<PAGE>
As filed with the Securities and Exchange Commission on November 10, 1998
Registration Number: 33-_________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
FIRST M&F CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
MISSISSIPPI 6712 64-0636653
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification Number)
incorporation or organization) Classification Code Number)
</TABLE>
221 WASHINGTON STREET
KOSCIUSKO, MISSISSIPPI 39090
(601) 289-5121
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
HUGH S. POTTS, JR.
221 WASHINGTON STREET
KOSCIUSKO, MISSISSIPPI 39090
(601) 289-5121
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
L. KEITH PARSONS,ESQ.
WATKINS LUDLAM WINTER & STENNIS, P.A.
POST OFFICE BOX 427
633 NORTH STATE STREET
JACKSON, MISSISSIPPI 39202
(601) 949-4900
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED OFFERING: As soon as
practicable after the effective date of this Registration Statement.
If securities being registered on this Form are to be offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Title of each class Amount Proposed maximum Proposed maximum Amount of
of securities to to be offering price per aggregate offering registration
be registered registered unit price ** fee
- -------------------------------------------------------------------------------------------------
Common Stock, 245,157 * $3,468,721 $1,023.27
$5.00 par value
- -------------------------------------------------------------------------------------------------
</TABLE>
*Not applicable.
**Estimated solely for purposes of determining the amount of the registration
fee in accordance with Rule 457(f)(2) under the Securities Act of 1933.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
FIRST BOLIVAR CAPITAL CORPORATION
FIRST NATIONAL BANK OF BOLIVAR COUNTY
308 E. SUNFLOWER ROAD
CLEVELAND, MISSISSIPPI 38732
MERGER PROPOSED---YOUR VOTE IS VERY IMPORTANT
November ______, 1998
Dear Shareholders:
You are cordially invited to attend a joint Special Meeting of shareholders
of First Bolivar Capital Corporation and First National Bank of Bolivar County,
to be held at the Banking House on December __, 1998 at _____p.m. local time.
First Bolivar and the Bank have agreed on a merger with First M&F
Corporation and Merchants & Farmers Bank. If the merger is completed, First
Bolivar and Bank shareholders will each receive 8.32169 shares of First M&F
common stock for each share of First Bolivar or Bank common stock that they own.
We estimate that, on completion of the merger, about 6.74% of the outstanding
common stock of First M&F will be owned by former First Bolivar and Bank
shareholders and that about 93.26% will be owned by those persons who were First
M&F shareholders just before the merger is completed.
We can't complete the merger unless the shareholders of First Bolivar and
the Bank approve it. We have scheduled a special joint meeting for the
shareholders of First Bolivar and Bank to approve the merger. First Bolivar
owns 99.23% of the shares of the Bank and intends to vote for the merger, which
means that the merger will be approved by the Bank's shareholders by First
Bolivar's vote, even if the remaining Bank shareholders vote against the merger.
YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING, PLEASE TAKE THE TIME TO VOTE BY COMPLETING AND PROMPTLY MAILING THE
ENCLOSED PROXY CARD TO US. IF YOU SIGN, DATE AND MAIL YOUR PROXY CARD WITHOUT
INDICATING HOW YOU WANT TO VOTE, YOUR PROXY WILL BE COUNTED AS A VOTE IN FAVOR
OF THE MERGER. IF YOU DON'T RETURN YOUR CARD, THE EFFECT WILL BE A VOTE AGAINST
THE MERGER.
This Joint Proxy Statement-Prospectus provides you with detailed
information about the proposed merger. You can also get information about First
M&F from documents it has filed with the Securities and Exchange Commission. We
encourage you to read this entire document carefully.
YOUR BOARDS OF DIRECTORS UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOR OF
THE MERGER.
Very truly yours,
<TABLE>
<S> <C>
James I. Tims Doug Springer
President, First Bolivar Capital Corporation President and CEO of First National Bank of Bolivar County
</TABLE>
DO NOT SEND IN YOUR STOCK CERTIFICATES NOW. AFTER THE MERGER IS COMPLETED FIRST
M&F WILL SEND YOU WRITTEN INSTRUCTIONS ON HOW TO EXCHANGE YOUR STOCK FOR FIRST
M&F COMMON STOCK.
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES +
+ COMMISSION HAVE APPROVED THE FIRST M&F COMMON STOCK TO BE ISSUED UNDER +
+ THIS JOINT PROXY STATEMENT-PROSPECTUS OR DETERMINED IF THIS JOINT PROXY +
+ STATEMENT-PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO +
+ THE CONTRARY IS A CRIMINAL OFFENSE. +
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Joint Proxy Statement-Prospectus dated November ___, 1998, and first mailed to
shareholders on November___, 1998.
<PAGE>
NOTICE OF SPECIAL JOINT SHAREHOLDERS' MEETING
TO BE HELD ON DECEMBER ______, 1998
Notice is hereby given that a Special Joint Meeting of Shareholders of
First Bolivar Capital Corporation and First National Bank of Bolivar County will
be held at the offices of First National Bank of Bolivar County (the Banking
House), 308 E. Sunflower Road, Cleveland, Mississippi 38732, on December __,
1998, at___ p.m. for the purpose of considering and voting on:
1. Approval and adoption of the Agreement and Plan of Merger and related
merger agreements dated as of September 9, 1998, and the transactions
contemplated in the agreements pursuant to which (a) First Bolivar
will be merged into First M&F Corporation and (b) the Bank will be
merged into Merchants & Farmers Bank.
2. To transact such other business as may properly come before the
meeting and any adjournment thereof.
Only those shareholders of record at the close of business on November 1, 1998,
are entitled to notice of and to vote at the meeting or any adjournments or
postponements of the Meeting.
All shareholders are cordially invited to attend the Meeting. To ensure your
representation at the Meeting, please complete and promptly mail your proxy in
the return envelope enclosed. This will not prevent you from voting in person,
but will help to secure a quorum and avoid added solicitation costs. Your proxy
may be revoked at any time before it is voted. Please review the Joint Proxy
Statement-Prospectus accompanying this notice for more complete information
regarding the merger and the Meeting.
If you are a First Bolivar shareholder and you dissent from the merger by
following the requirements of the Mississippi Law concerning dissenters'
appraisal rights, First M&F will pay you for the fair value of your shares. We
have included a copy of this law at Appendix B to the Joint Proxy Statement-
Prospectus.
If you are a Bank shareholder and you dissent from the merger by following the
requirements of the federal law concerning dissenters' rights, First M&F will
pay you for the fair value of your shares. We have included a copy of this law
at Appendix C to the Joint Proxy Statement-Prospectus. Please see the section
entitled "ADDITIONAL INFORMATION -- Dissenters' Appraisal Rights" in the
attached Joint Proxy Statement-Prospectus for a discussion of the procedures to
be followed in asserting these dissenters' rights.
BY ORDER OF THE BOARD OF DIRECTORS BY ORDER OF THE BOARD OF DIRECTORS OF
OF FIRST BOLIVAR CAPITAL CORPORATION FIRST NATIONAL BANK OF BOLIVAR COUNTY
Secretary Secretary
November ______, 1998
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY, WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING.
THE BOARDS OF DIRECTORS OF FIRST BOLIVAR AND THE BANK UNANIMOUSLY RECOMMEND THAT
SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
---
DO NOT SEND IN YOUR STOCK CERTIFICATES NOW. AFTER THE MERGER IS COMPLETED FIRST
M&F WILL SEND YOU WRITTEN INSTRUCTIONS ON HOW TO EXCHANGE YOUR STOCK FOR FIRST
M&F COMMON STOCK.
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q(1): WHY IS FIRST BOLIVAR MERGING WITH FIRST M&F?
A: The First Bolivar and Bank (collectively referred to as Bolivar) Boards
have approved the merger with First M&F based upon their assessment of
the financial condition and prospects of Bolivar in particular and the
competitive and regulatory environment for financial institutions
generally. First M&F is a Mississippi bank holding company for Merchants
& Farmers Bank, a Mississippi chartered state bank which operates offices
in Mississippi. Its common stock is traded on the Nasdaq stock market
under the symbol FMFC. The merger will enable First Bolivar and Bank
shareholders to hold stock in a larger and more diversified entity whose
shares are more widely held and more actively traded. The merger will
also enable us to better serve our customers with more products and
services. Based upon these and other factors we believe that the merger
is in the best interest of the First Bolivar and Bank shareholders. To
review the background and reasons for the merger see pages 11 through 13.
Q(2): AS A FIRST BOLIVAR OR BANK SHAREHOLDER, WHAT WILL I RECEIVE IN THE
MERGER?
A: First M&F will pay you 8.32169 shares of First M&F common stock in
exchange for each share of First Bolivar or Bank common stock you own.
However, First M&F will not issue any fractional shares. Instead, First
M&F will pay you cash for any fraction of a First M&F share based upon a
price of $37.00 per First M&F share.
Example: If you own 100 shares of First Bolivar or Bank common stock,
upon completion of the merger you will have the right to receive 832
shares of First M&F common stock and a check for $6.25 ($37 x .169).
Q(3): WHAT HAPPENS AS THE MARKET PRICE OF FIRST M&F COMMON STOCK FLUCTUATES?
A: The exchange ratio is based upon a formula that is not determined by the
market price of First M&F common stock and is not expected to change.
Since the market value of the First M&F common stock will fluctuate
before and after the closing date of the merger, the value of the stock
you will receive in the merger will fluctuate as well and could decrease.
Q(4): WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We hope to complete the merger by the end of 1998. In addition to the
approval of the First Bolivar and Bank shareholders, certain regulatory
agencies must approve the merger, which includes the approval of the
Federal Deposit Insurance Corporation and the Federal Reserve Board and
may include approval of or notice to certain state authorities.
Q(5): WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO ME?
A: We expect that for U.S. federal income tax purposes, your exchange of
shares of First Bolivar or Bank common stock for shares of First M&F
common stock in the merger generally will not cause you to recognize any
gain or loss. You will, however, have to recognize gain in connection
with any cash received instead of fractional shares. This tax treatment
won't apply to you if you dissent from the merger under Mississippi law
or Federal law.
We provide a more detailed review of the U.S. federal income tax
consequences of the merger at page 16 of this document.
Q(6): AS A FIRST BOLIVAR OR BANK SHAREHOLDER, DO I HAVE TO ACCEPT FIRST M&F
COMMON STOCK IN EXCHANGE FOR MY SHARES IF THE MERGER IS APPROVED?
A: No. First Bolivar Shareholders. If you are a First Bolivar shareholder
and you follow the procedures prescribed by Mississippi law, you may
dissent from the merger and have the fair value of your stock appraised
by a court. If you follow those procedures, you won't receive First M&F
common stock. The fair value of your First Bolivar stock, determined in
the manner prescribed by Mississippi law, will be paid to you in cash.
Bank Shareholders. If you are a Bank shareholder and you follow the
procedures prescribed by Federal law, you may dissent from the merger and
have the fair value of your stock appraised by a court. If you follow
these procedures you won't receive First M&F common stock. The fair value
of your Bank stock, determined in the manner prescribed by Federal law
will be paid to you in cash.
QUESTIONS AND ANSWERS
<PAGE>
For a more complete description of these dissenters' rights, see page __
of this document.
Q(7): WHAT DO I NEED TO DO NOW?
A: Just indicate on your proxy card how you want to vote, and sign and mail
the proxy card in the enclosed return envelope as soon as possible so
that your shares may be represented at the meeting. If you sign and send
in your proxy but don't indicate how you want to vote, your proxy will
be counted as a vote in favor of the merger. If you don't vote on the
merger or if you abstain, the effect will be a vote against the merger.
The meeting will take place on December __, 1998. You are invited to the
meeting to vote your shares in person rather than signing and mailing
your proxy card. If you do sign your proxy card, you can take back your
proxy up to and including the date of the meeting and either change your
vote or attend the meeting and vote in person. We provide more detailed
instructions about voting on page 9.
THE BOARDS OF DIRECTORS OF BOTH FIRST BOLIVAR AND BANK UNANIMOUSLY
RECOMMEND VOTING IN FAVOR OF THE PROPOSED MERGER.
Q(8): SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. No one should send their stock certificates in now. After the merger
is completed, we'll send you written instructions on how to exchange
your First Bolivar or Bank common stock for First M&F common stock.
Q(9): WHO CAN HELP ANSWER YOUR QUESTIONS?
A: If you have more questions about the merger you should contact:
First National Bank of Bolivar County
308 E. Sunflower Road
Cleveland, Mississippi 38732
Attention: Doug Springer, President
Phone Number: (601) 845-4321
QUESTIONS AND ANSWERS
<PAGE>
TABLE OF CONTENTS
PAGE
----
SUMMARY
The Companies 1
First M&F Corporation 1
First Bolivar Capital Corporation 1
First National Bank of Bolivar County 1
Reasons for the Merger 1
The Shareholders' Meeting 1
Our Recommendations to Shareholders 2
Record Date; Voting Power 2
Votes Required 2
The Merger 2
The Exchange Ratio 2
Conditions to Completion of the Merger 2
Termination of the Merger Agreement 2
Federal Income Tax Consequences 3
Accounting Treatment 3
Dissenters' Appraisal Rights 3
Regulatory Approvals 3
Comparative Per Share Market Price Information 3
Selected Financial Data 5
Comparative Unaudited Per Share Data 8
THE MEETING
General 9
Solicitation, Voting and Revocation of Proxies 9
Shares Entitled to Vote; Quorum 9
Votes Required 10
Dissenters' Appraisal Rights 10
Recommendation of First Bolivar and Bank Boards of Directors 10
THE MERGERS
Description of the Mergers 10
Background of and Reasons for the Mergers 11
Exchange of Certificates 13
Regulatory Approvals and Other Conditions to the Mergers 13
Conduct of Business Prior to the Effective Date 15
Waiver, Amendment and Termination 15
Employee Benefits 15
Expenses 16
Restrictions on Resales of Securities by Affiliates 16
Pooling of Interests Accounting Treatment 16
Material Federal Income Tax Consequences 16
INFORMATION ABOUT OUR COMPANIES
Information About First M&F 18
General 18
Recent Acquisition Activities 18
Information About First Bolivar 18
Information About Bank 19
Management and Operations After the Mergers 19
Price Range of common stock 19
Dividends 20
First M&F Capital Stock 21
Authorized and Outstanding Capital Stock 21
Voting Rights 21
Dividend Rights 21
<PAGE>
Preemptive Rights 22
Fully Paid and Nonassessable 22
Cumulative Voting 22
Liquidation Rights 22
Indemnification of Directors, Officers and Employees 22
Transfer Agent and Registrar 22
Provisions Discouraging Changes in Control 22
Comparative Rights of Shareholders of First M&F, First Bolivar and Bank 24
Authorized Shares of Capital Stock; Dividend Rights 25
Board of Directors 26
Removal of Directors 27
Vacancies in the Board of Directors 27
Amendment of the Articles of Incorporation 28
Amendment of the Bylaws 28
Special Meetings of Shareholders 28
Preemptive Rights 29
Reports to Shareholders 29
Voting Rights 29
Shareholder Inspection Rights 30
Limitation of Liability of Directors 30
Indemnification 30
Supermajority Voting Requirements; Business Combinations 32
Dissenters' Appraisal Rights 32
ADDITIONAL INFORMATION ABOUT FIRST BOLIVAR
Principal Business 33
Competition 33
Seasonality of Business and Concentration of Customers 33
Employees 33
Property 33
Legal Proceedings 33
Ownership of First Bolivar Stock 33
Transactions with Management 34
First Bolivar Management Discussion and Analysis of Financial Condition
and Results of Operations 34
Comparison of Years Ended December 31, 1997 and 1996 34
Comparison of Financial Condition at June 30, 1998 and
December 31, 1997 42
ADDITIONAL INFORMATION
Dissenters' Appraisal Rights 44
Legal Matters 47
Experts 47
Other Matters 47
Where You Can Find More Information 47
INDEX TO FIRST BOLIVAR FINANCIAL STATEMENTS F-1
APPENDICES
APPENDIX A -- AGREEMENT AND PLAN OF MERGER A-1
APPENDIX B -- ARTICLE 13 OF MISSISSIPPI BUSINESS CORPORATION ACT B-1
APPENDIX C -- 12 U.S.C. (S)214a NATIONAL BANK ACT C-1
<PAGE>
SUMMARY
This summary highlights selected information from this document. It does not
contain all of the information that is important to you. You should carefully
read this entire document, its appendices and the documents to which we have
referred you before you decide how to vote in order to fully understand the
merger and to obtain a more complete description of the legal terms of the
merger. See "ADDITIONAL INFORMATION -- Where You Can Find More Information"
(page 47). Each item in this summary includes a page reference that directs you
to a more complete description in this document of the topic discussed.
THE COMPANIES
PAGE 18
FIRST M&F CORPORATION
221 Washington Street
Kosciusko, Mississippi 39090
(601) 289-5121
First M&F is incorporated in Mississippi and is a one-bank holding company. We
provide commercial banking operations, credit card services, issuance services,
trust services and other related financial services in the counties of Attala,
Calhoun, Choctaw, DeSoto, Grenada, Hinds, Holmes, LaFayette, Leake, Madison,
Neshoba, Oktibbeha and Rankin in Mississippi. First M&F's principal asset is
its stock in Merchants & Farmer's Bank. As of June 30, 1998 our total assets
were about $644.9 million, our deposits were about $581.5 million and
shareholder's equity was about $56.6 million.
FIRST BOLIVAR CAPITAL CORPORATION
308 E. Sunflower Road
Cleveland, Mississippi 38732
(601) 843-4231
First Bolivar is incorporated in Mississippi and is a one-bank holding company.
Through our bank subsidiary First National Bank of Bolivar County, we serve
customers in Bolivar County, Mississippi. The Bank offers consumer, commercial
and agricultural loans and short term mortgage loans. As of June 30, 1998, our
total assets were $39.5 million, our deposits were about $32.3 million and
shareholders' equity was about $3.5 million.
FIRST NATIONAL BANK OF BOLIVAR COUNTY
308 E. Sunflower Road
Cleveland, Mississippi 38732
(601) 843-4231
First National Bank of Bolivar County is a national bank. First Bolivar owns
over 99% of the capital stock of the Bank. Bank operates a banking office in
Cleveland, Mississippi, Bolivar County. As of June 30, 1998, our total assets
were about $38.8 million, our deposits were about $32.4 million and shareholders
equity was about $3.2 million.
REASONS FOR THE MERGER
PAGE 11
We believe that the financial terms of the agreement were attractive based upon
the recent earnings performance of First M&F, each Boards' familiarity with
First M&F's business, the current and prospective economic and regulatory
environment and each Boards' belief that First M&F was an attractive choice as a
long term affiliation partner for First Bolivar and the Bank. The merger will
offer liquidity to the First Bolivar and Bank shareholders and more products and
services to the Banks' customers, including electronic banking products.
To review the background of and reasons for the merger in greater detail, please
see pages 11 through 13.
THE SHAREHOLDERS' MEETING
PAGE 9
The joint special Meeting will be held at the First National Bank of Bolivar
County (the Banking House), 308 E. Sunflower, Road, Cleveland, Mississippi, at
___ p.m. on December __, 1998. At the Meeting First Bolivar and Bank
shareholders will be asked to approve the merger agreement.
1 SUMMARY
<PAGE>
OUR RECOMMENDATIONS TO SHAREHOLDERS
PAGE 10
The Board of Directors of First Bolivar and the Bank believe that the merger is
fair to you and in your best interests and unanimously recommend that you vote
"FOR" the proposal to approve the merger agreement.
RECORD DATE; VOTING POWER
PAGE 9
You can vote at the Meeting if you owned First Bolivar common stock or Bank
common stock as of the close of business on November 1, 1998, the record date.
On that date, 29,230 shares of First Bolivar common stock were outstanding and
therefore allowed to vote at the Meeting. On that date 30,000 shares of Bank
common stock were outstanding and therefore are allowed to vote at the Meeting.
You will be able to cast one vote for each share of First Bolivar or Bank common
stock you owned on November 1, 1998.
VOTES REQUIRED
PAGE 10
In order for the merger to be approved, First Bolivar shareholders holding a
majority of the outstanding shares of common stock present at the Meeting must
vote in favor of the merger, and Bank shareholders holding at least two-thirds
of the outstanding shares voting at the Meeting must vote in favor of the
merger. Since First Bolivar owns 29,770 shares or 99.23% of the Bank's common
stock and will vote its shares in favor of the merger, it is expected that the
merger will get the needed approval of the Bank shareholders. Altogether the
directors and officers of First Bolivar can cast 86.25% of the votes entitled to
be cast at the Meeting. We expect that they will vote all of their shares in
favor of the merger.
THE MERGER
PAGE 10
We have attached the merger agreement to this Joint Proxy Statement-Prospectus
as Appendix A. We encourage you to read the merger agreement. It is the legal
document that governs the merger.
THE EXCHANGE RATIO
PAGE 10
In the merger, each outstanding share of First Bolivar and Bank common stock
will be converted into 8.32169 shares of First M&F common stock. The exchange
ratio will be adjusted if First M&F, First Bolivar or the Bank increases its
number of shares of common stock outstanding from the figures disclosed in this
Joint Proxy Statement-Prospectus.
CONDITIONS TO COMPLETION OF THE MERGER
PAGE 13
The completion of the merger depends on a number of conditions being met,
including the following:
1. First Bolivar and Bank shareholders approving the merger;
2. receipt of all required regulatory approvals and the expiration of any
regulatory waiting periods;
3. the absence of any governmental order blocking completion of the merger or of
any proceedings by a governmental body trying to block it;
4. receipt of opinions of First M&F's counsel that the U. S. federal income tax
treatment of First Bolivar and the Bank's shareholders, First Bolivar, the
Bank and First M&F in the merger will generally be as we've described it to
you in this document; and
5. the merger must qualify for "pooling of interests" accounting treatment.
In cases where the law permits, a party to the merger agreement could elect to
waive a condition that has not been satisfied and complete the merger although
it is entitled not to. We can't be certain whether or when any of the
conditions we've listed will be satisfied (or waived, where permissible), or
that the merger will be completed.
TERMINATION OF THE MERGER AGREEMENT
PAGE 15
We can agree at any time to terminate the merger agreement without completing
the merger, even if the shareholders of First Bolivar and the Bank have already
voted to approve it. Also, First M&F can terminate the merger agreement if the
holders of ten percent or more of the outstanding First
2
<PAGE>
Bolivar common stock exercise dissenters' appraisal rights.
Moreover, either of us can terminate the merger agreement in the following
circumstances:
1. after a final decision by a governmental authority to prohibit the merger, or
after the rejection of an application for a governmental approval required to
complete the merger;
2. if the merger isn't completed by March 31, 1999;
3. if the First Bolivar shareholders don't approve the merger; or
4. if the other party violates, in a significant way, any of its
representations, warranties or obligations under the merger agreement.
Generally, a party can only terminate the merger agreement in one of the
preceding four situations if that party isn't in violation of the merger
agreement or if its violations of the merger agreement aren't the cause of the
event permitting termination.
FEDERAL INCOME TAX CONSEQUENCES
PAGE 16
We have structured the merger with the intent that First Bolivar, the Bank and
its shareholders won't recognize any gain or loss for U.S. federal income tax
purposes in the merger, except in connection with cash received instead of
fractional shares by First Bolivar and Bank shareholders. We have conditioned
the merger on the receipt of legal opinions that this will be the case, but
these opinions won't bind the Internal Revenue Service, which could take a
different view.
THIS TAX TREATMENT WILL NOT APPLY TO ANY SHAREHOLDER WHO DISSENTS FROM THE
MERGER UNDER MISSISSIPPI OR FEDERAL LAW. Determining the actual tax
consequences of the merger to you can be complicated. They will depend on your
specific situation and many variables not within our control. You should
consult your own tax advisor for a full understanding of the merger's tax
consequences.
ACCOUNTING TREATMENT
PAGE 16
We expect the merger to qualify as a pooling of interests, which means that, for
accounting and financial reporting purposes, we will treat our companies as if
they had always been one company. We have conditioned the merger on qualifying
as a pooling of interests.
DISSENTERS' APPRAISAL RIGHTS
PAGE 44
First Bolivar Shareholders: Mississippi law permits you to dissent from the
merger and to have the fair value of your stock appraised by a court. To do
this, you must follow certain procedures, including the filing of certain
notices with us and refraining from voting your shares in favor of the merger.
If you dissent from the merger, your shares of First Bolivar common stock will
not be exchanged for shares of First M&F common stock in the merger, and your
only right will be to receive the appraised value of your shares in cash.
Bank Shareholders: Federal law permits you to dissent from the merger and to
have the fair value of your stock appraised by a court. To do this, you must
follow certain procedures, including the filing of certain notices with us and
refraining from voting your shares in favor of the merger. If you dissent from
the merger, your shares of Bank common stock will not be exchanged for shares of
First M&F common stock in the merger, and your only right will be to receive the
appraised value of your shares in cash.
REGULATORY APPROVALS
PAGE 13
We can't complete the merger unless we obtain the approval of the Federal
Deposit Insurance Corporation, the Board of Governors of the Federal Reserve
System and the Mississippi Department of Banking and Consumer Finance.
While we don't know of any reason why we shouldn't obtain these regulatory
approvals in a timely manner we can't be certain when we'll obtain them or that
we will obtain them.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION
PAGE 19
Shares of First M&F common stock are quoted on the Nasdaq stock market. Shares
of First Bolivar and the Bank are not publicly traded and there have been no
transactions in
3 SUMMARY
<PAGE>
this stock since January 1, 1996. First Bolivar's book value per share as of
June 30, 1998 was $118.74. On September 8, 1998 the last full trading day prior
to the public announcement of the merger, First M&F common stock closed at
$35.50 per share. On November 3, 1998 First M&F common stock closed at $33.00
per share.
Based on the exchange ratio in the merger which is 8.32169, the market value of
the 8.32169 shares of First M&F stock that First Bolivar and Bank shareholders
will receive in the merger for each share of their common stock would be $295.42
based on First M&F's September 8, 1998 closing price and $274.62 based on First
M&F's November 3, 1998 closing price. Of course, the market price of First M&F
common stock will fluctuate prior to and after completion of the merger, while
the exchange ratio is fixed. You should obtain current First M&F common stock
price quotations.
4
<PAGE>
SELECTED FINANCIAL DATA
The following tables show summarized unaudited historical financial data
for each of our companies.
The information we've set forth for the six-month period ended June 30,
1998 doesn't indicate what the results will be for the full 1998 fiscal year.
The First M&F information in the following tables is based on the
historical financial information that has been presented in prior filings with
the Securities and Exchange Commission. All of the summary financial information
provided in the following tables should be read in connection with this
historical financial information and with the more detailed financial
information we have provided in this Joint Proxy Statement-Prospectus, which you
can find beginning at page F-1. This historical financial information has also
been incorporated into this Joint Proxy Statement-Prospectus by reference -- see
"ADDITIONAL INFORMATION -- Where You Can Find More Information" on page 47.
First M&F's annual financial statements were audited by Shearer, Taylor &
Co., P.A. and First Bolivar's annual financial statements were audited by Taylor
Powell Wilson & Hartford, P.A., independent Certified Public Accountants to each
of our companies. The financial information as of or for the interim periods
ended June 30, 1998 and 1997 has not been audited and in the respective opinions
of management reflects all adjustments (consisting only of normal recurring
adjustments) necessary to a fair presentation of such data.
5
<PAGE>
FIRST M&F CORPORATION
SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
As of and for the period ended As of and for the year ended
<S> <C> <C> <C> <C> <C> <C> <C>
6/30/98 6/30/97 1997 1996 1995 1994 1993
------- ------- ------- ------- ------- ------- -------
(unaudited)
INCOME STATEMENT DATA:
Interest income 23,290 21,444 44,216 41,496 37,417 30,157 27,739
Interest expense 11,298 9,980 20,693 19,541 17,510 12,464 11,127
Net interest income 11,992 11,464 23,523 21,955 19,907 17,693 16,612
Provision for loan losses 938 791 2,050 1,221 1,509 882 1,070
Noninterest income 2,402 2,220 4,965 4,436 4,240 3,444 3,222
Noninterest expense 8,196 7,498 15,312 14,916 14,370 13,821 13,058
Income taxes 1,355 1,544 3,212 2,864 2,018 1,590 1,418
Net income 3,905 3,850 7,914 7,390 6,250 4,844 4,288
Net interest income, taxable
equivalent 12,749 12,092 24,838 23,077 21,082 18,796 17,669
Dividends paid 1,629 1,426 2,987 2,545 2,031 1,535 1,516
PER SHARE DATA:
Net income 1.15 1.13 2.33 2.18 1.90 1.55 1.37
Cash dividends paid 0.48 0.42 0.88 0.75 0.62 0.49 0.49
Book value 16.65 15.12 15.97 14.46 13.13 11.05 10.50
Closing stock price 43.00 28.00 40.00 29.00 22.00 13.00 11.00
AVERAGE BALANCES:
Assets 615,682 548,676 562,737 527,001 480,621 429,852 382,943
Earning assets 572,490 510,869 523,757 492,466 449,821 399,076 370,720
Loans 366,681 343,759 349,684 317,013 275,422 230,693 193,943
Investments 181,238 151,995 159,005 158,680 161,763 159,194 164,107
Total deposits 547,632 488,687 500,910 449,619 366,231 350,495 338,766
Equity 55,718 49,988 51,789 46,766 39,582 33,559 31,072
BALANCE SHEET DATA:
Assets 644,912 561,515 580,901 523,760 505,558 446,255 405,961
Earning assets 595,582 516,181 540,782 489,485 473,943 416,350 374,537
Loans 372,479 345,695 360,192 345,238 291,624 261,713 207,649
Investments 193,861 166,322 167,788 143,597 181,004 153,231 151,875
Core deposits 519,761 445,130 459,462 415,868 363,491 326,371 300,398
Total deposits 581,493 500,779 509,783 464,094 405,863 358,844 329,509
Equity 56,508 51,338 54,206 49,089 44,519 34,484 32,784
SELECTED RATIOS:
Return on average assets 1.28% 1.42% 1.41% 1.40% 1.30% 1.13% 1.12%
Return on average equity 14.13% 15.51% 15.28% 15.80% 15.79% 14.43% 13.80%
Equity to assets 9.06% 9.16% 9.20% 8.87% 8.24% 7.81% 8.11%
Dividend payout 41.74% 37.17% 37.77% 34.40% 32.63% 31.61% 35.77%
</TABLE>
6
<PAGE>
FIRST BOLIVAR CAPITAL CORPORATION
SELECTED FINANCIAL DATA (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
As of and for the As of and for the year ended
period ended
<S> <C> <C> <C> <C> <C> <C> <C>
6/30/98 6/30/97 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
------- ------- -------- -------- -------- -------- --------
(unaudited)
INCOME STATEMENT DATA:
Net interest income 578 568 1,190 1,097 1,077 1,071 1,061
Provision for loan losses 6 6 12 12 46 89 0
Net income 82 132 232 34 129 21 254
BALANCE SHEET DATA:
Total assets 39,498 39,750 40,557 39,917 38,632 35,685 30,310
Net loans 17,540 15,825 15,568 13,266 16,389 13,759 14,914
Deposits 32,339 31,882 33,223 32,699 31,407 30,173 25,321
Stockholders' equity 3,469 3,207 3,441 3,123 2,911 2,470 2,769
PER SHARE DATA:
Earnings per share 2.8 4.52 7.95 7.99 4.42 0.73 8.71
Dividends declared 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Dividends paid 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Average shares outstanding 29 29 29 29 29 29 29
SELECTED RATIOS:
Return on average assets 0.40% 0.67% 0.58% 0.59% 0.35% 0.06% 0.84%
Return on average equity 4.76% 8.51% 7.22% 7.74% 4.80% 0.82% 9.63%
Equity to assets 8.78% 8.07% 8.49% 7.8% 7.53% 6.92% 9.14%
Dividend payout 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
COMPARATIVE PER SHARE INFORMATION
NET INCOME
For the six months ended 2.81
6/30/98
For the year ended 12/31/97 7.95
For the year ended 12/31/96 7.99
For the year ended 12/31/95 4.42
CASH DIVIDENDS
For the six months ended 0.00
6/30/98
For the year ended 12/31/97 0.00
For the year ended 12/31/96 0.00
For the year ended 12/31/95 0.00
BOOK VALUE
As of 6/30/98 118.67
As of 12/31/97 117.73
As of 12/31/96 106.85
</TABLE>
SUMMARY
7
<PAGE>
COMPARATIVE UNAUDITED PER SHARE DATA
The following table shows information about our companies' income per
share, dividend per share and book value per share, and similar information
reflecting the merger (which is referred to as "pro forma" information). The
First M&F information in the following table is based on the historical
financial information that has been presented in prior Securities and Exchange
Commission filings. This information has been incorporated into this Joint Proxy
Statement-Prospectus by reference. See "ADDITIONAL INFORMATION -- Where You Can
Find More Information" on page 47. In presenting the comparative pro forma
information for certain time periods, we assumed that our companies had been
merged throughout those periods. In presenting the comparative pro forma
information, we also assumed that we will treat our companies as if they had
always been combined for accounting and financial reporting purposes (a method
which is referred to as the "pooling of interests" method of accounting).
The information listed as "equivalent pro forma" was obtained by
multiplying the pro forma amounts by the exchange ratio of 8.32169. It is
intended to reflect the fact that First Bolivar and Bank shareholders will be
receiving more than one share of First M&F common stock for each share of First
Bolivar and Bank common stock exchanged in the merger.
We expect that we will incur restructuring and merger-related expenses as a
result of combining our companies. We also anticipate that the merger will
provide the combined company with financial benefits such as reduced operating
expenses and the opportunity to earn more revenue. However, none of these
anticipated expenses or benefits has been factored into the pro forma
information, except for the pro forma combined condensed balance sheet. For that
reason, the pro forma information, while helpful in illustrating the financial
attributes of the combined company under one set of assumptions, doesn't attempt
to predict or suggest future results. Also, the information we've set forth for
the six-month period ended June 30, 1998 doesn't indicate what the results will
be for the full 1998 fiscal year.
<TABLE>
<CAPTION>
Bolivar Pro
-----------
Pro Forma with Forma
-------------- -----
First M&F Bolivar Equivalent
--------- ------- ----------
Net Income
<S> <C> <C> <C>
For the six months ended 6/30/98 1.15 1.10 9.15
For the year ended 12/31/97 2.33 2.24 18.64
For the year ended 12/31/96 2.18 2.10 17.48
For the year ended 12/31/95 1.90 1.80 14.98
Cash Dividends
For the six months ended 6/30/98 0.48 0.48 3.99
For the year ended12/31/97 0.88 0.88 7.32
For the year ended 12/31/96 0.75 0.75 6.24
For the year ended 12/31/95 0.62 0.62 5.16
Book Value
As of 6/30/98 16.65 16.48 137.14
As of 12/31/97 15.97 15.84 131.82
As of 12/31/96 14.46 14.35 119.42
</TABLE>
First M&F will account for each of the proposed transactions using the "pooling
of interests" method of accounting.
First Bolivar equivalent pro forma amounts are computed by multiplying the First
M&F pro forma combined amounts by the exchange ratio of 8.32169.
8
<PAGE>
THE MEETING
GENERAL
This Joint Proxy Statement-Prospectus is first being mailed on or about
November __, 1998 to the shareholders of First Bolivar Capital Corporation
("FIRST BOLIVAR SHAREHOLDERS") and the shareholders of (THE "BANK
SHAREHOLDERS") First National Bank of Bolivar County (the "Bank") in connection
with the solicitation of proxies on behalf of the First Bolivar Board and the
Bank Board for use at a special joint meeting (the "Meeting") of shareholders of
First Bolivar and the Bank to be held on December ___, 1998, at ___ p.m. in the
Banking House, 308 E. Sunflower Road, Cleveland, Mississippi and at any
adjournments or postponements thereof and is accompanied by the Notice of
Meeting and a form of proxy. At the Meeting, First Bolivar and Bank
shareholders will be asked to consider and vote upon a proposal to approve and
adopt the Agreement and Plan of Merger, dated as of September 9, 1998 (the
"Merger Agreement") by and between First Bolivar and First M&F Corporation, a
Mississippi corporation ("First M&F"), and the transactions contemplated
thereby, including a merger of First Bolivar with First M&F (the "Company
Merger") and a merger of Bank with Merchants & Farmers Bank (the "Bank Merger").
SOLICITATION, VOTING AND REVOCATION OF PROXIES
When a proxy in the form accompanying this Joint Proxy Statement-Prospectus
is properly executed and returned, the shares represented thereby will be voted
in the manner specified therein. ALL EXECUTED BUT UNMARKED PROXIES THAT ARE
RETURNED WILL BE VOTED "FOR" THE MERGER AGREEMENT. An instruction to abstain
from voting on the Merger Agreement will be considered present for quorum
purposes but will have the same effect as a vote against the Merger Agreement.
Only a vote against the Merger Agreement will preserve any statutory dissenters'
appraisal rights a shareholder may otherwise wish to exercise.
No matters are expected to be considered at the Meeting other than the
proposal to approve the Merger Agreement, but if any other matters should
properly come before the Meeting, it is intended that proxies will be voted on
all such matters in accordance with the judgment of the person(s) voting them.
Any proxy may be revoked at any time before it is voted. A shareholder may
revoke a proxy (1) by submitting a proxy bearing a later date, (2) by giving
written notice of revocation to the Secretary of First Bolivar or the Bank, or
(3) upon request, if such shareholder is present at the Meeting elects to vote
in person. Mere attendance at the Meeting will not of itself revoke a
previously submitted proxy. Revocation of a proxy will not affect a vote on any
matter taken before receipt of the revocation.
The cost of soliciting proxies will be borne by First Bolivar and the Bank.
In addition to the use of the mails, proxies may be solicited personally, by
telephone, telecopier, or telegram, by directors, officers and employees of
First Bolivar or Bank, who will not receive any additional compensation for so
doing.
SHARES ENTITLED TO VOTE; QUORUM
Only shareholders of First Bolivar or the Bank as of the close of business
on November 1, 1998, are entitled to notice of and to vote at the Meeting (the
"Record Date"). As of the Record Date, there were 29,230 shares of First
Bolivar common stock and 30,000 shares of Bank common stock outstanding, each of
which is entitled to one vote on all matters to come before the Meeting. The
presence at the Meeting, in person or by proxy, of the holders of a majority of
the outstanding shares of First Bolivar common stock and a majority of the
outstanding shares Bank common stock is necessary to constitute a quorum.
Therefore, not returning your proxy card would make it more difficult to obtain
a quorum because your shares would not be counted as present at the Meeting for
quorum purposes.
9
<PAGE>
VOTES REQUIRED
Approval of the Company Merger requires the affirmative vote of the holders
of at least a majority of the voting power of the First Bolivar common stock
present and approval of the Bank Merger requires the affirmative vote of at
least two-thirds of the voting power of the shares of Bank common stock present,
in person or by proxy, at the Meeting. As of the Record Date, directors and
executive officers of First Bolivar and their affiliates were the beneficial
owners of approximately 86.25 percent of the outstanding First Bolivar common
stock entitled to vote at the Meeting, and it is expected that all such shares
will be voted in favor of the Mergers. See "ADDITIONAL INFORMATION ABOUT FIRST
BOLIVAR -- Ownership of First Bolivar Stock." First Bolivar owns over 99% of
the Bank's common stock and will vote its shares in favor of the Bank Merger,
thus assuring that the Bank Merger will get the approval of the Bank
shareholders. Under Mississippi law, shareholders of First M&F are not required
to approve the Mergers.
DISSENTERS' APPRAISAL RIGHTS
First Bolivar Shareholders. Under Article 13 of the Mississippi Business
Corporation Act, each First Bolivar shareholder who dissents from the Company
Merger has the right to have the fair value of such First Bolivar's shares
appraised and paid to such First Bolivar shareholder in cash. See "ADDITIONAL
INFORMATION -- Dissenters' Appraisal Rights."
Bank Shareholders. Pursuant to 12 U.S.C. (S)215a, each Bank shareholder who
dissents from the Bank Merger has the right to have the fair value of such Bank
shareholder's shares appraised and paid to such Bank shareholder in cash. See
"ADDITIONAL INFORMATION -- Dissenters' Appraisal Rights."
RECOMMENDATION OF FIRST BOLIVAR AND BANK BOARDS OF DIRECTORS
The First Bolivar and Bank Boards of Directors have unanimously approved
the Merger Agreement and the transactions contemplated thereby. The Boards
believe the Mergers are fair to and in the best interests of the First Bolivar
and Bank shareholders and unanimously recommend that the shareholders vote "FOR"
approval and adoption of the Merger Agreement and the transactions contemplated
thereby. See "THE MERGER ---Background of and Reasons for the Mergers."
THE MERGERS
The following description of the Merger Agreement does not purport to be
complete and is qualified in its entirety by reference to the Merger Agreement,
which is incorporated herein by reference and attached as Appendix A to this
Joint Proxy Statement-Prospectus.
DESCRIPTION OF THE MERGERS
Subject to the terms and conditions of the Merger Agreement, First Bolivar,
a Mississippi corporation, will be merged with and into First M&F, a Mississippi
corporation (the "Company Merger"), and Bank, a national banking association,
will be merged with and into Merchants & Farmers Bank, a Mississippi state
chartered bank (the "Bank Merger" and collectively with the Company Merger, the
"Mergers"). As a result of the Company Merger, the separate corporate existence
of First Bolivar will cease and First M&F will be the surviving corporation (the
"Surviving Corporation") and will continue to exist as a Mississippi
corporation. As a result of the proposed Bank Merger, the separate legal
existence of Bank will cease, and Merchants & Farmers Bank will be the surviving
bank (the "Surviving Bank") and will continue to exist as a Mississippi state
chartered bank.
Subject to the satisfaction or waiver of certain conditions set forth in
the Merger Agreement and described more fully in "-- Regulatory Approvals and
Other Conditions to the Mergers," the proposed Company Merger will become
effective (the "First Bolivar Effective Date") upon the filing of articles of
merger (the "First Bolivar Articles
10
<PAGE>
of Merger") in the offices of the Secretary of State of the State of Mississippi
in accordance with the MBCA and the proposed Bank Merger will become effective
(the "Bank Effective Date") upon the filing of the articles of merger ("Bank
Articles of Merger") in the offices of the Mississippi Department of Banking
and Consumer Finance in accordance with the provisions of Miss. Code
Ann. (S) 81-5-85.
On and after the First Bolivar Effective Date, the proposed Company Merger
will have the effects set forth in Article II of the MBCA, and the charter and
bylaws of the Surviving Corporation at the First Bolivar Effective Date shall be
the charter and bylaws of First M&F in effect immediately prior to the First
Bolivar Effective Date. At and after the Bank Effective Date, the proposed Bank
Merger will have the effect set forth in 12 U.S.C. (S) 214a and Miss. Code Ann.
(S) 81-5-85, and the charter and bylaws of the Surviving Bank at the Bank
Effective Date shall be the charter and bylaws of Merchants & Farmers Bank in
effect immediately prior to the Bank Effective Date.
The directors of First M&F immediately following the Company Merger shall
be those directors of First M&F immediately prior to the proposed Company Merger
without change. The directors of Merchants & Farmers Bank immediately following
the proposed Bank Merger shall be those directors of Merchants & Farmers Bank
immediately prior to the proposed Bank Merger without change.
As a result of the Mergers, all shares of First Bolivar and Bank common
stock will cease to be outstanding, and each holder of a certificate for shares
of First Bolivar or Bank common stock ("Certificate") will thereafter cease to
have any rights with respect to such shares, and the Certificate will
thenceforth represent the number of shares of First M&F common stock into which
the common stock represented thereby was converted and cash for fractional
shares of First M&F common stock at the rate of $37 per share of First M&F
common stock. No fractional shares of First M&F common stock will be issued,
but cash will be paid to holders in respect of any fractional share of First M&F
common stock that would otherwise be issuable.
On the First Bolivar Effective Date, each share of First Bolivar will be
converted into 8.32169 shares of First M&F common stock and a cash payment in
lieu of fractional shares. Immediately following the Company Merger, the Bank
Effective Date will occur, and at that time, each share of Bank common stock
(excluding shares held by First Bolivar, which shall be canceled, or shares with
respect to which dissenters' rights have been properly demanded in accordance
with 12 U.S.C. (S) 214a ("Bank Dissenting Shares")) issued and outstanding
immediately prior to the Bank Merger will become and be converted into the right
to receive 8.32169 shares of First M&F common stock, and cash in lieu of any
fractional share.
If First Bolivar, the Bank or M&F changes its number of outstanding shares
as a result of a stock split, reverse stock split, stock dividend,
recapitalization or other similar transaction, the exchange ratio will be
appropriately adjusted.
It is expected that the market price of First M&F common stock will
fluctuate between the date of this Joint Proxy Statement-Prospectus and the date
on which the Mergers are consummated and thereafter. Because the exchange ratio
is fixed and because the market price of First M&F common stock is subject to
fluctuation, the value of the shares of First M&F common stock that holders of
First Bolivar common stock and Bank common stock will receive in the Mergers may
increase or decrease prior to the Mergers. For further information concerning
the historical market prices of First M&F common stock, First Bolivar common
stock and Bank common stock, see "INFORMATION ABOUT OUR COMPANIES -- Price Range
of Common Stock." No assurance can be given concerning the market price of
First M&F common stock before or after the Mergers.
BACKGROUND OF AND REASONS FOR THE MERGERS
On June 29, 1998, Hugh Potts, Jr., Chairman and CEO of Merchants and
Farmers Bank, received a letter from Mr. Robert L. Tims, a 12% shareholder of
First Bolivar in which he expressed his desire to liquidate certain business
interests held jointly by him and his brother, James Tims. Their combined
ownership in First Bolivar is approximately 52%. Robert Tims had discussed the
matter of selling First Bolivar with James Tims and certain other
11
<PAGE>
directors. They agreed to solicit an offer from another publicly traded bank
holding company, and to proceed further if an attractive offer was made.
After analyzing certain publicly available financial information concerning
First Bolivar and the Bank, Mr. Potts approached the Merchants and Farmers Bank
loan committee members at a July 3rd meeting with an analysis and a recommended
offered price range of $8.0 million to $9.0 million. The committee concurred
with the analysis and encouraged Mr. Potts to proceed. On Monday, July 6, Mr.
Potts sent a non-binding offer to Dr. Don Blackwood, the Chairman of First
Bolivar Board, of an acquisition price range of $8.5 million to $9.0 million,
dependent upon due diligence findings. The offer was forwarded to Mr. Robert
Tims. The First Bolivar Board considered the offer in a meeting on July 15, and
decided to allow First M&F to proceed with due diligence. On the afternoon of
July 15, Robert Tims informed Hugh Potts, Jr. of First Bolivar Board's
willingness to proceed. On July 17, First M&F forwarded a list of information
necessary for First M&F's analysis and a confidentiality agreement to Mr.
Springer, President of the Bank. On July 24, Mr. Springer brought the requested
information to the executive offices of Merchants and Farmers Bank, and met with
Hugh Potts, Jr., Robert Autry and Bobby Thompson, Chief Financial Officer of
First M&F. At this meeting, the backgrounds of First Bolivar, the Bank, First
M&F and Merchants & Farmers Bank were discussed including the Bank's and
Merchants & Farmers Bank's similar philosophies, lending standards and
autonomous branches. There was also discussion concerning the benefits to both
banks, shareholders, customers, employees and communities of a possible merger.
These benefits included liquidity to its shareholders, and the ability to offer
electronic banking products and make larger loans to Bank customers. The
benefits to Merchants & Farmers Bank included expansion into a new market area,
more density and another base to the bank to use excess capacities.
A loan trial balance was requested so that loans that needed to be examined
could be identified. Mr. Springer forwarded the loan trial balance on Monday,
July 27. On the afternoon of July 27, Hugh Potts, Jr. traveled to Cleveland to
meet with Robert Tims to discuss the possible merger. On Thursday, July 30,
Robert Autry, the Executive Vice President over the Northern Sales Region, and
Pat Vanderford, Executive Vice President in loan administration visited the bank
in Cleveland for a one (1) day examination of loans and another discussion with
Mr. Springer. The review verified the analysis that had been done, and Mr.
Potts, Mr. Wiggers and Mr. Thompson decided that First M&F should offer $9.0
million for First Bolivar. On August 3, Mr. Potts sent a letter to Dr. Blackwood
making a firm offer of $9.0 million for First Bolivar.
Dr. Blackwood received the letter on August 4 and called a special board
meeting that day to discuss the offer. After discussion, the First Bolivar Board
unanimously voted to accept the offer of $9.0 million and accept an exchange
ratio based upon a value of $37 per share for First M&F common stock. In
deciding to enter into the Merger Agreement, the First Bolivar and Bank Boards,
after considering various alternatives, concluded that the Mergers were in the
best interest of First Bolivar, the Bank and its shareholders because it would
permit shareholders to exchange on favorable terms their respective ownership
interests for participation in the ownership of a banking organization operating
on a multi-county basis. The Boards also concluded that the shareholders would
benefit additionally in that they would attain greater liquidity in their
investment by obtaining shares of stock of whose securities are more widely held
and actively traded.
The Boards consulted with management and considered a number of factors,
including, but not limited to, the following: (1) the parties' respective
earnings and dividend records, financial conditions, historical stock prices and
managements; (2) the market for Bank's services and the competitive pressures
existing in Bank's market area; (3) the outlook for First Bolivar and Bank in
the financial institutions industry; (4) the amount and type of consideration to
be received by the shareholders; (5) the fact that First M&F common stock to be
received pursuant to the Mergers will be listed for trading on the Nasdaq Stock
Market and should provide the shareholders with liquidity that is currently
unavailable to them; (6) recent changes in the regulatory environment will
result in First Bolivar and Bank facing additional competitive pressures in the
Bank's market area from other financial institutions with greater financial
resources capable of offering a broad array of financial services; and (7) the
Mergers are expected to qualify as tax-free reorganizations so that neither
First Bolivar , Bank nor First Bolivar and the Bank's shareholders
12
<PAGE>
(except to the extent that cash is received in respect of fractional shares or
in payment of statutory dissenters' rights) will recognize any gain in the
transaction.
The Boards did not assign any specific or relative weight to the foregoing
factors in its considerations. The Boards believe that the Mergers will provide
significant value to all its shareholders and will enable them to participate in
opportunities for growth that the Boards believe the Mergers make possible.
BASED ON THE FOREGOING, THE FIRST BOLIVAR AND BANK BOARDS HAVE APPROVED THE
MERGER AGREEMENT, BELIEVE THAT IT IS IN THE BEST INTEREST OF ITS SHAREHOLDERS,
AND RECOMMEND THAT ITS SHAREHOLDERS VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
EXCHANGE OF CERTIFICATES
Promptly after the First Bolivar Effective Date and Bank Effective Date,
First M&F will cause the Exchange Agent to mail to each shareholder of First
Bolivar and the Bank (except for those who have perfected dissenter's rights) a
letter of transmittal and instructions for use in effecting the exchange of
Certificates for certificates for shares of First M&F common stock ("First M&F
Certificates") and cash in lieu of fractional shares. SHAREHOLDERS ARE
REQUESTED NOT TO SURRENDER THEIR STOCK CERTIFICATES UNTIL THEY HAVE RECEIVED A
LETTER OF TRANSMITTAL AND FURTHER WRITTEN INSTRUCTIONS.
Upon surrender of a Certificate to the Exchange Agent together with such
letter of transmittal, duly executed and completed in accordance with the
instructions thereto, the holder of such certificate will be entitled to receive
in exchange therefor (1) a First M&F Certificate for that number of whole shares
of First M&F common stock into which his or her First Bolivar or Bank common
stock were converted, and (2) a check for cash in lieu of fractional shares, if
any, which such holder has the right to receive, after giving effect to any
required withholding tax. No interest will be paid or accrued on the value of
any First M&F common stock or cash payable to holders of Certificates.
No dividends on First M&F common stock into which shares of First Bolivar
or the Bank common stock were converted will be paid until the Certificate is
surrendered as described above. Subject to the effect of applicable laws,
following surrender of any such Certificate, there will be paid to the holder of
the Certificates surrendered, (1) at the time of such surrender, the amount of
dividends or other distributions with a record date on or after the First
Bolivar and Bank Effective Dates theretofore payable with respect thereto and
not paid, less any applicable withholding taxes, and (2) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the First Bolivar and Bank Effective Dates but prior to surrender, less
applicable withholding taxes. Certificates surrendered for exchange by any
"affiliate" of First Bolivar or the Bank for purposes of Rule 145(c) under the
Securities Act will not be exchanged until First M&F has received a written
agreement from such person as provided in the Merger Agreement.
If any Certificate has been lost, stolen or destroyed, upon the making of
an affidavit of that fact and, if required by First M&F, the posting of a bond
in such reasonable amount as First M&F may direct as indemnity against any claim
with respect to such Certificate, the Exchange Agent will issue the shares of
First M&F common stock and cash in lieu of fractional shares, if any, and unpaid
dividends and distributions on shares of First M&F common stock as provided in
the Merger Agreement.
REGULATORY APPROVALS AND OTHER CONDITIONS TO THE MERGERS
The Company Merger is subject to the approval by the Federal Reserve Board
(the "FRB"). On or about November 3, 1998 First M&F filed with the FRB a
request seeking approval to waive the FRB merger application. The Bank Merger is
subject to approval by the Federal Deposit Insurance Corporation (the "FDIC")
and the Mississippi Department of Banking and Consumer Finance. On or about
October 23, 1998, First M&F filed with the
13
<PAGE>
FDIC an application seeking approval to merge Bank into Merchants & Farmers
Bank. As of the date of this Joint Proxy Statement-Prospectus, the FDIC and FRB
have not acted on the merger application.
The Bank Merger is subject to approval by the FDIC, which requires the FRB,
when approving a transaction such as the Bank Merger, to take into consideration
the financial and managerial resources (including the competence, experience and
integrity of the officers, directors and principal shareholders) and future
prospects of the existing and proposed institutions and the convenience and
needs of the communities to be served. In considering financial resources and
future prospects, the FDIC will, among other things, evaluate the adequacy of
the capital levels of the parties to a proposed transaction.
The Bank Holding Company Act prohibits the FRB from approving a merger if
it would result in a monopoly or be in furtherance of any combination or
conspiracy to monopolize or to attempt to monopolize the business of banking in
any part of the United States, or if its effect in any section of the country
would be substantially to lessen competition or to tend to create a monopoly, or
if it would in any other manner result in a restraint of trade, unless the FRB
finds that the anti-competitive effects of a merger are clearly outweighed in
the public interest by the probable effect of the transaction in meeting the
convenience and needs of the communities to be served. In addition, under the
Community Reinvestment Act of 1977 the FRB must take into account the record of
performance of the existing institutions in meeting the credit needs of the
entire community, including low- and moderate-income neighborhoods, served by
such institutions.
An application will be submitted to the Mississippi Department of Banking
and Consumer Finance immediately after obtaining First Bolivar and Bank
shareholder approval.
The Mergers generally may not be consummated until 30 days (which may be
shortened to 15 days with the consent of the U. S. Department of Justice)
following the date of applicable United States federal regulatory approval,
during which time the U. S. Department of Justice may challenge the Mergers on
antitrust grounds. The commencement of an antitrust action by the U. S.
Department of Justice would stay the effectiveness of the regulatory agency's
approval unless a court specifically ordered otherwise.
There can be no assurance that any applicable regulatory authority will
approve or take other required action with respect to the Mergers or as to the
date of such regulatory approval or other action. First M&F, First Bolivar and
the Bank are not aware of any governmental approvals or actions that are
required in order to consummate the Mergers except as described herein. Should
such other approval or action be required, it is contemplated that First M&F,
First Bolivar and the Bank would seek such approval or action. There can be no
assurance as to whether or when any such other approval or action, if required,
could be obtained.
In addition to the receipt of all necessary regulatory approvals, and
shareholder approval of the Merger Agreement, consummation of the Mergers is
subject to the satisfaction of certain other conditions on or before the
Effective Date. Generally, such additional conditions include, among others,
the following: (1) the Joint Proxy Statement-Prospectus must have been filed
with the Securities and Exchange Commission ("SEC"), and the Registration
Statement of which it is a part must have been declared effective by the SEC and
not be the subject of any stop order or proceedings seeking a stop order; (2) no
action or proceeding shall have been threatened or instituted before a court or
other governmental body to restrain or prohibit the transactions contemplated by
the Merger Agreement; (3) the Mergers must be accounted for as a "pooling of
interests;" and (4) First Bolivar and the Bank must have received from Watkins
Ludlam Winter & Stennis, P.A., an opinion of counsel as to certain tax aspects
of the transactions contemplated by the Mergers.
The obligations of First Bolivar, the Bank and First M&F to effect the
Mergers are also subject to other conditions as set forth in the Merger
Agreement to the effect, among others, as follows: (1) each of the
representations and warranties of the other parties set forth in the Merger
Agreement is true and correct in all material respects on and as of the Closing;
(2) the other parties have in all material respects performed all obligations
required by the Merger Agreement to be performed before the Closing; (3) that
there has not been a material
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adverse change in the financial condition, results of operations or business of
the other parties; and (4) the receipt of customary legal opinion of the others'
counsel.
CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE DATE
Pending consummation of the Mergers, First Bolivar and the Bank has agreed
to conduct its business in the ordinary course consistent with prudent business
practices and in compliance with all applicable laws; and without First M&F's
prior consent, First Bolivar and the Bank will not, among other matters, (1)
amend its Articles of Incorporation or Bylaws, (2) sell, dispose of or encumber
any assets, issue or reacquire any stock, pay dividends except for dividends
from the Bank to First Bolivar to enable First Bolivar to service First Bolivar
corporate indebtedness and to pay expenses related to the Mergers, (3) authorize
any capital expenditure over $20,000, (4) extend any new or renew any existing
loan which individually exceeds $50,000, (5) adopt any type of compensation or
benefit plan for First Bolivar or Bank officers or employees, (6) grant any
increase in compensation to any director, officer, employee or representative of
First Bolivar and the Bank except in the ordinary course of business consistent
with past practice, (7) enter into, amend, or terminate any employment
agreement, relationship or responsibilities with any director, officer or key
employee or representative of First Bolivar or Bank, or (8) take any action with
respect to the grant or payment of any severance or termination pay.
WAIVER, AMENDMENT AND TERMINATION
First Bolivar and First M&F may waive their respective rights under the
Merger Agreement if any such waiver is in writing. The Merger Agreement may be
amended or modified only upon written agreement of both First Bolivar and First
M&F.
The Merger Agreement may be terminated at any time on or before the
Effective Date (a) by mutual consent; (b) by First M&F if holders of more than
10% of First Bolivar common stock dissent from the Company Merger; or (c) by
either party (1) if the Mergers have not become effective on or before March 31,
1999, (2) if the other party has breached any covenant, representation or
warranty that reflects a material adverse change in the financial condition of
the other party, (3) if regulatory approvals are not obtained, and (4) if the
Merger Agreement is not approved by the required shareholder votes.
Except under certain circumstances specified in the Merger Agreement, upon
termination of the Merger Agreement, no liability will result on the part of
either party or their respective directors, officers, employees, agents, or
shareholders unless there has been an intentional breach of the Merger Agreement
before the date of termination.
EMPLOYEE BENEFITS
Bank's Basic Savings Plan and 401(k) Plan ("Employee Plans") will remain
operative and in effect through the Bank Effective Date. The Employee Plans
will be terminated as of the Bank Effective Date and distributed to vested
employees of Bank in accordance with the terms of the Employee Plans after the
normal and customary contributions have been made consistent with past
practices. All retained employees will be eligible to enter the Merchants and
Farmers Bank employment benefit plans.
With respect to First Bolivar's and Bank's group health and life benefit
plan as it relates to employees, First M&F shall have the option of either: (1)
continuing such plan on and after the Effective Date of the Mergers; or (2)
discontinuing such plan upon the Effective Date and thereafter, all retained
employees will be eligible to participate in Merchants & Farmers Bank's group
health and life benefit plan based on the provisions in the plan. The ninety
(90) day employment period will be waived for eligible retained employees in
accordance with Merchants & Farmers Bank's plan. Merchants & Farmers Bank will
waive pre-existing medical conditions for health insurance purposes as to all
retained personnel.
All other Bank benefit plans will continue through Bank Effective Date.
Thereafter, all retained employees will be eligible to participate in all
Merchants and Farmers Bank employment benefit plans not set forth above based on
the provisions set forth in the plans.
EXPENSES
First M&F and First Bolivar have each agreed to pay their respective
expenses incurred in connection with or incidental to the Merger Agreement.
First M&F is responsible for preparing the applications, regulatory filings and
Registration Statement necessary to obtain approval of the Mergers and the
issuance of the First M&F common
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stock. First Bolivar is responsible for the cost of its accountants and legal
counsel and will bear all costs related to conducting the Meeting and obtaining
shareholder approval of the Merger Agreement.
RESTRICTIONS ON RESALES OF SECURITIES BY AFFILIATES
The shares of First M&F common stock to be issued pursuant to the Merger
Agreement have been registered under the Securities Act of 1933 ("Securities
Act"), thereby allowing such shares to be sold without restriction by persons
who are not deemed to be "affiliates" (as that term is defined in the rules
under the Securities Act) of First Bolivar and who do not become affiliates of
First M&F. The shares of First M&F common stock to be issued to affiliates of
First Bolivar may be resold only pursuant to an effective registration
statement, pursuant to Rule 145 under the Securities Act (which, among other
things, permits the resale of securities subject to certain volume limitations)
or in transactions otherwise exempt from registration under the Securities Act.
First M&F will not be obligated and does not intend to register its shares under
the Securities Act for resale by shareholders who are affiliates.
Before the First Bolivar Effective Date, each affiliate of First Bolivar
will deliver to First M&F a letter agreement pertaining to the limitations on
the transferability of such affiliate's shares of First M&F common stock
acquired in the Mergers and whereby such affiliate will agree, among other
things, that he or she will not sell, pledge, transfer, or otherwise dispose of
such shares of First M&F common stock in violation of the Securities Act.
POOLING OF INTERESTS ACCOUNTING TREATMENT
It is a condition to First M&F's obligation to complete the Merger
Agreement that the Mergers will be accounted for using the "pooling of
interests" method of accounting. Under such method, holders of First Bolivar and
the Bank common stock will be deemed to have combined their existing voting
common stock interest with that of holders of First M&F common stock by
exchanging their shares for shares of First M&F common stock. Accordingly, the
book value of the assets, liabilities and shareholders' equity of First Bolivar,
as reported on its consolidated balance sheet, will be carried over to the
consolidated balance sheet of First M&F, and no goodwill will be created. First
M&F will be able to include in its consolidated income the consolidated income
of First Bolivar for the entire fiscal year in which the Mergers occur; however,
certain expenses incurred to effect the Merger Agreement must be treated by
First M&F as current charges against income rather than adjustments to its
balance sheet. In order for the Mergers to qualify for "pooling of interests"
accounting treatment, among other things, substantially all (90% or more) of the
outstanding First Bolivar common stock must be exchanged for First M&F common
stock.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
Set forth below is a discussion of material federal income tax consequences
of the Mergers. The discussion is intended only as a summary and does not
purport to be a complete analysis of all potential tax effects relevant to a
decision whether to vote for the Merger Agreement. The discussion is based on
current provisions of the Internal Revenue Code, regulations thereunder, and
applicable judicial and administrative interpretations on the date hereof, any
of which is subject to change at any time.
We expect the Mergers to be tax-free reorganizations for federal income tax
purposes, with the result that no gain or loss will be recognized by First
Bolivar's or Bank's shareholders, except with respect to the cash consideration
for fractional shares, or payments received by such shareholders upon exercise
of their statutory dissenters' rights.
Consummation of the Mergers is conditioned upon receipt by First Bolivar of
an opinion from Watkins Ludlam Winter & Stennis, P.A., substantially to the
following effects, among others:
(1) The mergers will constitute reorganizations under Section 368 of the
Code.
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(2) No gain or loss will be recognized by First M&F, Merchants & Farmers
Bank, First Bolivar, or Bank as a result of the Mergers.
(3) No gain or loss will be recognized by a First Bolivar or Bank
shareholder with respect to the First M&F common stock received solely
in exchange for such shareholder's stock.
(4) Cash received by a shareholder in lieu of a fractional share interest
in First M&F common stock will be treated under Section 302 of the
Code as having been received by shareholder in exchange for such
fractional share, and the shareholder generally will recognize gain or
loss on such exchange equal to the difference between the cash
received and the shareholder's basis allocable to the fractional
share. If a fractional share of First M&F common stock would
constitute a capital asset in the hands of the shareholder, any
resulting gain or loss will be characterized as capital gain or loss
in accordance with the applicable provisions and limitations of the
Code.
(5) A shareholder who perfects his statutory dissenters' rights and who
receives solely cash in exchange for stock will be treated as having
received such cash payment as a distribution in redemption of his
shares of stock, subject to the provisions and limitations of Section
302 of the Code. After such distribution, if the former shareholder
does not actually or constructively own any stock, the redemption will
constitute a complete termination of interest and be treated as a
distribution in full payment in exchange for the stock so redeemed.
(6) The basis of the First M&F common stock to be received by the
shareholders (including any fractional share interests to which they
may be entitled) will be, in each instance, the same as the basis of
the stock surrendered in exchange therefor, decreased by the amount of
cash received.
(7) The holding period of the First M&F common stock to be received by the
shareholders (including any fractional share interests to which they
may be entitled) will include, in each case, the period during which
the First Bolivar or Bank common stock surrendered in exchange
therefor was held, provided that the First Bolivar and the Bank common
stock is held as a capital asset in the hands of such shareholder on
the Effective Date.
In connection with the foregoing opinion, counsel will make such factual
assumptions as are customary in similar tax opinions, and such factual
assumptions may be confirmed by certificates signed by appropriate officers of
First M&F, Merchants & Farmers Bank, First Bolivar and Bank. The foregoing
opinion cannot be relied upon if any such factual assumptions is, or later
becomes, inaccurate. No ruling from the Internal Revenue Service concerning the
tax consequences of the Mergers has been requested, and the opinion will not be
binding upon the Internal Revenue Service or the courts. If the Mergers are
consummated, and it is later determined that the Mergers did not qualify as tax-
free reorganizations under the Code, shareholders will, in general, recognize
taxable gain or loss on the Mergers equal to the difference between the fair
market value of the consideration received in the Mergers and their basis in
their stock.
The foregoing analysis of federal income tax consequences is included
herein for general information only and is not intended as a substitute for
careful tax planning. Shareholders of First Bolivar and the Bank are urged to
consult their tax advisors as to the specific tax consequences to them of the
Mergers and of ownership of First M&F common stock, including the application
and effect of state and local income and other tax laws.
INFORMATION ABOUT OUR COMPANIES
INFORMATION ABOUT FIRST M&F
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<PAGE>
GENERAL. First M&F is a bank holding company under the Bank Holding
Company Act. It engages exclusively in the banking business through its
subsidiary, Merchants and Farmers Bank ("M&F Bank"). The principal executive
offices of First M&F and M&F Bank are located at 221 East Washington Street,
Kosciusko, Mississippi.
First M&F was incorporated in 1979 by management of M&F Bank and became the
parent of M&F Bank through an exchange offer pursuant to which First M&F issued
shares of common stock and debentures in exchange for the then outstanding
shares of M&F Bank. First M&F presently owns 100% of the outstanding stock of
M&F Bank.
M&F Bank was chartered and organized under the laws of the State of
Mississippi in 1890. M&F Bank offers a complete range of commercial and consumer
banking services through its main office and two branch offices in Kosciusko and
its thirty locations in Ackerman, Brandon, Bruce, Canton, Clinton, Durant,
Grenada, Lena, Madison, Oxford, Pearl, Philadelphia, Pittsboro, Puckett,
Ridgeland, Starkville and Weir, Mississippi. The Bank makes commercial, real
estate, consumer and agricultural loans and offers a variety of trust services.
The Bank has a wholly-owned finance company subsidiary, M & F Financial
Services, Inc., located in Bruce, Mississippi. The Bank also has a wholly-owned
credit insurance subsidiary, First M&F Insurance Company, Inc., based in
Kosciusko. The Bank also has a wholly-owned real estate property management
subsidiary, Merchants and Farmers Bank Securities Corp., Inc., based in
Kosciusko and a wholly-owned insurance agency, M&F Insurance Agency, Inc.
RECENT ACQUISITION ACTIVITIES. In 1990, the Bank acquired the Kosciusko
and Philadelphia, Mississippi branches of Unifirst Bank for Savings, F.S.B. from
the Resolution Trust Corporation (RTC). This transaction increased the Bank's
total assets by approximately $21,100,000 and its total deposit liabilities by
approximately $21,200,000. On December 27, 1991, the Bank assumed approximately
$14,397,000 of deposits and acquired certain assets of OmniBank's Rankin County
operations. This Rankin County acquisition was made to complement the Bank's
opening of a Rankin County branch in 1990. In April, 1994, the Bank acquired
approximately $5,100,000 in deposit liabilities of Security Federal Savings
Association from the RTC at Kosciusko, Attala County and Starkville, Oktibbeha
County, Mississippi. In December of 1995, First M&F acquired Farmers &
Merchants Bank, Bruce, Mississippi. This transaction increased the Bank's total
assets by approximately $32 million and total deposit liabilities by
approximately $27 million.
INFORMATION ABOUT FIRST BOLIVAR
First Bolivar is a one-bank holding company which owns about 99% of the
outstanding shares of Bank common stock. First Bolivar was incorporated under
Mississippi law on October 23, 1981 for the purpose of acquiring the outstanding
stock of Bank and for related purposes. First Bolivar acquired its ownership in
Bank's stock by means of an exchange offer to Bank's shareholders which was
consummated in December, 1981. Bank is First Bolivar's only subsidiary. First
Bolivar is headquartered at 308 E. Sunflower Road, Cleveland, Bolivar County,
Mississippi. Bolivar County is located in northwestern Mississippi, contiguous
with the Mississippi River. Cleveland is the county seat of Bolivar County.
First Bolivar and the Bank have a market share of 10% of deposits in Bolivar
County. See "ADDITIONAL INFORMATION ABOUT FIRST BOLIVAR."
First Bolivar has 29,230 shares issued and outstanding which are owned by
54 shareholders. First Bolivar has 30,000 shares, no par value, of common stock
authorized. The First Bolivar Board owns or controls 25,211 shares or 86.25% of
the outstanding stock. First Bolivar common stock is not actively traded and
management knows of no market quotations by securities dealers.
First Bolivar has earned a satisfactory rating concerning the bank holding
company inspection from its primary regulator, the Federal Reserve Board.
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INFORMATION ABOUT BANK
Bank was organized under federal law in 1962. The purpose of the Bank is to
serve the banking needs of Bolivar County. Bank's deposits are insured by the
FDIC. Bank is a member of the Federal Reserve.
Bank is engaged in the general retail banking business and provides
financial products and services to individuals and small to medium size
businesses. These services include consumer, commercial and agricultural loans
and short term mortgage loans.
Bank has received satisfactory ratings from the FRB indirectly and the
Office of the Comptroller of Currency concerning safety and soundness issues.
Bank has received satisfactory ratings concerning its information technology,
consumer compliance and Community Reinvestment Act (CRA) activities. Neither
First Bolivar nor Bank is under any type of bank regulatory administrative
action. See "ADDITIONAL INFORMATION ABOUT FIRST BOLIVAR."
MANAGEMENT AND OPERATIONS AFTER THE MERGERS
Following the completion of the Mergers the current directors and executive
officers of First M&F will continue. First M&F currently expects that the Bank
will be merged with Merchants and Farmers Bank and will use the name Merchants
and Farmers Bank.
PRICE RANGE OF COMMON STOCK
First M&F is listed on the Nasdaq stock market under the trading symbol
FMFC. As of November 1, First M&F common stock was held of record by
approximately 568 persons.
The following table sets forth the high and low closing sale prices of
First M&F common stock as reported by Nasdaq.
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QUARTERLY CLOSING
COMMON STOCK PRICE RANGES
- ----------------------------------------------------------------
First Second Third Fourth
- ----------------------------------------------------------------
1998:
High $45.00 $48.00 $44.50
Low 37.75 42.00 33.50
Close 44.00 43.00 35.50
- ----------------------------------------------------------------
1997:
High $28.00 $29.25 $30.00 $44.00
Low 25.00 26.50 27.50 30.50
Close 27.00 28.00 30.00 40.00
- ----------------------------------------------------------------
1996:
High $24.00 $26.00 $27.00 $29.00
Low 22.00 24.00 25.00 29.00
Close 24.00 25.00 26.00 29.00
Through November 3, 1998 the high price was $34.50, the low price was
$31.00 and the close price was $33.00.
First Bolivar common stock is not listed or quoted on any securities
exchange or any quotation system and there is currently no established trading
market for such securities. Due to the lack of an active trading market, First
Bolivar does not have the available information to furnish specific high and low
sales prices for all transactions in the stock or the range of high and low bid
quotations for its stock. Management is not aware of any trades of First
Bolivar common stock over the past two years.
Bank common stock is not listed or quoted on any securities exchange or
quotation system and there is currently no established trading market for such
securities. Due to the lack of an active trading market, Bank does not have the
available information to furnish specific high and low sales prices for all
transactions in the stock or the range of high and low bid quotations for its
stock. Management is not aware of any trades of Bank common stock over the past
two years.
DIVIDENDS
The following table sets forth dividends declared per share of First M&F
common stock, First Bolivar common stock and Bank common stock, respectively,
for the periods indicated. The ability of either First M&F, First Bolivar or
Bank to pay dividends to its respective shareholders is subject to certain
restrictions. See "--First M&F Capital Stock" and "--Comparative Rights of
Shareholders of First M&F, First Bolivar and Bank."
20
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<TABLE>
<CAPTION>
FIRST M&F FIRST BOLIVAR BANK
--------- ------------- -----
DIVIDENDS DIVIDENDS DIVIDENDS
--------- --------- ---------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996:
First Quarter $0.17 -- --
Second Quarter 0.19 -- --
Third Quarter 0.19 -- --
Fourth Quarter 0.20 -- $3.10
YEAR ENDED DECEMBER 31, 1997:
First Quarter 0.20 -- --
Second Quarter 0.22 -- --
Third Quarter 0.22 -- --
Fourth Quarter 0.24 -- 3.33
YEAR ENDED DECEMBER 31, 1998:
First Quarter 0.24 -- --
Second Quarter 0.24 -- --
Third Quarter 0.24 -- --
</TABLE>
First Bolivar is restricted under the Merger Agreement from paying
dividends. The Bank is also restricted under the Merger Agreement from paying
dividends except for dividends from the Bank to First Bolivar to enable First
Bolivar to service First Bolivar corporate indebtedness and to pay expenses
related to the Mergers.
FIRST M&F CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK. The amended Articles of
Incorporation (the "Articles") of First M&F authorize the issuance of 15,000,000
shares of common stock, par value $5.00 per share. On the Record Date, there
were 3,394,656 shares of common stock outstanding.
In addition, the Articles authorize First M&F to issue 1,000,000 shares of
Class A voting preferred stock, no par value, and 1,000,000 shares of Class B
non-voting preferred stock, no par value. On the Record Date, there were no
shares of either class of preferred stock outstanding. The shares of each class
of preferred stock may be issued from time to time by the Board of Directors in
one or more series, and the variations, relative rights and preferences as
between different series of each class may be fixed and determined by resolution
of the Board of Directors with respect to the rate of dividend, redemption,
liquidation payments, sinking fund provisions and conversion.
VOTING RIGHTS. The holders of First M&F's common stock are entitled to one
vote for each share of common stock held. Holders of common stock have
cumulative voting rights in the election of directors.
A holder of Class A voting preferred stock would be entitled to voting
rights equivalent to those of a holder of common stock, including one vote per
share on matters submitted to a vote at a meeting of stockholders and cumulative
voting in the election of directors. A holder of Class B non-voting preferred
stock would have no voting rights as a holder of such stock, except as
specifically required by law.
DIVIDEND RIGHTS. The holders of common stock are entitled to receive such
dividends as may be declared, from time to time, by the Board of Directors out
of funds legally available therefor. Substantially all of the funds available
to First M&F for payment of dividends on the common stock are derived from
dividends paid by Bank.
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The payment of dividends by First M&F is subject to the restrictions of
Mississippi law applicable to the declaration of dividends by a business
corporation. Under such provisions, no distribution may be made if, after giving
it effect (1) First M&F would not be able to pay its debts as they become due in
the usual course of business; or (2) First M&F's total assets would be less than
the sum of its total liabilities plus the amount that would be needed, if First
M&F were to be dissolved at the time of the distribution, to satisfy the
preferential rights upon dissolution of stockholders whose preferential rights
are superior to those receiving the distributions.
The holders of Class A voting preferred stock and Class B non-voting
preferred stock would be entitled to receive fully cumulative dividends, when
and as declared by the Board of Directors, payable at periods fixed by the Board
of Directors at the rates specified in the issuing resolution of the Board of
Directors for the particular series thereof, and no more, before any dividend
could be paid or set apart for payment upon the common stock.
Additionally, the Federal Reserve, in its Policy Statement on Cash
Dividends Not Fully Covered by Earnings, has stated that bank holding companies
should not pay dividends except out of current earnings and unless the
prospective rate of earnings retention by the holding company appears consistent
with its capital needs, asset quality and overall financial condition.
PREEMPTIVE RIGHTS. The holders of common stock do not have any preemptive
or preferential right to purchase or to subscribe for any additional shares of
common stock that may be issued.
FULLY PAID AND NONASSESSABLE. The shares of common stock presently
outstanding are, and those shares of common stock to be issued in connection
with the Mergers will be when issued, fully paid and nonassessable. Such shares
do not have any redemption provisions.
CUMULATIVE VOTING. First M&F's Bylaws provide that in the election of
directors, each shareholder entitled to vote has the right to vote in person or
by proxy the number of shares owned by him for as many persons as there are
directors to be elected for whose election he has a right to vote, or to
cumulate his votes by giving one candidate as many votes as the number of such
directors multiplied by the number of his shares shall equal, or by distributing
such votes on the same principle among any number of candidates.
LIQUIDATION RIGHTS. In the event of liquidation, dissolution or winding-up
of First M&F, whether voluntary or involuntary, the holders of common stock will
be entitled to share ratably in any of the net assets or funds which are
available for distribution to stockholders after the satisfaction of all
liabilities or after adequate provision is made therefor and after payment of
any preferences on liquidation of preferred stock, if any.
INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES. First M&F's Articles
and Bylaws provide for indemnification by First M&F, to the fullest extent
permitted by the MBCA, of directors, officers, employees and agents for
expenses, judgments, fines and amounts paid in settlement by such persons.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling First M&F
pursuant to the foregoing provisions, First M&F has been informed that in the
opinion of the SEC such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable.
TRANSFER AGENT AND REGISTRAR. The registered transfer agent and registrar
is Registrar and Transfer Company, Cranford, New Jersey.
PROVISIONS DISCOURAGING CHANGES IN CONTROL. Certain provisions of First
M&F's Articles and Bylaws may have the effect of preventing, discouraging or
delaying any change in the control of First M&F. The classification of the Board
of Directors would delay any attempt by dissatisfied stockholders or anyone who
obtains a controlling interest in the common stock to elect a new Board of
Directors. The classes serve staggered three year terms so that
22
<PAGE>
one-third of the directors are elected each year. These staggered terms of
service may make it more difficult for First M&F's shareholders to effect a
change in the majority of First M&F's directors, because replacement of a
majority of the directors will normally require two annual meetings of
shareholders. Accordingly, this provision also may have the effect of
discouraging hostile attempts to gain control of First M&F.
The Articles contain in Article Nine provisions regarding the vote required
to approve certain business combinations or other significant corporate
transactions involving First M&F and a substantial shareholder. Mississippi law
generally requires the affirmative vote of the holders of a majority of shares
entitled to vote at a meeting to approve a merger, consolidation or dissolution
of First M&F or a disposition of all or substantially all of First M&F's assets.
The Articles require the affirmative vote of 80% of the total number of votes
entitled to be cast to approve these and other significant corporate
transactions ("business combinations") if an "Interested Stockholder" (as
defined) is a party to the transaction or its percentage equity interest in
First M&F will be increased by the transaction. A majority of the "Continuing
Directors" (as defined) of the Board of Directors may, in all such cases,
determine not to require such 80% affirmative vote. The required 80% approval of
any such business combination includes all votes entitled to be cast with
respect to voting shares not beneficially owned by any Interested Stockholder.
In addition, such 80% affirmative vote will not be required if certain price
criteria and procedural requirements are satisfied.
An "Interested Stockholder" generally is defined under Article Nine as the
"beneficial owner" of 10% or more of the outstanding shares of stock of First
M&F entitled to vote generally in the election of directors ("voting shares").
"Beneficial ownership" generally is defined in accordance with the definition of
beneficial ownership in Rule 13d-3 under the Securities Exchange Act of 1934 and
includes all shares to which the Interested Stockholder in question has sole or
shared voting or investment power. However, for purposes of Article Nine, an
Interested Stockholder is also deemed to own beneficially shares owned, directly
or indirectly, by an "Affiliate" or "Associate" (each as defined in paragraph
(C)(7) of Article Nine) of the Interested Stockholder, as well as (1) shares of
which it or any such Affiliate or Associate has a right to acquire, (2) shares
issuable upon the exercise of options or rights, or upon conversion of
convertible securities, held by the substantial shareholder and (3) shares
beneficially owned by any other person with whom the substantial shareholder or
any of his Affiliates or Associates acts as a partnership, syndicate or other
group pursuant to an agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of shares of capital stock of First M&F.
A "business combination" subject to Article Nine includes: a merger or
consolidation involving First M&F or any of its subsidiaries and an Interested
Stockholder; a sale, lease or other disposition of a "substantial part" of the
assets of First M&F or any of its subsidiaries (that is, assets constituting in
excess of 5% of the book value of the total consolidated assets of First M&F) to
an Interested Stockholder; an issuance of equity securities of First M&F or any
of its subsidiaries to an Interested Stockholder for consideration aggregating
5% of the shareholders' equity; a liquidation or dissolution of First M&F (if,
as of the Record Date for the determination of shareholders entitled to vote
with respect thereto, any person is an Interested Stockholder); and a
reclassification or recapitalization of securities (including any reverse stock
split) of First M&F or any of its subsidiaries or a reorganization, in any case
having the effect, directly or indirectly, of increasing the percentage interest
of an Interested Stockholder in any class of equity securities of First M&F or
such subsidiary.
A "Continuing Director" is defined as one serving as a director, or one
elected or appointed prior to the time the Interested Stockholder in question
acquires such status, or one designated as a Continuing Director (prior to his
initial election or appointment) by a majority of the whole Board of Directors,
but only if a majority of the whole Board shall then consist of Continuing
Directors, by a majority of the then Continuing Directors.
Under those circumstances in which Article Nine would apply, a minority of
First M&F's shareholders may prevent the consummation of a transaction favored
by a majority of shareholders. As a practical matter, the requirement of an 80%
vote may also mean that the type of business combination to which Article Nine
is addressed might not be accomplished by the controlling entity while there
remains any widely dispersed public market in First M&F's voting shares. All
directors and officers as a group may be deemed to beneficially own, as of
October 1,
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1998, approximately 31.48% of the outstanding common stock, excluding shares to
which beneficial ownership is disclaimed. Thus, management and these persons
could themselves, by failing to vote, defeat such a proposed transaction.
Article Nine may deter unsolicited tender offers for First M&F, even if such
tender offers are favored by and beneficial to the holders of a majority of
First M&F's shares. The Board of Directors has no knowledge of any proposed
tender offer for First M&F or other acquisition offer.
Article Nine may not be amended or repealed without the affirmative vote of
80% or more of the votes entitled to be cast by all holders of voting shares
(which 80% vote must also include the affirmative vote of a majority of the
votes entitled to be cast by all holders of voting shares not beneficially owned
by any Interested Stockholder).
Article Seven of the Articles provides that the number of directors which
shall constitute the whole Board of Directors shall be fixed from time to time
by Bylaw adopted by a majority of the Board of Directors (but in no event less
than nine). This provision enables the Board of Directors to increase the size
of the Board during the period between annual meetings of shareholders to
accommodate the inclusion of persons it concludes would be valuable additions to
the Board. It also enables the Board to decrease the number of directorships in
order to respond to circumstances under which the Board deems a lower number of
directors to be desirable, such as when a director unexpectedly dies or resigns
and a qualified candidate to replace the departing director is not immediately
available. It should be noted that, under the MBCA, the Board may only increase
or decrease by 80% or less the number of directors last approved by the
shareholders; the shareholders must approve any proposal by the Board to
increase or decrease by more than 30% the number of directors last approved by
the shareholders.
Article Seven of the Articles also provides that (1) vacancies occurring on
the Board of Directors may be filled only by the shareholders at an Annual
Meeting, (2) directors may be removed with or without cause only by the holders
of 80% of the shares eligible to vote and no individual director may be removed
if the number of votes cast against removal would be sufficient to elect the
director if such shares were voted cumulatively, and (3) Article Seven may not
be amended or repealed without the approval of the holders of 80% of the
outstanding common stock.
These provisions may have the effect of making it more difficult for
shareholders to replace or add directors, or to otherwise influence actions
taken by directors, which may discourage attempts to acquire control of First
M&F which may (or may not) be in the best interests of the majority of the
shareholders.
COMPARATIVE RIGHTS OF SHAREHOLDERS OF FIRST M&F, FIRST BOLIVAR AND BANK
Both First Bolivar and First M&F are incorporated in the State of
Mississippi and subject to the MBCA. Bank is a national banking association duly
chartered, organized and existing under and pursuant to the laws of the United
States of America. The rights of shareholders of First Bolivar are currently
governed by Mississippi law and by First Bolivar's Articles of Incorporation
(the "First Bolivar Articles") and Bylaws. The rights of shareholders of Bank
are currently governed by the National Bank Act, Title 12, United States Code,
Chapter 1 and 2 (the "NBA") and by Bank's Articles of Association (the "Bank
Articles") and Bylaws. The First Bolivar shareholders and the Bank shareholders
will become First M&F shareholders upon completion of the Mergers. As such, the
rights of the former First Bolivar and Bank shareholders will be governed by
Mississippi law and by First M&F's Articles of Incorporation (the "First M&F
Articles") and Bylaws.
While it is impractical to summarize all such differences, set forth below
are the material differences between the rights of shareholders of First
Bolivar, shareholders of Bank, and shareholders of First M&F. This summary is
qualified in its entirety by the Articles of Incorporation and Bylaws of First
Bolivar, Bank, and First M&F, respectively, and the MBCA and the NBA.
AUTHORIZED SHARES OF CAPITAL STOCK; DIVIDEND RIGHTS
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FIRST BOLIVAR. The First Bolivar Articles authorize the issuance of
1,000,000 shares of First Bolivar common stock having a par value of $10.00 per
share. As of the date of this Joint Proxy Statement-Prospectus, 29,230 shares
were issued and outstanding.
The First Bolivar Articles provide that the Board of Directors may convert
any authorized but unissued shares into preferred or special classes and the
preferences of those preferred or special classes shall be as fixed and
determined by the Board of Directors. As of the date of this Joint Proxy
Statement-Prospectus, no preferred or special classes of stock have been
authorized or issued by the Board of Directors.
The Bylaws of First Bolivar authorize the Board of Directors to declare,
and the corporation to pay, dividends on its outstanding shares, provided that,
pursuant to the MBCA, no distribution, including dividend distributions, may be
made if, after giving it effect, the corporation would not be able to pay its
debts as they become due in the usual course of business, or the corporation's
total assets would be less than the sum of its total liabilities plus the amount
that would be needed, if the corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of
shareholders who have superior preferential rights upon dissolution.
BANK. The Bank Articles authorize the issuance of 30,000 shares of Bank
common stock having a par value of $10.00 per share. As of the date of this
Joint Proxy Statement-Prospectus, 30,000 shares were issued and outstanding.
The NBA provides that the Board of Directors of a national banking
association may quarterly, semiannually, or annually, declare dividends of so
much of the undivided profits of the association, subject to the limitations of
the NBA, except that until the surplus fund of such association shall equal its
common capital, no dividends shall be declared unless there has been carried to
the surplus fund not less than one-tenth part of the association's net income of
the preceding half year in the case of quarterly or semiannual dividends, or not
less than one-tenth part of its net income of the preceding two consecutive
half-year periods in the case of annual dividends. No dividends may be declared
or paid unless Bank has unimpaired surplus equal to fifty percent of the
outstanding capital stock of Bank. Bank's unimpaired surplus cannot be reduced
below fifty percent by the payment of the dividend. Prior approval of the
Comptroller of the Currency shall be required if the total of all dividends
declared and paid by the association during any one year would exceed the total
of its net income of that year combined with the retained net income from the
immediately preceding two years.
FIRST M&F. First M&F's Articles authorize the issuance of 15,000,000
shares of First M&F common stock having a par value of $5.00, 1,000,000 shares
of Class A voting preferred stock having no par value, and 1,000,000 shares of
Class B non-voting preferred stock having no par value (together, "First M&F
Preferred Stock"). On November 1, 1998 there were 3,394,656 shares of common
stock outstanding, no shares of Class A voting preferred stock outstanding, and
there were no shares of Class B non-voting preferred stock outstanding.
The shares of each class of preferred stock may be issued from time to time
by the Board of Directors in one or more series, and the variations, relative
rights and preferences as between different series of each class may be fixed
and determined by resolution of the Board of Directors with respect to the rate
of dividend, redemption, liquidation payments, sinking fund provisions and
conversion.
The sources of funds for payments of dividends by First M&F are its
subsidiaries. Because the primary subsidiaries of First M&F are financial
institutions, payments made by such subsidiaries of First M&F to its
shareholders are limited by law and regulations of bank regulatory authorities.
The Federal Reserve, in its Policy Statement on Cash Dividends Not Fully
Covered by Earnings, has stated that bank holding companies should not pay
dividends except out of current earnings and unless the prospective rate of
earnings retention by the holding company appears consistent with its capital
needs, asset quality and overall financial condition.
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In addition, during the time that any series of First M&F Preferred Stock
is outstanding, no dividends may be declared or paid on First M&F common stock,
unless dividends on all outstanding shares of First M&F Preferred Stock for the
current and all past dividend periods have been declared and paid or provision
made for the payment thereof. Dividends with respect to First M&F Preferred
Stock are required to be cumulative.
The MBCA further limits the payment of dividends by providing that no
distribution, including dividend distributions, may be made if, after giving it
effect the corporation would not be able to pay its debts as they become due in
the usual course of business, or the corporation's total assets would be less
than the sum of its total liabilities plus the amount that would be needed, if
the corporation were to be dissolved at the time of the distribution, to satisfy
the preferential rights upon dissolution of shareholders who have superior
preferential rights upon dissolution.
BOARD OF DIRECTORS
FIRST BOLIVAR. The First Bolivar Articles and Bylaws provide that the Board
of Directors shall be composed of 8 directors. The directors hold office until
the next annual meeting of shareholders and thereafter until their successors
are elected.
The MBCA provides that the articles of incorporation or bylaws may
prescribe qualification for directors. The MBCA further provides that a director
need not be a resident of this state or a shareholder of the corporation unless
the articles of incorporation or bylaws so prescribe. Neither the First Bolivar
Articles nor Bylaws contain qualifications for directors.
Pursuant to the Bylaws and MBCA, a majority of directors constitute a
quorum for the transaction of business and the affirmative vote of a majority of
the directors present constitutes the action of the Board.
The Board of Directors has the authority, pursuant to the MBCA, to fix the
compensation of directors.
BANK. The Bank Articles and Bylaws provide that the Board of Directors of
Bank shall consist of not less than 5 nor more than 25 shareholders of the Bank.
Pursuant to the Bank Articles and Bylaws, the number of directors are determined
by a majority vote of the shareholders. The Bank's Board currently consists of
8 directors. The directors shall hold office for one year or until their
successors are elected and have qualified.
Pursuant to Section 72 of the NBA, every director must, during his whole
term of service, be a citizen of the United States, and at least a majority of
the directors must have resided in the State of Mississippi, or within one
hundred miles of the location of the office of the association for at least one
year immediately preceding their election, and during their continuance in
office. Section 72 of the NBA further provides that each director shall own a
minimum of $1,000 par value of stock. Any director who ceases to be the owner
of the required number of shares of stock or who becomes in any other manner
disqualified, is required under the NBA to vacate his place.
The Bylaws of Bank provide that a majority of the directors constitute a
quorum at any meeting.
The Bank Articles, Bylaws, and NBA are silent regarding the compensation of
directors, including the compensation of those directors serving on a committee.
FIRST M&F. The Board of Directors of First M&F may consist of not less than
5 persons, and currently consists of 15 members. The directors shall hold office
for one year or until their successors are elected and have qualified.
The MBCA provides that the articles of incorporation or bylaws may
prescribe qualification for directors. The MBCA further provides that a director
need not be a resident of this state or a shareholder of the corporation
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unless the articles of incorporation or bylaws so prescribe. Neither the First
M&F Articles nor Bylaws contain qualifications for directors.
A majority of the number of directors shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors.
The Bylaws of First M&F provide that by resolution of the Board of
Directors, the directors may be paid their expenses of attendance at each
meeting of the Board, and may be paid a fixed sum for attendance at each meeting
of the Board or a stated salary as director.
REMOVAL OF DIRECTORS
FIRST BOLIVAR. The MBCA provides that the shareholders may remove one or
more directors with or without cause, but no director may be removed if the
number of votes cast against removal would be sufficient to elect the director
if such shares were voted cumulatively.
In addition, the MBCA provides that the chancery court may remove a
director from office in a proceeding commenced by the corporation or by its
shareholders holding at least 10% of the outstanding shares if the court finds
that the director engaged in fraudulent or dishonest conduct, or gross abuse of
authority or discretion, with respect to the corporation and removal is in the
best interest of the corporation.
BANK. The NBA provides for the removal of a director who fails to maintain
the required qualifications as discussed in "Board of Directors" above.
FIRST M&F. First M&F's Articles provide that directors may be removed with
or without cause only by the holders of 80% of the shares eligible to vote and
no individual director may be removed if the number of votes cast against
removal would be sufficient to elect the director if such shares were voted
cumulatively.
In addition, the MBCA provides that the chancery court may remove a
director from office in a proceeding commenced by the corporation or by its
shareholders holding at least 10% of the outstanding shares if the court finds
that the director engaged in fraudulent or dishonest conduct, or gross abuse of
authority or discretion, with respect to the corporation and removal is in the
best interest of the corporation.
VACANCIES IN THE BOARD OF DIRECTORS
FIRST BOLIVAR. The MBCA provides that vacancies occurring on the Board of
Directors may be filled by the shareholders, the board of directors, or if the
directors remaining in office constitute fewer than a quorum of the board, the
vacancy may be filled by the affirmative vote of a majority of all the directors
remaining in office. The MBCA provides that a term of a director elected to
fill a vacancy expires at the next shareholders' meeting at which directors are
elected.
BANK. The Bylaws of Bank provide that when any vacancy occurs on the Board
of Directors, the remaining members of the Board may appoint a director to fill
the vacancy. The Bylaws of Bank provide that a director elected to fill a
vacancy shall hold office until the next regular election.
FIRST M&F. First M&F's Bylaws provide that vacancies occurring on the Board
of Directors may be filled by the shareholders.
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AMENDMENT OF THE ARTICLES OF INCORPORATION
FIRST BOLIVAR. The MBCA provides that, except with respect to certain
limited amendments to the Articles of Incorporation which may be adopted by the
Board of Directors without shareholder action, an amendment to the Articles of
Incorporation must be recommended by the Board of Directors to the shareholders
and approved by the affirmative vote of a majority of shares.
BANK. The Articles of Bank provide that, subject to the provisions of the
laws of the United States, the Articles may be amended at any meeting of the
shareholders by the affirmative vote of the owners of a majority of the stock of
Bank. However, with regard to an amendment which would increase or decrease the
amount of capital stock, the NBA provides that such increase or decrease must be
approved by a vote of the shareholders owning 2/3 of the stock of such
association.
FIRST M&F. Articles Seven and Nine of First M&F's Articles may not be
amended or repealed without the affirmative vote of 80% or more of the votes
entitled to be cast by all holders of voting shares. See "--First M&F Capital
Stock -- Provisions Discouraging Changes in Control" for a fuller discussion of
the terms of Articles Seven and Nine and the restrictions on their amendment or
repeal. For all other amendments, the MBCA provides that, except with respect
to certain limited amendments to the Articles of Incorporation which may be
adopted by the Board of Directors without shareholder action, an amendment to
the Articles of Incorporation must be recommended by the Board of Directors to
the shareholders and approved by the affirmative vote of a majority of shares.
AMENDMENT OF THE BYLAWS
FIRST BOLIVAR. The Bylaws of First Bolivar may be altered, amended or
repealed and new bylaws may be adopted by the directors at any regular or
special meeting of the Board of Directors. In addition, the MBCA authorizes the
shareholders to amend or repeal the Bylaws.
BANK. The Bylaws of Bank may be amended upon a vote of a majority of the
entire Board of Directors at any meeting of the Board of Directors, provided 10
days notice of the proposed amendment has been given to each director.
FIRST M&F. The First M&F Bylaws may be altered, amended or repealed by the
Board of Directors, at any regular or special meeting of the Board of Directors.
SPECIAL MEETINGS OF SHAREHOLDERS
FIRST BOLIVAR. The Bylaws of First Bolivar provide that a special meeting
of shareholders may be called for any purpose by the President, Chairman of the
Board, Board of Directors, or by holders of not less than 50% of the outstanding
shares entitled to vote at the meeting. In addition, the MBCA provides that
shareholders having at least 10% of all votes entitled to be cast on an issue
proposed to be considered at the proposed special meeting may call a special
meeting.
BANK. Under the Bank Articles and Bylaws, a special shareholders meeting
may be called by the Board of Directors or any three or more shareholders
owning, in the aggregate, not less than 10% of the stock of Bank.
FIRST M&F. The First M&F Bylaws provide that special meetings may be called
by the Chairman, Vice Chairman or at the request of the holders of not less than
thirty-three and one-third percent (33 1/3%) of all the outstanding shares of
First M&F entitled to vote at the meeting. In addition, the MBCA provides that
the Board of Directors or shareholders having at least 10% of all votes entitled
to be cast on an issue proposed to be considered at the proposed special meeting
may call a special meeting.
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PREEMPTIVE RIGHTS
FIRST BOLIVAR. First Bolivar's shareholders do not have preemptive rights.
BANK. The Bank Articles grant Bank's shareholders preemptive rights. If
the capital stock of Bank is increased by the sale of additional shares, each
shareholder shall be entitled to subscribe for such additional shares in
proportion to the number of shares of capital stock owned by him. If the
capital stock is increased by stock dividends, each shareholder shall be
entitled to his proportionate amount of such increase in accordance with the
number of shares of capital stock owned by him.
FIRST M&F. First M&F's shareholders do not have preemptive rights.
REPORTS TO SHAREHOLDERS
FIRST BOLIVAR. The MBCA requires a corporation to furnish to its
shareholders annual financial statements, including a balance sheet as of the
end of the fiscal year, an income statement for that year, and a statement of
changes in shareholders' equity for the year. In addition, the MBCA requires a
corporation to report in writing (1) any indemnification or advance to a
director and (2) the number of shares issued or authorized to be issued and the
consideration received if the shares were issued or authorized in return for
promissory notes or for promises to render services in the future.
BANK. Bank's common stock is not registered under the Exchange Act and Bank
does not provide its shareholders with annual reports containing audited
financial statements of Bank.
FIRST M&F. The First M&F common stock is registered under the Exchange
Act, and, therefore, First M&F is required to provide annual reports containing
audited financial statements to shareholders and to file such other reports with
the SEC and solicit proxies in accordance with the rules of the SEC. First M&F
also provides reports to its shareholders on an interim basis containing
unaudited financial information.
The MBCA also requires a corporation to furnish to its shareholders annual
financial statements, including a balance sheet as of the end of the fiscal
year, an income statement for that year, and a statement of changes in
shareholders' equity for the year. In addition, the MBCA requires a corporation
to report in writing (1) any indemnification or advance to a director and (2)
the number of shares issued or authorized to be issued and the consideration
received if the shares were issued or authorized in return for promissory notes
or for promises to render services in the future.
VOTING RIGHTS
FIRST BOLIVAR. Pursuant to the First Bolivar Articles and the MBCA, except
with respect to the election of directors, each outstanding share is entitled
to one vote on each matter submitted to a vote. With respect to the election of
directors, each shareholder shall have cumulative voting, which means that the
shareholders are entitled to multiply the number of votes they are entitled to
cast by the number of directors for whom they are entitled to vote and cast the
product for a single candidate or distribute the product among two or more
candidates.
BANK. The Bank's Bylaws provide that in deciding questions at meetings of
shareholders, except with regard to the election of directors, each shareholder
shall be entitled to one vote on each share of stock held by him. In all
elections of Bank's directors, each shareholder shall have the right to vote the
number of shares owned by him for as many persons as there are directors to be
elected, or to cumulate such shares and give one candidate as many votes as the
number of directors multiplied by the number of his shares shall equal, or to
distribute them on the same principle among as many candidates as he shall think
fit.
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FIRST M&F. Pursuant to the MBCA and First M&F's Bylaws, each outstanding
share of First M&F stock is entitled to one (1) vote on each matter submitted to
a vote. Holders of common stock have cumulative voting rights in the election
of directors. A holder of Class A voting preferred stock would be entitled to
voting rights equivalent to those of a holder of common stock, including one
vote per share on matters submitted to a vote at a meeting of shareholders and
cumulative voting in the election of directors. A holder of Class B non-voting
preferred stock would have no voting rights as a holder of such stock, except as
specifically required by law.
SHAREHOLDER INSPECTION RIGHTS
FIRST BOLIVAR. Under the MBCA, any shareholder may inspect the
shareholders' list, excerpts from minutes of any meeting of the Board of
Directors, records of any action of a committee of the Board of Directors while
acting in place of the Board of Directors, minutes of any meeting of the
shareholders, records of action taken by the shareholder or board of directors
without a meeting, accounting records of the corporation, and the record of
shareholders, if the demand is made in good faith and for a proper purpose. Such
shareholder must describe his purpose and establish that the items are directly
connected to his purpose.
BANK. Pursuant to the NBA, the president and cashier of every national
banking association shall cause to be kept at all times a full and correct list
of the names and residences of all the shareholders in the association, and the
number of shares held by each, in the office where its business is transacted.
Such list shall be subject to the inspection of all the shareholders.
FIRST M&F. Under the MBCA any shareholder may inspect the shareholders'
list, excerpts from minutes of any meeting of the board of directors, records of
any action of a committee of the board of directors while acting in place of the
board of directors, minutes of any meeting of the shareholders, records of
action taken by the shareholder or board of directors without a meeting,
accounting records of the corporation, and the record of shareholders, if the
demand is made in good faith and for a proper purpose. Such shareholder must
describe his purpose and establish that the item is directly connected to his
purpose.
LIMITATION OF LIABILITY OF DIRECTORS
FIRST BOLIVAR. Pursuant to the MBCA, a director is not liable for any
action taken as director or for any failure to take any action, if he performs
his duties according to the standard of conduct provided pursuant to the MBCA.
However, a director who votes for or assents to any unlawful distribution will
be personally liable.
BANK. Neither the Bank Articles, Bylaws, nor NBA contain any provisions
regarding the limitation of liability of directors.
FIRST M&F. Pursuant to the MBCA, a director is not liable for any action
taken as director or for any failure to take any action, if he performs his
duties according to the standard of conduct provided pursuant to the MBCA.
However, a director who votes for or assents to any unlawful distribution will
be personally liable.
INDEMNIFICATION
FIRST BOLIVAR. The MBCA provides that a director, officer or agent of a
corporation may be indemnified for such service if he conducted himself in good
faith, and he reasonably believed in the case of conduct in his official
capacity with the corporation, that his conduct was in the corporation's best
interests; and in all other cases that his conduct was at least not opposed to
the corporation's best interests. In the case of a criminal proceeding, a
director must show that he had no reasonable cause to believe his conduct was
unlawful. Indemnification permitted under this section in connection with a
derivative action is limited to reasonable expenses incurred in connection with
the proceeding.
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The MBCA further authorizes a corporation to make further indemnity for
actions that do not constitute gross negligence or wilful misconduct if
authorized by the corporation's Articles of Incorporation.
Under Mississippi law, the corporation may pay, prior to final disposition,
the expenses (including attorneys' fees) incurred by a director or officer in
defending a proceeding. Under Mississippi law, expenses incurred by an officer
or director in defending any action may be advanced prior to final disposition
upon receipt of an undertaking by the director or officer of the corporation to
repay such advances if it is ultimately determined that he is not entitled to
indemnification. Under Mississippi law, however, a determination must be made
that the facts known to those making the determination would not preclude
indemnification. Mississippi law does not require the undertaking to be secured
and the undertaking may be accepted without reference to financial ability to
make the repayment.
BANK. Bank's Articles provide for the indemnification or reimbursement of
directors, officers, or employees for reasonable expenses incurred in connection
with any action, suit, or proceeding. However, Bank's Articles prohibit
indemnification or reimbursement of any person in relation to any action, suit
or proceeding in which he or she shall finally be adjudged to have been
negligent in the performance of his or her duties or to have committed an act or
failed to perform a duty for which there is a common-law or a statutory
liability. Bank's Articles further prohibit indemnification or reimbursement in
relation to any action, suit, or proceeding which has been made the subject of a
compromise settlement, except with the approval of the holders of record of a
majority of the outstanding shares.
FIRST M&F. First M&F's Articles and Bylaws provide for indemnification by
First M&F, to the fullest extent permitted by the MBCA, of directors, officers,
employees and agents for expenses, judgments, fines and amounts paid in
settlement by such persons.
The MBCA provides that a director, officer or agent of a corporation may be
indemnified for such service if he conducted himself in good faith, and he
reasonably believed in the case of conduct in his official capacity with the
corporation, that his conduct was in the corporation's best interests; and in
all other cases that his conduct was at least not opposed to the corporation's
best interests. In the case of a criminal proceeding, a director must show that
he had no reasonable cause to believe his conduct was unlawful. Indemnification
permitted under this section in connection with a derivative action is limited
to reasonable expenses incurred in connection with the proceeding.
The MBCA further authorizes a corporation to make further indemnity for
actions that do not constitute gross negligence or wilful misconduct if
authorized by the corporation's Articles of Incorporation.
Under Mississippi law, the corporation may pay, prior to final disposition,
the expenses (including attorneys' fees) incurred by a director or officer in
defending a proceeding. Under Mississippi law, expenses incurred by an officer
or director in defending any action may be advanced prior to final disposition
upon receipt of an undertaking by the director or officer of the corporation to
repay such advances if it is ultimately determined that he is not entitled to
indemnification. Under Mississippi law, however, a determination must be made
that the facts known to those making the determination would not preclude
indemnification. Mississippi law does not require the undertaking to be secured
and the undertaking may be accepted without reference to financial ability to
make the repayment.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling First M&F
pursuant to the foregoing provisions, First M&F has been informed that in the
opinion of the SEC such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable.
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SUPERMAJORITY VOTING REQUIREMENTS; BUSINESS COMBINATIONS
FIRST BOLIVAR. The MBCA requires the affirmative vote of the holders of a
majority of shares entitled to vote at a meeting to approve a merger,
consolidation or dissolution of First Bolivar or a disposition of all or
substantially all of First Bolivar's assets.
BANK. Bank's Articles and Bylaws do not contain supermajority voting
requirements for business combinations or other matters. However, certain
transactions involving Bank as a national banking association, including
liquidation, merger, consolidation, conversion, sale of substantially all assets
or amendments to the Articles of Association which would increase or decrease
authorized capital, require the affirmative vote of holders of at least two-
thirds of the outstanding shares of Bank's common stock.
FIRST M&F. First M&F's Articles contain provisions regarding the vote
required to approve certain business combinations or other significant corporate
transactions involving First M&F and a substantial shareholder. Mississippi law
generally requires the affirmative vote of the holders of a majority of shares
entitled to vote at a meeting to approve a merger, consolidation or dissolution
of First M&F or a disposition of all or substantially all of First M&F's assets.
The Articles require the affirmative vote of 80% of the total number of votes
entitled to be cast to approve these and other significant corporate
transactions ("business combinations") if an "Interested Stockholder" (as
defined) is a party to the transaction or its percentage equity interest in
First M&F will be increased by the transaction. A majority of the "Continuing
Directors" (as defined) of the Board of Directors may, in all such cases,
determine not to require such 80% affirmative vote. The required 80% approval of
any such business combination includes all votes entitled to be cast with
respect to voting shares not beneficially owned by any Interested Stockholder.
In addition, such 80% affirmative vote will not be required if certain price
criteria and procedural requirements are satisfied. See "--First M&F Capital
Stock -- Provisions Discouraging Changes in Control" for a fuller discussion of
this provision and for definitions of such terms.
DISSENTERS' APPRAISAL RIGHTS
FIRST BOLIVAR. The MBCA provides appraisal rights to shareholders in any of
the following corporate actions: (1) a merger if shareholder approval is
required or if the corporation is a subsidiary that merges with its parent; (2)
a plan of share exchange if the corporation is being acquired and the
shareholder is entitled to vote; and (3) a sale or exchange of all or
substantially all of the property of the corporation that is not in the usual
and regular course of business, but not including a court ordered sale or sale
pursuant to a plan where the shareholders will receive the proceeds within one
(1) year after the date of sale.
BANK. The NBA provides for dissenters rights for conversion of national
banks into state banks, consolidations of national banks in the same state and
mergers of national banks into national banks. See "ADDITIONAL INFORMATION --
Dissenters' Appraisal Rights."
FIRST M&F. The MBCA provides appraisal rights to shareholders in any of the
following corporate actions: (1) a merger if shareholder approval is required or
if the corporation is a subsidiary that merges with its parent; (2) a plan of
share exchange if the corporation is being acquired and the shareholder is
entitled to vote; and (3) a sale or exchange of all or substantially all of the
property of the corporation that is not in the usual and regular course of
business, but not including a court ordered sale or sale pursuant to a plan
where the shareholders will receive the proceeds within one (1) year after the
date of sale.
32
<PAGE>
ADDITIONAL INFORMATION ABOUT FIRST BOLIVAR
PRINCIPAL BUSINESS
First Bolivar conducts no business other than ownership of the Bank. At
June 30, 1998, First Bolivar had total consolidated assets of approximately
$39.50 million and shareholders' equity of approximately $3.47 million. The Bank
provides traditional consumer and commercial agricultural deposit and loan
services to individuals, families and businesses in Bolivar County, Mississippi,
through a full service office. In addition to traditional bank services, the
Bank offers short term mortgage loans. Bank's deposits are insured by the FDIC.
At June 30, 1998, Bank had total assets of approximately $38.84 million and
total deposit liabilities of approximately $32.35 million.
COMPETITION
The Bank's main office is in Cleveland, Mississippi, Bolivar County. The
Bank's primary market area, Bolivar County, Mississippi, has a population of
approximately 40,915, as of April, 1998. Its main competitors in this county
are Cleveland State Bank, Union Planters National Bank, Cleveland Community Bank
and the Valley Bank.
SEASONALITY OF BUSINESS AND CONCENTRATION OF CUSTOMERS
Historically, the business of Bank has not been seasonal in nature, and
management of Bank does not anticipate any seasonal trends in the future. Bank
does not rely on foreign sources of funds or income.
The Bank has two significant depositors. Bolivar Medical, a hospital in
Cleveland, Mississippi had $3,327,104 in deposits at June 30, 1998, which was
10.34% of the Bank's total deposits. LT Corporation, owned by James I. Tims, is
a propane tank manufacturer and had $3,557,712 on deposit with the Bank at
June 30, 1998, which was 11.05% of the Bank's total deposits. There are no
significant concentration of loans to a single borrower or few borrowers. The
Bank's loans at June 30, 1998 include 8% in the agricultural industry, 15% in
the small business retail industry and 5% in the service industry.
EMPLOYEES
As of the date of this Joint Proxy Statement-Prospectus, First Bolivar and
Bank have, in the aggregate, approximately 16 full-time employees and 2 part-
time employees. None of such employees is represented by labor unions.
Management of First Bolivar and the Bank considers its relationship with its
employees to be good.
PROPERTY
The executive offices of First Bolivar and the Bank's main office are
located in the same building in Cleveland, Mississippi. The facility and the
real property upon which it is situated are owned and occupied by the Bank.
Management considers the building and premises to be in good condition.
LEGAL PROCEEDINGS
There are no legal proceedings which either First Bolivar or the Bank is a
party or to which its property is subject.
OWNERSHIP OF FIRST BOLIVAR STOCK
The following tables set forth, as of the Record Date, certain information
with respect to the beneficial ownership (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934) of First Bolivar common stock for (1) each
person who is the beneficial owner of more than five percent of any class of the
outstanding voting securities of First Bolivar; (2) each director and executive
officer of First Bolivar; and (3) all directors and executive officers of First
Bolivar as a group. Unless otherwise indicated, all shares indicated as
beneficially owned are held with sole voting and investment power.
33
<PAGE>
NUMBER
NAME OF BENEFICIAL OWNER OF SHARES PERCENT (1)
- ------------------------ --------- -------
James I. Tims 11,618 (2)(4) 39.75%
525 Hillcrest Circle
Cleveland, MS 38732
Robert Tims 3,462 (3)(4) 11.84
437 McKnight Road
Cleveland, MS 38732
Donald Blackwood 5,767 19.73
803 First Street
Cleveland, MS 38732
Roy L. Collins 1,797 6.15
P.O. Box 1008
Cleveland, MS 38732
Ned Mitchell 766 2.62
Thomas N. Sledge 350 1.20
Doug Springer 1,100 3.76
Jimmy Yeager 351 1.20
8 directors and executive
officers as a group 25,211 86.25%
(1) The percentages are calculated based on 29,230 shares issued and
outstanding on the Record Date.
(2) Includes 10,076 shares owned by Frances C. Tims, Mr. Tims' spouse, and 10
shares held by spouse as custodian for their minor child. Also includes
1,432 shares owned by LT Corporation which is wholly-owned by the Family of
James I. and Frances C. Tims.
(3) Includes 3,292 shares owned by Lynne H. Tims, Mr. Tims' spouse, and 70
shares held by Mr. Tims as custodian for Walter C. Tims.
(4) James Tims and Robert Tims are brothers.
TRANSACTIONS WITH MANAGEMENT
Directors and executive officers of Bank, including associates and members
of their immediate families, have been customers of and had transactions
including loans and commitments to lend with Bank in the ordinary course of
business. All such loans and commitments were made by Bank on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons and did not involve more
than the normal risk of collectability or present other unfavorable features.
Similar transactions may be expected to take place in the ordinary course of
business in the future. On June 30, 1998, the aggregate of these related party
loans was approximately $2.212 million or approximately 12.46% of total
consolidated loans of Bank.
FIRST BOLIVAR MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1996
The following provides a narrative discussion and analysis of significant
changes in First Bolivar's financial condition and results of operations. For a
complete understanding of this discussion, reference should be made to the
consolidated financial statements, the accompanying notes, and other financial
data presented in this report.
RESULTS OF OPERATIONS
34
<PAGE>
Net income for 1997 was $232,287, or $7.95 per share, which was slightly
below net income for 1996 of $233,541, or $7.99 per share. Net income for 1996
was up by 80.81% over net income for 1995, which was $129,166, or $4.42 per
share. The primary causes of the increased net income in 1996 were securities
gains taken in 1996 in excess of 1995 of $43,866 and a reduction in loan loss
accruals in 1996 of $34,000 from 1995 due to improvements in the loan portfolio.
Other items affecting net income are discussed in the following paragraphs.
NET INTEREST INCOME
Net interest income is the largest component of First Bolivar's net income
and represents the income earned on interest-bearing assets less the cost of
interest-bearing liabilities. This major source of income represents the
earnings from First Bolivar's primary business of gathering funds from deposit
sources and investing those funds in loans and securities. First Bolivar's long-
term objective is to manage those assets and liabilities to provide the largest
amount of income, while balancing interest-rate, credit, liquidity and capital
risks.
Net interest income remained relatively stable in 1997 as compared to 1996.
Interest and fees on loans decreased in 1997 even though earning assets grew
slightly. Loans as a percentage of earning assets also increased from 37.66% in
1996 to 43.73% in 1997. However, the strongest loan growth occurred in the
latter half of the year. Income from the investment portfolio made the largest
contribution to the overall increase in interest income of 4.09%. Interest
expense increase slightly in 1997 due primarily to increases in interest on
deposits. However, at the end of 1997, the ratio of non-interest bearing
deposits to total deposits had increased from 11.39% in 1996 to 15.84% in 1997.
PROVISION AND RESERVE FOR POSSIBLE LOAN LOSSES
The estimate of the loan loss reserve and provision for possible loan
losses is determined by management after considering the following factors: (1)
review of recent loan loss experience relative to loans outstanding; (2)
management reviews of problem loans and portfolio quality; (3) examinations of
the loan portfolio conducted by Federal supervisory authorities; (4)
management's analysis of economic conditions and their expected impact on
borrowers' financial condition; and (5) the relationship of the reserve for
possible loan losses to outstanding loans. The provision for loan losses was
$12,000 in 1997 and 1996. First Bolivar has continued to make significant
efforts to strengthen the loan portfolio through sound lending practices and
careful monitoring of existing loans.
A summary of the reserve for possible loan losses follows:
1997 1996
---- ----
Balance at beginning of period $134,587 $122,976
Charge-offs:
Installment 16,974 5,458
Recoveries:
Installment 15,464
Commercial 5,069
-------- --------
Net charge-offs 1,510 389
Provision for possible loan losses 12,000 12,000
-------- --------
Balance at end of period $145,077 $134,587
A summary of selected ratios follows:
1997 1996
---- ----
Net charge-offs to average net
loans .01% .00%
35
<PAGE>
Net charge-offs to reserve for
loan losses 1.04% .29%
Reserve for loan losses to net
year end loans .92% 1.00%
NON-INTEREST INCOME
Non-interest income decreased by $53,981 in 1997 as compared to 1996.
Service charges and fees on deposit accounts decreased from $178,923 in 1996 to
$165,598 in 1997. This was due to a decrease in opportunity for charges rather
than a decrease in pricing or in numbers of accounts. Surcharge income from ATMs
was also down by $22,344 in 1997 due to decreased usage. Gains on the sale of
securities also decreased by $21,677 from 1996 to 1997. This was due mainly to
the lack of good sale and replacement opportunities.
A summary of non-interest income follows:
1997 1996
---- ----
Service charges and fees on
deposits $165,598 $178,923
ATM surcharge income 31,478 53,822
Credit insurance income 3,544 2,729
Safe deposit rental 3,798 4,406
Other income 47,313 44,155
251,731 284,035
Securities gains 23,638 45,315
-------- --------
$275,369 $329,350
NON-INTEREST EXPENSE
Non-interest expenses decreased by 2.39% from 1996 to 1997. Non-interest
expenses had previously decreased by 1.54% in 1996 as compared to 1995. The
largest decreases for 1997 and 1996 occurred in FDIC assessments and other
expenses. First Bolivar has continued to apply its efforts to reducing non-
interest expenses without affecting the quality of customer service.
A summary of non-interest expense follows:
1997 1996
---- ----
Salaries $ 462,140 $ 452,743
Employee benefits 126,206 113,795
Occupancy expense 173,163 169,070
Data processing expenses 10,172 9,944
Advertising and public relations 29,823 30,831
FDIC assessment 4,898 42,939
Comptroller examination fees 17,877 19,255
Postage 21,178 19,773
Stationery and supplies 27,375 35,081
Amortization of intangible assets 67,796 67,796
Other expenses 198,301 205,601
---------- ----------
$1,138,929 $1,166,828
INCOME TAXES
Income tax expense for 1997 was $80,231 compared to $11,439 in 1996 and a
benefit of $12,105 in 1995. A reduction in interest on municipal securities was
the most significant cause of the increase in tax expenses for 1997. The
effective tax rate was 25.49% in 1997 as compared to 4.63% in 1996. Although
First Bolivar does
36
<PAGE>
not plan to significantly increase the percentage of investments allocated to
municipal securities, it will continue to evaluate tax-exempt opportunities
based upon the best tax-effective yields and First Bolivar's tax position.
FINANCIAL CONDITION
Loans increased by 17.26% in 1997 and decreased by 18.84% in 1996. The
primary source of the decreases in 1996 were commercial loans, while the primary
sources of the 1997 increases were installment loans and mortgage loans. The
amortized cost of the investment portfolio decreased by 16.71% in 1997 after
increasing by 54.02% in 1996. The mortgage-backed securities portfolio showed
the greatest fluctuation, as it increased by $5,020,871 in 1996 and decreased by
$2,514,319 in 1997.
The funding of earning assets in 1997 was made primarily through increases
in deposits. The following table shows the 1997 increases and decreases in
earning assets and liability funding:
December 31
1997 1996 Change
----------- ----------- ------------
Federal funds sold $ 1,500,000 - $ 1,500,000
Investments, amortized cost 18,063,228 21,686,286 (3,623,058)
Loans 15,713,421 13,400,909 2,312,512
Other investments 570,050 541,150 28,900
----------- ----------- -----------
Earning assets 35,846,699 35,628,345 218,354
Noninterest-bearing deposits 5,263,196 3,724,906 1,538,290
NOW accounts 3,471,507 3,708,182 (236,675)
MMDA and savings deposits 5,996,809 8,483,172 (2,486,363)
Certificates of deposit 18,491,414 16,782,981 1,708,433
----------- ----------- -----------
Interest-bearing deposits 27,959,730 28,974,335 (1,014,605)
----------- ----------- -----------
Total deposits 33,222,926 32,699,241 523,685
Long-term debt 3,556,731 3,821,737 (265,006)
----------- ----------- -----------
Liability funding $36,779,657 $36,520,978 $ 258,679
A comparison of the percentage composition of the investment portfolio, at
amortized cost, as of December 31, follows:
1997 1996
------- -------
U.S. Treasury and government agency 24.22% 22.28%
Mortgage-backed securities 62.61% 63.75%
States and political subdivisions 11.81% 12.45%
Other 1.36% 1.52%
------ ------
100.00% 100.00%
First Bolivar's primary use of funds in 1997 was increased loan volume.
This contrasts with 1996 when decreasing loan volumes were allocated into the
investment portfolio. A summary of the loan portfolio at December 31, follows:
1997 1996 Change
----------- ----------- -----------
Commercial loans $ 4,607,949 $ 4,135,160 $ 472,789
Real estate loans 9,420,782 8,315,549 1,105,233
Installment loans 1,665,615 947,569 718,046
Overdrafts 19,075 2,631 16,444
----------- ----------- -----------
37
<PAGE>
$15,713,421 $13,400,909 $ 2,312,512
A schedule of loan maturities at December 31, 1997 follows:
One Year After One but After
Or Less Within Five Five Years Total
------- ----------- ---------- -----
1-4 family residential $ 1,033 $ 1,092,492 $4,694,204 $ 5,787,729
Commercial and real estate 2,524,902 2,878,954 2,837,146 8,241,002
Installment loans 638,128 1,026,834 19,728 1,684,690
---------- ----------- ---------- -----------
$3,164,063 $ 4,998,280 $7,551,078 $15,713,421
A summary of interest rate sensitivity at December 31, 1997 follows:
Fixed Rate Variable Rate Total
---------- ------------- -----
Due after one but
within five years $ 4,474,535 $ 523,745 $ 523,745
Due after five years 4,376,770 3,174,308 7,551,078
----------- ----------- -----------
$ 8,851,305 $ 3,698,053 $12,549,358
First Bolivar had no loans that were in nonaccrual status or past due
90 days or more at December 31, 1997 and 1996. The policy of First Bolivar is to
place loans on nonaccrual status if they are past due by over 90 days, and the
collateral value is insufficient to provide for the repayment of the loan.
The following table sets forth the amortized cost (book value) of the
maturities (and estimated prepayments for mortgage-backed securities) of
investment securities available for sale at December 31, 1997, and the weighted
average yields of such securities. Tax equivalent adjustments (using a 34% rate)
have been made in calculating yields on obligations of states and political
subdivisions.
38
<PAGE>
<TABLE>
<CAPTION>
Maturity
--------------------------------------------------------------------------------------------------
After One After Five
Within But Within But Within After
One Year Five Years Ten Years Ten Years
Amount Yield Amount Yield Amount Yield Amount Yield
---------- ----------- ---------- ----------- ---------- ------ ---------- ---------
U.S.
Treasury
and
<S> <C> <C> <C> <C> <C> <C> <C> <C>
agency - - $ 287,022 7.04% $3,497,509 6.85% $ 591,019 6.78%
Mortgage
- -backed
Securities $ 798,201 4.28% 5,080,406 6.09% 1,948,866 6.20% 3,482,467 6.02%
State and
political
subdivis. 215,053 6.42% 909,527 6.73% 819,618 6.87% 188,400 7.70%
Other - - 95,000 9.07% 150,140 9.01% - -
---------- ---------- ---------- ---- ---------- ---- ---------- ----
Total $1,013,254 4.69% $6,371,955 6.27% $6,416,133 6.71% $4,261,886 6.21%
</TABLE>
DEPOSITS
As a primary source of funds, average total deposits increased by 3.04% in
1997 and by 4.10% in 1996. Management expects deposit growth to continue at a
steady pace, and to remain the primary funding source for asset growth.
A summary of the average balances of deposits is as follows:
1997 1996
----------- -----------
Non-interest bearing demand $ 4,000,160 $ 3,498,966
Interest bearing demand and savings 11,329,545 12,152,702
Certificates of deposit 17,697,200 16,401,549
----------- -----------
Total deposits $33,026,905 $32,053,217
Time deposits in excess of $100,000 as a percentage of total deposits were
25.63% and 23.22% at December 31, 1997 and 1996. Maturities of time deposits of
$100,000 or more at December 31, 1997, are as follows:
Three months or less $4,103,096
Over three through twelve months 2,750,065
Over twelve months 1,673,039
----------
Total $8,526,200
First Bolivar has not needed to utilize short-term borrowings for 1996 and
1997. However, First Bolivar does use borrowings, primarily from the Federal
Home Loan Bank to fund long-term real estate loans. This funding source is used
in order to mitigate the interest rate risk inherent in long-term financial
assets such as mortgages.
The following is a summary of the borrowings for 1996 and 1997:
1997 1996
----------- -----------
Year end balance $3,556,731 $3,821,737
Average balance 3,873,940 3,930,463
Maximum month end balance
during the year 4,402,390 4,039,188
Interest paid 230,001 267,325
Average rate 5.94% 6.80%
39
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The primary objective of asset/liability management is to provide a balance
between safety, liquidity and impact on net interest income. Asset/liability
management remained a priority in 1997 and 1996 as management worked toward
decreasing the impact of fluctuating short-term interest rates. Management
implemented a formal analysis program in 1997 designed to determine the impact
of rate changes on the net interest margins of First Bolivar. Management also
continues to address liquidity, and funds are available to provide for continued
loan growth.
The GAP position of First Bolivar at December 31, 1997, is set forth in the
following table:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
0-3 4-12 1-5 Over
Months Months Years 5 Years
------------ ----------- ----------- -----------
Federal funds sold $ 1,500,000 - - -
Investment securities 253,314 $ 759,940 $ 6,371,955 $10,678,019
Loans 791,016 2,373,047 4,998,280 7,551,078
Other investments 520,818 - - -
------------ ----------- ----------- -----------
Total earning assets 3,065,148 3,132,987 11,370,235 18,229,097
Interest-bearing demand and
savings deposits 9,468,316 - - -
Time deposits 7,477,168 8,188,182 2,826,064 -
Borrowings 58,619 175,855 1,008,308 2,313,949
------------ ----------- ----------- -----------
Total interest-bearing
liabilities 17,004,103 8,364,037 3,834,372 2,313,949
------------ ----------- ----------- -----------
Interest sensitivity gap $(13,938,955) $(5,231,050) $ 7,535,863 $15,915,148
</TABLE>
Variable rate instruments are presented based upon repricing frequency.
Mortgage-backed investments are included in the schedule based upon expected
payment activity. Interest earning assets and interest bearing liabilities that
do not have contractual maturity dates are included in the 0-30 day category.
First Bolivar has a negative gap for a one year horizon, meaning that if
interest rates increase, then liability costs will increase faster than earning
asset yields. If interest rates decrease, then liability costs will decrease
faster than the decrease in earning asset yields. The ability of First Bolivar
to effect the desired result depends on its ability to reprice interest-bearing
deposits other than certificates of deposit. Management believes that it is well
positioned to manage its interest rate risk.
First Bolivar's capital-to-assets ratio was 8.49% at December 31, 1997 and
7.82% at December 31, 1996. The risk-based capital ratios for First Bolivar at
December 31, 1997 and 1996 were far in excess of the minimum required regulatory
levels. The Tier one capital ratio was 13.31% and 11.55% while the total risk-
based capital ratio was 14.10% and 12.27%. These ratios exceed the requirements
for a well-capitalized institution. Management expects the capital position to
remain strong during 1998 through earnings retention.
40
<PAGE>
The following table illustrates First Bolivar's regulatory capital ratios
at December 31, under the year-end requirements:
1997 1996
------------ -------------
Tier one capital $ 2,470,024 $ 2,169,941
Tier two capital adjustment 145,077 134,587
----------- -----------
Total qualifying capital 2,615,101 2,304,528
Risk adjusted total assets 18,552,137 18,781,563
Tier one capital ratio 13.31% 11.55%
Total risk based capital ratio 14.10% 12.27%
Leverage ratio 6.24% 5.57%
1997 AVERAGE BALANCE SHEETS AND INTEREST DATA
<TABLE>
<CAPTION>
Average Average
Balance Interest Yield or Rate
----------- ----------- -------------
<S> <C> <C> <C>
Interest-bearing bank balances
and Federal funds sold $ 462,500 $ 61,445 13.29%
Taxable investments 18,165,584 1,138,742 6.27%
Tax-exempt investments 2,516,700 185,636 7.38%
Loans 15,568,043 1,322,117 8.49%
----------- ----------- -----------
Total earning assets 36,712,827 2,707,940 7.38%
Cash and due from banks 1,854,225
Fixed assets 561,531
Intangible assets 949,684
Reserve for loan loss (136,297)
Other assets 454,467
-----------
Total assets 40,396,437
Interest-bearing demand and
savings deposits 11,329,545 336,533 2.97%
Certificates of deposit 17,697,200 888,021 5.02%
Borrowings 3,873,940 230,001 5.94%
----------- ----------- -----------
Total interest-bearing liabilities 32,900,685 1,454,555 4.42%
Noninterest-bearing deposits 4,000,160
Other liabilities 276,510
Stockholders' equity 3,219,082
-----------
Total liabilities & equity 40,396,437
Average yield on earning assets 7.38%
Average cost of liabilities 4.42%
Interest rate spread 2.96%
Cost of funds supporting earning
assets 3.96%
Net interest margin 3.41%
Tax equivalent adjustment $ 63,116
</TABLE>
Yields and corresponding income amounts for non-taxable investments are
presented on a tax-equivalent basis, using a marginal tax rate of 34%.
41
<PAGE>
1996 AVERAGE BALANCE SHEETS AND INTEREST DATA
<TABLE>
<CAPTION>
Average Average
Balance Interest Yield or Rate
------------ ---------- --------------
<S> <C> <C> <C>
Interest-bearing bank balances
and Federal funds sold $ 2,100,000 $ 140,055 6.67%
Taxable investments 15,128,469 807,978 5.34%
Tax-exempt investments 3,201,032 321,954 10.06%
Loans 14,956,257 1,380,314 9.23%
----------- ---------- -----
Total earning assets 35,385,758 2,650,301 7.49%
Cash and due from banks 1,907,575
Fixed assets 581,174
Intangible assets 1,017,084
Reserve for loan loss (128,782)
Other assets 511,808
-----------
Total assets 39,274,616
Interest-bearing demand and
savings deposits 12,152,702 341,053 2.81%
Certificates of deposit 16,401,549 835,809 5.10%
Borrowings 3,930,463 267,325 6.80%
----------- ---------- -----
Total interest-bearing liabilities 32,484,714 1,444,187 4.45%
Noninterest-bearing deposits 3,498,966
Other liabilities 273,922
Stockholders' equity 3,017,015
-----------
Total liabilities & equity 39,274,616
Average yield on earning assets 7.49%
Average cost of liabilities 4.45%
Interest rate spread 3.04%
Cost of funds supporting earning
assets 4.08%
Net interest margin 3.41%
Tax equivalent adjustment $ 109,464
</TABLE>
Yields and corresponding income amounts for non-taxable investments are
presented on a tax-equivalent basis, using a marginal tax rate of 34%.
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 1998 AND DECEMBER 31, 1997
The following provides a narrative discussion and analyses of significant
changes in First Bolivar's results of operations and financial condition. This
discussion should be read in conjunction with the interim consolidated financial
statements presented elsewhere in this report.
Net income for the first six months of 1998 was $82,172, or $2.81 per
share, as compared to $132,053, or $4.52 per share for the six months ended
June 30, 1997. This decrease was primarily the result of a $27,718 decrease in
non-interest income and a $48,732 increase in non-interest expenses. Non-
interest income was down due to First Bolivar incurring $4,031 in securities
losses in 1998 as compared to $10,716 in securities gains in 1997. Also, First
Bolivar incurred approximately $17,000 in non-recurring revenues in 1997 through
the receipt of developer fees related to the financing of low income housing
projects.
42
<PAGE>
NET INTEREST INCOME
Net interest income for First Bolivar was $577,826 for the first six months
of 1998, a 1.76% increase over the same period in 1997. Interest on loans
increased by 15.68%, while interest on deposits increased by 9.20%. Interest on
Fed funds sold was approximately $30,000 higher in 1998 than in 1997 due to
liquidity brought about by deposit growth early in 1998. First Bolivar increased
its investment in municipal securities in 1998 as compared to 1997 due to the
favorable tax-equivalent yields offered by municipals relative to the Treasury
yield curve.
LOANS
Loans have grown by 12.59% during 1998, and have grown by 10.84% since
June, 1997. This growth has come in both commercial and consumer areas. At
June 30, 1998, loans represented 44.79% of assets and 54.71% of deposits. This
compares favorably to loans at December 31, 1997, which were 38.74% of assets
and 47.30% of deposits. As interest rates have fallen over the last two years,
loan demand has remained strong.
OTHER EARNING ASSETS
First Bolivar has managed its liquid assets around its loan portfolio
needs. Therefore, First Bolivar has maintained a policy of classifying all
investment securities as available-for-sale. First Bolivar manages its
investments for total return. Therefore, investments are sold when a better
long-term replacement rate of return is available. The average life of the
investment portfolio at June 30, 1998 was approximately 2 years. Approximately
60% of the securities portfolio is invested in mortgage-backed securities. This
segment of the portfolio has provided liquidity and return over the last year.
DEPOSITS
Total deposits as of June 30, 1998 were down by 2.66% from December 31,
1997 and up by 1.43% over June 30, 1997. Non-interest bearing deposits
represented 11.66% of total deposits at June 30, 1998. At June 30, 1998,
certificates of deposit were $17,644,483, as compared to $16,467,102 at June 30,
1997. CDs of $100,000 or more were $7,287,098 at June 30, 1998, or 22.53% of
deposits. Commercial checking accounts represent over $6 million of deposits for
First Bolivar, thereby providing a source of strong core deposits. The Bolivar
county market has experienced strong competition during 1997 and 1998 for
certificates of deposit. First Bolivar has tried to focus on consumer and
commercial deposit accounts as a more stable source of funds.
OTHER BORROWINGS
First Bolivar borrows primarily from the Federal Home Loan Bank in order to
fund long-term real estate secured loans. This strategy is used in order to
reduce interest rate risk in the company's overall portfolio of financial
instruments.
ASSET/LIABILITY MANAGEMENT
First Bolivar uses a third party consultant to quantify interest rate risk
and set strategies related to the maintenance of certain interest margin
targets. At June 30, First Bolivar had a negative 1-year maturity gap of
approximately 35% of total assets. Using only accounts with stated maturities,
the negative gap is approximately 11%. This puts First Bolivar in a position to
take advantage of falling interest rates. An increase in interest rates would
negatively impact the net interest margin of First Bolivar. First Bolivar has
chosen to manage the gap in a negative to neutral position until interest rates
are expected to increase.
CAPITAL
First Bolivar had a capital-to-assets ratio of 8.78% as compared to 8.49%
at December 31, 1997. The tier 1 capital ratio at June 30, 1998 was 15.16% as
compared to 15.79% at December 31, 1997. First Bolivar is adequately
capitalized, and maintains a policy of retaining earnings rather than paying
dividends. Management does not know of any plans for spending that will require
the raising of additional capital.
43
<PAGE>
YEAR 2000
The year 2000 problem is a data processing problem related to how computer
systems and other electronic systems recognize dates. Most computers recognize
years by the last two digits of the year. However, when the year 2000 arrives,
this programming may read the "00" as 1900 rather than 2000. This could cause
computer and other electronic equipment malfunctions that may interrupt the
business process. First Bolivar has had a program of assessing year 2000 risk
for the past year. Vendors who provide the mainframe equipment and data
processing software state that the computer system is year 2000 compliant. First
Bolivar has plans to test the hardware and software for year 2000 compliance
prior to year-end, 1998. Plans have been made to upgrade equipment that is not
year 2000 compliant. First Bolivar has preliminary estimates that year 2000
upgrades will cost approximately $20,000 to $30,000 over the next 12 months.
ADDITIONAL INFORMATION
DISSENTERS' APPRAISAL RIGHTS
First Bolivar Capital Corporation. Under Section 79-4-13.01 et seq. of the
Mississippi Business Corporation Act (the "MBCA") (a copy of which is attached
hereto as Appendix B), any holder of record of shares of First Bolivar common
stock, who files a written objection to the Company Merger prior to or at the
Meeting at which the vote on the Company Merger is taken, and who does not vote
in favor of the Company Merger, may demand in writing that First M&F pay to such
shareholder the fair cash value of such shares ("Appraisal Rights"). A person
who is a beneficial owner, but not a registered owner, of shares of First
Bolivar common stock who wishes to exercise the rights of a dissenting
shareholder under the MBCA must submit to First Bolivar the record shareholder's
written consent to the dissent not later than the time the beneficial owner
asserts dissenter's rights and he must do so with respect to all shares of which
he is the beneficial shareholder.
Any shareholder of record contemplating making a demand for appraisal is
urged to review carefully the provisions of Section 79-4-13.21 of the MBCA,
particularly the procedural steps required to perfect Appraisal Rights
thereunder. APPRAISAL RIGHTS WILL BE LOST IF THE PROCEDURAL REQUIREMENTS OF
SECTION 79-4-13.21 ARE NOT FULLY SATISFIED.
Set forth below is a summary of the procedures relating to the exercise of
appraisal rights. The following summary does not purport to be a complete
statement of the provisions of Article 13 of the MBCA and is qualified in its
entirety by reference to Appendix B hereto and to any amendments to such
sections as may be adopted after the date of this Joint Proxy Statement-
Prospectus.
Before the shareholders' vote is taken on the proposal to approve the
Company Merger, a shareholder of record who intends to exercise appraisal rights
(a "Dissenter") must deliver to First Bolivar a written notice of his intent to
demand payment for his shares if the proposed Company Merger is effectuated and
must not vote the shares of First Bolivar common stock held by such Dissenter
(the "Shares") in favor of the proposed Company Merger. Such written notice may
be sent to First Bolivar at 308 E. Sunflower Road, Cleveland, Mississippi 38732,
telephone number (601) 843-4321 to the attention of Doug Springer. The return of
a proxy by a Dissenter with instructions to vote the Shares represented thereby
against the Company Merger (or abstaining from voting) is not sufficient to
satisfy the requirement of delivering written objection to First Bolivar. The
submission of a signed blank proxy will serve to waive Appraisal Rights.
Within ten (10) days after the First Bolivar Effective Date First Bolivar
will notify each Dissenter who has purported to comply with the provisions of
Section 79-4-13.21 of the MBCA that the Company Merger has become effective (the
"First Bolivar Notice"). The First Bolivar Notice shall be sent by registered
mail, addressed to the Dissenter at such Dissenter's last address on First
Bolivar's records immediately prior to the First Bolivar Effective Date.
Within thirty (30) days after the delivery to the Dissenter of the First
Bolivar Notice, any Dissenter must file with First Bolivar a demand for payment
(the "Demand") for their Dissenter's Shares as of the day prior to the
44
<PAGE>
Meeting. The Demand must comply with the provisions of Article 13 and must
specify the Dissenter's name and mailing address, the number of shares of First
Bolivar common stock owned and state that the Dissenter is demanding payment of
his or her shares. The Dissenter must also certify that the Dissenter had
beneficial ownership of the shares before the date set forth in the First
Bolivar Notice, which is September 9, 1998, the date of the first announcement
of the proposed Company Merger to the news media. Simultaneously with the filing
of the Demand, the Dissenter shall also deposit the certificate in accordance
with the terms of the First Bolivar Notice. A Dissenter who fails to satisfy any
of the foregoing conditions within the proper time periods will conclusively be
presumed to have acquiesced in the Company Merger and will lose his appraisal
rights. The Demand may be sent to First Bolivar at 308 E. Sunflower Road,
Cleveland, Mississippi 38732, telephone number (601) 843-4321 to the attention
of Doug Springer.
Upon receipt of the Demand, First Bolivar shall pay Dissenters who complied
with Article 13 the amount First Bolivar estimates to be the fair value of the
Dissenter's Shares plus accrued interest. Certain financial information
concerning First Bolivar, its estimate of the value of the shares, an
explanation of how interest was calculated, and a statement of rights to demand
payment along with a copy of Article 13, must accompany such offer or payment.
A Dissenter may notify First Bolivar in writing of his own estimate of the
fair value of his shares and amount of interest due, and demand payment of his
estimate or a Dissenter may reject First Bolivar's payment and demand in writing
payment based on his own estimate of the fair value of his shares and amount of
interest due. To be entitled to such rights, the Dissenter must notify First
Bolivar of his demand in writing within thirty (30) days after First Bolivar
made payment for the shares. If a Dissenter has rejected First Bolivar's payment
and demanded payment of the fair value of the shares and interest due and the
demand for payment remains unsettled, First Bolivar shall commence a judicial
proceeding within sixty (60) days after receiving the payment demand and
petition an appropriate court, as described in Article 13, to determine the fair
value of the shares and accrued interest. If First Bolivar does not commence
such action within the required sixty (60) day period, it shall pay each
Dissenter whose demand remains unsettled the amount demanded.
First Bolivar shall make all Dissenters whose demands remain unsettled
parties to the proceeding and all parties must be served with a copy of the
petition. Each Dissenter made a party to the proceeding is entitled to judgment
for either the amount by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by First Bolivar or for the fair value of
his shares, plus accrued interest, after acquired shares for which First Bolivar
elected to withhold payment under Section 79-4-13.27.
Dissenters considering exercising appraisal rights should bear in mind that
the fair cash value of their Shares determined under Section 79-4-13.30 of the
MBCA could be more than, the same as or less than the consideration they would
otherwise receive pursuant to the Merger Agreement if they do not seek appraisal
of their Shares.
The court in an appraisal proceeding shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. Additionally, the court may assess fees of legal counsel
and of experts for the respective parties. The court shall assess the costs
against First Bolivar, except that the court may assess costs against all or
some of the Dissenters to the extent the court finds the Dissenters acted
arbitrarily, vexatiously or not in good faith in demanding payment under
Article 13, or the court may assess counsel fees against the Dissenters who were
benefited.
Any First Bolivar shareholder who desires to exercise appraisal rights
should carefully review the MBCA and is urged to consult such shareholder's
legal advisor before exercising or attempting to exercise such rights.
Bank. Any holder of record of shares of common stock of Bank who follows
the procedures specified in Section 214a of Title 12 of the United States Code
is entitled to have the "value" of his shares at the time of the meeting
appraised as set forth in Section 214a and to receive in cash the amount so
determined. A copy of Section 214a is attached to this Joint Proxy Statement-
Prospectus as Appendix C. The following discussion of appraisal rights is
qualified in its entirety by reference to Appendix C.
The address to which dissenting shareholders should send any communication
regarding their rights is: First Bolivar at 308 E. Sunflower Road, Cleveland,
Mississippi 38732, telephone number (601) 843-4321, Attention:
45
<PAGE>
Doug Springer. All communications of dissenting shareholders should be signed by
or on behalf of the dissenting shareholder in the form in which his shares are
registered on the books of the Bank.
If a holder of shares of the common stock of Bank elects to exercise his
rights to an appraisal under Section 214a, such shareholder must do one of the
following:
(i) Vote against approval of the Merger Agreement at the meeting and,
within 30 days after the effective time of the Bank Merger, make written request
for payment and accompany such written request by surrender of the shareholder's
stock certificate; or
(ii) Give notice in writing to Bank at or prior to the meeting that the
shareholder dissents from the Merger Agreement and, within 30 days after the
effective time of the Bank Merger, make written request for payment and
accompany such written request by surrender of the shareholder's stock
certificates.
In order to be considered as having voted against approval of the Merger
Agreement, a shareholder must personally vote against approval or deliver a
proxy (which is not revoked prior to the meeting) containing directions to vote
the shares represented thereby against approval of the Merger Agreement. A mere
failure to vote will not be considered a vote against the approval of the Merger
Agreement.
In order to be considered as having given notice in writing to Bank at or
prior to the meeting that the shareholder dissents from the Merger Agreement, a
shareholder must deliver a written notice to Bank before the taking of the vote
with respect to the Merger Agreement, which notice must reasonably inform Bank
of the identity of the shareholder and that the shareholder intends thereby to
dissent from the Merger Agreement and must be executed by or for the holder of
record. In addition, a shareholder who wishes to be considered as having
delivered notice of dissent must not deliver a proxy in favor of the Merger
Agreement. A failure to deliver such proxy will satisfy this condition, but
voting in favor of, or delivering a proxy (which is not revoked prior to the
meeting) containing directions to vote the shares represented thereby in favor
of approval of, the Merger Agreement (or not containing directions as to how the
shares represented thereby are to be voted), will nullify any previously filed
notice of dissent and constitute a waiver of such shareholder's right of
appraisal.
In the event the Merger Agreement is approved, in order to maintain a
shareholder's rights of appraisal a shareholder who gave notice of dissent prior
to the meeting or who voted against approval at the meeting must make written
request for payment within 30 days after the conversion and accompany such
request by surrender of the shareholder's stock certificates. Such written
request for payment should reasonably inform Bank of the identity of the
shareholder and that the shareholder intends thereby to request payment pursuant
to the right of appraisal and must be executed by or for the holder of record.
Requests for payment should be addressed to Doug Springer as provided above. If
stock certificates are sent by mail, it is recommended that registered or
certified mail, return receipt requested, be used.
If shares are owned of record in a fiduciary capacity, such as by a
trustee, guardian or custodian, execution of the notice of dissent and/or
request for payment should be made in such capacity; and if the stock is owned
of record by more than one person, as in a joint tenancy or tenancy in common,
such notice and/or request should be executed by or for all owners. An
authorized agent, including one of two or more joint owners, may execute the
notice and/or request for a shareholder of record; however, the agent must
identify the record owner or owners.
In general, a shareholder may not exercise the right of appraisal with
respect to less than all shares owned by such shareholder. However, a record
owner, such as a broker, who holds shares as a nominee for others, may exercise
his right of appraisal with respect to the shares held for one or more
beneficial owners, while not exercising such rights for other beneficial owners.
In the event the Merger Agreement is approved, within five days after the
effective time of the Bank Merger, the resulting state bank will give to each
shareholder who gave timely notice of dissent or who voted against approval of
the Merger Agreement a notice of the effective time and of the actions required
in order to maintain each such shareholder's appraisal rights.
46
<PAGE>
The value of a dissenting shareholder's shares is to be determined by an
appraisal made by a committee of three persons, one chosen by the dissenting
shareholder(s), one by the directors of the Merchants & Farmers Bank and one by
the two appraisers so selected. All expenses incurred in connection with such an
appraisal will be allocated equally between the Merchants & Farmers Bank and the
dissenting shareholder(s). Bank will bear the costs of appraisal proceedings. If
any appraiser is not selected within ninety (90) days of consummation of the
consolidation, or the appraisers fail within such period to determine a value,
or if a dissenting shareholder is dissatisfied with the appraised value and
appeals within five (5) days of notice of the appraisal, the Comptroller will
make a final determination of value, which will be binding on all parties. The
expenses of the Comptroller in making such a reappraisal or appraisal, as the
case may be, will be paid by the Merchants & Farmers Bank.
LEGAL MATTERS
Certain legal matters in connection with the First M&F common stock being
offered hereby will be passed upon by Watkins Ludlam Winter & Stennis, P.A.,
counsel for First M&F.
EXPERTS
The consolidated financial statements of First Bolivar as of and for the
years ended December 31, 1997 and 1996 contained in this Joint Proxy Statement-
Prospectus have been audited by Taylor Powell Wilson & Hartford, P.A.,
independent auditors, as set forth in their report with respect thereon
appearing elsewhere herein, and have been included in reliance upon the
authority of such firm as experts in accounting and auditing. The consolidated
financial statements of First M&F incorporated in this Joint Proxy Statement-
Prospectus by reference from the First M&F Annual Report on Form 10-K have been
audited by Shearer, Taylor & Co., P.A., independent auditors, as stated in their
report, which is incorporated herein by reference and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
OTHER MATTERS
At the time of the preparation of this Joint Proxy Statement-Prospectus,
neither First Bolivar nor Bank had been informed of any matters to be presented
by or on behalf of First Bolivar, Bank or their management for action at the
Meeting other than those listed in the Notice of Special Meeting of Shareholders
and referred to herein. If any other matters come before the meeting or any
adjournment thereof, the persons named in the enclosed proxy will vote on such
matters according to their best judgment. Shareholders are urged to sign the
enclosed proxy, which is solicited on behalf of the First Bolivar and the Bank
Board and return it at once in the enclosed envelope.
WHERE YOU CAN FIND MORE INFORMATION
First M&F has filed with the SEC a Registration Statement under the
Securities Act that registers the distribution to First Bolivar and Bank
shareholders of the shares of First M&F common stock to be issued in connection
with the Mergers (the "Registration Statement"). The Registration Statement
including the attached exhibits and schedules, contain additional relevant
information about First M&F and the First M&F common stock. The rules and
regulations of the SEC allow us to omit certain information included in the
Registration Statement from this Joint Proxy Statement-Prospectus.
47
<PAGE>
In addition, First M&F files reports, proxy statements and other
information with the SEC under the Exchange Act. You may read and copy this
information at the following locations of the SEC:
<TABLE>
<CAPTION>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 Suite 1400
Washington, D.C. 20549 New York, New York 10048 Chicago, Illinois 60661-2511
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates.
The SEC also maintains an Internet world wide web site that contains
reports, proxy statements and other information about issues, like First M&F,
who file electronically with the SEC. The address of that site is
http://www.sec.gov. You can view and download a copy of the Registration
Statement (including exhibits) at this web site.
You can also inspect reports, proxy statements and other information about
First M&F at the offices of the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The SEC allows First M&F to "incorporate by reference" information into
this Joint Proxy Statement-Prospectus. This means that First M&F can disclose
important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is considered
to be a part of this Joint Proxy Statement-Prospectus, except for any
information that is superseded by other information that is set forth directly
in this document.
This Joint Proxy Statement-Prospectus incorporates by reference the
documents set forth below that First M&F has previously filed with the SEC. They
contain important information about First M&F and its financial condition.
<TABLE>
<CAPTION>
First M&F SEC Filings Period
- --------------------------------- ----------------
<S> <C> <C>
Annual Report on Form 10-K Year ended December 31, 1997, as filed March 19, 1998
Quarterly Reports on Form 10-Q Quarters ended:
. March 31, 1998, as
filed May 12, 1998
. June 30, 1998, as filed
August 13, 1998
Current Reports on Form 8-K . Filed September 14, 1998
</TABLE>
First M&F incorporates by reference additional documents that it may have
filed with the SEC between the date of this Joint Proxy Statement-Prospectus and
the date of the Meeting. These documents include periodic reports, such as
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K, as well as proxy statements.
First M&F has supplied all information contained or incorporated by
reference in the Joint Proxy Statement-Prospectus relating to First M&F, as well
as all pro forma financial information, and First Bolivar and the Bank has
supplied all such information relating to First Bolivar and the Bank.
You can obtain any of the documents incorporated by reference in this
document through First M&F, or from the SEC through the SEC's Internet world
wide web site at the address described above. Documents incorporated by
reference are available from the companies without charge, excluding any
exhibits to those documents unless the exhibit is specifically incorporated by
reference as an exhibit in this Joint Proxy Statement-Prospectus. You can obtain
documents incorporated by reference in this Joint Proxy Statement-Prospectus by
requesting them in writing or by telephone from:
Bobby Thompson
48
<PAGE>
Chief Financial Officer
First M&F Corporation
221 Washington Street
Kosciusko, Mississippi 39090
Telephone (601) 289-5121
If you would like to request documents from First M&F, please do so by
___________, 1998 to receive them before the Meeting. If you request any
incorporated documents from us, we will mail them to you by first class mail, or
another equally prompt means, within one business day after we receive your
request.
You should rely only on the information contained in or incorporated by
reference in this Joint Proxy Statement-Prospectus in considering how to vote
your shares at the Meeting. Neither First M&F nor First Bolivar and the Bank has
authorized anyone to provide you with information that is different from the
information in this document. This Joint Proxy Statement-Prospectus is dated
November ____, 1998. You should not assume that the information contained in
this document is accurate as of any date other than that date. Neither the
mailing of the Joint Proxy Statement-Prospectus nor the issuance of First M&F
common stock in the Mergers shall create any implication to the contrary.
49
<PAGE>
INDEX TO FIRST BOLIVAR FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT F-2
FINANCIAL STATEMENTS - DECEMBER 1997 AND 1996
Consolidated balance sheets F-3
Consolidated statements of income F-4
Consolidated statements of changes in stockholder's equity F-5
Consolidated statements of cash flows F-6
Notes to consolidated financial statements F-8
FINANCIAL STATEMENTS - JUNE 30, 1998 AND 1997
(Unaudited)
Consolidated balance sheets F-18
Consolidated statements of income F-19
Consolidated statements of cash flows F-20
Notes to consolidated financial statements F-21
F-1
<PAGE>
Taylor, Powell, Wilson & Hartford, P.A.
Certified Public Accountants
Post Office Box 8240
Greenwood, Mississippi 38935-8240
601-453-6432
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of First Bolivar Capital Corporation
We have audited the consolidated balance sheets of First Bolivar Capital
Corporation and its subsidiary as of December 31, 1997 and 1996 and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of First Bolivar Capital
Corporation and its subsidiary as of December 31, 1997 and 1996 and the results
of their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
January 14, 1998
F-2
<PAGE>
FIRST BOLIVAR CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks $ 2,875,489 $ 2,336,530
Federal funds sold 1,500,000
Investment securities - available for sale 18,148,671 21,640,523
Loans 15,713,421 13,400,909
Less: Allowance for loan losses -145,077 -134,587
----------- -----------
Net loans 15,568,344 13,266,322
----------- -----------
Premises and equipment, net of
accumulated depreciation 520,818 597,735
Other investments - stock in Federal Reserve
and FHLB (at cost) 570,050 541,150
Intangible assets 915,373 983,169
Accrued interest receivable 361,745 431,479
Deferred income tax benefit 23,524 77,956
Other assets 73,286 41,609
Current income tax overpayment 552
----------- -----------
Total assets $40,557,300 $39,917,025
=========== ===========
LIABILITIES
Deposits:
Non-interest bearing deposits $ 5,263,196 $ 3,724,906
Interest bearing deposits 27,959,730 28,974,335
----------- -----------
Total deposits 33,222,926 32,699,241
Accrued income tax payable 28,409
Accrued interest payable 219,466 189,800
Other liabilities 64,232 61,019
Long term debt 3,556,731 3,821,737
----------- -----------
Total liabilities 37,091,764 36,771,797
Minority interest 24,179 22,090
STOCKHOLDERS' EQUITY
Common stock, without par value, 1,000,000 shares
authorized, 29,230 shares outstanding 292,300 292,300
Capital surplus 967,740 967,740
Retained earnings 2,125,357 1,893,070
Net unrealized gains, losses (-) on investments
(net of applicable income tax) 55,960 -29,972
----------- -----------
Total shareholders' equity 3,441,357 3,123,138
----------- -----------
Total liabilities and shareholders' equity $40,557,300 $39,917,025
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
FIRST BOLIVAR CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
December 31,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $1,322,117 $1,380,314
Interest on Investment Activities:
U.S. Treasury Securities and obligations
of U.S. Government agencies 1,138,742 807,978
Obligations of states and political
sub-divisions 122,520 212,490
Interest on federal funds sold 59,482 137,295
Other interest 1,963 2,760
---------- ----------
Total interest income 2,644,824 2,540,837
INTEREST EXPENSE:
Interest on deposits 1,224,554 1,176,862
Interest on borrowed money 230,001 267,325
---------- ----------
Total interest expense 1,454,555 1,444,187
Net interest income 1,190,269 1,096,650
Provision for loan losses -12,000 -12,000
---------- ----------
Net interest income after provision
for loan losses 1,178,269 1,084,650
OTHER INCOME:
Service fees and commission 201,070 235,474
Gain on sale of securities 23,638 45,315
Other 50,661 48,561
---------- ----------
Total other income 275,369 329,350
OTHER EXPENSES:
Salaries 462,140 452,743
Employee benefits 126,206 113,795
Occupancy expense 173,163 169,070
FDIC insurance assessment 4,898 42,939
Other expense 372,522 388,281
---------- ----------
Total expense 1,138,929 1,166,828
---------- ----------
Income before income tax and minority interest 314,709 247,172
Income tax 80,231 11,439
---------- ----------
Income before minority interest 234,478 235,733
Minority interest 2,191 2,192
---------- ----------
Net income $ 232,287 $ 233,541
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
FIRST BOLIVAR CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
common stock
------------------ Capital Retained
Shares Amount Surplus Earnings Total
------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1996 29,230 $292,300 $967,740 $1,659,529 $2,919,569
------- -------- -------- ---------- ----------
Net income 233,541 233,541
------- -------- -------- ---------- ----------
Balance, December 31, 1996 29,230 292,300 967,740 1,893,070 3,153,110
Net income 232,287 232,287
------- -------- -------- ---------- ----------
Balance, December 31, 1997 29,230 $292,300 $967,740 $2,125,357 $3,385,397
======= ======== ======== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
FIRST BOLIVAR CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 232,287 $ 233,541
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 147,280 143,329
Provision for loan losses 12,000 12,000
Amortization of premium on investment
securities 19,594 8,143
Accretion of discount on investment
securities -14,685 -19,894
Gain(-) or loss on sale of securities -23,638 -45,315
Increase(-), decrease in:
Accrued interest receivable 69,734 -34,819
Deferred income tax benefit 9,158 99
Other assets -31,677 14,709
Income tax overpayment 552 -552
Increase, decrease(-) in:
Accrued interest payable 29,666 26,695
Accrued income tax payable 28,409 -35,000
Other liabilities 3,111 4,087
Minority interest in net income of subsidiary 2,191 2,192
----------- ------------
Net cash provided by operating activities 483,982 309,215
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales and maturities of
investment securities 12,654,921 8,285,383
Purchases of investment securities -9,013,134 -16,012,969
Increase in other investments -28,900
Net increase(-), decrease in loans -2,314,022 3,110,307
Purchase of bank premises and equipment -2,567 -108,623
----------- ------------
Net cash provided, used(-) by
investing activities 1,296,298 -4,725,902
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase, decrease(-) in deposits -
non interest bearing 1,538,290 451,881
Net increase, decrease(-) in deposits -
interest bearing -1,014,605 840,168
Principal payments on debt -265,006 -217,451
----------- ------------
Net cash provided by financing activities 258,679 1,074,598
----------- ------------
</TABLE>
See Notes to Consolidated Financial Statements.
FIRST BOLIVAR CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
F-6
<PAGE>
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
(Cont'd)
1997 1996
---------- -----------
<S> <C> <C>
INCREASE, DECREASE(-) IN CASH AND CASH EQUIVALENTS $2,038,959 $-3,342,089
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,336,530 5,678,619
---------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $4,375,489 $ 2,336,530
========== ===========
SUPPLEMENTAL INFORMATION:
Amount paid for interest $1,424,889 $ 1,417,492
========== ===========
Amount paid for income taxes $ 51,895 $ 59,498
========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-7
<PAGE>
FIRST BOLIVAR CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accounting and reporting policies of First Bolivar Capital Corporation
(First Bolivar) and its subsidiary, First National Bank of Bolivar County (Bank)
conform to practices within the banking industry and are based on generally
accepted accounting principles. A summary of the significant accounting
policies consistently applied in the preparation of the accompanying financial
statements are as follows:
Principles of Consolidation - The consolidated financial statements include the
accounts of First Bolivar Capital Corporation and Bank. All significant
intercompany items have been eliminated in consolidation. As of December 31,
1997, First Bolivar Capital Corporation owned 99.23% of the outstanding common
stock of the Bank.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Securities - Effective January 1, 1994, the Bank adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("FAS 115"). FAS 115 requires that investments in debt
securities that have readily determinable fair values, and all investments in
debt securities, be classified into one of three categories:
Debt securities for which management has both the intent and ability to
hold to maturity are classified as "held-to-maturity securities" and are
reported at amortized cost;
Debt and equity securities that are purchased with the intent of being sold
in the near future are classified as "trading securities" and are reported
at estimated fair value, with unrealized gains and losses being included in
earnings; and
All debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as "available-for-sale
securities," with unrealized gains and losses being excluded from earnings
and reported in a separate component of shareholders' equity.
In December 1996, all debt securities that were previously classified as held-
to-maturity securities were transferred to available-for-sale securities. In
accordance with the provisions of FAS 115, the unrealized net loss on
investments classified as available-for-sale has been recorded as a separate
component of shareholders' equity.
F-8
<PAGE>
FIRST BOLIVAR CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Cont'd)
Loans - Loans are stated at the amount of unpaid principal, an allowance for
loan losses. Interest income is calculated by using the simple interest method
on daily balances of the principal amount outstanding. Interest on other loans
is calculated by using the simple interest method on daily balances of the
principal amount outstanding. The allowance for loan losses is established
through a provision for loan losses charged to expense. Loans are charged
against the allowance for loan losses when management believes that the
collectibility of the principal is unlikely. The allowance, which is based on
evaluations of the collectibility of loans and prior loan loss experience, is an
amount that management believes will be adequate to absorb probable losses on
loans existing at the reporting date. The evaluations take into consideration
such factors as changes in the nature and volume of the loan portfolio, overall
portfolio quality, review of specific problem loans and current economic
conditions that may affect a borrower's ability to pay. Accrual of interest is
discontinued on a loan when management believes, after considering economic and
business conditions and collection efforts, that the borrower's financial
condition is such that collection of principal or interest is doubtful. Loan
origination fees and certain direct origination costs are immaterial and are
recognized as income when received or expense when paid.
Effective January 1, 1996, the Bank adopted Statements of Financial Accounting
Standards Nos. 114 and 118, "Accounting by Creditors for Impairment of a Loan"
and "Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosures," respectively. Under these pronouncements a loan is considered to
be impaired when, based on current information and events, it is probable that
the Bank will not collect all principal and interest amounts according to the
contractual terms of the loan agreement.
The adoption of these pronouncements had no effect on the financial statements
or results of operations of the Bank.
Premises and Equipment - The assets are stated at cost less accumulated
depreciation and amortization, which are computed using the straight-line and
accelerated methods over the estimated useful lives of the assets. Maintenance
and repairs are charged to expense as incurred.
Income Taxes - First Bolivar Capital Corporation and Bank file a consolidated
tax return for federal income tax purposes. Federal income taxes are computed
for each company as though the company filed separate income tax returns. The
current tax expense recognized for financial accounting purposes by Bank is
remitted to First Bolivar Capital Corporation. First Bolivar Capital
Corporation retains the difference between total taxes reflected by Bank, and
the consolidated provision for income taxes.
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Refer to Note 7 for the
detail of temporary differences which give rise to deferred tax assets and
liabilities.
Intangible Assets - Goodwill is amortized over 40 years on the straight-line
method. Core deposit intangibles are amortized over a 10-year period on the
straight-line method.
F-9
<PAGE>
FIRST BOLIVAR CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Cont'd)
Profit Sharing Plan - The Bank has a qualified non-contributory profit sharing
plan which covers substantially all employees. Contributions to the plan by the
Bank are discretionary and are funded as declared.
Minority Interest in Equity of Subsidiary - Minority interest in equity of
subsidiary represents the minority shareholders' proportionate share of the
equity of the Bank.
Disclosures About Estimated Fair Value of Financial Instruments - In December of
1997 the Financial Accounting Standards Board (FASB) issued Statement No. 126
("FASB 126"), that amended FASB 107 to except certain entities from certain
disclosures about financial instruments. The Company is exempt under tax
statement and has not presented these disclosures.
Statement of Cash Flows - For purposes of reporting cash flows, cash and cash
equivalents include cash on hand, amounts due from banks and federal funds sold.
NOTE 2 - INVESTMENT SECURITIES:
The amortized cost and estimated market value of investment securities
classified as available for sale are as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
December 31,1997: Cost Gains Losses Value
- ------------------------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities
and obligations of U.S.
Government Corporations
and Agencies $ 4,375,550 $ 20,832 $ 14,425 $ 4,381,957
U.S. Government mortgage-
backed securities 11,309,940 116,360 41,827 11,384,473
Obligations of states and
political subdivisions 2,132,598 5,836 3,098 2,135,336
Other 245,140 1,765 246,905
----------- -------- -------- -----------
Total $18,063,228 $144,793 $ 59,350 $18,148,671
=========== ======== ======== ===========
Gross Gross Estimated
Amortized Unrealized Unrealized Market
December 31,1996: Cost Gains Losses Value
- ------------------------------- ----------- ---------- ---------- -----------
U.S. Treasury securities
and obligations of U.S.
Government Corporations
and Agencies $ 4,830,990 $ 20,466 $ 36,222 $ 4,815,234
U.S. Government mortgage-
backed securities 13,824,259 30,381 146,290 13,708,350
Obligations of states and
political subdivisions 2,699,320 47,416 20,022 2,726,714
Other 331,717 58,508 390,225
----------- -------- -------- -----------
Total $21,686,286 $156,771 $202,534 $21,640,523
=========== ======== ======== ===========
</TABLE>
F-10
<PAGE>
FIRST BOLIVAR CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 2 - INVESTMENT SECURITIES: (Cont'd)
Securities with aggregate book value of approximately $10,214,007 and
approximate market value of $10,273,127 were pledged to secure public funds and
for other purposes as required by law.
The amortized cost and estimated market value of securities as of December 31,
1997, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
Estimated
Amortized Market
Cost Value
----------- -----------
Due in one year or less $ 239,111 $ 239,490
Due after one year through five years 1,338,057 1,350,634
Due after five years through ten years 5,552,760 5,547,756
Due after ten years 10,933,300 11,010,791
----------- -----------
Total $18,063,228 $18,148,671
=========== ===========
The market values of obligations of state and political subdivisions are based
on available market data, which often reflect transactions of a relatively small
size and are not necessarily indicative of the price at which large amounts of
particular issues could be readily sold. Management does not anticipate a
requirement to sell at a loss any of the Bank's investment securities for
liquidity or other operating purposes.
Proceeds from sales, maturities and calls of investment securities in 1997 were
$12,654,921. Gross gains of $50,943 and losses of $27,305 were incurred on these
dispositions. Proceeds from sales, maturities and calls of investment securities
in 1997 were $8,285,383, gross gains were $52,410 and gross losses were $7,095.
The change in the net unrealized loss on available-for-sale securities that has
been included in the separate component of shareholders' equity was as follows
for the year ended December 31, 1997 (net of income taxes):
Net unrealized loss at beginning of year $-29,972
Net realized gains on sale of securities 23,638
Net increase in value of securities held
at year end 62,294
--------
Net unrealized gains at end of year $ 55,960
========
F-11
<PAGE>
FIRST BOLIVAR CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 3 - LOANS:
A summary of the loan portfolio as of December 31, 1997 and 1996 is given below:
December 31,
-------------------------
1997 1996
----------- -----------
Commercial $ 4,607,949 $ 4,135,160
Mortgage 9,420,782 8,315,549
Installment 1,665,615 947,569
Overdrafts 19,075 2,631
----------- -----------
Total $15,713,421 $13,400,909
=========== ===========
Loans are made primarily to customers in Bolivar and surrounding counties.
Although the bank has a diversified loan portfolio, the ability of its debtors
to honor their contracts is dependent upon the local Agri Business Economic
Sector.
Changes in the allowance for loan losses were as follows:
1997 1996
-------- --------
Balance at January 1 $134,587 $122,976
Provision for losses charged to expense 12,000 12,000
Loans charged off -16,974 -5,458
Recoveries 15,464 5,069
-------- --------
Balance at December 31 $145,077 $134,587
======== ========
At December 31, 1997, the Bank had no significant impaired loans and the average
recorded investment in impaired loans during the year ended December 31, 1997
was negligible.
NOTE 4 - PREMISES AND EQUIPMENT:
Major classifications of premises and equipment at December 31, 1997 and 1996
are summarized as follows:
1997 1996
---------- ----------
Land and improvements $ 100,250 $ 100,250
Buildings 648,925 648,925
Furniture, fixtures and equipment 735,396 732,830
---------- ----------
1,484,571 1,482,005
Less accumulated depreciation -963,753 -884,270
---------- ----------
Premises and equipment, net $ 520,818 $ 597,735
========== ==========
Depreciation and amortization of premises and equipment was $79,484 and $75,500
for 1997 and 1996 respectively.
F-12
<PAGE>
FIRST BOLIVAR CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 5 - INTANGIBLE ASSETS:
Intangible assets consist of the following:
1997 1996
---------- ----------
Goodwill $1,075,037 $1,075,037
Core deposit intangible 401,167 401,167
---------- ----------
1,476,204 1,476,204
Less accumulated amortization -560,831 -493,035
---------- ----------
$ 915,373 $ 983,169
========== ==========
NOTE 6 - LONG-TERM DEBT:
Long-term debt consists of the following:
1997 1996
---------- ----------
Notes payable to Federal Home Loan Bank in
variable monthly payments including interest
through July 2008, at rates varying from 5.87%
to 7.83%, collateralized by mortgage loans $3,187,064 $3,382,570
Note payable to bank, in annual principal
installments of $40,000 plus interest at the
bank's prime (8.50% at December 31, 1997),
collateralized by stock of the Bank 281,167 321,167
Note payable to bank in annual principal
installments of $29,500, plus interest at
the bank's prime rate (8.50% at December
31, 1997), through December 2000,
collateralized by stock of the Bank 88,500 118,000
---------- ----------
$3,556,731 $3,821,737
========== ==========
The Federal Home Loan Bank ("FHLB") notes are collateralized by the Bank's
related loans, stock in FHLB and certain funds on deposit at FHLB.
Principal payments required to be made for each of the next five fiscal years
and thereafter are as follows:
1998 $ 234,474
1999 246,505
2000 259,414
2001 243,764
2002 258,625
Thereafter 2,313,949
----------
Total $3,556,731
==========
F-13
<PAGE>
FIRST BOLIVAR CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 7 - INCOME TAXES:
The components of income tax expense, benefit(-) are as follows:
1997 1996
------- -------
Currently payable $70,409 $11,340
Deferred 9,822 99
------- -------
Total $80,231 $11,439
======= =======
A reconciliation of income tax expense as reflected in the statement of income
with income tax expense calculated at the statutory rate of 34% is as follows:
1997 1996
-------- --------
Tax at statutory rate $107,001 $ 83,292
Increase, reduction(-) in tax resulting from:
Tax exempt interest -40,837 -72,247
Amortization of goodwill 9,138 9,138
Interest to carry tax exempt securities 6,419 8,634
Other -1,490 -17,378
-------- --------
Taxes on income, benefit(-) $ 80,231 $ 11,439
======== ========
The components of the net deferred income tax asset at December 31, 1997 and
1996 consist of the following:
1997 1996
-------- --------
Deferred income tax assets:
Alternative minimum tax credits $ 43,376 $ 54,216
Allowance for loan losses 11,585 10,122
Amortization of core deposit intangible 7,601 5,663
Unrealized losses on securities 15,559
-------- --------
Total deferred income tax assets 62,562 85,560
-------- --------
Deferred income tax liability
Depreciation 9,988 7,604
Unrealized gains of securities 29,050
-------- --------
Total deferred income tax assets 39,038 7,604
-------- --------
Net deferred income tax asset $ 23,524 $ 77,956
======== ========
The Corporation has evaluated the need for a valuation allowance and, based on
the weight of the available evidence, has determined that it is more likely than
not that all deferred tax assets will eventually be realized.
F-14
<PAGE>
FIRST BOLIVAR CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 8 - RELATED PARTY TRANSACTIONS:
The Bank has made loans to its directors and officers and affiliated companies
owned by directors. Such loans outstanding are as follows:
1997 1996
---------- ----------
Affiliated companies $ 291,582 $ 516,635
Directors and officers 1,308,085 795,013
---------- ----------
Total $1,599,667 $1,311,648
========== ==========
NOTE 9 - COMMITMENTS AND CONTINGENCIES:
The Bank had outstanding commitments to extend credit of $4,923,187 at
December 31, 1997. Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Bank upon extension of credit, is based on management's
credit evaluation of the customer. The Bank is also contingently liable for
outstanding letters of credit totaling $35,000 at December 31, 1997. The credit
risk involved in issuing letters of credit is essentially the same as that
involved in extending a loan.
NOTE 10 - EMPLOYEE RETIREMENT PLAN:
The Company has a defined contribution profit sharing plan covering
substantially all employees with more than one year of service and who have
attained the age of 21.
The Company's contribution to the plan for 1997 was $22,848 and for 1996 was
$15,973.
NOTE 11 - REGULATORY MATTERS:
The Company is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory, and possibly additional discretionary, actions
by regulators that, if undertaken, could have a direct and material effect on
the Company's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Company must meet
specific capital guidelines that involve quantitative measures of the Company's
assets, liabilities, and certain off-balance sheet items as calculated under
regulatory accounting practices. The Company's capital amounts and
classification are also subject to qualitative judgements by the regulators
about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company to maintain minimum amounts and ratios of Total and Tier I
capital (as defined in the regulations) to risk-weighted assets (as defined),
and of Tier I capital (as defined) to average assets (as defined). The minimum
required ratios of Total and Tier I capital to risk-weighted assets and Tier I
capital to average assets are 8.0%, 4.0% and 4.0%, respectively. Management
believes, as of December 31, 1997, that the Company meets all capital adequacy
requirements to which it is subject.
F-15
<PAGE>
FIRST BOLIVAR CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 11 - REGULATORY MATTERS: (CONT'D)
As of December 31, 1997, the most recent notification from the Office of the
Comptroller of the Currency categorized the Company's subsidiary banks as well
capitalized under the regulatory framework for prompt corrective action. To be
categorized as well capitalized, the Company's subsidiary banks must maintain
minimum Total risk-based, Tier I risk-based, and Tier I leverage ratios of
10.0%, 6.0% and 5.0%, respectively. There are no conditions or events since
that notification that management believes have changed the institution's
category.
The Bank's actual capital amounts and ratios are presented in the following
table:
<TABLE>
<CAPTION>
To be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
---------------------- -------------------- -----------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Total Capital
(to Risk
Weighted Assets) $3,046,478 16.56% $1,471,026 *8.0% $1,838,783 *10.0%
Tier I Capital
(to Risk
Weighted Assets) 2,901,401 15.79 735,513 *4.0 1,103,270 *6.0
Tier I Capital
(to Average
Assets) 2,901,401 7.19 1,612,015 *4.0 2,015,019 *5.0
* greater than or equal to
</TABLE>
NOTE 12 - SUMMARIZED FINANCIAL INFORMATION OF FIRST BOLIVAR CAPITAL CORPORATION.
(PARENT COMPANY ONLY):
BALANCE SHEETS
December 31,
-----------------------
1997 1996
---------- ----------
Assets:
Investment in subsidiary $3,129,655 $2,859,207
Goodwill 662,940 689,816
Other 18,429 13,282
---------- ----------
$3,811,024 $3,562,305
========== ==========
Liabilities and Stockholders' Equity:
Long-term debt $ 369,667 $ 439,167
Stockholders' equity 3,441,357 3,123,138
---------- ----------
$3,811,024 $3,562,305
========== ==========
F-16
<PAGE>
FIRST BOLIVAR CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 12 - SUMMARIZED FINANCIAL INFORMATION OF FIRST BOLIVAR CAPITAL CORPORATION.
(PARENT COMPANY ONLY): (CONT'D)
STATEMENTS OF EARNINGS
Years Ended December 31,
------------------------
1997 1996
----------- -----------
Dividends received from subsidiary $ 99,134 $ 92,287
Excess equity in earnings of subsidiary
over dividends received 184,517 199,473
Other expenses -63,979 -68,666
Income tax credit 12,615 10,447
-------- --------
Net earnings $232,287 $233,541
======== ========
STATEMENTS OF CASH FLOWS
Year Ended December 31,
-----------------------
1997 1996
---------- ----------
Cash flows from operating activities -
dividends from subsidiary $ 99,134 $ 92,287
Interest paid on debt -37,074 -41,790
Other 9,865 10,001
-------- --------
71,925 60,498
-------- --------
Cash flows from financing activities -
payments on long-term debt -69,500 -69,500
-------- --------
Net increase, decrease(-) in cash 2,425 -9,002
Cash, beginning 2,836 11,838
-------- --------
Cash, ending $ 5,261 $ 2,836
======== ========
F-17
<PAGE>
FIRST BOLIVAR CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30 December 31 June 30
1998 1997 1997
Unaudited Audited Unaudited
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 1,261,599 $ 2,875,489 $ 1,488,545
Federal funds sold 250,000 1,500,000 -
Investment securities - available for sale 18,308,609 18,148,671 19,811,055
Loans 17,691,813 15,713,421 15,961,991
Less: Allowance for loan losses (151,352) (145,077) (136,992)
----------- ----------- -----------
Net loans 17,540,461 15,568,344 15,824,999
Premises and equipment, net of
accumulated depreciation 505,425 520,818 562,144
Other investments - stock in Federal Reserve
and FHLB (at cost) 225,050 570,050 557,079
Intangible assets 881,935 915,373 949,821
Accrued interest receivable 387,374 361,745 393,275
Deferred income tax benefit 68,434 23,524 108,321
Other assets 69,177 73,286 54,555
----------- ----------- -----------
Total assets $39,498,064 $40,557,300 $39,749,794
=========== =========== ===========
LIABILITIES
Deposits:
Non-interest bearing deposits $ 3,771,323 $ 5,263,196 $ 3,866,961
Interest bearing deposits 28,567,516 27,959,730 28,015,337
----------- ----------- -----------
Total deposits 32,338,839 33,222,926 31,882,298
Accrued income tax payable - 28,409 13,185
Accrued interest payable 204,292 219,466 184,564
Other liabilities 29,511 64,232 37,125
Long term debt 3,432,116 3,556,731 4,402,390
----------- ----------- -----------
Total liabilities 36,004,758 37,091,764 36,519,562
Minority interest 24,585 24,179 22,948
STOCKHOLDERS' EQUITY
Common stock, without par value, 1,000,000
shares authorized, 29,230 shares 292,300 292,300 292,300
outstanding
Capital surplus 967,740 967,740 967,740
Retained earnings 2,207,529 2,125,357 2,025,123
Net unrealized gains (losses) on available- 1,152 55,960 (77,879)
for sale securities __________ __________ __________
Total shareholders' equity 3,468,721 3,441,357 3,207,284
----------- ----------- -----------
Total liabilities and shareholders' $39,498,064 $40,557,300 $39,749,794
equity =========== =========== ===========
</TABLE>
F-18
<PAGE>
FIRST BOLIVAR CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED INCOME STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1998 1997 1998 1997
--------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $366,949 $315,970 $ 706,479 $ 610,716
Interest on Investment Activities:
U.S. Treasury securities and obligations
of U.S. Government agencies 224,257 298,014 488,683 590,042
Obligations of states and political
sub-divisions 48,344 28,649 78,340 59,776
Interest on federal funds sold 16,344 957 41,592 11,903
Other interest 649 554 1,279 1,127
-------- -------- ---------- ----------
Total interest income 656,543 644,144 1,316,373 1,273,564
INTEREST EXPENSE:
Interest on deposits 304,591 277,771 611,664 560,148
Interest on borrowed money 63,468 78,996 126,883 145,566
-------- -------- ---------- ----------
Total interest expense 368,059 356,767 738,547 705,714
-------- -------- ---------- ----------
Net interest income 288,484 287,377 577,826 567,850
Provision for loan losses 3,000 3,000 6,000 6,000
-------- -------- ---------- ----------
Net interest income after provision
for loan losses 285,484 284,377 571,826 561,850
OTHER INCOME:
Service fees and commissions 59,613 52,922 108,141 104,496
Gain (loss) on sale of securities (4,074) 6,262 (4,031) 10,716
Other 3,441 19,807 4,065 20,681
-------- -------- ---------- ----------
Total other income 58,980 78,991 108,175 135,893
OTHER EXPENSES:
Salaries 126,185 115,838 237,494 229,180
Employee benefits 35,689 27,127 68,316 55,180
Occupancy expense 62,082 46,339 114,716 90,343
FDIC insurance assessment 1,640 1,698 3,430 1,698
Other expense 81,551 81,530 161,414 160,237
-------- -------- ---------- ----------
Total expense 307,147 272,532 585,370 536,638
-------- -------- ---------- ----------
Income before income tax and minority
Interest 37,317 90,836 94,631 161,105
Income tax 3,474 17,162 11,621 27,828
-------- -------- ---------- ----------
Income before minority interest 33,843 73,674 83,010 133,277
Minority interest 370 668 838 1,224
-------- -------- ---------- ----------
Net income $ 33,473 $ 73,006 $ 82,172 $ 132,053
======== ======== ========== ==========
Earnings per share $1.15 $2.50 $2.81 $4.52
</TABLE>
F-19
<PAGE>
FIRST BOLIVAR CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
<TABLE>
<CAPTION>
For the six month periods ending
June 30 June 30
1998 1997
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 82,172 $ 132,053
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 73,805 71,088
Provision for loan losses 6,000 6,000
Amortization of premium on investment
Securities 16,712 1,740
Accretion of discount on investment
Securities (7,242) (3,845)
Loss (gain) on sale of securities 4,031 (10,716)
Decrease (increase) in:
Accrued interest receivable (25,629) 38,204
Deferred income tax benefit (16,676) (5,686)
Other assets 3,677 (12,760)
Increase (decrease) in:
Accrued interest payable (15,174) (5,236)
Accrued income tax payable (28,409) 13,185
Minority interest in net income of subsidiary 838 1,224
------------ -----------
Net cash provided by operating activities 59,384 201,357
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales and maturities of
securities available for sale 7,693,395 2,790,221
Purchases of securities available for sale (7,949,876) (1,020,518)
Decrease (increase) in other investments 345,000 (15,929)
Net decrease (increase) in loans (1,978,117) (2,564,677)
Purchase of bank premises and equipment (24,974) (2,149)
------------ -----------
Net cash provided (used) by
Investing activities (1,914,572) (813,052)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits -
non interest bearing (1,491,873) 142,055
Net increase (decrease) in deposits -
interest bearing 607,786 (958,998)
Principal payments on debt (124,615) 580,653
------------ -----------
Net cash provided by financing activities (1,008,702) (236,290)
------------ -----------
Increase (decrease) in cash and cash equivalents ($2,863,890) ($847,985)
Cash and cash equivalents at beginning of year 4,375,489 2,336,530
------------ -----------
Cash and cash equivalents at June 30 $ 1,511,599 $ 1,488,545
============ ===========
SUPPLEMENTAL INFORMATION:
Amount paid for interest $ 753,721 $ 710,950
============ ===========
Amount paid for income taxes $ 56,706 $ 20,329
============ ===========
</TABLE>
F-20
<PAGE>
FIRST BOLIVAR CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1: Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. The consolidated financial statements for First Bolivar Capital
Corporation include the financial statements of its 99.23% owned subsidiary,
First National Bank of Bolivar County.
For the purpose of presentation of the Statements of Cash Flows, Cash and cash
equivalents are defined as cash and due from banks plus Federal funds sold.
F-21
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of the 9th
day of September, 1998, is made between First Bolivar Corporation, Cleveland,
Mississippi, a Mississippi corporation ("First Bolivar"), First M&F Corporation,
Kosciusko, Mississippi, a Mississippi corporation ("First M&F"), First National
Bank of Bolivar County, Cleveland, Mississippi, a national association ("Bank"),
and Merchants & Farmers Bank, Kosciusko, Mississippi, a Mississippi state bank
("M&F Bank").
The Boards of Directors of First Bolivar, First M&F, Bank and M&F Bank
have duly approved this Agreement and have authorized the execution hereof by
their respective Presidents. First Bolivar and Bank have directed that this
Agreement be submitted to a vote of their shareholders, in accordance with
Article 11 of the Mississippi Business Corporation Act ("MBCA"), and 12 U.S.C.
(S)214a of the National Banking Act codified at 12 U.S.C. (S)214, et seq. and
Miss. Code Ann. (S)81-5-85, respectively, and the terms of this Agreement.
In consideration of their mutual promises and obligations, the parties
hereto adopt and make this Agreement for the merger of First Bolivar with and
into First M&F and the merger of Bank with and into M&F Bank and prescribe the
terms and conditions of such mergers and the mode of carrying them into effect,
which shall be as follows:
ARTICLE 1
DEFINITIONS
Certain Defined Terms. As used in this Agreement, the following terms
shall have the following meanings (such meaning to be equally applicable to both
the singular and plural forms of the terms defined):
1.1 "Agreement" shall mean this Agreement and Plan of Merger by and
between First Bolivar, First M&F, Bank, and M&F Bank and any amendments thereto.
References to Articles, Sections, Schedules and the like refer to the Articles,
Sections, Schedules and the like of this Agreement unless otherwise indicated.
1.2 "Bank" means First National Bank of Bolivar County, a national banking
association duly chartered on October 23, 1962, organized and existing under and
pursuant to the laws of the United States of America and maintaining its
principal place of business and registered address at 308 E. Sunflower Road, in
Cleveland, Bolivar County, Mississippi 38732.
A-1
<PAGE>
1.3 "Business Day" shall mean a day on which M&F Bank is open for business
and which is not a Saturday, Sunday or legal bank holiday.
1.4 "First Bolivar" means First Bolivar Capital Corporation, a corporation
duly chartered on October 23, 1981, organized, and existing under and pursuant
to the laws of the State of Mississippi; maintaining its principal place of
business at 308 E. Sunflower Road in Cleveland, Bolivar County, Mississippi; and
is a bank holding company within the meaning of the Bank Holding Company Act of
1956, as amended.
1.5 "Closing" The closing (the "Closing") of the transactions contemplated
herein will take place at a place and on a date that is mutually agreed to by
the parties ("Closing Date") that is within five (5) days following the later of
the date of receipt of all applicable regulatory approvals relating to the
transactions contemplated herein, the expiration of all applicable statutory and
regulatory waiting periods relative thereto, the date the Registration Statement
(the "Registration Statement") filed with the SEC is declared effective, the
date the First Bolivar shareholders approve the Agreement, or such earlier or
later date as may be agreed to by the parties. At the Closing the parties shall
each deliver to the other such evidence of the satisfaction of the conditions to
the Mergers (as defined in Section 2.1 hereof) as may reasonably be required
(including material required to be delivered under this Agreement).
1.6 "Effective Date" The Company Merger shall become effective as of the
date and time specified in Articles of Merger certified, executed, acknowledged
and delivered to the Secretary of State of the State of Mississippi (the
"Secretary") for filing pursuant to and in accordance with the provisions of
Article 11 of the MBCA.
The Bank Merger shall become effective as of the date and time specified in
Articles of Merger certified, executed, acknowledged and delivered to the
Mississippi Department of Banking and Consumer Finance (the "MDBCF") for filing
pursuant to and in accordance with the provisions of Miss. Code Ann. (S)81-5-85.
1.7 "FDIC" means that agency of the United States of America known as the
Federal Deposit Insurance Corporation, or any successor United States
governmental agency which insures deposits of commercial banks.
1.8 "FRB" means that agency of the United States of America which acts in
the capacity of a governmental central bank known as the Federal Reserve System
represented by actions of its Board of Governors, having regulatory authority
over bank holding companies, or any successor United States governmental agency
performing the function of exercising such regulatory authority.
1.9 "First M&F" means First M&F Corporation, a corporation duly chartered,
organized and existing under and pursuant to the laws of the State of
Mississippi; maintaining its principal place of business at 221 E. Washington,
in Kosciusko, Attala County, Mississippi; and is a bank holding company within
the meaning of the Bank Holding Company Act of 1956, as amended.
A-2
<PAGE>
1.10 "M&F Bank" means Merchants & Farmers Bank, a Mississippi banking
corporation, duly chartered, organized and existing under and pursuant to the
laws of the State of Mississippi and maintaining its principal place of business
at 221 Washington in Kosciusko, Attala County, Mississippi.
1.11 "MDBCF" means the Department of Banking and Consumer Finance of the
State of Mississippi having regulatory authority over M&F Bank or any successor
Mississippi governmental agency exercising such regulatory authority.
1.12 "OCC" means Office of the Comptroller of the Currency having
regulatory authority over Bank.
1.13 "Party" shall mean First M&F, M&F Bank, First Bolivar, or Bank and
"Parties" shall mean First M&F, M&F Bank, First Bolivar and Bank.
1.14 "Person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
1.15 "SEC" means that agency of the United States of America known as the
Securities and Exchange Commission.
ARTICLE 2
THE MERGERS AND RELATED MATTERS
2.1 Mergers. On the Effective Date, First Bolivar shall be merged with
and into First M&F under the Articles of Incorporation of First M&F, pursuant to
the provisions of this Agreement, the provisions of and with the effect provided
in, Article 11 of the MBCA (the "Company Merger") and the Company Merger
Agreement in substantially the form of Exhibit A hereto (the "Company Merger
Agreement"). On the Effective Date and contemporaneously with the Company
Merger, Bank shall be merged with and into M&F Bank under the Articles of
Incorporation of M&F Bank, pursuant to the provisions of this Agreement, the
provisions of and with the effect provided in 12 U.S.C. (S)214a and Miss. Code
Ann. (S)81-5-85 (the "Bank Merger" and together with the Company Merger, the
"Mergers") and the Bank Merger Agreement in substantially the form of Exhibit B
hereto (the "Bank Merger Agreement" and, together with the Company Merger
Agreement, the "Merger Agreements"). For federal income tax purposes, it is
intended that the Company Merger shall qualify as a non-taxable reorganization
A-3
<PAGE>
under and in accordance with Section 368(a)(1)(A) of the Internal Revenue Code
of 1986, as amended, and the applicable IRS regulations. In addition, for
federal income tax purposes, it is intended that the Bank Merger shall also
qualify as a non-taxable reorganization under and in accordance with Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended, and the
applicable IRS regulations. The Parties expect that the Mergers will further
certain of their business objectives, including, and without limitation, the
expansion of operations as a financial institution.
2.2 The Closing.
a. The closing of the transactions contemplated herein (the
"Closing") will take place, assuming satisfaction or waiver of each of the
conditions set forth in Article 8 hereof, on the date provided in Section
1.5.
b. At the Closing (i) First Bolivar and Bank, on the one hand, and
First M&F and M&F Bank, on the other hand, shall each provide to the other
such proof or other indication of satisfaction of the conditions set forth
in Article 8 as the party whose obligations are conditioned upon such
satisfaction may reasonably request, (ii) the certificates, letters and
opinions required by Article 8 shall be delivered, (iii) the appropriate
officers of the parties shall complete the execution, acknowledgment and
delivery of the Merger Agreements and (iv) the parties shall take such
further action as is required to consummate the transactions contemplated
by this Agreement and the Merger Agreements.
2.3 Effect of Company Merger. Upon consummation of the Company Merger,
the separate corporate existence of First Bolivar shall cease and First M&F
shall continue as the surviving corporation. The name of First M&F, as the
surviving corporation, shall by virtue of the Company Merger remain unchanged.
On the Effective Date, as hereinabove provided, all of the assets and property
of every kind and character, real, personal and mixed, tangible and intangible,
choses in action, rights, and credits then owned by First Bolivar, or which
would inure to it, shall immediately by operation of law and without any
conveyance or transfer or without any further action or deed, be vested in and
become the property of First M&F, which shall have, hold, and enjoy the same in
its own right as fully and to the same extent as the same were possessed, held,
and enjoyed by First Bolivar prior to such merger, and First M&F shall be deemed
to be and shall be a continuation of the original entities and all of the rights
and obligations of First Bolivar shall remain unimpaired, and First M&F, on the
Effective Date of the Company Merger shall succeed to all such rights,
obligations, duties and liabilities connected therewith.
2.4 Effect of Bank Merger. Upon consummation of the Bank Merger, the
separate corporate existence of Bank shall cease and M&F Bank shall continue as
the surviving corporation. The name of M&F Bank, as the surviving corporation,
shall by virtue of the Bank Merger remain unchanged. On the Effective Date, as
hereinabove provided, all of the assets and property of every kind and
character, real, personal and mixed, tangible and intangible, choses in action,
rights, and credits then owned by Bank, or which would inure to it, shall
immediately by operation of law and without any conveyance or transfer or
without any further action or deed, be vested in and become the property of M&F
Bank, which shall have, hold, and
A-4
<PAGE>
enjoy the same in its own right as fully and to the same extent as the same were
possessed, held, and enjoyed by Bank prior to such merger; and M&F Bank shall be
deemed to be and shall be a continuation of the original entities and all of the
rights and obligations of Bank shall remain unimpaired, and M&F Bank, on the
Effective Date of the Bank Merger shall succeed to all such rights, obligations,
duties and liabilities connected therewith.
ARTICLE 3
CONVERSION OF STOCK
3.1 Conversion of First Bolivar Stock and Bank Stock.
a. On the Effective Date, each share of the Common Stock, $5.00 par
value, of First M&F ("First M&F Common Stock") issued and outstanding
immediately prior to the Effective Date shall remain outstanding and shall
represent one share of Common Stock, $5.00 par value, of First M&F.
b. On the Effective Date, each share of common stock, $10.00 par
value, of First Bolivar ("First Bolivar Common Stock") issued and
outstanding immediately prior to the Effective Date, other than shares of
First Bolivar Common Stock owned by shareholders who pursuant to the MBCA
perfect dissenters' rights, shall by virtue of the Company merger be
converted into (i) that number of shares of common stock, $5.00 par value
per share, of First M&F ("First M&F Common Stock") equal to (x) $9,000,000
(the "Aggregate Merger Consideration Value") divided by $37.00, the average
of the closing sale prices of a share of First M&F Common Stock on the
Nasdaq stock market on August 7, 1998 (the "Average Market Price"), divided
by the (y) the number of outstanding shares of First Bolivar Common Stock
immediately preceding the Effective Date.
c. The formula set forth above shall be adjusted to take into account
any change in the number of shares of First M&F Common Stock outstanding as
a result of a stock split or stock dividend (as it may be so adjusted, the
"Conversion Number").
d. On the Effective Date, each share of Common Stock, $10.00 par
value, of Bank ("Bank Common Stock") issued and outstanding immediately
prior to the Effective Date other than shares of Bank Common Stock owned by
First Bolivar and other than shares of Bank Common Stock owned by
shareholders who pursuant to 12 U.S.C. (S)214a perfect dissenters' rights,
shall by virtue of the Bank Merger be converted into 8.32169 shares of
First M&F Common Stock. If the Conversion Number is adjusted as provided
in Section 3.1(c), the number of shares of First M&F Common Stock herein
shall be adjusted to equal the Conversion Number.
e. As a result of the Mergers and without any action on the part of
the holder thereof, all shares of First Bolivar Common Stock and Bank
Common Stock shall cease
A-5
<PAGE>
to be outstanding and shall be canceled and retired and shall cease to
exist, and each holder of a certificate (a "Certificate") representing any
shares of First Bolivar Common Stock or Bank Common Stock shall thereafter
cease to have any rights with respect to such shares of First Bolivar
Common Stock or Bank Common Stock, except the right to receive, without
interest, the First M&F Common Stock in accordance with Section 3.1(b) and
(d), and cash for fractional shares of First M&F Common Stock in accordance
with Section 3.2(e) upon the surrender of such Certificate.
f. Each share of First Bolivar Common Stock and Bank Common Stock
issued and held in First Bolivar's and Bank's treasury, respectively, at
the Effective Date shall, by virtue of the Mergers, cease to be outstanding
and shall be canceled and retired without payment of any consideration
therefor.
3.2 Exchange of Certificates Representing First Bolivar Common Stock and
Bank Common Stock.
a. As of the Effective Date, First M&F shall deposit, or shall cause
to be deposited, with M&F Bank Trust Department, as exchange agent (the
"Exchange Agent"), for the benefit of the holders of shares of First
Bolivar Common Stock and Bank Common Stock, for exchange in accordance with
this Article 3, certificates representing the shares of First M&F Common
Stock and cash (such certificates for shares of First M&F Common Stock and
cash being hereinafter referred to as the "Exchange Fund") to be issued
pursuant to Section 3.1 and paid pursuant to this Section 3.2 in exchange
for outstanding shares of First Bolivar Common Stock and Bank Common Stock.
b. Promptly after the Effective Date, First M&F shall cause the
Exchange Agent to mail to each holder of record of a Certificate or
Certificates (other than those representing Bank Common Stock held by First
Bolivar or other than those representing shares with respect to which the
holder thereof has perfected appraisal rights under the MBCA or 12 U.S.C.
(S)214a and has not subsequently lost, withdrawn or forfeited such rights)
(i) a letter of transmittal which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only
upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as First M&F may reasonably
specify and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of First M&F
Common Stock, and cash in lieu of fractional shares. Upon surrender of a
Certificate for cancellation to the Exchange Agent together with such
letter of transmittal, duly executed and completed in accordance with the
instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor (x) a certificate representing that number of
whole shares of First M&F Common Stock and (y) a check representing the
amount of cash in lieu of fractional shares, if any, which such holder has
the right to receive in respect of the Certificate surrendered after giving
effect to any required withholding tax, and the Certificate so surrendered
shall forthwith be canceled. No interest will be paid
A-6
<PAGE>
or accrued on the value of any First M&F Common Stock or cash payable to
holders of Certificates. In the event of a transfer of ownership of First
Bolivar Common Stock which is not registered in the transfer records of
First Bolivar, a certificate representing the proper number of shares of
First M&F Common Stock, together with a check for the cash to be paid in
lieu of fractional shares, may be issued to such a transferee if the
Certificate representing such First Bolivar Common Stock is presented to
the Exchange Agent, accompanied by all documents required to evidence and
effect such transfer and to evidence that any applicable stock transfer
taxes have been paid.
c. Notwithstanding any other provisions of this Agreement, no
dividends on First M&F Common Stock shall be paid with respect to any
shares of First Bolivar Common Stock or Bank Common Stock represented by a
Certificate until such Certificate is surrendered for exchange as provided
herein. Subject to the effect of applicable laws, following surrender of
any such Certificate, there shall be paid to the holder of the certificates
representing whole shares of First M&F Common Stock issued in exchange
therefor, without interest, (i) at the time of such surrender, the amount
of dividends or other distributions with a record date after the Effective
Date theretofore payable with respect to such whole shares of First M&F
Common Stock and not paid, less the amount of any withholding taxes which
may be required thereon, and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Date but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of First M&F Common
Stock, less the amount of any withholding taxes which may be required
thereon.
d. On or after the Effective Date, there shall be no transfers on the
stock transfer books of First Bolivar or Bank of the shares of First
Bolivar Common Stock or Bank Common Stock, respectively, which were
outstanding immediately prior to the Effective Date. If, after the
Effective Date, Certificates are presented to First M&F, they shall be
canceled and exchanged for certificates for shares of First M&F Common
Stock and cash in lieu of fractional shares, if any, deliverable in respect
thereof pursuant to this Agreement in accordance with the procedures set
forth in this Article 3. Certificates surrendered for exchange by any
person constituting an "affiliate" of First Bolivar or Bank for purposes of
Rule 145(c) under the Securities Act of 1933 (the "Securities Act") shall
not be exchanged until First M&F has received a written agreement from such
person as provided in Section 4.1.
e. No fractional shares of First M&F Common Stock shall be issued
pursuant hereto. In lieu of the issuance of any fractional share of First
M&F Common Stock pursuant to Section 3.1(b), cash adjustments will be paid
to holders in respect of any fractional share of First M&F Common Stock
that would otherwise be issuable, and the amount of such cash adjustment
shall be equal to such fractional proportion of the Average Market Price.
A-7
<PAGE>
f. Any portion of the Exchange Fund (including the proceeds of any
investments thereof and any shares of First M&F Common Stock) that remains
unclaimed by the former stockholders of First Bolivar or Bank one year
after the Effective Date shall be delivered to First M&F. Any former
stockholders of First Bolivar or Bank who have not theretofore complied
with this Article 3 shall thereafter look only to First M&F for payment in
respect of their shares, in any event without any interest thereon.
g. None of First M&F, First Bolivar, M&F Bank, Bank, the Exchange
Agent or any other person shall be liable to any former holder of shares of
First Bolivar Common Stock or Bank Common Stock for any amount properly
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
h. In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required
by First M&F, the posting by such person of a bond in such reasonable
amount as First M&F may direct as indemnity against any claim that may be
made against it with respect to such Certificate, the Exchange Agent will
issue in exchange for such lost, stolen or destroyed Certificate the shares
of First M&F Common Stock and cash in lieu of fractional shares, and unpaid
dividends and distributions on shares of First M&F Common Stock as provided
in Section 3.2(c), deliverable in respect thereof pursuant to this
Agreement.
ARTICLE 4
ACCOUNTING AND TAX MATTERS
4.1 Affiliates. First Bolivar, Bank and First M&F shall cooperate and use
their best efforts to identify those persons who may be deemed to be
"affiliates" of First Bolivar or Bank within the meaning of Rule 145(c) or Rule
144 (as applicable) under the Securities Act. First Bolivar and Bank shall use
its best efforts to cause each person so identified to deliver to First M&F, not
later than twenty (20) days after execution of this Agreement, a written
agreement in substantially the form set forth in Exhibit C attached hereto.
First M&F shall be entitled to place appropriate legends on the certificates
evidencing shares of First M&F Common Stock to be received pursuant to this
Agreement by such affiliates and to issue appropriate stop transfer instructions
to the transfer agent for First M&F Common Stock.
4.2 Accounting Treatment. It is intended by the Parties hereto, that the
Mergers will qualify for pooling of interest accounting treatment under
generally accepted accounting principles.
4.3 Tax Consequences. It is the intention of the Parties hereto, that the
Mergers shall constitute reorganizations within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), and that this
Agreement shall constitute a "plan of merger" for purposes of Section 368 of the
Code.
A-8
<PAGE>
4.4 Accounting and Tax Representations. Each Party hereto represents and
warrants that the statements made with respect to it in the Statement of
Representations attached hereto on Schedule 4.4 and made a part hereof, are true
and correct as of the date hereof and will be true and correct on the Effective
Date.
ARTICLE 5
FIRST BOLIVAR'S COVENANTS AND AGREEMENTS
5.1 Operation of Business. Between the date hereof and the Effective
Date, or until the termination of this Agreement, First Bolivar covenants and
agrees that it will operate its business solely in the ordinary course
consistent with prudent business practices and in compliance with all applicable
laws, regulations and rules; and, First Bolivar will cause the Bank to operate
its business solely in the ordinary course consistent with prudent business
practices and in compliance with all applicable laws, regulations and rules; and
without prior written consent of First M&F, First Bolivar will not, and First
Bolivar will cause Bank not to:
a. Amend or otherwise change its respective articles of incorporation
or bylaws (except to the extent required in order to effect the Mergers as
contemplated herein), as each such document is in effect on the date
hereof;
b. Issue or sell, or authorize for issuance or sale, the shares of
First Bolivar or Bank or any additional shares of any class of capital
stock of First Bolivar or Bank (except to the extent required to effect the
Mergers as contemplated herein);
c. Issue, grant, or enter into any subscription, option, warrant,
right, convertible security, or other agreement or commitment of any
character obligating First Bolivar or Bank to issue securities;
d. Declare, set aside, make, or pay any dividend or other
distribution with respect to its capital stock except dividends from the
Bank to First Bolivar consistent with past practices and to enable First
Bolivar to service existing First Bolivar corporate indebtedness and to pay
the expenses related to the transactions contemplated hereby.
e. Maintain a level of consolidated capital of not less than
$3,115,000 and a loan loss reserve at Bank of not less than $149,000.
f. Redeem, purchase, or otherwise acquire, directly or indirectly,
any of its capital stock respectively;
g. Authorize any capital expenditure(s) which, individually or in the
aggregate, exceed $20,000;
A-9
<PAGE>
h. Extend any new, or renew any existing, loan, credit, lease, or
other type of financing which individually exceeds $50,000 or renew any
such type of financing which individually exceeds $25,000 and does not meet
Bank's loan policy requirements except in connection with the workout of
loans;
i. Except in the ordinary course of business, sell, pledge, dispose
of, or encumber, or agree to sell, pledge, dispose of, or encumber, any
assets of First Bolivar or Bank;
j. Excluding normal and customary banking transactions, incur any
indebtedness for borrowed money, issue any debt securities, or enter into
or modify any contract, agreement, commitment, or arrangement with respect
thereto;
k. Impose or suffer the imposition, on any share of stock held by
First Bolivar in the Bank, of any material lien, charge, or encumbrance, or
permit any such lien to exist;
l. Establish or add any automated teller machines or branch or other
banking offices;
m. Acquire (by merger, consolidation, lease or other acquisition of
stock, ownership interests or assets) any corporation, partnership, or
other business organization or division thereof, or enter into any
contract, agreement, commitment, or arrangement with respect to any of the
foregoing, except to the extent required in order to effect the Mergers as
contemplated herein and except in the ordinary course of business in
connection with foreclosures or similar actions;
n. Enter into, extend, or renew any lease for office or other space;
o. Except as required by law, enter into, adopt or amend any bonus,
profit sharing, compensation, stock option, pension, retirement, deferred
compensation, employment, or other employee benefit plan, agreement, trust,
fund, or arrangement for the benefit or welfare of any officer, employee or
representative of First Bolivar or Bank;
p. Grant any increase in compensation to any director, officer, or
employee or representative of First Bolivar or Bank except in the ordinary
course of business consistent with past practice; or
q. Enter into, amend, or terminate any employment agreement,
relationship or responsibilities with any director, officer, or key
employee or representative of First Bolivar or Bank, or enter into, amend,
or terminate any employment agreement with any other person otherwise than
in the ordinary course of business, or take any action with respect to the
grant or payment of any severance or termination pay except as expressly
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consented to in writing by First M&F, provided, however, prior to the
Effective Date, First Bolivar and Bank shall terminate any and all
employment contracts with the persons listed on Schedule 5.1.p. with no
liability therefor on the part of First Bolivar or Bank;
r. Take any action or omit to take any action which would cause any
of First Bolivar's or Bank's representations or warranties to be untrue or
misleading in any material respect or any covenant of First Bolivar or Bank
under this Agreement incapable of being performed; or
s. Take any action that would materially and adversely affect the
ability of any Party hereto to obtain the approvals necessary for
consummation of the transactions contemplated hereby or that would
materially and adversely affect First Bolivar's ability to perform its
covenants and agreements hereunder;
t. Agree in writing or otherwise to do any of the foregoing.
5.2 Preservation of Business. Between the date hereof and the Effective
Date, First Bolivar will, and will cause Bank to, use its best efforts to
preserve its existing business and to keep its business organization intact,
including its present relationships with its employees and customers and others
having business relations with it.
5.3 Insurance. Pending the Closing, First Bolivar shall cause the real
property owned by First Bolivar and Bank to be insured reasonably against all
insurable risks under policies with reasonable deductibles and in full
compliance with any co-insurance provision.
5.4 Stockholders' Meeting. First Bolivar will (i) take all steps
necessary to call, give notice of, convene and hold a special meeting of its and
Bank's shareholders as soon as practicable for the purpose of approving this
Agreement, the Merger agreements and the transactions contemplated hereby and
for such other purposes as may be necessary or desirable, and (ii) cooperate and
consult with First M&F with respect to each of the foregoing matters. Said
notice shall include notice of dissenter's rights, if any, and shall solicit
stockholders' proxies in favor of this Agreement, and all notices shall be given
in accordance with all applicable laws, regulations, and rules. Except as may
be required by fiduciary obligations, First Bolivar and its directors and
principal stockholders will support and vote in favor of a stockholder
resolution approving this Agreement and the Company Merger, and First Bolivar
agrees to vote all of the shares of Bank owned by it in favor of the Bank Merger
of the Bank special shareholders' meeting called to consider and vote upon the
Bank Merger.
First Bolivar's Consolidated Group shall cooperate in preparing the
registration statement and the proxy statement, and will promptly furnish all
such data and information relating to it as First M&F may reasonably request for
the purpose of including such data and information in the registration
statement.
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5.5 Property Transfers. From time to time, as and when requested by First
M&F and to the extent permitted by Mississippi law, the officers and directors
of First Bolivar and Bank last in office shall be authorized to execute and
deliver such deeds and other instruments and shall take or cause to be taken
such further or other actions as shall be necessary in order to vest or perfect
in or to confirm of record or otherwise to First M&F title to, and possession
of, all the property, interests, assets, rights, privileges, immunities, powers,
franchises, and authorities of First Bolivar and Bank, and otherwise to carry
out the purposes of this Agreement.
5.6 First Bolivar and Bank Financial and Other Reports. First Bolivar
shall (and shall cause Bank to) make available to First M&F and M&F Bank the
following statements and other reports and documents:
a. First Bolivar's Consolidated Balance Sheets as of June 30, 1998
and 1997 (unaudited) and December 31, 1997, 1996 and 1995 (audited);
Consolidated Statements of Income and Changes in Stockholders' Equity and
Consolidated Statements of Cash Flows for the years ended December 31,
1997, 1996 and 1995 (audited) and Statements of Income for the three-month
periods ended June 30, 1998 and 1997 (unaudited) ("First Bolivar Financial
Statements");
b. All correspondence with the OCC, the FRB and the Internal Revenue
Service from January 1, 1997 through the date of Closing except as may be
restricted by legal limitations); and
c. Such additional financial or other information as may be required
for the regulatory applications and Registration Statement in connection
with the consummation of the Mergers (subject to any legal limitations).
5.7 Due Diligence. In order to afford First M&F access to such
information as it may reasonably deem necessary to perform any due diligence
review with respect to the assets of First Bolivar and Bank to be acquired as a
result of the Mergers, First Bolivar shall (and shall cause the Bank to), upon
reasonable notice, afford First M&F and its officers, employees, counsel,
accountants, and other authorized representatives access, during normal business
hours throughout the period prior to the Effective Date, to all of its and the
Bank's properties; books, contracts, commitments, loan files, litigation files
and records (including, but not limited to, the minutes of the Boards of
Directors of First Bolivar and the Bank and all committees thereof), and it
shall (and shall cause the Bank to), upon reasonable notice and to the extent
consistent with applicable law, furnish promptly to First M&F such information
as First M&F may reasonably request to perform such review. All information
obtained by First M&F shall be subject to the Confidentiality Agreement
heretofore executed.
5.8 No Solicitation. Prior to the Effective Date, neither First Bolivar
nor Bank shall authorize or knowingly permit any of their officers, directors,
employees, representatives, agents or other persons controlled by First Bolivar
or Bank to directly or indirectly, encourage or solicit or, hold any discussions
or negotiations with, or provide any information to, any persons, entity
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or group concerning any merger, consolidation, sale of substantial assets, sale
of shares of capital stock or similar transactions involving, directly or
indirectly, First Bolivar or Bank except as contemplated by this Agreement or as
required by fiduciary obligations. First Bolivar and Bank shall promptly
communicate to First M&F the identity and terms of any proposal which they may
receive with respect to any such transaction.
5.9 Covenant Not to Compete. The Directors of First Bolivar and Bank each
agree that for the period from the date hereof until one year after the
Effective Date, they will not become directly, indirectly or beneficially an
employee, five percent or more stockholder or director of any bank, savings
bank, savings association, trust company, financial institution or other similar
business enterprise which competes with M&F Bank (as successor to Bank) within
Bolivar County, Mississippi. The directors of First Bolivar and Bank further
agree not to initiate any action to induce any employee of M&F Bank (as
successor to Bank) to leave M&F Bank's employment or directly or indirectly
assist any other person or entity in requesting or inducing any such other
employee of M&F Bank to leave such employment for the period of the date hereof
until one (1) year after the Effective Date.
ARTICLE 6
FIRST BOLIVAR'S REPRESENTATIONS AND WARRANTIES
First Bolivar represents and warrants to First M&F and M&F Bank as follows:
for purposes of this Agreement, except in Section 6.1 and where the context
requires otherwise, any reference to First Bolivar in this Article 6 shall be
deemed to include First Bolivar and Bank and any reference to "material,"
material adverse effect or a similar standard shall refer to the financial
condition, operations or other aspects of First Bolivar and Bank taken as a
whole.
6.1 Organization and Authority. First Bolivar is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Mississippi and Bank is a national banking association duly organized, validly
existing and in good standing under the laws of the United States. Each of
First Bolivar and Bank has the corporate power and authority to own, lease and
operate its properties and assets and to carry on its business as it is now
being conducted.
6.2 Authorization. The execution, delivery and performance of this
Agreement by First Bolivar and Bank and the consummation of the transactions
contemplated hereby have been duly authorized by the Boards of Directors of
First Bolivar and Bank, subject to regulatory approval. No other corporate
proceedings on the part of First Bolivar or Bank are necessary to authorize
consummation of this Agreement, except for the approval of the transaction by
First Bolivar's and Bank's stockholders, and the performance by First Bolivar
and Bank of the terms hereof. This Agreement is a valid and binding obligation
of First Bolivar and Bank enforceable against First Bolivar and Bank in
accordance with its terms except as may be limited by applicable bankruptcy,
insolvency, reorganization or moratorium or other similar laws affecting
creditors' rights generally and except that the availability of equitable
remedies is within
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the discretion of the appropriate court and except that it is subject to
approval by its stockholders and applicable regulatory agencies.
Neither the execution, delivery or performance of this Agreement by First
Bolivar, nor the consummation of the transactions contemplated hereby, nor
compliance by First Bolivar with any of the provisions hereof, will (a) in any
material respect violate, conflict with, or result in a breach of any provision
of, or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration, or the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of First Bolivar or Bank under
any terms, conditions or provisions of (i) First Bolivar's or Bank's Charter or
Bylaws or other charter documents of First Bolivar or Bank or (ii) any material
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which First Bolivar or Bank is a party or by
which First Bolivar or Bank may be bound, or to which First Bolivar or Bank or
the properties or assets of it may be subject, or (b) violate in any material
respect any judgment, ruling, order, writ, injunction, decree, statute, rule or
regulation applicable to First Bolivar or Bank or any of its properties or
assets.
6.3 Capital Structure of First Bolivar. As of the date hereof, the
authorized capital of First Bolivar consists solely of 1,000,000 shares of
common stock of the par value of $10.00 each and no preferred stock. As of the
date hereof 29,230 shares of such authorized common stock were issued and
outstanding. The outstanding shares of capital stock of First Bolivar are
validly issued and outstanding, fully paid and nonassessable. There are no
outstanding options, conversion rights, warrants, calls, rights, commitments or
agreements to issue any form of stock or other security of First Bolivar. There
are no outstanding obligations or commitments to purchase, redeem or otherwise
acquire any outstanding shares of common stock of First Bolivar.
6.4 Ownership of Other Organizations. First Bolivar does not own,
directly or indirectly, five percent (5%) or more of the outstanding capital
stock or other voting securities of any corporation, bank, or other organization
except the Bank. The presently authorized capital of Bank consists solely of
30,000 shares of common stock of the par value of $10.00 each and no preferred
stock. As of the date hereof, 30,000 shares of common stock were issued and
outstanding. The outstanding shares of capital stock of the Bank are validly
issued and outstanding, fully paid and, nonassessable and, 29,770 of such shares
are owned by First Bolivar, free and clear of all liens, claims and
encumbrances.
6.5 First Bolivar Financial and Other Reports. First Bolivar has made
available to First M&F true and correct copies of (a) the consolidated balance
sheets as of December 31, 1997, 1996 and 1995 of First Bolivar and its
consolidated subsidiaries and the related consolidated statements of income,
changes in shareholders' equity and cash flows for the respective years then
ended, the related notes thereto, and the report of its independent public
accountants with respect thereto (the "First Bolivar Audited Financial
Statements") and the consolidated balance sheets of June 30, 1998 and 1997
(unaudited), and consolidated statements of income for the three- month periods
ended June 30, 1998 and 1997 (unaudited), and (b) all
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correspondence between First Bolivar, Bank (the "First Bolivar Consolidated
Group") and the OCC, the FRB, the SEC and the Internal Revenue Service since
January 1, 1997, except as may be prohibited by law. First Bolivar's Financial
Statements (i) have been prepared in accordance with generally accepted
accounting principles, consistently applied, and (ii) present fairly the
consolidated results of operations of the First Bolivar Consolidated Group for
the periods covered thereby and the consolidated financial condition of the
First Bolivar Consolidated Group as of the dates thereof.
6.6 No Material Adverse Change. Since June 30, 1998, there has been no
event or condition of any character (whether actual, or to the knowledge of
First Bolivar or the Bank, threatened or contemplated) that has had or can
reasonably be anticipated to have, a material adverse effect on the financial
condition, results of operations, business or prospects of First Bolivar or the
Bank, excluding changes in laws or regulations that affect banking institutions
generally.
6.7 Tax Liability. The amounts set up as liabilities for taxes in the
First Bolivar Financial Statements are sufficient for the payment of all
respective taxes (including, without limitation, federal, state, local, and
foreign excise, franchise, property, payroll, income, capital stock, and sales
and use taxes) accrued in accordance with GAAP and unpaid at the respective
dates thereof.
6.8 Tax Returns: Payment of Taxes. All federal, state, local, and foreign
tax returns (including, without limitation, estimated tax returns, withholding
tax returns with respect to employees, and FICA and FUTA returns) required to be
filed by or on behalf of First Bolivar or the Bank have been timely filed or
requests for extensions have been timely filed and granted and have not expired
for periods ending on or before June 30, 1998, and all returns filed are
complete and accurate to the best information and belief of their respective
managements and all taxes shown on filed returns have been paid. As of the date
hereof, there is no audit, examination, deficiency or refund litigation or
matter in controversy with respect to any taxes that might result in a
determination materially adverse to First Bolivar or the Bank except as reserved
against in the First Bolivar Financial Statements. All taxes, interest,
additions and penalties due with respect to completed and settled examinations
or concluded litigation have been paid, and First Bolivar's reserves for bad
debts at December 31, 1997, as filed with the Internal Revenue Service were not
greater than the maximum amounts permitted under the provisions of Section 585
of the Code.
6.9 Litigation and Proceedings. Except as set forth on Schedule 6.9
hereto, no litigation, proceeding or controversy before any court or
governmental agency is pending against First Bolivar or Bank that in the opinion
of its management is likely to have a material and adverse effect on the
business, results of operations or financial condition of First Bolivar and the
Bank taken as a whole, and, to the best of its knowledge, no such litigation,
proceeding or controversy has been threatened or is contemplated.
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6.10 Brokers' or Finders' Fees. No agent, broker, investment banker,
investment or financial advisor or other person acting on behalf of First
Bolivar or the Bank or under their authority is entitled to any commission,
broker's or finder's fee from any of the Parties hereto in connection with any
of the transactions contemplated by this Agreement.
6.11 Contingent Liabilities. Except as disclosed on Schedule 6.11 hereto
or as reflected in the First Bolivar Financial Statements and except in the case
of the Bank for unfunded loan commitments made in the ordinary course of
business consistent with past practices, as of June 30, 1998, neither First
Bolivar nor the Bank has any obligation or liability (contingent or otherwise)
that was material, or that when combined with all similar obligations or
liabilities would have been material, to First Bolivar and the Bank taken as a
whole and there does not exist a set of circumstances resulting from
transactions effected or events occurring prior to, on, or after June 30, 1998,
or from any action omitted to be taken during such period that, to the knowledge
of First Bolivar, could reasonably be expected to result in any such material
obligation or liability.
6.12 Title to Assets; Adequate Insurance Coverage.
Except as described on Schedule 6.12:
a. As of June 30, 1998, First Bolivar and the Bank had, and except
with respect to assets disposed of for adequate consideration in the
ordinary course of business since such date, now have, good and
merchantable title to all real property and good and merchantable title to
all other material properties and assets reflected in the First Bolivar
Financial Statements, free and clear of all mortgages, liens, pledges,
restrictions, security interests, charges and encumbrances of any nature
except for (i) mortgages and encumbrances which secure indebtedness which
is properly reflected in the First Bolivar Financial Statements or which
secure deposits of public funds as required by law; (ii) liens for taxes
accrued by not yet payable; (iii) liens arising as a matter of law in the
ordinary course of business with respect to obligations incurred after June
30, 1998, provided that the obligations secured by such liens are not
delinquent or are being contested in good faith; (iv) such imperfections of
title and encumbrances, if any, as do not materially detract from the value
or materially interfere with the present use of any of such properties or
assets or the potential sale of any such owned properties or assets; and
(v) capital leases and leases, if any, to third parties for fair and
adequate consideration. First Bolivar and the Bank own, or have valid
leasehold interests in, all material properties and assets, tangible or
intangible, used in the conduct of its business. Any real property and
other material assets held under lease by First Bolivar or the Bank are
held under valid, subsisting and enforceable leases with such exceptions as
are not material and do not interfere with the use made or proposed to be
made by First M&F in such lease of such property.
b. Except as disclosed on Schedule 6.12 with respect to each lease of
any real property or a material amount of personal property to which First
Bolivar or the Bank
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is a party, except for financing leases in which First Bolivar or the Bank
is lessor, (i) such lease is in full force and effect in accordance with
its terms; (ii) all rents and other monetary amounts that have been due and
payable thereunder have been paid; (iii) there exists no default or event,
occurrence, condition or act which with the giving of notice, the lapse of
time or the happening of any further event, occurrence, condition or act
would become a default under such lease; and (iv) the Mergers will not
constitute a default or a cause for termination or modification of such
lease.
c. Neither First Bolivar nor the Bank has any legal obligation,
absolute or contingent, to any other person to sell or otherwise dispose of
any substantial part of its assets or to sell or dispose of any of its
assets except in the ordinary course of business consistent with past
practices.
d. To the knowledge and belief of its management, the policies of
fire, theft, liability and other insurance maintained with respect to the
assets or businesses of First Bolivar and the Bank provide adequate
coverage against loss and the fidelity bonds in effect as to which First
Bolivar or the Bank is named insured meet the applicable standards of the
American Bankers Association.
6.13 Liabilities. To the best knowledge and belief of its management, all
liabilities of First Bolivar and Bank were, and will be created, for good,
valuable and adequate consideration in accordance with prudent business
standards and in substantial compliance with all laws, regulations and rules and
the accounts or evidence of ownership of accounts are and will be genuine, true,
valid and enforceable in accordance with their written terms. Neither First
Bolivar nor Bank has agreed to any modification or extension of accounts or
account terms or otherwise made any agreements regarding such accounts except as
disclosed in writing on the books and records of First Bolivar or Bank; and
First Bolivar and Bank have no knowledge of any claim of ownership to any
account other than as shown on the written ownership records of First Bolivar
and Bank for each account, and First Bolivar and Bank have no knowledge of any
alleged improper or wrongful withdrawal or payment of any such account.
6.14 Loans. To the best knowledge and belief of its management, each loan
reflected as an asset of First Bolivar in the First Bolivar Financial
Statements, as of June 30, 1998, or acquired since that date, is the legal,
valid, and binding obligation of the obligor named therein, enforceable in
accordance with its terms, and no loan is subject to any asserted defense,
offset or counterclaim known to First Bolivar, except as disclosed in writing to
First M&F on or prior to the date hereof.
6.15 Allowance for Loan Losses. The allowances for possible loan losses
shown on the consolidated balance sheets of First Bolivar as of June 30, 1998
are adequate in all material respects under the requirements of GAAP to provide
for possible losses, net of recoveries, relating to loans previously charged
off, on loans outstanding (including accrued interest receivable) as of June 30,
1998, and each such allowance has been established in accordance with GAAP.
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6.16 Investments. Except for investments classified as held-to-maturity as
prescribed under the Financial Accounting Standards Board Statement Number 115,
and pledges to secure public or trust deposits, none of the investments
reflected in the First Bolivar Financial Statements under the heading
"Investment Securities," and none of the investments made by First Bolivar or
the Bank since June 30, 1998, and none of the assets reflected in the First
Bolivar Financial Statements under the heading "Cash and Due From Banks," is
subject to any restriction, whether contractual or statutory, that materially
impairs the ability of First Bolivar or the Bank freely to dispose of such
investment at any time except as disclosed in Schedule 6.16. With respect to all
repurchase agreements to which First Bolivar or the Bank is a party, First
Bolivar or the Bank, as the case may be, has a valid, perfected first lien or
security interest in the government securities or other collateral securing each
such repurchase agreement which equals or exceeds the amount of debt secured by
such collateral under such agreement.
6.17 Information for Registration and Proxy Statements. None of the
information supplied or to be supplied by First Bolivar for inclusion in (a) the
Registration Statement to be filed by First M&F with the SEC (b) the Notice of
Meeting and Proxy Statement to be mailed by First Bolivar and Bank to
stockholders in connection with the meetings referred to in Section 5.4 hereof
(the "Proxy Statement"), and (c) any other documents to be filed with the SEC or
any regulatory agency in connection with the transactions contemplated hereby
will, as amended or supplemented at the time the Registration Statement is filed
with the SEC or at the time it becomes effective, at the time the Proxy
Statement is mailed to holders of First Bolivar's and Bank's stock, as may be
amended at the time of First Bolivar and Bank Stockholders' Meetings, and at the
time of filing of such other documents, respectively, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. All documents,
financial statements, or other information or materials which First Bolivar and
Bank shall provide for filing with the SEC and any regulatory agency in
connection with the Mergers will comply with generally accepted accounting
principles.
6.18 Commitments and Contracts. Neither First Bolivar nor Bank is a party
or subject to any of the following (whether written or oral, express or
implied):
a. Except as listed on Schedule 5.1.p. attached hereto and with a
complete copy provided to First M&F, any employment contract (including any
obligations with respect to severance or termination pay liabilities or
fringe benefits) with any present or former officer, director, employee or
consultant (other than those which are terminable at will by First Bolivar
or Bank);
b. Except as listed on Schedule 5.1.n. attached hereto and with a
complete copy provided to First M&F, any plan or contract providing for any
bonus, pension, option, deferred compensation, retirement payment, profit
sharing or similar arrangement with respect to any present or former
officer, director, employee or consultant; or
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c. Any contract not made in the ordinary course of business
containing covenants which limit the ability of First Bolivar or Bank to
compete in any line of business or with any person or which involves any
restriction of the geographical area in which, or method by which, First
Bolivar or Bank may carry on its respective business (other than as may be
required by law or applicable regulatory authorities).
6.19 Employee Plans. To the best of First Bolivar's knowledge and belief,
it, the Bank, and all "employee benefit plans," as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), that
cover one or more employees employed by First Bolivar or the Bank:
i. is in compliance with all laws, regulations, reporting and
licensing requirements and orders applicable to its business or to
such plan or any of its employees (because of such employee's
activities on behalf of it), the breach or violation of which could
have a material and adverse effect on such business; and
ii. has received no notification from any agency or department
of federal, state or local government or the staff thereof asserting
that any such entity is not in compliance with any of the statutes,
regulations or ordinances that such governmental authority enforces,
or threatening to revoke any license, franchise, permit or
governmental authorization, and is subject to no agreement with any
such governmental authority with respect to its assets or business.
6.20 Plan Liability. Except for liabilities to the Pension Benefit
Guaranty Corporation pursuant to Section 4007 of ERISA, all of which have been
fully paid, and except for liabilities to the Internal Revenue Service under
Section 4971 of the Code, all of which have been fully paid, neither First
Bolivar nor the Bank has any liability to the Pension Benefit Guaranty
Corporation or to the Internal Revenue Service with respect to any pension plan
qualified under Section 401 of the Code.
6.21 Vote Required. The affirmative vote of the holders of at least a
majority of the voting power of First Bolivar present, is the only vote of the
stockholders of First Bolivar necessary to approve the Company Merger and
related transactions contemplated hereby. The affirmative vote of the holders
of at least two-thirds of the voting power present is the only vote of the
stockholders of Bank necessary to approve the Bank Merger and related
transactions contemplated hereby.
6.22 Continuity of Interest. To the best knowledge of First Bolivar and
Bank, there is no plan or intention by the First Bolivar or Bank shareholders
who own 1% or more of the First Bolivar Common Stock or Bank Common Stock, and
to the best of the knowledge of management of First Bolivar and Bank, there is
no plan or intention on the part of the remaining First Bolivar or Bank
shareholders to sell, exchange or otherwise dispose of a number of shares of
First M&F Common Stock, to be received in the Mergers that would reduce First
Bolivar or Bank stockholders' ownership of the First M&F Common Stock to a
number of shares having
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a value, as of the date of the Mergers, of less than 50% of the value of all of
the formerly outstanding First Bolivar or Bank Common Stock as of the same date.
For purposes of this representation, shares of First Bolivar or Bank Common
Stock surrendered by dissenters or exchanged for cash in lieu of fractional
shares of First Bolivar or Bank Common Stock will be treated as outstanding
First Bolivar or Bank Common Stock on the date of the Mergers. Furthermore,
shares of First Bolivar or Bank Common Stock and shares of First M&F Common
Stock held by First Bolivar or Bank stockholders and otherwise sold, redeemed,
or disposed of prior to or subsequent to the Mergers are considered in this
assumption. See Schedule 4.4 for additional representations regarding continuity
of shareholder interest under Section 368(a)(1)(A) and Section 368(a)(2)(D) of
the Code of 1986, as amended.
6.23 Continuity of Business Enterprise. First Bolivar operates at least
one significant historic business line, namely, financial services, and owns at
least a significant portion of its historic business assets within the meaning
of Treasury Regulation Section 1.368-1(d).
6.24 Environmental Matters. Except as set forth on Schedule 6.24; neither
First Bolivar nor the Bank nor, to the best knowledge of its management, any
previous owner or operator of any properties at any time owned (including any
properties owned or subsequently resold) leased, or occupied by First Bolivar or
the Bank or used by First Bolivar or the Bank in their respective business
("First Bolivar Properties") used, generated, treated, stored, or disposed of
any hazardous waste, toxic substance, or similar materials on, under, or about
First Bolivar Properties except in compliance with all applicable federal,
state, and local laws, rules and regulations pertaining to air and water
quality, hazardous waste, waste disposal, air omissions, and other environmental
matters ("Environmental Laws"). Neither First Bolivar nor the Bank has received
any notice of noncompliance with Environmental Laws, applicable laws, orders, or
regulations of any governmental authorities relating to waste generated by any
such party or otherwise or notice that any such party is liable or responsible
for the remediation, removal, or clean-up of any site relating to First Bolivar
Properties.
6.25 Accuracy of Information. To the best of First Bolivar's and its
officers' and directors' knowledge, all information furnished by First Bolivar
or Bank to First M&F and M&F Bank relating to the assets, liabilities, and this
Agreement is accurate, and First Bolivar has not omitted to disclose any
information which is or would be material to this Agreement.
6.26 Compliance with Laws and Contracts. To the best of First Bolivar's
and its officers' and directors' knowledge, neither First Bolivar nor the Bank
is in violation of any laws, regulations, or agreements to which it is a party
and have failed to file any material reports required by any governmental or
other regulatory body.
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ARTICLE 7
FIRST M&F'S REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS
First M&F represents and warrants to First Bolivar as follows: for purposes
of this Agreement, except in Section 7.1 and where the context requires
otherwise, any reference to First M&F in this Article 7 shall be deemed to
include First M&F and M&F Bank and any reference to "material," material adverse
effect or a similar standard shall refer to the financial condition, operations
or other aspects of First M&F and its subsidiaries including M&F Bank taken as a
whole.
7.1 Organization and Authority. Each of First M&F and M&F Bank is a
corporation or bank duly incorporated, validly existing and in good standing
under the laws of the State of Mississippi and has the corporate power and
authority to own its properties and assets and to carry on its business as it is
now being conducted.
7.2 Shares Fully Paid and Non Assessable. The outstanding shares of
capital stock of First M&F are validly issued and outstanding, fully paid and
nonassessable and all of such shares of M&F Bank are owned directly or
indirectly by First M&F free and clear of all liens, claims, and encumbrances.
The shares of First M&F common stock to be issued in connection with the Mergers
pursuant to this Agreement have been duly authorized and, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid,
and nonassessable.
7.3 Authorization. The execution, delivery and performance of this
Agreement by First M&F and the consummation of the transactions contemplated
hereby have been duly authorized by the Board of Directors of First M&F and M&F
Bank, subject to regulatory approval. No other corporate proceedings on the
part of First M&F are necessary to authorize the execution and delivery of this
Agreement and the performance by First M&F of the terms hereof. This Agreement
is a valid and binding obligation of First M&F enforceable against First M&F in
accordance with its terms except as may be limited by applicable bankruptcy,
insolvency, reorganization or moratorium or other similar laws affecting
creditors' rights generally and except that the availability of equitable
remedies is within the discretion of the appropriate court and except that it is
subject to approval of applicable regulatory agencies.
7.4 No Material Adverse Change. Since June 30, 1998, there has been no
event or condition of any character (whether actual, or to the knowledge of
First M&F or M&F Bank, threatened or contemplated) that has had or can
reasonably be anticipated to have, or that, if concluded or sustained adversely
to First M&F would reasonably be anticipated to have, a material adverse effect
on the financial condition, results of operations, business or prospects of
First M&F or M&F Bank excluding changes in laws or regulations that affect
banking institutions generally.
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7.5 Loans. To the best knowledge and belief of its management, and
management of M&F Bank, each loan reflected as an asset of First M&F in the
unaudited consolidated balance sheet contained in First M&F's quarterly report
to shareholders for the period ended June 30, 1998, or acquired since that date,
is the legal, valid and binding obligation of the obligor named therein,
enforceable in accordance with its terms, and no loan is subject to any asserted
defense, offset, or counterclaim known to First M&F, except as disclosed on
Schedule 7.5 hereto.
7.6 Litigation. Except as disclosed on Schedule 7.6 hereto, no
litigation, proceeding or controversy before any court or governmental agency is
pending that in the opinion of its management is likely to have a material and
adverse effect on the business, results of operations or financial condition of
First M&F and its subsidiaries taken as a whole, and, to the best of its
knowledge, no such litigation, proceeding or controversy has been threatened or
is contemplated.
7.7 Contingent Liabilities. Except as disclosed on Schedule 7.7 hereto or
reflected in the First M&F reports filed with the SEC and except in the case of
First M&F's subsidiaries for unfunded loan commitments made in the ordinary
course of business consistent with past practices, as of June 30, 1998, neither
First M&F nor any of its subsidiaries had any obligation or liability
(contingent or otherwise) that was material, or that when combined with all
similar obligations or liabilities would have been material, to First M&F and
its subsidiaries taken as a whole.
7.8 Allowances for Possible Loan Losses. The allowances for possible loan
losses shown on the balance sheet of First M&F contained in the First M&F
reports filed with the SEC as of June 30, 1998, were or will be, as the case may
be, adequate in all material respects under the requirements of GAAP to provide
for possible loan losses, net of recoveries relating to loans previously charged
off, on loans outstanding (including accrued interest receivable) as of the
respective date of such balance sheet and such allowance has been or will have
been established in accordance with GAAP. To the knowledge of First M&F's and
M&F Bank's management, First M&F is not likely to be required to materially
increase the provision for loan losses between the date hereof and the Effective
Date.
7.9 Benefit Plans. To the knowledge and belief of First M&F's senior
management, First M&F, each of its subsidiaries and all "employee benefit
plans," as defined in Section 3(3) of ERISA, that cover one or more employees
employed by First M&F or any of its subsidiaries:
i. is in compliance with all laws, regulations, reporting and
licensing requirements and orders applicable to its business or to
such plan or any of its employees (because such employee's activities
on behalf of it), the breach or violation of which could have a
material and adverse effect on such business; and
ii. has received no notification from any agency or department
of federal, state or local government or the staff thereof asserting
that any such entity is not in compliance with any of the statutes;
regulations or ordinances that
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such governmental authority enforces, or threatening to revoke any
license, franchise or permit or governmental authorization, and is
subject to no agreement or written understanding with any such
governmental authorities with respect to its assets or business.
7.10 Pooling Treatment; CRA. First M&F and M&F Bank know of no reason why
Pooling Treatment will not be available or regulatory approval will not be
given, nor has First M&F or any of its affiliates received a CRA rating of less
than satisfactory.
7.11 Year 2000 Compliance. First M&F and M&F Bank are Year 2000
compliant.
First M&F covenants and agrees as follows:
7.12 Conduct of Business. First M&F agrees to operate its business solely
in the ordinary course consistent with prudent business practices and in
compliance with all applicable laws, regulations, and rules; but nothing herein
shall be construed as limiting or restricting First M&F in its assets,
liability, or capital structure or limiting any action of First M&F or its
affiliates, nor shall anything in this Agreement be construed as limiting the
future number and amount of outstanding shares of First M&F stock pending
consummation of the transactions contemplated hereby; provided however, that
First M&F and M&F Bank shall not, and shall instruct their executive officers,
directors, and control persons and any affiliates of any of the foregoing not
to, effect any transactions in First M&F Common Stock in violation of Regulation
M of the Securities Exchange Act of 1934, as amended (the "Exchange Act") or
otherwise for the purpose, or with the effect, of manipulating the trading price
of First M&F Common Stock.
7.13 Due Diligence. In order to afford First Bolivar access to such
information as it may reasonably deem necessary to perform its due diligence
review with respect to First M&F and its assets in connection with the Mergers,
First M&F shall (and shall cause M&F Bank to), (a) upon reasonable notice,
afford First Bolivar and its officers, employees, counsel, accountants and other
authorized representatives, during normal business hours throughout the period
prior to the Effective Date and to the extent consistent with applicable law,
access to its premises, properties, books and records, and to furnish First
Bolivar and such representatives with such financial and operating data and
other information of any kind respecting its business and properties as First
Bolivar shall from time to time reasonably request to perform such review, (b)
furnish First Bolivar with copies of all reports filed by First M&F with the
Securities and Exchange Commission ("SEC") throughout the period after the date
hereof prior to the Effective Date promptly after such reports are so filed, and
(c) promptly advise First Bolivar of the occurrence before the Effective Date of
any event or condition of any character (whether actual or to the knowledge of
First M&F, threatened or contemplated) that has had or can reasonably be
anticipated to have, or that, if concluded or sustained adversely to First M&F,
would reasonable be anticipated to have, a material adverse effect on the
financial condition, results of operations, business or prospects of its
consolidated group as a whole.
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7.14 Registration Statement. (a) First M&F will prepare and file on Form
S-4 a registration statement under the Securities Act (which will include the
Proxy Statement) complying with all the requirements of the Securities Act
applicable thereto, for the purpose, among other things, of registering the
First M&F Common Stock which will be issued to the holders of First Bolivar
Common Stock and Bank Common Stock pursuant to the Mergers. First M&F shall use
its best efforts to cause the Registration Statement to become effective as soon
as practicable, to qualify the First M&F Common Stock under the securities or
blue sky laws of such jurisdictions as may be required and to keep the
Registration Statement and such qualifications current and in effect for so long
as is necessary to consummate the transactions contemplated hereby.
(b) First M&F will indemnify and hold harmless each member of First
Bolivar's consolidated group and each of their respective directors, officers,
agents and other persons, if any, who control First Bolivar within the meaning
of the Securities Act from and against any losses, claims, damages, liabilities
or judgments, joint or several, to which they or any of them may become subject
under the Securities Act or any state securities or blue sky laws or otherwise,
insofar as such losses, claims, damages, liabilities, or judgements (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, or in any amendment or supplement thereto, or in any state
application for qualification, permit, exemption or registration as a
broker/dealer, or in any amendment or supplement thereto, 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 each such person for any legal or other expenses
reasonably incurred by such person in connection with investigating or defending
any such action or claim; provided, however, that First M&F shall not be liable,
in any such case, to the extent that any such loss, claim, damage, liability, or
judgment (or action in respect thereof) arises out of or is based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in the Registration Statement, or any such amendment or supplement thereto,
or in any such state application, or in any amendment or supplement thereto, in
reliance upon and in conformity with information furnished in writing to First
M&F by First Bolivar.
7.15 Application to Regulatory Authorities. First M&F shall prepare, as
promptly as practicable, all regulatory applications and filings which are
required to be made with respect to the Mergers and provide copies thereof to
First Bolivar and its counsel.
7.16 Continuity of Business Enterprise. It is the present intention of
First M&F to continue at least one significant historic business line of First
Bolivar, namely, financial services, and to use at least a significant portion
of First Bolivar's historic business assets in a business within the meaning of
Treasury Regulation Section 1.368-1(d).
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ARTICLE 8
CONDITIONS TO CLOSING
The obligations of First Bolivar, Bank, First M&F and M&F Bank under this
Agreement, except as otherwise provided herein, shall be subject to the
satisfaction or waiver of the following conditions on or prior to the Closing:
8.1 Conditions to Each Party's Obligations to Effect the Mergers. The
respective obligation of each party to effect the Mergers shall be subject to
the following conditions:
a. Stockholder Approval. The Company Merger shall have been approved
by the requisite vote of the holders of the outstanding shares of First
Bolivar Common Stock at First Bolivar's Stockholders' Meeting.
b. Regulatory Approvals. The transactions contemplated by this
Agreement shall have been approved by all governing regulatory authorities,
without any condition or requirement that either First M&F or First Bolivar
deem burdensome, or which otherwise would have a material adverse effect on
the business, operations, properties, assets or financial condition of
First M&F, M&F Bank, First Bolivar or Bank after the Effective Date, all
conditions required to be satisfied shall have been satisfied, and all
waiting periods relating to such approvals shall have expired.
c. Registration Statement. The Registration Statement shall have
been declared effective and shall not be subject to a stop order or any
threatened stop order, and all state securities and blue sky permits or
approvals required to consummate the transactions contemplated by this
Agreement shall have been received.
d. No Restraining Action. No action or proceeding shall have been
threatened or instituted before a court or other governmental body to
restrain or prohibit the transactions contemplated by the Merger Agreements
or this Agreement or to obtain damages or other relief in connection with
the execution of such agreements or the consummation of the transactions
contemplated hereby or thereby; and no governmental agency shall have given
notice to any party hereto to the effect that consummation of the
transactions contemplated by the Merger Agreements or this Agreement would
constitute a violation of any law or that it intends to commence
proceedings to restrain consummation of the Mergers.
e. Pooling Treatment. First M&F shall be satisfied that the Mergers
will qualify for accounting by First M&F as a pooling of interests under
generally accepted accounting principles and under applicable rules and
regulations of the SEC.
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8.2 Conditions to Obligations of First Bolivar to Effect the Mergers. The
obligations of First Bolivar to effect the Mergers shall be subject to the
following additional conditions:
a. Representations and Warranties. The representations and
warranties of First M&F set forth in this Agreement shall be true and
correct in all material respects (except to the extent such representation
or warranty is qualified by materiality in which case such representation
or warranty shall be true and correct) as of the date of this Agreement and
as of the Closing as though made at and as of the Closing, except as
otherwise contemplated by this Agreement or consented to in writing by
First Bolivar.
b. Performance of Obligations. First M&F and M&F Bank shall have
performed in all material respects all obligations and complied with all
covenants required by it under this Agreement prior to the Closing and
First M&F shall deliver at Closing appropriate certificates setting forth
such.
c. No Material Adverse Change. There shall not have occurred any
material adverse change from the date of this Agreement to the Closing Date
in the financial condition, results of operations or business of First M&F
and its subsidiaries taken as a whole.
d. Legal Opinion. An opinion of Watkins Ludlam Winter & Stennis,
P.A., special counsel to First M&F, shall be delivered to First Bolivar
dated the Closing Date and in form and substance reasonably satisfactory to
First Bolivar and its counsel to the effect that:
i. First M&F is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Mississippi, and has corporate authority to own and operate its
businesses and properties and to carry on its business as presently
conducted by it;
ii. M&F Bank is a Mississippi banking corporation, duly
organized and validly existing and in good standing under the laws of
the State of Mississippi, and has corporate authority to own and
operate its businesses and properties and to carry on its business as
presently conducted by it;
iii. First M&F had and has corporate authority to make, execute
and deliver this Agreement, it has been duly authorized and approved
by all necessary corporate action of First M&F and has been duly
executed and delivered and is as of the Closing Date its valid and
binding obligation subject, however, to bankruptcy, insolvency and
similar laws affecting the enforcement of creditors' rights generally
and to the availability of equitable remedies in general;
iv. All required regulatory approvals have been obtained;
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v. To such counsel's knowledge after inquiry, there is no
litigation or proceeding pending or threatened against First M&F
relating to the participation in or consummation of this Agreement by
First M&F and consummation will not violate any other contract,
agreement, charter or bylaw of First M&F; and
vi. All shares of First M&F Common Stock to be issued pursuant
to the Mergers have been duly authorized and, when issued pursuant to
the Merger Agreements, will be validly and legally issued, fully paid
and non-assessable and will be, at the time of their delivery, free
and clear of all liens, charges, security interests, mortgages,
pledges and other encumbrances and any preemptive or similar rights.
e. Tax Opinion. First Bolivar shall have received from Watkins
Ludlam Winter & Stennis, P.A. an opinion of counsel, dated the Closing Date
as to certain tax aspects of the transactions contemplated by this
Agreement and the Merger Agreements, including that such transactions as to
stockholders of First Bolivar and Bank will constitute a tax-free
reorganization.
8.3 Conditions to Obligations of First M&F to Effect the Mergers. The
obligations of First M&F to effect the Mergers shall be subject to the following
additional conditions:
a. Representations and Warranties. The representations and
warranties of First Bolivar and Bank set forth in this Agreement shall be
true and correct in all material respects (except to the extent such
representation or warranty is qualified by materiality in which case such
representation or warranty shall be true and correct) as of the date of
this Agreement and as of the Closing as though made at and as of the
Closing, except as otherwise contemplated by this Agreement or consented to
in writing by First M&F.
b. Performance of Obligations. First Bolivar and Bank shall have
performed in all material respects all obligations and complied with all
covenants required by it under this Agreement prior to the Closing and
First Bolivar shall deliver at Closing appropriate certificates setting
forth such.
c. No Material Adverse Change. There shall not have occurred any
material adverse change from the date of this Agreement to the Closing Date
in the financial condition, results of operations or business of First
Bolivar and its subsidiaries taken as a whole.
d. Affiliate Agreement. An Affiliate Agreement substantially in the
form specified on Exhibit C hereto (as contemplated by Section 4.1 hereof)
shall have been executed by each person who serves as an executive officer
or director of First Bolivar or Bank or who beneficially owns 10% or more
of the First Bolivar Common Stock
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outstanding; and First M&F shall have received from each such person a
written confirmation dated not earlier than five business days prior to the
Closing Date to the effect that each representation made in such person's
Affiliate Agreement is true and correct as of the date of such confirmation
and that such person has complied with all of his or her covenants therein
through the date of such confirmation.
e. Legal Opinion. An Opinion of Jacks, Adams and Westerfield,
counsel to First Bolivar, shall be delivered to First M&F dated the Closing
Date, and in form and substance reasonably satisfactory to First M&F to the
effect that:
i. First Bolivar is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Mississippi, and has corporate authority to own and operate its
businesses and properties and to carry on its business as presently
conducted by it;
ii. Bank is a national banking association, duly organized and
validly existing and in good standing under the laws of the United
States of America, and has corporate authority to own and operate its
businesses and properties and to carry on its business as presently
conducted by it;
iii. First Bolivar and Bank had and have corporate authority to
make, execute and deliver this Agreement, it has been duly authorized
and approved by all necessary corporate action of First Bolivar and
Bank and has been duly executed and delivered and is as of the Closing
Date its valid and binding obligation subject, however, to bankruptcy,
insolvency and similar laws affecting the enforcement of creditors'
rights generally and to the availability of equitable remedies in
general;
iv. To such counsel's knowledge after inquiry, there is no
litigation or proceeding pending or threatened against First Bolivar
or Bank relating to the participation in or consummation of this
Agreement by First Bolivar or Bank and consummation will not violate
any other contract, agreement, charter or bylaw of First Bolivar or
Bank; and
v. First Bolivar and Bank have complied with all laws and
regulations relating to dissenters' rights and all stock in First
Bolivar and Bank will be acquired by First M&F pursuant to the terms
of this Agreement and that the title and/or ownership interest in the
shares of First Bolivar and Bank stock are as represented in First
Bolivar's and Bank's certificate at Closing and that no known dispute
exists as to the title and/or ownership of any such shares.
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ARTICLE 9
CLOSING
9.1 Closing. The Closing shall be held at the offices of M&F Bank or such
other place as First M&F and First Bolivar shall mutually designate.
9.2 Deliveries at Closing. At the Closing, all documents and instruments
shall be duly and validly executed and delivered by all the Parties hereto, and
possession of all liabilities and assets shall be transferred and delivered
accordingly.
9.3 Documents. The Parties shall execute any and all documents reasonably
requested by them or their legal counsel for the purpose of effecting the
transaction contemplated, including but not limited to the following:
a. endorsement, negotiation, and/or assignment of all original notes
and Security Agreements relating to all loans;
b. warranty deeds for the real property;
c. commitments for owners title insurance for the real property;
d. such other endorsements, assignments or other conveyances as may
be appropriate or necessary to effect the transfer to First M&F of the
assets, duties, responsibilities and obligations as referred to herein; and
e. listing of dissenting stockholders, if any, including name,
address, and number of shares owned.
ARTICLE 10
EMPLOYMENT MATTERS
10.1 Employees. Neither First M&F nor M&F Bank shall be obligated to
retain in any capacity any of First Bolivar's or Bank's officers, directors, or
employees or to pay any stipulated compensation to any employees. First M&F
will make reasonable efforts to maintain compensation levels for any retained
personnel commensurate with the employees' experience and qualifications, and in
accordance with First M&F and M&F Bank's salary administration program. With
regard to any retained employee, First M&F and M&F Bank shall be free of any
obligation to honor any past agreement of First Bolivar or Bank to such person.
With respect to First Bolivar's and Bank's group health and life benefit
plan as it relates to employees, First M&F shall have the option of either: (1)
continuing such plan on and after the Effective Date of the Mergers; or (2)
discontinuing such plan upon the Effective Date and thereafter, all retained
employees will be eligible to participate in M&F Bank's group health and
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life benefit plan based on the provisions in the plan. The ninety (90) day
employment period will be waived for eligible retained employees in accordance
with M&F Bank's plan. M&F Bank will waive pre-existing medical conditions for
health insurance purposes as to all retained personnel.
10.2 Retirement Plan. First Bolivar and Bank currently maintain a Basic
Savings Plan and 401(k) Plan which will remain operative and in effect through
the Effective Date of the Mergers (the "Plans"). The Plans will be terminated
as of the Effective Date of the Mergers and distributed to vested employees of
First Bolivar and Bank in accordance with the terms of the Plans after the
normal and customary contributions have been made consistent with past
practices. The trustees for the Plans will be responsible for the termination,
allocation and distribution of plan assets and related notices and other
reporting responsibilities to the IRS, Department of Labor and other government
agencies. All such termination costs will be paid from the Plans' assets, if
permitted by law.
Upon the Effective Date of the Mergers, all retained employees will be
eligible to enter the M&F Bank Plans based on the provisions set forth in the
respective plans.
10.3 Other Benefit Plans. Other First Bolivar and Bank benefit plans will
continue through the Effective Date of the Mergers. Thereafter, all retained
employees will be eligible to participate in all M&F Bank employment benefit
plans not set forth in Sections 10.1 and 10.2 hereof, based on the provisions
set forth in the plans.
10.4 Notices. First Bolivar shall be (and shall cause Bank to be)
responsible for notifying its employees of the terms of this Agreement as it
affects and/or relates to them and for complying with any applicable laws
regarding such notices.
ARTICLE 11
REMEDIES
For purposes of this Agreement, any reference to First M&F in this Article
11 shall be deemed to include First M&F and M&F Bank and any reference to First
Bolivar in this Article 11 shall be deemed to include First Bolivar and Bank.
11.1 Parties' Joint Remedies. In the event regulatory authorities impose
requirements which do not materially alter this Agreement and which are not
otherwise burdensome or objectionable to the Parties, then the Parties agree to
amend this Agreement to conform to such regulatory requirements, and specific
performance shall be available as a remedy for this purpose.
11.2 First Bolivar's Remedies. In the event First M&F breaches this
Agreement, then First Bolivar shall give First M&F notice of the breach, and
First M&F shall have a reasonable amount of time to cure the breach, and First
M&F shall be liable for such economic damages
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that are the direct result of any uncured breach, but First M&F shall not be
liable for consequential or punitive damages. If First M&F breaches a warranty,
representation, covenant or agreement that does not materially affect the entire
transaction, then the amount of the damages shall be mutually agreed upon by the
Parties, and if they cannot agree as to the damage, then by an arbitrator
mutually agreeable to them, and the damage determined shall be conclusively
binding on both Parties and shall be treated as an adjustment to the Conversion
Amount.
11.3 First M&F's Remedies. In the event First Bolivar breaches this
Agreement, then First M&F shall give First Bolivar notice of the breach, and
First Bolivar shall have a reasonable amount of time to cure the breach, and
First Bolivar shall be liable for such economic damages that are the direct
result of any uncured breach, but First Bolivar shall not be liable for
consequential or punitive damages. If First Bolivar breaches a warranty,
representation, covenant or agreement that does not materially affect the entire
transaction, then the amount of the damages shall be mutually agreed upon by the
Parties, and if they cannot agree as to the damage, then by an arbitrator
mutually agreeable to them, and the damage determined shall be conclusively
binding on both Parties and shall be treated as an adjustment to the First
Bolivar Exchange Ratio.
11.4 Attorney Fees. Each Party shall bear its own attorney fees except
attorney fees may be awarded by the presiding judge if the trier of fact finds
that the other Party has committed fraud against the other Party.
ARTICLE 12
TERMINATION
12.1 Termination. This Agreement may be terminated, either before or after
approval by the stockholders of First Bolivar and Bank as follows:
a. Mutual Consent. At any time on or prior to the Effective Date, by
the mutual consent in writing of a majority of the members of each of the
Board of Directors of the Parties hereto;
b. Expiration of Time. By the Board of Directors of First M&F in
writing or by the Board of Directors of First Bolivar in writing, if the
Mergers shall have not become effective on or before March 31, 1999, unless
the absence of such occurrence shall be due to the failure of the Party
seeking to terminate this Agreement to perform each of its obligations
under this Agreement required to be performed by it on or prior to the
Effective Date;
c. Breach of Representation, Warranty or Covenant. By either Party
hereto, in the event of a breach by the other Party (a) of any covenant or
agreement contained herein or (b) of any representation or warranty herein,
if (i) the facts constituting such
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breach reflect a material and adverse change in the financial condition,
results of operations, business, or prospects taken as a whole, of the
breaching Party, which in either case cannot be or is not cured within 60
days after written notice of such breach is given to the Party committing
such breach, or (ii) in the event of a breach of a warranty or covenant,
such breach results in a material increase in the cost of the non-breaching
Party's performance of this Agreement.
d. Regulatory Approval. By either Party hereto, at any time after
the FRB, FDIC, or MDBCF has denied any application for any approval or
clearance required to be obtained as a condition to the consummation of the
Mergers and the time-period for all appeals or requests for reconsideration
thereof has run.
e. Shareholder Approval. By either Party hereto, if the Company
Merger is not approved by the required vote of shareholders of First
Bolivar.
f. Dissenters. By First M&F, if holders of ten percent (10%) or more
of the outstanding First Bolivar Common Stock exercise statutory rights of
dissent and appraisal pursuant to Article 11 of the MBCA.
ARTICLE 13
APPRAISAL RIGHTS
13.1 Appraisal Rights of First Bolivar. Notwithstanding any other
provision of this Agreement to the contrary, dissenting stockholders of First
Bolivar who comply with the procedural requirements of Article 13 of the MBCA
will be entitled to receive payment of the fair cash value of their shares if
the Company Merger is effected.
13.2 Appraisal Rights of Bank. Notwithstanding any other provision of this
Agreement to the contrary, dissenting stockholders of Bank (other than First
Bolivar) who comply with the procedural requirements of 12 U.S.C. (S)214a will
be entitled to receive payment of the fair cash value of their shares if the
Bank Merger is effected.
ARTICLE 14
MISCELLANEOUS
14.1 Entire Agreement. This Agreement embodies the entire understanding
of the Parties in relation to the subject matter herein and supersede all prior
understandings or agreements, oral or written, between the Parties hereto other
than the Confidentiality Agreement heretofore executed by the Parties.
14.2 Effect of Termination or Consummation; Survival. (a) Upon
termination of this Agreement pursuant to Article 12, the Merger Agreements
shall also terminate, and this
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Agreement and the Merger Agreements shall be void and of no effect, and there
shall be no liability by reason of this Agreement or the Merger Agreements, or
the termination thereof, on the part of any party or their respective directors,
officers, employees, agents or shareholders except for any liability of a party
hereto arising out of (i) an intentional breach of any representation, warranty
or covenant in this Agreement prior to the date of termination, except if such
breach was required by law or by any bank or bank holding company regulatory
authority or (ii) a breach of the covenant in Section 7.14(c).
(b) None of the representations and warranties in this Agreement or in any
instrument delivered pursuant hereto shall survive the Effective Time. Each
party hereby agrees that its sole right and remedy with respect to any breach of
a representation or warranty or covenant by the other party prior to the Closing
Date shall be not to close the transactions described herein if such breach
results in the nonsatisfaction of a condition set forth in Article 8 hereof;
provided, however, that the foregoing shall not be deemed to be a waiver of any
claim for an intentional breach of a representation, warranty or covenant or for
fraud except if such breach is required by law or by any bank or bank holding
company regulatory authority. Each covenant of the Parties to be performed
after the Effective Time shall survive the Effective Time and may be enforced by
the person or persons in whose favor it runs.
14.3 Headings. The headings and subheadings in this Agreement, except the
terms identified for definition in Article 1 and elsewhere in this Agreement,
are inserted for convenience only and shall not affect the meaning or
interpretation of this Agreement or any provision hereof.
14.4 Duplicate Originals. This Agreement may be executed in any number of
duplicate originals, any one of which when fully executed by all Parties shall
be deemed to be an original without having to account for the other originals.
14.5 Governing Law. This Agreement and the rights and obligations
hereunder shall be governed and construed by the laws of the State of
Mississippi.
14.6 Successors: No Third Party Beneficiaries. All terms and conditions of
this Agreement shall be binding on the successors and assigns of First Bolivar
and First M&F. Except as otherwise specifically provided in this Agreement,
including Section 14.2 nothing expressed or referred to in this Agreement is
intended or shall be construed to give any person other than First Bolivar and
First M&F any legal or equitable right, remedy or claim under or in respect of
this Agreement or any provisions contained herein, it being the intention of the
Parties hereto that this Agreement, the obligations and statements of
responsibilities hereunder, and all other conditions and provisions hereof are
for the sole and exclusive benefit of First Bolivar and First M&F and for the
benefit of no other person.
14.7 Modification; Assignment. No amendment or other modification of any
part of this Agreement shall be effective except pursuant to a written agreement
subscribed by the duly
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authorized representatives of all of the Parties hereto. This Agreement may not
be assigned without the express written consent of both Parties.
14.8 Notice. Any notice, request, demand, consent, approval or other
communication to any Party hereof shall be effective when received and shall be
given in writing, and delivered in person against receipt thereof, or sent by
certified mail, postage prepaid or courier service at its address set forth
below or at such other address as it shall hereafter furnish in writing to the
others. All such notices and other communications shall be deemed given on the
date received by the addressee or its agent.
First Bolivar
First Bolivar Capital Corporation
308 E. Sunflower Road
Cleveland, MS 38732
Attn: Doug Springer
Fax Number: (601) 843-4234
Copy to: Gerald Jacks, Esq.
Jacks, Adams and Westerfield
106 South Pearman
Cleveland, MS 38732
Fax Number: (601) 843-6176
First M&F
First M&F Corporation
221 E. Washington
Kosciusko, MS 39090
Attn: Scott M. Wiggers
Fax Number: (601) 289-5121
Copy to: Craig N. Landrum
Watkins Ludlam Winter & Stennis, P.A.
633 N. State Street
Jackson, MS 39205
Fax Number: (601) 949-4804
14.9 Waiver. First Bolivar and First M&F may waive their respective
rights, powers or privileges under this Agreement; provided that such waiver
shall be in writing; and further provided that no failure or delay on the part
of First Bolivar or First M&F to exercise any right, power or privilege under
this Agreement will operate as a waiver thereof, nor will any single or partial
exercise of any right, power or privilege under this Agreement preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege by First Bolivar
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or First M&F under the terms of this Agreement, nor will any such waiver operate
or be construed as a future waiver of such right, power or privilege under this
Agreement.
14.10 Costs, Fees and Expenses. Each Party hereto agrees to pay all
costs, fees and expenses which it has incurred in connection with or incidental
to the matters contained in this Agreement, including without limitation any
fees and disbursements to its accountants, financial advisors and counsel. First
M&F will be responsible for preparing the applications, regulatory filings and
registration statement necessary to obtain approval of the Mergers and the
issuance of the First M&F common stock. First Bolivar will be responsible for
the cost of its (and Bank's) accountants and legal counsel and will bear all
costs related to conducting its stockholders' meetings and obtaining
stockholders' approval of the Mergers.
14.11 Press Releases. First Bolivar and First M&F shall consult with each
other as to the form and substance of any press release related to this
Agreement or the transactions contemplated hereby, and shall consult each other
as to the form and substance of other public disclosures related thereto,
provided, however, that nothing contained herein shall prohibit First M&F,
following notification to First Bolivar, from making any disclosures which its
counsel deems necessary to conform with requirements of law or the rules of the
National Association of Securities Dealers Automated Quotation System.
14.12 Severability. If any provision of this Agreement is invalid or
unenforceable then, to the extent possible, all of the remaining provisions of
this Agreement shall remain in full force and effect and shall be binding upon
the Parties hereto.
14.13 Mutual Covenant of Best Efforts and Good Faith. The Parties
mutually covenant and agree with each other that they will use their best
efforts to consummate the transactions herein contemplated and that they will
act and deal with each other in good faith as to this Agreement and all matters
arising from or related to it.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.
[signatures omitted]
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EXHIBIT A
COMPANY MERGER AGREEMENT
This Company Merger Agreement is made and entered into as of the 9th day of
September, 1998, between First M&F Corporation, Kosciusko, Mississippi, a
Mississippi corporation ("First M&F") and First Bolivar Capital Corporation,
Cleveland, Mississippi, a Mississippi corporation ("First Bolivar") (the
"Company Merger Agreement").
W I T N E S S E T H:
WHEREAS, First M&F and First Bolivar (collectively, the "Constituent
Corporations") and their respective Boards of Directors deem it advisable that
First Bolivar be merged into First M&F (the "Company Merger") pursuant to the
provisions of the Mississippi Business Corporation Act and upon the terms and
conditions hereinafter set forth and in the Plan (as hereinafter defined); and
WHEREAS, the Constituent Corporations have entered into an Agreement and
Plan of Merger dated as of the date hereof (the "Plan") (the defined terms in
which are used herein as defined therein) setting forth certain representations,
warranties, covenants and conditions relating to the Company Merger;
NOW THEREFORE, the Constituent Corporations hereby make, adopt and approve
this Company Merger Agreement and prescribe the terms and conditions of the
Company Merger and the mode of carrying the Company Merger into effect as
follows:
ARTICLE ONE
The Company Merger
Upon the terms and subject to the conditions hereinafter set forth, on the
Effective Date (as defined in Article Two hereof) First Bolivar shall be merged
with and into First M&F and the separate existence of First Bolivar shall cease.
ARTICLE TWO
Effective Date and Time
The Company Merger shall be effective as of the date and time stated in
Articles of Merger certified, signed and acknowledged in the manner required by
law, and filed in the office of the Secretary of State of the State of
Mississippi, such date to be determined by the resolution of the Board of
Directors of First M&F (such time and date being herein referred to as the
"Effective Time" and the "Effective Date," respectively).
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ARTICLE THREE
Conversion and Cancellation of Shares
On the Effective Date, each share of Common Stock, $10.00 par value, of
First Bolivar ("First Bolivar Common Stock") issued and outstanding immediately
prior to the Effective Date, other than shares of First Bolivar Common Stock
owned by stockholders who, pursuant to the MBCA, perfect dissenters' rights,
shall, by virtue of the Company Merger and without any action on the part of the
holder thereof, be converted into 8.32169 shares of First M&F Common Stock (the
"First Bolivar Exchange Ratio") based upon 29,230 shares of First Bolivar Common
Stock issued and outstanding. In the event the number of shares is greater than
29,230, the parties will determine whether an adjustment will be made. In the
event First M&F Common Stock shall be changed before the Effective Date into a
different number of shares by reason of recapitalization, split-up, stock
dividend or the like, the First Bolivar Exchange Ratio shall be adjusted
according to the Plan.
The exchange of certificates representing First M&F Common Stock for
certificates formerly representing First Bolivar Common Stock shall be effected
as provided in the Plan. No fractional shares of First M&F Common Stock
representing such fractional shares will be issued to the holders of First
Bolivar Common Stock. Instead, a shareholder otherwise entitled to receive such
fractional shares shall be entitled to a cash payment (without interest) as
provided in the Plan.
ARTICLE FOUR
Effects of Company Merger
The Company Merger shall have the effects set forth in Miss. Code Ann.
(S) 79-4-11.06.
The Charter and Articles of Incorporation and Bylaws of First M&F shall be
the Charter and Articles of Incorporation and Bylaws of the merged corporation
following the Effective Date of the Merger, unless and until the same shall be
amended in accordance with the provisions hereof and the Act. The members of
the Board of Directors and Officers of First M&F shall be the Board of Directors
and Officers of the merged corporation until their respective successors are
elected and qualified. The shares of common stock of First M&F as the surviving
corporation outstanding immediately prior to the Effective Date of the Merger
shall remain outstanding. The authorized capital stock of First M&F as the
surviving corporation following the Effective Date of the Merger shall be
15,000,000 shares of common stock, $5.00 par value, unless and until the same
shall be changed in accordance with the Act.
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ARTICLE FIVE
Filing of Company Merger Agreement
If this Company Merger Agreement is approved by the shareholders of First
Bolivar, then the fact of such approval shall be certified in Articles of Merger
which shall be signed and acknowledged by the President or Vice President of
each of the Constituent Corporations. Thereafter, a multiple original of the
Articles of Merger, so certified, signed and acknowledged, shall be delivered to
the Secretary of State of Mississippi for filing and recordation in the manner
required by law.
ARTICLE SIX
Miscellaneous
The obligations of the Constituent Corporations to effect the Company
Merger shall be subject to all of the terms and conditions of the Plan. At any
time prior to the Effective Date, this Company Merger Agreement may be
terminated (a) by the mutual agreement of the Boards of Directors of the
Constituent Corporations or (b) pursuant to the terms and provisions of the
Plan.
IN WITNESS WHEREOF, this Company Merger Agreement is signed by a majority
of the Directors of each of the Constituent Corporations as of the day first
above written.
[signatures omitted]
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EXHIBIT B
BANK MERGER AGREEMENT
This Bank Merger Agreement is made and entered into as of the 9th day of
September, 1998, between Merchants & Farmers Bank, Kosciusko, Mississippi, a
Mississippi banking corporation ("M&F Bank") and First National Bank of Bolivar
County, Cleveland, Mississippi, a national banking association ("Bank") (the
"Bank Merger Agreement") and joined in by First M&F Corp., a Mississippi
corporation ("First M&F"), the parent of M&F Bank, for the purpose of its
agreement to issue shares of its common stock to minority shareholders of Bank
upon merger of Bank into M&F Bank.
WITNESSETH:
WHEREAS, M&F Bank and Bank (collectively, the "Constituent Banks") and
their respective Boards of Directors deem it advisable that Bank be merged into
M&F Bank (the "Bank Merger") pursuant to the provisions of the Mississippi
Banking Laws and 12 U.S.C. (S) 214a and upon the terms and conditions
hereinafter set forth and in the Plan (as hereinafter defined); and;
WHEREAS, the Constituent Corporations have entered into an Agreement and
Plan of Merger dated as of the date hereof (the "Plan") (the defined terms in
which are used herein as defined therein) setting forth certain representations,
warranties, covenants and conditions relating to the Bank Merger;
NOW THEREFORE, the Constituent Banks hereby make, adopt and approve this
Merger Agreement and prescribe the terms and conditions of the Bank Merger and
the mode of carrying the Bank Merger into effect as follows:
ARTICLE ONE
The Bank Merger
Upon the terms and subject to the conditions hereinafter set forth, on the
Effective Date (as defined in Article Two hereof) Bank shall be merged with and
into M&F Bank under the Charter of and with the name Merchants & Farmers Bank
and the separate existence of Bank shall cease.
ARTICLE TWO
Effective Date and Time
The Bank Merger shall be effective as of the date and time stated in
Articles of Merger certified, signed and acknowledged in the manner required by
law and filed in the Office of the
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Commissioner of Banking and Consumer Finance ("MDBCF") of the State of
Mississippi, such date to be determined by resolution of the Board of Directors
of M&F Bank (such time and date being herein referred to as the "Effective Time"
and the "Effective Date," respectively).
ARTICLE THREE
Conversion and Cancellation of Shares
On the Effective Date, each share of Common Stock, $10.00 par value, of
Bank (Bank Common Stock) issued and outstanding immediately prior to the
Effective Date, other than shares of Bank Common Stock owned by First Bolivar
Capital Corporation and other than shares of Bank Common Stock as to which
dissenters' rights have been perfected and not withdrawn or otherwise forfeited
under 12 U.S.C. (S) 214a of the National Banking Act shall by virtue of the Bank
Merger and without any action on the part of the holder thereof, by converted
into the right to 8.32169 shares of First M&F Corp. Common Stock ("Bank Exchange
Ratio"). In the event First M&F Common Stock shall be changed before the
Effective Date into a different number of shares by reason of recapitalization,
split-up, stock dividend or the like, the Bank Exchange Ratio shall be adjusted
according to the Plan. On the Effective Date each issued and outstanding share
of Bank Common Stock, par value $10.00, shall be canceled.
The exchange of certificates representing First M&F Common Stock for
certificates formerly representing Bank Common Stock shall be effected as
provided in the Plan. No fractional shares of First M&F Common Stock
representing such fractional shares will be issued to the holders of Bank Common
Stock. Instead, a shareholder otherwise entitled to receive such fractional
shares shall be entitled to a cash payment (without interest) as provided in the
Plan.
ARTICLE FOUR
Effects of Bank Merger
The Bank Merger shall have the effects set forth in Miss. Code Ann. (S) 81-
5-85. Upon the Effective Date, the main office and each branch office
maintained by Bank as a branch office immediately before the Bank Merger becomes
effective, shall become a branch office of M&F Bank.
The Charter and Articles of Incorporation and Bylaws of M&F Bank shall be
the Charter and Articles of Incorporation and Bylaws of the merged corporation
following the Effective Date of the Merger, unless and until the same shall be
amended in accordance with the provisions hereof and the Act. The members of
the Board of Directors and Officers of M&F Bank shall be the Board of Directors
and Officers of the merged corporation until their respective successors are
elected and qualified. The shares of common stock of M&F Bank as the surviving
corporation outstanding immediately prior to the Effective Date of the Merger
shall remain outstanding. The authorized capital stock of M&F Bank as the
surviving corporation
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following the Effective Date of the Merger shall be 219 shares of common stock,
$5.00 par value, unless and until the same shall be changed in accordance with
the Act.
ARTICLE FIVE
Filing of Merger Agreement
If this Bank Merger Agreement is approved by the shareholders of Bank and
M&F Bank, then the fact of such approval shall be certified in Articles of
Merger which shall be signed and acknowledged by the President or Vice President
of each of the Constituent Banks. Thereafter, a multiple original of the
Articles of Merger, so certified, signed and acknowledged, shall be delivered to
the MDBCF for filing and recordation in the manner required by law
ARTICLE SIX
Miscellaneous
The obligations of the Constituent Banks to effect the Bank Merger shall be
subject to all of the terms and conditions of the Plan. At any time prior to the
Effective Date, this Bank Merger Agreement may be terminated (a) by the mutual
agreement of the Boards of Directors of the Constituent Banks or (b) pursuant to
the terms and provisions of the Plan.
IN WITNESS WHEREOF, this Bank Merger Agreement is signed by a majority of
the Directors of each of the Constituent Banks and First M&F Corporation as of
the day first above written.
[signatures omitted]
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APPENDIX B
ARTICLE 13 OF MISSISSIPPI BUSINESS CORPORATION ACT
ARTICLE 13
DISSENTERS' RIGHTS
SUBARTICLE A. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
79-4-13.01 DEFINITIONS--ln this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Section 79-4-13.02 and who exercises that right when and
in the manner required by Sections 79-4-13.20 through 79-4-13.28.
(3) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
79-4-13.02 RIGHT TO DISSENT.--(a) A shareholder is entitled to dissent
from, and obtain payment of the fair value of his shares in the event of any of
the following corporate actions:
(1) Consummation of a Merger Agreement of merger to which the corporation
is a party (i) if shareholder approval is required for the merger by Section 79-
4-11.03 or the articles of incorporation and the shareholder is entitled to vote
on the merger, or (ii) if the corporation is a subsidiary that is merged with
its parent under Section 79-4-11.04;
(2) Consummation of a Merger Agreement of share exchange to which the
corporation is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the Merger Agreement;
(3) Consummation of a sale or exchange of all, or substantially all, of the
property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a Merger Agreement by which all or
substantially all of the net proceeds of the sale will be distributed to the
shareholders within one (1) year after the date of sale;
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(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) Alters or abolishes a preferential right of the shares;
(ii) Creates, alters or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(iii) Alters or abolishes a preemptive right of the holder of the shares to
acquire shares or other securities;
(iv) Excludes or limits the right of the shares to vote on any matter, or
to cumulate votes, other than a limitation by dilution through issuance of
shares or other securities with similar voting rights; or
(v) Reduces the number of shares owned by the shareholder to a fraction of
a share if the fraction share so created is to be acquired for cash under
Section 79-4-6.04; or
(5) Any corporate action taken pursuant to a shareholder vote to the extent
the articles of incorporation, bylaws or a resolution of the board of directors
provides that voting or nonvoting shareholders are entitled to dissent and
obtain payment for their shares.
(b) Nothing in subsection (a)(4) shall entitle a shareholder of a
corporation to dissent and obtain payment for his shares as a result of an
amendment of the articles of incorporation exclusively for the purpose of either
(i) making such corporation subject to application of the Mississippi Control
Share Act, or (ii) making such act inapplicable to a control share acquisition
of such corporation.
(c) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
79-4-13.03 DISSENT BY NOMINEES AND BENEFICIAL OWNERS.--(a) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written consent
to the dissent not later than the time the beneficial shareholder asserts
dissenters' rights; and
(2) He does so with respect to all shares of which he is the beneficial
shareholder or over which he has power to direct the vote.
SUBARTICLE B. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
79-4-13.20 NOTICE OF DISSENTERS' RIGHTS. --(a) If proposed corporate action
creating dissenters' rights under Section 79-4-13.02 is submitted to a vote at a
shareholders' meeting, the meeting notice must state that shareholders are or
may be entitled to assert dissenters' rights under this article and be
accompanied by a copy of this article.
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(b) If corporate action creating dissenters' rights under Section 79-4-
13.02 is taken without a vote of shareholders, the corporation shall notify in
writing all shareholders entitled to assert dissenters' rights that the action
was taken and send them the dissenters' notice described in Section 79-4-13.22.
79-4-13.21 NOTICE OF INTENT TO DEMAND PAYMENT.-- (a) If proposed corporate
action creating dissenters' rights under Section 79-4-13.02 is submitted to a
vote at a shareholders' meeting, a shareholder who wishes to assert dissenters'
rights (1) must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed action is
effectuated, and (2) must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirement of subsection (a) is
not entitled to payment for his shares under this article.
79-4-13.22 DISSENTERS' NOTICE.--(a) If proposed corporate action creating
dissenters' rights under Section 79-4-13.02 is authorized at a shareholders'
meeting, the corporation shall deliver a written dissenters' notice to all
shareholders who satisfied the requirements of Section 79-4-13.21.
(b) The dissenters' notice must be sent no later than ten (10) days after
the corporate action was taken, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action and requires that the person asserting dissenters' rights
certify whether or not he acquired beneficial ownership of the shares before
that date;
(4) Set a date by which the corporation must receive the payment demand,
which date may not be fewer than thirty (30) nor more that sixty (60) days after
the date the subsection (a) notice is delivered; and
(5) Be accompanied by a copy of this article.
79-4-13.23 DUTY TO DEMAND PAYMENT.--(a) A shareholder sent a dissenters'
notice described in Section 79-4-13.22 must demand payment, certify whether he
acquired beneficial ownership of the shares before the date required to be set
forth in the dissenter's notice pursuant to Section 79-13.22(b)(3), and deposit
his certificates in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits his shares under
subsection (a) retains all other rights of a shareholder until these rights are
canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required. each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
79-4-13.24 SHARE RESTRICTIONS.--(a) The corporation may restrict the
transfer of uncertified shares from the date the demand for their payment is
received until the proposed corporate action is taken or the restrictions
released under Section 79-4-13.26.
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(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
79-4-13.25 PAYMENT.--(a) Except as provided in Section 79-4-13.27, as soon
as the proposed corporate action is taken, or upon receipt of a payment demand,
the corporation shall pay each dissenter who complied with Section 79-4-13.23
the amount the corporation estimates to be the fair value of his shares, plus
accrued interest.
(b) The payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year ending
not more than sixteen (16) months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for that
year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenters' right to demand payment under Section
79-4-13.28; and
(5) A copy of this article.
79-4-13.26 FAILURE TO TAKE ACTION.--(a) If the corporation does not take
the proposed action within sixty (60) days after the date set for demanding
payment and depositing share certificates, the corporation shall return the
deposited certificates and release the transfer restrictions imposed on
uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Section 79-4-13.22 and repeat the payment demand
procedure.
79-4-13.27 AFTER-ACQUIRED SHARES.--(a) A corporation may elect to withhold
payment required by Section 79-4-13.25 from a dissenter unless he was the
beneficial owner of the shares before the date set forth in the dissenters'
notice as the date of the first announcement to news media or to shareholders of
the terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under
subsection (a), after taking the proposed corporate action, it shall estimate
the fair value of the shares, plus accrued interest, and shall pay this amount
to each dissenter who agrees to accept it in full satisfaction of his demand.
The corporation shall send with its offer a statement of its estimate of the
fair value of the shares, an explanation of how the interest was calculated and
a statement of the dissenter's right to demand payment under Section 79-4-13.28.
79-4-13.28 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.--
(a) A dissenter may notify the corporation in writing of his own estimate of the
fair value of his shares and amount of interest due, and demand payment of his
estimate (less any payment under Section 79-4-13.25), or reject the
corporation's offer under Section 79-4-13.27 and demand payment of the fair
value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under Section 79-4-13.25 or
offered under Section 79-4-13.27 is less than the fair value of his shares or
that the interest due is incorrectly calculated;
(2) The corporation fails to make payment under Section 79-4-13.25 within
sixty (60) days after the date set for demanding payment; or
(3) The corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions imposed
on uncertificated shares within sixty (60) days after the date set for demanding
payment.
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(b) A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing under subsection (a)
within thirty (30) days after the corporation made or offered payment for his
shares.
SUBARTICLE C. JUDICIAL APPRAISAL OF SHARES
79-4-13.30 COURT ACTION.--(a) If a demand for payment under Section 79-4-
13.28 remains unsettled, the corporation shall commence a proceeding within
sixty (60) days after receiving the payment demand and petition the court to
determine the fair value of the shares and accrued interest. If the corporation
does not commence the proceeding within the 60-day period, it shall pay each
dissenter whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the chancery court of
the county where a corporation's principal office (or, if none in this state,
its registered office) is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding in
the county in this state where the registered office of the domestic corporation
merged with or whose shares were acquired by the foreign corporation was
located.
(c) The corporation shall make all dissenters (whether or not residents of
this state) whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) is plenary and exclusive. The court may appoint one or
more persons as appraisers to receive evidence and recommend decision on the
question of fair value. The appraisers have the powers described in the order
appointing them, or in any amendment to it. The dissenters are entitled to the
same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment
(1) for the amount, if any, by which the court finds the fair value of his
shares, plus interest, exceeds the amount paid by the corporation, or (2) for
the fair value, plus accrued interest, of his after-acquired shares for which
the corporation elected to withhold payment under Section 79-4-13.27.
79-4-13.31 COURT COSTS AND COUNSEL FEES.--(a) The court in an appraisal
proceeding commenced under Section 79-4-13.30 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against the
corporation, except that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the court finds
the dissenters acted arbitrarily, vexatiously or not in good faith in demanding
payment under Section 79-4-13.28.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the requirements
of Sections 79-4-13.20 through 79-4-13.28; or
(2) Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously or not in good faith with respect to the
rights provided by this article.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefitted.
B-5
<PAGE>
APPENDIX C
12 U.S.C. (S)214A NATIONAL BANK ACT
PROCEDURE FOR CONVERSION, MERGER, OR CONSOLIDATION; VOTE OF STOCKHOLDERS
Section 214a (Act of August 17, 1950, Sec. 2). A national banking
association may, by vote of the holders of at least two-thirds of each class of
its capital stock, convert into, or merge or consolidate with, a State bank in
the same State in which the national banking association is located, under a
State charter, in the following manner:
APPROVAL OF BOARD OF DIRECTORS; PUBLICATION OF NOTICE OF SHAREHOLDERS' MEETING;
WAIVER OF PUBLICATION; NOTICE BY REGISTERED OR CERTIFIED MAIL
(a) The Merger Agreement of conversion, merger, or consolidation must be
approved by a majority of the entire board of directors of the national banking
association. The bank shall publish notice of the time, place, and object of
the shareholders' meeting to act upon the Merger Agreement, in some newspaper
with general circulation in the place where the principal office of the national
banking association is located, at least once a week for four consecutive weeks;
Provided, That newspaper publication may be dispensed with entirely if waived by
all the shareholders and in the case of a merger or consolidation one
publication at least ten days before the meeting shall be sufficient if
publication for four weeks is waived by holders of at least two-thirds of each
class of capital stock and prior written consent of the Comptroller of the
Currency is obtained. The national banking association shall send such notice
to each shareholder of record by registered mail or by certified mail at least
ten days prior to the meeting, which notice may be waived specifically by any
shareholder.
RIGHTS OF DISSENTING SHAREHOLDERS
(b) A shareholder of a national banking association who votes against the
conversion, merger, or consolidation, or who has given notice in writing to the
bank at or prior to such meeting that he dissents from the Merger Agreement,
shall be entitled to receive in cash the value of the shares held by him, if and
when the conversion, merger, or consolidation is consummated, upon written
request made to the resulting State bank at any time before thirty days after
the date of consummation of such conversion, merger, or consolidation,
accompanied by the surrender of his stock certificates. The value of such
shares shall be determined as of the date on which the shareholders' meeting was
held authorizing the conversion, merger, or consolidation, by a committee of
three persons, one to be selected by majority vote of the dissenting
shareholders entitled to receive the value of their shares, one by the directors
of the resulting State bank, and the third by the two so chosen. The valuation
agreed upon by any two of three appraisers thus chosen shall govern; but, if the
value so fixed shall not be satisfactory to any dissenting shareholder who has
requested payment as provided herein, such shareholder may within five days
after being notified of the appraised value of his shares appeal to the
Comptroller of the Currency, who shall cause a reappraisal to be made, which
shall be final and binding as to the value of the shares of the appellant. If,
within ninety days from the date of consummation of the conversion, merger, or
consolidation, for any reason one or more of the appraiser is not selected as
herein provided, or the appraisers fail to determine the value of such shares,
the Comptroller shall upon written request of any interested party, cause an
appraisal to be made, which shall be final and binding on all parties. The
expenses of the Comptroller in making the reappraisal, or the appraisal as the
case may be, shall be paid by the resulting State bank. The Merger Agreement of
conversion, merger, or consolidation shall provide the manner of disposing of
the shares of the resulting State bank not taken by the dissenting shareholders
of the national banking association.
C-1
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
First M&F's Articles provide for indemnification to the fullest extent
allowed by law. The Articles of First M&F provide in Article Eleven certain
provisions regarding the extent to which First M&F will provide indemnification
of and advancement of expenses to its Directors, officers, employees and agents
as well as persons serving at the request of First M&F as a Director, officer,
employee or agent of another corporation, partnership, joint venture, trust
employee benefit plan or other enterprise (collectively referred to as "Eligible
Persons").
First M&F's Bylaws currently contain a provision requiring First M&F to
indemnify any Director, officer, employee or agent who is made a party or
threatened to be made a party to any threatened, pending or completed claim,
action, suit or proceeding, other than an action by or in the right of First
M&F, by reason of the fact that such person is or was a Director, officer,
employee or agent of First M&F, or is or was serving at the request of First M&F
as a Director, officer, partner, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against reasonably
incurred expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement, but only if such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of First M&F,
and, in criminal actions, he had no reasonable cause to believe his conduct was
unlawful.
Unless limited by its Articles of Incorporation the Mississippi BCA
mandates that First M&F indemnify any Director who is successful, on the merits
or otherwise, in the defense of any proceeding to which he was a party, against
reasonable expenses incurred by him in connection with the proceeding (the
"Mandatory Provision"). The Mississippi BCA permits First M&F to indemnify a
Director who is made a party to a proceeding against liability (including
reasonable expenses) incurred in connection with such proceeding provided (1)
the Director's conduct was in good faith, (2) in the case of conduct in his
official capacity, the Director reasonably believed his conduct was in the best
interests of First M&F , (3) in the case of conduct not in his official
capacity, the Director reasonably believed his conduct was not opposed to the
best interests of First M&F, (4) in the case of any criminal proceeding, the
Director had no reasonable cause to believe that his conduct was unlawful, (5)
in the case of claims by or in the right of First M&F, the Director is not
adjudged liable to First M&F, and (6) in the case of third-party claims, the
Director is not adjudged liable on the basis that he derived an improper
personal benefit (the "Permissive Provision"). Statutory indemnification is
permitted under the Permissive Provision, however, only if indemnification is
authorized in a specific case after a determination is made by the Board of
Directors (by majority vote of a quorum consisting of directors not at the time
parties to the proceeding), by a majority of a special committee of
disinterested directors (if such quorum of directors is unobtainable), by
special legal counsel or by the shareholders (a "Disinterested Party"), that the
director has met the applicable standard of conduct. The Mississippi BCA also
provides that unless First M&F's Articles of Incorporation provide otherwise, a
court may order indemnification of a director even if it finds he has not met
the applicable standard of conduct, or in the case of third-party claims,
involving action where the director acted within or without of his official
capacity, the director is adjudged liable on the basis that he derived an
improper personal benefit, the director was adjudged liable to First M&F in a
proceeding by or in the right of First M&F, if the court determines that the
director is reasonably entitled to indemnification in view of all the relevant
circumstances; provide, however, that if the director was adjudged liable to
First M&F, his indemnification is limited to reasonable expenses. The
Mississippi BCA permits First M&F to pay for or reimburse the reasonable
expenses incurred by a director in advance of final disposition of the
proceeding, provided the director affirms that he reasonably believes he has met
the applicable standard of conduct, the director agrees to repay the advance if
it is ultimately determined that he did not meet the standard of conduct, and a
determination is made by a Disinterested Party that the facts then known to the
person(s) making the determination would not preclude indemnification. The
Mississippi BCA also permits First M&F to indemnify officers, employees and
agents of First M&F to the same extent permitted for directors. Finally, the
Mississippi BCA allows indemnification beyond the scope of the Amended and
Restated Mandatory and Permissive Provisions.
Article Eleven of First M&F's Articles of Incorporation does not limit the
applicability of the indemnification provisions contained in the Mississippi BCA
and, as permitted by the Mississippi BCA, requires First M&F to indemnify
Eligible Persons beyond the scope of such provisions. First M&F must indemnify
an Eligible Person, despite the fact that such person has not met the standard
of conduct set forth in the Permissive Provision or would be disqualified for
indemnification under the Permissive Provision because such person was either
found liable to First M&F in a suit brought by or in the right of First M&F or
was found liable in a third-party action on the basis that he received an
improper personal benefit, if a determination is made by a Disinterested Party,
or a court, that the act or omissions of the person seeking indemnification did
not constitute gross negligence or willful misconduct. Article Eleven also
provides for mandatory advancement of reasonable expenses to a person seeking
indemnification, without an affirmation by such
<PAGE>
person that he believes he has met the applicable standard of conduct, as long
as he agrees to repay the advance if it is ultimately determined that he has not
met the standard of conduct and a Disinterested Party determines that the facts
then known to such Disinterest Party would not preclude indemnification.
Article Eleven further provides that no amendment or repeal of its
provisions maybe applied retroactively with respect to any event that occurred
prior to such amendment or appeal. The effect of such provision is that the
protection of Article Eleven may not be taken away or diminished by an amendment
in the event of a change in control of First M&F.
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 such action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
The following exhibits are furnished (or incorporated by reference) as a
part of this Registration Statement:
Exhibit Number Description
-------------- -----------
2 Agreement and Plan of Merger dated as of
September 9, 1998, included as Exhibit A to the
Joint Proxy Statement/Prospectus contained
herein.
3.1 Articles of Incorporation of First M&F, as
amended (*)
3.2 Bylaws of First M&F (*)
4 Instruments defining the rights of security
holders including indentures:
First M&F Corporation has various instruments
outstanding which define the rights of security
holders and agrees to furnish a copy of any
such instrument to the Securities and Exchange
Commission upon request.
5 Opinion of Watkins Ludlam Winter & Stennis,
P.A. regarding legality of common stock
registered hereby.
8 Form of Opinion of Watkins Ludlam Winter &
Stennis, P.A. regarding tax matters to be filed
by amendment.
10 Material contracts:
Documents relating to lines of credit (*)
21 Subsidiaries of the Registrant (*)
23.1 Consent of Shearer Taylor & Co., P.A.,
independent public accountants.
23.2 Consent of Taylor Powell Wilson & Hartford,
P.A. independent public accountants.
23.3 Consent of Watkins Ludlam Winter & Stennis,
P.A. is contained in their opinion filed as
Exhibit 5 to this Registration Statement.
24 Power of attorney included as part of signature
page.
99 Forms of Proxy.
<PAGE>
(*) These documents were filed as Exhibits 3(a), 3(b), 10 and 22, respectively,
on Form S-1 (File No. 33-08751) filed with the Commission on September 15, 1986,
and are hereby specifically incorporated by reference herein.
(b) Financial Statement Schedules
No Financial Statement Schedules are required to be filed.
(c) Report, Opinion or Appraisal.
Not applicable.
ITEM 22. UNDERTAKINGS
(1) The Registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(2) The Registrant hereby undertakes that every prospectus (i) that
is filed pursuant to paragraph (1) immediately preceding, or (ii) that purports
to meet the requirements of Section 10(a)(3) of the Act and issued in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) The Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(4) The Registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
(5) The Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(6) Insofar as indemnification for liabilities arising under the Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 20 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, First M&F
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Kosciusko, State of
Mississippi on this the 9th day of November, 1998.
FIRST M&F CORPORATION
Registrant
BY: /s/ Hugh S. Potts, Jr.
-------------------------
Chairman of the Board and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, each person whose signature appears
below constitutes and appoints Robert C. Thompson, III (with full power to act
alone), his or her true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution for him or her and on his or her behalf and
in his or her name, place and stead, in any and all capacities, to sign, execute
and affix his or her name and signature to and file any and all documents
relating to the registration under the Securities Act of 1933 of shares of First
M&F Common Stock for issuance in accordance with the Agreement and Plan of
Merger dated as of September 9, 1998, and do hereby grant to said attorney, full
power and authority to do and perform each and every act and thing necessary to
be done in and about the premises in order to effectuate such registration as
fully to all intents and purposes as he or she might to personally, and do
hereby ratify and confirm all that said attorney, may lawfully do or cause to be
done by virtue hereof. The documents referred to include a Registration
Statement under the Securities Act of 1933 on Form S-4, and any amendments
(including post effective amendments) thereto, and all documents deemed
necessary or desirable by said attorney-in-fact to be filed with departments or
agencies of the several states regulating the qualification or registration of
securities under Blue Sky laws of said states, together with any and all
documents and all exhibits relating to the registration statement, amendments,
or exhibits required to be filed with any administrative or regulatory agency or
authority.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on November 9, 1998 by the following
persons in the capacities indicated.
SIGNATURE TITLE
--------- -----
By: /s/ Hugh S. Potts, Jr. Chairman of the Board and
-------------------------- Director (Principal
Executive Officer)
By: /s/ Scott M. Wiggers President and Director
--------------------------
By: /s/ Fred A. Bell Director
--------------------------
<PAGE>
By: Director
----------------------------
John Crocker
By: /s/ Charles T. England Director
----------------------------
By: Director
----------------------------
Toxey Hall, III
By: Director
----------------------------
Barbara K. Hammond
By: /s/ J. Marlin Ivey Director
----------------------------
By: Director
----------------------------
Joseph M. Ivey
By: Director
----------------------------
R. Dale McBride
By: Director
----------------------------
Susan P. McCaffery
By: /s/ Otho E. Pettit, Jr. Director
----------------------------
By: Director
----------------------------
Charles W. Ritter, Jr.
By: /s/ W.C. Shoemaker Director
----------------------------
By: /s/ Edward G. Woodard Director
----------------------------
By: /s/ Robert C. Thompson, III Chief Financial Officer
---------------------------- (Principal Accounting and
Financial Officer)
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Description
- -------------- -----------
2 Agreement and Plan of Merger dated as of
September 9, 1998, included as Exhibit A to the
Joint Proxy Statement/Prospectus contained
herein.
3.1 Articles of Incorporation of First M&F, as
amended (*)
3.2 Bylaws of First M&F (*)
4 Instruments defining the rights of security
holders including indentures: First M&F
Corporation has various instruments outstanding
which define the rights of security holders and
agrees to furnish a copy of any such instrument
to the Securities and Exchange Commission upon
request.
5 Opinion of Watkins Ludlam Winter & Stennis,
P.A. regarding legality of common stock
registered hereby.
8 Form of Opinion of Watkins Ludlam Winter &
Stennis, P.A. regarding tax matters to be filed
by amendment.
10 Material contracts:
Documents relating to lines of credit (*)
21 Subsidiaries of the Registrant (*)
23.1 Consent of Shearer Taylor & Co., P.A.,
independent public accountants.
23.2 Consent of Taylor Powell Wilson & Hartford,
P.A. independent public accountants.
23.3 Consent of Watkins Ludlam Winter & Stennis,
P.A. is contained in their opinion filed as
Exhibit 5 to this Registration Statement.
24 Power of attorney included as part of signature
page.
99 Forms of Proxy.
(*) These documents were filed as Exhibits 3(a), 3(b), 10 and 22, respectively,
on Form S-1 (File No. 33-08751) filed with the Commission on September 15, 1986,
and are hereby specifically incorporated by reference herein.
<PAGE>
EXHIBIT 5
[Watkins Ludlam Winter & Stennis, P.A. Letterhead]
November 5, 1998
(601)949-4973
Board of Directors
First M&F Corp.
221 East Washington
Kosciusko, MS 39090
Gentlemen:
We have acted as counsel to First M&F Corp. in connection with the preparation
of its Registration Statement on Form S-4 for registration of 245,157 shares of
common stock, no par value, under the Securities Act of 1933. Such shares are
to be issued pursuant to the Agreement and Plan of Merger (the "Agreement"),
dated as of September 9, 1998, by and among First M&F Corp., Merchants and
Farmers Bank and First Bolivar Capital Corporation and First National Bank of
Bolivar County.
We have examined the Agreement, the Articles of Incorporation and the amendments
thereto of First M&F Corp. and such other documents as we deemed relevant.
Based on the foregoing, it is our opinion that the 245,157 shares of common
stock of First M&F Corp. to be registered under the Securities Act of 1933, when
issued pursuant to the Agreement will be legally issued, fully paid and non-
assessable shares of common stock of First M&F Corp.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of our name under the heading "Legal Opinion" in the
Joint Proxy Statement/Prospectus comprising Part I of the Registration
Statement.
Sincerely,
WATKINS LUDLAM WINTER & STENNIS, P.A.
/s/ Craig N. Landrum
Craig N. Landrum
CNL/nfp
<PAGE>
EXHIBIT 23.1
[LETTERHEAD
OF SHEARER
TAYLOR & CO.
APPEARS HERE]
We have issued our report dated January 23, 1998, accompanying the consolidated
financial statements of First M & F Corporation incorporated by reference in the
Annual Report of First M & F Corporation on Form 10-K for the year ended
December 31, 1997. We hereby consent to the incorporation by reference of said
report in this Registration Statement on Form S-4 and to the use of our name as
it appears under the caption "Experts".
/s/ Shearer, Taylor & Co., P.A.
Jackson, Mississippi
November 9, 1998
Certified Public Accountants
6360 I-55 North
Suite 330
P. O. Drawer 13157
Jackson, MS 39236-3157
Telephone 601/956-0993
<PAGE>
EXHIBIT 23.2
CONSENT OF TAYLOR, POWELL, WILSON & HARTFORD, P.A.
Independent Auditors Consent
----------------------------
The Board of Directors
First Bolivar Capital Corporation
We consent to the use of our audit report dated January 14, 1998, on the
financial statements of First Bolivar Capital Corporation as of December 31,
1997 and 1996, and for each of the years in the two-year period ended
December 31, 1997, included in Part I of the Registration Statement on Form S-4
of First M&F Corporation and to the reference to our firm under the heading
"Experts" in the Proxy Statement/Prospectus.
/s/ TAYLOR, POWELL, WILSON & HARTFORD, P.A.
Greenwood, Mississippi
October 28, 1998
<PAGE>
EXHIBIT 99
FIRST BOLIVAR CAPITAL CORPORATION
308 E. SUNFLOWER ROAD
CLEVELAND, MISSISSIPPI 38732
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Roy Collins, James Tims and Robert Tims or
either of them (with full power to act alone and to appoint a substitute, except
no officer or employee of the Bank may act as a proxy), as Proxies, and hereby
authorizes them to represent and to vote all the shares of common stock of First
Bolivar Capital Corporation ("Bolivar") held of record by the undersigned on
November __, 1998, at the special meeting of shareholders (the "Meeting") to be
held on December __, 1998, at ______ p.m., local time, and at any and all
adjournments thereof as follows:
1. The proposal to approve and adopt the Agreement and Merger Agreement of
Merger and related merger agreements among First M&F Corporation ("First
M&F") and Bolivar whereby Bolivar will be merged into First M&F and First
National Bank of Bolivar County will be merged into Merchants & Farmers
Bank.
FOR _________ AGAINST _________ ABSTAIN ________
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting or any adjournment
thereof.
The Board of Directors recommends a vote "FOR" Proposal 1.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR PROPOSAL 1. IF ANY OTHER BUSINESS IS PRESENTED AT SUCH
MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN THEIR
DISCRETION.
Please sign exactly as your name appears on certificate(s) representing shares
to be voted by this proxy. When signing as attorney, executor, administrator,
trustee, or guardian, please give your full title. If a , please sign in full
corporate name by the president or other authorized officer. If a partnership,
please sign in full partnership name by an authorized person. If shares are
held as joint tenants, each holder should sign.
Dated ___________________, 1998
__________________________ __________________________________
SIGNATURE OF SHAREHOLDER SIGNATURE OF SHAREHOLDER
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED
ENVELOPE
<PAGE>
FIRST NATIONAL BANK OF BOLIVAR COUNTY
308 E. SUNFLOWER ROAD
CLEVELAND, MISSISSIPPI 38732
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Roy Collins, James Tims and Robert Tims or
either of them (with full power to act alone and to appoint a substitute, except
no officer or employee of the Bank may act as a proxy), as Proxies, and hereby
authorizes them to represent and to vote all the shares of common stock of First
National Bank of Bolivar County ("Bank") held of record by the undersigned on
November __, 1998, at the special meeting of shareholders (the "Meeting") to be
held on December __, 1998, at ______ p.m., local time, and at any and all
adjournments thereof as follows:
1. The proposal to approve and adopt the Agreement and Merger Agreement of
Merger and related merger agreements among First M&F Corporation ("First
M&F") and First Bolivar Capital Corporation ("Bolivar") whereby Bolivar
will be merged into First M&F and Bank will be merged into Merchants &
Farmers Bank.
FOR _________ AGAINST _________ ABSTAIN ________
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting or any adjournment
thereof.
The Board of Directors recommends a vote "FOR" Proposal 1.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR PROPOSAL 1. IF ANY OTHER BUSINESS IS PRESENTED AT SUCH
MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN THEIR
DISCRETION.
Please sign exactly as your name appears on certificate(s) representing shares
to be voted by this proxy. When signing as attorney, executor, administrator,
trustee, or guardian, please give your full title. If a , please sign in full
corporate name by the president or other authorized officer. If a partnership,
please sign in full partnership name by an authorized person. If shares are
held as joint tenants, each holder should sign.
Dated ___________________, 1998
__________________________ __________________________________
SIGNATURE OF SHAREHOLDER SIGNATURE OF SHAREHOLDER
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED
ENVELOPE
