As filed with the Securities and Exchange Commission on September 11, 1995
Registration No. 33-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
Piedmont BankGroup Incorporated
(Exact name of registrant as specified in its charter)
Virginia 54-1046817
(State or other jurisdiction of (I.R.S. Employer
incorporation) Identification No.)
200 East Church Street
Martinsville, Virginia 24112
(540) 632-2971
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Rebecca J. Jenkins
Senior Vice President, General Counsel and Secretary
200 East Church Street
Martinsville, Virginia 24112
(540) 632-2971
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Lathan M. Ewers, Jr. George P. Whitley
Hunton & Williams LeClair Ryan
951 East Byrd Street 707 East Main Street
Richmond, Virginia 23219 Richmond, Virginia 23219
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. ( )
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with dividend
or interest reinvestment plans, please check the following box. ( X )
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed maximum
Title of each class Amount to be maximum offering aggregate offering Amount of
of securities to be registered registered price per unit(1) price(1) registration fee
<S> <C> <C> <C> <C>
Common Stock(2) 441,923(3) $25.50 $11,269,037 $3,886.00
</TABLE>
(1) Estimated pursuant to Rule 457(c) under the Securities Act of 1933.
(2) Includes the Rights to purchase Participating Cumulative Preferred Stock,
Series A, which will be attached to and will trade with shares of the Common
Stock of Piedmont BankGroup Incorporated.
(3) The maximum number of shares issuable on conversion of the $8,043,000
aggregate principal amount of the Registrant's 7% Convertible Subordinated
Debentures due 2011 outstanding at the close of business on September 6,
1995.
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 the
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act, or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
441,923 Shares
Piedmont BankGroup Incorporated
Common Stock
____________________
The 441,923 shares of Common Stock, $5.00 par value per share (the
"Common Stock"), of Piedmont BankGroup Incorporated (the "Company") offered
hereby are the maximum number of shares issuable to Scott & Stringfellow,
Inc. (the "Standby Purchaser") (i) on conversion of the Company's 7%
Convertible Subordinated Debentures Due 2011 (the "Debentures") and (ii)
pursuant to the standby arrangements described below.
The Company has called all the Debentures for redemption on October 13,
1995 (the "Redemption Date") at a redemption price of $1,014.00 plus accrued
interest of $34.61 from April 15, 1995 to the Redemption Date, for a total of
$1,048.61 for each $1,000 principal amount of Debentures (the "Redemption
Price"). The Debentures are convertible into 54.945 shares of Common Stock
for each $1,000 principal amount of Debentures. The right to convert
Debentures expires at 5:00 p.m. (Eastern time) on October 5, 1995 (the
"Conversion Date"). Holders who elect to convert their Debentures into
Common Stock will not be entitled to receive interest accrued since April 15,
1995. Any Debentures not surrendered for conversion on or prior to 5:00 p.m.
(Eastern time) on the Conversion Date will be redeemed.
THE CONVERSION RIGHT EXPIRES AT 5:00 P.M. ON THE CONVERSION DATE.
DEBENTURES TO BE CONVERTED MUST BE RECEIVED BY THE TRUSTEE PRIOR TO THAT
TIME. FROM AND AFTER THAT DATE AND TIME, HOLDERS OF DEBENTURES WILL BE
ENTITLED ONLY TO THE REDEMPTION PRICE.
The Company's Common Stock is traded on The Nasdaq National Market under
the symbol "PBGI", and on September 7, 1995, the reported closing price of
the Common Stock on The Nasdaq National Market was $25.375 per share. A
holder of Debentures who converted such shares on September 7, 1995 would
have received Common Stock having a market value, based on the reported
closing price on The Nasdaq National Market on that date, of $1,394.23 for
each Debenture converted (including cash, if any, received in lieu of
fractional shares). If such Debentures were surrendered for redemption on
the Redemption Date, such holder would receive $1,048.61 in cash for each
Debenture. WHILE NO ASSURANCE CAN BE GIVEN AS TO ANY FUTURE PRICES FOR THE
COMMON STOCK, AS LONG AS THE MARKET PRICE OF THE COMMON STOCK REMAINS AT OR
ABOVE $18.45 PER SHARE, UPON CONVERSION OF THEIR DEBENTURES, HOLDERS WILL
RECEIVE COMMON STOCK AND CASH FOR FRACTIONAL SHARES HAVING AN AGGREGATE
MARKET PRICE (WITHOUT GIVING EFFECT TO COMMISSIONS AND OTHER COSTS WHICH
WOULD LIKELY BE INCURRED ON SALE) EQUAL TO OR GREATER THAN THE REDEMPTION
PRICE. It should be noted, however, that the price of the Common Stock
received upon conversion will fluctuate in the market. No assurance is given
as to the price of the Common Stock at any future time and holders should
expect to incur various expenses of sale if such Common Stock is sold.
In the event that fewer than all of the Debentures are surrendered for
conversion prior to the Conversion Date, the Standby Purchaser has agreed,
subject to certain conditions, to purchase from the Company such number of
shares of Common Stock as would have been issuable on conversion of the
Debentures not surrendered for conversion on or prior to the Conversion Date.
The purchase price of such shares will equal the aggregate Redemption Price
of such Debentures. The proceeds of such sale will be used by the Company to
effect redemption of the Debentures. The Standby Purchaser may also purchase
Debentures in the open market or otherwise prior to the Conversion Date and
has agreed to convert all Debentures owned or so purchased by it on or prior
to the Conversion Date.
Prior to or after the Redemption Date, the Standby Purchaser may offer
Common Stock, including Common Stock acquired through the purchase and
conversion of the Debentures, directly to the public at prices set from time
to time by the Standby Purchaser. It is the Standby Purchaser's intention
that, prior to the Redemption Date, each such price when set will not exceed
the greater of the last closing or current asked price of the Common Stock on
The Nasdaq National Market plus an additional amount equal to any applicable
commission. An offering price set on any calendar day will not be increased
more than once during such day. The Standby Purchaser may also make sales to
dealers at prices which represent concessions from the prices at which such
shares are being offered to the public. The amount of such concessions is to
be determined from time to time by the Standby Purchaser. Any Common Stock
so offered will be offered by the Standby Purchaser when, as and if delivered
to and accepted by the Standby Purchaser, and subject to their right to
reject orders in whole or in part.
The Company has agreed to indemnify the Standby Purchaser against
certain liabilities, including liabilities under the Securities Act of 1933.
____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF PIEDMONT BANKGROUP INCORPORATED COMMON STOCK OFFERED
HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS
OF A BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
____________________
Scott & Stringfellow, Inc.
____________________
The date of this Prospectus is September 12, 1995.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy information and other information
with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information can be inspected and copied
at the public reference facilities of the Commission at 450 Fifth Street,
N.W., Washington, D.C. and at the following Regional Offices of the
Commission: 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and
7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such
materials can be obtained from the public reference section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In
addition, such material can be inspected at the offices of the National
Association of Securities Dealers Stock Market, Reports Section, 1735 K
Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a registration statement on
Form S-3 (herein, together with all amendments and exhibits, referred to as
the "Registration Statement") under the Securities Act of 1933, as amended.
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information,
reference is hereby made to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission pursuant to the Exchange Act, are hereby incorporated in this
Prospectus:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994.
(2) The Company's Quarterly Reports on Form 10-Q for the periods ended
March 31, 1995 and June 30, 1995.
(3) The descriptions of the Company's Common Stock and associated
rights to purchase Participating Cumulative Preferred Stock, Series A, which
are contained in the Registration Statements filed under the Exchange Act,
including any amendment or reports filed for the purpose of updating such
descriptions.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of this offering shall be deemed to be incorporated
by reference into this Prospectus and to be a part hereof from the respective
dates of filing of such documents.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for all purposes to the extent
that a statement contained in this Prospectus or in any other subsequently
filed document that is also incorporated by reference modifies or replaces
such statement.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on written or oral request of such person, a copy of
any or all documents incorporated by reference into this Prospectus (other
than exhibits to such documents unless such exhibits are incorporated by
reference therein). Requests for such copies should be directed to Francia
M. Brown, Piedmont BankGroup Incorporated, 200 East Church Street,
Martinsville, Virginia 24112 (telephone number (540) 666-3234).
IN CONNECTION WITH THIS OFFERING, THE STANDBY PURCHASER MAY OVER-ALLOT
OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
COMMON STOCK OR THE DEBENTURES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
<PAGE>
THE COMPANY
General
Piedmont BankGroup Incorporated, is a multi-bank holding company
headquartered in Martinsville, Virginia, with total assets of $857.5 million
at June 30, 1995. Organized in 1977, the Company through its six affiliate
banks (the "Banks"), engages in a general banking business and provides a
broad spectrum of full-service banking to consumers, businesses, institutions
and governments, including accepting demand, savings and time deposits;
making commercial, personal, installment, mortgage and construction loans;
issuing letters of credit; and providing discount brokerage, trust services,
bank-card services, mortgage banking and investment services.
The Banks seek customers whose total financial requirements they can
serve. As a result, most of the Banks' business customers are small and
medium-sized entities. While the Company considers this middle market to be
its primary business market, the Company's lead bank, Piedmont Trust Bank,
has banking relationships with many of the larger textile and furniture
manufacturing companies located in its market area.
Principal markets served are the City of Martinsville and Henry County;
the Towns of Hillsville and Galax, and Carroll and Grayson Counties; the
Towns of Ferrum and Rocky Mount and Franklin County; the Town of Forest, City
of Lynchburg, and Bedford, Campbell and Amherst Counties; the Town of Stuart
and Patrick County; the Towns of Saltville and Chilhowie and Smyth County,
Virginia and contiguous areas. The Company's affiliate Banks operate a total
of 28 offices.
The Company continually seeks acquisition opportunities for banks and
bank related financial institutions. The Company's acquisition philosophy
permits the Banks to operate as separately incorporated banks with their
historical names and board of directors. The Company believes that this
philosophy maintains community loyalty at the Banks and has a positive effect
on operating performance. The Company seeks to capitalize on the local
identity of the Banks while providing the services and efficiencies of a
larger bank holding company.
During 1994, the Company moved to a centralized approach in management,
providing direction to the Banks and performing selected services in the
compliance, data processing, financial management, human resources,
investment, accounting, marketing, mortgage, trust and audit areas. The
Banks are still permitted to approve loans up to a certain credit limit,
above which central credit administration must consent. The Banks also still
must approve investments and other activities consistent with past practices
and the needs of their communities. To coordinate the activities of the
Banks and to maintain internal controls, the Company utilizes a planning and
budgeting process which involves Company officers, presidents of the Banks,
and principal department heads. Performance targets and budget goals are
developed for each Bank on an annual basis, with financial and operating
results reported and reviewed periodically during the year.
The Banks
Piedmont Trust Bank. Piedmont Trust Bank ("Piedmont") was incorporated
in 1921 under the laws of Virginia. Piedmont's main office is in the City of
Martinsville, a commercial center in southwest Virginia, and it has seven
branches in Martinsville and Henry County. Its primary service area has a
population of approximately 73,000 and its economy is oriented toward the
textile, furniture and prebuilt housing industries. It is insured by the
Federal Deposit Insurance Corporation (the "FDIC") and is supervised and
examined by the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") and the State Corporation Commission of Virginia
(the "SCC"). It engages in a general commercial banking business and offers
the range of banking services that can be expected of a banking organization
of its size. In addition, Piedmont has a Trust Department with assets in
excess of $558.4 million under management, which includes custodial accounts,
at June 30, 1995. Piedmont is the largest bank in the Martinsville trade
area with total assets of approximately $419.1 million, deposits of
approximately $322.1 million and net loans of approximately $262.0 million at
June 30, 1995.
Bank of Carroll. Bank of Carroll ("Carroll"), incorporated in 1971
under the laws of Virginia, was acquired by the Company in 1977. At June 30,
1995, it had total assets of approximately $56.2 million. Its main office is
located in Hillsville, Carroll County, Virginia, and it has branches in Cana
and Galax, Virginia. Its primary service area has a population of
approximately 27,000. Carroll is supervised and examined by the Federal
Reserve Board and the SCC and engages in a general commercial banking
business.
Bank of Ferrum. Bank of Ferrum ("Ferrum"), incorporated in 1917 under
the laws of Virginia and converted during the 1920's to a national bank, was
acquired by the Company in 1981. As of June 1, 1995 Bank of Ferrum converted
its charter to a state bank under the laws of Virginia. When Ferrum
converted to a state charter on June 1, 1995, the name changed from First
National Bank of Ferrum to Bank of Ferrum. At June 30, 1995, it had total
assets of approximately $77.7 million. Its main banking office is located at
Ferrum, Virginia, with branches at Oak Level and Rocky Mount, Virginia. Its
primary service area has a population of approximately 40,000. Ferrum is
supervised and examined by the Federal Reserve Board and the SCC and engages
in a general commercial banking business.
First Community Bank. First Community Bank ("Community"), incorporated
in 1978 under the laws of Virginia, was acquired by the Company in 1983. At
June 30, 1995, it had total assets of approximately $105.1 million.
Community's main office is located in Forest, Virginia, and it operates seven
branches in the Lynchburg and Forest area. Its primary service area has a
population of approximately 188,000. Community is regulated by the Federal
Reserve Board and the SCC. Retail and commercial banking services are
provided for customers in Forest, Bedford, Campbell and Amherst Counties and
the City of Lynchburg, Virginia.
The First Bank of Stuart. The First Bank of Stuart ("Stuart") was
incorporated in 1920 as a national bank and acquired by the Company in 1986.
Stuart converted its charter to a state bank and began operating as a state
banking corporation on September 1, 1995. When Stuart was converted to a
state charter on September 1, 1995, the name changed from The First National
Bank of Stuart to The First Bank of Stuart. At June 30, 1995, it had total
assets of approximately $115.0 million. Its main office is located in
Stuart, Virginia, and it has six other offices all located in Patrick County,
Virginia. Stuart is the largest bank in Patrick County. Stuart is regulated
by the Federal Reserve Board and the SCC.
The First Community Bank of Saltville. The First Community Bank of
Saltville ("Saltville") was incorporated in 1918 as a national bank and
acquired by the Company in 1986. As of August 1, 1995 Saltville completed
its conversion from a national bank to a Virginia banking corporation. When
Saltville converted to a state charter on August 1, 1995, the name changed
from The First National Bank of Saltville to The First Community Bank of
Saltville. At June 30, 1995, it had total assets of approximately $85.9
million. Its main office is located in Saltville, Virginia, and it has two
other offices located in Smyth County. Saltville is the third largest of the
four banks in Smyth County. Its primary service area has a population of
approximately 32,000. Saltville engages in a general commercial banking
business and is regulated by the Federal Reserve Board and the SCC.
Recent Developments
As a result of a Trust Department defalcation involving misappropriation
of customer funds by a former Trust Department employee of Piedmont Trust
Bank, Piedmont Trust Bank is subject to a cease and desist order, issued by
the Federal Reserve Board. The order requires Piedmont Trust Bank to
implement corrective measures related to internal controls and operating
procedures in its Trust Department. Piedmont Trust Bank has implemented the
corrective measures required by the order, and on August 25, 1995, the
Federal Reserve Bank of Richmond informed Piedmont Trust Bank that the
condition and administration of the Trust Department are fully satisfactory
and that Piedmont Trust Bank is fully in compliance with all provisions of
the order. The Federal Reserve Bank has advised Piedmont Trust Bank that it
will recommend to the Federal Reserve Board that the order be terminated.
USE OF PROCEEDS
The net proceeds from the sale of the Common Stock to the Standby
Purchaser pursuant to the standby arrangements described herein will be used
to effect a redemption of any Debentures not tendered for conversion. Any
additional proceeds from the sale of Common Stock pursuant to the standby
arrangements described herein will be used for general corporate purposes.
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Company's Common Stock is traded in the over-the-counter market and
is quoted on The Nasdaq National Market under the symbol "PBGI". The
following table sets forth for the periods indicated the high and low closing
prices per share of Common Stock as reported on The Nasdaq National Market,
and the cash dividends paid per share of Common Stock. Information in the
table gives effect to a 5-for-4 stock split effective June 30, 1993.
Price Range
High Low Dividends
1993
First Quarter. . . . . . . . . . $ 20.40 $ 18.00 $0.14
Second Quarter . . . . . . . . . 21.40 17.60 0.14
Third Quarter. . . . . . . . . . 24.50 18.00 0.15
Fourth Quarter . . . . . . . . . 25.00 20.50 0.15
1994
First Quarter. . . . . . . . . . 22.00 20.13 0.16
Second Quarter . . . . . . . . . 22.50 20.00 0.16
Third Quarter. . . . . . . . . . 25.50 20.00 0.17
Fourth Quarter . . . . . . . . . 25.00 18.00 0.17
1995
First Quarter. . . . . . . . . . 23.50 18.75 0.17
Second Quarter . . . . . . . . . 26.25 22.00 0.20
Third Quarter (through September 7) 26.00 24.125 0.20
As of June 30, 1995 there were approximately 2,170 holders of record of
the outstanding shares of Common Stock.
The payment of future dividends will depend upon future earnings of the
Company, its financial condition and other relevant factors, including the
amount of dividends payable to the Company by the Banks. Various federal and
state laws, regulations and policies limit the ability of the Company's
subsidiary banks to pay dividends to the Company, which affects the Company's
ability to pay dividends to shareholders. See "Regulation and Supervision."
<PAGE>
CAPITALIZATION
The following table sets forth the long-term debt and capitalization of
the Company as of June 30, 1995 and as adjusted to give effect to the assumed
conversion into shares of Common Stock of all of the outstanding Debentures
and the estimated expenses of the transaction:
Actual As Adjusted(1)
(in thousands)
Long-term debt:
7% Convertible Subordinated Debentures. . . . $ 8,493 $ -
Other long-term borrowings. . . . . . . . . . 1,000 1,000
Shareholders' equity:
Preferred stock, par value $5.00;
authorized 1,000,000 shares; none issued) - -
Common stock, par value $5.00; authorized
10,000,000 shares; issued 3,790,209
(4,256,855 as adjusted). . . . . . . . . . 18,951 21,284
Capital in excess of par. . . . . . . . . . . 5,403 11,729
Retained earnings . . . . . . . . . . . . . . 39,205 39,205
Unrealized gains (losses) on securities, net
of deferred income tax benefit of $1,441 (2,797) (2,797)
Total shareholders' equity . . . . . . . . 60,762 69,421
Total capitalization . . . . . . . . . . . . . . $70,255 $70,421
(1) As Adjusted represents conversion prior to call of $450,000 and assumed
conversion of $8,043,000 to 466,646 shares of Common Stock including
accrued interest on Debentures of $278,368 less expenses of $52,000 and
expenses associated with the standby arrangement of $60,323.
<PAGE>
SELECTED FINANCIAL DATA
The following operating data and net income per share data are derived
from the Company's audited consolidated financial statements for the years
ended December 31, 1994, 1993 and 1992 and the Company's unaudited
consolidated financial statements for the six-month periods ended June 30,
1995 and 1994. The other selected financial data are derived from the
underlying accounting records of the Company. Interim financial results, in
the opinion of management, reflect all adjustments necessary for a fair
presentation of the results of operations. The results of operations for an
interim period are not necessarily indicative of results that may be expected
for a full year or any other interim period.
<TABLE>
<CAPTION>
Six Months Ended June 30, Years Ended December 31,
1995 1994 1994 1993 1992
(in thousands except per share data)
<S> <C> <C> <C> <C> <C>
Operating Data:
Interest income . . . . . . . . . . . $ 32,647 $ 28,856 $ 59,516 $ 57,912 $ 59,486
Interest expense. . . . . . . . . . . 14,591 12,262 25,217 25,291 29,511
Net interest income . . . . . . . . . 18,056 16,594 34,299 32,621 29,975
Provision for loan losses . . . . . . 657 685 2,827 1,370 2,397
Noninterest income. . . . . . . . . . 3,800 3,539 1,175 6,414 6,386
Noninterest expense . . . . . . . . . 14,691 13,952 28,713 28,254 24,101
Net income. . . . . . . . . . . . . . $ 4,629 $ 4,614 $ 4,088 $ 6,881 $ 7,128
Per Share Data:
Net income:
Primary. . . . . . . . . . . . . . $ 1.22 $ 1.23 $ 1.09 $ 1.86 $ 1.94
Fully diluted. . . . . . . . . . . 1.13 1.13 1.06 1.74 1.82
Cash dividends paid . . . . . . . . . .37 .32 0.66 0.58 0.44
Net book value tier 1 . . . . . . . . 16.77 16.34 15.88 15.40 14.09
Net book value GAAP . . . . . . . . . 16.03 14.68 13.71 15.40 14.09
Significant Ratios:(1)
Return on average assets. . . . . . . 1.16% 1.19% .52% .91% 1.00%
Return on average shareholders' equity 16.56 16.22 7.33 12.39 14.31
Average shareholders' equity to average assets 7.71 7.59 7.73 7.37 6.99
Efficiency ratio. . . . . . . . . . . 64.59 65.74 64.78 64.26 65.35
Net interest margin . . . . . . . . . 4.96 4.64 4.81 4.72 4.60
Credit Quality Ratios:
Allowance for loan losses to nonperforming
loans. . . . . . . . . . . . . . . 155.80% 104.70% 188.17% 198.31% 122.48%
Allowance for loan losses to nonperforming
assets . . . . . . . . . . . . . . 110.61 77.97 118.71 89.97 66.29
Allowance for loan losses to actual loans,
net of unearned income . . . . . . 1.53 1.70 1.64 1.86 1.94
Net charge-offs to average loans, net of
unearned income. . . . . . . . . . .29 .37 .63 .36 .53
Daily Averages:
Total assets. . . . . . . . . . . . . $ 804,202 $ 779,927 $ 787,200 $753,018 $ 712,988
Interest-earning assets . . . . . . . 756,962 733,200 737,382 711,759 677,626
Securities available for sale . . . . 127,930 210,198 205,197 194,429 167,197
Investment securities . . . . . . . . 118,816 42,039 42,989 38,019 33,813
Loans, net of unearned income . . . . 508,033 462,645 474,216 448,772 445,614
Deposits. . . . . . . . . . . . . . . 705,718 689,697 697,337 665,580 632,361
Interest-bearing liabilities. . . . . 653,511 634,505 639,314 615,062 590,709
Shareholders' equity tier 1 . . . . . 62,518 59,353 61,317 55,529 49,804
Shareholders' equity GAAP . . . . . . 56,366 57,370 55,777 55,529 49,804
</TABLE>
(1) Annualized for the twelve months ended June 30, 1995 and 1994.
<PAGE>
REDEMPTION OF DEBENTURES
AND TERMINATION OF CONVERSION PRIVILEGE
The Company has called all the outstanding Debentures for redemption on
October 13, 1995 (the "Redemption Date"). Pursuant to the terms of the
indenture dated as of September 1, 1986 between the Company and First Union
National Bank of North Carolina, as Trustee (the "Trustee"), under which the
Debentures were issued (the "Indenture"), and as a result of the call,
holders of Debentures are entitled to receive $1,048.61 for each $1,000
principal amount of Debentures (consisting of a redemption price of $1,014.00
for each $1,000 principal amount of Debentures plus accrued and unpaid
interest thereon of $34.61 from April 15, 1995 to the Redemption Date). On
or prior to 5:00 p.m. (Eastern time) on October 5, 1995 (the "Conversion
Date"), Debentures are convertible into shares of Common Stock of the Company
at the conversion rate and in the manner described below.
Alternatives Available to Holders of Debentures
Holders of Debentures have the following alternatives which should be
carefully considered:
1. Conversion of Debenture into Common Stock. Debentures may be
converted at the option of the holder into shares of the Company's Common
Stock on the basis of 54.945 shares of Common Stock for each $1,000 principal
amount of Debentures prior to 5:00 p.m. (Eastern time) on the Conversion
Date. To convert any Debentures, the holder thereof must surrender the
Debentures to the Trustee, either by mail to First Union National Bank of
North Carolina, Bond Administration Department, 230 South Tryon Street, 8th
Floor, Charlotte, North Carolina 28288-1179 or Piedmont BankGroup
Incorporated, 200 East Church Street, Martinsville, Virginia 24112,
Attention: Francia M. Brown. Debentures must be accompanied by a written
notice of election to convert, which may be in the form of the Letter of
Transmittal provided to all holders of Debentures. Any Debentures not
delivered for conversion will be redeemed on the Redemption Date. No
interest will accrue with respect to the Debentures on or after the
Redemption Date. No payment or adjustment in respect of interest on the
Debentures will be made upon conversion of the Debentures.
THE CONVERSION RIGHT EXPIRES AT 5:00 P.M. ON THE CONVERSION DATE.
DEBENTURES TO BE CONVERTED MUST BE RECEIVED BY THE TRUSTEE PRIOR TO THAT
TIME. FROM AND AFTER THAT DATE AND TIME, HOLDERS OF DEBENTURES WILL BE
ENTITLED ONLY TO THE REDEMPTION PRICE.
The Company's Common Stock is traded on The Nasdaq National Market under
the symbol "PBGI", and on September 7, 1995, the reported closing price of
the Common Stock on The Nasdaq National Market was $25.375 per share. A
holder of Debentures who converted such shares on September 7, 1995 would
have received Common Stock having a market value, based on the reported
closing price on The Nasdaq National Market on that date, of $1,394.23 for
each Debenture converted (including cash, if any, received in lieu of
fractional shares). If such Debentures were surrendered for redemption on
the Redemption Date, such holder would receive $1,048.61 in cash for each
Debenture. While no assurance can be given as to any future prices for the
Common Stock, as long as the market price of the Common Stock remains at or
above $18.45 per share, upon conversion of their Debentures, holders will
receive Common Stock and cash for fractional shares having an aggregate
market price (without giving effect to commissions and other costs which
would likely be incurred on sale) equal to or greater than the Redemption
Price. It should be noted, however, that the price of the Common Stock
received upon conversion will fluctuate in the market. No assurance is given
as to the price of the Common Stock at any future time and holders should
expect to incur various expenses of sale if such Common Stock is sold.
2. Redemption of Debentures on October 13, 1995. Any Debentures which
have not been converted into Common Stock on or prior to October 5, 1995 will
be redeemed on the Redemption Date. Upon redemption a holder would receive
$1,048.61 per $1,000 principal amount of Debentures (consisting of a
redemption price of $1,014.00 per $1,000 principal amount plus accrued and
unpaid interest thereon of $34.61 from April 15, 1995 to the Redemption
Date). After the Redemption Date, interest will cease to accrue and holders
of Debentures will not have any rights as such holders other than the right
to receive $1,048.61 per $1,000 principal amount of Debentures, without
interest, upon surrender of their Debentures.
3. Sale of Debentures Through Ordinary Brokerage Transactions. Sales
of Debentures may be made through open market brokerage transactions, and if
made sufficiently in advance of the Conversion Date, buyers thereof may
convert Debentures into Common Stock in the manner described above. After
the Conversion Date, a holder of Debentures will not be entitled to convert
Debentures into Common Stock. This is expected to have an impact on the
market for Debentures. Holders of Debentures who wish to make sales should
consult with their own brokers concerning if and when their Debentures should
be sold.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summarizes the principal federal income tax consequences,
under current law, of the conversion of Debentures into Common Stock and of
the redemption of Debentures. It does not address all potentially relevant
federal income tax matters, including consequences to persons (such as
foreign persons and tax-exempt organizations) subject to special provisions
of federal income tax law. The following summary is for general information
only, and holders of Debentures should consult their own tax advisors about
the federal, state, local, and foreign tax consequences of the conversion or
redemption of Debentures.
Conversion into Common Stock. A holder will recognize no gain or loss
for federal income tax purposes on the conversion of a Debenture into shares
of Common Stock, except upon the receipt of cash in lieu of a fractional
share. The receipt of cash in lieu of a fractional share of Common Stock
will be taxable as if the fractional share had been received and then
redeemed for the cash, so a holder will recognize gain or loss equal to the
difference between the amount of cash received and the holder's tax basis in
the fractional share. A holder's aggregate tax basis in shares of Common
Stock (including any fractional share interest) received upon conversion will
be the same as the holder's tax basis in the Debenture converted into such
shares. Accordingly, if a holder converts Debentures into Common Stock and
subsequently sells the Common Stock, he generally will recognize gain or loss
equal to the difference, if any, between his tax basis in the Debentures
converted (less the portion allocable to any fractional share interest) and the
amount realized upon sale of the Common Stock. If a holder holds a Debenture as
a capital asset, the holder's holding period for shares of Common Stock
(including any fractional share interest) received upon conversion of the
Debenture will include the holder's holding period for the Debenture. In the
case of a holder who acquired a Debenture at a "market discount" within the
meaning of sections 1276 and 1278(a)(2) of the Internal Revenue Code of 1986, as
amended (the "Code"), the amount of accrued market discount that would have been
taxable as ordinary income under section 1276 of the Code upon a taxable
disposition of the Debenture at the time of conversion will attach to, and
generally will be recognized as ordinary income upon disposition of, the Common
Stock received upon conversion of the Debenture.
Redemption. The redemption of a Debenture will be taxable as a sale of
the Debenture. Consequently, a holder generally will recognize gain or loss
equal to the difference, if any, between the holder's tax basis in the
Debenture and the amount realized by the holder upon the redemption. (The
amount realized for purposes of determining gain or loss will not include the
amount paid in connection with the redemption for accrued interest, which
will be taxable as interest income.) Gain or loss recognized on the
redemption of a Debenture generally will be capital gain or loss if the
Debenture is held as a capital asset, and capital gain or loss will be long-
term if the holder's holding period for the Debenture exceeds one year on the
Redemption Date. In the case of a holder who acquired a Debenture at a
market discount within the meaning of sections 1276 and 1278(a)(2) of the
Code, gain recognized upon redemption of the Debenture will constitute
ordinary income to the extent of the accrued market discount not previously
included in the holder's income.
Backup Withholding. To prevent backup withholding of federal income tax
at the rate of 31% from the payment of cash in lieu of a fractional share or
the payment of the redemption price plus interest, any holder (other than an
exempt payee such as a corporation or tax-exempt organization) who has not
previously provided a valid IRS Form W-9 relating to the holder's Debentures
should provide a completed Form W-9 upon surrendering Debentures for
conversion or redemption.
DESCRIPTION OF CAPITAL STOCK
The Company has authority to issue 1,000,000 shares of Preferred Stock,
of which no shares are issued and outstanding, and 10,000,000 shares of
Common Stock, of which 3,790,209 shares were issued and outstanding as of
June 30, 1995 held by approximately 2,170 holders of record. The Common
Stock is traded in the over-the-counter market and quoted on The Nasdaq
National Market under the symbol "PBGI".
The following summary description of the capital stock of the Company is
qualified in its entirety by reference to the Company's Articles of
Incorporation, a copy of which has been incorporated by reference as an
exhibit to the Registration Statement.
Preferred Stock
The Board of Directors of the Company, without further action by the
stockholders, is authorized to designate and issue in series Preferred Stock
and to fix as to any series the dividend rate, redemption prices, preferences
on dissolution, the terms of any sinking fund, conversion rights, voting
rights, and any other preferences or special rights and qualifications.
Holders of the Preferred Stock, if and when issued, will be entitled to vote
as required under applicable Virginia law. Such law includes provisions for
the voting of the Preferred Stock in the case of any amendment to the
Articles of Incorporation affecting the rights of holders of Preferred Stock,
the payment of certain stock dividends, merger or consolidation, sale of all
or substantially all of the Company's assets, and dissolution. The Board of
Directors without shareholder approval can issue Preferred Stock with voting
and conversion rights which would adversely affect the voting power of the
common shareholders. In addition, the Preferred Stock could be used in a
manner which would discourage or make more difficult an attempt to acquire
control of the Company. The Company's Board of Directors has designated a
series of 100,000 shares of Participating Convertible Preferred Stock, Series
A (the "Series A Preferred Stock"), no shares of which have been issued. The
Series A Preferred Stock was created in connection with the Company's
shareholder rights plan which is described below.
Common Stock
Holders of Common Stock are entitled to one vote per share on each
matter to be voted upon by the stockholders of the Company. Directors are
elected by a vote of the holders of Common Stock. Dividends may be paid to
the holders of Common Stock when, as and if declared by the Board of
Directors of the Company out of funds legally available for such purposes.
The Company's principal source of funds for dividend payments is dividends
received from the Banks. Payment of dividends to the Company by the Banks,
without prior regulatory approval, is also subject to various state and
federal regulatory limitations. Holders of Common Stock have no conversion,
redemption, cumulative voting or preemptive rights. There is no sinking fund
obligation with respect to the Common Stock. In the event of any
liquidation, dissolution or winding up of the Company, after payment or
provision for payment of the debts and other liabilities of the Company and
the preferential amounts to which the holders of Preferred Stock, if any, are
entitled, the holders of Common Stock will be entitled to share ratably in
any remaining assets of the Company.
All outstanding shares of Common Stock are, and the shares of Common
Stock to be issued upon conversion of the Debentures or upon issuance by the
Company pursuant to the Standby Agreement will be, when issued, duly and
validly issued, fully paid and nonassessable.
Transfer Agent
First Union National Bank of North Carolina is transfer agent for the
Company's Common Stock.
Rights
Pursuant to a Rights Agreement (the "Rights Agreement") dated as of
January 18, 1990 between the Company and First Union National Bank of North
Carolina, the Company distributed as a dividend one Right for each
outstanding share of Common Stock. The number of Rights associated with each
share of Common Stock outstanding as of June 30, 1993 was adjusted
proportionately for the five-for-four stock split effected in the form of a
dividend paid July 30, 1993. Each Right entitles the holder to buy one one-
hundredth of a share of Participating Cumulative Preferred Stock, Series A,
par value $5.00 per share, at an exercise price of $60, subject to
adjustment. The Rights will become exercisable only if a person or group
acquires or announces a tender offer for 15% or more of the outstanding
Common Stock. When exercisable, the Company may issue a share of Common
Stock in exchange for each Right other than those held by such person or
group. If a person or group acquires 30% or more of the outstanding Common
Stock, each Right will entitle the holder, other than the acquiring person,
upon payment of the exercise price, to acquire Preferred Stock or, at the
option of the Company, Common Stock, having a value equal to twice the
Right's exercise price. If the Company is acquired in a merger or other
business combination or if 50% of its earnings power is sold, each Right will
entitle the holder, other than the acquiring person, to purchase securities
of the surviving company having a market value equal to twice the exercise
price of the Right. The Rights will expire on January 18, 2000, and may be
redeemed by the Company at any time prior to the tenth day after an
announcement that a 10% position has been acquired, unless such time period
has been extended by the Board of Directors.
Until such time as a person or group acquires or announces a tender
offer for 15% or more of the Common Stock, (i) the Rights will be evidenced
by the Common Stock certificates and will be transferred with and only with
such Common Stock certificates, and (ii) the surrender for transfer of any
certificate for Common Stock will also constitute the transfer of the Rights
associated with the Common Stock represented by such certificate. Rights may
not be transferred, directly or indirectly (i) to any person or group that
has acquired, or obtained the right to acquire, beneficial ownership of 10%
or more of the Rights (an "Acquiring Person"), (ii) to any person in
connection with a transaction in which such person becomes an Acquiring
Person or (iii) to any affiliate or associate of any such person. Any Right
that is the subject of a purported transfer to any such person will be null
and void.
The Rights can be expected to have certain anti-takeover effects if an
acquisition transaction not approved by the Board of Directors is proposed by
a person or group. In such event, the Rights will cause substantial dilution
to any person or group that acquires more than 15% of the outstanding shares
of Common Stock of the Company if certain events thereafter occur without the
Rights having been redeemed. For example, if thereafter such acquiring
person acquires 30% of the Company's outstanding Common Stock, or effects a
business combination with the Company, the Rights permits stockholders to
acquire securities having a value equal to twice the amount of the purchase
price specified in the Rights, but rights held by such "acquiring person" are
void to the extent permitted by law and may not be exercised. Further, other
stockholders may not transfer rights to such "acquiring person" above his 15%
ownership threshold. Because of these provisions, it is unlikely that any
person or group will propose an acquisition transaction that is not approved
by the Company's Board of Directors. Thus, the Rights could have the effect
of discouraging acquisition transactions not approved by the Company's Board
of Directors. The Rights do not interfere with any merger or other business
combination approved by the Company's Board of Directors and stockholders
because the rights are redeemable with the concurrence of a majority of the
"Continuing Directors," defined as directors in office when the Rights
Agreement was adopted or any person added thereafter to the Board with the
approval of the Continuing Directors.
Virginia Stock Corporation Act
The Virginia Stock Corporation Act contains provisions governing
"Affiliated Transactions." These provisions, with several exceptions
discussed below, require approval of material acquisition transactions
between a Virginia corporation and any holder of more than 10% of any class
of its outstanding voting shares (an "Interested Stockholder") by the holders
of at least two-thirds of the remaining voting shares. Affiliated
Transactions subject to this approval requirement include mergers, share
exchanges, material dispositions of corporate assets not in the ordinary
course of business, any dissolution of the corporation proposed by or on
behalf of an Interested Stockholder, or any reclassification, including
reverse stock splits, recapitalization or merger of the corporation with its
subsidiaries which increases the percentage of voting shares owned
beneficially by an Interested Stockholder by more than 5%.
For three years following the time that an Interested Stockholder
becomes an owner of more than 10% of the outstanding voting shares, a
Virginia corporation cannot engage in an Affiliated Transaction with such
Interested Stockholder without approval of two-thirds of the voting shares
other than those shares beneficially owned by the Interested Stockholder, and
majority approval of the "Disinterested Directors." A Disinterested Director
means, with respect to a particular Interested Stockholder, a member of the
Company's Board of Directors who was (1) a member on the date on which an
Interested Stockholder became an Interested Stockholder and (2) recommended
for election by, or was elected to fill a vacancy and received the
affirmative vote of, a majority of the Disinterested Directors then on the
Board. At the expiration of the three year period, the statute requires
approval of Affiliated Transactions by two-thirds of the voting shares other
than those beneficially owned by the Interested Stockholder.
The principal exceptions to the special voting requirement apply to
transactions proposed after the three year period has expired and require
either that the transaction be approved by a majority of the corporation's
Disinterested Directors or that the transaction satisfy the fair-price
requirements of the statute. In general, the fair-price requirement provides
that in a two-step acquisition transaction, the Interested Stockholder must
pay the stockholders in the second step either the same amount of cash or the
same amount and type of consideration paid to acquire the Virginia
corporation's shares in the first step.
None of the foregoing limitations and special voting requirements
applies to a transaction with an Interested Stockholder whose acquisition of
shares making such person an Interested Stockholder was approved by a
majority of the Virginia corporation's Disinterested Directors.
These provisions were designed to deter certain takeovers of Virginia
corporations. In addition, the statute provides that, by affirmative vote of
a majority of the voting shares other than shares owned by any Interested
Stockholder, a corporation can adopt an amendment to its articles of
incorporation or bylaws providing that the Affiliated Transactions provisions
shall not apply to the corporation. The Company has not "opted out" of the
Affiliated Transactions provisions.
Virginia law also provides that shares acquired in a transaction that
would cause the acquiring person's voting strength to meet or exceed any of
three thresholds (20%, 331/3% or 50%) have no voting rights unless granted by
a majority vote of shares not owned by the acquiring person or any officer or
employee-director of the Virginia corporation. This provision empowers an
acquiring person to require the Virginia corporation to hold a special
meeting of stockholders to consider the matter within 50 days of its request.
Reports to Stockholders
The Company furnishes stockholders with written annual reports
containing consolidated financial statements audited by an independent
certified public accountant and with written quarterly reports containing an
unaudited balance sheet as of the end of each of the first three quarterly
periods and an income statement for the period from the beginning of the
current fiscal year to the end of such quarterly period.
REGULATION AND SUPERVISION
Bank holding companies and banks operate in a highly regulated
environment and are regularly examined by federal and state regulators. The
following description briefly discusses certain provisions of federal and
state laws and certain regulations and the potential impact of such
provisions on the Company and the Banks. These federal and state laws and
regulations have been enacted for the protection of depositors in national
and state banks and not for the protection of shareholders of bank holding
companies such as the Company.
Bank Holding Companies
As a bank holding company registered under the Bank Holding Company Act
of 1956, as amended (the "BHCA"), the Company is subject to regulation by the
Federal Reserve Board. The Federal Reserve Board has jurisdiction under the
BHCA to approve any bank or nonbank acquisition, merger or consolidated
proposed by a bank holding company. The BHCA generally limits the activities
of a bank holding company and its subsidiaries to that of banking, managing
or controlling banks, or any other activity which is so closely related to
banking or to managing or controlling banks as to be a proper incident
thereto.
The BHCA currently prohibits the Federal Reserve Board from approving an
application from a bank holding company to acquire shares of a bank located
outside the state in which the operations of the holding company's banking
subsidiaries are principally conducted, unless such an acquisition is
specifically authorized by statute of the state in which the bank whose
shares are to be acquired is located. Under recently enacted federal
legislation, the restriction on interstate acquisitions will be abolished
effective September 29, 1995 and thereafter. Bank holding companies from any
state will then be able to acquire banks and bank holding companies located
in any other state. Effective June 1, 1997, the law will allow interstate
bank mergers, subject to earlier "opt-in" or "opt-out" action by individual
states. The law also allows interstate branch acquisitions and de novo
branching if permitted by the host state. Virginia has recently adopted
early "opt-in" legislation that will allow interstate bank mergers. These
laws also permit interstate branch acquisitions and de novo branching in
Virginia and North Carolina by out-of-state banks if reciprocal treatment is
accorded Virginia and North Carolina banks (as the case may be) in the state
of the acquiror.
There are a number of obligations and restrictions imposed on bank
holding companies and their depository institution subsidiaries by federal
law and regulatory policy that are designed to reduce potential loss exposure
to the depositors of such depository institutions and to the FDIC insurance
fund in the event the depository institution becomes in danger of default or
in default. For example, under a policy of the Federal Reserve Board with
respect to bank holding company operations, a bank holding company is
required to serve as a source of financial strength to its subsidiary
depository institutions and to commit resources to support such institutions
in circumstances where it might not do so otherwise. In addition, the
"cross-guarantee" provisions of federal law require insured depository
institutions under common control to reimburse the FDIC for any loss suffered
or reasonably anticipated by either the Savings Association Insurance Fund
("SAIF") or the Bank Insurance Fund ("BIF") as a result of the default of a
commonly controlled insured depository institution or for any assistance
provided by the FDIC to a commonly controlled insured depository institution
in danger of default. The FDIC may decline to enforce the cross-guarantee
provisions if it determines that a waiver is in the best interest of the SAIF
or the BIF or both. The FDIC's claim for reimbursement is superior to claims
of stockholders of the insured depository institution or its holding company
but is subordinate to claims of depositors, secured creditors and holders of
subordinated debt (other than affiliates) of the commonly controlled insured
depository institution.
The Federal Deposit Insurance Act ("FDIA") also provides that amounts
received from the liquidation or other resolution of any insured depository
institution by any receiver must be distributed (after payment of secured
claims) to pay the deposit liabilities of the institution prior to payment of
any other general or unsecured senior liability, subordinated liability,
general creditor or stockholder. This provision would give depositors a
preference over general and subordinated creditors and stockholders in the
event a receiver is appointed to distribute the assets of any of the Banks.
The BHCA also prohibits a bank holding company, with certain exceptions,
from acquiring more than 5% of the voting shares of any company that is not
a bank and from engaging in any business other than banking or managing or
controlling banks. Under the BHCA, the Federal Reserve Board is authorized
to approve the ownership of shares by a bank holding company in any company
the activities of which the Federal Reserve Board has determined to be so
closely related to banking or to managing or controlling banks as to be a
proper incident thereto. The Federal Reserve Board has by regulation
determined that certain activities are closely related to banking within the
meaning of the BHCA. These activities include: operating a mortgage company,
finance company, credit card company or factoring company; performing certain
data processing operations; providing investment and financial advice; and
acting as an insurance agent for certain types of credit-related insurance.
The Company also is registered under the bank holding company laws of
Virginia. Accordingly, the Company and the Banks are subject to further
regulation and supervision by the SCC.
Capital Requirements
The Federal Reserve Board and the FDIC have issued substantially similar
risk-based and leverage capital guidelines applicable to United States
banking organizations. In addition, those regulatory agencies may from time
to time require that a banking organization maintain capital above the
minimum levels because of its financial condition or actual or anticipated
growth. Under the risk-based capital requirements of these federal bank
regulatory agencies, the Company and the Banks are required to maintain a
minimum ratio of total capital to risk-weighted assets of at least 8%. At
least half of the total capital is required to be "Tier 1 capital", which
consists principally of common and certain qualifying preferred stockholders'
equity, less certain intangibles and other adjustments. The remainder "Tier
2 capital" consists of a limited amount of subordinated and other qualifying
debt (including certain hybrid capital instruments) and a limited amount of
the general loan loss allowance. The Tier 1 and total capital to
risk-weighted asset ratios of the Company as of June 30, 1995 were 11.76% and
14.59% respectively, exceeding the minimums required.
In addition, each of the federal regulatory agencies has established a
minimum leverage capital ratio (Tier 1 capital to average tangible assets).
These guidelines provide for a minimum ratio of 3% for banks and bank holding
companies that meet certain specified criteria, including that they have the
highest regulatory examination rating and are not contemplating significant
growth or expansion. All other institutions are expected to maintain a
leverage ratio of at least 100 to 200 basis points above the minimum. The
Tier 1 capital leverage ratio of the Company as of June 30, 1995, was 7.39%.
The guidelines also provide that banking organizations experiencing internal
growth or making acquisitions will be expected to maintain strong capital
positions substantially above the minimum supervisory levels, without
significant reliance on intangible assets.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") requires each federal banking agency to revise its risk-based
capital standards to ensure that those standards take adequate account of
interest rate risk, concentration of credit risk and the risks of
nontraditional activities, as well as reflect the actual performance and
expected risk of loss on multi-family mortgages. Rules have been promulgated
with respect to concentration of credit risk and the risks of non-traditional
activities, and also as to the risk of loss on multi-family mortgages. A
proposed rule with respect to interest rate risk is still under
consideration. The proposal would allow institutions to use internal risk
models to measure interest rate risk (if the models are acceptable to
examiners) and would require additional capital of institutions identified as
having excess interest rate risk. The Company does not expect any of these
rules, either individually or in the aggregate, to have a material impact on
its capital requirements.
Limits on Dividends and Other Payments
The Company is a legal entity separate and distinct from its subsidiary
institutions. Most of the revenues of the Company result from dividends paid
to the Company by the Banks. Effective September 1, 1995, each of the Banks
was a state member bank of the Federal Reserve System. As a result, the
Banks are regulated by the Federal Reserve and the SCC. There are various
regulatory limitations applicable to the payment of dividends by the Banks to
the Company as well as the payment of dividends by the Company to its
respective stockholders. Under federal law applicable to the Banks, prior
approval from the bank regulatory agencies is required if cash dividends
declared in any given year exceed net income for that year plus retained
earnings of the two preceding years. Under then existing supervisory
practices, at June 30, 1995, the Banks could have paid additional dividends
to the Company of approximately $27.9 million, without obtaining prior
regulatory approval. If all Banks had been state member banks at June 30,
1995, the Banks could have paid additional dividends to the Company of
approximately $42.5 million, without obtaining prior regulatory approval.
The payment of dividends by the Banks or the Company may also be limited by
other factors, such as requirements to maintain capital above regulatory
guidelines. Bank regulatory agencies have authority to prohibit any Bank or
the Company from engaging in an unsafe or unsound practice in conducting
their business. The payment of dividends, depending upon the financial
condition of the Bank in question, or the Company, could be deemed to
constitute such an unsafe or unsound practice. The Federal Reserve Board
has stated that, as a matter of prudent banking, a bank or bank holding
company should not maintain its existing rate of cash dividends on common
stock unless (1) the organization's net income available to common
stockholders over the past year has been sufficient to fund fully the
dividends and (2) the prospective rate of earnings retention appears
consistent with the organization's capital needs, asset quality, and overall
financial condition.
Under the FDIA, insured depository institutions such as the Banks are
prohibited from making capital distributions, including the payment of
dividends, if, after making such distribution, the institution would become
"undercapitalized" (as such term is used in the statute). Based on the Banks
current financial condition, the Company does not expect that this provision
will have any impact on its ability to obtain dividends from the Banks.
In addition to limitations on dividends, the Banks are limited in the
amount of loans and other extensions of credit that may be extended to the
Company, and any such loans or extensions of credit are subject to collateral
security requirements. Generally, up to 10% of the Banks' regulatory
capital, surplus, undivided profits, allowance for loan losses and
contingency reserves may be loaned to the Company. As of June 30, 1995,
approximately $6.9 million of credit was available to the Company under this
limitation, although no extensions of credit were outstanding.
Banks
The Banks are supervised and regularly examined by the Federal Reserve
Board and the SCC. The Banks are also subject to various requirements and
restrictions under federal and state law such as limitations on the types of
services that they may offer, the nature of investments that they make, and
the amounts of loans that may be granted. Various consumer and compliance
laws and regulations also affect the operations of the Banks. In addition to
the impact of regulation, the Banks are affected significantly by actions of
the Federal Reserve Board in attempting to control the money supply and the
availability of credit.
The Banks also are subject to the requirements of the Community
Reinvestment Act (the "CRA"). The CRA imposes on financial institutions an
affirmative and ongoing obligation to meet the credit needs of their local
communities, including low- and moderate-income neighborhoods, consistent
with the safe and sound operation of those institutions. Each financial
institution's efforts in meeting community credit needs currently are
evaluated as part of the examination process pursuant to twelve assessment
factors. These factors also are considered in evaluating mergers,
acquisitions and applications to open branches. The Banks have attained
either an "outstanding" or "satisfactory" rating on their most recent CRA
performance evaluations.
As a result of a 1993 Presidential initiative, each of the federal
banking agencies, recently approved a final rule establishing a new framework
for the implementation of CRA. The new rule, which will become fully
effective on July 1, 1997, will emphasize an institution's performance in
meeting community credit needs. Institutions will be evaluated on the basis
of a three pronged lending, investment and service test, with lending being
of primary importance. CRA ratings will continue to be a matter of public
record, and CRA performance will continue to be evaluated in connection with
mergers, acquisitions and branch applications. Although the new rule is
likely to have some impact on the Company's business practices, it is not
anticipated that any changes will be material.
Deposit Insurance
As institutions with deposits insured by BIF, the Banks also are subject
to insurance assessments imposed by the FDIC. Currently, a risk-based
assessment schedule imposes assessments on BIF deposits, ranging from 0.23%
to 0.31% of an institution's average assessment base. The actual assessment
paid is based on the institution's assessment risk classification, which is
determined based on whether the institution is considered "well capitalized,"
"adequately capitalized" or "undercapitalized." as such terms have been
defined in applicable federal regulations, and whether such institution is
considered by its supervisory agency to be financially sound or to have
supervisory concerns. The Banks currently pay at a rate of .23% of
assessable deposits.
On August 8, 1995, the FDIC's Board of Directors voted to revise the
range of assessment premiums applicable to BIF-insured deposits. Under the
revised risk-based assessment rate schedule for BIF-insured deposits, the
best-rated banks will pay 0.04% of deposits while the weakest ones will
continue to pay 0.31% of deposits. The new rate schedule is expected to be
applied in September, 1995, when the FDIC will be able to confirm that BIF
has reached its designated reserve ratio of 1.25% of deposits. The premium
reduction, however, will be retroactive to July 1, 1995, and institutions
will receive a refund for excess payments made during the interim period.
The Banks are expected to receive an after-tax refund in excess of $0.2
million, and the premium reduction on BIF-insured deposits is expected to
annually save the Banks approximately $0.8 million after-tax, based on their
current level of BIF deposits.
In a separate development, on July 28, 1995, the Clinton Administration
put forth a legislative proposal, supported by the FDIC and OTS, to
recapitalize SAIF with the imposition of a one-time assessment on SAIF
deposits of between 85 and 90 basis points (0.85% - 0.90%). The assessment
would be due on January 1, 1996, based on SAIF-assessable deposits held as of
March 31, 1995. The proposal calls for a merger of BIF and SAIF and for BIF
members to share in the cost of interest payments on bonds issued to
recapitalize the insurance funds ("FICO bonds"). After the one-time
assessment, the risk-based assessment schedule for the newly capitalized SAIF
would be similar to the schedule for BIF (that is, rates ranging from 4 to 31
basis points.) House and Senate hearings have been held on the proposal but
the prospects for passage are uncertain at this time.
Other Safety and Soundness Regulations
The federal banking agencies have broad powers under current federal law
to take prompt corrective action to resolve problems of insured depository
institutions. The extent of these powers depends upon whether the
institutions in question are "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" or "critically
undercapitalized," as such terms are defined under uniform regulations
defining such capital levels issued by each of the federal banking agencies.
In addition, FDIC regulations now require that management report on its
institution's responsibility for preparing financial statements, and
establishing and maintaining an internal control structure and procedures for
financial reporting and compliance with designated laws and regulations
concerning safety and soundness; and that independent auditors attest to and
report separately on assertions in management's reports concerning compliance
with such laws and regulations, using FDIC-approved audit procedures.
The 1991 FDICIA law, as amended by the Riegle Community Development Act
of 1994, requires the Federal bank regulators to develop standards for a wide
variety of internal bank operating procedures and grants regulators
discretion to develop standards on asset quality, earnings and stock
valuation. Final rules on the subject have not yet been published but a 1993
proposed rule contained broad principle-based standards that leave the method
for meeting such standards largely in the province of management. Based on
its review of the proposed rule, the Company does not believe that the
standards will have any significant impact on its operations.
STANDBY AND OTHER ARRANGEMENTS
Under the terms and subject to the conditions in the Standby Agreement,
dated September 12, 1995 between the Company and the Standby Purchaser (the
"Standby Agreement"), the Standby Purchaser has agreed to purchase from the
Company for settlement on October 12, 1995, such number of shares of Common
Stock as would have been issuable upon conversion of the Debentures that were
not surrendered for conversion on or prior to the Conversion Date for a
purchase price equal to the aggregate Redemption Price of such Debentures.
The Standby Purchaser may also purchase Debentures in the open market or
otherwise prior to the Conversion Date. The Standby Purchaser has agreed to
convert into Common Stock all Debentures so purchased by it on or prior to
the Conversion Date and any other Debentures beneficially owned by it. The
Standby Purchaser has agreed to remit to the Company 50% of the profits
(profits consist of the excess of total proceeds received on the sale of
shares of Common Stock sold by the Standby Purchaser, over the purchase price
paid to the Company for such shares, after deducting any selling concessions,
transfer taxes and other out-of-pocket selling expenses) made by the Standby
Purchaser from the sale, subsequent to the date hereof, of Common Stock
purchased by it from the Company pursuant to the Standby Agreement.
The Company has been advised by the Standby Purchaser that the Standby
Purchaser proposes to offer any shares of Common Stock purchased from the
Company or acquired on conversion of Debentures for resale as set forth on
the cover page of this Prospectus. The Standby Purchaser may also make sales
of such shares to dealers at prices which represent a concession of a maximum
of $0.50 per share. The Standby Purchaser may allow and such dealers may
reallow a concession of up to $0.25 per share to certain other dealers,
subject to change from time to time.
Pursuant to the terms of the Standby Agreement and in consideration of
its obligations thereunder, the Company has agreed to pay the Standby
Purchaser the sum of $60,323 plus $0.76 per share for each share purchased
pursuant to the Standby Agreement.
The Company has agreed to indemnify the Standby Purchaser against
certain liabilities, including liabilities under the Securities Act of 1933,
or contribute to payments the Standby Purchaser may be required to make in
respect thereof.
The Company has agreed that it will not, without the Standby Purchaser's
prior written consent (which consent will not be unreasonably withheld) for
a period of 90 days after the date of this Prospectus, issue, sell, contract
for or offer to sell, or grant any option (other than employee stock options)
for the purchase of or otherwise dispose, directly or indirectly, any shares
of Common Stock (or any securities convertible into or exercisable for such
Common Stock) other than issuances upon conversion of presently outstanding
convertible securities of the Company, upon the exercise of presently
outstanding warrants or stock options, in connection with the Company's
dividend reinvestment plan, and in connection with acquisitions.
LEGAL OPINIONS
The legality of Common Stock offered hereby will be passed upon for the
Company by Hunton & Williams, 951 East Byrd Street, Richmond, Virginia 23219.
Certain legal matters in connection with the Common Stock offered hereby will
be passed upon for the Standby Purchaser by LeClair Ryan, 707 East Main
Street, Richmond, Virginia 23219.
EXPERTS
The consolidated financial statements of Piedmont BankGroup Incorporated
and subsidiaries as of December 31, 1994 and 1993, and for each of the years
in the three year period ended December 31, 1994 included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1994 have been
incorporated by reference herein and in the registration statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified
public accountants, incorporated by reference herein, and upon the authority
of said firm as experts in accounting and auditing. Their report refers to
changes in accounting for certain investments in debt and equity securities,
impaired loans, income taxes and postretirement benefits other than pensions.
<PAGE>
===================================== =======================================
No person has been authorized to
give any information or to make
representations not contained in this
Prospectus regarding the Company or
the offering made hereby and, if given
or made, such information or
representations must not be relied
upon as having been authorized by the
Company or the Standby Purchaser.
This Prospectus does not constitute an 441,923 shares
offer to sell or a solicitation of an
offer to buy any securities other than
the registered securities to which it Piedmont
relates, nor does it constitute an BankGroup
offer to or solicitation of any person Incorporated
in any jurisdiction in which such
offer or solicitation would be
unlawful. Neither delivery of this Common Stock
Prospectus nor any sale made hereunder
shall create any implication that
information contained herein is
correct as of any time subsequent to
the date hereof.
PROSPECTUS
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION. . . . . . 1
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE . . . . 1
THE COMPANY. . . . . . . . . . . 2 Scott & Stringfellow, Inc.
USE OF PROCEEDS. . . . . . . . . 3
PRICE RANGE OF COMMON STOCK
AND DIVIDENDS. . . . . . . . . 4
CAPITALIZATION . . . . . . . . . 5
SELECTED FINANCIAL DATA. . . . . 6
REDEMPTION OF DEBENTURES September 12, 1995
AND TERMINATION OF
CONVERSION PRIVILEGE . . . . . 7
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES . . . . . . . . . 8
DESCRIPTION OF CAPITAL STOCK . . 8
REGULATION AND SUPERVISION . . . 11
STANDBY AND OTHER
ARRANGEMENTS . . . . . . . . . 15
LEGAL OPINIONS . . . . . . . . . 16
EXPERTS. . . . . . . . . . . . . 16
===================================== =======================================
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Estimated expenses in connection with the issuance and distribution of
the securities being registered, other than underwriting compensation, are as
follows:
Securities and Exchange Commission registration fee. . . $ 3,886.00
Blue Sky fees and expenses . . . . . . . . . . . . . . . 2,500.00
Legal fees . . . . . . . . . . . . . . . . . . . . . . . 30,000.00
Accounting fees. . . . . . . . . . . . . . . . . . . . . 10,000.00
Printing, engraving and postage expenses . . . . . . . . 5,000.00
Miscellaneous expenses . . . . . . . . . . . . . . . . . 614.00
Total. . . . . . . . . . . . . . . . . . . . . . . . . . $ 52,000.00
Item 15. Indemnification of Directors and Officers
The Company's Articles implement the provisions of the Virginia Stock
Corporation Act (the "VSCA"), which provide for the indemnification of the
Company's directors and officers in a variety of circumstances, which may
include indemnification for liabilities under the Securities Act of 1933.
Under sections 13.1-697 and 13.1-702 of the VSCA, a Virginia corporation
generally is authorized to indemnify its directors and officers in civil or
criminal actions if they acted in good faith and believed their conduct to be
in the best interests of the corporation and, in the case of criminal ac-
tions, had no reasonable cause to believe that the conduct was unlawful. The
Company's Articles require indemnification of directors and officers with
respect to certain liabilities, expenses and other amounts imposed upon them
by reason of having been a director or officer, except in the case of willful
misconduct or a knowing violation of criminal law. The Company also carries
insurance on behalf of directors, officers, employees or agents that may
cover liabilities under the Securities Act of 1933. In addition, the VSCA
and the Company's Articles eliminate the liability of a director or officer
of the Company in a stockholder or derivative proceeding. This elimination
of liability will not apply in the event of willful misconduct or a knowing
violation of the criminal law or any federal or state securities law.
Sections 13.1-692.1 and 13.1-696 to -704 of the VSCA are hereby incorporated
herein by reference.
Item 16. Exhibits
1 Form of Standby Agreement between the Company and
Scott & Stringfellow, Inc.
3.1 Articles of Incorporation of the Registrant, as amended (incorporated
by reference to Exhibit 3(a) to the Registrant's Form 10-K for the
fiscal year ended December 31, 1994)
3.2 Bylaws of the Registrant (incorporated by reference to Exhibit 3(b) to
the Registrant's Form 10-K for the fiscal year ended December 31, 1994)
4.1 Preferred Share Rights Plan (Incorporated by reference to Registrant's
Form 8-K dated January 18, 1990)
4.2 Indenture dated September 1, 1986 between Piedmont BankGroup
Incorporated and First Union National Bank of North Carolina as
Trustee, relating to Piedmont BankGroup Incorporated 7% convertible
subordinated debentures (incorporated by reference to Exhibit 4(b)) to
the Registrant's Registration Statement on Form S-2 (No. 33-9084).
5 Opinion of Hunton & Williams
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Hunton & Williams (included in Exhibit 5)
24 Powers of Attorney of Directors and Officers of the Company (included
on signature pages)
99.1 Notice of Redemption
99.2 Form of Letter of Transmittal
99.3 Form of Letter to Nominees
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3, and the information required to
be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Exchange Act) 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.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the registrant pursuant to the provisions described under Item 15 above,
or otherwise, the registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Martinsville, Commonwealth of
Virginia, on September 11, 1995.
PIEDMONT BANKGROUP INCORPORATED
(Registrant)
By: /s/ Michael R. Brenan
Michael R. Brenan
President, Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on September 11, 1995. Each of the directors and/or
officers of Piedmont BankGroup Incorporated whose signature appears below
hereby appoints Michael R. Brenan, James E. Adams, Rebecca J. Jenkins and
David M. Carter, and each of them severally, as his attorney-in-fact to sign
in his name and behalf, in any and all capacities stated below and to file
with the Commission, any and all amendments, including post-effective
amendments to this registration statement, making such changes in the
registration statement as appropriate, and generally to do all such things in
their behalf in their capacities as officers and directors to enable Piedmont
BankGroup Incorporated to comply with the provisions of the Securities Act of
1933, and all requirements of the Securities and Exchange Commission.
<TABLE>
<CAPTION>
Signature Title
<S> <C>
/s/ Michael R. Brenan President, Chairman of the Board and Chief
------------------------------ Executive Officer and Director (Principal
Michael R. Brenan Executive Officer)
/s/ James E. Adams Senior Vice President, Chief Financial Officer
------------------------------ and Treasurer (Principal Financial
James E. Adams and Accounting Officer)
/s/ W. Christopher Beeler, Jr. Director
------------------------------
W. Christopher Beeler, Jr.
------------------------------ Director
Thomas B. Bishop
------------------------------ Director
William S. Clark
/s/ William L. Cooper, III Director
------------------------------
William L. Cooper, III
/s/ Billy P. Craft Director
------------------------------
Billy P. Craft
------------------------------ Director
Larry E. Hutchens
------------------------------ Director
William O. McCabe, Jr., MD
Director
------------------------------
Albert L. Prillaman
/s/ Richard M. Simmons, Jr. Director
------------------------------
Richard M. Simmons, Jr.
/s/ Thomas B. Stanley, Jr. Director
------------------------------
Thomas B. Stanley, Jr.
</TABLE>
<PAGE>
EXHIBIT INDEX
1 Form of Standby Agreement between the Company and
Scott & Stringfellow, Inc.
5 Opinion of Hunton & Williams
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Hunton & Williams (included in Exhibit 5)
99.1 Notice of Redemption
99.2 Form of Letter of Transmittal
99.3 Form of Letter to Nominees
PIEDMONT BANKGROUP INCORPORATED
7% Convertible Subordinated Debentures Due 2011
___________________________
Standby Agreement
___________________________
September 12, 1995
SCOTT & STRINGFELLOW, INC.
909 East Main Street
Richmond, Virginia 23213
Dear Sirs:
Piedmont BankGroup Incorporated, a Virginia corporation (the "Company"),
proposes to redeem on October 13, 1995 (the "Redemption Date"), all of its
outstanding 7% Convertible Subordinated Debentures Due 2011 (the
"Debentures") at the redemption price of $1,014.00 plus accrued interest of
$34.61 from April 15, 1995 to the Redemption Date, for a total of $1,048.61
for each $1,000 principal amount of Debentures (the "Redemption Price"). The
Debentures are convertible into 54.945 shares of the Company's Common Stock,
$5.00 par value per share (the "Common Stock"), for each $1,000 principal
amount of Debentures. The right to convert the Debentures into Common Stock
will terminate at 5:00 p.m. (Eastern time) on October 5, 1995 (the fifth
business day next preceding the Redemption Date; herein referred to as the
"Conversion Date").
In order to assure that the Company will receive the benefits of full
conversion of the Debentures, the Company desires to make arrangements
pursuant to which the shares (the "Standby Shares") of its Common Stock
issuable on the Redemption Date on conversion of Debentures not surrendered
for conversion by 5:00 p.m. (Eastern time) on the Conversion Date will be
purchased from the Company by you (the "Purchaser").
1. Representations and Warranties.
The Company represents and warrants to, and agrees with the Purchaser
that:
(a) The Company meets the requirements for use of Form S-3 under the
Securities Act of 1933, as amended (the "Act") in connection with the
transactions contemplated by this Agreement and has filed with the Securities
and Exchange Commission (the "Commission") a registration statement in the
form heretofore delivered to you relating to the issuance by the Company of
the shares of Common Stock issuable upon conversion by the Purchaser of the
Debentures and the sale by the Purchaser of any shares of Common Stock that
may be acquired by it. The Commission has declared the registration
statement effective, and no stop order suspending the effectiveness of such
registration statement has been issued and no proceeding for that purpose has
been instituted or threatened by the Commission. Such registration
statement, including exhibits, when it became effective (the "Effective
Date"), is called the "Registration Statement," and the prospectus included
therein is called the "Prospectus." Any reference to the Registration
Statement or the Prospectus includes the documents incorporated by reference
pursuant to Item 12 of Form S-3 and filed under the Securities Exchange Act
of 1934 (the "Exchange Act") or the Act on or before the Effective Date or
the date of the Prospectus, as the case may be; and the terms "amend,"
"amendment" or "supplement" with respect to the Registration Statement or the
Prospectus include the filing of any document under the Exchange Act after
the Effective Date or the date of the Prospectus and incorporated by
reference;
(b) The Registration Statement conforms, and the Prospectus and any
amendments or supplements thereto will conform, in all material respects to
the requirements of the Act and the rules and regulations of the Commission
thereunder and do not and will not as of the applicable effective date as to
the Registration Statement and any amendment thereto and as of the applicable
filing date as to the Prospectus and any amendment or supplement thereto
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to the Company by you
expressly for use therein;
(c) Neither the Company nor any of its wholly-owned subsidiary banks
(the "Banks"), has sustained since the date of the latest audited financial
statements incorporated by reference in the Prospectus any material loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
expressly contemplated in the Prospectus; since the respective dates as of
which information is given in the Registration Statement and the Prospectus,
there has not been any change in the capital stock or long term debt of the
Company or the Banks or any material adverse change, or any development
involving a prospective material adverse change, in or affecting the general
affairs, management, financial position, shareholders' equity or results of
operations of the Company and the Banks taken as a whole, otherwise than as
set forth or expressly contemplated therein;
(d) The Company and the Banks have good and marketable title in fee
simple to all real property and good and marketable title to all personal
property owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus or
such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and the Banks; and any real property and buildings held under lease
by the Company and the Banks are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company and the Banks;
(e) The Company and each of the Banks have been duly incorporated (or,
in the case of former national banking associations, converted into) and are
validly existing as banking or other corporations, as applicable, in good
standing under the laws of the Commonwealth of Virginia, with power and
authority (corporate and other) to own or lease their respective properties
and conduct their respective businesses as described in the Prospectus; and
each has been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other jurisdiction in
which they own or lease properties, or conduct any business, so as to require
such qualifications, except where the failure to so qualify would not result
in a material adverse effect on the Company and the Banks taken as a whole;
and each of the Company and the Banks holds all material licenses,
certificates, authorizations and permits from governmental authorities
necessary for the conduct of its business as described in the Prospectus;
(f) The Debentures are convertible into 54.945 shares of Common Stock
for each $1,000 principal amount of Debentures. As of the date hereof, there
was $8,043,000 principal amount of Debentures outstanding; the redemption of
all the Debentures has been duly authorized by the Company; by the close of
business on the business day following the date hereof, the Debentures shall
have been duly called for redemption in accordance with the indenture, dated
as of September 1, 1986, between the Company and First Union National Bank of
North Carolina, as Trustee, under which the Debentures were issued (the
"Indenture"); and the right to convert the Debentures into Common Stock will
expire at 5:00 p.m. (Eastern time) on the Conversion Date. The Indenture has
been duly authorized, executed and delivered by the Company and constitutes
a legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms. The Debentures have been duly and
validly authorized and issued;
(g) The Company has an authorized capitalization as set forth in the
Prospectus; all of the issued shares of capital stock of the Company have
been duly and validly authorized and issued, are fully paid and nonassessable
and conform to the description of the capital stock of the Company contained
in the Prospectus; the shares of Common Stock issuable upon conversion of the
Debentures have been duly authorized and reserved for issuance upon such
conversion and, when issued in accordance with the provisions of the
Indenture, will have been validly issued and will be fully paid and
nonassessable and free of preemptive rights; and neither the filing of the
Registration Statement nor the offering or sale of the Standby Shares as
contemplated by this Agreement gives rise to any rights for or relating to
the registration of any securities of the Company;
(h) All outstanding shares of capital stock of the Banks are owned by
the Company free and clear of any perfected security interest and any other
security interests, claims, liens or encumbrances; and, other than the Banks,
the Company does not own or control, directly or indirectly, any corporation,
association or other entity;
(i) The Standby Shares have been duly authorized and, when issued and
delivered against payment therefor as provided herein, will be validly issued
and fully paid and nonassessable and will conform to the description of the
capital stock of the Company contained in the Prospectus;
(j) The issuance and sale of the Standby Shares by the Company and the
performance of this Agreement and the consummation of the other transactions
herein contemplated will not conflict with or result in a breach or violation
of any of the terms or provisions of, or constitute a default under, or
result in the creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Company or any Bank pursuant to, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or any Bank is a party or by which the Company or any Bank
is bound or to which any of the property or assets of the Company or any Bank
is subject, nor will such action result in any violation of the provisions of
the Articles of Incorporation or By-laws of the Company or any Bank or any
statute or any order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Company or any Bank or any of their
properties; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the issuance and sale of the Standby Shares or the consummation
by the Company of the transactions contemplated by this Agreement, except
such consents, approvals, authorizations, registrations or qualifications as
may be required under the Act and under state securities or Blue Sky laws in
connection with the purchase and distribution of the Standby Shares by the
Purchaser;
(k) There are no legal or governmental proceedings pending to which the
Company or any of the Banks is a party or of which any their property or
assets is subject, which, if determined adversely to the Company or any of
the Banks, would individually or in the aggregate, have a material adverse
effect on the financial position, shareholders' equity or results of
operations of the Company and the Banks taken as a whole and, to the best of
the Company's knowledge, no such proceedings are threatened or contemplated
by governmental authorities or by others;
(l) The consolidated financial statements of the Company, together with
related notes, as incorporated by reference in the Registration Statement,
present fairly the consolidated financial position and the results of
operations of the Company at the indicated dates and for the indicated
periods; such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied throughout the
periods presented except as noted in the accountants' notes thereon, and all
adjustments necessary for a fair presentation of results for such periods
have been made; and the selected financial information included in the
Prospectus presents fairly the information shown therein and has been
compiled on a basis consistent with the financial statements incorporated by
reference therein;
(m) The Company and the Banks have not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the Company to
facilitate the conversion of the Debentures;
(n) The Company has not paid or given, and will not pay or give,
directly or indirectly, any commission or other remuneration for soliciting
conversions of Debentures; and
(o) This Agreement has been duly authorized, executed and delivered by
the Company and constitutes a valid and binding agreement of the Company in
accordance with its terms.
2. Purchase and Sale of the Standby Shares.
Subject to the terms and conditions herein set forth, the Company agrees
to sell to the Purchaser, and the Purchaser agrees to purchase from the
Company, all of the Standby Shares at a purchase price of $19.09 per share.
3. Delivery and Payment.
Certificates in definitive form for the Standby Shares to be purchased
by the Purchaser hereunder, and in such denominations and registered in such
names as the Purchaser may request upon at least two business days' prior
notice to the Company, shall be delivered by or on behalf of the Company to
you for the your account, against payment of the purchase price therefor by
certified or official bank check in next day funds (unless the Company
desires settlement in same day funds, in which case the Company shall pay the
Purchaser for any costs associated with settlement in same day funds), all at
the offices of Scott & Stringfellow, Inc., 909 East Main Street, Richmond,
Virginia. The time and date of such delivery and payment shall be 10:00
a.m., Richmond, Virginia time, on the business day next preceding the
Redemption Date (the "Delivery Date"). Such certificates will be made
available to the Purchaser for checking and packaging at least twenty-four
hours prior to the Delivery Date in Richmond, Virginia or such other location
designated by the Purchaser to the Company.
4. Fees.
(a) The Purchaser intends to resell the Standby Shares at prices
prevailing in the open market. The Purchaser will remit to the Company 50%
of the excess of the total proceeds received on the sale of the Standby
Shares over the total purchase price paid to the Company for such shares as
specified in Section 2, after deducting from such proceeds of sale any
selling concessions, transfer taxes and other direct, out-of-pocket selling
expenses. For the purpose of determining the total proceeds received by the
Purchaser from the sale of the Standby Shares, the sale price of each Standby
Share shall be deemed to be the average sale price for the total number of
Standby Shares sold by the Purchaser. The Purchaser will provide the Company
on each trading day until the 10th business day after the Delivery Date a
schedule of data for sales on such day. On completion of the sale of such
shares, the Purchaser will furnish the Company a statement setting forth the
total proceeds received on the sale and the applicable selling concessions,
transfer taxes and other direct, out-of-pocket selling expenses. For
purposes of the foregoing determination, any Standby Shares not sold by or
for the account of the Purchaser before the close of business on the 10th
business day after the Delivery Date will be deemed to have been sold on such
10th business day for an amount equal to the last reported sale price of the
Common Stock on such day as reported on the NASDAQ National Market. Payment
of any amount due under this paragraph will be made by the 12th business day
after the Delivery Date in next day funds. Otherwise, the Purchaser, in its
discretion, may determine the price or prices at which, and the time or times
when, any Standby Shares will be sold and in what manner.
(b) As compensation for the commitment of the Purchaser under this
Agreement, the Company will pay the Purchaser on the Delivery Date $60,323
together with an additional sum equal to $0.76 per share for each Standby
Share purchased under this Agreement.
(c) The Company will pay the Purchaser on the Delivery Date as
additional compensation for the sale of the Standby Shares an amount equal to
the interest that would accrue on a loan in the amount paid by the Purchaser
under Section 2 for three days at the Federal Funds rate in effect from time
to time for such three days plus .25%.
5. Open Market Transactions.
(a) Until the close of business on the Conversion Date, the Purchaser
may (but will not be obligated to) purchase the Debentures in the open market
in such amounts and at such prices as the Purchaser deems advisable. All
Debentures so purchased will be converted into Common Stock. The Common
Stock acquired by the Purchaser upon conversion of the Debentures acquired
pursuant to this Section 5 may be sold at any time or from time to time by
the Purchaser. For the purpose of stabilizing the price of the Common Stock
or otherwise, the Purchaser may from time to time make purchases and sales of
Common Stock, in the open market or otherwise, at such times, in such amounts
and on such terms as it deems advisable and may overallot in arranging sales.
(b) The Purchaser will surrender for conversion into Common Stock any
Debentures beneficially owned by it on the Conversion Date (in addition to
any Debentures purchased as contemplated by the foregoing paragraph).
6. Agreements of the Company.
The Company agrees with the Purchaser:
(a) To prepare the Prospectus in a form reasonably approved by you and
to file such Prospectus pursuant to Rule 424(b) under the Act within the time
period prescribed or, if applicable, such earlier time as may be required by
Rule 430A under the Act; to make no amendment or supplement to the
Registration Statement or Prospectus which shall be reasonably disapproved by
you promptly after reasonable notice thereof; to advise you, promptly after
it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any supplement
to the Prospectus or any amended Prospectus has been filed and to furnish you
with copies thereof; to file promptly all reports and any definitive proxy or
information statements required to be filed by the Company with the
Commission subsequent to the date of the Prospectus and for so long as the
delivery of a prospectus is required in connection with the offering or sale
of the Standby Shares; to advise you, promptly after it receives notice
thereof, of the issuance by the Commission of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or the
Prospectus, of the suspension of the qualification of the Standby Shares for
offering or sale in any jurisdiction, of the initiation or threatening of any
proceeding for any such purpose, or of any request by the Commission for the
amending or supplementing of the Registration Statement or Prospectus or for
additional information; and, in the event of the issuance of any stop order
or of any order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus or suspending any such qualification, to use
promptly its best efforts to obtain its withdrawal;
(b) Promptly from time to time to take such actions as you may
reasonably request to qualify the Standby Shares for offering and sale under
the securities laws of such jurisdictions as you may request and to comply
with such laws so as to permit the continuance of sales and dealings therein
in such jurisdictions for as long as may be necessary to complete the
distribution of the Standby Shares, provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or to file
a general consent to service of process in any jurisdiction;
(c) To furnish the Purchaser with copies of the Registration Statement
and the Prospectus in such quantities as you may from time to time reasonably
request during such period following the date hereof as a prospectus is
required to be delivered in connection with offers or sales of Standby
Shares, and, if the delivery of a prospectus is required and if at such time
any event shall have occurred as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made when
such Prospectus is delivered, not misleading, or, if for any other reason it
shall be necessary during such period to amend or supplement the Prospectus
in order to comply with the Act, to notify you and upon your request prepare
and furnish without charge to each Purchaser and to any dealer in securities
as many copies as you may from time to time reasonably request of an amended
Prospectus or a supplement to the Prospectus which will correct such
statement or omission or effect such compliance;
(d) As soon as practicable, but not later than the Availability Date
(as defined below), to make generally available to its security holders and
deliver to you an earnings statement covering a period of at least 12 months
beginning after the effective date of the Registration Statement which will
satisfy the provisions of Section 11(a) of the Act (for the purpose of this
subsection 6(d) only, "Availability Date" means the 45th day after the end of
the fourth fiscal quarter following the fiscal quarter that includes the
effective date of the Registration Statement, except that, if such fourth
fiscal quarter is the last quarter of the Company's fiscal year,
"Availability Date" means the 90th day after the end of such fourth fiscal
quarter);
(e) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to shareholders, and deliver to
you (i) as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or any national
securities exchange on which any class of securities of the Company is listed
or the National Association of Securities Dealers, Inc.; and (ii) such
additional information concerning the business and financial condition of the
Company as you may from time to time reasonably request;
(f) For a period of 90 days from the effective date of the Registration
Statement, not to offer, sell, contract to sell or otherwise dispose of any
securities of the Company which are substantially similar to the Standby
Shares (other than the Standby Shares or pursuant to (i) employee stock
option or stockholder dividend reinvestment plans, (ii) conversion of the
Debentures, or (iii) merger and acquisition transactions) without your prior
written consent; and
(g) Not to take any action the effect of which would be to require an
adjustment in the conversion price of the Debentures.
7. Payment of Expenses.
The Company agrees with the Purchaser that the Company will pay or cause
to be paid the following: (i) the fees, disbursements and expenses of the
Company's counsel and accountants in connection with the registration of the
Standby Shares under the Act and all other expenses in connection with the
preparation, printing and filing of the Registration Statement, any
Preliminary Prospectus and the Prospectus and amendments and supplements
thereto and the mailing and delivering of copies thereof to the Purchaser and
dealers; (ii) the cost of printing or reproducing this Agreement, the Blue
Sky Survey and any other documents in connection with the offering, purchase,
sale and delivery of the Standby Shares; (iii) all expenses in connection
with the qualification of the Standby Shares for offering and sale under
state securities laws as provided in Section 6(b) hereof, including the
reasonable fees and disbursements of counsel for the Purchaser in connection
with such qualification and in connection with the Blue Sky Survey; (iv) the
filing fees incident to securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of the
Standby Shares; (v) the cost of preparing stock certificates; (vi) the costs
or expenses of any transfer agent or registrar; (vii) all fees relating to
the quotation of the Standby Shares in the NASDAQ National Market; and (viii)
all other costs and expenses incident to the performance of its obligations
hereunder which are not otherwise specifically provided for in this Section.
It is understood, however, that except as provided in this Section, Section
9 and Section 12 hereof, the Purchaser will pay all of its own costs and
expenses, including the fees of its counsel, stock transfer taxes on resale
of any of the Standby Shares by it, and any advertising expenses connected
with any offers it may make.
8. Conditions to Obligations of the Purchaser.
The obligations of the Purchaser hereunder, as to the Standby Shares to
be delivered at the Delivery Date, shall be subject, in its discretion, to
the condition that all representations and warranties and other statements of
the Company are, at and as of the date hereof and the Delivery Date, true and
correct in all material respects, and the condition that the Company shall
have performed in all material respects all of its obligations hereunder
theretofore to be performed, and the following additional conditions:
(a) The Registration Statement is effective; if the filing of the
Prospectus, or any supplement thereto, is required pursuant to Rule 424(b),
the Prospectus, and any such supplement, will be filed in the manner and
within the time period required by Rule 424(b); no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission; and all requests for additional information on the part of the
Commission shall have been complied with to your reasonable satisfaction;
(b) On the date of this Agreement and on the Delivery Date, LeClair
Ryan, counsel for the Purchaser, shall have furnished to you such opinion or
opinions, dated such dates, with respect to the incorporation of the Company,
the validity of the Standby Shares being issued on such Delivery Date, the
Registration Statement, the Prospectus, and other related matters as you may
reasonably request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon such
matters;
(c) On the date of this Agreement and on the Delivery Date, Hunton &
Williams, counsel for the Company, shall have furnished to you their written
opinion, dated such dates, in form and substance satisfactory to you, to the
effect that:
(i) The Company has been duly incorporated and is validly existing
as acorporation, in good standing under the laws of the Commonwealth of
Virginia, with corporate power and authority to own its properties and
conduct its business as described in the Prospectus; and the Company is
duly qualified to do business and is in good standing in each
jurisdiction in which its ownership or leasing of property requires such
qualification;
(ii) The Indenture pursuant to which the Debentures were issued has
been duly authorized, qualified under the Trust Indenture Act, executed
and delivered; the Indenture and the Debentures constitute valid and
legally binding obligations of the Company, enforceable in accordance
with their terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general equitable principles; the
Debentures are convertible into Common Stock of the Company in
accordance with the terms of the Indenture; and the shares of such
Common Stock issuable upon conversion of the Debentures and the Standby
Shares have been duly authorized and reserved for issuance upon such
conversion or sale to the Purchaser, as the case may be, and, when so
issued, will be validly issued, fully paid and nonassessable;
(iii) The Company has an authorized capitalization as set forth
in the Prospectus, the capital stock of the Company conforms to the
description contained in the Prospectus; there are no preemptive or
similar rights to subscribe for or to purchase any securities of the
Company; to the best of such counsel's knowledge, neither the filing of
the Registration Statement nor the offering or sale of the Standby
Shares as contemplated by this Agreement gives rise to any rights for or
relating to the registration of any securities of the Company; and the
form of the certificates evidencing the Standby Shares complies with all
formal requirements of Virginia law;
(iv) The Registration Statement is effective under the Act and,
to the best knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceeding for that purpose has been instituted or threatened under
the Act;
(v) To the best of such counsel's knowledge, there are no legal or
governmental proceedings pending to which the Company is a party or of
which any property or assets of the Company is subject which, if
determined adversely to the Company, would individually or in the
aggregate have a material adverse effect on the consolidated financial
position, shareholders' equity or results of operations of the Company;
and, to the best of such counsel's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened by
others;
(vi) Upon the mailing of the Notice of Redemption, all outstanding
Debentures will have been duly called for redemption on the Redemption
Date;
(vii) This Agreement has been duly authorized, executed and
delivered by the Company;
(viii) The issue and sale of the Standby Shares and the
performance of this Agreement by the Company and the consummation of the
other transactions contemplated by this Agreement will not result in a
breach or violation of any of the terms or provisions of, or constitute
a default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company
pursuant to, any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument known to such counsel to which the Company
is a party or by which the Company is bound or to which any of the
property or assets of the Company is subject, nor will such actions
result in any violation of the provisions of the Articles of
Incorporation or By-laws of the Company or of any statute or any order,
rule or regulation known to such counsel of any court or governmental
agency or body having jurisdiction over the Company or any of its
properties;
(ix) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body is
required for the issuance and sale of the Standby Shares by the Company
or the consummation by the Company of the other transactions
contemplated by this Agreement, except such as have been obtained under
the Act and such as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of the Standby
Shares by the Purchaser; and
(x) The Registration Statement and the Prospectus and any further
amendments and supplements thereto made by the Company prior to such
Delivery Date (other than the financial statements and related schedules
and other financial and statistical information included therein and
information furnished for use therein by the Purchaser, as to which such
counsel need express no opinion) comply as to form in all material
respects with the requirements of the Act and the rules and regulations
thereunder; they have no reason to believe that, as of the effective
date of the Registration Statement and as of the Delivery Date, either
the Registration Statement or the Prospectus or, as of its date, any
further amendment or supplement thereto made by the Company prior to the
Delivery Date (in each case, other than the financial statements and the
related schedules and other financial and statistical information
included therein, as to which such counsel need express no opinion)
contains an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
(d) On the date of this Agreement, KPMG Peat Marwick LLP shall have
furnished to you a letter, dated as of the date hereof, substantially in the
form previously delivered to you. The Purchaser must also receive on the
Delivery Date a letter, dated as of the Delivery Date, substantially in the
form previously delivered to you.
(e) (i) Neither the Company nor any Bank shall have sustained since the
date of the latest audited financial statements incorporated by reference in
the Prospectus, any loss or interference with their business taken as a whole
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or expressly contemplated in the
Prospectus, and (ii) since the respective dates as of which information is
given in the Prospectus there shall not have been any change in the capital
stock or long-term debt of the Company or the Banks or any change, or any
development involving a prospective change, in or affecting the general
affairs, management, financial position, shareholders' equity or results of
operation of the Company or the Banks otherwise than as set forth or
contemplated in the Prospectus, the effect of which, in any such case
described in clause (i) or (ii), is in your judgment so material and adverse
as to make it impracticable or inadvisable to proceed with the public
offering or the delivery of the Standby Shares being issued at the Delivery
Date on the terms and in the manner contemplated by the Prospectus; and
(f) The Company shall have furnished or caused to be furnished to you
on the date of this Agreement and on the Delivery Date certificates of
officers of the Company satisfactory to you as to the accuracy of the
representations and warranties of the Company herein at and as of the date
hereof and the Delivery Date, as to the performance by the Company of all of
its obligations hereunder to be performed at or prior to the Delivery Date,
as to the matters set forth in subsections (a) and (e) of this Section and as
to such other matters as you may reasonably request.
9. Indemnification and Contribution.
(a) The Company will indemnify and hold harmless the Purchaser against
any losses, claims damages or liabilities, joint or several, to which the
Purchaser may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of
a material fact contained in any preliminary prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement, or arise out of
or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Purchaser for any
legal or other expenses reasonably incurred by it in connection with
investigating, preparing to defend or defending, or appearing as a third
party witness in connection with, any such action or claims such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in any preliminary prospectus, the
Registration Statement or the Prospectus or any amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by the Purchaser expressly for use therein. This indemnity agreement
will be in addition to any liability which the Company may otherwise have.
(b) The Purchaser will indemnify and hold harmless the Company against
any losses, claims damages or liabilities, joint or several, to which the
Company may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of
a material fact contained in any preliminary prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement, or arise out of
or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in any preliminary prospectus,
Registration Statement or Prospectus or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by the Purchaser expressly for use therein; and will reimburse the
Company for any legal or other expenses reasonably incurred by the Company in
connection with investigating, preparing to defend or defending, or appearing
as a third party witness in connection with, any such action or claim as such
expenses are incurred. This indemnity agreement will be in addition to any
liability which the Purchaser may otherwise have. The Company acknowledges
that the statements set forth in the next to last paragraph on the cover page
of the Prospectus and under the heading "Standby and Other Arrangements" in
the Prospectus constitute the only information furnished in writing by or on
behalf of the Purchaser for inclusion in the Prospectus, and you confirm that
such statements are correct.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have
to any indemnified party otherwise than under such subsection. In case any
such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
shall wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel satisfactory to such indemnified
party; provided, however, that if the defendants in any such action include
both the indemnified party and the indemnifying party and the indemnified
party shall have been advised by counsel that representation of such
indemnified party and the indemnifying party may be inappropriate under
applicable standards of professional conduct due to actual or potential
differing interests between them, the indemnified party or parties shall have
the right to select separate counsel to defend such action on behalf of such
indemnified party or parties. It is understood that the indemnifying party
shall, in connection with any such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of only one separate firm or attorneys together with appropriate
local counsel at any time for all indemnified parties not having actual or
potential differing interests with any indemnified party. Upon receipt of
notice from the indemnifying party to such indemnified party of its election
so to appoint counsel to defend such action and approval by the indemnified
party of such counsel, the indemnifying party will not be liable for any
settlement entered into without its consent and will not be liable to such
indemnified party under this Section 9 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof unless (i) the indemnified party shall have employed separate
counsel in accordance with the proviso to the next preceding sentence, (ii)
the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of commencement of the action or (iii)
the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party; and except that,
if clause (i) or (iii) is applicable, such liability shall be only in respect
of the counsel referred to in such clause (i) or (iii). Notwithstanding the
immediately preceding sentence and the third preceding sentence, if at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its consent if (i) such settlement is entered
into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed
the indemnified party in accordance with such request prior to the date of
such settlement.
(d) If the indemnification provided for in this Section 9 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and the
Purchaser on the other from the offering of the Standby Shares. If, however,
the allocation provided by the immediately preceding is not permitted by
applicable law or if the indemnified party failed to give the notice required
under subsection (c) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as
is appropriate to reflect not only such relative benefits but also the
relative fault of the Company on the one hand and the Purchaser on the other
in connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as
any other relevant equitable considerations. Benefits received by the
Company shall be deemed to be equal to the sum (i) the net amount paid by the
Purchaser to the Company at the Delivery Date and (ii) the principal amount
of Debentures converted by the Purchaser pursuant to Section 5 hereof, and
benefits received by the Purchaser shall be deemed to be equal to the total
fees payable by the Company to the Purchaser pursuant to Section 4 hereof.
Relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or the Purchaser on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the Purchaser
agree that it would not be just and equitable if contributions pursuant to
this subsection (d) were determined by pro rata allocation or by any other
method of allocation which does not take into account the equitable
considerations referred to above in this subsection (d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), the Purchaser shall not be required to
contribute any amount in excess of the fees payable by the Company to the
Purchaser pursuant to Section 4 hereof. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(e) The obligations of the Company under this Section 9 shall be in
addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each officer, director,
employee and agent of the Purchaser and each person, if any, who controls the
Purchaser within the meaning of the Act; and the obligations of the Purchaser
under this Section 9 shall be in addition to any liability which the
Purchaser may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company and to each person,
if any, who controls the Company within the meaning of the Act.
10. Representations and Warranties to Survive.
The respective indemnities, agreements, representations, warranties and
other statements of the Company and the Purchaser, as set forth in this
Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall remain in full force and effect, regardless of any
termination or cancellation of this Agreement or any investigation (or any
statement as to the results thereof) made by or on behalf of the Purchaser or
any controlling person of the Purchaser, or the Company, or any officer or
director or controlling person of the Company, and shall survive delivery of
and payment for the Standby Shares.
11. Termination and Payment of Expenses.
(a) This Agreement shall be subject to termination in your absolute
discretion, by notice given to the Company prior to the delivery of any
payment for the Standby Shares, if prior to such time there shall have
occurred any of the following: (i) trading in the Common Stock is suspended
by the Commission or on the NASDAQ National Market or trading in securities
generally on the New York Stock Exchange shall have been suspended or
limited; (ii) a general moratorium on commercial banking activities in New
York or Virginia declared by federal, New York or Virginia authorities; (iii)
the outbreak or escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war, if any such
event specified in this clause (iii) would have such a materially adverse
effect, in your judgment, as to make it impracticable or inadvisable to
proceed with the public offering or the delivery of the Standby Shares on the
terms and in the manner contemplated in the Prospectus; or (iv) such a
material adverse change in general economic, political, financial or
international conditions affecting financial markets in the United States
having a material adverse impact on trading prices of securities in general,
as, in your judgment, makes it impracticable or inadvisable to proceed with
the payment for and delivery of the Standby Shares on the terms and in the
manner contemplated in the Prospectus.
(b) If for any reason the sale of the Standby Shares provided for
herein is not consummated because any condition to the obligations of the
Purchaser set forth in Section 8 hereof is not satisfied, because of any
termination pursuant to this Section 11 or because of any refusal, inability
or failure on the part of the Company to perform any agreements herein or
comply with the provisions hereof other than by reason of a default by any of
the Purchaser, the Company will be responsible for and will reimburse the
Purchaser for all out-of-pocket expenses, including fees and disbursements of
counsel, reasonably incurred by the Purchaser in connection with the proposed
purchase and sale of the Standby Shares. Nothing in this Section 11 shall be
deemed to relieve the Purchaser of its liability, if any, to the Company for
damages occasioned by its default hereunder.
12. Notices.
All statements, requests, notices and agreements hereunder shall be in
writing or by telegram if promptly confirmed in writing, and if to the
Purchaser shall be sufficient in all respects if delivered or sent by mail,
telex or facsimile transmission to Scott & Stringfellow, Inc., 909 East Main
Street, Richmond, Virginia 23219, Attention: Corporate Finance Department;
and if to the Company shall be sufficient in all respects if delivered or
sent by mail, telex or facsimile transmission to the address of the Company
set forth in the Prospectus, Attention: James E. Adams. Any such
statements, requests, notices or agreements shall take effect upon receipt
thereof.
13. Successors.
This Agreement shall be binding upon, and inure solely to the benefit
of, the Purchaser and the Company and, to the extent provided in Sections 9
and 10 hereof, the officers and directors of the Company, the officers and
directors, employees and agents of the Purchaser and each person who controls
the Company or the Purchaser, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of
the Standby Shares from the Purchaser shall be deemed a successor or assign
by reason merely of such purchase.
14. Time of the Essence.
Time shall be of the essence in this Agreement.
15. Business Day.
As used herein, the term "business day" shall mean any day when the
Commission's office in Washington, DC is open for business.
16. Applicable Law.
This Agreement shall be construed in accordance with the laws of the
State of New York.
17. Captions.
The captions included in this Agreement are included solely for
convenience of reference and shall not be deemed to be a part of this
Agreement.
18. Counterparts.
This Agreement may be executed by any one or more of the parties in any
number of counterparts, each of which shall be deemed to be an original, but
all such counterparts shall together constitute one and the same instrument.
If the foregoing is in accordance with your understanding, please sign
and return to us two counterparts hereof, and upon the acceptance hereof by
you, this letter and such acceptance hereof shall constitute a binding
agreement between the Purchaser and the Company.
Very truly yours,
PIEDMONT BANKGROUP
INCORPORATED
By: ____________________________
Name: _________________________
Title: __________________________
Accepted as of the date hereof
at Richmond, Virginia:
SCOTT & STRINGFELLOW, INC.
By: __________________________
Name: _______________________
Title: ________________________
Exhibit 5
Hunton & Williams
951 East Byrd Street
Richmond, Virginia 23219
File No.: 23679.34
Direct Dial: (804) 788-8269
September 11, 1995
Board of Directors
Piedmont BankGroup Incorporated
200 East Church Street
Martinsville, Virginia 24112
Registration Statement on Form S-3
Ladies and Gentlemen:
We are acting as counsel for Piedmont BankGroup Incorporated (the
"Company") in connection with the registration under the Securities Act of 1933
of 441,923 shares (the "Shares") of its common stock, par value $5.00 (the
"Common Stock"). The transaction in which the Common Stock will be issued is
described in the Company's Registration Statement on Form S-3 (the "Registration
Statement") filed with the Securities and Exchange Commission (the "Commission")
today and relating to the Company's redemption of its 7% Subordinated
Convertible Debentures Due 2011. In connection with the filing of the
Registration Statement you have requested our opinion concerning certain
corporate matters.
In rendering this opinion, we have relied upon, among other things, our
examination of such records of the Company and certificates of its officers and
of public officials as we have deemed necessary.
Based upon the foregoing, we are of the opinion that:
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the Commonwealth of Virginia.
2. The Common Stock has been duly authorized and, when the shares have
been issued as described in the Registration Statement, will be legally issued,
fully paid and nonassessable.
We consent to the filing of this opinion with the Commission as an exhibit
to the Registration Statement and to the references to us in the Prospectus
included therein.
Very truly yours,
Exhibit 23.1
[LETTERHEAD OF KPMG PEAT MARWICK LLP]
The Board of Directors
Piedmont BankGroup Incorporated
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 prospectus. Our report
refers to changes in accounting for certain investments in debt and equity
securities, impaired loans, income taxes and postretirement benefits other than
pensions.
KPMG Peat Marwick LLP
Roanoke, Virginia
September 11, 1995
September 12, 1995
PIEDMONT BANKGROUP INCORPORATED
Notice of Redemption
7% Convertible Subordinated Debentures Due 2011
------------------------------------------------------
| CONVERSION PRIVILEGE EXPIRES AT 5:00 P.M. AT THE |
| PLACE OF CONVERSION ON OCTOBER 5, 1995 |
------------------------------------------------------
NOTICE IS HEREBY GIVEN that, at 5:00 p.m. on October 13, 1995 (the
"Redemption Date"), pursuant to Section 1101 of the Indenture dated as of
September 1, 1986 between Piedmont BankGroup Incorporated (the "Company") and
First Union National Bank of North Carolina, as Trustee, the Company will redeem
all of its outstanding 7% Convertible Subordinated Debentures Due 2011 (the
"Debentures"), at a redemption price of $1,014.00 plus accrued interest of
$34.61 from April 15, 1995 to the Redemption Date, for a total of $1,048.61 for
each $1,000 principal amount of Debentures (the "Redemption Price"). The
Redemption Price will be due and payable on each $1,000 principal amount of
Debentures on the Redemption Date (unless the Debentures are converted as
referred to below). From and after the Redemption Date, interest thereon shall
cease to accrue and holders of Debentures will not have any rights as such
holders other than the right to receive the Redemption Price, without interest,
upon surrender of their Debentures.
ALTERNATIVES AVAILABLE TO HOLDERS OF DEBENTURES
Holders of Debentures have the following alternatives:
1. Conversion. Prior to 5:00 p.m. (Eastern time) on October 5, 1995,
to convert any or all of the Debentures into the Company's Common Stock at a
conversion price of $18.20 per share (54.945 shares of Common Stock for each
$1,000 principal amount of Debentures). The method of delivery is at the
option and risk of the holder but, if mail is used, it is recommended that
registered mail with return receipt requested, properly insured, be used as
a prevention against loss. If conversion is being requested, Debenture
certificates should be mailed, together with a Letter of Transmittal,
sufficiently in advance of October 5, 1995 to permit delivery to the Trustee
on or before such date.
2. Redemption. To surrender Debentures for redemption at the total
redemption price of $1,048.61 for each $1,000 principal amount of Debentures.
3. Sale Through Ordinary Brokerage Transactions. To sell the
Debentures through open market brokerage transactions and, if made
sufficiently in advance of October 5, 1995, buyers thereof may convert the
Debentures into Common Stock in the manner described herein. After October
5, 1995, a holder of Debentures will not be entitled to convert such
Debentures into Common Stock. This is expected to have an impact on the
market for the Debentures. Holders of Debentures who wish to make sales
should consult with their brokers concerning if and when such Debentures
should be sold.
____________________________
Instructions on presentation of Debentures for conversion or redemption
are given on the accompanying Letter of Transmittal.
In order to be converted into Common Stock, the Debentures must be
presented, surrendered and received before 5:00 p.m. (Eastern time) on
October 5, 1995, by First Union National Bank of North Carolina at one of the
following locations, where they may also be redeemed:
<TABLE>
By Mail: By Hand:
<S> <C> <C>
------------------------------------ --------------------------------------------------------------
First Union National Bank of First Union National Bank Piedmont Trust Bank
North Carolina of North Carolina 200 East Church Street
Bond Administration Department Bond Administration Department Martinsville, VA 24112
230 South Tryon Street, 8th Fl. 230 South Tryon Street, 8th Fl. Attn: Francia M. Brown
Charlotte, North Carolina 28288-1179 Charlotte, North Carolina 28288-1179
</TABLE>
The Standby Purchaser is:
________________________________
Scott & Stringfellow, Inc.
909 East Main Street
Richmond, VA 23219
Attn: R. Strother Scott
(804) 780-3271
For the convenience of holders of Debentures, a form of Letter of
Transmittal, which may be used for forwarding Debentures for conversion or
for redemption by the Company, has been mailed to each record holder of
Debentures and to nominees for holders of Debentures to be forwarded to each
holder with a copy of this notice, together with a copy of a Prospectus
relating to Common Stock issuable to Scott & Stringfellow, Inc. as standby
purchaser in respect of Debentures not converted by the holders thereof into
shares of Common Stock on or before October 5, 1995. Additional copies of
the form of Letter of Transmittal and the Prospectus may be obtained from
First Union National Bank of North Carolina, Bond Administration Department,
230 South Tryon Street, 8th Floor, Charlotte, North Carolina 28288-1179 (704)
374-2080, or from the Company, 200 Church Street, Martinsville, VA 24112,
Attn: Francia M. Brown, (540) 666-3234.
THE LAST REPORTED SALE PRICE OF THE COMMON STOCK ON SEPTEMBER 7, 1995
WAS $25.375 PER SHARE. AT SUCH LAST REPORTED SALE PRICE PER SHARE, THE
HOLDER OF $1,000 PRINCIPAL AMOUNT OF DEBENTURES WOULD RECEIVE, UPON
CONVERSION, COMMON STOCK HAVING AN AGGREGATE MARKET VALUE OF APPROXIMATELY
$1,394.23. SUCH VALUE IS SUBJECT TO CHANGE DEPENDING ON CHANGES IN THE
MARKET PRICE OF THE COMMON STOCK. SO LONG AS THE MARKET PRICE OF THE COMMON
STOCK IS AT LEAST $18.45 PER SHARE, HOLDERS OF DEBENTURES WHO CONVERT THEIR
DEBENTURES INTO COMMON STOCK WILL RECEIVE COMMON STOCK HAVING A GREATER
MARKET VALUE (WITHOUT TAKING INTO CONSIDERATION SALES EXPENSE) THAN THE CASH
WHICH THEY WOULD RECEIVE UPON REDEMPTION.
Please be sure to read and follow the instructions on the Letter of
Transmittal.
If there are any questions concerning this matter, please contact either
First Union National Bank of North Carolina at (704) 374-2080 or Piedmont
Trust Bank at (540) 666-3234.
Piedmont BankGroup Incorporated
Michael R. Brenan
President, Chairman of the Board
and Chief Executive Officer
Piedmont BankGroup Incorporated
LETTER OF TRANSMITTAL
To Accompany 7% Convertible Subordinated Debentures Due 2011
If you wish to convert your Debenture(s), the Debenture(s) and related Letter
of Transmittal must be RECEIVED by First Union National Bank of North
Carolina, at one of the addresses set forth below prior to 5:00 p.m. (Eastern
time) on October 5, 1995. See Instructions on reverse side. If you wish to
surrender your Debenture(s) for redemption, the Debenture(s) must be
surrendered to First Union National Bank of North Carolina at one of the
addresses set forth below.
<TABLE>
For hand or courier delivery: For mail delivery:
<S> <C> <C>
First Union National Bank of Piedmont Trust Bank First Union National Bank of
North Carolina or 200 E. Church Street North Carolina
Bond Administration Department Martinsville, Virginia 24112 Bond Administration Department
230 South Tryon Street, 8th Floor Attn: Francia M. Brown 230 South Tryon Street, 8th Floor
Charlotte, North Carolina 28288-1179 Charlotte, North Carolina 28288-1179
</TABLE>
Ladies and Gentlemen:
Surrendered herewith are 7% Convertible Subordinated Debentures Due 2011
(the "Debentures") of Piedmont BankGroup Incorporated (the "Company")
numbered and registered as listed below.
Items A, B, and E of this Letter of Transmittal must be completed for
Debentures surrendered for conversion.
PLEASE FOLLOW CAREFULLY THE INSTRUCTIONS ON THE REVERSE HEREOF
ITEM A
<TABLE>
<S> <C> <C>
------------------------------------------------------------------------------------------------------------------------------
| Please fill in your name(s) exactly as it appears on | |
| your Debenture(s) and your present address | PLEASE FILL IN NUMBERS AND AMOUNTS |
------------------------------------------------------------------------------------------------------------------------------|
| | Certificate Number (s) | Principal Amount |
| |---------------------------------------------------|
| | | |
| Name(s): |---------------------------------------------------|
| | | |
| |---------------------------------------------------|
| | | |
| Address(es): |---------------------------------------------------|
| | | |
| |---------------------------------------------------|
| | | Total |
| | | Principal |
| | | Amount |
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ABOVE DEBENTURES ARE SURRENDERED TO YOU FOR THE ACTION INDICATED BELOW.
INDICATE CHOICE BY CHECKING ONLY ONE BOX.
ITEM B
-------------------------------------------------------------------------------
| ( ) CONVERSION into Common Stock of the Company (the "Common Stock") at a |
| conversion price of $18.20 per share (54.945 shares of Common Stock for |
| each $1,000 principal amount of Debentures). (See Instructions on the |
| reverse.) |
| |
| ( ) REDEMPTION at $1,048.61 per $1,000 principal amount of Debentures |
| surrendered hereby. |
| |
| IF NO BOX IS CHECKED, THE ABOVE CERTIFICATES ARE DEEMED SURRENDERED |
| FOR REDEMPTION. |
| If your Debenture certificates, together with a signed and completed Letter |
| of Transmittal and any required supporting documents (see Instructions on the|
| reverse) are not tendered for conversion prior to the close of business at |
| First Union National Bank of North Carolina, Charlotte, North Carolina, on |
| October 5, 1995, such Debentures will be redeemed on October 13, 1995 (the |
| "Redemption Date") at the price of $1,014.00 plus accrued interest of $34.61 |
| from April 15, 1995 to the Redemption Date, for a total redemption price of |
| $1,048.61 for each $1,000 principal amount of Debentures. Payment of the |
| redemption price will be made on the Redemption Date at the principal office |
| of First Union National Bank of North Carolina upon surrender of the |
| Debentures to First Union National Bank of North Carolina at one of the |
| addresses set forth above. |
-------------------------------------------------------------------------------
As long as the price of the Company's Common Stock is at least $18.45
per share, the Common Stock received upon conversion will have a current
market value greater than the cash receivable upon redemption.
<PAGE>
ITEM C
SPECIAL ISSUANCE INSTRUCTIONS
To be completed ONLY if Common Stock certificate(s) and/or check are to
be issued in a name other than as indicated in Item A above (see
Instructions on the reverse).
Issue to:
Name.............................................................
Type or Print
Address..........................................................
.................................................................
Zip Code
.................................................................
Social Security Number or Taxpayer I.D. Number
ITEM D
SPECIAL MAILING INSTRUCTIONS
To be completed ONLY if Common Stock certificate(s) and/or check are to be
mailed to an address other than as indicated in Item A above (see Instructions
on the reverse).
Mail to:
Name.......................................................................
Type or Print
Address....................................................................
...........................................................................
Zip Code
ITEM E
REQUIRED SIGNATURES
The signature(s) on this Letter of Transmittal must
correspond exactly with the name(s) of the: (1) registered
owner(s) of the Debenture(s) surrendered, or (2) person(s)
to whom each such certificate has been properly assigned and
transferred. See Instructions on the reverse.
Dated:.....................................................
Please sign here
Signature:................................................. <--
Signature:.................................................
Telephone: ( )..........................................
Social Security Number or
Taxpayer I.D. Number.....................................
ITEM F
SIGNATURE GUARANTEE (if applicable)
A signature guarantee MUST be provided if a Common Stock certificate(s) and/or
check are to be issued in a name other than that of the registered owner of the
Debentures. See Instructions on the reverse.
Dated: .................................................................
Name of Firm: ..........................................................
Address of Firm: .......................................................
........................................................................
By: .............................................................
<PAGE>
INSTRUCTIONS
1. General
Please do not send Debenture certificates directly to the Company. Your
Debenture certificates, together with your signed and completed Letter of
Transmittal and any required supporting documents (see Instructions 5 and 6
below), should be mailed in the enclosed addressed envelope, or otherwise
delivered, to First Union National Bank of North Carolina (the "Trustee"), at
the appropriate address indicated on the front hereof. The method of
delivery is at the option and risk of the holder but, if mail is used, it is
recommended that registered mail with return receipt requested, properly
insured, be used as a prevention against loss, and if conversion is being
requested, that the mailing be made sufficiently in advance of October 5,
1995 to permit delivery to the Trustee on or before such date.
Items A, B and E of this Letter of Transmittal must be completed in all
cases.
If in any case you wish a Common Stock certificate and/or check to be
mailed to an address other than that shown in Item A on the front hereof, you
MUST complete Item D on the front thereof.
2. If You Wish to Convert Your Debentures
If you wish to convert your Debenture(s) into Common Stock, your
Debenture certificates and a completed Letter of Transmittal must be received
by the Trustee at one of the addresses indicated on the front hereof, prior
to 5:00 p.m. (Eastern time) on October 5, 1995. Alternatively, you may
convert by delivering your Debenture certificates duly endorsed and with
appropriate notification of the Trustee prior to such time.
If the Common Stock certificate is to be issued in the same name(s) as
that in which the surrendered Debenture certificates are registered, complete
Items A, B and E on the front hereof.
If the Common Stock certificate is to be issued in a different name, see
Instruction 5 and complete Items A, B, C, E and F on the front hereof.
No payments or adjustments in respect of interest will be made upon the
conversion of any Debenture. No fractional shares of Common Stock will be
issued upon the conversion of any Debenture. If more than one Debenture is
surrendered for conversion at any one time under the same Letter of
Transmittal or other notice by the same holder, the number of shares of
Common Stock issuable upon conversion of such Debentures will be computed
upon the basis of the aggregate principal amount of Debentures so
surrendered.
3. If You Wish to Redeem Your Debentures
If you wish to redeem your Debentures, your Debenture certificates and
completed Letter of Transmittal must be received by the Trustee prior to 5:00
p.m. (Eastern time) on October 13, 1995. See Instruction 4.
If the check is to be issued in the same name(s) in which the Debenture
certificates are registered, see Instruction 5 and complete Items A, B, E and
F on the front.
If the check is to be issued in a different name, see Instructions 5 and
6 and complete Items A, B, C, E and F on the front.
4. Signature Guarantee Requirement
If you have completed Item C, the signature of this Letter of
Transmittal must be guaranteed, in the space provided in Item F on the front,
by a commercial bank or trust company in the United States or by a firm which
is a member of a registered national securities exchange or of the National
Association of Securities Dealers, Inc. ("NASD").
5. Certificate or Check to be Issued in a Different Name
If a Common Stock certificate or a check is to be issued in a name other
than that of the registered owner of the Debentures, your Debenture
certificates must be properly endorsed or be accompanied by appropriate bond
powers (which may consist of this Letter of Transmittal), properly executed
by the registered owner(s), so that such endorsement or bond powers are
signed exactly as the name(s) of the registered owner(s) appear on the
Debenture certificates, and the signature(s) must be properly guaranteed by
a commercial bank or trust company in the United States or by a firm which is
a member of a registered national securities exchange or of the NASD.
Complete Items A, B, C, E and F on the front hereof.
6. Signature by Other Than Registered Holder
If the Letter of Transmittal is signed in Item E by an executor,
administrator, trustee, guardian, attorney or the like, the Letter of
Transmittal and Debenture certificates must be accompanied by evidence
satisfactory to the Trustee and the Company of the authority of such person
to sign the Letter of Transmittal.
If the Letter of Transmittal is signed in Item E by someone other than
the registered owner, who is not a person described in the preceding
paragraph, the Debenture certificates must be properly endorsed or be
accompanied by appropriate bond powers, properly executed by the registered
owner(s), so that such endorsement or bond powers are signed exactly as the
name(s) of the registered owner(s) appear on the Debenture(s), and the
signature(s) must be properly guaranteed by a commercial bank or trust
company in the United States or by a firm which is a member of a registered
national securities exchange or of the NASD. Complete Items A, B, C, E and
F on the front hereof.
7. Joint Holders of Debenture Certificates Registered in Different Names
If Debenture certificates are tendered by joint holders or owners, all
such persons must sign the Letter of Transmittal in Item E on the front
hereof. If Debenture certificates are registered in different names or forms
of ownership, separate Letters of Transmittal must be completed, signed and
returned for each different registration.
8. Stock Transfer Taxes
It is not presently anticipated that any stock transfer taxes will be
payable in connection with the issuance of Common Stock on conversion of
Debentures. If, however, it should develop that in certain circumstances
such taxes may be payable, conversion of Debentures will be effected without
charge to the converting holder for any such stock transfer tax except in the
following cases: (i) if Common Stock certificates issued upon conversions are
to be registered in the name of any person other than the registered holder,
or (ii) if tendered Debenture certificates are registered in the name of any
person other than the person(s) signing the Letter of Transmittal, the amount
of any stock transfer taxes (whether imposed on the registered holder or such
person) payable on account of the transfer to such person will be charged to
the person(s) signing the Letter of Transmittal (in the case of sale to the
Standby Purchaser, by deduction from the purchase price) if satisfactory
evidence of the payment of such taxes, or exemption therefrom, is not
submitted. The Company will not be required to issue or deliver Common Stock
certificates in any such case until such payment has been made and
satisfactory evidence of such payment has been received.
9. Lost or Destroyed Debentures
If your Debenture certificates have been either lost or destroyed,
notify the Trustee of this fact promptly at one of the addresses set forth on
the front hereof or telephone (704) 374-2080. You will then be instructed as
to the steps you must take in order to convert or have redeemed the
Debentures that you own.
10. Questions on How to Submit Your Debentures Certificates
Questions and requests for assistance on how to submit your Debenture
certificates should be directed to the Trustee at one of the addresses set
forth on the front hereof or by telephoning (704) 374-2080.
IMPORTANT TAX INFORMATION
Payer's Request for Taxpayer Identification Number
Under the federal income tax law, a security holder who redeems or
otherwise disposes of securities, in whole or in part for cash, is required
to furnish the payer with his Taxpayer Identification Number, which, for an
individual, would be his Social Security Number (the "TIN"), certified under
penalties of perjury. If the security holder does not furnish his correct
TIN in this manner, he may be subject to a penalty imposed by the Internal
Revenue Service ("IRS"). In addition, payments to such security holder may
be subject to backup withholding.
To prevent backup withholding on the payment for securities you are
forwarding at the rate of 31%, you should complete the enclosed form W-9.
Certain holders (including, among others, all corporations and certain
foreign individuals) are exempt from the backup withholding and reporting
requirements. In order for a holder who is a foreign individual to qualify
as an exempt recipient, such holder must submit a statement, signed under
penalties of perjury, attesting to that individual's exempt status. Such
statements can be obtained from the Trustee.
[Piedmont BankGroup Incorporated Letterhead]
September 12, 1995
Notice to Nominee Holders:
Enclosed is a copy of the Notice of Redemption of Piedmont BankGroup
Incorporated 7% Convertible Subordinated Debentures Due 2011. We are also
enclosing a form of Letter of Transmittal.
THE DEBENTURES ARE PRESENTLY CONVERTIBLE INTO SHARES OF COMMON STOCK OF
THE COMPANY AT A PRICE OF $18.20 PER SHARE. AFTER THE CLOSE OF BUSINESS ON
OCTOBER 5, 1995, DEBENTURES WILL NO LONGER BE SO CONVERTIBLE. THE DEBENTURES
WILL CEASE TO BEAR INTEREST FROM AND AFTER THE REDEMPTION DATE.
BASED UPON CURRENT PRICES, THE MARKET VALUE OF THE COMMON STOCK INTO
WHICH THE DEBENTURES ARE CONVERTIBLE IS GREATER THAN THE REDEMPTION PRICE OF
THE DEBENTURES.
Please forward copies of these enclosures to any of your clients who
hold Debentures, and the Company will reimburse you for any expense incurred
by you in doing so. Additional copies of the enclosures are available at
First Union National Bank of North Carolina, Bond Administration Department,
230 South Tryon Street, 8th Floor, Charlotte, North Carolina 28288-1179.
If you have any questions or require assistance in completing the Letter
of Transmittal, contact either of the following: Piedmont BankGroup
Incorporated, 200 East Church Street, Martinsville, Virginia 24112, Attn:
Francia M. Brown, (540) 666-3234; or First Union National Bank of North
Carolina, Bond Administration Department, 230 South Tryon Street, 8th Floor,
Charlotte, North Carolina 28288-1179, (704) 374-2080.
Very truly yours,
PIEDMONT BANKGROUP INCORPORATED
Michael R. Brenan
President, Chairman of the Board
and Chief Executive Officer
Enclosures:
A. Notice of Redemption
B. Letter of Transmittal
