MARBLE 47 MERCHANTS ROW * P.O. BOX 978
FINANCIAL CORPORATION RUTLAND, VT 05702 * 802/775-0025
Dear Stockholder:
You are cordially invited to attend a special meeting of the
stockholders of Marble Financial Corporation (the "Company") on November 27,
1995, at 9:30 a.m., Eastern Time, at the College of St. Joseph, 71 Clement
Road, Rutland, Vermont (the "Special Meeting").
The Special Meeting is being held for the purpose of considering
approval of the Plan of Merger set forth as Annex 1 to the Agreement and
Plan of Merger, dated as of June 20, 1995 (the "Acquisition Agreement"),
among the Company, ALBANK Financial Corporation, a Delaware corporation
("AFC"), and ALBANK, FSB, a federally chartered savings bank and a wholly-
owned subsidiary of AFC ("ALBANK"). Pursuant to the Acquisition Agreement,
(i) a newly-formed subsidiary of ALBANK will merge with and into the Company
(the "Merger") and (ii) each share of Common Stock of the Company
outstanding immediately prior to consummation of the Merger, other than
shares held as treasury stock, shares held by stockholders who exercise
dissenters' rights and certain shares held by ALBANK, will be converted into
and represent the right to receive $18.00 in cash, without interest. If
approved, the Merger is expected to close in January, 1996.
The Board of Directors of the Company unanimously recommends that you
vote in favor of approval of the Plan of Merger, which the Board believes is
in the best interests of the Company and its stockholders.
Enclosed is a Notice of Special Meeting of Stockholders and a Proxy
Statement containing a discussion of the Merger. Please give these materials
your prompt attention. I urge you to complete, sign, and date the enclosed
proxy card and return it as soon as possible in the envelope provided. If
you decide to attend the Special Meeting, you may vote your shares in person
whether or not you have previously submitted a proxy.
It is very important that your shares be represented at the Special
Meeting, regardless of whether you plan to attend in person. Approval of the
Plan of Merger requires the approval of a majority of all of the outstanding
shares of Common Stock of the Company. As a result, a failure to vote will
have the same effect as a vote against the Merger proposal. Please do not
send in any stock certificates at this time.
Your continued support of and interest in Marble Financial Corporation
are sincerely appreciated.
Sincerely,
/s/ EDWARD J. GROVER
Edward J. Grover
President and Chief Executive Officer
MARBLE FINANCIAL CORPORATION
47 MERCHANTS ROW
RUTLAND, VERMONT 05702
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held On November 27, 1995
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of
Marble Financial Corporation (the "Company") will be held at the College of
St. Joseph, 71 Clement Road, Rutland, Vermont, on November 27, 1995 at 9:30
a.m., Eastern Time, for the following purposes, as more completely set forth
in the accompanying Proxy Statement:
(1) To consider and vote upon approval of the Plan of Merger (the Plan
of Merger") set forth as Annex 1 to the Agreement and Plan of
Merger, dated as of June 20, 1995, attached as Annex A to the
accompanying Proxy Statement (the "Acquisition Agreement"), among
the Company, ALBANK Financial Corporation, a Delaware corporation
("AFC"),and ALBANK, FSB, a federally chartered savings bank and a
wholly-owned subsidiary of AFC ("ALBANK"), pursuant to which (i) a
newly-formed subsidiary of ALBANK will merge with and into the
Company (the "Merger") and (ii) each share of Common Stock of the
Company outstanding immediately prior to consummation of the
Merger, other than shares held as treasury stock, shares held by
stockholders who exercise dissenters' rights pursuant to the
applicable provisions of the Vermont Business Corporation Act and
certain shares held by ALBANK, will be converted into and
represent the right to receive $18.00 in cash, without interest;
and
(2) To transact such other business as may properly come before the
Special Meeting or any adjournment or postponement thereof.
The Board of Directors has fixed October 23, 1995, as the record date
for the determination of stockholders entitled to notice of and to vote at
the Special Meeting and at any adjournment or postponement thereof. Only
those stockholders of record as of the close of business on that date will
be entitled to vote at the Special Meeting or at any such adjournment or
postponement.
Holders of the Company's Common Stock have the right to dissent from
the Merger and to obtain payment for their shares by complying with relevant
provisions of Chapter 13 of the Vermont Business Corporation Act. A copy of
Chapter 13 is attached as Annex D to the accompanying Proxy Statement.
By Order of the Board of Directors,
/s/ GEORGE B. WILLIAMS
George B. Williams
Secretary
Rutland, Vermont
October 26, 1995
- ---------------------------------------------------------------------------
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. IT IS IMPORTANT
THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF
YOU PLAN TO BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE, AND RETURN
THE ENCLOSED PROXY PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THIS
MEETING, YOU MAY VOTE EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY BE
REVOKED BY YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE
THEREOF.
- ---------------------------------------------------------------------------
MARBLE FINANCIAL CORPORATION
47 MERCHANTS ROW
RUTLAND, VERMONT 05702
____________________________
PROXY STATEMENT
____________________________
INTRODUCTION
This Proxy Statement is furnished to holders of Common Stock of Marble
Financial Corporation, a Vermont corporation (the "Company"), in connection
with the solicitation of proxies by the Board of Directors of the Company for
use at a Special Meeting of Stockholders, to be held at the College of St.
Joseph, 71 Clement Road, Rutland, Vermont, on November 27, 1995, at 9:30 a.m.,
Eastern Time, including any adjournments or postponements thereof (the
"Special Meeting").
At the Special Meeting, the holders of common stock, no par value, of
the Company ("Common Stock") will consider and vote upon a proposal to approve
the Plan of Merger (the "Plan of Merger") set forth as Annex 1 to the
Agreement and Plan of Merger, dated as of June 20, 1995 (the "Acquisition
Agreement"), among the Company, ALBANK Financial Corporation, a Delaware
corporation ("AFC"), and ALBANK, FSB, a federally chartered savings bank and a
wholly owned subsidiary of AFC ("ALBANK"), a copy of which is attached as
Annex A to this Proxy Statement. The Acquisition Agreement and the Plan of
Merger provide, among other things, that (i) a newly-formed subsidiary of
ALBANK ("Interim Sub") will merge with and into the Company (the "Merger"),
and (ii) each share of Common Stock outstanding immediately prior to
consummation of the Merger (other than shares held by the Company as treasury
stock, shares held by stockholders who exercise dissenters' rights pursuant to
the applicable provisions of the Vermont Business Corporation Act (the "VBCA")
as described under "The Merger--Dissenters' Rights" and shares held by ALBANK
other than in a fiduciary capacity or in satisfaction of a debt previously
contracted in good faith (collectively, "Excluded Shares")), will be converted
into and represent the right to receive $18.00 in cash, without interest (the
"Merger Consideration"). Since the proposed Merger is a cash transaction,
holders of Common Stock will cease to have any continuing interest in the
Company following the Merger.
The solicitation of proxies in the enclosed form is made on behalf of
the Board of Directors of the Company. This Proxy Statement, the attached
Notice of Special Meeting of Stockholders, the form of proxy and the other
documents enclosed herewith are first being mailed to stockholders on or about
October 26, 1995.
The date of this Proxy Statement is October 26, 1995.
AVAILABLE INFORMATION
The Company and AFC are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations thereunder, and in accordance therewith file reports,
proxy statements and other information with the Securities and Exchange
Commission (the "SEC"). Such reports, proxy statements and other information
filed by the Company and AFC are available for inspection and copying at the
public reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the regional offices of the SEC located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511 and at 75 Park Place, New York, New York 10007. Copies of such material
can be obtained from the Public Reference Section of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549 upon payment of prescribed fees. The
Common Stock and the common stock of AFC ("AFC Common Stock") are quoted on
the Nasdaq Stock Market Inc.'s National Market ("Nasdaq National Market").
Reports, proxy statements and other information concerning the Company and AFC
may also be inspected at the offices of the National Association of Securities
Dealers, Inc. ("NASD") at 1735 K Street, N.W., Washington, D.C. 20006.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary 4
Selected Financial Data 10
Recent Developments 13
The Special Meeting 15
Matters to be Considered 15
Shares Outstanding and Entitled to Vote; Record Date 16
Votes Required 16
Voting, Revocation, and Solicitation of Proxies 17
The Merger 17
General 17
Background of and Reasons for the Merger 18
Opinion of Financial Advisor 20
Recommendation of the Board of Directors of the Company 22
Merger Consideration 23
Surrender of Stock Certificates; Payment of Merger Consideration 23
Regulatory Approvals 24
Conditions to the Merger 26
Effect on Employees 28
Interests of Certain Persons in the Merger 28
Business Pending the Merger 30
No Solicitation 34
Certain Federal Income Tax Consequences 34
Termination, Amendment, and Waiver 35
Fee Letter 36
Dissenters' Rights 37
Information Concerning the Company 39
Information Concerning AFC, ALBANK and Interim Sub 41
Annual Report to Stockholders; Quarterly Report on Form 10-Q 42
Incorporation by Reference 42
Stockholder Proposals 42
Other Matters 43
ANNEXES
A. Agreement and Plan of Merger
B. Fee Letter
C. Opinion of Sandler O'Neill & Partners L.P.
D. Chapter 13 of the Vermont Business Corporation Act
</TABLE>
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement and in the documents incorporated herein by reference.
Reference is made to, and this summary is qualified in its entirety by, the
more detailed information contained elsewhere in this Proxy Statement and in
the Annexes attached hereto, including the Acquisition Agreement, and the
information incorporated herein by reference. Stockholders are urged to
carefully read all such information.
The Special Meeting
The Special Meeting of stockholders of the Company will be held at the
College of St. Joseph, 71 Clement Road, Rutland, Vermont, on November 27,
1995 at 9:30 a.m., Eastern Time, and at any adjournment or postponement
thereof. Only the holders of record of the outstanding shares of Common Stock
at the close of business on October 23, 1995 (the "Record Date") will be
entitled to notice of and to vote at the Special Meeting. At the Record Date,
there were 3,350,501 shares of Common Stock outstanding and entitled to vote.
Each share of Common Stock entitles the holder thereof to one vote on each
matter to be submitted to stockholders at the Special Meeting.
At the Special Meeting, stockholders of the Company will consider and
vote upon (i) a proposal to approve the Plan of Merger set forth as Annex 1 to
the Acquisition Agreement, pursuant to which, among other things, (a) Interim
Sub will merge with and into the Company in the Merger and (b) each share of
Common Stock outstanding immediately prior to consummation of the Merger
(other than Excluded Shares) will be converted into and represent the right to
receive $18.00 in cash, without interest and (ii) the transaction of such
other business as may properly come before the Special Meeting and any
adjournment or postponement thereof. The affirmative vote of holders of a
majority of the issued and outstanding shares of Common Stock is required for
the approval of the Plan of Merger.
As of the Record Date, the directors and officers of the Company and its
subsidiaries and their affiliates in the aggregate beneficially owned 303,775
shares, or 9.1%, of the outstanding Common Stock, excluding shares of Common
Stock which may be acquired upon the exercise of outstanding stock options.
The Company has been advised by all of its directors and executive officers
that they intend to vote for approval of the Plan of Merger. As of the Record
Date, neither AFC nor ALBANK held any shares of Common Stock.
Every stockholder's vote is important. Since the vote of stockholders
required to approve the Plan of Merger is based upon the number of outstanding
shares of Common Stock, and not only those shares which are actually voted at
the Special Meeting, failure to vote, either by not returning the enclosed
proxy or by checking the "Abstain" box thereon, will have the same effect as a
vote against approval of the Plan of Merger.
See "The Special Meeting."
Parties to the Merger
The Company. The Company is a Vermont-chartered bank holding company
registered under the Bank Holding Company Act of 1956, as amended (the
"BHCA"). The Company was formed in 1986 in order to acquire all of the capital
stock of Marble Bank, a Vermont state-chartered savings bank (the "Bank"). The
Bank provides a full range of commercial and consumer banking services through
seven banking offices located in central and southern Vermont. The Bank has
offices in Rutland, Castleton, Norwich, Shelburne, Springfield, White River
Junction and Woodstock. At June 30, 1995 (unaudited), the Company had $413
million of total assets, $371 million of total liabilities, including $312
million of deposits, and $42 million of stockholders' equity. The Bank's
deposits are insured up to applicable limits by the Bank Insurance Fund (the
"BIF") of the Federal Deposit Insurance Corporation (the "FDIC").
The executive offices of the Company are located at 47 Merchants Row,
Rutland, Vermont 05702, and its telephone number is (802) 775-0025.
See "Information Concerning the Company."
AFC, ALBANK and Interim Sub. AFC is a Delaware corporation registered as
a savings and loan holding company under the Home Owner's Loan Act of 1933, as
amended ("HOLA"), which is the holding company of ALBANK, a federally
chartered stock savings association which was organized as the second mutual
savings bank in New York State in 1820. At June 30, 1995, ALBANK had 57
banking offices, 48 of which are located in 17 upstate New York counties and
nine of which are located in the metropolitan area of Springfield,
Massachusetts. Effective on June 10, 1995, ALBANK changed its name from Albany
Savings Bank, FSB. At June 30, 1995 (unaudited), ALBANK had assets of $3.0
billion and liabilities of $2.7 billion, including deposits of $2.6 billion,
and AFC had consolidated assets of $3.0 billion, consolidated liabilities of
$2.7 billion and stockholders' equity of $319.5 million. ALBANK's deposits are
insured up to applicable limits by the Savings Association Insurance Fund of
the FDIC (the "SAIF"), except for approximately 22.3% of deposits that are
insured by the BIF.
Interim Sub will be a Vermont corporation organized solely for the
purpose of effecting the Merger and will be merged with and into the Company
in the Merger. It is not anticipated that Interim Sub will conduct any
business or have any significant assets prior to the Merger.
The executive offices of AFC and ALBANK are located at 10 North Pearl
Street, Albany, New York 12207-2774, and its telephone number is (518) 445-
2000.
See "Information Concerning AFC, ALBANK and Interim Sub."
The Merger
The Acquisition Agreement sets forth the terms and conditions under
which ALBANK would acquire the Company and its subsidiaries. ALBANK's
acquisition of the Company will be accomplished in accordance with the Plan of
Merger through the merger of Interim Sub with and into the Company pursuant to
the applicable provisions of the VBCA, with the Company being the surviving
corporation (the "Merger"). In the Merger, each share of Common Stock
outstanding immediately prior thereto (other than Excluded Shares) will be
converted into the right to receive the Merger Consideration. It is currently
anticipated that the Merger will be consummated in January, 1996.
The Acquisition Agreement further contemplates that immediately
following the Merger, ALBANK and the Company will enter into a plan of
liquidation pursuant to which the Company will be liquidated and dissolved,
with the Company's assets (including all of the outstanding shares of capital
stock of the Bank) thereupon vesting in ALBANK. Immediately upon the
consummation of such liquidation, ALBANK and the Bank (which will then be a
wholly-owned subsidiary of ALBANK) will enter into a plan of merger pursuant
to which the Bank will be merged with and into ALBANK, with ALBANK being the
surviving entity (the "Bank Merger"). Upon the occurrence of the Bank Merger,
the business and properties of the Bank will vest in ALBANK, and the separate
corporate existence of the Bank will cease.
See "The Merger--General."
Fairness Opinion
Sandler O'Neill & Partners L.P. ("Sandler O'Neill") has rendered its
written opinion to the Board of Directors of the Company that the Merger
Consideration is fair, from a financial point of view, to the stockholders of
the Company. The full text of Sandler O'Neill's opinion, dated the date of
this Proxy Statement, which describes the procedures followed, assumptions
made, matters considered, and limitations on the review undertaken in
connection with Sandler O'Neill's rendering such opinion, is attached as Annex
C to this Proxy Statement and should be read in its entirety by stockholders
of the Company. See "The Merger--Opinion of Financial Advisor" for a further
description of the opinion of Sandler O'Neill and of the fees paid and payable
to Sandler O'Neill by the Company.
Recommendation of the Board of Directors of the Company; Reasons for the
Merger
The Board of Directors of the Company has unanimously approved the
Acquisition Agreement and believes that the Merger is in the best interests of
the Company and its stockholders. Accordingly, the Board of Directors of the
Company unanimously recommends that stockholders vote FOR approval of the Plan
of Merger.
In reaching its decision, the Board of Directors of the Company
considered, among other things, the relationship between the Merger
Consideration and the market value, book value, and earnings per share of the
Common Stock. The Board of Directors considered the results of discussions
with potential acquirors other than AFC to acquire the Company. The Board of
Directors also considered the long-range prospects and risks of the Company's
business and its financial condition, results of operations, capital levels,
and asset quality. In addition, the Board of Directors relied on the opinion
of Sandler O'Neill that the Merger Consideration is fair to the stockholders
of the Company from a financial point of view. See "The Merger--Background of
and Reasons for the Merger" and "--Opinion of Financial Advisor."
Regulatory Approvals; Conditions to the Merger
Consummation of the Merger is subject, among other things, to the prior
receipt of all required approvals, consents or waivers of (i) the Office of
Thrift Supervision (the "OTS") and (ii) all other governmental authorities or
other persons that are necessary or appropriate to the consummation of the
transactions contemplated by the Acquisition Agreement, in each case without
any condition or requirement that ALBANK, in its reasonable judgment, deems to
be materially adverse or materially burdensome or to substantially deprive
ALBANK of the benefits which it anticipates to receive in the Merger and the
Bank Merger, including any condition that either the Merger or the Bank Merger
be effected pursuant to a different structure from that contemplated by the
Acquisition Agreement.
The Merger is also subject to the condition that no party to the
Acquisition Agreement, and no subsidiary of any such party, shall be subject
to any order of a court or governmental entity of competent jurisdiction, or
to certain pending litigation, which enjoins or prohibits, or would enjoin or
prohibit, the consummation of the Merger or the exercise of control by AFC or
ALBANK over the Company or any of the Company's subsidiaries (including the
Bank) following the Merger or in which money damages in a material amount are
sought with respect to the Acquisition Agreement or any of the transactions
contemplated thereby.
In addition to the foregoing, the Acquisition Agreement sets forth
various other conditions to the respective obligations of the Company, AFC
and/or ALBANK to consummate the Merger, including that, as of consummation of
the Merger (the "Effective Time"), (i) a registration statement relating to
the AFC stock options to be issued to holders of Company stock options under
the Company's existing stock option plans shall have become effective, (ii)
not more than 10% of the outstanding shares of Common Stock shall be held by
stockholders who have perfected or purported to perfect dissenters' rights
under the VBCA, (iii) ALBANK shall have received from the Board of Governors
of the Federal Reserve System (the "Federal Reserve Board") confirmation that
consummation of the Merger and the Bank Merger will not require AFC or ALBANK
to register as a bank holding company under the BHCA or to obtain the prior
approval of the Federal Reserve Board with respect to any of the transactions
contemplated by the Acquisition Agreement, and (iv) AFC shall have received
certain other assurances relating to corporate and legal matters. See "The
Merger--Regulatory Approvals" and "--Conditions to the Merger."
The conditions precedent to consummation of the Merger (other than the
receipt of required regulatory approvals) can be waived by the benefitted
party in its discretion. Neither the Company nor AFC nor ALBANK has committed
to grant any such waiver.
Interests of Certain Persons in the Merger
In considering the recommendations of the Company's Board of Directors
with respect to the Merger, stockholders should be aware that certain members
of the Board of Directors and management of the Company have certain interests
in the Merger that are in addition to the interests of stockholders generally.
Among other things, pursuant to the Acquisition Agreement, AFC and
ALBANK have agreed to enter into an employment agreement with Edward J.
Grover, President and Chief Executive Officer of the Company and the Bank. The
employment agreement contains provisions relating to the continued employment
of Mr. Grover, the maintenance of certain salary and bonus programs and
employee benefits and the issuance of AFC stock options to Mr. Grover. It
further provides for Mr. Grover to receive payment in the event of the
termination of his employment other than for certain specified causes. The
estimated payment to Mr. Grover if he were terminated during the first quarter
of 1996 would be approximately $390,000.
Neither AFC nor ALBANK has entered into employment agreements with any
other director, officer or employee of the Company or the Bank. The Company
has entered into change of control agreements with three other officers,
George B. Williams, Executive Vice President and Chief Financial Officer,
Marvin B. Elliott, Executive Vice President and William B. Butler, Jr., Sr.
Vice President and Controller. The estimated potential payouts to Messrs.
Williams, Elliott and Butler, if terminated during the first quarter of 1996,
would be $227,105, $116,736 and $69,884, respectively.
In addition, AFC and ALBANK have agreed to continue directors' and
officers' indemnification and insurance coverage for specified periods, and to
establish and maintain for at least eighteen months following the Merger an
advisory board (the "Advisory Board") consisting of the current members of the
Company's Board of Directors who are willing to serve thereon and such other
members as ALBANK may appoint. The function of the Advisory Board will be to
advise ALBANK and its subsidiaries on deposit and lending activities in the
Bank's market area and to maintain and develop customer relationships. The
Advisory Board will not be considered a part of, or be entitled to vote on
actions taken by, ALBANK's Board of Directors. The Advisory Board will meet at
least once each month, and each member (other than an officer or employee of
AFC or its subsidiaries) will receive a fee of $875 for each meeting attended,
provided that the total amount of such fees to each individual during any
twelve-month period will not exceed $10,500.
The directors and certain officers and key employees of the Company also
hold options for the purchase (at exercise prices ranging from $3.375 to
$12.25 per share) of an aggregate of 204,613 shares of Common Stock under the
Company's stock option plans (the "Option Plans"). Such options that remain
outstanding and unexercised as of the Effective Time will be automatically
converted into options to acquire, for the same price and on the same terms
and conditions as are applicable under the stock options for each share of
Common Stock, a number of shares of common stock, $.01 par value, of AFC ("AFC
Common Stock") equal to the amount obtained by dividing (i) the Merger
Consideration by (ii) the closing bid price per share of AFC Common Stock as
reported on the Nasdaq National Market on the trading day immediately
preceding the closing date of the Merger (the "Effective Date").
The Board of Directors was aware of these interests and considered them,
among other matters, in unanimously approving and adopting the Acquisition
Agreement and the transactions contemplated thereby. See "The Merger--
Interests of Certain Persons in the Merger."
Business Pending the Merger
The Acquisition Agreement contains various covenants of the Company
regarding the conduct of the business of the Company between the date of the
execution of the Acquisition Agreement and the Effective Time. In this regard,
the Company generally is required to conduct its business in the usual,
regular and ordinary course consistent with past practice, as well as to
forbear from taking certain actions without the prior written consent of AFC.
See "The Merger--Business Pending the Merger."
Termination, Amendment and Waiver
The Acquisition Agreement may be terminated, and the Merger abandoned,
either before or after the approval of the stockholders of the Company, under
certain circumstances. Moreover, prior to the Effective Time, any provision of
the Acquisition Agreement may be (i) waived by the party benefitted by the
provision or (ii) amended or modified at any time by an agreement in writing
among the parties approved by their respective Boards of Directors, except
that, after the vote by the stockholders of the Company, no amendment may be
made that reduces the amount or changes the form of the Merger Consideration
or which materially adversely affects the rights of the Company's stockholders
without approval thereof by such stockholders. See "The Merger--Termination,
Amendment and Waiver."
Fee Letter
Simultaneously with the execution of the Acquisition Agreement, AFC,
ALBANK and the Company executed a letter agreement, dated June 20, 1995 (the
"Fee Letter"), pursuant to which the Company has agreed to pay to ALBANK a
termination fee in the amount of $3,500,000 in the event that the Acquisition
Agreement is terminated following or contemporaneously with the occurrence of
certain "trigger events" that create the potential for a third party to
acquire the Company. See "The Merger--Fee Letter."
No Solicitation
The Acquisition Agreement provides that, subject in certain respects to
the fiduciary duties of the Company's Board of Directors, neither the Company
nor any of its subsidiaries, nor any of its or their directors, officers,
advisors or other representatives, may, directly or indirectly, without the
prior written consent of ALBANK, solicit or encourage the making of any
proposal or offer by, or engage in discussions or conversations with, any
third party concerning a merger, consolidation or sale of a substantial amount
of Common Stock or other voting securities or substantial assets or a similar
transaction involving the Company or any of its subsidiaries, or provide
confidential information concerning the Company's business to any third party.
See "The Merger--No Solicitation."
Accounting Treatment
AFC expects to account for the Merger under the purchase method of
accounting.
Certain Federal Income Tax Consequences
The Merger will be treated as a taxable sale of the Common Stock of the
Company. Accordingly, none of the Company, AFC or ALBANK will recognize any
gain or loss as a result of the Merger. Company stockholders will be treated
as if they sold their shares in a fully taxable transaction for the cash they
receive. See "The Merger--Certain Federal Income Tax Consequences."
Dissenters' Rights
Pursuant to Chapter 13 of the VBCA, holders of Common Stock who (i) file
with the Company prior to the vote on the Plan of Merger at the Special
Meeting a written notice of intention to demand payment for their shares of
Common Stock if the Merger is effected and (ii) do not vote in favor of
approval of the Plan of Merger will be entitled to be paid the fair value of
their shares of Common Stock as agreed upon with the Company or its successor
or, if the fair value remains unsettled, as determined by a Vermont court,
provided that the Merger is consummated and such stockholders properly comply
with certain statutory procedures. The fair value of dissenting shares in the
Merger means the value of such shares immediately before the Effective Time,
excluding any change in value in anticipation of the Merger if such exclusion
is not inequitable (which amount may be more, less or the same as the Merger
Consideration). The written notice required to be delivered to the Company by
a dissenting stockholder is in addition to and separate from any proxy or vote
against approval of the Plan of Merger. The further procedures which must be
followed in connection with the exercise of dissenters' rights by dissenting
stockholders are described herein under "The Merger--Dissenters' Rights" and
in Chapter 13 of the VBCA, a copy of which is attached as Annex D to this
Proxy Statement.
The provisions of Vermont law regarding dissenters' rights are complex
and involve specific procedures, including those described under "The Merger--
Dissenters' Rights," which must be followed in order for a stockholder to
perfect such rights. Any deviation from such procedures may result in a
forfeiture of dissenters' rights. Accordingly, stockholders wishing to avail
themselves of dissenters' rights under Vermont law are urged to read carefully
the discussion under "The Merger--Dissenters' Rights" and Annex D to this
Proxy Statement (which sets forth applicable provisions of the VBCA) and
should consult with their own legal advisors prior to the Special Meeting.
Pursuant to the Acquisition Agreement, AFC and ALBANK will have no
obligation to cause the Merger to be consummated in the event that holders of
more than 10% of the outstanding Common Stock exercise or purport to exercise
dissenters' rights with respect to the Merger.
Common Stock Prices
The Common Stock is traded on the Nasdaq National Market under the
symbol "MRBL." The following table sets forth, for the periods indicated, the
high and low sales prices for the Common Stock, as quoted on the Nasdaq
National Market.
<TABLE>
<CAPTION>
Price Per Share
---------------
High Low
---------------
<S> <C> <C>
1993:
First Quarter $ 9.75 $ 6.25
Second Quarter 8.75 6.75
Third Quarter 11.25 7.25
Fourth Quarter 11.50 6.50
1994:
First Quarter $ 9.50 $ 8.00
Second Quarter 10.25 7.75
Third Quarter 14.00 9.50
Fourth Quarter 12.50 9.75
1995:
First Quarter $12.50 $ 9.50
Second Quarter 17.50 11.75
Third Quarter 17.375 17.125
Fourth Quarter (through October 24, 1995) 17.375 17.25
</TABLE>
On June 19, 1995, the business day prior to the public announcement of
the execution of the Acquisition Agreement, the closing sales price of the
Common Stock as reported by the Nasdaq National Market was $13.50 per share.
On October 24, 1995, a day shortly prior to the mailing of this Proxy
Statement, the closing sales price of the Common Stock as so reported was
$17.25 per share. Stockholders are advised to obtain current market quotations
for the Common Stock.
Dividends
Holders of Common Stock are entitled to dividends as and when declared
by the Company's Board of Directors, out of funds legally available therefor.
No dividends were declared or paid by the Company during 1993. The Company
declared and paid a cash dividend of $.05 per share in January, 1994.
Commencing in March, 1994, the Company resumed regular quarterly dividend
declarations and declared a $.05 cash dividend. Cash dividends of $.07, $.08
and $.09 per share were declared in the second, third and fourth quarters of
1994, respectively. Cash dividends of $.10 per share were declared in the
first, second and third quarters of 1995.
Under the terms of the Acquisition Agreement, the Company is permitted
to pay a regular quarterly cash dividend of up to $.10 per share of Common
Stock for the fourth quarter of 1995. In addition, if the Effective Date
occurs after January 5, 1996, the Company may pay quarterly cash dividends of
up to $.11 per share (pro rated, in the case of the fiscal quarter in which
the Effective Date occurs, on the basis of the number of calendar days
actually elapsed during such fiscal quarter through the Effective Date).
SELECTED FINANCIAL DATA
The following table sets forth selected consolidated historical data
regarding the Company's operating results and financial position for and at
the periods indicated. The information for, and as of the end of, the five
years ended December 31, 1994 is derived from and should be read in
conjunction with the Company's audited consolidated financial statements and
the notes thereto (which have been audited by Arthur Andersen LLP, independent
certified public accountants, with respect to the fiscal year ended December
31, 1994 and by KPMG Peat Marwick LLP, independent certified public
accountants, for the fiscal year ended December 31, 1993) included, with the
related auditor's report, in documents incorporated by reference in this Proxy
Statement. See "Incorporation by Reference". The audited consolidated
financial statements as of December 31, 1994 and 1993, and for each of the
years in the three-year period ended December 31, 1994, and report thereon,
appear in the Company's Annual Report to Stockholders for the 1994 fiscal year
(the "1994 Annual Report") furnished with this Proxy Statement. The same data
for the six months ended June 30, 1995 and 1994 are derived from unaudited
consolidated financial statements contained in the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1995 (the "Form 10-Q") also
furnished herewith which, in the opinion of management, include all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the consolidated financial position and results of
operations for such periods. Results for the six-month period ended June 30,
1995 are not necessarily indicative of the results expected for the full
fiscal year ending December 31, 1995.
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
------------------ ----------------------------------------------------
STATEMENT OF OPERATIONS DATA: 1995 1994 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------------
(In Thousands, Except Per Share Data)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $12,379 $ 9,810 $ 20,981 $ 20,286 $ 25,567 $ 32,615 $ 35,798
Interest and dividends on investments 4,195 3,670 7,378 5,945 4,659 3,026 1,913
Other 20 9 34 60 57 71 417
- ---------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME 16,594 13,489 28,393 26,291 30,283 35,712 38,128
- ---------------------------------------------------------------------------------------------------------------------
Interest expense:
Interest on deposits 7,076 4,939 10,671 10,762 14,314 20,272 22,108
Interest on borrowed funds 1,878 1,217 2,628 1,889 2,144 3,435 3,726
- ---------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 8,954 6,156 13,299 12,651 16,458 23,707 25,834
- ---------------------------------------------------------------------------------------------------------------------
Net interest income 7,640 7,333 15,094 13,640 13,825 12,005 12,294
Provision for possible loan losses 0 500 500 1,744 3,041 8,134 12,279
- ---------------------------------------------------------------------------------------------------------------------
Net interest income after provision
for possible loan losses 7,640 6,833 14,594 11,896 10,784 3,871 15
- ---------------------------------------------------------------------------------------------------------------------
Non-interest income (deductions):
Service charges on deposit accounts 400 343 753 711 570 537 557
Security transactions 134 (17) (964) (127) 2,198 602 258
Other income 194 221 433 347 372 470 397
- ---------------------------------------------------------------------------------------------------------------------
TOTAL NON-INTEREST INCOME 728 547 222 931 3,140 1,609 1,212
- ---------------------------------------------------------------------------------------------------------------------
Non-interest expense:
Salaries and employee benefits 2,911 2,769 5,560 5,255 4,657 4,448 4,517
Occupancy and equipment expense 797 741 1,500 1,424 1,322 1,382 1,482
Shareholder class action settlement 0 0 0 0 0 (1,900) 2,320
Other real estate owned expense, net 48 83 173 374 3,100 1,200 792
Other expenses 1,570 1,667 3,401 3,022 2,937 2,873 2,944
- ---------------------------------------------------------------------------------------------------------------------
TOTAL NON-INTEREST EXPENSE 5,326 5,260 10,634 10,075 12,016 8,003 12,055
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes &
cumulative effect of a change
in accounting principle 3,042 2,120 4,182 2,752 1,908 (2,523) (10,828)
Income tax expense (benefit) 882 (2,480) (2,907) (670) (627) 0 0
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) before cumulative effect of
a change in accounting principle 2,160 4,600 7,089 3,422 2,535 (2,523) (10,828)
Cumulative effect of a change in
accounting for securities 0 0 0 454 0 0 0
- ---------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 2,160 $ 4,600 $ 7,089 $ 3,876 $ 2,535 $ (2,523) $(10,828)
=====================================================================================================================
Per common share:
Income (loss) before cumulative of
a change in accounting principle $ 0.63 $ 1.36 $ 2.08 $ 1.02 $ 0.78 $ (0.78) $ (3.35)
Cumulative effect of a change in
accounting for securities $ 0.00 $ 0.00 $ 0.00 $ 0.13 $ 0.00 $ 0.00 $ 0.00
- ---------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 0.63 $ 1.36 $ 2.08 $ 1.15 $ 0.78 $ (0.78) $ (3.35)
- ---------------------------------------------------------------------------------------------------------------------
Dividends declared $ 0.20 $ 0.17 $ 0.34 $ 0.00 $ 0.00 $ 0.00 $ 0.00
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
June 30, December 31,
-------- ------------------------------------------------
BALANCE SHEET DATA: 1995 1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Total assets $412,958 $408,536 $396,698 $369,768 $382,162 $390,886
Loans:
Mortgage 133,460 133,590 134,863 146,935 180,089 188,317
Commercial and other 105,947 103,750 98,746 104,769 113,103 123,837
Consumer 40,230 39,938 25,255 22,519 26,989 29,481
- -----------------------------------------------------------------------------------------------------------
TOTAL LOANS 279,637 277,278 258,864 274,223 320,181 341,635
Less: Allowance for possible loan losses 7,675 8,006 9,830 9,118 8,953 10,948
- -----------------------------------------------------------------------------------------------------------
NET LOANS 271,962 269,272 249,034 265,105 311,228 330,687
- -----------------------------------------------------------------------------------------------------------
Investments(1) 117,462 113,349 126,322 83,292 44,087 30,049
Deposits:
Demand 15,681 14,549 20,582 15,242 14,628 13,150
Savings, NOW and money market 107,254 112,587 115,125 111,473 86,989 61,330
Time 188,892 178,037 168,839 163,687 193,463 231,549
- -----------------------------------------------------------------------------------------------------------
TOTAL DEPOSITS 311,827 305,173 304,546 290,402 295,080 306,029
- -----------------------------------------------------------------------------------------------------------
Borrowed funds 57,371 64,138 55,430 45,995 56,204 51,342
- -----------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY 42,115 37,037 35,012 31,285 28,723 31,229
- -----------------------------------------------------------------------------------------------------------
- -------------------
<F1> Includes investment securities, federal funds sold and other short-term
investments and interest-bearing deposits in banks.
</TABLE>
<TABLE>
<CAPTION>
June 30, December 31,
--------------- ------------------------------------
OTHER DATA: 1995 1994 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest rate spread 3.2% 3.4% 3.5% 3.3% 3.4% 2.7% 2.4%
Net interest margin (net interest income/
average interest earning assets) 3.8 3.8 3.9 3.7 3.8 3.3 3.4
Return on assets
(net income (loss)/average assets) 1.0 2.4 1.8 1.0 0.7 (0.7) (2.9)
Return on equity
(net income (loss)/average equity) 10.3 27.5 20.7 11.6 8.5 (8.2) (26.7)
Equity to assets ratio
(average equity/average assets) 10.2 9.6 8.6 8.8 8.0 8.0 10.7
Net charge-offs to average outstanding
loans during the period 0.0 0.6 0.9 0.4 1.0 3.1 6.2
Allowance for possible loan losses to
total loans outstanding 2.3 3.5 2.9 3.8 3.3 2.8 3.2
</TABLE>
RECENT DEVELOPMENTS
Third Quarter Summary Financial Information
The following tables set forth summary financial information as of
September 30, 1995 and for the three and nine month periods ended September
30, 1995 and 1994, and have not been audited by independent public
accountants; however, these statements, prepared in accordance with generally
accepted accounting principles, reflect, in the opinion of management, all
adjustments (consisting of only normal recurring items) necessary to present
fairly the financial position as of September 30, 1995, and the results of
operations and other data for the three and nine-month periods ended September
30, 1995 and 1994. These results are not necessarily indicative of the results
to be expected for the entire year.
Financial Condition Data:
<TABLE>
<CAPTION>
At September 30,
1995 1994
------------------------
(Dollars in thousands except
per share amounts)
<S> <C> <C>
Total assets $427,737 $404,447
Investment securities 138,187 116,241
Total loans 277,202 274,197
Allowance for possible loan losses 7,623 7,974
Total deposits 327,492 312,326
Borrowed funds 55,320 55,941
Stockholders' equity, gross 44,028 40,891
Unrealized loss on investment securities
available for sale, net 897 6,329
Stockholders' equity, net 43,131 34,562
Non-performing loans 6,444 5,877
Other real estate owned, net 1,019 1,446
Troubled debt restructurings 934 0
Book value per share $ 12.87 $ 10.38
Asset Quality Ratios:
Allowance for possible loan losses to total
loans outstanding 2.7% 2.9%
Total non-performing loans to total loans 2.3 2.1
Total non-performing assets to total assets 2.0 1.8
Allowance for possible loan losses to total
non-performing loans 118.3 135.7
Operations Data:
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
---------------------------------------------
(Dollars in thousands except per share amounts)
<S> <C> <C> <C> <C>
Total interest income $ 8,417 $ 7,193 $ 25,011 $ 20,682
Total interest expense 4,783 3,426 13,737 9,582
---------------------------------------------
Net interest income 3,634 3,767 11,274 11,100
Provision for possible loan losses 0 0 0 500
---------------------------------------------
Net interest income after provision for possible
loan losses 3,634 3,767 11,274 10,600
---------------------------------------------
Total non-interest income 626 313 1,354 860
---------------------------------------------
Total non-interest expense 2,709 2,745 8,035 8,005
---------------------------------------------
Income before income taxes 1,551 1,335 4,593 3,455
Income tax expense (benefit) 458 (100) 1,340 (2,580)
---------------------------------------------
Net income $ 1,093 $ 1,435 $ 3,253 $ 6,035
=============================================
Weighted average number of common shares
outstanding, including common stock equivalents 3,485,663 3,442,060 3,460,764 3,407,197
Per common share
Net income $ 0.31 $ 0.42 $ 0.94 $ 1.77
Dividends declared $ 0.10 $ 0.08 $ 0.30 $ 0.25
Performance Ratios:
Interest rate spread 2.9% 3.4% 3.1% 3.5%
Net interest margin 3.5 3.9 3.7 3.8
Return on average assets 1.0 1.4 1.0 2.0
Return on average equity 10.2 16.2 10.7 23.6
</TABLE>
Total assets at September 30, 1995 were $427.7 million compared to
$413.0 million at June 30, 1995, an increase of $14.7 million, or 3.6%. Short-
term investments decreased $.8 million and total investment securities
increased $21.5 million, or 18.4%, during the third quarter of 1995. Total
loans decreased $2.4 million, or 0.9%, from $279.6 million at June 30, 1995 to
$277.2 million at September 30, 1995, due mainly to a decrease in commercial
loans. Total deposits increased $15.7 million, or 5.0%, from $311.8 million at
June 30, 1995 to $327.5 million at September 30, 1995. Borrowed funds
decreased $2.1 million, or 3.6%, from $57.4 million at June 30, 1995 to $55.3
million at September 30, 1995. Total stockholders' equity increased by $1.0
million, or 2.4%, from $42.1 million at June 30, 1995 to $43.1 million at
September 30, 1995. The Company's Tier I leverage capital ratio at September
30, 1995 was 10.1%.
Net income was $1,093,000 for the third quarter and $3,253,000 for the
first nine months of 1995. These results represented a decrease of $342,000
when compared with earnings of $1,435,000 during the third quarter of 1994 and
a decrease of $2,782,000 when compared with earnings of $6,035,000 during the
nine month period ended September 30, 1994. As a result of the utilization of
a net operating loss carryforward, net income for the three and nine month
periods ended September 30, 1994 includes income tax benefits of $100,000 and
$2,580,000, respectively, while net income for the comparable periods of 1995
includes income tax expenses of $458,000 and $1,340,000, respectively.
Net interest income decreased by $133,000, or 3.5%, during the third
quarter of 1995 as compared to the third quarter of 1994. Non-interest income
during the third quarter of 1995 increased by $313,000, or 100.0%, compared to
the third quarter of 1994, due primarily to gains of $299,000 on securities
held for trading during the quarter. Non-interest expense decreased by
$36,000, or 1.3%, from $2,745,000 during the third quarter of 1994 to
$2,709,000 during the third quarter of 1995, as a refund of $204,000 on
prepaid FDIC premiums partially offset expenses totalling $305,000 relative to
the Merger. Income before taxes increased $216,000, or 16.2%, from $1,335,000
during the third quarter of 1994 to $1,551,000 during the third quarter of
1995.
There was no provision for possible loan losses made during the third
quarter of 1995. The Company has not made provisions to the allowance for
possible loan losses since the second quarter of 1994, when the level of non-
performing loans was decreased substantially as a result of a bulk sale of
non-performing assets in June 1994. At the end of the second quarter of 1994,
the ratio of the allowance for possible loan losses to total non-performing
loans was 136.6%. It has been the policy of the Company to maintain the
coverage level of the allowance for possible loan losses at a minimum ratio of
100.0% of non-performing loans. The coverage ratios in the ensuing periods
have been 135.7%, 138.7%, 119.5%, 110.2% and 118.3%, for the third and fourth
quarters of 1994 and the first three quarters of 1995, respectively.
Provisions are made to keep the balance in the allowance for possible loan
losses at a level consistent, in management's judgment, with the level of risk
in the loan portfolio.
At September 30, 1995, the Company had a Tier 1 leverage capital ratio
of 10.1%, a Tier 1 risk based capital ratio of 15.8% and a total Tier 1 and
Tier II capital ratio of 17.1%. All of these ratios were substantially in
excess of regulatory minimums.
Total non-performing assets decreased by $.6 million, or 6.8%, from $9.0
million at June 30, 1995 to $8.4 million at September 30, 1995. Non-performing
loans decreased by $.5 million, or 7.5%, from $6.9 million at June 30, 1995 to
$6.4 million at September 30, 1995. Net other real estate owned decreased by
$.1 million, or 7.8%, from $1.1 million at June 30, 1995 to $1.0 million at
September 30, 1995. Troubled debt restructurings remained unchanged at $.9
million at both June 30 and September 30, 1995. The allowance for possible
loan losses decreased by $.1 million, or 0.7%, from $7.7 million at June 30,
1995 to $7.6 million at September 30, 1995, and represented 118.3% of non-
performing loans and 2.7% of total loans outstanding.
THE SPECIAL MEETING
The Special Meeting of Stockholders of the Company will be held at the
College of St. Joseph, 71 Clement Road, Rutland, Vermont, on November 27, 1995
at 9:30 a.m., Eastern Time and at any adjournment or postponement thereof for
the purposes set forth in the Notice of Special Meeting of Stockholders.
Matters to be Considered
At the Special Meeting, stockholders of the Company will consider and
vote upon (i) a proposal to approve the Plan of Merger and (ii) the
transaction of such other business as may properly come before the Special
Meeting and any adjournment thereof. Management is not aware of any such other
business.
The Board of Directors of the Company has unanimously approved the
Acquisition Agreement and the Plan of Merger and recommends a vote FOR
approval of the Plan of Merger.
Shares Outstanding and Entitled to Vote; Record Date
The close of business on October 23, 1995 has been fixed by the Board of
Directors of the Company as the Record Date for the determination of holders
of Common Stock entitled to notice of and to vote at the Special Meeting. At
the close of business on the Record Date, there were 3,350,501 shares of
Common Stock outstanding and entitled to vote. Each share of Common Stock
entitles the holder thereof to one vote on each matter to be submitted to
stockholders at the Special Meeting.
As of the Record Date, the directors and executive officers of the
Company and its subsidiaries and their affiliates in the aggregate
beneficially owned and are entitled to vote 303,775 shares, or 9.1%, of the
outstanding shares of Common Stock (exclusive of shares of Common Stock which
may be acquired upon the exercise of outstanding stock options). The Company
has been advised by all of its directors and executive officers that they
intend to vote their shares FOR approval of the Plan of Merger. As of the
Record Date, neither AFC nor ALBANK held any shares of outstanding Common
Stock.
As of the Record Date, no person owned of record, or was known to own
beneficially, more than five percent (5%) of the outstanding shares of the
Company's voting stock other than Dimensional Fund Advisors, Inc.
("Dimensional"). The Company has been advised by Dimensional (through a
Schedule 13G statement filed by Dimensional with the SEC and certain
supplemental information furnished by Dimensional to the Company) that
Dimensional is a registered investment advisor, with a principal business
office located at 1299 Ocean Avenue, 11th Floor, Santa Monica, California
90401, and is deemed to have beneficial ownership of 194,900 shares (5.8%) of
the outstanding Common Stock as of December 31, 1994, all of which shares are
held in portfolios of DFA Investment Dimensions Group Inc., a registered open-
end investment company, or in series of the DFA Investment Trust Company, a
Delaware business trust, or the DFA Group Trust and DFA Participation Group
Trust, investment vehicles for qualified employee benefit plans, for all of
which Dimensional Fund Advisors, Inc. serves as investment manager.
Dimensional disclaims beneficial ownership of all such shares.
Votes Required
A quorum, consisting of a majority of the issued and outstanding Common
Stock, must be present in person or by proxy before any action may be taken at
the Special Meeting.
Under the applicable provisions of the VBCA and the Articles of
Association of the Company, approval of the Plan of Merger requires the
affirmative vote of holders of a majority of the issued and outstanding shares
of Common Stock.
Under the rules of the Nasdaq National Market, the proposal to approve
the Plan of Merger is considered a "non-discretionary item" as to which
brokerage firms may not vote in their discretion on behalf of their clients if
such clients have not furnished voting instructions. Abstentions and such
broker "non-votes" will be considered in determining the presence of a quorum
at the Special Meeting but will not be counted as a vote cast for a proposal.
Since the required vote of stockholders in order to approve the Plan of Merger
is based upon the number of outstanding shares of Common Stock, and not only
those shares actually voted, the failure by a stockholder (or a broker with
discretionary authority to vote) to submit a proxy card (or vote in person at
the Special Meeting) will have the same effect as a "NO" vote with respect to
the Plan of Merger.
Voting, Revocation and Solicitation of Proxies
A proxy for use at the Special Meeting accompanies this Proxy Statement
and is solicited by the Board of Directors of the Company. Any stockholder of
the Company executing a proxy may revoke it at any time before it is voted by
filing with the Secretary of the Company (George B. Williams, Secretary,
Marble Financial Corporation, 47 Merchants Row, Rutland, Vermont 05702)
written notice of such revocation, by executing a later-dated proxy or by
attending the Special Meeting and giving notice of such revocation in person.
Attendance at the Special Meeting will not, in and of itself, constitute
revocation of a proxy.
Each proxy returned to the Company (and not revoked) will be voted in
accordance with the instructions indicated thereon. If no instructions are
indicated, the proxy will be voted FOR approval of the Plan of Merger. The
Board of Directors of the Company knows of no other matters to be presented at
the Special Meeting. However, if any other matter properly comes before the
Special Meeting, all proxies returned to the Company will be voted by the
proxy holders in accordance with the determination of a majority of the Board
of Directors of the Company on any such matter, which may include, without
limitation, a motion to adjourn or postpone the Special Meeting to another
time and/or place for the purpose of soliciting additional proxies or
otherwise; provided, however, that no proxy which is voted against the
proposal to approve the Plan of Merger will be voted in favor of any such
adjournment or postponement.
The Company will bear the costs of printing and mailing this Proxy
Statement and the related proxy, the 1994 Annual Report and the Form 10-Q
which accompany this Proxy Statement, as well as all other costs incurred in
connection with the solicitation of proxies from stockholders of the Company
on behalf of the Board of Directors of the Company. The Company has entered
into a letter agreement with Morrow & Co., a professional proxy solicitation
firm, pursuant to which Morrow & Co. will perform consultation services in
connection with the solicitation of proxies for the Special Meeting, as well
as the actual solicitation of proxies from brokers, banks, nominees,
individual holders of record and other beneficial owners. Such firm will
receive a fee of $4,000 plus reimbursement for out-of-pocket expenses. Proxies
will be solicited by mail and may be further solicited, for no additional
compensation, by directors, officers, or employees of the Company by telephone
or by personal contact. Arrangements also will be made with brokerage houses,
voting trustees, banks, associations, and other custodians, nominees, and
fiduciaries, who are record holders of Common Stock not beneficially owned by
them, for forwarding such materials to and obtaining proxies from the
beneficial owners of Common Stock entitled to vote at the Special Meeting, and
the Company will reimburse such persons for their reasonable expenses incurred
in doing so.
Stockholders should not send stock certificates with their proxy cards.
THE MERGER
The following description of the material terms of the Acquisition
Agreement (including the Plan of Merger) and the transactions contemplated
thereby is qualified in its entirety by reference to the Acquisition
Agreement, a copy of which is attached as Annex A hereto. All stockholders of
the Company are urged to carefully read the Acquisition Agreement and the
related Annexes attached hereto.
General
On June 20, 1995, the Company, AFC and ALBANK entered into the
Acquisition Agreement, pursuant to which AFC would acquire the Company. AFC's
acquisition of the Company will be accomplished through the Merger, in which
Interim Sub will be merged with and into the Company pursuant to the
applicable provisions of the VBCA, with the Company being the surviving entity
(the "Surviving Corporation"). The separate corporate existence of Interim Sub
will thereupon cease. As of the Effective Time, the articles of association
and by-laws of the Surviving Corporation will be amended to conform to the
articles of association and by-laws of Interim Sub immediately prior to the
Merger, and the directors and officers of Interim Sub immediately prior to the
Merger will become the directors and officers of the Surviving Corporation. In
the Merger, each share of Common Stock outstanding immediately prior thereto
(other than Excluded Shares) will be converted into the right to receive the
Merger Consideration.
The Merger will be effected as soon as practicable after the expiration
of all applicable waiting periods and the satisfaction or waiver of all
applicable conditions by the filing with the Secretary of State of the State
of Vermont of a certificate of merger. The Effective Time will occur as of the
time of such filing of the certificate of merger or at such other time as may
be provided in the certificate of merger. It is currently anticipated that the
Merger will be consummated in January, 1996.
The Acquisition Agreement further contemplates that immediately
following the Merger, ALBANK and the Company will enter into a plan of
liquidation pursuant to which the Company will be liquidated and dissolved,
with the Company's assets (including all of the outstanding shares of capital
stock of the Bank) thereupon vesting in ALBANK. Immediately upon the
consummation of such liquidation, ALBANK and the Bank (which will then be a
wholly-owned subsidiary of ALBANK) will enter into a plan of merger to
implement the Bank Merger pursuant to which the Bank will be merged with and
into ALBANK, with ALBANK being the surviving entity. Upon the occurrence of
the Bank Merger, the business and properties of the Bank will vest in ALBANK,
and the separate corporate existence of the Bank will cease.
Background of and Reasons for the Merger
In January, 1995, the Company was contacted by a representative of AFC
seeking to arrange a meeting to discuss a possible merger with AFC. The
Company agreed to such a meeting, which was held on February 10, 1995. This
meeting was an initial general discussion and included an initial exchange of
publicly available information about the parties. An additional informational
meeting was held on March 7, 1995. On March 14, 1995, the Company's Board of
Directors met with representatives of Sandler O'Neill and the Company's legal
counsel to review the discussions with AFC. Following discussion, the Board of
Directors determined that the discussions with AFC should continue and that
financial analyses should be conducted regarding AFC and the Company. The
Board further directed the Company's management and financial advisors to
review the strategic alternatives available to the Company, including
remaining independent and considering alternative acquisition proposals. A
further meeting with AFC was held on March 23, 1995. The Board received
further reports from the Company's management and financial and legal advisors
at its meeting on March 28, 1995. At that meeting, the Board agreed to
authorize AFC to conduct full due diligence on the Company. AFC executed a
confidentiality agreement on March 28, 1995. On March 30, 1995, the Company
entered into a formal engagement letter with Sandler O'Neill for the provision
of financial advisory services with respect to merger and acquisition
transactions.
Discussions were also pursued with other potential acquirors identified
by the Company and Sandler O'Neill within general geographic proximity to the
Company having the financial capacity (based on financial condition and
capital position) to make an acquisition of the Company. In April, 1995,
confidentiality agreements were executed with two banking companies, and
exploratory discussions were held. Neither potential acquiror was willing to
make a proposal at a price level which the Company was willing to consider.
Contacts by Sandler O'Neill with several other financial institutions did not
result in expressions of interest. The Company did not pursue any acquisition
by a Vermont banking company, since the Company was of the view that any such
acquisition would likely present antitrust concerns.
AFC's due diligence was conducted during April, 1995 and in mid-May,
1995, AFC's Board of Directors authorized AFC to proceed with merger
negotiations. Those negotiations continued during May and June, and on June
20, 1995, the Board of Directors of the Company met again with the Company's
legal and financial advisors. Based upon the reports of the Company's
management and advisors and a thorough review and discussion of the terms of
the Acquisition Agreement, the Board approved the execution of the Acquisition
Agreement. The AFC Board of Directors met on that same day, and the
Acquisition Agreement and the Fee Letter were signed late in the day.
In the course of reaching its decision to approve the Acquisition
Agreement, the Board of Directors of the Company consulted with its legal
advisors regarding the legal terms of the Acquisition Agreement and the
obligations of the Board of Directors in its consideration thereof and with
its financial advisors regarding the financial terms and fairness, from a
financial point of view, of the Merger Consideration to the Company's
stockholders. Without assigning any relative or specific weights thereto, the
Board of Directors considered the factors outlined below, among others, that
it believed relevant to reaching its determination.
The terms of the Acquisition Agreement were reached on the basis of
arms' length negotiations between the Company and AFC. In reaching the
conclusion that the terms of the Acquisition Agreement are fair, the Board of
Directors considered, among other things, the fact that the Merger
Consideration would be paid entirely in cash as well as the market value, book
value and earnings per share of the Company. The Board of Directors considered
that the Merger provides an opportunity for the shareholders of the Company to
receive consideration in cash at a premium over the pre-existing market price
and well in excess of the book value of their shares. The $18.00 per share to
be paid in the Merger is approximately 1.5 times the book value per share of
the Common Stock of $11.90 at March 31, 1995, approximately 1.4 times the book
value per share of the Common Stock of $12.51 at June 30, 1995, approximately
8.7 times the Company's earnings for the fiscal year ended December 31, 1994
(which earnings included a tax benefit of $2.9 million) and approximately 14.3
times earnings for the first six months of 1995, annualized.
The Company considered the possibility of an acquisition in which the
Company's shareholders would receive stock of the acquiring company rather
than cash. However, AFC advised the Company that an acquisition on a stock
basis would only be offered at an exchange rate that would provide the
Company's shareholders significantly lower value (on a pre-tax basis) than an
acquisition on a cash basis. The Company did not receive any other acquisition
proposals on a stock basis which would have a value to shareholders comparable
to the Merger Consideration. The Board recognized that a cash transaction
would be taxable to its stockholders and that a stock transaction could be
structured as a tax-free reorganization. The desirability of each type of
transaction from a tax perspective would vary depending on the stockholder's
tax basis in the Common Stock and other factors relating to the stockholder's
individual tax position. Because the Board was not in a position to judge the
tax planning preferences of each stockholder, the Board focused predominantly
on pre-tax value.
The Board of Directors considered the strategic alternatives available
to the Company, including remaining independent, seeking to solicit additional
competing proposals, and accepting the AFC proposal, and its view that it was
not likely that a better offer could be obtained in the short term, before
concluding for the reasons discussed herein that the Merger represents an
opportunity to enhance stockholder value at this time and that the Merger
Consideration is fair to the stockholders of the Company.
The Board of Directors took into account and considered the presentation
made by Sandler O'Neill to the Board of Directors and the opinion of Sandler
O'Neill dated June 20, 1995 that, based upon the information known as of that
date, the consideration to be received by the Company's stockholders in the
Merger was fair, from a financial point of view.
The Board of Directors also considered the Company's financial
condition, results of operations, capital levels and asset quality and the
long term prospects and risks of the Company's business, as well as the impact
of the Merger on the communities and customers which the Company serves and on
the employees of the Company and the Bank. The Board of Directors believes
that the Merger, if consummated, will provide the Company's customers with
expanded services, and that the Bank's franchise will have greater ability to
grow and diversify with access to the resources of ALBANK as the resulting
institution and a strong parent in AFC. The Board of Directors considered
other factors such as competitive conditions, the likelihood of receiving
regulatory approval of the Merger, and the compatibility of the operations and
branch networks of the Bank and ALBANK.
In reviewing the provisions of the Acquisition Agreement, the Board
considered the requirement that the Company sign the Fee Letter committing to
pay to AFC a termination fee of $3,500,000 if, under certain specified
circumstances, the Merger is not consummated as described under "The Merger--
Fee Letter". The Board of Directors was aware that the existence of this
provision would make it more expensive for a third party to offer a price that
was in excess of the AFC proposal and might significantly deter a potential
competing acquiror from making an offer. The Board of Directors was also aware
that AFC and ALBANK required this provision as a condition to entering into
the Acquisition Agreement.
Opinion of Financial Advisor
Pursuant to a letter agreement dated as of March 30,1995 (the "Sandler
O'Neill Agreement"), the Company retained Sandler O'Neill as its financial
advisor in connection with merger and acquisition transactions, including the
Merger. Sandler O'Neill is a nationally recognized investment banking firm
whose principal business specialty is banks and savings institutions and, in
connection with mergers and acquisitions and other corporate transactions.
At the June 20, 1995 meeting at which the Company's Board of Directors
approved and adopted the Acquisition Agreement, Sandler O'Neill delivered a
written opinion to the Company's Board of Directors that, as of the date of
such opinion, the Merger Consideration was fair, from a financial point of
view, to holders of Common Stock. Sandler O'Neill's fairness opinion has been
reconfirmed as of the date of this Proxy Statement. The full text of Sandler
O'Neill's fairness opinion, dated the date of this Proxy Statement, is
attached as Annex C to this Proxy Statement and is incorporated herein by
reference. The description of such opinion set forth herein is qualified in
its entirety by reference to Annex C. Holders of Common Stock are urged to
read the fairness opinion in its entirety for a description of the procedures
followed, assumptions made, matters considered and qualifications on the
review undertaken by Sandler O'Neill in connection therewith.
In connection with this opinion, Sandler O'Neill reviewed, among other
things: (i) the Acquisition Agreement; (ii) the Company's and AFC's audited
consolidated financial statements and management's discussion and analysis of
the financial condition and results of operations contained in their
respective annual reports to stockholders for the year ended December 31,
1994; (iii) the Company's and AFC's unaudited consolidated financial
statements and management's discussion and analysis of the financial condition
and results of operations contained in their respective quarterly reports on
Form 10-Q for the quarters ended March 31 and June 30, 1995; (iv) certain
financial analyses and forecasts of the Company prepared by and reviewed with
management of the Company; (v) the views of senior management of the Company
and AFC of their respective past and current business operations, results
thereof, financial condition and future prospects; (vi) the pro forma impact
of the Merger on AFC; (vii) historical reported price and trading activity for
the Common Stock and the AFC Common Stock, including a comparison of certain
financial and stock market information for the Company and AFC with similar
information for certain other companies, the securities of which are publicly
traded; (viii) the financial terms of recent business combinations involving
savings institutions generally and the banking environment in particular; (ix)
a draft of this Proxy Statement; and (x) such other information, financial
studies, analyses and investigations and financial, economic and market
criteria as Sandler O'Neill considered relevant.
In performing its review, Sandler O'Neill assumed and relied upon,
without independent verification, the accuracy and completeness of all of the
financial information, analyses and other information reviewed by and
discussed with Sandler O'Neill. Sandler O'Neill did not make an independent
evaluation or appraisal of the specific assets, the collateral securing assets
or the liabilities of the Company or AFC or any of their subsidiaries, or the
collectibility of any such assets (relying, where relevant, on the analyses
and estimates of the the Company and AFC). With respect to the financial
projections reviewed with management, Sandler O'Neill assumed that such
projections had been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the respective managements of
the respective future financial performances of the Company and AFC and the
combined company, and that such performances will be achieved. Sandler O'Neill
also assumed that there had been no material change in the Company's or AFC's
assets, financial condition, results of operations, business or prospects
since the date of the last financial statements noted above. Sandler O'Neill
further assumed that the Company will remain as a going concern for all the
periods relevant to its analysis and that the conditions precedent in the
Acquisition Agreement are not waived. At the Company's direction, Sandler
O'Neill did not make any effort to solicit third party indications of interest
by a Vermont banking company in an acquisition or other business combination
transaction involving the Company, since, in the Company's view, an
acquisition by such an entity would be likely to raise antitrust concerns.
However, as noted above, Sandler O'Neill did hold discussions with certain
other potential acquirors of the Company.
Pursuant to the Sandler O'Neill Agreement, the Company has retained
Sandler O'Neill to act as independent financial advisor, to render advisory
services in connection with the Company's consideration of certain business
combinations involving the Company and a second party. Under the Sandler
O'Neill Agreement, the Company has paid Sandler O'Neill a fee of $50,000 for
rendering its fairness opinion relating to the Merger. Such fairness opinion
fee will be credited against the transaction fee with respect to the Merger
which is equal to (x) .25% of the aggregate purchase price of the Merger
payable upon signing of the Acquisition Agreement, plus (y) .75% of the
aggregate purchase price of the Merger, payable upon the consummation thereof,
less the fairness opinion fee stated above. Pursuant to such arrangement, the
Company paid to Sandler O'Neill $209,712 upon the execution of the Acquisition
Agreement and will be required to pay approximately $430,209 upon the
Effective Date.
Pursuant to the Sandler O'Neill Agreement, the Company has also agreed
to reimburse Sandler O'Neill for its reasonable out-of-pocket expenses
incurred in connection with its engagement and to indemnify Sandler O'Neill
and its affiliates and their respective partners, directors, officers,
employees, agents, and controlling persons against certain expenses and
liabilities, including liabilities under securities laws.
In connection with rendering its fairness opinion to the Company's Board
of Directors at its meeting held on June 20, 1995, Sandler O'Neill performed a
variety of financial analyses which are summarized below. The following is a
summary of such analyses, but does not purport to be a complete description of
Sandler O'Neill's analyses or presentation at such meeting. Sandler O'Neill
believes that its analyses must be considered as a whole and that selecting
portions of such analyses and factors considered therein, without considering
all factors and analyses, could create an incomplete view of the analyses and
the processes underlying Sandler O'Neill's opinion. The preparation of a
fairness opinion is a complex process involving subjective judgments and is
not necessarily susceptible to partial analyses or summary description. In its
analyses, Sandler O'Neill made numerous assumptions with respect to industry
performance, business and economic conditions and various other matters, many
of which are beyond the control of the Company and AFC. Any estimates
contained in Sandler O'Neill's analyses are not necessarily indicative of
future results or values, which may be significantly more or less favorable
than such estimates. Estimates of values of companies do not purport to be
appraisals or necessarily reflect the prices at which companies or their
securities may actually be sold. Because such estimates are inherently subject
to uncertainty, neither the Company nor Sandler O'Neill nor any other person
assumes responsibility for their accuracy.
Stock Trading History. Sandler O'Neill examined the history of the
trading prices and the volume of the Common Stock and the AFC Common Stock,
the relationship between the movements in the prices of both stocks to
movements in certain stock indices, including the Standard & Poor's 500 Index
and the NASDAQ Banking Index and a composite group of 18 publicly traded
savings institutions in geographic proximity and of similar asset size to the
Company.
Analyses of Selected Merger Transactions. Sandler O'Neill reviewed 25
transactions announced from January 1, 1995 to June 15, 1995 involving public
savings institutions nationwide as targets with transaction values over $15.0
million ("All Transactions") and 10 transactions announced from January 1,
1994 to June 15, 1995 involving public savings institutions in New England
with transaction values over $15.0 million ("Regional Transactions"). Sandler
O'Neill reviewed the ratios of price to earnings, price to book value, price
to tangible book value, price to deposits and price to assets, and deposit
premium paid in each such transaction and computed high, low, mean and median
ratios and premiums for the respective groups of transactions. Based upon the
median multiples for All Transactions, Sandler O'Neill derived an imputed
range of values per share of the Common Stock of $17.47 to $30.50. Based upon
the median multiples for Regional Transactions, Sandler O'Neill derived an
imputed range of values per share of the Common Stock of $17.76 to $28.57. The
high end of the range of imputed values based upon both the All Transactions
multiples and the Regional Transactions multiples were imputed values based on
the median price to earnings multiples applied to the Company's net income for
the twelve months ended June 30, 1995, which included a $2.9 million tax
benefit. When the median price to earnings multiples for All Transactions and
for Regional Transactions were applied to the Company's estimated earnings for
the twelve months beginning July 1, 1995, the imputed ranges of values per
share was $17.47 to $19.35 and $17.76 to $21.38, respectively.
Discounted Dividend Stream and Terminal Value Analyses. Sandler O'Neill
performed an analysis which estimated the future stream of after-tax dividend
flows of the Company through 1999 under various circumstances, assuming the
Company performed in accordance with the earnings and forecasts of its
management and certain variations thereof (including variation with respect to
the growth rate of assets, net interest spread, non-interest income, non-
interest expense and dividend payout ratio). To approximate the terminal value
of the Common Stock at the end of the five year period, Sandler O'Neill
applied price to earnings multiples ranging from 8 to 17 and applied multiples
of book value ranging from 100.0% to 190.0%.
The earnings and book value multiples were chosen by Sandler O'Neill to
reflect a reasonable range of multiples based on historical transactions of
public savings institutions. The dividend income streams and terminal values
were then discounted to present values using different discount rates (ranging
from 9% to 14%) chosen to reflect different assumptions regarding required
rates of return of holders of prospective buyers of the Common Stock. This
analysis, assuming the current dividend payout ratio, indicated an imputed
range of values per share of Common Stock of $8.37 to $21.90. In connection
with its analysis, Sandler O'Neill used sensitivity analyses to illustrate the
effects changes in the underlying assumptions would have on the resulting
present value, and discussed these changes with the Board of Directors.
Recommendation of the Board of Directors of the Company
Based on the factors discussed under "Background of the Reasons for the
Merger" and in reliance on the opinion of Sandler O'Neill that the
consideration to be received in the Merger is fair from a financial point of
view, the Board of Directors of the Company has determined that the Merger is
desirable and in the best interests of the Company and its stockholders and
has unanimously approved the Acquisition Agreement. Accordingly, the Board of
Directors of the Company unanimously recommends that stockholders vote FOR
approval of the Plan of Merger.
Merger Consideration
Pursuant to the Acquisition Agreement, as of the Effective Time, each
outstanding share of Common Stock (other than Excluded Shares) will be
converted into the right to receive the Merger Consideration of $18.00 in
cash, without interest.
The Acquisition Agreement also provides that each outstanding, vested
and unexercised option to purchase Common Stock under the Option Plans at the
Effective Time will be automatically converted into options to acquire, for
the same price and on the same terms and conditions as are applicable under
the stock options for each share of Common Stock, a number of shares of AFC
Common Stock equal to the amount obtained by dividing (i) the Merger
Consideration by (ii) the closing bid price per share of AFC Common Stock as
reported on the Nasdaq National Market on the trading day immediately
preceding the Effective Date.
The total transaction value is estimated to be $60.3 million based on
3,350,501 shares of Common Stock outstanding on the Record Date ($62.8
million, inclusive of the value of options to purchase 204,613 shares of
Common Stock to be converted on the Effective Date into options for the
purchase of shares of AFC Common Stock).
Surrender of Stock Certificates; Payment of Merger Consideration
At or after the Effective Time, each certificate previously representing
shares of Common Stock (each, a "Certificate"), other than certificates
representing Excluded Shares, will represent only the right to receive the
Merger Consideration.
The Acquisition Agreement provides that immediately after the Effective
Time, ALBANK will mail to each holder of record of Common Stock a letter of
transmittal containing instructions for use in effecting the surrender of
Certificates in exchange for the Merger Consideration. Risk of loss and title
to the Certificates will pass only upon delivery of the Certificates to
ALBANK. Upon the proper surrender of a Certificate to ALBANK, together with a
properly completed and duly executed letter of transmittal, the holder of such
Certificate will be entitled to receive in exchange therefor a check
representing the aggregate Merger Consideration in respect of the Certificate
surrendered, and the Certificate so surrendered will be cancelled. No interest
will be paid or accrued on the Merger Consideration. In the event of a
transfer of ownership of any shares of Common Stock not registered in the
transfer records of the Company, a check for the Merger Consideration will be
issued to the transferee if the Certificate representing such Common Stock is
presented to ALBANK, accompanied by documents sufficient, in the discretion of
ALBANK, (i) to evidence and effect such transfer, and (ii) to evidence that
all applicable stock transfer taxes have been paid. ALBANK will be entitled to
deduct and withhold from the Merger Consideration otherwise payable to any
holder of Certificates such amounts, if any, as ALBANK determines is required
under the Internal Revenue Code of 1986, as amended (the "Code"), or any
provision of state, local or foreign tax law. Certificates should not be
forwarded to ALBANK until after receipt of the letter of transmittal and
should not be returned to the Company with the enclosed proxy.
The Acquisition Agreement provides that, from and after the Effective
Time, there shall be no transfers on the stock transfer records of the Company
of any shares of Common Stock that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to
AFC or ALBANK for transfer, they will be cancelled and exchanged for the
Merger Consideration deliverable in respect thereof.
If outstanding Certificates for shares of Common Stock have not been
surrendered to ALBANK by the date two years after the Effective Time (or at
such earlier date on which any payments in respect of the Acquisition
Agreement would otherwise escheat or become the property of any governmental
unit or agency), such Certificates shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and
clear of all claims or interests of any person previously entitled thereto.
Notwithstanding the foregoing, none of ALBANK, the Surviving Corporation or
any other person shall be liable to any former holder of Common Stock for any
amount delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
In the event that any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by ALBANK,
the posting by such person of a bond in such amount as ALBANK may direct as
indemnity against any claim that may be made against it with respect to such
Certificate, ALBANK will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration deliverable in respect thereof.
In accordance with the terms of the Acquisition Agreement, the Company
has terminated its Dividend Reinvestment Plan ("DRP"). Certificates
representing the number of whole shares in each DRP participant's Plan Account
have been delivered to such participants together with cash in lieu of
fractional shares. Holders at the Effective Time of shares issued under the
DRP (other than Excluded Shares) will be entitled to receive the Merger
Consideration in exchange for such shares.
Regulatory Approvals
The consummation of the transactions contemplated in the Plan of Merger
is conditioned on the receipt of all required regulatory approvals. The Bank
Merger requires the approval of the OTS under the Federal Deposit Insurance
Act and related OTS regulations. An application for such approval was filed
with the OTS as of August 14, 1995. The OTS is required to evaluate the
application by taking into consideration, among other things, the financial
and managerial resources of the existing and proposed institutions and the
convenience and needs of the community to be served. In addition, the OTS may
not approve any proposed acquisition (i) which would result in a monopoly or
which would be in furtherance of any combination or conspiracy to monopolize
or to attempt to monopolize the business of banking in any part of the United
States or (ii) which in any section of the country may have the effect of
substantially lessening competition or tending to create a monopoly or which
in any other manner would be in restraint of trade, unless the OTS finds that
the anticompetitive effects of the proposed acquisition are clearly outweighed
in the public interest by the probable effect of the acquisition in meeting
the convenience and needs of the entire community, including low- and
moderate-income neighborhoods. The OTS also considers, among other things, the
capital level of the resulting savings association, the conformity of the
transaction to applicable law, regulation and supervisory policies, the
fairness and disclosure of the plan (including compensation to officers,
directors and controlling persons of the disappearing entity by the surviving
association), the justification, need for and compensation to be paid to any
advisory board, fees paid to each person or firm rendering legal and other
professional services in connection with a merger and the accounting treatment
of any goodwill in connection with a merger. The regulations of the OTS
provide for the publication of notice and the opportunity for public comments
relating to the application for approval discussed above.
Because the Bank Merger will involve the merger of the Bank, an
institution insured by the BIF, and ALBANK, a savings association generally
insured by the SAIF, the OTS may not approve the Bank Merger unless it
determines that ALBANK will meet all applicable capital requirements upon the
consummation of the transaction. ALBANK is expected to satisfy all applicable
capital requirements at the Effective Time.
In addition, because the Bank Merger will result in ALBANK having
branches in Vermont, ALBANK will be required to satisfy a provision of law and
OTS regulation that prohibits a federal savings association from establishing,
operating or retaining branches outside its home state unless it qualifies as
a "domestic building and loan association" under the Code or meets the asset
composition test that a "domestic building and loan association" is required
to meet. Furthermore, a federal savings association may not establish, operate
or retain such branches unless the total assets of the association
attributable to the branches in the new state would satisfy an asset
composition test. In general, the test requires 60% of the assets to be in
cash, certain U.S. Government obligations, residential real estate owned,
educational loans, property used in the institution's business, and regular
and residual interests in certain types of mortgage-backed securities. ALBANK
and the Marble branches are expected to satisfy the asset composition test
after the Bank Merger. In addition, ALBANK is expected to satisfy the
Qualified Thrift Lender test after the Bank Merger, which, in general,
requires a savings association to have 65% of its assets in residential
mortgage loans and mortgage-backed securities and related assets.
The Bank Merger may not be consummated for a period of 15 to 30 days
following the OTS's approval of such merger (the precise length of such period
to be determined by the OTS with the concurrence of the Attorney General of
the United States), during which time the United States Department of Justice
may challenge the Bank Merger on antitrust grounds. The commencement of any
antitrust action would stay the effectiveness of any approvals granted by the
OTS unless a court specifically orders otherwise.
The obligation of AFC and ALBANK to consummate the Merger is also
conditioned upon the receipt by AFC and ALBANK of confirmation from the
Federal Reserve Board that the consummation of the Merger and the Bank Merger
will not require AFC or ALBANK to register as a bank holding company under
Section 3 of the BHCA or to obtain the prior approval of the Federal Reserve
Board with respect to any of the transactions contemplated by the Acquisition
Agreement. Such confirmation was received from the Federal Reserve Bank of
Boston by letter dated October 2, 1995.
The Merger and Bank Merger cannot proceed in the absence of the
requisite regulatory approvals. See "The Merger--Conditions to the Merger"
and--"Termination, Amendment and Waiver". There can be no assurance that all
requisite approvals will be obtained, that such approvals will be received on
a timely basis or that such approvals will not impose conditions or
requirements that would cause a failure to satisfy certain conditions to the
obligations of ALBANK and AFC to consummate the Merger. There can be no
assurance that the United States Department of Justice will not challenge the
Merger, or if such challenge is made, as to the result thereof.
None of the Company, AFC or ALBANK is aware of any other governmental
approvals or actions that are required before the parties may consummate the
Merger and the Bank Merger.
The Company has agreed that if a governmental entity requires that the
transactional steps comprising the acquisition of the Company by ALBANK be
structured in a manner different from that described under "The Merger--
General", the Company and the Bank will, if requested by ALBANK, cooperate in
such restructuring provided that such restructuring includes (i) a cash
payment per share of Common Stock not less than the Merger Consideration, and
(ii) the agreements of AFC and ALBANK in the Acquisition Agreement with
respect to Company employees, indemnification of directors and officers of the
Company and its subsidiaries and the establishment and maintenance of the
Advisory Board. ALBANK is not obligated to structure the proposed acquisition
in any manner other than as contemplated by the Acquisition Agreement.
Conditions to the Merger
The obligations of the parties to the Acquisition Agreement to
consummate the Merger are subject to the satisfaction or waiver (to the extent
permitted by law) of the following conditions: (i) the Plan of Merger shall
have been approved by the requisite vote of the stockholders of the Company;
(ii) all required regulatory approvals, authorizations and consents shall have
been obtained and shall remain in full force and effect, all conditions
precedent and requirements prescribed by applicable law or by such approvals
shall have been satisfied, and all statutory waiting periods in respect
thereof shall have expired (provided, however, that this condition precedent
to ALBANK's obligation to effect the Merger will not be deemed to have been
met if such approval is subject to any condition or requirement that ALBANK,
in its reasonable judgment, deems to be materially adverse or materially
burdensome or to substantially deprive ALBANK of the benefits which it
anticipates to receive in the Merger and the Bank Merger, including any
condition that either the Merger or the Bank Merger be effected pursuant to a
different structure than that contemplated by the Acquisition Agreement);
(iii) no party to the Acquisition Agreement, and no subsidiary of any such
party, shall be subject to any order of a court or governmental entity of
competent jurisdiction which enjoins or prohibits the consummation of the
Merger or the exercise of control by AFC or ALBANK over the Company or any of
its subsidiaries following the Merger; (iv) except for litigation, proceedings
or investigations that ALBANK has been advised by its counsel do not have a
substantial likelihood of success, no litigation, proceeding or investigation
shall be pending or threatened before any court or governmental entity of
competent jurisdiction in which it is sought to restrain or prohibit the
consummation of the transactions contemplated by the Acquisition Agreement or
the exercise of control by AFC or ALBANK over the Company or any of its
subsidiaries following the Merger or in which money damages in a material
amount are sought with respect to the Acquisition Agreement or any of the
transactions contemplated thereby; and (v) the registration statement to be
filed with the SEC by AFC with respect to AFC Common Stock issuable upon
exercise of options to be granted to holders of options under the Option Plans
shall have become effective.
In addition to the foregoing, the obligations of AFC and ALBANK to
consummate the Merger are subject to the following conditions: (i) the
obligations of the Company required to be performed by it at or prior to
closing of the Merger shall have been performed and complied with in all
material respects; (ii) the representations and warranties of the Company in
the Acquisition Agreement shall be true and correct in all material respects;
(iii) the Company shall have delivered certificates of the Company to the
foregoing effects; (iv) ALBANK shall have received from the Federal Reserve
Board confirmation that the consummation of the Merger and the Bank Merger
will not require AFC or ALBANK to register as a bank holding company under
Section 3 of the BHCA or to obtain the prior approval of the Federal Reserve
Board with respect to any of the transactions contemplated by the Acquisition
Agreement; (v) ALBANK shall have received an opinion or opinions from counsel
for the Company covering the legal existence of the Company and its
subsidiaries, corporate authority to enter into the transactions, receipt of
regulatory approvals, validity of the outstanding shares of Common Stock and
other matters reasonably requested by ALBANK; (vi) holders of not more than
ten percent (10%) of the outstanding shares of Common Stock shall have
exercised or purported to exercise dissenters' rights with respect to the
Merger; and (vii) the revised employment agreement between the Company and
Edward J. Grover, the Company's President and Chief Executive Officer,
described under "--Interests of Certain Persons in the Merger--Grover
Employment Agreement", shall have been signed by Mr. Grover.
The obligations of the Company to effect the Merger are also subject to
the following conditions: (i) each of the obligations of AFC and ALBANK
required to be performed by them at or prior to the closing of the Merger
shall have been performed and complied with in all material respects; (ii) the
representations and warranties of AFC and ALBANK contained in the Acquisition
Agreement shall be true and correct in all material respects; (iii) the
Company shall have received certificates of AFC and ALBANK to the foregoing
effects; and (iv) the Company shall have received an opinion of counsel to AFC
and ALBANK generally covering the legal existence of AFC and ALBANK, corporate
authority to enter into the transactions, receipt of required regulatory
approvals and other matters reasonably requested by the Company.
In the Acquisition Agreement, the Company, AFC and ALBANK have made
certain representations and warranties. In the case of the Company, such
representations and warranties relate to: its corporate and regulatory
structure and capital structure; its corporate authority to enter into the
Acquisition Agreement and the Fee Letter and to effect the Merger and the Bank
Merger; the accuracy of certain financial and other information furnished by
the Company to ALBANK; the legality of the execution and performance by the
Company and the Bank of the transactions contemplated by the Acquisition
Agreement and the Fee Letter; the necessary regulatory approvals associated
with the consummation of the transactions contemplated by the Acquisition
Agreement; the timeliness and accuracy of reports filed with the SEC and other
regulatory authorities; the absence of undisclosed liabilities or events which
would have a "Material Adverse Effect" (as defined below) on the Company; the
payment of taxes and the filing of returns; the absence of any judicial or
administrative proceedings likely to materially hinder or delay the
consummation of the transactions contemplated by the Acquisition Agreement;
the absence of material claims or regulatory orders against the Company or the
Bank; the absence of undisclosed material agreements or defaults under
disclosed or undisclosed agreements; the absence of certain labor agreements
or claims; the compliance of employee benefit plans with applicable laws and
the absence of undisclosed material liabilities thereunder; title to
properties; compliance with environmental laws and the absence of undisclosed
material liabilities with respect thereto; the status of loans held by the
Bank; the status of the Company's insurance and investments; and certain other
matters.
A "Material Adverse Effect" with respect to the Company is defined in
the Acquisition Agreement as an effect which (A) is materially adverse to the
business, financial condition, results of operations, properties, assets,
liabilities or capital of the Company and its subsidiaries taken as a whole,
(B) significantly and adversely affects the ability of the Company to
consummate the transactions contemplated by the Acquisition Agreement or to
perform its obligations thereunder, or (C) enables any person to prevent the
consummation of the transactions contemplated by the Acquisition Agreement;
provided that the following matters are not deemed to constitute or contribute
to a Material Adverse Effect: (i) changes in the financial condition,
business or results of operations of the Company resulting directly or
indirectly from changes in interest rates (except insofar as the result of any
changes in interest rates is reflected in any action taken or omitted with
respect to holdings of, or transactions in, financial assets of the Company
which is contrary to the directions of ALBANK), or (ii) matters related to
changes in federal tax laws.
The Acquisition Agreement contains representations by AFC and ALBANK
regarding: corporate and regulatory structure; corporate authority to enter
into the Acquisition Agreement and the Fee Letter and to effect the Merger and
the Bank Merger; the legality of the execution and performance by AFC, ALBANK
and Interim Sub of the transactions contemplated by the Acquisition Agreement
and the Fee Letter; the necessary regulatory approvals associated with the
consummation of the transactions contemplated by the Acquisition Agreement;
the timeliness and accuracy of reports filed with the SEC and other regulatory
authorities; the absence of any judicial or administrative proceedings likely
to materially hinder or delay the consummation of the transactions
contemplated by the Acquisition Agreement; the adequacy of ALBANK's capital to
effect the Merger; and certain other matters.
The conditions precedent to the consummation of the Merger (other than
the receipt of required regulatory approvals) can be waived by the benefitted
party. Neither the Company nor AFC nor ALBANK has committed to grant any such
waiver.
Effect on Employees
The Acquisition Agreement provides that as of the Effective Time, all
employees of the Company and its subsidiaries ("Company Employees") will
become employees of ALBANK; however, ALBANK is not required by the Acquisition
Agreement to continue the employment of any of the Company Employees. To the
extent that ALBANK terminates the employment of any of the Company Employees,
other than for cause, within twelve months following the Effective Time, the
Acquisition Agreement provides for ALBANK to provide severance benefits
comparable to those that would have been payable under the Company's severance
plan in effect on the date of the Acquisition Agreement. Severance benefits
for Company Employees who are parties to employment contracts with the Company
as of the Effective Time will be governed by those contracts (and not the
Company's general severance policy).
In accordance with the terms of the Acquisition Agreement, the Company
has terminated its Employee Stock Purchase Plan (the "ESPP").
Interests of Certain Persons in the Merger
Certain members of the Board of Directors and executive officers of the
Company may be deemed to have interests in the Merger in addition to their
interests as stockholders generally. The Board of Directors of the Company was
aware of these factors and considered them, among other matters, in approving
the Acquisition Agreement and the transactions contemplated thereby.
Employment and Change of Control Agreements. The Company has entered
into a change of control contract with Edward J. Grover, President and Chief
Executive Officer of the Company and the Bank, which extends through December
31, 1995 and automatically renews annually thereafter unless terminated by the
Company or Mr. Grover not later than the preceding November 30th (the "Change
of Control Contract"). In conjunction with the execution of the Acquisition
Agreement, AFC, ALBANK and Mr. Grover have agreed to enter into an amended
employment agreement to be effective as of the Effective Time (the "Employment
Agreement").
The Change of Control Contract provides that following a change of
control of the Company or the Bank, if Mr. Grover's employment is terminated
other than for specified causes or if Mr. Grover terminates his employment
with the Company or the Bank for "good reason" (as specified), Mr. Grover will
receive severance payments in amounts up to 2.99 times his average annual
salary during the preceding five years. The estimated payout to Mr. Grover, if
he were terminated in the first quarter of 1996, would be $473,417. Upon the
effectiveness of the Employment Agreement, Mr. Grover will relinquish all
rights under the Change of Control Contract.
Pursuant to the Employment Agreement, Mr. Grover will be employed by
ALBANK as Divisional President responsible for operations of ALBANK within
what is now the market area of the Bank. The Employment Agreement provides for
Mr. Grover to receive a base salary of $130,000 per annum (subject to annual
review in accordance with ALBANK's standard review policies), a base bonus of
$125,000 on the Effective Date and bonuses in the same amount on the first and
second anniversaries of the Effective Date. In the event of a change of
control of AFC or ALBANK, any remaining unpaid base bonuses will be
immediately due and payable. The Employment Agreement further provides for
discretionary annual incentive bonuses in accordance with ALBANK's bonus
program as in effect from time to time. Mr. Grover will also be eligible to
participate in the other ALBANK benefit plans available to other ALBANK
officers holding equivalent positions.
The Employment Agreement provides for ALBANK to issue to Mr. Grover on
the Effective Date options to purchase 20,000 shares of AFC Common Stock
pursuant to an AFC stock option plan, exercisable at the fair market value of
AFC Common Stock on the Effective Date. These options will vest and become
exercisable ratably over the succeeding five years such that options for the
purchase of 20% of the shares of AFC Common Stock will vest and become
exercisable in each of the five years; provided that in the event of a change
of control of AFC or ALBANK, such options will be immediately exercisable.
The term of the Employment Agreement is for two years following the
Effective Date. If Mr. Grover's employment is terminated by ALBANK (other than
for cause) or as a result of Mr. Grover's death during that term, the
Employment Agreement provides for ALBANK to pay to Mr. Grover the entire
remaining amount of base salary and base bonuses that would otherwise be
payable over the remaining term up to a maximum of three times the base salary
($130,000 in the first year). In the event of a termination due to disability,
ALBANK is further required to pay incentive bonuses that otherwise would have
been payable for the remainder of the term. In the event of a termination for
"cause" (defined as personal dishonesty, incompetence, willful misconduct,
breach of fiduciary duty involving personal profit, intentional failure to
perform stated duties, the willful violation of any law, rule or regulation
(other than traffic violations and similar offenses), the imposition of a
final cease and desist order or a material breach of any provision of the
Employment Agreement), the Employment Agreement provides for the payment of
only the base salary through the date of suspension (which shall precede a
determination by the Board of Directors to terminate for cause under the
Employment Agreement) and the termination of all other benefits and rights to
compensation. Notwithstanding any other provision of the Employment Agreement,
in no event shall the total compensation paid to Mr. Grover upon termination
for any reason exceed three times Mr. Grover's average annual compensation
based on the most recent five years.
The Company has entered into change of control agreements with three
other officers, George B. Williams, Executive Vice President and Chief
Financial Officer, Marvin B. Elliott, Executive Vice President, and William T.
Butler, Jr., Senior Vice President and Controller, under which each is
entitled to receive specified percentages of their average annual salaries
(including bonus) during the preceding five years in the event they are
involuntarily terminated without cause or voluntarily terminated "for good
reason" (as defined in such agreements) within a specified number of years of
a "change of control" of the Company, which would include the Merger. While
some employees of the Company or the Bank may eventually assume positions that
carry the title of vice president or above, the only current officer of the
Company and the Bank to whom ALBANK has offered a position as an officer of
ALBANK is Mr. Grover. Unless ALBANK makes other employment arrangements with
Messrs. Williams, Elliott and Butler, it may be obliged to make payments to
these officers under their respective change of control agreements. The
estimated potential payouts to Messrs. Williams, Elliott and Butler, if
terminated during the first quarter of 1996, are $227,105, $116,736 and
$69,884, respectively.
Indemnification and Insurance. Pursuant to the Acquisition Agreement,
AFC and ALBANK have agreed, for a period of three years following the
Effective Date, to indemnify and hold harmless each present and former
director and officer of the Company or its subsidiaries in connection with any
litigation, proceeding or investigation arising in whole or in part out of the
fact that such person is or was a director, officer or employee of the Company
or its subsidiaries at or prior to the Effective Time to the fullest extent
permitted by the VBCA. In addition, the Acquisition Agreement provides for AFC
and the Surviving Corporation to use their best efforts to maintain in effect
for a period of three years from the Effective Time, if available, the current
directors' and officers' liability insurance policies maintained by the
Company (or substantially equivalent substitute policies) with respect to
matters occurring prior to the Effective Time, provided that the annual
premiums for such insurance do not exceed $95,000 per year.
Advisory Board. ALBANK has agreed promptly following the Effective Time
to establish and maintain for at least eighteen months the Advisory Board
consisting of the members of the Company's Board of Directors who are willing
to serve on the Advisory Board and such other members as ALBANK may appoint.
The function of the Advisory Board will be to advise ALBANK and its
subsidiaries on deposit and lending activities in the Bank's market area and
to maintain and develop customer relationships. The Advisory Board will not be
considered a part of, or be entitled to vote on actions taken by, ALBANK's
Board of Directors. The Advisory Board will meet at least once each month, and
each member (other than an officer or employee of AFC or its subsidiaries)
will receive a fee of $875 for each meeting attended, provided that the total
of such fees to each individual during any twelve-month period will not exceed
$10,500.
Stock Options. The directors and certain officers and key employees of
the Company (38 directors, officers and employees in the aggregate) also hold
options for the purchase (at exercise prices ranging from $3.375 to $12.25 per
share) of an aggregate of 204,613 shares of Common Stock under the Option
Plans, which as of the Effective Time, will be automatically converted into
options to acquire, for the same price and on the same terms and conditions as
are applicable under the stock options for each share of Common Stock, a
number of shares of AFC Common Stock equal to the amount obtained by dividing
(i) the Merger Consideration by (ii) the closing bid price per share of AFC
Common Stock as reported on the Nasdaq National Market on the trading day
immediately preceding the Effective Date.
Other than as set forth above, no director or executive officer of the
Company has any direct or indirect material interest in the Merger, except
insofar as the ownership of Common Stock might be deemed such an interest and,
in the case of executive officers, benefits to which they are entitled
pursuant to certain employee benefit plans of the Company on the same terms as
generally are applicable to all participating employees.
Business Pending the Merger
The Company has agreed in the Acquisition Agreement that, except as
expressly provided in the Acquisition Agreement and except to the extent
required by applicable law or by regulatory agencies, the Company and its
subsidiaries will (a) conduct their businesses in the usual, regular and
ordinary course consistent with prudent banking practice, (b) use their best
efforts to maintain and preserve intact their business organization,
properties, leases, franchises, employees and advantageous business
relationships and retain the services of its officers and key employees, and
(c) not knowingly take any action which would materially adversely affect or
delay the ability of the Company and ALBANK to obtain the regulatory approvals
required for the consummation of the Merger and the Bank Merger, make any of
the Company's representations or warranties untrue or incorrect if made or
deemed to be made immediately thereafter or cause any of the conditions
precedent to the Merger not to be satisfied.
The Acquisition Agreement also contains certain restrictions on the
conduct of the Company's business pending the consummation of the Merger. In
particular, the Acquisition Agreement provides that, without the consent of
ALBANK and except to the extent required by applicable law or by regulatory
agencies, neither the Company nor any of its subsidiaries will, among other
things, (i) amend or otherwise change its Articles of Association or By-Laws
or amend, modify, terminate or fail to renew or use its best efforts to
preserve the governmental permits and approvals necessary for the operation of
the Bank's business; (ii) issue any shares of capital stock (except for up to
5,963 shares of Common Stock issuable through July 31, 1995 pursuant to the
ESPP), change the terms of any outstanding stock options or issue, grant or
sell any option, warrant, call, commitment, stock appreciation right, right to
purchase or agreement to acquire of any character relating to the authorized
or issued capital stock of the Company or any of its subsidiaries, adjust,
split, combine or reclassify any of its capital stock, or make, declare or pay
any dividend (including any stock dividend) or make any other distribution
(other than dividends or other distributions payable on capital stock of the
Company's subsidiaries to the Company, cash dividends on the Common Stock
declared and paid from dividendable earnings of the Company through December
31, 1995 in a manner consistent with the Company's dividend policies and
practices as of June 20, 1995 in an amount not in excess of $.10 per share of
Common Stock per quarter and, in the event that the Effective Date occurs
after January 5, 1996, cash dividends on the Common Stock not in excess of
$.11 per share per fiscal quarter, pro rated, in the case of the fiscal
quarter in which the Effective Date occurs, on the basis of the number of
calendar days actually elapsed during such fiscal quarter through the
Effective Date) on, or directly or indirectly redeem, purchase or otherwise
acquire any shares of its capital stock, or any securities or obligations
convertible into or exchangeable for any share of its capital stock; (iii)
make or acquire any specified types of derivative instruments, reverse
repurchase agreements or other specified investments; (iv) lease, sell,
transfer, pledge, assign, encumber or otherwise dispose of properties or
assets having an aggregate book value or market value in excess of $250,000;
(v) dispose of or acquire the servicing rights with respect to any loan, lease
or other extension of credit; (vi) (a) increase in any manner the compensation
or benefits (including any severance or fringe benefits) of any of its
employees, former employees, directors or former directors, or pay any pension
or retirement allowance, in each case not required by any existing employee
benefit plan, to any such employees, former employees, directors or former
directors, or become a party to, amend or commit itself to or fund or
otherwise establish any trust or account related to any employee benefit plan
with or for the benefit of any employee, director, former employee or former
director, other than normal increases in salary or wages for employees and
contributions to employee benefit plans, in each case in the ordinary course
of business consistent with past practice and following consultation with
ALBANK, (b) voluntarily accelerate the vesting or exercisability of any stock
options or other compensation or benefit, (c) enter into, terminate or amend
or modify any employee benefit plan (other than amendments required in order
to comply with applicable law), (d) hire any employee with an annual
compensation in excess of $35,000 or enter into, terminate or amend or modify
any employment, severance, consulting or change of control agreement, (e) make
any discretionary contributions to any employee benefit plan, or (f) grant any
incentive compensation or bonus to any employee except as set forth in a
disclosure letter delivered by the Company to ALBANK at the time of the
execution of the Acquisition Agreement (the "Disclosure Letter"); (vii) enter
into, terminate or amend or modify in any material respect (a) any equipment
lease, (b) branch office lease, or (c) material contract involving an
aggregate payment by the Company or any of its subsidiaries under any such
agreement, transaction or commitment of more than $50,000 or having a term of
one year or more from the time of execution; (viii) settle for an amount
exceeding $10,000 singly or $100,000 in the aggregate any claim, action or
proceeding involving any material litigation, or waive or release any right or
collateral or cancel or compromise any debt or claim in which such waiver,
release, cancellation or compromise is in an amount exceeding $10,000 singly
or $100,000 in the aggregate; (ix) make, renegotiate, renew, increase, extend
or purchase any loan, lease (credit equivalent) or other extension of credit,
or make any commitment in respect of any of the foregoing, except, in the case
of the Bank, loans, leases and other extensions of credit in an amount not
exceeding (a) $203,150, in the case of loans which are for the sole purpose of
acquiring or refinancing one- to four-family owner-occupied residences
(provided, however, that the Bank may not make, renegotiate, renew, increase,
extend or purchase any loan that is underwritten based on either no or limited
verification of income or otherwise without full documentation customary for
such a loan), (b) in the case of commercial real estate loans or commercial
and industrial loans: (A) $250,000, with no additional approval required,
provided that each such loan is made in accordance with the Bank's established
or approved lending policies and procedures, (B) $500,000, with the approval
of the Bank's Loan Committee (including the approval of the President and
Chief Executive Officer of the Bank) and (C) $2,500,000, with the approval of
the Bank's Loan Committee (including the approval of the President and Chief
Executive Officer of the Bank) and the Loan Committee of the Bank's Board of
Directors and the approval of ALBANK, which shall be deemed given if, within
seven business days after the Bank requests in writing that ALBANK provide
such approval and furnishes to ALBANK a complete credit file on the proposed
transaction, ALBANK shall not have responded in writing to such request, (c)
$50,000, in the case of home equity loans, provided that each such loan is
made in accordance with the Bank's established or approved lending policies
and procedures or (d) $25,000, in the case of any other loans, leases and
other extensions of credit (except for manufactured home, mobile home or
similar loans, leases or other extensions of credit, each of which shall
require the prior express consent of ALBANK); (x) acquire, merge or
consolidate with, or purchase an equity interest in or a material amount of
assets of, any business or any institution, bank, corporation, partnership,
association or other business organization or division thereof (except in
satisfaction of a debt previously contracted in good faith); organize,
capitalize, lend to or otherwise invest in any subsidiary; enter into any
joint venture agreement or similar alliance with any other person (including
any branch lease, joint venture agreement or other agreement with respect to
the sale of insurance, securities or brokerage or other services at the
offices of the Company or any of its subsidiaries); or enter into any other
transaction that would have the practical effect of an acquisition by any
other person of an interest in the Company or any of its subsidiaries; (xi)
(a) incur any additional borrowings (except to the extent necessary to fund
withdrawals of deposits, provided that the aggregate consolidated borrowings
of the Company and its subsidiaries shall not, following such additional
borrowings, exceed $75,000,000), (b) renew any borrowings reflected on the
books and records of the Company or any of its subsidiaries on the date of the
Acquisition Agreement (except for a term to maturity not in excess of six
months, provided that the aggregate consolidated borrowings of the Company and
its subsidiaries shall not, following such renewal, exceed $75,000,000), (c)
pledge any of its assets to secure any borrowings other than as required
pursuant to the terms of borrowings of the Company or any of its Subsidiaries
in effect at the date of the Acquisition Agreement, or (d) incur any other
material direct or contingent liabilities, other than in the ordinary course
of business consistent with past customary practice; (xii) enter into any new
lines of business, engage or participate in any material transaction
(including, without limitation, opening or acquiring new branches, closing or
relocating (or filing any application to close or relocate) existing branches
and acquiring real or personal property); make capital expenditures in excess
of $100,000 in the aggregate other than pursuant to binding commitments
existing on the date of the Acquisition Agreement and other than expenditures
necessary to maintain existing assets in good repair in accordance with the
policies of the Company and its subsidiaries as in effect on the date of the
Acquisition Agreement; (xiii) make any investment or commitment to invest in
real estate or in any real estate development project, other than investments
or commitments approved by the Company's Board of Directors prior to the date
of the Acquisition Agreement; (xiv) except as requested by ALBANK or required
by changes in generally accepted accounting principles, authorize or make any
material change in any of its accounting policies, practices, standards or
methods as in effect at March 31, 1995; (xv) make less stringent than as in
effect on the date of the Acquisition Agreement its operational policies,
activities or practices (including credit underwriting policies or standards
of the Company or its subsidiaries and policies or practices of the Company
and its subsidiaries with respect to lending, charge-off or classification of
loans, securities or other investment or financial instruments, reserves and
provisions for loan losses, the placement of loans, securities or other
investment or financial instruments in non-accrual status, the making of
investments, and liability management); (xvi) transfer any deposits to any
person; solicit or accept deposits at a rate of interest that exceeds the
generally prevailing effective yields on insured deposits of comparable
maturity in its normal market area; or make any payment in respect of deposits
other than in accordance with the terms of the applicable deposit agreements;
(xvii) decrease the allowance for possible loan losses of the Company and its
subsidiaries from that shown in the 1994 Annual Report, except to the extent
that the allowance is applied to a corresponding charge-off of a loan; or
(xviii) solicit, encourage or enter into any agreement with respect to, or
enter into any discussion leading to or with a view towards any such agreement
with respect to, any of the foregoing.
The Acquisition Agreement further requires the Company and its
subsidiaries to: (i) preserve and enhance the goodwill of the Bank's customers
and others having business relations with the Bank; (ii) confer, at such times
and with such frequency as ALBANK may reasonably request, with one or more
representatives of ALBANK to report operational matters of materiality or to
obtain ALBANK's consent to appropriate matters or transactions and the general
status of ongoing operations; and consult with ALBANK as to the making of any
material decisions or the taking of any material actions with respect to such
operations; (iii) maintain its properties (owned or leased) in customary
repair, working order and condition; (iv) comply with all applicable law with
respect to its business or operations; (v) keep in force at not less than
their present limits all policies of insurance applicable to any aspect of its
business or operations; (vi) make no material change in the customary terms,
conditions, policies and practices upon which it does business; (vii) file in
a due and timely manner all reports, returns and other documents required to
be filed by it with all applicable governmental entities in respect of taxes,
and, unless contesting the same in good faith after establishing reasonable
reserves, pay when required to be paid all taxes indicated by such returns or
otherwise lawfully levied or assessed upon it or any of its properties; (viii)
permit ALBANK to communicate with, and to deliver information, brochures,
bulletins, press releases and other communications reasonably acceptable to
the Company to, depositors, borrowers and other customers of the Bank
concerning the business and operations of ALBANK and the transactions
contemplated by the Acquisition Agreement; (ix) permit ALBANK, at its request,
to train Company Employees and, when practicable, excuse such Employees for
reasonable periods of time from their duties for purposes of such training and
orientation; provided, that the Company shall be responsible for, and shall
continue, the salary and benefits of such Employees for the period that they
are so excused from their duties; (x) if reasonably requested by ALBANK,
conduct an environmental audit prior to foreclosure on any property concerning
which the Company or any of its subsidiaries has knowledge that hazardous
material was or is present, manufactured, generated, used, recycled,
reclaimed, released, stored, treated or disposed of, and provide the results
of such audit to, and consult with, ALBANK regarding the significance of such
audit prior to foreclosure on any such property; (xi) prior to the Effective
Date, cause all assets and liabilities of the Company (other than cash, short-
term investments in securities which the Bank could hold directly under
applicable law, and the capital stock of the Bank) to be sold, assigned or
otherwise disposed of in a manner permitted by applicable law, on such terms
and subject to such conditions as ALBANK shall approve; (xii)(a) utilize
shares of Common Stock purchased in the open market (and not newly-issued
shares) for the operation of the DRP with respect to any quarterly dividend
declared prior to June 30, 1995, and (b) prior to the declaration by the
Company of the next subsequent quarterly dividend, terminate the DRP; (xiii)
effective as of the termination of the offering under the ESPP on July 31,
1995 and following the distribution to ESPP participants of the shares of
Common Stock to be issued in such offering, terminate the ESPP; (xiv) use its
best efforts to adopt operational policies, activities and practices,
including credit underwriting policies and standards, and policies and
practices with respect to lending, generally comparable to those established
and adopted by ALBANK; (xv) prior to the Effective Date, prepare and deliver
to ALBANK a full valuation of the post-retirement welfare plan benefits
provided by the Company and its subsidiaries to their employees, former
employees, directors and former directors; and (xvi) permit a representative
of ALBANK to attend all meetings of the boards of directors of the Company and
its subsidiaries, and of each committee of each such board, as an observer,
and provide to ALBANK, at the same time as they are provided to members of any
such board or committee, all reports and other documents which are so provided
(whether in connection with a meeting or otherwise); provided, that the
Company shall be entitled to exclude such representative from any meeting at
which AFC, ALBANK or the transactions contemplated by the Acquisition
Agreement are discussed (for the period of time during which such discussions
take place), and shall be entitled to redact from reports and other documents
provided to such representative hereunder information relating to AFC, ALBANK
or the transactions contemplated the Acquisition Agreement. In addition, in
the Acquisition Agreement the Company has agreed to afford ALBANK and its
representatives with reasonable access to the books, records, properties and
personnel of the Company and its subsidiaries and to such other information as
ALBANK may reasonably request.
In the Acquisition Agreement, AFC and ALBANK have agreed that except as
otherwise provided in the Acquisition Agreement, and except to the extent
required by applicable law or by regulatory agencies, during the period from
the date of the Acquisition Agreement to the Effective Time, AFC and ALBANK
shall not (i) take any action that would materially affect the ability of AFC
and ALBANK to perform its covenants and agreements under the Acquisition
Agreement or to consummate the transactions contemplated thereby, or (ii)
knowingly take any action, other than action consistent with acting in the
ordinary course of business consistent with prudent banking practice, which
would materially adversely affect or delay the ability of the Company, AFC or
ALBANK to obtain the regulatory approvals required for the consummation of the
Merger and the Bank Merger, make any of AFC's or ALBANK's representations or
warranties untrue or incorrect if made or deemed to be made immediately
thereafter or cause any of the conditions to the consummation of the Merger
not to be satisfied.
No Solicitation
In the Acquisition Agreement, the Company has agreed that, without the
prior written consent of ALBANK, neither it nor any of its subsidiaries will,
directly or indirectly, through any officer, director, agent or otherwise, (i)
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making of any proposal or offer with respect to a "Competing Transaction" (as
hereinafter defined); (ii) discuss with or enter into conversations with any
person concerning any such transaction or proposal; or (iii) disclose any
nonpublic information to any person concerning the Bank's business, afford any
person access to the properties, books and records of the Company or any of
its subsidiaries or otherwise assist or encourage any person in connection
with any of the foregoing. For this purpose, a "Competing Transaction" means
any of the following involving the Company or any of its subsidiaries: (i) a
merger, consolidation, share exchange, business combination or similar
transaction; (ii) a sale, lease, exchange, mortgage, pledge, transfer or other
disposition of 10% or more of assets in a single transaction or series of
transactions; (iii) any sale of 10% or more of the shares of capital stock or
of voting power (or securities convertible or exchangeable into or otherwise
evidencing, or any agreement evidencing the right to acquire capital stock or
voting power); (iv) any tender offer (including a self tender offer), exchange
offer, sale of securities, acquisition of beneficial ownership of or the right
to vote securities representing 10% or more of the shares of capital stock or
of voting power or the filing of a registration statement in connection
therewith; (v) any solicitation of proxies in opposition to the approval of
the Plan of Merger by the Company's stockholders; (vi) the filing of an
acquisition application (or the giving of an acquisition notice), whether in
draft or final form, under the BHCA or the Change in Bank Control Act with
respect to the Company or the Bank; (vii) any person shall have acquired
beneficial ownership or the right to acquire beneficial ownership of, or any
"group" (as such term is defined under Section 13(d) of the Exchange Act, and
the rules and regulations promulgated thereunder) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, 10% or
more of the then outstanding shares of capital stock or of voting power; or
(viii) any public announcement of a proposal, plan or intention to do any of
the foregoing.
Notwithstanding the foregoing, the Board of Directors of the Company is
not prohibited from (i) furnishing or permitting its representatives to
furnish information to any person that requests information as to the Company
and its subsidiaries if (A) the Board of Directors, upon written advice of its
outside counsel, determines in good faith that such action is required for the
Board of Directors to comply with its fiduciary duties to stockholders under
the VBCA, and (B) prior to furnishing such information to such person, the
Company receives from such person an executed confidentiality agreement in
reasonably customary form, or (ii) complying with rules promulgated under the
Exchange Act relating to recommendations by the Company with respect to tender
offers.
Certain Federal Income Tax Consequences
The following discussion summarizes the material federal income tax
consequences of the Merger to the Company's stockholders. The discussion is
based on current provisions of the Code, existing and proposed Treasury
Regulations, current administrative rulings of the Internal Revenue Service
("IRS") and judicial decisions, all of which are subject to change, and
assumes that the Merger is carried out as described herein. If changes are
made to current law or if the Merger is not carried out as described herein,
the federal income tax consequences of the Merger may vary from those
described in this summary. The discussion does not purport to be a complete
analysis or listing of all potential tax effects relevant to a particular
stockholder, nor does it address the tax consequences that may be relevant to
particular categories of stockholders subject to special treatment under
certain federal income tax laws. In addition, it does not describe any tax
consequences arising under the laws of any state, local or foreign
jurisdiction. The discussion also may not be applicable with respect to Common
Stock received pursuant to the exercise of employee stock options or otherwise
as compensation. Accordingly, each stockholder is urged to consult his or her
own tax advisor regarding the tax consequences of the Merger in his or her own
particular tax situation and regarding state, local and foreign tax
implications of the Merger and any tax reporting requirements of the Merger.
Tax Treatment of the Company, AFC and ALBANK. The Merger will be treated
as a sale of the Common Stock to ALBANK. Accordingly, the Company, AFC and
ALBANK will recognize no gain or loss by reason of the Merger, and the basis
and holding periods of assets held by the Company and ALBANK immediately
before the Merger that continue to be held after the Merger will not change as
a result of the Merger.
Tax Consequences to the Company's Stockholders. A stockholder who
exchanges his or her Common Stock for cash in the Merger will be treated as if
the shares had been sold in a taxable transaction. Gain or loss realized will
be recognized. The amount of gain or loss realized will be measured by the
difference between the amount of cash received and the adjusted basis of the
shares. Such gain or loss will be capital gain or loss, assuming the shares
were a capital asset in the stockholder's hands at the time of the Merger, and
will be long-term capital gain or loss if the stockholder has held the Common
Stock for more than one year at the time of the Merger.
A Company stockholder who exercises dissenters' rights with respect to
his or her shares will be subject to tax on the receipt of the payments
pursuant to Section 302 of the Code (taking into account the application of
the stock attribution rules of Section 318 of the Code). In general, such
stockholder will recognize capital gain or loss measured by the difference
between the amount of cash received by such stockholder and the adjusted basis
for his or her shares, assuming the shares are held by the stockholder as a
capital asset.
THE TAX DISCUSSION SET FORTH ABOVE IS A GENERAL DISCUSSION BASED UPON
CURRENT LAW. THE INDIVIDUAL TAX CIRCUMSTANCES OF STOCKHOLDERS MAY VARY, AND,
ACCORDINGLY, STOCKHOLDERS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS AS TO
THE SPECIFIC TAX CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICATION AND
EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF
CHANGES IN FEDERAL OR OTHER LAWS.
Termination, Amendment, and Waiver
The Acquisition Agreement may be terminated and the Merger abandoned
prior to the Effective Time, either before or after its approval by
stockholders of the Company: (i) by mutual consent duly authorized by majority
votes of the entire Boards of Directors of ALBANK and the Company; (ii) by
ALBANK or the Company, if the Board of Directors of the party seeking to
terminate so determines by vote of a majority of the members of its entire
Board, in the event of (a) a failure to perform or comply by the other party
with any covenant or agreement of such other party contained in the
Acquisition Agreement, which failure or noncompliance is material in the
context of the transactions contemplated by the Acquisition Agreement, or (b)
any inaccuracies or omissions in the representations or warranties of the
other party contained in the Acquisition Agreement the circumstances as to
which either individually or in the aggregate have, or reasonably could be
expected to have, a material adverse effect on such other party; in either
case which has not been or cannot be cured within thirty (30) calendar days
after written notice thereof is given by the party seeking to terminate to
such other party; (iii) by ALBANK or the Company, by written notice to the
other party if either (a) any approval, consent or waiver of a governmental
entity required to permit consummation of the transactions contemplated hereby
shall have been denied or is subject to any condition or requirement which
ALBANK reasonably deems to be materially adverse or materially burdensome or
to substantially deprive ALBANK of the benefits which it anticipates to
receive in the Merger and the Bank Merger, or (b) any governmental entity of
competent jurisdiction shall have issued an order enjoining or otherwise
prohibiting consummation of the transactions contemplated by the Acquisition
Agreement; (iv) by ALBANK or the Company, if the Board of Directors of the
party seeking to terminate so determines by vote of a majority of the members
of its entire board, in the event that (a) the Merger is not consummated by
April 30, 1996, or (b) the meeting of the Company's stockholders to approve
the Plan of Merger is held and the holders of Common Stock shall fail to
approve the Plan of Merger thereat (or any adjournment thereof); unless in
either case the failure of such occurrence is due to the failure to perform or
comply with any term contained in the Acquisition Agreement by the party
seeking to terminate; (v) by ALBANK by written notice to the Company in the
event that there has occurred an event, condition, change or occurrence which,
individually or in the aggregate, has had or could reasonably be expected to
result in a Material Adverse Effect on the Company; provided, that ALBANK
shall have given the Company thirty (30) calendar days' prior written notice
of such termination, and the Company shall not have remedied such event,
condition, change or occurrence by the end of such thirty-day period; or (vi)
by ALBANK, by written notice to the Company upon the occurrence of any of the
following: (a) the Company's Board of Directors shall have recommended any
Competing Transaction or shall have entered into an agreement with respect to,
authorized, proposed or publicly announced its intention to enter into, any
Competing Transaction; (b) the Company's Board of Directors shall have
withdrawn or modified in a manner adverse to ALBANK its authorization,
approval or recommendation of the Acquisition Agreement or the Merger, or
shall have resolved to do the same, unless such withdrawal or modification
results solely from a material breach by ALBANK or any material obligation,
covenant or agreement of ALBANK contained in the Acquisition Agreement which
ALBANK fails to cure within thirty calendar days after notice thereof is
received from the Company; (c) upon request to reaffirm the Company's approval
or recommendation of the Acquisition Agreement or the Merger, the Board of
Directors of the Company shall fail to do so within thirty calendar days after
such request is made; or (d) any person, entity or "group" (as that term is
used in Section 13(d)(3) of the Exchange Act) (other than ALBANK or any of its
subsidiaries) acquires more than 10% of the voting power of the Company or all
or any material portion of the assets of the Company (including through any
merger or business combination).
Prior to the Effective Time, any provision of the Acquisition Agreement
may be (i) waived by the party benefitted by the provision or (ii) amended or
modified at any time by an agreement in writing among the parties approved by
their respective boards of directors, except that, after the approval by the
stockholders of the Company, no amendment may be made that reduces or changes
the form and amount of compensation payable pursuant to the Acquisition
Agreement and Plan of Merger or which in any way materially adversely affects
the rights of stockholders without stockholder approval thereof.
In the event of the termination of the Acquisition Agreement by either
the Company or ALBANK, the Acquisition Agreement shall thereafter become void
and have no effect, and there shall be no liability on the part of any party
thereto or their respective officers or directors, except that the provisions
of the Acquisition Agreement relating to confidential information shall remain
in effect. Following termination, each party will continue to be responsible
for its own expenses. See "--Fee Letter".
Fee Letter
Simultaneously with the execution of the Acquisition Agreement, AFC,
ALBANK and the Company executed the Fee Letter, pursuant to which the Company
has agreed to pay to ALBANK a termination fee in the amount of $3,500,000 in
the event that the Acquisition Agreement is terminated following or
contemporaneously with the occurrence of one of the following "trigger
events":
(i) the Company (or its Board of Directors) shall have recommended
any Competing Transaction (as such term is described under "--No
Solicitation") or shall have entered into a contract, agreement,
obligation, instrument, understanding or arrangement with respect to,
authorized, proposed or publicly announced its intention to enter into,
any Competing Transaction; or
(ii) (A) the Company's Board of Directors shall have withdrawn or
modified in a manner adverse to ALBANK its authorization, approval or
recommendation of the Acquisition Agreement, the Plan of Merger or the
Merger, or shall have resolved to do the same, and (B) any proposal to
enter into a Competing Transaction shall have been made at any time after
the date of the Acquisition Agreement and before the date occurring six
(6) months following such withdrawal, adverse modification or resolution;
or
(iii) (A) the Plan of Merger shall not have been approved at a
meeting of the Company's stockholders held for that purpose or such a
meeting shall not have been held or shall have been cancelled prior to
termination of the Acquisition Agreement in accordance with its terms,
and (B) any proposal to enter into a Competing Transaction shall have
been made at any time after the date of the Acquisition Agreement and
before the date occurring six (6) months following the date of such
stockholder meeting or such termination of the Acquisition Agreement,
as the case may be.
Except as provided in the Fee Letter, each party to the Acquisition
Agreement will bear all expenses incurred by it in connection with the
Acquisition Agreement and the transactions contemplated thereby.
Dissenters' Rights
Pursuant to Chapter 13 of the VBCA, Title 11A, V.S.A. [SECTION][SECTION]
13.01 et. seq. ("Chapter 13"), any holder of shares of Common Stock who
objects to the Merger is entitled to dissent from the Merger and to have the
fair value of such shares ("Dissenting Stock") as determined by the Company,
or if necessary, judicially determined, paid to him or her, by complying with
the provisions of Chapter 13. Failure to take any steps set forth in Chapter
13 in connection with the exercise of such rights may result in termination or
waiver thereof.
The following is a summary of the statutory procedures required to be
followed by a holder of Dissenting Stock (a "dissenting stockholder") in order
to exercise his or her rights under Vermont law. This summary is qualified in
its entirety by reference to Chapter 13, the text of which is attached as
Annex D to this Proxy Statement.
If a stockholder elects to exercise dissenters' rights with respect to
the Merger, such stockholder must (i) file with the Company prior to the vote
on the approval of the Plan of Merger at the Special Meeting a written notice
of intention to demand payment for his or her shares if the Merger is
effectuated and (ii) not vote in favor of approval of the Plan of Merger. The
written notice required to be delivered to the Company by a dissenting
stockholder is in addition to and separate from any proxy or vote against the
Merger. Neither voting against nor failure to vote for the Merger will
constitute the written notice required to be filed by a dissenting
stockholder. Failure to vote against the Merger, however, will not constitute
a waiver of rights under Chapter 13, provided that a written objection has
been properly filed. A signed proxy that is returned but which does not
contain any instructions as to how it should be voted will be voted in favor
of approval of the Merger and will be deemed a waiver of dissenters' rights.
See "The Special Meeting -- Voting, Revocation, and Solicitation of Proxies."
A beneficial stockholder may assert dissenters' rights as to shares held
on his or her behalf only if (i) such stockholder submits to the Company the
record stockholder's written consent to the dissent not later than the time
the beneficial stockholder asserts dissenters' rights and (ii) such
stockholder does so with respect to all shares of Common Stock of which he or
she is the beneficial owner or over which he or she has the power to direct
the vote. A record holder of shares of Common Stock may dissent on behalf of
any beneficial owner with respect to all but not less than all the shares of
such owner if the record holder notifies the Company in writing of the name
and address of each such person on whose behalf such record holder asserts
dissenters' rights. All notices of intention to demand payment should be
addressed to George B. Williams, Secretary, Marble Financial Corporation, 4
Merchants Row, Rutland, Vermont 05702.
If the Plan of Merger is approved, the Company is obligated to give
written notice to each dissenting stockholder who timely filed a notice of
intention to demand payment and who did not vote in favor of approval of the
Plan of Merger no later than 10 days after the Effective Date. The notice must
be accompanied by a copy of Chapter 13 and must (i) state where a demand for
payment must be sent and where and when Certificates representing Dissenting
Stock must be deposited in order to obtain payment, (ii) inform holders of
uncertificated shares to what extent transfer of the shares will be restricted
after the payment demand is received, (iii) be accompanied by a form demanding
payment that includes the date of the first announcement to news media or to
stockholders of the terms of the proposed Merger (June 20, 1995) and requires
that the person asserting dissenters' rights certify whether or not he or she
acquired beneficial ownership of the Dissenting Stock before that date and
(iv) set a date by which the Company must receive the payment demand, which
date shall not be less than 30 days nor more than 60 days after the date the
notice is delivered.
A dissenting stockholder who fails to demand payment or to deposit
Certificates for Dissenting Stock as required shall have no right under
Chapter 13 to receive payment for the Dissenting Stock.
Unless the Merger has been effected and the Company has made the payment
required below within 60 days after the date for demanding payment and
depositing Certificates for Dissenting Stock, the Company shall return any
Certificates for Dissenting Stock so deposited and release any transfer
restrictions imposed on uncertificated shares. If such Dissenting Stock has
been returned and such transfer restrictions have been released by the
Company, the Company may at a later time send a new notice conforming to the
requirements herein described.
Upon consummation of the Merger, the obligations of the Company under
Chapter 13 will be assumed by the Surviving Corporation.
As soon as the Merger has been consummated, or upon receipt of demand
for payment if the Merger has already been consummated, the Company shall
remit to each dissenting stockholder who has made proper demand and deposited
his or her Certificates with the Company the amount which the Company deems to
be the fair value of his or her Dissenting Stock, with accrued interest, if
any, accompanied by (i) the Company's balance sheet as of the end of a fiscal
year ending not more than 16 months before the date of payment, (ii) an income
statement and a statement of changes in stockholders' equity for such fiscal
year, (iii) the Company's latest available interim financial statements, if
any, (iv) a statement of the Company's estimate of the fair value of the
Dissenting Stock and how such estimate was calculated, (v) an explanation of
how interest (if any) was calculated and (vi) a statement of the dissenting
stockholders' right to demand payment pursuant to 11A V.S.A. [SECTION] 13.28,
together with a copy of Chapter 13. "Fair value" of Dissenting Stock means the
value of such stock immediately before the Effective Time, excluding any
change in value in anticipation of the Merger unless such exclusion would be
inequitable (which fair value may be more, less, or the same as the Merger
Consideration).
If (i) the Company fails to remit such fair value to a dissenting
stockholder within 60 days after the date set for demanding payment, (ii) a
dissenting stockholder believes the amount so remitted or offered to be less
than fair value of such holder's Dissenting Stock (or that the interest, if
any, is not correct), or (iii) the Company does not complete the Merger and
fails to return any deposited Certificates for Dissenting Stock or release any
transfer restrictions imposed on uncertificated shares, the affected
dissenting stockholder may reject the Company's offer and send the Company
such stockholder's own estimate of fair value (and interest, if any) and
demand payment of the deficiency. If the dissenting stockholder does not file
the estimate within 30 days of when the Company made or offered payment for
the Dissenting Stock, such stockholder shall be entitled to no more than the
amount remitted.
Within 60 days after a demand for payment of a deficiency, if the demand
remains unsettled, the Company shall commence a proceeding in the Superior
Court of Rutland County, Vermont (the "Court") and petition the Court to
determine the fair value of the Dissenting Stock and accrued interest. The
Company shall make all dissenting stockholders whose demands have not been
settled parties to such action, and all parties shall be served a copy of the
complaint. The Court shall determine the fair value of the Dissenting Stock
and each dissenting stockholder shall be entitled to judgment for the amount,
if any, by which the amount previously remitted by the Company is exceeded by
the Court's determination of fair value, plus interest. If the Company does
not file a petition within 60 days, each dissenting stockholder who has made
demand and who has not settled his or her claim shall be entitled to receive
the amount demanded with interest.
There are no specific valuation methods prescribed under Vermont law to
which the Court would be bound in determining fair value. The Court would
consider the evidence which it deemed relevant and material and render its
decision based on that evidence.
The Company may elect to withhold remittances to any dissenting
stockholder who did not own his or her shares before June 20, 1995, the day
the Merger was announced. With respect to these shares, upon consummation of
the Merger, the Company shall give its fair value estimate and explain the
basis thereof and offer to pay the amount plus accrued interest to such
holders who agree to accept it in full satisfaction of their demands. If the
dissenting stockholder disagrees, he or she may within 30 days mail the
Company his or her estimate and demand payment. If the dissenting stockholder
fails to mail such a response, he or she is entitled only to the Company's
offer. If demand is made and remains unsettled, further proceedings shall
follow the procedures for judicial appraisal of shares set forth above.
Costs of an appraisal proceeding, including costs and expenses of
appraisers appointed by the Court, shall be determined by the Court and
assessed against the Company, except that the Court may assess any part of
such costs and expenses to all or some of the dissenting stockholders who are
parties and whose action the court finds to be arbitrary, vexatious, or not in
good faith in demanding payment under Section 13.28 of Chapter 13. Fees and
expenses of counsel and experts for the respective parties may be assessed
against the Company if the Court finds it failed to comply substantially with
the requirements of Chapter 13 or may be assessed against any other party if
such party acted arbitrarily, vexatiously, or not in good faith with respect
to the rights provided by Chapter 13. If the Court finds that the services of
counsel for any dissenting stockholder are of substantial benefit to other
dissenting stockholders similarly situated and that the fees for those
services should not be assessed against the Company, the Court may award to
those counsel reasonable fees to be paid out of the amounts awarded the
dissenting stockholders who were benefitted.
INFORMATION CONCERNING THE COMPANY
The Company is a Vermont-chartered bank holding company registered under
the BHCA, and was formed in 1986 in order to hold all of the capital stock of
the Bank. The Bank was organized in 1883 under the name "Marble Savings Bank".
The Company acquired 100% of the stock of the Bank upon the conversion of the
Bank from a Vermont-chartered mutual to a Vermont-chartered stock savings bank
in September, 1986.
The Bank provides a full range of commercial and consumer banking
services through seven banking offices located in central and southern
Vermont. The Bank has offices in Rutland, Castleton, Norwich, Shelbourne,
Springfield, White River Junction and Woodstock. In addition to offering
residential mortgage and consumer loans, the Bank serves a wide variety of
businesses, ranging from small, family-owned operations to medium-sized
corporations. A full range of business credit services is offered by the Bank,
including lines of credit, term loans, revolving loans, equipment and
inventory financing, lease financing and commercial mortgages.
At June 30, 1995 (unaudited), the Company had $413 million of total
assets, $371 million of total liabilities, including $312 million of deposits,
and $42 million of stockholders' equity.
The Bank is subject to examination, regulation and supervision by the
Commissioner of the Vermont Department of Banking, Insurance and Securities
and the FDIC. The Bank's deposits are insured up to applicable limits by the
BIF. The Bank is also a member of the Federal Home Loan Bank of Boston and is
subject to its rules, and is also subject to limited regulation by the Federal
Reserve Board with respect to reserves required to be maintained against
deposits and certain other matters.
The following table sets forth information regarding the share holdings
of Common Stock by the directors and executive officers of the Company. Some
of the information has been obtained from the Company's records, and some has
been supplied by the persons listed.
<TABLE>
<CAPTION>
Shares of Common
Stock Beneficially Percent of
Owned on Outstanding Shares
Name The Record Date(1) (If Over 1%)
- ----------------------------------------------------------------------------------
Directors:
<S> <C> <C>
Alfred J. Beauchamp 15,010
Bruce K. Belden 49,710(2) 1.4%
Patrick W. Boylan 19,099
S. Stacey Chapman, III 17,260(3)
George C. Grant, Jr. 16,038
Edward J. Grover 58,563(4) 1.6%
Pamela A. Lafayette 19,000
John R. Pfeffer 113,000 3.2%
Paul E. Roche 24,000(5)
William B. Wright 64,710(6) 1.8%
Other Executive Officers:
George B. Williams 40,292(7) 1.1%
Marvin B. Elliott 21,593
All Directors and Officers as a group 458,275 12.9%
<F1> Shares of the Company beneficially owned. A beneficial owner of a
security includes any person who, directly or indirectly, through any
contract, arrangement, understanding, relationship or otherwise has or
shares the power to vote such security or the power to dispose of such
security. Included are shares owned by spouses and relatives living in the
same house as to which beneficial ownership may be disclaimed and shares
which may be obtained under the Option Plans.
<F2> Includes 10,870 shares owned with or by a spouse and 10,828 shares owned
by the Belden Company, Inc., of which Mr. Belden is president.
<F3> Includes 2,250 shares owned with or by a spouse.
<F4> Includes 3,400 shares owned with or by a spouse and 2,000 shares owned by
children.
<F5> Includes 15,000 options granted under the Option Plans, only 2,500 of
which will be assumed by AFC and converted into options for the purchase
of AFC Common Stock.
<F6> Includes 3,200 shares owned with or by a spouse.
<F7> Includes 7,300 shares owned with or by a spouse and 200 shares owned by a
spouse and children.
</TABLE>
--------------------
INFORMATION CONCERNING AFC, ALBANK AND INTERIM SUB
AFC is a Delaware corporation registered as a savings and loan holding
company under the HOLA, which was formed to hold all of the capital stock of
ALBANK.
ALBANK was organized as the second mutual savings bank in New York State
in 1820 and is currently the oldest operating savings bank in the state. In
1982, ALBANK converted to a federally chartered mutual savings bank, retaining
the broader investment powers available to a New York State chartered mutual
savings bank. In April 1992, ALBANK completed its conversion from mutual to
stock form.
At June 30, 1995, ALBANK had 57 banking offices, 48 of which are located
in 17 upstate New York counties and nine of which are located in the
metropolitan area of Springfield, Massachusetts. Effective on June 10, 1995,
ALBANK changed its name from Albany Savings Bank, FSB.
ALBANK's principal business has been and continues to be attracting
retail deposits from the general public and investing those deposits, together
with funds generated from operations and borrowings, in various loan products,
mortgage-backed securities, U.S. Government and federal agency securities and
other investments in securities. With regard to loans, ALBANK originates and
purchases primarily one- to four- family adjustable rate mortgage loans.
ALBANK's results of operations are dependent primarily on net interest income,
provisions for loan losses, the level of noninterest income earned and
noninterest expense incurred and the effect of income taxes. ALBANK's results
of operations are also significantly affected by general economic and
competitive conditions, particularly changes in market interest rates,
government policies and actions of regulatory authorities.
At June 30, 1995 (unaudited), ALBANK had assets of $3.0 billion,
liabilities of $2.7 billion, including deposits of $2.6 billion. ALBANK
currently intends to fund the payment of the Merger Consideration and other
expenses in connection with the Merger from cash on hand. ALBANK may utilize
funds from the sale of investment securities held for sale, or, in whole or in
part, from borrowings, including Federal Home Loan Bank advances,
collateralized repurchase agreements or other sources of borrowed funds.
ALBANK does not intend to issue debt securities to fund the transaction.
At June 30, 1995 (unaudited), AFC had consolidated assets of $3.0
billion, consolidated liabilities of $2.7 billion and stockholders' equity of
$319.5 million.
ALBANK and AFC are subject to examination, regulation and supervision by
the OTS and the FDIC. ALBANK's deposits are insured up to applicable limits by
the SAIF, except for approximately 22.3% of deposits that are insured by the
BIF. ALBANK is a member of the Federal Home Loan Bank of New York and is
subject to its rules and is also subject to limited regulation by the Federal
Reserve Board with respect to reserves required to be maintained against
deposits and certain other matters.
Interim Sub will be a Vermont corporation organized solely for the
purpose of effecting the Merger and will be merged with and into the Company
in the Merger. It is not anticipated that Interim Sub will conduct any
business or have any significant assets prior to the Merger.
ANNUAL REPORT TO STOCKHOLDERS; QUARTERLY REPORT ON FORM 10-Q
Copies of (i) the 1994 Annual Report and (ii) the Form 10-Q accompany
this Proxy Statement. The 1994 Annual Report is not part of the proxy
solicitation materials except to the extent incorporated herein by reference.
See "Incorporation by Reference" below.
Upon receipt of a written or oral request, the Company will furnish to
any stockholder, without charge, copies of the documents incorporated herein
by reference (see "Incorporation By Reference") and the exhibits to the Form
10-Q. Such requests should be directed to George B. Williams, Secretary,
Marble Financial Corporation, 47 Merchants Row, Rutland, Vermont 05702,
telephone number: (802) 775-0025. A copy will be sent by first class mail or
other equally prompt means within one business day of the receipt of such
request.
INCORPORATION BY REFERENCE
Pursuant to the rules and regulations under the Exchange Act, the
following documents are incorporated herein by reference thereto: (i) the
1994 Annual Report (other than the inside cover pages thereto and pages 1, 2,
39 and 40); (ii) the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994; (iii) the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1995; (iv) the Form 10-Q; and (v) the Current
Report of the Company on Form 8-K filed on July 10, 1995. The 1994 Annual
Report does not constitute proxy solicitation material except to the extent
that portions thereof are specifically incorporated by reference herein.
STOCKHOLDER PROPOSALS
If the Merger has not been consummated prior to the Company's 1996
Annual Meeting of Stockholders, which is currently scheduled to be held in
May, 1996, any proposal intended to be presented by any stockholder for action
at the 1996 Annual Meeting of Stockholders of the Company must be received at
the executive offices of the Company, 47 Merchants Row, Rutland, Vermont 05702
not later than December 5, 1995 in order for the proposal to be considered for
inclusion in the proxy statement and proxy relating to the 1996 Annual
Meeting.
OTHER MATTERS
Management knows of no other matters to be brought before the Special
Meeting. However, should any other matter requiring a vote of the stockholders
properly come before the Special Meeting, the persons named in the enclosed
proxy intend to vote the proxy in accordance with their best judgment,
discretionary authority to do so being included in the proxy; provided,
however, that no proxy which is voted against the proposal to approve the Plan
of Merger will be voted in favor of any motion to adjourn or postpone the
Special Meeting to another time and/or place for the purpose of soliciting
additional proxies or otherwise.
By Order of the Chairman of the Board
and the President
GEORGE B. WILLIAMS
Secretary
ANNEX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF JUNE 20, 1995
BY AND AMONG
ALBANK FINANCIAL CORPORATION,
ALBANK, FSB
AND
MARBLE FINANCIAL CORPORATION
TABLE OF CONTENTS
ARTICLE I
THE MERGER
Section 1.01 Structure of the Merger A--4
Section 1.02 Effect on Outstanding Shares A--4
Section 1.03 Exchange Procedures A--5
Section 1.04 Options A--6
Section 1.05 Bank Merger A--6
Section 1.06 Alternative Structure A--7
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.01 Representations and Warranties of the Seller A--7
Section 2.02 Representations and Warranties of the Parent and the
Purchaser A--23
ARTICLE III
CONDUCT PENDING THE MERGER
Section 3.01 Conduct of the Seller's Business Prior to the Effective
Time A--25
Section 3.02 Forbearance by the Seller A--26
Section 3.03 Affirmative Covenants of the Seller A--29
Section 3.04 Conduct of the Parent's and the Purchaser's Business
Prior to the Effective Time A--30
ARTICLE IV
COVENANTS
Section 4.01 Acquisition Proposals A--31
Section 4.02 Certain Policies of the Seller; Balance Sheet A--32
Section 4.03 Employees A--32
Section 4.04 Access and Information A--32
Section 4.05 Certain Filings, Consents and Arrangements A--33
Section 4.06 Antitakeover Provisions A--33
Section 4.07 Additional Agreements A--33
Section 4.08 Publicity A--34
Section 4.09 Stockholder Meeting A--34
Section 4.10 Proxy Statement A--34
Section 4.11 Notification of Certain Matters A--34
Section 4.12 Indemnification A--35
Section 4.13 Reports A--36
Section 4.14 Advisory Board A--36
ARTICLE V
CONDITIONS TO CONSUMMATION
Section 5.01 Conditions to Each Party's Obligations to Effect
the Merger A--37
Section 5.02 Conditions to the Obligations of the Parent and the
Purchaser to Effect the Merger A--37
Section 5.03 Conditions to the Obligations of the Seller to Effect
the Merger A--38
ARTICLE VI
TERMINATION
Section 6.01 Termination A--39
Section 6.02 Effect of Termination A--40
ARTICLE VII
CLOSING, CLOSING DATE AND EFFECTIVE TIME
Section 7.01 Closing Date and Effective Time A--40
Section 7.02 Deliveries at the Closing A--41
ARTICLE VIII
OTHER MATTERS
Section 8.01 Certain Definitions; Interpretation A--41
Section 8.02 Non-Survival of Representations, Warranties, Covenants
and Agreements A--41
Section 8.03 Amendment A--41
Section 8.04 Waiver A--41
Section 8.05 Counterparts A--42
Section 8.06 Governing Law A--42
Section 8.07 Expenses A--42
Section 8.08 Notices A--42
Section 8.09 Entire Agreement; Etc. A--43
Section 8.10 Assignment A--43
ANNEXES
Annex 1 Plan of Merger A--44
Annex 2 Form of Accountants' Procedures Letter A--47
AGREEMENT AND PLAN OF MERGER, dated as of June 20, 1995 (this
"Agreement"), by and among ALBANK FINANCIAL CORPORATION, a Delaware
corporation (the "Parent"), ALBANK, FSB, a federally chartered stock savings
bank (the "Purchaser"), and MARBLE FINANCIAL CORPORATION, a Vermont
corporation (the "Seller").
INTRODUCTORY STATEMENT
The Boards of Directors of the Parent, the Purchaser and the Seller
have approved, and deem it advisable and in the best interests of their
respective companies and their stockholders, employees, customers and
communities in which they operate to consummate, the business combination
transactions provided for herein.
The Parent, the Purchaser and the Seller desire to make certain
representations, warranties and agreements in connection with the business
combination transactions provided for herein and to prescribe various
conditions to such transactions.
In consideration of their mutual promises and obligations hereunder,
the parties hereto adopt and make this Agreement and prescribe the terms and
conditions hereof and the manner and basis of carrying it into effect, which
shall be as follows:
ARTICLE I
THE MERGER
Section 1.01 Structure of the Merger. The Purchaser shall cause a de
novo corporation ("Interim") to be organized under the laws of the State of
Vermont as a wholly owned subsidiary of the Purchaser. Subject to the terms
and conditions of this Agreement, at the Effective Time (as defined in
Section 7.01), Interim will merge (the "Merger") with and into the Seller,
with the Seller being the surviving entity (the "Surviving Corporation"),
pursuant to the provisions of, and with the effect provided in, the Vermont
Business Corporation Act (the "VBCA") and pursuant to the terms and
conditions of a plan of merger to be entered into among the Parent, the
Purchaser, Interim and the Seller in the form attached hereto as Annex 1
(the "Plan of Merger"). The Merger shall not be effective unless and until
approved by the Office of Thrift Supervision ("OTS") and, if required, the
Commissioner of Banking, Insurance, and Securities of the Vermont Department
of Banking, Insurance, and Securities (the "Vermont Commissioner"), and
unless and until all of the conditions to consummation of the Merger set
forth in this Agreement shall have been satisfied or waived. The separate
corporate existence of Interim shall thereupon cease. The Surviving
Corporation shall continue to be governed by the VBCA and its separate
corporate existence with all of its rights, privileges, immunities, powers
and franchises shall continue unaffected by the Merger. At the Effective
Time, the articles of association and bylaws of the Seller shall be amended
in their entirety to conform to the articles of association and bylaws of
Interim in effect immediately prior to the Effective Time and shall become
the articles of association and bylaws of the Surviving Corporation. At the
Effective Time, the directors and officers of Interim shall become the
directors and officers of the Surviving Corporation.
Section 1.02 Effect on Outstanding Shares. (a) By virtue of the
Merger, automatically and without any action on the part of the holder
thereof, each share of the Seller's common stock, $1.00 par value (the
"Seller Common Stock"), issued and outstanding at the Effective Time (other
than (i) shares held directly or indirectly by the Purchaser (other than
shares held in a fiduciary capacity or in satisfaction of a debt previously
contracted), (ii) shares held as treasury stock of the Seller, and (iii)
Dissenting Shares, as defined in paragraph (c) of this Section 1.02) shall
become and be converted into the right to receive $18.00 in cash, without
interest (the "Merger Consideration"). As of the Effective Time, each share
of Seller Common Stock held directly or indirectly by the Purchaser (other
than shares held in a fiduciary capacity or in satisfaction of a debt
previously contracted) and each share of Seller Common Stock held as
treasury stock of the Seller shall be canceled and retired and cease to
exist, and no exchange or payment shall be made with respect thereto.
(b) The shares of common stock of Interim issued and outstanding
immediately prior to the Effective Time shall become shares of the Surviving
Corporation after the Merger and shall thereafter constitute all of the
issued and outstanding shares of the capital stock of the Surviving
Corporation.
(c) Notwithstanding anything in this Agreement to the contrary, shares
of Seller Common Stock which are issued and outstanding immediately prior to
the Effective Time and which are held by stockholders who did not vote in
favor of the adoption of the Plan of Merger and comply with all of the
relevant provisions of Chapter 13 of the VBCA (the "Dissenting Shares")
shall not be converted into or be exchangeable for the right to receive the
Merger Consideration (unless and until such holders shall have failed to
perfect or shall have effectively withdrawn or lost their dissenters' rights
under the VBCA), but shall instead be entitled to all applicable dissenters'
rights as are prescribed by the VBCA. If any such holder shall have failed
to perfect or shall have effectively withdrawn or lost such dissenters'
rights, such holder's shares of Seller Common Stock shall thereupon be
converted into and become exchangeable for the right to receive, as of the
Effective Time, the Merger Consideration without any interest thereon. The
Seller shall give the Purchaser (i) prompt notice of any written demands for
payment for any capital stock of the Seller under Chapter 13 of the VBCA,
attempted withdrawals of such demands, and any other instruments served
pursuant to the VBCA and received by the Seller relating to dissenters'
rights, and (ii) the opportunity to direct all negotiations and proceedings
with respect to the exercise of dissenters' rights under the VBCA. The
Seller shall not, except with the prior written consent of the Purchaser,
voluntarily make any payment with respect to any demands for payment for
capital stock of the Seller under Chapter 13 of the VBCA, offer to settle or
settle any such demands or approve any withdrawal of any such demands.
Section 1.03 Exchange Procedures. (a) At and after the Effective Time,
each certificate (each, a "Certificate") previously representing shares of
the Seller Common Stock (except as specifically set forth in Section 1.02)
shall represent only the right to receive the Merger Consideration in cash,
without interest.
(b) Immediately after the Effective Time, the Purchaser shall mail or
deliver to each holder of record of a Certificate or Certificates the
following: (i) a letter of transmittal specifying that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only
upon delivery of the Certificates to the Purchaser, which shall be in a
customary form; and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration. Upon the proper
surrender of a Certificate or Certificates to the Purchaser, together with a
properly completed and duly executed letter of transmittal, the holder of
such Certificate or Certificates shall be entitled to receive in exchange
therefor a check in an amount equal to the product of the Merger
Consideration and the number of shares of Seller Common Stock represented by
the Certificate or Certificates surrendered pursuant to the provisions
hereof, and the Certificate or Certificates so surrendered shall forthwith
be canceled. No interest shall be paid or accrue on the Merger
Consideration. In the event of a transfer of ownership of any shares of
Seller Common Stock not registered in the transfer records of the Seller, a
check for the Merger Consideration may be issued to the transferee if the
Certificate representing such Seller Common Stock is presented to the
Purchaser, accompanied by documents sufficient, in the discretion of the
Purchaser, (i) to evidence and effect such transfer, and (ii) to evidence
that all applicable stock transfer taxes have been paid. The Purchaser shall
be entitled to deduct and withhold from the Merger Consideration otherwise
payable to any holder of Certificates such amounts (if any) as the Purchaser
determines is required under the Internal Revenue Code of 1986, as amended
(the "Code"), or any provision of state, local or foreign tax law. To the
extent that amounts are so withheld by the Purchaser, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to
the holder of such Certificate.
(c) From and after the Effective Time, there shall be no transfers on
the stock transfer records of the Seller of any shares of Seller Common
Stock that were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Purchaser or the
Surviving Corporation, they shall be canceled and exchanged for the Merger
Consideration deliverable in respect thereof pursuant to this Agreement in
accordance with the procedures set forth in this Section 1.03.
(d) If any Certificates shall not have been surrendered to the
Purchaser by the date two (2) years after the Effective Time (or by such
earlier date on which any payment in respect hereof would otherwise escheat
or become the property of any governmental unit or agency), the payment in
respect of such Certificates shall thereupon, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and
clear of all claims or interest of any such person previously entitled
thereto. Notwithstanding the foregoing, none of the Purchaser, the Surviving
Corporation or any other person shall be liable to any former holder of
Seller Common Stock for any amount delivered to a public official pursuant
to applicable abandoned property, escheat or similar laws.
(e) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required
by the Purchaser, the posting by such person of a bond in such amount as the
Purchaser may direct as indemnity against any claim that may be made against
it with respect to such Certificate, the Purchaser shall issue in exchange
for such lost, stolen or destroyed Certificate the Merger Consideration
deliverable in respect thereof pursuant to this Agreement.
Section 1.04 Options. (a) At the Effective Time each outstanding
option to purchase a share of Seller Common Stock (a "Seller Stock Option")
issued pursuant to the Marble Financial Corporation 1986 Stock Option Plan
and the Marble Financial Corporation 1994 Stock Option Plan (together, the
"Seller Option Plans"), whether or not exercisable or vested, shall be
assumed by the Parent as hereinafter provided. Each Seller Stock Option to
acquire one share of Seller Common Stock shall be deemed to constitute an
option to acquire, for the same price and on the same terms and conditions
as are applicable under such Seller Stock Option with respect to one share
of Seller Common Stock, a number of shares of common stock, $.01 par value,
of the Parent ("Parent Common Stock") equal to the amount obtained (rounded
up or down, as the case may be, to the nearest one hundredth of a share) by
dividing (i) the Merger Consideration by (ii) the closing bid price per
share of Parent Common Stock as reported on the Nasdaq Stock Market, Inc.'s
National Market on the trading day immediately preceding the Closing Date.
(b) On or prior to the Closing Date (as defined in Section 7.01), the
Parent shall prepare and file with the Securities and Exchange Commission
(the "SEC") a registration statement on Form S-8 with respect to the shares
of Parent Common Stock subject to the Seller Stock Options (the "Option
Registration Statement").
Section 1.05 Bank Merger. Immediately following the Effective Time, in
such form and manner as the Purchaser shall determine, the following
transactions (collectively, the "Bank Merger") shall be effected in the
following order (except as the Purchaser may otherwise direct): first, the
Purchaser and the Surviving Corporation shall enter into a plan of
liquidation (which shall be a plan of liquidation and dissolution of the
Surviving Corporation for purposes of Section 332(b) of the Code) pursuant
to which, as promptly as practicable after the Effective Time, the Surviving
Corporation shall be liquidated and dissolved, with all assets thereof
(including the outstanding shares of capital stock of Marble Bank, a Vermont
state-chartered savings bank and a wholly owned subsidiary of the Seller
("Marble")) vesting in the Purchaser (such liquidation, dissolution and
vesting to be effected, at the election of the Purchaser, by means of a
merger of the Surviving Corporation with and into the Purchaser); and,
second, immediately following such liquidation, dissolution and vesting, the
Purchaser, as a stockholder of Marble, and Marble shall enter into a plan of
merger (which shall be a plan of liquidation of Marble for purposes of
Section 332(b) of the Code) pursuant to which Marble shall be merged with
and into the Purchaser, all pursuant to and with the effect set forth in the
rules and regulations of the OTS ("OTS regulations") and, if required, the
rules and regulations of the Vermont Commissioner.
Section 1.06 Alternative Structure. The parties recognize that it is
possible that one or more courts, administrative agencies or commissions or
other governmental entities, authorities or instrumentalities (each, a
"governmental entity") may require that the transactional steps comprising
the acquisition of the Seller by the Purchaser be structured in a manner
different from that reflected in this Article I. If such a requirement is
imposed, the Seller agrees, at the request of the Purchaser, to cooperate in
such restructuring; provided, however, that such restructuring must involve
(i) a cash payment per share of Seller Common Stock (other than as provided
in Section 1.02(a)) not less than the Merger Consideration, and (ii) the
agreements of the Parent and the Purchaser set forth in Sections 4.03, 4.12
and 4.14; and provided, further, that the Purchaser shall be under no
obligation to structure such acquisition in any manner other than as
contemplated by this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.01 Representations and Warranties of the Seller. The Seller
represents and warrants to the Parent and the Purchaser as of the date
hereof and on and as of the Effective Time (except as to any representation
or warranty which specifically relates to an earlier date) that, except as
specifically disclosed in a letter of the Seller delivered to the Purchaser
prior to the execution hereof (and making specific reference to the Section
or Sections of this Agreement for which an exception is taken) (such letter,
the "Disclosure Letter"):
(a) Organization. (i) The Seller is a corporation duly
organized, validly existing and in good standing under the VBCA and is
a bank holding company duly registered as such with the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board")
under the Bank Holding Company Act of 1956, as amended (the "BHCA").
The Seller does not engage in any business or activity other than the
holding of its assets (including the capital stock of Marble).
(ii) Marble is a stock savings bank duly organized, validly
existing and in good standing under the laws of the State of Vermont.
Marble is an "insured depository institution" as defined in the
Federal Deposit Insurance Act, as amended (the "FDIA"), and applicable
regulations thereunder. The deposits of Marble are insured to the
maximum extent permitted by the FDIA by the Bank Insurance Fund of the
Federal Deposit Insurance Corporation (the "FDIC"). Marble is a member
in good standing of the Federal Home Loan Bank of Boston, and has
purchased all stock ("Federal Home Loan Bank Stock") and paid all
membership and other fees and assessments required in connection
therewith. Neither the State of Vermont nor the FDIC has appointed a
conservator for Marble.
(iii) Each Subsidiary of the Seller other than Marble is a
corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or organization.
As used in this Agreement, unless the context requires otherwise, the
term "Subsidiary," when used with respect to any person, means any
corporation, partnership or other organization, whether incorporated
or unincorporated, which is consolidated with such person for
financial reporting purposes or more than 25% of any class of voting
securities of which are held, directly or indirectly, by such person.
(iv) The Disclosure Letter sets forth all of the Subsidiaries of
the Seller and all other entities (whether corporations, partnerships
or similar organizations), including the corresponding percentage
ownership, in which the Seller owns, directly or indirectly, 5% or
more of the ownership interests as of the date of this Agreement and
indicates for each, as of such date, (A) its jurisdiction of
organization, (B) the date of its incorporation, (C) the location of
its chief executive office, (D) its capitalization (including a list
of the record holders of securities of each Subsidiary), (E) a summary
of its lines of business (including whether such Subsidiary is active
or inactive), and (F) its most recent balance sheet and income
statement. Except for directors' qualifying shares, the Seller owns,
either directly or indirectly, all of the outstanding capital stock of
each of its Subsidiaries. No Subsidiary of the Seller other than
Marble is an "insured depository institution" as defined in the FDIA
and applicable regulations thereunder. All of the shares of capital
stock of each of the Subsidiaries held by the Seller or by another
Subsidiary of the Seller are duly authorized, validly issued and
outstanding, fully paid, nonassessable and not subject to any
preemptive rights, and are owned of record and beneficially by the
Seller or a Subsidiary of the Seller, free and clear of any claims,
liens, encumbrances, pledges, security interests, charges, claims or
restrictions ("Liens"), other than those imposed by applicable federal
and state securities laws, and there are no contracts, agreements,
obligations, instruments, understandings or arrangements
(collectively, "agreements") with respect to the voting or disposition
of any such shares so held.
(v) Each of the Seller and its Subsidiaries, including Marble,
has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being
conducted, and is duly qualified and is in good standing to do
business in each jurisdiction in which the nature of its business or
the ownership or leasing of its properties makes such qualification
necessary, except for such failure to qualify or be in such good
standing which, when taken together with all such failures, would not
have a Material Adverse Effect (as such term is defined in Section
2.01(i)) on the Seller. Neither the Seller nor any of its Subsidiaries
engages or has engaged in any trust or other fiduciary activity.
(b) Capital Structure. (i) The authorized capital stock of the
Seller consists of eight million (8,000,000) shares of Seller Common
Stock and one million (1,000,000) shares of preferred stock, $1.00 par
value, of the Seller ("Seller Preferred Stock"). As of the date of
this Agreement: (A) 3,338,038 shares of Seller Common Stock and no
shares of Seller Preferred Stock are issued and outstanding, (B) no
shares of Seller Common Stock or Seller Preferred Stock are reserved
for issuance, other than 211,113 shares of Seller Common Stock
reserved for issuance pursuant to the Seller Option Plans, and (C) no
shares of Seller Common Stock are held by the Seller in its treasury
or by its Subsidiaries. All outstanding shares of Seller Common Stock
are validly issued, fully paid and nonassessable and not subject to
any preemptive rights. The Disclosure Letter sets forth a complete and
accurate list of all options to purchase Seller Common Stock that have
been issued pursuant to the Seller Option Plans, including the dates
of grant, exercise prices, dates of vesting, dates of termination and
shares subject to option for each grant.
(ii) Except for this Agreement and as set forth in the
Disclosure Letter, neither the Seller nor any of its Subsidiaries is a
party to or is bound by any outstanding options, warrants, calls,
rights, convertible securities, commitments or agreements of any
character obligating the Seller or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, any
additional shares of capital stock of the Seller or any of its
Subsidiaries or obligating the Seller or any of its Subsidiaries to
grant, extend or enter into any such option, warrant, call, right,
convertible security, commitment or agreement. There are no
outstanding contractual obligations of the Seller or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of the Seller or any of its Subsidiaries. Neither the
Seller nor any of its Subsidiaries is a party to, or to the best of
its knowledge, bound by, any agreement, or any note, debenture, bond
or other security, under the terms of which, or pursuant to which, its
right to declare or pay dividends on its capital stock is restricted.
(iii) No bonds, debentures, notes or other indebtedness having
the right to vote ("Voting Debt") of the Seller or any of its
Subsidiaries are issued or outstanding.
(c) Authority. (i) The Seller has all requisite corporate power
and authority to enter into this Agreement, the Plan of Merger and the
fee letter, dated as of even date herewith, between the Seller and the
Purchaser (the "Fee Letter" and, together with this Agreement and the
Plan of Merger, the "Transaction Agreements"), and, subject to receipt
of the Stockholder Approval (as such term is defined in Section
2.01(d)), to consummate the transactions contemplated hereby. The
execution, delivery and performance (other than the consummation of
the Merger) of each of the Transaction Agreements, and, subject to the
receipt of the Stockholder Approval, the consummation of the Merger,
have been duly authorized by all necessary corporate action on the
part of the Seller, including the approval of at least two-thirds of
the members of the Board of Directors of the Seller who are not
affiliated with, or stockholders of, the Parent or the Purchaser, as
required by Article VII, Section 3 of the Articles of Association of
the Seller. Each of this Agreement and the Fee Letter has been and,
upon the execution and delivery, the Plan of Merger will be, duly
executed and delivered by the Seller and, assuming due execution and
delivery by, and binding effect on, the Parent and the Purchaser,
constitutes and will constitute, as the case may be, a legal, valid
and binding obligation of the Seller, enforceable in accordance with
its terms, subject to applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally, and subject to general
principles of equity, whether applied in a court of law or a court of
equity.
(ii) Neither the Seller nor any of its Subsidiaries has taken
any action that would cause the transactions contemplated by the
Transaction Agreements to become subject to, and the Seller and its
Subsidiaries (and their Boards of Directors) have taken all actions
required to exempt the transactions contemplated by the Transaction
Agreements from, the requirements of any applicable state antitakeover
laws.
(d) Stockholder Approvals. The affirmative vote of the holders
of a majority of the outstanding shares of Seller Common Stock for the
approval of the Plan of Merger (the "Stockholder Approval") is the
only stockholder vote required on the part of the Seller in connection
with the Transaction Agreements and consummation of the Merger and the
other transactions contemplated hereby and thereby. The Seller has
received the written opinion of Sandler, O'Neill & Partners, L.P.,
dated the date hereof, to the effect that the Merger Consideration to
be received by the stockholders of the Seller in the Merger is fair,
from a financial point of view, to such stockholders.
(e) Information Regarding the Seller.
(i) The Seller has delivered or made available to the Purchaser
(and, with respect to any such documents prepared, filed or received
after the date hereof, will deliver to the Purchaser immediately upon
their preparation, filing or receipt, as the case may be) true,
correct and complete copies of (A) all Reports (as defined in Section
2.01(h)(ii)), (B) all Regulatory Reports (as defined in Section
2.01(h)(ii)), and (C) all applications for regulatory approvals and
all other registration forms, applications, financial, operating or
other reports, documents and notices filed by the Seller or any of its
Subsidiaries with, and (to the extent permitted by law) all reports of
investigation, findings, written communications and other documents
received from, and all orders received from, and agreements or
undertakings with, any banking regulatory authority received or
entered into since January 1, 1990 (including, without limitation, all
agreements and other documents relating to the Seller's borrowings
from or other financial obligations to the Federal Home Loan Bank of
Boston).
(ii) Without limiting any of the representations and warranties
contained herein: (A) no representation or warranty made by the Seller
in this Agreement, and no statement contained in the Disclosure
Letter, or in any Report or Regulatory Report delivered or made
available to the Purchaser, or required to be furnished or made
available to the Purchaser pursuant to this Agreement, as of the date
of such document or other materials contained or will contain any
untrue statement of material fact, or, at the date thereof, omitted or
will omit to state a material fact necessary in order to make the
statements contained therein, in light of the circumstances under
which such statements are or will be made, not misleading; and (B) or,
to the best knowledge of the Seller, no statement contained in any of
the documents delivered or made available to the Purchaser in
accordance with this Agreement or to be contained in any financial
statement, report, document or other written materials to be provided
or made available to the Purchaser as required by any provision of the
Agreement (other than any Reports or Regulatory Reports), or contained
or to be contained in any other certificate, agreement, schedule or
other document required to be furnished or made available to the
Purchaser by this Agreement (including, without limitation, any
financial statements or financial or statistical information contained
therein), as of the date of such document or other materials contained
or will contain any untrue statement of fact material to the Seller,
its Subsidiaries and the transactions contemplated by this Agreement,
or, at the date thereof, omitted or will omit to state a fact material
to the Seller, its Subsidiaries and the transactions contemplated by
this Agreement which is necessary in order to make the statements
contained therein, in light of the circumstances under which such
statements are or will be made, not misleading. The statements made,
and the information given or made available to the Purchaser by the
Seller concerning the Seller, its Subsidiaries and the transactions
contemplated by this Agreement are, to the best knowledge of the
Seller, accurate and complete in all material respects, and no
material fact regarding the Seller or any such Subsidiary has been
omitted therefrom.
(iii) Without limiting the generality of the provisions of
Section 2.01(e)(ii), the information relating to the Seller and its
Subsidiaries furnished or to be furnished to the Purchaser in
connection with any application filed or to be filed with a Regulatory
Agency (as defined in Section 2.01(h)(ii)) complies and will comply in
all material respects with the provisions of applicable law (as
defined in Section 2.01(f)), will be complete and correct in all
material respects, and does not and will not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements contained therein, in light of the
circumstances under which such statements are made, not misleading.
(f) No Violations. The execution, delivery and performance of
the Transaction Agreements by the Seller do not, and the consummation
of the transactions contemplated hereby and thereby by the Seller will
not, assuming that the consents referred to in Section 2.01(g) are
duly obtained, constitute (i) a breach or violation of, or a default
under, any law, rule, regulation, judgment, ruling, writ, directive,
decree, order or injunction, authorization, consent, approval, permit
or license (collectively, "applicable law"), (ii) a breach or
violation of, or a default under, the articles of association or
bylaws (or other constitutive documents) of the Seller or any
Subsidiary of the Seller, or (iii) a breach or violation of, or a
default under (or an event which with due notice or lapse of time or
both would constitute a default under), or result in the termination
of, accelerate the performance required by, or result in the creation
of any Lien upon any of the properties or assets of the Seller or any
of its Subsidiaries under, any of the terms, conditions or provisions
of any note, bond, indenture, deed of trust or other agreement to
which the Seller or any such Subsidiary is or may be a party or, to
the best of the Seller's knowledge, by which any of their respective
properties or assets may be bound or affected.
(g) Consents. Except (i) as specifically provided for herein,
and (ii) in connection, or in compliance, with the provisions of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Home Owners Loan Act of 1933, as amended (the "HOLA"), the Bank Merger
Act, as amended (the "BMA"), the FDIA and the regulations of the FDIC
thereunder, the OTS regulations, the Hart-Scott-Rodino Antitrust
Improvements Act of 1978, as amended, applicable Vermont banking laws
and rules and regulations of the Vermont Commissioner and the
environmental, corporation, securities or blue sky laws of the various
states (collectively, the "Government Approvals"), no filing or
registration with, or authorization, consent or approval of, any
governmental entity, or any party to any agreement to which the Seller
or any of its Subsidiaries (or any of their respective properties) is
or may be a party or, to the best knowledge of the Seller, is or may
be bound or affected, is necessary for the consummation by the Seller
of the Merger or the other transactions contemplated by the
Transaction Agreements.
(h) Reports. (i) Since December 31, 1991, the Seller and each of
its Subsidiaries have timely filed and will timely file all reports
and other documents required to be filed by it under the Securities
Act of 1933, as amended (the "Securities Act"), and the Exchange Act.
As of their respective dates, the Seller's Annual Reports on Form 10-K
for the fiscal years ended December 31, 1994 (the "1994 10-K"), 1993
and 1992, and all other documents filed subsequent to December 31,
1994 under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, each
in the form (including any documents incorporated by reference
therein) filed with the SEC (collectively, the "Reports"), complied
and will comply as to form in all material respects with the published
rules of the SEC with respect thereto and did not or will not contain
any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they are made,
not misleading. Each of the balance sheets of the Seller or its
Subsidiaries contained or specifically incorporated by reference in
the Reports (including in each case any related notes and schedules)
fairly presented and will fairly present the financial position
(consolidated, as appropriate) of the entity or entities to which it
relates as of its date, and each of the statements of operations and
of changes in stockholders' equity and of cash flows of the Seller or
its Subsidiaries contained or specifically incorporated by reference
in the Reports (including in each case any related notes and
schedules) fairly present and will fairly present the results of
operations, stockholders' equity and cash flows, as the case may be
(consolidated, as appropriate), of the entity or entities to which it
relates for the periods set forth therein (subject, in the case of
unaudited interim statements, to normal year-end audit adjustments
which will not be material), in each case in accordance with generally
accepted accounting principles consistently applied during the periods
involved.
(ii) The Seller and each of its Subsidiaries have filed and will
file all material reports, registrations and statements, together with
any amendments required to be made with respect thereto (collectively,
"Regulatory Reports"), required to be filed by them since December 31,
1991 with (A) the Federal Reserve Board, (B) the FDIC, (C) the Vermont
Commissioner and any other applicable federal or state banking
commission or regulatory authority charged with the supervision or
regulation of depository institutions or depository institution
holding companies or engaged in the insurance of bank and/or savings
and loan deposits (the entities set forth in clauses (A), (B) and (C),
collectively, the "Regulatory Agencies"), and (D) the National
Association of Securities Dealers, Inc. (the "NASD") and any other
self-regulatory organization ("SRO"), and have paid and will pay all
fees and assessments due and payable in connection therewith. As of
their respective dates, each of the Regulatory Reports complied or
will comply in all material respects with all applicable regulatory
requirements (including regulatory accounting principles and
practices).
(i) Undisclosed Liabilities; Absence of Certain Changes or
Events. (i) Neither the Seller nor any of its Subsidiaries has any
indebtedness, obligation or liability (contingent or otherwise) not
set forth either in the consolidated balance sheet of the Seller and
its Subsidiaries at December 31, 1994 contained in the Annual Report
of the Seller on Form 10-K for the year ended December 31, 1994 or on
the consolidated balance sheet of the Seller and its Subsidiaries at
March 31, 1995 contained in the Quarterly Report of the Seller on Form
10-Q for the quarter ended March 31, 1995 (the "March 31 Balance
Sheet") that, either alone or when combined with all similar
obligations or liabilities, could reasonably be expected to be
material to the business, financial condition, results of operations,
properties, assets, liabilities, capital or prospects of the Seller
and its Subsidiaries taken as a whole (the "Marble Business"), and
there do not exist such circumstances that, to the best knowledge of
the Seller, could reasonably be expected to result in any such
material indebtedness, obligation or liability, (ii) since March 31,
1995, the Seller and its Subsidiaries have not incurred any material
liability, other than in the ordinary course of their business
consistent with past practice, (iii) since March 31, 1995, except as
permitted or as would have been permitted by this Agreement, neither
the Seller nor any of its Subsidiaries has (A) issued any shares of
capital stock, or securities convertible into shares of capital stock,
of the Seller or any of its Subsidiaries, (B) repurchased, redeemed or
otherwise acquired, directly or indirectly, any shares of capital
stock of the Seller or any of its Subsidiaries (other than shares held
in a fiduciary capacity), or (C) declared, set aside, made or paid to
the stockholders of the Seller dividends or other distributions on the
outstanding shares of capital stock of the Seller, other than (1)
dividends and distributions on the capital stock of the Subsidiaries
of the Seller paid or payable to the Seller, and (2) regular quarterly
cash dividends on the Seller Common Stock at a rate not in excess of
$.10 per share per quarter, (iv) since March 31, 1995, neither the
Seller nor any of its Subsidiaries has made any change in any of its
policies, standards, methods, activities or practices referred to in
Section 2.01(ee), 3.02 or 3.03, and (v) since March 31, 1995, there
has not been any condition, event, change or occurrence that,
individually or in the aggregate, has had, or is reasonably likely to
have, a Material Adverse Effect on the Seller. As used in this
Agreement, "Material Adverse Effect", with respect to a person, means
an effect which (A) is materially adverse to the business, financial
condition, results of operations, properties, assets, liabilities or
capital of such person and its Subsidiaries taken as a whole, (B)
significantly and adversely affects the ability of such person to
consummate the transactions contemplated hereby or to perform its
material obligations hereunder, or (C) enables any person to prevent
the consummation of the transactions contemplated hereby; provided,
however, that the following matters shall not constitute or contribute
to a Material Adverse Effect: (i) changes in the financial condition,
business or results of operations of a person resulting directly or
indirectly from changes in interest rates (except insofar as the
result of any changes in interest rates is reflected in any action
taken or omitted with respect to holdings of, or transactions in,
financial assets of the Seller which is contrary to the directions of
the Purchaser), or (ii) matters related to changes in federal tax
laws.
(j) Taxes. (i) All federal, state, local and foreign tax returns
(including estimated tax returns, employer's withholding tax returns,
other withholding tax returns and Federal Unemployment Tax Act
returns) required to be filed by or on behalf of the Seller or any of
its Subsidiaries have been timely filed or requests for extensions
have been timely filed and any such extension has been granted and has
not expired. Each such return is complete and accurate in all material
respects. All taxes shown on such returns, all taxes required to be
shown on returns for which extensions have been granted, and all taxes
required to be paid without any return required to be filed, have been
paid in full or adequate provision has been made for such taxes, in
accordance with generally accepted accounting principles on the March
31, 1995 Balance Sheet. Adequate provisions (in accordance with
generally accepted accounting principles consistently applied) have
been made on the consolidated balance sheets of the Seller and its
Subsidiaries contained in the Reports for the payment of all taxes for
which the Seller and its Subsidiaries may be liable for the periods
covered thereby that were not yet due and payable as of the dates
thereof, regardless of whether the liability for such taxes is
disputed.
(ii) As of the date of this Agreement, there is no audit
examination, deficiency or refund litigation or administrative
proceeding pending or threatened with respect to any taxes of the
Seller or any of its Subsidiaries and, to the best knowledge of the
Seller, no claim has been made by any authority in a jurisdiction
where the Seller or any of its Subsidiaries do not file tax returns
that the Seller or any such Subsidiary is subject to taxation in that
jurisdiction. All taxes, interest, additions and penalties due with
respect to completed and settled examinations or concluded litigation
or administrative proceedings relating to the Seller or any of its
Subsidiaries have been paid in full or adequate provision has been
made for any such taxes on the March 31 Balance Sheet (in accordance
with generally accepted accounting principles).
(iii) The Seller and its Subsidiaries have not executed an
extension or waiver of any statute of limitations on the assessment or
collection of any material tax due that is currently in effect.
(iv) The Seller and each of its Subsidiaries have withheld and
paid all taxes required to have been withheld and paid in connection
with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party, and the Seller and each of
its Subsidiaries have timely complied with all applicable information
reporting requirements under Part III, Subchapter A of Chapter 61 of
the Code and similar applicable state and local information reporting
requirements, except in each case for such failure to withhold, pay or
comply that would not, individually or in the aggregate, result in a
Material Adverse Effect on the Seller.
(v) No tax is required to be withheld pursuant to section 1445
of the Code as a result of the consummation of any of the transactions
contemplated by the Transaction Agreements.
(vi) The Disclosure Letter sets forth as of the date of this
Agreement (A) a complete schedule of the tax and book basis
differences of the Seller and each of its Subsidiaries in their
respective assets, and (B) a complete listing of the amount of any net
operating loss, net capital loss, unused investment or other credits,
unused foreign tax credits, or excess charitable contributions
allocable to the Seller or any of its Subsidiaries arising out of any
deferred intercompany transaction.
(k) Absence of Claims. No litigation, proceeding, investigation
or controversy before any court, arbitrator or governmental entity
(including under the Equal Credit Opportunity Act, as amended, the
Fair Housing Act, as amended, the Community Reinvestment Act, as
amended, the Home Mortgage Disclosure Act, as amended, or any other
applicable fair lending law or other law relating to discrimination)
is pending, and there is no pending claim, against the Seller or any
of its Subsidiaries or involving their respective properties or, to
the best knowledge of the Seller, against or otherwise involving any
officer, director, employee or agent of the Seller or any of its
Subsidiaries (in connection with such person's activities on behalf of
the Seller or its Subsidiaries) in either case stating a claim amount
in excess of $25,000 or which is otherwise reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on
the Seller or to materially hinder or delay consummation of the
transactions contemplated hereby (such matters, individually or in the
aggregate as the case may be, "Material Litigation"), and, to the best
knowledge of the Seller, no Material Litigation has been threatened.
There are no outstanding judgments, rulings, writs, directives,
decrees, orders, awards or injunctions (collectively, "orders") of or
with any arbitrator or governmental entity to which the Seller or any
of its Subsidiaries is a party or by which it is bound that
(individually or in the aggregate) could have a Material Adverse
Effect on the Seller.
(l) Absence of Regulatory Actions. Neither the Seller nor any of
its Subsidiaries is a party to any cease and desist order, written
agreement or memorandum of understanding with, or a party to any
commitment letter or similar written undertaking to, or is subject to
any order by, or is a recipient of any extraordinary supervisory
letter from, any Regulatory Agency, nor has it been advised by any
Regulatory Agency that it is contemplating issuing or requesting (or
is considering the appropriateness of issuing or requesting) any such
order, written agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter or similar written undertaking.
There is no unresolved violation, criticism or exception by any
Regulatory Agency with respect to any report or statement relating to
an examination of the Seller or any of its Subsidiaries.
(m) Agreements. (i) Except for the Transaction Agreements, and
except as disclosed in the Reports filed prior to the date of this
Agreement, neither the Seller nor any of its Subsidiaries is a party
to any (A) agreement with respect to consulting or other retention of
a service provider not terminable by the Seller or its Subsidiaries on
thirty (30) days' or less notice without cost, liability or penalty,
(B) agreement with any person the benefits of which are contingent, or
the terms of which are materially altered, upon the occurrence of a
transaction involving the Seller or any of its Subsidiaries of the
nature contemplated by this Agreement, (C) agreement with respect to
any officer, employee or director of the Seller or any of its
Subsidiaries providing for other than at-will employment, (D)
agreement or plan (other than the Stock Option Plans), including any
stock option plan, stock appreciation rights plan, restricted stock
plan, stock purchase plan or similar plan, any of the benefits of
which will be increased, or the vesting or exercisability of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement, (E) agreement containing
covenants that limit the ability of the Seller or any of its
Subsidiaries to compete in any line of business or with any person, or
to engage in transactions or relationships with any person, or that
involve any restriction on the geographic area in which, or method by
which, the Seller (including any successor thereof) or any of its
Subsidiaries may carry on its business, (F) agreement with respect to
the purchase, sale or servicing of loans (mortgage or otherwise),
securities or other investment or financial assets, as to which the
Seller or any of its Subsidiaries has any continuing obligation
(whether or not contingent), (G) agreement relating to the borrowing
of money, or the guarantee of any such obligation, by the Seller or
any of its Subsidiaries, (H) real property lease providing for annual
rental payments in excess of $10,000, (I) branch lease, joint venture
agreement or other agreement with respect to the sale of insurance,
securities or brokerage services at the offices of the Seller or any
of its Subsidiaries (each, a "Marble Networking Agreement"), or (J)
other agreement that is a "material contract" within the meaning of
Item 601(b)(10) of Regulation S-K of the SEC or that is otherwise
material to the Marble Business (each such agreement or plan described
in the foregoing clauses (A) through (J), a "Material Contract"). The
Seller has provided or made available to the Purchaser true, correct
and complete copies of each Material Contract.
(ii) Neither the Seller nor any of its Subsidiaries nor, to the
best knowledge of the Seller, any third party, is in default under or
in violation of any provision of, or is aware of any fact or
circumstance that has been or could be alleged to constitute a default
or violation of, any note, bond, indenture, mortgage, deed of trust or
other agreement, including any Material Contract, to which the Seller
or any of its Subsidiaries is a party or, to the best knowledge of the
Seller, by which the Seller or any of its Subsidiaries is bound or, to
the best knowledge of the Seller, to which any of their respective
properties is subject, other than such defaults or violations as could
not reasonably be expected, individually or in the aggregate, to have
a Material Adverse Effect on the Seller. Without limiting the
generality of the foregoing, all activities conducted by the Seller
and its Subsidiaries and, to the best knowledge of the Seller, by each
other party thereto, pursuant to any Marble Networking Agreement have
been conducted by the Seller and its Subsidiaries and, to the best
knowledge of the Seller, by each other party thereto in compliance
with applicable law. Neither the Seller nor any of its Subsidiaries
currently intends, or is aware of any intention on the part of any
third party, to terminate or fail to renew any Material Contract.
(n) Labor Matters. Neither the Seller nor any of its
Subsidiaries is a party to, or is bound by, any collective bargaining
or other agreement with a labor union or labor organization. Neither
the Seller nor any of its Subsidiaries is delinquent in the payments
to any of its officers, directors, employees or agents for any wages,
salaries, commissions, bonuses or other direct compensation for any
services performed by them or amounts required to be reimbursed to
such officers, directors, employees or agents. Neither the Seller nor
any of its Subsidiaries nor, to the best knowledge of the Seller, any
of their respective officers, directors, employees or agents, is the
subject of any litigation, proceeding, investigation, controversy or
claim asserting the commission of an unfair labor practice or seeking
to compel bargaining with any labor organization as to wages and
conditions of employment, nor is the Seller aware of any strike, other
labor dispute or organizational effort involving the Seller or any of
its Subsidiaries that is pending or, to the best knowledge of the
Seller, threatened. There are no labor unions or other organizations
representing, purporting to represent, or attempting to represent any
employee of the Seller or any of its Subsidiaries.
(o) Employee Benefit Plans. (i) The Disclosure Letter identifies
each plan, program or agreement which is an employment, consulting,
change of control or deferred compensation agreement, or an executive
compensation, incentive bonus or other bonus, or an employee pension,
profit-sharing, savings, retirement, stock option, stock purchase,
severance pay, retainer, life, health, "cafeteria" (within the meaning
of Section 125 of the Code), disability or accident insurance plan, or
a vacation, fringe benefit or other employee benefit plan, program or
agreement, including "employee benefit plan" as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or any similar plan, program or agreement for the
benefit of one or more current or former directors of the Seller or
any of its Subsidiaries (collectively, the "Employee Plans"), which
the Seller or any of its Subsidiaries maintains or to which it
contributes, or with respect to which it has any obligation to
contribute or has any liability (including a liability arising out of
an indemnification, guarantee, hold harmless or similar agreement).
Each such Employee Plan is identified in the Disclosure Letter, to the
extent applicable, as one or more of the following: an "employee
pension benefit plan" (as defined in Section 3(2) of ERISA), an
"employee welfare benefit plan" (as defined in Section 3(1) of ERISA)
or as a Plan intended to be qualified under Section 401 of the Code.
(ii) All of the Employee Plans comply in all material respects,
in form and operation, with all applicable law, including (as if
applicable to the Seller or its Subsidiaries) the requirements of OTS
regulations regarding executive compensation and employment contracts
contained in 12 C.F.R. [Section Mark] [Section Mark] 563.39 and 563.161
(as interpreted by OTS Regulatory Bulletin 27a (March 5, 1993)),
12 C.F.R. [Section Mark] 563.47, ERISA and the Code.
(iii) To the best knowledge of the Seller, no event has occurred
in connection with which the Seller or any of its Subsidiaries or any
Employee Plan, directly or indirectly, could be subject to any
material liability (other than liabilities to provide for and pay the
benefits contemplated by an Employee Plan) under ERISA, the Code or
any other applicable law with respect to any Employee Plan, including
Section 406, 409, 502(i), 502(l) or 4069 of ERISA, or Section 4971,
4975 or 4976 of the Code, or under any agreement or applicable law
pursuant to or under which the Seller or its Subsidiaries has agreed
to indemnify or is required to indemnify any person against liability
incurred under, or for a violation or failure to satisfy the
requirements of, any such applicable law.
(iv) Neither the Seller nor any of its Subsidiaries, nor any
entity that is considered to be a single employer with the Seller or
any of its Subsidiaries under Section 4001 of ERISA or Section 414 of
the Code (an "ERISA Affiliate"), (A) currently maintains or formerly
maintained any plan subject to Title IV of ERISA, Section 302 of ERISA
or Section 412 of the Code, or (B) has or may have any direct or
indirect liability under Title IV of ERISA, Section 302 of ERISA or
Section 412 of the Code.
(v) None of the Seller, its Subsidiaries, or any ERISA Affiliate
has contributed to any "multiemployer plan," as such term is defined
in Section 3(37) of ERISA.
(vi) Each Employee Plan that is an "employee pension benefit
plan" (as defined in Section 3(2) of ERISA) and which is intended to
be qualified under Section 401(a) of the Code (a "Qualified Plan") has
received a favorable determination letter from the Internal Revenue
Service (the "IRS") that covers all amendments to such Employee Plan,
including all amendments made to comply with the Tax Reform Act of
1986 and subsequent legislation, and the Seller is not aware of any
circumstances that may result in revocation of any such favorable
determination letter.
(vii) There is no pending or, to the best knowledge of the
Seller, threatened litigation, proceeding, investigation, controversy
or claim (other than routine claims for benefits) relating to any
Employee Plan or the operation thereof (including any claims for
breach of fiduciary duty).
(viii) There has been no formal or informal announcement or
commitment by the Seller or any of its Subsidiaries to create any
additional Employee Plan or to amend any Employee Plan (except for
amendments required by applicable law that do not materially increase
the cost of such Employee Plan).
(ix) No Employee Plan provides benefits, including death or
medical benefits (whether or not insured) to any current or former
employee of the Seller or any of its Subsidiaries beyond his or her
termination of employment (other than (A) coverage mandated by
applicable law at the employee's cost, (B) retirement or death
benefits under any employee pension plan, (C) disability benefits
under any employee welfare plan that have been fully provided for by
insurance or otherwise, (D) deferred compensation benefits accrued as
liabilities on the books of the Seller and its Subsidiaries, or (E)
benefits in the nature of severance pay under the Severance Plan (as
defined in Section 4.03)).
(x) The Disclosure Letter sets forth all potential obligations
which the Seller or any of its Subsidiaries has or may have for post-
retirement or post-employment benefits under any Employee Plan that
cannot be amended and/or terminated at any time upon no more than
sixty (60) days' notice without incurring any cost, liability or
penalty thereunder.
(xi) The execution and delivery of the Transaction Agreements
and the consummation of the transactions contemplated hereby and
thereby will neither (A) result in any payment or series of payments
by the Seller or any of its Subsidiaries to any person which is an
"excess parachute payment" (as defined in Section 280G of the Code),
nor (B) except to the extent provided in the Disclosure Letter or
expressly provided in this Agreement, (1) entitle any person to
severance pay, unemployment compensation or any other payment, or (2)
accelerate the time of payment or vesting, or increase the amount of
compensation due to any person, or secure (by way of a trust or other
vehicle) any benefits payable under any Employee Plan.
(xii) The Disclosure Letter sets forth the extent to which any
employee of the Seller or any of its Subsidiaries is or will become
entitled, as a result of the execution and delivery of the Transaction
Agreements and the consummation of the transactions contemplated
thereby or otherwise, to "applicable employee remuneration" (within
the meaning of Section 162(m) of the Code).
(xiii) With respect to each Employee Plan, the Seller has
supplied to the Purchaser a true, correct and complete copy of (A) the
most recent annual report on the applicable form of the Form 5500
series filed with the IRS, (B) such Employee Plan, including amendments
thereto, (C) each trust agreement and insurance contract relating to
such Employee Plan, including amendments thereto, (D) the most recent
summary plan description for such Employee Plan, including amendments
and each "Summary of Material Modifications" required under ERISA with
respect thereto, (E) all material employee communications relating
thereto, and (F) the most recent determination letter issued by the
IRS if such Employee Plan is a Qualified Plan.
(xiv) The Seller has provided to the Purchaser a true, correct
and complete statement, as of a recent date specified thereon, listing
each person employed by the Seller and its Subsidiaries, and the date
of hire, the salary, and the work location of each such employee.
(xv) No action, suit or other court or administrative proceeding
has been commenced nor, to the best knowledge of the Seller, has the
commencement of such a proceeding been threatened, claiming that the
Seller or any of its Subsidiaries, or any of their respective
officers, directors, employees or agents, has violated any provision
of applicable law regarding the terms and conditions of employment of
employees, former employees or prospective employees or other labor-
related matters, including provisions of applicable law relating to
discrimination, fair labor standards and occupational health and
safety, wrongful discharge, worker retraining, disability rights,
equal opportunity, workers' compensation, employee benefits, employee
leave issues or violation of the personal rights of employees, former
employees or prospective employees which, taken together with any such
violation or violations of any other of the Seller or any of its
Subsidiaries, or any of their respective officers, directors,
employees or agents, could have a Material Adverse Effect on the
Seller and, to the best knowledge of the Seller, there is no basis for
any such action, suit or proceeding.
(p) Title to Assets.
(i) The Seller and its Subsidiaries have good and marketable
title and the right of possession to all real properties, including
fees, and all other ownership interests in real property (including
all premises used by each such entity in the conduct of its business)
and all interests representing real property owned through foreclosure
or other action, and good title to all other property and assets,
tangible and intangible, reflected in the March 31 Balance Sheet or
purported to have been acquired by the Seller or any such Subsidiary,
as the case may be, since the date thereof, free and clear of all
Liens except for (A) Liens for current taxes not yet due and payable,
(B) Liens which are normal to the business of the Seller and its
Subsidiaries and are not, in the aggregate, material in relation to
the assets of the Seller and its Subsidiaries on a consolidated basis,
and (C) such imperfections of title, easements and encumbrances, if
any, as do not materially interfere with the present use of the
properties subject thereto or affected thereby, or otherwise
materially impair the consolidated business operations of the Seller
and its Subsidiaries.
(ii) Since the date of the March 31 Balance Sheet, (A) except as
disclosed to the Purchaser in writing prior to the date of this
Agreement, neither the Seller nor any of its Subsidiaries has sold,
transferred or otherwise disposed of any material assets, and (B) none
of the properties of the Seller or any such Subsidiary which is
material to its operation has been damaged by fire, weather or other
Act of God except to the extent that any property owned or leased by
the Seller or any such Subsidiary (if so damaged) is insured to the
extent necessary to repair the damaged premises satisfactorily. To the
best knowledge of the Seller, all properties owned by the Seller or
any such Subsidiary are in a good state of maintenance and repair,
conform with all applicable ordinances, regulations and zoning laws,
and are reasonably adequate for the current business of the Seller and
its Subsidiaries.
(iii) All properties held by or for the benefit of the Seller or
any of its Subsidiaries under leases are so held under valid, binding
and enforceable leases (subject to applicable bankruptcy, insolvency
and similar laws affecting creditors' rights generally and subject to
general principles of equity), with such exceptions as are not
material and do not interfere with the conduct of the business of the
Seller or such Subsidiary, as the case may be, and the Seller and such
Subsidiary, as the case may be, enjoy quiet and peaceful possession of
such leased properties. Neither the Seller nor any of its Subsidiaries
is in default in any material respect under any lease or other
agreement regarding its respective properties and/or to which it is a
party or, to the best knowledge of the Seller, by which it is bound.
All persons with which the Seller or any such Subsidiary has leases or
other agreements regarding its real property or which have obligations
to the Seller or any such Subsidiary regarding its respective
properties are, to the best knowledge of the Seller, in compliance
with such leases and other agreements in all material respects.
(q) Compliance with Laws. The Seller and each of its
Subsidiaries has and has maintained in full force and effect all
permits, licenses, certificates of authority, orders and approvals of,
and has made all filings, applications and registrations with,
federal, state, local and foreign governmental entities that are in
each case required in order to permit it to carry on its business as
it is presently conducted or otherwise material to the conduct of the
Marble Business (the "Marble Permits"). The Seller and its
Subsidiaries are in compliance with the terms of the Marble Permits.
To the best knowledge of the Seller, no suspension or cancellation of
any of the Marble Permits is threatened. The business of the Seller
and its Subsidiaries is not being conducted, and none of the Seller or
its Subsidiaries has received any notification or communication
asserting that such business is being conducted, in violation of any
applicable law, except for possible violations which would not, in the
aggregate, have a Material Adverse Effect on the Seller.
(r) Brokers or Finders. Other than financial advisory services
performed for the Seller by Sandler, O'Neill & Partners, L.P.,
pursuant to terms set out in the Disclosure Letter, neither the Seller
nor any of its Subsidiaries, nor any of their respective officers,
directors, employees or agents, has employed any broker or finder or
incurred any liability for any financial advisory fees, brokerage
fees, commissions or finder's fees, and no broker or finder has acted
directly or indirectly for the Seller or any of its Subsidiaries in
connection with this Agreement or the transactions contemplated
hereby.
(s) Environmental Matters. (i) With respect to the Seller and
each of its Subsidiaries:
(A) Each of the Seller and its Subsidiaries, and to the
best knowledge of the Seller, the Loan Properties (as defined
below) are, and have been, in substantial compliance with all
applicable Environmental Laws (as defined below) except for such
non-compliance as, individually or in the aggregate, would not
have a Material Adverse Effect on the Seller.
(B) There is no litigation, proceeding, investigation,
controversy or claim pending or, to the best knowledge of the
Seller, threatened against the Seller or any of its Subsidiaries
(1) for alleged noncompliance (including by any predecessor)
with, or liability under, any applicable Environmental Law, or
(2) relating to the Release (as defined below) into the
environment of any Hazardous Material (as defined below),
whether or not occurring at or on a site owned, leased or
operated by the Seller or any of its Subsidiaries, or at or on a
Loan, which, individually or in the aggregate, could have a
Material Adverse Effect on the Seller.
(C) To the best knowledge of the Seller, the properties
currently or formerly owned or operated by the Seller or any of
its Subsidiaries (including soil, groundwater or surface water
on, under or adjacent to the properties, and buildings thereon)
do not contain any Hazardous Material other than as permitted
under applicable Environmental Law, the presence of which,
individually or in the aggregate, could have a Material Adverse
Effect on the Seller; provided, however, that such
representation is limited to the period the Seller or any such
Subsidiary owned or operated such properties.
(D) None of the Seller or any of its Subsidiaries has
received any notice, demand letter, order or request for
information from any federal, state or local governmental entity
or any third party relating to a Release or a threatened Release
of Hazardous Material or Remediation (as defined below) thereof
or indicating that it may be in violation of, or liable under,
any applicable Environmental Law.
(E) To the best knowledge of the Seller, during the period
of (1) the Seller's or any of its Subsidiaries' ownership or
operation of any of their respective current properties, or (2)
the Seller's or any of its Subsidiaries' holding of a security
interest in a Loan Property, there has been no Release of
Hazardous Material in, on, under, or affecting or migrating to,
such properties which could have a Material Adverse Effect on
the Seller. To the best knowledge of the Seller, prior to the
period of (a) the Seller's or any of its Subsidiaries' ownership
or operation of any of their respective current properties, or
(b) the Seller's or any of its Subsidiaries' holding of a
security interest in a Loan Property, there was no Release of
Hazardous Material in, on, under, affecting or migrating to any
such property, that is reasonably likely to have a Material
Adverse Effect on the Seller.
(F) None of the Seller or any of its Subsidiaries
participates in the management of a Loan Property within the
meaning of 40 C.F.R. [Section Mark] 300.1100(c).
(ii) The following definitions apply for purposes of this
Agreement: (A) "Loan Property" means any property in which the Seller
or any of its Subsidiaries holds a security interest or which secures
a loan or other extension of credit in which the Seller or any of its
Subsidiaries has a participation interest, or as to which the Seller
or any of its Subsidiaries participates in the management; (B)
"Environmental Law" means (1) any applicable law relating to (a) the
protection, preservation or restoration of the environment (which
includes air, water vapor, surface water, groundwater, drinking water
supply, structures, soil, surface land, subsurface land, plant and
animal life or any other natural resource), or to human health or
safety, or (b) the exposure to, or the use, storage, recycling,
treatment, manufacture, generation, transportation, processing,
handling, labeling, production, release or disposal of, Hazardous
Material, in each case as amended and as now in effect, including all
judicial or administrative interpretations of Environmental Laws, and
including the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Superfund Amendments and Reauthorization
Act, the Federal Water Pollution Control Act of 1972, the Clean Air
Act, the Clean Water Act, the Resource Conservation and Recovery Act
of 1976 (including the Hazardous and Solid Waste Amendments thereto
and Subtitle I relating to underground storage tanks), the Solid Waste
Disposal Act, the Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, the Occupational Safety
and Health Act of 1970, the Hazardous Substances Transportation Act,
the Emergency Planning and Community Right-To-Know Act, the Safe
Drinking Water Act, the National Environmental Policy Act, or any so-
called "Superfund" or "Superlien" law, each as amended and as now in
effect, and (2) any applicable law conditioning transfer of property
upon a negative declaration or other approval of a governmental entity
of the environmental condition of the property or requiring
notification or disclosure of Releases of Hazardous Material or other
environmental condition of the Loan Property to any governmental
entity or other person, in connection with transfer of title to or
interest in property ("Environmental Transfer Laws"); (C) "Hazardous
Material" means any substance (whether solid, liquid or gas) which is
listed, defined, designated or classified as hazardous, toxic or
radioactive, or otherwise regulated, under any Environmental Law,
whether by type or by quantity, including any substance containing any
such substance as a component, and including any toxic waste,
pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, special waste, industrial substance, extremely
hazardous waste, or words of similar meanings or regulatory effect
under any applicable Environmental Law, including oil or petroleum or
any derivative or by-product thereof, radon, radioactive material,
asbestos, asbestos-containing material, urea formaldehyde foam
insulation, lead and polychlorinated biphenyl; (D) "Release" of any
Hazardous Material means any release, deposit, discharge, emission,
leaking, spilling, seeping, migrating, injecting, pumping, pouring,
emptying, dumping, disposing or other movement of Hazardous Material;
and (E) "Remediation" includes any response, remedial, removal or
corrective action, any activity to cleanup, detoxify, decontaminate,
contain or otherwise remediate any Hazardous Material, any actions to
prevent, cure or mitigate any Release of Hazardous Material, any
inspection, investigation, study, monitoring, assessment, audit,
sampling and testing, laboratory or other analysis or evaluation, in
each case relating to a Release or threatened Release of any Hazardous
Material.
(t) Loans; Allowance for Loan Losses.
(i) To the best knowledge of the Seller, (A) each outstanding
loan, lease or other extension of credit or commitment to extend
credit of the Seller or any of its Subsidiaries is, in all material
respects, a legal, valid and binding obligation, is, in all material
respects, in full force and effect and is enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally, and subject to
general principles of equity, whether applied in a court of law or a
court of equity, (B) each of the Seller and its Subsidiaries has duly
performed in all material respects all of its obligations thereunder
to the extent that such obligations to perform have accrued, (C) all
documents and agreements necessary for the Seller or any Subsidiary
that is party thereto to enforce such loan, lease or other extension
of credit or commitment are in existence and, to the best knowledge of
the Seller, are in full force and effect, subject to no claim or
challenge, (D) no claim, counterclaim, set-off right or other right
exists, and no grounds for any such claim, counterclaim, set-off right
or other right exists, with respect to any such loan, lease or other
extension of credit or commitment which could impair the
collectibility thereof, and (E) each such loan, lease or other
extension of credit or commitment has been, in all material respects,
originated and serviced in accordance with the applicable underwriting
guidelines of the Seller or its Subsidiary, the terms of the relevant
agreements and applicable law.
(ii) The Disclosure Letter sets forth all loan commitments
(including participation commitments) of the Seller or any of its
Subsidiaries outstanding as of the date of this Agreement, identifying
each commitment by loan type.
(iii) The allowance for possible loan losses reflected in the
audited consolidated balance sheet of the Seller and its Subsidiaries
at December 31, 1994, as set forth in the 1994 10-K, and at March 31,
1995, as set forth in the March 31 Balance Sheet, was, and the
allowance for possible loan losses shown on the consolidated balance
sheets of the Seller and its Subsidiaries set forth in the Seller's
Reports for periods ending after March 31, 1995 have been and will be,
no less than adequate, as of the dates thereof, under generally
accepted accounting principles consistently applied, to provide for
losses relating to or inherent in the loan and lease portfolios
(including accrued interest receivables) of, and other extensions of
credit (including letters of credit and commitments to make loans or
extend credit) by, the Seller and its Subsidiaries. In addition, the
allowance for possible loan losses related to impaired loans shown on
the consolidated balance sheets of the Seller and its Subsidiaries set
forth in the Seller's Reports for periods ending after December 31,
1994 have been and will be calculated in accordance with Financial
Accounting Standards Board Statement of Financial Accounting Standards
No. 114, as amended by Statement of Financial Accounting Standards No.
118. The Disclosure Letter sets forth the amounts of all loans, leases
and other extensions of credit, commitments and interest-bearing
assets of the Seller and its Subsidiaries that are classified by any
bank examiners (whether regulatory or internal) as "Other Loans
Specially Mentioned," "Special Mention," "Substandard," "Doubtful,"
"Loss," "Classified," "Criticized," "Credit Risk Assets," "Concerned
Loans" or words of similar import, or which are otherwise 30 days or
more past due as to payments of principal, interest or other amounts
(collectively, "classified assets"). The real estate and other
property included in any non-performing assets of the Seller or any of
its Subsidiaries ("REO") is carried net of reserves at the lower of
cost or fair value. The Seller has received and maintains in its
records with respect to classified assets and REO with book values
(net of reserves) in excess of $100,000, current independent
appraisals or current internal appraisals, in either case performed
and prepared by a certified appraiser; provided, however, that, for
purposes of this sentence, "current" shall mean within the past 12
months.
(u) Material Interests of Certain Persons. Except as disclosed
in the Seller's Proxy Statement for its 1995 Annual Meeting of
Stockholders, to the best knowledge of the Seller, no officer or
director of the Seller or any of its Subsidiaries, or any "associate"
(as such term is defined in Rule 14a-1(a) under the Exchange Act) of
any such officer or director, has any material interest in any
agreement or property (real or personal), tangible or intangible, used
in or pertaining to the business of the Seller or any of its
Subsidiaries, whether or not required to be disclosed under the SEC's
Regulation S-K.
(v) Insurance. The Seller and its Subsidiaries are presently
insured, and since December 31, 1991 have been insured, for reasonable
amounts with financially sound and reputable insurance companies,
against such risks as companies engaged in a similar business would,
in accordance with good business practice, customarily be insured. All
of the insurance policies and bonds maintained by the Seller and its
Subsidiaries are in full force and effect, the Seller and its
Subsidiaries are not in default thereunder and all material claims
thereunder have been filed in a due and timely fashion. The Disclosure
Letter sets forth all pending material claims under such insurance
policies and bonds. True, correct and complete copies of all such
insurance policies and bonds have been made available to the
Purchaser.
(w) Investment Securities. Except for investments in Federal
Home Loan Bank Stock, pledges to secure public and trust deposits,
borrowings, repurchase agreements and reverse repurchase agreements,
in each case entered into in arm's length transactions pursuant to
normal commercial terms and conditions and other pledges required by
law, none of the investments reflected in the March 31 Balance Sheet,
and none of such investments made by the Seller or any of its
Subsidiaries since March 31, 1995, is subject to any restriction
(contractual, statutory or otherwise), other than applicable
securities laws, that would materially impair the ability of the
entity holding such investment freely to dispose of such investment at
any time. The Seller has properly (i) reported as such any investment
securities which are required to be classified as "available for
sale," and (ii) accounted for any decline in the market value of any
investment securities (including marketable equity securities), in
each case in accordance with generally accepted accounting principles
consistently applied, including, if applicable, in accordance with
Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 115.
(x) Interest Rate Risk Management Instruments. (i) The
Disclosure Letter sets forth a true, complete and correct list of each
"mortgage derivative product", "high risk mortgage security" (as
defined in the Federal Financial Institutions Examination Council's
"Statement of Policy on Securities Activities", as adopted by the OTS
as Thrift Bulletin No. 52, issued February 10, 1992 and amended April
22, 1994 ("TB52") ), each instrument that would be included under the
heading "Off-Balance Sheet Contracts" on Schedule CMR of Thrift
Financial Report filed with the OTS and each "structured note" (as
defined in OTS Thrift Bulletin No. 65, issued August 15, 1994
(collectively, "Derivative Instruments") as to which the Seller or its
Subsidiaries hold an open position, including the notional amount,
approximate market value and the maturity date thereof.
(ii) The Disclosure Letter sets forth the amount, maturity and
interest rate of all of Marble's brokered deposits.
(y) Intellectual Property. The Disclosure Letter sets forth all
patents, applications, trade names, trademarks or trademark
applications owned by or registered in the name of the Seller or any
of its Subsidiaries or used in its business (collectively,
"Intellectual Property"). The Seller and its Subsidiaries own or
possess valid and binding licenses and other rights to use (without
payment) all Intellectual Property used in its businesses. Neither the
Seller nor any of its Subsidiaries has received any notice of conflict
or infringement with respect to any such Intellectual Property that
asserts the right of others. The Seller and each such Subsidiary have
in all material respects performed all the obligations required to be
performed by them and are not in default in any material respect under
any agreement relating to any such Intellectual Property.
(z) Knowledge as to Conditions. As of the date of this
Agreement, none of the executive officers of the Seller or any of its
Subsidiaries knows of any reason why any Required Approvals (as
defined in Section 4.05) should not be obtained without the imposition
of any condition or restriction, or the conditions to the consummation
of the transactions contemplated by this Agreement should not be
satisfied, in each case in a due and timely manner.
(aa) Core Deposits. The deposits (excluding all certificates of
deposit of $100,000 and over) of the Seller as of May 31, 1995 are at
least $280,595,000. The Seller does not know of any fact which causes
it to believe that the foregoing balance will be materially lower
following the Closing Date than as stated above.
(bb) Registration Obligations. Neither the Seller nor any of its
Subsidiaries is under any obligation, contingent or otherwise, that
will survive the Merger with respect to the registration of any of its
securities under the Securities Act.
(cc) Books and Records. (i) The books and records of the Seller
and its Subsidiaries have been, and are being, maintained in
accordance with applicable legal and accounting requirements and
reflect in all material respects the substance of material events and
transactions that should be included therein.
(ii) Each of the Seller and its Subsidiaries maintains a system
of internal controls, policies and procedures sufficient to make it
reasonable to expect that (A) all transactions by the Seller and its
Subsidiaries are executed in accordance with its management's general
or specific authorization, (B) such transactions are recorded in
conformity with generally accepted accounting principles and in such a
manner as to permit preparation of financial statements in accordance
with generally accepted accounting principles and any other criteria
applicable to such statements, (C) access to assets is permitted only
in accordance with management's general or specific authorization, (D)
the recorded accountability for assets is compared with existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences, (E) records of such transactions are
retained, protected and duplicated in accordance with prudent banking
practices and applicable regulatory requirements, and (F) any
circumstance, action or event in the conduct of the business and
operations of the Seller and its Subsidiaries which could cause the
Seller or its Subsidiaries to fail to comply with applicable law is
identified and corrected promptly.
(dd) Corporate Documents. The Seller has delivered to the
Purchaser true, complete and correct copies of the articles of
association, bylaws and all other constituent documents of the Seller
and each of its Subsidiaries as amended to date and currently in full
force and effect. The minute books of the Seller and each of its
Subsidiaries contain an accurate record of all meetings, and a
complete, comprehensive and accurate record of all corporate action of
the Boards of Directors (and the Committees of such Boards) of the
Seller and each of its Subsidiaries.
(ee) Conduct of Business. Since December 31, 1991, the Seller
and its Subsidiaries have complied in all material respects with its
applicable internal credit, risk management, trading, equity investing
and similar policies and procedures in conducting the operations which
are subject to such policies and procedures.
Section 2.02 Representations and Warranties of the Parent and the
Purchaser. Each of the Parent and the Purchaser represents and warrants to
the Seller, as of the date hereof and on and as of the Effective Time
(except as to any representation or warranty which specifically relates to
an earlier date), that:
(a) Corporate Organization and Qualification. (i) The Parent.
The Parent is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and is a
savings and loan holding company duly registered as such with the OTS
under the HOLA. The Parent has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted, and is duly qualified and is in good
standing to do business in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such
qualification necessary, except for such failure to qualify or be in
such good standing which, when taken together with all such failures,
would not have a Material Adverse Effect on the Parent.
(ii) The Purchaser. The Purchaser is a stock savings bank duly
organized, validly existing and in good standing under the HOLA and
other applicable federal laws, and all of its outstanding capital
stock is owned by the Parent. The Purchaser is an "insured depository
institution" as defined in the FDIA and applicable regulations
thereunder. The deposits of the Purchaser are insured to the maximum
extent permitted by the FDIA by the Bank Insurance Fund or the Savings
Association Insurance Fund of the FDIC. The Purchaser is a member in
good standing of the Federal Home Loan Bank of New York and has
purchased all stock and paid all membership and other fees and
assessments required in connection therewith. The Purchaser has all
requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, and is
duly qualified and is in good standing to do business in each
jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary, except
for such failure to qualify or be in such good standing which, when
taken together with all such failures, would not have a Material
Adverse Effect on the Purchaser.
(iii) Interim. Interim will at the Effective Time be a
corporation duly organized, validly existing and in good standing
under the VBCA, and all of its outstanding capital stock will be owned
by the Purchaser. Interim will not, prior to the Effective Time,
engage in any business other than the transactions contemplated by
this Agreement or have any obligations or liabilities other than its
obligations and performance under the Plan of Merger.
(b) Authority. Each of the Parent and the Purchaser has all
requisite corporate power and authority to enter into the Transaction
Agreements and to consummate the transactions contemplated hereby,
including the Merger. The execution, delivery and performance of each
of the Transaction Agreements, and the consummation of the Merger,
have been duly authorized by all necessary corporate action on the
part of the Parent and the Purchaser. Each of this Agreement and the
Fee Letter has been and, upon its execution and delivery, the Plan of
Merger will be, duly executed and delivered by the Parent, the
Purchaser and Interim, as the case may be, and, assuming due execution
and delivery by, and binding effect on, the Seller, constitutes and
will constitute, as the case may be, a legal, valid and binding
obligation of the Parent, the Purchaser and Interim, enforceable in
accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and
(in the case of the Purchaser) the rights of creditors of insured
depository institutions, and subject to general principles of equity,
whether applied in a court of law or a court of equity.
(c) No Violations. The execution, delivery and performance by
the Parent, the Purchaser and Interim of the Transaction Agreements do
not, and the consummation of the transactions contemplated hereby or
thereby by the Parent, the Purchaser and Interim will not, assuming
that the consents referred to in Section 2.01(g) are duly obtained,
constitute (i) a breach or violation of, or a default under, any
applicable law, (ii) a breach or violation of, or a default under, the
certificate of incorporation, articles of association, federal stock
charter, bylaws (or other constitutive documents) of the Parent, the
Purchaser or Interim, or (iii) a breach or violation of, or a default
under (or an event which with due notice or lapse of time or both
would constitute a default under), or result in the termination of,
accelerate the performance required by, or result in the creation of
any Lien upon any of the properties or assets of the Parent, the
Purchaser or Interim under, any of the terms, conditions or provisions
of any note, bond, indenture, deed of trust or other agreement to
which the Parent, the Purchaser or Interim is or may be a party or, to
the best knowledge of the Parent and the Purchaser, by which any of
their respective properties or assets may be bound or affected.
(d) Consents. Except (i) as specifically provided for herein,
and (ii) the Government Approvals, no filing or registration with, or
authorization, consent or approval of, any governmental entity, or any
party to any agreement to which the Parent, the Purchaser or Interim
(or any of their respective properties) is a party or, to the best
knowledge of the Parent and the Purchaser, is or may be bound or
affected, is necessary for the consummation by the Parent, the
Purchaser or Interim of the Merger or the other transactions
contemplated by the Transaction Agreements.
(e) Absence of Claims. No litigation, proceeding, investigation
or controversy before any arbitrator or governmental entity is
pending, and there is no pending claim, against the Parent or the
Purchaser which is reasonably likely, individually or in the
aggregate, to materially hinder or delay consummation of the
transactions contemplated hereby, and, to the best knowledge of the
Parent and the Purchaser, no such litigation, proceeding,
investigation or controversy has been threatened.
(f) Brokers and Finders. Other than financial advisory services
performed for the Purchaser by Northeast Capital & Advisory, Inc.,
neither the Parent nor the Purchaser, nor any of their respective
officers, directors, employees or agents, has employed any broker or
finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions or finder's fees, and no broker or finder
has acted directly or indirectly for the Parent or the Purchaser in
connection with this Agreement or the transactions contemplated
hereby.
(g) Ownership of Seller Common Stock. None of the Parent, the
Purchaser or their respective Subsidiaries owns, of record or
beneficially, any shares of Seller Common Stock.
(h) Reports. (i) Since December 31, 1991, the Parent and each of
its Subsidiaries have timely filed and will timely file all reports
and other documents required to be filed by it under the Securities
Act and the Exchange Act. As of their respective dates, the Parent's
Annual Reports on Form 10-K for the fiscal years ended December 31,
1994, 1993 and 1992, and all other documents filed subsequent to
December 31, 1994 under Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act, each in the form (including any documents incorporated
by reference therein) filed with the SEC (collectively, the "Parent
Reports"), complied and will comply as to form in all material
respects with the published rules of the SEC with respect thereto and
did not or will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading. Each of the
balance sheets of the Parent or its Subsidiaries contained or
specifically incorporated by reference in the Parent Reports
(including in each case any related notes and schedules) fairly
presented and will fairly present the financial position
(consolidated, as appropriate) of the entity or entities to which it
relates as of its date, and each of the statements of operations and
of changes in stockholders' equity and of cash flows of the Parent or
its Subsidiaries contained or specifically incorporated by reference
in the Parent Reports (including in each case any related notes and
schedules) fairly present and will fairly present the results of
operations, stockholders' equity and cash flows, as the case may be
(consolidated, as appropriate), of the entity or entities to which it
relates for the periods set forth therein (subject, in the case of
unaudited interim statements, to normal year-end audit adjustments
which will not be material), in each case in accordance with generally
accepted accounting principles consistently applied during the periods
involved.
(ii) The Parent and each of its Subsidiaries have filed and will
file all material reports, registrations and statements, together with
any amendments required to be made with respect thereto, required to
be filed by them since December 31, 1991 with (A) the OTS, (B) the
FDIC, (C) any other applicable federal or state banking commission or
regulatory authority charged with the supervision or regulation of
depository institutions or depository institution holding companies or
engaged in the insurance of bank and/or savings and loan deposits, and
(D) the NASD and any other SRO, and have paid and will pay all fees
and assessments due and payable in connection therewith. As of their
respective dates, each of the reports described in the immediately
preceding sentence complied or will comply in all material respects
with all applicable regulatory requirements (including regulatory
accounting principles and practices).
(i) Adequacy of Capital to Consummate Merger. At the Effective
Time, the Purchaser will have sufficient capital to enable it to
consummate the Merger and to pay the Merger Consideration in exchange
for the shares of Seller Common Stock pursuant to the terms hereof.
ARTICLE III
CONDUCT PENDING THE MERGER
Section 3.01 Conduct of the Seller's Business Prior to the Effective
Time. Except as expressly provided in this Agreement and except to the
extent required by applicable law or by Regulatory Agencies, during the
period from the date of this Agreement to the Effective Time, the Seller
shall, and shall cause its Subsidiaries to, (a) conduct its business in the
usual, regular and ordinary course consistent with prudent banking practice,
(b) use its best efforts to maintain and preserve intact its business
organization, properties, leases, franchises, employees and advantageous
business relationships and retain the services of its officers and key
employees, and (c) not knowingly take any action which would materially
adversely affect or delay the ability of the Seller or the Purchaser to
obtain the Required Approvals, make any of the Seller's representations or
warranties untrue or incorrect if made or deemed to be made immediately
thereafter or cause any of the conditions set forth in Article V not to be
satisfied.
Section 3.02 Forbearance by the Seller. Without limiting the covenants
set forth in Section 3.01 or 3.03, except as otherwise specifically provided
in this Agreement and except to the extent required by applicable law or by
Regulatory Agencies, during the period from the date of this Agreement to
the Effective Time, the Seller shall not, and shall not permit any of its
Subsidiaries, without the prior specific consent of the Purchaser, to:
(a) change any provisions of the articles of association or
bylaws of the Seller or any similar governing documents of the
Seller's Subsidiaries; or amend, modify, terminate or fail to renew or
use its best efforts to preserve the Marble Permits;
(b) issue any shares of its capital stock (except pursuant to
the exercise of stock options outstanding as of the date hereof as set
forth in the Disclosure Letter and on the terms in effect on the date
hereof and pursuant to the Seller's Employee Stock Purchase Plan (the
"ESPP") with respect to the current "Offering" (as defined in the
ESPP) of up to 5,800 remaining shares of Seller Common Stock which may
be purchased under the ESPP through July 31, 1995); change the terms
of any outstanding stock options or issue, grant or sell any option,
warrant, call, commitment, stock appreciation right, right to purchase
or agreement to acquire of any character relating to the authorized or
issued capital stock of the Seller or any of its Subsidiaries; adjust,
split, combine or reclassify any of its capital stock; or make,
declare or pay any dividend (including any stock dividend) or make any
other distribution (other than (i) dividends or other distributions
payable on capital stock of the Subsidiaries of the Seller to the
Seller, (ii) cash dividends on the Seller Common Stock declared and
paid from dividendable earnings of the Seller through December 31,
1995 in a manner consistent with the Seller's dividend policies and
practices on the date hereof and in an amount not in excess of $.10
per share of Seller Common Stock per fiscal quarter, and (iii) in the
event that the Closing Date occurs after January 5, 1996, cash
dividends on the Seller Common Stock declared and paid from
dividendable earnings of the Seller, in an amount not in excess of
$.11 per share of Seller Common Stock per fiscal quarter, pro rated,
in the case of the fiscal quarter in which the Closing Date occurs, on
the basis of the number of calendar days actually elapsed during such
fiscal quarter through the Closing Date) on, or directly or indirectly
redeem, purchase or otherwise acquire (other than as necessary to
satisfy obligations, if any, existing as of the date hereof, under the
Seller Option Plans), any shares of its capital stock, or any
securities or obligations convertible into or exchangeable for any
shares of its capital stock;
(c) make or acquire (i) any Derivative Instrument, (ii) any
investment (other than any Derivative Instrument) that (A) deviates
from the Seller's investment practices and policies as currently in
effect and as set forth in the Disclosure Letter, (B) is in the amount
of $3 million or more in any transaction or series of transactions or
$15 million or more in the aggregate for all transactions, or (C) has
a duration at the time of purchase in excess of 36 months, or (iii)
any investment securities that are not rated investment grade; or
engage in (x) any of the activities listed in Section II of TB52, or
(y) any dollar reverse repurchase transactions;
(d) lease, sell, transfer, mortgage, pledge (other than to
secure Federal Home Loan Bank advances), assign, encumber or otherwise
dispose of properties or assets (including (i) REO, (ii) loans
originated by the Seller or any of its Subsidiaries, and (iii) to any
direct or indirect Subsidiary of the Seller, but excluding any
financial investment subject to the foregoing clause (c)) having an
aggregate book value or market value in excess of $250,000;
(e) dispose of or acquire, whether by sale, purchase, transfer,
assignment or any other means, the servicing rights with respect to
any loan, lease or other extension of credit;
(f) (i) increase in any manner the compensation or benefits
(including any severance or fringe benefits) of any of its employees,
former employees, directors or former directors, or pay any pension or
retirement allowance, in each case not required by any existing
Employee Plan, to any such employees, former employees, directors or
former directors, or become a party to, amend or commit itself to or
fund or otherwise establish any trust or account related to any
Employee Plan with or for the benefit of any employee, director,
former employee or former director, other than normal increases in
salary or wages for employees and contributions to Employee Plans, in
each case in the ordinary course of business consistent with past
practice and following consultation with the Purchaser, (ii)
voluntarily accelerate the vesting or exercisability of any stock
options or other compensation or benefit, (iii) enter into, terminate
or amend or modify any Employee Plan (other than amendments required
in order to comply with applicable law), (iv) hire any employee with
an annual compensation in excess of $35,000 or enter into, terminate
or amend or modify any employment, severance, consulting or change of
control agreement, (v) make any discretionary contributions to any
Employee Plan, or (vi) grant any incentive compensation or bonus to
any employee except as set forth in the Disclosure Letter;
(g) enter into, terminate or amend or modify in any material
respect (i) any equipment lease, (ii) branch office lease, or (iii)
Material Contract involving an aggregate payment by the Seller or any
of its Subsidiaries under any such agreement, transaction or
commitment of more than $50,000 or having a term of one year or more
from the time of execution;
(h) settle for an amount exceeding $10,000 singly or $100,000 in
the aggregate any claim, action or proceeding involving any Material
Litigation, or waive or release any right or collateral or cancel or
compromise any debt or claim in which such waiver, release
cancellation or compromise is in an amount exceeding $10,000 singly or
$100,000 in the aggregate;
(i) make, renegotiate, renew, increase, extend or purchase any
loan, lease (credit equivalent) or other extension of credit, or make
any commitment in respect of any of the foregoing, except, in the case
of Marble, loans, leases and other extensions of credit in an amount
not exceeding (i) $203,150, in the case of loans which are for the
sole purpose of acquiring or refinancing one- to four-family owner-
occupied residences (provided, however, that Marble may not make,
renegotiate, renew, increase, extend or purchase any loan that is
underwritten based on either no or limited verification of income or
otherwise without full documentation customary for such a loan), (ii)
in the case of commercial real estate loans or commercial and
industrial loans: (A) $250,000, with no additional approval required,
provided that each such loan is made in accordance with Marble's
established lending policies and procedures as in effect on the date
hereof (or as modified as contemplated by Section 3.03(n)), (B)
$500,000, with the approval of Marble's Loan Committee (including the
approval of the President and Chief Executive Officer of Marble) and
the Loan Committee of Marble's Board of Directors, and (C) $2,500,000,
with the approval of Marble's Loan Committee (including the approval
of the President and Chief Executive Officer of Marble) and the Loan
Committee of Marble's Board of Directors and the approval of the
Purchaser, which shall be deemed given if, within seven business days
after Marble requests in writing that the Purchaser provide such
approval and furnishes to the Purchaser a complete credit file on the
proposed transaction, the Purchaser shall not have responded in
writing to such request (it being understood that, in determining
whether any loan (a "new loan") complies with the maximum dollar
amounts set out in this clause (ii), all then outstanding loans,
leases and other extensions of credit to a single obligor (within the
meaning of Title 8, Chapter 57, Section 1206 of the Vermont Statutes
Annotated) shall be aggregated with such new loan), (iii) $50,000, in
the case of home equity loans, provided that each such loan is made in
accordance with Marble's established lending policies and procedures
as in effect on the date hereof, or (iv) $25,000, in the case any of
other loans, leases and other extensions of credit (except for
manufactured home, mobile home or similar loans, leases or other
extensions of credit, each of which shall require the prior express
consent of the Purchaser);
(j) acquire, merge or consolidate with, or purchase an equity
interest in or a material amount of assets of, any business or any
institution, bank, corporation, partnership, association or other
business organization or division thereof (except in satisfaction of a
debt previously contracted in good faith); organize, capitalize, lend
to or otherwise invest in any Subsidiary; enter into any joint venture
or similar alliance with any other person (including any branch lease,
joint venture agreement or other agreement with respect to the sale of
insurance, securities or brokerage or other services at the offices of
the Seller or any of its Subsidiaries); or enter into any other
transaction that would have the practical effect of an acquisition by
any other person of an interest in the Seller or any of its
Subsidiaries;
(k) (i) incur any additional borrowings (except to the extent
necessary to fund withdrawals of deposits, provided that the aggregate
consolidated borrowings of the Seller and its Subsidiaries shall not,
following such additional borrowings, exceed $75,000,000),(ii) renew
any borrowings reflected on the books and records of the Seller or any
of its Subsidiaries on the date hereof (except for a term to maturity
not in excess of six months, provided that the aggregate consolidated
borrowings of the Seller and its Subsidiaries shall not, following
such renewal, exceed $75,000,000), (iii) pledge any of its assets to
secure any borrowings other than as required pursuant to the terms of
borrowings of the Seller or any of its Subsidiaries in effect at the
date hereof, or (iv) incur any other material direct or contingent
liabilities, other than in the ordinary course of business consistent
with past customary practice; it being understood that deposits,
including certificates of deposit, shall not be deemed to be
borrowings within the meaning of this paragraph;
(l) enter into any new lines of business, engage or participate
in any material transaction (including, without limitation, opening or
acquiring new branches, closing or relocating (or filing any
application to close or relocate) existing branches and acquiring real
or personal property); make capital expenditures in excess of $100,000
in the aggregate other than pursuant to binding commitments existing
on the date hereof and set forth in the Disclosure Letter and other
than expenditures necessary to maintain existing assets in good repair
in accordance with the policies of the Seller and its Subsidiaries as
in effect on the date hereof;
(m) make any investment or commitment to invest in real estate
or in any real estate development project, other than investments or
commitments approved by the Seller's Board of Directors prior to the
date of this Agreement and disclosed in the Disclosure Letter;
(n) except as contemplated by Section 4.02 or as required by
changes in generally accepted accounting principles, authorize or make
any material change in any of its accounting policies, practices,
standards or methods as in effect at March 31, 1995, including methods
of accounting for income and deductions for federal income tax
purposes;
(o) make less stringent than as in effect on the date of this
Agreement its operational policies, activities or practices (including
credit underwriting policies or standards of the Seller or its
Subsidiaries and policies or practices of the Seller and its
Subsidiaries with respect to lending, charge-off or classification of
loans, securities or other investment or financial instruments,
reserves and provisions for loan losses, the placement of loans,
securities or other investment or financial instruments in non-accrual
status, the making of investments, and liability management);
(p) transfer any deposits to any person; solicit or accept
deposits at a rate of interest that exceeds the generally prevailing
effective yields on insured deposits of comparable maturity in its
normal market area; or make any payment in respect of deposits other
than in accordance with the terms of the applicable deposit
agreements;
(q) decrease the allowance for possible loan losses of the
Seller and its Subsidiaries from that shown on the audited
consolidated balance sheet of the Seller and its Subsidiaries
contained in the 1994 10-K, except to the extent that the allowance is
applied to a corresponding charge-off of a loan; or
(r) solicit, encourage or enter into any agreement with respect
to, or enter into any discussion leading to or with a view towards any
such agreement with respect to, any of the foregoing.
Section 3.03 Affirmative Covenants of the Seller. Without limiting the
covenants set forth in Section 3.01 or 3.02, except as otherwise
specifically provided in this Agreement and except to the extent required by
applicable law or by Regulatory Agencies, during the period from the date of
this Agreement to the Effective Time the Seller shall, and shall cause each
of its Subsidiaries to:
(a) preserve and enhance the goodwill of Marble's customers and
others having business relations with Marble;
(b) confer, at such times and with such frequency as the
Purchaser may reasonably request, with one or more representatives of
the Purchaser to report operational matters of materiality or to
obtain the Purchaser's consent to appropriate matters or transactions
as provided herein and the general status of ongoing operations; and
consult with the Purchaser as to the making of any material decisions
or the taking of any material actions with respect to such operations;
(c) maintain its properties (owned or leased) in customary
repair, working order and condition;
(d) comply with all applicable law with respect to its business
or operations;
(e) keep in force at not less than their present limits all
policies of insurance applicable to any aspect of its business or
operations;
(f) make no material change in the customary terms, conditions,
policies and practices upon which it does business;
(g) file in a due and timely manner all reports, returns and
other documents required to be filed by it with all applicable
governmental entities in respect of taxes, and, unless contesting the
same in good faith after establishing reasonable reserves, pay when
required to be paid all taxes indicated by such returns or otherwise
lawfully levied or assessed upon it or any of its properties;
(h) permit the Purchaser to communicate with, and to deliver
information, brochures, bulletins, press releases and other
communications reasonably acceptable to the Seller to, depositors,
borrowers and other customers of Marble concerning the business and
operations of the Purchaser and the transactions contemplated by this
Agreement;
(i) permit the Purchaser, at its request, to train Seller's
Employees (as defined in Section 4.02) and, when practicable, excuse
such Employees for reasonable periods of time from their duties for
purposes of such training and orientation; provided, that the Seller
shall be responsible for, and shall continue, the salary and benefits
of such employees for the period that they are so excused from their
duties;
(j) if reasonably requested by the Purchaser, conduct an
environmental audit prior to foreclosure on any property concerning
which the Seller or any of its Subsidiaries has knowledge that
Hazardous Material was or is present, manufactured, generated, used,
recycled, reclaimed, released, stored, treated or disposed of, and
provide the results of such audit to, and consult with, the Purchaser
regarding the significance of such audit prior to foreclosure on any
such property;
(k) prior to the Closing Date, cause all assets and liabilities
of the Seller (other than cash, short-term investments in securities
which Marble could hold directly under applicable law, and the capital
stock of Marble) to be sold, assigned or otherwise disposed of in a
manner permitted by applicable law, on such terms and subject to such
conditions as the Purchaser shall approve;
(l) (A) utilize shares of Seller Common Stock purchased in the
open market (and not newly-issued shares) for the operation of the
Seller's Dividend Reinvestment Plan (the "DRP") with respect to any
quarterly dividend declared prior to June 30, 1995, and (B) prior to
the declaration by the Seller of the next subsequent quarterly
dividend, terminate the DRP;
(m) effective as of the termination of the current offering
under the ESPP (which offering the Seller represents will terminate on
July 31, 1995) and following the distribution to ESPP participants of
the shares of Seller Common Stock to be issued in such current
offering, terminate the ESPP;
(n) use its best efforts to adopt operational policies,
activities and practices, including credit underwriting policies and
standards, and policies and practices with respect to lending,
generally comparable to those established and adopted by the Purchaser
and currently in effect;
(o) prior to the Closing Date, prepare and deliver to the
Purchaser a full valuation of the post-retirement welfare plan
benefits provided by the Seller and its Subsidiaries to their
employees, former employees, directors and former directors; and
(p) permit a representative of the Purchaser to attend all
meetings of the Boards of Directors of the Seller and its
Subsidiaries, and of each Committee of each such Board, as an
observer, and provide to the Purchaser, at the same time as they are
provided to members of any such Board or Committee, all reports and
other documents which are so provided (whether in connection with a
meeting or otherwise); provided, that the Seller shall be entitled to
exclude such representative from any meeting at which the Parent, the
Purchaser or the transactions contemplated hereby are discussed (for
the period of time during which such discussions take place), and
shall be entitled to redact from reports and other documents provided
to such representative hereunder information relating to the Parent,
the Purchaser or the transactions contemplated hereby.
Section 3.04 Conduct of the Parent's and the Purchaser's Business
Prior to the Effective Time. Except as expressly provided in this Agreement,
and except to the extent required by applicable law or by Regulatory
Agencies, during the period from the date of this Agreement to the Effective
Time, the Parent and the Purchaser shall not (i) take any action that would
materially affect the ability of the Parent or the Purchaser to perform its
covenants and agreements under this Agreement or to consummate the
transactions contemplated hereby, or (ii) knowingly take any action, other
than action consistent with acting in the ordinary course of business
consistent with prudent banking practice, which would materially adversely
affect or delay the ability of the Seller, the Parent, or the Purchaser to
obtain the Required Approvals, make any of the Parent's or the Purchaser's
representations or warranties untrue or incorrect if made or deemed to be
made immediately thereafter or cause any of the conditions set forth in
Article V not to be satisfied.
ARTICLE IV
COVENANTS
Section 4.01 Acquisition Proposals. (a) The Seller agrees that,
without the prior written consent of the Purchaser, neither the Seller nor
any of its Subsidiaries nor any of the respective officers and directors of
the Seller or any of its Subsidiaries shall, and the employees, agents and
representatives (including any investment banker, attorney or accountant) of
the Seller or any of its Subsidiaries shall not be permitted to, (i)
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making of any proposal or offer (including any proposal or offer to
stockholders of the Seller) with respect to any Competing Transaction (as
such term is defined below) (such inquiry or proposal being an "Acquisition
Proposal"); (ii) discuss with or enter into conversations with any person
concerning any such Competing Transaction or Acquisition Proposal; or (iii)
disclose any nonpublic information to any person concerning the Marble
Business, afford any person access to the properties, books and records of
the Seller or any of its Subsidiaries or otherwise assist or encourage any
person in connection with any of the foregoing.
(b) The Seller shall immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the matters referred to in Section 4.01(a)
and shall take the necessary steps to inform such parties of the obligations
undertaken in this Section 4.01. The Disclosure Letter includes a list of
each person other than the Parent and the Purchaser and their employees,
agents and representatives to which the Seller has provided non-public
information or other access of a type referred to in Section 4.01(a)(iii) on
or after January 1, 1994. The Seller shall promptly notify the Purchaser
orally (to be confirmed in writing as soon as practicable thereafter) if any
inquiry or proposal is received by, any such information is requested from,
or any such negotiations or discussions are sought to be initiated or
continued with the Seller or its Subsidiaries after the date hereof in
respect of any Acquisition Proposal, together with details as to the
identity of the persons making such inquiry or proposal, requesting such
information or seeking such negotiations or discussions and the terms and
conditions thereof.
(c) Notwithstanding the foregoing, nothing in this Section 4.01 shall
prohibit the Board of Directors of the Seller from (i) furnishing or
permitting any of its (or its Subsidiaries') officers, directors, employees,
investment bankers, attorneys, accountants or other agents or
representatives to furnish information to any person that requests
information as to the Seller and its Subsidiaries if (A) the Board of
Directors of the Seller, upon written advice of its outside legal counsel,
determines in good faith that such action is required for the Board of
Directors of the Seller to comply with its fiduciary duties to stockholders
under the VBCA, and (B) prior to furnishing such information to such person,
the Seller receives from such person an executed confidentiality agreement
in reasonably customary form, or (ii) complying with Rules 14d-2 and 14e-2
promulgated under the Exchange Act with regard to a Competing Transaction.
(d) For purposes of this Agreement, a "Competing Transaction" shall
mean any of the following involving the Seller or any of its Subsidiaries:
(i) a merger, consolidation, share exchange, business combination or similar
transaction; (ii) a sale, lease, exchange, mortgage, pledge, transfer or
other disposition of 10% or more of assets in a single transaction or series
of transactions; (iii) any sale of 10% or more of the shares of capital
stock or of voting power (or securities convertible or exchangeable into or
otherwise evidencing, or any agreement evidencing, the right to acquire
capital stock or voting power); (iv) any tender offer (including a self-
tender offer), exchange offer, sale of securities, acquisition of beneficial
ownership (within the meaning of Section 13(d)(1) of the Exchange Act and
Rule 13d-3 thereunder) of or the right to vote securities representing 10%
or more of shares of capital stock or of voting power or the filing of a
registration statement in connection therewith; (v) any solicitation of
proxies in opposition to the Stockholder Approval; (vi) the filing of an
acquisition application (or the giving of an acquisition notice), whether in
draft or final form, under the BHCA or the Change in Bank Control Act with
respect to the Seller or Marble; (vii) any person shall have acquired
beneficial ownership or the right to acquire beneficial ownership of, or any
"group" (as such term is defined under Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder) shall have been formed
which beneficially owns or has the right to acquire beneficial ownership of,
10% or more of the then outstanding shares of capital stock or of voting
power; or (viii) any public announcement of a proposal, plan or intention to
do any of the foregoing.
Section 4.02 Certain Policies of the Seller; Balance Sheet. (a) If
requested by the Purchaser, the Seller shall, prior to the close of business
on the business day immediately preceding the Closing Date, consistent with
generally accepted accounting principles, change its policies and practices
with respect to the charge-off and classification of loans, securities or
other investment or financial instruments, reserves and provisions for loan
losses, and the placement of loans, securities or other investment or
financial instruments in non-accrual status, as shall be directed by the
Purchaser to reflect the Purchaser's plans, policies and practices with
respect to the conduct of the Purchaser's business following the Effective
Time.
(b) The Seller's representations, warranties and covenants contained
in this Agreement shall not be deemed to be untrue or breached in any
respect for any purpose as a consequence of any modifications or changes
undertaken to conform to the Purchaser's policies solely on account of this
Section 4.02.
Section 4.03 Employees. (a) All persons who are employees of the
Seller or its Subsidiaries immediately prior to the Effective Time (the
"Seller's Employees") shall, following the Merger and the Bank Merger,
become employees of the Purchaser; provided, however, that in no event shall
any of the Seller's Employees be officers of the Purchaser, or have or
exercise any power or duty conferred upon such an officer, unless and until
duly elected or appointed to such position in accordance with the bylaws of
the Purchaser. The Purchaser shall have no duty or obligation to continue to
employ (or to cause the Seller or its Subsidiaries to continue to employ)
any of the Seller's Employees beyond the Effective Time. To the extent that
the Purchaser terminates the employment of any of Seller's Employees, other
than for cause, within twelve (12) months following the Effective Time, the
Purchaser shall provide severance benefits comparable to those which would
have been paid under the applicable written severance pay plan of the Seller
(or the Subsidiary of the Seller that employed such Seller's Employee) in
effect on, and delivered to the Purchaser prior to, the date of this
Agreement and referred to in the Disclosure Letter (the "Severance Plan").
The Purchaser shall not have any obligation under the preceding sentence to
provide such severance benefits to any individual who is entitled to
severance benefits or the equivalent thereof under the terms of an
individual contract with the Seller or any of its Subsidiaries or to provide
such severance benefits to any Seller's Employee under more than one
severance plan. After the expiration of the twelve-month period following
the Effective Time, the Seller's Employees shall be entitled only to such
severance benefits as the Purchaser may make available from time to time.
(b) The Purchaser shall employ Edward J. Grover, President and Chief
Executive Officer of the Seller, in accordance with the terms and conditions
of the employment agreement in the form previously agreed to by the Seller
and the Purchaser (the "Grover Agreement").
Section 4.04 Access and Information. (a) Upon reasonable notice, the
Seller shall (and shall cause its Subsidiaries to) afford to the Purchaser
and its representatives (including directors, officers and employees of the
Purchaser and its affiliates, and counsel, accountants and other
professionals retained) such reasonable access during normal business hours
as the Purchaser may reasonably request throughout the period prior to the
Effective Time to the books, records (including tax returns and work papers
of independent auditors), properties and personnel of the Seller and its
Subsidiaries, and to such other information as the Purchaser may reasonably
request (except for materials that are legally privileged or which the
Seller is prohibited by applicable law from disclosing); provided, however,
that no investigation pursuant to this Section 4.04 shall affect or be
deemed to modify any representation or warranty made herein.
(b) Each party hereto shall not, and shall cause its respective
representatives not to, use any information obtained from any other such
party as a result of this Agreement (including this Section 4.04) or in
connection with the transactions contemplated hereby (whether so obtained
before or after the execution hereof), including work papers and other
materials derived therefrom (collectively, the "Confidential Information"),
for any purpose unrelated to the consummation of the transactions
contemplated by this Agreement. Subject to the requirements of applicable
law, each party hereto shall keep confidential, and shall cause its
respective representatives to keep confidential, all Confidential
Information relating to or furnished by any other such party unless such
information (i) was already (or becomes) known to the general public, other
than from a prohibited disclosure by a party to this Agreement or its
representatives, (ii) becomes available to such party or an affiliate of
such party from sources (other than another party to this Agreement or its
representatives) not known by such party to be bound by a confidentiality
obligation or agreement, (iii) is disclosed with the prior written approval
of the party which furnished such Confidential Information, or (iv) is or
becomes readily ascertainable from published information. In the event that
this Agreement is terminated or the transactions contemplated by this
Agreement shall otherwise fail to be consummated, each party hereto and its
representatives shall promptly cause all Confidential Information in the
possession of it and its representatives, including all copies or extracts
thereof, to be returned to the party which furnished the same or to be
destroyed.
Section 4.05 Certain Filings, Consents and Arrangements. The Parent,
the Purchaser and the Seller shall, and the Purchaser shall cause Interim
to, (a) as soon as practicable make (or cause to be made) any filings and
applications required to be made in order to obtain all Government
Approvals, and all such other approvals, consents and waivers of
governmental entities necessary or appropriate for the consummation of the
transactions contemplated hereby (collectively with the Government
Approvals, the "Required Approvals"), (b) cooperate with one another (i) in
promptly determining what filings are required to be made or approvals,
consents or waivers are required to be obtained under any applicable law
with respect to the consummation of the transactions contemplated by this
Agreement and the Plan of Merger, and (ii) in promptly making any such
filings, furnishing information required in connection therewith and seeking
timely to obtain any Required Approvals, (c) use reasonable efforts to
obtain all Required Approvals, and to respond to all inquiries and requests
for information from governmental entities, (d) apprise each other of the
content of all communications with governmental entities with respect to all
filings and applications, and (e) deliver to the other copies of all such
filings and applications (except, insofar as delivery by the Parent or the
Purchaser is concerned, for materials that are legally privileged, which it
is prohibited by applicable law from disclosing or which constitutes
confidential business information) promptly after they are filed. In
addition, the Parent shall, as promptly as practicable after the date
hereof, make such filings and applications as shall be required in order to
obtain the confirmation referred to in Section 5.02(a) and shall use all
reasonable efforts to cause such confirmation to be obtained.
Section 4.06 Antitakeover Provisions. The Seller and its Subsidiaries
shall use reasonable best efforts (a) to exempt or continue to exempt the
Parent, the Purchaser, this Agreement, the Merger and the other transactions
contemplated by this Agreement from any provisions of an antitakeover nature
in the articles of association or bylaws of the Seller and its Subsidiaries
and the provisions of any state antitakeover laws, and (b) upon the
reasonable request of the Purchaser, to assist in any challenge by the
Purchaser to the applicability to the Agreement, the Merger or the other
transactions contemplated by this Agreement of any state antitakeover law.
Section 4.07 Additional Agreements. Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees to use all
reasonable efforts to take promptly, or cause to be taken promptly, all
actions and to do promptly, or cause to be done promptly, all things
necessary, proper or advisable under applicable law to consummate and make
effective the transactions contemplated by this Agreement as promptly as
practicable, including using reasonable efforts to obtain all necessary
actions or non-actions, extensions, waivers, consents and approvals from all
applicable governmental entities and other persons and effecting all
necessary filings and applications (including filings and applications in
respect of Required Approvals).
Section 4.08 Publicity. The initial press release announcing this
Agreement shall be a joint press release and thereafter the Seller and the
Purchaser shall consult with each other in issuing any press releases or
similar public disclosure with respect to the other or the transactions
contemplated hereby and in making any filings with any governmental entity
or SRO with respect thereto; provided, however, that nothing contained in
this Section 4.08 shall prohibit any party, following notification to the
other parties to this Agreement, from making any disclosure which, after
consultation with its counsel, it deems necessary to comply with the
requirements of applicable law.
Section 4.09 Stockholder Meeting. The Seller shall take all action
necessary, in accordance with the VBCA and the articles of association and
bylaws of the Seller, to convene a meeting of the holders of Seller Common
Stock (the "Stockholder Meeting") as promptly as practicable for the purpose
of considering and voting on the approval of this Agreement and the
transactions contemplated hereby, including the Merger. The Seller's Board
of Directors, subject to its fiduciary duties as advised by such Board's
counsel, (a) shall recommend at the Stockholder Meeting that the holders of
the Seller Common Stock vote in favor of the approval of this Agreement and
the transactions contemplated hereby, including the Merger, and (b) shall
use its reasonable best efforts to solicit such approval (including, at the
request of the Purchaser, the retention of one or more proxy soliciting
firms to assist in the solicitation of proxies from stockholders of the
Seller in favor of such approval by mail, telephone or personal
solicitation).
Section 4.10 Proxy Statement. As soon as practicable after the date
hereof, the Seller shall prepare a proxy statement pursuant to Regulation
14A under the Exchange Act, which shall be reasonably acceptable to the
Purchaser, in connection with the solicitation of proxies with respect to
the Stockholder Meeting (the "Proxy Statement"), file the Proxy Statement
with the SEC, respond to comments of the staff of the SEC and promptly
thereafter mail the Proxy Statement to all holders of record (as of the
applicable record date) of shares of Seller Common Stock. The Seller shall
provide the Purchaser with reasonable opportunity to review and comment upon
the contents of the Proxy Statement. The Seller represents and covenants
that the Proxy Statement and any amendment or supplement thereto, at the
date of mailing to stockholders of the Seller and the date of the
Stockholder Meeting, shall be in material compliance with applicable law,
including with all relevant rules and regulations of the SEC, and shall not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that no representation is made by
the Seller with respect to statements made in the Proxy Statement based on
information supplied by the Parent or the Purchaser for inclusion therein.
The Purchaser shall furnish the Seller with all information concerning the
Parent and the Purchaser as the Seller may reasonably request in connection
with the Proxy Statement. The Seller shall cause to be delivered to the
Purchaser letters of procedures from the Seller's independent certified
public accountants, (a) dated the date of the mailing of the Proxy Statement
to the Seller's stockholders and delivered on such date, and (b) dated a
date not earlier than five (5) business days preceding the Closing Date and
addressed to the Purchaser and delivered on or prior to the Closing Date,
substantively in the form of Annex 2 attached hereto.
Section 4.11 Notification of Certain Matters. The Purchaser and the
Seller shall give prompt notice to the other of (a) the occurrence or its
knowledge of any event or condition that would cause any of its
representations or warranties set forth in this Agreement not to be true and
correct in all material respects as of the date of this Agreement or as of
the Effective Time (except as to any representation or warranty which
specifically relates to an earlier date), or any of its obligations set
forth in this Agreement required to be performed at or prior to the
Effective Time not to be performed in all material respects at or prior to
the Effective Time, including, insofar as the Seller is concerned, any
event, condition, change or occurrence which individually or in the
aggregate has had, or which, so far as reasonably can be foreseen at the
time of its occurrence, is reasonably likely to result in, a Material
Adverse Effect on it, and (b) any action of a third party of which it
receives notice that might reasonably be expected to prevent or materially
delay the consummation of the transactions contemplated hereby, including
any notice or other communication from any third party alleging that the
consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement.
Section 4.12 Indemnification. (a) From and after the Effective Time
through the third anniversary of the Effective Date, the Parent and the
Purchaser, jointly and severally, agree to indemnify and hold harmless each
present and former director and officer of the Seller or its Subsidiaries
(each, an "Indemnified Party"), against all reasonable costs or expenses
(including reasonable attorneys' fees), and all judgments, fines, losses,
claims, damages or liabilities (collectively, "Costs"), incurred in
connection with any litigation, proceeding or investigation, whether civil,
criminal, or administrative and whether or not the Indemnified Party is a
party thereto, arising in whole or in part out of the fact that such person
is or was a director, officer or employee of the Seller or its Subsidiaries
at or prior to the Effective Time, whether asserted or claimed prior to, at
or after the Effective Time, and to advance any such Costs to each
Indemnified Party as they are from time to time incurred (subject to receipt
of an undertaking to repay such advances if it is determined that such
Indemnified Party is not entitled to indemnification) to the fullest extent
then permitted under the VBCA.
(b) Any Indemnified Party wishing to claim indemnification under
Section 4.12(a), upon learning of any such litigation, proceeding or
investigation, shall promptly notify the Purchaser thereof, but the failure
to so notify shall not relieve the Purchaser of any liability it may have
hereunder to such Indemnified Party if such failure does not materially and
substantially prejudice the Purchaser. In the event of any such litigation,
proceeding or investigation, (i) the Purchaser shall have the right to
assume the defense thereof with counsel reasonably acceptable to the
Indemnified Party and the Purchaser shall not be liable to such Indemnified
Party for any legal expenses of other counsel subsequently incurred by such
Indemnified Party in connection with the defense thereof, except that if the
Purchaser does not elect to assume such defense within a reasonable time or
counsel for the Indemnified Party at any time advises, in good faith and on
a reasonable basis, that there are issues which raise conflicts of interest
between the Purchaser and the Indemnified Party, the Indemnified Party may
retain counsel satisfactory to such Indemnified Party, and the Purchaser
shall remain responsible for the reasonable fees and expenses of such
counsel as set forth above promptly as statements therefor are received;
provided, however, that the Purchaser shall be obligated pursuant to this
paragraph (b) to pay for only one firm of counsel for all Indemnified
Parties in any one jurisdiction with respect to any given litigation,
proceeding or investigation unless counsel for an Indemnified Party advises,
in good faith and on a reasonable basis, that the use of one counsel for
such Indemnified Parties would present such counsel with a conflict of
interest, (ii) the Indemnified Party shall reasonably cooperate in the
defense of any such matter, and (iii) neither the Parent nor the Purchaser
shall be liable for any settlement effected by an Indemnified Party without
its prior written consent.
(c) The Parent and the Surviving Corporation shall use their best
efforts to maintain in effect for three years from the Effective Time, if
available, the current directors' and officers' liability insurance policies
maintained by the Seller (provided that the Parent and the Surviving
Corporation may substitute therefor policies of at least the same coverage
containing terms and conditions which are not materially less favorable)
with respect to matters occurring prior to the Effective Time; provided,
however, that in no event shall the Surviving Corporation be required to
expend pursuant to this Section 4.12(c) more than an amount per year equal
to the current annual premium paid by the Seller for such insurance (which
premium the Seller represents and warrants to be approximately $95,000 per
annum in the aggregate).
(d) In the event that the Parent, the Surviving Corporation or any of
their respective successors or assigns (i) consolidates with or merges into
any other person and shall not be the continuing or surviving corporation or
entity of such consolidation or merger, or (ii) transfers all or
substantially all of its properties and assets to any person, then, and in
each such case, proper provision shall be made so that the successors and
assigns of the Parent or the Surviving Corporation, as the case may be,
shall assume the obligations set forth in this Section 4.12, which
obligations are expressly intended to be for the irrevocable benefit of, and
shall be enforceable by, each director, officer and employee covered hereby.
Section 4.13 Reports. The Seller agrees to file, and to cause its
Subsidiaries to file, all reports, registrations and statements required to
be filed with the SEC, all Regulatory Agencies, the NASD and any other SRO
between the date of this Agreement and the Closing Date, and to deliver to
the Purchaser copies of all such reports, registrations and statements
promptly after the same are filed.
Section 4.14 Advisory Board. (a) The Purchaser agrees, promptly
following the Effective Time, to cause all the members of the Seller's Board
of Directors who are members both as of the date of this Agreement and
immediately prior to the Effective Time who are willing to serve to be
elected or appointed as members of a newly formed Advisory Board of the
Purchaser (the "Advisory Board"), the function of which shall be to advise
the Purchaser and its Subsidiaries on deposit and lending activities in
Marble's former market area and to maintain and develop customer
relationships, but shall not have power to vote on actions taken by the
Board of Directors of the Purchaser and shall not be included in determining
the number of Directors constituting the entire Board of Directors. The
Purchaser may at the time of the establishment of the Advisory Board or at
any time thereafter, add additional members to the Advisory Board. The
Purchaser may request the resignation of any member of the Advisory Board,
and such member promptly shall so resign, if the Purchaser reasonably
determines that such member has a conflict of interest that compromises such
member's ability to effectively serve as a member of the Advisory Board or
"for cause" as would allow for removal of such person as a director of the
Purchaser if such person was a member of the Purchaser's Board of Directors,
pursuant to the Purchaser's bylaws as in effect from time to time. Members
of the Advisory Board initially shall be elected or appointed for a term of
eighteen (18) months. Thereafter, the Purchaser, acting through its Board of
Directors, may, in its sole discretion, choose to re-elect or re-appoint any
or all of the initial members of such Advisory Board to such additional term
following the initial eighteen-month term as the Purchaser shall determine;
provided, however, that the Purchaser shall have no obligation to re-elect
or re-appoint any member, or to continue the Advisory Board, for a period
beyond the initial eighteen-month term thereof.
(b) The Advisory Board shall meet, at the direction of the Purchaser,
once every month and each member thereof shall be expected to attend each
such meeting (absent disability or some other cause acceptable to the
Purchaser). The Chairman, President and Chief Executive Officer of the
Purchaser shall approve the procedures for, and scheduling of, meetings of
the Advisory Board members. Each member of the Advisory Board who is not at
the time an officer or employee of the Parent or any of its Subsidiaries
shall receive a fee of $875 for each meeting attended, payable on the date
of such meeting; provided, however, that the total of such fees to each
individual during any twelve-month period shall not exceed $10,500.
(c) The parties agree to amend the provisions of this Section 4.14 if
necessary to comply with any requirements imposed by the OTS with respect to
the Advisory Board in connection with its review of the Merger and related
transactions contemplated hereunder.
ARTICLE V
CONDITIONS TO CONSUMMATION
Section 5.01 Conditions to Each Party's Obligations to Effect the
Merger. The respective obligations of each party to effect the Merger shall
be subject to the fulfillment at or prior to the Effective Time of the
following conditions:
(a) the Plan of Merger shall have been approved by the requisite
vote of the holders of Seller Common Stock at the Stockholder Meeting
in accordance with the articles of association and the bylaws of the
Seller and the VBCA;
(b) all Required Approvals shall have been obtained and shall
remain in full force and effect, all conditions precedent and
requirements prescribed by applicable law or by such Approvals shall
have been satisfied, and all statutory waiting periods in respect
thereof shall have expired; provided, however, that the condition set
forth in this Section 5.01(b) to the Purchaser's obligation to effect
the Merger shall not be met if any such Approval is, in the reasonable
judgment of the Purchaser, subject to any condition or requirement
that the Purchaser deems to be materially adverse or materially
burdensome or to substantially deprive the Purchaser of the benefits
which it anticipates to receive in the Merger and the Bank Merger,
including any condition that either the Merger or the Bank Merger be
effected pursuant to a different structure than that contemplated
hereby;
(c) no party hereto, and no Subsidiary of any party hereto,
shall be subject to any order of a court or governmental entity of
competent jurisdiction which enjoins or prohibits the consummation of
the Merger or the exercise of control by the Parent or the Purchaser
over the Seller, or any of its Subsidiaries following the Merger;
provided, however, that it shall be a further condition to the
obligation of the Purchaser to cause the Merger to be consummated
that, except for litigation, proceedings or investigations that the
Purchaser has been advised by its counsel do not have a substantial
likelihood of success, no litigation, proceeding or investigation
shall be pending or threatened before any court or governmental entity
of competent jurisdiction in which it is sought to restrain or
prohibit the consummation of the transactions contemplated by this
Agreement or the exercise of control by the Parent or the Purchaser
over the Seller or any of its Subsidiaries following the Merger, or in
which money damages in a material amount are sought with respect to
this Agreement or any of the transactions contemplated hereby; and
(d) the Option Registration Statement shall have become
effective under the Securities Act.
Section 5.02 Conditions to the Obligations of the Parent and the
Purchaser to Effect the Merger. The obligations of the Parent and the
Purchaser to effect the Merger shall be further subject to the satisfaction
at or prior to the Effective Time of the following conditions, any one or
more of which may be waived by the Parent and the Purchaser:
(a) the Purchaser shall have received from the Federal Reserve
Board, in form and substance reasonably satisfactory to the Purchaser,
confirmation that the consummation of the Merger and the Bank Merger
will not require the Parent or the Purchaser (i) to register as a bank
holding company under Section 3 of the BHCA, or (ii) to obtain the
prior approval of the Federal Reserve Board with respect to any of the
transactions contemplated by this Agreement;
(b) each of the obligations of the Seller required to be
performed by it at or prior to the Closing (as defined in Section
7.01) pursuant to the terms of this Agreement shall have been duly
performed and complied with in all material respects, and the
Purchaser shall have received a certificate to the foregoing effect
dated the Closing Date and signed by the President and the Chief
Financial Officer of the Seller;
(c) the representations and warranties of the Seller contained
in this Agreement shall be true and correct in all material respects
(except that this qualification shall not apply in the case of
representations and warranties qualified by references to "material"
or "Material Adverse Effect") as of the date of this Agreement and as
of the Effective Time (as though made at and as of the Effective Time
except as to any representation or warranty which specifically relates
to an earlier date), and the Purchaser shall have received a
certificate to the foregoing effect dated the Closing Date signed by
the President and the Chief Financial Officer of the Seller;
(d) the Purchaser shall have received certified copies of the
resolutions or documents of like import evidencing the authorization
of this Agreement and the consummation of the transactions
contemplated hereby by the Seller's Board of Directors and the
Seller's stockholders;
(e) the Purchaser shall have received an opinion or opinions,
dated the Closing Date, from (i) Devine, Millimet & Branch,
Professional Corporation, counsel to the Seller, substantially in the
form previously agreed to by the Seller and the Purchaser and
addressing such other matters as may be reasonably requested by the
Purchaser, and (ii) Vermont counsel, selected by the Seller and
reasonably acceptable to the Purchaser, addressing such matters of
Vermont law as may be reasonably requested by the Purchaser, such
opinion or opinions referred to in this Section 5.02(e) to be in form
and collectively in substance as is customary for the type of
transactions contemplated hereby and reasonably satisfactory to the
Purchaser;
(f) the holders of not more than 10% of all issued and
outstanding shares of the Seller Common Stock shall have exercised or
purported to exercise rights of appraisal with respect to the Merger;
and
(g) the Seller shall have furnished the Purchaser with such
certificates of its officers or others and such other documents as the
Purchaser may reasonably request; and
(h) Edward J. Grover shall have executed and delivered to the
Purchaser the Grover Agreement.
Section 5.03 Conditions to the Obligations of the Seller to Effect the
Merger. The obligations of the Seller to effect the Merger shall be further
subject to the satisfaction at or prior to the Effective Time of the
following conditions, any one or more of which may be waived by the Seller:
(a) each of the obligations of the Parent and the Purchaser
required to be performed by them at or prior to the Closing pursuant
to the terms of this Agreement shall have been duly performed and
complied with in all material respects, and the Seller shall have
received certificates to the foregoing effect dated the Closing Date
and signed by the President and the Chief Financial Officer of each of
the Parent and the Purchaser;
(b) the representations and warranties of the Parent and the
Purchaser contained in this Agreement shall be true and correct in all
material respects (except that this qualification shall not apply in
the case of representations and warranties qualified by references to
"material" or "Material Adverse Effect") as of the date of this
Agreement and as of the Effective Time (as though made at and as of
the Effective Time except as to any representation or warranty which
specifically relates to an earlier date), and the Seller shall have
received certificates to the foregoing effect dated the Closing Date
signed by the President and the Chief Financial Officer of each of the
Parent and Purchaser;
(c) the Seller shall have received certified copies of the
resolutions or documents of like import evidencing the authorization
of this Agreement and the consummation of the transactions
contemplated hereby by the Board of Directors of each of the Parent
and the Purchaser;
(d) the Seller shall have received an opinion or opinions, dated
the Closing Date, from Cleary, Gottlieb, Steen & Hamilton, counsel to
the Parent and the Purchaser, substantially in the form previously
agreed to by the Seller and the Purchaser and addressing such other
matters as may be reasonably requested by the Seller, in form and
collectively in substance as is customary for the type of transactions
contemplated hereby and reasonably satisfactory to the Seller; and
(e) each of the Parent and the Purchaser shall have furnished
the Seller with such certificates of its officers or others and such
other documents as the Seller may reasonably request.
ARTICLE VI
TERMINATION
Section 6.01 Termination. Notwithstanding any other provision of this
Agreement, this Agreement may be terminated, and the Merger abandoned, prior
to the Effective Time, either before or after its approval by the
stockholders of the Seller:
(a) by the mutual consent of the Purchaser and the Seller, if
the Board of Directors of each so determines by vote of a majority of
the members of its entire Board;
(b) by the Purchaser or the Seller, if the Board of Directors of
the party seeking to terminate so determines by vote of a majority of
the members of its entire Board, in the event of (i) a failure to
perform or comply by the other party with any covenant or agreement of
such other party contained in this Agreement, which failure or non-
compliance is material in the context of the transactions contemplated
by this Agreement, or (ii) any inaccuracies or omissions in the
representations or warranties of the other party contained in this
Agreement the circumstances as to which either individually or in the
aggregate have, or reasonably could be expected to have, a Material
Adverse Effect on such other party; in either case which has not been
or cannot be cured within thirty (30) calendar days after written
notice thereof is given by the party seeking to terminate to such
other party;
(c) by the Purchaser or the Seller by written notice to the
other party if either (i) any approval, consent or waiver of a
governmental entity required to permit consummation of the
transactions contemplated hereby shall have been denied or is subject
to any condition or requirement which the Purchaser reasonably deems
to be materially adverse or materially burdensome or to substantially
deprive the Purchaser of the benefits which it anticipates to receive
in the Merger and the Bank Merger, as described in Section 5.01(b), or
(ii) any governmental entity of competent jurisdiction shall have
issued an order enjoining or otherwise prohibiting consummation of the
transactions contemplated by this Agreement;
(d) by the Purchaser or the Seller, if the Board of Directors of
the party seeking to terminate so determines by vote of a majority of
the members of its entire Board, in the event that (i) the Merger is
not consummated by April 30, 1996, or (ii) the Stockholder Meeting is
held and the holders of Seller Common Stock shall fail to approve the
Plan of Merger thereat (or any adjournment thereof); unless in either
case the failure of such occurrence is due to the failure to perform
or comply with any term contained in this Agreement by the party
seeking to terminate;
(e) by the Purchaser by written notice to the Seller in the
event that there has occurred an event, condition, change or
occurrence which, individually or in the aggregate, has had or could
reasonably be expected to result in a Material Adverse Effect on the
Seller; provided, that the Purchaser shall have given the Seller
thirty (30) calendar days' prior written notice of such termination,
and the Seller shall not have remedied such event, condition, change
or occurrence by the end of such thirty-day period; or
(f) by the Purchaser, by written notice to the Seller upon the
occurrence of any of the following:
(i) the Seller's Board of Directors shall have recommended
any Competing Transaction or shall have entered into an agreement
with respect to, authorized, proposed or publicly announced its
intention to enter into, any Competing Transaction;
(ii) the Seller's Board of Directors shall have withdrawn
or modified in a manner adverse to the Purchaser its
authorization, approval or recommendation of this Agreement or
the Merger, or shall have resolved to do the same, unless such
withdrawal or modification results solely from a material breach
by the Purchaser of any material obligation, covenant or
agreement of the Purchaser contained in this Agreement which the
Purchaser fails to cure within thirty (30) calendar days after
notice thereof is received from the Seller, or (B) upon a
request to reaffirm the Seller's approval or recommendation of
this Agreement or the Merger, the Board of Directors of the
Seller shall fail to do so within thirty (30) calendar days
after such request is made; or
(iii) any person, entity or "group" (as that term is used
in Section 13(d)(3) of the Exchange Act) (other than the
Purchaser or any of its Subsidiaries) acquires more than 10% of
the voting power of the Seller or all or any material portion of
the assets of the Seller (including through any merger or
business combination).
Section 6.02 Effect of Termination. In the event of the termination of
this Agreement by either the Purchaser or the Seller, as provided in this
Article VI, this Agreement shall thereafter become void and have no effect,
and there shall be no liability on the part of any party hereto or their
respective officers or directors, except that (a) the provisions of Section
4.04(b), 8.03, 8.06 and 8.07 shall survive and remain in full force and
effect, and (b) no party shall be relieved from any liability arising out of
the willful breach by such party of any of its covenants or agreements or
any material misrepresentation by such party in this Agreement. In no event
shall any officer, agent or director of the Parent, the Purchaser, the
Seller, Interim or any of their respective Subsidiaries be personally liable
(i) for any default by any party in its obligations hereunder unless any
such default was intentionally caused by such officer, agent or director, or
(ii) in connection with any representation made in or pursuant to this
Agreement unless such officer, agent or director shall have had actual
knowledge that such representation was materially false when made.
ARTICLE VII
CLOSING, CLOSING DATE AND EFFECTIVE TIME
Section 7.01 Closing Date and Effective Time. Subject to the
provisions of Article V and VI, the closing of the transactions contemplated
hereby (the "Closing") shall take place at the offices of Cleary, Gottlieb,
Steen & Hamilton, One Liberty Plaza, New York, New York 10006, on such date
(the "Closing Date") and at such time as the Purchaser and the Seller
mutually agree as soon as practicable after the expiration of all applicable
waiting periods in connection with the Required Approvals and all conditions
to the consummation of the transactions contemplated by this Agreement are
satisfied or waived. The parties will endeavor to close the Merger by
December 31, 1995, but in no event shall the Closing Date be later than
April 30, 1996. On or before the Closing Date, articles of merger in the
form prescribed by the VBCA shall be executed in accordance with all
appropriate legal requirements and shall be filed as required by law, and
the Merger shall become effective at such time on the Closing Date as shall
be specified in such articles of merger. The "Effective Time" of the Merger
shall be the time on the Closing Date as set forth in such articles of
merger.
Section 7.02 Deliveries at the Closing. Subject to the provisions of
Articles V and VI, on the Closing Date there shall be delivered to the
Purchaser and the Seller the documents and instruments required to be
delivered under Article V.
ARTICLE VIII
OTHER MATTERS
Section 8.01 Certain Definitions; Interpretation. As used in this
Agreement, the following terms shall have the meanings indicated, unless the
context otherwise requires:
"material" means material to the Purchaser or the Seller (as the
case may be) and its respective Subsidiaries, taken as a whole.
"person" includes an individual, corporation, partnership,
association, trust or unincorporated organization.
When a reference is made in this Agreement to a Section or an Annex, such
reference shall be to a Section of, or Annex to, this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for ease of reference only and shall not affect the meaning or
interpretation of this Agreement. Whenever the words "include," "includes,"
or "including" are used in this Agreement, they shall be deemed followed by
the words "without limitation." Any singular term in this Agreement shall be
deemed to include the plural, and any plural term the singular. Any
reference to gender in this Agreement shall be deemed to refer to the other
gender.
Section 8.02 Non-Survival of Representations, Warranties, Covenants
and Agreements. No representation, warranty, covenant or agreement contained
in this Agreement (or in any instrument delivered pursuant to this
Agreement) shall survive beyond the Effective Time, except for the
agreements contained in this Section 8.02 and in Article I and Sections
1.03, 4.03, 4.12, 4.14, 8.03 and 8.06.
Section 8.03 Amendment. This Agreement may be amended by the parties
hereto, by or pursuant to action taken by their respective Boards of
Directors, at any time before or after approval hereof by the stockholders
of the Seller but, after such approval, no amendment shall be made which
reduces the amount or changes the form of the Merger Consideration as
provided in Section 1.02 or which in any way materially adversely affects
the rights of such stockholders, without the further approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing specifically referring to this Section 8.03 and signed on behalf of
each of the parties hereto.
Section 8.04 Waiver. At any time prior to the Effective Time, the
Purchaser and the Seller may (a) extend the time for the performance of any
of the obligations or other acts of the other, (b) waive any inaccuracies in
the representations and warranties of the other contained herein or in any
documents delivered pursuant hereto, and (c) waive compliance by the other
with any of the agreements or conditions contained herein which may legally
be waived. Any agreement on the part of a party hereto to any such extension
or waiver shall be valid only if set forth in an instrument in writing
specifically referring to this Section 8.04 and signed on behalf of such
party.
Section 8.05 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to constitute an original, but
all of which together shall constitute one and the same instrument.
Section 8.06 Governing Law. (a) As to matters of corporate and
banking law and regulation applicable to the Seller, to Interim or to the
Merger, the substantive law of the State of Vermont shall apply to the
extent that Federal law does not apply, and (b) for all other purposes, this
Agreement shall be governed by, and interpreted in accordance with, the laws
of the State of New York, without regard to conflicts of laws principles.
Section 8.07 Expenses. Except as provided in the Fee Letter, each
party hereto will bear all expenses incurred by it in connection with this
Agreement and the transactions contemplated hereby.
Section 8.08 Notices. All notices, requests, acknowledgements and
other communications hereunder to a party shall be in writing and shall be
delivered by hand, overnight courier or facsimile transmission (confirmed in
writing) to such party at its address or facsimile number set forth below or
such other address or facsimile number as such party may specify by notice
hereunder, and shall be deemed to have been delivered as of the date so
delivered.
If to the Seller, to: Marble Financial Corporation
47 Merchants Row
P.O. Box 978
Rutland, Vermont 05702
Facsimile: (802) 747-0321
Attention: Edward J. Grover
With copies to: Devine, Millimet & Branch, Professional Corporation
111 Amherst Street
Box 719
Manchester, New Hampshire 03105
Facsimile: (603) 669-8547
Attention: Paul C. Remus, Esq.
If to the Parent
or the Purchaser, to: ALBANK, FSB
10 North Pearl Street
Albany, New York 12207-2774
Facsimile: (518) 445-2016
Attention: Herbert G. Chorbajian
With copies to: Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Facsimile: (212) 225-3999
Attention: Robert L. Tortoriello, Esq.
Section 8.09 Entire Agreement; Etc. This Agreement, together with the
Disclosure Letter, Annex I hereto and the Fee Letter, represent the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersede any and all other oral or written
agreements heretofore made. All terms and provisions of this Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns. Except as to Sections 1.03, 4.12
and 4.14, nothing in this Agreement is intended to confer upon any other
person any rights or remedies of any nature whatsoever under or by reason of
this Agreement.
Section 8.10 Assignment. This Agreement may not be assigned by any
party hereto without the written consent of the other parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the day and year first
above written.
ALBANK FINANCIAL CORPORATION
By: /s/ Herbert G. Chorbajian
Herbert G. Chorbajian
Chairman of the Board, President and
Chief Executive Officer
ALBANK, FSB
By: /s/ Herbert G. Chorbajian
Herbert G. Chorbajian
Chairman of the Board, President and
Chief Executive Officer
MARBLE FINANCIAL CORPORATION
By: /s/ Edward J. Grover
Edward J. Grover
President and Chief Executive Officer
ANNEX 1
to the Agreement and Plan of Merger
PLAN OF MERGER
THIS PLAN OF MERGER ("Plan") dated as of , 199 by
and among ALBANK FINANCIAL CORPORATION, a Delaware corporation ("AFC"),
ALBANK, FSB, a federally chartered stock savings bank ("ALBANK"),
ALBANY INTERIM CORPORATION, a Vermont corporation wholly owned by ALBANK
("Interim"), and MARBLE FINANCIAL CORPORATION, a Vermont corporation
("Marble"), is as follows:
W I T N E S S E T H:
WHEREAS, the Boards of Directors of ALBANK, Interim and Marble, prior
to the date hereof, have approved this Plan, under which Interim shall be
merged with and into Marble, with Marble being the surviving corporation
(the "Merger"), and have authorized the execution hereof; and
WHEREAS, Marble, AFC and ALBANK have entered into an Agreement and
Plan of Merger dated as of June 20, 1995 (the "Merger Agreement"), which
contemplates the Merger.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto hereby agree as follows:
1. Subject to the satisfaction of the conditions of this Plan and to
the satisfaction or waiver of the conditions set forth in Article V of the
Merger Agreement (which are incorporated by reference herein), Interim shall
be merged with and into Marble in accordance with the Vermont Business
Corporation Act (the "VBCA"). The Merger shall be effective (the "Effective
Time") when a properly executed Certificate of Merger (together with any
other documents required by law to effectuate the Merger) shall be filed and
become effective as required under the VBCA, which filings shall be made as
soon as possible after the satisfaction or waiver of the conditions set
forth in Article V of the Merger Agreement. (The date on which the Effective
Time occurs is herein referred to as the "Effective Date".) When used in
this Plan, the term "Surviving Corporation" shall mean Marble as the
corporation surviving in the Merger as of the Effective Time and thereafter.
At the time the Merger becomes effective, the separate existence of Interim
shall cease. The Surviving Corporation shall possess all the rights,
privileges, powers and franchises of each of Interim and Marble, and shall
be subject to all restrictions, disabilities and duties imposed on Interim
and Marble, and the Merger otherwise shall have all of the effects as set
forth in the Merger Agreement. The Surviving Corporation shall be governed
by the laws of the State of Vermont. At the Effective Time, the articles of
association and bylaws of Marble shall be amended in their entirety to
conform to the articles of association and bylaws of Interim in effect
immediately prior to the Effective Time and shall become the articles of
association and bylaws of the Surviving Corporation. The directors and
officers of Interim shall become the directors and officers of the Surviving
Corporation. Each such director or officer shall continue in such office
until his or her successor is elected or appointed in accordance with the
bylaws of the Surviving Corporation and applicable law and shall have duly
qualified, or until his or her earlier death, disability, resignation,
removal or retirement.
2. The effect of the Merger on outstanding shares of Marble shall be
as follows:
(a) By virtue of the Merger, automatically and without any
action on the part of the holder thereof, each share of Marble's
common stock, $1.00 par value ("Marble Common Stock"), issued and
outstanding at the Effective Time (other than (i) shares held directly
or indirectly by ALBANK (other than shares held in a fiduciary
capacity or in satisfaction of a debt previously contracted), (ii)
shares held as treasury stock of Marble and (iii) Dissenting Shares,
as defined in paragraph (c) of this Section 2) shall become and be
converted into the right to receive $18.00 in cash, without interest
(the "Merger Consideration"). As of the Effective Time, each share of
Marble Common Stock held directly or indirectly by ALBANK (other than
shares held in a fiduciary capacity or in satisfaction of a debt
previously contracted) and each share of Marble Common Stock held as
treasury stock of Marble shall be cancelled and retired and cease to
exist, and no exchange or payment shall be made with respect thereto.
(b) The shares of common stock of Interim issued and outstanding
immediately prior to the Effective Time shall become shares of the
Surviving Corporation after the Merger and shall thereafter constitute
all of the issued and outstanding shares of the capital stock of the
Surviving Corporation.
(c) Shares of Marble Common Stock which are issued and
outstanding immediately prior to the Effective Time and which are held
by stockholders who did not vote in favor of the adoption of this Plan
and who comply with all of the relevant provisions of Chapter 13 of
the VBCA (the "Dissenting Shares") shall not be converted into or be
exchangeable for the right to receive the Merger Consideration (unless
and until such holders shall have failed to perfect or shall have
effectively withdrawn or lost such dissenters' rights under the VBCA),
but shall instead be entitled to all applicable dissenters' rights as
are prescribed by the VBCA. If any such holder shall have failed to
perfect or shall have effectively withdrawn or lost such dissenters'
rights, such holder's shares of Marble Common Stock shall thereupon be
converted into and become exchangeable for the right to receive, as of
the Effective Time, the Merger Consideration without any interest
thereon.
3. At and after the Effective Time, each certificate (each a
"Certificate") previously representing shares of Marble Common Stock (except
as specifically set forth in Section 2) shall represent only the right to
receive the Merger Consideration in cash, without interest. ALBANK shall
cause Certificates to be exchanged for the payment of the Merger
Consideration in the manner set forth in the Merger Agreement.
4. At the Effective Time, each outstanding option to purchase a share
of Marble Common Stock (a "Marble Stock Option") issued pursuant to the
Marble Financial Corporation 1986 Stock Option Plan and Marble Financial
Corporation 1994 Stock Option Plan, whether or not exercisable or vested,
shall be assumed by AFC. Each Marble Stock Option to acquire one share of
Marble Common Stock shall be deemed to constitute an option to acquire, for
the same price and on the same terms and conditions as are applicable under
such Marble Stock Option with respect to one share of Marble Common Stock, a
number of shares of common stock, $.01 par value, of AFC ("AFC Common
Stock") equal to the amount obtained (rounded up or down, as the case may
be, to the nearest one hundreth of a share) by dividing (i) the Merger
Consideration by (ii) the closing bid price per share of AFC Common Stock as
reported on the Nasdaq Stock Market, Inc.'s National Market on the trading
day immediately preceding the Closing Date as defined in the Merger
Agreement.
5. This Plan may be terminated pursuant to Article VI of the Merger
Agreement. In the event that this Plan is so terminated, the Merger provided
for herein shall be abandoned automatically and without any further act or
deed by the parties hereto.
6. This Plan may be amended by the parties hereto, by or pursuant to
action taken by their respective Boards of Directors, at any time before or
after approval hereof by the stockholders of Marble but, after such
approval, no amendment shall be made which reduces the amount or changes the
form of the Merger Consideration as provided in Section 2 or which in any
way materially adversely affects the rights of such stockholders, without
the further approval of such stockholders. This Plan may not be amended
except by an instrument in writing specifically referring to this Section 6
and signed on behalf of each of the parties hereto.
7. Any terms or provisions of this Plan (other than any matter which
cannot under applicable law be waived) may be waived at any time by the
party which is, or whose stockholders are, entitled to the benefits thereof
by an instrument in writing specifically referring to the provision or
provisions to be waived. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect such
party's right at a later time to enforce the same. No waiver by any party of
a condition or of the breach of this Plan, whether by conduct or otherwise,
in any one or more instances shall be deemed or be construed as a further or
continuing waiver of any such condition or breach or a waiver of any other
condition or of the breach of any other term, covenant, representation or
warranty of this Plan.
8. As to matters of corporate and banking law and regulation
applicable to Marble, to Interim or to the Merger, the substantive law of
the State of Vermont shall apply to the extent that Federal law does not
apply, and (b) for all other purposes, this Agreement shall be governed by,
and interpreted in accordance with, the laws of the State of New York,
without regard to conflicts of laws principles.
9. This Plan may be executed in multiple counterparts, each of which
shall be deemed an original and all of which together shall constitute one
agreement.
IN WITNESS WHEREOF, AFC, ALBANK, Interim and Marble have caused this
Plan to be executed by their duly authorized officers as of the date first
above written.
ALBANK FINANCIAL CORPORATION
By __________________________________
ALBANK, FSB
By __________________________________
ALBANY INTERIM CORPORATION
By __________________________________
MARBLE FINANCIAL CORPORATION
By __________________________________
ANNEX 2
to the Agreement and Plan of Merger
Form of Accountants' Procedures Letter
The Accountants' Procedures Letter shall be a letter of the
independent public accountants of the Seller, substantively to the effect
that:
a. Such accountants are independent public accountants with
respect to the Seller within the meaning of the Securities Act and the
Exchange Act and the rules and regulations of the SEC thereunder, and
have audited the subject audited consolidated financial statements and
issued an opinion with respect thereto;
b. In the opinion of such accountants, the audited consolidated
financial statements of the Seller examined by them comply as to form
in all material respects with the applicable requirements of the
Securities Act and the Exchange Act and the applicable published rules
and regulations of the SEC thereunder;
c. On the basis of the specified procedures (which do not
constitute an examination in accordance with generally accepted
auditing standards) consisting of a reading of the audited and
unaudited consolidated financial statements, if any, of the Seller,
inquiries of officers responsible for financial and accounting matters
of the Seller, and a reading of minutes of meetings of shareholders
and the Board of Directors of the Seller, nothing has come to the
attention of such accountants which causes them to believe: (i) that
the consolidated financial statements, if any, of the Seller contained
or incorporated by reference in the Proxy Statement do not comply in
all material respects with the applicable accounting requirements of
the Securities Act and the Exchange Act and the rules and regulations
thereunder; and (ii) that any such unaudited consolidated financial
statements of the Seller from which unaudited quarterly financial
information contained or incorporated by reference in the Proxy
Statement has been derived are not fairly presented in conformity with
generally accepted accounting principles applied on a basis consistent
with that of the audited consolidated financial statements; and
d. Such accountants have compared specified dollar amounts and
percentages contained in the Proxy Statement to dollar amounts and
percentages set forth in or derived from the audited consolidated
financial statements or the unaudited consolidated financial
statements, as applicable, of the Seller, and found such dollar
amounts and percentages to be in agreement.
ANNEX B
ALBANK FINANCIAL CORPORATION
ALBANK, FSB
10 North Pearl Street
Albany, New York 12207-2774
June 20, 1995
Marble Financial Corporation
47 Merchants Row
P.O. Box 978
Rutland, Vermont 05702
Attention: Edward J. Grover
President and Chief Executive Officer
Ladies and Gentlemen:
We refer to the Agreement and Plan of Merger (the "Merger Agreement")
of even date herewith by and among ALBANK Financial Corporation ("Parent"),
ALBANK, FSB ("Purchaser") and Marble Financial Corporation ("Seller").
Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Merger Agreement. In order to induce Parent and
Purchaser to enter into the Merger Agreement and in order to facilitate the
consummation of the transactions contemplated thereby, Seller agrees as
follows:
1. Representations and Warranties of Seller. Seller hereby
represents and warrants to Parent and Purchaser that Seller has all
requisite corporate power and authority to enter into this letter agreement
(this "Fee Letter") and to perform its obligations as set forth herein or
contemplated hereby. The execution, delivery and performance of this Fee
Letter have been duly authorized by all necessary corporate action on the
part of Seller. This Fee Letter has been duly executed and delivered by
Seller and constitutes a legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, subject to
bankruptcy, insolvency and similar laws affecting creditors' rights
generally, and subject to general principles of equity, whether applied in a
court of law or a court of equity.
2. Termination Fee. (a) In the event that the Merger Agreement is
terminated pursuant to Article VI thereof (regardless of whether such
termination is by Purchaser or Seller) and prior to or concurrently with
such termination a Trigger Event (as such term is defined below) shall have
occurred, Seller shall pay to Purchaser a fee of $3,500,000. Such fee shall
be payable in immediately available funds on the second business day
following the termination of the Merger Agreement.
(b) As used herein, "Trigger Event" shall mean the occurrence of any
of the following events:
(i) Seller (or its Board of Directors) shall have recommended any
Competing Transaction (as such term is defined below) or shall have
entered into a contract, agreement, obligation, instrument, understanding
or arrangement with respect to, authorized, proposed or publicly
announced its intention to enter into, any Competing Transaction; or
(ii) (A) Seller's Board of Directors shall have withdrawn or
modified in a manner adverse to Purchaser its authorization, approval or
recommendation of the Merger Agreement, the Plan of Merger or the Merger,
or shall have resolved to do the same, and (B) any Acquisition Proposal
shall have been made at any time after the date hereof and before the
date occurring six (6) months following such withdrawal, adverse
modification or resolution; or
(iii) (A) the Merger shall not have been approved at a meeting of
Seller's stockholders held for that purpose (the "Seller Stockholder
Meeting"), or the Seller Stockholder Meeting shall not have been held or
shall have been cancelled prior to termination of the Merger Agreement in
accordance with its terms, and (B) any Acquisition Proposal shall have
been made at any time after the date hereof and before the date occurring
six (6) months following the date of the Seller Stockholder Meeting or
such termination of the Merger Agreement, as the case may be.
(c) As used herein, "Competing Transaction" shall mean any of the
following involving Seller or any of its Subsidiaries: (A) a merger,
consolidation, share exchange, business combination or similar transaction;
(B) a sale, lease, exchange, mortgage, pledge, transfer or other disposition
of 10% or more of assets in a single transaction or series of transactions;
(C) any sale of 10% or more of the shares of capital stock or of voting
power (or securities convertible or exchangeable into or otherwise
evidencing, or any agreement or instrument evidencing, the right to acquire
capital stock or voting power); (D) any tender offer (including a self-
tender offer), exchange offer, sale of securities, acquisition of beneficial
ownership (within the meaning of Section 13(d)(1) of the Exchange Act and
Rule 13d-3 thereunder) of or the right to vote securities representing 10%
or more of shares of capital stock or of voting power or the filing of a
registration statement in connection therewith; (E) any solicitation of
proxies in opposition to the Stockholder Approval; (F) the filing of an
acquisition application (or the giving of an acquisition notice), whether in
draft or final form, under the BHCA or the Change in Bank Control Act with
respect to Seller or Marble; (G) any person shall have acquired beneficial
ownership or the right to acquire beneficial ownership of, or any "group"
(as such term is defined under Section 13(d) of the Exchange Act and the
rules and regulations promulgated thereunder) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, 10%
or more of the then outstanding shares of capital stock or of voting power;
or (H) any public announcement of a bona fide proposal, plan or intention to
do any of the foregoing.
(d) As used herein, "Acquisition Proposal" shall mean any bona fide
proposal, announcement, regulatory application or notice (whether in draft
or final form), agreement, understanding, disclosure of an intention to make
a proposal or of consideration of making a proposal, or other similar action
with respect to any Competing Transaction.
3. Interest. In the event that Seller fails to promptly pay when due
the amount set forth in Section 2(a), Seller shall pay to Purchaser in
addition to such unpaid amount all costs and expenses (including fees and
disbursements of counsel) incurred by Purchaser in collecting such unpaid
amount, together with interest on such unpaid amount from the date such
payment was required to be made until the date such payment is received, at
the rate of 10% per annum.
4. Governing Law. This Fee Letter shall be construed and interpreted
according to the laws of the State of New York without regard to conflicts
of laws principles thereof.
5. Counterparts. This Fee Letter may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
* * *
Please confirm your agreement with the understandings set forth herein
by signing and returning to us the enclosed copy of this Fee Letter.
Very truly yours,
ALBANK FINANCIAL CORPORATION
By /s/ Herbert G. Chorbajian
Name: Herbert G. Chorbajian
Title: Chairman of the Board, President
and Chief Executive Officer
ALBANK, FSB
By /s/ Herbert G. Chorbajian
Name: Herbert G. Chorbajian
Title: Chairman of the Board, President
and Chief Executive Officer
Accepted and agreed to as of
the date first above written:
MARBLE FINANCIAL CORPORATION
By /s/ Edward J. Grover
Name: Edward J. Grover
Title: President and Chief Executive Officer
ANNEX C
[Sandler O'Neill Letterhead]
October 26, 1995
Board of Directors
Marble Financial Corporation
47 Merchants Row
Rutland, VT 05702
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a
financial point of view, to the holders of the outstanding shares of
common stock, par value $1.00 per share (the "Shares"), of Marble
Financial Corporation (the "Company") of the consideration to be paid to
them for the Shares pursuant to the terms of the Agreement and Plan of
Merger dated as of June 20, 1995 (the "Agreement"), by and among Albank
Financial Corporation ("Albany"), Albany Savings Bank, FSB ("Bank") and
the Company.
Pursuant to the Agreement, a wholly-owned subsidiary of the Bank
will be merged with and into the Company (the "Merger") and, by virtue
of the Merger, each Share issued and outstanding as of the effective
time of the Merger (except for certain shares specified in the
Agreement, which shall be cancelled) will be converted into the right to
receive $18.00 in cash without interest (the "Consideration").
Sandler O'Neill Corporate Strategies, a division of Sandler
O'Neill & Partners, L.P., as part of its investment banking business, is
regularly engaged in the valuation of financial institutions and their
securities in connection with mergers and acquisitions and other
corporate transactions.
In connection with this opinion we have reviewed, among other
things: (a) the Agreement; (b) the Company's and Albany's audited
consolidated financial statements and management's discussion and
analysis of the financial condition and results of operations contained
in their respective Annual Reports to Shareholders for the year ended
December 31, 1994; (c) the Company's and Albany's unaudited consolidated
financial statements and management's discussion and analysis of the
financial condition and results of operations contained in their
respective Quarterly Reports on Form 10-Q for the quarter ended March 31
and June 30, 1995; (d) financial analyses and forecasts of the Company
prepared by and reviewed with management of the Company; (e) the views
of senior management of the Company and Albany of their respective past
and current business operations, results thereof, financial condition
and future prospects; (f) the pro forma impact of the Merger on Albany;
(g) historical reported price and trading activity for the Company's
common stock and Albany's common stock, including a comparison of
certain financial and stock market information for the Company and
Albany with similar information for certain other companies the
securities of which are publicly traded; (h) the financial terms of
recent business combinations in the savings institution and banking
industries; (i) the current market environment generally and the banking
environment in particular; (j) a draft of the Proxy Statement, of which
this opinion constitutes Annex C; and (k) such other information,
financial studies, analyses and investigations and financial, economic
and market criteria as we considered relevant.
In performing our review, we have assumed and relied upon, without
independent verification, the accuracy and completeness of all of the
financial information, analyses and other information reviewed by and
discussed with us, and we did not make an independent evaluation or
appraisal of the specific assets, the collateral securing assets or the
liabilities of Albany or the Company or any of their subsidiaries, or
the collectibility of any such assets (relying, where relevant, on the
analyses and estimates of the Company and Albany). With respect to the
financial projections reviewed with management, we have assumed that
they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the respective
managements of the respective future financial performances of the
Company and Albany and the combined company, and that such performances
will be achieved. We have also assumed that there has been no material
change in the Company's or Albany's assets, financial condition, results
of operations, business or prospects since the date of the last
financial statements noted above. We have further assumed that the
Company will remain as a going concern for all periods relevant to our
analysis and that the conditions precedent in the Agreement are not
waived. At your direction, we have not made any effort to solicit third
party indications of interest in an acquisition or other business
combination transaction involving the Company that were anticipated to
raise antitrust concerns.
Our opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to us as
of, the date hereof. Events occurring after the date hereof could
materially affect the assumptions used in preparing this opinion. We
have not undertaken to reaffirm or revise this opinion or otherwise
comment upon any events occurring after the date hereof.
We have acted as the Company's financial advisor in connection
with the Merger and will receive a fee for our services, a significant
portion of which is contingent upon consummation of the Merger. We will
also receive a fee for rendering this opinion. In the past, we have
provided financial advisory services for the Company and have received
fees for such services.
In the ordinary course of our business, we may actively trade the
equity securities of both the Company and Albany for our own account and
for the accounts of our customers and, accordingly, may at any time hold
a long or short position in such securities.
It is understood that this opinion is for the information of the
Board of Directors of the Company and is not to be quoted or referred
to, in whole or in part, in a registration statement, prospectus, proxy
statement or in any other document, nor shall this opinion be used for
any other purposes, without Sandler O'Neill's prior written consent;
provided, however, that we hereby consent to the inclusion of this
opinion in any registration statement or proxy statement used in
connection with the Merger so long as the opinion is quoted in full in
such registration statement or proxy statement.
Based upon and subject to the foregoing, it is our opinion that,
as of the date hereof, the Consideration to be received by the holders
of the Shares pursuant to the Agreement is fair, from a financial point
of view, to such holders.
Very truly yours,
/s/ SANDLER O'NEILL & PARTNERS, L.P.
ANNEX D
Chapter 13. Dissenters' Rights
SECTION
SUBCHAPTER 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
13.01 Definitions.
13.02 Right to dissent.
13.03 Dissent by nominees and beneficial owners.
SUBCHAPTER 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
13.20 Notice of dissenters' rights.
13.21 Notice of intent to demand payment.
13.22 Dissenters' notice.
13.23 Duty to demand payment.
13.24 Share restrictions.
13.25 Payment.
13.26 Failure to take action.
13.27 After-acquired shares.
13.28 Procedure if shareholder dissatisfied with payment or offer.
SUBCHAPTER 3. JUDICIAL APPRAISAL OF SHARES
13.30 Court action.
13.31 Court costs and counsel fees.
Subchapter 1. Right to Dissent and Obtain Payment for Shares
[SECTION] 13.01 Definitions
In this chapter;
(1) "Corporation" means the issuer of the shares held by a
dissenter before the corporate action, or the surviving or acquiring
corporation by merger or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent
from corporate action under section 13.02 of this title and who
exercises that right when and in the manner required by sections 13.20
through 13.28 of this title.
(3) "Fair value," with respect to a dissenter's shares, means
the value of the shares immediately before the effectuation of the
corporate action to which the dissenter objects, excluding any
appreciation or depreciation in anticipation of the corporate action
unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the
corporate action until the date of payment, at the average rate
currently paid by the corporation on its principal bank loans or, if
none, at a rate that is fair and equitable under all the
circumstances.
(5) "Record shareholder" means the person in whose name shares
are registered in the records of a corporation or the beneficial owner
of shares to the extent of the rights granted by a nominee certificate
on file with a corporation.
(6) "Beneficial shareholder" means the person who is a
beneficial owner of shares held by a nominee as the record
shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
[SECTION] 13.02 Right to dissent
(a) A shareholder is entitled to dissent from, and obtain payment of
the fair value of his or her shares in the event of, any of the following
corporate actions:
(1) Merger. Consummation of a plan of merger to which the
corporation is a party
(A) if shareholder approval is required for the merger by
section 11.03 of this title or the articles of incorporation and
the shareholder is entitled to vote on the merger; or
(B) if the corporation is a subsidiary that is merged with
its parent under section 11.04 of this title;
(2) Share exchange. Consummation of a plan of share exchange to
which the corporation is a party as the corporation whose shares will
be acquired, if the shareholder is entitled to vote on the plan;
(3) Sale of assets. Consummation of a sale or exchange of all,
or substantially all, of the property of the corporation other than in
the usual and regular course of business, if the shareholder is
entitled to vote on the sale or exchange, including a sale in
dissolution, but not including a sale pursuant to court order or a
sale for cash pursuant to a plan by which all or substantially all of
the net proceeds of the sale will be distributed to the shareholders
within one year after the date of sale;
(4) Amendment to articles. An amendment of the articles of
incorporation that materially and adversely affects rights in respect
of a dissenter's shares because it:
(A) alters or abolishes a preferential right of the
shares;
(B) creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking fund for
the redemption or repurchase, of the shares;
(C) alters or abolishes a preemptive right of the holder
of the shares to acquire shares or other securities;
(D) excludes or limits the right of the shares to vote on
any matter, or to cumulate votes, other than a limitation by
dilution through issuance of shares or other securities with
similar voting rights; or
(E) reduces the number of shares owned by the shareholder
to a fraction of a share if the fractional share so created is
to be acquired for cash under section 6.01 of this title; or
(5) Market exception. Any corporate action taken pursuant to a
shareholder vote to the extent the articles of incorporation, bylaws,
or a resolution of the board of directors provides that voting or non-
voting shareholders are entitled to dissent and obtain payment for
their shares.
(b) A shareholder entitled to dissent and obtain payment for his or
her shares under this chapter may not challenge the corporate action
creating his or her entitlement unless the action is unlawful or fraudulent
with respect to the shareholder or the corporation.
[SECTION] 13.03. Dissent by nominees and beneficial owners
(a) A record shareholder may assert dissenters' rights as to fewer
than all the shares registered in his or her name only if he or she dissents
with respect to all shares beneficially owned by any one person and notifies
the corporation in writing of the name and address of each person on whose
behalf he or she assorts dissenters' rights. The rights of a partial
dissenter under this subsection are determined as if the shares as to which
the shareholder dissents and the shareholder's other shares were registered
in the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to
shares held on his or her behalf only if:
(1) he or she submits to the corporation the record
shareholder's written consent to the dissent not later than the time
the beneficial shareholder asserts dissenters' rights; and
(2) he or she does so with respect to all shares of which he or
she is the beneficial shareholder or over which he or she has power to
direct the vote.
Subchapter 2. Procedure for Exercise of Dissenters' Rights
[SECTION] 13.20. Notice of dissenters' rights
(a) If proposed corporate action creating dissenters' rights under
section 13.02 of this title is submitted to a vote at a shareholders'
meeting, the meeting notice must state that shareholders are or may be
entitled to assert dissenters' rights under this chapter and be accompanied
by a copy of this chapter.
(b) If corporate action creating dissenters' rights under section
13.02 of this title is taken without a vote of shareholders, the corporation
shall notify in writing all shareholders entitled to assert dissenters'
rights that the action was taken and send them the dissenters' notice
described in section 13.22 of this title.
[SECTION] 13.21. Notice of intent to demand payment
(a) If proposed corporate action creating dissenters' rights under
section 13.02 of this title is submitted to a vote at a shareholders
meeting, a shareholder who wishes to assert dissenters' rights
(1) must deliver to the corporation before the vote is taken
written notice of his or her intent to demand payment for his or her
shares if the proposed action is effectuated; and
(2) must not vote his or her shares in favor of the proposed
action.
(b) A shareholder who does not satisfy the requirements of subsection
(a) of this section is not entitled to payment for his or her shares under
this chapter.
[SECTION] 13.22. Dissenters' notice
(a) If proposed corporate action creating dissenters' rights under
section 13.02 of this title is authorized at a shareholders' meeting the
corporation shall deliver a written dissenters' notice to all shareholders
who satisfied the requirements of section 13.21 of this title.
(b) The dissenters' notice must be sent no later than ten days after
the corporate action was taken, and must:
(1) state where the payment demand must be sent and where and
when certificates for certificated shares must be deposited;
(2) inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment demand is
received;
(3) supply a form for demanding payment that includes the date
of the first announcement to news media or to shareholders of the
terms of the proposed corporate action and requires that the person
asserting dissenters' rights certify whether or not the person
acquired beneficial ownership of the shares before that date;
(4) set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days
after the date the subsection (a) notice is delivered; and
(5) be accompanied by a copy of this chapter.
[SECTION] 13.23. Duty to demand payment
(a) A shareholder sent a dissenters' notice described in section 13.22
of this title must demand payment, certify whether he or she acquired
beneficial ownership of the shares before the date required to be set forth
in the dissenters' notice pursuant to section 13.22(b)(3) of this title, and
deposit his or her certificates in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits his or her share
certificates under subsection (a) of this section retains all other rights
of a shareholder until these rights are cancelled or modified by the taking
of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his or her
share certificates where required, each by the date set in the dissenters'
notice, is not entitled to payment for his or her shares under this chapter.
[SECTION] 13.24. Share restrictions
(a) The corporation may restrict the transfer of uncertificated shares
from the date the demand for their payment is received until the proposed
corporate action is taken or the restrictions released under section 13.26
of this title.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate
action.
[SECTION] 13.25. Payment
(a) Except as provided in section 13.27 of this title, as soon as the
proposed corporate action is taken, or upon receipt of a payment demand, the
corporation shall pay each dissenter who complied with section 13.23 of this
title the amount the corporation estimates to be the fair value of his or
her shares, plus accrued interest.
(b) The payment must be accompanied by:
(1) the corporation's balance sheet as of the end of a fiscal
year ending not more than 16 months before the date of payment, and
income statement for that year, a statement of changes in
shareholders' equity for that year, and the latest available interim
financial statements, if any;
(2) a statement of the corporation's estimate of the fair value
of the shares and how such estimate was calculated;
(3) an explanation of how the interest was calculated;
(4) a statement of the dissenter's right to remand payment under
section 13.28 of this title; and
(5) a copy of this chapter.
[SECTION] 13.26. Failure to take action
(a) If the corporation does not take the proposed action within 60
days after the date set for demanding payment and depositing share
certificates, the corporation shall return the deposited certificates and
release the transfer restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under section 13.22 of this title and repeat the payment
demand procedure.
[SECTION] 13.27. After-acquired shares
(a) A corporation may elect to withhold payment required by section
13.25 of this title from a dissenter unless the dissenter was the beneficial
owner of the shares before the date set forth in the dissenters notice as
the date of the first announcement to news media or to shareholders of the
terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under
subsection (a) of this section, after taking the proposed corporate action,
it shall estimate the fair value of the shares, plus accrued interest, and
shall pay this amount to each dissenter who agrees to accept it in full
satisfaction of his or her demand. The corporation shall send with its offer
a statement of its estimate and calculation of the fair value of the shares,
an explanation of how the interest was calculated, and a statement of the
dissenter's right to demand payment under section 13.28 of this title.
[SECTION] 13.28. Procedure if shareholder dissatisfied with payment or offer
(a) A dissenter may notify the corporation in writing of his or her
own estimate of the fair value of his or her shares and amount of interest
due, and demand payment of his or her estimate (less any payment under
section 13.25 of this title), or reject the corporation's offer under
section 13.27 of this title and demand payment of the fair value of his or
her shares and interest due, if:
(1) the dissenter believes that the amount paid under section
13.25 or offered under section 13.27 is less than the fair value of
his or her shares or that the interest due is incorrectly calculated;
(2) the corporation fails to make payment under section 13.25
within 60 days after the date set for demanding payment; or
(3) the corporation, having failed to take the proposed action,
does not return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares within 60 days after the
date set for demanding payment.
(b) A dissenter waives his or her right to demand payment under this
section unless he or she notifies the corporation of his or her demand in
writing under subsection (a) of this section within 30 days after the
corporation made or offered payment for his or her shares.
Subchapter 3. Judicial Appraisal of Shares
[SECTION] 13.30. Court action
(a) If a demand for payment under section 13.28 of this title remains
unsettled, the corporation shall commence a proceeding within 60 days after
receiving the payment demand and petition the court to determine the fair
value of the shares and accrued interest. If the corporation does not
commence the proceeding within the 60-day period, it shall pay each
dissenter whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the superior
court of the county where the corporation's principal office (or, if none in
this state, its registered office) is located. If the corporation is a
foreign corporation without a registered office in this state, it shall
commence the proceeding in the county in this state where the registered
office of the domestic corporation merged with or whose shares were acquired
by the foreign corporation was located.
(c) The corporation shall make all dissenters (whether or not
residents of this state) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be
served with a copy of the complaint. Nonresidents may be served by
registered or certified mail or by publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers
described in the order appointing them, or in any amendment to it. The
dissenters are entitled to the same discovery rights as parties in other
civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to
judgment
(1) for the amount, if any, by which the court finds the fair
value of his or her shares, plus interest, exceeds the amount paid by
the corporation; or
(2) for the fair value, plus accrued interest, of his or her
after-acquired shares for which the corporation elected to withhold
payment under section 13.27 of this title.
[SECTION] 13.31. Court costs and counsel fees
(a) The court in an appraisal proceeding commenced under section 13.30
of this title shall determine all costs of the proceeding, including the
reasonable compensation and expenses of appraisers appointed by the court.
The court shall assess the costs against the corporation, except that the
court may assess costs against all or some of the dissenters, in amounts the
court finds equitable, to the extent the court finds the dissenters acted
arbitrarily, vexatiously, or not in good faith in demanding payment under
section 13.28 of this title.
(b) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(1) against the corporation and in favor of any or all
dissenters if the court finds the corporation did not substantially
comply with the requirements of sections 13.20 through 13.28 of this
title; or
(2) against either the corporation or a dissenter, in favor of
any other party, if the court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously, or not
in good faith with respect to the rights provided by this chapter.
(c) If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and that
the fees for those services should not be assessed against the corporation,
the court may award to these counsel reasonable fees to be paid out of the
amounts awarded the dissenters who were benefited.
MARBLE FINANCIAL
CORPORATION
ANNUAL REPORT 1994
Marble Prices of Common Stock and Dividends
The common stock of Marble Financial Corporation commenced trading in the
over-the-counter market on the NASDAQ system under the symbol MRBL on August
26, 1986, in connection with the conversion of Marble Bank from mutual to
stock form. As of December 31, 1994 there were 1,654 registered stockholders
of record.
The following information is based on the intraday high and low prices as
reported by the NASDAQ National Market System for the period from January 1,
1994 to December 31, 1994.
<TABLE>
<CAPTION>
YEAR Quarter High Low
- ----------------------------------------
<C> <C> <C> <C>
1994 4th $12.50 $9.75
3rd 14.00 9.50
2nd 10.25 7.75
1st 9.50 8.00
1993 4th $11.50 $6.50
3rd 11.25 7.25
2nd 8.75 6.75
1st 9.75 6.25
</TABLE>
<TABLE>
<S> <S> <S>
Corporate Headquarters Annual Report on Form 10-K Transfer Agent and Registrar
Marble Financial Corporation and Other Financial Information Mellon Securities Trust Company
47 Merchants Row A copy of Marble Financial 85 Challenger Road, Overpeck Centre
Rutland, Vermont 05701 Corporation's Annual Report on Ridgefield Park, New Jersey 07660
802/775-0025 Form 10-K filed with the Securities
and Exchange Commission may be Independent Certified Public Accountant
Annual Meeting obtained from the Corporation Arthur Andersen LLP
9:30 a.m., Thursday, without charge by sending a written One International Place
May 4, 1995 at the request to: Boston, MA 02110
Killington Resort Center, Maryellen Stefanini
Killington, Vermont Stockholder Relations Stock Listing
Marble Financial Corporation The Common Stock of Marble Financial
47 Merchants Row, Box 978 is quoted on the NADSAQ National Market
Rutland, Vermont 05702 System under the Symbol MRBL
</TABLE>
Dividend Reinvestment
In 1994, Marble established a Dividend Reinvestment and Stock Purchase Plan
for the holders of record of Marble's common stock. The plan provides a
simple and convenient method of investing cash dividends and optional
additional payments in additional shares of Marble. For further information
or a prospectus contact George B. Williams or Maryellen Stefanini at Marble
Financial Corporation.
Cover: Castleton, Vermont - Home of Marble Bank's newest branch
Our Castleton Branch is located in a picturesque, historical district,
offering access to not only the Castleton area, but to residents of
Poultney, Fair Haven, Ira and the Lakes Region.
Having a branch in Castleton allows us to offer our home town banking
services to an even greater portion of our Rutland County Community.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
(In Thousands, except per share amounts) 1994 1993
_______________________________________________________________
<S> <C> <C>
At December 31,
Total assets $408,536 $396,698
Investments 113,349 126,322
Net loans 269,272 249,034
Total deposits 305,173 304,546
Stockholders' equity 37,037 35,012
For the years ended December 31,
Net interest income $ 15,094 $ 13,640
Provision for possible loan losses 500 1,744
Non-interest income 222 931
Non-interest expense 10,634 10,075
Federal income tax benefit (2,907) (670)
Net income 7,089 3,876
Per Common Share
Net income $ 2.08 $ 1.15
Cash dividends declared 0.34 0.00
Book value 11.11 10.61
Market value 9.75 9.00
Ratios
Return on average assets 1.8% 1.0%
Return on average equity 20.7 11.6
Average equity to average assets 8.6 8.8
Net interest margin 3.9 3.7
Dividend payout ratio 16.3 0.0
</TABLE>
PRESIDENT'S LETTER
To our Stockholders, Customers and Friends,
At this time last year, I said I was optimistic about the future of Marble.
I can now say that my optimism was well founded, as Marble Financial
Corporation enjoyed one of the best years in recent memory in a number of
important areas.
Foremost among our many accomplishments during 1994 was the sale of non-
performing assets that was concluded in June. Marble Bank was able to sell
$7.6 million in classified assets in a bulk sale to a private investor,
without incurring further losses or an adverse impact on income. During the
second half of 1994, this transaction helped increase income by enabling the
Bank to reduce the provision for possible loan losses and put the proceeds
from the sale into interest-earning assets.
By virtue of Marble being profitable for every quarter since the fourth
quarter of 1991, the increased ability to project profitability into the
future as a result of the non-performing asset sale, and the volume of tax-
loss carryforwards available as a result of operating losses in prior years,
we were able to realize a tax benefit of $2.9 million during 1994. This
amount was of considerable help in boosting our net income to a record $7.1
million for 1994.
During 1993, Marble made great progress in increasing the profitability of
its core product base, and as a result, the Board of Directors voted in
January 1994 to reinstate the dividend. Continued progress during 1994
allowed the Board to increase the dividend several times during the year and
declare total dividends of $.034 per share. Also, a dividend reinvestment
and stock purchase plan was made available to all of our common stockholders
as a convenient and easy method of increasing their share holdings in
Marble.
In August 1994, we took over the facilities of a former branch office of
another bank in Castleton, Vermont and opened our seventh full service
banking office. We were able to open the Castleton office quickly and
without many of the expensive capital outlays usually associated with new
facilities. This office was in our market area and allowed us to extend our
service and convenience to our customers in the area as well as offer local
banking services to many customers of the former bank. We also added ATM
facilities to this office during the fall of 1994. In December 1994, in
response to the request of area businesses and customers, we also opened an
ATM facility on the Killington Road in Killington, Vermont. During early
1995, we will also be installing a night deposit facility to bring further
convenience to our business customers in the Killington area. While we are
very selective and conservative in deciding where or whether to open branch
facilities, we felt these locations represented unique opportunities in our
market area to better serve our existing customers and to extend our
customer base. We hope to find such opportunities again in 1995.
During 1994, we also completed the renovation of the Gryphon Building in
downtown Rutland and moved most of the executive and administrative staff
into the offices there. These moves have allowed us to consolidate our
senior management, administrative and operations staff in one location,
which has considerably improved communications, planning and efficiency. In
conjunction with these moves, the Bank also made a number of organizational
changes during the year that will improve training, product development,
compliance and the advancement of a sales oriented culture. Our overall
organization structure is still fairly flat, with a considerable amount of
authority in the hands of the people that deal on a daily basis with the
customer base.
Interest rates rose considerably during 1994, and as a result, we saw some
shifts in customer demand. As rates rose, mortgage business flattened
considerably from the high demand of the previous year. But, while mortgage
business was down, several other areas increased. Home equity lines of
credit and automobile lending increased significantly and commercial loan
demand stepped up. The higher interest rates also had an effect on deposits,
as customers responded to higher rates by increasing time deposit balances.
As a result of the increasing rate environment during 1994, we also saw net
interest income and our net margin increase.
At our annual organization meeting in May, 1994, we saw the ending of an era
at Marble Bank. When Alfred J. Beauchamp was elected Chairman of the Board
of Marble and the Bank, it marked the first time since 1968 that someone
other than William B. Wright or his father, Earl J. Wright, had been
elected to the Chairman's position. While we will miss Bill's leadership
from the chair, we are fortunate to retain him as a Director, and enjoy his
advice and counsel in the future.
As we move into 1995, I am still optimistic about the future of Marble, our
ability to serve the needs of Vermont, and our continuing to be the bank
that Vermonters can count on.
------------------
| |
Sincerely, | Photo of |
| Edward J. Grover |
| |
------------------
/s/ EDWARD J. GROVER
Edward J. Grover
President & Chief Executive Officer
REPORTS OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Marble Financial Corporation:
We have audited the accompanying consolidated balance sheet of Marble
Financial Corporation and subsidiary as of December 31, 1994 and the related
consolidated statements of operations, changes in stockholders' equity and
cash flows for the year then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Marble
Financial Corporation and subsidiary as of December 31, 1994 and the results
of their operations and their cash flows for the year then ended, in
conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Arthur Andersen LLP
Boston, Massachusetts
January 17, 1995
Board of Directors and Stockholders
Marble Financial Corporation:
We have audited the accompanying consolidated balance sheet of Marble
Financial Corporation and subsidiary as of December 31, 1993 and the related
consolidated statements of operations, changes in stockholders' equity and
cash flows for the years ended December 31, 1993 and 1992. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Marble
Financial Corporation and subsidiary as of December 31, 1993 and the results
of their operations and their cash flows for the years ended December 31,
1993 and 1992, in conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Providence, Rhode Island
January 24, 1994
Marble Financial Corporation and Subsidiary
Consolidated Balance Sheets
(In Thousands, except par value and share amounts)
<TABLE>
<CAPTION>
December 31,
Assets 1994 1993
______________________________________________________________________________________
<S> <C> <C>
Cash and due from banks $ 6,858 $ 6,471
Interest-bearing deposits in other banks 4 19
Federal funds sold and other short-term investments 0 160
Investment securities held-to-maturity (market value $18,961 at
December 31, 1994)(note 2) 19,767 0
Investment securities available-for-sale (amortized cost
$100,578 at December 31, 1994, and $126,597 at
December 31, 1993) (note 2) 93,578 126,143
Loans (note 3) 277,278 258,864
Less: Allowance for possible loan losses (note 4) 8,006 9,830
NET LOANS 269,272 249,034
Other real estate owned, net (note 5) 1,517 3,711
Bank premises and equipment, net (note 6) 6,206 5,571
Other assets 11,334 5,589
TOTAL ASSETS $408,536 $396,698
Liabilities and Stockholders' Equity
Deposits:
Demand $ 14,549 $ 20,582
Savings, NOW and money market 112,587 115,125
Time 178,037 168,839
TOTAL DEPOSITS (note 8) 305,173 304,546
Borrowed funds (note 9) 64,138 55,430
Other liabilities 2,188 1,710
TOTAL LIABILITIES 371,499 361,686
Commitments and contingencies (note 14)
Stockholders' Equity (note 11):
Preferred stock, $1.00 par value, 1,000,000 shares
authorized and unissued at December 31, 1994 and 1993 --- ---
Common stock, $1.00 par value, 8,000,000 shares authorized,
3,333,438 and 3,299,637 shares issued and outstanding at
December 31, 1994 and December 31, 1993, respectively 3,333 3,300
Additional paid-in capital 42,777 42,579
Retained deficit (4,453) (10,413)
Unrealized loss on investment securities available-for-sale, net (4,620) (454)
TOTAL STOCKHOLDERS' EQUITY 37,037 35,012
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $408,536 $396,698
</TABLE>
See accompanying notes to consolidated financial statements.
Marble Financial Corporation and Subsidiary
Consolidated Statements of Operations
<TABLE>
<CAPTION>
(In Thousands, except per share amounts and shares outstanding) Year Ended December 31,
1994 1993 1992
__________________________________________________________________________________________________________
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $ 20,981 $ 20,286 $ 25,567
Interest and dividends on investment securities 7,378 5,945 4,659
Interest on interest-bearing deposits, federal funds sold,
and other short-term investments 34 60 57
TOTAL INTEREST INCOME 28,393 26,291 30,283
Interest expense:
Interest on savings deposits 3,190 3,170 4,242
Interest on time deposits 7,481 7,592 10,072
Interest on borrowed funds 2,628 1,889 2,144
TOTAL INTEREST EXPENSE 13,299 12,651 16,458
Net interest income 15,094 13,640 13,825
Provision for possible loan losses (note 4) 500 1,744 3,041
Net interest income after provision for
possible loan losses 14,594 11,896 10,784
Non-interest income:
Service charges on deposit accounts 753 711 570
Net gain (loss) on sales of investment securities
held-to-maturity (note 2) 0 (4) 866
Net gain (loss) on sales of investment securities
available-for-sale (note 2) (964) (123) 1,332
Net gain on sales of loans (note 3) 8 59 58
Other 425 288 314
TOTAL NON-INTEREST INCOME 222 931 3,140
Non-interest expense:
Salaries and employee benefits (note 12) 5,560 5,255 4,657
Occupancy and equipment expense 1,500 1,424 1,322
Other real estate owned expense, net (note 5) 173 374 3,100
Other (note 13) 3,401 3,022 2,937
TOTAL NON-INTEREST EXPENSE 10,634 10,075 12,016
Income before income taxes and cumulative effect of a change in
accounting principle 4,182 2,752 1,908
Income tax benefit (note 10) (2,907) (670) (627)
Income before cumulative effect of a change in accounting principle 7,089 3,422 2,535
Cumulative effect of a change in method of accounting for
securities (notes 1 and 2) --- 454 ---
NET INCOME $ 7,089 $ 3,876 $ 2,535
Earnings per common share:
Weighted average number of common shares outstanding
including common stock equivalents 3,414,451 3,364,351 3,258,487
Per common share:
Income before cumulative effect of a change in accounting principle $ 2.08 $ 1.02 $ 0.78
Cumulative effect of a change in method of accounting for securities --- $ 0.13 ---
Net income $ 2.08 $ 1.15 $ 0.78
Dividends declared $ 0.34 $ 0.00 $ 0.00
</TABLE>
See accompanying notes to consolidated financial statements.
Marble Financial Corporation and Subsidiary
Consolidated Statements of Changes in Stockholders' Equity
(In Thousands)
<TABLE>
<CAPTION>
Years Ended December 31, 1994, 1993, and 1992 Unrealized
Loss on
Investment
Additional Securities
Common Paid-In Retained Available
Stock Capital Deficit For Sale, Net Total
_____________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1991 $3,243 $42,304 $(16,824) $ --- $28,723
Exercise of stock options (note 12) 10 17 --- --- 27
Net income --- --- 2,535 --- 2,535
BALANCE AT DECEMBER 31, 1992 3,253 42,321 (14,289) --- 31,285
Exercise of stock options (note 12) 47 258 --- --- 305
Net income --- --- 3,876 --- 3,876
Unrealized loss on investment securities
available-for-sale, net (notes 1 and 2) --- --- --- (454) (454)
BALANCE AT DECEMBER 31, 1993 3,300 42,579 (10,413) (454) 35,012
Exercise of stock options (note 12) 33 198 --- --- 231
Net income --- --- 7,089 7,089
Dividends declared --- --- (1,129) --- (1,129)
Unrealized loss on investment securities
available-for-sale, net (notes 1 and 2) --- --- --- (4,166) (4,166)
BALANCE AT DECEMBER 31, 1994 $3,333 $42,777 $ (4,453) $(4,620) $37,037
</TABLE>
See accompanying notes to consolidated financial statements.
Marble Financial Corporation and Subsidiary
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(In Thousands) Year Ended December 31,
1994 1993 1992
____________________________________________________________________________________________________
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 7,089 $ 3,876 $ 2,535
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of a change in method of accounting
for securities 0 (454) 0
Depreciation 622 587 557
Loan loss provision 500 1,744 3,041
Other real estate owned valuation provision (37) 63 2,419
Net (gains) losses on sales of investment securities
held-to-maturity 0 4 (866)
Net (gains) losses on sales of investment securities
available-for-sale 964 123 (1,332)
Net gains on sales of loans (8) (59) (58)
Net gains on sales and disposals of other real estate owned (64) (103) 0
Net losses on sales and disposals of bank premises and equipment 131 3 6
Amortization of fees, discounts and premiums, net 1,096 2,021 (344)
Deferred federal tax benefit (2,917) (720) (680)
(Increase) decrease in other assets (240) (634) 1,558
Increase (decrease) in other liabilities 178 (376) (69)
Net cash provided by operating activities 7,314 6,075 6,767
Cash flows from investing activities:
Proceeds from sales of investment securities held-to-maturity 0 0 14,114
Proceeds from sales of investment securities available-for-sale 27,974 61,274 61,805
Proceeds from maturities of investment securities held-to maturity 100 1,291 2,800
Proceeds from maturities of investment securities available-for-sale 20,273 39,800 13,897
Proceeds from sales of loans 6,574 14,114 9,685
Proceeds from sales and disposals of other real estate owned 4,755 5,982 8,816
Purchases of investment securities held-to-maturity (19,740) 0 0
Purchases of investment securities available-for-sale (22,660) (137,652) (60,683)
Net increase in loans (31,686) (26,444) (27,888)
Capital expenditures, net (1,388) (704) (1,841)
Proceeds from sales of bank premises and equipment 0 6 0
Net cash provided (used) by investing activities (15,798) (42,333) 20,705
Cash flows from financing activities:
Net increase (decrease) in deposits 627 14,144 (4,678)
Net increase (decrease) in short-term borrowings 18,708 (565) (30,209)
Proceeds from long-term borrowings 0 18,000 20,000
Payments of long-term borrowings (10,000) (8,000) 0
Proceeds from issuance of common stock 190 305 27
Dividends paid (829) 0 0
Net cash provided (used) by financing activities 8,696 23,884 (14,860)
Net increase (decrease) in cash and cash equivalents 212 (12,374) 12,612
Beginning cash and cash equivalents 6,650 19,024 6,412
Ending cash and cash equivalents $ 6,862 $ 6,650 $19,024
Supplemental disclosure of cash flow information:
Cash paid during the year for
Interest $12,990 $ 12,661 $16,870
Income taxes $ 40 $ 50 $ 40
Supplemental disclosure of noncash investing and financing
activities:
Conversion of real estate loans to mortgage-backed
securities $ 2,017 $ 24,015 $56,852
Loans foreclosed $ 2,460 $ 2,877 $ 4,806
</TABLE>
See accompanying notes to consolidated financial statements.
Marble Financial Corporation and Subsidiary
Notes to Consolidated Financial Statements December 31, 1994
NOTE 1: Summary of Significant Accounting Policies
The accounting and reporting policies of Marble Financial Corporation
and subsidiary ("Marble") conform to generally accepted accounting
principles and to general practices within the banking industry. In
preparing the financial statements, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities
as of the dates of the balance sheets, and income and expense for the
periods. Material estimates that are particularly susceptible to significant
change in the near term relate to the determination of the allowance for
possible loan losses. In connection with the determination of the allowance
for possible loan losses and the carrying value of other real estate owned,
management obtains independent appraisals for significant properties. The
following is a summary of the more significant accounting policies.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Marble
Financial Corporation and its subsidiary, Marble Bank (the "Bank"). All
material intercompany accounts and transactions have been eliminated in
consolidation. Certain reclassifications have been made to the 1993 and 1992
consolidated financial statements to conform to the 1994 presentation.
INVESTMENT SECURITIES
As of September 30, 1992, Marble revised its securities accounting
policy and reclassified certain of its securities held in portfolio to
securities available-for-sale. The reclassification had no impact on the
results of operations since the aggregate market value of the securities
reclassified exceeded the book value.
In October 1994, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 119, "Disclosure
about Derivative Financial Instruments and Fair Value of Financial
Instruments" (Statement No. 119). Statement No. 119 is effective for
financial statements issued for fiscal years ending after December 15, 1994.
Derivative financial instruments, as defined by Statement No. 119, include
futures, forwards, swaps, or option contracts, or other financial
instruments with similar characteristics. Marble did not have any such
instruments as of December 31, 1994, except as discussed in note 14.
In May 1993, the FASB issued Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" (Statement No. 115). Under the new statement, investments in
debt securities may be classified as held-to-maturity and measured at
amortized cost only if Marble has the positive intent and ability to hold
such securities to maturity. Investments in debt securities that are not
classified as held-to-maturity and equity securities that have readily
determinable fair values are classified as trading securities or available-
for-sale securities. Trading securities are investments purchased and held
principally for the purpose of selling in the near term; available-for-sale
securities are investments not classified as trading or held-to-maturity.
Unrealized holding gains and losses for trading securities are included in
earnings; unrealized holdings gains and losses for available-for-sale
securities are reported in a separate component of stockholders' equity.
Effective December 31, 1993, Marble adopted Statement No. 115, resulting in
a decrease to stockholders' equity of $454,000.
Any portion of unrealized loss on an individual marketable security
deemed to be other than temporary is recognized as a realized loss in the
accounting period when such determination is made and is reported in non-
interest income under the caption "Net gain (loss) on investment securities
held-to-maturity" or "Net gain (loss) on investment securities available-
for-sale", depending upon the security's classification on the balance
sheet. Dividend and interest income, including amortization of premiums and
discounts, is included in earnings for all categories of investment
securities. Premiums and discounts are amortized or accreted to income by
use of the level-yield method.
In 1992 and prior periods, investment securities intended to be held-
to-maturity were carried at amortized cost, marketable equity securities
were carried at the lower of aggregate cost or market value and investment
securities available-for-sale were carried at the lower of cost or market
value.
LOANS
Management reviews all loans contractually past due 30 days or more on
a monthly basis. A loan generally is placed on non-accrual status at the
earlier of the time when management determines that doubt exists as to the
ultimate collection of principal or interest or when it is contractually
past due 90 days or more, except in certain instances where management
believes that collateral held by the Bank is clearly sufficient and full
satisfaction of both principal and interest is highly probable. In the case
of residential mortgage loans, the period is increased to 12 months. When
loans are placed on non-accrual, loan interest receivable is reversed
against interest income of the current period. Non-accrual loans may be
returned to accrual status when principal and interest payments are not
delinquent and the risk characteristics of the loan have improved to the
extent there no longer exists a concern as to the collectibility of
principal.
Loan origination fees and related direct incremental loan origination
costs are offset and the resulting net amount is deferred and amortized over
the life of the related loans using the level-yield method. When loans are
sold or paid off, the unamortized fees and costs are transferred to income.
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The allowance for possible loan losses is increased by the provision
charged to operations, based upon management's assessment of many factors,
including analysis of recent loan loss experience, current economic
conditions, the risk characteristics of the portfolio and trends in loan
delinquencies. Realized losses, net of recoveries, are charged directly to
the allowance. While management uses the best information available in
establishing the allowance, future additions to the allowance may be
necessary if economic conditions differ substantially from the assumptions
used in making the evaluation. In addition, various regulatory agencies, as
an integral part of their examination process, periodically review the
Bank's allowance for possible loan losses. Such agencies may require the
Bank to recognize additions to the allowance based on their judgments about
information available to them at the time of their examination.
In May 1993, the FASB issued Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan"
(Statement 114 as amended by Statement 118). The new standard requires that
impaired loans be measured based on the present value of expected future
cash flows discounted at each loan's effective interest rate or, as a
practical expedient, at the loan's observable market price or the fair value
of the collateral if the loan is collateral dependent. The Statement also
changes the accounting for insubstance foreclosures and troubled debt
restructurings. This Statement is to be applied prospectively with any
adjustment reflected in the provision for possible loan losses.
Marble adopted Statement No. 114 on January 1, 1995. Based on
management's analysis, the adoption of this Statement will not have a
material effect on Marble's financial position or results of operations.
MORTGAGE BANKING ACTIVITIES
Mortgage loans held for sale to the secondary market and commitments
to fund such loans are carried at the lower of cost or estimated market
value as determined by outstanding investor and origination commitments or,
in the absence of such commitments, current investor yield requirements.
Valuation adjustments are charged against gain/loss on sales of mortgage
loans.
Gains or losses on sales of mortgage loans are recognized at the time
of the sale. An excess servicing fee receivable is also recorded at the time
of such sales if the average interest rate on the loans sold, but serviced
by the Bank, adjusted for normal servicing fees and any required guaranty
fees, exceeds the agreed-upon yield to the buyer. Excess servicing fee
receivables are amortized using a method that approximates the interest
method over the contractual life of the loans, adjusted for estimated
prepayments.
OTHER REAL ESTATE OWNED
Other real estate owned is comprised of foreclosed properties where
the Bank has received title. Real estate formally acquired in settlement of
loans is recorded at the lower of the carrying value of the loan or the fair
value of the property received less estimated costs to sell. Loan losses
from the acquisition of such properties are charged against the allowance
for possible loan losses.
After foreclosure, if the fair value of the asset minus estimated cost
to sell is less than the cost of the asset, then this amount is recognized
as a valuation allowance. If the fair value of the asset minus the estimated
cost to sell subsequently increases and this amount is more than the asset's
current carrying value, then the valuation allowance is reversed. Increases
or decreases in the valuation allowance are charged or credited to income.
Operating expenses are charged to real estate operations. Gains upon
disposition are reflected in the statement of operations as realized.
Realized losses are charged to the valuation allowance.
BANK PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation and amortization are computed on
the straight line method over the estimated useful lives of the assets or
the term of the lease, if shorter. The cost of assets sold or otherwise
disposed of, and the related allowance for depreciation, are eliminated from
the accounts and the resulting gains or losses are reflected in the
accompanying consolidated statements of operations. Maintenance and repairs
are charged to current expenses as incurred and the cost of major renewals
and betterments are capitalized.
INCOME TAXES
Effective January 1, 1992, Marble adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes", which
recognizes income taxes under the asset and liability method. Under this
method, deferred tax assets and liabilities are established for the
temporary differences between the accounting basis and the tax basis of
Marble's assets and liabilities at enacted tax rates expected to be in
effect when the amounts related to such temporary differences are realized
or settled. Marble's deferred tax asset is reviewed quarterly and
adjustments to such asset are recognized as deferred income tax expense or
benefit based on management's judgments relating to the realizability of
such asset. There was no cumulative effect on Marble's statement of
operations as of the effective date of adoption.
PENSION PLAN
It is Marble's policy to provide for pension costs by annual charges
to income and to fund pension costs accrued.
EARNINGS PER SHARE
The calculation of earnings per share is based on the weighted average
number of shares of common stock outstanding and the dilutive effect of
options granted under Marble's stock option plan, using the treasury stock
method.
CASH AND CASH EQUIVALENTS
For purposes of the consolidated statement of cash flows, Marble
considers all highly liquid short-term investments, including interest-
bearing deposits in other banks and federal funds sold and other short-term
investments, purchased with a maturity of three months or less, to be cash
equivalents.
NOTE 2: Investment Securities
(In Thousands)
A summary of the investment portfolio follows:
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market
Cost Gains Losses Value Cost Gains Losses Value
___________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment securities held-to-maturity:
United States Government obligations $ 11,000 $ 0 $ 406 $ 10,594 $ 0 $ 0 $ 0 $ 0
Mortgage-backed securities 8,767 0 400 8,367 0 0 0 0
19,767 0 806 18,961 0 0 0 0
Investment securities available-for-sale:
United States Government obligations 3,555 1 326 3,230 502 40 0 542
Mortgage-backed securities 93,387 11 6,707 86,691 123,210 473 1,010 122,673
Federal Home Loan Bank stock 3,635 0 0 3,635 2,784 0 0 2,784
Other bank and corporate stocks 1 21 0 22 101 43 0 144
100,578 33 7,033 93,578 126,597 556 1,010 126,143
$120,345 $33 $7,839 $112,539 $126,597 $ 556 $1,010 $126,143
</TABLE>
The maturity distribution of investment securities at December 31, 1994
follows:
<TABLE>
<CAPTION>
After One After Five
Within One But Within But Within After Ten No Fixed
Year Five Years Ten Years Years Maturity Total
_____________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Amortized Cost
Investment securities held-to-maturity:
United States Government obligations $ 0 $ 0 $ 3,000 $ 8,000 $ 0 $ 11,000
Mortgage-backed securities (1) 578 1,750 1,376 5,063 0 8,767
578 1,750 4,376 13,063 0 19,767
Investment securities available-for-sale:
United States Government obligations 0 501 3,054 0 0 3,555
Mortgage-backed securities (1) 28,274 46,490 18,623 0 0 93,387
Federal Home Loan Bank stock 0 0 0 0 3,635 3,635
Other bank and corporate stocks 0 0 0 0 1 1
28,274 46,991 21,677 0 3,636 100,578
TOTAL INVESTMENT SECURITIES $28,852 $48,741 $26,053 $13,063 $3,636 $120,345
Comparative amounts at December 31, 1993 $31,150 $60,695 $31,867 $ 0 $2,885 $126,597
Market Value:
Investment securities held-to-maturity:
United States Government obligations $ 0 $ 0 $ 2,980 $ 7,614 $ 0 $ 10,594
Mortgage-backed securities (1) 551 1,670 1,313 4,833 0 8,367
551 1,670 4,293 12,447 0 18,961
Investment securities available-for-sale:
United States Government obligations 0 502 2,728 0 0 3,230
Mortgage-backed securities (1) 26,238 43,143 17,310 0 0 86,691
Federal Home Loan Bank stock 0 0 0 0 3,635 3,635
Other bank and corporate stocks 0 0 0 0 22 22
26,238 43,645 20,038 0 3,657 93,578
TOTAL INVESTMENT SECURITIES $26,789 $45,315 $24,331 $12,447 $3,657 $112,539
Comparative amounts at December 31, 1993 $31,014 $60,473 $31,728 $ 0 $2,928 $126,143
<FN>
<F1> Maturities of mortgage-backed securities are based on mortgage loan
prepayment assumptions
</TABLE>
Securities pledged to secure deposits and other short-term borrowings
amounted to $75,562 and $53,798 at December 31, 1994 and 1993, respectively.
Proceeds from the sale of debt securities available-for-sale were
$27,974, $60,947 and $51,789 in 1994, 1993 and 1992, respectively. Gains
realized from the sale of debt securities available-for-sale during 1994,
1993 and 1992 were $353, $573 and $1,499, respectively. Losses realized on
sales of debt securities available-for-sale were $1,317, $242 and $183
during 1994, 1993 and 1992, respectively. Proceeds from the sale of
marketable equity securities available-for-sale were $327 and $10,016 in
1993 and 1992, respectively. There was a gain of $16 on the sale of
marketable equity securities available-for-sale during 1992. At December 31,
1993, there was a net reduction of $454 to the carrying value of investment
securities available-for-sale relative to the adoption of FASB Statement No.
115. In 1993, there was a reduction of $4 to the carrying value of debt
securities held-to-maturity. In 1992, there were $14,114 in proceeds,
realized gains of $867 and realized losses of $1 on sales of debt securities
held-for-investment.
NOTE 3: Loans
(In Thousands)
The Bank's lending activity is primarily with customers located within
the state of Vermont. The Bank makes single and multi-family residential
loans, commercial loans, commercial real estate loans and various types of
consumer loans. In addition, the Bank makes loans for land development, and
for the construction of residential homes and multi-family commercial
properties. The ability and willingness of the single family residential and
consumer borrowers to honor their repayment commitments is generally
dependent on the level of overall economic activity within the borrower's
geographic areas and real estate values. The ability and willingness of
commercial real estate, land development, and construction loan borrowers to
honor their repayment commitments is generally dependent on the health of
the real estate sector in the borrower's geographic area and the general
economy.
A summary of the loan portfolio follows:
<TABLE>
<CAPTION>
December 31,
1994 1993
________________________________________________________________
<S> <C> <C>
Mortgage loans:
Residential $126,251 $125,906
Commercial 6,402 7,491
Construction 937 1,466
Total mortgage loans 133,590 134,863
Commercial loans:
Secured by real estate 56,599 46,523
Construction 289 2,003
All other 46,862 50,220
Total commercial loans 103,750 98,746
Consumer loans:
Equity lines of credit 28,839 17,323
All other 11,099 7,932
Total consumer loans 39,938 25,255
Total loans 277,278 258,864
Less: allowance for possible loan losses 8,006 9,830
Net loans $269,272 $249,034
Included in above totals:
Deferred loan origination fees $ 193 $ 371
Residential mortgage loans held for sale $ 0 $ 4,187
</TABLE>
Loans on non-accrual amounted to $5,439 and $11,159 at December 31,
1994 and 1993, respectively. As of December 31, 1994, there were accruing
fair value troubled debt restructurings of $3.2 million. Troubled debt
restructurings were included in non-accrual loans at December 31, 1993. The
reduction in interest income associated with non-accrual and restructured
loans held at December 31, 1994, 1993 and 1992 is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
_______________________________________________________________________
<S> <C> <C> <C>
Income in accordance with original loan terms $490 $1,108 $1,789
Income recognized 143 281 870
Reduction in interest income $347 $ 827 $ 919
</TABLE>
In the ordinary course of business the Bank has loan, deposit and
other transactions with its officers and trustees, and organizations with
which such persons are associated. Such transactions are on substantially
the same terms, including interest rates and collateral as to loans, as
those prevailing at the time for comparable transactions with others and do
not involve more than normal risk of collectibility or present other
unfavorable features. As of December 31, 1994, all loans to those parties
were performing in accordance with their contractual terms.
An analysis of loans in 1994 to those parties described in the foregoing is
as follows:
<TABLE>
<S> <C>
Balance at beginning of year $3,764
Additions 1,501
Less: deductions 1,584
Balance at end of year $3,681
</TABLE>
In the ordinary course of business the Bank originates and sells real
estate mortgages in the secondary market. At December 31, 1994, 1993, and
1992, approximately $99,156, $110,237, and $114,984, respectively, of such
mortgages were serviced by the Bank. The Bank charges a service fee to the
investor for collecting loan payments and remitting such payments to the
investor. For the years ended December 31, 1994, 1993 and 1992, gains from
the sale of real estate mortgage loans to investors amounted to $8 , $59 and
$58, respectively. Included in other assets was an amount for the excess
servicing fee receivable which totaled $614 and $670 at December 31, 1994
and 1993, respectively.
NOTE 4: Allowance for Possible Loan Losses
(In Thousands)
An analysis of the allowance for possible loan losses follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
_________________________________________________________________________
<S> <C> <C> <C>
Balance at beginning of year $ 9,830 $ 9,118 $ 8,953
Provisions charged to operations 500 1,744 3,041
Recoveries on loans previously charged off:
Mortgage 9 42 19
Commercial and other 1,674 742 419
Consumer 15 43 63
1,698 827 501
12,028 11,689 12,495
Less loans charged off:
Mortgage 1,130 224 808
Commercial and other 2,838 1,508 2,182
Consumer 54 127 387
4,022 1,859 3,377
Balance at end of year $ 8,006 $ 9,830 $ 9,118
</TABLE>
NOTE 5: Other Real Estate Owned
(In Thousands)
An analysis of the activity relative to other real estate owned follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
___________________________________________________________
<S> <C> <C> <C>
Balance at beginning of year $4,896 $8,482 $13,205
Foreclosures 2,460 2,877 4,806
Properties disposed of (4,691) (5,879) (8,816)
Writedowns, net (1,114) (584) (713)
1,551 4,896 8,482
Less: Valuation allowance 34 1,185 1,706
Balance at end of year $1,517 $3,711 $6,776
</TABLE>
An analysis of the valuation allowance follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
_______________________________________________________
<S> <C> <C> <C>
Balance at beginning of year $1,185 $1,706 $ 0
Provisions for losses (37) 63 2,419
Writedowns, net (1,114) (584) (713)
Balance at end of year $ 34 $1,185 $1,706
</TABLE>
Expenses relative to other real estate owned are incurred for the costs of
ownership of the properties and include such costs as real estate taxes,
insurance, maintenance, legal fees, management fees and disposal costs.
Expenses are stated net of rental or other income.
The components of other real estate expense are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
________________________________________________________________
<S> <C> <C> <C>
Net gain on sales of real estate owned $(64) $(103) $ 0
Provisions for losses (37) 63 2,419
Other operating expenses, net 274 414 681
$173 $ 374 $3,100
</TABLE>
NOTE 6: Bank Premises and Equipment
(In Thousands)
A summary of Bank premises and equipment at December 31, 1994 and 1993
follows:
<TABLE>
<CAPTION>
1994 1993
__________________________________________________
<S> <C> <C>
Land $ 878 $ 787
Bank premises 6,307 5,853
Equipment 4,480 4,002
11,665 10,642
Less: Accumulated depreciation 5,459 5,071
$ 6,206 $ 5,571
</TABLE>
Depreciation and amortization included in occupancy expense amounted
to $622, $587 and $557 in 1994, 1993 and 1992, respectively. Occupancy and
equipment expense is stated net of rental income of $98, $93 and $13 in
1994, 1993 and 1992, respectively.
The Bank leases various premises under noncancelable operating leases
expiring between 1995 and 1998. The Bank is expected to renew these or
similar leases in the ordinary course of business. At December 31, 1994,
future minimum lease payments under all noncancelable operating leases are
as follows:
<TABLE>
<CAPTION>
Year Ending December 31,
_______________________________
<C> <C>
1995 $60
1996 44
1997 26
1998 7
</TABLE>
Building rental expense for the years ended December 31, 1994, 1993
and 1992 was $52 , $81 and $107, respectively. Equipment rentals amounted to
$22, $14 and $4 for the years ended December 31, 1994, 1993 and 1992,
respectively.
NOTE 7: Stock in Federal Home Loan Bank of Boston
(In Thousands)
As a voluntary member of the Federal Home Loan Bank (FHLB) of Boston,
the Bank is required to invest in the stock of the FHLB of Boston, in an
amount equal to 1.0% of its outstanding loans and investments secured by
residential property or 5.0% of outstanding advances from the FHLB of
Boston, whichever is higher. The required stock is both purchased and
redeemed at its par value of $1.00 per share. The FHLB of Boston, at its
discretion, may declare dividends on this stock, and has declared and paid
such dividends on a quarterly basis in recent years. The outstanding amount
of FHLB of Boston stock is included with investment securities available-
for-sale (note 2). Dividends on this stock amounted to $269, $225 and $237
during the years ended December 31, 1994, 1993 and 1992, respectively.
NOTE 8: Deposits
(In Thousands)
The major components of deposits are as follows:
<TABLE>
<CAPTION>
December 31,
1994 1993
________________________________________
<S> <C> <C>
Demand $ 14,549 $ 20,582
Savings:
NOW 24,235 26,046
Passbook savings 29,987 30,650
Money market 58,365 58,429
TOTAL SAVINGS 112,587 115,125
Time deposits 178,037 168,839
TOTAL DEPOSITS $305,173 $304,546
</TABLE>
Included in time deposits are certificates of deposit in denominations
of $100,000 or more amounting to $34,192 and $23,613 at December 31, 1994
and 1993, respectively. Interest paid on certificates of deposit in
denominations of $100,000 or more amounted to $1,313, $1,208 and $1,462
during 1994, 1993 and 1992, respectively.
Time deposits in amounts of $100,000 or more as of December 31, 1994 will
mature as follows:
<TABLE>
<S> <C>
REMAINING MATURITY:
Within 3 months $ 9,293
Over 3 months through 6 months 10,818
Over 6 months through 12 months 8,526
Over 12 months 5,555
$34,192
</TABLE>
NOTE 9: Borrowed Funds
(In Thousands)
A summary of borrowed funds is as follows:
<TABLE>
<CAPTION>
December 31 December 31,
1994 1993
Weighted Weighted
Amount Avg. Rate Amount Avg. Rate
_____________________________________________________________________
<S> <C> <C> <C> <C>
Advances from FHLB due in:
1994 $ 0 0.0% $25,000 3.7%
1995 51,900 5.6 28,000 4.1
51,900 5.6 53,000 3.9
Other borrowings due in:
1994 0 0.0 2,430 1.5
1995 12,238 5.7 0 0.0
12,238 5.7 2,430 1.5
Total borrowed funds $64,138 5.6% $55,430 3.8%
</TABLE>
Federal Home Loan Bank advances and overnight borrowings are secured
by Federal Home Loan Bank stock held by the Bank. Additional collateral,
consisting of certain mortgage loans and other qualifying assets, has also
been pledged. Interest rates paid on these advances vary with the terms of
the borrowings. Other borrowings are secured by mortgage-backed securities
with book and market value of $4,328 and $4,174, respectively, at December
31, 1994, and $5,611 and $5,749, respectively, at December 31, 1993.
NOTE 10: Income Taxes
(In Thousands)
As discussed in note 1, effective January 1, 1992, Marble adopted
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes". The income tax benefits for the years ended December 31, 1994, 1993
and 1992 are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
______________________________________________________
<S> <C> <C> <C>
Current federal tax expense $ (10) $(50) $(53)
Deferred federal tax benefit 2,917 720 680
TOTAL INCOME TAX BENEFIT $2,907 $670 $627
</TABLE>
A reconciliation between the amount of total tax benefit and "expected" tax
(expense) benefit (computed by applying the federal income tax rate of
34% to income before taxes) is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
__________________________________________________________________________________________
<S> <C> <C> <C>
Computed "expected" tax (expense) benefit at statutory rate $(1,422) $ (936) $ (648)
Tax exempt income 12 12 10
Dividends received deduction 1 2 2
Expiration of capital loss carryforward (536) --- ---
Change in valuation reserve 4,968 1,610 1,270
Other, net (116) (18) (7)
TOTAL INCOME TAX BENEFIT $ 2,907 $ 670 $ 627
</TABLE>
The significant components of the deferred federal tax benefit are as
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
________________________________________________________________________________________
<S> <C> <C> <C>
Deferred federal tax benefit (expense) (exclusive of
effects of other components listed below) $(1,811) $ (359) $ 197
Utilization of operating loss carryforward (240) (531) (787)
Decrease in beginning of the year balance of the valuation
reserve for deferred tax assets 4,968 1,610 1,270
DEFERRED FEDERAL TAX BENEFIT $ 2,917 $ 720 $ 680
</TABLE>
At December 31, 1994, and 1993 gross deferred tax assets and gross deferred
tax liabilities are as follows:
<TABLE>
<CAPTION>
December 31,
1994 1993
____________________________________________________________________
<S> <C> <C>
Gross deferred tax assets:
Operating loss carryforward $2,466 $2,706
Allowance for possible loan losses 2,722 3,215
Capital loss carryforward 550 1,085
Valuation allowance on other real estate owned 12 211
Alternative minimum tax credit 327 322
Loan origination fees 60 120
Accrued deferred compensation 73 70
Accrued interest expense 136 48
Depreciation 55 71
Unrealized loss on investments available-for-sale 2,380 0
8,781 7,848
Valuation reserve 550 5,518
Gross deferred tax assets, net 8,231 2,330
Gross deferred tax liabilities:
Tax bad debt reserves in excess of base year 1,433 855
Excess servicing gains 33 49
Stock dividends 27 26
1,493 930
NET DEFERRED TAX ASSET $6,738 $1,400
</TABLE>
As a result of thirteen consecutive quarters of profitability, the
decrease in non-performing assets from the bulk sale in June 1994 and the
ability to project profitability three or more years into the future, Marble
feels it is more likely than not that the deferred tax asset will be
realized, and accordingly has reversed the valuation reserve established in
prior years. The remaining valuation reserve was established for the tax
effect of the capital loss carryforward.
Management believes the existing net deductible temporary differences
which give rise to the net deferred income tax asset will reverse during
periods in which the Company generates net taxable income. For the year
ending December 31, 1994, the Company generated taxable income of
approximately $89. In addition, gross deductible temporary differences are
expected to reverse in periods during which off-setting gross taxable
temporary differences are expected to reverse. It should be noted, however,
that factors beyond management's control, such as the general state of the
economy and real estate values, can affect future levels of taxable income
and that no assurance can be given that sufficient taxable income will be
generated to fully absorb gross deductible temporary differences.
Marble has capital loss carryforwards of $1,617 which will expire, to
the extent not utilized, in fiscal 1995, net operating loss carryforwards of
$7,254, which will expire to the extent not utilized, in fiscal 2006, and an
alternative minimum tax credit of $327, that may be carried forward
indefinitely.
NOTE 11: Stockholders' Equity
The retained deficit account combined with the allowance for possible
loan losses includes a reserve for loan losses for federal income tax
purposes totaling $8,228,000 at December 31, 1994. If this amount or any
portion thereof is used for purposes other than to absorb loan losses, the
amount so used must be included in income for federal income tax purposes,
during the year in which used and the Bank must provide income taxes on such
amount.
Marble, as a Vermont corporation, is subject to the Vermont Business
Corporation Act. Effective January 1994, the Vermont Business Corporation
Act was revised. The Revised Act refers to purchases and redemptions of a
corporation's own shares, along with dividends and distributions in the
classic sense, as "distributions". Under the Revised Act, a distribution
must be authorized by the Board of Directors and may not be paid if the
corporation, after the payment is made, would not be able to pay its debts
as they become due in the usual course of business, or the corporation's
total assets would be less than the sum of its total liabilities plus the
amount that would be needed, if the corporation were to be dissolved at the
time of the distribution, to satisfy the preferential rights upon
dissolution of stockholders whose preferential rights are superior to those
receiving the distribution.
Since Marble has no significant source of income other than dividends
from the Bank and earnings from investment of the proceeds of the conversion
to stock form retained by Marble, Marble's dividends will depend primarily
upon receipt of dividends from the Bank.
The Bank is not subject to the Vermont Business Corporation Act, but
applicable rules prohibit the payment of a cash dividend if the effect
thereof would cause the net worth of the Bank to be reduced below either the
amount required for the liquidation account (see note 14) or the net worth
requirements imposed by Vermont or federal laws or requirements. In
addition, so long as the Bank's "surplus fund", which Vermont law requires
it to maintain at a level of 10% of all deposits and other liabilities, is
below such 10% level, it must reserve 10% of its profits, before dividends,
for additions to such fund unless such reserved amount would not be
deductible for federal income tax purposes. Furthermore, the Federal Deposit
Insurance Act prohibits the Bank from paying dividends on its capital stock
if it is in default in the payment of any assessment to the FDIC.
During 1994, Marble declared dividends of $1,129,000, or $0.34 per
share. There were no dividends declared in 1993.
Marble is required to meet certain minimum leverage and risk-weighted
assets to capital ratios adopted by regulatory agencies and made applicable
to bank holding companies and state non-member banks. The leverage
requirement provides for minimum core capital of 3% of total assets for well
capitalized institutions and up to 5% of total assets for all others. The
risk based capital requirement provides for a minimum capital level of 8% of
risk-weighted assets. At December 31, 1994, Marble's capital ratios were in
excess of the regulatory requirements.
NOTE 12: Employee Benefit Plans
The Bank established a defined contribution plan effective January 1,
1985 which covers substantially all full-time employees who have a minimum
of three months of service prior to the anniversary date of the plan.
Pension expense recognized for the defined contribution plan was $172,000,
$186,000 and $212,000 for the years ended December 31, 1994, 1993 and 1992,
respectively.
On July 15, 1986, the Board of Directors of Marble adopted the 1986
Stock Option Plan as a performance incentive for directors, officers and
employees of Marble and the Bank. Under this plan, a total of 280,000 shares
of unissued common stock are reserved for issuance pursuant to incentive and
nonqualified stock options granted under the plan.
On March 22, 1994, the Board of Directors of Marble adopted the 1994
Stock Option Plan as a continued performance incentive for directors,
officers and employees of Marble and the Bank. The 1994 Plan was approved by
stockholders of Marble at its Annual Meeting held May 4, 1994. Under this
plan, a total of 250,000 shares of unissued common stock are reserved for
issuance pursuant to incentive and nonqualified stock options granted under
the plan.
All options granted under the 1986 and 1994 plans are required to have
an exercise price per share equal to at least the fair market value of a
share of Common Stock as of the date of grant of the option, and have a
maximum term of ten years. Transactions relative to both plans for the years
ended December 31, 1994, 1993 and 1992 are summarized as follows:
<TABLE>
<CAPTION>
Options Outstanding Option Price Per Share
_______________________________________________________________________
<S> <C> <C>
Balance December 31, 1991 180,850 $ 5.75-16.50
Granted 243,350 3.375-5.25
Exercised 0 ---
Terminated 199,850 5.75-16.50
Balance December 31, 1992 224,350 3.375-5.25
Granted 14,500 7.875-8.625
Exercised 37,093 3.375-5.25
Terminated 2,500 4.875
Balance December 31, 1993 199,257 3.375-8.625
Granted 47,500 8.25
Exercised 27,951 3.375-8.00
Terminated 5,593 4.875
Balance December 31, 1994 213,213 $ 3.375-8.625
</TABLE>
On July 15, 1986, the Board of Directors of Marble also adopted the
Employee Stock Purchase Plan of 1986 covering a maximum of 100,000 shares of
common stock. There were 18,063 shares of Marble's common stock issued
pursuant to this plan, which expired on August 1, 1992.
On February 25, 1992, the Board of Directors of Marble adopted the
Employee Stock Purchase Plan of 1992, which became effective August 1, 1992,
upon the expiration of the Employee Stock Purchase Plan of 1986, covering a
maximum of 100,000 shares of common stock. To date, 15,572 shares of Marble
common stock have been issued pursuant to this plan.
On January 26, 1993, the Board of Trustees of the Bank approved an
incentive savings and profit sharing plan (Plan) for Marble Bank employees.
The Plan is a 401(k) defined contribution plan that allows the Bank
employees to make contributions on a pre-tax basis. As part of the Plan, the
Bank has the option to make a matching contribution each year of up to 5% of
each participant's base compensation. For the years ended December 31, 1994
and 1993, the employer matching contributions amounted to $151,000 and
$139,000, respectively.
Marble currently has no postretirement or postemployment arrangements
other than pensions with its current and future retirees, and consequently
is not affected by the Financial Accounting Standards Board (FASB) Statement
No. 106, "Employers' Accounting For Postretirement Benefits Other Than
Pensions" or FASB Statement No. 112, "Accounting for Postemployment
Benefits".
NOTE 13: Other Non-interest Expense
(In Thousands)
The components of other non-interest expense are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
_________________________________________________________
<S> <C> <C> <C>
Advertising and marketing $ 363 $ 362 $ 312
Professional and consulting fees 297 281 399
FDIC insurance 774 869 724
Stationery and supplies 358 430 432
All other 1,609 1,080 1,070
$3,401 $3,022 $2,937
</TABLE>
NOTE 14: Financial Instruments With Off-Balance-Sheet Risk, Commitments and
Contingencies
(In Thousands)
The Bank is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers and to reduce its own exposure to fluctuations in interest rates.
These financial instruments, held for purposes other than trading, include
commitments to extend credit, standby letters of credit and the sale of
loans with recourse. Those instruments involve, to varying degrees, elements
of credit and interest rate risk in excess of the amount recognized in the
consolidated balance sheets. The contractual amounts of those instruments
reflect the extent of involvement the Bank has in particular classes of
financial instruments.
The Bank's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend credit
and standby letters of credit and financial guarantees written is
represented by the contractual amount of those instruments. The Bank uses
the same credit policies in making commitments and conditional obligations
as it does for on-balance-sheet instruments.
<TABLE>
<CAPTION>
Contractual Amounts
1994 1993
________________________________________________________________________________________
<S> <C> <C>
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit:
Mortgage $ 879 $ 3,096
Commercial 5,505 6,871
$ 6,384 $ 9,967
Standby letters of credit $ 332 $ 570
Unused credit lines:
Mortgage equity $22,402 $14,547
Commercial and other 9,325 13,787
$31,727 $28,334
Loans sold with recourse $ 1,168 $ 1,733
</TABLE>
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since some of the commitments are
expected to expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. The Bank evaluates each
customer's creditworthiness on a case-by-case basis. The amount of
collateral obtained, if deemed necessary by the Bank upon extension of
credit, is based on management's credit evaluation of the counter-party.
Collateral held varies but may include accounts receivable, inventory,
property, plant and equipment, and income producing commercial properties.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees
are primarily issued to support trade and borrowing arrangements. The credit
risk involved in issuing letters of credit is essentially the same as that
involved in extending loan facilities to customers. The Bank holds various
financial instruments as collateral supporting those commitments for which
collateral is deemed necessary.
The Bank has retained credit risk on certain residential mortgage
loans sold with recourse during 1987. Accordingly, the Bank has retained the
risk of loss resulting from any foreclosures on such loans.
At the time of its conversion from mutual to stock form, the plan of
conversion also provided for the establishment of a special "liquidation
account", for the benefit of eligible account holders at December 31, 1985.
These eligible account holders were granted a priority, in the event of a
complete liquidation of the Bank, to receive a liquidation distribution from
the liquidation account established for that purpose, equal to the net worth
of the Bank at December 31, 1985, of $9,726. The eligible account holders'
interests in the liquidation account are reduced proportionately by any
subsequent reduction in the deposit account balances at any annual closing
date (December 31). Increases to these accounts do not increase the
liquidation account and it ceases to exist if such accounts are closed.
As a nonmember of the Federal Reserve System, the Bank is required to
maintain certain reserve requirements of vault cash and/or deposits with the
Federal Reserve Bank of Boston. The amount of this reserve requirement,
included in Cash and Due from Banks, was $1,024 and $1,252 at December 31,
1994 and 1993, respectively.
A number of legal claims against Marble arising in the normal course
of business were outstanding at December 31, 1994. Management, after
reviewing these claims with legal counsel, is of the opinion that the
resolution of these claims will not have a material effect on the
consolidated financial statements.
NOTE 15: Fair Value of Financial Instruments
(In Thousands)
Fair value estimates, methods and assumptions are set forth below for
Marble's financial instruments at December 31, 1994 and 1993.
Cash and Cash Equivalents
The fair value of cash and cash equivalents approximate the carrying
value. Cash and cash equivalents include cash and due from banks, interest
bearing deposits in other banks and federal funds sold.
Investment Securities
The fair value of investment securities, including United States
Government obligations, state and political obligations, other bonds and
obligations, mortgage-backed securities and other common and preferred
stocks, is estimated on bid prices published in financial newspapers or bid
quotations received from securities dealers. Federal Home Loan Bank stock
has no market value and can only be sold back to the Federal Home Loan Bank.
As such, book value and fair value are assumed to be equal.
Loans
Fair values of loans are estimated for portfolios with similar
financial characteristics. Loans are segregated by type, such as commercial,
residential mortgage and consumer. Each loan category is further segmented
into fixed and adjustable rate interest terms and non-performing categories.
The fair value of performing loans, except residential mortgage loans,
is calculated by discounting scheduled cash flows through estimated
maturity, using interest rates currently being offered for loans with
similar terms and credit quality.
The fair value of performing residential mortgage loans is estimated
by discounting contractual cash flows adjusted for prepayment estimates
using discount rates based on secondary market sources, adjusted to reflect
differences in servicing costs.
The fair value of non-performing loans is based on recent external
appraisals or estimated cash flows using a rate commensurate with the risk
associated with the estimated cash flows. Assumptions regarding credit risk,
cash flows, and discount rates are judgmentally determined using available
market and borrower information.
Deposits
The fair value of deposits with no stated maturity, such as non-
interest earning demand deposits, savings, NOW, and money market accounts,
is equal to the amount payable on demand at each balance sheet date (i.e.
their carrying amounts). Fair values for fixed rate certificates of deposit
are estimated using a discounted cash flow calculation that applies interest
rates currently being offered on a schedule of aggregate expected monthly
maturities on time deposits.
Borrowed Funds
The fair value of borrowed funds that have maturities of 90 days or
less is equal to their carrying value at December 31. The fair value of
borrowings with maturities longer than 90 days is estimated using rates
currently available to Marble for borrowings with similar terms and
remaining maturities.
Accrued Interest
The carrying amounts of accrued interest receivable and accrued
interest payable approximate their fair value.
Commitments to Extend Credit and Standby Letters of Credit
The fair value of commitments to extend credit is estimated using the
fees currently charged to enter into similar agreements, taking into account
the remaining terms of the agreements and the present creditworthiness of
the counterparties. For fixed rate loan commitments, fair value also
considers the difference between current levels of interest rates and the
committed rates. The fair value of letters of credit is based on fees
currently charged for similar agreements or on the estimated cost to
terminate them or otherwise settle the obligations with the counterparties
at the reporting date.
At December 31, 1994 and 1993, the estimated fair value of these off-
balance sheet instruments was not material.
Limitations
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates do not reflect any premium or discount that could result
from offering for sale at one time Marble's entire holdings of a particular
financial instrument. Because no market exists for a significant portion of
Marble's financial instruments, fair value estimates are based on judgments
regarding future expected loss experience, current economic conditions, risk
characteristics of various financial instruments, and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on-and off-balance sheet
financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities that are
not considered financial instruments. Significant assets and liabilities
that are not considered financial assets or liabilities include the mortgage
banking operation, the net deferred tax asset and premises and equipment. In
addition, the tax ramifications related to the realization of the unrealized
gains and losses can have a significant effect on fair value estimates and
have not been considered in many of the estimates.
The following table summarizes the carrying value and estimated fair value
of Marble's financial instruments at December 31, 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
Carrying Fair Carrying Fair
Amount Value Amount Value
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 6,862 $ 6,862 $ 6,650 $ 6,650
Investment securities held-to-maturity 19,767 18,961 0 0
Investment securities available-for-sale 93,578 93,578 126,143 126,143
Loans 269,272 268,038 249,034 255,948
Accrued interest receivable 2,489 2,489 2,106 2,106
Financial liabilities:
Deposits 305,173 304,790 304,546 305,482
Borrowed funds 64,138 63,896 55,430 55,487
Accrued interest payable 627 627 318 318
</TABLE>
NOTE 16: Marble Financial Corporation (Parent Company Only)
(In Thousands, Except Par Value and Share Amounts)
The following are condensed financial statements of Marble Financial
Corporation (parent company only) as of December 31, 1994 and 1993 and for
the years ended December 31, 1994, 1993 and 1992.
<TABLE>
<CAPTION>
December 31,
BALANCE SHEETS 1994 1993
- ----------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and due from banks $ 69 $ 6
Short-term investments 4,270 5,242
Investment in subsidiary 32,999 29,765
Other assets 1 0
$37,339 $35,013
Liabilities and Stockholders' Equity
Accounts payable $ 2 $ 1
Other liabilities 300 0
TOTAL LIABILITIES 302 1
Stockholders' Equity:
Preferred stock --- ---
Common stock 3,333 3,300
Additional paid-in capital 42,777 42,579
Retained deficit (4,453) (10,413)
Unrealized loss on investment securities
available-for-sale, net (4,620) (454)
TOTAL STOCKHOLDERS' EQUITY 37,037 35,012
$37,339 $35,013
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
STATEMENTS OF OPERATIONS 1994 1993 1992
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Income on investments $ 142 $ 146 $ 210
Total income 142 146 210
Expenses:
Non-interest expense 453 506 497
Total operating expenses 453 506 497
Loss before taxes and equity in undistributed
income of subsidiary (311) (360) (287)
Applicable income taxes 0 0 0
Loss before equity in undistributed income of
subsidiary (311) (360) (287)
Equity in undistributed income of subsidiary 7,400 4,236 2,822
NET INCOME $ 7,089 $ 3,876 $ 2,535
<CAPTION>
Year Ended December 31,
STATEMENTS OF CASH FLOWS 1994 1993 1992
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 7,089 $ 3,876 $ 2,535
Adjustments to reconcile net income to net cash
used by operating activities:
Equity in undistributed income of subsidiary (7,400) (4,236) (2,822)
Decrease in other assets 40 2 2
Increase (decrease) in accounts payable 1 (16) 16
Net cash used by operating activities (270) (374) (269)
Cash flows from financing activities:
Proceeds from issuance of common stock 190 305 27
Dividends paid (829) 0 0
Net cash provided (used) by financing activities (639) 305 27
Net decrease in cash and cash equivalents (909) (69) (242)
Beginning cash and cash equivalents 5,248 5,317 5,559
Ending cash and cash equivalents $ 4,339 $ 5,248 $ 5,317
</TABLE>
NOTE 17: Quarterly Data
(In Thousands, Except Per Share Amounts)
The following table sets forth certain unaudited income and expense data for
the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended
1994 March 31 June 30 Sept 30 Dec 31
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total interest income $ 6,607 $ 6,882 $ 7,193 $ 7,711
Total interest expense 3,040 3,116 3,426 3,717
Net interest income 3,567 3,766 3,767 3,994
Provision for possible loan losses 300 200 0 0
Non-interest income 257 290 313 (638)
Non-interest expense 2,594 2,666 2,745 2,629
Income before income taxes 930 1,190 1,335 727
Income tax benefit (1) (125) (2,355) (100) (327)
Net income $ 1,055 $ 3,545 $ 1,435 $ 1,054
Earnings per common share $ 0.31 $ 1.05 $ 0.42 $ 0.31
Dividends declared $ 0.05 $ 0.12 $ 0.08 $ 0.09
<CAPTION>
Three Months Ended
1993 March 31 June 30 Sept 30 Dec 31
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total interest income $ 6,731 $ 6,430 $ 6,567 $ 6,563
Total interest expense 3,240 3,246 3,103 3,062
Net interest income 3,491 3,184 3,484 3,501
Provision for possible loan losses 405 606 433 300
Non-interest income 282 300 368 (19)
Non-interest expense 2,612 2,078 2,528 2,857
Income before income taxes and cumulative
effect of change in accounting principle 756 800 871 325
Income tax benefit (213) (183) (144) (130)
Income before cumulative effect of change
in accounting principle 969 983 1,015 455
Cumulative effect of change in accounting
principle (2) 0 0 0 454
Net income $ 969 $ 983 $ 1,015 $ 909
Earnings per common share:
Income before cumulative effect of change
in accounting principle $ 0.29 $ 0.29 $ 0.30 $ 0.14
Cumulative effect of change in accounting
principle $ 0.00 $ 0.00 $ 0.00 $ 0.13
Net income $ 0.29 $ 0.29 $ 0.30 $ 0.27
Dividends declared $ 0.00 $ 0.00 $ 0.00 $ 0.00
<FN>
<F1> As a result of a decrease in non-performing assets from a bulk sale in
June 1994, the increased profitability during the second quarter and
the ability to project profitability two or more years into the
future, it was the opinion of management that the Bank would more
likely than not recover a greater portion of its deferred tax asset.
For the quarter ended June 30, 1994 this review resulted in the
recording of an additional net deferred tax asset of $2,355.
<F2> Marble adopted FASB Statement No. 115 as of December 31, 1993. This
resulted in changes in the classification of certain investment
securities at December 31, 1993, the inclusion of the cumulative
effect on earnings as of December 31, 1993 of a previously recorded
lower of cost or market writedown on investment securities held for
sale of $454 in the statements of operations and the recording of this
unrealized loss as a component of equity.
</TABLE>
Quarterly per share figures may not total to the full year amount due to
changes in the average number of shares outstanding.
SELECTED FINANCIAL DATA
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
STATEMENT OF OPERATIONS DATA: 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $20,981 $20,286 $25,567 $32,615 $ 35,798
Interest and dividends on investments 7,378 5,945 4,659 3,026 1,913
Other 34 60 57 71 417
TOTAL INTEREST INCOME 28,393 26,291 30,283 35,712 38,128
Interest expense:
Interest on deposits 10,671 10,762 14,314 20,272 22,108
Interest on borrowed funds 2,628 1,889 2,144 3,435 3,726
TOTAL INTEREST EXPENSE 13,299 12,651 16,458 23,707 25,834
Net interest income 15,094 13,640 13,825 12,005 12,294
Provision for possible loan losses 500 1,744 3,041 8,134 12,279
Net interest income after provision for
possible loan losses 14,594 11,896 10,784 3,871 15
Non-interest income (deductions):
Service charges on deposit accounts 753 711 570 537 557
Security transactions (964) (127) 2,198 602 258
Other income 433 347 372 470 397
TOTAL NON-INTEREST INCOME 222 931 3,140 1,609 1,212
Non-interest expense:
Salaries and employee benefits 5,560 5,255 4,657 4,448 4,517
Occupancy and equipment expense 1,500 1,424 1,322 1,382 1,482
Shareholder class action settlement 0 0 0 (1,900) 2,320
Other real estate owned expense, net 173 374 3,100 1,200 792
Other expenses 3,401 3,022 2,937 2,873 2,944
TOTAL NON-INTEREST EXPENSE 10,634 10,075 12,016 8,003 12,055
Income(loss) before income taxes &
cumulative effect of a change in
accounting principle 4,182 2,752 1,908 (2,523) (10,828)
Income tax benefit (2,907) (670) (627) 0 0
Income (loss) before cumulative effect
of a change in accounting principle 7,089 3,422 2,535 (2,523) (10,828)
Cumulative effect of a change in
accounting for securities 0 454 0 0 0
NET INCOME (LOSS) $ 7,089 $ 3,876 $ 2,535 $(2,523) $(10,828)
Per common share:
Income (loss) before cumulative effect
of a change in accounting principle $ 2.08 $ 1.02 $ 0.78 $ (0.78) $ (3.35)
Cumulative effect of a change in
accounting for securities $ 0.00 $ 0.13 $ 0.00 $ 0.00 $ 0.00
Net income (loss) $ 2.08 $ 1.15 $ 0.78 $ (0.78) $ (3.35)
Dividends declared $ 0.34 $ 0.00 $ 0.00 $ 0.00 $ 0.00
</TABLE>
<TABLE>
<CAPTION>
December 31,
BALANCE SHEET DATA: 1994 1993 1992 1991 1990
- --------------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Total assets $408,536 $396,698 $369,768 $382,162 $390,886
Loans:
Mortgage 133,590 134,863 146,935 180,089 188,317
Commercial and other 103,750 98,746 104,769 113,103 123,837
Consumer 39,938 25,255 22,519 26,989 29,481
TOTAL LOANS 277,278 258,864 274,223 320,181 341,635
Less: Allowance for possible loan
losses 8,006 9,830 9,118 8,953 10,948
NET LOANS 269,272 249,034 265,105 311,228 330,687
Investments (1) 113,349 126,322 83,292 44,087 30,049
Deposits:
Demand 14,549 20,582 15,242 14,628 13,150
Savings, NOW and money market 112,587 115,125 111,473 86,989 61,330
Time 178,037 168,839 163,687 193,463 231,549
TOTAL DEPOSITS 305,173 304,546 290,402 295,080 306,029
Borrowed funds 64,138 55,430 45,995 56,204 51,342
STOCKHOLDERS' EQUITY 37,037 35,012 31,285 28,723 31,229
<FN>
<F1> Includes investment securities, federal funds sold and other short-
term investments and interest-bearing deposits in other banks.
</TABLE>
<TABLE>
<CAPTION>
December 31
OTHER DATA: 1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest rate spread 3.5% 3.3% 3.4% 2.7% 2.4%
Net interest margin [net interest income/
average interest earning assets] 3.9 3.7 3.8 3.3 3.4
Return on assets
[net income (loss)/average assets] 1.8 1.0 0.7 (0.7) (2.9)
Return on equity
[net income (loss)/average equity] 20.7 11.6 8.5 (8.2) (26.7)
Equity to assets ratio
[average equity/average assets] 8.6 8.8 8.0 8.0 10.7
Net charge-offs to average outstanding
loans during the period 0.9 0.4 1.0 3.1 6.2
Allowance for possible loan losses to
total loans outstanding 2.9 3.8 3.3 2.8 3.2
</TABLE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
FINANCIAL CONDITION
General
Total assets increased $11.8 million, or 3.0%, during 1994, from
$396.7 million at December 31, 1993 to $408.5 million at December 31, 1994.
The return on average assets during 1994 was 1.8% compared to a return on
average assets of 1.0% during 1993. Total stockholders' equity increased
$2.0 million, or 5.8%, from $35.0 million at December 31, 1993 to $37.0
million at December 31, 1994. The return on average equity during 1994 was
20.7% compared to a return on average equity of 11.6% during 1993.
Total assets increased $26.9 million, or 7.3%, during 1993, from
$396.8 million at December 31, 1992 to $396.7 million at December 31, 1993.
The return on average assets during 1993 was 1.0% compared to a return on
average assets of 0.7% during 1992. Total stockholders' equity increased
$3.7 million, or 11.9%, from $31.3 million at December 31, 1992 to $35.0
million at December 31, 1993. The return on average equity during 1993 was
11.6% compared to a return on average equity of 8.5% during 1992.
Investment Portfolio
Marble maintains an investment portfolio as a means to provide
liquidity, manage its balance sheet position and provide interest income. In
recent years, Marble has been securitizing portions of its fixed rate
mortgage portfolio and creating mortgage-backed securities, which has
resulted in increased volume and activity in the investment portfolio. This
process has also given Marble increased liquidity and flexibility in balance
sheet management.
As of December 31, 1993, Marble adopted Financial Accounting Standards
Board Statement No. 115 "Accounting for Certain Investments in Debt and
Equity Securities". This statement requires that debt and equity securities
classified as available-for-sale be reported at fair value, with unrealized
gains and losses, net of taxes, shown as a component of stockholders'
equity. This accounting change is not applicable to prior periods.
As part of its balance sheet management strategy, Marble has elected
to maintain flexibility in the management of its investment portfolio in
order to maintain liquidity and be able to react to changes in the
marketplace and the economic environment and therefore does not want, at
this time, to keep a large volume of investments until they mature. Marble
has elected to classify the majority of its investment securities as
available-for-sale, which allows it to turn over portions of the investment
portfolio from time to time in order to take advantage of changes in the
market.
During 1994, as interest rates have risen, the market value of most
investment securities has decreased. At December 31, 1994 investment
securities classified as available-for-sale with an amortized cost of
$100.6 million had a net unrealized loss of $7.0 million. Given the current
volatility in interest rates, it is possible that the amount of unrealized
loss could increase or decrease significantly in future periods.
Loans
Marble's loan portfolio grew by $18.4 million, or 7.1%, during 1994,
from $258.9 million at December 31, 1993 to $277.3 million at December 31,
1994. The heaviest growth was in the consumer loan portfolio, which
increased $14.7 million, or 58.1%, from $25.2 million at December 31, 1993
to $39.9 million at December 31, 1994. Increased emphasis on home equity
loans and automobile lending were primarily responsible for the increase in
the consumer area. Commercial loans increased $5.0 million, or 5.1%, from
$98.7 million at December 31, 1993 to $103.7 at December 31, 1994, due to
increased demand in commercial real estate loans. As interest rates
increased during 1994, Marble experienced a decrease in mortgage loan
demand. Total mortgage loans decreased $1.3 million, or 0.9%, from $134.9
million at December 31, 1993 to $133.6 million at December 31, 1994, mainly
due to decreases in commercial and construction mortgages.
The following table sets forth the composition of the Bank's total loan
portfolio and percentages of total loans (In thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992 1991 1990
Percent Percent Percent Percent Percent
of Total of Total Of Total Of Total Of Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans:
Residential $126,251 45.5% $125,906 48.6% $135,938 49.6% $165,752 51.8% $170,239 49.8%
Commercial 6,402 2.3 7,491 2.9 9,461 3.4 11,419 3.6 12,894 3.8
Construction 937 0.4 1,466 0.6 1,536 0.6 2,918 0.9 5,184 1.5
133,590 48.2 134,863 52.1 146,935 53.6 180,089 56.3 188,317 55.1
Commercial:
Secured by real estate 56,599 20.4 46,523 18.0 50,828 18.5 54,881 17.1 47,945 14.1
Construction 289 0.1 2,003 0.8 3,698 1.4 4,308 1.4 9,662 2.8
Other 46,862 16.9 50,220 19.4 50,243 18.3 53,914 16.8 66,230 19.4
103,750 37.4 98,746 38.2 104,769 38.2 113,103 35.3 123,837 36.3
Consumer:
Equity lines of credit 28,839 10.4 17,323 6.7 14,118 5.1 15,362 4.8 15,341 4.5
Other 11,099 4.0 7,932 3.0 8,401 3.1 11,627 3.6 14,140 4.1
39,938 14.4 25,255 9.7 22,519 8.2 26,989 8.4 29,481 8.6
Total loans 277,278 100.0% 258,864 100.0% 274,223 100.0% 320,181 100.0% 341,635 100.0%
Less:
Allowance for possible loan
loss 8,006 9,830 9,118 8,953 10,948
Net loans $269,272 $249,034 $265,105 $311,228 $330,687
</TABLE>
Non-Performing Assets
The management of the Bank has created a regular and ongoing loan
review process to rate and review factors relating to the financial quality
of the loan accounts of the Bank. Current collateral appraisals, current
economic conditions, the financial condition of the borrower, and other
known risk factors are considered in evaluating loan quality. Reviewed loans
are assigned a grading based on the reviewer's evaluation of the relevant
information. As part of the review process, loans are classified as either
satisfactorily performing, watch list loans or non-performing loans.
A satisfactorily performing loan is a loan that is performing within
the requirements of the original contract. A watch list loan is a loan that
is not performing in a timely or adequate manner and is less than 90 days
delinquent, or is a loan where the reviewer is aware of information that may
cause the loan to also become delinquent or non-performing in the future.
Watch list loans are monitored by a special assets group, and efforts are
made to correct any problems before the loan becomes non-performing. A loan
is considered to be non-performing when it is placed on non-accrual status,
is past due 90 days or more but still accruing interest or has been
renegotiated to terms for favorable to the borrower. Foreclosure actions are
instituted when collection through normal efforts is judged to be
ineffective.
The Financial Accounting Standards Board (FASB) has issued Statement
of Financial Accounting Standards (SFAS) Statement No. 114, "Accounting by
Creditors for Impairment of a Loan". SFAS No. 114, as amended by SFAS No.
118 (SFAS No. 114, as amended), requires that impaired loans, as defined, be
measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a practical
expedient, at the loan's observable market price or the face value of
collateral if the loan is collateral-dependent. This pronouncement amends
SFAS No. 5, "Accounting for Contingencies," to clarify that a creditor
should evaluate the collectability of both contractual interest and
contractual principal of all receivables when assessing the need for a loss
accrual. This pronouncement also amends SFAS No. 15, "Accounting by Debtors
and Creditors for Troubled Debt Restructuring", to require a creditor to
measure all loans that are restructured in a troubled debt restructuring
involving a modification of terms in accordance with this statement.
This pronouncement applies to financial statements for fiscal years
beginning after December 15, 1994. SFAS No 114, as amended, is applicable to
all loans (including troubled debt restructurings), uncollateralized as well
as collateralized, except large groups of smaller-balance homogeneous loans
that are collectively evaluated for impairment, loans that are measured at
fair value or the lower of cost or fair value, leases as defined by SFAS No.
13 and debt securities as defined in SFAS No. 115. The Bank adopted this
statement in 1995. Bank management does not anticipate that this accounting
change will have a material effect on its financial position or results of
operations.
The following table summarizes non-performing loans and non-performing
assets (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Non-accrual loans: (1)
Mortgage $ 648 $ 987 $ 1,160 $ 3,024 $ 945
Commercial 4,628 10,110 13,740 6,012 13,673
Consumer 163 62 143 309 125
Total 5,439 11,159 15,043 9,345 14,743
Accruing loans past due 90 days or more:
Mortgage 291 383 655 1,975 3,535
Commercial 0 0 79 3,737 250
Consumer 43 83 27 495 350
Total 334 466 761 6,207 4,135
Insubstance foreclosures:
Mortgage 0 436 1,240 1,064 505
Commercial 0 2,890 7,260 8,300 7,436
Consumer 0 0 25 68 16
Total 0 3,326 8,525 9,432 7,957
Total non-performing loans 5,773 14,951 24,329 24,984 26,835
Other real estate owned 1,551 4,896 8,482 13,205 13,174
Valuation allowance (34) (1,185) (1,706) 0 (255)
Net other real estate owned 1,517 3,711 6,776 13,205 12,919
Troubled debt restructurings 0 0 0 2,256 0
Total non-performing assets $7,290 $18,662 $31,105 $40,445 $39,754
Total non-performing loans as a
percentage of total loans 2.1% 5.8% 8.9% 7.8% 7.9%
Total non-performing assets as a
percentage of total loans and net
other real estate owned 2.6 7.1 11.1 12.2 11.2
Total non-performing assets as a
percentage of total assets 1.8 4.7 8.4 10.6 10.1
Allowance for possible loan losses as
a percentage of total non-performing
loans 138.7 65.7 37.5 35.8 40.1
Allowance for possible loan losses as
a percentage of total non-performing
assets 109.8 52.7 29.3 22.1 27.2
<FN>
<F1> Includes $0, $295 and $297 of troubled debt restructurings at December
31, 1994, 1993, and 1992, respectively.
</TABLE>
An analysis of non-performing loans as of December 31, 1994 follows (in
thousands):
<TABLE>
<CAPTION>
Non-Performing Loans as a Percent of
Non- Total
Performing Total Loans Non-Performing
Total Loans Loans In Category Loans
<S> <C> <C> <C> <C>
MORTGAGE LOANS:
Residential $126,251 $ 746 0.6% 12.9%
Commercial 6,402 19 0.1 3.4
Construction 937 0 0.0 0.0
TOTAL MORTGAGE LOANS 133,590 765 0.7 16.3
COMMERCIAL LOANS:
Secured by real estate 56,599 3,939 3.8 68.2
Construction 289 0 0.0 0.0
All other 46,862 689 0.7 11.9
TOTAL COMMERCIAL LOANS 103,750 4,628 4.5 80.1
CONSUMER LOANS:
Equity lines of credit 28,839 92 0.2 1.6
All other 11,099 114 0.3 2.0
TOTAL CONSUMER LOANS 39,938 206 0.5 3.6
$277,278 $5,599 2.1% 100.0%
</TABLE>
During 1994, Marble's total non-performing assets decreased by $11.4
million. Non-performing loans decreased $9.2 million, or 61.4%, from $15.0
million at December 31, 1993 to $5.8 million at December 31, 1994, and net
other real estate owned decreased $2.2 million, or 59.1%, from $3.7 million
at December 31, 1993 to $1.5 million at December 31, 1994. At December 31,
1994 there were accruing fair value troubled debt restructurings of $3.2
million.
In June 1994, there was a bulk sale of $7.7 million of non-performing
assets to a private investor. Included in this sale were $3.4 million of
non-performing loans, $3.7 million of other real estate owned and $.6
million of classified accruing loans. After charge-offs and writedowns
totalling $2.7 million, net cash of $5.0 million was received. The levels of
the reserve for possible loan losses and the valuation reserve for
writedowns of other real estate were sufficient to allow Marble to effect
the transaction without the need to recognize further losses.
The Bank maintains a special asset group within the loan department to
manage and monitor assets that represent increased risk. This group
identifies both current and potential problem loans, procures current
appraisals on the identified properties, pursues foreclosure proceedings
where warranted and manages the disposition of non-performing loans and
foreclosed assets.
At December 31, 1994 and 1993, properties having an estimated current
market value of $0 and $3.3 million, respectively, were categorized as
insubstance foreclosures. A loan usually becomes categorized as an
insubstance foreclosure when the borrower has little or no equity in the
collateral securing the loan, and the only apparent source of repayment
would come from the sale of the property. Using previously established loan
loss reserves, the loans are written down to the estimated market value of
the collateral and the balance transferred to the insubstance foreclosure
category.
Through foreclosure and other legal means, title has been obtained to
a number of properties that were previously held as collateral on certain
non-performing loans. Using previously established loan loss reserves, these
properties were written down to the estimated current market value of the
properties obtained and the remaining balance transferred to other real
estate owned. After foreclosure, these assets are carried at the lower of
fair market value less estimated costs to sell, or cost. Properties held
totaled $1.6 million at December 31, 1994 and $4.9 million at December 31,
1993. The special assets group is managing these properties for the benefit
of the Bank and is vigorously marketing them in order to bring about their
sale as soon as possible. During 1994 and 1993, disposal of these properties
totaled $4.7 million and $5.9 million, respectively.
Allowance for Possible Loan Losses
(In Thousands)
The following table summarizes net loans outstanding at the end of
each period indicated, and the average amount of net loans outstanding,
changes in the allowance for possible loan losses and other selected
statistics during each period indicated.
<TABLE>
<CAPTION>
At December 31,
1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Average net loans outstanding during period $258,488 $255,496 $293,903 $322,639 $325,922
Net loans outstanding, end of period $269,272 $249,034 $265,105 $311,228 $330,687
Allowance for possible loan losses, beginning
of period $ 9,830 $ 9,118 $ 8,953 $ 10,948 $ 19,614
Loans charged-off:
Mortgage(1) 1,130 224 808 1,203 749
Commercial and other(2) 2,838 1,508 2,182 9,715 20,633
Consumer 54 127 387 497 311
Total loans charged-off 4,022 1,859 3,377 11,415 21,693
Recoveries on amounts previously charged-off:
Mortgage(1) 9 42 19 152 20
Commercial and other(2) 1,674 742 419 1,057 713
Consumer 15 43 63 77 15
Total recoveries 1,698 827 501 1,286 748
Net loans charged-off 2,324 1,032 2,876 10,129 20,945
Provision for possible loan losses 500 1,744 3,041 8,134 12,279
Allowance for possible loan losses, end
of period $ 8,006 $ 9,830 $ 9,118 $ 8,953 $ 10,948
Net loans charged-off as a percentage of
average net loans outstanding 0.9% 0.4% 1.0% 3.1% 6.4%
Allowance for possible loan losses as a
percentage of net loans outstanding at
end of period 3.0% 3.9% 3.4% 2.9% 3.3%
<FN>
<F1> Includes residential construction loans.
<F2> Includes commercial loans secured by real estate and commercial
construction loans.
</TABLE>
Based on the recommendations of management, the loan review group and
the special assets group, the allowance for possible loan losses is
determined by applying the recommendations from these groups to a reserve
formula. Each non-performing loan is analyzed individually and an
appropriate level of reserve is established for each loan. In addition,
watch list loans, randomly selected groups of performing loans and all
performing commercial loans over $500,000 are regularly reviewed, and a
reserve percentage is allocated based on past experience and current
economic conditions. The balance of the loan portfolio is analyzed by type
and assigned a reserve allocation based on management's judgment of the past
history of performance of the loan category, underlying collateral values
and current economic conditions. The level of the reserve is determined by
aggregating the many separate calculations described above. The Bank
considers the formula and related calculations to be adequate to assess the
risk inherent in the loan portfolio at December 31, 1994 given the current
economic conditions in New England. The formula calculations are reviewed
and updated regularly, and the provision and the valuation allowance are
adjusted accordingly. Given the level of non-performing assets and the risk
inherent in the loan portfolio, it is possible that the application of the
reserve formula may not indicate the need for additions to the reserve
during 1995.
The allowance for possible loan losses was allocated as follows for the
periods indicated:
<TABLE>
<CAPTION>
At December 31,
1994 1993 1992 1991 1990
Percent Percent Percent Percent Percent
Of Total Of Total Of Total Of Total Of Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at end of year applicable to:
Mortgage (1) $ 668 48.2% $ 810 52.1% $ 753 53.6% $ 966 56.3% $ 1,056 55.1%
Commercial and other (2) 4,754 37.4 5,157 38.2 7,442 38.2 6,440 35.3 8,453 36.3
Consumer 420 14.4 272 9.7 231 8.2 316 8.4 272 8.6
Unallocated 2,164 0.0 3,591 0.0 692 0.0 1,231 0.0 1,167 0.0
Total $8,006 100.0% $9,830 100.0% $9,118 100.0% $8,953 100.0% $10,948 100.0%
<FN>
<F1> Includes residential construction loans.
<F2> Includes commercial loans secured by real estate and commercial
construction loans.
</TABLE>
Not withstanding the foregoing allocations, the entire allowance for
possible loan losses is available to absorb charge-offs in any category of
loans.
Liquidity
Marble's principal sources of funds are deposits, loan amortization
and maturities, prepayments and sales of loans and income on earning assets.
The Bank may also borrow from the Federal Home Loan Bank (FHLB) and other
correspondent banks.
The Bank experienced a net increase in total deposits of $.6 million
and $14.1 million during 1994 and 1993, respectively, and a net decrease of
$4.7 million in 1992, after crediting of interest. During 1994, 1993 and
1992, sales of mortgage loans, including securitizations, totalled $8.6
million, $38.1 million, and $66.5 million, respectively.
In addition to liquidity provided by the aforementioned sources, the
Bank maintains a portfolio of short-term investments and investment
securities which averaged $118.7 million, or 29.9% of average assets, in
1994, $107.5 million, or 28.1% of average assets, in 1993 and $58.9 million,
or 15.8% of average assets, in 1992. During 1994, 1993 and 1992, the Bank
securitized $2.0 million, $24.0 million and $56.9 million, respectively, of
pools of residential mortgage loans with the Federal National Mortgage
Association (FNMA) and converted them to mortgage-backed securities. This
process creates a more liquid asset while maintaining the attractive
interest rates of the underlying loans.
At December 31, 1994, 1993 and 1992, the Bank had $51.9 million, $53.0
million, and $43.0 million, respectively, of outstanding FHLB advances.
These advances are secured by certain mortgage loans, and other qualifying
assets, plus all FHLB stock owned by the Bank. Subject to certain
considerations, the Bank has potential access to an additional $31.9 million
from the FHLB.
Interest Sensitivity
(In Thousands)
Marble continuously monitors its interest rate sensitivity as a means
of insuring that changes in interest rates do not have a material adverse
impact on income. The Asset and Liability Committee of the Bank analyzes the
interest rate gap and attempts to manage and improve the interest rate
sensitivity. The interest rate gap is the difference between the volume of
interest sensitive assets and interest sensitive liabilities that will
mature or reprice within a given time period.
A positive gap position exists when the volume of rate sensitive
assets exceeds the volume of rate sensitive liabilities in a given time
frame, and indicates that more assets than liabilities will mature or
reprice during that period. A positive gap position will tend to improve
earnings in a rising rate environment and impede earnings in a declining
rate environment. A negative gap position exists when the volume of rate
sensitive liabilities exceeds the volume of rate sensitive assets in a given
time frame, and indicates that more liabilities than assets will mature or
reprice during that period. A negative gap position will tend to impede
earnings in a rising rate environment and improve earnings in a declining
rate environment.
The following schedule reflects the interest sensitive assets and
liabilities which will mature or reprice within the stated time frames, as
of December 31, 1994.
<TABLE>
<CAPTION>
At December 31, 1994
Over 3 Over 6 Over 1
Months Months Year
3 Months Through Through Through Over 5
or Less 6 Months 1 Year 5 Years Years (4) Total
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Rate-sensitive assets:
Mortgage loans (1) $ 34,522 $11,396 $43,101 $23,026 $21,545 $133,590
Commercial and other loans (2) 67,787 3,081 7,347 15,006 10,529 103,750
Consumer loans 21,179 4,973 5,537 4,225 4,024 39,938
Total loans 123,488 19,450 55,985 42,257 36,098 277,278
Investments and other (3) 10,236 14,156 16,377 48,464 24,116 113,349
Total rate-sensitive assets 133,724 33,606 72,362 90,721 60,214 390,627
Rate-sensitive liabilities:
Savings, NOW and money market 70,309 0 0 0 42,278 112,587
Time deposits 25,360 30,136 64,810 57,722 9 178,037
Total deposits 95,669 30,136 64,810 57,722 42,287 290,624
Borrowed funds 46,138 8,000 10,000 0 0 64,138
Total rate-sensitive liabilities 141,807 38,136 74,810 57,722 42,287 354,762
Interest sensitive gap $ (8,083) $(4,530) $(2,448) $32,999 $17,927 $ 35,865
Rate-sensitive assets/rate-sensitive
liabilities 94.3% 88.1% 96.7% 157.2% 142.4% 110.1%
Interest sensitive gap as a percent
of total assets (2.0)% (1.1)% (0.6)% 8.1% 4.4% 8.8%
<FN>
<F1> Includes residential construction loans.
<F2> Includes commercial loans secured by real estate and commercial
construction loans.
<F3> Maturities of mortgage-backed securities are based on mortgage loan
prepayment assumptions.
<F4> Includes non-accrual loans without regarding to contractual maturities.
</TABLE>
The following schedule shows loans due after one year with:
<TABLE>
<S> <C>
Predetermined interest rates $74,662
Floating or adjustable interest rates 3,693
TOTAL $78,355
</TABLE>
Capital Resources
Marble is required to meet certain minimum leverage and risk-weighted
assets to capital ratios adopted by the Federal Reserve Board (FRB) and the
FDIC, and made applicable to bank holding companies and state non-member
banks, respectively. All regulatory agencies have adopted the requirements
of 3% to 5% leveraged (core) capital and 8% risk-adjusted capital. The
following table sets forth a comparison of Marble's capital position to the
minimum regulatory requirements as of December 31, 1994. For regulatory
capital purposes, the impact of the adoption of Statement 115 need not be
considered.
<TABLE>
<CAPTION>
Ratio Requirements Actual
- ----------------------------------------------------------------
<S> <C> <C>
Leverage (core) 3.0% - 5.0% (1) 9.6%
Risk based capital 4.0% (2) 15.6%
Tier I total (Tier I & II) 8.0% (3) 16.9%
<FN>
<F1> Total stockholders' equity before the Statement 115 adjustment and
less the amount of intangible assets and the amount of the net
deferred tax asset that will not be realized within one year, divided
by total assets. The current requirement is 3.0% for banks with the
highest regulatory rating and higher requirements applied on a
case-by-case basis for other banks.
<F2> Total stockholders' equity before the Statement 115 adjustment and
less the amount of intangible assets, and the amount of the net
deferred tax asset that will not be realized within one year, divided
by risk-adjusted total assets. The current requirement is 4.0%.
<F3> The sum of Tier 1 capital and the allowance for possible loan losses
(limited to 1.25% of risk-adjusted total assets), divided by risk-
adjusted total assets. The current requirement is 8.0%.
</TABLE>
RESULTS OF OPERATIONS
Comparison of Years ended December 31, 1994 and 1993
General
Marble recorded net income of $7.1 million, or $2.08 per share, for
the year ended December 31, 1994, compared to net income of $3.9 million, or
$1.15 per share, during the year ended December 31, 1993. Foremost among the
factors that led to the increased net income during 1994 was the recording
of a net income tax benefit of $2.9 million compared to a net tax benefit of
$.7 million during 1993. Yields on loans and investments increased during
1994 faster than the cost of funds and resulted in an increase in net
interest income during 1994. Continued progress in the resolution of non-
performing assets led to a significant decrease in the provision for
possible loan losses during 1994 as compared to 1993, as well as an increase
in the percentage of earning assets and a decrease in the volume of expenses
relative to the ownership and collection of non-performing assets.
Marble Financial Corporation's operating results are largely dependent
on the net interest income of its subsidiary, Marble Bank. Net interest
income is the difference between interest income from loans and investments
and net interest expense on deposits and borrowings. The Bank's income is
also affected by the level of its non-interest income and expenses and,
particularly in more recent years, the extent of the required provisions for
loan losses, the level of non-performing assets, losses incurred in the
liquidation of its equity securities portfolio, and the level of loan
originations.
Net interest income increased by $1.5 million, or 10.7%, during 1994,
from $13.6 million during 1993 to $15.1 million during 1994. Total interest
income increased $2.1 million, or 8.0%, from $26.3 million during 1993 to
$28.4 million during 1994.
The table below sets forth the weighted average yield on earning
assets, the weighted average interest paid on interest-bearing liabilities,
the interest rate spread and the net interest margin for the periods
indicated.
Analysis of Average Rates and Balances
(In Thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
Average Interest Average Average Interest Average Average Interest Average
Balance Inc/Exp Yield/Rate Balance Inc/Exp Yield/Rate Balance Inc/Exp Yield/Rate
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Loans (1) $268,098 $20,998 7.8% $264,572 $20,300 7.7% $302,660 $25,583 8.5%
Mortgage-backed securities (2) 102,984 6,333 6.1 100,630 5,643 5.6 47,774 4,166 8.7
Taxable investment securities (2) 11,441 772 6.7 797 64 8.0 5,209 243 4.7
Non-taxable investment
securities(2)(3) 3,502 274 7.8 3,175 244 7.7 3,356 256 7.5
Short term investments and
interest-bearing deposits 787 34 4.3 2,902 60 2.1 2,583 57 2.2
Total interest-earning assets 386,812 28,411 7.3% 372,076 26,311 7.1% 361,582 30,305 8.4%
Other real estate owned 2,391 5,575 8,390
Other non-interest-earning assets 8,123 4,858 2,782
$397,326 $382,509 $372,754
Liabilities and Stockholders' Equity
Savings and time deposits $286,969 10,671 3.7% $286,641 10,762 3.8% 283,663 14,314 5.0%
FHLB advances 46,828 2,121 4.5 33,216 1,503 4.5 32,183 1,723 5.4
Other borrowed funds 12,325 507 4.1 12,558 386 3.1 10,913 421 3.9
Total interest-bearing liabilities 346,122 13,299 3.8% 332,415 12,651 3.8% 326,759 16,458 5.0%
Non-interest bearing liabilities 16,929 16,792 16,135
Total liabilities 363,051 349,207 342,894
Stockholders' equity 34,275 33,302 29,860
$397,326 $382,509 $372,754
Net interest income $15,112 $13,660 $13,847
Net interest spread (4) 3.5% 3.3% 3.4%
Net Interest margin (5) 3.9% 3.7% 3.8%
<FN>
<F1> Includes non-performing loans.
<F2> Includes both investment securities held-to-maturity and available-
for-sale.
<F3> Income on investment securities of states and political subdivisions
and common and preferred stocks are stated on a taxable-equivalent
basis (using a 34% tax rate) The amount of taxable equivalent
adjustment is $18, $20 and $22 for December 31, 1994, 1993 and 1992,
respectively.
<F4> Interest rate spread is the difference between the yield on earning
assets and the rates paid on interest-bearing liabilities.
<F5> Net interest margin is net interest income divided by average earning
assets.
</TABLE>
Rate Volume Analysis of Net Interest Income
(In Thousands)
The following table reflects changes in Marble's net interest income
on a fully taxable equivalent basis attributable to the change in interest
rates and change in the volume of earning assets and interest-bearing
liabilities. Amounts attributable to the variance in rate are based on the
change in rate multiplied by the prior year's volume. Amounts attributable
to the variance in volume are based on the changes in volume multiplied by
the prior year's rate. The combined effect on changes in both volume and
rate, which cannot be separately identified, have been allocated
proportionately to the variance due to volume and the variance due to rate.
<TABLE>
<CAPTION>
Year Ended December 31,
1994 Compared to 1993 1993 Compared to 1992
Variance Variance Variance Variance
Due To Due To Total Due To Due To Total
Volume Rate Variance Volume Rate Variance
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gross loans $ 273 $425 $ 698 $(3,048) $(2,235) $(5,283)
Mortgage-backed securities 135 555 690 2,180 (703) 1,477
Taxable investment securities 716 (8) 708 (1,189) 1,010 (179)
Non-taxable investment securities 26 4 30 (14) 2 (12)
Short-term investments 54 (80) (26) 7 (4) 3
Total interest income 1,204 896 2,100 (2,064) (1,930) (3,994)
Interest expense on deposits and
borrowed funds:
Savings and time deposits 12 (103) (91) 152 (3,704) (3,552)
FHLB advances 617 1 618 57 (277) (220)
Other short-term borrowings (7) 128 121 96 (131) (35)
Total interest expense 622 26 648 305 (4,112) (3,807)
Change in net interest income $ 582 $870 $1,452 $(2,369) $ 2,182 $ (187)
</TABLE>
As a result of increased interest rates during 1994, the yield on
average loans increased from 7.7% during 1993 to 7.8% during 1994. The
increase in rates combined with an increase in the volume of loans
outstanding led to an increase in interest income on loans of $.7 million,
or 3.4%, during 1994 as compared to 1993. Most of the increase in the
average volume of loans outstanding during 1994 occurred in the consumer
portfolio, primarily due to increased volume in home equity and automobile
loans. Due primarily to increased rates, interest income on mortgage-backed
securities increased by $.7 million during 1994 as compared to 1993. Due
mostly to increases in volume, interest income on all other investments
increased by $.7 million.
Total interest expense increased $.6 million, or 5.1%, from $12.7
million during 1993 to $13.3 million during 1994. Interest expense on
deposits decreased $.1 million or 0.8%, from $10.8 million during 1993 to
$10.7 million during 1994, primarily due to a decrease in the average rate
paid on deposits from 3.8% during 1993 to 3.7% during 1994, which offset a
slight increase in the average volume of interest-bearing deposits during
1994. The average volume of borrowed funds increased by $13.4 million, or
29.2%, from $45.8 million during 1993 to $59.2 million during 1994, and was
primarily responsible for an increase of $.7 million in interest expense on
total borrowed funds during 1994 as compared to 1993.
Interest rates began to rise during February 1994 and continued to
rise throughout the year. Marble was able to benefit from an excess of
interest sensitive assets over interest sensitive liabilities during most of
1994, and as a result the net interest spread increased from 3.3% during
1993 to 3.5% during 1994 and the net interest margin increased from 3.7% to
3.9%.
Provision for Possible Loan Losses
The provision for possible loan losses decreased by $1.2 million, or
71.3%, from $1.7 million during 1993, to $.5 million during 1994. A bulk
sale of non-performing assets in June 1994 and other resolutions during the
year increased the ratio of reserve coverage of non-performing loans from
65.7% at December 31, 1993 to 138.7% at December 31, 1994. The increased
coverage of the allowance for possible loan losses and the continued
improvement in loan quality decreased the need for provisions to the
allowance during 1994.
Non-interest Income and Expense
Non-interest income decreased by $.7 million, or 76.2%, from $.9
million during 1993 to $.2 million during 1994. The Bank recorded a net loss
on securities transactions of $1.0 million during 1994, compared to a net
loss of $.1 million during 1993. The losses realized during 1994 were
primarily from the sale of mortgage-backed securities, which were sold in an
effort to reduce future interest rate risk and improve earnings in future
periods. The loss during 1993 is the result of $.3 million in net gains from
sales of mortgage-backed securities, which were offset by a write down to
current market value of $.4 million in the available-for-sale investment
securities portfolio. Service charges on deposit accounts increased by $.1
million, from $.7 million during 1993 to $.8 million during 1994, due
primarily to increases in fees and an increased volume of accounts requiring
service charges. Other income increased $.1 million during 1994 as compared
to 1993, due primarily to increased servicing income on sold mortgages.
Non-interest expense increased $.5 million, or 5.5%, from $10.1
million during 1993 to $10.6 million during 1994. Salaries and benefits
expenses increased $.3 million, or 5.8%, during 1994 due to higher benefits
costs and increases in staff and salary levels. Occupancy and equipment
expenses increased $.1 million, or 5.3%, during 1994 due to a full year of
operation of the Gryphon Building and the opening of the Castleton office in
August 1994. Net other real estate owned expenses decreased $.2 million, or
46.6%, during 1994, due to a decreased volume of foreclosed properties.
Other non-interest expenses increased $.4 million, or 12.5%, from $3.0
million during 1993 to $3.4 million during 1994.
Income Taxes
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes" (Statement 109)
in February 1992. Marble adopted Statement 109 effective January 1, 1992.
There was no cumulative effect on Marble's statement of operations as of the
effective date of adoption. Under Statement 109, Marble's deferred tax asset
and related valuation allowance is reviewed quarterly and adjustments to
such net asset are recognized as deferred income tax expense or benefit
based on management's judgments relating to the realizability of such asset.
For the years ended December 31, 1994, and December 31, 1993, the adoption
of this method resulted in the recording of a net deferred tax asset of $2.9
million and $.7 million, respectively, which have been recognized as a
deferred income tax benefit.
RESULTS OF OPERATIONS
Comparison of years ended December 31, 1993 and 1992
General
Marble recorded net income of $3.9 million, or $1.15 per share, for
the year ended December 31, 1993, compared to net income of $2.5 million, or
$.78 per share, during the year ended December 31, 1992. Although there were
many factors, including the continued fall of interest rates, the increased
volume of residential mortgages and mortgage refinancing activity and the
increased levels of mortgage-backed securities, deposits and borrowings,
that contributed to the 52.9% increase in net income during 1993, the main
factors were the increase in the quality of the loan portfolio and the
decrease in the volume of non-performing assets. Continued progress in these
areas led to a lower provision for possible loan losses during 1993 and to a
substantial decrease in the amount of expenses relative to the ownership and
collection of non-performing assets.
Net Interest Income
Net interest income decreased by $.2 million, or 1.3%, during 1993,
from $13.8 million during 1992 to $13.6 million during 1993. Total interest
income decreased $4.0 million, or 13.2%, from $30.3 million during 1992 to
$26.3 million during 1993. Again in 1993, as a result of decreased interest
rates, the yield on average loans decreased, from 8.5% during 1992 to 7.7%
during 1993. The decrease in rates and a decrease in the average volume of
loans outstanding combined to create a decrease in interest income on loans
of $5.3 million, or 20.7%, during 1993 when compared to 1992. Most of the
decrease in the average volume of loans outstanding during 1993, as in 1992,
occurred in the mortgage portfolio, where average volume decreased $38.2
million, primarily due to the securitization of pools of fixed rate
residential mortgage loans. Some of these securitized pools were retained by
the Bank, and contributed to the increase in interest income on investments
during 1993. Due mostly to increases in volume, interest income on
investments increased by a total of $1.3 million during 1993, as compared to
1992.
Total interest expense decreased $3.8 million, or 23.1%, from $16.5
million during 1992 to $12.7 million during 1993. Interest expense on
deposits decreased $3.6 million, or 24.8%, primarily due to a decrease in
the average rates paid on deposits from 5.0% during 1992 to 3.8% during
1993. An increase of $3.0 million in the average outstanding volume of
interest bearing deposits during 1993 offset slightly the decrease in
interest expense. An increase in the average volume of borrowings
outstanding was offset by a decrease in the average rate paid on borrowings
and resulted in a decrease of $.3 million in interest expense on borrowed
funds during 1993, as compared to 1992.
Interest rates declined during 1993 to the lowest levels in many
years. While Marble was able to benefit from falling rates and an excess of
interest sensitive liabilities over interest sensitive assets during 1992,
the continued low rates during 1993 helped the yields on interest sensitive
assets to draw closer to already low interest sensitive liability rates, and
resulted in a decrease in the net interest spread from 3.4% during the year
ended December 31, 1992 to 3.3% for the year ended December 31, 1993, and a
decrease in the net interest margin from 3.8% for 1992 to 3.7% for 1993.
Provision for Possible Loan Losses
The provision for possible loan losses decreased by $1.3 million, or
42.7%, from $3.0 million during 1992, to $1.7 million during 1993. Loan
quality improved during 1993 such that net loan charge-offs decreased $1.9
million, from $2.9 million during 1992 to $1.0 million during 1993.
Non-interest Income and Expense
Non-interest income decreased by $2.2 million, or 70.3%, from $3.1
million during 1992 to $0.9 million during 1993. During 1993, the Bank
recorded a net loss on securities transactions of $.1 million, compared to a
net gain of $2.2 million during 1992. The gains realized during 1992 were
primarily from the sale of mortgage-backed securities, which were sold in an
effort to reduce future interest rate risk and change the interest
sensitivity position. The loss during 1993 is the result of $.3 million in
net gains from sales of mortgage-backed securities, which were offset by a
write down to current market value of $.4 million in the available-for-sale
investment securities portfolio. Service charges on deposit accounts
increased by $.1 million, from $.6 million during 1992 to $.7 million during
1993, due primarily to increases in fees and an increased volume of accounts
requiring service charges due to lower interest rates. Other income
decreased $26,000 during 1993, as compared to 1992, due primarily to
decreased fees on sold mortgages serviced for others, as many of these
mortgages continued to be refinanced due to the low rate environment.
Non-interest expense decreased $1.9 million, or 16.2%, from $12.0
million during 1992 to $10.1 million during 1993. Net other real estate
owned expenses were $.4 million during 1993, which was a decrease of $2.7
million, or 87.9%, from $3.1 million during 1992. Salaries and benefits
expenses increased $.6 million, or 12.8%, during 1993 due primarily to
increased salary levels and the implementation of new 401(k) and incentive
plans. Occupancy and equipment expenses increased $.1 million, or 7.7%,
primarily as a result of increased expenses relative to the ownership and
renovation of the Gryphon Building in Rutland. Other non-interest expense
increased $.1 million, or 2.9%, during 1993, as compared to 1992.
Income Taxes
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 109 - "Accounting for Income Taxes" (Statement 109)
in February 1992. Marble adopted Statement 109 effective January 1, 1992.
There was no cumulative effect on Marble's statement of operations as of the
effective date of adoption. Under Statement 109 Marble's deferred tax asset
and related valuation allowance is reviewed quarterly and adjustments to
such net asset are recognized as deferred income tax expense or benefit
based on management's judgments relating to the realizability of such asset.
For each of the years ending December 31, 1993 and December 31, 1992 the
adoption of this method resulted in the recording of a net deferred tax
asset of $.7 million, which has been recognized as a deferred income tax
benefit.
Change In Accounting For Investment Securities
At December 31, 1993, Marble adopted Financial Accounting Standards
Board (FASB) Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities"
(Statement 115). The adoption of Statement 115 resulted in changes in the
classification of certain securities at December 31, 1993, the inclusion of
the cumulative effect on earnings as of December 31, 1993 of a previously
lower of cost or market writedown on investment securities held for sale
($.5 million) in the statements of operations and the recording of this net
unrealized loss as a component of equity.
MARBLE FINANCIAL CORPORATION OFFICERS
Edward J. Grover Marvin B. Elliott
President and Chief Executive Officer Vice President
George B. Williams Julie M. Sharon
Vice President, Secretary and Treasurer Assistant Secretary
MARBLE BANK OFFICERS
<TABLE>
<S> <S> <S>
ADMINISTRATION OPERATIONS BUSINESS DEVELOPMENT
Edward J. Grover Lewis J. Watson Thomas E. Crittenden
President & Chief Executive Officer Vice President, Senior Operations Officer Vice President, Business Development
Senior Consumer Loan Officer
Marvin B. Elliott Patrica R. Barrett
Executive Vice President, Assistant Vice President, Deposit Services Christine A. Hatch
Deposits and Loans Assistant Vice President,
William C. Jacobs Deposit Development
George B. Williams Assistant Treasurer, Data Processing
Executive Vice President, Jean M. Kelly
Chief Financial Officer, Carroll A. Curtis Assistant Treasurer, Government
Corporate Treasurer, Corporate Secretary Assistant Treasurer, Loan Operations Accounts
Julie M. Sharon Maureen E. Mangan Robin S. Siss
Assistant Secretary Assistant Treasurer, Technical Support Assistant Treasurer,
Business Development
FINANCE Stephen P. Pelletier
Vice President, Technical Support BRANCH ADMINISTRATION
William T. Butler, Jr.
Senior Vice President, Controller LOANS Marshall M. Lawrence
Vice President, Branch Administration
David M. Loseby Robert D. Lesser Senior Mortgage Loan Officer
Assistant Vice President, Vice President, Senior Commercial Loan
Assistant Controller Officer Joyce A. Kopsack
Assistant Treasurer, Retail Banking
HUMAN RESOURCES George E. Araskiewicz Rutland
Assistant Treasurer, Collections
Kathleen J. Houghton Roderick K. Phillips
Vice President, Timothy P. Collins Vice President, Castleton
Director of Personnel Vice President, Commercial Loans
Faith S. Truax
Cheryl A. Fisher Debra A. Coyne Assistant Vice President, Norwich
Assistant Treasurer, Training Coordinator Assistant Treasurer, Consumer Loans
Robert V. Maynes
Karen S. Morris Robert E. Crosby Vice President, Shelburne
Assistant Treasurer, Benefits Vice President, Mortgage Loan Officer
Administrator Johanna W. White
Scott L. Dikeman Assistant Treasurer,
INTERNAL CONTROLS Assistant Vice President, Commercial Loans Assistant Manager, Shelburne
J. Daniel Way, Jr. Thomas E. Firliet Elizabeth J. Phelps
Vice President Assistant Treasurer, Special Assets Vice President, Springfield
Sara P. Magro Karen Forte Garrow Cynthia A. Gagnier
Assistant Treasurer, Auditor Assistant Vice President, Commercial Credit Assistant Treasurer,
Assistant Manager, Springfield
Audrey A. Zullo Mitchell D. Moore
Assistant Vice President, Assistant Vice President, Commercial Loans Theresa M. Minelli
Loan Review Vice President, White River Junction
Kevin J. Raleigh
MARKETING Vice President, Commercial Loans Richard F. Kozlowski
Assistant Treasurer,
Kathleen E. Doon Michael B. Southard Assistant Manager, White River Junction
Vice President, Director of Marketing Assistant Treasurer, Mortgage Originator
Bethany D. Hayes
Janet L. Stover Assistant Vice President,
Assistant Vice President, Senior Underwriter Woodstock
Mark S. Wright
Assistant Treasurer, Mortgage Originator
BOARD OF DIRECTORS OF BOARD OF TRUSTEES OF UPPER VALLEY REGIONAL
MARBLE FINANCIAL CORPORATION MARBLE BANK MARKETING ADVISORY BOARD
Alfred J. Beauchamp Alfred J. Beauchamp Richard M. Gaull, C.I.C.
Chairman of the Board. Chairman of the Board. Vice President, Woodstock Insurance
General Agent Emeritus, Conn. Mutual General Agent Emeritus, Conn. Mutual
Life Insurance Company Life Insurance Company Margaret A. Jacobs, Esq.
Attorney
Bruce K. Belden Bruce K. Belden
President, Belden Construction Co. President, Belden Construction Co. Edward J. Redpath
Owner, Coldwell Banker-
Patrick W. Boylan Patrick W. Boylan Redpath & Company, Realtors
President, President,
Woodlan Tool & Machine Co., Inc. Woodlan Tool & Machine Co., Inc. C. Kevin Tibbits
Vice President, Kinney, Pike, Bell
S. Stacy Chapman, III S. Stacy Chapman, III & Conner, White River Junction
Member Webber, Costello, Chapman & Member Webber, Costello, Chapman &
Kupferer, Ltd. Kupferer, Ltd. Debbie A. Young, CPA
Morgan & Young, PC
George C. Grant, Jr. George C. Grant, Jr.
President, President,
Geo. C. Grant Adjustment Agency Geo. C. Grant Adjustment Agency CHITTENDEN REGIONAL
MARKETING ADVISORY BOARD
Edward J. Grover Edward J. Grover
President & Chief Executive Officer President & Chief Executive Officer Maurice Harvey
Pamela A. Lafayette Pamela A. Lafayette John W. Mahoney
President, F.R. Lafayette, Inc. President, F.R. Lafayette, Inc. President,
Health Insurance & Vermont, Inc.
John R. Pfeffer John R. Pfeffer
Retired, Former Chairman of the Board, Retired, Former Chairman of the Board, Thomas Pierce
New Canaan Bank & Trust Co. New Canaan Bank & Trust Co. Executive Vice President, Knight
Quality Stations & General Manager
William B. Wright Paul E. Roche, CPA WEZF-FM
Retired, Former President & Chairman Partner,
of the Board, Marble Bank Paul E. Roche, Company Kenneth A. White
Retired
William B. Wright
Retired, Former President & Chairman SPRINGFIELD ADVISORY
of the Board, Marble Bank MARKETING BOARD
Stephen S. Ankuda, Esq.
Parkeat & Ankuda, P.C.
Michael Bernhardt
WCFR-AM and FM
Robert E. Dufresne
Vice President, Dufresne, Henry, Inc.
Eugene R. Guy
Springfield Financial
Peter G. MacGillivray
Treasurer, Wheelers Pharmacy
Owner, Liggett-Rexall Drug, Plaza
Peter Powers, CPA
</TABLE>
BRANCHES
Rutland Office
47 Merchants Row
P.O. Box 978
Rutland, Vermont 05702
802-775-0025
TOLL FREE 800-622-4493
Castleton Office
Main Street
P.O. Box 1547
Castleton, Vermont 05735
Norwich Office
Main Street
P.O. Box 793
Norwich, Vermont 05055
802-649-2323
Shelburne Office
Route 7
P.O. Box 189
Shelburne, Vermont 05482
802-985-9130
Springfield Office
Springfield Shopping Plaza
P.O. Box 689
Springfield, Vermont 05156
802-885-5151
White River Junction Office
Maple and Pine Street
P.O. Box 635
White River Junction, Vermont 05001
802-295-7777
Woodstock Office
Route 4 East
P.O. Box 297
Woodstock, Vermont 05091
802-457-3666
---------------------
| |
| MARBLE |
| BANK |
| |
---------------------
Member FDIC
MARBLE
FINANCIAL CORPORATION
47 Merchants Row
P.O. Box 978
Rutland, Vermont 05702
802-775-0025
Toll Free: 800-622-4493
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to________________
Commission file number (0-15124)
MARBLE FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
VERMONT 03-0303394
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
47 MERCHANTS ROW, RUTLAND, VERMONT 05701
(Address of principal executive offices)
(Zip Code)
(802) 775-0025
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of July 1__, 1995.
CLASS NUMBER OF SHARES OUTSTANDING
Common Stock $1 par value 3,340,538
MARBLE FINANCIAL CORPORATION AND SUBSIDIARY
FORM 10-Q
CROSS REFERENCE INDEX
Page
_____________________________________________________________________
Part I - Financial Information
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheets -
June 30, 1995 and December 31, 1994 1
Consolidated Statements of Operations -
Three and Six Months Ended June 30, 1995 and 1994 2
Consolidated Statements of Changes in Stockholders' Equity
Six Months Ended June 30, 1995 3
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1995 and 1994 4
Notes to Consolidated Financial Statements 5
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Part II - Other Information
Items 1 through 5 17
Item 6 - Exhibits and Reports on Form 8-K 17
Signatures 18
Exhibits 19
Part I - Item 1
Marble Financial Corporation and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, Dec 31,
1995 1994
_____________________________________________________________________________
<S> <C> <C>
(Dollars in thousands)
Assets (unaudited)
Cash and due from banks $ 7,086 $ 6,858
Interest-bearing deposits, Federal funds
sold and other short term investments 770 4
Investment securities held to maturity
(Market value $20,132 at June 30, 1995 and
$18,961 at December 31, 1994) 19,652 19,767
Investment securities available for sale
(amortized cost $ 98,672 at June 30, 1995 and
$100,578 at December 31, 1994) 97,040 93,578
Loans 279,637 277,278
Less: Allowance for possible loan losses 7,675 8,006
NET LOANS 271,962 269,272
Other real estate owned, net 1,105 1,517
Bank premises and equipment, net 6,277 6,206
Other assets 9,066 11,334
$412,958 $408,536
Liabilities and Stockholders' Equity
Deposits:
Demand $ 15,681 $ 14,549
Savings, Now and money market 107,254 112,587
Time 188,892 178,037
TOTAL DEPOSITS 311,827 305,173
Borrowed funds 57,371 64,138
Other liabilities 1,645 2,188
TOTAL LIABILITIES 370,843 371,499
Stockholders' equity:
Preferred stock, $1.00 par value, 1,000,000 shares
authorized and unissued at June 30, 1995,
and December 31, 1994 0 0
Common stock, $1.00 par value, 8,000,000 shares
authorized, 3,340,538 and 3,333,438 issued and
outstanding at June 30, 1995 and
December 31, 1994, respectively 3,341 3,333
Additional paid-in capital 42,812 42,777
Retained deficit (2,961) (4,453)
Unrealized loss on investment securities available
for sale, net (1,077) (4,620)
TOTAL STOCKHOLDERS' EQUITY 42,115 37,037
$412,958 $408,536
</TABLE>
See accompanying notes to consolidated financial statements
Marble Financial Corporation and Subsidiary
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
_____________________________________________________________________________________________________
(Dollars in thousands) (Dollars in thousands)
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans $ 6,313 $ 4,991 $ 12,379 $ 9,810
Interest and dividends on investment securities 2,150 1,884 4,195 3,670
Interest on interest bearing deposits, federal
funds sold and other short-term investments 7 7 20 9
Total interest income 8,470 6,882 16,594 13,489
Interest Expense:
Interest on savings deposits 996 751 1,983 1,486
Interest on time deposits 2,698 1,739 5,093 3,453
Interest on borrowings 1,051 626 1,878 1,217
Total interest expense 4,745 3,116 8,954 6,156
Net interest income 3,725 3,766 7,640 7,333
Provision for possible loan losses 0 200 0 500
Net interest income after provision
for possible loan losses 3,725 3,566 7,640 6,833
Non-interest Income:
Service charges on deposit accounts 193 170 400 343
Net gain on trading securities 334 0 334 0
Net loss on sales of investments available for sale (285) (17) (200) (17)
Net gain on sales of loans 2 3 4 (6)
Other 101 134 190 227
Total non-interest income 345 290 728 547
Non-interest Expense:
Salaries and employee benefits 1,505 1,390 2,911 2,769
Occupancy and equipment expense 395 366 797 741
Other real estate owned expense, net (34) 53 48 83
Other 882 857 1,570 1,667
Total non-interest expense 2,748 2,666 5,326 5,260
Income before income taxes 1,322 1,190 3,042 2,120
Income tax expense (benefit) 314 (2,355) 882 (2,480)
Net Income $ 1,008 $ 3,545 $ 2,160 $ 4,600
Weighted average number of common shares
outstanding, including common stock equivalents 3,454,137 3,387,265 3,444,627 3,385,932
Per common share
Net income $ 0.29 $ 1.05 $ 0.63 $ 1.36
Dividends declared $ 0.10 $ 0.12 $ 0.20 $ 0.17
</TABLE>
See accompanying notes to consolidated financial statements
Marble Financial Corporation and Subsidiary
Consolidated Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Six Months Ended June 30, 1995
Unrealized
Loss On
Investment
Securities
Additional Available
Common Paid-In Retained For Sale,
Stock In Capital Deficit Net Total
___________________________________________________________________________________________________________
(Dollars in thousands)
(unaudited)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $3,333 $42,777 $(4,453) $(4,620) $37,037
Exercise of stock options 8 35 43
Net income for six months ended June 30, 1995 2,160 2,160
Dividends declared (668) (668)
Decrease in unrealized loss on investment securities
available for sale, net 3,543 3,543
Balance at June 30, 1995 $3,341 $42,812 $(2,961) $(1,077) $42,115
</TABLE>
See accompanying notes to consolidated financial statements
Marble Financial Corporation and Subsidiary
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1995 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
(Dollars in thousands)
Cash flows from operating activities: (unaudited)
Net income $ 2,160 $ 4,600
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 329 286
Provision for possible loan losses 0 500
Other real estate owned valuation benefit 0 (37)
Net loss on sale of investment securities available for sale 200 17
Net gain on sales of trading securities (334) 0
Net (gain) loss on sale of loans (4) 6
Net gain on sales and disposal of other real estate owned (41) (55)
Net gain on sales of bank premises and equipment (1) 0
Amortization of fees, discounts & premiums, net 183 635
(Increase) decrease in net deferred tax asset 853 (2,500)
Increase in other assets (401) (349)
Decrease in other liabilities (577) (588)
Net cash provided by operating activities 2,367 2,515
Cash flows from investing activities:
Proceeds from sales of investment securities available for sale 20,936 15,395
Proceeds from sales of trading securities 30,334 0
Proceeds from maturities of investment securities held to maturity 253 0
Proceeds from maturities of investment securities available for sale 5,637 13,157
Proceeds from sales of loans 738 4,395
Proceeds from sales and disposal of other real estate owned 714 3,890
Purchases of investment securities held to maturity 0 (11,000)
Purchases of investment securities available for sale (25,182) (10,977)
Purchases of trading securities (30,000) 0
Net (increase) decrease in loans (3,691) (13,490)
Capital expenditures (400) (806)
Proceeds from sales of bank premises and equipment 1 0
Net cash provided (used) by investing activities (660) 564
Cash flows from financing activities:
Net increase (decrease) in deposits 6,654 (22,703)
Net increase in short-term borrowings 11,233 22,357
Payments of long-term borrowings (18,000) 0
Proceeds from issuance of common stock 34 126
Dividends paid (634) (330)
Net cash used by financing activities (713) (550)
Net increase in cash and cash equivalents 994 2,529
Beginning cash and cash equivalents 6,862 6,650
Ending cash and cash equivalents $ 7,856 $ 9,179
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Income taxes $ 25 $ 40
Interest $ 9,082 $ 6,191
Supplemental disclosures of noncash investing and financingactivities:
Conversion of real estate loans to mortgage-backed securities $ 0 $ 2,017
Loans foreclosed $ 261 $ 962
</TABLE>
See accompanying notes to consolidated financial statements
Marble Financial Corporation and Subsidiary
Notes to Consolidated Financial Statements
Three Months Ended June 30, 1995 and 1994 (Unaudited)
1. The accompanying consolidated financial statements as of June 30, 1995
and for the three and six month periods ended June 30, 1995 and 1994 include
the accounts of the Company, and have not been audited by independent public
accountants; however, these statements, prepared in accordance with
generally accepted accounting principles, reflect, in the opinion of
management, all adjustments (consisting of only normal recurring items)
necessary to present fairly the financial position as of June 30, 1995, and
the results of operations and cash flows for the six-month periods ended
June 30, 1995 and 1994. The results of operations for the six-month period
ended June 30, 1995 are not necessarily indicative of the results to be
expected for the entire year.
These consolidated financial statements do not include all disclosures
associated with annual consolidated financial statements and, accordingly,
should be read in conjunction with the footnotes contained in the Company's
Annual Report on Form 10-K for the year ended December 31, 1994.
2. Certain 1994 financial statement items have been reclassified to conform
to the current period's presentation.
3. As of January 1, 1995, Marble adopted Statement of Financial Accounting
Standards (SFAS) Statement No. 114, "Accounting by Creditors for Impairment
of a Loan". SFAS No. 114, as amended by SFAS No. 118 (SFAS No. 114, as
amended), requires that impaired loans, as defined, be measured based on the
present value of expected future cash flows discounted at the loan's
effective interest rate or, as a practical expedient, at the loan's
observable market price or the face value of collateral if the loan is
collateral-dependent. This pronouncement amends SFAS No. 5, "Accounting for
Contingencies," to clarify that a creditor should evaluate the
collectability of both contractual interest and contractual principal of all
receivables when assessing the need for a loss accrual. This pronouncement
also amends SFAS No. 15, "Accounting by Debtors and Creditors for Troubled
Debt Restructuring", to require a creditor to measure all loans that are
restructured in a troubled debt restructuring involving a modification of
terms in accordance with this statement. The existing methods for the
recognition of interest income on impaired loans has remained unchanged by
the adoption of SFAS No. 114, as amended.
4. On June 20, 1995, Marble Financial Corporation announced that it had
entered into a definitive agreement pursuant to which ALBANK, FSB, will
acquire all of the outstanding common stock of Marble Financial Corporation,
in a cash transaction, for $18.00 per share. ALBANK, FSB, is a wholly owned
subsidiary of Albank Financial Corporation, a $2.9 billion bank holding
company located in Albany, New York. The acquisition is subject to approval
by Marble Financial Corporation stockholders and various regulatory
agencies. Further information about the transaction and a special
stockholders' meeting will be distributed during the third quarter of 1995.
Part 1 - Item 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Marble Financial Corporation (Marble) and its wholly owned subsidiary,
Marble Bank (Bank), had consolidated net income of $1,008,000 for the second
quarter of 1995, which was a decrease of $2,537,000 from net income of
$3,545,000 during the second quarter of 1994. For the six month period
ending June 30, 1995, Marble had net income of $2,160,000, which is a
decrease of $2,440,000 when compared with net income of $4,600,000 during
the six month period ended June 30, 1994. The decrease in net income during
the three and six month periods ending June 30, 1995, as compared to the
same periods during 1994, are primarily due to the recording of a net income
tax benefit of $2,355,000 during the second quarter of 1994 compared to the
recording of a net income tax expense of $314,000 during the second quarter
of 1995.
Total assets increased $154,000 during the three month period ended June 30,
1995, from $412,804,000 at March 31, 1995 to $412,958,000 at June 30, 1995.
During the twelve month period ended June 30, 1995, total assets increased
$17,948,000, or 4.5%, from $395,010,000 at June 30, 1994 to $412,958,000 at
June 30, 1995.
Selected Consolidated Financial Highlights
<TABLE>
<CAPTION>
Three Months Ended June 30,
1995 1994 $ Change % Change
- ----------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Income statement data:
Net interest income $ 3,725 $ 3,766 $ (41) (1.1)%
Non-interest income 345 290 55 19.0
Non-interest expense 2,748 2,666 82 3.1
Net income 1,008 3,545 (2,537) (71.6)
Interest rate spread * 3.0% 3.6%
Net interest margin * 3.6% 4.0%
Return on average assets 0.9% 3.6%
Return on average equity 9.8% 43.7%
<CAPTION>
Six Months Ended June 30,
1995 1994 $ Change % Change
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income statement data: (Dollars in thousands)
Net interest income $ 7,640 $ 7,333 $ 307 4.2%
Non-interest income 728 547 181 33.1
Non-interest expense 5,326 5,260 66 1.3
Net income 2,160 4,600 (2,440) (53.0)
Interest rate spread * 3.2% 3.4%
Net interest margin * 3.8% 3.8%
Return on average assets 1.0% 2.4%
Return on average equity 10.3% 27.5%
<CAPTION>
June 30, March 31,
1995 1995 $ Change % Change
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance sheet data: (Dollars in thousands)
Total assets $412,958 $412,804 $ 154 0.0%
Total loans 279,637 275,730 3,907 1.4
Total deposits 311,827 321,404 (9,577) (3.0)
Stockholders' equity 42,115 39,700 2,415 6.1
Equity to assets ratio 10.2% 9.6%
<FN>
<F1> * fully tax equivalent basis
</TABLE>
Net Interest Income
The tables below set forth a comparison of average earning assets, average
interest-bearing liabilities, interest income and interest expense expressed
as a percentage of the related asset or liability. In order to reflect the
economic impact of the investment in state and municipal securities and
certain dividend paying securities, and to place data on a comparative
basis, income from and yields on these securities have been restated to a
current taxable-equivalent basis. Such adjustment, however, has no impact on
reported net income. The average balance stated includes non-performing
loans. The amount of taxable-equivalent adjustments are $13,000 and $5,000
for the three month periods ended June 30, 1995 and June 30, 1994, and
$20,000 and $10,000 for the six month periods ended June 30, 1995 and
June 30, 1994, respectively.
<TABLE>
<CAPTION>
Three Months Ended June 30, 1995 Three Months Ended June 30, 1994
Average Interest Average Average Interest Average
Balance Inc/Exp Yld/Rate Balance Inc/Exp Yld/Rate
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets (Dollars in thousands)
Loans $276,700 $6,325 9.1% $264,261 $4,996 7.6%
Mortgage-backed securities (1) 100,769 1,782 7.1 102,330 1,637 6.4
Trading securities 19,582 0 0.0 0 0 0.0
Other investment securities (1) 20,399 369 7.2 14,300 247 6.9
Short-term investments and interest-
bearing deposits 434 7 6.5 784 7 3.6
Total interest-earning assets 417,884 8,483 8.1% 381,675 6,887 7.2%
Other real estate owned 1,225 3,636
Other non-interest-earning assets 12,252 5,364
Total assets $431,361 $390,675
Liabilities and Stockholders' Equity
Savings and time deposits $302,959 3,694 4.9% $282,379 2,490 3.5%
FHLB advances 59,161 876 5.9 50,056 536 4.3
Other borrowed funds 11,933 175 5.9 9,667 90 3.7
Total interest-bearing liabilities 374,053 4,745 5.1 342,102 3,116 3.6
Non-interest-bearing liabilities 16,136 16,055
Total liabilities 390,189 358,157
Stockholders' equity 41,172 32,518
Total liabilities and stockholders'
equity $431,361 $390,675
Net interest income $3,738 $3,771
Net interest spread (2) 3.0% 3.6%
Net interest margin (3) 3.6% 4.0%
<FN>
<F1> Includes both investments held to maturity and available for sale.
<F2> Interest rate spread is the difference between the yield on earning
assets and the rates paid on interest-bearing liabilities.
<F3> Net interest margin is net interest income divided by average earning
assets.
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 1995 Six Months Ended June 30, 1994
Average Interest Average Average Interest Average
Balance Inc/Exp Yld/Rate Balance Inc/Exp Yld/Rate
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets (Dollars in thousands)
Loans $276,954 $12,398 9.0% $261,995 $ 9,818 7.5%%
Mortgage-backed securities (1) 98,588 3,505 7.1 112,498 3,333 5.9
Trading securities 9,845 0 0.0 0 0 0.0
Other investment securities (1) 21,792 691 6.3 9,820 339 6.9
Short-term investments and interest-
bearing deposits 656 20 6.1 532 9 3.4
Total interest-earning assets 407,835 16,614 8.1% 384,845 13,499 7.0%
Other real estate owned 1,330 3,680
Other non-interest-earning assets 13,266 5,436
Total assets $422,431 $393,961
Liabilities and Stockholders' Equity
Savings and time deposits $301,403 7,076 4.7% $282,437 4,939 3.5%
FHLB advances 54,216 1,559 5.8 45,967 964 4.2
Other borrowed funds 11,279 319 5.7 14,619 253 3.5
Total interest-bearing liabilities 366,898 8,954 4.9 343,023 6,156 3.6
Non-interest-bearing liabilities 15,614 17,248
Total liabilities 382,512 360,271
Stockholders' equity 39,919 33,690
Total liabilities and stockholders'
equity $422,431 $393,961
Net interest income $7,660 $7,343
Net interest spread (2) 3.2% 3.4%
Net interest margin (3) 3.8% 3.8%
<FN>
<F1> Includes both investments held to maturity and available for sale.
<F2> Interest rate spread is the difference between the yield on earning
assets and the rates paid on interest-bearing liabilities.
<F3> Net interest margin is net interest income divided by average earning
assets.
</TABLE>
Rate/Volume Analysis of Net Interest Income
The following table reflects changes in Marble's net interest income
attributable to the changes in interest rates and the changes in the volume
of earning assets and interest-bearing liabilities. Amounts attributable to
the variance in the rate are based upon the change in rate multiplied by the
prior period's volume. Amounts attributable to the variance in volume are
based upon the changes in volume multiplied by the prior period's rate. The
combined effect for changes in both volume and rate, which cannot be
separately identified, has been allocated proportionately to the variance
due to volume and the variance due to rate.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1995 June 30, 1995
Compared to Three Months Compared to Six Months
Ended June 30, 1994 Ended June 30, 1994
Variance Variance Variance Variance
Due To Due to Total Due To Due to Total
Volume Rate Variance Volume Rate Variance
- ---------------------------------------------------------------------------------------------------------
(Dollars in thousands) (Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Income on earning assets:
Gross loans $244 $1,085 $1,329 $ 586 $1,994 $2,580
Mortgage-backed securities (24) 169 145 (278) 450 172
Trading securities 0 0 0 0 0 0
Other investment securities (1) 109 13 122 378 (26) 352
Short-term investments and interest
bearing deposits 0 0 0 2 9 11
Total interest income 329 1,267 1,596 688 2,427 3,115
Interest expense on deposits
and borrowed funds:
Savings and time deposits 192 1,012 1,204 351 1,786 2,137
FHLB advances 109 231 340 194 401 595
Other borrowed funds 24 61 85 (38) 104 66
Total Interest expense 325 1,304 1,629 507 2,291 2,798
Change in net interest income $ 4 $ (37) $ (33) $ 181 $ 136 $ 317
<FN>
<F1> Income on tax-exempt investment securities is stated on a taxable-
equivalent basis using a 34% tax rate.
</TABLE>
As shown in the above analysis, net interest income increased by $4,000 due
to variances attributable to volume during the second quarter of 1995 and
decreased by $37,000 due to variances attributable to rate. These variances
resulted in a decrease in net interest income of $33,000 for the second
quarter of 1995, as compared to the second quarter of 1994. During the first
six months of 1995, net interest income increased by $181,000 due to
variances attributable to volume and increased by $136,000 due to variances
attributable to rate, which led to an increase in net interest income of
$317,000 for the first six months of 1995 as compared to the same period in
1994.
Non-Interest Income
Non-interest income increased $55,000, or 19.0%, from $290,000 during the
second quarter of 1994 to $345,000 during the second quarter of 1995. There
were realized gains on trading activities of $334,000 during the second
quarter of 1995. The Bank did not maintain a trading portfolio during 1994.
There was a net loss of $285,000 on the sale of securities available-for-
sale during the second quarter of 1995, compared to a net loss of $17,000
during the second quarter of 1994. Services charges on deposit accounts
increased $23,000 and all other non-interest income decreased $34,000.
During the first six months of 1995, non-interest income increased by
$181,000, or 33.1%, from $547,000 during the first six months of 1994 to
$728,000 during the first six months of 1995. There was a loss of $200,000
on sales of securities during the first six months of 1995 compared to a
loss of $17,000 during the first six months of 1994. Service charges on
deposit accounts increased $57,000, or 16.6%, and all other non-interest
income decreased $27,000, or 12.2%, during the first six months of 1995 as
compared to the first six months of 1994.
Non-Interest Expense
Non-interest expense increased by $82,000, or 3.1%, from $2,666,000 during
the second quarter of 1994 to $2,748,000 during the second quarter of 1995.
Salaries and benefits expense increased $115,000, or 8.3%, due to increased
salary levels and higher than expected benefits costs. Occupancy and
equipment expenses increased $29,000, or 7.9%, due to increases in
depreciation and net rental expense. Expenses relative to ownership of
foreclosed properties decreased by $87,000, from net expenses of $53,000
during the second quarter of 1994 to net recoveries of $34,000 during the
second quarter of 1995. Other non-interest expenses increased $25,000, or
2.9%, from $857,000 during the second quarter of 1994 to $882,000 during the
second quarter of 1995.
During the six month period ended June 30, 1995, non-interest expense
increased $66,000, or 1.3%, from $5,260,000 during the first six months of
1994 to $5,326,000 during the first six months of 1995. Salaries and
benefits expense increased $142,000, or 5.1%, due to increased salary levels
and benefits costs. Occupancy and equipment expenses increased $56,000, or
7.6%, due to increases in depreciation and net rental expenses. Expenses
relative to ownership of foreclosed properties decreased by $35,000, or
42.2%, from $83,000 during the first six months of 1994 to $48,000 during
the first six months of 1995. All other operating expenses decreased
$97,000, or 5.8%, from $1,667,000 during the first half of 1994 to
$1,570,000 during the first half of 1995, mainly due to a decrease in the
cost of F.D.I.C. insurance.
Provision for Possible Loan Losses
The provision for possible loan losses decreased by $200,000 during the
second quarter of 1995, as compared to the second quarter of 1994, from
$200,000 for the quarter ended June 30, 1994 to no provision for the quarter
ended June 30, 1995. Provisions are made to keep the balance in the
allowance for possible loan losses at a level consistent, in management's
judgement, with the risk in the loan portfolio.
Applicable Income Taxes
Marble's deferred tax asset and related valuation allowance under Statement
of Financial Accounting Standards #109 is reviewed quarterly and adjustments
to such net asset are recognized as deferred income tax expense or benefit
based on management's judgement relating to the realizability of such asset.
For the three month period ended June 30, 1995 this review resulted in the
recording of income tax expense of $314,000.
Asset/Liability Management
Investment Portfolio
Over the past several years Marble has acquired, both on the open market and
through securitization of portions of its mortgage loan portfolio, a large
volume of U.S. Government Agency and mortgage-backed securities. As part of
its balance sheet management strategy, Marble has elected to maintain
flexibility in the management of its investment portfolio in order to
maintain liquidity and be able to react to changes in the marketplace and
the economic environment and therefore does not want, at this time, to keep
a large volume of investments until they mature. Marble has elected to
classify the majority of its investment securities as available for sale,
which allows it to turn over portions of the investment portfolio from time
to time in order to take advantage of changes in the market. Financial
Accounting Standards Board Statement No. 115 - Accounting For Certain
Investments in Debt and Equity Securities, requires that debt and equity
securities classified as available-for-sale be reported at fair value, with
unrealized gains and losses, net of taxes, shown as a component of
stockholders' equity.
The yield on mortgage-backed securities is sensitive to changes in interest
rates. On bonds purchased at a premium, when interest rates rise the market
value and the prepayment speeds will generally decline and the yields will
increase. When interest rates fall, the market value and prepayment speeds
will generally increase and the yields will decline.
As interest rates rose during 1994, the market value of much of the
investment portfolio decreased. At December 31, 1994 investment securities
classified as available-for-sale of $100,578,000 had a net unrealized loss
of $7,000,00. Interest rates declined slightly during the first half of
1995, which improved the market value of the investment portfolio. At June
30, 1995 investment securities classified as available-for-sale of
$97,040,000 had a net unrealized loss of $1,077,000. Marble does not
consider the principal to be at risk on these securities and consequently,
does not believe that the unrealized losses are permanent or represent
permanent impairment of the ability to recover invested principal. If, in
connection with a planned restructuring of the investment portfolio or any
other reason, Marble becomes aware that a security will not be retained for
a period of time sufficient to allow for the recovery of the unrealized loss
in market value, such unrealized loss would be recognized in current
operations. Given the current volatility in interest rates, it is possible
that the amount of unrealized loss could increase or decrease significantly
in future periods.
The following table illustrates the changes in investments during the second
quarter of 1995. The changes are due to the purchase of United States
Treasury and mortgage-backed securities for the available-for-sale
portfolio, and principal payments and pay-offs on various investment
securities. The volume of mortgage-backed securities is reflective of
Marble's current strategy to increase the liquidity of its asset base in
order to be in a position to react to changes in interest rates. To this
end, Marble has in recent years, also been securitizing pools of its fixed
rate, long term residential mortgage loans and turning them into mortgage-
backed securities, which are then added to the investment portfolio. This
improves liquidity while still maintaining most of the yield of the
underlying loans.
During the second quarter of 1995, Marble made several investments in mutual
funds on a trading basis. While there were no investments for the trading
portfolio outstanding at June 30, 1995, it is the intent of Marble to
continue to invest in securities for trading purposes in future periods.
During the second quarter of 1995, the realized gains on trading securities
were $334,000.
An analysis of investments follows:
<TABLE>
<CAPTION>
Balance at June 30, 1995 Balance at March 31, 1995
Net Net
Amortized Unrealized Market Amortized Unrealized Market
Cost Gain(Loss) Value Cost Gain(Loss) Value
- -------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Investment securities held to maturity:
United States Government obligations $11,000 $ 116 $11,116 $ 11,000 $ (142) $ 10,858
Mortgage-backed securities 8,652 364 9,016 8,751 56 8,807
19,652 480 20,132 19,751 (86) 19,665
Investment securities available for sale:
United States Government obligations 5,442 (6) 5,436 5,450 (206) 5,244
Mortgage-backed securities 89,154 (1,653) 87,501 97,567 (4,057) 93,510
Federal Home Loan Bank stock 4,075 0 4,075 3,635 0 3,635
Other bank and corporate stocks 1 27 28 1 23 24
98,672 (1,632) 97,040 106,653 (4,240) 102,413
Total investment securities 118,324 (1,152) 117,172 126,404 (4,326) 122,078
Interest-bearing deposits in other banks 5 0 5 4 0 4
Federal funds sold and other short-term
investments 765 0 765 0 0 0
$119,094 $(1,152) $117,942 $126,408 $(4,326) $122,082
</TABLE>
Loans
As shown in the following table, total loans decreased by $3,907,000, or
1.4%, during the second quarter of 1995.
<TABLE>
<CAPTION>
Growth (Decrease) in
Balance at Balance at Three Month Period
June 30, March 31, Ended June 30, 1995
1995 1995 Amount Percent
- ----------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Mortgage:
Residential $126,198 $125,380 $ 818 0.7%
Commercial 6,224 6,541 (317) (4.8)
Construction 1,038 1,241 (203) (16.4)
Total mortgage loans 133,460 133,162 298 0.2
Commercial:
Secured by real estate 73,142 58,453 14,689 25.1
Construction 163 203 (40) (19.7)
All other 32,642 44,419 (11,777) (26.5)
Total commercial loans 105,947 103,075 2,872 2.8
Consumer loans:
Equity lines of credit 28,339 27,976 363 1.3
All other 11,891 11,517 374 3.2
Total consumer loans 40,230 39,493 737 1.9
Total loans 279,637 275,730 3,907 1.4
Less: Allowance for possible loan losses 7,675 7,688 (13) (0.2)
Net loans $271,962 $268,042 $ 3,920 1.5%
Included in above totals:
Deferred loan origination fees $ 164 $ 180
Mortgages available for sale $ 0 $ 0
</TABLE>
Allowance for Possible Loan Losses
An analysis of the allowance for possible loan losses follows:
<TABLE>
<CAPTION>
Three Months Ended
June 30, March 31,
1995 1995
- -------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C>
Balance beginning of period $7,688 $8,006
Provisions charged to operations 0 0
Recoveries on amounts previously charged off:
Mortgage 1 31
Commercial and other 40 53
Consumer 16 4
57 88
$7,745 $8,094
Less loans charged off:
Mortgage 48 16
Commercial and other 5 370
Consumer 17 20
70 406
Balance at end of period $7,675 $7,688
Percent of total loans outstanding 2.8% 2.8%
</TABLE>
While Marble considers the allowance for possible loan losses at June 30,
1995 to be adequate in relation to its assessment of the risk in the
portfolio, including, among other things, the volume of non-performing
loans, it is not able to predict whether, or the extent to which, the real
estate market and the economy could decline during 1995 and beyond. Given
this uncertainty, it is possible a decline could result in additional
charge-offs, additional writedowns in the value of non-performing assets,
changes in the level of the allowance for possible loan losses and increases
in the level of non-performing loans, foreclosures and other real estate
owned. Non-performing assets have a negative effect on income in that a
significant amount of interest is foregone on them and there is considerable
legal and other non-interest expense incurred as a result of foreclosure
actions and ownership costs. This negative impact on income will continue in
the future until all non-performing assets are disposed of through
resolution or sale.
Marble has determined after review of its credit quality policies, that
loans recognized as nonaccrual, in-substance foreclosure and restructured
are equivalent to "impaired loans" as defined in SFAS No. 114. At June 30,
1995 impaired loans with SFAS No. 114 required reserves totaled $3,597,000
and the reserve for possible loan losses allocated to such loans was in the
amount of $725,000. Also, at June 30, 1995, Marble has additional impaired
loans of $3,894,000 that did not require reserves. Marble also determined
that the reserve for possible loan losses at June 30, 1995 did not require
an additional loan loss provision as a result of the adoption of this
Standard.
The existing methods for the recognition of interest income on impaired
loans has remained unchanged by the adoption of SFAS No. 114 as amended by
SFAS No. 118. During the second quarter of 1995, Marble recognized $68,000
of interest income on impaired loans.
Non-performing Assets
The following tables present information regarding non-performing loans and
assets at the indicated dates.
<TABLE>
<CAPTION>
Increase (Decrease) in
Balance at Balance at Three Month Period
June 30, March 31, Ended June 30, 1995
1995 1995 Amount Percent
(Dollars in thousands)
<S> <C> <C> <C> <C>
Non-accrual loans $6,553 $5,661 $ 892 15.8%
Accruing loans past due 90 days or more 412 773 (361) (46.7)
Total non-performing loans 6,965 6,434 531 8.3
Other real estate owned 1,138 1,353 (215) (15.9)
Less: valuation allowance 33 34 (1) (2.9)
Net other real estate owned 1,105 1,319 (214) (16.2)
Troubled debt restructurings 938 920 18 2.0
Total non-performing assets $9,008 $8,673 $ 335 3.9%
Total non-performing loans as a percentage of
total loans 2.5% 2.3%
Total non-performing assets as a percentage of
total loans and other non-performing assets 3.2% 3.1%
Total non-performing assets as a percentage of
total assets 2.2% 2.1%
Allowance for possible loan losses as a
percentage of total non-performing loans 110.2% 119.5%
</TABLE>
The increase in non-performing assets during the second quarter of 1995 is
mainly the result of a large commercial loan being placed on non-accrual
status and increased delinquency on a small number of mortgage loans. As a
result of these actions during the second quarter, total non-performing
assets were increased by $335,000, or 3.9%, to $9,008,000 at June 30, 1995.
During the second quarter of 1995, approximately $182,000 of interest income
would have been recorded on loans accounted for on a non-accrual basis if
such loans had been current and in accordance with their original terms. Of
this amount, approximately $46,000 of interest was received and included in
net income on a cash basis during the second quarter of 1995.
An analysis of non-performing loans at June 30, 1995 follows:
<TABLE>
<CAPTION>
Non-Performing Loans
In Category as a
Percent of
Non- Total Loans Total Non-
Total Performing Loans In Performing
Loans Loans Category Loans
- --------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Mortgage:
Residential $126,198 $ 849 0.7% 12.2%
Commercial 6,224 0 0.0 0.0
Construction 1,038 0 0.0 0.0
Total mortgage loans 133,460 849 0.6 12.2
Commercial:
Secured by real estate 73,142 4,268 5.8 61.3
Construction 163 0 0.0 0.0
All other 32,642 1,560 4.8 22.4
Total commercial loans 105,947 5,828 5.5 83.7
Consumer loans:
Equity lines of credit 28,339 242 0.9 3.5
All other 11,891 46 0.4 0.7
Total consumer loans 40,230 288 0.7 4.1
Total loans $279,637 $6,965 2.5% 100.0%
</TABLE>
An analysis of the activity relative to other real estate owned follows:
<TABLE>
<CAPTION>
Three Months Ended
June 30, March 31,
1995 1995
- ----------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C>
Balance at beginning of period $1,353 $1,551
Foreclosures 30 231
Properties disposed of (244) (429)
Property writedowns, net (1) 0
Balance at end of period 1,138 1,353
Less valuation allowance:
Balance at beginning of period 34 34
Provisions 0 0
Property writedowns, net (1) 0
Balance at end of period 33 34
Net other real estate owned $1,105 $1,319
</TABLE>
Deposits
Total deposits decreased by $9,577,000, or 3.0%, during the second quarter
of 1995. Demand deposits increased during the three month period ended
June 30, 1995, due to seasonal fluctuations. Savings deposits increased
slightly. N.O.W. and money market deposits decreased $2,689,000, or 3.3%,
and time deposits decreased $9,249,000, or 4.7%, during the second quarter,
due primarily to seasonal fluctuations in municipal deposits.
<TABLE>
<CAPTION>
Increase(Decrease) In
Balance at Balance at Three Month Period
June 30, March 31, Ended June 30, 1995
1995 1995 Amount Percent
- --------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Demand $ 15,681 $ 13,446 $ 2,235 16.6%
Savings 28,109 27,983 126 0.5
NOW and money market 79,145 81,834 (2,689) (3.3)
Time 188,892 198,141 (9,249) (4.7)
$311,827 $321,404 $(9,577) (3.0)%
</TABLE>
Borrowed Funds
Borrowed funds increased by $7,498,000, or 15.0%, during the second quarter
of 1995, from $49,873,000 at March 31, 1995 to $57,371,000 at June 30, 1995.
Fluctuations in the amount of loans, investments, other real estate owned
and total deposits have created the changes in the need for borrowed funds.
Interest Sensitivity
Marble continuously monitors its interest rate sensitivity as a means
of insuring that changes in interest rates do not have a material adverse
impact on income. The Asset and Liability Committee of the Bank analyzes the
interest rate gap and attempts to manage and improve interest rate
sensitivity. The interest rate gap is the difference between the volume of
interest sensitive assets and interest sensitive liabilities that will
mature or reprice within a given time period.
A positive gap position exists when the volume of rate sensitive
assets exceeds the volume of rate sensitive liabilities in a given time
frame, and indicates that more assets than liabilities will mature or
reprice during that period. A positive gap position will tend to improve
earnings in a rising rate environment and impede earnings in a declining
rate environment. A negative gap position exists when the volume of rate
sensitive liabilities exceeds the volume of rate sensitive assets in a given
time frame, and indicates that more liabilities than assets will mature or
reprice during that period. A negative gap position will tend to impede
earnings in a rising rate environment and improve earnings in a declining
rate environment.
The following schedule reflects the interest sensitive assets and
liabilities which will mature or reprice within the stated time frames, as
of June 30, 1995.
<TABLE>
<CAPTION>
At June 30, 1995
Over 3 Over 6 Over 1
Months Months Year
3 Months Through Through Through Over 5
or Less 6 Months 1 Year 5 Years Years (4) Total
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Rate-sensitive assets: (Dollars in thousands)
Mortgage loans (1) $ 30,732 $ 11,647 $41,586 $18,829 $30,666 $133,460
Commercial and other loans (2) 24,120 2,982 3,084 6,104 3,940 40,230
Consumer loans 70,037 4,218 4,588 15,577 11,527 105,947
Total loans 124,889 18,847 49,258 40,510 46,133 279,637
Investments and other (3) 19,021 5,123 16,921 37,891 38,506 117,462
Total rate-sensitive assets 143,910 23,970 66,179 78,401 84,639 397,099
Rate-sensitive liabilities:
Savings, NOW and money (5) 65,335 0 0 0 41,919 107,254
Time deposits 44,768 40,227 51,962 51,769 167 188,893
Total deposits 110,103 40,227 51,962 51,769 42,086 296,147
Borrowed funds 49,838 7,533 0 0 0 57,371
Total rate-sensitive liabilities 159,941 47,760 51,962 51,769 42,086 353,518
Interest sensitive gap $(16,031) $(23,790) $14,217 $26,632 $42,553 $ 43,581
Rate-sensitive assets/rate-sensitive
liabilities 90.0% 50.2% 127.4% 151.4% 201.1% 112.3%
Interest sensitive gap as a percent of
total assets (3.9)% (5.8)% 3.4% 6.4% 10.3% 10.6%
<FN>
<F1> Includes residential construction loans.
<F2> Includes commercial loans secured by real estate and commercial
construction loans.
<F3> Maturities of mortgage-backed securities are based on mortgage loan
prepayment assumptions.
<F4> Includes non-accrual loans without regarding to contractual
maturities.
<F5> Savings and NOW deposits are considered core deposits that will
reprice within the longest time frame. Super NOW and money market
deposits will reprice within the shortest time frame.
</TABLE>
Income Taxes
At June 30, 1995 and March 31, 1995 gross deferred tax assets and gross
deferred tax liabilities were as follows:
<TABLE>
<CAPTION>
June 30, March 31,
1995 1995
- --------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C>
Gross deferred tax assets:
Operating loss carryforward $1,978 $2,076
Allowance for possible loan losses 2,609 2,614
Capital loss carryforward 408 521
Valuation allowance on other real estate owned 11 12
Alternative minimum tax credit 357 350
Loan origination fees 54 57
Accrued deferred compensation 75 74
Accrued interest expense 67 199
Depreciation 46 51
Unrealized loss on investments available-for-sale 555 1,442
6,160 7,396
Valuation reserve 408 521
Gross deferred tax assets, net 5,752 6,875
Gross deferred tax liabilities:
Tax bad debt reserves in excess of base year 1,632 1,559
Excess servicing gains 24 29
Stock dividends 27 27
1,683 1,615
NET DEFERRED TAX ASSET $4,069 $5,260
</TABLE>
As a result of fifteen consecutive quarters of profitability, the
decrease in non-performing assets from the bulk sale in June 1994 and the
ability to project profitability three or more years into the future, Marble
feels it is more likely than not that the deferred tax asset will be
realized, and accordingly has reversed the valuation reserve established in
prior years. The remaining valuation reserve was established for the tax
effect of the capital loss carryforward.
Management believes the existing net deductible temporary differences
which give rise to the net deferred income tax asset will reverse during
periods in which the Company generates net taxable income. For the quarter
ending June 30, 1995, the Company generated taxable income of approximately
$287,000. In addition, gross deductible temporary differences are expected
to reverse in periods during which off-setting gross taxable temporary
differences are expected to reverse. It should be noted, however, that
factors beyond management's control, such as the general state of the
economy and real estate values, can affect future levels of taxable income
and that no assurance can be given that sufficient taxable income will be
generated to fully absorb gross deductible temporary differences.
Marble has capital loss carryforwards of $1,199,000 which will expire,
to the extent not utilized, in fiscal 1995, net operating loss carryforwards
of $5,519,000 which will expire to the extent not utilized, in fiscal 2006,
and an alternative minimum tax credit of $357,000 that may be carried
forward indefinitely.
Liquidity and Capital Resources
Marble's principal sources of funds are deposits, loan and investment
amortization, prepayments and sales of loans and income on earning assets of
its banking subsidiary, Marble Bank. The Bank may also borrow from the
Federal Home Loan Bank and other correspondent banks.
The Bank experienced a net decrease in total deposits of $9.6 million during
the second quarter of 1995. In addition to liquidity provided by the
aforementioned sources, Marble Bank maintains a portfolio of short-term
investments, investment securities held-for-trading and investment
securities available-for-sale which averaged $121.5 million, or 28.2% of
average assets, during the second quarter of 1995.
Marble is required to meet certain minimum leverage and risk-weighted assets
to capital ratios adopted by the Federal Reserve Board (FRB) and the Federal
Deposit Insurance Corporation (FDIC) and made applicable to bank holding
companies and state non-member banks, respectively. All regulatory agencies
have adopted the requirements of 3% to 5% leveraged (core) capital and 8%
risk-adjusted capital. The following table sets forth a comparison of
Marble's capital position to the minimum regulatory requirements as of June
30, 1995 and March 31, 1995. For regulatory capital purposes, the impact of
the adoption of Statement 115 need not be considered.
<TABLE>
<CAPTION>
Ratio Requirements June 30, 1995 March 31, 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Leverage (core) 3.0% - 5.0% (1) 10.2% 9.6%
Risk-based capital - Tier I 4.0% (2) 16.8% 16.1%
Total (Tier I and II) 8.0% (3) 18.1% 17.4%
<FN>
<F1> Total stockholders' equity before the Statement 115 adjustment and
less the amount of intangible assets and the amount of the net
deferred tax asset that will not be realized within one year, divided
by total assets. The current requirement is 3.0% for banks with the
highest regulatory rating and higher requirements applied on a case -
by-case basis for other banks.
<F2> Total stockholders' equity before the Statement 115 adjustment and
less the amount of intangible assets, and the amount of the net
deferred tax asset that will not be realized within one year, divided
by risk-adjusted total assets. The current requirement is 4.0%.
<F3> The sum of Tier 1 capital and the allowance for possible loan losses
(limited to 1.25% of risk-adjusted total assets), divided by risk-
adjusted total assets. The current requirement is 8.0%.
</TABLE>
Part II - Items 1-6
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the business of banking, to which Marble or
the Bank is or may be considered a party or of which any of Marble's or the
Bank's property is the subject. There are no material pending legal
proceedings to which any director, officer or affiliate of Marble, any owner
of record or beneficiary of more than five percent (5%) of the common stock
of Marble, or any associate of any such director, officer, affiliate of
Marble or any security holder is or may be a party, adverse to Marble or has
or may have a material interest adverse to Marble or the Bank.
ITEM 2. CHANGES IN SECURITIES
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) Annual Meeting: The Annual Meeting of Shareholders of Marble
Financial Corporation, at which the holders of shares entitled to 2,814,177
votes were present in person or by proxy, was held on May 4, 1995.
(b) Election of Directors: Bruce K. Belden, George C. Grant, Jr., John
R. Pfeffer, and Paul E. Roche, each having received at least 2,778,530 votes
in favor of their election, were elected as directors of Marble Financial
Corporation for a three year term to expire in 1998. Alfred J. Beauchamp,
Patrick W. Boylan, S. Stacy Chapman, III, Edward J. Grover, Pamela A.
Lafayette, and William B. Wright, directors of Marble whose terms did not
expire in 1995, will continue in office for the remainder of their terms.
(c) Other Matters: The following proposal was submitted to and
approved by the shareholders by the votes indicated:
(1) Proposal to ratify the appointment of Arthur Andersen LLP as
auditors for calendar year 1995:
<TABLE>
<CAPTION>
Number of Shares
- --------------------------------------------------------
<S> <C>
For 2,789,862
Against 7,581
Abstain 16,734
</TABLE>
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 11 - Statement of Computation of Per Share Earnings
(b) Marble Financial Corporation did not file a report on Form 8-K
during the quarter ended June 30, 1995.
Signatures
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.
Date: 08/03/95 By: /s/ EDWARD J. GROVER
Edward J. Grover
President
(Principal Executive Officer)
Date: 08/02/95 By: /s/ GEORGE B. WILLIAMS
George B. Williams
Vice President, Secretary & Treasurer
(Principal Financial Officer)
EXHIBIT 11. STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
June 30, 1995 June 30, 1994
Fully Fully
Primary Diluted Primary Diluted
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $1,008 $1,008 $3,545 $3,545
Common and common equivalent shares:
Weighted average number of common
shares outstanding 3,338 3,338 3,308 3,308
Shares arising from assumed exercise
of stock options (as determined under
the Treasury Stock Method) (1) 116 141 79 106
Weighted average number of common and
equivalent shares outstanding 3,454 3,479 3,387 3,414
Earnings per share:
Net income $ 0.29 $ 0.29 $ 1.05 $ 1.04
<CAPTION>
Six Months Ended Six Months Ended
June 30, 1995 June 30, 1994
Fully Fully
Primary Diluted Primary Diluted
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $2,160 $2,160 $4,600 $4,600
Common and common equivalent shares:
Weighted average number of common
shares outstanding 3,337 3,337 3,306 3,306
Shares arising from assumed exercise
of stock options (as determined under
the Treasury Stock Method) (1) 108 140 80 102
Weighted average number of common and
equivalent shares outstanding 3,445 3,477 3,386 3,408
Earnings per share:
Net income $ 0.63 $ 0.62 $ 1.36 $ 1.35
<FN>
<F1> Assumes the exercise of only those options which would be dilutive.
</TABLE>
ARTHUR ANDERSEN LLP
As independent public accountants, we hereby consent to the
incorporation by reference in this proxy statement of our report dated
January 17, 1995, included in the 1994 Marble Financial Corporation
Annual Report and Form 10-K. It should be noted that we have not audited
any financial statements of the company subsequent to December 31, 1994
or performed any audit procedures subsequent to the date of our report.
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
October 24, 1995
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Marble Financial Corporation:
We consent to the use of our report relating to the consolidated balance
sheet of Marble Financial Corporation and subsidiary as of December 31,
1993 and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for the two years then ended, which
report is included in the 1994 Annual Report of the Company incorporated
by reference in the Proxy Statement relating to the acquisition of
Marble Financial Corporation by ALBANK Financial Corporation. Such
report refers to changes in the method of accounting for investments and
income taxes.
/s/ KPMG PEAT MARWICK LLP
Providence, Rhode Island
October 25, 1995
Board of Directors and Stockholders
Marble Financial Corporation
We have audited the accompanying consolidated balance sheet of Marble
Financial Corporation and subsidiary as of December 31, 1994 and the related
consolidated statements of operations, changes in stockholders' equity and
cash flows for the year then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Marble
Financial Corporation and subsidiary as of December 31, 1994 and the results
of their operations and their cash flows for the year then ended, in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Boston, Massachusetts
January 17, 1995
Board of Directors and Stockholders
Marble Financial Corporation:
We have audited the accompanying consolidated balance sheet of Marble
Financial Corporation and subsidiary as of December 31, 1993 and the
related consolidated statements of operations, changes in stockholders'
equity and cash flows for the years ended December 31, 1993 and 1992.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Marble Financial Corporation and subsidiary as of December 31, 1993 and
the results of their operations and their cash flows for the years ended
December 31, 1993 and 1992, in conformity with generally accepted
accounting principles.
As discussed in notes 1 and 2 to the consolidated financial statements,
the Company adopted a new method of accounting for investment securities
during 1993. As discussed in notes 1 and 10 to the consolidated
financial statements, the company adopted a new method of accounting for
income taxes during 1992.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Providence, Rhode Island
January 24, 1994
PROXY This proxy is solicited by the Board of Directors of PROXY
MARBLE FINANICAL CORPORATION
Proxy for Special Meeting of Stockholders--November 27, 1995
The undersigned hereby appoints Edward J. Grover and George B.
Williams and either of them, proxies of the undersigned with full power
of substitution, to vote all the shares of common stock of Marble
Financial Corporation (the "Company") that the undersigned is entitled
to vote, at the special meeting of stockholders of the Company to be
held on November 27, 1995, and at any adjournments thereof.
Continued and to be signed on the other side
I plan to attend the meeting. [ ]
1. Approvial of the Plan of Merger set forth as Annex 1 to the Agreement
and Plan of Merger, dated as of June 20, 1995, by and among the
Company, ALBANK Financial Corporation ("AFC") and ALBANK, FSB
("ALBANK"), pursuant to which (i) a newly-formed subsidiary of ALBANK
will merge with and into the Company (the "Merger") and (ii) each
share of Common Stock of the Company outstanding immediately prior
to consummation of the Merger, other than shares held as treasury
stock, shares held by stockholders who exercise dissenters' rights
pursuant to the applicable provisions of the Vermont Business
Corporation Act and certain shares held by ALBANK, will be converted
into and represent the right to receive $18.00 in cash, without
interest.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. In their discretion, on such other matters as may properly come
before the meeting or adjournments thereof.
This proxy will be voted as directed
herein. IF NO DIRECTION IS GIVEN,
THIS PROXY WILL BE VOTED FOR
PROPOSAL 1. The undersigned hereby
invokes proxies heretofore given by
the undersigned to vote at the
special meeting or any adjournments
thereof.
Dated: ,1995
__________________________________
__________________________________
Signature(s)
Please sign here personally. If the
stock is registered in more than one
name, each joint owner or fiduciary
should sign personally. Duly
authorized officers should sign for
a corporation.
"PLEASE MARK INSIDE BLUE BOXES SO THAT DATA
PROCESSING EQUIPMENT WILL RECORD YOUR VOTES"
MARBLE FINANCIAL CORPORATION
Special Meeting of Stockholders
November 27, 1995
9:30 a.m.
College of St. Joseph
71 Clement Road
Rutland, Vermont
