, but not
limited to, the absolute right (subject only to any necessary regulatory
approvals or concurrences) to reject, limit or revoke acceptance of any
subscription or order and to delay, terminate or refuse to consummate any sale
of Conversion Stock which they believe might violate, or is designed to, or is
any part of a plan to, evade or circumvent such terms, conditions, limitations,
restrictions and representations. Any such action shall be final, conclusive
and binding on all persons, and the Primary Parties and their respective
directors, employees and agents shall be free from any liability to any Person
on account of any such action.
11. TIMING OF SUBSCRIPTION OFFERING; MANNER OF EXERCISING SUBSCRIPTION RIGHTS
-------------------------------------------------------------------------
AND ORDER FORMS.
---------------
(a) The Subscription Offering may be commenced concurrently with or at any
time after the mailing to Voting Members of the Mutual Holding Company and
Stockholders of the Bank of the proxy statement(s) to be used in connection with
the Special Meeting and the Stockholders' Meeting. The Subscription Offering
may be closed before the Special Meeting and the Stockholders' Meeting, provided
that the offer and sale of the Conversion Stock shall be conditioned upon the
approval of the Plan by the Voting Members of the Mutual Holding Company and the
sole Stockholder of the Bank at the Special Meeting and the Stockholders'
Meeting, respectively.
17
<PAGE>
(b) The exact timing of the commencement of the Subscription Offering
shall be determined by the Primary Parties in consultation with the Independent
Appraiser and any financial or advisory or investment banking firm retained by
them in connection with the Conversion and Reorganization. The Primary Parties
may consider a number of factors, including, but not limited to, their current
and projected future earnings, local and national economic conditions, and the
prevailing market for stocks in general and stocks of financial institutions in
particular. The Primary Parties shall have the right to withdraw, terminate,
suspend, delay, revoke or modify any such Subscription Offering, at any time and
from time to time, as they in their sole discretion may determine, without
liability to any Person, subject to compliance with applicable securities laws
and any necessary regulatory approval or concurrence.
(c) The Primary Parties shall, promptly after the SEC has declared the
Registration Statement which includes the Prospectus effective and all required
regulatory approvals have been obtained, distribute or make available the
Prospectus, together with Order Forms for the purchase of Conversion Stock, to
all Participants for the purpose of enabling them to exercise their respective
Subscription Rights, subject to Section 13 hereof. The Primary Parties may
elect to mail a Prospectus and Order Form only to those Participants who request
such materials by returning a postage-paid card to the Primary Parties by a date
specified in the letter informing them of their Subscription Rights. Under such
circumstances, the Subscription Offering shall not be closed until the
expiration of 30 days after the mailing by the Primary Parties of the postage-
paid card to Participants.
(d) A single Order Form for all Deposit Accounts maintained with the Bank
by an Eligible Account Holder and any Supplemental Eligible Account Holder may
be furnished, irrespective of the number of Deposit Accounts maintained with the
Bank on the Eligibility Record Date and Supplemental Eligibility Record Date,
respectively. No person holding a subscription right may exceed any otherwise
applicable purchase limitation by submitting multiple orders for Conversion
Stock. Multiple orders are subject to adjustment, as appropriate, on a pro rata
basis and deposit balances will be divided equally among such orders in
allocating shares in the event of an oversubscription.
(e) The recipient of an Order Form shall have no less than 20 days and no
more than 45 days from the date of mailing of the Order Form (with the exact
termination date to be set forth on the Order Form) to properly complete and
execute the Order Form and deliver it to the Primary Parties. The Primary
Parties may extend such period by such amount of time as they determine is
appropriate. Failure of any Participant to deliver a properly executed Order
Form to the Primary Parties, along with payment (or authorization for payment by
withdrawal) for the shares of Conversion Stock subscribed for, within the time
limits prescribed, shall be deemed a waiver and release by such person of any
rights to subscribe for shares of Conversion Stock. Each Participant shall be
required to confirm to the Primary Parties by executing an Order Form that such
Person has fully complied with all of the terms, conditions, limitations and
restrictions in the Plan. Subscription Rights are not transferable, and any
misrepresentation in the Order Form as to the identity of the Participant or the
Participant's interest in the transaction will
18
<PAGE>
constitute a false entry on the books of a financial institution whose deposits
are insured by the FDIC.
(f) The Primary Parties shall have the absolute right, in their sole
discretion and without liability to any Participant or other Person, to reject
any Order Form, including, but not limited to, any Order Form that is (i)
improperly completed or executed; (ii) not timely received; (iii) not
accompanied by the proper payment (or authorization of withdrawal for payment)
or, in the case of institutional investors in the Community Offering, not
accompanied by an irrevocable order together with a legally binding commitment
to pay the full amount of the purchase price prior to 48 hours before the
completion of the Offerings; or (iv) submitted by a Person whose representations
the Primary Parties believe to be false or who they otherwise believe, either
alone, or acting in concert with others, is violating, evading or circumventing,
or intends to violate, evade or circumvent, the terms and conditions of the
Plan. Any attempt to violate the prohibition on transfer of the Subscription
Rights shall void any such Subscription Rights. The Primary Parties may, but
will not be required to, waive any irregularity on any Order Form or may require
the submission of corrected Order Forms or the remittance of full payment for
shares of Conversion Stock by such date as they may specify. The interpretation
of the Primary Parties of the terms and conditions of the Order Forms shall be
final and conclusive.
12. PAYMENT FOR CONVERSION STOCK.
----------------------------
(a) Payment for shares of Conversion Stock subscribed for by Participants
in the Subscription Offering and payment for shares of Conversion Stock ordered
by Persons in the Community Offering shall be equal to the Purchase Price
multiplied by the number of shares which are being subscribed for or ordered,
respectively. Such payment may be made in cash, if delivered in person, or by
check or money order at the time the Order Form is delivered to the Primary
Parties. The Primary Parties will not accept payment for shares of Conversion
Stock by wire transfer. The Primary Parties may elect to provide Participants
and/or other Persons who have a Deposit Account with the Bank the opportunity to
pay for shares of Conversion Stock by authorizing the Bank to withdraw from such
Deposit Account an amount equal to the aggregate Purchase Price of such shares.
(b) Consistent with applicable laws and regulations and policies and
practices of the OTS, payment for shares of Conversion Stock subscribed for by
Tax-Qualified Employee Stock Benefit Plans may be made with funds contributed by
Community First and/or the Bank and/or funds obtained pursuant to a loan from an
unrelated financial institution pursuant to a loan commitment which is in force
from the time that any such plan submits an Order Form until the closing of the
transactions contemplated hereby. Such funds need not be delivered until such
closing, provided such commitment is in place at the time the Order Form is
delivered.
(c) If a Participant or other Person authorizes the Bank to withdraw the
amount of the Purchase Price from his or her Deposit Account, the Bank shall
have the right to make such withdrawal or to freeze funds equal to the aggregate
Purchase Price upon receipt of the Order
19
<PAGE>
Form. Notwithstanding any regulatory provisions regarding penalties for early
withdrawals from certificate accounts, the Bank may allow payment by means of
withdrawal from certificate accounts without the assessment of such penalties.
In the case of an early withdrawal of only a portion of such account, the
certificate evidencing such account shall be cancelled if any applicable minimum
balance requirement ceases to be met. In such case, the remaining balance will
earn interest at the regular passbook rate. However, where any applicable
minimum balance is maintained in such certificate account, the rate of return on
the balance of the certificate account shall remain the same as prior to such
early withdrawal. This waiver of the early withdrawal penalty applies only to
withdrawals made in connection with the purchase of Conversion Stock and is
entirely within the discretion of the Primary Parties.
(d) The Bank shall pay interest, at not less than the passbook rate, for
all amounts paid in cash, by check or money order to purchase shares of
Conversion Stock in the Subscription Offering and the Community Offering from
the date payment is received until the date the Conversion and Reorganization is
completed or terminated.
(e) The Bank shall not knowingly loan funds or otherwise extend credit to
any Participant or other Person to purchase Conversion Stock.
(f) Each share of Conversion Stock shall be non-assessable upon payment in
full of the Purchase Price.
13. ACCOUNT HOLDERS IN NONQUALIFIED STATES OR FOREIGN COUNTRIES.
-----------------------------------------------------------
The Primary Parties shall make reasonable efforts to comply with the
securities laws of all jurisdictions in the United States in which Participants
reside. However, no Participant will be offered or receive any Conversion Stock
under the Plan if such Participant resides in a foreign country or resides in a
jurisdiction of the United States with respect to which all of the following
apply: (a) there is a small number of Participants otherwise eligible to
subscribe for shares under this Plan who reside in such jurisdiction; (b) the
granting of Subscription Rights or the offer or sale of shares of Conversion
Stock to such Participants would require any of the Primary Parties or any of
their respective Directors and Officers, under the laws of such jurisdiction, to
register as a broker-dealer, salesman or selling agent or to register or
otherwise qualify the Conversion Stock for sale in such jurisdiction, or any of
the Primary Parties would be required to qualify as a foreign corporation or
file a consent to service of process in such jurisdiction; and (c) such
registration, qualification or filing in the judgment of the Primary Parties
would be impracticable or unduly burdensome for reasons of cost or otherwise.
14. VOTING RIGHTS OF STOCKHOLDERS.
-----------------------------
Following consummation of the Conversion and Reorganization, voting rights
with respect to the Bank shall be held and exercised exclusively by Community
First as holder of all
20
<PAGE>
of the Bank's outstanding voting capital stock, and voting rights with respect
to Community First shall be held and exercised exclusively by the holders of
Community First's voting capital stock.
15. LIQUIDATION ACCOUNT.
-------------------
(a) At the time of the MHC Merger, the Bank shall establish a liquidation
account in an amount equal to 100% of the Bank's total stockholders' equity as
reflected in its latest statement of financial condition contained in the final
Prospectus utilized in the Conversion and Reorganization. The function of the
liquidation account will be to preserve the rights of certain holders of Deposit
Accounts in the Bank who maintain such accounts in the Bank following the
Conversion and Reorganization to a priority to distributions in the unlikely
event of a liquidation of the Bank subsequent to the Conversion and
Reorganization.
(b) The liquidation account shall be maintained for the benefit of
Eligible Account Holders and Supplemental Eligible Account Holders, if any, who
maintain their Deposit Accounts in the Bank after the Conversion and
Reorganization. Each such account holder will, with respect to each Deposit
Account held, have a related inchoate interest in a portion of the liquidation
account balance, which interest will be referred to in this Section 15 as the
"subaccount balance." All Deposit Accounts having the same social security
number will be aggregated for purposes of determining the initial subaccount
balance with respect to such Deposit Accounts, except as provided in Section
15(d) hereof.
(c) In the event of a complete liquidation of the Bank subsequent to the
Conversion and Reorganization (and only in such event), each Eligible Account
Holder and Supplemental Eligible Account Holder, if any, shall be entitled to
receive a liquidation distribution from the liquidation account in the amount of
the then current subaccount balances for Deposit Accounts then held (adjusted as
described below) before any liquidation distribution may be made with respect to
the capital stock of the Bank. No merger, consolidation, sale of bulk assets or
similar combination transaction with another FDIC-insured institution in which
the Bank is not the surviving entity shall be considered a complete liquidation
for this purpose. In any merger or consolidation transaction, the liquidation
account shall be assumed by the surviving entity.
(d) The initial subaccount balance for a Deposit Account held by an
Eligible Account Holder and Supplemental Eligible Account Holder, if any, shall
be determined by multiplying the opening balance in the liquidation account by a
fraction, of which the numerator is the amount of the Qualifying Deposits of
such account holder and the denominator is the total amount of Qualifying
Deposits of all Eligible Account Holders or Supplemental Eligible Account
Holders, as applicable. For Deposit Accounts in existence at both the
Eligibility Record Date and the Supplemental Eligibility Record Date, if any,
separate initial subaccount balances shall be determined on the basis of the
Qualifying Deposits in such Deposit Accounts on each such record date. Initial
subaccount balances shall not be increased, and shall be subject to downward
adjustment as provided below.
21
<PAGE>
(e) If the aggregate deposit balance in the Deposit Account(s) of any
Eligible Account Holder or Supplemental Eligible Account Holder, if any, at the
close of business on any December 31 annual closing date, commencing December
31, 1997, is less than the lesser of (a) the aggregate deposit balance in such
Deposit Account(s) at the close of business on any other annual closing date
subsequent to such record dates or (b) the aggregate deposit balance in such
Deposit Account(s) as of the Eligibility Record Date or the Supplemental
Eligibility Record Date, the subaccount balance for such Deposit Account(s)
shall be adjusted by reducing such subaccount balance in an amount proportionate
to the reduction in such deposit balance. In the event of such a downward
adjustment, the subaccount balance shall not be subsequently increased,
notwithstanding any subsequent increase in the deposit balance of the related
Deposit Account(s). The subaccount balance of an Eligible Account Holder or
Supplemental Eligible Account Holder, if any, will be reduced to zero if the
account holder ceases to maintain a Deposit Account at the Bank that has the
same social security number as appeared on his Deposit Account(s) at the
Eligibility Record Date or, if applicable, the Supplemental Eligibility Record
Date.
(f) Subsequent to the Conversion and Reorganization, the Bank may not pay
cash dividends generally on deposit accounts and/or capital stock of the Bank,
or repurchase any of the capital stock of the Bank, if such dividend or
repurchase would reduce the Bank's regulatory capital below the aggregate amount
of the then current subaccount balances for Deposit Accounts then held;
otherwise, the existence of the liquidation account shall not operate to
restrict the use or application of any of the net worth accounts of the Bank.
(g) For purposes of this Section 15, a Deposit Account includes a
predecessor or successor account which is held by an account holder with the
same social security number.
16. TRANSFER OF DEPOSIT ACCOUNTS.
----------------------------
Each Deposit Account in the Bank at the time of the consummation of the
Conversion and Reorganization shall become, without further action by the
holder, a Deposit Account in the Bank equivalent in withdrawable amount to the
withdrawal value (as adjusted to give effect to any withdrawal made for the
purchase of Conversion Stock), and subject to the same terms and conditions
(except as to voting and liquidation rights) as such Deposit Account in the Bank
immediately preceding consummation of the Conversion and Reorganization.
Holders of Deposit Accounts in the Bank shall not, as such holders, have any
voting rights.
17. REQUIREMENTS FOLLOWING CONVERSION AND REORGANIZATION FOR REGISTRATION,
----------------------------------------------------------------------
MARKET MAKING AND STOCK EXCHANGE LISTING.
----------------------------------------
In connection with the Conversion and Reorganization, Community First shall
register Community First Common Stock pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended, and shall undertake not to deregister such
stock for a period of three years thereafter. Community First also shall use
its best efforts to (i) encourage and assist a market maker to establish and
maintain a market for Community First Common Stock and (ii) list
22
<PAGE>
Community First Common Stock on a national or regional securities exchange or to
have quotations for such stock disseminated on the National Association of
Securities Dealers Automated Quotation System.
18. DIRECTORS AND OFFICERS OF THE BANK.
----------------------------------
Each person serving as a Director or Officer of the Bank and the Mutual
Holding Company at the time of the Conversion and Reorganization shall continue
to serve as a Director or Officer of the Bank and Community First for the
balance of the term for which the person was elected prior to the Conversion and
Reorganization, and until a successor is elected and qualified. The number,
names, business addresses and terms of the Directors of the Bank are set forth
in the Plans of Merger included as Annexes A and B hereto.
19. REQUIREMENTS FOR STOCK PURCHASES BY DIRECTORS AND OFFICERS FOLLOWING THE
------------------------------------------------------------------------
CONVERSION AND REORGANIZATION.
-----------------------------
For a period of three years following the Conversion and Reorganization,
the Directors and Officers of Community First and the Bank and their Associates
may not purchase, without the prior written approval of the OTS, Community First
Common Stock except from a broker-dealer registered with the SEC. This
prohibition shall not apply, however, to (i) a negotiated transaction arrived at
by direct negotiation between buyer and seller and involving more than 1% of the
outstanding Community First Common Stock and (ii) purchases of stock made by and
held by any Tax-Qualified Employee Stock Benefit Plan (and purchases of stock
made by and held by any Non-Tax-Qualified Employee Stock Benefit Plan following
the receipt of stockholder approval of such plan) which may be attributable to
individual officers or directors.
The foregoing restriction on purchases of Community First Common Stock
shall be in addition to any restrictions that may be imposed by federal and
state securities laws.
20. RESTRICTIONS ON TRANSFER OF STOCK.
---------------------------------
All shares of the Conversion Stock which are purchased by Persons other
than Directors and Officers shall be transferable without restriction, except in
connection with a transaction proscribed by Section 21 of this Plan. Shares of
Conversion Stock purchased by Directors and Officers of Community First and the
Bank on original issue from Community First (by subscription or otherwise) shall
be subject to the restriction that such shares shall not be sold or otherwise
disposed of for value for a period of one year following the date of purchase,
except for any disposition of such shares following the death of the original
purchaser or pursuant to any merger or similar transaction approved by the OTS.
The shares of Conversion Stock issued by Community First to Directors and
Officers shall bear the following legend giving appropriate notice of such one-
year restriction:
23
<PAGE>
The shares of stock evidenced by this Certificate are restricted as to
transfer for a period of one year from the date of this Certificate
pursuant to Part 563b of the Rules and Regulations of the Office of Thrift
Supervision. These shares may not be transferred during such one-year
period without a legal opinion of counsel for the Company that said
transfer is permissible under the provisions of applicable law and
regulation. This restrictive legend shall be deemed null and void after
one year from the date of this Certificate.
In addition, Community First shall give appropriate instructions to the
transfer agent for Community First Common Stock with respect to the applicable
restrictions relating to the transfer of restricted stock. Any shares issued at
a later date as a stock dividend, stock split or otherwise with respect to any
such restricted stock shall be subject to the same holding period restrictions
as may then be applicable to such restricted stock.
The foregoing restriction on transfer shall be in addition to any
restrictions on transfer that may be imposed by federal and state securities
laws.
21. RESTRICTIONS ON ACQUISITION OF STOCK OF COMMUNITY FIRST.
-------------------------------------------------------
The articles of incorporation of Community First shall prohibit any Person
together with Associates or group of Persons acting in concert from offering to
acquire or acquiring, directly or indirectly, beneficial ownership of more than
10% of any class of equity securities of Community First, or of securities
convertible into more than 10% of any such class, for five years following
completion of the Conversion and Reorganization. The articles of incorporation
of Community First also shall provide that all equity securities beneficially
owned by any Person in excess of 10% of any class of equity securities during
such five-year period shall be considered "excess shares," and that excess
shares shall not be counted as shares entitled to vote and shall not be voted by
any Person or counted as voting shares in connection with any matters submitted
to the stockholders for a vote. The foregoing restrictions shall not apply to
(i) any offer with a view toward public resale made exclusively to Community
First by underwriters or a selling group acting on its behalf, (ii) the purchase
of shares by a Tax-Qualified Employee Stock Benefit Plan established for the
benefit of the employees of Community First and its subsidiaries which is exempt
from approval requirements under 12 C.F.R. (S)574.3(c)(1)(vi) or any successor
thereto, and (iii) any offer or acquisition approved in advance by the
affirmative vote of two-thirds of the entire Board of Directors of Community
First. Directors, Officers or Employees of Community First or the Bank or any
subsidiary thereof shall not be deemed to be Associates or a group acting in
concert with respect to their individual acquisitions of any class of equity
securities of Community First solely as a result of their capacities as such.
22. TAX RULINGS OR OPINIONS.
-----------------------
Consummation of the Conversion and Reorganization is conditioned upon prior
receipt by the Primary Parties of either a ruling or an opinion of counsel with
respect to federal tax laws, and either a ruling or an opinion of counsel with
respect to Georgia tax laws, to the effect
24
<PAGE>
that consummation of the transactions contemplated hereby will not result in a
taxable reorganization under the provisions of the applicable codes or otherwise
result in any adverse tax consequences to the Primary Parties or to account
holders receiving Subscription Rights before or after the Conversion and
Reorganization, except in each case to the extent, if any, that Subscription
Rights are deemed to have fair market value on the date such rights are issued.
23. STOCK COMPENSATION PLANS.
------------------------
(a) Community First and the Bank are authorized to adopt Tax-Qualified
Employee Stock Benefit Plans in connection with the Conversion and
Reorganization, including without limitation an employee stock ownership plan.
(b) Community First and the Bank also are authorized to adopt stock option
plans, restricted stock grant plans and other Non-Tax-Qualified Employee Stock
Benefit Plans in accordance with applicable laws and regulations.
(c) Existing as well as any newly created Tax-Qualified Employee Stock
Benefit Plans may purchase shares of Conversion Stock in the Offerings, to the
extent permitted by the terms of such benefit plans and this Plan. Community
First and the Bank may make scheduled discretionary distributions to such
benefit plans, provided such contributions do not cause such institutions to
fail to meet applicable regulatory capital requirements.
24. PAYMENT OF FEES TO BROKERS.
--------------------------
The Primary Parties may elect to offer to pay fees on a per share basis to
securities brokers who assist purchasers of Conversion Stock in the Offerings.
25. EFFECTIVE DATE.
--------------
The effective date of the Conversion and Reorganization shall be the date
upon which the last of the following actions occurs: (i) the filing of Articles
of Combination with the OTS with respect to the MHC Merger, (ii) the filing of
Articles of Combination with the OTS with respect to the Bank Merger and (iii)
the closing of the issuance of the shares of Conversion Stock in the Offerings.
The filing of Articles of Combination relating to the MHC Merger and the Bank
Merger and the closing of the issuance of shares of Conversion Stock in the
Offerings shall not occur until all requisite regulatory, Member and Stockholder
approvals have been obtained, all applicable waiting periods have expired and
sufficient subscriptions and orders for the Conversion Stock have been received.
It is intended that the closing of the MHC Merger, the Bank Merger and the sale
of shares of Conversion Stock in the Offerings shall occur consecutively and
substantially simultaneously.
25
<PAGE>
26. AMENDMENT OR TERMINATION OF THE PLAN.
------------------------------------
If deemed necessary or desirable by the Boards of Directors of the Primary
Parties, this Plan may be substantively amended, as a result of comments from
regulatory authorities or otherwise, at any time prior to the solicitation of
proxies from Members and Stockholders to vote on the Plan and at any time
thereafter with the concurrence of the OTS. Any amendment to this Plan made
after approval by the Members and Stockholders with the concurrence of the OTS
shall not necessitate further approval by the Members or Stockholders unless
otherwise required by the OTS. This Plan shall terminate if the sale of all
shares of Conversion Stock is not completed within 24 months from the date of
the Special Meeting. Prior to the earlier of the Special Meeting and the
Stockholders' Meeting, this Plan may be terminated by the Boards of Directors of
the Primary Parties without approval of the OTS; after the Special Meeting or
the Stockholders' Meeting, the Boards of Directors may terminate this Plan only
with the approval of the OTS.
27. INTERPRETATION OF THE PLAN.
--------------------------
All interpretations of this Plan and application of its provisions to
particular circumstances by a majority of each of the Boards of Directors of the
Primary Parties shall be final, subject to the authority of the OTS.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
26
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Plan to be executed by their
duly authorized officers as of this _____ day of February, 1997.
CF MUTUAL HOLDINGS
Attest: ___________________ By:__________________________________________
Gary D. Dorminey
Secretary President and Chief Executive Officer
CARROLLTON FEDERAL BANK
Attest: ___________________ By: _________________________________________
Gary D. Dorminey
Secretary President and Chief Executive Officer
COMMUNITY FIRST BANKING COMPANY
Attest: ___________________ By: _________________________________________
Gary D. Dorminey
Secretary President and Chief Executive Officer
27
<PAGE>
ANNEX A AND ANNEX B
TO BE FILED BY AMENDMENT
28
<PAGE>
AMENDMENT NO. 1
TO
PLAN OF CONVERSION
OF
CF MUTUAL HOLDINGS
AND
AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
COMMUNITY FIRST BANKING COMPANY
AND
CARROLLTON FEDERAL BANK, FSB
THIS AMENDMENT NO. 1 to the Plan of Conversion of CF Mutual Holdings and
Agreement and Plan of Reorganization between Community First Banking Company and
Carrollton Federal Bank, FSB (the "Amendment") is made and entered into as of
this 2nd day of May, 1997.
WHEREAS, the parties have entered into a Plan of Conversion and Agreement
and Plan of Reorganization dated February 11, 1996 (the "Plan of Conversion")
pursuant to which CF Mutual Holdings will convert to a stock corporation;
WHEREAS, the parties now desire to amend the Plan of Conversion;
NOW, THEREFORE, the Plan of Conversion is hereby amended as follows:
The purchase limitation of $375,000 of Conversion Stock contained in
Section 5, "Subscription Rights of Eligible Account Holders;" Section 7,
"Subscription Rights of Supplemental Account Holders; Section 8, "Subscription
Rights of Other Members;" and Section 9, "Community Offering, Syndicated
Community Offering and Other Offerings" is hereby deleted, and the purchase
limitation of $482,700 of Conversion Stock is hereby inserted in its place in
said sections.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as a document under seal by their duly authorized officers as of the
day and year first written above.
CF MUTUAL HOLDINGS
Attest: /s/_____________________ By: /s/ _________________________________
Gary D. Dorminey
Secretary President and Chief Executive Officer
CARROLLTON FEDERAL BANK, FSB
Attest: /s/_____________________ By: /s/ _________________________________
Gary D. Dorminey
Secretary President and Chief Executive Officer
COMMUNITY FIRST BANKING COMPANY
Attest: /s/_____________________ By: /s/ _________________________________
Gary D. Dorminey
Secretary President and Chief Executive Officer
-2-
<PAGE>
[LOGO OF CFB APPEARS COMMON STOCK
HERE] PAR VALUE $0.01
-----NUMBER----- -----SHARES----
CUSIP
SEE REVERSE FOR
CERTAIN DEFINITIONS
INCORPORATED UNDER THE LAWS OF THE STATE OF GEORGIA
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES, OF THE PAR VALUE OF ONE CENT ($0.01)
EACH, OF COMMON STOCK OF
COMMUNITY FIRST BANKING COMPANY
a corporation organized under the laws of the State of Georgia, transferable on
the books of the Corporation by the holder hereof in person or by duly
authorized attorney upon surrender of this Certificate properly endorsed. This
Certificate and the shares represented hereby are subject to all the terms,
conditions and limitations of the Articles of Incorporation of the Corporation
and amendments thereto. This Certificate is not valid unless countersigned by
the Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
/s/ Gary D. Dorminey
PRESIDENT
COUNTERSIGNED AND REGISTERED:
REGISTRAR AND TRANSFER COMPANY
TRANSFER AGENT AND REGISTRAR
By
/s/ D. Lau Poston
AUTHORIZED SIGNATURE SECRETARY
<PAGE>
POWELL, GOLDSTEIN, FRAZER & MURPHY LLP
191 PEACHTREE STREET, N.E.
SIXTEENTH FLOOR
ATLANTA, GEORGIA 30303
(404) 572-6600
April __, 1997
Community First Banking Company
110 Dixie Street
Carrollton, Georgia 30117
RE: REGISTRATION OF 2,413,562 SHARES OF COMMON STOCK;
REGISTRATION STATEMENT ON FORM S-1
-----------------------------------
Ladies and Gentlemen:
We have acted as counsel to Community First Banking Company, a Georgia
corporation (the "Company") in connection with the registration under the
Securities Act of 1933, as amended, pursuant to the Company's Registration
Statement on Form S-1 (the "Registration Statement"), of up to 2,413,562 shares
of common stock, $.01 par value ("Common Stock"), of the Company (the "Shares").
In this capacity, we have examined the Registration Statement in the form
filed by the Company with the Securities and Exchange Commission (the
"Commission") on March 17, 1997 1997, as amended by Pre-Effective Amendment No.
1 thereto, which is to be filed with the Commission on the date hereof, and the
proposed form of Sales Agency Agreement among the Company, Carrollton Federal
Bank, CF Mutual Holdings and Trident Securities, Inc. (the "Sales Agency
Agreement") to be used in effecting the sale of the Shares, and originals or
copies, certified or otherwise identified to our satisfaction, of such corporate
records, agreements, documents and other instruments of the Company relating to
the authorization and issuance of the Shares and such other matters as we have
deemed relevant and necessary as a basis for the opinion hereinafter set forth.
In conducting our examination, we have assumed the genuineness of all
signatures, the legal capacity of all natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such documents.
Based upon the foregoing, and in reliance thereon, and subject to the
limitations and qualifications set forth herein, we are of the opinion that the
Shares, when issued and delivered against payment therefor in accordance with
the terms of the Sales Agency Agreement, will be legally and validly issued,
fully paid and non-assessable.
<PAGE>
We hereby consent to the use of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to our firm under the heading "Legal
Matters" in the Prospectus which is a part of the Registration Statement.
Very truly yours,
/s/ POWELL, GOLDSTEIN, FRAZER & MURPHY LLP
<PAGE>
May 2, 1997
CF Mutual Holdings
110 Dixie Street
Carrollton, Georgia 30117
Carrollton Federal Bank, FSB
110 Dixie Street
Carrollton, Georgia 30117
Community First Banking Company
110 Dixie Street
Carrollton, Georgia 30117
Ladies and Gentlemen:
You have requested our opinion as required pursuant to Section 22 of that
certain Plan of Conversion of CF Mutual Holdings and Agreement and Plan of
Reorganization between Community First Banking Company and Carrollton Federal
Bank (the "Plan of Conversion") dated February 11, 1997, as thereafter amended,
with respect to certain federal income tax consequences under the Internal
Revenue Code of 1986, as amended (the "Code") and certain State of Georgia
income tax consequences relating to the conversion of CF Mutual Holdings
("Mutual Holding Company"), a federally chartered mutual holding company into an
interim federal stock savings bank, and the merger (the "MHC Merger") of Mutual
Holding Company with and into Carrollton Federal Savings Bank (the "Bank"); the
formation of Community First Banking Company (the "Holding Company") as a
wholly-owned subsidiary of the Bank and the formation of an interim savings bank
("Interim") as a wholly-owned subsidiary of the Holding Company; and the merger
(the "Interim Merger") of Interim with and into the Bank, with the Bank as the
surviving entity.
In rendering the opinions expressed below, we have reviewed and relied on
the Plan of Conversion, the Form S-1 Registration Statement filed with the
Securities and Exchange Commission on March 17, 1997 (the "S-1"), the
certificates attached hereto, and such other documents as we have considered
appropriate (the "Documents"). Unless otherwise indicated, terms used in this
opinion have the same meaning as in the Plan of Conversion.
<PAGE>
CF Mutual Holdings
Carrollton Federal Bank, FSB
Community First Banking Company
May 2, 1997
Page 2
For purposes of this opinion, we have assumed that the MHC Merger and the
Interim Merger will be consummated pursuant to the terms and conditions set
forth in the Plan of Conversion. We have assumed that there is no plan or
intention on the part of the Members of the Mutual Holding Company to sell,
exchange or otherwise dispose of the interests in the liquidation account
established by the Bank (the "Liquidation Account Interests") that would reduce
the Member's ownership of Liquidation Account Interests to a value of less than
fifty percent (50%) of the value of all the Members' equity interests in the
Mutual Holding Company (the "Ownership Interests").
In addition, we have assumed with your permission that the facts and
representations certified to us in writing by the Bank and the Mutual Holding
Company which are set forth in the certificates attached hereto, apply as of the
effective time of the Conversion and Reorganization (the "Effective Time").
Copies of such certificates are attached hereto and incorporated herein by this
reference. We have assumed, without any independent investigation or
verification of any kind, that all the information as to factual matters
contained in the Documents is true, correct, and complete. Any inaccuracy with
respect to factual matters contained in the Documents could alter the conclusion
reached in this opinion.
In addition, for purposes of rendering the opinions expressed below, we
have assumed with your permission, that (i) all signatures on all Documents
reviewed by us are genuine, (ii) all Documents submitted to us as originals are
true and correct, (iii) all Documents submitted to us as copies are true and
correct copies of the originals thereof, (iv) each person signing any Document
reviewed by us had the legal capacity to do so, and (v) the transactions
contemplated in the Plan of Conversion will be effected in accordance with the
terms thereof.
Based on the foregoing and subject to the assumptions and qualifications
set forth in this letter, it is our opinion that for federal and State of
Georgia income tax purposes:
a. The MHC Merger will qualify as a reorganization pursuant to Section
368(a)(1)(A) of the Code;
b. No gain or loss will be recognized by the Mutual Holding Company or
the Bank as a consequence of the MHC Merger (except for deferred gain
or loss recognized pursuant to Section 1502 of the Code in the event
that the Mutual Holding Company consolidated group is not considered
to survive as a result of the Plan of Conversion and the resulting
Holding Company Group does not elect to file a consolidated return for
federal income tax purposes);
<PAGE>
CF Mutual Holdings
Carrollton Federal Bank, FSB
Community First Banking Company
May 2, 1997
Page 3
c. The Interim Merger will be disregarded for federal income tax
purposes and will be treated as the transfer of an amount of proceeds
received in the Offerings by the Holding Company to the Bank in
exchange for Bank Common Stock;
d. No gain or loss will be recognized by the Bank upon receipt of the
Contributed Offering Proceeds in exchange for Bank Common Stock.
e. No gain or loss will be recognized by Holding Company upon receipt of
the Offering Proceeds in exchange for Holding Company Common Stock.
This opinion is based on the Code, treasury regulations, Internal Revenue
Service rulings, judicial decisions, and other applicable authority, all as in
effect on the date of this opinion. The legal authorities on which this opinion
is based may change at any time. Any such change may be applied retroactively
and could modify the opinion expressed herein. This opinion does not address
any tax considerations under foreign, state (other than the State of Georgia),
we are giving a State of Georgia opinion for local laws.
This opinion is being rendered only to the parties to whom it is addressed,
and is solely for their benefit. No other person shall be entitled to rely on
this opinion without our prior express written consent. This opinion may not be
used, circulated, quoted, published, or otherwise referred to for any purpose
without our prior express written consent. Our opinion is limited to the
matters stated herein, and no opinion is implied or may be inferred beyond the
opinions expressly stated herein. We hereby consent to the reference to our
Firm in, and to the filing of this opinion as, an exhibit to the S-1.
Very truly yours,
POWELL, GOLDSTEIN, FRAZER & MURPHY LLP
<PAGE>
EXHIBIT 10.5.B
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 1st day of June, 1997, between Carrollton
Federal Bank, FSB (the "Bank"), a federal savings bank chartered by the United
States, and Community First Banking Company (the "Company"), the holding company
of the Bank (the Bank and the Company collectively, the "Employer"), and GARY D.
DORMINEY, a resident of the State of Georgia (the "Employee").
RECITALS:
The Employer desires to employ the Employee as the President and Chief
Executive Officer of the Employer and the Employee desires to accept such
employment.
In consideration of the above premises and the mutual agreements
hereinafter set forth, the parties hereby agree as follows:
1. DEFINITIONS. Whenever used in this Agreement, the following terms and their
-----------
variant forms will have the meaning set forth below:
1.1 "Agreement" means this Agreement and any exhibits incorporated herein
---------
together with any amendments hereto made in the manner described in this
Agreement.
1.2 "Affiliate" means any business entity which controls the Employer, is
---------
controlled by or is under common control with the Employer.
1.3 "Area" means the geographic area within a radius of 20 miles of any
----
office or facility maintained by the Employer. It is the express intent of the
parties that the Area as defined herein is the area where the Employee performs
or performed services on behalf of the Employer under this Agreement as of, or
within a reasonable time prior to, the termination of the Employee's employment
hereunder.
1.4 "Board" means the board of directors of the Bank.
-----
1.5 "Business of the Employer" means the business conducted by the Employer,
------------------------
which is community banking.
1.6 "Cause" means, any of the following events or conduct preceding a
-----
termination of employment initiated by the Employer:
(a) any act that constitutes, on the part of the Employee, fraud,
dishonesty, bad faith or a felony toward the Employer;
(b) the conviction of the Employee of a felony or crime involving
moral turpitude;
<PAGE>
(c) the Employee's entering into any transaction or contractual
relationship with, or diversion of business opportunity from, the
Employer (other than on behalf of the Employer or with the prior written
consent of the Board); provided, however, that in the case of this Clause
(c), such conduct will not constitute Cause unless the Board delivers to
the Employee notice setting forth (1) the conduct deemed to qualify as
Cause, (2) reasonable remedial action that might remedy such objection,
and (3) a reasonable time (not less than thirty (30) days) within which
the Employee may take such remedial action, and the Employee has not
taken the specified remedial action with the specified reasonable time;
(d) the Employee breaches the covenants contained in Sections 6, 7 or
8 hereof;
(e) conduct by the Employee that results in removal from the
Employee's position as an officer or employee of the Employer pursuant to
a written order by any regulatory agency with authority or jurisdiction
over the Employer; or
(f) immoderate use or addiction to alcohol or any controlled substance
to the visible and perceptive detriment to the performance of the
Employee's duties, responsibilities and representation of the Bank in the
community or the failure of the Employee to act in a moral and upright
manner consistent with generally accepted standards applicable to other
persons in Carroll County, Georgia, occupying similar positions of
employment; provided, however, that in the case of this Clause (f), such
conduct will not constitute Cause unless the Board delivers to the
Employee notice setting forth (1) the conduct deemed to qualify as Cause,
(2) reasonable remedial action that might remedy such objection, and (3)
a reasonable time (not less than thirty (30) days) within which the
Employee may take such remedial action, and the Employee has not taken
the specified remedial action with the specified reasonable time.
1.7 "Company Information" means Confidential Information and Trade Secrets.
-------------------
1.8 "Confidential Information" means data and information relating to the
------------------------
business of the Employer (which does not rise to the status of a Trade Secret)
which is or has been disclosed to the Employee or of which the Employee became
aware as a consequence of or through the Employee's relationship to the Employer
and which has value to the Employer and is not generally known to its
competitors. Confidential Information does not include any data or information
that has been voluntarily disclosed to the public by the Employer (except where
such public disclosure has been made by the Employee without authorization) or
that has been independently developed and disclosed by others, or that otherwise
enters the public domain through lawful means.
1.9 "Change in Control" means any one of the following events first to occur
-----------------
after the completion of the initial public offering of the common stock of the
Company:
(a) the acquisition by any person or persons acting in concert of the
then outstanding voting securities of either the Bank or the Company, if,
after the transaction, the acquiring
-2-
<PAGE>
person (or persons) owns, controls or holds with power to vote twenty-five
percent (25%) or more of any class of voting securities of the Bank or the
Company, as the case may be, or such other transaction as may be described
under 12 C.F.R. Section 225.41(b)(1) or any successor thereto;
(b) within any twelve-month period (beginning on or after the Effective
Date) the persons who were directors of either the Bank or the Company
immediately before the beginning of such twelve-month period (the "Incumbent
Directors") cease to constitute at least a majority of such board of
directors; provided that any director who was not a director as of the
Effective Date will be deemed to be an Incumbent Director if that director
was elected to such board of directors by, or on the recommendation of or
with the approval of, at least two-thirds of the directors who then qualified
as Incumbent Directors; and provided further that no director whose initial
assumption of office is in connection with an actual or threatened election
contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Securities Exchange Act of 1934) relating to the election of
directors will be deemed to be an Incumbent Director;
(c) the approval by the stockholders of either the Bank or the Company of
a reorganization, merger or consolidation, with respect to which persons who
were the stockholders of either the Bank or the Company, as the case may be,
immediately prior to such reorganization, merger or consolidation do not,
immediately thereafter, own more than fifty percent (50%) of the combined
voting power entitled to vote in the election of directors of the
reorganized, merged or consolidated company's then outstanding voting
securities; or
(d) the sale, transfer or assignment of all or substantially all of the
assets of the Company or the Bank to any third party.
1.10 "Effective Date" means June 1, 1997.
--------------
1.11 "Good Reason" means, any of the following events or conduct preceding a
-----------
termination of employment initiated by the Employee:
(a) a material diminution in the powers, responsibilities or duties of
the Employee hereunder;
(b) the failure of the Board to elect the Employee as the President and
Chief Executive Officer of the Bank and the Company;
(c) a material breach of the terms of this Agreement by the Employer; or
(d) the failure of the Board to nominate the Employee for re-election
following expiration of each of the Employee's terms of service on the Board
that arises during the Term (as defined below).
-3-
<PAGE>
provided, however, that no termination of employment which is triggered by any
conduct or event described in this Section 1.11 shall not constitute a
termination of employment for Good Reason unless the Employee has first provided
the Employer with the opportunity to cure the event or conduct by giving the
Employer a written notice describing in sufficient detail the Employee's belief
that a Good Reason exists and the Employee defers resigning until the expiration
of a thirty (30) day cure period, beginning with the date such notice is
received by the Employer.
1.12 "Permanent Disability" means the total inability of the Employee to
--------------------
perform the Employee's duties under this Agreement for a period of ninety (90)
consecutive days as certified by a physician chosen by the Employer and
reasonably acceptable to the Employee.
1.13 "Trade Secrets" means information including, but not limited to,
-------------
technical or nontechnical data, formulas, patterns, compilations, programs,
devices, methods, techniques, drawings, processes, financial data, financial
plans, product plans or lists of actual or potential customers or suppliers
which:
(a) derives economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by, other
persons who can obtain economic value from its disclosure or use; and
(b) is the subject of efforts that are reasonable under the circumstances
to maintain its secrecy.
2. DUTIES.
------
2.1 The Employee is employed as the President and Chief Executive Officer of
the Bank and the Company, subject to the direction of the Board or its designee,
must perform and discharge well and faithfully the duties which may be assigned
to him from time to time by the Employer in connection with the conduct of its
business. The duties and responsibilities of the Employee are set forth on
Exhibit A attached hereto.
- ---------
2.2 In addition to the duties and responsibilities specifically assigned to
the Employee pursuant to Section 2.1 hereof, the Employee must:
(a) devote substantially all of the Employee's time, energy and skill
during regular business hours to the performance of the duties of the
Employee's employment (reasonable vacations and reasonable absences due to
illness excepted) and faithfully and industriously perform such duties;
(b) diligently follow and implement all management policies and decisions
communicated to him by the Board; and
(c) timely prepare and forward to the Board all reports and accounting as
may be requested of the Employee.
-4-
<PAGE>
2.3 Without the approval of the Board, the Employee must devote the
Employee's entire business time, attention and energies to the Business of the
Employer and must not during the term of this Agreement be engaged (whether or
not during normal business hours) in any other business or professional
activity, whether or not such activity is pursued for gain, profit or other
pecuniary advantage; but this will not be construed as preventing the Employee
from:
(a) investing the Employee's personal assets in businesses which are not
in competition with the Business of the Employer and which will not require
any services on the part of the Employee in their operation or affairs and in
which the Employee's participation is solely that of an investor;
(b) purchasing securities in any corporation whose securities are
regularly traded provided that such purchase will not result in him
collectively owning beneficially at any time five percent (5%) or more of the
equity securities of any business in competition with the Business of the
Employer; and
(c) participating in civic and professional affairs and organizations and
conferences, preparing or publishing papers or books or teaching so long as
the Board approves of such activities prior to the Employee's engaging in
them.
2.4 Directorship. Employee will also be appointed to and serve as a member
------------
of the Board of Directors of the Bank.
3. TERM AND TERMINATION.
--------------------
3.1 Term. The term of this Agreement will initially be set at three (3) years
----
and will automatically renew each day after the date hereof so that the term
remains a three (3) year term; provided, however, that the automatic renewals as
set forth above will be terminated by either party giving written notice to the
other party of such termination, in which event the term will end on the third
anniversary of the thirtieth (30th) day following the date the written notice is
received (as so calculated, the "Term").
3.2 Termination. The employment of the Employee under this Agreement may be
-----------
terminated prior to the expiration of the Term only as follows, subject to the
conditions set forth below:
3.2.1 By the Employer:
(a) for Cause at any time, upon written notice to the Employee, in
which event the Employer will have no further obligation to the Employee
except for the payment of any amounts due and owing under Section 4 on
the effective date of the termination; or
(b) without Cause or upon the Permanent Disability of Employee at any
time, provided that the Employer gives the Employee sixty (60) days'
prior written notice of
-5-
<PAGE>
its intent to terminate, in which event the Employer will be required to
make the termination payments under Section 3.7.
3.2.2 By the Employee:
(a) for Good Reason at any time, in which event the Employer will be
required to make the termination payments under Section 3.7; or
(b) without Good Reason or upon the Permanent Disability of the
Employee, provided that the Employee gives the Employer sixty (60) days'
prior written notice of the Employee's intent to terminate, in which
event the Employer will have no further obligation to the Employee except
future payment of any amounts due and owing under Section 4 on the
effective date of the termination.
3.2.3 By the Employee within six (6) months following a Change in
Control; provided that the Employee gives at least thirty (30) days' prior
written notice to the Employer of the Employee's intention to terminate this
Agreement with such resignation to be effective immediately, in which event
the Employer will be required to make a termination payment under Section
3.7.
3.2.4 At any time upon mutual, written agreement of the parties, in
which event the Employer will have no further obligation to the Employee
except for the payment of any amounts due and owing under Section 4 on the
effective date of termination unless otherwise set forth in the written
agreement.
3.2.5 Immediately upon the Employee's death, in which event the Employer
will have no further obligation to the Employee except for the payment of any
amounts due and owing under Section 4 on the effective date of termination.
3.3 Effect of Termination. Termination of the employment of the Employee
---------------------
pursuant to Section 3.2 will be without prejudice to any right or claim which
may have previously accrued to either the Employer or the Employee hereunder and
will not terminate, alter, supersede or otherwise affect the terms and covenants
and the rights and duties prescribed in this Agreement.
3.4 Suspension With Pay. Nothing contained herein will preclude the Employer
-------------------
from releasing the Employee of the Employee's normal duties and suspending
Employee, with pay, during the pendency of any investigation or examination to
determine whether or not Cause exists for termination of employee.
3.5 Suspension Without Pay. If Employee is suspended and/or temporarily
----------------------
prohibited from participating in the conduct of the Employer's affairs by a
notice served under Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance
Act, the Employer's obligations under this Agreement will be suspended as of the
date of service thereof, unless stayed by appropriate proceedings. If the
charges in such notice are dismissed, the Employer may in its discretion:
-6-
<PAGE>
(a) pay Employee all or part of the compensation withheld while its
contract obligations were suspended; and/or
(b) reinstate (in whole or in part) any of its obligations which were
suspended.
3.6 Other Regulatory Requirements. If the Bank is in default, as defined in
-----------------------------
Section (3)(x)(1) of the Federal Deposit Insurance Act, all obligations under
this Agreement will terminate as the date of such default, but no vested rights
of the Employee will be affected. Further, all obligations under this Agreement
will be terminated, except to the extent determined that continuation of the
Agreement is necessary for the continued operation of the Bank:
(a) by the Director of the Office of Thrift Supervision (the "Director")
or his or her designee, at the time the FDIC enters into an agreement to
provide assistance to or on behalf of the Bank under the authority of the
Federal Deposit Insurance Act; or
(b) by the Director or his or her designee, at the time the Director or
his or her designee approves a supervisory merger to resolve problems
relating to the operation of the Bank or when the Bank is determined by the
Director to be in an unsafe or unsound condition.
Any rights of an Employee already accrued under this Agreement, however, will
not be affected by such action.
3.7 Termination Payments. In the event this Agreement is terminated by the
--------------------
Employer pursuant to Section 3.2.1(b) or by the Employee pursuant to Sections
3.2.2(a) or 3.2.3, then commencing with the first payroll date immediately
following the effective date of such termination, the Employer will pay to the
Employee as severance pay and liquidated damages an amount equal to the Average
Monthly Compensation (as defined below) for a period equal to the remaining
Term. Any amounts payable pursuant to this Section 3.7 will be paid at the same
frequency as the Employee's then Base Salary (as defined in Section 4.1(a)) is
paid. As used herein, the term "Average Monthly Compensation" means the
quotient determined by dividing (a) the greater of (1) the Employee's then
current Base Salary, or (2) the average of Base Salary and incentive bonus as
described in Section 4.1(b) with respect to the most recent three (3)
consecutive twelve-month periods during which the Employee was employed by the
Employer (or if the Employer has been employed for fewer periods, such lesser
number of periods) immediately prior to the effective date of the Agreement's
termination that produced the highest average, by (b) twelve (12).
Notwithstanding any other provisions to this Agreement to the contrary, if
the aggregate of the payments provided for in this Agreement and other payments
and benefits which the Employee has the right to receive from the Employer (the
"Total Payments") would constitute a "parachute payment", as defined in Section
280G(b)(2) of the Internal Revenue Code, the Employee shall receive the Total
Payments unless (a) the after-tax amount that would be retained by the Employee
(after taking into account all federal, state and local income taxes payable by
the Employee and the amount of any excise taxes payable by the Employee under
Section 4999 of the Internal Revenue Code that would be payable by the Employee
(the "Excise Taxes")) if the Employee were to receive
-7-
<PAGE>
the Total Payments has a lesser aggregate value than (b) the after-tax amount
that would be retained by the Employee (after taking into account all federal,
state and local income taxes payable by the Employee) if the Employee were to
receive the Total Payments reduced to the largest amount as would result in no
portion of the Total Payments being subject to Excise Taxes (the "Reduced
Payments"), in which case the Employee shall be entitled only to the Reduced
Payments. If the Employee is to receive the Reduced Payments, the Employee
shall be entitled to determine which of the Total Payments, and the relative
portions of each, are to be reduced.
4. COMPENSATION AND BENEFITS.
-------------------------
4.1 Compensation. The Employee will receive the following salary and
------------
benefits:
(a) Base Salary. During the Term, the Employee will receive a base
-----------
salary at the rate of $165,000 per annum, payable in substantially equal
installments in accordance with the Bank's regular payroll practices ("Base
Salary"). The Employee's Base Salary will be reviewed by the Board annually,
and the Employee will be entitled to receive annually an increase in such
amount, if any, as may be determined by the Board.
(b) Incentive Compensation.
----------------------
(i) In addition to Employee's Base Salary under Section 4.1(a), within
ninety (90) days following the end of each fiscal year of the Employer's
operations, the Employer will pay the Employee a bonus as determined each
year by the Compensation Committee of the Board provided certain
performance criteria (to be determined annually by the Board) are
satisfied.
(ii) The Employee will also be entitled to participate in such other
bonus, incentive and other executive compensation programs as are made
available to senior management of the Employer from time to time.
The bonus amounts which may be payable to the Employee pursuant to this
Section 4.1(b) is referred to herein as "Incentive Compensation".
4.2 Compensation as a Director. The Employee will be compensated for
--------------------------
attendance at regular and special Board meetings at the rate established for
Board members. No additional compensation will be paid to Employee for
attendance at executive committee meetings in the Employee's capacity as
director.
4.3 Automobile. The Bank will make available to the Employee a good, up-to-
----------
date and serviceable automobile to be utilized by Employee for business and
personal uses as is customary for heads of financial institutions in the Area.
4.4 Business Expenses; Memberships. The Employer specifically agrees to
------------------------------
reimburse the Employee for (a) reasonable business (including travel) expenses
incurred by the Employee in the
-8-
<PAGE>
performance of the Employee's duties hereunder, as approved from time to time by
the Board, and (b) the dues and business related expenditures, including
initiation fees, associated with membership in a country club and in
professional associations which are commensurate with the Employee's position;
provided, however, that the Employee must, as a condition of reimbursement,
submit verification of the nature and amount of such expenses in accordance with
reimbursement policies from time to time adopted by the Employer and in
sufficient detail to comply with rules and regulations promulgated by the
Internal Revenue Service.
4.5 Vacation. On a non-cumulative basis the Employee will be entitled to
--------
vacation in each year of this Agreement in accordance with the Bank's vacation
policy as then in effect, during which the Employee's Base Salary will be paid
in full.
4.6 Benefits. In addition to the Base Salary and Incentive Compensation, the
--------
Employee will be entitled to such benefits as may be available from time to time
for executives of the Employer similarly situated to the Employee. All such
benefits will be awarded and administered in accordance with the Employer's
standard policies and practices. Such benefits may include, by way of example
only, profit-sharing plans, retirement, life and disability insurance benefits
and such other benefits as the Employer deems appropriate.
4.7 Withholding. The Employer may deduct from each payment of compensation
-----------
hereunder all amounts required to be deducted and withheld in accordance with
applicable federal and state income, FICA and other withholding requirements.
5. COMPANY INFORMATION.
-------------------
5.1 Ownership of Information. All Company Information received or developed
------------------------
by the Employee while employed by the Employer will remain the sole and
exclusive property of the Employer.
5.2 Obligations of the Employee. The Employee agrees (a) to hold Company
---------------------------
Information in strictest confidence, and (b) not to use, duplicate, reproduce,
distribute, disclose or otherwise disseminate Company Information or any
physical embodiments thereof and may in no event take any action causing or fail
to take any action necessary in order to prevent any Company Information from
losing its character or ceasing to qualify as Confidential Information or a
Trade Secret. In the event that the Employee is required by law to disclose any
Company Information, the Employee will not make such disclosure unless (and then
only to the extent that) the Employee has been advised by independent legal
counsel that such disclosure is required by law and then only after prior
written notice is given to the Employer when the Employee becomes aware that
such disclosure has been requested and is required by law. This Section 5 will
survive the termination of this Agreement with respect to Confidential
Information for so long as it remains Confidential Information, but for no
longer than three (3) years following termination of this Agreement, and this
Section 5 will survive termination of this Agreement with respect to Trade
Secrets for so long as is permitted by the then-current Georgia Trade Secrets
Act of 1990, O.C.G.A. (S)(S) 10-1-760-10-1-767.
-9-
<PAGE>
5.3 Delivery upon Request or Termination. Upon request by the Employer, and
------------------------------------
in any event upon termination of employment with the Employer, the Employee will
promptly deliver to the Employer all property belonging to the Employer,
including without limitation all Company Information then in the Employee's
possession or control.
6. NON-COMPETITION. The Employee agrees that during the Term hereunder and, in
---------------
the event of the Employee's termination of employment for any reason, thereafter
for a period equal to the greater of (a) twelve (12) months; or (b) the period
during which the Employee is to be paid monthly termination payments, if any, in
accordance with Section 3.7 hereof, the Employee will not (except on behalf of
or with the prior written consent of the Employer), within the Area, either
directly or indirectly, on the Employee's own behalf or in the service or on
behalf of others, as a principal, partner, officer, director, manager,
supervisor, administrator, consultant, executive employee or in any other
capacity which involves duties and responsibilities similar to those undertaken
for the Employer, engage in any business which is the same as or essentially the
same as the Business of the Employer.
7. NON-SOLICITATION OF CUSTOMERS. The Employee agrees that during the Term
-----------------------------
hereunder and, in the event of the Employee's termination of employment for any
reason, thereafter for a period equal to the greater of (a) twelve (12) months;
or (b) the period during which the Employee is to be paid monthly termination
payments, if any, in accordance with Section 3.7 hereof, the Employee will not
(except on behalf of or with the prior written consent of the Employer), within
the Area, on the Employee's own behalf or in the service or on behalf of others,
solicit, divert or appropriate or attempt to solicit, divert or appropriate,
directly or by assisting others, any business from any of the Employer's
customers, including actively sought prospective customers, with whom the
Employee has or had material contact during the last two (2) years of the
Employee's employment, for purposes of providing products or services that are
competitive with those provided by the Employer.
8. NON-SOLICITATION OF EMPLOYEES. The Employee agrees that during the Term
-----------------------------
hereunder and, in the event of the Employee's termination of employment for any
reason, thereafter for a period equal to the greater of (a) twelve (12) months;
or (b) the period during which the Employee is to be paid monthly termination
payments, if any, in accordance with Section 3.7 hereof, the Employee will not,
within the Area, on the Employee's own behalf or in the service or on behalf of
others, solicit, recruit or hire away or attempt to solicit, recruit or hire
away, directly or by assisting others, any employee of the Employer or its
Affiliates, whether or not such employee is a full-time employee or a temporary
employee of the Employer or its Affiliates and whether or not such employment is
pursuant to written agreement and whether or not such employment is for a
determined period or is at will.
9. REMEDIES. The Employee agrees that the covenants contained in Sections 5
--------
through 8 of this Agreement are of the essence of this Agreement; that each of
the covenants is reasonable and necessary to protect the business, interests and
properties of the Employer; and that irreparable loss and damage will be
suffered by the Employer should the Employee breach any of the covenants.
Therefore, the Employee agrees and consents that, in addition to all the
remedies provided by law or in equity, the Employer will be entitled to a
temporary restraining order and temporary and
-10-
<PAGE>
permanent injunctions to prevent a breach or contemplated breach of any of the
covenants. The Employer and the Employee agree that all remedies available to
the Employer or the Employee, as applicable, will be cumulative.
10. SEVERABILITY. The parties agree that each of the provisions included in
------------
this Agreement is separate, distinct and severable from the other provisions of
this Agreement and that the invalidity or unenforceability of any Agreement
provision will not affect the validity or enforceability of any other provision
of this Agreement. Further, if any provision of this Agreement is ruled invalid
or unenforceable by a court of competent jurisdiction because of a conflict
between the provision and any applicable law or public policy, the provision
will be redrawn to make the provision consistent with and valid and enforceable
under the law or public policy.
11. NO SET-OFF BY THE EMPLOYEE. The existence of any claim, demand, action or
--------------------------
cause of action by the Employee against the Employer, or any Affiliate of the
Employer, whether predicated upon this Agreement or otherwise, will not
constitute a defense to the enforcement by the Employer of any of its rights
hereunder.
12. NOTICE. All notices and other communications required or permitted under
------
this Agreement will be in writing and, if mailed by prepaid first-class mail or
certified mail, return receipt requested, will be deemed to have been received
on the earlier of the date shown on the receipt or three (3) business days after
the postmarked date thereof. In addition, notices hereunder may be delivered by
hand, facsimile transmission or overnight courier, in which event the notice
will be deemed effective when delivered or transmitted. All notices and other
communications under this Agreement must be given to the parties hereto at the
following addresses:
(i) If to the Employer, to it at:
110 Dixie Street
P.O. Box 250
Carrollton, Georgia 30197-0250
Attn: Chairman, Compensation Committee
(ii) If to the Employee, to the Employee at:
103 Briarwood Drive
Carrollton, Georgia 30117
13. ASSIGNMENT. Neither party hereto may assign or delegate this Agreement or
----------
any of its rights and obligations hereunder without the written consent of the
other party hereto.
14. WAIVER. A waiver by the Employer of any breach of this Agreement by the
------
Employee will not be effective unless in writing, and no waiver will operate or
be construed as a waiver of the same or another breach on a subsequent occasion.
-11-
<PAGE>
15. ARBITRATION. Any controversy or claim arising out of or relating to this
-----------
Agreement, or the breach thereof, will be settled by binding arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. The decision of the arbitration panel will be final and binding on
the parties, and judgment upon the award rendered by the arbitration panel may
be entered by any court having jurisdiction thereof.
16. ATTORNEYS' FEES. In the event that the parties have complied with this
---------------
Agreement with respect to arbitration of disputes and litigation ensues between
the parties concerning the enforcement of an arbitration award and the Employee
must employ separate legal counsel, the Employer shall advance to the Employee,
within thirty (30) days after receiving copies of invoices submitted by
Employee, any and all reasonable attorneys' fees and expenses incurred with
preparing, investigating and litigating such action, proceeding or suit. The
Employee must reimburse the Employer for any and all advances that exceed the
first $5,000 advanced to the Employee for such legal expenses only if and to the
extent that a final decision by a court of competent jurisdiction has determined
that the Employee is not entitled to receive any amounts due or to enforce any
of the rights under this Agreement.
17. APPLICABLE LAW. This Agreement will be construed and enforced under and in
--------------
accordance with the laws of the State of Georgia. The parties agree that any
appropriate state court located in Carroll County, Georgia, will have
jurisdiction of any case or controversy arising under or in connection with this
Agreement and will be a proper forum in which to adjudicate such case or
controversy. The parties consent to the jurisdiction of such courts.
18. INTERPRETATION. Words importing the singular form shall include the plural
--------------
and vice versa. The terms "herein", "hereunder", "hereby", "hereto", "hereof"
and any similar terms refer to this Agreement. Any captions, titles or headings
preceding the text of any article, section or subsection herein are solely for
convenience of reference and will not constitute part of this Agreement or
affect its meaning, construction or effect.
19. ENTIRE AGREEMENT. Except for any rights the Employee may have under any
----------------
employee benefit plans maintained by the Employer for employees generally and
any rights the Employee may have under the Community First Banking Company 1997
Stock Option Plan and the Community First Banking Company Management Recognition
Plan, this Agreement embodies the entire and final agreement of the parties on
the subject matter stated in the Agreement. No amendment or modification of
this Agreement will be valid or binding upon the Employer or the Employee unless
made in writing and signed by both parties. All prior understandings and
agreements relating to the subject matter of this Agreement are hereby expressly
terminated.
20. RIGHTS OF THIRD PARTIES. Nothing herein expressed is intended to or will
-----------------------
be construed to confer upon or give to any person, firm or other entity, other
than the parties hereto and their permitted assigns, any rights or remedies
under or by reason of this Agreement.
-12-
<PAGE>
21. SURVIVAL. The obligations of the Employee pursuant to Sections 5, 6, 7, 8
--------
and 9 will survive the termination of the employment of the Employee hereunder
for the period designated under each of those respective sections.
22. JOINT AND SEVERAL. The obligation of the Bank and the Company to Employee
-----------------
hereunder will be joint and several.
IN WITNESS WHEREOF, the Employer and the Employee have executed and delivered
this Agreement as of the date first shown above.
THE EMPLOYER:
CARROLLTON FEDERAL BANK, FSB
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
COMMUNITY FIRST BANKING COMPANY
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
THE EMPLOYEE:
----------------------------------------
-13-
<PAGE>
Exhibit A
---------
CARROLLTON FEDERAL BANK
JOB DESCRIPTION
REVISED FIRST QUARTER, 1996
- -------------------------------------------------------------------------------
JOB TITLE: PRESIDENT/CHIEF EXECUTIVE OFFICER
JOB CODE: E001
JOB LEVEL: ADMINISTRATIVE
FSLA: EXEMPT
DEPARTMENT: EXECUTIVE
REPORTS TO: BOARD OF DIRECTORS
- -------------------------------------------------------------------------------
SUMMARY:
Plans, develops, and establishes policies and objectives of business
organization in accordance with Board directives and corporation charter by
performing the following duties personally or through subordinate managers.
ESSENTIAL DUTIES AND RESPONSIBILITIES: The primary duty and responsibility of
this position is quality service to both internal and external customers.
Specific duties are listed blow. Other duties may be assigned.
Confers with corporate managers to plan business objectives, to develop
organizational policies, to coordinate functions and operations between
divisions and departments, and to establish responsibilities and procedures for
attaining objectives.
Provides leadership representations for the bank and holding company board of
directors and its committees. Contributes to the effective, profitable
operation of the corporation by participation in Liquidity and Asset/Liability
Management, Loan Committee, Public Relations/Marketing Committee, and Asset
Review Committee activities.
Ensures that the spirit and intent of regulatory and supervisory trusts and
concerns are met or exceeded.
Keeps the Board informed concerning major developments and consults with same
regarding major decisions affecting the bank or holding company.
Represents the bank and provides leadership in key community activities,
including business, charitable, civic, and social organizations to maintain a
proper responsible citizen stature for the bank.
<PAGE>
Reviews activity reports and financial statements to determine progress and
status in attaining objectives and revises objectives and plans in accordance
with current conditions.
Directs and coordinates formulation of financial programs to provide funding for
new or continuing operations to maximize returns on investments and to increase
productivity.
Plans and develops labor and public relations policies designed to improve
company's image and relations with customers, employees, and the public.
Evaluates performance of executives for compliance with established policies and
objectives of bank.
SUPERVISORY RESPONSIBILITY:
Manages subordinate supervisors in the Lending/Deposit function, Finance and
Operations function, Human Resources, and Quality Services and Sales function.
Also, responsible for the direct supervision of the Corporate Secretary. Is
responsible for the overall direction, coordination, and evaluation of these
units.
Provides direct guidance on personnel activities which affect the key bank
management team, including salary administration, management incentive,
performance objectives, and compliance with established policies to ensure solid
team efforts toward the attainment of department, bank, and corporation goals.
Carries out supervisory responsibilities in accordance with the organization's
policies and applicable laws. Responsibilities include interviewing, hiring,
and training employees; planning, assigning, and directing work; appraising
performance; rewarding and disciplining employees; and addressing complaints and
resolving problems.
CRA REQUIREMENT:
Expected to understand the bank's obligations under the Community Reinvestment
Act and how to fulfill them. Expected to cooperate with and support the bank's
CRA program. Will be held accountable for any lack of cooperation that weakens
the bank's CRA performance, as reflected in internal audits, agency
examinations, and/or community projects.
PRODUCT AND KNOWLEDGE REQUIREMENT:
Should know and understand the products and services that are provided by
Carrollton Federal Bank and give quality service at all times to our customers.
QUALIFICATION REQUIREMENTS:
To perform this job successfully, an individual must be able to perform each
essential duty satisfactorily. The requirements listed below are representative
of the knowledge, skill, and/or
-2-
<PAGE>
ability required. Reasonable accommodations may be made to enable individuals
with disabilities to perform the essential functions.
EDUCATION AND/OR EXPERIENCE:
College graduate and graduate of recognized graduate banking school or
equivalent; ten years related experience and/or training; or equivalent
combination of education and experience.
LANGUAGE SKILLS:
Ability to read, analyze, and interpret common technical journals, financial
reports, and legal documents. Ability to respond to common inquiries or
complaints from customers, regulatory agencies, or members of the community.
A high level of interpersonal skills to effectively communicate policies,
procedures, staff objectives, and information to top management, public
groups, and/or boards of directors.
ANALYTICAL SKILLS:
A high level of analytical, mathematical and reasoning skills to assess and
evaluate the operation of subordinate areas of responsibility, participate in
establishing bank-wide financial goals, and draft operational reports to the
board.
PHYSICAL DEMANDS:
Reasonable accommodations may be made to enable individuals with disabilities to
perform the essential functions.
WORK ENVIRONMENT:
Good. There is little discomfort from noise, heat, dust, or other adverse
factors.
PERFORMANCE EXPECTATIONS:
ORGANIZATIONAL EXPECTATIONS:
Understands that the position exists to ultimately serve the customer either
directly or indirectly through assisting front-line personnel to answer
customer inquiries quickly.
Practices a high degree of professionalism and sets an example for others to
follow.
Demonstrates commitment to and understanding of continuous quality
improvement. Uses creativity and initiative to recommend quality
enhancements when relevant and appropriate.
Has satisfactory attendance within policy guidelines and is punctual.
-3-
<PAGE>
Manages time effectively. Completes assigned duties within required
deadlines.
FINANCIAL EXPECTATIONS:
Makes recommendations to the Board of Directors concerning budgetary needs of
the bank.
Within parameters of job, uses good judgment related to Bank income
opportunities and expense control.
Is financially responsible.
RELATIONSHIP EXPECTATIONS:
Conducts in-bank and public relationships in a manner that enhances the image
and marketing efforts of the Bank.
Participates in community organizations, activities, and projects.
Contributes to an overall team effort by being an effective team player.
This job description is not intended to be and should not be construed as an
all-inclusive list of the responsibilities, skills, or working conditions
associated with the position. While this job description is intended to
accurately reflect the position's activities and requirements, management
reserves the right to modify, add, or remove duties and assign other duties as
necessary.
-4-
<PAGE>
EXHIBIT 10.5.C
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 1st day of June, 1997, between Carrollton
Federal Bank, FSB (the "Bank"), a federal savings bank chartered by the United
States, and Community First Banking Company (the "Company"), the holding company
of the Bank (the Bank and the Company collectively, the "Employer"), and LANE
POSTON, a resident of the State of Georgia (the "Employee").
RECITALS:
The Employer desires to employ the Employee as the Chief Operating Officer
of the Employer and the Employee desires to accept such employment.
In consideration of the above premises and the mutual agreements
hereinafter set forth, the parties hereby agree as follows:
1. DEFINITIONS. Whenever used in this Agreement, the following terms and their
-----------
variant forms will have the meaning set forth below:
1.1 "Agreement" means this Agreement and any exhibits incorporated herein
---------
together with any amendments hereto made in the manner described in this
Agreement.
1.2 "Affiliate" means any business entity which controls the Employer, is
---------
controlled by or is under common control with the Employer.
1.3 "Area" means the geographic area within a radius of 20 miles of any
----
office or facility maintained by the Employer. It is the express intent of the
parties that the Area as defined herein is the area where the Employee performs
or performed services on behalf of the Employer under this Agreement as of, or
within a reasonable time prior to, the termination of the Employee's employment
hereunder.
1.4 "Board" means the board of directors of the Bank.
-----
1.5 "Business of the Employer" means the business conducted by the Employer,
------------------------
which is community banking.
1.6 "Cause" means, any of the following events or conduct preceding a
-----
termination of employment initiated by the Employer:
(a) any act that constitutes, on the part of the Employee, fraud,
dishonesty, bad faith or a felony toward the Employer;
(b) the conviction of the Employee of a felony or crime involving
moral turpitude;
<PAGE>
(c) the Employee's entering into any transaction or contractual
relationship with, or diversion of business opportunity from, the
Employer (other than on behalf of the Employer or with the prior written
consent of the Board); provided, however, that in the case of this Clause
(c), such conduct will not constitute Cause unless the Board delivers to
the Employee notice setting forth (1) the conduct deemed to qualify as
Cause, (2) reasonable remedial action that might remedy such objection,
and (3) a reasonable time (not less than thirty (30) days) within which
the Employee may take such remedial action, and the Employee has not
taken the specified remedial action with the specified reasonable time;
(d) the Employee breaches the covenants contained in Sections 6, 7 or
8 hereof;
(e) conduct by the Employee that results in removal from the
Employee's position as an officer or employee of the Employer pursuant to
a written order by any regulatory agency with authority or jurisdiction
over the Employer; or
(f) immoderate use or addiction to alcohol or any controlled substance
to the visible and perceptive detriment to the performance of the
Employee's duties, responsibilities and representation of the Bank in the
community or the failure of the Employee to act in a moral and upright
manner consistent with generally accepted standards applicable to other
persons in Carroll County, Georgia, occupying similar positions of
employment; provided, however, that in the case of this Clause (f), such
conduct will not constitute Cause unless the Board delivers to the
Employee notice setting forth (1) the conduct deemed to qualify as Cause,
(2) reasonable remedial action that might remedy such objection, and (3)
a reasonable time (not less than thirty (30) days) within which the
Employee may take such remedial action, and the Employee has not taken
the specified remedial action with the specified reasonable time.
1.7 "Company Information" means Confidential Information and Trade Secrets.
-------------------
1.8 "Confidential Information" means data and information relating to the
------------------------
business of the Employer (which does not rise to the status of a Trade Secret)
which is or has been disclosed to the Employee or of which the Employee became
aware as a consequence of or through the Employee's relationship to the Employer
and which has value to the Employer and is not generally known to its
competitors. Confidential Information does not include any data or information
that has been voluntarily disclosed to the public by the Employer (except where
such public disclosure has been made by the Employee without authorization) or
that has been independently developed and disclosed by others, or that otherwise
enters the public domain through lawful means.
1.9 "Change in Control" means any one of the following events first to occur
-----------------
after the completion of the initial public offering of the common stock of the
Company:
(a) the acquisition by any person or persons acting in concert of the
then outstanding voting securities of either the Bank or the Company, if,
after the transaction, the acquiring
-2-
<PAGE>
person (or persons) owns, controls or holds with power to vote twenty-five
percent (25%) or more of any class of voting securities of the Bank or the
Company, as the case may be, or such other transaction as may be described
under 12 C.F.R. Section 225.41(b)(1) or any successor thereto;
(b) within any twelve-month period (beginning on or after the Effective
Date) the persons who were directors of either the Bank or the Company
immediately before the beginning of such twelve-month period (the "Incumbent
Directors") cease to constitute at least a majority of such board of
directors; provided that any director who was not a director as of the
Effective Date will be deemed to be an Incumbent Director if that director
was elected to such board of directors by, or on the recommendation of or
with the approval of, at least two-thirds of the directors who then qualified
as Incumbent Directors; and provided further that no director whose initial
assumption of office is in connection with an actual or threatened election
contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Securities Exchange Act of 1934) relating to the election of
directors will be deemed to be an Incumbent Director;
(c) the approval by the stockholders of either the Bank or the Company of
a reorganization, merger or consolidation, with respect to which persons who
were the stockholders of either the Bank or the Company, as the case may be,
immediately prior to such reorganization, merger or consolidation do not,
immediately thereafter, own more than fifty percent (50%) of the combined
voting power entitled to vote in the election of directors of the
reorganized, merged or consolidated company's then outstanding voting
securities; or
(d) the sale, transfer or assignment of all or substantially all of the
assets of the Company or the Bank to any third party.
1.10 "Effective Date" means June 1, 1997.
--------------
1.11 "Good Reason" means, any of the following events or conduct preceding a
-----------
termination of employment initiated by the Employee:
(a) a material diminution in the powers, responsibilities or duties of
the Employee hereunder;
(b) the removal of the Employee from the position of Chief Operating
Officer of the Bank and the Company; or
(c) a material breach of the terms of this Agreement by the Employer.
provided, however, that no termination of employment which is triggered by any
conduct or event described in this Section 1.11 shall not constitute a
termination of employment for Good Reason unless the Employee has first provided
the Employer with the opportunity to cure the event or conduct by giving the
Employer a written notice describing in sufficient detail the Employee's belief
-3-
<PAGE>
that a Good Reason exists and the Employee defers resigning until the expiration
of a thirty (30) day cure period, beginning with the date such notice is
received by the Employer.
1.12 "Permanent Disability" means the total inability of the Employee to
--------------------
perform the Employee's duties under this Agreement for a period of ninety (90)
consecutive days as certified by a physician chosen by the Employer and
reasonably acceptable to the Employee.
1.13 "Trade Secrets" means information including, but not limited to,
-------------
technical or nontechnical data, formulas, patterns, compilations, programs,
devices, methods, techniques, drawings, processes, financial data, financial
plans, product plans or lists of actual or potential customers or suppliers
which:
(a) derives economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by, other
persons who can obtain economic value from its disclosure or use; and
(b) is the subject of efforts that are reasonable under the circumstances
to maintain its secrecy.
2. DUTIES.
------
2.1 The Employee is employed as the Chief Operating Officer of the Bank and
the Company, subject to the direction of the Chief Executive Officer and
President of the Employer, must perform and discharge well and faithfully the
duties which may be assigned to the Employee from time to time by the Employer
in connection with the conduct of its business. The duties and responsibilities
of the Employee are set forth on Exhibit A attached hereto.
---------
2.2 In addition to the duties and responsibilities specifically assigned to
the Employee pursuant to Section 2.1 hereof, the Employee must:
(a) devote substantially all of the Employee's time, energy and skill
during regular business hours to the performance of the duties of the
Employee's employment (reasonable vacations and reasonable absences due to
illness excepted) and faithfully and industriously perform such duties; and
(b) diligently follow and implement all management policies and decisions
communicated to the Employee by the Chief Executive Officer and President of
the Employer.
2.3 Without the approval of the Board, the Employee must devote the
Employee's entire business time, attention and energies to the Business of the
Employer and must not during the term of this Agreement be engaged (whether or
not during normal business hours) in any other business or professional
activity, whether or not such activity is pursued for gain, profit or other
pecuniary advantage; but this will not be construed as preventing the Employee
from:
-4-
<PAGE>
(a) investing the Employee's personal assets in businesses which are not
in competition with the Business of the Employer and which will not require
any services on the part of the Employee in their operation or affairs and in
which the Employee's participation is solely that of an investor;
(b) purchasing securities in any corporation whose securities are
regularly traded provided that such purchase will not result in the Employee
collectively owning beneficially at any time five percent (5%) or more of the
equity securities of any business in competition with the Business of the
Employer; and
(c) participating in civic and professional affairs and organizations and
conferences, preparing or publishing papers or books or teaching so long as
the Board approves of such activities prior to the Employee's engaging in
them.
3. TERM AND TERMINATION.
--------------------
3.1 Term. The term of this Agreement will initially be set at three (3) years
----
and will automatically renew each day after the date hereof so that the term
remains a three (3) year term; provided, however, that the automatic renewals as
set forth above will be terminated by either party giving written notice to the
other party of such termination, in which event the term will end on the third
anniversary of the thirtieth (30th) day following the date the written notice is
received (as so calculated, the "Term").
3.2 Termination. The employment of the Employee under this Agreement may be
-----------
terminated prior to the expiration of the Term only as follows, subject to the
conditions set forth below:
3.2.1 By the Employer:
(a) for Cause at any time, upon written notice to the Employee, in
which event the Employer will have no further obligation to the Employee
except for the payment of any amounts due and owing under Section 4 on
the effective date of the termination; or
(b) without Cause or upon the Permanent Disability of Employee at any
time, provided that the Employer gives the Employee sixty (60) days'
prior written notice of its intent to terminate, in which event the
Employer will be required to make the termination payments under Section
3.7.
3.2.2 By the Employee:
(a) for Good Reason at any time, in which event the Employer will be
required to make the termination payments under Section 3.7; or
(b) without Good Reason or upon the Permanent Disability of the
Employee, provided that the Employee gives the Employer sixty (60) days'
prior written notice of
-5-
<PAGE>
the Employee's intent to terminate, in which event the Employer will have
no further obligation to the Employee except future payment of any
amounts due and owing under Section 4 on the effective date of the
termination.
3.2.3 By the Employee within six (6) months following a Change in
Control; provided that the Employee gives at least thirty (30) days' prior
written notice to the Employer of the Employee's intention to terminate this
Agreement with such resignation to be effective immediately, in which event
the Employer will be required to make a termination payment under Section
3.7.
3.2.4 At any time upon mutual, written agreement of the parties, in
which event the Employer will have no further obligation to the Employee
except for the payment of any amounts due and owing under Section 4 on the
effective date of termination unless otherwise set forth in the written
agreement.
3.2.5 Immediately upon the Employee's death, in which event the Employer
will have no further obligation to the Employee except for the payment of any
amounts due and owing under Section 4 on the effective date of termination.
3.3 Effect of Termination. Termination of the employment of the Employee
---------------------
pursuant to Section 3.2 will be without prejudice to any right or claim which
may have previously accrued to either the Employer or the Employee hereunder and
will not terminate, alter, supersede or otherwise affect the terms and covenants
and the rights and duties prescribed in this Agreement.
3.4 Suspension With Pay. Nothing contained herein will preclude the Employer
-------------------
from releasing the Employee of the Employee's normal duties and suspending
Employee, with pay, during the pendency of any investigation or examination to
determine whether or not Cause exists for termination of employee.
3.5 Suspension Without Pay. If Employee is suspended and/or temporarily
----------------------
prohibited from participating in the conduct of the Employer's affairs by a
notice served under Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance
Act, the Employer's obligations under this Agreement will be suspended as of the
date of service thereof, unless stayed by appropriate proceedings. If the
charges in such notice are dismissed, the Employer may in its discretion:
(a) pay Employee all or part of the compensation withheld while its
contract obligations were suspended; and/or
(b) reinstate (in whole or in part) any of its obligations which were
suspended.
3.6 Other Regulatory Requirements. If the Bank is in default, as defined in
-----------------------------
Section (3)(x)(1) of the Federal Deposit Insurance Act, all obligations under
this Agreement will terminate as the date of such default, but no vested rights
of the Employee will be affected. Further, all obligations under
-6-
<PAGE>
this Agreement will be terminated, except to the extent determined that
continuation of the Agreement is necessary for the continued operation of the
Bank:
(a) by the Director of the Office of Thrift Supervision (the "Director")
or his or her designee, at the time the FDIC enters into an agreement to
provide assistance to or on behalf of the Bank under the authority of the
Federal Deposit Insurance Act; or
(b) by the Director or his or her designee, at the time the Director or
his or her designee approves a supervisory merger to resolve problems
relating to the operation of the Bank or when the Bank is determined by the
Director to be in an unsafe or unsound condition.
Any rights of an Employee already accrued under this Agreement, however, will
not be affected by such action.
3.7 Termination Payments. In the event this Agreement is terminated by the
--------------------
Employer pursuant to Section 3.2.1(b) or by the Employee pursuant to Sections
3.2.2(a) or 3.2.3, then commencing with the first payroll date immediately
following the effective date of such termination, the Employer will pay to the
Employee as severance pay and liquidated damages an amount equal to the Average
Monthly Compensation (as defined below) for a period equal to the remaining
Term. Any amounts payable pursuant to this Section 3.7 will be paid at the same
frequency as the Employee's then Base Salary (as defined in Section 4.1(a)) is
paid. As used herein, the term "Average Monthly Compensation" means the
quotient determined by dividing (a) the greater of (1) the Employee's then
current Base Salary, or (2) the average of Base Salary and incentive bonus as
described in Section 4.1(b) with respect to the most recent three (3)
consecutive twelve-month periods during which the Employee was employed by the
Employer (or if the Employer has been employed for fewer periods, such lesser
number of periods) immediately prior to the effective date of the Agreement's
termination that produced the highest average, by (b) twelve (12).
Notwithstanding any other provisions to this Agreement to the contrary, if
the aggregate of the payments provided for in this Agreement and other payments
and benefits which the Employee has the right to receive from the Employer (the
"Total Payments") would constitute a "parachute payment", as defined in Section
280G(b)(2) of the Internal Revenue Code, the Employee shall receive the Total
Payments unless (a) the after-tax amount that would be retained by the Employee
(after taking into account all federal, state and local income taxes payable by
the Employee and the amount of any excise taxes payable by the Employee under
Section 4999 of the Internal Revenue Code that would be payable by the Employee
(the "Excise Taxes")) if the Employee were to receive the Total Payments has a
lesser aggregate value than (b) the after-tax amount that would be retained by
the Employee (after taking into account all federal, state and local income
taxes payable by the Employee) if the Employee were to receive the Total
Payments reduced to the largest amount as would result in no portion of the
Total Payments being subject to Excise Taxes (the "Reduced Payments"), in which
case the Employee shall be entitled only to the Reduced Payments. If the
Employee is to receive the Reduced Payments, the Employee shall be entitled to
determine which of the Total Payments, and the relative portions of each, are to
be reduced.
-7-
<PAGE>
4. COMPENSATION AND BENEFITS.
-------------------------
4.1 Compensation. The Employee will receive the following salary and
------------
benefits:
(a) Base Salary. During the Term, the Employee will receive a base
-----------
salary at the rate of $115,000 per annum, payable in substantially equal
installments in accordance with the Bank's regular payroll practices ("Base
Salary"). The Employee's Base Salary will be reviewed by the Board annually,
and the Employee will be entitled to receive annually an increase in such
amount, if any, as may be determined by the Board.
(b) Incentive Compensation.
----------------------
(i) In addition to Employee's Base Salary under Section 4.1(a), within
ninety (90) days following the end of each fiscal year of the Employer's
operations, the Employer will pay the Employee a bonus as determined each
year by the Compensation Committee of the Board provided certain
performance criteria (to be determined annually by the Board) are
satisfied.
(ii) The Employee will also be entitled to participate in such other
bonus, incentive and other executive compensation programs as are made
available to senior management of the Employer from time to time.
The bonus amounts which may be payable to the Employee pursuant to this
Section 4.1(b) is referred to herein as "Incentive Compensation".
4.2 Automobile. The Bank will make available to the Employee a good, up-to-
----------
date and serviceable automobile to be utilized by Employee for business and
personal uses as is customary for heads of financial institutions in the Area.
4.3 Business Expenses; Memberships. The Employer specifically agrees to
------------------------------
reimburse the Employee for (a) reasonable business (including travel) expenses
incurred by the Employee in the performance of the Employee's duties hereunder,
as approved from time to time by the Board, and (b) the dues and business
related expenditures, including initiation fees, associated with membership in a
country club and in professional associations which are commensurate with the
Employee's position; provided, however, that the Employee must, as a condition
of reimbursement, submit verification of the nature and amount of such expenses
in accordance with reimbursement policies from time to time adopted by the
Employer and in sufficient detail to comply with rules and regulations
promulgated by the Internal Revenue Service.
4.4 Vacation. On a non-cumulative basis the Employee will be entitled to
--------
vacation in each year of this Agreement in accordance with the Bank's vacation
policy as then in effect, during which the Employee's Base Salary will be paid
in full.
-8-
<PAGE>
4.5 Benefits. In addition to the Base Salary and Incentive Compensation, the
--------
Employee will be entitled to such benefits as may be available from time to time
for executives of the Employer similarly situated to the Employee. All such
benefits will be awarded and administered in accordance with the Employer's
standard policies and practices. Such benefits may include, by way of example
only, profit-sharing plans, retirement, life and disability insurance benefits
and such other benefits as the Employer deems appropriate.
4.6 Withholding. The Employer may deduct from each payment of compensation
-----------
hereunder all amounts required to be deducted and withheld in accordance with
applicable federal and state income, FICA and other withholding requirements.
5. COMPANY INFORMATION.
-------------------
5.1 Ownership of Information. All Company Information received or developed
------------------------
by the Employee while employed by the Employer will remain the sole and
exclusive property of the Employer.
5.2 Obligations of the Employee. The Employee agrees (a) to hold Company
---------------------------
Information in strictest confidence, and (b) not to use, duplicate, reproduce,
distribute, disclose or otherwise disseminate Company Information or any
physical embodiments thereof and may in no event take any action causing or fail
to take any action necessary in order to prevent any Company Information from
losing its character or ceasing to qualify as Confidential Information or a
Trade Secret. In the event that the Employee is required by law to disclose any
Company Information, the Employee will not make such disclosure unless (and then
only to the extent that) the Employee has been advised by independent legal
counsel that such disclosure is required by law and then only after prior
written notice is given to the Employer when the Employee becomes aware that
such disclosure has been requested and is required by law. This Section 5 will
survive the termination of this Agreement with respect to Confidential
Information for so long as it remains Confidential Information, but for no
longer than three (3) years following termination of this Agreement, and this
Section 5 will survive termination of this Agreement with respect to Trade
Secrets for so long as is permitted by the then-current Georgia Trade Secrets
Act of 1990, O.C.G.A. (S)(S) 10-1-760-10-1-767.
5.3 Delivery upon Request or Termination. Upon request by the Employer, and
------------------------------------
in any event upon termination of employment with the Employer, the Employee will
promptly deliver to the Employer all property belonging to the Employer,
including without limitation all Company Information then in the Employee's
possession or control.
6. NON-COMPETITION. The Employee agrees that during the Term hereunder and, in
---------------
the event of the Employee's termination of employment for any reason, thereafter
for a period equal to the greater of (a) twelve (12) months; or (b) the period
during which the Employee is to be paid monthly termination payments, if any, in
accordance with Section 3.7 hereof, the Employee will not (except on behalf of
or with the prior written consent of the Employer), within the Area, either
directly or indirectly, on the Employee's own behalf or in the service or on
behalf of others, as a principal, partner, officer, director, manager,
supervisor, administrator, consultant, executive employee or in
-9-
<PAGE>
any other capacity which involves duties and responsibilities similar to those
undertaken for the Employer, engage in any business which is the same as or
essentially the same as the Business of the Employer.
7. NON-SOLICITATION OF CUSTOMERS. The Employee agrees that during the Term
-----------------------------
hereunder and, in the event of the Employee's termination of employment for any
reason, thereafter for a period equal to the greater of (a) twelve (12) months;
or (b) the period during which the Employee is to be paid monthly termination
payments, if any, in accordance with Section 3.7 hereof, the Employee will not
(except on behalf of or with the prior written consent of the Employer), within
the Area, on the Employee's own behalf or in the service or on behalf of others,
solicit, divert or appropriate or attempt to solicit, divert or appropriate,
directly or by assisting others, any business from any of the Employer's
customers, including actively sought prospective customers, with whom the
Employee has or had material contact during the last two (2) years of the
Employee's employment, for purposes of providing products or services that are
competitive with those provided by the Employer.
8. NON-SOLICITATION OF EMPLOYEES. The Employee agrees that during the Term
-----------------------------
hereunder and, in the event of the Employee's termination of employment for any
reason, thereafter for a period equal to the greater of (a) twelve (12) months;
or (b) the period during which the Employee is to be paid monthly termination
payments, if any, in accordance with Section 3.7 hereof, the Employee will not,
within the Area, on the Employee's own behalf or in the service or on behalf of
others, solicit, recruit or hire away or attempt to solicit, recruit or hire
away, directly or by assisting others, any employee of the Employer or its
Affiliates, whether or not such employee is a full-time employee or a temporary
employee of the Employer or its Affiliates and whether or not such employment is
pursuant to written agreement and whether or not such employment is for a
determined period or is at will.
9. REMEDIES. The Employee agrees that the covenants contained in Sections 5
--------
through 8 of this Agreement are of the essence of this Agreement; that each of
the covenants is reasonable and necessary to protect the business, interests and
properties of the Employer; and that irreparable loss and damage will be
suffered by the Employer should the Employee breach any of the covenants.
Therefore, the Employee agrees and consents that, in addition to all the
remedies provided by law or in equity, the Employer will be entitled to a
temporary restraining order and temporary and permanent injunctions to prevent a
breach or contemplated breach of any of the covenants. The Employer and the
Employee agree that all remedies available to the Employer or the Employee, as
applicable, will be cumulative.
10. SEVERABILITY. The parties agree that each of the provisions included in
------------
this Agreement is separate, distinct and severable from the other provisions of
this Agreement and that the invalidity or unenforceability of any Agreement
provision will not affect the validity or enforceability of any other provision
of this Agreement. Further, if any provision of this Agreement is ruled invalid
or unenforceable by a court of competent jurisdiction because of a conflict
between the provision and any applicable law or public policy, the provision
will be redrawn to make the provision consistent with and valid and enforceable
under the law or public policy.
-10-
<PAGE>
11. NO SET-OFF BY THE EMPLOYEE. The existence of any claim, demand, action or
--------------------------
cause of action by the Employee against the Employer, or any Affiliate of the
Employer, whether predicated upon this Agreement or otherwise, will not
constitute a defense to the enforcement by the Employer of any of its rights
hereunder.
12. NOTICE. All notices and other communications required or permitted under
------
this Agreement will be in writing and, if mailed by prepaid first-class mail or
certified mail, return receipt requested, will be deemed to have been received
on the earlier of the date shown on the receipt or three (3) business days after
the postmarked date thereof. In addition, notices hereunder may be delivered by
hand, facsimile transmission or overnight courier, in which event the notice
will be deemed effective when delivered or transmitted. All notices and other
communications under this Agreement must be given to the parties hereto at the
following addresses:
(i) If to the Employer, to it at:
110 Dixie Street
P.O. Box 250
Carrollton, Georgia 30197-0250
Attn: Chairman, Compensation Committee
(ii) If to the Employee, to the Employee at:
110 Sunset Court
Carrollton, Georgia 30117
13. ASSIGNMENT. Neither party hereto may assign or delegate this Agreement or
----------
any of its rights and obligations hereunder without the written consent of the
other party hereto.
14. WAIVER. A waiver by the Employer of any breach of this Agreement by the
------
Employee will not be effective unless in writing, and no waiver will operate or
be construed as a waiver of the same or another breach on a subsequent occasion.
15. ARBITRATION. Any controversy or claim arising out of or relating to this
-----------
Agreement, or the breach thereof, will be settled by binding arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. The decision of the arbitration panel will be final and binding on
the parties, and judgment upon the award rendered by the arbitration panel may
be entered by any court having jurisdiction thereof.
16. ATTORNEYS' FEES. In the event that the parties have complied with this
---------------
Agreement with respect to arbitration of disputes and litigation ensues between
the parties concerning the enforcement of an arbitration award and the Employee
must employ separate legal counsel, the Employer shall advance to the Employee,
within thirty (30) days after receiving copies of invoices submitted by
Employee, any and all reasonable attorneys' fees and expenses incurred with
preparing, investigating and litigating such action, proceeding or suit. The
Employee must reimburse the Employer for any and
-11-
<PAGE>
all advances that exceed the first $5,000 advanced to the Employee for such
legal expenses only if and to the extent that a final decision by a court of
competent jurisdiction has determined that the Employee is not entitled to
receive any amounts due or to enforce any of the rights under this Agreement.
17. APPLICABLE LAW. This Agreement will be construed and enforced under and in
--------------
accordance with the laws of the State of Georgia. The parties agree that any
appropriate state court located in Carroll County, Georgia, will have
jurisdiction of any case or controversy arising under or in connection with this
Agreement and will be a proper forum in which to adjudicate such case or
controversy. The parties consent to the jurisdiction of such courts.
18. INTERPRETATION. Words importing the singular form shall include the plural
--------------
and vice versa. The terms "herein", "hereunder", "hereby", "hereto", "hereof"
and any similar terms refer to this Agreement. Any captions, titles or headings
preceding the text of any article, section or subsection herein are solely for
convenience of reference and will not constitute part of this Agreement or
affect its meaning, construction or effect.
19. ENTIRE AGREEMENT. Except for any rights the Employee may have under any
----------------
employee benefit plans maintained by the Employer for employees generally and
any rights the Employee may have under the Community First Banking Company 1997
Stock Option Plan and the Community First Banking Company Management Recognition
Plan, this Agreement embodies the entire and final agreement of the parties on
the subject matter stated in the Agreement. No amendment or modification of
this Agreement will be valid or binding upon the Employer or the Employee unless
made in writing and signed by both parties. All prior understandings and
agreements relating to the subject matter of this Agreement are hereby expressly
terminated.
20. RIGHTS OF THIRD PARTIES. Nothing herein expressed is intended to or will
-----------------------
be construed to confer upon or give to any person, firm or other entity, other
than the parties hereto and their permitted assigns, any rights or remedies
under or by reason of this Agreement.
21. SURVIVAL. The obligations of the Employee pursuant to Sections 5, 6, 7, 8
--------
and 9 will survive the termination of the employment of the Employee hereunder
for the period designated under each of those respective sections.
22. JOINT AND SEVERAL. The obligation of the Bank and the Company to Employee
-----------------
hereunder will be joint and several.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the Employer and the Employee have executed and delivered
this Agreement as of the date first shown above.
THE EMPLOYER:
CARROLLTON FEDERAL BANK, FSB
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
COMMUNITY FIRST BANKING COMPANY
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
THE EMPLOYEE:
--------------------------------------
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<PAGE>
Exhibit A
---------
CARROLLTON FEDERAL BANK
JOB DESCRIPTION
REVISED FIRST QUARTER, 1996
- -------------------------------------------------------------------------------
JOB TITLE: CHIEF OPERATING OFFICER
JOB CODE: E003
JOB LEVEL: ADMINISTRATIVE
FSLA: EXEMPT
DEPARTMENT: EXECUTIVE
REPORTS TO: PRESIDENT/CHIEF EXECUTIVE OFFICER
- -------------------------------------------------------------------------------
SUMMARY:
Has overall responsibility for the bank's retail and lending deposit banking
function. Is responsible for significant contributions to the formulation,
development, recommendation, implementation, and administration of bank-wide
policies and business goals. Directs the activities of subordinate managers and
represents the bank to regulatory agencies, other financial organizations, trade
associations, and others. Additionally, serves as Chairman of the Loan
Committee and a member of the Asset-Liability Committee, Public Relations and
Marketing Committee, Community Reinvestment Act Committee, and 401-K Committee.
ESSENTIAL DUTIES AND RESPONSIBILITIES: The primary duty and responsibility of
this position is quality service to both internal and external customers.
Specific duties are listed below. Other duties may be assigned.
Serves as a member of the bank's senior management team and participates
significantly in developing overall policies, programs, objectives, and goals of
the lending and deposit function of the bank.
Serves on and/or directs a number of operational committees to ensure effective
interface among branches and that established policies, programs, objectives,
and goals are communicated.
Directly supervises subordinate department heads for consumer and commercial
loan functions. Evaluates the loan and deposit portfolios and analyzes any
developing trends.
Studies problems and recommends changes in present policies and practices.
Maintains contact with other banking institutions to keep informed of market
conditions and competitive interest rates to implement changes in the bank's
rate structure.
<PAGE>
Reviews innovations in the banking industry and evaluates their practicality and
effectiveness. Directs research into new products and/or concepts that could
increase operating efficiency, profits, and/or market share.
Reviews and extracts legislation and legal decisions affecting the bank and
ensures compliance with all applicable regulations and statutes.
Consults with loan officers on larger and more complex loans. May service a
select group of large problem loans which have special or sensitive issues.
Aids in the development of the officer/director call program and participates in
sales development activities by cross-selling services in a professional manner.
Reviews operating policies, procedures, objectives, and goals for each area of
responsibility to ensure they support bank-wide policies and objectives.
Monitors performance of subordinate areas of responsibility in attaining
business objectives and implementing corrective action when necessary.
Responsible for monthly communication to the Board of Directors on progress and
changes to the loan and deposit functions.
Exercises the usual authority of a department head concerning staffing,
performance appraisals, promotions, salary recommendations, and termination.
Encourages the growth and professional development of all department managers by
providing advice and guidance.
Prepares detailed information for preparing the department budget including
projected volumes, rate of return, and expenditures.
Represents the bank in contacts with business and trade associations, customers,
and regulatory agencies. Attends civic functions and otherwise promotes the
bank's image.
SUPERVISORY RESPONSIBILITIES:
Manages subordinate supervisors who supervise employees in the Commercial
Lending Department, Consumer Lending Department, Mortgage Lending Department,
Loan Administration, and Branches. Is responsible for the overall direction,
coordination, and evaluation of these units. Also directly supervisors one non-
supervisory employee.
Carries out supervisory responsibilities in accordance with the organization's
policies and applicable laws. Responsibilities include interviewing, hiring,
and training employees; planning assigning and directing work; appraising
performance; rewarding and disciplining employees; and addressing complaints and
resolving problems.
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<PAGE>
CRA REQUIREMENT:
Expected to understand the bank's obligations under the Community Reinvestment
Act and how to fulfill them. Expected to cooperate with and support the bank's
CRA program. Will be held accountable for any lack of cooperation that weakens
the bank's CRA performance, as reflected in internal audits, agency
examinations, and/or community protests.
PRODUCT KNOWLEDGE REQUIREMENT:
Should know and understand the products and services that are provided by
Carrollton Federal Bank and give quality service at all times to our customers.
QUALIFICATION REQUIREMENTS:
To perform this job successfully, an individual must be able to perform each
essential duty satisfactorily. The requirements listed below are representative
of the knowledge, skill, and/or ability required. Reasonable accommodations may
be made to enable individuals with disabilities to perform the essential
functions.
EDUCATION AND/OR EXPERIENCE:
College graduate and graduate of recognized graduate banking school or
equivalent. Seven to ten years of progressively increasing responsible
lending experience.
LANGUAGE SKILLS:
Ability to read, analyze, and interpret general business periodicals,
professional journals, technical procedures, or governmental regulations.
Ability to write reports, business correspondence, and procedure manuals.
Ability to effectively present information and respond to questions from
groups of managers, clients, customers, and the general public.
MATHEMATICAL SKILLS:
A high level of analytical skills with problem-solving ability. Ability to
work with mathematical concepts such as probability and fundamentals of
credit analysis. Ability to apply concepts such as fractions, percentages,
ratios, and proportions to practical situations.
REASONING ABILITY:
Ability to solve practical problems and deal with a variety of concrete
variables in situations where only limited standardization exists. Ability
to interpret a variety of instructions furnished in written, oral, diagram,
or schedule form.
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<PAGE>
OTHER SKILLS AND ABILITIES:
A high level of interpersonal skills needed to communicate policies,
procedures, and objectives effectively and to represent the bank positively
to significant external contacts. A high level of analytical skill to assess
and evaluate the operation of subordinate areas of responsibility,
participate in establishing bank-wide financial goals, analyze new products,
review legal opinions and draft operational reports to the board.
PHYSICAL DEMANDS:
Reasonable accommodations may be made to enable individuals with disabilities to
perform the essential functions.
WORK ENVIRONMENT:
Good. There is little discomfort from noise, heat, dust, or other adverse
factors.
PERFORMANCE EXPECTATIONS:
ORGANIZATIONAL EXPECTATIONS:
Understand that the position exists to ultimately serve the customer either
directly or indirectly through assisting front-line personnel to answer
customer inquiries quickly.
Practices a high degree of professionalism and sets an example for others to
follow.
Demonstrates commitment to and understanding of continuous quality
improvement. Uses creativity and initiative to recommend quality
enhancements when relevant and appropriate.
Has satisfactory attendance within policy guidelines and is punctual.
Manages time effectively. Completes assigned duties within required
deadlines.
FINANCIAL EXPECTATIONS:
Makes recommendations to Manager/Supervisor concerning budgetary needs of the
department.
Within parameters of job, uses good judgment related to Bank income
opportunities and expense control.
Is financially responsible.
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<PAGE>
RELATIONSHIP EXPECTATIONS:
Conducts in-bank and public relationships in a manner that enhances the image
and marketing efforts of the Bank.
Participates in community organizations, activities, and projects.
Contributes to an overall team effort by being an effective team player.
This job description is not intended to be and should not be construed as an
all-inclusive list of the responsibilities, skills, or working conditions
associated with the position. While this job description is intended to
accurately reflect the position's activities and requirements, management
reserves the right to modify, add, or remove duties and assign other duties as
necessary.
<PAGE>
EXHIBIT 10.5.D
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 1st day of June, 1997, between Carrollton
Federal Bank, FSB (the "Bank"), a federal savings bank chartered by the United
States, and Community First Banking Company (the "Company"), the holding company
of the Bank (the Bank and the Company collectively, the "Employer"), and C. LYNN
GABLE, a resident of the State of Georgia (the "Employee").
RECITALS:
The Employer desires to employ the Employee as the Chief Financial Officer
of the Employer and the Employee desires to accept such employment.
In consideration of the above premises and the mutual agreements
hereinafter set forth, the parties hereby agree as follows:
1. DEFINITIONS. Whenever used in this Agreement, the following terms and their
-----------
variant forms will have the meaning set forth below:
1.1 "Agreement" means this Agreement and any exhibits incorporated herein
---------
together with any amendments hereto made in the manner described in this
Agreement.
1.2 "Affiliate" means any business entity which controls the Employer, is
---------
controlled by or is under common control with the Employer.
1.3 "Area" means the geographic area within a radius of 20 miles of any
----
office or facility maintained by the Employer. It is the express intent of the
parties that the Area as defined herein is the area where the Employee performs
or performed services on behalf of the Employer under this Agreement as of, or
within a reasonable time prior to, the termination of the Employee's employment
hereunder.
1.4 "Board" means the board of directors of the Bank.
-----
1.5 "Business of the Employer" means the business conducted by the Employer,
------------------------
which is community banking.
1.6 "Cause" means, any of the following events or conduct preceding a
-----
termination of employment initiated by the Employer:
(a) any act that constitutes, on the part of the Employee, fraud,
dishonesty, bad faith or a felony toward the Employer;
(b) the conviction of the Employee of a felony or crime involving
moral turpitude;
<PAGE>
(c) the Employee's entering into any transaction or contractual
relationship with, or diversion of business opportunity from, the
Employer (other than on behalf of the Employer or with the prior written
consent of the Board); provided, however, that in the case of this Clause
(c), such conduct will not constitute Cause unless the Board delivers to
the Employee notice setting forth (1) the conduct deemed to qualify as
Cause, (2) reasonable remedial action that might remedy such objection,
and (3) a reasonable time (not less than thirty (30) days) within which
the Employee may take such remedial action, and the Employee has not
taken the specified remedial action with the specified reasonable time;
(d) the Employee breaches the covenants contained in Sections 6, 7 or
8 hereof;
(e) conduct by the Employee that results in removal from the
Employee's position as an officer or employee of the Employer pursuant to
a written order by any regulatory agency with authority or jurisdiction
over the Employer; or
(f) immoderate use or addiction to alcohol or any controlled substance
to the visible and perceptive detriment to the performance of the
Employee's duties, responsibilities and representation of the Bank in the
community or the failure of the Employee to act in a moral and upright
manner consistent with generally accepted standards applicable to other
persons in Carroll County, Georgia, occupying similar positions of
employment; provided, however, that in the case of this Clause (f), such
conduct will not constitute Cause unless the Board delivers to the
Employee notice setting forth (1) the conduct deemed to qualify as Cause,
(2) reasonable remedial action that might remedy such objection, and (3)
a reasonable time (not less than thirty (30) days) within which the
Employee may take such remedial action, and the Employee has not taken
the specified remedial action with the specified reasonable time.
1.7 "Company Information" means Confidential Information and Trade Secrets.
-------------------
1.8 "Confidential Information" means data and information relating to the
------------------------
business of the Employer (which does not rise to the status of a Trade Secret)
which is or has been disclosed to the Employee or of which the Employee became
aware as a consequence of or through the Employee's relationship to the Employer
and which has value to the Employer and is not generally known to its
competitors. Confidential Information does not include any data or information
that has been voluntarily disclosed to the public by the Employer (except where
such public disclosure has been made by the Employee without authorization) or
that has been independently developed and disclosed by others, or that otherwise
enters the public domain through lawful means.
1.9 "Change in Control" means any one of the following events first to occur
-----------------
after the completion of the initial public offering of the common stock of the
Company:
(a) the acquisition by any person or persons acting in concert of the
then outstanding voting securities of either the Bank or the Company, if,
after the transaction, the acquiring
-2-
<PAGE>
person (or persons) owns, controls or holds with power to vote twenty-five
percent (25%) or more of any class of voting securities of the Bank or the
Company, as the case may be, or such other transaction as may be described
under 12 C.F.R. Section 225.41(b)(1) or any successor thereto;
(b) within any twelve-month period (beginning on or after the Effective
Date) the persons who were directors of either the Bank or the Company
immediately before the beginning of such twelve-month period (the "Incumbent
Directors") cease to constitute at least a majority of such board of
directors; provided that any director who was not a director as of the
Effective Date will be deemed to be an Incumbent Director if that director
was elected to such board of directors by, or on the recommendation of or
with the approval of, at least two-thirds of the directors who then qualified
as Incumbent Directors; and provided further that no director whose initial
assumption of office is in connection with an actual or threatened election
contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Securities Exchange Act of 1934) relating to the election of
directors will be deemed to be an Incumbent Director;
(c) the approval by the stockholders of either the Bank or the Company of
a reorganization, merger or consolidation, with respect to which persons who
were the stockholders of either the Bank or the Company, as the case may be,
immediately prior to such reorganization, merger or consolidation do not,
immediately thereafter, own more than fifty percent (50%) of the combined
voting power entitled to vote in the election of directors of the
reorganized, merged or consolidated company's then outstanding voting
securities; or
(d) the sale, transfer or assignment of all or substantially all of the
assets of the Company or the Bank to any third party.
1.10 "Effective Date" means June 1, 1997.
--------------
1.11 "Good Reason" means, any of the following events or conduct preceding a
-----------
termination of employment initiated by the Employee:
(a) a material diminution in the powers, responsibilities or duties of
the Employee hereunder;
(b) the removal of the Employee from the position of Chief Financial
Officer of the Bank and the Company; or
(c) a material breach of the terms of this Agreement by the Employer.
provided, however, that no termination of employment which is triggered by any
conduct or event described in this Section 1.11 shall not constitute a
termination of employment for Good Reason unless the Employee has first provided
the Employer with the opportunity to cure the event or conduct by giving the
Employer a written notice describing in sufficient detail the Employee's belief
-3-
<PAGE>
that a Good Reason exists and the Employee defers resigning until the expiration
of a thirty (30) day cure period, beginning with the date such notice is
received by the Employer.
1.12 "Permanent Disability" means the total inability of the Employee to
--------------------
perform the Employee's duties under this Agreement for a period of ninety (90)
consecutive days as certified by a physician chosen by the Employer and
reasonably acceptable to the Employee.
1.13 "Trade Secrets" means information including, but not limited to,
-------------
technical or nontechnical data, formulas, patterns, compilations, programs,
devices, methods, techniques, drawings, processes, financial data, financial
plans, product plans or lists of actual or potential customers or suppliers
which:
(a) derives economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by, other
persons who can obtain economic value from its disclosure or use; and
(b) is the subject of efforts that are reasonable under the circumstances
to maintain its secrecy.
2. DUTIES.
------
2.1 The Employee is employed as the Chief Financial Officer of the Bank and
the Company, subject to the direction of the Chief Executive Officer and
President of the Employer, must perform and discharge well and faithfully the
duties which may be assigned to the Employee from time to time by the Employer
in connection with the conduct of its business. The duties and responsibilities
of the Employee are set forth on Exhibit A attached hereto.
---------
2.2 In addition to the duties and responsibilities specifically assigned to
the Employee pursuant to Section 2.1 hereof, the Employee must:
(a) devote substantially all of the Employee's time, energy and skill
during regular business hours to the performance of the duties of the
Employee's employment (reasonable vacations and reasonable absences due to
illness excepted) and faithfully and industriously perform such duties; and
(b) diligently follow and implement all management policies and decisions
communicated to the Employee by the Chief Executive Officer and President of
the Employer.
2.3 Without the approval of the Board, the Employee must devote the
Employee's entire business time, attention and energies to the Business of the
Employer and must not during the term of this Agreement be engaged (whether or
not during normal business hours) in any other business or professional
activity, whether or not such activity is pursued for gain, profit or other
pecuniary advantage; but this will not be construed as preventing the Employee
from:
-4-
<PAGE>
(a) investing the Employee's personal assets in businesses which are not
in competition with the Business of the Employer and which will not require
any services on the part of the Employee in their operation or affairs and in
which the Employee's participation is solely that of an investor;
(b) purchasing securities in any corporation whose securities are
regularly traded provided that such purchase will not result in the Employee
collectively owning beneficially at any time five percent (5%) or more of the
equity securities of any business in competition with the Business of the
Employer; and
(c) participating in civic and professional affairs and organizations and
conferences, preparing or publishing papers or books or teaching so long as
the Board approves of such activities prior to the Employee's engaging in
them.
3. TERM AND TERMINATION.
--------------------
3.1 Term. The term of this Agreement will initially be set at three (3) years
----
and will automatically renew each day after the date hereof so that the term
remains a three (3) year term; provided, however, that the automatic renewals as
set forth above will be terminated by either party giving written notice to the
other party of such termination, in which event the term will end on the third
anniversary of the thirtieth (30th) day following the date the written notice is
received (as so calculated, the "Term").
3.2 Termination. The employment of the Employee under this Agreement may be
-----------
terminated prior to the expiration of the Term only as follows, subject to the
conditions set forth below:
3.2.1 By the Employer:
(a) for Cause at any time, upon written notice to the Employee, in
which event the Employer will have no further obligation to the Employee
except for the payment of any amounts due and owing under Section 4 on
the effective date of the termination; or
(b) without Cause or upon the Permanent Disability of Employee at any
time, provided that the Employer gives the Employee sixty (60) days'
prior written notice of its intent to terminate, in which event the
Employer will be required to make the termination payments under Section
3.7.
3.2.2 By the Employee:
(a) for Good Reason at any time, in which event the Employer will be
required to make the termination payments under Section 3.7; or
(b) without Good Reason or upon the Permanent Disability of the
Employee, provided that the Employee gives the Employer sixty (60) days'
prior written notice of
-5-
<PAGE>
the Employee's intent to terminate, in which event the Employer will have
no further obligation to the Employee except future payment of any
amounts due and owing under Section 4 on the effective date of the
termination.
3.2.3 By the Employee within six (6) months following a Change in
Control; provided that the Employee gives at least thirty (30) days' prior
written notice to the Employer of the Employee's intention to terminate this
Agreement with such resignation to be effective immediately, in which event
the Employer will be required to make a termination payment under Section
3.7.
3.2.4 At any time upon mutual, written agreement of the parties, in
which event the Employer will have no further obligation to the Employee
except for the payment of any amounts due and owing under Section 4 on the
effective date of termination unless otherwise set forth in the written
agreement.
3.2.5 Immediately upon the Employee's death, in which event the Employer
will have no further obligation to the Employee except for the payment of any
amounts due and owing under Section 4 on the effective date of termination.
3.3 Effect of Termination. Termination of the employment of the Employee
---------------------
pursuant to Section 3.2 will be without prejudice to any right or claim which
may have previously accrued to either the Employer or the Employee hereunder and
will not terminate, alter, supersede or otherwise affect the terms and covenants
and the rights and duties prescribed in this Agreement.
3.4 Suspension With Pay. Nothing contained herein will preclude the Employer
-------------------
from releasing the Employee of the Employee's normal duties and suspending
Employee, with pay, during the pendency of any investigation or examination to
determine whether or not Cause exists for termination of employee.
3.5 Suspension Without Pay. If Employee is suspended and/or temporarily
----------------------
prohibited from participating in the conduct of the Employer's affairs by a
notice served under Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance
Act, the Employer's obligations under this Agreement will be suspended as of the
date of service thereof, unless stayed by appropriate proceedings. If the
charges in such notice are dismissed, the Employer may in its discretion:
(a) pay Employee all or part of the compensation withheld while its
contract obligations were suspended; and/or
(b) reinstate (in whole or in part) any of its obligations which were
suspended.
3.6 Other Regulatory Requirements. If the Bank is in default, as defined in
-----------------------------
Section (3)(x)(1) of the Federal Deposit Insurance Act, all obligations under
this Agreement will terminate as the date of such default, but no vested rights
of the Employee will be affected. Further, all obligations under
-6-
<PAGE>
this Agreement will be terminated, except to the extent determined that
continuation of the Agreement is necessary for the continued operation of the
Bank:
(a) by the Director of the Office of Thrift Supervision (the "Director")
or his or her designee, at the time the FDIC enters into an agreement to
provide assistance to or on behalf of the Bank under the authority of the
Federal Deposit Insurance Act; or
(b) by the Director or his or her designee, at the time the Director or
his or her designee approves a supervisory merger to resolve problems
relating to the operation of the Bank or when the Bank is determined by the
Director to be in an unsafe or unsound condition.
Any rights of an Employee already accrued under this Agreement, however, will
not be affected by such action.
3.7 Termination Payments. In the event this Agreement is terminated by the
--------------------
Employer pursuant to Section 3.2.1(b) or by the Employee pursuant to Sections
3.2.2(a) or 3.2.3, then commencing with the first payroll date immediately
following the effective date of such termination, the Employer will pay to the
Employee as severance pay and liquidated damages an amount equal to the Average
Monthly Compensation (as defined below) for a period equal to the remaining
Term. Any amounts payable pursuant to this Section 3.7 will be paid at the same
frequency as the Employee's then Base Salary (as defined in Section 4.1(a)) is
paid. As used herein, the term "Average Monthly Compensation" means the
quotient determined by dividing (a) the greater of (1) the Employee's then
current Base Salary, or (2) the average of Base Salary and incentive bonus as
described in Section 4.1(b) with respect to the most recent three (3)
consecutive twelve-month periods during which the Employee was employed by the
Employer (or if the Employer has been employed for fewer periods, such lesser
number of periods) immediately prior to the effective date of the Agreement's
termination that produced the highest average, by (b) twelve (12).
Notwithstanding any other provisions to this Agreement to the contrary, if
the aggregate of the payments provided for in this Agreement and other payments
and benefits which the Employee has the right to receive from the Employer (the
"Total Payments") would constitute a "parachute payment", as defined in Section
280G(b)(2) of the Internal Revenue Code, the Employee shall receive the Total
Payments unless (a) the after-tax amount that would be retained by the Employee
(after taking into account all federal, state and local income taxes payable by
the Employee and the amount of any excise taxes payable by the Employee under
Section 4999 of the Internal Revenue Code that would be payable by the Employee
(the "Excise Taxes")) if the Employee were to receive the Total Payments has a
lesser aggregate value than (b) the after-tax amount that would be retained by
the Employee (after taking into account all federal, state and local income
taxes payable by the Employee) if the Employee were to receive the Total
Payments reduced to the largest amount as would result in no portion of the
Total Payments being subject to Excise Taxes (the "Reduced Payments"), in which
case the Employee shall be entitled only to the Reduced Payments. If the
Employee is to receive the Reduced Payments, the Employee shall be entitled to
determine which of the Total Payments, and the relative portions of each, are to
be reduced.
-7-
<PAGE>
4. COMPENSATION AND BENEFITS.
-------------------------
4.1 Compensation. The Employee will receive the following salary and
------------
benefits:
(a) Base Salary. During the Term, the Employee will receive a base
-----------
salary at the rate of $90,000 per annum, payable in substantially equal
installments in accordance with the Bank's regular payroll practices ("Base
Salary"). The Employee's Base Salary will be reviewed by the Board annually,
and the Employee will be entitled to receive annually an increase in such
amount, if any, as may be determined by the Board.
(b) Incentive Compensation.
----------------------
(i) In addition to Employee's Base Salary under Section 4.1(a), within
ninety (90) days following the end of each fiscal year of the Employer's
operations, the Employer will pay the Employee a bonus as determined each
year by the Compensation Committee of the Board provided certain
performance criteria (to be determined annually by the Board) are
satisfied.
(ii) The Employee will also be entitled to participate in such other
bonus, incentive and other executive compensation programs as are made
available to senior management of the Employer from time to time.
The bonus amounts which may be payable to the Employee pursuant to this
Section 4.1(b) is referred to herein as "Incentive Compensation".
4.2 Automobile. The Bank will make available to the Employee a good, up-to-
----------
date and serviceable automobile to be utilized by Employee for business and
personal uses as is customary for heads of financial institutions in the Area.
4.3 Business Expenses; Memberships. The Employer specifically agrees to
------------------------------
reimburse the Employee for (a) reasonable business (including travel) expenses
incurred by the Employee in the performance of the Employee's duties hereunder,
as approved from time to time by the Board, and (b) the dues and business
related expenditures, including initiation fees, associated with membership in a
country club and in professional associations which are commensurate with the
Employee's position; provided, however, that the Employee must, as a condition
of reimbursement, submit verification of the nature and amount of such expenses
in accordance with reimbursement policies from time to time adopted by the
Employer and in sufficient detail to comply with rules and regulations
promulgated by the Internal Revenue Service.
4.4 Vacation. On a non-cumulative basis the Employee will be entitled to
--------
vacation in each year of this Agreement in accordance with the Bank's vacation
policy as then in effect, during which the Employee's Base Salary will be paid
in full.
-8-
<PAGE>
4.5 Benefits. In addition to the Base Salary and Incentive Compensation, the
--------
Employee will be entitled to such benefits as may be available from time to time
for executives of the Employer similarly situated to the Employee. All such
benefits will be awarded and administered in accordance with the Employer's
standard policies and practices. Such benefits may include, by way of example
only, profit-sharing plans, retirement, life and disability insurance benefits
and such other benefits as the Employer deems appropriate.
4.6 Withholding. The Employer may deduct from each payment of compensation
-----------
hereunder all amounts required to be deducted and withheld in accordance with
applicable federal and state income, FICA and other withholding requirements.
5. COMPANY INFORMATION.
-------------------
5.1 Ownership of Information. All Company Information received or developed
------------------------
by the Employee while employed by the Employer will remain the sole and
exclusive property of the Employer.
5.2 Obligations of the Employee. The Employee agrees (a) to hold Company
---------------------------
Information in strictest confidence, and (b) not to use, duplicate, reproduce,
distribute, disclose or otherwise disseminate Company Information or any
physical embodiments thereof and may in no event take any action causing or fail
to take any action necessary in order to prevent any Company Information from
losing its character or ceasing to qualify as Confidential Information or a
Trade Secret. In the event that the Employee is required by law to disclose any
Company Information, the Employee will not make such disclosure unless (and then
only to the extent that) the Employee has been advised by independent legal
counsel that such disclosure is required by law and then only after prior
written notice is given to the Employer when the Employee becomes aware that
such disclosure has been requested and is required by law. This Section 5 will
survive the termination of this Agreement with respect to Confidential
Information for so long as it remains Confidential Information, but for no
longer than three (3) years following termination of this Agreement, and this
Section 5 will survive termination of this Agreement with respect to Trade
Secrets for so long as is permitted by the then-current Georgia Trade Secrets
Act of 1990, O.C.G.A. (S)(S) 10-1-760-10-1-767.
5.3 Delivery upon Request or Termination. Upon request by the Employer, and
------------------------------------
in any event upon termination of employment with the Employer, the Employee will
promptly deliver to the Employer all property belonging to the Employer,
including without limitation all Company Information then in the Employee's
possession or control.
6. NON-COMPETITION. The Employee agrees that during the Term hereunder and, in
---------------
the event of the Employee's termination of employment for any reason, thereafter
for a period equal to the greater of (a) twelve (12) months; or (b) the period
during which the Employee is to be paid monthly termination payments, if any, in
accordance with Section 3.7 hereof, the Employee will not (except on behalf of
or with the prior written consent of the Employer), within the Area, either
directly or indirectly, on the Employee's own behalf or in the service or on
behalf of others, as a principal, partner, officer, director, manager,
supervisor, administrator, consultant, executive employee or in
-9-
<PAGE>
any other capacity which involves duties and responsibilities similar to those
undertaken for the Employer, engage in any business which is the same as or
essentially the same as the Business of the Employer.
7. NON-SOLICITATION OF CUSTOMERS. The Employee agrees that during the Term
-----------------------------
hereunder and, in the event of the Employee's termination of employment for any
reason, thereafter for a period equal to the greater of (a) twelve (12) months;
or (b) the period during which the Employee is to be paid monthly termination
payments, if any, in accordance with Section 3.7 hereof, the Employee will not
(except on behalf of or with the prior written consent of the Employer), within
the Area, on the Employee's own behalf or in the service or on behalf of others,
solicit, divert or appropriate or attempt to solicit, divert or appropriate,
directly or by assisting others, any business from any of the Employer's
customers, including actively sought prospective customers, with whom the
Employee has or had material contact during the last two (2) years of the
Employee's employment, for purposes of providing products or services that are
competitive with those provided by the Employer.
8. NON-SOLICITATION OF EMPLOYEES. The Employee agrees that during the Term
-----------------------------
hereunder and, in the event of the Employee's termination of employment for any
reason, thereafter for a period equal to the greater of (a) twelve (12) months;
or (b) the period during which the Employee is to be paid monthly termination
payments, if any, in accordance with Section 3.7 hereof, the Employee will not,
within the Area, on the Employee's own behalf or in the service or on behalf of
others, solicit, recruit or hire away or attempt to solicit, recruit or hire
away, directly or by assisting others, any employee of the Employer or its
Affiliates, whether or not such employee is a full-time employee or a temporary
employee of the Employer or its Affiliates and whether or not such employment is
pursuant to written agreement and whether or not such employment is for a
determined period or is at will.
9. REMEDIES. The Employee agrees that the covenants contained in Sections 5
--------
through 8 of this Agreement are of the essence of this Agreement; that each of
the covenants is reasonable and necessary to protect the business, interests and
properties of the Employer; and that irreparable loss and damage will be
suffered by the Employer should the Employee breach any of the covenants.
Therefore, the Employee agrees and consents that, in addition to all the
remedies provided by law or in equity, the Employer will be entitled to a
temporary restraining order and temporary and permanent injunctions to prevent a
breach or contemplated breach of any of the covenants. The Employer and the
Employee agree that all remedies available to the Employer or the Employee, as
applicable, will be cumulative.
10. SEVERABILITY. The parties agree that each of the provisions included in
------------
this Agreement is separate, distinct and severable from the other provisions of
this Agreement and that the invalidity or unenforceability of any Agreement
provision will not affect the validity or enforceability of any other provision
of this Agreement. Further, if any provision of this Agreement is ruled invalid
or unenforceable by a court of competent jurisdiction because of a conflict
between the provision and any applicable law or public policy, the provision
will be redrawn to make the provision consistent with and valid and enforceable
under the law or public policy.
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<PAGE>
11. NO SET-OFF BY THE EMPLOYEE. The existence of any claim, demand, action or
--------------------------
cause of action by the Employee against the Employer, or any Affiliate of the
Employer, whether predicated upon this Agreement or otherwise, will not
constitute a defense to the enforcement by the Employer of any of its rights
hereunder.
12. NOTICE. All notices and other communications required or permitted under
------
this Agreement will be in writing and, if mailed by prepaid first-class mail or
certified mail, return receipt requested, will be deemed to have been received
on the earlier of the date shown on the receipt or three (3) business days after
the postmarked date thereof. In addition, notices hereunder may be delivered by
hand, facsimile transmission or overnight courier, in which event the notice
will be deemed effective when delivered or transmitted. All notices and other
communications under this Agreement must be given to the parties hereto at the
following addresses:
(i) If to the Employer, to it at:
110 Dixie Street
P.O. Box 250
Carrollton, Georgia 30197-0250
Attn: Chairman, Compensation Committee
(ii) If to the Employee, to the Employee at:
370 Ringer Road
Carrollton, Georgia 30116
13. ASSIGNMENT. Neither party hereto may assign or delegate this Agreement or
----------
any of its rights and obligations hereunder without the written consent of the
other party hereto.
14. WAIVER. A waiver by the Employer of any breach of this Agreement by the
------
Employee will not be effective unless in writing, and no waiver will operate or
be construed as a waiver of the same or another breach on a subsequent occasion.
15. ARBITRATION. Any controversy or claim arising out of or relating to this
-----------
Agreement, or the breach thereof, will be settled by binding arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. The decision of the arbitration panel will be final and binding on
the parties, and judgment upon the award rendered by the arbitration panel may
be entered by any court having jurisdiction thereof.
16. ATTORNEYS' FEES. In the event that the parties have complied with this
---------------
Agreement with respect to arbitration of disputes and litigation ensues between
the parties concerning the enforcement of an arbitration award and the Employee
must employ separate legal counsel, the Employer shall advance to the Employee,
within thirty (30) days after receiving copies of invoices submitted by
Employee, any and all reasonable attorneys' fees and expenses incurred with
preparing, investigating and litigating such action, proceeding or suit. The
Employee must reimburse the Employer for any and
-11-
<PAGE>
all advances that exceed the first $5,000 advanced to the Employee for such
legal expenses only if and to the extent that a final decision by a court of
competent jurisdiction has determined that the Employee is not entitled to
receive any amounts due or to enforce any of the rights under this Agreement.
17. APPLICABLE LAW. This Agreement will be construed and enforced under and in
--------------
accordance with the laws of the State of Georgia. The parties agree that any
appropriate state court located in Carroll County, Georgia, will have
jurisdiction of any case or controversy arising under or in connection with this
Agreement and will be a proper forum in which to adjudicate such case or
controversy. The parties consent to the jurisdiction of such courts.
18. INTERPRETATION. Words importing the singular form shall include the plural
--------------
and vice versa. The terms "herein", "hereunder", "hereby", "hereto", "hereof"
and any similar terms refer to this Agreement. Any captions, titles or headings
preceding the text of any article, section or subsection herein are solely for
convenience of reference and will not constitute part of this Agreement or
affect its meaning, construction or effect.
19. ENTIRE AGREEMENT. Except for any rights the Employee may have under any
----------------
employee benefit plans maintained by the Employer for employees generally and
any rights the Employee may have under the Community First Banking Company 1997
Stock Option Plan and the Community First Banking Company Management Recognition
Plan, this Agreement embodies the entire and final agreement of the parties on
the subject matter stated in the Agreement. No amendment or modification of
this Agreement will be valid or binding upon the Employer or the Employee unless
made in writing and signed by both parties. All prior understandings and
agreements relating to the subject matter of this Agreement are hereby expressly
terminated.
20. RIGHTS OF THIRD PARTIES. Nothing herein expressed is intended to or will
-----------------------
be construed to confer upon or give to any person, firm or other entity, other
than the parties hereto and their permitted assigns, any rights or remedies
under or by reason of this Agreement.
21. SURVIVAL. The obligations of the Employee pursuant to Sections 5, 6, 7, 8
--------
and 9 will survive the termination of the employment of the Employee hereunder
for the period designated under each of those respective sections.
22. JOINT AND SEVERAL. The obligation of the Bank and the Company to Employee
-----------------
hereunder will be joint and several.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the Employer and the Employee have executed and delivered
this Agreement as of the date first shown above.
THE EMPLOYER:
CARROLLTON FEDERAL BANK, FSB
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
COMMUNITY FIRST BANKING COMPANY
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
THE EMPLOYEE:
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<PAGE>
Exhibit A
---------
CARROLLTON FEDERAL BANK
JOB DESCRIPTION
REVISED FIRST QUARTER, 1996
- ------------------------------------------------------------------------
JOB TITLE: CHIEF FINANCIAL OFFICER
JOB CODE: E002
JOB LEVEL: ADMINISTRATIVE
FSLA: EXEMPT
DEPARTMENT: EXECUTIVE
REPORTS TO: PRESIDENT/CHIEF EXECUTIVE OFFICER
- --------------------------------------------------------------------------
SUMMARY:
Has broad responsibility for the bank's fiscal operating results. Counsels
management on fiscal control and profitability. Prepares and represents the
major reports for top management and the Board of Directors. Directs the
preparation of all fiscal reporting, such as cost accounting, budgets,
regulatory agency, and government reports. Designated bank Security Officer to
safeguard the assets of the bank. Directs the activities of bank operations
providing advice and guidance to operations and data processing officers who
implement departmental objectives and programs. Manages the investment
portfolio of the bank in a manner which maximizes return while minimizing risk.
Provides information to bank personnel about interest rates and participates in
decisions involving rate sensitivity. Keeps the President informed concerning
operational developments and consults with the latter regarding decisions
affecting the bank. Works with top management in developing plans and policies
which may affect the bank as a whole. Represents the bank to other financial
institutions and the community in a manner that will enhance the image of the
bank.
ESSENTIAL DUTIES AND RESPONSIBILITIES: The primary duty and responsibility of
this position is quality service to both internal and external customers.
Specific duties are listed below. Other duties may be assigned.
Services as a member of the bank's senior management team and participates
significantly in developing overall policies, programs, objectives and goals.
Is responsible for working with subordinate executives to review overall
administration and advise on policy questions, business development, staff
requirements, performance appraisals, salary administration, and all other
administrative matters.
Services on and/or directs the Asset/Liability Committee, Asset Review
Committee, and 401(k) Administrative Committee.
<PAGE>
Responsible for security and maintenance of all bank assets. Ensures that the
bank security program is managed effectively to protect the assets, building,
and employees. Evaluates the bank's existing security program based on
recommendations made by the manager of security.
Is responsible for developing and prescribing adequate financial procedures to
provide the basis for management decisions and control.
Manages the bank's investments portfolio to maximize yield and ensure adequate
liquidity and pledges securities to collateralize public deposits. Consults
with others in making recommendations to revise the bank's investment
objectives.
Is responsible for managing the bank's cash and liquidity position based on
policy objectives.
Keeps abreast of capital needs of loan and operations divisions and plan
portfolio accordingly.
Prepares annual operating budget for the bank.
Is responsible for determining that all expenditures are properly approved and
justified.
Oversees the financial planning process in conjunction with other senior
management.
Prepares profits forecasts.
Manages bank's total insurance program (except employee benefit insurance).
Reviews operating policies, procedures, objectives, and goals for each area of
responsibility to ensure that they support bank-wide policies and objectives.
Reviews innovations in the banking industry and evaluates their practicality and
effectiveness. Directs research into new products and/or concepts that could
increase operating efficiency, profits, and/or market share.
Coordinates the development and effective operation of bank systems to provide
efficient customer service at minimum cost.
Stays abreast of all regulations and rules of all supervisory and regulatory
agencies pertaining to division functions. Analyzes, plans, and implements rule
and regulation changes through appropriate operational departments.
Monitors the performance of subordinate areas of responsibility in attaining
established business objectives. Takes corrective actions as necessary when
objectives are not being attained.
Conducts ad hoc projects and assignments as directed by the President/Chief
Executive Officer.
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<PAGE>
Is responsible for preparing, presenting, and interpreting financial reports to
management, the directors, and governmental agencies.
Serves as liaison officer for bank with outside auditing firm.
Represents the bank in contacts with business and trade associations, customers,
and regulatory agencies. Attends civic functions and otherwise promotes the
bank's image.
SUPERVISORY RESPONSIBILITIES:
Manages subordinate supervisors in the accounting and building maintenance
areas. Is responsible for the overall direction, coordination, and evaluation
of these units.
Carries out supervisory responsibilities in accordance with the organization's
policies and applicable laws. Responsibilities include interviewing, hiring and
training employees; planning, assigning, and directing work; appraising
performance; rewarding and disciplining employees; and addressing complaints and
resolving problems.
CRA REQUIREMENT:
Expected to understand the bank's obligations under the Community Reinvestment
Act and how to fulfill them. Expected to cooperate with and support the bank's
CRA program. Will be held accountable for any lack of cooperation that weakens
the bank's CRA performance, as reflected in internal audits, agency
examinations, and/or community projects.
PRODUCT KNOWLEDGE REQUIREMENTS:
Should know and understand the products and services that are provided by
Carrollton Federal Bank and give quality service at all times to our customers.
QUALIFICATION REQUIREMENTS:
To perform this job successfully, an individual must be able to perform each
essential duty satisfactorily. The requirements listed below are representative
of the knowledge, skill, and/or ability required. Reasonable accommodations may
be made to enable individuals with disabilities to perform the essential
functions.
EDUCATIONS AND/OR EXPERIENCE:
Bachelor's degree (B.A) from four-year college or university, five to seven
years related accounting and investment experience and/or training; or
equivalent combination of education and experience.
-3-
<PAGE>
LANGUAGE SKILLS:
Ability to read, analyze, and interpret general business periodicals,
professional journals, technical procedures, or governmental regulations.
Ability to write reports, business correspondence, and procedure manuals.
Ability to effectively present information and respond to questions from
groups of managers, clients, customers, and the general public.
MATHEMATICAL SKILLS:
Good analytical skills with problem-solving abilities. Ability to work with
mathematical concepts such as probability and statistical inference. Ability
to apply concepts such as fractions, percentages, ratios, and proportions to
practical situations.
REASONING ABILITY:
Ability to solve practical problems and deal with a variety of concrete
variables in situations where only limited standardization exists. Ability
to interpret a variety of instructions furnished in written, oral, diagram,
or schedule form.
OTHER SKILLS AND ABILITIES:
A high level of interpersonal skills to communicate policies, procedures, and
objectives effectively throughout the bank and to represent the bank
positively. A high level of analytical skill to assess and evaluate the
operation of subordinate areas of responsibility, participate in establishing
bank-wide financial goals, analyze new products, and draft operational
reports to the board. A mature, independent thinker and energetic leader
having demonstrated team management style.
PHYSICAL DEMANDS:
Reasonable accommodations may be made to enable individuals with disabilities to
perform the essential functions.
WORK ENVIRONMENT:
Good. There is little discomfort from noise, heat, dust, or other adverse
factors.
PERFORMANCE EXPECTATIONS:
ORGANIZATIONAL EXPECTATIONS:
Understand that the position exists to ultimately serve the customer either
directly or indirectly through assisting front-line personnel to answer
customer inquiries quickly.
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<PAGE>
Practices a high degree of professionalism and sets an example for others to
follow.
Demonstrates commitment to and understanding of continuous quality
improvement. Uses creativity and initiative to recommend quality
enhancements when relevant and appropriate. Has satisfactory attendance
within policy guidelines and is punctual.
Manages time effectively. Completes assigned duties within required
deadlines.
FINANCIAL EXPECTATIONS:
Makes recommendations to Manager/Supervisor concerning budgetary needs of the
department.
Within parameters of job, uses good judgment related to Bank income
opportunities and expense control.
Is financially responsible.
RELATIONSHIP EXPECTATIONS:
Conducts in-bank and public relationships in a manner that enhances the image
and marketing efforts of the Bank.
Participates in community organizations, activities, and projects.
Contributes to an overall team effort by being an effective team player.
This job description is not intended to be and should not be construed as an
all-inclusive list of the responsibilities, skills, or working conditions
associated with the position. While this job description is intended to
accurately reflect the position's activities and requirements, management
reserves the right to modify, add, or remove duties and assign other duties as
necessary.
-5-
<PAGE>
EXHIBIT 10.5.E
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 1st day of June, 1997, between Carrollton
Federal Bank, FSB (the "Bank"), a federal savings bank chartered by the United
States, and Community First Banking Company (the "Company"), the holding company
of the Bank (the Bank and the Company collectively, the "Employer"), and ANYCE
FOX, a resident of the State of Georgia (the "Employee").
RECITALS:
The Employer desires to employ the Employee as the Management Services
Officer of the Employer and the Employee desires to accept such employment.
In consideration of the above premises and the mutual agreements
hereinafter set forth, the parties hereby agree as follows:
1. DEFINITIONS. Whenever used in this Agreement, the following terms and their
-----------
variant forms will have the meaning set forth below:
1.1 "Agreement" means this Agreement and any exhibits incorporated herein
---------
together with any amendments hereto made in the manner described in this
Agreement.
1.2 "Affiliate" means any business entity which controls the Employer, is
---------
controlled by or is under common control with the Employer.
1.3 "Area" means the geographic area within a radius of 20 miles of any
----
office or facility maintained by the Employer. It is the express intent of the
parties that the Area as defined herein is the area where the Employee performs
or performed services on behalf of the Employer under this Agreement as of, or
within a reasonable time prior to, the termination of the Employee's employment
hereunder.
1.4 "Board" means the board of directors of the Bank.
-----
1.5 "Business of the Employer" means the business conducted by the Employer,
------------------------
which is community banking.
1.6 "Cause" means, any of the following events or conduct preceding a
-----
termination of employment initiated by the Employer:
(a) any act that constitutes, on the part of the Employee, fraud,
dishonesty, bad faith or a felony toward the Employer;
(b) the conviction of the Employee of a felony or crime involving
moral turpitude;
<PAGE>
(c) the Employee's entering into any transaction or contractual
relationship with, or diversion of business opportunity from, the
Employer (other than on behalf of the Employer or with the prior written
consent of the Board); provided, however, that in the case of this Clause
(c), such conduct will not constitute Cause unless the Board delivers to
the Employee notice setting forth (1) the conduct deemed to qualify as
Cause, (2) reasonable remedial action that might remedy such objection,
and (3) a reasonable time (not less than thirty (30) days) within which
the Employee may take such remedial action, and the Employee has not
taken the specified remedial action with the specified reasonable time;
(d) the Employee breaches the covenants contained in Sections 6, 7 or
8 hereof;
(e) conduct by the Employee that results in removal from the
Employee's position as an officer or employee of the Employer pursuant to
a written order by any regulatory agency with authority or jurisdiction
over the Employer; or
(f) immoderate use or addiction to alcohol or any controlled substance
to the visible and perceptive detriment to the performance of the
Employee's duties, responsibilities and representation of the Bank in the
community or the failure of the Employee to act in a moral and upright
manner consistent with generally accepted standards applicable to other
persons in Carroll County, Georgia, occupying similar positions of
employment; provided, however, that in the case of this Clause (f), such
conduct will not constitute Cause unless the Board delivers to the
Employee notice setting forth (1) the conduct deemed to qualify as Cause,
(2) reasonable remedial action that might remedy such objection, and (3)
a reasonable time (not less than thirty (30) days) within which the
Employee may take such remedial action, and the Employee has not taken
the specified remedial action with the specified reasonable time.
1.7 "Company Information" means Confidential Information and Trade Secrets.
-------------------
1.8 "Confidential Information" means data and information relating to the
------------------------
business of the Employer (which does not rise to the status of a Trade Secret)
which is or has been disclosed to the Employee or of which the Employee became
aware as a consequence of or through the Employee's relationship to the Employer
and which has value to the Employer and is not generally known to its
competitors. Confidential Information does not include any data or information
that has been voluntarily disclosed to the public by the Employer (except where
such public disclosure has been made by the Employee without authorization) or
that has been independently developed and disclosed by others, or that otherwise
enters the public domain through lawful means.
1.9 "Change in Control" means any one of the following events first to occur
-----------------
after the completion of the initial public offering of the common stock of the
Company:
(a) the acquisition by any person or persons acting in concert of the
then outstanding voting securities of either the Bank or the Company, if,
after the transaction, the acquiring
-2-
<PAGE>
person (or persons) owns, controls or holds with power to vote twenty-five
percent (25%) or more of any class of voting securities of the Bank or the
Company, as the case may be, or such other transaction as may be described
under 12 C.F.R. Section 225.41(b)(1) or any successor thereto;
(b) within any twelve-month period (beginning on or after the Effective
Date) the persons who were directors of either the Bank or the Company
immediately before the beginning of such twelve-month period (the "Incumbent
Directors") cease to constitute at least a majority of such board of
directors; provided that any director who was not a director as of the
Effective Date will be deemed to be an Incumbent Director if that director
was elected to such board of directors by, or on the recommendation of or
with the approval of, at least two-thirds of the directors who then qualified
as Incumbent Directors; and provided further that no director whose initial
assumption of office is in connection with an actual or threatened election
contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Securities Exchange Act of 1934) relating to the election of
directors will be deemed to be an Incumbent Director;
(c) the approval by the stockholders of either the Bank or the Company of
a reorganization, merger or consolidation, with respect to which persons who
were the stockholders of either the Bank or the Company, as the case may be,
immediately prior to such reorganization, merger or consolidation do not,
immediately thereafter, own more than fifty percent (50%) of the combined
voting power entitled to vote in the election of directors of the
reorganized, merged or consolidated company's then outstanding voting
securities; or
(d) the sale, transfer or assignment of all or substantially all of the
assets of the Company or the Bank to any third party.
1.10 "Effective Date" means June 1, 1997.
--------------
1.11 "Good Reason" means, any of the following events or conduct preceding a
-----------
termination of employment initiated by the Employee:
(a) a material diminution in the powers, responsibilities or duties of
the Employee hereunder;
(b) the removal of the Employee from the position of Management Services
Officer of the Bank and the Company; or
(c) a material breach of the terms of this Agreement by the Employer.
provided, however, that no termination of employment which is triggered by any
conduct or event described in this Section 1.11 shall not constitute a
termination of employment for Good Reason unless the Employee has first provided
the Employer with the opportunity to cure the event or conduct by giving the
Employer a written notice describing in sufficient detail the Employee's belief
-3-
<PAGE>
that a Good Reason exists and the Employee defers resigning until the expiration
of a thirty (30) day cure period, beginning with the date such notice is
received by the Employer.
1.12 "Permanent Disability" means the total inability of the Employee to
--------------------
perform the Employee's duties under this Agreement for a period of ninety (90)
consecutive days as certified by a physician chosen by the Employer and
reasonably acceptable to the Employee.
1.13 "Trade Secrets" means information including, but not limited to,
-------------
technical or nontechnical data, formulas, patterns, compilations, programs,
devices, methods, techniques, drawings, processes, financial data, financial
plans, product plans or lists of actual or potential customers or suppliers
which:
(a) derives economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by, other
persons who can obtain economic value from its disclosure or use; and
(b) is the subject of efforts that are reasonable under the circumstances
to maintain its secrecy.
2. DUTIES.
------
2.1 The Employee is employed as the Management Services Officer of the Bank
and the Company, subject to the direction of the Chief Executive Officer and
President of the Employer, must perform and discharge well and faithfully the
duties which may be assigned to the Employee from time to time by the Employer
in connection with the conduct of its business. The duties and responsibilities
of the Employee are set forth on Exhibit A attached hereto.
---------
2.2 In addition to the duties and responsibilities specifically assigned to
the Employee pursuant to Section 2.1 hereof, the Employee must:
(a) devote substantially all of the Employee's time, energy and skill
during regular business hours to the performance of the duties of the
Employee's employment (reasonable vacations and reasonable absences due to
illness excepted) and faithfully and industriously perform such duties; and
(b) diligently follow and implement all management policies and decisions
communicated to the Employee by the Chief Executive Officer and President of
the Employer.
2.3 Without the approval of the Board, the Employee must devote the
Employee's entire business time, attention and energies to the Business of the
Employer and must not during the term of this Agreement be engaged (whether or
not during normal business hours) in any other business or professional
activity, whether or not such activity is pursued for gain, profit or other
pecuniary advantage; but this will not be construed as preventing the Employee
from:
-4-
<PAGE>
(a) investing the Employee's personal assets in businesses which are not
in competition with the Business of the Employer and which will not require
any services on the part of the Employee in their operation or affairs and in
which the Employee's participation is solely that of an investor;
(b) purchasing securities in any corporation whose securities are
regularly traded provided that such purchase will not result in the Employee
collectively owning beneficially at any time five percent (5%) or more of the
equity securities of any business in competition with the Business of the
Employer; and
(c) participating in civic and professional affairs and organizations and
conferences, preparing or publishing papers or books or teaching so long as
the Board approves of such activities prior to the Employee's engaging in
them.
3. TERM AND TERMINATION.
--------------------
3.1 Term. The term of this Agreement will initially be set at three (3) years
----
and will automatically renew each day after the date hereof so that the term
remains a three (3) year term; provided, however, that the automatic renewals as
set forth above will be terminated by either party giving written notice to the
other party of such termination, in which event the term will end on the third
anniversary of the thirtieth (30th) day following the date the written notice is
received (as so calculated, the "Term").
3.2 Termination. The employment of the Employee under this Agreement may be
-----------
terminated prior to the expiration of the Term only as follows, subject to the
conditions set forth below:
3.2.1 By the Employer:
(a) for Cause at any time, upon written notice to the Employee, in
which event the Employer will have no further obligation to the Employee
except for the payment of any amounts due and owing under Section 4 on
the effective date of the termination; or
(b) without Cause or upon the Permanent Disability of Employee at any
time, provided that the Employer gives the Employee sixty (60) days'
prior written notice of its intent to terminate, in which event the
Employer will be required to make the termination payments under Section
3.7.
3.2.2 By the Employee:
(a) for Good Reason at any time, in which event the Employer will be
required to make the termination payments under Section 3.7; or
(b) without Good Reason or upon the Permanent Disability of the
Employee, provided that the Employee gives the Employer sixty (60) days'
prior written notice of
-5-
<PAGE>
the Employee's intent to terminate, in which event the Employer will have
no further obligation to the Employee except future payment of any
amounts due and owing under Section 4 on the effective date of the
termination.
3.2.3 By the Employee within six (6) months following a Change in
Control; provided that the Employee gives at least thirty (30) days' prior
written notice to the Employer of the Employee's intention to terminate this
Agreement with such resignation to be effective immediately, in which event
the Employer will be required to make a termination payment under Section
3.7.
3.2.4 At any time upon mutual, written agreement of the parties, in
which event the Employer will have no further obligation to the Employee
except for the payment of any amounts due and owing under Section 4 on the
effective date of termination unless otherwise set forth in the written
agreement.
3.2.5 Immediately upon the Employee's death, in which event the Employer
will have no further obligation to the Employee except for the payment of any
amounts due and owing under Section 4 on the effective date of termination.
3.3 Effect of Termination. Termination of the employment of the Employee
---------------------
pursuant to Section 3.2 will be without prejudice to any right or claim which
may have previously accrued to either the Employer or the Employee hereunder and
will not terminate, alter, supersede or otherwise affect the terms and covenants
and the rights and duties prescribed in this Agreement.
3.4 Suspension With Pay. Nothing contained herein will preclude the Employer
-------------------
from releasing the Employee of the Employee's normal duties and suspending
Employee, with pay, during the pendency of any investigation or examination to
determine whether or not Cause exists for termination of employee.
3.5 Suspension Without Pay. If Employee is suspended and/or temporarily
----------------------
prohibited from participating in the conduct of the Employer's affairs by a
notice served under Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance
Act, the Employer's obligations under this Agreement will be suspended as of the
date of service thereof, unless stayed by appropriate proceedings. If the
charges in such notice are dismissed, the Employer may in its discretion:
(a) pay Employee all or part of the compensation withheld while its
contract obligations were suspended; and/or
(b) reinstate (in whole or in part) any of its obligations which were
suspended.
3.6 Other Regulatory Requirements. If the Bank is in default, as defined in
-----------------------------
Section (3)(x)(1) of the Federal Deposit Insurance Act, all obligations under
this Agreement will terminate as the date of such default, but no vested rights
of the Employee will be affected. Further, all obligations under
-6-
<PAGE>
this Agreement will be terminated, except to the extent determined that
continuation of the Agreement is necessary for the continued operation of the
Bank:
(a) by the Director of the Office of Thrift Supervision (the "Director")
or his or her designee, at the time the FDIC enters into an agreement to
provide assistance to or on behalf of the Bank under the authority of the
Federal Deposit Insurance Act; or
(b) by the Director or his or her designee, at the time the Director or
his or her designee approves a supervisory merger to resolve problems
relating to the operation of the Bank or when the Bank is determined by the
Director to be in an unsafe or unsound condition.
Any rights of an Employee already accrued under this Agreement, however, will
not be affected by such action.
3.7 Termination Payments. In the event this Agreement is terminated by the
--------------------
Employer pursuant to Section 3.2.1(b) or by the Employee pursuant to Sections
3.2.2(a) or 3.2.3, then commencing with the first payroll date immediately
following the effective date of such termination, the Employer will pay to the
Employee as severance pay and liquidated damages an amount equal to the Average
Monthly Compensation (as defined below) for a period equal to the remaining
Term. Any amounts payable pursuant to this Section 3.7 will be paid at the same
frequency as the Employee's then Base Salary (as defined in Section 4.1(a)) is
paid. As used herein, the term "Average Monthly Compensation" means the
quotient determined by dividing (a) the greater of (1) the Employee's then
current Base Salary, or (2) the average of Base Salary and incentive bonus as
described in Section 4.1(b) with respect to the most recent three (3)
consecutive twelve-month periods during which the Employee was employed by the
Employer (or if the Employer has been employed for fewer periods, such lesser
number of periods) immediately prior to the effective date of the Agreement's
termination that produced the highest average, by (b) twelve (12).
Notwithstanding any other provisions to this Agreement to the contrary, if
the aggregate of the payments provided for in this Agreement and other payments
and benefits which the Employee has the right to receive from the Employer (the
"Total Payments") would constitute a "parachute payment", as defined in Section
280G(b)(2) of the Internal Revenue Code, the Employee shall receive the Total
Payments unless (a) the after-tax amount that would be retained by the Employee
(after taking into account all federal, state and local income taxes payable by
the Employee and the amount of any excise taxes payable by the Employee under
Section 4999 of the Internal Revenue Code that would be payable by the Employee
(the "Excise Taxes")) if the Employee were to receive the Total Payments has a
lesser aggregate value than (b) the after-tax amount that would be retained by
the Employee (after taking into account all federal, state and local income
taxes payable by the Employee) if the Employee were to receive the Total
Payments reduced to the largest amount as would result in no portion of the
Total Payments being subject to Excise Taxes (the "Reduced Payments"), in which
case the Employee shall be entitled only to the Reduced Payments. If the
Employee is to receive the Reduced Payments, the Employee shall be entitled to
determine which of the Total Payments, and the relative portions of each, are to
be reduced.
-7-
<PAGE>
4. COMPENSATION AND BENEFITS.
-------------------------
4.1 Compensation. The Employee will receive the following salary and
------------
benefits:
(a) Base Salary. During the Term, the Employee will receive a base
-----------
salary at the rate of $65,600 per annum, payable in substantially equal
installments in accordance with the Bank's regular payroll practices ("Base
Salary"). The Employee's Base Salary will be reviewed by the Board annually,
and the Employee will be entitled to receive annually an increase in such
amount, if any, as may be determined by the Board.
(b) Incentive Compensation.
----------------------
(i) In addition to Employee's Base Salary under Section 4.1(a), within
ninety (90) days following the end of each fiscal year of the Employer's
operations, the Employer will pay the Employee a bonus as determined each
year by the Compensation Committee of the Board provided certain
performance criteria (to be determined annually by the Board) are
satisfied.
(ii) The Employee will also be entitled to participate in such other
bonus, incentive and other executive compensation programs as are made
available to senior management of the Employer from time to time.
The bonus amounts which may be payable to the Employee pursuant to this
Section 4.1(b) is referred to herein as "Incentive Compensation".
4.2 Business Expenses; Memberships. The Employer specifically agrees to
------------------------------
reimburse the Employee for (a) reasonable business (including travel) expenses
incurred by the Employee in the performance of the Employee's duties hereunder,
as approved from time to time by the Board, and (b) the dues and business
related expenditures, including initiation fees, associated with membership in a
country club and in professional associations which are commensurate with the
Employee's position; provided, however, that the Employee must, as a condition
of reimbursement, submit verification of the nature and amount of such expenses
in accordance with reimbursement policies from time to time adopted by the
Employer and in sufficient detail to comply with rules and regulations
promulgated by the Internal Revenue Service.
4.3 Vacation. On a non-cumulative basis the Employee will be entitled to
--------
vacation in each year of this Agreement in accordance with the Bank's vacation
policy as then in effect, during which the Employee's Base Salary will be paid
in full.
4.4 Benefits. In addition to the Base Salary and Incentive Compensation, the
--------
Employee will be entitled to such benefits as may be available from time to time
for executives of the Employer similarly situated to the Employee. All such
benefits will be awarded and administered in accordance with the Employer's
standard policies and practices. Such benefits may include, by way of example
-8-
<PAGE>
only, profit-sharing plans, retirement, life and disability insurance benefits
and such other benefits as the Employer deems appropriate.
4.5 Withholding. The Employer may deduct from each payment of compensation
-----------
hereunder all amounts required to be deducted and withheld in accordance with
applicable federal and state income, FICA and other withholding requirements.
5. COMPANY INFORMATION.
-------------------
5.1 Ownership of Information. All Company Information received or developed
------------------------
by the Employee while employed by the Employer will remain the sole and
exclusive property of the Employer.
5.2 Obligations of the Employee. The Employee agrees (a) to hold Company
---------------------------
Information in strictest confidence, and (b) not to use, duplicate, reproduce,
distribute, disclose or otherwise disseminate Company Information or any
physical embodiments thereof and may in no event take any action causing or fail
to take any action necessary in order to prevent any Company Information from
losing its character or ceasing to qualify as Confidential Information or a
Trade Secret. In the event that the Employee is required by law to disclose any
Company Information, the Employee will not make such disclosure unless (and then
only to the extent that) the Employee has been advised by independent legal
counsel that such disclosure is required by law and then only after prior
written notice is given to the Employer when the Employee becomes aware that
such disclosure has been requested and is required by law. This Section 5 will
survive the termination of this Agreement with respect to Confidential
Information for so long as it remains Confidential Information, but for no
longer than three (3) years following termination of this Agreement, and this
Section 5 will survive termination of this Agreement with respect to Trade
Secrets for so long as is permitted by the then-current Georgia Trade Secrets
Act of 1990, O.C.G.A. (S)(S) 10-1-760-10-1-767.
5.3 Delivery upon Request or Termination. Upon request by the Employer, and
------------------------------------
in any event upon termination of employment with the Employer, the Employee will
promptly deliver to the Employer all property belonging to the Employer,
including without limitation all Company Information then in the Employee's
possession or control.
6. NON-COMPETITION. The Employee agrees that during the Term hereunder and, in
---------------
the event of the Employee's termination of employment for any reason, thereafter
for a period equal to the greater of (a) twelve (12) months; or (b) the period
during which the Employee is to be paid monthly termination payments, if any, in
accordance with Section 3.7 hereof, the Employee will not (except on behalf of
or with the prior written consent of the Employer), within the Area, either
directly or indirectly, on the Employee's own behalf or in the service or on
behalf of others, as a principal, partner, officer, director, manager,
supervisor, administrator, consultant, executive employee or in any other
capacity which involves duties and responsibilities similar to those undertaken
for the Employer, engage in any business which is the same as or essentially the
same as the Business of the Employer.
-9-
<PAGE>
7. NON-SOLICITATION OF CUSTOMERS. The Employee agrees that during the Term
-----------------------------
hereunder and, in the event of the Employee's termination of employment for any
reason, thereafter for a period equal to the greater of (a) twelve (12) months;
or (b) the period during which the Employee is to be paid monthly termination
payments, if any, in accordance with Section 3.7 hereof, the Employee will not
(except on behalf of or with the prior written consent of the Employer), within
the Area, on the Employee's own behalf or in the service or on behalf of others,
solicit, divert or appropriate or attempt to solicit, divert or appropriate,
directly or by assisting others, any business from any of the Employer's
customers, including actively sought prospective customers, with whom the
Employee has or had material contact during the last two (2) years of the
Employee's employment, for purposes of providing products or services that are
competitive with those provided by the Employer.
8. NON-SOLICITATION OF EMPLOYEES. The Employee agrees that during the Term
-----------------------------
hereunder and, in the event of the Employee's termination of employment for any
reason, thereafter for a period equal to the greater of (a) twelve (12) months;
or (b) the period during which the Employee is to be paid monthly termination
payments, if any, in accordance with Section 3.7 hereof, the Employee will not,
within the Area, on the Employee's own behalf or in the service or on behalf of
others, solicit, recruit or hire away or attempt to solicit, recruit or hire
away, directly or by assisting others, any employee of the Employer or its
Affiliates, whether or not such employee is a full-time employee or a temporary
employee of the Employer or its Affiliates and whether or not such employment is
pursuant to written agreement and whether or not such employment is for a
determined period or is at will.
9. REMEDIES. The Employee agrees that the covenants contained in Sections 5
--------
through 8 of this Agreement are of the essence of this Agreement; that each of
the covenants is reasonable and necessary to protect the business, interests and
properties of the Employer; and that irreparable loss and damage will be
suffered by the Employer should the Employee breach any of the covenants.
Therefore, the Employee agrees and consents that, in addition to all the
remedies provided by law or in equity, the Employer will be entitled to a
temporary restraining order and temporary and permanent injunctions to prevent a
breach or contemplated breach of any of the covenants. The Employer and the
Employee agree that all remedies available to the Employer or the Employee, as
applicable, will be cumulative.
10. SEVERABILITY. The parties agree that each of the provisions included in
------------
this Agreement is separate, distinct and severable from the other provisions of
this Agreement and that the invalidity or unenforceability of any Agreement
provision will not affect the validity or enforceability of any other provision
of this Agreement. Further, if any provision of this Agreement is ruled invalid
or unenforceable by a court of competent jurisdiction because of a conflict
between the provision and any applicable law or public policy, the provision
will be redrawn to make the provision consistent with and valid and enforceable
under the law or public policy.
11. NO SET-OFF BY THE EMPLOYEE. The existence of any claim, demand, action or
--------------------------
cause of action by the Employee against the Employer, or any Affiliate of the
Employer, whether predicated upon this Agreement or otherwise, will not
constitute a defense to the enforcement by the Employer of any of its rights
hereunder.
-10-
<PAGE>
12. NOTICE. All notices and other communications required or permitted under
------
this Agreement will be in writing and, if mailed by prepaid first-class mail or
certified mail, return receipt requested, will be deemed to have been received
on the earlier of the date shown on the receipt or three (3) business days after
the postmarked date thereof. In addition, notices hereunder may be delivered by
hand, facsimile transmission or overnight courier, in which event the notice
will be deemed effective when delivered or transmitted. All notices and other
communications under this Agreement must be given to the parties hereto at the
following addresses:
(i) If to the Employer, to it at:
110 Dixie Street
P.O. Box 250
Carrollton, Georgia 30197-0250
Attn: Chairman, Compensation Committee
(ii) If to the Employee, to the Employee at:
1835 West Highway 5
Carrollton, Georgia 30117
13. ASSIGNMENT. Neither party hereto may assign or delegate this Agreement or
----------
any of its rights and obligations hereunder without the written consent of the
other party hereto.
14. WAIVER. A waiver by the Employer of any breach of this Agreement by the
------
Employee will not be effective unless in writing, and no waiver will operate or
be construed as a waiver of the same or another breach on a subsequent occasion.
15. ARBITRATION. Any controversy or claim arising out of or relating to this
-----------
Agreement, or the breach thereof, will be settled by binding arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. The decision of the arbitration panel will be final and binding on
the parties, and judgment upon the award rendered by the arbitration panel may
be entered by any court having jurisdiction thereof.
16. ATTORNEYS' FEES. In the event that the parties have complied with this
---------------
Agreement with respect to arbitration of disputes and litigation ensues between
the parties concerning the enforcement of an arbitration award and the Employee
must employ separate legal counsel, the Employer shall advance to the Employee,
within thirty (30) days after receiving copies of invoices submitted by
Employee, any and all reasonable attorneys' fees and expenses incurred with
preparing, investigating and litigating such action, proceeding or suit. The
Employee must reimburse the Employer for any and all advances that exceed the
first $5,000 advanced to the Employee for such legal expenses only if and to the
extent that a final decision by a court of competent jurisdiction has determined
that the Employee is not entitled to receive any amounts due or to enforce any
of the rights under this Agreement.
-11-
<PAGE>
17. APPLICABLE LAW. This Agreement will be construed and enforced under and in
--------------
accordance with the laws of the State of Georgia. The parties agree that any
appropriate state court located in Carroll County, Georgia, will have
jurisdiction of any case or controversy arising under or in connection with this
Agreement and will be a proper forum in which to adjudicate such case or
controversy. The parties consent to the jurisdiction of such courts.
18. INTERPRETATION. Words importing the singular form shall include the plural
--------------
and vice versa. The terms "herein", "hereunder", "hereby", "hereto", "hereof"
and any similar terms refer to this Agreement. Any captions, titles or headings
preceding the text of any article, section or subsection herein are solely for
convenience of reference and will not constitute part of this Agreement or
affect its meaning, construction or effect.
19. ENTIRE AGREEMENT. Except for any rights the Employee may have under any
----------------
employee benefit plans maintained by the Employer for employees generally and
any rights the Employee may have under the Community First Banking Company 1997
Stock Option Plan and the Community First Banking Company Management Recognition
Plan, this Agreement embodies the entire and final agreement of the parties on
the subject matter stated in the Agreement. No amendment or modification of
this Agreement will be valid or binding upon the Employer or the Employee unless
made in writing and signed by both parties. All prior understandings and
agreements relating to the subject matter of this Agreement are hereby expressly
terminated.
20. RIGHTS OF THIRD PARTIES. Nothing herein expressed is intended to or will
-----------------------
be construed to confer upon or give to any person, firm or other entity, other
than the parties hereto and their permitted assigns, any rights or remedies
under or by reason of this Agreement.
21. SURVIVAL. The obligations of the Employee pursuant to Sections 5, 6, 7, 8
--------
and 9 will survive the termination of the employment of the Employee hereunder
for the period designated under each of those respective sections.
22. JOINT AND SEVERAL. The obligation of the Bank and the Company to Employee
-----------------
hereunder will be joint and several.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-12-
<PAGE>
IN WITNESS WHEREOF, the Employer and the Employee have executed and delivered
this Agreement as of the date first shown above.
THE EMPLOYER:
CARROLLTON FEDERAL BANK, FSB
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
COMMUNITY FIRST BANKING COMPANY
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
THE EMPLOYEE:
--------------------------------
-13-
<PAGE>
Exhibit A
---------
CARROLLTON FEDERAL BANK
JOB DESCRIPTION
REVISED DECEMBER, 1996
- ------------------------------------------------------------------------------
JOB TITLE: MANAGEMENT SERVICES OFFICER
JOB CODE: 0703
JOB LEVEL: 7
FSLA: EXEMPT
DEPARTMENT: MANAGEMENT SERVICES
REPORTS TO: PRESIDENT/CHIEF EXECUTIVE OFFICER
- ------------------------------------------------------------------------------
SUMMARY:
Member of top management team with direct responsibility for comprehensive
strategic planning.
ESSENTIAL DUTIES AND RESPONSIBILITIES: The primary duty and responsibility of
this position is quality service to both internal and external customers.
Specific duties are listed below. Other duties may be assigned.
Serves as the chairman of Asset-Liability and Asset Review.
Serves as a member of the following bank-wide committees: CRA, Senior
Management, and Long-Range Planning Committee.
Heads, in cooperation with the Chief Executive Officer and the Executive Vice
Presidents, the bank-wide strategic planning process. Ensures that short-run
and long-run plans are written, communicated, reviewed, and evaluated on a
quarterly basis.
Identifies and recommends changes and new procedures to eliminate weaknesses in
practices and procedures in the area of financial management.
Stays abreast of current trends in banking by regularly reading appropriate
periodicals, preparing summary memos for the Executive Vice Presidents and the
President, and by attending seminars and conventions.
Maintains the records for the bank's officer call program and other incentive
programs.
Recommends approved modifications in the strategic planning process.
<PAGE>
Follows up specific leads offering business development opportunities among high
income citizens. Promotes the bank's services by placing the prospect in
contact with the appropriate bank personnel and following through to determine
the results of the meeting.
Services on various civic committees as designated by the President to increase
bank community involvement.
Prepares new regulatory applications.
Takes responsibility for special projects assigned by the President.
Activates new work procedures and systems to accomplish bank development
objectives more efficiently.
Advises and assists division heads, department managers, officers, and staff in
their respective functions.
Maintains extensive contact with customers, the public, and community. Conducts
relationships in a manner that will enhance the overall marketing effort of the
bank.
Participates in community organizations and projects.
SUPERVISORY RESPONSIBILITIES:
Carries out supervisory responsibilities in accordance with the organization's
policies and applicable laws.
CRA REQUIREMENT:
Expected to understand the bank's obligations under the Community Reinvestment
Act and how to fulfill them. Expected to cooperate with and support the bank's
CRA program. Will be held accountable for any lack of cooperation that weakens
the bank's CRA performance, as reflected in internal audits, agency
examinations, and/or community projects.
PRODUCT KNOWLEDGE REQUIREMENT:
Should know and understand the products and services that are provided by CFB
and give quality service at all times to our customers.
QUALIFICATION REQUIREMENTS:
To perform this job successfully, an individual must be able to perform each
essential duty satisfactorily. The requirements listed below are representative
of the knowledge, skill, and/or
-2-
<PAGE>
ability required. Reasonable accommodations may be made to enable individuals
with disabilities to perform the essential functions.
EDUCATION AND/OR EXPERIENCE
A management degree in business administration or related areas or five to
seven years of progressively responsible experience in a financial
institution to learn the operation of various departments and procedures.
LANGUAGE SKILLS:
Ability to read, analyze, and interpret general business periodicals,
professional journals, technical procedures, or governmental regulations.
Ability to write reports, business correspondence, and procedure manuals.
Ability to effectively present information and respond to questions from
groups of managers, clients, customers, and the general public.
MATHEMATICAL SKILLS:
Good analytical skills with problem-solving abilities. Ability to work with
mathematical concepts such as probability and statistical inference. Ability
to apply concepts such as fractions, percentages, ratios, and proportions to
practical situations.
REASONING ABILITY:
Ability to solve practical problems and deal with a variety of concrete
variables in situations where only limited standardization exists. Ability
to interpret a variety of instructions furnished in written, oral, diagram,
or schedule form.
CERTIFICATES, LICENSES, REGISTRATIONS:
Completion of various banking courses and banking schools would be helpful.
OTHER SKILLS AND ABILITIES:
The analytical skill necessary to recommend policies and procedures that
conform with state and federal laws and that will achieve bank goals. Good
computer knowledge and ability to operate standard office equipment.
PHYSICAL DEMANDS:
Reasonable accommodations may be made to enable individuals with disabilities to
perform the essential functions of the job.
-3-
<PAGE>
WORK ENVIRONMENT:
Good. There is little discomfort from noise, heat, dust, or other adverse
factors.
PERFORMANCE EXPECTATIONS:
ORGANIZATIONAL EXPECTATIONS:
Understands that the position exists to ultimately serve the customer either
directly or indirectly through assisting front-line personnel to answer
customer inquiries quickly.
Practices a high degree of professionalism and sets an example for others to
follow.
Demonstrates commitment to and understanding of continuous quality
improvement. Uses creativity and initiative to recommend quality
enhancements when relevant and appropriate.
Has satisfactory attendance within policy guidelines and is punctual.
Manages time effectively. Completes assigned duties within required
deadlines.
FINANCIAL EXPECTATIONS:
Makes recommendations to Manager/Supervisor concerning budgetary needs of the
department.
Within parameters of job, uses good judgment related to Bank income
opportunities and expense control.
Is financially responsible.
RELATIONSHIP EXPECTATIONS:
Conducts in-bank and public relationships in a manner that enhances the image
and marketing efforts of the Bank.
Participates in community organizations, activities, and projects.
Contributes to an overall team effort by being an effective team player.
This job description is not intended to be and should not be construed as an
all-inclusive list of the responsibilities, skills, or working conditions
associated with the position. While this job description is intended to
accurately reflect the position's activities and requirements, management
reserves the right to modify, add, or remove duties and assign other duties as
necessary.
-4-
<PAGE>
CARROLLTON FEDERAL BANK
MAIN OFFICE
110 DIXIE STREET
P. O. BOX 250
CARROLLTON, GEORGIA 30117
TELEPHONE: (404) 834-1071
FAX: (404) 834-8823
November 3, 1993
President
Financial Institutions Retirement Fund
5 Corporate Park Drive
White Plains, New York 10604-3893
Re: Letter Agreement Regarding Financial Institutions
Retirement Fund Early Retirement Incentive
------------------------------------------
Gentlemen:
We understand that the Comprehensive Retirement Program (the "Retirement
Program") of the Financial Institutions Retirement Fund (the "Fund") as
established, effective December 1, 1943 and amended and restated effective
January 1, 1986, continues to be maintained for the exclusive purpose of
allowing eligible savings and loan associations or similar institutions, or any
organization serving the savings and home finance industry (collectively, the
"financial institutions"), to participate in a program for providing retirement
and death benefits to employees of such financial institutions. The Retirement
Program is a plan and trust which has been determined to meet the requirements
for tax-qualification and tax-exemption under Sections 401(a) and 501(a),
respectively, of the Internal Revenue Code of 1986, as amended (the "Code").
All contributions by participating financial institutions to the Fund with
respect to the Retirement Program are invested on a pooled basis and are
available for the payment of benefits under the Fund without allocation to
individual employers or employees.
As part of, and supplemental to, the other benefits offered under the
Retirement Program, a participating financial institution may offer certain of
its employees benefits which are in the nature of a voluntary early retirement
incentive (any such offer is hereafter referred to as an "Early Retirement
Incentive"). Subject to such rules as the Board may prescribe, an eligible
financial institution may offer an Early Retirement Incentive by completing an
Adoption Agreement and electing from a range of specified choices (i.e. as to
benefits and eligibility) structured to meet its individual needs. The choices
offered under the Fund are designed to meet the applicable requirements of the
Age Discrimination in Employment Act of 1967, as amended, the Employee
<PAGE>
President
Financial Institutions Retirement Fund
November 3, 1993
Page 2
Retirement Income Security Act of 1974, as amended, the Code, any other
applicable law and any regulations under the foregoing statutes (collectively,
referred to as the "applicable law").
This letter agreement (the "Agreement") is intended to confirm the
understanding and agreement between the Fund and Carrollton Federal Bank, FSB
that Carrollton Federal Bank, FSB will indemnify the Fund as to any pending or
threatened litigation or any claim to the extent permitted under applicable law
which arises out of the offer or failure to offer an Early Retirement Incentive
to its employees. Although Carrollton Federal Bank, FSB understands that the
range of terms from which it can elect to offer an Early Retirement Incentive
are permissible under applicable law, Carrollton Federal Bank, FSB understands
that (i) it is under an obligation to retain outside counsel to determine if its
offer of an Early Retirement Incentive will violate applicable law and (ii) its
offer of any such Early Retirement Incentive and its continued administration
and operation of same will be on a nondiscriminatory basis and not in violation
of applicable law.
1. Carrollton Federal Bank, FSB shall indemnify the Fund and hold it and
each of its officers, directors, principals, and employees (individually an
"Indemnified Party"), harmless against any and all losses, claims, damages or
liabilities, including legal fees and expenses, to which the Fund or any
Indemnified Party may become subject arising in any manner out of or in
connection with an Early Retirement Incentive or the availability thereof,
except that such Indemnified Party shall not be so indemnified if such losses,
claims, damages or liabilities are finally adjudged by a court of competent
jurisdiction to have resulted from its or their gross negligence or willful
misconduct. In addition, Carrollton Federal Bank, FSB waives any rights or
claims it may have against the Fund or any Indemnified Party in connection with
this Agreement, except to the extent such claims are based on the gross
negligence or willful misconduct of the Fund or any Indemnified Party as finally
adjudged by a court of competent jurisdiction. Pursuant to the foregoing
indemnification, Carrollton Federal Bank, FSB will, upon notice, advance or pay
promptly to or on behalf of the Fund and any Indemnified Party, all reasonable
attorneys' fees and other expenses and disbursements as they are incurred.
If the Fund or any Indemnified Party is required to participate in any
legal or other proceeding as a result of an Early Retirement Incentive, then, to
the extent the Fund is not indemnified under the preceding paragraph (other than
by reason of its gross negligence or willful misconduct), Carrollton Federal
Bank, FSB shall reimburse the Fund for any reasonable legal fees and out-of-
pocket expenses incurred to the same extent and in the same manner as specified
hereinabove. Carrollton Federal Bank, FSB also agrees to reimburse any
Indemnified Party for any reasonable legal fees incurred by an Indemnified
Party. Carrollton Federal Bank, FSB shall pay these sums within fifteen (15)
days of being billed; provided, however, that Carrollton Federal Bank, FSB shall
be entitled to prompt reimbursement in the event that the Indemnified Party is
finally adjudged to have acted with gross negligence or willful misconduct.
To the extent the Fund or any Indemnified Party is not reimbursed in the
time and manner described above, such unreimbursed amounts may, in the
discretion of the Board of Directors, be
<PAGE>
President
Financial Institutions Retirement Fund
November 3, 1993
Page 3
a charge, to the extent permitted by applicable law, against that portion of the
assets of the Fund attributable to Carrollton Federal Bank, FSB as an
administrative expense pursuant to Article XIV of the Regulations governing the
Retirement Program and may be a charge against Carrollton Federal Bank's
"distributable fund," if any, as determined in accordance with Article XII,
unless and until such expenses are reimbursed to the appropriate Indemnified
Party.
In addition, Carrollton Federal Bank, FSB shall reimburse the Fund for all
reasonable costs including legal fees incurred in enforcing this Agreement,
provided that the Fund is a prevailing party in any such action or proceeding.
2. The individuals executing this Agreement for the parties hereto
represent and warrant that they are authorized to enter into this Agreement.
3. The provisions of this Agreement shall inure to, and be binding upon,
the successors and assigns of the Fund and Carrollton Federal Bank, FSB, except
that Carrollton Federal Bank, FSB shall not assign or in any way delegate its
obligations hereunder to any other party without the express written consent of
the Fund.
4. The rights of the Fund under this Agreement are in addition to any
rights it may have under the terms of the Retirement Program, and the provisions
of this Agreement represent the entire understanding of the parties with respect
to the matters referred to herein and this Agreement supersedes all oral or
written agreements or understandings between the parties concerning the subject
matter of this Agreement.
5. This Agreement may be amended only by a written instrument executed by
the parties.
6. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same agreement.
<PAGE>
President
Financial Institutions Retirement Fund
November 3, 1993
Page 4
7. This Agreement shall be effective upon execution, and governed by and
construed in accordance with the laws of the State of New York.
Very truly yours,
CARROLLTON FEDERAL BANK, FSB
By:/s/ Gary D. Dorminey
------------------------------------------
Gary D. Dorminey
President and CEO
AGREED TO AND ACCEPTED
PRESIDENT
FINANCIAL INSTITUTIONS RETIREMENT FUND
By:/s/
----------------------------------
<PAGE>
FINANCIAL INSTITUTIONS RETIREMENT FUND
REGULATIONS
governing
THE COMPREHENSIVE RETIREMENT PROGRAM
24th Revision, Effective July 1, 1993
108 Corporate Park Drive . P. O. Box 847 . White Plains, NY 10604
<PAGE>
FINANCIAL INSTITUTIONS RETIREMENT FUND
Established December 1, 1943
A non-profit, IRS qualified, tax-exempt, pension plan and trust through which
Federal Home Loan Banks, Savings and Loan Associations and similar institutions,
or any other federally insured financial institutions (including those
organizations serving them) may cooperate in providing for the retirement of
their employees. These Regulations, including the Appendices attached hereto,
contain the governing provisions of the Fund's Comprehensive Retirement Program,
a plan which provides retirement and death benefits. All contributions to the
Fund are commingled, and all assets of the Fund are invested on a pooled basis,
without allocation to individual employers or employees. All amounts payable by
the Fund are a general charge upon all its assets.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS........................................................ 1
ARTICLE II PARTICIPATION AND MEMBERSHIP..................................... 10
SECTION 1. EMPLOYER PARTICIPATION................................... 10
SECTION 2. EMPLOYEE MEMBERSHIP...................................... 11
ARTICLE III SERVICE......................................................... 14
SECTION 1. BENEFIT SERVICE.......................................... 14
SECTION 2. VESTING SERVICE.......................................... 15
ARTICLE IV BASIC BENEFITS................................................... 17
SECTION 1. NORMAL RETIREMENT........................................ 17
SECTION 2. EARLY RETIREMENT......................................... 18
SECTION 3. DEATH BENEFITS........................................... 21
SECTION 4. POST-AGE 65 ACCRUALS..................................... 25
ARTICLE V BENEFIT FORMULAS AND ADDITIONAL BENEFITS.......................... 26
SECTION 1. NORMAL RETIREMENT BENEFIT FORMULAS....................... 26
SECTION 2. EARLY RETIREMENT FACTORS................................. 37
SECTION 3. DISABILITY RETIREMENT BENEFIT............................ 38
SECTION 4. ADDITIONAL DEATH BENEFITS................................ 40
SECTION 5. RETIREMENT ADJUSTMENT PAYMENT............................ 41
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
SECTION 6. POST-RETIREMENT SUPPLEMENTS............................. 41
SECTION 7. SUPPLEMENTAL EARLY RETIREMENT WINDOW BENEFIT............ 43
SECTION 8. REDUCTION IN ACCRUAL RATE FOR CERTAIN
EMPLOYEES......................................................... 47
ARTICLE VI OPTIONAL FORMS OF PAYMENT....................................... 48
SECTION 1. OPTIONS................................................. 48
SECTION 2. CONDITIONS OF ELECTION.................................. 49
SECTION 3. PAYMENT OF BENEFITS TO CERTAIN ACTIVE MEMBERS........... 50
ARTICLE VII METHOD OF PAYMENT.............................................. 52
ARTICLE VIII RESTORATION OF A RETIRANT TO SERVICE.......................... 59
ARTICLE IX CONTRIBUTIONS................................................... 60
SECTION 1. ENGAGEMENT OF ACTUARY................................... 60
SECTION 2. SINGLE PLAN............................................. 60
SECTION 3. CONTRIBUTIONS BY EMPLOYERS.............................. 61
SECTION 4. ADMINISTRATIVE EXPENSES................................. 62
SECTION 5. CONTRIBUTIONS BY MEMBERS................................ 62
SECTION 6. CONTRIBUTION REQUIREMENTS FOR BENEFIT
IMPROVEMENTS...................................................... 64
SECTION 7. RETURN OF CONTRIBUTIONS TO EMPLOYER..................... 64
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE X EFFECTS OF VARIOUS EVENTS ON MEMBERSHIP AND SERVICE............... 66
SECTION 1. TERMINATION OF MEMBERSHIP............................... 66
SECTION 2. REINSTATEMENT OF MEMBERSHIP AND SERVICE................. 66
SECTION 3. INACTIVE MEMBERSHIP..................................... 67
SECTION 4. LEAVES OF ABSENCE....................................... 69
SECTION 5. SERVICE WITH A CONTROLLED CORPORATION................... 71
SECTION 6. UNIFORM APPLICABILITY OF RULES.......................... 71
ARTICLE XI MISCELLANEOUS PROVISIONS........................................ 72
SECTION 1. LIMITATIONS ON BENEFITS REQUIRED BY THE IRC............. 72
SECTION 2. SMALL BENEFITS.......................................... 77
SECTION 3. AMOUNTS PAYABLE TO INCOMPETENTS, MINORS OR
ESTATES........................................................... 78
SECTION 4. NON-ALIENATION OF AMOUNTS PAYABLE....................... 79
SECTION 5. UNCLAIMED BENEFITS...................................... 79
SECTION 6. TOP HEAVY PROVISIONS.................................... 80
SECTION 7. TRANSFER OF ASSETS AND LIABILITIES FROM PRIOR
PLAN.............................................................. 84
ARTICLE XII WITHDRAWAL OF PARTICIPATING EMPLOYER........................... 85
SECTION 1. NOTICE AND EFFECT....................................... 85
SECTION 2. DISTRIBUTABLE FUND...................................... 88
SECTION 3. PAYMENT OF DISTRIBUTABLE FUND........................... 91
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
SECTION 4. PARTIAL TERMINATION..................................... 93
SECTION 5. TRANSFER TO QUALIFIED SUCCESSOR PLAN.................... 94
SECTION 6. SPECIAL PROCEDURES UPON CONSERVATORSHIP OR
RECEIVERSHIP...................................................... 94
ARTICLE XIII TERMINATION OF THE TRUST...................................... 98
ARTICLE XIV ADMINISTRATION AND MANAGEMENT OF FUND.......................... 102
SECTION 1. ADMINISTRATION.......................................... 102
SECTION 2. DISPUTE RESOLUTION...................................... 105
SECTION 3. MANAGEMENT.............................................. 106
SECTION 4. INFORMATION AND COMMUNICATIONS.......................... 109
ARTICLE XV AMENDMENTS...................................................... 113
ARTICLE XVI INTERPRETATION................................................. 114
SPECIAL EFFECTIVE DATES..................................................... 115
</TABLE>
iv
<PAGE>
FINANCIAL INSTITUTIONS RETIREMENT FUND
Established December 1, 1943
A non-profit, IRA qualified, tax-exempt, pension plan and trust through which
Federal Home Loan Banks, Savings and Loan Associations and similar institutions,
or any other federally insured financial institutions (including those
organizations serving them) may cooperate in providing for the retirement of
their employees. These Regulations, including the Appendices attached hereto,
contain the governing provisions of the Fund's Comprehensive Retirement Program,
a plan which provides retirement and death benefits. All contributions to the
Fund are commingled, and all assets of the Fund are invested on a pooled basis,
without allocation to individual employers or employees. All amounts payable by
the Fund are a general charge upon all of its assets.
<PAGE>
REGULATIONS
As amended to July 1, 1993
ARTICLE I DEFINITIONS
The following words and phrases as used in these Regulations shall have the
following
meanings:
(1) Abbreviations used in the following text shall mean:
IRS U. S. Internal Revenue Service
IRC U.S. Internal Revenue Code of 1986, as amended
ERISA Employee Retirement Income Security Act of 1974, as amended
PBGC Pension Benefit Guaranty Corporation
DOL U. S. Department of Labor
(2) "ACCUMULATED CONTRIBUTIONS" - The amount of benefit standing to the credit
of a Member representing the contributions made by the Member together with
Regular Interest thereon as determined in accordance with ERISA.
(3) "BENEFICIARY" - In accordance with Article IV, Section 3 and applicable
law, the person or persons, other than a Contingent Annuitant, designated
to receive any amount payable upon the death of a Member or Retirant. Such
designation may be made or changed only by the Member or Retirant on a form
provided by, and filed with, the Fund prior to the Member's death. If no
Beneficiary is designated, or if the designated Beneficiary
1
<PAGE>
predeceases the Member or Retirant, then (except as provided in Article IV,
Section 3(C) or Article VI, Section 1, Option 2) any such amount payable
shall be paid to the estate of such Member or Retirant upon the Member's or
Retirant's death.
(4) "BENEFIT SERVICE" - The period of Service counted in determining a Member's
benefits as described in Article III.
(5) "BOARD" - The Board of Directors provided for in Article XIV to direct the
operations of the Fund.
(6) "COMMENCEMENT DATE" - The date on which an Employer begins to participate
in the Fund's Comprehensive Retirement Program.
(7) "COMMUTED VALUE" - The present value of a series of future installment
payments discounted at the rate of 7% per annum.
(8) "CONTINGENT ANNUITANT" - A person designated to receive a continuing
allowance under one of the options of, and in accordance with, Article VI
upon the death of a Retirement.
(9) "EFFECTIVE DATE" - Except as otherwise noted herein, the effective date of
the Regulations, as amended and restated, is July 1, 1993.
(10) "EMPLOYEE" - Unless an Employer elects otherwise or as necessary to satisfy
the requirements of IRC Sections 41 O(b) and 401 (a)(26) and the IRS
Regulations thereunder, any person in the Service of an Employer who
receives a Salary. If an individual receives no income from an Employer
other than commissions and such Employer does not elect to include
commissions as Salary under Section (25) of this Article, then such
individual shall not be treated as an Employee for purposes of the
Regulations.
2
<PAGE>
(11) "EMPLOYER" - Any institution which has adopted the Regulations and
participates in the Fund, having applied, qualified and been approved in
accordance with Article II, Section 1.
(12) "ENROLLMENT DATE" - The date on which an Employee becomes a Member.
(13) "EQUIVALENT VALUE" - A benefit of equivalent value when computed on the
basis of tables, developed taking into account actuarial assumptions and
interest rates, which tables were last adopted for this purpose by the
Board and specified in Appendix A attached hereto; provided, however, that
the interest rate used to determine the Equivalent Value of a benefit for
purposes of Article Xl, Section 2, shall not be greater than the PBGC
Interest Rate.
(14) "FUND" - The Financial Institutions Retirement Fund (formerly known as
Savings Associations Retirement Fund) consisting of and governed by the
Regulations and Trust which together constitute a tax-qualified employee
retirement benefit plan.
(15) "HOUR OF SERVICE" -
(A) Each hour for which an Employee is paid, or entitled to payment,
for the performance of duties for an Employer. These hours will be
credited to the Employee for the computation period in which the duties are
performed; and
(B) Each hour for which an Employee is paid, or entitled to payment,
by an Employer on account of a period of time during which no duties are
performed (irrespective of whether the employment relationship has
terminated) due to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty or leave of absence. No more
than 501 Hours of Service will be credited under this Subsection (B) for
any single continuous period (whether or not such period occurs in a single
3
<PAGE>
computation period). Hours under this Subsection (B) will be calculated
and credited pursuant to Section 2530.200b-2 of the DOL Regulations which
is incorporated herein by this reference; and
(C) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by an Employer. The same Hours of
Service will not be credited both under Subsection (A) or (B), as the case
may be, and under this Subsection (C). These hours will be credited to the
Employee for the computation period or periods to which the award or
agreement pertains rather than the computation period in which the award,
agreement or payment is made.
Hours of Service will be credited for employment with other members of
an affiliated service group (under IRC Section 414(m)), a controlled group
of corporations (under IRC Section 414(b)), or a group of trades or
businesses under common control (under IRC Section 414(c)), of which the
Employer is a member, and any other entity required to be aggregated with
such Employer pursuant to IRC Section 41 4(o).
Hours of Service will also be credited for any individual considered
an Employee for purposes of the Regulations under IRC Section 414(n) or
Section 41 4(o).
(16) "MEMBER" - An Employee enrolled in the membership of the Fund's
Comprehensive Retirement Program as provided in Article II, Section 2.
(17) "PLAN YEAR" - A 12-month period ending June 30.
(18) "PBGC INTEREST RATE" - The interest rate used by the PBGC, as of the date
of distribution, for its purposes of determining the present value of a
lump sum distribution on plan termination.
4
<PAGE>
(19) "QUALIFIED DOMESTIC RELATIONS ORDER" - Any judgment, decree or order
(including approval of a property settlement agreement) which has been
determined by the Board to constitute a qualified domestic relations order
within the meaning of Section 414(p)(1) of the IRC. During the pendency of
the Fund's review of a domestic relations order which provides for the
payment of a portion of a Member's retirement benefits to an alternate
payee, such portion shall be placed in a separate account in the Trust.
(20) "REGULAR INTEREST" - Interest at the rate or rates adopted from time to
time by the Board for the purpose of computing interest on the
contributions made by a Member; provided, however, for Plan Years beginning
on or after July 1, 1988 interest compounded annually at the rate of 120
percent of the applicable Federal mid-term rate as in effect under IRC
Section 1274 for the first month of the Plan Year.
(21) "REGULATIONS" - The Regulations of the Fund, as the same may be amended
from time to time.
(22) "RETIRANT" - A former Member who has been retired under Article IV or XII
(including one who terminated with a vested benefit and deferred
commencement of his Retirement Allowance).
(23) "RETIREMENT ALLOWANCE" - The annual lifetime allowance payable to a
Retirement under Articles IV and V.
(24) "RETIREMENT DATE" - The date as of which a Member becomes a Retirant under
Article IV or XII.
(25) "SALARY" - An Employer shall adopt, on a uniform basis for its Members and
in accordance with the applicable provisions of the IRC and IRS
Regulations, one of the following definitions of Salary:
5
<PAGE>
(A) (1) Regular, basic salary or wage rate as of January 1 of the
calendar year or the Member's date of employment, if later.
(2) Regular, basic salary or wage rate as of January 1 of the
calendar year or the Member's date of employment, if later, plus
overtime payments earned in the immediately preceding calendar
year.
(3) Regular, basic salary or wage rate as of January 1 of the
calendar year or the Member's date of employment, if later, plus
overtime payments and bonuses earned in the immediately preceding
calendar year.
(4) Salary, as defined in Paragraph (1), (2) or (3) of this
Subsection (A), plus commissions earned in the immediately
preceding calendar year, but not to exceed such amount of
commissions as the Employer shall designate.
(B) (1) Regular, basic salary or wage rate as in effect for each month of
the calendar year.
(2) Regular, basic salary or wage rate as in effect for each month of
the calendar year, plus overtime payments earned in each such
month.
(3) Regular, basic salary or wage rate as in effect for each month of
the calendar year, plus overtime payments and bonuses earned in
each such month.
(4) Salary, as defined in Paragraph (1), (2) or (3) of this
Subsection (B), plus commissions earned in the current calendar
year, but not to exceed such amount of commissions as the
Employer shall designate.
(C) Total taxable compensation as reported on a Member's IRS Form W-2
(exclusive of any compensation deferred from a prior year) for the
calendar year.
6
<PAGE>
For purposes of the definition of "Salary" under Subsection (B) or Subsection
(C) of this Article I (25), Salary shall be deemed to be earned uniformly over
each month of Benefit Service during the calendar year.
For purposes of the definition of "Salary," special payments such as deferred
compensation (other than amounts voluntarily deferred by the Member under
Section 401(k) of the IRC), and contributions by the Employer under this or any
other plan (other than before-tax contributions made on behalf of a Member to a
cafeteria plan under Section 125 of the IRC unless the Employer specifically
elects to exclude such contributions) shall be excluded. If an Employer elects
to include commissions in the definition of Salary adopted under this Article I
(25), the amount of commissions to be included shall, at the Employer's option
which shall be uniformly applied, be reduced, but not below zero, to an amount
by which a fixed dollar amount specified by the Employer exceeds the Member's
Salary excluding commissions. Accordingly, if a Member's Salary, excluding
commissions, equals or exceeds the applicable fixed dollar amount, then no
commissions will be included as Salary.
For all purposes of this Article I(25), only a Member's first $200,000 (adjusted
for cost of living in accordance with Section 401(a)(17) of the IRC) of Salary
shall be taken into account. Effective July 1, 1994, "Salary," as otherwise
defined above, shall be limited to a Member's first $150,000 (as adjusted for
cost-of-living and otherwise limited or modified in accordance with Section
401(a)(17) of the IRC and applicable IRS rulings and regulations); provided,
however that a Member's accrued benefit determined in accordance with the
Regulations shall not be less than the accrued benefit of such Member determined
as of June 30, 1994.
7
<PAGE>
Subject to the IRC, any definition of "Salary" adopted by an Employer under
Section (25) of this Article I shall be applied to all years of a Member's
Benefit Service; provided, however, if an Employer so elects, the definition of
Salary adopted under this Section (25) shall be applied only to a Member's years
of Benefit Service completed subsequent to the effective date of the Employer's
adoption of such definition of Salary.
(26) "SERVICE" - Employment with an Employer. A period of employment shall
commence or recommence as of the first day the Employee is credited with an
Hour of Service. In accordance with DOL Regulations Section 2530.200b-2(b)
and (c), Service includes (i) periods of vacation, (ii) periods of layoff,
(iii) periods of absence authorized by an employer for sickness, temporary
disability or personal reasons, and (iv) if and to the extent required by
federal law, service in the Armed Forces of the United States. In addition
to the foregoing in this Section (26), Service shall include employment
with other entities required to be aggregated with an Employer under IRC
Section 414(b), (c), (m) or (o) and shall include an individual's
employment with an Employer during the period for which such individual is
not eligible for membership in the Fund's Comprehensive Retirement Program
pursuant to Article 11, Section 2(B).
(27) "SPOUSE" - Except as otherwise provided by a Qualified Domestic Relations
Order, the individual to whom a Member or Retirant was married on the
earlier of (i) the date of his death or (ii) the first date of the period
for which his Retirement Allowance commences.
(28) "TRUST" - The Trust established in respect of the Regulations under the
Declaration of Trust made as of July 15, 1943, as amended, in which the
Regulations are incorporated by reference.
(29) "TRUSTEE" - The Trustee of the Trust.
8
<PAGE>
(30) "VESTING SERVICE" - The period of Service counted in determining a Member's
eligibility for early retirement as described in Article III.
(31) The masculine pronoun wherever used shall include the feminine pronoun.
9
<PAGE>
ARTICLE II PARTICIPATION AND MEMBERSHIP
SECTION 1. EMPLOYER PARTICIPATION
Any federally insured financial institution or other organization serving it may
apply to the Board for participation in the Fund's Comprehensive Retirement
Program if (A) as of its Commencement Date and in accordance with Section 410(b)
of the IRC and the IRS Regulations (i) the percentage of non-highly compensated
employees who will benefit under the Regulations is at least 70% of the
percentage of highly compensated employees (as defined in Section 414(q) of the
IRC) who will benefit under the Regulations (excluding such employees as are
permitted to be excluded under IRS Regulations), or (ii) the average benefit
percentage test (as defined in Section 410(b)(2) of the IRC and the IRS
Regulations) will be satisfied with respect to the Employer, and (B) as of its
Commencement Date and in accordance with Section 401(a)(26) of the IRC and the
IRS Regulations, at least 50 (or, if a lesser number results, 40%) of the
Employer's Employees will benefit under the Fund. The applicant shall submit
the formal application and all required information, and the Board, in its
discretion, shall decide upon admittance and determine the Commencement Date.
The Board may, in its discretion and at such times as it may determine, require
an affirmative showing by an Employer of its continued compliance with the
requirements of Section 410(b) and Section 401(a)(26) of the IRC and IRS
Regulations. Initial and continued participation shall be subject to continued
compliance with the IRC and IRS Regulations in order that the Fund be maintained
as a trust qualified under Section 401(a) of the IRC. Notwithstanding anything
in this Section 1 to the contrary, any Member of the Fund's Comprehensive
Retirement Program who is transferred to a governmental or quasi-governmental
agency serving the financial industry shall continue as a Member of the Fund's
Comprehensive
10
<PAGE>
Retirement Program provided that such Member's employing agency has adopted the
Regulations.
SECTION 2. EMPLOYEE MEMBERSHIP
(A) Every Employee, except as provided in Subsection (B) of this Section 2,
shall be enrolled as a Member of the Fund's Comprehensive Retirement
Program on the latest of:
(1) His Employer's Commencement Date; or
(2) The first day of the month coincident with or next following the date
he is hired by his Employer; or
(3) The first day of the month coincident with or next following the
expiration of any waiting period established with the Fund by his
Employer and made uniformly applicable to its Employees, which period
may not extend beyond the later of his completion of one year of
Service or attainment of age 21. Such waiting period shall be
inapplicable, however, in the cases of restoration and reinstatement
of Service described in Article VIII and Article X, Section 2,
respectively, except for those Employees who have received a complete
distribution of their benefits on account of the withdrawal of their
Employer from participation in the Fund under Article XII or who have
elected to transfer their accrued benefits to a qualified successor
plan on account of such withdrawal from participation in the Fund
under Article XII; or
(4) The first day of the month coincident with or next following the date
he is no longer ineligible under Subsection (B) of this Section; or
11
<PAGE>
(5) In the case of an Employer with respect to whom Employees were
excluded from eligibility for membership pursuant to Paragraph (1) of
Subsection (B) of this Section 2, as in effect on June 30, 1988
(Employees hired on or after attainment of age 60 were ineligible), at
such Employer's option, with respect to any Employee who had attained
age 60 prior to being hired and who has an Flour of Service on or
after July 1, 1988 the applicable enrollment date otherwise provided
under this Subsection (A) and determined without regard to Paragraph
(1) of Subsection (B) of this Section 2 as in effect on June 30, 1988.
(B) An Employee shall not be eligible for membership if he is in one of the
following classes for which his Employer has requested, and the Fund has
granted, subject to continuing compliance with applicable provisions of the
IRC and ERISA, exclusion:
(1) Those who are covered by another designated pension plan of their
Employer.
(2) Those who are compensated on an hourly basis - whereby compensation
for each pay period (without regard to paid absences) is determined by
multiplying the hourly wage rate by the actual number of Hours of
Service completed.
(3) Those who are hired under a written agreement which (i) precludes
membership in the Fund and (ii) provides for a specific period of
employment not in excess of one year.
(C) Every Employee, except as provided in Subsection (D) of this Section 2,
shall, as a condition of his employment, agree to become a Member when
eligible and shall be enrolled as a Member by his Employer as of the date
he becomes eligible. However, no person shall under any circumstances
become a Member unless and until his enrollment application is filed with,
and accepted by, the Fund.
12
<PAGE>
(D) An Employee who is in Service on his Employer's Commencement Date may elect
not to become a Member by filing with the Fund, within 60 days after he
becomes eligible, written notice of such election wherein he waives all
present and prospective benefits which he would otherwise have as a Member.
An Employee who files such notice shall be excluded from membership upon
receipt by the Fund of such notice. Thereafter, he may become a Member
only if he files an enrollment application within five years of the later
of such Commencement Date or the date he becomes eligible for membership,
and furnishes evidence of good health satisfactory to the Fund.
(E) If, on the date a Member is enrolled, his Employer does not expect him to
complete at least 1,000 Hours of Service in the next 12 consecutive month
period, the Member shall be placed forthwith on inactive membership under
Article X, Section 3.
(F) Membership shall not confer any legal rights upon any Employee or other
person against any Employer, nor shall it interfere with the right of any
Employer to discharge any Employee.
13
<PAGE>
ARTICLE III SERVICE
SECTION 1. BENEFIT SERVICE
(A) Benefit Service is the period of Service counted in determining a Member's
benefits (subject to Articles IV and V). It is the sum of Membership
Service and Prior Service.
(B) Membership Service is the years and months of Service rendered by a Member
from his Enrollment Date to the date of termination of his membership,
which date shall be the date immediately preceding his applicable
Retirement Date. Subject to Article X, a Member shall be credited with one
month of Membership Service for each calendar month of enrolled membership
during which an Hour of Service is credited.
(C) Prior Service is the years and months of Service rendered by a Member
through the day preceding his Employer's Commencement Date, for which his
Employer will allow credit on a uniform basis. At the Employer's option
and in a uniform and nondiscriminatory manner, an Employer shall have the
right to count, as Prior Service under this Subsection (C), any period of
Service not otherwise taken into account pursuant to this Article III.
Notwithstanding the foregoing, an Employer may, with the consent of the
Fund, determine as Prior Service of any Employee a period of his continuous
employment with (i) an organization which has been merged or consolidated
with, or substantially all the assets of which have been acquired by, the
Employer and (ii) the Federal Home Loan Bank Board which preceded
employment with such Employer, provided that such determination be
uniformly applicable to all continuing Employees who have been employed by
such organization and enrolled in the membership of the Fund. An Employer
may, upon such terms and conditions as the Fund and the IRS shall approve,
14
<PAGE>
provide benefits in respect of any person covered by a prior retirement
plan of the Employer which was qualified under Section 401(a) of the IRC
and in connection therewith transfer funds from such plan to the Fund so
long as such transferred funds are applied so that each Member affected
thereby would receive a benefit immediately after the transfer, if the Fund
then terminated, at least equal to the benefit he would have received upon
the termination of the prior plan immediately before such transfer.
SECTION 2. VESTING SERVICE
For purposes of determining an Employee's eligibility for early retirement and
subject to any adjustment required by Article X, an Employee will receive credit
for the aggregate of all time period(s) commencing with the Employee's first day
of employment or reemployment with an Employer and ending on the date a break in
service begins. The first day of employment or reemployment is the first day
the Employee performs an hour of service. An Employee will also receive credit
for any period of severance of less than 12 consecutive months. Fractional
periods of a year will be expressed in terms of days. For purposes of this
Section 2, hour of service shall mean each hour for which an Employee is paid or
entitled to payment for the performance of duties for an Employer.
Break in service is a period of severance of at least 12 consecutive months.
Period of severance is a continuous period of time during which the Employee is
not employed by an Employer and commences on an Employee's severance from
service date. An Employee's severance from service date is the date the
Employee retires, quits or is discharged, or if earlier, the 12 month
anniversary of the date on which the Employee was otherwise first absent from
service.
15
<PAGE>
If an Employer is a member of an affiliated service group (under IRC Section
414(m)), a controlled group of corporations (under IRC Section 414(b)), or a
group of trades or businesses under common control (under IRC Section 414(c)),
or any other entity required to be aggregated with the employer pursuant to IRS
Section 414(o), Vesting Service will be credited for any employment for any
period of time for any other member of such group. Vesting Service will also be
credited for any individual required under IRC Section 414(n) or Section 414(o)
to be considered an Employee of an employer aggregated under IRC Section 414(b),
(c), or (m).
16
<PAGE>
ARTICLE IV BASIC BENEFITS
All the benefits described in Articles IV and V are provided on a uniform basis
for the Members of an Employer, except as otherwise provided under Article V,
Section 8.
SECTION 1. NORMAL RETIREMENT
(A) Any Member who attains age 65 while in Service shall be fully vested and
retired on his normal retirement date which shall be the first day of the
month coincident with or next following his 65th birthday or, if later, the
date of his termination of employment; except that if he shall have
attained age 65 before his Employer's Commencement Date, then his normal
retirement date shall be such Member's termination of employment.
(B) The annual normal Retirement Allowance payable as of a Member's normal
retirement date shall be determined under the benefit formula elected by
the Employer under Article V, Section 1. In the case of a Member who
retires after attaining age 65, such Member's Retirement Allowance shall be
the greater of (i) the Member's Retirement Allowance based on his years of
Benefit Service as of his Retirement Date, or (ii) the Member's Retirement
Allowance as of the first day of the month coincident with or next
following the later of (x) the Member's attainment of age 65 or (y) the
Member's Employer's Commencement Date, increased by .8% for each month from
such date to his normal retirement date (but not beyond age 70).
(C) In lieu of having his normal Retirement Allowance commence as of his normal
retirement date, a Member may elect to have such allowance commence in an
increased amount as of the first day of any month subsequent to his normal
retirement date but not later than the first day of the month next
following his attainment of age 70. The regular
17
<PAGE>
Retirement Allowance of such a Member shall be increased by .8% for each
month of deferral up to a maximum increase of 48%.
SECTION 2. EARLY RETIREMENT
(A) Any Member whose Service is terminated before attainment of age 65 and who
has a nonforfeitable right to all or a portion of the Retirement Allowance
provided by his Employer's contributions may, upon written application
filed with the Fund, be retired as of his early retirement date which shall
be the first day of the month coincident with or next following the date of
such termination.
(B) (i) With respect to the benefit formulas described in Article V, Sections
1(A), 1(B), 1(C), 1(F), 1(i), 1(J), 1(K), 1(L), and 1(M), the annual
early Retirement Allowance payable before age 65 shall be equal to a
percentage of the annual Retirement Allowance otherwise payable as of
the Member's normal retirement date, calculated on the basis of his
Salary (career average, High-5 or High-3, whichever is applicable)
and the Benefit Service as of his early retirement date.
(ii) With respect to the benefit formulas described in Article V, Sections
1(D), 1(E), 1(G), 1(H), 1(N), and 1(O), the annual early Retirement
Allowance payable before age 65 shall be equal to a percentage of the
annual Retirement Allowance otherwise payable as of the Member's
normal retirement date calculated on the basis of his Salary (High-5
or High-3, whichever is applicable) as of his early retirement date
and the Benefit Service he would have completed as of his normal
retirement date. The amount determined under the preceding sentence
shall be multiplied by a fraction, the numerator of which is the
actual years and months of
18
<PAGE>
Benefit Service the Member has completed as of his early retirement
date and the denominator of which is the number of years and months
of Benefit Service which the Member would have completed as of his
normal retirement date.
(iii) The percentage applied in Subsection (B)(i) or (B)(ii) of this
Section 2 shall be determined by the Member's Vesting Service at
early retirement from either of the following tables, as adopted by
his Employer:
<TABLE>
<CAPTION>
TABLE 1
-------
Completed Years of Vesting
Vesting Service Percentage
------------------ ----------
<S> <C>
Less than 5 0%
5 or more 100%
</TABLE>
<TABLE>
<CAPTION>
TABLE II
--------
Completed Years of Vesting
Vesting Service Percentage
------------------ ----------
<S> <C>
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
</TABLE>
An Employer may change from one vesting table to the other; provided,
however, that if an Employer adopts Table I subsequent to having adopted
Table II, then any Employee who became a Member before the date of adoption
of Table I and has less than 5 years of Vesting Service will continue to be
subject to Table II until such Member has 5 years of Vesting Service. If an
Employer adopts Table II subsequent to having adopted Table 1, then any
Employee who became a Member before the date of adoption of Table 11 and has
less than 5 years of Vesting Service shall be subject to Table 11; but, at
such time as
19
<PAGE>
such Member completes 5 years of Vesting Service he will again become
subject to Table 1.
(C) In lieu of having his early Retirement Allowance commence at age 65 under
Subsection (B) of this Section 2, a Member may elect to have such allowance
commence in an increased amount as of the first day of any month subsequent
to his attainment of age 65 but not later than the first day of the month
next following his attainment of age 70. The regular Retirement Allowance
of such a Member shall be increased by .8% for each month of deferral beyond
age 65 up to a maximum increase of 48%.
(D) In lieu of the Retirement Allowance payable at age 65 under Subsection (B)
of this Section 2, a Member may elect to have his early Retirement Allowance
commence in a reduced amount, as of the first day of any month subsequent to
his attainment of age 45, or 55, whichever has been designated on a uniform
basis by his Employer. If a Member so elects, his annual early Retirement
Allowance shall be equal to a percentage of his annual early Retirement
Allowance otherwise payable under Subsection (B) of this Section 2. Such
percentage shall be determined by the Member's age at commencement of his
Retirement Allowance using the Table adopted by his Employer pursuant to
Article V, Section 2.
Notwithstanding anything in this Section 2 to the contrary, an Employer may
elect to provide that any early Retirement Allowance which commences after a
Member's attainment of age 60 or 62, as designated by the Employer in its
election, shall not be reduced because of the commencement of such allowance
before the Member's normal retirement date; provided, however, an Employer
may not elect to provide such an unreduced early Retirement Allowance if the
Employer has elected to provide any of the
20
<PAGE>
normal retirement benefit formulas described in Article V, Section 1(E),
(F), (G), (H), (I), (J), (K), (L), (M), (N) or (O).
In the case of an Employer's election pursuant to this Subsection (D) to
provide an unreduced early Retirement Allowance upon a Member's attainment
of age 60 or 62, as designated by the Employer, the early retirement factors
set forth in Appendix E hereto shall apply to the commencement of the
Member's Retirement Allowance prior to the Member's attainment of age 60 or
62, as applicable.
Notwithstanding anything in this Article IV to the contrary, in the case of
a Member who has terminated Service with the Employer with a nonforfeitable
interest in his Retirement Allowance (as determined in accordance with
Article IV, Section 2(B)(iii)) and who is eligible for disability benefits
under the Federal Social Security Act, such Member may elect to commence to
receive his disability retirement benefits under this Section 2 regardless
of the Member's age at such time. In the event of the payment of such
disability retirement benefits as provided in this Subsection (E), such
benefits shall be the Equivalent Value of the disabled Member's early
Retirement Allowance as determined by the Fund in accordance with the IRC,
ERISA and applicable governmental regulations to reflect the early
commencement of the payment thereof.
SECTION 3. DEATH BENEFITS
(A) Subject to the provisions of Subsection (B) of this Section 3, upon the
death of a Member who was eligible for early retirement at the time of his
death and is survived by a Spouse, the Equivalent Value of 120 monthly
installments of his Retirement Allowance, determined as if he had retired as
of the first day of the month during which he died, but
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not less than his Accumulated Contributions, if any, shall be paid in the
form of a life annuity to such Spouse, as Beneficiary, unless such Spouse
elects a lump sum or an installment form of payment under Subsection (D) of
this Section 3; provided, however, that if such Member's Spouse had
consented in writing to the Member's designation of a different Beneficiary,
such death benefit will be paid to such designated Beneficiary. Any such
non-spousal designation may be revoked by the Member without spousal consent
at any time prior to the Member's death. If a Member eligible for early
retirement at the time of his death is not survived by a Spouse, such death
benefit will be paid to his designated Beneficiary or, if there is no
designated Beneficiary, to the Member's estate. If the Member was not
eligible for early retirement at the time of death, no death benefit other
than the refund of his Accumulated Contributions, if any, shall be payable.
(B) Upon the death of a Member who was eligible for early retirement and who was
survived by a Spouse entitled to receive the death benefit determined under
Subsection (A) of this Section 3 or under Article V, Section 4, whichever is
applicable, such death benefit shall not be less than the Equivalent Value
of one-half of the Option 3 allowance under Article VI, Section 1, as if
such Spouse had been designated Contingent Annuitant.
(C) Upon the death of a Retirant who died before 120 monthly installments of his
Retirement Allowance had been paid and was survived by a Spouse and at the
time of his death no optional form of payment under Article VI was in
effect, the Commuted Value of such unpaid installments shall be paid in a
lump sum to his Spouse as Beneficiary; provided, however, that if such
Retirant's Spouse had consented in writing to the designation of a different
Beneficiary, the death benefit will be paid to such designated Beneficiary.
Any such non-spousal designation may be revoked by the Retirant without
spousal consent at
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any time prior to the Retirant's death. If a Retirant is not survived by a
Spouse at the time of his death, the death benefit will be paid to his
designated Beneficiary or, if there is no designated Beneficiary, to the
Retirant's estate.
(D) (1) Upon written request filed with the Fund by the Member or Retirant, or
if no such request had been made prior to the time of death, then upon
written application filed by the Beneficiary prior to payment of any
amount on account of the death of the Member or Retirant, the lump sum
payment provided for in Subsection (A), (B) or (C) of this Section 3
may be converted into installments over a period of up to 10 years for
a spousal Beneficiary, or over a period of up to 5 years for a non-
spousal Beneficiary, computed with interest as specified by the Fund,
and should the Beneficiary die before having received all such
installments, the Equivalent Value of the unpaid installments using
such interest rate shall be paid in a lump sum to the Beneficiary's
estate.
(2) If a Member or Retirant dies before distribution of his Retirement
Allowance commences, distribution of the Member's or Retirant's entire
interest shall be completed by December 31 of the calendar year
containing the fifth anniversary of the Member's death except to the
extent that an election is made to receive distributions in accordance
with (a) or (b) below:
(a) if any portion of the Member's interest is payable to a designated
beneficiary, distributions may be made over the life or over a
period certain not greater than the life expectancy of the
designated beneficiary commencing on or before December 31 of the
calendar year immediately following the calendar year in which the
Member died,
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(b) if the designated beneficiary is the Member's Surviving Spouse,
the date distributions are required to begin in accordance with
(a) above shall not be earlier than the later of (1) December 31
of the calendar year immediately following the calendar year in
which the Member died and (2) December 31 of the calendar year in
which the Member would have attained age 70 1/2.
If the Member has not made an election pursuant to this Subsection (D) by
the time of his or her death, the Member's designated beneficiary must elect
the method of distribution no later than the earlier of (1) December 31 of
the calendar year in which distributions would be required to begin under
this section, or (2) December 31 of the calendar year which contains the
fifth anniversary of the date of death of the Member. If the Member has no
designated beneficiary, or if the designated beneficiary does not elect a
method of distribution, distribution of the Member's entire interest must be
completed by December 31 of the calendar year containing the fifth
anniversary of the Member's death. For purposes of this paragraph (2), if
the Member's or Retirant's Surviving Spouse dies after the Member or
Retirant, but before payments to such Spouse begin, the provisions of this
paragraph (2), with the exception of subparagraph (b) thereof, shall be
applied as if the Surviving Spouse was the Member or Retirant.
Notwithstanding the foregoing, to the extent any Retirement Allowance
provides for payments after a Retirant's death to a beneficiary other than
the Retirant's Spouse, such payments shall be made in accordance with
Section 401(a)(9) of the IRC and the IRS Regulations thereunder.
(E) Special provisions:
(i) If a Member who is eligible for early retirement dies after termination
of Service and prior to his Retirement Date, his death benefit shall be
determined under
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Subsection (A) of this Section 3, or Article V, Section 4(A), whichever
is applicable. If such a Member dies on or after his Retirement Date,
the death benefit shall be determined under Subsection (B) of this
Section 3 or Article V, Section 4(B), whichever is applicable.
(ii) If a disability Retirant dies within 90 days after his separation from
active employment, his death benefit, if any, shall be determined under
Subsection (A) of this Section 3, or Article V, Section 4(A), whichever
is applicable, and shall be reduced (but not below zero) by the sum of
any retirement payments made.
(F) Upon the death of a Retirant whose Retirement Allowance has commenced, any
death benefit (if paid in installments) shall be distributed to his
Beneficiary at least as rapidly as under the method being used as of the
date of the Retirant's death.
SECTION 4. POST-AGE 65 ACCRUALS
Effective July 1, 1988, an Employee who had attained age 65 prior to July 1,
1988 will continue to accrue benefits in accordance with the Regulations. No
benefits shall accrue with respect to such Employee's Service which occurred
after the employee's attainment of age 65 but prior to July 1, 1988; provided,
however, an Employer may elect to provide benefit accruals with respect to such
pre-July 1, 1988 Service.
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ARTICLE V BENEFIT FORMULAS AND ADDITIONAL BENEFITS
SECTION 1. NORMAL RETIREMENT BENEFIT FORMULAS
An Employer may provide, on a uniform basis for its Members, one of the
following normal retirement benefit formulas:
(A) Nonintegrated Benefit Formulas
The product of:
(1) An annual accrual rate equal to any rate not less than 1% and not
greater than 3% (determined in .25% increments), as designated by the
Employer, multiplied by
(2) The Member's (a) career average Salary, (b) High-5 Salary or (c) High-3
Salary, as designated by the Employer, multiplied by
(3) The number of years and months of Benefit Service.
(B) Nonintegrated Benefit Formulas with a Benefit Service Cap
The product of:
(1) An annual accrual rate equal to any rate not less than 1% and not
greater than 3% (determined in .25% increments), as designated by the
Employer, multiplied by
(2) The Member's (a) High-5 Salary or (b) High-3 Salary, as designated by
the Employer, multiplied by
(3) The number of years and months of Benefit Service up to a maximum of
25, 30, 35, 40, 45 or 50 years, as designated by the Employer.
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(C) Partial High-5 or High-3 Salary Benefit Formulas
The greater of (1) or (2):
(1) The product of:
(i) An annual accrual rate equal to any rate not less than 1% and
not greater than 3% (determined in .25% increments), as
designated by the Employer, multiplied by
(ii) The Member's (a) High-5 Salary or (b) High-3 Salary, as
designated by the Employer, multiplied by
(iii) The number of years and months of Benefit Service, multiplied by
(iv) Any percentage less than 100% but equal to or greater than 50%,
as designated by the Employer.
(2) The product of:
(i) An annual accrual rate equal to any rate not less than 1% and
not greater than 3% (determined in .25% increments), as
designated by the Employer under Subsection (C)(1)(i) of this
Section 1, multiplied by
(ii) The Member's career average Salary, multiplied by
(iii) The number of years and months of Benefit Service.
(D) Nonintegrated Fixed Percentage Formulas
The product of:
(1) Any percentage not less than 40% and not greater than 80%, as
designated by the Employer, multiplied by
(2) The Member's (a) High-5 Salary or (b) High-3 Salary, as designated by
the Employer, for each Member who completes a minimum number of years
of Benefit
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Service equal to 25 or 30 years of Benefit Service as of his normal
retirement date, as designated by the Employer.
If a Member does not complete the required minimum number of years of
Benefit Service as of his normal retirement date, his Retirement Allowance
under this Subsection (D) shall be multiplied by a fraction, the numerator
of which is the number of years and months of Benefit Service completed as
of his normal retirement date and the denominator of which is the required
minimum number of years of Benefit Service.
(E) 1.5% Integrated Benefit Formula With Career Average Minimum
The product of:
(1) 1.0% of the Member's High-5 (or High-3, as designated by the Employer)
Salary up to the Covered Compensation Level ("CCL"), plus 1.5% of the
Member's High-5 (or High-3) Salary above the CCL, multiplied by
(2) The number of years and months of Benefit Service.
In the event a Member has completed more than 35 years of Benefit
Service as of his normal retirement date, the Member's Retirement
Allowance, with respect to such years of Benefit Service in excess of
35, will be equal to 1.5% of the Member's High-5 (or High-3) Salary,
both above and below the CCL. At the Employer's election, with respect
to Benefit Service completed prior to the Employer's adoption of the
integrated benefit formula in this Section 1(E), the Retirement
Allowance computed with respect to such Benefit Service shall be
determined by applying an annual accrual rate of 1.5% of the Member's
High-5 (or High-3) Salary, both above and below the CCL. In no event
will the
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Member's normal Retirement Allowance computed under this Section 1(E)
be less than the product of:
(a) 1.5%, multiplied by
(b) The Member's career average Salary, multiplied by
(c) The number of years and months of Benefit Service.
(F) 2% Integrated Benefit Formula With Career Average Minimum
The product of:
(1) 1.5% of the Member's High-5 (or High-3, as designated by the Employer)
Salary up to the CCL, plus 2.0% of the Member's High-5 (or High-3)
Salary above the CCL, multiplied by
(2) The number of years and months of Benefit Service.
In the event a Member has completed more than 35 years of Benefit
Service as of the date of his termination of employment, the Member's
Retirement Allowance, with respect to such years of Benefit Service in
excess of 35, will be equal to 2.0% of the Member's High-5 (or High-3)
Salary, both above and below the CCL. At the Employer's election, with
respect to Benefit Service completed prior to the Employer's adoption
of the integrated benefit formula in this Section 1(F), the Retirement
Allowance computed with respect to such Benefit Service shall be
determined by applying an annual accrual rate of 2.0% of the Member's
High-5 (or High-3) Salary, both above and below the CCL. In no event
will the Member's normal Retirement Allowance computed under this
Section 1(F) be less than the product of:
(a) 2.0%, multiplied by
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(b) The Member's career average Salary, multiplied by
(c) The number of years and months of Benefit Service.
(G) 1.5% Integrated Benefit Formula Without Career Average Minimum
The product of:
(1) 1.0% of the Member's High-5 (or High-3, as designated by the Employer)
Salary up to the CCL, plus 1.5% of the Member's High-5 (or High-3)
Salary above the CCL, multiplied by
(2) The number of years and months of Benefit Service. In the event a
Member has completed more than 35 years of Benefit Service as of his
normal retirement date, the Member's Retirement Allowance, with respect
to Benefit Service in excess of 35 years, will be equal to 1.5% of the
Member's High-5 (or High-3) Salary, both above and below the CCL. At
the Employer's election, with respect to Benefit Service completed
prior to the Employer's adoption of the integrated benefit formula in
this Section 1(G), the Retirement Allowance computed with respect to
such Benefit Service shall be determined by applying an annual accrual
rate of 1.5% of the Member's High-5 (or High-3) Salary, both above and
below the CCL.
(H) 1.75% Integrated Benefit Formula Without Career Average Minimum
The product of:
(1) 1.25% of the Member's High-5 (or High-3, as designated by the Employer)
Salary up to the CCL, plus 1.75% of the Member's High-5 (or High-3)
Salary above the CCL, multiplied by
(2) The number of years and months of Benefit Service. in the event a
Member has completed more than 35 years of Benefit Service as of his
normal retirement date,
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the Member's Retirement Allowance, with respect to Benefit Service in
excess of 35 years, will be equal to 1.75% of the Member's High-5 (or
High-3) Salary, both above and below the CCL. At the Employer's
election, with respect to Benefit Service completed prior to the
Employer's adoption of the integrated benefit formula provided in this
Section 1(H), the Retirement Allowance computed with respect to such
Benefit Service shall be determined by applying an annual accrual rate
of 1.75% of the Member's High-5 (or High-3) Salary, both above and
below the CCL.
(I) 2% Integrated Benefit Formula Without Career Average Minimum
The product of:
(1) 1.5% of the Member's High-5 (or High-3, as designated by the Employer)
Salary up to the CCL, plus 2.0% of the Member's High-5 (or High-3)
Salary above the CCL, multiplied by
(2) The number of years and months of Benefit Service. in the event a
Member has completed more than 35 years of Benefit Service as of the
date of his termination of employment, the Member's Retirement
Allowance, with respect to Benefit Service in excess of 35 years, will
be equal to 2.0% of the Member's High-5 (or High-3) Salary, both above
and below the CCL. At the Employer's election, with respect to Benefit
Service completed prior to the Employer's adoption of the integrated
benefit formula in this Section 1(1), the Retirement Allowance computed
with respect to such Benefit Service shall be determined by applying an
annual accrual rate of 2.0% of the Member's High-5 (or High-3) Salary,
both above and below the CCL.
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(J) 2.25% Integrated Benefit Formula Without Career Average Minimum
The product of:
(1) 1.75% of the Member's High-5 (or High-3, as designated by the Employer)
Salary up to the CCL, plus 2.25% of the Member's High-5 (or High-3)
Salary above the CCL, multiplied by
(2) The number of years and months of Benefit Service. In the event a
Member has completed more than 35 years of Benefit Service as of his
normal retirement date, the Member's Retirement Allowance, with respect
to Benefit Service in excess of 35 years will be equal to 2.25% of the
Member's High-5 (or High-3) Salary, both above and below the CCL. At
the Employer's election, with respect to Benefit Service completed
prior to the Employer's adoption of the integrated benefit formula
provided in this Section 1(J), the Retirement Allowance computed with
respect to such Benefit Service shall be determined by applying an
annual accrual rate of 2.25% of the Member's High-5 (or High-3) Salary
both above and below the CCL.
(K) 2.5% Integrated Benefit Formula Without Career Average Minimum
The product of:
(1) 2.0% of the Member's High-5 (or High-3, as designated by the Employer)
Salary up to the CCL, plus 2.5% of the Member's High-5 (or High-3)
Salary above the CCL, multiplied by
(2) The number of years and months of Benefit Service. In the event a
Member has completed more than 35 years of Benefit Service as of his
normal retirement date, the Member's Retirement Allowance, with respect
to Benefit Service in excess of
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35 years, will be equal to 2.5% of the Member's High-5 (or High-3)
Salary, both above and below the CCL. At the Employer's election, with
respect to Benefit Service completed prior to the Employer's adoption
of the integrated benefit formula provided in this Section 1(K), the
Retirement Allowance computed with respect to such Benefit Service
shall be determined by applying an annual accrual rate of 2.5% of the
Member's High-5 (or High-3) Salary, both above and below the CCL.
(L) 2.75% Integrated Benefit Formula Without Career Average Minimum
The product of:
(1) 2.25% of the Member's High-5 (or High-3, as designated by the Employer)
Salary up to the CCL, plus 2.75% of the Member's High-5 (or High-3)
Salary above the CCL, multiplied by
(2) The number of years and months of Benefit Service. In the event a
Member has completed more than 35 years of Benefit Service as of his
normal retirement date, the Member's Retirement Allowance, with respect
to Benefit Service in excess of 35 years will be equal to 2.75% of the
Member's High-5 (or High-3) Salary, both above and below the CCL. At
the Employer's election, with respect to Benefit Service completed
prior to the Employer's adoption of the integrated benefit formula
provided in this Section 1(L), the Retirement Allowance computed with
respect to such Benefit Service shall be determined by applying an
annual accrual rate of 2.75% of the Member's High-5 (or High-3) Salary
both above and below the CCL.
(M) 3% Integrated Benefit Formula Without Career Average Minimum
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The product of:
(1) 2.5% of the Member's High-5 (or High-3, as designated by the Employer)
Salary up to the CCL, plus 3.0% of the Member's High-5 (or High-3)
Salary above the CCL, multiplied by
(2) The number of years and months of Benefit Service. In the event a
Member has completed more than 35 years of Benefit Service as of his
normal retirement date, the Member's Retirement Allowance, with respect
to Benefit Service in excess of 35 years will be equal to 3% of the
Member's High-5 (or High-3) Salary, both above and below the CCL. At
the Employer's election, with respect to Benefit Service completed
prior to the Employer's adoption of the integrated benefit formula
provided in this Section 1(M), the Retirement Allowance computed with
respect to such Benefit Service shall be determined by applying an
annual accrual rate of 3.0% of the Member's High-5 (or High-3) Salary
both above and below the CCL.
(N) Integrated Fixed Percentage Formulas with 25 Years of Benefit Service Cap
The product of:
(1) Any percentage commencing with 25% and not exceeding 62.5% (in
increments of 6.25%), as designated by the Employer, of the Member's
High-5 (or High-3, as designated by the Employer) Salary up to the CCL,
plus
(2) The sum of (i) the percentage designated in paragraph (1) of this
Subsection (N) and (ii) 12.5% multiplied by the Member's High-5 (or
High-3) Salary above the CCL, for each Member who completes 25 years of
Benefit Service as of his normal retirement date.
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If a Member does not complete 25 years of Benefit Service as of his normal
retirement date, his Retirement Allowance under this Section 1(N) shall be
multiplied by a fraction, the numerator of which is the number of years and
months of Benefit Service completed as of his normal retirement date and the
denominator of which is 25.
(O) Integrated Fixed Percentage Formulas with 30 Years of Benefit Service Cap
The product of:
(1) Any percentage commencing with 30% and not exceeding 75% (in increments
of 7.5%), as designated by the Employer, of the Member's High-5 (or
High-3, as designated by the Employer) Salary up to the CCL, plus
(2) The sum of (i) the percentage designated in paragraph (1) of this
Subsection (O) and (ii) 15% multiplied by the Member's High-5 (or High-
3) Salary above the CCL, for each Member who completes 30 years of
Benefit Service as of his normal retirement date.
If a Member does not complete 30 years of Benefit Service as of his normal
retirement date his Retirement Allowance under this Section 1(O) shall be
multiplied by a fraction, the numerator of which is the number of years and
months of Benefit Service completed as of his normal retirement date and the
denominator of which is 30.
For an Employer which had elected an integrated benefit formula prior to
July 1, 1989, and which elects any of the integrated benefit formulas
described in Subsection (E), (F), (G), (H), (I), (J), (K), (L), (M), (N) or
(O) of this Section 1, if a Member's Retirement Allowance determined under
the prior integration formula as of June 30, 1989 exceeds the Member's
Retirement Allowance determined under the applicable integration formula
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described in Subsection (E), (F), (G), (H), (I), (J), (K), (L), (M), (N) or
(O), then the higher Retirement Allowance will be payable. For purposes of
this Article V, "career average Salary" shall mean the average annual Salary
during Benefit Service. "High-5 Salary" shall mean the average annual
Salary over the 5 consecutive years of highest Salary during Benefit
Service. "High-3 Salary" shall mean the average annual Salary over the 3
consecutive yea's of highest Salary during Benefit Service. For purposes of
Subsections (E), (F), (G), (H), (I), (J), (K), (L), (M), (N), and (O) of
this Section 1 (except as otherwise provided in the following paragraph of
this Section 1), CCL shall mean the average of the taxable wage bases in
effect under Section 230 of the Social Security Act as of the beginning of
each Plan Year included in the 35-year period ending with the last day of
the calendar year preceding the calendar year in which the Member attains
(or will attain) his social security retirement age, as defined in Section
41 5(b)(8) of the IRC. However, commencing with the Plan Year beginning on
July 1, 1995, CCL shall mean the average of the taxable wage bases in effect
under Section 230 of the Social Security Act as of the beginning of each
Plan Year included in the 35-year period ending with the last day of the
calendar year in which the Member attains (or will attain) his social
security retirement age, as defined in Section 415(b)(8) of the IRC.
The taxable wage base for the current Plan Year and any subsequent Plan Year
shall be assumed to be the same as the taxable wage base in effect as of the
beginning of the Plan Year for which the determination is being made. In
addition, a Member's CCL for a Plan Year beginning before the 35-year period
referred to in this paragraph shall be the taxable wage base in effect as of
the beginning of such plan year.
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For purposes of Subsections (G), (H), (I), (J), (K), (L), (M), (N) and (O)
of this Section 1, in lieu of the foregoing definition of CCL, an Employer
may elect, on a uniform basis for its Members, to define CCL as the greater
of $10,000 or one-half of the "covered compensation" (as defined in Section
1.401(1)-1(c)(7) of the IRS Regulations) of an individual who attains his
social security retirement age in the calendar in which the Plan Year
begins.
Notwithstanding anything in this Section 1 to the contrary, in no event may
an Employer's election to provide any of the benefit formulas described in
this Section 1 reduce a Member's accrued benefit below the amount of such
accrued benefit determined as of the day immediately preceding the effective
date for the Employer's election of such a benefit formula under this
Section 1. In addition, a Member's Retirement Allowance determined under
the applicable integration formula described in Subsection (E), (F), (G),
(H), (I), (J), (K), (L), (M), (N) or (O) shall conform to the cumulative
permitted disparity limit and the annual overall permitted disparity limit
as provided under the IRS Regulations.
SECTION 2. EARLY RETIREMENT FACTORS
(A) An Employer shall adopt, on a uniform basis for its Members, one of the
Early Retirement Factor Tables (with interpolation made to the nearest
month) provided in Appendix E hereto.
(B) If an Employer provides an integrated benefit formula, as described in
Subsection (E), (F), (G), (H), (i), (J), (K), (L), (M), (N) or (O) of
Section 1 of this Article V, and adopts the early retirement factor table
described in Table l(B) or (C), II(B) or (C) or III(B) or (C) of Appendix E,
then the early retirement factor with respect to a Member's
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Retirement Allowance attributable to Salary up to the "Covered Compensation
Level," as defined in Section 1 of this Article V, and computed in
accordance with the accrual rate described in Subsection (E)(1), (F)(1),
(G)(1), (H)(1), (1)(1), (J)(1), (K)(1), (L)(1), (M)(1), (N)(1) or (O)(1) of
Section 1 of this Article V (whichever shall apply) but only with respect to
such Salary, shall be the applicable early retirement factor described in
Appendix A.
SECTION 3. DISABILITY RETIREMENT BENEFIT
(A) If an Employer has provided this benefit since its Commencement Date, then
each of its Members --
(i) who is not an inactive Member or is not on a leave of absence, and
for whom contributions have not been discontinued,
(ii) who is separated from active employment by reason of disability after
the earlier of one year of Membership Service or five years of
Benefit Service but before attainment of age 65, and
(iii) who is certified by physicians designated by the Fund to have a
physical or mental impairment which (a) prevents him from doing any
substantial gainful activity for which he is fitted by education,
training or experience, and (b) is expected to last at least 12
months from the date of such separation or to result in death, shall,
upon notice to the Fund within 13 months of such separation date, be
retired as of his disability retirement date which shall be the first
day of the month coincident with or next following the date of such
separation. (Receipt of proof satisfactory to the Fund within 13
months after the date of such separation that the Member is
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eligible for, or is receiving, disability insurance benefits under
Title II of the Federal Social Security Act will be deemed presumptive
evidence of entitlement to a disability Retirement Allowance under this
Subsection (A).)
If an Employer adopts this benefit subsequent to its Commencement Date, then
it shall be effective for each of its Members, subject to the above
conditions, no earlier than one year after notification to the Fund of its
adoption.
(B) The annual disability Retirement Allowance shall be the normal Retirement
Allowance (determined under Article V, Section 1) on the basis of the
Member's Salary and Benefit Service to his disability retirement date, but
shall not be less than 30% of his average annual Salary over the 5
consecutive years of his highest Salary during his Benefit Service (or
during all the years of his Benefit Service if less than 5). In no event
shall the disability Retirement Allowance exceed the Retirement Allowance
that the disabled Member would have received if he had continued in Service
to his normal retirement date and his Salary at disability had continued to
such date.
(C) The Board may require any disability Retirant who has not attained age 65 to
demonstrate continuing eligibility for disability retirement benefits as
often as once a year. If such a Retirant refuses or cannot demonstrate to
the satisfaction of the Board that he continues to be disabled within the
definition of Subsection (A) of this Section 3, then his disability
allowance shall be discontinued. The disability Retirement's disability
Retirement Allowance will also cease if and when he returns to substantial
gainful activity for which he is fitted by education, training or
experience. In either case, it may be resumed if it is subsequently
determined by the Board that the conditions of Subsection (A) of this
Section 3 are again satisfied.
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SECTION 4. ADDITIONAL DEATH BENEFITS
(A) In lieu of the basic death benefit, if any, provided under Article IV,
Section 3(A), an Employer may adopt the Additional Active Service Death
Benefit which is payable upon the death of a Member in Service, for whom
contributions have not been discontinued, to his Beneficiary in a lump sum
equal to (i) plus (ii):
(i) 100% of ne Member's last 12 months' Salary, plus an additional 10% of
such Salary for each year of Benefit Service until a maximum of 300% is
attained for 20 or more years of Benefit Service. If death occurs
prior to the completion of one year of Benefit Service, this part of
the benefit shall be 100% of the Member's annual Salary as of his
Enrollment Date if his Salary is determined under Section (25)(A) of
Article I, or his annualized Salary based on all completed months of
Benefit Service prior to death if Salary is determined under Section
(25)(B) or Section (25)(C) of Article I.
(ii) The Member's Accumulated Contributions, if any.
In no event shall such lump sum be less than the lump sum which would have
been payable under either Article IV, Section 3(A) or Article V, Section
4(B), whichever is applicable.
(B) In lieu of the basic death benefit provided under Article IV, Section 3(A),
an Employer (or a successor to such Employer) which was participating in the
Fund as of June 30, 1983 may adopt the "12 Times" Retirement Benefit which
is payable upon the death of a Retirant, who had not elected an optional
form of payment under Article VI, in a lump sum equal to the excess, if any,
of (i) over (ii):
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(i) An amount equal to 12 times the Retirant's annual allowance immediately
prior to the commencement of his Retirement Allowance, or as of the
first day of the month in which his death occurred if he died before
having received any payment of such allowance.
(ii) The sum of the Retirement Allowance payments he had received, if any.
This benefit shall also be payable upon the death of a Member who was
eligible for early retirement at the time of death in lieu of the
benefit which would have been payable under Article IV, Section 3(A).
SECTION 5. RETIREMENT ADJUSTMENT PAYMENT
(A) An Employer which was participating as of June 30, 1983 may provide this
benefit to those of its Members who (i) were enrolled prior to July 1, 1983
and (ii) retire after attainment of age 55.
(B) The Retirement Adjustment Payment shall be a single lump sum equal to three
monthly installments of his Retirement Allowance (before any optional
modification) determined and payable as of the date his Retirement Allowance
payments commence. If a Retirant, who would otherwise be eligible to
receive such a payment, dies prior to such date, his Retirement Adjustment
Payment shall be determined as though his Retirement Allowance payments had
commenced as of the first day of the month in which his death occurred, and
shall be payable to his Beneficiary.
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SECTION 6. POST-RETIREMENT SUPPLEMENTS
(A) Annual 1%, 2% or 3% Increment:
Subject to Section 11.1, an Employer may provide an annual increment which
shall be paid to each of its Retirants who has attained age 66 and is
receiving his annual Retirement Allowance. Each annual increment shall be
an amount equal to 1%, 2% or 3%, as the Employer may elect, of the
Retirant's annual Retirement Allowance multiplied by the number of years
from the calendar year in which he attained age 65 to the current year at
the end of which such increment is payable. Upon the Retirant's death, no
further amount shall be payable in respect of this benefit, except that if
he had elected a Contingent Annuitant under Article VI who is alive on the
later of (a) the date of the Retirant's death or (b) the date the Retirant
would have attained age 66, such Contingent Annuitant shall thereafter be
entitled to an annual increment equal to 1%, 2% or 3%, as the case may be,
of the Contingent Annuitant's annual allowance multiplied by the number of
years from the calendar year in which the Retirant had attained age 65 (or
would have attained age 65 if he died prior thereto) to the current year at
the end of which such increment is payable. Upon the Contingent Annuitant's
death, no further amount shall be payable in respect of this benefit.
(B) Single Fixed Percentage Adjustment:
Subject to Section 11.1, an Employer may provide, as of any January 1, a
fixed percentage supplement for each of its then eligible Retirants,
determined under one of the following formulas:
(a) 1% or more of the annual Retirement Allowance for each completed year
of retirement after attainment of the minimum under one of the
following formulas.
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(b) A single percentage uniformly applicable to all those eligible.
For purposes of this Subsection (B), an eligible Retirant is one who (i) has
retired prior to the effective date of the supplemental benefit described in
this Subsection (B) and (ii) has attained the minimum age specified by his
Employer. Such minimum age may be any age not less than 45 and not greater
than 66, and shall apply uniformly to all Retirants of the Employer. The
supplement shall be paid each January beginning with the effective date
(providing the Retirant has begun receiving his annual allowance) and ending
in the year in which the Retirant dies, except that if he had elected a
Contingent Annuitant under Article VI who is alive on the date of the
Retirant's death, such Contingent Annuitant shall thereafter be entitled to
an annual supplement determined by multiplying the fixed percentage by the
Contingent Annuitant's annual allowance and ending in the year in which the
Contingent Annuitant dies. If the fixed percentage supplement provided for
a Retirant is not paid due to the Retirant's deferral of commencement of
allowance payments, it shall be paid beginning with the January 1 coincident
with or following the date his Retirement Allowance payments commence and
shall be determined by multiplying the fixed percentage provided by the
Employer by the annual Retirement Allowance determined at the time payments
commence.
SECTION 7. SUPPLEMENTAL EARLY RETIREMENT WINDOW BENEFIT
(A) Subject to the provisions of this Section 7 and Section 11.1, an Employer
may provide for each Member who has satisfied the eligibility requirements
specified in Subsection (D) of this Section 7, a supplemental early
retirement window benefit determined pursuant to the formula elected in
Subsection (E) of this Section 7 and payable in accordance with
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Articles IV and V. Any such supplemental early retirement window benefit
shall not be deemed to be in lieu of any of the other additional benefits
described in this Article V. A Member who does not meet the eligibility
requirements of Subsection (D) of this Section 7 or who does not terminate
employment within the time period described in Subsection (B) of this
Section 7 will not be entitled to any additional benefits pursuant to this
Section 7.
(B) The Employer shall select a time period of not less than 45 days nor more
than 90 days from the effective date of its adoption of the supplemental
early retirement window benefit during which an eligible Member may elect
such benefit. A Member must agree to retire during the period described in
the preceding sentence in order to be eligible for the benefit.
(C) In order for an Employer to provide a supplemental early retirement window
benefit pursuant to this Section 7, the following conditions must be
satisfied:
(1) At least five (5) Members must be eligible for the supplemental early
retirement window benefit during the election.period described in
Subsection (B) of this Section 7;
(2) The Employer must comply with all procedural rules established by the
Fund with regard to the implementation and operation of such
supplemental early retirement window benefit;
(3) The Employer must indemnify the Fund in a manner satisfactory to the
Fund against any and all losses and expenses incurred by the Fund
(including reasonable legal fees) arising out of the Employer's
adoption of the early retirement window benefit; and
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(4) Any other conditions which the Fund, the IRS or any other governmental
authority might require.
(D) An Employer must establish an eligibility requirement, uniformly applicable
to all of its Employees, which must be satisfied by a Member as of the
effective date of the adoption of the supplemental early retirement window
benefit in order for the Member to be eligible for such benefit. The
eligibility requirement referred to in the preceding sentence can be either:
(i) A minimum age of not less than 45; or
(ii) A minimum total of age and Vesting Service of not less than 70.
Notwithstanding anything in this Subsection (D) of this Section 7 to the
contrary, an Employer may elect to restrict the eligibility for the
supplemental early retirement window benefit under this Section 7 to (i)
those Members who are not highly compensated employees within the meaning of
Section 414(q) of the IRC, (ii) those Members who are not inactive Members,
as described in Article X, Section 3, (iii) those Members employed at a
bona-fide geographical location or in a certain job function or job
classification designated by the Employer, or (iv) those Members who provide
the Employer with a valid waiver of certain legal rights of the Member,
provided that in such case the Employer shall have the sole responsibility
to determine whether any such waiver is valid and enforceable under
applicable law.
(E) Upon the termination of employment of an eligible Member who meets the
eligibility requirements of Subsection (D) of this Section 7 within the
period of time specified in Subsection (B) of this Section 7, the annual
Retirement Allowance otherwise determined
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under Article IV and this Article V for such Member will be increased by the
difference, if any, that results from determining such benefit based on the
following:
(1) the Benefit Service and Vesting Service credited to the Member as of
his termination date, plus 5 or 10 years, as may be designated by the
Employer in its election of this feature; and/or
(2) the early retirement reduction percentage (if any) based upon the
Member's actual age at commencement of his Retirement Allowance plus 5
or 10 years, as may be designated by the Employer in its election of
this feature; and/or
(3) no early retirement reduction, or a 1.5% or 3% early retirement
reduction percentage for each year the Retirement Allowance commences
before the Member's normal retirement date, as may be designated by the
Employer in its election of this feature. The adoption by an Employer
of any of the features described in this Subsection (E) of this Section
7 shall apply uniformly to all Members employed by such Employer who
meet the eligibility requirements of Subsection (D) of this Section 7.
In no event shall an increase in a Member's Retirement Allowance under
the provisions of this Section 7 be deemed to increase such Member's
Vesting Service or Benefit Service for any other purposes under the
Comprehensive Retirement Program. Notwithstanding the foregoing in
this Subsection (E) of this Section 7, if an Employer has elected to
provide normal retirement benefits on the basis of one of the
integrated benefit formulas described in Subsection (E), (F), (G), (H),
(I), (J), (K), (L), (M), (N) or (O) of Section 1 of this Article V, the
special early retirement reduction provided in Paragraph (2) of this
Subsection (E) and the elimination of an early retirement reduction
factor
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provided in Paragraph (3) of this Subsection (E) shall not apply;
provided, however, such Employer may elect to provide any of such early
retirement reductions but only with regard to a Member's benefit which
accrues with respect to the Member's Salary up to the "Covered
Compensation Level," as defined in Section 1 of this Article V.
(F) The Fund reserves the right to deny an Employer the right to adopt the
supplemental early retirement window benefit described in this Section 7 if
it determines, in its sole discretion, that the adoption by such Employer
would result in the provision of benefits that would not satisfy the
requirements of IRC Section 401 (a)(4) (or any applicable IRS Regulations
thereunder) or which would in any other way adversely affect the tax-
qualified status of the Regulations and the tax-exempt status of the Trust
under IRC Sections 401(a) and 501(a), respectively.
SECTION 8. REDUCTION IN ACCRUAL RATE FOR CERTAIN EMPLOYEES
An Employer may elect, on a prospective basis only, to reduce the benefit
accrual rate which shall apply to the calculation of the normal retirement
benefit with respect to certain Members, designated by the Employer, who
constitute "highly compensated employees" (as defined in IRC Section 414(q)),
provided that (i) the Employer certifies to the Fund in writing that such a
reduction in the benefit accrual rate is required by the Office of Thrift
Supervision or such other regulatory authority and (ii) the IRS approves such a
reduction in the benefit accrual rate. If an Employer elects, in accordance
with this Section 8, to reduce the accrual rate of certain Members, the Employer
shall, to the extent a cessation of future benefit accruals is not required,
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select one of the benefit formulas provided in Article V, Section 1 to apply
with respect to the future accrual of benefits for such Members.
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ARTICLE VI OPTIONAL FORMS OF PAYMENT
SECTION 1. OPTIONS
Any Member or Retirement may elect, subject to Section 2 of this Article VI, to
convert his regular Retirement Allowance and the death benefit described in
Article IV, Section 3(A) and 3(B) or in Article V, Section 4(B), whichever is
applicable, to a retirement benefit of Equivalent Value under one of the
following options:
Option 1. A larger Retirement Allowance during the Retirant's life, but at his
death all payments shall cease and no further amounts shall be due or
payable.
Option 2. A modified Retirement Allowance to be paid to the Retirant for his
life and, after his death, an allowance at the same rate to be paid
to his Contingent Annuitant (should the latter survive the Retirant)
for life commencing on the first day of the month in which the
Retirant's death occurs. If both the Retirant and his Contingent
Annuitant die before 120 monthly installments have been paid, the
Commuted Value of such unpaid installments shall be paid in a lump
sum to a Beneficiary designated by the Retirant, or, if there is no
designated Beneficiary, to the estate of the survivor of the Retirant
and his Contingent Annuitant (presuming the Retirant to be the
survivor if they die within 24 hours of each other). Upon the death
of the survivor of the Retirant and his Contingent Annuitant after
120 monthly installments have been paid, all payments shall cease and
no further amounts shall be due or payable.
Option 3. A modified Retirement Allowance to be paid to the Retirant for his
life and, after his death, an allowance at one-half the rate to be
paid to his Contingent Annuitant
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(should the latter survive the Retirant) for life commencing on the
first day of the month in which the Retirant's death occurs. Upon the
death of the survivor of the Retirant and his Contingent Annuitant,
all payments shall cease and no further amounts shall be due or
payable.
Option 4. A revised Retirement Allowance during the Retirant's life with some
other benefit payable upon his death, provided that such benefit be
approved by the Fund and be in compliance with the applicable
provisions of the IRC, including Section 401 (a)(9) thereof.
SECTION 2. CONDITIONS OF ELECTION
(A) The procedure for making an election or revocation with respect to any of
the options described in Section 1 of this Article VI shall be in compliance
with ERISA, the IRC and, as applicable, Section 14.4 and shall be
communicated by the Fund to the retiring Member. Thereafter the retiring
Member shall have 90 days (or such longer period as may be required by
ERISA) within which to make his election or revocation so long as it is
filed with the Fund prior to the date on which his Retirement Allowance
commences.
(B) If a retiring Member or his Contingent Annuitant dies before the date his
Retirement Allowance commences or before the date he receives a lump sum
settlement pursuant to Article VII, the benefit payable shall be the death
benefit under Article IV or Article V, whichever is applicable, provided
that such benefit shall not be less than the death benefit attributable to
the form of payment, including a lump sum, elected or the regular form of
payment, whichever is greater. If a disability Retirant whose allowance has
already
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commenced dies during the 90 day period following the date of his separation
from active employment, the election of any option shall be inoperative.
(C) No election under Option 2, 3 or 4 of Section 1 of this Article VI may be
made which would result in an allowance to the Retirant of less than 50% of
the Retirement Allowance he would have received under Article VI, Section 1,
Option 1.
SECTION 3. PAYMENT OF BENEFITS TO CERTAIN ACTIVE MEMBERS
(A) An Employer may, at its option, permit each Member who satisfies the
requirements provided in Subsection (B) of this Section 3 to make a one-time
irrevocable election to commence the payment of his Retirement Allowance,
under any of the payment options available to such Member, at any time on or
after April 1 of the calendar year following the calendar year in which the
Member attains age 70 1/2. If a Member elects to commence the payment of
his Retirement Allowance pursuant to this Subsection (A) of this Section 3,
any benefits which accrue under the Fund after the commencement of his
Retirement Allowance shall be deemed to be provided to the extent of the
Equivalent Value of the benefits paid (taking into account only those
payments made in accordance with the applicable normal form of Retirement
Allowance payable under the Regulations) to the Member pursuant to an
election under this Subsection (A); provided, however, in no event shall the
Member's accrued benefit be reduced below such Member's accrued benefit as
of the close of the Plan Year immediately preceding the Plan Year in which
such additional benefits accrue.
(B) A Member shall be eligible to make the election provided in Subsection (A)
of this Section 3 if such Member is not an inactive Member (as described in
Article X, Section 3), had
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attained age 70 1/2 prior to January 1, 1988 and was not a 5% owner (as
defined in IRC Section 416(i)) at any time during (i) the Plan Year ending
with or within the calendar year in which such Member attained age 66 1/2 or
(ii) any subsequent Plan Year.
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ARTICLE VII METHOD OF PAYMENT
SECTION 1.
If a Retirant is married at the time his Retirement Allowance commences, his
Retirement Allowance shall be paid as a qualified joint and survivor annuity
with his Spouse as Contingent Annuitant, as described in Article Vl, Section 1,
Option 2 or 3, as designated by the Retirant, unless such Spouse consents in
writing to permit the Retirant to elect a different form of allowance. If a
Retirant is not married at the time his Retirement Allowance commences, his
Retirement Allowance shall be paid as a life annuity unless an optional form of
allowance as described in Article Vl is elected by the Retirant. If an optional
form of allowance as described in Article Vl is not in effect with respect to a
Retirant, his Retirement Allowance shall be paid to him during his life and upon
his death there shall be payable the death benefit, if any, determined in
accordance with Article IV, Section 3(C) or, if adopted by such Retirant's
Employer, Article V, Section 4(B).
SECTION 2.
(A) Unless a proper election is received by the Fund, all Retirement Allowances
shall be payable in substantially equivalent monthly installments commencing
the first day of the month next following the Retirant's attainment of age
70, except that:
(1) A normal or early Retirement Allowance may be payable to a Retirant, by
written election filed with the Fund, as of the first day of any month
next following his Retirement Date, and
(2) An early Retirement Allowance may not be commenced until the first day
of the month next following the Retirant's attainment of age 45 or 55,
whichever has
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been designated on a uniform basis by his Employer, except as may
otherwise be provided under Section 2(E) of Article IV. Such
installments shall continue during the life of the Retirant (except as
provided otherwise under Article V, Section 3(C)), and the last
installment shall be due the first day of the month in which his death
occurs; except that if optional modification under Article Vl has
become effective the provisions thereof shall apply, and the last
installment payable to a surviving Contingent Annuitant designated
under such Article shall be due the first day of the month in which
such Contingent Annuitant's death occurs.
(B) Notwithstanding the preceding Subsection (A) of this Section 2, a Retirement
Allowance may be converted to a single lump sum payment of the Equivalent
Value of such allowance, if an eligible Retirement as described below so
elects prior to receiving his first monthly retirement payment, in the
following cases:
(a) Where that portion of the regular Retirement Allowance which is
attributable to the Employer's contributions amounts to less than $600
per year on the date such Allowance would otherwise commence; or
(b) Where the Employer has requested, and the Fund has approved, that a
lump sum settlement be available and uniformly applicable upon
attainment of any age between (and including) 45 and 65 as specified by
the Employer (but not earlier than the minimum age specified in Article
IV, Section 2(D) for the commencement of an early Retirement Allowance)
to those of its Retirants who meet the following conditions:
(i) Receipt by the Fund of a statement (in the form prescribed by the
Fund) in which the Retirement shall confirm that he has received
legal and tax advice
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as to the consequences of receiving a lump sum settlement in
respect of his benefits under the Regulations, and in which his
Employer shall represent that it has received from the Retirant
evidence that such advice was obtained.
(ii) Receipt by the Fund of a consent (in the form prescribed by the
Fund) of the Member's Spouse, if any, that such lump sum
settlement be paid to the Retirant. (In any case where an
Employer adopts this option and subsequently ceases to exist as an
independent entity, the Retirement Committee of the Board may, in
its discretion, substitute itself for such Employer for the
purposes of this Article VII.)
Any lump sum settlement under this Subsection (B) shall be calculated using
an interest rate, determined by the Fund by reference to the last month of a
calendar quarter, which rate shall be the average of the 10 and 20-year U.S.
Treasury Bond annual yields for such month, as reported in the Federal
Reserve Statistical Release (G.13), rounded to the nearest .5%; provided,
however, if the annual yield of 20-year U.S. Treasury Bonds is not
published, such rate shall be the annual yield of 10-year U.S. Treasury
Bonds. In the absence of the Release, the Fund may obtain such annual
yields from any other source it deems appropriate. The rate so determined
shall be applicable to settlements to be paid in the calendar quarter
beginning three months later; provided, however, that in no event shall the
interest rate used to calculate lump sum settlements exceed:
(1) The PBGC Interest Rate if the present value of the lump sum settlement
using the PBGC Interest Rate is less than $25,000, or
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(2) 120% of the PBGC Interest Rate if the present value of the lump sum
settlement using the PBGC Interest Rate is $25,000 or greater; except
that in no event shall such lump sum settlement computed pursuant to
this Subparagraph (2) be reduced below $25,000.
The settlement will be the present value, calculated on the basis of such
interest rate, of the regular form of allowance which would otherwise be
payable to the Retirant under the Regulations. It will be calculated and
payable as of the date on which payment of the corresponding Retirement
Allowance would otherwise commence, except that no settlement under
Paragraph (b) of this Subsection (B) is payable prior to the age specified
therein.
(C) No Retirement Allowance or lump sum settlement shall be increased on account
of any delay in payment beyond the date specified in this Article VII due to
the Retirant's failure to properly file the application form furnished by
the Fund or to otherwise accept such payment.
SECTION 3.
Notwithstanding anything herein to the contrary, if the Equivalent Value of a
Member's vested benefit is zero, the Member shall be deemed to have received a
distribution of such benefit upon termination of employment with his Employer
and shall immediately forfeit the nonvested portion of his benefit. If a Member
is deemed to receive a distribution pursuant to this Section 3, and the Member
is restored to Service before the date the Member incurs a break in service of
at least 60 consecutive months, then upon the reemployment of such Member, the
Member's
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Vesting Service and Benefit Service shall be reinstated and his retirement
benefits shall be restored to the amount of such benefits as of the date of the
deemed distribution.
SECTION 4.
This Section 4 applies to distributions made on or after January 1, 1993.
Solely to the extent required under applicable law and IRS Regulations, and
notwithstanding any provision of the Regulations to the contrary that would
otherwise limit a Distributee's election under this Section 4, a Distributee may
elect, at the time and in the manner prescribed by the Board, to have any
portion of an Eligible Rollover Distribution paid directly to an Eligible
Retirement Plan specified by the Distributee in a Direct Rollover. For purpose
of this Section 4, the following terms shall have the following meanings:
(A) Eligible Rollover Distribution: Solely to the extent required under
applicable law and IRS regulations, an Eligible Rollover Distribution is any
distribution of all or any portion of the balance to the credit of the
Distributee, except that an Eligible Rollover Distribution does not include:
any distribution that is one of a series of substantially equal periodic
payments (not less frequently than annually) made for the life (or life
expectancy) of the Distributee or the joint lives (or joint life
expectancies) of the Distributee and the Distributee's designated
beneficiary, or for a specified period of ten years or more; any
distribution to the extent such distribution is required under Section
401(a)(9) of the IRC; and the portion of any distribution that is not
includible in gross income (determined without regard to the exclusion for
net unrealized appreciation with respect to employer securities).
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(B) Eligible Retirement Plan: An Eligible Retirement Plan is an individual
retirement account described in Section 408(a) of the IRC, an individual
retirement annuity described in Section 408(b) of the IRC, an annuity plan
described in Section 403(a) of the IRC, or a qualified trust described in
Section 401 (a) of the IRC that accepts the Distributee's Eligible Rollover
Distribution. However, in the case of an Eligible Rollover Distribution to
a surviving Spouse, an Eligible Retirement Plan is an individual retirement
account or individual retirement annuity.
(C) Distributee: A Distributee includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving Spouse and the
Employee's or former Employee's spouse or former spouse who is an alternate
payee under a Qualified Domestic Relations Order are Distributees with
regard to the interest of the Employee or former Employee.
(D) Direct Rollover: A Direct Rollover is a payment by the Fund to the Eligible
Retirement Plan specified by the Distributee.
SECTION 5.
Unless the Member elects otherwise, distribution of his Retirement Allowance
will begin no later than the 60th day after the latest of the close of the Plan
Year in which:
1. the Member attains age 65;
2. occurs the 10th anniversary of the year in which the Member commenced
participation in the Fund; or,
3. the Member terminates Service with his Employer.
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Notwithstanding the foregoing, the failure of a Member and Spouse to consent to
a distribution before the Member attains age 65 shall be deemed to be an
election to defer commencement of payment of any benefit sufficient to satisfy
this Section 5.
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ARTICLE VIII RESTORATION OF A RETIRANT TO SERVICE
If a Retirant (or a terminated Member who is eligible for early retirement) is
restored to Service at the rate of 1,000 or more Hours of Service a year, he
shall be re-enrolled as an active Member as of his new employment date. If a
Retirant returns to active membership he may, within six months following (i)
his date of reemployment, or (ii) if such Retirant is first enrolled as an
inactive Member pursuant to Article X, Section 3, his change in status to an
active Member, make an irrevocable election to continue to receive the payment
of his Retirement Allowance or to suspend the payment of his Retirement
Allowance until his subsequent termination of Service or retirement in
accordance with Section 2530.203-3 of the DOL Regulations; provided, however, if
no such election is made, payment of such Member's Retirement Allowance shall
continue in the form of payment previously chosen. Upon subsequent retirement,
(i) his benefit shall be based on his Benefit Service before and after his
previous retirement and his Salary during such service, but shall be reduced by
the Equivalent Value of the benefits provided by the Fund, and (ii) any
Retirement Adjustment Payment for which he is then eligible shall be reduced by
the amount of any such payment made in respect of his previous retirement.
If a Retirant (or terminated Member who is eligible for early retirement) is
restored to Service at the rate of less than 1,000 Hours of Service a year, he
shall be re-enrolled as an inactive Member as of his new employment date. If it
is determined that a Retirant, who was restored to Service at a rate of less
than 1,000 Hours of Service per year, has completed at least 1,000 Hours of
Service in any 12 consecutive month period, measured from the first day of such
restoration to Service and then from each January 1 thereafter, Benefit Service
shall be credited retroactively to the beginning of such period.
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ARTICLE IX CONTRIBUTIONS
SECTION 1. ENGAGEMENT OF ACTUARY
The Board shall engage an enrolled actuary to (i) recommend the actuarial
funding method and the actuarial assumptions, tables, interest rates and other
factors to be used in determining the cost of participating in the Fund, (ii)
perform an annual actuarial valuation of the liabilities to determine the
minimum contributions required to be made in accordance with such valuation to
avoid an accumulated funding deficiency and the maximum contributions permitted
to be made without exceeding the full funding limitation under the IRC, and
(iii) determine each Employer's allocable share of the aggregate annual
contribution to the Fund which is approved by the Board. The Board may adopt
and modify from time to time any actuarially sound funding method which conforms
with IRC and IRS regulations as the funding method for the Fund.
SECTION 2. SINGLE PLAN
The Fund is a single plan which provides benefits to Members of all Employers
participating in the Fund and their Beneficiaries. It is intended to satisfy
the requirements of IRC Section 413(c) and IRS Regulation Section 1.414(1)-
1(b)(1). Accordingly, all Fund assets are available to pay benefits to all
Members of the Fund and their Beneficiaries.
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SECTION 3. CONTRIBUTIONS BY EMPLOYERS
(A) Each Employer shall contribute to the Fund the amount determined in
accordance with the annual actuarial valuation of the Fund for such year,
reflecting the benefits provided to its Employees under the Regulations.
The contribution so determined may be proportionally increased as directed
by the Board so that the total of all contributions remitted during the Plan
Year from all participating Employers will not result in a funding
deficiency under IRC Section 412.
(B) In determining each Employer's required contribution to the Fund, the
actuary shall take into account each Employer's normal cost for the benefits
provided to such Employer's Members under the Regulations, an annual
amortization of any unfunded accrued actuarial liabilities and an annual
amortization of actuarial experience gains and losses. In addition, the
actuary may take into account such other factors which it deems relevant to
determine the cost of an Employer's participation in the Fund and which are
otherwise in accordance with IRC Sections 412 and 413(c).
(C) Effective for Plan Years commencing before July 1, 1989, during any period
when the Fund is in full funding, the Board shall advise each Employer which
is precluded from making contributions that would otherwise be required but
for full funding, based on the advice of the actuary, of the amount of the
contributions which would otherwise have been required. The future
contribution requirements of each such Employer shall take into account an
amortization of such unpaid contributions over such period of time and at
such rate of interest as is determined by the Board.
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SECTION 4. ADMINISTRATIVE EXPENSES
Each Employer shall remit to the Fund annually, or more frequently as determined
by the Board, an amount equal to its share of expenses of administering the
Regulations, as determined by the Board in accordance with Section 1(1) of
Article XIV.
SECTION 5. CONTRIBUTIONS BY MEMBERS
(A) No Member shall contribute to the Fund unless his Employer elects to
participate on a contributory basis thereby reducing its contributions under
Section 3(A) of this Article IX. Each Member whose Employer does
participate on such contributory basis shall contribute a level percentage
of his Salary, as determined by the Board. The Board may modify
contribution rates after any actuarial valuation, but any increase in
contribution rates resulting therefrom shall apply only to Members enrolled
subsequent to such increase.
(B) The Fund shall certify to the Employer the contribution rate applicable to
each of its enrolling Members, and the Employer shall deduct from the
Member's Salary his contribution based on such rate. All contributions of
Members thus deducted shall be transmitted monthly by the Employer to the
Fund and, upon receipt by the Fund, shall be credited to the individual
accounts of the Members. Every Member shall be deemed to agree to the
deductions provided for herein.
(C) A Member's Accumulated Contributions shall be fully vested but payable only
in the form provided in the Regulations and in accordance with the spousal
consent requirements of Article VII, Section 2 and IRC Sections 401(a)(11)
and 417 and the IRS Regulations thereunder. For purposes of this provision,
Accumulated Contributions as of any date may be commuted to a life annuity
commencing on the Member's normal retirement date
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by multiplying such Accumulated Contributions by an appropriate conversion
factor as determined by the Fund in accordance with ERISA and Section 411
(c)(2) of the IRC.
(D) A person whose membership is terminated for any reason other than by death
or disability retirement shall, upon filing with the Fund the designated
form for giving notice thereof, be entitled to a refund of his Accumulated
Contributions, if any, provided the spousal consent requirements are met as
provided below:
(1) In the case of a person whose membership is terminated by a break in
service (prior to vesting under Article IV), such refund shall be in
lieu of all other benefits otherwise payable on his account. If the
Member's Accumulated Contributions amount to $3,500 or less, such
amounts will be paid in a lump sum upon such termination of Service.
However, if the Member's Accumulated Contributions amount to more than
$3,500, then if the Member does not elect to receive a refund of his
Accumulated Contributions, such contributions shall be paid upon his
attainment of age 65 in a lump sum, provided the Fund receives the
appropriate spousal consent therefor or, otherwise, in the form of a
qualified joint and survivor annuity. If such a terminated Member dies
before withdrawing his Accumulated Contributions, or receiving the
first payment of such annuity, the amount of such Accumulated
Contributions shall be paid to his Beneficiary.
(2) In the case of a person whose membership is terminated upon early or
normal retirement, such refund shall be payable only prior to the
commencement of his Retirement Allowance and shall be in lieu of the
actuarial equivalent of that portion of his retirement benefit which is
attributable to such Accumulated Contributions.
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The remaining portion of such retirement benefit, if any, shall be
calculated in accordance with ERISA and paid to him as provided in
Article VII.
SECTION 6. CONTRIBUTION REQUIREMENTS FOR BENEFIT IMPROVEMENTS
Notwithstanding anything in the Regulations to the contrary, in the event an
Employer elects a benefit improvement under the Regulations for which
contributions may not be made by an Employer (subject to Section 404 of the IRC)
on a tax-deductible basis, such election shall be effective only to the extent
the Fund determines that such benefit improvement may be adequately funded by
such Employer, and to the extent the Fund actuary determines it necessary (such
determination being performed in a uniform and nondiscriminatory manner), the
Employer satisfies a creditworthiness test (as prescribed by the Fund) and
executes a cash collateral agreement granting the Fund a security interest in
such assets as the Fund may reasonably require.
SECTION 7. RETURN OF CONTRIBUTIONS TO EMPLOYER
(A) The Fund is created for the exclusive benefit of Members, their
Beneficiaries and Contingent Annuitants. Except as provided in Subsections
(B) and (C) of this Section 7, at no time prior to the satisfaction of all
liabilities under the Fund with respect to all Members and Retirants, their
Beneficiaries and Contingent Annuitants shall any contributions to the Fund
by an Employer be returned by the Fund to the Employer.
(B) In the case of a contribution that is made by an Employer by reason of a
mistake of fact as determined by the Board, such Employer may request the
return to it of such
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contribution, provided such refund is made within one year after the payment
of the contribution.
(C) In the case of a contribution made by an Employer, such contribution shall
be conditioned upon the deductibility of the contribution by the Employer
under Section 404 of the IRC. To the extent the deduction for such
contribution is disallowed, in accordance with IRS Regulations, the Employer
may request the return to it of such contribution, provided such refund is
made within one year after the disallowance of the deduction.
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ARTICLE X EFFECTS OF VARIOUS EVENTS ON MEMBERSHIP AND SERVICE
SECTION 1. TERMINATION OF MEMBERSHIP
Membership shall cease upon date of retirement, death, break in service, or
withdrawal of the Employer's participation. For purposes of the Regulations, a
"break in service" occurs when a non-vested Member's Service is terminated.
SECTION 2. REINSTATEMENT OF MEMBERSHIP AND SERVICE
If a person whose membership is terminated by a break in service is again
employed by an Employer, he shall be re-enrolled as a Member as of his new
employment date. Further, (i) if his break in service did not exceed 60
consecutive months, then his previous Vesting Service shall be reinstated, and
if such break in service did not exceed 12 consecutive months, he shall also be
credited with Vesting Service for the period of such break; (ii) if his break in
service did exceed 60 consecutive months but did not exceed his previous Vesting
Service, then his previous Vesting Service shall be reinstated; and (iii) if
such Member had no vested interest in his Retirement Allowance, and his break in
service did equal or exceed the greater of (x) 60 consecutive months or (y) his
previous Vesting Service, then upon his reemployment he shall be treated as a
new Employee for all purposes under the Regulations. Upon reinstatement of his
Vesting Service, his previous Benefit Service shall also be reinstated provided
he repays to the Fund, within 5 years of such re-enrollment, the amount of his
Retirement Allowance which had been paid to him together with interest thereon,
at a rate permitted by ERISA, from the date of the original payment of his
Retirement Allowance to the date of repayment.
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Solely for purposes of determining whether a break in service has occurred, an
individual who has a maternity or paternity absence, as determined by the Fund
in accordance with the IRC and ERISA, that continues beyond the first
anniversary of the first day of absence by reason of a maternity or paternity
absence shall incur a break in service on the date of the second anniversary of
the first day of such maternity or paternity absence; provided, that the
individual timely provides the Fund with such information as it shall require.
For purposes of the Regulations, maternity or paternity absence shall mean an
absence from work by reason of the individual's pregnancy, the birth of the
individual's child or the placement of a child with the individual in connection
with adoption of the child by such individual, or for purposes of caring for a
child for the period immediately following such birth or placement.
In the event a Member is no longer part of an eligible class of Employees and
becomes ineligible to participate but has not incurred a break in service, such
Employee will participate immediately upon returning to an eligible class of
Employees. If such Member incurs a break in service, eligibility will be
determined under the break in service rules of the Regulations.
In the event an Employee who is not part of an eligible class of Employee
becomes a part of an eligible class, such Employee will participate immediately
if such Employee has satisfied the minimum age and service requirements provided
in Section 2.2 and would have otherwise previously become a Member.
SECTION 3. INACTIVE MEMBERSHIP
If an Employer certifies to the Fund that it expects a Member to complete less
than 1,000 Hours of Service in the 12 consecutive month period commencing on his
Enrollment Date (or any January 1 thereafter), he shall be deemed an "inactive
Member." This does not constitute a break
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in service. During a period of inactive membership (a) Vesting Service shall
accrue, (b) Benefit Service shall not accrue, and (c) no contributions may be
made by such inactive Member. If it is later determined that such Member has
completed, or is expected to complete, at least 1,000 Hours of Service in any
such period, then his regular membership shall be restored, and his Benefit
Service shall be credited retroactively for such period. Inactive membership
shall also be deemed to occur whenever a Member (a) is transferred from regular
membership to a class of employees for which the Employer has requested, and the
Fund has granted, exclusion pursuant to Article II, or to a non-participating
corporation which is a member of a controlled group of corporations of the
Employer (within the meaning of Section 1 563(a) of the IRC) or (b) receives no
income from an Employer other than commissions and such Employer, which
previously included commissions as Salary, elects not to include commissions as
Salary under Article I, Section 25 of the Regulations.
No benefit other than the refund of the Member's Accumulated Contributions, if
any, is payable on account of disability or death incurred during inactive
membership, except that if the Member is eligible for early retirement and dies
during such period, his Beneficiary shall be entitled to the death benefit which
would have been payable under Article IV, Section 3(B) or Article V, Section
4(B), whichever is applicable. Notwithstanding anything to the contrary under
the Regulations, if a Member becomes an "inactive Member," he shall be permitted
to elect to commence the payment of his Retirement Allowance at any time after
his attainment of age 65 while an inactive Member. If an inactive Member has
elected to commence the payment of his Retirement Allowance and, subsequent to
the commencement of such allowance, the Member returns to active membership
status and thus is no longer an inactive Member, such Member may elect to
continue to receive his Retirement Allowance or to suspend the payment of his
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Retirement Allowance. Any benefits which accrue subsequent to the Member's
return to active Member status shall be deemed to be provided to the extent of
the Equivalent Value of any benefits paid (taking into account only those
payments made in accordance with the applicable normal form of Retirement
Allowance payable under the Regulations) to the Member; provided, however, in no
event shall the Member's accrued benefit be reduced below such Member's accrued
benefit as of the close of the Plan Year immediately preceding the Plan Year in
which such additional benefits accrue.
SECTION 4. LEAVES OF ABSENCE
(A) Service crediting and membership shall continue during any approved leave of
absence, provided that the Employer notifies the Fund of its intention to
grant to a specific Employee or Member, pursuant to the Employer's policy
which is uniformly applicable to all its Employees under similar
circumstances, one of the leaves of absence described in Subsection (B) of
this Section 4, and agrees to notify the Fund at the conclusion thereof.
(B) For purposes of the Regulations, the following are the only types of
approved leaves of absence:
TYPE 1
------
Non-military leave granted to a Member for a period not in excess of one
year during which contributions continue. Under this leave, Benefit Service
continues to accrue and any benefit, except disability retirement, for which
the Member is otherwise eligible may become payable during the period of the
leave. Further, an Employer may elect that this leave be extended beyond
the one-year period to cover a Member who is receiving
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payments under (i) a disability program of the Employer, or (ii) Title II of
the Federal Social Security Act, but not beyond his normal retirement date.
TYPE 1A
-------
Special military leave granted to a Member who is required to report for
military service pursuant to an involuntary call-up in the reserves. Under
this leave, Benefit Service continues to accrue for the period of such
military service and any benefit, except disability retirement, for which
the Member is otherwise eligible may become payable during the period of the
leave. This special military leave shall terminate upon the earlier to
occur of (i) the Member's reemployment or (ii) 90 days after the Member
completes such military service.
TYPE 2
------
Non-military leave or layoff granted to a Member for a period not in excess
of one year during which no contributions are made. Under this leave,
Vesting Service continues to accrue, but Benefit Service ceases to accrue.
Benefit Service shall recommence upon termination of the leave and
resumption of contributions.
TYPE 3
------
Military or other governmental service leave granted to a Member from which
he returns directly to the Service of an Employer. Under this leave,
Vesting Service continues to accrue, but Benefit Service ceases to accrue.
Benefit Service shall recommence upon termination of the leave. However,
such Benefit Service as did not accrue by reason of the absence may be
credited retroactively to the Member at the election of the Employer on a
uniform basis or as otherwise required by applicable law.
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No benefit, other than a refund of the Member's Accumulated Contributions,
if any, is payable on account of disability or death incurred during a Type
2 or Type 3 leave under this Subsection (B), except that if the Member is
eligible for early retirement and dies during any leave, his Beneficiary
shall be entitled to the death benefit which would have been payable under
Article IV, Section 3(B) or Article V, Section 4(B), whichever is
applicable. At the termination of any leave, a break in service shall occur
unless the Member is then vested or hired by an Employer.
SECTION 5. SERVICE WITH A CONTROLLED CORPORATION
In determining an Employee's Service for purposes of eligibility for membership
under Article 11 and for vesting under Article IV, all Service with a
corporation which is a member of a controlled group of corporations of the
Employer (within the meaning of Section 1 563(a) of the IRC) shall be taken into
account.
SECTION 6. UNIFORM APPLICABILITY OF RULES
Notwithstanding anything in the Regulations to the contrary, Service credited to
each Employee and Member with respect to membership, vesting and benefits shall
be determined by the Fund on a basis uniformly applicable to each Employee or
Member similarly situated, in accordance with ERISA.
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ARTICLE XI MISCELLANEOUS PROVISIONS
SECTION 1. LIMITATIONS ON BENEFITS REQUIRED BY THE IRC
(A) In order that the Fund be maintained as a qualified trust under the IRC, the
benefits payable under the Regulations to or in respect of a Member shall be
subject to the limitations set forth in this Section 1, notwithstanding any
other provision of the Regulations. A Member's benefits to which this
Section 1 is applicable are those attributable to his Employer's
contributions, but excluding to the maximum extent permissible under the IRC
(i) any allowance payable under Article VI to his Spouse as Contingent
Annuitant, and (ii) any benefit which is not directly related to his
Retirement Allowance. All defined benefit plans (whether or not terminated)
of an Employer are to be treated as one defined benefit plan for purposes of
applying the limitations on benefits described in this Section 1.
(B) The benefits to which this Section 1 is applicable may not for any
limitation year (which shall be the calendar year) exceed the actuarial
equivalent (calculated as of the date of commencement of the Member's
Retirement Allowance or his death, if earlier) of an annual single life
annuity payable to the Member in an amount equal to the lesser of:
(i) $90,000 (the "Dollar Limitation"), or
(ii) 100 percent of the Member's High-3 Year Average Compensation (the
"Compensation Limitation"), subject, however, to the following
provisions of this Article XI. For purposes of this Article XI, "High-
3 Year Average Compensation" means a Member's average annual salary for
the three consecutive years of Benefit Service during which his salary
was highest (or for all the years of Benefit Service
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if less than 3). For purposes of determining a Member's "High-3 Year
Average Compensation" under this Subsection (B), a Member's salary
shall be determined in accordance with Section 1.415-2(d) of the IRS
Regulations.
(C) The limitations on the maximum amount of benefits contained in Subsection
(B) of this Section 1 shall be adjusted as follows:
(1) The Dollar Limitation shall be adjusted annually, for limitation years
beginning after December 31, 1987, for increases in the cost-of-living
on or after October 1, 1986 in accordance with the IRS Regulations.
(2) In the case of a benefit beginning prior to a Member's social security
retirement age, as defined in Section 41 5(b)(8) of the IRC, the Dollar
Limitation applicable to such benefit shall be reduced in accordance
with the IRS Regulations to an amount which is equal to a single life
annuity commencing at the same time which is the actuarial Equivalent
Value of a straight life annuity equal to the Dollar Limitation
commencing at the Member's social security retirement age. The
adjustment referred to in the preceding sentence shall be determined as
follows:
(i) If the annual benefit commences before the Member's social
security retirement age, but on or after age 62, and the Member's
social security retirement age is 65, the dollar limitation for
benefits commencing on or after age 62 is determined by reducing
the defined benefit dollar limitation by 5/9 of one percent for
each month by which benefits commence before the month in which
the Member attains age 65.
(ii) If the annual benefit commences before the Member's social
security retirement age, but on or after age 62, and the Member's
social security
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retirement age is greater than 65, the dollar limitation for
benefits commencing on or after age 62 is determined by reducing
the defined benefit dollar limitation by 5/9 of one percent for
each of the first 36 months and 5/12 of one percent for each of
the additional months (up to 24 months) by which benefits commence
before the month of the Member's social security retirement age.
(iii)If the annual benefit of a Member commences prior to age 62, the
defined benefit dollar limitation shall be the actuarial
equivalent, determined in accordance with IRC Section 415 and IRS
Regulations, of an annual benefit beginning at age 62, as
determined in (i) or (ii) above, reduced for each month by which
benefits commence before the month in which the Member attains age
62.
(3) In the case of a benefit beginning after the Member's social security
retirement age, the Dollar Limitation shall be increased in accordance
with the IRS Regulations to an amount which is equal to a single life
annuity commencing at the same time which is the Equivalent Value of a
single life annuity equal to the Dollar Limitation commencing at the
social security retirement age. For purposes of Paragraph (2) of this
Subsection (C) and this Paragraph (3), the term "Equivalent Value"
shall have the same meaning as described in Article I, except the
interest rate assumption for purposes of such Paragraph (2) shall not
be less than the greater of the interest rate assumption provided in
the Regulations or five percent (5%), and the interest rate assumption
for the purposes of this Paragraph (3) shall
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not be greater than the lesser of five percent (5%) or the rate
specified in the Regulations.
(4) Notwithstanding the provisions of Subsection (B) and Paragraphs (1),
(2) and (3) of this Subsection (C), the benefits payable to a Member
from the Fund shall not be deemed to exceed the limitations of such
provisions if (i) the retirement benefits payable with respect to such
Member under the Fund and all other defined benefit plans of his
Employer do not exceed $10,000 for the Plan Year, or for any prior Plan
Year, and (ii) the Employer has not at any time maintained a defined
contribution plan in which the Member participated.
(5) In accordance with the IRC and the Regulations, if the Member has fewer
than 10 years of membership in the Fund, the Dollar Limitation shall be
multiplied by a fraction, the numerator of which is the number of years
(computed to fractional parts of a year) of membership in the Fund, and
the denominator of which is 10. In the event a Member terminated
employment with an Employer prior to August 3, 1992, the Dollar
Limitation applicable to any amendment of the Regulations or election
by the Employer under the Regulations, made on or after May 17, 1989
but before August 3, 1992, which improves benefits thereunder shall be
subject to a separate 10 years of Fund membership requirement based
only on years of Fund membership credited on or after the date of such
amendment to, or election under, the Regulations; provided, however, an
Employer may elect, no later than June 30, 1993, not to have a separate
10 years of Fund membership requirement apply to such benefit
improvement; and provided, further, such election may not apply to any
such benefit improvement provided pursuant to an
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early retirement window benefit under Article V, Section 7 unless (i)
the amount of the benefit improvement would be provided under a
nonqualified plan providing benefits which otherwise would be payable
under the Fund but for certain legal restrictions, (ii) all such
Members eligible for an early retirement window benefit under Article
V, Section 7 are given notice that the portion of any such benefit
which was restricted under the Fund would be provided through a
nonqualified plan, and (iii) the Employer indemnifies the Board, the
Fund, the employees of the Fund and such other person or persons as may
be designated by the Board in such manner as shall be acceptable to the
Board in its sole discretion. In accordance with the IRC and the IRS
Regulations, if the Member has fewer than 10 years of Service, the
Compensation Limitation shall be multiplied by a fraction, the
numerator of which is the Member's years of Service (computed to
fractional parts of a year) and the denominator of which is 10.
(6) In no event shall Paragraph (5) of this Subsection (C) reduce the
Dollar Limitation and the Compensation Limitation to an amount less
than one-tenth of the applicable limitation (determined without regard
to such Paragraph (5)).
(D) Notwithstanding the foregoing provisions of this Article XI, if a Member
also participates in any defined contribution plan (as defined in Sections
414(i) and 415(k) of the IRC) maintained by the Employer (or any
organization which is required to be aggregated with such Employer under
Section 414(b), (c), (m) or (o) of the IRC), the sum of the Member's
"Defined Benefit Fraction" (as defined in IRC Section 41 5(e)(2)) and the
Member's "Defined Contribution Fraction" (as defined in IRC Section
415(e)(3)) shall not exceed 1.0. If a Member makes contributions to the
Fund the amount of such
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contributions shall be treated as an annual addition to a qualified defined
contribution plan for purposes of Section 415 of the IRC.
(E) Notwithstanding the foregoing provisions of this Article XI, if the maximum
limitation on Retirement Allowances with respect to any individual who was a
Member prior to July 1, 1987 and whose Retirement Allowance (determined
without regard to any changes in the Regulations after May 5, 1986 and
without regard to cost of living adjustments occurring after May 5, 1986)
exceeds the limitations set forth in Subsection (B) of this Section 1, then,
for purposes of such Subsection (B) and Section 415(b) and (e) of the IRC,
the Dollar Limitation with respect to such Member shall be equal to such
Member's Retirement Allowance as of June 30, 1987; provided that, such
Member's Retirement Allowance did not exceed the maximum limitation as in
effect for all Plan Years commencing prior to July 1, 1987.
(F) The Fund may from time to time adjust or modify the maximum limitations
applicable to a Member's benefits under this Section 1 as may be required or
permitted by the IRC or ERISA prior to the date that payment of any of such
benefits commences.
SECTION 2. SMALL BENEFITS
Following a Retirant's termination of employment, the Fund shall pay a Retirant,
who has not begun to receive his Retirement Allowance, a lump sum equal to the
Equivalent Value of his regular Retirement Allowance if such lump sum does not
exceed $3,500. Such lump sum shall be in lieu of the Retirement Allowance which
otherwise would be payable. If the Equivalent Value of a Member's vested
accrued benefit derived from Employer and Employee contributions exceeds (or at
the time of any prior distribution exceeded) $3,500, and the accrued benefit is
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immediately distributable, the Member and the Member's Spouse (or where either
the Member or the Spouse has died, the survivor) must consent to any
distribution of such accrued benefit. The consent of the Member and the
Member's Spouse shall be obtained in writing within the 90-day period ending on
the annuity starting date. The annuity starting date is the first day of the
first period for which an amount is paid as an annuity or any other form. The
Fund shall notify the Member and the Member's Spouse of the right to defer any
distribution until the Member's accrued benefit is no longer immediately
distributable. Such notification shall include a general description of the
material features, and an explanation of the relative values of, the optional
forms of benefit available under the Fund in a manner that would satisfy the
notice requirements of IRC Section 417 (a) (3), and shall be provided no less
than 30 days and no more than 90 days prior to the annuity starting date.
However, distribution may commence less than 30 days after the notice described
in the preceding sentence is given, provided the distribution is one to which
Sections 401 (a) (11) and 417 of the IRC do not apply, the Fund clearly informs
the Member that the Member has a right to a period of at least 30 days after
receiving the notice to consider the decision of whether or not to elect a
distribution (and, if applicable, a particular distribution option), and the
Member, after receiving the notice, affirmatively elects a distribution.
Notwithstanding the foregoing, only the Member need consent to the commencement
of a distribution in the form of a qualified joint and survivor annuity while
the accrued benefit is immediately distributable. Neither the consent of the
Member nor the Member's Spouse shall be required to the extent that a
distribution is required to satisfy Section 401 (a)(9) or Section 415 of the
IRC.
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SECTION 3. AMOUNTS PAYABLE TO INCOMPETENTS, MINORS OR ESTATES
If the Fund shall find that any person to whom any amount is payable under the
Regulations is unable to care for his affairs because of illness or accident, or
is a minor, or has died, then any payment due him or his estate (unless a prior
claim therefor has been made by a duly appointed legal representative) may be
paid to his Spouse, relative or any other person deemed by the Board to be a
proper recipient on behalf of such person otherwise entitled to payment. Any
such payment shall be a complete discharge of the liability of the Fund
therefor.
SECTION 4. NON-ALIENATION OF AMOUNTS PAYABLE
Except insofar as applicable law may otherwise require, or pursuant to the terms
of a Qualified Domestic Relations Order, no amount payable under the Regulations
shall be subject in any manner to alienation by anticipation, sale, transfer,
assignment, bankruptcy, pledge, attachment, charge or encumbrance of any kind,
and any attempt to so alienate shall be void; nor shall the Fund in any manner
be liable for or subject to the debts or liabilities of any persons entitled to
any such amount payable; and further if for any reason any amount payable under
the Regulations would not devolve upon such person entitled thereto, then the
Board, in its discretion, may terminate his interest and hold or apply such
amount for the benefit of such person or his dependents as it may deem proper.
SECTION 5. UNCLAIMED BENEFITS
If the Fund cannot ascertain the whereabouts of any person to whom an amount is
payable under the Regulations, and, if after 5 years from the date such payment
is due, a notice of such payment is mailed to the address of such person, as
last shown on the records of the Fund, and
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within 3 months after such mailing such person has not filed with the Fund
written claim therefor, the Board may direct that such payment and all remaining
payments and other benefits, if any, otherwise payable on his account be
cancelled and, to the extent permitted by ERISA, be applied to reduce
contributions. Upon cancellation, the Fund shall have no further liability
therefor, provided that any such amount payable shall be reinstated if such
person subsequently makes a valid claim therefor.
SECTION 6. TOP HEAVY PROVISIONS
The provisions of this Section 6 shall apply and supersede all other provisions
in the Regulations inconsistent therewith during each Plan Year with respect to
which the Regulations constitute a top heavy plan for purposes of the IRC.
(A) For purposes of this Section 6, the following terms shall have the meanings
set forth below:
(1) "Affiliate" - Any entity affiliated with any Employer within the
meaning of Section 41 4(b), 41 4(c) or 41 4(m) of the IRC, except that
for purposes of applying the provisions hereof with respect to the
limitation on contributions, Section 41 5(h) of the IRC shall apply.
(2) "Aggregation Group" - The group composed of each qualified retirement
plan of the Employer or an affiliate in which a key employee is a
participant and each other qualified retirement plan of the Employer or
an affiliate which enables a plan of the Employer or an affiliate in
which a key employee is a participant to satisfy Section 401(a)(4) or
410 of the IRC. In addition, the Board may choose to treat any other
qualified retirement plan as a member of the aggregation group if such
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aggregation group will continue to satisfy Sections 401(a)(4) and 410
of the IRC with such plan being taken into account.
(3) "Determination Date" - the last day of the preceding Plan Year or, in
the case of the first Plan Year, the last day of such Plan Year.
(4) "Key Employee" - A "key employee" as defined in Sections 41 6(i)(1) and
(5) of the IRC and IRS Regulations. For purposes of Section 416 of the
IRC and for determining who is a Key Employee, an Employer which is not
a corporation shall be deemed to have "officers" only for Plan Years
beginning after June 30, 1985. For purposes of determining who is a
key employee, compensation shall mean "compensation" as defined in
Section 1.415-2(d) of the IRS Regulations.
(5) "Top Heavy Ratio" - is a fraction, the numerator of which is the sum of
the present value of accrued benefits of all Key Employees as of the
applicable Determination Date (including any part of any accrued
benefit distributed in the five year period ending on the Determination
Date), and the denominator of which is the sum of the present value of
accrued benefits (including any part of any accrued benefits
distributed in the five year period ending on the Determination Date).
(B) The Regulations will be considered a Top Heavy Plan for any Plan Year if
they are determined to be a Top Heavy Plan as of the last day of the
immediately preceding Plan Year. For purposes of determining whether the
Regulations constitute a Top Heavy Plan, uniform actuarial assumptions which
reflect reasonable mortality experience and reasonable interest rates shall
be used. For purposes of Subsection (E)(1) of this Section 6, the present
value of a Member's Retirement Allowance shall be determined as of the
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last day of the immediately preceding Plan Year and shall include amounts
distributed to or on behalf of the Member within the four immediately
preceding Plan Years.
(C) For any Plan Year that the Regulations are a Top Heavy Plan, only the first
$200,000 (adjusted annually for years beginning on or after January 1, 1998,
in accordance with IRS regulations) (or, for Plan Years beginning on or
after July 1, 1994, $150,000 (as adjusted for cost-of-living and otherwise
limited or modified in accordance with Section 401(a)(17) of the IRC and
applicable IRS rulings and regulations)) of compensation (as defined in
Section 1.41 5-2(d) of the IRS Regulations) shall be credited to a Member
for purposes of the Regulations.
(D) If the Regulations are a Top Heavy Plan with respect to any Plan Year, the
nonforfeitable percentage of the Retirement Allowance which is derived from
Employer contributions on behalf of each Member who is credited with at
least one Hour of Service on or after the date the Regulations become top
heavy shall not be less than the amount determined in accordance with Table
II set forth in Article IV, Section 2(B)(iii).
(E) (1) Subject to the provisions of Subsection (F) of this Section 6, if the
Regulations constitute a Top Heavy Plan, the Retirement Allowance
derived from Employer contributions for each Member who has completed a
year of Membership Service and who is not a Key Employee shall not, at
such point, be less than the product of (a) such Member's average
Salary, multiplied by the (b) lesser of (i) 2% multiplied by the number
of years (computed to fractional parts of a year) of Membership Service
with the Employer or (ii) 20%. For purposes of the preceding sentence,
years of Membership Service shall not include any year of Membership
Service credited with respect to Plan Years which began prior to
January 1, 1984, or any
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other year of Membership Service credited with respect to a Plan Year
during which the Regulations did not constitute a Top Heavy Plan.
(2) For purposes of this Subsection (E), average Salary shall mean the
average of a Member's Salary for the period of five consecutive years
of Service (or, if the Member does not have five consecutive years of
Service, his actual number of consecutive years of Service) during
which the Member had the greatest aggregate Salary.
(F) (1) For each Plan Year that the Regulations are a Top Heavy Plan, 1.0 shall
be substituted for 1.25 as the multiplicand of the Dollar Limitation in
determining the denominator of the Defined Benefit Fraction and of the
Defined Contribution Fraction for purposes of Section 41 5(e) of the
IRC.
(2) If, after substituting 90% for 60% wherever the latter appears in
Section 416(9) of the IRC, the Regulations are not determined to be a
Top Heavy Plan, the provisions of Paragraph (1) of this Subsection (F)
shall not be applicable if the Retirement Allowance for each Member who
is not a Key Employee is determined in accordance with Subsection
(E)(1) of this Section 6, substituting 3% for 2% and 30% for 20% in
this Subsection.
(G) The Board shall, to the maximum extent permitted by the IRC and in
accordance with the governmental regulations, apply the provisions of this
Section 6 by taking into account the benefits payable and the contributions
made under the Financial Institutions Thrift Plan or any other qualified
plan maintained by an Employer, to prevent inappropriate omissions or
required duplication of minimum contributions.
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SECTION 7. TRANSFER OF ASSETS AND LIABILITIES FROM PRIOR PLAN
An Employer which adopts the Fund may, with the approval of the Board and in
accordance with such administrative procedures as the Board may adopt, transfer
the assets and liabilities under a tax-qualified retirement plan maintained by
such Employer (the "prior plan") to the Fund with respect to retirees currently
receiving benefits and participants with deferred vested benefits under the
prior plan. As a condition to the Fund's acceptance of such assets and
liabilities under the prior plan, the Employer shall provide, in a form and
manner acceptable to the Board, (i) an indemnification agreement by the Employer
providing for the indemnification of the Board, the Fund, employees of the Fund
and such other person or persons as may be designated by the Board, (ii) a
representation by the Employer's counsel that, among other things, the prior
plan satisfies the requirements for qualification under the IRC, including, but
not limited to Section 401(a) thereunder, (iii) a transfer agreement executed by
each retiree and, as applicable, deferred vested participant (and, as
applicable, such individual's spouse), and (iv) evidence, satisfactory to the
Board, that the Employer satisfies the appropriate capital requirements under
the Financial Institutions Reform, Recovery and Enforcement Act of 1989 or such
other similar statutory or regulatory requirement.
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ARTICLE XII WITHDRAWAL OF PARTICIPATING EMPLOYER
SECTION 1. NOTICE AND EFFECT
(A) Any Employer may withdraw from the Fund by giving the Fund written notice
specifying a withdrawal date which shall not be earlier than the first day
of the month coincident with or next following 30 days after such notice is
received by the Fund.
(B) The Fund may require any Employer to withdraw if the Fund determines that
the Employer has failed to pay its contributions, charges or other
assessments made by the Board, or to comply with any other provision of the
Regulations or any other applicable provision of the IRC, ERISA, or the
rulings and regulations promulgated thereunder. The withdrawal date
specified by the Fund shall not be earlier than the first day of the month
coincident with or next following 30 days after it has given the Employer
written notice.
(C) Upon any such Employer withdrawal, contributions shall be made to the
withdrawal date specified in Subsection (A) or (B) of this Section 1,
whichever shall apply. Any unpaid Employer contributions, charges or other
assessments and any unliquidated lump sum costs of the Employer referred to
in Article IX, Section 3 shall become immediately due and payable. Such
unliquidated lump sum costs shall not be subject to any market value
adjustment or withdrawal charge specified in Section 2 of this Article XII.
All such obligations shall constitute a first lien on the Employer's assets
and may be recorded by the Fund in any jurisdiction.
(D) Upon any such Employer withdrawal, the Fund shall notify the IRS and any
other appropriate governmental authority in such manner as applicable law
may require.
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Subject to any conditions which the IRS or other appropriate governmental
authority may impose, disposition shall be made in accordance with this
Article XII.
(E) In the event of an Employer withdrawal, no amount shall become payable by
the Fund on or after such Employer's withdrawal date to or in respect of any
of its Members (including those on leave of absence and inactive as
described in Article X) except as provided in this Article XII, and no
amount shall be payable to the Employer. To the maximum extent permitted by
ERISA, the rights of all Retirants (including those who become Retirants as
of the withdrawal date in accordance with Subsection (G) of this Section 1)
from the Service of such Employer on or prior to its withdrawal date, and of
Beneficiaries or Contingent Annuitants, who are drawing allowances from the
Fund on account of the death of a former Member or Retirant of such
Employer, shall be unaffected by the withdrawal of such Employer.
(F) If a qualified successor plan of the Employer, as defined below, is in
effect on the withdrawal date, each Employee who is a Member on such date
shall elect by written notice to the Fund either (i) to become an inactive
Member as of that date, in which case his retirement benefit, if any, shall
be based on Salary and Benefit Service to such date, or (ii) to be included
in the computation of the distributable fund under Section 2 of this Article
XII, in which case the amount representing the total present value of the
retirement benefits of all such Members shall be transferred to the
qualified successor plan pursuant to Section 3 of this Article XII. A
Member who is not fully vested in his retirement benefit as of the transfer
date and who elects inactive membership pursuant to this Subsection (F)
shall continue to accrue Vesting Service for continued employment in
accordance with Article X, Section 3. If a Member's retirement benefit
under the
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qualified successor plan of the Employer later becomes nonforfeitable by
reason of a complete or partial termination, then such inactive Member's
retirement benefit with the Fund will also become nonforfeitable. For
purposes of determining the vested interest of a Member who elects inactive
membership pursuant to this Subsection (F), such Member's retirement
benefits shall become vested in accordance with the Table set forth under
Article IV, Section 2(B)(iii) which had been adopted by his Employer;
provided, however, if the Employer withdrew from the Fund prior to July 1,
1989 with a qualified successor plan and had adopted a vesting schedule
which required 10 years of service for 100% vesting, the retirement benefits
of a Member who elected inactive membership and was still employed by the
Employer as of July 1, 1989 shall become vested in accordance with the
schedule set forth in Table I under Article IV, Section 2(B)(iii).
Notwithstanding the foregoing, if the Employer does not certify to the Fund
that the qualified successor plan provides retirement benefits comparable to
those of the Fund as provided by the Employer under the Regulations, then
each Member's retirement benefit payable under the Fund shall become
nonforfeitable as of the Employer's withdrawal date.
(G) If no qualified successor plan of the Employer, as defined below, is in
effect as of the withdrawal date, (1) the provisions of Sections 2 and 3 of
this Article XII shall not apply, and (2) each Employee who is a Member on
such date will become a Retirant, and his retirement benefit based upon
Salary and Benefit Service to such date shall be nonforfeitable and payable
in accordance with Article IV; provided, however, at the Employer's
irrevocable election, which election must be made by the later of (i) the
date of withdrawal or (ii) 90 days following the receipt of IRS approval
with respect to such provision, and which election shall be effective only
upon receipt of IRS approval, such
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retirement benefit shall be payable only upon such Employee's termination of
employment.
(H) For purposes of this Article XII, a qualified successor plan is a defined
benefit pension plan established by the withdrawing Employer which (i) has
been determined by the IRS to be a qualified and tax-exempt plan and trust
within the meaning of the IRC, (ii) has provided the Fund with written
certification by its appropriate fiduciaries that in the event of a transfer
to such successor plan of the distributable fund described in Section 2 of
this Article XII, the qualified successor plan shall be fully liable for the
payment of the actuarial equivalent of all normal and early retirement
benefits of the Members of such Employer (who consent to the transfer), had
they elected instead to have become inactive Members as of the withdrawal
date, and that the Fund shall not be liable for the payment of any part of
such benefits, (iii) is intended to be maintained indefinitely and which
will provide continuing benefit accruals at a rate at least equivalent to
any of the benefit formulas available under the Regulations, as certified to
the Fund by the Employer, on behalf of the participants thereunder, and (iv)
meets such other requirements of the IRS, other appropriate governmental
authority or of the Board which may apply.
(I) The benefits of all Members who become inactive Members under this Section 1
will be payable upon termination of their Service with the Employer in
accordance with Article IV. The benefits of the remaining Members will be
included in the computation of the distributable fund under Section 2 of
this Article XII. If no such Members remain, no distributable fund shall be
determined.
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SECTION 2. DISTRIBUTABLE FUND
(A) In the event of a transfer to a qualified successor plan referred to in
Section 1 of this Article XII, the Fund shall determine, as of the
Employer's withdrawal date, the actuarial liability of the Fund in respect
of the Members who had elected such transfer. The computation of such
liability shall exclude all Retirants and any Employees who became inactive
Members as of the withdrawal date in accordance with Section 1 (F) of this
Article XII. Such actuarial liability shall be computed as follows:
(1) with respect to withdrawal dates occurring during the period commencing on
July 1, 1987 and ending on December 31, 1987, such actuarial liability shall
be computed prospectively as the present value of the Members' normal and
early retirement benefits, on the assumption that such withdrawal did not
occur, less the present value of the future contributions which would
otherwise be payable for such benefits without regard to any possible
suspension of Employer contributions because of reaching the full funding
limitation. This computation shall be based on the annual actuarial
valuation of the Fund which determined the Employer contribution rates in
effect during the calendar year in which the withdrawal is effective; and
(2) with respect to withdrawal dates occurring on or after January 1, 1988, such
actuarial liability shall be computed as the sum of the Member's accrued
actuarial liabilities, with Salary projection, less the present value of any
unfunded accrued actuarial liabilities of the withdrawing Employer, plus the
present value of any credits due the withdrawing Employer. This computation
shall be made as of the withdrawal date based on the annual actuarial
valuation of the Fund which determined the Employer contribution for the
Plan Year in which the withdrawal is effective.
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(B) The actuarial liability determined under Subsection (A) of this Section 2
shall be reduced as follows:
(1) In the case of an Employer which commenced participation when the market
value of the Fund's assets was equal to or greater than the actuarial value
-- if on the Employer's withdrawal date the percentage of market to
actuarial value is less than 100%, then the reduction shall be the
difference between such percentage and 100%.
(2) In the case of an Employer which commenced participation when the market
value of the Fund's assets was less than the actuarial value -- if on the
Employer's withdrawal date the percentage of market to actuarial value is
less than such percentage at commencement, then the reduction shall be the
relative difference between the percentage at the withdrawal date and the
percentage at the Commencement Date.
For purposes of this Subsection (B), the market and actuarial values of the
Fund's assets as of any date shall exclude the Cash Flow Match Portfolio (a
fixed income portion of the Fund's investments which is not affected, for
purposes of the annual actuarial valuation, by fluctuations in market value) and
shall be those values which have been determined by the Fund and shown on the
Fund's records. The actuarial value of the Fund's assets shall be computed in
accordance with the asset valuation method used in the annual actuarial
valuation of the Fund which determined the Employer contribution requirements in
effect during the Plan Year in which the withdrawal is effective.
(C) A withdrawal charge shall thereafter be deducted as follows:
CHARGE ACTUARIAL LIABILITY
(after application of Subsection (B) above)
3% of first $100,000
2% of second $100,000
1% of excess
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(D) The amount of the actuarial liability remaining after making the above
adjustments is the "distributable fund" which shall be transferred to the
successor plan in accordance with Section 3 of this Article XII. In no
event will such total transfer be less than the present value of the
retirement benefits payable at age 65, based upon Salary and Benefit Service
to the withdrawal date, of all Members included in such transfer as a result
of their election under Section 1(F) of this Article XII, using for the
purpose of this computation the interest rates used by the PBGC to value
deferred and immediate retirement benefits for terminating plans as of the
withdrawal date.
SECTION 3. PAYMENT OF DISTRIBUTABLE FUND
(A) The portion of the distributable fund representing the present value of each
Member's retirement benefit, as computed in accordance with the second
sentence of Section 2(D) of this Article XII, but not less than 50% of the
distributable fund, plus interest determined as described below from the
withdrawal date to the date of transfer, shall be transferred in a lump sum
to the qualified successor plan as soon as practicable (but no earlier than
30 days) following receipt by the Fund of (a) each Member's written consent
to the transfer and his release of all claims against the Fund arising out
of his membership, (b) the qualified successor plan's favorable
determination letter from the IRS that such plan satisfies the then current
qualification and tax-exemption requirements of the IRC or a representation
from the Employer maintaining such qualified successor plan to the same
effect, and (c) a copy of the Employer's submission to the IRS of the
successor plan's Notice of Transfer (IRS Form 5310) of the distributable
fund. Upon the Fund's receipt of the foregoing, it shall submit to the IRS
notice of the Employer's withdrawal. The
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remaining amount of the distributable fund, if any, shall be transferred to
the qualified successor plan in approximately equal annual installments over
a period of 3 years with the first payment being made on or about the first
anniversary of the withdrawal date. Interest on all unpaid amounts will be
credited to date of payment, but not less than once a year, based upon the
Three Year Treasury Constant Maturity rate in effect on (a) the withdrawal
date if the withdrawal date is on or after January 1, 1994 or (b) January 1,
1994 if the withdrawal date is prior to January 1, 1994. The Three Year
Constant Maturity Rate in effect on a specific date shall be the rate
published in Federal Reserve Statistical Release (G.13) for the week ending
on the Friday coinciding with or immediately preceding the specific date in
the preceding sentence. In the absence of the Release, the Fund may obtain
such rate from any other source it deems appropriate. In order that the
Fund be maintained as a qualified trust under the IRC, no amount can be
payable on or after the date of termination, within the meaning of the IRC,
of the qualified successor plan.
(B) Notwithstanding anything to the contrary contained herein, upon receipt by
the Fund of a request from a federal governmental entity, as statutory
receiver for a withdrawn Employer (when such request is made after the
initial lump sum transfer of the portion of the distributable fund
representing the present value of each affected Member's Retirement
Allowance as provided for in subsection (A) of this Section 3 and following
payment of the first installment), provided the federal governmental entity
became statutory receiver for the withdrawn Employer following such
Employer's withdrawal from the Fund and establishment of a qualified
successor plan, the Fund may, in its sole discretion and subject to any
conditions provided herein or otherwise, accelerate the transfer of the
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remaining amount of the distributable fund, if any, to the qualified
successor plan maintained by the Employer for which such governmental entity
acts as receiver. The amount of any such accelerated lump sum payment of
the distributable fund shall be adjusted to reflect the payment of such fund
in advance of the installment payment dates. Any request by a federal
governmental entity, as statutory receiver for a withdrawn Employer, to
accelerate the transfer of the remaining amount of the distributable fund
shall be accompanied by a certification to the effect that such governmental
entity was duly appointed as receiver, citing the statutory authority
therefor, and that such appointment continues in effect as of the date of
the accelerated payment request. Prior to any such accelerated lump sum
payment of the distributable fund, such governmental entity shall indemnify
the Fund, in such form and manner as is acceptable to the Fund, for the full
amount of all reasonable legal fees, costs and expenses (including damages)
which arise from any claims made against the Fund by participants under the
qualified successor plan of the Employer in receivership because of the lump
sum payment by the Fund. If no payments have been made, the participating
Employer will be deemed to have withdrawn from the Fund without a qualified
successor plan, and all Members will become Retirants of the Fund.
SECTION 4. PARTIAL TERMINATION
If any governmental authority or the Fund determines that a partial termination
(within the meaning of the IRC or ERISA) of the Fund has occurred as to any
Employer, then (i) the rights of all its affected Members to their retirement
benefits accrued to the partial termination date shall be nonforfeitable, and
(ii) the provisions of Article XII, which in the opinion of the Fund
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are necessary for the distribution of its assets, shall apply. To the extent
permitted by ERISA, only an Employer as to which a partial termination of the
Fund has occurred shall be liable to the PBGC for any insufficiency of allocable
amounts.
SECTION 5. TRANSFER TO QUALIFIED SUCCESSOR PLAN
No transfer of assets and liabilities of the Fund to a qualified successor plan
(whether by merger or consolidation with such qualified successor plan or
otherwise) shall be made unless each Member would, if either the Employer's or
Employers' participation in the Fund or such qualified successor plan then
terminated, receive a benefit immediately after such transfer which (after
taking account of any distributions or payments to them as part of the same
transaction) is equal to or greater than the benefit he would have been entitled
to receive immediately before such transfer if the Employer's or Employers'
participation in the Fund had then been terminated. The Fund may also require
appropriate indemnification from the Employer or Employers maintaining such
qualified successor plan before making such a transfer.
SECTION 6. SPECIAL PROCEDURES UPON CONSERVATORSHIP OR RECEIVERSHIP
(A) Notwithstanding anything in the Regulations to the contrary and in
accordance with such administrative procedures, requirements and conditions
as the Board shall adopt, if an Employer participating in the Fund is placed
into conservatorship or receivership by the Resolution Trust Corporation
("RTC") (or such other appropriate governmental authority), the provisions
of this Section 6 shall apply.
(B) (i) If an Employer is placed into conservatorship by RTC, such Employer's
participation in the Fund will continue uninterrupted without any
formal action by
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RTC or the Employer and retirement benefits will continue to accrue for
its Members.
(ii) If the Employer is placed into receivership by RTC, RTC will have sixty
(60) days (unless within such 60-day period RTC requests an extension
for up to thirty (30) days and the Fund in its sole discretion approves
such request) from the date the Employer was placed into receivership
to reaffirm the Employer's participation in the Fund in which event
benefits shall continue to accrue from the date the Employer was placed
into receivership. Alternatively, RTC may elect to improve benefits as
of the date of receivership in such manner as shall be prescribed by
the Fund, provided in such case the Employer has a sufficient
accounting credit under the Fund to offset the cost of such benefit
improvements. The credit described in the preceding sentence, which
for purposes of this Section 6 shall be referred to as "FECO,"
represents with respect to an Employer an accounting credit entry on
the books and records of the Fund which may be applied solely to offset
an Employer's contribution obligations to the Fund. FECO may not be
transferred by the Fund for an Employer's general corporate use or
otherwise in contravention of applicable law.
(C) If RTC, on behalf of an Employer which is placed in receivership, elects to
improve benefits, such Employer will be deemed to have withdrawn from the
Fund (following the election to improve benefits) without a qualified
successor plan as of the date the Employer was placed into receivership.
Alternatively, if RTC neither reaffirms (within the time prescribed in
Subsection (B) of this Section 6) the participation in the Fund of an
Employer which was placed into receivership nor elects to improve benefits,
the Employer
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will be deemed to have withdrawn from the Fund without a qualified successor
plan as of the date the Employer was placed into receivership.
(D) If an Employer which has a FECO is placed into conservatorship or
receivership by RTC and such Employer has not withdrawn (or has not been
deemed to withdraw) from the Fund without a qualified successor plan, RTC
may, in accordance with this Subsection (D) and such procedures as may be
adopted by the Board, have the FECO made available under the Fund to another
entity (referred to as an "Acquirer") if such Acquirer, in accordance with
the Regulations, adopts the Fund. The maximum amount of the FECO which RTC
may make available to an Acquirer is a fraction of the "available FECO," the
numerator of which is the PBGC value of the accrued benefits of the
Employees who are transferred to the Acquirer and the denominator of which
is the PBGC value of the accrued benefits of all of the Employees of the
Employer as of the date of the acquisition of such Employer by such
Acquirer, inclusive of those Employees being transferred to the Acquirer.
The "available FECO" is the total FECO attributable to the Employer as of
the date of the acquisition, reduced by the amount of any FECO which could
have been, but was not, made available to any previous Acquirer. The
maximum amount of FECO that may be made available to an Acquirer shall not
be reduced as a result of Employees being terminated by RTC on or after the
date of conservatorship or receivership. If an Acquirer does not elect to
participate in the Fund, there shall be deemed to occur a withdrawal by the
Employer without a qualified successor plan with respect to the Employees
who are transferred to the Acquirer and such Employees shall become 100%
vested in their accrued benefit regardless of their number of years of
Vesting Service. RTC may apply any portion of the FECO remaining after an
acquisition to fund the normal cost or to
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improve benefits with respect to those Employees who have not been
transferred to the Acquirer and who continue to be employed by the Employer.
The amount of any FECO which could have been, but was not, transferred to
any previous Acquirer will be the first amount to be applied to fund the
normal cost or to improve benefits with respect to those Employees who
continue to be employed by the Employer. Any FECO remaining after the FECO
attributable to an Employer's participation in the Fund is applied, as
provided in this Subsection (D), shall remain in the Fund.
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ARTICLE XIII TERMINATION OF THE TRUST
(A) The Trust is the sole source of all benefits under the Regulations and shall
continue, unless terminated as herein provided, until all assets of the
Trust are distributed in accordance with the Regulations. The Trust and the
benefit programs embodied in the Regulations may be terminated only upon a
two-thirds vote of the Board and of the then participating Employers, in
which event termination shall be effective on a date specified after at
least 6 months' notice to the Trustee and all members of the Board and
Employers. In the event of such termination, (i) the rights of all Members
to their Retirement Allowances accrued to the date of termination shall
thereupon be nonforfeitable to the extent that such allowances have then
been funded by such amount of assets determined by the Fund to be properly
allocable to such Members' allowances, and (ii) the Board shall direct the
Trustee to liquidate the assets of the Trust as promptly as it deems
prudent. The Board shall notify the IRS, the PBGC and any other appropriate
governmental authority of such termination at least 30 days prior to the
termination date or at such other date as applicable law may require, and no
distribution of the Trust's assets shall be made until all applicable
governmental approvals have been obtained by the Fund.
(B) The Board shall determine the Trust's net funds remaining after providing
for necessary expenses and shall then allocate such funds to the extent
necessary and sufficient in the following order of priority:
(1) Each Member, former Member, Retirant, and Beneficiary or Contingent
Annuitant shall be entitled to a share equal to his Accumulated
Contributions (or the
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Accumulated Contributions of the Member on whose behalf the individual
is entitled to benefits), if any, less the sum of any allowances
received.
(2) Next, each Retirant, Beneficiary or Contingent Annuitant entitled to an
immediate or deferred benefit on the termination date shall be entitled
to a share equal to the actuarial liability attributable to his
benefits reduced by his share under Paragraph (1) of this Subsection
(B).
(C) The Board shall then:
(1) Determine as of the termination date, in the same manner as described
in Article XII, Section 2, Subsection (A), the actuarial liability
established by the Fund for each Employer group of Members as described
in Article XII reduced by the amount of any allocations to such Members
pursuant to Paragraph (1) of Subsection (B);
(2) Determine the net funds remaining after providing for all allocations
under Subsection (B) of this Article XIII;
(3) Allocate such funds to all such groups of Members as of the termination
date on the basis of the ratio of the actuarial liability computed for
each group of Members to the total liability for such groups; and
(4) Allocate such amounts to the individual Members in each group in
accordance with the procedure set forth in Article XII, Section 3.
(D) The amounts determined in accordance with Subsections (B) and (C) of this
Article XIII shall, subject to the approval of the IRS, the PBGC and any
other appropriate governmental authority, be distributed to the individuals
described in such Subsections.
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Any surplus remaining in the Trust after such distribution shall then be
distributed to the Employers in such manner as the Board shall deem
equitable and appropriate.
Upon completion of the foregoing distributions, the Trustee shall be
relieved of all further obligations under the Trust, but its powers shall
continue so long as any assets remain in the Trust.
(E) No asset or liability of the Trust shall in any event be merged,
consolidated with or transferred by the Trust to any other plan unless such
person affected thereby would, if such plan then terminated immediately
after such event, receive thereunder a benefit which is equal to or greater
than the benefit to which he would have been entitled if the Fund had
terminated immediately before such event.
(F) Notwithstanding the provisions of this Article XIII, all allocations and
distributions made pursuant to this Article XIII shall be made in accordance
with Title IV of ERISA.
(G) In the event of the termination of the Fund, the benefits of any highly
compensated employee (and any highly compensated former employee), as
defined in Section 414(q) of the IRC and IRS Regulations thereunder, shall
be limited to a benefit that is nondiscriminatory under Section 401(a)(4) of
the IRC.
The annual payments to a Restricted Employee (as defined below) may not
exceed an amount equal to the payments that would be made on behalf of such
Restricted Employee under a single life annuity that is the actuarial equivalent
of the sum of the Restricted Employee's accrued benefit and his other benefits
under the Fund. However, the restriction described in the foregoing sentence
shall not apply if:
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(i) after payment to a Restricted Employee of all Benefits (as defined
below), the value of the assets of the Fund equals or exceed 110% of
the value of current liabilities (as defined in Section 412(1)(7) of
the IRC) under the Fund; or
(ii) the value of the Benefits for a Restricted Employee is less that 1% of
the value of current liabilities (as defined in Section 412(1)(7) of
the IRC) under the Fund; or
(iii) the value of the Benefits for a Restricted Employee does not exceed
$3,500.
For purposes of this Subsection (G), a "Restricted Employee" means a Member who
is a highly compensated employee or highly compensated former employee of the
Employer (as defined in Section 414(q) of the IRC and the IRS Regulations
thereunder). In any year, the total number of individuals who are subject to
the restrictions described in Subsection (G) shall be limited to a group of not
less than 25 highly compensated employees and highly compensated former
employees and the Employees included in the group shall be determined on the
basis of such Employees with the greatest compensation. For purposes of this
Subsection (G), the term "Benefits" includes loans in excess of amounts set
forth in Section 72(p)(2)(A) of the IRC, any periodic income, any withdrawal
values payable to a living Employee, and any death benefits not provided for by
insurance on the Restricted Employee's life.
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ARTICLE XIV ADMINISTRATION AND MANAGEMENT OF FUND
SECTION 1. ADMINISTRATION
(A) The general administration of the Fund and the general responsibility for
carrying out the provisions of the Regulations shall be placed in a Board of
Directors who must be Members of the Fund. The President of the Fund shall
be the chief administrative officer of the Fund, a member ex officio of the
Board and, for purposes of ERISA, the "plan administrator." The Board shall
constitute the "named fiduciary" for purposes of ERISA.
(B) The Board may adopt, and amend from time to time, by-laws not inconsistent
with the Trust and the Regulations and shall have such duties and exercise
such powers as are provided in the Regulations, Trust and by-laws. The
number of Directors, their method of election and their terms of office
shall be governed by such by-laws. The Board shall hold an annual meeting
each year and may hold additional meetings from time to time.
(C) The Board shall select the Trustee of the assets of the Fund and shall
define the investment and other powers and duties of the Trustee and
determine the terms and provisions of the Trust, and may, subject to the
provisions of the Trust, appoint from time to time a successor trustee or
trustees as the Board in its discretion shall determine. The Trust shall
constitute a trust fund for the payment of benefits and expenses of the
Fund. All contributions, other income and property received by the Trust
shall be held by the Trustee and invested, reinvested and disbursed in
accordance with and subject to the provisions of the Trust and the
Regulations. All benefits payable under the Regulations shall be payable
from the Trust and from no other source. No person shall have interest in,
or right to, any part of the corpus or income thereof, except to the extent
expressly provided in the Regulations or the Trust.
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(D) The Board shall elect a chairman and a vice-chairman of the Board and such
officers of the Fund as the Board deems desirable and shall define their
duties. The Board shall elect annually from its membership an Executive
Committee, a Retirement Committee, an Investment Committee, an Audit
Committee, a Personnel Committee and a Nominating Committee and shall define
their duties. It may appoint such other committees and arrange for and hire
such actuarial, legal, accounting, auditing, investment manager or advisory,
administrative, medical and other services as it deems appropriate to carry
out the Regulations and may act in reliance upon the advice and actions of
the persons or firms providing such services. The Board may establish,
staff, equip and maintain a Fund Office to assist it in the administration
of the Regulations. The Board may authorize the Trustee or any committee,
officer, employee or agent of the Fund to perform any act pertaining to the
Fund or the administration thereof. The Board shall cause to be maintained
proper accounts and accounting procedures, and shall submit an Annual Report
on the operations of the Fund to each Employer for the information of its
Members.
(E) The members of the Board shall use ordinary care and reasonable diligence in
the performance of their duties and shall serve without compensation, but
shall be reimbursed for any reasonable expenses incurred in their capacities
as Board members. No bond or other security need be required of the Trustee
or any Board member in any jurisdiction.
(F) Each Employer, other than the Fund Office, by its participation in the
Comprehensive Retirement Program, agrees that each Board member, officer and
employee of the Fund shall be indemnified by the Employer for any liability,
in excess of that which is covered by insurance, arising out of any act or
omission to act in connection with the Regulations or the Trust except for
fraud or willful misconduct. The obligation to pay any such
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<PAGE>
expense shall be deemed an administrative expense of the Regulations and
shall be allocated among the Employers, other than the Fund Office, by the
Board as nearly as practicable in the same proportions as the then current
administrative expenses of the Fund are borne by the Employers. No Board
member or officer of the Fund shall be personally liable by virtue of any
contract or other instrument executed by him or on his behalf in such
capacity nor for any mistake of judgment made in good faith.
(G) No Employer shall under any circumstances or for any purpose be deemed an
agent of the Board, the Trustee or the Fund. Neither the Board nor the
Trustee shall be required to enforce payment of any contributions payable
under the Regulations.
(H) The Board shall adopt, and may change from time to time, actuarial or other
tables and the interest rate or rates which shall be used in calculations
under the Regulations, and shall establish the contribution rates as
provided in Article IX. The actuary designated by the Board shall make an
annual actuarial valuation of the Fund's benefit programs, and on the basis
thereof shall recommend to the Board such tables and interest and
contribution rates for its adoption.
(I) The expenses of administering the Regulations including (i) the fees and
expenses of the Trustee for performance of its duties under the Trust, (ii)
the expenses incurred by the Board and the Fund Office in the performance of
their duties under the Regulations and the Trust, and (iii) all other proper
charges and disbursements of the Trustee and the Fund Office, shall be borne
by the Employers in such proportions as shall be determined by the Board,
but until paid by the Employers, all of such expenses shall be a charge
against the assets of the Trust.
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<PAGE>
SECTION 2. DISPUTE RESOLUTION
(A) The Board shall have the exclusive right and full discretionary authority to
interpret the Regulations and any questions arising under or in connection
with the administration of the Fund, including without limitation, the
authority to determine eligibility for employer participation, eligibility
for membership and benefits, and the amount and mode of all contributions,
benefits and other payments under the Regulations. The decisions or actions
of the Board in respect thereof shall be final, conclusive and binding upon
all persons having an interest in the Trust or under the Regulations or
under any agreement with an insurance company or a financial institution
constituting a part of the Regulations and the Trust.
(B) The Board shall have full discretionary authority to delegate to the
Retirement Committee, or any other committee of the Board or to the
President, all or any part of the interpretative and decisional authority of
the Board, described in Subsection (A) of this Section 2, with respect to
the Regulations or the administration of the Fund.
(C) All disputed claims with respect to contributions, benefit eligibility and
payments arising under the Regulations shall be submitted in writing to the
President of the Fund at the office of the Fund. Within 90 days after
receipt of such claim, the decision of the President with respect thereto
shall be mailed to the claimant and shall be final, binding and conclusive;
provided, however, if special circumstances require an extension of time for
processing the claim, an additional 90 days from the end of the initial
period shall be allowed for processing the claim, in which event the
claimant shall be furnished with a written notice of the extension prior to
the termination of the initial 90-day period indicating the special
circumstances requiring an extension. The claimant may appeal
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<PAGE>
such decision in writing to the Retirement Committee of the Board, at the
office of the Fund, within 60 days after the mailing to the claimant of such
written decision of the President. Such written appeal shall contain all
information which the claimant desires the Retirement Committee to consider
and the Committee's decision with respect thereto shall be mailed to the
claimant within 60 days after its receipt of such appeal unless special
circumstances require an extension of time for processing, in which event an
additional 60 days shall be allowed for review and claimant shall be so
notified in writing. The decision of the President, or in the case of an
appeal, the decision of the Retirement Committee, in respect of such claim
shall be final, binding and conclusive.
SECTION 3. MANAGEMENT
(A) The Board shall also have the power, acting directly or through the Trustee:
(1) To purchase, lease for any term, invest or otherwise acquire an
interest in any property, real, personal or mixed, and wherever
situated, including, but not by way of limitation, real property,
whether improved or unimproved, common and preferred stocks, bonds,
notes, debentures, mortgages, mutual fund shares, financial futures and
options contracts, and certificates of deposit issued by any financial
institution including an Employer, without being limited to the class
of securities in which trustees are authorized by law or any rules of
court to invest trust funds and without regard to the proportion any
such property may bear to the entire amount of the Trust Fund;
(2) To sell, exchange, manage, lend, lease for any term, improve, or
otherwise dispose of, and grant options and security interests with
respect to any such
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<PAGE>
property of the Fund, and any sale or other disposition may be public
or private and upon such terms and conditions as the Board may deem
best;
(3) To participate in any plan of reorganization, consolidation, merger,
combination or other similar plan relating to such property, and to
consent to or oppose any such plan and any action thereunder, or any
contract, lease, mortgage, purchase, sale or other action by any legal
entity;
(4) To deposit any such property with any protective, reorganization or
similar committee, to delegate discretionary power thereto and to pay
part of its expenses and compensation and any assessments levied with
respect to any such property so deposited;
(5) To engage suitable employees, agents and professional consultants, and
to pay their reasonable compensation and expenses;
(6) To extend the time of payment of any obligations;
(7) To enter into stand-by agreements for future investment of the Trust
Fund, either with or without a stand-by fee;
(8) To exercise all conversion and subscription rights and all voting
rights with respect to such property and to grant proxies,
discretionary or otherwise;
(9) To cause any investments to be registered and held in the name of one
or more nominees of the Board or any custodian of such property, with
or without the addition of words indicating that such investments are
held in a fiduciary capacity, and to cause any such investments to be
held in bearer form;
(10) To collect and receive any and all money and other property due to the
Fund and to give full discharge and acquittance therefor;
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<PAGE>
(11) To settle, compromise or submit to arbitration any claims, debts or
damages due or owing to or from the Fund; to commence or defend suits
or legal proceedings whenever, in its judgment, any interest of the
Fund requires it; to represent the Fund in all suits or legal
proceedings in any court of law or equity or before any other body or
tribunal; to abstain from the enforcement of any right or claim in its
absolute discretion and to abandon, if it shall deem it advisable, any
property held by the Fund;
(12) To hold uninvested, without liability for interest thereon, any money
received by the Fund until the same shall be invested or disbursed;
(13) For purposes of the Fund, to borrow money from others, to issue
promissory notes of the Fund for the same and to secure the repayment
thereof by pledging any property of the Fund and to enter into cash
collateral agreements referred to in Article IX, Section 6;
(14) To make any agency, trust, custodial, advisory, depository, management,
administrative or other arrangement (i) with any bank or other
financial institution for the deposit and safekeeping of the assets of
the Fund, and (ii) with any investment advisor or manager for the
investment and reinvestment of the assets of the Fund;
(15) To transfer for investment purposes any part of the assets of the Fund
(i) to any group trust which meets the requirements of Sections 401(a)
and 501(a) of the IRC, with the equitable share of the Fund in the
commingled assets of such trust being part of the Fund under the
Regulations, and (ii) to any group deposit administration annuity
contract or other type of contract issued to the Fund by one
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<PAGE>
or more insurance companies, utilizing under any such contract,
general, commingled, or separate investment accounts as the Investment
Committee in its discretion shall determine, all such contracts being
part of the Fund under the Regulations;
(16) To charge against and pay out of the Fund (in accordance with ERISA and
the IRC) (i) taxes of any and all kinds whatsoever which are levied or
assessed upon or become payable in respect of the Fund, the income from
any property forming a part thereof, or any security transaction
pertaining thereto, and (ii) the expenses incurred by the Board in the
performance of its duties in respect of the Fund and all other proper
charges and disbursements of the Fund;
(17) To delegate powers, including, without limitation, discretionary powers
with respect to any of the foregoing to any Committee of the Board or
any officer or employee of the Fund or investment advisor or manager,
custodian or other agent;
(18) To appoint any bank or trust company, wherever domiciled, as successor
trustee under the Declaration of Trust, upon such terms and conditions
as the Board deems advisable; and
(19) Generally to do all acts, whether or not expressly authorized, which
the Board may deem necessary or desirable for the administration,
management and protection of the Fund.
(B) Persons dealing with the Board or the Trustee shall be under no obligation
to see to the proper application of any money paid or property delivered to
the Fund.
110
<PAGE>
SECTION 4. INFORMATION AND COMMUNICATIONS
(A) Each Employer, Member, Retirement and Beneficiary shall file with the Fund
such pertinent information as the Fund may require, and no Employer, Member,
Retirant, Beneficiary or Contingent Annuitant shall have any rights or be
entitled to any benefits from the Fund unless such information is filed in
the manner and form specified by the Fund. The Fund shall be fully protected
in acting upon any such information and shall be under no duty to inquire
into the accuracy or truth thereof, and the payment of any amount by the
Fund pursuant to such information shall constitute a complete discharge of
the liability therefor. All notices, instructions and other communications
shall be in writing and in such form as is prescribed from time to time by
the Fund, shall be mailed by first class mail or delivered personally, and
shall be deemed to have been duly given and delivered only upon actual
receipt thereof by the Fund.
(B) (1) In the case of a qualified joint and survivor annuity as described in
Article VII, Section 1, the Fund shall provide each Member no less than
30 days and no more than 90 days prior to the annuity starting date a
written explanation of: (i) the terms and conditions of a qualified
joint and survivor annuity; (ii) the Member's right to make and the
effect of an election to waive the qualified joint and survivor annuity
form of benefit; (iii) the rights of a Member's Spouse; (iv) the right
to make, and the effect of, a revocation of a previous election to
waive the qualified joint and survivor annuity; and (v) the relative
values of the various optional forms of benefit under the Fund.
(2) In the case of a preretirement survivor annuity as described in Article
IV, Section 3(B), the Fund shall provide each Member within the
applicable period for such
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<PAGE>
Member, a written explanation of the preretirement survivor annuity in
such terms and in such a manner as would be comparable to the
explanation provided for meeting the requirements of Paragraph (1) of
this Subsection (B) applicable to a qualified joint and survivor
annuity.
(3) The applicable period for a Member is whichever of the following
periods ends last: (i) the period beginning with the first day of the
plan year in which the Member attains age 32 and ending with the close
of the plan year preceding the plan year in which the Member attains
age 35; (ii) a reasonable period ending after the individual becomes a
Member; or (iii) a reasonable period ending after the preretirement
survivor annuity first applies to the Member. Notwithstanding the
foregoing, notice must be provided within a reasonable period ending
after separation of service in the case of a Member who separates from
service before attaining age 35.
(4) For purposes of the preceding paragraph, a reasonable period ending
after the enumerated events described in (ii), (iii) and (iv) is the
end of the two year period beginning one year prior to the date the
applicable event occurs and ending one year after that date. In the
case of a Member who separates from service before the plan year in
which age 35 is attained, notice shall be provided within the two year
period beginning one year prior to separation and ending one year after
separation. If such a Member thereafter returns to employment with the
employer, the applicable period for such Member shall be redetermined.
(C) A Member may, in accordance with this Subsection (C) elect to receive his
Retirement Allowance in one of the optional forms described in Article VI.
Any waiver of a
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<PAGE>
qualified joint and survivor annuity or a preretirement survivor annuity
shall not be effective unless: (a) the Member's Spouse consents in writing
to the election; (b) the election designates a specific alternate
beneficiary, including any class of beneficiaries or any contingent
beneficiaries, which may not be changed without spousal consent (or the
Spouse expressly permits designations by the Member without any further
spousal consent); (c) the Member's Spouse's consent acknowledges the effect
of the election; and (d) the Spouse's consent is witnessed by a notary
public. Additionally, a Member's waiver of the qualified joint and survivor
annuity will not be effective unless the election designates a form of
benefit payment which may not be changed without spousal consent (or the
Spouse expressly permits designations by the Member without any further
spousal consent.) If it is established to the satisfaction of the Fund that
such written consent may not be obtained because there is no Spouse or the
Spouse cannot be located, a waiver will be deemed a qualified election.
Any consent by a Spouse obtained under this provision (or establishment that
the consent of a Spouse may not be obtained) shall be effective only with
respect to such Spouse. A consent that permits designations by the Member
without any requirement of further consent by such Spouse must acknowledge
that the Spouse has the right to limit consent to a specific beneficiary,
and a specific form of benefit where applicable, and that the Spouse
voluntarily elects to relinquish either or both of such rights. A revocation
of a prior waiver may be made by a Member without the consent of the Spouse
at any time prior to the commencement of benefits. The number of revocations
shall not be limited. No consent obtained under this provision shall be
valid unless the Member has received notice as provided in Subsection (B) of
this Article XIV, Section 4.
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<PAGE>
ARTICLE XV AMENDMENTS
The Board reserves and shall have the right to amend the Regulations or the
Trust at any time in whole or in part, for any reason, and without the consent
of any Employer, or any Member or other person having an interest in the Trust,
or under the Regulations, and each Employer by its adoption of the Regulations
shall be deemed to have delegated this authority to the Board; but no amendment
shall be adopted which would:
(i) Raise the contribution rate of any Member since last becoming a Member
unless he shall consent thereto; or
(ii) Reduce the then accrued benefits of Members or Retirants for which
contributions have been received by the Fund, except to the extent
necessary to maintain the Trust as a trust qualified under Section 401(a)
of the IRC; or
(iii) Permit any of the assets of the Trust (other than that required to pay
taxes, if any, and the expenses described in Article XIV, Section 1(1) to
the extent, if any, not paid by the Employers) to be used for or diverted
to any purpose other than for the exclusive benefit of Members, Retirants,
and their Beneficiaries and Contingent Annuitants under the Regulations,
prior to the satisfaction of all liabilities with respect thereto.
114
<PAGE>
ARTICLE XVI INTERPRETATION
The Regulations shall be construed in accordance with ERISA and the laws of the
State of New York.
115
<PAGE>
SPECIAL EFFECTIVE DATES
<TABLE>
<CAPTION>
SECTION DATE
<S> <C>
Article I (18) July 1, 1985
Article VII, Section 2(B) (interest
rates used in calculating lump sum
settlements)
Article IX, Sections 1-4 July 1, 1987
Article XI, Section 1
Article XII, Section 2(A)
Article I(25) (inclusion of January 1, 1988
cafeteria plan contributions in
definition of salary)
Article II, Section 2(B) July 1, 1988
(removal of age 60 membership
exclusion)
Article IV, Section 4
Article I(25)(B) October 1, 1988
Article XI, Section 1(C)(5) May 17, 1989
Preamble July 1, 1989
Article I(25) ($200,000
limitation)
Article II, Section 1
Article IV, Section 2(B)(iii)
Article IV Section 3(F)
Article V, Section 2(E)
Article VI, Section 1, Option 4
Article XII, Section 1 (F) (5-year
cliff vesting for employees of
withdrawn employers which re-
quired 10 years of service for
full vesting)
</TABLE>
116
<PAGE>
<TABLE>
<CAPTION>
SECTION DATE
<S> <C>
Article V, Section 7 August 28, 1989
Article VII, Section 2(B) January 1, 1990
Article X, Section 3
Article I(25) January 1, 1991
(commissions limitation)
Article V, Section 1 (A)-(H), for
employers who commence Fund
participation on or after 1/1/91
Article X, Section 4(B), Type 1A
Article XII, Section 1(H), item (iii) February 8, 1991
Article XII, Section 6
Article XI, Section 7 May 1, 1991
Article IV, Section 2(D) July 1, 1991
Article V, Section 1(A)-(H), for
employers who commenced Fund
participation prior to 1/1/91
Article VI, Section 3
Article V, Section 1(B) and (D) October 1, 1991
Article XII, Section 1 (H), December 6, 1991
language preceding item (i)
Article V, Section 7(D), January 1, 1992
item (ii)
</TABLE>
117
<PAGE>
<TABLE>
<CAPTION>
SECTION DATE
<S> <C>
Article V, Section 1(I) and (J), July 1, 1992
for employers who commence
Fund participation on or
after 7/1/92
Article V, Section 7(D), item (iii)
Article V, Section 7(E)
Article XI, Section 1 (C)(5) November 1, 1992
Article V, Section 1(1) and (J), January 1, 1993
for employers who commenced
Fund participation prior to 7/1/92
Article VI I, Section 4
Article V, Section 8 Effective Upon IRS Approval
Article XII, Section 1(G)
Article V, Section 1(K), July 1, 1993
(L), (M), (N) and (O)
Article XII, Section 3(A) January 1, 1994
Article 1(25) July 1, 1994
($150,000 limit)
Article V, Section 1 (definition July 1, 1995
of Covered Compensation Level)
</TABLE>
118
<PAGE>
FINANCIAL INSTITUTIONS RETIREMENT FUND
CARROLLTON FEDERAL BANK, FSB BOARD RESOLUTION
#762 4049
WHEREAS, Carrollton Federal Bank, FSB, Carrollton, Georgia
("Carrollton") (Retirement Fund Member #4049) acquired 501 Alabama Avenue,
Bremen, Georgia branch of First Union Bank as of May 21, 1994 (the "Acquisition
Date" for plan purposes); and
WHEREAS, effective as of the Acquisition Date, Carrollton desires to
recognize the employees formerly of the Branch (the "New Members") as new
employees of Carrollton for the Financial Institutions Retirement Fund (the
"Fund") under all the stipulations and provisions of Carrollton's participation
in the Fund in effect on the Acquisition Date.
NOW, THEREFORE, with respect to the New Members, it is resolved that:
Each of the New Members will be enrolled in the Fund on the later of (i) the
Acquisition Date or (ii) the 1st day of the month coincident with or next
following completion of one year of service (as measured from the employment
date with First Union) and the attainment of age 21.
Vesting service will be measured from the New Members, original date of
employment with First Union. Benefit Service Credit will be provided for those
New Members who are enrolled on the Acquisition Date for service completed after
the enrollment date.
I, the undersigned, being duly elected and acting Secretary of Carrollton
Federal Bank hereby certify that the above is a true and exact copy of the
resolution adopted by the Board of Directors at Carrollton Federal Bank at a
meeting duly called and held on the 21st day of April, 1994 as the same appears
---- -----------
in the minutes of such meeting, and that the aforementioned resolution has not
been modified, changed or repealed since its adoption.
Date May 25, 1994 /s/ Cheryl F. McDonald
------------ -------------------------------------------
Secretary
****************
APPLICATION
The Carrollton Federal Bank, FSB
----------------------------
Address 110 Dixie Street, Carrollton, Georgia 30117 hereby applies for
-------------------------------------------
participation of the New Members in the Fund's Comprehensive Retirement Program
under conditions stated in the foregoing Resolution.
/s/ Gary D. Dorminey
--------------------------------------------
Signature of Authorized Officer
Date: May 25, 1994 President and CEO
------------
___________________________________________
Title President and CEO
<PAGE>
RESOLUTION TO CHANGE EMPLOYER'S
BASIS OF PARTICIPATION IN THE
FINANCIAL INSTITUTIONS RETIREMENT FUND
#900 RF# 4049
<TABLE>
<S> <C>
Financial Institutions INSTRUCTIONS
Retirement Fund
1. INDICATE ONLY THOSE PROVISIONS OF THE FUND BEING AMENDED.
2. THE EFFECTIVE DATE OF AN AMENDMENT MAY BE THE FIRST DAY OF ANY
MONTH, ALTHOUGH THE USE OF A RETROACTIVE DATE REQUIRES PRIOR
APPROVAL OF THE RETIREMENT FUND.
3. AS AN AMENDMENT TO THE FUND, ANY CHANGE ELECTED HEREIN MUST BE
APPROVED BY THE EMPLOYER'S BOARD OF DIRECTORS.
</TABLE>
WHEREAS, Carrollton Federal Bank, FSB (the Employer), desires to amend its
----------------------------
participation in the Retirement Fund as indicated below, effective May 1, 1990.
-----------
NOW, THEREFORE, IT IS RESOLVED THAT THE EMPLOYER:
A. Membership Eligibility: ___ No Change
X In accordance with Article II, Section 2, amends employee eligibility
for membership, as follows:
(a) Waiting period governing enrollment of eligible employees:
X Period of employment limitation (specify any period up to
one year) 1
-
X Age limitation (specify any age up to 21) 21
----
NOTE: IF BOTH THE ABOVE BOXES ARE CHECKED, THE LATER OF THE ATTAINMENT OF THE
SPECIFIED PERIOD OF EMPLOYMENT OR SPECIFIED AGE WILL DETERMINE THE DATE OF
ENROLLMENT.
(b) Exclusions from membership:
____ Those who are covered by another designated pension plan of
the Employer.
X Those who are compensated on an hourly basis.
____ Those who are hired under a written agreement precluding
membership and limiting employment to no more than one year.
NOTE: IF ELIGIBILITY REQUIREMENTS FOR MEMBERSHIP ARE MORE RESTRICTIVE THAN THAT
WHICH HAD BEEN IN EFFECT HERETOFORE, THEN, UNLESS OTHERWISE INDICATED, THEY
SHALL BE APPLICABLE ONLY TO EMPLOYEES HIRED ON OR AFTER THE EFFECTIVE DATE; IF
LESS RESTRICTIVE, IT SHALL BE APPLICABLE TO PRESENT AS WELL AS FUTURE EMPLOYEES.
2
<PAGE>
B. Plan Salary Definition X No Change
____ Provides that, in accordance with Article I, "Salary" for each
calendar year of benefit service shall be amended to:
(a) i ____ Basic salary rate as of January 1 of such year, or date of
employment, if later.
ii ____ Basic salary rate as of January 1 of such year, or date of
employment, if later, plus overtime payments earned in the
preceding calendar year.
Basic salary rate as of January 1 of such year, or date of
employment, if later, plus overtime payments and bonuses
earned in the preceding calendar year.
iii ____ Basic salary rate as of January 1 of such year, or date of
employment, if later, plus overtime payments and bonuses
in the preceding calendar year.
iv ____ In conjunction with i, ii or iii as indicated above,
salary shall also include commissions earned in the
current calendar year, not to exceed $______________.
(b) i ____ Basic salary rate as in effect for each month of such
year.
ii ____ Basic salary rate as in effect for, plus overtime payments
earned in, each month of such year.
iii ____ Basic salary rate as in effect for, plus overtime payments
and bonuses earned in, each month of such year.
iv ____ In conjunction with i, ii or iii as indicated above,
salary shall also include commissions earned in the
current calendar year, not to exceed $______________.
(c) ____ Total taxable compensation as reported on the member's
Internal Revenue Service Form W-2 (exclusive of any
compensation deferred from a prior year) for such year.
The above revised salary definition will be effective for employee-members
who terminate employment on or after ___________________________ (insert
date). It shall apply to benefit service completed on or after
_____________________ (date inserted must be 1st day of month. If a plan
salary definition change for a prior calendar year results in a lower plan
salary for such year, the prior reported salary shall be used.
NOTE: PLAN SALARY ALWAYS INCLUDES A MEMBER'S PRE-TAX CONTRIBUTION TO A
SECTION 401 (K) PLAN AND, UNLESS THE EMPLOYER ELECTS OTHERWISE, A MEMBER'S
PRE-TAX CONTRIBUTION TO A SECTION 125 CAFETERIA PLAN.
C. Early Retirement Provisions: X No Change
Establishes the earliest age for commencement of early retirement allowance
payments, as follows:
____ Age 45 or __ Age 55
Provides the following early retirement features [complete (a) and (b)]:
(a) Early Retirement Factors
i ____ Actuarial Equivalent
ii ____ 3%
iii ____ Rule of 70
iv ____ Rule of 80
3
<PAGE>
(b) Unreduced Early Retirement Benefits at:
i ____ Age 60
ii ____ Age 62
iii ____ Age 65
NOTE: (B)I AND (B)II NOT AVAILABLE WITH INTEGRATED UNIT ACCRUAL FORMULAS
UNDER ITEM G BELOW .
D. Vesting Schedule X No Change
____ Establishes, in accordance with Article IV, the vesting schedule
indicated:
<TABLE>
(a) ____ Vesting Table A-5 Year Cliff (b) ____ Vesting Table B - 2-6 Partial
Completed Years Vested Completed Years Vested
of Employment Percentage of Employment Percentage
<S> <C> <C> <C>
Less than 5 0% Less than 2 0%
5 100% 2 20%
3 40%
4 60%
5 80%
6 100%
</TABLE>
NOTE: VESTING TABLES A AND B APPLY WITHOUT REGARD TO AGE. IN ADDITION, A
MEMBER WHO REACHES AGE 65 IS 100% VESTED REGARDLESS OF THE NUMBER OF
COMPLETED YEARS OF EMPLOYMENT.
E. Lump Sum Settlement Option: X No Change
____ Agrees, in accordance with Article Vll, to make uniformly available
to all its retirants who have attained age ____ (any age between 45
and 65, inclusive, but not less than the early retirement
commencement age), the Lump Sum Settlement Option.
NOTE: IF THE LUMP SUM SETTLEMENT OPTION IS NOT ELECTED, ALL RETIREMENT
BENEFITS WILL BE PAID IN THE FORM OF A MONTHLY ALLOWANCE, EXCEPT IN THE
CASE OF CERTAIN DE MINIMIS AMOUNTS DESCRIBED IN THE REGULATIONS.
F. Prior Service Credit: X No Change
____ Provides, in accordance with Article III:
___ Prior service credit to be allowed for all service rendered since
______________ and/or
____ after attainment of age ______ and/or ____ completion of _____of
employment and/or
____ pursuant to attached rider(s)
G. Retirement Benefit Formula: X No Change
____ Provides the following benefit formula in accordance with the
Regulations [complete (a) or (b) or (c)]:
(a) ____ Nonintegrated Unit Accrual Formula
4
<PAGE>
Annual Accrual Rate ____ (Any rate between 1% and 3%, inclusive, in
.25% increments)
Average Salary Base ____ (High-5, High-3, Career Average)
Service Cap (None, 25, 30, 35, 40, 45 or 50 years) May
____ not be used with Career Average Salary
(b) ____ Integrated Unit Accrual Formula
i. Salary Base
____ High-5 Year
____ High-3 Year
ii Accrual Rates
____ 1% up to covered compensation level ("CCL") plus 1.5%
of excess
____ 1.25% up to CCL, plus 1.75% of excess
____ 1.5% up to CCL, plus 2% of excess
____ 1.75% up to CCL, plus 2.25% of excess
iii Integration Level
____ Integration at member's CCL with Career Average Minimum
____ Integration at member's CCL without Career Average
Minimum
____ Integration at greater of $10,000 or 1/2 of CCL of
individual reaching Social Security Retirement Age in
year of calculation without Career Average Minimum
(c) Fixed Percentage Formula
i Salary Base ____ High-5 Year ____ High 3 Year
ii. Uniform Percentage of Salary (any percent between 40% and 80%
inclusive) _____%
iii. Benefit Service Requirement at Normal Retirement Date for
Percentage in Item ii.
____ 25 years ____ 30 years
____ This modification in formula does not constitute a reduction in future
---
benefit accruals.
X This modification in formula constitutes a reduction in future benefit
accruals and benefits accrued to the modification date will be
protected by
____ Frozen Add-ons X Grandfathered minimum
H. Ancillary Features: X No Change
<TABLE>
<S> <C> <C>
(a) Annual Post Retirement Increment ____ Active Members Only ____ All Members
i ____ None
ii ____ 1%
iii ____ 2%
iv ____ 3%
</TABLE>
(b) Active Service Death Benefit
i ____ Basic Benefit (Vested early retirement allowance only)
ii ____ Additional Benefit (1 to 3 times last 12 months salary
5
<PAGE>
(c) Disability Retirement Benefit
____ Yes ____ No
(d) ____ 10-Year Certain Normal Form of Payment
(e) ____ Eliminate Retirement Adjustment Payment for Future Accruals
Will pay the total of the accrued actuarial liability as of the effective
date in the form of:
(a) ____ One lump sum as of the amendment date (may be subject to
Federal excise tax penalty).
(b) ____ A reduction in the Employer's Future Employer Contribution
Offset (FECO)*
(c) ____ An amortization and/or escrow program (subject to the terms and
conditions of the Fund).
* if accrued actuarial liability exceeds FECO, then box 9(a) or 9(c)
must also be checked.
Authorizes and directs its officers, or any of them:
(a) to execute the Employer's Application below and any other documents
(including agreements modifying costs and any required riders), and to
take such other action as he or they may deem advisable to finalize
the continued participation of the Employer in the Fund's
Comprehensive Retirement Program,
and
(b) to pay on behalf of the Employer to the Fund such contributions as are
determined by the Fund to be necessary to fund the benefits selected.
________________________________________________________________________________
I, the undersigned, being duly elected and acting Secretary of Carrollton
----------
Federal Bank FSB hereby certify that the above is a true and exact copy of a
- ----------------
resolution adopted by the Board of Directors of said Employer at a meeting duly
called and held on the 20th day of October, 1994, as the same appears in the
minutes of such meeting, and that the aforementioned resolution has not been
modified, changed or repealed since its adoption.
Date October 20, 1994 /s/ Cheryl F. McDonald
---------------- ------------------------------------
Secretary
APPLICATION
The Carrollton Federal Bank, FSB 5 8 - 0 1 8 4 9 8 5
Federal Identification No.
Address 110 Dixie Street Carrollton GA 30117 hereby applies for the modified
-------------------------------------
basis of participation checked in the above Resolution under the conditions
stated therein and in accordance with the Regulations of the Fund.
Date: October 20, 1994 /s/ Gary D. Dorminey
----------------------- ---------------------------------------
Signature of Authorized Officer
President/CEO
---------------------------------------
Title
6
<PAGE>
FINANCIAL INSTITUTIONS RETIREMENT FUND
CHANGES IN EMPLOYER'S BASIS OF PARTICIPATION
IN THE FINANCIAL INSTITUTIONS RETIREMENT FUND
RESOLUTION
#627 RF# 4049
1. INDICATE ONLY THOSE PROVISIONS OF THE FUND BEING AMENDED.
2. THE EFFECTIVE DATE OF AN AMENDMENT MAY BE THE FIRST DAY OF ANY MONTH,
ALTHOUGH THE USE OF A RETROACTIVE DATE REQUIRES PRIOR APPROVAL OF THE
RETIREMENT FUND.
3. AS AN AMENDMENT TO THE FUND, ANY CHANGE ELECTED HEREIN MUST BE APPROVED BY
THE EMPLOYER'S BOARD OF DIRECTORS.
WHEREAS, Carrollton Federal Bank, FSB (the Employer), desires to amend its
----------------------------
participation in the Retirement Fund as indicated below, effective January 1,
----------
1994.
- ----
NOW, THEREFORE, IT IS RESOLVED THAT THE EMPLOYER:
A. Membership Eligibility: X No Change
____ In accordance with Article II, Section 2, amends employee eligibility
for membership, as follows:
(a) Waiting period governing enrollment of eligible employees:
____ Period of employment limitation (specify any period up to
one year) ___
____ Age limitation (specify any age up to 21) ____
NOTE: IF BOTH THE ABOVE BOXES ARE CHECKED, THE LATER OF THE ATTAINMENT OF
THE SPECIFIED PERIOD OF EMPLOYMENT OR SPECIFIED AGE WILL DETERMINE THE DATE
OF ENROLLMENT.
(b) Exclusions from membership:
____ Those who are covered by another designated pension plan
of the Employer.
____ Those who are compensated on an hourly basis.
____ Those who are hired under a written agreement precluding
membership and limiting employment to no more than one
year.
NOTE: IF ELIGIBILITY REQUIREMENTS FOR MEMBERSHIP ARE MORE RESTRICTIVE THAN
THAT WHICH HAD BEEN IN EFFECT HERETOFORE, THEN, UNLESS OTHERWISE INDICATED,
THEY SHALL BE APPLICABLE ONLY TO EMPLOYEES HIRED ON OR AFTER THE EFFECTIVE
DATE; IF LESS RESTRICTIVE, IT SHALL BE APPLICABLE TO PRESENT AS WELL AS
FUTURE EMPLOYEES.
7
<PAGE>
B. Plan Salary Definition X No Change
____ Provides that, in accordance with Article I, "Salary" for each
calendar year of benefit service shall be amended to:
(a) i ____ Basic salary rate as of January 1 of such year, or date
of employment, if later.
ii ---- Basic salary rate as of January 1 of such year, or date
of employment, if later, plus overtime payments earned in
the preceding calendar year.
iii ---- Basic salary rate as of January 1 of such year, or date
of employment, if later, plus overtime payments and
bonuses earned in the preceding calendar year.
iv ---- In conjunction with i, ii or iii as indicated above,
salary shall also include commissions earned in the
preceding calendar year, not to exceed
$_________________.
(b) i ---- Basic salary rate as in effect for each month of such
year.
ii ____ Basic salary rate as in effect for, plus overtime
payments earned in, each month of such year
iii ---- Basic salary rate as in effect for, plus overtime
payments and bonuses earned in each month of such year.
iv ---- In conjunction with i, ii or iii as indicated above,
salary shall also include commissions earned in the
current calendar year, not to exceed $______________.
(c) ---- Total taxable compensation as reported on the member's
Internal Revenue Service Form W-2 (exclusive of any
compensation deferred from a prior year) for such year.
The above revised salary definition will be effective for employee-members
who terminate employment on or after ___________________________ (insert
date). It shall apply to benefit service completed on or after
_____________________ (date inserted must be 1st day of month. If a plan
salary definition change for a prior calendar year results in a lower plan
salary for such year, the prior reported salary shall be used.
NOTE: PLAN SALARY ALWAYS INCLUDES A MEMBER'S PRE-TAX CONTRIBUTION TO A
SECTION 401 (K) PLAN AND, UNLESS THE EMPLOYER ELECTS OTHERWISE, A MEMBER'S
PRE-TAX CONTRIBUTION TO A SECTION 125 CAFETERIA PLAN.
C. Early Retirement Provisions: X No Change
Establishes the earliest age for commencement of early retirement allowance
payments, as follows:
____ Age 45 or ____ Age 55
Provides the following early retirement features [complete (a) and (b)]:
(a) Early Retirement Factors
i ____ Actuarial Equivalent
ii ____ 3%
iii ____ Rule of 70
iv ____ Rule of 80
8
<PAGE>
(b) Unreduced Early Retirement Benefits at:
i ____ Age 60
ii ____ Age 62
iii ____ Age 65
NOTE: (B)I AND (B)II NOT AVAILABLE WITH INTEGRATED UNIT ACCRUAL FORMULAS
UNDER ITEM G BELOW.
D. Vesting Schedule X No Change
____ Establishes, in accordance with Article IV, the vesting schedule
indicated:
<TABLE>
<CAPTION>
(a) ____ Vesting Table A-5 Year Cliff (b) ____ Vesting Table B - 2-6 Partial
Completed Years Vested Completed Years Vested
of Employment Percentage of Employment Percentage
<S> <C> <C> <C>
Less than 5 0% Less than 2 0%
5 100% 2 20%
3 40%
4 60%
5 80%
6 100%
</TABLE>
NOTE: VESTING TABLES A AND B APPLY WITHOUT REGARD TO AGE. IN ADDITION, A
MEMBER WHO REACHES AGE 65 IS 100% VESTED REGARDLESS OF THE NUMBER OF
COMPLETED YEARS OF EMPLOYMENT.
E. Lump Sum Settlement Option: X No Change
____ Agrees, in accordance with Article Vll, to make uniformly available
to all its retirants who have attained age ____ (any age between 45
and 65, inclusive, but not less than the early retirement
commencement age), the Lump Sum Settlement Option.
NOTE: IF THE LUMP SUM SETTLEMENT OPTION IS NOT ELECTED, ALL RETIREMENT
BENEFITS WILL BE PAID IN THE FORM OF A MONTHLY ALLOWANCE, EXCEPT IN THE
CASE OF CERTAIN DE MINIMIS AMOUNTS DESCRIBED IN THE REGULATIONS.
F. Prior Service Credit: X No Change
____ Provides, in accordance with Article III:
___ Prior service credit to be allowed for all service rendered
since
_________________ and/or
____ after attainment of age ______ and/or ____ completion of
____________ of employment and/or
____ pursuant to attached rider(s)
9
<PAGE>
G. Retirement Benefit Formula: No Change
____ Provides the following benefit formula in accordance with the
Regulations [complete (a) or (b) or (c)]:
(a) X Nonintegrated Unit Accrual Formula
Annual Accrual Rate 1% (Any rate between 1% and 3%,
inclusive, in .25% increments)
Average Salary Base High-5 (High-5, High-3, Career Average)
Service Cap None (None, 25, 30, 35, 40, 45 or 50
---- years) May not be used with Career
Average Salary
(b) ____ Integrated Unit Accrual Formula
i. Salary Base
____ High-5 Year
____ High-3 Year
ii Accrual Rates
____ 1% up to covered compensation level ("CCL") plus
1.5% of excess
____ 1.25% up to CCL, plus 1.75% of excess
____ 1.5% up to CCL, plus 2% of excess
____ 1.75% up to CCL, plus 2.25% of excess
iii Integration Level
____ Integration at member's CCL with Career Average
Minimum
____ Integration at member's CCL without Career Average
Minimum
____ Integration at greater of $10,000 or 1/2 of CCL of
individual reaching Social Security Retirement Age
in year of calculation without Career Average
Minimum
(c) Fixed Percentage Formula
i Salary Base ____ High-5 Year ____ High 3 Year
ii. Uniform Percentage of Salary (any percent between 40% and 80%
inclusive) _____%
iii. Benefit Service Requirement at Normal Retirement Date for
Percentage in Item
ii.
____ 25 years ____ 30 years
____ This modification in formula does not constitute a reduction in
future benefit accruals.
X This modification in formula constitutes a reduction in future
benefit accruals and benefits accrued to the modification date will
be protected by
____ Frozen Add-ons X Grandfathered minimum
H. Ancillary Features: X No Change
<TABLE>
<S> <C> <C>
(a) Annual Post Retirement Increment ____ Active Members Only ____ All Members
i ____ None
ii ____ 1%
iii ____ 2%
iv ____ 3%
</TABLE>
10
<PAGE>
(b) Active Service Death Benefit
i ____ Basic Benefit (Vested early retirement allowance only)
ii ____ Additional Benefit (1 to 3 times last 12 months salary
(c) Disability Retirement Benefit
____ Yes ____ No
(d) ____ 10-Year Certain Normal Form of Payment
(e) ____ Eliminate Retirement Adjustment Payment for Future Accruals
Will pay the total of the accrued actuarial liability as of the
effective date in the form of:
(a) ____ One lump sum as of the amendment date (may be subject to
Federal excise tax penalty).
(b) ____ A reduction in the Employer's Future Employer Contribution
Offset (FECO)*
(c) ____ An amortization and/or escrow program (subject to the terms
and conditions of the Fund).
* lf accrued actuarial liability exceeds FECO, then box 9(a) or
9(c) must also be checked.
Authorizes and directs its officers, or any of them:
(a) to execute the Employer's Application below and any other documents
(including agreements modifying costs and any required riders), and to
take such other action as he or they may deem advisable to finalize
the continued participation of the Employer in the Fund's
Comprehensive Retirement Program,
and
(b) to pay on behalf of the Employer to the Fund such contributions as are
determined by the Fund to be necessary to fund the benefits selected.
________________________________________________________________________________
I, the undersigned, being duly elected and acting Secretary of Carrollton
----------
Federal Bank FSB hereby certify that the above is a true and exact copy of a
- ----------------
resolution adopted by the Board of Directors of said Employer at a meeting duly
called and held on the 21st day of October, 1993, as the same appears in the
minutes of such meeting, and that the aforementioned resolution has not been
modified, changed or repealed since its adoption.
Date October 22, 1993 /s/ Cheryl F. McDonald
------------------------- -----------------------------------------
Secretary
11
<PAGE>
APPLICATION
The Carrollton Federal Bank, FSB 5 8 - 0 1 8 4 9 8 5
Federal Identification No.
Address 110 Dixie Street Carrollton GA 30117 hereby applies for the modified
-------------------------------------
basis of participation checked in the above Resolution under the conditions
stated therein and in accordance with the Regulations of the Fund.
Date: October 22, 1993 /s/ Gary D. Dorminey
------------------------- -----------------------------------------
Signature of Authorized Officer
President and Chief Executive Officer
-----------------------------------------
Title
12
<PAGE>
EXHIBIT 10.7
SMITH BARNEY SHEARSON
---------------------
SMITH BARNEY SHEARSON PROTOTYPE
STANDARDIZED 401(K) PLAN
ADOPTION AGREEMENT #003
Adoption of a qualified plan has important legal and tax implications.
Failure to properly fill out the Adoption Agreement may result in
disqualification of the Plan. Employers should consult with their counsel
concerning the adoption of this Plan. To obtain further information about the
Plan, contact Smith Barney Shearson through your Financial Consultant.
NOTE: Under the terms of the Plan, options marked "STANDARD" AUTOMATICALLY
will apply unless another option is selected. If additional space is needed to
provide information requested in this Adoption Agreement, the information may be
provided in an addendum attached to this Adoption Agreement which contains a
reference to the appropriate Part(s) of the Adoption Agreement.
Adoption Agreement #003 may only be used in conjunction with the SMITH
BARNEY SHEARSON PROTOTYPE DEFINED CONTRIBUTION PLAN -- PLAN DOCUMENT #05.
Capitalized terms refer to defined terms in Plan Document #05. "(S)"
refers to sections of Plan Document #05; "Part" refers to provisions in this
Adoption Agreement. The instructions and descriptions in this Adoption
Agreement generally summarize the Plan Document provisions, but the Plan
Document terms will be controlling in the event of any conflict.
TO BE COMPLETED BY SMITH BARNEY SHEARSON
FINANCIAL CONSULTANTS: Greg Norris TELEPHONE NUMBER: (404) 933-3068
ADDRESS: 2300 Windy Ridge Pkwy., Suite 550 South, Atlanta, GA 30339
SMITH BARNEY SHEARSON INC. ACCOUNT # FOR PLAN: ______________________________
1
<PAGE>
I. EMPLOYER INFORMATION.
Name: Carrollton Federal Bank
Address: 110 Dixie Street
Carrollton, GA 30117
Taxable Year: 12/31 EIN: 58-2083902
II. PLAN INFORMATION.
A. PLAN NAME: Carrollton Federal Bank, F8B, 401(k) Plan
B. PLAN YEAR: the period which ends on December 31
C. CONSTRUCTION: Except as provided in (S) 1.2, the Plan and the Trust
Agreement will be subject to the laws of the State of
Georgia.
D. PLAN ADOPTION: The Plan is hereby adopted as [Check ONE. See (S)
14.1.]
1. [_] a new profit sharing plan (with cash or deferred
arrangement).
2. [X] an amendment and restatement of the Carrollton Federal
Bank, F8B 401(k) Plan ("Pre-Existing Plan") which was originally effective
____________________, 19____.
E. EFFECTIVE DATE OF THIS ADOPTION AGREEMENT: January 1, 1997.
III. ELIGIBILITY AND PARTICIPATION. [If Employer maintains another defined
contribution Paired Plan, the eligibility and participation requirements
specified in this Part III for Plan Years beginning on and after the Final
Compliance Date must be the same as those specified in the Adoption Agreement
for such other Paired Plan.]
A. ELIGIBLE EMPLOYEES. All Employees of the Employer and all Employees
of all Affiliates who satisfy the Participation Requirement generally are
eligible to participate in the Plan except certain nonresidential aliens.
However, notwithstanding any contrary language, participation in this Plan by
Employees who are covered by a collective bargaining agreement and the extent of
such participation, if any, will be determined by collective bargaining. [See
(S) 2.19.]
2
<PAGE>
B. PARTICIPATION REQUIREMENTS. In order to participate in this Plan, an
Eligible Employee must [Check ONE. See (S) 2.46, (S) 4 and Part V. B.a. Enter
"N/A" if there will be no minimum age or no waiting period, as applicable.]
1. [_] STANDARD: Reach minimum age of 21 and complete waiting
period of 1 Year of Service.
2. [_] No minimum age or waiting period.
3. [X] Reach minimum age of 18 [not to exceed 21] and complete
waiting period of 1 Year of Service [not to exceed 1].
4. [_] Reach minimum age of ____ [not to exceed 21] and complete
waiting period of ____ Year of Service [not to exceed 1]; however, each
Employee who is an Eligible Employee on the Effective Date will be deemed
to satisfy the Participation Requirement on the Effective Date regardless
of such Employee's actual age or service.
C. ENTRY DATE. [Check ONE. See (S) 2.25 and (S) 4.]
1. [_] STANDARD: The first day of each Plan Year and the first
day of the seventh month of each Plan Year.
2. [_] The date on which the Participant satisfies the
Participation Requirement.
3. [X] Other: 1st Day of every month [Specify date(s). If a
single Entry Date is entered, the minimum age in Part III.B cannot exceed
20 1/2 and the maximum waiting period in Part III.B cannot exceed 1/2
year.]
IV. VESTING.
A. DEATH, DISABILITY OR RETIREMENT. [See (S) 8.1(b).]
1. [X] STANDARD: A Participant's Employer Account and Matching
Account will be 100% vested if, while an Employee, that Participant dies,
becomes Disabled, or reaches Normal Retirement Age or, if applicable, Early
Retirement Age.
2. [_] A Participant's Employer Account and Matching Account
will be 100% vested if, while an Employee, that Participant reaches Normal
Retirement Age or if the Participant satisfies the following condition:
[Check one or more only if desired.]
a. [_] dies while an Employee.
3
<PAGE>
b. [_] becomes Disabled while an Employee.
c. [_] reaches Early Retirement Age while an Employee.
B. GENERAL VESTING SCHEDULE. [See (S) 8.1 and (S) 14.3(c). Generally,
the vesting schedule under this Plan must be at least as favorable at the
completion of each year as they vesting schedule under the Pre-Existing Plan.
The Top-Heavy Vesting Schedule selected in Part XI.A will apply for all Plan
Years in which the Plan is a Top-Heavy Plan. See (S) 12.4.]
1. MATCHING ACCOUNT. [Check ONE. "Full and Immediate Vesting" must
be selected if the 2-year requirement for Matching Contributions is
selected in Part VII.A.2.b.3.]
a. [_] STANDARD: Full and Immediate Vesting. 100% at all
times.
b. [_] Cliff Vesting. 100% after completion of ______
Years of Service [not to exceed 5].
c. [X] Graded Vesting.
YEARS OF SERVICE NONFORFEITABLE PERCENTAGE
Less than 1 0%
1 0%
2 25%
3 50% [AT LEAST 20%]
4 75% [AT LEAST 40%]
5 100% [AT LEAST 60%]
6 100% [AT LEAST 80%]
7 or more 100%
d. [_] Top-Heavy. The Top-Heavy Vesting Schedule in Part
XI.A will apply for all Plan Years.
2. EMPLOYER ACCOUNT. [Check ONE. "Full and Immediate Vesting" must
be selected if the 2-year requirement for Employer Contributions is
selected in Part VII.D.2.b.2.]
a. [_] STANDARD: Full and Immediate Vesting. 100% at all
times.
b. [_] Cliff Vesting. 100% after completion of ______
Years of Service [not to exceed 5].
4
<PAGE>
c. [_] Graded Vesting.
YEARS OF SERVICE NONFORFEITABLE PERCENTAGE
Less than 1 ____%
1 ____%
2 ____%
3 ____% [AT LEAST 20%]
4 ____% [AT LEAST 40%]
5 ____% [AT LEAST 60%]
6 ____% [AT LEAST 80%]
7 or more 100%
d. [_] Top-Heavy. The Top-Heavy Vesting Schedule in Part
XI.A will apply for all Plan Years.
C. NORMAL RETIREMENT AGE: [Check ONE. See (S) 2.43 and Part XIII.B.]
1. [X] STANDARD: Age 65.
2. [_] Age _____ [not to exceed 65].
3. [_] The later of age ____ [not to exceed 65] or the _____
[not to exceed 5th] anniversary of the date on which the Participant
commenced participation in the Plan.
D. EARLY RETIREMENT AGE: [The designation of an Early Retirement Age may
accelerate vesting and distribution. Early Retirement Age cannot exceed Normal
Retirement Age. Check ONE. See (S) 2.13 and (S) 9.1.]
1. [X] STANDARD: No Early Retirement Age.
2. [_] Age _____ [not to exceed 65]
3. [_] The later of age ____ or the completion of _______ Years
of Service (for vesting purposes).
V. SERVICE FOR PARTICIPATION AND VESTING.
A. METHOD FOR CREDITING SERVICE. [Check one. See (S) 3.]
---
1. [X] STANDARD: "Hour of Service" method. [See (S) 3.1.]
5
<PAGE>
a. Crediting Hours. Hours will be credited during each
Computation Period [Check one. See (S) 3.1(c).]
---
(1) [X] STANDARD: By maintaining records of the actual
hours worked. [See (S) 3.1(c)(2)(i).]
(2) [_] By using the following equivalency [check ONE. See
(S) 3.1(c)(2)(ii).
[_] 10 Hours or Service for each day.
[_] 45 Hours or Service for each week.
[_] 95 Hours or Service for each semi-monthly
payroll period.
[_] 190 Hours or Service for each month.
b. Vesting Computation Period. The Computation Period for
vesting purposes will be [Check one. See (S) 3.1(b)(2).]
---
(1) [X] STANDARD: The Plan Year.
(2) [_] The 12 month period beginning on the Participant's
hire date and each anniversary of that hire date.
c. Participation Computation Period. The initial Computation
Period for participation purposes will be the 12 month period
beginning on the Participant's hire date. Each subsequent Computation
Period after the initial 12 months of employment will be [Check one.
---
See (S) 3.1(b)(3).]
(1) [X] STANDARD: Plan Years beginning after the
Participant's hire date.
(2) [_] Subsequent 12 month periods beginning on the
anniversaries of the Participant's hire date.
d. Year of Service for Vesting. For vesting purposes, an
Employee will be credited with a Year of Service if, during a
Computation Period, the Employee completes at least [Check one. See
---
(S) 3.1(d).]
(1) [X] STANDARD: 1,000 Hours of Service.
(2) [_] _________ [not more than 1,000] Hours of Service.
6
<PAGE>
e. Year of Service for Participation. For participation
purposes, an Employee will be credited with a Year of Service [Check
one. See (S) 3.1(b)(3) and (S) 3.1(d).]
---
(1) [X] STANDARD: At the end of the Computation Period in
which the Employee completes at least 1,000 Hours of Service.
(2) [_] On the date on which the Employee completes at
least ______ [not more than 1,000] Hours of Service.
(3) [_] At the end of the Computation Period on which the
Employee completes at least _____ [not more than 1,000] Hours of
Service.
Notwithstanding the foregoing, if a partial Year of Service
is selected in Part III.B, no minimum number of Hours of Service
will be required.
2. [X] "Elapse Time" method. [See (S) 3.2.]
For purposes of determining whether a Participant is entitled to an
allocation of contributions or forfeitures, the Participant will be deemed
to have completed more than 500 Hours of Service in a Plan Year if the
Participant completes the following period of employment in the Plan Year:
[Check one. See (S) 2.2(d) and Part VII.]
---
a. [_] STANDARD: More than 91 consecutive calendar days.
b. [_] More than 3 consecutive months.
B. SPECIAL RULES.
1. VESTING SERVICE EXCLUSIONS. [See (S) 3.8.] In addition to any
service that is disregarded under the Break in Service rules described
below and in (S) 3.7(c), the following service will be excluded for vesting
purposes:
a. [_] STANDARD: No other exclusions.
b. [X] Years of Service before age 18.
c. [_] Years of Service before the Employer or an Affiliate
maintained this Plan or a predecessor plan.
d. [_] Years of Service during a period for which the Employee
made no mandatory contributions under a Pre-Existing Plan.
7
<PAGE>
2. PREDECESSOR EMPLOYER SERVICE (VESTING AND PARTICIPATION).
Generally, unless the Employer maintains the plan of a predecessor employer
(for example, an acquired company), service for a predecessor employer will
not be credited as service under this Plan. [Check and attach appropriate
addendum only if desires. See (S) 3.4.]
[_] Service Credit will be given under this Plan for certain
predecessor employers for participation and/or vesting purposes to the
extent provided in Addendum V.B.2.
3. BREAK IN SERVICE RULES. [See (S) 3.7 and (S) 8.2.] Generally,
all service completed before a Break in Service will be credited upon
reemployment. Certain service may be excluded under the following rules:
a. [_] STANDARD: No exclusions. [See (S) 3.7(a).]
b. [X] "Rule of Parity." [See (S) 3.7(b)(3).] This rule,
generally, disregards vesting and participation service completed
before 5 uninterrupted Breaks in Service.
c. [_] "Alternative maternity/Paternity Rule." [Not
applicable if "Elapsed Time" is selected. See (S) 3.7(b)(4).] This
rule, generally, increases the number of Breaks in Service form 5 to 6
for all Employees in lieu of crediting service for maternity/paternity
leave.
d. [_] Alternative to "Buy Back Rule." [See (S) 8.2(b).]
This rule, generally, does not require former participants (less than
100% vested) to pay back previous distributions upon reemployment
(vesting only). A rehired Participant's vested interest in restored
amounts will be determined under: [Check ONE. See (S) 8.2(a), (S)
8.2(c).]
(1) [_] STANDARD: Formula A
(2) [_] Formula B
VI. EMPLOYEE CONTRIBUTIONS.
A. ELECTIVE DEFERRALS. Elective Deferrals [See (S) 5.3(f). Check ONE.]
1. [X] STANDARD: Will be allowed. [Complete formula below;
enter "N/A" if not applicable.]
a. Minimum Amount. Not less than 1% of a Participant's
Compensation or $__________.
8
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b. Maximum Amount. For Plan Years ending on and before
____________________, not more than 15% of a Participant's
compensation or $__________, and for each Plan Year thereafter,
not more than ______% of a Participant's Compensation or
$__________.
2. [_] Will not be allowed.
B. EMPLOYEE CONTRIBUTIONS. Employee Contributions [See (S) 5.3(g). Check
ONE.]
1. [X] STANDARD: Will not be allowed.
2. [_] Will be allowed. [Complete formula below; enter "N/A"
if not applicable.]
a. Minimum Amount. Not less than _____% of a Participant's
Compensation or $__________.
b. Maximum Amount. For Plan Years ending on and before
____________________, not more than _____% of a Participant's
compensation or $__________, and for each Plan Year thereafter,
not more than ______% of a Participant's Compensation or
$__________.
C. ELECTION RULES. [Check ONE. See (S) 5.3(h).]
1. [X] STANDARD: If a Participant does not elect to begin
Elective Deferrals or Employee Contributions on the Participant's Entry
Date, the Participant may elect to begin such contributions as of any
following pay date. A Participant's election can be revised (prospectively
only) as of any pay date. A Participant who terminates contributions may
elect to resume contributions prospectively as of any pay date.
2. [_] Alternative to Standard: A Participant's elections may
be made as follows: [Must include at least one day in each calendar year.]
a. [_] COMMENCEMENT. [See (S) 5.3(h)(2).] effective
only as of any ____________________ following the Participant's
Entry Date.
b. [_] REVISION. [See (S) 5.3(h)(3).] effective only as
of any following ____________________ .
c. [_] RESUMPTION. [See (S) 5.3(h)(5).] effective only
as of any following ____________________.
D. ROLLOVER CONTRIBUTIONS. Rollover Contributions [Check ONE. See (S) 5.4.]
9
<PAGE>
1. [X] STANDARD: Will be allowed and may be made by [Check
ONE.]
a. [X] STANDARD. Any Eligible Employee.
b. [_] Any Eligible Employee who is a Participant.
2. [_] Will not be allowed.
E. LIMITATIONS ON ELECTIVE DEFERRALS.
1. CLAIMS. Claims for a refund of Excess Elective Deferrals
must be made no later than [See (S) 5.3(f). Check ONE.]
a. [X] STANDARD. March 1.
b. [_] ____________________ [no earlier than March 1 and
no later than April 15.]
2. DEEMED CLAIMS. Corrections of Excess Elective Deferrals
will be made [See (S) 7.3(f)(2). Check ONE.]
a. [X] STANDARD: From this Plan.
b. [_] From the following plan(s):
____________________________.
3. "GAP PERIOD" INCOME. The income or loss allocable to the
"gap period" [Check ONE. See (S) 7.3(e), (S) 7.4(d)(2) and (S) 7.5(d)(2).]
a. [X] STANDARD: Shall not be distributed.
b. [_] Shall be distributed.
4. HIGHLY COMPENSATED EMPLOYEES. The following special rules
in the temporary Code (S) 414(q) regulations and in Code (S) 414(q)(12)
will apply: [Check ONE. See (S) 7.4(a)(5)(v).]
a. [X] STANDARD: No special rules.
b. [_] The special rules set forth in Addendum V.E.3.
5. RECHARACTERIZATION. Recharacterization of Excess
Contributions as Employee Contributions [See (S) 7.4(e). Check ONE.]
10
<PAGE>
a. [X] STANDARD: Will not be allowed.
b. [_] [Do not check this option 2 if Employee
contributions are not allowed in Part VI.B.] Will be allowed.
VII. EMPLOYER CONTRIBUTIONS.
A. MATCHING CONTRIBUTIONS. [See (S) 5.3(b) and Part VII.F.]
1. FORMULA. [Check ONE.]
a. [_] STANDARD: No Matching Contributions will be made.
b. [X] Matching Contributions will be made on account of:
[Check one or both.]
[X] Elective Deferrals
[_] Employee Contributions
under the following formula: [Check and complete ONE. Enter
"N/A" if not applicable. The formula selected and completed must
not provide a higher rate of Matching Contributions for
Participants who make a higher amount of contributions.]
[X] 50% of the Participant's contributions which do not
exceed
$ - or 6% of the Participant's Compensation plus - %
---------- -------
of the Participant's contributions which exceed $ - or
-------- ---
- % , but contributions in excess of $ - or - %
----- --------- --------
of the Participant's Compensation will not be matched.
[_] Such percentage of the Participant's contributions
as determined by the Employer in its discretion for each
Plan Year.
[_] In an amount equal to ________________
______________________________.
2. ELIGIBLE PARTICIPANT. The Matching Contribution for any
Allocation Date will be made only for each Participant who makes
Elective Deferrals or Employee Contributions, as applicable, during
the period ending on the Allocation Date and who satisfies all of the
following requirements: [Check ONE.]
a. [X] STANDARD: No additional requirements.
11
<PAGE>
b. [_] Alternative: [Check one or more.]
(1) [_] The Participant is employed (or on an
authorized leave of absence) on the last day of the Plan
Year or (b) is not employed as of the last day of the Plan
Year but is credited with more than 500 Hours of Service in
such Plan Year. [Do not check if Allocation Date is not
Standard Option. Special Hour of Service equivalencies apply
if "Elapsed Time" is selected. See Part V.A.2.] However, a
Participant who died, retired or became disabled during the
Plan Year will be eligible: [Check ONE.]
[_] Without regard to the number of Hours
of Service.
[_] Only if the Participant completes the
Hours of Service specified above.
(2) [_] The Participant is a Non-Highly Compensated
Employee.
(3) [_] The Participant is credited with at least 2
Years of Service (for participation purposes) on such
Allocation Date.
(4) [_] For Plan Years beginning before the
____________________ [Not later than Final Compliance Date],
the Participant [Check one or more only if Allocation Date
is Standard Option.]
[_] Is employed (or on an authorized leave
of absence) on the last day of the Plan Year.
[_] Is not employed on the last day of the
Plan Year because the Participant died, retired or
became disabled during such Plan Year.
[_] If the "Hours of Service" method is
selected, is credited with more than 1,000 Hours
of Service during such Plan Year.
3. ALLOCATION DATE. Matching Contributions will be made and
allocated as of [Check ONE.]
a. [_] STANDARD: The last day of each Plan Year.
12
<PAGE>
b. [X] Each Month.
4. FORFEITURES. Forfeitures attributable to Matching Accounts
[Check ONE. See (S) 6.3(c)(2)(ii).]
a. [X] STANDARD: Will be applied to reduce Matching
Contributions as of the Allocation Date: [Check ONE. See (S)
8.2(e).]
(1) [X] STANDARD: Which immediately follows the date
the Forfeiture occurs.
(2) [_] Which immediately follows the last day of the
Plan Year in which the Forfeiture occurs.
b. [_] Will be reallocated to Active Participants as of
the last day of each Plan Year. [Complete Part VII.D.2 to specify
who is an Active participant for this purpose.]
B. QUALIFIED MATCHING CONTRIBUTIONS. [See (S) 5.3(c) and Part VII.F.]
1. FORMULA. [Check ONE.]
a. [X] STANDARD: No Qualified Matching Contributions
will be made.
b. [_] Qualified Matching Contributions will be made on
account of: [Check one or both.]
[X] Elective Deferrals
[_] Employee Contributions
under the following formula: [Check and complete ONE. Enter
"N/A" if not applicable. The formula selected and completed must
not provide a higher rate of Qualified Matching Contributions for
Participants who make a higher amount of contributions.]
[_] _____% of the Participant's contributions
which do not exceed $__________ or _____% of the
Participant's Compensation plus _____% of the Participant's
contributions which exceed $__________ or _____% , but
contributions in excess of $__________ or _____% of the
Participant's Compensation will not be matched.
13
<PAGE>
[_] Such percentage of the Participant's contributions
as determined by the Employer in its discretion for each
Plan Year.
[_] In an amount equal to ________________
______________________________.
2. ELIGIBLE PARTICIPANT. The Qualified Matching Contribution
for any Allocation Date will be made only for each Participant who
makes Elective Deferrals or Employee Contributions, as applicable,
during the period ending on the Allocation Date and who satisfies all
of the following requirements: [Check ONE.]
a. [_] STANDARD: No additional requirements.
b. [_] Alternative: [Check one or more.]
(1) [_] The Participant is employed (or on an
authorized leave of absence) on the last day of the Plan
Year or (b) is not employed as of the last day of the Plan
Year but is credited with more than 500 Hours of Service in
such Plan Year. [Do not check if Allocation Date is not
Standard Option. Special Hour of Service equivalencies apply
if "Elapsed Time" is selected. See Part V.A.2.] However, a
Participant who died, retired or became disabled during the
Plan Year will be eligible: [Check ONE.]
[_] Without regard to the number of Hours
of Service.
[_] Only if the Participant completes the
Hours of Service specified above.
(2) [_] The Participant is a Non-Highly Compensated
Employee.
(3) [_] The Participant is credited with at least 2
Years of Service (for participation purposes) on such
Allocation Date.
(4) [_] For Plan Years beginning before the
____________________ [Not later than Final Compliance Date],
the Participant [Check one or more only if Allocation Date
is Standard Option.]
[_] Is employed (or on an authorized leave
of absence) on the last day of the Plan Year.
14
<PAGE>
[_] Is not employed on the last day of the
Plan Year because the Participant died, retired or
became disabled during such Plan Year.
[_] If the "Hours of Service" method is
selected, is credited with more than 1,000 Hours
of Service during such Plan Year.
3. ALLOCATION DATE. Qualified Matching Contributions will be
made and allocated as of [Check ONE.]
a. [_] STANDARD: The last day of each Plan Year.
b. [_] Each __________.
C. QUALIFIED NONELECTIVE CONTRIBUTIONS. [See (S) 5.3(d) and Part VII.F.]
1. FORMULA. In addition to the Qualified Nonelective
Contributions which may be made for Non-Highly Compensated Employees
to satisfy the ADP or ACP limits, [Check ONE.]
a. [X] STANDARD: No Additional Qualified Nonelective
Contributions will be made.
b. [_] Additional Qualified Nonelective Contributions
will be made in an amount equal to: [Specify nondiscriminatory
formula that satisfies Code (S) 401(a)(4) safe harbors.]
______________________________
_________________________________________.
2. ELIGIBLE PARTICIPANT. The Additional Qualified Nonelective
Contribution described in this Part VII.C for any Allocation Date will
be made only for each Participant who is an Eligible Employee at any
time during the period ending ont he Allocation Date and who satisfies
all of the following requirements: [Check ONE.]
a. [_] STANDARD: No additional requirements.
b. [_] Alternative: [Check one or more.]
(1) [_] The Participant is employed (or on an
authorized leave of absence) on the last day of the Plan
Year or (b) is not employed as of the last day of the Plan
Year but is credited with more than 500 Hours of Service in
such Plan Year. [Do not check if Allocation Date is not
Standard Option. Special Hour of
15
<PAGE>
Service equivalencies apply if "Elapsed Time" is selected.
See Part V.A.2.] However, a Participant who died, retired or
became disabled during the Plan Year will be eligible:
[Check ONE.]
[_] Without regard to the number of Hours
of Service.
[_] Only if the Participant completes the
Hours of Service specified above.
(2) [_] The Participant is a Non-Highly Compensated
Employee.
(3) [_] The Participant is credited with at least 2
Years of Service (for participation purposes) on such
Allocation Date.
(4) [_] For Plan Years beginning before the
____________________ [Not later than Final Compliance Date],
the Participant [Check one or more only if Allocation Date
is Standard Option.]
[_] Is employed (or on an authorized leave
of absence) on the last day of the Plan Year.
[_] Is not employed on the last day of the
Plan Year because the Participant died, retired or
became disabled during such Plan Year.
[_] If the "Hours of Service" method is
selected, is credited with more than 1,000 Hours
of Service during such Plan Year.
3. ALLOCATION DATE. Qualified Nonelective Contributions
described in this Part VII.C will be made and allocated as of [Check
ONE.]
a. [_] STANDARD: The last day of each Plan Year.
b. [_] Each __________.
D. DISCRETIONARY EMPLOYER CONTRIBUTIONS.
1. ALLOCATION FORMULA. The Discretionary Employer Contributions
will be allocated among Active Participants as follows: [Check ONE.
See (S) 5.3(e), (S) 6.3(a), (S) 6.3(c)(4) and Part VII.F. Do not
select an integrated formula for Plan
16
<PAGE>
Years beginning on and after the Final Compliance Date if the Employer
also maintains another integrated plan for such Plan Year.]
a. STANDARD: Nonintegrated. [See (S) 5.3(a)(1) and (S)
6.3(c)(4)(i)(A).]
b. Integrated. [See (S) 6.3(a)(2), (S) 6.3(c)(4)(i)(B) and
(S) 12.3(h).]
(1) Integration Percentage. [Check one. If the
---
Integration Level is less than the Taxable Wage Base, the
Maximum Disparity Rate must be reduced. See (S) 2.39.]
[_] STANDARD: The Maximum Disparity Rate.
[_] _____% [not to exceed the Maximum Disparity
Rate.]
(2) Integration Level. [Check one. See (S) 2.35.]
---
[_] STANDARD: The Taxable Wage Base.
[_] $__________ or _____% of the Taxable Wage
Base [not to exceed the Taxable Wage Base.]
2. ACTIVE PARTICIPANT.
a. GENERAL. The Discretionary Employer Contributions and
Forfeitures, if applicable, will only be allocated to: [if the
Employer maintains another defined contribution Paired Plan, the
allocation requirements specified in this Part VII.D.2 for Plan
Years beginning on and after the Final Compliance Date must be
the same as those specified in the Adoption Agreement for such
other Paired Plan. Check ONE. See (S) 2.2, (S) 5.3(e) and Part
VII.F.]
(1) [_] STANDARD: Each Participant who is an
Eligible Employee at any time during the Plan Year and who
(1) is employed (or on an authorized leave of absence) on
the last day of the Plan Year, (2) terminated Employment
during the Plan Year or (3) was not employed on the last day
of the Plan Year but was credited with more than 500 Hours
of Service during the Plan Year. [Special Hour of Service
equivalencies apply if "Elapsed Time" is selected.]
(2) [_] Alternatives to Standard: [Check one or
more.]
17
<PAGE>
[_] The Participant must also be credited
with at least 2 Years of Service by the last day
of the Plan Year.
[_] The last day employment requirement
will not apply.
[_] The 500 hours requirement will not
apply.
[_] The exceptions for death, disability
and retirement will not apply.
b. Years Before Final Compliance Date. For Plan Years
beginning before ____________________ [Not later than the Final
Compliance Date], the discretionary Employer contributions and
Forfeitures will only be allocated to: [Complete only if
desired. See (S) 2.2. Check ONE.]
(1) [_] STANDARD: Each Participant who is an
Eligible Employee at any time during the Plan Year and who
(1) is employed (or on an authorized leave of absence) on
the last day of the Plan Year and (if the "Hours of Service"
method is selected) who is credited with 1,000 Hours of
Service during the Plan Year or (2) who died, retired or
became disabled during the Plan Year.
(2) [_] Alternatives to Standard: [Check one or
more.]
[_] The last day employment requirement will
not apply.
[_] The 1,000 hours requirement will not
apply. [Not applicable if "Elapsed Time" is
selected.]
[_] The Participant must also be credited
with at least 2 Years of Service by the last day
of the Plan Year.
[_] The exceptions for death, disability
and retirement will not apply.
3. FORFEITURES. Forfeitures attributable to Employer Accounts
[Check ONE. See (S) 5.3(i) and (S) 6.3(c)(4)(ii).]
18
<PAGE>
a. [_] STANDARD: Will be reallocated as of the last day
of each Plan to Active participants Year in the same manner as
Employer Contributions.
b. [X] Will be applied to reduce Matching Contributions,
Qualified Matching Contributions and/or Qualified Nonelective
Contributions.
E. NET PROFITS.
1. GENERAL. [Check one. See (S) 5.3(a)]
a. [_] STANDARD: All Employer contributions other than
Elective Deferrals will be made out of Net Profits.
b. [_] Alternatives to Standard: In addition to Elective
Deferrals, the following contributions will be made without regard to Net
Profits: [Check one or more.]
(1) [_] Matching Contributions
(2) [_] Qualified Matching Contributions
(3) [_] Qualified Nonelective Contributions
(4) [_] Discretionary Employer Contributions
(5) DEFINITION. For this purpose, Net Profits will be as
defined [Check ONE. See (S) 2.41.]
c. [_] Standard: in (S) 2.41(a).
d. [_] In the attached Addendum VII.E.2.
F. MINIMUM ALLOCATIONS. Each Active Participant (determined without
regard to the Participant's completed Hours of Service) who is not a Key
Employee, generally, will receive the minimum top-heavy allocation if the Plan
is top-heavy. [See (S) 6.3(e) and (S) 12.]
VIII. COMPENSATION. Compensation for any Plan Year generally means total
compensation (not to exceed $200,000 indexed for inflation after 1989) actually
paid to a Participant during such Plan Year (unless another determination period
is selected). [See (S) 2.10.]
A. BASIC DEFINITION. Total compensation means: [Check one. See (S)
---
2.10(a).]
19
<PAGE>
1. [_] STANDARD: Wages, tips and other compensation reportable
on Form W-2. [See 21 2.10(a)(1).]
2. [_] Wages subject to federal income tax withholding. [See
(S) 2.10(a)(2)(i).]
3. [X] General Code (S) 415 compensation. [See (S)
2.10(a)(2)(ii) and (S) 5.2(a)(2)(ii)(B).]
Reimbursements or other expense allowances, fringe benefits (cash
AND noncash), moving expenses, deferred compensation AND welfare benefits
(even if includible in gross income): [Check ONE. See (S) 2.10(a)(2)(iv).]
[_] STANDARD: will
[X] Will not
be included in Compensation as determined in accordance with the definition
selected above.
B. DETERMINATION PERIOD: [Check ONE. See (S) 2.10(d).]
1. [X] STANDARD: The Plan Year.
2. [_] The calendar year ending in the Plan Year.
3. [_] A period beginning each ____________________ [Enter the day
and month the period begins. The determination period must end with or
within the Plan Year, must be at least 12 consecutive months in duration
and must apply uniformly to all Employees in the Plan.]
C. SALARY REDUCTIONS. Participant salary reduction contributions (for
example, (S) 401(k) or benefit plan contributions) [Check ONE. See (S)
2.10(f).]
1. [X] STANDARD: will
2. [_] Will not
be included in total compensation.
D. SPECIAL RULES. [Complete only if desired. See (S) 2.10(g).]
1. [_] Compensation for periods ending before the Entry Date on
which an Eligible Employee becomes a Participant will be excluded. [See (S)
2.10(g)(1).]
20
<PAGE>
2. [_] If this is an amendment to a Pre-Existing Plan, the
definition of Compensation will be effective as of ____________________ [No
later than the first day of the first Plan Year after this Plan is adopted.
See (S) 2.10(g)(2). The definition in the Pre-Existing Plan will continue
to apply until that date.]
IX. DISTRIBUTIONS.
A. TIMING. Vested Plan benefits, generally, will be distributed as
follows: [Check one. See (S) 9.1(a).]
---
1. [X] STANDARD: As soon as practical after the participant
separates from service subject to the Participant's consent, if required.
2. [_] No earlier than the Participant's Normal Retirement Age,
Early Retirement Age or Disability, whichever is earlier.
B. ELECTIONS TO DEFER. A Participant whose Account is more than that
$3,500 may elect that distribution of vested Plan benefits be deferred until:
[Check one. See (S) 9.1(e).]
1. [X] STANDARD: The Participant's Required Beginning Date
(generally age 70 1/2).
2. [_] The later of the Participant's Normal Retirement Age or age
62.
C. IN-SERVICE DISTRIBUTIONS. [See (S) 9.2(b).]
1. ELECTIVE DEFERRAL ACCOUNTS. In-service distributions from
Elective Deferral Accounts will be allowed as follows: [Check applicable
box(es).]
a. [] STANDARD: No distributions before separation from
service.
b. [] On or after age 59 1/2 [See (S) 9.2(b)(4).]
c. [X] For the following financial hardship(s): [See (S)
9.2(b)(3). Check one or more.]
(1) [X] Medical expenses [See (S) 9.2(b)(3)(ii)(A).]
(2) [X] Purchase of principal residence [See (S)
9.2(b)(3)(ii)(B).]
(3) [X] Tuition [See (S) 9.2(b)(3)(ii)(C).]
(4) [X] Foreclosure or eviction [See (S)
9.2(b)(3)(ii)(D).]
21
<PAGE>
(5) [X] Other IRS "deemed" financial hardship [See
(S) 9.2(b)(3)(ii)(E).]
2. MATCHING ACCOUNTS. In-service distributions from Matching
Accounts will be allowed as follows: [Check applicable box(es).]
a. [X] STANDARD: No distributions before separation from
service.
b. [_] On or after age _____.
c. [_] After the __________ anniversary of Plan participation.
d. [_] For a financial hardship under the safe harbor tests.
[See (S) 9.2(b)(3).
e. [_] In accordance with the rules set forth in Addendum
IX.C.2. [See (S) 9.2(b)(5). The addendum should describe
nondiscriminatory objective standards from an in-service distribution
after a fixed number of years or upon the prior occurrence of some
event such as layoff, illness or hardship.]
3. EMPLOYER ACCOUNTS. In-service distributions from Employer
Accounts will be allowed as follows: [Check applicable box(es).]
a. [_] STANDARD: No distributions before separation from
service.
b. [_] On or after age _____.
c. [_] After the __________ anniversary of Plan participation.
d. [_] For a financial hardship under the safe harbor tests.
[See (S) 9.2(b)(3).
e. [_] In accordance with the rules set forth in Addendum
IX.C.3. [See (S) 9.2(b)(5). The addendum should describe
nondiscriminatory objective standards from an in-service distribution
after a fixed number of years or upon the prior occurrence of some
event such as layoff, illness or hardship.]
4. QUALIFIED NONELECTIVE AND QUALIFIED MATCHING ACCOUNTS. In-service
distributions from Qualified Nonelective and Qualified Matching Accounts
will be allowed as follows: [Check applicable box(es).]
a. [_] STANDARD: No distributions before separation from
service.
22
<PAGE>
b. [_] On or after age 59 1/2.
c. [_] For financial hardship (pre-89 amounts only). [See (S)
9.2(b)(3).]
5. EMPLOYEE ACCOUNTS. Withdrawals from Employee Accounts [See (S)
9.2(d). Check ONE.]
a. [_] STANDARD: Will be allowed.
b. [_] Will not be allowed.
D. JOINT AND SURVIVOR ANNUITY RULES. [Check ONE. See (S) 10.]
1. [_] STANDARD: The entire vested balance will be paid (a) to
married Participants as a 50% joint and survivor annuity, (b) to single
Participants as a 100% life annuity and (c) to the surviving Spouse of a
married Participant who dies before retirement as a 100% preretirement
survivor annuity.
2. [_] The entire vested balance will be paid under the standard
joint and survivor annuity rules except the percentages will be:
[Percentages must not be less than 50% nor more than 100%.]
a. Qualified Joint and Survivor Annuity: _____% [See (S)
10.1(f).]
b. Qualified Preretirement Survivor Annuity: _____% [See (S)
10.1(g).]
3. [_] The standard joint and survivor annuity rules will not
apply. [Check only if the safe harbor rule described in (S) 10.5 will be
satisfied. This option generally is not available if this Plan or a Pre-
Existing Plan provides annuities and separate accounts are not maintained
for such Pre-Existing Plan balances. Under this option, the entire vested
balance eligible for the safe harbor will be paid to the surviving Spouse
of a married Participant who dies before retirement. See (S) 10.5.]
E. OPTIONAL DISTRIBUTION FORMS. [See (S) 10.6(c). In addition to single
sum distributions in cash, Participants may also request:
1. [_] Installments [See (S) 10.5(c)(2)(ii).]
2. [_] Annuity contracts [See (S) 10.6(c)(2)(iii).]
3. [_] The optional forms or in kind distribution offered under a
Pre-Existing Plan as described in Addendum XIII.A.
23
<PAGE>
4. [_] Single sum distributions in kind [See (S) 10.6(e).]
X. INVESTMENT PROVISIONS.
A. INDIVIDUALLY DIRECTED INVESTMENTS. An individual's direction of the
investment of that individual's Account [Check one. See (S) 13.2.]
---
1. [_] STANDARD: Will not be allowed.
2. [X] Will be allowed and will apply: [Check ONE.]
a. [X] STANDARD: To the entire Account.
b. [_] Only to the following ____________________.
B. PARTICIPANT LOANS. Participant loans [Check one. See (S) 13.3.]
1. [_] STANDARD: Will not be allowed.
2. [X] Will be allowed.
a. Accounting. Loans will be treated as an asset of [See
(S) 13.3(e). Check ONE.]
(1) [X] STANDARD: The Participant's Account.
(2) [_] The Fund.
b. Amounts. The $10,000 exception for loans in excess of
50% of Account Value [Check ONE. See (S) 13.3(f)(2).]
(1) [X] STANDARD: Shall not apply.
(2) [_] Shall apply. [Note: Loans under this
exception must be secured by collateral in addition to the
Participant's vested Account.]
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<PAGE>
C. INSURANCE. A Participant's direction to purchase insurance contracts
[Check one. See (S) 13.1.]
1. [X] STANDARD: Will not be allowed.
2. [_] Will be allowed.
XI. TOP-HEAVY RULES. [See (S) 12.]
A. TOP-HEAVY VESTING SCHEDULE. The vesting schedule for any Plan Year in
which this Plan is a Top-Heavy Plan will be [Check one. See (S) 2.4.]
---
1. [_] STANDARD: Full and Immediate. 100% of all times.
2. [_] CLIFF. 100% after completion of _____ Years of Service [not
to exceed 3.]
3. [X] GRADED.
<TABLE>
<CAPTION>
YEARS OF SERVICE NONFORFEITABLE PERCENTAGE
<S> <C>
Less than 1 0%
1 0%
2 25% [AT LEAST 20%]
3 50% [AT LEAST 40%]
4 75% [AT LEAST 60%]
5 100% [AT LEAST 80%]
6 or more 100%
</TABLE>
B. OTHER PAIRED PLAN. [Complete only if the Employer maintains another
Smith Barney Shearson defined contribution Paired Plan. See (S) 2.45 and (S)
12.3(c).] The minimum top-heavy contributions or benefit, if any, will be
made under the following Paired Plans in the following order: [Check ONE.]
1. [_] STANDARD: Money Purchase Pension Plan, Target Benefit
Pension Plan, Profit Sharing Plan, 401(k) Plan.
2. [_] Other: ______________________________.
B. OTHER PLANS. [Complete only if the Employer maintains or has ever
maintained another plan that is not a Paired Plan.]
25
<PAGE>
1. MINIMUM ALLOCATION. The minimum top-heavy contributions or any,
will be made under [Check ONE. benefit, if See (S) 12.3(d) and (g).]
a. [_] STANDARD: This Plan.
b. [_] The following plan(s): ______________________________.
2. PRESENT VALUE. [See (S) 12.2(f)(3)(iii). Complete only if
Employer maintains a defined benefit plan.] "Present value" will be
determined using an interest rate of _____% and the following mortality
table:
_____________________________________________.
3. VALUATION DATE. The Top-Heavy Valuation Date for each other plan
will be: [See (S) 12.2(g). Check ONE.]
a. [_] STANDARD: The most recent valuation date.
b. [_] Other: ______________________________.
XII. LIMITATIONS ON ALLOCATIONS (CODE (S) 415). [See (S) 7.2.
A. COMPENSATION. For Code (S) 415 purposes, Compensation means: [Check
ONE. See (S) 7.2(a)(2).]
1. [_] STANDARD: Wages, tips and other compensation reportable on
Form W-2. [See (S) 7.2(a)(2)(i).]
2. [X] Wages subject to federal income tax withholding. [See (S)
7.2(a)(2)(ii)(A) and (S) 2.10(a)(2)(i).]
3. [_] General Code (S) 415 compensation. [See (S)
7.2(a)(2)(ii)(B).]
B. LIMITATION YEAR. The Limitation Year will be: [Check ONE. See (S)
7.2(a)(9).]
1. [X] STANDARD: The Plan Year.
2. [_] The 12 consecutive month period which ends on each
____________________.
C. OTHER PAIRED PLAN. [Complete only if the Employer maintains another
Smith Barney Shearson defined contribution Paired Plan. See (S) 2.45 and (S)
7.2(c)(1).] The allocation adjustment will be made under the following plans in
the following order: [Check ONE.]
26
<PAGE>
1. [_] STANDARD: Profit Sharing Plan, Money Purchase Pension Plan,
Target Benefit Pension Plan, 401(k) Plan.
2. [_] Other: ______________________________.
D. OTHER PLANS. [Complete only if the Employer maintains or has ever
maintained another plan that is not a Paired Plan.]
1. OTHER DEFINED CONTRIBUTION PLAN. The Annual Additions
attributable to this Plan will be determined: [Check ONE. See (S) 7.2(d).]
a. [_] STANDARD: BY TREATING THE OTHER PLAN AS A MASTER OR
PROTOTYPE PLAN.
b. [_] BY USING THE METHOD DESCRIBED I ADDENDUM XII.D.1.B.
2. DEFINED BENEFIT PLAN. [Check and attach appropriate addendum only
if applicable. See (S) 7.2(a)(3), (S)7.2.(a)(3), (S) 7.2(a)(11), (S) 7.2(e)
and (S) 12.3(g).]
[_] The Annual Additions attributable to this Plan will be
limited by using the method described in Addendum XII.D.2.
XIII. SPECIAL PROVISIONS FOR AMENDMENT AND RESTATEMENT OF PRE-EXISTING PLAN,
MERGER OR TRANSFERS.
A. VESTING OR DISTRIBUTION RULES. [Check and attach appropriate
description only if applicable. See (S) 10.6, (S) 14.1(b) and (S) 14.5.]
[_] The special vesting or distribution rules which must be preserved
under Code (S) 411 are described in Addendum XIII.A.
B. NORMAL RETIREMENT AGE [Check only if the normal retirement age under
the Pre-Existing Plan was determined with reference to the participation
commencement date and the special transitional rule in (S) 2.43 is desired. See
(S) 2.43.]
[_] The Normal Retirement Age of a Participant who commenced
participation in the Pre-Existing Plan in a Plan Years beginning before 1988
will be determined under the transitional rule described in (S) 2.43.
C. EFFECTIVE DATES. [Check and attach appropriate addendum only if any of
the selections made in this Adoption Agreement will become effective as of a
date other than the Effective Date set forth in Part II.E. However, the
addendum shall in no event delay the effective date of any Plan
27
<PAGE>
provisions beyond the latest effective date required for such provision under
TRA 86 or other applicable law or regulations.]
[_] Certain elections in this Adoption Agreement shall be effective
as of the date(s) specified in Addendum XIII.C. .
XIV. TRUSTEE APPOINTMENT AND TRUST AGREEMENT. [Check ONE. See (S) 2.66 and
(S) 2.68.]
A. [X] STANDARD TRUST AGREEMENT. The Standard Trust Agreement will apply
and the Trustee will be the following individual(s), bank(s) or other person(s)
who can serve as a fiduciary and trustee under the laws of the State shown in
Part II.C.
(SBSTC) Smith Barney Shearson [CORPORATE???] Trust Company
[If Smith Barney Shearson Trust Company ("SBSTC") will charge a fee and may
require the Employee to complete other documents prior to accepting its
appointment as Trustee. Further, SBSTC will act only as a nondiscretionary
Trustee and the investment of the Fund will be made as directed by the Plan
Administrator or the Employer. See (S) 15 and the Trust Agreement.]
B. [X] ALTERNATE TRUST AGREEMENT. The Alternate Trust Agreement for
401(k) Plans will apply and the Trustee will be ______________________________,
which is a bank or trust company organized under the laws of the State of
____________________ and which is authorized to serve as a fiduciary and trustee
under the laws of such State.
[The Trustee will charge a fee and will require the Employer to complete
other documents, including execution of the alternate Trust Agreement, prior to
accepting its appointment as Trustee. Except as described in the Trust
Agreement, the Trustee will act only as a nondiscretionary Trustee and will be
subject to the directions of the Plan Administrator as a named fiduciary under
the Plan in the control and management of the assets of the Fund. Such
directions will be communicated to t he Trustee by the Recordkeeper as described
in the Trust Agreement.]
XV. IRS APPROVAL.
This Plan is designed to operate as a "standardized" plan and an adopting
Employer may relay on the opinion letter issued to the Prototype Sponsor and may
not have to apply for a favorable determination letter on this Plan if the only
plans ever maintained (or later adopted) by the Employers are Paired Plans which
satisfy (S) 2.45.
Any Employer who has ever maintained or who later adopts any plan
(including, after December 31, 1985,a welfare benefit fund, as defined in Code
(S) 419(e), which provides post-retirement medical benefits allocated to
separate accounts for key employees as defined in Code (S) 419A(d)(3), or an
individual medical account as defined in Code (S) 4.15(l)(2) in addition to this
28
<PAGE>
Plan(other than a Paired Plan which satisfies (S) 2.45) may not rely on the
opinion letter issued to the Prototype Sponsor by the National Office of the
Internal Revenue Service as evidence that this Plan is qualified under Code (S)
401.
Any Employer who adopts or maintains multiple plans (other than Paired
Plans) must apply to the appropriate Key District Office for a favorable
determination letter on th is Plan to obtain reliance that this Plan as adopted
by the Employer is qualified.
An Employer may not rely on the opinion letter issued by the National
Office of the Internal Revenue Service as evidenced that this Plan is qualified
under Code (S) 401 unless the terms of the plan, as herein adopted or amended,
that pertain to the requirements of Code (S) 401(a)(4), (S) 401(a)(17), (S)
401(l), (S) 401(a)(5), (S) 410(b) and (S) 414(s), as amended by the Tax Reform
Act of 1986, or later laws, (a) are made effective retroactively to the first
day of the first Plan Year beginning after December 31, 1988 (or such later date
on which these requirements first become effective with respect to this Plan) or
(b) are made effective no late than the first day on which the Employer is no
longer entitled, under regulations, to rely on a reasonable, good faith
interpretation of these requirements, and the prior provisions of the plan
constitute such an interpretation.
Smith Barney Shearson will notify each adopting Employer of any amendments
that have been made to the Plan by Smith Barney Shearson as Prototype Sponsor or
of any intention to discontinue or abandon its sponsorship of the Plan as a
prototype plan.
SIGNATURES
IMPORTANT:
In order to have a valid plan and trust, this Adoption Agreement must be
signed by individuals authorized to sign for the Employer and, if applicable,
the Trustee and each Participating Affiliate. If the alternate Trust Agreement
is specified in Part XIV.B., the Trust Agreement must be signed by the Employer,
the Trustee and, if applicable, each Participating Affiliate.
This Adoption Agreement will not become effective as a prototype plan
unless and until it is accepted by Smith Barney Shearson as the Prototype
Sponsor but, upon such acceptance, will be effective a s prototype plan
retroactive to the Effective Date.
Each Affiliate (i.e., each member of a controlled group of corporations,
commonly controlled group of trades or businesses, or an affiliated service
group within the meaning of Code (S) 414) must adopt this Plan as a
Participating Affiliate.
EMPLOYER REPRESENTATIONS. The undersigned hereby certifies that the
adoption of the plan and the Trust Agreement is authorized by (1) a Board of
Directors' resolution for an Employer which is a corporation, or (2) a written
authorization by the person or persons duly authorized to act on behalf of an
Employer which is not a corporation. If this Adoption Agreement amends and
restates a Pre-Existing Plan, the undersigned hereby certifies that such
amendment is duly authorized by the Employer. The undersigned hereby
acknowledges that the Prototype Sponsor
29
<PAGE>
(1) is not responsible for the elections made in this Adoption Agreement, (2)
shall have no responsibility whatsoever with respect to the Fund or the
operation and administration of this Plan, and (3) has advised the Employer to
consult with legal counsel for the Employer regarding the adoption and operation
of this Plan. The undersigned further acknowledges that the Employer is solely
responsible for the elections made in this Adoption Agreement and for the
operation and administration of this Plan. Finally, the undersigned acknowledges
that the Prototype Sponsor will charge an annual prototype maintenance fee and
hereby authorizes the Prototype Sponsor to charge such fees against any
brokerage account maintained for the Plan.
EMPLOYER EXECUTION. Subject to the terms and conditions of the Plan, the
Trust Agreement and this Adoption Agreement, the undersigned hereby ahs executed
this Adoption Agreement, to evidence its adoption or, if applicable, amendment)
of the Plan and the Trust Agreement.
Signature:/s/ Gary D. Dorminey
----------------------------------------------------------------
Title: President & CEO Date: 12/19/96
TRUSTEE EXECUTION. Subject to the terms and conditions of the Plan, the
Trust Agreement and this Adoption Agreement, the undersigned hereby accepts its
appointment as Trustee and has executed this Adoption Agreement, to evidence its
adoption of the Trust Agreement. [Attach additional signature pages if there
are more than three Trustees. If the alternate Trust Agreement is specified in
Part XIV.B., the Trustee should execute the alternate Trust Agreement in lieu of
executing the Adoption Agreement in this section.]
Signature: /s/ Date: 12/19/96
---------------------
Signature: /s/ Date: 12/19/96
---------------------
Signature: /s/ Date: 12/19/96
---------------------
Signature: /s/ Gary D. Dorminey Date: 12/19/96
---------------------
PARTICIPATING AFFILIATES EXECUTION. [Attach additional signature pages if
there are more than three Participating Affiliates. An organization which
becomes an Affiliate after this Adoption Agreement is executed should evidence
its adoption of this Plan by executing and attaching to this adoption Agreement
a signature page which includes the information set forth below.] Subject to
the terms and conditions of the Plan, the Trust Agreement and this Adoption
Agreement, the undersigned hereby has executed this Adoption Agreement to
evidence its adoption (or, if applicable, amendment) of the Plan and the Trust
Agreement.
AFFILIATE NAME: _____________________________________________
Signature: _____________________________________________ Date: ________
30
<PAGE>
Effective Date of Adoption Plan by Affiliate (if different from the Effective
Date in Part II.E.): _____________________________________________.
AFFILIATE NAME: _____________________________________________
Signature: _____________________________________________ Date: ________
Effective Date of Adoption Plan by Affiliate (if different from the Effective
Date in Part II.E.): _____________________________________________.
AFFILIATE NAME: _____________________________________________
Signature: _____________________________________________ Date: ________
Effective Date of Adoption Plan by Affiliate (if different from the Effective
Date in Part II.E.): _____________________________________________.
PROTOTYPE SPONSOR ACCEPTANCE. Subject to the terms and conditions of the
Plan, the Trust Agreement and this Adoption Agreement, this Adoption Agreement
is accepted by the Prototype Sponsor.
Authorized Signature: _____________________________________________
Date: _____________________________________________________________
31
<PAGE>
Part I
Smith Barney Shearson
Prototype Defined Contribution
Plan Document
#05
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. INTRODUCTION AND CONSTRUCTION................................... 1
1.1 Introduction...................................................... 1
1.2 Controlling Laws.................................................. 1
1.3 Construction...................................................... 1
1.4 TRA 86 Amendments................................................. 2
SECTION 2. DEFINITIONS...................................................... 2
2.1 Account........................................................... 2
2.2 Active Participant................................................ 2
2.3 Adoption Agreement................................................ 4
2.4 Affiliate......................................................... 4
2.5 Allocation Date................................................... 4
2.6 Average Annual Compensation....................................... 4
2.7 Beneficiary....................................................... 4
2.8 Board............................................................. 5
2.9 Code.............................................................. 5
2.10 Compensation...................................................... 5
2.11 Covered Compensation.............................................. 8
2.12 Disability or Disabled............................................ 8
2.13 Early Retirement Age.............................................. 8
2.14 Earned Income..................................................... 8
2.15 Effective Date.................................................... 9
2.16 Election Form..................................................... 9
2.17 Elective Deferral................................................. 9
2.18 Elective Deferral Account......................................... 9
2.19 Eligible Employee................................................. 9
2.20 Employee.......................................................... 10
2.21 Employee Account.................................................. 10
2.22 Employee Contribution............................................. 10
2.23 Employer.......................................................... 10
2.24 Employer Account.................................................. 10
2.25 Employer Contribution............................................. 10
</TABLE>
i
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<TABLE>
<S> <C>
2.26 Entry Date....................................................... 10
2.27 ERISA............................................................ 11
2.28 Family Members................................................... 11
2.29 Final Compliance Date............................................ 11
2.30 Forfeiture....................................................... 11
2.31 401(k) Plan...................................................... 11
2.32 Fund............................................................. 11
2.33 Fund Earnings.................................................... 11
2.34 Highly Compensated Employee...................................... 11
2.35 Integration Level................................................ 11
2.36 Leased Employee.................................................. 11
2.37 Matching Account................................................. 12
2.38 Matching Contribution............................................ 12
2.39 Maximum Disparity Rate........................................... 12
2.40 Money Purchase Pension Plan...................................... 12
2.41 Net Profits...................................................... 12
2.42 Nonhighly Compensated Employee................................... 13
2.43 Normal Retirement Age -.......................................... 13
2.44 Owner Employee................................................... 14
2.45 Paired Plans..................................................... 14
2.46 Participant...................................................... 14
2.47 Participating Affiliate.......................................... 14
2.48 Participation Requirements....................................... 14
2.49 Plan............................................................. 14
2.50 Plan Administrator............................................... 14
2.51 Plan Year........................................................ 15
2.52 Pre-Existing Plan................................................ 15
2.53 Profit Sharing Plan.............................................. 15
2.54 Prototype Sponsor................................................ 15
2.55 Qualified Matching Contribution.................................. 15
2.56 Qualified Matching Account....................................... 15
2.57 Qualified Nonelective Contribution............................... 15
2.58 Qualified Nonelective Account.................................... 15
2.59 Rollover Account................................................. 15
2.60 Rollover Contribution............................................ 15
2.61 Self-Employed Individual......................................... 16
</TABLE>
ii
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<TABLE>
<S> <C>
2.62 Spouse......................................................... 16
2.63 Target Benefit Pension Plan.................................... 16
2.64 Taxable Wage Base.............................................. 16
2.67 Trustee........................................................ 16
2.68 Valuation Date................................................. 16
SECTION 3. SERVICE DEFINITIONS AND RULES................................... 16
3.1 Hour of Service Method (Standard Option).................... 16
3.1(d) Year of Service............................................. 20
3.1(e) Changes in Service Calculation Method....................... 20
3.2 Elapsed Time Method (Alternative)........................... 20
3.2(a) Break in Service............................................ 20
3.2(a)(1) General..................................................... 20
3.2(a(2) Maternity/Paternity Rule.................................... 20
3.2(b) Hour of Service............................................. 21
3.2(c) Period of Severance......................................... 21
3.2(d) Period of Service........................................... 21
3.2(d)(1) General..................................................... 21
3.2(d)(2) Aggregation................................................. 21
3.2(e) Year of Service............................................. 21
3.2(f) Change in Service Calculation Method........................ 21
3.3 Service Before Effective Date............................... 22
3.4 Service with Predecessor Employer........................... 22
3.4(a) Standard Option -........................................... 22
3.4(b) Alternative -............................................... 22
3.5 Leased Employees............................................ 22
3.6 Service with Affiliates..................................... 22
3.7 Special Break in Service Rules.............................. 23
3.7(a) Standard Option............................................. 23
3.7(b) Alternative................................................. 23
3.7(b)(4) Alternative Maternity/Paternity Rule........................ 24
3.7(c) Vesting on Reemployment After Break in Service.............. 24
</TABLE>
iii
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<TABLE>
<S> <C>
3.8 Service Exclusions for Vesting Purposes..................... 25
3.8(a) Standard Option............................................. 25
3.8(b) Alternative................................................. 25
SECTION 4. PARTICIPATION................................................... 25
4.1 General Rule................................................ 25
4.2 Special Rules............................................... 25
4.2(a) Pre-Existing Plan........................................... 25
4.2(b) Reemployment Before Satisfying Participation Requirement.... 25
4.2(c) Reemployment After Satisfying Participation Requirement..... 26
4.2(d) Status Change............................................... 26
4.3 Participation Information................................... 26
4.4 No Employment Rights........................................ 26
SECTION 5. CONTRIBUTIONS................................................... 26
5.1 Profit Sharing Plan......................................... 26
5.1(a) Standard Option............................................. 26
5.1(b) Alternative................................................. 26
5.2 Money Purchase Pension Plan................................. 26
5.2(a) Standard Option............................................. 27
5.2(b) Alternative................................................. 27
5.3 401(k) Plan................................................. 27
5.3(a) General..................................................... 27
5.3(a)(1) Standard Option............................................. 27
5.3(a)(2) Alternative................................................. 27
5.3(b) Matching Contributions...................................... 27
5.3(c) Qualified Matching Contributions............................ 27
5.3(d) Qualified Nonelective Contribution.......................... 28
5.3(e) Discretionary Employer Contribution......................... 29
5.3(f) Elective Deferrals.......................................... 29
5.3(g) Employee Contributions...................................... 29
5.3(h) Election Rules and Limitations.............................. 29
5.3(i) Application of Forfeitures.................................. 31
5.4 Target Benefit Pension Plan................................. 31
</TABLE>
iv
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<TABLE>
<S> <C>
5.4(a) General.................................................... 31
5.4(b) Theoretical Reserve........................................ 32
5.4(c) Past Service Credits....................................... 33
5.4(d) TRA 86 Amendment........................................... 33
5.4(e) Special Definitions and Rules.............................. 33
5.5 Rollover Contributions..................................... 37
5.5(a) Standard Option............................................ 37
5.5(b) Alternative................................................ 37
5.6 No Employee or Matching Contributions...................... 37
5.7 No Deductible Voluntary Employee Contributions............. 38
5.8 General Rules Applicable to All Contributions.............. 38
5.8(a) Limitations on Contributions............................... 38
5.8(b) Code (S)415................................................ 38
5.8(c) Code (S)416................................................ 38
5.8(d) Leased Employees........................................... 38
5.8(e) Owner-Employees............................................ 38
SECTION 6. ALLOCATIONS TO ACCOUNTS........................................ 39
6.1 Establishment and Maintenance of Accounts.................. 39
6.2 Allocation of Fund Earnings................................ 39
6.2(a) General.................................................... 39
6.2(b) Allocation Procedures...................................... 40
6.3 Allocation of Contributions and Forfeitures................ 40
6.3(a) Profit Sharing Plan........................................ 40
6.3(b) Money Purchase Pension Plan................................ 41
6.3(c) 401(k) Plan................................................ 41
6.3(d) Target Benefit Pension Plan................................ 44
6.3(e) Top Heavy Minimum Allocation............................... 44
6.3(f) Rollover Contributions..................................... 44
6.4 Allocation Report.......................................... 44
6.5 Allocation Corrections..................................... 44
SECTION 7. STATUTORY LIMITATIONS ON ALLOCATIONS........................... 44
7.1 Effective Date............................................. 44
7.2 Limitations on Annual Additions Under Code (S)415.......... 44
7.2(a) Special Definitions........................................ 45
</TABLE>
v
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<TABLE>
<S> <C>
7.2(a)(3) Defined Benefit Fraction.................................... 47
7.2(a)(4) Defined Contribution Dollar Limitation...................... 48
7.2(a)(5) Defined Contribution Fraction............................... 48
7.2(a)(6) Employer -.................................................. 48
7.2(a)(7) Excess Amount -............................................. 48
7.2(a)(8) Highest Average Compensation................................ 49
7.2(a)(9) Limitation Year............................................. 49
7.2(a)(1) Master or Prototype Plan.................................... 49
7.2(a)(11) Maximum Aggregate Amount.................................... 49
7.2(a)(12) Maximum Permissible Amount.................................. 49
7.2(a)(13) Projected Annual Benefit.................................... 50
7.2(b) Limitation If No Other Plans................................ 50
7.2(b)(1) Profit Sharing Plan......................................... 50
7.2(b)(2) Money Purchase Pension Plan or Target Benefit Pension
Plan........................................................ 50
7.2(b)(3) 401(k) Plan................................................. 51
7.2(b)(4) Suspense Account............................................ 51
7.2(c) Limitation If Other Defined Contribution Master Prototype
Plan....... or............................................. 51
7.2(d) Limitation If Other Defined Contribution Plan............... 53
7.2(e) Limitation If Other Defined Benefit Plan.................... 53
7.3 Individual Limitation on Elective Deferrals Under Code (S)
402(g)...................................................... 54
7.3(a) General..................................................... 54
7.3(b) Elective Deferrals.......................................... 54
7.3(c) Excess Elective Deferrals................................... 54
7.3(d) Distribution of Excess Elective Deferrals................... 54
7.3(e) Determination of Income or Loss............................. 54
7.3(f) Claims Procedure............................................ 55
7.3(f)(1) General..................................................... 55
7.3(f)(2) Deemed Claim................................................ 55
7.4 Limitations on Elective Deferrals for Highly Compensated
Employees under Code (S)401(k).............................. 55
7.4(a) Special Definitions......................................... 55
7.4(a)(1) Actual Deferral Percentage.................................. 55
</TABLE>
vi
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<TABLE>
<S> <C>
7.4(a)(2) ADP (or Average Actual Deferral Percentage)................ 56
7.4(a)(3) Employer Contributions..................................... 56
7.4(a)(4) Excess contributions....................................... 56
7.4(a)(5) Highly Compensated Employee................................ 56
7.4(b) ADP Limit.................................................. 57
7.4(c) Special Rules.............................................. 58
7.4(c)(1) Other Plans................................................ 58
7.4(c)(2) Aggregation................................................ 58
7.4(c)(3) Family Members............................................. 58
7.4(c)(4) Timing..................................................... 58
7.4(c)(5) Records.................................................... 59
7.4(c)(6) Other Requirements......................................... 59
7.4(d) Distribution of Excess contributions....................... 59
7.4(d)(1) General.................................................... 59
7.4(d)(2) Determination of Income or Loss............................ 59
7.4(d)(3) Order for Determining Excess Contributions................. 59
7.4(d)(4) Accounting for Excess Contributions........................ 59
7.4(e) Recharacterization......................................... 60
7.5 Limitations on Employee Contributions and Matching
Contributions under Code (S)401(m)......................... 60
7.5(a) Special Definitions........................................ 60
7.5(a)(1) Aggregate Limit............................................ 60
7.5(a)(2) ACP (or Average Contribution Percentage)................... 61
7.5(a)(3) Contribution Percentage.................................... 61
7.5(a)(4) Contribution Percentage Amount............................. 61
7.5(a)(5) Employee Contribution...................................... 62
7.5(a)(6) Excess Aggregate Contribution.............................. 62
7.5(a)(7) Matching Contribution...................................... 62
7.5(b) ACP Limit.................................................. 62
7.5(c) Special Rules.............................................. 62
7.5(c)(1) Multiple Use............................................... 62
7.5(c)(2) Other Plans................................................ 63
7.5(c)(3) Aggregation................................................ 63
7.5(c)(4) Family Members............................................. 63
</TABLE>
vii
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<TABLE>
<S> <C>
7.5(c)(5) Timing..................................................... 64
7.5(c)(6) Records.................................................... 64
7.5(c)(7) Other Requirements......................................... 64
7.5(d) Distribution of Excess Aggregate Contributions............. 64
7.5(d)(1) General.................................................... 64
7.5(d)(2) Determination of Income or Loss............................ 64
7.5(d)(3) Order for Determining Excess Aggregate Contributions....... 65
7.5(d)(4) Accounting for Excess Aggregate Contributions.............. 65
7.5(d)(5) Allocation of Forfeitures.................................. 65
SECTION 8. VESTING AND FORFEITURES........................................ 65
8.1 Determination of Nonforfeitable Percentage................. 65
8.1(a) Fully Vested Accounts...................................... 65
8.1(b) Death, Disability and Retirement........................... 65
8.1(b)(1) Standard Option............................................ 66
8.1(b)(2) Alternative................................................ 66
8.1(c) Other Separation From Service.............................. 66
8.1(c)(1) Standard Option............................................ 66
8.1(c)(2) Alternative................................................ 66
8.1(d) Employee Contribution Withdrawals.......................... 66
8.2 Forfeiture and Special Reemployment Rules.................. 66
8.2(a) Buy Back Rule (Standard Option)............................ 66
8.2(a)(1) Forfeiture................................................. 66
8.2(a)(2) Reemployment............................................... 67
8.2(b) Automatic Restoration (Alternative)........................ 67
8.2(b)(1) Forfeiture................................................. 67
8.2(b)(2) Reemployment............................................... 68
8.2(c) Deemed Distribution........................................ 69
8.2(d) Restoration Sources........................................ 69
8.2(e) Date Forfeitures Applied or Allocated...................... 69
8.2(f) In-service Distributions................................... 69
</TABLE>
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SECTION 9. ACCOUNT DISTRIBUTION - GENERAL RULES 70
9.1 After Separation From Service............................... 70
9.1(a) Timing...................................................... 70
9.1(a)(1) Standard Option............................................. 70
9.1(a)(2) Alternative................................................. 70
9.1(b) Reemployment................................................ 70
9.1(c) $3500 Cashout............................................... 70
9.1(d) Claim....................................................... 70
9.1(e) Election to Defer Payment................................... 71
9.1(e)(1) Standard Option............................................. 71
9.1(e)(2) Alternative................................................. 71
9.1(f) Early Retirement Age........................................ 71
9.1(g) Death....................................................... 71
9.2 Before Separation From Service.............................. 71
9.2(a) Money Purchase Pension Plan or Target Benefit Pension Plan.. 72
9.2(a)(1) Standard Option............................................. 72
9.2(a)(2) Alternative................................................. 72
9.2(b) 401(k) Plan................................................. 72
9.2(b)(1) Distribution Restrictions................................... 72
9.2(b)(2) Termination of Plan or Disposition of Assets or Subsidiary.. 72
9.2(b)(3) Hardship Distribution....................................... 73
9.2(b)(4) Distributions on or after Age 59 1/2........................ 75
9.2(c) Profit Sharing Plan......................................... 75
9.2(d) Withdrawals from Employee Account........................... 75
9.2(d)(1) Standard Option............................................. 75
9.2(d)(2) Alternative................................................. 75
9.2(e) Plan Termination............................................ 75
9.3 Consent..................................................... 75
9.3(a) General..................................................... 75
9.3(b) Exceptions.................................................. 76
9.3(c) Immediately Distributable................................... 76
9.3(d) Accumulated Deductible Employee Contributions............... 76
9.4 Form of Distribution........................................ 76
</TABLE>
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9.5 Minimum Distributions........................................ 76
9.6 Missing Person............................................... 77
9.7 No Estoppel of Plan.......................................... 77
9.8 Administration............................................... 77
SECTION 10. BENEFIT PAYMENT FORMS - JOINT AND SURVIVOR ANNUITY REQUIREMENTS
10.1 Application and Special Definitions......................... 77
10.1(a) Annuity Starting Date....................................... 78
10.1(b) Earliest Retirement Age..................................... 78
10.1(c) Election Period............................................. 78
10.1(d) Life Annuity................................................ 78
10.1(e) Qualified Election.......................................... 78
10.1(f) Qualified Joint and Survivor Annuity........................ 79
10.1(f)(1) Standard Option............................................. 79
10.1(f)(2) Alternative................................................. 79
10.1(g) Qualified Preretirement Survivor Annuity.................... 79
10.1(g)(1) Standard Option............................................. 80
10.1(g)(2) Alternative................................................. 80
10.1(h) Vested Account Balance...................................... 80
10.2 Distribution to Participant................................. 80
10.3 Distribution to Surviving Spouse............................ 80
10.4 Notice Requirements......................................... 80
10.4(a) Qualified Joint and Survivor Annuity and Life Annuity....... 80
10.4(b) Qualified Preretirement Survivor Annuity.................... 81
10.5 Safe Harbor Rules........................................... 81
10.5(a) Application................................................. 81
10.5(b) Conditions.................................................. 81
10.5(c) Surviving Spouse............................................ 82
10.5(d) Waiver of Spousal Benefit................................... 82
10.5(e) Vested Account Balance...................................... 82
10.6 Optional Forms.............................................. 82
10.6(a) General..................................................... 82
10.6(b) Before Separation From Service.............................. 82
10.6(c) After Separation From Service............................... 82
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10.6(c)(1) Standard Option........................................... 83
10.6(c)(2) Alternative............................................... 83
10.6(d) No Method Selected........................................ 83
10.6(e) Single Sum................................................ 83
10.6(f) In Kind Distributions..................................... 83
10.7 Annuity Contracts......................................... 84
10.8 Transitional Rules........................................ 84
10.9 Direct Rollovers.......................................... 85
10.9(a) General................................................... 85
10.9(b) Definitions............................................... 85
10.9(b)(1) Eligible Rollover Distribution............................ 85
10.9(b)(2) Eligible Retirement Plan.................................. 86
10.9(b)(3) Distributee............................................... 86
SECTION 11. MINIMUM DISTRIBUTION REQUIREMENTS............................ 86
11.1 General................................................... 86
11.2 Special Definitions....................................... 86
11.2(a) Applicable Calendar Year.................................. 86
11.2(b) Applicable Life Expectancy................................ 86
11.2(c) Designated Beneficiary.................................... 86
11.2(d) Distribution Calendar Year................................ 87
11.2(e) Life Expectancy........................................... 87
11.2(f) Participant's Benefit..................................... 87
11.2(g) Required Beginning Date................................... 87
11.2(g)(1) General Rule.............................................. 87
11.2(g)(2) Age 70 1/2 Before 1988.................................... 87
11.2(g)(3) Age 70 1/2 During 1988.................................... 88
11.3 Required Beginning Date................................... 88
11.4 Limits on Distribution Periods............................ 88
11.5 Determination of amount to be Distributed Each Year....... 89
11.6 Death Distribution Provisions............................. 89
11.7 Special Pre-TEFRA Distribution Election................... 91
SECTION 12. TOP-HEAVY PLAN RULES.......................................... 92
12.1 Application............................................... 92
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12.2 Special Definitions....................................... 92
12.4 Vesting Schedule.......................................... 98
12.5 401(k) Plan............................................... 99
SECTION 13. TOP-HEAVY PLAN RULES.......................................... 99
13.1 Insurance Contracts....................................... 99
13.2 Individually Directed Investments......................... 101
13.3 Participant Loans......................................... 102
SECTION 14. AND CONVERSION, MERGER, ASSET TRANSFERS AND ADOPTION,
AMENDMENT, WITHDRAWAL TERMINATION.................................... 106
14.1(b) Pre-Existing Plan......................................... 106
14.1(c) Participating Affiliates.................................. 106
14.2 Amendment................................................. 107
14.2(a) Prototype Sponsor......................................... 107
14.2(b) Employer.................................................. 107
14.3 Certain Amendment Restrictions............................ 107
14.3(a) General................................................... 107
14.4 Withdrawal as a Prototype and Conversion to Individually
Designed Plan............................................. 108
14.4(a) Voluntary Conversion...................................... 108
14.4(c) Effect of Withdrawal and Conversion....................... 109
14.5 Merger, Consolidation or Asset Transfers.................. 109
14.5(a) General................................................... 109
14.5(b) Authorization............................................. 109
SECTION 15. ADMINISTRATION................................................ 110
SECTION 16. MISCELLANEOUS................................................. 111
SECTION 1. INTRODUCTION AND CONSTRUCTION................................. 115
1.1 Introduction.............................................. 115
1.2 Definitions............................................... 115
1.3 Controlling Laws.......................................... 115
1.4 Construction.............................................. 115
</TABLE>
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SECTION 2. General................................................... 116
SECTION 3. CONTRIBUTIONS AND TRUST FUND.................................. 116
SECTION 4. MANAGEMENT OF TRUST FUND...................................... 117
4.1 Plan Administrator........................................ 117
4.2 Trustee................................................... 117
4.3 Investment Manager........................................ 120
4.4 Plan Administrator or Employer Investment Directions...... 121
4.5 Participant Investment Directions......................... 121
4.7 Multiple Trustees......................................... 121
4.8 Communications............................................ 122
4.9 Prototype Sponsor......................................... 122
4.10 Voting of Proxies......................................... 122
SECTION 6. VALUATION AND ACCOUNTING BY TRUSTEE........................... 124
SECTION 8. RESIGNATION OR REMOVAL OF TRUSTEE............................. 125
SECTION 9. MERGERS, CONSOLIDATIONS AND ASSET TRANSFERS................... 125
SECTION 10. SINGLE TRUST - SEPARATE FUNDS................................. 125
SECTION 11. NAMED FIDUCIARIES AND ADMINISTRATION.......................... 126
SECTION 12. MISCELLANEOUS................................................. 127
12.1 Spendthrift Clause and Qualified Domestic Relations
Orders................................................... 127
12.2 Benefits Supported Only by Trust Fund..................... 127
12.3 Claims.................................................... 127
12.4 Nonreversion.............................................. 127
12.5 Exclusive Benefit......................................... 128
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SMITH BARNEY SHEARSON
PLAN DOCUMENT
SECTION 1. INTRODUCTION AND CONSTRUCTION
1.1 INTRODUCTION. This Smith Barney Shearson Prototype Defined Contribution
Plan is established and maintained as a prototype plan by the Prototype Sponsor
for its customers and the customers of its subsidiaries and affiliates. This
Plan shall be adopted as a prototype plan only with the consent of the Prototype
Sponsor or one of its subsidiaries or affiliates as set forth in the related
Adoption Agreements and shall be maintained as a prototype plan only in
accordance with the terms and conditions set forth in this Plan.
1.2 CONTROLLING LAWS. To the extent such laws are not preempted by federal
law, this Plan and the related Adoption Agreement and Trust Agreement shall be
construed and interpreted under the laws of the state specified in the Adoption
Agreement; provided, if Smith Barney Shearson Trust Company has been appointed
as Trustee, the Trust Agreement shall be governed by and construed in accordance
with the laws of the State of [Delaware].
1.3 CONSTRUCTION. The headings and subheadings in this Plan have been inserted
for convenience of reference only and are to be ignored in the construction of
its provisions. Wherever appropriate, the masculine shall be read as the
feminine, the plural as the singular, and the singular as the plural.
References in this Plan to a section ((S)) shall be to a section in this Plan
unless otherwise indicated. References in this Plan to a section of the Code,
ERISA or any other federal law shall also refer to the regulations issued under
such section. Unless an alternative option is specified in the Adoption
Agreement, the option identified as the "Standard Option" will control.
The Employer intends that this Plan and the related Trust Agreement and Adoption
Agreement which are part of this Plan satisfy the requirements for tax exempt
status under Code (S)401(a), Code (S)501(a) and related Code sections and that
the provisions of this Plan, the Trust Agreement and the Adoption Agreement be
construed and interpreted in accordance with the requirements of the Code and
the regulations under the Code.
Further, except as expressly stated otherwise, no provision of this Plan or the
related Trust Agreement or Adoption Agreement is intended to nor shall grant any
rights to Participants or Beneficiaries or any interest in the Fund in addition
to those minimum rights or interests required to be provided under ERISA and the
Code and the regulations under ERISA and the Code.
Nothing in this Plan or the related Trust Agreement or Adoption Agreement shall
be construed to prohibit me adoption or the maintenance of this Plan or the
Trust Agreement as an individually designed plan or as a trust agreement with is
part of an individually designed plan, but in such event, the Employer may not
rely on the opinion letter issued to me Prototype Sponsor and me Prototype
Sponsor shall have absolutely no responsibility for such individually designed
plan.
Finally, in me event of any conflict between the terms of this Plan and the
terms of the Trust Agreement or the Adoption Agreement, the terms of this Plan
shall control.
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1.4 TRA 86 AMENDMENTS. If this Plan is adopted as an amendment to a Pre-
Existing Plan in order to satisfy the requirements of TRA 86, the retroactive
effective date of any provision required under TRA 86 is intended solely to
comply with the Code and is not intended to grant any substantive rights under
ERISA to the extent that such provision is different from the Pre-Existing Plan
as in effect between me applicable effective date of TRA 86 and the effective
date in the final regulations ("transition years").
SECTION 2. DEFINITIONS
The capitalized terms in this Plan and the related Adoption Agreement and Trust
Agreement shall have the meanings shown oppose those terms in this (S)2 and in
(S)3 for purposes of this Plan.
2.1 ACCOUNT - means the bookkeeping account maintained under this Plan to show
as of any Valuation Date a Participant's interest in the Fund attributable to
the contributions made by or on behalf of such Participant and the Fund Earnings
on such contributions, and an Account shall cease to exist when exhausted
through forfeiture or distributions made in accordance with this Plan.
2.2 ACTIVE PARTICIPANT - means for purposes of eligibility to receive an
allocation of the Employer Contribution or Forfeitures for each Plan Year, each
Participant who is an Eligible Employee at any time during me Plan Year and who
satisfies me following conditions:
2.2(a) STANDARD OPTION.
2.2(a)(1) STANDARDIZED PLANS. If this Plan is adopted as a
standardized Plan, such Participant (i) is employed as an Eligible
Employee (or on an authorized leave of absence as an Eligible
Employee) on me last day of such Plan Year, (ii) terminated
employment as an Eligible Employee during such Plan Year on or after
Normal Retirement Age or Early Retirement Age or by reason of death
or Disability, or (iii) such Participant is not employed on the last
day of such Plan Year but completed more than 500 Hours of Service
during such Plan Year (or me equivalent period described in (S)2.2(d)
if the "Elapsed Time" method is specified in me Adoption Agreement).
Notwithstanding me foregoing, if me "Hours of Service" method is
specified in me Adoption Agreement for a Plan Year beginning before
me Final Compliance Date, (S)2.2(a)(1)(iii) shall not apply and a
Participant who satisfies the requirements of (S)2.2(a)(1)(i) shall
not be eligible to receive an allocation of me Employer Contribution
or Forfeitures for such Plan Year unless such Participant also is
credited with at least 1,000 Hours of Service in such Plan Year.
2.2(a)(2) NONSTANDARDIZED PLANS. If this Plan is adopted as a
nonstandardized Plan, such Participant (i) is employed as an Eligible
Employee (or on an authorized leave of absence as an Eligible
Employee) on me last day of such Plan Year and, if the "Hours of
Service" method is specified in the Adoption Agreement, is credited
with at least 1,000 Hours of Service in such Plan Year, or (ii)
terminated
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employment as an Eligible Employee during Such Plan Year on or after
Normal Retirement Age or Early Retirement Age or by reason of death
or Disability.
2.2(b) ALTERNATIVE. Such Participant satisfies the alternative conditions
specified in the Adoption Agreement.
2.2(c) MINIMUM COVERAGE REQUIREMENT. If this Plan is adopted as a
nonstandardized Plan and fails to satisfy the minimum coverage and
participation requirements of Code (S)401(a)126) and (S)410(b) for any Plan
Year beginning on and after the Final Compliance Date as a result of the
application of the minimum hours or last day employment requirements in
this (S)2.2, such minimum participation and coverage requirements shall be
retroactively amended by executing a new Adoption Agreement within the
applicable retroactive correction period in the regulations or, if no such
amendment is made, shall be satisfied as follows:
2.2(c)(1) If the Plan utilizes both the minimum hours and last day
employment requirements:
(i) STEP 1 - Each Participant who completes at least 1,000 Hours of
Service without regard to whether such Participant is employed on the
last day of the Plan Year shall be deemed to be an Active Participant
for such Plan Year.
(ii) STEP 2 - If me minimum participation and coverage requirements
are not satisfied after the application of Step 1, men each
Participant who completes more than 500 Hours of Service and who is
employed on the last day of the Plan Year shall be deemed to be an
Active Participant for such Plan Year.
(iii) STEP 3 - If the minimum participation and coverage
requirements are not satisfied after me application of Step 1 and
Step 2, then each Participant who is not employed on the last day of
the Plan Year but who completed more than 500 Hours of Service in
such Plan Year also shall be deemed to be an Active Participant.
(iv) STEP 4 - If the minimum participation and coverage requirements
are not satisfied after the application of Steps 1 through 3, then
each Participant who satisfies the last day of employment requirement
also shall be deemed to be an Active Participant without regard to
the number of Hours of Service actually completed by such Participant
during such Plan Year.
2.2(c)(2) If the Plan utilizes only the last day employment requirement,
each Participant who is not employed on me last day of the Plan Year but
who completed more than 500 hours of Service in such Plan Year (or the
equivalent period described in (S)2.2(d) if the "Elapsed Time" method is
specified in the Adoption Agreement) also shall be deemed to be an Active
Participant.
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(i) STEP 1 - Each Participant who completes more than 500 Hours of
Service without regard to whether such Participant is employed
on the last day of the Plan Year shall be deemed to be an Active
Participant.
(ii) STEP 2 - If the minimum participation and coverage requirements
are not satisfied after the application of Step 1, then each
Participant who is employed on the last day of the Plan Year
shall be deemed to be an Active Participant.
2.2(d) SPECIAL ELAPSED TIME EQUIVALENCY RULE. If the "Elapsed Time method
is specified in the Adoption Agreement, Participant shall be treated as
completing more than 500 Hours of Service during such Plan Year for
purposes of this (S)2.2 if, during such Plan year, the Participant
completes more than
(A) STANDARD OPTION - 91 consecutive calendar days of employment, or
(B) ALTERNATIVE - if so specified in the Adoption Agreement, 3
consecutive calendar months of employment.
2.3 ADOPTION AGREEMENT - means the agreement by which the Employer adopted this
Plan.
2.4 AFFILIATE - means at any time (a) any parent, subsidiary or sister
corporation which at such time is a member of a controlled group of corporations
(as defined in Code (S)414(b)) with the Employer, (b) any trade or business,
whether or not incorporated, which at such time is considered to be under common
control (as defined in Code (S)414(c)) with the Employer, (c) any person or
organization which at such time is a member of an affiliated service group (as
defined in Code (S)414(m)) with the Employer, and (d) any other organization
which at such time is required to be aggregated with the Employer under Code
(S)414(o).
2.5 ALLOCATION DATE - means for a 401(k) Plan the respective dates specified in
the Adoption Agreement as of which Matching Contributions, Qualified Matching
Contributions and Qualified Nonelective Contributions, as applicable, are made.
2.6 AVERAGE ANNUAL COMPENSATION - means for a Target Benefit Plan the average
of an Employee's Compensation for the consecutive Plan Year period specified in
the Adoption Agreement during which such average is the highest, or if such
Employers entire period of participation in the Plan is less than the number of
Plan Years so specified, the Employee's Average Annual Compensation shall be
determined by averaging (on an annual basis) the Employee's Compensation for his
or her actual period of participation. For purposes of determining a
Participant's Average Annual Compensation for any Plan Year beginning after the
Final Compliance Date the annual Compensation taken into account for any prior
Plan Year; shall not exceed (a) for Plan Years beginning before January 1,1990,
$200,000 and (b) for Plan Years beginning on or after January 1, 1990, the
annual compensation limit described in (S)2.10(e) in effect for such prior Plan
Year.
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2.7 BENEFICIARY - means for each Participant the person or persons so
designated in writing by the Participant on a properly completed Election Form.
However, if no such designation is made, if no person so designated survives the
Participant, or if after checking the last known mailing address the whereabouts
of the person so designated is unknown and no death benefit claim is submitted
to the Plan Administrator by such person within one year after the Participant's
date of death, the Beneficiary shall be deemed to be (a) the Participant's
surviving Spouse, or if there is no surviving Spouse, (b) the personal
representative such Participant in his or her fiduciary capacity, if any has
qualified within one year from the date of the Participant's death, or it no
personal representative has so qualified or remains so qualified, (c) any person
determined by a court of competent jurisdiction to be the Participant's
Beneficiary for this purpose. If a Beneficiary is not identified and located
within 3 years of the Participant's date of death, (S)9.6, MISSING PERSON, shall
control the distribution of the Participant's Account.
2.8 BOARD - means (a) for any Employer which is a corporation, the Board of
Directors of such Employer and (b) for any Employer which is not a corporation,
the person or persons duly authorized to act on behalf of such Employer.
2.9 CODE - means the Internal Revenue Code, as amended.
2.10 COMPENSATION.
2.10(a) COMMON LAW EMPLOYEES. For an Employee who is not a Self-Employed
Individual or a Leased Employee, the term "Compensation" means for any
determination period
2.10(a)(1) STANDARD OPTION - the total compensation which is
actually paid (in cash or other benefits) by the Employer or any
Participating Affiliate to such Employee for such period and which is
reportable to the Internal Revenue Service on Form W-2 as wages
within the meaning of Code (S)3401(a) and all other payments of
compensation to such Employee from the Employer or Participating
Affiliate (in the course of its trade or business) for which a
written statement is required to be furnished to the Employee under
Code (S)6041(d), Code (S)6051(a)(3) and Code (S)6052. Such
Compensation shall be determined without regard to any rules under
Code (S)3401 (a) that limit the remuneration included in wages based
on the nature or location of the employment or the services performed
(such as the exception for agricultural labor in Code (S)3401(a)(2)),
or
2.10(a)(2) ALTERNATIVE - if so specified in the Adoption Agreement,
the total compensation which is actually paid (in cash or other
benefits) by the Employer or any Participating Affiliate to such
Employee for such period and which is
(i) considered as wages within the meaning of Code (S)3401 (a)
for the purposes of federal income tax withholding at the source
but determined without regard to any rules under Code (S)3401(a)
that limit the remuneration included in wages based on the nature
or location of the employment or the
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services performed (such as the exception for agricultural labor
in Code (S)3401(a)(2)),
(ii) considered as compensation within the meaning of Code
(S)415(c)(3) as described in (S)7.2(a)(2)(ii)(B),
(iii) for a nonintegrated nonstandardized Plan (other than a
Target Benefit Pension Plan), compensation identified on the
payroll records of the Employer or Participating Affiliates as
regular or base salary or wages (whether hourly, weekly, monthly,
annually or otherwise) and, if so specified in the Adoption
Agreement, overtime, bonuses, commissions, and/or other specific
compensation, or
(iv) compensation as described in (S)2.10(a)(1),
(S)2.10(a)(2)(i) or (S)2.10(a)(2)(ii), reduced by all of the
following items (even if includable in gross income):
reimbursements or other expense allowances, fringe benefits (cash
and noncash), moving expenses, deferred compensation and welfare
benefits, or
2.10(b) SELF-EMPLOYED. For an Employee who is a Self-Employed
Individual, the term "Compensation" means the Employee's Earned
Income for such period.
2.10(c) LEASED EMPLOYEES. All compensation paid by a leasing
organization to a Leased Employee for personal services rendered to
the Employer or a Participating Affiliate for such period shall be
treated as Compensation to the extent required under Code (S)414(n).
2.10(d) DETERMINATION PERIOD. For purposes of this definition and
unless otherwise specified in this Plan or the Adoption Agreement,
the phrase "determination period" means
2.10(d)(1) STANDARD OPTION - the Plan Year or
2.10(d)(2) ALTERNATIVE - the calendar year or other 12
consecutive month period ending with or within the Plan Year
specified in the Adoption Agreement.
2.10(e) LIMITATION. No more than $200,000 (as adjusted in
accordance with Code (S)401 (a)(17)) shall be taken into account
under this Plan for any determination period beginning on or after
January 1,1989. The annual Compensation limit under this (S)2.10(e)
for any determination period shall be adjusted in accordance with
Code (S)401(a)(17) for the calendar year in which such determination
period begins.
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If the determination period is less than 12 months as a result of a
short Plan Year, the annual Compensation limit under this (S)2.10(e)
shall equal the annual limit for such determination period multiplied
by a fraction, the numerator of which is the number of full months in
such period and the denominator of which is 12.
For purposes of this Compensation limit, the family aggregation rules
of Code (S)414(q)(6) shall be applied by aggregating only the
Participant's spouse and lineal descendants who have not reached age
19 before the end of such determination period. If the limit is
exceeded for any determination period as a result of the application
of the family aggregation rule, the limit shall be prorated among the
individuals affected by this limit in proportion to each such
individual's Compensation for such determination period as determined
under this (S)2.10 before the application of this (S)2.10(e).
However, if this Plan is adopted as an integrated plan, the preceding
sentence shall not apply for purposes of determining the portion of
Compensation which does not exceed the Integration Level.
2.10(f) SALARY REDUCTIONS. Any amount which is contributed by the
Employer or any Participation Affiliate pursuant to a salary
reduction agreement which is not currently includable in an
Employee's gross income under Code (S)125, (S)402(e)(3), (S)402(h) or
(S)403(b)
2.10(f)(1) STANDARD OPTION - shall be included in an Employee's
Compensation, or
2.10(f)(2) ALTERNATIVE - if so specified in the Adoption
Agreement, shall not be included in an Employee's Compensation.
2.10(g) SPECIAL RULES.
2.10(g)(1) If so specified in the Adoption Agreement, an
Employee's Compensation shall not include Compensation which is
paid to the Employee for periods ending before the Entry Date on
which the Employee becomes a Participant.
2.10(g)(2) If this Plan is adopted as an amendment and
restatement of a Pre-Existing Plan this-definition shall be
effective for Plan Years beginning on or after January 1, 1989
unless a later effective date is specified in the Adoption
Agreement, provided, the $200,000 limitation of (S)2.10(e) shall
not be effective later than the first day of the first Plan Year
beginning on or after January 1, 1989 and any such later
effective date specified in the Adoption Agreement for the other
provisions of this (S)2.10 shall not be later than the Final
Compliance Date.
2.10(9)(3) If so specified in the Adoption Agreement for a
nonstandardized Plan, a Participant's Compensation in excess of
the dollar
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amount or percentage specified in the Adoption Agreement shall
not be taken into account for purposes of determining the amount
or allocation of any contributions made by or on behalf of such
Participant under this Plan.
2.10(9)(4) If so specified in the Adoption Agreement for a
nonstandardized Plan, the Compensation of a Participant who is a
Highly Compensated Employee shall not include the specific types
of Compensation specified in the Adoption Agreement.
2.11 COVERED COMPENSATION - means for each Participant for each Plan Year
beginning on or after January 1, 1989, the average (without indexing) of the
Taxable Wage Bases in effect under the Social Security Act for each calendar
year during the 35-year period ending with the last day of the calendar year in
which the Participant attains (or will attain) Social Security Retirement Age,
determined by assuming that the Taxable Wage Base for all future years shall be
the same as the Taxable Wage Base in effect as of the beginning of such Plan
Year.
A Participants Covered Compensation for a Plan Year beginning before the 35-year
period ending with the last day of the calendar year in which the Participant
attains Social Security Retirement Age is the Taxable Wage Base in effect as of
the beginning of the Plan Year. A Participant's Covered Compensation for a Plan
Year beginning after such 35-year period is the Participant's Covered
Compensation for the Plan Year during which the 35-year period ends.
However, a Participant's Covered Compensation shall automatically be adjusted
each Plan Year and any increase in a Participant's Covered Compensation shall
not result in a decrease in the Participant's accrued benefit which would be
impermissible under Code (S)411(b)(1)(G) or (S)411(d)(6).
For purposes of this (S)2.11, Social Security Retirement Age means (a) age 65 in
the case of a Participant who was born before January 1, 1938, (b) age 66 for a
Participant who was born after December 31, 1937, but before January 1, 1955,
and (c) age 67 for a Participant who was born after December 31, 1954.
2.12 DISABILITY OR DISABLED - means an individual's inability to engage in any
substantially gainful activity at the individual's customary level of
compensation or competence and responsibility as an Employee due to any
medically determinable physical or mental impairment or impairments which may be
expected to result in death or to last for a continuous period of at least 12
months as determined by a qualified physician or other medical practitioner
selected by the Plan Administrator for this purpose in accordance with uniform
and nondiscriminatory standards.
2.13 EARLY RETIREMENT AGE - means
2.13(a) STANDARD OPTION - the Normal Retirement Age or
2.13(b) ALTERNATIVE - the alternative Early Retirement Age specified in
the Adoption Agreement.
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2.14 EARNED INCOME - means for any Self-Employed Individual for any period the
net earnings from self-employment (as defined in Code (S)1402(a)) for such
period from the Employer or any Participating Affiliate for which the personal
services of such Employee are a material income-producing factor, where such net
earnings are (a) determined without regard to items not included in gross income
for purposes of Chapter 1 of the Code and the deductions properly attributable
to such items, (b) determined with regard to the deduction allowed to the
SelfEmployed Individual under Code (S)164(f) for taxable years beginning after
December 31,1989, and (c) reduced by the contributions made on behalf of such
Employee to any qualified plan (as described in Code (S)401(a)) maintained by
the Employer or any Participating Affiliate to the extent such contributions are
deductible under Code (S)404.
2.15 EFFECTIVE DATE - means the effective date of the Employer's adoption or
amendment of this Plan as specified in the Adoption Agreement. However, if this
Plan is adopted as an amendment and restatement of a Pre-Existing Plan, certain
provisions of this Plan may be effective retroactive to Plan Years beginning
before such Effective Date or may be effective at a date later than such
Effective Date as specified in this Plan document or in the Adoption Agreement.
2.16 ELECTION FORM - means the form or forms provided by or acceptable to the
Plan Administrator for making the elections and designations called for under
this Plan and no such form shall become effective unless properly completed and
timely delivered to the Plan Administrator in accordance with the terms of this
Plan and such rules as the Plan Administrator shall adopt from time to time.
2.17 ELECTIVE DEFERRAL - means the nonforfeitable contribution made to the Fund
by the Employer or a Participating Affiliate on a Participant's behalf under
(S)5.3(f).
2.18 ELECTIVE DEFERRAL ACCOUNT - means the subaccount established as part of a
Participants Account to record the Participant's Elective Deferrals and the Fund
Earnings attributable to such contributions.
2.19 ELIGIBLE EMPLOYEE - means
2.19(a) STANDARD OPTION - each Employee of the Employer or a Participating
Affiliate other than
2.19(a)(1) an Employee who is included in a unit of employees
covered by a collective bargaining agreement between the Employer and
employee representatives which agreement does not provide for
participation in this Plan if retirement benefits under this Plan
were the subject of good faith bargaining; provided, however, that
(i) the term "employee representatives" shall not include an
organization more than half of whose members are employees who
are owners, officers or executives of the Employer, and
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(ii) an Employee shall not be treated as covered under a
collective bargaining agreement if more than 2% of the Employees
covered under such agreement are "professionals" (as defined in
(S)1.410(b)-9(g) of the Federal Income Tax Regulations); and
2.19(a)(2) an Employee who is a nonresident alien (within the
meaning of Code (S)7701(b)(1)(B) and who receives no earned income
(within the meaning of Code (S)911(d)(2)) from the Employer or any
Participating Affiliate which constitutes income from sources within
the United States (within the meaning of Code (S)861(a)(3)).
2.19(b) ALTERNATIVE - If this Plan is adopted as a nonstandardized Plan,
the Employer may specify in the Adoption Agreement a category of Employees
who shall not be treated as Eligible Employees under this Plan. However,
the Plan must satisfy on a continuing basis the nondiscrimination rules
under Code (S)401(a)(4), the coverage rules under Code (S)410(b), and the
minimum participation rules under Code (S)401 (a)(26).
2.20 EMPLOYEE - means each person who is treated as an employee of the Employer
or an Affiliate which is required to be aggregated with the Employer under Code
(S)414(b), (S)414(c), (S)414(m) or (S)414(o) including (a) a common-law employee
(whether full-time, part-time, regular, temporarY or otherwise), (b) a Self-
Employed Individual, (c) an Owner-Employee, (d) a Leased Employee and (e) each
Person who is deemed to be an employee under Code (S)414(o).
2.21 EMPLOYEE ACCOUNT - means the subaccount established as part of a
Participant's Account to record (1) the Participant's Employee Contributions
under this Plan, (2) the Participants nondeductible employee contributions, if
any, under a Pre-Existing Plan or a plan which is merged into this Plan under
(S)14.5, and (3) the Fund Earnings attributable to such contributions. If a
separate account was not maintained for contributions under other plans as
described in clause (2) above, the account balance attributable to such
contributions shall be the Participants total account balance under such other
plans multiplied by a fraction, the numerator of which is the total amount of
the Participant's nondeductible employee contributions (less withdrawals) and
the denominator of which is the sum of the numerator and the total contributions
made by the Employer on behalf of the Participant (less withdrawals). For
purposes of calculating such fraction, contributed amounts used to provide
ancillary benefits shall be treated as contributions and only amounts actually
distributed to the Participant (but not amounts which reflect the cost of any
death benefits) shall be treated as withdrawals.
2.22 EMPLOYEE CONTRIBUTION - means any contribution made by or on behalf of a
Participant to the Fund under (S)5.3(g) that is includable in the Participant's
gross income for the year in which made.
2.23 EMPLOYER - means the sole proprietorship, partnership or corporation
identified as the Employer in the Adoption Agreement and any successor in
interest to such organization.
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2.24 EMPLOYER ACCOUNT - means the subaccount established as part of a
Participant's Account to record the Participant's share of the Employer
Contributions and Forfeitures and the Fund Earnings attributable to such
amounts.
2.25 EMPLOYER CONTRIBUTION - means the contributions made by the Employer and by
any Participating Affiliate to the Fund under (S)5.1, (S)5.2, (S)5.3(e) or
(S)5.4.
2.26 ENTRY DATE - means
2.26(a) STANDARD OPTION - the first day of each Plan Year and the first
day of the 7th month in each Plan Year or
2.26(b) ALTERNATIVE - the alternative Entry Date specified in the Adoption
Agreement.
2.27 ERISA - means the Employee Retirement Income Security Act of 1974, as
amended.
2.28 FAMILY MEMBERS - means for any year, with respect to a Highly Compensated
Employee who is a 5% owner or who is in the group consisting of the 10 Highly
Compensated Employees paid the greatest Compensation during such year, (a) such
individual's spouse, (b) such individual's lineal descendants and (c) the
spouses of such lineal ascendants or descendants as determined under Code
(S)414(q)(6).
2.29 FINAL COMPLIANCE DATE - means the first day of the first Plan Year
beginning after December 31, 1993 or such other applicable effective date of the
final nondiscrimination and other TRA 36 regulations.
2.30 FORFEITURE - means the portion of an Account of a Participant which is
deducted from such Account in accordance with the terms of this Plan.
2.31 401(K) PLAN - means this Plan as adopted by entering into the Standardized
401(k) Plan Adoption Agreement or the Nonstandardized 401(k) Plan Adoption
Agreement.
2.32 FUND - means the trust fund created in accordance with this Plan and the
Trust Agreement which is a part of this Plan.
2.33 FUND EARNINGS - means for each period ending on a Valuation Date the
investment gains and losses (whether realized or unrealized), income and
expenses (other than expenses allocable directly to a specific Account) of the
Fund for such period as determined based on the fair - market value of the
assets of the Fund on such Valuation Date.
2.34 HIGHLY COMPENSATED EMPLOYEE - means a highly compensated employee within
the meaning of Code (S)414(q) (as described in (S)7.4(a)(5)).
2.35 INTEGRATION LEVEL - means the amount of Compensation specified in the
Adoption Agreement at or below which the rate of contributions or benefits
(expressed as a percentage of such
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Compensation) provided under the Plan is less than the rate of contributions or
benefits (expressed as a percentage of such Compensation) provided under the
Plan with respect to Compensation above such amount. The Integration Level
for any Plan Year shall not exceed the Taxable Wage Base in effect at the
beginning of such Plan Year.
2.36 LEASED EMPLOYEE - means for each Plan Year beginning on or after January 1,
1987 each person who is not a common-law employee of the Employer or an
Affiliate but who, pursuant to an agreement between the Employer or an Affiliate
("recipient") and any other person ("leasing organization"), has performed
services for the recipient or the recipient and a related person (as determined
in accordance with Code (S)414(n)(6)) on a substantially full-time basis for a
period of at least one year, which services are of a type historically performed
by employees in the business field of the recipient or related person for whom
such services are being performed. However, subject to the rules set forth in
the regulations under Code (S)414(n), such person shall not be treated as Leased
Employee if (a) the total number of such persons does not constitute more than
20% of the total nonhighly compensated work force of the recipient and (b) such
person is covered by a money purchase pension plan which is maintained by the
leasing organization and which provides for (1) a nonintegrated employer
contribution rate of at least 10% of compensation (as defined in Code
(S)415(c)(3) but including amounts contributed pursuant to a salary reduction
agreement which are excludable from the individual's gross income under Code (S)
125, (S)402(e)(3), (S)402(h) or (S)403(b)), (2) immediate participation and (3)
full and immediate vesting.
2.37 MATCHING ACCOUNT - means the subaccount established as put of a
Participant's Account to record the Matching Contributions made on the
Participant's behalf under this Plan and the Fund Earnings attributable to such
contributions.
2.38 MATCHING CONTRIBUTION - means the contribution made by the Employer and by
any Participating Affiliate to the Fund under (S)5.3(b) by reason of a
Participant's Elective Deferrals or Employee Contributions.
2.39 MAXIMUM DISPARITY RATE - means
2.39(a) STANDARD OPTION - if the Integration Level is equal to the Taxable
Wage Base, the greater of 5.7% or the portion of the tax rate under Code
(S)3111(a) which is attributable to old-age insurance as in effect on the
first day of such Plan Year, and
2.39(b) ALTERNATIVE - if the Integration Level is less than the Taxable
Wage Base, the applicable percentage determined in accordance with the
following table, where
X = the greater of $10,000 or 20% of the Taxable Wage Base
TWB = the Taxable Wage Base
It the Integration Level
Is More Than But Not More Than Applicable Percentage
$0 X 5.7%
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X 80% of TWB 4.3 %
80% of TWB 100% of TWB 5.4 %
or, if the portion of the tax rate under Code .63111(a) which is
attributable b old age insurance as in effect on the first day of such Plan
Year is greater than 5.7 %, the applicable percentage in the 5.7% amount in
the table above.
2.40 MONEY PURCHASE PENSION PLAN - means this Plan as adopted by entering into
the Standardized Money Purchase Pension Plan Adoption Agreement or the
Nonstandardized Money Purchase Pension Plan Adoption Agreement.
2.41 NET PROFITS
2.41(a) STANDARD OPTION. The term "Net Profits" means
2.41(a)(1) for an Employer or Participating Affiliate other than a
non-profit entity, the current or accumulated earnings for the
taxable year for which the Employer contribution is made as
determined before federal and state taxes and contributions to this
Plan or any other qualified plan, or
2.41(a)(2) for an Employer or Participating Affiliate which is a
nonprofit entity, the current or accumulated excess of receipts over
disbursements for the fiscal year for which the Employer contribution
is made.
2.41(b) ALTERNATIVE. The Employer may specify in an alternative
definition of Net Profits in the Adoption Agreement.
2.42 NONHIGHLY COMPENSATED EMPLOYEE - means each Employee who is neither a
Highly Compensated Employee nor a Family Member.
2.43 NORMAL RETIREMENT AGE -
2.43(a) GENERAL. The term "Normal Retirement Age" means
2.43(a)(1) Standard Option - age 65 or
2.43(a)(2) ALTERNATIVE - the alternative Normal Retirement Age
specified in the Adoption Agreement.
2.43(b) SPECIAL RULES.
2.43(b)(1) MANDATORY RETIREMENT AGE. If, consistent with
applicable age discrimination law, the Employer enforces a mandatory
retirement age, the Normal Retirement Age shall be the earlier of (1)
the date the Participant reaches such mandatory retirement age or (2)
the date the Participant reaches age 65 or, if an
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alternative is specified in the Adoption Agreement, the date the
Participant reaches Normal Retirement Age as specified in the
Adoption Agreement.
2.43(b)(2) TRANSITIONAL RULE. If
(i) the normal retirement age under the terms of the Pre-Existing
Plan as in effect for Plan Years beginning before January 1, 1988
was determined with reference to an anniversary of the date on
which a Participant commenced participation in such plan
("participation commencement date"),
(ii) such anniversary was later than the 5th anniversary of the
participation commencement date,
(iii) the Normal Retirement Age specified in the Adoption
Agreement is determined with reference to an anniversary of the
participation commencement date, and
(iv) this transitional rule is specified in the Adoption
Agreement,
then the anniversary for any Participant whose participation
commencement date occurred in a Plan Year beginning before January 1,
1988 shall be the earlier of (A) the anniversary under the terms of
the Pre-Existing Plan, or (B) the 5th anniversary of the first day of
the first Plan Year beginning after December 31, 1987.
2.44 OWNER EMPLOYEE - means each Self-Employed Individual who is (a) a sole
proprietor of the Employer or a Participating Affiliate or (b) a partner owning
more than 10% of either the capital or profits interest of the Employer or a
Participating Affiliate.
2.45 PAIRED PLANS - means (a) a combination of two or more standardized defined
contribution Plans under this Smith Barney Shearson Prototype Defined
Contribution Plan (Plan Document #05) or (b) a combination of one or more such
standardized defined contribution Plans with a standardized defined benefit plan
under the Smith Barney Shearson Prototype Defined Benefit Plan (Plan Document
#06). However, such Plans shall be treated as Paired Plans only if (1) such
Paired Plans have the same Plan Year, and (2) no more than one such plan is
integrated with social security.
2.46 PARTICIPANT - means (a) an Eligible Employee who has satisfied the
Participation Requirement specified in the Adoption Agreement and has become a
Participant in accordance with (S)4, and (b) any individual for whom an Account
continues to exist under the Plan.
2.47 PARTICIPATING AFFILIATE - means (a) if this Plan is a standardized Plan,
each Affiliate of the Employer or (b) if this Plan is a nonstandardized Plan,
each Affiliate which participates in this Plan, as set forth in (S)14.1 (c) of
the Plan; provided, an Affiliate automatically shall cease to be a Participating
Affiliate if, and at the time, it ceases to be an Affiliate as set forth in
(S)14.6(a).
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2.48 PARTICIPATION REQUIREMENTS - means
2.48(a) STANDARD OPTION - attainment of age 21 and completion of a waiting
period equal to one Year of Service or
2.48(b) ALTERNATIVE - the alternative minimum age and waiting period
requirement specified in the Adoption Agreement.
2.49 PLAN - means this Smith Barney Shearson Prototype Defined Contribution
Plan, as adopted by the Employer in the form of a Profit Sharing Plan, a 401 (k)
Plan, a Money Purchase Pension Plan or a Target Benefit Pension Plan, and as
amended from time to time in accordance with (S)14.2.
2.50 PLAN ADMINISTRATOR - means
2.50(a) STANDARD OPTION - the Employer or
2.50(b) ALTERNATIVE - the person or persons designated in writing by the
Employer as the Plan Administrator for this Plan.
2.51 PLAN YEAR - means the 12 consecutive month period or the 52/53 week period
which ends on the date specified in the Adoption Agreement; provided, however,
if this Plan is adopted as a new Plan, the first Plan Year shall be the period
beginning on the Effective Date and ending on the date specified in Adoption
Agreement.
2.52 PRE-EXISTING PLAN - means the Employer's prior defined contribution plan
and the related trust agreement or other funding arrangement which is described
in the Adoption Agreement and which is amended and restated in the form of this
Plan.
2.53 PROFIT SHARING PLAN - means this Plan as adopted by entering into the
Standard Profit Sharing Plan Adoption Agreement or the Nonstandardized Profit
Sharing Plan Adoption Agreement.
2.54 PROTOTYPE SPONSOR - means Smith Barney, Harris Upham & Co., Incorporated
and any successor to such corporation.
2.55 QUALIFIED MATCHING CONTRIBUTION - means the contribution made by the
Employer and by any Participating Affiliate to the Fund under (S)5.3(c) by
reason of a Participant's Elective Deferrals or Employee Contributions.
2.56 QUALIFIED MATCHING ACCOUNT - means the subaccount established as part of a
Participant's Account to record the Qualified Matching Contributions made on the
Participant's behalf under this Plan and the Fund Earnings attributable to such
contributions.
2.57 QUALIFIED NONELECTIVE CONTRIBUTION - means the contribution (other than
Matching Contributions, Qualified Matching Contributions and Employer
Contributions) made by the Employer and by any Participating Affiliate to the
Fund under (S)6.3(d).
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2.58 QUALIFIED NONELECTIVE ACCOUNT - means the subaccount established as part of
a Participant's Account to record the Qualified Nonelective Contributions made
on the Participant's behalf under this Plan and the Fund Earnings attributable
to such contributions.
2.59 ROLLOVER ACCOUNT - means the subaccount established as part of a
Participant's Account to record the Participant's Rollover Contributions and the
Fund Earnings attributable to such contributions.
2.60 ROLLOVER CONTRIBUTION - means (a) a contribution of an amount, or more than
one amount, which satisfies the applicable rollover requirements under Code
(S)402 or Code (S)408 made by a Participant to the Fund under (S)5.5 and (b)
effective January 1, 1993, an eligible rollover distribution which is directly
transferred to the Fund on or after such date pursuant to a Participant's
election under Code (S)401(a)(31).
2.61 SELF-EMPLOYED INDIVIDUAL - means an individual who is self-employed and who
receives Earned Income from the Employer or a Participating Affiliate did not
have Net Profits.
2.62 SPOUSE - means the person who is lawfully married to the Participant on the
date the Participant's Account becomes payable under this Plan or, if a
Participant dies before such date, the person who was lawfully married to such
Participant on the Participant's date of death. However, a former spouse shall
be treated as the Spouse and a current spouse shall not be treated as the Spouse
to the extent provided under a qualified domestic relations order as described
in Code (S)414(p).
2.63 TARGET BENEFIT PENSION PLAN - means this Plan as adopted by entering into
the Standardized Target Benefit Pension Plan Adoption Agreement or the
Nonstandardized Target Benefit Pension Plan Adoption Agreement.
2.64 TAXABLE WAGE BASE - means for any Plan Year the contribution and benefit
base in effect under (S)230 of the Social Security Act at the beginning of such
Plan Year.
2.65 TRA 86 - means the Tax Reform Act of 1986 ("Act") and any other legislation
and related regulations, notices or other guidance for which amendments are
required to be made at the same time as amendments for such Act.
2.66 TRUST AGREEMENT - means the bust agreement between the Employer and the
Trustee which is established as part of this Plan and which is set forth in the
attached Smith Barney Shearson Prototype Defined Contribution Plan Trust
Agreement or, if so specified in the Adoption Agreement gor a 401(k) Plan, the
Smith Barney Shearson Prototype Defined Contribution Plan Alternative Trust
Agreement for 401(k) Plans.
2.67 TRUSTEE - means the person or persons specified in the Adoption Agreement
who serve as the trustee for the Fund under the Trust Agreement and any
successor to such person or persons.
2.68 VALUATION DATE - means (a) the last day of each Plan Year and (b) each
other date, if any, agreed upon in advance by the Employer and the Trustee,
provided the selection of such other date
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does not result in discrimination in favor of Highly Compensated Employees which
would be prohibited under Code (S)401(a).
SECTION 3. SERVICE DEFINITIONS AND RULES
The definitions and rules in this (S)3 shall apply for purposes of measuring an
Employee's service (a) for participation purposes - to determine when the
Employee has satisfied the Participation Requirement and (b) for vesting
purposes - to determine the nonforfeitable interest in his or her Account.
3.1 HOUR OF SERVICE METHOD (STANDARD OPTION). The definitions and rules in
this (S)3.1 shall apply unless the "Elapsed Time" method of crediting service is
specified in the Adoption Agreement.
3.1(a) BREAK IN SERVICE.
3.1(a)(1) GENERAL. The term "Break in Service" means each
Computation Period during which an Employee fails to complete
more than 500 Hours of Service.
3.1(a)(2) MATERNITY/PATERNITY RULE. Solely for purposes of
determining whether an Employee has a Break in Service, an
Employee who is absent from work for "maternity or paternity
reasons" and who timely furnishes proof of the reason for such
absence (in accordance with such nondiscriminatory rules as may
be established by the Plan Administrator and communicated to
Employees) shall be credited with each Hour of Service for which
the Employee would otherwise have been credited but for such
absence, or if such Hours of Service cannot be determined, with 8
Hours of Service for each day of such absence. However the total
number of Hours of Service so credited to such Employee shall not
exceed 501 Hours of Service. The Hours of Service so credited
shall be credited to the Computation Period in which such absence
begins if such credit is necessary, to prevent a Break in Service
in such Computation Period or, if such credit is unnecessary, in
the immediately following Computation Period. For purposes of
this special maternity/paternity rule, an absence for "maternity
or paternity reasons" means an absence (i) by reason of the
pregnancy of the Employee, (ii) by reason of the birth of a child
of the Employee, (iii) by reason of the placement of a child with
the Employee in connection with the adoption of such child by
such Employee, or (iv) for purposes of caring for such child for
a period beginning immediately following such birth or placement.
3.1(b) COMPUTATION PERIOD.
3.1(b)(1) GENERAL. The term "Computation Period" for purposes of
determining Years of Service and Breaks in Service means the
applicable period described in this (S)3.1(b).
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3.1(b)(2) VESTING. The relevant Computation Period for measuring
Years of Service and Breaks in Service for vesting purposes shall
be
(i) STANDARD OPTION - the Plan Year or
(ii) ALTERNATIVE - if so specified in the Adoption
Agreement, (A) the 12 consecutive month period which begins
on the date the Employee first performs an Hour of Service
("hire date") and ends on the date immediately preceding the
first anniversary, of such hire date and (B) each 12
consecutive month period thereafter beginning on each
anniversary of such hire date and ending on the date
immediately preceding the next anniversary of such date.
3.1(b)(3) PARTICIPATION. The initial Computation Period for
measuring Years of Service and Breaks in Service for
participation purposes shall be the 12 consecutive month period
which begins on the first day an Employee first performs an Hour
of Service as an Employee ("hire date") and ends on the date
immediately preceding the first anniversary of such date. Each
subsequent Computation Period shall be
(i) STANDARD OPTION - each Plan Year, beginning with the
Plan Year which begins before the first anniversary, of the
Employee's hire date (regardless of whether the Employee is
credited with 1,000 Hours of Service in the Employee's
initial Computation Period). An Employee shall be credited
with two years of Service for participation purposes if the
Employee completes 1,000 or more Hours of Service in both
the initial Computation Period and the first Plan Year which
begins within such initial Computation Period, or
(ii) ALTERNATIVE - if so specified in the Adoption
Agreement, the 12 consecutive month period which begins on
each anniversary, of an Employee's hire date and ends on the
date immediately preceding the next anniversary, of the
Employee's hire date.
For participation purposes, an Employee shall be credited with a
Year of Service
(A) STANDARD OPTION - on the last day of the Computation
Period in which the Employee is credited with at least
1,000 Hours of Service (or such lesser number of hours
specified in the Adoption Agreement) or
(B) ALTERNATIVE - on the first date on which the Employee
is credited with at least 1,000 Hours of Service (or
such lesser number of hours specified in the Adoption
Agreement) provided the Employee
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completes such specified number of Hours of Service in
one Computation Period.
Notwithstanding the foregoing, if the Participation Requirement
includes a partial Year of Service, no minimum number of Hours of
Service shall be required for such partial year and an Employee
shall be credited with such partial Year of Service on the date
on which such partial period of service is completed.
3.1(b)(4) CHANGE IN COMPUTATION PERIOD. If an amendment
results in a change in the Computation Period, the first
Computation Period established under such amendment shall
begin before the last day of the preceding Computation
Period and each Employee to whom both such Computation
Periods apply and who completes 1,000 or more Hours of
Service in both such Computation Periods shall be credited
with one Year of Service for each such Computation Period.
3.1(c)(1) HOW OF SERVICE.
3.1(c)(1) GENERAL. The term "Hour of Service" means
(i) each hour for which an Employee is paid, or entitled
to payment, by the Employer or an Affiliate for the
performance of duties as an Employee, which hours shall be
credited to the Employee for the relevant Computation Period
in which such duties are performed;
(ii) each hour for which an Employee is paid, or entitled
to payment, by the Employer or an Affiliate on account of a
period of time during which no duties are performed
(irrespective of whether the employment relationship has
terminated) due to vacation, holiday, illness, incapacity
(including disability), layoff, jury duty, military duty or
leave of absence; provided (A) no more than 501 hours shall
be credited under this clause (ii) for any single continuous
period during which no duties are performed (whether or not
such period covers more than one relevant Computation
Period) and (B) hours under this clause (ii) shall be
calculated and credited pursuant to (S)2530.200b-2 of the
Department of Labor Regulations which are incorporated as
part of this Plan by this reference; and
(iii) each hour for which back pay, irrespective of
mitigation of damages, is either awarded or agreed to by the
Employer or an Affiliate; provided (A) no credit shall be
given for an hour described in this clause (iii) if credit
also is given for such hour under Clause (i) or clause (ii),
and (B) an hour described in this clause (iii) shall be
credited to the Employee for the relevant Computation Period
or Computation Periods to which the award or agreement
pertains rather than to the Computation Period in which the
award, agreement or payment is made.
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3.1(c)(2) DETERMINATION. The Employer shall determine an
Employee's Hours of Service
(i) STANDARD OPTION - by actually counting hours and
maintaining records which reflect the actual hours worked,
or
(ii) ALTERNATIVE - if so specified in the Adoption
Agreement, by crediting each such Employee with
(A) 10 Hours of Service for each day,
(B) 45 Hours of Service for each week,
(C) 95 Hours of Service for each semi-monthly
payroll period, or
(D) 190 Hours of Service for each month
during which the Employee otherwise would be credited with
at least one Hour of Service.
3.1(d) YEAR OF SERVICE. The term "Year of Service" means each
Computation Period during which an Employee completes at least
3.1(d)(1) STANDARD OPTION - 1,000 Hours of Service or
3.1(d)(2) ALTERNATIVE - such lesser number of Hours of
Service specified in the Adoption Agreement.
Notwithstanding the foregoing, if the Participation Requirement
includes a partial Year of Service, no minimum number of Hours of
Service shall be required for such partial year.
3.1(e) CHANGES IN SERVICE CALCULATION METHOD. If an amendment changes
the method of crediting service from the "Elapsed Time" method to the
"Hours of Service" method, each Employee who was credited with service
under the "Elapsed Time" method shall be credited with service
3.1(e)(1) for the Employee's employment before the Computation
Period in which such amendment is adopted, as determined on
the basis that one Year of Service credited to the Employee
under the "Elapsed Time" method for such employment shall
equal one Year of Service under this (S)3.1,
3.1(e)(2) for the Employee's employee during the Computation
Period in which such amendment is adopted, for a number of
Hours of Service determined by uniformly applying one of the
equivalencies set forth in (S)3,1(c)(2)(ii) to any fractional
part of a year credited to the Employee under the "Elapsed
Time" method as of the effective date of the amendment, and
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3.1(e)(3) for the Employee's employment on and after the
effective date of the amendment, as determined under the rules in
this (S)3.1.
3.2 ELAPSED TIME METHOD (ALTERNATIVE). If the "Elapsed Time" method of
crediting service is specified in the Adoption Agreement, the definitions and
rules in this (S)3.2 shall apply in lieu of the definitions and rules in (S)3.1.
3.2(a) BREAK IN SERVICE.
3.2(a)(1) GENERAL. The term "Break in Service" means a Period of
Severance of at least 12 consecutive months.
3.2(a(2) MATERNITY/PATERNITY RULE. If an Employee is absent from
service for "maternity or paternity reasons" and the Employee
timely furnishes proof of the reason for such absence (in
accordance with such nondiscriminatory rules as may be
established by the Plan Administrator and communicated to
Employees), the 12 consecutive month period beginning on the
first anniversary of the first date of such absence shall not
constitute a Break in Service. Such 12 consecutive month period
shall be neither a Period of Severance nor a period of Service.
For purposes of this special maternity/paternity rule, an absence
for "maternity or paternity reasons" means an absence (i) by
reason of the pregnancy of the Employee, (ii) by reason of the
birth of a child of the Employee, (iii) by reason of the
placement of a child with the Employee in connection with the
adoption of such child by the Employee, or (iv) for purposes of
caring for such child for a period beginning immediately
following such birth or placement.
3.2(b) HOUR OF SERVICE. The term "Hour of Service" means each hour for
which an Employee is paid, or entitled to payment, by the Employer or an
Affiliate for the performance of duties as an Employee during any period of
employment.
3.2(c) PERIOD OF SEVERANCE. The term "Period of Severance" means a
continuous period of time during which an Employee is not employed by the
Employer or an Affiliate beginning on the date the Employee retires, quits
or is discharged, or if earlier, the 12 month anniversary of the date on
which the Employee was otherwise first absent from service.
3.2(d) PERIOD OF SERVICE.
3.2(d)(1) GENERAL. For participation purposes and for vesting
purposes, the term "Period of Service" means an Employee's
employment completed as an Employee of the Employer and any
Affiliate beginning on such Employee's first day of employment or
reemployment and ending on the date a Break in Service begins. An
Employee's first day of employment or reemployment shall be the
first day the Employee performs an Hours of Service. A Period of
Service also shall include any Period of Severance of less than
12 consecutive months.
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3.2(d)(2) AGGREGATION. An Employee's employment completed in all
Periods of Service shall be aggregated (to the extent that such
service is not disregarded under (S)3.7 or (S)3.8) and the number
of days in each Period of Service in excess of a whole year of
employment (or, if there is no whole year of employment in any
such period, the number of days in such period) shall be
aggregated into additional whole years of employment on the
assumption that 365 days equals one whole year of employment.
3.2(e) YEAR OF SERVICE. The term "Year of Service" means each 12
consecutive month period of employment completed in any Period of Service
beginning on the date an Employee first completes an Hour of Service ("hire
date") and ending on the date immediately preceding the anniversary of such
hire date. Subsequent Years of Service shall begin on each anniversary of
the Employee's hire date and end on the date immediately preceding the next
anniversary of such hire date.
3.2(f) CHANGE IN SERVICE CALCULATION METHOD. If an amendment changes the
method of crediting service from the "Hour of Service" method to the
"Elapsed Time" method, each Employee who had any service credit under the
"Hour of Service" method shall be credited with service.
3.2(f)(1) for the Employee's employment before the Computation
Period in which such amendment is adopted, as determined on the
basis that one Year of Service credited to the Employee under the
"Hour of Service" method for such employment shall equal one Year
of Service under this (S)3.2,
3.2(f)(2) for the Employee's employment during the Computation
Period in which such amendment is adopted, as determined under
the rules in this (S)3.2 or, if greater, as determined for such
period under the "Hour of Service" method as converted to Years
of Service under the assumption that 365 days equals one Year of
Service, and
3.2(f)(3) for the Employee's employment after the last day of the
Computation Period in which such amendment is adopted, as
determined under the rules in this (S)3.2.
3.3 SERVICE BEFORE EFFECTIVE DATE. For participation purposes all periods of
employment with the Employer or an Affiliate completed before the Employer
adopted this Plan or a predecessor plan ("pre-effective date employment") shall
be included (to the extent such service is not disregarded under (S)3.7). For
vesting purposes all periods of pre-effective date employment shall be included
unless such service is disregarded under (S)3.7 or (S)3.8. Notwithstanding the
foregoing, service credit for vesting purposes automatically shall be granted
for pre-effective date employment to the extent required by Code (S)411(a) for
periods during which the Employer or an Affiliate maintained a predecessor plan.
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3.4 SERVICE WITH PREDECESSOR EMPLOYER. All periods of employment with a
predecessor employer or employers shall be included in calculating an Employee's
service to the extent required by Code (S)414(a) if the Employer or an Affiliate
maintains a plan of such predecessor employer. However, if the Employer or an
Affiliate does not maintain a plan of such predecessor employer, periods of
employment with such predecessor employer shall be included in calculating an
Employee's service
3.4(a) STANDARD OPTION - only to the extent required under regulations
under Code (S)414(a) or
3.4(b) ALTERNATIVE - only if so specified in the Adoption Agreement.
3.5 LEASED EMPLOYEES. A Leased Employee shall be credited with service as an
Employee of the Employer or an Affiliate in accordance with Code (S)414(n) or
(S)414(o).
3.6 SERVICE WITH AFFILIATES. An Employee shall be credited with all service
with any Affiliate and any other entity which is required to be aggregated with
the Employer under code (S)414(o).
3.7 SPECIAL BREAK IN SERVICE RULES.
3.7(a) STANDARD OPTION. Except as provided in (S)3.7 and (S)8.2, an
Employee who has a Break in Service shall be credited after such Break in
Service for both participation and vesting purposes with all Years of
Service completed before such Break in Service.
3.7(b) ALTERNATIVE. In addition to the exceptions in (S)3.7(c) and
(S)8.2, the Employer may specify in the Adoption Agreement that certain
service completed before a Break in Service may be disregarded under one or
more of the rules set forth in this (S)3.7(b).
3.7(b)(1) ONE YEAR HOLD-OUT RULE. If the "One Year Hold-Out Rule"
is specified in the Adoption Agreement for a nonstandardized
Plan, an Employee who has a Break in Service (two Breaks in
Service if the Alternative Maternity/Paternity Rule applies)
shall not be credited after such Break in Service for
participation purposes or vesting purposes with any Year of
Service complete before such Break in Service until the Employee
completes a Year of Service after such Break in Service.
In applying this rule for participation purposes, such Year of
Service shall be measured by the Computation Period which begins
on an Employee's "reemployment commencement date" and, if
necessary, subsequent Computation Periods beginning
(i) with the Plan Year which includes the first anniversary
of the "reemployment commencement date" if the standard
Computation Period in (S)3.1(b)(3)(i) is specified in the
Adoption Agreement, or
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(ii) on anniversaries of the "reemployment commencement
date" if the alternative Computation Period in
(S)3.1(b)(3)(ii) is specified in the Adoption Agreement.
The "reemployment commencement date" shall be the first day on
which the Employee is credited with an Hour of Service for the
performance of duties after the first Computation Period in which
the Employee incurs a Break in Service. If an Employee who was a
Participant before his or her Break in Service completes a Year
of Service in accordance with this provision, such Employee's
participation shall be reinstated as of his or her reemployment
commencement date.
3.7(b)(2) PRE-PARTICIPATION RULE. If the "Pre-Participation
Rule" is specified in the Adoption Agreement, an Employee who has
a Break in Service (two Breaks in Service if the Alternative
Maternity/Paternity Rule applies) before the Employee satisfies
the Participation Requirement shall not be credited for
participation purposes with any Year of Service completed before
such Break in Service. However, this rule shall only apply if the
Participation Requirement for the Plan requires more than one
Year of Service and the vesting schedule specified in the
Adoption Agreement provides for full and immediate vesting.
3.7(b)(3) RULE OF PARITY. If the "Rule of Parity" is specified
in the Adoption Agreement, the following rules shall apply:
(iii) GENERAL. If an Employee does not have any
nonforfeitable interest in the portion of the Employee's
Account which is attributable to Employer contributions, the
Employee's Years of Service before a period of consecutive
Breaks in Service shall not be taken into account in
computing service for participation or vesting purposes if
the number of consecutive Breaks in Service in such period
equals or exceeds the greater of 5 (6 if the Alternative
Maternity/Paternity Rule applies) or the aggregate number of
Years of Service completed before such Breaks in Service
("pre-break service"). Such pre-break service shall not
include any pre-break service disregarded under the
preceding sentence by reason of prior Breaks in Service.
(iv) PARTICIPATION. If an Employee's Years of Service are
disregarded under this rule of parity, the Employee shall be
treated as a new Employee for participation purposes. If the
Employee's Years of Service are not disregarded under this
rule, the Employee shall continue to participate in the
Plan, or, if the Employee separated from service, shall
participate immediately upon the Employee's reemployment.
(v) VESTING. If a Participant's Years of Service are
disregarded under this rule of parity, the Participant's
pre-break Years of Service shall be disregarded for purposes
of determining the Participant's nonforfeitable interest in
the Participant's post-break Employer Account. If a
Participant's
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pre-break Years of Service are not disregarded under this
rule of parity, the Participant's pre-break Years of Service
shall be counted for purposes of determining the
Participant's nonforfeitable interest in the Participant's
post-break Employer Account.
3.7(b)(4) ALTERNATIVE MATERNITY/PATERNITY RULE. If the
"Alternative Maternity/Paternity Rule" is specified in the
Adoption Agreement, the special Maternity/Paternity rule set
forth in (S)3.1(a)(2) shall not apply and the minimum period of
consecutive Breaks in Service required to disregard any service
or to deprive any Employee of any right under this Plan shall be
increased by one as specified in the parentheticals in this
(S)3.7 and in (S)8.2.
3.7(c) VESTING ON REEMPLOYMENT AFTER BREAK IN SERVICE. If a Participant
has 5 or more consecutive Breaks in Service (6 or more consecutive Breaks
in Service if the Alternative Maternity/Paternity Rule applies), all Years
of Service completed after such Breaks in Service shall be disregarded for
purposes of determining the Participant's nonforfeitable interest in the
Participation's Employer Account and Matching Account that accrued before
such Breaks in Service. Accordingly, as set forth in (S)8.2, the Employer
shall not be required to restore a Forfeiture upon such reemployment.
Unless the Adoption Agreement specifies the Rule of Parity, both the
Participant's pre-break service and post-break service shall count for
purposes of determining the nonforfeitable interest in the Participant's
post-break Employer Account and Matching Account. If the Adoption
Agreement specifies the Rule of Parity and the Participant's pre-break
Years of Service are disregarded under that rule, then the Participant's
pre-break Years of Service shall not count for purposes of determining the
nonforfeitable interest in the Participant's post-break Employer Account
and Matching Account. As provided in (S)8.2, separate accounts shall be
maintained for the Participant's pre-break and post-break Employer Account
and Matching Account and such accounts shall share in Fund Earnings.
If a Participant does not have 5 consecutive Breaks in Service (6 or more
consecutive Breaks in Service if the Alternative Maternity/Paternity Rule
applies), both the Participant's pre-break and post-break Years of Service
shall count in determining the nonforfeitable interest in both the pre-
break and post-break Employer Account and Matching Account balance.
However, unless the Adoption Agreement specifies the "Alternative to the
Buy Back Rule" (as described in (S)8.2(b)), a Participant's pre-break
Employer Account and Matching Account balance shall be zero unless the
Participant repays any distribution as provided in (S)8.2(a).
3.8 SERVICE EXCLUSIONS FOR VESTING PURPOSES.
3.8(a) STANDARD OPTION - An employee shall be credited with all Years of
Service for vesting purposes (to the extent such service is not disregarded
under (S)3.7 and (S)8.2).
3.8(b) ALTERNATIVE - The Employer may specify in the Adoption Agreement
service which is expressly excluded for vesting purposes.
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SECTION 4. PARTICIPATION
4.1 GENERAL RULE. Each Eligible Employee shall become a Participant in this
Plan on the Entry Date which coincides with or immediately follows the date on
which the Eligible Employee satisfies the Participation Requirement (provided he
or she is an Eligible Employee on such Entry Date).
4.2 SPECIAL RULES.
4.2(a) PRE-EXISTING PLAN. Any Employee who was a participant in the Pre-
Existing Plan on the date immediately preceding the Effective Date or who
would have become a participant int he Pre-Existing Plan on the Effective
Date shall become a Participant under this Plan on such Effective Date.
However, no contributions shall be made by or on behalf of such Participant
unless the Participant is otherwise entitled to a contribution under (S)5.
4.2(b) REEMPLOYMENT BEFORE SATISFYING PARTICIPATION REQUIREMENT. If an
Employee separates from service prior to satisfying the Participation
Requirement and is thereafter reemployed, all employment completed by such
Employee prior to such separation shall be aggregated with such Employee's
employment completed after reemployment for purposes of satisfying the
Participation Requirement unless such prior employment is excluded under
the rules set forth in (S)3.
4.2(c) REEMPLOYMENT AFTER SATISFYING PARTICIPATION REQUIREMENT. If an
Employee satisfies the Participation Requirement before he or she
separates from service and the Employee thereafter is reemployed,
the Employee shall become a Participant on the later of (1) the
first day he or she completes an Hour of Service as an Eligible
Employee upon reemployment or (2) the first Entry Date following
the date on which he or she satisfies the Participation
Requirement. However, any such Employee whose prior service is
disregarded under (S)3 shall be treated as a new Employee for
participation purposes.
4.2(d) STATUS CHANGE. If the status of an Eligible Employee for whom no
Account is maintained changes to that of an Employee (other than
an Eligible Employee) and such person's status thereafter changes
back to that of an Eligible Employee, such person shall become a
Participant on the later of (1) the date the status changes back
to that of an Eligible Employee or (2) the first Entry Date which
coincides with or immediately follows the date on which he or she
satisfies the Participation Requirement.
4.3 PARTICIPATION INFORMATION. Each Participant shall file with the Plan
Administrator such personal information and data as the Plan Administrator deems
necessary for the orderly administration of this Plan.
4.4 NO EMPLOYMENT RIGHTS. This Plan is not a contract of employment and
participation in this Plan shall not give any Employee or former Employee the
right to be retained in the employ of the
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Employer or any Affiliate or, upon termination of such employment, to have any
interest or right in the Fund other than as expressly provided in this Plan.
SECTION 5. CONTRIBUTIONS
5.1 PROFIT SHARING PLAN. If this Plan is adopted as a Profit Sharing Plan, the
Employer Contribution made by the Employer and each Participating Affiliate for
each Plan Year shall equal such amount, if any, as the Board determines in its
discretion that the Employer and each Participating Affiliate shall contribute
for such year. Employer Contributions under this (S)5.1 shall be made
5.1(a) STANDARD OPTION - from Net Profits or
5.1(b) ALTERNATIVE - if so specified in the Adoption Agreement, without
regard to Net Profits. Notwithstanding any such election, the Employer
intends that this Plan shall be a "profit-sharing plan" for purposes of the
Code and ERISA.
5.2 MONEY PURCHASE PENSION PLAN. If this Plan is adopted as a Money Purchase
Pension Plan, the Employer Contribution made by the Employer and each
Participating Affiliate for each Plan Year shall be an amount equal to the sum
of the contribution for each Active Participant as determined under the formula
specified in the Adoption Agreement. The Forfeitures for each Plan Year or
5.2(a) STANDARD OPTION - applied to reduce the Employer Contribution for
such Plan Year or
5.2(b) ALTERNATIVE - if so specified in the Adoption Agreement, allocated
to the Employer Account of each Active Participant in accordance with
(S)6.3(b). Notwithstanding any such election, the Employer intends that
this Plan shall be a "money purchased pension plan" for purposes of the
Code ERISA.
5.3 401(K) PLAN.
5.3(a) GENERAL. If this Plan is adopted as a 401(k) Plan, the contributions
made by the Employer and each Participating Affiliate shall be determined
in accordance with the elections made by the Employer in the Adoption
Agreement and the rules set forth in this (S)5.3. Contributions made under
this (S)5.3 other than Elective Deferrals and Employee Contributions shall
be made
5.3(a)(1) STANDARD OPTION - from Net Profits or
5.3(a)(2) ALTERNATIVE - if so specified in the Adoption Agreement,
without regard to Net Profits.
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Elective Deferrals and Employee Contributions shall be made without regard
to Net Profits. Notwithstanding any such election, the Employer intends
that this Plan shall be a "profit-sharing plan" for purposes of the Code
and ERISA.
5.3(b) MATCHING CONTRIBUTIONS. If the Employer specifies in the Adoption
Agreement that Matching Contributions shall be made to that Plan, the
Employer and each Participating Affiliate shall make a Matching
Contribution for each eligible Participant based on the Employee
Contributions and Elective Deferrals made by or on behalf of such eligible
Participant in such amount and as of each Allocation Date as specified in
the Adoption Agreement. Notwithstanding the foregoing.
5.3(b)(1) for Plan Years beginning on or after the Final
Compliance Date, no Matching Contribution shall be made on
account of a Participant's Elective Deferrals or Employee
Contributions which are Excess Elective Deferrals under (S)7.3,
Excess Contributions under (S)7.4 or Excess Aggregate
Contributions under (S)7.5, and
5.3(b)(2) for Plan Years beginning before the Final Compliance
Date, no Matching Contribution shall be made on account of such
excess amounts unless specified in the formula for Matching
Contributions set forth in the Adoption Agreement.
5.3(c) QUALIFIED MATCHING CONTRIBUTIONS. If the Employer specifies in
the Adoption Agreement that Qualified Matching Contributions shall be made
to the Plan, the Employer and each Participating Affiliate shall make a
Qualified Matching Contribution for each eligible Participant based on the
Employee Contributions and Elective Deferrals made by or on behalf of such
eligible Participant in such amount and as of each Allocation Date as
specified in the Adoption Agreement. Qualified Matching Contributions shall
be subject to the following special rules:
5.3(c)(1) the Participant may not elect to receive such
contributions in cash until distribution from the Plan;
5.3(c)(2) such contributions shall be completely nonforfeitable
when made;
5.3(c)(3) such contributions shall be subject to the same
distribution and withdrawal restrictions applicable to Elective
Deferrals set forth in (S)9.2(b);
5.3(c)(4) for Plan Years beginning on and after the Final
Compliance Date, no Qualified Matching Contribution shall be made
on account of a Participant's Elective Deferrals or Employee
Contributions which are Excess Elective Deferrals under (S)7.3,
Excess Contributions under (S)7.4 or Excess Aggregate
Contributions under (S)7.5; and
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5.3(c)(5) for Plan Years beginning before the Final Compliance
Date, no Qualified Matching Contribution shall be made on account
of such excess amounts unless specified in the formula for
Qualified Matching Contributions set forth in the Adoption
Agreement.
5.3(d) QUALIFIED NONELECTIVE CONTRIBUTION. If the Employer specifies in
the Adoption Agreement that Qualified Nonelective Contributions shall be
made to the Plan, the Employer and each Participating Affiliate shall make
Qualified Nonelective Contributions for each eligible Participant in such
amount and as of each Allocation Date specified in the Adoption Agreement.
In addition, in lieu of distributing Excess Contributions as provided in
(S)7.4(d) or Excess Aggregate Contributions as provided in (S)7.5(d), the
Employer and each Participating Affiliate may contribute on behalf of each
Participant who is a Nonhighly Compensated Employee on the last day of each
Plan Year such amount, if any, as the Employer and each Participating
Affiliate determine in their discretion to contribute for such Plan Year to
satisfy the ADP limit of (S)7.4(b) or the ACP limit of (S)7.5(b), or both,
pursuant to the regulations under the Code (S)401(k) and Code (S)491(m).
Qualified Nonelective Contributions shall be subject to the following
special rules:
5.3(d)(1) the Participant may not elect to receive such
contributions in cash until distributed from the Plan;
5.3(d)(2) such contributions shall be completely nonforfeitable
when made; and
5.3(d)(3) such contributions shall be subject to the same
distribution and withdrawal restrictions applicable to Elective
Deferrals set forth in (S)9.2(b).
5.3(e) DISCRETIONARY EMPLOYER CONTRIBUTION. If the Employer specifies in
the Adoption Agreement that discretionary Employer Contributions shall be
made, the Employer Contribution made by the Employer and each Participating
Affiliate for each Plan Year shall equal such amount, if any, as the Board
determines in its discretion that the Employer and each Participating
Affiliate shall contribute for such year.
5.3(f) ELECTIVE DEFERRALS. If the Employer specifies in the Adoption
Agreement that Elective Deferrals may be made, each Participant who is an
Eligible Employee may elect pursuant to a cash or deferred election that
the Employer and each Participating Affiliate make Elective Deferrals to
the Plan on the Participant's behalf in lieu of cash compensation for each
pay period ending on any date on or after he or she becomes a Participant
and on which he or she is an Eligible Employee in such amounts as specified
in the Adoption Agreement. All Elective Deferrals shall be made
exclusively through payroll withholding and shall be transferred by the
Employer or Participating Affiliate to the Trustee as soon as practicable
after the date such Elective Deferrals are withheld.
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5.3(g) EMPLOYEE CONTRIBUTIONS. If the Employer specifies in the Adoption
Agreement that Employee Contributions may be made, each Participant who is
an Eligible Employee may elect to make Employee Contributions to the Plan
for each pay period ending on any date on or after he or she becomes a
Participant and on which he or she is an Eligible Employee in such amounts
as specified in the Adoption Agreement. All Employee Contributions shall be
made exclusively through payroll withholding and shall be transferred by
the Employer of Participating Affiliate to the Trustee as soon as
practicable after the date such Employee Contributions are withheld.
5.3(h) ELECTION RULES AND LIMITATIONS.
5.3(h)(1) GENERAL. The Plan Administrator from time to time
shall establish and shall communicate in writing to Participants
who are Eligible Employees such reasonable nondiscriminatory
deadlines, rules and procedures for making the elections
described in this (S)5.3 as the Plan Administrator deems
appropriate under the circumstances for the proper administration
of this Plan. A Participant's election shall be made on an
Election Form and no election shall be effective unless such
Election Form is properly completed and timely filed in
accordance with such established deadlines, rules and procedures.
The Plan Administrator shall have the right at any time
unilaterally to reduce the amount or percentage of Elective
Deferrals or Employee Contributions elected under this (S)5.3 if
the Plan Administrator determines that such reduction is
necessary to satisfy the limitations under (S)7 of the Plan.
5.3(h)(2) COMMENCEMENT OF ELECTION. A Participant's initial
election to make Elective Deferrals or Employee Contributions
under this (S)5.3 for any period of employment may be effective
as early as the Entry Date on which he or she becomes a
Participant in the Plan. If a Participant does not make a proper
election to make Elective Deferrals or Employee Contributions as
of such Entry Date, the Participant may thereafter make an
election
(i) STANDARD OPTION - effective on any date or
(ii) ALTERNATIVE - effective only as of the dates specified
in the Adoption Agreement.
A Participant's election shall remain in effect until revised or
terminated in accordance with this (S)5.3(h).
5.3(h)(3) REVISION OF ELECTION. An election, once effective, can
thereafter be revised by a Participant.
(iii) STANDARD OPTION - effective on any date or
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(iv) ALTERNATIVE - effective only as of the dates specified
in the Adoption Agreement.
5.3(h)(4) TERMINATION OF ELECTION. A Participant shall have the
right to completely terminate an election under this (S)5.3 at
any time, and any such termination shall become effective as of
the first day of the first pay period following the date he or
she timely files a properly completed Election Form terminating
such election. Any Participant whose status as an Eligible
Employee terminates shall be deemed to have completely terminated
his or her election, if any, under this (S)5.3 as of the date the
Participant's status as such so terminates.
5.3(h)(5) RESUMPTION AFTER TERMINATION. A Participant whose
election terminates may thereafter elect to resume contributions
under this (S)5.3
(v) STANDARD OPTION - effective as of any date, or
(vi) ALTERNATIVE - effective only as of the dates specified
in the Adoption Agreement.
5.3(h)(6) EFFECTIVE DATES OF ELECTIONS. A Participant's
initial, revised or resumed election shall be effective only if
he or she is an Eligible Employee on the effective date of such
elections set forth in this (S)5.3(h). Elective Deferrals and
Employee Contributions made pursuant to a Participant's elections
shall be withheld from Compensation which otherwise would be paid
on or after the effective date of such election and while he or
she is an Eligible Employee. Under no circumstances shall a
Participant's Elective Deferral election apply to defer
Compensation which has been paid to the Participant or which he
or she is currently eligible to receive (in cash or otherwise) at
his or her discretion.
5.3(i) APPLICATION OF FORFEITURES. The Forfeitures attributable to
Matching Contributions and Employer Contributions shall be
5.3(i(1) STANDARD OPTION - applied to reduce the Matching
Contributions, Qualified Matching Contributions and Qualified
Nonelective Contributions, if any, in accordance with
(S)6.3(c)(2)(ii)(A) or
5.3(i)(2) ALTERNATIVE - if so specified in the Adoption
Agreement,
(vii) allocated to the Employer Account or Matching
Account, as applicable, of each active Participant in
accordance with (S)6.3(c)(2)(ii)(B)(1), or
(viii) for a nonstandardized Plan, allocated in accordance
with the formula specified in the Adoption Agreement.
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5.4 TARGET BENEFIT PENSION PLAN.
5.4(a) GENERAL. If this Plan is adopted as a Target Benefit Pension
Plan, the Employer Contribution made by the Employer and each Participating
affiliate for each Plan Year shall be an amount equal to the sum of the
contributions required to fund each Active Participant's "Target Benefit"
specified in the Adoption Agreement. The Forfeitures for each Plan Year
shall be applied to reduce the Employer Contribution for such Plan Year.
Such Contribution shall be determined as of the last day of such Plan Year
under the individual level premium funding method, using the interest rate
and mortality table specified in the Adoption Agreement, the Participant's
age on his or her last birthday and the assumption of a constant rate of
future Compensation, in accordance with the following:
5.4(a)(1) STEP 1. If the Participant has not reached the Plan's
Normal Retirement Age, calculate the present value of the "Target
Benefit" specified in the Adoption Agreement by multiplying the
"Target Benefit" by the produce of (1) the applicable factor from
Table 1(a) or (b), whichever is appropriate, in Exhibit A to the
Adoption Agreement and (2) the applicable factor from Table
III(a) or (b), whichever is appropriate, in Exhibit A to the
Adoption Agreement. If the Participant is at or beyond the Plan's
Normal Retirement Age, calculate the present value of the "Target
Benefit" specified int he Adoption Agreement by multiplying the
"Target Benefit" by the applicable factor from Table IV(a) or
(b), whichever is appropriate, in Exhibit A to the Adoption
Agreement.
5.4(a)(2) STEP 2. Calculate the excess, if any, of the amount
determined in Step 1 over the theoretical reserve.
5.4(a)(3) STEP 3. Amortize the result in Step 2 by multiplying it
by the applicable factor from Table II in Exhibit A to the
Adoption Agreement. For the Plan Year in which the Participant
attains Normal Retirement Age and for Subsequent Plan Years, the
applicable factor is 1.0.
5.4(b) THEORETICAL RESERVE. For purposes of this (S)5.4, the theoretical
reserve is determined as follows:
5.4(b)(1) A Participant's theoretical reserve as of the last day
of the first Plan Year in which the Participant participant's int
he Plan, and as of the last day of the first Plan Year after any
Plan Year in which the Plan wither did not satisfy the safe
harbor in (S)1.401(a)(4)-8(b)(3) of the Federal Income Tax
Regulations or was not a Prior Safe Harbor Plan, is zero. In all
other cases, in the first Plan Year in which this theoretical
reserve provision is adopted or made effective, if later, as
specified in the Adoption Agreement ("year 1"), the initial
theoretical reserve is determined as follows:
(i) Calculate as of the last day of the Plan Year
immediately preceding year 1 the present value of the
"Target Benefit", using the actuarial
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assumptions, the provisions of the Plan, and the
Participant's Average Annual Compensation as of such date;
provided, however, for a Participant who is beyond Normal
Retirement Age in year 1, the straight life annuity factor
used for such determination shall be in the factor
applicable for such Normal Retirement Age.
(ii) Calculate as of the last day of the Plan Year
immediately preceding year 1 the present value of future
Employer Contributions, i.e., the contributions due each
---
Plan Year using the actuarial assumptions, the provisions of
the Plan (disregarding those provisions of the Plan
providing for the limitations of Code (S)415 or the minimum
contributions under Code(S)416), and the Participant's
Average Annual Compensation as of such date, beginning with
year 1 through the end of the Plan Year in which the
Participant attains Normal Retirement Age.
(iii) Subtract the amount determine in clause (ii) from the
amount determined in clause (i).
5.4(b)(2) Accumulate the initial theoretical reserve in
(S)5.4(b)(1) and the Employer Contribution (as limited by Code
(S)415, but without regard to any required minimum contributions
under Code(S)416) for each Plan Year beginning in year 1 up
through the last day of the current Plan Year (excluding
contributions, if any, made for the current Plan Year) using the
Plan's interest assumption in effect for each such year. In any
Plan Year following the Plan Year in which the Participant
attains Normal Retirement Age, the accumulation is calculated
assuming an interest rate of 0%.
5.4(b)(3) The calculation is this (S)5.4(b) shall be made as of
the last day of each Plan Year, on the basis of the Participant's
age on his or her last birthday and the interest rate in effect
on the last day of the prior Plan Year.
5.4(c) PAST SERVICE CREDITS. If the Plan is adopted as a standardized
Plan, upon initial adoption of this Plan or upon a Plan amendment which
is effective on or after the Final Compliance Date, no more than 5 years
of credit shall be granted for service completed before the effective
date of such adoption or amendment, and any such past service credit
shall be granted on a uniform basis to all Participants in the Plan on
such effective date.
5.4(d) TRA 86 AMENDMENT. A Participant's Account balance shall not be
reduced as a result of an amendment to this Plan or a Pre-Existing Plan
to satisfy the requirements of TRA 86. To the extent that contributions
actually made on a Participant's behalf for Plan Years beginning after
December 31, 1998 exceed the contributions that would have been required
under the formula as effective for such years as a result of the
amendment of this Plan or a Pre-Existing Plan to satisfy TRA 86, such
excess shall be applied to offset contributions required to such
Participant's Account for Plan Years beginning after the date
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such TRA 86 amendments is adopted or, if later, the date such TRA 86
amendment is effective consistent with ERISA (S)204(h).
5.4(e) SPECIAL DEFINITIONS AND RULES. The special definitions and rules
in this (S)5.4(e) shall apply for purposes of determining the Employer
Contributions under a Target Benefit Pension Plan.
5.4(e)(1) CUMULATIVE DISPARITY LIMIT. For a Plan with a Unit
Benefit Formula, a Participant's Cumulative Limit is equal to 35
minus (1) the number of the Participant's Years of Participation
under this Plan during which this Plan did not satisfy the safe
harbor for target benefit plans in (S)1.401(a)(4)-8(b)(3) of the
Federal Income Tax Regulations or was not a Prior Safe Harbor
Plan, and (2) the number of years during which the Participant
participated in one or more qualified plans or simplified
employee pension plans ever maintained by the Employer (other
than years counted in clause (1) or counted toward a
Participant's total Years of Projected Participation). The
Cumulative Disparity Limit shall be determined taking into
account only those Years of Participation in this Plan beginning
after December 31, 1988 when this Plan had an integrated benefit
formula and those years of participation in such other qualified
plans and simplified employee pension plans beginning after
December 31, 1988 during which the Participant actually received
an allocation under an integrated defined contribution plan
(other than a target benefit pension plan), during which the
Participant was eligible to receive a benefit under an integrated
defined benefit pension plan or an integrated target benefit
pension plan), or during which the Participant received an
allocation or accrued a benefit under a plan which imputed
permitted disparity pursuant to (S)1.401(a)-7 of the Federal
Income Tax Regulations.
5.4(e)(2) CUMULATIVE DISPARITY REDUCTION. For a Plan with a
Fixed Benefit Formula, the Excess Benefit Percentage will further
be reduced as set forth in this (S)5.4(e)(2) for a Participant
with more than 35 "cumulative disparity years." A Participant's
"cumulative disparity years" consist of the sum of (1) the
Participant's total Years of Projected Participation, (2) the
Participant's Years of Participation during which this Plan did
not satisfy the safe harbor for target benefit plans in
regulations (S)1.401(a)(4)-8(b)(3) of the Federal Income Tax
Regulations or was not a Prior Safe Harbor Plan, and (3) the
number of years during which the Participant participated in one
or more qualified plans or simplified employee pension plans ever
maintained by the Employer (other than years in clause (1) or (2)
above); provided that the cumulative disparity years shall be
determined taking into account only those years of Participation
in this Plan beginning after December 31, 1988 when this Plan had
an integrated benefit formula and those years of participation in
such other qualified plans and simplified employee pension plans
beginning after December 31, 1988 during which the Participant
actually received an allocation under an integrated defined
contribution plan (other than a target benefit pension plan),
during which the Participant was eligible to receive a benefit
under an integrated defined benefit pension plan (or an
integrated target benefit pension
34
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plan), or during which the Participant received an allocation or
accrued a benefit under a plan which imputed permitted disparity
pursuant to (S)1.401(a)-7 of the Federal Income Tax Regulations.
If this Cumulative Disparity Reduction applies, the Excess Benefit
Percentage will be reduced as follows:
(A) Subtract the Participant's Base Benefit Percentage from the
Participant's Excess Benefit Percentage (after modification
as required in the Adoption Agreement for less than 35 Years
of Projected Participation).
(B) Multiply the results determined in (A) by a fraction (not
less than 0), the numerator of which is 35 minus the sum of
the years in clause (2) and (3) of this (S)5.4(e)2), and the
denominator of which is 35.
(C) The Participant's Excess Benefit Percentage is equal to the
sum of the result in (b) and the Participant's Base Benefit
Percentage, as otherwise modified in the Adoption Agreement.
5.4(e)(3) CURRENT STATED BENEFIT. Each Participant's Current Stated
Benefit will be the product of (1) the amount derived from the
formula specified in the Adoption Agreement,a nd (2) a fraction, the
numerator of which is the Participant's number of Years of
Participation from the latest Fresh-Start Date (if any) through and
including the later of the year in which the Participant attains
Normal Retirement Age or the current Plan Year, and the denominator
of which is the Participant's total Years of Projected Participation.
If this Plan has not had a Fresh-Start Date, such fraction will equal
1.0 for all Participants. In any event, for those Participants who
first participated in the Plan after the latest Fresh-Start Date,
such fraction will equal 1.0. For purposes of determining the
numerator of the fraction described in clause (2), only those current
and prior years during which a Participant was eligible to receive a
contribution under the Plan will be taken into account.
5.4(e)(4) FRESH-START DATE. Fresh-Start Date means the last day of
a Plan Year preceding a Plan Year for which provisions that would
affect the amount of the Current Stated Benefit are amended. If
applicable, the latest Fresh-Start Date of the Plan shall be
designated in the Adoption Agreement.
5.4(e)(5) FROZEN ACCRUED STATED BENEFIT. A Participant's Frozen
Accrued Stated Benefit is determined as of the Plan's latest Fresh-
Start Date as if the Participant terminated employment with the
Employer as of that date, without regard to any amendment made to the
Plan after that date except as permitted under regulations.
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<PAGE>
A Participant's Frozen Accrued Stated Benefit is equal to the amount
of the Current Stated Benefit in effect on the latest Fresh-Start
Date that a Participant has accrued as of that date, assuming that
such Current Stated Benefit accrues ratably from the year in which
the Participant first participated in this Plan (or, if later, the
immediately preceding Fresh-Start Date under this Plan) through and
including the Plan Year in which the Participant attains Normal
Retirement Age.
The amount of the Current Stated Benefit in effect on the latest
Fresh-Start Date that a Participant is assumed to have ratably
accrued is determined by multiplying the Plan's Current Stated
Benefit in effect on that date by a fraction, the numerator of which
is the number of Years of Participation from the later of the
Participant's first Year of Participation in this Plan or the
immediately preceding Fresh-Start Date (if any) through and including
the year that contains the latest Fresh-Start Date, and the
denominator of which is the number of Years of Participation from the
later of the Participant's first Year of Participation in this Plan
or the immediately preceding Fresh-Start Date (if any) through and
including the later of the year in which the Participant attains
Normal Retirement Age or the current Plan Year. For purposes of this
paragraph, only those Years of Participation during which a
Participant was eligible to receive a contribution under the Plan
will be taken into account.
If this Plan has had a preceding Fresh-Start Date, each Participant's
Frozen Accrued Stated Benefit as of the latest Fresh-Start Date will
equal the sum of the amount of the Current State Benefit in effect on
the latest Fresh-Start Date that a Participant is assumed to have
ratably accrued as of that date under the preceding paragraph, and
the Frozen Accrued Stated Benefit determined as of the preceding
Fresh-Start Date(s).
If (1) the Current Stated Benefit formula in effect on the latest
Fresh-Start Date was not express as a straight life annuity for all
Participants, and/or (2) the Normal Retirement Age for any
Participant on the latest Fresh-Start Date was greater than the
Normal Retirement Age for that Participant under the Current Stated
Benefit formula in effect after the latest Fresh-Start Date, the
Frozen Accrued Stated Benefit will be converted to an actuarially
equivalent straight life annuity commencing at the Participant's
Normal Retirement Age under the Current State Benefit formula in
effect after the latest Fresh-Start Date, using the actuarial
assumptions in effect under the Current State Benefit formula in
effect on the latest Fresh-Start Date.
Notwithstanding the above, if in the immediately preceding Plan Year this
Plan did not satisfy the safe harbor for target benefit plans in
(S)1.401(a)(4)-8(b)(3) of the Federal Income Tax Regulations or was not a
Prior Safe Harbor Plan, the Frozen Accrued Stated Benefit for any
Participant in the Plan, determined for the next Plan Year during which
(S)1.401(a)(4)-8(b)(3) of the Federal Income Tax Regulations is satisfied
until the year following the next Fresh-Start Date, if any, will be zero.
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<PAGE>
5.4(e)(6) MAXIMUM EXCESS ALLOWANCE. The Maximum Excess Allowance is
equal to the lesser of the Base Benefit Percentage or
(1) for a Plan with a Unit Benefit Formula, the Applicable
Factor determined from Table A or Table B in Exhibit B to the
Adoption Agreement, and
(2) for a Plan with a Fixed Benefit Formula, 35 times the
Applicable Factor determined from Table A or Table B in Exhibit B
to the Adoption Agreement.
5.4(e)(7) OVERALL PERMITTED DISPARITY LIMIT. If for any Plan Year
this Plan benefits any Participant who also benefits under another
qualified plan or simplified employee pension plan maintained by the
Employer that provides for permitted disparity (or imputes permitted
disparity), the Current State Benefit for all Participants under this
Plan will be equal to the Excess Benefit Percentage set forth in the
Adoption Agreement multiplied times
(1) for a Plan with a Unit Benefit Formula, the Participant's
total Average Annual Compensation times the Participant's total
Years of Projected Participation under the Plan up to the maximum
total Years of Projected Participation specified in the Adoption
Agreement, and
(2) for a Plan with a Fixed Benefit Formula, the Participant's
total Average Annual Compensation (prorated for years less than
35).
If this paragraph is applicable, this Plan will have a Fresh-Start
Date on the last day of the Plan Year preceding the Plan Year in
which this paragraph is first applicable. In addition, if in any
subsequent Plan Year this Plan no longer benefits any Participant who
also benefits under another plan of the Employer, this Plan will have
a Fresh-Start Date on the last day of the Plan Year preceding the
Plan Year in which this paragraph is no longer applicable.
5.4(e)(8) PRIOR SAFE HARBOR PLAN. Prior Safe Harbor Plan means a
Plan adopted and in effect on September 19, 1991, that satisfied the
applicable nondiscrimination requirements for target benefit plans on
that date and in all prior periods (taking into account no amendments
to the Plan after September 19, 1991, other than amendments necessary
to satisfy Code (S)401(1).
5.4(e)(9) YEAR OF PARTICIPATION - means each Year of Service (as
determined in the same manner as a Year of Service for vesting
purposes) completed after the Participant first becomes a Participant
in this Plan or the Pre-Existing Plan.
5.4(e)(10) YEARS OF PROJECTED PARTICIPATION. For purposes of
determining a Participant's Current Stated Benefit, a Participant's
total Years of Projected
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Participation under the Plan is the sum of the Participant's total
number of Years of Participation under this Plan for the years this
Plan consecutively satisfies the safe harbor for target benefit plans
in (S)1.401(a)(4)-8(b)(3) of the Federal Income Tax Regulations or
was a Prior Safe Harbor Plan, if applicable, projected through the
later of the end of the Plan Year in which the Participant attains
Normal Retirement Age or the end of the current Plan Year. For
purposes of determining a Participant's total Years of Projected
Participation, only those current and prior years during which a
Participant was eligible to receive a contribution under the Plan
will be taken into account.
5.5 ROLLOVER CONTRIBUTIONS.
5.5(a) STANDARD OPTION - An Eligible Employee may contribute on his or her
own behalf (or elect a direct transfer of) a Rollover Contribution to the
Fund, provided (1) such contribution shall be made (or transferred) in cash
or in a form which is acceptable to the Trustee, (2) such contribution
shall be made in accordance with such rules as the Plan Administrator and
the Trustee deem appropriate under the circumstances, and (3) if so
specified in the Adoption Agreement, no Rollover Contribution may be made
prior to the Entry Date on which the Eligible Employee becomes a
Participant in this Plan.
5.5(b) ALTERNATIVE - The Employer may specify in the Adoption Agreement
that no Rollover Contributions may be made.
5.6 NO EMPLOYEE OR MATCHING CONTRIBUTIONS. Unless this Plan is adopted as a
401(k) Plan which permits Employee Contributions, no nondeductible employee
contributions or matching contributions (as defined in Code (S)401(m) shall be
made to this Plan after the Plan Year in which this Plan is adopted by the
Employer. Any nondeductible employee contributions and matching contributions
made under a Pre-Existing Plan or under this Plan (in accordance with the
preceding sentence) for Plan Years beginning after December 31, 1986 shall be
subject to the nondiscrimination limitations under Code (S)401(m) as set forth
in (S)7.5.
5.7 NO DEDUCTIBLE VOLUNTARY EMPLOYEE CONTRIBUTIONS. No voluntary deductible
employee contributions shall be made to this Plan for a taxable year beginning
after December 31, 1986. Any voluntary deductible employee contributions made
under a Pre-Existing Plan prior to such date shall be maintained in a separate
account under this Plan. Such account shall be nonforfeitable at all times and
shall share in the Fund Earnings in the same manner as described in (S)6.2. No
part of such account shall be used to purchase life insurance. Subject to
(S)10, JOINT AND SURVIVOR ANNUITY REQUIREMENTS (if applicable), a Participant
may withdraw any part of the Participant's voluntary deductible employee
contribution account by making a written application to the Plan Administrator.
5.8 GENERAL RULES APPLICABLE TO ALL CONTRIBUTIONS.
5.8(a) LIMITATIONS ON CONTRIBUTIONS. The contributions made under this
(S)5 and the allocation of those contributions under (S)6 shall be subject
to the limitations set forth in the Adoption Agreement, this (S)5 and (S)7.
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5.8(b) CODE (S)415. The contributions for any Plan Year shall not (based on
the Employer's understanding of the facts at the time the contribution is
made) exceed the total amount allocable for such year among the Accounts of
all Participants in light of the restrictions in Code (S)415 as set forth
in (S)7.2. If a suspense account as described in (S)7.2(b) is in existence
at any time during a particular Limitation Year (1) no Employer
Contribution shall be made for such Limitation Year if (based on the
Employer's understanding of the facts at the time the contribution is made)
the allocation of the amount in such suspense account would be precluded by
Code (S)415 for such Limitation Year and (2) if this Plan is adopted as a
Money Purchase Pension Plan or a Target Benefit Plan, the Employer
Contribution required under this (S)5 shall be reduced by the amount in
such suspense account.
5.8(c) CODE (S)416. If this Plan is a To-Heavy Plan (as defined in (S)12)
for any Plan Year, the minimum allocation required under Code (S)416 shall
be made in accordance with (S)12.
5.8(d) LEASED EMPLOYEES. Contributions or benefits which are provided by
a leasing organization on behalf of a Participant who is a Leased Employee
and which are attributable to services performed by such Participant for
the Employer or a Participating Affiliate shall be credited against the
contribution, if any, due to be allocated to such Participant under this
Plan in accordance with Code (S)414(n).
5.8(e) OWNER-EMPLOYEES.
5.8(e)(1) GENERAL. If this Plan provides contributions or benefits
for one or more Owner-Employees who control the Employer or a
Participating Affiliate, then
(i) If such Owner-Employee, or Owner-Employees, also control
one or more of other trades or businesses,
(A) this Plan and the plans established for such other
trades or businesses shall, when viewed as a single plan,
satisfy the applicable requirements of Code (S)401(a) and
Code (S)401(d) for the employees of the Employer or the
Participating Affiliates and such other trades or
businesses, and
(B) the employees of such other trades or businesses shall
be included in a plan which satisfies the applicable
requirements of Code (S)401(a) and Code (S)401(d) and
which provides contributions and benefits which are at
least as favorable as those provided under this Plan for
such Owner-Employees, or
(ii) if such Owner-Employee is covered as an owner-employee
(within the meaning of Code (S)401(c)(3) under the plans of two
or more other trades or businesses which such Owner-Employee
does not control, then the contributions or benefits provided
under this Plan must be at least as
39
<PAGE>
favorable as those provided for such Owner-Employee under the
most favorable plan of such other trade or business.
5.8(e)(2) CONTROL. For purposes of this (S)5.8(e), an Owner-
Employee, or two or more such Owner-Employees, shall be considered to
control a trade or business if such Owner-Employee, or such Owner-
Employees together,
(iii) own the entire interest in an unincorporated trade or
business, or
(iv) in the case of a partnership, own more than 50% of either
the capital interest or the profits interest in such partnership.
Such Owner-Employee, or such Owner-Employees, shall be treated as
owning any interest in a partnership which is owned, directly or
indirectly, by a partnership which is controlled by such Owner-
Employee, or such Owner-Employees, within the meaning of clause
(ii).
SECTION 6. ALLOCATIONS TO ACCOUNTS
6.1 ESTABLISHMENT AND MAINTENANCE OF ACCOUNTS. An Account shall be established
and maintained for each Participant under the Plan and the Plan Administrator
shall established reasonable and nondiscretionary procedures under which (a) any
Forfeitures, insurance premium payments, loans, withdrawals, distributions and
other charges properly allocable to such Account shall be debited from such
Account and (b) any insurance contract dividends, insurance contract surrender
proceeds, loan repayments and other amounts properly allocable to such Account
(other than amounts described in (S)6.2 and (S)6.3) shall be credited to such
Account.
6.2 ALLOCATION OF FUND EARNINGS.
6.2(a) GENERAL. As of each Valuation Date the fair market value of
the Fund and the Fund Earnings for the period which ends on such
Valuation Date shall be determined. Such Fund Earnings shall be
allocated (and posted) among all Accounts in the proportion that the
balance in each such Account (determined in accordance with
(S)6.2(b)) bears to the total balance in all such Accounts in order
that each Account shall proportionately benefit from any earnings or
appreciation in the value of the Fund assets in which such Account is
invested or proportionately suffer any losses or depreciation in the
value of the Fund assets in which such Account is invested. Subject
to (S)13, each Participant shall have a ratable interest in all
assets of the Fund.
6.2(b) ALLOCATION PROCEDURES. The Plan Administrator shall
establish nondiscretionary allocation procedures for purposes of the
allocation of Fund Earnings under (S)6.2(a), which procedure shall be
set forth in writing with the records of this Plan. If so specified
in such procedures, the balance in each Account shall be determined
after adjusting for all or a portion of the contributions
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and other amounts credited to or debited from such Account since the
preceding Valuation Date. Further, if so provided in such allocation
procedures. Fund Earnings shall not be allocated to any Forfeiture
or to the balance in any suspense account described in (S)7.2(b).
6.3 ALLOCATION OF CONTRIBUTIONS AND FORFEITURES. Subject to the limitations in
(S)7, the Forfeitures (and any amount deemed to be a Forfeiture under the terms
of this Plan) and the contributions shall be allocated (and posted) in
accordance with the following rules:
6.3(a) PROFIT SHARING PLAN.
6.3(a)(1) NONINTEGRATED. If this Plan is adopted as a Profit
Sharing Plan and the nonintegrated allocation formula is
specified in the Adoption Agreement, the Forfeiture and the
Employer Contribution for each Plan Year shall be allocated (and
posted) as of the last day of such Plan Year to the Employer
Account of each Active Participant in the same ratio that each
Active Participant's Compensation for such Plan Year bears to the
total Compensation of all Active Participants for such Plan Year.
6.3(a)(2) INTEGRATED. If this Plan is adopted as a Profit Sharing
Plan and the integrated allocation formula is specified in the
Adoption Agreement, the Forfeitures and the Employer Contribution
shall be allocated (and posted) as of the last day of each Plan
Year to the Employer Account of each Active Participant in
accordance with the following:
(i) STEP ONE - First, the lesser of (A) the sum of the
Employer Contribution and Forfeitures for such Plan Year or
(B) the Integration Amount for such Plan Year shall be
allocated to the Employer Account of each Active Participant
in the same ratio that the sum of the total Compensation and
Excess Compensation of each Active Participant for such Plan
Year bears to the sum of the total Compensation and Excess
Compensation of all Active Participants for such Plan Year.
(ii) STEP TWO - Second, the remaining Employer Contribution
and the Forfeitures, if any, for such Plan Year shall be
allocated to the Employer Account of each Active Participant
(whether or not he or she had Excess Compensation) in the
same ratio that each Active Participant's total Compensation
for such Plan Year bears to the total Compensation of all
Active Participants for such Plan Year.
(iii) SPECIAL DEFINITIONS - For purpose of this
(S)6.3(a)(2).
(A) "Integration Amount" means the product of (1) the
total Compensation and the total Excess Compensation
of all Active Participants and (2) the Integration
Percentage specified in the
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Adoption Agreement, but in no event shall the
Integration Percentage exceed the Maximum Disparity
Rate for any Plan Year beginning after December 31,
1988.
(B) "Excess Compensation" means the amount, if any, of
a Participant's Compensation for such Plan Year which
exceeds the Integration Level for such Plan Year.
(iv) TOO-HEAVY. If this Plan is a Top-Heavy for any Plan
Year, the allocation formula in (S)12.3(h)(1) shall apply in
lieu of the formula in this (S)6.3(a)(2) for such Plan Year.
6.3(b) MONEY PURCHASE PENSION PLAN. If this Plan is adopted as a Money
Purchase Pension Plan, the Forfeitures and the Employer Contribution
actually made under (S)5.2 (adjusted, if applicable, in accordance with
(S)12.3(h)(2) for a Top-Heavy Plan) shall be allocated (and posted) as of
the last day of each Plan Year to the Employer Account of each Active
Participant in accordance with the formula specified in the Adoption
Agreement. If Forfeitures are applied to reduce the Employer Contribution
and the Forfeitures available under (S)8.2(e) for any Plan Year exceed the
contribution specified in the Adoption Agreement for such Plan Year, such
excess shall be held in a separate account and shall be applied in full as
a Forfeiture to offset such contributions in the future until such account
is exhausted under this (S)6.3(b). If Forfeitures are to be allocated to
Active Participants, such Forfeitures shall be allocated (and posted) to
the Employer Account of each Active Participant in the same ratio that such
Active Participant's Compensation for such Plan Year bears to the total
Compensation of all such Active Participants for such Plan Year.
6.3(c) 401(K) PLAN. If this Plan is adopted as a 401(k) Plan, Forfeitures
and contributions made under (S)5.3 shall be allocated (and posted) in
accordance with the following:
6.3(c)(1) ELECTIVE DEFERRALS AND EMPLOYEE CONTRIBUTIONS. Elective
Deferrals made on a Participant's behalf for the period ending on
each Valuation Date shall be credited to the Participant's Elective
Deferral Account as of such Valuation Date and the Employee
Contributions made by a Participant for such period shall be
credited to the Participant's Employee Account as of such Valuation
Date.
6.3(c)(2) MATCHING CONTRIBUTIONS AND QUALIFIED MATCHING
CONTRIBUTIONS.
(v) ALLOCATION. Matching Contributions and Qualified
Matching Contributions made on a Participant's behalf shall
be credited to the Participant's Matching Account and
Qualified Matching Account, respectively,
(A) STANDARD OPTION - as of the last day of each Plan
Year or
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(B) ALTERNATIVE - only as of each Allocation Date
specified in the Adoption Agreement.
(vi) FORFEITURES. Forfeitures attributable to Matching
Accounts shall be allocated or applied in accordance with the
following rules; provided, no Forfeitures attributable to
Excess Aggregate Contributions under (S)7.5(d) shall be
allocated to the Account of any Highly Compensated Employee:
(A) FORFEITURES TO REDUCE MATCHING CONTRIBUTION
(STANDARD OPTION). Forfeitures attributable to Matching
Accounts shall be applied to reduce the Matching
Contributions for the applicable Allocation Date (as
specified in (S)8.2 and the Adoption Agreement). If the
Forfeitures exceed the Matching Contribution specified
in the Adoption Agreement for any Allocation Date, such
excess shall be held in a separate account and shall be
applied in full as a Forfeiture to offset Matching
Contributions as of the next Allocation Date (and
succeeding Valuation Date) until such account is
exhausted under this (S)6.3(c)(2).
(B) FORFEITURES TO BE ALLOCATED (ALTERNATIVE). If so
specified in the Adoption Agreement, Forfeitures
attributable to Matching Accounts shall be allocated
(and posted)
(I) as of the last day of such Plan Year to the
Matching Account of each Active Participant in the
same ratio that such Active Participant's
Compensation for such Plan Year bears to the total
Compensation of all such Active Participants for
such Plan Year, or
(II) in accordance with the formula specified in the
Adoption Agreement for a nonstandardized Plan.
6.3(c)(3) QUALIFIED NONELECTIVE CONTRIBUTIONS. Qualified
Nonelective Contributions made on behalf of a Participant shall be
credited to the Participant's Qualified Nonelective Account
(vii) STANDARD OPTION - as of the last day of each Plan
Year or
(viii) ALTERNATIVE - only as of each Allocation Date
specified in the Adoption Agreement.
6.3(c)(4) DISCRETIONARY EMPLOYER CONTRIBUTION.
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(ix) ALLOCATION. As of the last day of each Plan Year, the
Employer Contribution, if any, for such Plan Year shall be
allocated (and posted) to the Employer Account of each Active
Participant
(A) STANDARD OPTION - in the nonintegrated method
described in (S)6.3(a)(1).
(B) ALTERNATIVE - if so specified in the Adoption
Agreement, in the integrated method described in
(S)6.3(a)(2).
(x) FORFEITURES. Forfeitures attributable to Employer
Accounts shall be allocated or applied in accordance with the
following:
(A) STANDARD OPTION. Forfeitures attributable to
Employer Accounts shall be allocated (and posted) as
of the last day of each Plan Year to the Employer
Account of each Active Participant in the same manner
as the Employer Contribution under (S)6.3(c)(4)(i).
(B) ALTERNATIVE. If so specified in the Adoption
Agreement, Forfeitures attributable to Employer
Accounts shall be
(I) applied to reduce Matching Contributions,
Qualified Matching Contributions and
Qualified Nonelective Contributions for the
applicable Allocation Date (as specified in
(S)8.2 and the Adoption Agreement) and
succeeding Allocation Dates, if necessary, or
(II) allocated (and posted) in accordance with the
formula specified in the Adoption Agreement
for a nonstandardized Plan.
6.3(d) TARGET BENEFIT PENSION PLAN. If this Plan is adopted as a Target
Benefit Pension Plan, the Forfeitures and the Employer Contribution
actually made under (S)5.4 for each Plan Year shall be (and posted) as of
the last day of each Plan Year to the Employer Account of each Active
Participant as specified in the Adoption Agreement. The Forfeitures for
each Plan Year shall be applied to reduce the Employer Contribution for
such Plan Year. If Forfeitures for any Plan Year exceed the Employer
Contributions determined under (S)5.4 for such Plan Year, such excess shall
be held in a separate account and shall be applied in full to offset
Employer Contributions in the future until such account is exhausted under
this (S)6.3(d).
6.3(e) TOP HEAVY MINIMUM ALLOCATION. If this Plan is a Top-Heavy Plan (as
defined in (S)12), the minimum allocation required to be made under this
Plan under (S)12.3, if any, shall be allocated (and posted) as of the last
day of the Plan Year (1) to the Employer Account of each Participant who is
not an Active Participant but for whom a minimum
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allocation is required under (S)12.3 and (2) to each Active Participant for
whom a minimum allocation is required to be made in this Plan under (S)12.3
to the extent such minimum allocation is not otherwise satisfied by the
allocation under this (S)6.3. If this Plan is adopted as a Profit Sharing
Plan, the minimum allocation may be made by reallocating the Employer
Contribution and Forfeitures allocated under (S)6.3(a) in a manner which
satisfies this (S)6.3(e) or by contributing an additional amount which will
be allocated in accordance with this (S)6.3(e). If this Plan is adopted as
a Money Purchase Pension Plan, a Target Benefit Pension Plan or a 401(k)
Plan, an additional Employer Contribution shall be made to satisfy this
(S)6.3(e).
6.3(f) ROLLOVER CONTRIBUTIONS. Rollover Contributions made by a
Participant during the period ending on each Valuation Date shall be
credited to the Participant's Rollover Contribution Account as of such
Valuation Date.
6.4 ALLOCATION REPORT. The Plan Administrator shall maintain records of the
allocations and adjustments made to Accounts under this (S)6 and shall at least
annually prepare and forward to each such Participant and Beneficiary a
statement which shows the new balance in such person's Account.
6.5 ALLOCATION CORRECTIONS. If an error or omission is discovered in any
Account, then as of the first Valuation Date in the Plan Year in which the error
or omission is discovered, the Plan Administrator shall make (and post) an
adjustment to such Account as the Plan Administrator deems necessary to remedy
in an equitable manner such error or omission.
SECTION 7. STATUTORY LIMITATIONS ON ALLOCATIONS
7.1 EFFECTIVE DATE. Except as otherwise expressly provided, this (S)7 shall be
effective retroactive to Plan Years beginning on or after January 1, 1987.
7.2 LIMITATIONS ON ANNUAL ADDITIONS UNDER CODE (S)415.
7.2(a) SPECIAL DEFINITIONS. For purposes of this (S)7.2, the terms
defined in this (S)7.2 shall have the meanings shown opposite such terms.
7.2(a)(1) ANNUAL ADDITIONS - means for each Participant for any
Limitation Year.
(i) the sum of the employer contributions, forfeitures, and
nondeductible employee contributions creditable (without
regard to the application of this (S)7.2) to the
Participant's account under this Plan or under any other
defined contribution plan (including a Master or Prototype
Plan and any defined benefit plan which provides for employee
contributions) maintained by the Employer for such Limitation
Year; and for this purpose, any Excess Amount allocated under
(S)7.2(b), any Excess Elective Deferrals under (S)7.3 (unless
such excess is distributed by the deadline set forth in
(S)7.3(d)), any Excess
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Contributions under (S)7.4 and any Excess Aggregate
Contributions under (S)7.3 shall be considered Annual
Additions for such Limitation Year;
(ii) amounts allocated on behalf of such Participant after
March 31, 1984 to an individual medical account (as defined
in Code (S)415(1)(2) which is part of a pension or annuity
plan maintained by the Employer; and
(iii) amounts derived from contributions paid or accrued
after December 31, 1985 in taxable years ending after such
date which are attributable to post-retirement medical
benefits allocated to the separate account of a key employee
(as defined in Code (S)419A(d)(3) under a welfare benefit
fund (as described in Code (S)419(e)) maintained by the
Employer; and
(iv) allocations under a simplified employee pension (as
defined in Code (S)408(k).
7.2(a)(2) COMPENSATION - means for a Self-Employed Individual,
such individual's Earned Income, and for each other Employee
(v) STANDARD OPTION - compensation reportable on Form W-2
as defined in (S)2.10(a)(1), or
(vi) ALTERNATIVE - if so specified in the Adoption
Agreement,
(A) compensation subject to withholding as defined in
(S)2.10(a)(2)(i), or
(B) the Employee's wages, salaries, fees for
professional services and other amounts received
(without regard to whether or not an amount is paid in
cash) for personal services actually rendered in the
course of employment with the Employer maintaining the
Plan to the extent that the amounts are includable in
gross income during the Limitation Year (including,
---------
but not limited to, commissions paid salesmen,
compensation for services on the basis of a percentage
of profits, commissions on insurance premiums, tips,
bonuses, fringe benefits and reimbursement or other
expense allowances under a nonaccountable plan as
described in (S)1.62-2(c) of the Federal Income Tax
Regulations). Compensation shall not include the
following:
(I) Employer contributions to a plan of deferred
compensation which are not includable in the
Participant's gross income for the taxable year in
which contributed, or Employer contributions under
any simplified employee pension plan, or any
(II) amounts
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realized from the exercise of a nonqualified
stock option, or when restricted stock (or
property) held by the Participant either become
s freely transferable or is no longer subject to
a substantial risk of forfeiture;
(III) amounts realized from the sale, exchange or
other disposition of stock acquired under a
qualified stock option; and
(IV) other amounts which receive special tax
benefits, or contributions made by the Employer
(whether or not under a salary reduction
agreement) towards the purchase of an annuity
contract described in Code(S)403(b) (whether or
not the
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contributions are actually excludable from the
gross income of the Participant).
For purposes or applying the limitations of this (S)7.2, an
Employee's Compensation for Limitation Years beginning on and after
the Final Compliance Date shall not include any Compensation which is
accrued for such Limitation Year.
However, for purposes of applying the limitations of this (S)7.2 to a
Participant in a defined contribution plan who is permanently and
totally disabled (as defined in Code (S)22(e)(3)), the term
"Compensation" shall mean the compensation such Participant would
have received for the Limitation Year if the Participant had been
paid at the Participant's rate of Compensation (as defined in this
(S)7.2(a)(2) paid immediately before becoming permanently and totally
disabled, and, further, such imputed compensation for the disabled
Participant may be taken into account only if the Participant is not
a Highly Compensated Employee and contributions made on behalf of
such Participant are nonforfeitable when made.
7.2(a)(3) DEFINED BENEFIT FRACTION - means a fraction, (i) the
numerator of which shall be the sum of the Participant's Projected
Annual Benefits under all defined benefit plans (whether or not
terminated) maintained by the Employer, and (ii) the denominator of
which shall be the lessor (A) 125% of the dollar limitation
determined for the Limitation year under Code (S)415(b) and (S)415(d)
or (B) 140% of the Participant's Highest Average Compensation,
including any adjustments under Code (S)415(b). However, if the
Participant was a participant as of the first day of the first
Limitation Year beginning after December 31, 1986 in one or more
defined benefit plans maintained by the Employer which were in
existence on May 6, 1986 and which individually and in the aggregate
satisfied the requirements of Code (S)415 for all Limitation Years
beginning before January 1, 1987, the denominator of such fraction
shall be not less than 125% of the sum of the annual benefits under
such plans which the Participant had accrued as of the end of the
last Limitation Year beginning before January 1, 1987 disregarding
any changes in the terms and conditions in the plan after May 5,
1986. Notwithstanding the foregoing, "100%" shall be substituted for
"125%" in any Limitation Year for which this Plan is a Top-Heavy Plan
(as defined ins (S)12) unless otherwise specified in the Adoption
Agreement.
7.2(a)(4) DEFINED CONTRIBUTION DOLLAR LIMITATION - means for each
Limitation year the great of (i) $30,000 or (ii) one-fourth of the
defined benefit dollar limitation under Code (S)415(b)(1) as in
effect for such Limitation Year.
7.2(a)(5) DEFINED CONTRIBUTION FRACTION - means a fraction, (i) the
numerator of which shall (subject to the adjustment rules set forth
below) be the sum of the Annual Additions credited to the
Participant's accounts under all defined contribution plans (whether
or not terminated) maintained by the Employer for the current and all
prior Limitation Years (including the Annual Additions attributable
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to the Participant's nondeductible employee contributions to all
defined benefit plans, whether or not terminated) maintained by the
Employer and the Annual Additions attributable to all welfare benefit
funds (as described in Code (S)419(e)) and all individual medical
accounts (as described in Code (S)415(l)(2)) maintained by the
Employer and (ii) the denominator of which shall be the sum of the
Maximum Aggregate Amounts for the current and all prior Limitation
Years of service with the Employer (without regard to whether a
defined contribution plan was maintained by the Employer). The
numerator of such fraction shall be adjusted if the Participant was a
participant as of the first day of the first Limitation Year
beginning after December 31, 1986 in one or more defined contribution
plans maintained by the Employer which were in existence on May 6,
1986 and the sum of this fraction and the Defined Benefit Fraction
would otherwise exceed 1.0 under the terms of this Plan. The
adjustment shall be made by taking an amount equal to the product of
(A) the excess of the sum of the fractions over 1.0, times (b) the
denominator of this fraction, and by permanently subtracting such
product from the numerator of this fraction. The adjustment shall be
calculated using the fractions as they would be computed as of the
end of the last Limitation Year beginning before January 1, 1987 and
disregarding any changes in the terms and conditions of the Plan made
after May 5, 1986 but using the Code (S)415 limitation applicable to
the first Limitation Year beginning on or after January 1, 1987. The
Annual Addition for any Limitation year beginning before January 1,
1987 shall not be recomputed to treat all employee contributions as
an Annual Addition.
7.2(a)(6) EMPLOYER - means the Employer that adopts this Plan and
all members of a controlled group of corporations (as defined in Code
(S)414(b) as modified by Code (S)415(h)), all commonly controlled
trades or businesses (as defined in Code (S)414(c) as modified by
Code (S)415(h)) or affiliated service groups (as defined in Code
(S)414(m)) of which the adopting Employer is a part and any other
entity required to be aggregated with the Employer pursuant to the
regulations under Code (S)414(o).
7.2(a)(7) EXCESS AMOUNT - means the excess of a Participant's Annual
additions for the Limitation Year over the Maximum Permissible
Amount.
7.2(a)(8) HIGHEST AVERAGE COMPENSATION - means the Participant's
average Compensation for the three consecutive Plan Years of
employment with the Employer (without regard to whether such Plan
Years were before the Effective Date) that produces the highest
average.
7.2(a)(9) LIMITATION YEAR - means
(vii) STANDARD OPTION - the Plan Year or
(viii) ALTERNATIVE - the alternative 12 consecutive month period
specified in the Adoption Agreement.
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All qualified plans maintained by the Employer must use the same
Limitation Year. If the Limitation Year is amended to a different 12
consecutive month period, the new Limitation Year must being on a
date within the Limitation Year in which the amendment is made.
7.2(a)(1) MASTER OR PROTOTYPE PLAN - means a plan the form of which
is the subject of a favorable opinion letter from the Internal
Revenue Service.
7.2(a)(11) MAXIMUM AGGREGATE AMOUNT - means for any Limitation Year
the lesser of (i) 125% of the dollar limitation determined under Code
(S)415(c)(1)(A) or (ii) 35% of the Participant's Compensation for
such year. Notwithstanding the foregoing. "100%" shall be
substituted for 125% in any Limitation Year for which this Plan is a
Top-Heavy Plan (as defined in (S)12) unless otherwise specified in
the Adoption Agreement.
7.2(a)(12) MAXIMUM PERMISSIBLE AMOUNT - means the lesser of (i) the
Defined Contribution Dollar Limitation or (ii) 25% of a Participant's
Compensation for the Limitation Year; provided,
(A) the compensation limitation referred to in clause (ii)
shall not apply to any contribution for medical benefits
(within the meaning of Code (S)401(h) or (S)419A(f)(20 which is
otherwise treated as an Annual Addition under Code (S)415(I)(I)
or (S)419(a)(d)(2); and
(B) if a short Limitation Year is created because of an
amendment changing the Limitation Year to a different 12
consecutive month period, the Maximum Permissible Amount shall
not exceed the Defined Contribution Dollar Limitation
multiplied by a fraction, the numerator of which shall be the
number of months in the short Limitation Year and the
denominator of which shall be 12.
7.2(a)(13) PROJECTED ANNUAL BENEFIT - means the annual retirement
benefit (adjusted to an actuarially equivalent straight life annuity
if such benefit is expressed in a form other than a straight life
annuity or qualified joint and survivor annuity) to which a
Participant would be entitled under the terms of a defined benefit
plan assuming:
(ix) the Participant will continue employment until
normal retirement age under the plan (or current age, if
later), and
(x) the Participant's Compensation for the current
Limitation Year and all other relevant factors used to
determine benefits under the plan will remain constant
for all future Limitation Years.
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7.2(b) LIMITATION IF NO OTHER PLANS. If a Participant does not
participate in, and has never participated in, another qualified plan
maintained by the Employer or a welfare benefit fund (as described in Code
(S)419(e)) or individual medical account (as described in Code
(S)415(l)(2)) maintained by the Employer which provides an Annual Addition
as defined in (S)7.2(a)(1) or a simplified employee pension (as defined in
Code (S)408(k)) maintained by the Employer, the amount of Annual Additions
which actually may be credited to the Account of any Participant for any
Limitation Year shall not exceed the lesser of the Maximum Permissible
Amount or any other limitation set forth in this Plan. If the Employer
Contribution that would otherwise be credited to the Participant's Account
would cause the Annual Additions for the Limitation Year to exceed the
Maximum Permissible Amount, such amount shall be reduced so that the Annual
Additions actually credited for the Limitation Year shall equal the Maximum
Permissible Amount. If pursuant to (S)7.2(f) or as a result of the
allocation of Forfeitures a Participant's Annual Additions under this Plan
would result in an Excess Amount, such Excess Amount shall be disposed of
as follows:
7.2(b)(1) PROFIT SHARING PLAN. If this Plan is adopted as a Profit
Sharing Plan,
(xi) such Excess Amount shall be deemed a Forfeiture which
shall be allocated and reallocated as provided in (S)6.3(a)
subject to the restrictions of this (S)7.2 among the Employer
Accounts of the remaining Active Participants until such amount
has been allocated in its entirety; and
(xii) if the restrictions in this (S)7.2 apply before such
amount has been reallocated in its entirety, as the final
allocation step such unallowable Excess Amount shall be
transferred to a suspense account.
7.2(b)(2) MONEY PURCHASE PENSION PLAN OR TARGET BENEFIT PENSION
PLAN. If this Plan is adopted as a Money Purchase Pension Plan or
Target Benefit Pension Plan,
(xiii) STANDARD OPTION - such Excess Amount shall be held
unallocated in a suspense account which shall be applied to
offset future Employer Contributions for Active Participants in
the next Limitation Year (and in each succeeding Limitation Year
if necessary).
(xiv) ALTERNATIVE - if so specified in the Adoption Agreement,
(A) for any Participant who is an Active Participant
at the end of the Limitation Year, such Excess Amount
shall be held unallocated in a suspense account which
shall be applied to offset the Employer Contribution for
Such Active Participant in the next Limitation Year (and
in each succeeding Limitation Year if necessary); and
(B) for any Participant who is not an Active
Participant at the end of such Limitation Year, such
Excess Amount shall be held
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<PAGE>
unallocated in a suspense account which shall be applied
to offset future Employer Contributions for all
remaining Active Participants in the next Limitation
Year (and in each succeeding Limitation Year if
necessary).
7.2(b)(3) 401(K) PLAN. If this Plan is adopted as a 401(k) Plan,
any Elective Deferrals and Employee Contributions made by the
Participant during the Limitation Year (and, to the extent required
under regulations, gains attributable to such Employee Contributions)
shall be refunded to the extent such refund would reduce the Excess
Amount and, if an Excess Amount still exists after such refund.
(xv) any such Excess Amount which is attributable to
discretionary Employer Contributions shall be disposed in the
same manner as an Excess Amount under a Profit Sharing Plan as
described in (S)7.2(b)(1), and
(xvi) any such Excess Amount which is attributable to a
Matching Contribution, Qualified Nonelective Contribution or
Qualified Matching Contribution shall be held unallocated in a
suspense account which shall be used to offset future Matching
Contributions, Qualified Nonelective Contributions or Qualified
Matching Contributions in the next Limitation Year (and in each
succeeding Limitation Year if necessary).
7.2(b)(4) SUSPENSE ACCOUNT. A suspense account established
pursuant to this (S)7.2(b) shall not be subject to any allocation of
Fund Earnings under (S)6.2, and the balance of such account shall be
returned to the Employer in the event this Plan is terminated prior
to the date such account has been allocated in its entirety as a
Forfeiture. In no event shall Excess Amounts be distributed to
Participants or former Participants.
7.2(c) LIMITATION IF OTHER DEFINED CONTRIBUTION MASTER OR PROTOTYPE PLAN.
This (S)7.2(c) applies if, in addition to this Plan, a Participant is
covered under another defined contributed Master or Prototype Plan
maintained by the Employer or a welfare benefit fund (as described in Code
(S)419(e)) or an individual medical account (as described in Code
(S)415(l)(2) maintained by the Employer which provides for an Annual
Addition as defined in (S)7.2(a)(1) or a simplified employee pension (as
defined in Code (S)408(k)) maintained by the Employer during any Limitation
Year. The Annual Additions which may be credited to a Participant's
Account under this Plan for any such Limitation Year shall not exceed the
Maximum Permissible Amount reduced by the Annual Additions credited to a
Participant's account under such other defined contribution Master or
Prototype Plan and welfare benefit funds for the same Limitation Year.
7.2(c)(1) If for any Limitation Year (1) the Employer also
maintains another defined contribution Paired Plan, (2) the
Employer does not maintain any other defined contribution Master or
Prototype Plan (other than such Paired Plan) and (3) a
Participant's Annual Additions under such Paired Plans would result
in an
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Excess Amount for such Limitation Year, the allocation adjustment
required to satisfy the limitations of Code (S)415 shall be made
under such Plans in the following order:
(xvii) STANDARD OPTION - first, under the Profit Sharing Plan,
if any; second under the Money Purchase Pension Plan, if any;
third under the Target Benefit Pension Plan, if any; and finally,
under the 401(k) Plan, if any; or
(xviii) ALTERNATIVE - in the alternative order specified in the
Adoption Agreement.
7.2(c)(2) If the Annual Additions with respect to any Participant
under such other defined contribution Master or Prototype Plan
(other than a defined contribution Paired Plan) and welfare benefit
funds maintained by the Employer are less than the Maximum
Permissible Amount and the Employer Contribution that would
otherwise be contributed or allocated to the Participant's Account
under this Plan would cause the Annual Additions for the Limitation
year to exceed this limitation, the amount contributed or allocated
shall be reduced so that the Annual Additions under all such plans
and funds for the Limitation Year shall equal the Maximum
Permissible Amount.
7.2(c)(3) If the Annual Additions with respect to the Participant
under such other defined contribution Master and Prototype Plan
(other than a defined contribution Paired Plan) and welfare benefit
funds in the aggregate are equal to or greater than the Maximum
Permissible Amount, no amount shall be credited to the
Participant's Account under this Plan for the Limitation Year.
7.2(c)(4) If pursuant to (S)7.2(f) or as a result of the allocation
of Forfeitures a Participant's Annual Additions under this Plan and
such other defined contribution Master or Prototype Plan (other
than a Paired Plan) and welfare benefit funds would result in an
Excess Amount for any Limitation Year,
(xix) the Excess Amount shall be deemed to consist of the Annual
Additions last allocated and the Annual Additions attributable to
a welfare benefit fund or an individual medical account shall be
deemed to have been allocated prior to all other Annual
Additions, and
(xx) if an Excess Amount was allocated to a Participant on an
allocation date of this Plan which coincides with an allocation
date of such other Master or Prototype Plan, then the Excess
Amount attributed to this Plan shall be the product of
(A) the total Excess Amount allocated as of such date, time
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(B) a fraction, the numerator of which shall be the Annual
Additions allocated to the Participant for the Limitation
Year as of such date under this Plan and the denominator of
which is the total Annual Additions allocated to the
Participant for the Limitation Year as of such date under
this and all such other defined contribution Master or
Prototype Plans.
7.2(c)(5) Any Excess Amount attributed to this Plan will be
disposed of in the manner described in (S)7.2(b).
7.2(c)(5) Any Excess Amount attributed to this Plan will be disposed
of in the manner described in (S)7.2(b).
7.2(d) LIMITATION IF OTHER DEFINED CONTRIBUTION PLAN. If any Participant
is covered under another qualified defined contribution plan maintained by
the Employer which is not a Master or Prototype Plan, the Annual Additions
which may be credited to the Participant's Account under this Plan for any
Limitation Year shall be limited
7.2(d)(1) STANDARD OPTION - as specified in (S)7.2(c) as though the
other plan was a Master or Prototype Plan or
7.2(d)(2) ALTERNATIVE - under the alternative method specified in
the Adoption Agreement for limiting the Annual Additions under this
Plan.
7.2(e) LIMITATION IF OTHER DEFINED BENEFIT PLAN. If the Employer
maintains, or at any time maintained a qualified defined benefit plan
(other than a defined benefit Paired Plan) covering any Participant in this
Plan, the sum of the Participant's Defined Benefit Fraction and Defined
Contribution Fraction shall not exceed 1.0 in any Limitation Year. The
Annual Additions which may be credited to any Participant's Account under
this Plan for any Limitation Year shall be limited as specified in the
Adoption Agreement. If the Employer maintains a defined benefit Paired
Plan, any adjustment to satisfy the requirements of Code (S)415(e) shall be
made only under such defined benefit Paired Plan.
7.2(f) COMPENSATION FOR DETERMINATION OF MAXIMUM PERMISSIBLE AMOUNT.
Prior to determining a Participant's actual Compensation for the Limitation
Year, the Employer may determine the Maximum Permissible Amount for a
Participant on the basis of a reasonable estimation of the Participant's
Compensation for the Limitation Year, and, if applicable, a reasonable
estimation of the amount of elective deferrals (within the meaning of Code
(S)402(g)(3)) that the Participant may make for the Limitation year,
uniformly determined for all similarly situated participants. As soon as
is administratively feasible after the end of the Limitation Year, the
Maximum Permissible Amount for the Limitation Year shall be determined on
the basis of the Participant's actual Compensation for the Limitation Year.
7.3 INDIVIDUAL LIMITATION ON ELECTIVE DEFERRALS UNDER CODE (S) 402(G).
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7.3(a) GENERAL. A Participant's Elective Deferrals under this Plan and
all other qualified plans, contracts and arrangements maintained by the
Employer or an Affiliate during any taxable year of the Participant shall
not exceed the dollar limitation under Code (S) 402(g) in effect at the
beginning of such taxable year.
7.3(b) ELECTIVE DEFERRALS. For purposes of the dollar limitation under
Code (S)402(g) and this (S)7.3, the term "Elective Deferrals" shall include
all employer contributions made on behalf of a Participant pursuant to an
election to defer under any qualified cash or deferred arrangement as
described in Code (S)401(k), any simplified employee pension cash or
deferred arrangement as described in Code (S)402(h)(1)(B), any plan
described under Code (S)501(c)(18), and any salary reduction agreement for
the purchase of an annuity contract under Code (S)403(b). However, the
term shall not include Elective Deferrals which are properly distributed to
the Participant from this Plan under (S)7.2 or such other plans or
arrangements to correct for excess annual additions.
7.3(c) EXCESS ELECTIVE DEFERRALS. For purposes of this (S)7.3, the term
"Excess Elective Deferrals" means for each Participant the Elective
Deferrals that are includable in gross income under Code (S)402(g) to the
extent the Participant's Elective Deferrals for a taxable year exceed the
dollar limitations under Code (S)402(g) for such taxable year.
7.3(d) DISTRIBUTION OF EXCESS ELECTIVE DEFERRALS. Notwithstanding any
other provision of this Plan restricting the timing of distributions,
Excess Elective Deferrals, plus any income and minus any loss allocable
thereto, shall be distributed no later than April 15 of any calendar year
to Participants (1) whose Excess Elective Deferrals for the preceding
taxable year were assignee to this Plan and (2) who claim (or are deemed to
have claimed) such allocable Excess Elective Deferrals for such taxable
year in accordance with the claims procedure set forth in (S)7.3(f).
7.3(e) DETERMINATION OF INCOME OR LOSS. A corrective distribution of
Excess Elective Deferrals under this (S)7.3 shall include the income or
loss allocable to such Excess Elective Deferrals for the Participant's
taxable year in which such excess occurred and, if so specified in the
Adoption Agreement, for the period between the end of such taxable year and
the date of distribution ("gap period"). The income or loss for such
taxable year and gap period, if applicable, shall be determined in
accordance with the regulations under Code (S)402(g). In lieu of using the
safe harbor method or the alternative method in the regulations for
allocating such income or loss, the Plan Administrator may use any
reasonable method for computing such income or loss, provided that such
method does not violate Code (S)401(a)(4), is used consistently for all
Participants and for all corrective distributions under the Plan for the
Plan Year, and is used by the Plan for allocating income or loss to
Participant's Accounts.
7.3(f) CLAIMS PROCEDURE.
7.3(f)(1) GENERAL. A Participant may assign to this Plan any Excess
Elective Deferral made during a taxable year by filing a claim with
the Plan Administrator on or before
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(i) STANDARD OPTION - March 1 or
(ii) ALTERNATIVE - the alternative date for filing such claims
specified in the Adoption Agreement.
Unless otherwise provided in administrative procedures established by
the Plan Administrator, such claim shall be in writing, shall specify
the dollar amount of the Participant's Excess Elective Deferrals
assigned to this Plan for such taxable year, and shall be accompanied
by the Participant's written statement that such amounts, if not
distributed to such Participant, will exceed the limit imposed on the
Participant by Code (S)402(g) for the taxable year in which the
deferral occurred.
7.3(f)(2) DEEMED CLAIM. A Participant automatically shall be deemed
to have filed a claim under this (S)7.3(f) to the extent that such
Excess Elective Deferrals occurred solely as a result of Elective
Deferrals under this Plan and any other plans of the Employer and the
Affiliates, unless the Employer specifies in the Adoption Agreement
that such Excess Elective Deferrals shall be distributed from one or
more of such other plans.
7.4 LIMITATIONS ON ELECTIVE DEFERRALS FOR HIGHLY COMPENSATED EMPLOYEES UNDER
CODE (S)401(K).
7.4(a) SPECIAL DEFINITIONS. For purposes of this (S)7.4, the terms
defined in this (S)7.4(a) shall have the meanings shown opposite such
terms.
7.4(a)(1) ACTUAL DEFERRAL PERCENTAGE - means for each Plan Year for
each Participant who is an Eligible Employee at any time during such
Plan Year the ratio (expressed as a percentage and determined in
accordance with (S)7.4(c) of Employer Contributions made on behalf of
such Participant for such Plan Year to such Participant's
Compensation for such Plan Year. The Actual Deferral Percentage of a
Participant who is an Eligible Employee, but does not make an
Elective Deferral and does not receive an allocation of a Qualified
Nonelective Contribution or a Qualified Matching Contribution, shall
be zero.
7.4(a)(2) ADP (OR AVERAGE ACTUAL DEFERRAL PERCENTAGE) - means for
each Plan year separately for the group of Participants who are
Highly Compensated Employees during such Plan Year and for the group
of Participants who are Nonhighly Compensated Employees during such
Plan Year, the average (expressed as a percentage) of the Actual
Deferral Percentages of the Participants in each such group who are
Eligible Employees at any time during such Plan Year.
7.4(a)(3) EMPLOYER CONTRIBUTIONS - means for purposes of determining
a Participant's Actual Deferral Percentage for each Plan Year, the
sum of (i) the Elective Deferrals made pursuant to the Participant's
deferral election, including Excess Elective Deferrals (as defined in
(S)7.3(c)) of Highly Compensated
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Employees, but excluding Excess Elective Deferrals of Nonhighly
Compensated Employees that arise solely from Elective Deferrals made
under this Plan or any other plans of the Employer and the
Affiliates, and excluding Elective Deferrals that are taken into
account in the ACP test described in (S)7.5(b) (provided the ADP test
is satisfied both with and without exclusion of such Elective
Deferrals), and (ii) at the election of the Employer, Qualified
Nonelective Contributions and Qualified Matching Contributions.
7.4(a)(4) EXCESS CONTRIBUTIONS - means for each Plan Year for each
Highly Compensated Employee the excess of the aggregate amount of
Employer Contributions actually taken into account in computing the
Average Deferral Percentage of such Highly Compensated Employee for
such Plan Year over the maximum amount of such contributions
permitted for such Plan Year under the ADP limit as set forth in
(S)7.4(b) (determined by reducing Elective Deferrals, Qualified
Nonelective Contributions and Qualified Matching Contributions made
on behalf of Highly Compensated Employees in order of their Actual
Deferral Percentages, beginning with the highest of such
percentages).
7.4(a)(5) HIGHLY COMPENSATED EMPLOYEE - means any Employee who is
either a "highly compensated active employee" or a "highly
compensated former employee" as described below.
(i) A "highly compensated active employee" means any Employee who
performs services for the Employer or any Affiliate during the
"determination year" and who, during the "look-back year": (A)
received compensation from the Employer or any Affiliate in
excess of $75,000 (as adjusted pursuant to Code (S)415(d); (B)
received compensation from the Employer or any Affiliate in
excess of $50,000 (as adjusted pursuant to Code (S)415(d) and was
a member of the "top-paid group" for such year; or (C) was an
officer of the Employer or any Affiliate and received
compensation during such year that is greater than 50% of the
dollar limitation in effect under Code (S)415(b)(1)(A). The term
"highly compensated employee" shall also include: (I) an
Employee who is both described in the preceding sentence if the
term "determination year" is substituted for the term "look-back
year" and is one of the 100 Employees who received the most
compensation from the Employer or any Affiliate during the
determination year; and (II) an Employee who is a 5% owner at any
time during the look-back year or determination year. If no
officer has satisfied the compensation requirement of clause (C)
above during either a determination year or look-back year, the
highest paid officer for each such year shall be treated as a
Highly Compensated Employee.
(ii) A "highly compensated former employee" means any Employee
who separated (or was deemed to have separated) from service
prior to the determination year, performs no services for the
Employer or any Affiliate
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during the determination year, and was a highly compensated
active employee for either the separation year or any
determination year ending on or after the Employee's 55th
birthday.
(iii) For purposes of this definition, the "determination year"
shall mean the Plan Year and the "look-back year" shall mean the
12-month period immediately preceding the determination year.
(iv) If an Employee is, during a determination year or look-
back year, a Family Member of either a 5% owner who is an active
or former Employee or a Highly Compensated Employee who is one of
the 10 most Highly Compensated Employees ranked on the basis of
compensation paid by the Employer during such year ("top-ten
Highly Compensated Employee"), then the Family Member and the 5%
owner or top-ten Highly Compensated Employee shall be treated as
a single Employee receiving compensation and Plan contributions
or benefits equal to the sum of such compensation and
contributions or benefits of the Family Member and the 5% owner
or top-ten Highly Compensated Employee.
(v) The determination of who is a Highly Compensated Employee,
including the determination of the number and identity of
Employees in the top-paid group, the top 100 Employees, the
number of Employees treated as officers and the compensation that
is considered,shall be made in accordance with Code (S)414(q)
including any available operational transition rules and any
elections provided in the regulations under Code (S)414(q) and
specified in the Adoption Agreement.
7.4(b) ADP LIMIT. The ADP for Highly Compensated Employees for any Plan
Year shall not exceed
7.4(b)(1) the ADP for Nonhighly Compensated Employees for such
Plan Year multiplied by 1.25, or
7.4(b)(2) the ADP for Nonhighly Compensated Employees for such
Plan Year multiplied by 2, provided that the ADP for Highly
Compensated Employees does not exceed the ADP for Nonhighly
Compensated Employees by more than 2 percentage points.
7.4(c) SPECIAL RULES.
7.4(c)(1) OTHER PLANS. The Actual Deferral Percentage for any
Participant who is a Highly Compensated Employee for the Plan Year
and who is eligible to participate in more than one cash or
deferred arrangement maintained by the Employer or an Affiliate
shall be determined by treating all such arrangements as a single
arrangement. If a Highly Compensated Employee participates in two
or
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more cash or deferred arrangements that have different plan years,
all such arrangements ending with or within the same calendar year
shall be treated as a single arrangement. Notwithstanding the
foregoing, plans which are mandatorily disaggregated under
regulations under Code (S)401(k) shall be treated as separate.
7.4(c)(2) AGGREGATION. In the event that this Plan satisfies the
requirements of Code (S)410(b) only if aggregated with one or more
other plans, or if one or more other plans satisfy the requirements
of such Code section only if aggregated with this Plan, then this
(S)7.4 shall be applied by determining the Actual Deferral
Percentages and ADP as if all such plans were a single plan. For
Plan Years beginning on and after the Final Compliance Date, such
plans may be aggregated only if they have the same plan years and
are not mandatorily disaggregated under regulations under Code
(S)401(k),
7.4(c)(3) FAMILY MEMBERS. For purposes of determining the Actual
Deferral Percentage of a Participant who is a 5% owner or one of
the 10 most highly paid Highly Compensated Employees and who is an
Eligible Employee at any time during the Plan Year, the Employer
Contributions and Compensation of such Participant shall include
the Employer Contributions and Compensation of his or her Family
Members, and such Family Members shall be disregarded as separate
Participants in determining the ADP both for Nonhighly Compensated
Employees and for Highly Compensated Employees.
7.4(c)(4) TIMING. For purposes of determining the Actual Deferral
Percentages for any Plan Year, Elective Deferrals, Qualified
Nonelective Contributions and Qualified Matching Contributions
shall be considered made for such Plan Year only if such
contributions are allocated as of a date within such Plan Year and
are actually paid to the Fund by the last day of the 12 month
period immediately following such Plan Year.
7.4(c)(5) RECORDS. The Plan Administrator shall maintain records
which are sufficient to demonstrate that the Plan complied with the
ADP limits, including the extent to which Qualified Nonelective
Contributions and Qualified Matching Contributions are taken into
account to satisfy such ADP limits.
7.4(c)(6) OTHER REQUIREMENTS. The determination and treatment of
the Elective Deferrals and Actual Deferral Percentage of any
Participant shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
7.4(d) DISTRIBUTION OF EXCESS CONTRIBUTIONS.
7.4(d)(1) GENERAL. Notwithstanding any other provision of this
Plan restricting the timing of distributions, Excess Contributions
for any Plan Year, plus any income and minus any loss allocable
thereto, shall be distributed no later than the last day of the
immediately following Plan Year to Participants on whose behalf
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such Excess contributions were made. If such Excess Contributions
are distributed more than 2 1/2 months after the last day of the
Plan Year in which such excess occurred, a 10% excise tax shall be
imposed under Code(S)4979 on the Employer with respect to such
excess. Such distributions shall be made to such Participants on
the basis of the respective portions of the Excess Contributions
attributable to each such Participant. Excess Contributions shall
be allocated to Participants who are subject to the Family Member
aggregation rules under Code (S)414(q)(6) in the manner prescribed
by the regulations under Code (S)401(k).
7.4(d)(2) DETERMINATION OF INCOME OR LOSS. A corrective
distribution of Excess Contributions under this (S)7.4 shall
include the income or loss allocable to such Excess Contributions
for the Plan Year in which such excess occurred and, if so
specified in the Adoption Agreement, for the period between the end
of such Plan Year and the date of distribution ("gap period"). The
income or loss for such Plan Year and gap period, if applicable,
shall be determined in accordance with the regulations under Code
(S)401(k). In lieu of using the safe harbor method or the
alternative method in the regulations for allocating such income or
loss, the Plan Administrator may use any reasonable method for
computing such income or loss, provided that such method does not
violate Code (S)401(a)(4), is used consistently for all
Participants and for all corrective distributions under the Plan
for the Plan Year, and is used by the Plan for allocating income or
loss to Participant's Accounts.
7.4(d)(3) ORDER FOR DETERMINING EXCESS CONTRIBUTIONS. Excess
Contributions shall be determined after first determining Excess
Elective Deferrals under (S)7.3. The Excess Contributions which
would otherwise be distributed to the Participant shall be reduced,
in accordance with regulations, by the Excess Elective Deferrals
distributed to the Participant under (S)7.3.
7.4(d)(4) ACCOUNTING FOR EXCESS CONTRIBUTIONS. Excess
Contributions shall be distributed proportionately from the
Participant's Elective Deferral Account and Qualified Matching
Account in the same ratio that such Participant's Elective
Deferrals and Qualified Matching Contributions for the Plan Year in
which such Excess Contributions were made bears to the sum of the
Participant's Elective Deferrals and Qualified Matching
Contributions for such Plan Year. Excess Contributions shall be
distributed from the Participant's Qualified Nonelective Account
only to the extent that such Excess Contributions exceed the
balance in the Participant's Elective Deferral Account and
Qualified Matching Account. Notwithstanding the foregoing, Excess
Contributions may be distributed from the applicable subaccounts in
accordance with procedures established by the Plan Administrator
provided such procedures do not result in discrimination in favor
of Highly Compensated Employees which would be prohibited under
Code (S)401(a)(4).
7.4(e) RECHARACTERIZATION. If the Employer specifies in the Adoption
Agreement that Excess Contributions may be recharacterized, a Participant
may elect to treat Excess
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Contributions as an amount distributed to the Participant and then
contributed as an Employee Contribution to the Plan. Any such Excess
Contribution which is so recharacterized as an Employee Contribution shall
remain nonforfeitable and shall thereafter be subject to the same
distribution restrictions applicable to Elective Deferrals under (S)9.2(b).
Excess Contributions shall not be recharacterized by a Participant to the
extent that such amounts, in combination with other Employee Contributions,
would exceed any limits on Employee Contributions set forth in the Plan or
in the Adoption Agreement.
Any such recharacterization must occur no later than 2 1/2 months after the
end of the Plan Year in which such Excess Contribution occurred and shall
be deemed to occur no earlier than the date on which the last Highly
Compensated Employee is informed in writing of the amount recharacterized
and the consequences of such recharacterization. Any Excess Contributions
which are so recharacterized shall be taxable to the Participant for the
taxable year in which the Participant would have received such amount in
cash but for the deferral election.
7.5 LIMITATIONS ON EMPLOYEE CONTRIBUTIONS AND MATCHING CONTRIBUTIONS UNDER CODE
(S)401(M).
7.5(a) SPECIAL DEFINITIONS. For purposes of this (S)7.5, the terms
defined in this (S)7.5(a) shall have the meanings shown opposite such
terms.
7.5(a)(1) AGGREGATE LIMIT - means the sum of
(i) 125% of the greater (or lesser, if it would result in a
larger Aggregate Limit) of
(A) the ADP for Nonhighly Compensated Employees under the
plan subject to Code (S)401(k) for the plan year or
(B) the ACP for Nonhighly Compensated Employees under the
plan subject to Code (S)401(m) for the plan year beginning
with or within the plan year of the plan which is subject
to Code (S)401(k) and
(ii) the lesser of
(A) 200% of such ADP or ACP or
(B) two plus the lesser (or greater, if it would result in
a larger Aggregate Limit) of such ADP or ACP.
7.5(a)(2) ACP (OR AVERAGE CONTRIBUTION PERCENTAGE) - means for each
Plan Year separately for the group of Participants who are Highly
Compensated Employees during such Plan Year and for the group of
Participants who are Nonhighly Compensated Employees during such Plan
Year, the average (expressed
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as a percentage) of the Contribution Percentages of the Participants
in each such group who are Eligible Employees at any time during such
Plan Year.
7.5(a)(3) CONTRIBUTION PERCENTAGE - means for each Plan Year for
each Participant who is an Eligible Employee at any time during such
Plan Year, the ratio (expressed as a percentage and determined in
accordance with(S)7.5(c)) of such Participant's Contribution
Percentage Amount for such Plan Year to such Participant's
Compensation for such Plan Year. The Contribution Percentage of a
Participant who is eligible to, but does not, make Employee
Contributions or Elective Deferrals and who, as a result of such
failure to make such contributions, does not receive an allocation of
a Matching Contribution or Qualified Matching Contribution shall be
zero.
7.5(a)(4) CONTRIBUTION PERCENTAGE AMOUNT - means for each Plan Year
for each Participant who is an Eligible Employee at any time during
such Plan Year the sum of
(i) The Employee Contributions, Matching Contributions and
Qualified Matching Contributions (to the extent not taken into
account for purposes of the ADP test described in (S)7.4) made on
behalf of such Participant for such Plan Year, other than
Matching Contributions which are forfeited either to correct
Excess Aggregate Contributions or because the contributions to
which they relate are Excess Elective Deferrals, Excess
Contributions or Excess Aggregate Contributions,
(ii) the Forfeitures allocated to such Participant's Account
for such Plan Year which are attributable to Matching
Contributions and Excess Aggregate Contributions,
(iii) at the election of the Employer, the Qualified Nonelective
Contributions made on behalf of such Participant for such Plan
Year (to the extent not taken into account for purposes of the
ADP test described in (S)7.4), and
(iv) at the election of the Employer, Elective Deferrals
(provided the ADP limit described in (S)7.4 is met both including
and excluding the Elective Deferrals that are used to meet the
ACP limit).
7.5(a)(5) EMPLOYEE CONTRIBUTION - means for purposes of determining
a Participant's Contribution Percentage Amount any contributions made
by the Participant which are included in gross income for the taxable
year in which made and which are maintained in a separate account to
which earnings and losses are allocated.
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7.5(a)(6) EXCESS AGGREGATE CONTRIBUTION - means for each Plan Year
for each Highly Compensated Employee the excess of the aggregate
Contribution Percentage Amounts actually taken into account in
computing the ACP of such Highly Compensated Employee for such Plan
Year over the maximum Contribution Percentage mounts permitted for
such Plan Year under the ACP limit as set forth in (S)7.5(b)
(determined by reducing contributions and Forfeitures on behalf of
Highly Compensated Employees in order of their Contribution
Percentages, beginning with the highest of such percentages).
7.5(a)(7) MATCHING CONTRIBUTION - means for purposes of
determining a Participant's Contribution Percentage Amount any
Employer contribution made to this Plan or any other defined
contribution plan on account of an Employee Contribution or
Elective Deferral made by or on behalf of the Participant under a
plan maintained by the Employer.
7.5(b) ACP LIMIT. The ACP for Participants who are Highly Compensated
Employees for any Plan Year shall not exceed
7.5(b)(1) the ACP for Participants who are Nonhighly Compensated
Employees for such Plan Year multiplied by 1.25, or
7.5(b)(2) the ACP for Participants who are Nonhighly Compensated
Employees for such Plan Year multiplied by 2, provided that the ACP
for Participants who are Highly Compensated Employees does not
exceed the ACP for Participants who are Nonhighly Compensated
Employees by more than 2 percentage points.
7.5(c) SPECIAL RULES.
7.5(c)(1) MULTIPLE USE. For Plan Years beginning after the Final
Compliance Date, if
(i) one or more Highly Compensated Employees participates both
in a plan with a qualified cash or deferred arrangement which is
subject to the ADP limitations under Code (S)401(k) as described
in (S)7.4 and in a plan which is subject to the ACP limitations
under Code (S)401(m) as described in this (S)7.5,
(ii) the sum of the ADP of the eligible Highly Compensated
Employees in the plan subject to Code (S)401(k) and the ACP of
the eligible Highly Compensated Employees in the plan subject to
Code (S)401(m) exceeds the Aggregate Limit, and
(iii) both the ADP and the ACP of the eligible Highly
Compensated Employees in such plans exceed 125% of the ADP or ACP
respectively of the eligible Nonhighly Compensated Employees in
such plans,
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then the Contribution Percentages of the Highly Compensated Employees
who participate in both such plans shall be reduced (beginning with
the highest of such percentages) so that the Aggregate Limit for such
plans is not exceeded. Any such reduction shall be treated as an
Excess Aggregate Contribution. The determination of the limitations
under this special rule shall be made after any corrections required
to meet the ADP limits and the ACP limits and in accordance with the
regulations under Code (S)401(m).
7.5(c)(2) OTHER PLANS. The Contribution Percentage for any
Participant who is a Highly Compensated Employee for the Plan Year
and who is eligible to participate in more than one plan maintained
by the Employer or an Affiliate to which "employee contributions"
(within the meaning of Code (S)401(m)) or "matching contributions"
(as described in Code (S)401(m)(4)) are made shall be determined by
treating all such plans as one plan. If a Highly Compensated
Employee participates in two or more such plans that have different
plan years, all such plans ending with or within the same calendar
year shall be treated as a single plan. Notwithstanding the
foregoing, plans which are mandatorily disaggregated under
regulations under Code (S)401(m) shall be treated as separate.
7.5(c)(3) AGGREGATION. In the event that this Plan satisfies the
requirements of Code (S)410(b) only if aggregated with one or more
other plans, or if one or more other plans satisfy the requirements
of such Code sections only if aggregated with this Plan, then this
(S)7.5 shall be applied by determining the Contribution Percentages
and ACP as if all such plans were a single plan. For Plan Years
beginning on and after the Final Compliance Date, such plans may be
aggregated only if they have the same plan years and they are not
mandatorily disaggregated under regulations under Code (S)401(m).
7.5(c)(4) FAMILY MEMBERS. For purposes of determining the
Contribution Percentage of a Participant who is a 5% owner or one of
the 10 most highly paid Highly Compensated Employees, the
Contribution Percentage Amounts and Compensation of such Participant
shall include the Contribution Percentage Amounts and Compensation of
his or her Family Members, and such Family Members shall be
disregarded as separate Participants in determining the ACP both for
Participants who are Nonhighly Compensated Employees and for
Participants who are Highly Compensated Employees.
7.5(c)(5) TIMING. For purposes of determining the ACP for any Plan
Year, Employee Contributions shall be considered made in the Plan
Year in which they are actually contributed to the Fund and Matching
Contributions (and, if applicable, Qualified Matching Contributions
and Qualified Nonelective Contributions) shall be considered made for
such Plan Year only if such contributions are allocated as of a date
within such Plan Year and are actually paid to the Fund by the last
day of the 12-month period immediately following such Plan Year.
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7.5(c)(6) RECORDS. The Plan Administrator shall maintain records
which are sufficient to demonstrate that the Plan complied with the
ACP limits, including the extent to which Elective Deferrals,
Qualified Nonelective Contributions and Qualified Matching
Contributions are taken into account to satisfy such ACP limits.
7.5(c)(7) OTHER REQUIREMENTS. The determination and treatment of
the Contribution Percentage of any Participant shall satisfy such
other requirements as may be prescribed by the Secretary of the
Treasury.
7.5(d) DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS.
7.5(d)(1) GENERAL. Notwithstanding any other provision of this
Plan restricting the timing of distributions, Excess Aggregate
Contributions for any Plan Year, plus any income and minus any loss
allocable thereto, shall be forfeited (if otherwise forfeitable
under the Plan) or distributed (if not forfeitable) from the
Accounts of Participants on whose behalf such Excess Aggregate
Contributions were made no later than the last day of the
immediately following Plan Year. If such Excess Aggregate
Contributions are distributed more than 2 1/2 months after the last
day of the Plan Year in which such excess occurred, a 10% excise
tax shall be imposed under Code (S)4979 on the Employer with
respect to such excess. Excess Aggregate Contributions shall be
allocated to Participants who are subject to the Family Member
aggregation rules under Code (S)414(q)(6) in the manner prescribed
by the regulations under Code (S)401(m).
7.5(d)(2) DETERMINATION OF INCOME OR LOSS. A corrective
distribution of Excess Aggregate Contributions under this (S)7.5
shall include the income or loss allocable to such Excess Aggregate
Contributions for the Plan Year in which such excess occurred and,
if so specified in the Adoption Agreement, for the period between
the end of such Plan Year and the date of distribution ("gap
period"). The income or loss for such Plan Year and gap period, if
applicable, shall be determined in accordance with the regulations
under Code (S)401(m). In lieu of using the safe harbor method or
the alternative method in the regulations for allocating such
income or loss, the Plan Administrator may use any reasonable
method for computing such income or loss, provided that such method
does not violate Code (S)401(a)(4), is used consistently for all
Participants and for all corrective distributions under the Plan
for the Plan Year, and is used by the Plan for allocating income or
loss to Participant's Accounts.
7.5(d)(3) ORDER FOR DETERMINING EXCESS AGGREGATE CONTRIBUTIONS.
Excess Aggregate Contributions shall be determined after first
determining Excess Elective Deferrals under (S)7.3 and then
determining Excess contributions under (S)7.4.
7.5(d)(4) ACCOUNTING FOR EXCESS AGGREGATE CONTRIBUTIONS. Excess
Aggregate Contributions shall be forfeited (if otherwise
forfeitable) or distributed (if not forfeitable) to the Highly
Compensated Employee from the Participant's Employee
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Account, Matching Account, Qualified Matching Account, Qualified
Nonelective Account and Elective Deferral Account in the same ratio
that the contributions made on the Participant's behalf to such
account (to the extent such contributions are used in the ACP test)
for the Plan Year in which such Excess Aggregate Contributions were
made bears to the total of all such contributions. Notwithstanding
the foregoing, Excess Aggregate Contributions may be distributed
from the applicable subaccounts in accordance with procedures
established by the Plan Administrator provided such procedures do
not result in discrimination in favor of Highly Compensated
Employees which would be prohibited under Code (S)401(a)(4).
7.5(d)(5) ALLOCATION OF FORFEITURES. Amounts forfeited by Highly
Compensated Employees under this (S)7.5 shall be allocated or
applied in accordance with (S)6.3(c)(2); provided, no Forfeitures
arising under this (S)7.5 shall be allocated to the Account of any
Highly Compensated Employee.
SECTION 8. VESTING AND FORFEITURES
8.1 DETERMINATION OF NONFORFEITABLE PERCENTAGE.
8.1(a) FULLY VESTED ACCOUNTS. Each Rollover Account, Employee Account,
Elective Deferral Account, Qualified Matching Account and Qualified
Nonelective Account shall be completely nonforfeitable at all times.
8.1(b) DEATH, DISABILITY AND RETIREMENT. The Employer Account and
Matching Account of each Participant who reaches Early Retirement Age or
Normal Retirement Age while an Employee shall become completely
nonforfeitable on such date. The Employer Account and Matching Account of
each Participant who dies while an Employee or who becomes Disabled while
an Employee
8.1(b)(1) STANDARD OPTION - shall become completely nonforfeitable
on such date.
8.1(b)(2) ALTERNATIVE - if so specified in the Adoption Agreement,
shall be determined in accordance with the vesting schedule under
(S)8.1(c).
8.1(c) OTHER SEPARATION FROM SERVICE. Subject to (S)12.4, the
nonforfeitable percentage of the Employer Account and Matching Account of a
Participant other than a Participant described in (S)8.1(b) shall be based
on the Participant's Years of Service and on the following vesting
schedule:
8.1(c)(1) STANDARD OPTION - the full and immediate vesting schedule.
8.1(c)(2) ALTERNATIVE - the alternative vesting schedule specified
in the Adoption Agreement;
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provided, however, if the Participation Requirement (or the requirement to
receive an allocation of Employer contributions under a 401(k) Plan)
consists of a minimum period of service which exceeds one year, the full
and immediate vesting schedule shall automatically apply notwithstanding
any election to the contrary in the Adoption Agreement.
8.1(d) EMPLOYEE CONTRIBUTION WITHDRAWALS. No Forfeiture shall occur
solely as a result of a Participant's withdrawal of Employee Contributions.
8.2 FORFEITURE AND SPECIAL REEMPLOYMENT RULES.
8.2(a) BUY BACK RULE (STANDARD OPTION).
8.2(a)(1) FORFEITURE. The forfeitable portion, if any, of the
Employer Account and Matching Account of a Participant who
separates from service shall become a Forfeiture on the earlier of
(i) the date as of which the Participant receives (or is
deemed to receive under (S)8.2(c)) a distribution of the
Participant's entire nonforfeitable Account balance derived from
Employer Contributions, or
(ii) the date he or she has 5 consecutive Breaks in Service (6
consecutive Breaks in Service if the Alternative
Maternity/Paternity Rule applies).
If a Participant elects to have distributed less than the entire
nonforfeitable balance of the Participant's Employer Account and Matching
Account, the part of such accounts that shall be treated as a Forfeiture is
the total forfeitable portion of such Accounts multiplied by a fraction,
the numerator of which is the amount of the distribution from the
Participant's Employer Account or Matching Account and the denominator of
which shall be the total nonforfeitable balance of the Participant's
Employer Account or Matching Account at the time of the distribution.
Any such Forfeiture shall be allocated or applied in accordance with (S)6
on the Valuation Date specified in (S)8.2(e).
8.2(a)(2) REEMPLOYMENT. If a Participant receives a distribution and
resumes employment covered under this Plan before the Participant has 5
consecutive Breaks in Service (6 consecutive Breaks in Service if the
Alternative Maternity/Paternity Rule applies), the Employer shall restore
to the Participant's Employer Account and Matching Account an amount equal
to the dollar amount of the Forfeitures from such accounts if the
Participant repays to the Plan an amount equal to the dollar amount of the
distributions from the Participant';s Employer Account and Matching Account
in accordance with this (S)8.2(a). Such repayment must be made before the
earlier of (a) 5 years after the first date on which the Participant is
subsequently reemployed by the Employer or a Participating Affiliate or (b)
the date the Participant incurs 5 consecutive Breaks in Service (6
consecutive
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Breaks in Service if the Alternative Maternity/Paternity Rule
applies) following the date of the distribution.
If a Participant whose nonforfeitable Account balance is zero is
deemed to receive a distribution under (S)8.2(c) and he or she
resumes employment covered under this Plan before he or she has 5
consecutive Breaks in Service (6 consecutive Breaks in Service if
the Alternative Maternity/Paternity Rule applies), the forfeitable
portion of the Participant's Employer Account and Matching Account
shall automatically be restored by the Employer upon the
Participant's reemployment.
Any amount restored by the Employer under this (S)8.2(a) shall be
restored upon repayment from the sources specified in (S)8.2(d).
Such restored or repaid amount shall not be treated as an Annual
Addition under (S)7.2 and shall be credited to the Participant's
Employer Account and Matching Account in the same proportion as
the distribution was made from such accounts.
8.2(b) AUTOMATIC RESTORATION (ALTERNATIVE). This (S)8.2(b) shall apply if
the Employer specifies the use of the "Alternative to the Buy Back Rule" in
the Adoption Agreement.
8.2(b)(1) FORFEITURE. The forfeitable portion, if any, of the
Employer Account and Matching Account of a Participant who
separates from service shall become a Forfeiture on the earlier of
(i) the date as of which payment of the nonforfeitable
percentage of the Participant's Account derived from
Employer contributions begins or is deemed to begin under
(S)8.2(c) or
(ii) the date he or she has 5 consecutive Breaks in
Service (6 consecutive Breaks in Service if the Alternative
Maternity/Paternity Rule applies)
and such Forfeiture shall be allocated or applied in accordance
with (S)6 on the allocation date specified in (S)8.2(e) unless he
or she is reemployed on or before such allocation date.
8.2(b)(2) REEMPLOYMENT. If a Participant is reemployed before the
Participant incurs 5 consecutive Breaks in Service (6 consecutive
Breaks in Service if the Alternative Maternity/Paternity Rule
applies) but after the date of a Forfeiture under (S)8.2(b)(1),
the Employer shall restore to such Participant as of the last day
of the Plan Year in which he or she is reemployed an amount equal
to the dollar amount of such Forfeiture.
Any amount restored by the Employer under this (S)8.2(b) shall be
restored from the sources specified in (S)8.2(d). Such restored
amount shall not be treated as an Annual Addition under (S)7.2 for
such Plan Year. The restored amount, together with any remaining
balance of the nonforfeitable portion of the Employer Account
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and Matching Account attributable to the Participant's service prior
to reemployment, shall be maintained thereafter as separate special
subaccounts of the Participant's Employer Account and Matching
Account (until such time as it becomes completely nonforfeitable or
again becomes a Forfeiture), and the dollar amount of the
Participant's nonforfeitable percentage in each such special
subaccount thereafter shall be determined in accordance with Formula
A unless Formula B is specified in the Adoption Agreement:
(i) FORMULA A (STANDARD OPTION): X = P(AB + D) - D
(i) FORMULA B (ALTERNATIVE): X = P(AB + (R x D)) - (R x D)
For purposes of these formulas:
X = The current dollar amount, if any, of the nonforfeitable
percentage in the Participant's special subaccount;
P = The Participant's current nonforfeitable percentage as
determined under (S)8.1;
AB = Such dollar amount, if any, as evidenced by the last balance
posted to the Participant's special subaccount;
D = The collar amount previously paid to the Participant under
(S)9 from the Participant's original Employer Account or Matching
Account, as applicable; and
R = The ratio of AB to the dollar amount, if any, posted to the
Participant's Employer Account or Matching Account, as
applicable, immediately after the distribution.
8.2(c) DEEMED DISTRIBUTION. If the nonforfeitable portion of a
Participant's Account balance derived from Employer and Employee
contributions is zero, the Participant shall be deemed to have
received a distribution of the nonforfeitable portion of the
Participant's Account upon the Participant's separation from service.
A Participant's nonforfeitable Account balance derived from Employee
contributions shall not include accumulated deductible employee
contributions within the meaning of Code (S)72(o)(5)(B) for Plan
Years beginning prior to January 1, 1989.
8.2(d) RESTORATION SOURCES. Any amount restored under this (S)8.2
shall be restored from the following sources in the following order:
first, from Forfeitures occurring in the Plan Year in which such
amounts are restored, if any; second, from Employer Contributions for
such Plan Year, if any; third from Fund Earnings
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for such Plan Year; and finally, from additional Employer
Contributions. However, at the election of the Employer, such
amounts shall be restored entirely from additional Employer
Contributions.
8.2(e) DATE FORFEITURES APPLIED OR ALLOCATED. Any amounts which
become a Forfeiture under this (S)8.2 shall be allocated or applied
as of the allocation date specified in (S)6 which coincides with or
immediately follows the date such Forfeiture occurs, except that the
Employer may specify in the Adoption Agreement that Forfeitures which
are applied to reduce Employer Contributions, Matching Contributions,
Qualified Matching Contributions or Qualified Nonelective
Contributions shall be so applied as of the allocation date for such
contributions which immediately follows the last day of the Plan Year
in which such Forfeiture occurs.
8.2(f) IN-SERVICE DISTRIBUTIONS. The provisions of this (S)8.2(f)
shall apply if the Plan permits in-service distribution under (S)9.2.
If a distribution is made at a time when a Participant has a
nonforfeitable right to less than 100% of his or her Employer Account
or Matching Account and the Participant may increase the
nonforfeitable percentage in such Account:
8.2(f)(1) A separate special subaccount of the Participant's
Employer Account and Matching Account shall be established to
record the Participant's interest in such accounts as of the time
of the distribution; and
8.2(f)(2) At any relevant time the Participant's nonforfeitable
portion of each such special subaccount shall be determined in
accordance with the formula specified in (S)8.2(b).
SECTION 9. ACCOUNT DISTRIBUTION - GENERAL RULES
9.1 AFTER SEPARATION FROM SERVICE. Subject to the rules in this (S)9, (S)10,
Benefit Payment Forms - JOINT AND SURVIVOR ANNUITY REQUIREMENTS, and (S)11,
MINIMUM DISTRIBUTION REQUIREMENTS, the nonforfeitable portion of each
Participant's Account (as determined in accordance with (S)8) shall not be
payable to such Participant before he or she separates from service with the
Employer and all Affiliates.
9.1(a) TIMING. A Participant who has separated from service with the
Employer and all Affiliates
9.1(a)(1) STANDARD OPTION - may request a distribution of the
nonforfeitable portion of his or her Account as soon as practicable
after such separation from service.
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9.1(a)(2) ALTERNATIVE - if so specified in the Adoption Agreement,
may not request a distribution of the nonforfeitable portion of his
or her Account until Normal Retirement Age, Early Retirement Age or
Disability, whichever is earlier.
9.1(b) REEMPLOYMENT. Except as required in (S)11, no payment shall be
made under this (S)9.1 if the Participant who separates from service is
reemployed as an Employee before payment is made. If a Participant is
reemployed as an Employee after payment of the nonforfeitable portion of
the Participant's Account has begun but before the entire balance
attributable to such nonforfeitable portion has been paid (or applied to
purchase an annuity), payments to the Participant from such balance shall
be terminated on the date he or she is so reemployed and no further
payments shall be made to the Participant until he or she is subsequently
entitled to such payments in accordance with the terms of this Plan.
9.1(c) $3500 CASHOUT. The nonforfeitable portion of a Participant's
Account shall be distributed in a single sum to such Participant (or to the
Participant's Beneficiary in the event of the Participant's death) as soon
as administratively practicable following the Participant's separation from
service with the Employer and all Affiliates for any reason if the
nonforfeitable portion of such Account is (and at the time of any prior
distribution was) $3500 or less. Any such distributions made on or after
January 1, 1993 shall be made in accordance with any applicable rules
regarding the period for providing notices under Code (S)402(f) and for
making direct rollover elections under Code (S)401(a)(31).
9.1(d) CLAIM. Except as provided in this (S)9 and (S)11, no payment shall
be made until a written claim for such payment is filed with the Plan
Administrator on an Election Form. The Plan Administrator shall process
each such claim in accordance with the claims procedure described in the
summary plan description for this Plan. If no such claim is submitted and
the Participant does not defer payment pursuant to (S)9.1(e), payment may
be made as soon as the benefit is not immediately distributable (within the
meaning of (S)9.3) and shall, in any event, begin no later than 60 days
following the end of the Plan Year in which
9.1(d)(1) the Participant separates from service as an Employee,
9.1(d)(2) the Participant reaches age 65 or Normal Retirement Age,
if earlier, or
9.1(d)(3) occurs the 10th anniversary of the year in which the
Participant commenced participation in the Plan, whichever occurs
last.
9.1(e) ELECTION TO DEFER PAYMENT. If a Participant has separated from
service with the Employer and all Affiliates and the nonforfeitable portion
of the Participant's Account is (or at the time of any prior distribution
was) more than $3500, the Participant may defer distribution of that
nonforfeitable portion, but in no event beyond
9.1(e)(1) STANDARD OPTION - the Participant's Required Beginning
Date (as defined in (S)11).
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9.1(e)(2) ALTERNATIVE - if so specified in the Adoption Agreement,
the later of the Participant's Normal Retirement Age or age 62.
The failure of a Participant and his or her Spouse, if applicable, to
consent to a distribution or make a written request to defer payment while
a benefit is immediately distributable (within the meaning of (S)9.3) shall
be deemed to be an election to defer commencement of payment of any benefit
under this (S)9 until the benefit is no longer immediately distributable
or, if (S)9.1(e)(1) applies, until the Required Beginning Date.
Nothing in this (S)9.1(e) shall prevent the Plan Administrator from paying
in the normal form a benefit which is not immediately distributable without
regard to whether the Participant and his or her Spouse consent to such
distribution, unless the Participant has requested a deferral pursuant to
(S)9.1(e)(2).
9.1(f) EARLY RETIREMENT AGE. If the Early Retirement Age includes both an
age and service requirement, any Participant who separates from service
before satisfying such age requirement, but after the Participant has
satisfied the service requirement, may request a distribution of the
nonforfeitable portion of his or her Account upon satisfaction of such age
requirement.
9.1(g) DEATH. In the event of the Participant's death, the nonforfeitable
portion of the Participant's Account shall be payable to the Participant's
Beneficiary as soon as administratively practicable after the Participant's
death.
9.2 BEFORE SEPARATION FROM SERVICE. Subject to the rules in this (S)9, (S)10,
JOINT AND SURVIVOR ANNUITY REQUIREMENTS, and (S)11, MINIMUM DISTRIBUTION
REQUIREMENTS, the nonforfeitable portion of a Participant's Account may be paid
to the Participant before he or she separates from service with the Employer and
all Affiliates if so specified in the Adoption Agreement or by the Board in
accordance with (S)9.2(b)(2) or (S)9.2(e).
9.2(a) MONEY PURCHASE PENSION PLAN OR TARGET BENEFIT PENSION PLAN. If
this Plan is adopted as a Money Purchase Pension Plan or a Target Benefit
Pension Plan,
9.2(a)(1) STANDARD OPTION - except as provided in (S)9.2(d) or (e),
no distributions shall be made before a Participant separates from
service with the Employer and all Affiliates, or
9.2(a)(2) ALTERNATIVE - if so specified in the Adoption Agreement, a
Participant may request a distribution of all or a portion of the
nonforfeitable portion of the Participant's Account on or after he or
she reaches Normal Retirement Age without regard to whether he or she
has separated from service.
9.2(b) 401(K) PLAN.
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9.2(b)(1) DISTRIBUTION RESTRICTIONS. If this Plan is adopted as a
401(k) Plan, then, except as provided in this (S)9.2(b), a
Participant's Elective Deferral Account, Qualified Nonelective Account
and Qualified Matching Account shall not be distributable to the
Participant or the Participant's Beneficiary earlier than upon the
Participant's separation from service with the Employer and all
Affiliates, death, or Disability.
9.2(b)(2) TERMINATION OF PLAN OR DISPOSITION OF ASSETS OR
SUBSIDIARY. Notwithstanding (S)9.2(b)(1) and subject to the
Participant and spousal consent rules in (S)9.3 and (S)10, the
Employer may, by action of its Board, make lump sum distributions
(within the meaning of Code (S)401(k)(10)(B)(ii) of a Participant's
Account, including the Participant's Elective Deferral Account,
Qualified Nonelective Account and Qualified Matching Account in
accordance with Code (S)401(k) by reason of
(i) the termination of the Plan without the establishment of
another defined contribution plan (other than an employee stock
ownership plan as defined in Code (S)4975(e) or Code (S)409 or a
simplified employee pension as defined in Code (S)408(k);
(ii) the disposition by the Employer or a Participating
Affiliate to an unrelated entity of substantially all of the
assets (within the meaning of Code (S)409(d)(2)) used by the
Employer or such Participating Affiliate in a trade or business
of the Employer or a Participating Affiliate, if the transferor
continues to maintain this Plan after such disposition, but such
distributions shall be made only with respect to a Participant
who continues employment with the entity acquiring such assets;
or
(iii) the disposition by the Employer or a Participating
Affiliate which is a corporation to an unrelated entity of
interest in a subsidiary (within the meaning of Code
(S)409(d)(3)), if the transferor continues to maintain this Plan
after such disposition, but such distributions shall be made only
with respect to a Participant who continues employment with such
former subsidiary.
9.2(b)(3) HARDSHIP DISTRIBUTION.
(iv) GENERAL. If the Employer specifies in the Adoption
Agreement that hardship distributions shall be permitted, a
Participant may request a hardship distribution before he or she
separates from service from the Participant's Elective Deferral
Account (and, if applicable, from the nonforfeitable portion of
the other subaccounts of such Account specified in the Adoption
Agreement). The Plan Administrator shall grant such request if,
and to the extent that, the Plan Administrator determines that
such distribution is "necessary" to satisfy and "immediate and
heavy financial need" of the Participant as determined in
accordance with this (S)9.2(b)(3). Any such
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request shall be made in writing, shall set forth in detail the
nature of such hardship and the amount of the distribution needed
as a result of such hardship, and shall include adequate
documentation of the type of financial need and the amount of the
need. If the Plan Administrator grants such request, such
application shall be processed and such distribution shall be
made in a single sum as soon as administratively practicable.
(v) SAFE HARBOR TEST FOR FINANCIAL NEED. An "immediate and heavy
financial Need" shall mean one or more of the following, as
specified in the Adoption Agreement,
(A) expenses for medical care described in Code (S)213(d)
incurred by the Participant or the Participant's spouse or
dependents (as defined in Code (S)152) and amounts necessary
for such individuals to obtain such care,
(B) the purchase of (but not the mortgage payments for) a
principal residence of the Participant,
(C) the payment of tuition and related educational fees for
the next 12 months of post-secondary education for the
Participant or the Participant's spouse, children or
dependents (as defined in Code (S)152),
(D) the prevention of the eviction of the Participant from
the Participant's principal residence or the foreclosure on
the mortgage of the Participant's principal residence, or
(E) such other events as the Internal Revenue Service deems
to constitute an "immediate and heavy financial need" under
Code (S)401(k).
(vi) SAFE HARBOR TEST FOR DISTRIBUTION NECESSARY TO SATISFY NEED.
A distribution shall be deemed to be "necessary" to satisfy an
immediate and heavy financial need only if all of the following
requirements are satisfied:
(A) the distribution is not in excess of the amount of such
need, including any amounts necessary to pay any federal,
state or local income taxes or penalties reasonably
anticipated to result from such withdrawal;
(B) the Participant has obtained all distributions (other
than hardship distributions) and all nontaxable loans
currently available under this Plan and all other plans
maintained by the Employer or an Affiliate;
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(C) the Participant's Elective Deferrals and Employee
Contributions under this Plan and elective deferrals and
employee contributions under all other plans maintained by
the Employer or an Affiliate shall be suspended for the 12-
month period following the date of receipt of such hardship
distribution; and
(D) the Participant's Elective Deferrals under this Plan
and elective deferrals under all other plans maintained by
the Employer or an Affiliate for the Participant's taxable
year immediately following the taxable year in which such
hardship distribution was made shall not exceed the
applicable dollar limitation under Code (S)402(g) for such
following taxable year less the amount of the Participant's
Elective Deferrals under this Plan and elective deferrals
under all such other plans for the taxable year in which
such hardship distribution was made.
(vii) ACCOUNT LIMITATIONS. For Plan Years beginning after
December 31, 1988, no hardship distribution shall be made under
this (S)9.2(b)(3) to a Participant from
(A) the Participant's Qualified Nonelective Account,
(B) the Participant's Qualified Matching Account, or
(C) the Fund Earnings allocated to the Participant's
Elective Deferral Account
except to the extent of amounts credited to such Accounts as of
the end of the last Plan Year ending before July 1, 1989.
9.2(b)(4) DISTRIBUTIONS ON OR AFTER AGE 59 1/2. If the Employer
specifies in the Adoption Agreement that distributions shall be
permitted on or after age 59 1/2, a Participant may request a
distribution of all or a portion of the nonforfeitable portion of the
subaccounts of the Participant's Account specified in the Adoption
Agreement at any time on or after he or she reaches age 59 1/2. Any
such request shall be made in writing on an Election Form and such
distribution shall be made in a single sum as soon as practicable in
accordance with such reasonable nondiscretionary procedures as the
Plan Administrator deems appropriate under the circumstances for the
proper administration of the Plan.
9.2(c) PROFIT SHARING PLAN. If this Plan is adopted as a Profit Sharing
Plan, then, if so specified in the Adoption Agreement, a Participant may
request in accordance with reasonable and nondiscriminatory procedures a
distribution of all or a portion of the nonforfeitable portion of the
Participant's Account after a fixed number of years, the
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attainment of a stated age or upon the occurrence of some prior event as
specified in the Adoption Agreement.
9.2(d) WITHDRAWALS FROM EMPLOYEE ACCOUNT.
9.2(d)(1) STANDARD OPTION. A Participant may request a withdrawal
of all or a portion of the Participant's Employee Account at any
time. Any such request shall be made in writing on an Election
Form and such withdrawal shall be made in a single sum as soon as
administratively practicable in accordance with such reasonable
nondiscretionary procedures as the Plan Administrator deems
appropriate under the circumstances for the proper administration
of this Plan.
9.2(d)(2) ALTERNATIVE. The Employer may specify in the Adoption
Agreement that withdrawals from Employee Accounts shall not be
permitted before the nonforfeitable portion of a Participant's
Account otherwise becomes distributable under this (S)9 or under
(S)11 or may specify other rules and conditions under which such
withdrawals may be made.
Notwithstanding the foregoing, any portion of a Participant's Employee
Account which is attributable to recharacterized Excess Contributions under
(S)7.4(e) may only be withdrawn in accordance with the rules set forth in
(S)9.2(b) applicable to an Elective Deferral Account.
9.2(e) PLAN TERMINATION. If this Plan is terminated under (S)14.6 and if
the Board so specifies in its written action effecting such termination,
distribution of the nonforfeitable portion of each Account shall be made as
soon as administratively practical after the Plan is terminated subject to
the rules in (S)9.2(b) and to Code (S)411.
9.3 CONSENT.
9.3(a) GENERAL. If the nonforfeitable portion of a Participant's Account
exceeds (or at the time of any prior distribution exceeded) $3500, and such
Account is "immediately distributable", the Participant and the
Participant's Spouse, if any, (or where the Participant has died, the
surviving Spouse, if any) must consent to any distribution from such
Account. The consent of the Participant and the Participant's Spouse shall
be obtained in writing within the 90 day period ending on the Annuity
Starting Date (as defined in (S)10.1). The Plan Administrator shall notify
the Participant and the Participant's Spouse of the right to defer any
distribution until the Participant's Account is no longer "immediately
distributable". such notification shall include a general description of
the material features, and an explanation of the relative values of, the
optional forms of benefit available under the Plan in a manner that would
satisfy the notice requirements of Code (S)417(a)(3) and shall be provided
no less than 30 days and no more than 90 days prior to the Annuity Starting
Date.
9.3(b) EXCEPTIONS. Notwithstanding the foregoing, only the Participant
need consent to the commencement of a distribution in the form of a
Qualified Joint and Survivor Annuity while the Participant's Account is
immediately distributable. Furthermore, if payment in the
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form of a Qualified Joint and Survivor Annuity is not required with respect
to the Participant pursuant to (S)10, only the Participant need consent to
the distribution from an Account that is immediately distributable. The
consent of the Participant and the Participant's Spouse shall not be
required to the extent that a distribution is required to satisfy Code
(S)401(a)(9), (S)401(k), (S)401(m), (S)402(g) or (S)415. In addition, upon
termination of this Plan if the Plan is not required to offer an annuity
option (purchased from a commercial provider), the nonforfeitable portion
of the Participant's Account shall, without the Participant's consent, be
distributed to the Participant unless the Employer or an Affiliate
maintains another defined contribution plan (other than an employee stock
ownership plan as defined in Code (S)4975(e)(7), in which event, the
Account of a Participant who does not consent to an immediate distribution
shall be transferred to such other plan.
9.3(c) IMMEDIATELY DISTRIBUTABLE. An Account is "immediately
distributable" if any part of the Account could be distributed to the
Participant (or the surviving Spouse) before the Participant reaches (or
would have reached if not deceased) the later of Normal Retirement Age or
age 62.
9.3(d) ACCUMULATED DEDUCTIBLE EMPLOYEE CONTRIBUTIONS. For purposes of
determining the applicability of the consent requirements under this (S)9.3
to distributions made before the first day of the first Plan Year beginning
after December 31, 1988, the nonforfeitable portion of the Participant's
Account shall not include amounts attributable to accumulated deductible
employee contributions within the meaning of Code (S)72(o)(5)(B).
9.4 FORM OF DISTRIBUTION. All distributions (including distributions before
separation from service under (S)9.2 but excluding corrective distributions
under (S)7) shall be made in the form specified in (S)10.
9.5 MINIMUM DISTRIBUTIONS. The Plan shall satisfy the minimum distribution
requirements of Code (S)401(a)(9) as set forth in (S)11.
9.6 MISSING PERSON. In the event that an Account becomes payable under this
Plan pursuant to (S)9.1(c), (S)9.1(d) or (S)9.1(e) and the Plan Administrator is
unable to locate the Participant or his or her Beneficiary after sending written
notice to the last known mailing address and to the United States Social
Security Administration, such Participant or Beneficiary shall be presumed dead
and such Account shall become a Forfeiture on the third anniversary of the date
such Account first became payable under this Plan. However, the amount of such
Forfeiture shall be paid to such missing Participant or Beneficiary in the event
that such person files a claim for such benefit while this Plan remains in
effect and demonstrates to the satisfaction of the Plan Administrator that such
person in fact is such missing Participant or Beneficiary.
9.7 NO ESTOPPEL OF PLAN. No person is entitled to any benefit under this Plan
except and to the extent expressly provided under this Plan. The fact that
payments have been made from this Plan in connection with any claim for benefits
under this Plan does not (1) establish the validity of the claim, (2) provide
any right to have such benefits continue for any period of time, or (3) prevent
this Plan from recovering the benefits paid to the extent that the Plan
Administrator determines that there
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was no right to payment of the benefits under this Plan. Thus, if a benefit is
paid under this Plan and it is thereafter determined by the Plan Administrator
that such benefit should not have been paid (whether or not attributable to an
error by the Participant, the Plan Administrator, the Employer or any other
person), then the Plan Administrator may take such action as the Plan
Administrator deems necessary or appropriate to remedy such situation, including
without limitation by (1) deducting the amount of any overpayment theretofore
made to or on behalf of such Participant from any succeeding payments to or on
behalf of such Participant under this Plan or from any amounts due or owing to
such Participant by the Employer or any Affiliate or under any other plan,
program or arrangement benefiting the employees or former employees of the
Employer or any Affiliate, or (2) otherwise recovering such overpayment from
whoever has benefitted from it.
If the Plan Administrator determines that an underpayment of benefits has been
made, the Plan Administrator shall take such action as it deems necessary or
appropriate to remedy such situation. However, in no event shall interest be
paid on the amount of any underpayment other than the investment gains (or
losses) credited to the Participant's Account pending payment.
9.8 ADMINISTRATION. All distributions shall be made in accordance with such
uniform and nondiscriminatory administrative and operational procedures for
Account distributions as the Plan Administrator deems appropriate under the
circumstances for the proper administration of the Plan.
SECTION 10. BENEFIT PAYMENT FORMS - JOINT AND SURVIVOR ANNUITY REQUIREMENTS
10.1 APPLICATION AND SPECIAL DEFINITIONS. This (S)10 shall apply to a
Participant who is vested at the time of death or at the time of a distribution
from the Participant's Account in any portion of the Participant's Account,
whether such portion is attributable to Employer contributions, Employee
contributions, or both. For purposes of this (S)10, the terms defined in this
(S)10.1 shall have the meanings shown opposite such terms.
10.1(a) ANNUITY STARTING DATE - means the first day of the first period
for which an amount is paid as an annuity or any other form.
10.1(b) EARLIEST RETIREMENT AGE - means
10.1(b)(1) if distributions are permitted only upon separation
from service, the earliest age at which the Participant could
separate from service and receive a distribution;
10.1(b)(2) if distributions are permitted before separation from
service, the earliest age at which such distribution could be
made; or
10.1(b)(3) if clauses (1) and (2) do not apply, the Early
Retirement Age.
10.1(c) ELECTION PERIOD - means
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10.1(c)(1) for a Qualified Preretirement Survivor Annuity, the
period which begins on the earlier of (i) the first day of the
Plan Year in which the Participant attains age 35 or (ii) the date
such Participant separates from service and ends on the date of
the Participant's death and
10.1(c)(2) for a Qualified Joint and survivor Annuity or a Life
Annuity, the 90 day period ending on the Annuity Starting Date.
Notwithstanding the foregoing, a Participant who has not yet reached age 35
(and who will not reach age 35 as of the end of the current Plan Year) may
make a special Qualified Election to waive the Qualified Preretirement
Survivor Annuity for the period beginning on the date of such election and
ending on the first day of the Plan Year in which the Participant will
reach age 35. Such election shall not be valid unless the Participant
receives a written explanation of the Qualified Preretirement Survivor
Annuity in such terms as are comparable to the explanation required under
(S)10.4. Qualified Preretirement Survivor Annuity coverage shall be
automatically reinstated as of the first day of the Plan Year in which the
Participant reaches age 35. Any new waiver on or after such date shall be
subject to the full requirements of this (S)10.
10.1(d) LIFE ANNUITY - mens a nontransferable immediate annuity payable
for the life of the Participant, which is the amount of benefit which can
be purchased with such Participant's Vested Account Balance as of the
Annuity Starting Date.
10.1(e) QUALIFIED ELECTION - means a Participant's election to waive the
Qualified Joint and Survivor Annuity or the Qualified Preretirement
Survivor Annuity which election shall not be effective unless (1) the
election designates a specific Beneficiary (including any class of
Beneficiaries or any contingent Beneficiaries) and, for an election to
waive a Qualified Joint and Survivor Annuity, the particular form of
benefit payment, which designations cannot be changed without the Spouse's
consent (or the Spouse expressly permits designations by the Participant
without any further spousal consent); (2) such Participant's Spouse
consents in writing to such election on an Election Form; (3) such consent
acknowledges the effect of such election; and (4) such consent is witnessed
by a notary public; provided,
(i) if the Participant establishes to the satisfaction of a
Plan representative that such written consent may not be obtained
because there is no Spouse or the Spouse cannot be located or
because of such other circumstances as may be described in the
regulations under Code (S)417, a Participant's election shall be
deemed to be a Qualified Election;
(ii) a Spouse's written consent under this (S)10.1(e) shall be
irrevocable as to such Spouse and shall be binding only as against
such Spouse;
(iii) no consent shall be valid unless the Participant received
notice as provided in (S)10.4;
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(iv) a consent that permits designations by the Participant
without any further spousal consent must acknowledge that the
Spouse has the right to limit consent to a specific Beneficiary,
and, if applicable, a specific form of benefit payment, and that
the Spouse voluntarily elects to relinquish either or both of such
rights; and
(v) a Participant may revoke (without the consent of his or her
Spouse) an election to waive the Qualified Joint and Survivor
Annuity or the Qualified Preretirement Survivor Annuity on an
Election Form at any time prior to the date as of which the
Participant's Account becomes payable under (S)9.
10.1(f) QUALIFIED JOINT AND SURVIVOR ANNUITY - means a nontransferable
immediate annuity payable for the life of the Participant which is the
amount of benefit which can be purchased with the Participant's Vested
Account Balance on the Annuity Starting Date with a survivor annuity
payable for the life of the Participant's surviving Spouse which is
10.1(f)(1) STANDARD OPTION - 50% or
10.1(f)(2) ALTERNATIVE - such greater percentage (not to exceed
100%) specified in the Adoption Agreement
of the amount of the annuity which is payable during the joint lives of the
Participant and such Spouse.
10.1(g) QUALIFIED PRERETIREMENT SURVIVOR ANNUITY - means a nontransferable
annuity payable for the life of the surviving Spouse, which is the amount
of benefit which can be purchased with
10.1(g)(1) STANDARD OPTION - 100% of the Participant's Vested
Account Balance as of the Annuity Starting Date or
10.1(g)(2) ALTERNATIVE - such lesser percentage (not less than
50%) specified in the Adoption Agreement of such Participant's
Vested Account Balance (determined by allocating the portion of
such balance which is attributable to employee contributions
proportionately to such annuity and to the remainder of such
balance).
10.1(h) VESTED ACCOUNT BALANCE - means the nonforfeitable portion of a
Participant's Account derived from Employer contributions and Employee
contributions (including Rollover Contributions), whether vested before or
upon death, including the proceeds of insurance contracts, if any, on the
Participant's life and reduced, if applicable, for outstanding loans in
accordance with (S)13.3(d)(1)(iv).
10.2 DISTRIBUTION TO PARTICIPANT. Unless a Participant waives the Qualified
Joint and Survivor Annuity and elects an optional method of distribution (as
described in (S)10.6) on an Election Form pursuant to a Qualified Election
within the Election Period, any distribution of such Participant's Vested
Account Balance shall be paid in the form of (a) a Qualified Joint and Survivor
Annuity for
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each such married Participant and his or her Spouse or (b) a Life Annuity for
each such unmarried Participant. A Participant may elect that such annuity be
distributed upon attainment of the Earliest Retirement Age.
10.3 DISTRIBUTION TO SURVIVING SPOUSE. Unless a Participant waives the
Qualified Preretirement Survivor Annuity and elects an optional method of
distribution (as described in (S)10.6) on an Election Form pursuant to a
Qualified Election within the Election Period, such Participant's Vested Account
Balance shall, in the event of the Participant's death before the Participant's
Annuity Starting Date, be applied to purchase a Qualified Preretirement Survivor
Annuity for the surviving Spouse. If the Qualified Preretirement Survivor
Annuity is less than 100%, the remaining portion of the Participant's Vested
Account Balance shall be payable to the Participant's Beneficiary under (S)9.
The surviving Spouse may elect that such Qualified Preretirement Survivor
Annuity be distributed to such Spouse within a reasonable period following the
death of the Participant. Notwithstanding the foregoing, a surviving Spouse
entitled to a Qualified Preretirement Survivor Annuity may elect in writing
after the Participant's death to have the Participant's Vested Account Balance
distributed in an optional form of benefit in accordance with (S)10.6.
10.4 NOTICE REQUIREMENTS.
10.4(a) QUALIFIED JOINT AND SURVIVOR ANNUITY AND LIFE ANNUITY. The Plan
Administrator shall no less than 30 days and no more than 90 days before
the Annuity Starting Date provide each Participant with a written
explanation of the Qualified Joint and Survivor Annuity and the Life
Annuity, which explanation shall describe
10.4(a)(1) the terms and conditions of such annuity;
10.4(a(2) the Participant's right to make a Qualified Election to
waive such annuity and the effect of such election;
10.4(a)(3) the rights of the Participant's Spouse, if any;
10.4(a)(4) the right to revoke such election and the effect of
such a revocation; and
10.4(a)(5) the relative values of the various optional forms of
benefits under the Plan.
10.4(b) QUALIFIED PRERETIREMENT SURVIVOR ANNUITY. The Plan Administrator
shall provide to each Participant within the "applicable period" for such
Participant a written explanation of the Qualified Preretirement Survivor
Annuity which includes the type of information described in (S)10.4(a).
The "applicable period" for a Participant is
10.4(b)(1) the period beginning on the first day of the Plan Year
in which such Participant attains age 32 and ending with the close
of the Plan Year preceding the Plan Year in which the Participant
attains age 35,
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10.4(b)(2) a reasonable period ending after he or she becomes a
Participant, or
10.4(b)(3) a reasonable period ending after this (S)10 applies to
such Participant,
whichever period ends last. However, if a Participant separates from
service before he or she reaches age 35, such notice shall be provided
within the two year period beginning one year before the Participant's
separation from service and ending one year after such separation and if
such Participant is subsequently reemployed, the applicable period for such
Participant shall be redetermined under (S)10.4(b)(1) through
(S)10.4(b)(3). For purposes of (S)10.4(b)(2) and (S)10.4(b)(3), a
"reasonable period" is the two year period which begins one year prior to
the occurrence of the event and ends one year after the occurrence of the
event.
10.5 SAFE HARBOR RULES.
10.5(a) APPLICATION. If so specified in the Adoption Agreement, the
provisions in this (S)10.5 shall apply in lieu of (S)10.1 through (S)10.4
to (1) a Participant in a Profit Sharing Plan or a 401(k) Plan, and (2) to
any distribution made on or after the first day of the first Plan Year
beginning after December 31, 1988 from or under a separate account
attributable solely to accumulated deductible employee contributions (as
defined in Code (S)72(o)(5)(B) and maintained on behalf of a Participant in
a Money Purchase Pension Plan or Target Benefit Pension Plan provided that
the conditions specified in (S)10.5(b) are satisfied.
10.5(b) CONDITIONS. In order to fit within this safe harbor (1) the
Participant does not or cannot elect payments in the form of a Life Annuity
with respect to the Participant's Vested Account Balance; (2) on the death
of a Participant, the Participant's Vested Account Balance shall be paid to
the Participant's surviving Spouse, or if there is no surviving Spouse or
if the surviving Spouse has consented in a manner conforming to a Qualified
Election, to the Participant's Beneficiary; and (3) with respect to a
Participant in a Profit Sharing Plan or a 401(k) Plan, the Plan is not a
direct or indirect transferee of a defined benefit plan,money purchase
pension plan, target benefit pension plan, stock bonus plan, or profit-
sharing plan which is subject to the survivor annuity requirement of Code
(S)401(a)(11) and Code (S)417 ("Transferee Plan"), or the Plan maintains
separate bookkeeping accounts for such Participant's Transferee Plan
benefits and all other benefits of the Participant under the Plan and
gains, losses, withdrawals, contributions, forfeitures, and other credits
or charges are allocated on a reasonable and consistent basis between the
Transferee Plan benefits (which are subject to the survivor annuity
requirements in (S)10.1 through (S)10.4) and the other Plan benefits (which
are subject to the safe harbor rule in this (S)10.5).
10.5(c) SURVIVING SPOUSE. The surviving Spouse may elect to have
distribution of the Vested Account Balance commence within the 90 day
period following the date of the Participant's death. The Vested Account
Balance shall be adjusted for Fund Earnings occurring after the
Participant's death in accordance with (S)6.2 in the same manner that
Accounts are adjusted for other types of distributions.
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10.5(d) WAIVER OF SPOUSAL BENEFIT. The Participant may waive the spousal
death benefit described in this (S)10.5 at any time; provided, no such
waiver shall be effective unless it satisfies the conditions described in
(S)10.1(e) (other than the notification requirement referred to in such
section) that would apply to the Participant's Qualified Election to waive
the Qualified Preretirement Survivor Annuity.
10.5(e) VESTED ACCOUNT BALANCE. For purposes of this (S)10.5, Vested
Account Balance shall mean, (1) in the case of a Money Purchase Pension
Plan or Target Benefit Pension Plan, the Participant's separate account
balance attributable solely to accumulated deductible employee
contributions within the meaning of Code (S)72(o)(5)(B) and (2) in the case
of a Profit Sharing Plan or 401(k) Plan, the Participant's Vested Account
Balance as defined in (S)10.1(h), excluding the portion of such Vested
Account Balance which is attributable to Transferee Plan benefits described
in (S)10.5(b).
10.6 OPTIONAL FORMS.
10.6(a) GENERAL. If a Participant properly and timely waives the
Qualified Joint and survivor Annuity as described in (S)10.2 or to the
extent the safe harbor rules of (S)10.5 apply to a distribution, such
distribution shall be made in the form specified in this (S)10.6 as
selected by the Participant (or his or her Beneficiary in the event of the
Participant's death).
10.6(b) BEFORE SEPARATION FROM SERVICE. Any distribution made pursuant to
(S)9.2 shall, subject to (S)10.2, be made in a single sum.
10.6(c) AFTER SEPARATION FROM SERVICE.
10.6(c)(1) STANDARD OPTION. The optional benefit form available
to any Participant after separation from service with the Employer
and all Affiliates or to his or her Beneficiary in the event of
the Participant's death shall be a single sum.
10.6(c)(2) ALTERNATIVE. If specified in the Adoption Agreement,
the following optional benefit forms shall be available to any
Participant (or to his or her Beneficiary in the event of the
Participant's death):
(i) SINGLE SUM - by payment in a single sum.
(ii) INSTALLMENTS - by payment in annual installments (or
more frequent installments) over a specified period in
accordance with the minimum distribution rules in (S)11.
(iii) ANNUITY - in the form of an annuity contract under
which the amount of benefits shall be that which can be
provided by applying the nonforfeitable portion of such
Participant's Account to the applicable settlement option or
annuity purchase rate under such contract; or
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(iv) OTHER FORMS - under one of the optional forms of
distribution, if any, under the Pre-Existing Plan or a plan
described in (S)14.5 which are required to be preserved
under Code (S)411(d)(6). Such optional forms shall be
described in the Adoption Agreement and, unless otherwise
specified in the Adoption Agreement, such other forms shall
apply to the Participant's entire Account balance.
Notwithstanding the foregoing, if the Plan Administrator
separately accounts for benefits under a Pre-Existing Plan
or a plan described under (S)14.5 or, if applicable, under
(S)10.5, the optional forms may be limited to such separate
accounts.
10.6(d) NO METHOD SELECTED. If the safe harbor rules of (S)10.5 apply to
a distribution, but the Participant or the Participant's Spouse of
Beneficiary fails to specify the method of distribution, then any
distribution made to such Participant, Spouse or Beneficiary shall be made
in a single sum.
10.6(e) SINGLE SUM. A distribution made on account of a Participant's
death or separation from service with the Employer and all Affiliates which
is made in more than one payment shall be deemed to be a single sum
distribution for purposes of this Plan if the additional payment or
payments are necessary to reflect allocations completed following the
Participant's death or separation from service.
10.6(f) IN KIND DISTRIBUTIONS. A distribution shall be made in kind only
to the extent provided in the Adoption Agreement and only to the extent an
"in Kind" distribution is permissible under ERISA.
10.7 ANNUITY CONTRACTS. Any annuity contract distributed by the Plan to a
Participant or a Beneficiary shall be nontransferable and the terms of such
contract shall comply with the applicable requirements of this Plan and the
Code.
10.8 TRANSITIONAL RULES.
10.8(a) Any living Participant not receiving benefits on August 23, 1984,
who would otherwise not receive the benefits prescribed by the previous
sections of this (S)10 must be given the opportunity to elect to have such
sections apply (1) if such Participant is credited with at least one Hour
of Service under this Plan or a predecessor plan in a Plan Year beginning
on or after January 1, 1976, and (2) such Participant had at least 10 years
of vesting service when he or she separated from service.
10.8(b) Any living Participant not receiving benefits on August 23, 1984,
who was credited with at least one Hour of Service under this Plan or a
predecessor plan on or after September 2, 1974, and who is not otherwise
credited with any service in a Plan Year beginning on or after January 1,
1976, must be given the opportunity to have his or her benefits paid in
accordance with (S)10.8(d).
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10.8(c) The respective opportunities to elect (as described in (S)10.8(a)
and (b) above) must be afforded to the appropriate Participants during the
period commencing on August 23, 1984, and ending on the date benefits would
otherwise commence to such Participants.
10.8(d) Any Participant who has elected pursuant to (S)10.8(b) and any
Participant who does not elect under (S)10.8(a) or who meets the
requirements of (S)10.8(a) except that such Participant does not have at
least 10 years of vesting service when he or she separates from service,
shall have his or her benefits distributed in accordance with all of the
following requirements if benefits would have been payable in the form of a
life annuity:
10.8(d)(1) If benefits in the form of a life annuity become
payable to a married Participant who:
(i) begins to receive payments under the Plan on or after
Normal Retirement Age; or
(ii) dies on or after Normal Retirement Age while still
working for the Employer; or
(iii) begins to receive payments on or after the "qualified
early retirement age"; or
(iv) separates from service on or after attaining Normal
Retirement Age (or the "qualified early retirement age") and
after satisfying the eligibility requirements for the
payment of benefits under the Plan and thereafter dies
before beginning to receive such benefits;
then such benefits shall be received under this Plan in the form
of a Qualified Joint and survivor Annuity, unless the Participant
has elected otherwise during the election period. The election
period must begin at least 6 months before the Participant attains
"qualified early retirement age" and end not more than 90 days
before the commencement of benefits. Any such election shall be in
writing and may be changed by the Participant at any time.
10.8(d)(2) A Participant who is employed after attaining the
qualified early retirement age shall be given the opportunity to
elect, during the election period, to have a survivor annuity
payable on death. The election period begins on the later of (i)
the 90th day before the Participant attains the "qualified early
retirement age", or (ii) the date on which participation begins,
and ends on the date the Participant separates from service. Any
such election shall be in writing and may be changed by the
Participant at any time. If the Participant elects the survivor
annuity, payments under such annuity must not be less than the
payments which would have been made to the Spouse under the
Qualified Joint and Survivor Annuity if the Participant had retire
on the day before the Participant's death.
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10.8(d)(3) For purposes of this (S)10.8(d), "qualified early
retirement age" means the latest of:
(i) the earliest date under the Plan on which the
Participant may elect to receive retirement benefits,
(ii) the first day of the 120th month beginning before the
Participant reaches Normal Retirement Age, or
(iii) the date the Participant begins participation.
10.9 DIRECT ROLLOVERS.
10.9(a) GENERAL. This (S)10.9 applies to distributions made on or after
January 1, 1993. Notwithstanding any provision of the Plan to the contrary
that would otherwise limit a Distributee's election under this (S)10, a
Distributee may elect, at the time and in the manner prescribed by the Plan
Administrator, to have any portion of an Eligible Rollover Distribution
paid directly by the Plan to an Eligible Retirement Plan specified by the
Distributee in a direct rollover in accordance with Code (S)401(a)(31).
10.9(b) DEFINITIONS.
10.9(b)(1) ELIGIBLE ROLLOVER DISTRIBUTION. An Eligible Rollover
Distribution is any distribution of all or any portion of the
balance to the credit of the Distributee, except that an Eligible
Rollover Distribution does not include: any distribution that is
one of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy)
of the Distributee or the joint lives (or joint life expectancies)
of the Distributee and the Distributee's designated beneficiary,
or for a specified period of ten years or more; any distribution
to the extent such distribution is required under Code
(S)401(a)(9); and the portion of any distribution that is not
includable in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to employer
securities).
10.9(b)(2) ELIGIBLE RETIREMENT PLAN. An Eligible Retirement Plan
is an individual retirement account described in Code (S)408(a),
an individual retirement annuity described in Code (S)408(b), an
annuity plan described in Code (S)403(a), or a qualified trust
described in Code (S)401(a), that accepts the Distributee's
Eligible Rollover Distribution. However, in the case of an
Eligible Rollover Distribution to the surviving spouse, an
Eligible Retirement Plan is an individual retirement account or
individual retirement annuity.
10.9(b)(3) DISTRIBUTEE. A Distributee includes an Employee or
former Employee. In addition, the Employee's or former Employee's
surviving spouse and the Employee's or former Employee's spouse or
former spouse who is the alternate payee under a qualified
domestic relations order, as defined in Code
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(S)414(p), are Distributees with regard to the interest of the
spouse or former spouse.
SECTION 11. MINIMUM DISTRIBUTION REQUIREMENTS
11.1 GENERAL. Subject to (S)10, BENEFIT PAYMENT FORMS - JOINT AND SURVIVOR
ANNUITY REQUIREMENTS, the requirements of this (S)11 shall apply to any
distribution of a Participant's Account and shall take precedence over any
inconsistent provisions of this Plan. Unless otherwise specified, the
provisions of this (S)11 shall apply to calendar years beginning after December
31, 1984. All distributions required under this (S)11 shall be determined and
made in accordance with the proposed regulations under Code (S)401(a)(9),
including the minimum distribution incidental benefit requirement of
(S)1.401(a)(9)-2 of the proposed regulations.
11.2 SPECIAL DEFINITIONS.
11.2(a) APPLICABLE CALENDAR YEAR - means the first Distribution Calendar
Year, and if life expectancy is being recalculated, each succeeding
calendar year.
11.2(b) APPLICABLE LIFE EXPECTANCY - means the life expectancy (or joint
and last survivor expectancy) calculated using the attained age of the
Participant (or Designated Beneficiary) as of the Participant's (or
Designated Beneficiary's) birthday in the Applicable Calendar Year reduced
by one for each calendar year which has elapsed since the date life
expectancy was first calculated. If life expectancy is being recalculated,
the Applicable Life Expectancy shall be the life expectancy as so
recalculated.
11.2(c) DESIGNATED BENEFICIARY - means the individual who is designated as
the Beneficiary under this Plan in accordance with Code (S)401(a)(9) and
the regulations under such Code section.
11.2(d) DISTRIBUTION CALENDAR YEAR - means a calendar year for which a
minimum distribution is required. For distributions beginning before the
Participant's death, the first Distribution Calendar Year shall be the
calendar year immediately preceding the calendar year which contains the
Participant's Required Beginning Date. For distributions beginning after
the Participant's death, the first Distribution Calendar Year shall be the
calendar year in which distributions are required to begin pursuant to
(S)11.6.
11.2(e) LIFE EXPECTANCY - means the life expectancy (or joint and last
survivor expectancy) as computed by use of the expected return multiples in
Tables V and VI of (S)1.72-9 of the Federal Income Tax Regulations. Unless
otherwise elected by the Participant (or Spouse, in the case of
distributions described in (S)11.6(b)(2)) by the time distributions are
required to begin, life expectancies shall be recalculated annually. such
election shall be irrevocable as to the Participant (or Spouse) and shall
apply to all subsequent years. The life expectancy of a nonspouse
Beneficiary may not be recalculated.
11.2(f) PARTICIPANT'S BENEFIT - means the nonforfeitable portion of a
Participant's Account determined as of the last Valuation Date in the
calendar year immediately preceding the
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Distribution Calendar Year ("valuation calendar year") increased by the
amount of any contributions or forfeitures allocated to the Account as of
dates in the valuation calendar year after such Valuation Date and
decreased by distributions made in the valuation calendar year after such
Valuation Date. If any portion of the minimum distribution for the first
Distribution Calendar Year is made in the second Distribution Calendar Year
on or before the Required Beginning Date, the amount of the minimum
distribution made in the second Distribution Calendar Year shall be treated
as if it had been made in the immediately preceding distribution Calendar
Year.
11.2(g) REQUIRED BEGINNING DATE.
11.2(g)(1) GENERAL RULE. The Required Beginning Date of a
Participant who reach age 70 1/2 after December 31, 1987 is the
first day of April of the calendar year following the calendar
year in which the Participant reaches age 70 1/2.
11.2(g)(2) AGE 70 1/2 BEFORE 1988. The Required Beginning Date of
a Participant who reaches age 70 1/2 before January 1, 1988 shall
be,
(i) for a Participant who is not a 5% owner, the first
day of April of the calendar year following the calendar
year in which occurs the later of retirement or reaching age
70 1/2; or
(ii) for a Participant who is a 5% owner during any year
beginning after December 31, 1979, the first day of April
following the later of:
(A) the calendar year in which the Participant
reaches age 70 1/2, or
(B) the earlier of the calendar year with or within
which ends the Plan Year in which the Participant
becomes a 5% owner, or the calendar year in which the
Participant retires.
11.2(g)(3) AGE 70 1/2 DURING 1988. The Required Beginning Date of
a Participant who is not a 5% owner, who reaches age 70 1/2 during
1988 and who has not retired before January 1, 1989 shall be April
1, 1990. The Required Beginning Date of a Participant who is a 5%
owner or who retired before January 1, 1989 and who reaches age 70
1/2 during 1988 shall be determined in accordance with (S)
11.2(g)(1).
11.2(g)(4) 5% OWNER. A Participant shall be treated as a 5% owner
for purposes of this (S) 11.2(g) if such Participant is a 5% owner
as defined in Code (S) 416(i) (determined in accordance with Code
(S) 416 but without regard to whether the Plan is top-heavy) at
any time during the Plan Year ending with or within the calendar
year in which such individual attains age 66 1/2 or any subsequent
Plan Year. Once
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distributions have begun to a 5% owner under this (S) 11, they
must continue to be distributed, even if the Participant ceases to
be a 5% owner in a subsequent year.
11.3 REQUIRED BEGINNING DATE. The entire nonforfeitable interest of a
Participant must be distributed or begin to be distributed no later than the
Participant's Required Beginning Date. Such distribution shall be made
11.3(a) in the form of a Qualified Joint and Survivor Annuity as described
in (S) 10.2, or
11.3(b) if the Qualified Joint and Survivor Annuity is properly waived or
to the extent the safe harbor rules in (S) 10.5 apply, in the optional
benefit form in (S) 10.6 selected by the Participant.
Notwithstanding the foregoing, even if installment distributions are not
otherwise available as an optional benefit form, a Participant who has not
separated from service with the Employer and all Affiliates as of the Required
Beginning Date (or as of the end of any Distribution Calendar Year thereafter)
may elect to receive the minimum distribution amount for each such Distribution
Calendar Year as described in (S) 11.5.
11.4 LIMITS ON DISTRIBUTION PERIODS. As of the first Distribution Calendar
Year, distributions (if not made in a single sum) may only be made over one of
the following periods (or a combination thereof);
11.4(a) the life of the Participant,
11.4(b) the life of the Participant and a Designated Beneficiary,
11.4(c) a period certain not extending beyond the life expectancy of the
Participant, or
11.4(d) a period certain not extending beyond the joint and last survivor
expectancy of the Participant and a Designated Beneficiary.
11.5 DETERMINATION OF AMOUNT TO BE DISTRIBUTED EACH YEAR. If the Participant's
interest is to be distributed in other than a single sum, the following minimum
distribution rules shall apply on or after the Required Beginning Date:
11.5(a) INDIVIDUAL ACCOUNT.
11.5(a)(1) GENERAL. If a Participant's Benefit is to be
distributed over (i) a period not extending beyond the life
expectancy of the Participant or the joint life and last survivor
expectancy of the Participant and the Participant's Designated
Beneficiary or (ii) a period not extending beyond the life
expectancy of the Designated Beneficiary, the amount required to
be distributed for each calendar year, beginning with
distributions for the first Distribution Calendar Year, must at
least
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equal the quotient obtained by dividing the Participant's Benefit
by the Applicable Life Expectancy.
11.5(a)(2) INCIDENTAL DEATH BENEFIT RULES.
(i) For calendar years beginning before January 1, 1989,
if the Participant's Spouse is not the Designated
Beneficiary, the method of distribution selected must assure
that at least 50% of the present value of the amount
available for distribution is paid within the life
expectancy of the Participant.
(ii) For calendar years beginning after December 31, 1988,
the amount to be distributed each year, beginning with
distributions for the first Distribution Calendar Year,
shall not be less than the quotient obtained by dividing the
Participant's Benefit by the lesser of (A) the Applicable
Life Expectancy or (B) if the Participant's Spouse is not
the Designated Beneficiary, the applicable divisor
determined from the table set forth in Q&A-4 of (S)
1.401(a)(9)-2 of the proposed regulations. Distributions
after the death of the Participant shall be distributed
using the Applicable Life Expectancy in (S) 11.5(a)(1) as
the relevant divisor without regard to (S) 1.401(a)(9)-2 of
the proposed regulations.
11.5(b) ANNUITY CONTRACTS. If the Participant's Benefit is distributed in
the form of an annuity purchased from an insurance company, distributions
under such annuity shall be made in accordance with the requirements of
Code (S) 401(a)(9).
11.6 DEATH DISTRIBUTION PROVISIONS.
11.6(a) DISTRIBUTION BEGINNING BEFORE DEATH. If the Participant dies
after distribution of his or her nonforfeitable interest has begun, the
remaining portion of such nonforfeitable interest shall continue to be
distributed at least as rapidly as under the method of distribution being
used prior to the Participant's death.
11.6(b) DISTRIBUTION BEGINNING AFTER DEATH. If the Participant dies
before distribution of his or her nonforfeitable interest begins,
distribution of the Participant's entire nonforfeitable interest shall be
completed by December 31 of the calendar year containing the fifth
anniversary of the Participant's death except to the extent that an
election is made to receive distributions in accordance with (1) or (2)
below:
11.6(b)(1) if any portion of the Participant's nonforfeitable
interest is payable to a Designated Beneficiary, distributions may
be made over the life or over a period certain not greater than
the life expectancy of the Designated Beneficiary and shall
commence on or before December 31 of the calendar year immediately
following the calendar year in which the Participant died;
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11.6(b)(2) if the Designated Beneficiary is the Participant's
surviving Spouse, distributions may be made over the period
described in clause (1) above but the required commencement date
may be deferred until the later of (i) December 31 of the calendar
year immediately following the calendar year in which the
Participant died or (ii) December 31 of the calendar year in which
the Participant would have reached age 70 1/2.
If the Participant has not made an election pursuant to this (S) 11.6(b) by
the time of the Participant's death, the Participant's Designated
Beneficiary must elect the method of distribution no later than the earlier
of (A) December 31 of the calendar year in which distributions would be
required to begin under this (S) 11.6 or (B) December 31 of the calendar
year which contains the fifth anniversary of the date of death of the
Participant. If the Participant has no Designated Beneficiary, or if the
Designated Beneficiary does not elect a method of distribution,
distribution of the Participant's entire interest must be completed by
December 31 of the calendar year containing the fifth anniversary of the
Participant's death.
11.6(c) SPECIAL RULES.
11.6(c)(1) For purposes of (S) 11.6(b), if the surviving Spouse
dies after the Participant, but before payments to such Spouse
begin, the provisions of (S) 11.6(b), with the exception of (S)
11.6(b)(2), shall be applied as if the surviving Spouse were the
Participant.
11.6(c)(2) For purposes of this (S) 11.6, any amount paid to a
child of the Participant shall be treated as if it had been paid
to the surviving Spouse if the amount becomes payable to the
surviving Spouse when the child reaches the age of majority.
11.6(c)(3) For the purposes of this (S) 11.6, distribution of a
Participant's interest shall be considered to begin on the
Participant's Required Beginning Date (or, if (S) 11.6(c)(1) above
is applicable, the date distribution is required to begin to the
surviving Spouse pursuant to (S) 11.6(b). If distribution in the
form of an annuity irrevocably commences to the Participant before
the Required Beginning Date, the date distribution is considered
to begin shall be the date distribution actually commences.
11.7 SPECIAL PRE-TEFRA DISTRIBUTION ELECTION.
11.7(a) GENERAL RULE. Subject to (S) 10, BENEFIT PAYMENT FORMS - JOINT
AND SURVIVOR ANNUITY REQUIREMENTS, the nonforfeitable percentage of the
Account of any Participant (including a "5% owner" as described in (S)
11.2(g)(4)) who has in effect a Special Pre-TEFRA Distribution Election (as
described in (S) 11.7(b)) shall be paid only to the Participant, or in the
case of the Participant's death, only to his or her beneficiary in
accordance with the
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method of distribution specified in such election without regard to the
distribution rules set forth in (S) 11.1 through (S) 11.6.
11.7(b) SPECIAL PRE-TEFRA DISTRIBUTION ELECTION. For purposes of this (S)
11.7, a Special Pre-TEFRA Distribution Election means a designation in
writing, signed by the Participant or his or her beneficiary, made before
January 1, 1984 by Participant in this Plan or a Participant in a Pre-
Existing Plan who had accrued a benefit under such plan as of December 31,
1983 which designation specifies
11.7(b)(1) a distribution method which was permissible under Code
(S) 401(a)(9) as in effect prior to amendment by the Deficit
Reduction Act of 1984,
11.7(b)(2) the time at which such distribution will commence,
11.7(b)(3) the period over which such distribution will be made,
and
11.7(b)(4) if such designation is to be effective for a
beneficiary, the beneficiaries of the Participant in order of
priority.
A distribution to be made upon the death of a Participant shall not be
covered under this (S) 11.7(b) unless the information in the designation
with respect to such distribution satisfies the requirements of this (S)
11.7(b).
11.7(c) CURRENT DISTRIBUTIONS. Any distribution which began before
January 1, 1984 and continues after such date shall be deemed to be made
pursuant to a Special Pre-TEFRA Distribution Election if the method of
distribution was set forth in writing and such method satisfied the
requirements of (S) 11.7(b)(1) through (4).
11.7(d) REVOCATION. A Participant who made a Special Pre-TEFRA
distribution Election shall have the right to revoke such election by
completing and filing a distribution Election Form under (S) 9.
Furthermore, any change (other than the mere substitution or addition of a
beneficiary not originally designated in such election which does not
directly or indirectly alter the period over which distributions are to be
made) to a Special Pre-TEFRA Distribution Election shall be deemed to be a
revocation of such election. Upon revocation, any subsequent distribution
shall be made in accordance with Code (S) 401(a)(9). If a designation is
revoked subsequent to the date distributions are required to begin, the
Plan must distribute by the end of the calendar year following the calendar
year in which the revocation occurs the total amount not yet distributed
which would have been required to have been distributed to satisfy Code (S)
401(a)(9), but for the Special Pre-TEFRA Distribution Election. For
calendar years beginning after December 31, 1988, such distributions must
meet the minimum distribution incidental benefit requirements in (S)
1.401(a)(9)-2 of the proposed regulations. If an amount is transferred or
rolled over from one plan to another plan, the rules in Q&A J2 and Q&A J-3
of (S) 1.401(a)(9)-1 of the proposed regulations shall apply.
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SECTION 12. TOP-HEAVY PLAN RULES
12.1 APPLICATION. The rules set forth in this (S) 12 shall supersede any
provisions of this Plan or the Adoption Agreement which are inconsistent with
these rules as of the first day of the first Plan Year beginning after December
31, 1983 during which the Plan is or becomes a Top-Heavy Plan and such rules
shall continue to supersede such provisions for o long as the Plan is a Top-
Heavy Plan unless the Code permits such rules to cease earlier or requires them
to remain in effect for a longer period.
12.2 SPECIAL DEFINITIONS. For purposes of this (S) 12, the terms defined in
this (S) 12.2 shall have the means shown opposite such terms.
12.2(a) DETERMINATION DATE - means
12.2(a)(1) for the first Plan Year of a Plan which is adopted as a
new Plan under the Adoption Agreement, the last day of such Plan
Year, and
12.2(a)(2) for any subsequent Plan Year, the last day of the
immediately preceding Plan Year, and
12.2(a)(3) for any plan year of each other qualified plan
maintained by the Employer or an Affiliate which is part of a
Permissive Aggregation Group or a Require Aggregation Group, the
date determined under this (S) 12.2(a) as if the term "Plan Year"
means the plan year for each such qualified plan.
12.2(b) KEY EMPLOYEE - means any Employee or former Employee (and the
Beneficiaries of such Employee)(as determined in accordance with Code (S)
416(i)(1) who at any time during the Plan Year or any of the four
immediately preceding Plan Years was
12.2(b)(1) an officer of the Employer or an Affiliate whose
compensation for such Plan Year exceeds 50% of the dollar
limitation under Code (S) 415(b)(1)(A),
12.2(b)(2) an owner (or considered to be an owner within the
meaning of Code (S) 318) of one of the ten largest interests in
the Employer or an Affiliate whose compensation for such Plan Year
exceeds the 100% of the dollar limitation under Code (S)
415(c)(1)(A); provided that the value of such Employee's ownership
interest is more than one-half of one percent.
12.2(b)(3) a 5% owner of the Employer or an Affiliate, or
12.2(b)(4) a 1% owner of the Employer or an Affiliate whose
compensation for such Plan Year exceeds $150,000.
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For purposes of this (S) 12.2(b), an Employee's compensation means
compensation within the meaning of Code (S) 415(c)(3)(as defined in (S)
7.2(a)(2)) but including amounts contributed by the Employer or an
Affiliate pursuant to a salary reduction agreement which are excluded from
gross income under Code (S) 125, (S) 402(e)(3), (S) 402(h) or (S) 403(b).
12.2(c) PERMISSIVE AGGREGATION GROUP - means a required Aggregation Group
and any other qualified plan or plans (as described in Code (S) 401(a))
maintained by the Employer or an Affiliate which, when considered with the
Required Aggregation Group, would continue to satisfy the requirements of
Code (S) 401(a)(4) and Code (S) 410.
12.2(d) REQUIRED AGGREGATION GROUP - means (1) each qualified plan (as
described in Code 401(a)) maintained by the Employer or an Affiliate in
which at least one Key Employee participates or participated at any time
during the 5-year period ending on the Determination Date (without regard
to whether such plan has terminated) and (2) any other qualified plan
maintained by the Employer or an Affiliate which enables any such plan to
satisfy the requirements of Code (S) 401(a)(4) or Code (S) 410.
12.2(e) TOP-HEAVY PLAN - means this Plan if, for any Plan Year beginning
after December 31, 1983, either
12.2(e)(1) this Plan is not part of a Required Aggregation Group
or a Permissive Aggregation Group and the Top-Heavy Ratio for this
Plan exceeds 60%.
12.2(e)(2) this Plan is part of a Required Aggregation Group but
not part of a Permissive Aggregation Group and the Top-Heavy Ratio
for the Required Aggregation Group exceeds 60%; or
12.2(e)(3) this Plan is part of a Required Aggregation Group and
part of a Permissive Aggregation Group and the Top-Heavy Ratio for
the Permissive Aggregation Group exceeds 60%.
12.2(f) TOP-HEAVY RATIO.
12.2(f)(1) if the Employer or an Affiliate maintains one or more
defined contribution plans (including any simplified employee
pension plan) and the Employer or an Affiliate has never
maintained a defined benefit plan under which benefits have been
accrued for a Participant in this Plan during the 5-year period
ending on the Determination Date, "Top-Heavy ratio" means for this
Plan alone or for the Required Aggregation Group or Permissive
Aggregation Group, as appropriate, a fraction, the numerator of
which shall be the sum of the account balances of all Key
Employees as of the Determination date under this and all other
such defined contribution plans and the denominator of which shall
be the sum of the account balances of all employees as of the
Determination date under this and all other such defined
contribution plans.
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12.2(f)(2) If the Employer or an Affiliate maintains one or more
defined contribution plans (including any simplified employee
pension plan) and the Employer or an Affiliate maintains or has
ever maintained one or more defined benefit plans under which
benefits have been accrued for a Participant in this Plan during
the 5-year period ending on the Determination Date. "Top-Heavy
Ratio" means for the Required Aggregation Group or the Permissive
Aggregation Group, as appropriate, a fraction, the numerator of
which shall be the sum of the account balances for all Key
Employees as of the Determination Date under this and all other
such defined contribution plans and the sum of the present value
of the accrued benefits for all Key Employees as of the
Determination Date under all defined benefit plans maintained by
the Employer or an Affiliate and the denominator of which shall be
the sum of the account balances for all employees as of the
Determination date under this and all other such defined
contribution plans and the sum of the present value of the accrued
benefits for all employees as of the Determination Date under all
defined benefit plans maintained by the Employer or an Affiliate.
12.2(f)(3) The following rules shall apply for purposes of
calculating the Top-Heavy Ratio:
(i) The value of any account balance and the present
value of any accrued benefit shall be determined as of the
most recent Top-Heavy Valuation Date that falls within, or
ends with, the 12-month period ending on the Determination
Date (or, if plans are aggregated, the Determination Dates
that fall within the same calendar year), except as provided
under the regulations under Code (S) 416 for the first and
second years of a defined benefit plan;
(ii) The value of any account balance and the present
value of any accrued benefit shall include the value of any
distributions made during the 5-year period ending on such
Determination Date and any contributions due but as yet
unpaid as of the Determination Date which are required to be
taken into account on that date under Code (S) 416;
(iii) The present value of an accrued benefit under a
defined benefit plan shall be determined in accordance with
the interest rate and mortality assumptions specified in the
Adoption Agreement or, if this Plan and such defined benefit
plan are Paired Plans, as specified in the Adoption
Agreement for such defined benefit Paired Plan;
(iv) The account balance or accrued benefit of a
Participant who is not a Key Employee for the current Plan
Year but who was a Key Employee in a prior Plan Year or who
has not performed an Hour of Service for the Employer or any
Affiliate at any time during the 5-year period ending on the
Determination Date shall be disregarded;
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(v) Deductible employee contributions shall be
disregarded;
(vi) The calculation of the Top-Heavy Ratio and the extent
to which contributions, distributions, rollovers, and
transfers are taken into account shall be determined in
accordance with Code 416; and
(vii) If the Employer maintains more than one defined
benefit plan, the accrued benefit of a Participant other
than a Key Employee shall be determined under the method, if
any, that uniformly applies for accrual purposes under all
such defined benefit plans maintained by the Employer or an
Affiliate, or if there is no such method, as if such benefit
accrued not more rapidly than the slowest accrual rate
permitted under the fractional rule of Code (S)
411(b)(1)(C).
12.2(g) TOP-HEAVY VALUATION DATE- means for this Plan, the last day of
each Plan Year and for each other qualified plan maintained by the Employer
or an Affiliate,
12.2(g)(1) STANDARD OPTION - the most recent valuation date for
such plan or
12.2(g)(2) ALTERNATIVE - the valuation date specified in the
Adoption Agreement.
12.3 MINIMUM ALLOCATION.
12.3(a) GENERAL. Except as otherwise provided in this (S) 12.3, for any
Plan Year in which this Plan is a Top-Heavy Plan, the "minimum allocation"
for each Participant who is not a Key Employee means an allocation of
Employer Contributions and Forfeitures made in accordance with (S) 12.3(d)
which shall not be less than the lesser of
12.3(a)(1) 3% of such Participant's Compensation for such Plan
Year or
12.3(a)(2) if the Employer or an affiliate has no defined benefit
plan which uses this Plan to satisfy the requirements of Code (S)
401(a)(4) or Code (S) 410, the largest percentage of the Employer
Contributions and Forfeitures allocated on behalf of any Key
Employee (expressed as a percentage of the first $200,000 of
Compensation) for such Plan Year.
12.3(b) DEFINED BENEFIT PAIRED PLAN. If this Plan is adopted in
combination with a defined benefit Paired Plan, the Employer and the
Participating Affiliates shall make a contribution under this Plan (or if
this Plan is adopted in combination with another defined contribution
Paired Plan, under any combination of defined contribution Paired Plans)
for each Participant who is an Eligible Employee at any time during such
Plan Year who is also a Participant in the defined benefit Paired Plan
equal to at least 5% (or such greater percentage as is specified in the
adoption agreement for the defined benefit Paired Plan) of Compensation for
such Plan Year unless the Employer elects under such defined benefit Paired
Plan to provide the minimum benefit accrual under such defined benefit
Paired Plan.
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If this (S) 12.3(b) applies and the Employer has not elected to provide the
minimum benefit accrual under the defined benefit Paired Plan, the minimum
allocation required under this (S) 12.3(b) for Plan Years beginning on and
after the Final Compliance Date shall, subject to the ordering rules in (S)
12.3(c), be made under this Plan without regard to whether the Participant
also benefits under the defined benefit Paired Plan. Further, if this Plan
and the defined benefit Paired Plan do not benefit the same participants
for such Plan Year, the minimum allocation described in (S) 12.3(a) shall,
subject to the ordering rules in (S) 1.2(c), be made under this Plan for
each Participant described in (S) 12.3(d)(1) and the minimum benefit
accrual shall be made for each participant in the defined Benefit Paired
Plan in accordance with the terms of such Paired Plan.
12.3(c) DEFINED CONTRIBUTION PAIRED PLAN. If this Plan is adopted in
combination with one or more defined contribution Paired Plans, the minimum
allocation required under this (S) 12.3, if any, shall be made under such
Paired Plans in the following order:
12.3(c)(1) STANDARD OPTION - First, under the Money Purchase
Pension Plan, if any; second, under the Target Benefit Pension
Plan, if any; third, under the Profit Sharing Plan; if any; and
finally, under the 401(k) Plan, if any.
12.3(c)(2) ALTERNATIVE - in the order specified in the Adoption
Agreement.
12.3(d) PARTICIPANTS ENTITLED TO ALLOCATION. The minimum allocation
required for any Plan Year under the (S) 12.3
12.3(d)(1) shall be made for each Participant who is not a Key
Employee and who is employed as an Eligible Employee (or on an
authorized leave of absence as an Eligible Employee) on the last
day of such Plan Year, without regard to the number of Hours of
Service actually completed by such Participant in such Plan Year;
and
12.3(d)(2) shall not apply to any Participant (i) who is covered
under any other plan or plans maintained by the Employer or an
Affiliate and the Employer has specified in the Adoption Agreement
that the minimum allocation or the minimum benefit required under
Code (S) 416 for any Plan Year for which this Plan is a Top-Heavy
Plan shall be made under such other plan or plans or (ii) to the
extent such Participant receives such minimum allocation or
minimum benefit under this Plan or any other plans maintained by
the Employer or an Affiliate.
Notwithstanding (S) 12.3(d)(2), if this Plan is adopted as a
nonstandardized Plan that intends to satisfy the safe harbor in the Code
(S) 401(a)(4) regulations, the minimum allocation required under (S) 12.3
for Plan Years beginning on and after the Final Compliance Date must be
made for each Participant described in (S) 12.3(d(1) without regard to
whether the Participant also benefits under another plan, but only to the
extent that such minimum allocation is not otherwise received under this
Plan.
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12.3(e) NONFORFEITABILITY. The minimum allocation required under this (S)
12.3 (to the extent required to be nonforfeitable under Code (S) 416(b)
shall not be forfeited under Code (S) 411(a)(3)(B) or Code (S)
411(a)(3)(D).
12.3(f) COMPENSATION. For purposes of computing the minimum allocation
under this (S) 12.3, the term "Compensation" shall mean Compensation within
the meaning of Code (S) 415(c)(3) as described in (S) 7.2(a)(2).
12.3(g) MULTIPLE PLANS. If the Employer or an Affiliate also maintains
another plan, the Employer shall specify in the Adoption Agreement how the
minimum allocation, if any, required under Code (S)416 will be satisfied
and, if the Employer or an Affiliate maintains or has maintained a defined
benefit plan, the method of satisfying Code (S)416(h).
12.3(h) INTEGRATED PLANS.
12.3(h)(1) STANDARD OPTION. If this Plan is adopted as an
integrated Profit Sharing Plan, the following allocation formula
shall apply in lieu of the formula in (S)6.3(a)(2) for each Plan
Year in which such Plan is a Top-Heavy Plan.
The Forfeitures and the Employer Contribution shall be allocated
(and posted) as of the last day of such Plan Year to the Employer
Account of each Active Participant and each other Participant for
whom a minimum allocation is required to be made under this
(S)12.3 in accordance with the following:
STEP ONE - First, the lesser of (A) the sum of the Employer
Contribution and Forfeitures for such Plan Year or (B) the
product o the Top-Heavy Percentage and the total
Compensation of all such Participants shall be allocated in
the same ratio that each such Participant's total
Compensation for such Plan Year bears o the total
Compensation of all such Participants for such Plan Year.
STEP TWO - Second, the lesser of (A) the remaining Employer
Contribution and Forfeitures for such Plan Year or (B) the
product o the Top-Heavy Percentage (or the Maximum Disparity
Rate, if less) and the total Excess Compensation of all such
Participants shall be allocated in the same ratio that each
such Participant's Excess Compensation for such Plan Year
bear to the total Excess Compensation for such Plan Year
bear to the total Excess Compensation of all such
Participants for such Plan Year.
STEP THREE - Third, the lesser of (A) the remaining Employer
Contribution and Forfeitures for such Plan Year or (B) the
Integration Amount shall be allocated in the same ratio that
the sum of the total Compensation and Excess Compensation of
each such Participant for such Plan Year bears to the sum of
the total Compensation and Excess Compensation of all such
Participations for such Plan Year.
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STEP FOUR - Finally, the remaining Employer Contribution and
Forfeitures for such Plan Year shall be allocated in the same
ratio that each such Participant's total Compensation for such
Plan Year bears to the total Compensation of all such
Participants for such Plan Year.
12.3(h)(2) MONEY PURCHASE PENSION PLAN. If this Plan is adopted as an
integrated Money Purchase Pension Plan, (i) the "Base Contribution
Percentage" specified in the Adoption Agreement, if less than the Top-
Heavy Percentage, shall be increased to equal the Top-Heavy Percentage
and (ii) the Employer Contribution required under (S)5.2 (as adjusted
in (i) above) shall be made for each Active Participant and each other
Participant for whom an allocation is required to be made under this
(S)12.3.
12.3(h)(3) SPECIAL DEFINITIONS For purposes of this (S)12.3(h),
(i) "Excess Compensation" means the amount, if any, of a
Participant's Compensation for such Plan year which exceeds the
Integration Level for such Plan Year.
(ii) "Integration Amount" means the product of (1) the total
Compensation and the total Excess Compensation of all such
Participants and (2) the excess, if any, of the Integration
Percentage specified in the Adoption Agreement over the Top-Heavy
Percentage.
(iii) "Top-Heavy Percentage" means 3% or such greater
percentage required under this (S)12.3 or specified in the
Adoption Agreement.
12.4 VESTING SCHEDULE. For any Plan Year in which this Plan is a Top-Heavy
Plan, the Top-Heavy vesting schedule specified in the Adoption Agreement
automatically shall apply to all benefits under the Plan within the meaning of
Code (S)411(a)(7) (other than the benefits which are attributable to Employee
Contributions or Rollover Contributions or other contributions which are
nonforfeitable when made), including benefits accrued before the effective date
of Code (S)416 and before this Plan became a Top-Heavy Plan, unless the regular
vesting schedule is at least as favorable as such top-Heavy vesting schedule.
However, the provisions of this (S)12.4 shall not apply to the Account balance
of any Participant who does not complete an Hour of Service after the Plan first
becomes a Top-Heavy Plan and such Participant's Account balance attributable to
Employer contributions and Forfeitures shall be determined attributable to
Employer contributions and Forfeitures shall be determined without regard to
this (S)12.4. Further, no change in the vesting schedule as a result of a
change in this Plan's status to a Top-Heavy Plan or to a plan which si not a
Top-Heavy Plan shall deprive a Participant of the nonforfeitable percentage of
the Participant's Account balance accrued to the date o the change, and any such
change to the vesting schedule shall be subject to the provisions of (S)14.3(c).
12.5 401(K) PLAN. Notwithstanding any contrary provision, the following rules
shall apply if this Plan adopted as 401(k) Plan:
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12.5(a) Qualified Nonelective Contributions shall be treated as Employer
contributions for purposes of satisfying the minimum allocation under
(S)12.3.
12.5(b) Matching Contributions allocated to the Account of a Key Employee
shall be treated as Employer contributions for purposes of determining the
amount of the minimum allocation required under (S)12.3. The Plan may use
Matching Contributions allocated on behalf of a non-Key Employee to satisfy
the minimum allocation under (S)12.3; provided, however, that for Plan
Years beginning on and after the Final Compliance Date, such contributions
shall not be treated as Matching Contributions for purposes of satisfying
the limitations of (S)7.4 and (S)7.5 but shall instead be subject to the
general nondiscrimination rules of Code (S)401(a)(4).
12.5(c) Elective Deferrals allocated to the Account of a Key Employee
shall be treated as Employer contributions for purposes of determining the
amount of the minimum allocation required under (S)12.3. However, for Plan
Years beginning on and after the Final Compliance Date, Elective Deferrals
allocated Deferrals allocated on behalf of non-Key Employees shall not be
treated as Employer contributions for purposes of satisfying the minimum
allocation required under (S)12.3.
SECTION 13. TOP-HEAVY PLAN RULES
13.1 INSURANCE CONTRACTS.
13.1(a) ELECTION AND EXISTING LIFE INSURANCE CONTRACTS.
13.1(a)(1) STANDARD OPTION. No Participant shall have the right
to elect to have the Trustee purchase an insurance contract on
his or her life for his or her Account under this Plan; however,
any life insurance contract purchased under their terms of a Pre-
Existing Plan, which is acceptable to the Trustee, shall continue
to be held by the Trustee for the benefit of the Participant
subject to the conditions of this (S)13.1.
13.1(a)(2) ALTERNATIVE. If so specified in the Adoption Agreement
each Participant who is an Eligible Employee may elect (subject
to this (S)13.1) to have the Trustee purchase an insurance
contract on his or her life for this or her Account under the
Plan by completing and filing an Election Form with the Plan
Administrator.
13.1(b) PREMIUMS. The aggregate annual premiums on any life insurance
contracts held for a Participant's Account under this Plan shall be subject
to the following limitations:
13.1(b)(1) ORDINARY LIFE. If the life insurance contracts are
ordinary whole life insurance contracts which are contracts with
both nondecreasing death benefits and nonincreasing premiums,
such premiums shall be less than one-half of the
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aggregate Employer Contributions plus Forfeitures credited to the
Participant's Employer Account and Matching Account.
13.1(b)(2) TERM AND UNIVERSAL LIFE. If the life insurance
contracts are term life insurance contracts (other than whole
life), then such premiums shall not exceed one-fourth of the
aggregate Employer Contributions plus Forfeitures credited to the
Participant's Employer Account and Matching Account.
13.1(b)(3) COMBINATION. If the life insurance contracts either
combine features of ordinary whole life and other life insurance
or consist of ordinary whole life and other life insurance
contracts, the sum of one-half of the ordinary whole life
premiums plus all other life insurance premiums shall not exceed
one-forth of the aggregate Employer Contributions plus
Forfeitures credited to the Participant's Employer Account and
Matching Account.
13.1(c) OWNER AND BENEFICIARY. The Trustee shall apply for and be the
owner of each life insurance contract held under this Plan and also shall
be named as the beneficiary of each such life insurance contract. In the
event of the Participant's death prior to the date as of which the
Participant's Account becomes payable under the Plan, the Trustee, as
beneficiary, shall pay the entire proceeds of such life insurance contracts
to the Participant's Account which shall then be distributed to the
surviving Spouse or, if applicable, to the Participant's Beneficiary in
accordance with (S)10. Under no circumstances shall the Fund retain any
part of the proceeds of any life insurance contracts. In the event of a
conflict between the terms of the Plan and the terms o any life insurance
contracts held under this Plan, the Plan provisions shall control.
13.1(d) ALLOCATIONS. Any dividends or credits earned on a life insurance
contract held under this Plan shall be allocated to the Account of the
Participant for whom the contract was purchased and may be applied to pay
the annual premium on such life insurance contract. The amount of the
annual premium on each such insurance contract shall be charged against the
Account of the insured Participant. The value of any such insurance
contract shall be deemed to be zero for the purposes of allocating the
Employer Contribution, Forfeitures or the Fund Earnings for any Plan year
as provided in (S)6.
13.1(e) DISTRIBUTION TO PARTICIPANT. Subject to (S)10, JOINT AND SURVIVOR
ANNUITY REQUIREMENTS, the life insurance contracts held as part of a
Participant's Account shall be distributed in kind to the Participant upon
retirement or other termination of employment as an Employee for reasons
other than death (1) if such Account is completely nonforfeitable or (2) if
the cash surrender value of such contracts is equal to or less than the
nonforfeitable portion of the Participant's Account. If neither one of
these conditions is satisfied and the Participant does not elect to
purchase the life insurance contracts under (S)13.1(f), the Trustee shall
surrender such contracts, add the proceeds to the Participant's Account and
distribute the nonforfeitable percentage of the Participant's Account in
accordance with (S)10.
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13.1(f) TERMINATION OF INSURANCE ELECTION. A Participant may direct the
Trustee to stop making premium payments on a life insurance contract held
as part of the Participant's Account and to surrender such contract or to
sell such contract to the participant by completing and filing and Election
Form with the Plan Administrator. If the Participant purchases the
contract, he or she shall prepare and deliver to the Trustee all papers
needed to properly effect that purchase and shall pay to the Trustee an
amount equal to the cash surrender value of the contract at the time of the
purchase. The amount paid either by the Participant for the purchase or by
the insurance company in connection with the surrender of a contract shall
be credited to the Participant's Account as of the date payment is made to
the Trustee. A Participant automatically shall be deemed to have directed
the Trustee to stop premium payments and to surrender a life insurance
contract immediately before a premium due date if the premium due on the
date would exceed the premium payment limits in (S)13.1(b).
13.2 INDIVIDUALLY DIRECTED INVESTMENTS.
13.2(a) GENERAL.
13.2(a)(1) STANDARD OPTION. No Participant or a Beneficiary may
direct the investment of such individual's Account.
13.2(a)(2) ALTERNATIVE. If so specified in the Adoption
Agreement, a Participant or a Beneficiary may elect how such
individual's Account shall be invested between the investment
alternative available under the Plan from time to time. The Plan
Administrator shall furnish to each Participant and Beneficiary
sufficient information to make informed decisions with regard to
investment alternatives and, if this Plan is intended to satisfy
ERISA (S)404(c), information which satisfied the requirements of
the regulations under ERISA (S)404(c). An individual investment
direction shall apply
(i) STANDARD OPTION - to the individual's entire Account or
(ii) ALTERNATIVE - only to the portion the individual's
Account specified in the Adoption Agreement.
13.2(b) ELECTION RULES. The Plan Administrator from time to time shall
establish and shall communication in writing to such individuals such
reasonable restrictions and procedures for making individual investment
elections as the Plan Administrator deems appropriate under the
circumstances for the proper administration of this Plan. Such
restrictions and procedures shall be applied on a uniform and
nondiscriminatory basis to all similarly situated individuals and, if this
Plan is intended to satisfy ERISA (S)404(c), shall be in accordance with
the regulations under ERISA (S)404(c).
13.2(c) NO ELECTION. The Account of an individual for whom no investment
election is in effect under this (S)13.2, either because such individual
failed to make a proper election or
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terminated an election under this (S)13.2, shall be invested as designated
by the Plan Administrator.
13.3 PARTICIPANT LOANS. This (S)13.3. shall apply only if the Employer
specifies in the Adoption Agreement that loans shall be permitted. However, if
loans are not permitted in the Adoption Agreement, any outstanding loans made
under the terms of the Pre-Existing Plan shall be subject to this (S)13.3.
13.3(a) ADMINISTRATION AND PROCEDURES. The Plan Administrator shall
establish objective nondiscriminatory written procedures for the
administration of the loan program under this (S)13.3 (which written
procedures, together with any written amendments to such procedures, hereby
are expressly incorporated by reference as a part of this Plan), including,
but not limited to,
13.3(a)(1) the class of Participants and Beneficiaries who are
eligible for a loan;
13.3(a)(2) the identity of the person or position authorized to
administer the loan program;
13.3(a)(3) the procedures for applying for a loan;
13.3(a)(4) the basis on which loans will be approved or denied;
13.3(a)(5) the limitations, if any, on the types of amount of loans
offered;
13.3(a)(6) the procedures for determining a reasonable rate of
interest;
13.3(a)(7) the types of collateral which may be used as security for
a loan; and
13.3(a)(8) the events constituting default and the steps that will
be taken to preserve Plan assets in the event of such default.
13.3(b) NO LOANS TO CERTAIN OWNERS AND FAMILY MEMBERS. No loan shall be
made under this Plan to a Participant or Beneficiary who is
13.3(b)(1) an Owner-Employee,
13.3(b)(2) an employee or officer of an Employer or an Affiliate
which is an electing small business corporation within the meaning of
Code (S)1361 ("S Corporation") who owns (or is considered to won
within the meaning of Code (S)318(a)(1)) on any day during any
taxable year of such corporation for which it is an S Corporation
more than 5% of the outstanding stock of such corporation, or
13.3(b)(3) a member of the family (as defined in Code (S)267(c)(4))
of a Participant or Beneficiary described in clause (1) or (2).
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13.3(c) GENERAL CONDITIONS. If loans are made available after October 18,
1989 to any Participant or Beneficiary who is a "party in interest" (as
defined in ERISA (S)3(14)) with respect to the Plan, then loans shall be
made available to all Participants and Beneficiaries who are parties in
interest with respect to the Plan. All loans which are made under this Plan
shall comply with the following requirements under Code (S)4975(d)(1) and
ERISA (S)408(b)(1):
13.3(c)(1) such loans shall be made available to Participants and
Beneficiaries who are eligible for a loan on a reasonably equivalent
basis;
13.3(c)(2) such loans shall not be made available to Highly
Compensated Employees in an amount greater than the amount made
available to other Employees;
13.3(c)(3) such loans shall be made in accordance with specific
provisions regarding such loans set forth in the Plana nd the written
procedures described in (S)13.3(a);
13.3(c)(4) such loans shall bear a reasonable rate of interest; and
13.3(c)(5) such loans shall be adequately secured.
13.3(c) OTHER CONDITIONS. All loans made under this Plan shall be subject
to the following conditions:
13.3(d)(1) If the loan is secured by an portion of the
Participant's Account and (S)10.5 does not apply to any portion of
the Participant's Account, the Participant's Spouse, if any, must
consent in writing to the granting of such security interest or to
any increase in the amount of security no earlier than the
beginning of the 90 day period before such loan is made; provided
(i) such consent must be in writing before a notary public and
must acknowledge the effect of such loan;
(ii) such consent shall be irrevocable and shall be binding
against the person, if any, identified as the Participant's Spouse
at the time of such consent and any individual who may
subsequently become the Participant's Spouse;
(iii) a new consent shall be required in the event of any
renegotiation, extension, renewal, or other revision of such a
loan; and
(iv) if a valid spousal consent has been obtained, then,
notwithstanding any other provision of this Plan, the portion of
the Participant's vested Account balance used as a security
interest held by the Plan by reason of a
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loan outstanding to the Participant shall be taken into account
for purposes of determining (and may reduce) the amount of the
Account balance payable at the time of death or distribution, by
only if the reduction is used as repayment of the loan. If less
than 100% of the Participant's vested Account balance (determined
without regard to the preceding sentence) is payable to the
surviving Spouse, then the vested Account balance shall be
adjusted by first reducing the vested Account balance by the
amount of the security used as repayment of the loan, and then
determining the benefit payable to the surviving Spouse.
13.3(d)(2) The loan shall provide for the repayment of principal and
interest in substantially level installments with payments not less
frequently than quarterly over a period of 5 years or less unless
such loan is classified as a "home loan" (as described in Code
(S)72(p));
13.3(d)(3) If the loan is secured by any portion of the
Participant's Account, such Account balance shall not be reduced as a
result of a default until a distributable event occurs under the
Plan; and
13.3(d)(4) The Participant or Beneficiary shall agree to such other
terms and conditions as are required under the written procedures
described in (S)13.3(a).
13.3(e) CREDITING OF LOAN PAYMENTS.
13.3(e)(1) ACCOUNT ASSET (STANDARD OPTION). The loan to a
Participant whose loan request is granted under this (S)13.3 shall be
made from, and shall be an asset of, the Participant's Account and
all principal and interest payments on such loan shall be credited
exclusively to the Participant's Account.
13.3(e)(2) FUND ASSET (ALTERNATIVE). If the Employer specifies the
Adoption Agreement that loans shall be treated as an asset Fund or,
if any loan which was made under a Pre-Existing Plan was treated as
an asset of the Fund, such loans shall be treated under this Plan as
a general Fund investment and an asset of the Fund, and all principal
and interest payments on such loan shall be credited exclusively to
the fund as general Fund investment.
13.3(f) LIMITATIONS ON AMOUNTS. The principal amount of any loan (when
addressed to the outstanding principal balance of any outstanding loans made
under this Plan or under any other plan which is tax exempt under Code (S)401
and which is maintained by the Employer or an Affiliate) to the Participant
shall not exceed the lesser of (1) and (2) below:
13.3(f)(1) DOLLAR LIMIT - $50,000 reduced by the excess, if any, of
(i) the highest outstanding principal balance of previous loans
to the Participant from the Plan (and any other plan maintained
by the Employer or
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an Affiliate) during the one year period ending immediately
before the date such current loan is made, over
(ii) the current outstanding principal balance of such previous
loans on the date such current loan is made, or
13.3(f)(2) ACCOUNT LIMIT -
(i) STANDARD OPTION - 50% of the nonforfeitable interest in the
Participant's Account at the time the loan is made or
(ii) ALTERNATIVE - if so specified in the Adoption Agreement,
the greater of $10,000 or the amount specified in
(S)13.3(f)(2)(i), but in no event more than the nonforfeitable
interest in the Participant's Account.
An assignment or pledge of any portion of the Participant's interest
in the Plan and a loan, pledge or assignment with respect to any
insurance contract purchased under the Plan shall be treated as a
loan for purposes of the limitations in this (S)13.3(f).
13.3(g) FAILURE TO REPAY. If (1) the terms of the loan provide that it
shall become due and payable in full if the Participant's or Beneficiary's
obligation to repay the loan has been discharged through a bankruptcy or
any other legal process or action which did not actually result in payment
in full and (2) such loan is not actually repaid in full, such loan shall
be cancelled on the Fund's books and records and the amount otherwise
distributable to such Participant or Beneficiary under this Plan shall be
reduced by the principal amount of the loan plus accrued but unpaid
interest due as determined without regard to whether the ban had been
discharged through a bankruptcy or any other legal process or action which
did not actually result in payment in full. The Plan Administrator shall
have the power to direct the Trustee to take such action as the Plan
Administrator deems necessary or appropriate to stop the payment of an
Account to or on behalf of a Participant who fails to repay a loan (without
regard to whether the obligation to repay such loan had been discharged
through a bankruptcy or any other legal process or action) until the
Participants Account has been reduced by the principal plus accrued but
unpaid interest due (without regard to such discharge) on such loan or to
distribute the note which evidences such loan in full satisfaction of that
portion of such Account which is represented by the value of such note.
Notwithstanding the foregoing, in the event of default, foreclosure on the
note and execution of the Plan's security interest in the Account shall not
occur until a distributable event occurs under this Plan and interest shall
continue to accrue only to the extent permissible under applicable law.
13.3(h) DISTRIBUTION. In the event the Participant's Account becomes
distributable before the loan is repaid in full, then the vested Account
balance shall be adjusted by first reducing the vested Account balance by
the amount of the security interest in the Account and then determining the
benefit payable. Nothing shall preclude the Trustee from cancelling the
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Plan's security interest in the Account and distributing the note in lieu
of any other Plan assets in full satisfaction of that portion of the
Participant's Account represented by the value of the outstanding balance
of the loan or the amount which would have been outstanding but for a
discharge in bankruptcy or through any other legal process.
SECTION 14. ADOPTION, AMENDMENT, WITHDRAWAL AND CONVERSION, MERGER, ASSET
TRANSFERS AND TERMINATION
14.1 ADOPTION
14.1(a) GENERAL. Subject to the terms and conditions of this Plan, the
Trust Agreement and the Adoption Agreement, any sole proprietorship,
partnership or corporation may adopt this Plan by completing and executing
the Adoption Agreement. The Plan as adopted by the Employer shall be
effective for all purposes (other than as a "prototype plan") as of the
Effective Date. However, the status of the Plan as a "prototype plan"
shall be conditioned upon acceptance of the Adoption Agreement by the
Prototype Sponsor and, upon such acceptance, such status as a "prototype
plan" shall be effective retroactive to the Effective Date except as
provided in (S)14.4.
14.1(b) PRE-EXISTING PLAN. If this Plan is adopted as an amendment and
restatement of a Pre-Existing Plan, (1) the Trust Agreement shall be
substitute for the trust or other funding arrangement under the Pre-
Existing Plan, (2) the assets held under such trust or other funding
arrangement shall become assets of the Fund, (3) an Account shall be
established for each person who is a participant or beneficiary in the Pre-
Existing Plan, and (4) the dollar value assigned to such participant's or
beneficiary's Pre-Existing Plan account or accounts shall be credited to
such person's Account under this Plan (or to one or more subaccounts under
such Account). All optional forms of benefit available under the Pre-
Existing Plan which must be preserved under Code (S)411(d)(6) shall be
available to the Participant under this Plan. Further, such optional forms
shall be described in the Adoption Agreement and shall apply to the
Participant's entire Account balance. Notwithstanding the foregoing, if
the Employer so specifies in the Adoption Agreement and separately accounts
for the benefits attributable to the Pre-Existing Plan as described in
(S)14.5(c) or, if applicable, (S)10.5, the optional forms which must be
preserved may be limited to such separate accounts.
14.1(c) PARTICIPATING AFFILIATES. If this Plan is adopted as a
standardized Plan, each Affiliate shall automatically become a
Participating Affiliate effect as of the later of the Effective Date or the
date such entity first becomes an Affiliate. If this Plan is adopted as a
nonstandardized Plan, an Affiliate of the Employer may adopt the Employer's
Plan effective as of any date on or after the Effective Date. An
Affiliate's execution of the Adoption Agreement (or a separate signature
page to the Adoption Agreement) shall evidence the Participating
Affiliate's adoption of the Plan and the effective date of such adoption.
In adopting this Plan, each Participating Affiliate is deemed to have
authorized the Employer to effect all actions under this Plan on its
behalf, including but not limited to the powers reserved to the Employer
under this (S)14 and the power to enter into such agreements with the
Trustee or others as may be necessary or appropriate under the Plan.
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14.2 AMENDMENT.
14.2(a) PROTOTYPE SPONSOR. Subject to the restrictions of (S)14.3, the
Prototype Sponsor shall have the right at any time and from time to time to
amend this Plan in any respect whatsoever in writing. To the extent
required under the procedures and rules in effect for master and prototype
plans at the time of any such amendment, notice of such amendment shall be
given to the Employer by the Prototype Sponsor as soon as practicable under
the circumstances.
14.2(b) EMPLOYER. Subject to the restrictions of (S)14.3, the Employer
shall have no right to amend this Plan except (1) by entering into a new
Adoption Agreement with the Prototype Sponsor, (2) by adding such language
to the Adoption Agreement as is necessary to allow the Plan to continue to
satisfy the requirements of Code (S)415 or Code (S)416 because of the
required aggregation of multiple plans, (3) by adopting certain model
amendments published by the Internal Revenue Service which specifically
provide that such adoption would not cause the Plan to be treated as an
individually designed plan, or (4) by withdrawing this Plan as a prototype
and converting it into an individually designed plan as provided in
(S)14.4.
14.3 CERTAIN AMENDMENT RESTRICTIONS.
14.3(a) GENERAL. No amendment to the Plan shall be made which would (1)
deprive a Participant of the nonforfeitable percentage of his or her
Account balance accrued to the later of the effective date of the amendment
or the date the amendment is adopted, or (2) decrease a Participant's
Account balance or eliminate an optional form of benefit except to the
extent permissible under Code (S)412(c)(8), (S)401(a)(4) and (S)411(d)(6)
and the regulations under those sections.
14.3(b) CHANGE IN SERVICE CALCULATION METHOD. If an amendment changes the
method of calculating service, each Employee who had any service credit
under such prior method shall be credited with any service for any
computation period during which such amendment was effective in accordance
with the rules in (S)3.
14.3(c) CHANGES IN VESTING SCHEDULE. If an amendment directly or
indirectly affects the computation of a Participant's nonforfeitable
percentage of his or her Account or if the Plan's vesting schedule changes
as a result of a change in the Plan's status as a Top-Heavy Plan (as
described in (S)12.4), each Participant with at least 3 years of service
with the Employer or an Affiliate may elect, within a reasonable period
after the adoption of the amendment, to have the nonforfeitable percentage
of his or her Account computed under this Plan without regard to such
amendment, in the case of a Participant who does not have at least one Hour
of Service in any Plan Year beginning after December 31, 1988, the
preceding sentence shall be applied by substituting 5 years of service for
3 years of service. The period during which the election may be made shall
commence with the date the amendment is adopted and shall end on the later
of
14.3(c)(1) 60 days after the amendment is adopted;
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14.3(c)(2) 60 days after the amendment becomes effective; or
14.3(c)(3) 60 days after the Participant is issued written notice of
the amendment by the Plan Administrator.
Furthermore, if an amendment changes the Plan's vesting schedule, the
nonforfeitable percentage (determined as of the later of the date the
amendment is adopted or the date it becomes effective) of the employer-
derived Account balance of each Employee who is a Participant as of such
date shall not be less than the percentage computed under the Plan without
regard to such amendment.
14.4 WITHDRAWAL AS A PROTOTYPE AND CONVERSION TO INDIVIDUALLY DESIGNED PLAN.
14.4(a) VOLUNTARY CONVERSION. The Employer may voluntarily withdraw this
Plan as a "prototype plan" and convert it to an individually designed plan
by written notice filed with the Trustee and the Prototype Sponsor. For
purposes of this (S)14.4, such withdrawal shall be effective with respect
to the Employer's plan and the Trustee as of the effective date of such
withdrawal, but such withdrawal shall not relieve the Employer of any
responsibilities or liabilities to the Prototype Sponsor until 60 days
after the date the Prototype Sponsor receives written notice of such
withdrawal unless the Prototype Sponsor agrees in writing to an earlier
effective date for such withdrawal.
14.4(b) INVOLUNTARY CONVERSION. The Employer shall be deemed to have
withdrawn this Plan as a "prototype plan" and converted it to an
individually designed plan effective as of the earlier of the date
14.4(b)(1) the Internal Revenue Service or a court determines
that this Plan fails to meet the requirements of Code (S)401;
14.4(b)(2) the Trustee ceases to maintain a brokerage account for
the Plan with the Prototype Sponsor or with an approved subsidiary
of the Prototype Sponsor;
14.4(b)(4) the Employer amends any provision of this Plan or the
Adoption Agreement (other than in accordance with (S)14.2(b)(1)
through (3)) including an amendment because of a waiver of the
minimum funding requirement under Code (S)412(d).
14.4(c) EFFECT OF WITHDRAWAL AND CONVERSION. If this Plan is withdrawn as
a prototype and converted to an individually designed Plan under this
(S)14.4, the Employer as of the effective date of such withdrawal shall
assume the right and responsibility to amend the Plan under (S)14.2(a) and
thereafter only the Employer shall make amendments to this Plan; provided,
(1) no such amendment shall affect the Trustee's rights or duties under
this Plan without the Trustee's prior written consent and (2) any such
amendment shall be subject to the restrictions of (S)14.3.
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14.5 MERGER, CONSOLIDATION OR ASSET TRANSFERS.
14.5(a) GENERAL. In the case of any Plan merger or consolidation with, or
transfer of assets or liabilities to or from, any other employee benefit
plan, each person for whom an Account then is maintained shall be entitled
to receive a benefit from such plan, if it is then terminated, which is
equal to greater than the benefit such person would have been entitled to
receive immediately before such merger, consolidation or transfer, if this
Plan then had been terminated.
14.5(b) AUTHORIZATION. The Plan Administrator may authorize the Trustee
to accept a transfer of assets from or transfer Fund assets to the trustee,
custodian or insurance company of any other plan which satisfies the
requirements of Code (S)401(a) in connection with a merger or consolidation
with, or other transfer of assets and liabilities to or form any such plan,
provided that the transfer will not effect the qualification of this Plan
under Code (S)401(a) and the assets to be transferred are acceptable to the
Trustee.
14.5(c) SEPARATE ACCOUNT. The Plan Administrator may establish separate
bookkeeping accounts for any assets transferred to the Trustee under this
(S)14.5 and shall establish such separate bookkeeping accounts if required
under this Plan. If separate accounts are maintain with respect to
transferred assets, no contributions or Forfeitures under this Plan shall
be credited to such separate accounts, but such accounts shall share in the
Fund Earnings on the same basis as each other Account under (S)6.2. Any
individual for whom an Account is established under this (S)14.5 shall
become a Participant in this Plan as of the effective date of the merger,
consolidation or asset transfer; however, no contributions shall be made by
or on behalf of such individual under this Plan unless such individual is
otherwise entitled to such contributions under the terms of this Plan.
14.5(d) CODE (S)411 (D)(6) PROTECTED BENEFITS. All optional forms of
benefit available under the transferor plan which must be preserved under
Code (S)411 (d)(6) shall be available to the Participant under this Plan
unless such transfer meets the requirements of Code (S)414(1) and the
Participant has made an elective transfer with satisfies the requirements
set forth in O&A-3(b) of (S)1.411(d)-4 of the Federal income Tax
Regulations. Further, such optional forms shall be described in the
Adoption Agreement and, generally, shall apply to Participant's entire
Account balance. Notwithstanding the foregoing, if the Employer so
specifies in the Adoption Agreement and separately accounts for such
transferred assets, the optional forms which must be preserved may be
limited to such separate account.
14.6 TERMINATION.
14.6(a) RIGHT TO TERMINATE. The Employer may terminate or partially
terminate this Plan or discontinue contributions to this Plan at any time
by written action of the Board filed with the Trustee and Prototype
Sponsor. The Employer reserves the right to terminate the participation in
this Plan by any Participating Affiliate at any time written action.
Furthermore, a Participating Affiliate's participation in this Plan
automatically shall terminate if (and at such time as) its status as an
Affiliate terminates for any reason whatsoever (other
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than through a merger or consolidation into another Participating
Affiliate). However, a Participating Affiliate's termination or
participation in this Plan shall not be deemed to be a termination or
partial termination of the Plan except to the extent required under the
Code. Upon complete termination of this Plan, any unallocated amounts
(other than amounts in a Code (S)415 suspense account described in
(S)7.2(b)) shall be allocated in accordance with the Plan terms but, if the
Plan terms do not address the allocation of such amounts, they shall be
allocated in a nondiscriminatory manner prior to distribution of Plan
assets.
14.6(b) FULL VESTING UPON TERMINATION. If this Plan is terminated or
partially terminated under this (S)14.6 or if there is a complete
discontinuance of contributions under this Plan, the Account of each
affected Employee of the Employer or an Affiliate shall become
nonforfeitable on the effective date of such termination or partial
termination or complete discontinuance of contributions, as the case may
be. In the event of a complete termination of this Plan or a complete
discontinuance of contributions, each other Account (except to the extent
otherwise nonforfeitable under the terms of this Plan) all become a
Forfeiture and shall be allocated as such under (S)6.3 of the effective
date of such complete termination or complete discontinuance as if such
date was the last day of a Plan Year.
SECTION 15. ADMINISTRATION
15.1 NAMED FIDUCIARIES. The Plan Administrator and the Employer (if the Plan
Administrator is not the Employer) shall be the Named Fiduciaries responsible to
the extent of their powers and responsibilities assigned in the Plan for the
control, management and administration of the Plan. The Plan Administrator, the
Employer and the Trustee (other than Smith Barney Shearson Trust Company) shall
be the Named Fiduciaries responsible to the extent of their respective powers
and responsibilities assigned to them in the Trust Agreement for the safe
keeping, control, management, investment and administration of the assets of the
Fund. Any power or responsibility for the control, management or administration
of the Plan or the Fund which is not expressly assigned to a Named Fiduciary
under the Plan or the Trust Agreement, or with respect to which the proper
assignment is in doubt, shall be deemed to have been assigned to the Employer as
a Named Fiduciary. One Named Fiduciary shall have no responsibility to inquire
into the acts and omissions of another Named Fiduciary in the exercise of powers
or the discharge of responsibilities assigned to such other Named Fiduciary
under the Plan or the Trust Agreement. Any person may serve in more than one
fiduciary capacity under the Plan or the Trust Agreement and a fiduciary may be
a Participant provided such individual otherwise satisfies the requirements of
(S)4.
A Named Fiduciary, by written instrument filed by the Plan Administrator with
the records o the Plan, may designate a person who is not a Named Fiduciary to
carry out any of its responsibility under the Plan or Trust Agreement, other
than the responsibilities of the Trustee for the safekeeping, control,
management, investment and administration of the assets of the Fund, except to
the extent the Trustee's responsibility for investment decisions is delegated to
the Employer, the Plan Administrator, or an investment manager.
15.2 ADMINISTRATIVE POWERS AND DUTIES. Except to the extent expressly reserved
under the Plan or the Trust Agreement to the Employer Board, or the Trustee, the
Plan Administrator shall have
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the exclusive responsibility and complete discretionary authority to control
operation, management and administration of the Plan, with all powers necessary
to enable it properly to carry out such responsibilities, including (but not
limited to) the power to construe the Plan, the related Adoption Agreement, and
the Trust Agreement, to determine eligibility for benefits and to resolve all
interpretative, equitable or other questions that arise under the Plan or the
Trust Agreement. The decisions of the Administrator on all matters within the
scope of its authority shall be final and binding. To the extent a
discretionary power or responsibility under the Plan or Trust Agreement is
expressly assigned to a person other the Plan Administrator, such person shall
have complete discretionary authority to carry out such power or responsibility
and such persons's decisions on all matters within the scope of such person's
authority be final and binding.
15.3 AGENT FOR SERVICE OF PROCESS. The agent for service of process for this
Plan shall be the person who is identified as the agent for service of process
in the summary plan description for this Plan. Neither Prototype Sponsor nor
any of its affiliates shall be the agent for service of process for the Plan.
15.4 REPORTING AND DISCLOSURE. All records regarding the operation management
and administration of this Plan shall be maintained by the Plan Administrator.
The Plan Administrator shall satisfy any federal or state requirement to report
and disclose any information regarding Plan to any federal or state department
or agency, or to any Participant or Beneficiary.
SECTION 16. MISCELLANEOUS
16.1 SPENDTHRIFT CLAUSE AND QUALIFIED DOMESTIC RELATIONS ORDERS. Except to the
extent permitted by law, no Account, benefit, payment or distribution under the
Plan or Trust Agreement shall be subject to attachment, garnishment, levy,
execution or any claim or legal process of any creditor of a Participant or
Beneficiary, and no Participant Beneficiary shall have any right to alienate,
commute, anticipate, or assign all or any part of such individual's Account,
benefit, payment or distribution under this Plan or Trust Agreement. The
preceding sentence also shall apply to the creation, alienation, assignment, or
recognition of a right to any benefit payable with respect to a Participant
pursuant to a domestic relations order unless such order is determined to be a
qualified domestic relations order ("QDRO") within the meaning of Code (S)414(p)
and such order is entered on or after January 1, 1985. The Plan Administrator
shall establish uniform and nondiscriminatory procedures regarding the
determination of whether a domestic relations constitutes a QDRO, the timing of
distributions made pursuant to a QDRO and the treatment of any separate account
established under Plan pursuant to a QDRO. Unless otherwise expressly specified
in such procedures, (1) the Plan Administrator shall treat a domestic relations
order entered before January 1, 1985 as a QDRO in accordance with Code (S)414(p)
and (2) a distribution may be made to an alternate payee pursuant to a QDRO
prior to the earliest date that a distribution could be made to a Participant
under the terms of this Plan and prior to a Participant's "earlier retirement
age" under Code (S)414(p). The determinations and the distributions made by, or
at the direction of, the Plan Administrator under this (S)16.1 shall be final
and binding on the Participant and on all other persons interested in such
order.
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16.2 BENEFITS SUPPORTED ONLY BY TRUST FUND. Any person having any claim for any
benefit under this Plan shall look solely to the assets of the Fund for the
satisfaction of that claim. In no event shall the Prototype Sponsor, the
Trustee, the Plan Administrator, the Employer or a Participating Affiliate or
any of their employees, officers, directors or their agents be liable in their
individual capacities to any person whomsoever for the payment of any benefits
under this Plan.
16.3 DISCRIMINATION. The Plan Administration shall administer the Plan in a
manner which it deems equitable under the circumstances for all similarly
situated Employees, Participants, spouses and Beneficiaries; provided the Plan
Administrator shall not permit discriminating in favor of Highly Compensated
Employees of the Employer or any Participating Affiliate which would be
prohibited under Code (S)401(a).
16.4 CLAIMS. Any payment to a Participant or Beneficiary or to the legal
representative or heirs-at-law of any such person made in accordance with the
provisions of this Plan shall to the extent of such payment be in full
satisfaction of all claims under this Plan against the Trustee, Plan
Administrator, a Named Fiduciary, the Employer and any Participating Affiliate,
any of may require such person, such person's legal representative or heirs-at-
law, as a condition precedent to such payment, to execute a receipt and release
in such form as shall be determined by the Trustee, Plan Administrator, a Named
Fiduciary, the Employer or a Participating Affiliates, as the case may be.
16.5 NONVERSION. Except as provided in (S)7.2(b) and in this (S)16.5, neither
the Employer nor any Participating Affiliate shall have any present or
prospective right, claim, or interest in the Fund or in any Employer
contribution made to the Trustee.
To the extent permitted by the Code and ERISA, the Employer contributions
described in this (S)16.5, less any losses on such contributions, shall be
returned by the Trustee to the Employer or to any Participating Affiliate upon
the written direction of the Plan Administrator that:
16.5(a) an Employer contribution is made by a mistake of fact, provided
such return is effected within one year after the payment of such
contribution;
16.5(b) a final judicial or Internal Revenue Service determination is made
that this Plan fails to satisfy the requirements of Code (S)401 with
respect to its initial qualification (provided, if the Employer is not to
entitled to rely on the Prototype Sponsor's opinion letter, the application
for the initial qualification of the Plan is made on or before the date
prescribed by law for filing the Employer's return for the taxable year in
which the Plan is adopted, or such later date as the Secretary of the
Treasury may prescribe), in which event all Employer contributions made
before such judicial or administrative determination (whichever last
occurs) plus any earnings and minus any losses shall be ruined within one
year after such determination, all such contributions begin hereby
conditioned upon this Plan satisfying all applicable requirements under
Code (S)401 from and after its adoption; or
16.6(c) a deduction for an Employer contribution is disallowed under Code
(S)404, in which event such contribution shall be returned within one year
after such disallowance, all such contributions being hereby conditioned
upon being deductible under Code (S)404.
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16.6 EXCLUSIVE BENEFIT. The corpus or income of the Fund shall not be diverted
to or used for any purpose other than the exclusive benefit of Participants or
Beneficiaries.
16.7 EXPENSES. Any expenses of the Fund which are properly allocable to an
individual's Account (including, but not limited to expenses related to an
individual's investment directions, annuity contract purchases and other
transactional fees for processing distributions) may be charged directly against
such individual's Account if so provided in the administrative procedures
established by the Plan Administrator.
16.8 SECTION 16 OF SECURITIES EXCHANGE ACT OF 1934. If this Plan is invested in
employer securities and this Plan permits employees of the Employer who are
subject to the reporting requirements of (S)16 of the Securities Act of 1934, as
amended ("Act") receive awards, then notwithstanding any other provision of this
Plan, the provisions of this Plan that set forth the formula or formulas that
determine the amount, price or timing of awards to such persons and any other
provisions of this Plan of the type referred to in 516b-3(c)(2)(ii) of the Act
shall not be amended more than once every six months, other than to comport with
changes in the Code, ERISA, or the rules thereunder. Further, to the extent
required, the employees described in the preceding sentence shall be subject to
such withdrawal, investment and other restrictions necessary to satisfy Rule
16b-3 under the Act. This (S)16.8 is intended to comply with Rule 16b-3 under
the Act and shall be effective only to the extent required by such rule and
shall be interpreted and administered in accordance with such rule.
16.9 ARBITRATION. Any claims or controversies with the Prototype Sponsor
related to this Plan are subject to arbitration in accordance the arbitration
provisions of the Smith Barney Shearson Qualified Retirement Plan and IRA Client
Agreement or any successor to such agreement, which provisions hereby are
expressly incorporated herein by reference.
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PART II
SMITH BARNEY SHEARSON
PROTOTYPE DEFINED CONTRIBUTION
TRUST AGREEMENT
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PART II.
PROTOTYPE DEFINED CONTRIBUTION PLAN TRUST AGREEMENT
SECTION 1. INTRODUCTION AND CONSTRUCTION
1.1 INTRODUCTION. This Trust Agreement is a part of the Smith Barney Shearson
Prototype Defined Contribution Plan and is entered into between the Employer and
the Trustee effective as of the date the Adoption Agreement is executed by the
Employer and the Trustee. If the Plan is adopted as an amendment and
restatement of a Pre-Existing Plan, this Trust Agreement shall amend and restate
the trust agreement or other funding arrangement for the Pre-Existing Plan.
1.2 DEFINITIONS. The terms in this Trust Agreement which begin with a capital
letter shall have the meanings set forth in (S)2 of the Plan. For purposes of
this Trust Agreement, "SBSTC" shall mean Smith Barney Shearson Trust Company and
any successor in interest to Smith Barney Shearson Trust Company.
1.3 CONTROLLING LAWS. To the extent such laws are preempted by federal law,
this Trust Agreement shall be construed and interpreted under the laws of the
state specified in the Adoption agreement; provided, if SBSTC has been
appointed as Trustee, this Trust Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
1.4 CONSTRUCTION. The headings and subheadings in this Trust Agreement have
been inserted for convenience of reference only and are to be ignored in the
construction of its provisions. Wherever appropriate, the masculine shall be
read as the feminine, the plural as the singular, and the singular as the
plural. References in this Trust Agreement to a section ((S)) shall be to a
section in this Trust Agreement unless otherwise indicated. References in this
Trust Agreement to a section of the Code, ERISA or any other federal law shall
also refer to the regulations issued under such section.
The Employer intends that the Plan and this Trust Agreement and the related
Adoption Agreement which are part of the Plan satisfy the requirements for tax
exempt status under Code (S)401(a), Code (S)501(a) and related Code sections and
that the provisions of this Trust Agreement, the Plan and the related Adoption
Agreement be construed and interpreted in accordance with the requirements of
the Code and the regulations under the Code.
Further, except as expressly stated otherwise, no provision of the Plan or this
Trust Agreement or the related Adoption Agreement is intended to nor shall grant
any rights to Participants or Beneficiaries or any interest in the Fund in
addition to those minimum rights or interests required to be provided under
ERISA and the Code and the regulations under ERISA and the Code.
Nothing in the Plan or this Trust Agreement or the related Adoption Agreement
shall be construed to prohibit the adoption or the maintenance of the Plan and
Trust Agreement as an individually designed plan and trust agreement or the
adoption of this Trust Agreement in connection with an individually designed
plan, but in such event, the Employer may not rely on the option letter issued
to the Prototype Sponsor and the Prototype Sponsor shall have absolutely no
responsibility for such individually designed plan and trust agreement.
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Finally, in the event of any conflict between the terms of the Plan and the
terms of this Trust Agreement or the Adoption Agreement, the terms of the Plan
shall control.
SECTION 2. GENERAL
All the Trustee's rights, power, authorities, duties and responsibilities
of any kind or description whatsoever respecting the Fund shall be solely and
exclusively as expressly stated in the Plan and in this Trust Agreement. Except
to the extent the Employer or Plan Administrator also is the Trustee for the
Plan, the Trustee shall have no responsibility whatsoever with respect to the
maintenance, operation and administration of the Plan. No right, power,
authority, duty or responsibility of any kind or description whatsoever
respecting the Fund or the maintenance, operation or administration of the Plan
shall be attributed to the Trustee on account of any ambiguity or inference
which might be interpreted by any person to exist in the terms of the Plan or
this Trust Agreement. Finally, if SBSTC is Trustee, my discretionary powers,
duties or responsibilities assigned to the Trustee in this Trust Agreement shall
be exercised or performed by SBSTC only upon the direction of the Plan
Administrator, the Employer or an Investment Manager, and SBSTC shall exercise
no discretion with respect to the investment or management of the Fund except
tot he extent that Fund Assets are invested in a common or collective group
trust maintained by SBSTC or an affiliate of SBSTC.
SECTION 3. CONTRIBUTIONS AND TRUST FUND
The Employer and the Trustee shall establish reasonable procedures for making
and accepting contributions to the Fund and any asset transfers pursuant to (S)9
of this Trust Agreement. The Trustee shall accept any contributions the Trustee
reasonably believes are paid to in accordance with such procedures, except that
the Trustee may refuse to accept any non-cash contributions or assets which
either are not acceptable tot he Trustee or the acceptance of which the Trustee
reasonably believes would constitute a prohibited transaction under ERISA or the
Code. If this Trust Agreement is an amendment and restatement of a trust
agreement or other funding arrangement for a Pre-Existing Plan, the assets held
under such pre-existing trust agreement or other funding arrangement shall (to
the extent acceptable to the Trustee and permissible under the prohibited
transaction rules of ERISA and the Code) be transferred to the Trustee pursuant
to reasonable transfers procedures established by the Trustee, the Employer and
any predecessor trustee, custodian or insurance carrier and shall become assets
of the Fund. The Trustee shall have no responsibility with respect to such
transferred assets except to receive such assets and to hold and administer the
same thereafter in accordance with this Trust Agreement. The Trustee shall not
be responsible for any act or omission of a predecessor trustee or any other
person with respect to assets that are transferred to the Trustee when the Fund
is a continuation of a trust fund or other funding arrangement under a Pre-
Existing Plan and shall not be required to make any claim or demand against any
of such persons unless the Employer requests in writing that the Trustee make
such claim or demand. The Fund shall consist of all such contributions and
assets together with the income or gains on such contributions and assets, less
any payments, distributions, transfers, assessments and losses from or on such
contributions and assets. The Fund shall be managed and controlled by the
Trustee pursuant to the terms of this Trust Agreement without distinction
between principal and income and without liability for the payment of any
interest on such assets. The Trustee shall not be responsible for the amount
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or the collection of any contributions to the Fund or for the determination of
the amount or frequency of any contribution required by the Plan, ERISA or the
Code and such responsibilities shall be borne solely by the Employer and the
Participating Affiliates. Further, the Trustee, for investment purposes, many
combine into one fund the Funds created under each Plan maintained by the
Employer and Participating Affiliates and (unless otherwise specified) all
references to the Fund in this Trust Agreement shall be references to the
combined Funds; provided that (a) the Trustee shall maintain separate books and
records of the assets, contributions, distributions and income or losses
allocable to each such Fund and (b) no part of one Fund shall be used to pay the
expenses, benefits or liabilities attributable to any other Fund.
SECTION 4. MANAGEMENT OF TRUST FUND
4.1 PLAN ADMINISTRATOR. With respect to the Fund, the Plan Administrator shall
have those duties and responsibilities specified in this Trust Agreement and,
additionally, shall have the duty to advise the Trustee and any other person of
such facts and issue such directions as may be required to enable the Trustee
and such other person to execute their duties and responsibilities under this
Agreement.
4.2 TRUSTEE. The Trustee shall have the sole and exclusive power (except as
otherwise provided in this Trust Agreement) in the management and control of the
Fund to do all things and execute such instruments as may be deemed necessary or
proper, including the powers described in this section, all of which may be
exercised without order of or report to any court. To the extent the exercise
of any such power would require the exercise of discretion by SBSTC as the
Trustee (other than the management and control of any assets invested in any
common or collective trust maintained by SBSTC or its affiliates), SBSTC as
Trustee shall exercise such power only in accordance with the specific direction
of the Plan Administrator, the Employer or an Investment Manager.
4.2(a) To sell, exchange, or otherwise dispose of any properly at any time
held or acquired by the Fund, at public or private sale, for cash or on
terms, without investment, including the right to lease for any term
notwithstanding the period of the Trust Agreement;
4.2(b) To vote in person or by proxy any corporate stock or other security
and to agree to or take, or refrain from taking, any other action necessary
or appropriate for a shareholder or owner in regard to any
reorganization,merger, consolidation, liquidation, bankruptcy or other
procedure or proceeding affecting any stock, bond,note or other property;
4.2(c) To compromise, settle or adjust any claim or demand by or against
the Fund and to agree to any rescission or modification of any contract or
agreement affecting the Fund;
4.2(d) To borrow money, and to secure the same by mortgaging, pledging, or
conveying the property of the Fund;
4.2(e) To deposit any stock, bond or other security in any depository or
other similar institution and to register any stock, bond or other security
in the name of a nominee or in street name provided such securities are
held on behalf of the Fund by a bank or trust
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company, subject to supervision by the United States or a State, a broker
or dealer registered under the Securities Exchange Act of 1934 ("Act") or a
"clearing agency" as defined in the Act, or their nominees, without the
addition of words indicating that such security is held in a fiduciary
capacity, but accurate records shall be maintained showing that such
security is a Fund asset and the Trustee shall be responsible for the acts
or such nominee;
4.2(f) To hold cash in such amounts as may be in its opinion reasonable
for the proper operation of the Fund;
4.2(g) To invest any and all monies in such stocks, bonds, securities,
investment company or trust shares or mutual funds, including mutual funds
which invest in commodities, mortgages, notes, choses in action, real
estate, improvements thereon, and other property as the Trustee may deem
appropriate, including "employers securities" (whether or not such
securities are "qualifying employer securities") or "employer real
property" (whether or not such property is "qualifying employer real
property), as such terms are defined for purposes of ERISA (S)407, except
to the extent prohibited under ERISA or the Code;
4.2(h) To grant, sell, purchase, or exercise any option of any kind or
description whatsoever to purchase or sell any security or other property
which is a permissible investment under this (S)4(b), provided the Trustee
in no event shall grant or sell any option under which any person can
require the Fund to sell any security or other property which the Fund at
the time of such grant or sale does not hold in an amount sufficient to
cover such option and any other outstanding option granted or sold by the
Trustee, and the Trustee in no event shall dispose of any such security or
other property covering any such option until such option is exercised or
otherwise expires;
4.2(i) To invest all, or any part, of the assets of the Fund in any
common, collective or group trust fund maintained under Code (S)584 or
Revenue Ruling 81-100, 1981-1 C.B. 326 exclusively for the investment of
the assets of tax exempt pension and profit sharing plans, the provisions
of which upon such investment shall automatically be adopted and made apart
of this Trust Agreement for the period such investment is made in such
common, collective or group trust fund; provided, if SBSTC is the Trustee,
4.2(i)(1) The trustee shall, upon receipt of written investment
directions, invest some or all of the Fund in one or more collective
trust funds (including, without limitation, any collective trust fund
maintained by the Trustee or by any affiliate of the Trustee) that
are exempt from taxation under Code (S)501(a);
4.2(i)(2) any such investment shall be subject to all the provisions
of the declaration of trust creating such collective trust fund which
is adopted in its entirety as an integral part of the Plan and of
this Trust Agreement;
4.2(i)(3) the Employer, Plan Administrator or Investment Manager
shall not have any right to vote or otherwise in any manners control
the operation and
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management of any such collective trust fund, the operation of
any party to any such collective trust fund, or any beneficiary
of any such collective trust fund;
4.2(i)(4) the Trustee (or its affiliate) is authorized to
utilized investment advice received from investment advisers for
any collective trust fund maintained by the Trustee (or its
affiliate) including, without limitation, such advice received
from [SLH Capital Management and SLH Asset Management, each of
which is a division of] an affiliate of the Trustee, and to
utilize the brokerage services of the Prototype Sponsor, an
affiliate of the Trustee; and
4.2(i)(5) the Employer, Plan Administrator or Investment Manager,
as applicable, shall determine, prior to any direction by either
of them to invest the Fund in any such collective trust fund,
that the services provided to the Plan through the collective
trust fund including, without limitation,any investment advisory
services provided to the Trustee (or its affiliate) by [SLH
Capital Management or SLH Asset Management and brokerage services
provided by the Prototype Sponsor are (A) necessary to the
operation of the Plan, (B) furnished under a declaration of trust
which is reasonable and (C) furnished for reasonable
compensation;
4.2(j) To purchase, hold, sell, surrender or distribute any investment
contract, life insurance contract or annuity contract as directed by a
Participant or the Plan Administrator in accordance with the Plan;
4.2(k) To make a participant loan as directed by the Plan Administrator;
and
4.2(l) To make such other investments as the Trustee in its discretion
shall deem best or if SBSTC is the Trustee or if the Trustee is subject to
the direction of another person, as directed by someone other than the
Trustee, without regard to any law now or hereafter in force (other than
ERISA) limiting the investments of trustees or other fiduciaries.
The Trustee shall not be required to make any inventory or appraisal or report
to any court, nor to secure any order of court for the exercise of any power
contained in this Trust Agreement, and shall not be required to give bond
(except as required by ERISA).
Notwithstanding the foregoing, if SBSTC is the Trustee, SBSTC shall invest all
assets of the Fund which are to be invested on an interim basis pending
reinvestment, distribution or other disbursement either (1) in depository
accounts bearing a reasonable rate of interest which are maintained by SBSTC or
by any affiliate of SBSTC or (2) in commingled short-term investment funds which
are maintained by SBSTC or by any affiliate of SBSTC, in which event the
provisions of (S)4(b)(9) of this Trust Agreement shall apply.
Except as agreed to in writing by the Trustee and the Employer, the Trustee
shall not be liable and shall be indemnified and held harmless by the Employer
for any liability, loss, damage, expense, assessment or other cost of any kind
or description whatsoever, which the Trustee incurs as a result of or arising
out of (1) any action taken at the direction of the Employer, the Plan
Administrator or
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an Investment Manager, (2) any failure to act if, under the terms of this Trust
Agreement, action can be taken only after receipt from the Employer, the Plan
Administrator or an Investment Manager of specific directions, (3) any action or
failure to act based on advice of legal counsel to the Employer or the Plan
Administrator, or (4) any failure to act pending the receipt of direction from
the Employer, the Plan Administrator or an Investment Manager, when the Trustee
has made a written request for such direction, provided such action or failure
to act is not attributable to fraud, misconduct, negligence or error by the
Trustee. Further, if SBSTC is the Trustee, SBSTC may from time to time request
the advice of counsel on any legal matter, including the interpretation of the
Plan and this Trust Agreement, and shall be indemnified and held harmless for
any and all liability, loss, damage, expense, assessment or other cost of any
kind or description resulting from or on account of its services as Trustee
under the Plan, including, but not limited to, any co-fiduciary liability under
ERISA (S)405 and any liability, damage, expense, assessment or other cost
arising out of its actions in accordance with advice of counsel. Except as
agreed to in writing by the Trustee and the Employer, the provisions of this
paragraph shall survive the term of this Trust Agreement and may not be amended
by any person or entity other than the Prototype Sponsor or terminated except
with the consent of the Trustee.
4.3 INVESTMENT MANAGER. The Plan Administrator as a Named Fiduciary at any
time may appoint in writing a person, or more than one person, including,
subject to (S)4(i) of this Trust Agreement, the Prototype Sponsor or any of its
affiliates, who either (1) is registered as an investment adviser under the
investment Advisers Act of 1940 ("Act"), (2) is a bank, as defined in the Act,
or (3) is an insurance company which, within the meaning of ERISA (S)3(38), is
qualified to manage, acquire and dispose of the assets of an employee benefit
plan under the laws of more than one state, as an investment manager pursuant to
ERISA (S)3(38) ("Investment Manager") for all of the Fund or for a specified
portion of the Fund allocated by the Plan Administrator to such Investment
Manager's management account ("Management Account").
The Plan Administrator shall notify the Trustee of such appointment and of the
date such appointment becomes effective, and such Investment Manager shall have
the sole responsibility and duty and the sole power, without prior consultation
with the Board, the Employer, the Plan Administrator, the Trustee, or any other
person, to manage and direct or effect the acquisition and disposition of the
assets of the Fund allocated to such Management Account from the date the
appointment as Investment Manager becomes effective. The Plan Administrator as
a Named Fiduciary also may terminate the appointment of any person as an
Investment Manager and may cause assets of the Fund to be added to or deleted
from any Management Account.
The Investment Manager may exercise his or her power through procedures as
agreed upon with the Trustee which satisfy the requirements of the securities
laws and the rules of the New York Stock Exchange (and any other exchange on
which securities are traded for such manager's Management Account), and the
Trustee shall not be liable in any respect to any person, and shall be
indemnified and held harmless by the Employer, for acting in accordance with
such procedures. Pending receipt of directions from the Investment Manager, any
cash received by the Trustee from time to time for such manager's Management
Account may be retained in the Fund in cash. If an Investment Manager ceases to
have investment responsibility for the Management Account, the Plan
Administrator or the Employer, as authorized in accordance with (S)4(d) of this
Trust Agreement, shall
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manage such assets in accordance with (S)4(d) or shall appoint another
Investment Manager to manage such assets.
4.4 PLAN ADMINISTRATOR OR EMPLOYER INVESTMENT DIRECTIONS. The Board at any
time may authorize in writing the Plan Administrator or the Employer as a Named
Fiduciary to manage and direct the investment of all or any specified portion of
the assets of the Fund as determined by the Board, and the Board at any time may
modify or terminate such authorization in writing. If SBSTC is appointed as
Trustee, the Employer shall automatically be deemed to be so authorized to
manage and direct the investment of the entire Fund; provided, the Employer may
specify in the Adoption Agreement that such direction shall be made by the Plan
Administrator. In the event the Plan Administrator or the Employer is
authorized to manage and direct the investment of Fund assets under this
(S)4(d), the provisions of (S)4(c) of this Trust Agreement shall apply in all
respects as if the Plan Administrator or the Employer, as applicable,was an
Investment Manager and the portion of the assets subject to such management and
direction was a Management Account.
4.5 PARTICIPANT INVESTMENT DIRECTIONS. If the Plan permits a Participant or a
Beneficiary to direct the investment of such individual's Account, the Plan
Administrator shall direct the Trustee to establish the investment alternatives
designated by the Plan Administrator and to accept directions to invest all or
any specified portion of the Participant's Account among such alternatives. The
Plan Administrator in consultation with the Trustee shall establish such
reasonable rules for effecting the investment elections as the Plan
Administrator deems necessary or appropriate and such rules shall be applied on
a uniform and nondiscriminatory basis to all similarly situated individuals.
Except as required under ERISA, neither the Plan Administrator, the Employer nor
the Trustee shall be responsible for any investment decisions made by a
Participant or a Beneficiary. If a Participant or Beneficiary fails to direct
the investment of the Account, then the Employer or Plan Administrator (as
authorized in accordance with (S)4(d) of this Trust Agreement) shall assume the
investment responsibility for such Account.
4.6 CUSTODIAN. The Trustee (including SBSTC) at any time and from time to time
may appoint one, or more than one, person, including, subject to (S)4(i) of this
Trust Agreement, the Prototype Sponsor or any of its affiliates, to perform such
custodial safekeeping, record keeping, securities execution and other
nondiscretionary functions of the Trustee as the Trustee deems appropriate, and
any person who is appointed to perform a custodial safekeeping function may (in
connection with the performance of that function) hold Fund securities in a
street name, provided that the Trustee shall remain the beneficial owner of all
assets held by such person and such person in no event shall be granted any
discretionary authority in the capacity as a custodian to manage and direct the
acquisition and disposition of Fund assets.
4.7 MULTIPLE TRUSTEES. More than one person can serve at the same time as the
Trustee, including any combination of individuals and banks or similar
institutions, and in the event that more than one person does serve at the same
time as Trustee under the Plan and this Trust Agreement, the references to
"Trustee" in the Plan and this Trust Agreement wherever applicable shall be
deemed to be to "Trustees" and such Trustees may allocate among themselves by
unanimous written consent (signed by all Trustees) such specific Trustee duties,
responsibilities and functions in the management of the Fund and otherwise under
the Plan and this Trust Agreement as the Trustees
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deem appropriate under the circumstances. The Trustees in all unallocated
duties, responsibilities and functions shall act by majority vote at a meeting
at which a majority of the Trustees are present or by unanimous written consent
(signed by all Trustees) in lieu of a meeting. Any person shall be entitled to
rely conclusively upon any written action signed by all Trustees or by any one
or more Trustees to whom the power to take such action has been allocated by
unanimous written consent signed by all Trustees. Finally, the provisions of
(S)8 of this Trust Agreement shall apply to the resignation or removal of any
one of the Trustees, provided that (1) all notices required in such (S)8 also
shall be given to any remaining Trustees, (2) the Employer only shall be
required to appoint successor Trustees upon the resignation or removal of all
Trustees then serving, and (3) the Employer or the remaining Trustees may demand
and receive an accounting upon the resignation or removal of one or more of the
Trustees. Notwithstanding the foregoing, if SBSTC is not the sole Trustee under
the Plan, SBSTC shall serve in a nondiscretionary, custodial capacity only
subject to the directions of the Employer or the Plan Administrator and SBSTC
shall have no duties with respect to assets held by any other person including,
without limitation, any other Trustee for the Fund. Further, the Employer
hereby agrees that SBSTC shall not serve as, and shall not be deemed to be, a
co-trustee under any circumstances.
4.8 COMMUNICATIONS. The Employer, the Plan Administrator and each Investment
Manager shall establish with the Trustee such oral, written or electronic
communication procedures (or any combination of such communication procedures)
or such other procedures as such persons and the Trustee deem reasonable and
prudent under the circumstances for the orderly administration of the Fund. The
Trustee and each other person shall be entitled to rely conclusively upon any
and all communication from the Employer, the Plan Administrator and each
Investment Manager reasonably believed to be communicated in accordance with
such established procedures.
If the Trustee receives a direction which in the Trustee's determination is
incomplete, was not communicated in accordance with established procedures or
otherwise cannot reasonably be executed, the Trustee shall promptly inform the
person responsible for such direction and shall take no further action pending
receipt of proper directions from such person.
4.9 PROTOTYPE SPONSOR. Nothing in the Plan or this Trust Agreement shall
prevent the Prototype Sponsor or any of its affiliates from engaging in any
transaction with the Plan or the Fund, provided that such transaction does not
(in the opinion of the Prototype Sponsor) constitute a "prohibited transaction"
under ERISA (S)406 or Code (S)4975, and the Employer shall provide such written
documentation as the Prototype Sponsor deems necessary or appropriate to
determine that any such transaction would not be a "prohibited transaction."
To the extent that ERISA or a prohibited transaction exemption requires action
by an individual independent of the Plan Sponsor and its affiliates or their
employers, officers and directors, then the Employer, the Plan Administrator, an
Investment Manager, a Participant or a Beneficiary shall have full power and
authority to take action on behalf of the Fund as necessary to satisfy ERISA or
such exemption provided such person otherwise is authorized to act under this
Trust Agreement.
4.10 VOTING OF PROXIES. Except as provided in this (S)4(j), the person with the
responsibility to manage and invest all or a portion of the Fund shall have the
exclusive authority and responsibility
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for voting proxies with respect to investments held for such portion of the Fund
and the Trustee shall be obligated to vote such proxies only in accordance with
the directions of such person and shall be precluded from voting such proxies
except in accordance with such directions.
However, the Plan Administrator, as a Named Fiduciary, may reserve to itself the
right to vote proxies with respect to any investments which are otherwise
subject to the management and control of an Investment Manager and, in such
event, the Investment Manager shall be precluded from voting such proxies.
SECTION 5. BENEFIT PAYMENTS
No disbursement from the Fund shall be made by the Trustee for purposes of the
payment of any Plan benefit except on the written direction of the Plan
Administrator, and the Trustee shall have no duty or obligation whatsoever to
inquire as to the accuracy of such direction or its propriety in light of the
provisions of the Plan, ERISA or the Code. Upon written direction (which may be
a continuing direction) from the Plan Administrator as to the name of any person
to who payment is to be made from the Fund and when such payment is to be made
and the amount and manner of such payment, and consistent with the income tax
withholding requirements, the Trustee shall draw checks, purchase annuity
contracts or distribute other assets from the Fund in the name of the person
designated by the Employer and deliver such checks, contracts or other assets in
such manner and in such amounts and at such times as the Plan Administrator
shall direct or, if appropriate, the Trustee shall make an electronic transfer
to the account of such person designated by the Plan Administrator in such
amounts and at such times as the Plan Administrator shall direct.
If SBSTC is the Trustee, all payments to be paid by means of a check from the
Trustee shall be paid from a non-interest bearing checking account to be
maintained with an affiliate of the Trustee. Prior to executing this Trust
Agreement, the Employer shall determine that such checking account services are
(1) necessary to the operation of the Plan, (2) furnished under an arrangement
which is reasonable and (3) furnished for reasonable compensation.
In the event the Trustee shall deem it necessary to withhold any distribution
pending compliance with legal requirements with respect to probate of wills,
appointment of personal representatives, payment or provision for estate or
inheritance taxes, or for death duties or otherwise, the Trustee shall notify
the Plan Administrator and shall thereafter take no action pending receipt of
the Plan Administrator's instructions to distribute and an agreement from the
Plan Administrator, in form satisfactory to the Trustee, protecting it from any
liability arising out of noncompliance with such requirements.
The Plan Administrator may in its discretion direct, and the Trustee shall make
payment on such direction, that Plan payments be made (1) directly to an
incompetent or disabled person, whether because of minority or mental or
physical disability, (2) to the guardian or to the person having custody of such
person if a court of competent jurisdiction has appointed such guardian or
custodian, or (3) to any person designated or authorized under any state statute
to receive such payments on behalf of such incompetent or disabled person
without further liability either on the part of the Employer, the Plan
Administrator or the Trustee for the amount of such payment to the person on
whose account such payment is made.
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In the case of a termination, partial termination, a complete discontinuance of
contributions or the termination of participation by a Participating Affiliate
as described in (S)14.5 of the Plan, the Plan Administrator shall direct the
Trustee precisely as to what action to take and the Trustee (subject to the
terms of this Trust Agreement and the Plan and to such terms and conditions, if
any, as agreed upon between the Plan Administrator and the Trustee) shall follow
such directions.
The Plan Administrator shall determine anticipated liquidity requirements to
meet project benefit payments for each Plan ear and, if any adjustment from the
practices and policies agreed upon between the Plan Administrator and the
Trustee at the adoption of this Trust Agreement is deemed appropriate, notice of
such adjustment shall be communicated by the Plan Administrator in writing as
soon as practicable to the Trustee. The Trustee shall be under no duty to make
any such adjustment prior to receiving notice.
SECTION 6. VALUATION AND ACCOUNTING BY TRUSTEE
The Trustee as of each Valuation Date shall determine the fair market value of
the assets of the Fund (or, if more than one Fund is combined for investment
purposes, of each such Fund) based upon such reasonable accounting principles,
practices and procedures as he Trustee shall adopt and consistently apply for
this purpose, which determination shall be final and binding. At such times as
agreed upon between the Trustee and the Plan Administrator, the Trustee shall
file with the Plan Administrator a written report setting forth such fair market
value and all investments, receipts and disbursements and other transactions of
the Fund since the date of the last such report.
Upon the expiration of 90 days from the filing of the Trustee's report and
except as provided under ERISA, the Trustee shall be forever relieved and
discharged from any liability or accountability to anyone with respect to the
propriety of its actions or the transactions shown by such report except with
respect to those acts or transactions to which the Plan Administrator or the
Employer shall, within such 90 day period, have filed with the Trustee is
written disapproval, and neither the Plan Administrator nor the Employer nor any
other person shall have the right to demand or be entitled to any further or
different accounting by the Trustee.
SECTION 7. EXPENSES
All reasonable and proper expenses of the Plan and the Fund (within the meaning
of ERISA (S) 403(c)(1) and (S)404(a)(1)(A), including any taxes which may be
levied or assessed against the Trustee on account of the Fund and the Trustee's
compensation as agreed upon from time to time by the Employer and the Trustee,
shall be paid from the Fund unless (a) the payment of such expense would
constitute a "prohibited transacted" within the meaning of ERISA (S)406 or Code
(S)4975 or (b) the Employer pays such expenses. Any such expenses of the Fund
which are properly allocable to an individual's Account (including, but not
limited to, expenses related to an individual's investment directions, annuity
contract purchases and other transactional fees for processing distributions)
may be charged directly against such individual's Account if so provided in
administrative procedures established by the Plan Administrator. No payments
shall be made to a Trustee who also receives full-time pay from the Employer or
from a Participating Affiliate except for his or her benefits, if
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any, from the Plan and the reimbursement of his or her reasonable and proper
expenses as a Trustee which are not reimbursed by any other person.
SECTION 8. RESIGNATION OR REMOVAL OF TRUSTEE
The Trustee may resign at any time by delivering its written resignation to the
Employer. The Employer shall within 60 days after receipt of such resignation
appoint a successor trustee in writing (acceptable to this purpose to the
Employer and the successor trustee) delivered to the Trustee and to such
successor trustee. The Employer may remove the Trustee at any time and appoint
a successor trustee or trustees upon 60 days written notice to the Trustee
unless the Trustee agrees to a shorter notice period. In either event, on the
appointment of such successor, the Trustee shall promptly turn over to such
successor all assets held by the Trustee and shall make a final accounting to
the Plan Administrator and the Employer. The successor trustee shall have no
responsibility except to receive such money and property from the Trustee and to
hold and administer the same thereafter in accordance with this Trust Agreement
and shall not be responsible for any act or omission of the Trustee, and shall
not be required to make any claim or demand against the Trustee unless the Plan
Administrator or the Employer shall in writing request the successor trustee to
make a claim or demand against the Trustee. Any such successor trustee shall
have and may exercise all the rights, powers, and duties of the Trustee as fully
and to the same extent as if it had originally been named Trustee herein.
SECTION 9. MERGERS, CONSOLIDATIONS AND ASSET TRANSFERS
The Trustee upon written direction of the Plan Administrator shall transfer and
deliver Fund assets to or accept the transfer to the Fund of assets acceptable
to it from any trustee, custodian or insurance carrier maintaining any
investment medium of a pension or profit sharing plan which is tax exempt under
Code (S)401(a) into which the Plan (or any portion thereof) shall be merged or
consolidated.
In the case of any Plan merger or consolidation with, or transfer of assets or
liabilities to or from, any other employee benefit plan, each person for whom an
Account then is maintained shall be entitled to receive a benefit from such
plan, if it is then terminated, which is equal to or greater than the benefit
such person would have been entitled to receive immediately before such merger,
consolidation or transfer, if the Plan then had been terminated. The Trustee in
connection with either of the above described transfers shall have no liability
or responsibility (1) to determine whether such transfer shall be in conformity
with the provisions of the Plan, any other plan, ERISA or the Code or (2) to
determine the effect of such transfer upon any Accounts. Any direction of the
Plan Administrator respecting any of the foregoing shall constitute a
certification that the transfer so directed is in conformity with the provisions
of the Plan or any other plan, this Trust Agreement, ERISA and the Code, and the
Trustee shall act in accordance with such direction.
SECTION 10. SINGLE TRUST - SEPARATE FUNDS
The assets of the Fund (or, if more than one Fund is combined for investment
purposes, of each such Fund) shall be held, administered, invested and managed
by the Trustee (except to the extent
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investment responsibility is allocated to another person under the terms of this
Trust Agreement) consistent with the terms of this Trust Agreement in all
respects as a single trust even through portions of such assets may be
attributable to different employers or may be allocable to the payment of
benefits for different employee groups. The Plan Administrator shall be
responsible to maintain and determine the appropriate portion of the Fund held
in respect to any such group of employees in the event that such maintenance or
determination shall become necessary. The determination by the Plan
Administrator of the portion of the Fund held in respect of any such employee
group shall be final and conclusive upon all persons.
SECTION 11. NAMED FIDUCIARIES AND ADMINISTRATION
The Plan Administrator and the Employer (if the Plan Administrator is not the
Employer) shall be the Named Fiduciaries responsible to the extent of their
powers and responsibilities assigned in the Plan for the control, management and
administration of the Plan. The Plan Administrator, the Employer and the
Trustee (other than SBSTC) shall be the Named Fiduciaries responsible to the
extent or their respective powers and responsibilities assigned to them in the
Trust Agreement for the safekeeping, control, management, investment and
administration of the assets of the Fund. Any power or responsibility for the
control, management or administration of the Plan or the Fund which is not
expressly assigned to a Named Fiduciary under the Plan or the Trust Agreement,
or with respect to which the proper assignment is in doubt, shall be deemed to
have been assigned to the Employer as a Named Fiduciary. One Named Fiduciary
shall have no responsibility to inquire into the acts and omissions of another
Named Fiduciary in the exercise of powers or the discharge of responsibilities
assigned to such other Named Fiduciary under the Plan or the Trust Agreement.
Any person may serve in more than one fiduciary capacity under the Plan or the
Trust Agreement and a fiduciary may be a Participant provided such individual
otherwise satisfies the requirements of (S)4.
A Named Fiduciary, by written instrument filed by the Plan Administrator with
the records of the Plan, may designate a person who is not a Named Fiduciary to
carry out any of its responsibilities under the Plan or Trust Agreement, other
than the responsibilities of the Trustee for the safekeeping, control,
management, investment and administration of the assets of the Fund, except to
the extent the Trustee's responsibility for investment decisions is delegated to
the Employer, the Plan Administrator, or an Investment Manager.
Except to the extent expressly reserved under the Plan or the Trust Agreement to
the Employer, the Board, or the Trustee, the Plan Administrator shall have the
exclusive responsibility and complete discretionary authority to control the
operation, management and administration of the Plan, with all powers necessary
to enable it properly to carry out such responsibilities, including (but not
limited to) the power to construe the Plan, the related Adoption Agreement, and
the Trust Agreement, to determine eligibility for benefits and to resolve all
interpretative, equitable or other questions that arise under the Plan or the
Trust Agreement. The decisions of the Plan Administrator on all matters within
the scope of its authority shall be final and binding. To the extent a
discretionary power or responsibility under the Plan or Trust Agreement is
expressly assigned to a person other than the Plan Administrator, such person or
responsibility and such person's decisions on all matters within the scope of
such person's authority shall be final and binding.
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SECTION 12. MISCELLANEOUS
12.1 SPENDTHRIFT CLAUSE AND QUALIFIED DOMESTIC RELATIONS ORDERS. Except to the
extent permitted by law, no Account, benefit, payment or distribution under the
Plan or this Trust Agreement shall be subject to attachment, garnishment, levy,
execution, or any claim or legal process of any creditor of a Participant or
Beneficiary, and no Participant or Beneficiary shall have any right to alienate,
commute, anticipate, or assign all or any part of such individual's Account,
benefit, payment or distribution under the Plan or this Trust Agreement. The
preceding sentence also shall apply to the creation, alienation, assignment, or
recognition of a right to any benefit payable with respect to a Participant
pursuant to a domestic relations order unless such order is determined to be a
qualified domestic relations order ("QDRO") within the meaning of Code (S)
414(p) and such order is entered on or after January 1, 1985. Notwithstanding
the foregoing, the Plan Administrator may treat a domestic relations order
entered before January 1, 1985 as a QDRO in accordance with Code (S)414(p) and
(S)16.1 of the Plan.
12.2 BENEFITS SUPPORTED ONLY BY TRUST FUND. Any person having any claim for any
benefit under the Plan shall look solely to the assets of the Fund for the
satisfaction of that claim. In no event will the Prototype Sponsor, the
Trustee, the Plan Administrator, the Employer or a Participating Affiliate or
any of their employees, officers, directors or their agents be liable in their
individual capacities to any person whomsoever for the payment of any benefits
under the Plan.
12.3 CLAIMS. Any payment to a Participant or Beneficiary, or to the legal
representative or heirs-at-law of any such person made in accordance with the
provisions of the Plan shall to the extent of such payment be in full
satisfaction of all claims under the Plan against the Trustee, Plan
Administrator, a Named Fiduciary, the Employer and any Participating Affiliate,
any of whom may require such person, such person's legal representative or
heirs-at-law, as condition precedent to such payment, to execute a receipt and
release in such form as shall be determined by the Trustee, Plan Administrator,
a Named Fiduciary, the Employer or a Participating Affiliate, as the case may
be.
12.4 NONREVERSION. Except as provided in (S)7.2(b) of the Plan and in this
(S)12(d), neither the Employer nor any Participating Affiliate shall have any
present or prospective right, claim, or interest in the Fund or in any Employer
contribution made to the Trustee.
To the extent permitted by the Code and ERISA, the Employer contributions
described in this (S)12(d), less any losses on such contributions, shall be
returned by the Trustee to the Employer or to any Participating Affiliate upon
the written direction of the Plan Administrator in the event that:
12.4(a) an Employer contribution is made by a mistake of fact, provided
such return is effected with one year after the payment of such
contribution;
12.4(b) a final judicial or Internal Revenue Service determination is made
that the Plan fails to satisfy the requirements of Code (S)401 with respect
to its initial qualification (provided, if the Employer is not entitled to
rely on the Prototype Sponsor's opinion letter, the application for the
initial qualification of the Plan is made by the time prescribed by law for
filing the Employer's return for the taxable year in which the Plan is
adopted, or such later date as the
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Secretary of the Treasury may prescribe), in which even all Employer
contributions made before such judicial or administrative determination
(whichever last occurs) plus any earnings and minus any losses shall be
returned within one year after such determination, all such contributions
being hereby conditioned upon the Plan satisfying all applicable
requirements under Code (S)401 from and after its adoption; or
12.4(c) a deduction for an Employer contribution is disallowed under Code
(S)404, in which event such contribution shall be returned within one year
after such disallowance, all such contributions being hereby conditioned
upon being deductible under Code (S)404.
The Trustee shall have no obligation or responsibility whatsoever to determine
whether the return of any such Employer contributions is permitted by the Code
or ERISA and shall (to the extent permissible under law) be indemnified and held
harmless by the Employer for acting in accordance with written directions given
by the Plan Administrator pursuant to this (S)12(d).
12.5 EXCLUSIVE BENEFIT. The corpus or income of the Fund shall not be diverted
to or used for any purpose other than the exclusive benefit of Participants or
Beneficiaries.
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EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated February 4, 1997, except for note 15, as to
which the date is February 11, 1997, accompanying the financial statements
of CF Mutual Holdings and Subsidiaries contained in the Registration
Statement on Form S-1 and the Prospectus. We consent to the use of the
aforementioned report in the Registration Statement on Form S-1 and the
Prospectus, and to the use of our name as it appears under the caption
"Experts."
PORTER KEADLE MOORE LLP
Successor to the practice of
Evans, Porter, Bryan & Co.
Atlanta, Georgia
May 5, 1997
<PAGE>
EXHIBIT 23.3
May 2, 1997
Boards of Directors
CF Mutual Holdings and
Carrollton Federal Bank, FSB
110 Dixie Street
Carrollton, Georgia 30117
Directors:
We hereby consent to the use of our firm's name in the Form AC Application
for Conversion of CF Mutual Holdings, Carrollton, Georgia, and any amendments
thereto, in the Form S-1 Registration Statement of Community First Banking
Company and any amendments thereto, and in the Application H-(e)1-S for
Community First Banking Company. We also hereby consent to the inclusion of,
summary of, and references to our Appraisal Report and our opinion concerning
subscription rights in such filings, including the Prospectus of Community First
Banking Company.
Sincerely,
/s/ Charles M. Hebert
--------------------------
Charles M. Hebert
Principal
<PAGE>
CONVERSION VALUATION REPORT
___________________________________________
Valued as of February 27, 1997
CARROLLTON FEDERAL BANK
CARROLLTON, GEORGIA
Prepared by:
Ferguson & Company
Suite 550
122 West John Carpenter Freeway
Irving, TX 75039
972-869-1177
<PAGE>
[LETTERHEAD OF FERGUSON & COMPANY]
STATEMENT OF APPRAISER'S INDEPENDENCE
CF MUTUAL HOLDINGS
------------------
CARROLLTON, GEORGIA
-------------------
We are the appraiser for CF Mutual Holdings in connection with its
conversion, reorganization and issuance of Public Shares. We are submitting our
independent estimate of the pro forma market value of the Community First
Banking Company's stock to be issued in the conversion and reorganization. In
connection with our appraisal of the to-be-issued stock, we have received a fee
which was not related to the estimated final value. The estimated pro forma
market value is solely the opinion of our company and it was not unduly
influenced by CF Mutual Holdings, its conversion counsel, its selling agent, or
any other party connected with the conversion.
CR Mutual Holdings has agreed to indemnify Ferguson & Company under certain
circumstances against liabilities arising out of our services. Specifically, we
are indemnified against liabilities arising from our appraisal except to the
extent such liabilities are determined to have arisen because of our negligence
or willful conduct.
Ferguson & Company
/s/ Charles M. Hebert
Charles M. Hebert
Principal
March 14, 1997
<PAGE>
[LETTERHEAD OF FERGUSON & COMPANY]
March 14, 1997
Board of Directors
Carrollton Federal Bank, FSB, and
Community First Banking Company
110 Dixie Street
Carrollton, Georgia 30117
Dear Directors:
We have completed and hereby provide, as of February 27, 1997, an
independent appraisal of the estimated pro forma market value of the common
stock which is to be issued by Community First Banking Company, ("Community
First" or the "Holding Company"), in connection with the conversion and
reorganization of CF Mutual Holdings ("Carrollton Federal" or the "MHC"). The
MHC currently has a majority ownership interest in, and its principal asset
consist of, the common stock of Carrollton Federal Bank, FSB ("Bank"). It is
our understanding that the Holding Company is to offer its stock in a
subscription and community offering to the Bank's Eligible Account Holders, the
Bank's employee stock ownership plan("ESOP"), to Supplemental Eligible Account
Holders of the Bank, to Other Members of the Bank, to directors, officers and
employees of the Bank, to certain Public Shareholders, and to the community.
This appraisal report is furnished pursuant to the regulatory filing of the
Bank's Application for Conversion ("Form AC") with the Office of Thrift
Supervision ("OTS").
Ferguson & Company ("F&C") is a consulting firm that specializes in
providing financial, economic, and regulatory services to financial
institutions. The background and experience of F&C is presented in Exhibit I.
We believe that, except for the fees we will receive for preparing the
appraisal, we are independent. F&C personnel are prohibited from owning stock
in conversion clients for a period of at least one year after conversion.
In preparing our appraisal, we have reviewed the Application for Approval
of Conversion, including the Proxy Statement as filed with the OTS. We
conducted an analysis of Carrollton Federal that included discussions with
Porter Keadle Moore, LLP the Association's independent auditors, and with
Powell, Goldstein, Frazer and Murphy, LLP., Association's conversion counsel. In
addition, where appropriate, we considered information based on other available
published sources that we believe is reliable; however, we cannot guarantee the
accuracy or completeness of such information.
<PAGE>
Board of Directors
March 14, 1997
Page 2
We also reviewed the economy in Carrollton Federal's primary market area
and compared the Bank's financial condition and operating results with that of
selected publicly traded thrift institutions. We reviewed conditions in the
securities markets in general and in the market for thrifts stocks in
particular.
Our appraisal is based on Carrollton Federal's representation that the
information contained in the Form AC and additional evidence furnished to us by
the MHC and its independent auditors are truthful, accurate, and complete. We
did not independently verify the financial statements and other information
provided by Carrollton Federal and its auditors, nor did we independently value
the assets or liabilities of the MHC or the Bank. The valuation considers
Carrollton Federal only as a going concern and should not be considered an
indication of its liquidation value.
It is our opinion that, as of February 27, 1997 the estimated pro forma
market value of CF Mutual Holdings was $36,500,000, or 1,825,000 shares at
$20.00 per share. The resultant valuation range was $31,025,000 at the minimum
(1,551,250 shares at $20.00 per share) to $41,975,000 at the maximum (2,098,750
shares at $20.00 per share), based on a range of 15 percent below and above the
midpoint valuation. The supermaximum was $48,271,240 (2,413,562 shares at
$20.00 per share).
Our valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing shares of common
stock in the conversion. Moreover, because such valuation is necessarily based
upon estimates and projections of a number of matters, all of which are subject
to change from time to time, no assurance can be given that persons who purchase
shares of common stock in the conversion will thereafter be able to sell such
shares at prices related to the foregoing estimate of the MHC's pro forma market
value. F&C is not a seller of securities within the meaning of any federal or
state securities laws and any report prepared by F&C shall not be used as an
offer or solicitation with respect to the purchase or sale of any securities.
Our opinion is based on circumstances as of the date hereof, including
current conditions in the United States securities markets. Events occurring
after the date hereof, including, but not limited to, changes affecting the
United States securities markets and subsequent results of operations of
Carrollton Federal, could materially affect the assumptions used in preparing
this appraisal.
<PAGE>
Board of Directors
March 14, 1997
Page 3
The valuation reported herein will be updated as provided in the OTS
conversion regulations and guidelines. Any updates will consider, among other
things, any developments or changes in Carrollton Federal's financial
performance and condition, management policies, and current conditions in the
equity markets for thrift shares. Should any such new developments or changes
be material, in our opinion, to the valuation of the shares, appropriate
adjustments will be made to the estimated pro forma market value. The reasons
for any such adjustments will be explained in detail at the time.
Respectfully,
Ferguson & Company
/s/ Charles M. Hebert
Charles M. Hebert
Principal
<PAGE>
FERGUSON & COMPANY
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TABLE OF CONTENTS
CARROLLTON FEDERAL BANK
CARROLLTON, GEORGIA
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION 1
SECTION I. - FINANCIAL CHARACTERISTICS 4
PAST & PROJECTED ECONOMIC CONDITIONS 4
FINANCIAL CONDITION OF INSTITUTION 4
BALANCE SHEET TRENDS 4
ASSET/LIABILITY MANAGEMENT 5
INCOME AND EXPENSE TRENDS 10
REGULATORY CAPITAL REQUIREMENTS 11
LENDING 12
NONPERFORMING ASSETS 16
LOAN LOSS ALLOWANCE 18
MORTGAGE BACKED SECURITIES AND INVESTMENTS 19
SAVINGS DEPOSITS 21
BORROWINGS 23
SUBSIDIARIES 23
LEGAL PROCEEDINGS 23
EARNINGS CAPACITY OF THE INSTITUTION 23
ASSET-SIZE-EFFICIENCY OF ASSET UTILIZATION 24
INTANGIBLE VALUES 24
EFFECT OF GOVERNMENT REGULATIONS 24
OFFICE FACILITIES 24
</TABLE>
i
<PAGE>
FERGUSON & COMPANY
- ------------------
TABLE OF CONTENTS - CONTINUED
CARROLLTON FEDERAL BANK
CARROLLTON, GEORGIA
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION II - MARKET AREA 1
DEMOGRAPHICS 1
SECTION III - COMPARISON WITH PUBLICLY TRADED THRIFTS 1
COMPARATIVE DISCUSSION 1
SELECTION CRITERIA 1
PROFITABILITY 2
BALANCE SHEET CHARACTERISTICS 2
RISK FACTORS 3
SUMMARY OF FINANCIAL COMPARISON 3
FUTURE PLANS 3
SECTION IV - CORRELATION OF MARKET VALUE 1
MARKETABILITY & LIQUIDITY OF STOCK TO BE ISSUED 1
FINANCIAL ASPECTS 1
MARKET AREA 3
MANAGEMENT 3
DIVIDENDS 3
LIQUIDITY 3
THRIFT EQUITY MARKET CONDITIONS 4
GEORGIA ACQUISITIONS 4
</TABLE>
ii
<PAGE>
FERGUSON & COMPANY
- ------------------
TABLE OF CONTENTS - CONTINUED
CARROLLTON FEDERAL BANK
CARROLLTON, GEORGIA
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION IV - CORRELATION OF MARKET VALUE - CONTINUED
EFFECT OF INTEREST RATES ON THRIFT STOCK 5
ADJUSTMENTS CONCLUSION 7
VALUATION APPROACH 7
VALUATION CONCLUSION 7
</TABLE>
iii
<PAGE>
FERGUSON & COMPANY
- ------------------
LIST OF TABLES
CARROLLTON FEDERAL BANK
CARROLLTON, GEORGIA
<TABLE>
<CAPTION>
TABLE
NUMBER TABLE TITLE PAGE
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<S> <C> <C>
SECTION I - FINANCIAL CHARACTERISTICS
1 Selected Financial Data 6
2 Selected Operating Data 6
3 Selected Operating Ratios 7
4 Loan Maturity Schedule 8
5 GAP Analysis 9
6 Net Portfolio Value 10
7 Regulatory Capital Compliance 11
8 Loan Portfolio Composition 12
9 Loan Activity 13
10 Average Balances, Yields, Costs 14
11 Rate/Volume Analysis 15
12 Non-Performing Assets 16
12a Schedule of Classified Assets 17
13 Analysis of Allowance for Loan Losses 17
14 Allocation of Allowance for Loan Losses 18
15 Classification of Investment Securities 19
15a Expected Maturities of Investment Securities 20
16 Deposit Portfolio 21
17 Time Deposit Rates and Maturities 22
18 Jumbo Certificates of Deposit 22
19 Office Facilities 25
SECTION II - MARKET AREA
1 Key Economic Indicators 4
1a Key Economic Indicators - Counties 5
2 Employment by Industry 6
3 Market Area Deposits 7
</TABLE>
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FERGUSON & COMPANY
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LIST OF TABLES - CONTINUED
CARROLLTON FEDERAL BANK
CARROLLTON, GEORGIA
<TABLE>
<CAPTION>
TABLE
NUMBER TABLE TITLE PAGE
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<S> <C> <C>
SECTION III - COMPARISON WITH PUBLICLY
TRADED THRIFTS
1 Comparatives General 4
2 Key Financial Indicators 5
3 Pro Forma Comparisons 6
4 Comparative Selection 8
SECTION IV - CORRELATION OF MARKET VALUE
1 Appraisal Adjustments to Earnings 2
2 Georgia Acquisitions Since January 1, 1995 9
3 Recent Conversions 11
4 Comparison of Pricing Ratios 14
<CAPTION>
LIST OF FIGURES
FIGURE
NUMBER FIGURE TITLE PAGE
- ------ ------------ ----
<S> <C> <C>
SECTION IV - CORRELATION OF MARKET VALUE
1 SNL Index Since 1994 15
2 Interest Rates Last Six Months 16
</TABLE>
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FERGUSON & COMPANY
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EXHIBITS
CARROLLTON FEDERAL BANK
CARROLLTON, GEORGIA
EXHIBIT TITLE
Exhibit I - Ferguson & Co., LLP. Qualifications
Exhibit II - Selected Region, State, and Comparatives Information
Exhibit III - Carrollton Federal Bank TAFS Report
Exhibit IV - Comparative Group TAFS and BankSource Reports
Exhibit V - Pro Forma Calculations
Pro Forma Assumptions
Pro Forma Effect of Conversion Proceeds at the Minimum of the Range
Pro Forma Effect of Conversion Proceeds at the Midpoint of the Range
Pro Forma Effect of Conversion Proceeds at the Maximum of the Range
Pro Forma Effect of Conversion Proceeds at the SuperMax of the Range
Pro Forma Analysis Sheet
vi
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SECTION I
FINANCIAL CHARACTERISTICS
<PAGE>
FERGUSON & COMPANY SECTION I.
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INTRODUCTION
CARROLLTON FEDERAL BANK
Carrollton Federal Bank, a federally chartered stock savings bank that was
organized on August 1, 1994, as a subsidiary of the Mutual Holding Company,
operates in Carrollton, Georgia and neighboring communities in western Georgia.
Prior to that date, the predecessor of the Savings Bank, Carrollton Federal
Bank, FSB, in its mutual form had operated since 1929. In 1929, the mutual
association was first organized as Carrollton Building and Loan Association. In
October 1935, the association received a federal charter and changed its name,
becoming Carrollton Federal Savings and Loan Association. Contemporaneously,
with receiving its federal charter, it received insurance of accounts. The
Savings Bank now conducts its business through 12 branch offices in Carroll,
Douglas, Coweta, Fayette, Haralson, Henry, Heard and Paulding counties in the
State of Georgia. At December 31, 1996, the Savings Bank had $351 million in
total assets, $325.0 million in total liabilities which included $308 million in
deposits, and equity capital of $25.3 million which equated to 7.16% of total
assets.
CF MUTUAL HOLDINGS
CF Mutual Holdings is a federally chartered mutual holding company formed
on August 1, 1994, in connection with the MHC Reorganization. The Mutual
Holding Company's primary asset is 100 shares of Savings Bank Common Stock,
which represents 100% of the shares outstanding. The Mutual Holding Company's
assets consist of a deposit account with the Bank in the amount of $2,044 and a
correspondent bank account and federal funds sold totaling $1,325,290. The
Mutual Holding Company also holds 3,500 shares of West Georgia National Bank
Stock ("WGNB") with a cost basis of $122,000, or $32 per share. This is less
than 1% of the outstanding stock of WGNB. As a part of this conversion and
reorganization, the Mutual Holding Company will convert to a federal stock
savings bank and merge into the Savings Bank. The Savings Bank will be the
surviving entity.
COMMUNITY FIRST BANKING COMPANY
Community First Banking Company is a Georgia corporation, organized in 1997
by the Savings Bank for the purpose of holding all of the common stock of the
Savings Bank. Upon completion of the Conversion and Reorganization, the only
significant assets of the Company will be all of the outstanding Savings Bank
Common Stock, the note evidencing the loan to the ESOP, and the portion of the
net proceeds from the offering that is retained by the company.
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FERGUSON & COMPANY SECTION I.
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Carrollton Federal is not a traditional thrift. In the early 1990's, the
institution began, with a change to a savings bank charter, a transition from a
traditional thrift to a full service community bank. The transition has been
ongoing since inception and now, the asset composition of the institution
suggests that it is a full service community bank, and importantly, the public
perception is of a full service bank. It invests primarily in: (1) 1-4 family
loans; (2) multifamily loans; (3) commercial real estate; (4) construction
loans; (5) commercial non-real estate loans; (6) consumer loans; (7) mortgage
backed securities; (8) United States government and agency securities; and (9)
temporary cash investments. It is funded principally by savings deposits,
borrowings, and existing net worth. It has utilized borrowings as an alternate
funding source and had $16.3 million outstanding as of December 31, 1996. The
advances were comprised of $10.0 million in adjustable and $6.3 million in fixed
rate.
The Bank offers a variety of loan products to accommodate its customer
base. Consumer loans and single family loans dominate the Bank's loan
portfolio. In recent years, Carrollton Federal has concentrated its single
family lending on ARM's. At December 31, 1996, gross loans on 1-4 family
dwellings made up 41.57% of total assets and 54.70% of the net loan portfolio.
Mortgage backed securities made up 1.38% of total assets. Cash and investment
securities made up 17.74% of Carrollton Federal's assets at December 31, 1996.
Carrollton Federal had $6.42 million in non-performing assets at December
31, 1996 (1.82% of total assets), as compared to $2.60 million at December 31,
1995 (1.09% of total assets), $4.09 million as of December 31, 1994 (1.17% of
total assets), $4.54 million as of December 31, 1993 (1.45% of total assets),
and $4.35 million as of December 31, 1992 (1.44% of total assets). In real
dollars, non-performing assets are up from the $4.35 million at December 31,
1992, to the $6.42 million at December 31, 1996. The current level of
nonperforming assets is high, but the Bank has historically operated at
nonperforming levels more indicative of a commercial bank than of a thrift.
Moreover, Management has adequate control on the nonperforming assets and does a
more than adequate job of managing such assets. Their nonperforming asset level
has not had a significant impact on the earning capacity of the Bank.
Savings deposits increased during the five years from December 31, 1992, to
December 31, 1996, by $37.70 million. Between December 31, 1992 and December 31,
1993, the deposits fell from $270.1 million to $269.6 million. In 1994 deposits
increased $20 million. Deposits showed little growth between 1994 and 1995 and
then increased $18.5 million to end 1996 at $307.8 million. At December 31,
1996, advances from FHLB were $16.3 million.
The Bank's capital to assets ratio has shown steady growth. Equity
capital, as a percentage of assets, increased from 5.71% at December 31, 1992,
to 7.16% at December 31, 1996. However, between December 31, 1995 and December
31, 1996, capital decreased as a percentage of assets. The decrease was due
mainly to asset growth, recognition of a need for additional provisions for loan
losses, and a substantial SAIF assessment. The former leveraging capital, and
the latter two having adverse impact on net earnings. Nevertheless, capital
levels remain ample. This capital position was a result of consistent earnings
combined with steady growth. Capital in dollars has increased from $17.26
million to $25.28 million, which is a 46.46% increase.
Carrollton Federal's profitability, as measured by return on average assets
("ROAA"), was below its peer group average of thrifts filing TFR's with the OTS,
consisting of OTS supervised thrifts with assets from $100 million to $500
million, with the exception of the calendar year ending
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December 31, 1995. For the years ending December 31, 1993, 1994, and 1995, and
the quarter ended September 30, 1996, Carrollton Federal ranked in the 30th,
25th, 55th, and 28th percentile, respectively, in ROAA. In return on equity for
the same periods, Carrollton Federal ranked in the 48th, 38th, 77th, and 29th
percentile, respectively./1/ The three quarters of 1996 reflect a "cleaning up"
of the operation, in preparation for conversion (see Exhibit III). In addition,
the disparity between the peer rankings on ROAA and ROAE reflect the lower
capital ratios of the institution. Although considered "Well Capitalized" by any
regulatory standard, the higher performance in ROAE is, of course, the result of
having less than peer average capital. However, after conversion the ratios will
trend downward as capital increases.
_____________________________
/1/ "TAFS" by Sheshunoff Information Services, Inc., as of June 30, 1996.
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FERGUSON & COMPANY SECTION I.
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I. FINANCIAL CHARACTERISTICS
PAST & PROJECTED ECONOMIC CONDITIONS
Fluctuations in thrift earnings in recent years have occurred within the
time frames as a result of changing temporary trends in interest rates and other
economic factors. However, the year-to-year results have been upward while the
general trends in the thrift industry have been improving as interest rates
declined. Interest rates began a general upward movement during late 1993,
followed by a decline in interest margins and profitability. Rates began a
general decline in mid 1995. Since early 1996, rates have moved in a narrow
band. From mid-March until early June there was a slight upward trend, with the
spread between the short end and the long end increasing. Early July saw the
jobless rate dip, and responding to inflation fears, the rates rose slightly.
In late July, Greenspan's comments sparked a rise in the Dow-Jones, but rates
remained steady. Mid-August's report on the rising CPI caused a slight increase
in rates, but they remained within the narrow band. The recent pass by the
Federal Reserve to raise rates provided some stability in rates and the equities
market. However, more recent comments by Greenspan to Congress invoked fear and
speculation in the market. Recently rates have been stable, and that stability
has sparked a general upward trend in all equity markets.
The general rise in the equity market has translated into overall gains in
the thrift equity market. These factors, coupled with the circumstances of
having fewer conversions in 1996, have had some dramatic results in the thrift
equities market. The number of "conversion stock speculators" has grown as
thrift and bank acquisitions have continued. The hope of a quick profit has
many speculative dollars chasing fewer good conversion opportunities.
The thrift industry generally is better equipped to cope with changing
interest rates than it was in the past, and investors have recognized the
demonstrated ability of the thrift industry to maintain interest margins in
spite of rising interest rates. However, much of the industry is still a long
lender and, for the most part, a short borrower. Periods of gradually rising
interest rates can be readily managed, but periods of rapidly rising rates and
interest rate spikes can negate, to a certain degree, the positive impact of
adjustable rate loans and investments.
FINANCIAL CONDITION OF INSTITUTION
BALANCE SHEET TRENDS
As Table I.1 shows, Carrollton Federal demonstrated a modest increase in
assets during the five year period between December 31, 1992, and December 31,
1996. Assets have an upward trend during that period, except for reflecting a
loss in total assets in 1995. Assets have grown from $302.10 million at
December 31, 1992, to $312.11 million at December 31, 1993, to $353.35 million
at December 31, 1994. Year end December 31, 1995, reflected a decline in total
assets to $334.47 million and then a resurgence to $352.53 million at December
31, 1996. The loan portfolio reflects an overall upward trend from $256.22
million at December 31, 1992, to $262.15 million at December 31, 1993, to
$283.48 million at December 31, 1994. Loans then declined to $273.17 million at
December 31, 1995, and declined further to $272.44 million at December 31, 1996.
Total earning assets have fluctuated in both dollar amount and when expressed as
a percent of total assets. At December 31, 1992, total earning assets were
$284.76 million or 94.25% of total assets. At December 31, 1993, total earning
assets had grown to $292.05 million and were 93.57% of total assets. Then at
December 31, 1994, total earning assets were $330.81 million, 93.62% of total
assets, and at
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FERGUSON & COMPANY SECTION I.
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December 31, 1995, they were $314.71 million, or 94.09% of total assets. At
December 31, 1996, earning assets were $326.44 million, 92.60% of total assets
The decrease in earning assets as a percentage of total assets would normally
have a negative impact on earnings. However, Carrollton's ratio of interest
earning assets ("IEA's") to interest bearing liabilities ("IBL's") has been on a
steady increase, reflecting 103.78%, 105.90% and 106.13%, at December 31, 1994,
1995, and 1996, respectively (See Table I.10). This increase has offset the
impact of the declining earning assets to total assets ratio. The increase in
the IEA to IBL ratio was mainly facilitated by the steady increase in
noninterest bearing liabilities, which grew from $7.1 million in 1994, to $11.1
million in 1995, and then to $15.6 million in 1996.
Equity accounts increased steadily from $17.26 million at December 31,
1992, to $25.0 million at December 31, 1995, and to $25.26 million in 1996.
During this period, net interest margins, net interest spread, and net interest
income have remained stable. Net interest income was $13.22 million in 1994,
$13.22 million in 1995, and $13.41 million in 1996. Net interest spread nearly
paralleled net interest income at 4.0% in 1994, 3.81% in 1995, and 3.93% in
1996. These ratios are followed closely by the net interest yield, which was
4.15% in 1994, 4.07% in 1995, and 4.21% in 1996.
ASSET/LIABILITY MANAGEMENT
Managing interest rate risk is a major and necessary component of the
strategy used in operating a thrift. Most of a thrift's interest earning assets
are long term, while most of the interest bearing liabilities have short to
intermediate terms to contractual maturity. To compensate, asset/liability
management techniques include: (1) making long term loans with interest rates
that adjust to market periodically, (2) investing in assets with shorter terms
to maturity, (3) lengthening the terms to maturities of savings deposits, and
(4) seeking to employ any combination of the aforementioned techniques
artificially through the use of synthetic hedge instruments. Table I.4 contains
information on contractual loan maturities at December 31, 1996. However, this
table must be read in conjunction with Table I.5. Table I.5 shows the gap
analysis of Carrollton Federal's interest earning assets and interest bearing
liabilities at December 31, 1996. It shows that, within one year of December,
1996, Carrollton Federal has a negative gap of interest earning assets to
interest bearing liabilities of $21.6 million or 9.4%, and a negative gap to
total assets of 6.29%. Table I.5 further reveals that this negative gap would
result in a -$671.1 thousand adjustment to income if rates were to increase 200
Basis Points (BP). However, if rates were to decline 200 BP, the income would
be enhanced by $147.9 thousand dollars. This level of interest rate risk is
indicative of an excellent effort on the part of Management to properly insulate
the institution against interest rate risk, while maintain the earning
capabilities of the Bank.
Table I.6 provides rate shock information at varying levels of interest
rate change and confirms the conclusions derived from Table I.5 in regard to the
interest rate sensitivity of Carrollton Federal.
The Bank has limited interest rate risk and would suffer minor
deterioration in profitability, as well an erosion in the value of its portfolio
equity. The preparation of the gap analysis (Table I.5) was approached in a
normal manner. The following assumptions were used: 1) monthly amortizing
fixed rate loans were assumed to repay at contractual amortization, 2)
adjustable rate loans and investments were included in the time period in which
they are scheduled to reprice, 3) a floor of 1.0% is assumed on variable rate
deposits, 4) variable rate assets and liabilities will reprice up or down
within contractual limits, and 5) fixed rate investments
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FERGUSON & COMPANY SECTION I.
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include callable agencies which will be called in a falling interest rate
environment, but will not increase in rate in a rising rate environment. Table
I.6 was prepared by the Office of Thrift Supervision.
Carrollton Federal's basic approach to interest rate risk management has
been to emphasize adjustable mortgage loans and intermediate term investment
securities, shorten fixed rate mortgage terms, increase consumer loans,
commercial real estate loans and commercial non-real estate loans. They have
also increased investments in short and intermediate term investment securities.
In addition, Carrollton Federal has used FHLB advances as an alternative source
of funding where it is cost effective and prudent. These advances have served
to lengthen the maturities of the liabilities. In addition, these advances are
secured and not as likely to be called. As of December 31, 1996, Carrollton
Federal had $16.3 million in advances for the FHLB. The results of this funding
strategy, combined with other actions, have been to produce an asset/liability
position that is less sensitive to rate changes.
TABLE I.1 - SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Loans, gross $ 272,435 $ 273,171 $ 283,476 $ 262,154 $ 256,224
Earning Assets 326,443 314,706 330,801 292,047 284,759
Assets 352,532 334,477 353,351 312,109 302,100
Deposits 307,756 289,288 289,328 269,624 270,050
Equity 25,258 25,030 22,083 19,700 17,261
</TABLE>
SOURCE: OFFERING CIRCULAR
TABLE I.2 - SELECTED OPERATING DATA
<TABLE>
<S> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA
Net interest income 13,409 13,217 13,224 13,418 11,694
Provision for loan losses 1,143 250 99 822 1,061
Noninterest income 3,244 3,118 2,137 2,003 1,864
Noninterest expense (1) 15,276 11,764 12,324 11,168 9,733
Deposit insurance premiums (1) 2,340 636 682 717 605
Net earnings (1) 248 2,947 2,384 2,438 1,803
</TABLE>
(1) Includes one-time SAIF assessment of $1,722,575.
Source: Offering Circular
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FERGUSON & COMPANY SECTION I.
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TABLE I.3 - SELECTED OPERATING RATIOS
<TABLE>
<CAPTION>
------------------------------------------------------
1996 1995 1994 1993 1992
----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PERFORMANCE RATIOS:
Return on assets (net income (loss) divided by
average total assets).............................. 0.07% 0.86% 0.72% 0.78% 0.59%
Return on average equity (net income(loss)
divided by average equity)......................... 0.99% 6.26% 5.70% 6.60% 10.45%
Interest rate spread (combined weighted average
interest rate earned less combined average
weighted interest rate cost)....................... 3.93% 3.81% 4.00% NA NA
Net interest margin (net interest income divided
by average interest-earning assets)................ 4.21% 4.07% 4.15% 3.97% 3.74%
Ratio of average interest-earning assets
to average interest-bearing liabilities............
Ratio of noninterest expense to average assets...... (1) 4.45% 3.42% 3.70% 3.64% 3.20%
Ratio of noninterest expense to average assets...... (2) 3.95% 3.42% 3.70% 3.64% 3.20%
Efficiency ratio.................................... (1) 91.73% 72.01% 80.23% 72.42% 71.78%
Efficiency ratio.................................... (2) 81.39% 72.01% 80.23% 72.42% 71.78%
ASSET QUALITY RATIOS:
Nonperforming assets to total assets
at end of period................................... 1.82% 0.78% 1.16% 1.45% 1.44%
Allowance for loan losses to total loans............ 0.95% 0.84% 0.84% 1.02% 0.79%
Net charge-offs to average loans outstanding........ 0.17% 0.07% 0.08% 0.04% 0.13%
</TABLE>
(1) Includes one-time SAIF assessment of $1,722,575
(2) Excludes one-time SAIF assessment of $1,722,575
Source: Offering Circular
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TABLE I.4 - LOAN MATURITY SCHEDULE
<TABLE>
<CAPTION>
1 year
Less than through Over
1 year 5 years 5 years Total
------ ------- ------- -----
<S> <C> <C> <C> <C>
Mortgage(1):
Adjustable(2) $ 83,593 $ 7,345 $ - $ 90,938
Fixed 2,341 8,726 44,572 55,639
Construction 34 - - 34
Consumer 35,088 30,132 2,818 68,038
Commercial(2) 38,512 14,657 4617 57,786
------------ ------------ ------------ ------------
Total $159,568 $60,860 $52,007 $272,435
============ ============ ============ ============
</TABLE>
(1) Includes second mortgage loans on one-to four family residential loans of
$13,884.
(2) Reflects repricing dates for adjustable rate loans.
Source: Offering circular
TABLE I.4A
The following tables sets forth the dollar amount of all loans, maturing or
repricing, before net items, due after one year from December 31, 1996, which
have fixed interest rates or which have adjustable interest rates.
<TABLE>
<CAPTION>
Fixed Adjustable
Rate Rate Total
----------- ----------- ----------
(in thousands)
<S> <C> <C> <C>
Mortgage $ 53,298 $ 7,345 $ 60,643
Construction - - -
Consumer 32,950 - 32,950
Commercial 17,824 1,450 19,274
----------- ----------- ----------
Total $ 104,072 $ 8,795 $ 112,867
=========== =========== ==========
</TABLE>
Source: Offering circular
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FERGUSON & COMPANY SECTION I.
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The following table sets forth the amounts of interest-earning assets and
interest-bearing liabilities outstanding at December 31, 1996, which are
expected to mature or reprice within the year.
TABLE I.5 - INTEREST RATE SENSITIVITY ANALYSIS - AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
12/31/96 Current Current Current +200bp Current +200bp
Assets/Liabilities Weighted Anticipated Wgt Avg Anticipated Wgt Avg Anticipated
Repricing w/in Average Interest Inc. Rate Interest Inc. Rate Interest Inc.
One Year Rate or Expense +200bp or Expense +200bp or Expense
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Cash 3,355,586 5.20% 174,490.47 7.20% 241,602.19 3.20% 107,378.75
Fed Fund 7,360,000 5.20% 382,720.00 7.20% 529,920.00 3.20% 235,520.00
Fixed Inv 11,974,702 7.13% 853,197.52 7.13% 853,796.25 5.13% 613,703.48
Lagging 3 66,199,641 7.50% 4,964,973.08 9.50% 6,288,965.90 5.50% 3,640,980.26
Current 3 88,472,228 9.00% 7,962,500.52 11.00% 9,731,945.08 7.00% 6,193,055.96
Colonial 3 814,802 8.00% 65,184.16 10.00% 81,480.20 6.00% 48,888.12
Stock 4,505,891 7.50% 337,941.83 9.50% 428,059.65 5.50% 247,824.01
Fixed Lns 25,571,128 9.90% 2,531,541.67 11.90% 3,042,964.23 7.90% 2,020,119.11
------------- --------------- --------------- -----------------
208,253,978 17,272,549.24 21,198,733.50 13,107,469.68
Liabilities
Var Dep 2 86,136,893 2.67% 2,299,855.04 4.67% 4,022,592.90 1.00% 861,368.93
Fixed Dep 133,726,844 5.40% 7,221,249.58 7.40% 9,895,786.46 3.40% 4,546,712.70
Advances 10,000,000 5.52% 552,000.00 7.52% 752,000.00 3.52% 352,000.00
------------- --------------- --------------- -----------------
229,863,737 10,073,104.62 14,670,379.36 5,760,081.63
1 Yr Gap (21,609,759)
Net II 7,199,444.62 6,528,354.14 7,347,388.06
Change in net interest income from rate shock (671,090.49) 147,943.43
</TABLE>
1 Fixed rate investments include callable agencies which will be called in a
falling interest rate environment but will not will not increase in rate in a
rising rate environment.
2 A floor of 1.0% is assumed on variable rate deposits
3 Variable rate assets and liabilities will reprice up or down within
contractual limits
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TABLE I.6 - NET PORTFOLIO VALUE
As of September 30, 1996
<TABLE>
<CAPTION>
Estimated
Change in NPV as a
Interest Rates Estimated Percentage Amount
(basis points) NPV of Assets of Change Percent Policy
- ----------------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
+400 $24,956 7.9 % $(7,694) (21.0)% -75
300 31,592 8.6 (5,058) (14.0) -50
200 33,896 9.3 (2,754) (8.0) -30
100 35,639 9.7 (1,012) (3.0) -15
0 36,651 10.0
-100 36,757 10.0 107 - -75
200 36,350 9.9 (301) (1.0) -50
300 36,628 10.0 (23) - -30
400 37,824 10.3 1,173 3.0 -15
</TABLE>
SOURCE: OFFICE OF THRIFT SUPERVISION, RISK MANAGEMENT DIVISION
INCOME AND EXPENSE TRENDS
Carrollton Federal was profitable for the five years ending December 31,
1996. However, the year ending December 31, 1996, was significantly less
profitable than preceding years. Profits were $1.8 million, $2.4 million, $2.4
million, $2.9 million, and $248 thousand in 1992, 1993, 1994, 1995, and 1996,
respectively. The diminution of earnings in the last period can be attributed
to the SAIF assessment of $1.72 million and additions to loan and lease loss
reserves of $840 thousand, in anticipation of the Conversion. As mentioned
earlier, net interest margins have remained strong, and so has the basic
earnings capacity of the Bank. The ability to generate core earnings will
improve with the anticipated infusion of capital generated by the Conversion.
Non-interest income levels consistently increased in both dollar amounts
and as a percentage of total assets. As of December 31, 1992, noninterest
income was $1.86 million (0.62% of total assets); at December 31, 1993, it was
$2.0 million (0.64% of total assets); December 31, 1994, it was $2.14 million
(0.60% of total assets); at December 31, 1995, it was $3.12 million (0.93% of
total assets); and at December 31, 1996, it was $3.24 million (0.92% of total
assets). This upward trend in noninterest income, expressed as a percentage and
in total dollars, is an impressive improvement over the performance of more
traditional thrifts. In contrast, the trend in noninterest expense items has
generally been subjected to control. Noninterest expense, expressed as a
percentage of average assets, has been in general decline. It was 3.22% in
1992, 3.56% in 1993, 3.49% in 1994, 3.52% in 1995, and 4.33% in 1996. However,
the 1996 noninterest expense number included $1.72 million in SAIF assessments.
Adjusting the 1996 noninterest expense for the SAIF assessment, the number is
3.84% of average assets.
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FERGUSON & COMPANY SECTION I.
- ------------------ ----------
REGULATORY CAPITAL REQUIREMENTS
As Table I.7 demonstrates, Carrollton Federal meets all regulatory capital
requirements and meets the regulatory definition of a "Well Capitalized"
institution. Moreover, the additional capital raised in the stock conversion
will add to the existing capital cushion.
TABLE I.7 - REGULATORY CAPITAL COMPLIANCE
<TABLE>
<CAPTION>
Amount
(000's) Percent
------------- -----------
<S> <C> <C>
GAAP Capital $ 25,258 7.16%
Tangible Capital:
Capital level $ 22,934 6.54%
Requirement 5,260 1.50%
------------- -----------
Excess $ 17,674 5.04%
============= ===========
Core Capital:
Capital level $ 22,934 6.54%
Requirement 10,520 3.00%
-------------
Excess $ 12,414 3.54%
============= ===========
Risk Based Capital:
Capital level $ 24,964 10.51%
Requirement 18,997 8.00%
------------- -----------
Excess $ 5,967 2.51%
============= ===========
</TABLE>
Source: Carrollton Federal TFR, Form SB-2, and F&C calculations.
11
<PAGE>
FERGUSON & COMPANY SECTION I.
- ------------------ ----------
LENDING
Table I.8 provides an analysis of the Bank's loan portfolio by type of loan
security. This analysis shows that Carrollton Federal's loan composition is
still dominated by 1-4 family dwelling loans. However, there is a noticeable
upward trend in the non-residential loans. This trend is consistent with the
institutions business strategies to become a full service community bank.
Notable in the composition of the portfolio is the number of consumer and
commercial loans. These loans, which represent 46.17% (24.97% consumer loans
and 21.22% commercial loans) of the total portfolio, have greatly increased the
repricing opportunities of Carrollton Federal.
Table I.9 provides information with respect to loan originations and
repayments. It also clearly shows the transition in emphasis from one to four
residential to consumer and commercial loans. At December 31, 1994, of the
$95.68 million in loans originated, $41.12 million, or 42.98%, were one to four
residential. At December 31, 1995, of the $81.1 million loans originated, $30.1
million, or 37.13%, were one to four residential. By December 31, 1996, out of
the $93.55 million in loans originated, the volume of one to four residential
loans had declined to $25.63 million, or 27.40%. Once again, the transition to
a full service community bank is reflected in the types of loans being
originated, and conforms to the strategies now employed.
Table I.10 provides rates, yields, and average balances for the three years
ended December 31, 1994, 1995, and 1996. Net yield on average interest-earning
assets increased from 8.10% in 1994 to 8.54% in 1995, and to 8.84% in 1996.
Interest rates paid on average interest-bearing liabilities decreased from 4.10%
in 1994, to 4.73% in 1995, and 4.91% in 1996. The net yield on interest earning
assets went from 4.15% in 1994, to 4.07% in 1995, to 4.21% in 1996. Carrollton
Federal's spread changed from 4.00% in 1994, to 3.81% in 1995, to 3.93% in 1996.
However, the ratio of average interest earning assets to average interest
bearing liabilities increased from 103.78% in 1994, to 105.90% in 1995, and
106.13% in 1996. The improvement of this ratio is reflected in overall
profitability and is an important component.
TABLE I.8 - LOAN PORTFOLIO COMPOSITION
<TABLE>
<CAPTION>
1996 1995 1994
----------------------------------------------------------------
Amount % Amount % Amount %
------ - ------ - ------ -
<S> <C> <C> <C> <C> <C> <C>
Real estate mortgage loans 146,577 52.56% 175,039 64.08% 196,761 69.41%
Real estate construction loans 6,500 2.33% 2,349 0.86% 1,451 0.51%
Commercial loans 57,786 20.72% 43,944 16.09% 38,755 13.67%
Consumer and other installment
loans 68,038 24.39% 51,840 18.98% 46,509 16.41%
--------- -------- --------
Total loans 278,901 100.00% 273,172 100.00% 283,476 100.00%
Less: Allowance for loan losses 2,601 0.93% 2,291 0.84% 2,392 0.84%
--------- -------- --------
Loans, net 269,834 270,881 281,084
========= ======== =========
</TABLE>
12
<PAGE>
FERGUSON & COMPANY SECTION I.
- ------------------ ----------
TABLE I.9 - LOAN ACTIVITY
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------
1996 1995 1994
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Loans originated:
Mortgage $ 25,629 $ 30,102 $ 41,124
Construction 9,031 6,097 5,741
Commercial 15,532 15,290 15,645
Consumer 43,356 29,575 33,166
----------- ------------ ------------
$ 93,548 $ 81,064 $ 95,676
=========== ============ ============
Loans purchased
Total loans originated
and purchased $ 93,548 $ 81,716 $ 114,146
=========== ============ ============
Sales and loan principal repayments:
Loans sold proceeds $ 10,882 $ 6,605 $ 13,239
Loan repayments 95,183 80,905 93,279
----------------------------------------------
$ 106,065 $ 87,510 $ 106,518
=========== ============ ============
</TABLE>
Table I.9 clearly demonstrates that Carrollton Federal can no longer be
considered primarily a residential lender. The information shows that consumer
and business type loans are becoming more common and are the growing portion of
the loan portfolio.
SOURCE: OFFERING CIRCULAR
13
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.10 - AVERAGE BALANCES, YIELDS AND COSTS
<TABLE>
<CAPTION>
1994 1996 1995
------------------------------------- ----------------------------------- --------------------
Average Average
Average Yield/ Average Yield/ Average
Balance Interest Cost Balance Interest Cost Balance
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets
Interest earning deposits
feds funds sold $ 15,158 $ 822 5.42% $ 7,993 $ 473 5.92% $ 11,110
Investment securities 31,623 2,538 8.03% 36,076 2,652 7.35% 33,470
Loans (including loan fees)(1) 272,786 24,874 9.12% 280,613 24,588 8.76% 274,135
------------------------------------- ------------ ------------------- ---------------
Total interest-earning assets 319,567 28,234 8.84% 324,682 27,713 8.54% 318,715
-------------------- -------------------
Allowance for loan losses (2,446) (2,341) (2,539)
Cash and due from banks 9,005 7,857 9,121
Premises and equipment 8,327 7,782 7,625
Other assets 9,322 5,649 6,961
----------
Total assets $343,775 $ 343,629 $ 339,883
========== ============ ===============
Interest-bearing liabilities
Deposits
Demand 46,821 1,386 2.96% 47,566 1,366 2.87% 52,867
Savings 32,991 889 2.69% 33,280 828 2.49% 37,892
Time 202,641 11,338 5.60% 195,200 10,444 5.35% 188,343
Other borrowings 18,650 1,169 6.27% 30,555 1,858 6.08% 28,007
---------- -------------------- ------------ ------------------- ---------------
301,103 14,782 4.91% 306,601 14,496 4.73% 307,109
Non-interest-bearing liabilities 15,635 11,104 7,137
Other liabilities 1,893 2,367 4,386
---------- ------------ ---------------
Total liabilities 316,738 320,072 318,632
Equity 25,144 23,557 21,251
---------- ------------ ---------------
Total liabilities and equity $341,882 $ 343,629 $ 339,883
========== ============ ===============
Net interest income $ 13,452 $13,217
======== ========
Interest rate spread 3.93% 3.81%
========= ========
Net yield on interest-earning assets 4.21% 4.07%
========= ========
Ratio of average interest-earning assets to
average interest-bearing liabilities 106.13% 105.90%
========= ========
<CAPTION>
1994
--------------------------------------
Average
Yield/
Interest Cost
-------- ----
<S> <C> <C>
Interest-earning assets
Interest earning deposits
feds funds sold $ 406 3.65%
Investment securities 2,414 7.21%
Loans (including loan fees)(1) 23,000 8.39%
--------------------------------------
Total interest-earning assets 25,820 8.10%
Allowance for loan losses
Cash and due from banks
Premises and equipment
Other assets
Total assets
Interest-bearing liabilities
Deposits
Demand 1,184 2.24%
Savings 1,094 2.89%
Time 8,652 4.59%
Other borrowings 1,666 5.95%
--------------------------------------
12,596 4.10%
--------------------------------------
Non-interest-bearing liabilities
Other liabilities
Total liabilities
Equity
Total liabilities and equity
Net interest income $ 13,224
==============
Interest rate spread
Net yield on interest-earning assets 4.00%
============
4.15%
============
Ratio of average interest-earning assets to
average interest-bearing liabilities 103.78%
============
</TABLE>
The average yield is calculated by combining earnings on investment securities
and mortgage-backed securities in one category for presentation in this
schedule.
SOURCE: OFFERING CIRCULAR
14
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
Table I.11 provides a rate volume analysis, measuring differences in
interest earning assets ("IEA's") and interest bearing liabilities ("IBL's"),
and the interest rates thereon comparing the years ended December 31, 1994,
1995, and 1996. The table shows that of the $235 thousand increase in income
between 1995 and 1996, a negative $245 thousand can be attributed to volume, and
$480 thousand can be attributed to rate. The reversal of the former is shown in
the 1994 -1995 comparison, where income decreased $7.0 thousand. This was a net
result in a $380 thousand increase in income due to volume, and a negative $387
thousand decrease due to rates. Although the Rate/Volume Analysis cannot
predict performance in a changing rate environment, it can demonstrate clearly
the impact of interest rate risk.
TABLE I.11 - RATE/VOLUME ANALYSIS
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------------------
1996 vs. 1995 1995 vs. 1994
----------------------------------- ----------------------------------------
Increase (Decrease) Increase (Decrease)
--------------------------------- ----------------------------------------
Volume Rate Total Volume Rate Total
------ ---- ----- ------ ---- -----
<S> <C> <C> <C> <C> <C> <C>
Interest Income
Interest earning deposits and
federal funds sold $ 392 $ (43) $ 349 $ (136) $ 203 $ 67
Investment securities
Taxable (439) 198 (241) 190 48 238
Nontaxable 127 - 127 - - -
Loans (697) 983 286 552 1,036 1,588
--------- -------- -------- -------- -------- --------
Total $ (619) $ 1,144 $ 524 $ 607 $ 1,286 $ 1,892
========= ======== ======== ======== ======== ========
Interest-bearing liabilities
Deposits
Demand (22) 42 20 (128) 310 182
Savings (7) 68 61 (125) (141) (266)
Time 402 492 894 324 1,468 1,792
Other borrowings (745) 56 (689) 155 37 192
--------- -------- -------- -------- -------- --------
Total interest-bearing liabilities (372) 658 286 226 1,674 1,900
--------- -------- -------- -------- -------- --------
Change in net interest income $ (245) $ 480 $ 235 $ 380 $ (387) $ (7)
========= ======== ======== ======== ======== ========
</TABLE>
SOURCE: OFFERING CIRCULAR
15
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
NON-PERFORMING ASSETS
As shown in Table I.12, Carrollton Federal's total non-performing loans as
of December 31, 1996, were $6.24 million and represented 2.36% of total loans
and 1.82% of total assets. Most of the non-performing loans as of that date
were secured. The majority of the nonperforming loans could be traced to two
large transactions, which at this time appear to be adequately collateralized
and subjected to substantial specific reserves. It would be folly to predict
the amount of recovery or loss that may be sustained in these transactions, but
it is believed that the collateral coverage and the specific reserves now in
place will adequately protect the institution from substantial losses.
TABLE I.12 - NON-PERFORMING ASSETS
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
Loans accounted for on a non-accrual basis:
Mortgage $ 943 $ 1,203 $ 1,411 $ 2,239 $ 1,354
Construction - - - - -
Commercial 3,900 582 245 39 261
Consumer 1,400 515 1,465 1,451 1,391
---------- ----------- ---------- --------- ----------
$ 6,243 $ 2,300 $ 3,121 $ 3,729 $ 3,006
========== =========== ========== ========= ==========
Accruing loans which are contractually
past due 90 days or more:
Mortgage $ - $ - $ - $ - $ -
Construction - - - - -
Commercial 0 0 0 0 0
Consumer 0 0 0 0 0
---------- ---------- ---------- --------- ----------
$ - $ - $ - $ - $ -
========== ========== ========== ========= ==========
Total non-peforming loan $ 6,243 $ 2,300 $ 3,121 $ 3,729 $ 3,006
========== ========== ========== ========= ==========
Percentage of total loans 2.36% 1.32% 1.46% 1.72% 1.44%
========== ========== ========== ========= ==========
Percentage of total assets 1.82% 1.09% 1.17% 1.45% 1.44%
========== ========== ========== ========= ==========
</TABLE>
SOURCE: OFFERING CIRCULAR.
16
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.12A - SCHEDULE OF CLASSIFIED ASSETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
Classification
Special Mention $ 4,216 $ 2,347 $ 1,511 $ 2,857 $ 22,136
Substandard 8,529 6,128 5,308 9,038 10,467
Doubtful 1,431 1,126 1,421 1,308 1,986
Loss - 55 5 669 5
---------------------------------------------------
Total classified assets $ 14,176 $ 9,656 $ 8,245 $ 13,872 $ 34,594
</TABLE>
Source: Offering Circular
The volume of total classified assets is high for an institution this
size. However, the majority of the $14.17 million in classified assets are
centered in Special Mention, $4.22 million, and Substandard, $8.53 million.
Doubtful classifications have remained relatively level since 1993, and assets
classified as loss have been nominal in the years following 1993. It is
apparent that Management has developed adequate management techniques for
dealing with the classified assets of the bank. Equally as important is the
fact that the majority of the assets classified by the examiner had already been
identified as problem assets by Management. In other words, the portfolio is
believed to hold only a minimum of asset quality surprises.
TABLE I.13 - ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
The following table sets forth an analysis of the Bank's allowance for possible
loan losses for the periods indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $2,291 $2,392 $2,687 $2,027 $1,464
Loans charged-off:
Mortgage loans 32 82 277 166 260
Commercial loans 117 59 - - 117
Consumer loans 776 308 181 88 339
------ ------ ------ ------ ------
Total charge-offs $ 925 $ 449 $ 458 $ 254 $ 716
------ ------ ------ ------ ------
Recoveries: 92 98 64 91 218
Net loans charged-off 833 351 394 163 $ 498
Provision for loan losses 1,143 250 99 822 1,061
Balance at end of period $2,601 $2,291 $2,392 $2,687 $2,027
====== ====== ====== ====== ======
</TABLE>
SOURCE: OFFERING CIRCULAR
17
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
LOAN LOSS ALLOWANCE
Table I.13 provides an analysis of the allocation of Carrollton Federal's
loan loss allowance. Significant increases to the loan loss reserves were made
at December 31, 1996. These increases in loan loss reserves were not dictated
by historical or anticipated losses, but instead were provisions made in
anticipation of the Conversion.
Table I.14 shows the allocation of the loan loss allowance among the
various loan categories for the years ending December 31, 1996, 1995, 1994,
1993, and 1992.
TABLE I.14
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------------
1996 1995 1994
------------------------- ------------------------- -------------------------
% of % of % of
Loans in Loans in Loans in
Each Each Each
Category to Category to Category to
Amount Total Loans Amount Total Loans Amount Total Loans
------ ----------- ------ ----------- ------ -----------
<S> <C> <C> <C> <C> <C> <C>
Allocated to:
Mortgage loans $ 441 61% $ 423 68% $ 222 76%
Commercial loans 1,170 22% 1,158 20% 1,158 13%
Consumer loans 996 17% 710 12% 1,020 11%
------------------------- ------------------------- -------------------------
Total $ 2,607 100% $ 2,291 100% $2,392 100%
========================= ========================= =========================
<CAPTION>
1993 1992
------------------------- -------------------------
% of % of
Loans in Loans in
Each Each
Category to Category to
Amount Total Loans Amount Total Loans
------ ----------- ------ -----------
<S> <C> <C> <C> <C>
Allocated to :
Mortgage loans $ 373 79% $ 224 79%
Commercial loans 1,364 12% 1,094 12%
Consumer loans 949 9% 709 9%
------------------------- -------------------------
Total $2,686 100% $2,027 100%
========================= =========================
</TABLE>
SOURCE: OFFERING CIRCULAR
The preceding table allocates the allowance for loan losses by loan
category at the dates indicated. The allocation of the allowance to each
category is not necessarily indicative of future losses and does not restrict
the use of the allowance to absorb losses in any other category.
18
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
MORTGAGE-BACKED SECURITIES AND INVESTMENTS
Table I.15 provides a breakdown of mortgage-backed securities and
investments as of December 31, 1996.
TABLE I.15 - CLASSIFICATION OF INVESTMENT SECURITIES
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ -------------
<S> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
Municipal securities $ 2,230 -
US government and agency obligations 16,790 -
Mortgage backed and related securities
GNMA certificate - -
FHLMC certificate - -
FNMA certificate 3,933 -
CMOs 8,934 -
Equity securities
FHLMC preferred stock - -
FHLMC common stock - -
FNMA common stock 2,040 -
FHLB common stock - -
US League common stock - -
Mutual funds - -
-------- -------- --------
Total securities available for sale 33,927
SECURITIES HELD FOR SALE
FHLMC stock - -
FNMA stock - -
Mutual funds - -
-------- -------- --------
Total securities held for sale - -
HELD TO MATURITY
US government and agency obligations 6,716 8,391 33,062
State government obligations 115 115
Domestic corporation obligations - -
FHLB common stock 2,432 3,191 3,191
US League common stock - -
-------- -------- --------
Total investments securities held to maturity 9,263 11,697 36,253
Total mortgage-backed securities and
related securities 923 1,871 12,204
-------- -------- --------
Total securities held to maturity 10,186 13,568 48,457
-------- -------- --------
Total securities $44,113 $13,568 $48,457
======== ======== ========
</TABLE>
19
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.15A - EXPECTED MATURITY OF INVESTMENT SECURITIES
<TABLE>
<CAPTION>
After one After five
Within one year but within five but within ten After ten years
years years
--------------------- -------------------- -------------------- ------------------
Amount Yield Amount Yield Amount Yield Amount Yield Totals
------ ----- ------ ----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Securities held to maturity:
US Treasury Securities $ 500 5.60% $ - - $ - - $ - - $ 500
US Government Agencies 582 7.22% 2,634 6.57% 3,000 7.39% - - 6,216
State, county and municipals - - 115 4.55% - - - - 115
Mortgage-backed securities 533 5.45% 239 6.05% 11 7.25% 150 7.21% 933
-------------------- ------------------- -------------------- ------------------ -------
$1,615 6.13% $2,988 6.46% $ 3,011 7.39% $ 150 7.21% $ 7,764
==================== =================== ==================== ================== =======
Securities available for sale:
US Treasury Securities - - - - - - - - -
US Government Agencies - - 3,000 6.88% 11,849 8.93% 4,018 7.12% 18,867
State, county and municipals - - - - - - 2,199 7.27% 2,199
Mortgage-backed securities - - 2,038 6.75% 1,946 6.86% 8,908 7.18% 12,892
-------------------- ------------------- -------------------- ------------------- --------
$ - - $5,038 6.83% $13,795 8.64% $15,125 7.18% $33,958
==================== =================== ==================== ==================== ========
</TABLE>
Carried at amortized cost.
Source: Offering circular
Table I.15 is notable for showing the changes in classification in
securities from "Held to Maturity" to "Available for Sale." The years ending
December 31, 1995 and 1994 show that the Bank did not have any investments that
were classified "Available for Sale." However, as of December 31, 1996, out of
$44.12 million in securities, $33.93 million were classified as "Available for
Sale." This change in classification enhances actual liquidity and provides
Management with the flexibility to properly manage the investment portfolio of
the Bank. All securities classified as "Available for Sale" are carried at
their fair value as of December 31, 1996. Securities classified as "Held to
Maturity" were carried at amortized historical cost at all respective dates.
Mortgage backed securities have been used by Management to supplement a
limited demand for both "fixed rate" and "adjustable rate" loan products.
Competitive factors within the primary trade area of the Bank have made
expansion of the one to four residential portfolio difficult. Management has
not committed a significant amount of its assets to Mortgage-Backed Securities
("MBS's"). At December 31, 1996, Carrollton Federal had $3.9 million in MBS's
carried as "Available for Sale" and $932 thousand MBS's carried as "Held to
Maturity." In addition, the Bank had $8.93 million in CMO's that were
classified as "Available for Sale."
Table I.15a displays the expected maturities of the investment securities.
The values in this table vary slightly from Table I.15, because the values are
noted at amortized cost. The information shows that the portfolio is basically
long term. It also shows that the majority of the investment securities are
classified "Available for Sale."
20
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.16 - DEPOSIT PORTFOLIO
Deposits in the Bank at December 31, 1996, were represented by the various
types of deposit programs described below.
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
Amount Percentage Amount Percentage Amount Percentage
------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Certificates of Deposit
greater than 100 $ 47,250 15.36% $ 43,641 15.09% $ 37,117 12.83%
less than 100 163,133 53.03% 155,103 53.64% 151,617 52.40%
----------------------------- -------------------- -------------------------
210,383 68.38% 198,744 68.73% 188,734 65.23%
Savings accounts 34,077 11.08% 31,736 10.98% 36,593 12.65%
Transaction accounts
NOW and money
market accounts 47,288 15.37% 46,626 16.12% 53,624 18.53%
Non-interest
bearing accounts 15,903 5.17% 12,056 4.17% 10,376 3.59%
----------------------------- -------------------- ------------------------
63,191 20.54% 58,682 20.29% 64,000 22.12%
$ 307,651 100.00% $ 289,162 100.00% $ 289,327 100.00%
============================== ==================== ========================
</TABLE>
Source: Offering circular
SAVINGS DEPOSITS
At December 31, 1996, Carrollton Federal's deposit portfolio of $307.62
million was composed as follows: total transaction type accounts--$63.19
million, or 20.54%; savings deposits and passbook account--$34.07 million,
11.08%, and certificate accounts--$210.35 million, or 68.38%. Certificates were
comprised of $47.22 million, or 15.35% of total deposits that were in excess of
$100 thousand, and $163.13 million, or 53.03% of total deposits that were less
than $100 thousand. (See Table I.16 above.)
Table I.17 displayed below shows the totals of certificates of deposits
and the maturities by year with rate ranges at the year ending December 31,
1996. The rate section of Table I.17 clearly shows the cost of funds for the
institution is affected more by rate than term. The majority of the
certificates of deposits are concentrated in rates between 4.00% and 7.99%, and
terms one year or less, and one year through two years. These rates and terms
make up 89.04% ($187.30 million) of Carrollton Federal's certificates. This
dependency on short term certificates has added to the interest rate risk of the
institution.
21
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.17 - TIME DEPOSIT RATES AND MATURITIES
The following table sets forth the rates and maturities of time deposits at
December 31, 1996.
<TABLE>
<CAPTION>
Amount Due
Less Than Over
One Year 1 - 2 Years 2 - 3 Years 3 - 4 Years 5 Years Total
-------- ----------- ----------- ----------- ------- -----
(in thousands)
--------------
<S> <C> <C> <C> <C> <C> <C>
2.00 - 3.99% $ - $ - $ - $ - $ - $ -
4.00 - 4.99% 671 - - - - 671
5.00 - 5.99% 113,162 41,654 4,685 1,613 783 161,897
6.00 - 7.99% 19,741 12,747 6,700 3,574 4,193 46,955
8.00 - 9.99% 165 243 - 133 - 541
---------------- ----------- --------------- ------------ ---------- --------
$133,739 $54,644 $11,385 $5,320 $4,976 $210,064
================ =========== =============== ============ ========== ========
</TABLE>
Source: Offering circular
Carrollton Federal has some dependency on jumbo certificates of deposit.
At December 31, 1996, the Bank had $47.23 million in certificates that were
issued for $100 thousand or more, or 15.35% of its total deposits (see Table
I.18). This degree of dependency on Jumbo Certificates is moderately high.
TABLE I.18 - JUMBO CD'S AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
Time Deposits over $100,000 - Maturity Schedules
Certificates of
Maturity Period Deposits
--------------- --------
<S> <C>
Three months or less $ 8,011
Over three through six months 6,866
Over six through 12 months 11,680
Over 12 months 20,673
---------------
$47,230
===============
</TABLE>
Source: Offering circular
22
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
BORROWINGS
At December 31, 1996, Carrollton Federal had FHLB advances of $16.3
million. Of the advances, $10.0 million were at an adjustable rate with a
weighted average rate of 5.485%. The remaining $6.3 million were fixed rate
advances and had a weighted average rate of 5.6803%. The current position in
advances is the result of Management's decision to fund asset growth with
advances rather than increase overall deposit interest expense. When you view
the advances concurrently with the jumbo certificates of deposits, you can see
that there is a large liability exposure of $63.53 million. This degree of
exposure will have little impact on the liquidity of the institution as long as
there are no obvious problems. Moreover, the $16.3 million in advances are
secured and have much less volatility than do the certificates. However, the
Bank has ample unpledged collateral and could, if necessary, convert a portion
of the jumbo certificate exposure to secured advances with the FHLB. Although
there is significant large liability exposure, the current situation in the
institution limits its potential impact.
SUBSIDIARIES
At December 31, 1996, CF Mutual Holdings, the parent company of Carrollton
Federal, had two subsidiaries, CFB Securities which was established in September
of 1996, and CFB Insurance which was established in December 1995. In addition,
Carrollton Federal, the association itself, has a service corporation, Carroll
Service and Development Corporation, which was established in March of 1972, but
is currently inactive. CFB Securities' purpose was to have a company to offer
"non-banking" investments, such as stocks and bonds, and mutual funds to the
public. CFB Insurance's purpose is to act as an insurance agent, offering
insurance products to the public. The various subsidiaries have been
consolidated with the financial information reported herein, and their financial
impact on the Bank or the Holding Company is insignificant.
LEGAL PROCEEDINGS
From time to time, Carrollton Federal becomes involved in legal proceedings
principally related to the enforcement of its security interest in real estate
loans. In the opinion of Management of the Bank, no legal proceedings are in
process or pending that would have a material effect on Carrollton Federal's
financial position, results of operations, or liquidity.
EARNINGS CAPACITY OF THE INSTITUTION
As in any interest sensitive industry, the future earnings capacity of
Carrollton Federal will be affected by the interest rate environment.
Historically, the thrift industry has performed at less profitable levels in
periods of rising interest rates. This performance is due principally to the
general composition of the assets and the limited repricing opportunities
afforded even the adjustable rate loans. The converse earnings situation
(falling rates) does not afford the same degree of profitability potential for
thrifts due to the tendency of borrowers to refinance both high rate loans,
fixed rate loans, and adjustable loans as rates decline.
Carrollton Federal is no exception to the aforementioned paradox. With its
current asset and liability structure, however, the effect of rising interest
rates will have less negative impact on earnings. Management's strategy of
becoming a full service community bank type institution will continue to help in
managing the institution's interest rate risk, and at the same time, improve
profitability.
23
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
The addition of capital through the conversion will allow Carrollton
Federal to grow. As growth is attained, the leverage of that new capital should,
from a ratio of expenses to total assets standpoint, reduce the operating
expense ratio. However, growth and additional leverage will likely be moderate
and well controlled to maintain the current acceptable risk levels inherent in
the Bank's asset base.
ASSET-SIZE-EFFICIENCY OF ASSET UTILIZATION
At its current size and in its current asset configuration, Carrollton
Federal is an efficient operation. With total assets of approximately $352.5
million, Carrollton Federal has 179 full time equivalent employees. If current
strategies are employed, the asset and liability composition of the institution
will change and become more volume oriented, but the current level of employees
seems adequate to manage additional asset and liability growth.
INTANGIBLE VALUES
Carrollton Federal's greatest intangible value (other than the goodwill
discussed earlier) lies in its loyal deposit base. Carrollton Federal has a 68
year history of sound operations, controlled growth, and generally consistent
earnings. The Bank currently has 7.94% of the deposit market in its area, and
it has the ability to increase market share (see Table II.3 in Section II).
Carrollton Federal has no significant intangible values that could be
attributed to unrecognized asset gains on investments and real estate.
EFFECT OF GOVERNMENT REGULATIONS
Government regulations will have the greatest impact in the area of cost of
compliance and reporting. The Conversion will create an additional layer of
regulations and reporting, and thereby increase the cost to the Bank. Moreover,
no future plans currently exist to make additional acquisitions, purchase
additional branches, or complicate operations with matters that would add to
reporting and regulatory compliance. However, economic situations change, and
if an appropriate opportunity arises, it will be considered, and a proper
request will be made of the regulators, if necessary.
OFFICE FACILITIES
Carrollton Federal's main office is an adequately maintained facility.
Table I.19 provides information on all of Carrollton Federal's offices. The
Bank's facilities are currently adequate for the convenience and needs of the
Bank's customer base.
24
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.19 - OFFICE FACILITIES AND LOCATIONS
<TABLE>
<CAPTION>
Net Book Year Owned or Square
Physical address Value Opened Leased Footage
- ---------------- ----- ------ ------ -------
<S> <C> <C> <C> <C>
($000's)
-------
110 Dixie $2,743 1956 Owned 43,000
Carrollton-Main Office
640 Bankhead Hwy 943 1970 Owned 4,000
Carrollton - Branch
207 W College 303 1971 Owned 4,000
Bowdon - Branch
501 Alabama Ave 98 1974 Leased 6,000
Bremen - Branch
505 Bankhead Hwy 12 1991 Leased 500
Carrollton - Branch
1355 South Park St. - 1991 Leased 500
Carrollton - Branch
9060 Hwy 27 276 1991 Owned 2,000
Franklin - Branch
2212 Atlanta Hwy - 1996 Leased 500
Hiram - Branch
5600 N Henry Blvd, Ste A - 1996 Leased 1,000
Stockbridge - Branch
1025-A Bullsboro Dr. - 1996 Leased 1,000
Newnan - Branch
125 Pavillion Parkway - 1996 Leased 500
Fayetteville - Branch
3218 Highway 5 4 1996 Leased -
Douglasville - Branch
</TABLE>
SOURCE: CARROLLTON FEDERAL BANK
25
<PAGE>
SECTION II
MARKET AREA
<PAGE>
FERGUSON & COMPANY SECTION II.
- ------------------ -----------
II. MARKET AREA
DEMOGRAPHICS
Carrollton Federal operates from its main office located at 110 Dixie
Street, Carrollton, Georgia. The Bank has eleven branch offices in addition to
its main office. Three branches are in Carrollton, and there is one branch each
in Bowdon, Bremen, Franklin, Hiram, Stockbridge, Newman, Fayetteville, and
Douglasville (all in Georgia).
Carrollton Federal considers its primary Assessment Area to the counties in
which it has banking offices, plus the contiguous counties. The Assessment Area
contains the following counties: Carroll, Coweta, Douglas, Fayette, Haralson,
Heard, Henry, and Paulding. Tables II.1 and II.1a present historical and
projected trends for the United States, Georgia, and all of the eight counties
heretofore mentioned. The information addresses population, income, employment,
and housing trends.
As indicated in Tables II.1 and II.1a, the counties have experienced
varying growth rates in terms of population. All are well above that of the
United States, and only two of the counties do not exceed the growth rate of the
State of Georgia, which is almost twice that of the United States (US, 6.67% vs.
Georgia, 13.41%). All of the eight counties had population increases between
1990 and 1996. They were: Carroll (11.11%), Douglas (18.98%), Coweta (41.05%),
Henry (53.53%), Heard (13.38%), Fayette (31.28%), Haralson (7.94%), and Paulding
(53.56%). All of the counties are estimating growth between 1996 and 2001. The
estimated population growth rates are 8.00% for Carroll, 12.76% for Douglas,
23.28% for Coweta, 27.89% for Henry, 9.43% for Heard, 19.06% for Fayette, 5.88%
for Haralson, and 27.90% for Paulding. In general, these counties compare well
to the 6.67% and 13.41% growth rates for the United States and Georgia,
respectively, from 1990 to 1996. They also compare favorably in terms of
anticipated growth when compared to the 5.09% anticipated in the United States,
and the 9.47% anticipated in the State of Georgia between 1996 and 2001. Two of
the counties in the assessment area have grown more than 50% between 1990 and
1996 (Henry County and Paulding County). With the exception of Haralson County,
which grew 7.94% between 1990 and 1996, all the remaining counties grew in the
double digits, from 11.11% to 41.05%. By any standards of economic growth, this
is spectacular.
These growth rates are obviously being pushed along by the population and
industrial growth rates that have been experienced by the Greater Atlanta
Metropolitan Area, but they are also being increased by industrial expansion in
their specific area. The recent inclusion of Carroll County in the Atlanta MSA
will undoubtedly help with future expansion of population and industrial base.
Georgia is one of the more affluent states, and the comparison of household
income demonstrates that fact. The estimated household income for the United
States for 1996 was $34,530, and that of Georgia was $35,329. Georgia was
primarily an agricultural state until the mid-20th century. Manufacturing has
become important statewide, producing 19% of the State's gross annual product.
The Atlanta area has become a center for commercial, financial, distribution,
transportation, and manufacturing. In addition, the State benefits from several
large federal military facilities./1/
____________________________________
/1/ Georgia, Encarta 96 Encyclopedia
1
<PAGE>
FERGUSON & COMPANY SECTION II.
- ------------------ -----------
Comparing the 1996 estimated household income of the assessment area
counties to the State, which was higher than the United States (US $34,530 vs.
Georgia $35,329), we find that three counties were below the state with
estimated incomes of $32,170, $27,811, and $28,455. They were Carroll, Heard,
and Haralson, respectively. However, five of the eight counties had estimated
household incomes that exceeded that of the State. They were Douglas ($43,912),
Coweta ($38,651), Henry ($43,637), Fayette ($60,361), and Paulding ($39,055).
Going forward to 2001, the same pattern is developing in estimated household
income as developed in population trends. Those that are above the State in
1996 are expected to be above the State in 2001, and those counties that are
below are anticipated to be below in 2001.
In the area of Household Income Distribution estimates for 2001, the
distribution shows a more metropolitan income pattern than a rural pattern. All
but two of the counties in the assessment area, Heard County and Haralson
County, have a higher percentage of their population making more than $25,000
and less than $100,000, than do the populations of the U.S. and the State of
Georgia. In addition, three of the counties have more people making between
$100,000 and $150,000 than the Country or the State. Interestingly, these three
counties also have experienced high population growth. Combining the
information on population growth with information on income growth, one could
conclude that there is evidence of real economic growth and stability in the
area.
Important to any financial institution that is in the business of financing
homes is the growth in the number of households. Tables II.1 and II.1a show
that the prospects for the establishment of new households in the trade area are
excellent. From 1990 until 1996, all of the counties in the trade area
experienced an increase in the number of households. The greatest increase was
seen in Henry County, with the number of households increasing 54.22% from
20,012 to 30,863, to Haralson County showing the least amount of increase at
8.06% (from 8,248 to 8,913 households). In addition, all of the remaining
counties in the assessment area are estimating continued growth in households
between 1996 and 2001.
When home ownership is compared to the Unites States and the State of
Georgia, all of the eight counties in the trade area have a higher incidence of
home ownership than the United States and the State of Georgia.
In summary, the demographics of the assessment area are very favorable.
The area has and is expected to have an overall growth in population. This
growth in population is being accompanied with an anticipated increase in
household income that is creating a more stable per capita income and an
anticipated increase in the number of new households that will be created.
These factors, coupled with a strong tradition of home ownership in the area,
should translate into an increased number of housing units being built and a
good market for previously owned housing. In addition, the modest level of
Average Housing Value (except Fayette County) presents ample opportunity for
affordable housing in the market area for both the first time home buyer and the
other market participants.
The principal sources of employment in Carrollton Federal's assessment
area are shown in Table II.2. On average, the major sources are trade,
manufacturing, and services. Four of the counties in the delineated trade area
exceed the State in the percentage of residents who are employed in
manufacturing; these are Carroll, Coweta, Heard, and Haralson Counties. Two of
the counties compare favorably to the State in the percentage of employment
attributed to trade.
2
<PAGE>
FERGUSON & COMPANY SECTION II.
- ------------------ -----------
Three of the counties have more people employed in services than does the State
of Georgia. Only one of the counties in the area shows significantly more
employment in public administration than does the State of Georgia.
This information gives rise to understanding the other demographic
information. With manufacturing and services employing such high percentages of
the population and contributing to the earnings of the citizenry, the
concentration of incomes in the middle range is more clear, as is the estimated
increase in household incomes. Obviously, the assessment area of Carrollton
Federal is better employed than the state average. This should equate to
continued economic growth which should translate into more home buyers, more
consumer goods being purchased, and a growing, stable, and robust economy.
Based on information publicly available on deposits as of June 30, 1996
(see Table II.3), in the eight county area which Carrollton Federal considers
its primary assessment area, there are $3.747 billion in total deposits. Banks
controlled $3,182 billion, credit unions $89.5 million, and other thrifts $475.2
million. As of that date, Carrollton Federal had 7.94% of the total deposit
market or $297.6 million.
The Bank is a major player in many of the markets that are located within
their delineated market area. The statistics reveal success and opportunities
for the institution. Additional capital infused by the Conversion will assist
the Bank in becoming more competitive.
Growth opportunities for Carrollton Federal can be assessed by reviewing
economic factors in its market area. The salient factors include growth trends,
economic trends, and competition from other financial institutions. We have
reviewed these factors to assess the potential for the market area. In
assessing the growth potential of Carrollton Federal, we must also assess the
willingness and flexibility of Management to respond to the competitive factors
that exist in their market area. It is our analysis that the economic
environment and the potential of the area is excellent, moreover, we feel that
the current Management team can readily realize the potential afforded by the
area's economic base. Our analysis of the economic potential and the potential
of Management has a positive affect on the valuation of the institution.
3
<PAGE>
FERGUSON & COMPANY SECTION II.
- ------------------ -----------
TABLE II.1 - DEMOGRAPHIC TRENDS
KEY ECONOMIC INDICATORS
United States, Georgia, Carroll County, Douglas County and Coweta County
<TABLE>
<CAPTION>
=================================================================================================================
UNITED CARROLL DOUGLAS COWETA
KEY ECONOMIC INDICATOR STATES GEORGIA COUNTY COUNTY COUNTY
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Population, 2001 Est. 278,802,003 8,043,036 85,707 95,419 93,643
1996 - 2001 Percent Change, Est. 5.09 9.47 8.00 12.76 23.28
Total Population, 1996 Est. 265,294,885 7,347,252 79,357 84,620 75,960
1990 - 96 Percent Change, Est. 6.67 13.41 11.11 18.98 41.05
Total Population, 1990 248,709,873 6,478,216 71,422 71,120 53,853
- -----------------------------------------------------------------------------------------------------------------
Household Income, 2001 Est. 33,189 36,749 35,409 47,081 42,698
1996 - 2001 Percent Change, Est. (3.88) 4.02 10.07 7.22 10.47
Household Income, 1996 Est. 34,530 35,329 32,170 43,912 38,651
- -----------------------------------------------------------------------------------------------------------------
Per Capita Income, 1990 16,738 16,714 14,419 17,050 17,382
- -----------------------------------------------------------------------------------------------------------------
Household Income Distribution-2001 Est. (%)
$15,000 and less 20 19 20 9 16
$15,000 - $25,000 16 15 17 11 13
$25,000 - $50,000 34 34 38 38 35
$50,000 - $100,000 24 25 22 35 29
$100,000 - $150,000 4 5 3 5 5
$150,000 and over 2 2 1 1 2
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Unemployment rate, 1990 6.24 5.61 5.39 4.99 5.33
- -----------------------------------------------------------------------------------------------------------------
Median Age of Population, 1996 Est. 34.3 33.2 32.3 32.7 32.9
Median Age of Population, 1990 32.9 31.6 30.4 31.1 32.0
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Average Housing Value, 1990 79,098 88,222 69,563 81,176 79,416
- -----------------------------------------------------------------------------------------------------------------
Total Households, 2001 Est. 103,293,062 2,937,039 30,582 32,651 32,905
1996 - 2001 Percent Change, Est. 5.14 9.46 8.21 12.85 23.26
Total Households, 1996 98,239,161 2,683,146 28,261 28,933 26,696
1990 - 96 Percent Change, Est. 6.84 13.37 11.40 19.18 41.02
Total Households, 1990 91,947,410 2,366,615 25,370 24,277 18,930
- -----------------------------------------------------------------------------------------------------------------
Total Housing Units, 1990 101,641,260 2,638,418 27,736 26,495 20,413
% Vacant 10.07 10.30 8.53 8.37 7.26
% Occupied 89.93 89.70 91.47 91.63 92.74
% By Owner 57.78 58.25 63.51 71.26 67.50
% By Renter 32.15 31.45 27.96 20.37 25.24
=================================================================================================================
</TABLE>
SOURCE: SCAN/US, INC. 4
<PAGE>
FERGUSON & COMPANY SECTION II.
- ------------------ -----------
TABLE II.1A - DEMOGRAPHIC TRENDS
KEY ECONOMIC INDICATORS
Henry, Heard, Fayette, Haralson and Paulding Counties
<TABLE>
<CAPTION>
=========================================================================================================
HENRY HEARD FAYETTE HARALSON PAULDING
KEY ECONOMIC INDICATOR COUNTY COUNTY COUNTY COUNTY COUNTY
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Population, 2001 Est. 115,339 10,704 97,553 25,105 81,729
1996 - 2001 Percent Change, Est. 27.89 9.43 19.06 5.88 27.90
Total Population, 1996 Est. 90,184 9,782 81,937 23,710 63,899
1990 - 96 Percent Change, Est. 53.53 13.38 31.28 7.94 53.56
Total Population, 1990 58,741 8,628 62,415 21,966 41,611
- ---------------------------------------------------------------------------------------------------------
Household Income, 2001 Est. 48,042 30,849 65,892 30,548 43,446
1996 - 2001 Percent Change, Est. 10.09 10.92 9.16 7.36 11.24
Household Income, 1996 Est. 43,637 27,811 60,361 28,455 39,055
- ---------------------------------------------------------------------------------------------------------
Per Capita Income, 1990 17,046 11,908 24,415 12,500 15,107
- ---------------------------------------------------------------------------------------------------------
Household Income Distribution-2001 Est. (%)
$15,000 and less 9 26 5 24 13
$15,000 - $25,000 11 17 6 18 11
$25,000 - $50,000 39 40 25 38 44
$50,000 - $100,000 35 15 46 19 30
$100,000 - $150,000 4 2 12 1 3
$150,000 and over 1 0 6 0 1
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Unemployment rate, 1990 4.19 5.32 3.19 4.81 4.69
- ---------------------------------------------------------------------------------------------------------
Median Age of Population, 1996 Est. 33.1 33.9 35.8 34.9 31.4
Median Age of Population, 1990 31.9 32.2 34.1 33.5 29.8
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Average Housing Value, 1990 87,564 47,631 130,398 53,053 72,971
- ---------------------------------------------------------------------------------------------------------
Total Households, 2001 Est. 39,543 3,846 32,898 9,446 28,072
1996 - 2001 Percent Change, Est. 28.12 9.51 19.05 5.98 27.79
Total Households, 1996 30,863 3,512 27,634 8,913 21,967
1990 - 96 Percent Change, Est. 54.22 13.55 31.25 8.06 53.34
Total Households, 1990 20,012 3,093 21,054 8,248 14,326
- ---------------------------------------------------------------------------------------------------------
Total Housing Units, 1990 21,275 3,536 22,428 9,016 15,237
% Vacant 5.94 12.53 6.13 8.52 5.98
% Occupied 94.06 87.47 93.87 91.48 94.02
% By Owner 78.45 69.03 80.84 69.69 76.61
% By Renter 15.61 18.44 13.03 21.79 17.41
=========================================================================================================
</TABLE>
SOURCE: SCAN/US, INC. 5
<PAGE>
FERGUSON & COMPANY SECTION II.
- ------------------ -----------
TABLE II.2 - EMPLOYMENT BY INDUSTRY
UNITED STATES, GEORGIA, AND COUNTIES IN CARROLLTON FEDERAL'S MARKET
<TABLE>
<CAPTION>
UNITED CARROLL DOUGLAS COWETA FAYETTE HENRY HEARD HARALSON PAULDING
INDUSTRY STATES GEORGIA COUNTY COUNTY COUNTY COUNTY COUNTY COUNTY COUNTY COUNTY
=========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Construction/Agriculture/Mining 9.5 5.8 6.7 7.0 7.0 3.0 6.0 6.4 6.1 7.0
Manufacturing 17.7 17.7 24.5 13.0 31.0 10.0 15.0 33.7 31.9 15.0
Transportation/Utilities 7.1 6.2 3.9 6.0 3.0 12.0 17.0 3.0 2.7 6.0
Trade 21.2 25.4 26.6 32.0 23.0 23.0 27.0 22.4 23.0 30.0
Finance/Insurance 6.9 5.1 2.9 5.0 3.0 8.0 3.0 2.7 2.9 5.0
Services 32.7 22.9 18.9 24.0 16.0 30.0 18.0 16.2 14.5 23.0
Public Administration 4.9 16.8 16.4 14.0 16.0 15.0 14.0 15.5 18.8 14.0
</TABLE>
6
<PAGE>
FERGUSON & COMPANY SECTION II.
- ------------------ -----------
TABLE II.3 - MARKET AREA DEPOSITS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
1996 1995 1994
-----------------------------------------------
(in Thousands)
<S> <C> <C> <C>
CARROLLTON FEDERAL BANK $ 297,645 $ 289,610 $ 300,084
-----------------------------------------------
Number of Branches 12 7 8
OTHER THRIFTS $ 177,566 $ 166,176 $ 159,082
-----------------------------------------------
Number of Branches 7 7 7
TOTAL THRIFT DEPOSITS $ 475,211 $ 455,786 $ 459,166
-----------------------------------------------
Number of Branches 18 14 15
TOTAL BANK DEPOSITS $3,182,129 $2,867,393 $2,610,406
-----------------------------------------------
Number of Branches 116 118 117
TOTAL CREDIT UNION DEPOSITS $ 89,858 $ 84,726 $ 84,675
-----------------------------------------------
Number of Branches 5 5 6
TOTAL MARKET AREA DEPOSITS $3,747,198 $3,407,905 $3,154,247
===============================================
CARROLLTON FEDERAL - MARKET SHARE
To Total Market Area Deposits 7.94% 8.50% 9.51%
- ------------------------------------------------------------------------------------------
</TABLE>
SOURCE: BRANCHSOURCE, A PRODUCT OF SHESHUNOFF INFORMATION SERVICES, INC.
7
<PAGE>
SECTION III
COMPARISON WITH PUBLICLY
TRADED THRIFTS
<PAGE>
FERGUSON & COMPANY SECTION III.
- ------------------ ------------
III. COMPARISON WITH PUBLICLY TRADED THRIFTS
COMPARATIVE DISCUSSION
This section presents an analysis of Carrollton Federal relative to a group
of 11 publicly traded thrift institutions ("Comparative Group"). Such analysis
is necessary to determine the adjustments that must be made to the pro forma
market value of Carrollton Federal's stock. Table III.1 presents a listing of
the comparative group with general information about the group. Table III.2
presents key financial indicators relative to profitability, balance sheet
composition and strength, and risk factors. Table III.3 presents a pro forma
comparison of Carrollton Federal to the comparative group. Exhibits III and IV
contain selected financial information on Carrollton Federal and the comparative
group. This information is derived from quarterly TFR's filed with the OTS.
The selection criteria and comparison with the Comparative Group are discussed
below.
SELECTION CRITERIA
Ideally, the comparative group would consist of thrifts in the same
geographic region with identical local economies, asset size, capital level,
earnings performance, asset quality, etc. However, there are few comparably
sized institutions with stock that is liquid enough to provide timely,
meaningful market values. Therefore, we have selected a group of comparatives
that are listed on either the New York Stock Exchange ("NYSE"), the American
Stock Exchange ("AMEX"), or NASDAQ. We excluded companies that are apparent
takeover targets and companies with unusual characteristics that tend to distort
both mean and median calculations. For example, we have excluded all companies
with losses during the trailing 12 months. We have also excluded mutual holding
companies (see Exhibit II.1).
The principal source of data was SNL Securities, Charlottesville, Virginia.
There are approximately 424 publicly traded thrifts listed on NYSE, AMEX, or
NASDAQ. In developing statistics for the entire country, we eliminated certain
institutions that skewed the results, in order to make the data more meaningful:
. We eliminated companies with losses,
. We eliminated indicated acquisition targets,
. We eliminated companies with price/earnings ratios in excess of 25,
. We eliminated companies that had not reported as a stock institution for
one complete year, and
. We eliminated mutual holding companies.
The resulting group of approximately 279 publicly traded thrifts is
included in Exhibit II.1.
Because of the limited number of similar size thrifts with sufficient
trading volume, we refined the search looking for members of the comparative
group among thrifts with assets between $250 million and $500 million. From
that group we then eliminated the following:
. Companies with earnings that were not meaningful,
. Companies with nonperforming assets in excess of 2.5%,
. Companies with loans less than 50% of total assets and loans more than
80% of total assets, and
. Companies with loan servicing more than 20% of total assets.
The result was a group of 11 thrifts. Normally, we consider 10 to be the
desired sample, but provided the extra comparative in case there are changes
before this Conversion is completed.
1
<PAGE>
FERGUSON & COMPANY SECTION III.
- ------------------ ------------
The selected group of comparatives has sufficient trading volume to
provide meaningful price data. Nine of the comparative group members are
located in the Midwest and two in the Southeast. Four of the group are located
in Illinois, two in Indiana, and one each in Iowa, Minnesota, North Carolina,
Florida, and Wisconsin. With total assets of approximately $353 million,
Carrollton Federal is near the group selected, which has average assets of $347
million and median assets of $351 million.
PROFITABILITY
Using the comparison of profitability components as a percentage of average
assets, Carrollton Federal was below the comparative group in return on assets,
0.52% to 0.72%; and core income, 0.52% to 0.98%. Carrollton Federal was above
the comparative group in other operating income, 0.94% to 0.31% and net interest
income, 3.90% to 3.18%; but above the group in operating expense, 2.94% to
1.91%. After conversion, deployment of the proceeds will provide additional
income, and Carrollton Federal will compare more favorably with the comparative
group in terms of return on average assets, with a return of .63% at the
midpoint of the appraisal range. Pro forma return on average equity is 4.18% at
the midpoint, versus a mean of 5.28%, and median of 5.18% for the comparative
group. Some of the comparisons within this paragraph do not take into account
the additional infrastructure and expenses that can be attributed to Carrollton
Federal successfully seeking to become a full service bank. After conversion,
the employment of funds and the growth of asset and liabilities will improve the
profitability of this institution.
BALANCE SHEET CHARACTERISTICS
The general asset composition of the Bank is similar to that of the
comparative group. Carrollton Federal has a lower level of passive investments
with 19.12% of its assets invested in cash, investments, and mortgage-backed
securities, versus 36.52% for the comparative group. In the investment
portfolio, the Bank has 17.74% in cash and investment securities, and 1.38% in
mortgage backed securities. The comparative group has a similar mixture with
29.15% in cash and investments, and 7.37% in mortgage backed securities.
Carrollton Federal has a higher percentage of its assets in loans at 76.54%,
versus 68.86% for the comparative group. The Bank's percentage of interest
earning assets to interest bearing liabilities is much lower than that of the
group. Carrollton Federal has 106.13%, and the comparative group averages
114.73%. A portion of this disparity can be explained by understanding that
Carrollton Federal has recently been engaged in an expansion program. Some of
the infrastructure recently purchased has yet to be efficiently utilized. After
conversion, and after the utilization of the capital infusion for earning assets
and supporting growth, Carrollton Federal's ratio will be in line with that of
the group of comparatives.
The liability side differs mainly in that Carrollton Federal has a lower
percentage of borrowings and higher percentage of deposits. Carrollton Federal
funds its assets with, among other things, 87.30% deposits, and borrowings of
4.62% expressed as a percentage of total assets. On the other hand, the
comparative group has deposits of 74.49% and borrowings of 11.38%. The
aggregate difference in the two group's liabilities is almost exactly the
capital differential. The Bank's capital level is 7.16%, versus 13.07% for the
comparative group. The comparison between Carrollton Federal's capital level
and that of the comparative group will improve after conversion, but at the
midpoint, equity to assets will be 14.65%, compared to their average of 13.07%,
and median of 12.40%.
2
<PAGE>
FERGUSON & COMPANY SECTION III.
- ------------------ ------------
RISK FACTORS
Both Carrollton Federal and the comparative group have reasonable and
controllable levels of non-performing assets, with the Bank being higher than
the comparative group, 1.82% to 0.28% of assets. Carrollton Federal's loan loss
allowance is 0.95% of net loans, which compares favorably with the comparative
group's 0.52%, and reflects the fact that Carrollton Federal's Management has
recognized the additional risk in their portfolio as they make the transition
from a traditional thrift to a full service community bank. In the area of
interest rate risk and the implications of one year gap assets, the Bank and the
comparative group are similar. Carrollton Federal has a negative one year gap
of 6.13%, and the group has a negative 8.20%.
SUMMARY OF FINANCIAL COMPARISON
Based on the above discussion of operational, balance sheet, and risk
characteristics of Carrollton Federal compared with the group, we believe that
Carrollton Federal's performance is equal to that of the comparative group.
While the Bank's profitability and capital levels are below the comparative
group, the conversion proceeds will increase its income and capital levels to
near comparable levels.
FUTURE PLANS
Carrollton Federal's future plans are to remain a well capitalized,
profitable institution with good asset quality, and a commitment to serving the
needs of its trade area, and emphasizing lending. The current strategy, which
is reflected in the business plan, emphasizes growth in consumer lending and
commercial non-real estate lending. Management recognizes that it will take
time to invest the proceeds of its capital infusion in a manner consistent with
its historic performance and current policy. During that period of time,
Management is willing to accept a lower return on assets as well as a lower
return on equity capital.
Carrollton Federal has always adhered to a controlled growth policy, and in
recent years, it has controlled its rates paid, its overall spreads, and has
funded some of its recent growth with FHLB advances. The advances were used to
control spreads and help control interest rate risk. The additional capital
raised by the sale of Common Stock will initially be used to purchase short term
investment securities. Adjustable rate and short term loans will continue to be
emphasized. The Bank will continue to minimize long term, fixed rate loans.
The Bank's business plan projects that it will experience growth in loans,
savings deposits, and liquidity.
Carrollton Federal anticipates a generous growth rate. The additional
capital and the continuation of the holding company concept would make the
acquisition of another institution or branches a viable option, along with de
nova branching. At this time there are no plans for acquisition of institutions
or branches, however, if an economically viable opportunity arises, proper
approval will be sought from the regulatory agencies.
Increasing market penetration by increasing the number of services and
products available, coupled with expanded marketing efforts and improved
service, are the most likely methods to be employed to achieve growth.
3
<PAGE>
FERGUSON & COMPANY SECTION III.
- ------------------ ------------
TABLE III.1 - COMPARATIVE GENERAL
<TABLE>
<CAPTION>
Total Current Current
Number Assets Stock Market
of ($000) Price Value
Ticker Short Name City State Offices Mst RctQ IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CASH First Midwest Financial, Inc. Storm Lake IA 12 369,885 9/20/93 16.750 48.52
FFHH FSF Financial Corp. Hutchinson MN 11 362,373 10/7/94 17.125 55.32
FFLC FFLC Bancorp, Inc. Leesburg FL 8 346,442 1/4/94 26.750 65.21
HALL Hallmark Capital Corp. West Allis WI 3 396,808 1/3/94 18.500 26.69
HBFW Home Bancorp Fort Wayne IN 9 325,168 3/30/95 19.500 51.73
KNK Kankakee Bancorp, Inc. Kankakee IL 9 350,643 1/6/93 27.875 39.44
PFDC Peoples Bancorp Auburn IN 6 280,339 7/7/87 20.750 47.85
SFSB SuburbFed Financial Corp. Flossmoor IL 12 404,092 3/4/92 22.750 28.55
SOPN First Savings Bancorp, Inc. Southern Pines NC 5 265,888 1/6/94 19.875 73.32
SWBI Southwest Bancshares Hometown IL 6 382,375 6/24/92 19.875 52.42
WCBI Westco Bancorp Westchester IL 1 310,992 6/26/92 21.875 56.15
Maximum 12 404,092 3/30/95 27.875 73.32
Minimum 1 265,888 7/7/87 16.750 26.69
Average 7 345,000 1/14/93 21.057 49.56
Median 8 350,643 9/20/93 19.875 51.73
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 4
<PAGE>
FERGUSON & COMPANY SECTION 111.
- ------------------ ------------
TABLE III.2 - KEY FINANCIAL INDICATORS
<TABLE>
<CAPTION>
CARROLLTON COMPARATIVE
FEDERAL BANK GROUP
-------------- --------------
<S> <C> <C>
PROFITABILITY
(% of average assets)
Net income 0.52 (*) 0.72
Net interest income 3.90 3.18
Loss (recovery) provisions 0.33 0.03
Other operating income 0.94 0.31
Operating expense 2.94 1.91
Core income ( excluding gains
and losses on asset sales) 0.52 0.98
BALANCE SHEET FACTORS
(% of assets)
Cash and investments 17.74 29.15
Mortgage-backed securities 1.38 7.37
Loans 76.54 68.86
Savings deposits 87.30 74.49
Borrowings 4.62 11.38
Equity 7.16 13.07
Tangible equity 6.91 12.90
RISK FACTORS
(%)
Earning assets/costing liabilities 106.13 114.73
Non-performing assets/assets 1.82 0.28
Loss allowance/non performing assets 41.66 131.74
Loss allowance/loans 0.95 0.52
One year gap/assets (6.13) (8.20)
(*) Based on Appraisal Earnings
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 5
<PAGE>
FERGUSON & COMPANY SECTION III.
- ------------------ ------------
TABLE III.3 - PRO FORMA COMPARISON
CONVERTING INSTITUTION TO COMPARATIVE GROUP
AS OF FEBRUARY 27, 1997
<TABLE>
<CAPTION>
Ticker Name Price Mk Value PE P/Book P/TBook P/Assets Div Yld Assets
($) ($Mil) (X) (%) (%) (%) (%) ($000)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CARROLLTON FEDERAL BANK
-----------------------
Before Conversion N/A N/A N/A N/A N/A N/A N/A 352,531
Pro Forma Supermax 20.000 48.27 18.95 72.74 73.76 12.26 3.00 393,632
Pro Forma Maximum 20.000 41.98 17.22 68.91 69.96 10.81 3.00 388,186
Pro Forma Midpoint 20.000 36.50 15.59 64.97 66.04 9.52 3.00 383,452
Pro Forma Minimum 20.000 31.03 13.81 60.31 61.40 8.19 3.00 378,717
COMPARATIVE GROUP
-----------------
Averages 21.057 49.56 16.31 112.47 114.51 14.96 2.17 345,000
Medians 19.875 51.73 15.91 111.07 113.70 15.27 2.15 350,643
GEORGIA PUBLIC THRIFTS
----------------------
Averages 16.729 54.70 34.28 146.42 160.97 13.29 2.32 434,018
Medians 16.563 31.69 16.01 144.46 158.21 12.91 2.32 243,101
SOUTHEAST REGION THRIFTS
------------------------
Averages 19.774 88.66 22.58 146.43 150.35 19.04 2.03 498,266
Medians 18.875 45.18 17.98 130.46 132.09 16.02 1.95 263,582
ALL PUBLIC THRIFTS
------------------
Averages 20.912 185.78 19.36 134.57 140.66 15.44 1.78 1,399,452
Medians 18.375 47.26 16.62 125.54 128.17 13.53 1.82 348,050
COMPARATIVE GROUP
-----------------
CASH FirstMidwestFin-IA 16.750 48.52 12.14 111.07 125.47 13.12 2.15 369,885
FFHH FSFFinancial-MN 17.125 55.32 21.41 108.32 108.32 15.27 2.92 362,373
FFLC FFLCBancorp,Inc-FL 26.750 65.21 21.06 121.59 121.59 18.82 1.79 346,442
HALL HallmarkCapCorp-WI 18.500 26.69 12.59 95.07 95.07 6.73 - 396,808
HBFW HomeBancorp-IN 19.500 51.73 19.12 113.70 113.70 15.91 1.03 325,168
KNK KankakeeBancorp-IL 27.875 39.44 17.64 108.08 115.66 11.25 1.72 350,643
PFDC PeoplesBancorp-IN 20.750 47.85 11.40 111.38 111.38 17.08 2.89 280,339
SFSB SuburbFedFinCp-IL 22.750 28.55 15.91 108.75 109.27 7.06 1.41 404,092
SOPN FirstSavingsBan-NC 19.875 73.32 18.23 110.23 110.23 27.57 3.42 265,888
SWBI SouthwestBnshrs-IL 19.875 52.42 15.41 131.54 131.54 13.71 3.82 382,375
WCBI WestcoBancorp-IL 21.875 56.15 14.49 117.42 117.42 18.06 2.74 310,992
</TABLE>
Note: Stock prices are closing prices or last trade. Pro forma calculations for
Carrollton Federal's are based on sales at $20 per SHARE WITH A MIDPOINT OF
$36,500,000, minimum of $31,025,000, and maximum of $41,975,000.
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 6
<PAGE>
FERGUSON & COMPANY SECTION III.
- ------------------ ------------
TABLE III.3 - PRO FORMA COMPARISON
CONVERTING INSTITUTION TO COMPARATIVE GROUP
<TABLE>
<CAPTION>
As of February 27, 1997
Ticker Name Eq/A TEq/A EPS ROAA ROAE
(%) (%) ($) (%) (%)
<S> <C> <C> <C> <C> <C>
Carrollton Federal Bank
-----------------------
Before Conversion 7.16 6.91 N/A 0.50 6.86
Pro Forma Supermax 16.86 16.63 1.06 0.66 3.84
Pro Forma Maximum 15.69 15.46 1.16 0.64 4.01
Pro Forma Midpoint 14.65 14.41 1.28 0.63 4.18
Pro Forma Minimum 13.58 13.34 1.45 0.61 4.38
Comparative Group
-----------------
Averages 13.07 12.90 1.33 0.72 5.28
Medians 12.40 12.40 1.38 0.65 5.18
Georgia Public Thrifts
----------------------
Averages 9.52 8.95 1.05 0.73 7.62
Medians 8.76 8.12 0.88 0.58 6.71
Southeast Region Thrifts
------------------------
Averages 14.54 14.50 0.94 0.61 2.61
Medians 11.62 11.40 1.12 0.66 5.52
All Public Thrifts
------------------
Averages 12.33 12.06 1.29 0.62 6.13
Medians 9.87 9.59 1.16 0.66 5.48
Comparative Group
-----------------
CASH FirstMidwestFin-IA 11.81 10.60 1.38 0.75 6.38
FFHH FSFFinancial-MN 12.40 12.40 0.80 0.58 4.02
FFLC FFLCBancorp,Inc-FL 15.48 15.48 1.27 0.65 3.94
HALL HallmarkCapCorp-WI 7.07 7.07 1.47 0.43 5.81
HBFW HomeBancorp-IN 13.99 13.99 1.02 0.52 3.36
KNK KankakeeBancorp-IL 10.41 9.79 1.58 0.50 4.95
PFDC PeoplesBancorp-IN 15.34 15.34 1.82 1.12 7.26
SFSB SuburbFedFinCp-IL 6.50 6.47 1.43 0.28 4.04
SOPN FirstSavingsBan-NC 25.01 25.01 1.09 1.34 5.18
SWBI SouthwestBnshrs-IL 10.42 10.42 1.29 0.72 6.30
WCBI WestcoBancorp-IL 15.38 15.38 1.51 1.06 6.83
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 7
<PAGE>
FERGUSON & COMPANY Section III.
- ------------------ ------------
TABLE III.4 - SELECTION OF COMPARATIVES
<TABLE>
<CAPTION>
Deposit
Insurance
Agency
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date
<S> <C> <C> <C> <C> <C> <C> <C>
ANA Acadiana Bancshares, Inc. Hutchinson LA SW SAIF AMSE 07/16/96
- ------- --------
ASBI Ameriana Bancorp New Castle IN MW SAIF NASDAQ 03/02/87
CAFI Camco Financial Corp. Cambridge OH MW SAIF NASDAQ NA
- -------
CBK Citizens First Financial Corp. Normal IL MW SAIF AMSE 05/01/96
- ------- --------
CBSB Charter Financial, Inc. Sparta IL MW SAIF NASDAQ 12/29/95
- -------
CFCP Coastal Financial Corp. Myrtle Beach SC SE SAIF NASDAQ 09/26/90
- -------
COOP Cooperative Bankshares, Inc. Wilmington NC SE SAIF NASDAQ 08/21/91
- -------
FBCI Fidelity Bancorp, Inc. Chicago IL MW SAIF NASDAQ 12/15/93
- -------
FBCV 1ST Bancorp Hometown IN MW SAIF NASDAQ 04/07/87
- -------
FBHC Fort Bend Holding Corp. Rosenberg TX SW SAIF NASDAQ 06/30/93
- -------
FFED Fidelity Federal Bancorp Evansville IN MW SAIF NASDAQ 08/31/87
- -------
FFFG F.F.O. Financial Group, Inc. St. Cloud FL SE SAIF NASDAQ 10/13/88
- -------
FFHH FSF Financial Corp. Hutchinson MN MW SAIF NASDAQ 10/07/94
FFKY First Federal Financial Corp. Elizabethtown KY MW SAIF NASDAQ 07/15/87
- -------
FFLC FFLC Bancorp, Inc. Leesburg FL SE SAIF NASDAQ 01/04/94
FFOH Fidelity Financial of Ohio Cincinnati OH MW SAIF NASDAQ 03/04/96
- ------- --------
FFSX First Fed SB of Siouxland, MHC Sioux City IA MW SAIF NASDAQ 07/13/92
- ------------------------------------------
FMBD First Mutual Bancorp, Inc. Decatur IL MW SAIF NASDAQ 07/05/95
- -------
FOBC Fed One Bancorp Wheeling WV SE SAIF NASDAQ 01/19/95
- -------
FSTC First Citizens Corporation Newnan GA SE SAIF NASDAQ 03/01/86
- -------
GFCO Glenway Financial Corp. Cincinnati OH MW SAIF NASDAQ 11/30/90
- -------
HALL Hallmark Capital Corp. West Allis WI MW SAIF NASDAQ 01/03/94
HBEI Home Bancorp of Elgin, Inc. Elgin IL MW SAIF NASDAQ 09/27/96
- ------- --------
HBFW Home Bancorp Fort Wayne IN MW SAIF NASDAQ 03/30/95
HMCI HomeCorp, Inc. Rockford IL MW SAIF NASDAQ 06/22/90
- -------
HVFD Haverfield Corporation Cleveland OH MW SAIF NASDAQ 03/19/85
- -------
INBI Industrial Bancorp Bellevue OH MW SAIF NASDAQ 08/01/95
- -------
KNK Kankakee Bancorp, Inc. Kankakee IL MW SAIF AMSE 01/06/93
MCBS Mid Continent Bancshares Inc. El Dorado KS MW SAIF NASDAQ 06/27/94
- -------
PERM Permanent Bancorp, Inc. Evansville IN MW SAIF NASDAQ 04/04/94
- -------
PFDC Peoples Bancorp Auburn IN MW SAIF NASDAQ 07/07/87
PFSL Pocahontas FS&LA, MHC Pocahontas AR SE SAIF NASDAQ 04/05/94
- ------------------------------------------
PMFI Perpetual Midwest Financial Cedar Rapids IA MW SAIF NASDAQ 03/31/94
PVFC PVF Capital Corp. Bedford Heights OH MW SAIF NASDAQ 12/30/92
- -------
SFSB SuburbFed Financial Corp. Flossmoor IL MW SAIF NASDAQ 03/04/92
SMFC Sho-Me Financial Corp. Mt. Vernon MO MW SAIF NASDAQ 07/01/94
- -------
SOPN First Savings Bancorp, Inc. Southern Pines NC SE SAIF NASDAQ 01/06/94
SWBI Southwest Bancshares Hometown IL MW SAIF NASDAQ 06/24/92
TSH Teche Holding Co. Franklin LA SW SAIF AMSE 04/19/95
- -------
UFRM United Federal Savings Bank Rocky Mount NC SE SAIF NASDAQ 07/01/80
- -------
WAYN Wayne Savings & Loan Co. MHC Wooster OH MW SAIF NASDAQ 06/25/93
- ------------------------------------------
WCBI Westco Bancorp Westchester IL MW SAIF NASDAQ 06/26/92
WFCO Winton Financial Corp. Cincinnati OH MW SAIF NASDAQ 08/04/88
- -------
WOFC Western Ohio Financial Corp. Springfield OH MW SAIF NASDAQ 07/29/94
- -------
Maximum
Minimum
Average
Median
<CAPTION>
Current Current Price/ Price/
Stock Market LTM Core
Price Value re EPS EPS
Ticker ($) ($M) (x) (x)
<S> <C> <C> <C> <C>
ANA 17.000 46.43 NA NA
- -------
ASBI 16.000 52.45 15.69 13.79
CAFI 16.000 33.21 10.53 11.43
- -------
CBK 15.125 42.61 NA 27.01
- -------
CBSB 15.750 66.99 NA 14.58
- -------
CFCP 21.625 74.55 19.31 18.64
- -------
COOP 20.000 29.83 NM 15.15
- ------- ------
FBCI 18.000 50.16 16.07 15.00
- -------
FBCV 29.000 20.22 NM 241.67
- ------- ------
FBHC 23.250 19.07 16.03 17.10
- -------
FFED 9.125 22.71 32.59 12.67
- -------
FFFG 4.000 33.72 18.18 20.00
- -------
FFHH 16.000 51.68 20.00 16.67
FFKY 19.250 80.50 15.91 14.58
- -------
FFLC 23.000 56.07 18.11 17.97
FFOH 12.375 69.23 NA 19.34
- -------
FFSX 31.500 59.32 18.10 18.75
- -------
FMBD 15.000 56.54 32.61 34.09
- -------
FOBC 17.750 43.64 13.65 13.05
- -------
FSTC 22.625 35.91 9.51 9.43
- -------
GFCO 20.000 23.03 13.51 13.16
- -------
HALL 18.000 25.97 12.24 11.25
HBEI 15.000 105.14 NA 34.09
- -------
HBFW 19.500 51.73 19.12 18.75
HMCI 21.250 23.99 23.61 29.51
- -------
HVFD 18.500 35.27 12.09 10.76
- -------
INBI 13.000 71.56 16.05 15.48
- -------
KNK 26.125 36.96 16.53 12.56
MCBS 27.000 54.45 13.43 12.05
- -------
PERM 21.250 44.26 22.14 17.14
- -------
PFDC 20.000 46.12 10.99 12.20
PFSL 19.750 32.16 14.01 14.11
- --------
PMFI 19.250 36.72 37.02 NM
PVFC 16.000 37.17 7.37 8.51
- -------
SFSB 22.000 27.60 15.38 14.47
SMFC 28.250 41.07 17.02 14.13
- -------
SOPN 19.500 71.94 17.89 16.25
SWBI 19.563 51.60 15.17 14.82
TSH 15.750 55.77 16.07 13.58
- -------
UFRM 8.125 24.90 19.82 NM
- -------
WAYN 26.000 38.94 25.49 25.00
- --------
WCBI 20.250 51.98 13.41 12.98
WFCO 12.500 24.83 11.57 10.42
- -------
WOFC 21.563 47.23 35.94 31.71
- -------
Maximum 31.500 105.14 37.02 241.67
Minimum 4.000 19.07 7.37 8.51
Average 18.875 45.57 17.90 22.29
Median 19.375 43.95 16.07 14.82
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 8
<PAGE>
FERGUSON & COMPANY Section III.
- ------------------ ------------
Table III.4 - Selection of Comparatives
<TABLE>
<CAPTION>
Tangible ROAA ROAA ROACE
Current Current Current Total Equity/ Equity/ Core Core Before Before Before
Price/ Price/ T Price/ Dividend Assets Assets T Assets EPS EPS Extra Extra Extra
Bk Value Bk Value Assets Yield ($000) (%) (%) ($) ($) (%) (%) (%)
Ticker (%) (%) (%) (%) MRQ MRQ MRQ LTM MRQ LTM MRQ LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ANA 99.82 99.82 17.52 2.118 265,079 17.55 17.55 NA NA NA (0.53) NA
- --------
ASBI 120.57 120.75 13.12 3.750 399,721 10.88 10.87 1.02 0.29 0.61 (0.23) 5.10
CAFI 115.86 115.86 8.78 3.000 378,078 7.58 7.58 1.52 0.35 0.78 (0.34) 9.63
- --------
CBK 105.70 105.70 16.00 0.000 266,410 15.14 15.14 NA 0.14 0.21 (0.76) NA
- --------
CBSB 118.78 128.68 17.25 1.524 388,431 14.52 13.55 NA 0.27 0.90 0.18 6.65
- --------
CFCP 268.97 268.97 16.19 2.035 459,712 6.02 6.02 1.12 0.29 0.86 0.23 14.17
- --------
COOP 117.16 117.16 8.74 0.000 341,300 7.46 7.46 0.04 0.33 (0.98) 0.64 (12.66)
- --------
FBCI 101.87 102.16 10.36 1.778 484,106 10.17 10.14 1.12 0.30 0.50 0.69 4.37
- --------
FBCV 94.59 94.59 7.77 1.379 260,211 8.22 8.22 (0.22) 0.03 0.17 0.58 2.04
- --------
FBHC 106.50 115.10 6.85 1.204 278,532 6.43 5.98 1.45 0.34 0.23 0.60 3.47
- --------
FFED 180.34 180.34 8.73 4.384 260,171 4.84 4.84 0.28 0.18 0.17 0.81 3.18
- --------
FFFG 179.37 179.37 10.84 0.000 311,028 6.05 6.05 0.22 0.05 0.21 (0.63) 3.28
- --------
FFHH 101.20 101.20 14.26 3.125 362,373 12.40 12.40 0.80 0.24 0.58 0.81 4.02
FFKY 161.09 171.88 21.93 2.494 367,067 13.62 12.87 1.21 0.33 1.23 1.53 8.76
- --------
FFLC 104.55 104.55 16.18 2.087 346,442 15.48 15.48 1.27 0.32 0.65 0.94 3.94
FFOH 99.32 99.32 19.72 1.616 255,870 19.85 19.85 NA 0.16 0.60 (0.23) NA
- --------
FFSX 158.61 160.06 12.97 2.286 457,311 8.18 8.11 1.74 0.42 0.41 0.69 4.90
- --------
FMBD 90.85 90.85 17.04 2.133 331,776 18.75 18.75 0.46 0.11 0.38 0.55 1.71
- --------
FOBC 105.15 110.59 12.76 3.268 341,897 11.69 11.18 1.30 0.34 0.69 0.99 5.66
- --------
FSTC 155.82 201.29 14.03 1.945 255,946 9.00 7.11 2.38 0.60 2.09 1.17 18.60
- --------
GFCO 87.41 89.21 8.12 3.400 283,727 9.28 9.12 1.48 0.38 0.25 (0.62) 2.66
- --------
HALL 92.50 92.50 6.55 0.000 396,808 7.07 7.07 1.47 0.40 0.43 0.58 5.81
HBEI 105.26 105.26 29.50 0.000 356,335 28.03 28.03 NA 0.11 0.19 0.80 0.94
- --------
HBFW 113.70 113.70 15.91 1.026 325,168 13.99 13.99 1.02 0.26 0.52 0.80 3.36
HMCI 114.99 114.99 7.14 0.000 335,824 6.21 6.21 0.90 0.18 0.11 0.41 1.72
- --------
HVFD 124.41 124.50 10.17 2.919 346,856 8.17 8.17 1.53 0.43 0.44 0.96 5.21
- --------
INBI 115.25 115.25 21.91 3.077 326,613 19.01 19.01 0.81 0.21 0.75 1.68 3.62
- --------
KNK 101.30 108.40 10.54 1.837 350,643 10.41 9.79 1.58 0.52 0.50 0.91 4.95
MCBS 139.39 139.46 15.32 1.481 355,525 10.64 10.64 2.01 0.56 1.05 1.25 8.88
- --------
PERM 110.45 111.55 10.72 1.412 412,967 9.70 9.61 0.96 0.31 0.24 0.69 2.37
- --------
PFDC 107.35 107.35 16.46 3.000 280,339 15.34 15.34 1.82 0.41 1.12 1.34 7.26
PFSL 137.92 137.92 8.62 4.253 373,084 6.25 6.25 1.41 0.35 0.55 0.62 9.15
- --------
PMFI 109.38 109.38 9.45 1.558 388,529 8.64 8.64 0.52 (0.02) 0.09 0.08 0.94
PVFC 156.25 156.25 10.70 0.000 347,577 6.85 6.85 2.17 0.47 0.99 1.36 14.87
- --------
SFSB 105.16 105.67 6.83 1.455 404,092 6.50 6.47 1.43 0.38 0.28 0.66 4.04
SMFC 136.74 136.74 13.78 0.000 298,037 10.08 10.08 1.66 0.50 0.79 1.17 7.14
- --------
SOPN 108.15 108.15 27.05 3.487 265,888 25.01 25.01 1.09 0.30 1.34 1.77 5.18
SWBI 129.47 129.47 13.49 3.885 382,375 10.42 10.42 1.29 0.33 0.72 0.96 6.30
TSH 106.71 106.71 14.69 3.175 379,590 13.77 13.77 0.98 0.29 0.72 (0.27) 4.29
- --------
UFRM 126.16 126.16 9.45 2.462 263,582 7.49 7.49 0.41 (0.02) 0.27 (1.32) 3.38
- --------
WAYN 172.87 172.87 15.52 3.538 250,856 8.98 8.98 1.02 0.26 0.25 (0.90) 2.70
- --------
WCBI 108.70 108.70 16.71 2.963 310,992 15.38 15.38 1.51 0.39 1.06 1.49 6.83
WFCO 116.17 119.05 8.49 3.360 292,264 7.31 7.15 1.08 0.30 0.67 1.04 8.96
- --------
WOFC 88.59 94.33 13.56 4.638 347,704 15.31 14.51 0.60 0.17 0.52 (0.20) 2.63
- --------
Maximum 268.97 268.97 29.50 4.638 484,106 28.03 28.03 2.38 0.60 2.09 1.77 18.60
Minimum 87.41 89.21 6.55 0.000 250,856 4.84 4.84 (0.22) (0.02) (0.98) (1.32) (12.66)
Average 122.74 125.04 13.45 2.115 338,337 11.45 11.30 1.14 0.29 0.56 0.52 5.12
Median 112.08 114.35 13.31 2.103 344,170 10.13 9.94 1.12 0.30 0.52 0.68 4.37
<CAPTION>
ROACE Before
Extra Merger
(%) Target?
Ticker MRQ (Y/N)
<S> <C> <C>
ANA (3.31) N
- --------
ASBI (2.12) N
CAFI (4.23) N
- --------
CBK (4.82) N
- --------
CBSB 1.15 N
- --------
CFCP 3.79 N
- --------
COOP 8.24 N
- --------
FBCI 6.77 N
- --------
FBCV 7.07 N
- --------
FBHC 9.41 N
- --------
FFED 15.80 N
- --------
FFFG (9.56) N
- --------
FFHH 6.24 N
FFKY 11.17 N
- --------
FFLC 5.92 N
FFOH (1.14) N
- --------
FFSX 8.50 N
- --------
FMBD 2.84 N
- --------
FOBC 8.44 N
- --------
FSTC 11.18 N
- --------
GFCO (6.61) N
- --------
HALL 8.28 N
HBEI 2.94 N
- --------
HBFW 5.66 N
HMCI 6.76 N
- --------
HVFD 11.56 N
- --------
INBI 8.86 N
- --------
KNK 8.90 N
MCBS 11.77 N
- --------
PERM 7.17 N
- --------
PFDC 8.82 N
PFSL 10.14 N
- --------
PMFI 0.96 N
PVFC 20.42 N
- --------
SFSB 10.05 N
SMFC 11.52 N
- --------
SOPN 7.02 N
SWBI 9.31 N
TSH (1.88) N
- --------
UFRM (16.96) N
- --------
WAYN (9.52) N
- --------
WCBI 9.66 N
WFCO 14.35 N
- --------
WOFC (1.23) N
- --------
Maximum 20.42
Minimum (16.96)
Average 4.98
Median 7.0
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALULATIONS 9
<PAGE>
FERGUSON & COMPANY SECTION III
- ------------------ -----------
TABLE III.4 - SELECTION OF COMPARATIVES
<TABLE>
<CAPTION>
Borrow-
NPAs/ Loans/ Loans/ Deposits/ ings/ Loans Loans
Current Assets Deposits Assets Assets Assets Serviced Serviced/
Pricing (%) (%) (%) (%) (%) ($0.00) Assets
Ticker Date MRQ MRQ MRQ MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ANA 02/14/97 0.56 92.70 68.24 73.62 7.64 NA NA B
- --------
ASBI 02/14/97 0.41 93.76 71.56 76.32 10.67 145,406 36.38 F
--------
CAFI 02/14/97 0.23 109.00 84.58 77.60 12.91 239,482 63.34 E, F
- -------- -------- --------
CBK 02/14/97 0.43 104.96 80.82 77.00 6.59 77,817 29.21 B, E, F
- -------- -------- --------
CBSB 02/14/97 0.67 111.73 71.55 64.03 19.66 NA NA B, F
- -------- --------
CFCP 02/14/97 0.17 121.67 82.95 68.18 23.90 115,100 25.04 E, F
- -------- -------- --------
COOP 02/14/97 0.24 94.96 77.39 81.49 10.38 62,753 18.39 C
- --------
FBCI 02/14/97 0.65 111.88 75.68 67.64 20.16 NA NA F
- -------- --------
FBCV 02/14/97 0.82 136.61 70.02 51.26 39.37 97,702 37.55 C, F
- -------- --------
FBHC 02/14/97 1.18 52.14 44.65 85.63 5.87 296,808 106.56 E, F
- -------- -------- --------
FFED 02/14/97 0.17 112.55 81.43 72.35 21.16 66,374 25.51 E, F
- -------- -------- --------
FFFG 02/14/97 2.94 81.13 69.59 85.78 6.51 106,611 34.28 D, F
- -------- -------- --------
FFHH 02/14/97 0.04 113.30 62.80 55.43 31.63 40,437 11.16 SELECTED
--------
FFKY 02/14/97 0.10 119.87 87.19 72.74 12.46 0 0.00 E
- -------- --------
FFLC 02/14/97 0.30 81.02 66.10 81.59 2.37 1,557 0.45 SELECTED
--------
FFOH 02/14/97 0.42 103.38 76.07 73.58 5.33 1,766 0.69 B
- --------
FFSX 02/14/97 0.15 101.50 73.28 72.20 18.48 29,932 6.55 A
- --------
FMBD 02/14/97 0.06 140.16 85.72 61.16 18.93 47,349 14.27 E
- -------- --------
FOBC 02/14/97 NA 54.00 39.44 73.03 14.72 NA NA E, F
- -------- -------- --------
FSTC 02/14/97 NA 92.68 77.70 83.84 5.54 NA NA F
- -------- --------
GFCO 02/14/97 0.41 99.70 80.09 80.33 8.45 NA NA E, F
- -------- -------- --------
HALL 02/14/97 0.02 98.23 64.64 65.80 26.36 21,986 5.54 SELECTED
--------
HBEI 02/14/97 0.42 NA NA 70.66 0.00 NA NA B
- --------
HBFW 02/14/97 0.00 93.10 79.32 85.20 0.00 2,809 0.86 SELECTED
--------
HMCI 02/14/97 3.51 84.23 78.19 92.83 0.00 162,856 48.49 D, F
- -------- -------- --------
HVFD 02/14/97 0.78 106.32 85.54 80.46 8.65 132,700 38.26 E, F
- -------- -------- --------
INBI 02/14/97 0.16 110.92 87.98 79.32 0.61 5,743 1.76 E
- -------- --------
KNK 02/14/97 0.60 85.21 67.40 79.10 9.85 35,377 10.09 SELECTED
--------
MCBS 02/14/97 0.14 87.10 55.07 63.23 24.61 1,246,918 350.73 F
- -------- --------
PERM 02/14/97 1.08 78.13 51.33 65.70 23.80 NA NA F
- -------- --------
PFDC 02/14/97 0.34 95.39 79.69 83.54 0.82 0 0.00 SELECTED
--------
PFSL 02/14/97 0.26 125.20 38.61 30.84 61.93 NA NA E
- -------- --------
PMFI 02/14/97 0.41 106.06 77.89 73.45 16.64 127,389 32.79 F
--------
PVFC 02/14/97 0.53 116.24 93.03 80.03 10.78 NA NA E
- -------- --------
SFSB 02/14/97 0.25 78.46 60.11 76.61 15.58 41,269 10.21 SELECTED
--------
SMFC 02/14/97 0.09 141.36 86.33 61.07 28.20 20,273 6.80 E
- -------- --------
SOPN 02/14/97 0.08 94.16 69.66 73.98 0.15 754 0.28 SELECTED
--------
SWBI 02/14/97 0.24 93.85 68.83 73.34 14.43 7,559 1.98 SELECTED
--------
TSH 02/14/97 0.16 125.39 84.14 67.10 17.62 0 0.00 E
- -------- --------
UFRM 02/14/97 1.01 78.72 69.67 88.50 0.00 451,151 171.16 F
- -------- --------
WAYN 02/14/97 0.59 100.08 83.64 83.58 6.41 39,284 15.66 E
- -------- --------
WCBI 02/14/97 0.50 88.10 72.28 82.05 0.00 0 0.00 SELECTED
--------
WFCO 02/14/97 0.39 113.34 85.92 75.81 15.86 NA NA E,F
- -------- -------- --------
WOFC 02/14/97 NA 136.22 75.05 55.10 28.70 NA NA F
- -------- --------
Maximum 3.51 141.36 93.03 92.83 61.93 1,246,918 350.73
Minimum 0.00 52.14 38.61 30.84 0.00 0 0.00
Average 0.52 101.50 73.05 73.23 13.95 113,286 34.50
Median 0.39 100.08 75.68 73.80 11.62 40,853 12.72
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 10
<PAGE>
FERGUSON & COMPANY Section III.
- ------------------ ------------
Table III.4a - Selection of Comparatives
<TABLE>
<CAPTION>
Deposit Current Current
Insurance Stock Market
Agency Price Value
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CASH First Midwest Financial, Inc. Hutchinson IA MW SAIF NASDAQ 09/20/93 16.500 47.79
FFHH FSF Financial Corp. Hutchinson MN MW SAIF NASDAQ 10/07/94 16.000 51.68
FFLC FFLC Bancorp, Inc. Leesburg FL SE SAIF NASDAQ 01/04/94 23.000 56.07
HALL Hallmark Capital Corp. West Allis WI MW SAIF NASDAQ 01/03/94 18.000 25.97
HBFW Home Bancorp Fort Wayne IN MW SAIF NASDAQ 03/30/95 19.500 51.73
KNK Kankakee Bancorp, Inc. Kankakee IL MW SAIF AMSE 01/06/93 26.125 36.96
PFDC Peoples Bancorp Auburn IN MW SAIF NASDAQ 07/07/87 20.000 46.12
SFSB SuburbFed Financial Corp. Flossmoor IL MW SAIF NASDAQ 03/04/92 22.000 27.60
SOPN First Savings Bancorp, Inc. Hometown NC SE SAIF NASDAQ 01/06/94 19.500 71.94
SWBI Southwest Bancshares Hometown IL MW SAIF NASDAQ 06/24/92 19.563 51.60
WCBI Westco Bancorp Westchester IL MW SAIF NASDAQ 06/26/92 20.250 51.98
Maximum 26.125 71.94
Minimum 16.000 25.97
Average 20.040 47.22
Median 19.563 51.60
<CAPTION>
Price/ Price/
LTM Core
Core EPS EPS
Ticker (x) (x)
<S> <C> <C>
CASH 14.10 8.97
FFHH 20.00 16.67
FFLC 18.11 17.97
HALL 12.24 11.25
HBFW 19.12 18.75
KNK 16.53 12.56
PFDC 10.99 12.20
SFSB 15.38 14.47
SOPN 17.89 16.25
SWBI 15.17 14.82
WCBI 13.41 12.98
Maximum 20.00 18.75
Minimum 10.99 8.97
Average 15.72 14.26
Median 15.38 14.47
</TABLE>
SOURCE: SNL Securities and F&C calculations 11
<PAGE>
FERGUSON & COMPANY SECTION III.
- ------------------ ------------
Table III.4a - Selection of Comparatives
<TABLE>
<CAPTION>
Tangible ROAA ROAA ROACE ROACE
Current Current Current Total Equity/ Equity/ Core Core Before Before Before Before
Price/ Price/ T Price/ Dividend Assets Assets T Assets EPS EPS Extra Extra Extra Extra
Bk Value Bk Value Assets Yield $0 (%) (%) ($) ($) (%) (%) (%) (%)
Ticker (%) (%) (%) (%) MRQ MRQ MRQ LTM MRQ LTM MRQ LTM MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CASH 111.41 126.24 12.41 2.182 388,008 11.14 9.95 1.17 0.46 0.74 0.02 5.94 0.18
FFHH 101.20 101.20 14.26 3.125 362,373 12.40 12.40 0.80 0.24 0.58 0.81 4.02 6.24
FFLC 104.55 104.55 16.18 2.087 346,442 15.48 15.48 1.27 0.32 0.65 0.94 3.94 5.92
HALL 92.50 92.50 6.55 0.000 396,808 7.07 7.07 1.47 0.40 0.43 0.58 5.81 8.28
HBFW 113.70 113.70 15.91 1.026 325,168 13.99 13.99 1.02 0.26 0.52 0.80 3.36 5.66
KNK 101.30 108.40 10.54 1.837 350,643 10.41 9.79 1.58 0.52 0.50 0.91 4.95 8.90
PFDC 107.35 107.35 16.46 3.000 280,339 15.34 15.34 1.82 0.41 1.12 1.34 7.26 8.82
SFSB 105.16 105.67 6.83 1.455 404,092 6.50 6.47 1.43 0.38 0.28 0.66 4.04 10.05
SOPN 108.15 108.15 27.05 3.487 265,888 25.01 25.01 1.09 0.30 1.34 1.77 5.18 7.02
SWBI 129.47 129.47 13.49 3.885 382,375 10.42 10.42 1.29 0.33 0.72 0.96 6.30 9.31
WCBI 108.70 108.70 16.71 2.963 310,992 15.38 15.38 1.51 0.39 1.06 1.49 6.83 9.66
Maximum 129.47 129.47 27.05 3.885 404,092 25.01 25.01 1.82 0.52 1.34 1.77 7.26 10.05
Minimum 92.50 92.50 6.55 0.000 265,888 6.50 6.47 0.80 0.24 0.28 0.02 3.36 0.18
Average 107.59 109.63 14.22 2.277 346,648 13.01 12.85 1.31 0.36 0.72 0.93 5.24 7.28
Median 107.35 108.15 14.26 2.182 350,643 12.40 12.40 1.29 0.38 0.65 0.91 5.18 8.28
<CAPTION>
Merger
Target?
(Y/N)
CASH N
FFHH N
FFLC N
HALL N
HBFW N
KNK N
PFDC N
SFSB N
SOPN N
SWBI N
WCBI N
Maximum
Minimum
Average
Median
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 12
<PAGE>
FERGUSON & COMPANY SECTION III.
- ------------------ ------------
TABLE III.4A - SELECTION OF COMPARATIVES
<TABLE>
<CAPTION>
Borrow-
NPAs/ Loans/ Loans/ Deposits/ ings/ Loans Loans
Current Assets Deposits Assets Assets Assets Serviced Serviced/
Pricing (%) (%) (%) (%) (%) $0 Assets
Ticker Date MRQ MRQ MRQ MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CASH 02/14/97 0.70 105.35 63.37 60.15 27.44 1,748 0.45 SELECTED
--------
FFHH 02/14/97 0.04 113.30 62.80 55.43 31.63 40,437 11.16 SELECTED
--------
FFLC 02/14/97 0.30 81.02 66.10 81.59 2.37 1,557 0.45 SELECTED
--------
HALL 02/14/97 0.02 98.23 64.64 65.80 26.36 21,986 5.54 SELECTED
--------
HBFW 02/14/97 0.00 93.10 79.32 85.20 0.00 2,809 0.86 SELECTED
--------
KNK 02/14/97 0.60 85.21 67.40 79.10 9.85 35,377 10.09 SELECTED
--------
PFDC 02/14/97 0.34 95.39 79.69 83.54 0.82 0 0.00 SELECTED
--------
SFSB 02/14/97 0.25 78.46 60.11 76.61 15.58 41,269 10.21 SELECTED
--------
SOPN 02/14/97 0.08 94.16 69.66 73.98 0.15 754 0.28 SELECTED
--------
SWBI 02/14/97 0.24 93.85 68.83 73.34 14.43 7,559 1.98 SELECTED
--------
WCBI 02/14/97 0.50 88.10 72.28 82.05 0.00 0 0.00 SELECTED
--------
Maximum 0.70 113.30 79.69 85.20 31.63 41,269 11.16
Minimum 0.00 78.46 60.11 55.43 0.00 0 0.00
Average 0.28 93.29 68.56 74.25 11.69 13,954 3.73
Median 0.25 93.85 67.40 76.61 9.85 2,809 0.86
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 13
<PAGE>
SECTION IV
CORRELATION OF MARKET VALUE
<PAGE>
FERGUSON & COMPANY SECTION IV.
- ------------------ -----------
IV. CORRELATION OF MARKET VALUE
MARKETABILITY & LIQUIDITY OF STOCK TO BE ISSUED
This section addresses the aforementioned factors and the estimated pro
forma market. Certain factors must be considered to determine whether
adjustments are required in correlating Carrollton Federal's market value to the
comparative group. Those factors include financial aspects, market area,
management, dividends, liquidity, thrift equity market conditions, and
subscription interest value of the to-be-issued common shares, and compares the
resulting market value of the Bank to the members of its comparative group and
the selected group of publicly held thrifts.
FINANCIAL ASPECTS
Section III includes a discussion regarding a comparison of Carrollton
Federal's earnings, balance sheet characteristics, and risk factors with its
comparative group. Table III.2 presents a comparison of certain key indicators,
and Table III.3 presents certain key indicators on a pro forma basis after
conversion.
As shown in Table III.2, from an earnings viewpoint, Carrollton Federal is
below its comparative group in return on assets and core income as a percentage
of average assets, principally as a result of its higher noninterest expense
levels and lower capital levels. Carrollton has a slightly higher net interest
margin than the comparables, 3.90% to the comparative group's 3.18%. The Bank's
lower capital ratio, a lower ratio of interest earning assets ("IEA's") to
interest bearing liabilities ("IBL's"), and higher operating expenses are
offsetting the higher net interest margins. Carrollton Federal's net interest
income as a percent of assets is 3.90% versus 3.18% for the comparatives. After
Carrollton Federal completes its stock conversion, its return on average assets
and core income as a percentage of average assets will increase, and will
achieve near parity with the comparable group principally in spite of the lower
ratio of IEA's to IBL's, and a higher level of operating expense (2.94% vs.
1.91%). Table III.3 projects that Carrollton Federal will near the group in
return on assets with 0.63% at the midpoint, versus a mean of 0.72% and median
of 0.65% for the comparative group.
Carrollton Federal's pro forma equity to assets ratio at the midpoint is
14.65%, versus a mean of 13.07%, and median of 12.40% for the comparative group.
Carrollton Federal's pro forma return on equity is below the comparative group--
4.18% at the midpoint versus a mean of 5.28%, and median of 5.18% for the
comparative group. This is an expected result considering the higher capital
ratios of Carrollton Federal in comparison to the group. In other words, higher
capital, lower ROAE, and lower capital, higher ROAE - all other factors being
equal.
Carrollton Federal's recorded earnings have been adjusted for appraisal
purposes (see Table IV.1). The Bank recorded gains of $178 thousand from the
sale of investments, paid the SAIF special assessment of $1.723 million, and
recorded, at December 31, 1996, an excess provision for loan loss reserves of
$840 thousand.
1
<PAGE>
FERGUSON & COMPANY SECTION IV.
- ------------------ -----------
TABLE IV.1 - APPRAISAL EARNINGS ADJUSTMENTS
FOR THE TWELVE MONTHS ENDING DECEMBER 31, 1996
<TABLE>
<CAPTION>
(In Thousands)
<S> <C>
APPRAISAL EARNINGS
YEAR END DECEMBER 31, 1996 $ 248
-------------
SAIF Assessment $1,723
Excess Loss Provision 840
Securities Gain (178)
-------------
2,385
Tax @ 38% (906)
Net Adjustments 1,479
-------------
ADJUSTED EARNINGS $1,727
=============
</TABLE>
Source: Carrollton Federal Bank's audited and unaudited financial statements and
F&C calculations.
Carrollton Federal's asset composition is similar to that of its
comparative group-- lending oriented; however, cash and investments and
mortgage-backed securities present some differences from the comparative group.
Carrollton Federal has 17.74% in cash and investment securities and a nominal
1.38% of total assets in MBS's. The comparative group has 29.15% in cash and
investments, and 7.37% in MBS's. However, if you add MBS's to loans, Carrolton
Federal then has 77.92% in combination (loans + MBS's), and the comparative
group has 76.23% in the same combination.
From the risk factor viewpoint, Carrollton Federal is similar to the
comparative group. Carrollton Federal has 1.82% in non performing assets, and
the comparative group has 0.28% in nonperforming assets. Obviously,
Carrollton's percentage is much larger, but both levels are manageable, and
neither should present any problems related to capital or future earnings.
Carrollton Federal's loan loss allowance is 0.95% of net loans, comparing
favorably with the comparative group, which is 0.52%. Carrollton Federal's loan
loss reserve is greater, mainly due to Management's recognition that their asset
composition has more risk than a traditional thrift. Its ratio of interest
earning assets to interest bearing liabilities (106.13%) is well below the
comparative group (114.73%). From an earnings perspective, this is a
significant amount of difference, but Carrollton Federal's ratio will be in line
with the comparative group after conversion. From an interest rate risk factor,
Carrollton Federal and the comparative group are similar and have some interest
rate risk, however, the amount of interest rate risk is manageable and
Carrollton Federal's interest rate risk will decrease after the Conversion with
the employment of the subsequent capital infusion.
We believe that NO ADJUSTMENT is necessary relative to financial aspects of
-------------
Carrollton Federal.
2
<PAGE>
FERGUSON & COMPANY SECTION IV.
- ------------------ -----------
MARKET AREA
Section II describes Carrollton Federal's market area.
We believe that AN UPWARD ADJUSTMENT is required for Carrollton Federal's
--------------------
market area.
MANAGEMENT
The CEO has served as President, CEO, and Director since 1990. He is a
graduate of Armstrong State College and holds an MBA from Auburn University.
Prior to joining Carrollton Federal he was a Vice President of CoBank, in
Atlanta, Georgia. He is well qualified for the position he holds. The
Executive Vice President and COO has been with Carrollton Federal since 1990.
He joined Carrollton Federal with an excess of 15 years experience in thrift
management. A graduate of Georgia Institute of Technology, with a MBA from
Georgia State University, he is well qualified for the position he holds. The
Chief Financial Officer of the Bank is a recent addition to the staff, also
coming into employment with excellent credentials. All senior officers report
directly to President Dorminey (six direct reports). The senior staff possess
the necessary intellect, skills, levels of expertise, and experience to maintain
the integrity of the assets and to implement the strategic goals of the
organization. Carrollton Federal's results compare well with the comparative
group. Therefore, Carrollton Federal's Management has done the same quality job
as its selected comparatives. The Board has developed a formal management
succession plan, and it is in effect. The Bank is not particularly vulnerable
to the loss of one senior manager, but the loss of two could create short term
problems.
We believe that NO ADJUSTMENT is required for Carrollton Federal's
-------------
Management.
DIVIDENDS
Table III.3 provides dividend information relative to the comparative group
and the thrift industry as a whole. The comparative group is paying a mean
yield on a market price of 2.17% and a median of 2.15%, while all public thrifts
are paying a mean of 1.78% and median of 1.82%. Georgia public thrifts are
paying a mean of 2.32% and a median of 2.32%, but they are so few in number that
they are not a significant analytical factor. Carrollton Federal intends to pay
a dividend at an initial annual rate of 3.0%, on an offering price of $20.00 per
share ($0.60 per share). Even with market appreciation, Carrollton Federal's
dividend rate will be comparable.
We believe that NO ADJUSTMENT is required relative to Carrollton Federal's
-------------
intention to pay dividends.
LIQUIDITY
The Holding Company has never issued capital stock to the public, and as a
result, there is no existing market for the Common Stock. Although the Holding
Company has applied to list its Common Stock on NASDAQ, there can be no
assurance that a liquid trading market will develop.
A public market having the desirable characteristics of depth, liquidity,
and orderliness depends upon the presence in the market place of both willing
buyers and sellers of the Common Stock. These characteristics are not within
the control of the Bank or the market.
The peer group includes companies with sufficient trading volume to develop
meaningful pricing characteristics for the stock. The market value of the
comparative group ranges from $73.32 million to $26.69 million, with a mean
value of $49.56 million. The midpoint of Carrollton Federal's valuation range
is $36.50 million at $20.00 a share, or 1,825,000 shares. The liquidity of
3
<PAGE>
FERGUSON & COMPANY SECTION IV.
- ------------------ -----------
the stock that is inherent in the size of the issue ($36.5 million), is offset
to some degree by the limited number of shares that are the result of an
offering price of $20.00 per share.
We believe a DOWNWARD ADJUSTMENT is required relative to the liquidity of
-------------------
Carrollton Federal's stock.
THRIFT EQUITY MARKET CONDITIONS
The SNL Thrift Index has performed well since the end of 1990. The Index
has grown as follows: year ended December 31, 1991--increased 49.0% from 96.6
to 143.9; year ended December 31, 1992--increased 39.7% to 201.1; year ended
December 31, 1993--increased 25.6% to 252.5; year ended December 31, 1994--
decreased 3.1% to 244.7; year ended December 31, 1995--increased 54.1% to 376.5.
The SNL Index is market value weighted with a base value of 100 as of March 31,
1984.
As shown in Figure IV.1, which is a graph of the SNL Thrift Index covering
the period January 31, 1994, through February 27, 1997, the market, as depicted
by the Index, has experienced fluctuations recently. It dipped in the latter
part of 1994, but recovered during the first quarter of 1995. During 1995, the
Index continued a more robust increase and moved from 244.7 at year end 1994, to
376.50 by December 31, 1995, an increase of 53.86%. Between December 30, 1995,
and May 31, 1996, the Index moved up and down within a narrow band of
performance. In May of 1996, the upward trend became recognizable and
continuous. The Index has generally trended upward since that start. Overall,
the market index increased 27.06% (from 382.99 to 486.63) between the end of May
and December 31, 1996. However, driven by other markets, generally good
economic news, and a pass by the Federal Reserve in February to raise rates, the
thrift equities market has risen abruptly. By the end of February, the SNL
Index was 569.67, an increase of an additional 17.06% since the beginning of
1997.
The increase in the SNL Index in general has been parallel with the
increases in other equity markets with some interim fluctuations caused by
changes or anticipated changes in interest rates or other economic conditions.
Another factor, however, is also notable. In other markets, increased prices
are responding to improved profits, with price to earnings ratios increasing as
increased earnings potentials are anticipated. The thrift market has also
reflected higher price earnings ratios. In addition, the thrift IPO market has
been affected by speculation that conveys the notion that the majority of the
converting institutions will sooner or later become viable consolidation
candidates and sell at some expanded multiple of book value. Moreover, the
number of conversions has decreased in recent months and the basics of supply
and demand are affecting the pricing of some of the recent issues, as
professional investor and regional speculators chase fewer viable issues of
thrift equities.
GEORGIA ACQUISITIONS
Table IV.2 provides information relative to acquisitions of financial
institutions in Georgia between January 1, 1995, and December 31, 1996. There
were six thrift acquisitions and 36 bank acquisitions announced during that time
frame. Currently there are six publicly held thrifts in the State of Georgia.
There are 58 publicly held thrifts in the Southeast region of the country. Bank
acquisitions in Georgia since January 1, 1995, have averaged 191.39% of tangible
book value and 19.44 times earnings. The median price has been 194.24% of
tangible book value and 17.94 times earnings. Thrifts generally sell at lower
price/book multiples than do banks. This data does not reflect that, and in
fact, reflects the opposite, but the limited number of thrifts in the data base
4
<PAGE>
FERGUSON & COMPANY SECTION IV.
- ------------------ -----------
makes it dangerous to deduce that the overall price of thrifts are nearing the
price of banks. Thrifts in Georgia (only six have sold during that period) have
averaged 204.10% of tangible book value and 17.60 times earnings. The median,
which is probably more reflective of actual value, was 166.91% of book and 15.62
times earnings. However, the data is distorted by the purchase/sale of one
thrift at a recorded price of 400.21% of book value. Disparity, or the lack
thereof, between the price of thrifts and banks aside, there is ample data
shown to conclude that speculators in thrift IPO stock have good reason to
believe that, in the event of a sell out, there would be a generous profit to be
made. Such knowledge and hope for profits have created a whole new level of
professional investors (speculators) and that, in turn, has increased the demand
for thrift IPO stocks.
EFFECT OF INTEREST RATES ON THRIFT STOCK
The current interest rate environment and the anticipated rate environment
will affect the pricing of thrift stocks and all other interest sensitive
stocks. As the economy continues to expand, the fear of inflation can return.
The Federal Reserve, in its resolve to curb inflation, has increased rates in
the past, but has more recently relented to vagaries of the economy and passed
on an opportunity to increase rates. In some minds, this was an attempt to
stimulate what is currently perceived as a fragile and irresolute economy that
could be dampened by a modest increase in rates. Recent gains in thrift stocks
are mainly due to the rise in other equity markets, the effect of supply and
demand, and fewer conversions. Should the merger and acquisition levels drop,
if there were a sharp and sustained rise in the interest rates, or if other
equity markets have an adjustment, the market in thrift equities would also
adjust downward.
What is likely to happen in the short to intermediate term is that rates
will float around current levels and trend upward. The yield curve will
continue to be of normal configuration. Most economists feel that a rise of
three quarters of one percent on the short side, and less on the long side,
could severely dampen the economy. Currently, we are in the second longest
post-war expansion on record. The Federal Reserve passed on raising rates in
February, and the next opportunity will be March 25, 1997. There is concern
that a decision to raise rates could have significant impact upon the stock
market, and if rates are increased, it will not be by much. It is also possible
that the Fed could slow the economy furtively, without raising rates. It could
allow the US Dollar to remain strong against the Yen and the European
currencies. Although not as effective as a rate increase, a continuing strong
dollar would have a natural economic "braking effect" on the US economy. Goods
and services produced by countries with weaker currencies would become cheaper
on the global economy and more competitive to US produced goods. The net result
would be a market induced slowing of the economy -- until the US Dollar loses
its strength and values of currencies are adjusted.
Thrift net interest margins will narrow if the cost of funds starts to rise
more quickly than currently anticipated. Even with portfolios replete with
adjustable rate loans and adjustable MBS's, a quickly rising rate environment
can cause the cost of funds to rise faster than the adjustable assets can
accommodate, and accordingly, spreads would narrow. If rates rise in a slow and
orderly manner, the negative impact on spreads will be less, and the adjustable
rate assets will have time to rise and protect rate spreads.
As clearly illustrated in Figure IV.1, the SNL Thrift Index has performed
well over the last five years. It moved in tandem with all interest sensitive
stocks and reflected the weakness in the market as investors began to consider
the importance of increases in rates and their impact on the
5
<PAGE>
FERGUSON & COMPANY SECTION IV.
- ------------------ -----------
net interest margins of thrifts. The clear implication is that eventually rising
interest rates will have a negative impact on earnings, but until that occurs,
it is likely that the market will continue to rise.
Figure IV.2 graphically displays the rate environment since August 30,
1996. In August, September, and October of 1996, the yield curve was normal,
with between 200 basis points ("BP") and 161 BP's difference between the federal
funds rate and the 30 year treasury. In November and December, the yield curve
has became flatter, with a 111 BP spread between the federal funds rate and the
30 year treasury rate being the low in November, and 140 BP spread being the
high in December. However, since the year end, the yield curve has increased
with the high spread being 171 BP and the low 151 BP. Mortgage rates follow
closely the long term government obligations. The increasing spread of the last
two months has improved portfolio managers chances of improving profitability.
Increased cost of funds will serve to narrow the net interest margins of
thrifts. A thrift's ability to maintain net interest margins through business
cycles is important to investors, unless thrifts can offset the decline in net
interest income by other sources of revenue or reductions in noninterest
expense. The former is difficult, and the latter is unlikely.
Carrollton Federal is slightly vulnerable to interest rate risk. If
current strategies to become a full service community bank are maintained, the
changes in portfolio composition should, in time, reduce the interest rate risk.
Table IV.3, which has information on recent conversions since August 1,
1996, shows that recent price appreciation has been more robust than it was in
past periods. Table IV.3 provides information on 21 conversions completed since
August, 1996. The average change in price since conversion is a gain of 47.96%,
and the median change is a gain of 47.50%. All thrifts within that group have
increased in value ranging from a low of 31.00% to a high of 78.75%. The
average increase in value at one day, one week, and one month after conversion
has been 24.30%, 27.12%, and 31.74%, respectively. The median increase in value
at one day, one week, and one month after conversion has been 25.25%, 26.25%,
and 31.74%, respectively. A notable change in pricing patterns is that it is
taking longer for the stocks to increase in value. In the recent past, it was
not uncommon for a stock to gain 75% to 80% of its total price increase in the
first day or week. However, more recent conversions gained 50.66% of their
total price increase in the first day, and 56.55% of the total price increase in
the first week. This is mainly due to the trend toward higher price to pro
forma book values at closings. Since December 1, 1996, only one stock has
closed at a price to pro forma book value of less than 70.00%, and that was
68.10% of pro forma book value. The remainder closed between 71.10% and 74.40%
price to pro forma book value.
Because of the lack of complete earnings information on recent conversions,
a meaningful comparison of the price earnings ratios is difficult to make.
However, there is sufficient information to review the current price-to-book
ratio. The average price-to-book ratio as of February 27, 1997, is 102.21%, and
the median is 101.90%. That compares to the offering price to pro forma book,
where the average was 71.37%, and the median was 72.10%.
We believe that a SLIGHT DOWNWARD ADJUSTMENT is required for the new issue
--------------------------
discount.
6
<PAGE>
FERGUSON & COMPANY SECTION IV.
- ------------------ -----------
ADJUSTMENTS CONCLUSION
ADJUSTMENTS SUMMARY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
NO CHANGE UPWARD DOWN
<S> <C> <C> <C>
Financial Aspects X
Market Area X
Management X
Dividends X
Liquidity X
Thrift Equity Market Conditions X
- -------------------------------------------------------------------
</TABLE>
VALUATION APPROACH
Typically, investors rely on the price/earnings ratio as the most
appropriate indicator of value. We consider price/earnings to be one of the
important pricing methods in valuing a thrift stock. Price/book is a well
recognized yardstick for measuring the value of financial institution stocks in
general. Another method of viewing thrift values is price/assets, which is more
meaningful in situations where the subject is thinly capitalized. Given the
healthy condition of the thrift industry today, more emphasis is placed on
price/earnings and price/book. Generally, price/earnings and price/book should
be considered in tandem.
Table III.3 presents Carrollton Federal's pro forma ratios and compares
them to the ratios of its comparative group and the publicly held thrift
industry as a whole. Carrollton Federal's earnings for the 12 months ended
December 31, 1996, were approximately $248,000, with net adjustments of
$2,385,000 ($1,479,000 after tax @ 38%) required to determine appraisal earnings
of $1,727,000 (see Table IV.1). Management has indicated an intention, through
its diversification of deposit and loan products, to exhibit the flexibility in
operations needed to serve both the public and the institution. The Bank is
well positioned to manage interest rate variations. The Bank projects generous
growth.
The comparative group traded at an average of 16.31 times earnings at
February 27, 1997, and at 112.47% of book value. The comparative group traded
at a median of 15.91 times earnings and a median of 111.07% of book value. At
the midpoint of the valuation range, Carrollton Federal is priced at 15.59 times
earnings and 64.97% of book value. At the maximum end of the range, Carrollton
Federal is priced at 17.22 times earnings and 68.91% of book value. At the
supermaximum, Carrollton Federal is priced at 18.95 times earnings and 72.74% of
book value.
The midpoint valuation of $36,500,000 represents a discount of 42.23% from
the average and a discount of 41.51% from the median of the comparative group on
a price/book basis. The price/earnings ratio for Carrollton Federal at the
midpoint represents a discount of 4.41% from the comparative group's mean and
2.01% from the median price/earnings ratio.
7
<PAGE>
FERGUSON & COMPANY SECTION IV.
- ------------------ -----------
The maximum valuation of $41,975,000 represents a discount of 38.73% from
the average and 37.96% from the median of the comparative group on a price/book
basis. The price/earnings ratio for Carrollton Federal at the maximum
represents a premium of 5.58% over the average and a premium of 8.23% over the
median of the comparative group.
As shown in Table IV.3, conversions closing since August 1, 1996, have
closed at an average price to book ratio of 71.37% and median of 72.10%.
Carrollton Federal's pro forma price to book ratio is 64.97% at the midpoint,
68.91% at the maximum, and 72.74% at the supermaximum of the range. At the
midpoint, Carrollton Federal is 8.96% below the average and 9.89% below the
median. At the maximum of the range, Carrollton Federal is 3.45% below the
average and 4.42% below the median. At the supermaximum of the range,
Carrollton Federal's pro forma price to book ratio is 1.54% above the average
and 0.89% above the median.
Addressing the discounts between the pro forma book value of Carrollton
Federal and the current price to book values of the comparative group (See Table
IV.5), there are some notable factors. All of these calculations were made from
book value, and in the case of Carrollton Federal, there is some goodwill, and
tangible book values would certainly reduce the discounts. At a midpoint pro
forma book value of 64.97%, the discount from the average pro forma book value
closing ratio for all of the recent conversions is 8.97%. Should the issue
close at the super maximum, which is likely, then it would be closing at a
premium of 1.92% on the average of recent conversion. It is important to
realized that there is some point beyond which most knowledgeable investors will
not travel as it relates to the price of thrift IPO stock. This valuation
provides for a 15% increase between midpoint and maximum and an additional 15%
to supermaximum, which would take the value higher than all but five of the most
recent conversions.
VALUATION CONCLUSION
- --------------------
We believe that as of February 27, 1997, the estimated pro forma market
value of Carrollton Federal was $36,500,000. The resulting valuation range was
$31,025,000 at the minimum to $41,975,000 at the maximum, based on a range of
15% below and 15% above the midpoint valuation. The supermaximum is
$48,271,250, based on 1.15 times the maximum. Pro forma comparisons with the
comparative group are presented in Table III.3 based on calculations shown in
Exhibit V.
8
<PAGE>
FERGUSON & COMPANY SECTION IV.
- ------------------ -----------
TABLE IV.2 - GEORGIA BANK AND THRIFT SALES
<TABLE>
<CAPTION>
Buyer Seller
Total Total
Bank/ Bank/ Assets Assets Announce
Buyer ST Thrift Seller ST Thrift ($000) ($000) Date Status
- --------------------------- -- ------ -------------------------------- -- ------ ----------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Regions Financial AL Bank SB&T Corporation GA Bank 18,731,424 140,575 12/20/96 Pending
Corporation
Regions Financial AL Bank First Bankshares, Inc. GA Bank 18,731,424 105,758 12/16/96 Pending
Corporation
ABC Bancorp, Inc GA Bank M&F Financial Corporation GA Bank 451,745 44,830 9/17/96 Completed
Allied Bankshares GA Bank Bank of Stapleton GA Bank 556,256 15,519 9/9/96 Completed
Colonial BancGroup AL Bank D/W Bankshares GA Bank 3,924,393 139,681 8/5/96 Pending
Colony Bankcorp, Inc GA Bank Broxton State Bank GA Bank 280,007 21,395 7/4/96 Pending
Regions Financial AL Bank Allied Bankshares GA Bank 17,531,422 561,730 6/14/96 Completed
Corporation
ABC Bancorp, Inc GA Bank First National Financial Corp. GA Bank 341,773 53,864 4/16/96 Completed
Mid State Banks, Inc GA Bank First State Bank of Ocilla GA Bank 166,242 33,508 4/5/96 Completed
Regions Financial AL Bank Rockdale Community Bank GA Bank 13,708,560 44,118 3/13/96 Completed
Corporation
ABC Bancorp, Inc GA Bank Central Bankshares Inc GA Bank 313,968 46,618 1/4/96 Completed
Colonial BancGroup AL Bank Commercial Bancorp of Georgia GA Bank 3,400,577 223,754 12/21/95 Completed
Westside Financial GA Bank Eastside Holding Corporation GA Bank 65,367 54,773 12/21/95 Completed
Corporation * *
Regions Financial AL Bank First Gwinnett Bancshares Inc GA Bank 13,847,910 62,816 10/24/95 Completed
Corporation
Regions Financial AL Bank First National Bancorp GA Bank 13,847,910 2,463,943 10/23/95 Completed
Corporation
First Banking Company of GA Bank FNB Bancshares Inc. GA Bank 300,201 41,180 10/16/95 Completed
Southeast GA
Wachovia Corporation NC Bank First National Bankshares of GA Bank 42,867,479 30,938 9/18/95 Completed
Henry County
NationsBank Corporation NC Bank Bank South Corporation GA Bank 184,188,000 7,439,701 9/5/95 Completed
Regions Financial AL Bank Metro Financial Corporation GA Bank 13,478,391 198,646 8/23/95 Completed
Corporation
Regions Financial AL Bank Enterprise National Bank of GA Bank 13,478,391 51,094 8/18/95 Completed
Corporation Atlanta
First National Bancorp GA Bank Bank of Heard County GA Bank 2,400,566 38,644 7/25/95 Completed
South Banking Company GA Bank Pineland State Bank GA Bank 85,180 26,412 7/24/95 Completed
Bank Corporation of Georgia GA Bank Effingham Bank & Trust Company GA Bank 215,655 28,187 6/20/95 Completed
Century South Banks, Inc. GA Bank Bank of Danielsville GA Bank 524,424 48,048 6/12/95 Completed
Queensborough Company GA Bank Ogeechee Valley Bank GA Bank 109,497 17,280 5/15/95 Completed
Century South Banks, Inc. GA Bank Peoples Bank GA Bank 513,117 42,467 5/2/95 Completed
Habersham Bancorp GA Bank Security Bancorp, Inc GA Bank 161,327 40,044 1/21/95 Completed
Newnan Holdings, Inc. GA Thrift Tara Bankshares Corporation GA Bank 162,199 60,400 10/21/96 Pending
Eagle Bancshares GA Thrift Southern Crescent Financial GA Bank 611,512 129,648 8/13/96 Pending
Corporation
First Liberty Financial GA Thrift Middle Georgia Bank GA Bank 991,226 112,804 1/19/96 Completed
Corp
Newnan Holdings, Inc. GA Thrift Southside Financial Group GA Bank 163,118 76,308 10/20/95 Completed
First Liberty Financial GA Thrift Tifton Banks Inc GA Bank 790,899 52,974 3/16/95 Completed
Corp
First State Bancshares of GA Bank First Southwest Bancorp, Inc. GA Thrift 79,350 69,532 3/26/96 Completed
Blakely Inc
First Alliance Bancorp GA Bank Premier Bancshares Inc GA Thrift 144,346 49,946 11/2/95 Completed
SouthTrust Corporation AL Bank Bankers First Corporation GA Thrift 20,020,763 1,061,044 10/31/95 Completed
Regions Financial AL Bank First Federal Bank of Northwest GA Thrift 13,478,391 88,885 10/2/95 Completed
Corporation Georgia FSB
First Union Corporation NC Bank Home Federal Savings Bank GA Thrift 77,854,608 193,572 4/18/95 Completed
Colonial BancGroup AL Bank Mt. Vernon Financial Corporation GA Thrift 2,767,128 172,450 3/16/95 Completed
Maximum 184,188,000 7,439,701
Minimum 65,367 15,519
Average 12,665,388 370,608
Median 701,206 54,319
BANKS ONLY
Maximum 184,188,000 7,439,701
Minimum 65,367 15,519
Average 11,466,880 388,989
Median 583,884 52,034
THRIFTS ONLY
Maximum 77,854,608 1,061,044
Minimum 79,350 49,946
Average 19,057,431 272,572
Median 8,122,760 130,668
</TABLE>
* merger of equals
SOURCE: SNL BANK M&A DATASOURCE
SNL SECURITIES, L.P., CHARLOTTESVILLE, VA
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 9
<PAGE>
FERGUSON & COMPANY SECTION IV.
- ------------------ -----------
Table IV.2-Georgia Bank and Thrift Sales
<TABLE>
<CAPTION>
Ann'd Ann'd Ann'd Ann'd Final Final Final Final
Deal Deal Deal Pr/ Deal Pr/ Deal Deal Deal Pr/ Deal Pr/
Completed Value Pr/Bk Tg Bk 4-Qtr Value Pr/Bk Tg Bk 4-Qtr
Seller Date ($M) (%) (%) EPS (x) ($M) (%) (%) EPS (x)
- ------ ----------- ------ -------- ---------- --------- --------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SB & T Corporation NA 26 253.49 253.49 14.59 NA NA NA NA
First Bankshares, Inc NA 18 198.80 198.80 10.59 NA NA NA NA
M & F Financial Corporation 12/31/96 6 190.00 215.05 12.90 6.2 176.49 194.24 12.40
Bank of Stapleton 1/17/97 3 114.47 114.47 27.17 2.5 110.96 110.96 26.60
D/W Bankshares NA 22 183.94 183.94 14.73 NA NA NA NA
Broxton State Bank NA 4 165.00 165.00 14.52 NA NA NA NA
Allied Bankshares 1/31/97 136 200.59 253.33 14.78 156.8 230.35 287.41 20.03
First National Financial Corp. 8/30/96 11 196.67 NA 17.97 11.6 197.35 197.35 18.07
First State Bank of Ocilla 10/1/96 7 150.85 150.85 19.15 7.2 150.72 150.72 18.41
Rockdale Community Bank 8/15/96 13 190.55 190.55 16.32 12.6 176.05 176.05 14.21
Central Bankshares Inc 7/31/96 8 198.38 200.69 15.73 8.8 193.41 195.64 14.04
Commercial Bancorp of Georgia 7/3/96 42 210.39 220.91 21.71 40.1 200.72 209.32 46.36
Eastside Holding Corporation 7/31/96 9 140.13 142.35 12.30 NA NA NA NA
First Gwinnett Bancshares Inc 8/16/96 14 182.24 182.24 12.71 15.3 195.13 195.13 16.76
First National Bancorp 3/1/96 655 210.83 218.57 19.12 724.6 235.26 243.98 20.63
FNB Bancshares Inc. 8/27/96 9 209.39 209.39 40.55 8.6 205.31 205.31 35.19
First National Bankshares of
Henry Co 4/1/96 9 171.22 171.31 31.65 9.3 159.52 159.52 24.93
Bank South Corporation 1/9/96 1,625 238.20 278.97 21.48 1,762.8 254.91 296.11 23.64
Metro Financial Corporation 1/31/96 30 216.49 216.49 19.01 32.5 224.31 224.31 17.48
Enterprise National Bank of 2/2/96 9 165.43 165.43 16.50 8.5 149.12 149.12 13.84
Atlanta
Bank of Heard County 2/15/96 7 161.71 161.71 14.95 10.3 229.32 229.32 20.39
Pineland State Bank 1/1/96 3 160.52 160.52 NM 2.7 147.14 147.14 13.50
Effingham Bank & Trust Company 6/6/96 NA NA NA NA 3.6 174.17 174.17 NM
Bank of Danielsville 12/27/95 10 170.90 170.90 11.31 12.3 175.31 175.31 12.58
Ogeechee Valley Bank 12/29/95 3 165.75 165.75 15.70 2.7 153.58 153.58 12.86
Peoples Bank 12/14/95 9 197.95 197.95 15.05 11.3 227.46 227.46 17.80
Security Bancorp, Inc 6/30/95 9 171.32 171.32 19.73 9.3 172.80 173.67 19.91
Tara Bankshares Corporation NA 11 166.19 166.19 9.89 NA NA NA NA
Southern Crescent Financial
Corporation NA 16 180.51 186.06 13.42 NA NA NA NA
Middle Georgia Bank 11/15/96 17 170.58 170.58 10.63 19.6 199.90 199.90 12.33
South Financial Group 8/21/96 16 185.25 185.25 18.78 16.0 164.42 164.42 12.35
Tifton Banks Inc 9/15/95 7 141.65 141.65 16.67 7.4 144.53 144.53 22.36
First Southwest Bancorp, Inc 11/8/96 9 NA NA NA NA NA NA NA
Premier Bancshares Inc 8/31/96 12 194.63 310.89 15.13 15.1 254.94 400.21 19.31
Bankers First Corporation 3/15/96 146 143.64 150.65 11.30 154.2 159.27 166.91 27.51
First Federal Bank of
Northwest Georgia 4/1/96 16 128.75 128.75 12.36 17.0 135.78 135.78 15.50
Home Federal Savings Bank 9/15/95 20 167.79 185.45 16.78 19.6 158.90 170.38 15.62
Mt. Vernon Financial
Corporation 10/20/95 16 146.12 146.12 7.67 16.9 147.20 147.20 10.07
Maximum 1,625 253.49 310.89 40.55 1,762.80 254.94 400.21 46.36
Minimum 3 114.47 114.47 7.67 2.50 110.96 110.96 10.07
Average 81 178.90 186.62 16.65 104.18 183.48 193.51 19.13
Median 11 175.92 182.24 15.13 11.95 175.68 175.68 17.80
Banks Only
Maximum 1,625 253.49 278.97 40.55 1,762.80 254.91 296.11 46.36
Minimum 3 114.47 114.47 9.89 2.50 110.96 110.96 12.33
Average 89 182.56 186.99 17.32 116.10 185.93 191.39 19.44
Median 10 182.24 183.09 15.72 10.30 176.49 194.24 17.94
Thrifts Only
Maximum 146 194.63 310.89 16.78 154.20 254.94 400.21 27.51
Minimum 9 128.75 128.75 7.67 15.10 135.78 135.78 10.07
Average 36 156.19 184.37 12.65 44.56 171.22 204.10 17.60
Median 16 146.12 150.65 12.36 17.00 158.90 166.91 15.62
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 10
<PAGE>
FERGUSON & COMPANY SECTION IV.
- ------------------ -----------
TABLE IV.3 - RECENT CONVERSIONS SINCE AUGUST 1, 1996
<TABLE>
<CAPTION>
Price/ Price/
Conversion Gross Offering Pro-Forma Pro-Forma
Assets Proceeds Price Book Value Earnings
Ticker Short Name State IPO Date ($000) ($000) ($) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AFBC Advance Financial Bancorp WV 01/02/97 91,852 10,845 10.000 71.10 16.80
AFED AFSALA Bancorp, Inc. NY 10/01/96 133,046 14,548 10.000 71.70 13.70
BFFC Big Foot Financial Corp. IL 12/20/96 194,624 25,128 10.000 72.70 33.10
CBES CBES Bancorp, Inc. MO 09/30/96 86,168 10,250 10.000 61.10 13.20
CENB Century Bancorp, Inc. NC 12/23/96 81,304 20,367 50.000 72.10 18.90
CFNC Carolina Fincorp, Inc. NC 11/25/96 94,110 18,515 10.000 77.00 17.20
CNBA Chester Bancorp, Inc. IL 10/08/96 134,781 21,821 10.000 72.10 18.80
DCBI Delphos Citizens Bancorp, Inc. OH 11/21/96 88,022 20,387 10.000 72.20 14.60
EFBC Empire Federal Bancorp, Inc. MT 01/27/97 86,810 25,921 10.000 68.10 21.50
FAB FirstFed America Bancorp, Inc. MA 01/15/97 723,778 87,126 10.000 72.00 13.60
FTNB Fulton Bancorp, Inc. MO 10/18/96 85,496 17,193 10.000 72.50 14.60
HBEI Home Bancorp of Elgin, Inc. IL 09/27/96 304,520 70,093 10.000 72.60 24.90
HCFC Home City Financial Corp. OH 12/30/96 55,728 9,522 10.000 71.20 13.70
PFED Park Bancorp, Inc. IL 08/12/96 158,939 27,014 10.000 66.70 26.20
PFFC Peoples Financial Corp. OH 09/13/96 78,078 14,910 10.000 64.30 28.60
PSFI PS Financial, Inc. IL 11/27/96 53,520 21,821 10.000 71.90 17.20
RIVR River Valley Bancorp IN 12/20/96 86,604 11,903 10.000 73.00 15.20
RSLN Roslyn Bancorp, Inc. NY 01/13/97 1,596,744 423,714 10.000 72.00 9.30
SCBS Southern Community Bancshares AL 12/23/96 64,381 11,374 10.000 74.40 14.50
SSFC South Street Financial Corp. NC 10/03/96 166,978 44,965 10.000 76.30 26.10
WEHO Westwood Homestead Fin. Corp. OH 09/30/96 96,638 28,434 10.000 73.80 NA
Maximum 1,596,744 423,714 50.000 77.00 33.10
Minimum 53,520 9,522 10.000 61.10 9.30
Average 212,482 44,564 11.905 71.37 18.59
Median 91,852 20,387 10.000 72.10 17.00
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 11
<PAGE>
FERGUSON & COMPANY SECTION IV.
- ------------------ -----------
Table IV.3-Recent Conversions Since August 1, 1996
<TABLE>
<CAPTION>
% Increase % Increase
Price/ Current Current Current Price One One Price One Week
Adjusted Stock Price/ Price/ Tang Day After Day After Week After Day After
Assets Price Book Value Book Value Conversion Conversion Conversion Conversion
Ticker (%) ($) (%) (%) ($) (%) ($) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AFBC 10.6 14.00 NA NA 12.875 28.75 12.938 29.38
AFED 9.9 13.25 NA NA 11.375 13.75 11.313 13.13
BFFC 11.4 13.88 NA NA 12.313 23.13 12.500 25.00
CBES 10.6 17.31 102.44 102.44 12.625 26.25 13.438 34.38
CENB 20.0 65.50 90.34 90.34 62.625 25.25 66.000 32.00
CFNC 16.4 15.25 108.46 108.46 13.000 30.00 13.000 30.00
CNBA 13.9 15.25 NA NA 12.938 29.38 12.625 26.25
DCBI 18.8 14.00 95.37 95.37 12.125 21.25 12.125 21.25
EFBC 23.0 13.75 NA NA 13.250 32.50 13.500 35.00
FAB 10.7 14.75 NA NA 13.625 36.25 14.125 41.25
FTNB 16.7 17.88 125.53 125.53 12.500 25.00 12.875 28.75
HBEI 18.7 14.94 104.83 104.83 11.813 18.13 12.500 25.00
HCFC 14.6 13.25 83.02 83.02 NA NA 12.500 25.00
PFED 14.5 16.00 104.03 104.03 10.250 2.50 10.438 4.38
PFFC 16.0 14.75 91.22 91.22 10.875 8.75 11.500 15.00
PSFI 29.0 13.75 NA NA 11.641 16.41 11.688 16.88
RIVR 12.1 15.25 NA NA 13.688 36.88 13.875 38.75
RSLN 21.0 15.88 NA NA 15.000 50.00 15.938 59.38
SCBS 15.0 13.50 96.15 96.15 13.000 30.00 13.750 37.50
SSFC 21.2 16.75 123.80 123.80 NA NA 12.500 25.00
WEHO 22.7 14.25 101.35 101.35 10.750 7.50 10.625 6.25
Maximum 29.0 65.50 125.53 125.53 62.625 50.00 66.000 59.38
Minimum 9.9 13.25 83.02 83.02 10.250 2.50 10.438 4.38
Average 16.5 17.29 102.21 102.21 15.067 24.30 15.226 27.12
Median 16.0 14.75 101.90 101.90 12.625 25.25 12.625 26.25
</TABLE>
SOURCE SNL SECURITIES AND F&C CALCULATIONS 12
<PAGE>
FERGUSON & COMPANY SECTION IV.
- ------------------ -----------
TABLE IV.3 - RECENT CONVERSIONS SINCE AUGUST 1, 1996
<TABLE>
<CAPTION>
% Increase
Price One Month % Increase
Month After Day After Since
Conversion Conversion Conversion
Ticker ($) (%)
<S> <C> <C> <C>
AFBC 14.000 40.00 40.00
AFED 11.563 15.63 32.50
BFFC 13.875 38.75 38.75
CBES 13.250 32.50 73.13
CENB 65.125 30.25 31.00
CFNC 13.625 36.25 52.50
CNBA 12.625 26.25 52.50
DCBI 12.063 20.63 40.00
EFBC 13.750 37.50 37.50
FAB 14.875 48.75 47.50
FTNB 14.750 47.50 78.75
HBEI 12.625 26.25 49.38
HCFC 13.500 35.00 32.50
PFED 10.500 5.00 60.00
PFFC 12.750 27.50 47.50
PSFI 12.500 25.00 37.50
RIVR 15.000 50.00 52.50
RSLN 16.000 60.00 58.75
SCBS 13.500 35.00 35.00
SSFC 12.375 23.75 67.50
WEHO 10.500 5.00 42.50
Maximum 65.125 60.00 78.75
Minimum 10.500 5.00 31.00
Average 15.655 31.74 47.96
Median 13.500 32.50 47.50
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 13
<PAGE>
FERGUSON & COMPANY SECTION IV.
- ------------------ -----------
TABLE IV.4 - COMPARISON OF PRICING RATIOS
<TABLE>
<CAPTION>
Carrollton Group Percent Premium
Federal Compared to (Discount) Versus
--------------------------------------------------------
Bank Average Median Average Median
-------- ---------- ------- -------- ----------
Comparison of PE ratio at
midpoint to:
- ------------------------
<S> <C> <C> <C> <C> <C>
Comparative group 15.59 16.31 15.91 (4.41) (2.01)
Georgia thrifts 15.59 54.70 31.69 (71.50) (50.80)
Southeast Region thrifts 15.59 22.58 17.98 (30.96) (13.29)
All public thrifts 15.59 19.36 16.62 (19.47) (6.20)
Recent conversions 15.59 18.59 17.00 (16.14) (8.29)
Comparison of PE ratio at
maximum to:
- ------------------------
Comparative group 17.22 16.31 15.91 5.58 8.23
Georgia thrifts 17.22 54.70 31.69 (68.52) (45.66)
Southeast Region thrifts 17.22 22.58 17.98 (23.74) (4.23)
All public thrifts 17.22 19.36 16.62 (11.05) 3.61
Recent conversions 17.22 18.59 17.00 (7.37) 1.29
Comparison of PE ratio at
supermaximum to:
- ------------------------
Comparative group 18.95 16.31 15.91 16.19 19.11
Georgia thrifts 18.95 54.70 31.69 (65.36) (40.20)
Southeast Region thrifts 18.95 22.58 17.98 (16.08) 5.39
All public thrifts 18.95 19.36 16.62 (2.12) 14.02
Recent conversions 18.95 18.59 17.00 1.94 11.47
Comparison of PB ratio at
midpoint to:
- ------------------------
Comparative group 64.97 112.47 111.07 (42.23) (41.51)
Georgia thrifts 64.97 146.42 144.46 (55.63) (55.03)
Southeast Region thrifts 64.97 146.43 130.46 (55.63) (50.20)
All public thrifts 64.97 134.57 125.54 (51.72) (48.25)
Recent conversions 64.97 71.37 72.10 (8.97) (9.89)
Comparison of PB ratio at
maximum to:
- ------------------------
Comparative group 68.91 112.47 111.07 (38.73) (37.96)
Georgia thrifts 68.91 146.42 144.46 (52.94) (52.30)
Southeast Region thrifts 68.91 146.43 130.46 (52.94) (47.18)
All public thrifts 68.91 134.57 125.54 (48.79) (45.11)
Recent conversions 68.91 71.37 72.10 (3.45) (4.42)
Comparison of PB ratio at
supermaximum to:
- ------------------------
Comparative group 72.74 112.47 111.07 (35.32) (34.51)
Georgia thrifts 72.74 146.42 144.46 (50.32) (49.65)
Southeast Region thrifts 72.74 146.43 130.46 (50.32) (44.24)
All public thrifts 72.74 134.57 125.54 (45.95) (42.06)
Recent conversions 72.74 71.37 72.10 1.92 0.89
</TABLE>
SOURCE SNL SECURITIES AND F&C CALCULATIONS 14
<PAGE>
FERGUSON & COMPANY
- ------------------
SNL index
<TABLE>
<CAPTION>
Date Index
- ------------------
<S> <C>
1/31/94 258.47
2/28/94 249.53
3/31/94 241.57
4/29/94 248.31
5/31/94 263.34
6/30/94 269.58
7/29/94 276.69
8/31/94 287.18
9/30/94 279.69
10/31/94 236.12
11/30/94 245.84
12/30/94 244.73
1/31/95 256.10
2/28/95 277.00
3/31/95 278.40
4/28/95 295.44
5/31/95 307.60
6/23/95 313.95
7/31/95 328.20
8/31/95 355.50
9/29/95 362.29
10/31/95 354.05
11/30/95 370.17
12/29/95 376.51
1/31/95 370.69
2/29/96 373.64
3/29/96 382.13
4/30/96 377.24
5/31/96 382.99
6/28/96 387.18
7/30/96 388.38
8/30/96 408.34
9/13/96 416.01
9/20/96 419.50
9/30/96 429.28
10/30/96 456.70
11/15/96 468.06
11/29/96 485.83
12/13/96 473.64
12/20/96 481.56
12/31/96 486.63
1/10/97 484.33
1/31/97 520.08
2/14/97 547.17
2/27/97 569.67
</TABLE>
<TABLE>
<CAPTION>
SNL Index
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
600.00
500.00
400.00
300.00
200.00
100.00
1/31/94 3/31/94 5/31/94 7/29/94 9/30/94 11/30/94 1/31/95 3/31/95 5/31/95 7/31/95 9/29/95 11/30/95
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
600.00
500.00
400.00
300.00
200.00
100.00
3/29/96 5/31/96 7/30/96 9/13/96 9/30/96 11/15/96 12/13/96 12/13/96 12/31/96 1/31/97 2/27/97
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Percentage Change Since
-------------------------------------------------------------
SNL Prev
Date Index Date 12/31/94 9/20/96
-------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/94 244.70
3/31/95 278.40 13.77% 13.77%
6/30/95 313.50 12.61% 28.12%
9/30/95 362.30 15.57% 48.06%
10/31/95 354.10 -2.26% 44.71%
11/30/95 370.20 4.55% 51.29%
12/31/95 376.50 1.70% 53.86%
1/12/96 372.40 -1.09% 52.19%
1/31/96 370.70 -0.46% 51.49%
2/29/96 373.60 0.78% 52.68%
3/29/96 382.10 2.28% 56.15%
4/30/96 377.20 -1.28% 54.15%
5/31/96 382.99 1.53% 56.51%
6/28/96 387.18 1.09% 58.23%
7/30/96 371.62 -4.02% 51.87%
8/30/96 408.34 9.88% 66.87%
9/20/96 419.50 2.73% 71.43%
9/30/96 429.28 2.33% 75.43% 2.33%
10/30/96 456.70 6.39% 86.64% 8.87%
11/29/96 485.83 6.38% 98.54% 15.81%
12/13/96 473.64 -2.51% 93.56% 12.91%
12/20/96 481.56 1.67% 96.80% 14.79%
12/31/96 486.63 1.05% 98.87% 16.00%
1/10/97 484.33 -0.47% 97.93% 15.43%
1/31/97 520.08 7.38% 112.54% 23.98%
2/14/97 547.17 5.21% 123.61% 30.43%
2/27/97 569.67 4.11% 132.80% 35.80%
-------------------------------------------------------------
</TABLE>
Figure IV_1-SNL Index
SOURCE: SNL SECURITIES, INC., AND F&C CALCULATIONS. 15 SECTION 1V
<PAGE>
FERGUSON & COMPANY
- ------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
1 Year 5 Year 10 Year 30 Year
Fed Fds(*) T-bill Treas. Treas. Treas.
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
8/30/96 5.21 5.80 6.60 6.84 7.07
9/6/96 5.39 5.94 6.73 6.95 7.17
9/13/96 5.16 5.90 6.69 6.93 7.16
9/27/96 5.34 5.75 6.53 6.77 6.96
10/17/96 5.25 5.56 6.28 6.55 6.86
10/25/96 5.22 5.52 6.25 6.53 6.81
11/18/96 5.21 5.39 5.96 6.19 6.46
11/29/96 5.30 5.41 5.90 6.12 6.41
12/13/96 5.22 5.45 6.03 6.27 6.53
12/20/96 5.38 5.51 6.15 6.40 6.63
12/31/96 5.18 5.48 6.12 6.34 6.58
1/17/97 5.19 5.60 6.33 6.56 6.81
1/31/97 5.18 5.60 6.36 6.62 6.89
2/14/97 5.05 5.48 6.14 6.37 6.63
2/27/97 5.16 5.52 6.25 6.45 6.71
</TABLE>
(*) Seven-day average for week ending two days earlier than date shown.
RATES AUGUST 30, 1996 TO FEBRUARY 27, 1997
<TABLE>
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
8/30/96 9/13/96 10/17/96 11/18/96 12/13/96 12/31/96 1/31/97 2/27/97
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- -----------------------------------------------------------------------------------------
1 Year 5 Year 10 Year 30 Year
Fed Fds T-bill Treas. Treas. Treas.
- -----------------------------------------------------------------------------------------
2/27/97 5.16 5.52 6.25 6.45 6.71
<S> <C> <C> <C> <C> <C>
</TABLE>
<TABLE>
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
7.00
6.00
5.00
4.00
3.00
2.00
1.00
Fed Fds T-bill Treas. Treas. Treas.
1 Year 5 Year 10 Year 30 Year
- -----------------------------------------------------------------------------------------
</TABLE>
SOURCE: U.S. Financial Data, Feb. 27, 1997, FIGURE IV.2 - RATE ENVIRONMENT
FEDERAL RESERVE BANK OF ST. LOUIS, MO. 16 SECTION IV
----------
<PAGE>
EXHIBITS
<PAGE>
EXHIBIT I
<PAGE>
FERGUSON & COMPANY QUALIFICATIONS
Ferguson & Company (F&C) is a financial, economic, and regulatory
consulting firm providing services to financial institutions. It is located in
Irving, Texas. Its services to financial institutions include:
. Mergers and acquisition services,
. Business plans,
. Fairness opinions and conversion appraisals,
. Litigation support,
. Loan review and valuation,
. Operational and efficiency consulting,
. Human resources evaluation and management, and
. Regulatory consulting.
F&C developed several financial institution databases of information
derived from periodic financial reports filed with regulatory authorities by
financial institutions. For example, F&C developed TAFS and BankSource. TAFS
includes thrifts filing TFR's with the OTS and BankSource includes banks and
savings banks filing call reports with the FDIC. Both databases of information
include information from the periodic reports plus numerous calculations derived
from F&C's analysis. In addition, both databases are interactive, permitting
the user to conduct merger analysis, do peer group comparisons, and a number of
other items. F&C recently sold its electronic publishing segment to Sheshunoff
Information Services Inc., Austin, Texas.
Brief biographical information is presented below on F&C's principals:
WILLIAM C. FERGUSON
- -------------------
Mr. Ferguson has approximately 30 years of experience providing various services
to financial institutions. He was a partner in a CPA firm prior to founding F&C
in 1984. Mr. Ferguson is a frequent speaker for financial institution seminars
and he has testified before Congressional Committees several times on his
analysis of the state of the thrift industry. Mr. Ferguson has a B.A. degree
from Austin Peay University and an M.S. degree from the University of Tennessee.
He is a CPA.
1
<PAGE>
CHARLES M. HEBERT
- -----------------
Mr. Hebert has over 30 years of experience providing services to and managing
financial institutions. He spent 7 years as a national bank examiner, 14 years
in bank management, 5 years in thrift management, and has spent the last 7 years
on the F&C consulting staff. Mr. Hebert holds a B.S. degree from Louisiana
State University. He is a certified commercial lender.
ROBIN L. FUSSELL
- ----------------
Mr. Fussell has over 25 years of experience providing professional services to
and managing financial institutions. He worked on the audit staff of a "Big
Six" accounting firm for 12 years, served as CFO of a thrift for 3 years, and
has worked in financial institution consulting for the last 12 years. He is a
co-founder of F&C. He holds a B.S. degree from East Carolina University. He is
a CPA.
2
<PAGE>
EXHIBIT II
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.1 - PUBLICLY TRADED THRIFTS - SELECT
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AADV Advantage Bancorp, Inc. Kenosha WI MW SAIF NASDAQ 03/23/92 36.000
ABBK Abington Bancorp, Inc. Abington MA NE BIF NASDAQ 06/10/86 22.000
ABCL Alliance Bancorp, Inc. Hinsdale IL MW SAIF NASDAQ 07/07/92 30.750
ABCW Anchor BanCorp Wisconsin Madison WI MW SAIF NASDAQ 07/16/92 46.000
AFCB Affiliated Community Bancorp Waltham MA NE SAIF NASDAQ 10/19/95 25.125
AFFFZ America First Financial Fund San Francisco CA WE SAIF NASDAQ NA 33.625
AHM Ahmanson & Company (H.F.) Irwindale CA WE SAIF NYSE 10/25/72 42.000
ALBK ALBANK Financial Corporation Albany NY MA SAIF NASDAQ 04/01/92 36.250
ANBK American National Bancorp Baltimore MD MA SAIF NASDAQ 10/31/95 13.250
ANDB Andover Bancorp, Inc. Andover MA NE BIF NASDAQ 05/08/86 29.250
ASBI Ameriana Bancorp New Castle IN MW SAIF NASDAQ 03/02/87 15.875
ASBP ASB Financial Corp. Portsmouth OH MW SAIF NASDAQ 05/11/95 12.063
ASFC Astoria Financial Corporation Lake Success NY MA SAIF NASDAQ 11/18/93 42.875
BANC BankAtlantic Bancorp, Inc. Fort Lauderdale FL SE SAIF NASDAQ 11/29/83 17.125
BDJI First Federal Bancorporation Bemidji MN MW SAIF NASDAQ 04/04/95 19.250
BFD BostonFed Bancorp, Inc. Burlington MA NE SAIF AMSE 10/24/95 16.375
BFSB Bedford Bancshares, Inc. Bedford VA SE SAIF NASDAQ 08/22/94 19.375
BKC American Bank of Connecticut Waterbury CT NE BIF AMSE 12/01/81 29.500
BKCT Bancorp Connecticut, Inc. Southington CT NE BIF NASDAQ 07/03/86 23.250
BKUNA BankUnited Financial Corp. Coral Gables FL SE SAIF NASDAQ 12/11/85 9.750
BSBC Branford Savings Bank Branford CT NE BIF NASDAQ 11/04/86 4.000
BVFS Bay View Capital Corp. San Mateo CA WE SAIF NASDAQ 05/09/86 57.250
BWFC Bank West Financial Corp. Grand Rapids MI MW SAIF NASDAQ 03/30/95 11.750
CAFI Camco Financial Corp. Cambridge OH MW SAIF NASDAQ NA 15.750
CAPS Capital Savings Bancorp, Inc. Jefferson City MO MW SAIF NASDAQ 12/29/93 14.000
CARV Carver Bancorp, Inc. New York NY MA SAIF NASDAQ 10/25/94 9.875
CASB Cascade Financial Corp. Everett WA WE SAIF NASDAQ 09/16/92 16.375
CASH First Midwest Financial, Inc. Storm Lake IA MW SAIF NASDAQ 09/20/93 16.750
CBCI Calumet Bancorp, Inc. Dolton IL MW SAIF NASDAQ 02/20/92 35.563
CBCO CB Bancorp, Inc. Michigan City IN MW SAIF NASDAQ 12/28/92 28.375
CBIN Community Bank Shares New Albany IN MW SAIF NASDAQ 04/10/95 13.750
CBNH Community Bankshares, Inc. Concord NH NE BIF NASDAQ 05/08/86 23.375
CBSA Coastal Bancorp, Inc. Houston TX SW SAIF NASDAQ NA 27.000
CBSB Charter Financial, Inc. Sparta IL MW SAIF NASDAQ 12/29/95 15.875
CEBK Central Co-operative Bank Somerville MA NE BIF NASDAQ 10/24/86 18.250
CENF CENFED Financial Corp. Pasadena CA WE SAIF NASDAQ 10/25/91 34.125
CFB Commercial Federal Corporation Omaha NE MW SAIF NYSE 12/31/84 35.875
CFCP Coastal Financial Corp. Myrtle Beach SC SE SAIF NASDAQ 09/26/90 24.000
CFFC Community Financial Corp. Staunton VA SE SAIF NASDAQ 03/30/88 22.000
CFSB CFSB Bancorp, Inc. Lansing MI MW SAIF NASDAQ 06/22/90 20.750
CFX CFX Corporation Keene NH NE BIF AMSE 02/12/87 17.000
CIBI Community Investors Bancorp Bucyrus OH MW SAIF NASDAQ 02/07/95 17.500
CKFB CKF Bancorp, Inc. Danville KY MW SAIF NASDAQ 01/04/95 17.750
CMRN Cameron Financial Corp Cameron MO MW SAIF NASDAQ 04/03/95 16.500
CMSV Community Savings, MHC North Palm Beach FL SE SAIF NASDAQ 10/24/94 19.750
CNIT CENIT Bancorp, Inc. Norfolk VA SE SAIF NASDAQ 08/06/92 45.000
CNSK Covenant Bank for Savings Haddonfield NJ MA BIF NASDAQ NA 13.875
COFD Collective Bancorp, Inc. Egg Harbor City NJ MA SAIF NASDAQ 02/07/84 42.000
COFI Charter One Financial Cleveland OH MW SAIF NASDAQ 01/22/88 47.688
CSA Coast Savings Financial Los Angeles CA WE SAIF NYSE 12/23/85 47.125
CTBK Center Banks Incorporated Skaneateles NY MA BIF NASDAQ 06/02/86 19.313
CTZN CitFed Bancorp, Inc. Dayton OH MW SAIF NASDAQ 01/23/92 36.000
CVAL Chester Valley Bancorp Inc. Downingtown PA MA SAIF NASDAQ 03/27/87 20.000
CZF CitiSave Financial Corp Baton Rouge LA SW SAIF AMSE 07/14/95 13.875
DFIN Damen Financial Corp. Schaumburg IL MW SAIF NASDAQ 10/02/95 14.500
DIBK Dime Financial Corp. Wallingford CT NE BIF NASDAQ 07/09/86 20.500
DME Dime Bancorp, Inc. New York NY MA BIF NYSE 08/19/86 17.250
DNFC D & N Financial Corp. Hancock MI MW SAIF NASDAQ 02/13/85 18.125
DSL Downey Financial Corp. Newport Beach CA WE SAIF NYSE 01/01/71 23.625
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 1
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.1 - PUBLICLY TRADED THRIFTS - SELECT
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EBSI Eagle Bancshares Tucker GA SE SAIF NASDAQ 04/01/86 16.875
EFBI Enterprise Federal Bancorp West Chester OH MW SAIF NASDAQ 10/17/94 14.750
EGFC Eagle Financial Corp. Bristol CT NE SAIF NASDAQ 02/03/87 29.250
EIRE Emerald Isle Bancorp, Inc. Quincy MA NE BIF NASDAQ 09/08/86 19.500
EQSB Equitable Federal Savings Bank Wheaton MD MA SAIF NASDAQ 09/10/93 33.000
ESBK Elmira Savings Bank (The) Elmira NY MA BIF NASDAQ 03/01/85 19.500
FBBC First Bell Bancorp, Inc. Pittsburgh PA MA SAIF NASDAQ 06/29/95 15.750
FBCI Fidelity Bancorp, Inc. Chicago IL MW SAIF NASDAQ 12/15/93 20.250
FBHC Fort Bend Holding Corp. Rosenberg TX SW SAIF NASDAQ 06/30/93 24.250
FBSI First Bancshares, Inc. Mountain Grove MO MW SAIF NASDAQ 12/22/93 19.250
FCIT First Citizens Financial Corp. Gaithersburg MD MA SAIF NASDAQ 12/17/86 21.875
FCME First Coastal Corporation Westbrook ME NE BIF NASDAQ NA 8.375
FDEF First Defiance Financial Defiance OH MW SAIF NASDAQ 10/02/95 12.938
FED FirstFed Financial Corp. Santa Monica CA WE SAIF NYSE 12/16/83 26.625
FESX First Essex Bancorp, Inc. Andover MA NE BIF NASDAQ 08/04/87 15.750
FFBI First Financial Bancorp, Inc. Belvidere IL MW SAIF NASDAQ 10/04/93 16.500
FFBS FFBS BanCorp, Inc. Columbus MS SE SAIF NASDAQ 07/01/93 22.000
FFBZ First Federal Bancorp, Inc. Zanesville OH MW SAIF NASDAQ 07/13/92 17.500
FFCH First Financial Holdings Inc. Charleston SC SE SAIF NASDAQ 11/10/83 27.000
FFES First Federal of East Hartford East Hartford CT NE SAIF NASDAQ 06/23/87 25.875
FFFC FFVA Financial Corp. Lynchburg VA SE SAIF NASDAQ 10/12/94 24.500
FFFG F.F.O. Financial Group, Inc. St. Cloud FL SE SAIF NASDAQ 10/13/88 3.750
FFFL Fidelity Bankshares Inc. West Palm Beach FL SE SAIF NASDAQ 01/07/94 18.750
FFHC First Financial Corp. Stevens Point WI MW SAIF NASDAQ 12/24/80 27.063
FFHH FSF Financial Corp. Hutchinson MN MW SAIF NASDAQ 10/07/94 17.125
FFHS First Franklin Corporation Cincinnati OH MW SAIF NASDAQ 01/26/88 16.250
FFIC Flushing Financial Corp. Flushing NY MA BIF NASDAQ 11/21/95 19.250
FFKY First Federal Financial Corp. Elizabethtown KY MW SAIF NASDAQ 07/15/87 21.000
FFLC FFLC Bancorp, Inc. Leesburg FL SE SAIF NASDAQ 01/04/94 26.750
FFSL First Independence Corp. Independence KS MW SAIF NASDAQ 10/08/93 11.750
FFSW FirstFederal Financial Svcs Wooster OH MW SAIF NASDAQ 03/31/87 38.625
FFSX First Fed SB of Siouxland, MHC Sioux City IA MW SAIF NASDAQ 07/13/92 30.250
FFWC FFW Corp. Wabash IN MW SAIF NASDAQ 04/05/93 25.250
FFWD Wood Bancorp, Inc. Bowling Green OH MW SAIF NASDAQ 08/31/93 15.750
FFYF FFY Financial Corp. Youngstown OH MW SAIF NASDAQ 06/28/93 25.125
FGHC First Georgia Holding, Inc. Brunswick GA SE SAIF NASDAQ 02/11/87 9.750
FIBC Financial Bancorp, Inc. Long Island City NY MA SAIF NASDAQ 08/17/94 18.375
FISB First Indiana Corporation Indianapolis IN MW SAIF NASDAQ 08/02/83 28.625
FKFS First Keystone Financial Media PA MA SAIF NASDAQ 01/26/95 21.500
FLFC First Liberty Financial Corp. Macon GA SE SAIF NASDAQ 12/06/83 21.500
FMCO FMS Financial Corporation Burlington NJ MA SAIF NASDAQ 12/14/88 19.750
FMSB First Mutual Savings Bank Bellevue WA WE BIF NASDAQ 12/17/85 19.500
FNGB First Northern Capital Corp. Green Bay WI MW SAIF NASDAQ 12/29/83 17.625
FOBC Fed One Bancorp Wheeling WV SE SAIF NASDAQ 01/19/95 18.375
FRC First Republic Bancorp San Francisco CA WE BIF NYSE NA 23.500
FSBI Fidelity Bancorp, Inc. Pittsburgh PA MA SAIF NASDAQ 06/24/88 23.250
FSFC First Southeast Financial Corp Anderson SC SE SAIF NASDAQ 10/08/93 11.000
FSLA First Savings Bank, MHC Edison NJ MA SAIF NASDAQ 07/10/92 21.750
FSPG First Home Bancorp, Inc. Pennsville NJ MA SAIF NASDAQ 04/20/87 17.500
FSTC First Citizens Corporation Newnan GA SE SAIF NASDAQ 03/01/86 23.750
FTF Texarkana First Financial Corp Texarkana AR SE SAIF AMSE 07/07/95 16.375
FTFC First Federal Capital Corp. La Crosse WI MW SAIF NASDAQ 11/02/89 29.500
FTSB Fort Thomas Financial Corp. Fort Thomas KY MW SAIF NASDAQ 06/28/95 11.750
FWWB First SB of Washington Bancorp Walla Walla WA WE SAIF NASDAQ 11/01/95 20.375
GBCI Glacier Bancorp, Inc. Kalispell MT WE SAIF NASDAQ 03/30/84 24.750
GDW Golden West Financial Oakland CA WE SAIF NYSE 05/29/59 70.000
GFCO Glenway Financial Corp. Cincinnati OH MW SAIF NASDAQ 11/30/90 21.500
GFSB GFS Bancorp, Inc. Grinnell IA MW SAIF NASDAQ 01/06/94 22.250
GPT GreenPoint Financial Corp. New York NY MA BIF NYSE 01/28/94 62.000
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 2
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.1 - PUBLICLY TRADED THRIFTS - SELECT
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GRTR Greater New York Savings Bank New York NY MA BIF NASDAQ 06/17/87 15.750
GSBC Great Southern Bancorp, Inc. Springfield MO MW SAIF NASDAQ 12/14/89 17.125
GSLC Guaranty Financial Corp. Charlottesville VA SE SAIF NASDAQ NA 9.500
GTFN Great Financial Corporation Louisville KY MW SAIF NASDAQ 03/31/94 33.000
GUPB GFSB Bancorp, Inc. Gallup NM SW SAIF NASDAQ 06/30/95 16.250
GWBC Gateway Bancorp, Inc. Catlettsburg KY MW SAIF NASDAQ 01/18/95 14.250
HALL Hallmark Capital Corp. West Allis WI MW SAIF NASDAQ 01/03/94 18.500
HARB Harbor Federal Savings Bk, MHC Fort Pierce FL SE SAIF NASDAQ 01/06/94 37.250
HARL Harleysville Savings Bank Harleysville PA MA SAIF NASDAQ 08/04/87 21.500
HAVN Haven Bancorp, Inc. Woodhaven NY MA SAIF NASDAQ 09/23/93 33.750
HBFW Home Bancorp Fort Wayne IN MW SAIF NASDAQ 03/30/95 19.500
HBNK Highland Federal Bank FSB Burbank CA WE SAIF NASDAQ NA 24.000
HBS Haywood Bancshares, Inc. Waynesville NC SE BIF AMSE 12/18/87 16.750
HFFB Harrodsburg First Fin Bancorp Harrodsburg KY MW SAIF NASDAQ 10/04/95 16.250
HFFC HF Financial Corp. Sioux Falls SD MW SAIF NASDAQ 04/08/92 20.250
HFGI Harrington Financial Group Richmond IN MW SAIF NASDAQ NA 10.500
HFSA Hardin Bancorp, Inc. Hardin MO MW SAIF NASDAQ 09/29/95 13.750
HHFC Harvest Home Financial Corp. Cheviot OH MW SAIF NASDAQ 10/10/94 10.000
HIFS Hingham Instit. for Savings Hingham MA NE BIF NASDAQ 12/20/88 18.625
HMCI HomeCorp, Inc. Rockford IL MW SAIF NASDAQ 06/22/90 19.750
HMNF HMN Financial, Inc. Spring Valley MN MW SAIF NASDAQ 06/30/94 23.250
HOMF Home Federal Bancorp Seymour IN MW SAIF NASDAQ 01/23/88 27.625
HPBC Home Port Bancorp, Inc. Nantucket MA NE BIF NASDAQ 08/25/88 18.250
HRBF Harbor Federal Bancorp, Inc. Baltimore MD MA SAIF NASDAQ 08/12/94 17.125
HRZB Horizon Financial Corp. Bellingham WA WE BIF NASDAQ 08/01/86 15.000
HTHR Hawthorne Financial Corp. El Segundo CA WE SAIF NASDAQ NA 11.250
HVFD Haverfield Corporation Cleveland OH MW SAIF NASDAQ 03/19/85 20.250
IFSB Independence Federal Savings Washington DC MA SAIF NASDAQ 06/06/85 8.875
INBI Industrial Bancorp Bellevue OH MW SAIF NASDAQ 08/01/95 12.625
IPSW Ipswich Savings Bank Ipswich MA NE BIF NASDAQ 05/26/93 15.500
ISBF ISB Financial Corporation New Iberia LA SW SAIF NASDAQ 04/07/95 25.250
ITLA ITLA Capital Corp. La Jolla CA WE BIF NASDAQ 10/24/95 16.375
IWBK InterWest Bancorp, Inc. Oak Harbor WA WE SAIF NASDAQ NA 35.500
JSBA Jefferson Savings Bancorp Ballwin MO MW SAIF NASDAQ 04/08/93 29.000
JSBF JSB Financial, Inc. Lynbrook NY MA BIF NASDAQ 06/27/90 39.750
KFBI Klamath First Bancorp Klamath Falls OR WE SAIF NASDAQ 10/05/95 15.625
KNK Kankakee Bancorp, Inc. Kankakee IL MW SAIF AMSE 01/06/93 27.875
KSAV KS Bancorp, Inc. Kenly NC SE SAIF NASDAQ 12/30/93 19.750
KSBK KSB Bancorp, Inc. Kingfield ME NE BIF NASDAQ 06/24/93 34.000
KYF Kentucky First Bancorp, Inc. Cynthiana KY MW SAIF AMSE 08/29/95 11.750
LARK Landmark Bancshares, Inc. Dodge City KS MW SAIF NASDAQ 03/28/94 18.875
LARL Laurel Capital Group, Inc. Allison Park PA MA SAIF NASDAQ 02/20/87 21.500
LFED Leeds Federal Savings Bk, MHC Baltimore MD MA SAIF NASDAQ 05/02/94 19.000
LIFB Life Bancorp, Inc. Norfolk VA SE SAIF NASDAQ 10/11/94 20.000
LISB Long Island Bancorp, Inc. Melville NY MA SAIF NASDAQ 04/18/94 38.375
LOGN Logansport Financial Corp. Logansport IN MW SAIF NASDAQ 06/14/95 13.000
LSBI LSB Financial Corp. Lafayette IN MW BIF NASDAQ 02/03/95 19.500
LSBX Lawrence Savings Bank North Andover MA NE BIF NASDAQ 05/02/86 9.875
LVSB Lakeview Financial West Paterson NJ MA SAIF NASDAQ 12/22/93 31.750
MAFB MAF Bancorp, Inc. Clarendon Hills IL MW SAIF NASDAQ 01/12/90 39.750
MARN Marion Capital Holdings Marion IN MW SAIF NASDAQ 03/18/93 21.250
MASB MASSBANK Corp. Reading MA NE BIF NASDAQ 05/28/86 40.750
MBB MSB Bancorp, Inc. Goshen NY MA BIF AMSE 09/03/92 18.875
MBB MSB Bancorp, Inc. Goshen NY MA BIF AMSE NA 18.875
MBLF MBLA Financial Corp. Macon MO MW SAIF NASDAQ 06/24/93 20.125
MCBN Mid-Coast Bancorp, Inc. Waldoboro ME NE SAIF NASDAQ 11/02/89 19.000
MCBS Mid Continent Bancshares Inc. El Dorado KS MW SAIF NASDAQ 06/27/94 25.250
MDBK Medford Savings Bank Medford MA NE BIF NASDAQ 03/18/86 29.000
MERI Meritrust Federal SB Thibodaux LA SW SAIF NASDAQ NA 35.500
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 3
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.1 - PUBLICLY TRADED THRIFTS - SELECT
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MFBC MFB Corp. Mishawaka IN MW SAIF NASDAQ 03/25/94 19.000
MFFC Milton Federal Financial Corp. West Milton OH MW SAIF NASDAQ 10/07/94 13.875
MFLR Mayflower Co-operative Bank Middleboro MA NE BIF NASDAQ 12/23/87 18.500
MFSL Maryland Federal Bancorp Hyattsville MD MA SAIF NASDAQ 06/02/87 37.250
MGNL Magna Bancorp, Inc. Hattiesburg MS SE SAIF NASDAQ 03/13/91 18.250
MIVI Mississippi View Holding Co. Little Falls MN MW SAIF NASDAQ 03/24/95 14.625
MLBC ML Bancorp, Inc. Villanova PA MA SAIF NASDAQ 08/11/94 17.375
MSBF MSB Financial, Inc. Marshall MI MW SAIF NASDAQ 02/06/95 21.750
MWBI Midwest Bancshares, Inc. Burlington IA MW SAIF NASDAQ 11/12/92 28.500
MWBX MetroWest Bank Framingham MA NE BIF NASDAQ 10/10/86 5.000
MWFD Midwest Federal Financial Baraboo WI MW SAIF NASDAQ 07/08/92 18.000
NASB North American Savings Bank Grandview MO MW SAIF NASDAQ 09/27/85 39.250
NEBC Northeast Bancorp Portland ME NE BIF NASDAQ 08/19/87 13.750
NEIB Northeast Indiana Bancorp Huntington IN MW SAIF NASDAQ 06/28/95 14.250
NHTB New Hampshire Thrift Bncshrs New London NH NE SAIF NASDAQ 05/22/86 11.750
NMSB NewMil Bancorp, Inc. New Milford CT NE BIF NASDAQ 02/01/86 9.500
NSSB Norwich Financial Corp. Norwich CT NE BIF NASDAQ 11/14/86 21.500
NSSY Norwalk Savings Society Norwalk CT NE BIF NASDAQ 06/16/94 25.375
NTMG Nutmeg Federal S&LA Danbury CT NE SAIF NASDAQ NA 7.375
NWEQ Northwest Equity Corp. Amery WI MW SAIF NASDAQ 10/11/94 13.500
NWSB Northwest Savings Bank, MHC Warren PA MA SAIF NASDAQ 11/07/94 15.625
NYB New York Bancorp Inc. Douglaston NY MA SAIF NYSE 01/28/88 33.500
OFCP Ottawa Financial Corp. Holland MI MW SAIF NASDAQ 08/19/94 19.000
OHSL OHSL Financial Corp. Cincinnati OH MW SAIF NASDAQ 02/10/93 22.125
PBCI Pamrapo Bancorp, Inc. Bayonne NJ MA SAIF NASDAQ 11/14/89 20.375
PBCT People's Bank, MHC Bridgeport CT NE BIF NASDAQ 07/06/88 34.500
PBKB People's Bancshares, Inc. South Easton MA NE BIF NASDAQ 10/23/86 12.750
PBNB People's Savings Financial Cp. New Britain CT NE BIF NASDAQ 08/20/86 31.250
PCBC Perry County Financial Corp. Perryville MO MW SAIF NASDAQ 02/13/95 17.250
PCCI Pacific Crest Capital Agoura Hills CA WE BIF NASDAQ NA 13.000
PDB Piedmont Bancorp, Inc. Hillsborough NC SE SAIF AMSE 12/08/95 10.375
PEEK Peekskill Financial Corp. Peekskill NY MA SAIF NASDAQ 12/29/95 15.250
PERM Permanent Bancorp, Inc. Evansville IN MW SAIF NASDAQ 04/04/94 22.500
PERT Perpetual Bank, MHC Anderson SC SE SAIF NASDAQ 10/26/93 26.000
PETE Primary Bank Peterborough NH NE BIF NASDAQ 10/14/93 17.500
PFDC Peoples Bancorp Auburn IN MW SAIF NASDAQ 07/07/87 20.750
PFNC Progress Financial Corporation Blue Bell PA MA SAIF NASDAQ 07/18/83 8.688
PFSB PennFed Financial Services,Inc West Orange NJ MA SAIF NASDAQ 07/15/94 25.000
PFSL Pocahontas FS&LA, MHC Pocahontas AR SE SAIF NASDAQ 04/05/94 19.063
PHBK Peoples Heritage Finl Group Portland ME NE BIF NASDAQ 12/04/86 31.375
PKPS Poughkeepsie Savings Bank, FSB Poughkeepsie NY MA SAIF NASDAQ 11/19/85 5.938
PLE Pinnacle Bancshares, Inc. Jasper AL SE SAIF AMSE 12/17/86 22.625
PSAB Prime Bancorp, Inc. Philadelphia PA MA SAIF NASDAQ 11/21/88 20.125
PSBK Progressive Bank, Inc. Fishkill NY MA BIF NASDAQ 08/01/84 24.125
PTRS Potters Financial Corp. East Liverpool OH MW SAIF NASDAQ 12/31/93 19.625
PULS Pulse Bancorp South River NJ MA SAIF NASDAQ 09/18/86 17.750
PVFC PVF Capital Corp. Bedford Heights OH MW SAIF NASDAQ 12/30/92 16.500
PVSA Parkvale Financial Corporation Monroeville PA MA SAIF NASDAQ 07/16/87 25.000
PWBC PennFirst Bancorp, Inc. Ellwood City PA MA SAIF NASDAQ 06/13/90 13.500
QCBC Quaker City Bancorp, Inc. Whittier CA WE SAIF NASDAQ 12/30/93 19.000
QCFB QCF Bancorp, Inc. Virginia MN MW SAIF NASDAQ 04/03/95 19.500
QCSB Queens County Bancorp, Inc. Flushing NY MA BIF NASDAQ 11/23/93 56.500
RARB Raritan Bancorp Inc. Raritan NJ MA BIF NASDAQ 03/01/87 24.250
RCSB RCSB Financial, Inc. Rochester NY MA BIF NASDAQ 04/29/86 33.875
RELY Reliance Bancorp, Inc. Garden City NY MA SAIF NASDAQ 03/31/94 22.125
ROSE TR Financial Corp. Garden City NY MA BIF NASDAQ 06/29/93 35.500
RVSB Riverview Savings Bank, MHC Camas WA WE SAIF NASDAQ 10/26/93 18.250
SBCN Suburban Bancorporation, Inc. Cincinnati OH MW SAIF NASDAQ 09/30/93 17.250
SECP Security Capital Corporation Milwaukee WI MW SAIF NASDAQ 01/03/94 86.750
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 4
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.1 - PUBLICLY TRADED THRIFTS - SELECT
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SFED SFS Bancorp, Inc. Schenectady NY MA SAIF NASDAQ 06/30/95 17.000
SFFC StateFed Financial Corporation Des Moines IA MW SAIF NASDAQ 01/05/94 18.000
SFSB SuburbFed Financial Corp. Flossmoor IL MW SAIF NASDAQ 03/04/92 22.750
SFSL Security First Corp. Mayfield Heights OH MW SAIF NASDAQ 01/22/88 18.875
SHEN First Shenango Bancorp, Inc. New Castle PA MA SAIF NASDAQ 04/06/93 25.500
SISB SIS Bancorp, Inc. Springfield MA NE BIF NASDAQ 02/08/95 26.500
SMBC Southern Missouri Bancorp, Inc Poplar Bluff MO MW SAIF NASDAQ 04/13/94 17.000
SMFC Sho-Me Financial Corp. Mt. Vernon MO MW SAIF NASDAQ 07/01/94 28.875
SOPN First Savings Bancorp, Inc. Southern Pines NC SE SAIF NASDAQ 01/06/94 19.875
SOSA Somerset Savings Bank Somerville MA NE BIF NASDAQ 07/09/86 2.625
SPBC St. Paul Bancorp, Inc. Chicago IL MW SAIF NASDAQ 05/18/87 26.500
SSBK Strongsville Savings Bank Strongsville OH MW SAIF NASDAQ NA 22.750
STFR St. Francis Capital Corp. Milwaukee WI MW SAIF NASDAQ 06/21/93 31.500
STND Standard Financial, Inc. Chicago IL MW SAIF NASDAQ 08/01/94 20.500
STSA Sterling Financial Corp. Spokane WA WE SAIF NASDAQ NA 17.250
SVRN Sovereign Bancorp, Inc. Wyomissing PA MA SAIF NASDAQ 08/12/86 12.625
SWBI Southwest Bancshares Hometown IL MW SAIF NASDAQ 06/24/92 19.875
SWCB Sandwich Co-operative Bank Sandwich MA NE BIF NASDAQ 07/25/86 32.500
TBK Tolland Bank Tolland CT NE BIF AMSE 12/19/86 15.750
TCB TCF Financial Corp. Minneapolis MN MW SAIF NYSE 06/17/86 45.500
THR Three Rivers Financial Corp. Three Rivers MI MW SAIF AMSE 08/24/95 14.250
THRD TF Financial Corporation Newtown PA MA SAIF NASDAQ 07/13/94 19.000
TPNZ Tappan Zee Financial, Inc. Tarrytown NY MA SAIF NASDAQ 10/05/95 15.000
TRIC Tri-County Bancorp, Inc. Torrington WY WE SAIF NASDAQ 09/30/93 18.500
TSBS Trenton SB, MHC Lawrenceville NJ MA BIF NASDAQ 08/03/95 16.188
TSH Teche Holding Co. Franklin LA SW SAIF AMSE 04/19/95 15.375
TWIN Twin City Bancorp Bristol TN SE SAIF NASDAQ 01/04/95 18.500
UBMT United Financial Corp. Great Falls MT WE SAIF NASDAQ 09/23/86 19.750
UFRM United Federal Savings Bank Rocky Mount NC SE SAIF NASDAQ 07/01/80 8.250
VFFC Virginia First Financial Corp. Petersburg VA SE SAIF NASDAQ 01/01/78 15.750
WAMU Washington Mutual Inc. Seattle WA WE BIF NASDAQ 03/11/83 54.063
WAYN Wayne Savings & Loan Co. MHC Wooster OH MW SAIF NASDAQ 06/25/93 26.000
WBST Webster Financial Corporation Waterbury CT NE SAIF NASDAQ 12/12/86 39.625
WCBI Westco Bancorp Westchester IL MW SAIF NASDAQ 06/26/92 21.875
WEFC Wells Financial Corp. Wells MN MW SAIF NASDAQ 04/11/95 15.250
WFCO Winton Financial Corp. Cincinnati OH MW SAIF NASDAQ 08/04/88 13.000
WFSL Washington Federal, Inc. Seattle WA WE SAIF NASDAQ 11/17/82 26.000
WRNB Warren Bancorp, Inc. Peabody MA NE BIF NASDAQ 07/09/86 16.000
WSB Washington Savings Bank, FSB Waldorf MD MA SAIF AMSE NA 5.125
WSFS WSFS Financial Corporation Wilmington DE MA BIF NASDAQ 11/26/86 12.000
WSTR WesterFed Financial Corp. Missoula MT WE SAIF NASDAQ 01/10/94 21.250
WVFC WVS Financial Corporation Pittsburgh PA MA SAIF NASDAQ 11/29/93 26.250
YFED York Financial Corp. York PA MA SAIF NASDAQ 02/01/84 18.500
Maximum 86.750
Minimum 2.625
Average 22.168
Median 19.500
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 5
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.1 - PUBLICLY TRADED THRIFTS - SELECT
<TABLE>
<CAPTION>
Tangible
Current Price/ Current Current Current Total Equity/ Equity/ Core
Market LTM Price/ Price/ Tang Price/ Dividend Assets Assets Tang Assets EPS
Value Core EPS B Value Book Value Assets Yield ($000) (%) (%) ($)
Ticker ($M) (x) (%) (%) (%) (%) Mst RctQ Mst RctQ Mst RctQ LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AADV 117.90 15.79 130.72 141.12 11.43 1.11 1,031,221 8.74 8.15 2.28
ABBK 41.65 14.57 124.15 138.98 8.55 1.82 486,958 6.89 6.20 1.51
ABCL 82.87 19.22 146.36 150.51 12.41 - 667,964 8.48 8.26 1.60
ABCW 212.56 14.51 184.44 189.07 11.37 1.09 1,869,211 6.17 6.02 3.17
AFCB 129.37 13.22 125.31 126.13 12.53 2.39 1,032,213 9.82 9.77 1.90
AFFFZ 202.11 6.15 120.09 122.05 9.15 4.76 2,209,051 8.03 7.91 5.47
AHM 4,290.43 18.83 220.01 261.36 8.60 2.10 49,902,044 4.88 4.28 2.23
ALBK 468.02 15.76 146.64 169.79 13.35 1.66 3,506,136 9.10 7.96 2.30
ANBK 47.75 20.08 102.47 102.47 9.81 0.91 486,639 9.15 9.15 0.66
ANDB 150.17 11.79 156.67 156.67 12.46 2.05 1,204,813 7.96 7.96 2.48
ASBI 52.25 15.12 118.91 119.00 13.17 3.78 396,755 11.08 11.07 1.05
ASBP 20.77 20.45 111.28 111.28 18.57 3.32 111,824 15.71 15.71 0.59
ASFC 920.65 18.17 156.36 188.46 12.66 1.03 7,272,763 8.10 6.81 2.36
BANC 318.29 18.03 180.45 194.16 11.61 0.85 2,170,480 6.44 6.01 0.95
BDJI 13.49 19.25 108.15 108.15 12.29 - 109,729 11.36 11.36 1.00
BFD 102.51 23.73 111.02 NA 12.49 1.22 820,567 10.52 NA 0.69
BFSB 22.16 12.66 113.44 113.44 17.10 2.48 129,601 14.26 14.26 1.53
BKC 67.64 12.83 143.41 150.20 12.11 4.88 558,437 8.45 8.10 2.30
BKCT 59.77 13.92 139.81 139.81 14.25 3.53 419,398 10.19 10.19 1.67
BKUNA 83.11 21.67 128.46 160.36 5.80 - 1,329,044 7.39 6.55 0.45
BSBC 20.72 14.81 159.36 159.36 14.30 2.00 183,511 8.98 8.98 0.27
BVFS 382.12 19.54 191.02 201.30 11.58 1.12 3,300,262 6.06 5.77 2.93
BWFC 21.38 23.50 94.23 94.23 14.93 2.38 143,186 15.85 15.85 0.50
CAFI 48.24 10.36 114.05 114.05 8.65 3.05 378,078 7.58 7.58 1.52
CAPS 26.49 13.33 132.83 132.83 11.24 1.71 235,687 8.46 8.46 1.05
CARV 22.85 24.09 65.48 68.43 6.14 - 372,147 9.38 9.01 0.41
CASB 33.62 20.47 158.37 158.37 9.66 - 348,050 6.10 6.10 0.80
CASH 48.52 12.14 111.07 125.47 13.12 2.15 369,885 11.81 10.60 1.38
CBCI 83.19 14.00 103.38 103.38 16.57 - 510,217 16.03 16.03 2.54
CBCO 32.98 14.78 164.88 164.88 14.56 - 226,553 8.83 8.83 1.92
CBIN 27.28 13.89 107.09 107.34 11.63 2.47 234,600 10.85 10.83 0.99
CBNH 57.24 14.34 140.31 140.31 10.40 2.74 550,596 7.41 7.41 1.63
CBSA 134.11 12.33 144.39 173.08 4.66 1.48 2,875,907 3.27 2.75 2.19
CBSB 67.52 16.20 116.73 125.99 17.77 1.51 380,051 15.22 14.27 0.98
CEBK 35.86 16.74 107.73 121.42 11.06 1.75 324,297 10.26 9.22 1.09
CENF 175.90 10.57 154.27 154.55 8.05 1.06 2,184,858 5.22 5.21 3.23
CFB 770.97 13.14 195.29 222.14 11.23 0.78 6,868,213 5.75 5.09 2.73
CFCP 82.85 20.51 286.40 286.40 18.25 1.83 453,955 6.37 6.37 1.17
CFFC 27.99 13.02 121.95 121.95 16.80 2.55 166,664 13.78 13.78 1.69
CFSB 97.65 13.83 156.37 156.37 11.77 2.31 829,800 7.53 7.53 1.50
CFX 220.67 15.45 166.02 178.38 14.26 5.18 1,547,092 8.59 8.05 1.10
CIBI 11.08 12.59 101.51 101.51 11.56 2.29 95,787 11.39 11.39 1.39
CKFB 16.46 21.65 104.29 104.29 27.41 2.48 60,038 25.15 25.15 0.82
CMRN 47.01 17.01 99.10 99.10 24.50 1.70 191,879 24.73 24.73 0.97
CMSV 96.97 16.19 127.42 127.42 14.80 4.05 655,209 11.62 11.62 1.22
CNIT 73.51 18.60 152.28 167.16 10.72 2.22 685,962 7.04 6.45 2.42
CNSK 38.05 20.71 178.11 178.11 9.83 - 387,177 7.28 7.28 0.67
COFD 856.43 14.69 227.64 253.47 15.45 2.38 5,543,924 6.79 6.14 2.86
COFI 2,214.76 13.98 238.44 257.22 15.93 1.93 13,904,563 6.68 6.22 3.41
CSA 875.80 22.99 206.33 209.44 10.06 - 8,704,952 4.88 4.81 2.05
CTBK 18.31 12.96 112.81 115.37 7.56 2.07 242,182 6.70 6.56 1.49
CTZN 309.04 15.65 167.13 188.58 10.59 0.89 2,918,160 6.34 5.66 2.30
CVAL 32.68 13.25 127.23 127.23 11.26 2.20 290,173 8.85 8.85 1.51
CZF 13.35 15.77 110.03 110.03 17.65 2.88 75,635 16.00 15.99 0.88
DFIN 54.68 22.66 101.54 101.54 23.24 1.66 235,264 22.88 22.88 0.64
DIBK 105.15 8.33 167.90 174.62 14.00 1.76 751,303 8.33 8.04 2.46
DME 1,806.83 13.69 176.74 178.39 9.58 - 18,870,108 5.42 5.37 1.26
DNFC 151.31 12.76 177.70 179.81 10.27 - 1,473,054 5.85 5.78 1.42
DSL 601.47 18.46 153.61 156.04 11.57 1.35 5,198,157 7.53 7.42 1.28
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 6
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.1 - PUBLICLY TRADED THRIFTS - SELECT
<TABLE>
<CAPTION>
Tangible
Current Price/ Current Current Current Total Equity/ Equity/ Core
Market LTM Price/ Price/ Tang Price/ Dividend Assets Assets Tang Assets EPS
Value Core EPS B Value Book Value Assets Yield ($000) (%) (%) ($)
Ticker ($M) (x) (%) (%) (%) (%) Mst RctQ Mst RctQ Mst RctQ LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EBSI 76.82 14.67 132.46 132.46 11.53 3.56 666,166 8.71 8.71 1.15
EFBI 29.88 16.95 95.72 95.84 12.13 - 246,397 12.67 12.65 0.87
EGFC 132.92 15.90 126.30 168.49 9.11 3.15 1,458,050 7.22 5.51 1.84
EIRE 43.11 16.96 154.39 154.39 10.52 1.44 409,639 6.82 6.82 1.15
EQSB 19.80 10.89 138.19 138.19 6.91 - 286,637 5.00 5.00 3.03
ESBK 13.78 22.94 97.79 102.20 6.19 3.28 222,839 6.33 6.07 0.85
FBBC 122.19 13.46 141.38 141.38 18.62 2.54 656,183 13.17 13.17 1.17
FBCI 56.43 18.08 114.60 114.93 11.66 1.58 484,106 10.17 10.14 1.12
FBHC 19.89 16.72 111.09 120.05 7.14 1.16 278,532 6.43 5.98 1.45
FBSI 23.01 14.69 99.33 99.48 14.65 1.04 157,014 14.75 14.73 1.31
FCIT 64.27 15.74 154.38 154.38 9.35 - 687,196 6.06 6.06 1.39
FCME 11.37 2.62 138.66 138.66 8.34 - 136,429 6.01 6.01 3.20
FDEF 122.53 22.70 105.10 105.10 22.55 2.47 543,411 21.45 21.45 0.57
FED 280.36 15.75 144.07 146.13 6.77 - 4,143,852 4.69 4.63 1.69
FESX 116.89 12.30 140.63 163.89 10.95 3.05 1,067,175 7.79 6.76 1.28
FFBI 7.47 23.24 99.40 99.40 7.68 - 97,143 7.73 7.73 0.71
FFBS 34.44 18.80 131.89 131.89 27.09 2.27 127,125 19.39 19.39 1.17
FFBZ 27.51 15.91 209.08 209.33 14.55 1.37 189,065 7.58 7.57 1.10
FFCH 170.24 14.06 176.70 176.70 10.75 2.67 1,582,274 6.09 6.09 1.92
FFES 67.95 11.15 112.94 112.94 7.09 2.32 958,550 6.28 6.28 2.32
FFFC 114.97 18.70 143.78 146.97 21.54 1.63 533,826 13.95 13.69 1.31
FFFG 31.61 17.05 168.16 168.16 10.16 - 311,028 6.05 6.05 0.22
FFFL 126.46 24.35 154.70 156.12 14.44 4.27 875,998 9.33 9.25 0.77
FFHC 995.99 14.87 242.72 250.58 17.47 2.22 5,700,431 7.20 6.99 1.82
FFHH 55.32 21.41 108.32 108.32 15.27 2.92 362,373 12.40 12.40 0.80
FFHS 18.82 15.19 95.25 96.04 8.62 1.97 218,329 9.05 8.98 1.07
FFIC 158.82 24.68 119.20 119.20 20.48 0.83 775,343 17.19 17.19 0.78
FFKY 87.82 17.36 175.73 187.50 23.93 2.48 367,067 13.62 12.87 1.21
FFLC 65.21 21.06 121.59 121.59 18.82 1.79 346,442 15.48 15.48 1.27
FFSL 12.43 14.87 103.71 103.71 11.41 2.13 108,914 11.00 11.00 0.79
FFSW 140.10 17.80 256.30 313.77 12.56 1.24 1,110,723 7.42 6.50 2.17
FFSX 56.97 17.39 152.32 153.71 12.46 2.38 457,311 8.18 8.11 1.74
FFWC 17.73 11.07 109.97 109.97 11.21 2.38 158,200 10.19 10.19 2.28
FFWD 23.51 13.58 115.13 115.13 14.72 2.54 159,693 12.78 12.78 1.16
FFYF 108.51 16.86 130.18 130.18 18.63 2.79 582,331 14.31 14.31 1.49
FGHC 19.84 15.98 164.97 183.96 13.18 0.82 150,551 8.01 7.24 0.61
FIBC 32.11 14.58 124.66 125.34 12.39 2.18 259,104 9.94 9.89 1.26
FISB 237.69 15.99 171.41 173.70 15.88 2.10 1,496,421 9.27 9.15 1.79
FKFS 26.40 11.81 119.25 119.25 8.94 0.93 310,695 7.50 7.50 1.82
FLFC 153.30 16.04 187.45 213.29 12.64 1.86 1,212,681 7.37 6.60 1.34
FMCO 47.26 10.45 139.67 143.12 8.72 1.01 541,710 6.24 6.10 1.89
FMSB 47.84 13.27 174.57 NA 11.48 1.03 416,832 6.57 NA 1.47
FNGB 77.33 16.17 110.09 110.09 12.56 3.63 615,503 11.41 11.41 1.09
FOBC 45.18 14.13 108.86 114.49 13.21 3.16 341,897 11.69 11.18 1.30
FRC 180.38 18.50 142.77 142.94 8.36 - 2,156,599 5.86 5.86 1.27
FSBI 32.15 13.06 138.81 138.81 10.02 1.55 320,336 7.22 7.22 1.78
FSFC 48.27 15.49 143.04 143.04 14.81 1.82 326,013 10.36 10.36 0.71
FSLA 156.28 18.75 168.34 190.79 15.83 1.84 987,115 9.41 8.39 1.16
FSPG 47.40 10.00 145.23 148.05 9.51 2.29 498,399 6.55 6.43 1.75
FSTC 38.42 9.42 156.46 198.91 14.66 1.85 257,288 9.37 7.52 2.52
FTF 30.02 10.36 114.27 114.27 18.37 2.75 163,571 16.07 16.07 1.58
FTFC 180.75 17.88 195.36 207.16 12.38 2.17 1,469,422 6.34 6.00 1.65
FTSB 18.49 24.48 117.85 117.85 20.30 2.13 91,109 17.22 17.22 0.48
FWWB 215.35 21.01 134.84 146.79 22.04 0.98 977,075 15.13 14.08 0.97
GBCI 83.56 13.60 214.47 214.66 20.27 2.59 412,042 9.45 9.44 1.82
GDW 4,013.97 9.25 170.77 170.77 10.64 0.63 37,730,598 6.23 6.23 7.57
GFCO 25.53 13.69 95.13 96.85 9.16 3.16 278,721 9.63 9.48 1.57
GFSB 11.07 11.65 110.59 110.59 12.69 1.80 87,625 11.47 11.47 1.91
GPT 2,943.82 22.06 178.31 311.24 22.09 1.61 13,325,585 10.95 6.58 2.81
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 7
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.1 - PUBLICLY TRADED THRIFTS - SELECT
<TABLE>
<CAPTION>
Tangible
Current Price/ Current Current Current Total Equity/ Equity/ Core
Market LTM Price/ Price/ Tang Price/ Dividend Assets Assets Tang Assets EPS
Value Core EPS B Value Book Value Assets Yield ($000) (%) (%) ($)
Ticker ($M) (x) (%) (%) (%) (%) Mst RctQ Mst RctQ Mst RctQ LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GRTR 213.17 23.86 139.26 139.26 8.39 1.27 2,541,888 8.25 8.25 0.66
GSBC 140.03 14.39 232.68 232.68 20.91 2.34 669,483 8.99 8.99 1.19
GSLC 8.78 17.92 132.13 132.13 7.56 1.05 116,177 5.71 5.71 0.53
GTFN 465.85 24.81 166.08 173.05 16.08 1.46 2,897,162 9.68 9.33 1.33
GUPB 14.65 20.06 100.68 100.68 17.91 2.46 81,775 17.79 17.79 0.81
GWBC 15.33 20.96 90.02 90.02 23.07 2.81 66,439 25.63 25.63 0.68
HALL 26.69 12.59 95.07 95.07 6.73 - 396,808 7.07 7.07 1.47
HARB 183.97 15.39 209.86 218.60 17.35 3.76 1,060,339 8.27 7.96 2.42
HARL 35.01 12.87 171.73 171.73 10.80 1.86 324,230 6.29 6.29 1.67
HAVN 145.98 11.18 146.87 NA 9.22 1.78 1,583,545 6.28 NA 3.02
HBFW 51.73 19.12 113.70 113.70 15.91 1.03 325,168 13.99 13.99 1.02
HBNK 55.10 23.30 158.10 158.10 11.25 - 489,701 7.12 7.12 1.03
HBS 20.11 14.96 100.18 104.30 15.37 3.34 130,859 15.34 14.83 1.12
HFFB 32.99 22.89 106.14 106.14 30.82 2.46 107,051 26.75 26.75 0.71
HFFC 60.58 14.36 119.40 119.75 10.96 1.78 552,735 9.26 9.24 1.41
HFGI 34.20 14.58 143.64 143.64 6.48 - 527,369 4.52 4.52 0.72
HFSA 13.13 18.09 91.73 91.73 13.53 2.91 97,015 14.76 14.76 0.76
HHFC 9.35 21.74 89.93 89.93 11.17 4.00 83,659 12.43 12.43 0.46
HIFS 24.17 11.86 125.76 125.76 11.99 1.93 201,586 9.53 9.53 1.57
HMCI 22.29 21.94 106.87 106.87 6.64 - 335,824 6.21 6.21 0.90
HMNF 103.09 20.39 125.54 125.54 18.59 - 554,732 14.80 14.80 1.14
HOMF 92.59 13.22 171.69 177.77 14.24 1.45 650,433 8.29 8.03 2.09
HPBC 33.61 11.06 167.28 167.28 17.70 4.38 189,931 10.58 10.58 1.65
HRBF 30.04 23.46 106.50 106.50 13.73 2.34 218,777 12.89 12.89 0.73
HRZB 96.36 13.04 123.25 123.25 19.06 2.67 504,553 15.46 15.46 1.15
HTHR 29.24 19.74 91.84 91.84 3.53 - 827,784 5.25 5.25 0.57
HVFD 38.60 13.24 136.18 136.27 11.13 2.77 346,856 8.17 8.17 1.53
IFSB 11.36 22.76 68.16 78.68 4.58 2.48 247,888 6.73 5.88 0.39
INBI 69.49 15.59 111.92 111.92 21.28 3.17 326,613 19.01 19.01 0.81
IPSW 18.41 14.62 186.97 186.97 11.58 1.29 158,942 6.20 6.20 1.06
ISBF 178.04 24.51 147.75 152.29 25.96 1.35 685,827 16.38 15.97 1.03
ITLA 128.12 12.04 143.39 143.39 15.81 - 810,443 11.02 11.02 1.36
IWBK 284.03 15.99 244.66 250.71 16.68 1.58 1,703,244 6.81 6.66 2.22
JSBA 121.27 16.86 134.32 163.01 10.75 1.38 1,128,339 7.24 6.04 1.72
JSBF 388.88 16.84 118.30 118.30 25.55 3.52 1,518,830 21.60 21.60 2.36
KFBI 156.29 19.78 102.46 102.46 23.22 1.79 673,094 22.67 22.67 0.79
KNK 39.44 17.64 108.08 115.66 11.25 1.72 350,643 10.41 9.79 1.58
KSAV 13.10 12.42 95.46 95.55 12.99 3.04 100,840 13.61 13.60 1.59
KSBK 13.98 10.12 149.78 160.91 10.42 0.59 134,079 6.96 6.51 3.36
KYF 16.32 16.32 108.29 108.29 18.57 4.26 87,874 17.15 17.15 0.72
LARK 34.65 17.16 105.92 105.92 15.61 2.12 221,978 14.74 14.74 1.10
LARL 32.58 12.15 150.24 150.24 16.09 2.05 202,474 10.71 10.71 1.77
LFED 65.64 21.84 145.93 145.93 23.58 3.58 278,311 16.16 16.16 0.87
LIFB 196.94 16.95 130.46 134.77 13.87 2.20 1,419,762 10.63 10.33 1.18
LISB 938.59 23.98 178.57 180.33 16.30 1.56 5,759,340 9.13 9.05 1.60
LOGN 16.33 14.94 105.86 105.86 21.03 3.08 77,668 19.86 19.86 0.87
LSBI 17.90 24.07 99.19 99.19 10.06 - 177,840 9.40 9.40 0.81
LSBX 41.97 8.30 144.58 144.58 12.42 - 337,856 8.59 8.59 1.19
LVSB 76.79 21.17 163.07 204.71 16.71 0.79 472,698 10.24 8.33 1.50
MAFB 416.98 13.12 166.39 192.77 12.91 0.91 3,230,341 7.76 6.77 3.03
MARN 39.18 16.35 98.02 98.02 22.29 3.77 175,806 22.74 22.74 1.30
MASB 109.48 12.66 118.67 118.67 12.33 2.65 888,237 10.39 10.39 3.22
MBB 53.49 18.33 96.35 245.13 6.31 3.18 848,255 8.01 4.21 1.03
MBB 53.49 18.33 96.35 245.13 6.31 3.18 848,255 8.01 4.21 1.03
MBLF 26.94 16.23 94.80 94.80 12.90 1.99 208,898 13.61 13.61 1.24
MCBN 4.37 12.67 87.92 87.92 7.56 2.74 57,838 8.60 8.60 1.50
MCBS 50.92 12.56 130.36 130.42 14.32 1.58 355,525 10.64 10.64 2.01
MDBK 131.50 13.49 142.16 154.09 12.66 2.48 1,039,098 8.90 8.27 2.15
MERI 27.48 13.98 156.80 156.80 12.13 1.97 226,591 7.73 7.73 2.54
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 8
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.1 - PUBLICLY TRADED THRIFTS - SELECT
<TABLE>
<CAPTION>
Tangible
Current Price/ Current Current Current Total Equity/ Equity/ Core
Market LTM Price/ Price/ Tang Price/ Dividend Assets Assets Tang Assets EPS
Value Core EPS B Value Book Value Assets Yield ($000) (%) (%) ($)
Ticker ($M) (x) (%) (%) (%) (%) Mst RctQ Mst RctQ Mst RctQ LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MFBC 33.71 21.35 97.79 97.79 15.05 1.68 223,945 15.39 15.39 0.89
MFFC 30.59 23.52 112.90 112.90 17.41 4.32 175,707 15.42 15.42 0.59
MFLR 16.46 16.67 141.76 144.42 13.66 2.60 120,448 9.64 9.48 1.11
MFSL 116.64 13.40 126.36 128.23 10.32 2.15 1,129,756 8.17 8.06 2.78
MGNL 250.77 11.77 192.51 200.55 18.69 3.29 1,341,985 9.71 9.36 1.55
MIVI 12.50 17.62 95.90 95.90 17.77 1.09 70,329 18.53 18.53 0.83
MLBC 202.65 17.20 132.94 136.27 10.81 2.19 1,875,091 7.53 7.36 1.01
MSBF 13.96 13.85 110.97 110.97 21.18 2.30 66,541 19.09 19.09 1.57
MWBI 9.96 10.67 103.71 103.71 7.30 2.11 136,425 7.04 7.04 2.67
MWBX 69.45 10.42 177.30 177.30 13.29 2.40 522,570 7.49 7.49 0.48
MWFD 29.17 16.82 176.64 184.80 14.83 1.67 194,707 8.39 8.05 1.07
NASB 88.84 11.15 173.67 180.29 12.49 2.04 711,088 7.19 6.95 3.52
NEBC 16.93 24.55 101.10 118.13 7.10 2.33 238,459 7.86 6.92 0.56
NEIB 25.58 15.83 99.72 99.72 17.40 2.25 160,032 17.44 17.44 0.90
NHTB 20.03 13.20 103.89 103.89 7.56 4.26 264,016 7.27 7.27 0.89
NMSB 38.40 17.27 117.28 117.28 12.31 2.53 311,863 10.50 10.50 0.55
NSSB 116.09 19.55 151.73 162.14 16.99 2.23 683,299 11.20 10.55 1.10
NSSY 60.84 19.98 137.68 143.52 9.52 0.79 637,156 7.21 6.94 1.27
NTMG 5.24 22.35 104.17 104.17 5.59 - 93,924 5.84 5.84 0.33
NWEQ 12.55 14.52 97.68 97.68 13.00 3.26 96,518 12.25 12.25 0.93
NWSB 365.25 18.38 191.25 200.58 19.10 2.05 1,911,978 9.99 9.57 0.85
NYB 555.08 15.65 348.96 348.96 17.78 1.79 3,122,017 5.09 5.09 2.14
OFCP 98.41 19.79 130.58 165.22 11.90 1.90 827,275 9.11 7.34 0.96
OHSL 27.06 16.03 107.51 107.51 12.43 3.44 217,627 11.56 11.56 1.38
PBCI 64.30 15.09 120.21 121.14 17.72 4.91 362,910 14.74 14.64 1.35
PBCT 1,399.09 22.55 226.38 226.68 18.30 2.55 7,645,200 8.08 8.07 1.53
PBKB 41.56 17.00 150.18 158.19 8.43 2.82 513,421 5.61 5.35 0.75
PBNB 59.56 16.03 128.92 137.91 12.35 2.94 482,394 9.58 9.01 1.95
PCBC 14.27 14.26 94.11 94.11 17.75 1.74 80,408 18.86 18.86 1.21
PCCI 38.09 15.48 155.69 155.69 12.53 - 304,085 8.05 8.05 0.84
PDB 28.54 23.06 145.31 145.31 22.82 3.86 125,086 15.69 15.69 0.45
PEEK 50.24 20.33 105.32 105.32 27.47 2.36 187,534 26.09 26.09 0.75
PERM 46.86 23.44 116.94 118.11 11.35 1.33 412,967 9.70 9.61 0.96
PERT 39.12 19.12 132.05 132.05 17.54 - 223,000 13.29 13.29 1.36
PETE 36.50 11.29 129.73 130.01 8.54 - 427,407 6.58 6.57 1.55
PFDC 47.85 11.40 111.38 111.38 17.08 2.89 280,339 15.34 15.34 1.82
PFNC 32.53 21.19 163.00 188.05 8.47 0.92 383,981 5.20 4.54 0.41
PFSB 120.52 13.23 120.83 148.63 9.93 1.12 1,213,679 7.56 6.23 1.89
PFSL 31.04 13.52 133.12 133.12 8.32 4.72 373,084 6.25 6.25 1.41
PHBK 885.45 13.94 202.68 242.47 16.40 2.30 5,398,398 8.10 6.86 2.25
PKPS 74.77 21.21 104.36 104.36 8.71 1.68 858,690 8.35 8.35 0.28
PLE 20.13 13.23 131.69 136.21 10.30 3.54 195,502 7.82 7.58 1.71
PSAB 106.48 15.60 150.98 NA 11.50 3.38 926,071 7.61 NA 1.29
PSBK 92.27 10.09 127.17 144.55 10.54 2.82 875,180 8.29 7.37 2.39
PTRS 9.93 22.30 96.44 96.44 7.92 1.43 125,497 8.21 8.21 0.88
PULS 54.33 11.75 136.64 136.64 10.62 3.94 509,690 7.77 7.77 1.51
PVFC 38.34 7.08 161.13 161.13 11.03 - 347,577 6.85 6.85 2.33
PVSA 101.15 10.78 142.37 143.68 10.70 2.08 945,302 7.52 7.45 2.32
PWBC 52.67 13.11 102.20 111.94 7.54 2.67 698,735 7.38 6.78 1.03
QCBC 72.05 18.81 106.26 106.50 9.43 - 764,466 8.87 8.85 1.01
QCFB 27.81 12.91 106.32 106.32 18.75 - 148,321 17.64 17.64 1.51
QCSB 431.10 20.40 203.90 203.90 31.73 1.77 1,358,656 15.56 15.56 2.77
RARB 36.71 12.25 133.76 136.54 10.49 2.89 354,176 7.84 7.69 1.98
RCSB 519.35 14.86 160.39 164.68 12.94 1.77 4,014,317 8.07 7.87 2.28
RELY 195.25 13.92 125.57 180.17 10.40 2.53 1,878,184 8.28 5.91 1.59
ROSE 311.94 12.37 141.94 141.94 9.57 2.48 3,259,627 6.26 6.26 2.87
RVSB 40.07 16.44 164.27 182.32 17.85 1.21 224,473 10.87 9.90 1.11
SBCN 25.44 20.78 95.62 95.62 11.63 3.48 218,734 11.81 11.81 0.83
SECP 798.33 18.50 149.13 149.13 21.82 1.38 3,657,959 15.53 15.53 4.69
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 9
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.1 - PUBLICLY TRADED THRIFTS - SELECT
<TABLE>
<CAPTION>
Tangible
Current Price/ Current Current Current Total Equity/ Equity/ Core
Market LTM Price/ Price/ Tang Price/ Dividend Assets Assets Tang Assets EPS
Value Core EPS B Value Book Value Assets Yield ($000) (%) (%) ($)
Ticker ($M) (x) (%) (%) (%) (%) Mst RctQ Mst RctQ Mst RctQ LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SFED 21.73 16.83 102.66 102.66 13.09 1.41 166,030 12.75 12.75 1.01
SFFC 14.20 14.17 95.85 95.85 17.03 2.22 82,809 17.77 17.77 1.27
SFSB 28.55 15.91 108.75 109.27 7.06 1.41 404,092 6.50 6.47 1.43
SFSL 93.88 13.20 162.86 165.86 15.04 2.33 624,296 9.24 9.08 1.43
SHEN 52.53 14.66 122.01 122.01 12.94 1.88 405,785 10.61 10.61 1.74
SISB 151.68 8.39 144.89 144.89 11.25 1.81 1,348,612 7.56 7.56 3.16
SMBC 27.84 16.67 107.87 NA 17.44 2.94 159,653 16.17 NA 1.02
SMFC 41.98 17.39 139.76 139.76 14.09 - 298,037 10.08 10.08 1.66
SOPN 73.32 18.23 110.23 110.23 27.57 3.42 265,888 25.01 25.01 1.09
SOSA 43.71 15.44 146.65 146.65 8.45 - 517,342 5.77 5.77 0.17
SPBC 603.56 16.46 155.52 155.97 13.85 1.81 4,357,170 8.91 8.88 1.61
SSBK 57.58 12.93 133.43 135.90 10.15 2.11 567,490 7.61 7.48 1.76
STFR 168.72 17.70 132.74 139.75 11.97 1.52 1,409,316 8.93 8.52 1.78
STND 331.55 20.10 123.64 123.87 13.78 1.95 2,405,221 11.15 11.13 1.02
STSA 95.55 23.63 151.18 NA 6.22 - 1,536,344 5.81 NA 0.73
SVRN 752.97 13.29 190.14 269.19 7.98 0.63 9,433,154 5.04 3.91 0.95
SWBI 52.42 15.41 131.54 131.54 13.71 3.82 382,375 10.42 10.42 1.29
SWCB 61.80 15.19 159.94 168.48 13.30 3.69 464,555 8.32 7.93 2.14
TBK 18.47 13.13 118.42 122.57 7.95 1.27 232,282 6.71 6.50 1.20
TCB 1,581.45 16.31 287.79 299.15 22.30 1.65 7,090,862 7.75 7.48 2.79
THR 12.13 16.57 94.75 95.13 13.59 2.53 89,271 14.34 14.29 0.86
THRD 81.35 17.12 103.77 118.90 12.56 2.11 647,853 11.20 9.92 1.11
TPNZ 23.09 19.74 108.62 108.62 19.78 1.33 116,726 18.21 18.21 0.76
TRIC 11.26 15.42 85.69 85.69 13.11 3.24 85,888 15.31 15.31 1.20
TSBS 146.29 21.58 141.50 154.91 24.34 2.16 601,017 17.20 15.94 0.75
TSH 52.84 14.50 102.36 102.36 13.59 3.25 388,910 13.27 13.27 1.06
TWIN 15.79 17.29 117.98 117.98 15.00 3.46 105,263 12.71 12.71 1.07
UBMT 24.16 15.43 99.30 99.30 22.38 4.76 107,945 22.53 22.53 1.28
UFRM 25.29 20.12 128.11 128.11 9.59 2.42 263,582 7.49 7.49 0.41
VFFC 91.18 17.12 143.31 148.87 11.25 0.64 808,545 7.85 7.58 0.92
WAMU 6,819.63 23.20 280.12 297.54 15.31 1.85 44,551,925 5.38 5.10 2.33
WAYN 38.97 24.07 170.83 170.83 15.58 3.54 250,057 9.12 9.12 1.08
WBST 314.09 13.71 159.84 206.38 8.02 1.82 3,917,600 5.27 4.18 2.89
WCBI 56.15 14.49 117.42 117.42 18.06 2.74 310,992 15.38 15.38 1.51
WEFC 31.69 15.89 112.38 112.38 15.74 - 201,326 14.01 14.01 0.96
WFCO 25.82 12.04 120.82 123.81 8.83 3.23 292,264 7.31 7.15 1.08
WFSL 1,233.70 12.87 185.85 207.50 21.02 3.36 5,869,259 11.31 10.26 2.02
WRNB 58.59 10.13 170.03 170.03 16.32 2.75 358,954 9.60 9.60 1.58
WSB 21.63 10.68 102.91 102.91 8.48 1.95 255,049 8.24 8.24 0.48
WSFS 154.95 10.26 204.43 206.54 11.41 - 1,357,635 5.58 5.53 1.17
WSTR 93.44 19.14 117.53 117.53 16.58 1.88 563,617 14.11 14.11 1.11
WVFC 45.60 13.46 129.89 129.89 16.53 3.05 275,920 12.72 12.72 1.95
YFED 125.66 16.37 132.90 132.90 10.83 3.24 1,160,035 8.15 8.15 1.13
Maximum 6,819.63 24.81 348.96 348.96 31.73 5.18 49,902,044 26.75 26.75 7.57
Minimum 4.37 2.62 65.48 68.43 3.53 - 57,838 3.27 2.75 0.17
Average 204.37 16.21 138.34 145.28 13.61 1.96 1,575,802 10.43 10.19 1.47
Median 52.84 15.77 131.69 136.27 12.56 2.00 412,042 8.98 8.71 1.28
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 10
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.1 - PUBLICLY TRADED THRIFTS - SELECT
<TABLE>
<CAPTION>
ROAA ROACE ROAA ROACE
Before Before NPAs/ Price/ Core Before Before
Extra Extra Merger Current Assets Core EPS Extra Extra
(%) (%) Target? Pricing (%) EPS ($) (%) (%)
Ticker LTM LTM (Y/N) Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AADV 0.32 3.42 N 02/27/97 0.55 14.52 0.62 0.96 10.95
ABBK 0.74 11.00 N 02/27/97 0.31 13.41 0.41 0.76 11.32
ABCL 0.47 5.72 N 02/27/97 0.26 21.35 0.36 0.66 7.72
ABCW 0.72 11.06 N 02/27/97 0.80 12.64 0.91 0.99 16.05
AFCB 0.88 8.70 N 02/27/97 0.49 11.85 0.53 1.06 10.84
AFFFZ 1.37 19.46 N 02/27/97 0.44 2.39 3.51 4.72 63.21
AHM 0.29 4.53 N 02/27/97 2.07 15.91 0.66 0.73 16.58
ALBK 0.77 8.20 N 02/27/97 0.66 14.16 0.64 1.03 11.30
ANBK 0.15 1.44 N 02/27/97 NA 16.56 0.20 (0.58) (6.00)
ANDB 1.09 14.08 N 02/27/97 1.21 12.39 0.59 1.07 13.44
ASBI 0.62 5.40 N 02/27/97 0.41 16.54 0.24 0.90 8.20
ASBP 0.60 2.72 N 02/27/97 1.60 20.11 0.15 1.11 5.83
ASFC 0.53 6.38 N 02/27/97 0.53 17.01 0.63 0.75 9.37
BANC 0.85 10.90 N 02/27/97 0.72 16.47 0.26 0.21 3.06
BDJI 0.32 2.45 N 02/27/97 0.22 16.59 0.29 0.71 6.25
BFD 0.40 3.32 N 02/27/97 NA 22.74 0.18 0.60 5.53
BFSB 1.06 7.02 N 02/27/97 0.03 14.68 0.33 1.10 7.73
BKC 1.26 14.40 N 02/27/97 2.20 15.36 0.48 1.26 14.59
BKCT 1.26 11.73 N 02/27/97 1.03 13.21 0.44 1.24 11.84
BKUNA 0.40 2.35 N 02/27/97 0.66 18.75 0.13 0.62 7.38
BSBC 1.05 11.77 N 02/27/97 1.92 14.29 0.07 1.15 12.63
BVFS 0.34 5.39 N 02/27/97 0.73 17.89 0.80 0.58 9.79
BWFC 0.77 4.12 N 02/27/97 0.05 24.48 0.12 1.04 6.25
CAFI 0.78 9.63 N 02/27/97 0.23 11.25 0.35 (0.34) (4.23)
CAPS 0.63 6.65 N 02/27/97 0.12 12.50 0.28 0.92 10.88
CARV (0.03) (0.28) N 02/27/97 0.41 35.27 0.07 0.16 1.75
CASB 0.51 8.16 N 02/27/97 0.57 21.55 0.19 0.53 8.76
CASH 0.75 6.38 N 02/27/97 0.75 12.69 0.33 1.01 8.78
CBCI 1.08 6.56 N 02/27/97 1.57 13.47 0.66 1.35 8.39
CBCO 1.01 10.71 N 02/27/97 NA 15.76 0.45 1.13 12.21
CBIN 0.59 5.03 N 02/27/97 0.13 12.28 0.28 (0.21) (1.90)
CBNH 0.94 12.84 N 02/27/97 0.44 13.28 0.44 0.95 12.77
CBSA 0.25 7.48 N 02/27/97 0.56 12.05 0.56 0.45 13.95
CBSB 0.98 5.72 N 02/27/97 0.54 14.17 0.28 1.21 8.12
CEBK 0.59 5.92 N 02/27/97 1.67 10.37 0.44 0.99 9.82
CENF 0.55 10.88 N 02/27/97 1.46 17.77 0.48 0.50 9.77
CFB 0.66 11.05 N 02/27/97 1.02 12.63 0.71 0.90 15.97
CFCP 0.88 14.38 N 02/27/97 0.19 19.35 0.31 1.12 18.06
CFFC 1.04 7.50 N 02/27/97 0.35 11.96 0.46 1.41 10.22
CFSB 0.69 8.54 N 02/27/97 0.24 12.65 0.41 1.06 13.94
CFX 0.86 9.58 N 02/27/97 0.68 13.71 0.31 1.18 13.67
CIBI 0.64 4.99 N 02/27/97 0.69 12.15 0.36 0.91 7.81
CKFB 1.30 4.87 N 02/27/97 0.52 20.17 0.22 1.31 5.19
CMRN 1.15 4.39 N 02/27/97 0.13 17.19 0.24 1.35 5.46
CMSV 0.64 5.37 N 02/27/97 0.63 22.44 0.22 0.71 6.11
CNIT 0.40 5.61 N 02/27/97 0.77 14.24 0.79 (0.07) (0.96)
CNSK 0.42 5.35 N 02/27/97 1.17 43.36 0.08 (0.41) (9.65)
COFD 0.92 13.11 N 02/27/97 NA 14.19 0.74 1.12 16.32
COFI 0.94 13.89 N 02/27/97 0.26 14.03 0.85 1.24 18.54
CSA 0.13 2.56 N 02/27/97 1.43 23.56 0.50 0.45 9.20
CTBK 0.65 9.54 N 02/27/97 1.61 11.23 0.43 0.72 10.85
CTZN 0.51 7.68 N 02/27/97 0.52 13.85 0.65 0.83 12.72
CVAL 0.61 6.72 N 02/27/97 0.64 12.82 0.39 0.92 10.36
CZF 0.78 4.30 N 02/27/97 0.22 20.40 0.17 (0.45) (2.73)
DFIN 0.72 3.09 N 02/27/97 0.15 32.95 0.11 0.67 2.94
DIBK 1.82 22.19 N 02/27/97 0.50 8.40 0.61 1.90 22.36
DME 0.52 10.36 N 02/27/97 2.20 13.48 0.32 0.63 12.05
DNFC 0.67 11.58 N 02/27/97 0.55 11.92 0.38 0.90 16.05
DSL 0.42 5.34 N 02/27/97 1.19 17.90 0.33 0.69 9.03
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 11
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.1 - PUBLICLY TRADED THRIFTS - SELECT
<TABLE>
<CAPTION>
ROAA ROACE ROAA ROACE
Before Before NPAs/ Price/ Core Before Before
Extra Extra Merger Current Assets Core EPS Extra Extra
(%) (%) Target? Pricing (%) EPS ($) (%) (%)
Ticker LTM LTM (Y/N) Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EBSI 0.59 6.63 N 02/27/97 0.88 15.07 0.28 0.75 8.43
EFBI 0.68 4.71 N 02/27/97 0.01 14.18 0.26 1.15 8.59
EGFC 0.96 13.44 N 02/27/97 1.20 11.99 0.61 0.81 11.23
EIRE 0.63 9.38 N 02/27/97 0.26 12.50 0.39 0.83 12.16
EQSB 0.41 8.08 N 02/27/97 0.73 10.19 0.81 0.73 14.81
ESBK 0.28 4.43 N 02/27/97 0.84 18.06 0.27 0.36 5.64
FBBC 1.30 6.75 N 02/27/97 0.10 14.58 0.27 1.24 7.57
FBCI 0.50 4.37 N 02/27/97 0.65 16.88 0.30 0.69 6.77
FBHC 0.23 3.47 N 02/27/97 1.18 17.83 0.34 0.60 9.41
FBSI 0.83 5.19 N 02/27/97 0.04 13.37 0.36 1.37 9.21
FCIT 0.48 7.98 N 02/27/97 2.14 12.72 0.43 0.85 14.30
FCME 1.49 45.72 N 02/27/97 2.24 8.38 0.25 0.89 18.95
FDEF 0.78 3.26 N 02/27/97 0.41 26.95 0.12 0.87 3.93
FED 0.20 4.22 N 02/27/97 1.78 10.74 0.62 0.64 14.05
FESX 1.08 14.37 N 02/27/97 0.62 10.94 0.36 1.23 16.33
FFBI 0.12 1.28 N 02/27/97 0.22 20.63 0.20 (0.70) (8.84)
FFBS 1.13 5.72 N 02/27/97 0.32 17.74 0.31 1.50 7.70
FFBZ 0.77 10.08 N 02/27/97 0.66 18.23 0.24 0.90 11.97
FFCH 0.52 8.24 N 02/27/97 1.10 12.98 0.52 0.86 14.13
FFES 0.43 6.91 N 02/27/97 0.42 13.48 0.48 0.49 7.81
FFFC 1.05 6.68 N 02/27/97 0.36 17.50 0.35 1.34 9.33
FFFG 0.21 3.28 N 02/27/97 2.94 18.75 0.05 (0.63) (9.56)
FFFL 0.43 4.36 N 02/27/97 0.36 26.04 0.18 0.74 7.89
FFHC 0.91 12.48 N 02/27/97 0.28 13.81 0.49 1.37 18.81
FFHH 0.58 4.02 N 02/27/97 0.04 17.84 0.24 0.81 6.24
FFHS 0.28 2.94 N 02/27/97 0.44 15.05 0.27 (0.75) (8.09)
FFIC 0.91 4.89 N 02/27/97 NA 20.92 0.23 0.90 5.16
FFKY 1.23 8.76 N 02/27/97 0.10 15.91 0.33 1.53 11.17
FFLC 0.65 3.94 N 02/27/97 0.30 20.90 0.32 0.94 5.92
FFSL 0.58 4.84 N 02/27/97 0.34 19.58 0.15 0.62 5.61
FFSW 0.92 13.44 N 02/27/97 0.16 10.73 0.90 0.29 2.45
FFSX 0.41 4.90 N 02/27/97 0.15 18.01 0.42 0.69 8.50
FFWC 0.87 8.36 N 02/27/97 0.11 10.70 0.59 1.09 10.79
FFWD 0.92 6.68 N 02/27/97 0.02 12.70 0.31 1.24 9.55
FFYF 0.84 4.74 N 02/27/97 0.86 17.45 0.36 1.27 7.38
FGHC 0.56 6.79 N 02/27/97 1.21 17.41 0.14 0.81 10.10
FIBC 0.50 4.78 N 02/27/97 3.62 13.51 0.34 0.90 9.20
FISB 0.90 10.23 N 02/27/97 1.78 18.35 0.39 1.17 12.62
FKFS 0.48 5.93 N 02/27/97 2.42 10.75 0.50 0.84 10.86
FLFC 0.80 11.32 N 02/27/97 NA 17.34 0.31 1.00 15.15
FMCO 0.58 9.05 N 02/27/97 1.20 8.98 0.55 1.06 16.36
FMSB 1.01 15.33 N 02/27/97 NA 12.19 0.40 0.99 15.05
FNGB 0.56 4.61 N 02/27/97 0.15 15.19 0.29 0.91 8.04
FOBC 0.69 5.70 N 02/27/97 0.17 13.51 0.34 0.99 8.51
FRC 0.61 10.86 N 02/27/97 1.32 17.28 0.34 0.65 11.43
FSBI 0.50 6.98 N 02/27/97 0.42 13.21 0.44 0.80 11.48
FSFC (0.01) (0.08) N 02/27/97 0.10 15.28 0.18 0.97 9.57
FSLA 0.49 5.15 N 02/27/97 0.72 17.54 0.31 0.95 10.22
FSPG 0.90 13.77 N 02/27/97 0.83 10.67 0.41 0.93 14.20
FSTC 2.04 19.36 N 02/27/97 NA 10.60 0.56 1.80 19.58
FTF 1.39 7.41 N 02/27/97 0.08 11.37 0.36 1.50 9.39
FTFC 0.71 10.18 N 02/27/97 0.12 13.17 0.56 (0.02) (0.25)
FTSB 0.51 2.32 N 02/27/97 1.68 16.32 0.18 1.16 6.58
FWWB 1.05 5.71 N 02/27/97 0.22 17.56 0.29 1.30 8.48
GBCI 1.36 14.25 N 02/27/97 0.09 13.75 0.45 0.82 8.66
GDW 1.03 16.75 N 02/27/97 1.43 13.46 1.30 0.81 13.13
GFCO 0.31 3.28 N 02/27/97 0.21 13.78 0.39 0.72 7.63
GFSB 0.96 8.10 N 02/27/97 1.65 11.35 0.49 1.14 9.93
GPT 0.95 8.97 N 02/27/97 2.89 19.87 0.78 1.02 9.46
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 12
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.1 - PUBLICLY TRADED THRIFTS - SELECT
<TABLE>
<CAPTION>
ROAA ROACE ROAA ROACE
Before Before NPAs/ Price/ Core Before Before
Extra Extra Merger Current Assets Core EPS Extra Extra
(%) (%) Target? Pricing (%) EPS ($) (%) (%)
Ticker LTM LTM (Y/N) Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GRTR 0.72 7.55 N 02/27/97 7.84 21.88 0.18 0.80 8.38
GSBC 1.42 14.24 N 02/27/97 1.75 12.97 0.33 1.76 19.00
GSLC 0.46 7.77 N 02/27/97 1.94 79.17 0.03 0.63 11.16
GTFN 0.73 7.00 N 02/27/97 0.41 21.71 0.38 0.96 9.92
GUPB 0.76 3.68 N 02/27/97 0.15 23.90 0.17 0.72 3.99
GWBC 0.76 2.99 N 02/27/97 0.12 19.79 0.18 1.10 4.34
HALL 0.43 5.81 N 02/27/97 0.02 11.56 0.40 0.58 8.28
HARB 0.91 10.74 N 02/27/97 0.57 15.27 0.61 1.17 14.41
HARL 0.62 9.33 N 02/27/97 0.04 11.20 0.48 1.00 16.02
HAVN 0.62 9.83 N 02/27/97 0.94 11.25 0.75 0.89 14.05
HBFW 0.52 3.36 N 02/27/97 - 18.75 0.26 0.80 5.66
HBNK 0.15 1.92 N 02/27/97 2.51 12.00 0.50 0.96 13.46
HBS 0.70 4.57 N 02/27/97 2.33 11.96 0.35 (0.04) (0.26)
HFFB 0.99 3.52 N 02/27/97 - 21.38 0.19 1.34 4.92
HFFC 0.61 6.67 N 02/27/97 0.55 12.98 0.39 0.92 9.99
HFGI 0.32 7.42 N 02/27/97 0.23 11.41 0.23 0.44 10.32
HFSA 0.49 2.82 N 02/27/97 0.18 14.32 0.24 0.93 5.92
HHFC 0.21 1.36 N 02/27/97 0.26 13.89 0.18 0.77 6.24
HIFS 1.10 11.06 N 02/27/97 0.59 10.12 0.46 1.22 12.57
HMCI 0.11 1.72 N 02/27/97 3.51 27.43 0.18 0.41 6.76
HMNF 0.78 4.82 N 02/27/97 0.06 19.38 0.30 0.93 6.09
HOMF 1.01 12.18 N 02/27/97 0.54 12.33 0.56 1.35 16.41
HPBC 1.72 15.84 N 02/27/97 0.04 10.37 0.44 1.74 16.28
HRBF 0.33 2.35 N 02/27/97 0.36 21.41 0.20 0.61 4.71
HRZB 1.56 9.70 N 02/27/97 - 11.72 0.32 1.63 10.36
HTHR 0.89 16.58 N 02/27/97 10.58 NM (0.11) (1.09) (32.90)
HVFD 0.44 5.21 N 02/27/97 0.78 11.77 0.43 0.96 11.56
IFSB 0.13 1.98 N 02/27/97 2.37 13.87 0.16 (0.55) (8.17)
INBI 0.75 3.62 N 02/27/97 0.16 15.03 0.21 1.68 8.86
IPSW 1.22 20.14 N 02/27/97 2.02 13.36 0.29 1.24 20.61
ISBF 0.80 4.34 N 02/27/97 NA 24.28 0.26 (0.11) (0.68)
ITLA 1.41 13.73 N 02/27/97 NA 11.70 0.35 1.46 12.83
IWBK 0.81 11.92 N 02/27/97 0.68 17.07 0.52 1.15 17.45
JSBA 0.23 3.21 N 02/27/97 1.02 14.22 0.51 (1.01) (13.85)
JSBF 1.65 7.60 N 02/27/97 1.30 15.77 0.63 1.72 8.08
KFBI 0.91 3.55 N 02/27/97 0.03 20.56 0.19 1.11 4.90
KNK 0.50 4.95 N 02/27/97 0.60 13.40 0.52 0.91 8.90
KSAV 0.88 5.94 N 02/27/97 0.27 12.99 0.38 1.11 7.96
KSBK 0.93 13.70 N 02/27/97 1.37 8.59 0.99 0.85 12.28
KYF 0.87 3.88 N 02/27/97 - 16.32 0.18 1.05 5.33
LARK 0.80 4.91 N 02/27/97 0.23 16.27 0.29 1.19 7.99
LARL 1.11 10.45 N 02/27/97 0.60 11.68 0.46 1.54 14.51
LFED 0.77 4.75 N 02/27/97 - 22.62 0.21 1.05 6.55
LIFB 0.68 5.52 N 02/27/97 0.44 14.71 0.34 0.90 8.56
LISB 0.63 6.22 N 02/27/97 1.08 21.80 0.44 0.87 9.10
LOGN 1.20 5.09 N 02/27/97 0.52 14.77 0.22 1.40 7.02
LSBI 0.50 4.77 N 02/27/97 1.37 13.18 0.37 0.79 8.31
LSBX 1.61 20.74 N 02/27/97 0.56 6.02 0.41 2.11 25.30
LVSB 1.24 11.87 N 02/27/97 1.21 16.20 0.49 0.30 2.94
MAFB 0.68 9.57 N 02/27/97 0.40 11.97 0.83 1.14 14.80
MARN 1.15 4.90 N 02/27/97 1.04 16.10 0.33 1.51 6.66
MASB 1.08 10.65 N 02/27/97 0.24 12.27 0.83 1.08 10.45
MBB 0.17 0.83 N 02/27/97 0.78 17.48 0.27 (0.41) (8.02)
MBB 0.17 0.83 N 02/27/97 0.78 17.48 0.27 (0.41) (8.02)
MBLF 0.66 4.86 N 02/27/97 0.26 13.60 0.37 0.93 7.43
MCBN 0.40 4.50 N 02/27/97 0.34 9.69 0.49 0.85 9.79
MCBS 1.05 8.88 N 02/27/97 0.14 11.27 0.56 1.25 11.77
MDBK 1.05 11.72 N 02/27/97 0.36 13.18 0.55 1.05 11.70
MERI 0.55 7.36 N 02/27/97 0.29 12.33 0.72 1.01 13.56
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 13
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.1 - PUBLICLY TRADED THRIFTS - SELECT
<TABLE>
<CAPTION>
ROAA ROACE ROAA ROACE
Before Before NPAs/ Price/ Core Before Before
Extra Extra Merger Current Assets Core EPS Extra Extra
(%) (%) Target? Pricing (%) EPS ($) (%) (%)
Ticker LTM LTM (Y/N) Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MFBC 0.52 2.93 N 02/27/97 - 18.27 0.26 0.86 5.30
MFFC 0.61 3.24 N 02/27/97 0.17 24.78 0.14 0.88 5.28
MFLR 0.94 9.67 N 02/27/97 0.97 17.79 0.26 1.01 10.37
MFSL 0.53 6.48 N 02/27/97 0.42 7.63 1.22 0.17 2.16
MGNL 1.37 13.90 N 02/27/97 2.47 12.33 0.37 1.72 17.46
MIVI 0.68 3.63 N 02/27/97 0.26 17.41 0.21 0.98 5.32
MLBC 0.71 9.21 N 02/27/97 0.84 20.68 0.21 0.63 8.43
MSBF 1.29 6.07 N 02/27/97 0.47 13.26 0.41 1.54 7.93
MWBI 0.46 6.61 N 02/27/97 0.68 10.48 0.68 0.82 11.63
MWBX 1.33 17.97 N 02/27/97 1.00 9.62 0.13 1.45 17.82
MWFD 1.04 11.26 N 02/27/97 0.24 17.31 0.26 0.21 2.45
NASB 1.13 15.64 N 02/27/97 NA 11.15 0.88 0.71 10.15
NEBC 0.46 5.49 N 02/27/97 1.34 12.28 0.28 0.90 11.97
NEIB 1.02 4.97 N 02/27/97 0.20 12.72 0.28 0.57 3.16
NHTB 0.40 5.25 N 02/27/97 0.94 12.77 0.23 (0.37) (5.03)
NMSB 0.82 7.49 N 02/27/97 1.55 16.96 0.14 0.84 7.84
NSSB 0.95 8.91 N 02/27/97 1.09 16.29 0.33 1.13 10.26
NSSY 0.81 10.27 N 02/27/97 1.99 11.75 0.54 0.82 11.66
NTMG 0.32 4.83 N 02/27/97 1.35 26.34 0.07 (0.67) (12.87)
NWEQ 0.76 5.88 N 02/27/97 1.52 12.05 0.28 1.04 8.47
NWSB 0.72 6.95 N 02/27/97 0.91 20.56 0.19 1.02 10.32
NYB 1.22 21.81 N 02/27/97 1.29 14.19 0.59 1.39 26.29
OFCP 0.40 3.11 N 02/27/97 0.18 16.96 0.28 (0.56) (5.68)
OHSL 0.57 4.60 N 02/27/97 0.01 18.44 0.30 (0.37) (3.14)
PBCI 0.81 5.25 N 02/27/97 2.23 14.98 0.34 1.20 8.08
PBCT 1.13 13.87 N 02/27/97 1.33 21.04 0.41 1.13 13.56
PBKB 0.76 13.20 N 02/27/97 1.02 15.18 0.21 0.75 13.71
PBNB 0.93 8.92 N 02/27/97 0.55 17.76 0.44 0.76 7.70
PCBC 0.71 3.69 N 02/27/97 - 16.59 0.26 1.43 7.65
PCCI 1.06 13.14 N 02/27/97 1.83 12.50 0.26 1.10 12.93
PDB (0.21) (0.77) N 02/27/97 0.62 NM (0.16) (4.50) (22.16)
PEEK 1.13 3.78 N 02/27/97 0.60 23.83 0.16 1.21 4.33
PERM 0.24 2.37 N 02/27/97 1.08 18.15 0.31 0.69 7.17
PERT 0.76 6.85 N 02/27/97 0.26 17.11 0.38 1.08 7.69
PETE 0.85 13.39 N 02/27/97 1.04 9.31 0.47 0.96 14.77
PFDC 1.12 7.26 N 02/27/97 0.34 12.65 0.41 1.34 8.82
PFNC 0.35 6.58 N 02/27/97 0.91 13.58 0.16 0.75 14.51
PFSB 0.55 6.39 N 02/27/97 0.78 12.25 0.51 0.82 10.51
PFSL 0.55 9.15 N 02/27/97 0.26 13.62 0.35 0.62 10.14
PHBK 1.21 14.41 N 02/27/97 0.86 12.45 0.63 1.33 16.97
PKPS 0.17 2.02 N 02/27/97 4.14 16.49 0.09 0.57 6.91
PLE 0.51 6.55 N 02/27/97 1.56 12.57 0.45 0.92 11.83
PSAB 0.46 5.75 N 02/27/97 NA 41.93 0.12 (0.39) (4.82)
PSBK 1.09 13.13 N 02/27/97 0.85 12.06 0.50 0.87 10.57
PTRS 0.03 0.27 N 02/27/97 2.20 24.53 0.20 (1.06) (12.06)
PULS 0.72 7.60 N 02/27/97 0.61 10.32 0.43 1.06 14.02
PVFC 0.99 14.87 N 02/27/97 0.53 8.78 0.47 1.36 20.42
PVSA 0.77 10.67 N 02/27/97 0.30 10.08 0.62 1.12 15.44
PWBC 0.41 5.47 N 02/27/97 0.59 12.98 0.26 0.58 7.92
QCBC 0.27 2.87 N 02/27/97 1.51 14.84 0.32 0.67 7.48
QCFB 1.24 6.18 N 02/27/97 NA 11.08 0.44 0.39 2.11
QCSB 1.63 10.10 N 02/27/97 0.55 28.25 0.50 1.15 7.51
RARB 0.84 11.12 N 02/27/97 0.44 11.02 0.55 0.70 9.20
RCSB 1.00 12.39 N 02/27/97 0.64 14.35 0.59 0.96 11.98
RELY 0.52 6.00 N 02/27/97 0.86 12.86 0.43 0.83 10.12
ROSE 1.00 16.03 N 02/27/97 0.47 10.96 0.81 0.98 15.49
RVSB 0.97 8.87 N 02/27/97 0.28 16.29 0.28 1.10 10.18
SBCN 0.19 1.50 N 02/27/97 0.26 16.59 0.26 0.70 5.88
SECP 0.99 6.02 N 02/27/97 0.11 14.56 1.49 1.57 9.93
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 14
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.1 - PUBLICLY TRADED THRIFTS - SELECT
<TABLE>
<CAPTION>
ROAA ROACE ROAA ROACE
Before Before NPAs/ Price/ Core Before Before
Extra Extra Merger Current Assets Core EPS Extra Extra
(%) (%) Target? Pricing (%) EPS ($) (%) (%)
Ticker LTM LTM (Y/N) Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SFED 0.45 3.22 N 02/27/97 0.61 11.81 0.36 (0.30) (2.31)
SFFC 1.01 5.29 N 02/27/97 0.79 13.24 0.34 1.24 6.96
SFSB 0.28 4.04 N 02/27/97 0.25 14.97 0.38 0.66 10.05
SFSL 0.94 9.99 N 02/27/97 0.25 12.75 0.37 1.33 14.39
SHEN 0.82 6.43 N 02/27/97 0.43 12.03 0.53 1.17 10.16
SISB 1.52 20.91 N 02/27/97 0.53 15.77 0.42 0.77 10.37
SMBC 0.74 4.56 N 02/27/97 0.61 15.74 0.27 1.06 6.65
SMFC 0.79 7.14 N 02/27/97 0.09 14.44 0.50 1.17 11.52
SOPN 1.34 5.18 N 02/27/97 0.08 16.56 0.30 1.77 7.02
SOSA 0.55 9.88 N 02/27/97 6.62 13.13 0.05 0.63 11.05
SPBC 0.62 6.85 N 02/27/97 0.15 14.72 0.45 1.01 11.40
SSBK 0.68 8.38 N 02/27/97 0.11 11.61 0.49 1.11 14.29
STFR 0.72 7.31 N 02/27/97 0.32 17.12 0.46 0.89 10.09
STND 0.53 4.45 N 02/27/97 0.18 19.71 0.26 0.70 25.30
STSA 0.16 0.91 N 02/27/97 0.42 14.87 0.29 0.57 11.09
SVRN 0.58 12.66 N 02/27/97 0.54 13.72 0.23 0.80 18.81
SWBI 0.72 6.30 N 02/27/97 0.24 15.06 0.33 0.96 9.31
SWCB 0.94 11.47 N 02/27/97 1.00 13.10 0.62 1.08 13.48
TBK 0.65 9.84 N 02/27/97 2.42 11.25 0.35 0.74 11.07
TCB 1.24 16.13 N 02/27/97 0.69 15.80 0.72 1.64 20.49
THR 0.53 3.59 N 02/27/97 1.23 14.25 0.25 0.91 6.35
THRD 0.61 4.74 N 02/27/97 0.32 17.59 0.27 0.73 6.59
TPNZ 0.71 3.82 N 02/27/97 0.93 20.83 0.18 0.87 4.83
TRIC 0.71 4.87 N 02/27/97 0.05 12.85 0.36 1.09 8.20
TSBS 1.56 8.34 N 02/27/97 0.50 23.81 0.17 1.38 7.59
TSH 0.69 4.42 N 02/27/97 0.08 14.24 0.27 0.92 6.80
TWIN 0.62 4.69 N 02/27/97 0.26 51.39 0.09 0.38 3.02
UBMT 1.20 5.24 N 02/27/97 0.62 15.43 0.32 0.14 0.60
UFRM 0.27 3.38 N 02/27/97 1.01 NM (0.02) (1.32) (16.96)
VFFC 1.42 17.69 N 02/27/97 1.98 16.41 0.24 1.10 13.85
WAMU 0.27 4.46 N 02/27/97 0.99 NM (0.02) (0.80) (16.80)
WAYN 0.28 2.97 N 02/27/97 0.69 25.00 0.26 0.65 7.04
WBST 0.67 12.23 N 02/27/97 0.80 13.39 0.74 0.78 15.00
WCBI 1.06 6.83 N 02/27/97 0.50 14.02 0.39 1.49 9.66
WEFC 0.61 4.21 N 02/27/97 NA 16.58 0.23 0.96 6.88
WFCO 0.67 8.96 N 02/27/97 0.39 10.83 0.30 1.04 14.35
WFSL 1.64 13.93 N 02/27/97 0.81 12.26 0.53 1.76 15.54
WRNB 1.87 20.56 N 02/27/97 1.76 8.16 0.49 2.20 23.34
WSB 0.48 5.82 N 02/27/97 NA 12.81 0.10 (1.00) (11.86)
WSFS 1.28 21.19 N 02/27/97 2.23 11.11 0.27 1.18 19.07
WSTR 0.61 4.47 N 02/27/97 0.10 18.97 0.28 0.95 6.83
WVFC 1.06 7.78 N 02/27/97 0.33 12.62 0.52 1.31 10.44
YFED 0.55 6.57 N 02/27/97 1.58 14.45 0.32 0.98 12.37
Maximum 2.04 45.72 10.58 79.17 3.51 4.72 63.21
Minimum (0.21) (0.77) - 2.39 (0.16) (4.50) (32.90)
Average 0.76 7.81 0.85 15.80 0.39 0.83 8.74
Median 0.72 6.61 0.56 14.24 0.34 0.92 9.37
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 15
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.2 - ALL SOUTHEAST REGION THRIFTS
<TABLE>
<CAPTION>
Deposit Current Current
Insurance Stock Market
Agency Price Value
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AFBC Advance Financial Bancorp Wellsburg WV SE SAIF NASDAQ 01/02/97 14.000 15.18
AMFB American Federal Bank, FSB Greenville SC SE SAIF NASDAQ 01/19/89 28.875 316.78
BANC BankAtlantic Bancorp, Inc. Fort Lauderdale FL SE SAIF NASDAQ 11/29/83 17.125 318.29
BFSB Bedford Bancshares, Inc. Bedford VA SE SAIF NASDAQ 08/22/94 19.375 22.16
BKUNA BankUnited Financial Corp. Coral Gables FL SE SAIF NASDAQ 12/11/85 9.750 83.11
CCFH CCF Holding Company Jonesboro GA SE SAIF NASDAQ 07/12/95 16.250 14.88
CENB Century Bancorp, Inc. Thomasville NC SE SAIF NASDAQ 12/23/96 65.500 26.68
CFCP Coastal Financial Corp. Myrtle Beach SC SE SAIF NASDAQ 09/26/90 24.000 82.85
CFFC Community Financial Corp. Staunton VA SE SAIF NASDAQ 03/30/88 22.000 27.99
CFNC Carolina Fincorp, Inc. Rockingham NC SE SAIF NASDAQ 11/25/96 15.250 28.24
CFTP Community Federal Bancorp Tupelo MS SE SAIF NASDAQ 03/26/96 20.000 85.65
CMSV Community Savings, MHC North Palm Beach FL SE SAIF NASDAQ 10/24/94 19.750 96.97
CNIT CENIT Bancorp, Inc. Norfolk VA SE SAIF NASDAQ 08/06/92 45.000 73.51
COOP Cooperative Bankshares, Inc. Wilmington NC SE SAIF NASDAQ 08/21/91 21.500 32.07
EBSI Eagle Bancshares Tucker GA SE SAIF NASDAQ 04/01/86 16.875 76.82
ESX Essex Bancorp, Inc. Norfolk VA SE SAIF AMSE NA 1.500 1.58
FFBH First Federal Bancshares of AR Harrison AR SE SAIF NASDAQ 05/03/96 20.000 103.08
FFBS FFBS BanCorp, Inc. Columbus MS SE SAIF NASDAQ 07/01/93 22.000 34.44
FFCH First Financial Holdings Inc. Charleston SC SE SAIF NASDAQ 11/10/83 27.000 170.24
FFFC FFVA Financial Corp. Lynchburg VA SE SAIF NASDAQ 10/12/94 24.500 114.97
FFFG F.F.O. Financial Group, Inc. St. Cloud FL SE SAIF NASDAQ 10/13/88 3.750 31.61
FFFL Fidelity Bankshares Inc. West Palm Beach FL SE SAIF NASDAQ 01/07/94 18.750 126.46
FFLC FFLC Bancorp, Inc. Leesburg FL SE SAIF NASDAQ 01/04/94 26.750 65.21
FFPB First Palm Beach Bancorp, Inc. West Palm Beach FL SE SAIF NASDAQ 09/29/93 27.375 136.47
FFRV Fidelity Financial Bankshares Richmond VA SE SAIF NASDAQ 05/01/86 28.750 66.08
FGHC First Georgia Holding, Inc. Brunswick GA SE SAIF NASDAQ 02/11/87 9.750 19.84
FLAG FLAG Financial Corp. LaGrange GA SE SAIF NASDAQ 12/11/86 12.250 24.95
FLFC First Liberty Financial Corp. Macon GA SE SAIF NASDAQ 12/06/83 21.500 153.30
FOBC Fed One Bancorp Wheeling WV SE SAIF NASDAQ 01/19/95 18.375 45.18
FSFC First Southeast Financial Corp Anderson SC SE SAIF NASDAQ 10/08/93 11.000 48.27
FSTC First Citizens Corporation Newnan GA SE SAIF NASDAQ 03/01/86 23.750 38.42
FTF Texarkana First Financial Corp Texarkana AR SE SAIF AMSE 07/07/95 16.375 30.02
GSFC Green Street Financial Corp. Fayetteville NC SE SAIF NASDAQ 04/04/96 18.875 81.13
GSLC Guaranty Financial Corp. Charlottesville VA SE SAIF NASDAQ NA 9.500 8.78
HARB Harbor Federal Savings Bk, MHC Fort Pierce FL SE SAIF NASDAQ 01/06/94 37.250 183.97
HBS Haywood Bancshares, Inc. Waynesville NC SE BIF AMSE 12/18/87 16.750 20.11
HFNC HFNC Financial Corp. Charlotte NC SE SAIF NASDAQ 12/29/95 21.250 365.34
KSAV KS Bancorp, Inc. Kenly NC SE SAIF NASDAQ 12/30/93 19.750 13.10
LIFB Life Bancorp, Inc. Norfolk VA SE SAIF NASDAQ 10/11/94 20.000 196.94
MBSP Mitchell Bancorp, Inc. Spruce Pine NC SE SAIF NASDAQ 07/12/96 15.375 15.07
MGNL Magna Bancorp, Inc. Hattiesburg MS SE SAIF NASDAQ 03/13/91 18.250 250.77
OCWN Ocwen Financial Corporation West Palm Beach FL SE SAIF NASDAQ NA 34.250 915.99
PALM Palfed, Inc. Aiken SC SE SAIF NASDAQ 12/15/85 14.750 77.11
PDB Piedmont Bancorp, Inc. Hillsborough NC SE SAIF AMSE 12/08/95 10.375 28.54
PERT Perpetual Bank, MHC Anderson SC SE SAIF NASDAQ 10/26/93 26.000 39.12
PFSL Pocahontas FS&LA, MHC Pocahontas AR SE SAIF NASDAQ 04/05/94 19.063 31.04
PLE Pinnacle Bancshares, Inc. Jasper AL SE SAIF AMSE 12/17/86 22.625 20.13
SCBS Southern Community Bancshares Cullman AL SE SAIF NASDAQ 12/23/96 13.500 15.35
SCCB S. Carolina Community Bancshrs Winnsboro SC SE SAIF NASDAQ 07/07/94 19.500 13.76
SOPN First Savings Bancorp, Inc. Southern Pines NC SE SAIF NASDAQ 01/06/94 19.875 73.32
SRN Southern Banc Company, Inc Gadsden AL SE SAIF AMSE 10/05/95 14.250 17.53
SSB Scotland Bancorp, Inc Laurinburg NC SE SAIF AMSE 04/01/96 15.375 28.29
SSFC South Street Financial Corp. Albemarle NC SE SAIF NASDAQ 10/03/96 16.750 75.32
SSM Stone Street Bancorp, Inc. Mocksville NC SE SAIF AMSE 04/01/96 27.250 49.73
SZB SouthFirst Bancshares, Inc. Sylacauga AL SE SAIF AMSE 02/14/95 13.750 11.29
TWIN Twin City Bancorp Bristol TN SE SAIF NASDAQ 01/04/95 18.500 15.79
UFRM United Federal Savings Bank Rocky Mount NC SE SAIF NASDAQ 07/01/80 8.250 25.29
VABF First Coastal Bank Virginia Beach VA SE SAIF NASDAQ 11/01/80 11.250 55.92
VFFC Virginia First Financial Corp. Petersburg VA SE SAIF NASDAQ 01/01/78 15.750 91.18
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 16
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.2 - ALL SOUTHEAST REGION THRIFTS
<TABLE>
<CAPTION>
Deposit Current Current
Insurance Stock Market
Agency Price Value
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum 65.500 915.99
Minimum 1.500 1.58
Average 19.774 88.66
Median 18.875 45.18
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 17
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.2 - ALL SOUTHEAST REGION THRIFTS
<TABLE>
<CAPTION>
Tangible ROAA ROACE
Price/ Current Current Current Total Equity/ Equity/ Core Before Before
LTM Price/ Price/ Tang Price/ Dividend Assets Assets T Assets EPS Extra Extra
Core EPS B Value Book Value Assets Yield ($000) (%) (%) ($) (%) (%)
Ticker (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AFBC NA NA NA NA 0.000 100,209 15.71 15.71 NA NA NA
AMFB 18.51 291.67 315.57 22.68 1.662 1,394,874 7.76 7.22 1.56 1.05 13.04
BANC 18.03 180.45 194.16 11.61 0.850 2,170,480 6.44 6.01 0.95 0.85 10.90
BFSB 12.66 113.44 113.44 17.10 2.477 129,601 14.26 14.26 1.53 1.06 7.02
BKUNA 21.67 128.46 160.36 5.80 0.000 1,329,044 7.39 6.55 0.45 0.40 2.35
CCFH 27.08 113.32 113.32 16.81 3.077 88,509 14.84 14.84 0.60 0.47 2.39
CENB NA 90.34 90.34 27.19 0.000 98,115 30.10 30.10 NA NA NA
CFCP 20.51 286.40 286.40 18.25 1.833 453,955 6.37 6.37 1.17 0.88 14.38
CFFC 13.02 121.95 121.95 16.80 2.545 166,664 13.78 13.78 1.69 1.04 7.50
CFNC NA 108.46 108.46 26.35 0.000 107,170 24.29 24.29 NA NA NA
CFTP NA 124.30 124.30 41.57 1.500 206,023 33.44 33.44 NA 1.27 4.26
CMSV 16.19 127.42 127.42 14.80 4.051 655,209 11.62 11.62 1.22 0.64 5.37
CNIT 18.60 152.28 167.16 10.72 2.222 685,962 7.04 6.45 2.42 0.40 5.61
COOP NM 125.95 125.95 9.40 0.000 341,300 7.46 7.46 0.04 (0.98) (12.66)
EBSI 14.67 132.46 132.46 11.53 3.556 666,166 8.71 8.71 1.15 0.59 6.63
ESX NM NM NM 0.92 0.000 171,498 8.65 8.52 (4.78) (2.57) (143.45)
FFBH NA 123.69 123.69 20.23 1.000 509,605 16.35 16.35 NA NA NA
FFBS 18.80 131.89 131.89 27.09 2.273 127,125 19.39 19.39 1.17 1.13 5.72
FFCH 14.06 176.70 176.70 10.75 2.667 1,582,274 6.09 6.09 1.92 0.52 8.24
FFFC 18.70 143.78 146.97 21.54 1.633 533,826 13.95 13.69 1.31 1.05 6.68
FFFG 17.05 168.16 168.16 10.16 0.000 311,028 6.05 6.05 0.22 0.21 3.28
FFFL 24.35 154.70 156.12 14.44 4.267 875,998 9.33 9.25 0.77 0.43 4.36
FFLC 21.06 121.59 121.59 18.82 1.794 346,442 15.48 15.48 1.27 0.65 3.94
FFPB 105.29 129.99 133.47 9.18 2.192 1,502,978 7.06 6.89 0.26 0.02 0.27
FFRV 20.99 238.19 238.19 20.07 0.696 329,233 8.43 8.42 1.37 0.66 7.73
FGHC 15.98 164.97 183.96 13.18 0.821 150,551 8.01 7.24 0.61 0.56 6.79
FLAG 122.50 123.86 123.86 10.90 2.776 228,914 8.80 8.80 0.10 (0.07) (0.75)
FLFC 16.04 187.45 213.29 12.64 1.860 1,212,681 7.37 6.60 1.34 0.80 11.32
FOBC 14.13 108.86 114.49 13.21 3.156 341,897 11.69 11.18 1.30 0.69 5.70
FSFC 15.49 143.04 143.04 14.81 1.818 326,013 10.36 10.36 0.71 (0.01) (0.08)
FSTC 9.42 156.46 198.91 14.66 1.853 257,288 9.37 7.52 2.52 2.04 19.36
FTF 10.36 114.27 114.27 18.37 2.748 163,571 16.07 16.07 1.58 1.39 7.41
GSFC NA 129.81 129.81 46.05 2.119 176,179 35.48 35.48 NA 1.31 NA
GSLC 17.92 132.13 132.13 7.56 1.053 116,177 5.71 5.71 0.53 0.46 7.77
HARB 15.39 209.86 218.60 17.35 3.758 1,060,339 8.27 7.96 2.42 0.91 10.74
HBS 14.96 100.18 104.30 15.37 3.343 130,859 15.34 14.83 1.12 0.70 4.57
HFNC 29.93 145.35 145.35 40.52 1.318 901,613 27.88 27.88 0.71 1.21 3.87
KSAV 12.42 95.46 95.55 12.99 3.038 100,840 13.61 13.60 1.59 0.88 5.94
LIFB 16.95 130.46 134.77 13.87 2.200 1,419,762 10.63 10.33 1.18 0.68 5.52
MBSP NA 101.15 101.15 44.05 5.203 34,203 43.56 43.56 NA NA NA
MGNL 11.77 192.51 200.55 18.69 3.288 1,341,985 9.71 9.36 1.55 1.37 13.90
OCWN NA 530.19 530.19 41.62 0.000 2,200,772 7.85 7.85 NA NA NA
PALM 25.88 148.84 NA 11.59 0.814 665,257 7.79 NA 0.57 0.02 0.22
PDB 23.06 145.31 145.31 22.82 3.855 125,086 15.69 15.69 0.45 (0.21) (0.77)
PERT 19.12 132.05 132.05 17.54 0.000 223,000 13.29 13.29 1.36 0.76 6.85
PFSL 13.52 133.12 133.12 8.32 4.721 373,084 6.25 6.25 1.41 0.55 9.15
PLE 13.23 131.69 136.21 10.30 3.536 195,502 7.82 7.58 1.71 0.51 6.55
SCBS NA 96.15 96.15 21.28 0.000 72,151 22.14 22.14 NA NA NA
SCCB 26.71 115.73 115.73 29.95 3.077 45,919 25.89 25.89 0.73 0.90 3.21
SOPN 18.23 110.23 110.23 27.57 3.421 265,888 25.01 25.01 1.09 1.34 5.18
SRN 25.00 99.03 100.14 16.66 2.456 105,245 16.83 16.67 0.57 0.21 1.11
SSB NA 112.72 112.72 41.57 1.951 68,067 36.87 36.87 NA 1.31 3.86
SSFC NA 123.80 123.80 32.96 1.910 228,523 26.63 26.63 NA NA NA
SSM NA 132.99 132.99 46.76 1.615 106,373 35.14 35.14 NA NA NA
SZB NM 86.97 86.97 12.16 3.636 93,110 13.98 13.98 0.05 (0.06) (0.43)
TWIN 17.29 117.98 117.98 15.00 3.459 105,263 12.71 12.71 1.07 0.62 4.69
UFRM 20.12 128.11 128.11 9.59 2.424 263,582 7.49 7.49 0.41 0.27 3.38
VABF 29.61 137.03 137.03 9.23 1.778 606,138 6.74 6.74 0.38 0.09 1.39
VFFC 17.12 143.31 148.87 11.25 0.635 808,545 7.85 7.58 0.92 1.42 17.69
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 18
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.2 - ALL SOUTHEAST REGION THRIFTS
<TABLE>
<CAPTION>
Tangible ROAA ROACE
Price/ Current Current Current Total Equity/ Equity/ Core Before Before
LTM Price/ Price/ Tang Price/ Dividend Assets Assets T Assets EPS Extra Extra
Core EPS B Value Book Value Assets Yield ($000) (%) (%) ($) (%) (%)
Ticker (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum 122.50 530.19 530.19 46.76 5.20 2,200,772 43.56 43.56 2.52 2.04 19.36
Minimum 9.42 86.97 86.97 0.92 - 34,203 5.71 5.71 (4.78) (2.57) (143.45)
Average 22.58 146.43 150.35 19.04 2.03 498,266 14.54 14.50 0.94 0.61 2.61
Median 17.98 130.46 132.09 16.02 1.95 263,582 11.62 11.40 1.12 0.66 5.52
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 19
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.2 - ALL SOUTHEAST REGION THRIFTS
<TABLE>
<CAPTION>
ROAA ROACE
NPAs/ Price/ Core Before Before
Merger Current Assets Core EPS Extra Extra
Target? Pricing (%) EPS ($) (%) (%)
Ticker (Y/N) Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C>
AFBC N 02/27/97 0.25 NA NA 0.84 7.49
AMFB Y 02/27/97 0.51 17.19 0.42 0.28 3.66
BANC N 02/27/97 0.72 16.47 0.26 0.21 3.06
BFSB N 02/27/97 0.03 14.68 0.33 1.10 7.73
BKUNA N 02/27/97 0.66 18.75 0.13 0.62 7.38
CCFH N 02/27/97 NA 40.63 0.10 0.42 2.58
CENB N 02/27/97 0.46 NA NA 1.14 5.02
CFCP N 02/27/97 0.19 19.35 0.31 1.12 18.06
CFFC N 02/27/97 0.35 11.96 0.46 1.41 10.22
CFNC N 02/27/97 0.15 NA NA 1.07 6.28
CFTP N 02/27/97 0.32 23.81 0.21 1.72 5.15
CMSV N 02/27/97 0.63 22.44 0.22 0.71 6.11
CNIT N 02/27/97 0.77 14.24 0.79 (0.07) (0.96)
COOP N 02/27/97 0.24 16.29 0.33 0.64 8.24
EBSI N 02/27/97 0.88 15.07 0.28 0.75 8.43
ESX N 02/27/97 3.41 NM (0.60) (1.18) (614.26)
FFBH N 02/27/97 0.15 17.86 0.28 (0.21) (1.25)
FFBS N 02/27/97 0.32 17.74 0.31 1.50 7.70
FFCH N 02/27/97 1.10 12.98 0.52 0.86 14.13
FFFC N 02/27/97 0.36 17.50 0.35 1.34 9.33
FFFG N 02/27/97 2.94 18.75 0.05 (0.63) (9.56)
FFFL N 02/27/97 0.36 26.04 0.18 0.74 7.89
FFLC N 02/27/97 0.30 20.90 0.32 0.94 5.92
FFPB N 02/27/97 1.07 18.01 0.38 0.61 8.59
FFRV Y 02/27/97 1.14 19.43 0.37 (0.28) (3.28)
FGHC N 02/27/97 1.21 17.41 0.14 0.81 10.10
FLAG N 02/27/97 3.67 NM (0.46) (2.81) (30.67)
FLFC N 02/27/97 NA 17.34 0.31 1.00 15.15
FOBC N 02/27/97 0.17 13.51 0.34 0.99 8.51
FSFC N 02/27/97 0.10 15.28 0.18 0.97 9.57
FSTC N 02/27/97 NA 10.60 0.56 1.80 19.58
FTF N 02/27/97 0.08 11.37 0.36 1.50 9.39
GSFC N 02/27/97 0.10 29.49 0.16 1.45 4.11
GSLC N 02/27/97 1.94 79.17 0.03 0.63 11.16
HARB N 02/27/97 0.57 15.27 0.61 1.17 14.41
HBS N 02/27/97 2.33 11.96 0.35 (0.04) (0.26)
HFNC N 02/27/97 0.92 33.20 0.16 1.23 4.30
KSAV N 02/27/97 0.27 12.99 0.38 1.11 7.96
LIFB N 02/27/97 0.44 14.71 0.34 0.90 8.56
MBSP N 02/27/97 2.28 25.63 0.15 1.62 3.72
MGNL N 02/27/97 2.47 12.33 0.37 1.72 17.46
OCWN N 02/27/97 5.46 24.46 0.35 2.07 24.85
PALM N 02/27/97 2.68 61.46 0.06 (0.68) (8.67)
PDB N 02/27/97 0.62 NM (0.16) (4.50) (22.16)
PERT N 02/27/97 0.26 17.11 0.38 1.08 7.69
PFSL N 02/27/97 0.26 13.62 0.35 0.62 10.14
PLE N 02/27/97 1.56 12.57 0.45 0.92 11.83
SCBS N 02/27/97 NA NA NA 0.94 5.91
SCCB N 02/27/97 1.83 24.38 0.20 1.20 4.42
SOPN N 02/27/97 0.08 16.56 0.30 1.77 7.02
SRN N 02/27/97 0.00 39.58 0.09 0.41 2.33
SSB N 02/27/97 0.05 21.35 0.18 1.77 4.84
SSFC N 02/27/97 0.40 NA NA 1.13 6.18
SSM N 02/27/97 0.01 21.29 0.32 1.01 2.84
SZB N 02/27/97 0.53 31.25 0.11 0.55 3.92
TWIN N 02/27/97 0.26 51.39 0.09 0.38 3.02
UFRM N 02/27/97 1.01 NM (0.02) (1.32) (16.96)
VABF N 02/27/97 1.11 23.44 0.12 0.50 7.53
VFFC N 02/27/97 1.98 16.41 0.24 1.10 13.85
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 20
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.2 - ALL SOUTHEAST REGION THRIFTS
<TABLE>
<CAPTION>
ROAA ROACE
NPAs/ Price/ Core Before Before
Merger Current Assets Core EPS Extra Extra
Target? Pricing (%) EPS ($) (%) (%)
Ticker (Y/N) Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C>
Maximum 5.46 79.17 0.79 2.07 24.85
Minimum - 10.60 (0.60) (4.50) (614.26)
Average 0.94 21.90 0.24 0.66 (5.00)
Median 0.51 17.62 0.29 0.92 7.02
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 21
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.2A - SOUTHEAST THRIFTS - SELECT
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BANC BankAtlantic Bancorp, Inc. Fort Lauderdale FL SE SAIF NASDAQ 11/29/83 17.125
BFSB Bedford Bancshares, Inc. Bedford VA SE SAIF NASDAQ 08/22/94 19.375
BKUNA BankUnited Financial Corp. Coral Gables FL SE SAIF NASDAQ 12/11/85 9.750
CFCP Coastal Financial Corp. Myrtle Beach SC SE SAIF NASDAQ 09/26/90 24.000
CFFC Community Financial Corp. Staunton VA SE SAIF NASDAQ 03/30/88 22.000
CMSV Community Savings, MHC North Palm Beach FL SE SAIF NASDAQ 10/24/94 19.750
CNIT CENIT Bancorp, Inc. Norfolk VA SE SAIF NASDAQ 08/06/92 45.000
EBSI Eagle Bancshares Tucker GA SE SAIF NASDAQ 04/01/86 16.875
FFBS FFBS BanCorp, Inc. Columbus MS SE SAIF NASDAQ 07/01/93 22.000
FFCH First Financial Holdings Inc. Charleston SC SE SAIF NASDAQ 11/10/83 27.000
FFFC FFVA Financial Corp. Lynchburg VA SE SAIF NASDAQ 10/12/94 24.500
FFFG F.F.O. Financial Group, Inc. St. Cloud FL SE SAIF NASDAQ 10/13/88 3.750
FFFL Fidelity Bankshares Inc. West Palm Beach FL SE SAIF NASDAQ 01/07/94 18.750
FFLC FFLC Bancorp, Inc. Leesburg FL SE SAIF NASDAQ 01/04/94 26.750
FGHC First Georgia Holding, Inc. Brunswick GA SE SAIF NASDAQ 02/11/87 9.750
FLFC First Liberty Financial Corp. Macon GA SE SAIF NASDAQ 12/06/83 21.500
FOBC Fed One Bancorp Wheeling WV SE SAIF NASDAQ 01/19/95 18.375
FSFC First Southeast Financial Corp Anderson SC SE SAIF NASDAQ 10/08/93 11.000
FSTC First Citizens Corporation Newnan GA SE SAIF NASDAQ 03/01/86 23.750
FTF Texarkana First Financial Corp Texarkana AR SE SAIF AMSE 07/07/95 16.375
GSLC Guaranty Financial Corp. Charlottesville VA SE SAIF NASDAQ NA 9.500
HARB Harbor Federal Savings Bk, MHC Fort Pierce FL SE SAIF NASDAQ 01/06/94 37.250
HBS Haywood Bancshares, Inc. Waynesville NC SE BIF AMSE 12/18/87 16.750
KSAV KS Bancorp, Inc. Kenly NC SE SAIF NASDAQ 12/30/93 19.750
LIFB Life Bancorp, Inc. Norfolk VA SE SAIF NASDAQ 10/11/94 20.000
MGNL Magna Bancorp, Inc. Hattiesburg MS SE SAIF NASDAQ 03/13/91 18.250
PDB Piedmont Bancorp, Inc. Hillsborough NC SE SAIF AMSE 12/08/95 10.375
PERT Perpetual Bank, MHC Anderson SC SE SAIF NASDAQ 10/26/93 26.000
PFSL Pocahontas FS&LA, MHC Pocahontas AR SE SAIF NASDAQ 04/05/94 19.063
PLE Pinnacle Bancshares, Inc. Jasper AL SE SAIF AMSE 12/17/86 22.625
SOPN First Savings Bancorp, Inc. Southern Pines NC SE SAIF NASDAQ 01/06/94 19.875
TWIN Twin City Bancorp Bristol TN SE SAIF NASDAQ 01/04/95 18.500
UFRM United Federal Savings Bank Rocky Mount NC SE SAIF NASDAQ 07/01/80 8.250
VFFC Virginia First Financial Corp. Petersburg VA SE SAIF NASDAQ 01/01/78 15.750
Maximum 45.000
Minimum 3.750
Average 19.392
Median 19.219
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 22
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.2A -SOUTHEAST THRIFTS - SELECT
<TABLE>
<CAPTION>
Tangible
Current Price/ Current Current Current Total Equity/ Equity/ Core
Market LTM Price/ Price/ Tang Price/ Dividend Assets Assets Tang Assets EPS
Value Core EPS B Value Book Value Assets Yield ($000) (%) (%) ($)
Ticker ($M) (x) (%) (%) (%) (%) Mst RctQ Mst RctQ Mst RctQ LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BANC 318.29 18.03 180.45 194.16 11.61 0.85 2,170,480 6.44 6.01 0.95
BFSB 22.16 12.66 113.44 113.44 17.10 2.48 129,601 14.26 14.26 1.53
BKUNA 83.11 21.67 128.46 160.36 5.80 - 1,329,044 7.39 6.55 0.45
CFCP 82.85 20.51 286.40 286.40 18.25 1.83 453,955 6.37 6.37 1.17
CFFC 27.99 13.02 121.95 121.95 16.80 2.55 166,664 13.78 13.78 1.69
CMSV 96.97 16.19 127.42 127.42 14.80 4.05 655,209 11.62 11.62 1.22
CNIT 73.51 18.60 152.28 167.16 10.72 2.22 685,962 7.04 6.45 2.42
EBSI 76.82 14.67 132.46 132.46 11.53 3.56 666,166 8.71 8.71 1.15
FFBS 34.44 18.80 131.89 131.89 27.09 2.27 127,125 19.39 19.39 1.17
FFCH 170.24 14.06 176.70 176.70 10.75 2.67 1,582,274 6.09 6.09 1.92
FFFC 114.97 18.70 143.78 146.97 21.54 1.63 533,826 13.95 13.69 1.31
FFFG 31.61 17.05 168.16 168.16 10.16 - 311,028 6.05 6.05 0.22
FFFL 126.46 24.35 154.70 156.12 14.44 4.27 875,998 9.33 9.25 0.77
FFLC 65.21 21.06 121.59 121.59 18.82 1.79 346,442 15.48 15.48 1.27
FGHC 19.84 15.98 164.97 183.96 13.18 0.82 150,551 8.01 7.24 0.61
FLFC 153.30 16.04 187.45 213.29 12.64 1.86 1,212,681 7.37 6.60 1.34
FOBC 45.18 14.13 108.86 114.49 13.21 3.16 341,897 11.69 11.18 1.30
FSFC 48.27 15.49 143.04 143.04 14.81 1.82 326,013 10.36 10.36 0.71
FSTC 38.42 9.42 156.46 198.91 14.66 1.85 257,288 9.37 7.52 2.52
FTF 30.02 10.36 114.27 114.27 18.37 2.75 163,571 16.07 16.07 1.58
GSLC 8.78 17.92 132.13 132.13 7.56 1.05 116,177 5.71 5.71 0.53
HARB 183.97 15.39 209.86 218.60 17.35 3.76 1,060,339 8.27 7.96 2.42
HBS 20.11 14.96 100.18 104.30 15.37 3.34 130,859 15.34 14.83 1.12
KSAV 13.10 12.42 95.46 95.55 12.99 3.04 100,840 13.61 13.60 1.59
LIFB 196.94 16.95 130.46 134.77 13.87 2.20 1,419,762 10.63 10.33 1.18
MGNL 250.77 11.77 192.51 200.55 18.69 3.29 1,341,985 9.71 9.36 1.55
PDB 28.54 23.06 145.31 145.31 22.82 3.86 125,086 15.69 15.69 0.45
PERT 39.12 19.12 132.05 132.05 17.54 - 223,000 13.29 13.29 1.36
PFSL 31.04 13.52 133.12 133.12 8.32 4.72 373,084 6.25 6.25 1.41
PLE 20.13 13.23 131.69 136.21 10.30 3.54 195,502 7.82 7.58 1.71
SOPN 73.32 18.23 110.23 110.23 27.57 3.42 265,888 25.01 25.01 1.09
TWIN 15.79 17.29 117.98 117.98 15.00 3.46 105,263 12.71 12.71 1.07
UFRM 25.29 20.12 128.11 128.11 9.59 2.42 263,582 7.49 7.49 0.41
VFFC 91.18 17.12 143.31 148.87 11.25 0.64 808,545 7.85 7.58 0.92
Maximum 318.29 24.35 286.40 286.40 27.57 4.72 2,170,480 25.01 25.01 2.52
Minimum 8.78 9.42 95.46 95.55 5.80 - 100,840 5.71 5.71 0.22
Average 78.17 16.53 144.62 150.31 14.84 2.39 559,285 10.83 10.59 1.24
Median 46.73 16.57 132.30 135.49 14.55 2.45 333,955 9.54 9.31 1.20
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 23
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.2A -SOUTHEAST THRIFTS - SELECT
<TABLE>
<CAPTION>
ROAA ROACE ROAA ROACE
Before Before NPAs/ Price/ Core Before Before
Extra Extra Merger Current Assets Core EPS Extra Extra
(%) (%) Target? Pricing (%) EPS ($) (%) (%)
Ticker LTM LTM (Y/N) Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BANC 0.85 10.90 N 02/27/97 0.72 16.47 0.26 0.21 3.06
BFSB 1.06 7.02 N 02/27/97 0.03 14.68 0.33 1.10 7.73
BKUNA 0.40 2.35 N 02/27/97 0.66 18.75 0.13 0.62 7.38
CFCP 0.88 14.38 N 02/27/97 0.19 19.35 0.31 1.12 18.06
CFFC 1.04 7.50 N 02/27/97 0.35 11.96 0.46 1.41 10.22
CMSV 0.64 5.37 N 02/27/97 0.63 22.44 0.22 0.71 6.11
CNIT 0.40 5.61 N 02/27/97 0.77 14.24 0.79 (0.07) (0.96)
EBSI 0.59 6.63 N 02/27/97 0.88 15.07 0.28 0.75 8.43
FFBS 1.13 5.72 N 02/27/97 0.32 17.74 0.31 1.50 7.70
FFCH 0.52 8.24 N 02/27/97 1.10 12.98 0.52 0.86 14.13
FFFC 1.05 6.68 N 02/27/97 0.36 17.50 0.35 1.34 9.33
FFFG 0.21 3.28 N 02/27/97 2.94 18.75 0.05 (0.63) (9.56)
FFFL 0.43 4.36 N 02/27/97 0.36 26.04 0.18 0.74 7.89
FFLC 0.65 3.94 N 02/27/97 0.30 20.90 0.32 0.94 5.92
FGHC 0.56 6.79 N 02/27/97 1.21 17.41 0.14 0.81 10.10
FLFC 0.80 11.32 N 02/27/97 NA 17.34 0.31 1.00 15.15
FOBC 0.69 5.70 N 02/27/97 0.17 13.51 0.34 0.99 8.51
FSFC (0.01) (0.08) N 02/27/97 0.10 15.28 0.18 0.97 9.57
FSTC 2.04 19.36 N 02/27/97 NA 10.60 0.56 1.80 19.58
FTF 1.39 7.41 N 02/27/97 0.08 11.37 0.36 1.50 9.39
GSLC 0.46 7.77 N 02/27/97 1.94 79.17 0.03 0.63 11.16
HARB 0.91 10.74 N 02/27/97 0.57 15.27 0.61 1.17 14.41
HBS 0.70 4.57 N 02/27/97 2.33 11.96 0.35 (0.04) (0.26)
KSAV 0.88 5.94 N 02/27/97 0.27 12.99 0.38 1.11 7.96
LIFB 0.68 5.52 N 02/27/97 0.44 14.71 0.34 0.90 8.56
MGNL 1.37 13.90 N 02/27/97 2.47 12.33 0.37 1.72 17.46
PDB (0.21) (0.77) N 02/27/97 0.62 NM (0.16) (4.50) (22.16)
PERT 0.76 6.85 N 02/27/97 0.26 17.11 0.38 1.08 7.69
PFSL 0.55 9.15 N 02/27/97 0.26 13.62 0.35 0.62 10.14
PLE 0.51 6.55 N 02/27/97 1.56 12.57 0.45 0.92 11.83
SOPN 1.34 5.18 N 02/27/97 0.08 16.56 0.30 1.77 7.02
TWIN 0.62 4.69 N 02/27/97 0.26 51.39 0.09 0.38 3.02
UFRM 0.27 3.38 N 02/27/97 1.01 NM (0.02) (1.32) (16.96)
VFFC 1.42 17.69 N 02/27/97 1.98 16.41 0.24 1.10 13.85
Maximum 2.04 19.36 2.94 79.17 0.79 1.80 19.58
Minimum (0.21) (0.77) 0.03 10.60 (0.16) (4.50) (22.16)
Average 0.75 7.17 0.79 18.95 0.30 0.68 7.10
Median 0.69 6.59 0.51 15.85 0.32 0.93 8.47
</TABLE>
SOURCE; SNL SECURITIES AND F&C CALCULATIONS 24
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.3 - GEORGIA THRIFTS
<TABLE>
<CAPTION>
Deposit Current Current
Insurance Stock Market
Agency Price Value
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CCFH CCF Holding Company Jonesboro GA SE SAIF NASDAQ 07/12/95 16.250 14.88
EBSI Eagle Bancshares Tucker GA SE SAIF NASDAQ 04/01/86 16.875 76.82
FGHC First Georgia Holding, Inc. Brunswick GA SE SAIF NASDAQ 02/11/87 9.750 19.84
FLAG FLAG Financial Corp. LaGrange GA SE SAIF NASDAQ 12/11/86 12.250 24.95
FLFC First Liberty Financial Corp. Macon GA SE SAIF NASDAQ 12/06/83 21.500 153.30
FSTC First Citizens Corporation Newnan GA SE SAIF NASDAQ 03/01/86 23.750 38.42
Maximum 23.750 153.30
Minimum 9.750 14.88
Average 16.729 54.70
Median 16.563 31.69
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 25
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.3 - GEORGIA THRIFTS
<TABLE>
<CAPTION>
Tangible ROAA ROACE
Price/ Current Current Current Total Equity/ Equity/ Core Before Before
LTM Price/ Price/ Tang Price/ Dividend Assets Assets T Assets EPS Extra Extra
Core EPS B Value Book Value Assets Yield ($000) (%) (%) ($) (%) (%)
Ticker (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CCFH 27.08 113.32 113.32 16.81 3.077 88,509 14.84 14.84 0.60 0.47 2.39
EBSI 14.67 132.46 132.46 11.53 3.556 666,166 8.71 8.71 1.15 0.59 6.63
FGHC 15.98 164.97 183.96 13.18 0.821 150,551 8.01 7.24 0.61 0.56 6.79
FLAG 122.50 123.86 123.86 10.90 2.776 228,914 8.80 8.80 0.10 (0.07) (0.75)
FLFC 16.04 187.45 213.29 12.64 1.860 1,212,681 7.37 6.60 1.34 0.80 11.32
FSTC 9.42 156.46 198.91 14.66 1.853 257,288 9.37 7.52 2.52 2.04 19.36
Maximum 122.50 187.45 213.29 16.81 3.56 1,212,681 14.84 14.84 2.52 2.04 19.36
Minimum 9.42 113.32 113.32 10.90 0.82 88,509 7.37 6.60 0.10 (0.07) (0.75)
Average 34.28 146.42 160.97 13.29 2.32 434,018 9.52 8.95 1.05 0.73 7.62
Median 16.01 144.46 158.21 12.91 2.32 243,101 8.76 8.12 0.88 0.58 6.71
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 26
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.3 - GEORGIA THRIFTS
<TABLE>
<CAPTION>
ROAA ROACE
NPAs/ Price/ Core Before Before
Merger Current Assets Core EPS Extra Extra
Target? Pricing (%) EPS ($) (%) (%)
Ticker (Y/N) Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C>
CCFH N 02/27/97 NA 40.63 0.10 0.42 2.58
EBSI N 02/27/97 0.88 15.07 0.28 0.75 8.43
FGHC N 02/27/97 1.21 17.41 0.14 0.81 10.10
FLAG N 02/27/97 3.67 NM (0.46) (2.81) (30.67)
FLFC N 02/27/97 NA 17.34 0.31 1.00 15.15
FSTC N 02/27/97 NA 10.60 0.56 1.80 19.58
Maximum 3.67 40.63 0.56 1.80 19.58
Minimum 0.88 10.60 (0.46) (2.81) (30.67)
Average 1.92 20.21 0.16 0.33 4.20
Median 1.21 17.34 0.21 0.78 9.27
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 27
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II-4 - COMPARATIVES GENERAL
<TABLE>
<CAPTION>
Total Current Current
Number Assets Stock Market
of ($000) Price Value
Ticker Short Name City State Offices Mst RctQ IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CASH First Midwest Financial, Inc. Storm Lake IA 12 369,885 9/20/93 16.750 48.52
FFHH FSF Financial Corp. Hutchinson MN 11 362,373 10/7/94 17.125 55.32
FFLC FFLC Bancorp, Inc. Leesburg FL 8 346,442 1/4/94 26.750 65.21
HALL Hallmark Capital Corp. West Allis WI 3 396,808 1/3/94 18.500 26.69
HBFW Home Bancorp Fort Wayne IN 9 325,168 3/30/95 19.500 51.73
KNK Kankakee Bancorp, Inc. Kankakee IL 9 350,643 1/6/93 27.875 39.44
PFDC Peoples Bancorp Auburn IN 6 280,339 7/7/87 20.750 47.85
SFSB SuburbFed Financial Corp. Flossmoor IL 12 404,092 3/4/92 22.750 28.55
SOPN First Savings Bancorp, Inc. Southern Pines NC 5 265,888 1/6/94 19.875 73.32
SWBI Southwest Bancshares Hometown IL 6 382,375 6/24/92 19.875 52.42
WCBI Westco Bancorp Westchester IL 1 310,992 6/26/92 21.875 56.15
Maximum 12 404,092 3/30/95 27.875 73.32
Minimum 1 265,888 7/7/87 16.750 26.69
Average 7 345,000 1/14/93 21.057 49.56
Median 8 350,643 9/20/93 19.875 51.73
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 28
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.5 -COMPARATIVES OPERATIONS
<TABLE>
<CAPTION>
Net Income Loan Total Total
Average Before Return on Return on Loss Noninterest Noninterest
Assets Net Income Extra Items Avg Assets Avg Equity Provision Income Expense
($000) ($000) ($000) (%) (%) ($000) ($000) ($000)
Short Name LTM LTM LTM LTM LTM LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Midwest Financial, Inc. 345,540 2,590 2,590 0.75 6.38 100 1,457 6,712
FSF Financial Corp. 339,057 1,969 1,969 0.58 4.02 66 1,349 7,075
FFLC Bancorp, Inc. 333,667 2,184 2,184 0.65 3.94 107 799 6,634
Hallmark Capital Corp. 364,139 1,571 1,571 0.43 5.81 597 1,084 5,995
Home Bancorp 316,998 1,658 1,658 0.52 3.36 8 231 4,877
Kankakee Bancorp, Inc. 356,527 1,776 1,776 0.50 4.95 42 1,320 8,470
Peoples Bancorp 280,097 3,125 3,125 1.12 7.26 57 636 4,493
SuburbFed Financial Corp. 378,341 1,052 1,052 0.28 4.04 193 2,864 10,322
First Savings Bancorp, Inc. 259,596 3,471 3,471 1.34 5.18 - 381 3,674
Southwest Bancshares 365,454 2,628 2,628 0.72 6.30 24 621 7,022
Westco Bancorp 309,293 3,288 3,288 1.06 6.83 - 776 5,275
Maximum 378,341 3,471 3,471 1.34 7.26 597 2,864 10,322
Minimum 259,596 1,052 1,052 0.28 3.36 - 231 3,674
Average 331,701 2,301 2,301 0.72 5.28 109 1,047 6,414
Median 339,057 2,184 2,184 0.65 5.18 57 799 6,634
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 29
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.5 -COMPARATIVES OPERATIONS
<TABLE>
<CAPTION>
Net Loan Common Dividend Interest Interest Net
Chargeoffs/ LTM EPS Dividends Payout Income/ Expense/ Income/
Avg Loans After Extra Per Share Ratio Avg Assets Avg Assets Avg Assets
(%) ($) ($) (%) (%) (%) (%)
Short Name LTM LTM LTM LTM LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C>
First Midwest Financial, Inc. 0.03 0.94 0.31 32.97 7.61 4.43 3.18
FSF Financial Corp. 0.02 0.61 0.50 81.97 7.17 4.21 2.96
FFLC Bancorp, Inc. 0.01 0.85 0.38 44.71 7.26 3.88 3.37
Hallmark Capital Corp. NA 1.10 - - 7.35 4.95 2.40
Home Bancorp - 0.61 0.15 24.59 7.31 4.39 2.92
Kankakee Bancorp, Inc. 0.03 1.18 0.40 33.90 7.24 4.26 2.98
Peoples Bancorp 0.01 1.34 0.58 43.28 7.75 3.99 3.75
SuburbFed Financial Corp. - 0.80 0.32 40.00 6.99 4.21 2.79
First Savings Bancorp, Inc. - 0.89 0.74 83.15 7.31 3.55 3.76
Southwest Bancshares 0.01 0.91 0.73 80.22 7.45 4.18 3.27
Westco Bancorp - 1.16 0.50 43.39 7.56 4.00 3.56
Maximum 0.03 1.34 0.74 83.15 7.75 4.95 3.76
Minimum - 0.61 - - 6.99 3.55 2.40
Average 0.01 0.94 0.42 46.20 7.36 4.19 3.18
Median 0.01 0.91 0.40 43.28 7.31 4.21 3.18
<CAPTION>
Gain on Real
Sale/ Estate
Avg Assets Expense
(%) ($000)
Short Name LTM LTM
<S> <C> <C>
First Midwest Financial, Inc. 0.01 6
FSF Financial Corp. 0.01 -
FFLC Bancorp, Inc. - (10)
Hallmark Capital Corp. 0.02 -
Home Bancorp - -
Kankakee Bancorp, Inc. 0.22 (45)
Peoples Bancorp - 3
SuburbFed Financial Corp. 0.11 2
First Savings Bancorp, Inc. - (7)
Southwest Bancshares - (682)
Westco Bancorp 0.03 -
Maximum 0.22 6
Minimum - (682)
Average 0.04 (67)
Median 0.01 -
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 30
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.5 -COMPARATIVES OPERATIONS
<TABLE>
<CAPTION>
Noninterest G&A Noninterest Net Oper Total Amortization
Income/ Expense/ Expense/ Expenses/ Nonrecurring of Tax
Avg Assets Avg Assets Avg Assets Avg Assets Expense Intangibles Provision
(%) (%) (%) (%) ($000) ($000) ($000)
Short Name LTM LTM LTM LTM LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C>
First Midwest Financial, Inc. 0.42 1.87 1.94 1.45 1,266.00 232.00 1,812.00
FSF Financial Corp. 0.40 2.09 2.09 1.69 1,031.00 - 1,290.00
FFLC Bancorp, Inc. 0.24 1.99 1.99 1.75 1,655.00 - 1,478.00
Hallmark Capital Corp. 0.30 1.65 1.65 1.35 877.00 - 854.00
Home Bancorp 0.07 1.54 1.54 1.47 1,648.00 - 1,295.00
Kankakee Bancorp, Inc. 0.37 2.32 2.38 1.95 1,700.00 232.00 713.00
Peoples Bancorp 0.23 1.60 1.60 1.38 1,501.00 - 1,971.00
SuburbFed Financial Corp. 0.76 2.72 2.73 1.96 1,691.00 47.00 564.00
First Savings Bancorp, Inc. 0.15 1.42 1.42 1.27 1,159.00 - 1,833.00
Southwest Bancshares 0.17 2.11 1.92 1.94 1,700.00 - 1,205.00
Westco Bancorp 0.25 1.71 1.71 1.45 1,610.00 - 1,709.00
Maximum 0.76 2.72 2.73 1.96 1,700.00 232.00 1,971.00
Minimum 0.07 1.42 1.42 1.27 877.00 - 564.00
Average 0.31 1.91 1.91 1.61 1,439.82 46.45 1,338.55
Median 0.25 1.87 1.92 1.47 1,610.00 - 1,295.00
<CAPTION>
Extra and
After Tax
Items
($000)
Short Name LTM
<S> <C>
First Midwest Financial, Inc. -
FSF Financial Corp. -
FFLC Bancorp, Inc. -
Hallmark Capital Corp. -
Home Bancorp -
Kankakee Bancorp, Inc. -
Peoples Bancorp -
SuburbFed Financial Corp. -
First Savings Bancorp, Inc. -
Southwest Bancshares -
Westco Bancorp -
Maximum -
Minimum -
Average -
Median -
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 31
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.5 -COMPARATIVES OPERATIONS
<TABLE>
<CAPTION>
Core Yield on Cost of Interest
Efficiency Income/ Preferred Int Earning Int Bearing Effective Yield
Ratio Avg Assets Dividends Assets Liabilities Tax Rate Spread
(%) (%) ($000) (%) (%) (%) (%)
Short Name LTM LTM LTM LTM LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C>
First Midwest Financial, 52.08 0.98 - 7.84 5.10 41.16 2.74
Inc.
FSF Financial Corp. 62.10 0.77 - 7.39 4.96 39.58 2.43
FFLC Bancorp, Inc. 55.10 0.98 - 7.52 4.72 40.36 2.80
Hallmark Capital Corp. 61.04 0.58 - 7.53 5.51 35.22 2.02
Home Bancorp 51.42 0.86 - 7.41 5.25 43.85 2.16
Kankakee Bancorp, Inc. 69.44 0.67 - 7.56 4.78 28.65 2.78
Peoples Bancorp 40.29 1.46 - 7.81 4.76 38.68 3.05
SuburbFed Financial Corp. 76.64 0.50 - 7.20 4.75 34.90 2.45
First Savings Bancorp, Inc. 36.31 1.63 - 7.44 4.89 34.56 2.55
Southwest Bancshares 61.26 1.02 - 7.91 4.83 31.44 3.08
Westco Bancorp 44.76 1.38 - 7.76 4.88 34.20 2.88
Maximum 76.64 1.63 - 7.91 5.51 43.85 3.08
Minimum 36.31 0.50 - 7.20 4.72 28.65 2.02
Average 55.49 0.98 - 7.58 4.95 36.60 2.63
Median 55.10 0.98 - 7.53 4.88 35.22 2.74
<CAPTION>
Loan Loss
Provisions/
Avg Assets
(%)
Short Name LTM
<S> <C>
First Midwest Financial, Inc. 0.03
FSF Financial Corp. 0.02
FFLC Bancorp, Inc. 0.03
Hallmark Capital Corp. 0.16
Home Bancorp 0.00
Kankakee Bancorp, Inc. 0.01
Peoples Bancorp 0.02
SuburbFed Financial Corp. 0.05
First Savings Bancorp, Inc. -
Southwest Bancshares 0.01
Westco Bancorp -
Maximum 0.16
Minimum -
Average 0.03
Median 0.02
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 32
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II-6 - COMPARATIVE PRICING
<TABLE>
<CAPTION>
Current Current Price/ Current Current
Stock Market LTM Price/ Price/Tang Price/
Abbreviated Price Value Core EPS Book Value Book Value Assets
Ticker Name City State ($) ($M) (x) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CASH FirstMidwestFin-IA Storm Lake IA 16.750 48.52 12.14 111.07 125.47 13.12
FFHH FSFFinancial-MN Hutchinson MN 17.125 55.32 21.41 108.32 108.32 15.27
FFLC FFLCBancorp,Inc-FL Leesburg FL 26.750 65.21 21.06 121.59 121.59 18.82
HALL HallmarkCapCorp-WI West Allis WI 18.500 26.69 12.59 95.07 95.07 6.73
HBFW HomeBancorp-IN Fort Wayne IN 19.500 51.73 19.12 113.70 113.70 15.91
KNK KankakeeBancorp-IL Kankakee IL 27.875 39.44 17.64 108.08 115.66 11.25
PFDC PeoplesBancorp-IN Auburn IN 20.750 47.85 11.40 111.38 111.38 17.08
SFSB SuburbFedFinCp-IL Flossmoor IL 22.750 28.55 15.91 108.75 109.27 7.06
SOPN FirstSavingsBan-NC Southern NC 19.875 73.32 18.23 110.23 110.23 27.57
Pines
SWBI SouthwestBnshrs-IL Hometown IL 19.875 52.42 15.41 131.54 131.54 13.71
WCBI WestcoBancorp-IL Westchester IL 21.875 56.15 14.49 117.42 117.42 18.06
Maximum 27.875 73.32 21.41 131.54 131.54 27.57
Minimum 16.750 26.69 11.40 95.07 95.07 6.73
Average 21.057 49.56 16.31 112.47 114.51 14.96
Median 19.875 51.73 15.91 111.07 113.70 15.27
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 33
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II-6 - COMPARATIVES PRICING
<TABLE>
<CAPTION>
Tangible Return on ROACE
Current Total Equity/ Equity/ Core Avg Assets Before NPAs/ Price/
Dividend Assets Assets Tang/Assets EPS Before Extra Extra Merger Current Assets Core
Yield ($000) (%) (%) ($) (%) (%) Target? Pricing (%) EPS
Ticker (%) MRQ MRQ MRQ LTM LTM LTM (Y/N) Date MRQ (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CASH 2.15 369,885 11.81 10.60 1.38 0.75 6.38 N 2/27/97 0.75 12.69
FFHH 2.92 362,373 12.40 12.40 0.80 0.58 4.02 N 2/27/97 0.04 17.84
FFLC 1.79 346,442 15.48 15.48 1.27 0.65 3.94 N 2/27/97 0.30 20.90
HALL - 396,808 7.07 7.07 1.47 0.43 5.81 N 2/27/97 0.02 11.56
HBFW 1.03 325,168 13.99 13.99 1.02 0.52 3.36 N 2/27/97 - 18.75
KNK 1.72 350,643 10.41 9.79 1.58 0.50 4.95 N 2/27/97 0.60 13.40
PFDC 2.89 280,339 15.34 15.34 1.82 1.12 7.26 N 2/27/97 0.34 12.65
SFSB 1.41 404,092 6.50 6.47 1.43 0.28 4.04 N 2/27/97 0.25 14.97
SOPN 3.42 265,888 25.01 25.01 1.09 1.34 5.18 N 2/27/97 0.08 16.56
SWBI 3.82 382,375 10.42 10.42 1.29 0.72 6.30 N 2/27/97 0.24 15.06
WCBI 2.74 310,992 15.38 15.38 1.51 1.06 6.83 N 2/27/97 0.50 14.02
Maximum 3.82 404,092 25.01 25.01 1.82 1.34 7.26 0.75 20.90
Minimum - 265,888 6.50 6.47 0.80 0.28 3.36 - 11.56
Average 2.17 345,000 13.07 12.90 1.33 0.72 5.28 0.28 15.31
Median 2.15 350,643 12.40 12.40 1.38 0.65 5.18 0.25 14.97
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 34
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II-6 - COMPARATIVES PRICING
<TABLE>
<CAPTION>
Return on
Avg Assets ROACE
Core Before Before
EPS Extra Extra
($) (%) (%)
Ticker MRQ MRQ MRQ
<S> <C> <C> <C>
CASH 0.33 1.01 8.78
FFHH 0.24 0.81 6.24
FFLC 0.32 0.94 5.92
HALL 0.40 0.58 8.28
HBFW 0.26 0.80 5.66
KNK 0.52 0.91 8.90
PFDC 0.41 1.34 8.82
SFSB 0.38 0.66 10.05
SOPN 0.30 1.77 7.02
SWBI 0.33 0.96 9.31
WCBI 0.39 1.49 9.66
Maximum 0.52 1.77 10.05
Minimum 0.24 0.58 5.66
Average 0.35 1.02 8.06
Median 0.33 0.94 8.78
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 35
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.7 -COMPARATIVES BALANCE SHEET
<TABLE>
<CAPTION>
Total Mortgage- Investment & Loan
Total Cash and Backed Net Foreclosed Servicing Total
Assets Investments Securities Loans Real Estate Rights Intangibles
($000) ($000) ($000) ($000) ($000) ($000) ($000)
Short Name MRQ MRQ MRQ MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C>
First Midwest Financial, Inc. 369,885 110,502 29,101 244,066 63 - 5,000
FSF Financial Corp. 362,373 127,273 84 226,164 51 - -
FFLC Bancorp, Inc. 346,442 110,664 31,529 227,948 483 - -
Hallmark Capital Corp. 396,808 135,708 55,909 254,964 18 - -
Home Bancorp 325,168 63,395 - 256,534 - - -
Kankakee Bancorp, Inc. 350,643 105,798 34,714 233,323 215 39 2,393
Peoples Bancorp 280,339 54,445 591 222,509 74 - -
SuburbFed Financial Corp. 404,092 154,404 133,486 241,815 14 97 126
First Savings Bancorp, Inc. 265,888 77,213 1,548 184,600 - - -
Southwest Bancshares 382,375 101,646 24,058 262,433 7,189 37 -
Westco Bancorp 310,992 82,829 - 223,898 - - -
Maximum 404,092 154,404 133,486 262,433 7,189 97 5,000
Minimum 265,888 54,445 - 184,600 - - -
Average 345,000 102,171 28,275 234,387 737 16 684
Median 350,643 105,798 24,058 233,323 51 - -
<CAPTION>
Other Total
Assets Deposit
($000) ($000)
Short Name MRQ MRQ
<S> <C> <C>
First Midwest Financial, Inc. 10,254 232,612
FSF Financial Corp. 8,267 200,869
FFLC Bancorp, Inc. 7,347 282,664
Hallmark Capital Corp. 6,118 260,482
Home Bancorp 5,239 277,040
Kankakee Bancorp, Inc. 8,235 277,348
Peoples Bancorp 3,311 234,186
SuburbFed Financial Corp. 7,636 309,581
First Savings Bancorp, Inc. 4,075 196,699
Southwest Bancshares 11,070 280,434
Westco Bancorp 4,265 255,154
Maximum 11,070 309,581
Minimum 3,311 196,699
Average 6,892 255,188
Median 7,347 260,482
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 36
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.7 -COMPARATIVES BALANCE SHEET
<TABLE>
<CAPTION>
Total Subordinated Other Total Preferred Common Total
Borrowings Debt Liabilities Liabilities Equity Equity Equity
($000) ($000) ($000) ($000) ($000) ($000) ($000)
Short Name MRQ MRQ MRQ MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C>
First Midwest Financial, Inc. 88,825 - 4,779 326,216 - 43,669 43,669
FSF Financial Corp. 114,621 - 1,957 317,447 - 44,926 44,926
FFLC Bancorp, Inc. 8,198 - 1,954 292,816 - 53,626 53,626
Hallmark Capital Corp. 104,586 - 3,666 368,734 - 28,074 28,074
Home Bancorp - - 2,647 279,687 - 45,481 45,481
Kankakee Bancorp, Inc. 34,545 - 2,256 314,149 - 36,494 36,494
Peoples Bancorp 2,288 - 856 237,330 - 43,009 43,009
SuburbFed Financial Corp. 62,938 - 5,319 377,838 - 26,254 26,254
First Savings Bancorp, Inc. 392 - 2,299 199,390 - 66,498 66,498
Southwest Bancshares 55,158 - 6,924 342,516 - 39,859 39,859
Westco Bancorp - - 8,005 263,159 - 47,833 47,833
Maximum 114,621 - 8,005 377,838 - 66,498 66,498
Minimum - - 856 199,390 - 26,254 26,254
Average 42,868 - 3,697 301,753 - 43,248 43,248
Median 34,545 - 2,647 314,149 - 43,669 43,669
<CAPTION>
Regulatory Regulatory
Tangible Core
Capital Capital
($000) ($000)
Short Name MRQ MRQ
<S> <C> <C>
First Midwest Financial, Inc. 32,436 32,436
FSF Financial Corp. 39,878 39,878
FFLC Bancorp, Inc. 41,651 41,651
Hallmark Capital Corp. NA 24,621
Home Bancorp 38,549 38,549
Kankakee Bancorp, Inc. 28,908 28,908
Peoples Bancorp 34,061 34,061
SuburbFed Financial Corp. 23,328 23,375
First Savings Bancorp, Inc. NA 66,170
Southwest Bancshares 28,187 28,187
Westco Bancorp 39,751 39,751
Maximum 41,651 66,170
Minimum 23,328 23,375
Average 34,083 36,144
Median 34,061 34,061
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 37
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.7 -COMPARATIVES BALANCE SHEET
<TABLE>
<CAPTION>
Regulatory Loan Loss
Total Tangible Core Risk-Based NPAs/ Reserves/ Reserves/
Capital Capital/ Capital/ Capital/ Assets Assets NPLs
($000) Tangible Adj Tangible Risk-Weightd (%) (%) (%)
Short Name MRQ Assets (%) Assets (%) Assets (%) MRQ MRQ MRQ
<S>
First Midwest Financial, Inc. 34,203 NA NA NA 0.75 0.64 87.38
FSF Financial Corp. 40,675 11.28 11.28 22.79 0.04 0.22 821.65
FFLC Bancorp, Inc. 42,714 12.12 12.12 28.19 0.30 0.31 159.61
Hallmark Capital Corp. 26,141 NA NA NA 0.02 0.38 NM
Home Bancorp 39,935 12.12 12.12 27.12 - 0.43 NM
Kankakee Bancorp, Inc. 30,983 8.10 8.10 15.09 0.60 0.67 122.92
Peoples Bancorp 34,929 12.09 12.09 25.63 0.34 0.32 102.77
SuburbFed Financial Corp. 23,736 5.84 5.85 12.48 0.25 0.26 105.23
First Savings Bancorp, Inc. 66,779 NA NA NA 0.08 0.23 274.32
Southwest Bancshares 28,926 7.43 7.43 14.94 0.24 0.20 92.60
Westco Bancorp 40,459 12.81 12.81 29.91 0.50 0.28 56.35
Maximum 66,779 12.81 12.81 29.91 0.75 0.67 821.65
Minimum 23,736 5.84 5.85 12.48 - 0.20 56.35
Average 37,225 10.22 10.23 22.02 0.28 0.36 202.54
Median 34,929 11.69 11.69 24.21 0.25 0.31 105.23
<CAPTION>
Publicly Tangible
Reported Publicly
Book Value Book Value
($) ($)
Short Name MRQ MRQ
<S> <C> <C>
First Midwest Financial, Inc. 15.08 13.35
FSF Financial Corp. 15.81 15.81
FFLC Bancorp, Inc. 22.00 22.00
Hallmark Capital Corp. 19.46 19.46
Home Bancorp 17.15 17.15
Kankakee Bancorp, Inc. 25.79 24.10
Peoples Bancorp 18.63 18.63
SuburbFed Financial Corp. 20.92 20.82
First Savings Bancorp, Inc. 18.03 18.03
Southwest Bancshares 15.11 15.11
Westco Bancorp 18.63 18.63
Maximum 25.79 24.10
Minimum 15.08 13.35
Average 18.78 18.46
Median 18.63 18.63
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 38
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.7 -COMPARATIVES BALANCE SHEET
<TABLE>
<CAPTION>
Earn Assets/ Full-Time Loans Cash and
Int Bearing Equivalent Serviced MBS/ Inv.(ex MBS)
Liabilities Employees For Others Assets Assets
(%) (Actual) ($000) ($000) ($000)
Short Name MRQ MRQ MRQ RQ MRQ
<S> <C> <C> <C> <C> <C>
First Midwest Financial, Inc. 110.76 96 3,027 7.87 29.87
FSF Financial Corp. 112.38 90 40,437 0.02 35.12
FFLC Bancorp, Inc. 116.51 108 1,557 9.10 31.94
Hallmark Capital Corp. 108.01 75 21,986 14.09 34.20
Home Bancorp 115.88 84 2,809 - 19.50
Kankakee Bancorp, Inc. 107.90 112 35,377 9.90 30.17
Peoples Bancorp 118.19 76 - 0.21 19.42
SuburbFed Financial Corp. 109.02 152 41,269 33.03 38.21
First Savings Bancorp, Inc. 136.97 39 754 0.58 29.04
Southwest Bancshares 107.56 95 7,559 6.29 26.58
Westco Bancorp 118.84 55 - - 26.63
Maximum 136.97 152 41,269 33.03 38.21
Minimum 107.56 39 - - 19.42
Average 114.73 89 14,070 7.37 29.15
Median 112.38 90 3,027 6.29 29.87
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 39
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.8 - COMPARATIVES RISK CHARACTERISTICS
<TABLE>
<CAPTION>
NPAs + Loans Net Loan
NPAs/ 90+ Pst Due/ NPAs/ Reserves/ Reserves/ Chargeoffs/ Loans/
Assets Assets Equity Loans NPAs Avg Loans Assets
(%) (%) (%) (%) (%) (%) (%)
Short Name MRQ MRQ MRQ MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C>
First Midwest Financial, Inc. 0.75 0.81 6.39 0.97 85.41 0.01 66.63
FSF Financial Corp. 0.04 0.04 0.33 0.35 538.51 0.02 62.80
FFLC Bancorp, Inc. 0.30 0.30 1.92 0.46 103.51 0.01 66.10
Hallmark Capital Corp. 0.02 0.03 0.33 0.59 NM NA 64.64
Home Bancorp - 0.06 - 0.54 NM - 79.32
Kankakee Bancorp, Inc. 0.60 1.16 5.79 1.00 111.69 (0.04) 67.40
Peoples Bancorp 0.34 0.41 2.19 0.40 94.68 0.02 79.69
SuburbFed Financial Corp. 0.25 0.32 3.92 0.44 103.79 0.03 60.11
First Savings Bancorp, Inc. 0.08 0.09 0.33 0.33 274.32 - 69.66
Southwest Bancshares 0.24 0.24 2.33 0.29 80.93 0.04 68.83
Westco Bancorp 0.50 0.50 3.28 0.39 56.35 - 72.28
Maximum 0.75 1.16 6.39 1.00 538.51 0.04 79.69
Minimum - 0.03 - 0.29 - (0.04) 60.11
Average 0.28 0.36 2.44 0.52 131.74 0.01 68.86
Median 0.25 0.30 2.19 0.44 94.68 0.01 67.40
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATION 40
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.8 - COMPARATIVES RISK CHARACTERISTICS
<TABLE>
<CAPTION>
Intangible One Year Earn Assets/
Assets/ Cum Gap/ Net Int Bearing
Equity Assets Loans Liabilities
(%) (%) ($000) (%)
Short Name MRQ MRY MRQ MRQ
<S> <C> <C> <C> <C>
First Midwest Financial, Inc. 11.45 (1.43) 244,066 110.76
FSF Financial Corp. - 12.74 226,164 112.38
FFLC Bancorp, Inc. - NA 227,948 116.51
Hallmark Capital Corp. - (13.66) 254,964 108.01
Home Bancorp - (28.82) 256,534 115.88
Kankakee Bancorp, Inc. 6.56 NA 233,323 107.90
Peoples Bancorp - (26.52) 222,509 118.19
SuburbFed Financial Corp. 0.48 NA 241,815 109.02
First Savings Bancorp, Inc. - (32.47) 184,600 136.97
Southwest Bancshares - NA 262,433 107.56
Westco Bancorp - NA 223,898 118.84
Maximum 11.45 12.74 262,433 136.97
Minimum - (32.47) 184,600 107.56
Average 1.68 (8.20) 234,387 114.73
Median - - 233,323 112.38
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 41
<PAGE>
EXHIBIT III
<PAGE>
FERGUSON & COMPANY
- ------------------
CARROLLTON FEDERAL BANK, FSB
CARROLLTON, GA
<TABLE>
<CAPTION>
1993 1994 1995 YTD 9/96
Num of Quarters Open for Period 4 4 4 3
FINANCIAL HIGHLIGHTS
(All $ Amounts in Thousands)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 312,107 353,552 334,611 355,517
% Change in Assets 3.21 13.28 (5.36) 6.25
Total Loans 263,668 283,088 275,855 275,525
Deposits 269,856 289,447 289,718 307,127
CAPITAL:
Equity Capital 19,805 23,600 26,345 26,092
Tangible Capital 19,519 22,248 25,091 23,761
Core Capital 19,519 22,721 25,091 23,761
Risk-Based Capital 21,558 24,755 26,990 25,536
Equity Capital/Total Assets 6.35 6.68 7.87 7.34
Core Capital/Risk Based Assets 9.24 10.37 11.49 10.24
Core Capital/Adj Tang Assets 6.27 6.44 7.53 6.73
Tangible Cap/Tangible Assets 6.27 6.32 7.53 6.73
Risk-Based Cap/Risk-Wt Assets 10.21 11.30 12.36 11.01
PROFITABILITY:
Net Income(Loss) 2,452.0 1,983.0 3,080.0 343.0
Ret on Avg Assets Bef Ext Item 0.80 0.60 0.89 0.13
Return on Average Equity 13.23 9.14 12.28 1.73
Net Interest Income/Avg Assets 3.77 3.45 3.28 3.31
Noninterest Income/Avg Assets 1.05 0.99 1.46 1.40
Noninterest Expense/Avg Assets 3.37 3.52 3.35 4.44
Yield/Cost Spread 3.99 3.66 3.39 3.50
LIQUIDITY:
Int Earn Assets/Int Bear Liab 100.85 100.96 102.79 100.16
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 2.57 2.19 1.38 2.32
Nonaccrual Loans/Gross Loans 1.44 1.12 0.83 1.81
Nonaccrual Lns/Ln Loss Reserve 132.57 132.98 100.39 247.82
Repos Assets/Tot Assets 0.26 0.27 0.09 0.06
Net Chrg-Off/Av Adj Lns 0.01 0.07 0.12 0.21
Nonmtg 1-4 Constr&Conv Lns/TA 6.43 9.42 13.12 12.87
</TABLE>
SOURCE: TAFS, SHESHUNOFF INFORMATION SERVICES INC. 1
<PAGE>
EXHIBIT IV
<PAGE>
FERGUSON & COMPANY
- ------------------
FIRST FSB OF THE MIDWEST
CASH
STORM LAKE, IA
<TABLE>
<CAPTION>
1993 1994 1995 YTD 9/96
Num of Quarters Open for Period 4 4 4 3
FINANCIAL HIGHLIGHTS
(All $ Amounts in Thousands)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 153,742 278,007 312,659 349,675
% Change in Assets (9.52) 80.83 12.46 11.84
Total Loans 83,781 158,665 203,880 226,184
Deposits 121,508 175,711 194,274 205,890
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 26,068 31,023 35,260 34,397
Tangible Capital 25,748 28,947 31,292 31,342
Core Capital 25,748 28,947 31,292 31,342
Risk-Based Capital 26,500 30,308 33,021 33,084
Equity Capital/Total Assets 16.96 11.16 11.28 9.84
Core Capital/Risk Based Assets 32.21 19.92 16.96 15.50
Core Capital/Adj Tang Assets 16.82 10.52 10.17 9.04
Tangible Cap/Tangible Assets 16.82 10.52 10.17 9.04
Risk-Based Cap/Risk-Wt Assets 33.15 20.86 17.90 16.36
PROFITABILITY:
Net Income(Loss) 1,694 2,933 3,447 1,634
Ret on Avg Assets Bef Ext Item 1.07 1.36 1.25 0.67
Return on Average Equity 8.39 10.27 10.26 6.27
Net Interest Income/Avg Assets 2.97 3.92 3.20 3.02
Noninterest Income/Avg Assets 0.96 0.47 0.86 0.57
Noninterest Expense/Avg Assets 2.14 2.16 1.91 2.42
Yield/Cost Spread 2.54 3.50 2.83 2.72
LIQUIDITY:
Int Earn Assets/Int Bear Liab 119.87 109.99 112.75 107.53
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 1.50 0.41 0.43 1.65
Nonaccrual Loans/Gross Loans 1.41 0.41 0.37 1.13
Nonaccrual Lns/Ln Loss Reserve 153.70 44.38 44.26 143.11
Repos Assets/Tot Assets - - 0.03 0.02
Net Chrg-Off/Av Adj Lns 0.00 0.00 0.02 0.03
Nonmtg 1-4 Constr&Conv Lns/TA 28.24 28.45 31.76 28.09
</TABLE>
SOURCE: TAFS AND BANKSOSURCE BY SHESHUNOFF
INFORMATION SERVICES INC., SEPTEMBER 30, 1996. 1
<PAGE>
FERGUSON & COMPANY
- ------------------
FIRST FEDERAL FSB
FFHH
HUTCHINSON, MN
<TABLE>
<CAPTION>
1993 1994 1995 YTD 9/96
Num of Quarters Open for Period 4 4 4 3
FINANCIAL HIGHLIGHTS
(All $ Amounts in Thousands)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 218,891 237,467 311,363 347,492
% Change in Assets 12.69 8.49 31.12 11.60
Total Loans 119,901 121,788 184,918 218,479
Deposits 166,838 153,529 180,863 189,920
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 20,245 42,369 42,665 38,856
Tangible Capital 20,245 42,959 43,070 39,239
Core Capital 20,245 42,959 43,070 39,239
Risk-Based Capital 20,967 43,473 43,824 40,014
Equity Capital/Total Assets 9.25 17.84 13.70 11.18
Core Capital/Risk Based Assets 20.26 40.66 28.69 22.35
Core Capital/Adj Tang Assets 9.25 18.05 13.81 11.28
Tangible Cap/Tangible Assets 9.25 18.05 13.81 11.28
Risk-Based Cap/Risk-Wt Assets 20.98 41.15 29.20 22.79
PROFITABILITY:
Net Income(Loss) 2,149 1,609 1,510 1,093
Ret on Avg Assets Bef Ext Item 1.04 0.54 0.56 0.45
Return on Average Equity 11.27 3.92 3.53 3.52
Net Interest Income/Avg Assets 3.57 3.51 3.02 2.76
Noninterest Income/Avg Assets 0.88 0.06 0.48 0.51
Noninterest Expense/Avg Assets 2.64 2.64 2.57 2.51
Yield/Cost Spread 3.54 3.31 2.61 2.44
LIQUIDITY:
Int Earn Assets/Int Bear Liab 105.82 116.83 110.86 108.68
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.27 0.39 0.28 0.13
Nonaccrual Loans/Gross Loans 0.12 0.31 0.22 0.10
Nonaccrual Lns/Ln Loss Reserve 19.75 51.58 56.94 28.26
Repos Assets/Tot Assets 0.08 0.04 0.03 0.02
Net Chrg-Off/Av Adj Lns 0.00 0.04 0.01 0.02
Nonmtg 1-4 Constr&Conv Lns/TA 4.50 5.15 5.56 6.45
</TABLE>
SOURCE: TAFS AND BANKSOSURCE BY SHESHUNOFF
INFORMATION SERVICES INC., SEPTEMBER 30, 1996. 2
<PAGE>
FERGUSON & COMPANY
- ------------------
FIRST FSB OF LAKE COUNTY
FFLC
LEESBURG, FL
<TABLE>
<CAPTION>
1993 1994 1995 YTD 9/96
Num of Quarters Open for Period 4 4 4 3
FINANCIAL HIGHLIGHTS
(All $ Amounts in Thousands)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 292,424 310,745 325,994 335,422
% Change in Assets 7.78 6.27 4.91 2.89
Total Loans 126,043 152,774 187,985 214,939
Deposits 241,470 253,063 270,085 279,189
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 27,246 40,659 41,667 40,677
Tangible Capital 27,115 40,848 41,530 40,642
Core Capital 27,115 40,848 41,530 40,642
Risk-Based Capital 27,850 41,717 42,507 41,665
Equity Capital/Total Assets 9.32 13.08 12.78 12.13
Core Capital/Risk Based Assets 24.54 33.23 30.22 27.50
Core Capital/Adj Tang Assets 9.28 13.12 12.75 12.12
Tangible Cap/Tangible Assets 9.28 13.12 12.75 12.12
Risk-Based Cap/Risk-Wt Assets 25.20 33.94 30.93 28.19
PROFITABILITY:
Net Income(Loss) 3,504 3,266 2,654 1,086
Ret on Avg Assets Bef Ext Item 1.24 1.08 0.84 0.44
Return on Average Equity 13.75 9.62 6.61 3.57
Net Interest Income/Avg Assets 3.22 3.14 2.93 3.08
Noninterest Income/Avg Assets 0.25 0.24 0.26 0.27
Noninterest Expense/Avg Assets 1.38 1.67 1.79 2.57
Yield/Cost Spread 2.97 2.81 2.60 2.78
LIQUIDITY:
Int Earn Assets/Int Bear Liab 116.56 111.04 110.52 110.32
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.66 0.49 0.57 0.46
Nonaccrual Loans/Gross Loans 0.39 0.20 0.04 0.27
Nonaccrual Lns/Ln Loss Reserve 70.88 37.86 7.16 59.04
Repos Assets/Tot Assets 0.02 0.03 0.05 0.05
Net Chrg-Off/Av Adj Lns 0.03 0.00 0.01 0.01
Nonmtg 1-4 Constr&Conv Lns/TA 3.58 4.18 4.40 5.36
</TABLE>
SOURCE: TAFS AND BANKSOSURCE BY SHESHUNOFF
INFORMATION SERVICES INC., SEPTEMBER 30, 1996. 3
<PAGE>
FERGUSON & COMPANY
- ------------------
WEST ALLIS SVGS BK
HALL
WEST ALLIS, WI
<TABLE>
<CAPTION>
1993 1994 1995 YTD 9/96
Number of Open Quarters 4 4 4 3
FINANCIAL HIGHLIGHTS
($'s in Thousands)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 170,116 198,492 312,987 387,642
% Change in Assets - 16.68 57.68 23.85
Securities-Book Value 62,713 60,617 133,069 132,993
Securities-Fair Value 63,383 58,984 133,585 133,077
Total Loans & Leases 97,262 128,198 167,941 242,703
Total Deposits 119,580 126,354 212,741 257,142
Loan/Deposit Ratio 81.34 101.46 78.94 94.38
Provision for Loan Losses 487.00 254.00 209.00 427.00
CAPITAL:
Equity Capital 17,217 16,491 19,237 22,946
Total Qualifying Capital(Est) 17,916 18,050 20,254 24,768
Equity Capital/Average Assets 10.12 8.95 7.53 6.47
Tot Qual Cap/Rk Bsd Asts(Est) 20.98 17.45 12.90 11.77
Tier 1 Cap/Rsk Bsed Asts(Est) 20.16 16.58 12.24 11.12
T1 Cap/Avg Assets(Lev Est) 10.26 8.91 6.31 6.12
PROFITABILITY:
Net Income(Loss) 274 674 1,240 875
Return on Average Assets 0.16 0.37 0.49 0.33
Return on Average Equity Cap 1.59 4.00 6.99 5.57
Net Interest Margin 2.66 2.70 2.41 2.36
Net Int Income/Avg Assets 2.72 2.70 2.32 2.30
Noninterest Income/Avg Assets 0.68 0.60 0.43 0.36
Noninterest Exp/Avg Assets 2.89 2.49 1.94 1.99
ASSET QUALITY:
NPL+Frcl RE/Lns+Frcl RE 0.05 0.11 0.02 0.08
NPA's/Equity + LLR 0.27 0.81 0.17 0.79
LLR/Nonperf & Restrcd Lns 1,456 787 2,931 818
Foreclosed RE/Total Assets - 0.01 - 0.01
90+ Day Del Loans/Total Loans 0.02 0.01 0.01 0.01
Loan Loss Reserves/Total Lns 0.72 0.71 0.61 0.57
Net Charge-Offs/Average Loans 0.09 0.04 0.06 0.04
Dom Risk R/E Lns/Tot Dom Lns 7.06 10.50 14.71 21.57
LIQUIDITY:
Brokered Dep/Total Dom Deps - - 28.32 32.74
$100M+ Time Dep/Total Dom Dep 5.59 4.82 16.82 19.77
Int Earn Assets/Int Bear Liab 112.43 109.94 108.44 107.06
Pledged Sec/Total Sec 13.12 5.88 9.87 21.45
Fair Value Sec/Amort Cost Sec 101.07 95.66 100.40 99.49
</TABLE>
SOURCE: TAFS AND BANKSOSURCE BY SHESHUNOFF
INFORMATION SERVICES INC., SEPTEMBER 30, 1996. 4
<PAGE>
FERGUSON & COMPANY
- ------------------
HOME LOAN BANK, FSB
HBFW
FORT WAYNE, IN
<TABLE>
<CAPTION>
1993 1994 1995 YTD 9/96
Num of Quarters Open for Period 0 4 4 3
FINANCIAL HIGHLIGHTS
(All $ Amounts in Thousands)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets - 281,129 301,144 316,947
% Change in Assets - - 7.12 5.25
Total Loans - 205,144 222,808 251,681
Deposits - 256,797 258,245 271,356
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital - 21,869 38,196 38,428
Tangible Capital - 21,869 38,196 38,425
Core Capital - 21,869 38,196 38,425
Risk-Based Capital - 23,179 39,574 39,811
Equity Capital/Total Assets - 7.78 12.68 12.12
Core Capital/Risk Based Assets - 19.70 29.02 26.18
Core Capital/Adj Tang Assets - 7.78 12.68 12.12
Tangible Cap/Tangible Assets - 7.78 12.68 12.12
Risk-Based Cap/Risk-Wt Assets - 20.87 30.07 27.12
PROFITABILITY:
Net Income(Loss) - 499 2,218 882
Ret on Avg Assets Bef Ext Item - 0.18 0.75 0.38
Return on Average Equity - 2.28 6.29 3.03
Net Interest Income/Avg Assets - 0.69 2.63 2.74
Noninterest Income/Avg Assets - 0.03 0.13 0.13
Noninterest Expense/Avg Assets - 0.42 1.50 2.16
Yield/Cost Spread - 0.64 2.16 2.23
LIQUIDITY:
Int Earn Assets/Int Bear Liab - 106.78 113.05 113.12
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO - 0.08 0.11 0.09
Repos Assets/Tot Assets - 0.01 - -
Net Chrg-Off/Av Adj Lns - - 0.00 -
Nonmtg 1-4 Constr&Conv Lns/TA - 0.44 0.43 0.43
</TABLE>
SOURCE: TAFS AND BANKSOSURCE BY SHESHUNOFF
INFORMATION SERVICES INC., SEPTEMBER 30, 1996. 5
<PAGE>
FERGUSON & COMPANY
- ------------------
KANKAKEE FSB
KNK
KANKAKEE, IL
<TABLE>
<CAPTION>
1993 1994 1995 YTD 9/96
Num of Quarters Open for Period 4 4 4 3
FINANCIAL HIGHLIGHTS
(All $ Amounts in Thousands)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 280,415 305,449 353,607 348,942
% Change in Assets (0.49) 8.93 15.77 (1.32)
Total Loans 192,719 213,755 231,781 237,062
Deposits 242,971 265,684 286,060 283,656
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 30,746 32,429 34,260 30,544
Tangible Capital 29,953 30,861 30,745 28,053
Core Capital 29,953 30,861 30,745 28,053
Risk-Based Capital 31,965 32,903 32,824 30,151
Equity Capital/Total Assets 10.96 10.62 9.69 8.75
Core Capital/Risk Based Assets 18.61 17.23 15.81 14.04
Core Capital/Adj Tang Assets 10.85 10.27 8.79 8.10
Tangible Cap/Tangible Assets 10.85 10.27 8.79 8.10
Risk-Based Cap/Risk-Wt Assets 19.86 18.37 16.88 15.09
PROFITABILITY:
Net Income(Loss) 3,607 2,440 1,990 1,048
Ret on Avg Assets Bef Ext Item 1.34 0.83 0.63 0.39
Return on Average Equity 13.00 7.72 5.96 4.34
Net Interest Income/Avg Assets 3.84 3.67 3.16 2.86
Noninterest Income/Avg Assets 1.22 0.47 0.42 0.71
Noninterest Expense/Avg Assets 2.88 2.78 2.57 3.03
Yield/Cost Spread 3.80 3.64 2.99 2.73
LIQUIDITY:
Int Earn Assets/Int Bear Liab 109.48 107.81 106.53 106.01
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.87 1.39 1.38 1.41
Nonaccrual Loans/Gross Loans 0.21 0.53 0.27 0.74
Nonaccrual Lns/Ln Loss Reserve 19.11 51.22 26.26 75.43
Repos Assets/Tot Assets 0.30 0.23 0.23 0.06
Net Chrg-Off/Av Adj Lns 0.34 0.10 0.02 0.05
Nonmtg 1-4 Constr&Conv Lns/TA 16.70 15.61 12.84 12.37
</TABLE>
SOURCE: TAFS AND BANKSOSURCE BY SHESHUNOFF
INFORMATION SERVICES INC., SEPTEMBER 30, 1996. 6
<PAGE>
FERGUSON & COMPANY
- ------------------
PEOPLES FSB OF DEKALB CTY
PFDC
AUBURN, IL
<TABLE>
<CAPTION>
1993 1994 1995 YTD 9/96
Num of Quarters Open for Period 4 4 4 3
FINANCIAL HIGHLIGHTS
(All $ Amounts in Thousands)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 254,652 266,242 275,034 274,419
% Change in Assets 5.33 4.55 3.30 (0.22)
Total Loans 199,539 213,359 219,734 224,244
Deposits 216,286 229,654 234,516 234,800
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 35,193 33,241 34,692 33,115
Tangible Capital 35,193 33,241 34,680 33,186
Core Capital 35,193 33,241 34,680 33,186
Risk-Based Capital 36,029 34,074 35,520 34,054
Equity Capital/Total Assets 13.82 12.49 12.61 12.07
Core Capital/Risk Based Assets 29.02 25.71 26.32 24.98
Core Capital/Adj Tang Assets 13.82 12.49 12.62 12.09
Tangible Cap/Tangible Assets 13.82 12.49 12.62 12.09
Risk-Based Cap/Risk-Wt Assets 29.71 26.35 26.96 25.63
PROFITABILITY:
Net Income(Loss) 3,820 3,744 3,743 2,006
Ret on Avg Assets Bef Ext Item 1.56 1.44 1.39 0.98
Return on Average Equity 11.62 10.94 10.91 7.56
Net Interest Income/Avg Assets 4.06 3.74 3.60 3.75
Noninterest Income/Avg Assets 0.27 0.28 0.31 0.30
Noninterest Expense/Avg Assets 1.69 1.66 1.58 2.38
Yield/Cost Spread 3.64 3.38 3.23 3.38
LIQUIDITY:
Int Earn Assets/Int Bear Liab 114.27 111.09 111.42 111.40
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.53 0.44 0.45 0.50
Nonaccrual Loans/Gross Loans 0.41 0.31 0.30 0.36
Nonaccrual Lns/Ln Loss Reserve 80.90 66.53 77.82 91.77
Repos Assets/Tot Assets 0.06 0.02 0.01 0.04
Net Chrg-Off/Av Adj Lns 0.02 0.01 0.02 0.01
Nonmtg 1-4 Constr&Conv Lns/TA 1.82 2.37 2.04 2.72
</TABLE>
SOURCE: TAFS AND BANKSOSURCE BY SHESHUNOFF
INFORMATION SERVICES INC., SEPTEMBER 30, 1996. 7
<PAGE>
SUBURBAN FEDERAL SVGS, FSB
SFSB
FLOSSMOOR, IL
<TABLE>
<CAPTION>
1993 1994 1995 YTD 9/96
Num of Quarters Open for Period 4 4 4 3
FINANCIAL HIGHLIGHTS
(All $ Amounts in Thousands)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 276,604 320,122 360,273 388,407
% Change in Assets 7.26 15.73 12.54 7.81
Total Loans 87,974 106,278 148,915 225,998
Deposits 245,026 257,412 288,230 298,370
Broker Originated Deposits - - 293 293
CAPITAL:
Equity Capital 19,189 18,526 22,523 22,373
Tangible Capital 18,849 20,622 22,104 22,700
Core Capital 19,052 20,762 22,192 22,757
Risk-Based Capital 19,306 21,046 22,490 23,122
Equity Capital/Total Assets 6.94 5.79 6.25 5.76
Core Capital/Risk Based Assets 18.62 17.25 14.79 12.28
Core Capital/Adj Tang Assets 6.90 6.44 6.17 5.85
Tangible Cap/Tangible Assets 6.83 6.40 6.15 5.84
Risk-Based Cap/Risk-Wt Assets 18.87 17.48 14.99 12.48
PROFITABILITY:
Net Income(Loss) 2,114 1,825 1,652 400
Ret on Avg Assets Bef Ext Item 0.79 0.61 0.49 0.14
Return on Average Equity 11.47 9.68 8.00 2.36
Net Interest Income/Avg Assets 3.36 3.22 2.94 2.71
Noninterest Income/Avg Assets 0.72 0.48 0.52 0.65
Noninterest Expense/Avg Assets 2.74 2.70 2.64 3.09
Yield/Cost Spread 3.47 3.29 2.92 2.65
LIQUIDITY:
Int Earn Assets/Int Bear Liab 103.05 103.06 104.54 103.94
Brokered Deposits/Tot Deposits - - 0.10 0.10
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 1.16 0.65 0.71 0.33
Nonaccrual Loans/Gross Loans 1.02 0.62 0.62 0.30
Nonaccrual Lns/Ln Loss Reserve 164.35 114.75 148.57 93.36
Repos Assets/Tot Assets 0.03 - 0.00 0.00
Net Chrg-Off/Av Adj Lns 0.02 0.03 0.03 0.03
Nonmtg 1-4 Constr&Conv Lns/TA 1.94 2.03 2.58 3.95
</TABLE>
SOURCE: TAFS AND BANKSOSURCE BY SHESHUNOFF
INFORMATION SERVICES INC., SEPTEMBER 30, 1996. 8
<PAGE>
FERGUSON & COMPANY
- ------------------
FIRST SVG BK MOORE CTY
SOPN
SOUTHERN PINES, NC
<TABLE>
<CAPTION>
1993 1994 1995 YTD 9/96
Number of Open Quarters 4 4 4 3
FINANCIAL HIGHLIGHTS
($'s in Thousands)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 270,284 245,677 246,967 252,253
% Change in Assets - (9.10) 0.53 2.14
Securities-Book Value 75,382 87,685 71,073 58,805
Securities-Fair Value 78,174 87,564 71,164 58,824
Total Loans & Leases 140,214 151,204 170,321 183,025
Total Deposits 241,368 178,939 186,033 193,208
Loan/Deposit Ratio 58.09 84.50 91.55 94.73
Provision for Loan Losses 500 - - -
CAPITAL:
Equity Capital 27,829 62,213 56,340 56,315
Total Qualifying Capital(Est) 28,442 65,200 56,122 56,797
Equity Capital/Average Assets 10.30 24.12 22.82 22.78
Tot Qual Cap/Rk Bsd Asts(Est) 29.91 70.16 52.39 51.11
Tier 1 Cap/Rsk Bsed Asts(Est) 29.27 69.50 51.82 50.56
T1 Cap/Avg Assets(Lev Est) 11.65 26.58 21.81 22.54
Dividends Declared/Net Income - 54.11 65.90 74.36
PROFITABILITY:
Net Income(Loss) 2,666 2,399 3,660 1,993
Return on Average Assets 0.99 0.93 1.48 1.07
Return on Average Equity Cap 9.58 5.33 5.74 4.73
Net Interest Margin 2.97 3.67 3.80 3.73
Net Int Income/Avg Assets 2.93 3.61 3.68 3.64
Noninterest Income/Avg Assets 0.13 0.14 0.14 0.16
Noninterest Exp/Avg Assets 1.03 2.35 1.47 2.15
ASSET QUALITY:
NPL+Frcl RE/Lns+Frcl RE 0.94 0.30 0.19 0.18
NPA's/Equity + LLR 4.62 0.72 0.58 0.59
LLR/Nonperf & Restrcd Lns 48.73 155.36 229.81 224.72
Foreclosed RE/Total Assets 0.02 0.02 0.03 0.03
90+ Day Del Loans/Total Loans 0.57 - - -
Loan Loss Reserves/Total Lns 0.44 0.40 0.36 0.33
Net Charge-Offs/Average Loans 0.01 0.00 - -
Dom Risk R/E Lns/Tot Dom Lns 9.34 9.54 8.95 9.27
LIQUIDITY:
$100M+ Time Dep/Total Dom Dep 6.97 8.76 10.81 11.78
Int Earn Assets/Int Bear Liab 110.13 131.69 129.10 128.75
Pledged Sec/Total Sec 12.34 14.20 22.30 13.60
Fair Value Sec/Amort Cost Sec 103.70 95.92 101.92 100.36
</TABLE>
SOURCE: TAFS AND BANKSOSURCE BY SHESHUNOFF
INFORMATION SERVICES INC., SEPTEMBER 30, 1996. 9
<PAGE>
FERGUSON & COMPANY
- ------------------
SOUTHWEST FS&LA OF CHICAGO
SWBI
CHICAGO, IL
<TABLE>
<CAPTION>
1993 1994 1995 YTD 9/96
Num of Quarters Open for Period 4 4 4 3
FINANCIAL HIGHLIGHTS
(All $ Amounts in Thousands)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 313,186 339,134 351,007 366,948
% Change in Assets 5.41 8.29 3.50 4.54
Total Loans 208,758 239,384 242,164 259,773
Deposits 241,635 237,042 257,919 277,512
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 39,428 34,592 33,846 29,166
Tangible Capital 36,804 34,266 31,134 27,173
Core Capital 36,804 34,266 31,134 27,173
Risk-Based Capital 37,505 34,789 31,876 27,933
Equity Capital/Total Assets 12.59 10.20 9.64 7.95
Core Capital/Risk Based Assets 25.56 20.88 18.36 14.53
Core Capital/Adj Tang Assets 11.85 10.05 8.94 7.43
Tangible Cap/Tangible Assets 11.85 10.05 8.94 7.43
Risk-Based Cap/Risk-Wt Assets 26.05 21.19 18.79 14.94
PROFITABILITY:
Net Income(Loss) 6,076 5,655 3,950 1,405
Ret on Avg Assets Bef Ext Item 1.99 1.73 1.14 0.54
Return on Average Equity 15.60 15.28 11.38 6.19
Net Interest Income/Avg Assets 4.94 4.27 3.35 3.20
Noninterest Income/Avg Assets 0.40 0.41 0.32 0.39
Noninterest Expense/Avg Assets 2.26 2.03 2.00 2.84
Yield/Cost Spread 5.00 4.35 3.37 3.31
LIQUIDITY:
Int Earn Assets/Int Bear Liab 109.63 105.85 104.59 103.36
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.27 0.36 0.35 0.34
Nonaccrual Loans/Gross Loans - - - -
Nonaccrual Lns/Ln Loss Reserve - - - -
Repos Assets/Tot Assets - 0.04 0.01 0.01
Net Chrg-Off/Av Adj Lns 0.06 - - -
Nonmtg 1-4 Constr&Conv Lns/TA 21.62 23.65 24.75 24.25
</TABLE>
SOURCE: TAFS AND BANKSOSURCE BY SHESHUNOFF
INFORMATION SERVICES INC., SEPTEMBER 30, 1996. 10
<PAGE>
FERGUSON & COMPANY
- ------------------
FIRST FS&LA OF WESTCHESTER
WCBI
WESTCHESTER, IL
<TABLE>
<CAPTION>
1993 1994 1995 YTD 9/96
Num of Quarters Open for Period 4 4 4 3
FINANCIAL HIGHLIGHTS
(All $ Amounts in Thousands)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 297,753 294,220 302,011 301,159
% Change in Assets (1.24) (1.19) 2.65 (0.28)
Total Loans 189,984 205,299 209,316 220,063
Deposits 252,982 248,864 256,737 257,137
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 39,392 39,785 40,345 38,894
Tangible Capital 39,173 39,477 40,013 38,536
Core Capital 39,173 39,477 40,013 38,536
Risk-Based Capital 40,021 40,325 40,896 39,419
Equity Capital/Total Assets 13.23 13.52 13.36 12.91
Core Capital/Risk Based Assets 35.38 33.33 32.42 29.24
Core Capital/Adj Tang Assets 13.18 13.45 13.28 12.81
Tangible Cap/Tangible Assets 13.18 13.45 13.28 12.81
Risk-Based Cap/Risk-Wt Assets 36.14 34.05 33.14 29.91
PROFITABILITY:
Net Income(Loss) 4,054 3,929 3,970 2,024
Ret on Avg Assets Bef Ext Item 1.35 1.33 1.35 0.90
Return on Average Equity 10.93 9.92 10.27 6.99
Net Interest Income/Avg Assets 3.38 3.39 3.56 3.48
Noninterest Income/Avg Assets 0.36 0.33 0.29 0.28
Noninterest Expense/Avg Assets 1.70 1.67 1.76 2.41
Yield/Cost Spread 3.11 3.07 3.20 3.09
LIQUIDITY:
Int Earn Assets/Int Bear Liab 113.09 114.00 113.44 113.41
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.45 0.58 0.54 0.73
Nonaccrual Loans/Gross Loans 0.40 0.15 0.54 0.73
Nonaccrual Lns/Ln Loss Reserve 83.60 34.88 129.22 183.35
Repos Assets/Tot Assets 0.03 0.15 - -
Net Chrg-Off/Av Adj Lns - 0.02 - -
Nonmtg 1-4 Constr&Conv Lns/TA 6.69 9.23 9.31 10.53
</TABLE>
SOURCE: TAFS AND BANKSOSURCE BY SHESHUNOFF
INFORMATION SERVICES INC., SEPTEMBER 30, 1996. 11
<PAGE>
EXHIBIT V
<PAGE>
FERGUSON & COMPANY EXHIBIT V. - PRO FORMA ASSUMPTIONS
- ------------------
1. Net proceeds from the conversion were invested at the beginning of the
period at 5.50%, which was the approximate rate on the one-year treasury
bill on December 31, 1996. This rate was selected because it is considered
more representative of the rate the Bank is likely to earn.
2. Carrollton Federal's ESOP will acquire 8% of the conversion stock with
loan proceeds obtained from the Holding Company; therefore, there will be no
interest expense. We assumed that the ESOP expense is 14.2857% annually of
the initial ESOP expense ( seven years).
3. Carrollton Federal's RP will acquire 4% of the stock through open market
purchases at $20 per share and the expense is recognized ratably over five
years as the shares vest.
4. All pro forma income and expense items are adjusted for income taxes at
a combined state and federal rate of 38%.
5. In calculating the pro forma adjustments to net worth, the ESOP and RP
are deducted in accordance with generally accepted accounting principles.
6. Earnings per share calculations have ignored AICPA OP 93-6. Calculating
earnings per share under SOP 93-6 and assuming 14.2857% of the ESOP shares
are committed to be released and allocated to individual accounts at the
beginning of the period would yield earnings per share of $1.56, $1.38,
$1.25 and $1.14, and a price to earnings ratio of 12.82, 14.46, 15.98 and
17.59, at the minimum, midpoint, maximum and super maximum, respectively.
1
<PAGE>
EXHIBIT V
PRO FORMA EFFECT OF CONVERSION PROCEEDS
AT THE MINIMUM OF THE CONVERSION VALUATION RANGE
31-DEC-96
CF MUTUAL HOLDINGS, CARROLLTON, GEORGIA, PRICED AT $20.00 PER SHARE.
- -------------------------------------------------------------------------
<TABLE>
<S> <C>
1. Conversion Proceeds
Pro Forma Market Value (Minimum) $ 31,025,000
Less: Estimated Expenses (1,116,890)
------------------
Net Conversion Proceeds $ 29,908,110
2. Estimated Additional Income From Conversion Proceeds
Net Conversion Proceeds $ 29,908,110
Less: ESOP Contributions (2,482,000)
MRP Contributions (1,241,000)
------------------
Net Conversion Proceeds after ESOP & MRP $ 26,185,110
Estimated Incremental Rate of Return(1) 3.41%
------------------
Estimated Additional Income $ 892,912
Less: ESOP Expense (219,834)
MRP Expense (153,884)
------------------
$ 519,194
==================
</TABLE>
3. Pro Forma Calculations
<TABLE>
<CAPTION>
Before Conversion After
Period Conversion Results Conversion
------------------------------------------------------------
<S> <C> <C> <C>
a. Pro Forma Earnings
Twelve Months Ended
31-Dec-96 $ 1,727,000 $ 519,194 $ 2,246,194
b. Pro Forma Net Worth
31-Dec-96 $ 25,257,523 $ 26,185,110 $ 51,442,633
c. Pro Forma Net Assets
31-Dec-96 $ 352,531,510 $ 26,185,110 $ 378,716,620
</TABLE>
(1) Investment rate of 5.50%, subject to an effective tax rate of 38%.
2
<PAGE>
EXHIBIT V
PRO FORMA EFFECT OF CONVERSION PROCEEDS
AT THE MIDPOINT OF THE CONVERSION VALUATION RANGE
31-DEC-96
CF MUTUAL HOLDINGS, CARROLLTON, GEORGIA, PRICED AT $20.00 PER SHARE.
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
1. Conversion Proceeds
Pro Forma Market Valuation (Midpoint) $ 36,500,000
Less: Estimated Expenses (1,200,000)
--------------------
Net Conversion Proceeds $ 35,300,000
2. Estimated Additional Income From Conversion Proceeds
Net Conversion Proceeds $ 35,300,000
Less: ESOP Contributions (2,920,000)
MRP Contributions (1,460,000)
--------------------
Net Conversion Proceeds after ESOP & MRP $ 30,920,000
Estimated Incremental Rate of Return(1) 3.41%
--------------------
Estimated Additional Income $ 1,054,372
Less: ESOP Expense (258,629)
MRP Expense (181,040)
--------------------
$ 614,703
====================
</TABLE>
3. Pro Forma Calculations
<TABLE>
<CAPTION>
Before Conversion After
Period Conversion Results Conversion
-------------------------------------------------------------------
<S> <C> <C> <C>
a. Pro Forma Earnings
Twelve Months Ended
31-Dec-96 $ 1,727,000 $ 614,703 $ 2,341,703
b. Pro Forma Net Worth
31-Dec-96 $ 25,257,523 $ 30,920,000 $ 56,177,523
c. Pro Forma Net Assets
31-Dec-96 $ 352,531,510 $ 30,920,000 $ 383,451,510
</TABLE>
(1) Investment rate of 5.50%, subject to an effective tax rate of 38%.
3
<PAGE>
EXHIBIT V
PRO FORMA EFFECT OF CONVERSION PROCEEDS
AT THE MAXIMUM OF THE CONVERSION VALUATION RANGE
31-DEC-96
CF MUTUAL HOLDINGS, CARROLLTON, GEORGIA, PRICED AT $20.00 PER SHARE.
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
1. Conversion Proceeds
Pro Forma Market Valuation (Maximum) $ 41,975,000
Less: Estimated Expenses (1,283,111)
--------------------
Net Conversion Proceeds $ 40,691,889
2. Estimated Additional Income From Conversion Proceeds
Net Conversion Proceeds $ 40,691,889
Less: ESOP Contributions (3,358,000)
MRP Contributions (1,679,000)
--------------------
Net Conversion Proceeds after ESOP & MRP $ 35,654,889
Estimated Incremental Rate of Return(1) 3.41%
--------------------
Estimated Additional Income $ 1,215,832
Less: ESOP Expense (297,423)
MRP Expense (208,196)
--------------------
$ 710,213
====================
</TABLE>
3. Pro Forma Calculations
<TABLE>
<CAPTION>
Before Conversion After
Period Conversion Results Conversion
-------------------------------------------------------------------
<S> <C> <C> <C>
a. Pro Forma Earnings
Twelve Months Ended
31-Dec-96 $ 1,727,000 $ 710,213 $ 2,437,213
b. Pro Forma Net Worth
31-Dec-96 $ 25,257,523 $ 35,654,889 $ 60,912,412
c. Pro Forma Net Assets
31-Dec-96 $ 352,531,510 $ 35,654,889 $ 388,186,399
</TABLE>
(1) Investment rate of 5.50%, subject to an effective tax rate of 38%.
4
<PAGE>
EXHIBIT V
PRO FORMA EFFECT OF CONVERSION PROCEEDS
AT THE SUPERMAX OF THE CONVERSION VALUATION RANGE
31-DEC-96
CF MUTUAL HOLDINGS, CARROLLTON, GEORGIA, PRICED AT $20.00 PER SHARE.
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
1. Conversion Proceeds
Pro Forma Market Valuation $ 48,271,240
Less: Estimated Expenses (1,378,688)
--------------------
Net Conversion Proceeds $ 46,892,552
2. Estimated Additional Income From Conversion Proceeds
Net Conversion Proceeds $ 46,892,552
Less: ESOP Contributions (3,861,699)
MRP Contributions (1,930,850)
--------------------
Net Conversion Proceeds after ESOP & MRP $ 41,100,003
Estimated Incremental Rate of Return(1) 3.41%
--------------------
Estimated Additional Income $ 1,401,510
Less: ESOP Expense (342,036)
MRP Expense (239,425)
--------------------
$ 820,049
====================
</TABLE>
3. Pro Forma Calculations
<TABLE>
<CAPTION>
Before Conversion After
Period Conversion Results Conversion
-------------------------------------------------------------------
<S> <C> <C> <C>
a. Pro Forma Earnings
Twelve Months Ended
31-Dec-96 $ 1,727,000 $ 820,049 $ 2,547,049
b. Pro Forma Net Worth
31-Dec-96 $ 25,257,523 $ 41,100,003 $ 66,357,526
c. Pro Forma Net Assets
31-Dec-96 $ 352,531,510 $ 41,100,003 $ 393,631,513
</TABLE>
(1) Investment rate of 5.50%, subject to an effective tax rate of 38%.
5
<PAGE>
EXHIBIT V
PRO FORMA ANALYSIS SHEET
<TABLE>
<CAPTION>
Name of Association: CF Mutual Holdings, Carrollton, Georgia, Priced at $20.00 per share.
Date of Letter to Assn.: 14-Mar-97
Date of Market Prices: 31-Dec-96 Southeast Publicly All Publicly
Comparatives Held Thrifts Held Thrifts
------------ ------------ ------------
Symbols Value Mean Median Mean Median Mean Median
-------------------------- ---- ------ ---- ------ ---- ------
Price-Earnings Ratio P/E
- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Last Twelve Months N/A
At Minimum of Range 13.81
At Midpoint of Range 15.59 16.31 15.91 22.58 17.98 19.36 16.62
At Maximum of Range 17.22
At SuperMax of Range 18.95
Price-Book Ratio P/B
Last Twelve Months N/A
At Minimum of Range 60.31%
At Midpoint of Range 64.97% 112.47 111.07 146.43 130.46 134.57 125.54
At Maximum of Range 68.91%
At SuperMax of Range 72.74%
Price-Asset Ratio P/A
Last Twelve Months N/A
At Minimum of Range 8.19%
At Midpoint of Range 9.52% 14.96 15.27 19.04 16.02 15.44 13.53
At Maximum of Range 10.81%
At SuperMax of Range 12.26%
Twelve Mo. Earnings Base Y $ 1,727,000
Period Ended 35430
Book Value B $ 25,257,523
As of 31-Dec-96
Total Assets A $ 352,531,510
As of 31-Dec-96
Return on Money (1) R 3.41%
Conversion Expense X $ 1,200,000
Underwriting Commission C 0.00%
Percentage Underwritten S 0.00%
Estimate Dividend
Dollar Amount DA per share $ 0.60
Yield DY 3.00%
ESOP Contributions P $ 2,920,000
MRP Contributions I $ 1,460,000
ESOP Annual Expense E $ 258,629
MRP Annual Contributions M $ 181,040
Cost of ESOP Borrowings F 0.00%
</TABLE>
(1) Investment rate of 5.50%, subject to an effective tax rate of 38%.
6
<PAGE>
EXHIBIT V
PRO FORMA ANALYSIS SHEET
Calculation of Estimated Value (V) at Midpoint Value
1. V= P/A(A-X-P-I) $ 36,500,000
-----------------------
1-P/A(1-(CxS))
2. V= P/B(B-X-P-I) $ 36,500,000
-----------------------
1-P/B(1-(CxX))
3. V= P/E(Y-R(X+P+I)-(E+M+ST)) $ 36,500,000
-------------------------------
1-P/E(R(1-(CxX))
<TABLE>
<CAPTION>
Value
Estimated Value Per Share Total Shares Date
--------------------------- -------- ------------- -------------
<S> <C> <C> <C>
$36,500,000 $20.00 1,825,000 31-Dec-96
</TABLE>
Range of Value
$36.5 million x 1.15 = $41.975 million or 2,098,750 shares at $20.00 per share.
$36.5 million x .085 = $31.025 million or 1,551,250 shares at $20.00 per share.
7
<PAGE>
Community First Banking Company
Stock Order Form
-------------------------------------
EXPIRATION DATE
CARROLLTON FEDERAL for Stock Order
BANK, FSB Forms:
STOCK INFORMATION , 1997
CENTER 12:00 Noon,
110 Dixie Street Eastern Time
Carrollton, GA
30117
(770) -
- --------------------------------------------------------------------------------
IMPORTANT--PLEASE NOTE: A properly completed original stock order form
must be used to subscribe for common stock. Faxes or copies of this form
are not required to be accepted. Please read the Stock Ownership Guide and
Stock Order Form Instructions as you complete this Form.
- --------------------------------------------------------------------------------
The minimum number of shares
(1) NUMBER OF SHARES that may be subscribed for is
SUBSCRIPTION PRICE shares. The maximum number is
shares for any individual
or individuals through a single
account.
(2) TOTAL PAYMENT DUE
$
X =
[_]
(3) EMPLOYEE/OFFICER/DIRECTOR INFORMATION(6) PURCHASER INFORMATION
Eligible Account Holder --
Check here if you are a director, Check here if you were a
officer or employee of or a depositor of at least $50.00
member of such person's immediate at Carrollton Federal on
family. , 199 . Enter
information below for all
deposit accounts that you had
at Carrollton Federal on
, 199 .
A. [_]
- ------------------------------------------
Check Amount
[_] (4) METHOD OF PAYMENT/CHECK
Supplemental Eligible Account
Holder--Check here if you
were a depositor of at least
$50.00 at Carrollton Federal
on , 1996 but are not
an Eligible Account Holder.
Enter information below for
all deposit accounts that you
had at Carrollton Federal on
, 1996.
B. [_]
Enclosed is a check,
bank draft or money
order made payable to
Carrollton Federal
Bank, FSB in the
amount of:
- ------------------------------------------
[_] (5) METHOD OF PAYMENT/WITHDRAWAL
Other Member -- Check here if
you held a deposit or loan at
Carrollton Federal as of
, 1997 but are not an
Eligible Account Holder or
Supplemental Eligible Account
Holder.
C. [_]
The undersigned authorizes withdrawal
from the following account(s) at
Carrollton Federal. There is no
penalty for early withdrawal used for
this payment.
-------------------------------------
Account Number(s) Withdrawal Local Community Resident --
Amount(s) Check here if you are a
permanent resident of
County, Georgia.
D. [_]
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
Account Title (Names on
Accounts)
Total Withdrawal ----------------- Account
Amount Number(s)
---------------------------------
---------------------------------
---------------------------------
PLEASE NOTE: FAILURE TO LIST
ALL YOUR ACCOUNTS MAY RESULT IN
THE LOSS OF PART OR ALL OF YOUR
SUBSCRIPTION RIGHTS. IF
ADDITIONAL SPACE IS NEEDED,
PLEASE UTILIZE THE BACK OF THIS
STOCK ORDER FORM.
(7) STOCK REGISTRATION/FORM OF STOCK OWNERSHIP
[_] Individual [_] Joint Tenants
[_] Tenants in Common
[_] Corporation or Partnership
[_] Uniform Gifts to Minors Act
[_] Fiduciary (i.e. trust, estate, etc.) [_] Other ________________
Social Security # or
Tax ID
(8) NAME(S) IN WHICH STOCK IS TO BE REGISTERED (PLEASE PRINT CLEARLY)
Name(s) continued Social Security # or
Tax ID
Street Address City State Zip Code
------------
(9) TELEPHONE Evening
INFORMATION Daytime County of Residence
( ) ( )
- --------------------------------------------------------------------------------
(10) NASD AFFILIATION
[_]
(11) ASSOCIATE--ACTING
IN CONCERT
[_]
Check here if you are a member of the National Check here, and
Association of Securities Dealers, Inc. complete the reverse
("NASD"), a person associated with an NASD side of this Form, if
member, a member of the immediate family of any you or any associates
such person to whose support such person (as defined on the
contributes, directly or indirectly, or the reverse side of this
holder of an account in which an NASD member or Form) or persons
person associated with an NASD member has a acting in concert
beneficial interest. To comply with conditions with you have
under which an exemption from the NASD's submitted other
Interpretation With Respect to Free-Riding and orders for shares in
Withholding is available, you agree, if you have the Subscription
checked the NASD Affiliation box, (i) not to and/or Community
sell, transfer or hypothecate the stock for a Offerings.
period of 90 days following issuance, and (ii)
to report this subscription in writing to the
applicable NASD member within one day of payment
therefor.
- --------------------------------------------------------------------------------
(12) ACKNOWLEDGMENT
To be effective, this fully completed Stock Order Form must be actually
received by Carrollton Federal, no later than 12:00 p.m. Noon, Eastern
Time, on , 1997, unless extended; otherwise this Stock Order Form
and all subscription rights will be void. Completed Stock Order Forms,
together with the required payment or withdrawal authorization, may be
delivered to any full service office of Carrollton Federal or may be
mailed to the Post Office Box indicated on the enclosed business reply
envelope. All rights exercisable hereunder are not transferable and shares
purchased upon exercise of such rights must be purchased for the account
of the person exercising such rights.
It is understood that this Stock Order Form will be accepted in accordance
with, and subject to, the terms and conditions of the Plan of Conversion
of Carrollton Federal described in the accompanying Prospectus. If the
Plan of Conversion is not approved by the voting members of Carrollton
Federal at a Special Meeting to be held on , 1997, or any
adjournment thereof, all orders will be cancelled and funds received as
payment, with accrued interest, will be returned promptly.
The undersigned agrees that after receipt by Carrollton Federal, this
Stock Order Form may not be modified, withdrawn or cancelled (unless the
conversion is not completed within 45 days after the completion of the
Subscription Offering) without the Bank's consent, and if authorization to
withdraw from deposit accounts at Carrollton Federal has been given as
payment for shares, the amount authorized for withdrawal shall not
otherwise be available for withdrawal by the undersigned.
Under penalty of perjury, I certify that the Social Security or Tax ID
Number and the other information provided under number 8 of this Stock
Order Form are true, correct and complete that I am purchasing for my own
account and that there is no agreement or understanding regarding the
transfer of my subscription rights or the sale or transfer of these
shares.
Applicable Regulations prohibit any person from transferring or entering
into any agreement directly or indirectly to transfer, the legal or
beneficial ownership of conversion subscription rights, or the underlying
securities to the account of another. Carrollton Federal and Community
First Banking Company may pursue any and all legal and equitable remedies
in the event they become aware of the transfer of subscription rights and
will not honor orders known by them to involve such transfer.
I acknowledge that the common stock offered is not a savings or deposit
account and is not federally insured or guaranteed.
I also acknowledge receipt of a Prospectus dated , 1997
SIGNATURE DATE SIGNATURE DATE DATE REC'D ___________
CATEGORY _____________
ORDER # ___ BATCH ____
DEPOSIT ______________
A SIGNED CERTIFICATION FORM MUST ACCOMPANY ALL STOCK ORDER FORMS
(SEE REVERSE SIDE)
<PAGE>
ITEM (6)A, B, C--(CONTINUED)
Account Title (Names on Account Account Title (Names on Account
Accounts) Number(s) Accounts) Number(s)
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
ITEM (11)--(CONTINUED)
List below all other orders "Associate" is defined as: (i) any
submitted by you or your corporation or organization (other than
Associates (as defined) or by Carrollton Federal, Community First Banking
persons acting in concert with Company, or a majority-owned subsidiary of
you. Carrollton Federal or Community First
Banking Company) of which such person is an
officer or partner or is, directly or
indirectly, the beneficial owner of 10% or
more of any class of equity securities; (ii)
any trust or other estate in which such
person has a substantial beneficial interest
or as to which such person serves as a
director or in a similar fiduciary capacity;
provided, however, such term shall not
include Community First Banking Company's or
Carrollton Federal's employee benefit plans
in which such person has a substantial
beneficial interest or serves as a director
or in a similar fiduciary capacity; and
(iii) any relative or spouse of such person,
or any relative of such spouse, who either
has the same home as such person or who is a
Director of Carrollton Federal or Community
First Banking Company or any subsidiaries
thereof.
Number of
Name(s) listed on Shares
other Stock Order Ordered
Forms
- --------------------------------
- --------------------------------
- --------------------------------
- --------------------------------
- --------------------------------
YOU MUST SIGN THE FOLLOWING CERTIFICATION IN ORDER TO PURCHASE STOCK
FORM OF CERTIFICATION
I/WE ACKNOWLEDGE THAT THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS NOT
FEDERALLY INSURED, AND IS NOT GUARANTEED BY CARROLLTON FEDERAL BANK, FSB
(THE "BANK") OR BY THE FEDERAL GOVERNMENT.
If anyone asserts that this security is federally insured or guaranteed, or
is as safe as an insured deposit, I should call the Administrator, Savings
Institutions Division, Georgia Department of Commerce, at (404) - or
the Federal Deposit Insurance Corporation, Atlanta Regional Office, at
(404) 817-2500.
I/We further certify that, before purchasing the common stock, par value
$.01 per share, of Community First Banking Company, the proposed holding
company for Carrollton Federal Bank, FSB, I/we received a Prospectus dated
, 1997 (the "Prospectus").
The Prospectus that I/we received contains disclosure concerning the nature
of the security being offered and describes the risks involved in the
investment, including but not limited to:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
Signature Date Signature Date
Name (Please Print) Name (Please Print)
<PAGE>
Community First Banking Company
STOCK OWNERSHIP GUIDE
INDIVIDUAL
Include the first name, middle initial and last name of the shareholder.
Avoid the use of two initials. Please omit words that do not affect ownership
rights, such as "Mrs.", "Mr.", "Dr.", "special account", "single person",
etc.
- --------------------------------------------------------------------------------
JOINT TENANTS
Joint tenants with right of survivorship may be specified to identify two or
more owners. When stock is held by joint tenants with right of survivorship,
ownership is intended to pass automatically to the surviving joint tenant(s)
upon the death of any joint tenant. All parties must agree to the transfer or
sale of shares held by joint tenants.
- --------------------------------------------------------------------------------
TENANTS IN COMMON
Tenants in common may also be specified to identify two or more owners. When
stock is held by tenants in common, upon the death of one co-tenant,
ownership of the stock will be held by the surviving co-tenant(s) and by the
heirs of the deceased co-tenant. All parties must agree to the transfer or
sale of shares held by tenants in common.
- --------------------------------------------------------------------------------
UNIFORM GIFT TO MINORS ACT ("UGMA")
Stock may be held in the name of a custodian for a minor under the Uniform
Gift to Minors Act of each state. There may be only one custodian and one
minor designated on a stock certificate. The standard abbreviation for
Custodian is "CUST", while the Uniform Gift to Minors Act is "UGMA". Standard
U.S. Postal Service state abbreviations should be used to describe the
appropriate state. For example, stock held by John Doe as custodian for Susan
Doe under the Georgia Uniform Gift to Minors Act will be abbreviated John
Doe, CUST Susan Doe UGMA, GA (use minor's social security number).
- --------------------------------------------------------------------------------
FIDUCIARIES
Information provided with respect to stock to be held in a fiduciary
capacity must contain the following:
. The name(s) of the fiduciary. If an individual, list the first name,
middle initial and last name. If a corporation, list the full corporate
title (name). If an individual and a corporation, list the corporation's
title before the individual.
. The fiduciary capacity, such as administrator, executor, personal
representative, conservator, trustee, committee, etc.
. A description of the document governing the fiduciary relationship, such
as a living trust agreement or court order. Documentation establishing a
fiduciary relationship may be required to register your stock in a
fiduciary capacity.
. The date of the document governing the relationship, except that the date
of a trust created by a will need not be included in the description.
. The name of the maker, donor or testator and the name of the beneficiary.
An example of fiduciary ownership of stock in the case of a trust is: John
Doe, Trustee Under Agreement Dated 10-1-87 for Susan Doe.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STOCK ORDER FORM INSTRUCTIONS
ITEMS 1 AND 2--
Fill in the number of shares that you wish to purchase and the total payment
due. The amount due is determined by multiplying the number of shares
purchased by the Purchase Price of $ .00 per share. The minimum purchase is
shares. No Eligible Account Holder, Supplemental Eligible Account Holder or
Other Member, including individuals on a joint account, may purchase in their
capacity as such in the subscription Offering more than shares, or
$ , of Common Stock. No person, including associates of and persons acting
in concert with such person, may purchase in the Community Offering more than
shares, or $ , of Common Stock. No person or entity, together with
associates or persons acting in concert, may purchase more than shares,
or $ , of the Common Stock in the Stock Conversion. Community First
Banking Company and Carrollton Federal Bank reserve the right to reject the
subscription of any order received in the Community Offering, in whole or in
part.
- --------------------------------------------------------------------------------
ITEM 3--
Please check this box to indicate whether you are a director, officer or
employee of Carrollton Federal Bank or a member of such person's immediate
family.
- --------------------------------------------------------------------------------
ITEM 4--
Payment for shares may be made in cash (only if delivered by you in person)
or by check, bank draft or money order made payable to Carrollton Federal
Bank, FSB. Your funds will earn interest at the Bank's passbook rate of
interest until the Stock Conversion is completed. DO NOT MAIL CASH TO
PURCHASE STOCK! Please check this box if your method of payment is by check,
bank draft or money order.
- --------------------------------------------------------------------------------
ITEM 5--
If you pay for your stock by a withdrawal from a deposit account at
Carrollton Federal, insert the account number(s) and the amount of your
withdrawal authorization for each account. The total amount withdrawn should
equal the amount of your stock purchase. There will be no penalty assessed
for early withdrawals from certificate accounts used for stock purchases.
THIS FORM OF PAYMENT MAY NOT BE USED IF YOUR ACCOUNT IS AN INDIVIDUAL
RETIREMENT ACCOUNT. PLEASE CONTACT THE STOCK INFORMATION CENTER FOR
INFORMATION REGARDING PURCHASES FROM AN INDIVIDUAL RETIREMENT ACCOUNT.
- --------------------------------------------------------------------------------
ITEM 6--
Please check the appropriate box if you were;
(a) A depositor at Carrollton Federal on , 199 (the "Eligibility Record
Date") with at least $50.00 on deposit.
(b) A depositor at Carrollton Federal on , 199 (the "Supplemental
Eligibility Record Date") with at least $50.00 on deposit.
(c) A depositor or borrower at Carrollton Federal on , 1997 (the "Voting
Record Date").
(d) A permanent resident of County, Georgia.
- --------------------------------------------------------------------------------
ITEMS 7, 8 AND 9--
The stock transfer industry has developed a uniform system of shareholder
registrations that we will use in the issuance of your Community First
Banking Company Common Stock. Please complete items 7, 8 and 9 as fully and
accurately as possible, and be certain to supply your social security or Tax
I.D. number(s) and your daytime and evening telephone number(s). We will need
to call you if we cannot execute your order as given. If you have any
questions regarding the registration of your stock, please consult your legal
advisor. Stock ownership must be registered in one of the ways described
above under "Stock Ownership Guide."
- --------------------------------------------------------------------------------
ITEM 10--
Please check this box if your are a member of the NASD or if this item
otherwise applies to you.
- --------------------------------------------------------------------------------
ITEM 11--
Please check this box if you or any associate (as defined on the reverse side
of the Stock Order Form) or person acting in concert with you has submitted
another order for shares and complete the reverse side of the Stock Order
Form.
- --------------------------------------------------------------------------------
ITEM 12--
Please sign and date the Stock Order Form and Certification Form where
indicated. Before you sign, review the Stock Order Form, including the
acknowledgement, and the Certification Form. Normally, one signature is
required. An additional signature is required only when payment is to be made
by withdrawal from a deposit account that requires multiple signatures to
withdraw funds.
- --------------------------------------------------------------------------------
You may mail your completed Stock Order Form and Certification Form in the
envelope that has been provided, or you may deliver your Stock Order Form and
Certification Form to any branch of Carrollton Federal Bank. Your Stock Order
Form and Certification Form, properly completed, and payment in full (or
withdrawal authorization) at the subscription price must be received by
Carrollton Federal Bank no later than 12:00 Noon, eastern time, on ,
1997 or it will become void. If you have any remaining questions, or if you
would like assistance in completing your Stock Order Form, you may call the
Stock Information Center at (770) - . The Stock Information Center will
be open between the hours of 9:00 a.m. and 4:00 p.m., Eastern Time, Monday
through Friday.
<PAGE>
ITEM 4
REVOCABLE PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
CF MUTUAL HOLDINGS
for a Special Meeting of Members to be held on [ ], 1997
The undersigned member of CF Mutual Holdings hereby appoints
________________ and ________________, or either of them, with full powers of
substitution, as attorneys-in-fact and agents for and in the name of the
undersigned to vote such votes as the undersigned may be entitled to cast at the
Special Meeting of Members (the "Meeting") of CF Mutual Holdings to be held at
[ ] on [ ], 1997 at [ __.M], Eastern Time, and at
any adjournments thereof. They are authorized to cast all votes to which the
undersigned is entitled, as follows:
1. Adoption of the Plan of Conversion providing for the conversion of CF
Mutual Holdings from a federally chartered mutual holding company to a
Georgia stock corporation under the name "Community First Banking Company."
2. In their discretion, on any other matters that may lawfully come before the
meeting.
NOTE: The Board of Directors is not aware of any other matter that may come
before the Meeting.
PLEASE VOTE, DATE AND SIGN ON THE REVERSE SIDE
<PAGE>
THIS PROXY WILL BE VOTED FOR THE PLAN IF NO CHOICE IS MADE HEREON
Should the undersigned be present and elect to vote at said Meeting or any
adjournment thereof and, after notification to the Secretary of CF Mutual
Holdings of said Meeting of the member's decision to terminate this Proxy, then
the power of said attorneys-in-fact or agents shall be deemed terminated and of
no further force and effect. The undersigned hereby revokes any and all proxies
heretofore given.
PLEASE MARK VOTES [X]
FOR AGAINST
1. Adoption of the Plan of Conversion. [ ] [ ]
The undersigned acknowledges receipt of a
notice of Special Meeting of the Members of
CF Mutual Holdings to be held on [ ],
1997 and a Proxy Statement and a
Prospectus dated [ ], 1997 prior
to the execution of this Proxy.
Date:_______________________________________
Signature:__________________________________
NOTE: Only one signature is required in the
case of a joint account.
<PAGE>
EXHIBIT 99.3
CARROLLTON FEDERAL BANK, FSB
CARROLLTON, GEORGIA
PROPOSED MARKETING MATERIALS
1
<PAGE>
Marketing Materials for
Carrollton Federal Bank
Table of Contents
-----------------
I. Press Release
A. Explanation
B. Schedule
C. Distribution List
D. Examples
II. Question and Answer Brochure
A. Explanation
B. Method of Distribution
C. Example
III. Counter Cards, Lobby Posters and Tombstone Advertisement
A. Explanation
B. Quantity
C. Examples (Enclosed)
VI. Community Meetings Materials
A. Explanation
B. Quantity - Method of Distribution
C. Letters to Prospects
D. Examples (Enclosed)
V. IRA Mailing
A. Explanation
B. Quantity
C. IRA Mailing Example
VI. Direct Deposit Plan Flyer
A. Explanation
B. Method of Distribution
C. Example
2
<PAGE>
VII. Cover Letters
Explanation
Examples
VIII. Proxygram
A. Explanation
B. Example (Enclosed)
3
<PAGE>
I. Press Releases
A. Explanation
In an effort to assure that all customers, community members and other
interested investors receive prompt accurate information in a simultaneous
manner, Trident advises the Savings Bank to forward press releases to
national and regional publications, newspapers, radio stations, etc. at
various points during the Conversion and Reorganization process.
Only press releases approved by Conversion Counsel will be forwarded for
publication in any manner.
B. Press Releases
1. Approval of Conversion and Reorganization by Office of Thrift
Supervision
2. Close of Stock Offering
C. Distribution Lists (see attached)
D. Examples (see attached)
4
<PAGE>
C. National Media Distribution List
------------------------------------
National Thrift News Wall Street Journal
- -------------------- -------------------
212 West 35th Street World Financial Center
13th Floor 200 Liberty
New York, New York 10001 New York, NY 10004
Richard Chang
American Banker SNL Securities
- --------------- --------------
One State Street Plaza Post Office Box 2124
New York, New York 10004 Charlottesville, Virginia 22902
Michael Weinstein
Barrons Investors Business Daily
- ------- ------------------------
Dow Jones & Company 12655 Beatrice Street
Barrons Statistical Information Post Office Box 661750
200 Burnett Road Los Angeles, California 90066
Chicopee, Massachusetts 01020
New York Times
- --------------
229 West 43rd Street
New York, NY 10036
Business Wire
- -------------
212 South Tryon
Suite 1460
Charlotte, North Carolina 28281
* Press releases will be distributed to all the applicable local media.
5
<PAGE>
Press Release
FOR IMMEDIATE RELEASE
---------------------
For More Information Contact:
Gary D. Dorminey, President
Telephone: (770) 834-8136
CARROLLTON FEDERAL BANK
-----------------------
TO PROCEED WITH STOCK SALE
--------------------------
Mr. Gary D. Dorminey, President and CEO of Carrollton Federal Bank,
FSB, Carrollton, Georgia, today announced that Carrollton Federal Bank and its
parent company, CF Mutual Holdings, have received approval from the Office of
Thrift Supervision, Washington, D.C. to proceed with the plan to convert from a
federally chartered mutual holding company to a stock institution. Carrollton
Federal will then be a subsidiary of a newly formed holding company, Community
First Banking Company. The current mutual holding company will no longer exist.
Under the plan of conversion, Community First Banking Company,
Carrollton Federal's proposed holding company, is offering up to 2,098,750
shares of common stock at $20.00 per share. Under certain circumstances the
number of shares sold could be increased to 2,413,562 shares. Certain
Carrollton Federal depositors and borrowers will have the opportunity to
purchase stock through a subscription offering that closes on ________, 1997.
Gary Dorminey, CEO of CFB, stressed that remaining locally controlled is a very
important aspect of the plan. He stated, "While we are not permitted by law to
limit this offering to our local depositors, their participation is critically
important to us.
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A Prospectus and a Proxy Statement describing the plan of conversion,
reorganization, and stock offering were mailed to depositors and borrowers of
Carrollton Federal on or about ________, 1997. Shares that are not subscribed
for during the Subscription Offering, if any, will be offered to the general
public with priority given to residents of Carroll, Coweta, Douglas, Fayette,
Haralson, Heard, Henry, and Paulding Counties in Georgia in a Community
Offering. The offerings are being managed by Trident Securities, Inc. of
Raleigh, North Carolina.
Mr. Dorminey stated "Carrollton Federal Bank is committed to remaining
a strong, locally owned and operated company in the best traditions of community
banking."
Carrollton Federal Bank is located in Carrollton, Georgia. The
Savings Bank was founded in 1929. At December 31, 1996, the Savings Bank had
total assets of $353 million and retained earnings of $25 million. Customers or
interested members of the community with questions concerning the stock offering
should call the Stock Information Center at (770) 838-7355 or visit Carrollton
Federal Bank.
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Press Release FOR IMMEDIATE RELEASE
---------------------
For More Information Contact:
Gary D. Dorminey, President
Telephone: (770) 834-8136
COMMUNTY FIRST BANKING COMPANY, HOLDING COMPANY FOR
---------------------------------------------------
CARROLLTON FEDERAL BANK COMPLETES INITIAL STOCK OFFERING
--------------------------------------------------------
________, 1997, Carrollton, Georgia - Mr. Gary D. Dorminey, President
of Carrollton Federal Bank, FSB, based in Carrollton, Georgia, announced today
that Carrollton Federal Bank and its parent company, CF Mutual Holdings, have
completed their Conversion and Reorganization from a federally chartered mutual
holding company to a stock institution. As part of that Conversion and
Reorganization, the Savings Bank's holding company, Community First Banking
Company issued ___________ shares of its common stock which sold for a price of
$20.00 per share.
Mr. Dorminey stated "We pledge our best efforts to preserve CFB as a
locally owned, locally operated institution. The net proceeds of the offering
are to be used for general corporate purposes permitted by applicable law and
regulations to enhance the services and operations of the bank. Pending such
use, investments will primarily be made in short to intermediate investment
securities such as U.S. government and government agency securities and interest
bearing deposits.
On ________, 1997, Carrollton Federal's Plan of Holding Company
Conversion was approved by the members of CF Mutual Holdings, the parent company
of the Savings Bank, at a Special Meeting that was held at the main office of
the Savings Bank.
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Mr. Dorminey indicated that the officers and Board of Directors of
Carrollton Federal express their thanks for the response by customers and the
community to the stock offering and that Carrollton Federal looks forward to
continuing to serve the needs of its customers as a stock institution.
The Company is expected to begin trading on the Nasdaq National Market
under the symbol "CFBC" on ________, 1997. Trident Securities, Inc., Raleigh,
North Carolina managed the stock offering for the Savings Bank.
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II. Question and Answer Brochure
A. Explanation
The Question and Answer brochure is an essential marketing piece in any
conversion. It serves to answer some of the most commonly asked questions
in "plain, everyday language." Although most of the answers are taken
verbatim from the Prospectus and Proxy Statement, it assists the individual
in finding answers to simple questions.
Conversion Counsel approves the language for each Question and Answer.
Trident and the Savings Bank will be responsible for any introductory or
concluding remarks, design, layout, color and paper stock. This will be
coordinated through Trident in conjunction with the financial printer.
B. Method of Distribution
There are four primary methods of distribution of the Question and Answer
brochure. However, regardless of the method, the brochure is always
accompanied by a Prospectus.
1. A Question and Answer brochure is sent out in the initial mailing to
all members of the Savings Bank.
2. Question and Answer brochures are available in the Savings Bank's
office.
3. Question and Answer brochures are distributed in information packets
at Community meetings.
4. Question and Answer brochures are sent out in a standard information
packet to all interested investors who phone the Stock Information
Center requesting information.
C. Example
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Proposed Corporate Structure
- ---------------------------------
Community First Banking Company
Stockholders
- ---------------------------------
Community First Banking Company
Carrollton Federal Bank
11
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Carrollton Federal Bank, FSB
Carrollton, Georgia
Questions and Answers Regarding the Subscription and Community Offering
THIS INFORMATION IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO
BUY SECURITIES. THE OFFER IS MADE ONLY BY THE PROSPECTUS. A PROSPECTUS CAN BE
OBTAINED AT ANY CARROLLTON FEDERAL BANK OFFICE OR BY CALLING THE CARROLLTON
FEDERAL BANK STOCK INFORMATION CENTER AT (770) 838-7355. THERE SHALL BE NO SALE
OF STOCK IN ANY STATE IN WHICH ANY OFFER, SOLICITATION OF AN OFFER OR SALE OF
STOCK WOULD BE UNLAWFUL.
TABLE OF CONTENTS
-----------------
Page
----
Summary....................................................
Mutual to Stock Conversion and Reorganization..............
The Conversion and Reorganization..........................
The Subscription and Community Offerings...................
Becoming a Stockholder.....................................
Voting for the Plan of Conversion and Reorganization.......
SUMMARY
-------
This summary highlights selected information from the Prospectus and
Proxy Statement and may not contain all the information that is important to
you. To understand the Offerings fully, you should read carefully the entire
Prospectus and Proxy Statement, including the consolidated financial statements
and the notes to the consolidated financial statements of CF Mutual Holdings.
References to the "Savings Bank" refer to Carrollton Federal Bank, FSB.
References in this document to the "Company" refer to Community First Banking
Company.
THE COMPANY
Community First Banking Company
110 Dixie Street
Carrollton, Georgia 30117
(770) 834-7355
The Company is not an operating company and has not engaged in any
significant business to date. It was formed in March 1997 as a Georgia stock
corporation to be the holding company for Carrollton Federal Bank after the
Conversion and Reorganization. See "Community First Banking Company."
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THE DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY AND THE SAVINGS BANK
BELIEVE THAT IT IS IN THE BEST INTERESTS OF THE SAVINGS BANK, THE COMPANY AND
THE COMPANY'S SHAREHOLDERS FOR THE COMPANY AND THE SAVINGS BANK TO REMAIN
INDEPENDENT, WITH THE OBJECTIVE OF LONG-TERM ENHANCEMENT OF SHAREHOLDER VALUE.
ACCORDINGLY, AN INVESTMENT IN THE COMMON STOCK OF THE COMPANY MAY NOT BE
SUITABLE FOR INVESTORS WHO ARE SEEKING SHORT-TERM RETURNS THROUGH A SALE OF THE
INSTITUTION.
THE SAVINGS BANK
Carrollton Federal Bank, FSB
110 Dixie Street
Carrollton, Georgia 30117
(770) 834-7355
The Savings Bank is a federally chartered stock savings bank organized on
August 1, 1994 and operates in Carrollton, Georgia and neighboring communities
in western Georgia. Prior to that date, the predecessor of the Savings Bank had
operated as a mutual savings bank since 1929. The Savings Bank conducts
business through 12 branch offices in Carroll, Douglas, Coweta, Fayette,
Haralson, Heard, Henry and Paulding Counties in Georgia. At December 31, 1996,
the Savings Bank had $351 million of total assets, $325 million of total
liabilities, including $308 million of deposits, and $26 million of equity or
7.4% of assets. See "Carrollton Federal Bank."
THE MUTUAL HOLDING COMPANY
CF Mutual Holdings
110 Dixie Street
Carrollton, Georgia 30117
(770) 834-7355
The Mutual Holding Company is a federally chartered mutual holding
company formed on August 1, 1994. The Mutual Holding Company was not formed to
raise capital, but to provide a corporate structure that would facilitate
entering new lines of business and possible acquisitions of other financial
institutions. Its primary asset is 100 shares of Savings Bank Common Stock,
which represents all of the outstanding shares of such stock. As part of the
Conversion and Reorganization, the Mutual Holding Company will merge into the
Savings Bank and the Mutual Holding Company will cease to exist. All of the
assets of the Mutual Holding Company will pass to the Company by virtue of the
Conversion and Reorganization. See "CF Mutual Holdings."
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INFORMATION RELATING TO VOTING AT THE MEMBERS' MEETING
The Board of Directors of the Mutual Holding Company has fixed the close
of business on [____________], 1997 as the record date (the "Voting Record
Date") for the determination of members entitled to notice of and to vote at the
Members' Meeting. All holders of the Savings Bank's deposit or other authorized
accounts and the Savings Bank's borrowers as of July 19, 1990 whose borrowings
remained in existence as of ___________, 1997 are members of the Mutual Holding
Company under its current federal mutual charter. All members of record as of
the close of business on the Voting Record Date who continue as such until the
date of the Members' Meeting will be entitled to vote at the Members' Meeting or
any adjournment thereof.
Each depositor member will be entitled at the Members' Meeting to cast
one vote for each $100, or fraction thereof, of the aggregate withdrawal value
of all of his or her savings accounts in the Savings Bank as of the Voting
Record Date. Borrower members will be entitled to one vote at the Members'
Meeting in addition to any votes such borrower member may have as a result of
being a depositor in the Savings Bank. No member may cast more than 1,000
votes.
Approval of the Plan of Conversion to be presented at the Members'
Meeting will require the affirmative vote of at least a majority of the total
outstanding votes of the Mutual Holding Company's members eligible to be cast at
the Members' Meeting. As of the Voting Record Date for the Members' Meeting,
there were approximately [________] votes eligible to be cast, of which
[________] votes constitute a majority.
Members may vote at the Members' Meeting or any adjournment thereof in
person or by proxy. All properly executed proxies received by the Mutual
Holding Company will be voted in accordance with the instructions indicated
thereon by the members giving such proxies. If no contrary instructions are
given, such proxies will be voted in favor of the Plan of Conversion described
herein. If any other matters are properly presented before the Members' Meeting
and may properly be voted upon, the proxies will be voted on such matters by the
proxy holders named therein as directed by the Board of Directors of the Mutual
Holding Company. Valid, previously executed general proxies, which typically
are obtained from members when they open their accounts at the Savings Bank,
will not be used to vote for approval of the Plan of Conversion, even if the
respective members do not execute another proxy or attend the Members' Meeting
and vote in person. Any member giving a proxy will have the right to revoke his
or her proxy at any time before it is voted by delivering written notice or a
duly executed proxy bearing a later date to the Secretary of the Mutual Holding
Company, provided that such written notice is received by the Secretary prior to
the Members' Meeting or any adjournment thereof, or by attending the Members'
Meeting and voting in person.
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FAILURE TO RETURN AN EXECUTED PROXY FOR THE MEMBERS' MEETING OR TO
ATTEND THE MEMBERS' MEETING AND VOTE IN PERSON WOULD HAVE THE SAME EFFECT AS
VOTING AGAINST THE CONVERSION AND REORGANIZATION.
Proxies may be solicited by officers, directors or other employees of the
Mutual Holding Company and/or the Savings Bank, in person, by telephone or
through other forms of communication. Such persons will be reimbursed by the
Mutual Holding Company only for their expenses incurred in connection with such
solicitation.
The proxies solicited hereby will be used only at the Members' Meeting
and at any adjournment thereof; they will not be used at any other meeting.
PURPOSES OF THE CONVERSION AND REORGANIZATION
The stock holding company form of organization has several advantages
over the existing mutual holding company form. For example, as a stock holding
company, the Company and the Savings Bank will be able to diversify their
business activities and will have a larger capital base and greater access to
capital markets. In addition, the Conversion and Reorganization will result in
a public trading market for the Company's common stock. It will also be easier
for the Company and the Savings Bank to acquire other financial institutions and
attract and retain qualified management. See "The Conversion and Reorganization
- -- Purposes of the Conversion and Reorganization."
DESCRIPTION OF THE CONVERSION AND REORGANIZATION
Under the Plan of Conversion, (i) the Mutual Holding Company will convert
to an interim federal stock savings bank ("Interim Mutual") and simultaneously
will merge with and into the Savings Bank, (ii) the Mutual Holding Company will
cease to exist and the 100 shares or 100% of the outstanding Savings Bank Common
Stock held by the Mutual Holding Company will be cancelled, and (iii) a second
interim savings bank ("Interim CFB") formed by the Company solely for such
purpose will then merge with and into the Savings Bank. As a result of the
merger of Interim CFB with and into the Savings Bank, the Savings Bank will
become a wholly owned subsidiary of the Company operating under the name
"Carrollton Federal Bank." See "The Conversion and Reorganization."
EFFECT OF THE CONVERSION AND REORGANIZATION ON DEPOSITORS AND BORROWERS OF THE
SAVINGS BANK
General. Each depositor in the Savings Bank has a pro rata ownership
interest in the Mutual Holding Company's retained earnings based upon the
balance in his or her deposit account. However, this ownership interest is tied
to the depositor's account and has no tangible market value separate from the
account. Any other depositor who opens a deposit account
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<PAGE>
obtains a pro rata interest in the Mutual Holding Company's retained earnings
without any additional payment beyond the amount of the deposit. A depositor
who reduces or closes his or her account receives a portion or all of his or her
account balance but nothing for his or her ownership interest, which is lost to
the extent that the balance in the account is reduced.
Consequently, depositors normally do not have a way to realize the value
of their ownership, which has realizable value only in the unlikely event that
the Mutual Holding Company is liquidated. In such event, the depositors of
record at that time, as owners, would share pro rata in any residual retained
earnings after other claims are paid.
Upon completion of the Conversion and Reorganization, permanent
nonwithdrawable capital stock will be created to represent the ownership of the
Company. The stock is separate and apart from deposit accounts and is not and
cannot be insured by the FDIC. Transferable certificates will be issued to
evidence ownership of the stock, which will enable the stock to be sold or
traded, if a purchaser is available, with no effect on any account held in the
Savings Bank. Under the Plan of Conversion, all of the capital stock of the
Savings Bank will be acquired by the Company in exchange for a portion of the
net proceeds from the sale of the Common Stock in the Conversion and
Reorganization. The Common Stock will represent an ownership interest in the
Company and will be issued upon completion of the Conversion and Reorganization
to persons who elect to purchase the shares being offered.
Continuity. During the Conversion and Reorganization process, the Saving
Bank's normal business of accepting deposits and making loans will continue
without interruption. The Savings Bank will continue to be subject to
regulation by the OTS and the FDIC, and FDIC insurance of accounts will continue
without interruption. After the Conversion and Reorganization, the Savings Bank
will continue to provide services for depositors and borrowers under current
policies and by its present management and staff.
The Board of Directors serving the Mutual Holding Company at the time of
the Conversion and Reorganization will serve as the Company's Board of
Directors. All of the Saving Bank's directors and officers at the time of the
Conversion and Reorganization will retain their positions after the Conversion
and Reorganization.
Voting Rights. Upon completion of the Conversion and Reorganization,
depositor and borrower members as such will have no voting rights in the
Company, the Mutual Holding Company or the Savings Bank. As a result, they will
not be able to elect directors of any of these institutions or control their
affairs. Currently, these rights are accorded to depositors and certain
borrowers of the Savings Bank who are the members of the Mutual Holding Company.
After the Conversion and Reorganization, only the shareholders of the Company
will have voting rights, and the Company will own all of the stock of the
Savings Bank. Each holder of Common Stock will be entitled to one vote per
share on any matter to be considered by the shareholders of the Company, subject
to the provisions of the Company's Articles of Incorporation.
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<PAGE>
Deposit Accounts and Loans. SAVINGS BANK DEPOSIT ACCOUNTS, THE BALANCES
OF INDIVIDUAL ACCOUNTS AND EXISTING FEDERAL DEPOSIT INSURANCE COVERAGE WILL NOT
BE AFFECTED BY THE CONVERSION AND REORGANIZATION. Furthermore, the Conversion
and Reorganization will not affect the loan accounts, the balances of these
accounts and the obligations of the borrowers under their individual contractual
arrangements with the Savings Bank.
Tax Effects. The Company and the Savings Bank have received an opinion
of counsel indicating that the Conversion and Reorganization will qualify as a
tax-free reorganization for federal and Georgia income tax purposes. See "Risk
Factors -- Possible Adverse Income Tax Consequences of Distribution of
Subscription Rights" and "The Conversion and Reorganization -- Effects of the
Conversion and Reorganization" and "-- Tax Aspects."
Effect on Liquidation Rights. Were the Mutual Holding Company to
liquidate, its creditors' claims would be paid first. Thereafter, if any assets
remained, members of the Mutual Holding Company would receive such remaining
assets, pro rata, based upon the deposit balances in their deposit accounts at
the Savings Bank immediately prior to liquidation. In the unlikely event that
the Savings Bank were to liquidate after the Conversion and Reorganization, all
creditors' claims (including those of depositors, to the extent of their deposit
balances) also would be paid first, followed by distribution of the "liquidation
account" to certain depositors, with any assets remaining thereafter distributed
to the Company as the holder of the Savings Bank's capital stock. Under OTS
regulations, a merger, sale of bulk assets or similar transaction with another
insured savings institution would not be considered a liquidation for this
purpose, and in such a transaction, the surviving institution would be required
to assume the liquidation account. See "The Conversion and Reorganization --
Liquidation Rights."
THE OFFERINGS
Between 1,551,250 and 2,098,750 shares of Common Stock are being offered
at $20 per share. As a result of changes in market and financial conditions
prior to completion of the Conversion or to fill the order of the Company's ESOP
and subject to OTS approval, the Company may increase the number of shares being
offered to 2,413,562 without further notice to you. See "The Conversion and
Reorganization -- The Offerings" and "-- Stock Pricing and Number of Shares to
be Issued."
STOCK PURCHASES
The shares of Common Stock will be offered on the basis of priorities.
Depositors and certain borrowers of the Savings Bank will receive subscription
rights to purchase shares in the Subscription Offering. The shares will be
offered first in the Subscription Offering and any remaining shares will be
offered to the general public in a Community Offering and a Syndicated Community
Offering. See "The Conversion and Reorganization -- The Offerings."
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<PAGE>
PURCHASE LIMITATIONS
The minimum purchase is 25 shares (or $500). The maximum purchase is
24,135 shares (or $482,700). For purposes of calculating your maximum purchase,
your purchase will be grouped together with those of persons or entities who are
your "associates" or with whom you are "acting in concert." Also, when more
than one person or entity is an owner of a particular deposit account or obligor
of a particular loan account, the orders of such persons and entities pursuant
to subscription rights related to those accounts may not exceed $482,700 in the
aggregate. See "The Conversion and Reorganization -- Purchase Limitations."
PAYMENT FOR SUBSCRIPTIONS FOR COMMON STOCK
If you subscribe for Common Stock in the Offerings, you may pay for the
Common Stock in cash, by check or money order or by authorizing a withdrawal
from your deposit account with the Savings Bank. You may not pay for your
shares by wire transfer. Your payment will be deposited in a separate account
at the Savings Bank and will earn interest at the Savings Bank's passbook rate
of interest from the date the Savings Bank receives payment until the Conversion
and Reorganization is completed or terminated. If you pay by authorization of
withdrawal from a deposit account, the funds to be withdrawn will continue to
accrue interest at the contractual rate, but will not be available to you until
completion or termination of the Conversion and Reorganization. See "Conversion
and Reorganization -- Procedure for Purchasing Shares in the Offering."
SUBSCRIPTION RIGHTS
You may not transfer or agree to transfer your subscription rights under
the Plan or the shares of Common Stock to be issued upon the exercise of your
subscription rights. If you subscribe for Common Stock, you will be required to
certify that your purchase of Common Stock is solely for your own account and
that there is no agreement or understanding regarding the sale or transfer of
the shares. A false certification on the subscription form may constitute a
federal criminal offense. See "The Conversion and Reorganization --
Restrictions on Transfer of Subscription Rights and Shares."
SUBSCRIPTION RIGHTS ARE NON-TRANSFERABLE AND PERSONS FOUND TO BE
ATTEMPTING TO TRANSFER SUBSCRIPTION RIGHTS WILL BE SUBJECT TO THE FORFEITURE OF
SUCH RIGHTS AND POSSIBLE FURTHER SANCTIONS AND PENALTIES IMPOSED BY THE OFFICE
OF THRIFT SUPERVISION. THE COMPANY AND THE SAVINGS BANK WILL REFER TO THE
OFFICE OF THRIFT SUPERVISION ANY SITUATION THAT THEY BELIEVE MAY INVOLVE A
TRANSFER OF SUBSCRIPTION RIGHTS AND WILL NOT HONOR ORDERS THAT THEY SUSPECT TO
INVOLVE THE TRANSFER OF SUCH RIGHTS. IN ADDITION, REFERRALS WILL BE MADE TO THE
OFFICE OF THE UNITED STATES ATTORNEY.
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THE OFFERING RANGE AND DETERMINATION OF THE PRICE PER SHARE
The offering range is based on an independent appraisal of the pro forma
market value of the Common Stock by Ferguson & Company, an appraisal firm
experienced in appraisals of savings institutions. Ferguson has estimated that
in its opinion, as of February 27, 1997, the aggregate pro forma market value of
the Company and the Savings Bank ranged between $31,025,000 and $41,975,000
(with a midpoint of $36,500,000). This range is called the "Valuation Price
Range." The pro forma market value of the Company and the Savings Bank gives
effect to the sale of shares in the Offerings. The appraisal was based in part
upon the Savings Bank's financial condition and operations and the effect of the
additional capital to be raised by the sale of Common Stock in the Offerings.
The $20.00 price per share was determined by the Company's Board of Directors.
The independent appraisal will be updated prior to the consummation of the
Conversion. Subject to OTS approval, the Company may increase or decrease the
Valuation Price Range to reflect changes in market and economic conditions or to
fill the order of the ESOP before completion of the Conversion and
Reorganization. This would result in an increase or decrease in the number of
shares of Common Stock sold. The Company will not resolicit subscribers or
permit them to modify or cancel their subscriptions unless the final appraised
valuation is less than $31,025,000 or more than $48,271,250 (15% above the
maximum of the Valuation Price Range). See "The Conversion and Reorganization -
Stock Pricing and Number of Shares to be Issued."
TERMINATION OF THE OFFERINGS
The Subscription Offering will terminate at 12:00 noon, Eastern Time, on
[JUNE 17], 1997 (the "Expiration Date"), unless it is extended for a period of
up to 45 days or, with OTS approval, for additional periods not beyond [JUNE
16], 1999. The Community Offering and/or any Syndicated Community Offering may
terminate at any time after such offerings begin but must be completed on or
before [AUGUST 1], 1997, unless extended with OTS approval. Orders submitted
are irrevocable until the completion of the Conversion and Reorganization.
However, if the Conversion and Reorganization is not completed on or before
[AUGUST 1], 1997 or extended beyond that date with OTS approval, the Company
will promptly return all funds to subscribers with interest and will cancel all
withdrawal authorizations.
BENEFITS TO MANAGEMENT FROM THE OFFERINGS
Full-time employees of the Savings Bank and the Company will participate
in the Offerings through purchases of Common Stock by the Company's ESOP, which
is a form of retirement plan. Following the completion of the Conversion and
Reorganization, management intends to implement a stock award plan and a stock
option plan. These plans will benefit directors and key employees. However,
under OTS regulations, the stock award plan and stock option plan may not be
adopted until after the Conversion and are subject to shareholder approval.
Certain members of management also have employment agreements with the Savings
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Bank. See "Management of the Company -- Benefits" and "-- Employment
Agreements" and "Risk Factors -- Possible Dilutive Effect of Issuance of
Additional Shares."
USE OF PROCEEDS RAISED FROM THE SALE OF COMMON STOCK
The Company will contribute up to 50% of the net proceeds from the
Offerings to the Savings Bank. The balance of the funds will be retained as the
Company's initial capitalization, with a portion of those funds being loaned to
the ESOP to fund its purchase of Common Stock in the Offerings. The Company may
use the funds it retains to support future expansion of operations or
diversification into other banking-related businesses and for other business or
investment purposes, although management has no current plans regarding such
activities. Subject to applicable limitations, the Company may also use
available funds to repurchase shares of Common Stock and for the payment of
dividends. Funds contributed to the Savings Bank will be invested initially in
short-to intermediate-term United States government and agency securities. The
Savings Bank will also use the proceeds to support its lending and investment
activities and to enhance its ability to serve the borrowing and other financial
needs of the communities it serves. See "Use of Proceeds."
DIVIDENDS
The Company intends initially to pay quarterly cash dividends on the
Common Stock at an annual rate of at least $0.60 per share (3% of the $20.00 per
share purchase price) after the Conversion and Reorganization. However, the
payment of dividends will be subject to the discretion of the Board of Directors
and to the Company's earnings and financial condition. If the Company's Board
of Directors determines in its discretion that the net income, capital and
financial condition of the Company, the general economy or the best interests of
the Company's shareholders do not support the payment of dividends, the Company
may not pay dividends on the Common Stock. A primary source of income to the
Company will be dividends periodically declared and paid by the Savings Bank on
the Savings Bank common stock held by the Company. The declaration and payment
of dividends by the Savings Bank are subject to the Savings Bank's earnings and
financial condition, general economic conditions and federal restrictions.
Accordingly, dividends may not be paid or, if paid, may be discontinued. See
"Dividend Policy" and "Regulation."
MARKET FOR THE COMMON STOCK
The Company has applied to have the Common Stock listed on Nasdaq under
the symbol "CFBC." No assurance can be given that an active and liquid trading
market will develop or be maintained. Investors should have a long-term
investment intent. Persons purchasing shares may not be able to sell their
shares or at a price equal to or above $20.00. See "Market for Common Stock."
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IMPORTANT RISKS IN OWNING COMMON STOCK OF THE COMPANY
Before you decide to purchase Common Stock in the Offerings, you should
read the section of this document entitled "Risk Factors."
MUTUAL TO STOCK CONVERSION AND REORGANIZATION
---------------------------------------------
The Boards of Directors of Carrollton Federal Bank, FSB ("Carrollton Federal" or
the "Savings Bank") and CF Mutual Holdings (the "Mutual Holding Company") have
voted to convert from a federally chartered mutual holding company to a stock
institution, subject to the approval of the members of the CF Mutual Holdings,
the parent company of Carrollton Federal. Complete details on the Conversion
and Reorganization, including reasons for conversion and reorganization, are
contained in the Prospectus and Proxy Statement. We ask you to please read
them.
This brochure is provided to answer basic questions you might have about the
conversion and reorganization. Remember, the Conversion and Reorganization will
not affect the rate on any of your savings accounts, deposit certificates or
loans.
THE CONVERSION
--------------
1. Q. What is a "Conversion"?
A. Conversion is a change in the legal form of organization from a mutual
holding company to a stock institution, which allows customers of
Carrollton Federal to subscribe for shares of stock in Community First
Banking Company, the holding company formed by the board of directors
of Carrollton Federal to hold all of the outstanding stock in
Carrollton Federal.
2. Q. Why is Carrollton Federal converting?
A. Carrollton Federal's Mutual Holding Company does not have stockholders
and has no authority to issue capital stock. By converting to the
stock form of organization, Carrollton Federal will be structured in
the form used by all commercial banks, most business entities and a
growing number of savings institutions.
The Conversion will also strengthen Carrollton Federal as an
independent, community-oriented financial institution, by providing a
larger capital base from which the Savings Bank may operate, the
ability to attract and retain qualified management and personnel
through stock-based employee benefit plans, enhanced
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flexibility to diversify into other financial services related
activities and expanded opportunities to render quality services to
its customers and the local community.
3. Q. Is Carrollton Federal's mutual to stock conversion beneficial to
the communities that the Savings Bank serves?
A. Management believes that the proposed Conversion and Reorganization is
in the best interest of the various communities that Carrollton
Federal serves because following the Conversion and Reorganization it
is anticipated that a significant portion of the Common Stock will be
owned by local residents desiring to share in the ownership of a local
community financial institution. Management desires that a
significant portion of the shares of common stock sold in the
offerings will be sold to residents of the Savings Bank's "Local
Community" -- Carroll, Coweta, Douglas, Fayette, Haralson, Heard,
Henry, and Paulding Counties in Georgia.
4. Q. Will the Conversion and Reorganization have any effect on savings
accounts, certificates of deposit or loans with Carrollton Federal?
A. No. The Conversion and Reorganization will not change the amount,
interest rate or withdrawal rights of savings and checking accounts or
certificates of deposit. The rights and obligations of borrowers
under their loan agreements will not be affected.
However, upon Conversion and Reorganization, deposit account holders
and borrowers will no longer have voting rights in Carrollton Federal
or its existing mutual holding company , unless they become
stockholders of Community First Banking Copany.
5. Q. Will the Conversion and Reorganization cause any changes in
personnel or management?
A. No. The Conversion and Reorganizaiton will not cause any changes in
personnel or management. The normal day-to-day operations will
continue as before.
6. Q. Did the Board of Directors of Carrollton Federal approve the
Conversion and Reorganization?
A. Yes. The Boards of Directors of Carrollton Federal and its existing
mutual holding company unanimously approved the Conversion and
Reorganization on February 11, 1997.
22
<PAGE>
7. Q. Is the Conversion and Reorganization like a de novo or newly
organized bank's selling stock?
A. No. A de novo bank or newly organized bank generally is in the
process of its initial organization, with no history, no experience,
no assets, no earnings, few employees, and the other difficulties
attendant to a start-up organization. Community First Banking
Company, on the other hand, has been in existence for 50 years, has
assets of $352,000,000, and has a demonstrated operating track record.
THE SUBSCRIPTION AND COMMUNITY OFFERINGS
----------------------------------------
8. Q. What are the Subscription and Community Offerings?
A. Under the Plan of Conversion and Reorganization adopted by Carrollton
Federal, consistent with the board's objective for Carrollton Federal
being a locally owned financial institution, Community First Banking
Company is offering shares of stock to certain customers of the
Savings Bank and to the Company's Employee Stock Ownership Plan
("ESOP") of the new holding company in the Subscription Offering.
Shares which are not subscribed for in the Subscription Offering, if
any, may be offered to the general public in a Community Offering
with preference given to natural persons who are residents of the
Savings Bank's Local Community. The Subscription Offering and
Community Offering, if conducted, are being managed by Trident
Securities, Inc. It is anticipated that any shares not subscribed for
in either the Subscription or Community Offerings may be offered for
sale in a Syndicated Community Offering, which is an offering on a
best efforts basis by a selling group of broker-dealers.
9. Q. Who is entitled to buy Community First Banking Company common
stock?
A. The shares are being offered pursuant to the Plan of Conversion and
Reorganization on a priority basis to: (i) Carrollton Federal's
depositors as of December 31, 1995 with account balances at the close
of business on such date of at least $50 ("Eligible Account Holders");
(ii) Community First Banking Company's Employee Stock Ownership Plan
(the "ESOP"); (iii) Carrollton Federal's depositors as of March 31,
1997 with account balances at the close of business on such date of at
least $50 (the "Supplemental Eligible Account Holders"); (iv)
Carrollton Federal's depositors as of April 30, 1997 and borrowers as
of July 19, 1990 with borrowings still in existence as of April 30,
1997 who are not Eligible Account Holders or Supplemental Eligible
Account Holders ("Other Members").
23
<PAGE>
Shares are that are not subscribed for during the Subscription
Offering, if any, will be offered to the general public in the
Community Offering with priority being given to natural persons
residing in Carroll, Coweta, Douglas, Fayette, Haralson, Heard, Henry,
and Paulding Counties in Georgia.
10. Q. How many shares of stock are being offered?
A. Community First Banking Company is offering 1,825,000 shares of common
stock at a price of $20.00 per share. The number of shares may be
reduced to as low as 1,551,250 or increased to as much as 2,098,750 in
response to the independent appraiser's final determination of the
consolidated pro forma market value of Carrollton Federal and
---------
Community First Banking Company at closing. Under certain
circumstances, to reflect changes in market and financial conditions
after the beginning of the offering, the number of shares may be
increased to up to 2,413,562 shares.
11. Q. How was it determined that between 1,551,250 shares and 2,098,750
shares of stock would be issued at $20.00 per share?
A. The price range was determined through an appraisal of Carrollton
Federal by Ferguson & Company, an independent appraisal firm
specializing in the thrift industry.
12. Q. How much stock do the directors and executive officers of Carrollton
Federal intend to purchase through the Subscription Offering?
A. Directors and executive officers and their associates intend to
purchase $4,403,900 (12.06% at the 1,825,000 share midpoint of the
offering) of the stock to be offered in the Conversion and
Reorganization. The purchase price paid by directors and officers
will be the same as that paid by customers and the general public.
13. Q. Will there be any dividends paid on the stock?
A. Following the Conversion and Reorganization, Community First Banking
Company intends to pay cash dividends on the Common Stock at an
initial annual rate of not less than 3% per share of the $20.00
offering price (or $0.60 per share). However, payment of dividends,
if any, will be subject to the discretion of the Board of Directors
and to the earnings and financial condition of the Company. There can
be no assurance that dividends will in fact be paid on the Common
Stock or that, if paid, such dividends will not be reduced or
eliminated in future periods.
24
<PAGE>
14. Q. How will dividends be paid?
A. Cash dividends can be deposited directly into an account at Carrollton
Federal. The Direct Dividend Deposit section in the Stock Order Form
must be completed, including information on the specific account into
which dividends are to be deposited. Dividends can only be deposited
directly into savings, passbook and money market accounts. Customers
who do not have savings, passbook or money market accounts can set up
an account by coming to any office of the Savings Bank. Cash
dividends not deposited directly will be sent out by check.
BECOMING A STOCKHOLDER
----------------------
15. Q. How do I purchase shares of stock?
A. Eligible customers wishing to subscribe for or purchase Community
First Banking Company common stock must complete a Stock Order Form
and return it to any office of the Savings Bank along with full
payment or appropriate instructions authorizing a withdrawal from a
deposit account at Carrollton Federal on or prior to the close of the
Subscription Offering which is 12:00 noon, Eastern time on _______,
1997. If shares remain available for sale after the expiration of the
Subscription Offering, they will be offered in the Community Offering,
which may commence at any time after the Subscription Offering
commences. There can be no assurance that any shares will be left to
offer in a Community Offering; accordingly, if a person desires to
purchase shares and is an Eligible Account Holder, such person should
subscribe in the Subscription Offering and not wait until the
Community Offering. Members of the public who wish to order stock
directly from the Savings Bank in the Community Offering should return
their Stock Order Form and accompanying payment to Carrollton Federal
as soon as possible after the Community Offering begins because it may
terminate at any time after it begins. Members of the general public
should contact the Stock Information Center at (770) 838-7355 for
additional information.
16. Q. How can I pay for the shares?
A. First, you may pay for your stock by cash, check, bank draft,
negotiable order of withdrawal or money order. These funds will earn
interest at the Savings Bank's passbook rate from the day we receive
them until the completion or termination of the Conversion and
Reorganization. Stock orders accompanied by cash must be delivered in
person to Carrollton Federal's main office at 110 Dixie Street,
Carrollton, Georgia.
25
<PAGE>
Second, you may authorize us to withdraw funds from your Carrollton
Federal savings account or certificate of deposit without early
withdrawal penalty. These funds will continue to earn interest at the
rate in effect for your account until completion of the offering at
which time your funds will be withdrawn for your purchase. Funds
remaining in this account (if any) will continue to earn interest at
the contractual rate unless the withdrawal reduces the account balance
below the applicable minimum in which case you will receive interest
at the passbook rate. A hold will be placed on your account for the
purchase amount you specify on the stock order form. You will not
have access to these funds from the day we receive your order until
the completion or termination of the Conversion and Reorganization.
17. Q. How much stock can I buy during the offering period?
A. The minimum number of shares that may be purchased is 25 shares. No
Stock Order Form will be accepted for less than $500. No person or
entity, together with their associates and persons acting in concert
with them, may purchase shares having an aggregate purchase price of
more than $482,700. When more than one person or entity is an owner
of a particular deposit account or obligor of a particular loan
account, the orders of such persons related to such accounts
collectively may not exceed the purchase limitation.
18. Q. When must I place my order for shares of stock?
A. To exercise subscription rights in the Subscription Offering, a Stock
Order Form must be received with full payment for all shares
subscribed for not later than 12:00 noon, Eastern time on _______,
1997.
Orders by non-customers desiring to purchase shares through the
Community Offering must be received before the close of the Community
Offering, which may terminate at any time after it begins. If there
is a Community Offering, it may begin at any time after the
Subscription Offering begins.
19. Q. Will I receive interest on funds I submit for stock purchases?
A. Yes. Carrollton Federal will pay its current passbook rate from the
date funds are received (with a completed Stock Order Form) during the
Subscription and Community Offerings until completion or termination
of the Conversion and Reorganization.
20. Q. Can I purchase stock using funds in an IRA account?
26
<PAGE>
A. Yes. To use such funds to subscribe for stock, you need to establish a
self-directed trust account with an outside trustee. When properly
executed, there will be no early withdrawal or tax consequences
incurred by these transactions. Contact the Stock Information Center
for further information at (770) 838-7355. It takes several days to
process the necessary IRA forms and therefore it is necessary that
your response be received by ________, 1997 to accommodate your
interest.
21. Q. Must I pay a commission on the stock for which I subscribe?
A. You will not pay a commission on stock purchased in the Subscription
Offering or the Community Offering. Conversion and Reorganization
expenses, including commissions, will be deducted from the proceeds of
the offering upon completion of the Conversion and Reorganization.
22. Q. Will the FDIC (Federal Deposit Insurance Corporation) insure the
shares of stock?
A. No. The shares are not and may not be insured by the FDIC. However,
the Savings Association Insurance Fund of the FDIC will continue to
insure savings accounts and certificates of deposit at Carrollton
Federal up to the applicable limits allowed by law.
23. Q. If I buy stock in the Conversion, how would I go about buying
additional shares or selling shares in the aftermarket?
A. Community First Banking Company has received conditional approval to
have the Common Stock quoted on the Nasdaq National Market System
under the symbol "CFBC." Therefore, once the stock has commenced
trading, interested investors may contact any broker to buy or sell
shares.
24. Q. Are the subscription rights transferable to another party?
A. No. Pursuant to federal regulations, subscription rights granted in
the Subscription Offering may be exercised only by the person(s) to
whom they are granted. Any person found to be transferring
subscription rights will be subject to forfeiture of such rights and
may be subject to other legal or equitable sanctions.
27
<PAGE>
25. Q. May I obtain a loan from Carrollton Federal using stock as collateral
to pay for my shares?
A. No. Federal regulations do not allow Carrollton Federal to make loans
for this purpose, but other financial institutions could make a loan
for this purpose.
26. Q. I closed my account several months ago. Someone told me that I am
still eligible to buy stock. Is that true?
A. If you were an account holder on the Eligibility Record Date, December
31, 1995, or the Supplemental Eligibility Record Date, March 31, 1997
you are entitled to subscribe for stock without regard to whether you
continue to hold your Carrollton Federal account.
27. Q. If I have misplaced my Stock Order Form what should I do?
A. Carrollton Federal will mail you another order form or you may obtain
one in person from the Stock Information Center in the main office of
Carrollton Federal Bank in Carrollton, Georgia. If you need
assistance in obtaining or completing a Stock Order Form, a Carrollton
Federal employee will be happy to help you.
VOTING FOR THE PLAN OF CONVERSION AND REORGANIZATION
----------------------------------------------------
28. Q. Am I eligible to vote at the Special Meeting of Members to be held to
consider the Plan of Conversion?
A. You are eligible to vote at the Special Meeting of Members to be held
on _______, 1997, if you were a depositor at Carrollton Federal on the
Voting Record Date (April 30, 1997) and continue as such until the
Special Meeting, or if you were a borrower on July 19, 1990 with
borrowings still in existence on April 30, 1997. If you are a Voting
Member, you should have received a Proxy Statement and proxy card with
which to vote. Please contact the Stock Information Center if you are
a voting member and did not receive a proxy.
29. Q. How many votes do I have as a Voting Member?
A. Each depositor account holder eligible to vote is entitled to one vote
for each $100, or fraction thereof, on deposit in such account as of
the voting record date. Borrower members eligible to vote are
entitled to cast one vote. No member may cast more than 1,000 votes.
28
<PAGE>
30. Q. What happens if Carrollton Federal does not get enough votes to
approve the Plan of Conversion and Reorganization?
A. The Conversion and Reorganization would not take place and Carrollton
Federal would remain in its current form of organization.
31. Q. As a qualifying depositor or borrower of Carrollton Federal, am I
required to vote?
A. No. However, failure to return your proxy card will have the same
effect as a vote "Against" the Plan of Conversion and Reorganization.
32. Q. What is a Proxy Card?
A. A Proxy Card gives you the ability to vote without attending the
Special Meeting in person. You may attend the meeting and vote, even
if you have returned your proxy card, if you choose to do so.
However, if you are unable to attend, you still are represented by
proxy.
33. Q. How does the Conversion and Reorganization affect me?
A. The Conversion and Reorganization is intended, among other things, to
assist Carrollton Federal in maintaining and expanding its many
services to Carrollton Federal's customers and community. You will
also have the opportunity to invest in Carrollton Federal through
purchasing stock in its holding company. However, there is no
obligation to do so. Purchase of stock is strictly optional and none
of your accounts will be affected.
34. Q. How can I get further information concerning the stock offering?
A. You may call the Stock Information Center, collect at (770) 838-7355
for further information or a copy of the Prospectus, Stock Order Form,
Proxy Statement and Proxy Card.
FOR YOUR CONVENIENCE
In order to assist you during the stock offering period, we have
established a Stock Information Center to answer your questions. Please call
collect:
(770) 838-7355
THE STOCK IS NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
29
<PAGE>
III. Counter Cards, Lobby Posters and the Tombstone Announcement
A. Explanation
Counter cards, lobby posters and the tombstone announcement serve two
purposes: (1) As a notice to Carrollton Federal's customers and members of
the local community that the stock sale is underway and (2) to remind the
customers of the end of the Subscription Offering. Trident has learned in
the past that many people need reminding of the deadline for subscribing
and therefore we suggest the use of these simple reminders.
B. Quantity
Approximately 3 - 4 counter cards will be used at each office of the
Savings Bank, at teller windows and on customer service representatives'
desks. These counter cards will be exact duplicates of the lobby poster
and will be no larger than 8-1/2" x 11".
Approximately 1 - 2 lobby posters will be used at each office of the
Savings Bank. These posters will be approximately 2' x 3'.
Tombstone announcements may be used for placement in local newspapers. The
advertisements will run no more than twice each in the local newspaper.
The ads will be no larger than 8-1/2" x 11".
C. Examples enclosed
30
<PAGE>
C. COUNTER CARD OR POSTER
CARROLLTON FEDERAL BANK, FSB
STOCK OFFERING MATERIALS
AVAILABLE HERE
Customer Priority Rights for the Stock Offering
by Community First Banking Company
Expire on _______, 1997
This information is neither an offer to sell nor a solicitation of an offer to
buy securities.
The offer is made only by the Prospectus.
THE STOCK WILL NOT BE INSURED BY THE FDIC OR ANY GOVERNMENTAL AGENCY.
31
<PAGE>
THIS ANNOUNCEMENT IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO
BUY THESE SECURITIES. THE OFFER IS MADE ONLY BY THE PROSPECTUS. THESE SHARES
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION,
THE OFFICE OF THRIFT SUPERVISION OR THE FEDERAL DEPOSIT INSURANCE CORPORATION,
NOR HAS SUCH COMMISSION, OFFICE OR CORPORATION PASSED UPON THE ACCURACY OR
ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
NEW ISSUE __________, 1997
UP TO [2,098,750] SHARES
These shares are being offered pursuant
to a Plan of Conversion whereby
CARROLLTON FEDERAL BANK, FSB
Carrollton, Georgia,
and its parent company, CF Mutual Holdings, will convert from a federally
chartered mutual holding company to a stock institution
and become a wholly owned subsidiary of
COMMUNITY FIRST BANKING COMPANY
COMMON STOCK
---------------
PRICE $20.00 PER SHARE
---------------
TRIDENT SECURITIES, INC.
For a copy of the prospectus call (770) ________.
Copies of the prospectus may be obtained in any State in which this announcement
is circulated from Trident Securities, Inc. or such other brokers and dealers
as may legally offer these securities in such state.
THE STOCK WILL NOT BE INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
32
<PAGE>
IV. Community Meeting Materials
A. Explanation
In order to educate the public about the stock offering, Trident suggests
holding Community meetings in various locations. In an effort to target a
group of interested investors, Trident requests that each Director of the
Savings Bank submit a list of acquaintances that he or she would like to
invite to a Community meeting.
B. Method of Distribution of Invitations and Prospect Letters
Each Director submits his list of prospects.
Invitations are sent to each Director's prospects through the mail. All
invitations are preceded by a Prospectus and all attendees are given a
Prospectus at the meeting. Letters will be sent to prospects to thank them
for their attendance and to remind them of closing dates.
C. Examples enclosed
33
<PAGE>
C. Community Meeting Example
The Directors and Officers
of
Carrollton Federal Bank, FSB
cordially invite you to attend a brief
presentation regarding the stock offering of
Community First Banking Company, our proposed
holding company
Please join us at the
[Place]
[Address]
[Date]
at [7:00 p.m.]
for hors d'oeuvres
R.S.V.P.
[(770) _______] (Collect)
34
<PAGE>
Example
(Introductory Letter)
(Carrollton Federal Letterhead)
_______, 1997
[Name]
[Address]
[City, State, Zip]
Dear [ ]:
You have probably read recently in the newspaper that Carrollton
Federal Bank and its parent company, CF Mutual Holdings, are converting from a
federally chartered mutual holding company to a stock institution. This
conversion and reorganization is the biggest step in the history of Carrollton
Federal in that it allows customers, community members, employees and directors
the opportunity to subscribe for stock in our new holding company, Community
First Banking Company. Local participation is vitally important to ensure that
Carrollton Federal remains a locally owned, locally controlled institution. We
do not want to see Carrollton Federal Bank, FSB become just another branch of
some mega-bank.
I have enclosed a Prospectus and a stock order form which will allow
you to subscribe for shares and become a charter stockholder of Community First
Banking Company should you so desire. In addition, we will be holding several
presentations for friends of Carrollton Federal in order to explain the
Conversion and review the merits of becoming a charter stockholder of Community
First Banking Company. You will receive an invitation shortly.
I hope that if you have any questions you will feel free to call me or
Carrollton Federal's Stock Information Center at (770) ___________. I look
forward to seeing you at our presentation.
Sincerely,
[Director]
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of Community First Banking Company common stock offered in the
Conversion and Reorganization. Such offer and solicitation is made only by
means of the Prospectus. There shall be no sale of stock in any state in which
any offer, solicitation of an offer or sale of stock would be unlawful.
35
<PAGE>
THE STOCK IS NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
36
<PAGE>
Example
(Thank You Letter)
(Carrollton Federal Letterhead)
___________, 1997
[Name]
[Address]
[City, State, Zip]
Dear [ ]:
On behalf of the Board of Directors and management of Carrollton Federal
Bank, FSB, thank you for attending our recent presentation regarding the stock
offering of Community First Banking Company. We are enthusiastic about the
local reaction to and participation in our stock offering and look forward to
completing the Subscription Offering on _______, 1997.
I hope that you will join me in being a local charter stockholder, and once
again thank you for your interest.
Sincerely,
Gary D. Dorminey
President
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of Community First Banking Company common stock offered in the
Conversion and Reorganization. Such offer and solicitation is made only by
means of the Prospectus. There shall be no sale of stock in any state in which
any offer, solicitation of an offer or sale of stock would be unlawful.
THE STOCK IS NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
37
<PAGE>
Example
(Sorry You Were Unable to Attend)
(Carrollton Federal Letterhead)
____________, 1997
[Name]
[Address]
[City, State, Zip]
Dear [ ]:
I am sorry you were unable to attend our recent presentation regarding
Carrollton Federal's mutual to stock conversion. The Board of Directors and
management as a group intend to invest $3,650,000 of our own funds in the common
stock of Community First Banking Company. We are enthusiastic about the stock
offering and look forward to completing the Subscription Offering on _______,
1997.
We have established a Stock Information Center to answer any questions
regarding the stock offering. Should you require any assistance between now and
_______, I encourage you either to stop by or call our Stock Information Center
at (770) 838-7355.
I hope you will join me in becoming a local charter stockholder of
Community First Banking Company.
Sincerely,
Gary D. Dorminey
President
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of Community First Banking Company common stock offered in the
Conversion and Reorganization. Such offer and solicitation is made only by
means of the Prospectus. There shall be no sale of stock in any state in which
any offer, solicitation of an offer or sale of stock would be unlawful.
THE STOCK IS NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
38
<PAGE>
Example
(Final Reminder Letter)
(Carrollton Federal Letterhead)
________, 1997
[Name]
[Address]
[City, State, Zip]
Dear [ ]:
Just a quick note to remind you that the deadline is quickly approaching
for purchasing stock in Community First Banking Company, the proposed holding
company for Carrollton Federal Bank. I hope you will join me in becoming a
local charter stockholder in what will be Georgia's newest publicly owned
financial institution holding company, and help us ensure local control for
years to come.
The deadline for subscribing for shares in the Subscription Offering is
_______, 1997. If you have any questions, I hope you will call our Stock
Information Center at (770) 838-7355.
Once again, I look forward to having you join me as a stockholder of
Community First Banking Company.
Sincerely,
Gary D. Dorminey
President
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of Community First Banking Company common stock offered in the
Conversion and Reorganization. Such offer and solicitation is made only by
means of the Prospectus. There shall be no sale of stock in any state in which
any offer, solicitation of an offer or sale of stock would be unlawful.
THE STOCK IS NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
39
<PAGE>
V. IRA Mailing
A. Explanation
A special IRA mailing is proposed to be sent to all IRA customers of the
Bank in order to alert the customers that funds held in an IRA can be used
to purchase stock. Since this transaction is not as simple as designating
funds from a certificate of deposit like a normal stock purchase, this
letter informs the customer that this process is slightly more detailed and
involves contact with the Stock Information Center.
B. Quantity
One IRA letter is proposed to be mailed to each local IRA customer of
Carrollton Federal. These letters would be mailed following OTS approval
for the conversion and after each customer has received the initial mailing
containing a Proxy Statement and a Prospectus.
C. Example - Enclosed
40
<PAGE>
(Carrollton Federal Letterhead)
________, 1997
Dear Individual Retirement Account Participant:
As you know, Carrollton Federal Bank, FSB, and its parent company, CF
Mutual Holdings, are in the process of converting from a federally chartered
mutual holding company to a stock institution and have formed Community First
Banking Company to hold all of the stock of Carrollton Federal (the "Conversion
and Reorganization"). Through the Conversion and Reorganization, certain
current and former depositors and borrowers of Carrollton Federal have the
opportunity to purchase shares of common stock of Community First Banking
Company in a Subscription Offering. Community First Banking Company currently
is offering up to 2,098,750 shares of common stock, subject to adjustment, at a
price of $20.00 per share.
As the holder of an individual retirement account ("IRA") at Carrollton
Federal, you have an opportunity to become a shareholder in Community First
Banking Company by using your IRA funds. If you desire to purchase shares of
common stock of Community First Banking Company through your IRA, Carrollton
Federal can assist you in self-directing those funds. This process can be done
without an early withdrawal penalty and generally without a negative tax
consequence to your IRA.
We hope that you will join the many local depositors of Carrollton Federal
who are subscribing for shares in our offering. If you are interested in
receiving more information on self-directing your IRA, please contact our Stock
Information Center at (770) 838-7355. Because it takes several days to process
the necessary IRA forms, a response must be received by _______, 1997 to
accommodate your interest.
Sincerely,
Gary D. Dorminey
President
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of Community First Banking Company common stock offered in the
Conversion and Reorganization. Such offer and solicitation is made only by
means of the Prospectus. There shall be no sale of stock in any state in which
any offer, solicitation of an offer or sale of stock would be unlawful.
THE STOCK IS NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
41
<PAGE>
VI. Direct Deposit Plan Flyer
A. Explanation
In order to educate customers about the ability to have dividends deposited
directly into an account at the Bank, Trident suggests using a flyer to
alert customers of this option.
Method of Distribution
Flyers would be included in the initial mailing packets, distributed at
community meetings and available at the Stock Information Center.
Example
42
<PAGE>
Direct Deposit Flyer Example
Carrollton Federal Bank, FSB
Customers
You Can Have Dividends Paid on Shares of Community First Banking Company
Deposited Directly Into a Carrollton Federal Bank Account
Please Check The Appropriate Box on the Stock Order Form
and
Inquire at the Stock Information Center
for
More Information
43
<PAGE>
VII. Cover Letters for Initial Mailing
A. Explanation
These cover letters are used as an introduction for the Offering and Proxy
materials mailed to potential investors.
B. Method of Distribution
Appropriate Cover Letters will be sent out in the initial mailing.
C. Examples
44
<PAGE>
(Carrollton Federal Bank Letterhead)
____________, 1997
Dear Valued Customer:
Carrollton Federal Bank CF Mutual Holdings, the parent company of
Carrollton Federal, are pleased to announce that we have received regulatory
approval to proceed with our plan to convert from a federally chartered mutual
holding company to a stock institution. This stock conversion and reorganization
is the most significant event in the history of Carrollton Federal Bank in that
it allows customers, community members, directors and employees an opportunity
to own stock in Community First Banking Company, the proposed holding company
for Carrollton Federal Bank.
Since 1929, the Savings Bank has successfully operated under the mutual
form of organization. We want to assure you that the Conversion and
Reorganization will not affect the terms, balances, interest rates or existing
FDIC insurance coverage on deposits at the Savings Bank, or the terms or
conditions of any loans to existing borrowers under their individual contract
arrangements with the Savings Bank. Let us also assure you that the Conversion
and Reorganization will not result in any changes in the management, personnel
or the Board of Directors of the Savings Bank.
As one of our valued members, you have the opportunity to invest in the
Savings Bank's future by purchasing stock in Community First Banking Company
during the Subscription Offering, without paying a sales commission.
If you decide to exercise your subscription rights to purchase shares, you
must return the properly completed stock order form together with full payment
for the subscribed shares so that it is received by the Savings Bank not later
than 12:00 noon, Eastern Time on _________, 1997.
Enclosed is a proxy card. Your Board of Directors solicits your vote "FOR"
the Savings Bank's Plan of Conversion. A vote in favor of the Plan does not
obligate you to purchase stock. Please sign and return your proxy card promptly;
your vote is important to us.
We have also enclosed a Prospectus and Proxy Statement which fully
describes the Savings Bank, its management, board and financial strength and the
Plan of Conversion. Please review it carefully before you vote or invest. For
your convenience we have established a Stock Information Center. If you have
any questions, please call the Stock Information Center collect at (770) 838-
7355.
We look forward to continuing to provide quality financial services to you
in the future.
Sincerely,
Gary D. Dorminey
President
Enclosures
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of Community First Banking Company common stock offered in the
Conversion and Reorganization. Such offer and solicitation is made only by
means of the Prospectus. There shall be no sale of stock in any state in which
any offer, solicitation of an offer or sale of stock would be unlawful.
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THE STOCK IS NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
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(Carrollton Federal Bank Letterhead)
____________, 1997
Dear Friend:
Carrollton Federal Bank, FSB, and CF Mutual Holdings, the parent company of
Carrollton Federal, are pleased to announce that we have received regulatory
approval to proceed with our plan to convert from a federally chartered mutual
holding company to a stock institution. This stock conversion is the most
significant event in the history of Carrollton Federal Bank in that it allows
customers, community members, directors and employees an opportunity to own
stock in Community First Banking Company, the proposed holding company for
Carrollton Federal Bank.
Since 1929, the Savings Bank has successfully operated under the mutual
form of organization. We want to assure you that the Conversion and
Reorganization will not affect the terms, balances, interest rates or existing
FDIC insurance coverage on deposits at the Savings Bank, or the terms or
conditions of any loans to existing borrowers under their individual contract
arrangements with the Savings Bank.
Let us also assure you that the Conversion and Reorganization will not
result in any changes in the management, personnel or the Board of Directors of
the Savings Bank.
Our records indicate that you were a depositor of the Savings Bank on
either December 31, 1995 or __________, 1997 but that you were not a member on
__________, 1997. Therefore, under applicable law, you are entitled to subscribe
for Common Stock in Community First Banking Company Subscription Offering.
Orders submitted by you and others in the Subscription Offering are contingent
upon the current members' approval of the Plan of Conversion at a special
meeting of members to be held on _________, 1997 and upon receipt of all
required regulatory approvals.
If you decide to exercise your subscription rights to purchase shares, you
must return the properly completed stock order form together with full payment
for the subscribed shares so that it is received at the Savings Bank not later
than 12:00 noon, Eastern Time on _________, 1997.
Enclosed is a Prospectus which fully describes the Savings Bank, its
management, board and financial strength. Please review it carefully before you
invest. For your convenience we have established a Stock Information Center.
If you have any questions, please call the Stock Information Center collect at
(770) 838-7355.
We look forward to continuing to provide quality financial services to you
in the future.
Sincerely,
Gary D. Dorminey
President
Enclosures
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of Community First Banking Company common stock offered in the
Conversion and Reorganization. Such offer and solicitation is made only by
means of the Prospectus. There shall be no sale of stock in any state in which
any offer, solicitation of an offer or sale of stock would be unlawful.
THE STOCK IS NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
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(Trident Letterhead)
------------,1997
To Members and Friends of Carrollton Federal Bank:
Trident Securities, Inc., a member of the National Association of
Securities Dealers, Inc., is assisting Carrollton Federal Bank, FSB, and its
parent company, CF Mutual Holdings, in the conversion from a federally chartered
mutual holding company to a stock institution and the concurrent offering of
shares of common stock by Community First Banking Company (the "Company"), a
Georgia corporation recently formed for the purpose of acquiring all of the
stock of Carrollton Federal Bank.
At the request of Carrollton Federal Bank, we are enclosing materials
explaining the conversion process and your right to subscribe for common shares
of the Company. Please read the enclosed offering materials carefully before
making an investment decision.
If you have any questions, please call the Stock Information Center at
(770) 838-7355.
Sincerely,
TRIDENT SECURITIES, INC.
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of Community First Banking Company common stock offered in the
Conversion and Reorganization. Such offer and solicitation is made only by
means of the Prospectus. There shall be no sale of stock in any state in which
any offer, solicitation of an offer or sale of stock would be unlawful.
THE STOCK IS NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
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IX. Proxygram
A. Explanation
A proxygram is used when the majority of votes needed to adopt the Plan of
Conversion is still outstanding. The proxygram is mailed to those "target
vote" depositors who have not previously returned their signed proxy.
The target vote depositors are determined by the conversion agent.
B. Example enclosed
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
P R O X Y G R A M
(LOGO)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
YOUR VOTE ON OUR PLAN OF CONVERSION AND REORGANIZATION HAS NOT BEEN RECEIVED.
---- -----------------
YOUR VOTE IS VERY IMPORTANT, PARTICULARLY SINCE FAILURE TO VOTE
- ---------------------------
IS EQUIVALENT TO VOTING AGAINST THE PLAN.
VOTING FOR THE CONVERSION AND REORGANIZATION WILL NOT AFFECT THE INSURANCE OF
YOUR ACCOUNTS. THEY WILL CONTINUE TO BE INSURED UP TO $100,000 BY THE SAVINGS
------------------------
ASSOCIATION INSURANCE FUND OF THE FEDERAL DEPOSIT INSURANCE CORPORATION, AN
AGENCY OF THE U.S. GOVERNMENT.
REMEMBER, VOTING FOR CONVERSION AND REORGANIZATION DOES NOT OBLIGATE YOU TO BUY
--------
ANY STOCK.
PLEASE CAREFULLY REVIEW THE PROXY STATEMENT AND ACT PROMPTLY! SIGN THE ENCLOSED
PROXY CARD AND MAIL OR DELIVER IT TO ANY CARROLLTON FEDERAL BANK OFFICE.
- ----------
WE RECOMMEND THAT YOU VOTE "FOR" THE PLAN OF CONVERSION.
-----
THANK YOU!
THE BOARD OF DIRECTORS AND
MANAGEMENT OF CARROLLTON FEDERAL BANK
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of Community First Banking Company common stock offered in the
Conversion and Reorganization. Such offer and solicitation is made only by
means of the Prospectus. There shall be no sale of stock in any state in which
any offer, solicitation of an offer or sale of stock would be unlawful.
THE STOCK WILL NOT BE INSURED BY THE FDIC OR ANY OTHER GOVERNMENTAL AGENCY.
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