<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- ---
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
---------------------------------
OR
- ---
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-14417
-------------------------------------------
FIRST LIBERTY FINANCIAL CORP.
- ------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-1680650
- ------------------------------------------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)
201 Second Street, Macon, Georgia 31297
- ------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(912) 743-0911
- ------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Exhibit index appears on page 21.
There were 4,001,578 shares of Common Stock outstanding as of
May 9, 1996.
Page 1 of 65
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FIRST LIBERTY FINANCIAL CORP.
-----------------------------
QUARTERLY REPORT ON FORM 10-Q
-----------------------------
FOR THE QUARTER ENDED MARCH 31, 1996
------------------------------------
Table of Contents
PART I - FINANCIAL INFORMATION
- ------------------------------
Item Page
- ---- ----
1. Financial Statements:
Consolidated Statements of Financial Condition 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 8
Independent Accountants' Report 11
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
PART II - OTHER INFORMATION
- ---------------------------
4. Submission of Matters to a Vote of Securities Holders 19
6. Exhibits and Reports on Form 8-K 19
Signatures 20
Index of Exhibits 21
2
<PAGE> 3
First Liberty Financial Corp. and Subsidiaries
- ----------------------------------------------
Consolidated Statements of Financial Condition
- ----------------------------------------------
(Unaudited)
- -----------
March 31, September 30,
--------- -------------
1996 1995
- ----------------------------------------------------------------------------
(dollars in thousands)
Assets:
- -------
Cash and due from banks $ 28,212 $ 24,610
Federal funds sold and repurchase agreements 2,370 22,652
Securities available-for-sale, at market value 173,392 167,613
Loans available-for-sale, net, at market value 57,603 22,282
Loans, net 648,825 625,641
Accrued interest receivable 6,712 6,406
Premises and equipment, net 21,750 22,194
Real estate, net 3,937 4,053
Intangible assets 10,768 11,315
Advances to attorneys for loans originated 19,253 3,220
Other assets 8,872 9,288
-------- --------
Total assets $981,694 $919,274
======== ========
Liabilities and Stockholders' Equity:
- -------------------------------------
Deposits $724,676 $719,226
Notes payable and other borrowed money 125,000 88,500
Subordinated debentures 12,588 12,501
Securities sold under agreements to repurchase 13,260 4,315
Checks payable on loans originated 17,246 7,119
Other liabilities 14,290 16,944
-------- --------
Total liabilities 907,060 848,605
-------- --------
Commitments and contingencies - -
Stockholders' equity:
Series B, 6.00% Cumulative Convertible
Preferred stock ($25.00 stated value, 302,580
shares authorized, issued and outstanding) 7,564 7,564
Common stock ($1.00 par value, 25,000,000
shares authorized, 4,003,918 and 3,982,616
shares issued, respectively, and 3,981,578 and
3,960,276 shares outstanding, respectively) 4,004 3,983
Additional paid-in capital 25,498 25,376
Retained earnings 37,177 33,584
Net unrealized gain on securities available-
for-sale, net of taxes 660 431
Treasury stock at cost (22,340 shares) (269) (269)
-------- --------
Total stockholders' equity 74,634 70,669
-------- --------
Total liabilities and stockholders' equity $981,694 $919,274
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
3
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First Liberty Financial Corp. and Subsidiaries
- ----------------------------------------------
Consolidated Statements of Income
- ---------------------------------
(Unaudited)
- -----------
<TABLE>
<CAPTION> Three Months Ended Six Months Ended
------------------ ----------------
March 31, March 31,
-----------------------------------------------
1996 1995 1996 1995
- --------------------------------------------------------------------------------------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest Income:
- ----------------
Loans $14,920 $12,167 $29,848 $23,176
Securities 3,102 2,851 6,114 5,254
Federal funds sold 115 141 417 227
Other interest income 22 - 39 -
------- ------- ------- -------
Total interest income 18,159 15,159 36,418 28,657
------- ------- ------- -------
Interest Expense:
- -----------------
Deposits 7,823 6,027 15,855 11,461
Short-term borrowings 1,448 1,359 2,823 2,220
Long-term borrowings 692 729 1,319 1,463
------- ------- ------- -------
Total interest expense 9,963 8,115 19,997 15,144
------- ------- ------- -------
Net interest income 8,196 7,044 16,421 13,513
Provision for estimated losses on loans 300 300 600 600
------- ------- ------- -------
Net interest income after provision
for estimated losses on loans 7,896 6,744 15,821 12,913
------- ------- ------- -------
Non-Interest Income:
- --------------------
Loan servicing fees 592 665 1,205 1,292
Gain on sale of investment securities - 21 11 21
Gain (loss) on sale of loans and
mortgage-backed securities 440 (7) 823 (4)
Gain on sale of servicing 281 368 545 817
Deposit account service charges 1,041 791 2,134 1,582
Other income 214 124 209 211
------- ------- ------- -------
Total non-interest income 2,568 1,962 4,927 3,919
------- ------- ------- -------
Total net and non-interest income 10,464 8,706 20,748 16,832
------- ------- ------- -------
Non-Interest Expense:
- ---------------------
Compensation, payroll taxes and 3,493 2,910 7,124 5,764
benefits
Occupancy and equipment 898 687 1,744 1,354
Advertising 225 233 451 451
Professional fees 129 159 277 301
Data processing 202 182 422 330
Federal deposit insurance premiums 342 431 713 821
Amortization of intangible assets 278 136 557 248
Net cost of operation of other real 212 47 220 243
estate
Other expenses 865 833 1,806 1,540
------- ------- ------- -------
Total non-interest expense 6,644 5,618 13,314 11,052
------- ------- ------- -------
Income before income tax expense 3,820 3,088 7,434 5,780
Income tax expense 1,341 1,061 2,580 1,988
------- ------- ------- -------
Net income 2,479 2,027 4,854 3,792
Dividends on preferred stock 113 279 227 519
------- ------- ------- -------
Net income applicable to common
stockholders $ 2,366 $ 1,748 $ 4,627 $ 3,273
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE> 5
First Liberty Financial Corp. and Subsidiaries
- ----------------------------------------------
Consolidated Statements of Income, continued
- --------------------------------------------
(Unaudited)
- -----------
<TABLE>
<CAPTION> Three Months Ended Six Months Ended
------------------ ----------------
March 31, March 31,
-----------------------------------------------
1996 1995 1996 1995
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Earnings Per Common Share:
- --------------------------
Primary $ .58 $ .56 $ 1.14 $ 1.06
Fully diluted $ .56 $ .48 $ 1.10 $ .91
Dividends Per Common Share: $ .13 $ .10 $ .26 $ .20
- ---------------------------
Average Number of Shares Outstanding:
- -------------------------------------
Primary 4,059,959 3,079,468 4,048,929 3,080,100
Fully diluted 4,459,626 4,217,271 4,449,159 4,155,611
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE> 6
First Liberty Financial Corp. and Subsidiaries
- ----------------------------------------------
Consolidated Statements of Cash Flows
- -------------------------------------
(Unaudited)
- -----------
Six Months Ended
----------------
March 31,
--------------------------
1996 1995
- -----------------------------------------------------------------------------
(dollars in thousands)
Operating Activities:
- ---------------------
Cash flows from operating activities:
Net income $ 4,854 $ 3,792
Adjustments to reconcile net income
to cash provided by (used in) operations:
Depreciation 949 854
Amortization of loan fees (20) (356)
Provision for estimated losses
on loans and real estate 790 1,012
Amortization of intangibles 557 248
Dividends received on stock (136) (118)
Gain on sale of loans and securities (834) (17)
Loans available-for-sale:
Disbursements (68,694) (4,924)
Purchases (115,189) (27,809)
Sales 149,193 37,479
Repayments 172 436
Increase in accrued interest receivable (306) (577)
Increase (decrease) in accrued interest payable 43 (408)
Other, net (3,177) 3,596
-------- --------
Total adjustments (36,652) 9,416
-------- --------
Net cash provided by (used in)
operating activities (31,798) 13,208
-------- --------
Investing Activities:
- ---------------------
Cash flows from investing activities:
Net decrease (increase) in federal funds
sold and repurchase agreements 20,282 (2,089)
Investment securities available-for-sale:
Purchases (5) (8,261)
Sales 819 28,645
Maturities 3,800 2,000
Mortgage-backed securities available-for-sale:
Purchases (26,598) (43,095)
Sales - 14,785
Repayments 16,703 11,213
Loan disbursements (198,372) (158,016)
Loan purchases (2,363) (7,802)
Loan repayments 175,550 123,277
Purchases of premises and equipment (506) (746)
Proceeds from sales of real estate 2,288 1,255
Net increase in advances to attorneys
for loans originated (16,033) (1,521)
Net cash received in acquisitions - 88,141
-------- --------
Net cash provided by (used in)
investing activities (24,435) 47,786
-------- --------
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE> 7
First Liberty Financial Corp. and Subsidiaries
- ----------------------------------------------
Consolidated Statements of Cash Flows, continued
- ------------------------------------------------
(Unaudited)
- -----------
Six Months Ended
----------------
March 31,
------------------------
1996 1995
- ----------------------------------------------------------------------------
(dollars in thousands)
Financing Activities:
- ---------------------
Cash flows from financing activities:
Net increase (decrease) in deposits 5,366 (17,601)
Notes payable and other borrowed money:
Proceeds 270,000 167,500
Repayments (233,500) (203,415)
Net increase (decrease) in securities sold
under agreements to repurchase 8,945 (1,036)
Net increase (decrease) in checks payable
on loans originated 10,127 (789)
Issuance of common stock 107 -
Dividends paid on stock (1,210) (541)
-------- --------
Net cash provided by (used in)
financing activities 59,835 (55,882)
-------- --------
Net increase in cash and due from banks 3,602 5,112
Cash and due from banks beginning of period 24,610 16,293
-------- --------
Cash and due from banks end of period $ 28,212 $ 21,405
======== ========
Supplemental Disclosures of
- ---------------------------
Cash Flow Information:
----------------------
Cash paid during the year for:
Interest $ 19,954 $ 15,217
Income taxes 2,927 1,335
Noncash investing and financing activities:
Real estate foreclosed $ 1,882 $ 682
Financing of sales of foreclosed real estate 174 408
Dividends declared, unpaid on preferred stock 113 279
Dividends declared, unpaid on common stock 518 301
Acquisitions:
Fair value of assets acquired - $(62,006)
Fair value of liabilities assumed - 150,147
--------
Net cash received - $ 88,141
========
The accompanying notes are an integral part of the consolidated financial
statements.
7
<PAGE> 8
FIRST LIBERTY FINANCIAL CORP. AND SUBSIDIARIES
----------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(Unaudited)
-----------
1. Summary of Significant Accounting Policies
------------------------------------------
The accounting and reporting policies of First Liberty Financial Corp. and
Subsidiaries ("the Company") conform to generally accepted accounting
principles and to general practices within the savings and loan industry. The
interim consolidated financial statements included herein are unaudited but
reflect all adjustments which, in the opinion of management, are necessary
for a fair presentation of the consolidated financial position, results of
operations and cash flows for the interim periods presented. All adjustments
reflected in the interim financial statements are of a normal recurring
nature. Such financial statements should be read in conjunction with the
financial statements and notes thereto and the report of independent
accountants included in the Company's Form 10-K Annual Report for the fiscal
year ended September 30, 1995. The year end balance sheet data was derived
from audited financial statements, but does not include all disclosures
required by generally accepted accounting principles. The results of
operations for the three and six months ended March 31, 1996 are not
necessarily indicative of the results to be expected for the full year.
Certain reclassifications have been made to the prior year consolidated
financial statements to conform to the current year consolidated financial
statements presentation.
2. Earnings Per Share
------------------
Earnings per share are computed based on the weighted average number of shares
outstanding including common stock equivalents, if dilutive. For computing
primary earnings per share, stock options exercisable at a price less than
average market price during the period are considered common stock equivalents.
Fully diluted earnings per share assumes (i) the conversion, if dilutive, of
all convertible debt as of the beginning of the year (or date of issue), with
the elimination of the related interest expense net of applicable income
taxes (ii) the exercise of all stock options below the market price at
March 31 or the average market price for the quarter, and (iii) the
conversion, if dilutive, of all convertible preferred stock as of the
beginning of the year (or date of issue), with the elimination of dividends
declared.
3. Sale of Servicing
-----------------
During the three and six months ended March 31, 1996, Liberty Mortgage
Corporation ("Liberty Mortgage"), the Company's mortgage banking subsidiary,
sold bulk loan servicing rights with aggregate principal balances of $24
million and $67 million, respectively, compared to $85 million and $125
million, respectively, a year earlier. This resulted in the recognition of
a gain on the sale of servicing of $281,000 and $545,000 for the three and
six months ended March 31, 1996 compared to $368,000 and $817,000,
respectively, for the same periods a year ago. The servicing rights sold
generally related to loans originated for sale and sold within the last six
months. The servicing sales
8
<PAGE> 9
FIRST LIBERTY FINANCIAL CORP. AND SUBSIDIARIES
----------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(Unaudited)
-----------
during both the six months ended March 31, 1996 and 1995 included principal
balances of $21 million and $47 million, respectively, in servicing rights
which Liberty Mortgage granted recourse to the seller. Accordingly, the
gains related to such rights of $250,000 for the six months ended March 31,
1996 was deferred to be recognized in the period that the recourse expires.
The related gain of $552,000 for the six months ended March 31, 1995 was
deferred and recognized in the fourth quarter of fiscal 1995.
4. Mortgage Servicing Rights
-------------------------
Liberty Mortgage invests in mortgage servicing rights ("MSRs") resulting from
loans originated or purchased through correspondent relationships. The
investment in MSRs has the effect of reducing the basis in the loans purchased
or originated, and increasing the gain (or reducing the loss) on sales of
loans. The following table outlines the activity in MSRs for the three and six
month periods ended March 31, 1996 and 1995 (dollars in thousands).
Three Months Ended Six Months Ended
------------------ ----------------
March 31, March 31,
-------------------------------------
1996 1995 1996 1995
-------------------------------------
Capitalized $1,217 $ 28 $1,959 $ 66
Sold 13 318 45 380
Amortized 128 128 222 255
Net Investment at March 31, 3,768 2,347
Prior to October 1, 1995 Liberty Mortgage recorded mortgage servicing rights
relating only to loans purchased. Effective October 1, 1995 the Company
adopted Statement of Financial Accounting Standards ("SFAS") No. 122
"Accounting for Mortgage Servicing Rights". This statement amends SFAS
No. 65 "Accounting for Certain Mortgage Banking Activities" and requires,
among other things, a mortgage banking enterprise to recognize as separate
assets MSRs regardless of whether the MSRs are purchased or originated.
As a result of the adoption of SFAS No. 122, the Company capitalized
$439,000 and $812,000 and amortized $21,000 and $27,000 MSRs for the three
and six months ended March 31, 1996, respectively, associated with loans
originated.
5. Acquisitions
------------
On January 19, 1996 the Company announced an agreement to acquire Middle
Georgia Bank in Byron, Georgia. Middle Georgia Bank has two offices,
approximately $110 million in assets, $100 million in deposits, and $63
million in loans. This transaction is expected to close in the fourth
quarter of fiscal 1996, subject to regulatory approval. The transaction,
if approved, is expected to be accounted for as a pooling-of-interests.
9
<PAGE> 10
On September 15, 1995 the Company acquired by merger Tifton Banks, Inc. of
Tifton Georgia, and its subsidiary, Tifton Bank & Trust Company ("Tifton
Bank"). Tifton Bank, on the date of acquisition, held the following
approximate balances: loans of $42 million, cash and investments of
$21 million, premises and equipment of $1 million and deposits of $45
million. Intangible assets resulting from the acquisition amounted to
approximately $2 million.
On March 24, 1995, the Company acquired three banking offices located in
Sylvania, Vidalia and Waycross, Georgia from a commercial bank. Total assets
acquired were approximately $3 million and total cash received and deposits
assumed were approximately $95 million. Intangible assets resulting from the
acquisition were approximately $4 million.
On December 2, 1994, the Company acquired Central Banking Company of
Swainsboro, Georgia and its subsidiary The Central Bank ("Central Bank").
Central Bank on the date of acquisition, held the following approximate
balances: loans of $21 million, cash and investments of $34 million,
premises and equipment of $1 million and deposits of $52 million. Intangible
assets resulting from the acquisition amounted to approximately $2 million.
The financial institutions acquired during fiscal 1995 were accounted for as
purchases and accordingly, income and expenses of such institutions are
included in the consolidated statements of the Company from the date of
acquisition forward.
10
<PAGE> 11
Coopers & Lybrand L.L.P.
1100 Campanile Building
1155 Peachtree Street
Atlanta, Georgia 30309
Report of Independent Accountants
- ---------------------------------
To the Board of Directors
First Liberty Financial Corp.
We have reviewed the accompanying consolidated financial statements of First
Liberty Financial Corp. and Subsidiaries as of March 31, 1996 and 1995 and for
the three-month and six-months periods then ended. These financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Atlanta, Georgia
May 6, 1996
11
<PAGE> 12
FIRST LIBERTY FINANCIAL CORP. AND SUBSIDIARIES
----------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
-------------------------------------------------------------
AND FINANCIAL CONDITION
-----------------------
Overview
- --------
First Liberty Financial Corp. is a unitary savings and loan holding company for
First Liberty Bank ("Liberty Bank"). The consolidated financial statements
include the accounts of First Liberty Financial Corp., Liberty Bank, a wholly-
owned subsidiary of First Liberty Financial Corp., and Liberty Mortgage
Corporation ("Liberty Mortgage"), a wholly-owned subsidiary of Liberty Bank
(collectively known as "the Company").
Liquidity
- ---------
The Company's primary sources of funds are deposits, loan repayments, sales and
maturities of securities, loan sales, repurchase agreements, advances from the
Federal Home Loan Bank of Atlanta and various other borrowings. Deposits
provide a source of funds that are highly dependent on market and other
conditions, while loan repayments are a relatively stable source of funds.
The liquidity of Liberty Bank's operation is measured by the ratio of cash and
short-term investments (as defined by federal regulations) to the sum of
withdrawable deposits and borrowings maturing within one year. Federal
regulations currently require institutions to maintain a liquidity ratio of at
least 5%. Liberty Bank was in compliance with its requirements at March 31,
1996.
Capital Resources
- -----------------
The Office of Thrift Supervision ("OTS") capital regulations include a core
capital requirement, a tangible capital requirement and a risk-based capital
requirement. Subject to certain exceptions, each of these capital standards
must be no less stringent than the capital standards applicable to national
banks, although the risk-based capital requirement for savings institutions may
deviate from the risk-based capital standards applicable to national banks to
reflect interest rate risk or other risks if the deviations in the aggregate
do not result in materially lower levels of capital being required of savings
institutions than would be required of national banks.
The following table reflects Liberty Bank's compliance with regulatory capital
requirements at March 31, 1996 (dollars in thousands):
Actual for Liberty Bank Regulatory Requirement
- -----------------------------------------------------------
% of % of
Capital Adjusted Adjusted Excess
Standard Amount Assets Amount Assets Amount
- ---------------------------------------------------------------------
Tangible $56,966 5.86% $14,575 1.50% $42,391
- ---------------------------------------------------------------------
Core $58,798 6.04% $29,205 3.00% $29,593
- ---------------------------------------------------------------------
Risk-based $77,907 11.18% $55,731 8.00% $22,176
- ---------------------------------------------------------------------
12
<PAGE> 13
The Federal Deposit Insurance Corporation Improvement Act of 1991 establishes
five classifications for institutions based upon the capital requirements.
Each appropriate banking agency, such as the OTS for Liberty Bank, must
establish by regulation the parameters of each such classification. Based
on final regulations promulgated by the OTS, Liberty Bank is considered well-
capitalized. Failure to maintain that status could result in greater
regulatory oversight or restrictions on Liberty Bank's activities.
Commitments
- -----------
Commitments to originate or purchase loans are generally made at the market
rate prevailing at the time of issuance. The Company had open commitments to
originate or purchase residential mortgage loans of approximately $122 million,
including $1.7 million to be held in portfolio and $52 million on which the
interest rate had not been locked-in at March 31, 1996. Commitments to sell
residential mortgage loans and mortgage-backed securities for mandatory
delivery was approximately $81 million at March 31, 1996. Also at March 31,
1996, the Company bought $8.0 million of optional commitments to sell
residential mortgage loans. Loans in process (which represent undisbursed
loan commitments related to construction loans) and unused lines of credit
amounted to $80 million at March 31, 1996.
Results of Operations
- ---------------------
The Company's consolidated net income for the three and six months ended March
31, 1996 was $2.5 million and $4.9 million, respectively, compared to $2.0
million and $3.8 million for the three and six months ended March 31, 1995,
respectively. The Company's net income is affected by the level of its non-
interest income, non-interest expense and the level of earnings of its mortgage
banking operations. However, the Company's net income is most significantly
affected by the difference between interest income on its loan and investment
portfolios and the interest expense of its deposits and borrowings ("net
interest income"). Net interest income is affected by several factors, but is
most affected by the volume of and interest rates on interest-earning assets
and interest-bearing liabilities.
13
<PAGE> 14
The following tables reflect the effective yields and costs of funds for the
three and six month periods ended March 31, 1996 and 1995. Average balances,
yields and costs of funds have been restated to reflect the conversion from
using month-end to daily balances for computing averages (dollars in thousands:)
Average Balance Rate/Yield
--------------- ----------
Three Months Ended Three Months Ended
------------------ ------------------
March 31, March 31,
--------- ---------
1996 1995 1996 1995
------------------- -----------------
Interest-Earning Assets:
- ------------------------
Loans $667,502 $546,118 8.94% 8.91%
Securities 172,545 174,416 7.19% 6.54%
Federal funds sold and
repurchase agreements 8,600 9,289 5.35% 6.07%
-------- ------- ---- ----
All interest-earning assets $848,647 $729,823 8.55% 8.31%
======== ======== ---- ----
Interest-Bearing Liabilities:
- -----------------------------
Deposits $717,484 $618,262 4.36% 3.90%
Borrowings 128,988 114,728 6.64% 7.28%
-------- -------- ---- ----
All interest-bearing liabilities $846,472 $732,990 4.71% 4.43%
======== ======== ---- ----
Interest rate spread 3.84% 3.88%
- -------------------- ==== ====
Interest income as a percentage
- -------------------------------
of average earning assets 3.85% 3.86%
------------------------- ==== ====
Average Balance Rate/Yield
--------------- ----------
Six Months Ended Six Months Ended
---------------- ----------------
March 31, March 31,
--------- ---------
1996 1995 1996 1995
---------------- ---------------
Interest-Earning Assets:
- ------------------------
Loans $654,806 $525,539 9.12% 8.82%
Securities 170,341 163,407 7.18% 6.43%
Federal funds sold and
repurchase agreements 13,286 7,855 6.28% 5.78%
-------- -------- ---- ----
All interest-earning assets $838,433 $696,801 8.68% 8.23%
======== ======== ---- ----
Interest-Bearing Liabilities:
- -----------------------------
Deposits $717,397 $605,164 4.42% 3.79%
Borrowings 117,794 99,022 7.03% 7.44%
-------- -------- ---- ----
All interest-bearing liabilities $835,191 $704,186 4.79% 4.30%
======== ======== ---- ----
Interest rate spread 3.89% 3.92%
- -------------------- ==== ====
Interest income as a percentage
- -------------------------------
of average earning assets 3.91% 3.88%
------------------------- ==== ====
14
<PAGE> 15
The following table describes the extent to which changes in interest rates and
changes in volume of interest-earning assets and interest-bearing liabilities
have affected the Company's interest income and expense for the six month
period ended March 31, 1996 and the six month period ended March 31, 1995
(dollars in thousands):
March 31, 1996 vs March 31, 1995
-------------------------------------------
Due To
-------------------------------------------
Rate/
Rate Volume Volume Total
-------- -------- ---------- -------
Changes in Interest Income:
- ---------------------------
Loans $ 780 $5,700 $ 192 $6,672
Securities 611 223 26 860
Federal funds sold and
repurchase agreements 19 157 14 190
------ ------ ------ ------
Total interest income 1,410 6,080 232 7,722
------ ------ ------ ------
Changes in Interest Expense:
- ----------------------------
Deposits 1,913 2,126 355 4,394
Borrowings (201) 698 (38) 459
------ ------ ------ ------
Total interest expense 1,712 2,824 317 4,853
------ ------ ------ ------
Net interest income $ (302) $3,256 $ (85) $2,869
====== ====== ====== ======
The Company's provision for estimated loan losses remained at $300,000 and
$600,000, respectively, during the three and six months ended March 31, 1996
and March 31, 1995. There were net charge-offs to the loan loss reserve of
$267,000 and $413,000 during the three and six months ended March 31, 1996,
respectively, compared to net recoveries of $243,000 and $221,000,
respectively, for the same periods a year earlier. Loan loss reserves at
March 31, 1996 were $8.0 million, or 269% of nonperforming loans, or 1.22%
of loans held for investment, compared to $7.0 million, or 387% of
nonperforming loans, or 1.25% of loans held for investment at March 31, 1995.
The table below summarizes nonperforming assets at March 31, 1996 and March 31,
1995. Nonperforming assets consist of nonaccrual loans, foreclosed real
estate, other repossessed assets, and loans with interest or principal past
due 90 days or more which are still accruing (dollars in thousands).
March 31,
---------------------------
1996 1995
---------------------------
Nonaccrual loans $2,972 $1,798
Foreclosed real estate 4,086 7,220
Other repossessed assets 200 132
------ ------
Total nonperforming assets $7,258 $9,150
====== ======
Total nonperforming assets as
a percentage of total assets .74% 1.15%
====== ======
Real estate owned remained relatively unchanged at approximately $4.0 million
at March 31, 1996, as compared to September 30, 1995. Activity in real estate
owned during the six months ended March 31, 1996 reflected foreclosures
totaling $1.9 million, sales of $2.6 million and capital expenditures totaling
$628,000.
15
<PAGE> 16
Liberty Mortgage originated loans during the three and six months ended
March 31, 1996 totaling $113 million and $190 million, respectively, compared
to $28 million and $65 million for the same periods a year earlier.
Liberty Mortgage invests in mortgage servicing rights ("MSRs") resulting from
loans originated or purchased through correspondent relationships. The
investment in MSRs has the effect of reducing the basis in the loans purchased
or originated, and increasing the gain (or reducing the loss) on sales of
loans. The following table outlines the activity in MSRs for the three and
six month periods ended March 31, 1996 and 1995 (dollars in thousands).
Three Months Ended Six Months Ended
--------------------------------------
March 31, March 31,
--------------------------------------
1996 1995 1996 1995
--------------------------------------
Capitalized $1,217 $ 28 $1,959 $ 66
Sold 13 318 45 380
Amortized 128 128 222 255
Net Investment at March 31, 3,768 2,347
Prior to October 1, 1995 Liberty Mortgage recorded mortgage servicing rights
relating only to loans purchased. Effective October 1, 1995 the Company
adopted Statement of Financial Accounting Standards ("SFAS") No. 122
"Accounting for Mortgage Servicing Rights". This statement amends SFAS
No. 65 "Accounting for Certain Mortgage Banking Activities" and requires,
among other things, a mortgage banking enterprise to recognize as separate
assets MSRs regardless of whether the MSRs are purchased or originated. As
a result of the adoption of SFAS No.122, the Company capitalized $439,000
and $812,000 and amortized $21,000 and $27,000 MSRs for the three and six
months ended March 31, 1996, respectively, associated with loans originated.
During the three and six months ended March 31, 1996, Liberty Mortgage sold
bulk loan servicing rights with aggregate principal balances of $24 million
and $67 million, respectively, compared to $85 million and $125 million,
respectively, a year earlier. This resulted in the recognition of a gain on
the sale of servicing of $281,000 and $545,000 for the three and six months
ended March 31, 1996 compared to $368,000 and $817,000, respectively, for the
same periods a year ago. The servicing rights sold generally related to
loans originated for sale and sold within the last six months. The
servicing sales during the periods ended March 31, 1996 and March 31, 1995
included principal balances of $21 million and $47 million, respectively, in
servicing rights which Liberty Mortgage granted recourse to the seller.
Accordingly, the gains related to such rights of $250,000 for the six months
ended March 31, 1996 was deferred to be recognized in the period that the
recourse expires. The related gain of $552,000 for the six months ended
March 31, 1995 was deferred and recognized in the fourth quarter of
fiscal 1995.
Non-interest income (net of gains on the sale of assets) increased $267,000 and
$463,000 during the three and six months ended March 31, 1996 as compared to
the same periods a year earlier. The significant contributor to this
variance was the increase in deposit account service charges of $250,000
or 32% and $552,000 or 35% for the same periods as compared to last year
resulting from average transaction accounts increasing 30% from March 1995
to March 1996.
16
<PAGE> 17
Non-interest expense (net of other real estate operations) for the three and
six months ended March 31, 1996 increased $861,000 and $2.3 million,
respectively, over the same periods a year ago. The acquisitions during
fiscal 1995 were largely responsible for the increases. Approximated
expenses directly relating to the acquisitions for the current periods are
as follows (dollars in thousands).
Three Months Six Months
---------------------------
Ended Ended
---------------------------
March 31,1996
---------------------------
Compensation, taxes and benefits $ 427 $1,017
Occupancy and equipment 127 272
Advertising 12 24
Professional fees 2 23
Data processing 13 51
Federal deposit insurance premiums 71 148
Amortization of intangibles 143 308
Other 82 219
------ ------
Total $ 877 $2,062
====== ======
The net cost of operations of other real estate increased by $165,000 for the
three months ended March 31, 1996 and decreased $23,000 for the six months then
ended as compared to the same periods a year earlier. Contributing to these
variances are the following (dollars in thousands).
Three Months Ended Six Months Ended
------------------------------------
March 31, March 31,
------------------------------------
1996 1995 1996 1995
------------------------------------
Provisions for estimated losses $186 $274 $190 $412
Net losses (gains) on sales (4) (179) (24) (172)
Net expense (income) from operations 30 (48) 54 3
---- ---- ---- ----
Net cost of operation of other
real estate $212 $ 47 $220 $243
==== ==== ==== ====
Accounting for Income Taxes
- ---------------------------
The Company's effective income tax rate, as well as the marginal income tax
rate, for the six months ended March 31, 1996 and 1995 was approximately 34%.
The Company's management has determined that it is more likely than not that
its deferred tax assets will be realized. This is based on the existence of
taxable income in the form of future reversals of existing taxable temporary
differences and taxable income in prior carryback years that is sufficient
to allow realization of the tax benefit of the Company's existing deductible
temporary differences. The Company is not aware of any material
uncertainties existing at March 31, 1996 that may affect the realization of
the Company's deferred tax assets. The Company evaluates the realizability
of deferred tax assets quarterly by assessing the need for a valuation
allowance.
Acquisitions
- ------------
On January 19, 1996 the Company announced an agreement to acquire Middle
Georgia Bank in Byron, Georgia. Middle Georgia Bank has two offices,
approximately $110 million in assets, $100 million in deposits, and $63
million in loans. This transaction is expected to close in the fourth
quarter of fiscal 1996, subject to regulatory approval. The transaction, if
approved, is expected to be accounted for as a pooling-of-interests.
17
<PAGE> 18
On September 15, 1995 the Company acquired by merger Tifton Banks, Inc. of
Tifton Georgia, and its subsidiary, Tifton Bank & Trust Company ("Tifton
Bank"). Tifton Bank, on the date of acquisition, held the following
approximate balances: loans of $42 million, cash and investments of
$21 million, premises and equipment of $1 million and deposits of
$45 million. Intangible assets resulting from the acquisition amounted to
approximately $2 million.
On March 24, 1995, the Company acquired three banking offices located in
Sylvania, Vidalia and Waycross, Georgia from a commercial bank. Total assets
acquired were approximately $3 million and total cash received and deposits
assumed were approximately $95 million. Intangible assets resulting from the
acquisition were approximately $4 million.
On December 2, 1994, the Company acquired Central Banking Company of
Swainsboro, Georgia and its subsidiary The Central Bank ("Central Bank").
Central Bank on the date of acquisition, held the following approximate
balances: loans of $21 million, cash and investments of $34 million,
premises and equipment of $1 million and deposits of $52 million.
Intangible assets resulting from the acquisition amounted to approximately
$2 million.
The financial institutions acquired during fiscal 1995 were accounted for as
purchases and accordingly, income and expenses of such institutions are
included in the consolidated statements of the Company from the date of
acquisition forward.
18
<PAGE> 19
PART II - Other Information
- ---------------------------
Item 4. Submission of Matters to a Vote of Securities Holders
- ------- -----------------------------------------------------
The Registrant's 1996 Annual Meeting of Stockholders was held on January
31, 1996. The following directors were elected for terms expiring at
the 1997 annual meeting - Melvin I. Kruger and Jo Slade Wilbanks. The
following directors were elected for terms expiring at the 1998 annual
meeting - F. Don Bradford and Richard W. Carpenter. The following
directors were elected for terms expiring at the 1999 annual meeting -
Thomas H. McCook, C. Lee Ellis and Robert F. Hatcher. The votes for
each nominees were as follows:
For Withhold
----------- -----------
F. Don Bradford 3,484,443 89,159
Richard W. Carpenter 3,479,268 94,334
C. Lee Ellis 3,484,367 89,235
Robert F. Hatcher 3,484,892 88,710
Mevlin I. Kruger 3,483,769 89,833
Thomas H. McCook 3,484,592 89,010
Jo Slade Wilbanks 3,482,800 90,802
The other matters voted upon at the meeting, and the respective votes,
abstentions and broker non-votes as to each such matters, were as
follows:
To Amend the Articles of Incorporation:
---------------------------------------
Voting For 2,773,000
Voting Against 219,774
Abstain from Voting 11,909
Broker Non-Vote 568,919
To Amend the 1992 Stock Incentive Plan:
---------------------------------------
Voting For 2,843,774
Voting Against 145,374
Abstain from Voting 15,535
Broker Non-Vote 568,919
To Approve the 1995 Director Stock Option Plan:
-----------------------------------------------
Voting For 2,810,702
Voting Against 170,391
Abstain from Voting 23,590
Broker Non-Vote 568,919
Item 6. Exhibits and Reports Filed on Form 8-K
- ------- --------------------------------------
(a) Exhibits
Exhibit 3(a) - Amended and Restated Articles of Incorporation
Exhibit 11 - Statements of Computation of Earnings Per Share
Exhibit 15 - Awareness Letter of Coopers & Lybrand L.L.P.
Exhibit 27 - Financial Data Schedule
(b) Reports Filed on Form 8-K
None
19
<PAGE> 20
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST LIBERTY FINANCIAL CORP.
-----------------------------
DATE: May 9, 1996 /s/ David L. Hall
----------- ------------------
David L. Hall
Executive Vice President and
Chief Financial Officer
(Duly authorized, principal
financial and principal
accounting officer)
20
<PAGE> 21
FIRST LIBERTY FINANCIAL CORP.
-----------------------------
Index of Exhibits
The following exhibits are filed as part of the Report.
Exhibit No. Description Page
- ----------- ----------- ----
3 Amended and Restated Articles of Incorporation 22
11 Statements of Computation of Earnings Per Share 63
15 Awareness Letter of Coopers & Lybrand L.L.P. 65
27 Financial Data Schedule -
21
<PAGE> 22
AMENDED AND RESTATED
--------------------
ARTICLES OF INCORPORATION
-------------------------
OF
--
FIRST LIBERTY FINANCIAL CORP.
-----------------------------
SECTION 1. Corporate Title. The full corporate title of the
---------- ----------------
corporation is "First Liberty Financial Corp."
SECTION 2. Organization. The corporation shall be organ-
---------- -------------
ized pursuant to the provisions of the Georgia Business Corporation Code.
SECTION 3. Duration. The duration of the corporation is
---------- ---------
perpetual.
SECTION 4. Powers. The purpose of the corporation is to
---------- -------
pursue any or all lawful objectives not specifically prohibited to corporations
under the laws of the State of Georgia, including, but not limited to, the
ownership and control of savings and loan associations and all activities not
specifically prohibited to savings and loan holding companies, subject to the
Constitution and laws of the United States as they are now in effect, or as
they may hereafter be amended, and subject to all lawful and applicable rules,
regulations, and orders of the Federal Home Loan Bank Board (which, as
hereinafter used, includes the Federal Savings and Loan Insurance Corporation).
SECTION 5. Capital Stock. The total number of shares of
---------- --------------
all classes of the capital stock which the corporation has authority to issue
is 30,000,000, of which 25,000,000 shall be common stock, par value $1.00 per
share, and 5,000,000 shall be serial preferred stock, without par value. The
shares may be issued by the corporation from time to time as approved by its
board of directors without the approval of its stockholders except as otherwise
provided in this Section 5. The consideration for the issuance of the shares
shall be paid in full before their issuance and, in the case of common stock,
shall not be less than the par value of $1.00 per share. Neither promissory
notes nor future services shall constitute payment or part payment for the
issuance of shares of the corporation. The consideration for the shares shall
be cash, tangible or intangible property, labor or services actually performed
for the corporation or any combination of the foregoing. In the absence of
actual fraud in the transaction, the value of such property, labor or
services, as determined by the board of directors of the corporation, shall be
conclusive. Upon payment of such consideration, such shares shall be deemed to
be fully paid and nonassessable. In the case of a stock dividend, that part of
the surplus of the corporation which is transferred to stated capital upon the
issuance of shares as a share dividend shall be deemed to be the consideration
for their issuance.
No shares of capital stock (including shares issuable upon
conversion, exchange or exercise of other securities) shall be issued, directly
or indirectly, to officers, directors or controlling persons of the corporation
other than as part of a general public offering unless their issuance or the
plan under which they would be issued has been approved by a majority of the
total votes eligible to be cast at a legal meeting.
Nothing contained in this Section 5 (or in any supplementary
sections hereto) shall entitle the holders of any class of a series of capital
stock to vote as a separate class or series or to more than one vote per share:
provided, that this restriction on voting separately by class or series shall
- --------
not apply:
(i) to any provision which would authorize the
holders of preferred stock, voting as a class or series, to elect
some members of the board of
22
<PAGE> 23
directors, less than a majority thereof, in the event of default
in the payment of dividends or any class or series of preferred
stock;
(ii) to any provision which would require the
holders of preferred stock, voting as a class or series, to approve
the merger or consolidation of the corporation with another
corporation or the sale, lease, or conveyance (other than by
mortgage or pledge) of properties or business in exchange for
securities of a corporation other than the corporation if the
preferred stock is exchanged for securities of such other
corporation: Provided, that no provision may require such
--------
approval for transactions undertaken with the assistance or
pursuant to the direction of the Federal Savings and Loan
Insurance Corporation;
(iii) to any amendment which would adversely
change the specific terms of any class or series of capital stock
as set forth in this Section 5 (or in any supplementary sections
hereto), including any amendment which would create or enlarge
any class or series ranking prior thereto in rights and
preferences. An amendment which increases the number of
authorized shares of any class or series of capital stock, or
substitutes the surviving corporation in a merger or
consolidation for the corporation, shall not be considered to be
such an adverse change.
A description of the different classes and series of the corporation's
capital stock and a statement of the designations and the relative rights,
preferences and limitations of the shares of each class of the series of
capital stock are as follows:
A. Common Stock. Except as provided in this Section 5 (or in any
-- -------------
supplementary sections hereto), the holders of the common stock shall
exclusively possess all voting power. Each holder of shares of common stock
shall be entitled to one vote for each share held by such holder.
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class of stock having
preference over the common stock as to the payment of dividends, the full
amount of dividends and of sinking fund or retirement fund or other retirement
payments, if any, to which such holders are respectively entitled, in
preference to the common stock, then dividends may be paid on the common stock
and on any class or series of stock entitled to participate therewith as to
dividends, out of any assets legally available for the payment of dividends;
but only when and as declared by the board of directors.
After there shall have been paid to or set aside for the holders of any
class having preferences over the common stock in the event of liquidation,
dissolution or winding up the full preferential amounts of which they are
respectively entitled, the holders of the common stock, and of any class or
series of stock entitled to participate therewith, in whole or in part, as to
distribution of assets, shall be entitled, after payment or provision for
payment of all debts and liabilities of the corporation, to receive the
remaining assets of the corporation available for distribution, in cash or in
kind.
Each share of common stock shall have the same relative rights as and be
identical in all respects with all the other shares of common shares.
B. Preferred Stock. The corporation may provide in supplementary
-- ----------------
sections to its charter for one or more classes of preferred stock which shall
be separately identified. The shares of any class may be divided into and
issued in series, with each series separately designated so as to distinguish
the shares thereof from the shares of all other series and classes. The terms
of each series shall be set forth in a supplementary
23
<PAGE> 24
section to the charter. All shares of the same class shall be identical except
as to the following relative rights and preferences, as to which there may be
variations between different series:
(a) the distinctive designation and the number of shares constituting
such series;
(b) the dividend rates or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and, if so, from
which date or dates, the payment date or dates for dividends, and the
participating or other special rights, if any, with respect to dividends;
(c) the voting powers, full or limited, if any, of shares of such series;
(d) whether the shares of such series shall be redeemable and, if so,
the price or prices at which, and the terms and conditions on which, such
shares may be redeemed;
(e) the amount or amounts payable upon the shares of such series in the
event of voluntary or involuntary liquidation, dissolution or winding up of
the corporation;
(f) whether the shares of such series shall be entitled to the benefit
of a sinking or retirement fund to be applied to the purchase or redemption
of such shares, and if so entitled, the amount of such fund and the manner of
its application, including the price or prices at which such shares may be
redeemed or purchased through the application of such funds;
(g) whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or of any other series
of the same or any other class or classes of stock of the corporation, and,
if so convertible or exchangeable, the conversion price or prices, or the
rate or rates of exchange, and the adjustments thereof, if any, at which such
conversion or exchange may be made, and any other terms and conditions of such
conversion or exchange;
(h) the price or other consideration for which the shares of such
series shall be issued; and
(i) whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of serial preferred
stock and whether such shares may be reissued as shares of the same or any
other series of serial preferred stock.
Each share of each series of serial preferred stock shall have the same
relative rights as and be identical in all respects with all the other shares
of the same series.
SECTION 6. Preemptive Rights. Holders of the capital stock of the
---------- ------------------
corporation shall not be entitled to preemptive rights with respect to any
shares of the corporation which may be issued.
SECTION 7. Initial Capitalization. The corporation shall not commence
---------- -----------------------
business until it shall have received not less than Five Hundred Dollars
($500.00) in payment for the issuance of shares.
SECTION 8. Board of Directors. (a) The corporation shall be under the
---------- -------------------
direction of a board of directors. The board of directors shall be divided
into three classes as nearly equal in number as possible, with the term of
office of one class expiring each year. At the meeting of stockholders during
which this Section 8 is adopted and approved, one class of directors shall be
elected to hold office for a term expiring at the first annual meeting there-
after, one class of directors shall be elected to hold office for a term
24
<PAGE> 25
expiring at the second annual meeting thereafter and one class of directors
shall be elected to hold office for a term expiring at the third annual
meeting thereafter. At each annual meeting of the stockholders held after the
meeting during which this Section 8 is adopted and approved, the directors of
one class shall be elected to hold office for a term expiring at the third
annual meeting following their election and until their successors shall have
been duly elected and qualified; at the next succeeding annual meeting, the
directors of a second class shall be elected to serve for such term; and at
the third succeeding annual meeting, the directors of the third class be
elected to serve for such term. During the intervals between annual meetings
of stockholders, any vacancy occurring in the board of directors caused by
the resignation, removal, death or other incapacity of one or more directors,
and any newly created directorships resulting from an increase in the number
of directors, shall be filled by a majority vote of the directors then in
office, whether or not a quorum. Each director elected by the board of
directors to fill a vacancy shall hold office for the unexpired term in
respect of which such vacancy occurred. Each director elected by the board
of directors to fill a newly created directorship or any decrease in
directorships shall be so apportioned among the classes as to make all classes
as nearly equal in number as possible.
(b) The board of directors shall consist of not less than six nor more
than fifteen members, the precise number to be fixed by resolution of the
board of directors from time to time. The minimum number of directors as set
forth herein may be reduced below six and the maximum number of directors as
set forth herein may be increased above fifteen only upon the affirmative
vote of the stockholders of record holding two-thirds of the then outstanding
shares of stock of each class of the corporation entitled to vote in
elections for directors at a meeting of stockholders called for that purpose.
SECTION 9. Supermajority Vote and Fair Price Criteria. Subject to the
---------- -------------------------------------------
provisions of any series of preferred stock which may be outstanding at the
time, the affirmative vote of the holders of not less than 80% of the then
outstanding shares of common stock of the corporation, including the
affirmative vote of the holders of at least 80% of the then outstanding
shares of common stock of the corporation other than those beneficially owned
by an Interested Stockholder (as defined below) (the "two tier voting
requirement") shall be required to effect any Business Combination (as
defined below) of the corporation with such Interested Stockholder; provided,
however, that the two tier voting requirement shall be inapplicable to any
Business Combination and such Business Combination shall require only such
affirmative vote as is required by law or otherwise by any provision of these
articles of incorporation, if all of the conditions specified in either of the
following subparagraphs (1) or (2) shall have been met:
(1) The Business Combination shall have been approved by two-thirds of the
members of the board of directors who are unaffiliated with the Interested
Stockholder and by two-thirds of all of the members of the board of
directors; or
(2) all of the following conditions shall have been met (provided,
however, that any reference below to the common stock of the corporation
shall be deemed, where appropriate, to refer instead to the common stock of
Liberty Federal Savings and Loan Association, Macon, Georgia):
(a) The aggregate amount of (x) cash and (y) Fair Market Value (as
defined below) as of the date of the consummation of the Business Combination
of other consideration to be received per share by holders of common stock in
such Business Combination shall be at least equal to the highest amount
determined under subclauses (i), (ii) and (iii) below:
(i) the Fair Market Value per share of common stock
on the date of first public announcement of the proposal of the
Business Combination (the "Announcement Date") or on
25
<PAGE> 26
the date on which the Interested Stockholder became an
Interested Stockholder (the "Determination Date"), whichever
is higher.
(ii) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and
soliciting dealers fees) paid by the Interested Stockholder
for any share of common stock of the corporation acquired
by it within the two year period immediately prior to the
Announcement Date or in the transaction in which it became
an Interested Stockholder, whichever is higher; and
(iii) (if applicable) the price per share equal to
the Fair Market Value per share of common stock determined
pursuant to subparagraph (2)(a)(i) above, multiplied by the
ratio of (A) the highest per share pricing (including any
brokerage commissions, transfer taxes and soliciting dealers
fees) paid by the Interested Stockholder for any shares of
common stock of the corporation acquired by it within the
two year period immediately prior to the Announcement Date
to (B) the Fair Market Value per share of common stock of
the corporation on the first day in such two year period on
which the Interested Stockholder acquired any shares of
common stock.
(b) The consideration to be received by holders of shares of common
stock shall be in cash or in the same form as the Interested Stockholder has
previously paid for shares of such class of stock. If the Interested
Stockholder has paid for shares of common stock with varying forms of
consideration, the form of consideration for the shares of stock shall be
either cash or the form used to acquire the largest number of shares of common
stock previously acquired by it.
(c) Subject to the provisions of any series of preferred stock which may
be outstanding at the time, the Business Combination shall have been approved
by the affirmative vote of the holders of not less than 75% of the then
outstanding shares of common stock of the corporation and the affirmative
vote of the holders of not less than 66 2/3% of the then outstanding shares of
common stock of the corporation other than those beneficially owned by an
Interested Stockholder.
To the extent required by applicable law, the consummation of any
Business Combination shall be subject to the approval of the Federal Home
Loan Bank Board. In the event that any Business Combination which requires
the approval of the Federal Home Loan Bank Board shall be approved by the
requisite vote of the stockholders of the Association but such Business
Combination shall not have been approved previously by such vote of the
members of the board of directors as may be required by this section, any
other section of these articles of incorporation or any provision of law, the
board of directors shall approve such Business Combination by the requisite
vote of the members of the board of directors promptly following the approval
of the Business Combination by the stockholders. Promptly thereafter, the
board of directors shall submit to the Federal Home Loan Bank Board all such
documents, records, certifications and other materials, and shall assist and
cooperate with the Federal Home Loan Bank Board, as may be necessary to
obtain the approval of such Business Combination by the Federal Home Loan
26
<PAGE> 27
Bank Board.
The provisions of this Section 9 may not be repealed or amended in any
respect unless such action is approved by the affirmative vote of the holders
of not less than 80% of the outstanding shares of common stock of the
corporation, subject to the provisions of any series of preferred stock which
may at the time be outstanding; provided, however, that if there is an
Interested Stockholder, such 80% vote must include the affirmative vote of the
holders of at least 80% of the outstanding shares of common stock other than
those shares beneficially owned by the Interested Stockholder, subject to the
provisions of any series of preferred stock which may be outstanding at the
time.
An "Interested Stockholder" shall mean any individual, corporation,
partnership, firm, corporation, business entity, trust, estate or other person
(other than the corporation, any subsidiary of the corporation, any profit-
sharing, employee stock ownership or other employee benefit plan of the
corporation or subsidiary thereof, or any trustee of or fiduciary with respect
to any such plan when acting in such capacity), or any Affiliate (as defined
below) of any of the foregoing, who or which owns beneficially or controls,
directly or indirectly, more than ten percent (10%) of the corporations
common stock on the record date for determining stockholders entitled to vote.
For the purpose of determining whether a person is an Interested
Stockholder, such person shall be deemed to own beneficially (i) all shares of
common stock with respect to which such person has the capacity to control
or to influence the voting power of the investment power in respect thereof
and (ii) all shares of common stock which such person has the immediate or
future right to acquire, directly or indirectly, pursuant to agreements,
through the exercise of options, warrants or rights or through the conversion
of convertible securities or otherwise; and all shares of common stock which
such person has the right to acquire in such manner shall be deemed to be
outstanding shares, but shares of common stock which any other person has
the right to acquire in such manner shall not be deemed to be outstanding
shares.
An "Affiliate" shall mean any individual, corporation, partnership, firm,
corporation, business entity, trust or estate who or which, directly or
indirectly, through one or more intermediaries, controls, is controlled by or
is under common control with, an Interested Stockholder. "Control" shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person, whether through the
ownership of or right to acquire voting securities, by contract, or otherwise.
"Business Combination" shall mean:
(a) any merger or consolidation of the corporation or any subsidiary
thereof with or into any Interested Stockholder; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition, in one transaction or a series of transactions, to or with any
Interested Stockholder of any of the assets of the corporation or any
subsidiary thereof having an aggregate Fair Market Value (as defined below)
of $500,000 or more; or
(c) the issuance or transfer by the corporation or any subsidiary thereof,
in one transaction or a series of transactions, of any securities of the
27
<PAGE> 28
corporation or any subsidiary hereof to any Interested Stockholder in
exchange for cash, securities or other property (or a combination thereof)
having an aggregate Fair Market Value of $500,000 or more; or
(d) the adoption of any plan or proposal for the liquidation of the
corporation or any subsidiary thereof proposed by or on behalf of any
Interested Stockholder; or
(e) any reclassification of securities (including any reverse stock split)
or recapitalization of the corporation or any subsidiary thereof or any merger
or consolidation of the corporation with any of its subsidiaries or any other
transaction (whether or not with or into or otherwise involving an Interested
Stockholder) which has the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of securities of the
corporation or any subsidiary thereof which is directly or indirectly owned by
an Interested Stockholder.
"Fair Market Value" means, as of any date, (a) in the case of stock, the
highest closing sale price during the 30 consecutive days immediately
preceding such date of a share of such stock on the Composite Tape for New
York Stock Exchange--Listed Stocks; or, if such stock is not quoted on the
Composite Tape, on the New York Stock Exchange; or, if such stock is not
listed on such Exchange, on the principal United States securities exchange
registered under the Securities Exchange Act of 1934 on which such stock is
listed; or, if such stock is not listed on any such exchange, the highest
closing bid quotation with respect to a share of such stock during the 30
consecutive days preceding such date on the National Association of Securities
Dealers Automated Quotations System or any system then in use, or, if no such
quotations are available, the fair market value on such date of a share of
such stock as determined in good faith by a majority of the members of the
board of directors who are unaffiliated with the Interested Stockholder; and
(b) in the case of property other than cash or stock, the fair market value of
such property on such date as determined in good faith by a majority of the
members of the board of directors who are unaffiliated with the Interested
Stockholder.
SECTION 10. Director Considerations in Responding to Acquisition
----------- ----------------------------------------------------
Proposals. The board of directors of the corporation, when evaluating any
- ----------
offer of another person to make a tender, exchange or other purchase offer
for any equity security of the corporation or any subsidiary thereof, to merge
or consolidate the corporation or any subsidiary thereof with another person,
or to purchase or otherwise acquire all or substantially all of the properties
and assets of the corporation or any subsidiary thereof shall, in determining
what is in the best interests of the corporation and its stockholders, give due
consideration to all relevant factors, including without limitation (i) the
fairness and adequacy of the consideration offered in relation to: the then
current market price or fair value of the corporation or subsidiary (including
the estimated fair value of the corporation or subsidiary in a freely
negotiated transaction), historical financial results and the then current
financial condition of the corporation or subsidiary, historical and
comparative market information (including price earnings ratios, market
trends, comparative premiums for sale of control and general economic
conditions), the then current market or replacement price of the tangible
and intangible assets of the corporation or subsidiary, the ability of
management of the corporation or subsidiary, the future earnings prospects
of the corporation or subsidiary and the then estimated future value of the
corporation or subsidiary as an
28
<PAGE> 29
independent entity; (ii) the nature of the consideration offered (including the
estimated present value and future earnings of any non-cash consideration);
(iii) the amount of securities of the corporation or subsidiary sought to be
acquired and, if less than all, the effect of the acquisition on the remaining
stockholders (including consideration of the resulting market liquidity, stock
prices and likelihood of subsequent freeze-out transactions); (iv) the method
of financing the proposed transaction, including the financial condition of the
offeror, its ability to finance and consummate the proposed transaction, the
extent to which the assets of the corporation or subsidiary will be used
directly or indirectly therefor, and the likelihood of success; (v) the
timing of the proposed transaction; (vi) the availability of other
alternatives; (vii) the legality of the proposed transaction (including
possible legal and regulatory obstacles and delays); (viii) the reputation
and integrity of the offeror in the business community and the perceived
purpose of the proposed transaction in light of the operating history and
reputation of the corporation or subsidiary in the communities it serves;
(ix) the social, legal and economic effects of the transaction on the
employees, customers and other constituents of the corporation and its
subsidiaries; (x) the effects and impact of the proposed transaction on the
communities in which the corporation and its subsidiaries operate or are
located; and (xi) the desirability of maintaining independence from any other
person.
SECTION 11. Director Liabilities. A director of the corporation shall not
----------- ---------------------
be personally liable to the corporation or its stockholders for monetary
damages for breach of his duty of care or other duty as a director, except
for liability (i) for any appropriation, in violation of his duties, of any
business opportunity of the corporation; (ii) for any acts or ommissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (iii) for the types of liability set forth in Section 14-2-154 of the
Code or successor provisions; or (vi) for any transaction from which the
director derives an improper personal benefit. If the Code is amended after
approval by the stockholders of this Section to authorize corporate action
further limiting the personal liability of directors, then the liability of a
director of the corporation shall be limited to the fullest extent permitted
by the Code, as so amended. Any repeal or modification of the foregoing
paragraph by the stockholders of the corporation shall not adversely affect
any right or protection of a director of the corporation existing at the time
of such repeal or modification.
SECTION 12. Amendments to Charter. Except as provided in Section 5
----------- ----------------------
and Section 9 hereof, no amendment, addition, alteration, change, or repeal of
this charter shall be made, unless such is first proposed by the board of
directors of the corporation and thereafter approved by the stockholders by a
majority of the total votes eligible to be cast at a legal meeting.
29
<PAGE> 30
IN WITNESS WHEREOF, the corporation has caused this Amended and
-------------------
Restated Articles of Incorporation to be executed by its President and its
corporate seal to be hereto affixed and to be attached by its Secretary, this
29th day of February, 1996.
FIRST LIBERTY FINANCIAL CORP.
-----------------------------
By: /s/ Robert F. Hatcher
-------------------------------------
Robert F. Hatcher
President and Chief Executive Officer
Attest:
- -------
By: /s/ Richard A. Hills, Jr.
--------------------------------
Richard A. Hills, Jr., Secretary
30
<PAGE> 31
APPENDIX A
----------
SERIES A 7.75% CUMULATIVE CONVERTIBLE PREFERRED STOCK
-----------------------------------------------------
1. Designation and Amount.
-- -----------------------
There hereby is created a series of Preferred Stock with a stated value
of $25.00 per share. The shares of such series shall be designated as Series
A 7.75% Cumulative Convertible Preferred Stock (the "Series A Preferred
Stock"), and the number of shares constituting the Series A Preferred Stock
shall be 460,000. Such number of shares may be decreased by a resolution
duly adopted by the Board of Directors; provided, that no decrease shall
--------
reduce the number of shares of Series A Preferred Stock to a number less
than the number of shares then outstanding plus the number of shares
reserved for issuance upon the exercise of outstanding options, rights, or
warrants or upon the conversion of any outstanding securities issued by the
corporation that are convertible into Series A Preferred Stock.
2. Ranking.
-- --------
Any class or classes of stock of the corporation shall be deemed to rank:
(a) prior to the Series A Preferred Stock as to dividends or as to
distribution of assets upon liquidation, dissolution or winding up if the
holders of such class shall be entitled to the receipt of dividends or of
amounts distributable upon liquidation, dissolution or winding up, as the case
may be, in preference or priority to the holders of Series A Preferred Stock;
and
(b) on a parity with the Series A Preferred Stock as to dividends or as
to distribution of assets upon liquidation, dissolution or winding up, whether
or not the dividend rates, dividend payment dates, or redemption or
liquidation prices per share thereof be different from those of the Series A
Preferred Stock, if the holders of such class of stock and the Series A
Preferred Stock shall be entitled to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as the case may be,
in proportion to their respective dividend rates or liquidation prices, without
preference or priority one over the other.
3. Dividends.
-- ----------
(a) For purposes of this Section 3, each January 1, April 1, July 1 and
October 1 on which any share of Series A Preferred Stock shall be
outstanding shall be deemed to be a "Dividend Payment Date." Commencing on
April 1, 1993, the holders of shares of Series A Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors of the
corporation out of funds legally available therefor, cumulative dividends
payable in arrears at the rate of $1.9375 per year on each share of Series A
Preferred Stock and no more. Dividends payable on April 1, 1993 shall be pro
rated based on the number of days that shall have elapsed since the date of
original issue of the Series A Preferred Stock. Dividends payable on the
Preferred Stock for any period greater or less than a full dividend period
shall be computed on the basis of a 360 day year consisting of twelve 30-day
months.
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<PAGE> 32
(b) The Board of Directors may fix a record date for the
determination of holders of shares of Series A Preferred Stock entitled to
receive payment of a dividend declared thereon, which record date shall be
not more than 45 days prior to the date fixed for the payment thereof.
(c) On each Dividend Payment Date, all dividends which shall have
accrued on each share of Series A Preferred Stock outstanding on such
Dividend Payment Date shall accumulate and be deemed to become "due." Any
dividend which shall not be paid on the Dividend Payment Date on which it
shall become due shall be deemed to be "past due" until such dividend shall
be paid or until the share of Series A Preferred Stock with regard to which
such dividend became due shall no longer be outstanding, whichever is the
earlier to occur. No interest or sum of money in lieu of interest shall be
payable with regard to any dividend payment or payments which are past due.
Dividends paid on shares of Series A Preferred Stock in an amount less than
the total amount of such dividends at the time accumulated and payable on
such shares shall be allocated pro rata on a share-by-share basis among all
such shares at the time outstanding.
(d) If there shall be outstanding shares of any other series of
Preferred Stock of the corporation ranking junior to the Series A Preferred
Stock as to dividends, no dividends shall be declared or paid or set apart for
payment on any such other series for any period unless full cumulative
dividends have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set apart for such payment on
the Series A Preferred Stock for all dividend payment periods terminating on
or prior to the date of payment of such full cumulative dividends. When
dividends are not paid in full or are past due on the shares of the Series A
Preferred Stock and on any other series of Preferred Stock ranking on a
parity as to dividends with the Series A Preferred Stock, all dividends
declared on all outstanding shares of the Series A Preferred Stock and shares
of such other series of Preferred Stock shall be declared pro rata so that the
amount of dividends declared per share on the Series A Preferred Stock and
such other Preferred Stock shall in all cases bear to each other the same
ratio that accrued and unpaid dividends per share on the shares of the Series
A Preferred Stock and such other Preferred Stock to the date of such
dividend payment bear to each other. Holders of shares of Series A Preferred
Stock shall not be entitled to any dividend, whether payable in cash, property
or securities, in excess of full cumulative dividends, as herein provided, on
the Series A Preferred Stock.
(e) So long as any shares of the Series A Preferred Stock are
outstanding, no dividend (other than a dividend or distribution in Common
Stock or in any other stock ranking junior to the Series A Preferred Stock as
to dividends and upon liquidation, dissolution or winding up) shall be declared
or paid or set aside for payment or other distribution declared or made upon
the Common Stock or upon any other stock ranking junior to, or on a parity
with, the Series A Preferred Stock as to dividends or upon liquidation,
dissolution or winding up, nor shall any Common Stock or any other stock of
the corporation ranking junior to, or on a parity with, the Series A Preferred
Stock as to dividends or upon liquidation, dissolution or winding up, be
redeemed, purchased or otherwise acquired for any consideration (or any
moneys be paid to or made available for a sinking fund for the redemption of
any shares of any such stock) by the corporation (except for the conversion
of such junior or parity stock into, or the exchange of such junior or parity
stock for, stock of the corporation ranking junior to the Series A Preferred
32
<PAGE> 33
Stock as to dividends and upon liquidation, dissolution, or winding up) unless,
in each case, the full cumulative dividends on all outstanding shares of the
Series A Preferred Stock shall have been paid or declared and set aside for
payment for all past dividend payment periods.
(f) The corporation shall not permit any subsidiary of the corporation
to purchase or otherwise acquire for consideration any shares of stock of the
corporation unless the corporation could, under paragraph (e) of this Section
3, purchase or otherwise acquire such shares at such time and in such
manner; provided, however, that this paragraph shall not prohibit the
-------- -------
acquisition of shares of stock of the corporation which have been pledged to
the corporation or any subsidiary of the corporation for a bona fide debt.
4. General, Class and Series, and Default Voting Right.
-- ----------------------------------------------------
Except as provided in this Section 4 or as otherwise from time to time
required by applicable law, the Series A Preferred Stock shall have no voting
rights.
(a) Unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the consent of the holders of at least
66-2/3% of all of the shares of the Series A Preferred Stock and all other
series of Preferred Stock, if any, of the corporation ranking on a parity with
shares of the Series A Preferred Stock, either as to dividends or upon
liquidation, dissolution or winding up, and upon which like voting rights have
been conferred and are then exercisable, at the time outstanding, given in
person or by proxy, either in writing or by a vote at a meeting called for the
purpose at which the holders of shares of the Series A Preferred Stock and
such other series of Preferred Stock of the corporation shall vote separately
as a single class without regard to series, shall be necessary for authorizing,
effecting or validating the authorization, creation or issuance of, or
reclassification of any authorized stock of the corporation into, or
authorization, creation or issuance of any obligation or security convertible
into or evidencing a right to purchase any shares of, or increase in the
authorized or issued amount of, any class or series of stock (including any
class or series of Preferred Stock) ranking prior to the Series A Preferred
Stock with respect to the payment of dividends or the distribution of assets
upon liquidation, dissolution or winding up.
(b) Unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the consent of the holders of at least
66-2/3% of all of the shares of the Series A Preferred Stock, and any one or
more series of Preferred Stock of the corporation similarly affected and upon
which like voting rights have been conferred and are then exercisable, at the
time outstanding, given in person or by proxy, either in writing or by a vote
at a meeting called for the purpose at which the holders of shares of such
series of Preferred Stock shall vote separately as a single class without
regard to series, shall be necessary for authorizing, effecting or validating
the amendment, alteration or repeal, whether by merger, consolidation or
otherwise, of any of the provisions of the Articles of Incorporation (or any
amendment thereof or supplement thereto providing for the capital stock of
the corporation, including, without limitation, these Articles of Amendment)
which would adversely affect the powers, preferences, privileges or rights of
holders of shares of the Series A Preferred Stock and such other series of
Preferred Stock of the corporation. Any increase in the amount of authorized
Preferred Stock or the creation and issuance of other series of Preferred
33
<PAGE> 34
Stock ranking on a parity with or junior to the Series A Preferred Stock with
respect to dividends and upon liquidation, dissolution or winding up shall not
be deemed to affect adversely the rights of the holders of shares of Series A
Preferred Stock.
(c) If at any time or times dividends payable on the shares of Series A
Preferred Stock shall be in arrears in an amount equal to at least six full
quarterly dividends (whether or not consecutive) on shares of the Series A
Preferred Stock at the time outstanding, the authorized number of directors of
the corporation automatically shall be increased by two (regardless of the
maximum number of directors stated in the Articles of Incorporation or in the
bylaws of the corporation) and the holders of the outstanding shares of Series
A Preferred Stock shall have the exclusive right (voting separately as a class
together with holders of shares of any one or more other series of Preferred
Stock ranking on a parity with the Series A Preferred Stock either as to
dividends or the distribution of assets upon liquidation, dissolution or
winding up and upon which like voting rights have been conferred and are then
exercisable) to elect two directors of the corporation at the corporation's
next annual meeting of stockholders and at each subsequent annual meeting of
stockholders until such time as all dividends accumulated on the Series A
Preferred Stock shall have been paid in full, at which time such right shall
terminate, except as herein or by law expressly provided, subject to revesting
in the event of each and every subsequent default of the character above
mentioned. At elections for such directors, each holder of Series A Preferred
Stock shall be entitled to one vote for each share held (the holders of shares
of any other series of Preferred Stock ranking on such a parity being
entitled to such number of votes, if any, for each share of stock held as may
be granted to them). Each such director so elected shall continue to serve as
such director for the full term for which he shall have been elected,
notwithstanding that prior to the end of such term such arrearage shall cease
to exist. If the office of any such director so elected becomes vacant by
reason of death, resignation, retirement, disqualification, removal from
office or otherwise, the remaining director so elected may choose a successor
who shall hold office for the unexpired term in respect of which such vacancy
occurred. Whenever the term of office of the directors so elected shall end
and the special voting powers vested in the holders of Series A Preferred
Stock as provided in this Section 4 shall have expired, the number of
directors shall be such number as may be provided for in the Articles of
Incorporation or the bylaws irrespective of any increase made pursuant to the
provisions of this Section 4.
(d) The voting provisions set forth in Subsections (a)-(c) above shall
not apply if, at or prior to the time when the act with respect to which such
vote would otherwise be required shall be effected, all outstanding shares of
Series A Preferred Stock shall have been redeemed or sufficient funds shall
have been deposited in trust to effect such redemption.
5. Redemption.
-- -----------
(a) The shares of Series A Preferred Stock shall not be redeemable
prior to April 1, 1993. At any time on or after such date, except as otherwise
provided below, the shares of Series A Preferred Stock may be redeemed, in
whole or in part, at the option of the corporation, during the twelve-month
periods commencing on April 1 of the years indicated below at the following
redemption prices per share of Series A Preferred Stock, plus accrued and
unpaid dividends thereon to but excluding the date fixed for redemption:
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<PAGE> 35
Redemption Redemption
---------- ----------
Year Price Year Price
---- ----- ---- -----
1993 $27.00 1996 $25.80
1994 26.60 1997 25.40
1995 26.20 1998 and
thereafter 25.00
Notwithstanding the foregoing, no shares of Series A Preferred Stock may be
redeemed prior to April 1, 1996 unless the average market price of the
Common Stock of the corporation for a period of 20 consecutive trading days
ending within five trading days prior to the date of the notice of redemption
specified has been at least 135% of the Conversion Price (as such term is
defined in Subsection 6(a) below). For purposes of this Subsection (a),
"average market price" means the average of the last reported sales prices of
the Common Stock for the preceding 20 consecutive trading days as reported
on the principal national securities exchange on which the Common Stock is
listed or admitted to trading, or, if not listed or admitted to trading on any
national securities exchange, on the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotations System ("Nasdaq")
or, if the Common Stock is not listed on the Nasdaq National Market System,
the average of the closing bid and asked prices on such day in the over-the-
counter market as reported by Nasdaq or, if bid and asked prices for the
Common Stock on each such day shall not have been reported through Nasdaq,
the average of the bid and asked prices for such date as furnished by any
New York Stock Exchange member firm regularly making a market in the
Common Stock selected from time to time by the Board of Directors of the
corporation for such purpose or, if no such quotations are available, the fair
market value of the Common Stock as determined by a New York Stock
Exchange member firm regularly making a market in the Common Stock
selected from time to time by the Board of Directors of the corporation for
such purpose.
(b) In the event the corporation shall elect to redeem shares of Series
A Preferred Stock, the corporation shall give notice of such redemption to the
holders of record of shares of the Series A Preferred Stock being so
redeemed, not less than 30 nor more than 60 days prior to such redemption,
by first class mail, postage prepaid, at their addresses as shown on the stock
registration books of the corporation; provided, that without limiting the
---------
obligation of the corporation hereunder to give the notice provided in this
Subsection 5(b), the failure of the corporation to give such notice shall not
invalidate any corporate action by the corporation. Each such notice shall
state (i) the redemption date; (ii) if the redemption date is prior to April 1,
1996, that the condition set forth in the third sentence of Subsection 5(a) has
been satisfied; (iii) the number of shares of Series A Preferred Stock to be
redeemed and, if fewer than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder; (iv)
the redemption price; (v) the place or places where certificates for such
shares are to be surrendered for payment of the redemption price; (vi) that
dividends on the shares to be redeemed will cease to accrue on such
redemption date; and (vii) that such holder has the right to convert such
shares into a number of shares of Common Stock of the corporation prior to
the close of business on the date fixed for the redemption.
(c) In the event that fewer than all the outstanding shares of Series A
Preferred Stock are to be redeemed, the number of shares to be redeemed
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<PAGE> 36
shall be determined by the Board of Directors of the corporation and the
shares to be redeemed shall be determined pro rata or by lot as may be
determined by the Board of Directors of the corporation or by any other
method as may be determined by the Board of Directors of the corporation in
its sole discretion to be equitable, provided that such method satisfies any
applicable requirements of any securities exchange or automated quotation
system on which the Series A Preferred Stock is then listed or traded.
(d) Notice having been mailed as aforesaid, from and after the
applicable redemption date (unless the corporation shall default in providing
money for the payment of the redemption price), dividends on the shares of
Series A Preferred Stock to be redeemed on such redemption date shall cease
to accrue and said shares shall no longer be deemed to be outstanding, and
all rights of the holders thereof as stockholders of the corporation (except the
right to receive from the corporation the redemption price) shall cease;
provided, however, that notwithstanding the foregoing, if notice of redemption
- --------- --------
has been given pursuant to this Section 5 and any holder of shares of Series
A Preferred Stock shall, prior to the close of business on the redemption date,
surrender for conversion any or all of the shares to be redeemed held by
such holder in accordance with Section 6 hereof, then the conversion of such
shares to be redeemed shall become effective as provided in Section 6. Upon
surrender of the certificates for any shares so redeemed (properly endorsed
or assigned for transfer, if the Board of Directors of the corporation shall so
require and the notice shall so state), such shares shall be redeemed by the
corporation at the redemption price aforesaid. In case fewer than all the
shares represented by any such certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares without cost to the holder
thereof.
(e) Any shares of Series A Preferred Stock which at any time shall
have been redeemed shall have, after such redemption, the status of
authorized but unissued shares of Preferred Stock, without designation as to
series, until such shares are once more designated as part of a particular
series by the Board of Directors of the corporation.
(f) Notwithstanding the foregoing provisions of this Section 5, if any
dividends on Series A Preferred Stock are past due, no shares of Series A
Preferred Stock shall be redeemed unless all outstanding shares of Series A
Preferred Stock are simultaneously redeemed, and the corporation shall not
purchase or otherwise acquire any shares of Series A Preferred Stock;
provided, however, that the foregoing shall not prevent the purchase or
- --------- --------
acquisition of shares of Series A Preferred Stock pursuant to a purchase or
exchange offer made on the same terms to holders of all outstanding shares of
Series A Preferred Stock.
6. Conversion.
-- -----------
(a) The holder of any share of Series A Preferred Stock shall have the
right at any time, at such holder's option (except that if such share is called
for redemption, then in respect of such share only to and including but not
after the close of business on the date fixed for such redemption, provided
that no default by the corporation in the payment of the applicable redemption
price (including any accrued and unpaid dividends) shall have occurred and
be continuing on the date fixed for such redemption) to convert such share
into that number of fully paid and non-assessable shares of Common Stock of
the corporation (calculated as to each conversion to the nearest 1/100th of a
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<PAGE> 37
share) obtained by dividing $25.00 by the Conversion Price then in effect.
The Conversion Price initially shall be $12.50 per share of Common Stock and
shall be subject to adjustment as set forth below.
(b) To exercise the conversion privilege, the holder of shares of Series
A Preferred Stock shall surrender the certificates representing such shares,
accompanied by transfer instruments satisfactory to the corporation and
sufficient to transfer the Series A Preferred Stock being converted to the
corporation free of any adverse interest, at any of the offices or agencies
maintained for such purpose by the corporation ("Conversion Agent") and
shall give written notice to the corporation at such Conversion Agent that the
holder elects to convert such shares. Such notice shall also state the names,
together with addresses, in which the certificates for shares of Common Stock
which shall be issuable upon such conversion shall be issued. As promptly as
practicable after the surrender of such shares of Series A Preferred Stock as
aforesaid, the corporation shall issue and shall deliver at such Conversion
Agent to such holder, or on his or her written order, a certificate for the
number of full shares of Common Stock issuable upon the conversion of such
shares in accordance with the provisions hereof. Balance certificates will be
issued for the remaining shares of Series A Preferred Stock in any case in
which fewer than all of the shares of Series A Preferred Stock represented by
a certificate are converted. Each conversion shall be deemed to have been
effected immediately prior to the close of business on the date on which
shares of Series A Preferred Stock shall have been so surrendered and such
notice received by the corporation as aforesaid, and the persons in whose
names any certificates for shares of Common Stock shall be issuable upon such
conversion shall be deemed to have become the holders of record of the
Common Stock represented thereby at such time, unless the stock transfer
books of the corporation shall be closed on the date on which shares of Series
A Preferred Stock are so surrendered for conversion, in which event such
conversion shall be deemed to have been effected immediately prior to the
close of business on the next succeeding day on which such stock transfer
books are open, and such persons shall be deemed to have become such
holders of record of the Common Stock at the close of business on such later
day. In either circumstance, such conversion shall be at the Conversion Price
in effect on the date upon which such share shall have been surrendered and
such notice received by the corporation.
(c) In the case of any share of Series A Preferred Stock which is
converted after any record date with respect to the payment of a dividend on
the Series A Preferred Stock and on or prior to the next succeeding Dividend
Payment Date, the dividend due on such Dividend Payment Date shall be
payable on such Dividend Payment Date to the holder of record of such share
as of such preceding record date notwithstanding such conversion. However,
shares of Series A Preferred Stock surrendered for conversion during the
period from the close of business on any record date with respect to the
payment of a dividend on the Series A Preferred Stock next preceding any
Dividend Payment Date to the opening of business on such Dividend Payment
Date shall (except in the case of shares of Series A Preferred Stock which
have been called for redemption on a redemption date within such period) be
accompanied by payment in New York Clearing House or other funds acceptable
to the corporation in an amount equal to the portion of the dividend payable
on such Dividend Payment Date which accrues during the period from the date
of such surrender until such Dividend Payment Date on the shares of Series A
Preferred Stock being surrendered for conversion. The dividend with respect
to a share of Series A Preferred Stock called for redemption on a redemption
37
<PAGE> 38
date during the period from the close of business on any record date with
respect to the payment of a dividend on the Series A Preferred Stock next
preceding any Dividend Payment Date to the opening of business on such
Dividend Payment Date shall be payable on such Dividend Payment Date to the
holder of record of such share on such dividend record date notwithstanding
the conversion of such share of Series A Preferred Stock after such record
date and prior to such Dividend Payment Date, and the holder converting such
share of Series A Preferred Stock need not include a payment of such
dividend amount upon surrender of such share of Series A Preferred Stock
for conversion. Except as provided in this Subsection (c), no payment or
adjustment shall be made upon any conversion on account of any dividends
accrued on shares of Series A Preferred Stock surrendered for conversion or
on account of any dividends on the Common Stock issued upon conversion.
(d) No fractional shares or scrip representing fractions of shares of
Common Stock shall be issued upon conversion of any shares of Series A
Preferred Stock. Instead of any fractional interest in a share of Common
Stock which would otherwise be deliverable upon the conversion of a share of
Series A Preferred Stock, the corporation shall pay to the holder of such
share of Series A Preferred Stock an amount in cash (computed to the nearest
cent, with one-half cent being rounded upward) equal to such fraction
multiplied by the then current market price (as defined in Subsection 6(e)(v)
hereof) of the Common Stock at the close of business on the day on which
such share or shares of Series A Preferred Stock are surrendered for
conversion in the manner set forth above, or if such date is not a trading
date, on the next succeeding trading date. If more than one certificate
representing shares of Series A Preferred Stock shall be surrendered for
conversion at one time by the same holder, the number of full shares issuable
upon conversion thereof shall be computed on the basis of the aggregate
number of shares of Series A Preferred Stock represented by such
certificates, or the specified portions thereof to be converted, so surrendered.
(e) The Conversion Price shall be adjusted from time to time as follows:
(i) In case the corporation shall pay or make a
dividend or other distribution in Common Stock on any class of
capital stock of the corporation, the Conversion Price in effect at
the opening of business on the day following the date fixed for the
determination of stockholders entitled to receive such dividend or
other distribution shall be reduced by multiplying such
Conversion Price by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination and of which
the denominator shall be the sum of such number of shares and
the total number of shares constituting such dividend or other
distribution, such reduction to become effective immediately after
the opening of business on the day following the date fixed for
such determination. For the purposes of this Subparagraph (i),
the number of shares of Common Stock at any time outstanding
shall not include shares held in the treasury of the corporation
but shall include shares issuable with regard to scrip certificates
issued in lieu of fractions of shares of Common Stock. The
corporation shall not pay any dividend or make any distribution
on shares of Common Stock held in the treasury of the
corporation.
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(ii) In case outstanding shares of Common Stock
shall be subdivided into a greater number of shares of Common
Stock, the Conversion Price in effect at the opening of business on
the day following the day upon which such subdivision becomes
effective shall be proportionately reduced, and, conversely, in case
outstanding shares of Common Stock shall each be combined into a
smaller number of shares of Common Stock, the Conversion Price
in effect at the opening of business on the day following the day
upon which such combination becomes effective shall be
proportionately increased, such reduction or increase, as the case
may be, to become effective immediately after the opening of
business on the day following the day upon which such
subdivision or combination becomes effective.
(iii) In case the corporation shall issue rights
or warrants to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per
share less than the then current market price per share (determined
as provided in Subparagraph (v) below) of the Common Stock on the
date fixed for the determination of stockholders entitled to receive
such rights or warrants (other than pursuant to a dividend
reinvestment plan), the Conversion Price in effect at the opening
of business on the day following the date fixed for such
determination shall be reduced by multiplying such Conversion
Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on
the date fixed for such determination plus the number of shares
of Common Stock which the aggregate of the offering price of the
total number of shares of Common Stock so offered for
subscription or purchase would purchase at such current market
price and of which the denominator shall be the number of shares
of Common Stock outstanding at the close of business on the date
fixed for such determination plus the number of shares of Common
Stock so offered for subscription or purchase, such reduction to
become effective immediately after the opening of business on the
day following the date fixed for such determination. For the
purposes of this Subparagraph (iii), the number of shares of
Common Stock at any time outstanding shall not include shares
held in the treasury of the corporation but shall include shares
issuable with regard to scrip certificates issued in lieu of
fractions of shares of Common Stock. The corporation shall not
issue any rights or warrants with regard to shares of Common
Stock held in the treasury of the corporation.
(iv) In case the corporation shall, by dividend or
otherwise, distribute to all holders of its Common Stock (x)
evidences of its indebtedness, (y) cash or other assets (including
securities, but excluding any rights or warrants referred to in
Subparagraph (iii) above, any regular quarterly dividend payable
solely in cash out of retained earnings of the corporation that
may from time to time be fixed by the Board of Directors of the
corporation and any dividend or distribution referred to in
Subparagraph (i) above) or (z) any combination thereof, then in
each case the Conversion Price shall be adjusted so that the same
shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the close of business on the
39
<PAGE> 40
date fixed for the determination of stockholders entitled to receive
such distribution by a fraction of which the numerator shall be
the then current market price per share (determined as provided
in subparagraph (v) below) of the Common Stock on the date fixed
for such determination less the then fair market value (as
determined by the Board of Directors, whose determination, if
made in good faith, shall be conclusive and shall be described in
a statement filed with any Conversion Agent) of the portion of the
cash or other assets or evidences of indebtedness so distributed
(and for which an adjustment to the Conversion Price has not
previously been made pursuant to the terms of this Section 6)
applicable to one share of Common Stock and of which the
denominator shall be such then current market price per share of
the Common Stock, such adjustment to become effective
immediately prior to the opening of business on the day following
such record date; provided, however, that if and to the extent
--------- --------
that the fair market value of such distribution, as so determined
by the Board of Directors, shall exceed the retained earnings of
the corporation, then in lieu of adjusting the Conversion Price as
provided above with respect to the portion of such distribution
which exceeds the corporation's retained earnings, the holder of
the Series A Preferred Stock then outstanding shall have the
right thereafter to convert the share of Series A Preferred Stock
into (i) the kind and amount of indebtedness or cash or other
assets of the corporation receivable in such distribution by a
holder of the number of shares of Common Stock into which the
Series A Preferred Stock might have been converted at the close
of business on the date fixed for the determination of
stockholders entitled to receive such distribution, and (ii) such
number of shares of Common Stock into which the Series A
Preferred Stock may then be convertible, as adjusted from time to
time pursuant to this Section 6.
(v) For the purpose of any computation under
Subparagraphs (iii) and (iv) above and for certain definitions
under Subparagraph (viii) below, the current market price per
share of Common Stock on any date shall be deemed to be the
average of the last reported sales prices of the Common Stock for
the five consecutive trading days selected by the Board of
Directors commencing no more than 20 trading days before and
ending no later than the day before the day in question, as
reported on the principal national securities exchange on which
the Common Stock is listed or admitted to trading or, if not listed
or admitted to trading on any national securities exchange, on the
National Market System of Nasdaq or, if the Common Stock is not
listed on the Nasdaq National Market System, the average of the
closing bid and asked prices for the Common Stock on such day
in the over-the-counter market as reported by Nasdaq or, if bid
and asked prices for the Common Stock on each such day shall
not have been reported through Nasdaq, the average of the bid
and asked prices for such date as furnished by any New York
Stock Exchange member firm regularly making a market in the
Common Stock selected from time to time by the Board of Directors
of the corporation for such purpose or, if no such quotations are
available, the fair market value of the Common Stock as
determined by a New York Stock Exchange member firm regularly
40
<PAGE> 41
making a market in the Common Stock selected from time to time
by the Board of Directors of the corporation for such purpose.
(vi) No adjustment in the Conversion Price shall be
required unless such adjustment would require an increase or
decrease of at least one percent of such price; provided, however,
--------- --------
that any adjustments which by reason of this Subparagraph (vi)
are not required to be made shall be carried forward and taken
into account in any subsequent adjustment; and provided further,
-------- --------
that adjustment shall be required and made in accordance with
the provisions hereof not later than such time as may be required
in order to preserve the tax-free nature of a distribution to the
holders of shares of Series A Preferred Stock or Common Stock.
All calculations shall be made to the nearest cent or to the
nearest 1/100th of a share, as the case may be. The corporation
may make such reductions in the Conversion Price, in addition to
those required by Subparagraphs (i), (ii), (iii) and (iv) above, as
it considers to be advisable in order to avoid or diminish any
income tax to any holders of shares of Common Stock resulting
from any dividend or distribution of stock or issuance of rights
or warrants to purchase or subscribe for stock or from any event
treated as such for income tax purposes or for any other reasons.
(vii) Whenever the Conversion Price is adjusted
as herein provided, (x) the corporation shall promptly file with any
Conversion Agent a certificate of a firm of independent public
accountants setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts
requiring such adjustment and the manner of computing the same,
which certificate shall be conclusive evidence of the correctness
of such adjustment, and (y) a notice stating that the Conversion
Price has been adjusted and setting forth the adjusted Conversion
Price shall forthwith be given by the corporation to any
Conversion Agent and mailed by the corporation to each holder of
shares of Series A Preferred Stock at their last address as the
same appears on the books of the corporation.
(viii) Notwithstanding any other provision herein
to the contrary, in case of (aa) any capital reorganization of the
corporation, (bb) any reclassification or change of outstanding
shares of Common Stock (other than a change relating to par
value, or as a result of a subdivision or combination of the
Common Stock), (cc) any consolidation, merger or combination of
the corporation with or into another corporation, or (dd) any sale
or conveyance of the properties and assets of the corporation as,
or substantially as, an entirety to any other entity, in each case
as a result of which Common Stock holders are entitled to receive
stock, securities or other property or assets (including cash) with
respect to or in exchange for their Common Stock, then there
shall be no adjustment of the Conversion Price, but the holder of
each share of Series A Preferred Stock then outstanding shall
have the right thereafter to convert such share into the kind and
amount of securities, cash or other property that the holder would
have owned or been entitled to receive immediately after such
reorganization, reclassification, change, consolidation, merger,
combination, sale or conveyance if such share had been converted
41
<PAGE> 42
immediately before the effective date of such reorganization,
reclassification, change, consolidation, merger, combination, sale or
conveyance. In the event that the corporation engages in a
transaction set forth in Subparagraphs (aa)-(dd) above and
holders of Series A Preferred Stock do not convert their shares
of Series A Preferred Stock as provided above, then the
continuing or surviving entity shall be obligated to redeem all
remaining outstanding shares of Series A Preferred Stock and the
holders of Series A Preferred Stock shall surrender their shares
of Series A Preferred Stock for redemption, all in accordance with
the redemption provisions otherwise applicable to the Series A
Preferred Stock as set forth in Section 5 hereof. The adjustments
described in this Subparagraph (viii) shall be subject to further
adjustments as appropriate that shall be as nearly equivalent as
may be practicable to the relevant adjustments provided for in
the preceding subparagraphs and in this subparagraph. If, in
the case of any such reorganization, reclassification, change,
consolidation, merger, combination, sale or conveyance, the stock
or other securities and property receivable thereupon by a holder
of shares of Common Stock includes shares of stock, securities or
other property or assets (including cash) of an entity other than
the successor or acquiring entity, as the case may be, in such
reorganization, reclassification, change, consolidation, merger,
combination, sale or conveyance, then the corporation shall enter
into an agreement with such other entity for the benefit of the
holders of Series A Preferred Stock that shall contain such
provisions to protect the interests of such holders as the Board
of Directors of the corporation shall reasonably consider necessary
by reason of the foregoing.
(f) For purposes of this Section 6, "Common Stock" includes any stock
of any class of the corporation which has no preference in respect of
dividends or of amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the corporation and which is not
subject to redemption by the corporation. However, subject to the provisions
of Subparagraph (viii) above, shares issuable upon conversion of shares of
Series A Preferred Stock shall include only shares of the class designated as
Common Stock of the corporation on the date of the initial issuance of Series
A Preferred Stock by the corporation, or shares of any class or classes
resulting from any reclassification thereof and which have no preference in
respect of dividends or of amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the corporation and which
are not subject to redemption by the corporation.
(g) In case:
(i) the corporation shall declare a dividend (or
any other distribution) on its Common Stock that would cause an
adjustment to the Conversion Price of the Series A Preferred Stock
pursuant to the terms of Subparagraph (i) or Subparagraph (iv) above
(including such an adjustment that would occur but for the terms
of the first sentence of Subparagraph (vi) above); or
(ii) the corporation shall authorize the granting
to the holders of its Common Stock of rights or warrants to subscribe
for or purchase any shares of capital stock of any class or of any
42
<PAGE> 43
other rights; or
(iii) of any reclassification of the Common Stock
of the corporation (other than a subdivision or combination of its
outstanding shares of Common Stock), or of any consolidation,
merger or share exchange to which the corporation is a party and
for which approval of any stockholders of the corporation is
required, or of the sale or conveyance of the property of the
corporation as an entirety or substantially as an entirety; or
(iv) of the voluntary or involuntary dissolution,
liquidation or winding up of the corporation; then the corporation
shall cause to be filed with any Conversion Agent, and shall cause
to be mailed to all holders of shares of Series A Preferred Stock
at each such holder's last address as the same appears on the books
of the corporation, at least 20 days (or 10 days in any case
specified in clause (i) or (ii) above) prior to the applicable
record or effective date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such
dividend, distribution, rights or warrants or, if a record is not to
be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution, rights or
warrants are to be determined, or (y) the date on which such
reclassification, consolidation, merger, share exchange, sale,
conveyance, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation,
merger, share exchange, sale, conveyance, dissolution, liquidation
or winding up. Neither the failure to give such notice nor any
defect therein shall affect the legality or validity of the
proceedings described in clauses (i) through (iv) above.
(h) The corporation will pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of shares
of Common Stock upon conversions of shares of Series A Preferred Stock
pursuant hereto; provided, however, that the corporation shall not be required
--------- --------
to pay any tax which may be payable in respect of any transfer involved in
the issue or delivery of shares of Common Stock in a name other than that of
the holder of the shares of Series A Preferred Stock to be converted, and no
such issue or delivery shall be made unless and until the person requesting
such issue or delivery has paid to the corporation the amount of any such tax
or has established, to the satisfaction of the corporation, that such tax has
been paid.
(i) All shares of Common Stock which may be delivered upon
conversions of shares of Series A Preferred Stock shall upon delivery be duly
and validly issued and fully paid and non-assessable, free of all liens and
charges and not subject to any preemptive rights. If necessary, the
corporation shall reduce the par value of the Common Stock so that all shares
of Common Stock delivered upon conversions of shares of Series A Preferred
Stock shall be fully paid and non-assessable.
(j) The corporation at all times shall reserve and keep available, free
from preemptive rights, out of its authorized but unissued shares of Common
43
<PAGE> 44
Stock or its issued shares of Common Stock held in its treasury, or both, for
the purpose of effecting conversions of shares of Series A Preferred Stock,
the full number of shares of Common Stock deliverable upon the conversion of
all outstanding shares of Series A Preferred Stock not theretofore converted.
For purposes of this reservation of Common Stock, the number of shares of
Common Stock which shall be deliverable upon the conversion of all
outstanding shares of Series A Preferred Stock shall be computed as if at the
time of computation all outstanding shares of Series A Preferred Stock were
held by a single holder. The issuance of shares of Common Stock upon
conversion of shares of Series A Preferred Stock is authorized in all respects.
7. Liquidation.
-- ------------
(a) In the event of any voluntary or involuntary dissolution, liquidation
or winding up of the corporation (for the purposes of this Section 7, a
"Liquidation"), before any distribution of assets shall be made to the holders
of the Common Stock or the holders of any other stock that ranks junior to
the Series A Preferred Stock in respect of distributions upon the Liquidation
of the corporation, the holder of each share of Series A Preferred Stock then
outstanding shall be entitled to be paid, out of the assets of the corporation
available for distribution to its stockholders, an amount equal to $25.00 per
share plus all dividends (whether or not declared or due) accrued and unpaid
on such share on the date fixed for the distribution of assets of the
corporation to the holders of Series A Preferred Stock.
(b) If, upon any Liquidation of the corporation, the assets available for
distribution to the holders of Series A Preferred Stock and any other stock of
the corporation ranking on a parity with the Series A Preferred Stock upon
Liquidation issued by the corporation which shall then be outstanding
(hereinafter in this paragraph called the "Total Amount Available") shall be
insufficient to pay the holders of all outstanding shares of Series A Preferred
Stock and all other such parity stock the full amounts (including all dividends
accrued and unpaid) to which they shall be entitled by reason of such
Liquidation of the corporation, then there shall be paid to the holders of the
Series A Preferred Stock in connection with such Liquidation of the
corporation an amount equal to the product derived by multiplying the Total
Amount Available times a fraction of which the numerator shall be the full
amount to which the holders of the Series A Preferred Stock shall be entitled
under the terms of Subsection (a) by reason of such Liquidation of the
corporation and of which the denominator shall be the total amount which
would have been distributed by reason of such Liquidation of the corporation
with respect to the Series A Preferred Stock and all other stock ranking on a
parity with the Series A Preferred Stock upon Liquidation then outstanding
had the corporation possessed sufficient assets to pay the maximum amount
which the holders of all such stock would be entitled to receive in connection
with such Liquidation of the corporation.
(c) The voluntary sale, conveyance, lease, exchange or transfer of the
property of the corporation as an entirety or substantially as an entirety, or
the merger or consolidation of the corporation into or with any other
corporation, or the merger of any other corporation into the corporation, or
any purchase or redemption of some or all of the shares of any class or
series of stock of the corporation shall not be deemed to be a Liquidation of
the corporation for the purposes of this Section 7 (unless in connection
therewith the Liquidation of the corporation is specifically approved).
44
<PAGE> 45
(d) The holder of any shares of Series A Preferred Stock shall not be
entitled to receive any payment owed for such shares under this Section 7
until such holder shall cause to be delivered to the corporation (i) the
certificate or certificates representing such shares of Series A Preferred
Stock and (ii) a transfer instrument or instruments satisfactory to the
corporation and sufficient to transfer such shares of Series A Preferred Stock
to the corporation free of any adverse interest. As in the case of the
redemption price, no interest shall accrue on any payment upon Liquidation
after the due date thereof.
(e) After payment of the full amount of the liquidating distribution to
which they are entitled, the holders of shares of the Series A Preferred Stock
will not be entitled to any further participation in any distribution of assets
by the corporation.
8. Payments.
-- ---------
(a) The corporation may provide funds for any payment of the
redemption price for any shares of Series A Preferred Stock or any amount
distributable with respect to any Series A Preferred Stock under Section 7
hereof by depositing such funds with a bank or trust company selected by
the corporation having a net worth of at least $50,000,000 and organized under
the laws of the United States or any state thereof, in trust for the benefit of
the holder of such shares of Series A Preferred Stock under arrangements
providing irrevocably for payment upon satisfaction of any conditions to such
payment by the holder of such shares of Series A Preferred Stock which shall
reasonably be required by the corporation. The corporation shall be entitled
to make any deposit of funds contemplated by this Section 8 under
arrangements designated to permit such funds to generate interest or other
income for the corporation, and the corporation shall be entitled to receive
all interest and other income earned by any funds while they shall be deposited
as contemplated by this Section 8, provided that the corporation shall maintain
on deposit funds sufficient to satisfy all payments which the deposit
arrangement shall have been established to satisfy. If the conditions
precedent to the disbursement of any funds deposited by the corporation
pursuant to this Section 8 shall not have been satisfied within two years after
the establishment of the trust for such funds, then (i) such funds shall be
returned to the corporation upon its request; (ii) after such return, such
funds shall be free of any trust which shall have been impressed upon them;
(iii) the person entitled to the payment for which such funds shall have been
originally intended shall have the right to look only to the corporation for
such payment, subject to applicable escheat laws; and (iv) the trustee which
shall have held such funds shall be relieved of any responsibility for such
funds upon the return of such funds to the corporation.
(b) Any payment which may be owed in payment of the redemption
price for any shares of Series A Preferred Stock pursuant to Section 5 or in
payment of any amount distributable with respect to the shares of Series A
Preferred Stock under Section 7 shall be deemed to have been paid or
properly provided for upon the earlier to occur of: (i) the date upon which
funds sufficient to make such payment shall be deposited in a manner
contemplated by Subsection (a) hereof or (ii) the date upon which a check
payable to the person entitled to receive such payment shall be delivered to
such person or mailed to such person at the address of such person then
appearing on the books of the corporation.
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<PAGE> 46
9. Status of Reacquired Shares.
-- ----------------------------
Shares of Series A Preferred Stock issued and reacquired by the
corporation (including, without limitation, shares of Series A Preferred Stock
which have been redeemed pursuant to the terms of Section 5 hereof and
shares of Series A Preferred Stock which have been converted into shares of
Common Stock) shall have the status of authorized and unissued shares of
Preferred Stock, undesignated as to series and subject to later issuance.
10. Preemptive Rights.
--- ------------------
Holders of shares of Series A Preferred Stock are not entitled to any
preemptive or subscription rights in respect of any securities of the
corporation.
11. Legal Holidays.
--- ---------------
In any case where any Dividend Payment Date, redemption date or the
last date on which a holder of Series A Preferred Stock has the right to
convert such holder's shares of Series A Preferred Stock shall not be a
Business Day (as defined below), then notwithstanding any other provision
hereof, payment of a dividend due or a redemption price or conversion of the
shares of Series A Preferred Stock need not be made on such date but may
be made on the next succeeding Business Day with the same force and effect
as if made on the Dividend Payment Date or redemption date or the last day
for conversion; provided, that for purposes of computing such payment, no
---------
interest shall accrue for the period from and after such Dividend Payment
Date or redemption date, as the case may be. As used in this Section 11,
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in the State of Georgia are
authorized or obligated by law or executive order to close.
APPENDIX B
----------
SERIES B 6.0% CUMULATIVE CONVERTIBLE PREFERRED STOCK
----------------------------------------------------
1. Designation and Amount.
-- -----------------------
There hereby is created a series of Preferred Stock with a stated value
of $25.00 per share. The shares of such series shall be designated as Series
B 6.0% Cumulative Convertible Preferred Stock (the "Series B Preferred
Stock"), and the number of shares constituting the Series B Preferred Stock
shall be 350,000. Such number of shares may be decreased by a resolution
duly adopted by the Board of Directors; provided, that no decrease shall
---------
reduce the number of shares of Series B Preferred Stock to a number less
than the number of shares then outstanding plus the number of shares
reserved for issuance upon the exercise of outstanding options, rights, or
warrants or upon the conversion of any outstanding securities issued by the
corporation that are convertible into Series B Preferred Stock.
2. Ranking.
-- --------
Any class or classes of stock of the corporation shall be deemed to
rank: (a) prior to the Series B Preferred Stock as to dividends or as to
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<PAGE> 47
distribution of assets upon liquidation, dissolution or winding up if the
holders of such class shall be entitled to the receipt of dividends or of
amounts distributable upon liquidation, dissolution or winding up, as the case
may be, in preference or priority to the holders of Series B Preferred Stock;
and
(b) on a parity with the Series B Preferred Stock as to dividends or
as to distribution of assets upon liquidation, dissolution or winding up,
whether or not the dividend rates, dividend payment dates, or redemption or
liquidation prices per share thereof be different from those of the Series B
Preferred Stock, if the holders of such class of stock and the Series B
Preferred Stock shall be entitled to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as the case may be,
in proportion to their respective dividend rates or liquidation prices, without
preference or priority one over the other.
3. Dividends.
-- ----------
(a) For purposes of this Section 3, each January 1, April 1, July 1 and
October 1 on which any share of Series B Preferred Stock shall be
outstanding shall be deemed to be a "Dividend Payment Date." Commencing on
the Dividend Payment Date next following the issuance of Series B Preferred
Stock, the holders of shares of Series B Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors of the corporation
out of funds legally available therefor, cumulative dividends payable in
arrears at the rate of $1.50 per year on each share of Series B Preferred
Stock and no more. Notwithstanding the foregoing, if the date of issuance of
the Series B Preferred Stock is 15 or fewer days prior to a Dividend Payment
Date, the corporation may, at its option, defer the initial dividend payment to
the second Dividend Payment Date following the date of issuance. Dividends
payable on the initial Dividend Payment Date shall be pro rated based on the
number of days that shall have elapsed since the date of original issue of the
Series B Preferred Stock. Dividends payable on the Preferred Stock for any
period greater or less than a full dividend period shall be computed on the
basis of a 360 day year consisting of twelve 30-day months.
(b) The Board of Directors may fix a record date for the determination
of holders of shares of Series B Preferred Stock entitled to receive payment
of a dividend declared thereon, which record date shall be not more than 45
days prior to the date fixed for the payment thereof.
(c) Except as provided in Subsection 3(a) above, on each Dividend
Payment Date, all dividends which shall have accrued on each share of Series
B Preferred Stock outstanding on such Dividend Payment Date shall accumulate
and be deemed to become "due." Any dividend which shall not be paid on the
Dividend Payment Date on which it shall become due shall be deemed to be
"past due" until such dividend shall be paid or until the share of Series B
Preferred Stock with regard to which such dividend became due shall no
longer be outstanding, whichever is the earlier to occur. No interest or sum
of money in lieu of interest shall be payable with regard to any dividend
payment or payments which are past due. Dividends paid on shares of Series
B Preferred Stock in an amount less than the total amount of such dividends
at the time accumulated and payable on such share shall be allocated pro rata
on a share-by-share basis among all such shares at the time outstanding.
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<PAGE> 48
(d) If there shall be outstanding shares of any other series of
Preferred Stock of the corporation ranking junior to the Series B Preferred
Stock as to dividends, no dividends shall be declared or paid or set apart for
payment on any such other series for any period unless full cumulative
dividends have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set apart for such payment on
the Series B Preferred Stock for all dividend payment periods terminating on
or prior to the date of payment of such full cumulative dividends. When
dividends are not paid in full or are past due on the shares of the Series B
Preferred Stock and on any other series of Preferred Stock ranking on a
parity as to dividends with the Series B Preferred Stock, all dividends
declared on all outstanding shares of the Series B Preferred Stock and shares
of such other series of Preferred Stock shall be declared pro rata so that the
amount of dividends declared per share on the Series B Preferred Stock and
such other Preferred Stock shall in all cases bear to each other the same
ratio that accrued and unpaid dividends per share on the shares of the Series
B Preferred stock and such other Preferred Stock to the date of such
dividend payment bear to each other. Holders of shares of Series B Preferred
Stock shall not be entitled to any dividend, whether payable in cash, property
or securities, in excess of full cumulative dividends, as herein provided, on
the Series B Preferred Stock.
(e) So long as any shares of the Series B Preferred Stock are
outstanding, no dividend (other than a dividend or distribution in Common
Stock or in any other stock ranking junior to the Series B Preferred Stock as
to dividends and upon liquidation, dissolution or winding up) shall be declared
or paid or set aside for payment or other distribution declared or made upon
the Common Stock or upon any other stock ranking junior to, or on a parity
with, the Series B Preferred Stock as to dividends or upon liquidation,
dissolution or winding up, nor shall any Common Stock or any other stock of
the corporation ranking junior to, or on a parity with, the Series B Preferred
Stock as to dividends or upon liquidation, dissolution or winding up, be
redeemed, purchased or otherwise acquired for any consideration (or any
moneys be paid to or made available for a sinking fund for the redemption of
any shares of any such stock) by the corporation (except for the conversion
of such junior or parity stock into, or the exchange of such junior or parity
stock for, stock of the corporation ranking junior to the Series B Preferred
Stock as to dividends and upon liquidation, dissolution, or winding up) unless,
in each case, the full cumulative dividends on all outstanding shares of the
Series B Preferred Stock shall have been paid or declared and set aside for
payment for all past dividend payment periods.
(f) The corporation shall not permit any subsidiary of the corporation
to purchase or otherwise acquire for consideration any shares of stock of the
corporation unless the corporation could, under paragraph (e) of this Section
3, purchase or otherwise acquire such shares at such time and in such
manner; provided, however, that this paragraph shall not prohibit the
--------- --------
acquisition of shares of stock of the corporation which have been pledged to
the corporation or any subsidiary of the corporation for a bona fide debt.
4. Voting Rights.
-- --------------
Except as otherwise from time to time required by applicable law, the
Series B Preferred Stock shall have no voting rights.
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<PAGE> 49
5. Redemption.
-- -----------
(a) The shares of Series B Preferred Stock shall not be redeemable
prior to January 1, 1997. At any time on or after such date, except as
otherwise provided below, the shares of Series B Preferred Stock may be
redeemed, in whole or in part, at the option of the corporation, during the
twelve-month periods commencing on January 1 of the years indicated below at
the following redemption prices per share of Series B Preferred Stock, plus
accrued and unpaid dividends thereon up to but excluding the date fixed for
redemption:
Redemption Redemption
---------- ----------
Year Price Year Price
---- ----- ---- -----
1997 $27.00 2000 $25.80
1998 26.60 2001 25.40
1999 26.20 2002 and
thereafter 25.00
(b) In the event the corporation shall elect to redeem shares of Series
B Preferred Stock, the corporation shall give notice of such redemption to the
holders of record of shares of the Series B Preferred Stock being so
redeemed, not less than 30 nor more than 60 days prior to such redemption,
by first class mail, postage prepaid, at their addresses as shown on the stock
registration books of the corporation; provided, that without limiting the
---------
obligation of the corporation hereunder to give the notice provided in this
Subsection 5(b), the failure of the corporation to give such notice shall not
invalidate any corporate action by the corporation. Each such notice shall
state (i) the redemption date; (ii) the number of shares of Series B Preferred
Stock to be redeemed and, if fewer than all of the shares held by such holder
are to be redeemed, the number of such shares to be redeemed from such
holder; (iii) the redemption price; (iv) the place or places where certificates
for such shares are to be surrendered for payment of the redemption price;
(v) that dividends on the shares to be redeemed will cease to accrue on such
redemption date; and (vi) that such holder has the right to convert such
shares into a number of shares of Common Stock of the corporation prior to
the close of business on the date fixed for the redemption.
(c) In the event that fewer than all the outstanding shares of Series B
Preferred Stock are to be redeemed, the number of shares to be redeemed
shall be determined by the Board of Directors of the corporation and the
shares to be redeemed shall be determined pro rata or by lot as may be
determined by the Board of Directors of the corporation or by any other
method as may be determined by the Board of Directors of the corporation in
its sole discretion to be equitable, provided that such method satisfies any
applicable requirements of any securities exchange or automated quotation
system on which the Series B Preferred Stock is then listed or traded.
(d) Notice having been mailed as aforesaid, from and after the
applicable redemption date (unless the corporation shall default in providing
money for the payment of the redemption price), dividends on the shares of
Series B Preferred Stock to be redeemed on such redemption date shall cease
49
<PAGE> 50
to accrue and said shares shall no longer be deemed to be outstanding, and
all rights of the holders thereof as stockholders of the corporation (except
the right to receive from the corporation the redemption price) shall cease;
provided, however, that notwithstanding the foregoing, if notice of redemption
- --------- --------
has been given pursuant to this Section 5 and any holder of shares of Series
B Preferred Stock shall, prior to the close of business on the redemption date,
surrender for conversion any or all of the shares to be redeemed held by
such holder in accordance with Section 6 hereof, then the conversion of such
shares to be redeemed shall become effective as provided in Section 6. Upon
surrender of the certificates for any shares so redeemed (properly endorsed
or assigned for transfer, if the Board of Directors of the corporation shall so
require and the notice shall so state), such shares shall be redeemed by the
corporation at the redemption price aforesaid. In case fewer than all the
shares represented by any such certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares without cost to the holder
thereof.
(e) Any shares of Series B Preferred Stock which at any time shall
have been redeemed shall have, after such redemption, the status of
authorized but unissued shares of Preferred Stock, without designation as to
series, until such shares are once more designated as part of a particular
series by the Board of Directors of the corporation.
(f) Notwithstanding the foregoing provisions of this Section 5, if any
dividends on Series B Preferred Stock are past due, no shares of Series B
Preferred Stock shall be redeemed unless all outstanding shares of Series B
Preferred Stock are simultaneously redeemed, and the corporation shall not
purchase or otherwise acquire any shares of Series B Preferred Stock;
provided, however, that the foregoing shall not prevent the purchase or
- --------- --------
acquisition of shares of Series B Preferred Stock pursuant to a purchase or
exchange offer made on the same terms to holders of all outstanding shares of
Series B Preferred Stock.
6. Conversion.
-- -----------
(a) The holder of any share of Series B Preferred Stock shall have the
right at any time, at such holder's option (except that if such share is called
for redemption, then in respect of such share only to and including but not
after the close of business on the date fixed for such redemption, provided
that no default by the corporation in the payment of the applicable redemption
price (including any accrued and unpaid dividends) shall have occurred and
be continuing on the date fixed for such redemption) to convert such share
into that number of fully paid and non-assessable shares of Common Stock of
the corporation (calculated as to each conversion to the nearest 1/100th of a
share) obtained by dividing $25.00 by the Conversion Price then in effect.
The Conversion Price initially shall be $21.00 per share of Common Stock and
shall be subject to adjustment as set forth below.
(b) To exercise the conversion privilege, the holder of shares of Series
B Preferred Stock shall surrender the certificates representing such shares,
accompanied by transfer instruments satisfactory to the corporation and
sufficient to transfer the Series B Preferred Stock being converted to the
50
<PAGE> 51
corporation free of any adverse interest, at any of the offices or agencies
maintained for such purpose by the corporation ("Conversion Agent") and
shall give written notice to the corporation at such Conversion Agent that the
holder elects to convert such shares. Such notice shall also state the names,
together with addresses, in which the certificates for shares of Common Stock
which shall be issuable upon such conversion shall be issued. As promptly as
practicable after the surrender of such shares of Series B Preferred Stock as
aforesaid, the corporation shall issue and shall deliver at such Conversion
Agent to such holder, or on his or her written order, a certificate for the
number of full shares of Common Stock issuable upon the conversion of such
shares in accordance with the provisions hereof. Balance certificates will be
issued for the remaining shares of Series B Preferred Stock in any case in
which fewer than all of the shares of Series B Preferred Stock represented by
a certificate are converted. Each conversion shall be deemed to have been
effected immediately prior to the close of business on the date on which
shares of Series B Preferred Stock shall have been so surrendered and such
notice received by the corporation as aforesaid, and the persons in whose
names any certificates for shares of Common Stock shall be issuable upon such
conversion shall be deemed to have become the holders of record of the
Common Stock represented thereby at such time, unless the stock transfer
books of the corporation shall be closed on the date on which shares of Series
B Preferred Stock are so surrendered for conversion, in which event such
conversion shall be deemed to have been effected immediately prior to the
close of business on the next succeeding day on which such stock transfer
books are open, and such persons shall be deemed to have become such
holders of record of the Common Stock at the close of business on such later
day. In either circumstance, such conversion shall be at the Conversion Price
in effect on the date upon which such share shall have been surrendered and
such notice received by the corporation.
(c) In the case of any share of Series B Preferred Stock which is
converted after any record date with respect to the payment of a dividend on
the Series B Preferred Stock and on or prior to the next succeeding Dividend
Payment Date, the dividend due on such Dividend Payment Date shall be
payable on such Dividend Payment Date to the holder of record of such share
as of such preceding record date notwithstanding such conversion. However,
shares of Series B Preferred Stock surrendered for conversion during the
period from the close of business on any record date with respect to the
payment of a dividend on the Series B Preferred Stock next preceding any
Dividend Payment Date to the opening of business on such Dividend Payment
Date shall (except in the case of shares of Series B Preferred Stock which
have been called for redemption on a redemption date within such period) be
accompanied by payment in New York Clearing House or other funds acceptable
to the corporation in an amount equal to the portion of the dividend payable
on such Dividend Payment Date which accrues during the period from the date
of such surrender until such Dividend Payment Date on the shares of Series B
Preferred Stock being surrendered for conversion. The dividend with respect
to a share of Series B Preferred Stock called for redemption on a redemption
date during the period from the close of business on any record date with
respect to the payment of a dividend on the Series B Preferred Stock next
preceding any Dividend Payment Date to the opening of business on such
Dividend Payment Date shall be payable on such Dividend Payment Date to the
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<PAGE> 52
holder of record of such share on such dividend record date notwithstanding
the conversion of such share of Series B Preferred Stock after such record
date and prior to such Dividend Payment Date, and the holder converting such
share of Series B Preferred Stock need not include a payment of such
dividend amount upon surrender of such share of Series B Preferred Stock
for conversion. Except as provided in this Subsection (c), no payment or
adjustment shall be made upon any conversion on account of any dividends
accrued on shares of Series B Preferred Stock surrendered for conversion or
on account of any dividends on the Common Stock issued upon conversion.
(d) No fractional shares or scrip representing fractions of shares of
Common Stock shall be issued upon conversion of any shares of Series B
Preferred Stock. Instead of any fractional interest in a share of Common
Stock which would otherwise be deliverable upon the conversion of a share of
Series B Preferred Stock, the corporation shall pay to the holder of such
share of Series B Preferred Stock an amount in cash (computed to the nearest
cent, with one-half cent being rounded upward) equal to such fraction
multiplied by the then current market price (as defined in Subsection 6(e)(v)
hereof) of the Common Stock at the close of business on the day on which
such share or shares of Series B Preferred Stock are surrendered for
conversion in the manner set forth above, or if such date is not a trading
date, on the next succeeding trading date. If more than one certificate
representing shares of Series B Preferred Stock shall be surrendered for
conversion at one time by the same holder, the number of full shares issuable
upon conversion thereof shall be computed on the basis of the aggregate
number of shares of Series B Preferred Stock represented by such
certificates, or the specified portions thereof to be converted, so surrendered.
(e) The Conversion Price shall be adjusted from time to time as follows:
(i) In case the corporation shall pay or make a dividend or other
distribution in Common Stock on any class of capital stock of the
corporation, the Conversion Price in effect at the opening of business
on the day following the date fixed for the determination of stockholders
entitled to receive such dividend or other distribution shall be reduced
by multiplying such Conversion Price by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding
at the close of business on the date fixed for such determination and of
which the denominator shall be the sum of such number of shares and
the total number of shares constituting such dividend or other
distribution, such reduction to become effective immediately after the
opening of business on the day following the date fixed for such
determination. For the purposes of this Subparagraph (i), the number
of shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the corporation but shall include shares
issuable with regard to scrip certificates issued in lieu of fractions of
shares of Common Stock. The corporation shall not pay any dividend or
make any distribution on shares of Common Stock held in the treasury
of the corporation.
(ii) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
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<PAGE> 53
Conversion Price in effect at the opening of business on the day
following the day upon which such subdivision becomes effective shall
be proportionately reduced, and, conversely, in case outstanding shares
of Common Stock shall each be combined into a smaller number of shares
of Common Stock, the Conversion Price in effect at the opening of
business on the day following the day upon which such combination
becomes effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the
opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(iii) In case the corporation shall issue rights or warrants to
all holders of its Common Stock entitling them to subscribe for or purchase
shares of Common Stock at a price per share less than the then current
market price per share (determined as provided in Subparagraph (v)
below) of the Common Stock on the date fixed for the determination of
stockholders entitled to receive such rights or warrants (other than
pursuant to a dividend reinvestment plan), the Conversion Price in
effect at the opening of business on the day following the date fixed for
such determination shall be reduced by multiplying such Conversion
Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the
date fixed for such determination plus the number of shares of Common
Stock which the aggregate of the offering price of the total number of
shares of Common Stock so offered for subscription or purchase would
purchase at such current market price and of which the denominator
shall be the number of shares of Common Stock outstanding at the close
of business on the date fixed for such determination plus the number of
shares of Common Stock so offered for subscription or purchase, such
reduction to become effective immediately after the opening of business
on the day following the date fixed for such determination. For the
purpose of this Subparagraph (iii), the number of shares of Common
Stock at any time outstanding shall not include shares held in the
treasury of the corporation but shall include shares issuable with
regard to scrip certificates issued in lieu of fractions of shares of
Common Stock. The corporation shall not issue any rights or warrants
with regard to shares of Common Stock held in the treasury of the
corporation.
(iv) In case the corporation shall, by dividend or otherwise,
distribute to all holders of its Common Stock (x) evidences of its
indebtedness, (y) cash or other assets (including securities, but
excluding any rights or warrants referred to in Subparagraph
(iii) above, any regular quarterly dividend payable solely in cash out of
retained earnings of the corporation that may from time to time be fixed
by the Board of Directors of the corporation and any dividend or
distribution referred to in Subparagraph (i) above) or (z) any
combination thereof, then in each case the Conversion Price shall be
adjusted so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior the close of
business on the date fixed for the determination of stockholders entitled
to receive such distribution by a fraction of which the numerator shall
53
<PAGE> 54
be the then current market price per share (determined as provided in
subparagraph (v) below) of the Common Stock on the date fixed for
such determination less the then fair market value (as determined by
the Board of Directors, whose determination, if made in good faith, shall
be conclusive and shall be described in a statement filed with any
Conversion Agent) of the portion of the cash or other assets or
evidences of indebtedness so distributed (and for which an adjustment
to the Conversion Price has not previously been made pursuant to the
terms of this Section 6) applicable to one share of Common Stock and of
which the denominator shall be such then current market price per
share of the Common Stock, such adjustment to become effective
immediately prior to the opening of business on the day following such
record date; provided, however, that if and to the extent that the fair
--------- --------
market value of such distribution, as so determined by the Board of
Directors, shall exceed the retained earnings of the corporation, then in
lieu of adjusting the Conversion Price as provided above with respect to
the portion of such distribution which exceeds the corporation's retained
earnings, the holder of the Series B Preferred Stock then outstanding
shall have the right thereafter to convert the share of Series B
Preferred Stock into (i) the kind and amount of indebtedness or cash or
other assets of the corporation receivable in such distribution by a
holder of the number of shares of Common Stock into which the Series B
Preferred Stock might have been converted at the close of business on
the date fixed for the determination of stockholders entitled to receive
such distribution, and (ii) such number of shares of Common Stock into
which the Series B Preferred Stock may then be convertible, as
adjusted from time to time pursuant to this Section 6.
(v) For the purpose of any computation under Subparagraphs
(iii) and (iv) above and for certain definitions under Subparagraphs
(viii) below, the current market price per share of Common Stock on any
date shall be deemed to be the average of the last reported sales prices
of the Common Stock for five consecutive trading days selected by the
Board of Directors commencing no more than 20 trading days before and
ending no later than the day before the day in question, as reported on
the principal national securities exchange on which the Common Stock is
listed or admitted to trading or, if not listed or admitted to trading on
any national securities exchange, on the Nasdaq National Market or, if
the Common Stock is not listed on the Nasdaq National Market, the
average of the closing bid and asked prices for the Common Stock on
such day in the over-the-counter market as reported by Nasdaq or, if
bid and asked prices for the Common Stock on each such day shall not
have been reported through Nasdaq, the average of the bid and asked
prices for such date as furnished by any New York Stock Exchange
member firm regularly making a market in the Common Stock selected
from time to time by the Board of Directors of the corporation for such
purpose or, if no such quotations are available, the fair market value of
the Common Stock as determined by a New York Stock Exchange member
firm regularly making a market in the Common Stock selected from time
to time by the Board of Directors of the corporation for such purpose.
(vi) No adjustment in the Conversion Price shall be required
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<PAGE> 55
unless such adjustment would require an increase or decrease of at
least one percent of such price; provided, however, that any
--------- --------
adjustments which by reason of this Subparagraph (vi) are not required
to be made shall be carried forward and taken into account in any
subsequent adjustment; and provided further, that adjustment shall be
-------- --------
required and made in accordance with the provisions hereof not later
than such time as may be required in order to preserve the tax-free
nature of a distribution to the holders of shares of Series B Preferred
Stock or Common Stock. All calculations shall be made to the nearest
cent or to the nearest 1/100th of a share, as the case may be. The
corporation may make such reductions in the Conversion Price, in
addition to those required by Subparagraphs (i), (ii), (iii) and (iv)
above, as it considers to be advisable in order to avoid or diminish any
income tax to any holders of shares of Common Stock resulting from any
dividend or distribution of stock or issuance of rights or warrants to
purchase or subscribe for stock or from any event treated as such for
income tax purposes or for any other reasons.
(vii) Whenever the Conversion Price is adjusted as herein
provided, (x) the corporation shall promptly file with any Conversion
Agent a certificate of a firm of independent public accountants setting
forth the Conversion Price after such adjustment and setting forth a
brief statement of the facts requiring such adjustment and the manner
of computing the same, which certificate shall be conclusive evidence of
the correctness of such adjustment, and (y) a notice stating that the
Conversion Price has been adjusted and setting forth the adjusted
Conversion Price shall forthwith be given by the corporation to any
Conversion Agent and mailed by the corporation to each record holder
of shares of Series B Preferred Stock at their last address as the same
appears on the books of the corporation.
(viii) Notwithstanding any other provision herein to the contrary,
in case of (aa) any capital reorganization of the corporation, (bb) any
reclassification or change of outstanding shares of Common Stock (other
than a change relating to par value, or as a result of a subdivision or
combination of the Common Stock), (cc) any consolidation, merger or
combination of the corporation with or into another corporation, or (dd)
any sale or conveyance of the properties and assets of the corporation
as, or substantially as, an entirety to any other entity, in each case as
a result of which Common Stock holders are entitled to receive stock,
securities or other property or assets (including cash) with respect to
or in exchange for their Common Stock, then there shall be no
adjustment of the Conversion Price, but the holder of each share of
Series B Preferred Stock then outstanding shall have the right
thereafter to convert such share into the kind and amount of securities,
cash or other property that the holder would have owned or been
entitled to receive immediately after such reorganization,
reclassification, change, consolidation, merger, combination, sale or
conveyance if such share had been converted immediately before the
effective date of such reorganization, reclassification, change,
consolidation, merger, combination, sale or conveyance. In the event
that the corporation engages in a transaction set forth in Subparagraphs
(aa)-(dd) above
55
<PAGE> 56
and holders of Series B Preferred Stock do not convert their shares of
Series B Preferred Stock as provided above, then the continuing or
surviving entity shall be obligated to redeem all remaining outstanding
shares of Series B Preferred Stock and the holders of Series B
Preferred Stock shall surrender their shares of Series B Preferred
Stock for redemption, all in accordance with the redemption provisions
otherwise applicable to the Series B Preferred Stock as set forth in
Section 5 hereof. The Adjustments described in this Subparagraph (viii)
shall be subject to further adjustments as appropriate that shall be as
nearly equivalent as may be practicable to the relevant adjustments
provided for in the preceding subparagraphs and in this subparagraph.
If, in the case of any such reorganization, reclassification, change,
consolidation, merger, combination, sale or conveyance, the stock or
other securities and property receivable thereupon by a holder of
shares of Common Stock includes shares of stock, securities or other
property or assets (including cash) of an entity other than the
successor or acquiring entity, as the case may be, in such
reorganization, reclassification, change, consolidation, merger,
combination, sale or conveyance, then the corporation shall enter into an
agreement with such other entity for the benefit of the holders of
Series A Preferred Stock that shall contain such provisions to protect
the interests of such holders as the Board of Directors of the
corporation shall reasonably consider necessary by reason of the
foregoing.
(f) For purposes of this Section 6, "Common Stock" includes any stock
of any class of the corporation which has no preference in respect of
dividends or of amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the corporation and which is not
subject to redemption by the corporation. However, subject to the provisions
of Subparagraph (viii) above, shares issuable upon conversion of shares of
Series B Preferred Stock shall include only shares of the class designated as
Common Stock of the corporation on the date of the initial issuance of Series
B Preferred Stock by the corporation, or shares of any class or classes
resulting from any reclassification thereof and which have no preference in
respect of dividends or of amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the corporation and which
are not subject to redemption by the corporation.
(g) In case:
(i) the corporation shall declare a dividend (or any other
distribution) on its Common Stock that would cause an adjustment to the
Conversion Price of the Series B Preferred Stock pursuant to the terms
of Subparagraph (i) or Subparagraph (iv) above (including such an
adjustment that would occur but for the terms of the first sentence of
Subparagraph (vi) above); or
(ii) the corporation shall authorize the granting to the holders of
its Common Stock of rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights; or
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<PAGE> 57
(iii) of any reclassification of the Common Stock of the
corporation (other than a subdivision or combination of its outstanding
shares of Common Stock), or of any consolidation, merger or share
exchange to which the corporation is a party and for which approval of
any stockholders of the corporation is required, or of the sale or
conveyance of the property of the corporation as an entirety or
substantially as an entirety; or
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of the corporation; then the corporation shall cause to be
filed with any Conversion Agent, and shall cause to be mailed to all
record holders of shares of Series B Preferred Stock at each such
holder's last address as the same appears on the books of the
corporation, at least 20 days (or 10 days in any case specified in clause
(i) or (ii) above) prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is
to be taken for the purpose of such dividend, distribution, rights or
warrants or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend,
distribution, rights or warrants are to be determined, or (y) the date on
which such reclassification, consolidation, merger, share exchange, sale,
conveyance, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities, cash or other property deliverable upon
such reclassification, consolidation, merger, share exchange, sale,
conveyance, dissolution, liquidation or winding up. Neither the failure
to give such notice nor any defect therein shall affect the legality or
validity of the proceedings described in clauses (i) through (iv) above.
(h) The corporation will pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of shares
of Common Stock upon conversions of shares of Series B Preferred Stock
pursuant hereto; provided, however, that the corporation shall not be required
--------- -------
to pay any tax which may be payable in respect of any transfer involved in
the issue or delivery of shares of Common Stock in a name other than that of
the holder of the shares of Series B Preferred Stock to be converted, and no
such issue or delivery shall be made unless and until the person requesting
such issue or delivery has paid to the corporation the amount of any such tax
or has established, to the satisfaction of the corporation, that such tax has
been paid.
(i) All shares of Common Stock which may be delivered upon
conversions of shares of Series B Preferred Stock shall upon delivery be duly
and validly issued and fully paid and non-assessable, free of all liens and
charges and not subject to any preemptive rights. If necessary, the
corporation shall reduce the par value of the Common Stock so that all shares
of Common Stock delivered upon conversions of shares of Series B Preferred
Stock shall be fully paid and non-assessable.
(j) The corporation at all times shall reserve and keep available, free
from preemptive rights, out of its authorized but unissued shares of Common
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<PAGE> 58
Stock or its issued shares of Common Stock held in its treasury, or both, for
the purpose of effecting conversions of shares of Series B Preferred Stock,
the full number of shares of Common Stock deliverable upon the conversion of
all outstanding shares of Series B Preferred Stock not theretofore converted.
For purposes of this reservation of Common Stock, the number of shares of
Common Stock which shall be deliverable upon the conversion of all
outstanding shares of Series B Preferred Stock shall be computed as if at the
time of computation all outstanding shares of Series B Preferred Stock were
held by a single holder. The issuance of shares of Common Stock upon
conversion of shares of Series B Preferred Stock is authorized in all respects.
7. Liquidation.
-- ------------
(a) In the event of any voluntary or involuntary dissolution, liquidation
or winding up of the corporation (for the purposes of this Section 7, a
"Liquidation"), before any distribution of assets shall be made to the holders
of the Common Stock or the holders of other stock that ranks junior to the
Series B Preferred Stock in respect of distributions upon the Liquidation of
the corporation, the holder of each share of Series B Preferred Stock then
outstanding shall be entitled to be paid, out of the assets of the corporation
available for distribution to its stockholders, an amount equal to $25.00 per
share plus all dividends (whether or not declared or due) accrued and unpaid
on such share on the date fixed for the distribution of assets of the
corporation to the holders of Series B Preferred Stock.
(b) If, upon any Liquidation of the corporation, the assets available for
distribution to the holders of Series B Preferred Stock and any other stock of
the corporation ranking on a parity with the Series B Preferred Stock upon
Liquidation issued by the corporation which shall then be outstanding
(hereinafter in this paragraph called the "Total Amount Available") shall be
insufficient to pay the holder of all outstanding shares of Series B Preferred
Stock and all other such parity stock the full amounts (including all dividends
accrued and unpaid) to which they shall be entitled by reason of such
Liquidation of the corporation, then there shall be paid to the holders of the
Series B Preferred Stock in connection with such Liquidation of the
corporation an amount equal to the product derived by multiplying the Total
Amount Available times a fraction of which the numerator shall be the full
amount to which the holders of the Series B Preferred Stock shall be entitled
under the terms of Subsection (a) by reason of such Liquidation of the
corporation and of which the denominator shall be the total amount which
would have been distributed by reason of such Liquidation of the corporation
with respect to the Series B Preferred Stock and all other stock ranking on a
parity with the Series B Preferred Stock upon Liquidation then outstanding
had the corporation possessed sufficient assets to pay the maximum amount
which the holders of all such stock would be entitled to receive in connection
with such Liquidation of the corporation.
(c) The voluntary sale, conveyance, lease, exchange or transfer of the
property of the corporation as an entirety or substantially as an entirety, or
the merger or consolidation of the corporation into or with any other
corporation, or the merger of any other corporation into the corporation, or
any purchase or redemption of some or all of the shares of any class or
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<PAGE> 59
series of stock of the corporation shall not be deemed to be a Liquidation of
the corporation for the purposes of this Section 7 (unless in connection
therewith the Liquidation of the corporation is specifically approved).
(d) The holder of any shares of Series B Preferred Stock shall not be
entitled to receive any payment owed for such shares under this Section 7
until such holder shall cause to be delivered to the corporation (i) the
certificate or certificates representing such shares of Series B Preferred
Stock and (ii) a transfer instrument or instruments satisfactory to the
corporation and sufficient to transfer such shares of Series B Preferred Stock
to the corporation free of any adverse interest. As in the case of the
redemption price, no interest shall accrue on any payment upon Liquidation
after the due date thereof.
(e) After payment of the full amount of the liquidating distribution to
which they are entitled, the holders of shares of Series B Preferred Stock will
not be entitled to any further participation in any distribution of assets by
the corporation.
8. Payments.
-- ---------
(a) The corporation may provide funds for any payment of the
redemption price for any shares of Series B Preferred Stock or any amount
distributable with respect to any Series B Preferred Stock under Section 7
hereof by depositing such funds with a bank or trust company selected by
the corporation having a net worth of at least $50,000,000 and organized under
the laws of the United States or any state thereof, in trust for the benefit of
the holder of such shares of Series B Preferred Stock under arrangements
providing irrevocably for payment upon satisfaction of any conditions to such
payment by the holder of such shares of Series B Preferred Stock which shall
reasonably be required by the corporation. The corporation shall be entitled
to make any deposit of funds contemplated by this Section 8 under
arrangements designated to permit such funds to generate interest or other
income for the corporation, and the corporation shall be entitled to receive all
interest and other income earned by any funds while they shall be deposited
as contemplated by this Section 8, provided that the corporation shall maintain
on deposit funds sufficient to satisfy all payments which the deposit
arrangement shall have been established to satisfy. If the conditions
precedent to the disbursement of any funds deposited by the corporation
pursuant to this Section 8 shall not have been satisfied within two years after
the establishment of the trust for such funds, then (i) such funds shall be
returned to the corporation upon its request; (ii) after such return, such
funds shall be free of any trust which shall have been impressed upon them;
(iii) the person entitled to the payment for which such funds shall have been
originally intended shall have the right to look only to the corporation for
such payment, subject to applicable escheat laws; and (iv) the trustee which
shall have held such funds shall be relieved of any responsibility for such
funds upon the return of such funds to the corporation.
(b) Any payment which may be owed in payment of the redemption
price for any shares of Series B Preferred Stock pursuant to Section 5 or in
payment of any amount distributable with respect to the shares of Series B
59
<PAGE> 60
Preferred Stock under Section 7 shall be deemed to have been paid or
properly provided for upon the earlier to occur: (i) the date upon which
funds sufficient to make such payment shall be deposited in a manner
contemplated by Subsection (a) hereof or (ii) the date upon which a check
payable to the person entitled to receive such payment shall be delivered to
such person or mailed to such person at the address of such person then
appearing on the books of the corporation.
9. Status of Reacquired Shares.
-- ----------------------------
Shares of Series B Preferred Stock issued and reacquired by the
corporation (including, without limitation, shares of Series B Preferred Stock
which have been redeemed pursuant to the terms of Section 5 hereof and
shares of Series B Preferred Stock which have been converted into shares of
Common Stock) shall have the status of authorized and unissued shares of
Preferred Stock, undesignated as to series and subject to later issuance.
10. Preemptive Rights.
--- ------------------
Holders of shares of Series B Preferred Stock are not entitled to any
preemptive or subscription rights in respect of any securities of the
corporation.
11. Legal Holidays.
--- ---------------
In any case where any Dividend Payment Date, redemption date or the
last date on which a holder of Series B Preferred Stock has the right to
convert such holder's shares of Series B Preferred Stock shall not be a
Business Day (as defined below), then notwithstanding any other provision
hereof, payment of a dividend due or a redemption price or conversion of the
shares of Series B Preferred Stock need not be made on such date but may
be made on the next succeeding Business Day with the same force and effect
as if made on the Dividend Payment Date or redemption date or the last day
for conversion; provided, that for purposes of computing such payment, no
interest shall accrue for the period from and after such Dividend Payment
Date or redemption date, as the case may be. As used in this Section 11,
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in the State of Georgia are
authorized or obligated by law or executive order to close.
60
<PAGE> 61
CERTIFICATE OF RESTATEMENT
--------------------------
I, Richard A. Hills, Jr., the duly elected and acting Secretary of First
Liberty Financial Corp., a Georgia corporation (the Corporation), do hereby
certify pursuant to the provisions of Section 14-2-1007(d) of the Georgia
Business Corporation Code (the Code), that the foregoing Amended and
Restated Articles of Incorporation of First Liberty Financial Corp. were duly
adopted by the Board of Directors of the Corporation on March 6, 1996. I
hereby certify further as follows:
1. The foregoing Amended and Restated Articles of Incorporation
contain an amendment to Section 8 thereof which required shareholder
approval, and said amendment was duly approved by the shareholders of
the Corporation on January 31, 1996, in accordance with the provisions
of Sections 14-2-1003, 14-2-1006 and 14-2-1007 of the Code. Pursuant to
such amendment, Section 8 of the Articles of Incorporation is hereby
amended by deleting current Section 8 in its entirely and substituting
in lieu thereof the following:
SECTION 8. Board of Directors. (a) The corporation
---------- -------------------
shall be under the direction of a board of directors. The board
of directors shall be divided into three classes as nearly equal in
number as possible, with the term of office of one class expiring
each year. At the meeting of stockholders during which this
Section 8 is adopted and approved, one class of directors shall be
elected to hold office for a term expiring at the first annual
meeting thereafter, one class of directors shall be elected to hold
office for a term expiring at the second annual meeting thereafter
and one class of directors shall be elected to hold office for a
term expiring at the third annual meeting thereafter. At each
annual meeting of the stockholders held after the meeting during
which this Section 8 is adopted and approved, the directors of
one class shall be elected to hold office for a term expiring at the
third annual meeting following their election and until their
successors shall have been duly elected and qualified; at the next
succeeding annual meeting, the directors of a second class shall
be elected to serve for such term; and at the third succeeding
annual meeting, the directors of the third class be elected to
serve for such term. During the intervals between annual
meetings of stockholders, any vacancy occurring in the board of
directors caused by the resignation, removal, death or other
incapacity of one or more directors, and any newly created
directorships resulting from an increase in the number of
directors, shall be filled by a majority vote of the directors then
in office, whether or not a quorum. Each director elected by the
board of directors to fill a vacancy shall hold office for the
unexpired term in respect of which such vacancy occurred. Each
director elected by the board of directors to fill a newly created
directorship or any decrease in directorships shall be so
apportioned among the classes as to make all classes as nearly
equal in number as possible.
61
<PAGE> 62
(b) The board of directors shall consist of not less than
six nor more than fifteen members, the precise number to be fixed
by resolution of the board of directors from time to time. The
minimum number of directors as set forth herein may be reduced
below six and the maximum number of directors as set forth
herein may be increased above fifteen only upon the affirmative
vote of the stockholders of record holding two-thirds of the then
outstanding shares of stock of each class of the corporation
entitled to vote in elections for directors at a meeting of
stockholders called for that purpose.
2. The foregoing Amended and Restated Articles of Incorporation
also have been amended by deleting Section 13 (Initial Registered Office
-------------------------
and Agent),Section 14 (Initial Board of Directors), and Section 15
--------- --------------------------
(Incorporators) as permitted by Section 14-2-1002 of the Code.
-------------
Pursuant to Section 14-2-1002 of the Code, the amendment to delete such
Sections was adopted by the Board of Directors on March 6, 1996.
Shareholder approval was not required for adoption of such amendment.
IN WITNESS WHEREOF, I have set my hand this 6th, day of March,
-------------------
1996.
/s/ Richard A. Hills, Jr.
-------------------------
Richard A. Hills, Jr., Secretary
62
<PAGE> 63
Exhibit 11
----------
Statements of Computation of Earnings Per Share
-----------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-----------------------------------------------------------
March 31, March 31,
-----------------------------------------------------------
1996 1995 1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Primary Earnings Per Share:
- ---------------------------
Average shares outstanding 3,980,501 3,008,350 3,971,849 3,008,350
---------- ---------- ---------- ----------
Average options outstanding 140,003 169,667 133,601 163,247
Average exercise price $ 9.38 $ 7.76 $ 9.10 $ 7.46
---------- ---------- ---------- ----------
Proceeds from the assumed exercise
of options outstanding $1,313,228 $1,316,616 $1,215,769 $1,217,823
Average market price per share 21.69 13.36 21.51 13.31
---------- ---------- ---------- ----------
Assumed shares repurchased 60,545 98,549 56,521 91,497
---------- ---------- ---------- ----------
Common stock equivalents of
options outstanding 79,458 71,118 77,080 71,750
---------- ---------- ---------- ----------
Average shares outstanding (including
common stock equivalents 4,059,959 3,079,468 4,048,929 3,080,100
========== ========== ========== ==========
Net income $2,479,357 $2,027,135 $4,854,237 $3,791,916
Preferred stock dividend 113,468 278,612 226,937 518,789
---------- ---------- ---------- ----------
Net income applicable to
common stockholders $2,365,889 $1,748,523 $4,627,300 $3,273,127
========== ========== ========== ==========
Earnings per common share $ .58 $ .56 $ 1.14 $ 1.06
========== ========== ========== ==========
Fully Diluted Earnings Per Share:
- ---------------------------------
Average shares outstanding 3,980,501 3,008,350 3,971,849 3,008,350
---------- ---------- ---------- ----------
Average options outstanding 140,003 169,667 133,601 163,247
Average exercise price $ 9.38 $ 7.76 $ 9.10 $ 7.46
---------- ---------- ---------- ----------
Proceeds from the assumed exercise
of options outstanding $1,313,228 $1,316,616 $1,215,769 $1,217,823
Average market price per share 21.69 13.36 21.51 13.31
---------- ---------- ---------- ----------
Assumed shares repurchased 60,545 98,549 56,521 91,497
---------- ---------- ---------- ----------
Common stock equivalents of options
outstanding 79,458 71,118 77,080 71,750
Assumed conversion of outstanding
convertible debentures (1) 39,453 40,661 40,016 40,661
Assumed conversion of outstanding
preferred stock (2) 360,214 1,097,142 360,214 1,034,850
---------- ---------- ---------- ----------
Average shares outstanding including
(common stock equivalents) 4,459,626 4,217,271 4,449,159 4,155,611
========== ========== ========== ==========
Net income $2,479,357 $2,027,135 $4,854,237 $3,791,916
Interest expenses associated with
the convertible debentures (3) 13,323 13,839 27,161 27,678
Income taxes (4) 4,530 4,705 9,235 9,411
---------- ---------- ---------- ----------
Net income adjusted $2,488,150 $2,036,269 $4,872,163 $3,810,183
========== ========== ========== ==========
Earnings per common share $ .56 $ .48 $ 1.10 $ .91
========== ========== ========== ==========
</TABLE>
63
<PAGE> 64
Exhibit 11
----------
Statements of Computation of Earnings Per Share, Continued
----------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------------------------------------
March 31, March 31,
----------------------------------------------------------
1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(1) Potential dilution relating to convertible debentures is calculated as follows:
Average debentures outstanding 644,267 664,000 653,461 664,000
Conversion price $ 16.33 $ 16.33 $ 16.33 $ 16.33
---------- ---------- ---------- ----------
Potentially dilutive shares 39,453 40,661 40,016 40,661
========== ========== ========== ==========
(2) Potential dilution relating to preferred stock is calculated as follows:
Average Series A Preferred stock
outstanding - 11,500,000 - 11,500,000
Conversion price - $ 12.50 - $ 12.50
---------- ----------
Potentially dilutive shares - 920,000 - 920,000
========== ==========
Average Series B Preferred stock
outstanding 7,564,500 3,719,975 7,564,500 2,411,950
Conversion price $ 21.00 $ 21.00 $ 21.00 $ 21.00
---------- ---------- ---------- ----------
Potentially dilutive shares 360,214 177,142 360,214 114,850
========== ========== ========== ==========
</TABLE>
(3) This amount includes interest expense and the amortization of issuance
costs associated with the convertible debentures.
(4) Income taxes have been computed at the Company's marginal tax rate of
34%.
64
<PAGE> 65
Coopers & Lybrand L.L.P.
1100 Campanile Building
1155 Peachtree Street
Atlanta, Georgia 30309
May 9, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: First Liberty Financial Corp.
Registration on Form S-8
We are aware that our report dated May 6, 1996 on our review of interim
financial information of First Liberty Financial Corp. and Subsidiaries for
the three-month and six-month periods ended March 31, 1996 and included in
the Company's quarterly report on Form 10-Q for the quarter then ended is
incorporated by reference into the Company's registration statements on
Form S-8 (File Nos. 33-24733 and 333-00385). Pursuant to Rule 436(c) under the
Securities Act of 1933 this report should not be considered a part of the
registration statements prepared or certified by us within the meaning of
Sections 7 and 11 of that Act.
/s/ Coopers & Lybrand L.L.P.
65
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S MARCH 31, 1996, FORM 10-Q AND THRIFT FINANCIAL REPORT IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 28,212
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2,370
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 173,392
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 714,476
<ALLOWANCE> 8,048
<TOTAL-ASSETS> 981,694
<DEPOSITS> 724,676
<SHORT-TERM> 120,260
<LIABILITIES-OTHER> 31,536
<LONG-TERM> 30,588
7,564
0
<COMMON> 4,004
<OTHER-SE> 63,066
<TOTAL-LIABILITIES-AND-EQUITY> 981,694
<INTEREST-LOAN> 29,848
<INTEREST-INVEST> 6,531
<INTEREST-OTHER> 39
<INTEREST-TOTAL> 36,418
<INTEREST-DEPOSIT> 15,855
<INTEREST-EXPENSE> 19,997
<INTEREST-INCOME-NET> 16,421
<LOAN-LOSSES> 600
<SECURITIES-GAINS> 11
<EXPENSE-OTHER> 13,314
<INCOME-PRETAX> 7,434
<INCOME-PRE-EXTRAORDINARY> 7,434
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,854
<EPS-PRIMARY> 1.14
<EPS-DILUTED> 1.10
<YIELD-ACTUAL> 8.68
<LOANS-NON> 2,972
<LOANS-PAST> 0
<LOANS-TROUBLED> 1,363
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 7,816
<CHARGE-OFFS> 1,155
<RECOVERIES> 742
<ALLOWANCE-CLOSE> 8,003
<ALLOWANCE-DOMESTIC> 6,161
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,842
</TABLE>
