<PAGE> 1
As filed with the Securities and Exchange Commission dated July 27, 1995
Registration No. 33-61019
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D. C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
THE COLONIAL BANCGROUP, INC.
(Exact name of Registrant as specified in its charter)
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Delaware 6711 63-0661573
(State of Incorporation) (Primary Standard Industrial (I.R.S. Employer Identification No.)
Classification Code Number)
ONE COMMERCE STREET, SUITE 800 (334) 240-5000
MONTGOMERY, ALABAMA 36104 (Telephone No.)
(Address of principal executive offices)
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---------------------------
W. FLAKE OAKLEY, IV
SECRETARY
POST OFFICE BOX 1108
MONTGOMERY, ALABAMA 36102
(Name and address of agent for service)
Copies to:
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MICHAEL D. WATERS, ESQUIRE KATHRYN L. KNUDSON, ESQ.
MILLER, HAMILTON, SNIDER & ODOM, L.L.C. POWELL, GOLDSTEIN, FRAZER & MURPHY
ONE COMMERCE STREET, SUITE 802 191 PEACHTREE STREET, N.E., 16TH FLOOR
P. O. BOX 19 ATLANTA, GEORGIA 30303
MONTGOMERY, ALABAMA 36101-0019
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Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON EACH 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
SECTION 8(a), MAY DETERMINE.
<PAGE> 2
THE COLONIAL BANCGROUP, INC.
CROSS REFERENCE SHEET
TO ITEMS IN FORM S-4
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<CAPTION>
CAPTION IN PROSPECTUS OR OTHER
------------------------------
FORM S-4 ITEM NUMBER AND CAPTION LOCATION IN REGISTRATION STATEMENT
- -------------------------------- ----------------------------------
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Item 1. Forepart of Registration Statement Facing page,
and Outside Front Cover Page of Cross Reference Sheet,
Prospectus Outside front cover page of
Prospectus
Item 2. Inside Front and Outside Back "AVAILABLE INFORMATION,"
Cover Pages of Prospectus Inside front cover page of Prospectus,
"DOCUMENTS INCORPORATED BY REFERENCE,"
"TABLE OF CONTENTS"
Item 3. Risk Factors, Ratio of Earnings "SUMMARY," Cover Page of Prospectus,
to Fixed Charges and Other "PER SHARE DATA," "APPROVAL OF THE MERGER,"
Information "PRO FORMA FINANCIAL INFORMATION"
AND "SELECTED FINANCIAL DATA"
Item 4. Terms of the Transaction "APPROVAL OF THE MERGER,"
"DOCUMENTS INCORPORATED BY REFERENCE"
Item 5. Pro Forma Financial Information "PER SHARE DATA," "CONDENSED PRO FORMA
STATEMENTS OF CONDITION," AND "CONDENSED
PRO FORMA STATEMENTS OF INCOME"
Item 6. Material Contacts with the Company "APPROVAL OF THE MERGER -- Background
of the Merger," "Reasons for the
Merger," and "Interests of Certain
Persons in the Merger"
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Item 7. Additional Information Required for Not Applicable
Reoffering by Persons and Parties
Deemed to be Underwriters
Item 8. Interests of Named Experts and "LEGAL OPINIONS"
Counsel
Item 9. Disclosure of Commission Position Not Applicable; See Items
on Indemnification for Securities 20 and 22 below
Act Liabilities
Item 10. Information with Respect to S-3 "DOCUMENTS INCORPORATED
Registrants BY REFERENCE," "BUSINESS
OF BANCGROUP - Management
Information"
Item 11. Incorporation of Certain Information "DOCUMENTS INCORPORATED
by Reference BY REFERENCE"
Item 12. Information with Respect to S-2 or Not Applicable
S-3 Registrants -- Item 12(b)
Item 13. Incorporation of Certain Information Not Applicable
by Reference
Item 14. Information with Respect to Not Applicable
Registrants Other Than S-3 or S-2
Registrants
Item 15. Information with Respect to S-3 Not Applicable
Companies
Item 16. Information with Respect to S-2 or Not Applicable
S-3 Companies
Item 17. Information with Respect to "BUSINESS OF FINANCIAL,"
Companies Other than S-3 or S-2 "FINANCIAL STATEMENTS"
Companies
Item 18. Information if Proxies, Consents or "INTRODUCTION," "BUSINESS
Authorizations are to be Solicited OF BANCGROUP - Voting Securities
and Principal Stockholders," "Security
Ownership of Management," "Management
Information"
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Item 19. Information if Proxies, Consents or Not Applicable
Authorizations are not to be
Solicited or in an Exchange Offer
Item 20. Indemnification of Directors and PART II, Item 20
Officers
Item 21. Exhibits and Financial Statement PART II, Item 21
Schedules
Item 22. Undertakings PART II, Item 22
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MT. VERNON FINANCIAL CORP.
4800 ASHFORD DUNWOODY ROAD
DUNWOODY, GEORGIA 30338
(404) 396-3966
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON _______________, 1995
NOTICE IS HEREBY GIVEN that a special meeting of stockholders (the
"Special Meeting") of Mt. Vernon Financial Corp. ("Financial") will be
held at Financial's office, 4800 Ashford Dunwoody Road, Dunwoody, Georgia, on
_______________, 1995, at __________ p.m., local time, for the following
purposes:
1. Merger. To consider and vote upon the proposed merger (the
"Merger") of Financial with and into The Colonial BancGroup,
Inc. ("BancGroup"), in accordance with an Agreement and Plan
of Merger, dated as of May 4, 1995 (the "Agreement").
Pursuant to the Agreement, BancGroup will be the surviving
corporation in the Merger, and each share of common stock of
Financial outstanding at the time of the Merger will be
converted into the right to receive shares of Common Stock of
BancGroup, with cash paid in lieu of fractional shares at the
same value as will be paid in BancGroup Common Stock, as
described more fully in the accompanying Joint Proxy Statement
and Prospectus. The Agreement is attached to the Joint Proxy
Statement and Prospectus as Appendix A.
2. Other Matters. To transact such other business as may
properly come before the Special Meeting or any adjournments
thereof.
The Board of Directors of Financial is not aware of any other
business to come before the Special Meeting.
The board of directors of Financial has fixed the close of business on
_______________, 1995, as the record date for the determination of stockholders
entitled to notice of and to vote at the Special Meeting. Only holders of
record of common stock of Financial at the close of business on that date will
be entitled to notice of and to vote at the Special Meeting or any adjournments
thereof.
Under Georgia law, holders of common stock of Financial are eligible
to exercise dissenters' rights of appraisal in connection with the Merger, as
described more fully in the accompanying Joint Proxy Statement and Prospectus.
You are requested to complete and sign the enclosed form of Proxy
which is solicited by the board of directors of Financial and to mail it
promptly in the enclosed envelope. The Proxy may be revoked at any time by
filing with the Secretary of Financial a written
<PAGE> 6
revocation, by executing a later dated Proxy, or by attending the Special
Meeting and voting in person.
BY ORDER OF THE BOARD OF DIRECTORS
Secretary
Dunwoody, Georgia
_______________, 1995
ii
<PAGE> 7
JOINT PROXY STATEMENT AND PROSPECTUS
- ------------------------------------
COLONIAL BANCGROUP
COMMON STOCK
MT. VERNON FINANCIAL CORP.
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON
_______________, 1995
This Joint Proxy Statement and Prospectus (the "Prospectus") relates to
the proposed merger (the "Merger") of Mt. Vernon Financial Corp. ("Financial")
with and into The Colonial BancGroup, Inc. ("BancGroup") and is furnished to
Financial's stockholders on or about the date set forth below. In connection
with the Merger, BancGroup will issue shares of its Common Stock to the holders
of the outstanding shares of common stock of Financial. The number of shares
to be issued to the stockholders of Financial will depend upon the market value
of such shares, subject to maximum and minimum amounts to be issued. See
"APPROVAL OF THE MERGER -- Conversion of Financial Shares." The shares of
Common Stock of BancGroup are listed on the New York Stock Exchange. The
closing price per share of such stock as of _______________, 1995, was
$__________.
Consummation of the Merger requires, among other things, the
affirmative vote of the holders of at least a majority of the outstanding
shares of common stock of Financial.
BancGroup has filed a Registration Statement pursuant to the
Securities Act of 1933, as amended, to register the shares of its Common Stock,
par value $2.50 per share, to be
<PAGE> 8
issued in connection with the Merger described herein. This document
constitutes a Proxy Statement of Financial in connection with stockholder
approval of the Merger described herein and a Prospectus of BancGroup with
respect to the Common Stock to be issued in the Merger.
THE BOARD OF DIRECTORS OF FINANCIAL UNANIMOUSLY RECOMMENDS APPROVAL OF
THE MERGER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS SUCH COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE SHARES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION.
The office and mailing address of Financial are 4800 Ashford Dunwoody
Road, Dunwoody, Georgia 30338 (telephone 404-396-3966), and the principal
office and mailing address of BancGroup are Colonial Financial Center, One
Commerce Street, Post Office Box 1108, Montgomery, Alabama 36192 (telephone
334-240-5000).
The date of this Prospectus is _______________, 1995.
2
<PAGE> 9
AVAILABLE INFORMATION
BancGroup is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith files
reports, and other information with the Securities and Exchange Commission (the
"Commission"). Such reports and other filings made by BancGroup, including
proxy and information statements, can be inspected and copied at the public
reference facilities of the Commission, Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and at certain regional offices:
Seven World Trade Center, 13th Floor, New York, New York 10048; Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; 1401
Brickell Avenue, Suite 200, Miami, Florida 33131; 1801 California Street, Suite
4800, Denver, Colorado 80202-2648; 5670 Wilshire Boulevard, 11th Floor, Los
Angeles, California 90036-3648. Copies of such material can be obtained from
the Public Reference Section of the Commission at prescribed rates.
BancGroup's Common Stock is listed for trading on the New York Stock
Exchange (the "NYSE"). Reports, including proxy and information statements, of
BancGroup and other information may be inspected at the NYSE, 20 Broad Street,
New York, New York 10005.
BancGroup has filed with the Commission a Registration Statement under
the Securities Act of 1933, as amended, to register the shares of Common Stock
of BancGroup being offered in connection with the Merger. This Prospectus
omits certain information contained in the Registration Statement and exhibits
thereto. Such Registration Statement, including the exhibits thereto, can be
inspected at the Public Reference Section of the
3
<PAGE> 10
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of such
Registration Statement can be obtained at prescribed rates from the Commission
at that address.
DOCUMENTS INCORPORATED BY REFERENCE
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON
REQUEST FROM THE PERSON SPECIFIED BELOW. IN ORDER TO ENSURE TIMELY DELIVERY OF
THE DOCUMENTS, ANY REQUEST SHOULD BE RECEIVED BY BANCGROUP NO LATER THAN FIVE
BUSINESS DAYS PRIOR TO THE SPECIAL MEETING.
The following documents filed by BancGroup with the Commission are
hereby incorporated by reference into this Prospectus:
(1) BancGroup's annual report on Form 10-K for the fiscal year
ended December 31, 1994;
(2) BancGroup's quarterly report on Form 10-Q for the quarter
ended March 31, 1995;
(3) BancGroup's report on Form 8-K dated February 21, 1995;
(4) BancGroup's report on Form 8-K/A dated April 21, 1995;
(5) BancGroup's report on Form 8-K dated July 10, 1995; and
(6) BancGroup's Form 8-A dated November 22, 1994, effective
February 22, 1995, containing a description of BancGroup's
common stock.
All documents filed by BancGroup pursuant to Section 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934 after the date of this
Prospectus and prior to the
4
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Special Meeting shall be deemed incorporated by reference in the Prospectus and
made a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed incorporated herein by reference
will be deemed to be modified or superseded for the purpose of this Prospectus
to the extent that a statement contained herein or in the other subsequently
filed document which also is or is deemed to be, incorporated herein by
reference modifies or supersedes such statement. Any such statement so
modified or superseded will not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
BancGroup has entered into the Agreement with Financial regarding the
Merger described herein. Various provisions of the Agreement are summarized or
referred to in this Prospectus, and the Agreement is incorporated by reference
into this Prospectus and attached hereto at Appendix A.
BancGroup will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the request of any
such person, a copy of any and all of the documents which have been
incorporated herein by reference but not delivered herewith (other than the
exhibits to such documents). Such request, in writing or by telephone, should
be directed to W. Flake Oakley, IV, Secretary, The Colonial BancGroup, Inc.,
One Commerce Street, Post Office Box 1108, Montgomery, Alabama 36192 (telephone
334-240-5000).
5
<PAGE> 12
TABLE OF CONTENTS
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PAGE
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SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Record Date; Shares Entitled to Vote; Vote Required for the Merger . . . . . . . . . . . . . . . . . . . . 27
Solicitation, Voting and Revocation of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Voting Effect of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
APPROVAL OF THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Background of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Reasons for the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Conversion of Financial Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Other Possible Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Conditions of Consummation of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Conduct of Business Pending the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Rights of Dissenting Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Resale of BancGroup Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
COMPARATIVE MARKET PRICES AND DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
BancGroup . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Financial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
BANCGROUP CAPITAL STOCK AND DEBENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Preference Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
1985 Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
1986 Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Changes in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
COMPARATIVE RIGHTS OF STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Director Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Removal of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Authorized Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
</TABLE>
6
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Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Preemptive Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Directors' Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Special Meetings of Stockholders; Action Without a Meeting. . . . . . . . . . . . . . . . . . . . . . . 75
Mergers, Share Exchanges and Sales of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Amendment of Certificate of Incorporation and Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . 77
Rights of Dissenting Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Antitakeover Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Effect of the Merger on Financial Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
Condensed Pro Forma Statement of Condition (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . 82
Condensed Pro Forma Statement of Income (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . 84
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
Selected Financial Data 1994-1990 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Selected Quarterly Financial Data 1994-1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Selected Interim Financial Data (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
MT. VERNON FINANCIAL CORPORATION AND SUBSIDIARIES
Selected Financial Data 1994-1990 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . 93
Selected Interim Financial Data (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Management's Discussion and Analysis of Financial Condition and Results of Operations comparison of the
Nine Months Ended March 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
BUSINESS OF BANCGROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Proposed Affiliate Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Voting Securities and Principal Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Security Ownership of Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Management Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Certain Regulatory Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
BUSINESS OF FINANCIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Principal Holders of Financial Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Financial Common Stock Owned by Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
ADJOURNMENT OF SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
</TABLE>
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DATE FOR SUBMISSION OF BANCGROUP'S STOCKHOLDER PROPOSAL . . . . . . . . . . . . . . . . . . . . . . . 117
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
APPENDIX A - Agreement and Plan of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
APPENDIX B -- Georgia Statute Regarding Dissenters' Rights of Appraisal . . . . . . . . . . . . . . . B-1
APPENDIX C - Opinion of The Robinson-Humphrey Company, Inc . . . . . . . . . . . . . . . . . . . . . C-1
</TABLE>
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF
ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN
OFFER TO SELL THE SECURITIES COVERED HEREBY IN ANY JURISDICTION WHERE, OR TO
ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER. THE DELIVERY OF THIS
PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE.
8
<PAGE> 15
SUMMARY
The following provides a summary of information included in this
Prospectus. The summary is qualified in its entirety by the more detailed
information appearing elsewhere herein, the Appendices hereto and the documents
incorporated herein by reference. Stockholders of Financial are urged to read
this document in full.
GENERAL
This Prospectus relates to the issuance of shares of BancGroup Common
Stock pursuant to the Merger of Financial with BancGroup. BancGroup will be
the surviving corporation in the Merger. See "APPROVAL OF THE MERGER."
The Merger will be presented for approval at the Special Meeting of
the stockholders of Financial to be held on _______________, _______________,
1995, at __________ p.m., local time, at the main office of Financial.
See "INTRODUCTION."
TERMS OF THE MERGER
Upon the date of consummation of the Merger (the "Effective Date") and
subject to certain conditions, holders of Financial's common stock will be
entitled to receive shares of BancGroup Common Stock. Each share of common
stock of Financial outstanding and held by Financial's stockholders shall be
converted into the number of shares of BancGroup Common Stock which shall be
equal to $18.794 divided by the Market Value (the "Exchange Ratio"). The
"Market Value" shall represent the per share market value of the BancGroup
9
<PAGE> 16
Common Stock at the Effective Date and shall be determined by calculating the
average of the closing prices of the Common Stock of BancGroup as reported by
the New York Stock Exchange (the "NYSE") on each of the 20 trading days ending
on the trading day immediately preceding the Effective Date, provided that for
purposes of calculating the Exchange Ratio, the Market Value shall not be less
than $19 nor greater than $28. As a result, the maximum number of shares of
BancGroup Common Stock to be issued shall be 703,327, and the minimum number
shall be 477,258, subject to adjustment as described in the following
paragraphs.
The Agreement originally provided that the aggregate number of shares
of BancGroup Common Stock to be issued in the Merger shall be reduced by an
amount of shares equal to the amount by which expenses incurred by Financial
for the termination of certain data processing contracts exceed $92,000 divided
by $18.794. However, BancGroup and Financial have amended the Agreement to
delete this adjustment to the purchase price.
BancGroup shall pay cash to holders of non-qualified options of
Financial common stock equal to the difference between $18.794 and the option
price respecting such shares of Financial stock which are subject to options.
Such options shall be terminated and shall not be entitled to be exchanged for
shares of BancGroup Common Stock in the Merger. The cash to be paid for such
options totals $1,754,419.38.
10
<PAGE> 17
Financial also has 66,411 shares of its common stock subject to
exercise under its incentive stock option plan. Holders of such options may
exercise such options prior to the Merger and receive shares of BancGroup
Common Stock as part of the Merger. If holders of incentive options exercise
such options prior to the Effective Date, then the maximum and minimum
aggregate number of shares of BancGroup Common Stock described above shall be
increased to account for such exercises, and, assuming that all incentive
options are exercised prior to the Effective Date, then the number of shares of
Common Stock that BancGroup shall issue shall not exceed 769,018 and shall not
be less than 521,834. Any such options which are not exercised prior to the
Closing shall be cancelled and shall not be entitled to be exchanged for shares
of BancGroup Common Stock or options respecting BancGroup Common Stock.
No fractions of shares of Common Stock will be issued. To the extent
cash is paid in lieu of fractional shares, the cash will be paid based upon the
Market Value.
As an example, and subject to the maximum and minimum number of shares
that shall be issued, if the Market Value is $24, then the Exchange Ratio will
be .7831, and each one share of Financial common stock shall be converted into
.7831 of a share of BancGroup Common Stock (i.e., $18.794 divided by $24). A
shareholder of Financial holding 100 shares of Financial common stock would
receive in the aggregate 78 shares of BancGroup Common Stock (100 multiplied by
.7831) with the .31 of a share of BancGroup Common Stock converted to cash
equal to $7.44 ($24 multiplied by .31).
See "APPROVAL OF THE MERGER."
11
<PAGE> 18
Except as stated above, no adjustments will be made to the number of
shares of BancGroup Common Stock to be issued in the Merger based upon the
operating results, financial condition or other factors relating to either
Financial or BancGroup. The actual number of shares to be issued will depend
upon the Market Value of the Common Stock at the time of the Effective Date of
the Merger, subject to the maximum and minimum number of shares to be issued.
Subject to such maximum and minmum numbers, the aggregate number of shares of
Common Stock will increase as the Market Value of such shares at the Effective
Date of the Merger falls and will decrease as the Market Value increases.
Depending upon the Market Value of the Common Stock and the number of shares of
Financial common stock held, holders of a relatively small number of shares
could be paid only cash in lieu of such shares. Such persons would pay
federal income tax on the amount of cash received. See "APPROVAL OF THE MERGER
- -- Conversion of Financial Shares" and " -- Certain Federal Income Tax
Consequences."
Financial stockholders will be given notice of the Merger within seven
(7) business days after the Effective Date of the Merger. Certificates for the
BancGroup Common Stock will not be distributed until stockholders surrender
their certificates representing Financial common stock. Shares issued upon
consummation of the Merger, however, may be traded prior to receipt of
certificates. See "APPROVAL OF THE MERGER -- Conversion of Financial Shares."
12
<PAGE> 19
RECOMMENDATION OF THE FINANCIAL BOARD OF DIRECTORS
The Financial board of directors believes that the Merger is in the
best interests of Financial and its stockholders and has approved the Agreement
and the consummation of the Merger. THE FINANCIAL BOARD OF DIRECTORS
RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE AGREEMENT AND THE
CONSUMMATION OF THE MERGER. In deciding to approve the Agreement and the
consummation of the Merger, Financial's board of directors considered a number
of factors, including: (i) the alternatives to the Merger, including remaining
as an independent financial institution in light of current economic conditions
in Financial's primary market and the competition presented by larger financial
institutions operating in the market; (ii) the value of the consideration to be
received by Financial's stockholders relative to the book value, tangible book
value and earnings of Financial; (iii) the financial terms of recent business
combinations in the financial services industry with respect to multiples
received on book value and earnings of the acquired entities; (iv) information
concerning the financial condition, results of operations and business
prospects of BancGroup; (v) the current lack of marketability of Financial
common stock, contrasted with the ability of Financial's stockholders to
exchange their common stock for BancGroup Common Stock in connection with the
Merger and thereafter have the ability to trade such stock on the New York
Stock Exchange; (vi) the tax aspects of the Merger with respect to the
consideration to be received by the Financial stockholders; and (vii) the
fairness opinion described in "APPROVAL OF THE MERGER--Opinion of Financial
Advisor." See "APPROVAL OF THE MERGER--Background of the Merger" and "Reasons
for the Merger."
OPINION OF FINANCIAL ADVISOR
Financial has received a written opinion of The Robinson-Humphrey
Company, Inc. ("Robinson-Humphrey"), dated May 4, 1995, that, as of such date,
the consideration to be
13
<PAGE> 20
received by Financial stockholders in connection with the Merger was fair, from
a financial point of view, to the holders of Financial common stock. The full
text of Robinson-Humphrey's opinion, which describes the procedures followed,
assumptions made, limitations on the review taken, and other matters in
connection with rendering such opinion, is set forth in Appendix C to this
Prospectus and should be read in its entirety by Financial stockholders. For
additional information regarding Robinson-Humphrey's opinion and a discussion
of its qualifications and the method of its selection, see "APPROVAL OF THE
MERGER--Opinion of Financial Advisor."
INTEREST OF CERTAIN PERSONS IN THE MERGER
No director or executive officer of Financial, and no associate of any
such person, has any substantial direct or indirect interest in the Merger,
other than an interest arising from the ownership of Financial common stock, in
which case the director or officer receives no benefit not shared on a pro rata
basis by all other holders of Financial common stock.
VOTE REQUIRED
The Merger (item 1 on the proxy card) requires the approval of the
holders of at least a majority of the outstanding shares of common stock of
Financial. Only those stockholders of Financial who were stockholders of
record at the close of business on _______________, 1995, are entitled to
notice of and to vote at the Special Meeting. Financial's directors, executive
officers, and certain persons affiliated with them own in the aggregate
approximately 32.5% of the outstanding shares of common stock of Financial and
have agreed to vote for the Merger. Directors and executive officers of
BancGroup beneficially own in the aggregate 2,098,835
14
<PAGE> 21
shares representing 16.72% of the outstanding shares of common stock of
BancGroup, but no vote of BancGroup's stockholders is required for the Merger.
See "INTRODUCTION."
Proxies should be submitted in the envelope enclosed herewith.
Stockholders of Financial submitting proxies may revoke their proxies by giving
notice of such revocation in writing to the person named in the Notice of
Special Meeting of Stockholders, by executing and delivering a proxy bearing a
later date, or by attending the Special Meeting and voting in person. Because
approval of the Merger requires the approval of at least a majority of the
outstanding shares of common stock of Financial, failure to submit a proxy or
failure to vote in person at the Special Meeting will have the same effect as a
negative vote, except with respect to dissenters' appraisal rights. See
"INTRODUCTION -- Solicitation, Voting and Revocation of Proxies."
RIGHTS OF DISSENTING STOCKHOLDERS
Any stockholder of Financial may dissent from the Merger and obtain
the value of his Financial common stock in cash if such stockholder (1) has
delivered notice in writing to Financial before the vote is taken at the
Special Meeting that he intends to demand payment of his or her shares if the
Merger is consummated and (2) does not vote in favor of the Merger. If the
Merger is authorized at the Special Meeting, BancGroup will deliver a written
dissenters' notice within ten (10) days of the Effective Date of the Merger to
all holders of Financial common stock who have provided notice that they intend
to seek payment. Stockholders wishing to exercise appraisal rights must follow
properly all requirements for the exercise of such rights as set forth in
Georgia law, Title 14, chapter 2, article 13 set forth at Appendix B hereto.
See "APPROVAL OF THE MERGER - Rights of Dissenting Stockholders."
15
<PAGE> 22
Any stockholder who properly exercises appraisal rights and receives
fair market value for his shares will encounter income tax treatment different
than the treatment for stockholders who do not exercise appraisal rights. See
"APPROVAL OF THE MERGER -- Certain Federal Income Tax Consequences."
For certain information concerning dissenting stockholders' rights,
voting at the Special Meeting, and management of BancGroup and Financial, see
"APPROVAL OF THE MERGER -- Rights of Dissenting Stockholders," "-- Conversion
of Financial Shares"; "INTRODUCTION -- Solicitation, Voting and Revocation of
Proxies," "-- Record Date; Shares Entitled to Vote; Vote Required"; "BUSINESS
OF BANCGROUP -- Voting Securities and Principal Stockholders," "-- Security
Ownership of Management," and "BUSINESS OF FINANCIAL -- Principal Holders of
Financial Common Stock," and "-- Financial Common Stock Owned By Management."
CONDITIONS OF CONSUMMATION
The Merger is subject to approval by the requisite vote of holders of
at least a majority of the outstanding shares of common stock of Financial, and
certain other conditions. The Merger must be approved by the Georgia
Department of Banking and Finance (the "Georgia Department"), the Board of
Governors of the Federal Reserve System (the "Federal Reserve") and the Office
of Thrift Supervision ("OTS"). Applications have been filed with these
agencies. It is anticipated that the foregoing conditions, as well as certain
other conditions contained in the Agreement, will be satisfied, but the
Agreement states that Financial and BancGroup may waive all conditions to their
obligations to consummate the Merger, except that the conditions of the
requisite approvals of regulatory authorities and stockholder approval of the
Merger may
16
<PAGE> 23
not be waived. Either BancGroup or Financial may terminate the Merger if the
Merger is not consummated by December 31, 1995. See "APPROVAL OF THE MERGER --
Conditions of Consummation of the Merger."
In addition, the boards of directors of BancGroup and Financial may
amend or terminate the Agreement before or after approval by the stockholders
of Financial. No amendments will be made to the Agreement which would alter
the Exchange Ratio or which, in the opinion of the board of directors of
Financial, would adversely affect the rights of the stockholders of Financial.
Any amendments to the Agreement which in the opinion of the board of directors
of Financial would have a material adverse effect upon the stockholders of
Financial would be submitted to Financial's stockholders for approval. Such
amendments could require the filing of an amendment of the Registration
Statement, of which this Prospectus forms a part, with the Commission. See
"APPROVAL OF THE MERGER -- Conditions of Consummation of the Merger."
BUSINESS OF FINANCIAL
Financial was organized on April 13, 1993 under the laws of Georgia
and acquired Mt. Vernon Federal Savings Bank (the "Bank") on December 8, 1993.
The Bank commenced business as a federally chartered savings bank on February
26, 1986. It operates a full-service financial services business based in the
Atlanta Metropolitan area, providing such customary banking services as
checking and savings accounts, various types of time deposits, money transfers
and individual retirement accounts. It engages in mortgage and consumer
lending, with primary emphasis on mortgage banking activities, including both a
retail and wholesale mortgage loan origination operation.
17
<PAGE> 24
BUSINESS OF BANCGROUP
BancGroup is a bank holding company registered under the Bank Holding
Company Act of 1956, as amended. It was organized in 1974 under the laws of
Delaware. BancGroup operates as its wholly-owned subsidiary Colonial Bank
which conducts a full service commercial banking business in the state of
Alabama through 95 banking offices. BancGroup also has a wholly-owned bank
subsidiary in Tennessee, The Colonial Bank of Tennessee, which conducts a
general commercial banking business through four offices located in that state.
BancGroup's loan portfolio is comprised primarily of commercial real estate
loans (27%) and residential real estate (41%), a significant portion of which
is located within the State of Alabama. BancGroup's growth in loans over the
past several years has been concentrated in commercial and residential real
estate loans. The lending activities of Colonial Bank are dependent upon the
demands within the local markets of its branches. Based on this demand, loans
collateralized by commercial and residential real estate have been the fastest
growing component of Colonial Bank's loan portfolio. See "BUSINESS OF
BANCGROUP."
LENDING ACTIVITIES
BancGroup, through the branches and offices of its subsidiary banks,
makes loans for a range of business and personal uses in response to local
demands for credit. Loans are concentrated in Alabama and Tennessee and are
dependent upon economic conditions in those states. Alabama has historically
been a slow growth state. The following broad categories of loans have varying
risks and underwriting standards.
- Real Estate-Commercial -- Loans classified as commercial real
estate loans are loans which are collateralized by real estate
and substantially
18
<PAGE> 25
dependent upon cash flow from income-producing improvements
attached to the real estate. For BancGroup, these primarily
consist of apartments, hotels, office buildings, shopping
centers, amusement/recreational facilities, one to four
family residential housing developments, and health service
facilities.
Loans within this category are underwritten based on projected
cash flows and loan-to-appraised-value ratios of 80% or less.
The risks associated with commercial real estate loans are
primarily dependent upon real estate values in local market
areas, the equity investments of borrowers, and the borrowers'
experience and expertise. BancGroup has diversified its
portfolio of commercial real estate loans with less than 10%
of its total loan portfolio concentrated in any of the
above-mentioned industries.
- Real Estate Construction -- Construction loans include loans
to finance single family and multi-family residential as well
as nonresidential real estate. Loan values for these loans
are from 80% to 85% of completed appraised values. The
principal risks associated with these loans are related to the
borrowers' ability to complete the project and local market
demand, the sales market, presales or preleasing, and
permanent loan commitments. BancGroup evaluates presale
requirements, preleasing rates, permanent loan take-out
commitments, as well as other factors in underwriting
construction loans.
19
<PAGE> 26
- Real Estate - Residential -- These loans consist of loans made
to finance one to four family residences and home equity loans
on residences. BancGroup may loan up to 95% of appraised value
on these loans without other collateral or security. The
principal risks associated with one to four family residential
loans are the borrowers' debt coverage ratios and real estate
values.
- Commercial, Financial, and Agricultural -- Loans classified as
commercial, financial, and agricultural consist of secured and
unsecured credit lines and equipment loans for various
industrial, agricultural, commercial, retail, or service
businesses.
The risk associated with loans in this category are generally
related to the earnings capacity and cash flows generated from
the individual business activities of the borrowers.
Collateral consists primarily of business equipment,
inventory, and accounts receivables with loan-to-value ratios
of less than 80%. Credit may be extended on an unsecured
basis or in excess of 80% of collateral value in circumstances
as described in the paragraph below.
- Installment and Consumer -- Installment and consumer loans are
loans to individuals for various purposes. Automobile loans
and unsecured loans make up the majority of these loans. The
principal source of repayment
20
<PAGE> 27
is the earnings capacity of the individual borrowers as well
as the value of the collateral. Installment and consumer
loans are sometimes made on an unsecured basis or with
loan-to-value ratios in excess of 80%.
Collateral values referenced above are monitored by loan officers
through property inspections, reference to broad measures of market values, as
well as current experience with similar properties or collateral. Loans with
loan-to-value ratios in excess of 80% have potentially higher risks which are
offset by other factors including the borrower's or guarantors' credit
worthiness, the borrower's other banking relationships, the bank's lending
experience with the borrower, and any other potential sources of repayment.
Colonial Bank and The Colonial Bank of Tennessee fund loans primarily
with customer deposits approximately 10% of which are considered more rate
sensitive or volatile than other deposits.
COMMON STOCK OF FINANCIAL
The holders of common stock of Financial are entitled to dividends as
and when declared by the board of directors out of funds legally available
therefor, to one vote for each share held on matters submitted to a vote of
stockholders, and, in the event of liquidation, to the net assets remaining
after satisfaction of all liabilities. As of April 30, 1995, Financial had
711,036 shares of its common stock outstanding and 162 stockholders of record.
See "COMPARATIVE RIGHTS OF STOCKHOLDERS."
21
<PAGE> 28
COMMON STOCK OF BANCGROUP
BancGroup is authorized to issue 44,000,000 shares of its Common
Stock, of which on April 30, 1995, 12,219,699 shares were issued and
outstanding. Further, up to 766,229 shares of Common Stock are issuable upon
conversion of certain debentures of BancGroup and 233,424 shares may be issued
under BancGroup's stock option plans. BancGroup has authorized 1,000,000
shares of Preference Stock, none of which has been issued. Certain provisions
of BancGroup's Restated Certificate of Incorporation and bylaws may have the
effect of preventing, delaying or deferring a change in control of BancGroup.
Among other things, these provisions include the election of the BancGroup
board of directors on a classified basis, supermajority votes of stockholders
to approve certain business combinations, and the inability of stockholders to
call special meetings or to act by written consent.
See "BANCGROUP CAPITAL STOCK AND DEBENTURES," and "COMPARATIVE RIGHTS OF
STOCKHOLDERS."
INCOME TAX CONSEQUENCES
It is expected that the Merger will constitute a tax-free
reorganization for federal income tax purposes and, accordingly, no gain or
loss will be recognized by holders of Financial common stock upon the
conversion of Financial common stock solely into BancGroup Common Stock by
reason of the Merger (except with respect to cash, if any, received in lieu of
fractional share interests in BancGroup Common Stock). Stockholders whose
shares of Financial common stock are converted into cash or receive cash for
shares upon perfection of dissenters' rights, however, will realize gain or
loss for federal income tax purposes with respect to such shares. See
"APPROVAL OF THE MERGER -- Certain Federal Income Tax
22
<PAGE> 29
Consequences." Financial stockholders are urged to consult their own tax
advisors as to the specific tax consequences to them of the Merger.
ACCOUNTING TREATMENT
The acquisition of Financial will be treated as a "purchase"
transaction by BancGroup. Accordingly, the purchase price will be assigned to
the fair value of the net tangible assets acquired and any purchase price in
excess thereof will be assigned to intangibles. The valuation of intangibles,
if any, will be made as of the Effective Date of the Merger. Intangibles,
approximating $4,604,000, will be amortized by charges or credits to future
earnings over a period approximating 20 years.
RECENT PER SHARE MARKET PRICE
FINANCIAL. There is no established public trading market for the
common stock of Financial. To the knowledge of Financial, approximately
239,000 shares of Financial common stock have been sold during the last two
fiscal years at prices ranging from $8.89 to $11.25. The most recent sale
occurred on November 15, 1994 when 90 shares were sold at $11.25 per share.
BANCGROUP. BancGroup Common Stock is listed for trading on the NYSE
under the System symbol "CNB."
The following table indicates the high and low closing prices of the
Common Stock as reported on the NYSE and on the NASDAQ System for the last two
full fiscal years. Prior to February 21, 1995, BancGroup had two classes of
Common Stock outstanding, Class A and Class B. Class B was not publicly
traded. Class A was traded as a NASDAQ security.
23
<PAGE> 30
<TABLE>
<CAPTION>
PRICE OF COMMON STOCK
HIGH LOW
<S> <C> <C>
1993
First Quarter 23 20
Second Quarter 23 1/2 19
Third Quarter 22 20
Fourth Quarter 21 3/4 18
1994
First Quarter 20 1/4 18
Second Quarter 25 19 1/4
Third Quarter 24 3/4 22
Fourth Quarter 23 3/4 19 1/2
1995
First Quarter (1) 23 5/8 19 1/2
Second Quarter 27 1/2 23 1/8
</TABLE>
(1) Trading on the NYSE commenced on February 24, 1995.
On March 15, 1995, the business day immediately prior to the public
announcement of the Merger, the closing price of the Common Stock on the NYSE
was $23.50 per share. The following table presents the market value of
BancGroup Common Stock on March 15, 1995, and the market value and equivalent
per share value of Financial common stock on that date:
<TABLE>
<CAPTION>
=====================================================================================================
Equivalent
BancGroup Financial BancGroup
Common Stock Common Stock Common Stock
(Per Share) (Per Share) (Per Share)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Comparative Market Value $23.50(1) $11.25(2) $18.794(3)
=====================================================================================================
</TABLE>
(1) Closing price as reported by the NYSE.
(2) There is no established public trading market for the common
stock of Financial. The value shown is the price at which shares of Common
Stock were sold on the last sale of which management of Financial is aware.
(3) If the Merger had closed on March 15, 1995, .7997 (18.794/23.50)
shares of BancGroup Common Stock would have been exchanged for each one share
of Financial common stock.
24
<PAGE> 31
See "COMPARATIVE MARKET PRICES AND DIVIDENDS."
CERTAIN LEGAL RESTRICTIONS ON ACQUISITIONS OF CONTROL
Certain restrictions under Delaware law prevent a person who
beneficially owns 15% or more of BancGroup's Common Stock from engaging in a
"business combination" with BancGroup unless certain conditions are satisfied.
Also, the Change in Bank Control Act of 1978 prohibits a person from acquiring
"control" of BancGroup unless certain notice provisions with the Federal
Reserve Board have been satisfied.
BancGroup's Restated Certificate of Incorporation and bylaws also
contain provisions which may deter or prevent a takeover of BancGroup that is
not supported by BancGroup's board of directors. These provisions include (1)
a classified board of directors, (2) supermajority vote requirements for
certain "business combinations" that exceed the provisions of Delaware law
described above, (3) flexibility for the board to consider non-economic and
other factors in evaluating a "business combination," (4) inability of
stockholders to call special meetings and act by written consent, and (5)
certain advance notice provisions for the conduct of business at stockholder
meetings.
See "COMPARATIVE RIGHTS OF STOCKHOLDERS."
PER SHARE DATA
BancGroup's historical financial information has been restated to give
effect to the February 17, 1995 acquisition of Colonial Mortgage Company and
its parent, both entities under common control. The combination is accounted
for in a manner similar to a pooling of interests, accordingly BancGroup's
historical financial information has been restated to give retroactive effect
to the combination (filed on Form 8-K, July 10, 1995 incorporated by reference
into this prospectus).
The table on the following page presents on a per share basis the book
value, cash dividends and income from continuing operations of BancGroup and
Financial on a historical basis and on a pro forma equivalent basis reflecting
the March 31, 1995 acquisition of Brundidge Banking Company and assuming
the acquisition of Financial and Farmers and Merchants Bank. Certain
information from the table has been taken from the condensed proforma
statements of
25
<PAGE> 32
condition and income included elsewhere in this document. The table should be
read in conjuction with those proforma statements.
<TABLE>
<CAPTION>
PER SHARE DATA Three months Year
Ended Ended
March 31, 1995 1994(a)
-------------- -------
<S> <C> <C>
BancGroup-Historical (restated):
Net Income
Primary $ 0.69 $ 2.28
Fully diluted 0.67 2.23
Book value at end of period 16.82 16.08
Dividends per share:
Common Stock 0.225
Common A 0.80
Common B 0.40
BancGroup and Completed Acquisitions (Brundidge Banking Company)
Pro Forma Combined:
Net Income
Primary 0.69 2.26
Fully diluted 0.67 2.22
Mt. Vernon Financial:
Net Income
Historical
Primary 0.50 2.43
Fully diluted 0.44 2.14
Pro forma equivalent assuming acquisition of Mt. Vernon Financial Only (b):
Primary 0.50 1.67
Fully diluted 0.49 1.64
Pro forma equivalent assuming acquisition of Mt. Vernon Financial and Farmers &
Merchants Bank (b):
Primary 0.51 1.68
Fully diluted 0.49 1.65
Book value at end of period
Historical 14.39 N/A
Pro forma equivalent assuming acquisition of Mt. Vernon Financial Only (b) 12.68 N/A
Pro forma equivalent assuming acquisition of Mt. Vernon Financial and Farmers &
Merchants Bank (b) 12.83 N/A
Dividends per share (c)
Historical
Primary - -
Fully diluted - -
Pro Forma Equivalent .17 .59
BancGroup-Pro Forma Combined (Mt. Vernon Financial only):
Net Income
Primary 0.68 2.27
Fully diluted 0.67 2.23
Book value at end of period 17.21 N/A
BancGroup-Pro Forma Combined (Mt. Vernon Financial and Farmers &
Merchants Bank)
Net Income
Primary 0.69 2.28
Fully diluted 0.67 2.24
Book value at end of period 17.41 N/A
</TABLE>
N/A Not applicable due to pro forma balance sheet being presented only at March
31, 1995 which assumes the transanction was consummated on the latest
balance sheet date in accordance with Rule 11.02(b) of Regulation S-X.
(a) Per share data of Colonial BancGroup, Inc. is for the year ended December
31, 1994 (as restated). Per share data of Mt. Vernon Financial is for the
year ended December 31, 1994 (last six months from fiscal year end June 30,
1994 and first six months of fiscal year end June 30, 1995.
(b) Pro forma equivalent per share amounts are calculated by multiplying the
pro forma combined total income per share and the pro forma combined total
book value per share of BancGroup by the conversion ratio so that the per
share amounts are equated to the respective values for one share of Mt.
Vernon Financial. For the purposes of these pro forma equivalent per share
amounts, a .7370 BancGroup common stock share conversion ratio is utilized.
The ratio is based on the 20-day average market price of Colonial
BancGroup, Inc. common stock of $25.50 at June 20, 1995 and the stated
$18.794 maximum per share transaction value.
(c) During the year ended December 31, 1994, the Board of Directors of Mt.
Vernon Financial and paid a 5% stock dividend.
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<PAGE> 33
INTRODUCTION
GENERAL
This Prospectus is being furnished to the stockholders of Financial in
connection with the solicitation of proxies by the board of directors of
Financial for use at a Special Meeting of stockholders to be held on
_______________, 1995, at __________ p.m., local time, and at any adjournments
thereof (the "Special Meeting"), as stated in the accompanying Notice of
Special Meeting of Stockholders and described herein. The purpose of the
Special Meeting is to consider and vote upon the proposed merger of Financial
with and into BancGroup. BancGroup will be the surviving corporation in the
Merger.
This Prospectus is also furnished by BancGroup in connection with the
offer of shares of BancGroup Common Stock to be issued in the Merger. No vote
of BancGroup stockholders is required to approve the Merger.
The board of directors of Financial believes that the Merger is in the
best interests of Financial and its stockholders and unanimously recommends
that stockholders vote "FOR" the Merger (item 1 on the proxy card). Each
member of the board of directors of Financial has separately agreed with
BancGroup to vote his or her shares in favor of the Merger.
RECORD DATE; SHARES ENTITLED TO VOTE; VOTE REQUIRED FOR THE MERGER
Shares of common stock, par value $.01 per share, are the only
securities of Financial issued and outstanding. The close of business on
_______________, 1995, has been fixed by the board of directors of Financial as
the record date for determination of stockholders entitled to vote at the
Special Meeting. There were 162 record holders of Financial common stock as of
27
<PAGE> 34
such date. On that date, there were 711,036 shares of common stock of
Financial outstanding, each entitled to one vote per share.
Approval of the Merger requires the affirmative vote of at least a
majority of the outstanding shares of common stock of Financial. Each share is
entitled to one vote.
Assuming that (i) no dissenters' rights of appraisal are exercised in
connection with the Merger, (ii) all incentive options respecting 66,411 shares
of Financial common stock are exercised, and (iii) a Market Value of BancGroup's
Common Stock of $24 per share, upon consummation of the Merger (a) 608,805
shares of BancGroup Common Stock will be issued in connection with the Merger
and (b) former holders of Financial common stock will hold approximately
608,805 shares, or 4.7%, of the BancGroup Common Stock then outstanding.
Under Georgia law, stockholders of Financial will have dissenters'
rights of appraisal with respect to the Merger. It is a condition to
consummation of the Merger that the holders of not more than 10% of the shares
of Financial's common stock exercise dissenters' appraisal rights. This
condition may be waived by BancGroup. The condition was placed in the
Agreement by BancGroup to limit the amount of cash that BancGroup might have to
pay in the Merger in case a larger number of shareholders of Financial exercise
dissenters' rights of appraisal. See "APPROVAL OF THE MERGER -- Rights of
Dissenting Stockholders."
If the Merger is approved at the Special Meeting, Financial is
expected to merge with and into BancGroup promptly after the other conditions
to the Agreement are satisfied. See "APPROVAL OF THE MERGER -- Conditions of
Consummation of the Merger." If the Merger is not approved at the Special
Meeting and it becomes reasonably and objectively certain that stockholder
approval cannot be obtained or the other conditions to the Agreement
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are not satisfied, Financial will continue to operate in the foreseeable future
as a federal savings bank, and the Merger will be terminated.
THE BOARD OF DIRECTORS OF FINANCIAL URGES THE STOCKHOLDERS OF
FINANCIAL TO EXECUTE AND RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE AND
UNANIMOUSLY RECOMMENDS THAT THE SHARES REPRESENTED BY THE PROXY BE VOTED IN
FAVOR OF THE MERGER.
SOLICITATION, VOTING AND REVOCATION OF PROXIES
In addition to soliciting proxies by mail, directors, officers, and
other employees of Financial, without receiving special compensation therefor,
may solicit proxies from Financial's stockholders by telephone, by telegram or
in person. Arrangements will also be made with brokerage firms and other
custodians, nominees and fiduciaries, if any, to forward solicitation materials
to any beneficial owners of shares of common stock of Financial held of record
by such persons
The cost of assembling and mailing this Prospectus and other materials
furnished to stockholders of Financial and all other expenses of solicitation,
including the expenses of brokers, custodians, nominees, and other fiduciaries
who, at the request of Financial, mail material to or otherwise communicate
with beneficial owners of the shares held by them, will be paid by Financial.
Expenses incident to the registration of the securities to be issued in
connection with the Merger will be paid by BancGroup.
Each proxy which is solicited on behalf of Financial, as stated on
such proxy, permits each record holder of common stock of Financial to vote on
the Merger. Where a stockholder
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specifies his choice on the proxy with respect to the Merger, the shares
represented by the proxy will be voted in accordance with such specification.
IF NO SUCH SPECIFICATION IS MADE, THE SHARES WILL BE VOTED IN FAVOR OF THE
MERGER. Properly executed proxies will be voted in accordance with the
determination of a majority of the board of directors of Financial as to any
other matter which may properly come before the Special Meeting. The enclosed
proxy card should be returned in the accompanying envelope.
Proxies marked as abstentions and shares held in street name which
have been designated by brokers on proxy cards as not voted will not be counted
as votes cast. Such proxies will be counted for purposes of determining a
quorum at the Special Meeting. Stockholders who execute proxies retain the
right to revoke them at any time. However, abstentions and broker non-votes
will have the same effect as a "no" vote respecting stockholder approval of the
Merger.
A proxy may be revoked prior to its exercise by: (i) filing with
Financial a written notice of revocation at any time prior to the vote at the
Special Meeting; (ii) delivering to Financial a duly executed proxy bearing a
later date; or (iii) attending the Special Meeting and voting in person.
The board of directors of Financial is not aware of any business to be
acted upon at the Special Meeting other than consideration of the Merger
described herein.
VOTING EFFECT OF MERGER
Assuming a Market Value of BancGroup Common Stock of $24 on the
Effective Date, and the exercise of all incentive stock options of Financial,
608,805 shares of BancGroup Common Stock would be distributed to the
stockholders of Financial pursuant to the Merger.
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Accordingly, the 608,805 shares of Common Stock to be issued in the Merger will
represent approximately 4.7% of the total number of shares of Common Stock
outstanding following the Merger.
APPROVAL OF THE MERGER
THE FOLLOWING DESCRIPTIONS WHICH, IN THE OPINION OF BANCGROUP AND
FINANCIAL, CONTAIN A FAIR SUMMARY OF ALL MATERIAL PROVISIONS OF THE AGREEMENT
AND PLAN OF MERGER, ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE
AGREEMENT ATTACHED HERETO AS APPENDIX A, AND CERTAIN PROVISIONS OF GEORGIA LAW
RELATING TO THE RIGHTS OF DISSENTING STOCKHOLDERS, A COPY OF WHICH IS ATTACHED
HERETO AS APPENDIX B. ALL FINANCIAL STOCKHOLDERS ARE URGED TO READ THE
AGREEMENT AND THE OTHER APPENDICES IN THEIR ENTIRETY.
GENERAL
The board of directors of Financial has agreed that, subject to
stockholder ratification and confirmation, receipt of necessary regulatory
approval and certain other conditions described below at "Conditions of
Consummation of the Merger," Financial will merge with and into BancGroup.
Upon completion of the Merger, the corporate existence of Financial will cease,
and BancGroup will succeed to the business formerly conducted by Financial.
BancGroup intends to change the name of Mt. Vernon Federal Savings Bank to
"Colonial Bank," and to operate such bank in Georgia as a federal savings bank.
In the event there is an insufficient number of shares of Financial
common stock present in person or by proxy at the Special Meeting to approve
the Merger, the board of directors of Financial intends to adjourn the Special
Meeting. Any such adjournment will require the
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affirmative vote of a majority of shares present at the Special Meeting. The
effect of any such adjournment would be to permit Financial to continue to
solicit additional proxies for approval of the Merger. While such an
adjournment would not invalidate any proxies previously filed, including those
filed by stockholders voting against the Merger, it would give Financial the
opportunity to solicit additional proxies in favor of the Merger.
BACKGROUND OF THE MERGER
During 1994 certain members of Financial's board of directors and
certain of its stockholders felt that Financial should explore strategic
alternatives in its marketplace including the possible sale of Financial. In
addition, Financial had received indications of possible interest from several
financial institutions operating in Georgia. A Strategic Planning Committee of
the board of directors of Financial was formed to coordinate Financial's
analysis and response to these preliminary overtures. The Strategic Planning
Committee met several times during the latter half of 1994, and its activities
were reviewed by the full board of directors.
On December 12, 1994, the board of directors interviewed four
potential financial advisors to discuss the possible sale of Financial. After
these discussions, the board selected The Robinson-Humphrey Company, Inc.
("Robinson-Humphrey"), Atlanta, Georgia as its financial advisor, having
determined that Robinson-Humphrey created the best likelihood for completion of
a proposed transaction, had the best market exposure, and had the best
capability of analyzing and marketing Financial.
On January 19, 1995, Financial's board of directors met with
representatives of Robinson-Humphrey and discussed the package to be delivered
to bidders, the marketing process, and a list of potential merger partners.
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On February 23, 1995, Financial's board of directors met with
representatives of Robinson-Humphrey and with counsel to Financial to review
the indications of interest received from potential merger partners who had
been contacted since the prior meeting. Detailed information and available
market statistics on each potential merger partner were distributed and
discussed and, as a result, the board of directors authorized Robinson-Humphrey
to invite two groups to perform due diligence on Financial with their
submission of a firm bid to take place immediately thereafter. The board of
directors also authorized counsel to draft an outline for a proposed definitive
agreement and requested that Robinson-Humphrey prepare a fairness opinion for
the stockholders of Financial. See "APPROVAL OF THE MERGER - Opinion of
Financial Advisor." The timeframes for due diligence to be conducted at
Financial were discussed, and Robinson-Humphrey was requested to conduct due
diligence on the proposed merger partners.
On March 16, 1995, Financial's board of directors met with
representatives from Robinson-Humphrey and with counsel to Financial to discuss
a proposed letter of intent received from BancGroup. Robinson-Humphrey
reviewed for the board of directors its analysis of the financial aspects of
the transaction and the terms of the proposed letter of intent. Following a
lengthy discussion and analysis of the issues, the proposed letter of intent
was executed by Financial.
From March 16, 1995 through April 20, 1995, the terms of the
definitive Agreement were negotiated. On April 20, 1995, Financial's board of
directors met with representatives from Robinson-Humphrey and counsel to
Financial. Robinson-Humphrey and counsel discussed the due diligence they had
conducted on BancGroup, outlining the procedures used and summarizing the
pertinent information, and reported that the due diligence had been completed
with satisfactory results. Counsel to Financial then led a discussion
concerning the major points
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of the definitive agreement. Robinson-Humphrey next reviewed its financial
analysis. After a lengthy discussion of the specific terms of the agreement,
the board of directors unanimously approved the acquisition of Financial by
BancGroup on terms and conditions substantially as set forth in the proposed
agreement. They further authorized Gerald S. Lesher and D. Michael Sleeth to
execute and deliver the proposed agreement on behalf of Financial.
On May 4, 1995, after further negotiation of the definitive agreement,
Robinson-Humphrey delivered its opinion that the consideration to be given
pursuant to the Merger is fair, from a financial point of view, to the
Financial stockholders.
REASONS FOR THE MERGER
Financial's board of directors, after consideration of relevant
business, financial, legal and market factors, approved the Agreement.
Financial's board did not assign any relative or specific weight to the factors
considered. The factors considered included:
(i) the alternatives to the Merger, including remaining as an
independent financial institution in light of current economic conditions in
Financial's primary market and the competition presented by larger financial
institutions operating in the market;
(ii) the value of the consideration to be received by Financial's
stockholders relative to the book value, tangible book value and earnings of
Financial;
(iii) the financial terms of recent business combinations in the
financial services industry with respect to multiples received on book value
and earnings of the acquired entities;
(iv) information concerning the financial condition, results of
operations and business prospects of BancGroup;
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(v) the current lack of marketability of Financial common stock,
contrasted with the ability of Financial's stockholders to exchange their
common stock for BancGroup Common Stock in connection with the Merger and
thereafter have the ability to trade such stock on the New York Stock Exchange;
(vi) the tax aspects of the Merger with respect to the
consideration to be received by the Financial stockholders; and
(vii) the opinion of Robinson-Humphrey as to the fairness, from a
financial point of view, of the consideration to be received by holders of
Financial common stock. See "APPROVAL OF THE MERGER -- Opinion of Financial
Advisor."
THE BOARD OF DIRECTORS OF FINANCIAL RECOMMENDS THAT YOU VOTE "FOR"
APPROVAL OF THE AGREEMENT AND CONSUMMATION OF THE MERGER.
From the point of view of BancGroup, the Merger will enable BancGroup
to expand for the first time its banking operations into the State of Georgia.
Also, because the primary feature of the business of Financial has been the
origination of home mortgages, the Merger will provide opportunities for the
expansion by BancGroup of home mortgage production and servicing, given the
operations of Colonial Bank's mortgage company subsidiary, Colonial Mortgage
Company.
OPINION OF FINANCIAL ADVISOR
General. Financial retained Robinson-Humphrey to act as its financial
adviser in connection with the Merger. Robinson- Humphrey has rendered an
opinion to Financial's board of directors that, based on the matters set forth
therein, the consideration to be given pursuant
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to the Merger is fair, from a financial point of view, to the Financial
stockholders. The text of such opinion is set forth in Appendix C to this
Prospectus and should be read in its entirety by stockholders of Financial.
The consideration to be given to Financial stockholders in the Merger
was determined by Financial and BancGroup in their negotiations. No
limitations were imposed by the board of directors or management of Financial
upon Robinson-Humphrey with respect to the investigations made or the
procedures followed by Robinson-Humphrey in rendering its opinion.
In connection with rendering its opinion to Financial's board of
directors, Robinson-Humphrey performed a variety of financial analyses.
However, the preparation of a fairness opinion involves various determinations
as to the most appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances, and, therefore,
such an opinion is not readily susceptible to summary description.
Robinson-Humphrey, in conducting its analysis and in arriving at its opinion,
has not conducted a physical inspection of any of the properties or assets of
Financial and has not made or obtained any independent valuation or appraisals
of any properties, assets or liabilities of Financial. Robinson-Humphrey has
assumed and relied upon the accuracy and completeness of the financial and
other information that was provided to it by Financial or that which was
publicly available. Its opinion is necessarily based on economic, market and
other conditions as in effect on, and the information made available to it as
of the date of, its analyses.
Valuation Methodologies. In connection with its opinion on the Merger
and the presentation of that opinion to Financial's board of directors,
Robinson-Humphrey performed three valuation analyses with respect to Financial:
(i) a comparison with comparable publicly traded companies; (ii) an analysis of
comparable prices and terms of recent transactions
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involving financial institutions buying thrifts; and (iii) a discounted cash
flow analysis. For purposes of the comparable company and comparable
transaction analyses, BancGroup stock was valued at $23.50 per share. All
three of these methodologies are discussed briefly below.
COMPARABLE COMPANY ANALYSIS. In performing its comparable company
analysis, Robinson-Humphrey analyzed the market trading of Financial
common stock relative to publicly traded thrifts that had total assets
comparable to Financial and were located in the Southeast. The
institutions included in the comparison to Financial consisted of:
Bedford Bancshares, Inc. (BFSB), Community Financial Corp. (CFFC),
First Federal of Alabama, FSB (FAB), First Financial Bancshares of
Polk (FBPC), FFBS BanCorp, Inc. (FFBS), FFE Financial Corp. (FFEF),
First Family Financial Corp. (FFML), First Georgia Holding, Inc.
(FGHC), FLAG Financial Corp. (FLAG), First Financial Bancorp (FPRY),
KS Bancorp, Inc. (KSAV), Newnan Savings Bank, FSB (NFSL), Perpetual
Savings Bank, SSB (PSTB), South Carolina Community Bancshares (SCCB),
Seaboard Bancorp (SEAB), Southern Financial Federal SB (SFFB), First
SB of Moore County (SOPN), SouthFirst Bancorp (SZB), Twin City Bancorp
(TWIN), United Federal Savings Bank (UFRM) and Valley Federal Savings
Bank (VAFD).
Among the market trading information compared was market price to book
value and tangible book value, for which the mean multiples for
the comparables were 99.34 percent and 100.61 percent, respectively,
compared to the multiple of approximately 150.80 percent of book
value and tangible book value represented by the consideration to be
received by Financial stockholders in the Merger. Also examined was
market price
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to the latest 12 months earnings per share, for which the average
multiple for the comparable banks was 11.73, compared to a multiple
of approximately 9.56 represented by the consideration to be received
by Financial stockholders in the Merger.
COMPARABLE TRANSACTION ANALYSIS. Robinson-Humphrey performed two
analyses of premiums paid for selected banks with comparable
characteristics to Financial. Comparable transactions were considered
to be (i) transactions since January 1, 1995, where the total deal
value was less than $50 million, and (ii) transactions since January
1, 1992, where the seller was a Georgia thrift.
Based on the first of the foregoing transactions, merger agreements
since January 1, 1995, where the total deal value was less than $50
million, the analysis yielded a range of transaction values to book
value of 80.51 percent to 154.31 percent, with a mean of 129.60
percent and a median of 133.95 percent. These compare to a
transaction value for the Merger of approximately 150.80 percent of
Financial book value as of March 31, 1995.
In addition, the analysis yielded a range of transaction values as a
percentage of tangible book value for the comparable transactions
ranging from 80.51 percent to 155.54 percent, with a mean of 130.65
percent and a median of 136.62 percent. These compare to a
transaction value to tangible book value at March 31, 1995 of
approximately 150.80 percent for the Merger.
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Furthermore, the analysis yielded a range for transaction values as a
multiple of trailing twelve month earnings per share. These values
ranged from 7.67 times to 31.16 times, with a mean of 16.15 times and
a median of 15.03 times. These compare to a transaction value to the
March 31, 1995 trailing twelve months earnings per share of 9.56 times
for the Merger.
Lastly, the analysis yielded a range of transaction values as a
percentage of total assets for the comparable transactions ranging
from 5.32 percent to 27.38 percent, with a mean of 13.60 percent and a
median of 12.03 percent. These compare to a transaction value of
total assets at March 31, 1995 of approximately 8.60 percent for the
Merger.
Based on transactions since January 1, 1992, where the seller was a
Georgia thrift, the analysis yielded a range of transaction values to
book value of 68.71 percent to 185.85 percent, with a mean of 138.29
percent and a median of 139.06 percent. These compare to a
transaction value for the Merger of approximately 150.80 percent of
Financial book value as of March 31, 1995.
In addition, the analysis yielded a range of transaction values as a
percentage of tangible book value for the comparable transactions
ranging from 100.78 percent to 185.85 percent, with a mean of 141.72
percent and a median of 139.06 percent. These compare to a
transaction value to tangible book value at March 31, 1995 of
approximately 150.80 percent for the Merger.
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Furthermore, the analysis yielded a range of transaction values as a
multiple of trailing twelve month earnings per share. These values
ranged from 3.91 times to 26.26 times, with a mean of 13.68 times and
a median of 12.48 times. These compare to a transaction value to the
March 31, 1995 trailing twelve months earnings per share of 9.56 times
for the Merger.
Lastly, the analysis yielded a range for transaction values as a
percentage of total assets for the comparable transactions ranging
from 3.39 percent to 20.35 percent, with a mean of 11.79 percent and a
median of 11.36 percent. These compare to a transaction value of
total assets at March 31, 1995 of approximately 8.60 percent for the
Merger.
No company or transaction used in the comparable transaction analyses
is identical to Financial. Accordingly, an analysis of the foregoing
necessarily involves complex considerations and judgments, as well as
other factors that affect the public trading value or the acquisition
value of the company to which it is being compared.
DISCOUNTED CASH FLOW ANALYSIS. Using discounted cash flow analysis,
Robinson-Humphrey estimated the present value of the future stream of
after-tax cash flows that Financial could produce through 1999, under
various circumstances, assuming that Financial performed in accordance
with the earnings/return projections of management. Robinson-Humphrey
estimated the terminal value for Financial at the end of the period by
applying multiples of earnings ranging from 8.0 to 10.0 times and then
discounting the cash flow streams, dividends paid to stockholders and
terminal value using differing
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discount rates (ranging from 9.0 percent to 11.0 percent) chosen to
reflect different assumptions regarding the required rates of return
of Financial and the inherent risk surrounding the underlying
projections. This discounted cash flow analysis indicated a reference
range of $14.0 million to $18.5 million, or $15.44 to $20.43 per
share, for Financial. This compares to a per share value of $18.794
to be received by the Financial stockholders.
Compensation of Robinson-Humphrey. Pursuant to an engagement letter
dated December 19, 1994 between Financial and Robinson-Humphrey, Financial
agreed to pay Robinson-Humphrey a $75,000 Fairness Opinion Fee and an
incremental Success Fee (to be paid at closing) equal to approximately 1.60
percent on the total consideration received by stockholders less the Fairness
Opinion Fee. Financial has also agreed to indemnify and hold harmless
Robinson-Humphrey and its officers and employees against certain liabilities in
connection with its services under the engagement letter, except for
liabilities resulting from the negligence of Robinson-Humphrey.
As part of its investment banking business, Robinson-Humphrey is
regularly engaged in the valuation of securities in connection with mergers and
acquisitions, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate
and other purposes. Financial's board of directors decided to retain
Robinson-Humphrey based on its experience as a financial advisor in mergers and
acquisitions of financial institutions, particularly transactions in the
Southeastern region of the U.S., and its knowledge of financial institutions
and Financial in particular.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
No director or executive officer of Financial, and no associate of any
such person, has any substantial direct or indirect interest in the Merger,
other than an interest arising from the ownership of Financial common stock, in
which case the director or officer receives no benefit not shared on a pro rata
basis by all other holders of Financial common stock.
CONVERSION OF FINANCIAL SHARES
On the effective date of the Merger (the "Effective Date"), each share
of Financial's common stock outstanding and held of record by Financial
stockholders shall be converted into shares of BancGroup Common Stock. Each
share of common stock of Financial outstanding and held by Financial's
stockholders shall be converted into the number of shares of BancGroup Common
Stock which shall be equal to $18.794 divided by the Market Value (the
"Exchange Ratio"). The Market Value shall represent the per share market value
of the BancGroup Common Stock at the Effective Date and shall be determined by
calculating the average of the closing prices of the Common Stock of BancGroup
as reported by the NYSE on each of the 20 trading days ending on the trading
day immediately preceding the Effective Date, provided that for purposes of
calculating the Exchange Ratio, the Market Value shall not be less than $19 nor
greater than $28. As a result, the maximum number of shares of BancGroup
Common Stock to be issued shall be 703,327, and the minimum number shall be
477,258, subject to adjustment for option exercises and data processing costs
described below.
The Agreement originally provided that the aggregate number of shares
of BancGroup Common Stock to be issued in the Merger shall be reduced by an
amount of shares equal to the amount by which expenses incurred by Financial
for the termination of certain data processing contracts exceed $92,000
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divided by $18.794. However, BancGroup and Financial have amended the
Agreement to delete this adjustment to the purchase price.
BancGroup shall pay cash to holders of non-qualified options of
Financial common stock equal to the difference between $18.794 and the option
price respecting such shares of Financial common stock which are subject to
options. Such options shall be terminated and shall not be entitled to be
exchanged for shares of BancGroup Common Stock in the Merger. The cash to be
paid for such options totals $1,754,419.38.
Financial also has 66,411 shares of its common stock subject to
exercise under its incentive stock option plan. Holders of such options may
exercise such options prior to the Merger and receive shares of BancGroup
Common Stock as part of the Merger. If holders of incentive stock options
exercise such options prior to the Effective Date, then the maximum and minimum
aggregate number of shares of BancGroup Common Stock shall be appropriately
increased to account for such exercises, and, assuming that all incentive
options are exercised prior to the Effective Date, then the number of shares of
Common Stock that BancGroup shall issue shall not exceed 769,018 and shall not
be less than 521,834. Any such options which are not exercised prior to the
Effective Date shall be cancelled and shall not be entitled to be exchanged for
shares of BancGroup Common Stock or options respecting BancGroup Common Stock.
No fractional shares of BancGroup Common Stock will be issued, and
each stockholder of Financial having a fractional interest arising upon the
conversion or exchange of Financial common stock into BancGroup Common Stock
will, at the time of surrender of the certificates representing Financial
common stock, be paid by BancGroup an amount of cash equal to the
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value of such fractional interest based on the fair market value of such
fractional share. Fair market value for this purpose shall be the Market Value
as defined above. Such fair market value will, therefore, represent the same
value that such fractional interest would have been entitled to receive in
BancGroup Common Stock.
As an example, and subject to the maximum and minimum number of shares
that shall be issued, if the Market Value is $24, then the Exchange Ratio will
be .7831, and each one share of Financial common stock shall be converted into
.7831 of a share of BancGroup Common Stock (i.e., $18.794 divided by $24). A
stockholder of Financial holding 100 shares of Financial common stock would
receive in the aggregate 78 shares of BancGroup Common Stock (100 multiplied by
.7831) with the .31 of a share of BancGroup Common Stock converted to cash
equal to $7.44 ($24 multiplied by .31).
If any stockholder of Financial exercises dissenters' rights of
appraisal and receives cash for Financial common stock held or if any shares of
common stock of Financial are converted to cash in any state in which BancGroup
Common Stock may not be issued pursuant to exemptions from registration under
applicable state securities laws, the number of shares of BancGroup Common
Stock to be issued in the Merger will be adjusted to reduce such shares based
upon the conversion of such Financial common stock into cash. Based upon a
survey of all states in which shares of Financial common stock are currently
outstanding, BancGroup does not anticipate that any shares of Financial common
stock will be required to be converted to cash, rather than shares of BancGroup
Common Stock, under state securities laws.
Upon the Effective Date and subject to the conditions described at
"Conditions of Consummation of the Merger," Financial's stockholders will
automatically, and without further action by such stockholders or by BancGroup,
become owners of BancGroup Common Stock
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as described herein. Outstanding certificates representing shares of the
common stock of Financial shall represent shares of Common Stock of BancGroup.
Thereafter, upon surrender of the certificates formerly representing shares of
Financial common stock, the holder will be entitled to receive certificates for
the Common Stock of BancGroup. Dividends on the shares of BancGroup Common
Stock will accumulate without interest and will not be distributed to any
former stockholder of Financial unless and until such stockholder surrenders
for cancellation his certificate for Financial common stock. Shares issued
upon consummation of the Merger, however, may be traded following the Effective
Date and prior to receipt of certificates representing such shares. Trust
Company Bank, Atlanta, Georgia, transfer agent for BancGroup Common Stock, will
act as the Exchange Agent with respect to the shares of Financial common stock
surrendered in connection with the Merger.
A detailed explanation of these arrangements will be mailed to
Financial stockholders within seven (7) business days following the Effective
Date. Stock certificates should not be sent to the Exchange Agent until such
notice is received.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to qualify as a "reorganization" for federal
income tax purposes under Section 368(a)(1)(A) of the Internal Revenue Code of
1986, as amended (the "Code"). The obligation of Financial and BancGroup to
consummate the Merger is conditioned on the receipt by Financial and BancGroup
of an opinion from Powell, Goldstein, Frazer & Murphy to the effect that the
Merger will constitute such a reorganization. In delivering its opinion,
Powell, Goldstein, Frazer & Murphy will receive and rely upon certain
representations of
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BancGroup and Financial and certain other information, data, documentation and
other materials as it deems necessary.
Neither Financial nor BancGroup intends to seek a ruling from the
Internal Revenue Service as to the federal income tax consequences of the
Merger. Financial's stockholders should be aware that Powell, Goldstein,
Frazer & Murphy's opinion will not be binding on the Internal Revenue Service
or the courts. Financial's stockholders also should be aware that some of the
tax consequences of the Merger are governed by provisions of the Code as to
which there are no final regulations and little or no judicial or
administrative guidance. There can be no assurance that future legislation,
administrative rulings, or court decisions will not adversely affect the
accuracy of the statements contained herein.
Among other things, the following discussion is based on Financial's
stockholders maintaining sufficient equity ownership interest in BancGroup
after the Merger. The Internal Revenue Service takes the position for purposes
of issuing an advance ruling on reorganizations, that the stockholders of an
acquired corporation (i.e., Financial) must maintain a continuing equity
ownership interest in the acquiring corporation (i.e., BancGroup) equal, in
terms of value, to at least 50% of their interest in such acquired corporation.
For this purpose, shares of Financial common stock exchanged for cash in lieu
of fractional shares of BancGroup Common Stock will be treated as outstanding
shares of Financial common stock. Moreover, shares of Financial common stock
and BancGroup common stock held by Financial stockholders and otherwise sold,
redeemed or disposed of prior or subsequent to the Merger may be taken into
account in determining whether the requirement with respect to continuing
equity ownership of BancGroup's Common Stock is met by Financial's
stockholders.
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Assuming the Merger will constitute a reorganization as defined in
Section 368(a) of the Code, the following federal income tax consequences will
result to Financial's stockholders who exchange their shares of Financial
common stock for shares of BancGroup Common Stock:
(i) No gain or loss will be recognized by Financial's
stockholders on the exchange of shares of Financial common
stock for shares of BancGroup Common Stock;
(ii) The aggregate basis of BancGroup Common Stock
received by each Financial stockholder (including any
fractional shares of BancGroup Common Stock deemed received,
but not actually received), will be the same as the aggregate
tax basis of the shares of Financial common stock surrendered
in exchange therefor increased by the gain, if any, recognized
on the exchange, and decreased by any cash received in the
exchange;
(iii) The holding period of the shares of BancGroup Common
Stock received by each Financial stockholder will include the
period during which the shares of Financial common stock
exchanged therefor were held, provided that the shares of
Financial common stock were a capital asset in the holder's
hands; and
(iv) Cash payments received by each Financial stockholder
in lieu of a fractional share of BancGroup Common Stock will
be treated for federal income tax purposes as if the
fractional share had been issued in the exchange and then
redeemed by BancGroup. Gain or loss will be recognized on the
redemption of the fractional share and generally will be
capital gain or loss if the Financial common stock is a
capital asset in the hands of the holder.
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THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER AND DOES NOT PURPORT TO BE A
COMPLETE ANALYSIS OR LISTING OF ALL POTENTIAL TAX EFFECTS RELEVANT TO A
DECISION WHETHER TO VOTE IN FAVOR OF APPROVAL OF THE MERGER. THE DISCUSSION
DOES NOT ADDRESS THE TAX CONSEQUENCES THAT MAY BE RELEVANT TO A PARTICULAR
STOCKHOLDER SUBJECT TO SPECIAL TREATMENT UNDER CERTAIN FEDERAL INCOME TAX LAWS,
SUCH AS DEALERS IN SECURITIES, BANKS, INSURANCE COMPANIES, TAX-EXEMPT
ORGANIZATIONS, NON-UNITED STATES PERSONS, STOCKHOLDERS WHO DO NOT HOLD THEIR
SHARES OF FINANCIAL COMMON STOCK AS "CAPITAL ASSETS" WITHIN THE MEANING OF
SECTION 1221 OF THE CODE, AND STOCKHOLDERS WHO ACQUIRED THEIR SHARES OF
FINANCIAL COMMON STOCK PURSUANT TO THE EXERCISE OF OPTIONS OR OTHERWISE AS
COMPENSATION, NOR ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE,
LOCALITY OR FOREIGN JURISDICTION. MOREOVER, THE TAX CONSEQUENCES TO HOLDERS OF
FINANCIAL OPTIONS ARE NOT DISCUSSED. THE DISCUSSION IS BASED UPON THE CODE,
TREASURY REGULATIONS THEREUNDER AND ADMINISTRATIVE RULINGS AND COURT DECISIONS
AS OF THE DATE HEREOF. ALL OF THE FOREGOING ARE SUBJECT TO CHANGE AND ANY SUCH
CHANGE COULD AFFECT THE CONTINUING VALIDITY OF THIS DISCUSSION. FINANCIAL
STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE MERGER TO THEM.
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OTHER POSSIBLE CONSEQUENCES
If the Merger becomes effective, the stockholders of Financial, a
Georgia corporation, will exchange their shares of common stock for securities
in a Delaware business corporation.
The state tax consequences, where applicable, of owning stock of a
Delaware business corporation may be different from those of owning shares of a
Georgia corporation.
For a discussion of the differences, if any, in the rights,
preferences, and privileges attaching to Financial common stock as compared
with BancGroup Common Stock, see "COMPARATIVE RIGHTS OF STOCKHOLDERS."
CONDITIONS OF CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to a number of conditions. The
Agreement must be approved by the affirmative vote of the holders of at least a
majority of the outstanding shares of common stock of Financial.
The Merger must be approved by the Georgia Department of Banking and
Finance (the "Georgia Department"), the Board of Governors of the Federal
Reserve System (the "Federal Reserve") and the Office of Thrift Supervision
(the "OTS"). Applications for approval have been filed with these agencies.
Any of these agencies might refuse or revoke approval or condition approval on
one or more of the parties agreeing to take some action such as making some
change in operations. The Merger may not be consummated for 15 days after the
approval of the Merger by the Federal Reserve. During such period, the United
States Department of Justice, should it object to the Merger for antitrust
reasons, may challenge the consummation of the Merger.
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The obligations of Financial and BancGroup to consummate the Merger
are conditioned upon, among other things, (i) the absence of pending or
threatened litigation with a view to restraining or prohibiting consummation of
the Merger or in which it is sought to obtain divestiture, rescission or
damages in connection with the Merger, (ii) the absence of any investigation by
any governmental agency which might result in any such proceeding, (iii)
consummation of the Merger no later than December 31, 1995, and (iv) receipt of
a favorable opinion of counsel to Financial regarding certain federal income
tax consequences of the Merger.
The mutual obligations of Financial and BancGroup to consummate the
Merger are further conditioned upon, among other things, (i) the accuracy in
all material respects of the representations and warranties of Financial and
BancGroup contained in the Agreement, and the performance by Financial and
BancGroup of all covenants and agreements of Financial and BancGroup; (ii) the
absence of any material adverse changes in the results of operations and
financial condition of Financial and BancGroup or their subsidiaries since
March 31, 1995, except as may be disclosed in the Agreement; and (iii) in the
case of BancGroup's obligations, receipt by BancGroup of certain undertakings
from holders of Financial common stock who may be deemed to be "affiliates" of
Financial pursuant to the rules of the Securities and Exchange Commission (the
"Commission").
It is anticipated that the foregoing conditions, as well as certain
other conditions contained in the Agreement, such as the receipt of
certificates of officers of each party as to compliance with the Agreement,
will be satisfied, but the Agreement states that Financial and BancGroup may
waive all conditions to their obligations to consummate the Merger, other than
the conditions requiring the requisite approvals of regulatory authorities and
Financial
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stockholder approval of the Merger. In making any decisions regarding a waiver
of one or more conditions to consummation of the Merger or an amendment of the
Agreement, the boards of directors of Financial and BancGroup would be subject
to fiduciary duty standards imposed upon such boards by relevant law that would
require such boards to act in the best interests of their respective
stockholders.
In addition, the boards of directors of BancGroup and Financial may
amend or terminate the Agreement before or after approval by the stockholders
of Financial. No amendments will be made to the Agreement which would alter
the Exchange Ratio or which, in the opinion of the board of directors of
Financial would adversely affect the rights of the stockholders of Financial.
Any amendments to the Agreement which in the opinion of the board of directors
of Financial would have a material adverse effect upon the stockholders of
Financial would be submitted to Financial's stockholders for approval. Such
amendments could require the filing of an amendment of the Registration
Statement, of which this Prospectus forms a part, with the Commission.
CONDUCT OF BUSINESS PENDING THE MERGER
The Agreement contains certain restrictions on the conduct of the
business of Financial pending consummation of the Merger. In particular, prior
to the Effective Date, the Agreement prohibits Financial from taking any of the
following actions, subject to certain limited exceptions previously agreed to
by the parties, without the prior written approval of BancGroup:
(i) Issuing, delivering or agreeing to issue or deliver any stock,
bonds or other corporate securities (whether authorized and
unissued or held in the treasury);
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(ii) Borrowing or agreeing to borrow any funds or incurring or
becoming subject to, any liability (absolute or contingent)
except borrowings, obligations and liabilities incurred in the
ordinary course of business and consistent with past practice;
(iii) Paying any material obligation or liability (absolute or
contingent) other than current liabilities reflected in or
shown on the most recent balance sheet and current liabilities
incurred since that date in the ordinary course of business
and consistent with past practice;
(iv) Declaring or making or agreeing to declare or make, any
payment of dividends or distributions of any assets of any
kind whatsoever to stockholders, or purchasing or redeeming or
agreeing to purchase or redeem, any of its outstanding
securities;
(v) Except in the ordinary course of business, selling or
transferring or agreeing to sell or transfer, any of its
assets, property or rights or cancelling, or agreeing to
cancel, any debts or claims;
(vi) Except in the ordinary course of business, entering or
agreeing to enter into any agreement or arrangement granting
any preferential rights to purchase any of its assets,
property or rights or requiring the consent of any party to
the transfer and assignment of any of its assets, property or
rights;
(vii) Suffering any losses or waiving any rights of value which in
the aggregate are material;
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(viii) Except in the ordinary course of business, making or
permitting any amendment or termination of any contract,
agreement or license to which it is a party if such amendment
or termination is material considering its business as a
whole;
(ix) Making any accrual or arrangement for or payment of bonuses or
special compensation of any kind or any severance or
termination pay to any present or former officer or employee
except that accruals for bonuses to be paid in accordance with
normal and usual practice may be made in case the Merger is
not consummated;
(x) Except in accordance with normal and usual practice,
increasing the rate of compensation payable to or to become
payable to any of its officers or employees or making any
material increase in any profit-sharing, bonus, deferred
compensation, savings, insurance, pension, retirement or other
employee benefit plan, payment or arrangement made to, for or
with any of its officers or employees;
(xi) Failing to operate its business in the ordinary course so as
to preserve its business intact and to preserve the goodwill
of its customers and others with whom it has business
relations; and
(xii) Entering into any other material transaction other than in the
ordinary course of business.
Until the termination of the Agreement, neither Financial nor any of
its directors or officers (or any person representing any of the foregoing)
shall solicit or encourage inquiries or proposals with respect to, furnish any
information relating to or participate in any negotiations
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or discussions concerning, any acquisition or purchase of all or of a
substantial portion of the assets of, or of a substantial equity interest in,
Financial or any business combination involving Financial other than as
contemplated by the Agreement. Financial will notify BancGroup immediately if
any such inquiries or proposals are received by Financial, if any such
information is requested from Financial, or if any such negotiations or
discussions are sought to be initiated with Financial. Financial shall
instruct its officers, directors, agents or affiliates or their subsidiaries
to refrain from doing any of the above; provided, however, that nothing
contained in the Agreement shall be deemed to prohibit any officer or
director of such party from fulfilling his fiduciary duty or from taking any
action that is required by law.
RIGHTS OF DISSENTING STOCKHOLDERS
Title 14, chapter 2, article 13 of the Georgia Business Corporation
Code provides for rights of appraisal for the value of the shares of a
stockholder who (i) has delivered notice in writing to Financial before the
vote is taken that the stockholder intends to demand payment for his or her
shares if the Merger is consummated and (ii) does not vote in favor of the
Merger. Within ten (10) days after the Effective Date of the Merger,
BancGroup, as the corporation surviving the Merger, will send to each
stockholder who has given such notice a written dissenter's notice (the
"Dissenter's Notice") stating, among other things, a date not less than thirty
(30) days nor more than sixty (60) days after the date of the Dissenter's
Notice by which the stockholder must submit a written payment demand. The
Dissenter's Notice will also include where and when stock certificates for
shares of Financial common stock must be deposited and inform holders of
uncertificated shares to what extent transfer of those shares will be
restricted after the demand for payment is received. A record stockholder who
does not
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demand payment or deposit stock certificates where required by the date set in
the Dissenter's Notice is not entitled to payment.
Within ten (10) days of the later of the Effective Date of the Merger
or receipt of a payment demand by the stockholders, BancGroup will offer to pay
each dissenting stockholder who has complied with the payment demand and
deposit requirements the amount which BancGroup estimates to be the fair value
of the shares, plus accrued interest. A stockholder may agree to accept such
offer.
If a dissenting stockholder is dissatisfied with BancGroup's offer of
payment, the stockholder may notify BancGroup in writing within thirty (30)
days of the offer of his or her own estimate of the fair value plus interest
and demand that such payment be made. A dissenting stockholder waives his or
her right to demand payment and is deemed to have accepted BancGroup's offer
unless such notification is provided to BancGroup.
A record stockholder may assert dissenters' rights as to fewer than
all shares registered in such holder's name, but only if the record holder
dissents with respect to all shares beneficially owned by any one beneficial
stockholder and provides written notice to Financial of the name and address of
each person on whose behalf the dissenting rights are asserted. A "beneficial
shareholder" is defined by title 14, chapter 2, article 13 of the Georgia
Business Corporation Code as a "person who is a beneficial owner of shares held
in a voting trust or by a nominee as the record shareholder." For these
purposes, "shareholder" and "stockholder" have the same meaning. The rights of
a partial dissenter are determined as if the shares as to which such holder
dissents and other shares held by the holder are registered in different names
of stockholders. Thus, if a beneficial stockholder holds shares of Financial
common stock through a bank, broker, or other nominee, such beneficial holder
may assert dissenters' rights,
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but only if the nominee dissents with respect to all shares beneficially owned
by such stockholder through the bank broker or nominee and provides Financial
with the name and address of each such person wishing to assert dissenters'
rights.
If BancGroup fails to effect the Merger and does not return the
deposited certificate or release transfer restrictions imposed on
uncertificated shares within sixty (60) days after the date set for demanding
payment, the stockholder may notify BancGroup of his or her own fair value and
demand payment. If a demand for payment remains unsettled, BancGroup must
commence a nonjury equity valuation proceeding in the Superior Court of DeKalb
County within sixty (60) days of the payment demand to have the fair value of
the shares plus accrued interest determined. If BancGroup does not commence
the proceeding within sixty (60) days and the stockholder's account still
remains unsettled, BancGroup must pay each dissenter the amount of money
demanded. In any court proceeding, the court shall assess costs against
BancGroup, except that the court may assess costs against all or some of the
dissenting stockholders to the extent the court finds the dissenters acted
arbitrarily, vexatiously or not in good faith in demanding payment.
A stockholder dissenting may not challenge the Merger unless Financial
fails to comply with appropriate procedures under Georgia law or Financial's
articles of incorporation and bylaws or unless the stockholder vote to approve
the Merger was obtained by fraudulent and deceptive means.
FAILURE OF A STOCKHOLDER TO COMPLY WITH ANY REQUIREMENTS OF THE
PROVISIONS RELATING TO DISSENTER'S RIGHTS OF APPRAISAL WILL RESULT IN A
FORFEITURE BY SUCH STOCKHOLDER OF APPRAISAL RIGHTS.
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References herein to applicable statutes are summaries of portions
thereof and do not purport to be complete and are qualified in their entirety
by reference to applicable law. Title 14, chapter 2, article 13 of the Georgia
Business Corporation Code is attached hereto as Appendix B. STOCKHOLDERS
SHOULD READ APPENDIX B CAREFULLY.
RESALE OF BANCGROUP COMMON STOCK
The issuance of the shares of BancGroup Common Stock pursuant to the
Merger has been registered under the Securities Act of 1933 (the "Securities
Act") and the shares so issued may be traded without restriction, except that
such registration does not cover resales by persons ("Affiliates") receiving
such Common Stock who may be deemed to control or be controlled by, or be under
common control with Financial at the time of the Special Meeting. Rule 145
promulgated by the Commission under the Securities Act restricts the resale of
Common Stock received in the Merger by Affiliates.
Financial will provide BancGroup with such information as may be
reasonably necessary to determine the identity of those persons (primarily
officers, directors and principal stockholders) who may be deemed to be
Affiliates. Financial will also obtain from each such person a written
undertaking to the effect that no sale or transfer will be made of any shares
of Common Stock by such person except pursuant to Rule 145 of the Commission or
pursuant to an effective registration or an exemption from registration under
the Securities Act. Receipt of such an undertaking is a condition to
BancGroup's obligation to close the Merger. If such certificates are not
received and BancGroup waives receipt of such condition, the certificates for
the shares of Common Stock to be issued to such person will contain an
appropriate
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restrictive legend and appropriate stock transfer orders will be given to
BancGroup's stock transfer agent.
ACCOUNTING TREATMENT
The acquisition of Financial will be treated as a "purchase"
transaction by BancGroup. Accordingly, the purchase price will be assigned to
the fair value of the net tangible assets acquired and any purchase price in
excess thereof will be assigned to intangibles. The valuation of intangibles,
if any, will be made as of the Effective Date of the Merger. Intangibles, in
the approximate amount of $4,604,000, will be amortized by charges or credits
to future earnings over a period of approximately twenty years.
COMPARATIVE MARKET PRICES AND DIVIDENDS
BANCGROUP
BancGroup Common Stock is listed for trading on the New York Stock
Exchange. The Common Stock was first listed on the NYSE on February 24, 1995.
Prior to February 21, 1995, BancGroup had two classes of common stock
outstanding, Class A and Class B. The Class B was not publicly traded. The
Class A Common Stock was traded in the over-the-counter market and quoted on
the NASDAQ National Market System. The Class A and Class B Common Stock were
reclassified into one class of Common Stock on February 21, 1995, and the Class
A Common Stock ceased to be quoted on NASDAQ on February 24, 1995.
The following table shows the dividends paid per share and indicates
the high and low closing prices for the Common Stock as reported by the NASDAQ
National Market System up
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to February 24, 1995, and the same information reported by the NYSE for the
Common Stock commencing February 24, 1995.
<TABLE>
<CAPTION>
Price and Dividends Paid
------------------------
Dividends
High Low (per share)
---- --- -----------
<S> <C> <C> <C> <C>
1993 - 1st Quarter 23 20 $0.17
2nd Quarter 23 1/2 19 0.18
3rd Quarter 22 20 0.18
4th Quarter 21 3/4 18 0.18
1994 - 1st Quarter 20 1/4 18 0.20
2nd Quarter 25 19 1/4 0.20
3rd Quarter 24 3/4 22 0.20
4th Quarter 23 3/4 19 1/2 0.20
1995 - 1st Quarter 23 5/8 19 1/2 0.225
2nd Quarter 27 1/2 23 1/8 0.225
</TABLE>
On March 15, 1995, the business day immediately prior to the public
announcement of the Merger, the closing price as reported on the NYSE of the
Common Stock was $23.50 per share.
At December 31, 1994, BancGroup's banking subsidiaries accounted for
approximately 99.98% of BancGroup's consolidated assets. BancGroup derives
substantially all of its income from dividends received from Colonial Bank.
Various statutory provisions limit the amount of dividends the subsidiary banks
may pay without regulatory approval. In addition, federal statutes restrict the
ability of subsidiary banks to make loans to BancGroup, and regulatory policies
may also restrict such dividends.
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FINANCIAL
There is no organized public market for Financial's common stock. To
the knowledge of Financial, approximately 239,000 shares of Financial common
stock have been sold during the last two fiscal years at prices ranging from
$8.89 to $11.25 per share. The most recent sale took place on November 15,
1994 when 90 shares were sold at a price of $11.25 per share.
Since July 1, 1993, Financial has not paid cash dividends.
BANCGROUP CAPITAL STOCK AND DEBENTURES
BancGroup's authorized capital stock consists of 44,000,000 shares of
its Common Stock, par value $2.50 per share, and 1,000,000 shares of its
Preference Stock, par value $2.50 per share. As of April 30, 1995, there were
issued and outstanding a total of 12,219,699 shares of Common Stock. No shares
of Preference Stock are issued and outstanding. Also, BancGroup issued in 1985
$7,500,000 in principal amount of its 12 3/4% Convertible Subordinated
Debentures due 2000, Series A (the "1985 Debentures") of which $7,494,000 are
currently outstanding and are convertible at any time into 410,622 shares of
Common Stock subject to adjustment, and BancGroup issued in 1986 $28,750,000 in
principal amount of its 7 1/2% Convertible Subordinated Debentures due 2011
(the "1986 Debentures") of which $9,964,000 are currently outstanding and are
convertible at any time into 355,607 shares of Common Stock, subject to
adjustment. There are 233,424 shares of Common Stock subject to issue under
BancGroup's stock option plans.
The following statements with respect to Common Stock and Preference
Stock are brief summaries of material provisions of Delaware law and the
Restated Certificate of Incorporation
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(the "Certificate"), as amended, of BancGroup, do not purport to be complete
and are qualified in their entirety by reference to the foregoing.
COMMON STOCK
Dividends. Subject to the rights of holders of BancGroup's Preference
Stock, if any, to receive certain dividends prior to the declaration of
dividends on shares of Common Stock, when and as dividends, payable in cash,
stock or other property, are declared by the BancGroup board of directors, the
holders of Common Stock are entitled to share ratably in such dividends.
Voting Rights. Each holder of Common Stock has one vote for each
share held on matters presented for consideration by the stockholders.
Preemptive Rights. The holders of Common Stock have no preemptive
rights to acquire any additional shares of BancGroup.
Issuance of Stock. The BancGroup Certificate authorizes the BancGroup
board to issue authorized shares of Common Stock without stockholder approval.
However, BancGroup's Common Stock is listed on the NYSE, which requires
stockholder approval of the issuance of additional shares of Common Stock under
certain circumstances.
Liquidation Rights. In the event of liquidation, dissolution or
winding-up of BancGroup, whether voluntary or involuntary, the holders of
Common Stock will be entitled to share ratably in any of its assets or funds
that are available for distribution to its stockholders after the satisfaction
of its liabilities (or after adequate provision is made therefor) and after
preferences of any outstanding Preference Stock.
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PREFERENCE STOCK
BancGroup's Preference Stock may be issued from time to time as a
class without series, or if so determined by the BancGroup board of directors,
either in whole or in part in one or more series. The voting rights, and such
designations, preferences and relative, participating, optional or other
special rights, if any, and the qualifications, limitations or restrictions
thereof, if any, including, but not limited to, the dividend rights, conversion
rights, redemption rights and liquidation preferences, if any, of any wholly
unissued series of BancGroup Preference Stock (or of the entire class of
BancGroup Preference Stock if none of such shares has been issued), the number
of shares constituting any such series and the terms and conditions of the
issue thereof may be fixed by resolution of the BancGroup board of directors.
BancGroup Preference Stock may have a preference over the Common Stock with
respect to the payment of dividends and the distribution of assets in the event
of the liquidation or winding-up of BancGroup and such other preferences as may
be fixed by the BancGroup board.
1985 DEBENTURES
BancGroup issued in 1985 its 12 3/4% Convertible Subordinated
Debentures due 2000, Series A in the total principal amount of $7,500,000. The
1985 Debentures were issued under a trust indenture (the "1985 Indenture")
between BancGroup and Sun Bank, National Association, Orlando, Florida, as
trustee.
The 1985 Debentures will mature on December 15, 2000, and are
convertible into shares of BancGroup Common Stock at the option of a holder
thereof prior to December 15, 2000, at the conversion price of $18.25 principal
amount of the 1985 Debentures for each share of BancGroup Common Stock. The
conversion price is, however, subject to adjustment upon the
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occurrence of certain events as described in the 1985 Indenture. In the event
all of the outstanding 1985 Debentures are converted into shares of BancGroup
Common Stock in accordance with the 1985 Indenture, a total of 410,622 shares
of such Common Stock will be issued. The 1985 Debentures are redeemable, in
whole or in part, at the option of BancGroup, commencing on December 17, 1995,
at a redemption price equal to the face value of the 1985 Debentures plus
accrued interest to the date fixed for redemption. The payment of principal
and interest on the 1985 Debentures is subordinate, to the extent provided in
the 1985 Indenture, to the prior payment when due of all Superior Indebtedness
of BancGroup. "Superior Indebtedness" is defined as the principal of and
unpaid interest on all indebtedness of BancGroup to contract creditors. The
1985 Debentures rank pari passu (i.e., equally) with the 1986 Debentures.
1986 DEBENTURES
BancGroup issued in 1986 its 7 1/2% Convertible Subordinated
Debentures due 2011 in the total principal amount of $28,750,000. The 1986
Debentures were issued under a trust indenture (the "1986 Indenture") between
BancGroup and Trust Company Bank, Atlanta, Georgia, as trustee.
The 1986 Debentures will mature on March 31, 2011, and are convertible
at any time into shares of BancGroup Common Stock at the option of a holder
thereof, at the conversion price of $28 principal amount of the 1986 Debentures
for each share of BancGroup Common Stock. The conversion price is, however,
subject to adjustment upon the occurrence of certain events as described in the
1986 Indenture. In the event all of the outstanding 1986 Debentures are
converted into shares of BancGroup Common Stock in accordance with the 1986
Indenture,
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a total of 355,607 shares of such Common Stock will be issued. The 1986
Debentures are redeemable, in whole or in part, at the option of BancGroup at
certain premiums until 1996, when the redemption price shall be equal to 100%
of the face amount of the 1986 Debentures plus accrued interest. The payment
of principal and interest on the 1986 Debentures is subordinate, to the extent
provided in the 1986 Indenture, to the prior payment when due of all Senior
Indebtedness of BancGroup. "Senior Indebtedness" is defined as any
indebtedness of BancGroup for money borrowed, or any indebtedness incurred in
connection with an acquisition or with a merger or consolidation, outstanding
on the date of execution of the 1986 Indenture as originally executed, or
thereafter created, incurred or assumed, and any renewal, extension,
modification or refunding thereof, for the payment of which BancGroup (which
term does not include BancGroup's consolidated or unconsolidated subsidiaries)
is at the time of determination responsible or liable as obligor, guarantor or
otherwise. Senior Indebtedness does not include (i) indebtedness as to which,
in the instrument creating or evidencing the same or pursuant to which the same
is outstanding, it is provided that such indebtedness is subordinate in right
of payment to any other indebtedness of BancGroup, (ii) indebtedness which by
its terms states that such indebtedness is subordinate to or equally
subordinate with the 1986 Debentures, and (iii) the indebtedness created by
BancGroup's 1985 Debentures. The 1986 Debentures rank pari passu (i.e.,
equally) with the 1985 Debentures.
At March 31, 1995, BancGroup's Superior Indebtedness as defined in the
1985 Indenture and Senior Indebtedness as defined in the 1986 Indenture
aggregated approximately $421.6 million. Such debt includes all short-term
debt consisting of federal funds purchased, securities purchased under
repurchase agreements and borrowings with the Federal Home Loan Bank but
excludes all federally-insured deposits. BancGroup may from time to time incur
additional
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indebtedness constituting such Superior or Senior Indebtedness. The 1985
Indenture and the 1986 Indenture do not limit the amount of Superior or Senior
Indebtedness, as the case may be, which BancGroup may incur, nor do such
indentures prohibit BancGroup from creating liens on its property for any
purpose.
CHANGES IN CONTROL
Certain provisions of the BancGroup Certificate and bylaws may have
the effect of preventing, discouraging or delaying any change in control of
BancGroup. The authority of the BancGroup board of directors to issue
BancGroup Preference Stock with such rights and privileges, including voting
rights, as it may deem appropriate may enable the BancGroup board to prevent a
change in control despite a shift in ownership of the BancGroup Common Stock.
See "General" and "Preference Stock." In addition, the BancGroup board's power
to issue additional shares of BancGroup Common Stock may help delay or deter a
change in control by increasing the number of shares needed to gain control.
See "Common Stock." The following provisions also may deter any change in
control of BancGroup.
Classified Board. BancGroup's board of directors is classified into
three classes, as nearly equal in number as possible, with the members of each
class elected to three-year terms. Thus, one-third of BancGroup's board of
directors is elected by stockholders each year. With this provision, two
annual elections of directors are required in order to change a majority of the
board of directors. There are currently 18 directors of BancGroup. This
provision of BancGroup's Certificate also stipulates that (i) directors can be
removed only for cause upon a vote of 80% of the voting power of the
outstanding shares entitled to vote in the election of directors, voting as a
class, (ii) vacancies in the board may only be filled by a majority vote of
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the directors remaining in office, (iii) the maximum number of directors shall
be fixed by resolution of the board of directors, and (iv) the provisions
relating to the classified board can only be amended by the affirmative vote of
the holders of at least 80% of the voting power of the outstanding shares
entitled to vote in the election of directors, voting as a class.
Business Combinations. Certain "Business Combinations" of BancGroup
with a "Related Person" may only be undertaken with the affirmative vote of at
least 75% of the outstanding shares of "Voting Stock," plus the affirmative
vote of at least 67% of the outstanding shares of Voting Stock, not counting
shares owned by the Related Person, unless the Continuing Directors of
BancGroup approve such Business Combination. A "Related Person" is a person,
or group, who owns or acquires 10% or more of the outstanding shares of Common
Stock, provided that no person shall be a Related Person if such person would
have been a Related Person on the date of approval of this provision by
BancGroup's board of directors, i.e., April 20, 1994. An effect of this
provision may be to exclude Robert E. Lowder or certain members of his family
from the definition of Related Person. A "Continuing Director" is a director
who was a member of the board of directors immediately prior to the time a
person became a Related Person. This provision may not be amended without the
affirmative vote of the holders of at least 75% of the outstanding shares of
Voting Stock, plus the affirmative vote of the outstanding shares of at least
67% of the outstanding Voting Stock, excluding shares held by a Related Person.
This provision may have the effect of giving the incumbent board of directors a
veto over a merger or other Business Combination that could be desired by a
majority of BancGroup's stockholders. The current board of directors of
BancGroup owns approximately 16% of the outstanding shares of common stock of
BancGroup.
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<PAGE> 73
Board Evaluation of Mergers. BancGroup's Certificate permits the
board of directors to consider certain factors such as the character and
financial stability of the other party, the projected social, legal, and
economic effects of a proposed transaction upon the employees, suppliers,
regulatory agencies and customers and communities of BancGroup, and other
factors when considering whether BancGroup should undertake a merger, sale of
assets, or other similar transaction with another party. This provision may
not be amended except by the affirmative vote of at least 80% of the
outstanding shares of common stock. This provision may give greater latitude
to the board of directors in terms of the factors which the board may consider
in recommending or rejecting a merger or other Business Combination of
BancGroup.
Director Authority. BancGroup's Certificate prohibits stockholders
from calling special stockholders' meetings and acting by written consent. It
also provides that only BancGroup's board of directors has the authority to
undertake certain actions with respect to governing BancGroup such as
appointing committees, electing officers, and establishing compensation of
officers, and it allows the board to act by majority vote.
Bylaw Provisions. BancGroup's bylaws provide that stockholders
wishing to propose nominees for the board of directors or other business to be
taken up at an annual meeting of BancGroup stockholders must comply with
certain advance written notice provisions. These bylaw provisions are intended
to provide for the more orderly conduct of stockholder meetings but could make
it more difficult for stockholders to nominate directors or introduce business
at stockholder meetings.
Delaware Business Combination Statute. Subject to some exceptions,
Delaware law prohibits BancGroup from entering into certain "business
combinations" (as defined) involving persons beneficially owning 15% or more of
the outstanding BancGroup Common Stock (or
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<PAGE> 74
who is an affiliate of BancGroup and has over the past three years beneficially
owned 15% or more of such stock) (either, for the purpose of this paragraph, an
"Interested Stockholder"), unless the BancGroup board has approved either (i)
the business combination or (ii) prior to the stock acquisition by which such
person's beneficial ownership interest reached 15% (a "Stock Acquisition"), the
Stock Acquisition. The prohibition lasts for three years from the date of the
Stock Acquisition. Notwithstanding the preceding, Delaware law allows
BancGroup to enter into a business combination with an Interested Stockholder
if (i) the business combination is approved by the BancGroup board of directors
and authorized by an affirmative vote of at least 66 2/3% of the outstanding
voting stock of BancGroup which is not owned by the Interested Stockholder or
(ii) upon consummation of the transaction which resulted in the stockholder
becoming an Interested Stockholder, such stockholder owned at least 85% of the
outstanding stock of BancGroup (excluding BancGroup stock held by officers and
directors of BancGroup or by certain BancGroup stock plans). These provisions
of Delaware law apply simultaneously with the provisions of BancGroup's
Certificate relating to business combinations with a related person, described
above at "Business Combinations," but they are generally less restrictive than
BancGroup's Certificate.
Control Acquisitions. As it relates to BancGroup, the Change in Bank
Control Act of 1978 prohibits a person or group of persons from acquiring
"control" of a bank holding company unless the Federal Reserve Board has been
given 60 days' prior written notice of such proposed acquisition and within
that time period the Federal Reserve Board has not issued a notice disapproving
the proposed acquisition or extending for up to another 30 days the period
during which such a disapproval may be issued. An acquisition may be made
prior to the expiration of the disapproval period if the Federal Reserve Board
issues written notice of its intent not to
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<PAGE> 75
disapprove the action. Under a rebuttable presumption established by the
Federal Reserve Board, the acquisition of more than 10% of a class of voting
stock of a bank holding company with a class of securities registered under
Section 12 of the Exchange Act, such as BancGroup, would, under the
circumstances set forth in the presumption, constitute the acquisition of
control. The receipt of revocable proxies, provided the proxies terminate
within a reasonable time after the meeting to which they relate, is not
included in determining percentages for change in control purposes.
COMPARATIVE RIGHTS OF STOCKHOLDERS
If the Merger is consummated, all stockholders of Financial other than
those exercising dissenters' rights of appraisal will become holders of
BancGroup Common Stock. The rights of the holders of the common stock of
Financial who become holders of the Common Stock of BancGroup following the
Merger will be governed by BancGroup's Certificate and bylaws, as well as the
laws of Delaware, the state in which BancGroup is incorporated.
The following summary compares the rights of common stockholders of
Financial with the rights of the holders of the Common Stock of BancGroup. For
a more complete description of the rights of the holders of BancGroup Common
Stock, see "BANCGROUP CAPITAL STOCK AND DEBENTURES."
The following information is qualified in its entirety by BancGroup's
Certificate and bylaws, and Financial's Articles of Incorporation and bylaws,
the Delaware General Corporation Law (the "Delaware GCL") and the Georgia
Business Corporation Code.
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<PAGE> 76
DIRECTOR ELECTIONS
Financial. Financial's directors are elected for terms of three years
with approximately one-third of the board to be elected annually. There is no
cumulative voting in the election of directors.
BancGroup. BancGroup's directors are also elected to terms of three
years with approximately one-third of the board to be elected annually. There
is no cumulative voting in the election of directors. See "BANCGROUP CAPITAL
STOCK AND DEBENTURES -- Changes in Control -- Classified Board."
REMOVAL OF DIRECTORS
Financial. The Articles of Incorporation of Financial provide that a
director may be removed from office without cause by the affirmative vote of a
majority of all directors then in office followed by the affirmative vote of
the holders of at least a majority of the issued and outstanding shares of
Financial entitled to vote in an election of directors. The Articles of
Incorporation of Financial also provide that a director may be removed for
cause by the affirmative vote of the holders of at least a majority of the
issued and outstanding shares of Financial.
BancGroup. The BancGroup Certificate provides that a director may be
removed from office, but only for cause and by the affirmative vote of the
holders of at least 80% of the voting shares then entitled to vote at an
election of directors.
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AUTHORIZED CAPITAL STOCK
Financial. The Articles of Incorporation of Financial authorize the
issuance of up to 10,000,000 shares of common stock, of which 711,036 shares
were issued and outstanding as of April 30, 1995.
BancGroup. The BancGroup Certificate authorizes the issuance of up to
44,000,000 shares of Common Stock, of which 12,219,699 shares were issued and
outstanding as of April 30, 1995, and up to 1,000,000 shares of Preference
Stock, $2.50 par value per share, of which no shares are issued and
outstanding. The Preference Stock is issuable in series, each series having
such rights and preferences as the BancGroup board may fix and determine by
resolution.
VOTING
Financial. Each stockholder is entitled to one vote for each share of
Financial common stock held, and such holders are not entitled to cumulative
voting rights in the election of directors.
BancGroup. Each stockholder is entitled to one vote for each share of
Common Stock held, and such holders are not entitled to cumulative voting
rights in the election of directors.
PREEMPTIVE RIGHTS
Financial. The holders of Financial common stock have no preemptive
rights to acquire any additional shares of Financial common stock.
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<PAGE> 78
BancGroup. The holders of BancGroup Common Stock have no preemptive
rights to acquire any additional shares of BancGroup Common Stock or any other
shares of BancGroup capital stock.
DIRECTORS' LIABILITY
Financial. The Articles of Incorporation of Financial provide that a
director of Financial will have no personal liability to Financial or its
stockholders for monetary damages for breach of fiduciary duty as a director
except (i) any appropriation, in violation of the directors' duties, of any
business opportunity of the corporation; (ii) acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of a law;
(iii) the types of liability set forth in Section 14-2-832 of the Georgia
Business Corporation Code dealing with unlawful distribution of corporate
assets to stockholders; or (iv) any transaction from which the director derived
an improper material tangible personal benefit. This provision would absolve
directors of personal liability for negligence in the performance of duties,
including gross negligence, but it would not affect the availability of
injunctive or other equitable relief as a remedy.
BancGroup. Similarly, the BancGroup Certificate provides that a
director of BancGroup will have no personal liability to BancGroup or its
stockholders for monetary damages for breach of fiduciary duty as a director
except (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law, (iii) for the
payment of certain unlawful dividends and the making of certain stock purchases
or redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit. This provision would absolve directors of personal
liability for negligence in the performance of duties, including gross
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<PAGE> 79
negligence. It would not permit a director to be exculpated, however, for
liability for actions involving conflicts of interest or breaches of the
traditional "duty of loyalty" to BancGroup and its stockholders, and it would
not affect the availability of injunctive or other equitable relief as a
remedy.
INDEMNIFICATION
Financial. The bylaws of Financial contain certain provisions which
provide indemnification to directors and officers of Financial that is broader
than the protection expressly mandated in Sections 14-2-850 et. seq. of the
Georgia Business Corporation Code. These sections expressly allow Financial to
provide these broader indemnification rights to its directors and officers,
subject to stockholder approval. The broader indemnification rights were
adopted by Financial to encourage qualified individuals to serve and remain as
directors and officers of Financial.
The indemnification provisions in Financial's bylaws require Financial
to indemnify persons who are parties to any civil, criminal, administrative or
investigative action, suit or proceeding, by reason of the fact that such
person was or is a director, officer, employee or agent of Financial. Except
as noted below, these persons would be indemnified against expenses (including,
but not limited to, attorneys' fees and court costs) and against any judgments,
fines and amounts paid in settlement, actually and reasonably incurred by them.
These persons may also be entitled to have Financial advance any such expenses
prior to the final disposition of the proceeding, upon an undertaking to repay
Financial if it is ultimately determined that they are not entitled to
indemnification. Under Financial's bylaws, Financial will indemnify a
director, officer, employee or agent if the individual acted in a manner he or
she believed in good faith
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to be in or not opposed to the best interests of Financial, and in the case of
a criminal proceeding, if he or she had no reasonable cause to believe his or
her conduct was unlawful.
BancGroup. Section 145 of the Delaware GCL contains detailed and
comprehensive provisions providing for indemnification of directors and
officers of Delaware corporations against expenses, judgments, fines and
settlements in connection with litigation. Under the Delaware GCL, other than
an action brought by or in the right of BancGroup, such indemnification is
available if it is determined that the proposed indemnitee acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of BancGroup and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
In actions brought by or in the right of BancGroup, such indemnification is
limited to expenses (including attorneys' fees) actually and reasonably
incurred in the defense or settlement of such action if the indemnitee acted in
good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of BancGroup and except that no indemnification
shall be made in respect of any claim, issue or matter as to which such person
has been adjudged to be liable to BancGroup unless and only to the extent that
the Delaware Court of Chancery or the court in which the action was brought
determines upon application that in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses as
the court deems proper.
To the extent that the proposed indemnitee has been successful on the
merits or otherwise in defense of any action, suit or proceeding (or any claim,
issue or matter therein), such person must be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection therewith.
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In addition, BancGroup maintains an officers' and directors' insurance
policy and a separate indemnification agreement pursuant to which certain
officers and all directors of BancGroup would be entitled to indemnification
against certain liabilities, including reimbursement of certain expenses.
SPECIAL MEETINGS OF STOCKHOLDERS; ACTION WITHOUT A MEETING
Financial. The bylaws of Financial provide that a special meeting of
stockholders may be called by Financial's board of directors, its president,
and by Financial upon the written request of any one or more stockholders
owning an aggregate of not less than 25% of the outstanding capital stock of
Financial. The Articles of Incorporation of Financial provide that
stockholders may act by written consent without a meeting if the consent action
is signed by persons who own the requisite number of shares necessary to
authorize the action if it had been voted on at a meeting at which all shares
entitled to vote were present and voted.
BancGroup. Under the BancGroup Certificate, a special meeting of
BancGroup's stockholders may only be called by a majority of the BancGroup
board of directors or by the chairman of the board of directors of BancGroup.
Holders of BancGroup Common Stock may not call special meetings or act by
written consent.
MERGERS, SHARE EXCHANGES AND SALES OF ASSETS
Financial. The Georgia Business Corporation Code provides that a
merger, share exchange or the sale of all or substantially all of a
corporation's assets must be approved by a majority of all the votes entitled
to be cast on the transaction. The Georgia Business Corporation Code further
provides, however, that action by the stockholders of the surviving
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corporation in a merger is not required if (i) the articles of incorporation of
the surviving corporation will not differ from its articles before the merger,
(ii) each stockholder of the surviving corporation whose shares were
outstanding immediately before the effective date of the merger will hold the
same number of shares, with identical designations, preferences and relative
rights immediately after the merger, and (iii) the number and kind of shares
outstanding immediately after the merger, plus the number and kind of shares
issuable as a result of the merger and by the conversion of securities issued
pursuant to the merger or the exercise of rights and warrants issued pursuant
to the merger, will not exceed the total number and kind of shares of the
surviving corporation authorized by its articles of incorporation immediately
before the merger.
BancGroup. The Delaware GCL provides that mergers and sales of
substantially all of the property of corporations must be approved by a
majority of the outstanding stock of the corporation entitled to vote thereon.
The Delaware GCL law also provides, however, that the stockholders of the
corporation surviving a merger need not approve the transaction if: (i) the
agreement of merger does not amend in any respect the certificate of
incorporation of such corporation; (ii) each share of stock of such corporation
outstanding immediately prior to the effective date of the merger is to be an
identical outstanding or treasury share of the surviving corporation after the
effective date of the merger; and (iii) either no shares of common stock of the
surviving corporation and no shares, securities or obligations convertible into
such stock are to be issued or delivered under the plan of merger, or the
authorized unissued shares or the treasury shares of common stock of the
surviving corporation to be issued or delivered under the plan of merger plus
those initially issuable upon conversion of any other shares, securities or
obligations to be issued or delivered under such plan do not exceed 20% of the
shares of
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<PAGE> 83
common stock of such corporation outstanding immediately prior to the effective
date of the merger. See also "BANCGROUP CAPITAL STOCK AND DEBENTURES --
Changes in Control" for a description of the statutory provisions and the
provisions of the BancGroup Certificate relating to changes of control of
BancGroup.
See "Antitakeover Statutes" for a description of additional
restriction on business combination transactions.
AMENDMENT OF CERTIFICATE OF INCORPORATION AND BYLAWS
Financial. The Georgia Business Corporation Code provides that a
corporation's articles may be amended by the affirmative vote of the holders of
a majority of the issued and outstanding shares of stock of the corporation
unless otherwise provided in the articles. The Articles of Incorporation of
Financial provide that unless two-thirds of the directors then in office
approve the proposed change, the affirmative vote of the holders of at least
two-thirds of the issued and outstanding shares entitled to vote thereon is
required to amend or rescind the articles governing (i) the limitation of
liability of directors and (ii) the board of directors' consideration of all
relevant factors when evaluating an offer for a business combination with
Financial.
The Georgia Business Corporation Code provides that the board of
directors may amend or repeal a corporation's bylaws or adopt new bylaws by the
affirmative vote of a majority of the directors present at the meeting, unless
the articles of incorporation reserve this power exclusively to the
stockholders in whole or in part. In addition, the Georgia Business
Corporation Code provides that stockholders have concurrent power with the
board of directors to amend or repeal the bylaws or to adopt new bylaws by the
affirmative vote of a majority of
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the shares represented at the meeting. The Articles of Incorporation of
Financial provide that any amendment of the bylaws changing the number of
directors requires the affirmative vote of a majority of all directors then in
office or the affirmative vote of the holders of a majority of the issued and
outstanding shares entitled to vote in an election of directors.
BancGroup. Under the Delaware GCL, a corporation's certificate of
incorporation may be amended by the affirmative vote of the holders of a
majority of the outstanding shares entitled to vote thereon, and a majority of
the outstanding stock of each class entitled to vote as a class, unless the
certificate requires the vote of a larger portion of the stock. The BancGroup
Certificate requires "supermajority" shareholder approval to amend or repeal
any provision of, or adopt any provision inconsistent with, certain provisions
in the BancGroup Certificate governing (i) the election or removal of
directors, (ii) business combinations between BancGroup and a Related Person,
and (iii) board of directors evaluation of business combination procedures.
See "BANCGROUP CAPITAL STOCK AND DEBENTURES -- Changes in Control."
As is permitted by the Delaware GCL, the Certificate gives the board
of directors the power to adopt, amend or repeal the bylaws. The stockholders
entitled to vote have concurrent power to adopt, amend or repeal the BancGroup
bylaws.
RIGHTS OF DISSENTING STOCKHOLDERS
Financial. See "APPROVAL OF THE MERGER -- Rights of Dissenting
Stockholders" for a description of the rights of dissenting stockholders under
the Georgia Business Corporation Code.
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BancGroup. Under the Delaware GCL, a stockholder has the right, in
transactions involving mergers or consolidations (but not sales of all or
substantially all of the assets of the corporation), to dissent from certain
corporate transactions and receive the fair market value (excluding any
appreciation or depreciation as a consequence or in expectation of the
transaction) of his or her shares in cash in lieu of the consideration he or
she otherwise would have received in the transaction. Such fair value is
determined by the Delaware Court of Chancery if a petition for appraisal is
timely filed. Appraisal rights are not available, however, to stockholders of
a corporation (i) if the shares are listed on a national securities exchange
(as is BancGroup Common Stock) or quoted on the NASDAQ National Market System,
or held of record by more than 2,000 stockholders (as is BancGroup Common
Stock), and (ii) stockholders are permitted by the terms of the merger or
consolidation to accept in exchange for their shares (a) shares of stock of the
surviving or resulting corporation, (b) shares of stock of another corporation
listed on a national securities exchange or held of record by more than 2,000
stockholders, (c) cash in lieu of fractional shares of such stock, or (d) any
combination thereof. Stockholders are not permitted appraisal rights in a
merger if such corporation is the surviving corporation and no vote of its
stockholders is required.
ANTITAKEOVER STATUTES
Financial. Financial is not subject to the business combination
statute nor to the fair price statute set forth in the Georgia Business
Corporation Code at Section 14-2-1131 through Section 14-2-1133 and Section
14-2-1110 through Section 14-2-1113, respectively.
BancGroup. As a Delaware corporation, BancGroup is subject to the
business combination statute described under the heading "BANCGROUP CAPITAL
STOCK AND DEBENTURES -- Changes in Control -- Control Acquisitions."
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PREFERRED STOCK
Financial. The Articles of Incorporation of Financial do not
authorize the issuance of any shares of preferred stock.
BancGroup. The BancGroup Certificate authorizes the issuance of
1,000,000 shares of Preference Stock from time to time by resolution of the
BancGroup board of directors. Currently, no shares of Preference Stock are
issued and outstanding. See "BANCGROUP CAPITAL STOCK AND DEBENTURES --
Preference Stock."
DIVIDENDS
Financial. The holders of shares of Financial common stock are
entitled to dividends and other distributions as and when declared by the board
of directors of Financial out of assets legally available therefor. Dividends
are payable in cash, property or shares of Financial common stock, unless
Financial is insolvent or the dividend payment would render it insolvent. In
the absence of other activities conducted by Financial, its ability to pay
dividends depends on the earnings of its subsidiary Bank. There are various
regulatory limitations on the ability of Financial's subsidiary Bank to pay
dividends to Financial. Based on its current capital levels, the Bank is
authorized, without regulatory approval, to pay dividends during any calendar
year equal to (i) 100% of its net income to date during that calendar year plus
the amount that would reduce by one-half its surplus capital ratio at the
beginning of that calendar year or (ii) 75% of its net income over the most
recent four-quarter period.
BancGroup. The Delaware GCL provides that subject to any restrictions
in the corporation's certificate of incorporation, dividends may be declared
from the corporation's surplus or, if there is no surplus, from its net profits
for the fiscal year in which the dividend is
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declared and the preceding fiscal year. Dividends may not be declared,
however, if the corporation's capital has been diminished to an amount less
than the aggregate amount of all capital represented by the issued and
outstanding stock of all classes having a preference upon the distribution of
assets. Substantially all of the funds available for the payment of dividends
by BancGroup are derived from its subsidiary banks. There are various
regulatory limitations on the ability of BancGroup's subsidiary banks to pay
dividends to BancGroup. See "BUSINESS OF BANCGROUP -- Certain Regulatory
Considerations."
EFFECT OF THE MERGER ON FINANCIAL STOCKHOLDERS
As of April 30, 1995, the number of stockholders of record of
Financial was 162 and the number of shares of common stock outstanding was
711,036. As of that date, BancGroup had 12,219,699 shares of Common Stock
outstanding with 5,268 stockholders of record.
Assuming at the Effective Date a 20-day average market price per share
of the BancGroup Common Stock of $24 and the exercise of all options under
Financial's incentive stock option plans, an aggregate amount of 608,805 shares
of BancGroup Common Stock would be distributed to the stockholders of Financial
pursuant to the Merger. These shares would represent 4.7% of the total shares
of Common Stock outstanding after the Merger.
The issuance of the Common Stock pursuant to the Merger will reduce
the percentage interest of the Common Stock currently held by each principal
stockholder and each director and officer of BancGroup. Such reduction will
not be material. See "BUSINESS OF BANCGROUP -- Voting Securities and Principal
Stockholders."
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The Colonial BancGroup, Inc. and subsidiaries
Condensed Pro Forma Statement of Condition (Unaudited)
(In Thousands)
The following summary includes (i) the condensed statement of condition
of BancGroup and subsidiaries as of March 31, 1995, (ii) the condensed
statement of condition of Mt. Vernon Financial and subsidiaries as of March 31,
1995, (iii) the condensed statement of condition of Farmers and Merchants Bank
as of March 31, 1995, (iv) adjustments to give effect to the proposed
acquisition of Mt. Vernon Financial and subsidiaries and Farmers and Merchants
Bank, and (iv) the proforma combined condensed statement of condition of
BancGroup and subsidiaries as if such acquisitions had occurred on March 31,
1995 on a purchase accounting basis.
These pro forma statements should be read in conjunction with the accompanying
notes and the separate consolidated statements of condition of BancGroup and
subsidiaries (as restated), incorporated by reference herein, and the
statements of condition of Mt. Vernon Financial, included elsewhere herein.
The pro forma information provided below may not be indicative of future
results.
<TABLE>
<CAPTION>
March 31, 1995
(Dollars in Thousands) Farmers & Pro Forma
Mt. Vernon Adjustments/ Merchants Adjustments/ Combined
Assets: Colonial Bancgroup Financial (Deductions) Subtotal Bank (Deductions) Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and due from banks $ 120,749 $ 1,094 $ 408 (1) $ 120,497 $ 1,697 ($3,000)(2) $ 119,194
(1,754)(1)
Interest-bearing deposits 2,481 2,481 2,481
Federal funds sold 1,480 7,765 9,245 1,065 10,310
Securities available for sale 83,239 2,200 85,439 85,439
Investment securities 334,817 334,817 22,250 (328)(2) 356,739
Mortgage loans held for sale 61,428 21,726 83,154 83,154
Loans, net of unearned income 2,255,258 157,778 525 (1) 2,413,561 24,860 2,438,421
Less: Allowance for possible
loan losses (34,095) (550) (34,645) (270) (34,915)
-------------------------------------------------------------------------------------------
Loans, net 2,221,163 157,228 525 2,378,916 24,590 2,403,506
Premises and equiment, net 47,248 4,228 51,476 515 (67)(2) 51,924
Excess of cost over tangible and
intangible assets acquired, net 18,635 4,604 (1) 23,239 2,946 (2) 26,185
Purchased mortgage servicing rights 57,299 1,362 678 (1) 59,339 59,339
Other real estate owned 8,611 8,611 8,611
Accrued interest and other assets 57,504 2,173 (66)(1) 59,992 735 188 (2) 60,915
381 (1)
-------------------------------------------------------------------------------------------
Total Assets $3,014,654 $197,776 $ 4,776 $3,217,206 $50,852 ($261) $3,267,797
===========================================================================================
Liabilities and Shareholders' Equity:
Deposits $2,295,341 $134,204 $2,429,545 $43,338 $2,472,883
FHLB short-term borrowings 310,000 44,000 354,000 354,000
Other short-term borrowings 112,748 1,365 114,113 114,113
Subordinated debt 17,458 17,458 17,458
Other long-term debt 25,290 25,290 25,290
Other liabilities 48,483 7,976 $ 396 (1) 56,855 143 $104 (2) 57,102
-------------------------------------------------------------------------------------------
Total liabilities 2,809,320 187,545 396 2,997,261 43,481 104 3,040,846
Common Stock 30,521 7 (7)(1) 31,953 560 (560)(2) 32,595
1,432 (1) 642 (2)
Additional paid in capital 115,672 4,174 (4,174)(1) 128,851 560 (560)(2) 135,215
13,179 (1) 6,364 (2)
Retained earnings 60,677 6,050 (6,050)(1) 60,677 6,251 (6,251)(2) 60,677
Unrealized loss on securities (1,536) (1,536) (1,536)
-------------------------------------------------------------------------------------------
Total equity 205,334 10,231 4,380 219,945 7,371 (365) 226,951
Total liabilities and equity $3,014,654 $197,776 $ 4,776 $3,217,206 $50,852 ($261) $3,267,797
===========================================================================================
</TABLE>
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Pro Forma Adjustments (In Thousands):
Mt. Vernon Financial
(1) To assign the amount by which the estimated value of the investment in Mt.
Vernon Financial is in excess of the historical carrying amount of the net
assets acquired, based on the estimated fair value of such net assets and
to record the investment in Mt. Vernon Financial by the issuance of
approximately 572,993 shares of BancGroup Common Stock for all of the
outstanding 711,036 shares of Mt. Vernon Financial and 66,411 shares from
the exercise of stock options as follows:
<TABLE>
<S> <C>
Equity in carrying value of net assets $10,231
Exercise of incentive stock options representing 66,411 shares of Mt. Vernon
Financial common stock 408
-------
Total equity in Mt. Vernon Financial 10,639
Adjustments to state assets at fair value:
Write-down other assets (66)
Write-up loan portfolio 525
Write-up purchase mortgage servicing rights 678
Cash paid for nonqualified stock options outstanding (1,754)
Acquisition accruals:
Buyout data processing agreement (92)
Employee severance agreements (175)
Miscellaneous legal, accounting, supplies, etc. (129)
--------
Total acquisition accruals recorded (396)
Tax effect of purchase adjustments 381
Goodwill 4,604
---------
Total adjustments to assets, liabilities & equity 3,972
Adjusted equity in carrying value of net assets $14,611
=========
Allocated as follows:
Par Value of 572,993 shares issued for all outstanding shares
of Mt. Vernon Financial and exercise of stock options $ 1,432
Estimated amount in excess of par value of 572,993 shares of
BancGroup Common Stock issued for Mt. Vernon Financial
outstanding shares and exercise of stock options at an
assumed market value of $25.50 per share (20 day average
at June 20, 1995) 13,179
---------
Total purchase price $14,611
=========
</TABLE>
Farmers & Merchants Bank
(2) To assign the amount by which the estimated value of the investment in
Farmers & Merchants Bank is in excess of the historical carrying amount of
the net assets acquired, based on the estimated fair value of such net
assets and to record the investment in Farmers & Merchants Bank by the
issuance of approximately 256,881 shares of BancGroup Common Stock for all
of the outstanding 5,600 shares of Farmers & Merchants Bank as follows:
<TABLE>
<S> <C>
Equity in carrying value of net assets of Farmers & Merchants Bank $ 7,371
Adjustments to state assets at fair value:
Write-down fixed assets (67)
Write-down investment securities (328)
Acquisition accruals:
Miscellaneous legal, accounting, suuplies, etc. (104)
Tax effect of purchase adjustments 188
Goodwill 2,946
---------
Total adjustments to assets, liabilities & equity 2,635
Adjusted equity in carrying value of net assets $10,006
=========
Allocated as follows:
Par Value of 256,881 shares issued for all outstanding shares
of Farmers & Merchants Bank $ 642
Estimated amount in excess of par value of 256,881 shares of
BancGroup Common Stock issued for Farmers & Merchants
Bank outstanding shares at an assumed market
value of $27.275 per share (10 day average at July 5, 1995) 6,364
Cash of approximately $535.71 per share paid to Farmers &
Merchants Bank shareholders 3,000
---------
Total purchase price $10,006
=========
</TABLE>
83
<PAGE> 90
Condensed Pro Forma Statement of Income (Unaudited)
The following summaries include (i) the condensed consolidated
statements of income of Colonial BancGroup and subsidiaries on a historical
basis for the three months ended March 31, 1995 and the year ended December 31,
1994 (as restated), (ii) the condensed statements of income of Brundidge
Banking Company for the three months ended March 31, 1995 and for the year
ended December 31, 1994 (acquisition completed on March 31, 1995), (iii) the
condensed consolidated statements of income of Mt. Vernon Financial for the
three months ended March 31, 1995 and for the year ended December 31, 1994,
(iv) the condensed statements of income of Farmers & Merchants Bank for the
three months ended March 31, 1995 and for the year ended December 31, 1994, (v)
adjustments to give effect to the completed acquisition of Brundidge Banking
Company and the proposed acquisition of Mt. Vernon Financial and Farmers &
Merchants Bank, and (vi) the pro forma combined condensed consolidated
statements of income of BancGroup and subsidiaries (as restated) as if such
acquisitions had occurred on January 1, 1994.
These pro forma statements should be read in conjunction with the accompanying
notes and the separate consolidated statements of income of BancGroup and
subsidiaries (as restated), incorporated by reference herein, and the
statements of income of Mt. Vernon Financial, included elsewhere herein. The
pro forma information provided below may not necessarily be indicative of
future results.
<TABLE>
<CAPTION>
Three Months Ended March 31, 1995
Adjustments/
(Deductions)
(Dollars in Thousands Applicable to
except per share amounts) Brundidge Brundidge Mt. Vernon
Colonial BancGroup Banking Company Banking Company Subtotal Financial
(restated)(1)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income $54,009 $1,076 $40 (1) $55,125 $3,694
Interest expense 26,831 503 27,334 2,226
------------------------------------------------------------------------------------------
Net interest income before
provision for loan losses 27,178 573 40 27,791 1,468
Provision for loan losses 1,067 19 1,086
------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses 26,111 554 40 26,705 1,468
------------------------------------------------------------------------------------------
Noninterest income 10,864 70 10,934 350
Noninterest expense 24,203 375 33 (1) 24,611 1,211
------------------------------------------------------------------------------------------
Income before income taxes 12,772 249 7 (1) 13,028 607
Income taxes 4,471 14 4,485 252
------------------------------------------------------------------------------------------
Net Income $ 8,301 $ 249 ($7) $ 8,543 $ 355
==========================================================================================
Average primary shares
outstanding 12,049,000 49,898 (49,898) 12,305,517 711,036
256,517
Average fully-diluted shares
outstanding 12,818,000 49,898 (49,898) 13,074,517 811,932
256,517
Earnings per share:
Net Income:
Primary $ 0.69 $ 4.99 $ 0.69 $ 0.50
Fully diluted $ 0.67 $ 4.99 $ 0.67 $ 0.44
<CAPTION>
Adjustments/ Adjustments/
(Deductions) (Deductions)
(Dollars in Thousands Applicable to Farmers & Applicable to Pro Forma
except per share amounts) Mt. Vernon Merchants Farmers & Combined
Financial Subtotal Bank Merchants Bank Total
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income ($26)(2) $58,793 $938 $16 (3) $59,747
Interest expense 29,560 376 29,936
----------------------------------------------------------------------------------
Net interest income before
provision for loan losses (26) 29,233 562 16 29,811
Provision for loan losses 1,086 1,086
----------------------------------------------------------------------------------
Net interest income after
provision for loan losses (26) 28,147 562 16 28,725
----------------------------------------------------------------------------------
Noninterest income 11,284 51 11,335
31 (2) (8)(3)
Noninterest expense 58 (2) 25,911 281 37 (3) 26,221
----------------------------------------------------------------------------------
Income before income taxes (115) 13,520 332 (13) 13,839
Income taxes (20)(2) 4,717 107 9 (3) 4,833
----------------------------------------------------------------------------------
Net Income ($95) $ 8,803 $225 ($22) $ 9,006
==================================================================================
Average primary shares
outstanding (711,036) 12,878,510 5,600 (5,600) 13,135,391
572,993 256,881
Average fully-diluted shares
outstanding (811,932) 13,647,510 5,600 (5,600) 13,904,391
572,993 256,881
Earnings per share:
Net Income:
Primary $ 0.68 $40.18 $ 0.69
Fully diluted $ 0.67 $40.18 $ 0.67
</TABLE>
(1) Restated to give effect to the February 17, 1995 acquisition of Colonial
Mortgage Company and of its parent.
84
<PAGE> 91
<TABLE>
<CAPTION>
Twelve Months Ended December 31, 1994
Adjustments/
(Deductions)
(Dollars in Thousands Applicable to
except per share amounts) Colonial BancGroup Brundidge Brundidge Mt. Vernon
(restated) (1) Banking Company Banking Company Subtotal Financial
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income $187,230 $4,306 $160 (1) $191,696 $11,921
Interest expense 82,549 1,921 84,470 6,064
--------------------------------------------------------------------------------------------
Net interest income before
provision for loan losses 104,681 2,385 160 107,226 5,857
Provision for loan losses 6,481 151 6,632
--------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses 98,200 2,234 160 100,594 5,857
--------------------------------------------------------------------------------------------
Noninterest income 44,243 341 44,584 1,504
Noninterest expense 100,791 1,904 130 (1) 102,825 4,589
--------------------------------------------------------------------------------------------
Income before income taxes 41,652 671 30 42,353 2,772
Income taxes 14,342 207 56 (1) 14,605 980
--------------------------------------------------------------------------------------------
Net Income $ 27,310 $ 464 ($26) $ 27,748 $ 1,792
============================================================================================
Average primary shares outstanding 11,996,000 49,898 (49,898) 12,252,517 738,326
256,517
Average fully-diluted shares
outstanding 12,763,000 49,898 (49,898) 13,019,517 835,630
256,517
Earnings per share:
Net income:
Primary $ 2.28 $ 9.30 $ 2.26 $ 2.43
Fully diluted $ 2.23 $ 9.30 $ 2.22 $ 2.14
<CAPTION>
Adjustments/ Adjustments/
(Deductions) (Deductions)
(Dollars in Thousands Applicable to Farmers & Applicable to Pro Forma
except per share amounts) Mt. Vernon Merchants Farmers & Combined
Financial Subtotal Bank Merchants Bank Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income ($105)(2) $203,512 $ 3,492 $66 (3) $207,070
Interest expense 90,534 1,352 91,886
--------------------------------------------------------------------------------------------
Net interest income before
provision for loan losses (105) 112,978 2,140 66 115,184
Provision for loan losses 6,632 79 6,711
--------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses (105) 106,346 2,061 66 108,473
--------------------------------------------------------------------------------------------
Noninterest income 46,088 259 46,347
122 (2) (34)(3)
Noninterest expense 230 (2) 107,766 1,153 147 (3) 109,032
--------------------------------------------------------------------------------------------
Income before income taxes (457) 44,668 1,167 (47) 45,788
Income taxes (79)(2) 15,506 359 35 (3) 15,900
--------------------------------------------------------------------------------------------
Net Income ($378) $ 29,162 $ 808 ($82) $ 29,888
============================================================================================
Average primary shares outstanding (738,326) 12,825,510 5,600 (5,600) 13,082,391
572,993 256,881
Average fully-diluted shares
outstanding (835,630) 13,592,510 5,600 (5,600) 13,849,391
572,993 256,881
Earnings per share:
Net income:
Primary $ 2.27 $144.29 $ 2.28
Fully diluted $ 2.23 $144.29 $ 2.24
</TABLE>
(1) Restated to give effect to the February 17, 1995 acquisition of Colonial
Mortgage Company and of its parent.
85
<PAGE> 92
<TABLE>
<CAPTION>
Pro Forma Adjustments: March 31 December 31
(In thousands) 1995 1994
-----------------------------
<S> <C> <C>
Adjustments Applicable to completed acquisition of
Brundidge Banking Company:
(1)To amortize the assignment of estimated fair value in excess
of the carrying amount of assets acquired. The amortization
consists of the following:
Decrease in income:
Amortization of goodwill (20 year period) ($33) ($130)
Increase in income:
Amortization of write-down on securities (3 year period) 40 160
-----------------------------
Net increase in income before taxes 7 30
Tax effect of the pro forma adjustments (other than
goodwill amortization) contained in Note (1) (14) (56)
-----------------------------
Net decrease in income ($7) ($26)
-----------------------------
Adjustments Applicable to Mt. Vernon Financial:
(2)To amortize the assignment of estimated fair value in excess
of the carrying amount of assets acquired. The amortization
consists of the following:
Decrease in income:
Amortization of write-up of purchased mortgage servicing
rights (5.5 year period) ($31) ($122)
Amortization of write-up of loan portfolio (5 year year) (26) (105)
Amortization of goodwill (20 year period) (58) (230)
-----------------------------
Net decrease in income before taxes (115) (457)
Tax benefit of the pro forma adjustments (other than
goodwill amortization) contained in Note (2) 20 79
-----------------------------
Net decrease in income ($95) ($378)
Adjustments Applicable to Farmers & Merchants Bank:
(3)To amortize the assignment of estimated fair value in excess
of the carrying amount of assets acquired. The amortization
consists of the following:
Decreases in income:
Amortization of goodwill (20 year period) ($37) ($147)
Increases in income:
Amortization of write-down of investment securities
(5 year period) 16 66
-----------------------------
Total (21) (81)
=============================
Decrease in expense:
Reversal of depreciation on premises and equiment written
down at acquisition (2 year period) 8 34
-----------------------------
Net decrease in income before taxes (13) (47)
Tax effect of the pro forma adjustments (other than
goodwill amortization) contained in Note (3) (9) (35)
-----------------------------
Net decrease in income ($22) ($82)
=============================
</TABLE>
86
<PAGE> 93
SUMMARY OF FUTURE ADJUSTMENTS
Assuming that the actual purchase accounting adjustments approximate such
adjustments used in preparing the March 31, 1995 pro forma statement of
condition, (assuming that the acquisitions had taken place December 31, 1994)
the anticipated effect of purchase accounting adjustments for the acquisition
of Mt. Vernon Financial and Farmers & Merchants Bank and the completed
acquisition of Brundidge Banking Company would be as follows:
<TABLE>
<CAPTION>
Years Ending December 31,
------------------------------------------
1995 1996 1997 1998 1999
------------------------------------------
<S> <C> <C> <C> <C> <C>
Amortization of goodwill ($507) ($507) ($507) ($507) ($507)
Amortization of write-up of loan portfolio (105) (105) (105) (105) (105)
Amortization of write-up of purchase mortgage
servicing rights (122) (122) (122) (122) (122)
------------------------------------------
Total charges to earnings (734) (734) (734) (734) (734)
Amortization of write-down of fixed assets 34 34
Amortization of write-down of securities 226 226 226 66 66
------------------------------------------
Total credits to earnings 260 260 226 66 66
------------------------------------------
Net charges to future earnings
before income taxes (474) (474) (508) (668) (668)
Tax benefit of net charges to future earnings (12) (12) - 56 56
------------------------------------------
Net charges to future earnings ($486) ($486) ($508) ($612) ($612)
------------------------------------------
Applicable to:
Brundidge Banking Company ($26) ($26) ($26) ($130) ($130)
Mt. Vernon Financial (378) (378) (378) (378) (378)
Merchants and Farmers Bank (82) (82) (104) (104) (104)
------------------------------------------
Net charges to future earnings ($486) ($486) ($508) ($612) ($612)
------------------------------------------
</TABLE>
87
<PAGE> 94
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
- -------------------------------------------------------------------------------
SELECTED FINANCIAL DATA
(as restated)*
<TABLE>
<CAPTION>
For the years ended
December 31, 1994, 1993, 1992, 1991 and 1990
(In thousands, except per share amounts)
1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
Interest income $187,230 $141,572 $130,624 $138,969 $137,343
Interest expense 82,549 59,517 60,576 81,486 88,102
- -----------------------------------------------------------------------------------------------------------------------
Net interest income 104,681 82,055 70,048 57,483 49,241
Provision for possible loan losses 6,481 7,945 7,979 6,364 6,306
- -----------------------------------------------------------------------------------------------------------------------
Net interest income after provision for
possible loan losses 98,200 74,110 62,069 51,119 42,935
Noninterest income 44,243 40,433 34,727 31,271 28,547
Noninterest expense 100,791 86,520 75,529 65,996 61,435
- -----------------------------------------------------------------------------------------------------------------------
Income before income taxes 41,652 28,023 21,267 16,394 10,047
Applicable income taxes 14,342 8,886 5,715 4,175 1,782
- -----------------------------------------------------------------------------------------------------------------------
Income before extraordinary items
and the cumulative effect of a change in
accounting for income taxes 27,310 19,137 15,552 12,219 8,265
Extraordinary items, net of income taxes -- (463) -- 831 1,385
Cumulative effect of a change in
accounting for income taxes -- 3,219 -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Net income $ 27,310 $ 21,893 $ 15,552 $ 13,050 $ 9,650
=======================================================================================================================
EARNINGS PER COMMON SHARE
Income before extraordinary items
and the cumulative effect of a change in
accounting for income taxes:
Primary $ 2.28 $ 2.01 $ 1.72 $ 1.37 $ 0.94
Fully-diluted $ 2.23 $ 1.96 $ 1.71 $ 1.37 $ 0.94
Net income:
Primary $ 2.28 $ 2.30 $ 1.72 $ 1.47 $ 1.10
Fully-diluted $ 2.23 $ 2.21 $ 1.71 $ 1.47 $ 1.10
Average shares outstanding:
Primary 11,996 9,530 9,016 8,905 8,792
Fully-diluted 12,763 10,623 10,327 10,247 10,095
Cash dividends per common share:(1)
Class A $ 0.80 $ 0.71 $ 0.67 $ 0.63 $ 0.60
Class B $ 0.40 $ 0.31 $ 0.27 $ 0.23 $ 0.20
=======================================================================================================================
</TABLE>
* As restated to give effect to the February 17, 1995 acquisition of Colonial
Mortgage Company, an entity under common control, which was accounted for
in a manner similar to a pooling of interests; restated BancGroup financial
statements were filed on July 10, 1995 on Form 8-K and are incorporated by
reference to this prospectus.
(1) On February 21, 1995, the Class A and Class B Common Stock were
reclassified into one class of Common Stock.
88
<PAGE> 95
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
SELECTED FINANCIAL DATA CONTINUED
(as restated)*
<TABLE>
<CAPTION>
For the years ended
December 31, 1994, 1993, 1992, 1991 and 1990
(In thousands, except per share amounts)
1994 1993(1) 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF CONDITION
At year-end:
Total assets $2,838,343 $2,822,521 $1,796,246 $1,687,177 $1,568,216
Loans, net of unearned income 2,093,703 1,771,989 1,172,151 1,093,728 1,062,798
Mortgage loans held for sale 60,536 361,496 144,215 105,219 31,069
Deposits 2,171,464 2,190,998 1,493,479 1,452,344 1,339,918
Long-term debt 69,043 57,397 22,979 27,225 29,397
Shareholders' equity 191,551 172,764 100,406 88,429 78,412
Average daily balances:
Total assets $2,726,710 $2,119,660 $1,764,397 $1,643,622 $1,532,863
Interest-earning assets 2,458,568 1,871,254 1,540,926 1,450,115 1,355,059
Loans, net of unearned income 1,906,385 1,315,910 1,136,124 1,094,096 1,016,826
Mortgage loans held for sale 131,121 241,683 118,510 65,373 28,525
Deposits 2,158,532 1,644,658 1,476,668 1,403,538 1,309,395
Shareholders' equity 182,823 119,790 94,833 84,423 75,371
Book value per share at year-end $ 16.08 $ 14.64 $ 11.27 $ 10.00 $ 8.92
Tangible book value per share at year-end 14.71 13.25 10.60 9.21 8.12
======================================================================================================================
SELECTED RATIOS
Income before extraordinary items and the
cumulative effect of a change in accounting
for income taxes to:
Average assets 1.00% 0.90% 0.88% 0.74% 0.54%
Average shareholders' equity 14.94 15.98 16.40 14.47 10.97
Net income to:
Average assets 1.00 1.03 0.88 0.79 0.63
Average shareholders' equity 14.94 18.28 16.40 15.46 12.80
Efficiency ratio 66.68 69.50 70.64 72.52 76.69
Dividend payout ratio 27.21 25.33 26.85 31.60 44.00
Average equity to average total assets 6.70 5.65 5.37 5.14 4.92
Total nonperforming assets to
net loans, other real estate and repossessions 0.91 1.31 1.34 1.07 1.49
Net charge-offs to average loans 0.09 0.33 0.47 0.51 0.49
Allowance for possible loan losses to
total loans (net of unearned income) 1.60 1.62 1.60 1.48 1.42
Allowance for possible loan losses to
nonperforming loans 314% 347% 246% 246% 132%
======================================================================================================================
</TABLE>
* As restated to give effect to the February 17, 1995 acquisition of Colonial
Mortgage Company, an entity under common control, which was accounted for
in a manner similar to a pooling of interests; restated BancGroup financial
statements were filed on July 10, 1995 on Form 8-K and are incorporated by
reference to this prospectus.
89
<PAGE> 96
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
SELECTED QUARTERLY FINANCIAL DATA 1994-1993
(as restated)*
<TABLE>
<CAPTION>
(In thousands, except per share amounts)
1994 1993
----------------------------------------- -----------------------------------------
DEC. 31 SEPT. 30 JUNE 30 MARCH 31 DEC. 31 SEPT. 30 JUNE 30 MARCH 31
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income $50,870 $47,180 $45,779 $43,401 $38,269 $37,524 $35,361 $30,418
Interest expense 23,341 20,439 19,915 18,854 15,922 15,824 14,855 12,916
- -----------------------------------------------------------------------------------------------------------------------
Net interest income 27,529 26,741 25,864 24,547 22,347 21,700 20,506 17,502
Provision for loan losses 1,767 1,818 1,448 1,448 2,333 2,061 2,263 1,288
- -----------------------------------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses 25,762 24,923 24,416 23,099 20,014 19,639 18,243 16,214
Income before
extraordinary items and
the cumulative effect of
a change in accounting
for income taxes 6,644 7,078 6,740 6,848 4,688 5,223 5,202 4,024
Net income $ 6,644 $ 7,078 $ 6,740 $ 6,848 $ 4,688 $ 4,760 $ 5,202 $ 7,243(1)
- -----------------------------------------------------------------------------------------------------------------------
Per common share:
Income before
extraordinary items and
the cumulative effect of
a change in accounting
for income taxes
Primary $ 0.55 $ 0.59 $ 0.56 $ 0.57 $ 0.48 $ 0.54 $ 0.54 $ 0.44
Fully-diluted 0.54 0.58 0.55 0.56 0.47 0.53 0.52 0.43
Net income
Primary $ 0.55 $ 0.59 $ 0.56 $ 0.57 $ 0.48 $ 0.49 $ 0.54 $ 0.80
Fully-diluted 0.54 0.58 0.55 0.56 0.47 0.48 0.52 0.74
=======================================================================================================================
</TABLE>
* As restated to give effect to the February 17, 1995 acquisition of Colonial
Mortgage Company, an entity under common control, which was accounted for
in a manner similar to a pooling of interests; restated BancGroup financial
statements were filed on July 10, 1995 on Form 8-K and are incorporated by
reference to this prospectus.
90
<PAGE> 97
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
SELECTED INTERIM FINANCIAL DATA (Unaudited)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
% Change
March 31, Dec. 31, March 31, March 31,
1995 1994* 1994* 1995 to 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Statement of Condition Summary
Total assets.............................. $3,014,654 $2,838,343 $2,797,486 8%
Loans, net of unearned income............. 2,255,258 2,093,703 1,831,507 23%
Total earnings assets..................... 2,738,703 2,561,379 2,587,174 6%
Deposits.................................. 2,295,341 2,171,464 2,176,037 5%
Shareholders' equity...................... 205,334 191,551 178,554 15%
Book value per share...................... $16.82 $16.08 $15.08 12%
- -------------------------------------------------------------------------------------------
<CAPTION>
Three Months Ended
March 31,
1995 1994* % Change
---------- ---------- ---------
<S> <C> <C>
Earnings Summary
Net interest income (taxable equivalent).. $27,779 $25,027 11%
Provision for loan losses................. 1,067 1,448 -26%
Noninterest income........................ 10,864 11,222 -3%
Noninterest expense....................... 24,203 23,975 1%
Net income................................ 8,301 6,848 21%
Average primary shares outstanding........ 12,049 11,957
Average fully diluted shares outstanding.. 12,818 12,730
Per common share:
Fully-diluted earnings:
Net Income.............................. $ 0.67 $ 0.56 20%
Dividends:
Common Stock............................ 0.225 N/A
Class A................................. N/A 0.20
Class B................................. N/A 0.10
- -------------------------------------------------------------------------------------------
Selected Ratios
Return on average assets 1.18% 1.03%
Return on average equity 17.16% 15.80%
Efficiency ratio 62.63% 66.14%
Equity to assets 6.81% 6.38%
Total capital 8.43% 7.98%
Tangible leverage 6.46% 6.05%
- -------------------------------------------------------------------------------------------
</TABLE>
*As restated
91
<PAGE> 98
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FINANCIAL CONDITION DATA JUNE 30,
--------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Total Amount of:
Assets $167,956 $155,693 $126,860 $107,860 $101,701
Investments 8,874 8,572 7,567 13,749 2,582
Loans Receivable, net 149,907 140,572 110,723 81,543 86,046
Deposits 117,084 101,609 85,917 86,675 82,265
Stockholder's Equity 9,223 8,612 6,424 5,089 4,677
- -----------------------------------------------------------------------------------------------------------------------
Number of full service customer facilities 3 3 3 3 3
</TABLE>
<TABLE>
<CAPTION>
OPERATING DATA YEAR ENDED JUNE 30,
-------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Interest income $11,053 $9,933 $9,264 $9,910 $9,526
Interest expense 5,299 5,405 5,820 7,011 7,324
------- ------ ------ ------ ------
Net interest income before loan loss provision 5,754 4,528 3,444 2,899 2,202
Provision for loan losses - - 130 658 595
------- ------ ------ ------ ------
Net interest income after loan loss provision 5,754 4,528 3,314 2,241 1,607
------- ------ ------ ------ ------
Gain (loss) on sale of investments and mortgage
backed securities - - 322 129 (38)
Gain on sale of loans 314 2,611 1,065 765 735
Gain on sale of loan servicing 1,900 307 199 303 -
Other income 928 789 667 416 254
Other expenses 5,046 4,120 3,419 3,027 3,022
Income tax expense (benefit) 1,402 1,447 813 421 (214)
------- ------ ------ ------ ------
Net income (loss) $ 2,448 $2,668 $1,335 $ 406 ($250)
======= ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
SELECTED STATISTICAL DATA YEAR ENDED JUNE 30,
-------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Return on assets 1.49% 1.75% 1.19% 0.40% -0.26%
Equity-to-assets ratio (period end) 6.27% 5.47% 5.06% 4.80% 4.60%
Stock dividends per share 5.00% (1) N/A N/A N/A
Earnings per share $2.67 $2.87 $1.42 0.44 ($0.25)
</TABLE>
(1) A cash dividend of $.05 per share was paid in 1993
92
<PAGE> 99
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
INTRODUCTION
The following discussion and financial information is presented to aid
the understanding of the current financial position and results of operations
of Mt. Vernon Financial Corp. and subsidiaries ("MVFC") and should be read in
conjunction with the Consolidated Financial Statements and Notes. With respect
to the figures for the nine month periods ended March 31, 1995 and 1994 which
are unaudited and for the years ended June 30, 1994, 1993 and 1992, in the
opinion of management all adjustments (none of which were other than normal
recurring adjustments) necessary for a fair statement of such results for such
periods have been included. Mt. Vernon Financial Corp. ("MVFC") is a savings
bank holding company headquartered in Dunwoody, Georgia. Chartered in 1985, Mt.
Vernon Federal Savings Bank ("MVFSB" or "Mt. Vernon Federal") is a wholly-owned
subsidiary of MVFC and it has two wholly owned subsidiaries, Mt. Vernon
Services Co., Inc. and The Mortgage Bank. MVFSB is a federally chartered
savings bank that was established to serve the mortgage lending and general
banking needs of a rapidly-growing population in metropolitan Atlanta. MVFC
offers products and services across the spectrum of retail banking with
particular expertise in residential mortgage lending in the Atlanta market.
MVFC operates through three strategically-located branch offices in Dunwoody
(Dekalb County), Buckhead (Fulton County) and the Town Center area in Kennesaw,
Georgia (Cobb County). In addition, MVFC has a mortgage loan production office
in Gwinnett County near Gwinnett Place Mall. MVFC also has a wholesale
mortgage lending operation that originates residential mortgage loans through
91 correspondents located in nine states. MVFC engages in a wide variety of
consumer and mortgage banking activities. Among the products and services
offered are: first and second mortgages, home equity lines of credit,
construction and construction/permanent loans, savings accounts, checking
accounts (personal and business), individual retirement accounts ("IRA's"),
certificates of deposit and money market accounts.
As of and For the Years Ended
June 30, 1994 and 1993
FINANCIAL CONDITION
Assets:
The total consolidated assets of MVFC were $167,956,090 at June 30,
1994, a $12,262,662 increase from the 1993 year end assets of $155,693,428. At
June 30, 1994, earning assets totaled $158,780,877, or 94.54%, of total assets,
compared to $149,144,556, or 95.79%, at June 30, 1993.
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<PAGE> 100
Since MVFC is primarily engaged in mortgage banking activities, cash needs
fluctuate during the month, therefore excess funds are invested in federal
funds sold to provide quick access to funds for mortgage loan closings and to
meet regulatory liquidity requirements. The amount of federal funds sold at
June, 30, 1994 increased by 16% to $7,473,515 from $6,442,247 at year end 1993.
Total loans, net of unearned income and the allowance for loan losses,
increased by $9,335,053 during 1994, or 6.64% from the June 30, 1993 total of
$140,572,309. A low interest rate environment in 1993 and 1994 attracted
borrowers to refinance their mortgages and to purchase new homes. There was
also increased demand for new housing which resulted in a significant increase
in construction lending. MVFC experienced record loan origination activity in
both 1993 and 1994. Total loan originations were $322,762,000, and
$469,757,034, in 1993 and 1994 respectively.
Loans receivable at June 30 are summarized as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Residential - fixed rate $ 9,387,198 18,026,858
Residential - balloon payment 8,767,852 670,647
Residential - adjustable rate 71,015,297 55,352,383
Residential construction 69,897,143 43,281,068
Commercial real estate 2,550,456 1,918,062
Land loans 1,738,933 1,016,133
Participation investment loans purchased 686,643 751,954
Other loans 2,685,620 2,148,097
------------- -----------
$ 166,729,142 123,165,202
Loans in process (34,699,241) (21,722,323)
Deferred loan fees (1,006,452) (427,777)
Premiums on loans purchased 117,583 305,975
Allowances (550,000) (550,000)
------------- -----------
$130,591,032 100,771,077
Loans receivable held for sale 19,316,330 39,801,232
------------- -----------
Total loans $ 149,907,362 140,572,309
============= ===========
</TABLE>
Loans are reviewed on a regular basis and are placed on nonaccrual status when,
in the opinion of management, the collection of additional interest is
doubtful. Generally, this occurs when either principal or interest is 90 days
or more past due. Interest accrued and unpaid at the time a loan is placed in
non-accrual status is charged against interest income. Subsequent payments are
either applied to the outstanding principal balance or recorded as interest
income, depending on the assessment of the ultimate collectibility of the loan.
There were no nonaccruing loans at June 30, 1994. This was a decrease from the
previous year end total of $73,403. The volume of nonaccruing loans
represented .05% of total loans, net of unearned income, for 1993. Nonaccrual
loans are considered to be minimal and are not
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<PAGE> 101
considered likely to significantly impact future earnings.
MVFC strives to maintain the allowance for loan losses at an appropriate level
determined by management based on its analysis of the loan portfolio, in order
to provide for possible future loan losses. Management's analysis takes into
consideration such factors as current and expected economic conditions,
historical loss experience, levels of nonaccruing loans and loan delinquencies.
In addition, there can be no assurance that regulators, in reviewing the loan
portfolio, will not request MVFC to increase its allowance for loan losses,
based on information available to them at the time of their examination,
thereby negatively impacting the financial condition and earnings. The Office
of Thrift Supervision completed their safety and soundness examination in May
1995 and did not recommend any increase to the allowance for loan losses.
Management considers the current allowance for loan losses adequate to absorb
potential losses in MVFC's loan portfolio. Management is not aware of any
potential problem loans other than those disclosed in the table above, which
includes all loan recommended for such classification by regulators, which
would have a material impact on asset quality.
The allowance for loan losses at year end was $550,000 for 1994 and 1993. The
corresponding ratios of allowance to total loans net of unearned income were
.36% and .39%. There were no charge-offs in 1994 or 1993.
Deposits and Borrowings:
MVFC relies primarily on its deposits and borrowings to fund loans and other
investments. Total deposits at June 30, 1994 were $117,083,778, an increase of
$15,474,919 from June 30, 1993. The majority of this increase was due to the
acquisition of new deposits. Demand, savings, and time deposit accounts at
June 30, 1994 were $15,197,884, $2,537,120, and $99,348,774, respectively,
representing changes of ($840,694), $1,351,726, and $14,963,887 from June 30,
1993, respectively. MVFC utilizes the Federal Home Loan Bank of Atlanta to
borrow funds. Advances from the Federal Home Loan Bank of Atlanta totalled
$28,000,000 and $26,600,000 at year end 1994 and 1993 respectively. During 1994
MVFC borrowed $1,600,000 from a commercial bank at a variable rate equal to
the prime rate. The purpose of the loan was to repurchase shares of the
corporation's stock from shareholders desiring to sell. Quarterly principal
payments as of June 30, 1994 of $100,000 are due through June 30, 1998.
Liquidity:
Liquidity refers to the ability of MVFC to meet the borrowing needs and
withdrawal demands of its customers, while also providing funds for operating
expenses and its own cash flow requirements. MVFC achieves its desired
liquidity from management of both assets and liabilities. In the ordinary
course of business, MVFC's cash flows are generated from interest and fee
income, as well as from loan repayments and the maturity or sales of other
earning assets principally mortgage loans. In addition, liquidity is
continuously provided through the acquisition of new deposits or the rollover
of matured deposits and borrowings.
MVFC is typically a seller of federal funds but may, during occasional
short-term peaks in loan
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<PAGE> 102
demand or temporary fluctuations in liquidity factors, purchase federal funds
or borrow from a correspondent bank to meet its cash needs. A continuing flow
of funds from federal funds sold is available for cash needs and to maintain a
desired liquidity position. At June 30, 1994, $7,473,515 was invested in
federal funds sold. A relatively stable flow of deposits also enhances
liquidity.
MVFC's 1994 year end liquid assets, consisting primarily of cash on hand and on
deposit in other institutions, and federal funds sold, totaled $9,124,868
compared to $7,564,807 at year end 1993. Management considers MVFC's liquidity
sources to be adequate to meet its current and projected needs.
Liquid assets maintained at the Holding Company at June 30, 1994 totaled
$43,220. The primary source of funds available to the Holding Company to pay
shareholder dividends and other expenses including debt service is dividends
from its subsidiary bank. Regulatory agencies impose restrictions on the
amounts of dividends that may be declared by the subsidiary bank. The amount
of cash dividends available from the subsidiary bank for payment in 1995, upon
regulatory approval, is approximately $3,284,000. As a result, at June 30,
1994, approximately $7,176,000 of the Holding Company's investment in MVFSB was
restricted as to dividend payments from MVFSB to the Holding Company under the
foregoing regulatory limitations.
Capital:
Capital is a measure of MVFC's financial soundness and viability. MVFC is
committed to maintaining a strong capital position to protect shareholders and
depositors, provide for reasonable growth, and fully comply with all regulatory
requirements.
MVFC's capital at June 30, 1994 totaled $9,222,910 compared to $8,612,283 at
year end 1993. This growth in MVFC's capital has been through the retention of
internally generated earnings. MVFC purchased and retired 154,369 and 53,412
common shares during the years ended June 30, 1994 and 1993, respectively. The
cost of these shares was $1,868,044 and $456,543 for the years ended June 30,
1994 and 1993, respectively. Frequently, capital is expressed as a percent of
assets to measure financial strength. At year end 1994 and 1993, these ratios
were 5.49% and 5.53%, respectively.
Risk-based capital regulations adopted by banking regulators require MVFSB to
achieve and maintain specified ratios of capital to risk-weighted assets. The
risk-based capital rules weigh assets and off-balance sheet obligations at 0%,
20%, 50% or 100%, depending upon the risk classification of the asset or
obligation. A minimum risk-based capital ratio of 8.00% is required, with
one-half, or 4.00%, of the amount in the form of Tier 1 capital (consisting
primarily of shareholders' equity, less goodwill). Furthermore, the federal
regulatory agencies have adopted minimum leverage ratio rules that require
financial institutions to maintain a ratio of core capital to total assets of
at least 3.00%. These are minimum requirements, however, and institutions
experiencing internal growth or making acquisitions, as well as institutions
with supervisory or operational weakness, will be expected to maintain capital
positions well above these minimum levels. At June 30, 1994, MVFSB satisfied
all regulatory capital requirements.
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<PAGE> 103
The table below summarizes MVFSB's compliance with the capital standards.
RISK-BASED CAPITAL RATIOS AND LEVERAGE RATIOS
AS OF JUNE 30, 1994
(Dollars in thousands)
<TABLE>
<S> <C> <C>
Risk Based Capital Ratios
----------------------------------------------
Tier 1 Capital $ 10,460 10.99%
Tier 1 Capital - Minimum Required 3,806 4.00
--------- -----
Excess 6,654 6.99%
Risk Based Capital $ 11,010 11.40%
Risk Based Capital - Minimum Required 7,726 8.00
--------- -----
Excess 3,284 3.40%
Total Risk Weighted Assets $ 96,575
=========
Leverage Ratios
---------------------------------------------
Total Core Capital $ 10,460 6.23%
Minimum Leverage Requirement 5,030 3.00
--------- -----
Excess $ 5,430 3.23%
========= =====
Adjusted Tangible Assets $ 167,946
=========
</TABLE>
Results of Operations:
In 1994, MVFC recorded net income of $2,448,396, which represents an 8.22%
decrease from 1993 net income of $2,667,750. Earnings per share were $2.67,
$2.87 and $1.42, respectively, for the three years ended June 30, 1994, 1993,
and 1992.
Net Interest Income:
By the nature of its business, the largest portion of MVFC's income is derived
primarily from net interest income. Net interest income is the difference
between interest income, earned primarily on loans and federal funds sold, and
interest expense, which is paid on deposits and other interest-bearing
liabilities. Many factors influence net interest income including fluctuations
in interest rates and changes in the volume and mix of earning assets and
interest-bearing liabilities.
The following schedule, Average Balance Sheet and Analysis of Net Interest
Income, details the distribution of average assets, liabilities and
shareholders' equity, with the interest rate differentials for MVFC for the
three years ended June 30, 1994, 1993, and 1992.
Interest income for 1994 of $11,053,434 represents an 11.28% increase over 1993
interest income of $9,933,217. The increase in income was primarily due to the
growth in the volume of
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<PAGE> 104
average earning assets of $24,692,000 from 1993 to 1994.
Interest income on loans and federal funds sold represents the largest
source of revenue for MVFC. In 1994, interest income on loans grew to
$10,588,095, compared to $9,592,005 in 1993. The increase in interest income
on loans was the result primarily of the increase in the average balance of
loans from $126,373,000 in 1993 to $148,033,000 in 1994.
The average interest rate on federal funds sold, a liquid investment source of
excess funds increased approximately .25% during 1994. Interest income on
federal funds sold totaled $220,902 for 1994, an 87% increase from $118,052 in
1993. Since the average balance in federal funds sold and the rates earned
increased during 1994, the income earned increased compared to 1993.
Interest expense is MVFC's largest single expense category. In 1994, interest
expense totaled $5,298,900, a 1.96% decrease from the 1993 interest expense of
$5,405,004. The average cost of deposits decreased from 4.99% in 1993 to 4.21%
in 1994. The balance of deposits in 1994 increased $15,474,919 to
$117,083,778.
Interest on borrowings in 1994 totaled $851,312 a 28.7% decrease from 1993
interest on borrowings of $1,193,521. The average cost of FHLB advances, which
represents the majority of borrowings outstanding, decreased by .59% from 4.30%
in 1993 to 3.71% in 1994. The decrease in interest on borrowings was also due
to a lower average balance in outstanding borrowings during 1994 than in 1993.
The resulting net interest income for 1994 was $5,754,534, a 27.08% increase
from the 1993 net interest income of $4,528,213. The net yield on interest
earning assets increased by .23% from 2.69% in 1993 to 2.92% in 1994.
1993 interest income increased to $9,933,217 from $9,264,323 in 1992.
The higher earnings were mainly the result of an increase in the volume of
earning assets, as the average yield on earning assets dropped from 9.01% in
1992 to 7.52% in 1993. The volume of earning assets increased in 1993 by
$29,330,000, or 28.53%, over the 1992 volume of $102,830,000. A $6,934,000,
or 8.94%, increase in volume of deposit accounts in 1993 was partially offset
by a drop in interest rates. Interest expense increased from $5,820,247 in
1992 to $5,405,004 in 1993. The resulting net interest income for 1993 was
$4,528,213, compared to $3,444,076 for 1992.
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<PAGE> 105
AVERAGE BALANCE SHEET AND ANALYSIS OF NET INTEREST INCOME
for the years ended June 30, 1994, 1993 and 1992
(Dollars in thousands)
<TABLE>
<CAPTION>
1994 1993 1992
----------------------- ------------------------ ------------------------
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
----------------------- ------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest Earning Assets:
Loans, net $148,033 $10,588 7.15% 126,373 9,592 7.59% 93,929 8,593 9.15%
Mortgage backed securities - - - - - - 3,911 324 8.28%
Federal funds sold 6,898 221 3.20% 3,974 118 2.95% 3,421 157 4.59%
Federal Home Loan Bank stock 1,921 105 5.47% 1,625 97 5.97% 985 68 6.90%
Interest earned on float (1) - 140 - - 114 - - 60 -
Other investments - - - 188 12 6.38% 584 62 10.62%
----------------------- ------------------------ ------------------------
Total interest earnings assets 156,852 11,054 7.05% 132,160 9,933 7.52% 102,830 9,264 9.01%
Non-interest earning assets:
Cash and due from banks 1,790 1,525 938
Bank premises and equipment 964 548 548
Other assets 4,995 7,718 8,101
------- ------- -------
Total non-interest earning assets 7,749 9,791 9,587
------- ------- -------
Total assets 164,601 141,951 112,417
======= ======= =======
LIABILITIES
Interest bearing liabilities:
Interest bearing deposits 105,561 4,448 4.21% 84,466 4,211 4.99% 77,532 4,979 6.42%
Federal Home Loan Bank advances 22,383 831 3.71% 27,533 1,185 4.30% 14,650 815 5.56%
Notes payable and other borrowings 288 20 6.94% - 9 567 26 4.59%
----------------------- ------------------------ ------------------------
Total interest bearing liablities 128,232 5,299 4.13% 111,999 5,405 4.83% 92,749 5,820 6.28%
Non-interest bearing demand deposits 7,515 7,082 5,970
Other liabilities 19,197 15,210 8,041
------- ------- -------
Total non-interest bearing liabilities 26,712 22,292 14,011
------- ------- -------
Total Liabilities 154,944 134,291 106,760
------- ------- -------
Stockholders' equity 9,657 7,660 5,657
------- ------- -------
Total liabilities and
stockolders' equity $164,601 $141,951 $112,417
======= ======= =======
Net interest income $5,755 $4,528 $3,444
====== ====== ======
Net yield on interest earning assets 2.92% 2.69% 2.73%
===== ===== =====
</TABLE>
(1) Interest earned on outstanding checks in the check disbursement account
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<PAGE> 106
Provision for Loan Losses:
There was no provision for loan losses in 1994 and 1993. The provision for
loan losses was $130,000 in 1992. The purpose of the provision for loan losses
is to replace reductions to the allowance for loan losses caused by actual
charge-offs and to establish adequate reserves for the growth of the loan
portfolio. The allowance for loan losses represents the estimated
uncollectible amount of loans included in MVFC's loan portfolio and is
available to absorb potential losses from any category of loans. There have
been no loan charge-offs during the three years ended June 30, 1994.
Non-Interest Income:
Non-interest income is generated by various financial services and activities.
Mt. Vernon Financial derives a significant portion of its income from its
mortgage banking activities, (e.g. mortgage loan servicing fees and gain on
sale of loans and loan servicing).
Total non-interest income decreased $565,698 in 1994 to $3,141,704. Net gain
on the sale of loans and loan servicing was $2,214,034 in 1994, compared to
$2,917,959 in 1993. In 1993 the rates on mortgages decreased significantly
which resulted in marketing gains from the sale of mortgage loans held for
sale. In 1994 MVFC sold approximately $160,100,000 in mortgage loan servicing,
recognizing gains on sale of $1,899,567 as part of its overall plan to
recognize the total economic benefit from its mortgage banking activities.
In 1993, non-interest income was $3,707,402 a $1,454,279 increase over 1992.
In 1993, net gain on the sale of loans, loan servicing and securities totaled
$2,917,959, compared to $1,585,264 in 1992.
Non-Interest Expense:
Total non-interest expense for 1994 totaled $5,045,764, compared to $4,120,375
for 1993. Salaries and employee benefits in 1994 were $2,821,604, compared to
$2,253,388 in 1993, a 25.22% increase. Occupancy and equipment expense, and
other general and administrative expenses increased 19.95% and 18.66% to
$823,017 and $1,401,143, respectively. The increase in general and
administrative expenses is primarily attributable to expenses associated with
the volume of mortgage loans originated during the year.
For the year 1993, non-interest expense increased to $4,120,375, from
$3,419,190 in the previous year. Again the increase in general and
administrative expenses is attributable to the increase in the volume of
mortgage loans originated in 1993 compared to 1992. The net non-interest
expense (i.e. non-interest expense less non-interest income) decreased by
$753,094 in 1993 from $1,166,067 in 1992 to $412,973 in 1993.
Income Tax Expense:
Income before taxes for 1994 was $3,850,474, a 6.43% decrease from the 1993
income before taxes of $4,115,240. Income before taxes for 1992 totaled
$2,148,009. Income tax expense for 1994 totaled $1,402,078, compared to
$1,447,490 for 1993 and $812,700 for 1992. Provisions for income taxes include
deferred taxes on temporary differences between income tax and financial
accounting. The effective income tax rates were 36.4%, 35.2% and 37.8% for the
years ended June 30, 1994, 1993 and 1992, respectively. State income taxes
represent the primary difference when comparing the effective income tax rate
to the statutory federal income tax rate of 34%.
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<PAGE> 107
New Accounting Standards:
Mt. Vernon Financial Corp. adopted SFAS 109 as of July 1,1992. The cumulative
effect of this change in accounting for income taxes was immaterial and
therefore did not have any effect on the consolidated statement of income for
the year ended June 30, 1993. Prior years' financial statements were not
restated.
Deferred income taxes were recognized in accordance with the deferred method
for 1992 and prior years. Under the deferred method, annual income tax expense
is matched with pretax accounting income by providing deferred taxes at current
tax rates for timing differences between the determiniation of net income for
financial reporting and tax purposes. Under the deferred method, deferred tax
assets and liabilities were not adjusted upon a change in tax rates.
During 1993, the Financial Accounting Standards Board (FASB) issued SFAS No.
114, "Accounting by Creditors for impairment of a Loan". SFAS No. 114 requires
impaired loans to be measured based on the present value of expected future
cash flows, discounted at the loan's effective interest rate, or at the loan's
observable market price, or the fair value of the collateral if the loan is
collateral dependent, beginning in fiscal 1996. SFAS No. 114 may be adopted
prior to 1996. MVFC has not yet determined the actual impact of SFAS No. 114
on its financial statements or made a determination of whether it will adopt
SFAS No. 114 prior to 1996.
Impact of Inflation and Changing Prices:
The financial statements and related data presented herein have been prepared
in accordance with generally accepted accounting principles which require the
measurement of financial position and operating results without considering
changes in the relative purchasing power of money over time due to inflation.
The majority of assets and liabilities of a financial institution are monetary
in nature and therefore differ greatly from most commercial and industrial
companies that have significant investments in fixed assets or inventories.
However, inflation does have an important impact on the growth of total assets
and creates the need to generate more equity capital in order to maintain an
appropriate equity to assets ratio. Another significant effect of inflation is
on non-interest expenses, which tend to rise during periods of inflation.
MVFC's profitability, like that of most financial institutions, is dependent to
a large extent upon its net interest income. Management believes, therefore,
that changes in interest rates have a more significant impact on a financial
institution's performance than the effects of general levels of inflation.
Interest rates do not necessarily move in the same direction or in the same
magnitude as the price of goods and services, since such prices are affected by
inflation. Whenever interest-earning assets reprice to market interest rates
at a different pace than interest-bearing liabilities, net interest income
performance will be affected favorably or unfavorably during periods of changes
in general interest rates. In a volatile interest rate environment, liquidity
and the maturity structure of MVFC's assets and liabilities are critical to the
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<PAGE> 108
maintenance of acceptable performance levels. Prevailing interest rates during
1994 were at significantly lower levels than prevailing rates in recent years.
While MVFC is unable to predict future changes in market rates of interest, an
upward trend in interest rates would tend to have a negative effect on MVFC's
net interest margin, as MVFC's interest-bearing liabilities are scheduled to
reprice faster than its interest-earning assets.
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<PAGE> 109
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
SELECTED INTERIM FINANCIAL DATA
<TABLE>
<CAPTION>
FINANCIAL CONDITION DATA MARCH 31
----------------------------
1995 1994
(Unaudited)
(Dollars in Thousands)
<S> <C> <C>
Total Amount of:
Assets $197,776 $139,417
Federal funds sold and FHLB stock 9,965 5,187
Loans Receivable, net 178,954 127,541
Deposits 134,204 113,371
Stockholder's Equity 10,231 9,662
- ------------------------------------------------------------------------------------------------------
Number of full service customer facilities 3 3
</TABLE>
<TABLE>
<CAPTION>
OPERATING DATA NINE MONTHS ENDED MARCH 31,
---------------------------
1995 1994
---- ----
(Unaudited)
(Dollars in Thousands)
<S> <C> <C>
Interest income $10,421 $8,443
Interest expense 5,781 4,012
------- ------
Net interest income before loan loss provision 4,640 4,431
Provision for loan losses 0 0
------- ------
Net interest income after loan loss provision 4,640 4,431
------- ------
Gain on sale of loans 405 1,155
Gain (loss) on sale of loan servicing (20) 793
Other income 660 272
Other expenses 3,768 3,626
Income tax expense 707 1,103
------- ------
Net income $ 1,210 $1,922
======= ======
Net income per share $ 1.70 $ 2.51
======= ======
</TABLE>
103
<PAGE> 110
MT. VERNON FINANCIAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
COMPARISON OF THE NINE MONTHS ENDED
MARCH 31, 1995 AND MARCH 31, 1994
FINANCIAL CONDITION
ASSETS: Total assets decreased $16,276,680 from $155,693,428 at 1993 year end
to $139,416,748 at March 31, 1994 and increased $29,819,606 from $167,956,090
at 1994 year end to $197,775,696 at March 31, 1995. Total loans, net of
unearned income and allowances for losses, decreased $13,031,293 for the nine
months ending March 31, 1994 or 80% of the total decrease in total assets.
Total loans, net of unearned income and allowance for losses, increased by
$29,046,561 which accounts for approximately 97% of the total increase in
assets for the nine months ending March 31, 1995.
LIABILITIES: Total liabilities were $129,755,032 at March 31, 1994, a
$17,326,113 decrease from 1993 year end and were $187,544,945 at March 31,
1995, a $28,811,765 increase from 1994 year end. The decrease at March 31,
1994 is attributable to a decrease in borrowings of $23,000,000, a net decrease
in accrued expenses, advance payments by borrowers for taxes and insurance and
other liabilities of $6,088,246 which were partially offset by an increase in
deposits of $11,762,133. The increase at March 31, 1995 is attributable to an
increase in deposits of $17,120,343, and an increase in borrowings of
$15,764,938, which were partially offset by a decrease in advance payments by
borrowers for taxes and insurance of $2,092,038 and decrease in accrued
expenses and other liabilities of $1,981,478.
CAPITAL: Capital at March 31, 1995 totaled $10,230,751, a $1,007,841 increase
from the 1994 year end capital of $9,222,910. The net increase consists of net
income of $1,210,262 less the repurchase of capital stock of $201,843 and the
cash portion of stock dividends paid of $578.
RESULTS OF OPERATIONS
SUMMARY: MVFC's net income decreased $711,640 from $1,921,902 or $2.51
per share to $1,210,262 or $1.70 per share for the nine months ended March 31,
1994 and 1995, respectively. The decrease is primarily attributable to the
decrease in mortgage banking activities which resulted in a decrease in the
gain on sale of loans and loan servicing.
NET INTEREST INCOME: Net interest income increased $207,731 from $4,431,896
for the nine months ended March 31, 1994 to $4,639,627 in the same period of
1995. The increase is primarily attributable to volume increases and rate
increases on interest earning assets off-set by volume increases and rate
increases in interest bearing liabilities. Interest earning assets
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<PAGE> 111
decreased $16,416,307 to $132,728,249 in the first nine months of 1994 and
increased $30,137,629 to $188,918,506 in the same period of 1995. Interest
bearing liabilities decreased $11,237,867 to $116,970,992 in the first nine
months of 1994 and increased $32,885,281 to $179,569,059 for the same period of
1995.
PROVISION FOR LOAN LOSSES: There was no provision for loan losses for the
first nine months of 1995 or 1994. Asset quality has remained consistently
strong, however management continues to maintain reserves on an adequate basis
to protect future capital.
NON INTEREST INCOME: For the nine month period ended March 31, 1995 compared
to the nine months ended March 31, 1994 non-interest income decreased
$1,174,563 to $1,045,270. The decrease is primarily due to the decrease in
mortgage banking activities with a corresponding decrease in gain on sale of
loans and sale of loan servicing. The level of non-interest income recorded in
the nine months ended March 31, 1994 was unusually high and is not considered
to be typical due to the unusually large volume of mortgage refinance loans
that were made during this period.
NON-INTEREST EXPENSES: Non-interest expense increased $140,915 to $3,767,497
for the first nine months of 1995 from $3,626,582 for the same period in 1994.
The increase is primarily attributable to increases in compensation and FDIC
insurance premiums on a larger deposit base. For the nine month period ended
March 31, 1995, pre-tax income was $1,917,400 compared to $3,025,147 for the
same period in 1994.
PROVISION FOR INCOME TAXES: The provision for income taxes for the nine months
ended March 31, 1995 and 1994 was $707,138 and $1,103,245 respectively. The
income tax expense expressed as a percent of income before income taxes was
36.88% for the nine months ended March 1995 and 36.47% for the nine months
ended March 1994.
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<PAGE> 112
BUSINESS OF BANCGROUP
PROPOSED AFFILIATE BANK
BancGroup has entered into a definitive agreement dated as of May 19,
1995, to acquire Farmers and Merchants Bank, Ariton, Alabama ("F&M"). F&M is
an Alabama bank and will merge with Colonial Bank, BancGroup's Alabama
subsidiary bank. Based on the 10 day average market price of BancGroup Common
Stock as of July 5, 1995, a total of 256,881 shares of Common Stock of
BancGroup will be offered to the stockholders of F&M. The actual number of
shares to be issued will vary based upon the market value of the BancGroup
Common Stock, subject to a maximum of 354,430 shares and a minimum of 256,881
shares being issued. Also, $3,000,000 in cash will be paid to the stockholders
of F&M. This transaction is subject to, among other things, approval by the
stockholders of F&M and approval by appropriate regulatory authorities. At
March 31, 1995, F&M had assets of $50.9 million, deposits of $43.3 million and
stockholders' equity of $7.4 million. See "THE COLONIAL BANCGROUP, INC. AND
SUBSIDIARIES -- Condensed Pro Forma Statements of Condition (Unaudited)."
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
As of April 30, 1995, BancGroup had issued and outstanding 12,219,699
shares of Common Stock with 5,268 stockholders of record. Each such share is
entitled to one vote. In addition, as of that date, 233,424 shares of Common
Stock were subject to options pursuant to BancGroup's stock option plans and up
to 766,229 shares of Common Stock were issuable upon
106
<PAGE> 113
conversion of BancGroup's 1985 and 1986 Debentures. There are currently
44,000,000 shares of Common Stock authorized.
On February 21, 1995, BancGroup concluded a reclassification of its
Class A and Class B Common Stock into one class of Common Stock. The
reclassification was approved by BancGroup's stockholders on December 8, 1994.
On February 24, 1995, the Common Stock of BancGroup was listed for trading on
the New York Stock Exchange.
The following table shows those persons who are known to BancGroup to
be beneficial owners as of April 30, 1995, of more than five percent of
BancGroup's outstanding Common Stock.
<TABLE>
<CAPTION>
SHARES OF BANCGROUP BENEFICIALLY OWNED
PERCENTAGE
COMMON OF CLASS
NAME AND ADDRESS STOCK OUTSTANDING(1)
- ---------------------------------------------------------------------------------
<S> <C> <C>
Robert E. Lowder(2) 1,435,030 11.43%
Post Office Box 1108
Montgomery, AL 36101
James K. Lowder 1,099,253 8.76%
Post Office Box 250
Montgomery, AL 36142
Thomas H. Lowder 1,072,707 8.55%
Post Office Box 11687
Birmingham, AL 35202
- ---------------
</TABLE>
(1) Percentages are calculated assuming the issuance of 233,424 shares
of Common Stock pursuant to BancGroup's stock option plans and assuming the
issuance of 96,430 shares of Common Stock into which BancGroup's 1985 and 1986
debentures beneficially owned by directors, officers or principal stockholders
are convertible.
(2) Robert E. Lowder is the brother of James K. and Thomas H. Lowder.
Robert E. Lowder disclaims any beneficial ownership interest in the shares
owned by his brothers. Robert
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<PAGE> 114
E. Lowder's mother, Catherine K. Lowder, owns 85,442 shares of Common Stock.
Mr. Lowder disclaims any beneficial interest in such shares.
SECURITY OWNERSHIP OF MANAGEMENT
The following table indicates for each director, executive officer, and
executive officers and directors of BancGroup as a group the number of shares
of outstanding Common Stock of BancGroup beneficially owned as of April 30,
1995.
<TABLE>
<CAPTION>
SHARES OF BANCGROUP BENEFICIALLY OWNED
PERCENTAGE
COMMON OF CLASS
NAME STOCK OUTSTANDING(1)
- ----------------------------------------------------------------------------------
<S> <C> <C>
DIRECTORS
Young J. Boozer 6,623(2) *
William Britton 6,808 *
Jerry J. Chesser 72,536 *
Augustus K. Clements, III 7,708 *
Robert S. Craft 5,997 *
Patrick F. Dye 24,832(3) *
Clinton O. Holdbrooks 145,538(4) 1.16%
D. B. Jones 9,168 *
Harold D. King** 77,099(4) *
Robert E. Lowder** 1,435,030(5) 11.43%
John Ed Mathison 13,978 *
Milton E. McGregor 0 *
John C. H. Miller, Jr. 11,174 *
Joe D. Mussafer 10,000 *
William E. Powell, III 6,232 *
Jack H. Rainer 1,345 *
Frances E. Roper 180,934 1.44%
Ed V. Welch 29,411 *
EXECUTIVE OFFICERS WHO ARE NOT ALSO DIRECTORS
Alan T. Romanchuck 23,421(6) *
Young J. Boozer, III 22,168(2)(6)
W. Flake Oakley, IV 8,633(6)
Michael R. Holley 200
</TABLE>
108
<PAGE> 115
<TABLE>
<S> <C> <C>
All Executive Officers
& Directors as a Group 2,098,835 16.72%
</TABLE>
__________________________
* Represents less than one percent.
**Executive Officer.
(1) Percentages are calculated assuming the issuance of 233,424 shares
of Common Stock pursuant to BancGroup's stock option plans and assuming the
issuance of 96,430 shares of Common Stock into which BancGroup's 1985 and 1986
Debentures beneficially owned by directors, officers or principal stockholders
are convertible.
(2) Includes 500 shares of Common Stock out of 1,000 shares owned by
Young J. Boozer, and Young J. Boozer, III EX U/W Phyllis C. Boozer.
(3) Includes 24,600 shares of Common Stock subject to options
exercisable under BancGroup's stock option plans.
(4) Includes 12,262 shares and 12,262 shares of Common Stock subject
to options exercisable by Mr. Holdbrooks and Mr. King, respectively, under
BancGroup's stock option plans and 43,067 shares and 41,078 shares of Common
Stock into which BancGroup's 1985 Debentures owned by Mr. Holdbrooks and Mr.
King, respectively, are convertible.
(5) These shares include 97,000 shares of Common Stock subject to
options under BancGroup's stock option plans. See the table at "Voting
Securities and Principal Stockholders."
(6) Alan Romanchuck, Young J. Boozer, III, and W. Flake Oakley, IV,
executive officers of BancGroup, hold options respecting 10,000, 12,500, and
3,000, shares of Common Stock, respectively, pursuant to BancGroup's stock
option plans.
MANAGEMENT INFORMATION
Certain information regarding the biographies of the directors and
executive officers of BancGroup, executive compensation and related party
transactions is included in BancGroup's Annual Report on Form 10-K for the
fiscal year ending December 31, 1994, at items 10, 11, and 13 and is
incorporated herein by reference.
109
<PAGE> 116
CERTAIN REGULATORY CONSIDERATIONS
BancGroup is a registered bank holding company subject to supervision
and regulation by the Federal Reserve. As such, it is subject to the Bank
Holding Company Act of 1956 as amended (the "BHC Act") and many of the Federal
Reserve's regulations promulgated thereunder.
BancGroup's subsidiary banks, Colonial Bank and Colonial Bank of
Tennessee (the "Subsidiary Banks"), are subject to supervision and examination
by applicable federal and state banking agencies. Colonial Bank, as a state
chartered bank and not a member of the Federal Reserve system, is regulated and
examined both by the State of Alabama Banking Department and by the FDIC.
Colonial Bank of Tennessee is also state chartered and not a member of the
Federal Reserve system and is regulated by both the State of Tennessee
Department of Financial Institutions and by the FDIC. The deposits of the
Subsidiary Banks are insured by the FDIC to the extent provided by law. The
FDIC assesses deposit insurance premiums the amount of which may, in the
future, depend in part on the condition of the Subsidiary Banks. Moreover, the
FDIC may terminate deposit insurance of the Subsidiary Banks under certain
circumstances. Both the FDIC and the respective state regulatory authorities
have jurisdiction over a number of the same matters, including, lending
decisions, branching and mergers.
One limitation under the BHC Act and the Federal Reserve's regulations
requires that BancGroup obtain prior approval of the Federal Reserve before
BancGroup acquires, directly or indirectly, more than five percent of any class
of voting securities of another bank. Prior approval also must be obtained
before BancGroup acquires all or substantially all of the assets of another
bank, or before it merges or consolidates with another bank holding company.
BancGroup may not engage in "non-banking" activities unless it demonstrates to
the Federal
110
<PAGE> 117
Reserve's satisfaction that the activity in question is closely related to
banking and a proper incident thereto. Because BancGroup is a registered bank
holding company, persons seeking to acquire 25 percent or more of any class of
its voting securities must receive the approval of the Federal Reserve.
Similarly, persons seeking to acquire between 10 percent and 25 percent also
are required to obtain prior Federal Reserve approval.
In 1989 Congress expressly authorized the acquisition of savings
associations by bank holding companies. BancGroup must obtain the prior
approval of the Federal Reserve (among other agencies) before making such an
acquisition, and must demonstrate that the likely benefits to the public of the
proposed transaction (such as greater convenience, increased competition, or
gains in efficiency) outweigh potential burdens (such as an undue concentration
of resources, decreased or unfair competition, conflicts of interest, or
unsound banking practices).
Following enactment in 1991 of the FDIC Improvement Act, banks now are
subject to increased reporting requirements and more frequent examinations by
the bank regulators. The agencies also now have the authority to dictate
certain key decisions that formerly were left to management, including
compensation standards, loan underwriting standards, asset growth, and payment
of dividends. Failure to comply with these new standards, or failure to
maintain capital above specified levels set by the regulators, could lead to
the imposition of penalties or the forced resignation of management. If a bank
becomes critically undercapitalized, the bank agencies have the authority to
place an institution into receivership or require that the bank be sold to, or
merged with, another financial institution.
In September 1994 Congress enacted the Riegle-Neal Interstate Banking
and Branching Efficiency Act of 1994. This legislation, among other things,
amended the BHC Act to permit bank holding companies, subject to certain
limitations, to acquire either control or substantial
111
<PAGE> 118
assets of a bank located in states other than that bank holding company's home
state regardless of state law prohibitions. This amendment becomes effective
on September 29, 1995. In addition, this legislation also amended the Federal
Deposit Insurance Act to permit, beginning on June 1, 1997 (or earlier where
state legislatures provide express authorization), the merger of insured banks
with banks in other states.
The officers and directors of BancGroup and the Subsidiary Banks are
subject to numerous insider transactions restrictions, including limits on the
amount and terms of transactions involving the Subsidiary Banks, on the one
hand, and their principal stockholders, officers, directors, and affiliates on
the other. There are a number of other laws that govern the relationship
between the Subsidiary Banks and their customers. For instance, the Community
Reinvestment Act is designed to encourage lending by banks to persons in low
and moderate income areas. The Home Mortgage Disclosure Act and the Equal
Credit Opportunity Act attempt to minimize lending decisions based on
impermissible criteria, such as race or gender. The Truth-in-Lending Act and
the Truth-in-Savings Act requires banks to provide full disclosure of relevant
terms related to loans and savings accounts, respectively. Anti-tying
restrictions (which prohibit, for instance, conditioning the availability or
terms of credit on the purchase of another banking product) further restrict
the Subsidiary Banks' relationships with their customers.
It should be noted that supervision, regulation, and examination of
BancGroup and the Subsidiary Banks are intended primarily for the protection of
depositors, not stockholders.
112
<PAGE> 119
BUSINESS OF FINANCIAL
GENERAL
Financial operates a full-service financial services business based in
the Atlanta Metropolitan area, providing such customary banking services as
checking and savings accounts, various types of time deposits, money transfers
and individual retirement accounts. It engages in mortgage and consumer
lending, with primary emphasis on mortgage banking activities, including both a
retail and wholesale mortgage loan origination operation.
As of June 1, 1995, Financial had issued and outstanding 711,036
shares of common stock with 161 stockholders of record. Each such share is
entitled to one vote. In addition, as of that date, 193,506 shares of common
stock were subject to options. There are currently 10,000,000 shares of
Financial common stock authorized.
PRINCIPAL HOLDERS OF FINANCIAL COMMON STOCK
The following table sets forth the persons who beneficially owned, at
June 1, 1995, more than five percent of the outstanding shares of Financial
common stock to the best information and knowledge of Financial. Unless
otherwise indicated, each person is the record owner of and has sole voting and
investment powers over his shares.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership(1) of Class(1)
- ------------------- -------------------- --------
<S> <C> <C>
Anthony L. Watts 107,904(2) 11.93%
Mt. Vernon Savings Bank
2408 Mt. Vernon Rd.
Dunwoody, GA 30338
Thomas P. Prince 104,736(3) 11.58%
P. O. Box 1925
Winter Park, FL 32790
Robert G. Randall 52,535(4) 5.81%
P. O. Box 151
Point Clear, AL 36564
Barney C. Guttman 83,071(5) 9.18%
Barney C. Guttman & Associates, Inc.
1022 Frick Building
Pittsburgh, PA 15219-6002
</TABLE>
113
<PAGE> 120
_______________
(1) Based on 711,036 shares of Financial common stock outstanding at June 1,
1995 plus 193,506 shares issuable upon exercise of the vested portion of
outstanding options as of June 1, 1995 for a total of 904,542 shares.
(2) Consists of (i) 56,914 shares owned of record jointly by Mr. Watts and his
spouse and (ii) 50,990 shares subject to presently exercisable options held by
Mr. Watts.
(3) Consists of (i) 88,199 shares held by the "Prince Group," which consists of
Thomas P. Prince, Selby J. Prince, Joseph S. Prince (2,756 shares), Michelle L.
Prince (2,756 shares), the Prince Family Trust (61,296 shares), the Irrevocable
Trust FBO Selby J. Prince (9,400 shares) and Robert C. Bush (11,991 shares)
and (ii) 16,537 shares subject to presently exercisable options held by Thomas
P. Prince.
(4) Consists of (i) 35,924 shares held by Robert G. Randall (13,542 shares),
Patricia T. Randall c/f Anne Randall (1,000 shares), Patricia T. Randall c/f
Meredith Randall (1,000 shares), Patricia T. Randall c/f McGarry Randall (1,000
shares), shares owned of record by Smith Barney Shearson as custodian for (a)
Robert G. Randall (14,182 shares), (b) Patricia T. Randall c/f Anne (1,733
shares), (c) Patricia T. Randall c/f Meredith (1,733 shares) and (d) Patricia
T. Randall c/f McGarry (1,733 shares) and (ii) 16,611 shares subject to
presently exercisable options held by Mr. Randall.
(5) Consists of (i) 73,966 shares owned of record by B.C. Guttman Trust and (ii)
9,105 shares owned of record by the Barney C. Guttman Profit Sharing Plan.
FINANCIAL COMMON STOCK OWNED BY MANAGEMENT
The following table sets forth the number and percentage ownership of
shares of Financial common stock beneficially owned by each director of
Financial based on information furnished to Financial by such director, and by
all directors and executive officers as a group, at June 1, 1995. Unless
otherwise indicated, each person is the record owner of and has sole voting and
investment powers over his or her shares.
114
<PAGE> 121
<TABLE>
<CAPTION>
Number of Shares Percentage
Name of Director Beneficially Owned Of Total(1)
- ---------------- ------------------ --------
<S> <C> <C>
Richard T. Bryant 13,906(2) 1.54%
Donna E. Fleishman 17,777(3) 1.97%
Gerald S. Lesher 16,749(4) 1.85%
Joseph E. Magaro 20,583(5) 2.28%
Kenneth Niemann 34,778(6) 3.85%
Thomas E. Prince 104,736(7) 11.58%
Robert G. Randall 52,535(8) 5.81%
Anthony L. Watts 107,904(9) 11.93%
All Directors and Executive 401,955(10) 44.44%
Officers as a Group (9 persons)
- ---------------
</TABLE>
(1) Based on 711,036 shares of Financial common stock outstanding at June 1,
1995 plus 193,506 shares issuable upon exercise of the vested portion of
outstanding options as of June 1, 1995 for a total of 904,542 shares.
(2) Consists of (i) 2,469 shares owned of record by Mr. Bryant and (ii) 11,437
shares subject to presently exercisable options held by Mr. Bryant.
(3) Consists of (i) 5,512 shares owned of record by Ms. Fleishman and (ii)
12,265 shares subject to presently exercisable options held by Ms. Fleishman.
(4) Consists of (i) 170 shares owned of record jointly by Mr. Lesher and his
spouse, (ii) 22 shares owned jointly by Mathew Lesher and his spouse, and (iii)
16,557 shares subject to presently exercisable options held by Mr. Lesher,
which have been assigned by Mr. Lesher to his wife, L.D. Lesher.
(5) Consists of (i) 7,162 shares owned of record by Mr. Magaro, (ii) 1,102
shares owned by Elaine Magaro, (iii) 441 shares owned by Raymond Magaro and
(iv) 11,878 shares subject to presently exercisable options held by Mr. Magaro.
(6) Consists of (i) 21,814 shares owned of record by Mr. Niemann, (ii) 94 shares
owned by Kristin Niemann and (iii) 12,870 shares subject to presently
exercisable options held by Mr. Niemann.
115
<PAGE> 122
(7) Consists of (i) 88,199 shares held by the "Prince Group," which consists of
Thomas P. Prince, Selby J. Prince, Joseph S. Prince (2,756 shares), Michelle L.
Prince (2,756 shares), the Prince Family Trust (61,296 shares), the Irrevocable
Trust FBO Selby J. Prince (9,400 shares) and Robert C. Bush (11,991 shares)
and (ii) 16,537 shares subject to presently exercisable options held by Thomas
P. Prince.
(8) Consists of (i) 35,924 shares held by Robert G. Randall (13,542 shares),
Patricia T. Randall c/f Anne Randall (1,000 shares), Patricia T. Randall c/f
Meredith Randall (1,000 shares), Patricia T. Randall c/f McGarry Randall (1,000
shares), shares owned of record by Smith Barney Shearson as custodian for (a)
Robert G. Randall (14,182 shares), (b) Patricia T. Randall c/f Anne (1,733
shares), (c) Patricia T. Randall c/f Meredith (1,733 shares) and (d) Patricia
T. Randall c/f McGarry (1,733 shares) and (ii) 16,611 shares subject to
presently exercisable options held by Mr. Randall.
(9) Consists of (i) 56,914 shares owned of record jointly by Mr. Watts and his
spouse and (ii) 50,990 shares subject to presently exercisable options held by
Mr. Watts.
(10) Consists of (i) 231,023 shares owned of record by the directors and
executive officers of Financial and (ii) 170,932 shares subject to presently
exercisable options held by them.
ADJOURNMENT OF SPECIAL MEETING
Approval of the Merger by Financial's stockholders requires the
affirmative vote of at least a majority of the total votes eligible to be cast
at the Special Meeting. In the event there are an insufficient number of
shares of Financial common stock present in person or by proxy at the Special
Meeting to approve the Merger, Financial's board of directors intends to
adjourn the Special Meeting to a later date. The place and date to which the
Special Meeting would be adjourned would be announced at the Special Meeting.
Proxies voted against the Merger will not be voted to adjourn the Special
Meeting.
The effect of any such adjournment would be to permit Financial to
solicit additional proxies for approval of the Merger. While such an
adjournment would not invalidate any proxies previously filed, including those
filed by stockholders voting against the Merger, it would afford Financial the
opportunity to solicit additional proxies in favor of the Merger.
116
<PAGE> 123
OTHER MATTERS
The board of directors of Financial is not aware of any business to
come before the Special Meeting other than those matters described above in
this Prospectus. If, however, any other matters not now known should properly
come before the Special Meeting, the proxy holders named in the accompanying
proxy will vote such proxy on such matters as determined by a majority of the
board of directors of Financial.
DATE FOR SUBMISSION OF BANCGROUP STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in BancGroup's proxy
solicitation materials for its 1996 annual meeting of stockholders, any
stockholder proposal to take action at such meeting must be received at
BancGroup's main office at One Commerce Street, Post Office Box 1108,
Montgomery, Alabama 36101, no later than 120 calendar days in advance of March
17, 1996.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand serves as the independent accountants for BancGroup.
It is not expected that a representative of such firm will be present at the
Special Meeting.
KPMG Peat Marwick, LLP, serves as the independent accountants for
Financial. It is expected that a representative of such firm will be present
at the Special Meeting and will have an opportunity to answer questions from
stockholders.
LEGAL OPINIONS
Certain issues regarding the shares of Common Stock of BancGroup
offered hereby are being passed upon by the law firm of Miller, Hamilton,
Snider & Odom, L.L.C., Mobile,
117
<PAGE> 124
Alabama, of which John C. H. Miller, Jr., a director of BancGroup and of
Colonial Bank, is a partner. John C. H. Miller, Jr. owns 11,174 shares of
Common Stock. Mr. Miller also received employee-related compensation from
BancGroup in 1994 of $42,500.
PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE
ACCOMPANYING ENVELOPE AS PROMPTLY AS POSSIBLE. YOU MAY REVOKE THE PROXY BY
GIVING WRITTEN NOTICE OF REVOCATION TO THE PERSON NAMED IN THE NOTICE OF THE
SPECIAL MEETING PRIOR TO THE SPECIAL MEETING, BY EXECUTING A LATER DATED PROXY
OR BY ATTENDING THE SPECIAL MEETING VOTING IN PERSON.
118
<PAGE> 125
INDEX TO FINANCIAL STATEMENTS
COLONIAL BANCGROUP:
All required financial statements have been incorporated by reference into this
prospectus.
MOUNT VERNON FINANCIAL CORP:
Independent Auditors' Report ...................................... F-2
Consolidated Statements of Financial Condition, June 30, 1994
and 1993......................................................... F-3
Consolidated Statements of Income Years Ended June 30, 1994,
1993 and 1992.................................................... F-4
Consolidated Statements of Stockholders' Equity Years Ended
June 30, 1994, 1993 and 1992..................................... F-5
Consolidated Statements of Cash Flows Years Ended
June 30, 1994, 1993 and 1992..................................... F-6
Notes to Consolidated Financial Statements......................... F-8
Consolidated Statements of Financial Condition,
March 31, 1995 (Unaudited)....................................... F-26
Consolidated Statements of Income for the Nine Months
Ended March 31, 1995 and 1994 (Unaudited)........................ F-27
Consolidated Statements of Stockholders' Equity for the Nine
Months Ended March 31, 1995 (Unaudited).......................... F-28
Consolidated Statements of Cash Flows for the Nine Months
Ended March 31, 1995 and 1994 (Unaudited)........................ F-29
Notes to Consolidated Financial Statements
March 31, 1995 (Unaudited)....................................... F-30
F-1
<PAGE> 126
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Mt. Vernon Financial Corp.
Dunwoody, Georgia:
We have audited the accompanying consolidated statements of financial condition
of Mt. Vernon Financial Corp. and subsidiaries as of June 30, 1994 and 1993,
and the related consolidated statements of income, stockholders' equity, and
cash flows for each of the years in the three-year period ended June 30, 1994.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Mt. Vernon
Financial Corp. and subsidiaries at June 30, 1994 and 1993, and the results of
their operations and their cash flows for each of the years in the three-year
period ended June 30, 1994, in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
August 5, 1994, except for
note 19, which is as of
August 18, 1994
F-2
<PAGE> 127
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
June 30, 1994 and 1993
<TABLE>
<CAPTION>
Assets 1994 1993
------ ---- ----
<S> <C> <C>
Cash $ 1,651,353 1,122,560
Federal funds sold 7,473,515 6,442,247
Loans receivable, net (note 3) 130,591,032 100,771,077
Loans receivable held for sale, approximate market value
of $19,336,000 at June 30, 1994 and $40,352,000 at
June 30, 1993 19,316,330 39,801,232
Federal Home Loan Bank stock, at cost (notes 4 and 9) 1,400,000 2,130,000
Real estate acquired through foreclosure, net (note 6) -- 983,214
Office properties and equipment, net (note 7) 1,154,806 621,786
Accrued interest receivable (note 5) 871,763 755,741
Other assets (note 3) 5,497,291 3,065,571
------------ ------------
$167,956,090 155,693,428
============ ============
Liabilities and Stockholders' Equity
------------------------------------
Liabilities:
Deposits (note 8) $117,083,778 101,608,859
Federal Home Loan Bank advances (note 9) 28,000,000 26,600,000
Note payable (note 10) 1,600,000 --
Advance payments by borrowers for taxes and insurance 5,991,910 4,671,087
Accrued expenses and other liabilities (notes 8 and 12) 6,057,492 14,201,199
------------ ------------
Total liabilities 158,733,180 147,081,145
------------ ------------
Stockholders' equity (notes 2, 13, 18, and 19):
Common stock, $.01 par value. Authorized 10,000,000
shares; issued and outstanding 693,114 and 804,539
shares at June 30, 1994 and 1993, respectively 6,931 8,046
Additional paid-in capital 3,873,225 4,267,329
Retained earnings 5,342,754 4,336,908
------------ ------------
Total stockholders' equity 9,222,910 8,612,283
Commitments (notes 3 and 11)
------------ ------------
$167,956,090 155,693,428
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 128
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
Consolidated Statements of Income
Years ended June 30, 1994, 1993, and 1992
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Interest income:
Loans $10,588,095 9,592,005 8,593,006
Mortgage-backed securities -- -- 324,223
Other investments 465,339 341,212 347,094
----------- ----------- -----------
Total interest income 11,053,434 9,933,217 9,264,323
----------- ----------- -----------
Interest expense:
Deposits (note 8) 4,447,588 4,211,483 4,979,193
Advances and other borrowings 851,312 1,193,521 841,054
----------- ----------- -----------
Total interest expense 5,298,900 5,405,004 5,820,247
----------- ----------- -----------
Net interest income 5,754,534 4,528,213 3,444,076
Provision for possible loan losses (note 3) -- -- 130,000
----------- ----------- -----------
Net interest income after provision
for possible loan losses 5,754,534 4,528,213 3,314,076
----------- ----------- -----------
Other income:
Loan fees and service charges 566,059 479,998 288,484
Mortgage loan servicing fees 311,301 225,980 220,492
Gain on sale of investment and mortgage-backed
securities -- -- 321,838
Gain on sale of loans 314,467 2,611,337 1,064,820
Gain on sale of loan servicing 1,899,567 306,622 198,606
Loss on real estate acquired through foreclosure
(note 6) -- (24,157) (8,636)
Other operating income, net 50,310 107,622 167,519
----------- ----------- -----------
3,141,704 3,707,402 2,253,123
----------- ----------- -----------
General and administrative expenses:
Compensation, payroll taxes, and fringe benefits
(note 15) 2,821,604 2,253,388 1,815,137
Occupancy and equipment expense (note 11) 823,017 686,158 619,856
Other 1,401,143 1,180,829 984,197
----------- ----------- -----------
Total general and administrative expenses 5,045,764 4,120,375 3,419,190
----------- ----------- -----------
Income before income taxes 3,850,474 4,115,240 2,148,009
Income tax expense (note 12) 1,402,078 1,447,490 812,700
----------- ----------- -----------
Net income $ 2,448,396 2,667,750 1,335,309
=========== =========== ===========
Income per share of common stock (notes 2, 17,
and 19) $ 2.67 2.87 1.42
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 129
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended June 30, 1994, 1993, and 1992
<TABLE>
<CAPTION>
Common stock
--------------------- Additional Total
Number paid-in Retained stockholders'
of shares Amount capital earnings equity
--------- ------ ------- -------- ------
<S> <C> <C> <C> <C> <C>
Balances at June 30, 1991, as
previously reported 4,167,926 $ 41,680 4,326,603 720,812 5,089,095
Effect of reorganization and
related stock exchange
(note 2) (3,334,341) (33,344) 33,344 -- --
---------- ---------- ---------- ---------- ----------
Balances at June 30, 1991, as
adjusted 833,585 8,336 4,359,947 720,812 5,089,095
Net income -- -- -- 1,335,309 1,335,309
---------- ---------- ---------- ---------- ----------
Balances at June 30, 1992 833,585 8,336 4,359,947 2,056,121 6,424,404
Exercise of common stock
options (note 16) 13,000 130 97,370 -- 97,500
Purchase and retirement of
common stock (53,412) (534) (277,390) (178,619) (456,543)
Common stock issued relating
to reinvestment of cash
dividends 11,366 114 87,402 -- 87,516
Dividends paid ($.05 per share) -- -- -- (208,344) (208,344)
Net income -- -- -- 2,667,750 2,667,750
---------- ---------- ---------- ---------- ----------
Balances at June 30, 1993 804,539 8,046 4,267,329 4,336,908 8,612,283
Purchase and retirement of
common stock (154,369) (1,544) (854,295) (1,012,205) (1,868,044)
Sales of common stock 2,725 27 30,248 -- 30,275
Stock dividend 40,219 402 429,943 (430,345) --
Net income -- -- -- 2,448,396 2,448,396
---------- ---------- ---------- ---------- ----------
Balances at June 30, 1994 693,114 $ 6,931 3,873,225 5,342,754 9,222,910
========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 130
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended June 30, 1994, 1993, and 1992
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,448,396 2,667,750 1,335,309
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for possible loan losses -- -- 130,000
Depreciation 204,589 177,016 226,332
Amortization of organizational costs 5,596 -- --
Amortization of loan servicing fees 553,850 982,709 425,366
Deferred income tax expense 196,577 460,475 420,200
Gain on sale of investment and mortgage-backed securities -- -- (321,838)
Gain on sale of loan servicing (1,899,567) (306,622) (198,606)
Loss on sale of real estate acquired through foreclosure -- 24,157 8,636
Gain on sale of premises and equipment -- -- --
FHLB stock dividends (105,712) (46,800) (65,500)
Decrease (increase) in mortgage loans held for sale 20,484,902 (26,347,267) (811,725)
(Increase) decrease in accrued interest receivable (116,022) (31,118) 62,111
(Increase) decrease in other assets (3,898,769) 103,588 (815,571)
Increase in advance payments by borrowers for
taxes and insurance 1,320,823 745,153 1,199,068
(Decrease) increase in other liabilities (8,425,730) 6,047,855 3,804,135
------------- ------------- -------------
Net cash provided by (used in) operating activities 10,768,933 (15,523,104) 5,397,917
------------- ------------- -------------
Cash flows from investing activities:
Proceeds from the sale or maturity of investment securities -- 250,000 --
Principal payments received on mortgage-backed securities -- -- 341,858
Proceeds from sales of mortgage-backed securities -- -- 9,769,834
Purchases of loan servicing (2,957,498) (1,419,865) (90,825)
Proceeds from the sale of loan servicing 5,715,195 1,011,510 643,293
Loan originations, net of repayments (29,819,955) (3,501,831) (34,375,490)
Sale (purchase) of stock in Federal Home Loan Bank of Atlanta 835,712 (638,200) (426,700)
Purchases of premises and equipment (737,609) (262,122) (150,306)
Capital improvements of real estate acquired through
foreclosure -- (8,071) (161,915)
Proceeds from sale of real estate acquired through foreclosure 1,118,133 797,686 721,370
------------- ------------- -------------
Net cash used in investing activities (25,846,022) (3,770,893) (23,728,881)
------------- ------------- -------------
</TABLE>
(Continued)
F-6
<PAGE> 131
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in deposits $ 15,474,919 15,691,620 (758,025)
Proceeds from Federal Home Loan Bank advances 265,000,000 177,000,000 61,300,000
Repayments of Federal Home Loan Bank advances (263,600,000) (173,300,000) (48,300,000)
Proceeds from note payable 1,600,000 -- --
Dividends paid -- (208,344) --
Proceeds from dividend reinvestment -- 87,516 --
Purchase and retirement of treasury stock (1,868,044) (456,543) --
Proceeds from the exercise of stock options -- 97,500 --
Net proceeds from sale of common stock 30,275 -- --
------------- ------------- -------------
Net cash provided by financing activities 16,637,150 18,911,749 12,241,975
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents 1,560,061 (382,248) (6,088,989)
Cash and cash equivalents at beginning of year 7,564,807 7,947,055 14,036,044
------------- ------------- -------------
Cash and cash equivalents at end of year $ 9,124,868 7,564,807 7,947,055
============= ============= =============
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 5,295,327 5,505,294 6,028,904
============= ============= =============
Income taxes $ 1,425,000 716,650 345,000
============= ============= =============
Supplemental disclosures of noncash investing activities:
Loans receivable transferred to real estate
acquired through foreclosure $ 73,404 374,099 571,147
============= ============= =============
Loan originations to finance the sale of real estate
acquired through foreclosure $ 1,071,634 655,200 1,105,450
============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 132
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1994 and 1993
(1) Summary of Significant Accounting Policies
The accounting and reporting policies of Mt. Vernon Financial Corp. and
its wholly owned subsidiary (the Company), Mt. Vernon Federal Savings
Bank and subsidiaries (the Bank) conform to generally accepted
accounting principles and to general practices within the thrift
industry. In preparing the consolidated financial statements, management
is required to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the date of the balance sheet
and revenues and expenses for the period. The following is a description
of the more significant of these policies.
(a) Principles of Consolidation
The consolidated financial statements include the accounts of
Mr. Vernon Financial Corp. and its wholly owned subsidiary, Mt.
Vernon Federal Savings Bank and its wholly owned subsidiaries,
Mt. Vernon Services Co., Inc. and The Mortgage Bank. All
significant intercompany accounts and transactions have been
eliminated in consolidation.
(b) Investment Securities
Investment securities are carried at amortized cost and are not
adjusted to the lower of cost or market because it is
management's intention to hold them for the foreseeable future.
Premiums are amortized and discounts are accreted to maturity
using a method which approximates level yield. Gains and losses
on sales of securities are recognized upon disposition, based
on the adjusted cost of the specific security.
(c) Loan Origination Fees, Discounts, Direct
Loan Origination Costs, and Loan Servicing Fees
Loan origination fees and discounts, net of certain direct
origination costs, are deferred and amortized using the
level-yield method over the lives of the underlying loans.
In addition, the Bank receives fees from the servicing of first
mortgage loans for others. Mortgage servicing fees related to
these loans are recognized as income over the period that
servicing is performed.
(d) Loan and Loan Servicing Sales
Gains and losses are realized at the time of sale of loans as
determined by the difference between the selling price and face
amount (net of fees collected) of the loans sold, adjusted by
the present value of the excess of estimated future revenues
over normal servicing fees.
Gains on sales of the right to service mortgage loans are
recognized when the purchase price is determined by a firm
agreement and certain financial criteria are met.
Loans receivable held for sale are carried at the lower of cost
or estimated market value determined on the aggregate basis.
(Continued)
F-8
<PAGE> 133
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(e) Allowance for Loan Losses
The Bank extends credit to its customers through real estate
mortgage loans secured by collateral located primarily in the
greater Atlanta metropolitan area. The Bank also extends credit
through its correspondence department in other areas of the
Southeast.
Additions to the allowance for loan losses are based on
management's evaluation of the loan portfolio under current
economic conditions, past loan loss experience, and such other
factors which, in management's judgment, deserve recognition in
estimating loan losses. In connection with the determination of
the allowance for loan losses, management obtains independent
appraisals for significant properties. Loans are charged to the
allowance when, in the opinion of management, such loans are
deemed to be uncollectible; subsequent recoveries are added to
the allowance.
Management believes that the allowances for losses on loans and
real estate acquired through foreclosure are adequate. While
management uses available information to recognize losses on
loans and real estate acquired through foreclosure, future
additions to the allowances may be necessary based on changes
in economic conditions. In addition, various regulatory
agencies, as an integral part of their examination process,
periodically review the Bank's allowances for losses on loans
and real estate acquired through foreclosure. Such agencies may
require the Bank to recognize additions to the allowances based
on their judgments of information available to them at the time
of their examination.
(f) Real Estate Acquired Through Foreclosure
Real estate acquired through foreclosure is reported at fair
value, adjusted for estimated selling costs. Fair value is
determined on the basis of current appraisals, comparable
sales, and other estimates of value obtained principally from
independent sources. Any excess of the loan balance at the time
of foreclosure over the fair value of the real estate held as
collateral is recorded as a loan loss. Gain or loss on sale and
any subsequent permanent decline in fair value is recorded in
income.
(g) Office Properties and Equipment
Office properties and equipment are carried at cost less
accumulated depreciation and amortization. Depreciation and
amortization are calculated principally on a straight-line
method over the estimated useful lives of the assets or, with
respect to leasehold improvements, over the terms of the
related leases.
(h) Organizational Costs
Organizational costs associated with the 1994 reorganization
which formed Mt. Vernon Financial Corp. (see note 2) are being
amortized on a straight-line basis over a period of five years.
(Continued)
F-9
<PAGE> 134
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(i) Mortgage Loan Interest Income
Mortgage loans that are contractually delinquent in excess of
90 days and for which collection of interest appears doubtful
are placed on nonaccrual status by the Bank. The Bank provides
an allowance for uncollected interest on all accrued interest
related to these loans. The allowance for uncollected interest
is a reduction of accrued interest receivable for financial
statement reporting.
(j) Income Taxes
Mt. Vernon Financial Corp. (the Company) files consolidated
income tax returns with its subsidiaries.
In February 1992, Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes" was issued. SFAS
109 requires a change from the deferred method of accounting
for income taxes to the asset and liability method. Under the
asset and liability method of SFAS 109, deferred tax assets and
liabilities are recognized for the temporary differences
between the financial reporting basis and the tax basis of the
Company's assets and liabilities at enacted tax rates expected
to be in effect when such amounts are realized or settled.
Under SFAS 109, deferred tax assets and liabilities are
adjusted for the effect of changes in tax rates in the period
of change.
Effective July 1, 1992, the Company adopted SFAS 109. The
cumulative effect on prior years of that change in the method
of accounting for income taxes is immaterial; therefore, no
such effect is reported in the 1993 consolidated statement of
income.
Deferred income taxes were recognized in accordance with the
deferred method for 1992 and prior years. Under the deferred
method, annual income tax expense is matched with pretax
accounting income by providing deferred taxes at current tax
rates for timing differences between the determination of net
income for financial reporting and tax purposes. Under the
deferred method, deferred tax assets and liabilities were not
adjusted upon a change in tax rates.
(k) Statement of Cash Flows
For purposes of the statement of cash flows, the Company
considers cash on hand and in banks and federal funds sold with
maturities of three months or less to be cash and cash
equivalents.
(l) Reclassifications
Certain amounts in the prior year financial statements have
been reclassified to conform with current year presentation.
(Continued)
F-10
<PAGE> 135
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(m) Recent Pronouncements
During 1993, the Financial Accounting Standards Board (FASB)
issued SFAS No. 114, "Accounting by Creditors for Impairment of
a Loan." SFAS No. 114 requires impaired loans to be measured
based on the present value of expected future cash flows,
discounted at the loan's effective interest rate, or at the
loan's observable market price, or the fair value of the
collateral if the loan is collateral dependent, beginning in
fiscal 1996. SFAS No. 114 may be adopted prior to 1996. The
Company has not yet determined the actual impact of SFAS No.
114 on its financial statements or made a determination of
whether it will adopt SFAS No. 114 prior to 1996.
(2) Reorganization
On December 8, 1993, the Bank's plan of reorganization was declared
effective with Mt. Vernon Financial Corp., a Georgia business
corporation formed solely for the purpose of effecting the
reorganization, whereby Mt. Vernon Financial Corp. acquired all
4,097,000 shares of the Bank's outstanding common stock in exchange for
819,400 shares of Mt. Vernon Financial Corp.'s common stock.
Accordingly, the accompanying consolidated financial statements reflect
restatement of all share and per share data based on the exchange. The
Bank is operated as a wholly owned subsidiary of Mt. Vernon Financial
Corp. The reorganization was accounted for at historical cost in a
manner similar to a pooling of interests.
(3) Loans Receivable
The Bank lends primarily in the greater Atlanta metropolitan area.
Although the Bank has a diversified loan portfolio, a substantial
portion of its borrowers' ability to repay loans receivable is dependent
on the economy of the Bank's primary lending area.
Loans receivable at June 30 are summarized as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Residential - fixed rate $ 9,387,198 18,026,858
Residential - balloon payment 8,767,852 670,647
Residential - adjustable rate 71,015,297 55,352,383
Residential construction 69,897,143 43,281,068
Commercial real estate 2,550,456 1,918,062
Land loans 1,738,933 1,016,133
Participation investment in loans purchased 686,643 751,954
Other loans 2,685,620 2,148,097
------------- -------------
166,729,142 123,165,202
Loans in process (34,699,241) (21,722,323)
Deferred loan fees (1,006,452) (427,777)
Premiums on loans purchased 117,583 305,975
Allowance for loan losses (550,000) (550,000)
------------- -------------
$ 130,591,032 100,771,077
============= =============
</TABLE>
(Continued)
F-11
<PAGE> 136
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following is a summary of activity in the allowance for loan losses
for the periods indicated:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of period $550,000 550,000 420,000
Provision for loan losses -- -- 130,000
Loan charge-offs, net of recoveries -- -- --
-------- -------- --------
Balance at end of period $550,000 550,000 550,000
======== ======== ========
</TABLE>
Loans to Officers and Directors - The Bank had direct and indirect loans
outstanding to certain executive officers, directors, and their
associates which aggregated $2,142,126 and $2,024,993 at June 30, 1994
and 1993, respectively. Such loans are made substantially on the same
terms as those prevailing at the time for comparable transactions with
other customers, and do not involve more than normal risk of
collectibility or contain other unfavorable features. The following is a
summary of activity during the year ended June 30, 1994 with respect to
such aggregate loans to these individuals and their associates:
<TABLE>
<S> <C>
Balance at June 30, 1993 $ 2,024,993
New loans 321,300
Repayments (204,167)
------------
Balance at June 30, 1994 $ 2,142,126
============
</TABLE>
Standby Letters of Credit - The Bank is party to certain standby letters
of credit in the normal course of business to meet the financing needs
of its customers. Those instruments involve, to varying degrees,
elements of credit and interest rate risk.
The exposure to credit loss in the event of nonperformance by the other
party to the financial commitments to the standby letters of credit is
represented by the contractual notional amount of those instruments. The
credit policies and underwriting guidelines used in making the
conditional obligations are the same as for other loans receivable.
Standby letters of credit are agreements to guarantee the performance of
a customer to a third party as long as there is no violation of any
condition established in the contract. These standby letters of credit
generally have fixed expiration dates or other termination clauses and
may require payment of a fee. Creditworthiness of each customer is
evaluated on a case-by-case basis. The amount of collateral obtained, if
deemed necessary upon extension of credit, is based on management's
credit evaluation of the counterparty. Collateral held varies, but is
generally savings deposits or certificates of deposit. The Bank had
approximately $100,000 in standby letters of credit at June 30, 1994.
(Continued)
F-12
<PAGE> 137
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Mortgage Loan Commitments - At June 30, 1994, the Bank had outstanding
commitments to originate first mortgage loans totaling approximately
$912,000. These first mortgage loan commitments consisted of $379,000 in
variable rate loans and $533,000 in fixed rate loans with terms of up to
30 years. The Bank also had commitments to fund existing equity lines of
credit of approximately $1,615,000 and additional warehouse lines of
credit of approximately $9,804,000. In addition to the loans above, at
June 30, 1994, the Bank had outstanding commitments to purchase loans or
participation in loans of approximately $3,755,000 and to sell loans or
participation in loans of approximately $17,355,000. It is the opinion
of management that such commitments do not involve more than a normal
risk of loss.
Loans Serviced for Others - At June 30, 1994, 1993, and 1992, the Bank
was servicing loans for others aggregating approximately $231,091,000,
$244,314,000, and $172,554,000, respectively.
The Bank has included in other assets the cost of acquiring the right to
service mortgage loans and an excess servicing fee receivable which
represents the net present value of the excess of estimated servicing
income over normal servicing fees on loans serviced for others. An
analysis of activity with respect to the purchased servicing and excess
servicing fee receivable for the years ended June 30 is as follows:
<TABLE>
<CAPTION>
Excess servicing fee Purchased servicing
---------------------------------- ----------------------------------
1994 1993 1992 1994 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of
period $ 1,420,354 848,955 334,681 1,212,884 1,209,637 1,437,256
Amounts capitalized 1,503,827 1,352,166 1,065,883 2,957,498 1,419,865 90,825
Amortization (303,895) (247,010) (205,675) (249,955) (735,699) (219,691)
Sales of servicing (1,415,234) (533,757) (345,934) (2,400,394) (171,131) (98,753)
Adjustments to fair value (368,451) -- -- -- (509,788) --
----------- ----------- ----------- ----------- ----------- -----------
Balance at end of period $ 836,601 1,420,354 848,955 1,520,033 1,212,884 1,209,637
=========== =========== =========== =========== =========== ===========
</TABLE>
Amortization of the purchased servicing and excess service fee assets is
provided using the level-yield method over the estimated life of the
loans being serviced. The carrying value of the purchased servicing and
excess servicing fee receivable is evaluated and adjusted periodically
when the Bank experiences unanticipated principal payments and the net
present value of estimated future servicing revenue in excess of a
normal fee is less than its carrying value.
(4) Investments Required by Law
Investment in stock of a Federal Home Loan Bank is carried at cost and
is required of those institutions who utilize their services. No ready
market exists for the stock and it has no quoted market value.
(Continued)
F-13
<PAGE> 138
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Accrued Interest Receivable
Accrued interest receivable at June 30 is summarized as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Loans $836,045 717,175
Investments 15,741 12,262
Federal Home Loan Bank stock 19,977 26,304
-------- --------
$871,763 755,741
======== ========
</TABLE>
(6) Real Estate Acquired Through Foreclosure
Real estate acquired through foreclosure at June 30 is summarized as
follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Real estate acquired through foreclosure $ -- 983,214
Less allowance for losses -- --
-------- --------
$ -- 983,214
======== ========
</TABLE>
Gain (loss) on real estate acquired through foreclosure for the years
ended June 30 is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Gain (loss) on sales $ -- (24,157) (8,636)
Provision for losses -- -- --
-------- -------- --------
$ -- (24,157) (8,636)
======== ======== ========
</TABLE>
A summary of activity in the allowance for losses on real estate
acquired through foreclosure for the years ended June 30 is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of period $ -- 1,139 66,390
Provision for losses -- -- --
Charge-offs -- (1,139) (65,251)
------- ------- -------
Balance at end of period $ -- -- 1,139
======= ======= =======
</TABLE>
(7) Office Properties and Equipment
Office properties and equipment at June 30 are summarized as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Leasehold improvements $ 477,455 447,684
Land 431,288 --
Furniture and equipment 1,425,833 1,189,566
---------- ----------
2,334,576 1,637,250
Less accumulated depreciation and amortization 1,179,770 1,015,464
---------- ----------
$1,154,806 621,786
========== ==========
</TABLE>
(Continued)
F-14
<PAGE> 139
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(8) Deposits
A summary of the Bank's deposits at June 30 is as follows:
<TABLE>
<CAPTION>
1994 1993
--------------------- ---------------------
Weighted Weighted
average average
Balance rate Balance rate
------- ---- ------- ----
<S> <C> <C> <C> <C>
Passbook accounts $ 2,537,120 2.75% $ 1,185,394 3.00%
------------ ---- ------------ ----
NOW and money market deposit
accounts 15,197,884 2.04 16,038,578 1.42
------------ ---- ------------ ----
Time deposits:
Within six months 4,392,771 3.47 2,157,965 3.15
Six months to one year 37,519,397 4.05 22,527,570 3.93
One year to three years 27,856,568 4.84 19,187,535 5.31
Over three years 5,066,500 6.63 4,988,747 7.67
Jumbo certificate accounts 17,536,726 4.43 29,566,185 4.39
Individual retirement accounts 6,976,812 4.87 5,956,885 4.53
------------ ---- ------------ ----
99,348,774 4.50 84,384,887 4.65
------------ ---- ------------ ----
$117,083,778 4.14% $101,608,859 4.05%
============ ==== ============ ====
</TABLE>
A summary of the Bank's interest expense on deposits, by category, for
the years ended June 30 is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Passbook accounts $ 47,074 42,297 33,615
NOW and money market deposit accounts 275,968 224,696 330,265
Time deposits:
Within six months 97,997 79,356 136,190
Six months to one year 1,092,374 823,650 1,790,271
One year to three years 1,146,152 1,154,297 799,331
Over three years 344,606 355,254 325,842
Jumbo certificate accounts 1,138,812 1,168,790 900,381
Individual retirement accounts 304,605 363,143 663,298
---------- ---------- ----------
$4,447,588 4,211,483 4,979,193
========== ========== ==========
</TABLE>
The amount and maturities of all time deposits at June 30, 1994 is as
follows:
<TABLE>
<CAPTION>
Years ending June 30, Amount
--------------------- ------
<S> <C>
1995 $ 73,110,681
1996 17,514,174
1997 4,631,288
1998 and thereafter 4,092,631
------------
$ 99,348,774
============
</TABLE>
(Continued)
F-15
<PAGE> 140
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Accrued interest payable on all deposits at June 30, 1994 and 1993 was
$72,746 and $57,737, respectively, and is included in accrued expenses
and other liabilities in the accompanying consolidated statements of
financial condition.
(9) Federal Home Loan Bank Advances
Advances from the Federal Home Loan Bank at June 30, 1994 and 1993 are
summarized by year of maturity in the table below:
<TABLE>
<CAPTION>
Date Interest rate 1994 1993
---- ------------- ---- ----
<S> <C> <C> <C>
Notes maturing within
12 months 3.24% to 6.7% $28,000,000 26,600,000
=========== ==========
</TABLE>
The weighted average interest rate on Federal Home Loan Bank advances
was 4.96% and 3.79% at June 30, 1994 and 1993, respectively.
The Bank has the ability to borrow an additional $4,000,000 from the
Federal Home Loan Bank. The advances and any future borrowings are
collateralized by certain qualifying real estate loans with outstanding
principal balances aggregating approximately $37,658,000 under a
security agreement with the Federal Home Loan Bank. Additionally, all
stock of the Federal Home Loan Bank is pledged as collateral for the
advances.
The Bank also has a standing agreement for credit, in the form of
federal funds sold, of up to $2,000,000 with a correspondent bank.
(10) Note Payable
During the year, Mt. Vernon Financial Corp. borrowed $1,600,000 from a
commercial bank at a variable rate equal to the prime rate. Quarterly
principal payments of $100,000 are due beginning September 1994 with
interest payable quarterly.
At June 30, 1994, annual principal payments are as follows:
<TABLE>
<CAPTION>
Years ending June 30, Amount
--------------------- ------
<S> <C>
1995 $400,000
1996 400,000
1997 400,000
1998 400,000
========
</TABLE>
(11) Commitments
The Company leases its office space under nine operating leases which
expire at various dates ranging through 1998. Rent expense totaled
$344,379, $279,681, and $251,740 for the years ended June 30, 1994,
1993, and 1992, respectively.
(Continued)
F-16
<PAGE> 141
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
At June 30, 1994, the minimum lease payments due under the leases are as
follows:
<TABLE>
<CAPTION>
Years ending June 30, Amount
--------------------- ------
<S> <C>
1995 $363,010
1996 147,898
1997 131,133
1998 102,230
1999 41,413
========
</TABLE>
(12) Income Taxes
The Company adopted SFAS 109 as of July 1, 1992, as discussed in note 1.
The cumulative effect of this change in accounting for income taxes was
immaterial and therefore does not have any effect on the consolidated
statement of income for the year ended June 30, 1993. Prior years'
financial statements have not been restated. Deferred tax assets have
been recognized for taxes paid in prior years and future reversals of
existing taxable temporary differences.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at June
30, 1994 and 1993 are presented below.
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Deferred tax assets (liabilities):
Loans receivable, principally due to deferred
loan fees and allowance for loan losses $(1,364,382) (1,125,682)
FHLB stock, due to dividends not recognized
for tax purposes (112,577) (139,894)
Premises and equipment, due to differences
in depreciation methods for tax purposes 36,558 27,503
Other -- (5,751)
----------- -----------
Net deferred tax liabilities $(1,440,401) (1,243,824)
=========== ===========
</TABLE>
The Company has determined that a valuation allowance against deferred
tax assets is not required as reversing temporary taxable items will
offset the reversing deductible temporary differences.
(Continued)
F-17
<PAGE> 142
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the year ended June 30, 1992, deferred income tax expense results
from timing differences caused by differences in the periods in which
financial statement income and taxable income are reported. The
components of the deferred tax provisions resulting from such
differences are summarized as follows:
<TABLE>
<S> <C>
Reporting of certain income and expense under the cash
basis for tax purposes $ 81,886
Gain on sale of loans deferred and amortized for tax purposes (7,933)
FHLB stock dividends received 25,968
Recognition of loan origination fees, net of direct loan
origination costs 333,649
Excess (deficit) of tax cost recovery deductions over book
depreciation (13,370)
---------
$ 420,200
=========
</TABLE>
The components of income tax expense attributable to income from
continuing operations for the years ended June 30, 1994, 1993, and 1992
are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Federal:
Current $ 1,087,449 826,328 343,800
Deferred 173,477 506,843 351,200
----------- ----------- -----------
1,260,926 1,333,171 695,000
----------- ----------- -----------
State:
Current 118,052 -- 48,700
Deferred 23,100 114,319 69,000
----------- ----------- -----------
141,152 114,319 117,700
----------- ----------- -----------
Total $ 1,402,078 1,447,490 812,700
=========== =========== ===========
</TABLE>
The difference between the actual total provision for Federal and state
income taxes and Federal income taxes computed at the statutory rates of
34% is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Federal income tax at statutory rate $ 1,309,161 1,399,182 730,323
Increase (decrease) in taxes resulting from:
Statutory bad debt deduction -- -- (62,662)
Provision for possible losses on loans
and real estate acquired through
foreclosure -- -- 44,200
State income tax, net of Federal income
tax benefit 93,160 75,451 77,682
Other (243) (27,143) 23,157
----------- ----------- -----------
$ 1,402,078 1,447,490 812,700
=========== =========== ===========
Effective tax rate 36.4% 35.2 37.8
=========== =========== ===========
</TABLE>
(Continued)
F-18
<PAGE> 143
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(13) Stockholders' Equity and Regulatory Matters
The Federal Deposit Insurance Corporation Improvement Act of 1991
(FDICIA) was signed into law on December 19, 1991. Regulations
implementing the prompt corrective action provisions of FDICIA became
effective on December 19, 1992. In addition to the prompt corrective
action requirements, FDICIA includes significant changes to the legal
and regulatory environment for insured depository institutions,
including reductions in insurance coverage for certain kinds of
deposits, increased supervision by the Federal regulatory agencies,
increased reporting requirements for insured institutions, and new
regulations concerning internal controls, accounting, and operations.
The prompt corrective action regulations define specific capital
categories based on an institution's capital ratios. The capital
categories, in declining order, are "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized," and
"critically undercapitalized." Institutions categorized as
"undercapitalized" or worse are subject to certain restrictions,
including the requirement to file a capital plan with its primary
Federal regulator, prohibitions on the payment of dividends and
management fees, restrictions on executive compensation, and increased
supervisory monitoring, among other things. Other restrictions may be
imposed on the institution either by its primary Federal regulator or by
the Federal Deposit Insurance Corporation, including requirements to
raise additional capital, sell assets, or sell the entire institution,
Once an institution becomes "critically undercapitalized," it must
generally be placed in receivership or conservatorship within 90 days.
To be considered "well capitalized," an institution must generally have
a leverage ratio of at least 5%, a Tier 1 risk-based capital ratio of at
least 6%, and a total risk-based capital ratio of at least 10%. An
institution is deemed to be "critically undercapitalized" if it has a
tangible equity ratio of 2% or less.
While the OTS and the Financial Institutions Reform Recovery and
Enforcement Act of 1989 (FIRREA) minimum capital requirements were not
changed by FDICIA, an OTS regulated thrift capital category will be
determined using thresholds associated with the above capital
categories. OTS minimum capital requirements are 1.5% tangible capital,
3% core capital, and 8% risk-based capital. Therefore, an OTS-regulated
thrift could meet all three of its OTS minimum capital requirements yet
still be "undercapitalized" for purposes of prompt corrective action
under FDICIA.
At June 30, 1994, the Bank was in compliance with all such capital
requirements. The following table summarizes the regulatory capital
requirements and the Bank's regulatory capital at June 30, 1994.
<TABLE>
<CAPTION>
Minimum required
regulatory capital
Regulatory capital under FIRREA
------------------ ------------------
% of % of
Amount assets Amount assets
------ ------ ------ ------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Tangible $10,460,000 6.2% $ 2,515,000 1.5%
Core 10,460,000 6.2 5,030,000 3.0
Risk-based 11,010,000 11.4 7,726,000 8.0
</TABLE>
(Continued)
F-19
<PAGE> 144
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
At June 30, 1994, the Bank's tangible, core, and risk-based regulatory
capital exceeded the minimum required regulatory capital under FIRREA by
$7,945,000 (unaudited), $5,430,000 (unaudited), and $3,284,000
(unaudited), respectively; furthermore, the Bank was categorized as
"well capitalized" under the aforementioned FDICIA requirements.
A reconciliation of stockholder's equity of the Bank as disclosed in
note 18 to regulatory capital amounts at June 30, 1994 follows:
<TABLE>
<CAPTION>
Tangible
and core Risk-based
-------- ----------
(unaudited)
<S> <C> <C>
Stockholder's equity as reported in the
accompanying financial statements $10,460,000 10,460,000
General loan loss reserves -- 550,000
----------- -----------
$10,460,000 11,010,000
=========== ===========
</TABLE>
During the year ended June 30, 1994, the Board of Directors of the
Company declared a 5% stock dividend. Net income per share and weighted
average share and equivalent share data has been restated for all
periods presented to reflect this stock dividend.
The Company purchased and retired 154,369 and 53,412 common shares
during the years ended June 30, 1994 and 1993, respectively. The cost of
these shares was $1,868,044 and $456,543 for the years ended June 30,
1994 and 1993, respectively.
(14) Fair Values of Financial Instruments
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments"
(SFAS 107), requires disclosure of fair value information about
financial instruments, whether or not recognized in the balance sheet,
for which it is practicable to estimate such value. In cases where
quoted market prices are not available, fair values are to be based on
estimates using present value or other valuation techniques. Those
techniques are significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. In that regard,
the derived fair value estimates cannot be substantiated by comparison
to independent markets and, in many cases, could not be realized in
immediate settlement of the instrument. These estimates are subjective
in nature and involve uncertainties and matters of significant judgment
and therefore cannot be determined with precision. Changes in
assumptions would significantly affect the estimates. SFAS 107 excludes
certain financial instruments and all nonfinancial instruments from its
disclosure requirements.
Fair value estimates are based on existing on and off balance sheet
financial instruments and other recorded assets and liabilities without
attempting to estimate the value of anticipated future business. The tax
ramifications related to the realization of the unrealized gains and
losses can have a significant effect on fair value estimates and have
not been considered in any of the estimates. Accordingly, the aggregate
fair value amounts presented do not represent the underlying value of
the Company.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for its financial instruments.
(Continued)
F-20
<PAGE> 145
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Cash and federal funds sold - The carrying amounts of cash and federal
funds sold approximate those assets' fair values.
FHLB stock - The carrying amount of FHLB stock approximates fair value
although no ready market exists for such stock.
Loans - For loans where a ready market exists, fair values are estimated
based on published mortgage-backed security prices, or indications from
external secondary market makers.
The fair value of construction loans approximates the carrying value, as
this type of loan is short-term in nature and the interest rate is
variable. Fair values for commercial, consumer, and all other types of
loans are calculated by discounting scheduled cash flows through the
estimated maturity using estimated market discount rates that reflect
the credit and interest rate risk inherent in the loan. The estimation
of maturity is based on the Company's historical experience with
repayments for each loan classification modified, as required, by an
estimate of the effect of the current economic and lending conditions.
Fair value for significant nonperforming loans is based on recent
external appraisals. If appraisals are not available, estimated cash
flows are discounted using a rate commensurate with the risk associated
with the estimated cash flows. Assumptions regarding credit risk, cash
flows, and discount rates are judgmentally determined using available
market information and specific borrower information.
Deposits - Fair values for fixed rate certificates of deposit are
estimated based on a discounted cash flow method which uses interest
rates currently being offered on certificates of similar terms and
maturities. The carrying amounts of all other deposits, due to their
nature, approximate their fair values.
FHLB advances - The carrying amounts of FHLB advances approximate fair
value due to their short-term nature.
Note payable - The carrying amount of the note payable approximates fair
value because such note bears interest at a variable rate (prime).
Off-balance sheet instruments - Fair values for the Company's
off-balance sheet instruments are based on fees and income on sales
currently earned on similar agreements, taking into account the terms of
the agreements and credit standings.
(Continued)
F-21
<PAGE> 146
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The estimated fair value of the Company's financial instruments at June
30, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
------------------ ------------------
Carrying Fair Carrying Fair
amount value amount value
------ ----- ------ -----
(Amounts in thousands)
<S> <C> <C> <C> <C>
Financial assets:
Cash $ 1,651 1,651 1,123 1,123
Federal funds sold 7,474 7,474 6,442 6,442
Loans, net 130,591 130,856 100,771 103,516
Loans held for sale 19,316 19,336 39,801 40,352
FHLB stock 1,400 1,400 2,130 2,130
Financial liabilities:
Deposits 117,084 117,257 101,609 100,929
FHLB advances 28,000 28,000 26,600 26,600
Note payable 1,600 1,600 -- --
Off-balance sheet instruments -
loan and other commitments -- 40 -- 106
</TABLE>
At June 30, 1994, the Bank had purchased and excess servicing fees
receivable with carrying amounts of $1,520,000 and $837,000,
respectively. The fair value of the purchased servicing fees, as
determined by an independent consulting and valuation firm, was
$2.464,000 (unaudited) at June 30, 1994. The fair value of the excess
servicing fees at June 30, 1994 was $837,000. The fair value of excess
servicing fees receivable approximates its carrying value due to the
Bank's evaluation of the underlying loan portfolio and subsequent
adjustment for loan prepayments and other market conditions.
(15) Employee Benefit Plans
Effective June 1, 1992, the Company adopted a 401(k) Profit Sharing Plan
and Trust (Plan) which covers substantially all of its employees. The
Company matches 25% of employee contributions to the Plan and may make
additional discretionary contributions. The Company made contributions
to the Plan of $26,630 in 1994, $30,479 in 1993, and $8,175 in 1992.
(16) Stock Option and Employee Stock Purchase Plans
On May 19, 1988, the Board of Directors authorized the grant of 13,000
options to certain employees at an exercise price of $7.50 per share.
The options were granted on June 1, 1988 and were exercised prior to
their expiration date of June 1, 1993. On May 21, 1992, the Board of
Directors authorized the grant of 168,296 options for Board members and
employees at an exercise price of $4.99 per share. The options were
granted on June 18, 1992 and expire on October 15, 1996. Also, on July
15, 1993, the Board of Directors authorized the grant of 16,800 (as
adjusted for 5% stock dividend - see note 19) options to certain
employees at an exercise price of $9.53 per share which expire on
October 15, 1996.
(Continued)
F-22
<PAGE> 147
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following is a summary of activity in the Stock Incentive Plan for
the periods indicated. Prior amounts have been adjusted to reflect a
one-for-five reverse stock split and 5% stock dividend declared in
fiscal year 1994 and a 5% stock dividend declared in August 1994 (see
note 19):
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Options outstanding at beginning of year 168,296 181,296
Options granted 16,800 --
Options exercised -- 13,000
Options canceled or expired -- --
Effect of stock dividend (see note 19) 8,410 --
------- -------
Options outstanding at end of year 193,506 168,296
======= =======
</TABLE>
On March 30, 1994, the Company adopted an Employee Stock Purchase Plan
(the "Purchase Plan"). The Purchase Plan provided that an eligible
employee may have purchased Company stock during the period from
adoption to April 12, 1994 at an exercise price of $11.11 per share.
During the offer period, employees purchased 2,725 shares representing
proceeds of $30,275.
(17) Net Income Per Share
Net income per share is based on a weighted average of 916,061 shares
and equivalent shares during the year ended June 30, 1994, 930,491
shares and equivalent shares during the year ended June 30, 1993, and
939,161 shares and equivalent shares during the year ended June 30,
1992. The dilutive effect of stock options has been considered in the
computation of equivalent shares and is included from the respective
dates of issuance. Net income per share, weighted average shares, and
equivalent shares outstanding have been retroactively restated to
reflect the fiscal 1994 reverse stock split and 5% stock dividend and
the 5% stock dividend declared in August 1994 (see note 19).
(18) Condensed Financial Information of Mt. Vernon Financial Corp. (Parent
Only)
The following represents parent company only condensed financial
information of the Company. The parent company was formed in 1994.
(Continued)
F-23
<PAGE> 148
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Condensed Balance Sheet
June 30, 1994
Assets
------
<TABLE>
<S> <C>
Cash $ 43,220
Dividends receivable 250,000
Investment in bank subsidiary 10,460,283
Other assets 69,701
-----------
Total assets $10,823,204
===========
Liabilities and Shareholders' Equity
------------------------------------
Note payable (note 10) $ 1,600,000
Other liabilities 294
-----------
Total liabilities 1,600,294
-----------
Shareholders' equity:
Common stock, $.01 par value, authorized 10,000,000
shares; issued and outstanding 693,114 shares 6,931
Additional paid-in capital 3,873,225
Retained earnings 5,342,754
-----------
Total shareholders' equity 9,222,910
-----------
Total liabilities and shareholders' equity $10,823,204
===========
Condensed Statement of Income
Year ended June 30, 1994
Dividends from the bank subsidiary $ 350,000
Expenses:
Amortization of organization costs 5,596
Interest expense 15,794
Other expenses 1,285
-----------
Total expenses 22,675
-----------
Income before equity in undistributed income
of bank subsidiary 327,325
Equity in undistributed income of bank subsidiary 2,121,071
-----------
Net income $ 2,448,396
===========
</TABLE>
(Continued)
F-24
<PAGE> 149
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Condensed Statement of Cash Flows
Year ended June 30, 1994
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income $ 2,448,396
Adjustments to reconcile net income to net cash
provided by operating activities:
Undistributed earnings of bank subsidiary (2,121,071)
Amortization expense 5,596
Changes in assets and liabilities:
Increase in other assets (75,297)
Increase in other liabilities 294
-----------
Net cash provided by operating activities 257,918
-----------
Cash flows used in investing activities - increase in dividends
receivable from subsidiary bank (250,000)
-----------
Cash flows from financing activities:
Proceeds from note payable 1,600,000
Purchase and retirement of treasury stock after
formation of holding company (1,594,973)
Net proceeds from issuance of common stock 30,275
-----------
Net cash provided by financing activities 35,302
-----------
Net increase in cash and cash equivalents 43,220
Cash and cash equivalents at beginning of year --
-----------
Cash and cash equivalents at end of year $ 43,220
===========
</TABLE>
The primary source of funds available to the parent company to pay
shareholder dividends and other expenses is dividends from its
subsidiary bank. Regulatory agencies impose restrictions on the amounts
of dividends that may be declared by the subsidiary bank. Such
restriction for the Bank is the amount of the aforementioned required
capital (see note 13). The amount of cash dividends available from the
subsidiary bank for payment in 1995, upon regulatory approval, is
approximately $3,284,000. As a result, at June 30, 1994, approximately
$7,176,000 of the parent company's investment in the Bank was restricted
as to dividend payments from the Bank to the parent company under the
foregoing regulatory limitations.
(19) Subsequent Event
On August 18, 1994, the Board of Directors of the Company declared a 5%
stock dividend. Income and dividends per share information as well as
outstanding stock option information have been retroactively restated to
reflect such stock dividend.
F-25
<PAGE> 150
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
March 31, 1995
<TABLE>
<CAPTION>
Assets 1995 1994
----------- -----------
(unaudited)
<S> <C> <C>
Cash $ 1,093,741 $ 1,124,974
Federal funds sold 7,764,583 3,853,233
Loans receivable, net 157,227,647 127,480,444
Loans receivable held for sale, approximate market
value of $22,087,100 21,726,276
Federal Home Loan Bank Stock, at cost 2,200,000 1,334,000
Real estate acquired through foreclosure 0 77,452
Office properties and equipment, net 4,227,694 709,082
Accrued interest receivable 1,149,719 727,920
Other assets 2,386,036 4,109,643
----------- -----------
$197,775,696 $139,416,748
=========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Deposits $134,204,121 113,370,992
Federal Home Loan Bank advances 44,000,000 3,000,000
Note payable 1,364,938 600,000
Advance payments by borrowers for property taxes
and insurance 3,899,872 4,930,659
Accrued expenses and other liabilites 4,076,014 7,853,381
----------- -----------
Total liabilities 187,544,945 129,755,032
----------- -----------
Stockholders' equity
Common stock, $.01 par value. Authorized 10,000,000
shares; issued and outstanding 711,036 shares 7,110 7,661
Additional paid-in capital 4,173,718 4,264,862
Retained earnings 6,049,923 5,389,193
----------- -----------
Total stockholders' equity 10,230,751 9,661,716
----------- -----------
$197,775,696 $139,416,748
=========== ===========
</TABLE>
F-26
<PAGE> 151
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
Consolidated Statement of Income
For the nine months ended March 31, 1995 and 1994
<TABLE>
<CAPTION>
Nine months ended March 31,
---------------------------
1995 1994
----------- ----------
(unaudited)
<S> <C> <C>
Interest Income:
Loans $10,011,340 $8,100,723
Other investments 409,645 342,907
----------- ----------
Total interest income 10,420,985 8,443,630
----------- ----------
Interest expense:
Deposits 4,387,790 3,286,897
Advances and other borrowings 1,393,568 724,837
----------- ----------
Total interest expense 5,781,358 4,011,734
----------- ----------
Net interest income 4,639,627 4,431,896
Provision for possible loan losses 0 0
----------- ----------
Net interest income after provision for possible
loan losses 4,639,627 4,431,896
----------- ----------
Other income:
Loan fees and service charges 257,009 417,983
Mortgage loan servicing fees 298,850 (161,780)
Gain on sale of loans 405,455 1,155,254
Gain (loss) on sale of loan servicing (20,315) 793,390
Gain on real estate acquired through foreclosure 84,132 0
Other operating income, net 20,139 14,986
----------- ----------
1,045,270 2,219,833
----------- ----------
General and administrative expenses:
Compensation, payroll taxes, and fringe benefits 2,165,891 1,988,305
Occupancy and equipment expense 659,837 608,185
Other 941,769 1,030,092
----------- ----------
Total general and administrative expenses 3,767,497 3,626,582
----------- ----------
Income before income taxes 1,917,400 3,025,147
Income tax expense 707,138 1,103,245
----------- ----------
Net income $ 1,210,262 $1,921,902
=========== ==========
</TABLE>
F-27
<PAGE> 152
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
For the nine months ended March 31, 1995
<TABLE>
<CAPTION>
Common Stock
---------------------- Additional Total
Number paid-in Retained stockholders'
of shares Amount capital earnings equity
--------- -------- ----------- --------- -------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1994 693,114 $6,931 3,873,225 5,342,754 9,222,910
Purchase and retirement of common stock (15,889) (159) (88,672) (113,012) (201,843)
5% stock dividend 33,811 338 389,165 (390,081) (578)
Net income 1,210,262 1,210,262
------------------------------------------------------------
Balances at March 31, 1995 711,036 $7,110 $4,173,718 $6,049,923 $10,230,751
============================================================
</TABLE>
F-28
<PAGE> 153
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the nine months ended March 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
(unaudited)
Cash flows from operating activities:
Net income $1,210,262 $1,921,902
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for possible loan losses 0 0
Depreciation 172,106 147,305
Amortization of organizational costs 8,743 2,798
Amortization of loan servicing fees 297,834 1,065,963
Deferred income tax expense (243,757) 0
(Gain) loss on sale of loan servicing 20,315 (793,390)
(Gain) loss on sale of real estate acquired through foreclosure (84,132) 0
FHLB stock dividends 0 (105,712)
Decrease (increase) in mortgage loans held for sale (2,409,946) 22,669,020
(Increase) decrease in accrued interest receivable (277,956) 27,821
(Increase) decrease in other assets 2,517,894 (1,670,031)
Increase (decrease) in advance payments by borrowers for
taxes and insurance (2,092,038) 259,572
(Decrease) increase in other liabilities (1,737,721) (6,433,024)
---------- ----------
Net cash provided by (used in) operating activities (2,618,396) 17,092,224
---------- ----------
Cash flows from investing activities:
Purchases of loan servicing 105,778 (2,840,965)
Proceeds from the sale of loan servicing 235,051 3,259,176
Loan originations, net of repayments (26,733,040) (9,698,299)
Sale (purchase) of stock in Federal Home Loan Bank of Atlanta (800,000) 901,712
Purchases of premises and equipment (3,244,994) (234,601)
Capital improvements of real estate acquired through foreclosure (39,904) 0
Proceeds from sale of real estate acquired through foreclosure 146,101 1,044,729
---------- ----------
Net cash used in investing activities (30,331,008) (7,568,248)
---------- ----------
Cah flows from financing activities:
Net increase (decrease) in deposits 17,120,343 11,762,133
Proceeds from Federal Home Loan Bank advances 360,000,000 219,000,000
Repayments of Federal Home Loan Bank advances (344,000,000) (242,600,000)
Proceeds from note payable 203,000 600,000
Repayments of note payable (438,062) 0
Cash paid in lieu of fractional shares (578) 0
Purchase and retirement of treasury stock (201,843) (872,709)
---------- ----------
Net cash provided by (used in) financing activities 32,682,860 (12,110,576)
---------- ----------
Net decrease in cash and cash equivalents (266,544) (2,586,600)
Cash and cash equivalents at beginning of period 9,124,868 7,564,807
---------- ----------
Cash and cash equivalents at end of period $8,858,324 $4,978,207
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $5,740,755 $4,060,135
========== ==========
Income taxes $1,013,778 $1,163,835
========== ==========
Supplemental disclosures of noncash investing activities:
Loans receivable transferred to real estate
acquired through foreclosure $96,425 $73,404
========== ==========
Loan originations to finance the sale of real estate
acquired through foreclosure $0 $1,071,634
========== ==========
</TABLE>
F-29
<PAGE> 154
MT. VERNON FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995
(UNAUDITED)
SELECTED INFORMATION - SUBSTANTIALLY ALL DISCLOSURES
REQUIRED BY GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
ARE NOT INCLUDED
The accompanying unaudited consolidated financial statements of Mt. Vernon
Financial Corp. and subsidiaries as of March 31, 1995 and for the nine months
ended March 31, 1995 and 1994 have been prepared in accordance with generally
accepted accounting principles for interim information. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all material adjustments considered necessary for a fair
presentation have been included, including normal recurring accruals and
adjustments. The results of operations for the interim periods herein are not
necessarily indicative of the results that may be expected for the entire year.
For further information, refer to the consolidated financial statements and
footnotes thereto included in Mt. Vernon Financial Corp.'s audited consolidated
financial statements for the year ended June 30, 1994.
F-30
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
THE COLONIAL BANCGROUP, INC.,
AND
MT. VERNON FINANCIAL CORPORATION
DATED AS OF
MAY 4, 1995
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TABLE OF CONTENTS
<TABLE>
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ARTICLE 1 -- NAME
1.1 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-7
ARTICLE 2 -- MERGER -- TERMS AND CONDITIONS
2.1 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-7
2.2 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-7
2.3 Articles of Incorporation and Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-8
2.4 Resulting Corporation's Officers and Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-8
2.5 Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-9
2.6 Further Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-9
2.7 Effective Date and Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-9
ARTICLE 3 -- CONVERSION OF FINANCIAL STOCK
3.1 Conversion of Financial Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-10
3.2 Surrender of Financial Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-12
3.3 Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-13
3.4 Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-13
3.5 BancGroup Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-14
3.6 Dissenting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-14
3.7 Cash Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-14
ARTICLE 4 -- REPRESENTATIONS, WARRANTIES AND
COVENANTS OF BANCGROUP
4.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-15
4.2 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-15
4.3 Financial Statements; Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-16
4.4 No Conflict with Other Instrument . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-18
4.5 Absence of Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-19
4.6 Approval of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-19
4.7 Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-20
4.8 Title and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-20
4.9 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-20
4.10 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-21
4.11 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-21
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4.12 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-22
4.13 Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-22
4.14 Filings Incorporated by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-23
4.15 Form S-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-23
4.16 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-23
ARTICLE 5 -- REPRESENTATIONS, WARRANTIES AND
COVENANTS OF FINANCIAL
5.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-24
5.2 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-24
5.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-25
5.4 Financial Statements; Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-25
5.5 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-28
5.6 Title and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-31
5.7 Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-33
5.8 Charter and Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-33
5.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-34
5.10 Material Contract Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-35
5.11 No Conflict with Other Instrument . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-35
5.12 Governmental Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-35
5.13 Absence of Regulatory Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-35
5.14 Absence of Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-36
5.15 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-36
5.16 Pension and Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-37
5.17 Buy-Sell Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-37
5.18 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-38
5.19 Approval of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-38
5.20 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-38
5.21 Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-39
5.22 Loans; Adequacy of Allowance for Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-39
5.23 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-40
5.24 Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-41
5.25 Lender and Servicer Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-41
5.26 Loan and Mortgage Servicing Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-44
5.27 No Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-47
5.28 Mortgage Servicing Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-49
5.29 Investor Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-50
5.30 Custodial Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-50
5.31 Pool Certification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-51
5.32 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-51
5.33 Stock Repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-52
</TABLE>
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ARTICLE 6 -- ADDITIONAL COVENANTS
6.1 Additional Covenants of BancGroup . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-52
6.2 Additional Covenants of Financial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-55
ARTICLE 7 -- MUTUAL COVENANTS AND AGREEMENTS
7.1 Best Efforts; Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-58
7.2 Press Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-59
7.3 Mutual Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-59
7.4 Access to Properties and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-59
ARTICLE 8 -- CONDITIONS TO OBLIGATIONS OF ALL PARTIES
8.1 Approval by Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-60
8.2 Regulatory Authority Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-60
8.3 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-61
8.4 Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-61
8.5 Tax Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-61
ARTICLE 9 -- CONDITIONS TO OBLIGATIONS OF FINANCIAL
9.1 Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-63
9.2 Adverse Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-63
9.3 Closing Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-63
9.4 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-65
9.5 Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-65
ARTICLE 10 -- CONDITIONS TO OBLIGATIONS OF BANCGROUP
10.1 Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-66
10.2 Adverse Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-66
10.3 Closing Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-66
10.4 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-68
10.5 Controlling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-68
10.6 Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-69
10.7 Material Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-69
10.8 Dissenters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-69
10.9 Cash Out of Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-69
10.10 Employment and Compensation Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-70
10.11 Employee Stock Purchase Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-70
ARTICLE 11 -- TERMINATION OF REPRESENTATIONS
AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-70
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ARTICLE 12 -- NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-71
ARTICLE 13 -- AMENDMENT OR TERMINATION
13.1 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-72
13.2 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-72
13.3 Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-73
ARTICLE 14 -- DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-74
ARTICLE 15 -- MISCELLANEOUS
15.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-90
15.2 Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-90
15.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-90
15.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-91
15.5 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-91
15.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-91
15.7 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-91
15.8 Return of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-92
15.9 Equitable Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-92
15.10 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-92
15.11 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-93
15.12 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-93
15.13 Entire Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-93
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of this
the 4th day of May 1995, by and between MT. VERNON FINANCIAL CORPORATION
("Financial"), a Georgia corporation, and THE COLONIAL BANCGROUP, INC.
("BancGroup"), a Delaware corporation.
WITNESSETH
WHEREAS, Financial operates as a savings and loan holding company for
its wholly owned subsidiary, Mt. Vernon Federal Savings Bank (the "Bank"), with
offices in Atlanta, Georgia; and
WHEREAS, BancGroup is a bank holding company with subsidiary banks in
Alabama and Tennessee; and
WHEREAS, Financial wishes to merge with BancGroup; and
WHEREAS, it is the intention of BancGroup and Financial that such
merger shall qualify for federal income tax purposes as a "reorganization"
within the meaning of section 368(a) of the Code, as defined herein;
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NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the Parties hereto agree as follows:
ARTICLE 1
NAME
1.1 NAME. The name of the corporation resulting from the Merger
shall be "The Colonial BancGroup, Inc."
ARTICLE 2
MERGER -- TERMS AND CONDITIONS
2.1 APPLICABLE LAW. On the Effective Date, Financial shall be
merged with and into BancGroup (herein referred to as the "Resulting
Corporation" whenever reference is made to it as of the time of merger or
thereafter). The Merger shall be undertaken pursuant to the provisions of and
with the effect provided in the DGCL. The offices and facilities of Financial
and of BancGroup shall become the offices and facilities of the Resulting
Corporation.
2.2 CORPORATE EXISTENCE. On the Effective Date, the corporate
existence of Financial and of BancGroup shall, as provided in the DGCL, be
merged into and continued in the Resulting Corporation, and the Resulting
Corporation shall be deemed to be the
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same corporation as Financial and BancGroup. All rights, franchises and
interests of Financial and BancGroup, respectively, in and to every type of
property (real, personal and mixed) and choses in action shall be transferred
to and vested in the Resulting Corporation by virtue of the Merger without any
deed or other transfer. The Resulting Corporation on the Effective Date, and
without any order or other action on the part of any court or otherwise, shall
hold and enjoy all rights of property, franchises and interests, including
appointments, designations and nominations and all other rights and interests
as trustee, executor, administrator, transfer agent and registrar of stocks and
bonds, guardian of estates, assignee, and receiver and in every other fiduciary
capacity and in every agency, and capacity, in the same manner and to the same
extent as such rights, franchises and interests were held or enjoyed by
Financial and BancGroup, respectively, on the Effective Date.
2.3 ARTICLES OF INCORPORATION AND BYLAWS. On the Effective Date,
the certificate of incorporation and bylaws of the Resulting Corporation shall
be the restated certificate of incorporation and bylaws of BancGroup as they
exist immediately before the Effective Date.
2.4 RESULTING CORPORATION'S OFFICERS AND BOARD. The board of
directors and the officers of the Resulting Corporation on the Effective Date
shall consist of those persons serving in such capacities of BancGroup as of
the Effective Date.
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2.5 SHAREHOLDER APPROVAL. This Agreement shall be submitted to
the shareholders of Financial at the Stockholders Meeting to be held as
promptly as practicable consistent with the satisfaction of the conditions set
forth in this Agreement. Upon approval by the requisite vote of the
shareholders of Financial as required by applicable Law, this Agreement shall
become effective as soon as practicable thereafter in the manner provided in
section 2.7 hereof.
2.6 FURTHER ACTS. If, at any time after the Effective Date, the
Resulting Corporation shall consider or be advised that any further assignments
or assurances in law or any other acts are necessary or desirable (i) to vest,
perfect, confirm or record, in the Resulting Corporation, title to and
possession of any property or right of Financial or BancGroup, acquired as a
result of the Merger, or (ii) otherwise to carry out the purposes of this
Agreement, Financial or BancGroup and its officers and directors shall execute
and deliver all such proper deeds, assignments and assurances in law and do all
acts necessary or proper to vest, perfect or confirm title to, and possession
of, such property or rights in the Resulting Corporation and otherwise to carry
out the purposes of this Agreement; and the proper officers and directors of
the Resulting Corporation are fully authorized in the name of Financial or
BancGroup, or otherwise, to take any and all such action.
2.7 EFFECTIVE DATE AND CLOSING. Subject to the terms of all
requirements of Law and the conditions specified in this Agreement, the Merger
shall become effective on the date specified in the Certificate of Merger to be
issued by the Secretary of State of the State
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of Delaware (such time being herein called the "Effective Date"). The Closing
shall take place at the offices of BancGroup, in Montgomery, Alabama, at 11:00
a.m. on the date that the Effective Date occurs or at such other place and time
that the Parties may mutually agree.
ARTICLE 3
CONVERSION OF FINANCIAL STOCK
3.1 CONVERSION OF FINANCIAL STOCK. (a) On the Effective Date,
each share of common stock of Financial outstanding and held by Financial's
shareholders (the "Financial Stock"), shall be converted into the number of
shares, or such fractions of a share (subject to section 3.3 hereof), of
BancGroup Common Stock which shall be equal to $18.794 divided by the Market
Value (the "Exchange Ratio"), subject to adjustment as set forth in section
3.1(b) hereof; provided, however, that the aggregate number of shares of Common
Stock that BancGroup shall issue in the Merger shall not exceed 703,327 and
shall not be less than 477,258, subject to section 3.1(c)(ii). The Market
Value shall represent the per share market value of the BancGroup Common Stock
at the Effective Date and shall be determined by calculating the average of the
closing prices of the Common Stock of BancGroup as reported by the NYSE on each
of the twenty (20) trading days ending on the trading day immediately preceding
the Effective Date, provided that for purposes of calculating the Exchange
Ratio in this section 3.1(a) and section 3.1(c)(ii), the Market Value shall not
be less than $19 nor greater than $28. Thus, as an illustration only, and
subject
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to the maximum and minimum number of shares that shall be issued, if the Market
Value is $24, then the Exchange Ratio will be .7831, and each one share of
Financial Stock shall be converted into .7831 of a share of BancGroup Common
Stock (i.e., $18.794 divided by $24), and a shareholder of Financial holding
100 shares of Financial Stock would receive in the aggregate 78 shares of
BancGroup Common Stock (100 multiplied by .7831) with the .31 of a share of
BancGroup Common Stock converted to cash equal to $7.44 ($24 multiplied by .31)
as provided in section 3.3.
(b) Notwithstanding section 3.1(a), the aggregate number
of shares of BancGroup Common Stock to be issued in the Merger shall be reduced
by an amount of shares equal to the amount by which expenses incurred by
Financial for the termination of data processing controls listed on Schedule
3.1(b) hereto exceed $92,000 divided by $18.794. In case of such reduction,
the Parties acknowledge that the per share consideration to be received under
section 3.1(a) hereof for each share of Financial Stock shall be less than
$18.794, and, therefore, an appropriate adjustment to the calculation of the
Exchange Ratio will be made.
(c)(i) BancGroup shall pay cash to holders of non-qualified
options of Financial Stock equal to the difference between $18.794 and the
option price respecting such shares of Financial Stock which are subject to
options. Such options shall be terminated and shall not be entitled to be
exchanged for shares of BancGroup Common Stock. Schedule 3.1(c) hereto shows
the names of all holders of non-qualified options, the number of shares subject
to options held by such holders and the option price of such
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shares. Such holders shall sign an agreement to be bound by this section
substantially in accordance with Exhibit D.
(ii) Schedule 3.1(c) hereto shows the names of all holders of
incentive options under Financial's stock option plan, the number of shares
subject to options held by such holders and the option price of such shares.
If holders of incentive options exercise such options prior to the Closing,
then the maximum and minimum aggregate number of shares of BancGroup Common
Stock specified in section 3.1(a) shall be increased to account for such
exercises, and, assuming that all incentive options are exercised prior to the
Closing, then the number of shares of Common Stock that BancGroup shall issue
shall not exceed 769,018 and shall not be less than 521,834. Any such options
which are not exercised prior to the Closing shall be cancelled and shall not
be entitled to be exchanged for shares of BancGroup Common Stock or options
respecting BancGroup Common Stock.
3.2 SURRENDER OF FINANCIAL STOCK. After the Effective Date, each
holder of an outstanding certificate or certificates which prior thereto
represented shares of Financial Stock who is entitled to receive BancGroup
Common Stock shall be entitled, upon surrender to BancGroup of their
certificate or certificates representing shares of Financial Stock, to receive
in exchange therefor a certificate or certificates representing the number of
whole shares of BancGroup Common Stock into and for which the shares of
Financial Stock so surrendered shall have been converted, such certificates to
be of such denominations and registered in such names as such holder may
reasonably request. Until
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so surrendered and exchanged, each such outstanding certificate which, prior to
the Effective Date, represented shares of Financial Stock and which is to be
converted into BancGroup Common Stock shall for all purposes evidence ownership
of the BancGroup Common Stock into and for which such shares shall have been so
converted, except that no dividends or other distributions with respect to such
BancGroup Common Stock shall be made until the certificates previously
representing shares of Financial Stock shall have been properly tendered.
3.3 FRACTIONAL SHARES. No fractional shares of BancGroup Common
Stock shall be issued, and each holder of shares of Financial Stock having a
fractional interest arising upon the conversion of such shares into shares of
BancGroup Common Stock shall, at the time of surrender of the certificates
previously representing Financial Stock, be paid by BancGroup an amount in cash
equal to the Market Value of such fractional share.
3.4 ADJUSTMENTS. In the event that prior to the Effective Date
BancGroup Common Stock shall be changed into a different number of shares or a
different class of shares by reason of any recapitalization or
reclassification, stock dividend, combination, stock split, or reverse stock
split of the Common Stock, an appropriate and proportionate adjustment shall be
made in the number of shares of BancGroup Common Stock into which the Financial
Stock shall be converted.
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3.5 BANCGROUP STOCK. The shares of Common Stock of BancGroup
issued and outstanding immediately before the Effective Date shall continue to
be issued and outstanding shares of the Resulting Corporation.
3.6 DISSENTING RIGHTS. Any shareholder of Financial who shall not
have voted in favor of this Agreement and has complied with the applicable
procedures set forth in the Georgia Business Corporation Code, relating to
rights of dissenting shareholders, shall be entitled to receive payment for the
fair value of his Financial Stock. If after the Effective Date a dissenting
shareholder of Financial fails to perfect, or effectively withdraws or loses,
his right to appraisal and payment for his shares of Financial Stock, BancGroup
shall issue and deliver the consideration to which such holder of shares of
Financial Stock is entitled under Section 3(a) (without interest) upon
surrender of such holder of the certificate or certificates representing shares
of Financial Stock held by him.
3.7 CASH CONVERSION. If, for any reason, the shares of BancGroup
Common Stock cannot be registered or otherwise qualified for sale pursuant to
the securities laws of any state, territory or other jurisdiction, the shares
of Financial Stock held by shareholders residing in such state, territory or
other jurisdiction, at the sole option of BancGroup, may be converted into cash
based upon the fair value of such shares, as provided in section 3.3 above.
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ARTICLE 4
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BANCGROUP
BancGroup represents, warrants and covenants to and with Financial as
follows:
4.1 ORGANIZATION. BancGroup is a corporation duly organized,
validly existing and in good standing under the Laws of the State of Delaware.
BancGroup has the necessary corporate powers to carry on its business as
presently conducted and is qualified to do business in every jurisdiction in
which the character and location of the Assets owned by it or the nature of the
business transacted by it requires qualification or in which the failure to
qualify could, individually or in the aggregate, have a Material Adverse Effect
on the condition (financial or other), earnings, business, affairs, Assets,
properties, prospects or results of operations of BancGroup or of BancGroup and
its Subsidiaries taken as a whole.
4.2 CAPITAL STOCK.
(a) The authorized capital stock of BancGroup consists of
(A) 44,000,000 shares of Common Stock, $2.50 par value per share, of which as
of March 31, 1995, 12,208,446 shares were validly issued and outstanding, fully
paid and nonassessable and are not subject to preemptive rights, (B) and
1,000,000 shares of Preference Stock, $2.50 par value per share, none of which
are issued and outstanding. The shares of Common Stock
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to be issued upon the Merger are duly authorized and, when so issued, will be
validly issued and outstanding, fully paid and nonassessable.
(b) The authorized capital stock of each Subsidiary of
BancGroup is validly issued and outstanding, fully paid and nonassessable, and
each Subsidiary is wholly owned, directly or indirectly, by BancGroup.
4.3 FINANCIAL STATEMENTS; TAXES. (a) BancGroup has delivered to
Financial copies of the following financial statements of BancGroup.
(i) Consolidated balance sheets as of December
31, 1993, and December 31, 1994, and for the quarterly period ending March 31,
1995;
(ii) Consolidated statements of operations for
each of the three years ended December 31, 1992, 1993 and 1994, and for the
quarterly period ending March 31, 1995;
(iii) Consolidated statements of cash flows for
each of the three years ended December 31, 1992, 1993 and 1994, and for the
quarterly period ending March 31, 1995; and
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(iv) Consolidated statements of changes in
shareholders' equity for the three years ended December 31, 1992, 1993 and
1994, and for the quarterly period ending March 31, 1995.
Between the date hereof and the Effective Date, BancGroup will deliver to
Financial copies of all quarterly financial statements as soon as they become
available. All such financial statements are in all material respects in
accordance with the books and records of BancGroup and have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated, all as more particularly set
forth in the notes to such statements. Each of the consolidated balance sheets
presents fairly as of its date the consolidated financial condition of
BancGroup and its Subsidiaries. Except as and to the extent reflected or
reserved against in such balance sheets (including the notes thereto),
BancGroup did not have, as of the dates of such balance sheets, any material
Liabilities or obligations (absolute or contingent) of a nature customarily
reflected in a balance sheet or the notes thereto, other than Liabilities
(including reserves) in the amount set forth in such balance sheets and the
notes thereto. The statements of consolidated income, shareholders' equity and
changes in consolidated financial position present fairly the results of
operations and changes in financial position of BancGroup and its Subsidiaries
for the periods indicated.
(b) All Tax returns required to be filed by or on behalf
of BancGroup have been timely filed (or requests for extensions therefor have
been timely filed and granted and
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have not expired), and all returns filed are complete and accurate in all
material respects. All Taxes shown on said returns to be due and all
additional assessments received have been paid. The amounts recorded for Taxes
on the balance sheets provided under section 4.3(a) are, to the Knowledge of
BancGroup, sufficient in all material respects for the payment of all unpaid
federal, state, county, local, foreign or other Taxes (including any interest
or penalties) of BancGroup accrued for or applicable to the period ended on the
dates thereof, and all years and periods prior thereto and for which BancGroup
may at said dates have been liable in its own right or as transferee of the
Assets of, or as successor to, any other corporation or other party. No audit,
examination or investigation is presently being conducted or, to the Knowledge
of BancGroup, threatened by any taxing authority which is likely to result in a
material Tax Liability, no material unpaid Tax deficiencies or additional
liabilities of any sort have been proposed by any governmental representative
and no agreements for extension of time for the assessment of any material
amount of Tax have been entered into by or on behalf of BancGroup. BancGroup
has withheld from its employees (and timely paid to the appropriate
governmental entity) proper and accurate amounts for all periods in material
compliance with all Tax withholding provisions of applicable federal, state,
foreign and local Laws (including without limitation, income, social security
and employment Tax withholding for all types of compensation).
4.4 NO CONFLICT WITH OTHER INSTRUMENT. The consummation of the
transactions contemplated by this Agreement will not result in a breach of or
constitute a Default (without regard to the giving of notice or the passage of
time) under any material indenture,
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mortgage, deed of trust or other material agreement or instrument to which
BancGroup or any of its Subsidiaries is a party or by which they or their
Assets may be bound; will not conflict with any provision of the restated
certificate of incorporation or bylaws of BancGroup or the articles of
incorporation or bylaws of any of its Subsidiaries; and will not violate any
provision of any Law, Regulation, judgment or decree binding on them or any of
their Assets.
4.5 ABSENCE OF MATERIAL ADVERSE CHANGE. Since the date of the
most recent balance sheet provided under section 4.3(a)(i) above, there have
been no events, changes or occurrences which have had or are reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on
BancGroup.
4.6 APPROVAL OF AGREEMENTS. The board of directors of BancGroup
has, or will have prior to the Effective Date, approved this Agreement and the
transactions contemplated by it and have, or will have prior to the Effective
Date, authorized the execution and delivery by BancGroup of this Agreement.
Subject to the matters referred to in section 8.2, BancGroup has full power,
authority and legal right to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. BancGroup has no Knowledge of any
fact or circumstance under which the appropriate regulatory approvals required
by section 8.2 will not be granted without the imposition of material
conditions.
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4.7 TAX TREATMENT. BancGroup has no present plan to sell or
otherwise dispose of any of the Assets of Financial, or to liquidate any
Subsidiaries, subsequent to the Merger, and BancGroup intends to continue the
historic business of Financial.
4.8 TITLE AND RELATED MATTERS. BancGroup has good and marketable
title to all the properties, interests in properties and Assets, real and
personal, reflected in the most recent balance sheet referred to in section
4.3(a), or acquired after the date of such balance sheet (except properties,
interests and Assets sold or otherwise disposed of since such date, in the
ordinary course of business), free and clear of all mortgages, Liens, pledges,
charges or encumbrances except (i) mortgages and other encumbrances referred to
in the notes of such balance sheet, (ii) liens for current Taxes not yet due
and payable and (iii) such imperfections of title and easements as do not
materially detract from or interfere with the present use of the properties
subject thereto or affected thereby, or otherwise materially impair present
business operations at such properties. To the Knowledge of BancGroup, the
material structures and equipment of BancGroup comply in all material respects
with the requirements of all applicable Laws.
4.9 SUBSIDIARIES. Each Subsidiary of BancGroup has been duly
incorporated and is validly existing as a corporation in good standing under
the Laws of the jurisdiction of its incorporation and each Subsidiary has been
duly qualified as a foreign corporation to transact business and is in good
standing under the Laws of each other jurisdiction in which it owns or leases
properties, or conducts any business so as to require such qualification and
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in which the failure to be duly qualified could have a Material Adverse Effect
upon BancGroup and its Subsidiaries considered as one enterprise; each of the
banking Subsidiaries of BancGroup has its deposits fully insured by the Federal
Deposit Insurance Corporation to the extent provided by the Federal Deposit
Insurance Act; and the businesses of the non-bank Subsidiaries of BancGroup are
permitted to subsidiaries of registered bank holding companies.
4.10 CONTRACTS. Neither BancGroup nor any of its Subsidiaries is
in violation of its respective certificate of incorporation or by-laws or in
default in the performance or observance of any material obligation, agreement,
covenant or condition contained in any Contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which it is a party or by which
it or its property may be bound.
4.11 LITIGATION. Except as disclosed in or reserved for in
BancGroup's financial statements, there is no Litigation before or by any court
or Agency, domestic or foreign, now pending, or, to the Knowledge of BancGroup,
threatened against or affecting BancGroup or any of its Subsidiaries (nor is
BancGroup aware of any facts which could give rise to any such Litigation)
which is required to be disclosed in the Registration Statement (other than as
disclosed therein), or which is likely to have any Material Adverse Effect or
prospective Material Adverse Effect in the condition, financial or otherwise,
or in the general affairs, management, stockholders' equity or results of
operations of BancGroup and its Subsidiaries considered as one enterprise, or
which is likely to materially and adversely
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affect the properties or Assets thereof or which is likely to materially affect
the consummation of the transactions contemplated by this Agreement; all
pending legal or governmental proceedings to which BancGroup or any Subsidiary
is a party or of which any of their properties is the subject which are not
described in the Registration Statement, including ordinary routine litigation
incidental to the business, are, considered in the aggregate, not material; and
neither BancGroup nor any of its Subsidiaries have any contingent obligations
which could be considered material to BancGroup and its Subsidiaries considered
as one enterprise which are not disclosed in the Registration Statement as it
may be amended or supplemented.
4.12 COMPLIANCE. BancGroup and its Subsidiaries, in the conduct of
their businesses, are to the Knowledge of BancGroup, in material compliance
with all material federal, state or local Laws applicable to their or the
conduct of their businesses.
4.13 REGISTRATION STATEMENT. At the time the Registration
Statement becomes effective and at the time of the Stockholders' Meeting, the
Registration Statement, including the Proxy Statement which shall constitute a
part thereof, will comply in all material respects with the requirements of the
1933 Act and the rules and regulations thereunder, will not contain an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that the
representations and warranties in this subsection shall not apply to statements
in or omissions from the Proxy
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Statement made in reliance upon and in conformity with information furnished in
writing to BancGroup by Financial or any of its representatives expressly for
use in the Proxy Statement or information included in the Proxy Statement
regarding the business of Financial, its operations, Assets and capital.
4.14 FILINGS INCORPORATED BY REFERENCE. The documents incorporated
by reference into the Registration Statement, at the time they were filed with
the SEC, complied in all material respects with the requirements of the 1934
Act and Regulations thereunder and when read together and with the other
information in the Registration Statement will not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading at the time
the Registration Statement becomes effective or at the time of the Stockholders
Meeting.
4.15 FORM S-4. The conditions for use of a registration statement
on SEC Form S-4 set forth in the General Instructions on Form S-4 have been or
will be satisfied with respect to BancGroup and the Registration Statement.
4.16 DISCLOSURE. No representation or warranty, or any statement
or certificate furnished or to be furnished to Financial by BancGroup, contains
or will contain any untrue statement of a material fact, or omits or will omit
to state a material fact necessary to make the statements contained in this
Agreement or in any such statement or certificate not misleading.
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ARTICLE 5
REPRESENTATIONS, WARRANTIES AND COVENANTS OF FINANCIAL
Financial represents, warrants and covenants to and with BancGroup, as
follows:
5.1 ORGANIZATION. Financial is a Georgia corporation, and the
Bank is a federal stock savings bank, as defined by Section 1462(2)(d) of the
Home Owners' Loan Act of 1983. Each Financial Company is duly organized,
validly existing and in good standing under the respective Laws of its
jurisdiction of incorporation and has all requisite power and authority to
carry on its business as it is now being conducted and is qualified to do
business in every jurisdiction in which the character and location of the
Assets owned by it or the nature of the business transacted by it requires
qualification or in which the failure to qualify could, individually, or in the
aggregate, have a Material Adverse Effect on the condition (financial or other)
earnings, business, affairs, Assets, properties, prospects or results of
operations of Financial or of Financial and its Subsidiaries taken as a whole.
5.2 CAPITAL STOCK. (i) As of March 31, 1995, the authorized
capital stock of Financial consists of 10,000,000 shares of common stock, $.01
par value per share, 711,036 shares of which are issued and outstanding as of
the date hereof. All of such shares which are outstanding are validly issued,
fully paid and nonassessable and not subject to preemptive rights. Financial
has 193,506 shares of its common stock subject to exercise pursuant to stock
options. Except for the foregoing, Financial does not have any other
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arrangements or commitments obligating it to issue shares of its capital stock
or any securities convertible into or having the right to purchase shares of
its capital stock.
5.3 SUBSIDIARIES. Financial has no direct Subsidiaries other than
the Bank, and there are two operating subsidiaries of the Bank, The Mortgage
Bank, Inc. and Mt. Vernon Service Co., Inc. Financial owns all of the issued
and outstanding capital stock of the Bank free and clear of any liens, claims
or encumbrances of any kind, and the Bank owns all of the issued and
outstanding capital stock of the other two Subsidiaries free and clear of any
liens, claims or encumbrances of any kind. All of the issued and outstanding
shares of capital stock of the Subsidiaries have been validly issued and are
fully paid and non-assessable. As of March 31, 1995, there were 10,000,000
shares of the Bank's common stock, par value $.01 per share, authorized, 1,000
of which are issued and outstanding; there were 10,000 shares of The Mortgage
Bank, Inc. common stock, par value $1.00 per share, authorized, 10,000 shares
of which are issued and outstanding; and there were 50,000 shares of Mt. Vernon
Service Co., Inc. common stock, no par value, authorized, 30,000 shares of
which are issued and outstanding.
5.4 FINANCIAL STATEMENTS; TAXES (a) Financial has delivered to
BancGroup copies of the following financial statements of Financial:
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(i) Consolidated statements of financial condition as of
June 30, 1993 and 1994, and for the quarterly period ending March 31, 1995;
(ii) Consolidated statements of income for each of the
three years ended June 30, 1992, 1993 and 1994, and for the quarterly period
ending March 31, 1995;
(iii) Consolidated statements of stockholders' equity
for each of the three years ended June 30, 1992, 1993, and 1994, and for the
quarterly period ending March 31, 1995; and
(iv) Consolidated statements of cash flows for the three
years ended June 30, 1992, 1993 and 1994, and for the quarterly period ending
March 31, 1995.
Between the date hereof and the Effective Date, Financial will deliver copies
of all monthly financial statements as soon as they become available. All of
the foregoing financial statements are in all material respects in accordance
with the books and records of Financial and have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods indicated, except for changes required by GAAP, all as
more particularly set forth in the notes to such statements. Each of such
balance sheets presents fairly as of its date the financial condition of
Financial. Except as and to the extent reflected or reserved against in such
balance sheets (including the notes thereto), Financial did not have, as of the
date of such balance sheets, any material
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Liabilities or obligations (absolute or contingent) of a nature customarily
reflected in a balance sheet or the notes thereto, other than Liabilities
(including reserves) in the amount set forth in such balance sheets and the
notes thereto. The statements of income, stockholders' equity and cash flows
present fairly the results of operation, changes in shareholders equity and
cash flows of Financial for the periods indicated.
(b) Except as set forth on Schedule 5.4(b), all Tax
returns required to be filed by or on behalf of Financial have been timely
filed (or requests for extensions therefor have been timely filed and granted
and have not expired), and all returns filed are complete and accurate in all
material respects. All Taxes shown on said returns to be due and all
additional assessments received have been paid. The amounts recorded for Taxes
on the balance sheets provided under section 5.4(a) are, to the Knowledge of
Financial, sufficient in all material respects for the payment of all unpaid
federal, state, county, local, foreign and other Taxes (including any interest
or penalties) of Financial accrued for or applicable to the period ended on the
dates thereof, and all years and periods prior thereto and for which Financial
may at said dates have been liable in its own right or as a transferee of the
Assets of, or as successor to, any other corporation or other party. No audit,
examination or investigation is presently being conducted or, to the Knowledge
of Financial, threatened by any taxing authority which is likely to result in a
material Tax Liability, no material unpaid Tax deficiencies or additional
liability of any sort have been proposed by any governmental representative and
no agreements for extension of time for the assessment of any material amount
of Tax have been entered into by or on behalf of Financial.
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Financial has not executed an extension or waiver of any statute of limitations
on the assessment or collection of any Tax due that is currently in effect.
(c) Each Financial Company has withheld from its
employees (and timely paid to the appropriate governmental entity) proper and
accurate amounts for all periods in material compliance with all Tax
withholding provisions of applicable federal, state, foreign and local Laws
(including without limitation, income, social security and employment Tax
withholding for all types of compensation). Each Financial Company is in
compliance with, and its records contain all information and documents
(including properly completed IRS Forms W-9) necessary to comply with, all
applicable information reporting and Tax withholding requirements under
federal, state and local Tax Laws, and such records identify with specificity
all accounts subject to backup withholding under section 3406 of the Code.
5.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the
most recent balance sheet provided under section 5.4(a)(i) above, no Financial
Company has
(a) issued, delivered or agreed to issue or deliver any
stock, bonds or other corporate securities (whether authorized and unissued or
held in the treasury) except shares of common stock issued upon the exercise of
options previously granted under Financial's stock option plan and shares
issued as director's qualifying shares;
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(b) borrowed or agreed to borrow any funds or incurred,
or become subject to, any Liability (absolute or contingent) except borrowings,
obligations and Liabilities incurred in the ordinary course of business and
consistent with past practice;
(c) paid any material obligation or Liability (absolute
or contingent) other than current Liabilities reflected in or shown on the most
recent balance sheet referred to in section 5.4(a)(i) and current Liabilities
incurred since that date in the ordinary course of business and consistent with
past practice;
(d) declared or made, or agreed to declare or make, any
payment of dividends or distributions of any Assets of any kind whatsoever to
shareholders, or purchased or redeemed, or agreed to purchase or redeem, any of
its outstanding securities;
(e) except in the ordinary course of business, sold or
transferred, or agreed to sell or transfer, any of its Assets, property or
rights or canceled, or agreed to cancel, any debts or claims;
(f) except in the ordinary course of business, entered or
agreed to enter into any agreement or arrangement granting any preferential
rights to purchase any of its Assets, property or rights or requiring the
consent of any party to the transfer and assignment of any of its Assets,
property or rights;
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(g) suffered any Losses or waived any rights of value
which in either event in the aggregate are material;
(h) except in the ordinary course of business, made or
permitted any amendment or termination of any Contract, agreement or license to
which it is a party if such amendment or termination is material considering
its business as a whole;
(i) made any accrual or arrangement for or payment of
bonuses or special compensation of any kind or any severance or termination pay
to any present or former officer or employee; provided that accruals or
arrangements currently in place and due to be paid for the year ending June 30,
1995, are not covered by this paragraph (i) and provided that, after June 30,
1995, accruals may be made for bonuses to be paid for the year ending June 30,
1996, in accordance with normal and usual practice but only if the Merger is
not consummated;
(j) except in accordance with normal and usual practice,
increased the rate of compensation payable to or to become payable to any of
its officers or employees or made any material increase in any profit sharing,
bonus, deferred compensation, savings, insurance, pension, retirement or other
employee benefit plan, payment or arrangement made to, for or with any of its
officers or employees;
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(k) received notice or had Knowledge or reason to believe
that any of its substantial customers has terminated or intends to terminate
its relationship, which termination would have a Material Adverse Effect on its
financial condition, results of operations, business, Assets or properties;
(l) failed to operate its business in the ordinary course
so as to preserve its business intact and to preserve the goodwill of its
customers and others with whom it has business relations; and
(m) entered into any other material transaction other
than in the ordinary course of business.
Between the date hereof and the Effective Date, no Financial Company,
without the express written approval of BancGroup, will do any of the things
listed in clauses (a) through (m) of this section 5.5 except as permitted
therein or as contemplated in this Agreement.
5.6 TITLE AND RELATED MATTERS.
(a) Title. Financial has good and marketable title to
all the properties, interest in properties and Assets, real and personal,
reflected in the most recent balance sheet referred to in section 5.4(a), or
acquired after the date of such balance sheet (except properties, interests and
Assets sold or otherwise disposed of since such date, in the
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ordinary course of business), free and clear of all mortgages, Liens, pledges,
charges or encumbrances except (i) mortgages and other encumbrances referred to
in the notes to such balance sheet, (ii) Liens for current Taxes not yet due
and payable and (iii) such imperfections of title and easements as do not
materially detract from or interfere with the present use of the properties
subject thereto or affected thereby, or otherwise materially impair present
business operations at such properties. To the Knowledge of Financial, the
material structures and equipment of each Financial Company, comply in all
material respects with the requirements of all applicable Laws and Regulations.
(b) Leases. Schedule 5.6(b) sets forth a list and
description of all real and personal property owned or leased by any Financial
Company, either as lessor or lessee.
(c) Personal Property. Schedule 5.6(c) sets forth a
depreciation schedule of each Financial Company's fixed Assets as of December
31, 1994.
(d) Computer Hardware and Software. Schedule 5.6(d)
contains a description of all agreements relating to data processing computer
software and hardware now being used in the business operations of any
Financial Company. Financial is not aware of any defects, irregularities or
problems with any of its computer hardware or software which renders such
hardware or software unable to satisfactorily perform the tasks and functions
to be performed by them in the business of any Financial Company.
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5.7 COMMITMENTS. Except as set forth in Schedule 5.7, no
Financial Company is a party to any oral or written (i) Contracts for the
employment of any officer or employee which is not terminable on 30 days' (or
less) notice, (ii) profit sharing, bonus, deferred compensation, savings, stock
option, severance pay, pension or retirement plan, agreement or arrangement,
(iii) loan agreement, indenture or similar agreement relating to the borrowing
of money by such party, (iv) guaranty of any obligation for the borrowing of
money or otherwise, excluding endorsements made for collection, and guaranties
made in the ordinary course of business, (v) consulting or other similar
Contracts, (vi) collective bargaining agreement, (vii) agreement with any
present or former officer, director or shareholder of such party, or (viii)
other Contract, agreement or other commitment which is material to the
business, operations, property, prospects or Assets or to the condition,
financial or otherwise, of any Financial Company. Complete and accurate copies
of all Contracts, plans and other items so listed have been made or will be
made available to BancGroup for inspection. Prior to the Effective Date, no
Financial Company will enter into or amend any Contract, agreement or other
instrument of any of the types listed in this section without the express
written consent of BancGroup.
5.8 CHARTER AND BYLAWS. Financial has delivered to BancGroup true
and correct copies of the articles of incorporation and bylaws of each
Financial Company, including all amendments thereto, as currently in effect.
There will be no changes in such articles of incorporation or bylaws prior to
the Effective Date, without the prior written consent of BancGroup.
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5.9 LITIGATION. There is no Litigation (whether or not
purportedly on behalf of Financial) pending or, to the Knowledge of Financial,
threatened against or affecting any Financial Company (nor is Financial aware
of any facts which could give rise to any such Litigation) at law or in equity,
or before or by any governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, or before any arbitrator of any kind,
which involves the possibility of any judgment or Liability not fully covered
by insurance in excess of a reasonable deductible amount or which may have a
Material Adverse Effect on the business operations, properties or Assets or in
the condition, financial or otherwise, of any Financial Company, and no
Financial Company is in Default with respect to any judgment, order, writ,
injunction, decree, award, rule or regulation of any court, arbitrator or
governmental department, commission, board, bureau, agency or instrumentality,
which Default would have a Material Adverse Effect on the business operations,
properties or Assets or in the condition, financial or otherwise, of such
party. To the Knowledge of Financial, each Financial Company has complied in
all material respects with all material applicable Laws and Regulations
including those imposing Taxes, or any applicable jurisdiction and of all
states, municipalities, other political subdivisions and Agencies, in respect
of the ownership of its properties and the conduct of its business, which, if
not complied with, would have a Material Adverse Effect in the business
operations, properties or Assets or in the condition, financial or otherwise,
of any such Financial Company.
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5.10 MATERIAL CONTRACT DEFAULTS. No Financial Company is in
Default in any material respect under the terms of any Contract, agreement,
lease or other commitment which is or may be, material to the business,
operations, properties or Assets, or the condition, financial or otherwise, of
such company and, to the Knowledge of Financial, there is no event which, with
notice or lapse of time, or both, may be or become an event of Default under
any such Contract, agreement, lease or other commitment in respect of which
adequate steps have not been taken to prevent such a Default from occurring.
5.11 NO CONFLICT WITH OTHER INSTRUMENT. The consummation of the
transactions contemplated by this Agreement will not result in the breach of
any term or provision of or constitute a Default under any Contract, indenture,
mortgage, deed of trust or other material agreement or instrument to which any
Financial Company is a party and will not conflict with any provision of the
charter or bylaws of any Financial Company.
5.12 GOVERNMENTAL AUTHORIZATION. Each Financial Company has all
licenses, franchises, permits and other governmental authorizations that, to
the Knowledge of Financial, are or will be legally required to enable any
Financial Company to conduct its business in all material respects as now
conducted by each Financial Company.
5.13 ABSENCE OF REGULATORY COMMUNICATIONS. Except for an agreement
with the Office of Thrift Supervision which terminated in 1992, no Financial
Company is subject to, nor has any Financial Company received during the past
three years, any written
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communication directed specifically to it from any Agency to which it is
subject or pursuant to which such Agency has imposed or has indicated it may
impose any material restrictions on the operations of it or the business
conducted by it or in which such Agency has raised any material question
concerning the condition, financial or otherwise, of such company.
5.14 ABSENCE OF MATERIAL ADVERSE CHANGE. Since the date of the
most recent balance sheet provided under section 5.4(a)(i), there have been no
events, changes or occurrences which have had, or are reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on any
Financial Company.
5.15 INSURANCE. Each Financial Company has in effect insurance
coverage and bonds with reputable insurers which, in respect to amounts, types
and risks insured, management of Financial reasonably believes to be adequate
for the type of business conducted by such company. No Financial Company is
liable for any material retroactive premium adjustment. All insurance policies
and bonds are valid, enforceable and in full force and effect, and no Financial
Company has received any notice of a premium increase or cancellation with
respect to any of its insurance policies or bonds. Within the last three
years, no Financial Company has been refused any insurance coverage which it
has sought or applied for, and it has no reason to believe that existing
insurance coverage cannot be renewed as and when the same shall expire, upon
terms and conditions as favorable as those presently in effect, other than
possible increases in premiums that do not result from any extraordinary loss
experience. All policies of insurance presently held or policies containing
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substantially equivalent coverage will be outstanding and in full force with
respect to each Financial Company at all times from the date hereof to the
Effective Date.
5.16 PENSION AND EMPLOYEE BENEFIT PLANS.
(a) To the Knowledge of Financial, all employee benefit
plans of each Financial Company have been established in compliance with, and
such plans have been operated in material compliance with, all applicable Laws.
No Financial Company sponsors or otherwise maintains a "pension plan" within
the meaning of section 3(2) of ERISA or any other retirement plan other than
the Financial 401(k) plan that is intended to qualify under section 401 of the
Code, nor do any unfunded Liabilities exist with respect to any employee
benefit plan, past or present. To the Knowledge of Financial, no employee
benefit plan, any trust created thereunder nor any trustee or administrator
thereof has engaged in a "prohibited transaction," as defined in section 4975
of the Code, which may have a Material Adverse Effect on the condition,
financial or otherwise, of any Financial Company.
(b) Financial has no reason to believe that any amount
payable to any employee of any Financial Company will fail to be deductible for
federal income tax purposes by virtue of Section 280G of the Code and
Regulations thereunder.
5.17 BUY-SELL AGREEMENT. Financial is not aware of any agreement
among any of its shareholders granting to any person or persons a right of
first refusal in respect of the
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sale, transfer, or other disposition of shares of outstanding securities by any
shareholder of Financial, any similar agreement or any voting agreement or
voting trust in respect of any such shares.
5.18 BROKERS. Except for services provided for Financial by The
Robinson-Humphrey Company, Inc., all negotiations relative to this Agreement
and the transactions contemplated by this Agreement have been carried on by
Financial directly with BancGroup and without the intervention of any other
person, either as a result of any act of Financial, or otherwise, in such
manner as to give rise to any valid claim against Financial for a finder's fee,
brokerage commission or other like payment.
5.19 APPROVAL OF AGREEMENTS. The board of directors of Financial
has approved this Agreement and the transactions contemplated by this Agreement
and has authorized the execution and delivery by Financial of this Agreement.
Subject to the matters referred to in section 8.2, Financial has full power,
authority and legal right to enter into this Agreement, and, upon appropriate
vote of the shareholders of Financial in accordance with this Agreement,
Financial shall have full power, authority and legal right to consummate the
transactions contemplated by this Agreement.
5.20 DISCLOSURE. No representation or warranty, nor any statement
or certificate furnished or to be furnished to BancGroup by Financial, contains
or will contain any untrue statement of a material fact, or omits or will omit
to state a material fact necessary to make
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the statements contained in this Agreement or in any such statement or
certificate not misleading.
5.21 REGISTRATION STATEMENT. At the time the Registration
Statement becomes effective and at the time of the Stockholders Meeting, the
Registration Statement, including the Proxy Statement which shall constitute
part thereof, will not contain an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided, however, that the representations and warranties in this subsection
shall only apply to statements in or omissions from the Proxy Statement
relating to descriptions of the business of Financial, its Assets, properties,
operations, and capital stock or to information furnished by Financial or its
representatives expressly for inclusion in the Proxy Statement.
5.22 LOANS; ADEQUACY OF ALLOWANCE FOR LOAN LOSSES. All reserves
for loan losses shown on the most recent financial statements furnished by
Financial are adequate in all material respects, and Financial has no Knowledge
of any fact which is likely to require a future material increase in the
provision for loan losses or a material decrease in the loan loss reserve
reflected in such financial statements. Each loan reflected as an Asset on the
financial statements of Financial is the legal, valid and binding obligation of
the obligor of each loan, enforceable in accordance with its terms subject to
the effect of bankruptcy, insolvency, reorganization, moratorium, or other
similar laws relating to creditors' rights generally and to general equitable
principles. Financial does not have in its portfolio any
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loan exceeding its legal lending limit, and except as disclosed on Schedule
5.22, Financial has no known significant delinquent, substandard, doubtful,
loss, nonperforming or problem loans other than those listed on the March 31,
1995, classification of assets report.
5.23 ENVIRONMENTAL MATTERS. To the Knowledge of Financial, each
Financial Company is in material compliance with all Laws and other
governmental requirements relating to the generation, management, handling,
transportation, treatment, disposal, storage, delivery, discharge, release or
emission of any waste, pollution, or toxic, hazardous or other substance (the
"Environmental Laws"), and Financial has no Knowledge that any Financial
Company has not complied with all regulations and requirements promulgated by
the Occupational Safety and Health Administration that are applicable to any
Financial Company. To the Knowledge of Financial, there is no Litigation
proceeding, suit or investigation pending or threatened with respect to any
violation or alleged violation of the Environmental Laws. To the Knowledge of
Financial, with respect to properties or Assets of or owned by any Financial
Company, including any Loan Property, (i) there has been no spillage, leakage,
contamination or release of any substances for which the appropriate remedial
action has not been completed; (ii) no owned or leased property is contaminated
with or contains any hazardous substance or waste; and (iii) there are no
underground storage tanks on any premises owned or leased by any Financial
Company. Financial has no Knowledge of any facts which might suggest that any
Financial Company has engaged in any management practice with respect to any of
its past or existing borrowers which could reasonably be expected to subject
any Financial Company to any Liability, either directly
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or indirectly, under the principles of law as set forth in United States v.
Fleet Factors Corp., 901 F.2d 1550 (11th Cir. 1990) or any similar principles.
Moreover, to the Knowledge of Financial, no Financial Company has extended
credit, either on a secured or unsecured basis, to any person or other entity
engaged in any activities which would require or requires such person or entity
to obtain any Permits, licenses, and other authorizations which are required
under any Environmental Law which has not been obtained.
5.24 TRANSFER OF SHARES. Financial has no Knowledge of any plan or
intention on the part of Financial's shareholders to sell or otherwise dispose
of any of the BancGroup Common Stock to be received by them in the Merger that
would reduce such shareholders' ownership to a number of shares having, in the
aggregate, a fair market value of less than fifty (50%) percent of the total
fair market value of Financial common stock outstanding immediately before the
Merger.
5.25 LENDER AND SERVICER QUALIFICATIONS.
(a) The Bank (i) is qualified (A) by FHA as a mortgagee
and servicer for Mortgage Loans which are insured by the FHA ("FHA Loans"), (B)
by the VA as a lender and servicer for Mortgage Loans guaranteed by the VA ("VA
Loans"), (C) by FNMA and FHLMC as a seller/servicer of first mortgages to FNMA
and FHLMC and by FNMA under the Delegated Underwriting and Servicing Program,
and (D) by GNMA as an authorized issuer and servicer of GNMA guaranteed
mortgage-backed securities; and (ii) has all other
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material Permits necessary to conduct its current mortgage banking business,
and is in good standing under all applicable Laws thereunder as a mortgage
lender and servicer. Schedule 5.25(a) lists each jurisdiction in which the
Bank has obtained or applied for a Permit. Except as disclosed in Schedule
5.25(a), none of the Financial Companies:
(x) to the Knowledge of Financial, is in violation of any
Laws, Orders, or Permits applicable to its business or employees conducting its
business as interpreted by the respective courts and Agencies having
jurisdiction over the Bank as of the date of this Agreement or the Effective
Date, nor is there a reasonable probability of the operation or practices of
the Bank being held to be a violation of such Laws, Orders or Permits; or
(y) has received any notification or communication from
any agency or department of federal, state, or local government or any Agency
or the staff thereof (i) asserting that the Financial Company is not in
compliance with any of the Laws or Orders which such governmental authority or
Agency enforces, or (ii) threatening to revoke any Permits.
(b) Except as disclosed in Schedule 5.25(b), the Bank
and, to the Knowledge of Financial, all prior servicers and originators have
been and are in compliance in all material respects with all Laws (including
the Regulations) and Orders of any court or governmental authorities applicable
to it, its Assets and its conduct of business, the breach of which would
require the Repurchase of a Mortgage Loan or result in the Bank
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incurring a Loss. The Bank has timely filed, or will have timely filed by the
Effective Date, all material reports required by any Investor or Insurer or by
any Law to be filed. To the Knowledge of Financial, the Bank has not done or
caused to be done, or has failed to do or omitted to be done, any act, the
effect of which would operate to invalidate or materially impair (i) any
approvals of the FHA, VA, FNMA, FHLMC, GNMA or HUD, (ii) any FHA insurance or
commitment of the FHA to insure, (iii) any VA guarantee or commitment of the VA
to guarantee, (iv) any private mortgage insurance or commitment of any private
mortgage insurer to insure, (v) any title insurance policy, (vi) any hazard
insurance policy, (vii) any flood insurance policy, (viii) any fidelity bond,
direct surety bond, or errors and omissions insurance policy required by HUD,
GNMA, FNMA, FHA, FHLMC, VA or private mortgage insurers, (ix) any surety or
guaranty agreement, or (x) any guaranty issued by GNMA, FNMA or FHLMC to the
Bank respecting mortgage-backed securities issued by the Bank and other like
guaranties. Except as set forth in Schedule 5.25(b), since January 1, 1991, no
Agency, Investor or private mortgage insurer has (i) claimed that the Bank has
repeatedly violated or has not complied on a recurring basis with the
applicable underwriting standards with respect to Mortgage Loans sold by the
Bank to an Investor or (ii) imposed restrictions on the activities (including
commitment authority) of the Bank.
(c) Except as set forth in Schedule 5.25(c), to the Knowledge of
Financial, no Mortgage Loan, Pipeline Loan, Warehouse Loan or Previously
Disposed Loan has been originated and/or serviced by the Bank in violation of
the Regulations, the violation of
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which would require the Repurchase of a Mortgage Loan or Previously Disposed
Loan or result in the Bank incurring a Loss.
5.26 LOAN AND MORTGAGE SERVICING PORTFOLIO.
(a) Financial has previously delivered to BancGroup a
confidential offering memorandum prepared by The Robinson-Humphrey Company,
Inc. containing certain information regarding the Loan Portfolio and the
Mortgage Servicing Portfolio. To the Knowledge of Financial, the information
contained in such confidential offering memorandum is true and correct in all
material respects. Each Mortgage Loan (i) is, except as set forth in Schedule
5.26(a), evidenced by a note or other evidence of indebtedness with such terms
as are customary in the business, (ii) is duly secured by a mortgage or deed of
trust with such terms as are customary in the business and which grants the
holder thereof either a first lien on the subject property with respect to
loans originated as first mortgages, and with respect to loans originated as
second mortgages, a second lien on the subject property (including any
improvements thereon), and which constitutes a security interest that has been
duly perfected and maintained (or is in the process of perfection in due
course) and is in full force and effect and is accompanied by a title policy
issued by a company acceptable to FNMA, (iii) is accompanied by an insurance
policy covering improvements on the premises subject to such mortgage or deed
of trust, with a loss payee clause in favor of the Bank or its assignee, which
insurance policy or policies covers such risks as are customarily insured
against in accordance with industry practice and in
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accordance with Investor requirements, (iv) includes flood insurance and/or
special hazard insurance where either is required by an Investor or Agency or
requested by the mortgagor, and the Bank has complied in all material respects
with all of its obligations under the insurance policies described in this
clause (iv), and (v) except as set forth in Schedule 5.26(a), is covered by an
FHA insurance certificate, VA guaranty certificate, or policy of private
mortgage insurance, as required by the terms of any agreement or any Law
applicable to such loan. The Bank has substantially complied with all
applicable provisions of the insurance or guaranty contract or policy referred
to in clause (v) and the Laws related thereto, the insurance or guaranty is in
full force and effect with respect to each such loan, and there is no Default
that would result in the revocation of any such insurance or guaranty. Except
as set forth in Schedule 5.26(a), each Warehouse Loan is a Mortgage Loan that
is or is eligible to be an FHA Loan or a VA Loan or which is a loan eligible to
be sold to FNMA or FHLMC ("Conforming Loan") or is subject to a commitment of a
Person to purchase a Mortgage Loan owned by the Bank ("Investor Commitment").
(b) To the Knowledge of Financial, all Mortgage Loans are genuine,
valid and legally binding obligations of the borrowers thereunder, have been
duly executed by a borrower of legal capacity and are enforceable in accordance
with their terms, except as enforcement thereof may be limited by (i)
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether
applied in a proceeding in equity or at law), (ii) state Laws requiring
creditors to proceed against the collateral before pursuing the borrower, (iii)
state Laws on deficiencies,
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and (iv) the matters set forth in Schedule 5.26(b). Except as set forth in
Schedule 5.26(b), neither the operation of any of the terms of any Mortgage
Loan, nor the exercise of any right thereunder, has rendered or will render the
related mortgage or note unenforceable, in whole or in part, or subject it to
any right of rescission, setoff, counterclaim or defense, and no such right of
rescission, setoff, counterclaim or defense has been asserted with respect
thereto. The files, records and documents necessary to originate and/or
service the Mortgage Loans in accordance with applicable standards ("Loan
Documents") were in compliance in all material respects with applicable
Regulations and Investor requirements upon origination of the underlying
Mortgage Loan and are complete in all material respects.
(c) All Mortgage Loans held for the account of the Bank (whether
or not for future sale or delivery to an Investor) are owned by the Bank free
and clear of any Lien other than Liens in favor of the Bank's lender banks
pursuant to warehouse lines. Such Mortgage Loans have been duly recorded or
submitted for recordation in the appropriate filing office in the name of the
Bank as mortgagee. The Bank has not, with respect to any such Mortgage Loan,
released any security therefor, except upon receipt of reasonable consideration
for such release or of Investor approval, or accepted prepayment of any such
Mortgage Loan which has not been promptly applied to such Mortgage Loan. To
the Knowledge of Financial, there exists no physical damage to any property
securing a Mortgage Loan ("Collateral"), which physical damage is not insured
against in compliance with the Regulations and would cause any Mortgage Loan to
become delinquent or
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adversely affect the value or marketability of any Mortgage Loan, Servicing
Rights or Collateral.
(d) To the Knowledge of Financial, (i) all monies received with
respect to each Mortgage Loan have been properly accounted for and applied,
(ii) upon origination, all of the Mortgage Loans were fully disbursed in
accordance with applicable law and regulations, and (iii) all payoff and
assumption statements with respect to each Mortgage Loan provided by the Bank
to borrowers or their agents were, at the time they were provided, complete and
accurate in all material respects.
(e) The responsibilities of the Bank with respect to all
applicable Taxes (including tax reporting for the period prior to the Closing),
assessments, ground rents, flood insurance premiums, hazard insurance premiums
and mortgage insurance premiums that are related to the Mortgage Loans have
been duly met in all material respects. All Tax identifications are correct
and complete and comply with all applicable Laws in all material respects, and
property descriptions contained in any Loan Document are legally sufficient in
all material respects.
5.27 NO RECOURSE
(a) Except as set forth in Schedule 5.27(a), the Bank is
not a party to (i) any Contract with (or otherwise obligated to) any Person,
including an Investor or
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Insurer, to repurchase from any such Person any Mortgage Loan, mortgaged
property serviced for others or mortgage loan sold by the Bank with servicing
released ("Servicing Released Loans") or Previously Disposed Loans, or (ii) any
Contract to reimburse, indemnify or hold harmless any Person or otherwise
assume any Liability with respect to any loss suffered or incurred as a result
of any default under or the foreclosure or sale of any such Mortgage Loan,
mortgaged property, Servicing Released Loans, or Previously Disposed Loans
except insofar as (A) such recourse is based upon a breach by the Bank of a
customary representation, warranty or undertaking, or (B) the Bank incurs
expenses such as legal fees in excess of the customary reimbursement limits, if
any, set forth in the applicable Mortgage Servicing Agreement. For purposes of
this Agreement, the term "Recourse Loan" means any Mortgage Loan, mortgaged
property, Servicing Released Loan or Previously Disposed Loan with respect to
which the Bank bears the risk of loss as described in the preceding sentence.
(b) Except as set forth in Schedule 5.27(b), there are no
pooling, participation, servicing or other Contracts to which the Bank is a
party which obligate it to make servicing advances with respect to defaulted or
delinquent Mortgage Loans other than as provided in GNMA, FNMA or FHLMC pooling
and servicing agreements. The amounts that, as of the Effective Date, have
been advanced by the Bank in connection with servicing the Mortgage Loans
(including principal, interest, taxes and insurance premiums) and which are
permitted to be paid by the Bank as the servicer of the Mortgage Loans pursuant
to applicable Investor requirements and the terms of the applicable Mortgage
Servicing
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Agreement will be valid and subsisting amounts owing to the Bank, subject to
the terms of the applicable Mortgage Servicing Agreement.
5.28 MORTGAGE SERVICING AGREEMENTS.
Schedule 5.28 lists all Mortgage Servicing Agreements to which
the Bank is a party as of the date of this Agreement. Except as set forth in
Schedule 5.28, the Mortgage Servicing Agreements and the Regulations set forth
all the terms and conditions of the Bank's rights against and obligations to
the Agencies and Investors and they have not been modified in any material
respect. All of the Mortgage Servicing Agreements are valid and binding
obligations of the Bank and, to the Knowledge of Financial, all of the other
parties thereto and are in full force and effect and are enforceable in
accordance with their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether
applied in a proceeding in equity or at law). Except as set forth in Schedule
5.28, (i) to the Knowledge of Financial there is no Default by any party under
any such Mortgage Servicing Agreement, (ii) there is no pending or, to the
Knowledge of Financial, threatened cancellation of any Mortgage Servicing
Agreement, (iii) no material sanctions or penalties have been imposed upon the
Bank under any Mortgage Servicing Agreement or under any applicable Regulation,
and (iv) all of the Mortgage Servicing Agreements and the rights created
thereunder are owned by the Bank free and clear of any
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Liens and upon the consummation of the Merger, will continue to be so owned by
the Bank except upon termination by an Investor pursuant to Contract right.
5.29 INVESTOR COMMITMENTS. Set forth in Schedule 5.29 is a
complete and correct list of each Investor Commitment to which the Bank was a
party as of the date hereof. Financial has made available to BancGroup
complete and correct copies of all Investor Commitments in effect on such date.
Each Investor Commitment constitutes a valid and binding obligation of the
Bank, and, to the Knowledge of Financial, all of the other parties thereto,
enforceable in accordance with its terms, subject to bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights generally and
by general principles of equity (whether applied in a proceeding in equity or
at law). Except as set forth in Schedule 5.29, each Mortgage Loan or Warehouse
Loan which is subject to an Investor Commitment is a Conforming Loan or is
otherwise readily salable in the secondary market.
5.30 CUSTODIAL ACCOUNTS. The Bank has full power and authority to
maintain escrow accounts ("Custodial Accounts") for certain serviced loans.
Except as disclosed in Schedule 5.30, such Custodial Accounts comply in all
material respects with (i) all applicable Regulations and the payment of
interest on escrows and (ii) any terms of the Mortgage Loans (and Mortgage
Servicing Agreements) relating thereto. To the Knowledge of Financial, the
Custodial Accounts contain the amounts shown in the records of the Bank, which
amounts represent all monies received or advanced by the Bank as required by
the
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applicable Mortgage Servicing Agreements, less amounts remitted by or on behalf
of the Bank pursuant to applicable Mortgage Servicing Agreements, except for
checks in process.
5.31 POOL CERTIFICATION. Except as set forth in Schedule 5.31, all
Pools relating to the Mortgage Loans have been certified, finally certified and
recertified (if required) in accordance with applicable Regulations. The
principal balance outstanding and owing on the Mortgage Loans in each Pool
equals or exceeds the amount owing to the corresponding security holders of
such Pool. To the Knowledge of Financial, no event has occurred or failed to
occur which would require the Bank to repurchase any Mortgage Loan from any
Pool, except with respect to the obligation to repurchase from GNMA Pools FHA
Loans or VA Loans that are in the process of foreclosure (or equivalent
procedure).
5.32 REPORTS. Since January 1, 1991, the Bank has timely filed all
reports and statements, together with any amendments required to be made with
respect thereto, that it was required to file with Agencies. As of their
respective dates, each of such reports and documents, including the financial
statements, exhibits, and schedules thereto, complied in all material respects
with all applicable Laws. As of its respective date, each such report and
document did not, in all material respects, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
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5.33 STOCK REPURCHASES. No Financial Company has repurchased any
shares of common stock of Financial since July 26, 1994.
ARTICLE 6
ADDITIONAL COVENANTS
6.1 ADDITIONAL COVENANTS OF BANCGROUP. BancGroup covenants to and
with Financial as follows:
(a) Registration Statement and Other Filings. BancGroup
shall prepare and file with the SEC the Registration Statement on Form S-4 (or
such other form as may be appropriate) and all amendments and supplements
thereto, in form reasonably satisfactory to Financial and its counsel, with
respect to the Common Stock to be issued pursuant to this Agreement. BancGroup
shall use reasonable good faith efforts to prepare all necessary filings with
any Agencies which may be necessary for approval to consummate the transactions
contemplated by this Agreement.
(b) Blue Sky Permits. BancGroup shall use its best
efforts to obtain, prior to the effective date of the Registration Statement,
all necessary state securities Law or "blue sky" Permits and approvals required
to carry out the transactions contemplated by this Agreement.
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(c) Financial Statements. BancGroup shall furnish to
Financial:
(i) As soon as practicable and in any event
within forty-five (45) days after the end of each quarterly period (other than
the last quarterly period) in each fiscal year, consolidated statements of
operations of BancGroup for such period and for the period beginning at the
commencement of the fiscal year and ending at the end of such quarterly period,
and a consolidated statement of financial condition of BancGroup as of the end
of such quarterly period, setting forth in each case in comparative form
figures for the corresponding periods ending in the preceding fiscal year,
subject to changes resulting from year-end adjustments;
(ii) Promptly upon receipt thereof, copies of all
audit reports submitted to BancGroup by independent auditors in connection with
each annual, interim or special audit of the books of BancGroup made by such
accountants;
(iii) As soon as practicable, copies of all such
financial statements and reports as it shall send to its stockholders and of
such regular and periodic reports as BancGroup may file with the SEC or any
other Agency; and
(iv) With reasonable promptness, such additional
financial data as Financial may reasonably request.
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(d) No Control of Financial by BancGroup.
Notwithstanding any other provision hereof, until the Effective Date, the
authority to establish and implement the business policies of Financial shall
continue to reside solely in Financial's officers and board of directors.
(e) Listing. Prior to the Effective Date, BancGroup
shall use its reasonable efforts to list the shares of BancGroup Common Stock
to be issued in the Merger on the NYSE or other quotations system on which such
shares are primarily traded.
(f) Employee Benefit Matters. On the Effective Date, all
employees of any Financial Company shall, at BancGroup's option, either became
employees of the Resulting Corporation or its Subsidiaries or be entitled to
severance benefits in accordance with Colonial Bank's severance policy as of
the date of this Agreement. All employees of any Financial Company who become
employees of the Resulting Corporation or its Subsidiaries on the Effective
Date shall be entitled, to the extent permitted by applicable law, to
participate in all benefit plans of Colonial Bank to the same extent as
Colonial Bank employees; provided that employees of any Financial Company who
become employees of the Resulting Corporation or its Subsidiaries shall be
allowed to participate as of the Effective Date in the medical and dental
benefits plan of Colonial Bank as new employees of Colonial Bank with a waiver
of the 30-day waiting period and of any pre-existing condition limitations. To
the extent permitted by applicable law, the period of service with the
appropriate Financial Company of all employees who become employees of the
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Resulting Corporation or its Subsidiaries on the Effective Date shall be
recognized only for vesting and eligibility purposes under Colonial Bank's
benefit plans. In addition, if the Effective Date falls within an annual
period of coverage under any group health plan or group dental plan of the
Resulting Corporation and its Subsidiaries, each such Financial Company
employee shall be given credit for covered expenses paid by that employee under
comparable employee benefit plans of the Financial Company during the
applicable coverage period through the Effective Date towards satisfaction of
any annual deductible limitation and out-of-pocket maximum that may apply under
that group health plan or group dental plan of the Resulting Corporation and
its Subsidiaries.
6.2 ADDITIONAL COVENANTS OF FINANCIAL. Financial covenants to and
with BancGroup as follows:
(a) Operations. Financial will conduct its business
and the business of each Financial Company in a proper and prudent manner and
will use its best efforts to maintain its relationships with its depositors,
customers and employees. No Financial Company will engage in any material
transaction outside the ordinary course of business or make any material change
in its accounting policies or methods of operation, nor will Financial permit
the occurrence of any change or event which would render any of the
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representations and warranties in Article 5 hereof untrue in any material
respect at and as of the Effective Date with the same effect as though such
representations and warranties had been made at and as of such Effective Date.
(b) Stockholders Meeting; Best Efforts. Financial will
cause the Stockholders Meeting to be held for the purpose of approving the
Merger as soon as practicable after the effective date of the Registration
Statement, and will use its best efforts to bring about the transactions
contemplated by this Agreement, including stockholder approval of this
Agreement, as soon as practicable unless this Agreement is terminated as
provided herein.
(c) Prohibited Negotiations. Until the termination of
this Agreement, neither Financial nor any of Financial's directors or officers
(or any person representing any of the foregoing) shall solicit or encourage
inquiries or proposals with respect to, furnish any information relating to or
participate in any negotiations or discussions concerning, any acquisition or
purchase of all or of a substantial portion of the Assets of, or of a
substantial equity interest in, Financial or any business combination involving
Financial or any Financial Company other than as contemplated by this
Agreement. Financial will notify BancGroup immediately if any such inquiries
or proposals are received by Financial, if any such information is requested
from Financial, or if any such negotiations or discussions are sought to be
initiated with Financial, and Financial shall instruct Financial's officers,
directors, agents or affiliates or their subsidiaries to refrain from doing any
of the above;
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provided, however, that nothing contained herein shall be deemed to prohibit
any officer or director of Financial from fulfilling his fiduciary duty or from
taking any action that is required by Law.
(d) Director Voting. The members of the Board of
Directors of Financial agree to support publicly the Merger, and Financial
shall on the date of execution of this Agreement obtain an agreement from each
of its directors substantially in the form set forth in Exhibit A.
(e) Expenses. The expenses incurred by Financial in
connection with the transactions contemplated by this Agreement not including
any fees or expenses to be paid to the Robinson-Humphrey Co., Inc., shall not
exceed, in the aggregate, $75,000. For this purpose, expenses shall include,
but not be limited to, fees and costs of legal counsel and accountants, plus
any out-of-pocket costs incurred by Financial, provided that regulatory filing
fees incurred by Financial shall not be included in such expenses.
(f) Servicing Rights. Financial shall enter into an
Interim Servicing Agreement with Colonial Mortgage Company substantially in the
form set forth in Schedule 6.2(f). Financial shall be bound by such agreement
and shall maintain such agreement in force until the earlier of the Closing or
the termination of this Agreement.
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(g) New Building. Financial will provide BancGroup with
any construction plans, including costs, regarding its building at 4800 Ashford
Dunwoody Road, as well as any proposed leases, and Financial will not authorize
additional construction on such building or enter into any leases regarding
such premises without the prior written consent of BancGroup.
ARTICLE 7
MUTUAL COVENANTS AND AGREEMENTS
7.1 BEST EFFORTS; COOPERATION. Subject to the terms and
conditions herein provided, BancGroup and Financial each agrees to use its best
efforts promptly to take, or cause to be taken, all actions and do, or cause to
be done, all things necessary, proper or advisable under applicable Laws or
otherwise, including, without limitation, promptly making required deliveries
of stockholder lists and stock transfer reports and attempting to obtain all
necessary Consents and waivers and regulatory approvals, to consummate and make
effective, as soon as practicable, the transactions contemplated by this
Agreement. The officers of each Party to this Agreement shall fully cooperate
with officers and employees, accountants, counsel and other representatives of
the other Parties not only in fulfilling the duties hereunder of the Party of
which they are officers but also in assisting, directly or through direction of
employees and other persons under their supervision or control, such as stock
transfer agents for the Party, the other Parties requiring information which is
reasonably available from such Party.
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7.2 PRESS RELEASE. Each Party hereto agrees that, unless approved
by the other Parties in advance, such Party will not make any public
announcement, issue any press release or other publicity or confirm any
statements by any person not a party to this Agreement concerning the
transactions contemplated hereby. Notwithstanding the foregoing, each Party
hereto reserves the right to make any disclosure if such Party, in its
reasonable discretion, deems such disclosure required by Law. In that event,
such Party shall provide to the other Party the text of such disclosure
sufficiently in advance to enable the other Party to have a reasonable
opportunity to comment thereon.
7.3 MUTUAL DISCLOSURE. Each Party hereto agrees to promptly
furnish to each other Party hereto its public disclosures and filings not
precluded from disclosure by Law including but not limited to call reports,
Form 8-K, Form 10-Q and Form 10-K filings, Y-2 applications, reports on Form
Y-6, quarterly or special reports to shareholders, Tax returns, Form S-8
registration statements and similar documents.
7.4 ACCESS TO PROPERTIES AND RECORDS. Each Party hereto shall
afford the officers and authorized representatives of each of the other Parties
full access to the properties, books and records of such Party in order that
such other Parties may have full opportunity to make such investigation as they
shall desire of the affairs of such Party and shall furnish to such Parties
such additional financial and operating data and other information as to its
businesses and Assets as shall be from time to time reasonably requested.
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ARTICLE 8
CONDITIONS TO OBLIGATIONS OF ALL PARTIES
The obligations of BancGroup and Financial to cause the transactions
contemplated by this Agreement to be consummated shall be subject to the
satisfaction, in the sole discretion of the Party relying upon such conditions,
on or before the Effective Date of all the following conditions, except as such
Parties may waive such conditions in writing:
8.1 APPROVAL BY SHAREHOLDERS. At the Stockholders Meeting, this
Agreement and the matters contemplated by this Agreement shall have been duly
approved by the vote of the holders of not less than the requisite number of
the issued and outstanding voting securities of Financial as is required by
applicable law and Financial's stock charter and by-laws.
8.2 REGULATORY AUTHORITY APPROVAL. Orders, Consents and
approvals, in form and substance reasonably satisfactory to BancGroup and
Financial shall have been entered by the Board of Governors of the Federal
Reserve System and other appropriate bank regulatory Agencies (i) granting the
authority necessary for the consummation of the transactions contemplated by
this Agreement and (ii) satisfying all other requirements prescribed by Law.
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8.3 LITIGATION. There shall be no pending or threatened
Litigation in any court or any pending or threatened proceeding by any
governmental commission, board or Agency, with a view to seeking or in which it
is sought to restrain or prohibit consummation of the transactions contemplated
by this Agreement or in which it is sought to obtain divestiture, rescission or
damages in connection with the transactions contemplated by this Agreement and
no investigation by any Agency shall be pending or threatened which might
result in any such suit, action or other proceeding.
8.4 REGISTRATION STATEMENT. The Registration Statement shall be
effective under the 1933 Act and no stop order suspending the effectiveness of
the Registration Statement shall be in effect; no proceedings for such purpose,
or under the proxy rules of the SEC or any bank regulatory authority pursuant
to the 1934 Act, as amended, and with respect to the transactions contemplated
hereby, shall be pending before or threatened by the SEC or any bank regulatory
authority; and all approvals or authorizations for the offer of BancGroup
Common Stock shall have been received or obtained pursuant to any applicable
state securities Laws, and no stop order or proceeding with respect to the
transactions contemplated hereby shall be pending or threatened under any such
state Law.
8.5 TAX OPINION. An opinion of Powell, Goldstein, Frazer &
Murphy, counsel to Financial, shall have been received by Financial and
BancGroup in form and substance reasonably satisfactory to Financial and
BancGroup to the effect that (i) the Merger will constitute a "reorganization"
within the meaning of section 368 of the Code; (ii) no gain or loss will be
recognized by Financial or BancGroup; (iii) no gain or
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loss will be recognized to the stockholders of Financial who receive shares of
BancGroup Common Stock; (iv) the basis of the BancGroup Common Stock received
in the Merger will be equal to the basis of the shares of Financial common
stock exchanged in the Merger; (v) the holding period of the BancGroup Common
Stock will include the holding period of the shares of Financial common stock
exchanged therefor if such shares of Financial common stock were capital assets
in the hands of the exchanging Financial stockholder; and (vi) cash received by
a Financial stockholder in lieu of a fractional share interest of BancGroup
stock will be treated as having been received as a distribution in full payment
in exchange for the fractional share interest of BancGroup Common Stock which
he would otherwise be entitled to receive and will qualify as capital gain or
loss (assuming Financial common stock was a capital asset in his hands as of
the Effective Date).
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF FINANCIAL
The obligations of Financial to cause the transactions contemplated by
this Agreement to be consummated shall be subject to the satisfaction on or
before the Effective Date of all the following conditions except as Financial
may waive such conditions in writing:
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9.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. Notwithstanding
any investigation made by or on behalf of Financial, all representations and
warranties of BancGroup contained in this Agreement shall be true in all
material respects on and as of the Effective Date as if such representations and
warranties were made on and as of such Effective Date, and BancGroup shall have
performed in all material respects all agreements and covenants required by this
Agreement to be performed by it on or prior to the Effective Date.
9.2 ADVERSE CHANGES. There shall have been no changes after the
date of the most recent balance sheet provided under section 4.3(a)(i) hereof in
the results of operations (as compared with the corresponding period of the
prior fiscal year), Assets, Liabilities, financial condition or affairs of
BancGroup which in their total effect constitute a Material Adverse Effect, nor
shall there have been any material changes in the Laws governing the business of
BancGroup or which would impair the rights of Financial or its stockholders
pursuant to this Agreement.
9.3 CLOSING CERTIFICATE. In addition to any other deliveries
required to be delivered hereunder, Financial shall have received a certificate
from the President or a Vice President and from the Secretary or Assistant
Secretary of BancGroup dated as of the Closing certifying that:
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(a) the Board of Directors of BancGroup has duly adopted
resolutions (copies of which shall be attached to such certificate) approving
the substantive terms of this Agreement and authorizing the consummation of the
transactions contemplated by this Agreement and such resolutions have not been
amended or modified and remain in full force and effect;
(b) each person executing this Agreement on behalf of
BancGroup is an officer of BancGroup holding the office or offices specified
therein and the signature of each person set forth on such certificate is his
or her genuine signature;
(c) the certificate of incorporation and bylaws of
BancGroup referenced in section 4.4 hereof remain in full force and effect;
(d) such persons have no knowledge of a basis for any
material claim, in any court or before any Agency or arbitration and or
otherwise against, by or affecting BancGroup or the business, prospects,
condition (financial or otherwise), or Assets of BancGroup or which would
prevent the performance of this Agreement or the transactions contemplated by
this Agreement or declare the same unlawful or cause the recision thereof;
(e) to such persons' knowledge, the Proxy Statement
delivered to Financial's stockholders, or any amendments or revisions thereto
so delivered, as of the date thereof, did not contain or incorporate by
reference, any untrue statement of a material fact
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or omit to state any material fact required to be stated therein or necessary
to make the statements therein, not misleading in light of the circumstances
under which they were made (it being understood that such persons need not
express a statement as to information concerning or provided by Financial for
inclusion in such Proxy Statement); and
(f) the conditions set forth in this Article 9 insofar as
they relate to BancGroup have been satisfied.
9.4 OPINION OF COUNSEL. Financial shall have received an opinion
of Miller, Hamilton, Snider & Odom, counsel to BancGroup, dated as of the
Closing, in form reasonably satisfactory to Financial, as to matters set forth
in Exhibit B hereto.
9.5 OTHER MATTERS. There shall have been furnished to such
counsel for Financial certified copies of such corporate records of BancGroup
and copies of such other documents as such counsel may reasonably have
requested for such purpose.
ARTICLE 10
CONDITIONS TO OBLIGATIONS OF BANCGROUP
The obligations of BancGroup to cause the transactions contemplated by
this Agreement to be consummated shall be subject to the satisfaction by
Financial on or before
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the Effective Date of the following conditions except as BancGroup may waive
such conditions in writing:
10.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. Notwithstanding
any investigation made by or on behalf of BancGroup, all representations and
warranties of Financial contained in this Agreement shall be true in all
material respects on and as of the Effective Date as if such representations
and warranties were made on and as of the Effective Date, and Financial shall
have performed in all material respects all agreements and covenants required
by this Agreement to be performed by it on or prior to the Effective Date.
10.2 ADVERSE CHANGES. There shall have been no changes after the
date of the most recent balance sheet provided under section 5.4(a)(i) hereof
in the results of operations (as compared with the corresponding period of the
prior fiscal year), Assets, Liabilities, financial condition, or affairs of
Financial which constitute a Material Adverse Effect, nor shall there have been
any material changes in the Laws governing the business of Financial which
would impair BancGroup's rights pursuant to this Agreement.
10.3 CLOSING CERTIFICATES. In addition to any other deliveries
required to be delivered hereunder, BancGroup shall have received a certificate
from the President or Vice President and from the Secretary or Assistant
Secretary of Financial dated as of the Closing certifying that:
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(a) the Board of Directors has duly adopted resolutions
(copies of which shall be attached to such certificate) approving the
substantive terms of this Agreement and authorizing the consummation of the
transactions contemplated by this Agreement and such resolutions have not been
amended or modified and remain in full force and effect;
(b) the shareholders of Financial have duly adopted
resolutions (copies of which shall be attached to such certificate) approving
the substantive terms of the Merger and the transactions contemplated thereby
and such resolutions have not been amended or modified and remain in full force
and effect;
(c) each person executing this Agreement on behalf of
Financial is an officer of Financial holding the office or offices specified
therein and the signature of each person set forth on such certificate is his
or her genuine signature;
(d) the charter documents of Financial and the bank
referenced in section 5.8 hereof were in full force and effect and have not
been amended or modified since the date hereof;
(e) to such persons' knowledge, the Proxy Statement
delivered to Financial's stockholders, or any amendments or revisions thereto
so delivered, as of the date thereof, did not contain or incorporate by
reference any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
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statements therein, not misleading in light of the circumstances under which
they were made (it being understood that such persons need not express a
statement as to any information concerning or provided by BancGroup for
inclusion in such Proxy Statement); and
(f) the conditions set forth in this Article 10 insofar
as they relate to Financial have been satisfied.
10.4 OPINION OF COUNSEL. BancGroup shall have received an opinion
of Powell, Goldstein, Frazer & Murphy, counsel to Financial, dated as of the
Closing, in form reasonably satisfactory to BancGroup, as to matters set forth
in Exhibit C hereto.
10.5 CONTROLLING SHAREHOLDERS. Each shareholder of Financial who
may be an "affiliate" of Financial, within the meaning of Rule 145 of the
general rules and regulations under the 1933 Act shall have executed and
delivered a commitment and undertaking to the effect that such person shall not
make a "distribution" (within the meaning of Rule 145) of the Common Stock which
he receives upon the Effective Date and that such Common Stock will be held
subject to all applicable provisions of the 1933 Act and the rules and
regulations of the SEC thereunder. Financial recognizes and acknowledges that
Common Stock issued to such persons may bear a legend evidencing the
undertakings described above.
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10.6 OTHER MATTERS. There shall have been furnished to counsel for
BancGroup certified copies of such corporate records of Financial and copies of
such other documents as such counsel may reasonably have requested for such
purpose.
10.7 MATERIAL EVENTS. There shall have been no determination by
the board of directors of BancGroup that the transactions contemplated by this
Agreement have become impractical because of any state of war, national
emergency, declaration of a banking moratorium in the United States or a
general suspension of trading on the NYSE or any other major stock exchange.
10.8 DISSENTERS. The number of shares as to which shareholders of
Financial have exercised dissenters rights of appraisal does not exceed 10% of
the outstanding shares of common stock of Financial.
10.9 CASH OUT OR TERMINATION OF OPTIONS. Each holder of
non-qualified options of Financial common stock shall have agreed not to
exercise such options and to accept cash in payment for such options as
specified in section 3.1(c)(i). Options outstanding under Financial's
incentive stock option plan shall be terminated if such options have not been
exercised prior to the Closing, as specified in section 3.1(c)(ii).
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10.10 EMPLOYMENT AND COMPENSATION ARRANGEMENTS. No employment or
compensation arrangements of the type described in section 5.7 or listed in
Schedule 5.7 will continue in force or effect beyond the Closing.
10.11 EMPLOYEE STOCK PURCHASE PLAN. For at least six (6) months
prior to the Closing, Financial shall not have offered employees of any
Financial Company the opportunity to purchase shares of Financial stock under
the Mt. Vernon Financial Corporation Employee Stock Purchase Plan.
ARTICLE 11
TERMINATION OF REPRESENTATIONS AND WARRANTIES
All representations and warranties provided in Articles 4 and 5 of
this Agreement or in any closing certificate pursuant to Articles 9 and 10
shall terminate and be extinguished at and shall not survive the Effective
Date. All covenants, agreements and undertakings required by this Agreement to
be performed by any Party hereto following the Effective Date shall survive
such Effective Date and be binding upon such Party. If the Merger is not
consummated, all representations, warranties, obligations, covenants, or
agreements hereunder or in any certificate delivered hereunder relating to the
transaction which is not consummated shall be deemed to be terminated or
extinguished except that section 7.2, Article 11 and Article 15 shall survive.
Items disclosed in the Exhibits and Schedules attached hereto are incorporated
into this Agreement and form a part of the
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representations, warranties, covenants or agreements to which they relate.
Information provided in such Exhibits and Schedules is provided only in
response to the specific section of this Agreement which calls for such
information.
ARTICLE 12
NOTICES
All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given at
the time given or mailed, first class postage prepaid:
(a) If to Financial to Anthony L. Watts, President,
Financial, 2408 Mt. Vernon Road, Dunwoody, Georgia 30238, facsimile (404)
390-1917, with copies to Walter G. Moeling, IV, Powell, Goldstein, Frazer &
Murphy, Sixteenth Floor, 191 Peachtree Street, N.E., Atlanta, Georgia 30303,
facsimile (404) 572-5958, and Gerald S. Lesher, Esq., Cooney, Ward, Lesher &
Damon, 1555 Palm Beach Lakes Boulevard, Suite 1000, West Palm Beach, Florida
33401, facsimile (407) 689-9303, or as may otherwise be specified by Financial
in writing to BancGroup.
(b) If to BancGroup, to W. Flake Oakley, IV, One Commerce
Street, Suite 800, Montgomery, Alabama, 36104, facsimile (334) 240-6040, with a
copy to Michael D. Waters, Miller, Hamilton, Snider & Odom, One Commerce
Street, Suite 802, Montgomery,
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Alabama 36104, facsimile (334) 265-4533, or as may otherwise be specified in
writing by BancGroup to Financial.
ARTICLE 13
AMENDMENT OR TERMINATION
13.1 AMENDMENT. This Agreement may be amended by the mutual
consent of BancGroup and Financial before or after approval of the transactions
contemplated herein by the shareholders of Financial. No amendments shall be
made which would alter the Exchange Ratio or which, in the opinion of the board
of directors of any Party hereto, would adversely affect the rights of the
shareholders of any Party hereto.
13.2 TERMINATION. This Agreement may be terminated at any time
prior to or on the Effective Date whether before or after action thereon by the
shareholders of Financial, as follows:
(a) by the mutual consent of the respective boards of
directors of Financial and BancGroup;
(b) by the board of directors of either Party (provided
that the terminating Party is not then in material breach of any
representation, warranty, covenant, or other agreement contained in this
Agreement) in the event of a breach by the other Party of any
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representation or warranty contained in this Agreement which cannot be or has
not been cured within thirty (30) days after the giving of written notice to
the breaching Party of such breach and which breach would provide the
non-breaching party the ability to refuse to consummate the Merger under the
standard set forth in section 10.1 of this Agreement in the case of BancGroup
and section 9.1 of this Agreement in the case of Financial;
(c) by the board of directors of either Party (provided
that the terminating Party is not then in material breach of any
representation, warranty, covenant, or other agreement contained in this
Agreement) in the event of a material breach by the other Party of any covenant
or agreement contained in this Agreement which cannot be or has not been cured
within thirty (30) days after the giving of written notice to the breaching
Party of such breach, or if any of the conditions to the obligations of such
Party contained in this Agreement shall not have been satisfied in full; or
(d) by the board of directors of BancGroup or Financial
if all transactions contemplated by this Agreement shall not have been
consummated on or prior to December 31, 1995, if the failure to consummate the
transactions provided for in this Agreement on or before such date is not
caused by any breach of this Agreement by the Party electing to terminate
pursuant to this section 13.2(d).
13.3 DAMAGES. In the event of termination pursuant to section
13.2, Financial and BancGroup shall not be liable for damages for any breach of
warranty or representation
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contained in this Agreement made in good faith, and the expenses incurred shall
be borne as set forth in section 15.1 hereof.
ARTICLE 14
DEFINITIONS
(a) The following terms, which are capitalized in this
Agreement, shall have the meanings set forth below for the purpose of this
Agreement:
<TABLE>
<S> <C>
Agencies Shall mean, collectively, the Federal Trade Commission, the United States Department of Justice, the
Board of the Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the
Office of Thrift Supervision, all state regulatory agencies having jurisdiction over the Parties and
their respective Subsidiaries, HUD, the VA, the FHA, the GNMA, the FNMA, the FHLMC, the NYSE, and the
SEC.
Agreement Shall mean this Agreement and Plan of Merger and the Exhibits and Schedules delivered pursuant hereto
and incorporated herein by reference.
</TABLE>
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<TABLE>
<S> <C>
Assets Of a Person shall mean all of the assets, properties, businesses and rights of such Person of every
kind, nature, character and description, whether real, personal or mixed, tangible or intangible,
accrued or contingent, or otherwise relating to or utilized in such Person's business, directly or
indirectly, in whole or in part, whether or not carried on the books and records of such Person, and
whether or not owned in the name of such Person or any Affiliate of such Person and wherever located.
BancGroup The Colonial BancGroup, Inc., a Delaware corporation with its principal offices in Montgomery,
Alabama.
Bank Mt. Vernon Federal Savings Bank, a stock Federal savings bank with its home office in Georgia.
Closing The closing of the transactions contemplated hereby as described in section 2.7 of this Agreement.
Code The Internal Revenue Code of 1986, as amended.
</TABLE>
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<TABLE>
<S> <C>
Common Stock BancGroup's Common Stock authorized and defined in the restated certificate of incorporation of
BancGroup, as amended.
Consent Any consent, approval, authorization, clearance, exemption, waiver, or similar affirmation by any
Person pursuant to any Contract, Law, Order, or Permit.
Contract Any written or oral agreement, arrangement, authorization, commitment, contract, indenture,
instrument, lease, obligation, plan, practice, restriction, understanding or undertaking of any kind
or character, or other document to which any Person is a party or that is binding on any Person or its
capital stock, Assets or business.
Default Shall mean (i) any breach or violation of or default under any Contract, Order or Permit, (ii) any
occurrence of any event that with the passage of time or the giving of notice or both would constitute
a breach or violation of or default under any Contract, Order or Permit, or (iii) any occurrence of
any event that with or without the
</TABLE>
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<TABLE>
<S> <C>
passage of time or the giving of notice would give rise to a right to terminate or revoke, change the
current terms of, or renegotiate, or to accelerate, increase, or impose any Liability under, any
Contract, Order or Permit.
DGCL The Delaware General Corporation Law.
Effective Date Means the date and time at which the Merger becomes effective as defined in section 2.7 hereof.
Environment Laws Means the laws, regulations and governmental requirements referred to in section 5.23 hereof.
ERISA The Employee Retirement Income Security Act of 1974, as amended.
Exhibits A through E, inclusive, shall mean the Exhibits so marked, copies of which are attached to this
Agreement. Such Exhibits are hereby incorporated by reference herein and made a part hereof, and may
be referred to in this Agreement and any other related instrument or document without being attached
hereto.
</TABLE>
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<TABLE>
<S> <C>
FHA The United States Federal Housing Authority.
FHLMC The Federal Home Loan Mortgage Corporation.
FNMA The Federal National Mortgage Association.
Financial Mt. Vernon Financial Corporation, a Georgia corporation located in Atlanta, Georgia.
Financial Company Shall mean Financial, the Bank, any Subsidiary of Financial or the Bank, or any person or entity
acquired as a Subsidiary of Financial or the Bank in the future and owned by Financial at the
Effective Date.
Financial Stock Shares of Common stock, par value $.01 per share, of Financial.
GNMA The Government National Mortgage Association.
HUD The United Stated Department of Housing and Urban Development.
</TABLE>
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<TABLE>
<S> <C>
Insurer Any Person who insures or guarantees all or any portion of the risk of loss upon borrower Default on
any of the mortgage Loans, including the FHA, the VA, and any private mortgage insurer, and providers
of life, hazard, flood, disability, title or other insurance with respect to any of the Mortgage
Loans or the Collateral.
Investor Any Person who (i) owns Mortgage Loans or Previously Disposed Loans or servicing rights to Mortgage
Loans or Previously Disposed Loans, serviced or master serviced by the Bank pursuant to a Mortgage
Servicing Agreement or (ii) a party (other than the Bank) to an Investor Commitment.
Knowledge Means the knowledge after due inquiry of the Chairman, President, Chief Financial Officer, Chief
Accounting Officer, Chief Credit Officer, General Counsel or any Senior or Executive Vice President of
BancGroup, in the case of knowledge of BancGroup, or of Financial and the Bank, in the case of
knowledge of Financial.
</TABLE>
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<TABLE>
<S> <C>
Law Any code, law, ordinance, regulation, reporting or licensing requirement, rule, or statute applicable
to a Person or its Assets, Liabilities or business, including those promulgated, interpreted or
enforced by any Agency.
Liability Any direct or indirect, primary or secondary, liability, indebtedness, obligation, penalty, cost or
expense (including costs of investigation, collection and defense), deficiency, guaranty or
endorsement of or by any Person (other than endorsements of notes, bills, checks, and drafts presented
for collection or deposit in the ordinary course of business) of any type, whether accrued, absolute
or contingent, liquidated or unliquidated, matured or unmatured, or otherwise.
Lien Any conditional sale agreement, default of title, easement, encroachment, encumbrance, hypothecation,
infringement, lien, mortgage, pledge, reservation, restriction, security interest, title retention or
other security arrangement, or any adverse right or interest, charge, or claim of any nature
whatsoever of, on, or with
</TABLE>
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<TABLE>
<S> <C>
respect to any property or property interest, other than (i) Liens for current property Taxes not yet
due and payable, (ii) for depository institution Subsidiaries of a Party, pledges to secure deposits
and other Liens incurred in the ordinary course of the banking business, and (iii) Liens in the form
of easements and restrictive covenants on real property which do not materially adversely affect the
use of such property by the current owner thereof.
Litigation Any action, arbitration, complaint, criminal prosecution, governmental or other examination or
investigation, hearing, inquiry, administrative or other proceeding relating to or affecting a Party,
its business, its Assets (including Contracts related to it), or the transactions contemplated by this
Agreement.
Loan Property Any property owned by the Party in question or by any of its Subsidiaries or in which such Party or
Subsidiary holds a security interest, and, where required by the context, includes the owner or
operator of such property, but only with respect to such property.
</TABLE>
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<TABLE>
<S> <C>
Loss Any and all direct or indirect payments, obligations, recoveries, deficiencies, fines, penalties,
interest, assessments, losses, diminution in the value of Assets, damages, punitive, exemplary or
consequential damages (including, but not limited to, lost income and profits and interruptions of
business), liabilities, costs, expenses (including without limitation, reasonable attorneys' fees and
expenses, and consultant's fees and other costs of defense or investigation), and interest on any
amount payable to a Third Party as a result of the foregoing.
Market Value Shall be the market value of BancGroup Common Stock as determined in section 3.1 hereof.
material For purposes of this Agreement shall be determined in light of the facts and circumstances of the
matter in question; provided that any specific monetary amount stated in this Agreement shall
determine materiality in that instance.
Material Adverse Effect On a Party shall mean an event, change or occurrence which has a material adverse impact on (i) the
financial
</TABLE>
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<TABLE>
<S> <C>
position, business, or results of operations of such Party and its Subsidiaries, taken as a whole, or
(ii) the ability of such Party to perform its obligations under this Agreement or to consummate the
Merger or the other transactions contemplated by this Agreement provided that "material adverse
impact" shall not be deemed to include the impact of (x) changes in banking and similar laws of
general applicability or interpretations thereof by courts or governmental authorities, (y) changes in
generally accepted accounting principles or regulatory accounting principles generally applicable to
banks and their holding companies, and (z) the Merger and compliance with the provisions of this
Agreement on the operating performance of the Parties.
Merger The merger of Financial with BancGroup as contemplated in this Agreement.
Mortgage Loan Any closed mortgage loan, whether or not such mortgage loan is included in a securitized portfolio, in
the Mortgage Servicing Portfolio, as evidenced by notes
</TABLE>
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<TABLE>
<S> <C>
or other evidences of indebtedness duly secured by mortgages or deeds of trust.
Mortgage Servicing The portfolio of Mortgage Loans serviced or master serviced Portfolio by the Bank pursuant to Mortgage
Servicing Agreements, together with all Warehouse Loans, but not including any Pipeline Loans or
Warehouse Loans committed to be sold pursuant to an Investor Commitment on a servicing-released basis.
NYSE The New York Stock Exchange.
Order Any administrative decision or award, decree, injunction, judgment, order, quasi-judicial decision or
award, ruling, or writ of any federal, state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency or Agency.
Party Shall mean Financial or BancGroup, and "Parties" shall mean both Financial and BancGroup.
</TABLE>
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<TABLE>
<S> <C>
Permit Any federal, state, local, and foreign governmental approval, authorization, certificate, easement,
filing, franchise, license, notice, permit, or right to which any Person is a party or that is or may
be binding upon or inure to the benefit of any Person or its securities, Assets or business.
Person A natural person or any legal, commercial or governmental entity, such as, but not limited to, a
corporation, general partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in a representative
capacity.
Pipeline Loans Those pending loans to be secured by a first priority mortgage lien on a one-to-four-family residence
with respect to which, as of the Closing Date, the Bank had taken and registered on its data
processing system an application ("Retail Pipeline Loan") or has agreed in writing with a
correspondent originator to purchase ("Correspondent Pipeline"), including those loans which are
pending with a correspondent originator as of the
</TABLE>
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<TABLE>
<S> <C>
Effective Date and which meet the Bank's acquisition criteria, and which have not yet closed or been
purchased from the correspondent originator on the Effective Date and which in the case of a Retail
Pipeline Loan closes within 90 days of the Effective Date and in the case of a Correspondent Pipeline
Loan closes within 60 days of the Effective Date.
Pool An aggregate of one or more Mortgage Loans that have been pledged or granted to secure mortgage-backed
securities or participation certificates.
Previously Disposed Loan Any mortgage loan and/or servicing rights related thereto which is not a Warehouse Loan, a Pipeline
Loan or in the Mortgage Servicing Portfolio, and any Servicing Rights relating to a Mortgage Loan but
which were sold to any Person by the Bank prior to the Effective Date.
Proxy Statement The proxy statement used by Financial to solicit the approval of its stockholders of the transactions
contemplated by this Agreement, which shall include the prospectus of BancGroup relating to the
issuance of the
</TABLE>
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<TABLE>
<S> <C>
BancGroup Common Stock to the shareholders of Financial.
Registration Statement The registration statement on Form S-4, or such other appropriate form, to be filed with the SEC by
BancGroup, and which has been agreed to by Financial, to register the shares of BancGroup Common Stock
offered to stockholders of the Bank pursuant to this Agreement, including the Proxy Statement.
Repurchase The purchase of a Mortgage Loan out of a Pool or an Investor's portfolio by the Bank at the direction
of the Investor based upon a breach by the Bank of a representation, warranty or undertaking contained
in the related Contract with such Investor.
Regulations Shall mean (i) federal, state or local Laws with respect to the origination, insuring, purchase, sale,
servicing or filing of claims in connection with a Mortgage Loan, (ii) the responsibilities and
obligations set forth in any agreement between the Bank and an Investor or private mortgage insurer
(including Mortgage Servicing
</TABLE>
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<TABLE>
<S> <C>
Agreements, Investor Commitments, and selling and servicing guides), and (iii) the Laws, guidelines,
handbooks, public housing program or Investor program, with respect to the origination, insuring,
purchase, sale, servicing or filing of claims in connection with a Mortgage Loan or Previously
Disposed Loan.
Resulting Corporation BancGroup, as the surviving corporation resulting from the Merger.
SEC United States Securities and Exchange Commission.
Stockholders Meeting The special meeting of stockholders of Financial called to approve the transactions contemplated by
this Agreement.
Subsidiaries Shall mean all those corporations, banks, associations, or other entities of which the entity in
question owns or controls 5% or more of the outstanding equity securities either directly or through
an unbroken chain of entities as to each of which 5% or more of the outstanding equity securities is
owned directly or indirectly by its
</TABLE>
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<TABLE>
<S> <C>
parent; provided, however, there shall not be included any such entity acquired through foreclosure or
any such entity the equity securities of which are owned or controlled in a fiduciary capacity.
Tax or Taxes Means any federal, state, county, local, foreign, and other taxes, assessments, charges, fares, and
impositions, including interest and penalties thereon or with respect thereto.
VA The United States Department of Veterans Affairs.
Warehouse Loan A Mortgage Loan that is owned by the Bank and held for sale.
1933 Act The Securities Act of 1933, as amended.
1934 Act The Securities Exchange Act of 1934, as amended.
</TABLE>
(b) Except as otherwise provided herein, the following terms shall
have the meanings ascribed to such terms in the referenced section of this
Agreement:
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<TABLE>
<S> <C>
Collateral Section 5.26
Conforming Loan Section 5.26
Custodial Accounts Section 5.30
Exchange Ratio Section 3.1(a)
FHA Loans Section 5.25
Investor Commitment Section 5.26
Loan Documents Section 5.26
Servicing Released Loan Section 5.27
VA Loans Section 5.25
</TABLE>
ARTICLE 15
MISCELLANEOUS
15.1 EXPENSES. Each Party hereto shall bear its own legal,
auditing, trustee, investment banking, regulatory and other expenses in
connection with this Agreement and the transactions contemplated hereby.
15.2 BENEFIT. This Agreement shall inure to the benefit of and be
binding upon Financial and BancGroup, and their respective successors.
15.3 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with the Laws of the State of Alabama without regard to
any conflict of Laws.
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15.4 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to constitute an original. Each such counterpart
shall become effective when one counterpart has been signed by each Party
thereto.
15.5 HEADINGS. The headings of the various articles and sections
of this Agreement are for convenience of reference only and shall not be deemed
a part of this Agreement or considered in construing the provisions thereof.
15.6 SEVERABILITY. Any term or provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining terms and provisions thereof or affecting the
validity or enforceability of such provision in any other jurisdiction, and if
any term or provision of this Agreement is held by any court of competent
jurisdiction to be void, voidable, invalid or unenforceable in any given
circumstance or situation, then all other terms and provisions, being
severable, shall remain in full force and effect in such circumstance or
situation and the said term or provision shall remain valid and in effect in
any other circumstances or situation.
15.7 CONSTRUCTION. Use of the masculine pronoun herein shall be
deemed to refer to the feminine and neuter genders and the use of singular
references shall be deemed to include the plural and vice versa, as
appropriate. No inference in favor of or against any
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Party shall be drawn from the fact that such Party or such Party's counsel has
drafted any portion of this Agreement.
15.8 RETURN OF INFORMATION. In the event of termination of this
Agreement prior to the Effective Date, each Party shall return to the other,
without retaining copies thereof, all confidential or non-public documents,
work papers and other materials obtained from the other Party in connection
with the transactions contemplated in this Agreement and shall keep such
information confidential, not disclose such information to any other person or
entity, and not use such information in connection with its business.
15.9 EQUITABLE REMEDIES. The parties hereto agree that, in the
event of a breach of this Agreement by either Party, the other Party may be
without an adequate remedy at law owing to the unique nature of the
contemplated transactions. In recognition thereof, in addition to (and not in
lieu of) any remedies at law that may be available to the non-breaching Party,
the non-breaching Party shall be entitled to obtain equitable relief, including
the remedies of specific performance and injunction, in the event of a breach
of this Agreement by the other Party, and no attempt on the part of the
non-breaching Party to obtain such equitable relief shall be deemed to
constitute an election of remedies by the non-breaching Party that would
preclude the non-breaching Party from obtaining any remedies at law to which it
would otherwise be entitled.
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15.10 ATTORNEYS' FEES. If any Party hereto shall bring an action at
law or in equity to enforce its rights under this Agreement (including an
action based upon a misrepresentation or the breach of any warranty, covenant,
agreement or obligation contained herein), the prevailing Party in such action
shall be entitled to recover from the other Party its costs and expenses
incurred in connection with such action (including fees, disbursements and
expenses of attorneys and costs of investigation).
15.11 NO WAIVER. No failure, delay or omission of or by any Party
in exercising any right, power or remedy upon any breach or Default of any
other Party shall impair any such rights, powers or remedies of the Party not
in breach or Default, nor shall it be construed to be a wavier of any such
right, power or remedy, or an acquiescence in any similar breach or Default;
nor shall any waiver of any single breach or Default be deemed a waiver of any
other breach or default theretofore or thereafter occurring. Any waiver,
permit, consent or approval of any kind or character on the part of any Party
of any provisions of this Agreement must be in writing and be executed by the
Parties to this Agreement and shall be effective only to the extent
specifically set forth in such writing.
15.12 REMEDIES CUMULATIVE. All remedies provided in this Agreement,
by law or otherwise, shall be cumulative and not alternative.
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15.13 ENTIRE CONTRACT. This Agreement and the documents and
instruments referred to herein constitute the entire contract between the
parties to this Agreement and supersede all other understandings with respect
to the subject matter of this Agreement.
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IN WITNESS WHEREOF, Financial and BancGroup have caused this Agreement
to be signed by their respective duly authorized officers as of the date first
above written.
ATTEST: MT. VERNON FINANCIAL CORPORATION
BY: D. Michael Sleeth BY:/s/ Gerald S. Lesher
--------------------------- ------------------------
ITS: Senior Vice President ITS: Chairman
--------------------------- ------------------------
(CORPORATE SEAL)
ATTEST: THE COLONIAL BANCGROUP, INC.
BY: Teresa R. Skipper BY:/s/ Alan T. Romanchuck
--------------------------- ------------------------
ITS: Assistant Secretary ITS: Executive Vice President
--------------------------- ------------------------
(CORPORATE SEAL)
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AMENDMENT NO. 1
dated as of July 25, 1995
to the
AGREEMENT AND PLAN OF MERGER
dated as of May 4, 1995
This Amendment No. 1, dated as of July 25, 1995 (the "Amendment"), to
that certain Agreement and Plan of Merger by and between The Colonial
BancGroup, Inc. ("BancGroup") and Mt. Vernon Financial Corporation
("Financial"), dated as of May 4, 1995 (the "Agreement"), is entered into by
and between BancGroup and Financial.
W I T N E S S E T H:
WHEREAS, the parties hereto desire to amend the Agreement to delete
Section 3.1(b) of the Agreement;
NOW THEREFORE, in consideration of the premises, mutual covenants, and
agreements herein contained and contained in the Agreement, the parties hereto
agree as follows:
1. Section 3.1(b) of the Agreement is hereby amended by deleting
the text thereof in its entirety.
2. This Amendment may be executed in one or more counterparts, each
of which shall constitute one and the same instrument.
3. All of the other provisions of the Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, Financial and BancGroup have caused this Amendment
to be signed by their respective duly authorized officers as of the date first
above written.
ATTEST: MT. VERNON FINANCIAL CORPORATION
BY: /s/ Susan Breeden BY: /s/ D. Mike Sleeth
---------------------------- ---------------------------
ITS: Assistant Secretary ITS: Secretary
--------------------------- --------------------------
(CORPORATE SEAL)
ATTEST: THE COLONIAL BANCGROUP, INC.
BY: /s/ Sheila Moody BY: /s/ W. Flake Oakley
---------------------------- ---------------------------
ITS: Vice President & Controller ITS: Chief Financial Officer
--------------------------- --------------------------
(CORPORATE SEAL)
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APPENDIX B
Georgia Business
Corporation Code
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
Section 14-2-1301. DEFINITIONS.
As used in this article, the term:
a. "Beneficial shareholder" means the person who is a
beneficial owner of shares held in a voting trust or by a nominee as
the record shareholder.
b. "Corporate Action" means the transaction or other
action by the corporation that creates dissenters' rights under the
Code Section 14-2-1302.
c. "Corporation" means the issuer of shares held by a
dissenter before the corporate action, or the surviving or acquiring
corporation by merger or share exchange of that issuer.
d. "Dissenter" means a shareholder who is entitled to
dissent from corporate action under Code Section 14-2-1302 and who
exercises that right when and in the manner required by Code Sections
14-2-1320 through 14-2-1327.
e. "Fair value," with respect to a dissenter's shares,
means the value of the shares immediately before the effectuation of
the corporate action to which the dissenter objects, excluding any
appreciation or depreciation in anticipation of the corporate action.
f. "Interest" means interest from the effective date of
the corporate action until the date of payment, at a rate that is fair
and equitable under all the circumstances.
g. "Record shareholder" means the person in whose name
shares are registered in the records of a corporation or the
beneficial owner of shares to the extent
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of the rights granted by a nominee certificate on file with a
corporation.
h. "Shareholder" means the record shareholder or the
beneficial shareholder.
Section 14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent
from, and obtain payment of the fair value of his shares in the event
of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the
corporation is a party:
(A) If approval of the shareholders of the
corporation is required for the merger by Code Section
14-2-1103 or the articles of incorporation and the shareholder
is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is
merged with its parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be
acquired, if the shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all or
substantially all of the property of the corporation if a shareholder
vote is required on the sale or exchange pursuant to Code Section
14-2-1202, but not including a sale pursuant to court order or a sale
for cash pursuant to a plan by which all or substantially all of the
net proceeds of the sale will be distributed to the shareholders
within one year after the date of sale;
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(4) An amendment of the articles of incorporation that
materially and adversely affects rights in respect of a dissenter's
shares because it:
(A) Alters or abolishes a preferential right of
the shares;
(B) Creates, alters, or abolishes a right in
respect of redemption, including a provision respecting a
sinking fund for the redemption or repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the
holder of the shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to
vote on any matter, or to cumulate votes, other than a
limitation by dilution through issuance of shares or other
securities with similar voting rights;
(E) Reduces the number of shares owned by the
shareholder to a fraction of a share if the fractional share
so created is to be acquired for cash under Code Section
14-2-604; or
(F) Cancels, redeems, or repurchases all or part
of the shares of the class; or
(5) Any corporate action taken pursuant to a shareholder
vote to the extent that Article 9 of this chapter, the articles of
incorporation, bylaws, or a resolution of the board of directors
provides that voting or nonvoting shareholders are entitled to dissent
and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment
for his shares under this article may not challenge the corporate
action creating his entitlement unless the
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corporate action fails to comply with procedural requirements of this
chapter or the articles of incorporation or bylaws of the corporation
or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether
the shareholder has exercised dissenter's rights.
(c) Notwithstanding any other provision of this article,
there shall be no right of dissent in favor of the holder of shares of
any class or series which, at the record date fixed to determine the
shareholders entitled to receive notice of and to vote at a meeting at
which a plan of merger or share exchange or a sale or exchange of
property or an amendment of the articles of incorporation is to be
acted on, were either listed on a national securities exchange or held
of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share
exchange, the holders of shares of the class or series are
required under the plan of merger or share exchange to accept
for their shares anything except shares of the surviving
corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either
listed on a national securities exchange or held of record by
more than 2,000 shareholders, except for scrip or cash
payments in lieu of fractional shares; or
(2) The articles of incorporation or a resolution
of the board of directors approving the transaction provides
otherwise.
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Section 14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than
all the shares registered in his name only if he dissents with respect to all
shares beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf
he asserts dissenters' rights. The rights of a partial dissenter under this
Code section are determined as if the shares as to which he dissents and his
other shares were registered in the names of different shareholders.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
Section 14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under
Code Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the
meeting notice must state that shareholders are or may be entitled to assert
dissenters' rights under this article and be accompanied by a copy of this
article.
(b) If corporate action creating dissenters' rights under Code
Section 14-2-1302 is taken without a vote of shareholders, the corporation
shall notify in writing all shareholders entitled to assert dissenters' rights
that the action was taken and send them the dissenters' notice described in
Code Section 14-2-1322 no later than ten days after the corporate action was
taken.
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Section 14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under
Code Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a
record shareholder who wishes to assert dissenters' rights:
(1) must deliver to the corporation before the vote is
taken written notice of his intent to demand payment for his shares if
the proposed action is effectuated; and
(2) must not vote his shares in favor of the proposed
action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
Section 14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under
Code Section 14-2-1302 is authorized at a shareholders' meeting, the
corporation shall deliver a written dissenters' notice to all shareholders who
satisfied the requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days
after the corporate action was taken and must:
(1) State where the payment demand must be sent and where
and when certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what
extent transfer of the shares will be restricted after the payment
demand is received;
(3) Set a date by which the corporation must receive the
payment demand, which date may not be fewer than 30 nor more than 60
days after the date the notice
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required in subsection (a) of this Code section is delivered; and
(4) Be accompanied by a copy of this article.
Section 14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in
Code Section 14-2-1322 must demand payment and deposit his certificates in
accordance with the terms of the notice.
(b) A record shareholder who demands payment and deposits his
shares under subsection (a) of this Code section retains all other rights of a
shareholder until these rights are cancelled or modified by the taking of the
proposed corporate action.
(c) A record shareholder who does not demand payment or deposit
his share certificates where required, each by the date set in the dissenters'
notice, is not entitled to payment for his shares under this article.
Section 14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated
shares from the date the demand for their payment is received until the
proposed corporate action is taken or the restrictions released under Code
Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate
action.
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Section 14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days
of the later of the date the proposed corporate action is taken or receipt of a
payment demand, the corporation shall by notice to each dissenter who complied
with Code Section 14-2-1323 offer to pay to such dissenter the amount the
corporation estimates to be the fair value of his or her shares, plus accrued
interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a
fiscal year ending not more than 16 months before the date of payment,
an income statement for that year, a statement of changes in
shareholders' equity for that year, and the latest available interim
financial statements, if any;
(2) A statement of the corporation's estimate of the fair
value of the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand
payment under Code Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written
notice to the corporation within 30 days after the corporation's offer or is
deemed to have accepted such offer by failure to respond within said 30 days,
payment for his or her shares shall be made within 60 days after the making of
the offer or the taking of the proposed corporate action, whichever is later.
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Section 14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60
days after the date set for demanding payment and depositing share
certificates, the corporation shall return the deposited certificates and
release the transfer restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing
transfer restrictions, the corporation takes the proposed action, it must send
a new dissenters' notice under Code Section 14-2-1322 and repeat the payment
demand procedure.
Section 14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR
OFFER.
(a) A dissenter may notify the corporation in writing of his own
estimate of the fair value of his shares and amount of interest due, and demand
payment of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under
Code Section 14-2-1325 is less than the fair value of his shares or
that the interest due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed
action, does not return the deposited certificates or release the
transfer restrictions imposed on uncertificated shares within 60 days
after the date set for demanding payment.
(b) A dissenter waives his or her right to demand payment under
this Code section and is deemed to have accepted the corporation's offer unless
he or she notifies the corporation of his or her demand in writing under
subsection (a) of this Code section within 30 days after
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the corporation offered payment for his or her shares, as provided in Code
Section 14-2-1325.
(c) If the corporation does not offer payment within the time set
forth in subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required
under subsection (b) of Code Section 14-2-1325, and the corporation
shall provide the information to the shareholder within ten days after
receipt of a written demand for the information; and
(2) The shareholder may at any time, subject to the
limitations period of Code Section 14-2-1332, notify the corporation
of his own estimate of the fair value of his shares and the amount of
interest due and demand payment of his estimate of the fair value of
his shares and interest due.
PART 3. JUDICIAL APPRAISAL OF SHARES
Section 14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains
unsettled, the corporation shall commence a proceeding within 60 days after
receiving the payment demand and petition the court to determine the fair value
of the shares and accrued interest. If the corporation does not commence the
proceeding within the 60 day period, it shall pay each dissenter whose demand
remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding, which shall be
a nonjury equitable valuation proceeding, in the superior court of the county
where a corporation's registered office is located. If the surviving
corporation is a foreign corporation without a
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registered office in this state, it shall commence the proceeding in the county
in this state where the registered office of the domestic corporation merged
with or whose shares were acquired by the foreign corporation was located.
(c) The corporation shall make all dissenters, whether or not
residents of this state, whose demands remain unsettled parties to the
proceeding, which shall have the effect of an action quasi in rem against their
shares. The corporation shall serve a copy of the petition in the proceeding
upon each dissenting shareholder who is a resident of this state in the manner
provided by law for the service of a summons and complaint, and upon each
nonresident dissenting shareholder either by registered or certified mail or by
publication, or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is
commenced under subsection (b) of this Code section is plenary and exclusive.
The court may appoint one or more persons as appraisers to receive evidence and
recommend decision on the question of fair value. The appraisers have the
powers described in the order appointing them or in any amendment to it.
Except as otherwise provided in this chapter, Chapter 11 of Title 9, known as
the "Georgia Civil Practice Act," applies to any proceeding with respect to
dissenters' rights under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to
judgment for the amount which the court finds to be the fair value of his
shares, plus interest to the date of judgment.
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Section 14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code
Section 14-2-1330 shall determine all costs of the proceeding, including the
reasonable compensation and expenses of appraisers appointed by the court, but
not including fees and expenses of attorneys and experts for the respective
parties. The court shall assess the costs against the corporation, except that
the court may assess the costs against all or some of the dissenters, in
amounts the court finds equitable, to the extent the court finds the dissenters
acted arbitrarily, vexatiously, or not in good faith in demanding payment under
Code Section 14-2-1327.
(b) The court may also assess the fees and expenses of attorneys
and experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all
dissenters if the court finds the corporation did not substantially
comply with the requirements of Code Sections 14-2-1320 through
14-2-1327; or
(2) Against either the corporation or a dissenter, in
favor of any other party, if the court finds that the party against
whom the fees and expenses are assessed acted arbitrarily,
vexatiously, or not in good faith with respect to the rights provided
by this article.
(c) If the court finds that the services of attorneys for any
dissenter were of substantial benefit to other dissenters similarly situated,
and that the fees for those services should not be assessed against the
corporation, the court may award to these attorneys reasonable fees to be paid
out of the amounts awarded the dissenters who were benefited.
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Section 14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be
brought more than three years after the corporate action was taken, regardless
of whether notice of the corporate action and of the right to dissent was given
by the corporation in compliance with the provisions of Code Section 14-2-1320
and Code Section 14-2-1322.
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APPENDIX C
THE ROBINSON-HUMPHREY COMPANY, INC.
CORPORATE FINANCE INVESTMENT BANKERS
DEPARTMENT SINCE 1894
May 4, 1995
Board of Directors
Mt. Vernon Financial Corporation
2408 Mt. Vernon Road
Dunwoody, Georgia 30338
Ladies and Gentlemen:
In connection with the proposed acquisition of Mt. Vernon Financial
Corporation ("MVFC") by Colonial BancGroup, Inc. ("CNB") (the "Merger"), you
have asked us to render an opinion as to whether the financial terms of the
Merger, as provided in the Agreement and Plan of Merger dated as of May 4,
1995 among such parties (the "Merger Agreement"), are fair, from a financial
point of view, to the stockholders of MVFC. Under the terms of the Merger,
holders of all outstanding shares of MVFC common stock will receive
consideration equal to $18.794 per MVFC share in the form of CNB common stock.
Certain MVFC stock option holders will receive in cash the difference between
$18.794 per share and the strike price of their options as consideration for
the value of their stock options.
Our firm, as part of its investment banking business, is frequently
involved in the valuation of securities as related to public underwritings,
private placements, mergers, acquisitions, recapitalizations and other
purposes.
In connection with our study for rendering this opinion, we have
reviewed the Merger Agreement, MVFC's financial results for fiscal years 1990
through 1994 and for the three quarters ended March 31, 1995, and certain
documents and information we deem relevant to our analysis. We have also held
discussions with senior management of MVFC for the purpose of reviewing the
historical and current operations of, and outlook for MVFC, industry trends,
the terms of the proposed Merger, and related matters.
ATLANTA FINANCIAL CENTER
3333 PEACHTREE ROAD, NE ATLANTA, GEORGIA 30326
(404) 266-6000
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Board of Directors
Mt. Vernon Financial Corporation
May 4, 1995
Page 2
__________________________________
We have also studied published financial data concerning certain other
publicly traded financial institutions which we deem comparable to MVFC as well
as certain financial data relating to acquisitions of other financial
institutions that we deem relevant or comparable. In addition, we have
reviewed other published information, performed certain financial analyses and
considered other factors and information which we deem relevant.
We have reviewed similar information and data relating to CNB
including its historical financial statements, from fiscal 1990 up through and
including the quarter ended March 31, 1995.
In rendering this opinion, we have relied upon the accuracy of the
Merger Agreement, the financial information listed above, and other information
furnished to us by MVFC and CNB. We have not separately verified this
information nor have we made an independent evaluation of any of the assets or
liabilities of MVFC and CNB.
Based upon the foregoing and upon current market and economic
conditions, we are of the opinion that, from a financial point of view, the
terms of the Merger as provided in the Merger Agreement are fair to the
stockholders of MVFC.
Very truly yours,
THE ROBINSON-HUMPHREY COMPANY, INC.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to section 145 of the Delaware General Corporation Law, as
amended, and the Restated Certificate of Incorporation of the Registrant,
officers, directors, employees, and agents of the Registrant are entitled to
indemnification against liabilities incurred while acting in such capacities on
behalf of the Registrant, including reimbursement of certain expenses. In
addition, the Registrant maintains an insurance policy pursuant to which
officers and directors are entitled to indemnification against certain
liabilities, including reimbursement of certain expenses, and the Registrant
has indemnity agreements with certain officers and all of its directors
pursuant to which such persons may be indemnified by the Registrant against
certain liabilities, including expenses.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following is a list of exhibits that are included in Part
II of the Registration Statement. Such exhibits are
separately indexed elsewhere in the Registration Statement.
DESCRIPTION
Exhibit 2 Plan of acquisition, reorganization, arrangement, liquidation
of successor:
(A)(1) Agreement and Plan of Merger between The Colonial BancGroup,
Inc. and Mt. Vernon Financial Corporation, dated as of May 4,
1995, as amended included in the Prospectus portion of this
Registration Statement at Appendix A and incorporated herein
by reference.
Exhibit 3 Articles of Incorporation and Bylaws:
(A) Restated Certificate of Incorporation of the Registrant, filed
as Exhibit 4.1 to the Registrant's Current Report on Form 8-K,
dated February 21, 1995, and incorporated herein by reference.
(B) Bylaws of the Registrant, filed as Exhibit 4.2 to the
Registrant's Current Report on Form 8-K, dated February 21,
1995, and incorporated herein by reference.
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Exhibit 4 Instruments defining the rights of security holders:
(A) Article 4 of the Restated Certificate of Incorporation of the
Registrant filed as Exhibit 4.1 to the Registrant's Current
Report on Form 8-K, dated February 21, 1995, and incorporated
herein by reference.
(B) Article II of the Bylaws of the Registrant filed as Exhibit
4.2 to the Registrant's Current Report on Form 8-K, dated
February 21,1995, and incorporated herein by reference.
(C) Dividend Reinvestment and Class A Common Stock Purchase Plan
of the Registrant dated January 15, 1986, and Amendment No. 1
thereto dated as of June 10, 1986, filed as Exhibit 4(C) to
the Registrant's Registration Statement on Form S-4 (File No.
33-07015), effective July 15, 1986, and incorporated herein by
reference.
Exhibit 5 Opinion of Miller, Hamilton, Snider & Odom as to certain
Delaware law issues of the securities being registered.*
Exhibit 8 Tax Opinion of Powell, Goldstein, Frazer & Murphy.*
Exhibit 10 Material Contracts:
(A)(1) Second Amendment and Restatement of 1982 Incentive Stock Plan
of the Registrant, filed as Exhibit 4-1 to the Registrant's
Registration Statement on Form S-8 (Commission Registration
No. 33-41036), effective June 4, 1991, and incorporated herein
by reference.
(A)(2) Second Amendment and Restatement to 1982 Nonqualified Stock
Option Plan of the Registrant filed as Exhibit 4-2 to the
Registrant's Registration Statement on Form S-8 (Commission
Registration No. 33-41036), effective June 4, 1991, and
incorporated herein by reference).
(A)(3) 1992 Incentive Stock Option Plan of the Registrant, filed as
Exhibit 4-1 to Registrant's Registration Statement on Form S-8
(File No. 33-47770), effective May 8, 1992, and incorporated
herein by reference.
(A)(4) 1992 Nonqualified Stock Option Plan of the Registrant, filed
as Exhibit 4-2 to Registrant's Registration Statement on Form
S-8 (File No. 33-47770), effective May 8, 1992, and
incorporated herein by reference.
(B)(1) Residential Loan Funding Agreement between Colonial Bank and
Colonial Mortgage Company dated January 18, 1988, included as
Exhibit 10(B)(1) to
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<PAGE> 268
the Registrant's Registration Statement as Form S-4, file no.
33-52952, and incorporated herein by reference.
(B)(2) 1993 Term Loan Agreement between the Registrant and SunBank,
National Association, and related Pledge Agreement filed as
Exhibit 10(B)(1) to Amendment No. 2 of the Registrant's
Registration Statement on Form S-4, registration number
33-63826 and incorporated herein by reference.
(C)(1) The Colonial BancGroup, Inc. First Amended and Restated
Restricted Stock Plan for Directors, as amended, included as
Exhibit 10(C)(1) to the Registrant's Registration Statement as
Form S-4, file no. 33-52952, and incorporated herein by
reference.
(C)(2) The Colonial BancGroup, Inc., Stock Bonus and Retention
Plan,included as Exhibit 10(C)(2) to the Registrant's
Registration Statement as Form S-4, file no. 33-52952, and
incorporated herein by reference.
(D) Stock Purchase Agreement dated as of July 20, 1994, by and
among The Colonial BancGroup, Inc., Colonial Bank, The
Colonial Company, Colonial Mortgage Company, and Robert E.,
James K. and Thomas H. Lowder, included as Exhibit 2 in
Registrant's registration statement on Form S-4, Registration
No. 33-83692 and incorporated herein by reference.
Exhibit 13 Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995, and incorporated herein by reference.
Exhibit 21 List of subsidiaries of the Registrant.
Exhibit 23 Consents of experts and counsel:
(A) Consent of Coopers & Lybrand*
(B) Consent of Miller, Hamilton, Snider & Odom*
(C) Consent of KPMG Peat Marwick & Company*
(D) Consent of Powell, Goldstein, Frazer & Murphy*
(E) Consent of The Robinson-Humphrey Company, Inc.*
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<PAGE> 269
Exhibit 24 Power of Attorney filed as Exhibit 25 to the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1994, and incorporated herein by reference.
Exhibit 99 Additional exhibits:
(A) Form of Proxy of Mt. Vernon Financial Corporation
(b) Financial Statement Schedules
The financial statement schedules required to be included
pursuant to this Item are not included herein because they are
not applicable or the required information is shown in the
financial statements or notes thereto.
* previously filed
ITEM 22. UNDERTAKINGS.
(a) The undersigned hereby undertakes as follows as required by
Item 512 of Regulation S-K:
(1) That prior to any public reoffering of the
securities registered hereunder through use of a
prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus
will contain the information called for by the
applicable registration form with respect to
reofferings by persons who may be deemed
underwriters, in addition to the information called
for by the other Items of the applicable form.
(2) That every prospectus (i) that is filed pursuant to
paragraph (1) immediately above, or (ii) that
purports to meet the requirements of section 10(a)(3)
of the Act and is used in connection with an offering
of securities subject to Rule 415, will be filed as a
part of an amendment to the Registration Statement
and will not be used until such amendment is
effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
Registration Statement relating to such securities
offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona
fide offering thereof.
(3) Insofar as indemnification for liabilities arising
under the Act may be permitted to directors,
officers, and controlling persons of the Registrant,
the Registrant has been advised that in the opinion
of the
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Securities and Exchange Commission such
indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the Registrant
of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the
successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling
person in connection with the securities being
registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as
expressed in the Act and will be governed by the
final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes to respond to
requests for information that is incorporated by reference
into the prospectus pursuant to Items 4, 10(b), 11, or 13 of
Form S-4, within one business day of receipt of such request,
and to send the incorporated documents by first class mail or
other equally prompt means. This includes information
contained in documents filed subsequent to the effective date
of the Registration Statement through the date of responding
to the request.
(c) The undersigned Registrant hereby undertakes to supply by
means of a post-effective amendment all information concerning
a transaction, and the company being acquired involved
therein, that was not the subject of and included in the
Registration Statement when it became effective.
(d) 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 paragraphs (d)(1)(i) and (d)(1)(ii) do
not apply if the
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<PAGE> 271
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 Exchange Act that are incorporated by reference
in the 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 relating to the securities offered
therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide
offering thereof.
(3) 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.
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<PAGE> 272
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Montgomery, Alabama, on the 26th day of July, 1995.
THE COLONIAL BANCGROUP, INC.
By: /s/ Robert E. Lowder
--------------------------
Robert E. Lowder
Its Chairman of the Board
of Directors, Chief
Executive Officer, and
President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
/s/ Robert E. Lowder Chairman of the Board **
- --------------------------- of Directors, President
Robert E. Lowder and Chief Executive
Officer
/s/ W. Flake Oakley, IV Chief Financial **
- --------------------------- Officer, Secretary
W. Flake Oakley, IV and Treasurer (Principal
Financial Officer and
Principal Accounting
Officer)
* Director **
- --------------------------
Young J. Boozer
</TABLE>
II-7
<PAGE> 273
<TABLE>
<S> <C> <C>
* Director **
- --------------------------
William Britton
* Director **
- --------------------------
Jerry J. Chesser
Director
- --------------------------
Augustus K. Clements, III
* Director **
- -------------------------
Robert C. Craft
* Director **
- -------------------------
Patrick F. Dye
* Director **
- -------------------------
Clinton O. Holdbrooks
* Director **
- -------------------------
D. B. Jones
* Director **
- -------------------------
Harold D. King
</TABLE>
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<PAGE> 274
<TABLE>
<S> <C> <C>
* Director **
- -------------------------
John Ed Mathison
* Director **
- -------------------------
Milton E. McGregor
* Director **
- -------------------------
John C. H. Miller, Jr.
* Director **
- -------------------------
Joe D. Mussafer
* Director **
- -------------------------
William E. Powell
* Director **
- -------------------------
Jack H. Rainer
* Director **
- -------------------------
Frances E. Roper
* Director **
- -------------------------
Ed V. Welch
</TABLE>
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<PAGE> 275
* The undersigned, acting pursuant to a power of attorney, has signed
this Registration Statement on Form S-4 for and on behalf of the
persons indicated above as such persons' true and lawful
attorney-in-fact and in their names, places and stead, in the
capacities indicated above and on the date indicated below.
/s/ W. Flake Oakley, IV
- -------------------------------
W. Flake Oakley, IV
Attorney-in-Fact
** Dated: July 26, 1995
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<PAGE> 276
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
- ------- ----
<S> <C> <C>
Exhibit 2 Plan of acquisition, reorganization, arrangement, liquidation of successor:
(A)(1) Agreement and Plan of Merger, as amended between The Colonial BancGroup, Inc., and
Mt. Vernon Financial Corporation, dated as of May 4, 1995, as amended included in the Prospectus
portion of this registration statement at Appendix A and incorporated herein by reference.
Exhibit 23 Consents of experts and counsel:
(B) Consent of Miller, Hamilton, Snider & Odom
(D) Consent of Powell, Goldstein, Frazer & Murphy
</TABLE>
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<PAGE> 1
EXHIBIT 2(A)(1)
AGREEMENT AND PLAN OF MERGER, AS AMENDED
<PAGE> 2
AGREEMENT AND PLAN OF MERGER BETWEEN THE COLONIAL BANCGROUP,
INC. AND MT. VERNON FINANCIAL CORPORATION, DATED AS OF MAY 4,
1995, AS AMENDED INCLUDED IN THE PROSPECTUS PORTION OF THIS
REGISTRATION STATEMENT AT APPENDIX A AND INCORPORATED HEREIN
BY REFERENCE.
<PAGE> 1
EXHIBIT 23(B)
Consent of Miller, Hamilton, Snider & Odom, L.L.C.
<PAGE> 2
CONSENT OF COUNSEL
The Colonial BancGroup, Inc.
We hereby consent to use in this Form S-4 Registration Statement of The
Colonial BancGroup, Inc., of our name in the Prospectus, which is a part of
such Registration Statement, under the heading "LEGAL OPINIONS," and to the
summarization of our opinions referenced therein.
/s/ MILLER, HAMILTON, SNIDER & ODOM, L.L.C.
July 11, 1995
<PAGE> 1
EXHIBIT 23(D)
CONSENT OF POWELL, GOLDSTEIN, FRAZER & MURPHY
<PAGE> 2
CONSENT OF COUNSEL
We hereby consent to use in this Registration Statement of The Colonial
BancGroup, Inc., of our name in the Prospectus, which is a part of such
Registration Statement, under the heading, "APPROVAL OF THE MERGER - Certain
Federal Income Tax Consequences" and to the summarization of our opinion
referenced therein.
/s/ Powell, Goldstein, Frazer & Murphy
July 11, 1995
