As filed with the Securities and Exchange Commission on August 23, 1999
Registration Number: ___-_____
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)
MISSISSIPPI 6712 64-0636653
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification
Number)
221 WASHINGTON STREET
KOSCIUSKO, MISSISSIPPI 39090
(662) 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
(662) 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. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------------------------------------
<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(1) share (2) price (2) fee (2)
- -----------------------------------------------------------------------------------------------
Common Stock, 1,217,985 $25.0588 $30,521,317.00 $8,485
$5.00 par value
- -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(1) Based upon the anticipated maximum number of shares to be issued in
connection with the transaction described herein, plus such additional
shares as may be issued as a result of the adjustment provisions
contained in the Agreement and Plan of Merger.
(2) Estimated solely for purposes of determining the amount of the
registration fee in accordance with Rule 457 under the Securities Act of
1933. Pursuant to Rule 457(f) of the Securities Act of 1933, as amended,
he registration fee is calculated based upon the market value (determined
by averaging the high and low sales prices) of the common stock, $.01
par value, of Community Federal Bancorp, Inc. on the Nasdaq Stock Market
on August 18, 1999 of $16.00 times the maximum number of shares of
Community Federal Bancorp, Inc. that may be exchanged (4,266,150),
reduced by the amount of cash to be paid by the Registrant ($37,737,083).
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 M&F CORPORATION COMMUNITY FEDERAL BANCORP, INC.
221 WASHINGTON STREET 333 COURT STREET
KOSCIUSKO, MISSISSIPPI 39090 TUPELO, MISSISSIPPI 38801
MERGER PROPOSED---YOUR VOTE IS VERY IMPORTANT
_____________, 1999
Dear Stockholders:
The Boards of Directors of First M&F Corporation and Community Federal
Bancorp, Inc. have agreed on a merger of First M&F and Community Federal. If the
merger is completed, Community Federal stockholders will each receive .2855
shares of First M&F common stock and $8.8457 in cash for each share of Community
Federal common stock that they own. First M&F stockholders will continue to own
their existing shares of First M&F common stock after the merger. We estimate
that, on completion of the merger, about 25% of the outstanding common stock of
First M&F will be owned by former Community Federal stockholders and that about
75% will be owned by those persons who were First M&F stockholders just before
the merger is completed.
We can't complete the merger unless the stockholders of First M&F and
Community Federal approve it. We have scheduled special meetings for the
stockholders of each company to approve 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.
The dates, times and places of the meetings are as follows:
FOR FIRST M&F STOCKHOLDERS: FOR COMMUNITY FEDERAL STOCKHOLDERS:
________, 1999, __ a.m./p.m. _______, 1999, __ a.m./p.m.
221 Washington Street 333 Court Street
Kosciusko, Mississippi 39090 Tupelo, Mississippi 38801
This Joint Proxy Statement-Prospectus provides you with detailed
information about the proposed merger. You can also get information about our
companies from documents we have filed with the Securities and Exchange
Commission. We encourage you to read this entire document carefully.
First M&F's and Community Federal's common stock are traded on the
NASDAQ stock market. The trading symbol of First M&F is "FMFC." The trading
symbol for Community Federal is "CFTP."
YOUR BOARDS OF DIRECTORS UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOR OF
THE MERGER.
Very truly yours,
Hugh S. Potts, Jr. Jim Ingram
Chairman and Chief Executive Officer, Chief Executive Officer,
First M&F Corporation Community Federal Bancorp, Inc.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS JOINT PROXY STATEMENT-PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Joint Proxy Statement-Prospectus dated _________,1999, and first mailed to
stockholders on ___________, 1999.
<PAGE>
REFERENCES TO ADDITIONAL INFORMATION
First M&F has filed with the SEC a registration statement under the
Securities Act of 1933 that registers the distribution of the shares of First
M&F common stock to be issued to Community Federal stockholders in connection
with the merger. The registration statement, including the attached exhibits
and schedules, contains 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.
In addition, First M&F and Community Federal file reports, proxy
statements, and other information with the SEC under the Securities Exchange
Act of 1934. You may read and copy this information at the following locations
of the SEC:
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, NY 10048 Chicago, IL 60661-2511
You may also obtain copies of this information by mail, at prescribed
rates, from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, or by calling the SEC at 1-800-SEC-0330.
The SEC also maintains an Internet world wide web site that contains
reports, proxy statements and other information about issuers, like First M&F
and Community Federal, 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 and Community Federal at the offices of the National Association
of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows First M&F and Community Federal to "incorporate by
reference" information into this Joint Proxy Statement-Prospectus. This means
that the companies 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 and Community Federal have previously
filed with the SEC. They contain important information about the companies and
their financial condition.
First M&F SEC Filings Period
- --------------------- ------
Annual Report on Form 10-K Year ended December 31, 1998, as filed
March 30, 1999
Quarterly Reports on Form 10-Q Quarter ended March 31, 1999, as filed
May 14, 1999, and Quarter ended June 30,
1999, as filed August 16, 1999.
Current Reports on Form 8-K Filed July 14, 1999
<PAGE>
Community Federal SEC Filings Period
- ----------------------------- ------
Annual Report on Form 10-K, as Fiscal Year ended September 30, 1998, as filed
amended on Form 10-K/A December 29, 1998, and as amended on August 5,
1999
Quarterly Reports on Form 10-Q Quarter ended December 31, 1998, as filed
February 12, 1999, and Quarter ended March 31,
1999, as filed May 14, 1999, and Quarter ended
June 30, 1999, as filed August 13, 1999.
Current Reports on Form 8-K Filed July 14, 1999
First M&F and Community Federal incorporate by reference additional
documents that either may have filed with the SEC between the date of this Joint
Proxy Statement-Prospectus and the date of the First M&F Meeting and the
Community Federal 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.
In addition to the documents of Community Federal which are incorporated
by reference, copies of Community Federal's Annual Report to Stockholders for
the year ended September 30, 1998 and Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999 accompany each copy of this Joint Proxy Statement-
Prospectus. Additional copies of these documents are available to any holder of
Community Federal common stock, including any beneficial owner, free of charge
upon written or oral request as set forth hereinafter.
All documents filed by First M&F pursuant to Sections 13(a), 13(c), 14,
or 15(d) of the Exchange Act subsequent to the date hereof and prior to the
earlier of (i) the date of the meeting to which this Joint Proxy Statement-
Prospectus relates, or (ii) the termination of the merger agreement which is the
subject of the meeting, are hereby incorporated by reference into this Joint
Proxy Statement-Prospectus and shall be deemed a part hereof from the date of
filing of such documents.
Any statement contained herein, in any supplement hereto, or in a
document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Joint Proxy
Statement-Prospectus to the extent that a statement contained herein, or in
any supplement hereto, or in any other subsequently filed document which also is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Joint Proxy
Statement-Prospectus.
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 Community Federal has supplied all
such information relating to Community Federal.
You can obtain any of the documents incorporated by reference in this
document through First M&F or Community Federal, or from the SEC through the
SEC's Internet world wide web site at the address described in "References to
Additional Information." 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:
<PAGE>
First M&F Community Federal
--------- -----------------
Robert C. Thompson, III Sherry S. McCarty
Chief Financial Officer Chief Financial Officer
First M&F Corporation Community Federal Bancorp, Inc.
221 Washington Street 333 Court Street
Kosciusko, Mississippi 39090 Tupelo, Mississippi 38801
Telephone (662) 289-5121 Telephone (662) 842-3981
If you would like to request documents from First M&F or Community
Federal, please do so by ___________, 1999, to receive them before the First
M&F Meeting and the Community Federal 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 First M&F special meeting and the Community Federal special
meeting. Neither First M&F nor Community Federal has authorized anyone to
provide you with information that is different from the information in this
document. This Joint Proxy Statement-Prospectus is dated _____________, 1999.
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
merger shall create any implication to the contrary.
<PAGE>
COMMUNITY FEDERAL BANCORP, INC.
333 COURT STREET
TUPELO, MISSISSIPPI 38801
(662) 842-3981
NOTICE OF SPECIAL STOCKHOLDERS' MEETING
TO BE HELD ON _____________, 1999
Notice is hereby given that a Special Meeting of stockholders of
Community Federal Bancorp, Inc. will be held at the main office of Community
Federal Bank, 333 Court Street, Tupelo, Mississippi 38801, on ___________, 1999,
at ____ a.m./p.m. for the purpose of considering and voting on:
1. Approval and adoption of the Agreement and Plan of Merger
dated as of July 8, 1999, pursuant to which Community
Federal Bancorp, Inc. will be merged into First M&F
Corporation.
2. To transact such other business as may properly come before
the Meeting and any adjournment thereof.
Only those stockholders of record at the close of business on _________,
1999, are entitled to notice of and to vote at the Meeting or any adjournments
or postponements of the Meeting.
All stockholders 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 Community Federal stockholder and you perfect statutory
appraisal rights by following the requirements of Section 262 of the Delaware
General Corporation Law, you will have the right to seek appraisal of your
shares. A summary of the provisions of the Delaware General Corporation Law
regarding such rights of dissent and appraisal are included in the attached
Joint Proxy Statement-Prospectus and a copy of the applicable provisions are
included as Appendix B.
BY ORDER OF THE BOARD OF DIRECTORS
Jim Ingram
Chief Executive Officer
____________________, 1999
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY, WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING.
THE BOARD OF DIRECTORS OF COMMUNITY FEDERAL UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS 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>
FIRST M&F CORPORATION
221 WASHINGTON STREET
KOSCIUSKO, MISSISSIPPI 39090
(662) 289-5121
NOTICE OF SPECIAL STOCKHOLDERS' MEETING
TO BE HELD ON _______________, 1999
Notice is hereby given that a Special Meeting of stockholders of First M&F
Corporation will be held at the main office of Merchants & Farmers Bank, 221
Washington Street, Kosciusko, Mississippi 39090, on __________, 1999 at
_____ a.m./p.m. for the purpose of considering and voting on:
1. Approval and adoption of the Agreement and Plan of Merger
dated as of July 8, 1999, pursuant to which Community
Federal Bancorp, Inc. will be merged into First M&F
Corporation.
2. To transact such other business as may properly come before
the Meeting and any adjournment thereof.
Only those stockholders of record at the close of business on __________,
1999, are entitled to notice of and to vote at the Meeting or any adjournments
or postponements of the Meeting.
All stockholders 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 M&F stockholder 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. A
summary of the provisions of the Mississippi law regarding such rights of
dissent are included in the attached Joint Proxy Statement-Prospectus and a copy
of the applicable provisions are included as Appendix C.
BY ORDER OF THE BOARD OF DIRECTORS
Hugh S. Potts, Jr.
Chairman and Chief Executive Officer
_____________, 1999
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY, WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING.
THE BOARD OF DIRECTORS OF FIRST M&F CORPORATION UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE
FOR APPROVAL OF THE MERGER AGREEMENT.
---
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q(1): WHY ARE THE TWO COMPANIES PROPOSING TO MERGE?
A: The Boards of First M&F and Community Federal have approved the
merger based upon their assessment of the financial condition and
prospects of each company in particular and the competitive and
regulatory environment for financial institutions generally. 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
stockholders of both companies. To review the background and
reasons for the merger see page 20.
Q(2): AS A COMMUNITY FEDERAL STOCKHOLDER, WHAT WILL I RECEIVE IN
THE MERGER?
A: First M&F will pay you $8.8457 cash and .2855 shares of First M&F
common stock in exchange for each share of Community Federal
common stock you own. 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 the price of First M&F shares.
Example: If you own 100 shares of Community Federal common stock,
upon completion of the merger you will have the right to receive
28 shares of First M&F common stock and a check for $884.57 plus
an amount for your fractional share interest.
Q(3): WHAT HAPPENS AS THE MARKET PRICE OF FIRST M&F COMMON STOCK
FLUCTUATES?
A: The exchange ratio is not determined by the market price of First
M&F common stock and is not expected to change. However, if the
price of First M&F stock falls below $26 per share before the
merger is completed, the exchange ratio may be adjusted. 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): AS A FIRST M&F STOCKHOLDER, HOW WILL THE MERGER AFFECT ME?
A: The merger will not affect your shares of common stock.
Following the merger, you and the other First M&F stockholders
will own approximately 75% of the common stock of First M&F.
Q(5): WHY WILL COMMUNITY FEDERAL STOCKHOLDERS RECEIVE SHARES OF FIRST
M&F STOCK, BUT FIRST M&F STOCKHOLDERS WILL NOT RECEIVE COMMUNITY
FEDERAL STOCK?
A: Community Federal will merge with and into First M&F and will
no longer be a separate company. First M&F will be the
surviving company in the merger and will continue to exist
after the merger is completed. The businesses and operations
of Community Federal and First M&F will be combined into a
single, larger company. Accordingly, the ownership of
Community Federal stockholders in Community Federal will
entitle them to own a portion of the combined company, which is
represented by the shares of First M&F stock that they will
receive in the merger.
Q(6): WHAT HAPPENS TO MY DIVIDENDS IN THE FUTURE?
A: After the merger, First M&F expects to pay quarterly dividends
on its common stock in the amount of $.25 per share, the
amount First M&F has recently paid as a regular quarterly cash
dividend to its stockholders. While we currently expect to pay
those dividends, we can't assure these payments. The combined
company's board of directors will use its discretion to decide
whether and when to declare dividends and in what amount, and it
will consider all relevant factors in doing so.
<PAGE>
Q(7): WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We hope to complete the merger during 1999. In addition to the
approval of the First M&F stockholders and Community Federal
stockholders, the Federal Reserve Board must approve the merger.
Q(8): AS A COMMUNITY FEDERAL STOCKHOLDER, WHAT ARE THE U.S. FEDERAL
TAX CONSEQUENCES OF THE MERGER TO ME?
A: We expect that for U.S. federal income tax purposes, your
exchange of shares of Community Federal 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 the cash received in exchange
for your shares and instead of fractional shares, and if you
dissent from the merger under Delaware law.
You will generally recognize gain, but not loss, to the extent of
the lesser of:
(1) the excess of the sum of the total fair market value of the First
M&F common stock received plus the amount of cash received over
your total tax basis for the shares of Community Federal common
stock exchanged; or
(2) the amount of cash you receive for your Community Federal shares.
We provide a more detailed review of the U.S. federal income tax
consequences of the merger on page 37 of this document.
Q(9): AS A COMMUNITY FEDERAL STOCKHOLDER, DO I HAVE TO ACCEPT FIRST
M&F COMMON STOCK IN EXCHANGE FOR MY SHARES IF THE MERGER IS APPROVED?
A: No. If you are a Community Federal stockholder and you follow the
procedures prescribed by Delaware 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 Community Federal stock,
determined in the manner prescribed by Delaware law, will be paid
to you in cash.
For a more complete description of these dissenters' rights, see
page 53 of this document.
Q(10): 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 stock 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 First M&F special meeting will take place on ___________,
1999, and the Community Federal special meeting will take place
on ____________, 1999. You are invited to your stockholders'
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 your
stockholders' meeting and either change your vote or attend your
stockholders' meeting and vote in person. We provide more
detailed instructions about voting on page 16 for First M&F
stockholders, and page 17 for Community Federal stockholders.
THE BOARDS OF DIRECTORS OF BOTH FIRST M&F AND COMMUNITY FEDERAL
UNANIMOUSLY RECOMMEND VOTING IN FAVOR OF THE PROPOSED MERGER.
Q(11): IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER,
WILL MY BROKER VOTE MY SHARES FOR ME?
A: Only if you provide instructions on how your broker should vote.
You should instruct your broker how to vote your shares,
following the directions your broker provides. Without
instruction from you to your broker, your shares will not be
voted and this will effectively be a vote against the merger.
<PAGE>
Q(12): SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. No one should send their stock certificates in now.
Community Federal Stockholders. After the merger is completed,
we'll send you written instructions on how to exchange your
Community Federal common stock for First M&F common stock.
First M&F Stockholders. You will keep your shares of common stock
and so you should not send in your First M&F certificates at all.
Q(13): WHO CAN HELP ANSWER YOUR QUESTIONS?
A: If you have more questions about the merger you should contact:
COMMUNITY FEDERAL STOCKHOLDERS:
Community Federal Bancorp, Inc.
333 Court Street
Tupelo, Mississippi 38801
Attention: H. Lewis Whitfield, President
Phone Number: (662) 842-3981
FIRST M&F STOCKHOLDERS:
First M&F Corporation
221 Washington Street
Kosciusko, Mississippi 39090
Attention: Scott M. Wiggers, President
Phone Number (662) 289-5121
If you would like additional copies of this Joint Proxy Statement-Prospectus,
you should contact:
COMMUNITY FEDERAL STOCKHOLDERS:
Regan & Associates, Inc.
90 West Street
New York, New York 10006
Phone Number (212) 587-3005
FIRST M&F STOCKHOLDERS:
First M&F Corporation
221 Washington Street
Kosciusko, Mississippi 39090
Attention: Robert C. Thompson, III
Phone Number (662) 289-5121
<PAGE>
TABLE OF CONTENTS
PAGE
----
SUMMARY
The Companies. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
First M&F Corporation . . . . . . . . . . . . . . . . . . . . 1
Community Federal Bancorp, Inc. . . . . . . . . . . . . . . . 1
Our Reasons for the Merger . . . . . . . . . . . . . . . . . . . . . 1
The Stockholders' Meeting. . . . . . . . . . . . . . . . . . . . . . 1
Our Recommendations to Stockholders. . . . . . . . . . . . . . . . . 1
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. . . . . . . . . . . . . . . . . 3
Federal Income Tax Consequences. . . . . . . . . . . . . . . . . . . 3
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . 3
Opinions of Financial Advisors . . . . . . . . . . . . . . . . . . . 3
Board of Directors and Management of First M&F Following the Merger. 3
Interests of Other Persons in the Merger That are Different from
Yours. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Dissenters' Appraisal Rights . . . . . . . . . . . . . . . . . . . . 4
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . 4
Forward-Looking Statements May Prove Inaccurate. . . . . . . . . . . 5
SELECTED FINANCIAL DATA
First M&F Corporation. . . . . . . . . . . . . . . . . . . . . . . . 7
Community Federal Bancorp, Inc.. . . . . . . . . . . . . . . . . . . 8
Pro Forma Condensed Financial Information. . . . . . . . . . . . . . 9
Selected Pro Forma Financial Data . . . . . . . . . . . . . . . . .10
Actual and Pro Forma Comparative Unaudited Per Share Data. . . . . .11
Price Range of Common Stock and Dividends. . . . . . . . . . . . . .12
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Comparative Per Share Market Price Information . . . . . . . . . . .14
INTRODUCTION
Information About First M&F. . . . . . . . . . . . . . . . . . . . .15
Information About Community Federal. . . . . . . . . . . . . . . . .15
THE MEETINGS
First M&F Special Meeting. . . . . . . . . . . . . . . . . . . . . .16
General . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Solicitation, Voting and Revocation of Proxies. . . . . . . .16
Shares Entitled to Vote; Quorum . . . . . . . . . . . . . . .16
Votes Required. . . . . . . . . . . . . . . . . . . . . . . .17
Dissenters' Appraisal Rights. . . . . . . . . . . . . . . . .17
Recommendation of First M&F Board of Directors. . . . . . . .17
Community Federal Special Meeting. . . . . . . . . . . . . . . . . .17
General . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Solicitation, Voting and Revocation of Proxies. . . . . . . .17
Shares Entitled to Vote; Quorum . . . . . . . . . . . . . . .18
Votes Required. . . . . . . . . . . . . . . . . . . . . . . .18
Dissenters' Appraisal Rights. . . . . . . . . . . . . . . . .18
Recommendation of Community Federal Board of Directors. . . .18
<PAGE>
THE MERGER
Description of the Merger. . . . . . . . . . . . . . . . . . . . . .19
Background of and Reasons for the Merger . . . . . . . . . . . . . .20
Community Federal's Reasons for the Merger. . . . . . . . . . .20
Reasons of First M&F . . . . . . . . . . . . . . . . . . . . . 21
Opinion of First M&F's Financial Advisor . . . . . . . . . . . . . .22
Opinion of Community Federal's Financial Advisor . . . . . . . . . .27
Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . .33
Conduct of Business Prior to the Effective Date. . . . . . . . . . .33
Regulatory Approvals and Other Conditions to the Merger. . . . . . .34
Regulatory Approval . . . . . . . . . . . . . . . . . . . . .34
Other Conditions. . . . . . . . . . . . . . . . . . . . . . .35
Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Waiver; Amendment; and Expenses. . . . . . . . . . . . . . . . . . .37
Material Federal Income Tax Consequences . . . . . . . . . . . . . .37
Share Exchange. . . . . . . . . . . . . . . . . . . . . . . .37
Appraisal Rights. . . . . . . . . . . . . . . . . . . . . . .38
Interests of Certain Persons in the Merger . . . . . . . . . . . . .38
Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . . .40
The Stock Option Agreement . . . . . . . . . . . . . . . . . . . . .40
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . .41
Restrictions on Resales of Securities by Affiliates. . . . . . . . .41
INFORMATION ABOUT OUR STOCK
First M&F Capital Stock. . . . . . . . . . . . . . . . . . . . . . .42
Authorized and Outstanding Capital Stock. . . . . . . . . . .42
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . .42
Dividend Rights . . . . . . . . . . . . . . . . . . . . . . .42
Preemptive Rights . . . . . . . . . . . . . . . . . . . . . .43
Fully Paid and Nonassessable. . . . . . . . . . . . . . . . .43
Cumulative Voting . . . . . . . . . . . . . . . . . . . . . .43
Liquidation Rights. . . . . . . . . . . . . . . . . . . . . .43
Indemnification of Directors, Officers and Employees. . . . .43
Transfer Agent and Registrar. . . . . . . . . . . . . . . . .43
Provisions Discouraging Changes in Control. . . . . . . . . .43
Comparative Rights of Stockholders of First M&F and Community
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Authorized Shares of Capital Stock. . . . . . . . . . . . . .45
Dividend Rights . . . . . . . . . . . . . . . . . . . . . . .45
Board of Directors. . . . . . . . . . . . . . . . . . . . . .46
Removal of Directors. . . . . . . . . . . . . . . . . . . . .46
Vacancies in the Board of Directors . . . . . . . . . . . . .46
Amendment of the Articles of Incorporation. . . . . . . . . .47
Amendment of the Bylaws . . . . . . . . . . . . . . . . . . .47
Special Meetings of Stockholders. . . . . . . . . . . . . . .47
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . .47
Limitation of Liability of Directors. . . . . . . . . . . . .47
Indemnification . . . . . . . . . . . . . . . . . . . . . . .48
Supermajority Voting Requirements; Business Combinations. . .49
Dissenters' Appraisal Rights. . . . . . . . . . . . . . . . .49
ADDITIONAL INFORMATION
Dissenters' Appraisal Rights . . . . . . . . . . . . . . . . . . . .50
First M&F . . . . . . . . . . . . . . . . . . . . . . . . . .50
Community Federal . . . . . . . . . . . . . . . . . . . . . .51
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . .54
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . .54
Stockholder Proposals. . . . . . . . . . . . . . . . . . . . . . . .54
First M&F . . . . . . . . . . . . . . . . . . . . . . . . . .54
Community Federal . . . . . . . . . . . . . . . . . . . . . .54
Cautionary Statement Concerning Forward-looking Information. . . . .55
FINANCIAL AND BUSINESS INFORMATION
Pro Forma Combined Condensed Consolidated Statements of Condition
(Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
Pro Forma Combined Condensed Consolidated Statements of Income
(Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
APPENDICES
Appendix A - Agreement and Plan of Merger
Appendix B - Section 262 of the Delaware General Corporation Law
Appendix C - Article 13 of the Mississippi Business Corporation Act
Appendix D - Opinion of Morgan Keegan & Company, Inc.
Appendix E - Opinion of Trident Securities
<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 "References To Additional Information" and "Information Incorporated
By Reference." 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 15
FIRST M&F CORPORATION
221 Washington Street
Post Office Box 520
Kosciusko, Mississippi 39090
(662) 289-5121
First M&F is incorporated in Mississippi and is a one-bank holding company. We
provide commercial banking operations, credit card services, insurance services,
trust services and other related financial services in the counties of Attala,
Bolivar, Calhoun, Choctaw, DeSoto, Grenada, Hinds, Holmes, LaFayette, Leake,
Madison, Neshoba, Oktibbeha and Rankin, Mississippi. First M&F's principal
asset is its stock in Merchants & Farmers Bank. As of June 30, 1999, our total
assets were about $717.3 million, our deposits were about $637.5 million and
stockholder's equity was about $61.9 million.
COMMUNITY FEDERAL BANCORP, INC.
333 Court Street (38801)
Post Office Box F
Tupelo, Mississippi 38802
(662) 842-3981
Community Federal is incorporated in Delaware and is a unitary savings and loan
holding company. Through our savings bank subsidiary Community Federal Bank, we
serve customers in Lee County, Mississippi. We are primarily engaged in
originating loans secured by one- to four-family residences, but also make other
mortgage loans, business loans and consumer loans. As of June 30, 1999, our
total assets were $308.7 million, our deposits were about $151.8 million and
stockholders' equity was about $58.3 million.
OUR REASONS FOR THE MERGER
PAGE 20 AND PAGE 21
We believe that the financial terms of the agreement are attractive based upon
the recent earnings performance of each company, each Boards' familiarity with
the other company's business, the current and prospective economic and
regulatory environment, and each Boards' belief that the other company is an
attractive choice as a long term affiliation partner. The merger will offer more
products and services to Community Federal Bank's customers, including
electronic banking products.
To review the background of and reasons for the merger in greater detail, please
see page 20.
THE STOCKHOLDERS' MEETING
PAGE 16 AND PAGE 17
First M&F Stockholders. The First M&F special meeting will be held at 221
Washington Street, Kosciusko, Mississippi, at ______ a.m. on ________, 1999. At
the special meeting, First M&F stockholders will be asked to approve the merger
agreement.
Community Federal Stockholders. The Community Federal special meeting will be
held at 333 Court Street, Tupelo, Mississippi, at _____ p.m. on _________, 1999.
At the special meeting, Community Federal stockholders will be asked to approve
the merger agreement.
<PAGE>
OUR RECOMMENDATIONS TO STOCKHOLDERS
PAGE 20 AND PAGE 21
First M&F Stockholders. The First M&F Board of Directors believes that the
merger is fair to you and in your best interests, and unanimously recommends
that you vote "FOR" the proposal to approve the merger agreement.
Community Federal Stockholders. The Community Federal Board of Directors
believes that the merger is fair to you and in your best interests, and
unanimously recommends that you vote "FOR" the proposal to approve the merger
agreement.
RECORD DATE; VOTING POWER
PAGE 16 AND PAGE 17
First M&F Stockholders. You can vote at the First M&F special meeting if you
owned First M&F common stock as of the close of business on _____________, 1999,
the record date. On that date, [3,639,779] shares of First M&F common stock were
outstanding and therefore are allowed to vote at the First M&F special meeting.
You will be able to cast one vote at the First M&F special meeting for each
share of First M&F common stock you owned on __________, 1999.
Community Federal Stockholders. You can vote at the Community Federal special
meeting if you owned Community Federal common stock as of the close of business
on _________, 1999, the record date. On that date, 4,266,150 shares of
Community Federal common stock were outstanding and therefore are allowed to
vote at the Community Federal special meeting. You will be able to cast one
vote for each share of Community Federal common stock you owned on __________,
1999.
VOTES REQUIRED
PAGE 18
First M&F Stockholders. In order for the merger to be approved, First M&F
stockholders holding a majority of the outstanding shares of the common stock
on the record date must vote in favor of the merger.
All together, the directors and officers of First M&F can cast approximately
29.5% of the votes entitled to be cast at the First M&F special meeting. We
expect that they will vote all of their shares in favor of the merger.
Community Federal Stockholders. In order for the merger to be approved,
Community Federal stockholders holding a majority of the outstanding shares of
common stock on the record date must vote in favor of the merger.
All together, the directors and officers of Community Federal can cast
approximately 12.5% of the votes entitled to be cast at the Community Federal
special meeting. We expect that they will vote all of their shares in favor of
the merger.
THE MERGER
PAGE 19
We propose to merge Community Federal into First M&F Corporation. 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 19
In the merger, each outstanding share of Community Federal common stock will be
converted into $8.8457 in cash and .2855 shares of First M&F common stock. The
exchange ratio will be adjusted if First M&F increases its number of shares of
common stock outstanding from the figures disclosed in this Joint Proxy
Statement-Prospectus. It may also be adjusted if the average market price of
First M&F common stock is less than $26.00 during a period prior to the closing.
CONDITIONS TO COMPLETION OF THE MERGER
PAGE 34
The completion of the merger depends on a number of standard conditions being
met, including approval of the merger by the stockholders of First M&F and
Community Federal and receipt of all required regulatory approvals.
In addition, the obligation of Community Federal to consummate the merger is
also conditioned on the receipt of an opinion from Watkins Ludlam Winter &
Stennis, P.A. as to the tax treatment of the merger.
The obligation of First M&F to consummate the merger is also conditioned upon
the receipt of affiliate agreements from each person who serves as an executive
officer or director of Community Federal and the receipt of executed non-
competition agreements with Jim Ingram and H. Lewis Whitfield.
A party to the merger agreement could elect to waive a condition that has not
been satisfied and complete the merger although it is not required to. We can't
be certain whether or when any of the conditions we've listed will be satisfied
or waived or that the merger will be completed.
<PAGE>
TERMINATION OF THE MERGER AGREEMENT
PAGE 36
We can agree at any time to terminate the merger agreement without completing
the merger, even if the stockholders of both our companies have already voted to
approve it. Also, First M&F can terminate the merger agreement if the holders
of 20% or more of the outstanding Community Federal common stock exercise
dissenters' appraisal rights.
The Board of Community Federal may terminate the agreement, during a set time
period, in the event that the First M&F stock price falls below $26 per share
and First M&F does not increase the exchange ratio.
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, 2000;
3. if the First M&F stockholders or the Community Federal
stockholders 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 37
We have structured the merger with the intent that First M&F, Community Federal,
and our stockholders won't recognize any gain or loss for U.S. federal income
tax purposes in the merger, except in connection with cash received by Community
Federal stockholders. We have conditioned the merger on the receipt of a legal
opinion that this will be the case, but this opinion won't bind the Internal
Revenue Service, which could take a different view.
THIS TAX TREATMENT WILL NOT APPLY TO ANY STOCKHOLDER WHO DISSENTS FROM THE
MERGER UNDER MISSISSIPPI OR DELAWARE 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 41
The purchase method of accounting will be used to reflect the merger.
OPINIONS OF FINANCIAL ADVISORS
PAGE 22 AND PAGE 27
First M&F Stockholders. In deciding to approve the merger, our Board considered
the opinion of its financial advisor, Morgan Keegan & Company, Inc., that the
consideration to be paid was fair, from a financial point of view, to First M&F
stockholders. We have attached this opinion as Appendix D to this document. You
should read it carefully.
Community Federal Stockholders. In deciding to approve the merger, our Board
considered the opinion of its financial advisor, Trident Securities, that
the exchange ratio was fair from a financial point of view to Community Federal
stockholders. We have attached this opinion as Appendix E to this document. You
should read it carefully.
<PAGE>
BOARD OF DIRECTORS AND MANAGEMENT OF FIRST M&F FOLLOWING THE MERGER
PAGE 38
Board of Directors. After the merger is completed, the Board of Directors of
First M&F will continue as the Board of Directors of the surviving corporation.
The Board of First M&F has agreed to nominate Jim Ingram, Charles V. Imbler,
Sr., and L. F. Sams, Jr. for election to the Board of Directors of First M&F at
the Year 2000 Annual Meeting of Shareholders, and the members of the Board have
agreed to vote their shares in favor of the election of the nominees.
Advisory Boards. After the merger is completed, Jim Ingram, Charles V. Imbler,
Sr., and L. F. Sams, Jr. will be appointed to serve as members of a Special
Advisory Board until the Year 2000 Annual Meeting of Stockholders.
All non-employee directors of Community Federal, other than those appointed to
the Special Advisory Board, have been requested by First M&F to serve as
members of an advisory board.
Management. Mr. Jim Ingram, who is the Chief Executive Officer of Community
Federal and Community Federal Bank, will become a consultant of First M&F after
the merger. Mr. Ingram has agreed to a two year Consulting Agreement. During
the term of this agreement, Mr. Ingram will receive $75,000 per year in return
for his services.
Mr. Lewis Whitfield, who is Community Federal Bank's President, will become
President of the Tupelo Division of First M&F after the merger.
Please refer to page 39 for more information concerning employment arrangements
and interests of Community Federal directors and officers in the merger.
INTERESTS OF OTHER PERSONS IN THE MERGER THAT ARE DIFFERENT FROM YOURS
PAGE 38
In addition to the agreements described in the preceding paragraphs, certain
officers of Community Federal have interests in the merger that are different
from, or in addition to, their interests as stockholders of Community Federal.
In particular, existing employment agreements between Community Federal,
Community Federal Bank and Messrs. Ingram and Whitfield provide them with
certain benefits upon a change in control of Community Federal. Messrs. Ingram
and Whitfield and First M&F have agreed to cash lump sum payments in
satisfaction of these obligations. Mr. Ingram will receive $320,000.00 and Mr.
Whitfield will receive $355,000.00.
Messrs. Ingram and Whitfield have also agreed to enter into Non-Competition
Agreements with First M&F and Merchants & Farmers Bank, pursuant to which each
will receive a lump sum payment of $75,000.00.
Members of Community Federal's Board and its officers also are entitled to
indemnification and liability insurance under the merger agreement.
Please refer to page 39 for more information concerning employment arrangement
and interests of Community Federal directors and officers in the merger.
DISSENTERS' APPRAISAL RIGHTS
PAGE 49
First M&F Stockholders. 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 only right will be to receive the appraised value of your
First M&F stock in cash.
Community Federal Stockholders. Delaware 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 not voting your shares of stock in favor of the merger. If
you dissent from the merger, your only right will be to receive the appraised
value of your Community Federal stock in cash.
<PAGE>
REGULATORY APPROVALS
PAGE 34
We can't complete the merger unless we obtain the approval of the Board of
Governors of the Federal Reserve System. The U.S. Department of Justice also has
input into the Federal Reserve Board's approval process. Federal law requires us
to wait for up to 30 days before completing the merger after the Federal Reserve
Board has approved it.
The notice to the Federal Reserve Board was filed on August 3, 1999; however,
the Federal Reserve Board has not yet acted on the application.
While we don't know of any reason why we shouldn't obtain this regulatory
approval in a timely manner, we can't be certain when we'll obtain it or that we
will obtain it.
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
PAGE 55
We have each made forward-looking statements in this document, and in documents
to which we refer you in this document, that contain certain forward-looking
statements, including statements concerning stockholder value and revenue
options. These forward-looking statements involve risks and uncertainties. Many
possible events or factors could cause the actual results to differ materially
from those expressed in our forward-looking statements.
<PAGE>
SELECTED FINANCIAL DATA
The following tables show summarized historical financial data, audited
and unaudited, for each of our companies and also show similar pro forma
information reflecting the merger of our two companies. The pro forma
information reflects the "purchase" method of accounting for 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 income
statement information. 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, 1999 doesn't
indicate what the results will be for the full 1999 fiscal year.
The information in the following tables is based on the historical
financial information of our companies that has been presented in our prior
filings with the SEC. All of the summary financial information provided in the
following tables should be read in connection with this historical financial
information which has also been incorporated into this Joint Proxy Statement-
Prospectus by reference. See "References To Additional Information" and
"Information Incorporated By Reference." First M&F's annual financial
statements were audited by Shearer, Taylor & Co., P.A. and Community Federal's
annual financial statements were audited by Arthur Andersen LLP, independent
Certified Public Accountants to each of our companies. The financial
information as of or for the interim periods ended June 30, 1999 and 1998 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.
<PAGE>
FIRST M&F CORPORATION
SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For the six month
period ended June 30, For the year ended December 31,
----------------------- --------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
CONDENSED INCOME DATA
(THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income 13,620 12,229 25,619 24,676 23,030 20,984 18,764
Provision for loan losses 1,102 944 1,965 2,062 1,233 1,555 971
Noninterest income 3,199 2,851 5,501 5,241 4,765 4,513 3,666
Noninterest expense 10,095 8,782 18,718 16,416 16,063 15,557 15,004
Income taxes 1,447 1,367 2,595 3,293 2,876 2,006 1,590
------ ------ ------ ------ ------ ------ ------
Net income 4,176 3,987 7,842 8,146 7,623 6,379 4,865
====== ====== ====== ====== ====== ====== ======
END OF PERIOD BALANCE
SHEET ITEMS (THOUSANDS):
Assets 717,285 684,410 702,006 621,458 563,677 544,190 481,940
Total net loans 431,903 384,583 408,349 370,590 354,030 303,763 272,438
Deposits 637,454 613,832 625,398 543,006 496,793 437,270 389,017
Long-term debt 14,077 5,991 9,399 16,417 10,453 11,045 8,078
Shareholders' equity 61,923 59,976 63,512 57,646 52,211 47,429 36,953
PER SHARE DATA:
Net income 1.15 1.10 2.16 2.24 2.10 1.80 1.45
Cash dividends declared 0.50 0.48 0.96 0.88 0.75 0.62 0.49
Book value, end of period 17.01 16.49 17.45 15.85 14.35 13.05 10.98
SHARES OUTSTANDING
(THOUSANDS):
Average 3,640 3,638 3,638 3,638 3,636 3,538 3,364
End of period 3,640 3,640 3,640 3,638 3,638 3,638 3,368
</TABLE>
<PAGE>
COMMUNITY FEDERAL BANCORP, INC.
SELECTED FINANCIAL DATA (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For the nine month
period ended June 30, For the year ended September 30,
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
CONDENSED INCOME DATA (THOUSANDS):
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income 5,474 5,242 7,034 7,484 6,200 4,749 3,573
Provision for loan losses 62 55 235 20 20 30 25
Noninterest income 1,273 915 1,929 227 188 132 752
Noninterest expense 3,079 2,593 3,860 2,926 3,036 1,672 1,840
Income taxes 1,294 1,229 1,817 1,728 1,184 1,144 1,012
----- ----- ----- ----- ----- ----- -----
Income before cumulative effect of
changes in accounting principles,
net of tax 2,312 2,280 3,051 3,037 2,148 2,035 1,448
Cumulative effect of changes in
accounting principles, net of tax - - - - - - 131
----- ----- ----- ----- ----- ----- -----
Net income 2,312 2,280 3,051 3,037 2,148 2,035 1,317
===== ===== ===== ===== ===== ===== =====
END OF PERIOD BALANCE SHEET ITEMS
(THOUSANDS):
Assets 308,690 263,246 275,320 215,938 204,017 162,042 154,600
Total net loans 141,822 140,501 141,414 127,335 117,631 97,988 84,269
Deposits 151,776 143,097 144,802 132,718 131,740 134,555 131,989
Long-term debt 92,323 54,592 65,451 18,282 - 1,000 -
Shareholders' equity 58,252 58,635 57,565 58,563 67,139 23,427 20,394
PER SHARE DATA:
Net income .60 .56 .76 .72 .27 N/A N/A
Cash dividends declared .26 .24 .32 2.80 .15 N/A N/A
Book value, end of period 13.66 13.33 13.33 12.65 14.50 N/A N/A
SHARES OUTSTANDING (THOUSANDS):
Average 3,835 4,058 4,014 4,216 4,266 N/A N/A
End of period 4,266 4,398 4,318 4,629 4,629 N/A N/A
</TABLE>
<PAGE>
PRO FORMA CONDENSED FINANCIAL INFORMATION
The following tables present certain pro forma unaudited combined
condensed financial information from the pro forma unaudited combined condensed
statements of income for the six month period ended June 30, 1999, and for the
year ended December 31, 1998, and the pro forma unaudited combined condensed
balance sheet at December 31, 1998. First M&F's fiscal year ends December 31
and Community Federal's fiscal year ends September 30, 1998. In the following
table, financial data for the fiscal year ended December 31, 1998 include
Community Federal financial data for the 12 months ended September 30 and
information regarding First M&F is presented consistent with the fiscal year of
First M&F ended December 31. The information for the six months ended June 30,
1999, is based on the respective historical unaudited financial statements of
First M&F and Community Federal.
The information in the following table is based on the historical
financial information that has been presented in prior SEC filings. This
information has been incorporated into this Joint Proxy Statement-Prospectus by
reference. See "References To Additional Information" and "Information
Incorporated By Reference."
The pro forma financial information assumes an exchange ratio of .2855
shares of First M&F common stock for each share of Community Federal common
stock outstanding.
The pro forma information in the tables assumes that the merger is
accounted for using the purchase method of accounting. The merger will be
accounted for as a "purchase," which means that the purchase price will be
allocated to the assets acquired and the liabilities assumed by First M&F based
on their estimated fair values at the time Community Federal and First M&F are
combined. For a more detailed description of purchase accounting, see "The
Merger -- Accounting Treatment."
The summary unaudited pro forma financial information should be read in
conjunction with the pro forma financial information and the related notes
thereto presented on page 57 in this Joint Proxy Statement-Prospectus and the
consolidated financial statements and related notes incorporated by reference in
this Joint Proxy Statement-Prospectus.
The pro forma information is not necessarily indicative of the results of
operations which would have been achieved had the merger been consummated as of
the beginning of the periods for which such data are presented and should not
be construed as being representative of future periods.
<PAGE>
SELECTED PRO FORMA CONDENSED FINANCIAL DATA
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
As of and As of or
for the six for the
months ended year ended
June 30, 1999 December 31, 1998
INCOME DATA (THOUSANDS):
Net interest income 16,364 30,719
Provision for loan losses 1,142 2,200
Noninterest income 4,012 7,431
Noninterest expense 12,718 23,580
Income taxes 1,922 3,641
------ ------
Net income 4,594 8,729
====== ======
END OF PERIOD BALANCE SHEET ITEMS
(THOUSANDS):
Assets 1,006,318 958,357
Total net loans 574,196 550,233
Deposits 789,690 770,660
Long-term debt 106,400 74,851
Shareholders' equity 99,680 101,269
PER SHARE DATA:
Net income 0.93 1.73
Cash dividends declared 0.50 0.96
Book value, end of period 20.38 20.51
SHARES OUTSTANDING (THOUSANDS)
Average 4,937 5,044
End of period 4,890 4,937
<PAGE>
ACTUAL AND PRO FORMA 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.
In presenting the comparative pro forma information for certain time
periods, we have assumed that the merger is accounted for using the purchase
method of accounting.
The information listed as "equivalent pro forma" was obtained by
multiplying the pro forma amounts by the exchange ratio of .2855.
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, 1999 doesn't indicate what the results will
be for the full 1999 fiscal year.
The information in the following table is based on the historical
financial information that has been presented in prior SEC filings. This
information has been incorporated into this Joint Proxy Statement-Prospectus by
reference. See "References To Additional Information" and "Information
Incorporated By Reference."
<PAGE>
For the six For the year
months ended ended
June 30, 1999 December 31, 1998
FIRST M&F COMMON STOCK
Income from continuing operations per
common shares, primary:
Historical 1.15 2.16
Pro Forma .91 1.68
Cash dividends declared per common share:
Historical 0.50 0.96
Pro Forma 0.50 0.96
Book value per common share as of end of
Historical 17.01 17.45
Pro Forma 20.38 21.85
COMMUNITY FEDERAL COMMON STOCK
Income from continuing operations per
common share, primary:
Historical 0.37 0.76
Equivalent Pro Forma 0.27 0.49
Cash dividends declared per common shares:
Historical 0.17 0.32
Equivalent Pro Forma 0.14 0.27
Book value per common share as of end of
Historical 13.66 13.33
Equivalent Pro Forma 5.82 6.24
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
First M&F is listed for quotation on the NASDAQ National Market System
under the trading symbol FMFC. As of June 30, 1999, First M&F common stock was
held of record by approximately 622 persons. The following table sets forth the
high and low closing sale prices of First M&F common stock as reported by
NASDAQ.
Community Federal common stock is also listed on the NASDAQ National
Market System under the trading symbol CFTP. As of June 30, 1999, Community
Federal common stock was held of record by approximately ____ persons. The
following table sets forth the high and low closing sale prices of Community
Federal common stock as reported by NASDAQ.
<PAGE>
First M&F Community Federal
Closing Closing Sales
Sales Prices Prices
High Low High Low
YEAR ENDED DECEMBER 31, 1997:
First Quarter 28.00 25.00 20.00 16.75
Second Quarter 29.25 26.50 20.75 16.875
Third Quarter 30.00 27.50 18.75 17.25
Fourth Quarter 44.00 30.50 22.00 16.375
YEAR ENDED DECEMBER 31, 1998:
First Quarter 45.00 37.75 20.8125 18.125
Second Quarter 48.00 42.00 18.875 17.25
Third Quarter 44.50 33.50 17.75 14.00
Fourth Quarter 37.00 31.00 15.75 13.625
YEAR ENDED DECEMBER 31, 1999:
First Quarter 39.00 31.75 16.00 11.50
Second Quarter 33.50 29.375 16.00 11.875
DIVIDENDS
The following table sets forth dividends declared per share of First M&F
common stock and Community Federal common stock, respectively, for the periods
indicated. The ability of either First M&F or Community Federal to pay dividends
to its respective stockholders is subject to certain restrictions. See
"Information About Our Stock - First M&F Capital Stock" and "Information About
Our Stock - Comparative Rights of Stockholders of First M&F and Community
Federal."
First M&F Community Federal
Dividends Dividends
--------- -----------------
YEAR ENDED DECEMBER 31, 1997:
First Quarter 0.20 .075
Second Quarter 0.22 2.575(1)
Third Quarter 0.22 .075
Fourth Quarter 0.24 .075
YEAR ENDED DECEMBER 31, 1998:
First Quarter 0.24 0.08
Second Quarter 0.24 0.08
Third Quarter 0.24 0.08
Fourth Quarter 0.24 0.085
YEAR ENDED DECEMBER 31, 1999:
First Quarter 0.25 0.085
Second Quarter 0.25 0.085
____________________________________
(1) A special dividend of $2.50 was paid in the second quarter of 1997 in
addition to the regular quarterly dividend of .075.
<PAGE>
COMPARATIVE PER SHARE MARKET PRICE INFORMATION
The following table sets forth the closing prices per share of First M&F
common stock and Community Federal common stock as reported on the NASDAQ
National Market System on (1) July 8, 1999, the last full trading day prior to
the public announcement of the merger, and (2) ________, the last full trading
day for which closing prices were available at the time of the printing of this
Joint Proxy Statement-Prospectus.
The following table also sets forth, in the column titled "Equivalent per
Share Price," the value, including any premium, you would have received for each
share of Community Federal common stock, if the merger had been completed, and
you had exchanged your shares of Community Federal common stock for shares of
First M&F common stock and cash on the dates listed.
Community Federal First M&F Equivalent
Common Common per
Stock Stock Share Price
--------- --------- -----------
July 8, 1999 16.00 33.00 18.26
_____, 1999 _____ _____ _____
Because the market price of First M&F common stock and Community Federal
common stock may increase or decrease before the completion of the merger, you
are urged to obtain current market quotations.
<PAGE>
INTRODUCTION
INFORMATION ABOUT FIRST M&F
First M&F Corporation is a bank holding company under the Bank Holding
Company Act. It engages exclusively in the banking business through its
subsidiary, Merchants & Farmers Bank. The principal executive offices of First
M&F and Merchants & Farmers Bank are located at 221 Washington Street,
Kosciusko, Mississippi. The mailing address of the principal executive office
is Post Office Box 520, Kosciusko, Mississippi 39090 and the telephone number is
(662) 289-5121.
First M&F was incorporated in 1979 by management of Merchants & Farmers
Bank and became the parent of Merchants & Farmers 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 Merchants & Farmers Bank. First M&F
presently owns 100% of the outstanding stock of Merchants & Farmers Bank.
Merchants & Farmers Bank was chartered and organized under the laws of
the State of Mississippi in 1890. Merchants & Farmers Bank offers a complete
range of commercial and consumer banking services through its main office and
two branch offices in Kosciusko and over thirty locations in Ackerman, Brandon,
Bruce, Canton, Cleveland, Clinton, Durant, Grenada, Lena, Madison, Oxford,
Pearl, Philadelphia, Pittsboro, Puckett, Ridgeland, Southaven, Starkville and
Weir, Mississippi. Merchants & Farmers Bank makes commercial, real estate,
consumer and agricultural loans and offers a variety of trust services.
Merchants & Farmers Bank has a wholly-owned finance company subsidiary,
M&F Financial Services, Inc., located in Bruce, Mississippi. Merchants &
Farmers Bank also has a wholly-owned credit insurance subsidiary, First M&F
Insurance Company, Inc., based in Kosciusko. Merchants & Farmers 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.
INFORMATION ABOUT COMMUNITY FEDERAL
Community Federal Bancorp, Inc. is a unitary savings and loan holding
company. It engages exclusively in the banking business through its subsidiary,
Community Federal Bank. The principal executive offices of Community Federal
and Community Federal Bank are located at 333 Court Street, Tupelo, Mississippi
38801. The mailing address of the principal executive office is Post Office Box
F, Tupelo, Mississippi 38802 and the telephone number is (662) 842-3981.
Community Federal was incorporated in 1995 by management of Community
Federal Bank and became the parent of Community Federal Bank through an exchange
offer with the stockholders of Community Federal Bank. Community Federal
presently owns 100% of the outstanding stock of Community Federal Bank.
Community Federal Bank, through its main office and branches which are located
in Tupelo, primarily focuses on originating one- to four- family residences,
but also makes other mortgage loans, business loans, and consumer loans.
<PAGE>
THE MEETINGS
FIRST M&F SPECIAL MEETING
GENERAL. This Joint Proxy Statement-Prospectus is first being mailed by
First M&F on or about ______________, 1999, to the stockholders of First M&F in
connection with the solicitation of proxies on behalf of the Board of Directors
of First M&F for use at a special meeting of stockholders of First M&F (the
"First M&F Meeting") to be held on____________, 1999, at ____ p.m. at 221
Washington Street, Kosciusko, Mississippi and at any adjournments or
postponements thereof and is accompanied by the Notice of Meeting and a form of
proxy. At the First M&F Meeting, First M&F stockholders will be asked to
consider and vote upon a proposal to approve and adopt the Agreement and Plan of
Merger, dated as of July 8, 1999, by and between First M&F and Community
Federal, providing for the merger of Community Federal with First M&F.
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"
APPROVAL OF THE MERGER. 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. To preserve any statutory
dissenters' appraisal rights a stockholder may otherwise wish to exercise, a
stockholder must not vote his shares in favor of the proposed merger.
No other matters are expected to be considered at the First M&F Meeting,
but if any other matters should properly come before the First M&F 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 stockholder
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 M&F; or
(3) upon request, if such stockholder is present at the
First M&F Meeting and elects to vote in person.
Mere attendance at the First M&F 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 M&F. 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 M&F who
will not receive any additional compensation for so doing. In addition, First
M&F will request banks, brokers and other record holders to send proxies and
proxy material to the beneficial owners of the stock and secure their voting
instructions, if necessary. First M&F will reimburse such record holders for
their reasonable expenses in so doing.
SHARES ENTITLED TO VOTE; QUORUM. Only stockholders of First M&F as of
the close of business on __________, 1999 (the "First M&F Record Date"), are
entitled to notice of and to vote at the First M&F Meeting. As of the First M&F
Record Date, there were [3,639,779] shares of First M&F common stock
outstanding, each of which is entitled to one vote on all matters to come before
the First M&F Meeting. The presence at the First M&F Meeting, in person or by
proxy, of the holders of a majority of the outstanding shares of First M&F
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 First M&F Meeting for quorum purposes.
<PAGE>
VOTES REQUIRED. Approval of the merger requires the affirmative vote of
the holders of at least a majority of the voting power of the First M&F common
stock present, in person or by proxy, at the First M&F Meeting. As of the First
M&F Record Date, directors and executive officers of First M&F and their
affiliates were the beneficial owners of approximately 29.5% of the outstanding
First M&F common stock entitled to vote at the First M&F Meeting, and it is
expected that all such shares will be voted in favor of the merger.
DISSENTERS' APPRAISAL RIGHTS. Under Article 13 of the Mississippi
Business Corporation Act, each First M&F stockholder who dissents from the
merger has the right to have the fair value of such First M&F's shares appraised
and paid to such First M&F stockholder in cash. See "Additional Information --
Dissenters' Appraisal Rights" and Appendix C.
RECOMMENDATION OF FIRST M&F BOARD OF DIRECTORS. The First M&F Board of
Directors has unanimously approved the merger agreement and the transactions
contemplated thereby. The Board believes the merger is fair to and in the best
interests of the First M&F stockholders and unanimously recommends that the
stockholders vote "FOR" approval and adoption of the merger agreement and the
transactions contemplated thereby. See "The Merger -- Background of and Reasons
for the Merger."
COMMUNITY FEDERAL SPECIAL MEETING
GENERAL. This Joint Proxy Statement-Prospectus is first being mailed by
Community Federal on or about ______________, 1999, to the stockholders of
Community Federal in connection with the solicitation of proxies on behalf of
the Board of Directors of Community Federal for use at a special meeting of
stockholders (the "Community Federal Meeting") to be held on____________, 1999,
at ____ p.m. at 333 Court Street, Tupelo, Mississippi and at any adjournments or
postponements thereof and is accompanied by the Notice of Meeting and a form of
proxy. At the Community Federal Meeting, Community Federal stockholders will be
asked to consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Merger, dated as of July 8, 1999, by and between Community Federal
and First M&F, providing for the merger of Community Federal with First M&F.
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 to abstain or against
the merger agreement will preserve any statutory dissenters' appraisal rights a
stockholder may otherwise wish to exercise.
No matters are expected to be considered at the Community Federal Meeting
other than the proposal to approve the merger agreement, but if any other
matters should properly come before the Community Federal 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
stockholder may revoke a proxy:
(1) by submitting a proxy bearing a later date;
(2) by giving written notice of revocation to the
Secretary of Community Federal; or
(3) upon request, if such stockholder is present at the
Community Federal Meeting and elects to vote in
person.
<PAGE>
Mere attendance at the Community Federal 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 Community Federal.
Community Federal has made arrangements with Regan & Associates, Inc. to assist
it in soliciting proxies from banks, brokers and nominees, and has agreed to pay
$4,000, plus expenses, for such services. In addition, Community Federal will
request banks, brokers and other record holders to send proxies and proxy
material to the beneficial owners of the stock and secure their voting
instructions, if necessary. Community Federal will reimburse such record
holders for their reasonable expenses in so doing. If necessary, proxies may
also be solicited personally, by telephone, telecopier, or telegram, by
directors, officers and employees of Community Federal who will not receive any
additional compensation for so doing.
SHARES ENTITLED TO VOTE; QUORUM. Only stockholders of Community Federal
as of the close of business on __________, 1999 (the "Community Federal Record
Date"), are entitled to notice of and to vote at the Community Federal Meeting.
As of the Community Federal Record Date, there were 4,266,150 shares of
Community Federal common stock outstanding, each of which is entitled to one
vote on all matters to come before the Community Federal Meeting. The presence
at the Community Federal Meeting, in person or by proxy, of the holders of a
majority of the outstanding shares of Community Federal 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 Community Federal Meeting for quorum purposes.
VOTES REQUIRED. Approval of the merger requires the affirmative vote of
the holders of at least a majority of the voting power of the Community Federal
common stock present, in person or by proxy, at the Community Federal Meeting.
As of the Community Federal Record Date, directors and executive officers of
Community Federal and their affiliates were the beneficial owners of
approximately 12.5% of the outstanding Community Federal common stock entitled
to vote at the Community Federal Meeting, and it is expected that all such
shares will be voted in favor of the merger.
DISSENTERS' APPRAISAL RIGHTS. Under Section 262 of the Delaware General
Corporation Law, each Community Federal stockholder who does not vote in favor
of the merger agreement and files a demand for appraisal prior to the Community
Federal Meeting has the right to obtain cash payment for the fair value of his
shares. See "Additional Information -- Dissenters' Appraisal Rights" and
Appendix B.
RECOMMENDATION OF COMMUNITY FEDERAL BOARD OF DIRECTORS. The Community
Federal Board of Directors has unanimously approved the merger agreement and the
transactions contemplated thereby. The Board believes the merger is fair to and
in the best interests of the Community Federal stockholders and unanimously
recommends that the stockholders vote "FOR" approval and adoption of the merger
agreement and the transactions contemplated thereby. See "The Merger --
Background of and Reasons for the Merger."
<PAGE>
THE MERGER
The following description of the merger agreement is not complete, but is
a summary of some of the material terms. The merger agreement is attached as
Appendix A to this Joint Proxy Statement-Prospectus. You are urged to read the
merger agreement carefully.
DESCRIPTION OF THE MERGER
Subject to the terms and conditions of the merger agreement, Community
Federal will be merged with and into First M&F. As a result of the merger, the
separate corporate existence of Community Federal will cease and First M&F will
be the surviving corporation and will continue to exist as a Mississippi
corporation.
Subject to the satisfaction or waiver of certain conditions, the proposed
merger will become effective upon the filing of articles of merger in the
offices of the Secretary of State of the State of Mississippi and Delaware. See
"The Merger -- Regulatory Approvals and Other Conditions to the Merger."
The effective date of the merger will be the date of filing of the
articles of merger. The proposed merger will have the effects set forth in
Article 11 of the Mississippi Business Corporation Act and Section 252 of the
Delaware General Corporation Law, and the articles of incorporation and bylaws
of the surviving corporation shall be the articles of incorporation and bylaws
of First M&F in effect immediately prior to the filing of the articles of
merger.
The directors of First M&F immediately following the merger shall be
those directors of First M&F immediately prior to the proposed merger.
As a result of the merger, all shares of Community Federal common stock
will cease to be outstanding, and each holder of a certificate for shares of
Community Federal common stock will thereafter cease to have any rights with
respect to such shares, and the Community Federal stock certificate will
thenceforth represent the right to receive the cash and 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. 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 date of filing of the articles of merger, each share of Community
Federal common stock issued and outstanding immediately prior to that date,
other than shares of Community Federal common stock owned by stockholders who
perfect appraisal rights, will be converted into:
(a) .2855 shares of First M&F common stock,
(b) $8.8457 in cash, and
(c) cash in lieu of fractional shares based upon the price
of First M&F common stock.
If First 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 merger is 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
Community Federal common stock will receive in the merger may increase or
decrease prior to the merger. For further information concerning the historical
market prices of First M&F common stock and Community Federal common stock, see
"Selected Financial Data - Price Range of Common Stock and Dividends." No
assurance can be given concerning the market price of First M&F common stock
before or after the merger.
<PAGE>
BACKGROUND OF AND REASONS FOR THE MERGER
Background of the Merger
On January 7, 1999, Trident Securities, Community Federal's financial
advisor, met with the Board of Community Federal to review strategic options for
increasing stockholder value. Trident reviewed a number of capital management
scenarios, including but not limited to the possibility of merging with another
financial institution. At that time, Trident presented Community Federal with
a range of values Community Federal might expect to receive in a merger context.
The Board of Directors determined that the best strategy for increasing the
value of stockholder's investment in Community Federal would be a sale of
Community Federal to a larger institution. On February 12, 1999 Community
Federal engaged Trident to assist Community Federal in exploring the possibility
of a merger with another financial institution, and to render a fairness opinion
in the event of a successful merger transaction.
On February 18, 1999 Trident again met with the Board to review a list of
bank and thrift holding companies that might be interested in merging with
Community Federal. At that meeting the Board authorized Trident to contact six
companies that were considered appropriate acquirors. During March 1999, Trident
contacted the six companies. Of the six companies contacted, none chose to
submit a non-binding indication of interest. On April 1, 1999 Trident again met
with the Board to review progress to date and review Community Federal's options
for continuing with the process for the possible sale of the company. At that
meeting, the Board authorized Trident to contact two additional companies. In
April 1999, Trident contacted the two companies. On May 14, 1999, First M&F
submitted its initial offer. The other company contacted in April chose not to
submit an offer. After reviewing the offer with Trident, the Board elected to
continue merger discussions with First M&F.
During June of 1999, representatives of both First M&F and Community
Federal conducted due diligence of the other's financial condition, business and
operations. Negotiations on the terms of the Agreement and Plan of Merger were
finalized in early July. Due to the price and form of consideration offered by
First M&F, and having contacted several other companies previously, Community
Federal did not solicit additional offers or enter into negotiations with any
other party.
At a meeting of the Community Federal Board of Directors held on July 8,
1999, the management of Community Federal as well as Community Federal's legal
counsel and Trident reviewed, among other things, a summary of management's due
diligence findings and the terms of the proposed merger. The Community Federal
Board of Directors unanimously approved and authorized the execution of the
Agreement and Plan of Merger and the Stock Option Agreement, which were executed
on July 8, 1999.
Community Federal's Reasons for the Merger
In reaching its determination that the merger and the Agreement and
Plan of Merger are fair to, and in the best interests of Community Federal
Bancorp and its shareholders, Community Federal's Board of Directors consulted
with its financial advisor, as well as with Community Federal's management, and
considered a number of factors, including, without limitation, the following:
(a) the Board of Directors belief that the terms of the Agreement
and Plan of Merger are attractive in that it provides that Community Federal's
shareholders will become shareholders of First M&F, a company that the Board of
Directors believes has positive future prospects;
(b) the written opinion of Trident Securities that the
consideration to be paid by First M&F is fair to Community Federal's
shareholders from a financial point of view;
<PAGE>
(c) pro forma financial information on the merger, including,
among other things, earnings per share, dilution analysis and ratio impact
information;
(d) the sustainability of core earnings by First M&F and
potential for growth;
(e) the taxable nature of the mix of cash and stock to Community
Federal's shareholders;
(f) historical stock price information for both First M&F and
Community Federal;
(g) the Board's review, based on a presentation by Trident
regarding Community Federal's due diligence and its analysis of the business,
operations, management, earnings and financial condition of First M&F on both a
historical and a prospective basis, of (1) the enhanced opportunities for
operating efficiencies, particularly in terms of integration of operations and
support functions such as product development, asset-liability management,
marketing, data processing, loan review and finance and accounting, that could
result from the merger and (2) the enhanced opportunities for growth that the
merger would make possible, particularly the ability to access the resources of
First M&F in designing future products and services that Community Federal does
not now offer and in responding to changing competitive, technological and
regulatory environments;
(h) the improvement of the franchise value of Community Federal
to its stockholders as a result of the enhanced network and products and
services;
(i) the Board's review of alternatives to the merger, including
the alternatives of remaining independent and growing internally, remaining
independent for a period of time and then selling Community Federal and
remaining independent and growing through future acquisitions;
(j) the Board's belief that the merger represents a strategic
alliance between First M&F and Community Federal;
(k) the Board's review of multiples of book value, earnings per
share and market price to be paid by First M&F and paid by other acquirors in
other comparable recent acquisitions of savings banks and thrifts; and
(l) the current and prospective industry and economic conditions
facing financial institutions, including First M&F and Community Federal.
In approving the merger, the Board did not identify one factor or
group of factors as being more important or significant than any other factor in
the decision making process, although individual directors may have given one or
more factors more weight than other factors.
The directors of Community Federal believe that the merger is in the
best interests of their organization and shareholders. THE COMMUNITY FEDERAL
DIRECTORS UNANIMOUSLY RECOMMEND THAT COMMUNITY FEDERAL SHAREHOLDERS VOTE FOR THE
APPROVAL OF THE MERGER AGREEMENT.
Reasons of First M&F
In determining whether to merge with Community Federal, the Board of
Directors of First M&F consulted with its financial advisor concerning the
financial aspects of the transaction and the fairness of the consideration to be
paid and with senior management regarding operational matters.
<PAGE>
In reaching its decision to approve the merger, the Board of Directors
of First M&F considered the following factors:
(a) an evaluation of the financial condition and results of
operations of Community Federal;
(b) an evaluation of the legal terms of the merger and the
financial terms of the merger, including the fairness opinion of its financial
advisor, Morgan Keegan & Company;
(c) its evaluation that the merger with Community Federal will
provide First M&F with an established presence in the Tupelo, Mississippi market
area which has been rapidly expanding and which the Board believes will continue
to grow;
(d) its belief that the merger represents an opportunity to
leverage First M&F's infrastructure, technology, products, marketing, and lines
of business over a larger customer base;
(e) its belief that the merger will result in increased revenue
growth potential based on the combined company's ability to expand the product
line and commercial lending in the Tupelo market area;
(f) the opportunity to bring talented management into the First
M&F organization;
(g) the increased marketability of First M&F stock resulting from
the increased number of shareholders due to the merger; and
(h) the likelihood of the merger being approved by applicable
regulatory authorities without undue conditions or delay.
The discussion of the information and factors considered by the First
M&F Board is not intended to be exhaustive but includes all material factors
considered by the First M&F Board. In reaching its determination to approve the
merger, the First M&F Board did not assign any relative or specific weights to
the foregoing factors, and individual directors may have given differing weights
to differing factors.
BASED ON THE FOREGOING, THE FIRST M&F BOARD HAS APPROVED THE MERGER
AGREEMENT, BELIEVE THAT IT IS IN THE BEST INTEREST OF ITS STOCKHOLDERS, AND
RECOMMENDS THAT THE FIRST M&F STOCKHOLDERS VOTE "FOR" APPROVAL OF THE MERGER
AGREEMENT.
OPINION OF FIRST M&F'S FINANCIAL ADVISOR
First M&F retained Morgan Keegan & Company, Inc. as its financial
advisor to render an opinion to the First M&F Board of Directors concerning the
fairness, from a financial point of view, to First M&F stockholders of the
consideration to be paid pursuant to the merger agreement. Morgan Keegan was
retained by First M&F on the basis of, among other things, its experience and
expertise in the bank and thrift industries. As part of its investment banking
business, Morgan Keegan is regularly engaged in the valuation of businesses and
securities in connection with mergers and acquisitions, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for other various purposes.
On July 2, 1999, Morgan Keegan delivered its written opinion to the
Board of Directors of First M&F to the effect that, as of July 2, 1999 and based
upon and subject to certain matters stated in such opinion, the consideration to
be paid is fair, from a financial point of view, to First M&F stockholders.
<PAGE>
The full text of the written opinion of Morgan Keegan, which sets
forth the assumptions made, matters considered and limitations on the review
undertaken, is attached hereto as Appendix D and is incorporated herein by
reference. First M&F stockholders are urged to read this opinion carefully in
its entirety. Morgan Keegan's opinion is directed only to the fairness to the
First M&F stockholders, from a financial point of view, of the consideration to
be paid and does not address any other aspect of the merger or related
transactions and does not constitute a recommendation to any stockholder as to
how such stockholder should vote at the First M&F Meeting. The summary of the
opinion of Morgan Keegan set forth in this Joint Proxy Statement-Prospectus is
qualified in its entirety by reference to the full text of such opinion.
In arriving at its opinion, Morgan Keegan reviewed the merger
agreement and held discussions with certain senior officers, directors and other
representatives and advisors of First M&F and certain senior officers and other
representatives and advisors of Community Federal concerning the businesses,
operations and prospects of First M&F and Community Federal. Morgan Keegan
examined certain publicly available business and financial information relating
to First M&F and Community Federal as well as certain financial forecasts, to
the extent publicly available, and other data for First M&F and Community
Federal which were provided to Morgan Keegan by or otherwise discussed with the
respective management teams of First M&F and Community Federal, including
information relating to certain strategic implications and operational benefits
anticipated from the merger. Morgan Keegan reviewed the financial terms of the
merger as set forth in the merger agreement in relation to, among other things:
current and historical market prices and trading volumes of First M&F and
Community Federal common stock; the historical and publicly available projected
earnings and operating data of First M&F and Community Federal; and the
capitalization and financial condition of First M&F and Community Federal.
Morgan Keegan considered, to the extent publicly available, the financial terms
of certain other similar transactions recently effected which Morgan Keegan
considered relevant in evaluating the merger and analyzed certain financial,
stock market and other publicly available information relating to the businesses
of other companies whose businesses Morgan Keegan considered relevant in
evaluating those of First M&F and Community Federal. In addition to the
foregoing, Morgan Keegan conducted such other analyses and examinations and
considered such other financial, economic and market criteria as Morgan Keegan
deemed appropriate to arrive at its opinion. Morgan Keegan noted that its
opinion was necessarily based upon information available, and financial, stock
market and other conditions and circumstances existing and disclosed, to Morgan
Keegan as of the date of its opinion.
In conducting its review and rendering its opinion, Morgan Keegan
assumed and relied, without independent verification, upon the accuracy and
completeness of all financial and other information publicly available or
furnished to or otherwise reviewed by or discussed with Morgan Keegan. With
respect to financial forecasts and other information provided to or otherwise
reviewed by or discussed with Morgan Keegan, the management teams of First M&F
and Community Federal advised Morgan Keegan that such forecasts and other
information were reasonably prepared on a basis reflecting the best currently
available estimates and judgements of the respective management teams of First
M&F and Community Federal as to the future financial performance of First M&F
and Community Federal and the strategic implications and operational benefits
anticipated from the merger. Morgan Keegan assumed, with the consent of the
Board of Directors of First M&F, that the merger will be accounted for as a
purchase in accordance with generally accepted accounting principles and as a
tax-free reorganization for federal income tax purposes. Morgan Keegan did not
express any opinion as to what the value of First M&F stock actually will be
when issued pursuant to the merger or the price at which First M&F common stock
will trade subsequent to the merger. In addition, Morgan Keegan did not make or
obtain an independent evaluation or appraisal of the assets or liabilities,
contingent or otherwise, of First M&F or Community Federal nor did Morgan Keegan
make any physical inspection of the properties or assets of First M&F or
Community Federal. Morgan Keegan was not asked to consider, and its opinion
does not address, the relative merits of the merger as compared to any
alternative business strategies that might exist for First M&F or the effect of
any other transaction in which First M&F might engage. In addition, Morgan
Keegan was not asked to and did not assist in recommending the specific
consideration payable in the merger. No other limitations were imposed by First
M&F on Morgan Keegan with respect to the investigations made or procedures
followed by Morgan Keegan in rendering its opinion.
<PAGE>
The following is a summary of the principal analyses performed by
Morgan Keegan in connection with its opinion.
Summary Transaction Analysis. Morgan Keegan reviewed the terms of the
proposed transaction, including the consideration to be received and the
aggregate transaction value. Morgan Keegan reviewed the implied value of the
consideration offered based upon a market price per share of $31.00, which is
the closing price per share of First M&F common stock on Nasdaq, as reported by
Bloomberg L.P., on June 21, 1999. This indicates an implied value of $17.70 per
share of Community Federal common stock. This assumes 4,266,150 shares of
Community Federal common stock outstanding with an exchange ratio of 0.2855
share of First M&F common stock for one (1) share of Community Federal common
stock, 462,875 options to purchase one (1) share of Community Federal common
stock with an exchange ratio of 0.5710 options to purchase First M&F common
stock, which includes any Stock Equivalents and $37.75 million in cash. The
implied aggregate transaction value is $76.6 million. Morgan Keegan calculated
that as of June 21, 1999, the aggregate transaction value represented 25.07% of
the total assets of Community Federal at March 31, 1999, 1.31x Community
Federal's stated book value at March 31, 1999 and 24.20x Community Federal's
earnings for the last twelve months ended March 31, 1999.
Comparable Company Analysis for Community Federal. Morgan Keegan
reviewed and compared certain financial information relating to Community
Federal to corresponding financial information, public market multiples and
ratios for six publicly traded banks that it deemed to be comparable to
Community Federal. The companies Morgan Keegan used for the purposes of this
analysis were Cavalry Bancorp, Inc., First Federal Bancshares of Arkansas, Inc.,
FirstSpartan Financial Corp., Gaston Federal Bancorp, Inc., Heritage Bancorp,
Inc. and Teche Holding Co. (collectively, the "Comparable Companies"). Morgan
Keegan calculated a range of market multiples for the Comparable Companies by
dividing market value per share as of June 30, 1999 by each such company's LTM
earnings per share ended March 31, 1999 and by dividing market value by tangible
book value reported March 31, 1999. For the LTM results ended March 31, 1999,
Morgan Keegan also compared certain ratios, including, among other things,
return on latest assets, return on latest equity; loan loss reserve to total
loans; total equity capital to total assets; and total loans to total deposits,
of the Comparable Companies to Community Federal.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Community Federal Comparable Company Analysis
- --------------------------------------------------------------------------------
Market Value/
-------------------
LTM Tangible Return on Return on LLR/Total Equity/ Total Loans/
EPS Book Value Latest Assets Latest Equity Loans Total Assets Total Deposits
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
High 30.4 1.76 1.51% 7.58% 1.34% 30.81% 112.78%
Low 13.0 0.80 0.87% 4.64% 0.18% 12.24% 88.49%
Mean 19.3 1.13 1.16% 6.05% 0.75% 20.14% 102.63%
Median 15.7 0.99 1.11% 5.98% 0.77% 19.35% 106.11%
- --------------------------------------------------------------------------------------------------
CFTP 17.2 0.93 1.04% 5.41% 0.55% 19.16% 94.54%
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Share Premium Analysis. Using publicly available information, Morgan
Keegan reviewed and analyzed the premium of the transaction value over Community
Federal's stock price and compared that to the median share premiums paid for
banks in the Southeast and the United States whose shares were publicly traded.
The premium paid on Community Federal shares is based on the levels at which
Community Federal shares last traded during one-day, five-day, two-week and one-
month periods prior to the announcement of the transaction.
- --------------------------------------------------------------------------------
Share Premium Analysis
Deal Value to Market Capitalization
6/1/98 - 6/30/99
- --------------------------------------------------------------------------------
Median Median Community
U.S. Southeast Federal
- --------------------------------------------------------------------------------
One Day 127.50% 135.55% 136.15%
Five Day 133.35% 145.15% 138.82%
Two Week 129.65% 141.20% 133.58%
One Month 131.50% 140.35% 133.58%
- --------------------------------------------------------------------------------
Analysis of Selected Comparable Mergers and Acquisitions. In order to
assess market pricing for comparable mergers, Morgan Keegan reviewed overall
merger transactions in the banking industry using four different sets of
parameters. Morgan Keegan selected 73 transactions occurring between June 1,
1998 and June 22, 1999, involving selling thrifts located in the United States,
33 transactions occurring between June 1, 1998 and June 22, 1999, involving
selling thrifts located within the United States with total assets between $200
million and $500 million, 16 transactions occurring between June 1, 1998 and
June 22, 1999 within the United States involving selling thrifts with equity/
asset ratios above 15% and 17 transactions occurring between June 1, 1998 and
June 22, 1999, involving selling thrifts within the Southeast. Because no
transaction was considered identical to the merger, the medians of the overall
transaction multiples were considered more relevant than the multiples for any
specific transaction.
<TABLE>
<CAPTION>
Medians of Comparable Mergers
- -----------------------------------------------------------------------------------------
United States United States
All Deals Total Assets Equity/Assets Community
United States $200M-$600M Southeast Less Than 15% Federal
------------- ------------- --------- -------------- ---------
<S> <C> <C> <C> <C> <C>
Price/EPS (x) 24.40 24.01 25.89 29.27 24.20
Price/Book (x) 1.88 1.83 2.08 1.27 1.31
Price/Assets (%) 20.88 20.70 25.79 27.30 25.07
Price/Deposits (%) 28.35 28.35 30.62 41.34 50.22
</TABLE>
No company or transaction used in the comparable companies and comparable
transactions analyses for comparative purposes is identical to Community Federal
or the merger. Accordingly, an analysis of the results of the foregoing
necessarily involves complex considerations concerning differences in financial
and operating characteristics of the companies and other factors. Mathematical
analysis, such as determining the average or median, is not, in itself, a
meaningful method of using comparable company or transaction data.
Discounted Cash Flow Analysis. Morgan Keegan performed a discounted cash
flow analysis of the projected cash flow available for dividends of Community
Federal for fiscal years 1999 through 2003, based on projections provided by
Community Federal management. Using this information, Morgan Keegan calculated a
range of equity values for Community Federal based on the sum of (a) the present
value of the cash flow available for dividends to Community Federal and (b) the
present value of the estimated terminal value for Community Federal assuming
that it was sold at the end of fiscal year 2003. In performing its discounted
cash flow analysis, Morgan Keegan assumed, among other things, discount rates of
11.0% to 15.0% and terminal multiples of net income of 12.0x to 16.0x. Those
discount rates and terminal multiples reflect Morgan Keegan's qualitative
judgments concerning the specific risk associated with such an investment and
the historical and projected operating performance of Community Federal. This
analysis resulted in a range of equity values for Community Federal of $67.9
million to $85.7 million, with a median of $76.2 million.
<PAGE>
The summary of the Morgan Keegan opinion set forth above does not purport
to be a complete description of the analyses performed by Morgan Keegan. The
preparation of a fairness opinion is not necessarily susceptible to partial
analysis or summary description. Morgan Keegan believes that its analyses and
the summary set forth above must be considered as a whole and that selecting
portions of its analyses, without considering all analyses, or of the above
summary, without considering all factors and analyses, would create an
incomplete view of the process underlying the analyses set forth in the opinion.
In addition, Morgan Keegan may have deemed various assumptions more or less
probable than other assumptions, so that the ranges of valuations resulting from
any particular analysis described above should not be taken to represent the
actual value of Community Federal or the combined company.
In performing its analyses, Morgan Keegan made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of First M&F or Community
Federal. The analyses performed by Morgan Keegan are not necessarily indicative
of actual values or actual future results, which may be significantly more or
less favorable than suggested by such analyses. Such analyses were prepared
solely as part of Morgan Keegan's analysis of the fairness, from a financial
point of view, of the consideration to be paid by Community Federal. The
analyses do not purport to be appraisals or to reflect the prices at which a
company might actually be sold or the prices at which any securities may trade
at the present time or at any time in the future.
First M&F has agreed to pay Morgan Keegan a retainer fee of $15,000,
payable in advance upon the signing of its engagement letter and an additional
fee of $85,000, payable in cash promptly upon delivery by Morgan Keegan of a
fairness opinion. First M&F has also agreed to reimburse Morgan Keegan for its
reasonable out-of-pocket expenses and to indemnify Morgan Keegan against certain
liabilities, including liabilities under the federal securities laws.
OPINION OF COMMUNITY FEDERAL'S FINANCIAL ADVISOR
Community Federal retained Trident to act as its financial advisor and to
render a fairness opinion in connection with a possible merger. In January 1999,
Trident was engaged to perform a valuation analysis of Community Federal in an
acquisition context and to advise the Board of Directors with regard to
strategic alternatives. On January 7, 1999 Trident presented its valuation
report to the Board of Directors. In February 1999, Trident was engaged to
assist Community Federal in exploring the possibility of a merger with another
financial institution, and to render a fairness opinion in the event of a
successful merger transaction.
On July 8, 1999, Trident met with Community Federal's Board of Directors to
review the proposed terms of the merger agreement. At that time, Trident
presented a report to Community Federal's Board of Directors summarizing the
financial terms of the merger and providing updated market information with
respect to thrift mergers and acquisitions. Trident also analyzed the advantages
and disadvantages of the merger from a financial point of view. In addition,
Trident rendered its oral opinion to Community Federal's Board of Directors to
the effect that, as of that date, the consideration to be received by Community
Federal's stockholders pursuant to the merger agreement was fair to them from a
financial point of view.
<PAGE>
Trident confirmed and delivered its opinion to Community Federal's Board
of Directors as of the date of this proxy statement that the consideration to be
received by the stockholders of Community Federal in the merger is fair from a
financial point of view, as of such date. A copy of the opinion, which sets
forth certain assumptions made, matters considered and limitations on the
reviews undertaken, is attached to this proxy statement as Appendix E. Trident
has consented to the inclusion of such opinion and a summary of the matters
considered in forming its opinion in the proxy statement that will be circulated
to Community Federal's stockholders.
TRIDENT'S OPINION IS DIRECTED TO THE BOARD OF DIRECTORS OF COMMUNITY
FEDERAL AND IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF
THE CONSIDERATION TO BE RECEIVED BY COMMUNITY FEDERAL'S STOCKHOLDERS BASED ON
CONDITIONS AS THEY EXISTED AND COULD BE EVALUATED AS OF THE DATE OF THE OPINION.
TRIDENT'S OPINION DOES NOT CONSTITUTE A RECOMMENDATION TO ANY COMMUNITY FEDERAL
STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE SPECIAL MEETING, NOR
DOES TRIDENT'S OPINION ADDRESS THE UNDERLYING BUSINESS DECISION TO EFFECT THE
MERGER. THIS SUMMARY OF TRIDENT'S OPINION IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION, WHICH IS ATTACHED TO THIS PROXY
STATEMENT AS APPENDIX E. STOCKHOLDERS ARE URGED TO READ TRIDENT'S OPINION IN ITS
ENTIRETY FOR A DESCRIPTION OF THE ASSUMPTIONS MADE AND MATTERS CONSIDERED AND
THE LIMITS ON THE REVIEW UNDERTAKEN IN RENDERING SUCH OPINION.
In connection with rendering its opinion, Trident reviewed and analyzed,
among other things, the following:
(i) the merger agreement;
(ii) this proxy statement;
(iii) certain publicly available information concerning Community Federal,
including the audited financial statements of Community Federal for
each of the years in the three-year period ended September 30, 1998
and the unaudited financial statements of Community Federal for the
six months ended March 31, 1999;
(iv) certain publicly available information concerning First M&F,
including the audited financial statements of First M&F for each of
the years in the three-year period ended December 31, 1998 and the
unaudited financial statements of First M&F for the three months
ended March 31, 1999;
(v) certain other internal information, primarily financial in nature,
concerning the business and operations of Community Federal and First
M&F furnished to Trident by Community Federal and First M&F for
purposes of Trident's analysis;
(vi) information with respect to the trading market for Community Federal
common stock;
(vii) certain publicly available information with respect to other
companies that Trident believed to be comparable to Community Federal
and the trading markets for such other companies' securities; and
(viii) certain publicly available information concerning the nature and
terms of other transactions that Trident considered relevant to its
inquiry.
Trident also met with certain officers and employees of Community Federal
and First M&F to discuss the foregoing, as well as other matters, which it
believed relevant to its inquiry. No limitations were imposed by either
Community Federal or its Board or management with respect to the investigation
made or procedures followed by Trident.
<PAGE>
In its review and analysis and in arriving at its opinion, Trident assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided to it by Community Federal, or that was publicly available,
the accuracy of the representations and warranties of the officers and the
employees of Community Federal and First M&F with whom Trident held discussions,
and the accuracy of the representations and warranties of Community Federal and
First M&F in the merger agreement, and did not attempt independently to verify
any such information. Trident further assumed that there are no conditions in
the regulatory approvals of the merger agreement that will have a material
adverse effect upon the contemplated economic benefits of the merger. The
financial information provided to Trident by Community Federal was of the type
normally produced by the management of Community Federal and reviewed by
Community Federal's Board of Directors at its regular meetings and the Board and
management of Community Federal have represented to Trident that they have no
reason to believe that Trident's reliance thereon was unreasonable. Trident did
not conduct a physical inspection of the properties or facilities of Community
Federal, nor did they make or obtain any independent evaluations or appraisals
of any of such properties or facilities.
In conducting its analyses and arriving at its opinion, Trident considered
such financial and other factors as it deemed appropriate under the
circumstances including, among others, the following:
(i) the historical and current financial condition and results of
operations of Community Federal, including interest income, interest
expense, net interest income, net interest margin, interest
sensitivity, non-interest expense, earnings, dividends, book value,
return on assets, return on equity, capitalization, the amount and
type of non-performing assets and the reserve for loan losses;
(ii) the business prospects of Community Federal;
(iii) the economy in Community Federal's market area;
(iv) the historical and current market for Community Federal common stock
and for the equity securities of certain other companies that Trident
believed to be comparable to Community Federal; and
(v) the nature and terms of certain other acquisition transactions that
Trident believed to be relevant.
Trident also took into account its assessment of general economic, market,
financial and regulatory conditions and trends, as well as its knowledge of the
financial institutions industry, its experience in connection with similar
transactions, and its knowledge of securities valuation generally. Trident's
opinion necessarily was based upon conditions in existence and subject to
evaluation on the respective dates of its opinion. Trident's opinion is, in any
event, limited to the fairness, from a financial point of view, of the
consideration to be received by the holders of Community Federal common stock in
the merger and does not address Community Federal's underlying business decision
to effect the merger.
The summaries set forth below reflect all the material analysis, factors
and assumptions considered by Trident and the material valuation methodologies
used by Trident in arriving at its opinion as to fairness described above. The
preparation of a fairness opinion is a complex process and is not necessarily
susceptible to partial or summary description. Trident believes that its
analyses and the summary set forth below must be considered as a whole, and that
selecting portions of its analyses without considering all of the analyses, or
reviewing the summary without considering all factors and analyses, would create
an incomplete view of the processes underlying the analyses set forth in
Trident's reports and its opinion. Therefore, the ranges of valuations
resulting from any single analysis described below should not be taken to be
Trident's view of the actual value of Community Federal. In performing its
analyses, Trident made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond the control of Community Federal. The results of the specific
analyses performed by Trident may differ from Community Federal's actual values
or actual future results as a result of changing economic conditions, changes in
company strategy and policies, as well as a number of other factors. Such
individual analyses were prepared to provide valuation guidance solely as part
of Trident's overall valuation analysis and the determination of the fairness of
the consideration to be paid to Community Federal's stockholders. The analyses
do not purport to be appraisals or to reflect the prices at which a company
might actually be sold or the prices at which any securities may trade at the
present time or at any time in the future. In addition, as described above,
Trident's opinion and presentations to Community Federal's Board of Directors
were among the many factors taken into consideration by Community Federal's
Board of Directors in making its determination to approve the merger agreement.
<PAGE>
Trident met or engaged in discussions with the Board of Directors of
Community Federal at various times between January and July 1999 to present
analyses contained in a series of reports that serve as the basis for Trident's
opinion. Two key reports presented by Trident were the Valuation Report dated
January 7, 1999 and the Due Diligence Report dated July 8, 1999.
The following is a brief summary of the Valuation Report presented by
Trident to the Board of Directors of Community Federal on January 7, 1999:
State of the Market. Trident reviewed the current and historical trading
market for thrift and bank equities, and current and historical trends in the
acquisition markets for banks and thrifts. Trident focused on the acquisition
market for thrifts with particular attention to the segments of the market which
it believed to be the most relevant to Community Federal, such as thrifts of
similar size and profitability, thrifts with similar capital structures and
asset quality, and thrifts located in the same geographic region. Trident also
studied the trading market for Community Federal common stock and compared the
performance of Community Federal common stock over the preceding twelve months
to the performance of the Standard and Poor's 500 Index and an index of thrift
stocks.
Financial Analysis of Community Federal. Trident examined Community
Federal's financial performance for the period September 30, 1994 through
September 30, 1998 by analyzing the composition of its balance sheet, adjusting
and normalizing its earnings, and calculating a variety of operating and
financial ratios for Community Federal. Trident compared Community Federal's
deposit market share with other financial institutions operating in the same
market.
Comparison to Actively-Traded Thrifts. Trident evaluated Community
Federal's strengths and weaknesses by comparing the financial performance of
Community Federal to that of the following groups of actively-traded thrifts as
of January 5, 1999:
(i) all U.S. thrifts;
(ii) Southcentral thrifts;
(iii) Mississippi thrifts;
(iv) thrifts with tangible capital between 20% and 25%;
(v) thrifts with a return on equity during the trailing four quarters
between 4% and 6%;
(vi) thrifts with a return on assets during the trailing four quarters
between 1.15% and 1.30%;
(vii) thrifts with a total assets between $200 million and $350 million;
and
(viii) ten actively-traded thrifts Trident believed were most similar to
Community Federal in terms of size, capital structure, profitability
and asset quality.
<PAGE>
Trident compared Community Federal to the aforementioned groups of actively
- -traded thrifts on the basis of its stock pricing, balance sheet composition,
capital ratios, asset quality and reserve coverage, asset and deposit growth,
return on average assets, return on average equity, and the components of
earnings during the trailing four quarters.
Control Valuation of Community Federal Common Stock. Trident estimated
the fair market value of Community Federal common stock in a merger. In valuing
Community Federal common stock, Trident utilized the income approach and the
market approach, and then reconciled the values derived therefrom.
Trident used an income method in its valuation of Community Federal by
capitalizing earnings for the twelve months ended December 31,1998. Prior to
capitalizing earnings, Trident took into account Community Federal's significant
level of excess capital. Trident estimated that Community Federal only required
7.00% capital to operate the Bank. Therefore, Trident isolated the excess
capital (the amount in excess of 7.00%) and adjusted the earnings base for the
income associated with this excess capital at a pre-tax yield of 5.50% (3.47%
after-tax). The base earnings were adjusted to exclude non-recurring income and
expenses, plus merger cost saving of 40% to 60% as a result of an assumed
acquisition of Community Federal (the "normalized earnings"). The normalized
earnings were capitalized at rates between 5% and 12%, to reflect earnings
growth rates between 3% and 8%. The capitalization rates chosen were estimates
of the required rates of return for holders or prospective holders of shares of
financial institutions similar to Community Federal, based on a number of
factors, including prevailing interest rates, the pricing ratios of publicly
traded financial institutions, the financial condition and operating results of
Community Federal, as well as well as Trident's general knowledge of valuation,
the securities markets, and acquisition values in mergers of other financial
institutions. Trident adjusted the resulting values to reflect the cost of
terminating certain long-term contracts and benefit plans, and certain merger-
related expenses, and added back the excess capital identified earlier. Using
the income approach, Trident established a reference range of $13.25 to $18.75
per share.
In the market approach, Trident analyzed certain market pricing ratios
(such as price to book value, price to tangible book value, price to earnings,
and price to assets) resulting from selected completed thrift merger
transactions, as well as recently announced pending transactions. In applying
the market approach, Trident considered the median pricing ratios for the
following groups of thrift merger transactions:
(i) all pending thrift merger transactions (40 transactions);
(ii) all pending thrift mergers announced during the 90 days prior to
December 28, 1998 (the date of the market data) (14 transactions);
(iii) all recent thrift mergers (announced in the preceding 18 months)
(144 transactions);
(iv) all recent thrift mergers involving thrifts located in the
Southcentral region (6 transactions);
(v) all recent thrift mergers in which the target thrift had assets
between $200 million and $350 million (14 transactions);
(vi) all recent thrift mergers in which the aggregate consideration was
between $50 million and $150 million (36 transactions);
(vii) all recent thrift mergers in which the target thrift had a return on
assets of between 1.00% and 1.30% (20 transactions);
(viii) all recent thrift mergers in which the target thrift had a return on
equity of between 4% and 7% (31 transactions);
(ix) all recent thrift mergers in which the target thrift had assets
between $100 million and $200 million (reflecting Community Federal's
size without excess capital) (20 transactions); and
(x) all recent thrift mergers in which the target thrift had a tangible
equity to assets ratio of between 18% and 30% (6 transactions).
<PAGE>
Trident also considered the pricing ratios for seven pending or completed
thrift merger transactions in which the target thrift was of similar size and
capital structure as Community Federal, and in which the target thrift had
similar profitability and asset quality. Trident then compared a number of
financial ratios for Community Federal to those of the target thrift
institutions.
Based on Community Federal's financial condition and results of operations,
as well as other factors, relative to the groups of thrift mergers noted above,
Trident chose ranges of pricing ratios to apply to Community Federal. Trident
chose price to book value ratios of 125% to 160%, resulting in per share values
of $16.75 to $21.25; price to tangible book value ratios of 125% to 160%, also
resulting in per share values of $16.75 to $21.25; price to earnings ratios of
24.0x to 30.0x, resulting in per share values of $18.25 to $22.75; price to
assets ratios of 28.0% to 36.0%, resulting in per share values of $17.75 to
$23.00.
Trident then reviewed the results from the two approaches, and after
consideration of all relevant facts, determined a final range of $15.00 to
$20.00 per share for the acquisition value of Community Federal. Trident did
not apply specific weights to the two individual approaches, but Trident gave
greater consideration to the market approach in its final range of value for
Community Federal.
Strategic Alternatives. Trident presented a list of the pros and cons of
various strategic alternatives open to Community Federal:
(i) leverage excess capital;
(ii) issue a special dividend;
(iii) repurchase common stock;
(iv) a Dutch Auction tender offer;
(v) an acquisition strategy; and
(vi) merger with a larger financial institution.
Prospective Acquirors. Trident presented Community Federal with a list of
other financial institutions with operations in the Southcentral region that it
believed to be prospective acquirors (a total of 18 companies). These
prospective acquirors were categorized based on Trident's perceived level of
interest from the prospective acquiror and "fit" with Community Federal.
The following is a summary of the Due Diligence Report presented to the
Board of Directors of Community Federal on July 8, 1999:
Process. Trident briefly reviewed the process that led to the merger
agreement. Trident presented a list of the financial institutions that were
contacted regarding a possible business combination with Community Federal, and
the response from each company contacted.
Review of Due Diligence Examination of First M&F. Trident presented a
summary of its on-site due diligence examination of First M&F. First M&F's
historical balance sheets and income statements were presented, along with a
variety of financial ratios and graphs that analyzed First M&F's financial
condition and operating results through March 31, 1999. Trident discussed First
M&F's business strategy, strengths and weaknesses, profitability, growth, net
interest margin, non-interest income, operating expenses, intangible assets,
borrowed funds, market area, capital, asset quality and reserve coverage,
concentrations of credit and loan portfolio composition, use of derivatives,
interest-rate risk, year 2000 preparations, regulatory exam results, subsidiary
activities, culture, technological expertise, stock pricing, and other issues.
<PAGE>
Summary of Proposed Transaction. Trident presented a summary of the
financial terms of the merger. Trident discussed the advantages and
disadvantages of the merger from a financial point of view. Trident compared
the pricing ratios for the merger with the median pricing ratios for selected
groups of recently announced thrift mergers and acquisitions. Trident also
presented a pro forma financial statements for the combined company and
discussed the possible affects of earnings dilution and accretion on First M&F's
common stock price.
Trident reported that during its investigation, Trident did not discover
any conditions that would prevent it from rendering its fairness opinion to
Community Federal's Board of Directors. As discussed above, Trident relied,
without independent verification, upon the accuracy and completeness of all of
the financial and other information provided by Community Federal and First M&F.
Trident, as part of its investment banking business, is continually engaged
in the valuation of businesses and their securities in connection with mergers
and acquisitions, negotiated underwriting, and valuations for corporate and
other purposes. Trident has extensive experience with the valuation of financial
institutions. Trident served as the Community Federal's sales agent in its
mutual-to-stock conversion in 1996, and received total fees and commissions of
$752,218 for that transaction. In addition, in the ordinary course of business,
Trident may trade the securities of Community Federal for its own account and
for the accounts of its customers and, accordingly, may at any time hold a long
or short position in such securities. The Board of Directors selected Trident
as its financial advisor because of its previous experience with Trident,
because Trident is a nationally recognized investment banking firm specializing
in financial institutions, and because of its substantial experience in
transactions similar to the merger. Trident is not affiliated with the
Community Federal or First M&F.
For its services as financial advisor, Community Federal paid Trident
$5,000 to assist Community Federal in exploring the possibility of a merger with
another financial institution, and to render a fairness opinion in the event of
a successful merger transaction. Community Federal paid Trident a fee of
$50,000 upon execution of the merger agreement. An additional fee equal to 0.55%
of the total merger consideration, less $55,000, will be payable to Trident upon
consummation of the merger (a balance due of approximately $360,850 based on the
total merger consideration and the aforementioned fee structure). Community
Federal has also agreed to reimburse Trident for its reasonable out-of-pocket
expenses and to indemnify Trident against certain liabilities, including certain
liabilities under federal securities laws.
EXCHANGE OF CERTIFICATES
Promptly after the date of filing of the articles of merger, First M&F will
cause its exchange agent, Registrar and Transfer Company, to mail to each
stockholder of Community Federal, except for those who have perfected appraisal
rights, a letter of transmittal and instructions for use in effecting the
exchange of Community Federal stock certificates for cash, certificates for
shares of First M&F stock certificates, and cash in lieu of fractional shares.
STOCKHOLDERS ARE REQUESTED NOT TO SURRENDER THEIR STOCK CERTIFICATES UNTIL THEY
HAVE RECEIVED A LETTER OF TRANSMITTAL AND FURTHER WRITTEN INSTRUCTIONS.
<PAGE>
Upon surrender of a Community Federal stock 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, after giving effect to any required
withholding tax:
(1) a First M&F certificate for that number of whole shares of First
M&F common stock into which his or her Community Federal common
stock were converted;
(2) a check for cash to be received in exchange for the Community
Federal shares, and
(3) a check for cash in lieu of fractional shares, if any, which
such holder has the right to receive.
No interest will be paid or accrued on the value of any First M&F common
stock or cash payable to holders of Community Federal stock certificates.
No dividends on First M&F common stock into which shares of Community
Federal common stock were converted will be paid until the Community Federal
stock certificate is surrendered as described above. Subject to the effect of
applicable laws, following surrender of any such Community Federal Stock
Certificate, the holder will be paid any dividends or other distributions,
without interest, which had become payable with respect to the shares of First
M&F as represented by the Community Federal shares.
No fractional shares of First M&F common stock and no First M&F
certificates or scrip therefor, or other evidence of ownership thereof, will be
issued in the merger, nor will any dividend or distribution be payable on or
with respect thereto, nor will any such fractional share entitle the holder
thereof, to vote or to any other rights of a First M&F stockholder. Instead,
First M&F will pay to each Community Federal stockholder who would otherwise be
entitled to a fractional share of First M&F common stock, after taking into
account all Community Federal stock certificates delivered by such Community
Federal stockholder, an amount in cash to be paid in lieu of fractional shares,
without interest, determined by multiplying such fraction by the average of the
closing per share trading price of First M&F common stock as reported by the
NASDAQ National Market System on the last ten consecutive trading days ending on
the third business day prior to the later of (i) the date of approval of the
federal regulatory authority having jurisdiction over the merger shall be
received, or (ii) the date of approval by both Community Federal and First M&F
stockholders.
If any Community Federal stock 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 Community Federal
stock certificate, the exchange agent will issue the cash and 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.
CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE DATE
Pending consummation of the merger, Community Federal and Community Federal
Bank have agreed to conduct its business in the ordinary course consistent with
prudent business practices and in compliance with all applicable laws. In
particular, Community Federal and Community Federal Bank have agreed that they
will not declare, set aside, make, or pay any dividend or other distribution
with respect to its stock; however, Community Federal may continue to pay its
regular quarterly dividend in the amount of $.085 per share. If the record date
for payment of a quarterly First M&F dividend is prior to the date of filing of
the articles of merger, then stockholders of Community Federal will receive a
dividend for that quarter from Community Federal. If the record date for payment
of a quarterly First M&F dividend is after the date of filing of the articles of
merger, then stockholders of Community Federal will receive a dividend for that
quarter from First M&F.
<PAGE>
In addition to the restriction on payment of dividends, Community Federal
and Community Federal Bank will not, without First M&F's prior consent, among
other matters:
(1) amend its Certificate of Incorporation or Bylaws;
(2) sell, dispose of or encumber any assets, issue or reacquire any
stock;
(3) authorize any capital expenditure over $50,000;
(4) extend any new or renew any existing loan which individually
exceeds $500,000;
(5) adopt any type of compensation or benefit plan for Community
Federal officers or employees;
(6) grant any increase in compensation to any director, officer,
employee or representative of Community Federal and 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 Community Federal; or
(8) take any action with respect to the grant or payment of any
severance or termination pay.
REGULATORY APPROVALS AND OTHER CONDITIONS TO THE MERGER
REGULATORY APPROVAL. Federal Reserve Board. The merger is subject to
prior approval by the Federal Reserve Board under the Bank Holding Company Act
of 1956. The Bank Holding Company Act requires the Federal Reserve Board, when
approving a transaction such as the merger, to take into consideration the
financial and managerial resources, including the competence, experience and
integrity of officers, directors and principal stockholders, 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 Federal Reserve Board 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 Federal Reserve Board 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 Federal Reserve Board 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 Federal
Reserve Board 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.
Applicable U.S. federal law provides for the publication of notice and
public comment on applications or notices filed with the Federal Reserve Board
and authorizes such agency to permit interested parties to intervene in the
proceedings. If an interested party is permitted to intervene, such intervention
could delay the regulatory approvals required for consummation of the merger.
<PAGE>
The merger 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 merger on
antitrust grounds. The commencement of an antitrust action by the U.S.
Department of Justice, if it occurred, would stay the effectiveness of the
regulatory agency's approval unless a court specifically ordered otherwise.
Status of Regulatory Approvals and Other Information. On August 3, 1999,
First M&F filed notice with the Federal Reserve Board seeking approval to merge
Community Federal into First M&F. As of the date of this Joint Proxy Statement-
Prospectus, the Federal Reserve Board has not acted on the merger application.
There can be no assurance that the Federal Reserve Board will approve or
take other required action with respect to the merger or as to the date of such
regulatory approval or other action. First M&F and Community Federal are not
aware of any governmental approvals or actions that are required in order to
consummate the merger except as described herein. Should such other approval or
action be required, it is contemplated that First M&F and Community Federal
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.
OTHER CONDITIONS. The obligations of First M&F and Community Federal to
consummate the merger are subject to the satisfaction, or waiver, where legally
allowed, at or prior to the effective date of the merger, of a number of
conditions set forth in the merger agreement, including:
(1) Approval and adoption of the merger agreement by the stockholders
of First M&F and Community Federal;
(2) The receipt of all necessary regulatory approvals;
(3) The Joint Proxy Statement-Prospectus must have been filed with
the 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;
(4) 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;
(5) The shares of First M&F common stock issuable pursuant to the
merger shall have been approved for listing on the NASDAQ
National Market System;
(6) 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;
(7) In the case of the obligations of Community Federal to consummate
the merger, the receipt of an opinion from Watkins Ludlam Winter
& Stennis, P.A. as to certain tax aspects of the transactions
contemplated by the merger;
(8) In the case of the obligation of First M&F to consummate the
merger, the receipt of affiliate agreements shall have been
executed by each person who serves as an executive officer or
director of Community Federal; and
(9) In the case of the obligation of First M&F to consummate the
merger, the receipt of executed non-competition agreements from
Jim Ingram and H. Lewis Whitfield.
No assurance can be provided as to whether all of the conditions precedent
to the merger will be satisfied or, where legally permitted, waived by the party
permitted to do so.
<PAGE>
TERMINATION
The merger agreement may be terminated at any time prior to the effective
date of the merger, whether before or after approval of the merger by both the
First M&F stockholders and the Community Federal stockholders:
(1) By mutual written consent of the Board of Director of both
companies;
(2) By either party if the merger has not become effective on or
before March 31, 2000;
(3) By either party in the event of a breach by the other party of
(a) any covenant or agreement, or
(b) any representation or warranty that reflects a material
adverse change in the financial condition of the other party
or a material increase in the cost to the non-breaching
party's performance of the merger agreement;
(4) By either party if regulatory approvals are not obtained;
(5) By either party if the merger is not approved by the required
stockholder votes; or
(6) By First M&F if holders of more than 20% of Community Federal
common stock dissent from the merger.
The merger agreement may also be terminated by a majority vote of the
members of the entire Board of Directors of Community Federal during the ten-day
period commencing two days after the Determination Date, as defined below, if
the Average Market Price, as defined below, of First M&F common stock is less
than $26.00. Upon such a decision by the Board of Community Federal, the Board
is required to give prompt written notice to First M&F. First M&F shall have
the option, during the five-day period commencing with its receipt of the
notice, to elect to increase the stock portion of the exchange ratio to equal
the quotient, rounded to the nearest one-ten-thousandth, obtained by dividing
7.423 by the Average Market Price. If First M&F exercises its option, First M&F
shall give prompt written notice to Community Federal, no event of termination
shall be deemed to have occurred, and the merger agreement shall remain in
effect in accordance with its terms, except as the exchange ratio shall have
been so modified.
"Determination Date" means the later of the date on which (i) the approval
of the merger by the federal regulatory authority having jurisdiction over the
merger shall be received or (ii) the Community Federal and First M&F
stockholders approve the merger. The "Average Market Price" of the First M&F
common stock shall be the average of the closing per share trading prices of
First M&F common stock as reported by the NASDAQ National Market System,
adjusted for any stock split or similar transaction, on the last ten consecutive
trading days ending on the third business day prior to the Determination Date.
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
stockholders unless there has been an intentional breach of the merger agreement
before the date of termination.
<PAGE>
WAIVER; AMENDMENT; AND EXPENSES
First M&F and Community Federal 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 Community Federal and First M&F.
First M&F and Community Federal 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 merger and the
issuance of the First M&F common stock. First M&F is also responsible for the
cost of its accountants and legal counsel and will bear all costs related to
conducting the First M&F Meeting for obtaining stockholder approval of the
merger. Community Federal is responsible for the cost of its accountants and
legal counsel and will bear all costs related to conducting the Community
Federal Meeting for obtaining stockholder approval of the merger.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
SHARE EXCHANGE. Set forth below is a discussion of material federal income
tax consequences of the merger. 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 approval of the merger agreement.
The discussion is based on current provisions of the Internal Revenue Code of
1986, the regulations thereunder, and applicable judicial and administrative
interpretations on the date hereof, any of which is subject to change at any
time.
It is a condition to consummation of the merger that both parties shall
have received from Watkins Ludlam Winter & Stennis, P.A., an opinion of counsel
as to certain tax aspects of the transactions contemplated by the merger
agreement. 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 and Community Federal. The foregoing opinion cannot be relied upon if
any such factual assumption is, or later becomes, inaccurate. No ruling from the
Internal Revenue Service concerning the tax consequences of the merger has been
requested, and the opinion will not be binding upon the Internal Revenue Service
or the courts. If the merger is consummated, and it is later determined that
the merger did not qualify as a tax-free reorganization under the Internal
Revenue Code, stockholders will, in general, recognize taxable gain or loss on
the merger equal to the difference between the fair market value of the
consideration received in the merger and their basis in their stock.
A Community Federal stockholder will receive both First M&F common stock
and cash consideration in exchange for all of his or her shares of Community
Federal common stock. The Community Federal stockholder will generally recognize
gain, but not loss, to the extent of the lesser of:
(1) the excess of (a) the sum of the aggregate fair market value of
common stock received plus the amount of cash the First M&F received over
(b) the stockholder's aggregate tax basis for the shares of Community
Federal common stock exchanged; or
(2) the amount of cash received by such stockholder.
For this purpose, gain or loss must be calculated separately for each
identifiable block of shares surrendered in the exchange, and a loss realized on
one block of shares may not be used to offset gain realized on another block of
shares. Any such gain will be long-term capital gain if the shares of Community
Federal common stock exchanged were held for more than one year, unless the
receipt of cash has the effect of a distribution of a dividend under the
provisions of the Internal Revenue Code, in which case such gain will be treated
as a dividend to the extent of such stockholder's ratable share of the
undistributed accumulated earnings and profits of Community Federal. Community
Federal stockholders should consult their tax advisors as to the possibility
that all or a portion of any cash received in exchange for their Community
Federal common stock will be treated as a dividend.
<PAGE>
Such stockholder's aggregate tax basis in the First M&F common stock
received pursuant to the merger will equal such stockholder's aggregate tax
basis in the shares of Community Federal common stock being exchanged, reduced
by any amount allocable to a fractional share interest of First M&F common stock
for which cash is received and by the amount of any cash consideration received,
and increased by the amount of gain, if any, recognized by such stockholder in
the merger, including any portion of such gain that is treated as a dividend.
The holding period of First M&F common stock received will include the holding
period of the shares of Community Federal common stock being exchanged.
No fractional shares of First M&F common stock will be issued in the
merger. A Community Federal stockholder who receives cash in lieu of such a
fractional share will be treated as having received such fractional share
pursuant to the merger and then as having exchanged such fractional share for
cash in a redemption by First M&F. A Community Federal stockholder will
generally recognize capital gain or loss on such a deemed redemption of the
fractional share in an amount determined by the excess of the amount of cash
received and the stockholder's tax basis in the fractional share. Any capital
gain or loss will be long-term capital gain or loss if the Community Federal
common stock exchanged was held for more than one year.
APPRAISAL RIGHTS. Community Federal stockholders or First M&F stockholders
who perfect statutory appraisal rights in connection with the merger will be
treated as having received the fair value of their stock, as determined in the
appraisal rights proceeding, in redemption of their stock which is subject to
the proceeding. Such deemed redemption will be subject to the provisions and
limitations of Section 302(a) of the Internal Revenue Code, with the result that
a holder who exercises statutory appraisal rights will recognize gain or loss
equal to the difference between the amount realized and such holder's tax basis
in the stock subject to the proceeding. Any such gain or loss recognized on
such redemption will be treated as capital gain or loss if the stock with
respect to which statutory appraisal rights were exercised were held as capital
assets and if after the deemed redemption, such stockholder does not
constructively own any First M&F common stock after the merger. Each stockholder
who contemplates exercising statutory appraisal rights in connection with the
merger should consult his tax advisor as to the possibility that all or a
portion of the payment received pursuant to the appraisal proceeding will be
treated as dividend income.
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. STOCKHOLDERS OF COMMUNITY FEDERAL AND FIRST M&F ARE URGED
TO CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE
MERGER AND OF OWNERSHIP OF FIRST M&F COMMON STOCK, INCLUDING THE APPLICATION AND
EFFECT OF STATE AND LOCAL INCOME AND OTHER TAX LAWS.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Community Federal's management and the Community Federal
Board may be deemed to have certain interests in the merger that are in addition
to their interests as Community Federal stockholders generally. The Community
Federal Board was aware of these interests and considered them, among other
matters, in approving the merger agreement and the transactions contemplated
thereby.
Directorships; Advisory Board. Following the effective date of the merger,
First M&F will request each non-employee member of the Community Federal Board,
other than those appointed to the Special Advisory Board, to serve on an
advisory board. Members of the advisory board will be paid fees in respect of
their service on the advisory board equal to fees paid to other advisory board
members of First M&F.
<PAGE>
On the effective date of the merger, Jim Ingram, Charles V. Imbler, Sr.,
and L. F. Sams, Jr. will be appointed to become members of the Special Advisory
Board until the Year 2000 Annual Stockholders' Meeting. As members of the
Special Advisory Board, each will be entitled to attend meetings of the Board of
First M&F and to receive the same fees as directors of First M&F. Also, on the
effective date of the merger, Jim Ingram, Charles V. Imbler, Sr., and L. F.
Sams, Jr. will be appointed to the Board of Directors of Merchants & Farmers
Bank.
The Board of Directors of First M&F has approved an increase in the number
of directors from 15 to 18. One new director position will be added to each of
the three classes of directors. The First M&F Board has also agreed to nominate
Jim Ingram, Charles V. Imbler, Sr., and L. F. Sams, Jr. for election to the
Board at the Year 2000 Annual Meeting of Stockholders and to vote their shares
in favor of the election of Messrs Ingram, Imbler, and Sams.
Change of Control Payments. The existing employment agreements of Jim
Ingram and Lewis Whitfield with Community Federal provide for certain benefits
upon a change in control of Community Federal. In complete satisfaction of
these obligations, on the effective date of the merger Mr. Ingram will receive
a lump sum cash payment of $320,000 and Mr. Whitfield will receive a lump sum
cash payment of $355,000.
Consulting Agreement. In connection with the execution of the merger
agreement, Jim Ingram has agreed to enter into a consulting agreement with First
M&F. Pursuant to the agreement, Mr. Ingram will be employed as a consultant by
First M&F for a period of two years following execution of the consulting
agreement. Mr. Ingram's responsibilities will be to provide his personal advice
and counsel to First M&F in connection with its business, including consulting
with First M&F regarding the operations of First M&F and providing introductions
to customers. Mr. Ingram's duties will be limited to no more than 80 hours of
service per month and will not be required to provide his services outside of a
50 mile radius of Tupelo, Mississippi.
In return for his services, Mr. Ingram will receive $75,000 per annum. Mr.
Ingram will also receive life and health insurance coverage substantially
identical to the coverage provided by Merchants & Farmers Bank to its employees,
country club dues, and continued use of the car that Community Federal had
provided to him, plus payment of the costs of gas, insurance, repairs and
maintenance.
Appointment. On the date of filing of the articles of merger, Lewis
Whitfield will be appointed President of the Tupelo division of First M&F. In
return for his services, Mr. Whitfield will receive an annual salary of
$135,000.
Non-Competition Agreement. In connection with the execution of the merger
agreement, Messrs. Ingram and Whitfield have agreed to enter into non-
competition agreements with First M&F and Merchants & Farmers Bank. Pursuant to
the non-competition agreements, each will be paid a lump sum of $75,000 on the
effective date of the merger. In return, Mr. Ingram has agreed that, for a
period of three years following the date upon which he ceases to be a director
of, or a consultant to, First M&F or Merchants & Farmers Bank, and Mr. Whitfield
has agreed that, for a period of three years following the date upon which he
ceases to be an employee of First M&F or Merchants & Farmers Bank, neither will:
(1) engage in the banking or financial services business within
Mississippi,
(2) directly or indirectly own, manage, operate, control, be employed
by, or provide management or consulting service in any capacity
to, any entity engaged in the banking or financial services
business in Mississippi, or
(3) directly or indirectly cause any employee, officer or member of
the Board of First M&F or Merchants & Farmers Bank to engage in
any action prohibited in (1) or (2).
<PAGE>
Indemnification; Insurance. The merger agreement provides that First M&F
shall indemnify and hold harmless each present and former director, officer and
employee of Community Federal and against any costs or expenses, including
reasonable attorneys' fees, judgments, fines, losses, claims, damages or
liabilities incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of matters existing or occurring at or prior to the effective date of the
merger to the fullest extent permitted under Delaware law and Community
Federal's Certificate of Incorporation and Bylaws.
First M&F has also agreed, for a period of four years following the
effective date of the merger, to maintain the existing directors' and officers'
liability insurance policy of Community Federal and, or an equivalent policy,
covering persons who are currently covered by such insurance.
EMPLOYEE BENEFITS
Pursuant to the merger agreement, the various employee benefit plans of
Community Federal will be altered or amended following consummation.
The Community Federal Bancorp, Inc. Employee Stock Ownership Plan will
remain operative and in effect through the effective date of the merger. Each
participant in the ESOP not fully vested on the effective date of the merger
will become fully vested as of that date. The ESOP will be terminated upon that
date.
The Community Federal Management Recognition and Retention Plan, which
provides awards of common stock to directors and officers, will remain operative
and in effect through the effective date of the merger. Each award granted
under the Management Recognition and Retention Plan not fully vested will become
fully vested as of the effective date of the merger, and the Plan will be
terminated upon that date.
Community Federal Bank maintains a qualified, noncontributory defined
benefit pension plan which will remain operative and in effect through the
effective date of the merger. The Pension Plan will either be terminated as of
the effective date and distributed to vested employees in accordance with the
terms of the Pension Plan or responsibility for the Pension Plan will be assumed
by First M&F or Merchants & Farmers Bank.
The Community Federal Stock Option Plan will continue after the effective
date of the merger, but shall be amended to provide that each option to purchase
shares of Community Federal which is outstanding will be converted into an
option to purchase shares of First M&F and the Board of First M&F, or a duly
authorized committee, will administer the Stock Option Plan. The number of
shares subject to options shall be adjusted by multiplying .5710 and the
exercise price shall be adjusted by dividing by .5710. Each option granted
under the Stock Option Plan not fully vested will become fully vested on the
effective date of the merger.
The Team Incentive Plan shall be terminated following the payment of
bonuses in December 1999.
The Directors' Retirement Plan, which provides directors and their
beneficiaries with quarterly retirement benefits for a period of ten years
following retirement, will remain operative and in effect through the effective
date. On the effective date of the merger, all directors who are not
participants in the Directors' Retirement Plan shall be deemed participants. On
the effective date, the Directors' Retirement Plan will be terminated, provided
that such termination will not affect the rights or benefits to be provided to
the participants of the Directors' Retirement Plan.
THE STOCK OPTION AGREEMENT
Community Federal has granted to First M&F an option to purchase up to
848,960 shares of Community Federal common stock at a price of $17 per share
under certain terms and conditions set forth in the Stock Option Agreement dated
July 8, 1999. It is intended that the number of shares subject to the option
equal 19.9% of the Community Federal common stock issued and outstanding at any
time during the term of the Stock Option Agreement; accordingly, if Community
Federal takes any action to increase the number of issued and outstanding
shares, the shares subject to the option and the option price will automatically
adjust to reflect the increase. In no event, however, will the number of shares
subject to the option exceed 19.9% of the issued and outstanding shares of
Community Federal common stock. The option price is also subject to adjustment
if Community Federal issues or agrees to issue any shares of Community Federal
common stock, other than as contemplated by the merger, at a price less than $17
per share, in which event, the option price will be equal to the lesser price.
<PAGE>
Pursuant to the Stock Option Agreement, First M&F is entitled to exercise
the option if:
(1) Any person, other than First M&F, commences a bona fide tender
or exchange offer to purchase shares of Community Federal common
stock and upon consummation such person will own or control 20%
or more of the outstanding shares of Community Federal common
stock;
(2) Community Federal, without the prior written consent of First
M&F, enters into an agreement with any person, other than First
M&F, to
(a) merge or consolidate,
(b) transfer assets, or
(c) allow such person to purchase or acquire securities
representing 20% or more of the voting power of Community
Federal; or
(3) Any person, other than First M&F in a fiduciary capacity,
acquires beneficial ownership, or the right to acquire beneficial
ownership, of 20% or more of the outstanding shares of Community
Federal common stock, except for shares beneficially owned prior
to the effective date of the Stock Option Agreement.
The option granted by the Stock Option Agreement expires upon the earliest
of:
(1) the effective date of the merger,
(2) six months after the occurrence of an event entitling First M&F
to exercise its option;
(3) upon the termination of the merger agreement, unless such
termination is the result of a willful and material breach by
Community Federal of the covenants or agreements therein or from
the failure of the stockholders of Community Federal to approve
the merger; or
(4) March 31, 2000.
ACCOUNTING TREATMENT
The merger, if consummated as proposed, will be treated as a purchase for
accounting and financial reporting purposes. The purchase method accounts for a
business combination as the acquisition of one company by another. First M&F
will record the fair market value of Community Federal's assets and liabilities
on First M&F's financial statements. Any difference between the purchase price
and the fair market value of the identifiable assets of Community Federal is
recorded as goodwill.
<PAGE>
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, 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
Community Federal and who do not become affiliates of First M&F. The shares of
First M&F common stock to be issued to affiliates of Community Federal 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 stockholders who are affiliates.
Before the effective date, each affiliate of Community Federal is to
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 merger 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.
INFORMATION ABOUT OUR STOCK
FIRST M&F CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK. The amended Articles of
Incorporation of First M&F authorize the issuance of 15,000,000 shares of common
stock, par value $5.00 per share. On the First M&F Record Date, there were
[3,639,779] shares of common stock outstanding.
In addition, the First M&F Articles authorize issuance of 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 First M&F 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 Merchants & Farmers Bank.
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.
<PAGE>
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 merger 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 stockholder 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 Mississippi Business Corporation Act, of directors, officers,
employees and agents for expenses, judgments, fines and amounts paid in
settlement by such persons.
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 one-third of the
directors are elected each year. These staggered terms of service may make it
more difficult for First M&F's stockholders 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 stockholders. Accordingly, this
provision also may have the effect of discouraging hostile attempts to gain
control of First M&F.
<PAGE>
The First M&F 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 stockholder.
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 First M&F 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"), as defined, 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 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 stockholder, and (3) shares
beneficially owned by any other person with whom the substantial stockholder 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 stockholders' equity; a liquidation or dissolution of First M&F, if,
as of the record date for the determination of stockholders 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 stockholders may prevent the consummation of a transaction favored
by a majority of stockholders. 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
June 30, 1999, approximately 29.5% 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.
<PAGE>
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 First M&F 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 shall be the Board consist of less than nine directors. Under
Mississippi law, the Board of Directors may increase or decrease the number of
directors by 30% or less; however, the stockholders must approve an increase or
decrease in the number of directors by more than 30%. Any vacancy occurring on
the Board, including vacancies from the increase in the number of directors, may
be filled only by the Stockholders at the Annual Meeting.
Article Seven also provides 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.
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
stockholders 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
stockholders.
COMPARATIVE RIGHTS OF STOCKHOLDERS OF FIRST M&F AND COMMUNITY FEDERAL
First M&F is incorporated in the State of Mississippi and subject to the
Mississippi Business Corporation Act. Community Federal is incorporated in the
State of Delaware and subject to the Delaware General Corporation Law. The
rights of stockholders of Community Federal are currently governed by Delaware
law and by Community Federal's Certificate of Incorporation and Bylaws. The
Community Federal stockholders will become First M&F stockholders upon
completion of the merger. As such, the rights of the former Community Federal
stockholders will be governed by Mississippi law and by 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 stockholders of Community
Federal and stockholders of First M&F. This summary is qualified in its
entirety by the Certificate of Incorporation and Bylaws of Community Federal,
the Articles of Incorporation and Bylaws of First M&F, the Mississippi Business
Corporation Act and the Delaware General Corporation Law, respectively.
AUTHORIZED SHARES OF CAPITAL STOCK. Community Federal. Community Federal's
Certificate authorizes the issuance of 10,000,000 shares of Community Federal
common stock having a par value of $.01 per share. Community Federal's
Certificate also authorizes the issuance of 2,000,000 shares of Community
Federal preferred stock having no par value. As of June 30, 1999, there were
4,266,150 shares of common stock issued and outstanding, and no shares of
preferred stock issued and outstanding.
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. The First M&F
Articles also authorize the issuance of 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. On June 30, 1999, there were 3,639,779
shares of common stock outstanding, no shares of Class A voting preferred stock
outstanding, and no shares of Class B non-voting preferred stock outstanding.
<PAGE>
DIVIDEND RIGHTS. Community Federal. The Bylaws of Community Federal
authorize the Board of Directors to declare, and the corporation to pay,
dividends on its outstanding shares. Delaware law generally limits dividends to
an amount equal to the excess of the net assets of Community Federal, the amount
by which total assets exceed total liabilities, over its statutory capital, or
if there is no such excess, to its net profits for the current and/or
immediately preceding fiscal year.
Because Community Federal does not conduct any material activities at the
holding company level, its ability to pay dividends depends on capital
distributions from its subsidiary, a federal savings bank, which is regulated by
bank regulatory authorities.
Pursuant to regulations of the Office of Thrift Supervision, which
regulates Community Federal Bank, an institution that is a subsidiary of a
savings and loan holding company must submit a notice to the Office of Thrift
Supervision at least 30 days prior to making a capital distribution. If the
distribution, when added to previous capital distributions made by the savings
association during the same calender year, exceeds the savings association's net
income for that year to date plus the savings associations' net income for the
preceding two years, the Office of Thrift Supervision regulations require the
savings association to obtain prior regulatory approval from the Office of
Thrift Supervision.
First M&F. 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
stockholders 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.
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 Mississippi Business Corporation Act 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 stockholders who have superior preferential rights upon
dissolution.
BOARD OF DIRECTORS. Community Federal. The Community Federal Certificate
provides that the number of directors shall be the number stated in the Bylaws
and that the Board shall be divided into three classes as nearly equal in number
as reasonably possible. The Community Federal Bylaws provide that the Board
shall consist of not less than 7 nor more than 15, and shall currently consist
of 9 directors. The directors shall hold office until the third succeeding
annual meeting of stockholders and thereafter until their successors are
elected.
First M&F. The Board of Directors of First M&F may consist of not less
than 9 persons and no more than 25 directors, and currently consists of 15
members. The Board of Directors is dividend into three classes of five
directors, with one class of three directors elected each year. The directors
shall hold office until the third succeeding annual meeting of stockholders and
thereafter until their successors are elected.
<PAGE>
REMOVAL OF DIRECTORS. Community Federal. The Community Federal Certificate
provides that any director may be removed from office at any time, but only for
cause and only by an affirmative vote of not less than a majority of the votes
eligible to be cast by stockholders at a meeting expressly called for the
removal of the director.
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 Mississippi Business Corporation Act provides that the
chancery court may remove a director from office in a proceeding commenced by
the corporation or by its stockholders 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. Community Federal. The Community
Federal Certificate provides that any vacancy occurring in the Board, including
a vacancy created by reason of an increase in the size of the Board, may be
filled by the remaining directors.
First M&F. First M&F's Bylaws provide that vacancies occurring on the
Board of Directors may be filled by the stockholders.
AMENDMENT OF THE ARTICLES OF INCORPORATION. Community Federal. The
Community Federal Certificate provides that amendment to the Certificate may
only be adopted if first approved upon the affirmative vote of a majority of the
directors then in office and then approved by the affirmative vote of a majority
of the shares entitled to vote generally in an election of directors, voting as
a single class.
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 "Information About Our
Stock - First M&F Capital Stock - Provisions Discouraging Changes in Control"
for a more detailed discussion of the terms of Articles Seven and Nine and the
restrictions on their amendment or repeal. For all other amendments, the
Mississippi Business Corporation Act provides that, except with respect to
certain limited amendments to the Articles of Incorporation which may be adopted
by the Board of Directors without stockholder action, an amendment to the
Articles of Incorporation must be recommended by the Board of Directors to the
stockholders and approved by the affirmative vote of a majority of shares.
AMENDMENT OF THE BYLAWS. Community Federal. The Community Federal
Certificate and Bylaws provide that the Bylaws of Community Federal 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 or by a majority vote
of the stockholders eligible to vote at a meeting called expressly for this
purpose.
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 STOCKHOLDERS. Community Federal. The Bylaws of
Community Federal provide that, except as otherwise required by law and subject
to the rights of holders of any class or series of preferred stock, a special
meeting of stockholders may only be called by the Board of Directors pursuant to
a resolution approved by the affirmative vote of a majority of the directors
then in office.
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 33 1/3% of all the outstanding shares of First M&F entitled to vote at
the meeting. In addition, the Mississippi Business Corporation Act provides
that the Board of Directors or stockholders 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.
<PAGE>
VOTING RIGHTS. Community Federal. Pursuant to the Community Federal
Certificate and Bylaws, each outstanding share is entitled to one vote on each
matter submitted to a vote. Stockholders do not have cumulative voting with
respect to the election of directors.
First M&F. Pursuant to the Mississippi Business Corporation Act and First
M&F's Bylaws, each outstanding share of First M&F stock is entitled to one 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 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.
LIMITATION OF LIABILITY OF DIRECTORS. Community Federal. The Community
Federal Certificate provides that directors shall not be personally liable to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty except with respect to the following:
(1) for breach of the director's duty of loyalty;
(2) for acts or omissions not in good faith or involving
intentional misconduct or knowing violation of law;
(3) for willful or negligent conduct in paying dividends or
repurchasing stock out of other than lawfully available
funds; or
(4) for any transaction from which the director derives an
improper personal benefit.
First M&F. Pursuant to the Mississippi Business Corporation Act, 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 Mississippi Business Corporation Act. However, a director who
votes for or assents to any unlawful distribution will be personally liable.
INDEMNIFICATION. Community Federal. Under Delaware law, a Delaware
corporation may indemnify fully its directors, officers, employees, and agents
acting in good faith and in a manner that he reasonably believed was in, or not
opposed to, the best interests of the corporation. A Delaware corporation also
may indemnify fully such individuals with respect to criminal actions or
proceedings, provided that such individual had no reasonable cause to believe
his conduct was unlawful. Community Federal's Certificate provides that it will
indemnify its directors, officers, employees, and agents to the fullest extent
authorized by Delaware Law against all expense, liability and loss reasonably
incurred or suffered by him; provided, however, that Community Federal will not
be liable for any amount which may be due to a person in connection with a
proceeding or action effected without Community Federal's prior written consent.
Community Federal's Certificate further permits it to maintain insurance on
behalf of any director, officer, employee, or agent of Community Federal.
First M&F. First M&F's Articles and Bylaws provide for indemnification by
First M&F, to the fullest extent permitted by the Mississippi Business
Corporation Act, of directors, officers, employees and agents for expenses,
judgments, fines and amounts paid in settlement by such persons.
<PAGE>
The Mississippi Business Corporation Act 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 Mississippi Business Corporation Act 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.
SUPERMAJORITY VOTING REQUIREMENTS; BUSINESS COMBINATIONS. Community
Federal. The Certificate of Incorporation of Community Federal provides that,
for a period of five years from the date of reorganization of Community Federal
Bank as a subsidiary of Community Federal, no person may acquire more than 10%
of the outstanding shares of Community Federal. However, this restriction shall
not apply to:
(1) any offer with a view toward public resale made exclusively to
Community Federal by underwriters or a selling group acting on
its behalf;
(2) any tax qualified employee benefit plan or arrangement
established by the Community Federal or Community Federal Bank
and any trustee of such a plan or arrangement; and
(3) any other offer or acquisition approved in advance by the
affirmative vote of two-thirds of the Community Federal's Board
of Directors.
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 stockholder. 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 First M&F 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"), as defined, 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
"Information About Our Stock - First M&F Capital Stock - Provisions Discouraging
Changes in Control" for a more detailed discussion of this provision and for
definitions of such terms.
<PAGE>
DISSENTERS' APPRAISAL RIGHTS. Community Federal. Stockholders of a
Delaware corporation who do not vote in favor of a merger or consolidation of
the corporation may be entitled to appraisal rights. There are no statutory
rights of appraisal with respect to stockholders of a corporation whose shares
are either (a) listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc., or (b) held of record by more
than 2,000 stockholders, where such stockholders receive only shares of stock or
depository receipts of the corporation surviving or resulting from the merger or
consolidation or shares of stock or depository receipts of any other corporation
which at the effective date of the merger or consolidation will be either listed
on a national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association of
Securities Dealers, Inc. or held of record by more than 2,000 stockholders, or
cash in lieu of fractional share interests therein.
First M&F. The Mississippi Business Corporation Act provides appraisal
rights to stockholders in any of the following corporate actions:
(1) a merger if stockholder 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 stockholder 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 stockholders will receive the
proceeds within one year after the date of sale.
ADDITIONAL INFORMATION
DISSENTERS' APPRAISAL RIGHTS
FIRST M&F. Under Article 13, Section 79-4-13.01 et seq., of the Mississippi
-- ---
Business Corporation Act, a copy of which is attached hereto as Appendix C, any
holder of record of shares of First M&F common stock who:
(1) files a written objection to the merger prior to or at the
First M&F Meeting at which the vote on the merger is taken, and
(2) does not vote in favor of the merger,
may demand in writing that First M&F pay to such stockholder the fair cash value
of such shares. A person who is a beneficial owner, but not a registered owner,
of shares of First M&F common stock who wishes to exercise the rights of a
dissenting stockholder under the Mississippi Business Corporation Act must
submit to First M&F the record stockholder'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 stockholder.
Any stockholder contemplating making a demand for appraisal is urged to
review carefully the provisions of Section 79-4-13.21 of the Mississippi
Business Corporation Act, 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.
<PAGE>
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 Mississippi Business
Corporation Act and is qualified in its entirety by reference to Appendix C
hereto and to any amendments to such sections as may be adopted after the date
of this Joint Proxy Statement-Prospectus.
Before the First M&F stockholders' vote is taken on the proposal to approve
the merger, a stockholder of record who intends to exercise appraisal rights
must
(1) deliver to First M&F a written notice of his intent to demand
payment for his shares if the proposed merger is effectuated and
(2) must not vote the shares of First M&F common stock held by such
dissenter in favor of the proposed merger.
Such written notice may be sent to First M&F at 221 Washington Street,
Kosciusko, Mississippi 39090, telephone number (662)289-5121 to the attention
of Robert C. Thompson, III.
The return of a proxy by a dissenter with instructions to vote the shares
represented thereby against the merger, or abstaining from voting, is not
sufficient to satisfy the requirement of delivering written objection to First
M&F. The submission of a signed blank proxy will serve to waive appraisal
rights.
Within ten days after the effective date of the merger, First M&F will
notify each dissenter who has purported to comply with the provisions of Section
79-4-13.21 of the Mississippi Business Corporation Act that the merger has
become effective.
Within the time specified in the notice of consummation, any dissenter must
file with First M&F a demand for payment for their shares as of the day prior to
the effective date of the merger. 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 M&F 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 notice of consummation, which is July 9, 1999, the date of the first
announcement of the proposed merger to the news media. Simultaneously with the
filing of the demand for payment, the dissenter shall also deposit his stock
certificates in accordance with the terms of the notice of consummation. 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 merger and
will lose his appraisal rights. The demand may be sent to First M&F at 221
Washington Street, Kosciusko, Mississippi 39090, telephone number
(662) 289-5121, to the attention of Robert C. Thompson, III.
Upon receipt of the demand, First M&F shall pay dissenters who complied
with Article 13 the amount First M&F estimates to be the fair value of the
dissenter's shares plus accrued interest. Certain financial information
concerning First M&F's 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.
If the dissenter disagrees with the value paid by First M&F, the dissenter
may notify First M&F in writing of his own estimate of the fair value of his
shares and amount of interest due and demand payment of his estimate. To be
entitled to such rights, the dissenter must notify First M&F of his demand in
writing within thirty days after First M&F made payment for the shares. If a
dissenter has rejected First M&F's payment and demanded payment of the fair
value of the shares and interest due and the demand for payment remains
unsettled, First M&F shall commence a judicial proceeding within sixty 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. First M&F 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 M&F.
<PAGE>
If First M&F does not commence such action within the required 60-day
period, it shall pay each dissenter whose demand remains unsettled the amount
demanded.
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
Mississippi Business Corporation Act 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 M&F 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
benefitted.
Any First M&F stockholder who desires to exercise appraisal rights should
carefully review the Mississippi Business Corporation Act and is urged to
consult such stockholder's legal advisor before exercising or attempting to
exercise such rights.
COMMUNITY FEDERAL. Any holder of Community Federal Stock is entitled to
appraisal rights under Section 262 of the Delaware General Corporation Law, a
copy of which is attached hereto as Appendix B, as a result of the merger. All
references in Section 262 and in this summary to a "stockholder" are to the
record holder of common stock as to which appraisal rights are being asserted.
A person having a beneficial interest in shares of Community Federal stock that
are held of record in the name of another person, such as a broker or nominee,
must act promptly to cause the record holder to follow the steps summarized
below properly and in a timely manner to perfect whatever appraisal rights the
beneficial owner may have.
Under the Delaware General Corporation Law, any holder of stock who follows
the procedures set forth in Section 262 will be entitled to have his shares
appraised by the Delaware Court of Chancery and to receive payment of the "fair
value" of such shares, exclusive of any element of value arising from the
accomplishment or expectation of the merger, as determined by such court. In
order for a stockholder to perfect his appraisal rights, his shares must not be
voted in favor of approving the merger. Because a proxy which does not contain
voting instructions will, unless revoked, be voted for approval of the merger
agreement, the submission of a signed blank proxy will serve to waive appraisal
rights.
Under Section 262, where a merger is to be submitted for approval at a
meeting of stockholders, the corporation, not less than twenty (20) days prior
to the meeting, must notify each of its stockholders entitled to appraisal
rights that such appraisal rights are available and include in such notice a
copy of Section 262. This Joint Proxy Statement-Prospectus shall constitute such
notice to the stockholders of Community Federal and a copy of Section 262 is
attached as Appendix B. The following discussion is not a complete statement of
the law pertaining to appraisal rights under the Delaware General Corporation
Law. Any stockholder who wishes to exercise such appraisal rights or who wishes
to preserve his right to do so, should review Section 262 and the following
discussion carefully because failure to timely and properly comply with the
procedures specified will result in the complete loss of appraisal rights under
the Delaware General Corporation Law.
<PAGE>
Each stockholder electing to demand the appraisal of his shares of
Community Federal common stock must deliver to Community Federal, before the
taking of the vote on the merger agreement, a written demand for appraisal of
such shares. Such written demand must:
(1) be received by Community Federal prior to the vote being taken
on the merger agreement at the Community Federal Meeting; and
(2) inform Community Federal of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of
his shares.
The written demand should be sent to Community Federal at 333 Court Street,
Tupelo, Mississippi 38801, telephone number (662) 842-3981and to the attention
of Sherry S. McCarty.
Appraisal rights may be exercised only by a stockholder who holds his
shares on the date of making the demand for appraisal and who continuously holds
such shares through the effective date of the merger. A vote against adoption of
the merger agreement, in person or by proxy, will not in and of itself
constitute a demand for appraisal satisfying the requirements of Section 262.
Only a holder of record of Community Federal common stock is entitled to
assert appraisal rights for the shares registered in that holder's name. A
demand for appraisal should be exercised by or on behalf of the holder of
record, fully and correctly, as his name appears on his stock certificates. If
such holder's shares are owned of record in a fiduciary capacity, such as by a
trustee, guardian or custodian, execution of the demand should be made in that
capacity, and if the shares are owned of record by more than one person, as in
a joint tenancy or a tenancy in common, the demand should be executed by or on
behalf of all joint owners. An authorized agent, including one or more joint
owners, may execute a demand for appraisal on behalf of a holder of record;
however, the agent must identify the record owner or owners and expressly
disclose the fact that, in executing the demand, the agent is acting as agent
for such owner or owners. A record holder, such as a broker, who holds shares of
stock as nominee for several beneficial owners may exercise appraisal rights
with respect to the shares held for one or more beneficial owners while not
exercising such rights with respect to the shares held for other beneficial
owners. In such case, the written demand should set forth the number of shares
as to which appraisal is sought. Where no number of shares is expressly
mentioned, the demand will be presumed to cover all shares held in the name of
the record owner. Stockholders who hold their shares of stock in brokerage
accounts or other nominee forms and who wish to exercise appraisal rights are
urged to consult with their brokers to determine the appropriate procedures for
the making of a demand for appraisal by such a nominee.
Within ten days after the effective date of the merger, First M&F must
send a notice as to the effectiveness of the merger to each person who has made
demand for appraisal and otherwise satisfied the foregoing provisions of
Section 262. Within 120 days after the effective date, but not thereafter,
First M&F or any stockholder entitled to appraisal rights under Section 262 may
file a petition in the Delaware Court of Chancery demanding a determination of
the "fair value" of the shares. Notwithstanding the foregoing, at any time
within sixty days after the effective date any stockholder has the right to
withdraw his previously made demand for appraisal and accept the merger
consideration. After such 60-day period, a stockholder may only withdraw his
demand for appraisal of the Community Federal stock with the consent of First
M&F. First M&F will not file a petition with respect to the appraisal of the
"fair value" of the shares. Accordingly, it is the obligation of stockholders to
initiate all necessary action to perfect their appraisal rights within the time
periods prescribed in Section 262.
Within 120 days after the effective date of the merger, any stockholder who
has complied with the requirements for exercise of appraisal rights will be
entitled, upon written request, to receive from First M&F, as the surviving
corporation of the merger, a statement setting forth the aggregate number of
shares not voted in favor of adoption of the merger and with respect to which
demands for appraisal have been received and the aggregate number of holders of
such shares. Such statement must be mailed within ten days after a written
request therefor has been received by First M&F or within ten days after
expiration of the period for delivery of demands for appraisal, whichever is
later.
<PAGE>
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Court of Chancery will determine whether the stockholder
is entitled to appraisal rights and will determine the "fair value" of their
shares, exclusive of any element of value arising from the accomplishment or
expectation of the merger, together with a fair note of interest, if any, to be
paid upon the amount determined to be the fair value. Stockholders considering
seeking appraisal should be aware that the fair value of their shares as
determined under Section 262 could be more than, the same as, or less than the
consideration they would receive pursuant to the merger agreement if they did
not seek appraisal of their shares, and that investment banking opinions as to
fairness are not necessarily opinions as to "fair value" under Section 262. The
Delaware Supreme Court has stated that "proof of value by any techniques or
methods which are generally considered acceptable in the financial community and
otherwise admissible in court" should be considered in the appraisal proceeding.
The Court will also determine the amount of interest, if any, to be paid upon
the amounts to be received by persons whose shares have been appraised. The
costs of the action may be determined by the Court and borne by the parties as
the Court deems equitable. Upon application of a stockholder, the Court may also
order that all or a portion of the expenses incurred by any stockholder in
connection with an appraisal, including, without limitation, reasonable
attorneys' fees and the fees and expenses of experts utilized in the appraisal
proceeding be charged pro rata against the value of all the shares entitled to
appraisal.
Any stockholder who has duly demanded an appraisal in compliance with
Section 262 will not, after the effective date of the merger, be entitled to
vote the shares of stock subject to such demand for any purpose or be entitled
to the payment of dividends or other distributions on such shares, except
dividends or other distributions payable to stockholders of record as of a date
prior to the effective date.
If any stockholder who demands appraisal of his shares under Section 262
fails to perfect, or effectively withdraws or loses, his right to appraisal, the
shares of such holder will be converted into the right to receive First M&F
common stock and cash in accordance with the merger agreement. A stockholder
will fail to perfect, and therefore lose, his right to appraisal if no petition
for appraisal is filed within 120 days after the effective date, or if the
stockholder delivers to First M&F a written withdrawal of his demand for
appraisal and his acceptance of the merger, except that any such attempt to
withdraw made more than sixty days after the effective date will require the
written approval of First M&F.
Failure to follow the steps required by Section 262 of the Delaware General
Corporation Law for perfecting appraisal rights will result in loss of such
rights.
Any Community Federal stockholder who desires to exercise appraisal rights
should carefully review the Delaware General Corporation Law and is urged to
consult such stockholder's legal advisor before exercising or attempting to
exercise such rights.
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 Community Federal incorporated
in this Joint Proxy Statement-Prospectus by reference from the Community Federal
Annual Report on Form 10-K have been audited by Arthur Andersen LLP, independent
auditors, as stated in their report which is incorporated herein by reference
and have been so incorporated 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.
<PAGE>
OTHER MATTERS
As of the date of this Joint Proxy Statement-Prospectus, the First M&F
Board and the Community Federal Board know of no matters that will be presented
for consideration at the First M&F Meeting or the Community Federal Meeting,
respectively, other than as described in this Joint Proxy Statement-Prospectus.
If any other matters should properly come before either meeting or any
adjournments or postponements thereof and be voted upon, the enclosed proxies
will be deemed to confer discretionary authority on the individuals named as
proxies therein to vote the shares represented by such proxies as to any such
matters. The persons named as proxies intend to vote or not to vote in
accordance with the recommendation of the respective managements of First M&F
and Community Federal.
STOCKHOLDER PROPOSALS
FIRST M&F. In order for stockholder proposals for the 2000 annual meeting
of stockholders to be eligible for inclusion in First M&F's 2000 proxy
statement, all such proposals must be mailed to First M&F Corporation,
221 Washington Street, Jackson, Mississippi 39090, Attention: Hugh S. Potts,
Jr., and must be received no later than [NOVEMBER 17, 1999.] After this date, a
stockholder who intends to raise a proposal to be acted upon at the 2000 annual
meeting of stockholders must inform First M&F in writing no later than
[JANUARY 31, 2000.] If notice is not provided by that date, the First M&F Board
may exclude such proposal from being acted upon at the 2000 meeting. Further,
the persons named in First M&F's proxy for the 2000 annual meeting will be
allowed to exercise their discretionary authority to vote upon any such proposal
without the matter having been discussed in the proxy statement for the 2000
annual meeting.
COMMUNITY FEDERAL. If the merger is not completed, Community Federal will
set a date for its next annual meeting as provided in its Bylaws. Any
stockholder who wishes to present a proposal at Community Federal's next annual
meeting and who wishes to have the proposal included in Community Federal's
proxy statement for the annual meeting must submit the proposal to Community
Federal Bancorp, 333 Court Street, Tupelo, Mississippi 38801, Attention: Sherry
S. McCarty, and must be received no later than August 23, 1999. After this date,
a stockholder who intends to raise a proposal to be acted upon at the next
annual meeting of stockholders must inform Community Federal in writing no later
than November 6, 1999. If notice is not provided by that date, the Community
Federal Board may exclude such proposal from being acted upon at the 2000
meeting. Further, the persons named in Community Federal's proxy for the 2000
annual meeting will be allowed to exercise their discretionary authority to vote
upon any such proposal without the matter having been discussed in the proxy
statement for the 2000 annual meeting.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This Joint Proxy Statement-Prospectus contains certain forward-looking
statements about the financial condition, results of operations and business of
each of our companies and about the combined company following the consummation
of the merger. These statements concern the cost savings, revenue enhancements
and other advantages we expect to obtain from the merger, the anticipated impact
of the merger on First M&F's financial performance and earnings estimates for
the combined company. These statements appear in several sections of this Joint
Proxy Statement-Prospectus, including "Summary," "The Merger - Background of and
Reasons for the Merger," "The Merger - Opinion of First M&F's Financial Advisor"
and "The Merger - Opinion of Community Federal's Financial Advisor." Also, when
we use any of the words "believes," "expects," "anticipates," "intends,"
"estimates," "plans" or similar expressions, we are making forward-looking
statements.
Forward-looking statements are not guarantees of future performance. They
involve risks, uncertainties and assumptions. The future results and
stockholder values of First M&F and Community Federal, and of the combined
company, may differ materially from those expressed in these forward-looking
statements. Many of the factors that could influence or determine actual
results are unpredictable and not within the control of First M&F or Community
Federal. In addition, neither First M&F nor Community Federal intend to, nor
are they obligated to, update these forward-looking statements after they
distribute this Joint Proxy Statement-Prospectus, even if new information,
future events or other circumstances have made them incorrect or misleading as
of any future date. For all of these statements, First M&F and Community
Federal claim the protection of the safe harbor for forward-looking statements
provided in the Private Securities Litigation Reform Act of 1995.
Factors that may cause actual results to differ materially from those
contemplated by such forward-looking statements include, among others, the
following possibilities:
(1) expected cost savings from the proposed merger cannot be fully
realized or realized within the expected time frame;
(2) costs or difficulties related to the integration of the
businesses are greater than expected;
(3) revenues following the proposed merger are lower than expected;
(4) competitive pressure among depository institutions increases
significantly;
(5) changes in the interest rate environment reduce interest
margins;
(6) general economic conditions, either nationally or in
Mississippi, are less favorable than expected; or
(7) legislation or regulatory changes adversely affect the
businesses in which the combined company would be engaged.
FINANCIAL AND BUSINESS INFORMATION
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENTS OF CONDITION (UNAUDITED)
The following unaudited Pro Forma Combined Condensed Consolidated Statement
of Condition combines the historical consolidated statements of condition of
First M&F and Community Federal giving effect to the Merger, which will be
accounted for as a purchase, as if it had been completed and the issuance of
1,217,986 shares of First M&F Common Stock occurred, on June 30, 1999, after
giving effect to the pro forma adjustments described in the accompanying
footnotes. No provision has been reflected for expenses related to the Merger,
which are disclosed with the Pro Forma Combined Income Statement.
The merger will be accounted for as a "purchase," which means that the
purchase price will be allocated to the assets acquired and the liabilities
assumed by First M&F based on their estimated fair values at the time Community
Federal and First M&F are combined. For a more detailed description of purchase
accounting, see "The Merger - Accounting Treatment."
The information set forth below should be read in conjunction with the
historical consolidated financial statements of First M&F and Community Federal,
including their respective notes thereto, certain of which are incorporated by
reference in this Joint Proxy Statement-Prospectus and with the condensed
consolidated historical and other pro forma financial information, including
the notes thereto, appearing elsewhere in this Joint Proxy Statement-Prospectus.
First M&F's fiscal year ends December 31 and Community Federal's fiscal
year ends September 30. In the following table, financial data for the fiscal
year ended December 31, 1998 includes Community Federal financial data for the
12 months ended September 30, 1998 and information regarding First M&F is
presented consistent with the fiscal year of First M&F ended December 31. The
information for the six months ended June 30, 1999, is based on the respective
historical unaudited financial statements of First M&F and Community Federal.
The pro forma information is not necessarily indicative of the results of
operations which would have been achieved had the merger been consummated as of
the beginning of the periods for which such data are presented and should not be
construed as being representative of future periods.
(Remainder of this page left blank intentionally)
<PAGE>
First M&F Corporation/Community Federal Bancorp
Pro Forma Combined Condensed Consolidated Statements of Condition (Unaudited)
June 30, 1999
<TABLE>
<CAPTION>
Consolidating Adjustments
First M&F Community Consolidated
Corp. Federal Debits Credits First M&F
--------- --------- ------ ------- ------------
Cash and short
<S> <C> <C> <C> <C> <C>
term investments 29,902,434 7,804,481 (a) 37,737,083 (c) 37,737,083 40,839,807
(f) 1,151,810
(c) 1,981,082
Investment securities:
Available for sale 215,740,504 149,850,456 (g) 1,923,838 (a) 37,737,083 329,777,715
Held to maturity - 1,940,561 (g) 1,940,561 -
Loans 438,302,439 142,640,063 (b) 470,000 581,412,502
Less allowance for
loan losses 6,399,198 817,658 7,216,856
Net Loans 431,903,241 141,822,405 574,195,646
Intangible assets 3,111,305 (c) 14,645,330 17,756,635
Other assets 36,627,864 7,271,927 (b) 1,000,000 (f) 1,151,810 43,747,981
----------- ----------- ---------- ---------- -------------
Total Assets 717,285,348 308,689,830 1,006,317,784
=========== =========== =============
Deposits:
Total deposits 637,454,343 151,775,659 (b) 460,000 789,690,002
Borrowed Funds 14,077,409 92,323,014 106,400,423
Other liabilities 3,830,808 6,338,752 (d) 377,445 10,547,005
----------- ----------- ---------- ---------- -------------
Total Liabilities 655,362,560 250,437,425 906,637,430
----------- ----------- -------------
Common stock,
4,890,163 shares 18,198,895 46,288 (c) 46,288 (c) 6,089,930 24,450,815
(e) 1,159,520 (e) 1,321,510
Additional paid-in
capital 10,800,455 45,355,832 (c) 45,355,832 (c) 31,667,636 42,306,101
(e) 6,029,504 (e) 5,867,514
Retained earnings 35,078,707 16,712,436 (c) 16,712,436 35,078,707
Treasury stock (6,330,042) (c) 6,330,042
Unearned compensation (4,605,547) (c) 4,605,547
Unrealized securities
gains (losses), net (2,155,269) 7,073,438 (c) 7,073,438 (2,155,269)
----------- ----------- ---------- ---------- -------------
Total Shareholders'
Equity 61,922,788 58,252,405 99,680,354
----------- ----------- -------------
Total Liabilities and
Shareholders' Equity 717,285,348 308,689,830 1,006,317,784
=========== =========== =============
</TABLE>
(a) Assumes the sale of approximately $38 million of Community Federal's
available for sale investments to fund the cash outlay of the purchase.
Assumes no tax gain on sale of the selected securities.
(b) Reflects adjustment of assets and liabilities to Fair Value.
(c) Reflects issuance of 1,217,986 shares of First M&F common stock at $31.00
per share in exchange for the outstanding shares of Community Federal, the
cash payment of 537.7 million, and the retirement of Community Federal's
treasury stock. The $31.00 stock price of First M&F, the stock price that
prevailed when the merger was negotiated, was used in calculating the
goodwill. The pro forma statement includes adjustments for the excess of the
cost over the fair value of the net assets acquired as follows:
<PAGE>
June 30, 1999
-------------
Purchase Price - stock issued $37,757,566
Purchase Price - cash 37,737,083
-----------
Total purchase price 75,494,649
-----------
Historical net tangible assets acquired 58,252,405
Estimated loan fair value adjustment (b) 470,000
Estimated property fair value adjustment (b) 1,000,000
Estimated deposit fair value adjustment (b) (460,000)
Cash due from ESOP termination to repay loan (c) 1,981,082
Deferred tax adjustment on mark to market (d) (377,445)
Estimated investment fair value adjustment (g) (16,723)
-----------
Estimated fair value of net assets 60,849,319
-----------
Excess cost over net assets acquired $14,645,330
===========
(d) Additional deferred tax liability on fair market value adjustments.
(e) Assumes issuance of 264,302 shares of stock for Community Federal's stock
options at an average converted option price of $27.20 and the repurchase
and retirement of 231,904 shares at $31.00.
(f) Increase in cash and offsetting reduction in other assets. Receivable
from the ESOP grantor trust is paid to the Company to pay the ESOP loan.
(g) Reclassify held to maturity securities to available for sale.
(Remainder of this page left blank intentionally)
<PAGE>
First M&F Corporation/Community Federal Bancorp
Pro Forma Combined Condensed Consolidated Statements of Condition (Unaudited)
December 31, 1998/September 30, 1998
<TABLE>
<CAPTION>
Consolidating Adjustments
First M&F Community Consolidated
Corp. Federal Debits Credits First M&F
--------- --------- ------ ------- ------------
Cash and short
<S> <C> <C> <C> <C> <C>
term investments 48,142,542 4,070,714 (a) 37,737,083 (c) 37,737,083 55,346,148
(f) 1,151,810
(c) 1,981,082
Investment securities:
Available for sale 210,646,083 119,799,017 (g) 2,760,651 (a) 37,737,083 295,468,668
Held to maturity - 2,742,209 (g) 2,742,209 -
Loans 414,183,683 142,170,549 (b) 470,000 556,824,232
Less allowance for
loan losses 5,835,000 756,285 6,591,285
Net Loans 408,348,683 141,414,264 550,232,947
Intangible assets 3,241,435 (c) 15,297,944 18,539,379
Other Assets 31,627,481 7,294,238 (b) 1,000,000 (f) 1,151,810 38,769,909
----------- ----------- ---------- ---------- ------------
Total Assets 702,006,224 275,320,442 958,357,051
=========== =========== ============
Deposits:
Total deposits 625,398,006 144,801,613 (b) 460,000 770,659,619
Borrowed Funds 9,399,850 65,451,449 74,851,299
Other liabilities 3,696,791 7,502,754 (d) 377,445 11,576,990
----------- ----------- ---------- ---------- ------------
Total Liabilities 638,494,647 217,755,816 857,087,908
----------- ----------- ------------
Common stock,
4,937,246 shares 18,198,895 46,288 (c) 46,288 (c) 6,089,930 24,450,815
(e) 1,159,520 (e) 1,321,510
Additional paid-in
capital 10,800,455 45,210,144 (c) 45,210,144 (c) 31,667,838 42,306,101
(e) 6,029,504 (e) 5,867,514
Retained earnings 32,722,727 15,487,717 (c) 15,487,717 32,722,727
Treasury stock (5,545,540) (c) 5,545,540
Unearned compensation (5,277,786) (c) 5,277,786
Unrealized securities
gains (losses), net 1,789,500 7,643,803 (c) 7,643,803 1,789,500
----------- ----------- ---------- ---------- ------------
Total Shareholders'
Equity 63,511,577 57,564,626 101,269,143
----------- ----------- ------------
Total Liabilities and
Shareholders' Equity 702,006,224 275,320,442 958,357,051
=========== =========== ============
</TABLE>
(a) Assumes the sale of approximately $38 million of Community Federal's
available for sale investments to fund the cash outlay
of the purchase. Assumes no tax gain on sale of the selected securities.
(b) Reflects adjustment of assets and liabilities to Fair Value.
(c) Reflects issuance of 1,217,986 shares of First M&F common stock at $31.00
per share in exchange for the outstanding shares of Community Federal, the
cash payment of $37.7 million, and the retirement of Community Federal's
treasury stock. The $31.00 stock price of First M&F, the stock price that
prevailed when the merger was negotiated, was used in calculating the
goodwill. The pro forma statement includes adjustments for the excess of
the cost over the fair value of the net assets required as follows:
<PAGE>
December 31, 1998
-----------------
Purchase Price - stock issued $37,757,566
Purchase Price - cash 37,737,083
-----------
Total purchase price 75,494,649
-----------
Historical net tangible assets acquired 57,564,626
Estimated loan fair value adjustment (b) 470,000
Estimated property fair value adjustment (b) 1,000,000
Estimated deposit fair value adjustment (b) (460,000)
Cash due from ESOP termination to repay loan (c) 1,981,082
Deferred tax adjustment on mark to market (d) (377,445)
Estimated investment fair value adjustment (g) 18,442
-----------
Estimated fair value of net assets 60,196,341
-----------
Excess cost over net assets acquired $15,297,944
===========
(d) Additional deferred tax liability on fair market value adjustments.
(e) Assumes issuance of 264,302 shares of stock for Community Federal's stock
options at an average converted option price of $27.20 and the repurchase
and retirement of 231,904 shares at $31.00.
(f) Increase in cash and offsetting reduction in other assets. Receivable
from the ESOP grantor trust is paid to the Company to pay the ESOP loan.
(g) Reclassify held to maturity securities to available for sale.
(Remainder of this page left blank intentionally)
<PAGE>
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
The following unaudited Pro Forma Combined Condensed Consolidated Statements
of Income have been prepared giving effect to the Merger as if it had been
completed, and the issuance of 1,217,986 shares of First M&F Common Stock
occurred, on January 1 for the period presented, presented on a purchase
accounting basis, after giving effect to the pro forma adjustments described in
the accompanying footnotes. No provision has been reflected for expenses
related to the Merger, the amounts of which are disclosed in the accompanying
footnotes.
This financial data should be read in conjunction with the historical
consolidated financial statements, including the respective notes thereto, of
First M&F and of Community Federal, which are incorporated by reference in this
Joint Proxy Statement - Prospectus and with the condensed consolidated
historical and other pro forma financial information, including the notes
thereto, appearing elsewhere in this Joint Proxy Statement - Prospectus.
This pro forma financial information is not necessarily indicative of the
actual operating results that would have occurred had the Merger been
consummated as of the beginning of the periods presented, nor is it necessarily
indicative of future operating results.
(Remainder of this page left blank intentionally)
<PAGE>
First M&F Corporation/Community Federal
Pro Forma Combined Condensed Consolidated Statements of Income (Unaudited)
June 30, 1999
<TABLE>
<CAPTION>
First M&F Comm Fed Pro Forma
YTD 2Q and 3Q Adjustments Combined
---------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Total interest income 25,335,806 9,408,779 (c)(1,010,128) 33,700,886
Total interest expense (d) (33,571)
11,715,989 5,697,709 (d) (76,667) 17,337,031
---------- --------- --------- ----------
Net interest income 13,619,817 3,711,070 (967,032) 16,363,855
Provision for loan losses 1,101,920 40,000 - 1,141,920
---------- --------- --------- ----------
Net interest income after
provision for loan losses 12,517,897 3,671,070 (967,032) 15,221,935
Total noninterest income 3,199,417 812,508 - 4,011,925
Goodwill amortization 130,129 (a) 488,178 618,307
Other expenses 9,964,417 2,122,906 (d) 12,500 12,099,823
---------- --------- ------- ----------
Total noninterest expense 10,094,546 2,122,906 500,678 12,718,130
---------- --------- ------- ----------
Income before income taxes 5,622,768 2,360,672 (1,467,710) 6,515,730
Income taxes 1,446,899 860,222 (c) (385,748) 1,921,373
---------- --------- --------- ----------
Net income 4,175,869 1,500,450 1,081,962 4,594,357
========== ========= ========= ==========
Average Shares 4,937,246
==========
Earnings Per Share 0.93
====
</TABLE>
(a) Amortization of goodwill of $976,355 per year, $488,178 for 6 months, over
15 years straight line. Goodwill calculation is shown in the pro forma
balance sheet.
(b) Average number of shares outstanding was computed by applying the share
conversion factor to the outstanding shares of Community Federal and adding
the result to First M&F's historical average shares outstanding.
(c) The interest income reduction, and tax effect, due to the sale of
Community's investments to fund the cash paid, assuming combination at the
beginning of the year at $8.8457 cash and .2855 shares. $37,737,083 of
investment sold at an annual yield of 5.38%.
(d) Yield adjustments due to fair value adjustment on loans, deposits, and
depreciation for the six months of $33,571, $76,667, and $12,500,
respectively.
The following are estimates of merger related expenses that are not incorporated
into the pro forma analysis.
Community Federal investment banking and legal fees $ 750,000
Community Federal executive change-in-control payments 750,000
First M&F Corp legal and investment banking fees
unrelated to the registration 150,000
Fees related to the registration of the securities 100,000
---------
$1,750,000
=========
<PAGE>
First M&F Corporation/Community Federal
Pro Forma Combined Condensed Consolidated Statements of Income (Unaudited)
December 31, 1998
<TABLE>
<CAPTION>
First M&F Comm Fed Pro Forma
Corp Fiscal 98 Adjustments Combined
---------- --------- ------------- ----------
<S> <C> <C> <C> <C>
Total interest income 50,009,589 16,607,283 (c)(2,020,256) 64,529,474
Total interest expense (d) (67,142)
24,390,499 9,573,422 (d) (153,333) 33,810,588
---------- ---------- --------- ----------
Net interest income 25,619,090 7,033,861 (1,934,065) 30,718,886
Provision for loan losses 1,964,746 235,000 - 2,199,746
---------- ---------- --------- ----------
Net interest income after
provision for loan losses 23,654,344 6,798,861 (1,934,065) 28,519,140
Total noninterest income 5,501,309 1,929,373 - 7,430,682
Goodwill amortization 236,802 (a) 976,355 1,213,157
Other expenses 18,481,603 3,859,876 (d) 25,000 22,366,479
---------- --------- --------- ----------
Total noninterest expense 18,718,405 3,859,876 1,001,355 23,579,636
---------- --------- --------- ----------
Income before income taxes 10,437,248 4,868,358 (2,935,420) 12,370,186
Income taxes 2,594,981 1,817,545 (c) (771,496) 3,641,030
---------- --------- --------- ----------
Net income 7,842,267 3,050,813 (2,163,924) 8,729,156
========== ========= ========= ==========
Average Shares 5,043,954
==========
Earnings Per Share 1.73
====
</TABLE>
(a) Amortization of goodwill of $976,355 over 15 years straight line.
Goodwill calculation is shown in the pro forma balance sheet.
(b) Average number of shares outstanding was computed by applying the share
conversion factor to the outstanding shares of Community Federal and adding
the result to First M&F's historical average shares outstanding.
(c) The interest income reduction, and tax effect, due to the sale of
Community's investments to fund the cash paid, assuming combination at the
beginning of the year at $8.8457 cash and .2855 shares. $37,737,083 of
investment sold at an annual yield of 5.38%.
(d) Yield adjustments due to fair value adjustment on loans, deposits, and
depreciation of $67,142, $153,333, and $25,000, respectively.
The following are estimates of merger related expenses that are not incorporated
into the pro forma analysis.
Community Federal investment banking and legal fees $ 750,000
Community Federal executive change-in-control payments 750,000
First M&F Corp legal and investment banking fees
unrelated to the registration 150,000
Fees related to the registration of the securities 100,000
---------
$1,750,000
=========
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of the 8th
day of July, 1999, is made between Community Federal Bancorp, Inc., Tupelo,
Mississippi, a Delaware corporation ("Community Federal"), First M&F
Corporation, Kosciusko, Mississippi, a Mississippi corporation ("First M&F"),
Community Federal Bank, Tupelo, Mississippi, a federally chartered savings bank
("Community Federal Bank"), and Merchants & Farmers Bank, Kosciusko,
Mississippi, a Mississippi state bank ("M&F Bank").
In consideration of their mutual promises and obligations, the parties
agree that Community Federal shall be merged with and into First M&F on the
terms and subject to the conditions set forth in this Agreement:
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 Community Federal, First M&F, Community Federal 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 "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.
1.3 "Community Federal Bank" means Community Federal Bank, a federally
----------------------
chartered savings bank that was organized on August 25, 1994, 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 333 Court
Street, in Tupelo, Lee County, Mississippi 38802.
1.4 "Community Federal" means Community Federal Bancorp, Inc., a
-----------------
corporation duly chartered in November 1995, organized, and existing under and
pursuant to the laws of the State of Delaware; maintaining its principal place
of business at 333 Court Street in Tupelo, Lee County, Mississippi.
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 thirty (30) 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 dates on which the Community Federal shareholders
and the First M&F 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
Merger (as defined in Section 2.1 hereof) as may reasonably be required
(including material required to be delivered under this Agreement).
<PAGE>
1.6 "Effective Date" The Merger shall become effective as of the date
--------------
and time specified in Articles of Merger filed with the Secretary of State of
the State of Mississippi pursuant to the provisions of Article 11 of the
Mississippi Business Corporation Act (the "MBCA") and the Certificate of Merger
filed with the Delaware Secretary of State pursuant to Section 252 of the
Delaware General Corporation Law (the "DGCL").
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.
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 E. 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 "OTS" means the Office of Thrift Supervision having regulatory
---
authority over Community Federal Bank.
1.13 "Party" shall mean First M&F, M&F Bank, Community Federal or
-----
Community Federal Bank and "Parties" shall mean First M&F, M&F Bank, Community
Federal and Community Federal 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.
1.16 "Trading Day" means a day on which First M&F Common Stock is traded
-----------
as reported on the NASDAQ National Market System.
ARTICLE 2
THE MERGER AND RELATED MATTERS
------------------------------
2.1 Merger. On the Effective Date, Community Federal shall be merged
------
with and into First M&F (the "Merger") pursuant to the provisions of this
Agreement, the provisions of and with the effect provided in, Article 11 of the
MBCA and Section 252 of the DGCL and the Merger Agreement in substantially the
form of Exhibit A hereto (the "Merger Agreement"). For federal income tax
purposes, it is intended that the Merger shall qualify as a reorganization under
Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the
"Code"), and the applicable IRS regulations. The Parties expect that the Merger
will further certain of their business objectives, including, and without
limitation, the expansion of operations as a financial institution.
<PAGE>
2.2 The Closing.
-----------
a. The Closing of the transactions contemplated herein 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) Community Federal and Community Federal
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 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 and letters
required by Article 8 shall be delivered, (iii) the appropriate officers of
the Parties shall complete the execution, acknowledgment and delivery of
the Merger Agreement and (iv) the Parties shall take such further action as
is required to consummate the transactions contemplated by this Agreement
and the Merger Agreement.
2.3 Effect of Merger. Upon consummation of the Merger, the separate
----------------
corporate existence of Community Federal 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 Merger remain unchanged. On the Effective
Date, 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 Community Federal, 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 Community Federal prior to such
Merger, and First M&F shall be a continuation of the original entities and all
of the rights and obligations of Community Federal shall remain unimpaired, and
First M&F, on the Effective Date of the Merger shall succeed to all such rights,
obligations, duties and liabilities connected therewith.
2.4 Bank Merger. First M&F and Community Federal shall take all action
-----------
necessary and appropriate to cause Community Federal Bank to merge into M&F
Bank simultaneously with or after the consummation of the Merger.
2.5 Stock Option Agreement. Simultaneously with the execution of this
----------------------
Agreement and as a condition thereto, the parties have executed a Stock Option
Agreement, providing First M&F an option to acquire up to 19.9% of the
outstanding shares of Community Federal, if certain triggering events occur.
ARTICLE 3
CONVERSION OF STOCK
-------------------
3.1 Conversion of Community Federal 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 First M&F Common Stock.
b. On the Effective Date, each share of common stock, $.01 par
value, of Community Federal ("Community Federal Common Stock") issued and
outstanding immediately prior to the Effective Date, other than shares of
Community Federal Common Stock owned by shareholders who pursuant to
Section 262 of the DGCL perfect appraisal rights, shall by virtue of the
Merger be converted into (i) .2855 shares of First M&F Common Stock,
subject to adjustment as set forth in Section 12.1g, and (ii) the right to
receive $8.8457 in cash (the "Exchange Ratio"). On the Effective Date, all
shares of Community Federal Common Stock held in treasury will be canceled
and terminated and will not be converted into shares of First M&F Common
Stock.
<PAGE>
The stock portion of the Exchange Ratio may be adjusted upward and
the cash portion of the Exchange Ratio reduced proportionally in a mutually
acceptable manner if necessary in the event neither Watkins Ludlam Winter
& Stennis, P.A., nor Elias, Matz, Tiernan and Herrick L.L.P. can give an
opinion that the Merger qualifies as a reorganization within the meaning of
Section 368 of the Code.
c. The Exchange Ratio shall be subject to appropriate proportionate
adjustments in the event that, subsequent to the date of this Agreement but
prior to the Effective Date, the outstanding shares of First M&F Common
Stock shall have been increased, decreased, changed into or exchanged for a
different number or kind of shares or securities through reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse
stock split or other like changes in First M&F capitalization.
d. As a result of the Merger and without any action on the part of
the holder thereof, on the Effective Date, all shares of Community Federal
Common Stock shall cease 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 Community Federal Common Stock
shall thereafter cease to have any rights with respect to such shares of
Community Federal Common Stock, except the right to receive, without
interest, the First M&F Common Stock and cash in accordance with Section
3.1b and c, and cash for fractional shares of First M&F Common Stock in
accordance with Section 3.2e upon the surrender of such Certificate.
3.2 Exchange of Certificates Representing Community Federal Common Stock.
--------------------------------------------------------------------
a. As of the Effective Date, First M&F shall deposit, or shall cause
to be deposited, with Registrar and Transfer Company, as exchange agent
(the "Exchange Agent"), for the benefit of the holders of shares of
Community Federal 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 Community Federal Common Stock.
b. Within five (5) business days 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 shares with
respect to which the holder thereof has perfected appraisal rights under
the DGCL 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, cash in lieu of fractional shares and $8.8457 in cash per
share. 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 in the amount of cash that such holder has the right to receive
pursuant to this Agreement after giving effect to any required withholding
tax, and the Certificate so surrendered shall forthwith be canceled. No
interest will be paid 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 Community Federal Common Stock which is not registered in the
transfer records of Community Federal, a certificate representing the
proper number of shares of First M&F Common Stock, together with a check
in the amount of cash that such holder has the right to receive pursuant
to this Agreement after giving effect to any required withholding tax, may
be issued to such a transferee if the Certificate representing such
Community Federal 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.
<PAGE>
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 Community Federal Common Stock represented by a Certificate until
such Certificate is surrendered for exchange as provided herein. 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 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 required withholding taxes.
d. On or after the Effective Date, there shall be no transfers on
the stock transfer books of Community Federal of the shares of Community
Federal Common Stock that 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 shares of First M&F
Common Stock and the amount of cash that such holder has the right to
receive pursuant to this Agreement. Certificates surrendered for exchange
by any person constituting an "affiliate" of Community Federal 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 5.10.
e. No fractional shares of First M&F Common Stock shall be issued
pursuant to this Agreement. In lieu of the issuance of any fractional
share of First M&F Common Stock pursuant to Section 3.1b, cash will be paid
equal to such fractional proportion times the Average Market Price as
defined in Section 12.1g.
f. Any portion of the shares of First M&F Common Stock and cash
(including the proceeds of any investments thereof and any shares of First
M&F Common Stock) that remains unclaimed by the former stockholders of
Community Federal one year after the Effective Date shall be delivered to
First M&F. Any former stockholders of Community Federal who have not
complied with this Article 3 before that date shall look only to First M&F
for payment in respect of their shares, without any interest thereon.
g. Neither the Parties nor the Exchange Agent or any other person
shall be liable to any former holder of shares of Community Federal 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 cash and
shares of First M&F Common Stock as provided in Section 3.1 and cash in
lieu of fractional shares, and unpaid dividends and distributions on shares
of First M&F Common Stock as provided in Section 3.2c.
<PAGE>
ARTICLE 4
TAX MATTERS
-----------
4.1 Tax Consequences. It is the intention of the Parties hereto that the
----------------
Merger shall constitute a reorganization within the meaning of Section 368(a)
of the Code, and that this Agreement shall constitute a "plan of merger" for
purposes of Section 368 of the Code.
4.2 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 as Schedule 4.2, are true and correct as of
the date hereof and will be true and correct on the Effective Date.
ARTICLE 5
COMMUNITY FEDERAL'S COVENANTS AND AGREEMENTS
--------------------------------------------
5.1 Operation of Business. Between the date hereof and the Effective
---------------------
Date, or until the termination of this Agreement, Community Federal 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, Community Federal will cause Community Federal
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 (or in the case of
paragraphs h and i the oral consent) of First M&F, which consent will not be
unreasonably withheld, Community Federal will not, and Community Federal will
cause Community Federal Bank not to:
a. Amend or otherwise change its articles of incorporation, charter
or bylaws (except to the extent required in order to effect the Merger 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
Community Federal or Community Federal Bank or any additional shares of any
class of capital stock of Community Federal or Community Federal Bank
(except to the extent required to effect the Merger 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 Community Federal or Community Federal Bank to issue
securities;
d. Declare, set aside, make, or pay any dividend or other
distribution with respect to its capital stock except (i) for each calender
quarter in which the record date for dividends on First M&F Common Stock
precedes the Effective Date, Community Federal may pay a regular quarterly
dividend in the amount of $.085 per share, and (ii) dividends from
Community Federal Bank to Community Federal to the extent necessary to pay
necessary and routine expenses of Community Federal (including expenses
relating to the transactions contemplated by this Agreement) and to fund
regular dividends by Community Federal to its stockholders to the extent
permitted by this paragraph;
e. Maintain a level of retained earnings of not less than
$16,657,000, less the costs associated with the Merger, and a loan loss
reserve at Community Federal Bank of not less than $800,000;
f. Redeem, purchase, or otherwise acquire, directly or indirectly,
any of its capital stock, respectively;
<PAGE>
g. Authorize any capital expenditure(s) which, individually or in
the aggregate, exceed $50,000;
h. Extend any new, or renew any existing, loan, credit, lease, or
other type of financing which individually exceeds $500,000;
i. Renew any type of financing which individually exceeds $100,000
and does not meet Community Federal Bank's loan policy requirements except
in connection with the workout of loans;
j. 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 Community Federal or Community Federal Bank;
k. 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;
l. Impose or suffer the imposition, on any share of stock held by
Community Federal in Community Federal Bank, of any material lien, charge,
or encumbrance, or permit any such lien to exist;
m. Establish or add any automated teller machines or branch or
other banking offices;
n. 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 Merger
as contemplated herein and except in the ordinary course of business in
connection with foreclosures or similar actions;
o. Enter into, extend, or renew any lease for office or other space;
p. Except as required by law or permitted by this Agreement, 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 Community Federal or
Community Federal Bank;
q. Grant any increase in compensation to any director, officer, or
employee or representative of Community Federal or Community Federal Bank
except in the ordinary course of business consistent with past practice;
r. Enter into, amend, or terminate any employment agreement,
relationship or responsibilities with any director, officer, or key
employee or representative of Community Federal or Community Federal 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 consented to in writing by First M&F;
s. Take any action or omit to take any action which would cause any
of Community Federal's or Community Federal Bank's representations or
warranties to be untrue or misleading in any material respect or any
covenant of Community Federal or Community Federal Bank under this
Agreement incapable of being performed;
t. 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 Community Federal's ability to perform its
covenants and agreements hereunder; or
u. Agree in writing or otherwise to do any of the foregoing.
<PAGE>
5.2 Preservation of Business. Between the date hereof and the Effective
------------------------
Date, Community Federal will, and will cause Community Federal 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, Community Federal shall cause the
---------
real property owned by Community Federal and Community Federal 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. Community Federal will (i) take all steps
---------------------
necessary to call, give notice of, convene and hold a special meeting of its
shareholders as soon as practicable for the purpose of approving this Agreement
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, Community Federal and its directors will support and vote in favor
of a stockholder resolution approving this Agreement and the Merger.
Community Federal shall cooperate in preparing the Registration Statement
and the proxy statement, and will promptly furnish all such information relating
to it as First M&F may reasonably request for the purpose of including such
information in the Registration Statement.
5.5 Property Transfers. From time to time, as requested by First M&F and
------------------
to the extent permitted by Mississippi law, the officers and directors of
Community Federal 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 Community Federal, and otherwise to carry out the purposes of
this Agreement.
5.6 Community Federal and Community Federal Bank Financial and Other
----------------------------------------------------------------
Reports. Community Federal shall (and shall cause Community Federal Bank to)
- -------
make available to First M&F and M&F Bank the following statements and other
reports and documents:
a. Community Federal's Consolidated Balance Sheets as of March 31,
1999 and 1998 (unaudited) and September 30, 1998, 1997 and 1996 (audited);
Consolidated Statements of Income and Changes in Stockholders' Equity and
Consolidated Statements of Cash Flows for the years ended September 30,
1998, 1997 and 1996 (audited) and Statements of Income for the six-month
periods ended March 31, 1999 and 1998 (unaudited) ("Community Federal
Financial Statements").
b. The thrift financial reports, consolidated reports of condition
and income, and accompanying schedules, filed by Community Federal Bank
with the OTS for each calendar quarter, beginning October 1, 1995, through
March 31, 1999.
c. Such additional financial or other information as may be required
for the regulatory applications and the Registration Statement in
connection with the consummation of the Merger (subject to any legal
limitations).
<PAGE>
5.7 Access to Properties and Records. Community Federal shall (and shall
--------------------------------
cause Community Federal 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 Community Federal 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
Community Federal and Community Federal Bank and all committees thereof), and it
shall (and shall cause Community Federal 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. Similar
access shall be provided to Community Federal by First M&F. All information
obtained hereunder shall be subject to the confidentiality agreement heretofore
executed.
5.8 No Solicitation. Prior to the Effective Date, neither Community
---------------
Federal nor Community Federal Bank shall authorize or knowingly permit any of
their officers, directors, employees, representatives, agents or other persons
controlled by Community Federal or Community Federal Bank to directly or
indirectly, encourage or solicit or, hold any discussions or negotiations with,
or provide any information to, any persons, entity or group concerning any
merger, consolidation, sale of substantial assets, sale of shares of capital
stock or similar transactions involving, directly or indirectly, Community
Federal or Community Federal Bank, except as contemplated by this Agreement or
as required by fiduciary obligations. Community Federal and Community Federal
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. In addition to any restrictions which may be
-----------------------
contained in any employment agreement between Community Federal, Community
Federal Bank and any director (other than Jim Ingram and Lewis Whitfield who
have entered into separate Non-Competition Agreements pursuant to Section 8.3d
hereof), each of the directors of Community Federal and Community Federal Bank
agree that for the period from the date hereof until four (4) years after the
Effective Date, they will not become directly, indirectly or beneficially an
employee, five percent (5%) 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 Community
Federal Bank) within Lee County, Mississippi. The directors of Community Federal
and Community Federal Bank further agree not to initiate any action to induce
any employee of M&F Bank (as successor to Community Federal 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 four (4) years after the
Effective Date.
5.10 Affiliates. Community Federal and First M&F shall cooperate and use
----------
their best efforts to identify those persons who may be deemed to be
"affiliates" of Community Federal within the meaning of Rule 145(c) and Rule 144
under the Securities Act. Community Federal 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 B 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.
<PAGE>
ARTICLE 6
COMMUNITY FEDERAL'S REPRESENTATIONS AND WARRANTIES
--------------------------------------------------
For purposes of this Agreement, except where the context requires
otherwise, any reference to Community Federal in this Article 6 shall be deemed
to include Community Federal and Community Federal Bank and any reference to
"material," material adverse effect or a similar standard shall refer to the
financial condition, operations or other aspects of Community Federal and
Community Federal Bank taken as a whole. Community Federal represents and
warrants to First M&F and M&F Bank as follows:
6.1 Organization and Authority. Community Federal is a corporation duly
--------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware and Community Federal Bank is a federally chartered savings bank duly
organized, validly existing and in good standing under the laws of the United
States. Each of Community Federal and Community Federal 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 Community Federal and Community Federal Bank and the consummation
of the transactions contemplated hereby have been duly authorized by the Boards
of Directors of Community Federal and Community Federal Bank, subject to
regulatory and stockholder approval. No other corporate proceedings on the part
of Community Federal or Community Federal Bank are necessary to authorize
consummation of this Agreement, except for the approval of the transaction by
Community Federal's stockholders, and the performance by Community Federal and
Community Federal Bank of the terms hereof. This Agreement is a valid and
binding obligation of Community Federal and Community Federal Bank enforceable
against Community Federal and Community Federal 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 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
Community Federal, nor the consummation of the transactions contemplated hereby,
nor compliance by Community Federal 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 Community Federal
or Community Federal Bank under any terms, conditions or provisions of (i)
Community Federal's or Community Federal Bank's Charter or Bylaws or (ii) except
as set forth on Schedule 6.2, any material note, bond, mortgage, indenture, deed
of trust, license, lease, agreement or other instrument or obligation to which
Community Federal or Community Federal Bank is a party or by which Community
Federal or Community Federal Bank may be bound, or to which Community Federal or
Community Federal 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 Community Federal or Community
Federal Bank or any of its properties or assets.
6.3 Capital Structure of Community Federal. As of the date hereof, the
--------------------------------------
authorized capital of Community Federal consists solely of 10,000,000 shares of
Community Federal Common Stock and 2,000,000 shares of preferred stock with no
par value. As of the date hereof, 4,266,150 shares of such authorized common
stock were issued and outstanding. The outstanding shares of capital stock of
Community Federal are validly issued and outstanding, fully paid and
nonassessable. Except as set forth on Schedule 6.3, there are no outstanding
options, conversion rights, warrants, calls, rights, commitments or agreements
to issue any form of stock or other security of Community Federal. There are no
outstanding obligations or commitments to purchase, redeem or otherwise acquire
any outstanding shares of Community Federal Common Stock.
<PAGE>
6.4 Ownership of Other Organizations. Community Federal 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 Community Federal Bank. The presently authorized capital of Community
Federal Bank consists of 15,000,000 shares of common stock of the par value of
$.01 each and 5,000,000 shares of preferred stock with no par value. As of the
date hereof, 100 shares of common stock were issued and outstanding. The
outstanding shares of common stock of Community Federal Bank are validly issued
and outstanding, fully paid and, nonassessable and, all of such shares are owned
by Community Federal, free and clear of all liens, claims and encumbrances.
6.5 Community Federal Financial and Other Reports. Community Federal has
---------------------------------------------
made available to First M&F true and correct copies of the consolidated balance
sheets as of September 30, 1998, 1997 and 1996 of Community Federal and its
consolidated subsidiaries ("the Community Federal Consolidated Group") 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
"Community Federal Audited Financial Statements") and the consolidated balance
sheets of March 31, 1999 and 1998 (unaudited), and consolidated statements of
income for the three- month periods ended March 31, 1999 and 1998 (unaudited).
Community Federal's Financial Statements (i) have been prepared in accordance
with generally accepted accounting principles ("GAAP"), consistently applied,
and (ii) present fairly the consolidated results of operations of the Community
Federal Consolidated Group for the periods covered thereby and the consolidated
financial condition of the Community Federal Consolidated Group as of the dates
thereof.
6.6 No Material Adverse Change. Since March 31, 1999, there has been no
--------------------------
event or condition of any character (whether actual, or to the knowledge of
Community Federal or Community Federal Bank, threatened or contemplated) that
has had or can reasonably be anticipated to have, a material adverse effect on
the financial condition (including the unrealized gain on securities available
for sale), results of operations, business or prospects of Community Federal and
Community Federal Bank taken as a whole, excluding changes in laws or
regulations that affect financial institutions generally and excluding costs
associated with the Merger.
6.7 Tax Liability. The amounts set up as liabilities for taxes in the
-------------
Community Federal 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 Community Federal or Community Federal 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 March 31, 1999, 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 Community Federal or Community Federal
Bank, except as reserved against in the Community Federal Financial Statements.
All taxes, interest, additions and penalties due with respect to completed and
settled examinations or concluded litigation have been paid, and Community
Federal's reserves for bad debts at September 30, 1998, 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 Community Federal or Community Federal
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
Community Federal and Community Federal Bank taken as a whole, and, to the
best of its knowledge, no such litigation, proceeding or controversy has been
threatened or is contemplated.
<PAGE>
6.10 Brokers' or Finders' Fees. Except as set forth on Schedule 6.10
-------------------------
hereto, no agent, broker, investment banker, investment or financial advisor or
other person acting on behalf of Community Federal or Community Federal 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 Community Federal Financial Statements, and except in the
case of Community Federal Bank for unfunded loan commitments made in the
ordinary course of business consistent with past practices, as of March 31,
1999, neither Community Federal nor Community Federal 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
Community Federal and Community Federal Bank taken as a whole and there does not
exist a set of circumstances that, to the knowledge of Community Federal, 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 March 31, 1999, Community Federal and Community Federal
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
Community Federal 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 Community Federal Financial
Statements or which secure deposits of public funds as required by law;
(ii) liens for taxes accrued but not yet payable; (iii) liens arising as a
matter of law in the ordinary course of business with respect to
obligations incurred after March 31, 1999, 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. Community Federal and
Community Federal Bank own, or have valid leasehold interests in, all
material properties and assets, tangible or intangible, used in the conduct
of its businesses. Any real property and other material assets held under
lease by Community Federal or Community Federal 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
Community Federal or Community Federal Bank is a party and except for
financing leases in which Community Federal or Community Federal 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 Merger will not
constitute a default or a cause for termination or modification of such
lease.
c. Neither Community Federal nor Community Federal 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 Community Federal and Community Federal Bank
provide adequate coverage against loss and are insured in such amounts with
such deductibles and against such risks and losses as are in the opinion of
management adequate for the businesses engaged in by Community Federal and
Community Federal Bank.
<PAGE>
6.13 Liabilities. To the best knowledge and belief of its management,
-----------
all liabilities of Community Federal and Community Federal 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 Community Federal nor Community Federal 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 Community Federal or Community Federal Bank; and Community
Federal and Community Federal Bank have no knowledge of any claim of ownership
to any account other than as shown on the written ownership records of Community
Federal and Community Federal Bank for each account, and Community Federal and
Community Federal 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 Community Federal in the Community Federal Financial
Statements, as of March 31, 1999, 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 Community Federal, except as disclosed in
writing to First M&F on or prior to the date hereof.
6.15 Allowance for Loan Losses. The allowance for loan losses shown on
-------------------------
the consolidated balance sheets of Community Federal as of March 31, 1999 is
adequate in all material respects under the requirements of GAAP to provide for
reasonably anticipated losses on outstanding loans, net of recoveries.
6.16 Investments. Except as set forth on Schedule 6.16 and 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 Community Federal
Financial Statements under the heading "Investment Securities," and none of the
investments made by Community Federal or Community Federal Bank since March 31,
1999, and none of the assets reflected in the Community Federal 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 Community Federal or Community Federal Bank freely to dispose of such
investment at any time except as disclosed on Schedule 6.16. With respect to all
repurchase agreements to which Community Federal or Community Federal Bank is a
party, Community Federal or Community Federal 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 Community Federal with respect to
Community Federal 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 Community Federal 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 Community
Federal's Common Stock, as may be amended at the time of Community Federal
Stockholders' Meeting, 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 Community Federal shall provide for filing with the SEC and any
regulatory agency in connection with the Merger will, to the extent applicable,
comply with GAAP.
<PAGE>
6.18 Commitments and Contracts. Neither Community Federal nor Community
-------------------------
Federal Bank is a party or subject to any of the following (whether written or
oral, express or implied):
a. Except as listed on Schedule 6.18a 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 Community
Federal or Community Federal Bank);
b. Except as listed on Schedule 6.18b attached hereto, 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
c. Any contract not made in the ordinary course of business
containing covenants which limit the ability of Community Federal or
Community Federal 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, Community Federal or Community Federal Bank may
carry on its respective businesses (other than as may be required by law or
applicable regulatory authorities).
6.19 Employee Plans. To the best of Community Federal's knowledge and
--------------
belief, it, Community Federal 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 Community
Federal or Community Federal Bank:
(1) are 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 adverse effect on
such business; and
(2) have 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 Community
Federal nor Community Federal 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 outstanding shares of Community Federal Common Stock is the only
vote of the stockholders of Community Federal necessary to approve the Merger
and related transactions contemplated hereby.
<PAGE>
6.22 Continuity of Business Enterprise. Community Federal 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).
6.23 Environmental Matters. Except as set forth on Schedule 6.23, neither
---------------------
Community Federal nor Community Federal 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
Community Federal or Community Federal Bank or used by Community Federal or
Community Federal Bank in their respective businesses ("Community Federal
Properties") used, generated, treated, stored, or disposed of any hazardous
waste, toxic substance, or similar materials on, under, or about Community
Federal 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 Community Federal nor Community Federal 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
Community Federal Properties.
6.24 Accuracy of Information. To the best of Community Federal's and its
-----------------------
officers' and directors' knowledge, all information furnished by Community
Federal or Community Federal Bank to First M&F and M&F Bank relating to the
assets, liabilities, and this Agreement is accurate, and Community Federal has
not failed to disclose any information which is material to this Agreement.
6.25 Compliance with Applicable Law. Community Federal and Community
------------------------------
Federal Bank hold, and have at all times held, all licenses, franchises, permits
and authorizations necessary for the lawful conduct of their respective
businesses under and pursuant to all, and have complied with and are not in
default in any respect under any, applicable law, statute, order, rule,
regulation, policy and/or guideline of any governmental entity relating to
Community Federal or Community Federal Bank, and neither Community Federal or
Community Federal Bank knows of or has received notice of any violations of any
of the above.
ARTICLE 7
FIRST M&F'S REPRESENTATIONS, WARRANTIES,
----------------------------------------
COVENANTS AND AGREEMENTS
------------------------
For purposes of this Agreement, except 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. First M&F represents and warrants to Community Federal and covenants as
follows:
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, lease and operate its properties and assets and to carry on
its business as it is now being conducted.
7.2 Shares Fully Paid and Nonassessable. The outstanding shares of
-----------------------------------
capital stock of First M&F are validly issued and outstanding, fully paid and
nonassessable. The shares of First M&F Common Stock to be issued in connection
with the Merger 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, 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.
<PAGE>
7.3 Authorization. The execution, delivery and performance of this
-------------
Agreement by First M&F and M&F Bank and the consummation of the transactions
contemplated hereby have been duly authorized by the Boards of Directors of
First M&F and M&F Bank, subject to regulatory and stockholder 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, except for the approval of the transaction by the
shareholders of First M&F. 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.
Neither the execution, delivery or performance of this Agreement by First
M&F, nor the consummation of the transactions contemplated hereby, nor
compliance by First M&F 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 M&F or M&F Bank under
any terms, conditions or provisions of (i) First M&F's or M&F Bank's Charter or
Bylaws or (ii) except as set forth on Schedule 7.3, any material note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which First M&F or M&F Bank is a party or by which
First M&F or M&F Bank may be bound, or to which First M&F or M&F 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 M&F or M&F Bank or any of its properties or
assets.
7.4 No Material Adverse Change. Since March 31, 1999, 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
financial institutions generally.
7.5 First M&F Financial and Other Reports. First M&F has made available
-------------------------------------
to Community Federal true and correct copies of the consolidated balance sheets
as of December 31, 1998, 1997 and 1996 of First M&F and its consolidated
subsidiaries ("the First M&F Consolidated Group") 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 M&F Audited
Financial Statements") and the consolidated balance sheets of March 31, 1999
and 1998 (unaudited), and consolidated statements of income for the three-month
periods ended March 31, 1999 and 1998 (unaudited). First M&F's Audited
Financial Statements (i) have been prepared in accordance with generally
accepted accounting principles ("GAAP"), consistently applied, and (ii) present
fairly the consolidated results of operations of the First M&F Consolidated
Group for the periods covered thereby and the consolidated financial condition
of the First M&F Consolidated Group as of the dates thereof.
7.6 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 Community Federal
Common Stock pursuant to the Merger. 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.
<PAGE>
b. First M&F will indemnify and hold harmless each member of
Community Federal's Consolidated Group and each of their respective
directors, officers, agents and other persons, if any, who control
Community Federal 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 judgments (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 Community Federal.
7.7 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 Merger and provide copies thereof to
Community Federal and its counsel.
7.8 Tax Liability. The amounts set up as liabilities for taxes in the
-------------
First M&F Audited 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.
7.9 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 M&F or M&F 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 March 31, 1999, 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 M&F or M&F Bank, except as reserved
against in the First M&F Audited Financial Statements. All taxes, interest,
additions and penalties due with respect to completed and settled examinations
or concluded litigation have been paid, and First M&F's reserves for bad debts
at September 30, 1998, as filed with the Internal Revenue Service were not
greater than the maximum amounts permitted under the provisions of Section 585
of the Code.
7.10 Litigation and Proceedings. Except as set forth on Schedule 7.10
--------------------------
hereto, no litigation, proceeding or controversy before any court or
governmental agency is pending against First M&F or M&F 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 M&F and M&F Bank
taken as a whole, and, to the best of its knowledge, no such litigation,
proceeding or controversy has been threatened or is contemplated.
<PAGE>
7.11 Contingent Liabilities. Except as disclosed on Schedule 7.11 hereto
----------------------
or as reflected in the First M&F Audited Financial Statements, and except in the
case of M&F Bank for unfunded loan commitments made in the ordinary course of
business consistent with past practices, as of March 31, 1999, neither First M&F
nor M&F 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 M&F and M&F Bank taken as a whole and there
does not exist a set of circumstances that, to the knowledge of First M&F, could
reasonably be expected to result in any such material obligation or liability.
7.12 Liabilities. To the best knowledge and belief of its management, all
-----------
liabilities of First M&F and M&F 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 M&F
nor M&F 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 M&F or M&F Bank; and
First M&F and M&F Bank have no knowledge of any claim of ownership to any
account other than as shown on the written ownership records of First M&F and
M&F Bank for each account, and First M&F and M&F Bank have no knowledge of any
alleged improper or wrongful withdrawal or payment of any such account.
7.13 Loans. To the best knowledge and belief of its management, each loan
-----
reflected as an asset of First M&F in the First M&F Audited Financial
Statements, as of March 31, 1999, 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 in writing to
Community Federal on or prior to the date hereof.
7.14 Allowance for Loan Losses. The allowance for loan losses shown on the
-------------------------
consolidated balance sheets of First M&F as of March 31, 1999 is adequate in all
material respects under the requirements of GAAP to provide for reasonably
anticipated losses on outstanding loans, net of recoveries.
7.15 Investments. Except as set forth on Schedule 7.15 and 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 M&F Audited
Financial Statements under the heading "Investment Securities," and none of the
investments made by First M&F or M&F Bank since March 31, 1999, and none of the
assets reflected in the First M&F Audited 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 M&F or M&F Bank freely
to dispose of such investment at any time except as disclosed on Schedule 7.15.
With respect to all repurchase agreements to which First M&F or M&F Bank is a
party, First M&F or M&F 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.
7.16 Information for Registration and Proxy Statements. None of the
-------------------------------------------------
information supplied or to be supplied by First M&F with respect to First M&F
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 M&F
to stockholders in connection with the meeting of stockholders 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 M&F's
Common Stock, as may be amended at the time of First M&F Stockholders' Meeting,
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 M&F shall
provide for filing with the SEC and any regulatory agency in connection with the
Merger will, to the extent applicable, comply with GAAP.
<PAGE>
7.17 Environmental Matters. Except as set forth on Schedule 7.17, neither
---------------------
First M&F nor M&F 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 M&F or M&F
Bank or used by First M&F or M&F Bank in their respective businesses ("First M&F
Properties") used, generated, treated, stored, or disposed of any hazardous
waste, toxic substance, or similar materials on, under, or about First M&F
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 M&F nor M&F 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 M&F
Properties.
7.18 Accuracy of Information. To the best of First M&F's and its officers'
-----------------------
and directors' knowledge, all information furnished by First M&F or M&F Bank to
Community Federal and Community Federal Bank relating to the assets,
liabilities, and this Agreement is accurate, and First M&F has not failed to
disclose any information which is material to this Agreement.
7.19 Compliance with Applicable Law. First M&F and M&F Bank hold, and
------------------------------
have at all times held, all licenses, franchises, permits and authorizations
necessary for the lawful conduct of their respective businesses under and
pursuant to all, and have complied with and are not in default in any respect
under any, applicable law, statute, order, rule, regulation, policy and/or
guideline of any governmental entity relating to First M&F or M&F Bank, and
neither First M&F or M&F Bank knows of or has received notice of any
violations of any of the above.
7.20 Title to Assets; Adequate Insurance Coverage.
--------------------------------------------
Except as described on Schedule 7.20:
a. As of March 31, 1999, First M&F and M&F 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 material properties and assets reflected in the First M&F Audited
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 M&F Audited Financial Statements or
which secure deposits of public funds as required by law; (ii) liens for
taxes accrued but not yet payable; (iii) liens arising as a matter of law
in the ordinary course of business with respect to obligations incurred
after March 31, 1999, 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 M&F and M&F Bank own,
or have valid leasehold interests in, all material properties and assets,
tangible or intangible, used in the conduct of its businesses. Any real
property and other material assets held under lease by First M&F or M&F
Bank are held under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made by
First M&F or M&F Bank in such lease of such property.
<PAGE>
b. Except as disclosed on Schedule 7.20 with respect to each lease
of any material real property or a material amount of personal property to
which First M&F or M&F Bank is a party and except for financing leases in
which First M&F or M&F 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 Merger will not constitute a default or a cause for
termination or modification of such lease.
c. Neither First M&F nor M&F 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 M&F or M&F Bank provide adequate coverage
against loss and are insured in such amounts with such deductibles and
against such risks and losses as are in the opinion of management adequate
for the businesses engaged in by First M&F and M&F Bank.
ARTICLE 8
CONDITIONS TO CLOSING
---------------------
The obligations of the Parties 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 Merger. The
-----------------------------------------------------------
respective obligation of each Party to effect the Merger shall be subject to the
following conditions:
a. Stockholder Approval. The Merger shall have been approved by
--------------------
the requisite vote of the holders of the outstanding shares of Community
Federal Common Stock and by the requisite vote of the holders of the
outstanding shares of First M&F Common Stock.
b. Regulatory Approvals. The transactions contemplated by this
--------------------
Agreement shall have been approved by all governing regulatory authorities,
without any condition or requirement which, in the reasonable good faith
judgment of the Boards of Directors of First M&F or Community Federal would
so materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement so as to render inadvisable the
consummation of the Merger, 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, Community Federal or Community Federal
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 Agreement
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 this Agreement would constitute a violation of
any law or that it intends to commence proceedings to restrain consummation
of the Merger.
<PAGE>
e. NASDAQ National Market System Listing. The shares of First M&F
-------------------------------------
Common Stock issuable pursuant to the Merger shall have been approved for
listing on the NASDAQ National Market System.
8.2 Conditions to Obligations of Community Federal to Effect the Merger.
-------------------------------------------------------------------
The obligations of Community Federal to effect the Merger 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
Community Federal, and First M&F shall deliver at Closing an appropriate
certificate to that effect.
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 an appropriate certificate to that
effect.
c. Tax Opinion. Community Federal 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 Agreement, including that such transactions as to
stockholders of Community Federal will constitute a tax-free reorganization
under Section 368 of the Code.
8.3 Conditions to Obligations of First M&F to Effect the Merger. The
-----------------------------------------------------------
obligations of First M&F to effect the Merger shall be subject to the following
additional conditions:
a. Representations and Warranties. The representations and
------------------------------
warranties of Community Federal and Community Federal 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, and Community Federal shall deliver
at Closing an appropriate certificate to that effect.
b. Performance of Obligations. Community Federal and Community
--------------------------
Federal 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 Community Federal shall deliver at Closing an
appropriate certificate to that effect.
c. Affiliate Agreement. An Affiliate Agreement substantially in the
-------------------
form specified on Exhibit B hereto (as contemplated by Section 5.10 hereof)
shall have been executed by each person who serves as an executive officer
or director of Community Federal.
d. Non-Competition Agreements. Mr. Ingram and Mr. Whitfield shall
--------------------------
have executed and delivered the Non-Competition Agreements in the form of
Exhibit C hereto.
<PAGE>
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 Community Federal 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 herein, 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 Community Federal's or Community Federal Bank's
officers, directors, or employees or to pay any stipulated compensation to any
employees, except as set forth in this Agreement. 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. First M&F will assume the
obligations of Community Federal and Community Federal Bank under the Severance
Pay Plan for Employees and the Key Employee Retention Plan, and the obligations
of Community Federal and Community Federal Bank arising on or prior to the
Effective Date under the Recognition and Retention Plan, the Team Incentive
Plan, and the Directors' Retirement Plan.
All employees of Community Federal and Community Federal Bank immediately
prior to the Effective Date who are employed by First M&F or M&F Bank (the
"Employers") immediately following the Effective Date ("Transferred Employees")
will be covered by the Employers' employee benefit plans on substantially the
same basis as any employee of the Employers in a comparable position.
Notwithstanding the foregoing, First M&F and M&F Bank may determine to continue
any of such benefit plans of Community Federal and Community Federal Bank for
Transferred Employees in lieu of offering participation in the Employers'
benefit plans providing similar benefits (e.g., medical hospitalization
benefits), to terminate any of such benefit plans, or to merge any such benefit
plans with the Employers' benefit plans, provided the result is the provision of
benefits to Transferred Employees that are substantially similar to the benefits
provided to the Employers' employees generally. Service to Community Federal
and Community Federal Bank by a Transferred Employee prior to the Effective Date
shall be recognized as service to the Employers for purposes of eligibility to
participate under the Employers' sick leave policies, paid vacation policies,
and medical, long-term disability and life insurance plans. For purposes of
participation, vesting and benefit accruals (but not accrual of benefits under
First M&F's tax-qualified defined benefit plans) under such employee benefit
plans, (i) service under any qualified defined benefit or contribution plans of
Community Federal or Community Federal Bank shall be treated as service under
First M&F's qualified defined benefit or contribution plans and (ii) service
under any other employee benefit plans of Community Federal or Community Federal
Bank shall be treated as service under any similar employee benefit plans
maintained by First M&F. First M&F and M&F Bank agree that any pre-existing
condition, limitation or exclusion in its medical, long-term disability and life
insurance plans shall not apply to Transferred Employees or their covered
dependents who are covered under a medical or hospitalization indemnity plan
maintained by Community Federal or Community Federal Bank on the Effective Date
and who then change coverage to the Employers' medical or hospitalization
indemnity health plan at the time such Transferred Employees are first given the
option to enroll.
<PAGE>
10.2 ESOP. (1) Notwithstanding any provision to the contrary contained
----
herein, each participant in the Community Federal Bancorp, Inc. Employee Stock
Ownership Plan ("ESOP") not fully vested will, in accordance with the terms of
the ESOP, become fully vested in his or her ESOP account as of the Effective
Date. As soon as practicable after the execution of this Agreement, Community
Federal and First M&F will cooperate to cause the ESOP to be amended and other
action taken, in a manner reasonably acceptable to Community Federal and First
M&F, to provide that the ESOP will terminate upon the Effective Date. Between
the date of this Agreement and the Effective Date, the existing ESOP
indebtedness shall be paid in the ordinary course of business pursuant to the
existing loan amortization schedule and Community Federal or Community Federal
Bank shall make such contributions to the ESOP as necessary to fund such
payments. Any indebtedness of the ESOP remaining as of the Effective Date shall
be repaid from the Trust associated with the ESOP through application of the
First M&F Common Stock and cash as provided herein received by the ESOP;
provided, however, that (A) any related sale or distribution of shares by the
ESOP shall be effected in accordance with the requirements of federal and any
applicable state securities laws and regulations, including any rules of the
NASD, and (B) all stock distributions from the ESOP after the Effective Date
shall be in shares of First M&F Common Stock.
Upon the repayment of the ESOP loan, the remaining funds in the ESOP
suspense account will be allocated as earnings and not as "annual additions" to
ESOP participants (as determined under the terms of the ESOP) to the extent
permitted by the Code and ERISA. Community Federal and First M&F agree that,
subject to the conditions described herein, as soon as practicable after the
Effective Date and repayment of the ESOP loan, participants in the ESOP shall be
entitled at their election to have the amounts in their ESOP accounts either
distributed to them in a lump sum or rolled over to another tax-qualified plan
(including plans of First M&F to the extent permitted by First M&F) or
individual retirement account.
(2) The actions relating to termination of the ESOP will be adopted
conditioned upon the consummation of the Merger and upon receiving a favorable
determination letter from the IRS with regard to the continued qualification of
the ESOP after any required amendments (including the amendment which terminates
the ESOP). Community Federal and First M&F will cooperate in submitting
appropriate requests for any such determination letter to the IRS and will use
their best efforts to seek the issuance of such letter as soon as practicable
following the date of this Agreement. Community Federal and First M&F will adopt
such additional amendments to the ESOP as may be reasonably required by the IRS
as a condition to granting such determination letter, provided that such
amendments do not (A) substantially change the terms outlined herein, (B) have
a material adverse effect on Community Federal, or (C) result in an additional
material liability to First M&F.
(3) As of and following the Effective Date, First M&F shall cause the ESOP
to be maintained for the exclusive benefit of employees and other persons who
were participants or beneficiaries therein prior to the Effective Date and
proceed with termination of the ESOP through distribution of its assets in
accordance with its terms subject to the amendments described herein and as
otherwise may be required to comply with applicable law or to obtain a favorable
determination from the IRS as to the continuing qualified status of the ESOP,
provided, however, that no such termination distributions or the ESOP shall
occur after the Effective Date until a favorable termination letter has been
received from the IRS.
<PAGE>
10.3 Recognition Plan. Each participant in the Community Federal Management
----------------
Recognition and Retention Plan ("RRP") not fully vested will, in accordance with
the terms of the RRP, become fully vested in plan share awards thereunder as of
the Effective Date. As soon as practicable after the execution of this
Agreement, Community Federal and First M&F will cooperate to cause the RRP to be
amended and other action taken, in a manner reasonably acceptable to Community
Federal and First M&F, to provide that the RRP will terminate upon the Effective
Date; provided, however, that (i) any distribution of shares under the RRP shall
be effected in accordance with the requirements, if any, of federal and state
securities laws and regulations, and (ii) all distributions from the RRP after
the Effective Date shall be in shares of First M&F Common Stock and cash as
provided herein. No action shall be taken that would adversely affect the rights
of plan participants who hold outstanding grants or awards of shares of
Community Federal Common Stock, whether before or after the Effective Date. No
further grants or awards shall be made under the RRP following the date of this
Agreement.
10.4 Pension Plan. Community Federal and Community Federal Bank currently
------------
maintain a Pension Plan (the "Pension Plan") which will remain operative and in
effect through the Effective Date of the Merger. The Pension Plan will either
be terminated as of the Effective Date of the Merger and distributed to vested
employees of Community Federal and Community Federal Bank in accordance with the
terms of the Pension Plan, or responsibility for the Pension Plan will be
assumed by First M&F or M&F Bank. If the Pension Plan is terminated, the trustee
for the Pension Plan 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 Pension Plan's assets, if
permitted by law. No termination, merger or amendment of the Pension Plan shall
reduce or change any benefits that were vested at or immediately prior to the
Effective Date.
10.5 Stock Options. Community Federal maintains a stock option plan
-------------
pursuant to which options to acquire 462,875 shares have been issued (the
"Options"). Community Federal agrees not to issue any additional options to
acquire shares of Community Federal Common Stock. On the Effective Date, each
Option which is then outstanding, whether or not exercisable, shall cease to
represent a right to acquire shares of Community Federal Common Stock and shall
be converted automatically into an option to purchase shares of First M&F Common
Stock, and First M&F shall assume each Community Federal Option, in accordance
with the terms of the Community Federal stock option plan and stock option
agreement by which it is evidenced, except that from and after the Effective
Date, (i) First M&F and its Board of Directors or a duly authorized committee
thereof shall be substituted for the Community Federal and Community Federal's
Board of Directors or duly authorized committee thereof administering the
Community Federal stock option plan, (ii) each Community Federal Option assumed
by First M&F may be exercised solely for shares of First M&F Common Stock, (iii)
the number of shares of First M&F Common Stock subject to such Community Federal
Options shall be equal to the number of shares of Community Federal Common Stock
subject to such Community Federal Options immediately prior to the Effective
Date multiplied by .5710, provided that any fractional shares of First M&F
Common Stock resulting from such multiplication shall be rounded down to the
nearest share, and (iv) the per share exercise price under each such Community
Federal Option shall be adjusted by dividing the per share exercise price under
each such Community Federal Option by .5710, provided that such exercise price
shall be rounded up to the nearest cent. Notwithstanding the preceding sentence,
(i) each Community Federal Option which is an "incentive stock option" shall be
adjusted as required by Section 424 of the Code, and the regulations promulgated
thereunder, so as not to constitute a modification, extension or renewal of the
option within the meaning of Section 424(h) of the Code and (ii) the Community
Federal Options held by H. Lewis Whitfield on the Effective Date shall vest
pursuant to the terms set forth in Schedule 10.6(5).
<PAGE>
First M&F and Community Federal agree to take all necessary steps to effect
the foregoing provisions of this Section. As soon as practicable after the
Effective Date, First M&F shall deliver to each participant in the Community
Federal stock option plan an appropriate notice setting forth such participant's
rights pursuant thereto and the grants subject to the Community Federal stock
option plan shall continue in effect on the same terms and conditions, including
without limitation the duration thereof, subject to the adjustments set forth
above. Within thirty (30) days after the Effective Date, First M&F shall file a
registration statement on Form S-3 or Form S-8, as the case may be (or any
successor or other appropriate forms), with respect to the shares of First M&F
Common Stock subject to such Options and shall use its reasonable best efforts
to maintain the current status of the prospectus or prospectuses contained
therein for so long as such Options remain outstanding.
10.6 Board and Management Matters.
----------------------------
a. First M&F agrees to take all actions necessary to appoint or
elect to the Board of Directors of First M&F, effective as of the Effective
Date, Jim Ingram and two other persons serving as director of Community
Federal immediately prior to the Effective Date who are reasonably
acceptable to First M&F. Each person who is appointed or elected to the
Board of Directors of First M&F pursuant to the preceding sentence shall
serve until the first annual meeting of shareholders of First M&F following
the Effective Date and until his successor is elected and qualified.
Subject to compliance with the director qualification requirements set
forth in First M&F's Bylaws and the fiduciary duties of the Board of
Directors of First M&F, First M&F shall include each such person on the
list of nominees for director presented by the Board of Directors of First
M&F and for which said Board shall solicit proxies at the first annual
meeting of shareholders of First M&F following the Effective Date, which
persons shall be allocated equally among the three classes of directors of
First M&F and nominated for election for three, two or one-year terms, as
applicable.
b. The remaining non-employee directors who are not elected as
directors of First M&F shall be requested by First M&F to serve as members
of an Advisory Board following the Effective Date, and each of such persons
shall be paid an Advisory Board fee equal to fees paid to other advisory
board members of First M&F.
c. At the Effective Date, in complete satisfaction of the
obligations to make the cash payments provided for by Section 5(c)(1) of
their respective employment agreements, Lewis Whitfield shall receive a
lump sum cash payment of $355,000 and Jim Ingram shall receive a lump sum
cash payment of $320,000. In addition, at the Effective Date, First M&F
shall enter into a consulting agreement with Mr. Ingram in the form of
Exhibit D hereto, and M&F Bank shall retain Mr. Whitfield as President of
its Tupelo Division after the Effective Date on the terms set forth on
Schedule 10.6.
10.7 Team Incentive Plan. Bonuses payable under the Team Incentive Plan
-------------------
for the plan year ending September 30, 1999 shall be paid in December 1999. If
the Effective Date is after October 31, 1999, then additional bonuses shall be
paid on the Effective Date on a pro rata basis to the participants in the Team
Incentive Plan based upon Community Federal Bank's income, before income taxes,
from October 1, 1999 through and including the last day of the calendar month
immediately preceding the Effective Date. The aggregate pro rata bonuses shall
not exceed the amount accrued by Community Federal Bank as a liability in the
ordinary course of business consistent with past practice. Following the
payment of the above bonuses, the Team Incentive Plan shall be terminated.
10.8 Directors' Retirement Plan. On the Effective Date, Robert R. Black,
--------------------------
Sr., Robert W. Reed, III and Michael R. Thomas shall be deemed to be
Participants in Community Federal Bank's Directors' Retirement Plan entitled to
receive, over a 10-year period in accordance with Sections 2.03 and 2.04 of the
Directors' Retirement Plan, the amounts accrued by Community Federal Bank as a
liability for such directors, as set forth on Schedule 10.8. All other current
directors of Community Federal Bank are currently Participants in the Directors'
Retirement Plan and shall receive their benefits over a 10-year period pursuant
to Article 2 of the Directors' Retirement Plan. On the Effective Date, the
Directors' Retirement Plan shall be terminated, provided that such termination
shall not affect the rights or benefits to which a director is entitled under
the Directors' Retirement Plan or as set forth above.
<PAGE>
10.9 Notices. Community Federal and Community Federal Bank shall be
-------
responsible for notifying their employees of the terms of this Agreement as it
affects them and for complying with any applicable laws regarding such notices.
10.10 Directors' and Officers' Liability Insurance Coverage. First M&F
-----------------------------------------------------
shall maintain the existing directors' and officers' liability insurance policy
of Community Federal and Community Federal Bank, respectively, covering persons
who are currently covered by such insurance for a period of four (4) years after
the Effective Date on terms generally no less favorable than those in effect on
the date of this Agreement; provided, however, that First M&F may substitute
therefor policies providing at least comparable coverage containing terms and
conditions no less favorable than those in effect on the date of this Agreement.
10.11 Indemnification. From and after the Effective Date through the third
---------------
anniversary of the Effective Date, First M&F shall indemnify and hold harmless
each present and former director, officer and employee of Community Federal and
Community Federal Bank determined as of the Effective Date (the "Indemnified
Parties") against any costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities (collectively, "Costs")
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of matters existing or occurring at or prior to the Effective Date, whether
asserted or claimed prior to, at or after the Effective Date, to the fullest
extent to which such Indemnified Parties were entitled under Delaware law and
Community Federal's Certificate of Incorporation and Bylaws as in effect on the
date hereof.
Any Indemnified Party wishing to claim indemnification under this Section
10.11, upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify First M&F, but the failure to so notify
shall not relieve First M&F of any liability it may have to such Indemnified
Party if such failure does not materially prejudice First M&F. In the event of
any such claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Date), (i) First M&F shall have the right to
assume the defense thereof and First M&F shall not be liable to such Indemnified
Parties for any legal expenses of other counsel or any other expenses
subsequently incurred by such Indemnified Parties in connection with the defense
thereof, except that if First M&F elects not to assume such defense or counsel
for the Indemnified Parties advises that there are issues which raise conflicts
of interest between First M&F and the Indemnified Parties, the Indemnified
Parties may retain counsel which is reasonably satisfactory to First M&F, and
First M&F shall pay, promptly as statements therefor are received, the
reasonable fees and expenses of such counsel for the Indemnified Parties (which
may not exceed one firm in any jurisdiction unless the use of one counsel for
such Indemnified Parties would present such counsel with a conflict of
interest), (ii) the Indemnified Parties will cooperate in the defense of any
such matter, and (iii) First M&F shall not be liable for any settlement effected
without its prior written consent.
In the event that First M&F or any of its respective successors or assigns
(i) consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then, and in each such case, the successors and assigns of such entity
shall assume the obligations set forth in this Section 10.11, which obligations
are expressly intended to be for the irrevocable benefit of, and shall be
enforceable by, each of the Indemnified Parties and his or her heirs or
representatives.
<PAGE>
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
Community Federal in this Article 11 shall be deemed to include Community
Federal and Community Federal Bank.
11.1 Parties' Joint Remedies. In the event regulatory authorities impose
-----------------------
requirements that do not meet the standards for termination as set forth in
Section 8.1b, 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 Community Federal's Remedies. In the event First M&F breaches this
----------------------------
Agreement, then Community Federal shall give First M&F notice of the breach, and
First M&F shall have fifteen (15) business days to cure the breach. If the
breach by First M&F results in a termination of the Agreement, First M&F shall
be liable for out-of-pocket costs incurred by Community Federal in connection
with this Agreement and the transactions contemplated thereby, but First M&F
shall not be liable for any other damages.
11.3 First M&F's Remedies. In the event Community Federal breaches this
--------------------
Agreement, then First M&F shall give Community Federal notice of the breach, and
Community Federal shall have fifteen (15) business days to cure the breach. If
the breach by Community Federal results in a termination of the Agreement,
Community Federal shall be liable for out-of-pocket costs incurred by First M&F
in connection with this Agreement and the transactions contemplated thereby, but
Community Federal shall not be liable for any other damages.
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 Community Federal and Community Federal 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 Community Federal in writing, if
the Merger shall have not become effective on or before March 31, 2000,
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 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 sixty (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;
<PAGE>
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
Merger and the time period for all appeals or requests for reconsideration
thereof has run;
e. Shareholder Approval. By either Party hereto, if the Merger is
--------------------
not approved by the required vote of shareholders of Community Federal or
by the required vote of the shareholders of First M&F;
f. Dissenters. By First M&F, if holders of twenty percent (20%) or
----------
more of the outstanding Community Federal Common Stock exercise statutory
appraisal rights pursuant to Section 262 of the DGCL; and
g. Market Price. By the Board of Directors of Community Federal, if
------------
it determines by a vote of a majority of the members of its entire Board,
at any time during the ten-day period commencing two (2) days after the
Determination Date (as defined below), if the Average Market Price (as
defined below) shall be less than $26.00; subject, however, to the
following three sentences. If Community Federal refuses to consummate the
Merger pursuant to this Section 12.1g, it shall give prompt written notice
thereof to First M&F; provided, that such notice of election to terminate
may be withdrawn at any time within the aforementioned ten-day period.
During the five-day period commencing with its receipt of such notice,
First M&F shall have the option to elect to increase the stock portion of
the Exchange Ratio to equal the quotient (rounded to the nearest one-ten-
thousandth) obtained by dividing 7.423 by the Average Market Price. If
First M&F makes an election contemplated by the preceding sentence, within
such five-day period, it shall give prompt written notice to Community
Federal of such election and the revised Exchange Ratio, whereupon no
termination shall have occurred pursuant to this Section 12.1g and this
Agreement shall remain in effect in accordance with its terms (except as
the Exchange Ratio shall have been so modified), and any references in this
Agreement to "Exchange Ratio" shall thereafter be deemed to refer to the
Exchange Ratio as adjusted pursuant to this Section 12.1g.
"Determination Date" means the later of the date on which (i) the
approval of the federal regulatory authority having jurisdiction over the
Merger to the Merger shall be received or (ii) the Community Federal and
First M&F stockholders approve the Merger.
The "Average Market Price" of the First M&F Common Stock shall be the
average of the closing per share trading prices of First M&F Common Stock
as reported by the NASDAQ National Market System (adjusted for any stock
split or similar transaction) on the last ten (10) consecutive trading days
ending on the third business day prior to the Determination Date.
ARTICLE 13
MISCELLANEOUS
-------------
13.1 Entire Agreement. This Agreement embodies the entire understanding
----------------
of the Parties in relation to the subject matter herein and supersedes all prior
understandings or agreements, oral or written, between the Parties hereto.
<PAGE>
13.2 Effect of Termination or Consummation; Survival.
-----------------------------------------------
a. Upon termination of this Agreement pursuant to Article 12, the
Merger Agreement shall also terminate, and this Agreement and the Merger
Agreement shall be void and of no effect, and there shall be no liability
by reason of this Agreement or the Merger Agreement, 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 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.
b. None of the representations and warranties in this Agreement or
in any instrument delivered pursuant hereto shall survive the Effective
Date. 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 Date shall survive the Effective Date and may be
enforced by the person or persons in whose favor it runs.
13.3 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.
13.4 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.
13.5 Governing Law. This Agreement and the rights and obligations hereunder
-------------
shall be governed and construed by the laws of the State of Mississippi.
13.6 Successors; No Third Party Beneficiaries. All terms and conditions of
----------------------------------------
this Agreement shall be binding on the successors and assigns of Community
Federal and First M&F. Except as otherwise specifically provided in this
Agreement, nothing expressed or referred to in this Agreement is intended or
shall be construed to give any person other than Community Federal 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 Community Federal and First M&F and for
the benefit of no other person.
13.7 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 authorized representatives of all of the Parties hereto.
This Agreement may not be assigned without the express written consent of both
Parties.
13.8 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.
<PAGE>
Community Federal
-----------------
Community Federal Bancorp, Inc.
333 Court Street
Tupelo, MS 38802
Attn: H. Lewis Whitfield
Fax Number: (601) 842-3187
Copy to: John P. Soukenik, Esq.
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, D.C. 20005
Fax Number: (202) 347-2172
First M&F
---------
First M&F Corporation
221 E. Washington
Kosciusko, MS 39090
Attn: Scott M. Wiggers
Fax Number: (601) 289-7753
Copy to: Craig N. Landrum, Esq.
Watkins Ludlam Winter & Stennis, P.A.
633 N. State Street
Jackson, MS 39202
Fax Number: (601) 949-4804
13.9 Waiver. Community Federal 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 Community Federal 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 Community Federal 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.
13.10 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 Merger and the
issuance of the First M&F Common Stock. Community Federal will be responsible
for the cost of its (and Community Federal Bank's) accountants and legal counsel
and will bear all costs related to conducting its stockholders' meetings and
obtaining stockholders' approval of the Merger.
13.11 Press Releases. Community Federal 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 Community Federal, 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.
<PAGE>
13.12 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.
13.13 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.
<PAGE>
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]
<PAGE>
APPENDIX B
DELAWARE GENERAL CORPORATION LAW
SECTION 262
APPRAISAL RIGHTS
SECTION 262. APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to s 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to s 251 (other than a merger effected pursuant to s 251(g) of
this title), s 252, s 254, s 257, s 258, s 263 or s 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of s 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by the
terms of an agreement of merger or consolidation pursuant to ss 251, 252, 254,
257, 258, 263 and 264 of this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this paragraph;
or
d. Any combination of the shares of stock, depository receipts
and cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
<PAGE>
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under s 253 of this title is not owned by the parent
corporation immediately prior to the merger, appraisal rights shall be available
for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsection (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of
such stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of such
stockholder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such stockholder's shares. A proxy or
vote against the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written demand
as herein provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become effective;
or
(2) If the merger or consolidation was approved pursuant to s 228 or
s 253 of this title, each constituent corporation, either before the effective
date of the merger or consolidation or within ten days thereafter, shall notify
each of the holders of any class or series of stock of such constituent
corporation who are entitled to appraisal rights of the approval of the merger
or consolidation and that appraisal rights are available for any or all shares
of such class or series of stock of such constituent corporation, and shall
include in such notice a copy of this section; provided that, if the notice is
given on or after the effective date of the merger or consolidation, such notice
shall be given by the surviving or resulting corporation to all such holders of
any class or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective date
of the merger or consolidation, shall, also notify such stockholders of the
effective date of the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation the appraisal of
such holder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such notice
did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a second
notice before the effective date of the merger or consolidation notifying each
of the holders of any class or series of stock of such constituent corporation
that are entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send such a
second notice to all such holders on or within 10 days after such effective
date; provided, however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only be sent
to each stockholder who is entitled to appraisal rights and who has demanded
appraisal of such holder's shares in accordance with this subsection. An
affidavit of the secretary or assistant secretary or of the transfer agent of
the corporation that is required to give either notice that such notice has been
given shall, in the absence of fraud, be prima facie evidence of the facts
stated therein. For purposes of determining the stockholders entitled to receive
either notice, each constituent corporation may fix, in advance, a record date
that shall be not more than 10 days prior to the date the notice is given,
provided, that if the notice is given on or after the effective date of the
merger or consolidation, the record date shall be such effective date. If no
record date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the day on
which the notice is given.
<PAGE>
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
<PAGE>
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the
Court of Chancery shall be dismissed as to any stockholder without the approval
of the Court, and such approval may be conditioned upon such terms as the Court
deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
<PAGE>
APPENDIX C
MISSISSIPPI BUSINESS CORPORATION ACT
ARTICLE 13
DISSENTERS' RIGHTS
SUBARTICLE A. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SECTION 79-4-13.01. DEFINITIONS.
In 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.
SECTION 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 plan 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 plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired, if the shareholder is
entitled to vote on the plan;
<PAGE>
(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 plan 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;
(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.
SECTION 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.
<PAGE>
SUBARTICLE B. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SECTION 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.
(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.
SECTION 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.
SECTION 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.
<PAGE>
SECTION 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 79-4-13.22(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
cancelled 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.
SECTION 79-4-13.24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from the
date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Section 79-4-13.26.
(b) The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder until these rights are
cancelled or modified by the taking of the proposed corporate action.
SECTION 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.
SECTION 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.
<PAGE>
SECTION 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.
SECTION 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.
(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
SECTION 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.
<PAGE>
(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.
SECTION 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 benefited.
<PAGE>
APPENDIX D
OPINION OF MORGAN KEEGAN & COMPANY, INC.
July 2, 1999
Board of Directors
First M&F Corporation
221 East Washington Street
Kosciusko, MS 39090
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the shareholders of First M&F Corporation (the "Company") of the
consideration paid in connection with its proposed merger with Community Federal
Bancorp, Inc. ("CFTP") (the "Transaction") pursuant to and in accordance with
the terms of the Agreement and Plan of Merger (the "Agreement") entered into by
and between CFTP and the Company. Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to them in the Agreement.
You have advised us that, pursuant to the Agreement, CFTP will merge with and
into the Company (the "Merger") and that the CFTP's banking subsidiary will
become a wholly owned bank subsidiary of the Company. The consideration paid to
CFTP shareholders will consist of $37,750,000 in cash ($8.85 per share) and
0.2855 share of the Company's common stock for each share of CFTP common stock
(excluding shares held by CFTP shareholders who have perfected their dissenters'
rights of appraisal) issued and outstanding at the Effective Time. In addition,
each option outstanding to purchase a share of CFTP common stock shall be
converted into the option to purchase 0.5710 share with respect to the Company's
Common Stock.
Morgan Keegan & Company, Inc. ("Morgan Keegan"), as part of its investment
banking business, is regularly engaged in the valuation of businesses and
securities in connection with mergers and acquisitions, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for various purposes. We have been retained by the Board of
Directors of the Company to serve as its financial advisor in connection with
this Transaction. Morgan Keegan will receive a fee for rendering this opinion.
We have not advised any party in connection with the Transaction other than the
Company and we make no recommendation to the shareholders of the Company.
In connection with our opinion, we have (1) reviewed the Agreement; (2) held
discussions with various members of management and representatives of the
Company and CFTP concerning each company's historical and current operations,
financial condition and prospects; (3) reviewed historical consolidated
financial and operating data that was publicly available or furnished to us by
the Company and CFTP; (4) reviewed internal financial analyses, financial and
operating forecasts, to the extent publicly available, reports and other
information prepared by officers and representatives of the Company; (5)
reviewed certain publicly available information with respect to certain other
companies that we believe to be comparable to the Company and CFTP and the
trading markets for such other companies' securities; (6) reviewed certain
publicly available information concerning the terms of certain other
transactions that we deemed relevant to our inquiry; (7) assessed the accretion/
dilution to the Company's shareholders; and (8) conducted such other financial
studies, analyses and investigations as we deemed appropriate for the purpose of
this opinion.
<PAGE>
In our review and analysis and in arriving at our opinion, we have assumed and
relied upon the accuracy and completeness of all of the financial and other
information provided us or publicly available and have assumed and relied upon
the representations and warranties of the Company and CFTP contained in the
Agreement. We have not been engaged to, and have not independently attempted to,
verify any of such information. We have also relied upon the managements of the
Company and CFTP as to the reasonableness and achievabililty of the financial
and operating projections and the assumptions and bases therefor provided to us
and, with your consent, we have assumed that such projections reflect the best
currently available estimates and judgments of such respective managements of
the Company and CFTP and that such projections and forecasts will be realized in
the amounts and time periods currently estimated by the managements of the
Company and CFTP. We have not been engaged to assess the achievability of such
projections or the assumptions on which they were based and express no view as
to such projections or assumptions. In addition, we have not conducted a
physical inspection or appraisal of any of the assets, properties or facilities
of either the Company or CFTP nor have we been furnished with any such
evaluation or appraisal. We have also assumed that the conditions to the
Transaction would be consummated on a timely basis in the manner contemplated in
the Agreement. Our opinion is based upon analyses of the foregoing factors in
light of our assessment of general economic, financial and market conditions as
they exist and can be evaluated by us as of the date hereof. We express no
opinion as to the price or trading range at which shares of the Company's Common
Stock will trade following the date hereof, or the price or trading range at
which the Company's Common Stock will trade upon completion of the Transaction.
Morgan Keegan has not previously provided investment banking services, but has
provided fixed income services, to the Company. In the ordinary course of our
business, we serve as a market maker for the Company's and CFTP Common Stock and
trade shares for our own account and the accounts of our customers. Accordingly,
we may at any time hold long or short positions in the Company's or CFTP Common
Stock.
It is understood that this opinion is not to be quoted or referred to, in whole
or in part (including excerpts or summaries), in any filing, report, document,
release or other communication used in connection with the Transaction (unless
required to be quoted or referred to by applicable regulatory requirements), nor
shall this opinion be used for any other purposes, without our prior written
consent, which consent shall not be unreasonably withheld. Furthermore, our
opinion is directed to the Board of Directors of the Company and does not
constitute a recommendation to any shareholder of the Company as to how such
shareholder should vote at the shareholders' meeting to be held in connection
with the Transaction.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that, as of the date hereof, the
consideration proposed to be paid in the Transaction is fair, from a financial
point of view, to the Company's shareholders.
Yours very truly,
MORGAN KEEGAN & COMPANY, INC.
<PAGE>
APPENDIX E
OPINION OF TRIDENT SECURITIES
Board of Directors
Community Federal Bancorp, Inc.
333 Court Street
Tupelo, MS 38801
Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of shares of common stock (the "Community Federal Common
Stock"), of Community Federal Bancorp ("Community Federal") of the consideration
to be received by such holders in a merger (the "Merger") of Community Federal
with First M&F Corporation, Inc. ("First M&F") pursuant to the Agreement and
Plan of Merger (the "Agreement") dated July 8, 1999. Unless otherwise noted,
all terms used herein shall have the same meaning as defined in the Agreement.
As more specifically set forth in the Agreement, and subject to a number of
conditions and procedures described in the Agreement, in the Merger each of the
issued and outstanding shares of Community Federal Common Stock shall be
exchanged for .2855 shares of First M&F Common Stock and the right to receive
$8.84577 in cash. Each outstanding option to purchase Community Federal Common
Stock shall be converted into options to purchase shares of First M&F Common
Stock.
Trident Securities, a division of McDonald Investments, Inc. ("Trident"),
is a financial consulting and investment banking firm experienced in the
valuation of business enterprises with considerable experience in the valuation
of thrift institutions. In the ordinary course of our business we may actively
trade the securities of Community Federal and First M&F for our own account and
for the accounts of our customers and, accordingly, may at any one time hold a
long or short position in such securities. Trident is not affiliated with
Community Federal or First M&F.
In connection with rendering our opinion, we have reviewed and analyzed,
among other things, the following: (i) the Proxy Statement-Prospectus dated as
of the date above describing the merger; (ii) the Agreement; (iii) certain
publicly available information concerning Community Federal, including the
audited financial statements for each of the years in the three year period
ended September 30, 1998 and unaudited financial statements for the six months
ended March 31, 1999; (iv) certain publicly available information concerning
First M&F, including the audited financial statements for each of the years in
the three year period ended December 31, 1998 and unaudited financial statements
for the three months ended March 31, 1999; (v) certain other internal
information, primarily financial in nature, concerning the business and
operations of Community Federal and First M&F furnished to us by Community
Federal and First M&F for purposes of our analysis; (vi) certain publicly
available information with respect to other companies that we believe to be
comparable to Community Federal and First M&F; and (vii) certain publicly
available information concerning the nature and terms of other transactions that
we consider relevant. We have also spoken with certain officers and employees
of Community Federal and First M&F, to discuss the foregoing as well as other
matters we believe relevant to our inquiry.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided to us or publicly available and have not attempted
independently to verify any such information. We did not perform a review of
the loan portfolio, and we did not assess the adequacy of Community Federal's
loan loss reserves. We have not conducted a physical inspection of the
properties or facilities of Community Federal, nor have we made or obtained any
independent evaluations or appraisals of any of such properties or facilities.
<PAGE>
In conducting our analysis and arriving at our opinion as expressed herein,
we have considered such financial and other factors as we have deemed
appropriate under the circumstances including, among others, the following: (i)
the historical and current financial condition and results of operations of
Community Federal and First M&F, including interest income, interest expense,
net interest income, net interest margin, interest sensitivity, non-interest
income and expense, earnings, dividends, book value, return on assets, return on
equity, capitalization, the amount and type of non-performing assets and the
reserve for loan losses; (ii) the business prospects of Community Federal and
First M&F; (iii) the economy of Community Federal's and First M&F's market
areas, and (iv) the nature and terms of certain other merger transactions that
we believe to be relevant. We have also taken into account our assessment of
general economic, market, financial and regulatory conditions and trends, as
well as our knowledge of the financial services industry, our experience in
connection with similar transactions, and our knowledge of securities valuation
generally. Our opinion necessarily is based upon conditions as they exist and
can be evaluated on the date hereof. Our opinion is, in any event, limited to
the fairness, from a financial point of view, of the consideration to be
received by Community Federal in the Merger and does not address Community
Federal's underlying business decision to effect the Merger.
Based upon and subject to the foregoing, we are of the opinion that the
consideration to be received by Community Federal in the Merger is fair, as of
the date hereof, from a financial point of view, to the shareholders of
Community Federal.
This opinion is being delivered to the Board of Directors of Community
Federal for its use and is not to be reproduced, disseminated or delivered to
any third party without the express written consent of Trident, except as
required by law.
Very truly yours,
TRIDENT SECURITIES
A Division of McDonald Investments, Inc.
<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 Business
Corporation Act 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 Business
Corporation Act 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 stockholders (a "Disinterested
Party"), that the director has met the applicable standard of conduct. The
Mississippi Business Corporation Act 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 Business Corporation Act
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 Business
Corporation Act 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 Business Corporation Act allows indemnification beyond the scope of
the Amended and Restated Mandatory and Permissive Provisions.
<PAGE>
Article Eleven of First M&F's Articles does not limit the applicability of
the indemnification provisions contained in the Mississippi Business Corporation
Act and, as permitted by the Mississippi Business Corporation Act, 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 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 Securities Act and will be governed by the final
adjudication of such issue.
<PAGE>
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
-------------- -----------
2.1 Agreement and Plan of Merger dated as of July 8, 1999,
included as Appendix A to the Joint Proxy Statement-
Prospectus contained herein.
2.2 Option Agreement dated July 8, 1999.
3.1 Articles of Incorporation of First M&F, as amended (*).
3.2 Bylaws of First M&F (*).
5.1 Opinion of Watkins Ludlam Winter & Stennis, P.A.
regarding legality of common stock registered hereby.
8.1 Opinion of Watkins Ludlam Winter & Stennis, P.A.
regarding tax matters.
13.1 Annual Report of Community Federal Bancorp, Inc. for the
year ended September 30, 1998, and Form 10-Q for the
period ended June 30, 1999(**).
21.1 Subsidiaries of the Registrant (*).
23.1 Consent of Shearer Taylor & Co., P.A.
23.2 Consent of Taylor, Powell, Wilson & Hartford, P.A.
23.3 Consent of Arthur Andersen LLP.
23.4 Consents of Watkins Ludlam Winter & Stennis, P.A. are
contained in their opinions filed as Exhibit 5 and
Exhibit 8 to this Registration Statement.
23.5 Consent of Morgan Keegan & Company, Inc.
23.6 Consent of Trident Securities
99.1 Form of Proxy of First M&F.
99.2 Form of Proxy of Community Federal.
(*) 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 SEC on September 15, 1986, and
are hereby specifically incorporated by reference herein.
(**) Incorporated by Reference.
(b) Financial Statement Schedules
No Financial Statement Schedules are required to be filed.
(c) Report, Opinion or Appraisal.
Not applicable.
<PAGE>
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 SEC 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 19th day of August, 1999.
FIRST M&F CORPORATION
Registrant
BY: /s/ Hugh S. Potts, Jr.
--------------------------------------------------
Hugh S. Potts, Jr.
Chairman of the Board and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on August 19, 1999 by the following
persons in the capacities indicated.
SIGNATURE TITLE
--------- -----
By: /s/ Hugh S. Potts, Jr. Chairman of the Board and
--------------------------- Director (Principal
Hugh S. Potts, Jr. Executive Officer)
By: /s/ Scott M. Wiggers President and Director
---------------------------
Scott M. Wiggers
By: /s/ Charles W. Ritter, Jr. Director
---------------------------
Charles W. Ritter, Jr.
By: /s/ Susan P. McCaffery Director
---------------------------
Susan P. McCaffery
By: /s/ Fred A. Bell, Jr. Director
---------------------------
Fred A. Bell, Jr.
By: /s/ Jon A. Crocker Director
---------------------------
Jon A. Crocker
By: /s/ E. G. Woodard Director
---------------------------
E. G. Woodard
By: /s/ W. C. Shoemaker Director
---------------------------
W. C. Shoemaker
By: /s/ Robert C. Thompson Chief Financial Officer
---------------------------- (Principal Accounting and
Robert C. Thompson Financial Officer)
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Description
- -------------- -----------
2.1 Agreement and Plan of Merger dated as of July 8, 1999,
included as Appendix A to the Joint Proxy Statement-Prospectus
contained herein.
2.2 Option Agreement dated July 8, 1999.
3.1 Articles of Incorporation of First M&F, as amended (*).
3.2 Bylaws of First M&F (*).
5.1 Opinion of Watkins Ludlam Winter & Stennis, P.A. regarding
legality of common stock registered hereby.
8.1 Opinion of Watkins Ludlam Winter & Stennis, P.A. regarding tax
matters.
13.1 Annual Report of Community Federal Bancorp, Inc. for the year
ended September 30, 1998, and Form 10-Q for the period ended
June 30, 1999(**).
21.1 Subsidiaries of the Registrant(*).
23.1 Consent of Shearer Taylor & Co., P.A.
23.2 Consent of Taylor, Powell, Wilson & Hartford, P.A.
23.3 Consent of Arthur Andersen LLP.
23.4 Consents of Watkins Ludlam Winter & Stennis, P.A. are
contained in their opinions filed as Exhibit 5 and Exhibit 8
to this Registration Statement.
23.5 Consent of Morgan Keegan & Company, Inc.
23.6 Consent of Trident Securities
99.1 Form of Proxy of First M&F.
99.2 Form of Proxy of Community Federal.
(*) 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 SEC on September 15, 1986, and
are hereby specifically incorporated by reference herein.
(**) Incorporated by Reference.
EXHIBIT 2.2
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Option Agreement") is dated as of July 8,
1999, between Community Federal Bancorp, Inc., a Delaware corporation
("Community Federal") and First M&F Corporation ("First M&F"), a Mississippi
corporation.
WITNESSETH
WHEREAS, the Boards of Directors of Community Federal and First M&F have
approved an Agreement and Plan of Merger ("Merger Agreement") dated as of the
date hereof providing for the merger of Community Federal into First M&F;
WHEREAS, as a condition to First M&F's entry into the Merger Agreement
and to induce such entry, Community Federal has agreed to grant to First M&F the
option set forth herein to purchase authorized but unissued shares of Community
Federal Common Stock;
NOW, THEREFORE, in consideration of the premises herein contained, the
parties agree as follows:
1. Definitions.
-----------
Capitalized terms defined in the Merger Agreement and used herein shall
have the same meanings as in the Merger Agreement.
2. Grant of Option.
---------------
Subject to the terms and conditions set forth herein, Community Federal
hereby grants to First M&F an option ("Option") to purchase up to 848,960 shares
of Community Federal Common Stock, at a price of $17.00 per share payable in
cash as provided in Section 4 hereof; provided, however, that in the event
Community Federal issues or agrees to issue any shares of Community Federal
Common Stock (other than as permitted under the Merger Agreement) at a price
less than $17.00 per share (as adjusted pursuant to Section 6 hereof), the
exercise price shall be equal to such lesser price; in no event, however, shall
the number of shares for which the Option is exercisable exceed 19.9% of
Community Federal's issued and outstanding Common Stock.
3. Exercise of Option.
------------------
(a) Subject to compliance with applicable laws and regulations and unless
First M&F shall have breached in any material respect and failed to cure any
covenant or representation contained in the Merger Agreement, First M&F may
exercise the Option, in whole or part, at any time following the occurrence of a
Purchase Event (as defined below).
(b) As used herein, a "Purchase Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) any person (other than First M&F) shall have commenced a bona
fide tender or exchange offer to purchase shares of Community Federal
Common Stock and upon consummation of such offer such person owns or
controls twenty percent (20%) or more of the outstanding shares of
Community Federal Common Stock; or
<PAGE>
(ii) Community Federal, without having received First M&F's prior
written consent, shall have entered into an agreement with any person
(other than First M&F), other than in connection with a transaction to
which First M&F has given its prior written consent, to (x) merge or
consolidate, or enter into any similar transaction, with Community Federal
other than with respect to any requirement of divestiture in connection
with the Merger Agreement under the federal banking or antitrust laws, (y)
purchase, lease or otherwise acquire any substantial portion of the assets
of Community Federal other than in the ordinary course of business of
Community Federal, or (z) purchase or otherwise acquire (including by way
of merger, consolidation, share exchange or any similar transaction)
securities representing twenty percent (20%) or more of the voting power of
Community Federal and the transaction referred to in (x), (y) or (z) shall
have been consummated; or
(iii) any person (other than First M&F or a subsidiary of Community
Federal acting in a fiduciary capacity) shall have acquired beneficial
ownership or the right to acquire beneficial ownership of twenty percent
(20%) or more of the outstanding shares of Community Federal Common Stock
(the term "beneficial ownership" for purposes of this Option Agreement
having the meaning assigned thereto in Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "1934 Act") and the regulations
promulgated thereunder); provided, however, that in calculating the number
of shares owned by any person, no shares which were beneficially owned
prior to the effective date of this Option Agreement shall be included.
(c) In the event First M&F wishes to exercise the Option, it shall send to
Community Federal a written notice (the date of which being herein referred to
as "Notice Date") specifying (i) the total number of shares it will purchase
pursuant to such exercise, and (ii) a place and date not earlier than three (3)
business days nor later than twenty (20) business days from the Notice Date for
the closing of such purchase ("Closing Date"); provided that if prior
notification to or approval of the Federal Deposit Insurance Corporation
("FDIC") or any other regulatory authority is required in connection with such
purchase, First M&F shall promptly file the required notice or application for
approval and shall expeditiously process the same and the period of time that
otherwise would run pursuant to this sentence shall run instead from the date on
which any required notification period has expired or been terminated or such
approval has been obtained and any requisite waiting period shall have passed.
(d) The Option shall expire and terminate to the extent not previously
exercised, upon the earliest to occur of the following (each a "Termination
Event"):
(i) the Effective Date of the Merger; or
(ii) six (6) months after the occurrence of a Purchase Event; or
(iii) the Merger Agreement is terminated, except for a termination
resulting from a willful and material breach by Community Federal of any of
its covenants or agreements in the Merger Agreement or from the failure of
the stockholders of Community Federal to approve the Merger; or
(iv) March 31, 2000.
(e) Notwithstanding the termination of the Option, First M&F shall be
entitled to purchase any shares with respect to which it has exercised the
Option in accordance with the terms hereof prior to the termination of the
Option. The termination of the Option shall not affect any rights hereunder
which by their terms extend beyond the date of such termination.
<PAGE>
4. Payment and Delivery of Certificates.
------------------------------------
(a) At the closing referred to in Section 3 hereof, First M&F shall pay to
Community Federal the aggregate purchase price for the shares of Community
Federal Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by a wire transfer to a bank account designated by
Community Federal or by federal funds check if no account has been designated.
(b) At such closing, simultaneously with the delivery of cash as provided
in subsection (a), Community Federal shall deliver to First M&F a certificate or
certificates representing the number of shares of Community Federal Common Stock
purchased by First M&F and First M&F shall deliver to Community Federal a letter
agreeing that First M&F will not offer to sell or otherwise dispose of such
shares in violation of applicable law or the provisions of this Option
Agreement.
5. Representations.
---------------
Community Federal hereby represents, warrants and covenants to First M&F
as follows:
(a) Community Federal shall at all times maintain sufficient authorized
but unissued shares of Community Federal Common Stock so that the Option may be
exercised without authorization of additional shares of Community Federal Common
Stock.
(b) The shares to be issued upon due exercise, in whole or in part, of the
Option, when paid for as provided herein, will be duly authorized, validly
issued, fully paid and nonassessable and will be delivered free and clear of all
claims, liens, encumbrances and security interests and not subject to any
preemptive rights.
(c) Community Federal will not, by amendment of its articles of
incorporation or through reorganization, consolidation, merger, dissolution or
sale of assets, or by any other voluntary act, avoid or seek to avoid the
observance or performance of any of the covenants, stipulations or conditions to
be observed or performed hereunder by it; and will promptly take all action as
may from time to time be required (including cooperating fully with First M&F in
preparing applications or notices and providing information with respect to
regulatory approval) in order to permit First M&F to exercise the Option and
Community Federal duly and effectively to issue shares of Community Federal
Common Stock pursuant hereto.
6. Adjustment Upon Changes in Capitalization.
-----------------------------------------
If Community Federal should split or combine the Community Federal Common
Stock, or pay a stock dividend or other stock distribution in Community Federal
Common Stock, or otherwise change the Community Federal Common Stock into any
other securities, or make any other dividend or distribution in respect of the
Community Federal Common Stock (other than normal cash dividends), then the
number of shares of Community Federal Common Stock subject to the Option shall
be adjusted so that, after such issuance, it equals 19.9% of the number of
shares of Community Federal Common Stock then issued and outstanding without
giving effect to any shares subject or issued pursuant to the Option. Nothing
contained in this Section 6 shall be deemed to authorize Community Federal to
breach any provisions of the Merger Agreement. Whenever the number of shares of
Community Federal Common Stock purchasable upon exercise hereof is adjusted as
provided in this Section 6, the Option exercise price shall be adjusted by
multiplying the Option exercise price by a fraction, the numerator of which
shall be equal to the number of shares of Community Federal Common Stock
purchasable prior to the adjustment and the denominator of which shall be equal
to the number of shares of Community Federal Common Stock purchasable after the
adjustment.
<PAGE>
7. Registration Rights.
-------------------
Community Federal shall, if requested by First M&F, as expeditiously as
possible file a registration statement with the FDIC, if necessary, in order to
permit the sale or other disposition of this Option and/or the shares of
Community Federal Common Stock acquired upon exercise of the Option in
accordance with the intended method of sale or other disposition requested by
First M&F. First M&F shall provide all information reasonably requested by
Community Federal for inclusion in any registration statement to be filed
hereunder. Community Federal will use its reasonable best efforts to cause such
registration statement first to become effective and then to remain effective
for such period not in excess of 270 days from the day such registration
statement first becomes effective as may be reasonably necessary to effect such
sales or other dispositions. The first registration effected under this Section
7 shall be at Community Federal's expense except for underwriting commissions
and the fees and disbursements of First M&F's counsel attributable to the
registration. A second registration may be requested hereunder at First M&F's
expense. In no event shall Community Federal be required to effect more than
two registrations hereunder. If requested by Community Federal, in connection
with any such registration, First M&F will become a party to any underwriting
agreement relating to the sale of such shares, but only to the extent of
obligating itself in respect of representations, warranties, indemnities and
other agreements customarily included by a selling shareholder in such
underwriting agreements.
8. Certain Puts.
------------
(a) Upon the occurrence of a Purchase Event that occurs prior to
termination of the Option, (i) at the request of First M&F, delivered while the
Option (in whole or part) is exercisable, Community Federal shall repurchase
the Option from First M&F at a price equal to (x) the amount by which (a) the
market/offer price (as defined below) exceeds (b) the Option exercise price,
multiplied by (y) the number of shares for which the Option may then be
exercised; and (ii) at the request from time to time of the owner of shares
purchased pursuant to the Option, delivered while the Option (in whole or part)
is exercisable (or, if it has been fully exercised, would have been exercisable
had such exercise not been made). Community Federal shall repurchase such number
of the shares issued pursuant to the Option from the owner as the owner shall
designate at a price equal to (x) the market/offer price multiplied by the
number of such shares so designated. The term "market/offer price" shall mean
the highest of (i) the price per share of Community Federal Common Stock at
which a tender offer or exchange offer therefor has been made after the date
hereof, (ii) the price per share of Community Federal Common Stock to be paid
by any third party pursuant to any merger, consolidation, share exchange or
other agreement with Community Federal entered into after the date hereof, (iii)
the average closing price for shares of Community Federal Common Stock within
the 30-day period immediately preceding the date First M&F gives notice of the
required repurchase of this Option or the owner gives notice of the required
repurchase of shares, as the case may be, or (iv) in the event of a sale of all
or substantially all of Community Federal's assets, the sum of the price paid in
such sale for such assets and the current market value of the remaining assets
of Community Federal as determined by a nationally recognized investment banking
firm selected by the parties (or by an arbitrator if they cannot agree) divided
by the number of shares of Community Federal Common Stock outstanding at the
time of such sale. In determining the market/offer price, the value of
consideration other than cash shall be determined by a nationally recognized
investment banking firm selected by the parties (or by an arbitrator if they
cannot agree), and such determination shall be conclusive and binding on all
parties.
(b) First M&F or the owner, as the case may be, may exercise its right to
require Community Federal to repurchase the Option and any shares pursuant to
this Section 8 by surrendering for such purpose to Community Federal, at its
principal office, this Option Agreement or certificates for the shares, as
applicable, accompanied by a written notice or notices stating that First M&F or
the owner, as the case may be, elects to require Community Federal to repurchase
the Option and/or the shares in accordance with the provisions of this Section
8. As promptly as practicable, and in any event within five (5) business days
after the surrender of the Option and/or certificates representing shares and
the receipt of such notice or notices relating thereto, Community Federal shall
deliver or cause to be delivered to First M&F or the owner of the applicable
repurchase price therefor or the portion thereof that Community Federal is not
then prohibited from so delivering under applicable law and regulation or as a
consequence of administrative policy.
<PAGE>
(c) Community Federal hereby undertakes to use its best efforts to obtain
all required regulatory and legal consents and to file any required notices in
order to accomplish any repurchase contemplated by this Section 8. Nonetheless,
to the extent that Community Federal is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option and/or the shares in full, Community Federal shall immediately so notify
First M&F and the owner and thereafter deliver or cause to be delivered, from
time to time, the portion of the repurchase price that it is no longer
prohibited from delivering. If Community Federal at any time after delivery of a
notice of repurchase pursuant to Section 8 is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering the
repurchase price in full (and Community Federal hereby undertakes to use its
best efforts to obtain all required regulatory and legal approvals and to file
any required notices as promptly as practicable in order to accomplish such
repurchase), First M&F and/or the owner may revoke its notice of repurchase
either in whole or to the extent of the prohibition.
9. Severability.
------------
If any term, provision, covenant or restriction contained in this Option
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Option
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Option will not permit the holder to acquire the full
number of shares of Community Federal Common Stock provided in Section 2 hereof
(as adjusted pursuant to Section 6 hereof), it is the express intention of
Community Federal to allow the holder to acquire or to require Community Federal
to repurchase such lesser number of shares as may be permissible, without any
amendment or modification hereof.
10. Miscellaneous.
-------------
(a) Extension. The period for exercise by First M&F and its assignees of
---------
any rights under this Option Agreement shall be extended (i) to the extent
necessary to obtain all regulatory approvals for the exercise of such rights,
and for the expiration of all statutory waiting periods; and (ii) to the extent
necessary to avoid liability under Section 16(b) of the 1934 Act by reason of
such exercise.
(b ) Consents. Each of First M&F and Community Federal will use its best
--------
efforts to make all filings with, and to obtain consents of, all third parties
and regulatory authorities necessary to the consummation of the transactions
contemplated by this Option Agreement.
(c) Expenses. Except as otherwise expressly provided herein or in the
--------
Merger Agreement each of the parties hereto shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel.
(d) Entire Agreement. Except as otherwise expressly provided herein or in
----------------
the Merger Agreement, this Option Agreement contains the entire agreement
between the parties with respect to the transactions contemplated hereunder and
supersedes all prior agreements or understandings with respect thereto, written
or oral. The terms and conditions of this Option Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns. Nothing in this Option Agreement, expressed or implied,
is intended to confer upon any party, other than the parties hereof, and their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Option Agreement, except as expressly
provided herein.
(e) Assignment. Neither of the parties hereto may assign any of its
----------
rights or obligations under this Option Agreement or the Option created
hereunder to any other person, without the express written consent of the other
party, except that in the event a Purchase Event shall have occurred and be
continuing First M&F may assign in whole or in part its rights and obligations
hereunder; provided, however, that until the date thirty (30) days following the
date on which the FDIC approves an application by First M&F to acquire the
shares of Community Federal Common Stock subject to the Option, First M&F may
not assign its rights under the Option except in (i) a widely dispersed public
distribution, (ii) a private placement in which no one party acquires the rights
to purchase in excess of two percent (2%) of the Community Federal Common Stock,
(iii) an assignment to a single party (e.g., a broker or investment banker) for
the purpose of conducting a widely dispersed public distribution on First M&F's
behalf or (iv) any other manner approved by the FDIC.
<PAGE>
(f) Notices. All notices or other communications which are required or
-------
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by overnight express or by registered or certified mail, postage
prepaid, addressed as follows:
Community Federal
-----------------
Community Federal Bancorp, Inc.
333 Court Street
Tupelo, MS 38802
Attn: H. Lewis Whitfield
Fax Number: (601) 842-3187
Copy to: John P. Soukenik, Esq.
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, D.C. 20005
Fax Number: (202) 347-2172
First M&F
---------
First M&F Corporation
221 E. Washington
Kosciusko, MS 39090
Attn: Scott M. Wiggers
Fax Number: (601) 289-7753
Copy to: Craig N. Landrum, Esq.
Watkins Ludlam Winter & Stennis, P.A.
633 N. State Street
Jackson, MS 39202
Fax Number: (601) 949-4804
A party may change its address for notice purposes by written notice to the
other party hereto.
(g) Counterparts. This Option Agreement may be executed in any number of
------------
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
(h) Specific Performance. The parties agree that damages would be an
--------------------
inadequate remedy for a breach of the provisions of this Option Agreement by
either party hereto and that this Option Agreement may be enforced by either
party hereto through injunctive or other equitable relief.
<PAGE>
(i) Governing Law. This Option Agreement shall be governed by and
-------------
construed in accordance with the laws of the Mississippi applicable to
agreements made and entirely to be performed within such state, and such federal
laws as may be applicable.
IN WITNESS WHEREOF, each of the parties hereto has executed this Option
Agreement as of the day and year first written above.
[signatures omitted]
EXHIBIT 5.1
[LETTERHEAD OF WATKINS LUDLAM WINTER & STENNIS, P.A.]
August 20, 1999
Board of Directors
First M&F Corporation
221 Washington Street
Kosciusko, Mississippi 39090
Gentlemen:
We have acted as counsel to First M&F Corporation in connection with the
preparation of its Registration Statement on Form S-4 for registration of
1,217,985 shares of Common Stock, $5 par value, under the Securities Act of
1933. Such shares are to be issued pursuant to the Agreement and Plan of
Merger (the "Merger Agreement"), dated as of July 8, 1999, by and among First
M&F Corporation, Merchants & Farmers Bank, Community Federal Bancorp, Inc.
and Community Federal Bank.
We have examined the Merger Agreement, the Articles of Incorporation and
the amendments thereto of First M&F Corporation, and such other documents as we
deemed relevant.
Based on the foregoing, it is our opinion that the 1,217,985 shares of
Common Stock of First M&F Corporation to be registered under the Securities Act
of 1933, when issued pursuant to the Merger Agreement will be legally issued,
fully paid and non-assessable shares of Common Stock of First M&F Corporation.
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 Matters" in the
Proxy Statement comprising Part I of the Registration Statement.
Sincerely,
/s/ Watkins Ludlam Winter & Stennis, P.A.
WATKINS LUDLAM WINTER & STENNIS, P.A.
Jackson, Mississippi
EXHIBIT 8.1
________________, 1999
Board of Directors
Community Federal Bancorp, Inc.
333 Court Street
Tupelo, Mississippi 38802
Board of Directors
First M&F Corp.
221 East Washington Street
Kosciusko, Mississippi 39090
RE: THE FEDERAL INCOME TAX CONSEQUENCES OF CERTAIN MATTERS ARISING UNDER
THE CORPORATE REORGANIZATION PROVISIONS OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED
Gentlemen:
We have acted as counsel to First M&F Corp., a Mississippi corporation
("First M&F"), in connection with the proposed merger (the "Merger") of
Community Federal Bancorp, Inc., a Delaware corporation ("Community Federal"),
with and into First M&F pursuant to the terms of the Agreement and Plan of
Merger dated as of the 8th day of July, 1999 (the "Merger Agreement") by and
between First M&F, Merchants & Farmers Bank, a Mississippi banking corporation,
Community Federal, and Community Federal Bank, a Mississippi banking corporation
("Community Federal Bank"). This opinion is being rendered pursuant to your
request in satisfaction of the closing condition described in Article 8.2(c) of
the Merger Agreement. All capitalized terms, unless otherwise specified, have
the meaning assigned to them in the Merger Agreement.
In connection with this opinion, we have examined and are familiar with
the originals or copies, certified or otherwise identified to our satisfaction,
of the Merger Agreement and such other documents as we have deemed sufficient to
enable us to render the opinion below. In our examination, we have assumed the
genuineness of all signatures, the legal capacity of all natural persons, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified, conformed or
photostatic copies and the authenticity of the originals of such copies. In
rendering the opinion set forth below, we have relied not only on such documents
but also on the representations and statements of the Parties to the proposed
Merger, as set forth in the Certificates which are attached hereto as Exhibits
"A" and "B", regarding certain matters addressed in this opinion, and the
following factual information supplied by the Parties to the Merger.
I.
BACKGROUND FACTS CONCERNING CORPORATE PARTIES
A. First M&F Corporation
---------------------
First M&F is a corporation duly chartered, organized and existing under and
pursuant to the laws of the State of Mississippi with its principal place of
business located in Kosciusko, Mississippi.
The authorized capital stock of First M&F consists of 15,000,000 shares of
common stock, $5.00 par value (the "First M&F Common Stock"), of which 3,639,779
shares are issued and outstanding; 1,000,000 shares of Class A voting preferred
stock with no par value of which zero shares are issued and outstanding; and
1,000,000 shares of Class B nonvoting preferred stock with no par value of which
zero shares are issued and outstanding.
<PAGE>
Board of Directors
______________, 1999
Page 2
B. Community Federal Bancorp, Inc.
-------------------------------
As noted, Community Federal is a corporation duly chartered, organized and
existing under the laws of the State of Delaware with its principal place of
business located in Tupelo, Mississippi.
The authorized capital stock of Community Federal consists of 10,000,000
shares of common stock with par value of $.01 (the "Community Federal Common
Stock") and 2,000,000 shares of preferred stock with no par value of which
4,266,150 shares of the Community Federal Common Stock are issued and
outstanding.
II.
BUSINESS REASONS FOR AND DESCRIPTION
OF THE PROPOSED TRANSACTIONS
A. Reasons for the Merger
----------------------
The directors of First M&F and Community Federal believe that by expanding
First M&F's customer base into the Tupelo, Mississippi market area, the Merger
should enhance First M&F's earnings capacity by enabling it to deliver products
and provide services to that enlarged customer base, and by permitting cost
savings through consolidation of operations. In addition, both boards believe
that the combination of First M&F and Community Federal will allow First M&F and
Community Federal to increase overall efficiency and take advantage of economies
of scale in several areas.
B. Description of the Merger
-------------------------
The proposed Merger will be structured and carried out in accordance with
the Merger Agreement, the description set forth in the Registration Statement
and related Proxy Statement/Prospectus, the laws of the United States and the
states of Delaware and Mississippi, and the representations of the Parties to
the transactions. As of the Effective Date, Community Federal will be merged
with and into First M&F on the terms and subject to the conditions set forth in
the Merger Agreement, some of which are further described below. First M&F will
acquire all of the assets and assume all of the liabilities of Community
Federal. As of the Effective Date of the Merger, the separate corporate
existence of Community Federal shall cease, and First M&F shall continue as the
surviving corporation.
On the Effective Date, each share of Community Federal Common Stock issued
and outstanding immediately prior to the Effective Date, other than shares of
Community Federal Common stock owned by shareholders who pursuant to Section 262
of the Delaware General Corporation Law (the "DGCL") perfect appraisal rights,
shall by virtue of the Merger be converted into (i) .2855 shares of First M&F
Common Stock, subject to adjustment as set forth in Section 12.1(g) of the
Merger Agreement, and (ii) the right to receive $8.8457 in cash (collectively,
the "Exchange Ratio"). If after application of the Exchange Ratio, the exchange
of Community Federal Common Stock for the First M&F Common Stock results in any
shareholder of Community Federal being entitled to receive a fractional share of
First M&F Common Stock, then such shareholder will receive cash in lieu of such
fractional share. Such cash amount shall be equal to such fractional proportion
times the Average Market Price, as defined in Section 12.1(g), of First M&F
Common Stock.
Holders of Community Federal Common Stock who vote against the proposed
Merger and otherwise perfect appraisal rights under Section 262 of the DGCL will
have the right to receive the appraised value of their shares in cash. Under the
Merger Agreement, First M&F has the right to not consummate the Merger if at or
before the Effective Date the number of shares of Community Federal Common Stock
as to which appraisal rights have been perfected equals or exceeds twenty
percent (20%) or more of the outstanding shares of Community Federal.
<PAGE>
Board of Directors
_______________, 1999
Page 3
After the Merger, First M&F will continue both its and Community Federal's
historical business in a substantially unchanged manner.
III. DISCUSSION OF APPLICABLE CORPORATE
AND REORGANIZATION PROVISIONS
The parties intend that the Merger will satisfy the requirements for
nonrecognition (i.e., treatment as a tax-free reorganization) under section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). This
Code section describes a statutory merger under which the target corporation
(Community Federal) is merged into the acquiring corporation (First M&F) in
exchange for acquiring corporation stock distributed to the target's historic
shareholders.
The requisite criteria for nonrecognition treatment in the case of a
statutory merger are as follows (applied in the context of the proposed Merger):
1. The requirements for a statutory merger under the applicable
provisions of Delaware, Mississippi and federal law must be satisfied.
2. There must be continuity of shareholder interest ("COI"). The COI
requirement was established by the courts to ensure that the consideration
furnished by the acquiring corporation in a purported reorganization
represents a proprietary interest in the affairs of the acquiring
corporation and that such consideration represents a substantial part of
the value of the stock or properties transferred. See HELVERING V.
MINNESOTA TEA CO., 296 U.S. 378 (1935); CORTLAND SPECIALTY CO. V.
COMMISSIONER, 60 F.2d 937 (2d Cir. 1932), cert. denied 288 U.S. 599 (1933).
The overriding purpose of the COI requirement is to ensure that
reorganization treatment applies only to those corporate readjustments of
existing interests which were intended to be covered by the reorganization
provisions, as opposed to those transactions that are, in effect, sales.
The COI requirement does not require that all shareholders of the acquired
corporation have a proprietary interest in the surviving corporation after the
acquisition; it is not even necessary for a substantial percentage of such
shareholders to have such an interest. Rather, the Service announced in Rev.
Proc. 77-37, 1977-2 C.B. 568, that it would rule that the COI requirement is met
so long as one or more of the acquired corporation's shareholders retain a
sufficient proprietary interest in the continuing corporation. The Service
indicated in Rev. Proc. 77-37 that a sufficient proprietary interest is an
interest with a value that is at least 50% of the total equity value of the
acquired corporation.
Historically, through the evolution of case law and through rulings of the
Service, it became well-settled law that the COI requirement was not limited to
analyzing merely the proportion of equity consideration to aggregate
consideration received for the transferred assets of equity consideration to
aggregate consideration received for the transferred assets but, instead, had a
broader reach which focused also on who received such consideration (only
historic shareholders counted) and on what recipients did with the consideration
(the historic shareholders had to demonstrate that they harbored, at the time of
the transaction, no firm and fixed intention to dispose of their stock in
amounts that would violate COI). See, e.g., MCDONALD'S RESTAURANTS OF ILL.,
INC. V. COMMISSIONER, 688 F.2d 520 (7th Cir. 1982); PENROD V. COMMISSIONER,
88 T.C. 1415 (1987); Rev. Rul. 66-23, 1966-1 C.B. 67, Rev. Rul. 78-142, 1978-1
C.B. 111; Rev. Rul. 84-30, 1984-1 C.B. 114; Rev. Rul. 95-69, 1995-42 I.R.B. 4.
<PAGE>
Board of Directors
_______________, 1999
Page 4
However, on January 23, 1998, the Service issued final regulations changing
the COI requirement. Treasury Regulations section 1.368-1(e) provides that COI
is satisfied if the acquiring corporation furnishes consideration that (a)
represents a proprietary interest in the affairs of the acquiring corporation
and (b) represents a substantial part of the value of the stock or properties
transferred. In determining whether the acquiring corporation has furnished
sufficient consideration, all facts and circumstances must be considered. Thus,
any prearranged plan by the acquiring corporation or a related party to redeem
or acquire the consideration furnished in the reorganization may indicate that
the acquiring corporation furnished too much nonqualifying consideration in the
reorganization, in which case the COI requirement would not be met. However, a
subsequent sale of the stock received by the target shareholders to a party
unrelated to the acquiring corporation will generally not be taken into account
in determining whether the COI requirement has been met, even if the disposition
was contemplated at the time of the reorganization.
Treasury Regulations section 1.368-1(e)(7) states that the changes to the
COI requirement apply to transactions occurring after January 28, 1998, except
that they shall not apply to any transaction occurring pursuant to a written
agreement which is (subject to customary conditions) binding on January 28,
1998, and at all times thereafter. Thus, the new COI regulations will be
applicable to the proposed Merger as a transaction occurring after January 28,
1998.
Based on the representations in the Certificates attached as Exhibits "A"
and "B" hereto and the adoption of Treasury Regulation section 1.368-1(e), the
COI requirement should be met with respect to the Merger.
3. In addition to the requirements under the Code and the COI
requirement which have been generally described above, nonrecognition for
the Merger is subject to other nonstatutory rules that have been established
through case law and Treasury Regulations. These requirements involve
continuity of business enterprise and the existence of a valid business
purpose for the transaction. The judicially-developed step transaction
doctrine, wherein a series of formally separate steps are considered
together as component parts of an overall plan, must also be considered when
evaluating whether a transaction, in substance, qualifies as a valid
statutory merger under Code section 368(a)(1)(A).
4. Where a target shareholder exchanges his or her Community Federal
Common Stock for part First M&F Common Stock and part cash, the character of
any gain recognized by such shareholder will depend, on a shareholder-by-
shareholder basis, whether the cash has the effect of the distribution of a
dividend.
There are two applicable tests for this determination: (i) a test to see if
the hypothetical redemption of First M&F Common Stock (discussed below) is
"substantially disproportionate" with respect to the shareholder, and (ii) a
test to determine whether the hypothetical redemption of First M&F Common Stock
is "not essentially equivalent to a dividend," with both tests taking into
account the constructive stock ownership rules of Section 318(a) of the Code. If
either one of these tests is met, the Community Federal shareholder will be
entitled to long-term capital gain treatment if the shares of Community Federal
Common Stock were held for more than one year.
The determination of whether the exchange is "substantially disproportionate"
with respect to the Community Federal shareholder must be made by comparing the
interest each Community Federal shareholder actually receives in First M&F in
the Merger exchange with the interest such shareholder would have received in
First M&F if solely First M&F Common Stock had been received, followed by a
hypothetical redemption by First M&F. See CLARK V. COMMISSIONER, 489 U.S. 726
(1989); Rev. Rul. 93-61, 1993-2 C.B. 118. The deemed redemption will qualify as
"substantially disproportionate" if the shareholder experiences a more than 20
percent reduction in his proportionate interest in First M&F as a result
pursuant to section 302(b)(2) of the Code.
<PAGE>
Board of Directors
_______________, 1999
Page 5
The hypothetical redemption of First M&F Common Stock will be treated as
"not essentially equivalent to a dividend" if such redemption: (a) involves a
minority shareholder whose relative stock interest in First M&F Bank is minimal
and who exercises no control over the affairs of First M&F or (b) results in a
reduction of the former Community Federal shareholder's right to vote, to
participate in current earnings and accumulated surplus, or to share in First
M&F's net assets on liquidation.
IV. OPINION
In rendering our opinion, we have considered the applicable provisions of
the Code, Treasury Regulations, pertinent judicial authorities, interpretive
rulings of the Internal Revenue Service (the "Service") and such other
authorities as we have considered relevant.
Based upon and subject to the foregoing authorities, facts, and the
representations of the parties to the Merger transactions as stated in the
Certificates, and based upon our review of such documents and consideration of
such legal matters as we have deemed relevant and sufficient to enable us to
render an informed opinion, we are of the opinion that for federal income tax
purposes:
1. Provided that the proposed merger of Community Federal with and into
First M&F qualifies as a statutory merger under applicable state and federal
law, the Merger will constitute a reorganization within the meaning of
section 368(a)(1)(A) of the Code. First M&F and Community Federal will each
be "a party to a reorganization" within the meaning of section 368(b) of the
Code.
2. No gain or loss will be recognized by Community Federal upon the
transfer of all of its assets to First M&F and the assumption by First M&F
of the liabilities of Community Federal (Code sections 357(a) and 361(a)).
3. No gain or loss will be recognized by First M&F upon the receipt by
First M&F of all of the assets of Community Federal and the assumption by
First M&F of the liabilities to which the transferred assets are subject
(Code section 1032(a)).
4. A Community Federal shareholder whose adjusted basis in the shares
of Community Federal Common Stock surrendered in the transaction is less
than the value, as of the Effective Date, of the First M&F Common Stock plus
the amount of cash received will realize a gain on the transaction. Such
shareholders will recognize gain equal to the lesser of (i) the excess, if
any, of the value, as of the Effective Date, of the First M&F Common Stock
plus the amount of cash received, over the adjusted basis of the shares of
Community Federal Common Stock surrendered in the transaction, or (ii) the
amount of cash received. As discussed above, the character of such
recognized gain (i.e., as a dividend or capital gain) will depend upon
whether, on a shareholder-by-shareholder basis, the exchange of Community
Federal Common Stock for part First M&F Common Stock and part cash has the
effect of the distribution of a dividend.
5. The holding period of the First M&F Common Stock to be received by
the Community Federal shareholders (including any fractional share interests
to which they may be entitled) will include, in each instance, the period
during which the Community Federal Common Stock surrendered in exchange
therefor was held, provided that the Community Federal Common Stock is held
as a capital asset in the hands of the Community Federal shareholder on the
Effective Date of the Merger (Code section 1223(1)).
<PAGE>
Board of Directors
_______________, 1999
Page 6
6. The payment of cash to Community Federal shareholders in lieu of
fractional shares of First M&F Common Stock will be treated for federal
income tax purposes as if the fractional shares were distributed as part of
the reorganization exchange and then redeemed by First M&F. The cash
payments will be treated as having been received in full payment in exchange
for such fractional share interests, subject to the provisions and
limitations of section 302 of the Code (Rev. Rul. 66-365, 1966-2 C.B. 116;
Rev. Proc. 77-41, 1977-2 C.B. 574).
7. Where a dissenting Community Federal shareholder receives solely
cash in exchange for his or her Community Federal Common Stock, such cash
will be treated as having been received by the shareholder as a distribution
in redemption of his or her Community Federal Common Stock subject to the
provisions and limitations of Code section 302.
In rendering this opinion, we have not been requested nor have we undertaken
to make independent investigations to verify the various facts and
representations of the Parties in connection herewith. However, based upon, our
discussions with representatives of the Parties and our limited review of
certain background material, we believe that it is reasonable for us to rely on
such representations and statements.
Except as set forth above, we express no opinion as to the tax consequences
to any Party, whether federal, state, local or foreign, of the Merger or of any
transactions related to the Merger or contemplated by the Merger. No other
opinions are intended nor should they be inferred. An opinion of counsel has
no binding effect upon the Service and no assurances can be given that the
conclusions reached in any opinion will not be contested by the Service, or if
contested, will be sustained by a court.
This opinion is being furnished for the sole benefit of First M&F and
Community Federal, together with their respective shareholders, in connection
with the Merger and may not be used or relied upon for any other purpose and
may not be circulated, quoted or otherwise referred to for any other purpose
without our express written consent.
Very truly yours,
WATKINS LUDLAM WINTER & STENNIS, P.A.
EXHIBIT 23.1
INDEPENDENT AUDITORS CONSENT OF SHEARER TAYLOR & CO.
[LETTERHEAD OF SHEARER TAYLOR & CO.]
We have issued our report dated February 5, 1999, 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, 1998. 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.
Ridgeland, Mississippi
August 20, 1999
EXHIBIT 23.2
[LETTERHEAD OF TAYLOR, POWELL, WILSON & HARTFORD, P.A.]
August 16, 1999
Ladies and Gentlemen:
We have issued our report dated January 14, 1998, accompanying the
consolidated financial statements of First Bolivar Capital Corporation, which
was subsequently merged into First M&F Corporation on December 31, 1998. The
report of Shearer Taylor & Co., P.A. dated February 5, 1999, accompanying the
consolidated financial statements of First M&F Corporation, refers to our report
insofar as it relates to the amounts included for First Bolivar Capital
Corporation as of December 31, 1997, and for the years ended December 31, 1997
and 1996.
We hereby consent to the incorporation by reference of the Shearer Taylor
& Co. P.A. report which refers to our report in this Registration Statement on
Form S-4.
Sincerely,
/s/ Taylor, Powell, Wilson & Hartford, P.A.
Taylor, Powell, Wilson & Hartford, P.A.
Greenwood, Mississippi
EXHIBIT 23.3
CONSENT OF ARTHUR ANDERSEN LLP
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our report dated October 8, 1998
included in Community Federal Bancorp, Inc.'s Form 10-K/A for the year ended
September 30, 1998 and to all references to our Firm included in or made a part
of this Registration Statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Birmingham, Alabama
August 20, 1999
EXHIBIT 23.5
[LETTERHEAD OF MORGAN KEEGAN & CO., INC.]
August 19, 1999
Pursuant to the penultimate paragraph of our letter to the Board of Directors
of First M&F Corporation dated July 2, 1999, we hereby consent to the use of our
opinion attached as Appendix D to the Registration Statement on Form S-4 of
First M&F Corporation, and confirmed as of this date, and to the references to
such opinion and to our firm contained in the section titled "-Opinion of
Financial Advisor to First M&F" of the Proxy Statement/Prospectus that is a part
of said Registration Statement.
Very truly yours,
/s/ Morgan Keegan & Company, Inc.
MORGAN KEEGAN & COMPANY, INC.
Memphis, Tennessee
EXHIBIT 23.6
CONSENT OF TRIDENT SECURITIES
August 20, 1999
We hereby consent to the use of our opinion attached as Appendix E to the Joint
Proxy Statement-Prospectus included in the Registration Statement on Form S-4 of
First M&F Corporation, and to the references to such opinion and to our firm
contained in the Joint Proxy Statement-Prospectus that is a part of said
Registration Statement.
Very truly yours,
/s/ Trident Securities
TRIDENT SECURITIES
A Division of McDonald Investments, Inc.
EXHIBIT 99.1
FIRST M&F CORPORATION
221 WASHINGTON STREET
KOSCIUSKO, MISSISSIPPI 39090
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints ____________, _______________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 M&F Corporation
held of record by the undersigned on __________, 1999, at the special meeting of
stockholders to be held on _________, 1999, at _:__ p.m., local time, and at any
and all adjournments thereof as follows:
1. The proposal to approve and adopt the Agreement and Plan of Merger among
First M&F and Community Federal Bancorp, Inc. whereby Community Federal
will be merged into First M&F.
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 and Proposal 2.
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 corporation, 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 ___________________, 1999
_____________________________ _______________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED
ENVELOPE
EXHIBIT 99.2
COMMUNITY FEDERAL BANCORP, INC.
333 COURT STREET
TUPELO, MISSISSIPPI 38801
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints ____________, _______________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 Community Federal
Bancorp, Inc. held of record by the undersigned on __________, 1999, at the
special meeting of stockholders to be held on __________, 1999, at _:__ p.m.,
local time, and at any and all adjournments thereof as follows:
1. The proposal to approve and adopt the Agreement and Plan of Merger and
related merger agreements among First M&F Corporation and Community
Federal whereby Community Federal will be merged into First M&F.
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 corporation, 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 ___________________, 1999
______________________________ ______________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED
ENVELOPE
