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As filed with the Securities and Exchange Commission on October 17, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MERIT HOLDING CORPORATION
(Exact name of Registrant as specified in its charter)
Georgia 58-1934011
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5100 LaVista Road
Tucker, Georgia 30085
(770) 491-8808
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
J. RANDALL CARROLL
Chairman and Chief Executive Officer
5100 LaVista Road
Tucker, Georgia 30085
(770) 491-8808
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
ROBERT C. SCHWARTZ
SMITH, GAMBRELL & RUSSELL
3343 PEACHTREE ROAD, N.E., SUITE 1800
ATLANTA, GEORGIA 30326
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
<TABLE>
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Title of each class of Proposed maximum Proposed maximum
securities to be Amount to be offering price per aggregate offering Amount of
registered registered (1) share (2) price (2) registration fee
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<S> <C> <C> <C> <C>
Common Stock, par value 1,278,092 $11.00 $14,059,012 $4,261
$2.50 per share . . . .
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</TABLE>
(1) The shares of Common Stock being registered hereby are for the account of
certain shareholders of the Company. No other shares of Common Stock are
being registered pursuant to this offering.
(2) Estimated solely for the purpose of calculating the filing fee pursuant
to Rule 457(c) under the Securities Act of 1933.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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PROSPECTUS
1,278,092 SHARES
MERIT HOLDING CORPORATION
COMMON STOCK
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The 1,278,092 shares of Common Stock (the "Common Stock") of Merit Holding
Corporation (the "Company") offered hereby are being sold by certain holders of
the Common Stock of the Company named herein under "Selling Shareholders."
Unless the context otherwise requires, the holders of the Common Stock selling
shares hereunder are hereinafter collectively referred to as the "Selling
Shareholders." The Company will not receive any proceeds from the sale of the
Common Stock by the Selling Shareholders. See "Selling Shareholders," "Plan of
Distribution" and "Use of Proceeds."
The Common Stock is traded on the Nasdaq National Market under the symbol
"MRET". The last sale price of the Common Stock on October 16, 1996, as
reported on the Nasdaq National Market, was $11.25 per share.
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SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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OFFERING UNDERWRITING PROCEEDS TO PROCEEDS
PRICE TO DISCOUNTS AND SELLING TO
PUBLIC COMMISSIONS SHAREHOLDERS COMPANY
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<S> <C> <C> <C> <C>
Per Share . . . . . . . See Text See Text See Text See Text
Total . . . . . . . . . Below Below Below Below
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</TABLE>
The Selling Shareholders have advised the Company that they may elect to
offer for sale and to sell the Common Stock from time to time in one or more
transactions through brokers in the over-the-counter market, in private
transactions, or otherwise, in each case at market prices then prevailing or
obtainable. Accordingly, sales prices and proceeds to the Selling Shareholders
will depend upon price fluctuations and the manner of sale. The Selling
Shareholders may effect such transactions by selling to or through one or more
broker-dealers, and such broker-dealers may receive compensation in the form of
underwriting discounts, brokerage commissions or similar fees in amounts which
may vary from transaction to transaction. Except for the payment of such
brokerage commissions and charges and the legal fees, if any, of the Selling
Shareholders, the Company will bear all expenses in connection with registering
the shares offered hereby, which expenses are estimated to total approximately
$30,000. See "Plan of Distribution."
This Prospectus also relates to such additional shares as may be issued to
the Selling Shareholders because of future stock dividends, stock
distributions, stock splits on similar capital readjustments.
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The date of this Prospectus is ___________, 1996
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AVAILABLE INFORMATION
The Company is subject to certain informational requirements of the
Securities Exchange Act of 1934 (the "1934 Act") and, in accordance therewith,
files reports and other information with the Securities and Exchange Commission
(the "Commission"). Such reports and other information can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's
regional offices located at Seven World Trade Center, 13th Floor, New York, New
York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can also be obtained at prescribed
rates by writing to the Securities and Exchange Commission, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also
maintains a World Wide Web site, containing such reports, proxy and information
statements and other information regarding the Company, at http://www.sec.gov.
In addition, such reports, proxy statements and other information concerning
the Company may be inspected at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006-1506.
The Company has filed a Registration Statement on Form S-3 (together with
all amendments and exhibits filed or to be filed in connection therewith, the
"Registration Statement") under the Securities Act of 1933, as amended, with
respect to the Common Stock offered hereby. This Prospectus does not contain
all the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. Statements contained herein concerning the provisions of documents
are necessarily summaries of such documents, and each statement is qualified in
its entirety by reference to the copy of the applicable document filed with the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission pursuant to
the 1934 Act are hereby incorporated in this Prospectus by reference:
1. The Company's Annual Report on Form 10-KSB for the year ended
December 31, 1995;
2. The Company's Quarterly Report on Form 10-QSB for the quarter
ended March 31, 1996;
3. The Company's Quarterly Report on Form 10-QSB for the quarter ended
June 30, 1996; and
4. The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A declared effective by
the Commission as of June 9, 1995.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the 1934 Act subsequent to the date of this Prospectus and prior to
the termination of this offering shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the respective
dates of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified and superseded, to constitute a part of
this Prospectus.
The Company will provide without charge to each person to whom a
Prospectus is delivered, upon written or oral request of such person, a copy of
any and all of the information that has been incorporated by reference in this
Prospectus (excluding exhibits unless such exhibits are specifically
incorporated by reference into such documents). Please direct such requests to
Investor Relations Department, Merit Holding Corporation, 5100 LaVista Road,
Tucker, Georgia 30085, telephone number (770) 491-8808.
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THE COMPANY
Merit Holding Corporation (the "Company") is a registered bank holding
company under the federal Bank Holding Company Act of 1956, as amended, and
owns 100% of the outstanding capital stock of Mountain National Bank, Tucker,
Georgia ("Mountain") and Charter Bank and Trust Co., Marietta, Georgia
("Charter") (Mountain and Charter collectively referred to as the "Banks").
The Company was incorporated under the laws of the State of Georgia in November
1990. The Company's principal offices are located at 5100 LaVista Road,
Tucker, Georgia 30085 and its telephone number is (770) 491-8808.
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE
FOLLOWING FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE COMPANY AND
ITS BUSINESS BEFORE PURCHASING ANY OF THE SHARES OF COMMON STOCK OFFERED
HEREBY. EXCEPT FOR HISTORICAL INFORMATION CONTAINED IN THIS PROSPECTUS AND IN
THE DOCUMENTS INCORPORATED IN THIS PROSPECTUS BY REFERENCE, THE MATTERS
DISCUSSED HEREIN AND THEREIN CONTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THOSE SUGGESTED IN THE FORWARD-LOOKING STATEMENTS, INCLUDING, WITHOUT
LIMITATION, THE EFFECT OF ECONOMIC CONDITIONS, INTEREST RATES, PRODUCT DEMAND,
COMPETITIVE PRODUCTS AND OTHER RISKS DETAILED HEREIN AND IN THE COMPANY'S OTHER
FILINGS WITH THE COMMISSION.
DIVIDEND POLICY; RESTRICTIONS ON PAYMENT OF DIVIDENDS
The Company has never paid cash dividends on its Common Stock, and there
can be no assurance of whether or when the Company may pay cash dividends.
Because the Company's principal business operations are conducted through the
Banks, cash available to pay dividends would be derived primarily, if not
entirely, from dividends paid to it by the Banks. The Banks' ability to pay
dividends to the Company and the Company's ability to pay dividends to
stockholders on the Common Stock are subject to and limited by certain legal
and regulatory restrictions.
ANTI-TAKEOVER MEASURES
The Company has certain takeover defenses in place, including (i)
supermajority provisions for the approval of certain business combinations;
(ii) the ability of the Board of Directors to issue additional shares without
stockholder approval; and (iii) employment agreements with certain executive
officers which provide for additional management compensation to such officer
if the officer's employment is terminated after a change in control of the
Company. Any of these measures may impede the takeover of the Company without
the approval of the Company's Board of Directors, may result in the Company
being less attractive to potential acquirers and may result in stockholders
receiving less for their shares than otherwise might be available.
CREDIT RISK; ADEQUACY OF ALLOWANCE FOR LOAN LOSSES
There are certain risks inherent in making all loans, including risks with
respect to the period of time over which loans may be repaid, risks resulting
from changes in economic and industry conditions, risks inherent in dealing
with individual borrowers and, in the case of a collateralized loan, risks
resulting from uncertainties as to the future value of the collateral.
Management maintains an allowance for loan losses based on, among other things,
historical experience, an evaluation of economic conditions, and regular
reviews of delinquencies and loan portfolio quality. Based upon such factors,
management makes various assumptions and judgments about the ultimate
collectibility of the loan portfolio and provides an allowance for potential
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loan losses based upon a percentage of the outstanding balances and for specific
loans when their ultimate collectibility is considered questionable. Although
management believes that its allowance for loan losses is adequate, there can
be no assurance that the allowance will prove sufficient to cover future
losses. Further, future adjustments may be necessary if economic conditions
differ or adverse developments arise with respect to the Company's
nonperforming or performing loans. Material additions to the Company's
allowance for loan losses would result in a material decrease in the Company's
net income and, possibly, its capital, and could result in its inability to pay
dividends, among other adverse consequences.
LOCAL ECONOMIC CONDITIONS
The success of the Company is dependent to a certain extent upon the
general economic conditions in the geographic markets served by the Banks.
Although the Company expects that economic conditions will continue to be
favorable in these markets in the near-term, no assurance can be given that
favorable economic conditions will occur or continue. Adverse changes in
economic conditions in the geographic markets that the Banks serve would likely
impair the Banks' ability to collect loans and could otherwise have a negative
effect on the financial condition of the Company. See "Business -- Market Area
and Competition."
COMPETITION
The banking business is highly competitive. The Banks compete as
financial intermediaries with other commercial banks, savings and loan
associations, credit unions, mortgage banking companies, securities brokerage
companies, insurance companies, and money market mutual funds operating in
Georgia and elsewhere. Many of these competitors have substantially greater
resources and lending limits than the Company and the Banks and offer certain
services that the Banks do not currently provide. In addition, non-depository
institution competitors are generally not subject to the extensive regulation
applicable to the Company and the Banks. Recent federal legislation permits
commercial banks to establish operations nationwide, further increasing
competition from out-of-state financial institutions. See "Business --
Competition" and "Supervision and Regulation."
SUPERVISION AND REGULATION
The banking industry is heavily regulated. The success of the Company and
the Banks depends not only on competitive factors but also on state and federal
regulations affecting banks and bank holding companies. These regulations are
primarily intended to protect depositors, not stockholders. Regulation of the
financial institutions industry is undergoing continued changes, and the
ultimate effect of such changes cannot be predicted. In September 1994, the
Community Development and Regulatory Improvement Act and the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 were enacted and in
December 1991, the Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA") was enacted. The effects of this legislation are still being
defined as regulations mandated by it are adopted by the Company's and the
Banks' regulators. FDICIA and the regulations thereunder have increased the
regulatory and supervisory requirements for financial institutions, which have
resulted and will continue to result in increased operating expenses. Recently
adopted legislation in the State of Georgia has eased restrictions on branching
within the state, which may increase competition. Additional statutes
affecting financial institutions have been proposed and may be enacted.
Regulations now affecting the Company and the Banks may be modified at any
time, and there is no assurance that such modifications will not adversely
affect the business of the Company and the Banks. See "Supervision and
Regulation."
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MONETARY POLICIES
The results of operations of the Company will be affected by credit
policies of monetary authorities, particularly the Federal Reserve Board.
There can be no assurance that the effect of actions by monetary and fiscal
authorities, including the Federal Reserve Board, will not have an adverse
effect on the deposit levels, net interest margin, loan demand, or the business
and earnings of the Banks.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of shares
of the Common Stock by the Selling Shareholders. See "Selling Shareholders"
for a list of those persons who will receive the proceeds from such sales.
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BUSINESS
Merit Holding Corporation (the "Company") is a registered bank holding
company under the federal Bank Holding Company Act of 1956, as amended, and
owns 100% of the outstanding capital stock of Mountain National Bank, Tucker,
Georgia ("Mountain") and Charter Bank and Trust Co., Marietta, Georgia
("Charter") (collectively, the "Banks"). The Company was incorporated under
the laws of the State of Georgia on November 27, 1990 to effect the
reorganization of Mountain into a one-bank holding company structure, thereby
providing a mechanism to enhance that bank's ability to serve its future
customers' requirements for financial services. The shareholders of Mountain
approved the reorganization on May 7, 1991 and the reorganization was
consummated on May 24, 1991. The holding company structure provides
flexibility for expansion of the Company's banking business through acquisition
of other financial institutions and provision of additional banking-related
services which the traditional commercial bank may not provide under present
laws. On December 30, 1994, the Company completed the acquisition of 100% of
the outstanding shares of common stock of Charter following the approval of
such transaction by Charter's shareholders.
Mountain commenced business operations on August 2, 1988 in a permanent
facility located at 5100 LaVista Road in Tucker, Georgia. The property
consists of a two-story brick building of approximately 14,000 square feet,
which is constructed on 1.877 acres of land owned by Mountain. Improvements
include a three-lane drive through teller installation, an exterior automated
teller machine, as well as vault and safe deposit facilities. Certain
bookkeeping, accounting and personnel functions of the Company and Mountain are
conducted out of a leased 7,551 square foot facility in Stone Mountain, Georgia.
From this location, Mountain operates separately a branch banking office and
its real estate lending activities.
On September 25, 1993, the Company acquired the charter and assets, and
assumed the liabilities of, Button Gwinnett National Bank in Gwinnett County,
Georgia. Concurrently with such acquisition, the Company merged Button
Gwinnett National Bank into Mountain National Bank and opened a branch office
of Mountain at 1200 Rockbridge Road in Norcross, Georgia, approximately 5 miles
from Mountain's main office.
Charter commenced business operations on February 3, 1989 and in October
1989 moved into its present 18,460 square foot facility located at 269 Roswell
Street in Marietta, Georgia. In October 1994, Charter opened a branch office
at 3100 Cumberland Circle in the Cumberland/Galleria area of Atlanta. Charter
has applied for permission to open an additional branch in a 3,800 square foot
facility owned by Charter on Powers Ferry Road in Marietta.
Both Mountain and Charter are full service commercial banks, without trust
powers. Each operates as a locally owned community bank that targets primarily
the commercial banking needs of individuals, professionals and small to medium
sized businesses in their primary service areas, emphasizing personal service
and banking services that focus on local needs.
The Banks provide a wide range of commercial banking products and
services. The Banks' services include interest bearing and non-interest
bearing checking accounts, money market, savings and other time deposit
accounts, including retirement accounts and certificates of deposit. Loan
services include commercial and real estate loans, Small Business
Administration loans, commercial and consumer lines of credit, letters of
credit, home equity loans, mortgage loans and consumer/installment loans. In
addition, the Banks provide such consumer services as traveler's checks, money
orders, Cashier's checks, Series E Bonds, bankcard
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services, safe deposit boxes, direct deposit services, wire transfer services,
and membership in a nationwide automated teller machine network.
MARKET AREA AND COMPETITION
The primary service area for Mountain consists of DeKalb, Gwinnett and
North Fulton counties in the Atlanta metropolitan area.
The primary service area for Charter consists of approximately 110 square
miles in central and west central Cobb County, Georgia in the metropolitan
Atlanta area. Charter is located in the City of Marietta, the county seat of
Cobb County.
There are many banking offices and savings and loan associations within
the primary service areas of the Banks. Most of these offices are affiliated
with major regional bank holding companies. Many of the major commercial banks
in the Company's service areas or their affiliates offer services such as
international banking and investment and trust services which are not offered
directly by the Banks. Such competitors, because of their capitalization, also
have substantially higher lending limits than the Banks and are better able to
absorb risk. In addition, the larger competitors of the Banks have the ability
to finance extensive advertising campaigns and to allocate and diversify their
assets among loans and securities of the highest yield in locations with the
greatest demand.
The Banks also compete for deposits, loans and other business with
existing area financial institutions other than commercial banks and savings
and loan associations, including insurance companies, consumer finance
companies, brokerage houses, credit unions and other business entities which
continue to invade the traditional banking markets. Recent legislation,
regulatory changes by the primary regulators of the various types of financial
institutions and competition from unregulated entities have eliminated many
traditional distinctions between commercial banks, thrifts and other providers
of financial services. Consequently, competition among financial institutions
of all types is virtually unlimited with respect to legal ability and authority
to provide most financial services. It is anticipated that additional
competition will continue from new entrants to the market.
DEPOSITS
The Banks offer a full range of interest bearing and non-interest bearing
deposit accounts, including checking accounts, negotiable order of withdrawal
("NOW") accounts, money market checking accounts, individual retirement
accounts, regular statement savings accounts and certificates of deposit. The
sources of deposits are residents, businesses and employees of businesses
within the Banks' market areas, obtained through the personal solicitation of
the Banks' officers and directors, direct mail solicitation and advertisements
published in the local media. The Banks pay competitive interest rates on time
and savings deposits up to the maximum permitted by law or regulation. In
addition, the Banks have implemented service charge fee schedules competitive
with other financial institutions in their market areas, covering such matters
as maintenance fees on checking accounts, per item processing fees on checking
accounts, returned check charges and the like.
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LOAN PORTFOLIO
The Banks engage in a full complement of lending activities, including
commercial, consumer/installment and real estate loans, and concentrate their
lending efforts on small to medium sized businesses, professionals and
individuals. As of June 30, 1996, Mountain's loan portfolio consisted of 52%
commercial loans, 43% real estate loans and 5% consumer/installment loans, and
Charter's loan portfolio consisted of 63% commercial loans, 27% real estate
loans and 10% consumer/installment loans.
Commercial lending is directed principally toward businesses whose demands
for funds fall within the Banks' legal lending limits and which are potential
deposit customers of the Bank. This category of loans includes loans made to
individual, partnership or corporate borrowers, and obtained for a variety of
business purposes. Such loans include short-term lines of credit, medium-term
plant and equipment loans, medium-term land acquisition and development loans,
construction loans and letters of credit.
The Banks' consumer loans consist of secured and unsecured personal term
loans, revolving lines of credit, home improvement loans, home equity loans and
medium-term mortgage loans. The Banks also offer credit card services through
a third party processor at substantially no risk to the Banks. Additionally,
the Banks assist customers with residential construction lending as well as
Small Business Loans as approved SBA lenders.
Generally loans are made to businesses, secured and unsecured, for
purposes of inventory, accounts receivable, equipment financing or business
expansion, and may be either term loans or revolving lines of credit; loans to
consumers are secured and unsecured, for purposes of financing automobiles,
boats, home improvements, education, credit consolidation or to meet other
personal financial needs; and loans for purposes related to real estate are
made for residential construction and improved or unimproved real estate.
The following loans are considered to be undesirable and are avoided by
the Banks: loans to parties with questionable honesty or integrity; loans
secured by stock in a closely held corporation with no market value; loans
enabling a borrower to speculate on commodities or futures markets; capital
loans for business where the repayment source is the liquidation of the
business or borrowing from another source; loans to a business or consumer that
has previously declared bankruptcy; "floor plan" loans; and loans secured by
luxury goods, such as jewelry, furs or coins. Each loan request is reviewed to
determine its validity and whether it meets the credit criteria of the Banks.
Exceptions to loan policy must be approved by the appropriate officer or the
appropriate loan committee of the respective Banks.
The Banks' Loan Committees are authorized to approve loans up to 15% of
capital for Mountain (as of June 30, 1996, $2,086,989) and, for Charter, 15% of
capital for unsecured loans and 25% of capital for secured loans ($1,527,274
and $2,585,457, respectively). Loans exceeding $250,000 must be approved or
ratified by the respective Loan Committee and reported to the Board of
Directors on a monthly basis. See "Supervision and Regulation."
Individual lending officers are provided authorized lending authorities.
Loans in excess of these limits must be approved by the Loan Committee. Loans
approved by loan officers pursuant to their individual lending authority must
be made in accordance with the loan policy. All loans in the aggregate are
considered when determining the individual loan officers' limits.
The Banks originate loans and participate with other banks with respect to
loans which exceed the lending limits imposed by the Banks' internal lending
policies or regulatory provisions. Management does not believe that loan
participations necessarily pose any greater risk of loss than loans which the
Banks originate. See "-- Correspondent Banking."
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ASSET/LIABILITY MANAGEMENT
It is the objective of the Banks to manage assets and liabilities to
provide a satisfactory, consistent level of profitability within the framework
of established cash, loan, investment, borrowing and capital policies. An
Assets and Liabilities Management Committee (ALCO) is responsible for monitoring
policies and procedures that are designed to ensure acceptable composition of
the asset/liability mix, stability and leverage of all sources of funds while
adhering to prudent banking practices. It is the overall philosophy of
management to support asset growth primarily through growth of core deposits,
which include deposits of all categories made by individuals, partnerships and
corporations. Management of each Bank seeks to invest the largest portion of
the Bank's assets in commercial, consumer and real estate loans.
The Banks' asset/liability mix is monitored on a daily basis with a
quarterly report reflecting interest-sensitive assets and interest-sensitive
liabilities being prepared and presented to each Bank's Board of Directors.
The objective of this policy is to control interest-sensitive assets and
liabilities so as to minimize the impact of substantial movements in interest
rates on the Banks' earnings.
CORRESPONDENT BANKING
Correspondent banking involves the provision of services by one bank to
another bank which elects not to or cannot provide that service for itself from
an economic or practical standpoint. The Banks utilize correspondent services,
including check collections, purchase or sale of Federal funds, security
safekeeping, investment consulting or sales services and coin and currency
supplies. The Banks have established loan participations with other federally
insured financial institutions as well as privately owned companies. These
loan participations may be for overline or liquidity purposes or for loans
whose amounts exceed the Banks' legal lending limits. At June 30, 1996,
Mountain had $1,487,800 in participations sold ($605,006 of which consisted of
participations sold to Charter) and Charter had $3,695,000 in participations
sold ($418,000 of which consisted of participations sold to Mountain).
Mountain has established correspondent relationships with NationsBank of
Georgia, N.A. and The Bankers' Bank, both of Atlanta, Georgia and Columbus Bank
and Trust of Columbus, Georgia. Charter has established correspondent
relationships with NationsBank of Georgia, N.A., The Bankers Bank, SunTrust
Bank, N.A. and Wachovia Bank of Georgia, N.A., all of Atlanta, Georgia and
Centura Bank of Rocky Mount, North Carolina. The Banks maintain certain
balances with such correspondents. In addition, both Banks are members of the
Federal Home Loan Bank of Atlanta.
DATA PROCESSING
Mountain has a data processing servicing agreement with ProVesa, Inc.
(formerly known as Databank Solutions, Inc.) of Thomson, Georgia and Charter
has a data processing servicing agreement with FiServe of Atlanta, Georgia.
These servicing agreements provide for the Banks to receive a full range of
data processing services through remote data line transmission, including a
fully integrated deposit, loan and general ledger system. Payments for the
services are fee-based dependent on the type, kind and volume of data
processing services provided.
FACILITIES
The main office of both the Company and Mountain is located at 5100
LaVista Road in Tucker, Georgia. The property consists of a two-story brick
building of approximately 14,000 square feet, which is constructed on 1.877
acres of land owned by Mountain. Improvements include a three-lane drive
through
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teller installation, a drive-up night depository, an exterior automated
teller machine, as well as vault and safe deposit facilities.
Mountain's Norcross branch is located at 1200 Rockbridge Road in Norcross,
Georgia, approximately five miles from Mountain's main office. The branch
office consists of a one-story brick building of approximately 4,000 square
feet, constructed on 0.795 acres of land owned by Mountain. Improvements
include a three-lane drive up window, drive-up night depository, automated
teller machine, as well as vault and safe deposit facilities.
Mountain has opened a new 7,551 square foot leased facility located at
2300 West Park Place in Stone Mountain, Georgia and has moved all bookkeeping,
accounting, personnel, advertising and marketing functions from the main office
in Tucker to this new facility. In addition, Mountain conducts its real estate
lending activities from this facility and operates a branch bank from the
facility as well.
Charter's main office is located in an approximately 18,500 square foot
building owned by Charter located at 269 Roswell Street in Marietta, Georgia.
Improvements include a four- lane drive through teller installation, a drive-up
night depository, a vault and safe deposit facility. Charter maintains an
automated teller machine on leased property across the street from the main
branch. Charter's Galleria branch is located in approximately 1,100 square
feet of leased office space at 3100 Cumberland Circle, Suite 100, Atlanta,
Georgia. Improvements at Charter's Galleria branch include a walk-up night
depository.
EMPLOYEES
As of June 30, 1996, Mountain employed 43 persons on a full-time
equivalent basis, including 16 officers and Charter employed 38 persons on a
full-time equivalent basis, including 13 officers. Each Bank considers its
employee relations to be good, and will hire additional personnel as needed.
MONETARY POLICIES
The results of operations of the Banks, and, thus, of the Company, are
affected by credit policies of monetary authorities, particularly the Federal
Reserve Board (even though Charter is not a member of the Federal Reserve
System). The instruments of monetary policy employed by the Federal Reserve
Board include open market operations in U.S. Government securities, changes in
the discount rate on member bank borrowings, changes in reserve requirements
against the deposits of member banks and other depository institutions
(including Charter) and limitations on interest rates which member banks may
pay on time and savings deposits. In view of changing conditions in the
national economy and in the money markets, as well as the effect of action by
monetary and fiscal authorities, including the Federal Reserve Board, no
prediction can be made as to possible future changes in interest rates, deposit
levels, loan demand or the business and earnings of the Banks.
SUPERVISION AND REGULATION
The Company and the Banks operate in a highly regulated environment, and
their business activities are governed by statute, regulation and
administrative policies. The business activities of the Company and the Banks
are closely supervised by a number of federal regulatory agencies, including
the Federal Reserve Board, the Comptroller of the Currency ("Comptroller") with
respect to Mountain, and the Georgia Department of Banking and Finance (the
"Georgia Banking Department") and the Federal Deposit Insurance Corporation
("FDIC") with respect to Charter.
The Company is regulated by the Federal Reserve Board under the federal
Bank Holding Company Act, which requires every bank holding company to obtain
the prior approval of the Federal Reserve Board
-10-
<PAGE> 12
before acquiring more than 5% of the voting shares of any bank or all or
substantially all of the assets of a bank, and before merging or consolidating
with another bank holding company. The Federal Reserve Board (pursuant to
regulation and published policy statements) has maintained that a bank holding
company must serve as a source of financial strength to its subsidiary banks. In
adhering to the Federal Reserve Board policy, the Company may be required to
provide financial support to a subsidiary bank at a time when, absent such
Federal Reserve Board policy, the Company may not deem it advisable to provide
such assistance.
Under the Riegel-Neal Interstate Banking and Branching Efficiency Act of
1994, the restrictions on interstate acquisitions of banks by bank holding
companies were repealed on September 9, 1995, such that Merit and any other bank
holding company located in Georgia is able to acquire a bank located in any
other state, and a bank holding company located outside Georgia can acquire any
Georgia-based bank, in either case subject to certain deposit percentage and
other restrictions. The legislation also provides that, unless an individual
state elects beforehand either (i) to accelerate the effective date or (ii) to
prohibit out-of-state banks from operating interstate branches within its
territory, on or after June 1, 1997, adequately capitalized and managed bank
holding companies will be able to consolidate their multistate bank operations
into a single bank subsidiary and to branch interstate through acquisitions. De
novo branching by an out-of-state bank would be permitted only if it is
expressly permitted by the laws of the host state. The authority of a bank to
establish and operate branches within a state will continue to be subject to
applicable state branching laws. Pursuant to the Riegel-Neal Interstate Banking
and Branching Efficiency Act, the State of Georgia has recently adopted an
interstate banking statute that, beginning on June 1, 1997, removes the existing
restrictions on the ability of banks to branch interstate through mergers,
consolidations and acquisitions.
A bank holding company is generally prohibited from acquiring control of
any company which is not a bank and from engaging in any business other than
the business of banking or managing and controlling banks. However, there are
certain activities which have been identified by the Federal Reserve Board to
be so closely related to banking as to be a proper incident thereto and thus
permissible for bank holding companies, including the following activities:
acting as investment or financial advisor to subsidiaries and certain outside
companies; leasing personal and real property or acting as a broker with
respect thereto; providing management consulting advice to nonaffiliated banks
and nonbank depository institutions; operating collection agencies and credit
bureaus; acting as a futures commission merchant; providing data processing and
data transmission services; acting as an insurance agent or underwriter with
respect to limited types of insurance; performing real estate appraisals;
arranging commercial real estate equity financing; providing securities
brokerage services; and underwriting and dealing in obligations of the United
States, the states and their political subdivisions. In determining whether an
activity is so closely related to banking as to be permissible for bank holding
companies, the Federal Reserve Board is required to consider whether the
performance of such activities by a bank holding company or its subsidiaries
can reasonably be expected to produce such benefits to the public as greater
convenience, increased competition or gains in efficiency that outweigh such
possible adverse effects as undue concentration of resources, decreased or
unfair competition, conflicts of interest or unsound banking practices.
Generally, bank holding companies are required to obtain prior approval of the
Federal Reserve Board to engage in any new activity not previously approved by
the Federal Reserve Board.
The Company is also regulated by the Georgia Banking Department under the
Georgia Bank Holding Company Act, which requires every Georgia bank holding
company to obtain the prior approval of the Georgia Commissioner of Banking
before acquiring more than 5% of the voting shares of any bank or all or
substantially all of the assets of a bank, or before merging or consolidating
with any other bank holding company. A Georgia bank holding company is
generally prohibited from acquiring ownership or control of 5% or more of the
voting shares of any bank unless the bank being acquired is either a bank for
purposes of the federal Bank Holding Company Act of 1956, or a federal or state
savings and loan association or a savings bank or federal savings bank whose
deposits are insured by the FDIC and such bank has been in existence
-11-
<PAGE> 13
and continuously operating as a bank for a period of five years or more prior to
the date of application to the Georgia Commissioner of Banking for approval of
such acquisition.
As a national bank, Mountain is subject to the supervision of the
Comptroller and, to a limited extent, the FDIC and the Federal Reserve Board.
With respect to expansion, national banks situated in the State of Georgia are
generally prohibited from establishing branch offices or facilities outside of
the county in which their main office is located, except (i) in adjacent
counties in certain situations, or (ii) by means of a merger or consolidation
with a bank which has been in existence for at least five years. In addition,
in the case of a merger or consolidation, the acquiring bank must have been in
existence for at least 24 months prior to the merger. The Georgia Legislature
has recently adopted legislation which reduces the limitations imposed on banks
situated in the State of Georgia to establish branch offices. The new law
permits a Georgia bank to establish three new or additional branch banks, de
novo, in any county within the State of Georgia, in addition to establishing
branch offices or facilities in adjacent counties and by merger or
consolidation. Moreover, beginning on July 1, 1998, a bank located in the State
of Georgia will be permitted to establish new or additional branch banks
anywhere in the state by relocation of the parent bank or another branch bank,
or by merger, consolidation, or purchase of assets and assumption of liabilities
involving another parent bank or branch bank.
Mountain is also subject to the Georgia banking and usury laws restricting
the amount of interest which it may charge in making loans or other extensions
of credit. In addition, Mountain, as a subsidiary of the Company, is subject
to restrictions under federal law in dealing with the Company and other
affiliates, if any. These restrictions apply to extensions of credit to an
affiliate, investments in the securities of an affiliate and the purchase of
assets from an affiliate.
Loans and extensions of credit by national banks, such as Mountain, are
subject to legal lending limitations. Under federal law, a national bank may
grant unsecured loans and extensions of credit in an amount up to 15% of its
unimpaired capital and surplus to any person. In addition, a national bank may
grant loans and extensions of credit to a single person up to 10% of its
unimpaired capital and surplus, provided that the transactions are fully
secured by readily marketable collateral having a market value determined by
reliable and continuously available price quotations. This 10% limitation is
separate from, and in addition to, the 15% limitation for unsecured loans.
Loans and extensions of credit may exceed the general lending limit if they
qualify under one of several exceptions. Such exceptions include certain loans
or extensions of credit arising from the discount of commercial or business
paper, the purchase of bankers' acceptances, loans secured by documents of
title, loans secured by U.S. obligations and loans to or guaranteed by the
federal government.
As a state-chartered bank, most of Charter's operations are regulated and
examined by the Georgia Banking Department and the FDIC, including reserves for
loan losses and other contingencies, loans, investments, borrowings, deposits,
mergers, issuances of securities, payments of dividends, interest rates payable
on deposits, interest rates or fees chargeable on loans, establishment of
branches, consolidation or corporate reorganization, and maintenance of books
and records. Charter is required by the Georgia Banking Department to prepare
reports on its financial condition and to conduct an annual internal audit of
its financial affairs, in compliance with minimum standards and procedures
prescribed by the Georgia Banking Department. Reports of Charter's auditors
must be filed with the Georgia Banking Department within 45 days after
Charter's receipt of any such report.
The Banks' loan operations are also subject to certain federal laws
applicable to credit transactions, such as the federal Truth-In-Lending Act
governing disclosures of credit terms to consumer borrowers, the Equal Credit
Opportunity Act prohibiting discrimination on the basis of race, color,
religion or other prohibited factors in extending credit, the Fair Credit
Reporting Act governing the manner in which consumer debts may be collected by
collection agencies, and the rules and regulations of the various federal
agencies
-12-
<PAGE> 14
charged with the responsibility of implementing such federal laws. The deposit
operations of the Banks are also subject to the Electronic Funds Transfer Act
and Regulation E issued by the Federal Reserve to implement that act, which
govern automatic deposits to and withdrawals from deposit accounts and customers
rights and liabilities arising from the use of automated teller machines and
other electronic banking services.
The Banks are also subject to the provisions of the Community Reinvestment
Act of 1977, which requires the appropriate federal regulator, in connection
with its regular examination of a bank, to assess the bank s record in meeting
the credit needs of the community serviced by the bank, including low- and
moderate-income neighborhoods. The FDIC s assessment of a bank s record is
made available to the public. Further, such assessment is required of any bank
that has applied, among other things, to establish a new branch office that
will accept deposits, to relocate an existing office, or to merge or
consolidate with, or acquire the assets of or assume the liabilities of, a
federally-regulated financial institution.
Both the Company and the Banks are subject to regulatory capital
requirements imposed by the Federal Reserve Board, the Comptroller (with
respect to Mountain) and the FDIC (with respect to Charter). In 1989, each of
those agencies issued new risk-based capital guidelines for bank holding
companies and banks which made regulatory capital requirements more sensitive
to differences in risk profiles of various banking organizations. The capital
adequacy guidelines issued by the Federal Reserve Board are applied to bank
holding companies on a consolidated basis with the banks owned by the holding
company. The risk capital guidelines of the Comptroller and the FDIC apply
directly to national banks and insured state-chartered banks which are not
members of the Federal Reserve System, respectively, regardless of whether they
are a subsidiary of a bank holding company. Each agency's requirements (which
are substantially similar), provide that banking organizations must have
capital equivalent to 8% of risk-weighted assets. The risk weights assigned to
assets are based primarily on credit risks. Depending upon the riskiness of a
particular asset, it is assigned to a risk category. For example, securities
with an unconditional guarantee by the United States government are assigned to
the lowest risk category. A risk weight of 50% is assigned to loans secured by
owner-occupied one to four family residential mortgages. The aggregate amount
of assets assigned to each risk category is multiplied by the risk weight
assigned to that category to determine the weighted values, which are added
together to determine total risk-weighted assets. The Federal Reserve Board,
the Comptroller and the FDIC have also implemented new minimum capital leverage
ratios to be used in tandem with the risk-based guidelines in assessing the
overall capital adequacy of banks and bank holding companies. Under the
Federal Reserve Board and Comptroller rules, banking institutions are required
to maintain a ratio of 3% "Tier 1" capital to total assets (net of goodwill).
Tier 1 capital includes common stockholders equity, noncumulative perpetual
preferred stock and minority interests in the equity accounts of consolidated
subsidiaries. At June 30, 1996, capital ratios for the Company and the Banks
were as follows:
<TABLE>
Regulatory
Company Mountain Charter Minimum
------- -------- ------- ----------
<S> <C> <C> <C> <C>
Total Risk-Based Capital . . . . . . . 15.62% 15.85% 14.50% 8.00%
Tier 1 Risk-Based Capital . . . . . . 14.20% 14.39% 13.25% 4.00%
Leverage Ratios . . . . . . . . . . . 12.31% 13.30% 9.71% 3.00%
</TABLE>
Both the risk-based capital guidelines and the leverage ratio are minimum
requirements, applicable only to top-rated banking institutions. Institutions
operating at or near these levels are expected to have well-diversified risk,
excellent asset quality, high liquidity, good earnings and in general, have to
be considered strong banking organizations, rated composite 1 under the CAMEL
rating system for banks or the BOPEC rating system for bank holding companies.
Institutions with lower ratings and institutions with high levels of
-13-
<PAGE> 15
risk or experiencing or anticipating significant growth would be expected to
maintain ratios 100 to 200 basis points above the stated minimums.
The FDIC adopted a rule substantially similar to that issued by the
Federal Reserve Board and the Comptroller. The FDIC rule also establishes a
minimum leverage ratio of 3%, but provides that FDIC-regulated banks that do
not receive a CAMEL-1 rating must maintain a ratio of at least 4%. In
addition, the FDIC rule specifies that institutions operating with Tier 1
capital of 2% of total assets or less would be determined to be operating in an
unsafe and unsound manner and would be subject to enforcement action by the
FDIC.
The Comptroller amended the risk-based capital guidelines applicable to
national banks in an effort to clarify certain questions of interpretation and
implementation, specifically with regard to treatment of purchased mortgage
servicing rights ("PMSRs") and other intangible assets. The Comptroller's
guidelines provide that intangible assets are generally deducted from Tier 1
capital in calculating a bank's risk-based capital ratio. However, certain
intangible assets which meet specified criteria ("qualifying intangibles") such
as PMSRs are retained as a part of Tier 1 capital. The Comptroller currently
maintains that only PMSRs and purchased credit card relationships meet the
criteria to be considered qualifying intangibles. The Comptroller's guidelines
formerly provided that the amount of such qualifying intangibles that may be
included in Tier 1 capital was strictly limited to a maximum of 25% of total
Tier 1 capital. The Comptroller has amended its guidelines to increase the
limitation on such qualifying intangibles from 25% to 50% of Tier 1 capital and
further to permit the inclusion of purchased credit card relationships as a
qualifying intangible asset.
In addition, the Comptroller has adopted rules which clarify treatment of
asset sales with recourse not reported on a bank's balance sheet. Among assets
affected are mortgages sold with recourse under Fannie Mae, Freddie Mac and
Farmer Mac programs. The rules clarify that even though those transactions are
treated as asset sales for bank Call Report purposes, those assets will still
be subject to a capital charge under the risk-based capital guidelines.
The Comptroller, the Federal Reserve Board and the FDIC recently adopted
final regulations revising their risk-based capital guidelines to further
ensure that the guidelines take adequate account of interest rate risk.
Interest rate risk is the adverse effect that changes in market interest rates
may have on a bank's financial condition and is inherent to the business of
banking. Under the new regulations, when evaluating a bank's capital adequacy,
the agencies capital standards now explicitly include a bank's exposure to
declines in the economic value of its capital due to changes in interest rates.
The exposure of a bank's economic value generally represents the change in the
present value of its assets, less the change in the value of its liabilities,
plus the change in the value of its interest rate off-balance sheet contracts.
Concurrently, the banking agencies have proposed a measurement process to
identify banks that have high interest rate risk exposures. Under the proposed
measurement process, the agencies would employ a supervisory model that focuses
on the sensitivity of a bank's economic value to changes in interest rate risk
as well as various other quantitative factors to determine the adequacy of an
individual bank's capital for interest rate risk. After gaining experience
with the proposed supervisory measurement and assessment process, the agencies
intend to propose further regulations to establish an explicit risk-based
capital charge for interest rate risk.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (the
"Act"), enacted on December 19, 1991, provides for a number of reforms relating
to the safety and soundness of the deposit insurance system, supervision of
domestic and foreign depository institutions and improvement of accounting
standards. One aspect of the Act involves the development of a regulatory
monitoring system requiring prompt action on the part of banking regulators
with regard to certain classes of undercapitalized institutions. While the Act
did not change any of the minimum capital requirements, it directed each of the
federal banking agencies to issue regulations implementing the monitoring plan.
The Act creates five "capital categories"
-14-
<PAGE> 16
("well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized" and "critically undercapitalized") which are
defined in the Act and which are used to determine the severity of corrective
action the appropriate regulator may take in the event an institution reaches a
given level of undercapitalization. For example, an institution which becomes
"undercapitalized" must submit a capital restoration plan to the appropriate
regulator outlining the steps it will take to become adequately capitalized.
Upon approving the plan, the regulator will monitor the institution's
compliance. Before a capital restoration plan will be approved, any entity
controlling a bank (i.e., holding companies) must guarantee compliance with the
plan until the institution has been adequately capitalized for four consecutive
calendar quarters. The liability of the holding company is limited to the
lesser of five percent of the institution's total assets or the amount which is
necessary to bring the institution into compliance with all capital standards.
In addition, "undercapitalized" institutions will be restricted from paying
management fees, dividends and other capital distributions, will be subject to
certain asset growth restrictions and will be required to obtain prior approval
from the appropriate regulator to open new branches or expand into new lines of
business.
As an institution drops to lower capital levels, the extent of action to
be taken by the appropriate regulator increases, restricting the types of
transactions in which the institution may engage and ultimately providing for
the appointment of a receiver for certain institutions deemed to be critically
undercapitalized.
The Act also provides that banks have to meet new safety and soundness
standards. In order to comply with the Act, the Federal Reserve Board, the
Comptroller and the FDIC have adopted regulations defining operational and
managerial standards relating to internal controls, loan documentation, credit
underwriting, interest rate exposure, asset growth and compensation, fees and
benefits.
Both the capital standards and the safety and soundness standards which
the Act seeks to implement are designed to bolster and protect the deposit
insurance fund.
In response to the directive issued under the Act, the regulators have
proposed regulations which, among other things, prescribe the capital
thresholds for each of the five capital categories established by the Act. The
following table reflects the proposed capital thresholds:
<TABLE>
<CAPTION>
Total Risk - Tier 1 Risk - Tier 1
Based Capital Based Capital Leverage
Ratio Ratio Ratio
------------- ------------- --------
<S> <C> <C> <C>
Well capitalized(1) 10% 6% 5%
Adequately Capitalized(1) 8% 4% 4% (2)
Undercapitalized(3) < 8% < 4% < 4% (4)
Significantly Undercapitalized(3) < 6% < 3% < 3%
Critically Undercapitalized
___________________________ - - < 2%
</TABLE>
(1) An institution must meet all three minimums.
(2) 3% for composite 1-rated institutions, subject to appropriate federal
banking agency guidelines.
(3) An institution falls into this category if it is below the specified
capital level for any of the three capital measures.
(4) Less than 3% for composite 1-rated institutions, subject to appropriate
federal banking agency guidelines.
As a national bank, Mountain is subject to examination and review by the
Comptroller. This examination is typically completed on-site at least annually
and is subject to off-site review at call. The
-15-
<PAGE> 17
Comptroller, at will, can access quarterly reports of condition, as well as such
additional reports as may be required by the national banking laws.
As a state-chartered bank, Charter is subject to the supervision of the
Georgia Banking Department and the FDIC. In addition, the Banks, as
subsidiaries of the Company, are subject to restrictions under federal law in
dealing with the Company and other affiliates, if any. These restrictions
apply to extensions of credit to an affiliate, investments in the securities of
an affiliate and the purchase of assets from an affiliate.
As a bank holding company, the Company is required to file with the
Federal Reserve Board an annual report of its operations at the end of each
fiscal year and such additional information as the Federal Reserve Board may
require pursuant to the Act. The Federal Reserve Board may also make
examinations of the Company and each of its subsidiaries.
The scope of regulation and permissible activities of the Company and the
Bank is subject to change by future federal and state legislation.
-16-
<PAGE> 18
SELLING SHAREHOLDERS
Except as indicated otherwise, the following table sets forth certain
information regarding the beneficial ownership of the Company's Common Stock as
of August 15, 1996 by the shareholders of the Company who are offering
securities pursuant to this Prospectus (the "Selling Shareholders").
"Beneficial Ownership" includes shares for which an individual, directly or
indirectly, has or shares voting or investment power or both. All of the
listed persons have sole voting and investment power over the shares listed
opposite their names unless otherwise indicated in the notes below. Shares
shown as beneficially owned after the offering assumes that all shares offered
hereby by the Selling Shareholder are sold.
<TABLE>
<CAPTION>
BEFORE THE OFFERING AFTER THE OFFERING
------------------- ------------------
NUMBER Securities to Number
NAME OF BENEFICIAL BENEFICIALLY Percent Be Sold Beneficially Percent
OWNER OWNED (1) Of Class in Offering Owned Of Class
- ------------------ ------------- ---------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
To be sold upon exercise of Replacement Warrants (a):
Basil Abdeswahab 220 * 43 177 *
Samuel Anderson 402 * 80 322 *
John F. Barrows 201 * 201 0 0
Chris & Amy Batchelor 71 * 14 57 *
Carolyn Benson 402 * 402 0 0
Bently, Bently & Bently PSP(2) 31,153 * 402 30,751 *
William Q. Bird 5,232 * 1,046 4,186 *
John D. Bramblett 402 * 80 322 *
Greg M. & Stephanie Braswell 1,207 * 241 966 *
Larry & Linda Brogdon 23 * 4 19 *
James W. Bryan, Jr. 2,012 * 402 1,610 *
James Bunch, Jr. 402 * 80 322 *
Leslie G. Callahan III (3) 68,518 1.4 13,483 55,035 1.1
Meredith Campbell 402 * 80 322 *
Thomas G. Cannon 8,050 * 1,610 6,440 *
Mary E. Carter 402 * 80 322 *
Douglas H. Chaffins 402 * 80 322 *
Crystal & Jane Champion 47 * 9 38 *
Victoria Chastain 1,006 * 201 805 *
Eric & Sandra Cobb 402 * 80 322 *
Raymond & Barbara Cobb 542 * 59 483 *
Michael Coles (3)(4) 190,981 3.8 21,936 136,045 2.7
George H. Davison Co., Inc. 1,207 * 241 966 *
Dean & Mary Dibling 272 * 54 218 *
Sharon Donaldson 2,012 * 402 1,610 *
Kerry P. Dorman 2,857 * 281 2,576 *
Carolyn Doxey 15,829 * 2,682 13,147 *
William Driskell Living Trust 6,037 * 1,207 4,830 *
Phil & L. Ann Ekern (5) 13,958 * 40 13,918 *
John F. Elliott IRA 2,415 * 483 1,932 *
Patricia Elliott 1,006 * 201 805 *
Ande' Evers 4,025 * 805 3,220 *
Cole Forsyth 675 * 135 540 *
Ronald H. Francis (6) 49,352 * 474 48,878 *
</TABLE>
-17-
<PAGE> 19
<TABLE>
<CAPTION>
BEFORE THE OFFERING AFTER THE OFFERING
------------------- ------------------
NUMBER Securities to Number
NAME OF BENEFICIAL BENEFICIALLY Percent Be Sold Beneficially Percent
OWNER OWNED (1) Of Class in Offering Owned Of Class
- ------------------ ------------- ---------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Ronald & Claire Francis 1,239 * 112 1,127 *
Shana Francis 201 * 40 161 *
Cindy Franklin 201 * 40 161 *
Donald D. Franklin 201 * 40 161 *
Donald D. Franklin, Jr. 201 * 40 161 *
Jackie G. Franklin 201 * 40 161 *
Lamar H. Franklin, Jr. 201 * 40 161 *
Lamar H. Franklin III 201 * 40 161 *
Michael W. Franklin 201 * 40 161 *
Scott C. Franklin 201 * 40 161 *
Allen C. Freisem 402 * 80 322 *
H. Scott Freisem 402 * 80 322 *
James & Sandra Furbish 201 * 40 161 *
Adele Gabbay 2,012 * 402 1,610 *
Phillip Goldstein 1,408 * 40 1,368 *
Seth Goodman 1,018 * 106 912 *
Edward Grenvicz/Trustee 4,025 * 805 3,220 *
Edward Grenvicz 76,273 1.5 2,817 73,456 1.5
Kimberly A. Gresh 402 * 80 322 *
Michael Grimsley 675 * 135 540 *
Albert & Eleanor Gruensfelder 885 * 80 805 *
John W. Harden 555 * 111 444 *
Haynie & Litchfield, P.C. 2,012 * 402 1,610 *
Rebecca Helms (5) 1,206 * 40 1,166 *
Bradley E. Henderson 2,012 * 402 1,610 *
Elizabeth W. Henderson 2,012 * 402 1,610 *
Lauren E. Henderson 669 * 133 536 *
Mackensie Henderson 669 * 133 536 *
Ryan Henderson 669 * 133 536 *
Charles L. Hill 2,012 * 402 1,610 *
William K. Hilley (5) 6,635 * 260 6,375 *
Edwin Hinnefield 4,025 * 805 3,220 *
Steven Hobson, Sr. 212 * 212 0 0
Hot Cookies Family Trust 13,583 * 1,508 12,075 *
J.W. Hurt III 1,006 * 201 805 *
Dr. James H. Hutson 603 * 120 483 *
Robert & Evelyn Ingalls 201 * 40 161 *
JLH Partners Ltd. 24,150 * 4,830 19,320 *
Richard Jarbeau 2,008 * 402 1,606 *
Jack M. Jones 2,644 * 161 2,483 *
S. Karp Accumulation Trust 6,707 * 1,341 5,366 *
S. Karp Life Trust 13,414 * 2,682 10,732 *
Christian & Martha Keifer 805 * 161 644 *
Naresh Khanna 201 * 40 161 *
William H. Kelly (5) 16,929 * 40 16,889 *
William H. & Gail Kelly 442 * 201 241 *
Jack & Anne Kendrick 1,006 * 201 805 *
</TABLE>
-18-
<PAGE> 20
<TABLE>
<CAPTION>
BEFORE THE OFFERING AFTER THE OFFERING
------------------- ------------------
NUMBER Securities to Number
NAME OF BENEFICIAL BENEFICIALLY Percent Be Sold Beneficially Percent
OWNER OWNED (1) Of Class in Offering Owned Of Class
- ------------------ ------------- ---------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Kennesaw Enterprises Inc. 201 * 40 161 *
John D. Knox 300 * 59 241 *
Kyburz & Goodlet Profit Sharing Plan 6,220 * 644 5,576 *
Stephen R. Leeds 4,024 * 201 3,823 *
Michael S. Levine 1,408 * 40 1,368 *
Adams D. Little III 683 * 600 83 *
Sybil K. Little 6,037 * 1,207 4,830 *
George W. Lucas 10,464 * 402 10,062 *
J. Frank Mann 2,406 * 481 1,925 *
Estate of Henry A. Manning 8,653 * 281 8,372 *
Nate & Susan Marini 805 * 161 644 *
C.W. & Catherine Marlow 201 * 40 161 *
Walter W. McBride 2,564 * 149 2,415 *
Judy B. McMennamy IRA 362 * 362 0 0
R. Pat McPherson 3,622 * 241 3,381 *
McRae & Stolz 1,340 * 267 1,073 *
Beth S. Miller (5) 2,422 * 80 2,342 *
Shirley Miller 1,408 * 40 1,368 *
Edgar Mills 4,025 * 805 3,220 *
James & Martha Mobley 1,340 * 267 1,073 *
L. R. Mons 335 * 80 255 *
C. Frank Moore 201 * 40 161 *
John H. Moore 2,012 * 402 1,610 *
Rebecca M. Moore 1,146 * 180 966 *
Richard L. Moore 2,012 * 402 1,610 *
Harold J. Mulkey 3,752 * 246 3,506 *
Cory Michael Mull 2,012 * 402 1,610 *
North Cobb Orthopedics 2,415 * 402 2,013 *
Patricia Orwin 1,146 * 180 966 *
Doris Owens 1,610 * 402 1,208 *
Elsie Owens 1,360 * 272 1,088 *
Glen Owens 3,360 * 272 3,088 *
James S. Owens 555 * 111 444 *
Nena G. Owens 555 * 111 444 *
PWJ Inc. 20,125 * 4,025 16,100 *
Fayoline Paul 3,018 * 603 2,415 *
Jacqueline Perrone 10,948 * 1,610 9,338 *
Henry M. Picken Jr. 805 * 201 604 *
Rometta Powell 402 * 80 322 *
Alan & Marlee Price 2,615 * 281 2,334 *
Mr. & Mrs. Charles V. Reeves 1,006 * 201 805 *
Donna Reeves 1,508 * 301 1,207 *
H. James Reisinger 201 * 40 161 *
James L. Rhoden 1,910 * 260 1,650 *
Beverly Gibbs Riccardi 2,512 * 402 2,110 *
Lesley & Don Robertson 1,709 * 99 1,610 *
Ward & Brenda Sachs 40 * 40 0 0
</TABLE>
-19-
<PAGE> 21
<TABLE>
<CAPTION>
BEFORE THE OFFERING AFTER THE OFFERING
------------------- ------------------
NUMBER Securities to Number
NAME OF BENEFICIAL BENEFICIALLY Percent Be Sold Beneficially Percent
OWNER OWNED (1) Of Class in Offering Owned Of Class
- ------------------ ------------- ---------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Herbert L. Sander 13,685 * 805 12,880 *
Simone Sawyer 268 * 53 215 *
Perry & Jayme Scallan 2,678 * 534 2,144 *
P. Novy Scheinfeld 4,025 * 805 3,220 *
Edward M. Schuster 402 * 80 322 *
Betty Sessoms 402 * 80 322 *
John T. Sherrer Jr. 1,006 * 201 805 *
Lindsey Sherrer 1,006 * 201 805 *
Nancy Simmons 201 * 201 0 0
Francis & Elizabeth Small 528 * 45 483 *
Madison E. Smith 534 * 106 428 *
Steven & Leigh Smith 805 * 161 644 *
William D. Smith 8,452 * 1,207 7,245 *
Marilyn & Joel Smolinski 402 * 80 322 *
Roger & Judith Snow 402 * 402 0 0
Dorothy Snyder 402 * 80 322 *
James D. & Mary Southerland 201 * 40 161 *
James H. & Betty Southerland 201 * 40 161 *
Aubrey & Wendy Steinbaum 402 * 80 322 *
Lynn Stevens 402 * 402 0 0
Debra Stockton 201 * 40 161 *
Dee Ann Stone 2,415 * 603 1,812 *
Timothy Sullivan 603 * 120 483 *
Alice Summerour 3,984 * 764 3,220 *
Francis R. Sutton, cust. for Anna K. Sutton 28,655 * 40 28,615 *
Frances & William Tapp 1,006 * 201 805 *
Nelle Pender Tatum 402 * 80 322 *
Andrew Tiedt 2,012 * 402 1,610 *
Victor & Carolyn Tobler 2,012 * 402 1,610 *
Alexandria Travis/Victor Tobler 201 * 40 161 *
Mackenzie Travis/Victor Tobler 201 * 40 161 *
David W. Wade 201 * 40 161 *
Julia Waters 684 * 40 644 *
Abbie E. Watson 201 * 40 161 *
Eric Kenneth Watson 273 * 40 233 *
Maxwell Watson 201 * 40 161 *
Andrew Webb/Sue Webb 201 * 40 161 *
John Webb/Sue Webb 201 * 40 161 *
B.A. Werner 7,513 * 536 6,977 *
Jane Werner 2,683 * 536 2,147 *
Anne Wheatley 542 * 59 483 *
James White III 40 * 40 0 0
J.P. Whorton 201 * 40 161 *
Kirk Wimberly III 1,006 * 201 805 *
Patricia C. Winship 2,012 * 402 1,610 *
Mercedes Wise & Linda Brogdon 23 * 4 19 *
Daniel Wicker 603 * 120 483 *
</TABLE>
-20-
<PAGE> 22
<TABLE>
<CAPTION>
BEFORE THE OFFERING AFTER THE OFFERING
------------------- ------------------
NUMBER Securities to Number
NAME OF BENEFICIAL BENEFICIALLY Percent Be Sold Beneficially Percent
OWNER OWNED (1) Of Class in Offering Owned Of Class
- ------------------ ------------- ---------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Kevin J. Woods 201 * 40 161 *
Cara Workman 510 * 27 483 *
Jill Workman 510 * 27 483 *
Benjamin Worley 201 * 40 161 *
Jane Worley 4,025 * 805 3,220 *
Nancy & Todd Yates 402 * 80 322 *
Allison Nicole Young 4,025 * 805 3,220 *
Elizabeth Anne Young 4,025 * 805 3,220 *
William D. Young 2,012 * 402 1,610 *
To be sold upon exercise of Charter Options (b):
Steven Chasteen (5) 2,010 * 1,610 400 *
Philip Ekern (5) 13,958 * 11,954 2,004 *
Ronald H. Francis (6) 49,352 * 31,395 17,957 *
Rebecca Helms (5) 1,206 * 805 401 *
William K. Hilley (5) 6,635 * 4,427 2,208 *
William H. Kelly (5) 16,929 * 11,471 5,458 *
Rhonda Cook Meaders (5) 4,405 * 4,105 300 *
Beth S. Miller (5) 2,422 * 1,529 893 *
Julie C. Poole (5) 9,053 * 8,533 520 *
Joyce R. Self (5) 2,562 * 2,012 550 *
Frances S. Sutton (5) 28,655 * 24,351 4,304 *
A. Renee White (5) 7,211 * 6,842 364 *
To be sold upon exercise of Merit Organizers' Warrants (c):
1st Source Corporation 64,866 1.3 32,433 32,433 *
Bettis Enterprises, LP 9,866 * 4,933 4,933 *
Roy B. Burnette 30,000 * 10,000 20,000 *
Dennis R. Byerly 9,000 * 4,500 4,500 *
J. Randall Carroll (7) 125,020 2.5 30,000 95,020 1.9
Parks R. Chewning (8) 68,500 1.4 23,000 45,500 *
Bill Crecelius, Jr. 40,000 * 20,000 20,000 *
W. Daniel Faulk, Jr. (8) 90,000 1.8 45,000 45,000 *
Clarence Flake, Jr. IRA 5,000 * 5,000 0 0
David S. Golden 38,400 * 19,200 19,200 *
David S. Golden, Custodian Jessica P. Golden 4,800 * 2,400 2,400 *
David S. Golden, Custodian Theodore D. Golden 4,800 * 2,400 2,400 *
Jonathan Golden 12,000 * 6,000 6,000 *
J. Louis Harris (8) 146,000 2.9 73,000 73,000 1.5
The Hickok's Irrevocable Trust 23,000 * 11,500 11,500 *
Michael E. Hickok and Ann S. Anderson, JTWROS 7,000 * 3,500 3,500 *
Patrick H. Hickok (8) 63,960 1.3 31,880 32,080 *
Sharon Hickok 16,240 * 8,120 8,120 *
William L. Kane (8) 32,920 * 1,000 31,920 *
</TABLE>
-21-
<PAGE> 23
<TABLE>
<CAPTION>
BEFORE THE OFFERING AFTER THE OFFERING
------------------- ------------------
NUMBER Securities to Number
NAME OF BENEFICIAL BENEFICIALLY Percent Be Sold Beneficially Percent
OWNER OWNED (1) Of Class in Offering Owned Of Class
- ------------------ ------------- ---------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Johnson & Montgomery Deferred
Compensation Plan 13,200 * 6,600 6,600 *
Johnson & Montgomery Profit Sharing Plan 13,200 * 6,600 6,600 *
Albert Sidney Johnson (8) 13,600 * 6,800 6,800 *
Walter J. McCloud, II (8) 83,980 1.7 45,000 38,980 *
Paul M. McLarty, Jr., IRA 7,878 * 1,439 6,439 *
Ruth B. McLarty (8) 85,000 1.7 45,000 40,000 *
Piedmont Title Insurance Agency, Inc. 16,000 * 8,000 8,000 *
John H. Plant (8) 100,000 2.0 50,000 50,000 1.0
Martha H. Plant 10,000 * 5,000 5,000 *
C. Alvin Roberds, Jr. (8) 133,000 2.7 67,500 65,500 1.3
Basil Alfred Sellers 32,433 * 32,433 0 0
Lloyd M. Smith or E. Garda Smith, JTWROS 360,000 7.2 180,000 180,000 3.6
Roy W. Vandiver, M.D. (8) 40,000 * 20,000 20,000 *
James C. Van Voorhies, Jr., IRA 9,122 * 4,561 4,561 *
Robert E. Webb 14,000 * 7,000 7,000 *
John A. Williams 320,000 6.4 160,000 160,000 3.2
To be sold upon exercise of Employee Stock Options (d):
J. Randall Carroll 125,000 2.5 90,000 35,020 *
_________
Total 1,278,092
=========
</TABLE>
- --------------------------------
*Less than 1%.
(a) On December 30, 1994, Merit acquired 100% of the outstanding shares of
common stock of Charter (the "Merger"). Prior to the Merger, Charter had
outstanding certain warrants to purchase Charter common stock. These
warrants were cancelled in the Merger and replaced with newly issued
warrants to purchase Merit Common Stock (the "Replacement Warrants") of
equal economic value. The Replacement Warrants expired by their terms in
February 1996 and were exercised prior thereto.
(b) Prior to the Merger, Charter had outstanding certain options to purchase
Charter common stock (the "Charter Options"). Pursuant to the Merger, the
Charter Options were converted into the right to purchase Merit Common
Stock. The Charter Options had been granted between 1990 and 1994 and are
fully vested. The Charter Options are exercisable at prices ranging from
$3.52 to $4.66 per share and expire at various times between 2000 and
2004. All of the listed individuals, with the exception of Mr. Chasteen,
Ms. Meaders, Ms. Poole, Ms. Self and Ms. White, are also listed as Selling
Shareholders with respect to shares received upon the exercise of
Replacement Warrants. For each of such persons, the number of shares shown
in the table as beneficially owned after the offering reflects only the
sale of option shares in that section of the table and only the sale of
warrant shares in that section of the table.
(c) Upon the formation of Mountain, stock purchase warrants (the "Organizers'
Warrants") were issued to certain individuals in consideration of their
efforts in its organization. The Organizers' Warrants are exercisable at
$5.00 per share and expire on August 2, 1998.
(d) The Board of Directors of the Company has granted options to purchase a
total of 90,000 shares to J. Randall Carroll, the Company's Chairman and
Chief Executive Officer. Of such amount, options to purchase 75,000 shares
were granted pursuant to the provisions of Mr. Carroll's employment
agreement and options to purchase 15,000 shares were granted pursuant to
the terms of a Stock Purchase Agreement entered into between the Company
and Mr. Carroll in 1993. All of such options are exercisable at $5.00 per
share and expire on August 2, 1998.
-22-
<PAGE> 24
(1) Assuming exercise of 100% of the option or warrant.
(2) Fred D. Bentley, Sr., Chairman of the Board of Directors of Charter, is a
partner in the law firm of Bentley, Bentley & Bentley.
(3) Serves as a director of Charter.
(4) Serves as a director of the Company.
(5) Serves as an officer of Charter.
(6) Mr. Francis serves as President, Chief Financial Officer and director of
the Company and as President, Chief Executive Officer and director of
Charter.
(7) Mr. Carroll serves as Chairman and Chief Executive Officer of the Company
and as Chairman, President and Chief Executive Officer of Mountain.
(8) Serves as a director of Mountain.
-23-
<PAGE> 25
PLAN OF DISTRIBUTION
The shares of Common Stock offered hereby for the benefit of the Selling
Shareholders represent either (i) shares issued to certain of the Selling
Shareholders pursuant to the exercise of certain stock purchase warrants, (ii)
shares underlying certain outstanding options to purchase Common Stock
previously granted to certain of the Selling Shareholders, (iii) shares
underlying certain outstanding stock purchase warrants granted in connection
with the organization of Mountain and (iv) shares underlying certain
outstanding stock options granted to the Company's Chairman and Chief Executive
Officer. See "Selling Shareholders." The Company has agreed to register such
shares for resale by the Selling Shareholders. The Company will not receive
any of the proceeds from the sale of such shares by the Selling Shareholders.
The Selling Shareholders have advised the Company that they may elect to
offer for sale and to sell Common Stock from time to time in one or more
transactions through brokers in the over-the-counter market, in private
transactions, or otherwise, in each case at market prices prevailing at the
time of sale or at prices and terms then obtainable, in block transactions,
negotiated transactions, or otherwise. Accordingly, sales prices and proceeds
to the Selling Shareholders will depend upon market price fluctuations and the
manner of sale.
The Selling Shareholders may effect such transactions by selling to or
through one or more broker-dealers, and such broker-dealers may receive
compensation in the form of underwriting discounts, brokerage commissions or
similar fees in amounts which may vary from transaction to transaction. The
Selling Shareholders will pay such brokerage commissions and charges, as well
as the fees and expenses of any counsel retained by them in connection with
this offering. The Company will bear all other expenses in connection with
registering the shares offered hereby, which expenses are estimated to total
approximately $30,000.
LEGAL MATTERS
Certain legal matters with respect to the legality of the shares of Common
Stock offered hereby have been passed upon for the Company by Smith, Gambrell &
Russell, Atlanta, Georgia.
EXPERTS
The financial statements of the Company as of December 31, 1995 and 1994
and for each of the three years in the period ended December 31, 1995,
incorporated by reference in this Prospectus have been so incorporated by
reference in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
-24-
<PAGE> 26
===============================================================================
No dealer, salesperson, or other person has been authorized to give any
information or to make any representation not contained in this Prospectus,
and, if given or made, such information and representation must not be relied
upon as having been authorized by the Company. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction or to any person to whom it is
unlawful to make such offer or solicitation. Neither the delivery of this
Prospectus nor any sale made hereunder shall under any circumstances create an
implication that there has been no change in the facts set forth in this
Prospectus or in the affairs of the Company since the date hereof.
___________________________
TABLE OF CONTENTS
Page
Available Information ................................................. 2
Incorporation of Certain
Documents by Reference .............................................. 2
The Company .......................................................... 3
Risk Factors .......................................................... 3
Use of Proceeds ....................................................... 5
Business .............................................................. 6
Selling Shareholders .................................................. 17
Plan of Distribution .................................................. 24
Legal Matters ......................................................... 24
Experts ............................................................... 24
===============================================================================
===============================================================================
MERIT HOLDING CORPORATION
1,278,092 SHARES
COMMON STOCK
P R O S P E C T U S
___________, 1996
5100 LaVista Road
Tucker, Georgia 30085
(770) 491-8808
===============================================================================
<PAGE> 27
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below are estimates of the fees and expenses payable by the
Registrant in connection with the offer and sale of the Common Stock:
<TABLE>
<S> <C>
SEC Registration Fee ........................... $4,261
Blue Sky Qualification Fees and Expenses ........ 2,500
Transfer Agent Fees ............................. 1,000
Printing, Materials, and Postage ................ 4,000
Legal Fees and Expenses ......................... 10,000
Accounting Fees and Expenses .................... 3,000
Miscellaneous Expenses .......................... 5,239
------
TOTAL ........................ $30,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation provide that a director shall not
be personally liable to the Company or its shareholders for monetary damages
for breach of duty of care or any other duty owed to the Company as a director,
except that such provision shall not eliminate or limit the liability of a
director (a) for any appropriation, in violation of his duties, of any business
opportunity of the Company, (b) for acts or omissions which involve intentional
misconduct or a knowing violation of law, (c) for unlawful corporate
distributions, or (d) for any transaction from which the director received an
improper personal benefit.
Article VI of the Company's By-Laws provides that the Company shall
indemnify a director or officer who has been successful in the defense of any
proceeding to which he was a party or in defense of any claim, issue or matter
therein because he is or was a director of the Company, against reasonable
expenses incurred by him in connection with such defense.
The Company's By-Laws also provide that the Company may indemnify any
director, officer, employee or agent made a party to a proceeding because he is
or was a director, officer, employee or agent against liability incurred in the
proceeding if he acted in a manner he believed in good faith or to be in or not
opposed to the best interest of the Company and, in the case of any criminal
proceeding, he had no reasonable cause to believe his conduct was unlawful.
Determination concerning whether or not the applicable standard of conduct has
been met can be made by (a) a disinterested majority of the Board of Directors,
(b) a majority of a committee of disinterested directors, (c) independent legal
counsel, or (d) an affirmative vote of a majority of shares held by
disinterested shareholders. No indemnification may be made to or on behalf of
a director, officer, employee or agent (i) in connection with a proceeding by
or in the right of the Company in which such person was adjudged liable to the
Company or (ii) in connection with any other proceeding in which such person
was adjudged liable on the basis that personal benefit was improperly received
by him.
The Company may, if authorized by its shareholders by a majority of votes
which would be entitled to be cast in a vote to amend the Company's Articles of
Incorporation, indemnify or obligate itself to indemnify a director, officer,
employee or agent made a party to a proceeding, including a proceeding brought
by or in the right of the Company.
II-1
<PAGE> 28
ITEM 16. EXHIBITS.
(a) The following exhibits are filed with this Registration Statement.
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<S> <C>
5.1 Opinion of Smith, Gambrell & Russell
23.1 Consent of Price Waterhouse LLP
23.2 Consent of Smith, Gambrell & Russell
(contained in their opinion at Exhibit 5.1)
</TABLE>
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
Provided, however, that the undertakings set forth in
paragraphs (i) and (ii) above do not apply if the information
required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at the time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referred to in Item 15
above, or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is therefore unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or
II-2
<PAGE> 29
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
II-3
<PAGE> 30
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Tucker, State of Georgia, on the 30th day of
September, 1996.
MERIT HOLDING CORPORATION
By: /s/ J. Randall Carroll
-----------------------------------------
J. Randall Carroll, Chairman of the Board
and Chief Executive Officer
(Principal Executive Officer)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints J. Randall Carroll and Ronald H. Francis and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his name, place and stead,
in any and all capacities, to sign any or all amendments (including
post-effective amendments) to this Registration Statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
including a Registration Statement filed under Rule 462(b) of the Securities
Act of 1933, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
following capacities on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ J. Randall Carroll Chairman of the Board, September 30, 1996
- ---------------------- and Chief Executive Officer
J. Randall Carroll
/s/ Ronald H. Francis President, September 30, 1996
- --------------------- Chief Financial Officer
Ronald H. Francis and Director (Principal Financial
and Accounting Officer)
/s/ Michael J. Coles Director September 30, 1996
- ----------------------
Michael J. Coles
/s/ Patrick H. Hickok Director September 30, 1996
- ----------------------
Patrick H. Hickok
/s/ Walter J. McCloud, II Director September 30, 1996
- -------------------------
Walter J. McCloud, II
</TABLE>
<PAGE> 31
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description of Exhibit Page No.
------- ---------------------- ----------
<S> <C> <C>
5.1 Opinion of Smith, Gambrell & Russell
23.1 Consent of Price Waterhouse LLP
</TABLE>
<PAGE> 1
EXHIBIT 5.1
[SMITH, GAMBRELL & RUSSELL LETTERHEAD]
October 15, 1996
Board of Directors
Merit Holding Corporation
5100 LaVista Road
Tucker, Georgia 30085
RE: Merit Holding Corporation
Registration Statement on Form S-3
1,278,092 Shares of Common Stock
Gentlemen:
We have acted as counsel for Merit Holding Corporation (the "Company") in
connection with the proposed public offering by certain shareholders of the
Company of shares of the Company's $2.50 par value Common Stock (the "Common
Stock") covered by the above-described Registration Statement.
In connection therewith, we have examined the following:
(1) The Articles of Incorporation of the Company, as amended,
certified by the Secretary of State of the State of Georgia;
(2) The By-Laws of the Company, certified as complete and
correct by the Secretary of the Company;
(3) The minute book of the Company, certified as correct and
complete by the Secretary of the Company;
(4) A Certificate of Existence with respect to the Company,
issued by the Secretary of State of the State of Georgia;
and
(5) The Registration Statement on Form S-3 to be filed with the
Securities and Exchange Commission pursuant to the Securities
Act of 1933, as amended (the "Registration Statement").
<PAGE> 2
Board of Directors
Merit Holding Corporation
October 15, 1996
Page 2
Based upon such examination and upon examination of such other
instruments and records as we have deemed necessary, we are of the opinion that:
(A) The Company was duly organized as a corporation and is
existing and in good standing under the laws of the State
of Georgia.
(B) The 1,278,092 shares of Common Stock covered by the Registration
Statement have been legally authorized by the Company and when
sold in accordance with the terms described in said
Registration Statement, will be validly issued, fully paid
and nonassessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Prospectus. In giving this consent, we do not thereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, or the rules and regulations of
the Securities and Exchange Commission thereunder.
Sincerely,
SMITH, GAMBRELL & RUSSELL
/s/ Robert C. Schwartz
-----------------------------
Robert C. Schwartz
RCS/dkaw
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report
dated January 19, 1996 appearing on page 35 of Merit Holding Corporation's
Annual Report on Form 10-KSB for the year ended December 31, 1995. We also
consent to the reference to us under the heading "Experts" in such Registration
Statement.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Atlanta, Georgia
October 16, 1996
