As filed with the Securities and Exchange Commission on July 10, 1998
Registration File No._____________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-----------------------------
FORM S-4
Registration Statement
Under
The Securities Act of 1933
Synovus Financial Corp.
(Exact Name of registrant as specified in its charter)
Georgia 6022 58-1134883
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification
incorporation of Classification Number)
organization) Code Number)
Suite 301, One Arsenal Place
901 Front Avenue
Columbus, Georgia 31901
(706) 649-2387
(Address, including zip code, and telephone
number, including area code, of registrant's principal
executive offices)
------------------------------------
Kathleen Moates, Senior Vice President and Deputy General Counsel
Synovus Financial Corp.
Suite 202, One Arsenal Place
901 Front Avenue
Columbus, Georgia 31901
(706) 649-4818
(Name, Address, including zip code, and Telephone Number of Agent for Service)
Approximate date of commencement of the
proposed sale of the securities to
the public:
The date of mailing the Proxy Statement/Prospectus to the shareholders
of Community Bank Capital Corporation.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. _____
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. ________
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. ______
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Proposed Proposed
each class of Amount maximum maximum
securities to be offering aggregate Amount of
to be registered registered price per unit offering price registration fee
- ---------------- ---------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
Common Stock 4,002,253<F1> <F2> <F2> $6,726
$1.00 par value
Common Stock
Rights 4,002,253 <F3> <F3> <F3>
- ----------------------
<FN>
<F1> Maximum number of shares which may be issued by Registrant under its
Agreement in connection with the acquisition of Community Bank Capital
Corporation.
<F2> Determined pursuant to Rule 457(f)(2) under the Securities Act of 1933,
as amended, solely for the purpose of calculating the registration fee.
Based upon the book value of common stock of Community Bank Capital
Corporation at June 30, 1998, there being 688,500 shares of such stock
issued and outstanding on that date, having an aggregate book value on
that date of approximately $22,800,000.
<F3> The Common Stock Rights (the "Rights") are attached to and trade with
the common stock of Synovus Financial Corp. The value, if any,
attributable to the Rights is reflected in the market price of the
common stock of Synovus Financial Corp.
</FN>
</TABLE>
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.
COMMUNITY BANK CAPITAL CORPORATION
Haynes Bridge at Westside Parkway
8025 Westside Parkway
Alpharetta, Georgia 30004
July __, 1998
Dear Shareholder:
You are cordially invited to attend a special meeting of shareholders
(the "Special Meeting") of Community Bank Capital Corporation ("CBCC") to be
held at 9:30 a.m., local time, on August __, 1998 at CBCC's headquarters at 8025
Westside Parkway, Alpharetta, Georgia 30004.
As described in the enclosed Proxy Statement/Prospectus, at the Special
Meeting you will be asked to consider and vote upon an Agreement and Plan of
Merger (the "Merger Agreement"), dated June 5, 1998, by and between CBCC and
Synovus Financial Corp. ("Synovus"). The Merger Agreement provides for the
Merger of CBCC with and into Synovus and for the Bank of North Georgia to
operate as a separate subsidiary of Synovus after the Merger. The material terms
of the Merger Agreement are described in the enclosed Proxy
Statement/Prospectus.
CBCC's Board of Directors has unanimously approved the Merger Agreement
and recommends that you vote FOR the proposed Merger.
Whether or not you plan to attend the Special Meeting in person, you
are requested to complete, date, and sign the enclosed proxy and return it
promptly in the enclosed envelope as soon as possible. If you decide to attend
the Special meeting and wish to change your proxy vote, you may do so by voting
in person at the Special Meeting. If you need assistance in completing your
Proxy, please call Gerri Teel or me.
Very truly yours,
Gordon R. Teel
Chairman and CEO
COMMUNITY BANK CAPITAL CORPORATION
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Notice is hereby given that a Special Meeting (the "Special Meeting")
of Shareholders of Community Bank Capital Corporation ("CBCC") will be held at
9:30 a.m., local time, on August __, 1998 at CBCC's headquarters at 8025
Westside Parkway, Alpharetta, Georgia 30004 for the following purposes:
To consider and vote upon a proposal to merge CBCC with and into
Synovus Financial Corp. ("Synovus"), with Synovus being the resulting
corporation of the merger (the "Merger"), upon the terms and conditions provided
for in the Agreement and Plan of Merger dated June 5, 1998 (the "Merger
Agreement"), and to consider and act upon all matters necessary or incidental to
the Merger Agreement and the Merger; and
To transact such other business as may properly come before the Special
Meeting or any adjournment thereof.
Shareholders of CBCC shall have the right to dissent to the Merger and
receive payment in cash of the fair value for their shares of CBCC Common Stock
upon compliance with the procedures set forth in Section 14-2-1301 et. seq. of
the Official Code of Georgia Annotated, as amended, a copy of which is attached
as Appendix "B" to the Proxy Statement/Prospectus which accompanies this Notice
of Special Meeting of Shareholders.
Only shareholders of record at the close of business on July __, 1998
will be entitled to receive notice of and to vote at the Special Meeting or any
adjournment thereof.
By Order of the Board of Directors
Alpharetta, Georgia Gordon R. Teel
July __, 1998 Chairman and CEO
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING OF CBCC SHAREHOLDERS,
PLEASE VOTE, DATE, SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES, SO THAT CBCC
MAY BE ASSURED OF THE PRESENCE OF A QUORUM AT THE SPECIAL MEETING. IF YOU DO
ATTEND THE SPECIAL MEETING, YOU MAY, IF YOU WISH, VOTE IN PERSON.
--------------------
THE BOARD OF DIRECTORS OF CBCC RECOMMENDS THAT THE HOLDERS OF CBCC COMMON STOCK
VOTE FOR APPROVAL OF THE MERGER AGREEMENT AND AUTHORIZATION OF THE MERGER.
PROSPECTUS
OF
SYNOVUS FINANCIAL CORP.
4,002,253 SHARES OF COMMON STOCK
PROXY STATEMENT
OF
COMMUNITY BANK CAPITAL CORPORATION
FOR A SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON __________, 1998
CALLED TO CONSIDER THE AGREEMENT
PROVIDING FOR THE MERGER
This Proxy Statement/Prospectus relates to the issuance in the Merger
described herein, pursuant to which Community Bank Capital Corporation ("CBCC")
will be merged with and into Synovus Financial Corp. ("Synovus"), of up to
4,002,253 shares of common stock of Synovus in exchange for all of the
outstanding shares of common stock of CBCC (the "Merger").
At the Special Meeting, CBCC shareholders will be asked to approve an
Agreement and Plan of Merger dated June 5, 1998 (the "Merger Agreement"), by and
between CBCC and Synovus. The Merger Agreement is attached as Appendix "A" and
is incorporated herein by reference.
The Merger Agreement provides that on the effective date of the Merger
(the "Effective Date") all holders of the $1.00 par value common stock of CBCC
("CBCC Common Stock"), except dissenting shareholders, will be entitled to
receive 5.43489 (less fractional shares for which cash shall be paid in lieu
thereof) of the $1.00 par value common stock of Synovus ("Synovus Common Stock")
for each share of CBCC Common Stock held of record. See "THE MERGER."
This Proxy Statement/Prospectus was first mailed to CBCC shareholders
on or about _________, 1998.
THE SECURITIES OF SYNOVUS TO BE ISSUED IN CONNECTION WITH THE MERGER HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE. THE SHARES OF SYNOVUS COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS, DEPOSITS, OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
The Date of this Proxy Statement/Prospectus is _______, 1998.
TABLE OF CONTENTS
Caption Page
AVAILABLE INFORMATION....................................................1
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE........................1
SUMMARY OF PROXY STATEMENT/PROSPECTUS....................................4
The Companies and Their Businesses..............................4
CBCC Special Shareholders' Meeting..............................5
The Merger......................................................5
Reasons for the Merger; Recommendation of Board of Directors....5
Opinion of Financial Advisor....................................6
Votes Required..................................................6
Dissenters' Rights..............................................6
Interests of Certain Persons
in the Merger.................................................7
Tax Opinion.....................................................8
Accounting Treatment............................................8
Conditions to the Merger; Regulatory Approvals..................8
Effective Date..................................................9
Waiver and Amendment............................................9
Termination.....................................................9
Description of Stock and Effect of Merger
on Rights of CBCC Shareholders................................9
Markets and Market Prices......................................10
COMPARATIVE PER SHARE DATA..............................................10
SELECTED FINANCIAL DATA.................................................12
THE SPECIAL MEETING.....................................................14
General Information............................................14
Voting Information.............................................14
THE MERGER..............................................................15
The Merger Agreement...........................................15
Terms of the Merger............................................16
Recommendation of CBCC Board of Directors; Background of
and Reasons for the Merger...................................17
Opinion of Financial Advisor...................................19
Conditions to the Merger.......................................24
Regulatory Approvals...........................................26
Waiver and Amendment...........................................26
Termination....................................................26
Interests of Certain Persons in the Merger.....................27
Employee Benefits..............................................29
Tax Opinion....................................................29
Accounting Treatment...........................................30
Expenses.......................................................30
Resales of Synovus Common Stock................................30
NYSE Listing...................................................31
i
DESCRIPTION OF STOCK AND EFFECT OF MERGER
ON RIGHTS OF CBCC SHAREHOLDERS........................................31
Synovus Common Stock...........................................33
Voting Rights - Certain Anti-Takeover
Effects - The Voting Amendment...............................34
The Rights Plan................................................35
Staggered Board of Directors; Supermajority Approvals..........38
Evaluation of Business
Combinations.................................................39
CBCC Common Stock..............................................39
Dissenters' Rights.............................................40
Conduct of Business of CBCC
and Synovus Pending the Merger...............................42
DESCRIPTION OF SYNOVUS..................................................43
Business.......................................................43
Management and Additional Information..........................43
REGULATORY MATTERS......................................................44
General........................................................44
Dividends......................................................45
Capital Requirements...........................................46
Commitments to Subsidiary Banks................................48
Prompt Corrective Action.......................................48
Safety and Soundness Standards.................................49
Depositor Preference Statute...................................50
DESCRIPTION OF CBCC.....................................................50
Background.....................................................50
Business.......................................................51
CBCC Common Stock Owned by Management..........................51
Management's Discussion and Analysis of
Financial Condition and Results of Operations.................53
EXPERTS.................................................................61
Synovus........................................................61
CBCC...........................................................61
OTHER MATTERS...........................................................61
SHAREHOLDER PROPOSALS...................................................61
PRO FORMA FINANCIAL INFORMATION.........................................61
INDEX TO FINANCIAL STATEMENTS...........................................63
Appendix "A" - Agreement and Plan of Merger
Appendix "B" - Section 14-2-1301 et. seq. of the Official Code of Georgia
Annotated, as amended, relating to the rights of dissenting
shareholders
Appendix "C" - Opinion of Brown, Burke Capital Partners, Inc.
Appendix "D" - Tax Opinion of KPMG Peat Marwick LLP
ii
AVAILABLE INFORMATION
Synovus is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission ("Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, NW,
Judiciary Plaza, Washington, D.C. 20549 and at the regional offices of the
Commission at: Chicago Regional Office, Citicorp Center, Suite 1400, 500 West
Madison Street, Chicago, Illinois 60661 and New York Regional Office, 7 World
Trade Center, 13th Floor, New York, New York 10048. Copies of such reports,
proxy statements and other information can be obtained from the Commission at
prescribed rates by addressing a written request for such copies to the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549. The Commission maintains an Internet World Wide Web site
that contains reports, proxy and information statements and other information
about issuers like Synovus, who file electronically with the Commission. The
address of that site is http://www.sec.gov. The common stock of Synovus is
listed on the New York Stock Exchange (the "NYSE") and such reports, proxy
statements and other information concerning Synovus can be inspected at the
office of the NYSE, 20 Broad Street, New York, New York 10005.
Synovus has filed with the Commission a Registration Statement on Form
S-4 (together with any amendments thereto, the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the shares of Synovus Common Stock to be issued pursuant to the Merger
Agreement. This Proxy Statement/Prospectus does not contain all the information
and undertakings set forth in the Registration Statement and the exhibits
thereto. Such additional information may be obtained from the Commission's
principal office in Washington, D.C.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
This Proxy Statement/Prospectus incorporates documents by reference
which are not presented herein or delivered herewith. Documents relating to
Synovus, excluding exhibits unless specifically incorporated herein, are
available without charge upon written or oral request to Synovus Financial
Corp., Suite 301, One Arsenal Place, 901 Front Avenue, Columbus, Georgia 31901,
Attention: G. Sanders Griffith, III, Senior Executive Vice President, General
Counsel and Secretary, Telephone Number: (706) 649-2267. In order to ensure
timely delivery of the documents, any request should be made at least five (5)
business days prior to the date of the Special Shareholders' Meeting.
The following documents filed by Synovus with the Commission are hereby
incorporated by reference into this Proxy Statement/Prospectus: (i) Synovus'
Annual Report on Form 10-K for the year ended December 31, 1997; (ii) Synovus'
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998; (iii)
Synovus' Current Reports on Form 8-K dated March 9, 1998, April 23, 1998, May
18, 1998 and June 5, 1998; (iv) the description of Synovus Common Stock
contained in Synovus' Registration
1
Statement on Form 8-A filed with the Commission on August 21, 1989; and (v) the
description of the Common Stock Rights of Synovus contained in Synovus'
Registration Statement on Form 8-A filed with the Commission on May 3, 1989.
All documents filed by Synovus pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act, subsequent to the date hereof and prior to the
Special Meeting are hereby incorporated by reference into this Proxy
Statement/Prospectus and shall be deemed a part hereof from the date of filing
of such documents. Any statement contained in a document incorporated by
reference herein shall be deemed to be modified or superseded for purposes
hereof to the extent that a statement contained herein (or in any other
subsequently filed document which also is incorporated by reference herein)
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed to constitute a part hereof except as so modified or
superseded.
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement/Prospectus and, if given or
made, such information or representation should not be relied upon as having
been authorized. This Proxy Statement/Prospectus does not constitute an offer to
sell, or a solicitation of an offer to purchase, the securities offered by this
Proxy Statement/Prospectus, or the solicitation of a proxy, in any jurisdiction
to any person to whom it is unlawful to make such offer or solicitation in such
jurisdiction. Neither the delivery of this Proxy Statement/Prospectus nor any
distribution of the securities to which this Proxy Statement/Prospectus relates
shall, under any circumstances, create any implication that there has been no
change in the affairs of Synovus or CBCC since the date hereof or that the
information herein is correct as of any time subsequent to the date hereof.
All information contained in this Proxy Statement/Prospectus with
respect to Synovus and Synovus' subsidiaries has been supplied by Synovus and
all information with respect to CBCC and CBCC's subsidiary has been supplied by
CBCC.
This Proxy Statement/Prospectus does not relate to any resale of
Synovus Common Stock received by any person upon consummation of the Merger and
no person is authorized to make any use of this Proxy Statement/Prospectus in
connection with any such resale.
This Proxy Statement contains certain forward-looking statements with
respect to the financial condition, results of operations, and business of
Synovus following the consummation of the Merger including statements preceded
by, followed by or that include the words "believes," "expects," "anticipates,"
"estimates" or similar expressions. These forward-looking statements involve
certain risks and uncertainties. Factors that may cause actual results to differ
materially from those contemplated by such forward-looking statements include,
among others, the following possibilities: (i) expected cost savings from the
Merger cannot be realized; (ii) deposit attrition, customer loss, or revenue
loss
2
following the Merger is greater than expected; (iii) competitive pressure in the
banking industry increases significantly; (iv) costs or difficulties related to
the integration of the business of CBCC into Synovus are greater than expected;
(v) changes in the interest rate environment reduce margins; (vi) general
economic conditions, either nationally or regionally, are less favorable than
expected, resulting in, among other things, a deterioration in credit quality;
(vii) changes occur in the regulatory environment; (viii) changes occur in
business conditions and inflation; and (ix) changes occur in the securities
markets. Further information on other factors that could affect the financial
results of Synovus after the Merger is included in the documents filed by
Synovus with the Commission incorporated by reference herein.
3
SUMMARY OF PROXY STATEMENT/PROSPECTUS
The following is a brief summary of certain information contained
elsewhere in or incorporated by reference into this Proxy Statement/Prospectus.
This summary is necessarily incomplete and is qualified in its entirety by
reference to the more detailed information contained elsewhere herein or in the
accompanying exhibits or documents incorporated herein by reference.
The Companies and their Businesses
Synovus
Synovus is a multi-financial services company, organized and existing
as a business corporation under the laws of the State of Georgia. Synovus is
registered as a bank holding company under the Bank Holding Company Act of 1956,
as amended ("BHC Act"). As of March 31, 1998, Synovus and its subsidiaries
("Subsidiaries") had total assets of $9.4 billion, total deposits of $7.9
billion, shareholders' equity of $927 million and net loans of $6.6 billion.
Synovus and its 34 commercial banking affiliates presently provide banking
services at approximately 227 offices located in the States of Georgia, Alabama,
Florida and South Carolina. Synovus also owns nonbanking Subsidiaries including
a full service brokerage firm and an 80.7% interest in Total System Services,
Inc. ("Total System"), a bankcard data processing company whose stock is traded
on the NYSE. The principal executive offices of Synovus are located at Suite
301, One Arsenal Place, 901 Front Avenue, Columbus, Georgia 31901 (telephone
number (706) 649-2387).
Synovus continually evaluates acquisition opportunities and frequently
conducts due diligence activities in connection with possible acquisitions. As a
result, acquisition discussions and, in some cases, negotiations frequently take
place and future acquisitions involving cash or equity securities can be
expected. Acquisitions typically involve the payment of a premium over book and
market values, and therefore some dilution of Synovus' book value and/or net
income per common share may occur in connection with any such future
acquisitions.
Additional information about Synovus is included in documents
incorporated by reference in this Proxy Statement/Prospectus. See "INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE."
CBCC
CBCC is a financial services company, organized and existing as a
business corporation under the laws of the State of Georgia. CBCC is registered
as a bank holding company under the BHC Act. As of March 31, 1998, CBCC and the
Bank of North Georgia, CBCC's wholly-owned subsidiary, had total assets of
$348.4 million, total deposits of $315.2 million, total shareholders' equity of
$21.3 million and net loans of $253.8 million. CBCC and the Bank of North
Georgia provide banking services through six full-service offices located in its
primary service area of north Fulton, Cherokee and
4
Pickens Counties, Georgia. CBCC also operates a full-service mortgage company
known as Bank of North Georgia Mortgage, as a division of the Bank of North
Georgia. The principal executive offices of CBCC are located at 8025 Westside
Parkway, Alpharetta, Georgia 30004 (telephone number (770) 751-4700).
CBCC Special Shareholders' Meeting
The Special Meeting called to consider the Merger will be held at 9:30
a.m., local time, on August __, 1998 at CBCC's headquarters at 8025 Westside
Parkway, Alpharetta, Georgia 30004. Only shareholders of record of CBCC Common
Stock at the close of business on July __, 1998, will be entitled to receive
notice of and to vote at the Special Meeting. See "THE SPECIAL MEETING - General
Information" and "- Voting Information."
The Merger
Subject to approval by the shareholders of CBCC at the Special Meeting,
the receipt of required regulatory approvals, and certain other conditions, CBCC
will be merged with and into Synovus pursuant to the Merger Agreement. As a
result of the Merger, the former shareholders of CBCC will receive from Synovus
5.43489 shares of Synovus Common Stock for each of their shares of CBCC Common
Stock (the "Per Share Exchange Ratio").
No fractional shares of Synovus Common Stock will be issued in
connection with the Merger but rather cash (without interest) will be paid in
lieu thereof, with the amount of cash to be paid in lieu of fractional shares to
be determined based upon the closing price per share of Synovus Common Stock on
the NYSE on the fifth business day immediately preceding the effective date of
the Merger ("Effective Date"). See "THE MERGER - The Merger Agreement."
Reasons for the Merger; Recommendation of Board of Directors
The Board of Directors of CBCC considered a variety of factors in
evaluating the Merger, including: (i) the value of the consideration to be
received by CBCC shareholders relative to the book value and earnings per share
of CBCC Common Stock; (ii) certain information concerning the financial
condition, results of operations and business prospects of Synovus; (iii) the
financial terms of recent business combinations in the financial services
industry and a comparison of the multiples of selected combinations with the
terms of the proposed transaction with Synovus; (iv) the alternatives to the
Merger, including remaining an independent institution; (v) the competitive and
regulatory environment for financial institutions generally; (vi) the fact that
the Merger will enable CBCC shareholders to exchange their shares of CBCC Common
Stock, in a tax-free transaction, for shares of common stock of a regional
company, the stock of which is widely held and actively traded; and (vii) the
opinion of Brown, Burke Capital Partners, Inc. that the consideration to be
received by CBCC shareholders as a result of the Merger is fair from a financial
point of view. Based on these factors, the Board of Directors of CBCC has
determined that the Merger is
5
in the best interests of the shareholders of CBCC and has unanimously approved
the Merger Agreement. Accordingly, the Board of Directors recommends that the
shareholders of CBCC vote FOR the Merger Agreement. See "THE MERGER -
Recommendation of CBCC Board of Directors and Reasons for the Merger."
The Board of Directors of Synovus, after careful study and evaluation
of relevant factors, believes the Merger will provide Synovus with expanded
market opportunities for profitable long-term growth. The Synovus Board believes
that the Merger will result in the addition of a well-suited and positioned
banking organization to Synovus' existing organization.
Opinion of Financial Advisor
CBCC's financial advisor, Brown, Burke Capital Partners, Inc., has
rendered its opinion to CBCC's Board of Directors that the Per Share Exchange
Ratio is fair from a financial point of view to CBCC and its shareholders. A
copy of such opinion is attached hereto as Appendix "C" and should be read in
its entirety with respect to the assumptions made, other matters considered and
the reviews undertaken. See "THE MERGER - Opinion of Financial Advisor."
Votes Required
The affirmative vote of the holders of a majority of the issued and
outstanding shares of CBCC Common Stock entitled to vote at the Special Meeting
is required to approve the Merger Agreement and to authorize the Merger. The
holders of CBCC Common Stock are entitled to one vote on each matter to be
considered and voted on at the CBCC Special Shareholders' Meeting for each share
of CBCC Common Stock held by them of record at the close of business on July
____, 1998.
As of the record date for the Special Meeting, CBCC's present
directors, executive officers and their affiliates had the power to vote, or
direct the voting of, approximately 42% of the outstanding shares of CBCC Common
Stock. It is anticipated that all shares of CBCC Common Stock as to which CBCC's
directors, executive officers and their affiliates control the voting power will
be voted to approve the Merger Agreement and the Merger. Approval of the Merger
by the holders of Synovus Common Stock is not required and will not be sought.
See "THE SPECIAL MEETING - Voting Information."
Dissenters' Rights
The shareholders of CBCC Common Stock are entitled to dissenters'
rights of appraisal with respect to the Merger under the Georgia Business
Corporation Code. The failure by a shareholder of CBCC to precisely follow the
statutory procedure for exercising dissenters' rights may result in the loss of
such dissenters' rights. See "DESCRIPTION OF STOCK AND EFFECT OF MERGER ON
RIGHTS OF CBCC SHAREHOLDERS - Dissenters' Rights."
6
Interests of Certain Persons in the Merger
No officer or director of CBCC, nor any of their "associates," has any
direct or indirect material interest in the Merger, except insofar as the
following might be deemed to create such an interest: (i) the ownership by such
person of CBCC Common Stock or options to purchase such stock under the existing
CBCC stock option plan; (ii) the continued employment by such person with Bank
of North Georgia after consummation of the Merger; (iii) the potential service
by such person as a director of Bank of North Georgia after consummation of the
Merger; (iv) after the Effective Date, the eligibility of such persons to
participate in the Synovus Financial Corp. Director and/or Employee Stock
Purchase Plans or Synovus' welfare, incentive and benefit plans; and (v) certain
rights to indemnification.
In addition, as a condition to the Merger, Synovus has agreed to enter
into an Employment Agreement with Gordon R. Teel, Chairman of the Board and
Chief Executive Officer of CBCC. Pursuant to the Employment Agreement, Mr. Teel
will be elected as Chairman of the Board and Chief Executive Officer and as a
director of Bank of North Georgia. The Agreement is for a two-year term and
provides that Mr. Teel will be compensated for his services at an annual rate of
base compensation of $276,600 per year, will be guaranteed an incentive bonus of
at least $100,000 for 1998 and will be eligible to receive an annual incentitive
bonus of 50% of his annual base compensation during the term of the Employment
Agreement. The Employment Agreement also provides that Mr. Teel will be granted
an option to purchase 15,000 shares of Synovus Common Stock on the Effective
Date of the Merger at an exercise price equal to the closing price of Synovus
Common Stock on the Effective Date of the Merger with the options becoming
exercisable three years from the Effective Date. Finally, the Employment
Agreement provides that Mr. Teel will not compete with Synovus following
termination of his employment under certain circumstances for a two-year period
following the Effective Date of the Merger.
As an additional condition to the Merger, Synovus has agreed to enter
into an Employment Agreement with Donald D. Howard, President and Chief
Executive Officer of Bank of North Georgia. Pursuant to the Employment
Agreement, Mr. Howard will be elected as President and Chief Operating Officer
of Bank of North Georgia. The Agreement is for a three year term and provides
that Mr. Howard will be compensated for his services at an annual rate of base
compensation of $160,000 per year, will be guaranteed an incentive bonus of at
least $64,000 for 1998 and will be eligible to receive an annual incentive bonus
of 50% of his annual base compensation during the term of the Employment
Agreement. The Employment Agreement also provides that Mr. Howard will be
granted an option to purchase 15,000 shares of Synovus Common Stock on the
Effective Date of the Merger at an exercise price equal to the closing price of
Synovus Common Stock on the Effective Date of the Merger with the options
becoming exercisable three years from the Effective Date. Finally, the
Employment Agreement provides that Mr. Howard will not compete with Synovus for
a two-year period following termination of his employment under certain
circumstances, with the restricted period ending, in all events, on the third
anniversary of the Effective Date of the Merger.
7
In addition, Synovus has agreed to enter into its standard Change of
Control Agreement ("Agreement") with Mr. Teel and Mr. Howard. Each Agreement
provides severance pay and continuation of certain benefits in the event of a
Change of Control. In order to receive benefits under the Agreement, the
executive's employment must be terminated involuntarily, without cause, whether
actual or "constructive" within one year following a Change of Control or the
executive may voluntarily or involuntarily terminate employment during the
thirteenth month following a Change of Control. See "THE MERGER - Interests of
Certain Persons in the Merger."
Tax Opinion
Synovus and CBCC have received a tax opinion ("Tax Opinion") from KPMG
Peat Marwick LLP ("KPMG"), Certified Public Accountants, to the effect that, for
federal income tax purposes, the Merger will constitute a "reorganization"
within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code of 1986,
as amended (the "Tax Code"); the basis of Synovus Common Stock to be received by
each CBCC shareholder will be the same as the basis of CBCC Common Stock
surrendered in exchange therefor; the holding period of Synovus Common Stock
will include the holding period of the CBCC Common Stock exchanged therefor,
provided that such CBCC Common Stock is held as a capital asset at the Effective
Date of the Merger; and that, for federal income tax purposes, the shareholders
of CBCC will not recognize gain or loss on the exchange in the Merger of their
CBCC Common Stock for Synovus Common Stock (except to the extent of any cash
paid in lieu of fractional shares, any cash paid to those CBCC shareholders who
perfect their statutory dissenters' rights against the Merger and except to the
extent that the Share Purchase Rights, which are described on pages 35 through
38 of this Proxy Statement/Prospectus, are determined to be other property
within the meaning of Section 356 of the Tax Code, as described on pages 8 and 9
of the Tax Opinion which is attached hereto as Appendix "D").
ALL CBCC SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO
THE SPECIFIC CONSEQUENCES TO THEM OF THE MERGER UNDER FEDERAL, STATE, LOCAL AND
ANY OTHER APPLICABLE TAX LAWS.
Accounting Treatment
It is a condition precedent to the obligations of CBCC and Synovus to
consummate the Merger for the Merger to qualify for pooling of interests
accounting treatment. Synovus anticipates receiving a letter from KPMG to the
effect that the Merger will qualify for pooling of interests accounting
treatment. See "THE MERGER - Accounting Treatment"; and " - Resales of Synovus
Common Stock."
Conditions to the Merger; Regulatory Approvals
Consummation of the Merger is subject to various conditions, including
receipt of the shareholder approval solicited hereby, receipt of the necessary
regulatory approvals, receipt of the opinion of KPMG regarding certain tax
aspects of the Merger (which has been satisfied), receipt of assurances that the
Merger qualifies for pooling of interests
8
accounting treatment and satisfaction of other customary closing conditions.
The regulatory approvals and consents necessary to consummate the
transactions contemplated by the Merger Agreement include the approval of the
Board of Governors of the Federal Reserve System (the "Federal Reserve") and the
Department of Banking and Finance of the State of Georgia ("Georgia Banking
Department"). Applications have been submitted for such approvals. The Merger
has not yet been approved by the Federal Reserve or the Georgia Banking
Department. See "THE MERGER - Conditions to the Merger; Regulatory Approvals."
Effective Date
The Merger will become effective at the time a Certificate of Merger is
filed in accordance with the Georgia Business Corporation Code, or on such later
date as the Certificate of Merger may specify. This filing will be made on the
last business day of the month during which the expiration of all applicable
waiting periods in connection with governmental approvals occurs and all
conditions to the consummation of the Merger are satisfied or waived, or on such
earlier or later date as may be agreed to by Synovus and CBCC ("Effective
Date"). Subject to the conditions specified in the Merger Agreement, the parties
currently anticipate that the Merger will become effective during the third
quarter of 1998, although there can be no assurances as to whether or when the
Merger will occur. See "THE MERGER - Conditions to the Merger; Regulatory
Approvals."
Waiver and Amendment
Prior to the Effective Date, any provision of the Merger Agreement may
be waived by the party entitled to the benefits of such provision or by all
parties, to the extent allowed by law. In addition, the Merger Agreement may be
amended at any time, to the extent allowed by law, by an agreement in writing
between Synovus and CBCC after approval of their respective Boards of Directors.
See "THE MERGER - Waiver and Amendment."
Termination
The Merger Agreement may be terminated at any time prior to the
Effective Date by the mutual consent of Synovus and CBCC, if the Board of
Directors of each so determines, and by either of them individually under
certain specified circumstances, including if the Merger has not become
effective by November 30, 1998. See "THE MERGER - Termination."
Description of Stock and Effect of Merger on Rights of CBCC Shareholders
On the Effective Date, shareholders of CBCC (other than CBCC
shareholders who exercise and perfect their statutory dissenters' rights against
the Merger) will automatically become shareholders of Synovus and their rights
as shareholders of Synovus will be determined by the Georgia Business
Corporation Code and by Synovus'
9
Articles of Incorporation and bylaws. The rights of shareholders of Synovus
differ from the rights of shareholders of CBCC with respect to certain important
matters, including the required shareholder votes as to certain matters,
Synovus' Share Purchase Rights Plan and Synovus' Voting Rights Amendment which
entitles certain of its shareholders to ten votes per share. See "DESCRIPTION OF
STOCK AND EFFECT OF MERGER ON RIGHTS OF CBCC SHAREHOLDERS."
Markets and Market Prices
The following table presents the closing price for Synovus Common Stock
reported on the NYSE on April 14, 1998, the last business day preceding the
public announcement of the Merger, and the closing price for Synovus Common
Stock reported on the NYSE on ______, 1998. On _______, 1998, there were ___
shareholders of record of CBCC Common Stock. No established trading market for
CBCC Common Stock exists. Because transactions in CBCC Common Stock are
infrequent and are negotiated privately between the persons involved in these
transactions and because such transactions are not reported on an exchange or
other organized trading system, CBCC does not have reliable data regarding
recent trading activity in CBCC Common Stock. To the best of the knowledge of
CBCC's management, the last transaction in CBCC Common Stock took place on May
17, 1996 at a price of $33.50 per share. The table also sets forth the CBCC
Common Stock Equivalent which represents the closing price of Synovus on April
14, 1998 and _____, 1998 multiplied by the Per Share Exchange Ratio of 5.43489.
Synovus Common CBCC Common CBCC Common
Stock Stock Stock Equivalent
April 14, 1998 $24.05 $33.50 $130.71
_____, 1998
Shareholders are advised to obtain current market quotations for
Synovus Common Stock. It is expected that the market price of Synovus Common
Stock will fluctuate between the date of the Proxy Statement/Prospectus and the
Effective Date of the Merger and thereafter. No assurances can be given as to
the market price of Synovus Common Stock or CBCC Common Stock at, or in the case
of Synovus Common Stock after, the Effective Date of the Merger.
COMPARATIVE PER SHARE DATA
The following summary presents selected comparative unaudited per share
information: (1) for Synovus Common Stock, on a historical and pro forma basis
assuming the Merger had been effective during the periods presented and (2) for
CBCC on a historical basis and on a pro forma equivalent basis. In presenting
the equivalent CBCC per share amounts, the data reflects one share of CBCC
Common Stock as 5.43489 shares of Synovus Common Stock. The pro forma
information has been prepared giving effect to the Merger as a pooling of
interests. The pro forma financial
10
information does not include the effects of other pending immaterial
acquisitions by Synovus. These tables should be read in conjunction with the
consolidated financial statements of Synovus and CBCC set forth in documents
included or incorporated herein by reference. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
The following information is presented for informational purposes only
and is not necessarily indicative of the results of operations or combined
financial position that would have resulted had the Merger been consummated at
the beginning of the periods indicated, nor is it necessarily indicative of the
results of operations of future periods or future combined financial position.
[Rest of page intentionally blank]
11
The following table reflects the issuance of 3,646,811 shares of Synovus Common
Stock pursuant to the Per Share Exchange Ratio of 5.43489 shares of Synovus
Common Stock for each share of CBCC Common Stock currently outstanding.
<TABLE>
<CAPTION>
As Of and For The
Three Months Years Ended
Ended December 31,
March 31, 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited except Synovus and CBCC Historical)
<S> <C> <C> <C> <C>
Net income per common share - basic
Historical:
Synovus $ 0.16 0.63 0.53 0.44
Community Bank Capital Corporation 1.69 6.38 3.61 2.65
Pro forma combined 0.16 0.64 0.54 0.44
Pro forma equivalent per common
Community Bank Capital Corporation share<F1> 0.87 3.48 2.93 2.39
Net income per common share - assuming dilution
Historical:
Synovus 0.15 0.62 0.53 0.44
Community Bank Capital Corporation 1.60 6.04 3.43 2.53
Pro forma combined 0.16 0.63 0.53 0.44
Pro forma equivalent per common
Community Bank Capital Corporation share<F1> 0.87 3.42 2.88 2.39
Cash dividends declared per common share
Historical:
Synovus 0.07 0.24 0.19 0.16
Community Bank Capital Corporation 0.00 0.00 0.00 0.00
Equivalent per common Community Bank
Capital Corporation share<F2> 0.38 1.30 1.03 0.87
Book values per common share at period end
Historical:
Synovus 3.53 3.44
Community Bank Capital Corporation 31.81 30.13
Pro forma combined 3.55 3.46
Pro forma equivalent per common Community Bank
Capital Corporation share<F1> 19.29 18.80
<FN>
<F1> Determined by multiplying the pro forma amounts by the Exchange Ratio of 5.43489:1.
<F2> Determined by multiplying the Synovus historical cash dividends declared
per share by Synovus by the Exchange Ratio of 5.43489:1.
</FN>
</TABLE>
11.1
SELECTED FINANCIAL DATA
The following tables set forth certain selected historical financial
information for Synovus and CBCC. The selected historical financial information
is based upon, derived from, and should be read in conjunction with the
historical consolidated financial statements of Synovus and CBCC and the related
notes therein, set forth in documents included or incorporated herein by
reference. See "INCORPORATION OF CERTAIN INFORMATION BY REFERENCE."
Interim unaudited information for Synovus and CBCC for the three
months ended March 31, 1998, and March 31, 1997, reflect, in the opinion of
management of Synovus and CBCC, all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of such information.
Results for the three months ended March 31, 1998, are not necessarily
indicative of results which may be expected for the year as a whole.
[Rest of page intentionally blank]
12
SYNOVUS FINANCIAL CORP.
Selected Financial Data
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(Unaudited) Years Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income $ 106,062 98,155 412,389 374,874 341,875 301,231 263,213
Provision for losses on loans $ 7,594 7,001 32,296 31,766 25,787 25,387 24,924
Income before extraordinary item $ 41,213 35,807 165,236 139,604 114,583 89,452 80,379
Net income $ 41,213 35,807 165,236 139,604 114,583 89,452 77,467
Per share data:
Income before extraordinary item - basic $ 0.16 0.14 0.63 0.53 0.44 0.35 0.32
Income before extraordinary item - assuming
dilution $ 0.15 0.13 0.62 0.53 0.44 0.35 0.32
Net income - basic $ 0.16 0.14 0.63 0.53 0.44 0.35 0.31
Net income - assuming dilution $ 0.15 0.13 0.62 0.53 0.44 0.35 0.31
Cash dividends declared $ 0.07 0.06 0.24 0.19 0.16 0.13 0.11
Book value per share $ 3.53 3.04 3.44 2.99 2.66 2.27 2.17
Long-term debt $ 117,860 100,897 126,174 97,283 106,815 139,811 143,481
Average total equity $ 920,505 796,414 834,726 730,541 639,426 566,562 505,027
Average total assets $9,227,000 8,531,218 8,815,423 8,135,587 7,498,299 6,782,659 6,141,794
Ratios:
Return on assets before extraordinary item<F1> 1.81 % 1.70 1.87 1.72 1.53 1.32 1.31
Return on assets after extraordinary item <F1> 1.81 1.70 1.87 1.72 1.53 1.32 1.26
Return on equity before extraordinary item<F1> 18.16 18.23 19.80 19.11 17.92 15.79 15.92
Return on equity after extraordinary item<F1> 18.16 18.23 19.80 19.11 17.92 15.79 15.34
Dividend payout ratio 46.83 43.86 38.10 36.62 36.69 36.90 35.10
Average equity to average assets 9.98 9.34 9.47 8.98 8.53 8.35 8.22
<FN>
<F1>All ratios for the three month periods have been annualized.
</FN>
</TABLE>
12.1
COMMUNITY BANK CAPITAL CORPORATION
Selected Financial Data
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(Unaudited) Years Ended December 31,
1998 1997 1997 1996 1995 1994 1993
- ------------------------- ------------- -------------- -------------- -------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Interest Income $ 3,630 2,902 12,589 10,556 7,931 4,836 3,134
Provision for loan losses 150 100 700 350 245 142 149
Net Income 1,136 760 4,284 2,340 1,614 847 989
Per share data:
Net Income - basic 1.69 1.13 6.38 3.61 2.65 1.66 2.41
Net Income - assuming
dilution 1.60 1.07 6.04 3.43 2.53 1.60 2.37
Cash dividends
declared - - - - - - -
Book value per share 31.81 24.42 30.13 23.83 19.39 16.23 12.41
Long-term debt 3,938 4,550 4,100 4,700 3,150 3,450 3,700
Average total equity 20,782 16,189 17,618 14,018 10,727 7,059 4,855
Average total assets 362,984 276,562 321,693 237,153 193,830 133,560 95,820
Ratios:
Return on average
assets <F1> 1.25% 1.10 1.33 0.99 0.83 0.63 1.03
Return on average
equity <F1> 21.87 18.78 24.32 16.69 15.05 12.00 20.37
Dividend payout ratio 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Average equity to
average assets 5.73 5.85 5.48 5.91 5.53 5.28 5.07
<FN>
<F1>All ratios for three months have been annualized
</FN>
</TABLE>
13
THE SPECIAL MEETING
General Information
This Proxy Statement/Prospectus is being furnished to the shareholders
of CBCC in connection with the solicitation, by and on behalf of the Board of
Directors of CBCC, of Proxies for use and to be voted at a Special Meeting of
Shareholders of CBCC to be held at 9:30 a.m., local time, on August __, 1998 at
CBCC's headquarters at 8025 Westside Parkway, Alpharetta, Georgia 30004, and at
any adjournment thereof, and is being mailed on _______, 1998 to the CBCC
shareholders entitled to receive Notice of and to vote at the Special Meeting.
The Special Meeting has been called by the Board of Directors of CBCC
so that CBCC shareholders may consider and vote upon a proposal to merge CBCC
with and into Synovus with Synovus as the resulting corporation of the Merger
pursuant to the Merger Agreement, a copy of which is attached to this Proxy
Statement/Prospectus as Appendix "A," and incorporated herein by reference. Upon
the Effective Date of the Merger, CBCC shareholders will receive from Synovus
5.43489 shares of Synovus Common Stock for each of their shares of CBCC Common
Stock (the "Per Share Exchange Ratio").
No fractional shares of Synovus Common Stock will be issued in
connection with the Merger but rather cash (without interest) will be paid in
lieu thereof, with the amount of cash in lieu of fractional shares to be
determined based upon the closing price per share of Synovus Common Stock on the
NYSE on the fifth business day immediately preceding the Effective Date.
If and when the Merger is consummated, Bank of North Georgia will
operate as a wholly-owned banking subsidiary of Synovus and CBCC will cease to
exist as a separate corporation.
Voting Information
At the close of business on _______, 1998, the record date for
determining shareholders of CBCC Common Stock eligible to receive Notice of and
to vote at the Special Meeting, _________ shares of CBCC Common Stock were
issued and out standing. With respect to all matters to be considered and voted
upon at the Special Meeting, each shareholder of CBCC Common Stock is entitled
to one vote for each share of CBCC Common Stock held by such shareholder on the
record date.
The presence, in person or by proxy, of at least a majority of the
total number of outstanding shares is necessary to constitute a quorum at the
Special Meeting. Some proxies may be broker non-votes (marked to indicate that
the shares are not being voted on the Merger Agreement). Any proxy authorized to
be voted at the meeting (including on routine matters pursuant to the
discretionary authority granted to management's proxy) whether or not the proxy
is marked to "ABSTAIN" or to effect a broker non-vote, will be counted in
establishing a quorum.
14
Approval of the Merger Agreement and the authorization of the Merger
requires the affirmative vote of the holders of a majority of the issued and
outstanding shares of CBCC Common Stock entitled to vote at the Special Meeting.
Consequently, both abstentions and broker non-votes will have the effect of a
vote against the Merger Agreement.
As of the record date for the Special Meeting, CBCC's directors,
executive officers and their affiliates had the power to vote, or direct the
voting of, approximately 42% of the issued and outstanding shares of CBCC Common
Stock entitled to be voted at the Special Meeting. It is anticipated that all
shares of CBCC Common Stock as to which CBCC's present directors, executive
officers and their affiliates control the voting power will be voted FOR
approval of the Merger Agreement and the authorization of the Merger.
Shares represented by properly executed Proxies, if such Proxies are
received at or prior to the Special Meeting and not subsequently revoked, will
be voted at the Special Meeting in accordance with the choice specified therein,
or, if no choice is specified therein, will be voted FOR approval of the Merger
Agreement and the authorization of the Merger. A Proxy may be revoked by its
maker at any time before it is exercised by: (i) giving written notice of
revocation to Gerri Teel, Assistant Secretary of CBCC, or (ii) properly
submitting to CBCC a duly executed Proxy bearing a later date. Attendance at the
Special Meeting will constitute revocation of the Proxy if the maker thereof
elects to vote in person.
The cost of soliciting proxies from holders of CBCC Common Stock will
be borne by CBCC. In addition to use of the mail, CBCC shareholders may be
solicited by personal contact, or by telephone, telegraph or other electronic
communications, by directors, officers or employees of CBCC, who will receive no
additional compensation therefor. Custodians, nominees and fiduciaries will be
reimbursed for reasonable out-of-pocket expenses incurred by them in connection
with this solicitation of Proxies.
THE MERGER
The following is a description of certain provisions of the Merger
Agreement, the Merger and the consequences thereof. THIS DESCRIPTION IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE MERGER AGREEMENT,
A COPY OF WHICH IS ATTACHED AS APPENDIX "A" TO THIS PROXY STATEMENT/PROSPECTUS
AND IS INCORPORATED HEREIN BY REFERENCE. ALL SHAREHOLDERS ARE URGED TO READ
CAREFULLY THE MERGER AGREEMENT, AS WELL AS THE OTHER EXHIBITS, IN THEIR
ENTIRETY.
The Merger Agreement
The Board of Directors of CBCC has approved, executed and delivered,
and the proper officers of CBCC have executed and delivered, the Merger
Agreement relating to the Merger. The Merger Agreement sets forth the terms of
the Merger and contains: (i) conditions precedent to both parties' obligations
to consummate the Merger; (ii)
15
conditions precedent to Synovus' obligations to consummate the Merger; (iii)
conditions precedent to CBCC's obligations to consummate the Merger; (iv)
provisions relating to CBCC's and Synovus' operations pending consummation of
the Merger; and (v) certain other provisions.
Terms of the Merger
On the Effective Date of the Merger (which is the date of or to be
specified in the certificate to be issued by the Secretary of State of Georgia
causing the Merger to become effective), the issued and outstanding shares of
CBCC Common Stock will be converted into shares of Synovus Common Stock at the
Per Share Exchange Ratio, and outstanding certificates representing shares of
CBCC Common Stock shall thereafter represent shares of Synovus Common Stock.
Certificates representing shares of CBCC Common Stock shall be
surrendered to Synovus by the holders thereof on or after the Effective Date of
the Merger for new certificates representing shares of Synovus Common Stock.
Until so surrendered to Synovus, such certificates theretofore representing
shares of CBCC Common Stock will be deemed for all corporate purposes to
evidence the ownership of the respective number of shares of Synovus Common
Stock which the holders could or would have been entitled to receive upon their
surrender to Synovus (except for the payment of dividends, which shall be
subject to the exchange of stock certificates as provided herein).
UNTIL SUCH STOCK CERTIFICATES NOMINALLY REPRESENTING SHARES OF CBCC
COMMON STOCK ARE SURRENDERED TO SYNOVUS IN EXCHANGE FOR CERTIFICATES
REPRESENTING SHARES OF SYNOVUS COMMON STOCK, NO DIVIDENDS PAYABLE AS OF ANY DATE
SUBSEQUENT TO THE EFFECTIVE DATE OF THE MERGER ON THE SHARES OF SYNOVUS COMMON
STOCK REPRESENTED BY SUCH CBCC COMMON STOCK CERTIFICATES WILL BE PAID TO THE
RECORD HOLDERS THEREOF (HOWEVER, FORMS 1099 REPORTING THE PAYMENT OF SUCH
DIVIDENDS WILL BE FILED WITH THE INTERNAL REVENUE SERVICE AND MAILED TO EACH
SHAREHOLDER); BUT UPON THE SURRENDER TO SYNOVUS OF SUCH CBCC COMMON STOCK
CERTIFICATES, THERE WILL BE PAID TO THE RECORD HOLDERS THEREOF THE AMOUNT OF
DIVIDENDS WHICH THERETOFORE HAD BECOME PAYABLE, WITHOUT INTEREST THEREON, UPON
THE SHARES OF SYNOVUS COMMON STOCK REPRESENTED BY SUCH OUTSTANDING CBCC COMMON
STOCK CERTIFICATES.
No fractional shares of Synovus Common Stock will be issued in
connection with the Merger, but rather cash (without interest) will be paid in
lieu thereof, with the amount of cash to be paid in lieu of fractional shares to
be determined based upon the closing price per share of Synovus Common Stock on
the NYSE on the fifth day immediately preceding the Effective Date.
The delivery of Synovus stock certificates and other amounts may be
subject to possible forfeiture under applicable escheat laws if CBCC stock
certificates are not
16
surrendered for exchange within the legally specified periods of time which vary
with the state of residence of the certificate holder. Therefore, all CBCC
shareholders are urged to surrender their CBCC stock certificates at the
earliest possible date after consummation of the Merger.
As soon as practicable following consummation of the Merger, Synovus
will send each shareholder of CBCC Common Stock a Letter of Transmittal
explaining the procedure to be followed in exchanging certificates representing
shares of CBCC Common Stock for certificates representing shares of Synovus
Common Stock. Until such Letter of Transmittal is received, shareholders of CBCC
should continue to hold their certificates representing shares of CBCC Common
Stock.
On the basis of the number of shares of CBCC Common Stock which were
outstanding on the date of this Proxy Statement/Prospectus and the number of
options to purchase shares of CBCC currently outstanding, a maximum of 4,002,253
shares of Synovus Common Stock may be issued to the shareholders of CBCC Common
Stock pursuant to the terms of the Merger Agreement.
Recommendation of CBCC Board of Directors; Background of and Reasons for the
Merger
Background of and Reasons for the Merger. During the fourth quarter of
1997, the Chairman and CEO of CBCC met with certain investment bankers to
explore the possibility of a public offering and also met with representatives
of various financial institutions, including Synovus, to explore the possibility
of a combination between CBCC and such financial institutions. Discussions
continued during the fourth quarter and into the first quarter of 1998.
On January 15, 1998, in conjuction with these activities, CBCC and
Synovus entered into a confidentiality agreement, and CBCC provided Synovus with
certain confidential information describing CBCC and its operations.
On February 20, 1998, Synovus presented a proposed letter of intent to
CBCC, which did not provide for an exchange offer acceptable to CBCC.
On March 10, 1998, CBCC engaged Brown, Burke Capital Partners, Inc.
("BBCP") to serve as its financial advisor in connection with the possible
merger of CBCC and to render advice to CBCC concerning the financial aspects of
a potential merger with one of several different banking companies. Thereafter,
BBCP contacted various financial institutions, including Synovus, concerning
their interest in a merger with CBCC, received confidentiality agreements from
such institutions and provided them with confidential information describing
CBCC and its operations as well as procedures for submitting an offer to acquire
CBCC.
On April 9, 1998, Synovus submitted a revised letter of intent which
provided for an increased exchange ratio. CBCC's Chairman and CEO reviewed
Synovus' revised letter of intent, together with an offer from another
institution, with the members of
17
CBCC's Board. Following these discussions, CBCC's Chairman and CEO executed the
revised letter of intent from Synovus.
From April 10 through June 5, 1998, CBCC and Synovus conducted due
diligence investigations of each other and proceeded to negotiate the definitive
merger agreement.
On May 18, 1998, at a special meeting of the Board of Directors of
CBCC, representatives of BBCP reviewed BBCP's analysis of the two offers made
for CBCC and issued BBCP's oral opinion that the offer from Synovus was fair to
the shareholders of CBCC from a financial point of view. At the same meeting,
counsel to CBCC reviewed the proposed Merger Agreement with the Board. Following
the presentations and subsequent discussions, the CBCC Board authorized its
Chairman and CEO to execute the proposed Merger Agreement, subject to
negotiation of certain additional points.
Following the May 18, 1998 CBCC Board meeting, CBCC and Synovus
continued to negotiate certain aspects of the Merger Agreement, resulting in its
execution on June 5, 1998.
Recommendation of CBCC Board of Directors. CBCC's Board of Directors
has unanimously approved the Merger Agreement and has determined that the Merger
is in the best interests of CBCC and its shareholders. The terms of the Merger
were the result of arms'-length negotiations between representatives of CBCC and
representatives of Synovus. Without assigning any relative or specific weights
to the factors, the Board of Directors of CBCC considered the following material
factors: (i) the value of the consideration to be received by CBCC shareholders
relative to the book value and earnings per share of CBCC Common Stock; (ii)
certain information concerning the financial condition, results of operations
and business prospects of Synovus; (iii) the financial terms of recent business
combinations in the financial services industry and a comparison of the
multiples of selected combinations with the terms of the proposed transaction
with Synovus; (iv) the alternatives to the Merger, including remaining an
independent institution; (v) the competitive and regulatory environment for
financial institutions generally; (vi) the fact that the Merger will enable CBCC
shareholders to exchange their shares of CBCC Common Stock, in a tax-free
transaction, for shares of common stock of a regional company, the stock of
which is widely held and actively traded; and (vii) the opinion of Brown, Burke
Capital Partners, Inc. that the consideration to be received by CBCC
shareholders as a result of the Merger is fair from a financial point of view.
Each member of the Board of Directors of CBCC has agreed to vote such
members' shares of CBCC Common Stock in favor of the Merger.
18
CBCC'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT CBCC
SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE THE MERGER AGREEMENT.
Management of Synovus believes that the Merger will provide Synovus
with expanded market opportunities for profitable long-term growth. Management
of Synovus also believes that the Merger will result in the addition of a
well-suited and positioned banking organization to Synovus' existing
organization.
Opinion of Financial Advisor
CBCC has retained Brown, Burke Capital Partners, Inc. ("BBCP") to act
as its financial advisor in connection with the Merger. Representatives of BBCP
participated in a meeting of the CBCC Board held on May 18, 1998. At the
meeting, subject to the draft of the Merger Agreement to purchase CBCC, BBCP
rendered its oral opinion to the effect that, as of such date, conversion of
each share of CBCC Common Stock into the right to receive a number of shares of
Synovus Common Stock equal to the Per Share Exchange Ratio and the additional
terms to be provided by the Merger Agreement (the "Per Share Purchase Price and
Terms") were fair to the stockholders and option holders of CBCC from a
financial point of view. BBCP has also rendered a written opinion to the CBCC
Board that, on the date of this Prospectus/Proxy Statement, based on the
information set forth therein, the Per Share Purchase Price and Terms were fair,
from a financial point of view, to the CBCC stockholders and optionholders.
The full text of BBCP's written opinion is attached as Appendix "C" to
this Prospectus/Proxy Statement and is incorporated herein by reference. The
description of the opinion set forth herein is qualified in its entirety by
reference to Appendix "C." CBCC stockholders are urged to read the opinion in
its entirety for a description of the procedures followed, assumptions made,
matters considered, and qualifications and limitations on the review undertaken
by BBCP in connection therewith.
BBCP's opinion is directed to the CBCC Board only and is directed only
to the Per Share Purchase Price and Terms and does not constitute a
recommendation to any CBCC stockholder regarding how such stockholder should
vote at the Special Meeting.
In arriving at its written opinion, BBCP, among other things: (i)
analyzed certain audited and unaudited financial statements and other
information of CBCC and Synovus; (ii) reviewed and discussed with appropriate
management personnel of CBCC and Synovus the past and current business
activities and financial results and the business and financial outlook of CBCC
and Synovus; (iii) reviewed the historical price and trading activity of the
common stock of Synovus; (iv) compared certain financial and stock market data
relating to Synovus with similar data of other publicly held banking
institutions considered to be potential alternative affiliation candidates to
Synovus for CBCC; (v) performed an analysis comparing the pro forma consequences
of the Merger to CBCC stockholders with respect to earnings per share assuming
dilution, book value per share and dividends per share represented by the
Synovus Common Stock they will
19
receive in the Merger to those same measures represented by the CBCC Common
Stock they currently hold; (vi) reviewed the prices paid in certain comparable
acquisition transactions of community banking and thrift institutions and the
multiples of earnings and book value and the level of deposit base premium
received by the selling institutions; (vii) reviewed the Merger Agreement and
certain related documents; (viii) considered the financial implications of
certain other strategic alternatives available to CBCC; and (ix) performed such
other analyses as BBCP deemed appropriate.
In conducting its analysis and arriving at its opinion, BBCP assumed
and relied upon, without independent verification, the accuracy and completeness
of the information it reviewed for the purposes of the opinion. BBCP also relied
upon the management of CBCC with respect to the reasonableness and achievability
of the financial forecast (and the assumptions and bases underlying such
forecast) provided to it. CBCC instructed BBCP that, for the purposes of its
opinion, BBCP should assume that such forecast will be realized in the amounts
and in the time periods currently estimated by the management of CBCC. BBCP also
assumed, with CBCC's consent, that the aggregate allowances for loan losses for
each of CBCC and Synovus are adequate to cover such losses. BBCP is not an
expert in the evaluation of allowances for loan losses and has not reviewed any
individual credit files. BBCP did not make, nor was it furnished with,
independent valuations or appraisals of the assets or liabilities of either CBCC
or Synovus or any of their subsidiaries. BBCP did not, and was not asked to,
express any opinion about what the value of Synovus Common Stock actually will
be when issued to the holders of CBCC Common Stock pursuant to the Merger or the
price at which Synovus Common Stock will trade subsequent to the Merger.
Moreover, CBCC has informed BBCP, and BBCP has assumed, that the Merger will be
recorded utilizing pooling of interests accounting under generally accepted
accounting principles.
No limitations were imposed by CBCC or the CBCC Board on the scope of
BBCP's investigation or the procedures to be followed by BBCP in rendering its
opinion. As part of its procedures, BBCP held discussions with selected major
regional bank holding companies for their indications of acquisition interest in
CBCC. The opinion is necessarily based on economic, market and other conditions
as in effect on, and the information made available to BBCP as of, the date of
its analysis.
In arriving at the fairness, from a financial point of view, of the
consideration to be received by the stockholders and optionholders of CBCC, BBCP
developed an opinion of the value of CBCC Common Stock should the institution
remain independent and analyzed such value in light of the premium represented
by the Per Share Purchase Price and Terms. In connection with rendering its
opinion to the CBCC Board, BBCP also reviewed a variety of generally recognized
valuation methodologies and merger analyses and performed those which it
believed were most appropriate for developing its opinion of fairness, from a
financial point of view.
The preparation of a fairness opinion involves various determinations
of the most appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances, and, therefore,
such an opinion is not readily susceptible to summary description. In arriving
at its fairness opinion, BBCP did not
20
attribute any particular weight to any analysis or factor considered by it, but
rather made qualitative judgments about the significance and relevancy of each
analysis and factor. None of the analyses performed by BBCP were assigned a
greater significance by BBCP than any other. Accordingly, BBCP believes that its
analyses must be considered as a whole and that a review of selected portions of
such analyses and the factors considered therein, without considering all
analyses and factors, could create a misleading or incomplete view of the
processes underlying its opinion and any conclusions reached therein. In its
analyses, BBCP made numerous assumptions with respect to industry performance,
general business and economic conditions, and other matters, many of which are
beyond CBCC's and Synovus' control. Any estimates contained in BBCP's analyses
are not necessarily indicative of actual values or predictive of future results
or values that may be significantly more or less favorable than such estimates.
Estimates of values of companies do not purport to be appraisals or necessarily
reflect the prices at which companies or their securities actually may be sold.
In addition, as described above, BBCP's opinion and presentations to the CBCC
Board were only a few of many factors taken into consideration by the CBCC Board
in making its determination to approve the Agreement.
The following is a brief summary of analyses performed by BBCP in
connection with its opinion delivered to the CBCC Board on May 18, 1998:
Summary of Proposal. BBCP reviewed the terms of the proposed
transaction as reflected in the Agreement, including the calculation of the Per
Share Exchange Ratio. BBCP stated that based on the closing price of Synovus
Common Stock on May 15, 1998 of $23.38, the Per Share Exchange Ratio of 5.43489
shares of Synovus Common Stock per share of CBCC Common Stock would provide CBCC
stockholders a per share value of $127.04 (the "Per Share Purchase Price") or a
total deal value of $92.5 million.
Indicated Value of CBCC as an Independent Bank. BBCP undertook an
analysis addressing the range of potential values which would be implied if CBCC
were to remain an independent bank. BBCP computed this range of values based on
a discounted cash flow analysis, relying on projections extrapolated from CBCC's
1998 budget and its historical performance. In this analysis methodology, BBCP
assumed stockholders received, in addition to the projected dividend stream of
35% of projected earnings, a terminal valuation at December 31, 2002 based upon
an average of (i) 2.10 times projectable book value at December 31, 2002 and
(ii) 15.0 times projected earnings for such year. In addition, BBCP assumed that
all common stock equivalents were converted to common stock. These amounts were
discounted at rates ranging from 12% to 16% and indicated net present values to
CBCC stockholders between $61.9 million and $73.2 million.
Per Share Merger Consequences Analysis. Based upon the Per Share
Exchange Ratio of 5.43489 shares of Synovus Common Stock for each share of CBCC
Common Stock and common stock equivalents and using the earnings estimates for
CBCC prepared by CBCC management and earnings estimates for Synovus prepared by
independent securities analysts, BBCP compared the estimated 1998 and 1999
earnings per share assuming dilution of CBCC Common Stock on a stand-alone basis
to the
21
equivalent pro forma earnings per share assuming dilution of Synovus Common
Stock which would be received in the Merger. BBCP concluded that the Merger
would result in an earnings decrease of 40.8% in 1998 and 42.1% in 1999 for CBCC
stockholders in the combined company.
BBCP also analyzed the impact of the Merger on the amount of fully
diluted book value represented by a share of CBCC Common Stock. BBCP assumed
exercise of all outstanding options and consummation of the Merger. BBCP
concluded that the Merger would result in a decrease of 39.3% in fully diluted
book value on an equivalent per share basis for CBCC stockholders projected as
of March 31, 1998.
BBCP also compared the amount of dividends expected to be paid on a
share of CBCC Common Stock before the Merger, assuming 10% payout for 1998, to
the level expected to be paid on a pro forma basis reflecting the Merger. BBCP
concluded that the Merger would result in an increase of 122.9% in dividends per
share for CBCC stockholders.
Synovus' stock price, in recent years, has exceeded banking industry
averages in terms of market price-to-forecasted earnings per share and market
price-to-book value per share. While comparable institutions (banks located in
the Southeast with assets greater than $1 billion) as of June 1, 1998 trade at
average multiples to projected 1998 earnings and book value of 18.3x and 3.03x,
respectively, Synovus Common Stock trades at multiples to forecasted 1998
earnings and book value of 31.8x and 6.39x. Such premium to banking industry
multiples may be partially attributed to Synovus' 80.7% ownership of a
nonbanking subsidiary, Total System Services, Inc. ("Total System"). Total
System is one of the world's largest credit, debit, commercial and private label
card processing companies. Total System's Common Stock trades at multiples
indicative of a high growth business. Each shareholder of CBCC Common Stock will
also receive an ownership interest in Total System by virtue of Synovus' 80.7%
ownership interest in Total System.
To adjust Synovus' valuation so as to be comparable to more mainstream
bank holding companies, BBCP removed earnings, equity and market value
attributable to Total System from Synovus. The resulting market value, earnings
and equity were then assumed to be attributable to adjusted Synovus ("Synovus
Adjusted"). As of the date of BBCP's May 18, 1998 oral opinion, Synovus Adjusted
traded at multiples to projected 1998 earnings and book value of 16.9x and
3.30x, which are in line with bank industry valuation benchmarks.
In addition, BBCP analyzed the impact on the Merger if Synovus
Adjusted, as a stand-alone entity, were to purchase CBCC. Using the same fully
diluted share base, BBCP assumed that Synovus Adjusted purchased CBCC in an all
equity transaction for $92.5 million. Such analysis resulted in the following
per share consequences for CBCC shareholders. On an earnings per share assuming
dilution basis, the Merger would result in an earnings increase of 15.2% in 1998
and 6.9% in 1999 for CBCC shareholders in the combined company. On a fully
diluted book value basis, the Merger would result in an increase of 19.9% on an
equivalent per share basis as of March 31,
22
1998.
Analysis of Selected Other Bank Mergers Involving Southeastern
Community Banks and Thrifts. BBCP reviewed nine mergers involving Southeastern
community banks, thrifts and bank holding companies announced since January 1,
1998 in which the selling institution had a return on average assets between
.75% and 1.50%. BBCP noted in particular the prices paid in these mergers as a
multiple of earnings and book values and the transaction premiums paid in excess
of tangible book value as a percentage of core deposits. BBCP also reviewed
other data in connection with each of these mergers, including the amount of
total assets and the capital level of the acquired institutions and the return
on equity and the return on assets of the acquired institutions. BBCP then
compared this data to that of CBCC and to the value to be received by CBCC
stockholders in the Merger.
This comparison yielded a range of transaction values as multiples of
latest twelve-months earnings per share of a low of 21.5 times and a high of
36.3 times and a median value of 25.9 times. The CBCC multiple of trailing
earnings was 26.7 times. The calculations yielded a range of transaction values
as multiples of book value per share of a low of 2.13 times to a high of 4.78
times and a median value of 3.21 times. The CBCC multiple of book value was 4.33
times. Finally, the calculations yielded a range of deposit base premiums paid
from a low of 23.33% to a high of 49.05%, with a median value of 27.26%. The
equivalent premium on CBCC deposits represented by the Per Share Purchase Price
and Terms was 33.5%.
No company or transaction used in the above analyses as a comparison is
identical to CBCC, Synovus, or the Merger. Accordingly, an analysis of the
results of the foregoing necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies and other factors that could affect the public trading value of
the companies to which they are being compared. Mathematical analysis (such as
determining the average or median) is not, in itself, a meaningful method of
using comparable company data.
In connection with its opinion dated the date of this Proxy
Statement/Prospectus, BBCP confirmed the appropriateness of its reliance on the
analyses used to render its May 18, 1998 opinion by performing procedures to
update certain of such analyses and by reviewing the assumptions on which such
analyses were based and the factors considered in connection therewith.
BBCP is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, private placements, and
valuations for estate, tax, corporate and other purposes. CBCC has paid BBCP a
fee of $25,000 in connection with its engagement. An additional fee of 1% of the
aggregate market value of the consideration received by CBCC stockholders will
be payable to BBCP upon consummation of the Merger. Based upon an assumed Market
Price and value of a share of Synovus Common Stock at the Effective Date of the
Merger of $24.125 (the closing price of Synovus Common Stock on July 6, 1998)
this additional fee would be approximately $955,000. No compensation payable to
BBCP is contingent on the
23
conclusions reached in the opinion of BBCP. CBCC has also agreed to reimburse
BBCP for reasonable out-of-pocket-expenses and to indemnify BBCP and certain
related persons against certain liabilities relating to or arising out of its
engagement.
Conditions to the Merger
The respective obligations of Synovus and CBCC to effect the Merger are
subject to the satisfaction prior to the Effective Date of the following
conditions: (i) the Merger Agreement and the transactions contemplated thereby
shall have been approved by the affirmative vote of the holders of a majority of
CBCC Common Stock; (ii) approval of the Merger Agreement and the transactions
contemplated thereby by the Federal Reserve and the Georgia Banking Department;
(iii) receipt of all other regulatory consents and approvals which are necessary
to the consummation of the transactions contemplated by the Merger Agreement;
provided, however, that no approval or consent referred to therein or in clause
(ii) above will be deemed to have been received if it includes any conditions or
requirements (other than conditions or requirements which are customarily
included in such an approval or consent) which would have such a material
adverse impact on the economic or business benefits of the transactions
contemplated by the Merger Agreement as to render inadvisable the consummation
of the Merger in the reasonable opinion of the Board of Directors of Synovus or
CBCC; (iv) the satisfaction of all other statutory or regulatory requirements
which are necessary to the consummation of the transactions contemplated by the
Merger Agreement; (v) neither Synovus nor CBCC shall be subject to any order,
decree or injunction or any other action of a United States federal or state
court or a United States federal or state governmental, regulatory or
administrative agency or commission permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by the Merger Agreement;
(vi) the Registration Statement of which this Proxy Statement/Prospectus forms a
part will have become effective and no stop order suspending the effectiveness
of the Registration Statement will have been issued and no proceedings for that
purpose will have been initiated or threatened by the Commission and Synovus
will have received all state securities law and "Blue Sky" permits, approvals,
qualifications or exemptions necessary to consummate the transactions
contemplated by the Merger Agreement; (vii) receipt by Synovus and CBCC of an
opinion from KPMG to the effect that the Merger will be treated for federal
income tax purposes as a tax-free reorganization within the meaning of Section
368(a)(1)(A) of the Tax Code; (viii) receipt by Synovus and CBCC from each other
of a certificate to the effect that the representations made by management of
such party to KPMG in delivery of the opinion referenced in (vii) above were
true, correct and complete when made; and (ix) receipt by Synovus of a letter
dated as of the Effective Date from KPMG to the effect that Merger will qualify
for pooling of interests accounting treatment.
The obligation of Synovus to effect the Merger is subject to the
satisfaction prior to the Effective Date of the following additional conditions:
(i) there shall not exist inaccuracies in the representations and warranties or
instances of non-compliance with the covenants of CBCC set forth in the Merger
Agreement such that their aggregate effect has, or is reasonably likely to have,
a material adverse effect on CBCC and Synovus will have received a certificate
signed by the Chief Executive Officer of CBCC,
24
dated the Effective Date, to such effect; (ii) there will be no discovery of
facts, or actual or threatened causes of action, investigations or proceedings
by or before any court or other governmental body that relates to or involves
either CBCC or Bank of North Georgia: (a) which, in the reasonable judgment of
Synovus, would have a Material Adverse Effect (as defined in the Merger
Agreement) upon CBCC or the consummation of the transactions contemplated by the
Merger Agreement; (b) that challenges the validity or legality of the Merger
Agreement or the consummation of the transactions contemplated by the Merger
Agreement; or (c) that seeks to restrain or invalidate the consummation of the
transactions contemplated by the Merger Agreement or seeks damages in connection
therewith; (iii) Synovus will not have learned of any fact or condition with
respect to the business, properties, assets, liabilities, deposit relationships
or earnings of CBCC which, in the reasonable judgment of Synovus, is materially
and adversely at variance with one or more of the warranties or representations
set forth in the Merger Agreement or which, in the reasonable judgment of
Synovus, has or will have a Material Adverse Effect on CBCC; (iv) Gordon R. Teel
and Donald D. Howard will have entered into Employment Agreements with Synovus;
(v) Bank of North Georgia will have a CAMEL rating of at least 2 on the
Effective Date and a Community Reinvestment Act Rating of at least Satisfactory;
(vi) on the Effective Date, Bank of North Georgia will have a loan loss reserve
of at least 1.0% of loans and which will be adequate in all material respects
under generally accepted accounting principles applicable to banks; (vii) CBCC
will have delivered to Synovus certain environmental reports; (viii) the results
of any regulatory exam of CBCC and Bank of North Georgia shall be reasonably
satisfactory to Synovus; and (ix) a "no claims" letter shall have been delivered
to Synovus by each of CBCC's officers and directors.
The obligation of CBCC to effect the Merger is subject to the
satisfaction prior to the Effective Date of the following additional conditions:
(i) there shall not exist inaccuracies in the representations and warranties or
instances of non-compliance with the covenants of Synovus set forth in the
Merger Agreement such that their aggregate effect has, or is reasonably likely
to have, a material adverse effect on Synovus and CBCC will have received a
certificate signed by the Chief Executive Officer of Synovus, dated the
Effective Date, to such effect; (ii) the listing for trading of the shares of
Synovus Common Stock which shall be issued pursuant to the terms of the Merger
Agreement on the NYSE shall have been approved by the NYSE subject to official
notice of issuance; (iii) there will be no discovery of facts, or actual or
threatened causes of action, investigations or proceedings by or before any
court or other governmental body that relates to or involves either Synovus or
its Subsidiaries: (a) which, in the reasonable judgment of CBCC, would have a
Material Adverse Effect upon either Synovus or the consummation of the
transactions contemplated by the Merger Agreement; (b) that challenges the
validity or legality of the Merger Agreement or the consummation of the
transactions contemplated by the Merger Agreement; or (c) that seeks to restrain
or invalidate the consummation of the transactions contemplated by the Merger
Agreement or seeks damages in connection therewith; and (iv) CBCC will not have
learned of any fact or condition with respect to the business, properties,
assets, liabilities, deposit relationships or earnings of Synovus which, in the
reasonable judgment of CBCC, is materially and adversely at variance with one or
more of the warranties or representations set forth in the Merger Agreement or
which, in the reasonable judgment
25
of CBCC, has or will have a Material Adverse Effect on Synovus.
Regulatory Approvals
As indicated above, consummation of the Merger and the transactions
contemplated thereby is subject to, and conditioned upon, receipt of the
approvals from the Federal Reserve and the Georgia Banking Department.
Applications in connection with the Merger were filed with the Federal Reserve
and the Georgia Banking Department on or about June 11, 1998. The Merger has not
yet been approved by the Federal Reserve or the Georgia Banking Department. The
Merger cannot be consummated for 15 days after approval thereof by the Federal
Reserve, and during such period, the United States Justice Department may
challenge the Merger on antitrust grounds.
There can be no assurance that the Federal Reserve or the Georgia
Banking Department or any other applicable regulatory authority will approve or
take other required action with respect to the Merger. Synovus and CBCC are not
aware of any governmental approvals or actions that are required in order to
consummate the Merger except as described above. Should such other approval or
action be required, it is contemplated that Synovus and CBCC would seek such
approval or action. There can be no assurance as to whether or when any such
other approval or action, if required, could be obtained.
Waiver and Amendment
Prior to the Effective Date, any provision of the Merger Agreement may
be waived by the party entitled to the benefits of such provision or by all
parties, to the extent allowed by law. In addition, the Merger Agreement may be
amended at any time, to the extent allowed by law, by an agreement in writing
between Synovus and CBCC after approval of their respective Boards of Directors.
Termination
The Merger Agreement may be terminated prior to the Effective Date,
either before or after its approval by the stockholders of CBCC: (i) by the
mutual consent of Synovus and CBCC, if the Board of Directors of each so
determines by vote of a majority of the members of its entire Board; (ii) by
Synovus or CBCC, if consummation of the Merger does not occur by reason of the
failure of any of the conditions precedent set forth in the Merger Agreement
unless the failure to meet such condition precedent is due to a breach of the
Merger Agreement by the party seeking to terminate; or (iii) by Synovus or CBCC
if its Board of Directors so determines by vote of a majority of the members of
its entire Board in the event that the Merger is not consummated by November 30,
1998 unless the failure to so consummate by such time is due to the breach of
the Merger Agreement by the party seeking to terminate. In the event of the
termination of the Merger Agreement by Synovus or CBCC for the reasons and as
provided in this paragraph, the Merger Agreement will become void.
26
Interests of Certain Persons in the Merger
No officer or director of CBCC, nor any of their "associates," has any
direct or indirect material interest in the Merger, except insofar as the
following might be deemed to create such an interest: (i) the ownership by such
person of CBCC Common Stock or options to purchase such stock under the existing
CBCC stock option plan; (ii) the continued employment by such person with Bank
of North Georgia after consummation of the Merger; (iii) the potential service
by such person as a director of Bank of North Georgia after consummation of the
Merger; (iv) after the Effective Date, the eligibility of such persons to
participate in the Synovus Financial Corp. Director and/or Employee Stock
Purchase Plans or Synovus' welfare, incentive and benefit plans; and (v) certain
rights to indemnification. The CBCC Board was aware of these interests and
considered them, among other matters, in approving the Merger Agreement and the
transactions contemplated thereby.
Pursuant to the Merger Agreement, for a period of six years after the
Effective Date, Synovus will indemnify, defend and hold harmless each person
entitled to indemnification from CBCC and Bank of North Georgia against all
liabilities arising out of actions or omissions occurring at or prior to the
Effective Date (including the transactions contemplated by the Merger Agreement)
to the fullest extent permitted under Georgia law and by CBCC's and Bank of
North Georgia's Articles of Incorporation and bylaws.
CBCC officers and employees with outstanding stock options under any
CBCC stock option plan will have their options converted into options with
respect to Synovus Common Stock in accordance with the Per Share Exchange Ratio
applicable to the Merger. All other provisions of the stock option plan of CBCC
will remain in effect.
In addition, as a condition to the Merger, Synovus has agreed to enter
into an Employment Agreement with Gordon R. Teel, Chairman of the Board and
Chief Executive Officer of CBCC. Pursuant to the Employment Agreement, Mr. Teel
will be elected as Chairman of the Board and Chief Executive Officer and as a
director of Bank of North Georgia. The Agreement is for a two-year term and
provides that Mr. Teel will be compensated for his services at an annual rate of
base compensation of $276,600 per year, will be guaranteed an incentive bonus of
at least $100,000 for 1998 and will be eligible to receive an annual incentive
bonus of 50% of his annual base compensation during the term of the Employment
Agreement. The Employment Agreement also provides that Mr. Teel will be granted
an option to purchase 15,000 shares of Synovus Common Stock on the Effective
Date of the Merger at an exercise price equal to the closing price of Synovus
Common Stock on the Effective Date of the Merger with the options becoming
exercisable three years from the Effective Date. Finally, the Employment
Agreement provides that Mr. Teel will not compete with Synovus following
termination of his employment under certain circumstances for a two-year period
following the Effective Date of the Merger.
As an additional condition to the Merger, Synovus has agreed to enter
into an Employment Agreement with Donald D. Howard, President and Chief
Executive Officer of
27
Bank of North Georgia. Pursuant to the Employment Agreement, Mr. Howard will be
elected as President and Chief Operating Officer of Bank of North Georgia. The
Agreement is for a three-year term and provides that Mr. Howard will be
compensated for his services at an annual rate of base compensation of $160,000
per year, will be guaranteed an incentive bonus of at least $64,000 for 1998 and
will be eligible to receive an annual incentive bonus of 50% of his annual base
compensation during the term of the Employment Agreement. The Employment
Agreement also provides that Mr. Howard will be granted an option to purchase
15,000 shares of Synovus Common Stock on the Effective Date of the Merger at an
exercise price equal to the closing price of Synovus Common Stock on the
Effective Date of the Merger with the options becoming exercisable three years
from the Effective Date. Finally, the Employment Agreement provides that Mr.
Howard will not compete with Synovus for a two-year period following termination
of his employment under certain circumstances, with the restricted period
ending, in all events, on the third anniversary of the Effective Date of the
Merger.
In addition, Synovus has agreed to enter into its standard Change of
Control Agreement ("Agreement") with Mr. Teel and Mr. Howard. Each Agreement
provides severance pay and continuation of certain benefits in the event of a
Change of Control. In order to receive benefits under the Agreement, the
executive's employment must be terminated involuntarily, without cause, whether
actual or "constructive" within one year following a Change of Control or the
executive may voluntarily or involuntarily terminate employment during the
thirteenth month following a Change of Control. Generally, a "Change of Control"
is deemed to occur in any of the following circumstances: (i) the acquisition by
any person of 20% or more of the "beneficial ownership" of Synovus' outstanding
voting stock, with certain exceptions for Turner family members; (ii) the
persons serving as directors of Synovus as of the date of the Agreement and
those replacements or additions subsequently approved by a two-thirds (2/3) vote
of the Synovus Board ceasing to comprise at least two-thirds (2/3) of the
Synovus Board; (iii) a merger, consolidation, reorganization or sale of Synovus'
assets unless (a) the previous beneficial owners of Synovus own more than
two-thirds (2/3) of the new company, (b) no person owns more than 20% of the new
company, and (c) two-thirds (2/3) of the new company's Board were members of the
incumbent Board which approved the business combination; or (iv) a "triggering
event" occurs as defined in the Synovus Rights Agreement. For information
concerning the Synovus Rights Agreement, see "DESCRIPTION OF STOCK AND EFFECT OF
MERGER ON RIGHTS OF CBCC SHAREHOLDERS-The Rights Plan." Under each Agreement,
severance pay would equal two times current base salary and bonus, with bonus
being defined as the average of the previous three years measured as a
percentage of base salary multiplied by current base salary. Medical, life,
disability and other welfare benefits will be provided at the expense of Synovus
for two years with the level of coverage being determined by the amount elected
by the executive during the open enrollment period immediately preceding the
Change of Control. The executive would also receive a short-year bonus for the
year of separation based on the greater of a half year's maximum bonus or pro
rata maximum bonus to the date of termination and a cash amount in lieu of a
long-term incentive award for the year of separation. If the executive has
already received a long-term incentive award in the separation year, the amount
would equal 1.5 times the market grant and if the executive has not, the amount
would equal 2.5 times the market grant. If the executive were to be impacted by
the Internal Revenue
28
Service excise tax that applies to certain change of control agreements, he
would receive additional gross up payments so that he would be in the same
position as if there were no excise tax. The Agreement does not provide for
retirement benefits or perquisites.
Employee Benefits
Synovus has agreed in the Merger Agreement that, following the
Effective Date, Synovus will provide generally to officers and employees of Bank
of North Georgia employee benefits, including without limitation pension
benefits, health and welfare benefits, life insurance and vacation and severance
arrangements (collectively, "Employee Benefits"), on terms and conditions which,
when taken as a whole, are substantially similar to those currently provided by
CBCC and Bank of North Georgia. As soon as administratively and financially
practicable following the Effective Date, Synovus has agreed to provide
generally to officers and employees of Bank of North Georgia employee benefits
which, when taken as a whole, are substantially similar to those provided to
Synovus and its Subsidiaries to their similarly situated officers and employees.
Tax Opinion
Synovus and CBCC have received an opinion from KPMG, to the effect
that: (i) the Merger will constitute a tax-free reorganization under Section
368(a)(1)(A) of the Tax Code; (ii) the basis of Synovus Common Stock to be
received by each CBCC shareholder will be the same as the basis of CBCC Common
Stock surrendered in exchange therefor; (iii) the holding period of Synovus
Common Stock will include the holding period of the CBCC Common Stock exchanged
therefor, provided that such CBCC Common Stock is held as a capital asset at the
Effective Date of the Merger; and (iv) that, upon consummation of the Merger, no
gain or loss will be recognized by the shareholders of CBCC upon their receipt
of shares of Synovus Common Stock: (a) with the exception of any income or loss
that will be recognized by any CBCC shareholders with respect to any cash
payments required to be received by them in lieu of their receipt of fractional
shares of Synovus Common Stock; (b) with the exception of any income or loss
that will be recognized by any CBCC shareholders with respect to any cash
payments received by them by virtue of their exercise of their statutory
dissenters' rights against the Merger; and (c) except to the extent that the
Share Purchase Rights, which are described on pages 35 through 38 of this Proxy
Statement/Prospectus, are determined to be other property within the meaning of
Section 356 of the Tax Code, as described on pages 8 and 9 of the opinion, which
is attached hereto as Appendix "D." The Tax Opinion was issued on July 7, 1998.
The Tax Opinion is based upon certain assumptions and representations by the
managements of Synovus and CBCC (including, in general, the absence of any plan
or intention of CBCC's shareholders to sell or otherwise dispose of any amount
of Synovus Common Stock received in the Merger that would violate certain
precedents regarding continuity of interest required to exist in a
reorganization). KPMG serves Synovus as independent auditors.
ALL CBCC SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO
THE SPECIFIC CONSEQUENCES TO THEM OF THE MERGER
29
UNDER FEDERAL, STATE, LOCAL AND ANY OTHER APPLICABLE INCOME TAX LAWS.
Accounting Treatment
It is anticipated that the Merger will be accounted for as a pooling of
interests for financial reporting purposes. The Merger Agreement provides that
consummation of the Merger is subject to the receipt by Synovus of an opinion
from KPMG to the effect that the Merger will qualify as a pooling of interests
under generally accepted accounting principles and applicable rules of the
Commission if consummated in accordance with the Merger Agreement.
Expenses
The Merger Agreement provides that Synovus and CBCC will each pay its
own expenses in connection with the Merger and the transactions contemplated by
the Merger Agreement, including, but not limited to, the fees and expenses of
its own counsel and accountants.
Resales of Synovus Common Stock
The shares of Synovus Common Stock issued pursuant to the Merger
Agreement will be freely transferable under the Securities Act except for shares
issued to any shareholder who may be deemed to be an "affiliate" of CBCC for
purposes of Rule 145 under the Securities Act as of the date of the CBCC Special
Meeting. Affiliates may not sell their shares of Synovus Common Stock acquired
in connection with the Merger except pursuant to an effective registration
statement under the Securities Act covering such shares or in compliance with
Rule 145 promulgated under the Securities Act or another applicable exemption
from the registration requirements of the Securities Act. Persons who may be
deemed to be affiliates of CBCC generally include individuals or entities that
control, are controlled by or are under common control with CBCC and may include
certain officers and directors of CBCC as well as principal shareholders of
CBCC.
CBCC has agreed in the Merger Agreement to use its best efforts to
cause each director, executive officer and other person who is an affiliate of
CBCC to enter into an agreement with Synovus providing that such person will not
sell, pledge, transfer or otherwise dispose of shares of CBCC Common Stock owned
by such person or Synovus Common Stock to be received by such person in the
Merger: (i) in the case of shares of Synovus Common Stock only, except in
compliance with the applicable provisions of the Securities Act and the rules
and regulations thereunder; and (ii) during the periods when any such sale,
pledge, transfer or other disposition would, under generally accepted accounting
principles or the rules, regulations or interpretations of the Commission,
disqualify the Merger for pooling of interests accounting treatment. Such
periods in general encompass the period commencing 30 days prior to the Merger
and ending at the time of publication of financial results covering at least 30
days of combined operations of Synovus and CBCC. This Proxy Statement/Prospectus
does not
30
cover resales of Synovus Common Stock following consummation of the Merger, and
no person may make use of this Proxy Statement/Prospectus in connection with any
such resale.
NYSE Listing
Synovus Common Stock is listed on the NYSE. The Synovus Common Stock
issued to the shareholders of CBCC pursuant to the Merger Agreement will be
listed on the NYSE.
DESCRIPTION OF STOCK AND EFFECT OF MERGER
ON RIGHTS OF CBCC SHAREHOLDERS
If the Merger is consummated, CBCC shareholders will become
shareholders of Synovus (other than CBCC shareholders who perfect their
statutory dissenters' rights against the Merger).
The following sets forth, in summary form, a comparison of certain
rights of shareholders owning Synovus Common Stock and shareholders owning CBCC
Common Stock.
[Rest of page intentionally blank]
31
<TABLE>
<CAPTION>
Synovus CBCC
<S> <C>
1. Ten votes for each share held, 1. One vote for each share held
except in certain limited
circumstances described below
2. No cumulative voting rights in the 2. Shareholders have cumulative
election of directors, meaning that voting rights in the election of
the holders of a plurality of the directors, meaning that a
shares elect the entire Board of shareholder may vote the number
Directors of shares owned by such
shareholder for each nominee or
may cumulate his or her
votes by giving one nominee as many votes as
equals the number of
directors to be elected
multiplied by the number of
his or her shares, or
may distribute
his or her votes on the
same principle
among any number of
such nominees
3. Dividends may be paid from funds 3. Dividends may be paid from funds
legally available, subject to legally available, subject to
contractual and regulatory contractual and regulatory
restrictions restrictions
4. Right to participate pro rata in 4. Right to participate pro rata in
distribution of assets upon distribution of assets upon liquidation
liquidation
5. No pre-emptive or other rights to 5. Shareholders have pre-emptive
subscribe for any additional shares rights to subscribe for any
or securities additional shares of CBCC
Common Stock if issued for cash
consideration
6. No conversion rights 6. No conversion rights
7. Directors serve staggered 3-year 7. Directors serve one-year terms
terms
32
8. Certain corporate actions, including 8. Corporate actions require the
business combinations, require the affirmative vote of a majority of the
affirmative action or vote of 66- votes actually cast at the meeting,
2/3% of the votes entitled to be unless otherwise required by law,
cast by the shareholders of all as is the case in business
voting stock combinations which require the
affirmative vote of a majority of the
votes entitled to be cast at the
meeting
9. No preferred stock is authorized 9. 5,000,000 shares of preferred
stock are authorized
10. Common Stock Purchase Rights 10. No comparable provision
trade with shares as described below
</TABLE>
Synovus Common Stock
Synovus is incorporated under the Georgia Business Corporation Code,
and Synovus is authorized to issue 600,000,000 shares of Synovus Common Stock,
of which shares 263,110,874 were outstanding on June 30, 1998. Synovus has no
preferred stock authorized. Synovus' Board of Directors may at any time, without
additional approval of the holders of Synovus Common Stock, issue authorized but
unissued shares of Synovus Common Stock.
Synovus' Articles of Incorporation and bylaws presently contain several
provisions which may make Synovus a less attractive target for an acquisition of
control by an outsider who does not have the support of Synovus' Board of
Directors. See "DESCRIPTION OF STOCK AND EFFECT OF MERGER ON RIGHTS OF CBCC
SHAREHOLDERS - Voting Rights - Certain Anti-Takeover Effects - The Voting
Amendment"; " - The Rights Plan"; " - Staggered Board of Directors"; and " -
Evaluation of Business Combinations."
33
Voting Rights - Certain Anti-Takeover Effects - The Voting Amendment
Pursuant to an amendment to Synovus' Articles of Incorporation and
bylaws which became effective on April 24, 1986 ("Voting Amendment"),
shareholders of Synovus Common Stock are entitled to ten votes on each matter
submitted to a vote at a meeting of shareholders for each share of Synovus
Common Stock which: (i) has had the same beneficial owner since April 24, 1986;
(ii) was acquired by reason of participation in a dividend reinvestment plan
offered by Synovus and is held by the same beneficial owner for whom it was
acquired under such plan; (iii) is held by the same beneficial owner to whom it
was issued as a result of an acquisition of a company or business by Synovus
where the resolutions adopted by Synovus' Board of Directors approving such
issuance specifically reference and grant such rights, including shares of
Synovus Common Stock to be issued to the former shareholders of CBCC upon
consummation of the Merger; (iv) was acquired under any employee, officer and/or
director benefit plan maintained for one or more employees, officers and/or
directors of Synovus and/or its subsidiaries, and is held by the same beneficial
owner for whom it was acquired under such plan; (v) is held by the same
beneficial owner to whom it was issued by Synovus, or to whom it was transferred
by Synovus from treasury shares, and the resolutions adopted by Synovus' Board
of Directors approving such issuance and/or transfer specifically reference and
grant such rights; (vi) has been beneficially owned continuously by the same
shareholder for a period of 48 consecutive months prior to the record date of
any meeting of shareholders at which the share is eligible to be voted; (vii)
was acquired as a direct result of a stock split, stock dividend or other type
of share distribution if the share as to which it was distributed has had the
same beneficial owner for a period of 48 consecutive months prior to the record
date of any meeting of shareholders at which the share is eligible to be voted;
or (viii) is owned by a holder who, in addition to shares which are beneficially
owned under the provisions of (i)-(vii) above, is the beneficial owner of less
than 1,139,063 shares of Synovus Common Stock (which amount has been
appropriately adjusted to reflect the stock splits which have occurred
subsequent to April 24, 1986 and with such amount to be appropriately adjusted
to properly reflect any other change in Synovus Common Stock by means of a stock
split, a stock dividend, a recapitalization or otherwise occurring after April
24, 1986) ("ten-vote shares"). Shareholders of shares of Synovus Common Stock
not described above are entitled to one vote per share for each such share
("one-vote shares"). A shareholder may own both ten-vote shares and one-vote
shares, in which case he will be entitled to ten votes for each ten-vote share
and one vote for each one-vote share.
In connection with various meetings of Synovus' shareholders,
shareholders are required to submit to Synovus' Board of Directors satisfactory
proof necessary for it to determine whether such shareholders' shares of Synovus
Common Stock are ten-vote shares. If such information is not provided to
Synovus' Board of Directors, shareholders who would, if they had provided such
information, be entitled to ten votes per share, are entitled to only one vote
per share.
As Synovus Common Stock is registered with the Commission and is listed
on the NYSE, Synovus Common Stock is subject to the provisions of an NYSE rule,
which, in general, prohibits a company's common stock and equity securities from
being
34
authorized or remaining authorized for listing on NYSE if the company issues
securities or takes other corporate action that would have the effect of
nullifying, restricting or disparately reducing the voting rights of existing
shareholders of the company. However, such rule contains a "grandfather"
provision, under which Synovus' Voting Amendment falls, which, in general,
permits grandfathered disparate voting rights plans to continue to operate as
adopted. Synovus' management believes that all current shareholders of Synovus
Common Stock are entitled to ten votes per share, and as such, the further
issuance of any ten-vote shares would not disenfranchise any existing
shareholders. In the event it is determined in the future that Synovus cannot
continue to issue ten-vote shares in mergers and acquisitions, Synovus will
consider repealing the Voting Amendment and restoring the principle of one
share/one vote.
If the Merger is approved, present shareholders of CBCC Common Stock,
as future shareholders of Synovus Common Stock, will, pursuant to the Voting
Amendment described above, be entitled to ten votes per share for each share of
Synovus Common Stock received by them on the Effective Date of the Merger. In
addition, present employees of CBCC will be entitled to ten votes per share for
each share of Synovus Common Stock received by them on exercise of their options
to purchase CBCC Common Stock (which will be converted into options to purchase
Synovus Common Stock as a result of the Merger) and on exercise of options to
purchase Synovus Common Stock which may be granted by Synovus in the future
pursuant to any of its employee, officer and/or director benefit plans
maintained for one or more employees, officers and/or directors of Synovus
and/or its subsidiaries. In addition to such ten vote shares, such persons may
also acquire by purchase, stock dividend or otherwise, up to 1,139,063
additional shares of Synovus Common Stock which will also be entitled to ten
votes per share. However, if CBCC shareholders acquire by purchase, stock
dividend or otherwise, more than 1,139,063 additional shares of Synovus Common
Stock, they will be entitled to only receive one vote per share for each of such
shares in excess of 1,139,063 shares until they have been held for four years.
Except with respect to voting, ten-vote shares and one-vote shares are
identical in all respects and constitute a single class of stock, i.e., Synovus
Common Stock. Neither the ten-vote shares nor the one-vote shares have a
preference over the other with regard to dividends or upon liquidation. Synovus
Common Stock does not carry any preemptive rights enabling a holder to subscribe
for or receive shares of Synovus Common Stock.
The Rights Plan
On April 20, 1989, the Board of Directors of Synovus established a
Share Purchase Rights Plan ("Rights Plan") and declared a dividend distribution
of one Common Stock Purchase Right ("Right") for each outstanding share of
Synovus Common Stock. Each Right once it becomes exercisable entitles the
registered holder to purchase from Synovus one share of Synovus Common Stock at
a price of $12.84 per share ("Purchase Price"). The description and terms of the
Rights are set forth in a Rights Agreement ("Rights Agreement") between Synovus
and SunTrust Bank, Atlanta
35
(formerly Trust Company Bank), as Rights Agent ("Rights Agent").
As discussed below, initially the Rights will not be exercisable,
certificates will not be sent to shareholders and the Rights will automatically
trade with Synovus Common Stock. Until the close of business on the tenth day
following the earlier to occur of (i) a public announcement that a person or
group of affiliated persons has become an Acquiring Person, which is defined as
a person who has acquired, or obtained the right to acquire, beneficial
ownership of securities of Synovus representing 10% or more of the outstanding
Common Stock of Synovus, or such earlier date as a majority of the Board of
Directors shall become aware of the existence of an Acquiring Person (the "Stock
Acquisition Date"), or (ii) the commencement of, or public announcement of an
intention to commence, a tender or exchange offer the consummation of which
would result in the ownership of 15% or more of the outstanding Synovus Common
Stock (the earlier of such dates being called the "Distribution Date"), the
Rights will be evidenced by the Synovus Common Stock certificates. As soon as
practicable following the Distribution Date, separate certificates evidencing
the Rights ("Rights Certificates") will be mailed to holders of record of
Synovus Common Stock as of the close of business on the Distribution Date, and
such separate certificates alone will evidence the Rights from and after the
Distribution Date.
Each of the following persons (an "Exempt Person") will not be deemed
to be an Acquiring Person even if they have acquired, or obtained the right to
acquire, beneficial ownership of 10% or more of the outstanding Common Stock of
Synovus: (i) Synovus, any subsidiary of Synovus, any employee benefit plan or
employee stock plan of Synovus or of any subsidiary of Synovus; (ii) any
shareholder who is a descendant of D. Abbott Turner (the "Turner Family"), any
shareholder who is affiliated or associated with the Turner Family and any
person who would otherwise become an Acquiring Person as a result of the receipt
of Common Stock or a beneficial interest in Common Stock from one or more
members of the Turner Family by way of gift, devise, descent or distribution,
but not by way of sale, unless any such person, together with his affiliates and
associates, becomes the beneficial owner of more than 30% of the outstanding
shares of Synovus Common Stock; (iii) any person who would otherwise become an
Acquiring Person solely by virtue of a reduction in the number of outstanding
shares of Synovus Common Stock unless and until such person shall become the
beneficial owner of any additional shares of Synovus Common Stock; and (iv) any
person who is not otherwise an Exempt Person and who as of April 20, 1989 was
the beneficial owner of 10% or more of the outstanding Common Stock unless and
until such person shall become the beneficial owner of any additional shares of
Synovus Common Stock.
The Rights are not exercisable until the Distribution Date. The Rights
will expire at the close of business on May 4, 1999, unless earlier redeemed by
Synovus as described below.
The Purchase Price payable, and the number of shares of Synovus Common
Stock or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of the
Common Stock, (ii) upon the grant
36
to holders of the Common Stock of certain rights or warrants to subscribe for
Common Stock or convertible securities at less than the current market price of
the Common Stock or (iii) upon the distribution to holders of the Common Stock
of evidences of indebtedness or assets (excluding dividends payable in Common
Stock) or of subscriber rights or warrants (other than those referred to above).
After the Rights have become exercisable, if Synovus is acquired in a
merger or other business combination (in which any shares of Synovus Common
Stock are changed into or exchanged for other securities or assets) or more than
30% of the assets or earning power of Synovus and its Subsidiaries (taken as a
whole) are sold or transferred in one transaction or a series of related
transactions, the Rights Agreement provides that proper provision shall be made
so that each holder of record of a Right will have the right to receive, upon
payment of the Purchase Price, that number of shares of common stock of the
acquiring company having a market value at the time of such transaction equal to
two times the Purchase Price.
In the event (i) any Person (other than an Exempt Person) becomes the
beneficial owner of 15% or more of the then outstanding shares of Synovus Common
Stock or any Exempt Person who is the beneficial owner of 15% or more of the
outstanding shares of Synovus Common Stock fails to continue to qualify as an
Exempt Person (unless, in either case, such Person's failure is inadvertent and,
within 10 days after the date upon which Synovus first becomes aware of the
occurrence of such ownership, the Board of Directors in its sole discretion
approves the beneficial ownership interest then held by such Person or provides
such Person a 30-day period to divest a sufficient number of shares so as to
decrease the beneficial ownership of such Person to less than 15% or to
requalify as an Exempt Person, and such Person does so) or (ii) any Acquiring
Person or any of its affiliates or associates, directly or indirectly, engages
in certain self-dealing transactions with Synovus as more particularly described
in the Rights Agreement, such as entering into a merger with Synovus or engaging
in transactions with Synovus on terms and conditions less favorable to Synovus
than Synovus would be able to obtain in an arm's-length negotiation with an
unaffiliated third party, then, and in each such case, each holder of record of
a Right, other than the Acquiring Person, will thereafter have the right to
receive, upon payment of the Purchase Price, that number of shares of Synovus
Common Stock having a market value at the time of the transaction equal to twice
the Purchase Price. Any Rights that are or were at any time, on or after the
earlier of the Stock Acquisition Date or the Distribution Date, beneficially
owned by an Acquiring Person which is or was involved in or which caused or
facilitated, directly or indirectly, the event or transaction or transactions
described in this paragraph shall become null and void. Each of the above
described events and each of the events described in the previous paragraph is
referred to as a "Triggering Event."
To the extent that sufficient shares of Synovus Common Stock are not
available for the exercise in full of the Rights, holders of Rights will receive
upon exercise shares of Common Stock to the extent available and then cash,
property or other securities of Synovus, in proportions determined by Synovus,
so that the aggregate value received is equal to twice the Purchase Price.
Synovus, however, shall not be required to issue any cash, property or
securities (other than Synovus Common Stock) upon exercise of
37
the Rights to the extent their aggregate value would exceed the amount of cash
Synovus would otherwise be entitled to receive upon exercise in full of the then
exercisable Rights.
No fractional shares of Synovus Common Stock will be issued upon
exercise of the Rights and, in lieu thereof, a payment in cash will be made to
the holder of such Rights equal to the same fraction of the current market value
of a share of Synovus Common Stock.
At any time until the date of the first Triggering Event (subject to
extension by the Board of Directors), Synovus may redeem the Rights in whole,
but not in part, at a price of $0.01 per Right. Immediately upon the action of
the Board of Directors of Synovus authorizing redemption of the Rights, the
Rights will terminate, and the only right of the holders of Rights will be to
receive the redemption price without any interest thereon.
Until the close of business on the date of the first Triggering Event
(subject to extension) Synovus may, except with respect to the redemption price
or the date of expiration of the Rights, amend the Rights in any manner. After
the date of the first occurrence of a Triggering Event (subject to extension),
Synovus may amend the Rights in any manner that does not adversely affect the
interest of holders of the Rights.
Until a Right is exercised, the holder, as such, will have no rights as
a shareholder of Synovus, including, without limitation, the right to vote or to
receive dividends.
The issuance of the Rights is not taxable to Synovus or to shareholders
under presently existing federal income tax law, and will not change the way in
which shareholders can presently trade Synovus Common Stock. If the Rights
should become exercisable, shareholders, depending on then existing
circumstances, may recognize taxable income.
A copy of the Rights Agreement has been filed with the Commission as an
Exhibit to a Registration Statement on Form 8-A which is incorporated into this
Proxy Statement/Prospectus by reference. A copy of the Rights Agreement is
available free of charge from either SunTrust Bank, Atlanta or Synovus. This
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement. If the Merger is
approved, Rights will attach to the Synovus Common Stock issued to the present
shareholders of CBCC.
Staggered Board of Directors; Supermajority Approvals
Pursuant to Synovus' Articles of Incorporation and bylaws, Synovus'
Board of Directors is divided into three classes of directors serving staggered
3-year terms, with the terms of each class of directors to expire each
succeeding year. Also pursuant to Synovus' Articles of Incorporation and bylaws,
the vote or action of shareholders possessing 66-2/3% of the votes entitled to
be cast by the shareholders of all the issued and outstanding shares of Synovus
Common Stock is required to: (i) call a special meeting of Synovus'
shareholders; (ii) fix, from time to time, the number of members of
38
Synovus' Board of Directors; (iii) remove a member of Synovus' Board of
Directors; (iv) approve any merger or consolidation of Synovus with or into any
other corporation, and the sale, lease, exchange or other disposition of all, or
substantially all, of Synovus' assets to or with any other corporation, person
or entity, with respect to which the approval of Synovus' shareholders is
required by the provisions of the corporate laws of the State of Georgia; and
(v) alter, delete or rescind any provision of Synovus' Articles of
Incorporation.
This allows directors to be removed only for cause by 66-2/3% of the
votes entitled to be cast at a shareholders' meeting called for that purpose.
Vacancies or new directorships can only be filled by a majority vote of the
directors then in office. Synovus' staggered Board of Directors, especially when
combined with the Voting Amendment, makes it more difficult for its shareholders
to force an immediate change in the composition of the majority of the Board. A
potential acquiror with shares recently acquired and not entitled to 10 votes
per share under the Voting Amendment may be discouraged or prevented from
soliciting proxies for the purpose of electing directors other than those
nominated by current management for the purpose of changing the policies or
control of Synovus.
Evaluation of Business Combinations
Synovus' Articles of Incorporation also provide that in evaluating any
business combination or other action, Synovus' Board of Directors may consider,
in addition to the amount of consideration involved and the effects on Synovus
and its shareholders, the interests of the employees, customers, suppliers and
creditors of Synovus and its subsidiaries, the communities in which offices of
Synovus or its Subsidiaries are located, and any other factors the Board of
Directors deem pertinent.
CBCC Common Stock
The authorized capital stock of CBCC consists of 5,000,000 shares of
Common Stock, $1.00 par value and 5,000,000 shares of Preferred Stock. As of
June 30, 1998, 688,500 shares of CBCC Common Stock were issued and outstanding
and no shares of CBCC Preferred Stock were issued and outstanding.
Holders of CBCC Common Stock are entitled to one vote per share on all
matters to be voted on by shareholders except in the election of directors where
they are entitled to cumulative voting. Cumulative voting means that a holder of
CBCC Common Stock is entitled to vote the number of shares owned by him or her
for each of the nominees for election as a director or to cumulate his or her
votes by giving one nominee as many votes as equals the number of directors to
be elected multiplied by the number of his or her shares, or to distribute his
or her votes on the same principle among any number of such nominees.
Holders of shares of CBCC Common Stock are entitled to share ratably in
such dividends as may be declared by the Board of Directors and paid by CBCC out
of funds legally available therefor and to share pro rata in the distribution to
shareholders upon
39
dissolution of CBCC.
Holders of CBCC Common Stock have pre-emptive rights which means they
are entitled to purchase their pro rata portion of any shares of CBCC Common
Stock issued by CBCC for cash consideration. Holders of CBCC Common Stock do not
have conversion rights, and there are no redemption provisions with respect to
such shares. All outstanding shares of CBCC Common Stock are fully paid and
nonassessable.
The preceding descriptive information supplied herein concerning
Synovus Common Stock and CBCC Common Stock outlines certain provisions of
Synovus' Articles of Incorporation and bylaws, CBCC's Articles of Incorporation
and bylaws and certain statutes regulating the rights of holders of Synovus and
CBCC Common Stock. The information does not purport to be complete and is
subject in all respects to provisions of the Articles of Incorporation and
bylaws of Synovus and CBCC and the laws of the State of Georgia.
Dissenters' Rights
Pursuant to Sections 14-2-1301 et. seq. of the Official Code of Georgia
Annotated, as amended ("Georgia Law"), any shareholder of record of CBCC Common
Stock who objects to the Merger, and who fully complies with all of the
provisions of Georgia Law, will be entitled to demand and receive payment in
cash of an amount equal to the fair value of his or her shares of CBCC Common
Stock if the Merger is consummated. A record shareholder may assert dissenters'
rights as to fewer than all the shares registered in his or her name only if the
shareholder dissents with respect to all shares beneficially owned by any one
beneficial shareholder and notifies CBCC in writing of the names and addresses
of each person on whose behalf he or she asserts dissenters' rights. A
beneficial owner must dissent with respect to all the shares he or she owns. For
the purpose of determining the amount to be received in connection with the
exercise of statutory dissenters' rights under Georgia Law, the fair value of a
dissenting shareholder's CBCC Common Stock is determined as of the close of the
business on the date prior to the Effective Date of the Merger, excluding any
appreciation or depreciation therein in anticipation of the Merger.
Any CBCC shareholder desiring to receive payment of the fair value of
his CBCC Common Stock in accordance with the requirements of Georgia Law: (i)
must file with CBCC prior to the Special Meeting of Shareholders of CBCC at
which the vote will be taken on the Merger Agreement and the Merger, or at the
Special Meeting, but before the vote is taken, a written notice of his or her
intent to demand payment of the fair value of his or her shares of CBCC Common
Stock if the Merger Agreement is approved and the Merger is consummated; (ii)
must not vote in favor of the proposal to which the shareholder objects
(although he or she may abstain from voting); and (iii) must, by the date
specified in the dissenters' notice ("Dissenters' Notice") mailed to him or her
by CBCC, or Synovus as successor to CBCC, which date shall not be fewer than 30
nor more than 60 days from the shareholder's receipt of the Dissenters' Notice,
demand payment for his or her shares and deposit his or her share certificates
in accordance with the terms of the Dissenters' Notice. A filing of the written
notice of intent to demand
40
payment for shares and the demand for payment pursuant to conditions (i) and
(iii) above should be sent to: Community Bank Capital Corporation, 8025 Westside
Parkway, Alpharetta, Georgia 30004. A vote against the Merger Agreement and the
Merger alone will not satisfy the requirements for the separate written notice
of intent to demand payment and the payment demand referred to in conditions (i)
and (iii) above; all three conditions must be separately satisfied.
If the Merger Agreement is approved and the Merger is authorized, CBCC,
or Synovus as successor to CBCC, will mail within 10 days thereafter to each
CBCC shareholder who has complied with conditions (i) and (ii) above, a
Dissenters' Notice, addressed to the CBCC shareholder at such address as he or
she has furnished CBCC in writing, or, if none, at the CBCC shareholder's
address as it appears on the records of CBCC, which notice will: (i) state where
the payment demand must be sent and where and when certificates for certificated
shares must be deposited; (ii) inform holders of uncertificated shares to what
extent transfer of the shares will be restricted after the payment demand is
received, and (iii) set a day by which CBCC, or Synovus as successor to CBCC,
must receive the payment demand which date may not be less than 30 nor more than
60 days after the Dissenters' Notice is delivered. A record shareholder who does
not demand payment or deposit his or her share certificates where required, each
by the date specified in the Dissenters' Notice, is not entitled to payment for
his or her shares.
If all of the conditions specified in (i), (ii) and (iii) above are
fully satisfied, CBCC, or Synovus as successor to CBCC, is required to make a
written offer, within 10 days of the later of the date the Merger is consummated
or receipt of the payment demand, to each dissenting shareholder to purchase all
of his or her shares of CBCC Common Stock at a specified price which Synovus
considers to be their fair value, plus accrued interest, as of the close of
business on the day prior to the Merger, excluding any change in value induced
by the proposed Merger or its consummation.
The offer of payment must be accompanied by:
(i) A copy of CBCC's consolidated balance sheet as of the end of a
fiscal year not more than 16 months before the date of payment,
an income statement for that year, a statement of changes in
shareholders' equity for that year, and the latest available
interim financial statements, if any;
(ii) A statement of CBCC's and/or Synovus' estimate of the fair value
of the shares;
(iii) An explanation of how the interest was calculated;
(iv) A statement of the dissenter's right to demand payment under
Section 14-2- 1327 of Georgia Law; and
(v) A copy of Section 14-2-1301 et. seq. of Georgia Law, a copy of
which is attached to this Proxy Statement/Prospectus as Appendix
"B."
41
Assuming the Merger has been effected, if the shareholder accepts
Synovus' offer by written notice within 30 days after the offer or is deemed to
have accepted the offer by failing to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer of
or the consummation of the Merger, whichever is later. If a dissenting
shareholder's demand for payment under Section 14- 2-1327 of Georgia Law remains
unsettled, Synovus shall commence a proceeding within 60 days after receiving
the payment demand and petition the Superior Court of Muscogee County, Georgia
to determine the fair value of the dissenter's shares and accrued interest,
which interest shall be computed from the Effective Date of the Merger. If
Synovus does not commence the proceeding within the 60 day period, it must pay
each dissenter whose demand remains unsettled the amount demanded.
The foregoing does not purport to be a complete statement of the
provisions of Georgia Law relating to statutory dissenters' rights and is
qualified in its entirety by reference to said provisions, relevant portions of
which are reproduced in full in Appendix "B" to this Proxy Statement/Prospectus,
which is incorporated herein by reference.
Conduct of Business of CBCC and Synovus Pending the Merger
The Merger Agreement provides that prior to the Effective Date of the
Merger, CBCC and Bank of North Georgia shall conduct their banking business only
in the ordinary course and will not, without the prior written consent of
Synovus: (i) issue any options to purchase capital stock or issue any shares of
capital stock, other than shares of CBCC Common Stock issued in connection with
the exercise of currently outstanding options to purchase shares of CBCC Common
Stock; (ii) declare, set aside, or pay any dividend or distribution with respect
to the capital stock of CBCC; (iii) directly or indirectly redeem, purchase or
otherwise acquire any capital stock of CBCC or Bank of North Georgia; (iv)
effect a split or reclassification of the capital stock of CBCC or Bank of North
Georgia or a recapitalization of CBCC or Bank of North Georgia; (v) amend the
articles of incorporation or bylaws of CBCC or Bank of North Georgia; (vi) grant
any increase in the salaries payable or to become payable by CBCC or Bank of
North Georgia to any employee other than normal, annual salary increases to be
made with regard to the employees of CBCC or Bank of North Georgia's employees
or as required by law or as described in the disclosure letter; (vii) make any
change in any bonus, group insurance, pension, profit sharing, deferred
compensation, or other benefit plan, payment or arrangement made to, for or with
respect to any employees or directors of CBCC or Bank of North Georgia, except
to the extent such changes are required by applicable laws or regulations or
result from a third party's exercise of its rights to terminate an insurance
contract providing benefits under such benefit plan, payment or arrangement;
(viii) enter into, terminate, modify or amend any contract, lease or other
agreement with any officer or director of CBCC or Bank of North Georgia or any
"associate" of any such officer or director, as such term is defined in
Regulation 14A under the Exchange Act, other than in the ordinary course of
their banking business; (ix) incur or assume any liabilities, other than in the
ordinary course of their business; (x) dispose of any of their assets or
properties, other than in the ordinary course of their business; (xi) solicit,
encourage or authorize any individual, corporation or other entity, including
its directors, officers and other employees, to solicit from any third party any
42
inquiries or proposals relating to the disposition of CBCC's business or assets,
or the acquisition of its voting securities, or the merger of CBCC or Bank of
North Georgia with any corporation or other entity other than as provided by the
Merger Agreement, or, subject to the fiduciary obligations of its Board of
Directors, provide any individual, corporation or other entity with information
or assistance or negotiate with any individual, corporation or other entity in
furtherance of such inquiries or to obtain such a proposal (and CBCC shall
promptly notify Synovus of all of the relevant details relating to all inquiries
and proposals which it may receive relating to any of such matters); (xii) take
any other action or permit Bank of North Georgia to take any action not in the
ordinary course of business; or (xiii) directly or indirectly agree to take any
of the foregoing actions.
The Merger Agreement also provides that without the prior written
consent of CBCC, Synovus will not: (i) declare, set aside or pay any cash
dividend on its Common Stock other than normal and customary cash dividends in
accordance with Synovus' current Dividend Policy; or (ii) take any action that
would: (a) delay or adversely affect the ability of Synovus to obtain any
necessary approvals of regulatory authorities required for the transactions
contemplated by the Merger Agreement; or (b) adversely affect its ability to
perform its covenants and agreements on a timely basis under the Merger
Agreement.
DESCRIPTION OF SYNOVUS
Business
The disclosures made in this Proxy Statement/Prospectus together with
the following information which is specifically incorporated by reference herein
describe the business of Synovus:
1. Synovus' Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 (which includes certain portions of Synovus'
1997 Annual Report to Shareholders and its Proxy Statement for
its Annual Meeting of Shareholders held on April 23, 1998).
2. Synovus' Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998.
3. Synovus' Current Reports on Form 8-K dated March 9, 1998, April
23, 1998, May 18, 1998 and June 5, 1998.
Management and Additional Information
Certain information relating to the executive compensation, various
benefit plans, voting securities and the principal holders thereof, certain
relationships and related transactions and other related matters as to Synovus
is incorporated by reference or set forth in Synovus' Annual Report on Form 10-K
for the year ended December 31, 1997 which is incorporated herein by reference.
See "INCORPORATION OF CERTAIN INFORMATION BY REFERENCE." Shareholders of CBCC
desiring copies of such
43
documents may contact Synovus at its address or phone number indicated under
"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE."
REGULATORY MATTERS
General
Synovus is a registered multi-bank holding company and CBCC is a
registered bank holding company, subject to supervision and regulation by the
Federal Reserve under the BHC Act, and by the Georgia Banking Department under
the bank holding company laws of the State of Georgia (the "Georgia Act"). As a
bank holding company, Synovus is required to furnish the Federal Reserve and the
Georgia Banking Department with annual reports of the financial condition,
management and inter-company relationships of Synovus and its subsidiaries and
affiliates at the end of each fiscal year, and such additional information as
the Board and the Georgia Banking Department may require from time to time. The
Board and the Georgia Banking Department also make examinations of Synovus and
certain of its subsidiaries and affiliates.
The BHC Act and the Georgia Act require each bank holding company to
obtain the prior approval of the Federal Reserve and the Georgia Banking
Department before: (i) it may acquire direct or indirect ownership or control of
any voting shares of any bank, if, after such acquisition, such bank holding
company will, directly or indirectly, own or control more than 5% of the voting
shares of such bank; (ii) it or any of its subsidiaries, other than a bank, may
acquire all or substantially all of the assets of a bank; or (iii) it may merge
or consolidate with any other bank holding company. In addition, under the
Georgia Act, it is unlawful for any bank holding company to acquire, direct or
indirect, ownership or control of more than 5% of the voting shares of any
presently operating bank, unless such bank has been in existence and
continuously operating as a bank for a period of five years or more prior to the
date of making application to the Georgia Banking Department for approval of
said acquisition.
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994 ("Interstate Banking Act"), effective September 29, 1995, bank holding
companies were permitted to acquire banks in any state. Under the Interstate
Banking Act, effective June 1, 1997, banks may merge or consolidate across state
lines, unless either of the states involved elected to prohibit such merger or
consolidation prior to May 31, 1997. Finally, under the Interstate Banking Act,
states may authorize banks from other states to engage in branching across state
lines.
In addition, a bank holding company is, with certain exceptions,
prohibited by the BHC Act from engaging in, or acquiring or retaining direct or
indirect control of the voting shares of any company engaged in non-banking
activities. One of the principal exceptions to this prohibition is for
activities found by the Federal Reserve to be so closely related to banking, or
managing or controlling banks, as to be a proper incident thereto.
Because Synovus is a registered multi-bank holding company, its
subsidiary banks
44
are also subject to examination, supervision and regulation by the Board. The
banks which are chartered under the banking laws of the States of Georgia,
Florida and Alabama are subject to examination, supervision and regulation by
the Georgia Banking Department, Florida Banking Department and the Alabama
Banking Department, respectively. The banks which are chartered under the
banking laws of the United States are subject to examination, supervision and
regulation by the Office of the Comptroller of the Currency ("OCC"). In
addition, the deposits of Synovus' subsidiary banks are insured by the FDIC to
the extent provided by law, and are subject to examination, supervision and
regulation by the FDIC.
The Georgia Banking Department, Florida Banking Department, Alabama
Banking Department, OCC and the FDIC regulate all areas of the banks' banking
and trust operations, including, where appropriate, reserves, investments,
loans, mergers, the issuance of securities, payment of dividends, interest
rates, extension of credit to officers and directors, establishment of branches,
maintenance of capital and other aspects of their operations.
Also, the payment of management fees by banking subsidiaries of a bank
holding company is subject to supervision and regulation by the Georgia Banking
Department, Florida Banking Department, Alabama Banking Department, the OCC, the
Federal Reserve and the FDIC. The payment of management fees by non-banking
subsidiaries of a bank holding company is also subject to supervision and
regulation by the Federal Reserve.
Numerous other federal and state laws, as well as regulations
promulgated by the Federal Reserve, the Georgia Banking Department, Florida
Banking Department, Alabama Banking Department, the OCC and the FDIC govern
almost all aspects of the operations of the banks.
Dividends
Under the laws of the State of Georgia, Synovus and CBCC, as business
corporations, may declare and pay dividends in cash or property unless the
payment or declaration would be contrary to restrictions contained in their
Articles of Incorporation, and unless, after payment of the dividend, they would
not be able to pay their debts when they become due in the usual course of its
businesses or their total assets would be less than the sum of their total
liabilities. Synovus is also subject to certain contractual and regulatory
capital restrictions that limit the amount of cash dividends that Synovus may
pay.
The primary sources of funds for Synovus' payment of dividends to its
shareholders are dividends and fees to Synovus from its banking and nonbanking
affiliates. Similarly, the primary source of funds for CBCC's operation are
dividends and fees from Bank of North Georgia . Various federal and state
statutory provisions and regulations limit the amount of dividends that the
subsidiary banks of Synovus and CBCC may pay. Pursuant to the regulations of the
Georgia Banking Department, a Georgia bank must have approval of the Georgia
Banking Department to pay cash
45
dividends if, at the time of such payment: (i) the ratio of such banking
affiliate's equity capital (defined to include the aggregate par value of all
outstanding common stock, paid-in surplus, retained earnings, capital resources,
reserves for loan losses, aggregate par value of outstanding preferred stock
which is not redeemable and other outstanding instruments which are required to
be converted into common stock) to its adjusted total assets is less than 6%;
(ii) the aggregate amount of dividends to be declared or anticipated to be
declared during the current calendar year exceeds 50% of its net after-tax
profit for the previous calendar year; or (iii) its total classified assets in
its most recent regulatory examination exceeded 80% of its equity capital (as
defined above) as reflected in such examination. In general, the approval of the
Alabama Banking Department and the Florida Banking Department, as applicable, is
required if the total of all dividends declared by an Alabama or Florida bank,
as the case may be, in any year would exceed the total of its net profits (as
defined) for that year combined with its retained net profits for the preceding
two years less any required transfers to surplus. In addition, the approval of
the OCC is required for a national bank to pay dividends in excess of the bank's
net income for the current year plus retained net income for the preceding two
years, less any required transfers to surplus.
Certain of Synovus' banking affiliates have in the past been required
to secure prior regulatory approval for the payment of dividends to Synovus in
excess of regulatory limits and may be required to seek approval for the payment
of dividends to Synovus in excess of such limits in the future. If such prior
regulatory approvals are sought, there is no assurance that any such regulatory
approvals will be granted.
Federal and state banking regulations applicable to Synovus and its
banking subsidiaries require minimum levels of capital which limit the amounts
available for payment of dividends. Synovus' objective is to pay out
approximately one-third of prior year's earnings in cash dividends to its
shareholders.
Synovus and its predecessors have paid cash dividends on their common
stock in every year since 1891. Under restrictions imposed under federal and
state laws, Synovus' subsidiary banks could declare aggregate dividends to
Synovus of approximately $92.9 million during 1998 without obtaining regulatory
approval.
CBCC has not paid cash dividends to its shareholders. At March 31,
1998, under restrictions imposed under federal and state laws, the Bank of North
Georgia could declare aggregate dividends to CBCC of approximately $2,163,877
without obtaining regulatory approval. For information concerning Bank of North
Georgia's conversion from a federal savings bank to a state-chartered commercial
bank, see "DESCRIPTION OF CBCC - Background."
Capital Requirements
Synovus and CBCC are required to comply with the capital adequacy
standards established by the Federal Reserve and their banking subsidiaries must
comply with similar capital adequacy standards established by the OCC and FDIC
as applicable. There are two basic measures of capital adequacy for bank holding
companies and their
46
banking subsidiaries that have been promulgated by the Federal Reserve, the FDIC
and the OCC: a risk-based measure and a leverage measure. All applicable capital
standards must be satisfied for a bank holding company or a bank to be
considered in compliance.
The risk-based capital standards are designed to make regulatory
capital requirements more sensitive to differences in risk profile among banks
and bank holding companies, to account for off-balance-sheet exposure, and to
minimize disincentives for holding liquid assets. Assets and off-balance-sheet
items are assigned to broad risk categories, each with appropriate weights. The
resulting capital ratios represent capital as a percentage of total
risk-weighted assets and off-balance-sheet items.
The minimum guideline for the ratio ("Risk-Based Capital Ratio") of
total capital ("Total Capital") to risk-weighted assets (including certain
off-balance-sheet items, such as standby letters of credit) is 8.0%. At least
half of Total Capital must comprise common stock, minority interests in the
equity accounts of consolidated subsidiaries, noncumulative perpetual preferred
stock, and a limited amount of cumulative perpetual preferred stock, less
goodwill and certain other intangible assets ("Tier 1 Capital"). The remainder
may consist of subordinated debt, other preferred stock, and a limited amount of
loan loss reserves ("Tier 2 Capital").
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio (the "Leverage Ratio") of Tier 1 Capital to average assets, less goodwill
and certain other intangible assets, of 3.0% for bank holding companies that
meet certain specified criteria, including having the highest regulatory rating.
All other bank holding companies generally are required to maintain a Leverage
Ratio of at least 4.0%. Bank holding companies are expected to maintain
higher-than-minimum capital ratios if they have supervisory, financial,
operational, or managerial weaknesses, or if they are anticipating or
experiencing significant growth. Synovus has not been advised by the Federal
Reserve of any specific minimum Leverage Ratio applicable to it.
At March 31, 1998, Synovus' Total Capital ratio was 13.77%, its Tier 1
Capital ratio was 12.49% and its Tier 1 Leverage Ratio was 10.13%. Assuming the
Merger, and Synovus' other pending acquisitions, had been consummated on March
31, 1998, the Total Capital ratio of the resulting corporation of the Merger
would have been 13.60%, its Tier 1 Capital ratio would have been 12.40% and its
Tier 1 Leverage Ratio would have been 10.00%. Each of these ratios exceeds the
current requirements under the Federal Reserve's capital guidelines. Each of
Synovus' subsidiary banks was in compliance with applicable minimum capital
requirements as of March 31, 1998.
At March 31, 1998, CBCC's Total Capital ratio was 10.03%, its Tier 1
Capital ratio was 9.19% and its Tier 1 Leverage Ratio was 6.67%. Each of these
ratios exceeds the current requirements under the Federal Reserve's capital
guidelines. CBCC's subsidiary bank was also in compliance with applicable
minimum capital requirements as of March 31, 1998.
Failure to meet capital guidelines could subject a bank to a variety of
enforcement
47
remedies, including issuance of a capital directive, the termination of deposit
insurance by the FDIC, a prohibition on the taking of brokered deposits, and
certain other restrictions on its business. As described below, substantial
additional restrictions can be imposed upon FDIC-insured depository institutions
that fail to meet applicable capital requirements. See "PROMPT CORRECTIVE
ACTION."
The federal bank regulators continue to indicate their desire to raise
capital requirements applicable to banking organizations beyond their current
levels. In this regard, the federal banking agencies have amended the risk-based
capital standards that calculate the change in an institution's net economic
value attributable to increases and decreases in market interest rates and
require banks with excessive interest rate risk exposure to hold additional
amounts of capital against such exposures.
Commitments to Subsidiary Banks
Under the Federal Reserve's policy, Synovus is expected to act as a
source of financial strength to its subsidiary banks and to commit resources to
support its subsidiary banks in circumstances when it might not do so absent
such policy. In addition, any capital loans by Synovus to any of its subsidiary
banks would also be subordinate in right of payment to depositors and to certain
other indebtedness of such bank.
In the event of Synovus' bankruptcy, any commitment by Synovus to a
federal bank regulatory agency to maintain the capital of a banking subsidiary
will be assumed by the bankruptcy trustee and entitled to a priority of payment.
In addition, the Federal Deposit Insurance Act (the "FDIA") provides that any
financial institution whose deposits are insured by the FDIC generally shall be
liable for any loss incurred by the FDIC in connection with the default of, or
any assistance provided by the FDIC to, a commonly controlled financial
institution.
Prompt Corrective Action
The Federal Deposit Insurance Corporation Act of 1991 ("FDICIA")
establishes a system of prompt corrective action to resolve the problems of
undercapitalized institutions. Under this system the federal banking regulators
are required to rate supervised institutions on the basis of five capital
categories (well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized) and to take
certain mandatory supervisory actions, and are authorized to take other
discretionary actions, with respect to institutions in the three
undercapitalized categories, the severity of which will depend upon the capital
category in which the institution is placed. Generally, subject to a narrow
exception, FDICIA requires the banking regulator to appoint a receiver or
conservator for an institution that is critically undercapitalized. The federal
banking agencies have specified by regulation the relevant capital level for
each category.
Pursuant to FDICIA, the Federal Reserve, the FDIC, the OCC and the
Office of Thrift Supervision ("OTS") have adopted regulations setting forth a
five-tier scheme for
48
measuring the capital adequacy of the financial institutions they supervise.
Under the regulations, an institution would be placed in one of the following
capital categories: (a) well capitalized (an institution that has a Total
Capital ratio of at least 10%, a Tier 1 Capital ratio of at least 6% and a Tier
1 Leverage Ratio of at least 5%); (b) adequately capitalized (an institution
that has a Total Capital ratio of at least 8%, a Tier 1 Capital ratio of at
least 4% and a Tier 1 Leverage Ratio of at least 4%); (c) undercapitalized (an
institution that has a Total Capital ratio of under 8%, a Tier 1 Capital ratio
of under 4% or a Tier 1 Leverage Ratio of under 4%); (d) significantly
undercapitalized (an institution that has a Total Capital ratio of under 6%, a
Tier 1 Capital ratio of under 3% or a Tier 1 Leverage Ratio of under 3%); and
(e) critically undercapitalized (an institution whose tangible equity is not
greater than 2% of total tangible assets). The regulations permit the
appropriate Federal banking regulator to downgrade an institution to the next
lower category if the regulator determines (a) after notice and opportunity for
hearing or response, that the institution is in an unsafe or unsound condition
or (b) that the institution has received (and not corrected) a
less-than-satisfactory rating for any of the categories of asset quality,
management, earnings or liquidity in its most recent examination. Supervisory
actions by the appropriate Federal banking regulator depend upon an
institution's classification within the five categories. Synovus' management
believes that Synovus and its bank subsidiaries have the requisite capital
levels to qualify as well capitalized institutions under the FDICIA regulations.
FDICIA generally prohibits a depository institution from making any
capital distribution (including payment of a dividend) or paying any management
fee to its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are subject to
restrictions on borrowing from the Federal Reserve System. In addition,
undercapitalized depository institutions are subject to growth limitations and
are required to submit capital restoration plans. A depository institution's
holding company must guarantee the capital plan, up to an amount equal to the
lesser of 5% of the depository institution's assets at the time it becomes
undercapitalized or the amount of the capital deficiency when the institution
fails to comply with the plan. Federal banking agencies may not accept a capital
plan without determining, among other things, that the plan is based on
realistic assumptions and is likely to succeed in restoring the depository
institution's capital. If a depository institution fails to submit an acceptable
plan, it is treated as if it is significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject
to a number of requirements and restrictions, including orders to sell
sufficient voting stock to become adequately capitalized, requirements to reduce
total assets and cessation of receipt of deposits from correspondent banks.
Critically undercapitalized depository institutions are subject to appointment
of a receiver or conservator.
Safety and Soundness Standards
The FDIA, as amended by FDICIA and the Riegle Community Development and
Regulatory Improvement Act of 1994, requires the federal bank regulatory
agencies to prescribe standards, by regulations or guidelines, relating to
internal controls, information systems and internal audit systems, loan
documentation, credit underwriting, interest rate
49
risk exposure, asset growth, asset quality, earnings, stock valuation and
compensation, fees and benefits and such other operational and managerial
standards as the agencies deem appropriate. The federal bank regulatory agencies
have adopted a set of guidelines prescribing safety and soundness standards
pursuant to FDICIA. The guidelines establish general standards relating to
internal controls and information systems, internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset growth and
compensation, fees and benefits. In general, the guidelines require, among other
things, appropriate systems and practices to identify and manage the risks and
exposures specified in the guidelines. The guidelines prohibit excessive
compensation as an unsafe and unsound practice and describe compensation as
excessive when the amounts paid are unreasonable or disproportionate to the
services performed by an executive officer, employee, director or principal
stockholders. The federal banking agencies determined that stock valuation
standards were not appropriate. In addition, the agencies adopted regulations
that authorize, but do not require, an agency to order an institution that has
been given notice by an agency that it is not satisfying any of such safety and
soundness standards to submit a compliance plan. If, after being so notified, an
institution fails to submit an acceptable compliance plan, the agency must issue
an order directing action to correct the deficiency and may issue an order
directing other actions of the types to which an undercapitalized institution is
subject under the prompt correction action provisions of FDICIA. See "Prompt
Corrective Action." If an institution fails to comply with such an order, the
agency may seek to enforce such order in judicial proceedings and to impose
civil money penalties.
Depositor Preference Statute
Legislation has been enacted providing that deposits and certain claims
for administrative expenses and employee compensation against an insured
depository institution would be afforded a priority over other general unsecured
claims against such an institution, including federal funds and letters of
credit, in the "liquidation or other resolution" of such an institution by any
receiver.
DESCRIPTION OF CBCC
Background
CBCC was formed during 1992 as a privately-held Georgia corporation. On
January 12, 1993, CBCC acquired Cherokee Federal Bank ("CFB"), headquartered in
Canton, Georgia, and CBCC became a one-thrift holding company. In July 1994,
CBCC acquired North Georgia National Bank, headquartered in Woodstock, Georgia,
by merging North Georgia National Bank into CFB, with the combined entity being
known as the "Bank of North Georgia." In April 1996, the Bank of North Georgia
(the "Bank") started a mortgage business as a division of the Bank under the
name "Bank of North Georgia Mortgage." On April 16, 1998, Bank of North Georgia
completed its conversion from a federal savings bank to a commercial bank
organized under the laws of the State of Georgia.
50
CBCC has obtained capital for growth through three private offerings
completed in 1993, 1994 and 1996.
Business
The principal business of the Bank is to accept deposits from the
public and to make loans and other investments in and around its primary service
area of north Fulton, Cherokee and Pickens Counties, Georgia. The principal
sources of income for the Bank are interest and fees collected on loans,
interest and dividends collected on other investments, and service charges on
deposit accounts. The principal expenses of the Bank are interest paid on
deposits, employee compensation, office expenses, and other overhead expenses.
The Bank offers a full range of deposit services that are typically
available from financial institutions, including NOW accounts, demand accounts,
savings accounts, and other time deposit accounts. In addition, retirement
accounts such as Individual Retirement Accounts are available. All deposit
accounts are insured by the FDIC up to the maximum amount currently permitted by
law, which is generally $100,000 per depositor subject to certain aggregation
rules.
The Bank also provides loans to businesses, including both secured and
unsecured short-term loans for working capital purposes, term loans for fixed
asset and expansion needs such as real estate acquisition and improvements, real
estate construction loans (primarily residential), and other commercial loans
suitable to the needs of its business customers. Loans to individuals which are
offered by the Bank include mortgage loans and installment loans for personal
use such as education and personal investment, or for the purchase of
automobiles or other consumer items.
The Bank's loan portfolio at December 31, 1997, consisted of
approximately 28% real estate construction loans, 42% commercial mortgage loans
(based on the underlying collateral), 13% commercial loans, 6% real estate
mortgage loans, primarily single family residences, 5% home equity lines and
second mortgages, and 6% consumer and other installment loans.
The Bank's marketing plan relies heavily upon local advertising and
promotional activity and upon personal contacts by its directors, officers and
employees to attract business and to acquaint potential customers with the
Bank's personalized services. The Bank emphasizes a high degree of personalized
client service to provide for each customer's banking needs. All banking
services are reviewed periodically to assess their profitability and their
position relative to the Bank's competition. At the present time, the Bank does
not currently offer trust or securities services.
CBCC Common Stock Owned by Management
The following table sets forth as of June 30, 1998, the number and
percentage ownership of shares of CBCC Common Stock beneficially owned by each
director of CBCC, by all directors and executive officers as a group, and by
each owner of more
51
than 5% of the outstanding shares of CBCC Common Stock. Unless otherwise
indicated, each person is the record owner of and has sole voting and investment
powers over his or her shares.
<TABLE>
<CAPTION>
Number of Shares Percentage
Name of Director Beneficially Owned<F1> of Total<F2>
- -----------------------------------------------------------------------------------------
<S> <C> <C>
George A. Budd 69,600<F3> 10.06
Donald D. Howard 19,250<F4> 2.74
Gordon R. Teel 111,360<F5> 15.77
J. C. Wallace, Jr. 25,270 3.67
Orlando Wilson 7,500 1.09
Thomas H. Wotka, Jr. 42,800 6.22
All Directors and Executive Officers
as a Group ( 7 persons) 305,982<F6> 42.25
Name/Address of Additional 5% Shareholders
Joann Harrison<F7> 40,000 5.81
5526 SW 53rd St.
Topeka, KS 66610
Bradford M. Johnson 49,600 7.20
President, Heron Hill Corporation
7301 Mission Road
P. O. Box 8208
Shawnee Mission, KS 66208-0208
Mid-Atlantic Investors 62,060 9.01
c/o Jerry Shearer
289 Hunters Blind Dr.
Columbia, SC 29212
Jane E. Novak 59,760 8.68
701 Ponte Vedra Blvd.
Ponte Vedra Beach, FL 32082
- --------------------
<FN>
<F1> The information shown above is based upon information furnished by the
named persons. Information relating to beneficial ownership is based upon
"beneficial
52
ownership" concepts set forth in rules promulgated under the Securities
Exchange Act of 1934, as amended. Under such rules a person is deemed to be
a "beneficial owner" of a security if that person has or shares "voting
power," which includes the power to dispose or to direct the voting of such
security, or "investment power," which includes the power to dispose or to
direct the disposition of such security. A person is also deemed to be a
beneficial owner of any security of which that person has the right to
acquire beneficial ownership within sixty (60) days. Under the rules, more
than one person may be deemed to be a beneficial owner of the same
securities, and a person may be deemed to be a beneficial owner of
securities as to which he or she has no beneficial interest.
<F2> The shares of CBCC Common Stock issuable upon exercise of outstanding
options held by the indicated shareholder (and no other shareholders) are
assumed to be outstanding for the purpose of determining the percentage of
shares beneficially owned by the indicated shareholder.
<F3> Includes options to purchase an aggregate of 3,000 shares.
<F4> Includes options to purchase an aggregate of 8,250 shares.
<F5> Includes options to purchase an aggregate of 17,500 shares.
<F6> Includes options to purchase an aggregate of 35,750 shares.
<F7> Consists of 40,000 shares held of record by Community National Bank
Custodian FBO Joanne Harrison IRA, P.O. Box 210, Seneca, KS 66538.
</FN>
</TABLE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
1997 Compared to 1996. Net income for 1997 of $4,283,567 exceeds comparable
1996 net income which amounted to $2,340,317. The level of 1997 performance
represents an increase of 83% compared to 1996. 1997 results reflect measurable
growth in the fundamental performance of CBCC even after considering the
positive impact of some non-recurring events and transactions. These include
non-interest income from the sale of the Ellijay Banking Office which
contributed approximately $1.2 million to 1997 earnings on an after-tax basis
and a large increase in income from sales of investment securities which
resulted in an after-tax gain of approximately $410,000. Comparisons are also
affected by income from loan sales and sale of mortgage servicing rights, and
the gain on sale of CBCC's former operations center, which significantly
increased 1996 non-interest income.
The significant increase in income from mortgage banking activities to
$2,281,479 in 1997 from $591,185 a year earlier, reflects the Mortgage
Division's first full year of operations, during which mortgage loans totaling
$120 million were originated.
The decline in interest rates during 1997 and high levels of liquidity
from a deposit
53
promotion afforded the opportunity to realize significant gains on securities
available for sale. During the year, net gains of $631,359 were realized, as
compared to net gains in 1996 of $188,007. At year-end 1997, unrealized net
gains, net of taxes, on securities available for sale were $2,536, as compared
with $55,865 at December 31, 1996. The available for sale portfolio decreased to
$1,834,017 at December 31, 1997 compared to $31,162,889 a year earlier.
Reinvestment in investment securities has not occurred because of the interest
rate environment, liquidity needs for the pending Ellijay sale settlement, loan
demand and other balance sheet needs.
Net interest income increased to $12,589,395 during 1997 from
$10,555,893 a year earlier. This increase was less than expected primarily due
to an increase in the average cost of funds. The cost of funds increased
substantially as a result of a money market deposit promotion initiated in June
1997. The success of this promotion resulted in excess liquidity as loan growth
did not accelerate as quickly as expected.
The loan portfolio continued to experience excellent growth during
1997. At December 31, 1997, total loans reached $205,689,400 compared to a
portfolio total of $152,240,450 at December 31, 1996. This growth, net of
repayments, represents total new loans other than residential mortgages during
1997 in excess of $160,000,000.
The performance of the loan portfolio continues to reflect strong
credit quality. Non-accrual loans, foreclosed real estate and repossessed assets
remain at relatively low levels at December 31, 1997 and net loan losses for the
year were $117,889 as compared to $66,260 for 1996. Past due loans increased to
$3,817,000 at December 31, 1997 from $1,769,000 at December 31, 1996, primarily
reflecting loan growth. The provision for loan losses increased to $700,000 in
1997 from $350,000 for 1996 also reflecting portfolio growth. At December 31,
1997, the allowance for loan losses was $2,118,096 as compared to $1,535,985 a
year earlier. Management believes that the allowance, at 1.03% of total loans
outstanding, is adequate to absorb any inherent loan losses based on all methods
it uses to evaluate risk in the loan portfolio.
Premises and equipment increased to $13,750,617 at December 31, 1997
from $10,811,786 a year earlier. The increase includes the cost of CBCC's new
main office facilities, as well as total remodeling of the Roswell Banking
Center.
The increase in other assets to $7,484,567 at December 31, 1997
reflects increases in accrued interest receivable and other assets consistent
with the growth in loans and operations. Increases in these assets are somewhat
offset by declines in intangibles from amortization.
Deposits grew to $349.8 million at December 31, 1997 compared to $241
million at the prior year-end. Transaction accounts, which generally represent a
lower cost source of funds than term deposits, continued to increase during 1997
comprising 54% of total deposits compared to 41% at December 31, 1996.
The decrease in the term loan balance to $4,100,000 at December 31,
1997 represents scheduled principal repayments during 1997.
54
Stockholders' equity increased to $20,219,874 at December 31, 1997, or
$30.13 per share based on 671,000 shares outstanding. Stock options awarded to
purchase 65,400 shares remain outstanding at December 31, 1997, at per share
prices ranging from $11.58 to $38.60. During 1997, 4,900 options were granted,
500 were forfeited and no options were exercised.
1996 Compared to 1995. Net income for 1996 of $2,340,317, or $3.61 per
weighted average share outstanding, exceeds comparable 1995 amounts of
$1,613,784 or $2.65, respectively. This level of 1996 performance represents an
increase of 45% in net income and 36% increase in per share earnings as more
shares were issued in 1996. In reviewing 1996 performance, it is particularly
important to note the positive trends in fundamentals such as growth in net
interest income, growth in service charge income and CBCC's continuing effort to
build a solid reserve for loan losses, even through credit risk management and
performance continues very strong. At the same time, 1996 was a very unusual
year and some comparisons were affected. The start-up costs of the mortgage
division and other initiatives together with the special FDIC assessment
significantly increased non-interest expense. Income from some of the loan sales
and sale of mortgage servicing rights, as well as mortgage division revenues
greatly increased non-interest income. In reviewing year-to-year trends, it is
also important to consider that 1995 non-interest income related to the
recognition of $207,000 of capitalized mortgage servicing rights.
The investment securities portfolio was further adjusted in 1996 in
conjunction with loan and loan servicing sales, all of which significantly
changed the balance sheet. At the same time, the portfolio was expanded during
the year to $57,576,588, and at year-end was composed almost entirely of U.S.
Treasury securities. The overall average maturity remains fairly short as the
longest security owned matures in December 2001. The split between securities
being held to maturity and those being held for possible sale generally reflects
maturity dates or potential pledging needs for public deposits. Only securities
with enough remaining life to achieve real gains as they move down the yield
curve are carried as available for sale. During the year net gains of $188,007
were realized, as compared to net gains in 1995 of $132,049. At year-end 1996
unrealized net gains, net of taxes, on securities held available for sale were
$55,865, as compared with $275,407 at December 31, 1995.
The loan portfolio continued to experience excellent growth and
improving mix (balance) as between the various types of lending. At December 31,
1996, total loans reached $152,240,450 compared to the comparable portfolio
total of $107,145,026 at December 31, 1995. This growth, net of repayments,
represents total new loans other than residential mortgages during 1996 in
excess of $121,760,000. Loan quality was strong as net loan losses for the year
were $66,260 as compared to $41,209 for 1995.
Loans monitored by past due status continue to reflect CBCC's strong
loan quality. At December 31, 1996, the past due status of the portfolio was
$1,769,000 as compared with $2,209,000 at December 31, 1995. Non-accrual loans
continue to be immaterial and foreclosed real estate and repossessed collateral
also continue at low levels consistent with prior years. At the same time,
because of high loan volume and
55
portfolio growth, the provision for loan losses was increased to $350,000 for
1996 from $245,000 for 1995. After absorbing net losses during 1996, the
resulting loan loss reserve stands at $1,535,935, an increase of 23% over the
prior year level. The reserve represents 1.01% of total loans outstanding at
December 31, 1996, a level at which management deems as adequate given CBCC's
loan loss history for four years under current management, past due status,
collateral status, and loan mix.
The premises and equipment account grew to $10,811,786 at December 31,
1996, from $8,142,474 a year earlier, as costs of CBCC's major new building
facilities project were capitalized. Very little funding was expended on other
capital projects, as CBCC generally had facilities and system capacity in place
to accommodate 1996 growth.
The change in other assets from December 31, 1995 to 1996, reflects
declines in intangibles from amortization, elimination of capitalized servicing
rights on mortgages which were sold, and increases in accrued interest
receivable and other asset categories affected by growth.
Deposits grew to $240,976,630 at December 31, 1996 as compared to
$181,580,000 at the prior year-end. Of the total, 41% of year-end deposits were
in transaction accounts which 59% were in certificate of deposit and IRA term
deposit categories. This mix compares to 39% and 61% at December 31, 1995. The
increase in the percentage of funding from transaction accounts represents a
lower cost source of funds generally as compared to the rates paid on term
deposits.
The term loan balance of $4,700,000 at December 31, 1996 represents the
result of both added borrowing and principal repayments on schedule. In
conjunction with the stock rights offering and debt increase, CBCC was able to
obtain a reduction in the interest rate to prime.
Stockholders' equity grew to $15,989,636 at December 31, 1996, or
$23.83 per share based on 671,000 shares outstanding. In addition to growth from
earnings retention, the proceeds of the May 1996 rights offering of 61,000 new
shares added almost $2,050,000 of equity. Stock options awarded in prior years
to purchase 61,000 shares remain outstanding at per share prices ranging from
$11.58 to $20.00. During 1996 no new options were granted and no options were
exercised.
Three Months Ended March 31, 1998 Compared to Three Months Ended March
31, 1997. Net income for the three months ended March 31, 1998 increased to
$1,135,951, an increase of 49% over net income of $760,140 for the comparable
period in 1997. A 25% increase in net interest income and a 73% increase in
noninterest income contributed to CBCC's performance for the 1998 three-month
period compared to the same period in 1997.
Net interest income increased to $3,629,735 for the three months ended
March 31, 1998 compared to $2,901,804 the same period a year earlier. Increases
in interest earning assets, primarily loans and loans held for sale, were the
primary factors contributing to the $727,931 increase in net interest income.
CBCC's provision for loan
56
losses increased by $50,000 to $150,000 for the three months ended March 31,
1998 consistent with the increase in loans.
Noninterest income increased to $1,415,572 for the three months ended
March 31, 1998 compared to $816,966 for the first three months of 1997. Income
from mortgage banking activities was the primary reason for this record
performance, improving by $728,661 to $1,133,199 for the three months ended
March 31, 1998. The increase in mortgage loans originated which exceeded $63
million for the first three months of 1998 compared to $21.3 million for the
same period a year earlier produced the improvement in mortgage banking income.
A favorable interest rate environment and additions to CBCC's mortgage lending
personnel contributed to the significant increase in mortgage loans originated.
CBCC had no noninterest income from sales of SBA loans during the first
three months of 1998 compared to $76,633 for the same period in 1997. No sales
of investment securities occurred during the three months ended March 31, 1998,
while declining interest rates during the first quarter of 1997 provided CBCC
with the opportunity to realize a gain of $80,184 on the sale of investment
securities available for sale.
Noninterest expense increased 29% to $3,146,656 for the three months
ended March 31, 1998 compared to $2,443,130 for the first three months of 1997.
Increases in salaries and employee benefits, primarily attributable to the
volume related increase in incentive based compensation of mortgage lending
personnel, is the principal cause of the increase in noninterest expense.
Interest earning assets continued to grow during the first three months
of 1998. Loans increased $10.3 million during the three months ended March 31,
1998 compared to an increase of $11.6 million during the same period in 1997.
The decrease in net growth for the first three months of 1998 is attributable to
the final settlement and delivery during 1998 of $3.2 million of loans sold in
conjunction with the 1997 sale of the Ellijay Banking Center. Loans held for
sale (mortgage loans) increased $7.4 million for the three months ended March
31, 1998 compared to a decrease of $480,000 for the same three months of 1997.
CBCC management believes loan growth for fiscal 1998 will exceed 1997 growth
based on the current level of loan demand and the increase in unfunded loan
commitments and undisbursed construction loans. Such commitments totaled $79.4
million as of March 31, 1998 compared to $60.1 million at March 31, 1997.
Asset quality remains solid as measured by the performance of CBCC's
loan portfolio which continues to experience relatively low levels of
charge-offs, foreclosures and nonaccrual loans with increases reflecting growth
in total loans outstanding. The allowance for loan losses was $2,217,361 or
1.03% of loans as of March 31, 1998 compared to $1,635,356 or 1% of loans as of
March 31, 1997.
Premises and equipment decreased approximately $275,000 for the three
months ended March 31, 1998 to $ 13,475,680 compared to an increase of
$1,658,823 for the same three-month period in 1997. The 1998 decrease represents
depreciation expense
57
for the three-month period. The 1997 increase includes a portion of the cost of
CBCC's new main office facilities as well as remodeling costs for the Roswell
Banking Center.
Deposits decreased $34.6 million for the three months ended March 31,
1998 to $315.2 million compared to an increase of $7.5 million for the same
three-month period in 1997. The 1998 decrease reflects the impact of the
settlement of the 1997 sale of the Ellijay Banking Center as well as a decline
in money market deposits resulting from the conclusion of a special promotion
initiated in June of 1997.
Short-term borrowings consisting primarily of advances from the Federal
Home Loan Bank increased for the three months ended March 31, 1998 by $3.9
million compared to an increase of $8.6 million for the same three-month period
in 1997.
Long-term debt decreased $162,500 for the three months ended March 31,
1998 compared to a decrease of $150,000 for the same three-month period in 1997.
The decreases represent scheduled quarterly principal payments.
Nonperforming Loans. The following table represents nonperforming loans
at December 31, 1997, 1996, 1995, 1994 and 1993. Nonperforming loans consist
solely of loans which are contractually past due 90 days or more as to interest
or principal payments and still accruing (past-due loans) and loans accounted
for on a nonaccrual basis(nonaccrual loans).
Past-due loans Nonaccrrual loans
--------------------------------------------
(dollars in thousands)
December 31, 1997 $1,168 $ 64
December 31, 1996 $1,159 $199
December 31, 1995 $ 417 $ -
December 31, 1994 $ 277 $121
December 31, 1993 $ - $356
Total interest income recognized on nonperforming loans for the year
ended December 31, 1997 was approximately $105,000. Additional interest income
of approximately $2,000 would have been recorded in 1997 if all nonperforming
loans had performed in accordance with their original terms.
If, as a result of CBCC's loan review and evaluation procedures, it is
determined that payment of interest on a commercial or real estate loan is
questionable, such loan is placed on nonaccrual status. A loan can be reinstated
to full accrual status when and if the borrower's financial condition and
payment performance can justify sustainable performance of all conditions and
terms of the loan.
Summary of Loan Loss Experience. The following table summarizes loan
balances at the end of each year, average loans outstanding during the year and
activity in the allowance for loan losses for each of the last five years.
58
<TABLE>
<CAPTION>
Year ended December 31,
1997 1996 1995 1994 1993
-----------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Allowance for loan losses at beginning of
year $1,536 $1,252 $ 1,048 $ 536 $ 429
Loans charged off:
Commercial, financial and agricultural 50 13 -- 13 --
Real estate loans -- 20 -- 76 --
Consumer installment 73 45 70 -- 48
- -----------------------------------------------------------------------------------------------------------------
Total charged off 123 78 70 89 48
- -----------------------------------------------------------------------------------------------------------------
Recoveries of loans previously charged off:
Commercial, financial and agricultural -- -- -- -- --
Real estate loans -- -- -- -- --
Consumer installment 5 12 29 29 6
- -----------------------------------------------------------------------------------------------------------------
Total recoveries 5 12 29 29 6
- -----------------------------------------------------------------------------------------------------------------
Net charge-offs 118 66 41 60 42
- -----------------------------------------------------------------------------------------------------------------
Allowance acquired in
business combinations -- -- -- 430 --
Provision for loan losses 700 350 245 142 149
- -----------------------------------------------------------------------------------------------------------------
Allowance for loan losses at end of year $ 2,118 $ 1,536 $ 1,252 $ 1,048 $ 536
=================================================================================================================
Loans outstanding, net of unearned income,
excluding held for sale $205,505 $152,067 $106,638 $100,441 $ 64,458
=================================================================================================================
Average loans outstanding, including held
for sale, net of unearned income $212,430 $164,582 $126,655 $ 89,126 $ 66,311
Ratio of net charge-offs to average
net loans outstanding 0.06% 0.04% 0.03% 0.07% 0.06%
Ratio of allowance for loan losses to net loans
(excluding held for sale) outstanding 1.03% 1.01% 1.17% 1.04% 0.83%
</TABLE>
Provision for Loan Losses. CBCC's provision for loan losses is a
reflection of actual losses experienced during the year and management's
judgment as to the adequacy of the allowance for loan losses. Some of the
factors considered by management in determining the amount of the provision and
resulting allowance include: (1) credit reviews of individual loans; (2)
charge-offs and recoveries in the current year; (3) growth in the loan
portfolio; (4) the current level of the allowance in relation to total loans and
to historical loss levels; (5) past due and nonaccruing loans; (6) collateral
values of properties securing loans; (7) the composition of the loan portfolio
(types of loans); and (8) management's evaluation of current and future economic
conditions and the resulting impact on CBCC.
Allowance for loan losses. The allowance for loan losses is based on
management's evaluation of the loan portfolio under current economic conditions.
The
59
evaluation includes a study of loss experience, a review of delinquencies and an
estimate of the probability of loss based on the risk characteristics of the
portfolio. Loans monitored by past due status continue to reflect strong loan
quality. Nonaccrual loans continue to be immaterial and foreclosed real estate
and repossessed collateral continue at low levels consistent with prior years.
Charge-offs for fiscal 1998 are not expected to increase significantly compared
to 1997.
Forward Looking Statements
Certain statements contained in this Proxy Statement/Prospectus and the
exhibits hereto which are not statements of historical fact constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act (the "Act"). In addition, certain statements by CBCC in
oral and written statements made by or with the approval of CBCC which are not
statements of historical fact constitute forward-looking statements within the
meaning of the Act. Examples of forward-looking statements include, but are not
limited to: (i) projections of revenues, income or loss, earnings or loss per
share, the payment or non-payment of dividends, capital structure and other
financial items; (ii) statements of plans and objectives of CBCC or its
management or Board of Directors, including those relating to products or
services; (iii) statements of future economic performance; and (iv) statements
of assumptions underlying such statements. Words such as "believes,"
"anticipates," "expects," "intends," "targeted," and similar expressions are
intended to identify forward-looking statements but are not the exclusive means
of identifying such statements.
Forward-looking statements involve risks and uncertainties which may
cause actual results to differ materially from those in such statements. Facts
that could cause actual results to differ from those discussed in the
forward-looking statements include, but are not limited to: (i) the strength of
the U.S. economy in general and the strength of the local economies in which
operations are conducted; (ii) the effects of and changes in trade, monetary and
fiscal policies and laws, including interest rate policies of the Federal
Reserve; (iii) inflation, interest rate, market and monetary fluctuations; (iv)
the timely development of and acceptance of new products and services and
perceived overall value of these products and services by users; (v) changes in
consumer spending, borrowing and saving habits; (vi) technological changes;
(vii) acquisitions; (viii) the ability to increase market share and control
expenses; (ix) the effect of changes in laws and regulations (including laws and
regulations concerning taxes, banking, securities and insurance) with which CBCC
and its subsidiary must comply; (x) the effect of changes in accounting policies
and practices, as may be adopted by the regulatory agencies as well as the
Financial Accounting Standards Board; (xi) changes in CBCC's organization,
compensation and benefit plans; (xii) the costs and effects of litigation and of
unexpected or adverse outcomes in such litigation; and (xiii) the success of
CBCC at managing the risks involved in the foregoing.
Such forward-looking statements speak only as of the date on which such
statements are made, and CBCC undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which such statement is made to reflect the occurrence of unanticipated events.
60
EXPERTS
Synovus
The consolidated balance sheets of Synovus and its Subsidiaries as of
December 31, 1997 and 1996, and the related consolidated statements of income,
changes in shareholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1997, all of which are incorporated by
reference in this Proxy Statement/Prospectus, have been audited by KPMG Peat
Marwick LLP, independent certified public accountants, whose report thereon is
incorporated herein by reference. Such financial statements have been so
incorporated herein by reference in reliance upon the report of KPMG Peat
Marwick LLP and upon their authority as experts in accounting and auditing.
CBCC
The consolidated financial statements of CBCC at December 31, 1997 and
1996, and for each of the three years in the period ended December 31, 1997
appearing in this Proxy Statement/Prospectus have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
OTHER MATTERS
CBCC's Board of Directors does not know of any matters to be presented
at the Special Meeting other than those set forth above. If any other matters
are properly brought before the Special Meeting or any adjournment thereof, the
enclosed proxy will be deemed to confer discretionary authority on the
individuals named as proxies therein to vote the shares represented by the proxy
as to any such matters.
SHAREHOLDER PROPOSALS
Synovus management expects to hold its next annual meeting of
shareholders during April 1999. Under the Commission's rules, proposals of
shareholders intended to be presented at that meeting must have been received by
Synovus at its principal executive offices on or before November 13, 1998 for
consideration by Synovus for possible inclusion in such proxy materials.
If the Merger is not consummated, CBCC will inform its shareholders of
the date and time of the 1999 annual meeting of shareholders of CBCC.
PRO FORMA FINANCIAL INFORMATION
Pro forma financial information reflecting the acquisition of CBCC by
Synovus is not presented herein since the pro forma effect is not significant.
61
On April 22, 1998, Synovus signed an Agreement and Plan of Merger
providing for the acquisition of Bank of Georgia. At March 31, 1998, Bank of
Georgia had total assets of $54 million and shareholders' equity of $5.6
million, and for the three months ended March 31, 1998, reported net income of
$215,000. On April 20, 1998, Synovus signed a letter of intent providing for the
acquisition of Georgia Bank & Trust. At March 31, 1998, Georgia Bank & Trust had
total assets of $166.4 million and shareholders' equity of $13.6 million, and
for the three months ended March 31, 1998, reported net income of $715,000.
These two pending acquisitions were not considered significant for inclusion in
pro forma statements either individually or in the aggregate, or when combined
with CBCC.
[Rest of page intentionally blank]
62
INDEX TO FINANCIAL STATEMENTS
Community Bank Capital Corporation:
Report of Independent Auditors F-1
Consolidated Balance Sheets - December 31, 1997 and 1996 F-2
Consolidated Statements of Income for the Years
ended December 31, 1997, 1996 and 1995 F-3
Consolidated Statements of Stockholders' Equity for the Years
ended December 31, 1997, 1996 and 1995 F-4
Consolidated Statements of Cash Flows for the Years
ended December 31, 1997, 1996 and 1995 F-5
Notes to Consolidated Financial Statements F-7
Unaudited Consolidated
Balance Sheets - March 31, 1998 and 1997 F-26
Unaudited Consolidated Statements of Income
for the Three Months Ended
March 31, 1998 and 1997 F-27
Unaudited Consolidated Statements of Cash Flows
for the Three Months Ended
March 31, 1998 and 1997 F-28
Notes to Unaudited Consolidated
Financial Statements F-30
[Rest of page intentionally blank]
63
Report of Independent Auditors
The Board of Directors and Stockholders
Community Bank Capital Corporation
We have audited the accompanying consolidated balance sheets of Community Bank
Capital Corporation and subsidiary (the Company) as of December 31, 1997 and
1996, and the related consolidated statements of income, stockholders equity,
and cash flows for each of the years in the period ended December 31, 1997.
These financial statements are the responsibility of the Companys management.
Our responsibility is to express an opinion on these 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Community Bank
Capital Corporation and subsidiary at December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
February 17, 1998
Ernst & Young LLP
F-1
<TABLE>
<CAPTION>
Community Bank Capital Corporation and Subsidiary
Consolidated Balance Sheets
December 31
1997 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash $ 11,118,435 $ 7,682,535
Interest-bearing balances with banks 67,812,406 5,784,744
- ---------------------------------------------------------------------------------------
Total cash and cash equivalents 78,930,841 13,467,279
Investment securities held-to-maturity (estimated fair
value of $39,797,504 and $26,244,694 at December 31, 1997
and 1996, respectively) 39,599,931 26,413,699
Investment securities available for sale 1,834,017 31,162,889
Loans held for sale 32,608,340 28,881,021
Loans receivable, net 203,387,037 150,531,101
Premises and equipment, net 13,750,617 10,811,786
Other assets 7,484,567 6,832,677
- ---------------------------------------------------------------------------------------
Total assets $377,595,350 $268,100,452
=======================================================================================
Liabilities and stockholders' equity
Liabilities:
Deposits:
Interest-bearing deposits $317,888,300 $221,011,996
Noninterest-bearing deposits 31,903,492 19,964,634
- ---------------------------------------------------------------------------------------
Total deposits 349,791,792 240,976,630
Short-term borrowings 1,595,261 5,044,232
Long-term debt 4,100,000 4,700,000
Other liabilities 1,888,423 1,389,954
- ---------------------------------------------------------------------------------------
Total liabilities 357,375,476 252,110,816
Stockholders' equity:
Serial preferred stock, $1 par value per share;
authorized 5,000,000 shares; none issued - -
Common stock, $1 par value per share;
authorized 5,000,000 shares; issued and outstanding
671,000 shares at December 31, 1997 and 1996,
respectively 671,000 671,000
Additional paid-in capital 9,472,734 9,472,734
Net unrealized gain on investment securities
available for sale, net of tax of
$1,365 and $30,081 at December 31, 1997 and 1996,
respectively 2,536 55,865
Retained earnings 10,073,604 5,790,037
- ---------------------------------------------------------------------------------------
Total stockholders' equity 20,219,874 15,989,636
- ---------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $377,595,350 $268,100,452
========================================================================================
See accompanying notes.
F-2
Community Bank Capital Corporation and Subsidiary
Consolidated Statements of Income
Year ended December 31
1997 1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income:
Loans receivable $22,612,032 $18,132,198 $13,948,863
Investment securities held-to-maturity 2,043,323 492,058 2,323,133
Investment securities available for sale 1,626,953 2,406,427 335,508
Interest-bearing deposits 1,275,432 308,096 290,035
- ---------------------------------------------------------------------------------------------
Total interest income 27,557,740 21,338,779 16,897,539
Interest expense:
Deposits 14,283,600 10,344,437 8,294,313
Short-term borrowings 295,799 30,781 339,179
Long-term debt 388,946 407,668 332,989
- ---------------------------------------------------------------------------------------------
Total interest expense 14,968,345 10,782,886 8,966,481
- ---------------------------------------------------------------------------------------------
Net interest income 12,589,395 10,555,893 7,931,058
Provision for loan losses 700,000 350,000 245,000
- ---------------------------------------------------------------------------------------------
Net interest income after provision for
loan losses 11,889,395 10,205,893 7,686,058
Noninterest income:
Service charges on deposit accounts 1,067,509 862,671 736,407
Loan servicing income -- 150,096 157,225
Mortgage banking activities 2,281,479 591,185 -
Net gain on sale of loans and loan
servicing 144,912 960,294 268,718
Net gain on sale of
premises and equipment 1,842,269 137,224 -
Gain on sale of investment securities 631,359 188,007 132,049
Other income 33,960 28,878 100,493
- --------------------------------------------------------------------------------------------
Total noninterest income 6,001,488 2,918,355 1,394,892
Noninterest expense:
Salaries and employee benefits 6,593,370 4,941,424 3,362,109
Occupancy expense 1,867,684 1,541,142 1,099,867
Deposit insurance expense 125,139 1,090,743 318,048
Other operating expenses 2,697,623 1,936,622 1,808,123
- --------------------------------------------------------------------------------------------
Total noninterest expense 11,283,816 9,509,931 6,588,507
- ---------------------------------------------------------------------------------------------
Income before income taxes 6,607,067 3,614,317 2,492,443
Income tax expense (including tax effect of
securities gains of $214,662, $63,922 and
$44,897 for the years ended December
31, 1997, 1996 and 1995 respectively) 2,323,500 1,274,000 878,659
- ---------------------------------------------------------------------------------------------
Net income $ 4,283,567 $ 2,340,317 $ 1,613,784
=============================================================================================
Net income per share
of common stock $ 6.38 $ 3.61 $ 2.65
=============================================================================================
Net income per share of
common stock, diluted $ 6.04 $ 3.43 $ 2.53
=============================================================================================
</TABLE>
See accompanying notes.
F-3
<TABLE>
<CAPTION>
Community Bank Capital Corporation and Subsidiary
Consolidated Statements of Stockholders' Equity
Net
Unrealized
Gain (Loss)
on
Investment
Securities
Additional Available Total
Common Stock Paid-In for Sale, Retained Stockholders'
------------------
Shares Amount Capital Net of Tax Earnings Equity
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31,1994 610,000 $ 610,000 $7,490,000 $ (35,841) $1,835,936 $9,900,095
Change in net
unrealized gain on
investment
securities for sale,
net of tax of
$160,340 -- -- -- 311,248 -- 311,248
Net income -- -- -- 1,613,784 1,613,784
---------------------------------------------------------------------------------------------------
Balance at
December 31, 1995 610,000 610,000 7,490,000 275,407 3,449,720 11,825,127
Sale of common stock 61,000 61,000 1,982,734 -- -- 2,043,734
Change in net
unrealized gain on
investment
securities available
for sale, net of tax
of $118,215 -- -- -- (219,542) -- (219,542)
Net income -- -- -- -- 2,340,317 2,340,317
-------------------------------------------------------------------------------------
Balance at
December 31, 1996 671,000 671,000 9,472,734 55,865 5,790,037 15,989,636
Change in net
unrealized gain on
investment
securities available
for sale, net of tax
of $28,716 -- -- -- (53,329) -- (53,329)
Net income -- -- -- 4,283,567 4,283,567
--------------------------------------------------------------------------------------
Balance at
December 31, 1997 671,000 $ 671,000 $ 9,472,734 $ 2,536 $ 10,073,604 $ 20,219,874
=======================================================================================
</TABLE>
See accompanying notes
F-4
<TABLE>
<CAPTION>
Community Bank Capital Corporation and Subsidiary
Consolidated Statements of Cash Flows
Year ended December 31
1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income $ 4,283,567 $ 2,340,317 $1,613,784
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for loan losses 700,000 350,000 245,000
Depreciation and amortization 849,887 869,780 677,865
Gain on sale of bank property and OREO (1,854,561) (141,296) -
Gain on sale of loans -- (178,626) -
Gain on sale of investment securities (631,359) (188,007) -
Net (increase) decrease in loans held for sale (3,727,319) 6,045,859 1,119,541
Changes in operating assets and liabilities:
Increase in other assets (1,948,499) (904,007) (163,203)
Increase (decrease) in other liabilities 498,469 (427,945) 740,208
Other, net 578,030 56,657 (692,149)
- --------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by operating activities (1,251,785) 7,822,732 3,541,046
Investing activities
Purchase of investment securities held-to-maturity (13,552,079) (20,430,806) (10,439,952)
Purchase of investment securities available for sale (66,572,538) (36,064,068) (17,227,729)
Proceeds from maturities of investment securities held-to-
maturity -- 8,705,251 4,978,022
Proceeds from maturities of investment securities available
for sale -- 2,000,000 4,000,000
Proceeds from sale of investment securities available for sale 96,216,258 23,514,004 25,649,908
Principal collected on investment securities available for sale 170,277 1,395,541 293,932
Proceeds from sale of loans -- 12,417,471 -
Net increase in loans receivable (53,555,936) (57,733,734) (29,951,274)
Proceeds from sale of real estate acquired
through foreclosure 1,308,901 416,771 138,014
Proceeds from sale of premises and equipment 2,177,300 1,383,250 -
Purchase of premises and equipment (4,243,027) (1,469,132) (614,687)
Net increase in construction in progress -- (2,916,640) -
- --------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (38,050,844) (68,782,092) (23,173,766)
Financing activities
Net increase in deposits 108,815,161 59,396,473 24,487,430
(Decrease) increase in short-term borrowings (3,448,970) 1,744,232 (2,900,000)
Proceeds from sale of common stock -- 2,043,734 -
(Decrease) increase in long-term debt (600,000) 1,550,000 (300,000)
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 104,766,191 64,734,439 21,287,430
Net increase in cash 65,463,562 3,775,079 1,654,710
Cash and cash equivalents at beginning of year 13,467,279 9,692,200 8,037,490
- --------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 78,930,841 $ 13,467,279 $9,692,200
==========================================================================================================================
</TABLE>
F-5
<TABLE>
<CAPTION>
Community Bank Capital Corporation and Subsidiary
Consolidated Statements of Cash Flows (continued)
Year ended December 31
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest $ 14,347,059 $ 10,556,605 $ 8,927,245
Income Taxes $ 2,554,000 $ 1,536,000 $ 812,000
====================================================================================================================
Supplemental disclosures of noncash transactions
Loans receivable transferred to real estate acquired through
foreclosure $ 2,395,346 $ 470,704 $ 199,552
====================================================================================================================
</TABLE>
See accompanying notes.
F-6
Community Bank Capital Corporation and Subsidiary
Notes to Consolidated Financial Statements
December 31, 1997
1. Summary of Significant Accounting Policies
Description of Community Bank Capital Corporation and Subsidiary and Basis of
Presentation
Community Bank Capital Corporation ("CBCC") is a Georgia corporation established
for the purpose of acquiring financial services companies. CBCC principally
operates through its wholly owned subsidiary Bank of North Georgia (the "Bank").
The Bank is a federally chartered stock savings bank regulated by the Office of
Thrift Supervision ("OTS") and provides a full range of banking services to
individual and corporate customers through its banking offices in Roswell,
Alpharetta, Crabapple, Canton, Woodstock, and Jasper, Georgia.
The financial statements of CBCC and subsidiary (collectively the "Company") are
prepared in accordance with generally accepted accounting principles and
practices within the financial services industry which require management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates. Certain amounts have been reclassified to conform to current year
presentation. The following is a summary of significant accounting policies.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of CBCC
and the Bank. All significant intercompany transactions and balances have been
eliminated in consolidation.
Loans Held for Sale
Loans held for sale are carried at the lower of aggregate cost or market value.
Investment Securities
Management determines the appropriate classification of investment securities at
the time of purchase and reevaluates such designation as of each balance sheet
date. Investment securities are classified as held-to-maturity when the Company
has the positive intent and ability to hold the securities to maturity.
Held-to-maturity securities are stated at amortized cost.
F-7
Community Bank Capital Corporation and Subsidiary
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Investment securities not classified as held-to-maturity are classified as
available for sale. Available for sale securities are stated at fair value, with
the unrealized gains and losses, net of tax, reported as a separate component of
stockholders' equity.
The amortized cost of investment securities classified as held-to-maturity or
available-for sale is adjusted for premiums and discounts on investment
securities amortized or accreted over the securities' remaining term to
maturity. Such amortization is included in interest income from investments.
Realized gains and losses, and declines in value judged to be
other-than-temporary are included in net securities gains (losses). The cost of
securities sold is based on the specific identification method.
Loans Receivable
Loans receivable that management has the intent and ability to hold for the
foreseeable future or until maturity or pay-off are reported at their
outstanding principal adjusted for any charge-offs, the allowance for loan
losses, and any deferred fees or costs on originated loans and unamortized
premiums or discounts on purchased loans. Interest income and fees on loans are
recognized over the terms of the loans using methods which generally result in
level rates of return on principal amounts outstanding. The Company discontinues
the accrual of interest on loans when the collectibility of all principal or
interest cannot reasonably be expected. Such expectation is based upon the
delinquency status of the loan, the financial strength of the borrower and an
evaluation of any collateral. When interest accruals are discontinued, income in
the current year is reversed.
Allowance for Loan Losses
The allowance for loan losses is based on management's evaluation of the loan
portfolio under current economic conditions. The evaluation includes a study of
loss experience, a review of delinquencies and an estimate of the probability of
loss based on the risk characteristics of the portfolio.
F-8
Community Bank Capital Corporation and Subsidiary
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Real Estate Acquired Through Foreclosure
Real estate, acquired principally through foreclosure, is initially recorded at
the lower of the investment in the loan or fair value, less estimated costs to
sell, at the date of foreclosure. Subsequent to foreclosure, valuations are
periodically performed by management, with a corresponding charge to operations
if the carrying value of a property exceeds its fair value, less estimated costs
to sell.
Loan Origination Fees and Costs
Loan origination fees and certain direct loan origination costs are deferred,
and the net fee or cost is recognized as an adjustment to interest income
effectively using the interest method over the contractual life of the loans.
Premises and Equipment
Premises and equipment are recorded at cost net of accumulated depreciation.
Depreciation is computed on a straight-line basis at rates based on estimated
useful lives.
Income Taxes
The Company accounts for income taxes using the liability method. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
Statements of Cash Flows
For purposes of presentation in the statements of cash flows, the Company
considers all short-term interest-bearing deposits in other banks with
maturities of three months or less as cash equivalents.
F-9
Community Bank Capital Corporation and Subsidiary
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Stock Options
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related interpretations
in accounting for its employee stock options. Under APB 25, because the exercise
price of the Company's stock options equals the market price of the underlying
stock on the date of grant, no compensation expense is recognized.
Earnings Per Share
The Financial Accounting Standards Board ("FASB") issued Statement No. 128,
"Earnings per Share" ("Statement 128") in February 1997. Statement 128 replaced
the calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. The new standard is required for presentation of
earnings per share for entities that have issued common stock traded in a public
market or non-public entities voluntarily presenting earnings per share
information.
Recent Accounting Pronouncements
In June 1997, the FASB issued Statement 130, "Reporting Comprehensive Income"
("Statement 130"). Statement 130 establishes standards for the reporting and
display of comprehensive income and its components in a full set of general
purpose financial statements. The Statement was developed in response to
financial statement users' concerns about the increasing number of items that
bypass the income statement, such as changes in value of available-for-sale
securities, and the effort required to analyze them. Because this Statement
addresses how supplemental financial information is disclosed in annual and
interim reports, the adoption will have no material impact on the consolidated
financial statements. Statement 130 will become effective in 1998.
F-10
Community Bank Capital Corporation and Subsidiary
Notes to Consolidated Financial Statements (continued)
2. Investment Scurities
<TABLE>
<CAPTION>
December 31, 1997
- ----------------------------------------------------------------------------------------------------------------------
Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Held-to-Maturity Securities
U. S. Treasury and federal
agencies $39,599,931 $ 197,573 $- $39,797,504
- ----------------------------------------------------------------------------------------------------------------------
Total investment securities
held-to-maturity 39,599,931 197,573 $- 39,797,504
- ----------------------------------------------------------------------------------------------------------------------
Available for Sale Securities
U. S. Treasury and federal
agencies 1,744,812 3,547 1,562 1,746,797
Mortgage-backed securities 85,304 1,916 _ 87,220
- ----------------------------------------------------------------------------------------------------------------------
Total investment securities
available for sale 1,830,116 5,463 1,562 1,834,017
- ----------------------------------------------------------------------------------------------------------------------
Total investment securities $41,430,047 $ 203,036 $ 1,562 $41,631,521
======================================================================================================================
</TABLE>
F-11
2. Investment Securities (continued)
<TABLE>
<CAPTION>
December 31, 1996
- ----------------------------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Held-to-Maturity Securities
U. S. Treasury and federal
agencies $26,413,699 $ 12,759 $ 181,764 $26,244,694
- ----------------------------------------------------------------------------------------------------------------------
Total investment securities
held-to-maturity 26,413,699 12,759 181,764 26,244,694
- ----------------------------------------------------------------------------------------------------------------------
Available for Sale Securities
U. S. Treasury and federal
agencies 30,822,110 157,122 74,619 30,904,613
Mortgage-backed securities 254,833 3,443 -- 258,276
- ----------------------------------------------------------------------------------------------------------------------
Total investment securities
available for sale 31,076,943 160,565 74,619 31,162,889
- ----------------------------------------------------------------------------------------------------------------------
Total investment securities $57,490,642 $ 173,324 $ 256,383 $57,407,583
======================================================================================================================
</TABLE>
F-12
Community Bank Capital Corporation and Subsidiary
Notes to Consolidated Financial Statements (continued)
2. Investment Securities (continued)
The following table sets forth the maturities of investments in debt securities
at December 31, 1997.
<TABLE>
<CAPTION>
Amortized Cost Fair Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Investment securities held to maturity:
Due in one year or less $11,027,415 $11,041,250
Due after one year through five years 23,332,847 23,493,754
Due after five years through ten years 5,239,669 5,262,500
- ----------------------------------------------------------------------------------------------
Total investment securities held-to-maturity $39,599,931 $39,797,504
==============================================================================================
Investment securities available for sale:
Due in one year or less $ 1,744,812 $ 1,746,797
Mortgage-backed securities 85,304 87,220
- ----------------------------------------------------------------------------------------------
Total investment securities available for sale $ 1,830,116 $ 1,834,017
==============================================================================================
</TABLE>
Proceeds from sales of investment securities available for sale during 1997,
1996 and 1995 were $96,216,258, $23,514,004 and $25,649,908, respectively. Gross
gains of $631,672, $229,401 and $268,264 and gross losses of $313, $41,394 and
$132,003 were realized on those sales during 1997, 1996 and 1995, respectively.
Proceeds from sales of investment securities held-to-maturity during 1996 and
1995 were $1,796,626 and $999,837, respectively. There were no such sales in
1997. These sales were related to securities that were within 90 days of
maturity. For the purpose of the statement of cash flows these were included in
proceeds from maturities.
Investment securities with amortized costs of $25,349,184 and $6,065,408 and
estimated fair values of $25,369,909 and $6,031,750 at December 31, 1997 and
1996, respectively, were pledged to secure public funds, other deposits and
short term borrowings as provided by law.
F-13
Community Bank Capital Corporation and Subsidiary
Notes to Consolidated Financial Statements (continued)
3. Loans Receivable
Loans receivable are summarized as follows:
<TABLE>
<CAPTION>
December 31
1997 1996
- ---------------------------------------------------------------------------------
<S> <C> <C>
Real estate mortgage loans, primarily single family
residences $ 12,327,467 $ 12,187,720
Home equity lines and second mortgages 10,025,061 9,433,382
Commercial loans secured by real estate 85,693,869 42,072,124
Real estate construction 58,500,396 56,328,761
Commercial loans 25,891,134 19,192,773
Consumer and other installment 13,251,473 13,025,690
- ---------------------------------------------------------------------------------
205,689,400 152,240,450
- ---------------------------------------------------------------------------------
Less:
Deferred loan fees 172,211 156,359
Unearned income 12,056 17,005
Allowance for loan losses 2,118,096 1,535,985
- ---------------------------------------------------------------------------------
2,302,363 1,709,349
- ---------------------------------------------------------------------------------
$203,387,037 $150,531,101
=================================================================================
</TABLE>
Activity in the allowance for loan losses is summarized as follows:
<TABLE>
<CAPTION>
Year ended December 31
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ 1,535,985 $ 1,252,245 $1,048,454
Provision for loan losses 700,000 350,000 245,000
Charge-offs (122,711) (78,271) (70,166)
Recoveries 4,822 12,011 28,957
- ----------------------------------------------------------------------------------------------------------
Balance at end of year $ 2,118,096 $ 1,535,985 $1,252,245
==========================================================================================================
</TABLE>
F-14
Community Bank Capital Corporation and Subsidiary
Notes to Consolidated Financial Statements (continued)
3. Loans Receivable (continued)
At December 31, 1997, outstanding mortgage loan commitments, exclusive of loans
in process, amounted to approximately $24,746,000. These outstanding loan
commitments consisted of $4,949,200 in variable rate commitments and $19,796,800
in fixed rate commitments with terms of up to 30 years and interest rates
ranging from 5.50% to 9.375%. The majority of these loan commitments are at
rates locked with an outside investor, therefore the Company has no significant
interest rate risk on these commitments. The Company also had commitments to
extend credit for certain commercial and real estate loans totaling $41,725,000
at December 31, 1997. In addition, the Company is committed to loan funds on
unused variable rate consumer lines of credit (the unused portions of home
equity lines of credit) of approximately $11,124,000 at December31,1997. The
Company's policy is to offer these lines where collateral requirements are
residential real estate with aggregate loan-to-value ratios of 90% or less. At
December31,1997, the Company also had unused lines on credit card accounts
totaling $4,407,488 which were primarily unsecured. In addition, standby letters
of credit were $3,665,000 and $2,245,699 at December 31, 1997 and 1996,
respectively.
A substantial portion of the Company's loans are secured by real estate in North
Georgia communities, primarily in Cherokee, Fulton, Gilmer, and Pickens
counties. In addition, a substantial portion of real estate acquired through
foreclosure consists of single-family residential properties and land located in
those same markets. The ultimate collectibility of a substantial portion of the
Company's loan portfolio and the recovery of a substantial portion of the
carrying amount of real estate are susceptible to changes in market conditions
in North Georgia.
F-15
Community Bank Capital Corporation and Subsidiary
Notes to Consolidated Financial Statements (continued)
3. Loans Receivable (continued)
The following is a summary of activity of loans outstanding to officers,
directors and their related interests.
<TABLE>
<CAPTION>
December 31
1997 1996
- --------------------------------------------------------------------------------------
<S> <C> <C>
Balance at beginning of year $ 3,532,204 $ 4,172,418
New loans 5,818,177 2,884,212
Principal repayments (3,341,265) (3,524,426)
- --------------------------------------------------------------------------------------
Balance at end of year $ 6,009,116 $ 3,532,204
======================================================================================
</TABLE>
4. Premises and Equipment
Premises and equipment accounts are summarized as follows:
<TABLE>
<CAPTION>
December 31
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Land $ 3,187,577 $ 2,778,148
Buildings and building improvements 9,041,523 4,224,005
Construction in progress -- 2,916,640
Furniture, fixtures, and equipment 4,349,003 2,920,357
- --------------------------------------------------------------------------------
16,578,103 12,839,150
Less accumulated depreciation 2,827,486 2,027,364
- --------------------------------------------------------------------------------
$13,750,617 $10,811,786
================================================================================
</TABLE>
F-16
Community Bank Capital Corporation and Subsidiary
Notes to Consolidated Financial Statements (continued)
5. Interest-Bearing Deposits
Interest-bearing deposits are summarized as follows:
<TABLE>
<CAPTION>
December 31
1997 1996
- ----------------------------------------------------------------------------------------
Weighted Weighted
Average Average
Amount Rate Amount Rate
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NOW accounts $ 25,816,664 2.67% $ 25,585,534 2.77%
Savings accounts 11,916,348 3.00% 14,901,664 3.25%
Money market
demand accounts 117,642,378 5.51% 37,777,840 4.55%
Time deposits:
3.01%-4.00% -- 11,924
4.01%-5.00% 1,448,887 1,551,590
5.01%-6.00% 97,781,514 95,178,201
6.01%-7.00% 59,111,440 38,255,048
7.01%-8.00% 4,171,069 7,750,195
--------------- -------------
162,512,910 6.00% 142,746,958 5.98%
- --------------------------------------------------------------------------------------
$ 317,888,300 5.44% $221,011,996 5.18%
======================================================================================
</TABLE>
Interest expense on deposit accounts is summarized as follows:
<TABLE>
<CAPTION>
Year ended December 31
1997 1996 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NOW accounts $ 633,832 $ 636,422 $ 480,300
Savings accounts 408,012 455,789 441,676
Money market demand accounts 4,221,707 1,518,448 1,204,292
Time deposits 9,020,049 7,733,778 6,168,045
- ------------------------------------------------------------------------------------------------
$14,283,600 $10,344,437 $8,294,313
================================================================================================
</TABLE>
F-17
Community Bank Capital Corporation and Subsidiary
Notes to Consolidated Financial Statements (continued)
5. Interest-Bearing Deposits (continued)
A summary of time deposits by year of maturity at December 31, 1997 is as
follows:
1998 $ 105,394,962
1999 31,417,132
2000 7,878,824
2001 14,508,591
2002 and after 3,313,401
- -----------------------------------------------
Total time deposits $ 162,512,910
================================================
The Company had approximately $42,753,000 and $33,100,000 in time deposits over
$100,000 at December31, 1997 and 1996, respectively. Interest expense on these
deposits approximated $2,265,985, $1,873,289 and $1,451,000 in 1997, 1996 and
1995, respectively.
6. Short Term Borrowings
The Company had $5,000,000 in borrowings from the Federal Home Loan Bank
outstanding as of December 31, 1996. The average amount outstanding during 1997
was approximately $4,940,876 with a weighted average rate of 5.64%.
The Company had securities sold under agreements to repurchase in the amount of
$1,595,261 and $44,232 as of December 31, 1997 and 1996, respectively. At
December 31, 1997 the securities underlying these agreements were US Treasury
securities with a book value and market value of $2,021,340 and $2,026,750,
respectively. The Company maintains possession of the securities underlying this
type of agreement. The maximum amount of these agreements at any month end
during 1997 was $1,595,262 and the average outstanding for the year ended
December 31, 1997 was $495,045.
7. Long-Term Debt
Long-term debt of $4,100,000 and $4,700,000 at December 31, 1997 and 1996,
respectively, consisted of a term note. A new term note was entered into on July
1, 1996, with amounts payable in thirty consecutive quarterly installments
beginning on September 30, 1996, with the final installment of all principal and
interest then remaining due at maturity on December 31, 2003. Interest is
payable quarterly at the prime rate. At December 31, 1997 and 1996, the interest
rate was 8.50% and 8.25%, respectively.
F-18
Community Bank Capital Corporation and Subsidiary
Notes to Consolidated Financial Statements (continued)
7. Long-Term Debt (continued)
Maturities of long-term debt for the five years subsequent to December 31, 1997
are as follows:
1998 $ 650,000
1999 737,500
2000 762,500
2001 787,500
2002 812,500
Thereafter 350,000
- ------------------------------------------
$4,100,000
==========================================
The debt is collateralized by a first security interest in all of the shares of
the common stock of the Bank.
The most restrictive provisions of the Company's loan agreement include, among
other things, provisions relative to additional borrowings, maintenance of
capital, maintenance of certain financial ratios, and restrictions on stock
issuance and capital expenditures.
8. Income Taxes
The Company's subsidiary qualified in prior years under provisions of the
Internal Revenue Code that permitted it to deduct from taxable income an
allowance for bad debts that differed from the provision for such losses charged
to income. Accordingly, retained income for tax purposes includes approximately
$960,000 for which no provision for federal or state income taxes has been made.
If in the future this portion of retained income is used for any purpose other
than to absorb bad debt losses, including distributions and liquidation, income
taxes may be imposed at the then-applicable rates.
F-19
Community Bank Capital Corporation and Subsidiary
Notes to Consolidated Financial Statements (continued)
8. Income Taxes (continued)
The income tax provision consisted of the following:
<TABLE>
<CAPTION>
Year ended December 31
1997 1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current $2,551,409 $1,289,719 $904,790
Deferred (227,909) (15,719) (26,131)
- ---------------------------------------------------------------------------------------------
$2,323,500 $1,274,000 $878,659
=============================================================================================
</TABLE>
Federal income tax expense approximates income tax expense expected utilizing
the statutory federal income tax rate.
Significant components of the deferred tax liabilities and assets are as
follows:
<TABLE>
<CAPTION>
December 31
1997 1996
- ----------------------------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities:
Tax bad debt reserves over base year $ 325,588 $ 325,588
Purchase accounting adjustment (loan
valuation) 87,063 131,877
Stock dividend on FHLB stock 130,274 130,274
Depreciation and purchase accounting
adjustments on premises and equipment 759,715 740,860
Market value adjustment on investment
securities available for sale 1,365 30,081
Other -- 6,473
- ----------------------------------------------------------------------------
Total deferred tax liabilities 1,304,005 1,365,153
Deferred tax assets:
Allowance for loan losses 779,981 575,209
Deferred loan fees 93,848 84,696
Other purchase accounting adjustments 217,643 177,701
Other, net 3,340 57,552
- ----------------------------------------------------------------------------
Total deferred tax assets 1,094,812 895,158
- ----------------------------------------------------------------------------
Net deferred tax liabilities $ 209,193 $ 469,995
============================================================================
</TABLE>
Taxes paid in 1997, 1996 and 1995 totaled $2,554,000, $1,536,000 and $812,000,
respectively.
F-20
Community Bank Capital Corporation and Subsidiary
Notes to Consolidated Financial Statements (continued)
9. Subsidiary Dividend Restrictions
The OTS capital distribution regulations, which were enacted in August 1990,
restrict the Bank's cash dividend payments and other capital distributions to
the Company. The OTS regulations provide that an institution that has not been
notified by the OTS of the need for more than the normal supervision, such as
the Bank, that exceeds all fully phased-in capital requirements before and after
the proposed capital distribution, could, after prior notice but without the
approval of the OTS, make capital distributions during a calendar year up to the
higher of 100% of its net income to date during the calendar year plus the
amount that would reduce by one-half the excess capital over fully phased-in
capital requirements at the beginning of the calendar year or 75% of its net
income over the most recent four-quarter period. Any additional capital
distributions would also require prior notice to the OTS. The Bank paid and
declared dividends totaling $1,300,000 in 1997.
In order to grant a priority to eligible account holders (as defined in the Plan
of Conversion) in the event of future liquidation, the Bank, at the time of
conversion to a capital stock institution, established a liquidation account in
an amount equal to its net worth as of December 31, 1988, adjusted as described
below. In the event of future liquidation of the Bank, eligible account holders
who continue to maintain their deposit accounts shall be entitled to receive a
distribution from the liquidation account based on their proportionate share of
the then total remaining qualifying deposits. The total amount of the
liquidation account will be decreased as the balances of eligible account
holders are reduced on annual determination dates subsequent to the conversion.
No dividends may be paid to the Company if such dividends reduce the
stockholder's equity of the Bank below the amount required for the liquidation
account.
10. Stock Option Plan
Effective July 16, 1993, the Company adopted a stock option plan for certain
employees and members of the Board of Directors. Under the plan, as amended,
options could be granted for up to 67,100 shares of the Company's common stock.
The number of options granted to any one individual are determined by a
committee of the Board of Directors.
F-21
Community Bank Capital Corporation and Subsidiary
Notes to Consolidated Financial Statements (continued)
10. Stock Option Plan (continued)
The plan provides that the option price shall not be less than the fair market
value of the shares on the date of grant and that no portion of the option may
be exercised beyond five years from that date.
On February 7, 1997, options for the purchase of 3,400 shares were granted to
employees of the Company at a per share price of $33.50. On July 25, 1997,
options for the purchase of 1,500 shares were granted to employees of the
Company at a per share price of $38.60. Options for the purchase of 500 shares
were canceled during 1997. At December 31, 1997 there were a total of 65,400
options outstanding with exercise prices ranging from $11.58 to $38.60. At
December 31, 1996, there were a total of 61,000 options outstanding with
exercise prices ranging from $11.58 to $20. No options were exercised during
1997 or 1996, however 61,000 options were exercisable at December 31, 1997.
Pro forma information regarding net income and earnings per share is required by
FASB Statement No. 123 "Accounting for Stock-Based Compensation", and has been
determined as if the Company had accounted for its stock options under the fair
value method of that Statement. The fair value in these options was estimated at
the date of grant using the "minimum value" method allowed by the Statement. The
model requires the use of numerous assumptions, many of which are highly
subjective in nature. Therefore, the pro forma results are, of a necessity,
estimates of results of operations as if compensation expense had been
recognized for all stock-based compensation plans and are not indicative of the
impact on future periods. Pro forma net income and earnings per share was
$4,188,572 and $6.25 for the year ended December31,1997. The weighted average
fair value of options granted during the year ended December31,1997 was
$46,106. There were no options issued during the year ended December 31, 1996.
The weighted average share price of options outstanding was $16.12 and $14.74 at
December 31, 1997 and 1996, respectively.
F-22
Community Bank Capital Corporation and Subsidiary
Notes to Consolidated Financial Statements (continued)
11. Regulatory Capital
Regulatory capital is the basis by which the OTS determines whether an
institution is insolvent and whether the institution is meeting its regulatory
capital requirements. Regulatory standards impose the following capital
requirements: a risk-based capital standard expressed as a percent of
risk-adjusted assets, a core ratio of core capital to total adjusted assets, and
a tangible capital ratio expressed as a percent of total adjusted assets. As of
its most recent regulatory notification, the Bank was considered well
capitalized under current regulatory guidelines. There are no conditions or
events since that notification that management believes have changed the
institution's category.
12. Fair Value of Financial Instruments
FASB Statement No. 107,"Disclosures about Fair Value of Financial Instruments"
("Statement 107"), requires disclosure of fair value information about financial
instruments, whether or not recognized in the balance sheet, for which it is
practicable to estimate that value. In cases where quoted market prices are not
available, fair values are based on settlements using present value or other
valuation techniques. Those techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, could not be realized
in immediate settlement of the instruments. Statement 107 excludes certain
financial instruments and all non-financial instruments from its disclosure
requirements. Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Company.
The following methods and assumptions were used in estimating the fair value
disclosures for financial instruments:
Cash and Interest-Bearing Deposits in Banks
The carrying amounts reported in the balance sheet for cash and interest-bearing
deposits in banks approximate those assets' fair values.
F-23
Community Bank Capital Corporation and Subsidiary
Notes to Consolidated Financial Statements (continued)
12. Fair Value of Financial Instruments (continued)
Investment Securities
For investment securities held-to-maturity and available for sale, fair values
are based on quoted market prices. If a quoted market price is not available,
fair value is estimated using quoted market prices for similar securities or
dealer quotes. See Note 2 for fair values on investment securities.
Loans
For variable rate loans that reprice frequently and with no significant change
in credit risk, fair values are based on carrying values. The fair values for
residential mortgage loans are based on quoted market prices of similar loans
sold in conjunction with securitization transactions, adjusted for differences
in loan characteristics. The fair values for other loans are estimated using
discounted cash flow analyses, using interest rates currently being offered for
loans with similar terms to borrowers of similar credit quality. Due to the
nature of the loan portfolio, the carrying amounts of loans and accrued interest
approximate their fair values.
Deposits
The fair values disclosed for demand deposits are, by definition, equal to the
amount payable on demand at the reporting date. The carrying amounts for
variable-rate, fixed-term money market deposit accounts, time deposits and
certificates of deposits, fixed-rate time deposits and certificates of deposit
with maturities less than one year approximate their fair values at the
reporting date. Fair values for all other fixed-rate time deposits and
certificates of deposit are estimated using a discounted cash flow calculation
that applies interest rates currently being offered on these deposits to a
schedule of aggregated expected monthly maturities. The carrying amounts for
deposits also approximate their fair values.
Short-Term Borrowings
The carrying amounts reported in the balance sheet for short-term borrowings
approximately those liabilities' fair values.
F-24
Community Bank Capital Corporation and Subsidiary
Notes to Consolidated Financial Statements (continued)
12. Fair Value of Financial Instruments (continued)
Long-Term Debt
The carrying amounts reported in the balance sheet for long-term debt
approximate fair value.
13. SAIF Assessment
A portion of the Bank's deposits are subject to FDIC deposit insurance
assessments for the Savings Association Insurance Fund (SAIF). On September 30,
1996, legislation authorizing the recapitalization of the SAIF became effective.
This legislation required the Bank, and all other depository institutions having
SAIF insured deposits, to pay a one-time assessment. As a result of this
legislation the Bank recorded a pretax charge of $787,134 during the year ended
December 31, 1996.
14. Sale of Office
In December 1997, the Bank completed the sale of its Ellijay office operations
and facilities to another financial institution. The Bank recorded a gain on the
sale of the office of $1,836,000. In conjunction with such sale, the Bank agreed
to transfer loans of $3,201,271 and deposits of $23,582,495 at the conclusion of
a regulatory waiting period. Such waiting period expired and the transfer
occurred on January 30, 1998. The loans and deposits transferred are included in
the accompanying statement of financial condition.
F-25
Community Bank Capital Corporation and Subsidiary
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
March 31
1998 1997
<S> <C> <C>
- -------------------------------------------------------------------------------------
Assets
Cash $9,116,437 $6,658,626
Interest-bearing balances with banks 15,436,070 2,153,961
- -------------------------------------------------------------------------------------
Total cash and cash equivalents 24,552,507 8,812,587
Investment securities held-to-maturity
(estimated fair value
of $40,733,445 and $33,976,260 at March 31, 1998
and 1997, respectively) 40,540,803 34,501,569
Investments securities available for sale 7,823,038 31,478,516
Loans held for sale 39,977,527 28,401,352
Loans receivable, net 213,782,052 162,214,879
Premises and equipment, net 13,475,680 12,470,609
Other assets 8,220,027 7,144,156
- -------------------------------------------------------------------------------------
Total assets $348,371,634 $285,023,668
=====================================================================================
Liabilities and stockholders' equity
Liabilities:
Deposits:
Interest-bearing deposits $290,368,270 $227,954,863
Noninterest-bearing deposits 24,803,058 20,478,769
- -------------------------------------------------------------------------------------
Total deposits 315,171,328 248,433,632
Short-term borrowings 5,507,272 13,644,739
Long-term debt 3,937,500 4,550,000
Other liabilities 2,411,912 2,007,066
- -------------------------------------------------------------------------------------
Total liabilities 327,028,012 268,635,437
Stockholders' equity:
Serial preferred stock, $1 par value per share:
authorized 5,000,000 shares; none issued -- --
Common stock, $1 par value per share:
authorized 5,000,000 shares: issued and outstanding
671,000 shares at March 31, 1998 and 1997,
respectively 671,000 671,000
Additional paid-in-capital 9,472,734 9,472,734
Net unrealized loss on investment securities available
for sale, net of tax of $5,078 and $164,471 at
March 31, 1998 and 1997, respectively (9,431) (305,447)
Retained earnings 11,209,319 6,549,944
- --------------------------------------------------------------------------------------
Total stockholders' equity 21,343,622 16,388,231
- --------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $348,371,634 $285,023,668
======================================================================================
</TABLE>
F-26
Community Bank Capital Corporation and Subsidiary
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31
1998 1997
- --------------------------------------------------------------------------------------
<S> <C> <C>
Interest income:
Loans receivable $6,326,316 $4,908,630
Investment securities held-to-maturity 615,859 272,667
Investment securities available for sale 72,639 690,138
Interest-bearing deposits 322,980 30,080
- --------------------------------------------------------------------------------------
Total interest income 7,337,794 5,901,515
Interest expense:
Deposits 3,612,411 2,752,620
Short-term borrowings 6,912 106,641
Long-term debt 88,736 140,450
- --------------------------------------------------------------------------------------
Total interest expense 3,708,059 2,999,711
- --------------------------------------------------------------------------------------
Net interest income 3,629,735 2,901,804
Provision for loan losses 150,000 100,000
- --------------------------------------------------------------------------------------
Net interest income after provision for loan losses 3,479,735 2,801,804
Noninterest income:
Service charges on deposit accounts 278,951 237,069
Mortgage banking activities 1,133,199 404,538
Net gain on sale of loans - 76,633
Gain on sale of investment securities - 80,184
Other income 3,422 18,542
- --------------------------------------------------------------------------------------
Total noninterest income 1,415,572 816,966
Noninterest expense:
Salaries and employee benefits 1,912,665 1,478,238
Occupancy expense 437,266 424,913
Deposit insurance expense 64,948 31,337
Other operating expenses 731,777 508,642
- --------------------------------------------------------------------------------------
Total noninterest expense 3,146,656 2,443,130
- --------------------------------------------------------------------------------------
Income before income taxes 1,748,651 1,175,640
Income tax expense (including tax effect of securities
gains of $27,263 for the three months
ended March 31, 1997 612,700 415,500
- --------------------------------------------------------------------------------------
Net income $1,135,951 $760,140
======================================================================================
</TABLE>
F-27
<TABLE>
<CAPTION>
Community Bank Capital Corporation and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited)
Three months ended March 31,
1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating activities
Net income $1,135,951 $760,140
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 150,000 100,000
Depreciation and amortization 371,999 286,724
Gain on sale of OREO 8,205 (14,031)
Net (increase) decrease in loans held for sale (7,369,187) 479,669
Changes in operating assets and liabilities:
Increase in other assets (846,753) (463,494)
Increase in other liabilities 523,489 617,115
Other, net 11,973 142,089
- ---------------------------------------------------------------------------------------------------------
Net cash (used in) provided by operating activities (6,014,323) 1,908,212
Investing activities
Purchase of investment securities held-to-maturity (3,000,000) -
Purchase of investment securities available for sale (6,011,620) (14,085,216)
Proceeds from maturities of investment securities held-to-
maturity 2,000,000 -
Proceeds from sale of investment securities available for sale - 4,926,066
Principal collected on investment securities available for sale 6,027 151,941
Net increase in loans receivable (10,545,014) (11,783,778)
Proceeds from sale of real estate acquired through
foreclosure 102,851 165,810
Purchase of premises and equipment (45,302) (131,022)
Net increase in construction in progress - (1,714,214)
Net cash used in investing activities (17,493,058) (22,470,413)
Financing activities
Net (decrease) increase in deposits (34,620,464) 7,457,002
Increase in short-term borrowings 3,912,011 8,600,507
Decrease in long-term debt (162,500) (150,000)
Net cash (used in) provided by financing activities (30,870,953) 15,907,509
Net decrease in cash (54,378,334) (4,654,692)
Cash and cash equivalents at beginning of three month period 78,930,841 13,467,279
Cash and cash equivalents at end of three month period $24,552,507 $8,812,587
F-28
Community Bank Capital Corporation and Subsidiary
Consolidated Statements of Cash Flows (continued)
</TABLE>
<TABLE>
<CAPTION>
Three months ended March 31,
1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Supplemental disclosure of cash flow information
Cash paid during the year for:
Interest $3,587,695 $2,873,182
==========================================================================================================
Supplemental disclosures of noncash transactions
Loans receivable transferred to real estate acquired through
foreclosure $116,070 $179,246
==========================================================================================================
</TABLE>
F-29
Community Bank Capital Corporation and Subsidiary
Notes to Unaudited Consolidated Financial Statements
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and therefore do not include
all information and footnotes necessary for a fair presentation of financial
position, results of operations, and cash flows in conformity with generally
accepted accounting principles. All adjustments consisting of normally occurring
accruals which, in the opinion of management are necessary for a fair
presentation of the financial position and results of operations for the periods
covered by this report have been included.
Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board (FASB) issued statement
of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income". This statement establishes standards for reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. SFAS No. 130 requires all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in an annual financial statement that is displayed in equal prominence
with the other annual financial statements. For interim period financial
statements, enterprises are required to disclose a total for comprehensive
income in those financial statements. The term "comprehensive income" is used in
SFAS No. l30 to describe the total of all components of comprehensive income
including net income. "Other comprehensive income" refers to revenues, expenses,
gains, and losses that are included in comprehensive income but excluded from
earnings under current accounting standards. Currently, "other comprehensive
income" for CBCC consists solely of items previously recorded as a component of
shareholders' equity under SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". CBCC has adopted the interim-period disclosure
requirements of SFAS No. 130 effective March 31, 1998 and will adopt the annual
financial statement reporting and disclosure requirements of SFAS No. 130
effective December 31, 1998.
Total comprehensive income for the three months ended March 31, 1998 was
$1,123,984 compared to $398,828 for the three months ended March 31, 1997.
F-30
APPENDIX A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of the 5th day of June, 1998
(the "Plan" or the "Agreement"), by and among Synovus Financial Corp.
("Synovus") and Community Bank Capital Corporation ("CBCC").
RECITALS:
A. Synovus. Synovus has been duly incorporated and is an existing
corporation in good standing under the laws of Georgia, with its principal
executive offices located in Columbus, Georgia. As of the date hereof, Synovus
has 600,000,000 authorized shares of common stock, par value $1.00 per share
("Synovus Common Stock"), of which 263,080,194 shares are outstanding on the
date hereof. All of the issued and outstanding shares of Synovus Common Stock
are duly and validly issued and outstanding and are fully paid and nonassessable
and not subject to any preemptive rights. Synovus has 34 wholly-owned banking
subsidiaries (as defined in Rule 1-02 of Regulation S-X promulgated by the
Securities and Exchange Commission, a "Subsidiary") and other non-banking
Subsidiaries as of the date hereof.
B. CBCC. CBCC has been duly incorporated and is an existing corporation
in good standing under the laws of Georgia, with its principal executive offices
located in Alpharetta, Georgia. As of the date hereof, CBCC has 5,000,000
authorized shares of common stock, par value $1.00 per share ("CBCC Common
Stock"), of which 671,000 shares are outstanding on the date hereof. All of the
issued and outstanding shares of CBCC Common Stock are duly and validly issued
and outstanding and are fully paid and nonassessable and subject to preemptive
rights. CBCC has one wholly-owned banking Subsidiary, Bank of North Georgia.
C. Board Approvals. The Boards of Directors of Synovus and CBCC have
duly approved the Plan and have duly authorized its execution.
D. Materiality. Unless the context otherwise requires, any reference in
this Agreement to materiality with respect to any party shall be deemed to be
with respect to such party and its Subsidiaries, or in the case of CBCC, its
Subsidiary, in each case taken as a whole.
In consideration of their mutual promises and obligations hereunder,
and intending to be legally bound hereby, Synovus and CBCC hereto adopt and make
the Plan and prescribe the terms and conditions hereof and the manner and basis
of carrying it into effect, which shall be as follows:
I. THE MERGER
(A) Structure of the Merger. On the Effective Date (as defined in
Article VII), CBCC will merge (the "Merger") with and into Synovus, with Synovus
being the surviving
corporation (the "Surviving Corporation") under the name Synovus Financial Corp.
pursuant to the Georgia Business Corporation Code ("Georgia Act"). On the
Effective Date, the Articles of Incorporation and by-laws of Synovus (as the
Surviving Corporation) shall be the Articles of Incorporation and by-laws of
Synovus in effect immediately prior to the Effective Date.
(B) Effect on Outstanding Shares. By virtue of the Merger,
automatically and without any action on the part of the holder thereof, each
share of CBCC Common Stock issued and outstanding on the Effective Date (other
than shares as to which dissenters' appraisal rights have been validly exercised
and perfected and for which cash is payable pursuant to the Georgia Act
("Dissenters' Shares")) shall become and be converted into 5.43489 shares of
Synovus Common Stock ("Per Share Exchange Ratio"). As of the Effective Date,
each share of CBCC Common Stock held as treasury stock of CBCC shall be
canceled, retired and cease to exist, and no payment shall be made in respect
thereof.
No fractional shares of Synovus Common Stock shall be issued in
connection with the Merger, but rather cash shall be paid in lieu thereof
(without interest), with the amount of cash to be paid in lieu of fractional
shares to be determined based upon the closing price per share of Synovus Common
Stock on the New York Stock Exchange ("NYSE") on the fifth business day
immediately preceding the Effective Date of the Merger.
Each shareholder of CBCC Common Stock will be entitled to ten votes for
each share of Synovus Common Stock to be received by him on the Effective Date
pursuant to a set of resolutions adopted by the Board of Directors of Synovus on
June 5, 1998 in accordance with and subject to those certain Articles of
Amendment to Synovus' Articles of Incorporation, dated April 24, 1986. Synovus
shall provide CBCC with certified copies of such Resolutions.
Upon and after the Effective Date, each issued and outstanding share of
Synovus Common Stock shall remain unchanged and shall continue to evidence the
same number of shares of Synovus Common Stock.
Dissenters' Shares shall be purchased and paid for in accordance with
the applicable provisions of Section 14-2-1301, et seq. of the Georgia Act.
In the event that, subsequent to the date of this Plan but prior to the
Effective Date, the outstanding shares of Synovus Common Stock shall have been
increased, decreased, changed into or exchanged for a different number or kind
of shares or securities through reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split, or other
like changes in Synovus' capitalization, then an appropriate and proportionate
adjustment shall be made to the Per Share Exchange Ratio.
(C) Procedures. Certificates which represent shares of CBCC Common
Stock that are outstanding on the Effective Date (each, a "Certificate") and are
converted into shares of Synovus Common Stock pursuant to the Plan shall, after
the Effective Date, be deemed to represent shares of the Synovus Common Stock
into which such shares have become converted and shall be exchangeable by the
holders thereof in the manner provided in the
2
transmittal materials described below for new certificates representing the
shares of Synovus Common Stock into which such shares have been converted.
As promptly as practicable after the Effective Date, Synovus shall send
to each holder of record of shares of CBCC Common Stock outstanding on the
Effective Date transmittal materials for use in exchanging the Certificates for
such shares for certificates for shares of the Synovus Common Stock into which
such shares of the CBCC Common Stock have been converted pursuant to the Plan.
Upon surrender of a Certificate, together with a duly executed stock power and
any other required documents, the holder of such Certificate shall be entitled
to receive in exchange therefor a certificate for the number of shares of
Synovus Common Stock to which such holder is entitled, and such Certificate
shall forthwith be canceled. No dividend or other distribution payable after the
Effective Date with respect to the Synovus Common Stock shall be paid to the
holder of any unsurrendered Certificate until the holder thereof surrenders such
Certificate, at which time such holder shall receive all dividends and
distributions, without interest thereon, previously withheld from such holder
pursuant hereto. After the Effective Date, there shall be no transfers on the
stock transfer books of CBCC of shares of CBCC Common Stock which were issued
and outstanding on the Effective Date and converted pursuant to the provisions
of the Plan. If, after the Effective Date, Certificates are presented for
transfer to CBCC, they shall be canceled and exchanged for the shares of Synovus
Common Stock deliverable in respect thereof as determined in accordance with the
provisions of Paragraph (B) of Article I and in accordance with the procedures
set forth in this Paragraph C.
After the Effective Date, holders of CBCC Common Stock shall cease to
be, and shall have no rights as, stockholders of CBCC, other than to receive
shares of Synovus Common Stock into which such shares have been converted or
fractional share payments pursuant to the Plan.
Notwithstanding the foregoing, neither Synovus nor CBCC nor any other
person shall be liable to any former holder of shares of CBCC Common Stock for
any amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(D) Options. On the Effective Date, each option granted by CBCC to
purchase shares of CBCC Common Stock, which is outstanding and unexercised
immediately prior thereto, shall be converted automatically without tax to the
holder of the option into an option to purchase shares of Synovus Common Stock
in an amount and at an exercise price determined as provided below (and
otherwise having the same duration and other terms as the original option):
(1) The number of shares of Synovus Common Stock to be subject
to the new option shall be equal to the product of the number of shares of CBCC
Common Stock subject to the original option multiplied by the Per Share Exchange
Ratio provided that any fractional shares of Synovus Common Stock resulting from
such multiplication shall be rounded to the nearest whole share; and
3
(2) The exercise price per share of Synovus Common Stock under
the new option shall be equal to the exercise price per share of CBCC Common
Stock under the original option divided by the Per Share Exchange Ratio provided
that such exercise price shall be rounded up to the nearest cent.
The adjustment provided herein with respect to any options which are
"incentive stock options" (as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code")), shall be and is intended to be effected
in a manner which is consistent with Section 424(a) of the Code.
Within thirty (30) days after the Effective Date, Synovus shall notify
each holder of an option to purchase CBCC Common Stock of the assumption of such
options by Synovus and the revisions to the options shall be effected thereby.
No payment shall be made for fractional interests.
II. ACTIONS PENDING MERGER
(A) CBCC and its Subsidiary shall conduct their banking business only
in the ordinary course and shall not, without the prior written consent of
Synovus, which consent will not be unreasonably withheld: (1) issue any options
to purchase capital stock or issue any shares of capital stock, other than
shares of CBCC Common Stock issued in connection with the exercise of currently
outstanding options to purchase shares of CBCC Common Stock; (2) declare, set
aside, or pay any dividend or distribution with respect to the capital stock of
CBCC, (3) directly or indirectly redeem, purchase or otherwise acquire any
capital stock of CBCC or its Subsidiary; (4) effect a split or reclassification
of CBCC or its Subsidiary's capital stock or a recapitalization of CBCC or its
Subsidiary; (5) amend the Articles of Incorporation or bylaws of CBCC or its
Subsidiary; (6) grant any increase in the compensation payable or to become
payable by CBCC or its Subsidiary to any employee other than normal, annual
compensation increases that are desired to be made with regard to CBCC or its
Subsidiary's employees or are required by law or as described in the disclosure
letter; (7) make any change in any bonus, group insurance, pension, profit
sharing, deferred compensation, or other benefit plan, payment or arrangement
made to, for or with respect to any employees or directors of CBCC or its
Subsidiary, except to the extent such changes are required by applicable laws or
regulations or result from a third party's exercise of its rights to terminate
an insurance contract providing benefits under such benefit plan, payment or
arrangement; (8) enter into, terminate, modify or amend any contract, lease or
other agreement with any officer or director of CBCC or its Subsidiary or any
"associate" of any such officer or director, as such term is defined in
Regulation 14A under the Securities Exchange Act of 1934, as amended ("Exchange
Act"), other than in the ordinary course of their banking business; (9) incur or
assume any liabilities, other than in the ordinary course of their banking
business; (10) dispose of any of their assets or properties, other than in the
ordinary course of their banking business; (11) solicit, encourage or authorize
any individual, corporation or other entity, including its directors, officers
and other employees, to solicit from any third party any inquiries or proposals
relating to the disposition of its business or assets, or the acquisition of its
voting securities, or the merger of it or its Subsidiary with any corporation or
other entity other than as provided by this Agreement, or subject to the
fiduciary obligations of its Board of Directors, provide any individual,
corporation or other entity with information or assistance or
4
negotiate with any individual, corporation or other entity in furtherance of
such inquiries or to obtain such a proposal (and CBCC shall promptly notify
Synovus of all of the relevant details relating to all inquiries and proposals
which it may receive relating to any of such matters); (12) take any other
action or permit its Subsidiary to take any action not in the ordinary course of
business of it and its Subsidiary; or (13) directly or indirectly agree to take
any of the foregoing actions.
(B) Without the prior written consent of CBCC, which consent will not
be unreasonably withheld, Synovus will not declare, set aside or pay any cash
dividend on its Common Stock other than normal and customary quarterly cash
dividends in accordance with Synovus' current dividend policy or take any action
that would: (1) delay or adversely affect the ability of Synovus to obtain any
necessary approvals of regulatory authorities required for the transactions
contemplated hereby; or (2) adversely affect its ability to perform its
covenants and agreements on a timely basis under this Plan.
III. REPRESENTATIONS AND WARRANTIES
Synovus hereby represents and warrants to CBCC, and CBCC represents and
warrants to Synovus, that, except as previously disclosed in a letter of Synovus
or CBCC, respectively, of even date herewith delivered to the other party (all
references to Subsidiaries below shall, in the case of CBCC, be deemed to be
Subsidiary):
(A) the representations set forth in Recitals A through C of the Plan
with respect to it are true and correct;
(B) the outstanding shares of capital stock of it and its Subsidiaries
are duly authorized, validly issued and outstanding, fully paid and (subject to
12 U.S.C. ss.55 in the case of a national bank subsidiary) non-assessable, and
(in the case of Synovus) subject to no preemptive rights;
(C) each of it and its Subsidiaries has the power and authority, and is
duly qualified in all jurisdictions (except for such qualifications the absence
of which will not as a whole have a Material Adverse Effect, as hereinafter
defined) where such qualification is required, to carry on its business as it is
now being conducted and to own all its material properties and assets, and it
has all federal, state, local, and foreign governmental authorizations necessary
for it to own or lease its properties and assets and to carry on its business as
it is now being conducted, except for such powers and authorizations the absence
of which, either individually or in the aggregate, would not have a Material
Adverse Effect;
(D) the shares of capital stock of each of its Subsidiaries are owned
by it (except for director's qualifying shares) free and clear of all liens,
claims, encumbrances and restrictions on transfer;
(E) subject, in the case of CBCC, to the receipt of any required
shareholder approval of this Plan, the Plan has been authorized by all necessary
corporate action of it and, subject to receipt of such approvals of shareholders
and required regulatory approvals, is a valid and binding agreement of it
enforceable against it in accordance with its terms,
5
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles;
(F) the execution, delivery and performance of the Plan by it does not,
and the consummation of the transactions contemplated hereby by it will not,
constitute: (1) a breach or violation of, or a default under, any law, rule or
regulation or any judgment, decree, order, governmental permit or license, or
agreement, indenture or instrument of it or its Subsidiaries or to which it or
its Subsidiaries (or any of their respective properties) is subject which
breach, violation or default would have a material adverse effect on the
financial condition, results of operations or business of it and its
subsidiaries, taken as a whole (a "Material Adverse Effect"), or enable any
person to enjoin any of the transactions contemplated hereby; or (2) a breach or
violation of, or a default under, the certificate or articles of incorporation
or by-laws of it or any of its Subsidiaries; and the consummation of the
transactions contemplated hereby will not require any consent or approval under
any such law, rule, regulation, judgment, decree, order, governmental permit or
license or the consent or approval of any other party to any such agreement,
indenture or instrument, other than the required approvals of applicable
regulatory authorities and the approval of the shareholders of CBCC, both of
which are referred to in Paragraph (A) of Article V and any consents and
approvals the absence of which will not have a Material Adverse Effect;
(G) in the case of Synovus, its Annual Report on Form 10-K for the
fiscal year ended December 31, 1997, nor any other document filed subsequent to
December 31, 1997 under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act,
each in the form filed with the Securities and Exchange Commission ("SEC")
(collectively, its "Reports"), 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, in light of the circumstances under which
they were made, not misleading. Each of the balance sheets in or incorporated by
reference into Synovus' Reports (including the related notes and schedules)
fairly presents the financial position of the entity or entities to which it
relates as of its date and each of the statements of operations and retained
earnings and of cash flows and changes in financial position or equivalent
statements in or incorporated by reference into Synovus' Reports (including any
related notes and schedules) fairly presents the results of operations, retained
earnings and cash flows and changes in financial position, as the case may be,
of the entity or entities to which it relates for the periods set forth therein
(subject, in the case of unaudited interim statements, to normal year-end audit
adjustments that are not material in amount or effect), in each case in
accordance with generally accepted accounting principles applicable to bank
holding companies consistently applied during the periods involved, except as
may be noted therein. Synovus has no material obligations or liabilities
(contingent or otherwise) except as disclosed in the Reports. For purposes of
this Paragraph, material shall have the meaning as defined under the Securities
Act of 1933, as amended ("Securities Act"), the Exchange Act and the rules
promulgated thereunder;
(H) it has no material liabilities and obligations secured or
unsecured, whether accrued, absolute, contingent or otherwise, known or unknown,
due or to become due, including, but not limited to tax liabilities, that should
have been but are not reflected in or
6
reserved against in its audited financial statements as of December 31, 1997 or
in its unaudited financial statements as of March 31, 1998 or disclosed in the
notes thereto;
(I) there has not been the occurrence of one or more events,
conditions, actions or states of facts which have caused a Material Adverse
Effect with respect to it since December 31, 1997;
(J) all material federal, state, local, and foreign tax returns
required to be filed by or on behalf of it or any of its Subsidiaries have been
timely filed or requests for extensions have been timely filed and any such
extension shall have been granted and not have expired; and to the best of its
knowledge, all such returns filed are complete and accurate in all material
respects. All taxes shown on returns filed by it have been paid in full or
adequate provision has been made for any such taxes on its balance sheet (in
accordance with generally accepted accounting principles). As of the date of the
Plan, there is no audit examination, deficiency, or refund litigation with
respect to any taxes of it that would result in a determination that would have
a Material Adverse Effect. All taxes, interest, additions, and penalties due
with respect to completed and settled examinations or concluded litigation
relating to it have been paid in full or adequate provision has been made for
any such taxes on its balance sheet (in accordance with generally accepted
accounting principles). It has not executed an extension or waiver of any
statute of limitations on the assessment or collection of any material tax due
that is currently in effect;
(K)(1) no litigation, proceeding or controversy before any court or
governmental agency is pending, and there is no pending claim, action or
proceeding against it or any of its Subsidiaries, which in the reasonable
judgment of its Chief Executive Officer is likely to have a Material Adverse
Effect or to prevent consummation of the transactions contemplated hereby, and,
to the best of its knowledge, no such litigation, proceeding, controversy, claim
or action has been threatened or is contemplated; and (2) neither it nor any of
its Subsidiaries is subject to any agreement, memorandum of understanding,
commitment letter, board resolution or similar arrangement with, or transmitted
to, any regulatory authority materially restricting its operations as conducted
on the date hereof or requiring that certain actions be taken which could
reasonably be expected to have a Material Adverse Effect;
(L) neither it nor its Subsidiaries are in default in any material
respect under any material contract (as defined in Item 601(b)(10)(i) and (ii)
of Regulation S-K) and there has not occurred any event that, with the lapse of
time or the giving of notice or both, would constitute such a default;
(M) all "employee benefit plans," as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), that
cover any of its or its Subsidiaries' employees, comply in all material respects
with all applicable requirements of ERISA, the Code and other applicable laws;
neither it nor any of its Subsidiaries has engaged in a "prohibited transaction"
(as defined in Section 406 of ERISA or Section 4975 of the Code) with respect to
any such plan which is likely to result in any material penalties or taxes under
Section 502(i) of ERISA or Section 4975 of the Code; no material liability to
the Pension Benefit Guaranty Corporation has been or is expected by it or them
to be
7
incurred with respect to any such plan which is subject to Title IV of ERISA
("Pension Plan"), or with respect to any "single-employer plan" (as defined in
Section 4001(a)(15) of ERISA) currently or formerly maintained by it, them or
any entity which is considered one employer with it under Section 4001 of ERISA
or Section 414 of the Code; no Pension Plan had an "accumulated funding
deficiency" (as defined in Section 302 of ERISA (whether or not waived) as of
the last day of the end of the most recent plan year ending prior to the date
hereof; the fair market value of the assets of each Pension Plan exceeds the
present value of the "benefit liabilities" (as defined in Section 4001(a)(16) of
ERISA) under such Pension Plan as of the end of the most recent plan year with
respect to the respective Plan ending prior to the date hereof, calculated on
the basis of the actuarial assumptions used in the most recent actuarial
valuation for such Pension Plan as of the date hereof; no notice of a
"reportable event" (as defined in Section 4043 of ERISA) for which the 30-day
reporting requirement has not been waived has been required to be filed for any
Pension Plan within the 12-month period ending on the date hereof; it and its
Subsidiaries have not contributed to a "multi-employer plan", as defined in
Section 3(37) of ERISA; and it and its Subsidiaries do not have any obligations
for retiree health and life benefits under any benefit plan, contract or
arrangement, except as required by Section 4980B of the Code and Part 6 of
Subtitle B of Title I of ERISA;
(N) each of it and its Subsidiaries has good and marketable title to
its properties and assets, tangible or intangible (other than property as to
which it is lessee) that are material to its business except for such defects in
title which would not, in the aggregate, have a Material Adverse Effect;
(O) it knows of no reason why the regulatory approvals referred to in
Paragraphs (A)(2) and (A)(3) of Article V should not be obtained without the
imposition of any condition of the type referred to in the proviso following
such Paragraphs (A)(2) and (A)(3) or why the accountants' letter referred to in
Paragraph (A)(8) of Article V cannot be obtained;
(P) it and each of its Subsidiaries has all material permits, licenses,
certificates of authority, orders, and approvals of, and has made all filings,
applications, and registrations with, federal, state, local, and foreign
governmental or regulatory bodies that are required in order to permit it to
carry on its business as it is presently conducted and the absence of which
would have a Material Adverse Effect; all such permits, licenses, certificates
of authority, orders, and approvals are in full force and effect, and to the
best knowledge of it no suspension or cancellation of any of them is threatened;
(Q) in the case of Synovus, the shares of capital stock to be issued
pursuant to the Plan, when issued in accordance with the terms of the Plan, will
be duly authorized, validly issued, fully paid and nonassessable and subject to
no preemptive rights;
(R) neither it nor any of its Subsidiaries is a party to, or is bound
by, any collective bargaining agreement, contract, or other agreement or
understanding with a labor union or labor organization, nor is it or any of its
Subsidiaries the subject of a proceeding asserting that it or any such
Subsidiary has committed an unfair labor practice or seeking to compel it or
such Subsidiary to bargain with any labor organization as to wages and
8
conditions of employment, nor is there any strike or other labor dispute
involving it or any of its Subsidiaries pending or threatened;
(S) other than services performed by Brown, Burke Capital Partners,
Inc., which has been retained by CBCC and the arrangements with which, including
fees, have been disclosed to Synovus prior to the date hereof, neither it nor
any of its Subsidiaries, nor any of their respective officers, directors, or
employees, has employed any broker or finder or incurred any liability for any
financial advisory fees, brokerage fees, commissions, or finder's fees, and no
broker or finder has acted directly or indirectly for it or any of its
Subsidiaries, in connection with the Plan or the transactions contemplated
hereby;
(T) the information to be supplied by it for inclusion in: (1) the
Registration Statement on Form S-4 and/or such other form(s) as may be
appropriate to be filed under the Securities Act with the SEC by Synovus for the
purpose of, among other things, registering the issuance of the Synovus Common
Stock to be issued to the shareholders of CBCC in the Merger (the "Registration
Statement"); or (2) the proxy statement to be distributed in connection with
CBCC's meeting of its shareholders to vote upon this Plan (as amended or
supplemented from time to time, the "Proxy Statement", and together with the
prospectus included in the Registration Statement, as amended or supplemented
from time to time, the "Proxy Statement/Prospectus") will not at the time such
Registration Statement becomes effective, and in the case of the Proxy
Statement/Prospectus at the time it is mailed and at the time of the meeting of
stockholders contemplated under this Plan, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading;
(U) for purposes of this section, the following terms shall have the
indicated meaning:
"Environmental Law" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any governmental
entity relating to: (1) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource); and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Hazardous Substances. The term
Environmental Law includes without limitation: (1) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
ss. 9601, et seq; the Resource Conservation and Recovery Act, as amended, 42
U.S.C. ss. 6901, et seq; the Clean Air Act, as amended, 42 U.S.C. ss. 7401, et
seq; the Federal Water Pollution Control Act, as amended, 33 U.S.C. ss. 1251, et
seq; the Toxic Substances Control Act, as amended, 15 U.S.C. ss. 9601, et seq;
the Emergency Planning and Community Right to Know Act, 42 U.S.C. ss. 11001, et
seq; the Safe Drinking Water Act, 42 U.S.C. ss. 300f, et seq; all accompanying
federal regulations and all comparable state and local laws; and (2) any common
law (including without limitation common law that may impose strict liability)
that may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any Hazardous
Substance.
9
"Hazardous Substance" means any substance or waste presently listed,
defined, designated or classified as hazardous, toxic, radioactive or dangerous,
or otherwise regulated, under any Environmental Law, whether by type or by
quantity, including any material containing any such substance as a component.
Hazardous Substances include without limitation petroleum or any derivative or
by-product thereof, asbestos, radioactive material, and polychlorinated
biphenyls.
"Loan Portfolio Properties and Other Properties Owned" means those
properties owned or operated by Synovus or CBCC, as applicable, or any of their
respective Subsidiaries.
(1) there are no actions, suits, demands, notices, claims,
investigations or proceedings pending or, to its actual knowledge, threatened
against it and its Subsidiaries relating to the Loan Portfolio Properties and
Other Properties Owned by it or its Subsidiaries under any Environmental Law,
including without limitation any notices, demand letters or requests for
information from any federal or state environmental agency relating to any such
liabilities under or violations of Environmental Law, nor, in the actual
knowledge of it and its Subsidiaries, are there any circumstances which could
lead to such actions, suits, demands, notices, claims, investigations or
proceedings, except such which will not have, or result in, a Material Adverse
Effect; and
(2) CBCC will, within 30 days after the date hereof, engage a firm
satisfactory to Synovus to conduct: (a) a phase one environmental assessment of
the banking facilities currently owned by CBCC upon which CBCC is conducting a
banking business, which assessment shall meet the standards of ASTM E1527-97 and
shall include at a minimum a site history, on-site inspection, asbestos report,
evaluation of surrounding properties and soil tests in the event any underground
storage tanks are discovered; and (b) a transaction screen that meets the
standards of ASTM E 1528 for the two properties that CBCC leases, which are
known as "John's Creek and "Dogwood," and in addition, CBCC agrees to conduct a
phase I assessment of the leased properties if, in Synovus' reasonable judgment,
the transaction screen indicates potential environmental liabilities associated
with the leased properties. Synovus has requested such inspection and testing in
an effort to reasonably determine whether potential liabilities exist relating
to Environmental Law. Delivery of the phase one assessments and transaction
screens satisfactory to Synovus is an express condition precedent to the
consummation of the Merger. Within 15 days after receipt of these reports,
Synovus shall notify CBCC in writing whether or not, in the reasonable judgment
of Synovus, the results of such reports will have a Material Adverse Effect on
CBCC. In the event that Synovus determines, in its reasonable judgment, that the
results of such reports will have a Material Adverse Effect on CBCC, such
written notification shall include a statement by Synovus regarding whether or
not it intends to terminate this Agreement based upon the results of such
reports. The Parties agree that Synovus has given CBCC good and valuable
consideration for its agreement to obtain and pay the cost of such inspection
and testing, and Synovus shall be entitled to rely on same;
(V) in the case of Synovus, its reserve for possible loan losses as
shown in its audited financial statements as of December 31, 1997 was, and its
reserve for possible loan losses as shown in its Quarterly Reports on Form 10-Q
filed prior to the Effective Date
10
will be, adequate in all material respects under generally accepted accounting
principles applicable to banks and bank holding companies and, in the case of
CBCC, its reserve for possible loan losses as shown in its audited financial
statements as of December 31, 1997 was, and its reserve for possible loan losses
as shown in its unaudited quarterly financial statements prepared for all
quarters ending prior to the Effective Date will be, adequate in all material
respects under generally accepted accounting principles applicable to banks and
bank holding companies;
(W) in the case of CBCC, other than options to purchase 65,400 (or
fewer) shares of CBCC Common Stock pursuant to the Community Bank Capital
Corporation 1993 Stock Option Plan, there are no outstanding options,
agreements, contracts, calls or commitments which would require the issuance by
CBCC of any shares of CBCC Common Stock or securities convertible into such
Common Stock; and
(X) it has adopted and is in the process of implementing policies and
procedures to ensure that it will be in compliance with the Federal Financial
Institution Examination Counsel's May 5, 1997 Interagency Statement on Year 2000
Project Management Awareness and subsequent regulatory directives with respect
to Year 2000 issues.
IV. COVENANTS
Synovus hereby covenants to CBCC, and CBCC hereby covenants to Synovus,
that:
(A) it shall take or cause to be taken all action necessary or
desirable under the Plan on its part as promptly as practicable, including, in
the case of Synovus, the filing of all necessary applications and the
Registration Statement, so as to permit the consummation of the transactions
contemplated by the Plan at the earliest possible date and cooperate fully with
the other party hereto to that end;
(B) in the case of CBCC, it shall: (1) take all steps necessary to duly
call, give notice of, convene and hold a meeting of its shareholders for the
purpose of approving, upon the recommendation of its Board of Directors, the
Plan as soon as is reasonably practicable; (2) distribute to its shareholders
the Proxy Statement/Prospectus in accordance with applicable federal and state
law and with its articles of incorporation and by-laws; (3) recommend to its
shareholders that they approve the Plan (unless such recommendation would
constitute a breach of its board of directors' fiduciary duties as determined in
good faith after consultation with counsel); and (4) cooperate and consult with
Synovus with respect to each of the foregoing matters;
(C) it will cooperate in the preparation and filing of the Proxy
Statement/Prospectus and Registration Statement in order to consummate the
transactions contemplated by the Plan as soon as is reasonably practicable;
(D) Synovus will advise CBCC, promptly after Synovus receives notice
thereof, of the time when the Registration Statement has become effective or any
supplement or amendment has been filed, of the issuance of any stop order or the
suspension of the qualification of the shares of Synovus Common Stock issuable
pursuant to the Plan for
11
offering or sale in any jurisdiction, of the initiation or threat of any
proceeding for any such purpose or of any request by the SEC for the amendment
or supplement of the Registration Statement or for additional information;
(E) in the case of Synovus, it shall take all actions to obtain, prior
to the effective date of the Registration Statement, all applicable state
securities law or "Blue Sky" permits, approvals, qualifications or exemptions
for the Synovus shares to be issued pursuant to this Plan;
(F) subject to its disclosure obligations imposed by law, unless
reviewed and agreed to by the other party hereto in advance, it will not issue
any press release or written statement for general circulation relating to the
transactions contemplated hereby; provided, however, that nothing in this
Paragraph (F) shall be deemed to prohibit either party from making any
disclosure which its counsel deems necessary or advisable in order to satisfy
such party's disclosure obligations imposed by law;
(G) from and subsequent to the date hereof, it will: (1) give to the
other party hereto and its respective counsel and accountants full access to its
premises and books and records during normal business hours for any reasonable
purpose related to the transactions contemplated hereby; and (2) cooperate and
instruct its respective counsel and accountants to cooperate with the other
party hereto and with its respective counsel and accountants with regard to the
formulation and production of all necessary information, disclosures, financial
statements, registration statements and regulatory filings with respect to the
transactions encompassed by the Plan. Any nonpublic information regarding either
party shall be held strictly confidential and used solely for the purposes of
the transactions contemplated herein. In the event of termination, each party
shall return all nonpublic information regarding the other party to such other
party;
(H) it shall notify the other party hereto as promptly as practicable
of: (1) any breach of any of its representations, warranties or agreements
contained herein; (2) any occurrence or impending occurrence, of any event or
circumstance which would cause or constitute a material breach of any of the
representations, warranties or agreements of it contained herein; (3) any
material adverse change in its financial condition, results of operations or
business; and (4) it shall use its best efforts to prevent or remedy the same;
(I) it shall cooperate and use its best efforts to promptly prepare and
file all necessary documentation to effect all necessary applications, notices,
petitions, filings and other documents, and to obtain all necessary permits,
consents, approvals and authorizations of all third parties and governmental
bodies or agencies, including, in the case of Synovus, submission of
applications for approval of the Plan and the transactions contemplated hereby
to the Board of Governors of the Federal Reserve System (the "Board of
Governors") in accordance with the provisions of the Bank Holding Company Act of
1956, as amended (the "BHC Act"), the Georgia Department of Banking and Finance
("Georgia Department") and to such other regulatory agencies as required by law;
12
(J) it will use its best efforts to cause the Merger to qualify for
pooling-of-interests accounting treatment and, in the case of CBCC, it will not
cash out any of the options granted pursuant to the Community Bank Capital
Corporation 1993 Stock Option Plan;
(K) in the case of Synovus, it shall cause the shares of Synovus Common
Stock to be issued pursuant to the terms of this Plan to be approved for listing
on the NYSE, and each such share shall be entitled to ten votes per share in
accordance with and subject to those certain Articles of Amendment to Synovus'
Articles of Incorporation dated April 24, 1986;
(L) in the case of Synovus, following the Effective Date, it shall
provide generally to officers and employees of CBCC and its Subsidiary employee
benefits, including without limitation pension benefits, health and welfare
benefits, life insurance and vacation and severance arrangements ("Employee
Benefits") on terms and conditions which, when taken as a whole, are
substantially similar to those currently provided by CBCC and its Subsidiary. As
soon as administratively and financially practicable following the Effective
Date, Synovus shall provide generally to officers and employees of CBCC and its
Subsidiary Employee Benefits which, when taken as a whole, are substantially
similar to those provided from time to time by Synovus and its Subsidiaries to
their similarly situated officers and employees. With respect to Employee
Benefits maintained by Synovus in which CBCC and its Subsidiary participate
after the Effective Date, Synovus agrees: (1) to treat service by CBCC employees
prior to the Effective Date as service with Synovus for eligibility, vesting,
and with the exception of the Synovus Financial Corp./Total System Services,
Inc. Money Purchase Pension Plan, Profit Sharing Plan and 401(K) Savings Plan,
benefit accrual purposes; and (2) to waive pre-existing condition limitations
and waiting periods, if any, as would otherwise be applied to participating
employees of CBCC upon the implementation of such Employee Benefits constituting
"group health plans" within the meaning of Section 5000(b)(i) of the Code;
(M) in the case of CBCC, it will use its best efforts to deliver to
Synovus on or prior to the date of this Agreement audited consolidated financial
statements of CBCC and its Subsidiary as of, and for the year ended, December
31, 1997;
(N) in the case of CBCC, it shall use its best efforts to cause each
director, executive officer and other person who is an "affiliate" (for purposes
of Rule 145 under the Securities Act and for purposes of qualifying for
"pooling-of interests" treatment as described below) to deliver to Synovus as
soon as practicable after the date hereof, but in no event after the date of the
CBCC shareholders meeting called to approve the Merger, a written agreement
providing that such person will not sell, or in any other way reduce his or her
risk relative to any shares of CBCC Common Stock held by such "affiliate" and
the shares of Synovus Common Stock to be received by such "affiliate" in the
Merger: (1) in the case of shares of Synovus Common Stock only, except in
compliance with the applicable provisions of the Securities Act and the rules
and regulations thereunder; and (2) during the periods during which any such
sale, pledge, transfer or other disposition would, under generally accepted
accounting principles or the rules, regulations or interpretations of the SEC,
disqualify the Merger for "pooling-of-interests" accounting treatment, except as
permitted by Staff Accounting Bulletin No. 76 issued by the SEC. The
certificates of Synovus Common Stock
13
issued to affiliates of CBCC will bear an appropriate legend reflecting the
foregoing. The parties understand that such periods in general encompass the
period commencing 30 days prior to the Merger and ending at the time of the
publication of financial results covering at least 30 days of combined
operations of Synovus and CBCC within the meaning of Section 201.01 of the SEC's
Codification of Financial Reporting Policies;
(O) it will not directly or indirectly take any action or omit to take
any action to cause any of its representations and warranties made in this Plan
to become untrue;
(P) in the case of Synovus, it shall take no action which would cause
the shareholders of CBCC to recognize gain or loss as a result of the Merger to
the extent such shareholders would not otherwise recognize gain or loss as
described in Paragraph (A)(7) of Article V;
(Q) it shall take no action which would prevent the issuance of the
accountants' letter referred to in Paragraph (A)(8) of Article V; and
(R)(1) in the case of Synovus, subject to the conditions set forth in
Paragraph (2) below, for a period of six years after the Effective Date, Synovus
shall indemnify, defend and hold harmless each person entitled to
indemnification from CBCC and its Subsidiary (each, an "Indemnified Party")
against all liabilities arising out of actions or omissions occurring at or
prior to the Effective Date (including the transactions contemplated by this
Agreement) to the fullest extent permitted under Georgia law and by CBCC's and
its Subsidiary's Articles of Incorporation and bylaws as in effect on the date
hereof, including provisions relating to advances of expenses incurred in the
defense of any litigation. Without limiting the foregoing, in any case in which
approval by Synovus is required to effectuate any indemnification, Synovus shall
direct, at the election of the Indemnified Party, that the determination of any
such approval shall be made by independent counsel mutually agreed upon between
Synovus and the Indemnified Party.
(2) Any Indemnified Party wishing to claim indemnification under
Paragraph (a) upon learning of any such liability or litigation, shall promptly
notify Synovus thereof. In the event of any such litigation (whether arising
before or after the Effective Date), (a) Synovus shall have the right to assume
the defense thereof, and Synovus shall not be liable to such Indemnified Parties
for any legal expenses of other counsel or any other expenses subsequently
incurred by such Indemnified Parties in connection with the defense thereof,
except that if Synovus elects not to assume such defense or counsel for the
Indemnified Parties advises that there are substantive issues which raise
conflicts of interest between Synovus and the Indemnified Parties, the
Indemnified Parties may retain counsel satisfactory to them, and Synovus shall
pay all reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided, that Synovus shall be
obligated pursuant to this Paragraph (2) to pay for only one firm of counsel for
all Indemnified Parties in any jurisdiction, (b) the Indemnified Parties will
cooperate in the defense of any such litigation, and (c) Synovus shall not be
liable for any settlement effected without its prior written consent; and
provided further, that Synovus shall not have any obligation hereunder to any
Indemnified Party when and if a court of competent jurisdiction shall determine,
and such determination shall have become final,
14
that the indemnification of such Indemnified Party in the manner contemplated
hereby is prohibited by applicable law.
V. CONDITIONS TO CONSUMMATION
(A) The respective obligations of Synovus and of CBCC to effect the
Merger shall be subject to the satisfaction prior to the Effective Date of the
following conditions:
(1) the Plan and the transactions contemplated hereby shall have been
approved by the requisite vote of the shareholders of CBCC;
(2) the procurement by Synovus of approval of the Plan and the
transactions contemplated hereby by the Board of Governors and by the Georgia
Department;
(3) procurement of all other regulatory consents and approvals which
are necessary to the consummation of the transactions contemplated by the Plan;
provided, however, that no approval or consent in Paragraphs (A)(2) and (A)(3)
of this Article V shall be deemed to have been received if it shall include any
conditions or requirements (other than conditions or requirements which are
customarily included in such an approval or consent) which would have a Material
Adverse Effect on the economic or business benefits of the transactions
contemplated hereby as to render inadvisable the consummation of the Merger in
the reasonable opinion of the Board of Directors of Synovus or CBCC;
(4) the satisfaction of all other requirements prescribed by law which
are necessary to the consummation of the transactions contemplated by the Plan;
(5) no statute, rule, regulation, order, injunction or decree shall
have been enacted, entered, promulgated or enforced by any governmental
authority which prohibits, unreasonably restricts or makes illegal consummation
of the Merger;
(6) the Registration Statement shall have become effective and no stop
order suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been initiated or
threatened by the SEC and Synovus shall have received all state securities law
and "Blue Sky" permits, approvals, qualifications or exemptions necessary to
consummate the transactions contemplated hereby;
(7) each party shall have received an opinion from KPMG Peat Marwick,
Certified Public Accountants ("KPMG"), updated as of the Effective Date, to the
effect that, the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a)(1)(A) of the Code and that,
accordingly: (i) no gain or loss will be recognized by Synovus or CBCC as a
result of the Merger; and (ii) no gain or loss will be recognized by the
shareholders of CBCC who exchange their shares of CBCC Common Stock solely for
shares of Synovus Common Stock pursuant to the Merger (except with respect to
cash received in lieu of a fractional share interest in Synovus Common Stock or
cash received as a result of the exercise of statutory dissenters' rights
against the Merger);
15
(8) each party shall have delivered to the other party a certificate,
dated as of the Effective Date, signed by its Chairman of the Board, and its
Chief Financial Officer or Controller to the effect that, to the best knowledge
and belief of such officers, the statement of facts and representations made on
behalf of the management of such party, presented to KPMG in delivering the Tax
Opinion, were at the date of such presentation true, correct and complete. Each
party shall have received a copy of the Tax Opinion referred to in Paragraph
(A)(7) of this Article V; and
(9) Synovus shall have received a letter dated as of the Effective Date
from KPMG, its independent certified public accountants, to the effect that the
Merger will qualify for pooling-of-interests accounting treatment.
(B) The obligation of Synovus to effect the Merger shall be subject to
the satisfaction prior to the Effective Date of the following additional
conditions:
(1)(a) For purposes of this Article V(B)(1), the accuracy of
the representations and warranties of CBCC set forth in this Agreement shall be
assessed as of the date of this Agreement and as of the Effective Date with the
same effect as though all such representations and warranties had been made on
and as of the Effective Date (provided, that representations and warranties that
are confined to a specific date shall speak only as of that date).
(b) The representations and warranties set forth in Recital
B regarding the number of shares of CBCC Common Stock outstanding shall be true
and correct (except for inaccuracies that are de minimus in amount). There shall
not exist inaccuracies in the representations and warranties or instances of
non-compliance with the covenants of CBCC set forth in this Agreement such that
the aggregate effect of such inaccuracies or such instances of non-compliance
has, or is reasonably likely in the opinion of Synovus to have, a material
adverse effect on CBCC, and Synovus shall have received a certificate, signed by
the Chief Executive Officer of CBCC, dated the Effective Date, to such effect.
For purposes of this subsection (b) only, those representations and warranties
that are qualified by references to "Material" or "Material Adverse Effect"
shall be deemed not to include such qualifications;
(2) there shall be no discovery of facts, or actual or threatened
causes of action, investigations or proceedings by or before any court or other
governmental body that relates to or involves either CBCC or its Subsidiary: (a)
which, in the reasonable judgment of Synovus, would have a Material Adverse
Effect upon either CBCC or the consummation of the transactions contemplated by
this Agreement; (b) that challenges the validity or legality of this Agreement
or the consummation of the transactions contemplated by this Agreement; or (c)
that seeks to restrain or invalidate the consummation of the transactions
contemplated by this Agreement or seeks damages in connection therewith;
(3) Synovus shall not have learned of any fact or condition with
respect to the business, properties, assets, liabilities, deposit relationships
or earnings of CBCC or its Subsidiary which, in the reasonable judgment of
Synovus, is materially and adversely at variance with one or more of the
warranties or representations set forth in this Agreement
16
or which, in the reasonable judgment of Synovus, has or will have a Material
Adverse Effect on CBCC or its Subsidiary, including, without limitation, the
loan portfolio of Subsidiary and the adequacy of the loan loss reserves for such
loan portfolio;
(4) Gordon R. Teel, Donald D. Howard and Glenn Jack Johnson shall have
executed employment agreements with Synovus as proposed by Synovus and approved
by Messrs. Teel, Howard and Johnson;
(5) on the Effective Date, Subsidiary will have a CAMEL rating of at
least 2 and a Compliance Rating and Community Reinvestment Act Rating of at
least Satisfactory;
(6) on the Effective Date, Subsidiary will have a loan loss reserve of
at least 1.0% of loans and which will be adequate in all material respects under
generally accepted accounting principles applicable to banks;
(7) CBCC shall have delivered to Synovus the environmental reports
referenced in Paragraph (U) of Article III;
(8) the results of any regulatory exam of CBCC and its Subsidiary
occurring between the date hereof and the Effective Date shall be reasonably
satisfactory to Synovus; and
(9) each of the officers and directors of CBCC and its Subsidiary shall
have delivered a letter to Synovus to the effect that such person is not aware
of any claims he might have against CBCC or its Subsidiary other than routine
compensation (with the exception of the Bank of North Georgia Long Term
Incentive Award), benefits and the like as an employee, or ordinary rights as a
customer.
(C) The obligation of CBCC to effect the Merger shall be subject to the
satisfaction prior to the Effective Date of the following additional conditions:
(1)(a) For purposes of this Article V(C)(1), the accuracy of
the representations and warranties of Synovus set forth in this Agreement shall
be assessed as of the date of this Agreement and as of the Effective Date with
the same effect as though all such representations and warranties had been made
on and as of the Effective Date (provided, that representations and warranties
that are confined to a specific date shall speak only as of that date).
(b)The representations and warranties set forth in Recital
B regarding the number of shares of Synovus Common Stock outstanding shall be
true and correct (except for inaccuracies that are de minimus in amount). There
shall not exist inaccuracies in the representations and warranties or instances
of non-compliance with the covenants of Synovus set forth in this Agreement such
that the aggregate effect of such inaccuracies or such instances of
non-compliance has, or is reasonably likely in the opinion of CBCC to have, a
material adverse effect on Synovus, and CBCC shall have received a certificate,
signed by the Chief Executive Officer of Synovus, dated the Effective Date, to
such effect. For purposes of this subsection (b) only, those
17
representations and warranties that are qualified by references to "Material" or
"Material Adverse Effect" shall be deemed not to include such qualifications.
(2) the listing for trading of the shares of Synovus Common Stock which
shall be issued pursuant to the terms of this Plan on the NYSE shall have been
approved by the NYSE subject to official notice of issuance;
(3) there shall be no discovery of facts, or actual or threatened
causes of action, investigations or proceedings by or before any court or other
governmental body that relates to or involves either Synovus or its
Subsidiaries: (a) which, in the reasonable judgment of CBCC, would have a
Material Adverse Effect upon either Synovus or the consummation of the
transactions contemplated by this Agreement; (b) that challenges the validity or
legality of this Agreement or the consummation of the transactions contemplated
by the Agreement; or (c) that seeks to restrain or invalidate the consummation
of the transactions contemplated by this Agreement or seeks damages in
connection therewith; and
(4) CBCC shall not have learned of any fact or condition with respect
to the business, properties, assets, liabilities, deposit relationships or
earnings of Synovus which, in the reasonable judgment of CBCC, is materially and
adversely at variance with one or more of the warranties or representations set
forth in this Agreement or which, in the reasonable judgment of CBCC, has or
will have a Material Adverse Effect on Synovus.
VI. TERMINATION
A. The Plan may be terminated prior to the Effective Date, either
before or after its approval by the stockholders of CBCC:
(1) by the mutual consent of Synovus and CBCC, if the Board of
Directors of each so determines by vote of a majority of the members of its
entire Board;
(2) by Synovus or CBCC if consummation of the Merger does not
occur by reason of the failure of any of the conditions precedent set forth in
Article V hereof unless the failure to meet such condition precedent is due to a
breach of the Plan by the party seeking to terminate; or
(3) by Synovus or CBCC if its Board of Directors so determines
by vote of a majority of the members of its entire Board in the event that the
Merger is not consummated by November 30, 1998 unless the failure to so
consummate by such time is due to the breach of the Plan by the party seeking to
terminate.
B. In the event of the termination of this Plan by Synovus or CBCC for
the reasons and as provided in 1, 2 or 3 above, this Plan shall thereafter
become void and there shall be no liability on the part of any party hereto or
their respective officers or directors.
18
VII. EFFECTIVE DATE
The "Effective Date" shall be the date on which the Merger becomes
effective as specified in the Certificate of Merger to be filed with the
Secretary of State of Georgia approving the Merger.
VIII. OTHER MATTERS
(A) The agreements and covenants of the parties which by their terms
apply in whole or in part after the Effective Date shall survive the Effective
Date. Except for Paragraph (Q) of Article III, and Paragraphs (N) and (R) of
Article IV which shall survive the Effective Date, no other representations,
warranties, agreements and covenants shall survive the Effective Date. If the
Plan shall be terminated, the agreements of the parties in Paragraph (G) of
Article IV and Paragraphs (E) and (F) of this Article shall survive such
termination.
(B) Prior to the Effective Date, any provision of the Plan may be: (1)
waived by the party benefitted by the provision or by both parties; or (2)
amended or modified at any time (including the structure of the transaction) by
an agreement in writing between the parties hereto approved by their respective
Boards of Directors (to the extent allowed by law) or by their respective Boards
of Directors.
(C) This Plan may be executed in multiple and/or facsimile originals,
and each copy of the Plan bearing the manually executed, facsimile transmitted
or photocopied signature of each of the parties hereto shall be deemed to be an
original.
(D) The Plan shall be governed by, and interpreted in accordance with,
the laws of the State of Georgia.
(E) Each party hereto will bear all expenses incurred by it in
connection with the Plan and the transactions contemplated hereby, including,
but not limited to, the fees and expenses of its respective counsel and
accountants.
(F) Each of the parties and its respective agents, attorneys and
accountants will maintain the confidentiality of all information provided in
connection herewith which has not been publicly disclosed unless it is advised
by counsel that any such information is required by law to be disclosed.
(G) All notices, requests, acknowledgments and other communications
hereunder to a party shall be in writing and shall be deemed to have been duly
given when delivered by hand, telecopy, telegram or telex (confirmed in
writing), by overnight courier or sent by registered or certified mail, postage
paid, to such party at its address set forth below or such other address as such
party may specify by notice to the other party hereto.
If to Synovus, to Mr. Thomas J. Prescott, Executive Vice President and
Chief Financial Officer of Synovus, Suite 301, 901 Front Avenue, Columbus,
Georgia 31901 (fax (706)649-2342), with a copy to Ms. Kathleen Moates at the
same address.
19
If to CBCC, to Mr. Gordon R. Teel, Chairman of CBCC, P.O. Box 1407,
Alpharetta, Georgia 30239 (fax (770)754-9950), with a copy to Mr. Walter G.
Moeling, IV, Powell, Goldstein, Frazer & Murphy LLP, 16th Floor, 191 Peachtree
Street, N.E., Atlanta, Georgia 30303 (fax (404) 572-6999).
(H) All terms and provisions of the Plan shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns. Except as expressly provided for herein, nothing in this Plan is
intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Plan.
(I) The Plan represents the entire understanding of the parties hereto
with reference to the transactions contemplated hereby and supersedes any and
all other oral or written agreements heretofore made.
(J) This Plan may not be assigned by any party hereto without the
written consent of the other parties.
20
In Witness Whereof, the parties hereto have caused this instrument to
be executed in counterparts by their duly authorized officers as of the day and
year first above written.
SYNOVUS FINANCIAL CORP.
By:/s/Thomas J. Prescott
Title: Executive V.P. and CFO
Attest:/s/Kathy Moates
Title: Assistant Secretary
COMMUNITY BANK CAPITAL CORPORATION
BY:/s/Gordon R. Teel
Title: Chairman & CEO
Attest:/s/Edward P. Vollertsen, III
Title: Executive Vice President
21
APPENDIX B
Georgia Business Corporation Code
Article 13. Dissenters' Rights
Part 1. Right to Dissent and Obtain Payment for Shares
14-2-1301 DEFINITIONS. - As used in this article, the term:
(1) "Beneficial Shareholder" means the person who is a beneficial
owner of shares held in a voting trust or by a nominee as the record
shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302 RIGHT TO DISSENT. - (a) A record shareholder of the
corporation is entitled to dissent from, and obtain payment of the fair value of
his shares in the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of incorporation and
the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its parent
under Code Section 14-2-1104;
(2) Consummation of plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired, if the shareholder is
entitled to vote on the plan;
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the sale or
exchange pursuant to Code Section 14-2-1202, but not including a sale pursuant
to court order or a sale for cash pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed to the
shareholders within one year after the date of sale;
1
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the shares
to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any matter,
or to cumulate votes, other than a limitation by dilution through issuance of
shares or other securities with similar voting rights;
(E) Reduces the number of shares owned by the shareholder to a fraction
of a share if the fractional share so created is to be acquired for cash under
Code Section 14-2- 604; or
(F) Cancels, redeems, or repurchases all or part of the shares of the
class;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation, bylaws,
or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's rights.
(c) Notwithstanding any other provision of this article, there shall be
no right of dissent in favor of the holder of shares of any class or series
which, at the record date fixed to determine the shareholders entitled to
receive notice of and to vote at a meeting at which a plan of merger or share
exchange or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or share
exchange to accept for their shares anything except shares of the surviving
corporation or another publicly held corporation which at the effective date of
the merger or share exchange are either listed on a national securities exchange
or held of record by more than 2,000 shareholders, except for scrip or cash
payments in lieu of fractional shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303 DISSENT BY NOMINEES AND BENEFICIAL OWNERS. - A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this
2
Code section are determined as if the shares as to which he dissents and his
other shares were registerd in the names of different shareholders.
Part 2. Procedure for Exercise of Dissenters' Rights
14-2-1320 NOTICE OF DISSENTERS' RIGHTS. -(a) If proposed corporate
action creating dissenters' rights under Code Section 14-2-1302 is submitted to
a vote at a shareholders' meeting, the meeting notice must state that
shareholders are or may be entitled to assert dissenters' rights under this
article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321 NOTICE OF INTENT TO DEMAND PAYMENT. - (a) If proposed
corporate action creating dissenters' rights under Code Section 14-2-1302 is
submitted to a vote at a shareholders' meeting, a record shareholder who wishes
to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed action is
effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322 DISSENTERS' NOTICE. - (a) If proposed corporate action
creating dissenters' rights under Code Section 14-2-1302 is authorized at a
shareholders' meeting, the corporation shall deliver a written dissenters'
notice to all shareholders who satisfied the requirements of Code Section
14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after
the corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the date
the notice required in subsection (a) of this Code section is delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323 DUTY TO DEMAND PAYMENT. - (a) A record shareholder sent a
dissenters' notice described in Code Section 14-2-1322 must demand payment and
deposit his certificates in accordance with the terms of the notice.
3
(b) A record shareholder who demands payment and deposits his shares
under subsection (a) of this Code section retains all other rights of a
shareholder until these rights are canceled or modified by the taking of the
proposed corporate action.
(c) A record shareholder who does not demand payment or deposit his
share certificates where required, each by the date set in the dissenters'
notice, is not entitled to payment for his shares under this article.
14-2-1324 SHARE RESTRICTIONS. - (a) The corporation may restrict the
transfer of uncertificated shares from the date the demand for their payment is
received until the proposed corporate action is taken or the restrictions
released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
14-2-1325 OFFER OF PAYMENT. - (a) Except as provided in Code Section
14- 2-1327, within ten days of the later of the date the proposed corporate
action is taken or receipt of a payment demand, the corporation shall by notice
to each dissenter who complied with Code Section 14-2-1323 offer to pay to such
dissenter the amount the corporation estimates to be the fair value of his or
her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income statement
for that year, a statement of changes in shareholders' equity for that year, and
the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written
notice to the corporation within 30 days after the corporation's offer or is
deemed to have accepted such offer by failure to respond within said 30 days,
payment for his or her shares shall be made within 60 days after the making of
the offer or the taking of the proposed corporate action, whichever is later.
14-2-1326 FAILURE TO TAKE ACTION. - (a) If the corporation does not
take the proposed action within 60 days after the date set for demanding payment
and depositing share certificates, the corporation shall return the deposited
certificates and release the transfer restrictions imposed on uncertificated
shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
4
14-2-1327 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
- - (a) A dissenter may notify the corporation in writing of his own estimate of
the fair value of his shares and amount of interest due, and demand payment of
his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest due is
incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for demanding
payment.
(b) A dissenter waives his or her right to demand payment under this
Code section and is deemed to have accepted the corporation's offer unless he or
she notifies the corporation of his or her demand in writing under subsection
(a) of this Code section within 30 days after the corporation offered payment
for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth
in subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide the
information to the shareholder within ten days after receipt of a written demand
for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of the
fair value of his shares and the amount of interest due and demand payment of
his estimate of the fair value of his shares and interest due.
Part 3. Judicial Appraisal of Shares
14-2-1330 COURT ACTION. - (a) If a demand for payment under Code
Section 14-2-1327 remains unsettled, the corporation shall commence a proceeding
within 60 days after receiving the payment demand and petition the court to
determine the fair value of the shares and accrued interest. If the corporation
does not commence the proceeding within the 60 day period, it shall pay each
dissenter whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a
nonjury equitable valuation proceeding, in the superior court of the county
where a corporation's registered office is located. If the surviving corporation
is a foreign corporation without a registered office in this state, it shall
commence the proceeding in the county in this state where the registered office
of the domestic corporation merged with or whose shares were acquired by the
foreign corporation was located.
(c) The corporation shall make all dissenters, whether or not residents
of this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each
5
nonresident dissenting shareholder either by registered or certified mail or by
publication, or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to
judgment for the amount which the court finds to be the fair value of his
shares, plus interest to the date of judgment.
14-2-1331 COURT COSTS AND COUNSEL FEES. - (a) The court in an appraisal
proceeding commenced under Code Section 14-2-1330 shall determine all costs of
the proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court, but not including fees and expenses of attorneys and
experts for the respective parties. The court shall assess the costs against the
corporation, except that the court may assess the costs against all or some of
the dissenters, in amounts the court finds equitable, to the extent the court
finds the dissenters acted arbitrarily, vexatiously, or not in good faith in
demanding payment under Code Section 14-2-1327.
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2- 1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332 LIMITATION OF ACTIONS. - No action by any dissenter to
enforce dissenters' rights shall be brought more than three years after the
corporate action was taken, regardless of whether notice of the corporate action
and of the right to dissent was given by the corporation in compliance with the
provisions of Code Section 14-2-1320 and Code Section 14-2-1322.
6
APPENDIX C
BROWN, BURKE CAPITAL PARTNERS, INC.
ATLANTA, GEORGIA
July 10, 1998
Board of Directors
Community Bank Capital Corporation
8025 Westside Parkway
Alpharetta, GA 30004
Dear Members of the Board:
You have asked us to advise you with respect to the fairness to the shareholders
of Community Bank Capital Corporation (the Company), from a financial point of
view, of the per share purchase price and terms (the Per Share Purchase Price
and Terms) provided for in the Agreement and Plan of Merger (the Merger
Agreement) dated June 5, 1998 between the Company and Synovus Financial Corp.
(Synovus). The Merger Agreement provides for a merger (the Merger) of the
Company and Synovus pursuant to which the common shareholders of the Company
will receive 5.43489 common shares of Synovus for every common share of the
Company and optionholders shall receive the right to 5.43489 shares of Synovus
common stock for each option to purchase a share of the Company. The exercise
price per share for each of the options to acquire common stock of the Company
shall be adjusted by dividing the original exercise price by 5.43489.
In arriving at our opinion, we have reviewed certain publicly available business
and financial information relating to Synovus and the Company. We have also
reviewed certain other information, including financial forecasts and budgets,
provided to us by Synovus and the Company, and have discussed with the Company's
management the business and prospects of the Company.
We have also considered certain financial and stock market data of Synovus and
the Company and we have compared that data with similar data for other publicly
held bank holding companies and we have considered the financial terms of
certain other comparable transactions which have recently been effected. We also
considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria which we deemed
relevant. In connection with our review, we have not independently verified any
of the foregoing information and have relied on its being complete and accurate
in all material respects. With respect to the financial forecasts and budgets,
we have assumed that they have been reasonably prepared on bases reflecting the
best currently
ONE BUCKHEAD PLAZA, SUITE 1585
3060 PEACHTREE ROAD, N.W., ATLANTA, GEORGIA 30305
TEL. (404) 364-2092 / FAX (404) 364-2058
Board of Directors
Community Bank Capital Corporation
July 10, 1998
Page Two
available estimates and judgments of Synovus' and the Company's managements as
to the future financial performance of Synovus and the Company. In addition, we
have not made an independent evaluation or appraisal of the assets of Synovus or
the Company and we have assumed that the aggregate allowances for loan losses
for Synovus and the Company are adequate to cover such losses. We have solicited
third party indications of interest in acquiring the Company and have considered
the results of that solicitation in arriving at our opinion.
It should be noted that this opinion is based on market conditions and other
circumstances existing on the date hereof and this opinion does not represent
our view as to what the value of the Synovus common stock necessarily will be
when the Synovus common stock is issued to the stockholders of the Company upon
consummation of the Merger.
We have acted as financial advisor to the Company in connection with the Merger
and will receive a fee for our services, a significant portion of which is
contingent upon the consummation of the Merger.
We agree to the inclusion of this opinion letter in the Proxy
Statement/Prospectus relating to the Merger. The opinion may not, however, be
summarized, excerpted from or otherwise publicly referred to without our prior
written consent.
Based upon and subject to the foregoing, it is our opinion that as of the date
hereof, the Per Share Purchase Price and Terms of the Merger are fair to the
common shareholders and optionholders of the Company from a financial point of
view.
Very truly yours,
BROWN, BURKE CAPITAL PARTNERS, INC.
APPENDIX D
July 7, 1998
PRIVATE & CONFIDENTIAL
Board of Directors Board of Directors
Synovus Financial Corp. Community Bank Capital Corporation
P.O. Box 120 8025 Westside Parkway
Columbus, GA 31902 Alpharetta, GA 30004
Board Members:
You have requested the opinion of KPMG Peat Marwick LLP ("KPMG") regarding
certain Federal income tax consequences relating to the merger of Community Bank
Capital Corporation ("CBCC") with and into Synovus Financial Corp. ("Synovus").
Specifically, you have requested us to opine that the form and substance of the
merger of CBCC with and into Synovus constitutes a tax-free reorganization under
Sections 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the
"Code") (hereinafter all section references are to the Code unless otherwise
indicated) and that under the Code no gain or loss will be recognized by the
shareholders of CBCC upon receipt of the Synovus common stock in exchange for
their CBCC common stock upon consummation of the merger.
Our opinion as to the tax-free reorganization treatment of the merger of CBCC
with and into Synovus does not include: (1) cash payments that are to be made to
CBCC common shareholders in lieu of their receipt of fractional shares of
Synovus common stock and (2) cash payments that are made to CBCC shareholders
who exercise their statutory dissenters' rights against the merger and receive
cash. All affected CBCC common shareholders should consult their own tax
advisers on these matters.
Facts
Synovus is a bank holding company organized and existing under the laws of
Georgia and having its principal office in Muscogee County, Georgia. It has
authorized 600,000,000 shares of $1.00 par value common stock of which
263,080,194 were outstanding at June 30 1998. Synovus common stock is widely
held, is publicly traded and is listed on the New York Stock Exchange.
Synovus common stock carries ten votes per share unless the shares do not meet
certain ownership tests, in which case each share is entitled to only one vote.
In accordance with the amendment to Synovus' Articles of Incorporation which was
adopted by the shareholders of Synovus and became effective on April 24, 1986, a
holder of Synovus common stock will be entitled to ten votes on each matter
submitted to a vote of shareholders for each share of Synovus common stock
beneficially owned on the record date for any meeting of shareholders which: (1)
has had the same beneficial owner since April 24, 1986; (2) was acquired by
reason of participation in a dividend reinvestment plan offered by Synovus and
is held by the same beneficial owner for whom it was acquired under such plan;
(3) is held by the same beneficial owner to whom it was issued as a result of an
acquisition of a company or business by Synovus where the resolutions adopted by
Synovus' Board of Directors approving such issuance specifically reference and
grant such rights; (4) was acquired under any employee, officer and/or director
benefit plan maintained for one or more employees, officers and/or directors of
Synovus and/or its subsidiaries, and is held by the same beneficial owner for
whom it was acquired under any such plan; (5) is held by the same beneficial
owner to whom it was issued by Synovus, or to whom it was transferred by Synovus
from treasury shares, and the
Board of Directors
Synovus Financial Corp.
Community Bank Capital Corporation
July 7, 1998
Page 2
resolutions adopted by Synovus' Board of Directors
approving such issuance and/or transfer specifically reference and grant such
rights; (6) was acquired as a direct result of a stock split, stock dividend or
other type of share distribution if the share as to which it was distributed has
been held by the same beneficial owner for a period of 48 consecutive months
prior to the record date of any meeting of shareholders at which the share is
eligible to be voted; (7) has been beneficially owned continuously by the same
shareholder for a period of 48 consecutive months prior to the record date of
any meeting of shareholders at which the share is eligible to be voted; or (8)
is owned by a holder who, in addition to shares that are beneficially owned
under the provisions of (1)-(7) above, is the beneficial owner of less than
1,139,063 shares of Synovus common stock (which amount has been appropriately
adjusted to reflect the stock splits which have occurred subsequent to April 24,
1986, and with such amount to be appropriately adjusted to properly reflect any
other change in Synovus common stock by means of a stock split, a stock
dividend, a recapitalization or otherwise occurring after April 24, 1986). There
are no other classes of stock authorized. Ten-vote shares will be issued to the
CBCC shareholders in the proposed transaction.
Effective April 20, 1989, the Board of Directors of Synovus adopted a plan that
provides the common shareholders of Synovus with Common Stock Purchase Rights
("poison pill rights"), i.e. rights to acquire the stock of Synovus or its
successor.
Under the terms of the plan, holders of Synovus common stock received a poison
pill right for each share of Synovus common stock held by them. A shareholder's
ability to exercise his rights is contingent upon the occurrence of either a
tender offer for 15% or more, or the actual acquisition of 10% or more, of
Synovus common stock by a corporation or individual (the "acquiring person")
without the approval of the Synovus' Board of Directors.
In general, the rights become exercisable on the earlier of (1) ten days
following a public announcement that, without prior approval of Synovus, a
person or group of affiliated persons has acquired, or obtained the right to
acquire, beneficial ownership of 10% or more of the outstanding common stock of
Synovus, or (2) ten days following the commencement or announcement of an
intention to make a tender offer or exchange offer, without the prior written
consent of Synovus, for 15% or more of the outstanding shares of Synovus common
stock. Until the rights become exercisable, they cannot be transferred
separately from the underlying common stock on which they were distributed, nor
are the rights represented by any certificate other than the underlying stock
certificate itself. Additional, Synovus may redeem the poison pill rights for 1
cent per right until the date that specified events occur. The poison pill
rights expire on May 4, 1999.
Once they become exercisable, the poison pill rights entitle the holder to
purchase from Synovus one share of common stock. No fractional shares of common
stock will be issued upon exercise of the poison pill right. In lieu thereof, a
payment in cash will be made to the holder of such poison pill right equal to
the same fraction of the current market value of a share of common stock.
If, after the rights become exercisable, a "flip-in" or "flip-over" event
occurs, all holders of such rights, except the acquiring person, are entitled to
purchase, at a 50 percent discount, the stock of either Synovus or the acquiring
corporation (whichever is applicable). A "flip-in" event is either (1) the
acquisition by the acquiring person of 15% or more of the outstanding stock of
Synovus, or (2) the conduct of certain self-dealing transactions between an
acquiring person or any of its affiliates or associates and Synovus. A
"flip-over" event is either (1) a merger or other business combination in which
Synovus is not the surviving corporation, or (2) a sale or transfer of more than
30% of the assets or earning power of Synovus and its subsidiaries (taken as a
whole) in one or a series of transactions.
Board of Directors
Synovus Financial Corp.
Community Bank Capital Corporation
July 7, 1998
Page 3
CBCC is a one-bank holding company organized and existing under the laws of
Georgia and having its principal office in Alpharetta, Georgia. CBCC has
authorized 5,000,000 shares of $1.00 par value common stock and 5,000,000 shares
of $1.00 par value serial preferred stock. As of June 30, 1998, 688,500 shares
of CBCC common stock were issued and outstanding and no shares of CBCC preferred
stock were issued and outstanding. CBCC shares are not listed on an exchange and
are not publicly traded. There are no outstanding warrants, options, rights,
calls, or other commitments of any nature to which any person could acquire
stock in CBCC that, if exercised or converted, would affect Synovus' acquisition
or retention of control of CBCC. There are no outstanding securities or debt
obligations of CBCC convertible into shares of CBCC common stock.
Bank of North Georgia, a wholly-owned subsidiary of CBCC, is a Georgia banking
corporation with its principal office in Alpharetta, Georgia. As of the date
hereof, Bank of North Georgia had outstanding capital stock of $595,125, divided
into 595,125 shares of common stock with a par value of $1 each.
PROPOSED TRANSACTION
For what has been represented to be valid business purposes, Synovus and CBCC
want to combine their businesses. In order to reach that result, the following
transaction is proposed:
1. Pursuant to the Agreement and Plan of Merger dated June 5, 1998
(collectively referred to as the "Merger Agreement"), by and among Synovus
and CBCC, CBCC will merge with and into Synovus in accordance with Georgia
state law. Synovus will survive the merger and the separate corporate
existence of CBCC will cease.
2. Immediately after the Merger and pursuant to the Merger Agreement dated
June 5, 1998, the separate corporate existence of Bank of North Georgia
will continue. After the merger, Bank of North Georgia will retain its
name.
3. As a result of the Merger and on its effective date, CBCC shareholders will
be entitled to receive from Synovus not less than 5.43489 shares of Synovus
common stock for each of their shares of CBCC common stock (the "Per Share
Exchange Ratio"). The maximum number of shares of Synovus common stock to
be issued in the merger is 4,002,253 shares.
4. No fractional shares of Synovus common stock will be issued in the Merger.
Instead, CBCC shareholders who would otherwise be entitled to a fractional
share of Synovus common stock will be paid in cash for the fractional
shares to be determined based upon the closing price per share of Synovus
common stock on the NYSE on the fifth business day immediately preceding
the effective date of the Merger.
5. Each CBCC shareholder has the right, pursuant to the state laws of Georgia,
to dissent from the Merger. Each dissenting shareholder will be entitled to
receive from Synovus (as the successor to CBCC), the fair value of his or
her shares in cash as established by Georgia law.
6. Following the effective date of the Merger, Synovus will enter into an
Employment Agreement with Mr. Gordon R. Teel, Chairman of the Board and
Chief Executive Officer of CBCC and Mr. Donald D. Howard, President and
Chief Executive Officer of Bank of North Georgia for two and three years
respectively. The contracts will provide for Messrs. Teel and Howard to
continue to receive substantially the same base salary and benefits which
Messrs. Teel and Howard presently receive, and certain severance benefits
and participation by Messrs. Teel and Howard in various Synovus incentive,
welfare and benefit plans.
Board of Directors
Synovus Financial Corp.
Community Bank Capital Corporation
July 7, 1998
Page 4
Mr. Teel will be a director and executive officer, and Mr. Howard will be a
director and executive officer of Bank of North Georgia and will enter into
a covenant not to compete. The covenant not to compete will prohibit
Messrs. Teel and Howard from competing with Synovus under certain
circumstances.
In consideration of Messrs. Teel and Howard entering into the Employment
Agreement, both will be granted fair market value options to purchase
15,000 shares of Synovus common stock. No shares or compensation will be
paid to these individuals as consideration for the covenant.
The following assumptions of fact have been made in regard to the proposed
merger (and they form an integral part of the opinions contained herein) each of
which you have examined and agree with:
a) The fair market value of the Synovus voting common stock and cash to
be received by each of the CBCC shareholders as a result of the merger
will be approximately equal, in each instance, to the fair market
value of the CBCC common stock exchanged therefor.
b) There is no plan or intention by the CBCC shareholders to sell or
otherwise dispose of any Synovus voting common stock received by them
in the transaction which would reduce their ownership of Synovus
voting common stock to a number of shares having, in the aggregate, a
fair market value as of the date of the transaction of less than 50
percent of the fair market value of the formerly outstanding stock of
CBCC as the date of the transaction. For purposes of this
representation, shares of CBCC common stock exchanged for cash as a
result of dissenters' rights or in lieu of fractional shares will be
treated as outstanding stock of CBCC on the date of the transaction
which was disposed of for cash. None of (i) Synovus, (ii) any member
of Synovus's affiliated group as defined in Section 1504 of the Code
without regard to Section 1504(b) of the Code (iii) any corporation in
which at least fifty percent (50%) of the total combined voting power
of all classes of stock entitled to vote or at least fifty percent
(50%) of the value of all classes of stock outstanding is owned
directly or indirectly by Synovus, or (iv) any entity that is treated
as a partnership for federal income tax purposes and has as an owner a
corporation described in (i), (ii) or (iii) of this paragraph has the
intent to, at the time of the merger, or shall, in a transaction that
may be considered in connection with the merger, acquire or redeem
(directly or indirectly) any shares of Synovus common stock issued in
connection with the merger except for repurchases by Synovus of a
small percentage of its stock in the open market as part of any
ongoing stock repurchase program not created or modified in any way in
connection with the merger. For purposes hereof, any entity described
in (ii), (iii), or (iv) shall be referred to as a Synovus Related
Party. An entity will be treated as a Synovus Related Party if the
requisite relationship exists immediately before or immediately after
the acquisition or redemption. In addition, an entity (other than CBCC
or any CBCC Related Party) will be treated as a Synovus Related Party
if the requisite relationship is created in connection with the
merger. A CBCC Related Party means any corporation in which at least
fifty percent (50%) of the total combined voting power of all classes
of stock entitled to vote or at least fifty percent (50%) of the value
of all classes of stock outstanding is owned directly or indirectly by
CBCC.
c) Other than cash paid to former shareholders of CBCC who dissent from
the merger and perfect their rights of appraisal, neither CBCC nor any
CBCC Related Party has redeemed or acquired any CBCC common stock
prior to and in connection with the merger.
Board of Directors
Synovus Financial Corp.
Community Bank Capital Corporation
July 7, 1998
Page 5
d) Synovus has no plan or intention to liquidate, to merge with and into
another corporation, to sell or otherwise dispose of its stock, or to
cause to sell or otherwise dispose of any assets of CBCC acquired in
the transaction, except for dispositions made in the ordinary course
of business or transfers described in Section 368(a)(2)(C).
e) The liabilities of CBCC assumed by Synovus and the liabilities to
which the transferred assets of CBCC are subject were incurred by CBCC
in the ordinary course of its business.
f) The liabilities of Bank of North Georgia and the liabilities to which
the transferred assets of Bank of North Georgia are subject were
incurred by Bank of North Georgia in the ordinary cause of its
business.
g) Following the transaction, Synovus will continue the historic business
of CBCC or use a significant portion of CBCC's historic assets in a
business.
h) Synovus and CBCC, and the shareholders of CBCC will each pay their own
fees, expenses, and disbursements in connection with the merger.
i) There is no intercorporate debt existing between Synovus, CBCC and
Bank of North Georgia that was issued, acquired, settled or will be
settled at a discount.
j) No two parties to the merger (i.e. Synovus and CBCC) are investment
companies within the meaning of such term as used in Section 368
(a)(2)(F)(iii) and (iv).
k) Neither CBCC nor Bank of North Georgia is under the jurisdiction of a
court in a Title 11 or similar case within the meaning of
368(a)(3)(A).
l) On the effective date of the Merger, the fair market value of the
assets of CBCC transferred to Synovus will exceed the sum of the
liabilities assumed by Synovus plus the amount of liabilities to which
the transferred assets are subject.
m) None of the Synovus common stock being issued to the CBCC shareholders
will represent compensation for past or future services. The
compensation to be paid to CBCC directors, officers, and employees who
are stockholders of CBCC and who will be employed following the Merger
will not be part of the consideration paid for their CBCC common stock
but will be commensurate, in each instance, with past or future
services.
n) All distributions made by CBCC and Bank of North Georgia prior to the
merger will be "regular, normal" distributions. o) The maximum amount
of cash to be paid in lieu of fractional shares of Synovus voting
common stock will, in the aggregate, be less than one percent of the
total consideration paid to the CBCC shareholders in the transaction.
The payment of cash in lieu of fractional shares of Synovus common
stock is solely for the purpose of avoiding the expense and
inconvenience of issuing fractional shares and does not represent
separately bargained-for consideration.
p) No event has occurred which made the poison pill rights exercisable.
Board of Directors
Synovus Financial Corp.
Community Bank Capital Corporation
July 7, 1998
Page 6
q) At the time of merger, each option to purchase or other right with
respect to shares of CBCC common stock pursuant to stock options
granted by CBCC, which are outstanding at the time of merger, whether
or not exercisable, shall be converted into and become rights with
respect to Synovus common stock, and Synovus shall assume each CBCC
option, in accordance with the terms of the CBCC stock plan by which
it is evidenced in substantially the same terms and conditions.
The opinions expressed in this letter are rendered only with respect to the
specific matters discussed herein and we express no opinion with respect to any
other legal, federal, or state income tax aspect of this transaction. Therefore,
no inference should be drawn on any matter not expressly opined on.
The opinions contained herein are based on the facts, circumstances, and
assumptions stated above. If any of the above-stated facts, circumstances or
assumptions are not entirely complete or accurate, it is imperative that we be
informed immediately, as the incompleteness or inaccuracy could have a material
effect on our conclusions and we have not independently verified each of the
above facts or assumptions.
In rendering our opinion, we are relying upon the relevant provisions of the
Internal Revenue Code of 1986, as amended; the regulations thereunder; and
judicial and administrative interpretations thereof, all of which are subject to
change or modification by subsequent legislative, regulatory, administrative or
judicial decisions. Such change could be retroactive in effect and therefore
could have an effect on our conclusions. We undertake no responsibility to
update our opinions in the event of any such change.
DISCUSSION
Merger
Classification as a reorganization
Section 368(a)(1)(A) provides that the term "reorganization" includes a
statutory merger. The term statutory merger refers to a merger effected pursuant
to the corporate laws of the United States, a state or territory, or the
District of Columbia, Treasury Regulation Section 1.368-2(b).
Requisite to all reorganizations under Section 368(a)(1) are (1) valid business
purpose; (2) a continuity of the business enterprise under the modified
corporate form; and (3) a continuity of interest in the corporation surviving
the merger on the part of those persons who directly or indirectly were the
owners of the merged corporation prior to the reorganization, Regulation Section
1.368-1(b). The term "reorganization" does not embrace the mere purchase by one
corporation of the properties of another, Regulation Section 1.368-2(a). These
regulations reflect well-developed judicial interpretation of the statutory
definition of a reorganization, the purpose of which is to exclude from the
scope of the reorganization provisions those transactions that are in fact
sales.
Continuity of business enterprise requires that the transferee corporation
either continue the transferor corporation's historic business or use a
significant portion of the transferor corporation's historic business assets,
Regulation Section 1.368-1(d)(2).
This will be satisfied in this transaction as per assumption "g" above.
The regulations under Section 368(a) do not establish the amount of qualifying
consideration necessary to satisfy the continuity of shareholder interest
requirement. However, the Service has promulgated a definite test as to the
requirement for purposes of obtaining a private letter ruling. Under Revenue
Procedure 77-37, 1977-2 C.B. 568, the continuity of interest requirement of
Regulation section 1.368-1(b) is satisfied if:
Board of Directors
Synovus Financial Corp.
Community Bank Capital Corporation
July 7, 1998
Page 7
[T]here is continuing interest through stock ownership in the acquiring or
transferee corporation.... on the part of the former shareholders of the
acquired or transferor corporation which is equal in value, as of the effective
date of the reorganization, to at least 50 percent of the value of all the
formerly outstanding stock of the acquired or transferor corporation as of the
same date. It is not necessary that each shareholder of the acquired or
transferor corporation receive in the exchange, stock of the acquiring of
transferor corporation... which is equal in value to at least 50 percent of the
value of his former stock interest in the acquired or transferor corporation, so
long as one or more of the shareholders of the acquired or transferor
corporation have a continuing interest through stock ownership in the acquiring
or transferee corporation... which is, in the aggregate, equal in value to at
least 50 percent of the value of all of the formerly outstanding stock of the
acquired or transferor corporation.
The 50 percent definitive test of this revenue procedure does not as a matter of
law establish the amount of qualifying consideration necessary to meet the
continuity of interest requirement of Regulation Section 1.368-1(b). In other
words, the continuation of a capital stock ownership in the acquiring
corporation equal to less that 50 percent of the value of the stock of the
acquired corporation does not itself mark a discontinuity of interest. The
Supreme Court in John A. Nelson Co. v. Helvering, 296 U.S. 374 (1935), 36-1
U.S.T.C. para 9019, held that there was a reorganization even though the
shareholders of the acquired corporation received less than half of their total
consideration in the form of stock of the acquiring corporation and received
nonvoting preferred stock. It is only necessary that the shareholders continue
to have a definite and substantial equity interest in the assets of the
acquiring corporation, Revenue Ruling 61-156, 1961-2 C.B. 62. This requirement
should be met in this transaction as per assumption "b" above.
In addition to the foregoing, it has been represented as a fact that this
transaction is being undertaken for a bona fide corporate business reason, thus
satisfying the first requirement stated above.
The merger of CBCC with and into Synovus will constitute a reorganization within
the meaning of Section 368(a)(1)(A) provided that (1) the merger of CBCC with
and into Synovus qualified as a statutory merger under the applicable federal
and state laws and is undertaken for a valid business purpose as stated in the
above facts; (2) after the transaction Synovus continues the historic business
of CBCC; and (3) CBCC shareholders exchange for Synovus voting common stock an
amount of the CBCC stock meeting the continuity of shareholder interest test.
Synovus and CBCC will each be "a party to a reorganization" within the meaning
of Section 368(b). As discussed above, each of the foregoing will be complied
with in this transaction.
Federal income tax consequences to exchanging shareholders
Section 354(a)(1) provides that no gain or loss will be recognized if stock of a
corporation which is a party to a reorganization is, pursuant to the plan or
reorganization, exchanged solely for stock of such corporation or of another
corporation which is a party to the reorganization. Section 356(a)(1) in
relevant part provides that if money or other property is received in an
exchange to which section 354 would otherwise apply, then gain, if any, to the
recipient will be recognized to the extent of the sum of the money and fair
market value of the property received. If the exchange has the effect of the
distribution of a dividend, then the amount of gain recognized that is not in
excess of each distributee shareholder's ratable share of the undistributed
earnings and profits of the acquired corporation will be treated as a dividend,
Section 356(a)(2). No loss will be recognized on the exchange, Section 356(c).
Section 358 provides that, generally, shareholders are entitled to a carryover
basis for stock received in a reorganization transaction qualifying under
Section 354 or 356.
Board of Directors
Synovus Financial Corp.
Community Bank Capital Corporation
July 7, 1998
Page 8
The CBCC common shareholders who receive solely Synovus common stock in exchange
for their CBCC common stock will not recognize any gain or loss pursuant to
Section 354(a)(1). The tax basis which these CBCC common shareholders will have
in their newly received Synovus common stock will be the same as their tax basis
in the CBCC common stock immediately prior to the merger under Section 358(a).
If the property received in an exchange (i.e., Synovus common stock) has the
same (i.e., carryover) basis as the property given up, then Section 1223(1)
applies to determine the holding period for the property received. Section
1223(1) provides that the period during which the taxpayer held the property
surrendered in the exchange is added to the period he or she holds the property
received in the exchange in order to determine the holding period of the
property received.
This tacking of the previous holding period applies only if the property
exchanged (i.e., CBCC common stock) was a capital asset in the taxpayer's hands
at the time of the exchange, Section 1223(1). The status of the property as a
capital asset is determined under Section 1221, which defines "capital asset" as
any property of a taxpayer other than property within specified classifications.
As a general rule, stock of a corporation would be treated as a capital asset
under this section. Provided that his or her CBCC common stock is a capital
asset, then each CBCC shareholder will be able to include his or her respective
ownership period of the CBCC common stock in determining the holding period of
the Synovus common stock received in the proposed transaction.
Poison Pill Rights
The shares of Synovus common stock to be issued to the CBCC shareholders entitle
such shareholders to receive the poison pill rights which will become
excercisable upon the happening of future events as described above. An issue
with respect to the poison pill rights is whether the rights should be
considered separable from the Synovus common stock and therefore "other
property" within the meaning of Section 356(a) or rather as an attribute of the
Synovus common stock, that is, a right to a future dividend inseparable from the
other rights inherent in the stock and not personal to the shareholders.
Presently, the Service has not published any direct authoritative position
regarding the treatment of poison pill rights in the context of a corporate
reorganization that can be cited as precedent. Nor are there any judicial
opinions specifically addressing poison pill rights in the context of a
corporate reorganization.
The only available guidance consists of Private Letter Rulings ("PLRs") that
address the shareholder tax consequences upon the receipt of capital stock
incorporating a poison pill rights plan in the context of a corporate
reorganization. Under Section 6110(j)(3), PLRs may not be used or cited as
precedent. If the Service issues further authority, such authority could be
prospective only in accordance with the provisions of Section 7805.
In PLR 8808081, the Service ruled that poison pill rights incorporated in the
terms of capital stock issued in a corporate reorganization constituted "other
property" within the meaning of Section 356(a). Accordingly, the filing held
that the acquired corporation's shareholders recognized gain, to the extent of
the fair market value of the poison pill rights, in the exchange for capital
stock of the acquiring corporation.
Subsequently, however, the Service reversed its position and ruled in PLR
8925087, PLR 8925088, PLR 9040069, and PLR 9040042 (among others) that poison
pill rights did not constitute other property within the meaning of Section
356(a).
Indirect support for the proposition that poison pill rights do not constitute
"other property" can also be found in Revenue Ruling 90-11, 1990-1 C.B. 10.
Although not in the context of a corporate
Board of Directors
Synovus Financial Corp.
Community Bank Capital Corporation
July 7, 1998
Page 9
reorganization, the Service concluded that the initial issuance of poison pill
rights is not a distribution of property which would give rise to current tax to
the shareholders.The terms of the poison pill plan described in the ruling are
comparable to the terms of the Synovus plan. This ruling is a published ruling,
and therefore may be cited as precedent. This published ruling indicates that
the more recent private letter rulings cited immediately above reflect the
current thinking of the Service, i.e., that poison pill rights do not constitute
other property when associated with stock received in a corporate
reorganization. Should the Service successfully maintain that the poison pill
rights are other property, then gain, if any, realized by a CBCC common
shareholder receiving such rights would be recognized to the extent of the fair
market value of such rights.
CONCLUSION
1. Based on the foregoing, it is the opinion of KPMG that the merger of CBCC
with and into Synovus, provided it is in accordance with Georgia state law,
will be treated as a reorganization under Section 368(a)(1)(A), and that
Synovus and CBCC will each be a party to the reorganization as defined in
Section 368(b).
2. No gain or loss will be recognized by the shareholders of CBCC who receive
solely shares of Synovus voting common stock for their CBCC common stock
upon consummation of the Merger. The basis of the Synovus shares received
by such CBCC shareholders (including any fractional share to which they may
be entitled) will be the same as the basis of the CBCC common stock
surrendered in the exchange. Provided that the CBCC common stock was a
capital asset in the shareholder's hands, the holding period of the Synovus
common stock (including any fractional share to which they may be entitled)
will include the holding period of the CBCC stock.
3. The payment by Synovus of cash in lieu of fractional share interests in its
common stock will, for federal income tax purposes, be treated as if
Synovus actually issued the fractional share interests to the CBCC common
shareholders and then Synovus redeemed such fractional shares for cash. See
Revenue Ruling 66-365, 1966-2 C.B. 116. Each affected CBCC common
shareholder should consult their own tax advisor for the tax effect to them
of such redemption (i.e. exchange treatment or dividend).
4. Under Sections 357(a) and 361, no gain or loss will be recognized by CBCC
upon the transfer of substantially all of its assets to Synovus in exchange
for solely shares of Synovus common stock and the assumption by Synovus of
the CBCC liabilities. Under Section 361(c), CBCC will not recognize any
gain or loss upon the distribution of the Synovus common stock to its
shareholders in pursuance of the plan of reorganization.
5. Under Revenue Ruling 57-278, 1957-1 C.B. 124, no gain or loss will be
recognized by Synovus upon the acquisition of substantially all of the
assets of CBCC in exchange for solely shares of Synovus common stock and
the assumption of the CBCC liabilities.
6. Based on the discussion above under Poison Pill Rights, it appears
reasonable to conclude that the Synovus poison pill rights plan adopted on
April 20, 1989, should be treated as an attribute of the Synovus common
stock, a right that is inseparable from other rights inherent in the stock
and does not constitute other property received by the CBCC common
shareholders in exchange for their CBCC common stock. However, in view of
the lack of precedent, there can be no assurance that the Service will
agree with this conclusion. In the event the Service ultimately establishes
that such poison pill rights constitute other property, then the CBCC
shareholders, who realize gain on the exchange of their shares for Synovus
common stock, will recognize such gain to the extent of the value of the
poison pill
Board of Directors
Synovus Financial Corp.
Community Bank Capital Corporation
July 7, 1998
Page 10
rights received.
7. No gain or loss will be recognized by CBCC and Bank of North Georgia upon
the transfer of its assets, subject to its liabilities, to Synovus in the
Merger (Section 357(a) and 361(a)).
8. The basis of the assets of CBCC and Bank of North Georgia in the hands of
Synovus will be the same as the basis of such assets in the hands of CBCC
and Bank of North Georgia immediately prior to the Merger (Section 362(b)).
9. The tax attributes enumerated in Section 381(c), including any earnings and
profits or a deficit of earnings and profits, will be taken into account by
Synovus following the Merger.
10. Where a CBCC shareholder elects to receive cash by exercising statutory
dissenter's rights, such cash will be treated as having been received by
the shareholder as a distribution in redemption of his or her CBCC stock
subject to the provisions and limitations of Section 302 of the Code.
We are furnishing this opinion to you solely in connection with Article V
paragraph (A)(7) of the Merger Agreement. This opinion is solely for your
benefit and is not to be used, circulated, quoted or otherwise referred to for
any purpose without our express written permission.
KPMG Peat Marwick LLP
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS; UNDERTAKINGS
Item 20. Indemnification of Directors and Officers
Subsection (a) of Section 14-2-851 of the Georgia Business Corporation Code
provides that a corporation may indemnify or obligate itself to indemnify an
individual made a party to a proceeding because he or she is or was a director
against liability incurred in the proceeding if such individual conducted
himself or herself in good faith and such individual reasonably believed, in the
case of conduct in an official capacity, that such conduct was in the best
interests of the corporation and, in all other cases, that such conduct was at
least not opposed to the best interests of the corporation and, in the case of
any criminal proceeding, such individual had no reasonable cause to believe such
conduct was unlawful. Subsection (d) of Section 14-2-851 of the Georgia Business
Corporation Code provides that a corporation may not indemnify a director in
connection with a proceeding by or in the right of the corporation except for
reasonable expenses incurred if it is determined that the director has met the
relevant standard of conduct, or in connection with any proceeding with respect
to conduct under Section 14-2-851 of the Georgia Business Corporation Code for
which he was adjudged liable on the basis that personal benefit was improperly
received by him. Notwithstanding the foregoing, pursuant to Section 14-2-854 of
the Georgia Business Corporation Code a court may order a corporation to
indemnify a director or advance expenses if such court determines that the
director is entitled to indemnification under the Georgia Business Corporation
Code or that the director is fairly and reasonably entitled to indemnification
in view of all the relevant circumstances, whether or not such director met the
standard of conduct set forth in subsections (a) and (b) of Section 14-2-851 of
the Georgia Business Corporation Code, failed to comply with Section 14-2-853 of
the Georgia Business Corporation Code or was adjudged liable as described in
paragraph (1) or (2) of subsection (d) of Section 14-2-851 of the Georgia
Business Corporation Code.
Section 14-2-852 of the Georgia Business Corporation Code provides that to the
extent that a director has been successful, on the merits or otherwise, in the
defense of any proceeding to which he was a party, because he or she is or was a
director of the corporation, the corporation shall indemnify the director
against reasonable expenses incurred by the director in connection therewith.
Section 14-2-857 of the Georgia Business Corporation Code provides that a
corporation may indemnify and advance expenses to an officer of the corporation
who is a party to a proceeding because he or she is an officer of the
corporation to the same extent as a director and if he or she is not a director
to such further extent as may be provided in its articles of incorporation,
bylaws, action of its board of directors or contract except for liability
arising out of conduct specified in Section 14-2-857(a)(2) of the Georgia
Business Corporation Code. Section 14-2-857 of the Georgia Business Corporation
Code also provides that an officer of the corporation who is not a director is
entitled to mandatory indemnification under Section 14-2-852 and is entitled to
apply for court ordered indemnification or advances for expenses under Section
14-2-854, in each case to the same extent as a director. In addition, Section
14-2-857 provides that a corporation may also indemnify and advance expenses to
an employee or agent who is not a director to the extent, consistent with public
policy, that may be provided by its articles of incorporation, bylaws, action of
its board of directors or contract.
In accordance with Article VIII of the Company's Bylaws, every person who is or
was (and the heirs and personal representatives of such person) a director,
officer, employee or agent of the Company shall be indemnified and held harmless
by the Company from and against the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an employee
benefits plan), and reasonable expenses (including attorneys' fees and
disbursements) that may be imposed upon or incurred by him or her in connection
with or resulting from any threatened, pending, or completed, action, suit, or
proceeding, whether civil, criminal, administrative, investigative, formal or
informal, in which he or she is, or is threatened to be made, a named defendant
or respondent: (a) because he or she is or was a director, officer, employee, or
agent of the Company; (b) because he or she or is or was serving at the request
of the Company as a director, officer, partner, trustee, employee, or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise; or (c) because he or she is or was serving as an employee of
the corporation who was employed to render professional services as a lawyer or
accountant to the corporation; regardless of whether such person is acting in
such a capacity at the time such obligation shall have been imposed or incurred,
if (i) such person acted in a manner he or she believed in good faith to be in
or not opposed to the best interest of such corporation, and, with respect to
any criminal proceeding, if such person had no reasonable cause to believe his
or her conduct was unlawful or (ii), with respect to an employee benefit plan,
such person believed in good faith that his or her conduct was in the interests
of the participants in and beneficiaries of the plan.
Pursuant to Article VIII of the Bylaws of the Company, reasonable expenses
incurred in any proceeding shall be paid by the Company in advance of the final
disposition of such proceeding if authorized by the Board of Directors in the
specific case, or if authorized in accordance with procedures adopted by the
Board of Directors, upon receipt of a written undertaking executed personally by
or on behalf of the director, officer, employee or agent to repay such amount if
it shall ultimately be determined that he or she is not entitled to be
indemnified by the Company, and a written affirmation of his or her good faith
belief that he or she has met the standard of conduct required for
indemnification.
The foregoing rights of indemnification and advancement of expenses are not
intended to be exclusive of any other right to which those indemnified may be
entitled, and the Company has reserved the right to provide additional indemnity
and rights to its directors, officers, employees or agents to the extent they
are consistent with law.
The Company carries insurance for the purpose of providing indemnification to
its directors and officers. Such policy provides for indemnification of the
Company for losses and expenses it might incur to its directors and officers for
successful defense of claims alleging negligent acts, errors, omissions or
breach of duty while acting in their capacity as directors or officers and
indemnification of its directors and officers for losses and expense upon the
unsuccessful defense of such claims.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company 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
Company of expenses incurred or paid by a director, officer or
controlling person of the Company 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 Company 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.
Item 21. Exhibits and Financial Statement Schedules
The following Exhibits are filed as part of this Registration
Statement:
Exhibit No. Description
2 Agreement and Plan of Merger is attached as Appendix
"A" to the Proxy Statement/Prospectus included in
this Registration Statement.
4.1 Articles of Incorporation of Synovus Financial
Corp., as amended, incorporated by reference to
Exhibit 4(a) of Synovus Financial Corp.'s
Registration Statement on Form S-8 filed with the
Securities and Exchange Commission on July 23, 1990
(File No. 33-35926).
4.2 Bylaws, as amended, of Synovus Financial Corp.,
incorporated by reference to Exhibit 3.2 of Synovus
Financial Corp.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 filed with the
Securities and Exchange Commission on March 6, 1997.
4.3 Form of Rights Agreement incorporated by reference to
Exhibit 1 of Synovus Financial Corp.'s Registration
Statement on Form 8-A dated May 3, 1989 filed with
the Securities and Exchange Commission on May 3, 1989
pursuant to Section 12 of the Securities Exchange Act
of 1934, as amended.
5 Legal opinion of the Deputy General Counsel of
Synovus regarding the legality of the Synovus
Common Stock being issued in the Merger.
8 Tax opinion of KPMG Peat Marwick LLP regarding
the tax consequences of the Merger to shareholders
of CBCC Common Stock is attached as Appendix
"D" to the Proxy Statement/Prospectus included
in this Registration Statement.
23.1 The consent of KPMG Peat Marwick LLP re: Consolidated
Financial Statements of Synovus Financial Corp.
and Subsidiaries.
23.2 The consent of Ernst & Young re: Consolidated
Financial Statements of Community Bank Capital
Corporation and Subsidiary.
23.3 The consent of KPMG Peat Marwick LLP regarding its
tax opinion filed as Appendix "D" to the Proxy
Statement/Prospectus included in this Registration
Statement.
23.4 The consent of the Deputy General Counsel of Synovus
is contained in her opinion filed as Exhibit 5 to the
Registration Statement.
23.5 The consent of Brown, Burke Capital Partners, Inc.
regarding its opinion as to the fairness of the
consideration to be received by Community Bank
Capital Corporation's shareholders.
24 Powers of Attorney contained on the signature pages
of the Registration Statement.
99.1 Form of Proxy
99.2 Opinion of Brown, Burke Capital Partners, Inc. as to
the fairness of the consideration to be received by
Community Bank Capital Corporation's shareholders is
attached as Appendix "C" to the Proxy
Statement/Prospectus included in this Registration
Statement.
The Registrant agrees to provide to the Commission, upon request,
copies of instruments defining the rights of holders of long-term debt of the
Registrant.
Item 22. Undertakings.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement 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.
The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes 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 public offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 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 that 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.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes the information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all the requirements for filing on Form S-4 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Columbus, State of Georgia, on the 10th day of
July, 1998.
SYNOVUS FINANCIAL CORP.
(Registrant)
By:/s/James H. Blanchard
----------------------------------
James H. Blanchard,
Chairman of the Board and
Principal Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James H. Blanchard, James D. Yancey and
Stephen L. Burts, Jr., and each of them, his or her true and lawful
attorney(s)-in-fact and agent(s), with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any or all amendments to this Registration Statement
and to file the same, with all exhibits and schedules thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney(s)-in-fact and agent(s) full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all that said
attorney(s)-in-fact and agent(s), or their substitute(s), may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/William B. Turner Date: July 10, 1998
- ---------------------------------------------
William B. Turner,
Director and Chairman of
the Executive Committee
/s/James H. Blanchard Date: July 10, 1998
- ------------------------------------------
James H. Blanchard,
Chairman of the Board and
Principal Executive Officer
- ------------------------------------------ Date:
John T. Oliver, Jr.,
Director and Vice Chairman
of the Executive Committee
/s/James D. Yancey Date: July 10, 1998
- ------------------------------------------
James D. Yancey,
President and Director
/s/Richard E. Anthony Date: July 10, 1998
- -------------------------------------------
Richard E. Anthony,
Vice Chairman of the Board
/s/Walter M. Deriso, Jr. Date: July 10, 1998
- ---------------------------------------------
Walter M. Deriso, Jr.,
Vice Chairman of the Board
/s/Stephen L. Burts, Jr. Date: July 10, 1998
- --------------------------------------------
Stephen L. Burts, Jr.,
Vice Chairman of the Board
/s/Thomas J. Prescott Date: July 10, 1998
- ------------------------------------------
Thomas J. Prescott,
Executive Vice President, Treasurer,
Principal Accounting and Financial Officer
Date:
- ------------------------------------------
Joe E. Beverly,
Director
/s/Richard Y. Bradley Date: July 10, 1998
- --------------------------------------------
Richard Y. Bradley,
Director
Date:
- ------------------------------------------
C. Edward Floyd,
Director
Date:
- ------------------------------------------
Gardiner W. Garrard, Jr.,
Director
Date:
- ------------------------------------------
V. Nathaniel Hansford,
Director
/s/John P. Illges, III Date: July 10, 1998
- -----------------------------------------------
John P. Illges, III,
Director
/s/Mason H. Lampton Date: July 10, 1998
- ---------------------------------------------
Mason H. Lampton,
Director
Date:
- ------------------------------------------
Elizabeth C. Ogie,
Director
Date:
- ------------------------------------------
H. Lynn Page,
Director
/s/Robert V. Royall, Jr. Date: July 10, 1998
- --------------------------------------------
Robert V. Royall, Jr.,
Director
Date:
- ------------------------------------------
Melvin T. Stith,
Director
July 10, 1998
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street
Washington, D.C. 20549
Ladies and Gentlemen:
As Senior Vice President and Deputy General Counsel of Synovus
Financial Corp. (the "Registrant"), I am familiar with the preparation and
filing of the Registrant's Registration Statement on Form S-4, as filed with the
Securities and Exchange Commission on or about July 10, 1998, pursuant to which
the Registrant proposes to issue up to 4,002,253 shares of its $1.00 par value
common stock ("Registrant's Common Stock") to certain of the former shareholders
of Community Bank Capital Corporation upon the merger of Community Bank Capital
Corporation with and into Registrant.
I have examined, and am familiar with, the originals or copies,
certified or otherwise, of the documents, corporate records and other
instruments of the Registrant relating to the proposed issuance of Registrant's
Common Stock which I deem relevant and which form the basis of the opinion
hereinafter set forth.
I am of the opinion that under the laws of the State of Georgia, the
jurisdiction in which the Registrant is incorporated and the jurisdiction in
which the Registrant has its principal office, upon the issuance of the shares
of the Registrant's Common Stock pursuant to the aforesaid Registration
Statement, all such shares when so issued will be duly authorized, validly
issued and outstanding, and will be fully paid and non-assessable shares of the
Registrant's Common Stock, and no personal liability will attach to the holders
of any of the shares of the Registrant's Common Stock.
The undersigned counsel to the Registrant hereby consents to the use of
my opinion as Exhibit 5 to the aforesaid Registration Statement.
Sincerely,
/s/Kathleen Moates
Kathleen Moates
Accountants' Consent
The Board of Directors
Synovus Financial Corp.:
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the Proxy
Statement/Prospectus.
KPMG Peat Marwick LLP
Atlanta, Georgia
July 9, 1998
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 17, 1998, included in the Proxy Statement of
Community Bank Capital Corporation that is made a part of the Registration
Statement (Form S-4 No. 333-00000) and Prospectus of Synovus Financial Corp. for
the registration of 4,002,253 shares of its common stock.
Ernst & Young LLP
Atlanta, Georgia
July 10, 1998
The Board of Directors
Synovus Financial Corp.
P.O. Box 120
Columbus, GA 31902
We consent to the use of our tax opinion included herein as Exhibit D and to the
reference to our firm under the heading of "Experts" and "Tax Opinion" in the
prospectus.
Memphis, Tennessee
July 9, 1998
KPMG Peat Marwick LLP
CONSENT OF FINANCIAL ADVISOR
We hereby consent to the use in this Registration Statement on Form S-4 of
Synovus Financial Corp. of our letter to the Board of Directors of Community
Bank Capital Corporation included as Appendix C to the Proxy
Statement/Prospectus that is part of the Registration Statement, and to the
references to such letter and to our firm in the Proxy Statement/Prospectus. In
giving such consent we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933
or the rules and regulations of the Securities and Exchange Commission
thereunder.
Brown, Burke Capital Partners, Inc.
July 10, 1998
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all the requirements for filing on Form S-4 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Columbus, State of Georgia, on the 10th day of
July, 1998.
SYNOVUS FINANCIAL CORP.
(Registrant)
By:/s/James H. Blanchard
-----------------------------------------
James H. Blanchard,
Chairman of the Board and
Principal Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James H. Blanchard, James D. Yancey and
Stephen L. Burts, Jr., and each of them, his or her true and lawful
attorney(s)-in-fact and agent(s), with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any or all amendments to this Registration Statement
and to file the same, with all exhibits and schedules thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney(s)-in-fact and agent(s) full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all that said
attorney(s)-in-fact and agent(s), or their substitute(s), may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/William B. Turner Date: July 10, 1998
- ---------------------------------------------
William B. Turner,
Director and Chairman of
the Executive Committee
/s/James H. Blanchard Date: July 10, 1998
- ------------------------------------------
James H. Blanchard,
Chairman of the Board and
Principal Executive Officer
- ------------------------------------------ Date:
John T. Oliver, Jr.,
Director and Vice Chairman
of the Executive Committee
/s/James D. Yancey Date: July 10, 1998
- ------------------------------------------
James D. Yancey,
President and Director
/s/Richard E. Anthony Date: July 10, 1998
- -------------------------------------------
Richard E. Anthony,
Vice Chairman of the Board
/s/Walter M. Deriso, Jr. Date: July 10, 1998
- ---------------------------------------------
Walter M. Deriso, Jr.,
Vice Chairman of the Board
/s/Stephen L. Burts, Jr. Date: July 10, 1998
- --------------------------------------------
Stephen L. Burts, Jr.,
Vice Chairman of the Board
/s/Thomas J. Prescott Date: July 10, 1998
- ------------------------------------------
Thomas J. Prescott,
Executive Vice President, Treasurer,
Principal Accounting and Financial Officer
Date:
- ------------------------------------------
Joe E. Beverly,
Director
/s/Richard Y. Bradley Date: July 10, 1998
- --------------------------------------------
Richard Y. Bradley,
Director
Date:
- ------------------------------------------
C. Edward Floyd,
Director
Date:
- ------------------------------------------
Gardiner W. Garrard, Jr.,
Director
Date:
- ------------------------------------------
V. Nathaniel Hansford,
Director
/s/John P. Illges, III Date: July 10, 1998
- -----------------------------------------------
John P. Illges, III,
Director
/s/Mason H. Lampton Date: July 10, 1998
- ---------------------------------------------
Mason H. Lampton,
Director
Date:
- ------------------------------------------
Elizabeth C. Ogie,
Director
Date:
- ------------------------------------------
H. Lynn Page,
Director
/s/Robert V. Royall, Jr. Date: July 10, 1998
- --------------------------------------------
Robert V. Royall, Jr.,
Director
Date:
- ------------------------------------------
Melvin T. Stith,
Director
COMMUNITY BANK CAPITAL CORPORATION
Haynes Bridge at Westside Parkway
8025 Westside Parkway
Alpharetta, Georgia 30004
PROXY SOLICITED BY THE BOARD OF
COMMUNITY BANK CAPITAL CORPORATION
FOR A SPECIAL MEETING OF SHAREHOLDERS
__________, 1998
The undersigned shareholder of Community Bank Capital Corporation
("CBCC") hereby appoints Gordon R. Teel and Edward P. Vollertsen, III and each
of them, with full power of substitution, proxies to vote the shares of stock
which the undersigned could vote if personally present at the Special Meeting of
Shareholders of CBCC to be held at 9:30 a.m., local time, on _________, 1998 at
CBCC's headquarters at 8025 Westside Parkway, Alpharetta, Georgia 30004 or at
any adjournment thereof.
(1) PROPOSAL TO APPROVE THE AGREEMENT AND PLAN OF MERGER
BY AND AMONG CBCC AND SYNOVUS FINANCIAL CORP.
FOR______ AGAINST______ ABSTAIN_____
(2) IN THEIR DISCRETION UPON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE SPECIAL MEETING OF
SHAREHOLDERS.
IF NO DIRECTION TO THE CONTRARY IS INDICATED, THIS PROXY WILL BE VOTED FOR
PROPOSAL (1).
Dated:_______________, 1998 ___________________________________
Signature(s) of Shareholder
Please sign exactly as name appears hereon. If shares are held jointly, each
shareholder should sign. Agents, executors, administrators, guardians, trustees,
etc., should use full title, and if more than one, all should sign. If the
shareholder is a corporation, please sign full corporate name by an authorized
officer.
Please fill in, date and sign the proxy and return it in the enclosed postpaid
envelope.