As filed with the Securities and Exchange Commission on July 16, 1999
Registration File No 333-______________
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
Merit Holding 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 7,128,041<F1> <F2> $162,590,613<F3> $45,200
$1.00 par value
Common Stock
Rights 7,128,041<F4> <F4> <F4> <F4>
- ----------------------
<FN>
<F1> This amount is based upon the number of shares of Common Stock
anticipated to be issued upon the merger of Merit Holding Corporation
with and into Synovus Financial Corp.
<F2> Not applicable.
<F3> Determined pursuant to Rule 457(f)(1) under the Securities Act of 1933,
as amended, solely for the purpose of calculating the registration fee.
Based upon the average of the high ($22.875) and low ($22.75) sales
price of common stock of Merit Holding Corporation on July 13, 1999 as
reported on the Nasdaq National Market.
<F4> 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.
-------------------------
Merit Holding Corporation
5100 LaVista Road
Post Office Box 49
Tucker, Georgia 30085-0049
SPECIAL MEETING OF SHAREHOLDERS
MERGER PROPOSED - YOUR VOTE IS VERY IMPORTANT
The Board of Directors of Merit Holding Corporation has unanimously
approved a merger combining Merit and Synovus Financial Corp. In the merger,
Merit shareholders will receive not less than 1.0537 shares nor more than 1.4132
shares of Synovus Financial Corp. common stock for each share of Merit common
stock, depending upon the trading price of Synovus common stock over a 20-day
measuring period. Synovus common stock is traded on the New York Stock Exchange
under the symbol "SNV." Merit shareholders generally will not recognize federal
income tax gain or loss for the Synovus common stock they receive. Merit's
subsidiaries, Mountain National Bank and Charter Bank & Trust Co., will continue
to operate as separately chartered subsidiaries of Synovus following the
proposed merger.
At the Special Meeting, you will consider and vote on the merger agreement.
The merger cannot be completed unless holders of at least a majority of the
outstanding shares of Merit common stock approve it. The Board of Directors
believes the merger is in the best interests of Merit shareholders and
unanimously recommends that shareholders vote to approve the merger agreement.
No vote of Synovus shareholders is required to approve the merger agreement.
The date, time and place of the meeting are:
August __, 1999
-----------
---------------------------
This proxy statement/prospectus provides you with detailed information
about the proposed merger. We urge you to read carefully the "Risk Factors"
section beginning on page 13, along with the rest of this proxy
statement/prospectus, before deciding how to vote on the merger. You can also
obtain other information about Merit and Synovus from documents filed with the
Securities and Exchange Commission.
Whether or not you plan to attend the meeting, if you are a holder of Merit
common stock please take the time to vote by completing and mailing the enclosed
proxy card to us. If you fail to return your card or vote in person, the effect
will be a vote against approval of the merger agreement. Your vote is very
important. You can revoke your proxy by writing to Merit's Secretary any time
before the meeting or by attending the meeting and voting in person.
On behalf of the Board of Directors of Merit, we urge you to vote "FOR"
approval and adoption of the merger agreement.
J. Randall Carroll
Chairman of the Board of Directors
And Chief Executive Officer
- -------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved of the Synovus common stock to be issued in the merger
or determined if this proxy statement/prospectus is accurate or adequate. Any
representation to the contrary is a criminal offense. These securities are not
savings or deposit accounts or other obligations of any bank or non-bank
subsidiary of any of the parties, and they are not insured by the Federal
Deposit Insurance Corporation, the Bank Insurance Fund or any other governmental
agency.
- -------------------------------------------------------------------------------
This proxy statement/prospectus is dated __________, 1999
and was first mailed to shareholders on or about __________, 1999.
MERIT HOLDING CORPORATION
5100 LaVista Road
Post Office Box 49
Tucker, Georgia 30085-0049
----------------------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON _______, 1999
----------------------------------------------
TO THE SHAREHOLDERS OF MERIT HOLDING CORPORATION:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Merit Holding
Corporation, a Georgia corporation, will be held _______________________________
________________________________________________________________________________
for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and Plan of
Merger, dated as of June 28, 1999, between Merit and Synovus Financial
Corp., a Georgia corporation, pursuant to which Merit will merge with and
into Synovus and each share of common stock of Merit then outstanding will
be converted into the right to receive not less than 1.0537 shares nor more
than 1.4132 shares of common stock of Synovus, depending upon the trading
price of Synovus stock, plus cash in lieu of any fractional share interest.
A copy of the merger agreement is attached to the accompanying proxy
statement/prospectus as Appendix "A."
2. To transact such other business as may be properly brought before the
special meeting or at any and all adjournments or postponements thereof.
Shareholders of Merit of record at the close of business on ______, 1999
are entitled to notice of and to vote at the special meeting. You are cordially
invited to attend the special meeting in person; however, whether or not you
plan to attend, we urge you to complete, date and sign the accompanying proxy
card and to return it promptly in the enclosed postage prepaid envelope.
BY ORDER OF THE BOARD OF DIRECTORS
J. Randall Carroll
Chairman
Tucker, Georgia
______, 1999
Please complete, sign, date and return the enclosed proxy card promptly whether
or not you plan to be present at the special meeting. Failure to return a
properly executed proxy or to vote at the special meeting will have the same
effect as a vote against the merger agreement. Please do not send in any
certificates for your shares at this time.
TABLE OF CONTENTS
Caption Page
- ------- ----
SUMMARY........................................................................1
The Companies and their Businesses....................................1
The Merger............................................................1
What Merit Shareholders Will Receive..................................2
Our Reasons for the Merger............................................2
Opinion of Financial Advisor..........................................3
Merit Special Shareholders' Meeting...................................3
Recommendation to Shareholders........................................3
Vote Required to Approve the Merger...................................4
Interests of Certain Persons in the Merger............................4
Conditions to the Merger; Regulatory Approvals........................4
Accounting Treatment as Additional Condition to the Merger............5
Tax Opinion...........................................................5
Effective Date of Merger..............................................5
Waiver and Amendment..................................................5
No Dissenters' Rights.................................................5
Termination of Merger Agreement.......................................6
Effect of Merger on Rights of Merit Shareholders......................6
Comparative Market Price Information and Dividends....................6
UNAUDITED COMPARATIVE PER SHARE AND
SELECTED FINANCIAL DATA.....................................................7
RISK FACTORS..................................................................13
Floating Exchange Ratio..............................................13
A Warning About Forward-Looking Statements...........................13
THE SPECIAL MEETING...........................................................14
General Information..................................................14
Record Date, Voting Rights and Vote Required.........................14
Voting and Revocation of Proxies.....................................15
Solicitation of Proxies..............................................16
Recommendation of Merit Board........................................16
THE MERGER....................................................................16
The Merger Agreement.................................................16
Terms of the Merger..................................................16
Background of and Reasons for the Merger.............................19
Opinion of Financial Advisor.........................................21
Conditions to the Merger.............................................23
Conduct of Business of Merit and Synovus Pending the Merger..........26
Regulatory Approvals.................................................28
Waiver and Amendment.................................................28
Termination..........................................................28
Interests of Certain Persons in the Merger...........................29
Employee Benefits....................................................32
Tax Opinion..........................................................32
Accounting Treatment.................................................33
Expenses.............................................................33
Resales of Synovus Common Stock......................................33
NYSE Listing.........................................................34
DESCRIPTION OF STOCK AND EFFECT OF MERGER
ON RIGHTS OF MERIT SHAREHOLDERS.............................................34
Synovus Common Stock.................................................35
Voting Rights - Certain Anti-Takeover
Effects - The Voting Amendment.....................................36
The Rights Plan......................................................37
Staggered Board of Directors; Supermajority Approvals................41
Evaluation of Business Combinations..................................41
Merit Common Stock...................................................41
No Dissenters' Rights................................................42
DESCRIPTION OF SYNOVUS........................................................42
Business.............................................................42
Management and Additional Information................................42
DESCRIPTION OF MERIT..........................................................43
Business.............................................................43
Management and Additional Information................................43
REGULATORY MATTERS............................................................43
General..............................................................43
Dividends............................................................44
Capital Requirements.................................................45
Commitments to Subsidiary Banks......................................46
Prompt Corrective Action.............................................47
Safety and Soundness Standards.......................................48
Depositor Preference Statute.........................................48
LEGAL MATTERS.................................................................49
EXPERTS.......................................................................49
Synovus..............................................................49
Merit................................................................49
OTHER MATTERS.................................................................49
SHAREHOLDER PROPOSALS.........................................................49
WHERE YOU CAN FIND MORE INFORMATION...........................................50
PRO FORMA FINANCIAL INFORMATION...............................................51
Appendix "A" - Agreement and Plan of Merger
Appendix "B" - Opinion of T. Stephen Johnson & Associates, Inc.
Appendix "C" - Tax Opinion of KPMG LLP
SUMMARY
This summary highlights selected information contained in this proxy
statement/prospectus and related documents. Because this is a summary, it does
not contain all of the information that may be important to you. To understand
the merger fully, you should read this entire document and other documents we
have referred you to.
The Companies and their Businesses
Synovus Financial Corp.
Suite 301, One Arsenal Place
901 Front Avenue
Columbus, Georgia 31901
(706) 649-2387
Synovus Financial Corp. is a multi-financial services company. Synovus is
registered as a bank holding company under the Bank Holding Company Act of 1956,
as amended. As of March 31, 1999, Synovus had total assets of $10.6 billion,
total deposits of $8.5 billion, shareholders' equity of $1.1 billion and net
loans of $7.5 billion. Synovus and its 36 commercial banking affiliates
presently provide banking services at approximately 230 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 80.8%
interest in Total System Services, Inc. Total System Services, Inc. is an
information technology processor of credit, debit, commercial and private label
cards whose stock is traded on the New York Stock Exchange. See "DESCRIPTION OF
SYNOVUS" (page 42).
Merit Holding Corporation
5100 LaVista Road
Post Office Box 49
Tucker, Georgia 30085-0049
(404) 491-8808
Merit Holding Corporation is registered as a bank holding company under the
Bank Holding Company Act. As of March 31, 1999, Merit had total assets of $311
million, total deposits of $250 million, shareholders' equity of $40 million and
net loans of $196 million. Merit has two banking subsidiaries, Mountain National
Bank, Tucker, Georgia and Charter Bank & Trust Co., Marietta, Georgia, which
provide services through six offices. See "DESCRIPTION OF MERIT" (page 43).
The Merger
Pursuant to the terms of the merger agreement, dated as of June 28, 1999,
Merit will merge into Synovus, and Merit's banking subsidiaries, through which
it operates, will become wholly owned subsidiaries of Synovus. In addition,
Merit's indirect subsidiary, through which it offers equipment leasing services,
will become an indirect subsidiary of Synovus. The merger requires the approval
of the holders of at least a majority of the Merit common stock outstanding on
the record date. If we obtain this approval, we currently expect to complete the
merger in the third quarter of 1999.
1
We have attached the merger agreement (Appendix "A") at the back of this
proxy statement/prospectus. We encourage you to read the merger agreement, as it
is the legal document that governs the merger.
What Merit Shareholders Will Receive
If the merger is completed, you will receive between 1.0537 and 1.4132
shares of Synovus common stock for each share of Merit common stock you own,
plus cash instead of any fractional share. The precise exchange ratio will be
based upon the average closing price of Synovus common stock for the 20 trading
days ending on the fifth business day before the special meeting. If the average
closing price of Synovus common stock during the measurement period is between
$17.00 and $22.80, the exchange ratio will be set so that you will receive
$24.02 worth of Synovus common stock, valued at that average closing price, for
each of your shares of Merit common stock. If the average closing price of
Synovus common stock is less than $17.00, the exchange ratio will be fixed at
1.4132 and you will receive less than $24.02 worth of Synovus stock for each of
your Merit shares (although Merit has the right to terminate the transaction if
the average closing price is less than $17.00). If the average closing price of
Synovus common stock is greater than $22.80, the exchange ratio will be fixed at
1.0537 and you will receive greater than $24.02 worth of Synovus stock for each
of your Merit shares (although Synovus has the right to terminate the
transaction if the average closing price is greater than $25.00). Because the
market price of Synovus fluctuates, you will not know when you vote what the
shares will be worth when issued in the merger. See "THE MERGER - Terms of the
Merger" (page 16).
On March 18, 1999, the last full trading day before the public announcement
of the proposed merger, Synovus common stock closed at $22.94, and Merit common
stock closed at $19.19. If the average closing price of Synovus common stock
during the measurement period were $22.94 and the merger was consummated, Merit
shareholders would receive 1.0537 shares of Synovus common stock, which at
$22.94 per share would be valued at $24.17, in exchange for each share of Merit
common stock owned.
On _________, Synovus common stock closed at _______, and Merit common
stock closed at _______. If the average closing price of Synovus common stock
during the measurement period were______ and the merger was consummated, Merit
shareholders would receive _____ shares of Synovus common stock, which at _____
per share would be valued at _____, in exchange for each share of Merit common
stock owned.
Our Reasons for the Merger
The Board of Directors of Merit believes that the terms of the merger
agreement and the merger are fair to, and in the best interests of, Merit and
its shareholders. In reaching this decision, the Merit Board considered a
variety of factors, including the following:
. the value of the consideration to be received by Merit shareholders
relative to the book value and earnings per share of Merit common
stock;
. information concerning the financial condition, results of operations
and business prospects of Synovus;
2
. the fact that, following the merger, Mountain National Bank and
Charter Bank & Trust Co. would continue to operate under their
existing names and management teams;
. 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
and the potential future impact of a change in the rules relating to
pooling of interests accounting;
. the alternatives to the merger, including remaining an independent
institution;
. the competitive and regulatory environment for financial institutions
generally;
. the fact that the merger will enable Merit shareholders to exchange
their shares of Merit 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
. the opinion of T. Stephen Johnson & Associates, Inc. that the
consideration to be received by Merit shareholders as a result of the
merger is fair from a financial point of view.
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 integration of a well-suited and well-positioned
banking organization into Synovus' existing organization. See "THE MERGER -
Background of and Reasons for the Merger" (page 19).
Opinion of Financial Advisor
Merit's financial advisor, T. Stephen Johnson & Associates, Inc., has
rendered its opinion to Merit's Board of Directors that the exchange ratio in
the merger is fair from a financial point of view to Merit's shareholders. A
copy of the opinion is attached to this proxy statement/prospectus as Appendix
"B." We urge you to read the opinion in its entirety to understand the
assumptions made, other matters considered and the reviews undertaken. See "THE
MERGER - Opinion of Financial Advisor" (page 21).
Merit Special Shareholders' Meeting
The special meeting called to consider the merger will be held at
_________, local time, on ________________ at . Only shareholders of record of
Merit common stock at the close of business on , 1999 will be entitled to
receive notice of and to vote at the special meeting. See "THE SPECIAL MEETING"
(page 14).
Recommendation to Shareholders
The Board of Directors of Merit has determined that the merger is in the
best interests of the shareholders of Merit and has approved the merger
agreement. Accordingly, the Board
3
of Directors unanimously recommends that the shareholders of Merit vote FOR the
merger agreement. See "THE MERGER - Background of and Reasons for the Merger"
(page 19).
Vote Required to Approve the Merger
Approval of the merger agreement requires the affirmative vote of the
holders of at least a majority of the outstanding shares of Merit common stock.
You are entitled to one vote at the meeting for each share of Merit common stock
you own on the record date. Your failure to vote will have the effect of a vote
against approval of the merger agreement. The directors and executive officers
of Merit together own about 10.4% of the shares entitled to vote at the meeting,
and we expect them to vote their shares in favor of the merger.
Brokers who hold shares of Merit common stock as nominees will not have
authority to vote such shares with respect to the merger unless shareholders
provide voting instructions.
The merger does not require the approval of Synovus' shareholders. See "THE
SPECIAL MEETING" (page 14).
Interests of Certain Persons in the Merger
Certain executive officers and directors of Merit have interests in the
merger that are different from your interests. J. Randall Carroll, Chairman and
Chief Executive Officer of Merit, and Ronald H. Francis, President and Chief
Financial Officer of Merit, have entered into employment agreements with Synovus
providing for their continued employment as the Chief Executive Officers of
Mountain National Bank and Charter Bank & Trust Co., respectively, for five
years following the merger. These agreements will provide severance payments and
other benefits if there is a change in control of Synovus. Also, Synovus will
honor the indemnification arrangements and benefit obligations which apply to
the officers and directors of Merit. The Board of Directors of Merit was aware
of these interests and took them into account in approving the merger agreement.
See "THE MERGER - Interests of Certain Persons in the Merger" (page 29).
Conditions to the Merger; Regulatory Approvals
Consummation of the merger is subject to various conditions, including:
. receipt of Merit shareholder approval;
. receipt of the necessary regulatory approvals;
. receipt of an opinion from KPMG LLP regarding certain tax aspects
of the merger (which has been satisfied);
. receipt of assurances that the merger qualifies for pooling of
interests accounting treatment; and
. satisfaction of other customary closing conditions.
4
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 and the Department of Banking
and Finance of the State of Georgia. Applications have been submitted for such
approvals. Neither the Federal Reserve nor the Georgia Banking Department has
approved the merger at this time. See "THE MERGER Conditions to the Merger"
(page 23) and "- Regulatory Approvals" (page 28).
Accounting Treatment as Additional Condition to the Merger
We expect the merger to qualify as a "pooling of interests," which
means that we will treat our companies as if they had always been one company
for accounting and financial reporting purposes. Both Synovus and Merit have the
right not to complete the merger if Synovus does not receive a letter from its
independent public accountants that the merger will qualify as a "pooling of
interests." See "THE MERGER - Accounting Treatment" (page 33) and " - Resales of
Synovus Common Stock" (page 33).
Tax Opinion
The merger is structured so that Merit shareholders will not recognize gain
or loss for federal income tax purposes for the shares of Synovus common stock
they receive in the merger. Synovus' independent public accountants, KPMG LLP,
have issued an opinion to this effect, which is attached to this proxy
statement/prospectus as Appendix "C." Merit shareholders will be taxed on cash
received instead of any fractional share of Synovus common stock. Tax matters
are complicated, and tax results may vary among shareholders. We urge you to
contact your own tax advisor to understand fully how the merger will affect you.
See "THE MERGER - Tax Opinion" (page 32).
Effective Date of Merger
The merger will become effective when a certificate of merger is filed with
the Secretary of State of Georgia, or on such later date as the certificate of
merger may specify. Subject to the conditions specified in the merger agreement,
the parties anticipate that the merger will become effective in the third
quarter of 1999. There can be no assurances, however, as to whether or when the
merger will occur. See "THE MERGER - Conditions to the Merger" (page 23) and " -
Regulatory Approvals" (page 28).
Waiver and Amendment
Prior to the effective date of the merger, 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. Except as limited by law, the
merger agreement may be amended at any time by an agreement in writing between
Synovus and Merit after approval of their respective Boards of Directors. See
"THE MERGER - Waiver and Amendment" (page 28).
No Dissenters' Rights
Under Georgia law, Merit shareholders will not have dissenters' rights with
respect to the merger, meaning that you will have no right to dissent from the
merger and receive a cash
5
payment for the fair value of your shares. See "DESCRIPTION OF STOCK AND EFFECT
OF MERGER ON RIGHTS OF MERIT SHAREHOLDERS - No Dissenters' Rights" (page 42).
Termination of Merger Agreement
The merger agreement may be terminated at any time prior to the effective
date of the merger by the mutual consent of Synovus and Merit if the Board of
Directors of each company approves termination by a vote of a majority of the
members of its entire board. Merit may terminate the merger agreement if the
average closing price of Synovus common stock on the NYSE during the 20 trading
days ending on the fifth business day preceding the date of the special meeting
is less than $17.00 per share. Similarly, Synovus may terminate the merger
agreement if the average closing price of Synovus common stock on the NYSE
during the same period is more than $25.00 per share. The merger agreement may
also be terminated by either company under certain other circumstances. See "THE
MERGER - Termination" (page 28).
Effect of Merger on Rights of Merit Shareholders
On the effective date of the merger, Merit shareholders will automatically
become shareholders of Synovus. At that time, your rights as shareholders of
Synovus will continue to be determined by the Georgia Business Corporation Code
but will also be determined by Synovus' Articles of Incorporation and bylaws.
The rights of shareholders of Synovus differ from the rights of shareholders of
Merit with respect to certain important matters, including: (i) the required
shareholder votes as to certain matters, (ii) Synovus' Shareholder Rights Plan,
and (iii) 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 MERIT SHAREHOLDERS" (page 34).
Comparative Market Price Information and Dividends
Synovus common stock is listed on the NYSE under the symbol "SNV" and Merit
common stock is included on the Nasdaq National Market under the symbol "MRET."
The table below shows the high and low closing prices of Synovus common stock
and Merit common stock and cash dividends declared per share for the last two
fiscal years plus the interim period. For Synovus, prices have been adjusted to
account for a 2-for-1 stock split on May 21, 1998.
6
<TABLE>
<CAPTION>
Synovus Merit
------- -------
Cash Cash
High Low Dividend High Low Dividend
------ --- -------- ---- --- --------
<S> <C> <C> <C> <C> <C> <C>
Quarter Ended
March 31, 1999 $25.00 $20.50 $.0900 $23.00 $17.00 $.06
Quarter Ended
March 31, 1998 25.81 20.75 .0733 23.00 18.25 .05
June 30, 1998 25.81 21.94 .0733 24.00 19.63 .05
September 30, 1998 25.00 18.06 .0733 23.00 17.25 .05
December 31, 1998 24.06 20.19 .0733 19.50 17.50 .06
For year 1998 25.81 18.06 .2900 24.00 17.25 .21
Quarter Ended
March 31, 1997 17.31 13.06 .0600 13.25 11.00 .04
June 30, 1997 18.94 14.50 .0600 14.75 12.13 .04
September 30, 1997 19.31 14.31 .0600 16.50 14.00 .04
December 31, 1997 22.38 13.31 .0600 19.50 16.13 .05
For year 1997 22.38 13.06 .2400 19.50 11.00 .17
</TABLE>
The table below shows the closing prices of Synovus common stock and Merit
common stock on March 18, 1999, the last full trading day before public
announcement of the proposed merger, and on ____, 1999.
March 18, 1999 ______, 1999
-------------- ------------
Synovus $22.94 $_______
Merit 19.19 _______
See "THE MERGER - Terms of the Merger" on page 16 for information on the
determination of the exchange ratio in the merger.
UNAUDITED COMPARATIVE PER SHARE AND SELECTED FINANCIAL DATA
The following tables show summary historical financial data for Synovus and
Merit and also show similar information reflecting the merger of Synovus and
Merit (which is referred to as "pro forma" information). In presenting the
comparative pro forma information for certain time periods, it was assumed that
Synovus and Merit had been merged throughout those periods. The pro forma
financial information does not include the effects of recently completed or
other pending immaterial acquisitions by Synovus. The following tables show
information about Synovus' and Merit's net income per diluted share, dividends
per share and book value per share, and similar pro forma information.
The tables were prepared assuming that Synovus will treat Merit as if it
had always been combined with Synovus for accounting and financial reporting
purposes (a method known as "pooling of interests" accounting). The information
listed as "pro forma equivalent" for Merit was computed by multiplying the pro
forma amounts by either the maximum exchange ratio of 1.4132 shares of Synovus
common stock or the minimum exchange ratio of 1.0537 shares of Synovus common
stock. This information reflects the fact that Merit shareholders will receive
more than one share of Synovus common stock for each share of Merit common stock
they own before the merger.
The pro forma information, while helpful in illustrating the financial
characteristics of the continuation of Synovus and Merit under one set of
assumptions, does not attempt to
7
predict or suggest future results. The pro forma information also does not
attempt to show how Synovus and Merit would actually have performed had the
companies been combined throughout these periods. All adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of
results of the unaudited historical interim periods have been included.
The information in the following tables was derived from historical
financial information contained in annual and quarterly reports and other
information Synovus and Merit have filed with the SEC. When you read the summary
financial information provided in the following tables, you should also read the
historical financial information contained in annual and quarterly reports and
other information Synovus and Merit have filed with the SEC. See "WHERE YOU CAN
FIND MORE INFORMATION" on page 50.
[Rest of page intentionally left blank]
8
MAXIMUM EXCHANGE RATIO
The following table reflects the issuance of 6,751,303 shares of Synovus common
stock pursuant to the maximum exchange ratio of 1.4132 shares of Synovus common
stock for each share of Merit common stock currently outstanding.
<TABLE>
<CAPTION>
As of and for the
Three Months Years Ended
December 31,
Ended
March 31, 1999 1998 1997 1996
--------------------- -------------------------------------
(Unaudited) (Unaudited except Synovus and Merit
historical)
<S> <C> <C> <C> <C>
NET INCOME PER COMMON SHARE - BASIC
Historical:
Synovus $ 0.18 0.71 0.63 0.53
Merit 0.27 1.15 1.18 0.95
Pro forma combined 0.18 0.71 0.64 0.54
Pro forma equivalent per Merit common share <F1> 0.25 1.00 0.90 0.76
NET INCOME PER COMMON SHARE - DILUTED
Historical:
Synovus 0.18 0.70 0.62 0.53
Merit 0.26 1.03 0.96 0.81
Pro forma combined 0.18 0.70 0.63 0.53
Pro forma equivalent per Merit common share <F1> 0.25 0.99 0.89 0.75
CASH DIVIDENDS DECLARED PER COMMON SHARE
Historical:
Synovus 0.09 0.29 0.24 0.19
Merit 0.06 0.21 0.17 0.04
Pro forma equivalent per Merit common share <F2> 0.13 0.41 0.34 0.27
BOOK VALUES PER COMMON SHARE AT PERIOD END
Historical:
Synovus 4.05 3.96 3.44 2.99
Merit 8.35 7.99 8.04 7.24
Pro forma combined 4.13 4.03
Pro forma equivalent per Merit common share <F1> 5.83 5.70
<FN>
<F1> Determined by multiplying the pro forma amounts by the maximum exchange ratio of 1.4132:1.
<F2> Determined by multiplying the Synovus historical cash dividends declared per share
by the maximum exchange ratio of 1.4132:1.
</FN>
</TABLE>
MINIMUM EXCHANGE RATIO
The following table reflects the issuance of 5,033,857 shares of Synovus common
stock pursuant to the minimum exchange ratio of 1.0537 shares of Synovus common
stock for each share of Merit common stock currently outstanding.
<TABLE>
<CAPTION>
As of and for the
Three Months Years Ended
December 31,
Ended
March 31, 1999 1998 1997 1996
----------------- -----------------------------------------------------
(Unaudited) (Unaudited except Synovus and Merit historical)
<S> <C> <C> <C> <C>
NET INCOME PER COMMON SHARE - BASIC
Historical:
Synovus $ 0.18 0.71
0.63 0.53
Merit 0.27 1.15
1.18 0.95
Pro forma combined 0.18 0.71
0.64 0.54
Pro forma equivalent per Merit common share <F1> 0.19 0.75
0.67 0.57
NET INCOME PER COMMON SHARE - DILUTED
Historical:
Synovus 0.18 0.70
0.62 0.53
Merit 0.26 1.03
0.96 0.81
Pro forma combined 0.18 0.70
0.63 0.53
Pro forma equivalent per Merit common share <F1> 0.19 0.74
0.66 0.56
CASH DIVIDENDS DECLARED PER COMMON SHARE
Historical:
Synovus 0.09 0.29
0.24 0.19
Merit 0.06 0.21
0.17 0.04
Pro forma equivalent per Merit common share <F2> 0.09 0.31
0.25 0.20
BOOK VALUES PER COMMON SHARE AT PERIOD END
Historical:
Synovus 4.05 3.96
3.44 2.99
Merit 8.35 7.99
8.04 7.24
Pro forma combined 4.13 4.03
Pro forma equivalent Merit per common share <F1> 4.35 4.25
<FN>
<F1> Determined by multiplying the pro forma amounts by the miminum exchange ratio of 1.0537:1.
<F2> Determined by multiplying the Synovus historical cash dividends declared per share by the minimum exchange ratio
of 1.0537:1.
</FN>
</TABLE>
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,
---------------------------- ---------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------------- ------------ ------------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income $ 116,730 106,062 440,526 412,389 374,874 341,875 301,231
Provision for losses on loans $ 7,153 7,594 26,660 32,296 31,766 25,787 25,387
Non-interest income $ 159,387 132,320 561,973 489,246 425,378 340,834 274,332
Non-interest expense $ 194,358 166,615 684,207 610,436 549,174 477,453 411,250
Net income $ 48,189 41,213 187,108 165,236 139,604 114,583 89,452
Per share data:
Net income - basic $ 0.18 0.16 0.71 0.63 0.53 0.44 0.35
Net income - diluted $ 0.18 0.15 0.70 0.62 0.53 0.44 0.35
Cash dividends declared $ 0.09 0.07 0.29 0.24 0.19 0.16 0.13
Book value per share $ 4.05 3.53 3.96 3.44 2.99 2.66 2.27
Investment securities $ 1,870,400 1,679,594 1,817,667 1,655,173 1,639,091 1,487,216 1,337,702
Loans, net of unearned income $ 7,628,679 6,615,700 7,411,992 6,570,314 6,028,194 5,487,167 5,065,411
Total assets $ 10,622,793 9,376,677 10,498,009 9,260,331 8,612,344 7,927,595 7,176,079
Deposits $ 8,464,488 7,889,802 8,542,798 7,707,927 7,203,035 6,727,879 5,924,603
Long-term debt $ 136,406 117,860 127,015 126,174 97,283 106,815 139,811
Average total shareholders' equity
$ 1,054,311 920,507 975,737 834,726 730,541 639,426 566,562
Average total assets $ 10,418,324 9,227,000 9,529,096 8,815,423 8,135,587 7,498,299 6,782,659
Ratios:
Return on assets <F1> 1.88 % 1.81 1.96 1.87 1.72 1.53 1.32
Return on equity <F1> 18.54 % 18.16 19.18 19.80 19.11 17.92 15.79
Dividend payout ratio <F2> 50.63 % 46.83 41.52 38.10 36.62 36.69 36.90
Average shareholders' equity
to average assets 10.12 % 9.98 10.24 9.47 8.98 8.53 8.35
<FN>
<F1> Ratios for the three month periods have been annualized.
<F2> Determined by dividing dividends declared by net income, including pooled subsidiaries.
</FN>
</TABLE>
MERIT HOLDING CORPORATION
Selected Financial Data
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(Unaudited) Years Ended December 31,
----------------------- ----------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- --------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income $ 3,857 3,535 14,722 13,724 11,476 10,480 7,904
Provision for losses on loans $ 62 98 222 188 645 1,054 604
Non-interest income $ 427 370 1,550 1,449 1,268 1,701 1,145
Non-interest expense $ 2,213 1,985 8,239 8,145 6,632 6,233 5,612
Net income $ 1,278 1,154 4,955 4,441 3,503 3,006 1,793
Per share data:
Net income - basic $ 0.27 0.29 1.15 1.18 0.95 0.83 0.50
Net income - diluted $ 0.26 0.24 1.03 0.96 0.81 0.70 0.48
Cash dividends declared $ 0.05 0.05 0.21 0.17 0.04 -- --
Book value per share $ 8.35 7.99 7.99 8.04 7.24 6.36 5.40
Investment securities $ 61,822 47,753 57,456 45,875 39,823 33,066
46,581
Loans, net of unearned income $ 199,775 178,736 188,327 179,184 157,916 130,674 115,708
Total assets $ 310,829 283,843 306,366 267,363 236,180 205,250 184,722
Deposits $ 250,356 236,239 254,614 220,284 192,697 173,064 159,157
Long-term debt $ 4,715 5,212 4,787 5,283 3,086 2,484 2,613
Average total shareholders' equity $ 39,186 32,563 34,499 29,025 25,068 21,532 18,660
Average total assets $ 299,096 267,608 291,787 248,610 217,514 191,230 163,107
Ratios:
Return on assets <F1> 1.71 % 1.73 1.70 1.79 1.61 1.57 1.10
Return on equity <F1> 13.04 % 14.18 14.36 15.30 13.97 13.96 9.61
Dividend payout ratio <F2> 22.43 % 17.31 18.63 14.50 4.23 -- --
Average shareholders' equity to
average assets 13.10 % 12.17 11.82 11.67 11.52 11.26 11.44
<FN>
<F1> Ratios for the three month periods have been annualized.
<F2> Determined by dividing dividends declared by net income, including pooled subsidiaries.
</FN>
</TABLE>
RISK FACTORS
In addition to the other information included in this document, Merit
shareholders should consider the matters described below carefully in
determining whether to approve the merger agreement and the transactions
contemplated by the merger agreement.
Floating Exchange Ratio
Upon completion of the merger, each share of Merit common stock will be
converted into the right to receive not less than 1.0537 shares nor more than
1.4132 shares of Synovus common stock with the precise exchange ratio to be
determined in accordance with the merger agreement as described in "THE MERGER -
Terms of the Merger" on page 16. (There are termination provisions in the merger
agreement associated with the price of Synovus common stock. See "THE MERGER -
Termination" (page 28)). The price of Synovus common stock when the merger takes
place may vary from its price at the date of this document and at the date of
the special meeting. Such variations in the price of Synovus common stock may
result from changes in the business, operations or prospects of Synovus, market
assessments of the likelihood and when the merger will be completed, regulatory
considerations, general market and economic conditions and other factors. At the
time of the special meeting, Merit shareholders will not know the exact value of
the Synovus common stock that Merit shareholders will receive when the merger is
completed. You are urged to obtain current market quotations for Synovus common
stock.
A Warning About Forward-Looking Statements
Each company makes forward-looking statements in this document, and in our
public documents, that are subject to risks and uncertainties. These
forward-looking statements include information about possible or assumed future
results of our operations. Also, when we use any of the words "believes,"
"expects," "anticipates" or similar expressions, we are making forward-looking
statements. Many possible events or factors could affect the financial results
and performance of each of our companies. This could cause results or
performances to differ materially from those expressed in our forward-looking
statements. You should consider these risks when you vote on the merger. These
possible events or factors include the following:
. our cost savings from the merger are less than we expect, or we
are unable to obtain those cost savings as soon as we expect;
. we lose more deposits, customers, or business than we expect;
. competition in the banking industry increases significantly;
. our restructuring costs are higher than we expect or our
operating costs after the merger are greater than we expect;
. technological changes and systems integration are harder to make
or more expensive than we expect;
13
. changes in the interest rate environment reduce our margins;
. general economic or business conditions are worse than we expect;
. legislative or regulatory changes occur which adversely affect
our business;
. changes occur in business conditions and inflation;
. changes occur in the securities markets; and
. we have more trouble obtaining regulatory approvals for the
merger than we expect.
Management of each of Synovus and Merit believes the forward-looking
statements about its company are reasonable; however, you should not place undue
reliance on them. Forward-looking statements are not guarantees of performance.
They involve risks, uncertainties and assumptions. The future results and
shareholder values of Synovus following completion of the merger may differ
materially from those expressed or implied in these forward-looking statements.
Many of the factors that will determine these results and values are beyond
Synovus' and Merit's ability to control or predict.
THE SPECIAL MEETING
General Information
We are providing this proxy statement/prospectus to Merit shareholders,
along with a form of proxy that the Merit Board is soliciting for use at a
special meeting of Merit shareholders to be held on ______________________
_____________________________________________________________________.
At the special meeting, Merit shareholders will vote upon a proposal to
approve the merger agreement, pursuant to which Merit would merge with
and into Synovus. Proxies may be voted on such other matters as may
properly come before the meeting at the discretion of the proxy holders. The
Merit Board knows of no such other matters except those incidental to the
conduct of the meeting. The merger agreement is attached as Appendix "A."
We request holders of the common stock of Merit to complete, date and sign
the accompanying proxy and return it promptly to Merit in the enclosed postage
prepaid envelope.
Record Date, Voting Rights and Vote Required
The record date for the determination of Merit shareholders entitled to
notice of and to vote the special meeting is ______, 1999. Only the holders of
Merit common stock on the record date are entitled to receive notice of and to
vote at the meeting. On the record date, there were _________ shares of Merit
common stock outstanding, held by approximately ___ holders of record. Each such
share of Merit common stock is entitled to one vote on each matter submitted at
the meeting.
Approval of the merger agreement requires the affirmative vote of the
holders of at least a majority of the outstanding shares of Merit common stock.
Failure of a holder of Merit
14
common stock to vote such shares will have the same effect as a vote "against"
the merger agreement.
Except as described in the immediately preceding paragraph, action on any
other matters that properly come before the special meeting will be approved if
a quorum is present and the votes in favor of the matter exceed the votes
against the matter. Presence in person or by proxy of a majority of the
outstanding shares of Merit common stock entitled to vote at the meeting will
constitute a quorum.
As of the record date, the directors and executive officers of Merit and
their affiliates beneficially owned a total of _______ shares, or _____%, of the
issued and outstanding shares of Merit common stock (exclusive of shares that
may be acquired pursuant to the exercise of outstanding stock options). To the
best of Synovus' management's knowledge, as of the record date, neither the
directors and executive officers of Synovus or their affiliates nor Synovus or
its subsidiaries beneficially owned any shares of Merit common stock.
Voting and Revocation of Proxies
The shares of Merit common stock represented by properly completed proxies
received at or before the time for the meeting will be voted as directed by the
shareholders unless revoked as described below. If no instructions are given,
executed proxies will be voted "FOR" approval of the merger agreement. Proxies
marked "FOR" approval of the merger agreement and executed but unmarked proxies
will be voted in the discretion of the persons named therein as to any proposed
adjournment of the meeting. Proxies which are voted "AGAINST" approval of the
merger agreement will not be voted in favor of any motion to adjourn the meeting
to solicit more votes in favor of the merger.
Shares held in street name that have been designated by brokers on proxy
cards as not voted with respect to a proposal ("broker non-votes") will not be
counted as votes cast on the proposal. Shares with respect to which proxies have
been marked as abstentions also will not be counted as votes cast on the
proposal. Shares with respect to which proxies have been marked as abstentions
and broker non-votes, however, will be treated as shares present for purposes of
determining whether a quorum is present.
The proposal to adopt the merger agreement is a "non-discretionary" item,
meaning that brokerage firms may not vote shares in their discretion on behalf
of a client if the client has not furnished voting instructions. Because the
proposal to adopt the merger agreement must be approved by the holders of at
least a majority of the outstanding shares of Merit common stock, abstentions
and broker non-votes will have the same effect as a vote against the merger at
the meeting. Accordingly, the Merit Board urges Merit's shareholders to
complete, date and sign the accompanying proxy and return it promptly in the
enclosed postage prepaid envelope.
If any other matters are properly presented at the meeting and voted upon,
the proxies solicited hereby will be voted on such matters at the discretion of
the proxy holders named therein. The Merit Board is not aware of any other
business to be presented at the meeting other than matters incidental to the
conduct of the meeting.
A shareholder's attendance at the meeting will not automatically
revoke his or her
15
proxy. A shareholder may, however, revoke a proxy any time before its exercise
by filing a written notice of revocation with, or by delivering a duly executed
proxy bearing a later date to, the Secretary of Merit at Merit's principal
executive offices before the meeting, or by attending the meeting and voting in
person. A shareholder's proxy will not be revoked by his or her death or
incapacity unless, before the shares are voted, the Secretary of Merit or other
person authorized to tabulate the votes receives notice of the death or
incapacity.
Solicitation of Proxies
Merit will pay for the cost of printing this proxy statement/prospectus and
pay all other costs of soliciting proxies. Directors, officers and other
employees of Merit or its subsidiaries may solicit proxies personally or by
telephone or facsimile. None of these people will receive any special
compensation for solicitation activities. Merit will arrange with brokerage
firms and other custodians, nominees and fiduciaries for the forwarding of
solicitation material to the beneficial owners of stock held of record by such
persons, and Merit will reimburse these record holders for their reasonable
out-of-pocket expenses.
Recommendation of the Merit Board
THE MERIT BOARD HAS UNANIMOUSLY ADOPTED THE MERGER AGREEMENT AND BELIEVES
THAT THE PROPOSED TRANSACTION IS FAIR TO AND IN THE BEST INTERESTS OF MERIT AND
ITS SHAREHOLDERS. THE MERIT BOARD UNANIMOUSLY RECOMMENDS THAT MERIT'S
SHAREHOLDERS VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
THE MERGER
The following is a description of certain provisions of the merger
agreement, the merger and the consequences of the merger. 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 appendices, in their
entirety.
The Merger Agreement
The Board of Directors of Merit has approved, and the proper officers of
Merit have executed and delivered, the merger agreement. The merger agreement
sets forth the terms of the merger and contains: (i) conditions precedent to
each party's obligations to consummate the merger; (ii) representations,
warranties and covenants of each of Merit and Synovus; (iii) provisions relating
to Merit's and Synovus' operations pending consummation of the merger; and (iv)
certain other provisions.
Terms of the Merger
On the effective date of the merger (which will be specified in the
certificate to be issued by the Secretary of State of Georgia causing the merger
to become effective), each issued and outstanding share of Merit common stock
will be converted into the right to receive
16
between 1.0537 and 1.4132 shares of Synovus common stock.
The exact exchange ratio will be determined based on the average closing
price of Synovus common stock during a 20-day measurement period ending five
business days before the special meeting. If the average closing price of
Synovus common stock during the measurement period is between $17.00 and $22.80
per share, the exchange ratio will be set so that each Merit shareholder will
receive $24.02 worth of Synovus common stock (valued at the average closing
price during the measurement period) in exchange for each share of Merit common
stock the shareholder owns.
If the average price of Synovus common stock during the measurement period
is less than $17.00 per share, the Board of Directors of Merit may terminate the
merger agreement. If the average price of Synovus common stock is less than
$17.00 and the merger is consummated, Merit shareholders will receive 1.4132
shares of Synovus common stock for each share of Merit common stock owned. If
the average price of Synovus common stock is more than $22.80 and the merger is
consummated, Merit shareholders will receive 1.0537 shares of Synovus common
stock for each share of Merit common stock owned. If the average price of
Synovus common stock during the measurement period is greater than $25.00 per
share, the Board of Directors of Synovus may terminate the merger agreement.
The following table provides examples of the operation of the exchange
ratio. The first column shows various possible average closing prices of Synovus
common stock. The second column shows the exchange ratio which would be
applicable based on the corresponding price of Synovus stock. The exchange ratio
is the number of shares of Synovus common stock which will be issued in exchange
for each share of Merit common stock. The third column shows the dollar value of
the Synovus common stock, valued at the average closing price of Synovus common
stock during the measurement period, which Merit shareholders will be entitled
to receive in exchange for each share of Merit common stock owned. Because the
market price of Synovus common stock fluctuates, you will not know when you vote
on the merger precisely what the shares of Synovus common stock will be worth
when issued in the merger.
Average Closing Price of
Synovus Stock during Equivalent Price Per
Measurement Period Exchange Ratio Merit Share
------------------------ -------------- ---------------------
$16.00 1.4132 $22.61
16.50 1.4132 23.32
17.00 1.4132 24.02
18.00 1.3347 24.02
19.00 1.2644 24.02
20.00 1.2012 24.02
21.00 1.1440 24.02
22.00 1.0920 24.02
22.80 1.0537 24.02
23.00 1.0537 24.24
23.50 1.0537 24.76
You should obtain current stock price quotations for Synovus common stock.
The market price of Synovus common stock will fluctuate before and after
completion of the
17
merger. No assurances can be given as to the market price of Synovus common
stock or Merit common stock at, or in the case of Synovus common stock after,
the effective date of the merger.
After the effective date, outstanding certificates representing shares of
Merit common stock will represent shares of Synovus common stock. Certificates
representing shares of Merit 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 which previously represented shares of Merit
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 are
entitled to receive upon their surrender to Synovus (except for the payment of
dividends, which is subject to the exchange of stock certificates as provided
herein).
Until the stock certificates nominally representing shares of Merit 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 the Merit common stock certificates will be paid (however, forms
1099 reporting the payment of such dividends will be filed with the Internal
Revenue Service and mailed to each shareholder); however, upon the surrender to
Synovus of the Merit common stock certificates, Synovus will pay to the record
holders the amount of dividends which previously had become payable, without
interest, upon the shares of Synovus common stock represented by the outstanding
Merit common stock certificates.
Synovus will not issue fractional shares of Synovus common stock in
connection with the merger. Instead, Synovus will pay cash (without interest) in
lieu of fractional shares, in an amount equal to such fractional part of a share
of Synovus common stock multiplied by 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.
The delivery of Synovus stock certificates and other amounts may be subject
to possible forfeiture under applicable escheat laws if Merit stock certificates
are not surrendered for exchange within the legally specified periods of time
which vary with the state of residence of the certificate holder. Therefore, we
urge all Merit shareholders to surrender their Merit 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 Merit common stock a letter of transmittal explaining
the procedure to be followed in exchanging certificates representing shares of
Merit common stock for certificates representing shares of Synovus common stock.
Until the letter of transmittal is received, shareholders of Merit should
continue to hold their certificates representing shares of Merit common stock.
Do not send any Merit stock certificates with your proxy card.
On the basis of the number of shares of Merit common stock which were
outstanding on the record date, a maximum of _________ shares of Synovus common
stock may be issued to the shareholders of Merit pursuant to the terms of the
merger agreement. In addition, Synovus will also issue a number of additional
shares of its common stock to three Merit
18
shareholders (the "Source Shareholders") pursuant to a contingent payment
obligation in connection with Merit's January, 1999 acquisition of Source
Capital Group I, Inc. The exact number of shares of Synovus common stock to be
issued to the Source Shareholders cannot be determined at this time, because it
will be based on the exchange ratio in this merger and the closing price of
Synovus common stock on the date of the closing of this merger; however, the
number of additional Synovus shares will likely not exceed 60,000 shares.
After the effective date, each outstanding Merit stock option will be
converted into an option to acquire shares of Synovus common stock. The exercise
price of the converted options and the number of shares subject to the converted
options will be adjusted in accordance with the exchange ratio.
Background of and Reasons for the Merger
In June 1998, Synovus announced the proposed acquisition of the Bank of
North Georgia, Alpharetta, Georgia. Bank of North Georgia was slightly larger
than Merit and was competing with Merit to a limited extent in North Fulton
County. One of Merit's banking subsidiaries, Mountain National Bank, had for
years maintained its principal correspondent relationship with Columbus Bank and
Trust Company, Columbus, Georgia, a subsidiary of Synovus. Accordingly, in early
June 1998, Merit's Chairman, J. Randall Carroll, contacted Murray Jones, the
Vice President of Correspondent Banking at Columbus Bank and Trust Company to
arrange a meeting to discuss Synovus' acquisition strategy for the metropolitan
Atlanta market. That meeting was held in Columbus, Georgia on June 9, 1998. Mr.
Carroll and Ronald H. Francis, President and Chief Financial Officer of Merit,
attended on behalf of Merit and Mr. Jones and Thomas J. Prescott, the Executive
Vice President and Chief Financial Officer of Synovus, attended on behalf of
Synovus. Merit's purpose in the meeting was to ascertain whether Synovus
intended to implement an acquisition strategy in the metropolitan Atlanta market
which would make Synovus a competitor of Merit. In early September of 1998,
representatives of Synovus contacted Messrs. Carroll and Francis to arrange for
a second meeting. After informing the Merit Board, a meeting was agreed to. On
September 15, 1998, Messrs. Carroll and Francis met with Messrs. Yancey,
Prescott, Deriso and Anthony in Columbus, Georgia and were asked to provide
these Synovus executives with information regarding Merit.
In October 1998, executives of Synovus contacted Messrs. Carroll and
Francis to arrange another meeting. On October 14, 1998, a meeting occurred at
the offices of Charter Bank and included Messrs. Carroll and Francis of Merit
and Messrs. Anthony and Prescott of Synovus. At this meeting, the Synovus
representatives indicated that they were interested in discussing a business
combination with Merit. However, no price terms or other terms and conditions
were discussed. Messrs. Carroll and Francis reported the substance of these
conversations to the Merit Board of Directors which authorized them to continue
discussions with Synovus if and when requested by Synovus to do so.
Approximately one week after this meeting, representatives of Synovus called
Messrs. Carroll and Francis and informed them that other business issues would
require them to suspend discussions with Merit until some later time. In January
1999, representatives of Synovus contacted Messrs. Carroll and Francis informing
them that Synovus was interested in reopening discussions regarding the
acquisition of Merit. On January 14, 1999, Messrs. Carroll and Francis met with
Messrs. Anthony and Prescott at Merit's offices in Tucker, Georgia to answer
additional questions regarding the business operations of Merit. At this time,
Messrs. Anthony and Prescott indicated that Merit would receive an offer from
Synovus within a
19
few weeks. On February 8, 1999, Synovus sent a written offer to Merit. At the
February meeting of the Merit Board, the Synovus offer was rejected because of a
lower than anticipated offering price. In rejecting this offer, the Merit Board
indicated to Messrs. Carroll and Francis the minimum price which they believed
would have to be paid for Merit. This minimum price was communicated to
representatives of Synovus in connection with the message that Synovus' offer
had been rejected.
On March 12, 1999, Synovus provided Merit with a proposed letter of intent
regarding the merger of Synovus with Merit. The Board of Directors of Merit and
its counsel reviewed and revised the letter of intent. On March 18, 1999, the
Board of Directors approved the terms of the letter of intent and authorized its
execution by Messrs. Carroll and Francis.
The letter of intent dated March 18, 1999 included a fixed exchange ratio
of 1.0529 Synovus shares for each Merit share. During the period from March 18
until June 28, 1999, the stock prices of large United States financial
institutions were erratic and generally lower than they had been during the
first quarter of 1999. This was especially true in connection with Synovus'
stock price. Therefore, during this period, negotiations occurred between
representatives of Merit and Synovus regarding the exchange ratio, among other
issues. Further, on May 26, 1999, representatives of Synovus met with the Merit
Board to discuss an employee benefit issue which had not been resolved in prior
negotiations between the two companies. On June 28, 1999, the Merit Board met
with its legal counsel and with a representative of its financial advisor, T.
Stephen Johnson & Associates, Inc., to consider and approve the Agreement and
Plan of Merger with Synovus.
Our Reasons for the Merger. Merit's Board of Directors has approved the
merger agreement and has determined that the merger is in the best interests of
Merit and its shareholders. The terms of the merger were the result of
arms'-length negotiations between representatives of Merit and representatives
of Synovus. Without assigning any relative or specific weights to the factors,
the Board of Directors of Merit considered the following material factors, among
others:
. the value of the consideration to be received by Merit
shareholders relative to the book value and earnings per share of
Merit common stock;
. information concerning the financial condition, results of
operations and business prospects of Synovus;
. the fact that following the merger, Mountain National Bank and
Charter Bank & Trust Co. would continue to operate under their
existing names and management teams;
. 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 and the potential future impact of a change in the
rules relating to pooling of interests accounting;
. the alternatives to the merger, including remaining an
independent institution;
20
. the competitive and regulatory environment for financial
institutions generally;
. the fact that the merger will enable Merit shareholders to
exchange their shares of Merit 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
. the opinion of T. Stephen Johnson & Associates, Inc. that the
consideration to be received by Merit shareholders as a result of
the merger is fair from a financial point of view.
The Merit Board believes that the financial services industry, including
banking, is becoming increasingly competitive and that the merger will enable
Mountain and Charter to better serve their customers, while providing Merit
shareholders with substantial benefits. The merger will provide opportunities
for the banks to offer customers more diverse products and services. Further,
because Synovus operates with a decentralized structure that allows its
affiliate banks to operate in an autonomous manner, the Merit Board also
believes that the same commitment to customer service now existing will continue
following the merger.
Each member of the Board of Directors of Merit has indicated that he
intends to vote his shares of Merit common stock in favor of the merger.
MERIT'S BOARD OF DIRECTORS RECOMMENDS THAT MERIT 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
T. Stephen Johnson & Associates, Inc. ("TSJ") is an investment banking and
financial services firm located in Roswell, Georgia. As part of its investment
banking business, TSJ engages in the review of the fairness of bank acquisition
transactions from a financial perspective and in the valuation of banks and
other businesses and their securities in connection with mergers, acquisitions
and other transactions. Neither TSJ nor any of its affiliates has a material
financial interest in Merit or Synovus. TSJ was selected to advise Merit's Board
of Directors based upon its familiarity with Merit, the regional community
banking industry and its knowledge of the banking industry as a whole. No
instructions were given or limitations imposed by the Merit Board of Directors
upon TSJ regarding the scope of its investigation or the procedures it followed
in rendering its opinion. Merit has agreed to pay TSJ $40,000 for its services.
At the meeting of the Merit Board on June 28, 1999, TSJ delivered its oral
opinion that the consideration to be received by the holders of Merit common
stock under the merger agreement is fair to such shareholders from a financial
point of view. TSJ rendered its written
21
opinion to the same effect (the "Fairness Opinion") to the Merit Board on
_____________, 1999. A copy of the Fairness Opinion, which sets forth certain
assumptions made, matters considered and limitations on the review undertaken,
is attached as Appendix "B" to this proxy statement/prospectus and should be
read in its entirety. The summary of the Fairness Opinion set forth herein is
qualified in its entirety by reference to the text of the Fairness Opinion.
In arriving at its Fairness Opinion, TSJ performed the merger analyses
described below. TSJ also reviewed certain publicly available business and
financial information relating to Merit and Synovus. TSJ also considered certain
financial and stock market data of Merit and Synovus, compared that data with
similar data for certain other publicly-held banks and bank holding companies
and considered the financial terms of certain other recent comparable community
bank acquisition transactions in the southeastern United States, as further
discussed below. TSJ also considered such other information, financial studies,
analyses and investigations and financial, economic and market criteria that it
deemed relevant, including the conversion of Merit options into Synovus options
and the additional Synovus common shares to be issued to the Source
Shareholders. In connection with its review, TSJ did not independently verify
the foregoing information and relied on such information as being complete and
accurate in all material respects. Financial forecasts prepared by Merit
management and submitted to TSJ were based on assumptions believed by TSJ to be
reasonable and to reflect currently available information, but TSJ did not
independently verify such information. TSJ did not make an independent
evaluation or appraisal of the assets of Merit or Synovus.
In connection with rendering the Fairness Opinion, TSJ performed a variety
of financial analyses, including those summarized below. The summary set forth
below does not purport to be a complete description of the analyses performed by
TSJ in this regard. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of these methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to summary
description. Accordingly, notwithstanding the separate factors summarized below,
TSJ believes that its analyses must be considered as a whole and that selecting
portions of its analyses and the factors considered by it, without considering
all analyses and factors, could create an incomplete view of the evaluation
process underlying its opinion. In performing its analyses, TSJ made numerous
assumptions with respect to industry performance, business and economic
conditions and other matters, many of which are beyond Merit's or Synovus'
control. The analyses performed by TSJ are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable than
suggested by such analyses. No company or transaction considered as a comparison
in the analyses is identical to Merit, Synovus or the merger. Accordingly, an
analysis of the results of such comparisons is not mathematical; rather, it
involves complex considerations and judgments concerning differences in
financial and operating characteristics of companies and other factors that
could affect the public trading value of the companies involved in such
comparisons. In addition, the analyses do not purport to be appraisals or
reflect the process by which or the prices at which businesses actually may be
sold or the prices at which any securities may trade at the present time or at
any time in the future.
Merger Analysis: The merger consideration to be received by Merit
shareholders is based on the defined exchange ratio for Synovus common shares.
The exact number of Synovus common shares into which each Merit common share is
to be converted is based on a conversion
22
table. The conversion table establishes a set per share value to be received for
each Merit common share equal to $24.024 per share as long as the 20-day average
closing price of the Synovus common shares used to determine the exchange ratio
is between $17.00 and $22.80 per share. Should the 20-day average closing price
of Synovus common shares be below $17.00, the exchange ratio will become fixed
and Merit may elect to terminate the transaction or accept the exchange ratio
calculated using $17.00. Should the 20-day average closing price of Synovus
common shares exceed $22.80, the exchange ratio will become fixed. In addition,
if the 20-day average closing price of Synovus exceeds $25.00, Synovus may
terminate the transaction or accept the exchange ratio using $22.80. TSJ
performed the merger analysis using the average 20-day closing price of Synovus
common shares from June 1, 1999 to June 28, 1999. At no time during that period
did Synovus common shares trade at a value outside of the $17.00 to $22.80
range. The 20-day average closing price calculated by TSJ for this analysis
resulted in an average Synovus common share price of $19.76 and an exchange
ratio of 1.2158 to 1. Based on this exchange ratio, the total value of the
transaction would equal $114.77 million ($24.0244 per Merit common share). This
total transaction value is 2.8759 times book value, 22.602 times trailing
earnings, 36.92 percent of assets and 45.84 percent of deposits.
Comparable Transactions Analysis: TSJ reviewed the merger as of June 28,
1999, for the purpose of comparing those values with purchase premiums paid in
all 110 transactions that were announced since January 1998 involving selling
institutions headquartered in the states of Alabama, Florida, Georgia, South
Carolina and Tennessee, of which 18 all stock transactions involving selling
institutions with total assets between $100 million and $500 million and total
equity capital to total assets exceeding 10.00% were considered to be comparable
transactions. A listing of these transactions is included with the Fairness
Opinion. On average, the comparable transactions reported an announced deal
price to book value of 2.7402 times, an announced deal price to earnings of
23.14 times, an announced deal price to assets of 32.68 percent and an announced
deal price to deposits of 38.65 percent. The merger compares favorably with
these transactions with the deal price to book value, the deal price to
earnings, the deal price to assets and the deal price to deposits each ranking
well within the range of the comparable transactions.
Dividend Analysis: TSJ reviewed the historical dividend payouts at Merit in
an effort to equate such payouts to the current dividend payout at Synovus. The
Merit shareholders received $.22 per common share during the last twelve months.
Assuming the current Synovus dividend payout of $.36 per share, the Merit
shareholders would have received the equivalent of $.44 per current Merit share,
based on an assumed exchange ratio of 1.2158 to 1.
Conditions to the Merger
The obligations of Synovus and Merit to effect the merger are subject to
the satisfaction prior to the effective date of the following conditions:
. approval of the merger agreement and the transactions
contemplated by that agreement by the affirmative vote of the
holders of a majority of Merit common stock;
. approval of the merger agreement and the transactions
contemplated by that
23
agreement by the Federal Reserve and the Georgia Banking
Department and the 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 in the
merger agreement or immediately 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 Merit;
. the satisfaction of all other statutory or regulatory
requirements which are necessary to the consummation of the
transactions contemplated by the merger agreement;
. neither Synovus nor Merit 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;
. 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 SEC or any
other regulatory authority;
. receipt by Synovus and Merit of an opinion from KPMG LLP 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 of the Internal Revenue Code;
. receipt by Synovus and Merit from each other of a certificate to
the effect that the representations made by management of such
party to KPMG LLP in delivery of the opinion referenced
immediately above were true, correct and complete when made; and
. receipt by Synovus of a letter dated as of the effective date of
the merger from KPMG LLP 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 merger of the following
additional conditions:
. each of the representations, warranties and covenants of Merit
contained in the merger agreement will be true on, or complied
with by, the effective date in all material respects as if made
on such date (or on the date when made in the case of any
representation or warranty which specifically relates to an
earlier date) and Synovus will have received a certificate signed
by the Chief Executive Officer of
24
Merit, dated the effective date, to such effect;
. 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 Merit or its subsidiaries: (a) which, in the reasonable
judgment of Synovus, would have a material adverse effect upon
Merit 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;
. Synovus will not have learned of any fact or condition with
respect to the business, properties, assets, liabilities, deposit
relationships or earnings of Merit which, in the reasonable
judgment of Synovus, is materially 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 Merit;
. J. Randall Carroll and Ronald H. Francis will have entered into
employment agreements with Synovus;
. on the effective date, Mountain National Bank and Charter Bank &
Trust Co. will have a CAMELS rating of at least 2 and a
Compliance Rating and a Community Reinvestment Act Rating of at
least Satisfactory;
. on the effective date, Merit will have a loan loss reserve of at
least 1.50% of loans which will be adequate in all material
respects under generally accepted accounting principles
applicable to banks;
. Merit will have delivered to Synovus certain environmental
reports;
. the results of any regulatory exam of Merit will be reasonably
satisfactory to Synovus; and
. each of Merit's officers and directors will have delivered a "no
claims" letter to Synovus.
The obligation of Merit to effect the merger is subject to the satisfaction
prior to the effective date of the merger of the following additional
conditions:
. each of the representations, warranties and covenants of Synovus
contained in the merger agreement will be true on, or complied
with by, the effective date in all material respects as if made
on such date (or on the date when made in the case of any
representation or warranty which specifically relates to an
earlier date) and Merit will have received a certificate signed
by the Chief Executive Officer of Synovus, dated the effective
date, to such effect;
25
. 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;
. 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 Merit, 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;
. Merit 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 Merit, is materially at variance with one or more of
the warranties or representations set forth in the merger
agreement or which, in the reasonable judgment of Merit, has or
will have a material adverse effect on Synovus;
. Merit shall have received from the Deputy General Counsel of
Synovus an opinion to the effect that the shares of Synovus
common stock to be issued in the merger are duly authorized,
validly issued, fully paid, nonassessable, and not subject to any
preemptive rights; and
. Merit shall have received a letter from TSJ dated not more than
five business days prior to the date of the proxy
statement/prospectus, to the effect that, in the opinion of such
firm, the exchange ratio is fair from a financial point of view to
the holders of Merit common stock.
Conduct of Business of Merit and Synovus Pending the Merger
The merger agreement provides that prior to the effective date of the
merger, Merit and its subsidiaries shall conduct their business only in the
ordinary course and will not, without the prior written consent of Synovus:
. issue any options to purchase capital stock or issue any shares
of capital stock, other than shares of Merit common stock issued
in connection with the exercise of currently outstanding options
to purchase shares of Merit common stock;
. declare, set aside, or pay any dividend or distribution with
respect to the capital stock of Merit or its subsidiaries, other
than normal and customary quarterly cash dividends in accordance
with past practices;
. directly or indirectly redeem, purchase or otherwise acquire any
capital stock of
26
Merit or its subsidiaries;
. effect a split or reclassification of the capital stock of Merit
or a recapitalization of Merit or its subsidiaries;
. amend the Articles of Incorporation or bylaws of Merit or its
subsidiaries;
. grant any increase in the salaries payable or to become payable
by Merit or its subsidiaries or to any employee other than
normal, annual salary increases to be made with regard to the
employees of Merit or its subsidiaries;
. 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 Merit or its subsidiaries, except to the extent such
changes are required by applicable laws or regulations;
. enter into, terminate, modify or amend any contract, lease or
other agreement with any officer or director of Merit or its
subsidiaries 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, other than in the ordinary
course of its banking business;
. incur or assume any liabilities, other than in the ordinary
course of its business;
. dispose of any of its assets or properties, other than in the
ordinary course of its business;
. 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 subsidiaries with any bank 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
Merit 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);
. take any other action or permit its subsidiaries to take any
other action not in the ordinary course of its business; or
. directly or indirectly agree to take any of the foregoing
actions.
The merger agreement also provides that without the prior written
consent of Merit, Synovus will not:
. declare, set aside or pay any cash dividend on its common stock
other than normal
27
and customary cash dividends in accordance with Synovus' current
dividend policy; or
. 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.
Regulatory Approvals
As indicated above, consummation of the merger and the transactions
contemplated by the merger agreement 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 29, 1999.
The merger has not yet been approved by the Federal Reserve or the Georgia
Banking Department. The merger cannot be consummated for 30 days after approval
thereof by the Federal Reserve, although this period may be shortened to 15 days
by the U.S. Attorney General. During this 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 Merit 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 Merit would seek the
approval or action. There can be no assurance as to whether or when any other
approval or action, if required, could be obtained.
Waiver and Amendment
Prior to the effective date of the merger, any provision of the merger
agreement may be waived by the party entitled to the benefits of such provision
or by both 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 Merit after approval of their
respective Boards of Directors.
Termination
The merger agreement may be terminated prior to the effective date of the
merger, either before or after its approval by the shareholders of Merit:
. by the mutual consent of Synovus and Merit, if the Board of
Directors of each so determines by vote of a majority of the
members of its entire Board;
. by Synovus or Merit 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
28
the failure to meet the conditions precedent is due to a breach
of the merger agreement by the party seeking to terminate;
. by Synovus or Merit, 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, 1999
unless the failure to so consummate by such time is due to the
breach of the merger agreement by the party seeking to terminate;
. by Merit, if the average closing price of Synovus common stock on
the NYSE during the 20 trading days ending on the fifth business
day preceding the date of the special meeting is less than $17.00
per share; or
. by Synovus, if the average closing price of Synovus common stock
on the NYSE during the same period is more than $25.00 per share.
In the event of the termination and abandonment of the merger agreement
pursuant to the provisions described above, the merger agreement will become
void and have no effect, except that provisions relating to confidentiality and
expenses shall survive any such termination. Merit shall be entitled to a cash
payment from Synovus for Merit's reasonable out-of-pocket expenses relating to
the merger in an amount not to exceed $150,000, which amount shall not be deemed
an exclusive remedy or liquidated damages, in the event of the termination of
the merger agreement due to: (i) the failure by Synovus to satisfy any of its
representations, warranties or covenants set forth in the merger agreement; or
(ii) withdrawal of the fairness opinion of TSJ, other than a withdrawal due to
materially inaccurate or fraudulent information having been provided by Merit to
TSJ. Synovus shall be entitled to a cash payment from Merit for Synovus'
reasonable out-of-pocket expenses relating to the merger in an amount not to
exceed $150,000, which amount shall not be deemed an exclusive remedy or
liquidated damages, in the event of the termination of the merger agreement due
to the failure by Merit to satisfy any of its representations, warranties or
covenants set forth in the merger agreement.
Interests of Certain Persons in the Merger
No officer or director of Merit, 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:
. the ownership by such person of Merit common stock;
. the continued employment by such person with Synovus after
consummation of the merger;
. the service by such person as a director of Mountain National
Bank or Charter Bank & Trust Co. after consummation of the
merger;
. after the effective date of the merger, the eligibility of such
persons to participate in the Synovus Financial Corp. Director
and/or Employee Stock Purchase Plans or
29
Synovus' welfare, incentive and benefit plans; and
. certain rights to indemnification.
The Merit Board was aware of these interests and considered them, among
other matters, in approving the merger agreement and related transactions.
Pursuant to the merger agreement, for a period of three years after the
effective date, Synovus will indemnify, defend and hold harmless each person
entitled to indemnification from Merit 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 Merit's Articles of Incorporation and bylaws.
Officers and employees with outstanding stock options under any Merit stock
option plan will have their options converted into options with respect to
Synovus common stock in accordance with the exchange ratio applicable to the
merger. All other provisions of the stock option plans of Merit will remain in
effect.
In addition, as a condition to the merger, Synovus has agreed to enter into
an employment agreement with J. Randall Carroll, Chairman of the Board and Chief
Executive Officer of Merit. Pursuant to the employment agreement, Mr. Carroll
will be elected as Chairman, President and Chief Executive Officer of Mountain
National Bank. The agreement is for a five-year term and provides that Mr.
Carroll will be compensated for his services at an annual rate of base
compensation of $168,000 per year and will be eligible to participate in the
Synovus incentive bonus plan. The employment agreement also provides that Mr.
Carroll 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 five years from the effective date. Finally,
the employment agreement provides that Mr. Carroll 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 fifth
anniversary of the effective date of the merger.
Additionally, as a condition to the merger, Synovus has agreed to enter
into an employment agreement with Ronald H. Francis, President of Merit.
Pursuant to the employment agreement, Mr. Francis will be elected as President
and Chief Executive Officer of Charter Bank & Trust Co. The agreement is for a
five-year term and provides that Mr. Francis will be compensated for his
services at an annual rate of base compensation of $165,000 per year and will be
eligible to participate in the Synovus incentive bonus plan. The employment
agreement also provides that Mr. Francis 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 five years
from the effective date. Finally, the employment agreement provides that Mr.
Francis 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 fifth anniversary of the effective date of
the merger.
30
Synovus has also agreed to enter into its standard change of control
agreement with Messrs. Carroll and Francis. The agreement provides severance pay
and continuation of certain benefits in the event of a change of control of
Synovus. In order to receive benefits under the agreement, the executive's
employment must be terminated involuntarily and without cause, whether actually
or constructively, 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:
. 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;
. the persons serving as directors of Synovus as of the date of the
change of control 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;
. 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
. 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 MERIT SHAREHOLDERS - The Rights Plan." Under the change
of control agreement, severance pay would equal two times current
base salary and bonus, with bonus being defined as the average
bonus paid in 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 Service excise tax
that applies to certain change of control agreements, the
executive 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.
31
Employee Benefits
Synovus has agreed in the merger agreement that, following the effective
date, Synovus will provide generally to officers and employees of Merit and its
subsidiaries employee benefits, including without limitation pension benefits,
health and welfare benefits, life insurance and vacation and severance
arrangements, on terms and conditions which, when taken as a whole, are
substantially similar to those currently provided by Merit and its subsidiaries.
As soon as administratively and financially practicable following the effective
date, Synovus has agreed to provide generally to officers and employees of Merit
and its subsidiaries employee benefits which, when taken as a whole, are
substantially similar to those provided by Synovus and its subsidiaries to their
similarly situated officers and employees.
Tax Opinion
The following is a summary description of the material anticipated federal
income tax consequences of the merger generally applicable to the shareholders
of Merit and to Synovus and Merit. This summary is not intended to be a complete
description of all of the federal income tax consequences of the merger. No
information is provided with respect to the tax consequences of the merger under
any other tax laws, including applicable state, local and foreign tax laws. In
addition, the following discussion may not be applicable with respect to certain
specific categories of shareholders, including but not limited to persons who
are corporations, trusts, dealers in securities, financial institutions,
insurance companies or tax exempt organizations; persons who are not United
States citizens or resident aliens or domestic entities (partnerships or
trusts); persons who are subject to alternative minimum tax (to the extent that
tax affects the tax consequences of the merger) or are subject to the "golden
parachute" provisions of the Internal Revenue Code (to the extent that tax
affects the tax consequences of the merger); persons who acquired Merit common
stock pursuant to employee stock options or otherwise as compensation if such
shares are subject to any restriction related to employment; persons who do not
hold their shares as capital assets; or persons who hold their shares as part of
a "straddle" or "conversion transaction." No ruling has been or will be
requested from the IRS with respect to the tax effects of the merger. The
federal income tax laws are complex, and a shareholder's individual
circumstances may affect the tax consequences to the shareholder.
Synovus and Merit have received an opinion from KPMG LLP, to the effect
that:
. the merger will constitute a tax-free reorganization under
Section 368(a) of the Internal Revenue Code;
. the basis of Synovus common stock to be received by each Merit
shareholder will be the same as the basis of Merit common stock
being surrendered;
. the holding period of Synovus common stock will include the
holding period of the Merit common stock being exchanged,
provided that the Merit common stock is held as a capital asset
at the effective date of the merger; and
. that, upon consummation of the merger, no gain or loss will be
recognized by the
32
shareholders of Merit upon their receipt of shares of Synovus
common stock: (a) with the exception of any income or loss that
will be recognized by any Merit 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; and (b)
except to the extent that the share purchase Rights, which are
described on pages 37 through 41 of this proxy
statement/prospectus, are determined to be other property
within the meaning of Section 356 of the Internal Revenue
Code, as described on pages 9 and 10 of the opinion,
which is attached hereto as Appendix "C." The tax
opinion was issued on July 16, 1999. The tax opinion is based
upon certain assumptions and representations by the managements
of Synovus and Merit (including, in general, the absence of any
plan or intention of Merit'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 LLP
serves Synovus as independent auditors.
All Merit 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 income tax laws.
Accounting Treatment
It is anticipated that the merger will be accounted for as a pooling of
interests for financial reporting purposes. Under such accounting method,
holders of Merit common stock will be deemed to have combined their existing
voting common stock interest with that of holders of Synovus common stock by
exchanging their shares for shares of Synovus common stock. Accordingly, the
book value of the assets, liabilities and shareholders' equity of Merit, as
reported on its consolidated balance sheet, will be carried over to the
consolidated balance sheet of Synovus, and no goodwill will be created. Synovus
will be able to include in its consolidated income the consolidated income of
Merit for the entire fiscal year in which the merger occurs; however, certain
expenses incurred to effect the merger must be treated by Synovus as current
charges against income rather than adjustments to its balance sheet. The
unaudited pro forma financial information contained in this proxy
statement/prospectus has been prepared using the pooling of interests method of
accounting. The merger agreement provides that consummation of the merger is
subject to the receipt by Synovus of a letter from KPMG LLP to the effect that
the merger will qualify as a pooling of interests under generally accepted
accounting principles and applicable rules of the SEC if consummated in
accordance with the merger agreement.
Expenses
The merger agreement provides that Synovus and Merit will each pay its own
expenses in connection with the merger and related transactions, 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
33
freely transferable under the Securities Act of 1933, except for shares issued
to any shareholder who may be deemed to be an "affiliate" of Merit for purposes
of Rule 145 under the Securities Act as of the date of the Merit 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 Merit generally include individuals or entities that
control, are controlled by or are under common control with Merit and may
include certain officers and directors of Merit as well as principal
shareholders of Merit.
Merit 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 Merit
to enter into an agreement with Synovus providing that such person will not
sell, pledge, transfer or otherwise dispose of shares of Merit 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 Securities and
Exchange 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 Merit. This
proxy statement/prospectus does not 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 Merit pursuant to the merger agreement will be listed on
the NYSE.
DESCRIPTION OF STOCK AND EFFECT OF MERGER
ON RIGHTS OF MERIT SHAREHOLDERS
If the merger is consummated, Merit shareholders will become shareholders
of Synovus.
The following sets forth, in summary form, a comparison of certain rights
of shareholders owning Synovus common stock and shareholders owning Merit common
stock.
34
<TABLE>
<CAPTION>
Synovus Merit
<S> <C>
. Ten votes for each share held, except . One vote for each share held
in certain limited circumstances
described below
. No cumulative voting rights in the . No cumulative voting rights in the
election of directors, meaning that the election of directors, meaning that the
holders of a plurality of the shares holders of a plurality of the shares
elect the entire Board of Directors elect the entire Board of Directors
. Dividends may be paid from funds . Dividends may be paid from funds
legally available, subject to contractual legally available, subject to contractual
and regulatory restrictions and regulatory restrictions
. Right to participate pro rata in . Right to participate pro rata in
distribution of assets upon liquidation distribution of assets upon
liquidation
. No pre-emptive or other rights to . No pre-emptive or other rights to
subscribe for any additional shares or subscribe for any additional shares or
securities securities
. No conversion rights . No conversion rights
. Directors serve staggered 3-year terms . Directors serve one-year terms
. Certain corporate actions, including . Certain corporate actions, including
business combinations, require the business combinations with "interested
affirmative action or vote of 66-2/3% parties," require the affirmative action or
of the votes entitled to be cast by the vote of 75% of the votes entitled to be
shareholders of all voting stock cast at the meeting.
. No preferred stock is authorized . No preferred stock is authorized
. Common Stock Purchase Rights trade . No comparable provision
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 271,409,573 shares were outstanding on June 30, 1999. 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
35
STOCK AND EFFECT OF MERGER ON RIGHTS OF MERIT SHAREHOLDERS - Voting
Rights - Certain Anti-Takeover Effects - The Voting Amendment"; " - The Rights
Plan"; " Staggered Board of Directors"; and " - Evaluation of Business
Combinations."
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 Merit 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 SEC and is listed on the
NYSE,
36
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
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 Merit 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. 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 Merit 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 divi dends or upon liquidation. Synovus
common stock does not carry any pre-emptive rights enabling a holder to
subscribe for or receive shares of Synovus common stock.
The Rights Plan
Synovus has adopted a Shareholder Rights Plan pursuant to which holders of
shares of Synovus common stock also hold rights to purchase securities that may
be exercised upon the occurrence of certain "triggering events." Shareholder
rights plans such as Synovus' plan are intended to encourage potential hostile
acquirors of a target corporation to negotiate with the board of directors of
the target corporation in order to avoid occurrence of the "triggering events"
specified in such plans. Shareholder rights plans are intended to give the
directors of a target corporation the opportunity to assess the fairness and
appropriateness of a proposed transaction in order to determine whether or not
it is in the best interests of the corporation and its shareholders.
Notwithstanding these purposes and intentions of shareholder rights plans, such
plans, including that of Synovus, could have the effect of discouraging a
business combination that shareholders believe to be in their best interests.
The provisions of Synovus' Shareholder Rights Plan are discussed below.
On April 27, 1999, the Board of Directors of Synovus adopted a Shareholder
Rights Plan pursuant to a Rights Agreement and authorized and declared a
dividend of one Common Stock Purchase Right (a "Right") with respect to each
outstanding share of Synovus common
37
stock outstanding on May 4, 1999, and to each holder of common stock issued
thereafter until the Distribution Date (as hereinafter defined) or the
expiration or earlier redemption of the Rights. Each Right entitles the
registered holder to purchase from Synovus at any time after the Distribution
Date one share of common stock at a price of $225.00 per share, subject to
adjustment (the "Purchase Price"). The description and terms of the Rights are
set forth in the Rights Agreement between Synovus and State Street Bank and
Trust Company, as Rights Agent.
Initially, the Rights will attach to all certificates of outstanding shares
of common stock, and no separate Right Certificates (as hereinafter defined)
will be distributed. The Rights will become exercisable and separate from the
shares of common stock upon the earlier to occur of (i) ten days after the date
(the "Stock Acquisition Date") of a public announcement that a person or group
of affiliated or associated persons has acquired beneficial ownership of 15% or
more of the outstanding common stock (such person or group being hereinafter
referred to as an "Acquiring Person"); or (ii) ten business days (or such later
date as the Board may determine) following the commencement of, or announcement
of an intention to make, a tender offer or exchange offer, the consummation of
which would result in a person or group becoming the beneficial owner of 15% or
more of the outstanding common stock (the earlier of such dates in clauses (i)
and (ii) being called the "Distribution Date"). Shares of common stock
beneficially owned by Synovus or any subsidiary of Synovus will not be
considered outstanding for purposes of calculating the percentage ownership of
any person.
Each of the following persons will not be deemed to be an Acquiring Person
even if they have acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the outstanding common stock: (i) Synovus, any
subsidiary of Synovus, or any employee benefit 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 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 common stock unless and until such person
shall become the beneficial owner of any additional shares of common stock; and
(iv) any person who as of the Record Date was the beneficial owner of 15% or
more of the outstanding common stock unless and until such person shall become
the beneficial owner of any additional shares of common stock.
Until the Distribution Date (or earlier redemption or expiration of the
Rights), (i) the Rights will be evidenced by the certificates for the common
stock, (ii) the Rights will be transferred with, and only with, the shares of
common stock, (iii) new common stock certificates issued after the Record Date
upon transfer or new issuance of shares of common stock will contain a notation
incorporating the Rights Agreement by reference, and (iv) the surrender for
transfer of any certificates for shares of common stock outstanding as of the
Record Date, even without such notation, will also constitute the transfer of
the Rights associated with the shares of common stock represented by such
certificate. As soon as
38
practicable following the Distribution Date, separate certificates evidencing
the Rights (collectively, the "Right Certificates") will be mailed to holders of
record of the shares of common stock as of the close of business on the
Distribution Date, and such separate Right Certificates alone will evidence the
Rights. The Rights are not exercisable until the Distribution Date. The Rights
will expire at the close of business on May 5, 2009, unless earlier redeemed by
Synovus as described below.
If any person becomes an Acquiring Person, each holder of a Right will
thereafter have the right (the "Flip-In Right") to receive upon payment of the
Purchase Price, shares of common stock (or in certain circumstances, cash,
property or other securities of Synovus) having a value equal to two times the
Purchase Price of the Right. Notwithstanding the foregoing, all Rights that are,
or were, beneficially owned by an Acquiring Person or any affiliate or associate
thereof will be null and void and not exercisable.
If, at any time on or after the Stock Acquisition Date, (i) Synovus is
acquired in a merger or other business combination transaction in which the
holders of all of the outstanding shares of common stock immediately prior to
the consummation of the transaction are not the holders of all of the surviving
corporation's voting power, or (ii) more than 30% of Synovus' assets, cash flow
or earning power is sold or transferred other than in the ordinary course of
Synovus' business, then each holder of a Right (except Rights which have
previously been voided as set forth above) shall thereafter have the right (the
"Flip-Over Right") to receive, in lieu of shares of common stock and upon
exercise and payment of the Purchase Price, common shares of the acquiring
company having a value equal to two times the Purchase Price. If a transaction
would otherwise result in a holder's having a Flip-In as well as a Flip-Over
Right, then only the Flip-Over Right will be exercisable. If a transaction
results in a holder's having a Flip-Over Right subsequent to a transaction
resulting in a holder's having a Flip-In Right, a holder will have Flip-Over
Rights only to the extent such holder's Flip-In Rights have not been exercised.
The Purchase Price payable, and the number of shares of 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 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 subscription rights or warrants (other
than those referred to above). However, no adjustment in the Purchase Price will
be required until cumulative adjustments require an adjustment of at least 1%.
The number of outstanding Rights and the number of shares of common stock
issuable upon exercise of each Right are also subject to adjustment in the event
of a stock split of the common stock or a stock dividend on the common stock
payable in common stock or subdivisions, consolidations or combinations of the
common stock occurring, in any such case, prior to the Distribution Date.
At any time after a Person becomes an Acquiring Person and before the
acquisition by a
39
Person of 50% or more of the outstanding common stock of Synovus, the Board of
Directors may, at its option, issue common stock or common stock equivalents of
Synovus in mandatory redemption of, or in exchange for, all or part of the then
outstanding exercisable Rights (other than Rights owned by such Acquiring Person
which would become null and void) at an exchange ratio of one share of common
stock, or common stock equivalents equal to one share of common stock, per
Right, subject to adjustment.
To the extent that, after the triggering of Flip-In Rights, insufficient
shares of common stock are 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 is not required to issue fractional shares of common stock 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 value of share of common stock. Following
the triggering of the Flip-In Rights, Synovus will not be required to issue
fractional shares of common stock 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 common stock.
At any time prior to the Distribution Date, the Board of Directors of
Synovus may redeem all, but not less than all, of the then outstanding Rights at
a price of $.001 per Right (the "Redemption Price"). The redemption of the
Rights may be made effective at such time, on such basis and with such
conditions as the Board of Directors in its sole discretion may establish.
Immediately upon the action of the Board of Directors ordering redemption of the
Rights, the right to exercise the Rights will terminate and the only right of
the holders of Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, 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' shares of common stock. If the
Rights should become exercisable, shareholders, depending on then existing
circumstances, may recognize taxable income.
Prior to the Stock Acquisition Date, the Rights Agreement generally may be
amended by Synovus without the consent of the holders of the Rights or the
common stock. On or after the Stock Acquisition Date, Synovus may amend the
Rights Agreement only to (i) cure any ambiguity, (ii) correct or supplement any
provision which may be defective or inconsistent with the other provisions of
the Rights Agreement, or (iii) change or supplement the Rights Agreement in any
other manner which Synovus may deem necessary or desirable, provided that no
amendment shall adversely affect the interests of the holders of Rights (other
than any interest of an Acquiring Person or an affiliate or associate of an
Acquiring Person).
A copy of the Rights Agreement has been filed with the SEC as an exhibit to
Synovus' Registration Statement on Form 8-A with respect to the Rights filed
with the SEC. This
40
Registration Statement and the Rights Agreement are incorporated by reference in
this proxy statement/prospectus, and reference is made to them for the complete
terms of the Rights Agreement and the Rights. 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 Synovus common stock issued to the present shareholders of Merit.
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 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
the corporation or its subsidiaries are located, and any other factors the Board
of Directors deems pertinent.
Merit Common Stock
The authorized capital stock of Merit consists of 10,000,000 shares of
common stock, $2.50 par value. As of June 30, 1999, 4,777,316 shares of Merit
common stock were issued and outstanding.
41
Holders of Merit common stock are entitled to one vote per share on all
matters to be voted on by shareholders.
Holders of shares of Merit common stock are entitled to share ratably in
such dividends as may be declared by the Board of Directors and paid by Merit
out of funds legally available therefor and to share pro rata in the
distribution to shareholders upon dissolution of Merit.
Holders of Merit common stock do not have pre-emptive rights. Holders of
Merit common stock do not have conversion rights, and there are no redemption
provisions with respect to such shares. All outstanding shares of Merit common
stock are fully paid and nonassessable.
The preceding descriptive information supplied herein concerning Synovus
common stock and Merit common stock outlines certain provisions of Synovus'
Articles of Incorporation and bylaws, Merit's Articles of Incorporation and
bylaws and certain statutes regulating the rights of holders of Synovus and
Merit 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 Merit and the laws of the State of Georgia.
No Dissenters' Rights
Holders of Merit common stock do not have dissenters' rights of appraisal
with respect to the merger under the Georgia Business Corporation Code because
Merit common stock is listed on the Nasdaq National Market.
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, 1998 (which incorporates certain portions of
Synovus' 1998 Annual Report to Shareholders and its Proxy
Statement for its Annual Meeting of Shareholders held on April
22, 1999).
2. Synovus' Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999.
3. Synovus' Current Reports on Form 8-K dated February 26, 1999,
March 15, 1999 and April 27, 1999.
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'
42
Annual Report on Form 10-K for the year ended December 31, 1998 which is
incorporated herein by reference. See "WHERE YOU CAN FIND MORE INFORMATION."
Shareholders desiring copies of such documents may contact Synovus at its
address or phone number indicated under "WHERE YOU CAN FIND MORE INFORMATION."
DESCRIPTION OF MERIT
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 Merit:
1. Merit's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 (which incorporates certain portions of Merit's
Proxy Statement for its Annual Meeting of Shareholders held on
May 11, 1999).
2. Merit's Quarterly Report on Form 10-Q for the quarter ended March
31, 1999.
3. Merit's Current Report on Form 8-K dated June 28, 1999.
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 Merit is
incorporated by reference or set forth in Merit's Annual Report on Form 10-K for
the year ended December 31, 1998 which is incorporated herein by reference. See
"WHERE YOU CAN FIND MORE INFORMATION." Shareholders desiring copies of such
documents may contact Merit at its address or phone number indicated under
"WHERE YOU CAN FIND MORE INFORMATION."
REGULATORY MATTERS
General
As a bank holding company, each of Synovus and Merit is subject to
regulation under the Bank Holding Company Act, and to inspection, examination
and supervision by the Federal Reserve. Under the Bank Holding Company Act, bank
holding companies generally may not acquire the ownership or control of more
than 5% of the voting shares or substantially all the assets of any company,
including a bank, without the Federal Reserve's prior approval. In addition,
bank holding companies generally may engage, directly or indirectly, only in
banking and such other activities as are determined by the Federal Reserve to be
closely related to banking.
Each of Synovus' and Merit's affiliate national banking associations are
subject to regulation and examination primarily by the Office of the Comptroller
of the Currency ("OCC") and, secondarily, by the FDIC and the Federal Reserve.
Each of Synovus' and Merit's state-chartered banks are subject to primary
federal regulation and examination by the
43
FDIC and, in addition, are regulated and examined by their respective state
banking departments.
Numerous other federal and state laws, as well as regulations promulgated
by the Federal Reserve, the state banking regulators, the OCC and the FDIC
govern almost all aspects of the operations of the banks.
Dividends
Under the laws of the State of Georgia, each of Synovus and Merit, as
business corporations, may declare and pay dividends in cash or property unless
the payment or declaration would be contrary to restrictions contained in its
Articles of Incorporation, and unless, after payment of the dividend, it would
not be able to pay its debts when they become due in the usual course of its
business or its total assets would be less than the sum of its total
liabilities. Synovus and Merit are also subject to certain regulatory capital
restrictions that limit the amount of cash dividends that they may pay.
Additionally, Synovus is subject to certain contractual restrictions that limit
the amount of cash dividends it 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 sources of funds for Merit's payment of
dividends to its shareholders are dividends to Merit from its banking
affiliates, one of which is a national bank and the other of which is a Georgia
state chartered bank. Various federal and state statutory provisions and
regulations limit the amount of dividends that the subsidiary banks of Synovus
and Merit 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 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
44
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 at least 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 1999 without obtaining regulatory approval.
Under restrictions imposed under federal and state laws, Merit's subsidiary
banks could declare aggregate dividends to Merit of approximately $9.9 million
during 1999 without obtaining regulatory approval.
Capital Requirements
Synovus and Merit 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 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 of 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").
The Federal Reserve also requires certain bank holding companies that engage in
trading activities to adjust their risk-based capital to take into consideration
market risk that may result from movements in market prices of covered trading
positions in trading accounts, or from foreign exchange or commodity positions,
whether or not in trading accounts, including changes in interest rates, equity
prices, foreign exchange rates or commodity prices. Any capital required to be
maintained pursuant to these provisions may consist of new "Tier 3 Capital"
consisting of certain short term subordinated debt. In addition, the Federal
Reserve has issued a policy statement, pursuant to which a bank holding
45
company that is determined to have weaknesses in its risk management processes
or a high level of interest rate risk exposure may be required to hold
additional capital.
The Federal Reserve has also 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, 1999, Synovus' total capital ratio was 13.62%, its Tier 1
Capital ratio was 12.36% and its Tier 1 leverage ratio was 10.71%. Assuming the
merger, and Synovus' other pending acquisitions, had been consummated on March
31, 1999, the total capital ratio of Synovus would have been 13.67%, its Tier 1
Capital ratio would have been 12.41% and its Tier 1 leverage ratio would have
been 10.65%. Each of these ratios exceeds the current requirements under the
Federal Reserve's capital guidelines.
At March 31, 1999, Merit's total capital ratio was 18.06%, its Tier 1
Capital ratio was 16.81% and its Tier 1 leverage ratio was 13.36%. Each of these
ratios exceeds the current requirements under the Federal Reserve's capital
guidelines.
Each of Synovus' and Merit's banking subsidiaries is subject to similar
risk-based and leverage capital requirements adopted by its applicable federal
banking agency, and each was in compliance with the applicable minimum capital
requirements as of March 31, 1999.
Failure to meet capital guidelines could subject a bank to a variety of
enforcement 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."
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 provides that any financial
institution whose deposits are insured by the FDIC
46
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 have adopted regulations setting forth a five-tier scheme
for 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: (i) 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%); (ii) 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%); (iii) 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%); (iv) 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
(v) 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 (i) after notice and opportunity for
hearing or response, that the institution is in an unsafe or unsound condition
or (ii) 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
47
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 Federal Deposit Insurance Act, 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 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.
48
LEGAL MATTERS
The validity of the Synovus common stock to be issued in connection with
the merger will be passed upon by Kathleen Moates, Senior Vice President and
Deputy General Counsel of Synovus. Ms. Moates beneficially owns shares of
Synovus common stock and options to purchase additional shares of Synovus common
stock. As of the date of this proxy statement/prospectus, the number of shares
Ms. Moates owns or has the right to acquire upon exercise of her options is, in
the aggregate, less than 0.1% of the outstanding shares of Synovus common stock.
EXPERTS
Synovus
The consolidated balance sheets of Synovus and its subsidiaries as of
December 31, 1998 and 1997, 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, 1998, all of which are incorporated by
reference in this proxy statement/prospectus, have been audited by KPMG 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 LLP and upon their authority as
experts in accounting and auditing.
Merit
The consolidated balance sheets of Merit and its subsidiaries as of
December 31, 1998 and 1997, and the related consolidated statements of income
and comprehensive income, changes in shareholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1998, all of which
are incorporated by reference in this proxy statement/prospectus, have been
audited by PricewaterhouseCoopers LLP, independent 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
PricewaterhouseCoopers LLP given their authority as experts in accounting and
auditing.
OTHER MATTERS
Merit'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
Any proposal which a shareholder wishes to have presented at the next
annual meeting of shareholders of Merit, which will not be held if the merger is
completed, and included in Merit's proxy materials must be received at the
principal executive offices of Merit no later than December 3, 1999. If such
proposal is in compliance with all of the requirements of Rule
49
14a-8 of the Securities Exchange Act, it will be included in Merit's proxy
statement and set forth on the form of proxy issued for the next annual meeting
of shareholders, if applicable. Shareholders wishing to present proposals at
such meeting (but not include them in Merit's proxy materials) must also give
notice of such proposals to Merit no later than February 16, 2000. It is urged
that any proposals be sent by certified mail, return receipt requested.
Any shareholder satisfying the SEC's requirements and wishing to submit a
proposal to be included in Synovus' proxy statement for the 2000 Annual Meeting
of Shareholders should submit the proposal in writing to the Secretary, Synovus
Financial Corp., 901 Front Avenue, Suite 301, Columbus, Georgia 31901. Synovus
must receive a proposal by November 22, 1999 in order to consider it for
inclusion in the proxy statement for the 2000 Annual Meeting of Shareholders.
Shareholders who wish to present director nominations or other business at
the Annual Meeting (but not include them in Synovus' proxy materials) are
required to notify the Secretary of their intent at least 45 days but not more
than 90 days before March 19, 2000 and the notice must provide information as
required in the bylaws. A copy of these bylaw requirements will be provided upon
request in writing to the Secretary of Synovus.
WHERE YOU CAN FIND MORE INFORMATION
Synovus and Merit file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any reports, statements or other information that Synovus
and Merit file with the SEC at the SEC's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. These SEC
filings are also available to the public from commercial document retrieval
services and at the Internet world wide web site maintained by the SEC at
"http://www.sec.gov." Reports, proxy statements and other information should
also be available for inspection at the offices of the NYSE, for Synovus, and
Nasdaq, for Merit.
Synovus filed a registration statement to register with the SEC the Synovus
common stock to be issued to Merit shareholders in the merger. This proxy
statement/prospectus is a part of that registration statement and constitutes a
prospectus of Synovus. As allowed by SEC rules, this proxy statement/prospectus
does not contain all the information you can find in Synovus' registration
statement or the exhibits to that registration statement.
The SEC allows Synovus and Merit to "incorporate by reference" information
into this proxy statement/prospectus, which means that Synovus and Merit can
disclose important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is considered
part of this proxy statement/prospectus, except for any information superseded
by information contained directly in this proxy statement/prospectus or in later
filed documents incorporated by reference in this proxy statement/prospectus.
This proxy statement/prospectus incorporates by reference the documents set
forth below that Synovus and Merit have previously filed with the SEC. These
documents contain
50
important information about Synovus and Merit and their businesses.
Synovus SEC Filings (File No. 1-10312)
(i) Synovus' Annual Report on Form 10-K for the year ended December 31,
1998;
(ii) Synovus' Quarterly Report on Form 10-Q for the quarter ended March 31,
1999;
(iii) Synovus' Current Reports on Form 8-K dated February 26, 1999, March
15, 1999 and April 27, 1999;
(iv) the description of Synovus common stock contained in Synovus'
Registration Statement on Form 8-A filed with the SEC on August 21, 1989; and
(v) the description of the shareholder rights plan of Synovus contained in
Synovus' Registration Statement on Form 8-A filed with the SEC on April 28,
1999.
Merit SEC Filings (File No. 0-25938)
(i) Merit's Annual Report on Form 10-K for the year ended December 31,
1998;
(ii) Merit's Quarterly Report on Form 10-Q for the quarter ended March 31,
1999;
(iii) Merit's Current Report on Form 8-K dated June 28, 1999 announcing the
signing of the merger agreement; and
(iv) the description of Merit common stock contained in Merit's
Registration Statement on Form 8-A declared effective by the SEC on June 9,
1995.
Synovus and Merit also incorporate by reference additional documents that
may be filed with the SEC between the date of this proxy statement/prospectus
and the consummation of the merger or the termination of the merger agreement.
These include periodic reports, such as Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K, as well as proxy
statements.
Synovus has supplied all information contained or incorporated by reference
in this proxy statement/prospectus relating to Synovus and Merit has supplied
all information contained or incorporated by reference in this proxy
statement/prospectus relating to Merit.
You can obtain any of the documents incorporated by reference from the
companies, the SEC or the SEC's Internet web site as described above. Documents
incorporated by reference are available from the companies without charge,
excluding all exhibits, except that if the companies have specifically
incorporated by reference an exhibit in this proxy statement/prospectus, the
exhibit will also be available without charge. You may obtain documents
incorporated by reference in this proxy statement/prospectus by requesting them
in writing or by telephone from the appropriate company at the following
addresses:
51
Merit Holding Corporation
5100 LaVista Road
Post Office Box 49
Tucker, Georgia 30085-0049
Attn: Ronald H. Francis
President
Telephone: (770)423-2265
Synovus Financial Corp.
901 Front Avenue
Suite 301
Columbus, Georgia 31901
Attn: G. Sanders Griffith, III
Senior Executive Vice President,
General Counsel & Secretary
Telephone: (706)649-2267
If you would like to request documents from us, please do so by _______,
1999 to receive them before the meeting.
You should rely only on the information contained or incorporated by
reference in this proxy statement/prospectus. Synovus and Merit have not
authorized anyone to provide you with information that is different from what is
contained in this proxy statement/prospectus. This proxy statement/prospectus is
dated ______, 1999. You should not assume that the information contained in this
proxy statement/prospectus is accurate as of any date other than that date.
Neither the mailing of this proxy statement/prospectus to shareholders nor the
issuance of Synovus stock in the merger creates any implication to the contrary.
PRO FORMA FINANCIAL INFORMATION
Pro forma financial information reflecting the acquisition of Merit by
Synovus is not presented herein since the pro forma effect is not significant.
On June 7, 1999, Synovus signed an Agreement and Plan of Merger providing
for the acquisition of Ready Bank of Fort Walton Beach Holding Company which is
located in Fort Walton Beach, Florida. At March 31, 1999, Ready Bank of Fort
Walton Beach Holding Company had total assets of $72.5 million and shareholders'
equity of $6.5 million, and for the three months ended March 31, 1999, reported
net income of $126,000. Pro forma financial information reflecting this
acquisition is not presented in this proxy statement/prospectus because the pro
forma effect of such acquisition is not significant either individually, or when
combined with Merit.
acq\merit\front.wpd
52
Appendix "A"
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of the 28th day of June, 1999 (the
"Plan" or the "Agreement") by and between SYNOVUS FINANCIAL CORP. ("Synovus")
and MERIT HOLDING CORPORATION ("Merit").
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 May 31, 1999, Synovus had
600,000,000 authorized shares of common stock, par value $1.00 per share
("Synovus Common Stock"), of which 271,314,672 shares are outstanding. 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 36 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. Each subsidiary that is a depository institution is an "insured
institution" as defined in the Federal Deposit Insurance Act and the applicable
regulations thereunder, and the deposits in which are insured by the Federal
Deposit Insurance Corporation.
B. Merit. Merit has been duly incorporated and is an existing corporation
in good standing under the laws of Georgia, with its principal executive offices
located in Tucker, Georgia. As of the date hereof, Merit has 10,000,000
authorized shares of common stock, par value $2.50 per share ("Merit Common
Stock"), of which 4,777,316 shares are outstanding as of the date hereof. All of
the issued and outstanding shares of Merit Common Stock are duly and validly
issued and outstanding and are fully paid and nonassessable and not subject to
any preemptive rights. Merit has two wholly-owned banking Subsidiaries, one of
which owns a Subsidiary which engages in leasing activities, as of the date
hereof. Each subsidiary that is a depository institution is an "insured
institution" as defined in the Federal Deposit Insurance Act and the applicable
regulations thereunder, and the deposits in which are insured by the Federal
Deposit Insurance Corporation.
C. Rights, Etc. Neither Synovus nor Merit has any shares of its capital
stock reserved for issuance, any outstanding option, call or commitment relating
to shares of its capital stock or any outstanding securities, obligations or
agreements convertible into or exchangeable for, or giving any person any right
(including, without limitation, preemptive rights) to subscribe for or acquire
from it, any shares of its capital stock except as described in filings made
with the Securities and Exchange Commission ("SEC") by Synovus and Merit
("Public Filings") or except as otherwise disclosed in the letter referred to in
Article III below.
D. Board Approvals. The respective Boards of Directors of Synovus and Merit
have unanimously approved and adopted the Plan and have duly authorized its
execution. In the case of Merit, the Board of Directors has unanimously voted to
recommend to its stockholders that the Plan be approved.
E. 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 taken as a whole.
In consideration of their mutual promises and obligations hereunder, and
intending to be legally bound hereby, Synovus and Merit adopt 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), Merit 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 applicable provisions of the Georgia Business
Corporation Code ("Georgia Act"). On the Effective Date, the articles of
incorporation and bylaws of the Surviving Corporation shall be the articles of
incorporation and bylaws 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 Merit
Common Stock issued and outstanding on the Effective Date shall be converted
into and exchanged for shares of Synovus Common Stock, with the exact number of
shares of Synovus Common Stock into which each such share of Merit Common Stock
is to be converted to be determined in accordance with the conversion ratio
table set forth in Appendix "A" attached hereto and made a part hereof ("Per
Share Exchange Ratio"). As of the Effective Date, each share of Merit Common
Stock held as treasury stock of Merit 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. Each holder of Merit Common Stock who would otherwise have been
entitled to receive a fraction of a share of Synovus Common Stock shall receive,
in lieu thereof, cash (without interest) in an amount equal to such fractional
part of a share of Synovus Common Stock multiplied by 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.
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Each shareholder of Merit Common Stock will be entitled to ten votes for
each share of Synovus Common Stock to be received by him/her on the Effective
Date pursuant to a set of resolutions adopted by the Board of Directors of
Synovus on June 28, 1999 in accordance with and subject to those certain
Articles of Amendment to Synovus' Articles of Incorporation, dated April 24,
1986. Synovus shall provide Merit with certified copies of such resolutions
prior to the Effective Date.
The shares of the Synovus Common Stock issued and outstanding immediately
prior to the Effective Date shall remain outstanding and unchanged after the
Merger.
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 so as to prevent the
dilutive effect of such transaction on a percentage of ownership basis.
The shareholders of Merit Common Stock shall not be entitled to rights of
dissent and appraisal in connection with the Merger pursuant to the Georgia Act.
(C) Procedures. Certificates which represent shares of Merit 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 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 Merit 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 Merit Common Stock have been converted pursuant to the Plan.
Upon surrender of a Certificate, duly endorsed as Synovus may require, the
holder of such Certificate shall be entitled to receive in exchange therefor the
consideration set forth in Paragraph I(B) hereof 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
-3-
Merit of shares of Merit 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 Merit, 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.
In the case of any lost, mislaid, stolen or destroyed Certificate, the holder
thereof may be required, as a condition precedent to the delivery to such holder
of the consideration described in Paragraph B, to deliver to Synovus a bond in
such sum as Synovus may direct as indemnity against any claim that may be made
against the exchange agent, Synovus or Merit with respect to the Certificate
alleged to have been lost, mislaid, stolen or destroyed.
After the Effective Date, holders of Merit Common Stock shall cease to be,
and shall have no rights as, stockholders of Merit, other than to receive shares
of Synovus Common Stock into which such shares have been converted, fractional
share payments pursuant to the Plan and any dividends or distributions with
respect to such shares of Synovus Common Stock. Until 90 days after the
Effective Date, former shareholders of record of Merit shall be entitled to vote
at any meeting of Synovus shareholders the number of shares of Synovus Common
Stock into which their respective Merit Common Stock are converted regardless of
whether such holders have exchanged their certificates pursuant to the Plan.
Notwithstanding the foregoing, neither Synovus nor Merit nor any other
person shall be liable to any former holder of shares of Merit Common Stock for
any amounts paid or property delivered in good faith to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(D) Options. On the Effective Date, each option granted by Merit to
purchase shares of Merit Common Stock, which is outstanding and unexercised
immediately prior thereto, shall be converted automatically 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
Merit 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
(2) The exercise price per share of Synovus Common Stock under
the new option shall be equal to the exercise price per share of Merit Common
Stock under the original
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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 (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 Merit 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. From and after the date
hereof, no additional options to purchase Merit Common Stock shall be granted.
II. ACTIONS PENDING MERGER
(A) Merit and its Subsidiaries shall conduct their 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 Merit Common Stock issued in connection with the exercise of currently
outstanding options to purchase shares of Merit Common Stock; (2) declare, set
aside, or pay any dividend or distribution with respect to the capital stock of
Merit other than normal and customary quarterly cash dividends in accordance
with past practices; (3) directly or indirectly redeem, purchase or otherwise
acquire any capital stock of Merit or its Subsidiaries; (4) effect a split or
reclassification of the capital stock of Merit or its Subsidiaries or a
recapitalization of Merit or its Subsidiaries; (5) amend the articles of
incorporation or by-laws of Merit or its Subsidiaries; (6) grant any increase in
the salaries payable or to become payable by Merit or its Subsidiaries to any
employee and other than normal, annual salary increases to be made with regard
to the employees of Merit or its Subsidiaries; (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 Merit or its Subsidiaries, except to the extent such
changes are required by applicable laws or regulations; (8) enter into,
terminate, modify or amend any contract, lease or other agreement with any
officer or director of Merit or its Subsidiaries 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 business; (10) dispose of any of
their assets or properties, other than in the ordinary course of their 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
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acquisition of its voting securities, or the merger of it or its Subsidiaries
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
negotiate with any individual, corporation or other entity in furtherance of
such inquiries or to obtain such a proposal (and Merit 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 Subsidiaries to take any action not in the ordinary course
of business of it and its Subsidiaries; or (13) directly or indirectly agree to
take any of the foregoing actions.
(B) Without the prior written consent of Merit, which consent will not be
unreasonably withheld, Synovus will not: (1) 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 (2) 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 hereby; or (b) 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 Merit, and Merit represents and
warrants to Synovus, that, except as previously disclosed in a letter of Synovus
or Merit, respectively, of even date herewith delivered to the other party:
(A) the representations set forth in Recitals A through D of the Plan with
respect to it are true and correct and constitute representations and warranties
for the purpose of Article V, hereof;
(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. Section 55 in the case of a national bank subsidiary) non-assessable, and
subject to no preemptive rights of current or past shareholders;
(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 an adverse effect on the business, results of
operations or financial condition of it or its Subsidiaries which is material to
it and its Subsidiaries, taken as a whole ("Material Adverse Effect") provided
that "Material Adverse Effect" shall not be deemed to include: (1) the impact of
changes in banking or similar laws of general applicability or interpretations
thereof by courts or governmental authorities; or (2) changes in generally
accepted accounting principles applicable to banks and their holding companies)
where such qualification is
-6-
required to carry on its business as it is now being conducted, to own all its
material properties and assets, and 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 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 Merit, 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 legal, valid and binding agreement of it
enforceable against it in accordance with its terms, 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 involving specific performance or injunctive relief;
(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, 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 Merit, 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) since December 31, 1996, Merit and Synovus have filed all forms,
reports and documents with the SEC required to be filed by it pursuant to the
federal securities laws and SEC rules and regulations thereunder (the "SEC
Reports,") each of which complied as to form, at the time such form, report or
document was filed, in all material respects with the applicable requirement of
the Securities Act of 1933, as amended ("Securities Act"), the Exchange Act and
the applicable rules and regulations thereunder. As of their respective dates,
none of the SEC 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
-7-
therein, in light of the circumstances under which they were made, not
misleading. Each of the balance sheets in or incorporated by reference into the
SEC 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 the SEC 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. It has no
material obligations or liabilities (contingent or otherwise) except as
disclosed in the SEC Reports. For purposes of this paragraph, material shall
have the meaning as defined under the 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 reserved against in its audited financial statements
as of December 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, 1998;
(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. Deferred
taxes have been provided for in its financial statements in accordance with
generally accepted accounting principles applied on a consistent basis;
-8-
(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 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 ("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 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; to the actual knowledge
of its executive officers, there are no pending or anticipated material claims
against or otherwise involving any of its employee benefit plans and no suit,
action or other litigation (excluding claims for benefits incurred in the
ordinary course of activities of such plans) has been brought against or with
respect to any such plan, except for any of the foregoing which would not have a
Material Adverse Effect; 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
-9-
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
respective properties and assets, tangible or intangible (other than property as
to which it is lessee), 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)(10) of Article V cannot be obtained;
(P) its reserve for possible loan and lease losses as shown in its audited
financial statements as of December 31, 1998 was, and its reserve for possible
loan and lease losses as shown in all Quarterly Reports on Form 10-Q filed prior
to the Effective Date will be, adequate in all material respects under generally
accepted accounting principles applicable to banks and bank holding companies;
(Q) 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;
(R) 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 of any current or past shareholders;
(S) 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
conditions of
-10-
employment, nor is there any strike or other labor dispute involving it or any
of its Subsidiaries pending or threatened;
(T) other than services provided by T. Stephen Johnson & Associates, Inc.,
which has been retained by Merit 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;
(U) 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 Synovus Common Stock to be
issued to the shareholders of Merit in the Merger (the "Registration
Statement"); or (2) the proxy statement to be filed with the SEC under the
Exchange Act and distributed in connection with Merit'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;
(V) 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.
Section 9601, et seq; the Resource Conservation and Recovery Act, as amended, 42
U.S.C. Section 6901, et seq; the Clean Air Act, as amended, 42 U.S.C. Section
7401, et seq; the Federal Water Pollution Control Act, as amended, 33 U.S.C.
Section 1251, et seq; the Toxic Substances Control
-11-
Act, as amended, 15 U.S.C. Section 9601, et seq; the Emergency Planning and
Community Right to Know Act, 42 U.S.C. Section 11001, et seq; the Safe Drinking
Water Act, 42 U.S.C. Section 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.
"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 Merit as applicable, or any of their
respective Subsidiaries.
(1) there are no actions, suits, demands, notices, claims,
investigations or proceedings pending or, to the actual knowledge of its
executive officers, 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 its executive officers and the executive
officers of 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;
(W) in the case of Merit, all securities issued by it (or any other
person), convertible into Merit Common Stock shall, as a result and upon
consummation of the Merger be convertible only into Synovus Common Stock; and
(X) it has adopted and is in the process of implementing policies and
procedures to ensure that it will be in material compliance with the Federal
Financial Institutions 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 Merit, and Merit hereby covenants to Synovus,
that:
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(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 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 Merit, 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 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 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 Merit, 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 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 reasonable access to its
premises and books and records during normal business hours for any reasonable
purpose related to the transactions
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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
subject to the terms of that certain letter agreement between Synovus and Merit
dated March 23, 1999;
(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; and (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") and the Georgia Department of Banking and
Finance ("Georgia Department"), and to such other regulatory agencies as
required by law;
(J) it will use its best efforts to cause the Merger to qualify for pooling
of interests accounting treatment and to qualify as a reorganization within the
meaning of Section 368(a) of the Code for federal income tax purposes;
(K) Synovus shall use its best efforts to 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) following the Effective Date, Synovus shall continue to provide
generally to officers and employees of Merit and its Subsidiaries 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 Merit and its Subsidiaries.
As soon as administratively and financially practicable following the Effective
Date, Synovus shall provide generally to officers and employees of Merit and its
Subsidiaries
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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 Merit participates after the Effective Date,
Synovus agrees: (1) to treat service by Merit employees prior to the Effective
Date as service with Synovus for eligibility and vesting purposes only; and (2)
to waive pre-existing condition limitations, if any, as would otherwise be
applied to participating employees of Merit upon the implementation of such
Employee Benefits constituting "group health plans" within the meaning of
Section 5000(b)(i) of the Code;
(M) it shall promptly furnish the other party with copies of all documents
filed prior to the Effective Date with the SEC and all documents filed with
other governmental or regulatory agencies or bodies in connection with the
Merger;
(N) Merit 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 Merit shareholders
meeting called to approve the Merger, a written agreement providing that such
person will not sell, pledge, transfer or otherwise dispose of any shares of
Merit 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 issued to affiliates of Merit 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 Merit 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 Merit 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)(8) of Article V;
-15-
(Q) it shall take no action which would prevent the issuance of the
accountants' letter referred to in Paragraph (A)(10) of Article V, including, in
the case of Merit, the discretionary vesting of outstanding stock options;
(R) Merit shall coordinate with Synovus the declaration of any dividends in
respect of Merit Common Stock and the record dates and payment dates relating
thereto, it being the intention of the parties hereto that holders of Merit
Common Stock shall not receive two dividends, or fail to receive one dividend,
for any single calendar quarter with respect to their shares of Merit Common
Stock and any shares of Synovus Common Stock any such holder receives in
exchange therefor in the Merger;
(S) Merit 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 Merit upon which Merit 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 properties that Merit leases, which are known
as Riverside, Stone Mountain and Peachtree Corners branches and in addition,
Merit agrees to conduct a phase one 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 Merit in writing whether or
not, in the reasonable judgment of Synovus, the results of such reports will
have a Material Adverse Effect on Merit. In the event that Synovus determines,
in its reasonable judgment, that the results of such reports will have a
Material Adverse Effect on Merit, 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 Merit 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;
(T) Prior to the Effective Date, Merit shall purchase for, and on behalf
of, its current and former officers and directors, extended coverage under the
current directors' and officers' liability insurance policy maintained by Merit
to provide for continued coverage of such insurance for a period of three years
following the Effective Date with respect to matters occurring prior to the
Effective Date; and
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(U)(1) in the case of Synovus, subject to the conditions set forth in
Paragraph (2) below, for a period of three years after the Effective Date,
Synovus shall indemnify, defend and hold harmless each person entitled to
indemnification from Merit and its Subsidiaries (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 Merit's and
its Subsidiaries' 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 (R)(1) 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, 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 Merit 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 Merit in
accordance with applicable law and Merit shall have furnished to Synovus
certified copies of resolutions duly adopted by Merit's shareholders evidencing
the same;
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(2) the procurement by Synovus and Merit 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
such a material adverse impact 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
Merit;
(4) the satisfaction of all other statutory or regulatory
requirements which are necessary to the consummation of the transactions
contemplated by the Plan;
(5) no party hereto shall be subject to any order, decree or
injunction or any other action of a United States federal or state court of
competent jurisdiction permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement;
(6) no party hereto shall be subject to any order, decree or
injunction or any other action of a United States federal or state governmental,
regulatory or administrative agency or commission permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement;
(7) the Registration Statement shall have become effective
under the Securities Act 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;
(8) each party shall have received an opinion ("Tax Opinion")
from KPMG LLP, 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 Merit as a result of the Merger; and (ii) no gain or loss will be
recognized by the shareholders of Merit who exchange their shares of Merit
Common Stock solely for shares of Synovus Common Stock pursuant to the Merger;
-18-
(9) each party shall have delivered to the other party a
certificate, dated as of the Effective Date, signed by its Chairman of the
Board, or its Chief Financial Officer, and by its 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)(8) of this Article V; and
(10) 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. Prior to the receipt of said letter, Synovus and Merit shall have
received a letter from PricewaterhouseCoopers LLP, Merit's certified public
accountants, stating that Merit meets the criteria 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) each of the representations, warranties and covenants
contained herein of Merit shall be true on, or complied with by, the Effective
Date in all material respects as if made on such date (or on the date when made
in the case of any representation or warranty which specifically relates to an
earlier date) and Synovus shall have received a certificate signed by the Chief
Executive Officer of Merit, dated the Effective Date, to such effect;
(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 Merit or its
Subsidiaries: (a) which, in the reasonable judgment of Synovus, would have a
Material Adverse Effect upon Merit 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 Merit which, in the reasonable judgment of Synovus,
is materially at variance with one or more of the warranties or representations
set forth in this Agreement or which, in the reasonable judgment of Synovus, has
or will have a Material Adverse Effect on Merit;
(4) J. Randall Carroll and Ronald H. Francis shall have
entered into employment agreements with Synovus as proposed by Synovus and
approved by Messrs. Carroll and Francis which will become effective as of the
Effective Date;
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(5) on the Effective Date, Mountain National Bank and Charter
Bank & Trust Co. will each 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, Merit will have a loan loss reserve
of at least 1.50% of loans and which will be adequate in all material respects
under generally accepted accounting principles applicable to banks;
(7) Merit shall have delivered to Synovus the environmental
reports referenced in Paragraph (V) of Article III;
(8) the results of any regulatory exam of Merit and its
Subsidiaries occurring between the date hereof and the Effective Date shall be
reasonably satisfactory to Synovus; and
(9) each of the officers and directors of Merit shall have
delivered a letter to Synovus to the effect that such person is not aware of any
claims he might have against Merit other than routine compensation, benefits and
the like as an employee, or ordinary rights as a customer.
(C) The obligation of Merit to effect the Merger shall be subject to the
satisfaction prior to the Effective Date of the following additional conditions:
(1) each of the representations, warranties and covenants
contained herein of Synovus shall be true on, or complied with by, the Effective
Date in all material respects as if made on such date (or on the date when made
in the case of any representation or warranty which specifically relates to an
earlier date) and Merit shall have received a certificate signed by the Chief
Executive Officer of Synovus, dated the Effective Date, to such effect;
(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 Merit, 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;
-20-
(4) Merit 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 Merit, is materially
at variance with one or more of the warranties or representations set forth in
this Agreement or which, in the reasonable judgment of Merit, has or will have a
Material Adverse Effect on Synovus;
(5) Merit shall have received from the Deputy General Counsel
of Synovus an opinion to the effect that Synovus is duly organized, validly
existing and in good standing, the Plan has been duly and validly authorized by
all necessary corporate action on the part of Synovus, has been duly and validly
executed and delivered by Synovus, is the valid and binding obligation of
Synovus, enforceable in accordance with its terms except as such may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and that the shares of
Synovus Common Stock to be issued in the Merger are duly authorized, validly
issued, fully paid, nonassessable, and not subject to any preemptive rights of
any current or past shareholders; and
(6) Merit shall have received from T. Stephen Johnson &
Associates, Inc. a letter, dated not more than five (5) business days prior to
the date of the Proxy Statement, to the effect that, in the opinion of such
firm, the Exchange Ratio is fair, from a financial point of view, to the holders
of Merit Common Stock.
VI. TERMINATION
A. The Plan may be terminated prior to the Effective Date, either before or
after its approval by the stockholders of Merit:
(1) by the mutual consent of Synovus and Merit, 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 Merit 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;
(3) by Synovus or Merit 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, 1999 unless the failure to so
consummate by such time is due to the breach of the Plan by the party seeking to
terminate;
(4) by Merit, if the average closing price of Synovus Common
Stock on the NYSE is below $17.00 per share for the 20 trading day period ending
five business days prior
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to the shareholders' meeting called to vote on the Merger ("Measurement
Period"). Merit shall have three business days after such time in which to make
a determination to terminate this Agreement; and
(5) by Synovus, if the average closing price of Synovus Common
Stock on the NYSE is above $25.00 per share for the Measurement Period. Synovus
shall have three business days after such time in which to make a determination
to terminate this Agreement.
B. In the event of the termination and abandonment of this Agreement
pursuant to Article VI(A) of this Agreement, this Agreement shall become void
and have no effect, except as set forth in Paragraph (A) of Article VIII, and
there shall be no liability on the part of any party hereto or their respective
officers or directors; provided, however, that: (1) Merit shall be entitled to a
cash payment from Synovus for Merit's reasonable out-of-pocket expenses relating
to the Merger in an amount not to exceed $150,000, which amount shall not be
deemed an exclusive remedy or liquidated damages, in the event of the
termination of this Agreement due to (i) the failure by Synovus to satisfy any
of its representations, warranties or covenants set forth herein; or (ii)
withdrawal of the fairness opinion of T. Stephen Johnson & Associates, Inc.,
other than a withdrawal due to materially inaccurate or fraudulent information
having been provided by Merit to T. Stephen Johnson & Associates, Inc.; and (2)
Synovus shall be entitled to a cash payment from Merit for Synovus' reasonable
out-of-pocket expenses relating to the Merger in an amount not to exceed
$150,000, which amount shall not be deemed an exclusive remedy or liquidated
damages, in the event of the termination of this Agreement due to the failure by
Merit to satisfy any of its representations, warranties or covenants set forth
herein.
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 (R) of Article III, and Paragraph (N) 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,
Paragraph (B) of Article VI and Paragraphs (E) and (F) of this Article shall
survive such termination.
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(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 Number 706/649-2342), with a copy to Ms. Kathleen Moates at
the same address.
If to Merit to J. Randall Carroll, Chairman of the Board and Chief
Executive Officer, Merit Holding Corporation, 5100 LaVista Road, Tucker, Georgia
30085-0049, (Fax Number 770/270/9132), Ronald H. Francis, President, Merit
Holding Corporation, 269 Roswell Street, Marietta, Georgia 30060, (Fax Number
770/428-1409), with a copy to Robert C. Schwartz, Smith, Gambrell & Russell,
LLP, Suite 3100, Promenade II, Atlanta, Georgia 30309-3592, (Fax Number
404/685-7058.
(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
-23-
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.
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: EVP & CFO
Attest: /s/Kathleen Moates
Title: Assistant Secretary
MERIT HOLDING CORPORATION
BY: /s/J. Randall Carroll
Title: Chairman & CEO
Attest: /s/Ronald H. Francis
Title: President
-24-
Appendix "A"
Conversion Ratio Table
The conversion ratio of shares of Synovus Common Stock for Merit Common
Stock to be issued upon consummation of the Merger shall be computed using the
following table:
Average of the Closing Prices Per
Share of Synovus Common Stock on Per Share Ratio of
the 20 Trading Days ending on the 5th Conversion-Shares of Synovus
Business Day Before the Merit Common Stock To
Special Shareholders' Meeting Merit Common Stock
- ------------------------------------- -----------------------------
$22.80 and above 1.0537:1
22.00 1.0920:1
21.00 1.1440:1
20.00 1.2012:1
19.00 1.2644:1
18.00 1.3347:1
17.00 or below 1.4132:1
In the event the above-described average of the closing prices per share of
Synovus Common Stock is greater than $17.00 per share but less than $22.80 per
share, such conversion ratio shall be interpolated and arrived at in a manner
consistent with this Table.
The minimum conversion ratio of shares of Synovus Common Stock for shares
of Merit Common Stock upon consummation of the Merger shall be 1.0537:1.
The maximum conversion ratio of shares of Synovus Common Stock for shares
of Merit Common Stock upon consummation of the Merger shall be 1.4132:1.
acq\Merit\MERGER.1
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Appendix "B"
_____________, 1999
Board of Directors
Merit Holding Corporation
5100 LaVista Road
Tucker, Georgia 30085
Dear Directors:
T. Stephen Johnson & Associates, Inc., Roswell, Georgia ("TSJ&A") has been
asked to render an opinion as to the fairness from a financial point of view of
the consideration to be received by the shareholders of Merit Holding
Corporation ("Merit") in connection with the proposed merger with Synovus
Financial Corp. ("Synovus"). As a result of the merger, Merit's subsidiaries,
Mountain National Bank and Charter Bank & Trust Co., will become wholly owned
subsidiaries of Synovus, pursuant to an Agreement and Plan of Merger dated as of
June 28, 1999 (the "Merger Agreement"). The Merger Agreement calls for each
outstanding share of Merit common stock to be converted into the right to
receive not less than 1.0537 shares nor more than 1.4132 shares of Synovus
common stock, depending upon the trading price of Synovus common stock over a
twenty day measuring period.
TSJ&A is an investment banking and consulting firm that specializes in the
valuation of closely-held corporations and provides fairness opinions as part of
its practice. Because of its prior experience in the appraisal of southeastern
financial institutions involved in mergers, it has developed an expertise in
fairness opinions related to the securities of southeastern financial
institutions. Merit retained TSJ&A to render a fairness opinion for which
compensation will be received.
In performing its analysis, TSJ&A relied upon and assumed without
independent verification, the accuracy and completeness of all information
provided to it. TSJ&A has not performed any independent appraisal or evaluation
of the assets of Merit or of Synovus or any of its subsidiaries. As such, TSJ&A
does not express an opinion as to the fair market value of Merit. The opinion of
financial fairness expressed herein is necessarily based on market, economic and
other relevant considerations as they exist and can be evaluated as of June 28,
1999.
Directors
_____________, 1999
Page 2
In arriving at its opinion, TSJ&A reviewed and analyzed audited and
unaudited financial information regarding Merit and Synovus, the merger, the
Merger Agreement, a draft of SEC filings, as well as publicly available
information and actual comparable transactions.
The merger consideration to be received by Merit shareholders is based on
the defined exchange ratio for Synovus common shares. The exact number of
Synovus common shares into which each Merit common share is to be converted is
based on a conversion table. The conversion table establishes a set per share
value to be received for each Merit common share equal to $24.024 per share as
long as the 20-day average closing price of the Synovus common shares used to
determine the exchange ratio is between $17.00 and $22.80 per share. Should the
20-day average closing price of Synovus common shares be below $17.00, the
exchange ratio will become fixed and Merit may elect to terminate the
transaction or accept the exchange ratio calculated using $17.00. Should the
20-day average closing price of Synovus common shares exceed $22.80, the
exchange ratio will become fixed. In addition, if the 20-day average closing
price of Synovus common shares is greater than $25.00, Synovus may terminate the
transaction or accept the exchange ratio using $22.80. TSJ&A performed the
merger analysis using the average 20-day closing price of Synovus common shares
from June 1, 1999 to June 28, 1999. At no time during that period did Synovus
common shares trade at a value outside of the $17.00 to $22.80 range. The 20-day
average closing price calculated by TSJ&A for this analysis resulted in an
average Synovus common share price of $19.76 and an exchange ratio of 1.2158 to
1. Based on this exchange ratio, the total deal value would equal $114.77
million ($24.0244 per Merit common share). This total transaction value is
2.8759 times book value, 22.602 times trailing earnings, 36.92 percent of assets
and 45.84 percent of deposits.
TSJ&A reviewed the merger as of June 28, 1999, for the purpose of comparing
those values with purchase premiums paid in all 110 transactions that were
announced since January 1998 involving selling institutions headquartered in the
states of Alabama, Florida, Georgia, South Carolina and Tennessee, of which 18
all stock transactions involving selling institutions with total assets between
$100 million and $500 million and total equity capital to total assets exceeding
10.00% were considered to be comparable transactions. A listing of these
transactions is included with the Fairness Opinion. On average, the comparable
transactions reported an announced deal price to book value of 2.7402 times, an
announced deal price to earnings of 23.14 times, an announced deal price to
assets of 32.68 percent and an announced deal price to deposits of 38.65
percent. The merger compares favorably with these transactions with the deal
price to book value, the deal price to earnings, the deal price to assets and
the deal price to deposits each ranking well within the range of the comparable
transactions.
Directors
______________, 1999
Page 3
TSJ&A reviewed the historical dividend payouts at Merit in an effort to
equate such payouts to the current dividend payout at Synovus. The Merit
shareholders received $.24 per common share during the last twelve months.
Assuming the current Synovus dividend payout of $.36 per share, the Merit
shareholders would have received the equivalent of $.44 per current Merit share,
based on the conversion ratio of 1.2158 to 1.
Therefore, in consideration of the above, it is the opinion of TSJ&A that,
based on the structure of the Merger and the analyses that have been performed,
the consideration to be received by the shareholders of Merit is fair from a
financial point of view.
Sincerely,
T. Stephen Johnson & Associates, Inc.
Buyer Target
--------- --------
PAB Bankshares Baxley Fed Svgs Bk
Premier Bancshares Farmers & Mrchnts Bk
Capital City Bk Grp Grady Holding Co.
BB&T Corp. First Citizens Corp.
BancorpSouth Inc. The First Corp.
Union Planters Corp. FSB Inc.
First American Corp. Middle Tennessee Bk
Carolina First Corp. First NB Pickens Cty
First American Corp. Peoples Bank
FNB Corporation Citizens Hldg Corp.
Whitney Holding Corp. First National Bncp
Smoky Mountain Bncp First Franklin Bkshr
Union Planters Corp. Transflorida Bank
Regions Financial Jacobs Bank
First Liberty Finl. Southland Bank Corp.
Premier Bancshares Button Gwinnett Finl.
Union Planters Corp. CB&T Inc.
Centura Banks Inc. Pee Dee Bankshares
"Appendix C"
July 16, 1999
PRIVATE & CONFIDENTIAL
- ----------------------
Board of Directors Board of Directors
Synovus Financial Corp. Merit Holding Corporation
P.O. Box 120 5100 LaVista Road
Columbus, GA 31902 Tucker, GA 30085
Board Members:
You have requested the opinion of KPMG LLP ("KPMG") regarding certain
Federal income tax consequences relating to the merger of Merit Holding
Corporation ("Merit") with and into Synovus Financial Corp. ("Synovus").
Specifically, you have requested KPMG to opine that the form and substance of
the merger of Merit with and into Synovus (the "Merger") constitutes a
reorganization under Section 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 Merit upon receipt of the Synovus common stock
in exchange for their Merit common stock upon consummation of the merger. All
affected Merit 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
271,314,672 shares were outstanding at May 31, 1999. Synovus common stock is
widely held, 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
Board of Directors
Synovus Financial Corp.
Merit Holding Corportion
July 16, 1999
Page 2
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; (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).
Synovus has no other class of stock authorized.
Effective April 27, 1999, 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 5, 2009.
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 a 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.
Merit is a bank holding company organized and existing under the laws of
Georgia and having its principal office in Tucker, Georgia. Merit has authorized
10,000,000 shares of $2.50 par value common stock. As of May 31, 1999, 4,777,316
shares of Merit common stock were issued and outstanding. Merit shares are
listed on the Nasdaq National Market. There are no outstanding warrants,
options, rights, calls, or other
Board of Directors
Synovus Financial Corp.
Merit Holding Corporation
July 16, 1999
Page 3
commitments of any nature to which any person could acquire stock in Merit that,
if exercised or converted, would affect Synovus' acquisition or retention of
control of Merit. There are no outstanding securities or debt obligations of
Merit convertible into shares of Merit common stock.
Mountain National Bank and Charter Bank and Trust Co., are wholly-owned
subsidiaries of Merit with their principal offices in Tucker and Marietta,
Georgia, respectively.
PROPOSED TRANSACTION
---------------------
For what has been represented to be valid business purposes, Synovus and
Merit 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 28, 1999
(collectively referred to as the "Merger Agreement"), by and among Synovus
and Merit, Merit will merge with and into Synovus in accordance with
Georgia state law. Synovus will survive the merger and the separate
corporate existence of Merit will cease.
2. Immediately after the Merger and pursuant to the Merger Agreement dated
June 28, 1999, the separate corporate existence of Mountain National Bank
and Charter Bank and Trust Co. will continue. After the Merger, Mountain
National Bank and Charter Bank and Trust Co. will retain their names.
3. As a result of the Merger and on its effective date, Merit shareholders
will be entitled to receive from Synovus not less than 1.0537 shares and no
more than 1.4132 shares of Synovus common stock for each of their shares of
Merit common stock (the "Per Share Exchange Ratio").
4. No fractional shares of Synovus common stock will be issued in the Merger.
Instead, Merit 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. Following the effective date of the Merger, Synovus will enter into an
Employment Agreement with Mr. J. Randall Carroll, Chairman of the Board and
Chief Executive Officer of Merit and Mr. Ronald H. Francis, President and
Chief Financial Officer of Merit. The contracts will provide for Messrs.
Carroll and Francis to continue to receive substantially the same base
salary and benefits which Messrs. Carroll and Francis presently receive,
and certain severance benefits and participation by Messrs. Carroll and
Francis in various Synovus incentive, welfare and benefit plans.
Mr. Carroll will be an executive officer of Mountain National Bank, and Mr.
Francis will be an executive officer of Charter Bank and Trust Co. The
covenant not to compete will prohibit Messrs. Carroll and Francis from
competing with Synovus under certain circumstances.
In consideration of Messrs. Carroll and Francis entering into the
Employment Agreement, both will be granted fair market value options to
purchase 15,000 shares of Synovus common stock.
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 common stock and cash to be
received by each of the Merit shareholders pursuant to the Merger
will be approximately equal, in each instance, to
Board of Directors
Synovus Financial Corp.
Merit Holding Corporation
July 16, 1999
Page 4
the fair market value of the Merit common stock exchanged therefor.
b) There is no plan or intention by the Merit shareholders to sell or otherwise
dispose of any Synovuscommon stock received by them in the transaction which
would reduce their ownership of Synovus 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 Merit as the date of the Merger. For purposes of this
representation, shares of Merit common stock exchanged for cash as a result
of dissenters' rights or in lieu of fractional shares will be treated as
outstanding stock of Merit on the date of the Merger 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 pursuant
to 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 Merit or any Merit Related Party) will be treated as a Synovus
Related Party if the requisite relationship is created in connection
with the Merger. A Merit 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 Merit.
c) Neither Merit nor any Merit Related Party has redeemed or acquired
any Merit common stock prior to and in connection with the merger.
d) Synovus has no plan or intention to liquidate, to merge with and
into another corporation, or to cause to sell or otherwise dispose
of any assets of Merit acquired in the Merger, except for
dispositions made in the ordinary course of business or transfers
described in Section 368(a)(2)(C).
e) The liabilities of Merit assumed by Synovus and the liabilities to
which the transferred assets of Merit are subject were incurred by
Merit in the ordinary course of its business.
f) Following the Merger, Synovus will continue the historical
business of Merit or use a significant portion of Merit's
historical assets in a business.
g) Synovus and Merit, and the shareholders of Merit will each pay
their own fees, expenses, and disbursements in connection with the
Merger.
h) There is no intercorporate debt existing between Synovus, Merit,
Mountain National Bank and Charter Bank and Trust Co. that was
issued, acquired, settled or will be settled at a discount.
Board of Directors
Synovus Financial Corp.
Merit Holding Corporation
July 16, 1999
Page 5
i) No two parties to the Merger (i.e. Synovus and Merit) are
investment companies within the meaning of such term as used in
Section 368(a)(2)(F)(iii) and (iv).
j) Neither Merit, Mountain National Bank, nor Charter Bank and Trust
Co. is under the jurisdiction of a court in a Title 11 or similar
case within the meaning of 368(a)(3)(A).
k) On the effective date of the Merger, the fair market value of the
assets of Merit 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.
l) None of the Synovus common stock being issued to the Merit
shareholders will represent compensation for past or future
services. The compensation to be paid to Merit directors,
officers, and employees who are stockholders of Merit and who will
be employed following the Merger will not be part of the
consideration paid for their Merit common stock, but will be
commensurate, in each instance, with past or future services.
m) All distributions made by Merit, Mountain National Bank and
Charter Bank and Trust Co. prior to the Merger will be "regular,
normal" distributions.
n) 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 Merit
shareholders in the Merger. 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.
o) No event has occurred which made the poison pill rights exercisable.
p) At the time of Merger, each option to purchase or other right with
respect to shares of Merit common stock pursuant to stock options
granted by Merit, 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 Merit option, in accordance with the terms of the
Merit stock plan by which it is evidenced in substantially the
same terms and conditions.
Scope of Opinion
- -----------------
The opinions expressed below are rendered only with respect to the specific
- ---------------------------------------------------------------------------
facts and representations set forth in this letter. KMPG expressed no opinion
- -----------------------------------------------------------------------------
with respect to any foreign, federal, state, or local tax aspect not
- --------------------------------------------------------------------
specifically addressed under the heading opinion, or any legal aspect of this
- -----------------------------------------------------------------------------
transaction. Furthermore, no inference should be drawn regarding any matter on
- ------------------------------------------------------------------------------
which we have not specifically expressed an opinion.
- ---------------------------------------------------
You have submitted for our consideration certain facts and representations about
- --------------------------------------------------------------------------------
the Merger and KPMG has made no independent inquiry thereon. With your knowledge
- --------------------------------------------------------------------------------
and agreement, our opinion is based upon the facts and representations set forth
- --------------------------------------------------------------------------------
in this letter. If any of the above-stated facts, representations, or
- ---------------------------------------------------------------------
assumptions are not entirely complete or accurate, it is imperative that we be
- ------------------------------------------------------------------------------
informed in writing immediately, as the incompleteness or inaccuracy could cause
- --------------------------------------------------------------------------------
us to change our opinion.
- -------------------------
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
- -----------------------------------------------------------
Board of Directors
Synovus Financial Corp.
Merit Holding Corporation
July 16, 1999
Page 6
which are subject to change or modification by subsequent legislative,
- ---------------------------------------------------------------------
regulatory, administrative or judicial decisions. Because such change could be
- ------------------------------------------------------------------------------
retroactive in effect, any such change could have an effect on our opinion. We
- ------------------------------------------------------------------------------
undertake no responsibility to update our opinion in the event of any such
- --------------------------------------------------------------------------
change. We assume no duty to inform you of any changes in our opinion due to
- ----------------------------------------------------------------------------
changes in law that may occur after the date of this opinion letter. Unless you
- -------------------------------------------------------------------------------
specifically request otherwise, we will not update our advise for subsequent
- ----------------------------------------------------------------------------
change or modifications to the law or regulations, or to the judicial and
- -------------------------------------------------------------------------
administrative interpretations thereof. The opinions contained in this letter
- -----------------------------------------------------------------------------
are not binding upon the Internal Revenue Service, any other tax authority or
- -----------------------------------------------------------------------------
any court, and no assurance can be given that a position contrary to that
- -------------------------------------------------------------------------
expressed in this letter will not be asserted by a tax authority and ultimately
- -------------------------------------------------------------------------------
sustained in court.
- ------------------
KPMG is furnishing this opinion solely in connection with Article V paragraph
- -----------------------------------------------------------------------------
(A)(8) of the Merger Agreement. This opinion may not be included in any
- -----------------------------------------------------------------------
documents available to any party, including, but not limited to, the general
- ----------------------------------------------------------------------------
public, nor may this opinion be incorporated by reference in any document
- -------------------------------------------------------------------------
available to any party other than to which it is addressed, without the
- -----------------------------------------------------------------------
expressed written permission of KPMG.
- ------------------------------------
OPINION
--------
1. Based on the foregoing, it is the opinion of KPMG that the merger of Merit
with and into Synovus, in accordance with Georgia state law, will be
treated as a reorganization under Section 368(a)(1)(A), and that Synovus
and Merit 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 Merit upon the
receipt of the shares of Synovus voting common stock for their Merit common
stock upon consummation of the Merger. The basis of the Synovus shares
received by such Merit shareholders (including any fractional share to
which they may be entitled) will be the same as the basis of the Merit
common stock surrendered in the exchange. Provided that the Merit 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 Merit 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 Merit common
shareholders and then Synovus redeemed such fractional shares for cash. See
Revenue Ruling 66-365, 1966-2 C.B. 116. Each affected Merit 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 Merit
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 Merit liabilities. Under Section 361(c), Merit 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 Section 1032, no gain or loss will be recognized by Synovus upon the
acquisition of substantially all of the assets of Merit in exchange for
solely shares of Synovus common stock and the assumption of the Merit
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 27, 1999, 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 Merit
common shareholders in exchange for their Merit
Board of Directors
Synovus Financial Corp.
Merit Holding Corporation
July 16, 1999
Page 7
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 Merit 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 rights received.
7. No gain or loss will be recognized by Merit, 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 Merit, in the hands of Synovus will be the same
as the basis of such assets in the hands of Merit, 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. These tax attributes may be subject to
various provisions and limitation including those of Sections 381, 382,
383, and 384, the regulations thereunder, and the consolidated return
regulations.
10. Where a Merit 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 Merit stock
subject to the provisions and limitations of Section 302 of the Code.
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 a (1) valid
business purpose; (2) continuity of the business enterprise under the modified
corporate form; and (3) continuity of interest in the corporation surviving the
merger. 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 historical business or use a
significant portion of the transferor corporation's historical business assets.
Regulation Section 1.368-1(d)(2). This will be satisfied in this transaction as
per representation "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:
[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
Board of Directors
Synovus Financial Corp.
Merit Holding Corporation
July 16, 1999
Page 8
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 representation "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 Merit with and into Synovus will constitute a reorganization
within the meaning of Section 368(a)(1)(A) provided that (1) the merger of Merit
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 historical
business of Merit; and (3) Merit shareholders exchange for Synovus common stock
an amount of the Merit stock meeting the continuity of shareholder interest
test. Synovus and Merit 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.
The Merit common shareholders will not recognize any gain or loss pursuant to
Section 354(a)(1) on the receipt solely of Synovus common stock in exchange for
their Merit common stock. The tax basis which these Merit common shareholders
will have in their newly received Synovus common stock will be the same as their
tax basis in the Merit common stock immediately prior to the merger under
Section 358(a),
Board of Directors
Synovus Financial Corp.
Merit Holding Corporation
July 16, 1999
Page 9
less any cash received in lieu of fractional shares, plus any gain recognized
on the receipt of cash in lieu of fractional shares.
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., Merit 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 Merit common stock is a capital
asset, then each Merit shareholder will be able to include his or her respective
ownership period of the Merit 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 Merit 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, PLR 9040042, PLR 9120006, and PLR 199904013
(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 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
Board of Directors
Synovus Financial Corp.
Merit Holding Corporation
July 16, 1999
Page 10
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 Merit common shareholder receiving such rights would be
recognized to the extent of the fair market value of such rights.
/s/KPMG LLP
KPMG 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
II-2
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 4.2 of Synovus Financial Corp.'s Registration
Statement on Form S-3 filed with the Securities and Exchange
Commission on February 23, 1999 (File No. 333-72827).
4.3 Form of Rights Agreement incorporated by reference to Exhibit 4.1 of
Synovus Financial Corp.'s Registration Statement on Form 8-A dated
April 28, 1999 filed with the Securities and Exchange Commission on
April 28, 1999 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 LLP regarding the tax consequences of the Merger
to shareholders of Merit Holding Corporation Common Stock is attached
as Appendix "C" to the Proxy Statement/Prospectus included in this
Registration Statement.
23.1 The consent of KPMG LLP re: Consolidated Financial Statements of
Synovus Financial Corp. and Subsidiaries.
23.2 The consent of PricewaterhouseCoopers LLP re: Consolidated Financial
Statements of Merit Holding Corporation.
II-3
23.3 The consent of KPMG LLP regarding its tax opinion filed as Appendix
"C" 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 T. Stephen Johnson & Associates, Inc. regarding its
opinion as to the fairness of the consideration to be received by
Merit Holding Corporation shareholders.
24 Powers of Attorney contained on the signature pages of the
Registration Statement.
99.1 Form of Proxy
99.2 Opinion of T. Stephen Johnson & Associates, Inc. as to the fairness of
the consideration to be received by Merit Holding Corporation's
shareholders is attached as Appendix "B" to the Proxy/Statement
prospectus included in the 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
II-4
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.
II-5
acq\Merit\PartII.doc
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 16th day of July,
1999.
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 16, 1999
- -------------------------------
William B. Turner,
Director and Chairman of
the Executive Committee
/s/James H. Blanchard Date: July 16, 1999
- -------------------------------
James H. Blanchard,
Chairman of the Board and
Principal Executive Officer
/s/James D. Yancey Date: July 16, 1999
- -----------------------------
James D. Yancey,
President and Director
/s/Richard E. Anthony Date: July 16, 1999
- ------------------------------
Richard E. Anthony,
Vice Chairman of the Board
/s/Walter M. Deriso, Jr. Date: July 16, 1999
- ------------------------------
Walter M. Deriso, Jr.,
Vice Chairman of the Board
/s/Stephen L. Burts, Jr. Date: July 16, 1999
- ------------------------------
Stephen L. Burts, Jr.,
Vice Chairman of the Board
/s/Thomas J. Prescott Date: July 16, 1999
- ------------------------------
Thomas J. Prescott,
Executive Vice President, Treasurer,
Principal Accounting and Financial Officer
- -------------------------------- Date:
Joe E. Beverly,
Director
/s/Richard Y. Bradley Date: July 16, 1999
- -----------------------------
Richard Y. Bradley,
Director
- -------------------------------- Date:
C. Edward Floyd,
Director
/s/Gardiner W. Garrard, Jr. Date: July 16, 1999
- ------------------------------
Gardiner W. Garrard, Jr.,
Director
- -------------------------------- Date:
V. Nathaniel Hansford,
Director
/s/John P. Illges, III Date: July 16, 1999
- ----------------------------
John P. Illges, III,
Director
/s/Mason H. Lampton Date: July 16, 1999
- ---------------------------
Mason H. Lampton,
Director
- -------------------------------- Date:
Elizabeth C. Ogie,
Director
/s/H. Lynn Page Date: July 16, 1999
- ---------------------------
H. Lynn Page,
Director
- -------------------------------- Date:
Robert V. Royall, Jr.,
Director
- -------------------------------- Date:
Melvin T. Stith,
Director
filings\snv\conf.sig
July 16, 1999
Synovus Financial Corp.
901 Front Avenue, Suite 301
Columbus, Georgia 31902
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 16, 1999, pursuant to which
the Registrant proposes to issue up to 7,128,041 shares of its $1.00 par value
common stock ("Registrant's Common Stock") to certain of the former shareholders
of Merit Holding Corporation upon its acquisition by 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
KM/bmk
Exhibit 5
<PAGE>
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.
/s/KPMG LLP
Atlanta, Georgia
July 15, 1999
Exhibit 23.1
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of Synovus Financial Corp. of our report dated January 26,
1999 relating to the financial statements appearing in Merit Holding
Corporation's Annual Report on Form 10-K for the year ended December 31, 1998.
We also consent to the reference to us under the heading "Experts" in such
Registration Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Atlanta, Georgia
July 15, 1999
Exhibit 23.2
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 Appendix C and to
the reference to our firm under the heading of "Experts" and "Tax Opinion" in
the prospectus.
Memphis, Tennessee
July 16, 1999
Exhibit 23.3
CONSENT OF FINANCIAL ADVISOR
We consent to the use in this Registration statement of Synovus Financial Corp.
on Form S-4 of our opinion related to Merit Holding Corporation included in the
Prospectus to such Registration Statement at Exhibit C and to the reference to
our firm in the Prospectus under the caption "DESCRIPTION OF TRANSACTION-Opinion
of Merit's Financial Advisor."
/s/T. Stephen Johnson & Associates, Inc.
T. Stephen Johnson & Associates, Inc.
July 15, 1999
Exhibit 23.5
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 16, 1999
- -------------------------------
William B. Turner,
Director and Chairman of
the Executive Committee
/s/James H. Blanchard Date: July 16, 1999
- -------------------------------
James H. Blanchard,
Chairman of the Board and
Principal Executive Officer
/s/James D. Yancey Date: July 16, 1999
- -----------------------------
James D. Yancey,
President and Director
/s/Richard E. Anthony Date: July 16, 1999
- ------------------------------
Richard E. Anthony,
Vice Chairman of the Board
/s/Walter M. Deriso, Jr. Date: July 16, 1999
- ------------------------------
Walter M. Deriso, Jr.,
Vice Chairman of the Board
/s/Stephen L. Burts, Jr. Date: July 16, 1999
- ------------------------------
Stephen L. Burts, Jr.,
Vice Chairman of the Board
/s/Thomas J. Prescott Date: July 16, 1999
- ------------------------------
Thomas J. Prescott,
Executive Vice President, Treasurer,
Principal Accounting and Financial Officer
- -------------------------------- Date:
Joe E. Beverly,
Director
/s/Richard Y. Bradley Date: July 16, 1999
- -----------------------------
Richard Y. Bradley,
Director
- -------------------------------- Date:
C. Edward Floyd,
Director
/s/Gardiner W. Garrard, Jr. Date: July 16, 1999
- ------------------------------
Gardiner W. Garrard, Jr.,
Director
- -------------------------------- Date:
V. Nathaniel Hansford,
Director
/s/John P. Illges, III Date: July 16, 1999
- ----------------------------
John P. Illges, III,
Director
/s/Mason H. Lampton Date: July 16, 1999
- ---------------------------
Mason H. Lampton,
Director
- -------------------------------- Date:
Elizabeth C. Ogie,
Director
/s/H. Lynn Page Date: July 16, 1999
- ---------------------------
H. Lynn Page,
Director
- -------------------------------- Date:
Robert V. Royall, Jr.,
Director
- -------------------------------- Date:
Melvin T. Stith,
Director
filings\snv\conf.sig
MERIT HOLDING CORPORATION
Special Meeting of Shareholders, __________, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder(s) of Merit Holding Corporation ("Merit"), a
Georgia corporation, hereby acknowledges receipt of the proxy
statement/prospectus dated _____________, 1999 and hereby appoints Roy L.
Simmons, Jr. and Ruth B. McLarty, and each of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent and vote as designated below all of the
Merit common shares that the undersigned held of record at _______ Eastern Time
on ________________, 1999, at the Special Meeting of Shareholders of Merit, to
be held at _______________________________________, on _______________, 1999, at
______, or any adjournment or postponement thereof, on the following matters:
I. APPROVAL OF MERGER AGREEMENT
Proposal to approve and adopt the Agreement and Plan of Merger
dated as of June 28, 1999, by and between Merit and Synovus Financial Corp., as
described in the accompanying proxy statement/prospectus dated
_________________, 1999.
_ FOR _ AGAINST _ ABSTAIN
II. In their discretion, upon such other matter or matters which may
properly come before the meeting or any adjournment or postponement thereof (the
Board of Directors is not aware of any matter other than Proposal I which is to
be presented for action at the Special Meeting).
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY. This Proxy,
when properly executed, will be voted in accordance with the directions given by
the undersigned shareholder. If no direction is made, it will be voted FOR the
approval of the Agreement and Plan of Merger.
Dated: ____________________________ , 1999
-----------------------------------------
Name of Shareholder Signature
-----------------------------------------
No. of Shares Signature
(This Proxy should be marked, dated,
and signed by the shareholder(s)
exactly as his or her name appears
hereon, and returned promptly
in the enclosed envelope. Persons
signing in a fiduciary capacity
should so indicate. If shares are held by
joint tenants or as community
property, both should sign.)
Exhibit 99.1
