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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D. C. 20549
---------------------
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
Classification Code Number) No.)
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 ROD JONES, ESQ.
MILLER, HAMILTON, SNIDER & ODOM, L.L.C. SHUTTS & BOWEN
ONE COMMERCE STREET, SUITE 802 20 NORTH ORANGE AVENUE
P. O. BOX 19 SUITE 1000
MONTGOMERY, ALABAMA 36101-0019 ORLANDO, FLORIDA 32801
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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. [ ]
CALCULATION OF REGISTRATION FEE(1)
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PROPOSED PROPOSED
TITLE OF EACH CLASS AMOUNT MAXIMUM MAXIMUM AMOUNT OF
OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE
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Common Stock, par value
$2.50 per share................. 632,209 Not Applicable $8,357,007.90 $2,532.43
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(1) Calculated pursuant to Rule 457(f)(2) and (3) based upon the book value of
$16.92 per share of 493,913 shares of company acquired, including 83,000
shares subject to employee stock options.
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.
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THE COLONIAL BANCGROUP, INC.
CROSS REFERENCE SHEET
TO ITEMS IN FORM S-4
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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 and
Outside Front Cover Page of
Prospectus............................ Facing page, Cross Reference Sheet,
Outside front cover page of Prospectus
Item 2. Inside Front and Outside Back Cover
Pages of Prospectus................... "AVAILABLE INFORMATION," Inside front
cover page of Prospectus, "DOCUMENTS
INCORPORATED BY REFERENCE," "TABLE OF
CONTENTS"
Item 3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information......... "SUMMARY," Cover Page of Prospectus,
"PER SHARE DATA," "THE MERGER," "PRO
FORMA FINANCIAL INFORMATION" AND
"SELECTED FINANCIAL DATA"
Item 4. Terms of the Transaction................ "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...... "THE MERGER -- Background of the
Merger," "Tomoka's Board of Directors'
Reasons for Approving the Merger," and
"Interests of Certain Persons in the
Merger"
Item 7. Additional Information Required for
Reoffering by Persons and Parties
Deemed to be Underwriters............. Not Applicable
Item 8. Interests of Named Experts and
Counsel............................... "LEGAL MATTERS" and "EXPERTS"
Item 9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities........................... Not Applicable; See Items 20 and 22
below
Item 10. Information with Respect to S-3
Registrants........................... "DOCUMENTS INCORPORATED BY REFERENCE,"
"BUSINESS OF BANCGROUP"
Item 11. Incorporation of Certain Information by
Reference............................. "DOCUMENTS INCORPORATED BY REFERENCE"
Item 12. Information with Respect to S-2 or S-3
Registrants -- Item 12(b)............. Not Applicable
Item 13. Incorporation of Certain Information by
Reference............................. Not Applicable
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<TABLE>
<CAPTION>
CAPTION IN PROSPECTUS OR OTHER
FORM S-4 ITEM NUMBER AND CAPTION LOCATION IN REGISTRATION STATEMENT
- --------------------------------------------------- ----------------------------------------
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Item 14. Information with Respect to Registrants
Other Than S-3 or S-2 Registrants..... Not Applicable
Item 15. Information with Respect to S-3
Companies............................. Not Applicable
Item 16. Information with Respect to S-2 or S-3
Companies............................. Not Applicable
Item 17. Information with Respect to Companies
Other than S-3 or S-2 Companies....... "BUSINESS OF TOMOKA," "FINANCIAL
STATEMENTS"
Item 18. Information if Proxies, Consents or
Authorizations are to be Solicited.... "THE SPECIAL MEETING," "BUSINESS OF
BANCGROUP -- Voting Securities and
Principal Stockholders," "Security
Ownership of Management," "Management
Information"
Item 19. Information if Proxies, Consents or
Authorizations are not to be Solicited
or in an Exchange Offer............... Not Applicable
Item 20. Indemnification of Directors and
Officers.............................. PART II, Item 20
Item 21. Exhibits and Financial Statement
Schedules............................. PART II, Item 21
Item 22. Undertakings............................ PART II, Item 22
</TABLE>
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TOMOKA BANCORP, INC.
201 SOUTH NOVA ROAD
ORMOND BEACH, FLORIDA 32174
(904)672-5100
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 1996
---------------------
NOTICE IS HEREBY GIVEN that a special meeting of shareholders (the "Special
Meeting") of Tomoka Bancorp, Inc. ("Tomoka") will be held at the office of
Tomoka State Bank located at 201 South Nova Road, Ormond Beach, Florida, on
, , 1996, at p.m., local time, for the following
purposes:
1. Merger. To consider and vote upon the proposed merger (the
"Merger") of Tomoka with and into The Colonial BancGroup, Inc.
("BancGroup"), in accordance with an Agreement and Plan of Merger, dated as
of July 19, 1996 between Tomoka and BancGroup (the "Agreement"). Pursuant
to the Agreement, BancGroup will be the surviving corporation in the
Merger. Each share of common stock of Tomoka outstanding at the time of the
Merger will be converted into the right to receive such number of shares of
the common stock, par value $2.50 per share, of BancGroup ("BancGroup
Common Stock") as shall be equal to $32 divided by the Market Value of the
BancGroup Common Stock (as defined in the Agreement), with cash paid in
lieu of fractional shares at the Market Value of such fractional shares, 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 or postponements
thereof.
The Board of Directors of Tomoka has fixed the close of business on
, 1996, as the record date for the determination of shareholders
entitled to notice of and to vote at the Special Meeting. Only holders of record
of the common stock of Tomoka at the close of business on that date will be
entitled to notice of and to vote at the Special Meeting or any adjournments or
postponements thereof.
Under Florida law, holders of the common stock of Tomoka are entitled to
dissent from the Merger and to receive in cash the fair value of their shares of
Tomoka common stock, as described more fully in the accompanying Joint Proxy
Statement and Prospectus.
You are requested to complete and sign the enclosed form of proxy and to
mail it promptly in the enclosed envelope. The proxy may be revoked at any time
by filing a written revocation with the Secretary of Tomoka, by executing a
later dated proxy and delivering it to the Secretary of Tomoka, or by attending
the Special Meeting and voting in person.
BY ORDER OF THE BOARD OF DIRECTORS
THOMAS H. DARGAN
President
Ormond Beach, Florida
, 1996
<PAGE> 5
JOINT PROXY STATEMENT AND PROSPECTUS
COLONIAL BANCGROUP
COMMON STOCK
TOMOKA BANCORP, INC.
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON , 1996
This Joint Proxy Statement and Prospectus (the "Prospectus") relates to the
proposed merger (the "Merger") of Tomoka Bancorp, Inc., a Florida corporation
("Tomoka"), with and into The Colonial BancGroup, Inc., a Delaware corporation
("BancGroup"). This Prospectus is being furnished to the shareholders of Tomoka
in connection with the solicitation of proxies by the Board of Directors of
Tomoka for use at a special meeting of the shareholders of Tomoka to be held on
, , 1996, at p.m., local time, at the offices of Tomoka
State Bank, located at 201 South Nova Road, Ormond Beach, Florida, including any
adjournments or postponements thereof (the "Special Meeting"). At the Special
Meeting, shareholders of Tomoka will consider and vote upon the matters set
forth in the preceding Notice of Special Meeting of the Shareholders of Tomoka,
as more fully described in this Prospectus.
The Merger will be consummated pursuant to the terms of a certain Agreement
and Plan of Merger dated as of July 19, 1996 by and between BancGroup and Tomoka
(the "Agreement"). The Agreement provides that, subject to the approval of the
Agreement by the shareholders of Tomoka at the Special Meeting and the
satisfaction (or waiver, to the extent that such waiver is permitted by law) of
other conditions contained in the Agreement, Tomoka will be merged with and into
BancGroup and BancGroup will be the surviving corporation. Each issued and
outstanding share of common stock, par value $5.00 per share of Tomoka (the
"Tomoka Common Stock"), other than shares held by persons who do not vote in
favor of the Merger and who properly exercise their dissenter's rights by
following the procedures required under the Florida Business Corporation Act
(the "FBCA"), shall be converted into shares of the common stock, par value
$2.50 per share, of BancGroup (the "BancGroup Common Stock"). As more fully
described in this Prospectus, each share of Tomoka Common Stock outstanding and
held by Tomoka shareholders, shall be converted into such number of shares of
BancGroup Common Stock as shall be equal to $32 divided by the Market Value of
the BancGroup Common Stock. 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 BancGroup
Common Stock as reported by the New York Stock Exchange (the "NYSE") on each of
the twenty (20) trading days ending on the fifth trading day preceding the
Effective Date. The shares of BancGroup Common Stock are listed on the NYSE. The
closing price per share of the BancGroup Common Stock on the NYSE on October 18,
1996 was $35.
Consummation of the Merger requires, among other things, the affirmative
vote of the holders of at least a majority of the outstanding shares of Tomoka
Common Stock.
BancGroup has filed a Registration Statement pursuant to the Securities Act
of 1933, as amended (the "Securities Act"), to register the shares of the
BancGroup Common Stock to be issued in connection with the Merger as well as to
register shares of BancGroup Common Stock to be issued upon the exercise of
options respecting Tomoka common stock assumed by BancGroup as part of the
Merger. This document constitutes a Proxy Statement of Tomoka in connection with
the solicitation of proxies by Tomoka for the Special Meeting and a Prospectus
of BancGroup with respect to the BancGroup Common Stock to be issued in the
Merger and upon the exercise of stock options assumed in the Merger. This
Prospectus and accompanying form of proxy are first being mailed to shareholders
of Tomoka on or about , 1996.
THE BOARD OF DIRECTORS OF TOMOKA UNANIMOUSLY RECOMMENDS APPROVAL OF THE
MERGER.
---------------------
THE SECURITIES TO WHICH THIS PROSPECTUS RELATES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
THE SHARES OF BANCGROUP COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS
OR DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
The office and mailing address of Tomoka are 201 South Nova Road, Post
Office Box 5058, Ormond Beach, Florida 32175-5058 (telephone 904-672-5100), 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 , 1996.
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AVAILABLE INFORMATION
BancGroup is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information filed 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: 7 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; and 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
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Commission also maintains a Web site (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding
registrants, such as BancGroup, that file electronically with the Commission.
The BancGroup Common Stock is listed for trading on 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 to register the shares of BancGroup Common Stock 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 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.
The information in this Prospectus concerning BancGroup and its
subsidiaries has been furnished by BancGroup, and the information concerning
Tomoka and its subsidiary has been furnished by Tomoka. Tomoka is not subject to
the periodic reporting requirements of the Exchange Act.
DOCUMENTS INCORPORATED BY REFERENCE
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE, WITHOUT CHARGE,
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, 1995;
(2) BancGroup's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996 and June 30, 1996;
(3) BancGroup's Report on Form 8-K dated July 17, 1996;
(4) BancGroup's Report on Form 8-K/A dated October 9, 1996; and
(5) BancGroup's Registration Statement on Form 8-A dated November 22,
1994, effective February 22, 1995, containing a description of the
BancGroup Common Stock.
All documents filed by BancGroup pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
Special Meeting, or, in the case of the exercise of options that are being
assumed by BancGroup, prior to the exercise of such options, shall be deemed
incorporated by reference in this Prospectus and made a part hereof from the
date of filing of such documents. Any statement
ii
<PAGE> 7
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 Tomoka 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 as 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 unless specifically incorporated herein). 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).
iii
<PAGE> 8
TABLE OF CONTENTS
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PAGE
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SUMMARY.............................................................................. 1
THE SPECIAL MEETING.................................................................. 9
General............................................................................ 9
Record Date; Shares Entitled to Vote; Vote Required for the Merger................. 9
Solicitation, Voting and Revocation of Proxies..................................... 10
Effect of Merger on Outstanding BancGroup Common Stock............................. 10
THE MERGER........................................................................... 11
General............................................................................ 11
Background of the Merger........................................................... 11
Tomoka's Board of Directors' Reasons for Approving the Merger...................... 13
Opinion of Financial Advisor....................................................... 13
Recommendation of the Board of Directors of Tomoka................................. 16
BancGroup's Reasons for the Merger................................................. 16
Interests of Certain Persons in the Merger......................................... 16
Conversion of Tomoka Common Stock.................................................. 17
Surrender of Tomoka Common Stock Certificates...................................... 17
Certain Federal Income Tax Consequences............................................ 18
Other Possible Consequences........................................................ 19
Conditions to Consummation of the Merger........................................... 20
Amendment or Termination........................................................... 20
Regulatory Approvals............................................................... 20
Conduct of Business Pending the Merger............................................. 22
Commitments with Respect to Other Offers........................................... 23
Indemnification.................................................................... 23
Rights of Dissenting Shareholders.................................................. 23
Resale of BancGroup Common Stock Issued in the Merger.............................. 25
Accounting Treatment............................................................... 26
NYSE Reporting of BancGroup Common Stock Issued in the Merger...................... 26
Treatment of Tomoka Options........................................................ 26
COMPARATIVE MARKET PRICES AND DIVIDENDS.............................................. 28
BancGroup.......................................................................... 28
Tomoka............................................................................. 29
BANCGROUP CAPITAL STOCK AND DEBENTURES............................................... 29
BancGroup Common Stock............................................................. 30
Preference Stock................................................................... 30
1986 Debentures.................................................................... 30
Changes in Control................................................................. 31
COMPARATIVE RIGHTS OF SHAREHOLDERS................................................... 33
Director Elections................................................................. 33
Removal of Directors............................................................... 33
Voting............................................................................. 33
Preemptive Rights.................................................................. 33
Directors' Liability............................................................... 34
Indemnification.................................................................... 34
Special Meetings of Shareholders; Action Without a Meeting......................... 35
Mergers, Share Exchanges and Sales of Assets....................................... 35
Amendment of Certificate of Incorporation and Bylaws............................... 36
Rights of Dissenting Stockholders.................................................. 36
</TABLE>
iv
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Preferred Stock.................................................................... 37
Effect of the Merger on Tomoka Shareholders........................................ 37
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES........................................ 38
Condensed Pro Forma Statements of Condition (Unaudited)............................ 38
Condensed Pro Forma Statements of Income (Unaudited)............................... 43
Pro Forma Adjustments (Unaudited).................................................. 48
Recent Developments -- BancGroup and Tomoka........................................ 49
Selected Financial and Operating Information....................................... 52
TOMOKA BANCORP, INC.................................................................. 54
Selected Financial Data............................................................ 54
Management's Discussion and Analysis of Financial Condition and Results of
Operations for the Fiscal Years Ended December 31, 1995, 1994, and 1993 and for
the Six Months Ended June 30, 1996 and 1995..................................... 55
BUSINESS OF BANCGROUP................................................................ 68
General............................................................................ 68
Proposed Affiliate Banks........................................................... 68
Voting Securities and Principal Stockholders....................................... 69
Security Ownership of Management................................................... 70
Management Information............................................................. 71
Certain Regulatory Considerations.................................................. 71
BUSINESS OF TOMOKA BANCORP, INC...................................................... 73
Tomoka State Bank.................................................................. 73
Primary Service Area............................................................... 73
Offices............................................................................ 73
Employees.......................................................................... 73
Legal Proceedings.................................................................. 73
Supervision and Regulation......................................................... 74
Principal Holders of Tomoka Common Stock........................................... 77
Tomoka Common Stock Owned by Management............................................ 78
ADJOURNMENT OF SPECIAL MEETING....................................................... 79
OTHER MATTERS........................................................................ 79
DATE FOR SUBMISSION OF BANCGROUP STOCKHOLDER PROPOSALS............................... 79
LEGAL MATTERS........................................................................ 79
EXPERTS.............................................................................. 79
INDEX TO FINANCIAL STATEMENTS........................................................ F-1
APPENDIX A -- Agreement and Plan of Merger........................................... A-1
APPENDIX B -- Opinion of Financial Advisor........................................... B-1
APPENDIX C -- Sections 607.1301, 607.1302 and 607.1320 of the Florida Business
Corporation Act Regarding Dissenters' Rights........................... C-1
</TABLE>
v
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF
SECURITIES MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY BANCGROUP OR TOMOKA. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION, TO
OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF BANCGROUP
OR TOMOKA SINCE THE DATE OF THIS PROSPECTUS OR THAT INFORMATION IN THIS
PROSPECTUS OR IN THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THE DATES THEREOF.
vi
<PAGE> 11
SUMMARY
The following provides a summary of certain information included in this
Prospectus. This summary is qualified in its entirety by the more detailed
information appearing elsewhere herein, the Appendices hereto and the documents
incorporated herein by reference. Shareholders of Tomoka are urged to read this
Prospectus in full.
GENERAL
This Prospectus relates to the issuance of shares of BancGroup Common Stock
in connection with the proposed Merger of Tomoka with and into BancGroup. As a
result of the Merger, Tomoka's subsidiary, Tomoka State Bank, will become a
wholly owned subsidiary of BancGroup. Following the Merger, Tomoka State Bank
will be merged into BancGroup's Florida subsidiary, Colonial Bank. See "THE
MERGER -- General."
THE SPECIAL MEETING
The Special Meeting will be held at the office of Tomoka State Bank,
located at 201 South Nova Road, Ormond Beach, Florida on , 1996, at
p.m., local time, for the purpose of considering and voting upon the
Agreement (which includes the Merger). Only holders of record of Tomoka Common
Stock at the close of business on , 1996 (the "Record Date") are
entitled to the notice of and to vote at the Special Meeting. As of such date,
410,913 shares of Tomoka Common Stock were issued and outstanding. See "THE
SPECIAL MEETING."
THE COMPANIES
BancGroup. BancGroup is a bank holding company within the meaning of the
Bank Holding Company Act of 1956, as amended (the "BHCA"). It was organized in
Delaware in 1974. BancGroup operates wholly owned commercial banking
subsidiaries in the states of Alabama, Florida, Georgia and Tennessee, each
under the name "Colonial Bank." Colonial Bank conducts a full service commercial
banking business in the State of Alabama through 110 banking offices. In
Tennessee, Colonial Bank conducts a general commercial banking business through
three offices. In Georgia, BancGroup operates a federal savings bank, Colonial
Bank, FSB, which has four offices in Atlanta, Georgia and the surrounding area
and Colonial Bank, located in Lawrenceville, Georgia which operates seven
offices. In Florida, Colonial Bank operates eight offices. BancGroup has also
entered into agreements or letters of intent to acquire four additional banks.
Colonial Mortgage Company, a subsidiary of the Colonial Bank in Alabama, is a
mortgage banking company which services approximately $10 billion in residential
loans and which originates residential mortgages in 29 states through 6 regional
offices. At June 30, 1996, BancGroup had consolidated total assets of $4.5
billion and consolidated stockholders equity of $317.6 million. See "BUSINESS OF
BANCGROUP."
Tomoka. Tomoka is a bank holding company within the meaning of the BHCA.
It is a Florida corporation organized in June, 1992. The only business activity
of Tomoka is the operation of its wholly-owned subsidiary, Tomoka State Bank,
located in Ormond Beach, Florida. Tomoka State Bank operates three full-service
branch offices located in Port Orange, New Smyrna Beach, and Pierson, Florida.
All of the offices of Tomoka State Bank are located in Volusia County, Florida.
At June 30, 1996, Tomoka had consolidated total assets of $72.7 million and
consolidated stockholders' equity of $5.9 million. See "BUSINESS OF TOMOKA
BANCORP, INC."
TERMS OF THE MERGER
The Agreement provides for the Merger of Tomoka with and into BancGroup,
with BancGroup to be the surviving corporation. Upon the date of consummation of
the Merger (the "Effective Date"), each outstanding share of Tomoka Common Stock
shall be converted into the right to receive such number of shares of BancGroup
Common Stock as shall be equal to $32 divided by the Market Value of the
BancGroup Common Stock (the "Exchange Ratio"). No fractional shares of BancGroup
Common Stock will be issued in connection with the Merger. To the extent cash is
paid in lieu of fractional shares, the cash will be paid based
1
<PAGE> 12
upon the Market Value of the BancGroup Common Stock. For these purposes, "Market
Value" shall mean the average of the closing prices of the BancGroup Common
Stock as reported by the NYSE on each of the 20 trading days ending on the fifth
trading day preceding the Effective Date.
As of the date of this Prospectus, Tomoka had granted options (the "Tomoka
Options") which entitled the holders thereof to acquire up to 83,000 shares of
Tomoka Common Stock. On the Effective Date, BancGroup shall assume all Tomoka
Options outstanding, and each such option shall represent the right to acquire
BancGroup Common Stock on substantially the same terms as are applicable to the
Tomoka Options. The number of shares of BancGroup Common Stock to be issued
pursuant to such options shall equal the number of shares of Tomoka Common Stock
subject to such Tomoka Options multiplied by the Exchange Ratio, provided that
no fractional shares of BancGroup Common Stock shall be issued, and the number
of shares of BancGroup Common Stock to be issued upon the exercise of Tomoka
Options, if a fractional share exists, shall equal the number of whole shares
obtained by rounding to the nearest whole number, giving account to such
fraction. The exercise price for the acquisition of BancGroup Common Stock to be
issued pursuant to such options shall equal the exercise price for each share of
Tomoka Common Stock subject to such Tomoka Options divided by the Exchange
Ratio, adjusted appropriately for any rounding to the nearest whole number of
shares that may be done.
Tomoka shareholders will be given notice of the Merger promptly after the
Effective Date of the Merger. Certificates for the shares of BancGroup Common
Stock issued will not be distributed or dividends paid until shareholders
surrender their certificates representing their shares of Tomoka Common Stock.
See "THE MERGER -- Conversion of Tomoka Common Stock," "Surrender of Tomoka
Common Stock Certificates," and "Treatment of Tomoka Options."
For certain information concerning dissenters' rights, voting at the
Special Meeting, and management of BancGroup and Tomoka, see "THE
MERGER -- Rights of Dissenting Shareholders," "-- Conversion of Tomoka Common
Stock"; "THE SPECIAL MEETING -- 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 TOMOKA BANCORP, INC. -- Principal
Holders of Tomoka Common Stock," and "-- Tomoka Common Stock Owned By
Management."
RECOMMENDATION OF TOMOKA'S BOARD OF DIRECTORS
The Board of Directors of Tomoka has unanimously approved the Agreement.
THE BOARD OF DIRECTORS OF TOMOKA BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE
BEST INTERESTS OF, THE SHAREHOLDERS OF TOMOKA, AND RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE APPROVAL OF THE AGREEMENT. For a discussion of the factors
considered by the Board of Directors in reaching its conclusions, see "THE
MERGER -- Background of the Merger" and "Tomoka's Board of Directors' Reasons
for Approving the Merger."
OPINION OF FINANCIAL ADVISOR
Tomoka has received an opinion from Professional Bank Services, Inc.
("PBS") that the Merger is fair to the shareholders of Tomoka from a financial
point of view. See "THE MERGER -- Opinion of Financial Advisor."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain directors and executive officers of Tomoka hold Tomoka Options
which entitle them to purchase, in the aggregate, up to 83,000 shares of Tomoka
Common Stock. Under the terms of the Agreement, any Tomoka Options which are not
exercised prior to the Effective Date will be assumed by BancGroup. See "THE
MERGER -- Conversion of Tomoka Common Stock," and "Treatment of Tomoka Options."
Thomas H. Dargan, President and Chief Executive Officer of Tomoka, has
entered into an agreement with BancGroup regarding his employment after the
consummation of the Merger. Under this agreement, if
2
<PAGE> 13
BancGroup terminates the employment of Mr. Dargan without cause within one year
after the Effective Date, then BancGroup will pay Mr. Dargan a lump-sum
severance payment equal to Mr. Dargan's annual salary. Further, if Mr. Dargan or
BancGroup terminates his employment during this period, then Mr. Dargan may not
compete with BancGroup for a period of one year.
On the Effective Date, all employees of Tomoka (including its executive
officers) shall, at BancGroup's option, either become employees of BancGroup or
its subsidiaries or be entitled to severance benefits in accordance with
BancGroup's severance policy as of the date of the Agreement. All employees of
Tomoka who become employees of BancGroup or its subsidiaries on the Effective
Date shall be entitled, to the extent permitted by applicable law, to
participate in all benefit plans of BancGroup to the same extent as BancGroup's
employees.
Under the Agreement, BancGroup has agreed to indemnify the directors and
executive officers of Tomoka against certain claims and liabilities arising out
of or pertaining to matters existing or occurring at or prior to the Effective
Date, to the fullest extent that Tomoka would have been permitted under Florida
law, or under its Articles of Incorporation or Bylaws, to indemnify such persons
(and also to advance expenses as incurred to the fullest extent permitted under
applicable law).
Except as described above, none of the directors or executive officers of
Tomoka, 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 Tomoka Common Stock.
See "THE MERGER -- Interests of Certain Persons in the Merger."
VOTE REQUIRED
Under Florida law, the Agreement (which includes the Merger) must be
approved by the affirmative vote of the holders of at least a majority of the
outstanding shares of Tomoka Common Stock. Each share of Tomoka Common Stock is
entitled to one vote on the Agreement. Approval of the Agreement and the Merger
by BancGroup stockholders is not required under Delaware, Florida or other
applicable law, or the rules of the NYSE on which the BancGroup Common Stock is
listed. See "THE SPECIAL MEETING."
Only holders of record of Tomoka Common Stock at the close of business on
, 1996 are entitled to notice of and to vote at the Special Meeting.
As of such date, 410,913 shares of Tomoka Common Stock were issued and
outstanding. As of the Record Date, Tomoka's directors, executive officers and
their affiliates held approximately 42.3% of the outstanding shares of Tomoka
Common Stock. As of the same date, the directors, executive officers and
affiliates of BancGroup held no shares of Tomoka Common Stock. See "THE SPECIAL
MEETING."
The directors of Tomoka have agreed to vote or cause the record owner to
vote any shares of Tomoka Common Stock held by such directors in favor of the
Merger and the Agreement and against any business combination or other
reorganization of any kind involving Tomoka or its subsidiaries with any entity
other than BancGroup. As of the Record Date, these directors owned, either
beneficially or of record, 172,204 shares of Tomoka Common Stock or
approximately 41.9% of the Tomoka Common Stock held on such date. The parties
anticipate that all of the shares of Tomoka Common Stock held by these directors
will be voted in favor of the Agreement and the Merger. Directors and executive
officers of BancGroup beneficially own in the aggregate 2,187,008 shares of
BancGroup Common Stock representing approximately 13% of the outstanding shares,
but no vote of BancGroup stockholders is required to approve the Merger. See
"THE SPECIAL MEETING."
Proxies should be returned to Tomoka in the envelope enclosed herewith.
Shareholders of Tomoka submitting proxies may revoke their proxies by (i) giving
notice of such revocation in writing to the Secretary of Tomoka at or prior to
the Special Meeting, (ii) by executing and delivering a proxy bearing a later
date to the Secretary of Tomoka at or prior to the Special Meeting, or (iii) 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
Tomoka Common Stock, failure to submit a proxy or failure to vote in person at
the Special Meeting
3
<PAGE> 14
will have the same effect as a negative vote. See "THE SPECIAL
MEETING -- Solicitation, Voting and Revocation of Proxies."
RIGHTS OF DISSENTING SHAREHOLDERS
Holders of Tomoka Common Stock as of the Record Date are entitled to
dissenters' rights under Sections 607.1301, 607.1302 and 607.1320 of the FBCA,
copies of which are attached as Appendix C to this Prospectus. Under the FBCA,
any holder of Tomoka Common Stock as of the Record Date who follows the
procedures set forth in Section 607.1320 will be entitled to receive the fair
value of his or her shares in cash. A Tomoka shareholder wishing to exercise
dissenters' rights must deliver to Tomoka, before the vote of holders of Tomoka
Common Stock on the Agreement at the Special Meeting, a written notice of intent
("Notice of Intent") to demand payment for his or her shares. Such shareholder
must not vote in favor of approval of the Agreement. Because a signed proxy
which does not contain voting instructions will, unless revoked, be voted for
the Agreement, a Tomoka shareholder who votes by proxy and who wishes to
exercise dissenter's rights must either: (i) vote against the Agreement or (ii)
abstain from voting with respect to the Agreement. A vote against approval of
the Agreement will not, in and of itself, constitute a demand for dissenters'
rights satisfying the requirements of Section 607.1320.
Any Notice of Intent should be addressed to Tomoka Bancorp, Inc., 201 South
Nova Road, Ormond Beach, Florida 32174, Attention: S. Craig Suazo, Secretary,
and should be executed by or on behalf of the holder of record. The Notice of
Intent must reasonably inform Tomoka of the identity of the shareholder and that
such shareholder is thereby objecting to the Merger and demanding payment for
his or her shares if the Merger is consummated.
See "THE MERGER -- Rights of Dissenting Shareholders."
Any shareholder of Tomoka who properly exercises dissenters' rights and
receives the fair value for his or her shares will encounter income tax
treatment different than the treatment for shareholders who do not exercise
dissenters' rights. See "THE MERGER -- Certain Federal Income Tax Consequences."
BancGroup's obligation to consummate the Merger is subject to the condition
that holders of no more than 10% of the shares of Tomoka Common Stock exercise
their dissenter's rights. The purpose of this condition is to limit the amount
of cash which BancGroup is required to expend in the Merger and to preserve the
treatment of the Merger as a "pooling-of-interests" for accounting purposes.
BancGroup has no present intention of waiving this condition, although it has
the right to do so.
CONDITIONS TO THE MERGER
The parties' obligation to consummate the Merger is subject to the
satisfaction (or waiver, to the extent permitted by law) of various conditions
set forth in the Agreement.
The mutual obligations of the parties to consummate the Merger are subject
to the following conditions, among others: (i) the approval of the Agreement by
the holders of at least a majority of the outstanding shares of Tomoka Common
Stock; (ii) the approval of the Merger by the Florida Department of Banking and
Finance (the "Florida Department") and the Federal Deposit Insurance Corporation
("FDIC"); (iii) the absence of any pending or threatened litigation which seeks
to restrain or prohibit the Merger or any investigation by a governmental agency
which might result in such a proceeding; (iv) the consummation of the Merger on
or before March 31,1997; and (v) receipt of opinions of counsel regarding
certain matters, including tax matters.
The obligation of Tomoka to consummate the Merger is further subject to
several conditions, including: (i) the absence of any material adverse changes
in the financial condition or affairs of BancGroup; (ii) the receipt of a letter
from PBS, the financial advisor of Tomoka, stating that the Merger is fair to
the shareholders of Tomoka from a financial point of view; and (iii) the shares
of BancGroup Common Stock to be issued under the Agreement shall have been
approved for listing on the NYSE.
4
<PAGE> 15
The obligation of BancGroup to consummate the Merger is subject to various
conditions, including: (i) the absence of any material adverse change in the
financial condition or affairs of Tomoka; (ii) the holders of not more than 10%
of the outstanding shares of Tomoka Common Stock shall have exercised
dissenters' rights with respect to their shares; and (iii) the receipt of a
letter from Coopers & Lybrand L.L.P. that the Merger will qualify for the
"pooling-of-interests" method of accounting under generally accepted accounting
principles.
Applications for approval of the Merger were filed on October 18, 1996. The
regulatory approval process is expected to take approximately four months from
that date.
See "THE MERGER -- Conditions to Consummation of the Merger" and
"Regulatory Approvals."
AMENDMENT OR TERMINATION OF AGREEMENT
The Boards of Directors of BancGroup and Tomoka may agree to amend or
terminate the Agreement at any time prior to the Effective Date. However, the
Board of Directors of Tomoka shall not agree to any amendments to the Agreement
which would alter the Exchange Ratio or which, in the opinion of the Board of
Directors of Tomoka, would adversely affect the rights of the shareholders of
Tomoka, unless such amendments are approved by the holders of a majority of the
outstanding shares of Tomoka Common Stock. Such amendments may require the
filing of an amendment of the Registration Statement, of which this Prospectus
forms a part, with the Commission. See "THE MERGER -- Amendment or Termination."
COMPARISON OF SHAREHOLDER RIGHTS
The rights of the holders of the Tomoka Common Stock may be different from
the rights of the holders of the BancGroup Common Stock. A discussion of these
rights and a comparison thereof is set forth in this Prospectus at "COMPARATIVE
RIGHTS OF STOCKHOLDERS."
FEDERAL INCOME TAX CONSEQUENCES
Miller, Hamilton, Snider & Odom, L.L.C., counsel for BancGroup, has
delivered to BancGroup and Tomoka an opinion that, among other things: (i) the
Merger will constitute a tax-free reorganization for federal income tax
purposes; (ii) no gain or loss will be recognized by holders of Tomoka Common
Stock upon the conversion of Tomoka Common Stock solely into BancGroup Common
Stock by reason of the Merger (except with respect to cash, if any, received in
lieu of fractional shares in BancGroup Common Stock); (iii) the aggregate tax
basis of the BancGroup Common Stock received by Tomoka shareholders will equal
the aggregate tax basis of the Tomoka Common Stock surrendered therefor by such
shareholders; and (iv) the holding period of the BancGroup Common Stock received
generally will include the holding period of the Tomoka Common Stock
surrendered. Tomoka shareholders whose shares of Tomoka Common Stock are
converted into cash or who receive cash for shares upon perfection of
dissenters' rights, however, will be required to recognize gain or loss for
federal income tax purposes with respect to such shares. Tomoka shareholders are
urged to consult their own tax advisors as to the specific tax consequences to
them of the Merger. See "THE MERGER -- Certain Federal Income Tax Consequences."
ACCOUNTING TREATMENT
The acquisition of Tomoka will be treated as a "pooling of interests"
transaction by BancGroup for accounting purposes. See "THE MERGER -- Accounting
Treatment."
RECENT PER SHARE MARKET PRICES
Tomoka. There is no established public trading market for the Tomoka
Common Stock. To the knowledge of Tomoka, approximately 2,310 shares of Tomoka
Common Stock have been sold during the last two fiscal years at prices ranging
from $12.50 to $17.00 per share. The most recent sale occurred on July 12, 1996
when 101 shares were sold. The next most recent sale occurred on July 10, 1996,
when 507 shares were sold. In both transactions the shares were sold at a price
of $17.00 per share.
5
<PAGE> 16
BancGroup. BancGroup Common Stock is listed for trading on the NYSE under
the symbol "CNB." The following table indicates the high and low closing prices
of the BancGroup Class A Common Stock and the BancGroup Common Stock as reported
on the NASDAQ System and the NYSE, respectively, 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 under the symbol "CLBGA" until February 24, 1995. On
February 21, 1995, the BancGroup Class A and Class B Common Stock were
reclassified into BancGroup Common Stock.
<TABLE>
<CAPTION>
PRICE PER
SHARE
OF COMMON
STOCK
--------------
HIGH LOW
---- ---
<S> <C> <C>
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
Third Quarter................................................................ 29 7/8 27 1/2
Fourth Quarter............................................................... 32 7/8 28 1/2
1996
First Quarter................................................................ 36 1/2 30
Second Quarter............................................................... 36 1/8 31 1/4
Third Quarter................................................................ 35 7/8 31 1/4
</TABLE>
- ---------------
(1) Trading on the NYSE commenced on February 24, 1995.
On July 22, 1996, the business day immediately prior to the public
announcement of the Merger, the closing price of the BancGroup Common Stock on
the NYSE was $33.875 per share.
The following table presents the market value of BancGroup Common Stock on
July 22, 1996, and the market value and equivalent per share value of Tomoka
Common Stock on that date:
<TABLE>
<CAPTION>
EQUIVALENT
BANCGROUP TOMOKA BANCGROUP
COMMON STOCK COMMON STOCK COMMON STOCK
(PER SHARE) (PER SHARE) (PER SHARE)
------------ ------------ ------------
<S> <C> <C> <C>
Comparative Market Value...................... $ 33.875(1) $17.00(2) $32.00(3)
</TABLE>
- ---------------
(1) Closing price as reported by the NYSE.
(2) There is no established public trading market for the Tomoka Common Stock.
The value shown is the price at which shares of Tomoka Common Stock were
sold on the last sale of which management of Tomoka is aware.
(3) If the Merger had closed on that date, .9446 shares of BancGroup Common
Stock would have been exchanged for each share of Tomoka Bancorp, Inc.
Common Stock (i.e. 32 / 33.875).
See "COMPARATIVE MARKET PRICES AND DIVIDENDS."
CERTAIN RESTRICTIONS ON ACQUISITIONS OF CONTROL OF BANCGROUP
The ability of a person to acquire control of BancGroup is subject to
certain restrictions imposed by applicable law and BancGroup's Certificate of
Incorporation and bylaws. In this connection, Delaware law
6
<PAGE> 17
prevents a person who beneficially owns 15% or more of the BancGroup Common
Stock from engaging in a "business combination" with BancGroup unless certain
conditions are satisfied. Additionally, 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 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 voting 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 "BANCGROUP CAPITAL STOCK AND DEBENTURES" and "COMPARATIVE RIGHTS OF
STOCKHOLDERS."
PER SHARE DATA
The table below presents on a per share basis the book value, cash
dividends and income from continuing operations of BancGroup and Tomoka on a
historical basis and on a pro forma equivalent basis assuming the combination
with Tomoka. Certain information from the table has been taken from the
condensed pro forma statements of condition and income included elsewhere in
this document. The table should be read in conjunction with those pro forma
statements.
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED YEAR YEAR YEAR
JUNE 30, JUNE 30, ENDED ENDED ENDED
1996(E) 1995 1995 1994 1993(A)
---------- ---------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
BancGroup-Historical:
Net Income
Primary..................................... $ 1.65 $ 1.41 $ 2.63 $ 2.00 $ 1.65
Fully diluted............................... 1.63 1.38 2.56 1.97 1.64
Book value at end of period................... 19.62 17.10 18.65 15.62 14.40
Dividends per share:
Common Stock................................ 0.54 0.45 0.675
Common A.................................... 0.225 0.80 0.71
Common B.................................... 0.125 0.40 0.31
Tomoka Bancorp, Inc.:
Net Income
Historical:
Primary.................................. 1.15 0.81 2.02 1.08 0.23
------ ------- ------- -------
Fully diluted............................ 1.13 0.81 2.02 1.08 0.23
------ ------- ------- -------
Pro forma equivalent assuming combination with
Tomoka Bancorp, Inc. only(b):
Primary..................................... 1.52 1.30 2.43 1.84 1.50
------ ------- ------- -------
Fully diluted............................... 1.51 1.27 2.37 1.82 1.49
------ ------- ------- -------
Pro forma equivalent assuming combination with
Tomoka Bancorp, Inc., Jefferson Bancorp,
Inc. and other proposed mergers(b):
Primary..................................... 1.42 1.17 2.25 1.72 1.44
------ ------- ------- -------
Fully diluted............................... 1.41 1.15 2.19 1.71 1.44
------ ------- ------- -------
Book value at end of period
Historical.................................. 14.53 12.19 13.65 11.38 10.62
------ ------- ------- -------
Pro forma equivalent assuming combination with
Tomoka Bancorp, Inc. only................... 18.20 N/A N/A N/A N/A
------ ------- ------- -------
</TABLE>
7
<PAGE> 18
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED YEAR YEAR YEAR
JUNE 30, JUNE 30, ENDED ENDED ENDED
1996(E) 1995 1995 1994 1993(A)
---------- ---------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Pro forma equivalent assuming combination with
Tomoka Bancorp, Inc., Jefferson Bancorp,
Inc. and other proposed mergers(b):......... 17.91 N/A N/A N/A N/A
---------- ---------- ------- ------- -------
Dividends per share
Historical(d)............................... 0 0 0.10 0 0
---------- ---------- ------- ------- -------
Pro forma equivalent assuming combination with
Tomoka Bancorp, Inc. only(c)................ 0.50 0.42 0.84 0.75 0.66
---------- ---------- ------- ------- -------
Pro forma equivalent assuming combination with
Tomoka Bancorp, Inc., Jefferson Bancorp,
Inc. and other proposed mergers(c):......... 0.50 0.42 0.84 0.75 0.66
---------- ---------- ------- ------- -------
BancGroup-Pro Forma Combined (Tomoka Bancorp,
Inc. only):
Net Income:
Primary..................................... 1.63 1.39 2.61 1.97 1.61
---------- ---------- ------- ------- -------
Fully diluted............................... 1.62 1.36 2.54 1.95 1.60
---------- ---------- ------- ------- -------
Book value at end of period................... 19.53 N/A N/A N/A N/A
---------- ---------- ------- ------- -------
BancGroup-Pro Forma Combined (Tomoka Bancorp,
Inc., Jefferson Bancorp, Inc. and other
proposed mergers(b)):
Net Income
Primary..................................... 1.52 1.26 2.41 1.85 1.54
---------- ---------- ------- ------- -------
Fully diluted............................... 1.51 1.23 2.35 1.84 1.54
---------- ---------- ------- ------- -------
Book value at end of period................... 19.21 N/A N/A N/A N/A
---------- ---------- ------- ------- -------
</TABLE>
- ---------------
N/A Not applicable due to pro forma balance sheet being presented only at June
30, 1996 which assumes the transaction was consummated on the latest
balance sheet date in accordance with Rule 11.02(b) of Regulation S-X.
(a) Net Income per share for the year ended December 31, 1993 represents income
before extraordinary items and cumulative effect of change in accounting
principle.
(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 Tomoka.
For the purposes of these pro forma equivalent per share amounts, a .9319
BancGroup Common Stock share conversion ratio is utilized. The ratio is
based on the 20-day average of the daily average market price of BancGroup
Common Stock of $34.3375 at September 19, 1996 ($32.00/34.3375 = .9319).
(c) Pro forma equivalent dividends per share are shown at BancGroup's Common
Stock dividend per share rate multiplied by the .9319 conversion ratio per
share of Tomoka (see note (b)). BancGroup presently contemplates that
dividends will be declared in the future. However, the payment of cash
dividends is subject to BancGroup's actual results of operations as well as
certain other internal and external factors. Accordingly, there is no
assurance that cash dividends will either be declared and paid in the
future, or, if declared and paid, that such dividends will approximate the
pro forma amounts indicated.
(d) Tomoka Bancorp, Inc. has paid dividends as follows:
<TABLE>
<CAPTION>
FISCAL YEAR PER SHARE TOTAL
----------------------------------------------------- --------- -------
<S> <C> <C>
1995................................................. .10 $38,718
</TABLE>
(e) Pro forma net income excludes two non-recurring charges for employee
severance and bonuses expected to result from the proposed pooling of
interests business combination with Jefferson Bancorp, Inc. in the amount
of $4.4 million, net of tax.
8
<PAGE> 19
THE SPECIAL MEETING
GENERAL
This Prospectus is being furnished to the shareholders of Tomoka in
connection with the solicitation of proxies by the Board of Directors of Tomoka
for use at the Special Meeting. The purpose of the Special Meeting is to
consider and vote upon the proposed Merger of Tomoka 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 Tomoka believes that the Merger is in the best
interests of Tomoka and its shareholders and unanimously recommends that
shareholders vote "FOR" the Merger (item 1 on the proxy card).
RECORD DATE; SHARES ENTITLED TO VOTE; VOTE REQUIRED FOR THE MERGER
The Board of Directors of Tomoka has fixed the close of business on
, 1996, as the Record Date for determination of shareholders
entitled to vote at the Special Meeting. There were record holders of
Tomoka Common Stock as of such date. On that date, there were 410,913 shares of
Tomoka Common Stock outstanding, each entitled to one vote per share. Tomoka is
obligated to issue an additional 83,000 shares of Tomoka Common Stock upon the
exercise of outstanding Tomoka Options.
The affirmative vote of the holders of at least a majority of the
outstanding shares of Tomoka Common Stock, whether or not present or represented
at the Special Meeting, is required to approve the Agreement. Broker non-votes
and abstentions will not be counted as votes cast for or against the proposal to
approve the Agreement and, as a result, will have the same effect as votes cast
against the Agreement. Each holder of record of shares of Tomoka Common Stock is
entitled to cast, for each share registered in his or her name, one vote on the
Agreement and on each other matter presented to a vote of shareholders at the
Special Meeting.
As of the Record Date, directors and executive officers of Tomoka and their
affiliates were the owners of 173,667 shares of Tomoka Common Stock,
representing approximately 42.3% of the outstanding shares of Tomoka Common
Stock. All of such persons intend to vote in favor of the Merger.
The directors of Tomoka have agreed to vote, or to cause the record owner
to vote, all shares of Tomoka Common Stock held beneficially or of record by
such directors in favor of the Merger and the Agreement. The directors held, as
of the Record Date, 172,204 shares or 41.9% of the outstanding shares of Tomoka
Common Stock. The parties anticipate that all of the shares of Tomoka Common
Stock held by the directors will be voted in favor of the Agreement.
Under the FBCA, shareholders of Tomoka have the right to dissent from the
Merger. However, the obligation of BancGroup to consummate the Merger is subject
to the condition that the holders of not more than 10% of the outstanding shares
of Tomoka Common Stock exercise their dissenters' rights. BancGroup has no
intention of waiving this condition, although it has the right to do so. It was
placed in the Agreement by BancGroup to limit the amount of cash that BancGroup
might have to pay in the Merger and to insure that the Merger qualifies for
"pooling-of-interests" accounting. See "THE MERGER -- Rights of Dissenting
Shareholders."
If the Merger is approved at the Special Meeting, Tomoka is expected to
merge with and into BancGroup promptly after the other conditions to the
Agreement are satisfied. See "THE MERGER -- Conditions to Consummation of the
Merger."
THE BOARD OF DIRECTORS OF TOMOKA URGES THE SHAREHOLDERS OF TOMOKA TO
EXECUTE AND RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE AND UNANIMOUSLY
RECOMMENDS THAT ALL SHARES BE VOTED IN FAVOR OF THE MERGER.
9
<PAGE> 20
SOLICITATION, VOTING AND REVOCATION OF PROXIES
In addition to soliciting proxies by mail, directors, officers and other
employees of Tomoka, without receiving special compensation therefor, may
solicit proxies from Tomoka's shareholders 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 Tomoka Common Stock.
Tomoka will bear the cost of assembling and mailing this Prospectus and
other materials furnished to shareholders of Tomoka. It will also pay all other
expenses of solicitation, including the expenses of brokers, custodians,
nominees, and other fiduciaries who, at the request of Tomoka, mail material to
or otherwise communicate with beneficial owners of the shares held by them.
BancGroup will pay all expenses incident to the registration of the BancGroup
Common Stock to be issued in connection with the Merger.
Shares of Tomoka Common Stock represented by a proxy properly signed and
received at or prior to the Special Meeting, unless properly revoked, will be
voted in accordance with the instructions on the proxy. IF A PROXY IS SIGNED AND
RETURNED WITHOUT ANY VOTING INSTRUCTIONS, SHARES OF TOMOKA COMMON STOCK
REPRESENTED BY THE PROXY WILL BE VOTED FOR THE PROPOSAL TO APPROVE THE AGREEMENT
AND THE MERGER AND, AT THE DISCRETION OF THE HOLDER OF THE PROXY, FOR ANY
NECESSARY ADJOURNMENT OF THE SPECIAL MEETING. A shareholder may revoke any proxy
given pursuant to this solicitation by: (i) delivering to the Secretary of
Tomoka, prior to or at the Special Meeting, a written notice revoking the proxy;
(ii) delivering to the Secretary of Tomoka, prior to or at the Special Meeting,
a duly executed proxy relating to the same shares bearing a later date; or (iii)
by voting in person at the Special Meeting. All written notices of revocation
and other communications with respect to the revocation of Tomoka's proxies
should be addressed to:
Tomoka Bancorp, Inc.
Post Office Box 5058
Ormond Beach, FL 32175-5058
Attention: S. Craig Suazo, Secretary
Attendance at the Special Meeting will not, in and of itself, constitute a
revocation of a proxy.
Votes will be tabulated by one or more inspectors of election appointed by
Tomoka. 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. However, such proxies will be counted for purposes of determining
whether a quorum is present at the Special Meeting.
The Board of Directors of Tomoka is not aware of any business to be acted
upon at the Special Meeting other than consideration of the Agreement and the
Merger described herein. If, however, other matters are properly brought before
the Special Meeting, or any adjournments or postponements thereof, the persons
appointed as proxies will have the discretion to vote or act on such matters
according to their best judgment. Proxies voted in favor of the Merger, and
proxies as to which no voting instructions are given, will be voted to adjourn
the Special Meeting, if necessary, in order to solicit additional proxies in
favor of the Merger. Proxies voted against the Merger or abstentions will not be
voted for an adjournment. See "ADJOURNMENT OF THE SPECIAL MEETING."
EFFECT OF MERGER ON OUTSTANDING BANCGROUP COMMON STOCK
The number of shares of BancGroup Common Stock to be issued on the
Effective Date will be based upon the Market Value. As of September 19, 1996,
the Market Value was $34.3375. Assuming the Market Value on the Effective Date
is $34.3375, then BancGroup will issue 382,940 shares of BancGroup Common Stock
to the shareholders of Tomoka pursuant to the Merger, excluding any shares of
BancGroup Common Stock to be issued pursuant to Tomoka Options and assuming the
absence of any dissenting shareholders. These 382,940 shares of BancGroup Common
Stock would represent approximately 2.296% of the total number of shares of
BancGroup Common Stock outstanding following the Merger (based upon the number
of outstanding shares of BancGroup Common Stock as of September 19, 1996). Under
the foregoing assumptions, if all holders of Tomoka Options exercise their
options prior to the Effective Date, a total of 460,290 additional shares of
BancGroup Common Stock would be issued in the Merger.
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THE MERGER
THE FOLLOWING SETS FORTH A SUMMARY OF ALL MATERIAL PROVISIONS OF THE
AGREEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE AGREEMENT
ATTACHED HERETO AS APPENDIX A, AND CERTAIN PROVISIONS OF THE FBCA RELATING TO
THE RIGHTS OF DISSENTING SHAREHOLDERS, COPIES OF WHICH ARE ATTACHED HERETO AS
APPENDIX C. ALL TOMOKA SHAREHOLDERS ARE URGED TO READ THE AGREEMENT AND THE
OTHER APPENDICES IN THEIR ENTIRETY.
GENERAL
The Agreement provides that, subject to shareholder ratification and
confirmation, receipt of necessary regulatory approvals and certain other
conditions described below at "Conditions to Consummation of the Merger," Tomoka
will merge with and into BancGroup. Upon completion of the Merger, the corporate
existence of Tomoka will cease, and BancGroup will succeed to the business
formerly conducted by Tomoka. After the consummation of the Merger, BancGroup
intends to cause Tomoka's subsidiary bank, Tomoka State Bank, to be merged with
BancGroup's wholly owned subsidiary bank in Florida, Colonial Bank.
BACKGROUND OF THE MERGER
Tomoka's only subsidiary, Tomoka State Bank, was organized in 1990 to serve
the need for a locally owned and managed banking institution in the Ormond Beach
community in Volusia County, Florida. From its inception, the board of directors
of Tomoka State Bank has worked to maximize shareholder value by achieving a
steady growth of sound assets and consistent profitability.
In order to achieve its growth objectives, and realizing the opportunity
that a community bank had in the growing Volusia County market, the board of
directors of Tomoka State Bank initiated an expansion program in 1991 with the
acquisition of the Port Orange branch office of a local thrift institution. In
1993, Tomoka State Bank established its second branch office in New Smyrna Beach
in facilities purchased from the Resolution Trust Corporation. In 1995, Tomoka
State Bank established its third branch office in the town of Pierson, Florida,
in western Volusia County.
The expansion of Tomoka State Bank's branch network is reflected in the
growth of its total assets from $47.9 million at December 31, 1992 to $62.7
million by December 31, 1995, and more than $72.7 million by June 30, 1996. This
asset growth has also contributed to an increase in net income from $298,000 in
1992 to $817,000 in 1995, and $485,000 for the six months ended June 30, 1996.
In the opinion of the Tomoka directors, this performance has enabled Tomoka
State Bank to gain a reputation as a sound, high performance community bank and
has greatly improved its attractiveness as an acquisition candidate for larger
regional banks.
In December, 1993, Tomoka completed the acquisition of all of the
outstanding shares of Tomoka State Bank. The formation of a bank holding company
to own the shares of Tomoka State Bank gave the board of directors greater
flexibility both to ensure the availability of additional capital to support the
continuing growth of Tomoka State Bank and to provide greater liquidity for
shareholders who might wish to sell their stock.
During 1994, Tomoka was approached by several regional banking
organizations seeking to determine its interest in a possible merger or
acquisition. Accordingly, the Board of Directors of Tomoka formed an acquisition
committee in June, 1994 to assist the board in evaluating any potential merger
or acquisition offers which might be received. In late 1994, after considerable
deliberation, the acquisition committee recommended to the Board that Tomoka
remain independent, and this recommendation was adopted by the full Board of
Directors.
In 1995, the acquisition committee identified and contacted several other
local area community banks to explore their possible interest in a sale to or
merger with Tomoka. Due to the lack of positive responses, the Board of
Directors focused its attention on internal expansion and developed a five-year
growth plan for Tomoka State Bank. The Board also implemented an ongoing review
of the size, rate of growth, profitability, and market value of Tomoka State
Bank to guide its efforts to maximize shareholder value.
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After further review and discussion of the growth plan in late 1995, the
Board elected to engage an independent financial advisor to assist it in
determining how best to accomplish its objective of maximizing shareholder
value. After interviewing several investment banking firms, the Board chose to
engage Professional Bank Services, Inc., Louisville, Kentucky ("PBS"), a bank
consulting firm with offices in Atlanta, Chicago, Indianapolis, Louisville,
Nashville, and Washington, D.C., which had previously been retained to perform
annual loan reviews and was familiar with the history and management of Tomoka
and Tomoka State Bank.
In February 1996, Tomoka retained Investment Bank Services, Inc. ("IBS"),
Louisville, Kentucky, a subsidiary of PBS, to serve as its investment banker in
connection with the exploration of a possible sale of Tomoka by means of a
merger, consolidation, or other acquisition of either the Tomoka Common Stock or
substantially all of the assets of Tomoka. IBS is registered with the Commission
as a broker/dealer of investment securities and is a member of the National
Association of Securities Dealers.
In connection with the engagement of IBS to facilitate the possible sale of
Tomoka, PBS agreed to provide to Tomoka its opinion as to the fairness of the
financial terms of any such transaction. As part of its investment banking
business, PBS is regularly engaged in reviewing the fairness of financial
institution acquisition transactions from a financial point of view and in the
valuation of financial institutions and other businesses and their securities in
connection with mergers, acquisitions, estate settlements, and other
transactions. Neither PBS nor any of its affiliates has a material financial
interest in Tomoka or BancGroup. PBS and IBS were selected to advise Tomoka's
Board of Directors based upon their familiarity with Florida financial
institutions and knowledge of the banking industry as a whole.
In April, 1996, a representative of IBS met with the Board of Directors of
Tomoka to review historical information on Florida bank acquisitions, to compare
projected earnings and stock valuations based on Tomoka's five-year plan with
prices paid in recent acquisitions, and to discuss a list of 15 potentially
interested acquirors. Based on this review, the Board concluded that
circumstances were favorable for a potentially attractive offer for Tomoka and
that the best interest of Tomoka's shareholders would be served by a thorough
exploration of the possibility of obtaining such an offer.
At its next meeting on May 20, 1996, IBS presented to the Board of
Directors the package of confidential financial information on Tomoka that it
proposed to distribute to a select list of eight of the potential acquirors.
After review of the package and the proposed distribution list, the Board
authorized IBS to contact the institutions to explore their interest in Tomoka.
In response to these contacts, on June 11, 1996 IBS received indications of
interest in Tomoka and preliminary acquisition proposals from four of the
regional bank holding companies that had been contacted. IBS presented a review
and analysis of each of the four proposals to the Board of Directors of Tomoka
at its meeting on June 17, 1996. Each of the proposals involved an exchange of
the stock of the acquiring company for all of the Tomoka Common Stock. Since the
offer from BancGroup was significantly higher than the other three proposals,
the Board of Directors authorized IBS to proceed with the negotiation of a
definitive agreement and invited BancGroup to begin its due diligence review of
Tomoka.
On June 26, 1996, BancGroup provided to Tomoka an initial draft of the
Agreement with respect to the proposed Merger and proceeded to conduct its due
diligence investigation. Tomoka then engaged the firm Shutts & Bowen L.L.P.,
Orlando, Florida, to act as its special counsel in connection with the Agreement
and the Merger.
On July 15, 1996, the Board of Directors of Tomoka met with representatives
of PBS and Shutts & Bowen to review the principal terms of the Agreement. At
this meeting, PBS described the methodology of its financial analysis and
delivered its opinion that the terms of the Merger were fair to the shareholders
of Tomoka from a financial point of view. Shutts & Bowen described the principal
terms of the Agreement and suggested certain changes in its provisions.
Management reiterated the principal reasons for the Merger, including the
attractive price offered by BancGroup. After further discussion, the Board of
Directors unanimously approved the Agreement, subject to BancGroup's acceptance
of the changes suggested by
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counsel, and agreed to recommend that the shareholders of Tomoka vote in favor
of the Agreement and the Merger at the Special Meeting.
After further discussions among representatives of PBS, Shutts & Bowen, and
BancGroup, the terms of the Agreement were finalized in accordance with the
changes sought by Tomoka, and the Agreement was subsequently executed by both
parties on July 19, 1996.
TOMOKA'S BOARD OF DIRECTORS' REASONS FOR APPROVING THE MERGER
In its deliberations with regard to the Merger, the Board of Directors of
Tomoka considered the following: (i) the consideration to be received by the
shareholders of Tomoka upon the consummation of the Merger; (ii) the federal
income tax consequences of the Merger; (iii) the transferability of the
BancGroup Common Stock to be received in connection with the Merger; (iv) the
financial condition, earnings record and business prospects of Tomoka and
BancGroup; (v) the current and historical market prices of BancGroup Common
Stock; (vi) the amounts paid in recent acquisitions of other community banks
based in Florida; (vii) the opinion of PBS that the consideration to be received
by the shareholders of Tomoka is fair from a financial point of view; and (viii)
the impact of the Merger on Tomoka State Bank's customers, employees and local
community. The Board also considered BancGroup's ability to offer a broader
range of products and services to the customers of Tomoka State Bank. No
specific weight or value was assigned by the Board of Directors to any of the
foregoing factors.
OPINION OF FINANCIAL ADVISOR
On July 15, 1996, at a meeting of the Board of Directors of Tomoka, PBS
delivered its written opinion that the consideration to be received by the
shareholders of Tomoka in exchange for their shares of the Tomoka Common Stock
is fair from a financial point of view. The full text of PBS' written opinion,
which includes a summary of the assumptions made and information analyzed by PBS
in deriving its opinion, and which sets forth matters considered and
qualifications and limitations on the review undertaken by PBS in connection
with the opinion, is attached as Appendix B to this Prospectus. The following
summary of the opinion is qualified in its entirety by reference to the full
text of such opinion.
In arriving at its opinion, PBS performed certain analyses described below
and discussed with the Board of Directors of Tomoka the range of values for
Tomoka resulting from such analyses. In this connection, PBS reviewed certain
publicly available business and financial information relating to Tomoka and
BancGroup. PBS also considered certain financial and stock market data of Tomoka
and BancGroup, compared that data with similar data for certain other
publicly-held bank holding companies and considered the financial terms of
certain other comparable Florida transactions that had recently been completed.
PBS also considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria that it deemed
relevant. In connection with its review, PBS did not independently verify the
foregoing information and relied on such information as being complete and
accurate in all material respects. Financial forecasts prepared by PBS were
based on assumptions believed by PBS to be reasonable and to reflect currently
available information. PBS did not make an independent evaluation or appraisal
of the assets of Tomoka or BancGroup.
PBS took into account the contacts made by IBS with other financial
institutions concerning their possible interest in affiliation with Tomoka. PBS
reviewed the correspondence and information regarding the financial institutions
contacted regarding their interest in a merger or acquisition of Tomoka. PBS
reviewed all offers received by Tomoka.
In preparing its opinion, PBS performed a due diligence review of
BancGroup. The due diligence review focused on various financial and other data
which included: minutes of BancGroup's Board of Directors' quarterly meetings
for a period of one year; the March 31, 1995 report of inspection by the Federal
Reserve Bank of Atlanta; the report of the 1995 annual audit by Coopers &
Lybrand L.L.P., and the accompanying management letter; 1995 and year to date
1996 Forms 8-K, 10-Q and 10-K filed with the Commission; the Uniform Bank
Holding Company Performance Report as of December 31, 1995; investment portfolio
listings;
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internally identified problem loan lists and loan delinquency reports; the
allowance for loan and lease loss analysis as of June 30, 1996; internal loan
review reports; pending litigation report provided by senior management;
asset/liability interest rate sensitivity reports; the summary of BancGroup's
capital plan; and discussions with various members of BancGroup's senior
management.
PBS also interviewed senior management and external auditors of BancGroup
regarding operations, performance and the future prospects of BancGroup. PBS
compared the historical stock market activity of selected financial institutions
headquartered in the Southeastern United States to BancGroup.
PBS reviewed and analyzed the historical performance of Tomoka and Tomoka
State Bank contained in the audited financial statements dated December 31, 1994
and 1995; March 26, 1996 Proxy Statement; unaudited internal financial
statements as of March 31, 1996; Tomoka State Bank's 1996 operating budget;
September 30, 1995, December 31, 1995 and March 31, 1996 Consolidated Reports of
Condition and Income as filed with the Federal Deposit Insurance Corporation;
March 31, 1996 and December 31, 1995 Uniform Bank Performance Reports of Tomoka
State Bank, historical common stock trading activity of Tomoka; and the premises
and other fixed assets.
PBS reviewed and tabulated statistical data regarding the loan portfolio,
securities portfolio and other performance ratios and statistics of Tomoka State
Bank. Financial projections were prepared and analyzed as well as other
financial studies, analyses and investigations as deemed relevant for the
purposes of this opinion. In review of this information, PBS took into account
its assessment of general market and financial conditions, experience in other
transactions, and knowledge of the banking industry generally.
In connection with rendering its opinion and preparing its various written
and oral presentations to Tomoka's Board of Directors, PBS performed a variety
of financial analyses, including those summarized below. The summary does not
purport to be a complete description of the analyses performed by PBS in this
regard. The preparation of a fairness opinion involves various determinations as
to the most appropriate and relevant methods of financial analysis and the
application of these methods to the particular circumstances and, therefore,
such an opinion is not readily susceptible of summary description. Accordingly,
notwithstanding the separate factors summarized below, PBS believes that its
analyses must be considered as a whole and that selecting portions of its
analyses and of the factors considered by it, without considering all analyses
and factors, could create an incomplete view of the evaluation process
underlying its opinion.
In performing its analyses, PBS made numerous assumptions with respect to
industry performance, business and economic conditions and other matters, many
of which are beyond Tomoka's or BancGroup's control. The analyses performed by
PBS are not necessarily indicative of actual values or future results, which may
be significantly more or less favorable than suggested by such analyses. In
addition, analyses relating to the values of businesses do not purport to be
appraisals or to reflect the process by which businesses may actually be sold.
Acquisition Comparison Analysis: In performing this analysis, PBS reviewed
the terms of other bank acquisition transactions in the state of Florida
announced since 1985. There were 104 such transactions for which detailed
financial information was available. The purpose of this analysis was to obtain
an evaluation range based on these Florida acquisition transactions. Median
multiples of earnings and book value implied by the comparable transactions were
utilized in obtaining a range for the acquisition value of Tomoka.
In addition to reviewing recent Florida bank transactions, PBS performed
separate comparable analyses for acquisitions of Florida banks which, like
Tomoka, had an equity-to-asset ratio between 8.0% and 10.0%, a return on average
equity between 14.0% and 17.0% and those with deposits between $40.0 and $60.0
million. Median values for the 104 Florida acquisitions expressed as multiples
of both book value and earnings were 1.75 and 8.40, respectively. The median
multiples of book value and earnings for acquisitions of Florida banks with
equity-to-asset ratios between 8.0% and 10.0% were 1.76 and 16.56, respectively.
For acquisitions of Florida banks with a return on average equity between 14.0%
and 17.0%, the median multiples were 2.10 and 15.84, respectively. For
acquisitions of Florida banks with deposits between $40.0 and $60.0 million the
median multiples were 1.71 and 18.81, respectively.
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In the proposed Merger, Tomoka shareholders will receive for each share of
Tomoka Common Stock such number of shares of BancGroup Common Stock as shall be
equal to $32.00 divided by the market value (as defined) of BancGroup Common
Stock at the Effective Date of the Merger, subject to certain adjustments as
provided in the Agreement. Utilizing the market value of BancGroup Common Stock
as of the date of the Agreement of $32.00 per share, the value of the
consideration to be received in the Merger would equal $32.00 per share of
Tomoka Common Stock. This represents multiples of book value and earnings of
2.56 and 16.10, respectively.
Adjusted Net Asset Value Analysis: PBS also reviewed Tomoka's balance
sheet data to determine the amount of material adjustments required to adjust
the stockholder's equity of Tomoka to current market value, based on differences
between the market value of Tomoka's assets and their value as reflected on
Tomoka's financial statements. PBS determined that two adjustments were
warranted. The investment securities portfolio had depreciation of approximately
$4,000 after adjustment for income taxes. PBS also calculated the value of
Tomoka State Bank's non-interest bearing demand deposits to be approximately
$3,173,000. On this basis, the adjusted net asset value of the Tomoka Common
Stock was determined to be $21.82 per share.
Discounted Earnings Analysis: A dividend discount analysis was performed
by PBS pursuant to which a range of stand-alone values of Tomoka was determined
by adding (i) the present value of estimated future dividend streams that Tomoka
could generate over a five-year period beginning in 1996 and ending in 2000, and
(ii) the present value of the "terminal value" of Tomoka's earnings at the end
of the year 2000. The "terminal value" of Tomoka's earnings at the end of the
five-year period was determined by applying a multiple of 1.75 times the
projected terminal year equity. The 1.75 multiple represents the median price
paid as a multiple of book value for all Florida bank transactions since 1985.
Dividend streams and terminal values were discounted to present values
using a discount rate of 12%. This rate reflects assumptions regarding the
required rate of return of holders or buyers of the Tomoka Common Stock. The
value of the Tomoka Common Stock, determined by adding the present value of the
total cash flows, was $26.71 per share. In addition, using the five-year
projection as a base, a twenty-year projection was prepared assuming that an
annual growth rate of 8% and a consistent rate of return on assets of 1.50%
would remain in effect for the entire period, beginning in 2001. Dividends also
were assumed to be 50% of income for all years. This long-term projection
resulted in a value of $30.95 per share of the Tomoka Common Stock.
Specific Acquisition Analysis: PBS also valued Tomoka based on an
acquisition analysis assuming a "break-even" earnings scenario to an acquiror as
to price, current interest rates and amortization of any premium paid. Based on
this analysis, an acquiring institution could pay $26.82 per share of Tomoka
Common Stock, with no impact on its net income in the initial year. This
analysis was based on a projected funding cost of 8% adjusted for taxes,
amortization of the acquisition premium over 15 years, and Tomoka's anticipated
earnings level of $921,000 in 1996.
Pro Forma Merger Analysis: PBS compared the historical performance of
Tomoka to that of BancGroup and other regional bank holding companies. This
comparison included, among other things, profitability, asset quality and
capital adequacy measures. In addition, the contribution of each of Tomoka and
BancGroup to the income statement and balance sheet of the pro forma combined
company was analyzed.
The effect of the affiliation on the historical and pro forma financial
data of Tomoka, as well as the projected financial data prepared by PBS, was
analyzed. Tomoka's historical financial data was compared to pro forma combined
historical and projected earnings, book value and dividends per share, as well
as other measures of profitability, capital adequacy, and asset quality.
The opinion of PBS is directed only to the question of whether the
consideration to be received by Tomoka's shareholders under the Agreement is
fair and equitable from a financial point of view and does not constitute a
recommendation to any Tomoka shareholder to vote in favor of the Merger. No
limitations were imposed on PBS regarding the scope of its investigation or
otherwise by Tomoka or any of its affiliates. PBS did not recommend or negotiate
the Exchange Ratio in the Merger.
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Based on the results of the various analyses described above, PBS concluded
that the consideration to be received by Tomoka's shareholders under the
Agreement is fair and equitable from a financial point of view.
The opinion expressed by PBS was based upon market, economic, and other
relevant considerations as they existed and were evaluated as of the date of the
opinion. Events occurring after the date of the opinion, including but not
limited to changes affecting the securities markets, the results of operations,
or material changes in the assets and liabilities of Tomoka, could materially
affect the assumptions used in preparing the opinion.
Pursuant to an engagement letter dated February 2, 1996, PBS and IBS will
receive a fee of $80,000 plus 3% of the total consideration received by the
Tomoka shareholders in excess of $13 million for all of their services performed
in connection with the Merger, including rendering the fairness opinion. In
addition, Tomoka has agreed to reimburse IBS for its out-of-pocket expenses in
an amount not to exceed $5,000 and to indemnify PBS and IBS and their directors,
officers and employees, from liability in connection with the Merger, and to
hold PBS and IBS harmless from any losses, actions, claims, damages, expenses or
liabilities related to any of PBS' or IBS' acts or decisions made in good faith
and in the best interest of Tomoka.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF TOMOKA
The Board of Directors of Tomoka has determined that the Merger is in the
best interests of Tomoka and its shareholders. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF TOMOKA VOTE IN FAVOR OF THE
APPROVAL AND ADOPTION OF THE AGREEMENT AND, THEREFORE, THE MERGER.
BANCGROUP'S REASONS FOR THE MERGER
The Board of Directors of BancGroup has unanimously approved the Merger and
the Agreement. BancGroup has been seeking to expand its banking service in the
Florida market, and, to that end, it currently operates a bank in the Orlando
area and has pending agreements to acquire other banks in Florida. The Board of
Directors of BancGroup believes that the acquisition of Tomoka and Tomoka State
Bank is consistent with that strategy.
In approving the Merger and the Agreement, the Board of Directors of
BancGroup took into account: (i) the financial performance and condition of
Tomoka, including its strong capital and good asset quality; (ii) similarities
in the philosophies of BancGroup and Tomoka, including Tomoka's commitment to
delivering high quality personalized financial services to its customers; and
(iii) Tomoka's management's knowledge of and experience in the East Central
Florida market.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain directors and executive officers of Tomoka hold Tomoka Options
which entitle them to purchase, in the aggregate, up to 83,000 shares of Tomoka
Common Stock. Under the terms of the Agreement, any Tomoka Options which are not
exercised prior to the Effective Date will be assumed by BancGroup giving the
holders of such options the right to acquire shares of BancGroup Common Stock.
See "Treatment of Tomoka Options."
Thomas H. Dargan, President and Chief Executive Officer of Tomoka has
entered into an agreement with BancGroup regarding his employment after the
consummation of the Merger. Under this agreement, if BancGroup terminates the
employment of Mr. Dargan without cause within one year after the Effective Date,
then BancGroup will pay Mr. Dargan a lump-sum severance payment equal to Mr.
Dargan's annual salary. Further, if Mr. Dargan or BancGroup terminates his
employment during this period, then Mr. Dargan may not compete with BancGroup
for a period of one year.
On the Effective Date, all employees of Tomoka (including its executive
officers) shall, at BancGroup's option, either become employees of BancGroup or
its subsidiaries or be entitled to severance benefits in accordance with
BancGroup's severance policy as of the date of the Agreement. All employees of
Tomoka who become employees of BancGroup or its subsidiaries on the Effective
Date shall be entitled, to the extent
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permitted by applicable law, to participate in all benefit plans of BancGroup to
the same extent as BancGroup's employees.
Under the Agreement, BancGroup has agreed to indemnify the directors and
executive officers of Tomoka against certain claims and liabilities arising out
of or pertaining to matters existing or occurring at or prior to the Effective
Date, to the fullest extent that Tomoka would have been permitted under Florida
law, or under its Articles of Incorporation or Bylaws, to indemnify such persons
(and also to advance expenses as incurred to the fullest extent permitted under
applicable law).
Except as described above, none of the directors or executive officers of
Tomoka, 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 Tomoka Common Stock.
CONVERSION OF TOMOKA COMMON STOCK
On the Effective Date, each outstanding share of Tomoka Common Stock (other
than treasury shares) shall be converted by operation of law and without any
action by the holder thereof into such number of shares of BancGroup Common
Stock as shall be equal to $32 divided by the Market Value of the BancGroup
Common Stock. 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 fifth
trading day preceding the Effective Date.
No fractional shares of BancGroup Common Stock will be issued in connection
with the Merger. Each shareholder of Tomoka having a fractional interest arising
upon the conversion of Tomoka Common Stock into BancGroup Common Stock will, at
the time of surrender of the certificates representing Tomoka Common Stock, be
paid by BancGroup an amount of cash equal to the value of such fractional
interest based on the Market Value.
As an example, assuming the Market Value (calculated as of September 19,
1996) on the Effective Date is $34.3375, the Exchange Ratio in the Merger would
be 0.9319 ($32.00 divided by $34.3375). Accordingly, a shareholder of Tomoka
owning 500 shares of Tomoka Common Stock would be entitled to receive 465.95
shares of BancGroup Common Stock. The fractional share of .95 would be paid
$32.62 in cash (.95 multiplied by $34.3375), and 465 shares of BancGroup Common
Stock would be issued to such holder.
The Agreement provides that if, 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 BancGroup
Common Stock, an appropriate and proportionate adjustment shall be made in the
number of shares of BancGroup Common Stock into which the Tomoka Common Stock
shall be converted in the Merger.
For a description of the assumption of Tomoka Options, see "Treatment of
Tomoka Options."
SURRENDER OF TOMOKA COMMON STOCK CERTIFICATES
Upon the Effective Date and subject to the conditions described at
"Conditions to Consummation of the Merger," Tomoka's shareholders will
automatically, and without further action by such shareholders or by BancGroup,
become owners of BancGroup Common Stock as described herein. Outstanding
certificates representing shares of the Tomoka Common Stock shall represent
shares of BancGroup Common Stock. Thereafter, upon surrender of the certificates
formerly representing shares of Tomoka Common Stock, the holders will be
entitled to receive certificates for the BancGroup Common Stock. Dividends on
the shares of BancGroup Common Stock will accumulate without interest and will
not be distributed to any former shareholder of Tomoka unless and until such
shareholder surrenders for cancellation his certificate for Tomoka Common Stock.
SunTrust Bank, Atlanta, Georgia, transfer agent for BancGroup Common Stock, will
act as the Exchange Agent with respect to the shares of Tomoka Common Stock
surrendered in connection with the Merger.
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A detailed explanation of these arrangements will be mailed to Tomoka
shareholders promptly 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 Tomoka and BancGroup to consummate the
Merger is conditioned on the receipt by Tomoka and BancGroup of an opinion from
Miller, Hamilton, Snider & Odom, L.L.C., counsel to BancGroup, to the effect
that the Merger will constitute such a reorganization. The opinion has been
delivered to Tomoka and BancGroup. In delivering its opinion, Miller, Hamilton,
Snider & Odom, L.L.C., has received and relied upon certain representations of
BancGroup and Tomoka and certain other information, data, documentation and
other materials as it deems necessary. The tax opinion is based upon certain
assumptions, including the assumption that Tomoka has no knowledge of any plan
or intention on the part of the Tomoka shareholders to sell or dispose of
BancGroup Common Stock that would reduce their holdings to the number of shares
having in the aggregate a fair market value of less than 50% of the total fair
market value of the Tomoka Common Stock outstanding immediately prior to the
Merger.
Neither Tomoka nor BancGroup intends to seek a ruling from the Internal
Revenue Service as to the federal income tax consequences of the Merger.
Tomoka's shareholders should be aware that the opinion of counsel will not be
binding on the Internal Revenue Service or the courts.
Among other things, the following discussion is based on Tomoka's
shareholders maintaining sufficient equity ownership interest in BancGroup after
the Merger. The Internal Revenue Service takes the position for purposes of
issuing advance rulings on reorganizations that the shareholders of an acquired
corporation (i.e., Tomoka) must maintain, in the aggregate, 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 Tomoka Common Stock exchanged for cash in lieu of
fractional shares of BancGroup Common Stock and shares as to which dissenters'
rights are exercised will be treated as outstanding shares of Tomoka Common
Stock. Moreover, shares of Tomoka Common Stock and BancGroup Common Stock held
by Tomoka shareholders 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 Common
Stock is met by Tomoka's shareholders.
Counsel could not opine that the Merger is a tax free reorganization under
Section 368 of the Code if there were a plan or intention by the Tomoka
shareholders to sell or dispose of BancGroup Common Stock that would reduce
their holdings to the number of shares with an aggregate fair market value of
less than 50 percent of the total fair market value of Tomoka Common Stock
outstanding immediately before the Merger.
The tax opinion states that the Merger will constitute a reorganization as
defined in Section 368(a) of the Code and that the following federal income tax
consequences will result to Tomoka's shareholders who exchange their shares of
Tomoka Common Stock for shares of BancGroup Common Stock:
(i) No gain or loss will be recognized by Tomoka's shareholders on the
exchange of shares of Tomoka Common Stock for shares of BancGroup Common
Stock;
(ii) The aggregate basis of BancGroup Common Stock received by each
Tomoka shareholder (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 Tomoka Common Stock surrendered in
exchange therefor;
(iii) The holding period of the shares of BancGroup Common Stock
received by each Tomoka shareholder will include the period during which
the shares of Tomoka Common Stock exchanged therefor were held, provided
that the shares of Tomoka Common Stock were a capital asset in the holder's
hands as of the Effective Date;
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(iv) No gain or loss will be recognized by Tomoka upon the transfer of
its assets and liabilities to BancGroup. No gain or loss will be recognized
by BancGroup upon the receipt of the assets and liabilities of Tomoka;
(v) The basis of the assets of Tomoka acquired by BancGroup will be
the same as the basis of the assets in the hands of Tomoka immediately
prior to the Merger;
(vi) The holding period of the assets of Tomoka in the hands of
BancGroup will include the period during which such assets were held by
Tomoka;
(vii) Cash payments received by each Tomoka shareholder 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 Tomoka Common Stock is a capital asset in the hands of the
holder; and
(viii) A Tomoka shareholder who dissents and receives only cash
pursuant to dissenters rights will recognize gain or loss. Such gain or
loss will, in general, be treated as capital gain or loss, measured by the
difference between the amount of cash received and the tax basis of the
shares of Tomoka Common Stock converted, if the shares of Tomoka Common
Stock were held as capital assets. However, a Tomoka shareholder who
receives only cash may need to consider the effects of Sections 302 and 318
of the Code in determining the federal income tax consequences of the
transaction.
THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF ALL MATERIAL
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO THE SHAREHOLDERS OF TOMOKA, TO
TOMOKA, AND TO BANCGROUP 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 SHAREHOLDER 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,
SHAREHOLDERS WHO DO NOT HOLD THEIR SHARES OF TOMOKA COMMON STOCK AS "CAPITAL
ASSETS" WITHIN THE MEANING OF SECTION 1221 OF THE CODE, AND SHAREHOLDERS WHO
ACQUIRED THEIR SHARES OF TOMOKA COMMON STOCK PURSUANT TO THE EXERCISE OF OPTIONS
OR OTHERWISE AS COMPENSATION, NOR ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY
STATE, LOCAL OR FOREIGN JURISDICTION. MOREOVER, THE TAX CONSEQUENCES TO HOLDERS
OF TOMOKA 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. TOMOKA
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE
PARTICULAR FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE MERGER TO
THEM.
OTHER POSSIBLE CONSEQUENCES
If the Merger is consummated, the shareholders of Tomoka, a Florida
corporation, will become shareholders of BancGroup, a Delaware business
corporation.
For a discussion of the differences in the rights, preferences, and
privileges of ownership of Tomoka Common Stock and BancGroup Common Stock, see
"COMPARATIVE RIGHTS OF SHAREHOLDERS."
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CONDITIONS TO CONSUMMATION OF THE MERGER
The parties' obligation to consummate the Merger is subject to the
satisfaction (or waiver, to the extent permitted by law) of various conditions
set forth in the Agreement.
The obligations of Tomoka and BancGroup to consummate the Merger are
conditioned upon, among other things, (i) the approval of the Agreement by the
holders of at least a majority of the outstanding shares of Tomoka Common Stock;
(ii) the approval of the Merger by the Florida Department of Banking and the
Federal Reserve; (iii) 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, (iv) the absence of any investigation by any governmental agency which
might result in any such proceeding, (v) consummation of the Merger no later
than March 31, 1997, and (vi) receipt of opinions of counsel regarding certain
matters.
The obligation of Tomoka to consummate the Merger is further subject to
several other conditions, including: (i) the absence of any material adverse
change in the financial condition or affairs of BancGroup; (ii) the shares of
BancGroup Common Stock to be issued under the Agreement shall have been approved
for listing on the NYSE; (iii) the accuracy in all material respects of the
representations and warranties of BancGroup contained in the Agreement and the
performance by BancGroup of all of its covenants and agreements under the
Agreement; and (iv) receipt of the opinion of PBS that the Exchange Ratio is
fair from a financial point of view to the shareholders of Tomoka.
The obligation of BancGroup to consummate the Merger is subject to several
other conditions, including: (i) the absence of any material adverse change in
the financial condition or affairs of Tomoka; (ii) the holders of not more than
10% of the outstanding shares of Tomoka Common Stock shall have exercised
dissenters' rights with respect to their shares; (iii) the receipt of a letter
from Coopers & Lybrand L.L.P. that the Merger will qualify for the
"pooling-of-interests" method of accounting under generally accepted accounting
principles; (iv) the accuracy in all material respects of the representations
and warranties of Tomoka contained in the Agreement, and the performance by
Tomoka of all of its covenants and agreements under the Agreement; (v) the
receipt by BancGroup of certain undertakings from holders of Tomoka Common Stock
who may be deemed to be "affiliates" of Tomoka pursuant to the rules of the
Commission; and (vi) the execution and receipt of the severance agreement
between BancGroup and Thomas H. Dargan.
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.
The Agreement provides that Tomoka and BancGroup may waive all conditions to
their obligations to consummate the Merger, other than the receipt of the
requisite approvals of regulatory authorities and Tomoka shareholder approval of
the Merger. In making any decision regarding a waiver of one or more conditions
to consummation of the Merger or an amendment of the Agreement, the Boards of
Directors of Tomoka 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 shareholders.
AMENDMENT OR TERMINATION
The Boards of Directors of BancGroup and Tomoka may agree to amend or
terminate the Agreement before or after approval by the shareholders of Tomoka.
However, the Board of Directors of Tomoka shall not agree to any amendments to
the Agreement which would alter the Exchange Ratio or which, in the opinion of
the Board of Directors of Tomoka, would adversely affect the rights of the
shareholders of Tomoka, unless such amendments are approved by the holders of a
majority of the outstanding shares of Tomoka Common Stock. Such amendments may
require the filing of an amendment of the Registration Statement, of which this
Prospectus forms a part, with the Commission. See "Conditions to Consummation of
the Merger."
REGULATORY APPROVALS
Prior to the Merger, a 30-day prior notification to the Federal Reserve
will be provided pursuant to Section 3 of the BHCA and the regulations
promulgated pursuant thereto. It is contemplated that the Merger
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will occur simultaneously with the merger of Tomoka State Bank with and into
Colonial Bank, Orlando, Florida (the "Bank Merger). The approval of the Federal
Deposit Insurance Corporation (the "FDIC") and the Florida Department of Banking
and Finance (the "Florida Department") must be obtained prior to the Bank
Merger. BancGroup filed the applications with the FDIC and the Florida
Department on October 18, 1996, and the regulatory approval process is expected
to take approximately four months from that date.
Federal Reserve Notification. Under limited circumstances, approval of the
Merger by the Federal Reserve under Section 3 of the BHCA is not required. More
specifically, the Merger would not require Federal Reserve approval if: (1)
Tomoka State Bank is merged into a BancGroup bank subsidiary simultaneously with
the Merger; (2) Tomoka State Bank's merger into a BancGroup bank subsidiary
requires the prior approval of a federal supervisory agency under the Bank
Merger Act; (3) the transaction does not involve an acquisition subject to
Section 4 of the BHCA; (4) both before and after the transaction, BancGroup
meets the Federal Reserve's capital adequacy guidelines; and (5) BancGroup
provides written notice of the transaction to the Federal Reserve at least
thirty days prior to the transaction, and during that period, the Federal
Reserve does not require an application under Section 3 of the Bank Holding
Company Act. It is anticipated that BancGroup will satisfy the foregoing
requirements, and, absent Federal Reserve action pursuant to item 5 above, an
application with the Federal Reserve will not be required.
In the event the Federal Reserve requires an application pursuant to
Section 3 of the BHCA, approval of the Federal Reserve would be required prior
to the Merger. Pursuant to Section 3 of the BHCA, and the regulations
promulgated pursuant thereto, the Federal Reserve must withhold approval of the
Merger if it finds that the transaction will result in a monopoly or be in
furtherance of any combination or conspiracy to monopolize or attempt to
monopolize the business of banking in any part of the United States. In
addition, the Federal Reserve may not approve the Merger if it finds that the
effect thereof may be substantially to lessen competition in any section of the
country, or tend to create a monopoly, or would in any other manner be in
restraint of trade, unless it finds that the anti-competitive effects of the
Merger are clearly outweighed by the probable effect of the Merger in meeting
the convenience and needs of the communities to be served. The Federal Reserve
will also take into consideration the financial condition and managerial
resources of BancGroup, its subsidiaries, any banks related to BancGroup through
common ownership or management, and Tomoka State Bank. Finally, the Federal
Reserve will consider the compliance records of BancGroup's subsidiaries under
the Community Reinvestment Act.
The BHCA provides for the publication of notice and public comment on the
application and authorizes the Federal Reserve to permit interested parties to
intervene in the proceedings. If an interested party is permitted to intervene,
such intervention could delay the regulatory approvals required for consummation
of the Merger. Under Section 11 of the BHCA, the Merger may not be consummated
until the 30th day after the date of approval by the Federal Reserve, during
which time the United States Department of Justice or others may challenge the
Merger on antitrust grounds. This 30 day period may be reduced to 15 days under
certain circumstances.
Florida Department of Banking. The Bank Merger must be approved by the
Florida Department pursuant to applicable provisions of the Florida Banking
Code. The Florida Department must approve the Bank Merger if it appears that the
resulting state bank meets all the requirements of state law as to the formation
of a new state bank, the agreement of merger provides an adequate capital
structure, including surplus, of the resulting state bank in relation to its
activities which are to continue or are to be undertaken, and also in relation
to its deposit liabilities, the valuation is fair, and the Bank Merger is not
contrary to the public interest.
FDIC Approval. Pursuant to the requirements of the Bank Merger Act, the
FDIC's approval of the Bank Merger must be obtained. The FDIC is prohibited from
approving the Bank Merger if it would result in a monopoly or would be in
furtherance of any combination or conspiracy to monopolize or to attempt to
monopolize the business of banking in any part of the United States. In
addition, the FDIC is prohibited from approving the Bank Merger if its effect,
in any section of the country, would be substantially to lessen competition, or
to tend to create a monopoly, or which in any other manner would be in restraint
of trade, unless it finds that the anti-competitive effects of the Bank Merger
are clearly outweighed in the public
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interest by the probable effect of the Bank Merger in meeting the convenience
and needs of the community to be served. The FDIC is required to take into
consideration the financial and managerial resources and future prospects of the
existing and proposed institutions, and the convenience and needs of the
community to be served.
The Bank Merger Act imposes a waiting period which prohibits consummation
of the Bank Merger, in ordinary circumstances, for a period ranging from 15-30
days following the FDIC's approval of the Bank Merger. 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.
The Agreement provides that the obligation of each of BancGroup and Tomoka
to consummate the Merger is conditioned upon the receipt of all necessary
regulatory approvals, including the approval of the Federal Reserve and the
Florida Department. There can be no assurance that the Federal Reserve or the
Florida Department will approve BancGroup's applications to acquire Tomoka, and,
if such approvals are received, that such approvals will not be conditioned upon
terms and conditions that would cause the parties to abandon the Merger.
CONDUCT OF BUSINESS PENDING THE MERGER
The Agreement contains certain restrictions on the conduct of the business
of Tomoka pending consummation of the Merger. The Agreement prohibits Tomoka
from taking any of the following actions, prior to the Effective Date, 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), except shares of Tomoka Common Stock issued upon the
exercise of Tomoka Options;
(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
shareholders, or purchasing or redeeming or agreeing to purchase or redeem,
any of its outstanding securities; except if the Effective Date has not
occurred as of January 19, 1997, Tomoka may pay a cash dividend to its
shareholders each time that BancGroup pays a cash dividend to BancGroup
stockholders following such date. The amount of the dividend that Tomoka
shall be permitted to pay shall equal, in the aggregate, the total dividend
that the holders of Tomoka Common Stock would have received from BancGroup
had the holders of Tomoka Common Stock been holders of BancGroup Common
Stock on the date of record for any dividends paid by BancGroup. For this
purpose, the "Market Value" shall be calculated as if the Effective Date
had occurred on the date of record of the payment of the BancGroup
dividend, and, accordingly, a pro forma calculation of the number of shares
of BancGroup Common Stock that would have been outstanding and held by
Tomoka shareholders will be made to determine the amount of the cash
dividend to which shareholders of Tomoka are entitled;
(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
canceling, 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) Except in accordance with normal and usual practice, 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;
(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.
The Agreement provides that prior to the Effective Date, no director or
officer of Tomoka or any of its subsidiaries shall, directly or indirectly, own,
manage, operate, join, control, be employed by or participate in the ownership,
proposed ownership, management, operation or control of or be connected in any
manner with, any business, corporation or partnership which is competitive to
the business of Tomoka or its subsidiaries.
The Agreement also provides that, at the request of BancGroup, (i) Tomoka
will consult with BancGroup and advise BancGroup through its bank subsidiary in
Florida of all non single-family residential loan requests over $150,000 or any
other loan request out of the normal course of business and (ii) Tomoka will
consult with BancGroup to coordinate various other business issues on a basis
mutually satisfactory to Tomoka and BancGroup. Tomoka and the Tomoka State Bank
shall not be required to undertake any of such activities, however, except as
such activities may be in compliance with existing law and regulations.
COMMITMENTS WITH RESPECT TO OTHER OFFERS
Until the termination of the Agreement, neither Tomoka 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 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, Tomoka or any business
combination involving Tomoka other than as contemplated by the Agreement. Tomoka
will notify BancGroup immediately if any such inquiries or proposals are
received by Tomoka, if any such information is requested from Tomoka, or if any
such negotiations or discussions are sought to be initiated with Tomoka. Tomoka
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 or her fiduciary duty or from taking
any action that is required by law.
INDEMNIFICATION
BancGroup has agreed to indemnify present and former directors and officers
of Tomoka and Tomoka State Bank against liabilities arising out of actions or
omissions occurring at or prior to the Effective Date to the extent provided in
the FBCA and Tomoka's Articles of Incorporation and Bylaws.
RIGHTS OF DISSENTING SHAREHOLDERS
Holders of Tomoka Common Stock as of the Record Date are entitled to
dissenters' rights under Sections 607.1301, 607.1302 and 607.1320 of the FBCA,
copies of which are attached as Appendix C to this Prospectus. The following
discussion is not a complete statement of the law pertaining to dissenters'
rights under the FBCA and is qualified in its entirety by reference to Appendix
C.
Under the FBCA, any holder of Tomoka Common Stock as of the Record Date who
follows the procedures set forth in Section 607.1320 will be entitled to receive
an offer from Tomoka to pay the dissenting
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shareholder an amount estimated by Tomoka to be the "fair value" for such
shareholder's shares. "Fair value" is defined under the FBCA as the value of the
dissenter's shares as of the close of business on the day prior to the date the
merger is approved by the corporation's shareholders, excluding any appreciation
or depreciation in anticipation of the corporate action, unless exclusion would
be inequitable. Any shareholder who wishes to exercise dissenters' rights, or
who wishes to preserve his or her right to do so, should review the following
discussion and Appendix C carefully because failure to comply timely and
properly with the procedures specified will result in the loss of dissenters'
rights under the FBCA. A person having a beneficial interest in Tomoka Common
Stock held of record in the name of another person, such as a broker or nominee,
must act promptly to cause the record holder to follow the steps summarized
below properly and in a timely manner to perfect such dissenters' rights as the
beneficial owners may have.
A Tomoka shareholder wishing to exercise dissenters' rights must deliver to
Tomoka, before the vote of holders of Tomoka Common Stock on the Agreement at
the Special Meeting, a written notice of intent ("Notice of Intent") to demand
payment for his or her shares. Such shareholder must not vote in favor of
approval of the Agreement. Because a signed proxy which does not contain voting
instructions will, unless revoked, be voted for the Agreement, a Tomoka
shareholder who votes by proxy and who wishes to exercise dissenters' rights
must mark the proxy either to (i) vote against the Agreement, or (ii) abstain
from voting with respect to the Agreement. A vote against approval of the
Agreement will not, in and of itself, constitute a written demand for
dissenters' rights satisfying the requirements of Section 607.1320.
Any Notice of Intent should be addressed to Tomoka Bancorp, Inc., Post
Office Box 5058, Ormond Beach, Florida 32175-5058, Attention: S. Craig Suazo,
Secretary, and should be executed by, or on behalf of, the holder of record. The
Notice of Intent must reasonably inform Tomoka of the identity of the
shareholder and that such shareholder is thereby objecting to the Merger and
demanding payment of his or her shares if the Merger is consummated.
Under Section 607.1320, Tomoka must provide written notification (a "Notice
of Approval"), within 10 days after shareholder approval of the Agreement, of
such shareholder approval to each shareholder who gave Tomoka a Notice of
Intent. Within twenty days after the Notice of Approval is given by Tomoka, the
dissenting shareholder must file with Tomoka a written notice of election to
dissent ("Notice of Election to Dissent") and deposit his or her certificates
evidencing shares of Tomoka Common Stock with Tomoka simultaneously with the
filing of the Notice of Election to Dissent. Upon filing a Notice of Election to
Dissent, a shareholder shall thereafter be entitled only to payment as provided
by Section 607.1320 and shall not be entitled to vote or to exercise any other
rights of a shareholder. A notice of Election to Dissent may be withdrawn in
writing by a dissenting shareholder at any time before Tomoka has made an offer
to pay for the shares of the shareholder.
Within 10 days after the expiration of the period in which shareholders may
file their Notice of Election to Dissent or within 10 days after consummation of
the Merger, whichever is later, but in no event more than 90 days after the date
the Tomoka shareholders approve the Agreement, Tomoka must make a written offer
to each dissenting shareholder who has filed a Notice of Election of Dissent to
pay an amount that Tomoka estimates to be the "fair value" of the shares. If the
dissenting shareholder accepts Tomoka's offer, payment must be made within 90
days after the offer was made or consummation of the Merger, whichever occurs
later. If Tomoka fails to make the offer or if the dissenting shareholder does
not accept the offer within 30 days after the offer is made, then Tomoka, within
30 days after receipt of written demand from any dissenting shareholder given
within 60 days after consummation of the Merger, must bring an action in a court
of competent jurisdiction in Volusia County, Florida, requesting that the "fair
value" of the shares be determined together with a fair rate of interest, as
determined by the court. If Tomoka fails to bring such an action, any dissenting
shareholder may do so on behalf of Tomoka.
The costs and expenses of any such action shall be determined by the court
and shall be assessed against Tomoka, but all or any part of such costs and
expenses may be apportioned and assessed as the court may deem equitable against
any or all of the dissenting shareholders who are parties to the action, and to
whom Tomoka has made an offer to pay for the shares, if the court finds that
such shareholders' failure to accept such offer was arbitrary, vexatious, or not
in good faith. Such expenses shall include reasonable compensation
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for, and reasonable expenses of, appraisers appointed by the court, but shall
exclude the fees and expenses of counsel for, and experts employed by, any
party. If the fair value of the shares, as determined by the court, materially
exceeds the amount Tomoka offered to pay therefor or if no offer was made, the
court may award to any shareholder who is a party to the proceeding such sum as
the court may determine to be reasonable compensation to any attorney or expert
employed by the shareholder in the action.
Tomoka shareholders who are considering the assertion of dissenters' rights
should be aware that the "fair value" of their shares of Tomoka Common Stock as
determined under the FBCA could be more than, the same as, or less than the
consideration they would receive pursuant to the Agreement if they did not seek
dissenters' rights. BancGroup's obligation to consummate the Merger under the
Agreement is subject to the condition that not more than 10% of the shares of
Tomoka Common Stock shall be subject to the exercise of dissenters' rights under
the FBCA.
ONLY A HOLDER OF RECORD OF TOMOKA COMMON STOCK AS OF THE RECORD DATE IS
ENTITLED TO ASSERT DISSENTERS' RIGHTS FOR THE SHARES OF TOMOKA COMMON STOCK
REGISTERED IN THAT HOLDER'S NAME. The demand for dissenters' rights should be
executed by or on behalf of the holder of record fully and correctly, as his or
her name appears on the stock certificates. If the shares of Tomoka Common Stock
are owned of record in a fiduciary capacity, such as by a trustee, guardian or
custodian, execution of the demand should be made in this capacity, and if the
shares of Tomoka Common Stock are owned of record by more than one person, as by
joint tenancy or in common, the demand should be executed by or on behalf of all
joint owners. An authorized agent, including one or more joint owners, may
exercise dissenters rights on behalf of a holder of record; however, the agent
must identify the record owner or owners and expressly disclose the fact that,
in executing the demand, the agent is acting as agent for such owner or owners.
A record holder such as a broker who holds shares of Tomoka Common Stock as
nominee for several beneficial owners may exercise dissenters' rights with
respect to the shares of Tomoka Common Stock held for one or more beneficial
owners while not exercising such rights with respect to the shares of Tomoka
Common Stock held for other beneficial owners. In such case, the written demand
should set forth the number of shares of Tomoka Common Stock as to which
dissenters' rights are sought. Where no number of shares of Tomoka Common Stock
is expressly mentioned, the demand will be presumed to be with respect to all
shares of Tomoka Common Stock held in the name of the record owners. Tomoka
shareholders who hold their shares of Tomoka Common Stock in brokerage accounts
or other nominee forms and who wish to exercise dissenters' rights are urged to
consult with their brokers to determine the appropriate procedures for making a
demand.
If any Tomoka shareholder who demands dissenters' rights with respect to
his or her shares of Tomoka Common Stock fails to perfect, or effectively
withdraws or loses, the right to dissent, the shareholder's rights as a
shareholder will be restored, and, if the Merger has been consummated, the
shares of Tomoka Common Stock of such shareholder will be converted into shares
of BancGroup Common Stock in accordance with the terms of the Agreement. A
dissenting shareholder will fail to perfect, or effectively withdraw or lose,
the right to dissent if such shareholder fails to deliver a Notice of Intent to
Tomoka prior to the vote on the Agreement at the Special Meeting, votes for the
approval of the Agreement, fails to file a Notice of Election to Dissent with
Tomoka, or delivers to Tomoka a written withdrawal of his or her Notice of
Election to Dissent before an offer is made by Tomoka under Section 607.1320.
After such offer is made by Tomoka, no Notice of Election to Dissent may be
withdrawn except with the written consent of Tomoka.
Failure to follow the steps required by Sections 607.1301, 607.1302 and
607.1320 of the FBCA for perfecting dissenters' rights will result in the loss
of such rights. Consequently, any Tomoka shareholder who desires to exercise
dissenters' rights is urged to consult a legal advisor before attempting to
exercise such rights.
RESALE OF BANCGROUP COMMON STOCK ISSUED IN THE MERGER
The issuance of the shares of BancGroup Common Stock pursuant to the Merger
(including any shares to be issued pursuant to the Tomoka Options) has been
registered under the Securities Act of 1933 (the "Securities Act"). As a result,
shareholders of Tomoka who are not "affiliates" of Tomoka (as such term is
defined under the Securities Act) may resell, without restriction, all shares of
BancGroup Common Stock
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<PAGE> 36
which they receive in connection with the Merger. Under the Securities Act,
affiliates of Tomoka are subject to restrictions on the resale of the BancGroup
Common Stock which they receive in the Merger.
The BancGroup Common Stock received by affiliates of Tomoka who do not also
become affiliates of BancGroup after the consummation of the Merger may not be
sold except pursuant to an effective Registration Statement under the Securities
Act covering such shares or in compliance with Rule 145 promulgated under the
Securities Act or another applicable exemption from the registration
requirements of the Securities Act. Generally, Rule 145 permits BancGroup Common
Stock held by such shareholders to be sold in accordance with certain provisions
of Rule 144 under the Securities Act. In general, these provisions of Rule 144
permit a person to sell on the open market in brokers transactions within any
three month period a number of shares that does not exceed the greater of 1% of
the then outstanding shares of BancGroup Common Stock or the average weekly
trading volume in BancGroup Common Stock reported on the NYSE during the four
calendar weeks preceding such sale. Sales under Rule 144 are also subject to the
availability of current public information about BancGroup. The restrictions on
sales will cease to apply under most circumstances once the former Tomoka
affiliate has held the BancGroup Common Stock for at least two years. BancGroup
Common Stock held by affiliates of Tomoka who become affiliates of BancGroup
will be subject to additional restrictions on the ability of such persons to
resell such shares.
Tomoka will provide BancGroup with such information as may be reasonably
necessary to determine the identity of those persons (primarily officers,
directors and principal shareholders) who may be deemed to be affiliates of
Tomoka. Tomoka 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 BancGroup
Common Stock by such person except pursuant to Rule 145 or pursuant to an
effective registration statement 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 undertakings are not received and
BancGroup waives receipt of such condition, the certificates for the shares of
BancGroup Common Stock to be issued to such person will contain an appropriate
restrictive legend and appropriate stock transfer orders will be given to
BancGroup's stock transfer agent.
The undertaking from each Tomoka affiliate will also provide that,
notwithstanding the permissible sale of stock described above, each affiliate of
Tomoka may not sell or in any other way reduce his or her risk relative to any
shares of Tomoka Common Stock or of BancGroup Common Stock during the period
commencing thirty days prior to the Effective Date and ending on the date on
which financial results covering at least thirty days of post-Merger combined
operations of BancGroup and Tomoka have been published.
ACCOUNTING TREATMENT
BancGroup will account for the Merger as a pooling-of-interests transaction
in accordance with generally accepted accounting principles, which, among other
things, requires that the number of shares of Tomoka Common Stock acquired for
cash pursuant to the exercise of dissenters' rights or in lieu of fractional
shares not exceed 10% of the outstanding shares of Tomoka Common Stock. Under
this accounting treatment, assets and liabilities of Tomoka would be added to
those of BancGroup at their recorded book values, and the shareholders' equity
of the two companies would be combined in BancGroup's consolidated balance
sheet. Financial statements of BancGroup issued after the Effective Date of the
Merger will be restated to reflect the consolidated operations of BancGroup and
Tomoka as if the Merger had taken place prior to the periods covered by the
financial statements.
NYSE REPORTING OF BANCGROUP COMMON STOCK ISSUED IN THE MERGER
Sales of BancGroup Common Stock to be issued in the Merger in exchange for
Tomoka Common Stock will be reported on the NYSE.
TREATMENT OF TOMOKA OPTIONS
Assumption of Options. As of the date of this Prospectus, Tomoka had
granted Tomoka Options to its directors and certain executive officers which
entitled the holders thereof to acquire up to 83,000 shares of Tomoka Common
Stock. On the Effective Date, BancGroup shall assume all Tomoka Options
outstanding,
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<PAGE> 37
and each such option shall represent the right to acquire BancGroup Common Stock
on substantially the same terms applicable to the Tomoka Options except as
specified below. The registration statement registering the shares of BancGroup
Common Stock issued pursuant to the Merger also registers the shares of
BancGroup Common Stock to be issued upon the exercise of the Tomoka Options
assumed by BancGroup. The number of shares of BancGroup Common Stock to be
issued pursuant to such options shall equal the number of shares of Tomoka
Common Stock subject to such Tomoka Options multiplied by the Exchange Ratio,
provided that no fractional shares of BancGroup Common Stock shall be issued and
the number of shares of BancGroup Common Stock to be issued upon the exercise of
Tomoka Options, if a fractional share exists, shall equal the number of whole
shares obtained by rounding to the nearest whole number, giving account to such
fraction. The exercise price for the acquisition of BancGroup Common Stock shall
be the exercise price for each share of Tomoka Common Stock subject to such
options divided by the Exchange Ratio, adjusted appropriately for any rounding
to whole shares that may be done. For these purposes, the "Exchange Ratio" shall
mean the result obtained by dividing $32.00 by the Market Value.
The Tomoka Options are issuable pursuant to the Tomoka Bancorp, Inc. 1994
Directors' Stock Option Plan and the Tomoka Bancorp, Inc. Key Employee Stock
Option Plan (the "Option Plan").
The Option Plan is not qualified under Section 401(a) of the Internal
Revenue Code of 1986, as amended, nor is it subject to the Employee Retirement
Income Security Act of 1974. Tomoka Options are not transferrable except under
the laws of descent and distribution.
Purpose of the Option Plan. The purpose of the Option Plan is to assist
Tomoka in retaining the employment of valued directors and employees by offering
them a greater stake in Tomoka's success and a closer identity with it, and to
aid in obtaining the services of individuals whose employment would be helpful
to Tomoka and would contribute to its success. BancGroup believes that its
assumption of the Tomoka Options will be consistent with this purpose. No
further options will be granted under the Option Plan after the Merger.
Tax Consequences -- Incentive Options. BancGroup believes, after
consultation with legal counsel, that, if the options issued under the Option
Plan as incentive options qualified as such at the time of grant, the options,
after assumption by BancGroup, will continue to qualify as "incentive stock
options," under Section 422 of the Internal Revenue Code of 1986, as amended.
Under the Internal Revenue Code no income will result to a grantee of any such
option upon the granting or exercising of an option by the grantee, and
BancGroup will not be entitled to a tax deduction by reason of such grant or
exercise.
If, after exercising the option, the employee holds the stock obtained
through exercise for at least two years after the date of option grant and at
least one year after the stock was obtained, the employee's gain (if any) on
selling the stock will generally be treated as a long term capital gain.
Generally, the employee's alternative minimum taxable income for minimum tax
purposes will be increased by the difference between the option price and the
fair market value of the stock on the date of exercise.
If the holding period requirements just stated are not met, then any gain
on the sale of the stock will be taxed partly or entirely at ordinary income tax
rates. If the stock is held for less than the required holding period, then the
difference between the option exercise price and the fair market value of the
stock on the date of exercise will be taxed at ordinary income tax rates. The
gain equal to the increase in the fair market value of the stock after the date
of exercise of the option will generally be taxed as capital gain.
It should be understood that the holding periods discussed above relate
only to federal income tax treatment and not to securities law restrictions on
the sale of shares obtained through an option.
The foregoing statements concerning federal income tax treatment are
necessarily general and may not apply in a particular instance. No legal opinion
has been received by BancGroup or Tomoka respecting the effect of the Merger on
holders of Tomoka Options or of the exercise of such options. Option holders
should contact their own professional tax advisors for advice concerning their
particular tax situation and any changes in the tax law since the date of this
Prospectus.
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<PAGE> 38
Tax Consequences -- Non Qualified Options. The Tomoka Options that are
issued as nonqualified options are not "incentive stock options" under Section
422 of the Internal Revenue Code of 1986, as amended. Thus, upon the exercise of
such an option, ordinary income will result to the grantee equal to the
difference between the price of the option and the fair market value of the
stock subject to the option at the date of exercise. BancGroup, however, will be
entitled to a tax deduction equal to the amount of ordinary income accruing to
the optionee.
The foregoing statements concerning federal income tax treatment are
necessarily general and may not apply in a particular instance. No legal opinion
has been received by BancGroup or Tomoka respecting the effect of the Merger on
holders of Tomoka Options or of the exercise of such options. Option holders
should contact their own professional tax advisors for advice concerning their
particular tax situation and any changes in the tax law since the date of this
Prospectus.
Administration. The shares of stock to be delivered upon the exercise of
Tomoka Options granted under the Option Plan shall be made available after the
Merger, from the authorized but unissued shares of BancGroup's Common Stock.
The Option Plan is to be administered, after the Merger, by the Personnel
and Compensation Committee (the "Committee") of the board of directors of
BancGroup. All members of the Committee are directors of BancGroup. The Chairman
of the Committee, John C. H. Miller, Jr., receives employee-related compensation
from BancGroup and holds options under BancGroup's stock option plans. Mr.
Miller is a member of a law firm that performs legal services for BancGroup. See
"LEGAL OPINIONS." Another member of the Committee, Jack H. Rainer, is Chairman
of Bankers Credit Life Insurance Company, which provides credit life insurance
on certain loans made by Colonial Bank, BancGroup's Alabama bank subsidiary. The
members of the Committee serve at the pleasure of the Board of Directors of
BancGroup. The Committee shall interpret the Option Plan and resolve questions
presented by holders of options under the Option Plan. Requests for information
or questions about the Plans should be directed to BancGroup's Corporate
Secretary, at the offices of BancGroup, Post Office Box 1108, One Commerce
Street, Montgomery, Alabama 36102, telephone: (334) 240-5000.
Exercise of Options. After a Tomoka Option becomes exercisable in
accordance with its terms, it may be exercised by the holder by giving written
notice to BancGroup on a form provided by BancGroup and, in the case of options,
by paying to BancGroup in cash the exercise price of the shares to be acquired
under a Tomoka Option. Payment may be made to BancGroup by cash, check, bank
draft, or money order, or, if the Committee agrees in a particular instance, by
delivering BancGroup stock already owned by the option holder.
Amendment and Other Matters. BancGroup's Board of Directors may at any
time amend the Option Plan, except that no amendment may make any change in any
option already granted which would adversely affect the rights of any
participant.
It is not anticipated that BancGroup will make any reports to option
holders regarding the amount or status of Tomoka Options held. Option holders
may obtain such information from BancGroup at the address given above.
The shares subject to options will be obtained by BancGroup from authorized
but unissued shares. BancGroup has reserved sufficient authorized but unissued
shares for issuance pursuant to options under the Option Plan and does not
anticipate acquiring any shares in the open market for such purposes.
COMPARATIVE MARKET PRICES AND DIVIDENDS
BANCGROUP
BancGroup Common Stock is listed for trading on the NYSE. The BancGroup
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
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<PAGE> 39
BancGroup Class A Common Stock had more limited voting rights than the BancGroup
Class B Common Stock. 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 BancGroup Class A Common Stock as reported
by the NASDAQ National Market System up to February 24, 1995, and the same
information reported by the NYSE for the BancGroup Common Stock commencing
February 24, 1995.
<TABLE>
<CAPTION>
PRICE AND
DIVIDENDS
PAID
------------ DIVIDENDS
HIGH LOW (PER SHARE)
---- --- -----------
<S> <C> <C> <C>
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
3rd Quarter........................................................ 29 7/8 27 1/2 0.225
4th Quarter........................................................ 32 7/8 28 1/2 0.225
1996
1st Quarter........................................................ 36 1/2 30 0.27
2nd Quarter........................................................ 36 1/8 31 1/4 0.27
3rd Quarter........................................................ 35 7/8 31 1/4 0.27
</TABLE>
On July 22, 1996, the business day immediately prior to the public
announcement of the Merger, the closing price as reported on the NYSE of the
BancGroup Common Stock was $33.875 per share.
At June 30, 1996, BancGroup's banking subsidiaries accounted for
approximately 98% of BancGroup's consolidated assets. BancGroup derives
substantially all of its income from dividends received from its subsidiary
banks. Various statutory provisions and regulatory policies 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.
TOMOKA
There is no established public market for the Tomoka Common Stock. To the
knowledge of Tomoka, approximately 2,310 shares of Tomoka Common Stock have been
sold during the last two fiscal years at prices ranging from $12.50 to $17.00
per share. The most recent sale occurred on July 12, 1996 when 101 shares were
sold. The next most recent sale occurred on July 10, 1996 when 507 shares were
sold. In both transactions the shares were sold at a price of $17.00 per share.
Tomoka paid a cash dividend of 10 cents per share in 1995. In 1996, Tomoka
paid a stock dividend equivalent to 20 cents per share, based on the book value
per share of the Tomoka Common Stock as of January 31, 1996. The Agreement
contains certain restrictions on Tomoka's right to pay dividends. See "THE
MERGER -- Conduct of Business Pending the Merger."
BANCGROUP CAPITAL STOCK AND DEBENTURES
BancGroup's authorized capital stock consists of 44,000,000 shares of
BancGroup 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 September 19, 1996, there
were issued and outstanding a total of 16,296,558 shares of BancGroup Common
Stock. No shares of Preference Stock are issued and outstanding. In 1986,
BancGroup issued $28,750,000 in principal amount of its 7 1/2% Convertible
Subordinated Debentures due 2011 (the "1986 Debentures") of
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<PAGE> 40
which $8,082,000 are currently outstanding and are convertible at any time into
277,177 shares of BancGroup Common Stock, subject to adjustment. There are
767,571 shares of BancGroup Common Stock subject to issue upon exercise of
options under BancGroup's stock option plans. In addition to BancGroup Common
Stock to be issued in the Merger, BancGroup will issue additional shares of its
Common Stock in certain other pending combinations. See "BUSINESS OF
BANCGROUP -- Proposed Affiliate Banks."
The following statements with respect to BancGroup Common Stock and
Preference Stock are brief summaries of material provisions of Delaware law, the
Restated Certificate of Incorporation (the "Certificate"), as amended, and
bylaws of BancGroup, do not purport to be complete and are qualified in their
entirety by reference to the foregoing.
BANCGROUP 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 BancGroup Common Stock, when and as dividends, payable in
cash, stock or other property, are declared by the BancGroup Board of Directors,
the holders of BancGroup Common Stock are entitled to share ratably in such
dividends.
Voting Rights. Each holder of BancGroup Common Stock has one vote for each
share held on matters presented for consideration by the stockholders.
Preemptive Rights. The holders of BancGroup 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 BancGroup 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 BancGroup
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 BancGroup 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.
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 BancGroup 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.
1986 DEBENTURES
BancGroup issued in 1986 its 7 1/2% Convertible Subordinated Debentures due
2011 (the "1986 Debentures") in the total principal amount of $28,750,000. The
1986 Debentures were issued under a trust indenture (the "1986 Indenture")
between BancGroup and SunTrust 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,
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<PAGE> 41
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, a total of 277,177 shares of such BancGroup 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, and (ii) indebtedness which by
its terms states that such indebtedness is subordinate to or equally subordinate
with the 1986 Debentures.
At June 30, 1996, BancGroup's Senior Indebtedness as defined in the 1986
Indenture aggregated approximately $716 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 indebtedness constituting Senior Indebtedness. The 1986 Indenture
does not limit the amount of Senior Indebtedness which BancGroup may incur, nor
does such indenture 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 power of BancGroup's Board 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
"BancGroup 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
are required in order to change a majority of the Board of Directors. There are
currently 19 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 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 BancGroup Common Stock,
provided that no person shall be a Related Person if such person would have been
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<PAGE> 42
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, the current Chairman and President of BancGroup, and
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 13% of the
outstanding shares of BancGroup Common Stock.
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 BancGroup 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 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 has been given 60
days' prior written notice of such proposed acquisition and within that time
period the Federal Reserve 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 issues written notice of its
intent not to disapprove the action. Under a rebuttable presumption established
by the Federal Reserve, the acquisition of more than
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<PAGE> 43
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 SHAREHOLDERS
If the Merger is consummated, all shareholders of Tomoka other than those
properly exercising statutory dissenters' rights will become holders of
BancGroup Common Stock. The rights of the holders of the Tomoka Common Stock who
become holders of the BancGroup Common Stock 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 the shareholders of Tomoka
Common Stock with the rights of the holders of the BancGroup Common Stock. 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 Tomoka's Articles of Incorporation and bylaws, the
Delaware General Corporation Law (the "Delaware GCL") and the FBCA.
DIRECTOR ELECTIONS
Tomoka. Tomoka's directors are 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.
BancGroup. BancGroup's directors are 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
Tomoka. Under Section 607.0808 of the FBCA, any director of Tomoka may be
removed from office with or without cause if the number of votes cast to remove
him exceeds the number of votes cast against such removal.
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.
VOTING
Tomoka. Each stockholder of Tomoka is entitled to one vote for each share
of Tomoka Common Stock held, and such holders are not entitled to cumulative
voting rights in the election of directors.
BancGroup. Each stockholder of BancGroup is entitled to one vote for each
share of BancGroup Common Stock held, and such holders are not entitled to
cumulative voting rights in the election of directors.
PREEMPTIVE RIGHTS
Tomoka. The holders of Tomoka Common Stock have no preemptive rights to
acquire any additional shares of Tomoka Common Stock or any other shares of
Tomoka capital stock.
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.
33
<PAGE> 44
DIRECTORS' LIABILITY
Tomoka. Section 607.0831 of the FBCA provides that a director of Tomoka
will not be personally liable for monetary damages to Tomoka or any other person
for any statement, vote, decision or failure to act, regarding corporate
management or policy, by a director unless: (a) the director breached or failed
to perform his duties as a director, and (b) the director's breach of or failure
to perform those duties constitutes: (1) a violation of the criminal law, unless
the director had reasonable cause to believe his conduct was lawful or had no
reasonable cause to believe his conduct was unlawful, (2) a transaction in which
the director derived an improper personal benefit, (3) a payment of certain
unlawful dividends and distributions, (4) in a proceeding by or in the right of
Tomoka to procure judgment in its favor or by or in the right of a shareholder,
conscious disregard for the best interests of Tomoka, or willful misconduct, or
(5) in a proceeding by or in the right of someone other than Tomoka or a
shareholder, recklessness or an act or omission which was committed in bad faith
or with malicious purpose or in a manner exhibiting wanton and willful disregard
of human rights, safety or property. This provision would absolve directors of
Tomoka of personal liability for negligence in the performance of their duties,
including gross negligence. It would not permit a director to be exculpated,
however, from liability for actions involving conflicts of interest or breaches
of the traditional "duty of loyalty" to Tomoka and its shareholders, and it
would not affect the availability of injunctive and other equitable relief as a
remedy.
BancGroup. 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 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
Tomoka. Under Section 607.0850 of the FBCA and the bylaws of Tomoka, the
directors and officers of Tomoka may be indemnified against certain liabilities
which they may incur in their capacity as officers and directors. Such
indemnification is generally available if the executive acted in good faith and
in a manner he or she reasonably believed to be in, or not opposed to, the best
interest of Tomoka, and with respect to any criminal proceeding, had no
reasonable cause to believe his or her conduct was unlawful. Indemnification may
also be available unless a court of competent jurisdiction establishes by final
adjudication that the actions or omissions of the executive are material to the
cause of action so adjudicated and constituted: (a) a violation of the criminal
law, unless the executive had reasonable cause to believe his or her conduct was
lawful or had no reasonable cause to believe his or her conduct was unlawful;
(b) a transaction from which the executive derived an improper personal benefit;
or (c) willful misconduct or conscious disregard for the best interest of Tomoka
in a proceeding by or in the right of Tomoka to procure a judgment in its favor
or in a proceeding by or in the right of a shareholder.
To the extent that the proposed indemnitee is successful on the merits or
otherwise in the defense of any action, suit or proceeding (or any claim, issue
or matter therein) he or she must be indemnified against expenses (including
attorney's fees) actually and reasonably incurred by him or her in connection
with such proceeding. Tomoka maintains a directors and officers insurance policy
pursuant to which officers and directors of Tomoka would be entitled to
indemnification against certain liabilities, including reimbursement of certain
expenses.
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
34
<PAGE> 45
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 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), he or she must be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
BancGroup maintains an officers' and directors' insurance policy and a
separate indemnification agreement pursuant to which officers and directors of
BancGroup would be entitled to indemnification against certain liabilities,
including reimbursement of certain expenses that extends beyond the minimum
indemnification provided by Section 145 of the Delaware GCL.
SPECIAL MEETINGS OF STOCKHOLDERS; ACTION WITHOUT A MEETING
Tomoka. Under the bylaws of Tomoka, a special meeting of Tomoka's
shareholders may be called by the Board of Directors of Tomoka or upon a request
in writing by the holders of not less than a majority of all the shares entitled
to vote at the meeting. Additionally, under Section 607.0704 of the FBCA, any
action which may be taken at any annual or special meeting of the shareholders
may be taken without a meeting, without prior notice, and without a vote, if a
consent in writing setting forth the actions so taken is signed by the holders
of outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all such
shares entitled to vote thereon 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
Tomoka. The FBCA provides that mergers and sales of substantially all of
the property of a Florida corporation must be approved by a majority of the
outstanding shares of the corporation entitled to vote thereon. Under Tomoka's
Articles, however, any business combination with an interested shareholder or
affiliate of such interested shareholder may require approval by the holders of
four-fifths of the outstanding shares of Tomoka Common Stock and the holders of
two-thirds of such shares held by independent shareholders. The FBCA also
provides that the shareholders of a corporation surviving a merger need not
approve the transaction if: (a) the articles of incorporation of the surviving
corporation will not differ from its articles before the merger, and (b) each
shareholder of the surviving corporation whose shares were outstanding
immediately prior to the effective date of the merger will hold the same number
of shares with identical designations, preferences, limitations and relative
rights, immediately after the merger.
BancGroup. The Delaware GCL provides that mergers and sales of
substantially all of the assets of Delaware 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
35
<PAGE> 46
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 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
restrictions on business combination transactions.
AMENDMENT OF CERTIFICATE OF INCORPORATION AND BYLAWS
Tomoka. Under the FBCA, a Florida corporation's articles 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 FBCA, the articles
of incorporation or the bylaws require a greater vote. The Tomoka Articles and
Bylaws do not require a greater vote, except that repeal of the provisions of
Tomoka's Articles requiring a supermajority vote to approve certain business
combinations with interested shareholders are also subject to the same
supermajority vote requirement. As permitted by the FBCA, Tomoka's bylaws give
the Board of Directors and shareholders of Tomoka the power to adopt, amend or
repeal the bylaws provided that the Board of Directors may not amend or repeal
any bylaw adopted by shareholders if the shareholders specifically provide that
such bylaw is not subject to amendment or repeal by the directors.
BancGroup. Under the Delaware GCL, a Delaware 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" stockholder 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
Tomoka. Under the FBCA, a shareholder of a Florida corporation has the
right, in certain circumstances, to dissent from certain corporate transactions
and receive the fair value of his or her shares in cash in lieu of the
consideration he or she would otherwise be entitled to receive in the
transaction. If the parties are unable to agree on the fair value of the shares,
such fair value is determined by the Circuit Court in the county in Florida
where the registered office of Tomoka is located. Dissenters' rights are not
available with respect to a plan of merger or share exchange, or a proposed sale
or exchange of property if the shares are either registered on a national
securities exchange or designated as a national market system security on an
interdealer quotation system by the National Securities Dealers, Inc., or held
of record by not fewer than 2,000 shareholders. The shareholders are not
permitted dissenters' rights in a merger if such corporation is the surviving
corporation and no vote of its shareholders is required. The shareholders of
Tomoka will have dissenters' rights with respect to the Merger. See "THE
MERGER -- Rights of Dissenting Shareholders."
BancGroup. Under the Delaware GCL, a stockholder has the right, in certain
circumstances, 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,
36
<PAGE> 47
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.
PREFERRED STOCK
Tomoka. Tomoka's Articles 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."
EFFECT OF THE MERGER ON TOMOKA SHAREHOLDERS
As of September 30, 1996, Tomoka had shareholders of record and
410,913 outstanding shares of Tomoka Common Stock. As of September 19, 1996,
BancGroup had 16,296,558 shares of BancGroup Common Stock outstanding with 5914
stockholders of record.
Assuming none of the shareholders of Tomoka exercise their dissenter's
rights and a Market Value of BancGroup Common Stock of $34.3375 (calculated as
of September 19, 1996), an aggregate amount of 382,940 shares of BancGroup
Common Stock would be issued to the shareholders of Tomoka pursuant to the
Merger. These shares would represent approximately 2.296% of the total shares of
BancGroup Common Stock outstanding after the Merger, not counting any shares of
BancGroup Common Stock to be issued in certain other pending acquisitions.
The issuance of the BancGroup Common Stock pursuant to the Merger will
reduce the percentage interest of the BancGroup Common Stock currently held by
each stockholder and each director and officer of BancGroup. As a group, the
directors and officers of BancGroup who currently own 12.82% of BancGroup's
outstanding shares would own approximately 12.44% after the Merger. See
"BUSINESS OF BANCGROUP -- Voting Securities and Principal Stockholders."
37
<PAGE> 48
THE COLONIAL BANCGROUP INC.
AND SUBSIDIARIES
CONDENSED PRO FORMA STATEMENT OF CONDITION (UNAUDITED)
(IN THOUSANDS)
The following summary includes (i) the condensed consolidated statement of
condition of BancGroup and subsidiaries as of June 30, 1996 (as restated), (ii)
the condensed consolidated statement of condition of Tomoka as of June 30, 1996,
(iii) the condensed consolidated statement of condition of Jefferson Bancorp,
Inc. and subsidiaries ("Jefferson"), a probable combination with BancGroup, as
of June 30, 1996, (iv) the combined presentation of condensed consolidated
statements of condition of other probable combinations with BancGroup: First
Family Financial Corporation ("First Family"), D/W Bankshares, Inc.
("Bankshares") and Fort Brooke Bancorporation ("Fort Brooke") ("other probable
combinations") as of June 30, 1996, (v) adjustments to give effect to the
proposed purchase method combination with First Family and the proposed pooling
of interests method business combinations with Tomoka, Jefferson and the other
probable combinations, (vi) the pro forma combined condensed statement of
condition of BancGroup and subsidiaries as if such combinations had occurred on
June 30, 1996.
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 statement of condition of Tomoka, included elsewhere herein. These pro forma
statements exclude the effects of one immaterial purchase method combination
which was completed by BancGroup on July 8, 1996. The pro forma information
provided below may not be indicative of future results.
38
<PAGE> 49
JUNE 30, 1996
<TABLE>
<CAPTION>
CONSOLIDATED
COLONIAL BANCGROUP TOMOKA ADJUSTMENTS/
(RESTATED)** BANCORP, INC. (DEDUCTIONS) SUBTOTAL
------------------ ------------- ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS:
Cash and due from banks....................................... $ 142,175 $ 3,789 $ 145,964
Interest-bearing deposits..................................... 2,688 2,688
Federal funds sold............................................ 12,380 5,385 17,765
Securities available for sale................................. 202,191 202,191
Investment securities......................................... 298,183 15,032 313,215
Mortgage loans held for sale.................................. 165,925 165,925
Loans, net of unearned income................................. 3,442,323 46,275 3,488,598
Less: Allowance for possible loan losses...................... (43,643) (516) (44,159)
---------- -------- ------- ----------
Loans, net.................................................... 3,398,680 45,759 3,444,439
Premises and equipment, net................................... 70,720 1,853 72,573
Excess of cost over tangible and intangible assets acquired,
net......................................................... 30,114 30,114
Purchased mortgage servicing rights........................... 92,511 92,511
Other real estate owned....................................... 10,342 10,342
Accrued interest and other assets............................. 82,117 893 83,010
---------- -------- ------- ----------
Total Assets.................................................. $4,508,026 $ 72,711 $ 0 $4,580,737
========== ======== ======= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits...................................................... $3,373,641 $ 64,281 $3,437,922
FHLB short-term borrowings.................................... 565,000 565,000
Other short-term borrowings................................... 127,032 2,267 129,299
Subordinated debt............................................. 8,082 8,082
Other long-term debt.......................................... 26,197 26,197
Other liabilities............................................. 90,462 277 90,739
---------- -------- ------- ----------
Total liabilities............................................. 4,190,414 66,825 4,257,239
Common Stock.................................................. 40,461 2,025 (2,025)(1) 41,405
944(1)
Additional paid in capital.................................... 168,985 1,215 (1,215)(1) 171,281
2,296(1)
Retained earnings............................................. 110,522 2,762 113,284
Treasury Stock................................................
Unearned compensation......................................... (740) (740)
Unrealized gain (loss) on securities.......................... (1,616) (116) (1,732)
---------- -------- ------- ----------
Total equity.................................................. 317,612 5,886 0 323,498
Total liabilities and equity.................................. $4,508,026 $ 72,711 $ 0 $4,580,737
========== ======== ======= ==========
Capital Ratios:
Capital Ratio............................................... 8.11% 8.12%
Tangible Leverage Ratio..................................... 6.66 6.69
Tier One Capital Ratio*..................................... 9.22 9.23
Total Capital Ratio*........................................ 10.73 10.70
<CAPTION>
OTHER PROFORMA
JEFFERSON PROBABLE ADJUSTMENTS/ COMBINED
BANCORP, INC. COMBINATIONS (DEDUCTIONS) TOTAL
------------- ------------ ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS:
Cash and due from banks....................................... $ 12,027 $ 12,178 $ (6,404)(2) $ 163,765
Interest-bearing deposits..................................... 1,689 4,377
Federal funds sold............................................ 11,650 29,415
Securities available for sale................................. 114,400 54,832 371,423
Investment securities......................................... 1,108 46,567 (1,600)(2) 359,290
Mortgage loans held for sale.................................. 654 8,506 175,085
Loans, net of unearned income................................. 289,672 327,165 (100)(2) 4,105,335
Less: Allowance for possible loan losses...................... (2,358) (4,031) (50,548)
-------- -------- -------- ----------
Loans, net.................................................... 287,314 323,134 (100) 4,054,787
Premises and equipment, net................................... 4,789 11,808 900(2) 90,070
Excess of cost over tangible and intangible assets acquired,
net......................................................... 6,211(2) 36,325
Purchased mortgage servicing rights........................... 92,511
Other real estate owned....................................... 477 1,433 12,252
Accrued interest and other assets............................. 19,474 9,521 1,127(2) 113,861
(50)(2)
779(3)
-------- -------- -------- ----------
Total Assets.................................................. $ 440,243 $481,318 $ 863 $5,503,161
======== ======== ======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits...................................................... $ 386,306 $432,997 $4,257,225
FHLB short-term borrowings.................................... 13,036 578,036
Other short-term borrowings................................... 4,473 133,772
Subordinated debt............................................. 1,425 9,507
Other long-term debt.......................................... 26,197
Other liabilities............................................. 4,567 6,460 $ 2,369(2) 109,300
5,165(3)
-------- -------- -------- ----------
Total liabilities............................................. 403,909 445,355 7,534 5,114,037
Common Stock.................................................. 4,005 8,752 (12,752)(2) 50,630
(5)(2)
457(2)
8,768(2)
Additional paid in capital.................................... 29,401 13,094 (39,622)(2) 219,505
(2,873)(2)
41,744(2)
5,947(2)
533(2)
Retained earnings............................................. 9,145 14,636 (6,344)(2) 126,335
(4,386)(3)
Treasury Stock................................................ (1,862) 1,862(2)
Unearned compensation......................................... (782) (1,522)
Unrealized gain (loss) on securities.......................... (3,573) (519) (5,824)
-------- -------- -------- ----------
Total equity.................................................. 36,334 35,963 (6,671) 389,124
Total liabilities and equity.................................. $ 440,243 $481,318 $ 863 $5,503,161
======== ======== ======== ==========
Capital Ratios:
Capital Ratio............................................... 8.09%
Tangible Leverage Ratio..................................... 6.72
Tier One Capital Ratio*..................................... 10.91
Total Capital Ratio*........................................ 12.48
</TABLE>
- ---------------
* Based on risk weighted assets
** Restated to give effect to the July 3, 1996 pooling of interests combination
with Southern Banking Corporation and Commercial Bancorp of Georgia, Inc.
39
<PAGE> 50
TOMOKA BANCORP, INC.
(pooling of interests)
(1) To record the issuance of 377,430 shares of BancGroup Common Stock in
exchange for all of the outstanding shares of Tomoka.
<TABLE>
<CAPTION>
OUTSTANDING
SHARES
-----------
<S> <C> <C>
Tomoka outstanding shares................................................ 405,000
Conversion ratio, determined as follows:
$32.00/$34.3375 per share, the 20-day average market value of BancGroup
Common Stock on September 19, 1996.................................. 0.9319
-------
BancGroup shares to be issued............................................ 377,430
Par value of 377,430 shares issued at $2.50 per share.................... $ 944
Shares issued at par value............................................... $ 944
Total capital stock of Tomoka............................................ 3,240
-------
Excess recorded as an increase in contributed capital.................. 2,296
-------
3,240
To eliminate Tomoka's capital stock:
Common stock, at par value............................................. (2,025)
Contributed capital.................................................... (1,215)
-------
(3,240)
-------
Net change in equity........................................... $ 0
=======
</TABLE>
40
<PAGE> 51
OTHER PROBABLE COMBINATIONS
(2) (pooling of interests)
To record the issuance of 3,507,240 shares of BancGroup Common Stock in
exchange for all of the outstanding shares of Jefferson, Bankshares and Fort
Brooke:
<TABLE>
<CAPTION>
OUTSTANDING
SHARES
-----------
<S> <C> <C>
Jefferson outstanding shares................................... 3,811,976
Conversion ratio, determined as follows:
$18.90/$35.05 per share, the 10-day average market value of
BancGroup Common Stock on September 19, 1996.............. 0.5392
---------
BancGroup shares to be issued.................................. 2,055,531
Bankshares outstanding shares.................................. 700,836
Conversion ratio, determined as follows:
$27.39/$35.05 per share, the 10-day average of the market
value of BancGroup Common Stock on September 19, 1996..... 0.7815
---------
BancGroup shares to be issued.................................. 547,672
Fort Brooke outstanding shares................................. 1,005,920
Conversion ratio, determined as follows:
$31.50/$35.05 per share, the 10-day average of the market
value of BancGroup Common Stock on September 19, 1996..... 0.8987
---------
BancGroup shares to be issued.................................. 904,037
---------
Total BancGroup shares to be issued............................ 3,507,240
Par value of 3,507,240 shares issued at $2.50 per share........ $ 8,768
Shares issued at par value..................................... $ 8,768
Total capital stock of Jefferson, Bankshares and Fort Brooke... 50,512
Excess recorded as an increase in contributed capital........ 41,744
---------
50,512
To eliminate Jefferson, Bankshares and Fort Brooke capital
stock:
Common stock, at par value................................... (12,752)
Contributed capital.......................................... (39,622)
Treasury Stock............................................... 1,862
---------
(50,512)
---------
Net change in equity................................. $ 0
=========
</TABLE>
41
<PAGE> 52
OTHER PROBABLE COMBINATION
(2) (purchase method)
To assign the amount by which the estimated value of BancGroup's investment
in First Family 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 First Family by the issuance of 182,703 shares of BancGroup Common
Stock and payment of $6,403,750 in cash for all of the outstanding 545,000
shares of First Family as follows:
<TABLE>
<S> <C>
Equity in carrying value of net assets of First Family..................... $ 9,222
Adjustments to state assets at fair value:
Write-up of fixed assets................................................. 900
Write-down on securities held to maturity................................ (1,600)
Other.................................................................... (150)
Acquisition accruals:
Severance pay............................................................ (1,013)
SAIF Premium............................................................. (1,100)
Other legal, accounting, and professional................................ (256)
Tax effect of purchase adjustments......................................... 1,127
Goodwill................................................................... 6,211
-------
Total adjustments.......................................................... 4,119
Adjusted equity in carrying value of net assets............................ $13,341
=======
Allocated as follows:
Par Value of 182,703 shares issued for all outstanding shares of First
Family................................................................ $ 457
Estimated amount in excess of par value of 182,703 shares of BancGroup
Common Stock issued for First Family outstanding shares at an assumed
market value of $35.05 per share (10 day average at September 19,
1996)................................................................. 5,947
Stock options to be assumed by BancGroup................................... 533
Cash of $11.75 per share paid to First Family shareholders................. 6,404
-------
Total purchase price....................................................... $13,341
=======
</TABLE>
(3) To record nonrecurring charges expected to result from the proposed
pooling of interests combination with Jefferson:
<TABLE>
<S> <C>
Accrual of severance pay.................................................... $4,325
Accrual of discretionary bonus.............................................. 840
------
Total accrual adjustments......................................... 5,165
Deferred tax................................................................ (779)
------
Net charge to retained earnings............................................. $4,386
======
</TABLE>
42
<PAGE> 53
CONDENSED PRO FORMA STATEMENTS OF INCOME
(UNAUDITED)
The following summaries include (i) the condensed consolidated statements
of income of Colonial BancGroup, Inc. and subsidiaries on a historical basis for
the six months ended June 30, 1996 and 1995 (as restated), and the years ended
December 31, 1995, 1994 and 1993 (as restated), (ii) the condensed consolidated
statements of income of Tomoka for the six months ended June 30, 1996 and 1995
and the years ended December 31, 1995, 1994 and 1993, (iii) the condensed
consolidated statements of income of Jefferson, a probable combination with
BancGroup, for the six months ended June 30, 1996 and 1995 and the years ended
December 31, 1995, 1994, and 1993, (iv) the combined presentation of condensed
consolidated statements of income of the other probable combinations for the six
months ended June 30, 1996 and 1995 and the years ended December 31, 1995, 1994
and 1993, (v) adjustments to give effect to the pooling of interests method
combinations with Tomoka and the proposed purchase method combination with First
Family and the proposed pooling of interests method combinations with Jefferson,
and the other probable combinations, and (vi) the pro forma combined condensed
consolidated statements of income of BancGroup and subsidiaries as if such
combination had occurred on January 1, 1993. Note that for purchase method
combinations, Article 11 of Regulation S-X requires pro forma statements of
income to be presented for only the most recent fiscal year and interim period.
Accordingly, only the condensed consolidated statements of income for the six
months ended June 30, 1996 and the year ended December 31, 1995 are included in
(iv) above for First Family.
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 Tomoka included elsewhere herein. These pro forma
statements exclude the effect of two nonrecurring charges related to Jefferson
in the amount of $4.4 million net of tax. These pro forma statements exclude the
effects of one immaterial purchase method combination which was complete by
BancGroup on July 8, 1996. The pro forma information provided may not
necessarily be indicative of future results.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
---------------------------------------------------------------------------------------------------------------
CONSOLIDATED
COLONIAL TOMOKA JEFFERSON OTHER PROFORMA
BANCGROUP BANCORP, ADJUSTMENTS/ BANCORP, PROBABLE ADJUSTMENTS/ COMBINED
(RESTATED)** INC. (DEDUCTIONS) SUBTOTAL INC. COMBINATIONS (DEDUCTIONS) TOTAL
------------ -------- ------------ ----------- ---------- ------------ ------------ -----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest
income......... $ 166,706 $ 2,594 $ 169,300 $ 16,276 $ 18,325 $ (2 )(1) $ 203,899
Interest
expense........ 85,386 1,014 86,400 7,305 8,891 102,596
----------- -------- --------- ----------- ---------- ---------- ----------- -----------
Net interest
income before
provision for
loan losses.... 81,320 1,580 82,900 8,971 9,434 (2 ) 101,303
Provision for
loan
losses......... 3,468 122 3,590 20 206 3,816
----------- -------- --------- ----------- ---------- ---------- ----------- -----------
Net interest
income after
provision for
loan losses.... 77,852 1,458 79,310 8,951 9,228 (2 ) 97,487
----------- -------- --------- ----------- ---------- ---------- ----------- -----------
Noninterest
income......... 33,311 294 33,605 2,441 2,037 38,083
Noninterest
expense........ 69,203 1,062 70,265 9,146 7,491 177 (1) 87,079
----------- -------- --------- ----------- ---------- ---------- ----------- -----------
Income before
income taxes... 41,960 690 42,650 2,246 3,774 (179 ) 48,491
Income taxes..... 14,910 205 15,115 722 1,287 (8 )(1) 17,116
----------- -------- --------- ----------- ---------- ---------- ----------- -----------
Net Income....... $ 27,050 $ 485 $ 0 $ 27,535 $ 1,524 $ 2,487 $ (171 ) $ 31,375
=========== ======== ========= =========== ========== ========== =========== ===========
Average primary
shares
outstanding.... 16,418,000 422,392 (422,392) 16,843,692 3,906,120 2,301,007 (6,207,127 ) 20,671,292
425,692 3,827,600
Average
fully-diluted
shares
outstanding.... 16,707,000 428,938 (428,938) 17,132,813 3,906,120 2,365,780 (6,271,900 ) 21,011,498
425,813 3,878,685
Earnings per
share:
Net Income:
Primary...... $ 1.65 $ 1.15 $ 1.63 $ 0.39 $ 1.08 $ 1.52
Fully
diluted.... $ 1.63 $ 1.13 $ 1.62 $ 0.39 $ 1.06 $ 1.51
</TABLE>
- ---------------
** Restated to give effect to the July 3, 1996 pooling of interests combinations
with Southern Banking Corporation and Commercial Bancorp of Georgia, Inc.
43
<PAGE> 54
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1995
---------------------------------------------------------------------------------------------------------------
CONSOLIDATED
COLONIAL TOMOKA JEFFERSON OTHER PROFORMA
BANCGROUP BANCORP, ADJUSTMENTS/ BANCORP, PROBABLE ADJUSTMENTS/ COMBINED
(RESTATED)** INC. (DEDUCTIONS) SUBTOTAL INC. COMBINATIONS (DEDUCTIONS) TOTAL
------------ -------- ------------ ----------- ---------- ------------ ------------ -----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest
income........ $ 131,861 $ 2,318 $ 134,179 $ 14,735 $ 11,376 $ (2 )(1) $ 160,288
Interest
expense....... 65,562 908 66,470 6,080 4,677 77,227
----------- -------- --------- ----------- ---------- ---------- ----------- -----------
Net interest
income before
provision for
loan losses... 66,299 1,410 67,709 8,655 6,699 (2 ) 83,061
Provision for
loan losses... 2,779 90 2,869 150 351 3,370
----------- -------- --------- ----------- ---------- ---------- ----------- -----------
Net interest
income after
provision for
loan losses... 63,520 1,320 64,840 8,505 6,348 (2 ) 79,691
----------- -------- --------- ----------- ---------- ---------- ----------- -----------
Noninterest
income........ 25,725 231 25,956 2,103 1,278 29,337
Noninterest
expense....... 56,991 1,010 58,001 9,240 4,940 177 (1) 72,358
----------- -------- --------- ----------- ---------- ---------- ----------- -----------
Income before
income
taxes......... 32,254 541 32,795 1,368 2,686 (179 ) 36,670
Income taxes.... 11,446 214 11,660 423 1,023 (8 )(1) 13,098
----------- -------- --------- ----------- ---------- ---------- ----------- -----------
Net Income...... $ 20,808 $ 327 $ 0 $ 21,135 $ 945 $ 1,663 $ (171 ) $ 23,572
=========== ======== ========= =========== ========== ========== =========== ===========
Average primary
shares
outstanding... 14,762,000 405,000 (405,000) 15,169,612 3,785,703 1,705,725 (5,491,428 ) 18,757,757
407,612 3,588,145
Average
fully-diluted
shares
outstanding... 15,517,000 405,000 (405,000) 15,929,032 3,785,703 1,705,725 (5,491,428 ) 19,537,242
412,032 3,608,210
Earnings per
share:
Net Income:
Primary..... $ 1.41 $ 0.81 $ 1.39 $ 0.25 $ 0.97 $ 1.26
Fully
diluted... $ 1.38 $ 0.81 $ 1.36 $ 0.25 $ 0.97 $ 1.23
</TABLE>
- ---------------
** Restated to give effect to the July 3, 1996 pooling of interests combinations
with Southern Banking Corporation and Commercial Bancorp of Georgia, Inc.
44
<PAGE> 55
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
---------------------------------------------------------------------------------------------------------------
CONSOLIDATED
COLONIAL TOMOKA JEFFERSON OTHER PROFORMA
BANCGROUP BANCORP, ADJUSTMENTS/ BANCORP, PROBABLE ADJUSTMENTS/ COMBINED
(RESTATED)** INC. (DEDUCTIONS) SUBTOTAL INC. COMBINATIONS (DEDUCTIONS) TOTAL
------------ -------- ------------ ----------- ---------- ------------ ------------ -----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest
income........ $ 287,141 $ 4,852 $ 291,993 $ 30,792 $ 35,497 $ (3 )(1) $ 358,279
Interest
expense....... 146,981 1,908 148,889 13,463 17,190 179,542
----------- -------- --------- ----------- ---------- ---------- ----------- -----------
Net interest
income before
provision for
loan losses... 140,160 2,944 143,104 17,329 18,307 (3 ) 178,737
Provision for
loan losses... 7,350 130 7,480 150 1,666 9,296
----------- -------- --------- ----------- ---------- ---------- ----------- -----------
Net interest
income after
provision for
loan losses... 132,810 2,814 135,624 17,179 16,641 (3 ) 169,441
----------- -------- --------- ----------- ---------- ---------- ----------- -----------
Noninterest
income........ 54,391 649 55,040 4,207 3,808 63,055
Noninterest
expense....... 122,406 2,146 124,552 18,705 13,733 356 (1) 157,346
----------- -------- --------- ----------- ---------- ---------- ----------- -----------
Income before
income
taxes......... 64,795 1,317 66,112 2,681 6,716 (359 ) 75,150
Income taxes.... 23,242 500 23,742 772 2,436 (17 )(1) 26,933
----------- -------- --------- ----------- ---------- ---------- ----------- -----------
Net Income...... $ 41,553 $ 817 $ 0 $ 42,370 $ 1,909 $ 4,280 $ (342 ) $ 48,217
=========== ======== ========= =========== ========== ========== =========== ===========
Average primary
shares
outstanding... 15,797,000 405,000 (405,000) 16,215,285 3,816,071 2,265,641 (6,081,712 ) 20,014,375
418,285 3,799,090
Average
fully-diluted
shares
outstanding... 16,667,000 405,000 (405,000) 17,091,691 3,816,071 2,318,394 (6,134,465 ) 20,957,443
424,691 3,865,752
Earnings per
share:
Net Income:
Primary..... $ 2.63 $ 2.02 $ 2.61 $ 0.50 $ 1.89 $ 2.41
Fully
diluted... $ 2.56 $ 2.02 $ 2.54 $ 0.50 $ 1.87 $ 2.35
</TABLE>
- ---------------
** Restated to give effect to the July 3, 1996 pooling of interests combinations
with Southern Banking Corporation and Commercial Bancorp of Georgia, Inc.
45
<PAGE> 56
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
------------------------------------------------------------------------------------------------------------
CONSOLIDATED
COLONIAL TOMOKA JEFFERSON OTHER PROFORMA
BANCGROUP BANCORP, ADJUSTMENTS/ BANCORP, PROBABLE ADJUSTMENTS/ COMBINED
(RESTATED)** INC. (DEDUCTIONS) SUBTOTAL INC. COMBINATIONS (DEDUCTIONS) TOTAL
------------ -------- ------------ ----------- ---------- ------------ ------------ ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income.... $ 211,903 $ 3,704 $ 215,607 $ 25,107 $ 18,749 $ 259,463
Interest expense... 90,902 1,548 92,450 7,433 7,462 107,345
----------- -------- --------- ----------- ---------- ---------- ----------- ----------
Net interest income
before provision
for loan
losses........... 121,001 2,156 123,157 17,674 11,287 152,118
Provision for loan
losses........... 7,506 82 7,588 330 418 8,336
----------- -------- --------- ----------- ---------- ---------- ----------- ----------
Net interest income
after provision
for loan
losses........... 113,495 2,074 115,569 17,344 10,869 143,782
----------- -------- --------- ----------- ---------- ---------- ----------- ----------
Noninterest
income........... 47,752 477 48,229 4,346 2,051 54,626
Noninterest
expense.......... 115,677 1,898 117,575 18,152 10,290 146,017
----------- -------- --------- ----------- ---------- ---------- ----------- ----------
Income before
income taxes..... 45,570 653 46,223 3,538 2,630 52,391
Income taxes....... 15,829 215 16,044 521 894 17,459
----------- -------- --------- ----------- ---------- ---------- ----------- ----------
Net Income......... $ 29,741 $ 438 $ 0 $ 30,179 $ 3,017 $ 1,736 $ 0 $ 34,932
=========== ======== ========= =========== ========== ========== =========== ==========
Average primary
shares
outstanding...... 14,898,000 405,000 (405,000) 15,291,578 3,637,576 1,681,430 (5,319,006 ) 18,874,547
393,578 3,582,969
Average
fully-diluted
shares
outstanding...... 15,665,000 405,000 (405,000) 16,058,578 3,637,576 1,681,430 (5,319,006 ) 19,641,547
393,578 3,582,969
Earnings per share:
Net Income:
Primary........ $ 2.00 $ 1.08 $ 1.97 $ 0.83 $ 1.03 $ 1.85
Fully
diluted...... $ 1.97 $ 1.08 $ 1.95 $ 0.83 $ 1.03 $ 1.84
</TABLE>
- ---------------
** Restated to give effect to the July 3, 1996 pooling of interests combinations
with Southern Banking Corporation and Commercial Bancorp of Georgia, Inc.
46
<PAGE> 57
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
-------------------------------------------------------------------------------------------------------------
CONSOLIDATED
COLONIAL TOMOKA JEFFERSON OTHER PROFORMA
BANCGROUP BANCORP, ADJUSTMENTS/ BANCORP, PROBABLE ADJUSTMENTS/ COMBINED
(RESTATED)** INC. (DEDUCTIONS) SUBTOTAL INC. COMBINATIONS (DEDUCTIONS) TOTAL
------------ -------- ------------ ----------- ---------- ------------ ------------ -----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income... $ 160,829 $ 2,975 $ 163,804 $ 26,462 $ 17,031 $ 207,297
Interest
expense......... 66,357 1,504 67,861 7,382 7,269 82,512
----------- -------- -------- ----------- ---------- ---------- ----------- -----------
Net interest
income before
provision for
loan losses..... 94,472 1,471 95,943 19,080 9,762 124,785
Provision for loan
losses.......... 8,850 62 8,912 2,335 582 11,829
----------- -------- -------- ----------- ---------- ---------- ----------- -----------
Net interest
income after
provision for
loan losses..... 85,622 1,409 87,031 16,745 9,180 112,956
----------- -------- -------- ----------- ---------- ---------- ----------- -----------
Noninterest
income.......... 43,445 744 44,189 5,350 2,195 51,734
Noninterest
expense......... 98,501 2,025 100,526 18,750 8,650 127,926
----------- -------- -------- ----------- ---------- ---------- ----------- -----------
Income before
income taxes.... 30,566 128 30,694 3,345 2,725 36,764
Income taxes...... 9,780 35 9,815 528 941 11,284
----------- -------- -------- ----------- ---------- ---------- ----------- -----------
Income before
extraordinary
items and the
cumulative
change in
accounting for
income taxes.... $ 20,786 $ 93 $ 0 $ 20,879 $ 2,817 $ 1,784 $ 0 $ 25,480
----------- -------- -------- ----------- ---------- ---------- ----------- -----------
Extraordinary
Items, net of
tax............. (463) (463) (463)
Cumulative effect
of a change in
accounting for
income taxes.... $ 3,650 $ 36 $ 3,686 $ 67 $ 3,753
----------- -------- -------- ----------- ---------- ---------- ----------- -----------
Net Income........ $ 23,973 $ 129 $ 0 $ 24,102 $ 2,817 $ 1,851 $ 0 $ 28,770
=========== ======== ======== =========== ========== ========== =========== ===========
Average primary
shares
outstanding..... 12,613,000 405,000 (405,000) 12,991,326 3,816,071 1,663,590 (5,479,661 ) 16,565,474
378,326 3,574,148
Average
fully-diluted
shares
outstanding..... 13,706,000 405,000 (405,000) 14,084,326 3,497,878 1,663,590 (5,161,468 ) 17,658,474
378,326 3,574,148
Earnings per
share:
Income before
extraordinary
items and
cumulative
effect of a
change in
accounting
principle:
Primary....... $ 1.65 $ 0.23 $ 1.61 $ .81 $ 1.07 $ 1.54
Fully
diluted..... $ 1.64 $ 0.23 $ 1.60 $ .81 $ 1.07 $ 1.54
Net Income:
Primary....... $ 1.90 $ 0.32 $ 1.86 $ .81 $ 1.11 $ 1.74
Fully
diluted..... $ 1.87 $ 0.32 $ 1.83 $ .81 $ 1.11 $ 1.72
</TABLE>
- ---------------
** Restated to give effect to the July 3, 1996 pooling of interests combinations
with Southern Banking Corporation and Commercial Bancorp of Georgia, Inc.
47
<PAGE> 58
PRO FORMA ADJUSTMENTS
(IN THOUSANDS)
Adjustments Applicable to First Family Financial Corporation:
(1) To amortize the assignment of estimated fair value in excess of the
carrying amount of assets acquired. The amortization consists of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 AND 1995 1995
-------------- ------------
<S> <C> <C>
Increases in income:
Amortization of other write downs (2-5 year period)............... $ 22 $ 45
Amortization of write-down on securities portfolio (5 year
period)........................................................ 160 320
Decreases in income:
Earnings foregone on $6,403,750 cash at an average interest rate
5.75%.......................................................... (184) (368)
----- -----
Total..................................................... (2) (3)
----- -----
Increase in expense:
Additional depreciation due to write-up in building and premises
(20 year period)............................................... (22) (45)
Amortization of goodwill (20 year period)......................... (155) (311)
----- -----
Total..................................................... (177) (356)
----- -----
Net decrease in income before tax................................... (179) (359)
----- -----
Tax effect of the pro forma adjustments (other than goodwill
amortization)..................................................... 8 17
----- -----
Net decrease in income.............................................. $ (171) $ (342)
----- -----
</TABLE>
48
<PAGE> 59
RECENT DEVELOPMENTS -- BANCGROUP AND TOMOKA
BANCGROUP -- RECENT UNAUDITED RESULTS
The following table presents certain unaudited data for BancGroup for the
period ended September 30, 1996. Unaudited historical data reflect, in the
opinion of management, all adjustments (consisting of normal recurring
adjustments) necessary to a fair presentation of such data. The unaudited
financial information is presented for informational purposes only and is not
necessarily indicative of the financial position or results of operations which
would have actually occurred if the transactions had been consummated in the
past or which may be obtained in the future.
THE COLONIAL BANCGROUP, INC.
SELECTED FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
% CHANGE
SEPT. 30, DEC. 31, SEPT. 30, SEPT. 30,
1996 1995 1995 1996 TO 1995
---------- ---------- ---------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
STATEMENT OF CONDITION SUMMARY
Total assets.................................... $4,713,524 $4,202,194 $3,837,969 23%
Loans, net of unearned income................... 3,570,490 3,175,506 2,848,089 25%
Total earning assets............................ 4,324,106 3,823,233 3,518,662 23%
Deposits........................................ 3,561,923 3,204,260 2,935,768 21%
Shareholders' equity............................ 329,917 289,463 260,038 27%
Book value per share............................ $ 20.24 $ 18.65 $ 17.71 14%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPT. 30, THREE MONTHS ENDED SEPT. 30,
------------------------------ ----------------------------
% CHANGE % CHANGE
1996 1995 96 TO 95 1996 1995 96 TO 95
-------- -------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS SUMMARY
Net interest income (taxable
equivalent)......................... $126,766 $104,374 21% $44,255 $36,716 21%
Provision for loan losses............. 6,023 4,155 45% 2,555 1,433 78%
Noninterest income.................... 49,854 39,291 27% 16,614 13,640 22%
Noninterest expense (excl. SAIF
special assessment)................. 104,042 87,049 20% 34,890 30,043 16%
SAIF special assessment*.............. 3,817 -- 3,817
Net income (excl. SAIF special
assessment)......................... 41,816 32,432 29% 14,766 11,665 27%
Net income............................ 39,350 32,432 21% 12,300 11,665 5%
Average primary shares outstanding.... 16,465 14,826 16,698 14,942
Average fully diluted shares
outstanding......................... 16,754 15,597 16,985 15,706
Earnings per share excluding SAIF
special assessment*:
Primary............................. $ 2.54 $ 2.19 16% $ 0.88 $ 0.78 13%
Fully diluted....................... 2.52 2.13 18% 0.88 0.76 16%
Earnings per common share:
Primary............................. $ 2.39 $ 2.19 9% $ 0.74 $ 0.78 -5%
Fully-diluted....................... 2.37 2.13 11% 0.73 0.76 -4%
</TABLE>
49
<PAGE> 60
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPT. 30, THREE MONTHS ENDED SEPT. 30,
------------------------------ ----------------------------
% CHANGE % CHANGE
1996 1995 96 TO 95 1996 1995 96 TO 95
-------- -------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
SELECTED RATIOS:
Return on average assets.............. 1.20% 1.23% 1.21% 1.22%
Return on average assets (excl. SAIF
assessment)*........................ 1.26% 1.23% 1.27% 1.22%
Return on average equity.............. 17.05% 17.90% 17.25% 18.29%
Return on average equity (excl. SAIF
assessment)*........................ 17.83% 17.90% 18.01% 18.29%
Efficiency ratio (excl. SAIF
assessment)*........................ 58.91% 60.59% 57.32% 59.66%
Equity to assets...................... 7.00% 6.78%
Total capital......................... 8.04% 8.17%
Tier one leverage..................... 6.52% 6.34%
</TABLE>
- ---------------
NOTE: Restated financial results above reflect the July 3, 1996 mergers of
Colonial BancGroup with Commercial Bancorp of Georgia, Inc. and Southern
Banking Corporation. These mergers were accounted for as poolings of
interests and the financial results restated accordingly.
* Legislation approving a one-time special assessment on SAIF deposits resulted
in $3,817,000 in expense before income taxes and $2,466,000 net of applicable
income taxes in the third quarter.
Net income for nine months ended September 30, 1996 was $39,350,000
compared to $32,432,000 for the previous period, a 21% increase. Earnings per
share for the nine months were $2.37 on a fully diluted basis, an 11% increase
over 1995. The company's return on average equity was 17.05% compared to 17.90%
in 1995. Return on average assets was 1.20% compared to 1.23% in 1995.
Net income for the third quarter of 1996 was $12,300,000 compared to
$11,665,000 in 1995, a 5% increase. Earnings per share for the third quarter of
1996 were $.73 compared to $.76 for the same period in 1995, a 4% decrease.
TOMOKA UNAUDITED RESULTS OF OPERATIONS AND FINANCIAL HIGHLIGHTS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1996
Tomoka unaudited results for the nine months ended September 30, 1996
reported net income of $709,443 or $1.73 per share, versus $548,905 or $1.36 per
share for the prior year.
Tomoka unaudited results for the quarter ended September 30, 1996 reported
net income of $224,380 or $.55 per share, versus $221,473 or $.55 per share for
the prior year.
BancGroup has advised Tomoka that BancGroup's unaudited 1996 financial
results will not affect the proposed Merger.
50
<PAGE> 61
Set forth below are selected financial highlights for Tomoka for the
periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Total interest income................... $1,421,540 $1,244,700 $4,015,642 $3,562,275
Total interest expense.................. 580,413 500,876 1,594,428 1,409,270
---------- ---------- ---------- ----------
Net interest income..................... 841,127 743,824 2,421,214 2,153,005
Provision for loan losses............... 87,000 25,000 209,000 115,000
---------- ---------- ---------- ----------
Net interest income after provision for
loan losses........................... 754,127 718,824 2,212,214 2,038,005
Total other income...................... 152,972 120,078 447,090 351,397
Total other expenses.................... 527,998 488,622 1,589,984 1,498,052
---------- ---------- ---------- ----------
Income (loss) before taxes.............. 379,101 350,280 1,069,320 891,350
Income tax.............................. 154,721 128,807 359,877 342,445
---------- ---------- ---------- ----------
Net income (loss)....................... $ 224,380 $ 221,473 $ 709,443 $ 548,905
Net income (loss) per share............. $ 0.55 $ 0.55 $ 1.73 $ 1.36
Average share outstanding............... 410,913 405,000 410,266 405,000
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
(UNAUDITED)
---------------------------
1996 1995
----------- -----------
<S> <C> <C>
Total Assets...................................................... $71,539,545 $62,094,971
Deposits.......................................................... 63,466,840 54,815,058
Loans receivable, net of allowances for loan losses............... 47,988,530 36,839,942
Securities........................................................ 15,513,259 14,578,091
Real estate owned................................................. 1,832,775 1,915,707
Stockholders' equity.............................................. 6,147,669 5,224,406
Stockholders' equity per share.................................... 14.96 12.90
</TABLE>
51
<PAGE> 62
SELECTED FINANCIAL AND OPERATING INFORMATION
The following table sets forth selected financial information on a
historical (as restated) and pro forma basis for BancGroup for the year ended
December 31, 1995 and as of and for the six months ended June 30, 1996, and on a
historical (as restated) basis for BancGroup as of and for the five years ended
December 31, 1995, 1994, 1993, 1992 and 1991.
The pro forma information includes consolidated restated BancGroup and
subsidiaries, consolidated First Family, consolidated Jefferson, consolidated
Bankshares, consolidated Tomoka and Fort Brooke. The pro forma balance sheet
data give effect to the combinations as if they had occurred on June 30, 1996
and the pro forma operating data give effect to the combinations as if they had
occurred at the beginning of the earliest period presented.
The following selected financial information should be read in conjunction
with the discussion set forth in "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and all of the financial
statements included elsewhere in this Prospectus or incorporated by reference.
In the opinion of BancGroup, all adjustments necessary for a fair presentation
of the results of the interim periods have been included, and all adjustments
are of a normal and recurring nature. The results of operations for the interim
period ended June 30, 1996 are not necessary indicative of the results obtained
for the full year.
SELECTED FINANCIAL DATA
COLONIAL BANCGROUP (PRO FORMA) AND COLONIAL BANCGROUP (HISTORICAL -- AS
RESTATED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
---------------------------------------------
BANCGROUP BANCGROUP BANCGROUP BANCGROUP
PRO FORMA HISTORICAL PRO FORMA HISTORICAL
1996 1996 1995 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Statement of Income:
Interest income...................................... $203,899 $166,706 $160,288 $131,861
Interest expense..................................... 102,596 85,386 77,227 65,562
--------- --------- --------- ---------
Net interest income.................................. 101,303 81,320 83,061 66,299
Provision for possible loan losses................... 3,816 3,468 3,370 2,779
--------- --------- --------- ---------
Net interest income after provision for possible loan
losses............................................. 97,487 77,852 79,691 63,520
Noninterest income................................... 38,083 33,311 29,337 25,725
Noninterest expense.................................. 87,079 69,203 72,358 56,991
--------- --------- --------- ---------
Income before income taxes........................... 48,491 41,960 36,670 32,254
Applicable income taxes.............................. 17,116 14,910 13,098 11,446
--------- --------- --------- ---------
Income before extraordinary items and the cumulative
effect of a change in accounting for income
taxes.............................................. 31,375 27,050 23,572 20,808
Extraordinary items, net of income taxes.............
Cumulative effect of change in accounting for income
taxes..............................................
--------- --------- --------- ---------
Net Income........................................... $ 31,375 $ 27,050 $ 23,572 $ 20,808
======== ======== ======== ========
Earnings Per Common Share
Income before extraordinary items and the cumulative
effect of a change in accounting for income taxes:
Primary............................................ $ 1.52 $ 1.65 1.26 $ 1.41
Fully-diluted...................................... $ 1.51 $ 1.63 1.23 $ 1.38
Net Income:
Primary............................................ $ 1.52 $ 1.65 1.26 $ 1.41
Fully-diluted...................................... $ 1.51 $ 1.63 1.23 $ 1.38
Average shares outstanding:
Primary............................................ 20,671 16,418 18,758 14,762
Fully-diluted...................................... 21,011 16,707 19,537 15,517
Cash dividends per common share:(1)
Common............................................. $ 0.54 $ 0.54 $ 0.45 $ .045
</TABLE>
- ---------------
(1) On February 21, 1995, the Class A and Class B Common Stock were reclassified
into one class of Common Stock.
52
<PAGE> 63
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------------------------------ -----------------------------------------------------
BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP
PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
1995 1994 1993 1992 1991 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of
Income:
Interest income... $358,279 $259,463 $207,297 $196,374 $203,889 $287,141 $211,903 $160,829 $146,486 $150,462
Interest
expense......... 179,542 107,345 82,512 87,947 117,491 146,981 90,902 66,357 67,389 87,717
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Net interest
income.......... 178,737 152,118 124,785 108,427 86,398 140,160 121,001 94,472 79,097 62,745
Provision for
possible loan
losses.......... 9,296 8,336 11,829 14,726 12,363 7,350 7,506 8,850 8,956 7,097
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Net interest
income after
provision for
possible loan
losses.......... 169,441 143,782 112,956 93,701 74,035 132,810 113,495 85,622 70,141 55,648
Noninterest
income.......... 63,055 54,626 51,734 46,657 39,373 54,391 47,752 43,445 37,027 32,668
Noninterest
expense......... 157,346 146,017 127,926 113,510 95,524 122,406 115,677 98,501 85,636 72,377
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Income before
income taxes.... 75,150 52,391 36,764 26,848 17,884 64,795 45,570 30,566 21,532 15,939
Applicable income
taxes........... 26,933 17,459 11,284 8,047 5,238 23,242 15,829 9,780 5,742 4,197
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Income before
extraordinary
items and the
cumulative
effect of a
change in
accounting for
income taxes.... 48,217 34,932 25,480 18,801 12,646 41,553 29,741 20,786 15,790 11,742
Extraordinary
items, net of
income taxes.... (463 ) 831 (463 ) 831
Cumulative effect
of change in
accounting for
income taxes.... 3,753 280 184 3,650
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Net Income........ $ 48,217 $ 34,932 $ 28,770 $ 19,081 $ 13,661 $ 41,553 $ 29,741 $ 23,973 $ 15,790 $ 12,573
========= ========= ========= ========= ========= ========= ========= ========= ========= =========
Earnings Per
Common Share
Income before
extraordinary
items and the
cumulative
effect of a
change in
accounting for
income taxes:
Primary......... $ 2.41 $ 1.85 $ 1.54 $ 1.14 $ .90 $ 2.63 $ 2.00 $ 1.65 $ 1.44 $ 1.15
Fully-diluted... $ 2.35 $ 1.84 $ 1.54 $ 1.14 $ .90 $ 2.56 $ 1.97 $ 1.64 $ 1.44 $ 1.15
Net Income:
Primary......... $ 2.41 $ 1.85 $ 1.74 $ 1.16 $ .97 $ 2.63 $ 2.00 $ 1.90 $ 1.44 $ 1.23
Fully-diluted... $ 2.35 $ 1.84 $ 1.72 $ 1.16 $ .97 $ 2.56 $ 1.97 $ 1.87 $ 1.44 $ 1.23
Average shares
outstanding:
Primary......... 20,014 18,875 16,565 16,498 14,104 15,797 14,898 12,613 10,996 10,219
Fully-diluted... 20,957 19,642 17,658 17,264 15,446 16,667 15,665 13.706 12,307 11,561
Cash dividends per
common share:(1)
Common.......... $ 0.675 $ 0.675
Class A......... $ 0.225 $ 0.80 $ 0.71 $ 0.67 $ 0.63 $ 0.225 $ 0.80 $ 0.71 $ 0.67 $ 0.63
Class B......... $ 0.125 $ 0.40 $ 0.31 $ 0.27 $ 0.23 $ 0.125 $ 0.40 $ 0.31 $ 0.27 $ 0.23
</TABLE>
- ---------------
(1) On February 21, 1995, the Class A and Class B Common Stock were reclassified
into one class of Common Stock.
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
---------------------- -----------------------------------------------------------
BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP
PRO FORMA HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
1996 1996 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Condition
At period end:
Total assets............................... $5,503,161 $4,508,026 $4,202,195 $3,219,082 $3,104,410 $2,027,455 $1,861,980
Loans, net of unearned income.............. 4,105,335 3,442,323 3,175,560 2,352,870 1,963,052 1,330,928 1,200,443
Mortgage loans held for sale............... 175,085 165,925 110,486 60,726 361,496 144,215 105,219
Deposits................................... 4,257,225 3,373,641 3,204,198 2,504,461 2,444,418 1,697,648 1,601,973
Long-term debt............................. 35,704 34,279 29,142 69,203 57,397 22,979 27,225
Shareholders' equity....................... 389,124 317,612 289,464 224,018 198,389 123,952 111,437
Average daily balances:
Total assets............................... $5,413,500 $4,425,465 $3,659,140 $3,074,619 $2,379,628 $1,978,313 $1,779,767
Interest-earning assets.................... 4,956,982 4,038,424 3,333,887 2,768,705 2,100,674 1,730,373 1,583,046
Loans, net of unearned income.............. 3,986,157 3,340,474 2,708,633 2,138,371 1,494,053 1,273,486 1,187,081
Mortgage loans held for sale............... 175,660 175,660 97,511 131,121 241,683 118,510 65,373
Deposits................................... 3,490,161 2,717,879 2,828,864 2,471,657 1,876,026 1,665,417 1,531,672
Shareholders' equity....................... 388,839 312,630 250,826 214,543 144,216 117,822 103,330
Book value per share at period end........... $ 19.21 $ 19.62 $ 18.65 $ 15.62 $ 14.40 $ 11.04 $ 11.08
Tangible book value per share at period
end........................................ $ 17.92 $ 17.86 $ 16.82 $ 14.33 $ 13.21 $ 10.45 $ 10.39
Selected Ratios
Income before extraordinary items and the
cumulative effect of a change in
accounting for income taxes to:
Average assets........................... 0.58 0.61 1.14 0.97 0.87 0.80 0.66
Average shareholders' equity............. 8.07 8.65 16.57 13.86 14.41 13.40 11.36
Net Income to:
Average assets........................... 0.58 0.61 1.14 0.97 1.01 0.80 0.71
Average shareholders' equity............. 8.07 8.65 16.57 13.86 16.62 13.40 12.17
Efficiency ratio............................. 62.47 60.37 62.11 67.65 70.40 72.41 74.11
Dividend payout ratio........................ 27.49 27.28 25.32 24.99 20.22 26.44 30.71
Average equity to average total assets....... 7.18 7.06 6.85 6.98 6.06 5.96 5.81
Allowance for possible loan losses to total
loans (net of unearned income)............. 1.23 1.26 1.31 1.57 1.58 1.55 1.44
</TABLE>
53
<PAGE> 64
TOMOKA BANCORP, INC.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
FINANCIAL CONDITION DATA
Total Amount of:
Assets................................................... $62,658 $56,976 $52,282 $47,900 $39,858
Investments.............................................. 14,509 15,522 21,877 22,232 21,365
Loans Receivable, net.................................... 37,574 33,587 24,050 18,818 9,956
Deposits................................................. 54,493 48,715 47,556 43,510 35,777
Stockholder's Equity..................................... 5,526 4,610 4,301 4,172 3,875
Number of full service customer facilities................. 4 3 3 2 2
OPERATING DATA
Interest income............................................ $ 4,852 $ 3,704 $ 2,975 $ 2,887 $ 1,645
Interest expense........................................... 1,908 1,548 1,504 1,664 980
Net interest income before loan loss provision............. 2,944 2,156 1,471 1,223 665
Provision for loan losses.................................. 130 82 62 100 70
Net interest after loan loss provision..................... 2,814 2,074 1,409 1,123 595
Other income............................................... 649 477 744 455 89
Other expense.............................................. 2,146 1,898 2,025 1,170 724
Income tax expense......................................... 500 215 35 110 --
Cumulative effect of change in accounting principle........ -- -- 36 -- --
Net Income................................................. $ 817 $ 438 $ 129 $ 298 $ (40)
SELECTED STATISTICAL DATA
Return on assets........................................... 1.36% 0.80% 0.25% 0.68% (0.15)%
Equity to assets ratio (period end)........................ 8.82% 8.09% 8.23% 8.71% 9.72%
Earnings per share......................................... $ 2.02 $ 1.08 $ 0.32 $ 0.74 $ (0.10)
</TABLE>
54
<PAGE> 65
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FOR THE FISCAL YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
RESULTS OF OPERATIONS
Tomoka's consolidated net income for 1995 was $817,000, or 86% more than
$438,000 in 1994, and 533% more than the $129,000 earned in 1993. Net income per
common share was $2.02 in 1995, $1.08 in 1994 and $0.32 in 1993. The year to
year increases in net income were primarily the result of growth in Tomoka's
earning assets and increases in the company's net interest yield.
Tomoka's performance in 1995 resulted in a return on average stockholders'
equity of 16.12%, compared to 9.83% in 1994, and 3.04% in 1993. The return on
average assets was 1.36% in 1995, compared to 0.80% in 1994, and 0.25% in 1993.
Tomoka's financial performance has improved significantly in recent years due to
planned growth and target marketing. Tomoka's profitability has increased
because it has minimized additions to staff, while maintaining a superior level
of service.
Over the last two years, the total assets and liabilities of Tomoka have
grown significantly. Average assets grew from $55 million in 1994 to $60 million
in 1995, and average liabilities have increased from $50 million to $55 million.
These increases were the result of the opening of a new banking office as well
as growth in existing offices. This successful expansion has enabled Tomoka to
target additional markets and customers through increased lending limits and new
deposit products.
The following ratios reflect Tomoka's operating results for 1995, 1994 and
1993.
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1994 1993
----- ---- ----
<S> <C> <C> <C>
Return on Assets...................................................... 1.36% 0.80% 0.25%
Return on Equity...................................................... 16.12% 9.83% 3.04%
Equity to Assets...................................................... 8.82% 8.09% 8.23%
</TABLE>
NET INTEREST INCOME
Net interest income is defined as the total of interest income on earning
assets less interest expense on deposits and other interest-bearing liabilities.
Earning assets, which consist of loans, investment securities, and federal funds
sold, are financed by a large base of interest-bearing funds in the form of
money market, NOW, savings and time deposits. Earning assets are also funded by
the net amount of non-interest related funds, which consist of non-interest
bearing demand deposits, the allowance for loan losses and stockholders' equity,
reduced by non-interest bearing assets such as cash and due from banks, and
premises and equipment.
55
<PAGE> 66
The following table sets forth Tomoka's average balance sheets and related
interest, yield and rate information for the three last fiscal years.
AVERAGE BALANCE SHEETS
<TABLE>
<CAPTION>
1995 1994 1993
--------------------------- --------------------------- ---------------------------
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
------- -------- ------ ------- -------- ------ ------- -------- ------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Earning Assets:
Loans, net of unearned
income.................. $35,941 $ 3,794 10.56% $30,418 $ 2,697 8.87% $22,119 $ 1,725 7.80%
Securities................ 15,248 843 5.53% 18,537 922 4.97% 21,667 1,175 5.42%
Federal funds sold........ 3,693 215 5.82% 1,960 85 4.34% 2,561 75 2.93%
Total earning
assets........... 54,882 4,852 8.84% 50,915 3,704 7.27% 46,347 2,975 6.42%
Non-interest earning assets:
Cash and due from banks... 2,998 -- -- 1,941 -- -- 2,278 -- --
Premises and equipment.... 1,922 -- -- 1,923 -- -- 1,885 -- --
Other Real Estate Owned... -- -- -- -- -- -- -- -- --
Other assets.............. 937 -- -- 744 -- -- 820 -- --
Allowance for loan
losses.................. (366) -- -- (290) -- -- (235) -- --
Total non-interest
earning assets... 5,491 -- -- 4,318 -- -- 4,748 -- --
Total assets....... $60,373 -- -- $55,233 -- -- $51,095 -- --
======= ======= =======
LIABILITIES AND STOCKHOLDERS EQUITY
Interest bearing
liabilities:
Savings accounts.......... $ 4,153 $ 83 2.00% $ 4,478 $ 94 2.10% $ 4,271 $ 90 2.11%
Money market/NOW acct..... 12,033 256 2.13% 12,601 282 2.24% 10,283 224 2.18%
Time Deposits............. 28,384 1,494 5.26% 26,173 1,128 4.31% 27,202 1,187 4.36%
Repurchase agreements..... 1,756 75 4.27% 1,027 40 3.89% -- -- --
Other borrowings.......... -- -- -- 29 4 13.79% 29 3 10.34%
Total interest
bearing
liabilities...... 46,326 1,908 4.12% 44,308 1,548 3.49% 41,785 1,504 3.60%
Non-interest bearing
liabilities:
Demand deposits........... 8,452 -- -- 6,221 -- -- 4,634 -- --
Other liabilities......... 609 -- -- 295 -- -- 320 -- --
Total non-interest
bearing
liabilities...... 9,061 -- -- 6,516 -- -- 4,954 -- --
Total
liabilities...... 55,387 -- -- 50,824 -- -- 46,739 -- --
Stockholders' Equity........ 4,986 -- -- 4,409 -- -- 4,356 -- --
Total Liabilities
and Stockholders;
Equity........... $60,373 -- -- $55,233 -- -- $51,095 -- --
======= ======= =======
Net Interest Inc/Spread..... -- $ 2,944 4.72% -- $ 2,156 3.78% -- $ 1,471 2.82%
Net Interest Margin......... -- -- 5.36% -- -- 4.23% -- -- 3.17%
</TABLE>
- ---------------
Notes:
- -- The amounts set forth as average balances are based on daily averages for
each fiscal year.
- -- Loan fees, which are included in interest income and in the calculation of
average yields, were $143,000, $101,000 and $73,000 in 1995, 1994 and 1993,
respectively.
- -- Tax exempt income is not calculated on a tax equivalent basis.
- -- Non-accruing loans are included in average loans.
56
<PAGE> 67
Net interest income is primarily affected by changes in the amounts and
types of earning assets, interest-bearing funds and net non-interest related
funds, as well as their respective sensitivity to interest rate movements. The
following table reflects these factors:
CHANGES IN NET INTEREST INCOME
<TABLE>
<CAPTION>
1995 VS 1994 1994 VS 1993 1993 VS 1992
CHANGE DUE TO: CHANGE DUE TO: CHANGE DUE TO:
---------------------- --------------------- ----------------------
VOLUME RATE TOTAL VOLUME RATE TOTAL VOLUME RATE TOTAL
------ ---- ------ ------ ---- ----- ------ ----- -----
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Interest
Income:
Loans............................... $ 583 $514 $1,097 $ 735 $237 $ 972 $509 $ (96) $ 413
Securities.......................... (183 ) 104 (79) (155 ) (98) (253) (5) (249) (254)
Federal funds sold.................... 101 29 130 (26 ) 36 10 (42) (30) (72)
Total Interest Inc........... 501 647 1,148 554 175 729 462 (375) 87
Increase (Decrease) in Interest
Expense:
Savings accounts.................... (7 ) (4) (11) 4 -- 4 22 (25) (3)
Money mkt/NOW acct.................. (12 ) (14) (26) 52 6 58 48 (52) (4)
Time Deposits....................... 117 249 366 (45 ) (14) (59) 58 (214) (156)
Repurchase agreements............... 31 4 35 40 -- 40 -- -- --
Other borrowings.................... (4 ) -- (4) -- 1 1 3 -- 3
Total Int. Expense........... 125 235 360 51 (7) 44 131 (291) (169)
Increase (Decrease) in Net Interest
Income.............................. $ 376 412 788 503 182 685 331 (84) 247
----- ---- ------ ----- ---- ----- ---- ----- -----
</TABLE>
- ---------------
Notes:
- -- To calculate volume change, multiply the change in volume from current year
to prior year times the prior year's rate.
- -- To calculate rate change, multiply the change in rate from current year to
prior year times the prior year's dollar volume.
- -- Changes which are not due only to volume changes or rate changes are included
in the changes due to volume column.
Net interest income for 1995 was $2,944 thousand, up 36.55% from $2,156,000
in 1994, up 100.14% from $1,470,000 in 1993, and up 140.72% from $1,223,000 in
1992. The growth in net interest income in 1995 was attributable to an increase
in earning asset volumes, which grew by 7.79% from 1994. This increase was
achieved by attracting a large volume of non-interest bearing demand deposits,
while at the same time increasing the loan portfolio. Average loans (which are
Tomoka State Bank's highest yielding earning assets) grew 18.16% in 1995, while
investment securities decreased 17.74%. Tomoka was able to maintain loan growth
by its ability to target an expanded customer base due to increased lending
limits and an additional location. Also contributing to the increase in net
interest income was a 1.57% increase in the yield on earning assets from 1994 to
1995. An increase of 0.63% from 1994 to 1995 in the average rate on interest
bearing liabilities effected a partial offset to the increase in net interest
income realized in 1995. The increase in the size of Tomoka significantly
affected its liabilities. Average interest bearing liabilities grew $2,018,000
or 4.55% in 1995, and average demand deposits climbed $2,231,000 or 35.86%.
NON-INTEREST INCOME
Non-interest income totalled $649 thousand in 1995, compared with $477,000
in 1994, and $744,000 in 1993. Customer service charges totalled $393 thousand
in 1995, up 24.75% from $315,000 in 1994, and up 14.67% from $343,000 in 1993.
The customer service fees component of non-interest income has increased
primarily as a result of the company's deposit growth. In 1993, Tomoka earned
$330,000 in net gains on sales of mortgage loans, reflecting the unusually
strong volume of mortgage refinancings which prevailed in that time period. Net
gains on sales of mortgage loans contributed $126,000 to non-interest income in
1995, and $174,000 in 1994.
57
<PAGE> 68
INVESTMENT SECURITIES GAINS
At December 31, 1995, Tomoka held investment securities with a market value
of $14,515,000 which was $22,000 more than the book value of the portfolio. This
difference consisted of $59,000 of gross unrealized gains offset by $37,000 of
gross unrealized losses. Before the adoption of SFAS 115 in 1994, Tomoka would
occasionally sell a portion of its investment securities prior to maturity, and
that practice continues subsequent to the adoption of SFAS 115 only for
securities classified as available for sale. This activity resulted in a net
securities loss of $40,000 in 1995, compared to net securities gains of $5,000
and $97,000 in 1994 and 1993, respectively.
PROVISION FOR LOAN LOSSES
The provision for loan losses totalled $130 thousand in 1995, up from
$82,000 in 1994 and $62,000 in 1993. See "Allowance and Provision for Loan
Losses."
NON-INTEREST EXPENSES
Non-interest expenses for 1995 totalled $2,146,000 which was up 13.04% from
$1,899,000 in 1994, and up 5.99% from $2,025,000 in 1993. The increase was
primarily due to higher operating expenses associated with additional locations.
Non-interest expenses are discussed below in more detail.
PERSONNEL. Personnel expense (which includes salaries and benefits)
represented 47.90% of total non-interest expenses in 1995, 45.43% in 1994, and
40.92% in 1993. Personnel expenses increased 19.18% to $1,028,000 in 1995, from
$863,000 in 1994, and up 24.08% from $829,000 in 1993. These increases were the
result of salary increases, benefit costs, increased number of employees due to
growth, and upgrading of personnel. Staff on a full-time equivalent basis
averaged 33 in 1995 compared to 32 in 1994, and 29 in 1993.
OCCUPANCY EXPENSE. Net occupancy expense, which includes the costs of
premises and equipment, in 1995 totalled $301 thousand, up 7.73% from $279,000
in 1994 and up 21.02% from $249,000 in 1993. The principal reason for the
increase was the acquisition of new banking offices in July, 1993 and February,
1995.
OTHER NON-INTEREST EXPENSES. Other non-interest expenses for 1995 totalled
$778 thousand, up 2.76% from $757,000 in 1994, and down 17.95% from $948,000 in
1993. Increases in other non-interest expenses were primarily effected by
increased FDIC insurance premiums due to the increased deposit base, and
increased data processing and support area costs directly related to growth. In
1993 Tomoka realized an actual loss of $280 thousand, included in other
non-interest expenses, as the result of liability arising from the company's
processing of certain sight draft items. Pursuant to the same legal action,
Tomoka received a settlement benefit of $150 thousand from its bonding company
in 1995. That amount is included in other non-interest income in the statement
of operations for the year ended December 31, 1995.
PROVISION FOR INCOME TAXES
The income tax provision totalled $500,000 in 1995 compared with $215,000
in 1994, and $35,000 in 1993. See Note 6 to the Consolidated Financial
Statements for Tomoka for more information regarding the income tax provision.
CAPITAL EXPENDITURES
Tomoka's capital expenditures are reviewed by its Board of Directors.
Tomoka makes capital expenditures in order to improve its ability to provide
quality services to its customers. Capital expenditures equaled $110,000 in
1995, $27,000 in 1994, and $539,000 in 1993. These expenditures were principally
related to building, improvements and equipment purchased for new and existing
branch sites and changes in equipment due to technological advances.
58
<PAGE> 69
ASSET QUALITY AND CREDIT RISK
INVESTMENT SECURITIES. Tomoka maintains a high quality investment
portfolio including U.S. Treasury securities, securities of other U.S.
government entities, state and municipal securities, and other securities.
Securities issued by the U.S. Treasury, other U.S. government entities and
states constitute approximately 86.67% of Tomoka's investment portfolio. Tomoka
management believes that the securities have very little risk of default. At
December 31, 1995, all of the securities held in Tomoka's investment portfolio
were rated "A" or better. Approximately 16.67% of these securities were
classified "held to maturity," and 83.33% were classified "available for sale."
A rating of "A" or better means that the bonds are of "upper medium grade, with
strong ability to repay, possibly with some susceptibility to adverse economic
conditions or changing circumstances." Ratings are assigned by independent
rating agencies and are subject to the accuracy of reported information
concerning the issuers and the subjective judgment and analysis of the rating
agencies. They are not a guarantee of collectibility. Approximately 15.71% of
these securities mature in one year or less, and 47.50% in five years or less.
As such, the risk of significant fluctuations in value due to changes in the
general level of interest rates is limited.
The following table sets forth information regarding the composition of the
investment portfolio for the last three years (amounts in thousands).
INVESTMENT PORTFOLIO
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
U.S. Treasury Securities.......................................... $ 505 $ 499 498
Securities of other U.S. Government agencies and corporations..... 12,070 15,224 20,581
Obligations of states and political subdivisions.................. 1,934 799 798
Other securities.................................................. -- -- --
Total investments....................................... $14,509 $16,522 21,877
======= ======= =======
</TABLE>
During the last two years, Tomoka's investment portfolio decreased by
33.68% due to significant increases in the company's loan portfolio which
surpassed the growth of deposits. During this period, Tomoka adjusted the mix of
its investment securities to increase the proportion of tax-exempt municipals
and decrease the proportion invested in U.S. Government agencies. U.S.
Government agencies represented 94.08% in 1993, 92.14% in 1994, and 83.19% in
1995, while municipals represented 3.65% in 1993, 4.84% in 1994, and 13.33% in
1995.
LOANS. Tomoka maintains a high quality portfolio of real estate,
commercial and consumer loans. All loans over individual lending limits are
reviewed and approved by Tomoka's loan committee, which ensures that loans
comply with applicable credit standards. In most cases, Tomoka requires
collateral from the borrower. The type and amount of collateral varies but may
include residential or commercial real estate, deposits held by financial
institutions, U.S. Treasury securities, other marketable securities and personal
property. Collateral values are monitored to ensure that they are maintained at
proper levels.
As of December 31, 1995 approximately 65% of all Tomoka's loans were real
estate loans secured by real estate in Central Florida. This level of
concentration could present a potential credit risk to Tomoka because the
ultimate collectibility of these loans is susceptible to adverse changes in real
estate market conditions in this market. Tomoka has addressed this risk by
limiting most loans to a maximum of 75% of the appraised value of the underlying
real estate and maximum amortization schedules of 15 years with balloons not
exceeding five years.
59
<PAGE> 70
The following table divides Tomoka's loan portfolio into four categories.
Most of the loans are short-term and may be renewed or rolled over at maturity.
At that time, Tomoka undertakes a complete review of the borrower's
creditworthiness and the value of any collateral. If these items are
satisfactory, Tomoka will generally renew the loan at prevailing interest rates.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
TYPES OF LOANS 1995 1994 1993
- ------------------------------------------------------------------ ------- ------- -------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Commercial, financial and agricultural............................ $10,916 $ 9,215 9,449
Real estate....................................................... 24,804 21,636 13,555
Installment loans to individuals.................................. 2,240 3,064 1,292
Overdrafts........................................................ 4 5 12
Total loans............................................. $37,964 $33,920 $24,308
======= ======= =======
</TABLE>
The following table sets forth information regarding the maturities and
repricing of Tomoka's loans. For purposes of the table, demand loans are shown
as being payable in one year or less. The entire amount of a balloon loan is
treated as maturing in the year that the balloon payment is due. Variable rate
loans are shown based on earliest repricing opportunity.
MATURITIES OF LOANS BASED ON REPRICING
<TABLE>
<CAPTION>
DECEMBER 31, 1995
--------------------------------------------
ONE YEAR OVER ONE TO OVER FIVE
OR LESS FIVE YEARS YEARS TOTAL
-------- ----------- --------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Total Loans:
Fixed................................................... $ 1,540 $ 6,446 $ 990 $ 8,976
Variable................................................ 28,988 -- -- 28,988
</TABLE>
Tomoka's loans are segmented by fixed and variable interest rates. At
December 31, 1995, the amount of such loans with a maturity or repricing of more
than one year which had fixed interest terms was $7,436 and the amount which had
variable interest terms was $0.
COMMERCIAL, FINANCIAL AND AGRICULTURAL LOANS. Tomoka makes commercial,
financial and agricultural loans to businesses located in Central Florida. Loans
to businesses are generally secured by corporate assets, marketable securities
or other liquid financial instruments. The credit risk associated with business
lending is influenced by general economic conditions, deterioration in a
borrower's capital position resulting in increasing debt to equity ratios,
deterioration in a borrower's cash position resulting in a liquidity problem,
and decreasing revenues due to inefficient operations of the borrower. These
loans totalled approximately $10,953 at December 31, 1995, and $8,565 at
December 31, 1994. Legally binding commitments to extend credit and letters of
credit for commercial, financial and agricultural borrowers totalled $3.4
million on December 31, 1995.
REAL ESTATE LOANS. Tomoka makes real estate loans from time to time for
real estate projects located in Central Florida. Tomoka generally requires
security in the form of a mortgage on the underlying real property and the
improvements constructed thereon and personal guarantees. It attempts to limit
its credit exposure to 75% of the appraised value of the underlying real
property. On December 31, 1995, real estate loans totaled $24.8 million. Risks
associated with real estate loans include variations from vacancy projections,
delays in construction, environmental factors, reliability of subcontractors and
timing and reliability of inspections, and cost overruns.
Tomoka makes real estate loans secured by commercial real estate, including
loans to acquire or refinance office buildings, warehouses and apartments. At
December 31, 1994, these loans totalled $14.8 million, or 43.7% of total loans.
Almost all of these loans are secured by real property located in Volusia
County, Florida. These loans generally require a loan-to-collateral value of not
more than 75%. At December 31, 1995, Tomoka had legally binding commitments to
extend credit or standby letters of credit
60
<PAGE> 71
involving commercial real estate borrowers totalling approximately $1.2 million.
At December 31, 1994, Tomoka had approximately $0.5 million in such commitments.
Residential real estate loans totalled $5.7 million, or 15% of total loans
at December 31, 1995, compared with $4.9 million, or 14% at December 31, 1994.
Residential real estate loans are predominantly adjustable rate home mortgages
which generally require a loan-to-collateral value of not more than 80% and
variable rate home equity credit lines which generally limit the
loan-to-collateral value to not more than 80%. Almost all of the residential
real estate loans are secured by homes in Volusia County, Florida. Legally
binding commitments to extend credit secured by residential mortgages totalled
$1.1 million as of December 31, 1995 and $0.6 million as of December 31, 1994.
INSTALLMENT LOANS. Tomoka offers consumer loans and personal and secured
loans. The security for these loans ordinarily consists of automobiles, consumer
goods, marketable securities, certificates of deposit and similar items. These
loans totalled approximately $2.2 million, or 6% of total loans, on December 31,
1995, compared with $3.1 million, or 9% of total loans, on December 31, 1994.
Risks associated with installment loans include loss of employment of borrowers,
declines in the financial condition of borrowers resulting in delinquencies, and
rapid depreciation of loan collateral.
NON-PERFORMING ASSETS AND PAST DUE LOANS
Non-performing assets consist of non-accrual loans and residential and
commercial properties acquired in partial or total satisfaction of problem
loans, which are known as "other real estate owned" or "OREO." Past due loans
are loans that are delinquent 30 days or more which are still accruing interest.
Maintaining a low level of non-performing assets is important to the
ongoing success of any financial institution. Tomoka's credit review and
approval process is critical to Tomoka's ability to minimize non-performing
assets on a long term basis. In addition to the negative impact on interest
income, non-performing assets also increase operating costs due to the expense
of collection efforts. It is Tomoka's policy to place all loans which are past
due 90 days or more on non-accrual status, subject to exceptions made on a case
by case basis.
The following table presents Tomoka's non-performing assets and past due
loans for 1995, 1994 and 1993:
NON-PERFORMING ASSETS AND 90 DAY PAST DUE LOANS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995(1) 1994 1993
------- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Non-Accrual Loans................................................. $81 $ 0 $ 0
OREO and in substance foreclosed loans, net....................... 0 0 0
Total Non Performing Assets....................................... $81 $ 0 $ 0
--- --- ---
Accruing Loans Past Due 90 Days................................... $63 $ 0 $ 0
--- --- ---
</TABLE>
- ---------------
(1) For 1995, gross interest income of $2,000 would have been recorded if the
non-accrual loans had been current in accordance with their original terms
and had been outstanding throughout the period or since origination.
Of the total portfolio of $38.0 million at December 31, 1995, $81,000 or
0.2%, was non-performing, an increase of $81,000 from year end 1994. This total
represented two loans, both backed by U.S. Small Business Administration
guarantees. The total of subsequent actual charge-offs of these loans was
significantly less than $81,000, due to the SBA guarantees. Both of the
non-performing loans at December 31, 1995 were classified as commercial loans.
Tomoka had no assets classified in other real estate owned at December 31,
1995.
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<PAGE> 72
ALLOWANCE AND PROVISION FOR LOAN LOSSES
Tomoka evaluates the adequacy of its allowance for loan losses as part of
its ongoing credit review and approval process. The review process is intended
to identify, as early as possible, customers who may be facing financial
difficulties. Once identified, the extent of the client's financial difficulty
is carefully monitored by Tomoka's credit administrator, who recommends to the
directors' loan committee the portion of any credit that needs a specific
reserve allocation or should be charged off. Other factors considered by the
loan committee in evaluating the adequacy of the allowance include overall loan
volume, historical net loan loss experience, the level and composition of
non-accrual and past due loans, local economic conditions, and the value of any
collateral. From time to time, specific amounts of the reserve are designated
for certain loans in connection with an independent loan review consultant's
analysis of the adequacy of the allowance for loan losses.
While a portion of this allowance is typically intended to cover specific
loan losses, it is considered a general reserve which is available for all
credit-related purposes. The allowance is not a precise amount, but is derived
based upon the above factors and represents management's best estimate of the
amount necessary to adequately cover probable losses from current credit
exposures. The provision for loan losses is a charge against current earnings
and is determined by management as the amount needed to maintain an adequate
allowance.
The overall credit quality of the loan portfolio has been satisfactory in
recent years as evidenced by Tomoka's relatively low level of non-performing
loans and net charge-offs. Management relied on these factors as well as its
assessment of the financial condition of specific clients facing financial
difficulties and the expansion of Tomoka's loan portfolio in deciding to
increase the allowance for loan losses to $386,000 at December 31, 1995, from
$327,000 at December 31, 1994.
The following table summarizes the allowance for loan losses for 1995, 1994
and 1993:
ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1994 1993
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of period................................ $328 $246 $207
Charge-offs:
Commercial, fin. and agricultural........................... 12 -- --
Real estate -- nonfarm, nonresidential...................... 51 -- --
Real estate -- residential.................................. -- -- --
Installment loans........................................... 10 -- 23
Total charge-offs................................... 73 -- 23
Recoveries:
Commercial, financial and agricultural...................... 1 -- --
Real estate -- construction................................. 0 -- --
Real estate -- nonfarm, nonresidential...................... 0 -- --
Real estate -- residential.................................. 0 -- --
Installment loans to individuals............................ 0 -- --
Total recoveries.................................... 1 -- --
Net charge-offs..................................... 72 -- 23
Provision charged to operations............................... 130 82 62
Balance at end of period...................................... $386 $328 $246
---- ---- ----
Ratio of net charge-offs during period to average loans
outstanding during period................................... 0.18% 0.00% 0.09%
</TABLE>
In 1995, less than 0.18% of the entire loan portfolio was charged off, with
net charge-offs being a modest $72,000. In 1994, the net charge-offs were 0% of
the entire portfolio. Tomoka's allowance for loan losses increased to $386,000
in 1995, which was approximately 1% of total loans ($38.0 million). Since 1994,
Tomoka has maintained the allowance for loan losses at approximately 1% of
outstanding loans. This level has been more than sufficient to absorb loan
charge-offs during this period.
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<PAGE> 73
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1993
------------------- ------------------- -------------------
PERCENT OF PERCENT OF PERCENT OF
ALLOWANCE ALLOWANCE ALLOWANCE
IN EACH IN EACH IN EACH
CATEGORY CATEGORY CATEGORY
TO TOTAL TO TOTAL TO TOTAL
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
------ ---------- ------ ---------- ------ ----------
(AMOUNT IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial, agricultural....... $ 12 0.03% -- -- -- --
Real Estate............................... 51 0.13% -- -- -- --
Mortgage.................................. -- -- -- -- -- --
Installment loans......................... 10 0.03% -- -- 23 0.09%
Unallocated general reserves.............. 313 0.82% 328 0.97% 223 0.92%
Total allowance for loan
losses........................ $386 1.01% $328 0.97% $246 1.01%
</TABLE>
FINANCIAL CONDITION
Tomoka's goal is to maintain a high quality and liquid balance sheet.
Tomoka seeks to achieve this objective through increases in collateralized
loans, a strong portfolio of commercial loans secured by real estate, and a
stable portfolio of investment securities of high quality.
INVESTMENT SECURITIES. In 1995, investment securities averaged $15 million
or 27.78% of total earning assets. Tomoka's management strategy for its
investment account is to maintain a very high quality portfolio with generally
intermediate maturities. To maximize after tax income, investments in municipal
securities are utilized, but with somewhat longer maturities. The investment
portfolio decreased 12.19% from $16.5 million in 1994 to $14.5 million at
December 31, 1995. The decrease was largely due to planned growth of loans,
accommodated by greater and more routine investment in overnight federal funds
sold. The following table sets forth information regarding the investment
portfolio at December 31, 1995.
REMAINING MATURITY AND AVERAGE YIELD OF INVESTMENT SECURITIES
(DECEMBER 31, 1995)
<TABLE>
<CAPTION>
ONE YEAR OR ONE TO FIVE FIVE TO TEN
LESS YEARS YEARS OVER TEN YEARS
-------------- -------------- -------------- --------------
BOOK YIELD BOOK YIELD BOOK YIELD BOOK YIELD TOTAL YIELD
------ ----- ------ ----- ------ ----- ------ ----- ------- -----
($ AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities............... $ 505 5.58 % $ -- -- % $ -- -- % $ -- -- % $ 505 5.58 %
Securities of other U.S. Governmental
agencies and corporations............ 1,773 4.75 % 5,794 6.35 % 702 7.25 % 3,801 6.34 % 12,070 6.16 %
Obligations of states and political
subdivisions......................... -- -- 600 4.71 % 821 4.76 % 513 4.51 % 1,934 4.68 %
Other securities....................... -- -- -- -- -- -- -- -- -- --
Total.......................... $2,278 4.93 % $6,394 6.20 % $1,523 5.91 % $4,314 6.12 % $14,509 5.94 %
------ ------ ------ ------ -------
</TABLE>
- ---------------
Note: Yields on tax exempt bonds have not been computed on an equivalent basis.
LOANS. Loans averaged $36 million in 1995, an increase of 18.16% from the
prior year. The increase in the loan portfolio reflects an expanded customer
base, favorable economic conditions and increased business development. See
"Asset Quality and Credit Risk -- Loans," above.
INTEREST-BEARING LIABILITIES. Total interest-bearing liabilities averaged
$46 million in 1995, up from $44 million in 1994. Average money market and NOW
deposits decreased $568 thousand or 4.51% to $12 million. The increase in time
deposits of $2.2 million or 8.45% was due to increased market penetration
through the opening of a new banking office and due to attractively priced
deposit products.
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<PAGE> 74
The following table sets forth information regarding Tomoka's average
deposits for the last three years.
AVERAGE DEPOSITS
<TABLE>
<CAPTION>
1995 1994 1993
-------------- -------------- --------------
AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE
------- ---- ------- ---- ------- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Demand deposits -- non-interest bearing....... $ 8,452 --% $ 6,221 --% $ 4,634 --%
Savings accounts.............................. 4,153 2.00% 4,478 2.10% 4,271 2.11%
Money market and NOW accounts................. 12,033 2.13% 12,601 2.24% 10,283 2.18%
Time deposits................................. 28,384 5.26% 26,173 4.31% 27,202 4.36%
Total deposits...................... $53,022 3.46% $49,473 3.04% $46,390 3.23%
======= ======= =======
</TABLE>
The following table summarizes the maturity of time deposits over $100
thousand.
SUMMARY OF TIME DEPOSITS OVER $100,000 BY MATURITY
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------------
(AMOUNTS IN THOUSANDS)
<S> <C>
Three Months or less.................................... $ 913
Three to Six months..................................... 569
Six to Twelve months.................................... 494
Over Twelve months...................................... 1,213
------
Total......................................... $ 3,189
</TABLE>
LIQUIDITY AND RATE SENSITIVITY
The principal functions of asset and liability management are to provide
for adequate liquidity, to manage interest rate exposure by maintaining a
prudent relationship between rate sensitive assets and liabilities, and to
manage the size and composition of the balance sheet so as to maximize net
interest income.
Liquidity is the ability to provide funds at minimal cost to meet
fluctuating deposit withdrawals or loan demand. These demands are met by
maturing assets and the capacity to raise funds from internal and external
sources. Tomoka primarily utilizes cash and federal funds sold to meet its
liquidity needs. Although not utilized in managing daily liquidity needs, the
sale of investment securities provides a secondary source of liquidity.
Fluctuating interest rates, increased competition and changes in the
regulatory environment continue to significantly affect the importance of
interest rate sensitivity management. Rate sensitivity arises when interest
rates on assets change in a different period of time or a different proportion
than that of interest rates on liabilities. The primary objective of interest
rate sensitivity management is to prudently structure the balance sheet so that
movements of interest rates on assets and liabilities are highly correlated and
produce a reasonably stable net interest margin even in periods of volatile
interest rates.
Regular monitoring of assets and liabilities that are rate sensitive within
30 days, 90 days, 180 days and one year is an integral part of Tomoka's rate
sensitivity management process. It is Tomoka's policy to maintain a reasonably
similar balance of rate sensitive assets and liabilities on a cumulative one
year basis, thus minimizing net interest income exposure to changes in interest
rates. Tomoka's sensitivity position at December 31, 1995 was such that net
interest income would increase modestly if there were an increase in short-term
interest rates.
Tomoka monitors interest rate risk sensitivity with traditional gap
measurements. The gap table has certain limitations in its ability to accurately
portray interest sensitivity; however, it does provide a static reading of
Tomoka's interest rate risk exposure.
Tomoka's interest sensitive gap at December 31, 1995 is shown on the
following table. This table shows the repricing structure of Tomoka's balance
sheet with each maturity interval referring to the earliest repricing
64
<PAGE> 75
opportunity (i.e., the earlier of scheduled contractual maturities or next reset
date) for each asset and liability. As of that date, Tomoka remained asset
sensitive (interest sensitive assets subject to repricing exceeded interest
sensitive liabilities subject to repricing) on a 365-day basis to the extent of
$4.5 million. This positive gap at December 31, 1995 was 7.2% of total assets.
Tomoka's targeted gap position is in the range of negative 10 percent to
positive 10 percent of total assets. Tomoka measures its gap position as a
percentage of its total assets.
INTEREST SENSITIVITY TABLE AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
OVER ONE
TOTAL YEAR AND
0-30 30-90 90-180 180-365 INTEREST NON-INTEREST
DAYS DAYS DAYS DAYS SENSITIVE SENSITIVE TOTAL
------- ------- ------- ------- --------- ------------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Earning Assets:
Loans....................... $28,854 $ 394 $ 382 $ 904 $ 30,534 $ 7,426 $37,960
Securities.................. 788 200 2,686 2,399 6,073 8,436 14,509
Federal funds sold.......... 4,700 -- -- -- 4,700 -- 4,700
Interest Earning Liabilities:
Deposits.................... 17,902 3,757 5,818 9,317 36,794 $ 9,097 $45,891
Federal Funds Purchased..... -- -- -- -- -- -- --
Gap........................... $16,440 $(3,163) $(2,750) $(6,014) $ 4,513 $ 6,765 $11,278
======= ======= ======= ======= ======= ======= =======
Cumulative Gap................ $16,440 $13,277 $10,527 $ 4,513 $ 4,513 $ 11,278 $11,278
------- ------- ------- ------- ------- ------- -------
Cumulative Gap as % of Total
Assets...................... 26.2% 21.2% 16.8% 7.2% 7.2% 18.0% 18.0%
</TABLE>
CAPITAL
One of management's primary objectives is to maintain a strong capital
position to merit the confidence of customers, bank regulators and stockholders.
A strong capital position helps Tomoka withstand unforeseen adverse developments
and take advantage of attractive lending and investment opportunities when they
rise. During 1995, stockholders' equity increased by $916 thousand, or 19.88%
over 1994.
The Federal Reserve's final rules pertaining to risk-based capital became
effective as of December 31, 1992. Under these rules at December 31, 1995,
Tomoka's tier one capital was 13.13% and the total capital was 14.05% of
risk-based assets. These risk-based capital ratios are well in excess of the
minimum requirements of 4% for tier one and 8% for total risk-based capital
ratios.
Tomoka's leverage ratio (tier one capital to total average adjusted
quarterly assets) of 8.89% at December 31,1995, is also well in excess of the
minimum 4% requirement. All of these capital ratios increased during 1995 as
equity capital increased 19.88% while assets increased by 9.97%.
The following table sets forth Tomoka's required and actual capital amounts
and ratios for 1995, 1994 and 1993.
TOMOKA CAPITAL
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1993
------------------------------- ------------------------------- -------------------------------
REQUIRED ACTUAL REQUIRED ACTUAL REQUIRED ACTUAL
-------------- -------------- -------------- -------------- -------------- --------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ ----- ------ ----- ------ ----- ------ -----
($'S IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tier 1 Capital (to Risk
Weighted Assets).......... $1,684 4.00 % $5,526 13.13% $1,474 4.00 % $4,610 12.51% $1,111 4.00 % $4,301 15.48%
Total Capital (to Risk
Weighted Assets).......... $3,367 8.00 % $5,913 14.05% $2,949 8.00 % $4,938 13.40% $2,223 8.00 % $4,547 16.37%
Tier 1 Capital (to Average
Assets)................... $2,486 4.00 % $5,526 8.89% $2,310 4.00 % $4,610 7.98% $2,096 4.00 % $4,301 8.21%
</TABLE>
65
<PAGE> 76
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO THE SIX
MONTHS ENDED JUNE 30, 1995
Tomoka's net income for the six months ended June 30, 1996 was $485
thousand, an increase of 48.14% from net income of $327,000 reported in the
first six months of 1995. Net income per share was also up 45.73% to $1.18 from
$0.81 reported in 1995. The principal reasons for this improvement were the
growth of assets and liabilities (due to increased market penetration) and an
increase in net interest margin due to the positive impact of rising rates on
loans and investments, which increased more rapidly than interest rates on
deposits.
NET INTEREST INCOME
Net interest income totalled $1,580,000 for the first six months of 1996,
or 12.13% higher than $1,409,000 in the first six months of 1995. The increase
in net interest income was due to an increase of $10.6 million or 30.36% in
loans and an increase of $7.0 million or 15.83% in interest bearing deposits.
Earning assets as of the end of the second quarter of 1996 were $66.2 million,
up 21.97% or $12.0 million from the $54.2 million reported at June 30, 1995. The
increase in earning assets reflects a $12 thousand or 0.08% increase in
investment securities and a $1,255,000 increase in federal funds sold. Net loans
at the end of the second quarter were $45.8 million, reflecting a $10.6 million
increase from June 30, 1995.
The increase in earning assets was largely attributable to increases in
loans and federal funds sold. Total deposits at June 30, 1996 were $64.3
million, up $12,200,000 or 23.43% from the $52.1 million reported at June 30,
1995. The increase resulted from a $2,203,000 increase in money market and NOW
deposits, a $131,000 decrease in savings deposits, and a $5,141,000 increase in
non-interest bearing demand deposits, in addition to an increase of $4,988,000
in time deposits. The increase was due to attractive and competitively priced
deposit products and an expanded market base. The positive effect of the
increase in deposits in funding the growth of earning assets was augmented by a
$950,000 increase in total stockholders' equity.
The net interest margin for the first six months of 1996 was 4.59% compared
to 4.76% in 1995. This decrease was due to the impact of more rapidly rising
rates on deposits as well as growth in earning assets.
PROVISIONS FOR LOAN LOSSES
The provision for loan losses was $122,000 during the first six months of
1996, compared to $90,000 for the first six months of 1995.
NON-INTEREST INCOME
Non-interest income for the first six months of 1996 totalled $294,000,
which was 27.15% more than the $231,000 reported in the same period of the prior
year. The change was primarily due to Tomoka's expanded deposit base and the
service charges related to those deposit accounts.
NON-INTEREST EXPENSES
Non-interest expenses totalled $1,062,000 for the first six months of 1996,
up 5.21% or $53,000 from the $1,009,000 reported for the first six months of
1995. The major factors in the change were increases in salaries and supplies
costs.
PROVISION FOR INCOME TAXES
The income tax provision for the first six months of 1996 totalled $205,000
compared with $214,000 for the same period of 1995. The $9,000 decrease from the
prior year was attributable to an increase in the proportion of tax-exempt
securities in Tomoka's investments portfolio.
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<PAGE> 77
STATEMENT OF CONDITION
Total assets as of June 30, 1996 were $72.7 million, up 23.42% from $58.9
million on June 30, 1995. The growth in total assets paralleled the growth in
deposits discussed above. Net loans totalled $45.8 million at June 30, 1996,
representing a 30.36% increase from $35.1 million reported at June 30, 1995. The
increase in loans was due to increased business development and favorable
economic conditions. Investment securities remained materially unchanged
compared to the June 30, 1995 level at $15.0 million.
The continuing profitability of Tomoka resulted in an increase of
stockholders' equity to $5,886,000, or 19.25% more than the $4,936,000 at June
30, 1995.
Tomoka's risk-based capital ratios remained strong at 8.70% for tier one
and 9.46% for total capital at June 30, 1996. Risk-based capital ratios
substantially exceeded the regulatory guidelines of 4% for tier one and 8% for
total capital. The leverage ratio (tier one capital to average assets) of 8.55%
at June 30, 1996 also significantly exceeded the regulatory requirement of 4%
for adequately capitalized institutions
ASSET QUALITY
The total of non-performing assets at June 30, 1996 increased to $927,000
from $81,000 at December 31, 1995 and $33,000 at June 30, 1995. Non-accrual
loans, totalled $927,000 or 2.03% of total loans at June 30, 1996. At December
31, 1995 and June 30, 1995, non-accrual loans totalled $81,000 and $33,000,
respectively. At June 30, 1996, non-accrual loans were comprised of five
separate loans, all bearing SBA guarantees. Although $927,000, representing the
total book value of outstanding balances on the five loans is disclosed as
non-accrual loans, the actual maximum exposure of Tomoka totalled $214,405. That
figure represents book value of the five loans less the guaranteed portion of
the balances. It is the belief of Tomoka's management that liquidation of the
collateral associated with the five credits will further reduce Tomoka's
potential charge-off amounts. At June 30, 1996, OREO assets were $0, as was OREO
at December 31, 1995, and June 30, 1995. Management of Tomoka is not aware of
any loans not disclosed above in which management has serious doubts as to the
ability of the borrowers to comply with the present loan repayment terms.
On, December 31, 1995 Tomoka adopted Financial Accounting Standards Board
Statement of Financial Accounting standards ("SFAS") No. 114, Accounting by
Creditors for Impairment of a Loan, and SFAS No. 118, Accounting by Creditors
for Impairment of a Loan -- Recognition and Disclosures, an amendment of SFAS
No. 114. These standards address the accounting for impairment of certain loans
when it is probable that all amounts due pursuant to the contractual terms of
the loan will not be collected. Adoption of these standards entailed the
identification of commercial, industrial, real estate commercial and real estate
construction loans which are considered impaired under the provisions of SFAS
No. 114. Adoption of these statements did not have a material impact on Tomoka's
financial position or results of operations and does not affect the
comparability of the above amounts at June 30, 1996 to prior periods.
PROVISION FOR LOAN LOSSES
The provision for loan losses for the six months ended June 30, 1996 was
$122,000, compared to $90,000 for the first six months in 1995. The change was
attributable to the low level of charge-offs in the first six months of 1995.
Net charge-offs during the first six months of 1996 were $6,000. The allowance
for loan losses was $517,000 on June 30, 1996, which equaled 1.12% of
outstanding loans. This compares with $346,000 or 0.98% of outstanding loans at
June 30, 1995 and $386,000 or 1.02% of outstanding loans at December 31, 1995.
The low level of loan loss reserves (relative to outstanding loans) is
attributable to the quality of the loan portfolio.
The quality of the loan portfolio remains sound and the reserve for loan
losses is considered to be adequate to cover current credit related
uncertainties. Established credit review procedures ensure that close attention
is given to commercial real estate related loans as well as other credit
exposures which may be adversely affected by a significant increase in interest
rates and/or down-turns of segments of the local economy.
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<PAGE> 78
BUSINESS OF BANCGROUP
GENERAL
BancGroup is a bank holding company registered under the BHCA. It was
organized in 1974 under the laws of Delaware. BancGroup operates wholly owned
commercial banking subsidiaries in the states of Alabama, Florida, Georgia and
Tennessee, each under the name of "Colonial Bank". Colonial Bank conducts a full
service commercial banking business in the state of Alabama through 110 banking
offices. In Tennessee, Colonial Bank conducts a general commercial banking
business through three offices. In Georgia, BancGroup's federal savings bank
subsidiary, Colonial Bank, FSB, operates through four offices in the Atlanta
area, and its commercial bank subsidiary, Colonial Bank, operates seven branches
in Lawrenceville. In Florida, Colonial Bank operates eight branches in the
Orlando area. Colonial Mortgage Company, a subsidiary of Colonial Bank, is a
mortgage banking company which services approximately $10 billion in residential
loans and which originates mortgages in 29 states through 6 regional offices.
BancGroup's commercial banking loan portfolio is comprised primarily of
commercial real estate loans (22%) and residential real estate loans (49%), 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 in
Alabama 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.
PROPOSED AFFILIATE BANKS
BancGroup has entered into a definitive agreement dated as of July 19,
1996, to acquire First Family Financial Corporation ("First Family"). First
Family is a Florida corporation and is a holding company for First Family Bank,
fsb. First Family will merge with BancGroup. Based on the market price of
BancGroup Common Stock as of September 19, 1996, a total of 182,703 shares of
BancGroup Common Stock and $6,403,750 in cash would be issued to the
stockholders of First Family. The actual number of shares of BancGroup Common
Stock to be issued in this transaction will depend upon the market value of such
Common Stock at the time of the merger. This transaction is subject to, among
other things, approval by the stockholders of First Family and approval by
appropriate regulatory authorities. At June 30, 1996, First Family had assets of
$155.9 million, deposits of $143.4 million and stockholders' equity of $9.2
million.
BancGroup has entered into a definitive agreement dated as of September 12,
1996, to acquire D/W Bankshares, Inc. ("Bankshares"). Bankshares is a Georgia
corporation and is a holding company for Dalton/Whitfield Bank & Trust located
in Dalton, Georgia. Bankshares will merge with BancGroup and following such
merger Bankshares' subsidiary bank will merge with BancGroup's existing bank
subsidiary in Lawrenceville, Georgia, Colonial Bank. Based on the market price
of BancGroup Common Stock as of September 19, 1996, a total of 547,672 shares of
BancGroup Common Stock would be issued to the stockholders of Bankshares. The
actual number of shares of BancGroup Common Stock to be issued in this
transaction will depend upon the market value of such Common Stock at the time
of the merger. This transaction is subject to, among other things, approval by
the stockholders of Bankshares and approval by appropriate regulatory
authorities. At June 30, 1996, Bankshares had assets of $139.7 million, deposits
of $126.1 million and stockholders' equity of $10.4 million.
BancGroup has signed a letter of intent dated September 11, 1996, to
acquire Jefferson Bancorp, Inc. ("Jefferson"). Jefferson is a Florida
corporation and is a holding company for Jefferson Bank of Florida located in
Miami Beach, Florida. Jefferson will merge with BancGroup. Based on the market
price of BancGroup Common Stock as of September 19, 1996, a total of 2,055,531
shares of BancGroup Common Stock would be issued to the stockholders of
Jefferson. The actual number of shares of BancGroup Common Stock to be issued in
this transaction will depend upon the market value of such Common Stock at the
time of the merger subject to a maximum of 2,349,202 shares and a minimum of
1,861,056 shares to be issued. This transaction is subject to, among other
things, approval by the stockholders of Jefferson and approval by appropriate
regulatory authorities. At June 30, 1996, Jefferson had assets of $440.2
million, deposits of $386.3 million and stockholders' equity of $36.3 million.
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<PAGE> 79
BancGroup has signed a letter of intent dated September 20, 1996, to
acquire Fort Brooke Bancorporation ("Fort Brooke"). Fort Brooke is a Florida
corporation and is a holding company for Fort Brooke Bank located in Tampa,
Florida. Fort Brooke will merge with BancGroup and following such merger Fort
Brooke Bank will merge with BancGroup's existing bank subsidiary in Orlando,
Colonial Bank. Based on the market price of BancGroup Common Stock as of
September 19, 1996, a total of 904,037 shares of BancGroup Common Stock would be
issued to the stockholders of Fort Brooke. The actual number of shares of
BancGroup Common Stock to be issued in this transaction will depend upon the
market value of such Common Stock at the time of the merger subject to a maximum
of 990,207 shares and a minimum of 812,471 shares to be issued. This transaction
is subject to, among other things, approval by the stockholders of Fort Brooke
and approval by appropriate regulatory authorities. At June 30, 1996, Fort
Brooke had assets of $185.7 million, deposits of $163.5 million and
stockholders' equity of $16.3 million.
See "THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES -- Condensed Pro Forma
Statements of Condition (Unaudited)."
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
As of September 19, 1996, BancGroup had issued and outstanding 16,296,558
shares of BancGroup Common Stock with 5914 stockholders of record. Each such
share is entitled to one vote. In addition, as of that date, 767,571 shares of
BancGroup Common Stock were subject to issue upon exercise of options pursuant
to BancGroup's stock option plans and up to 277,177 shares of BancGroup Common
Stock were issuable upon conversion of BancGroup's 1986 Debentures. There are
currently 44,000,000 shares of BancGroup 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 NYSE.
The following table shows those persons who are known to BancGroup to be
beneficial owners as of September 19, 1996, of more than five percent of
BancGroup's outstanding Common Stock.
<TABLE>
<CAPTION>
PERCENTAGE
COMMON OF CLASS
NAME AND ADDRESS STOCK OUTSTANDING(1)
- ------------------------------------------------------------------- --------- --------------
<S> <C> <C>
Robert E. Lowder(2)................................................ 1,437,409(3) 8.43%
Post Office Box 1108
Montgomery, AL 36101
James K. Lowder.................................................... 1,099,649 6.45%
Post Office Box 250
Montgomery, AL 36142
Thomas H. Lowder................................................... 1,073,053 6.29%
Post Office Box 11687
Birmingham, AL 35202
</TABLE>
- ---------------
(1) Percentages are calculated assuming the issuance of 767,571 shares of Common
Stock pursuant to BancGroup's stock option plans.
(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 E. Lowder's mother, Catherine K. Lowder, owns 85,442
shares of Common Stock. Mr. Lowder disclaims any beneficial interest in
such shares.
(3) Includes 90,510 shares of BancGroup Common Stock subject to options under
BancGroup's stock option plans.
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<PAGE> 80
SECURITY OWNERSHIP OF MANAGEMENT
The following table indicates the number of shares of BancGroup Common
Stock beneficially owned by each director, executive officer, and all executive
officers and directors of BancGroup as a group as of September 19, 1996.
<TABLE>
<CAPTION>
PERCENTAGE
COMMON OF CLASS
NAME STOCK OUTSTANDING(1)
- ------------------------------------------------------------------- --------- --------------
<S> <C> <C>
DIRECTORS
Young J. Boozer.................................................... 7,146(2) *
William Britton.................................................... 6,808 *
Jerry J. Chesser................................................... 73,295 *
Augustus K. Clements, III.......................................... 9,476
Robert S. Craft.................................................... 5,997 *
Patrick F. Dye..................................................... 18,980(3) *
Clinton O. Holdbrooks.............................................. 145,932(4) *
D. B. Jones........................................................ 10,064 *
Harold D. King**................................................... 77,729(4) *
Robert E. Lowder**................................................. 1,437,409(5) 8.43%
John Ed Mathison................................................... 14,227 *
Milton E. McGregor................................................. 0 *
John C. H. Miller, Jr.............................................. 15,243(7) *
Joe D. Mussafer.................................................... 10,000 *
William E. Powell, III............................................. 6,959 *
Donald J. Prewitt***............................................... 88,544(8) *
Jack H. Rainer..................................................... 1,345 *
Frances E. Roper................................................... 182,034 1.07%
Ed V. Welch........................................................ 14,825 *
EXECUTIVE OFFICERS WHO ARE NOT ALSO DIRECTORS
Young J. Boozer, III............................................... 22,914(2)(6) *
W. Flake Oakley, IV................................................ 16,808(6) *
Michael R. Holley.................................................. 21,337(6) *
All Executive Officers and Directors as a Group.................... 2,187,008(9) 12.82%
</TABLE>
- ---------------
* Represents less than one percent.
** Executive Officer.
*** Mr. Prewitt was added as a director by resolution of the BancGroup Board on
July 17, 1996. Mr. Prewitt was the Chairman of the Board of Southern
Banking Corporation, Orlando, Florida, which was acquired by BancGroup on
July 3, 1996. Mr. Prewitt is a real estate developer and is president of
his own company, Land Sales of Central Florida, Inc., located in Orlando.
Mr. Prewitt is also a director of Colonial Bank, Orlando.
(1) Percentages are calculated assuming the issuance of 767,571 shares of
Common Stock pursuant to BancGroup's stock option plans.
(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.
(5) These shares include 90,510 shares of Common Stock subject to options under
BancGroup's stock option plans. See the table at "Voting Securities and
Principal Stockholders."
(6) Young J. Boozer, III, Michael R. Holley, and W. Flake Oakley, IV, hold
options respecting 12,500, 5,000, and 3,000 shares of Common Stock,
respectively, pursuant to BancGroup's stock option plans.
(7) Includes shares subject to options.
(8) Includes 35,504 shares subject to stock options.
(9) Includes shares subject to options.
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<PAGE> 81
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, 1995, at Items 10, 11, and 13 and is
incorporated herein by reference.
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 BHCA and many
of the Federal Reserve's regulations promulgated thereunder. It is also subject
to regulation by the OTS, as a savings and loan holding company, and by the
Georgia Department of Banking and Finance.
BancGroup's subsidiary banks (the "Subsidiary Banks") are subject to
supervision and examination by applicable federal and state banking agencies.
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 BHCA 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 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, under certain circumstances, persons seeking to acquire
between 10 percent and 25 percent also may be 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 and the OTS (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 BHCA to permit bank holding companies, subject to certain limitations, to
acquire either control or substantial assets of a bank located in states other
than that bank holding company's home state regardless of state law
prohibitions. This legislation became 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.
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<PAGE> 82
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 require 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.
On September 30, 1996, Congress passed and the President signed a
continuing resolution which directed the FDIC to set a one-time special
assessment on SAIF-insured deposits in an amount sufficient to capitalize the
Savings Association Insurance Fund ("SAIF") at the reserve level previously
mandated by statute. The FDIC Board met on October 8, 1996, and set this special
assessment at $0.657 per $100 of SAIF-insured deposits. Though the special
assessment applies to SAIF-insured deposits, the special assessment, under the
legislation enacted into law on September 30, 1996, will not be applied to 20%
of those SAIF-insured deposits held be certain so-called Oakar and Sasser
institutions. Thus, the special assessment's effective rate with respect to the
SAIF-insured deposits in such institutions will be $0.525 per $100 of their
SAIF-insured deposits. In addition, the legislation enacted by Congress provides
that the annual $800-million FICO bond service will be shared by both
BIF-insured institutions and SAIF-insured institutions. Prior to this
legislation, this bond service was the obligation of SAIF members only. This
sharing of the FICO bond service obligation, coupled with the capitalization of
SAIF to the mandatory reserve level, will cause the regular SAIF deposit
insurance premium rate to fall from $0.23 per $100 of SAIF-insured deposits to
under $0.07, assuming the SAIF does not incur any large losses which would
necessitate recapitalization of the Fund. The regular BIF deposit insurance
premium rate will be under $0.02 per $100 of BIF-insured deposits. The
differential between BIF and SAIF caused by the FICO bond service will terminate
on December 31, 1999, after which time the FICO bond service will be divided on
a strictly pro rata basis and SAIF and BIF rates will be equal unless one of the
deposit insurance funds requires recapitalization. BIF and SAIF premium rates
will be approximately $0.024 per $100 of deposits after December 31, 1999. In
the event of a merger of the thrift and bank charters, the differential could be
eliminated prior to December 31, 1999. The legislation also provides for a
merger of SAIF and BIF if charter merger occurs. Such a merger of the funds,
assuming a merger of the charters has taken place, would occur on January 1,
1999. BancGroup's subsidiary banks hold deposits which are insured by both SAIF
and BIF. The SAIF-insured deposits in all of BancGroup's subsidiary institutions
totals approximately $850 million, before adjusting for certain allowances such
as the 20 percent discount referenced above, which would be subject to the
special assessment.
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.
72
<PAGE> 83
BUSINESS OF TOMOKA BANCORP, INC.
Tomoka is a bank holding company organized in Florida in 1992 for the
purpose of acquiring all of the outstanding capital stock of Tomoka State Bank.
Tomoka State Bank is the only subsidiary of Tomoka. On June 30, 1996, Tomoka had
consolidated total assets of $72.7 million and stockholders' equity of $5.9
million. Substantially all of the income of Tomoka is derived from dividends
received from Tomoka State Bank. The amount of these dividends is directly
related to expenses incurred by Tomoka State Bank and is subject to various
regulatory restrictions. See "Supervision and Regulation".
TOMOKA STATE BANK
Tomoka State Bank was founded in 1990 to provide banking services to the
residents of Volusia County, Florida. Since its opening, Tomoka State Bank has
attracted business from customers who prefer to deal with a financial
institution which provides a high level of personal service and responsiveness
and a demonstrated commitment to the local community.
Tomoka State Bank offers a wide range of banking services to individuals
and businesses located in its primary service area. Tomoka State Bank is
actively engaged in the business of seeking deposits from the public and making
real estate, commercial and consumer loans. Tomoka State Bank offers a variety
of deposit accounts to its individual and commercial customers, as well as
related banking services. These services include interest bearing checking
accounts, savings accounts, certificates of deposit, ATM cards, commercial
checking accounts, individual retirement accounts, safe deposit boxes,
bank-by-mail service, drive-up teller service, extended lobby and drive-in hours
and extended daily cut-off time, letters of credit, draft collection, and direct
deposit.
Tomoka State Bank's principal sources of income are interest on loans and
investments and service fees. Its principal expenses are interest paid on
deposits and general operating expenses.
PRIMARY SERVICE AREA
Tomoka State Bank's primary service area is Volusia County, Florida.
OFFICES
The corporate offices of Tomoka and the main banking office of Tomoka State
Bank are located at 201 South Nova Road, Ormond Beach, Florida 32174.
In addition to its main banking office in Ormond Beach, Tomoka State Bank
operates full service banking offices at the following locations:
- 900 Village Trail, Port Orange, Florida 32127
- 161 North Causeway, New Smyrna Beach, Florida 32169
- 106 North Center Street, Pierson, Florida 32180
EMPLOYEES
At June 30, 1996, Tomoka State Bank had a staff of 33 full-time employees.
LEGAL PROCEEDINGS
Neither Tomoka nor Tomoka State Bank is a party to any material legal
proceedings, other than routine litigation incidental to its banking business.
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<PAGE> 84
SUPERVISION AND REGULATION
Tomoka State Banking Corporation
Tomoka is a bank holding company registered under the BHCA. As a result,
Tomoka is subject to supervision, examination and regulation by the Federal
Reserve. The BHCA and the regulations of the Federal Reserve impose a variety of
requirements on the activities of bank holding companies such as Tomoka. Certain
of these requirements, along with other federal banking law requirements
applicable to Tomoka are described below:
Acquisition of Financial Institutions. Tomoka is required to obtain the
prior approval of the Federal Reserve before it may acquire more than 5% of the
outstanding shares of any class of voting securities or substantially all of the
assets of any bank or bank holding company. Prior approval from the Federal
Reserve is also required for the merger or consolidation of Tomoka and another
bank holding company. BancGroup has applied for such approval in connection with
the Merger. See "Terms of Merger Agreement -- Regulatory Approvals".
Non-Banking Activities. Tomoka is prohibited by the BHCA, except in
limited instances, from acquiring direct or indirect ownership and control of
more than 5% of the outstanding voting shares of any company that is not a bank
or a bank holding company and from engaging directly or indirectly in activities
other than those of banking, managing and controlling banks or furnishing
services to its subsidiaries. However, Tomoka may, subject to the prior approval
of the Federal Reserve, engage in, or acquire shares of companies engaged in,
activities that are deemed by the Federal Reserve to be so closely related to
banking or managing or controlling banks as to be a proper incident thereto. In
making any such determination, the Federal Reserve is required to consider
whether the performance of such activities by Tomoka or any affiliate can
reasonably be expected to produce benefits to the public, such as greater
convenience, increased competition or gains in efficiency, that outweigh
possible adverse effects, such as undue concentration of resources, decreases in
competition, conflicts of interest or unsound banking practices. The Federal
Reserve may also require Tomoka to terminate an activity or terminate control
of, liquidate or divest certain subsidiaries or affiliates when the Federal
Reserve believes that the activity or control of the subsidiary or affiliate
constitutes a significant risk to the financial safety, soundness or stability
of any of its banking subsidiaries. At the present time, Tomoka does not have
any subsidiaries other than the Tomoka State Bank and does not engage in any
material non-banking activities.
Capital Structure. The Federal Reserve has the authority to regulate
provisions of certain bank holding company debt, including authority to impose
interest ceilings and reserve requirements on such debts. Under certain
circumstances, Tomoka must obtain approval from the Federal Reserve prior to
purchasing or redeeming any of its equity securities. Further, Tomoka is
required by the Federal Reserve to maintain certain minimum levels of capital.
Tie-In Arrangements. Under the BHCA and the regulations adopted by the
Federal Reserve, a bank holding company and its non-banking subsidiaries are
prohibited from requiring certain tie-in arrangements in connection with any
extension of credit, lease or sale of property or furnishing of services.
Tomoka State Bank
General. Tomoka State Bank is a commercial bank chartered by the Florida
Department of Banking. The deposits of Tomoka State Bank are insured by the FDIC
to the maximum extent provided by law, which is currently $100,000 for each
depositor, subject to certain limited exceptions. Accordingly, Tomoka State Bank
is subject to supervision, regulation and examination by both the Florida
Department and the FDIC. The supervisory, regulatory and enforcement powers of
the FDIC were expanded pursuant to the provisions of the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"). Tomoka State Bank is
also subject to a variety of state and federal laws and regulations which affect
its activities and operations, including state usury and consumer credit laws,
the federal Truth-in-Lending Act, the Truth-in-Savings Act, the federal Fair
Credit Reporting Act and the Community Reinvestment Act. Federal law restricts
management interlocks between depository institutions and governs the privacy of
bank records and the
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<PAGE> 85
transfer of significant amounts of currency. Although certain of these laws and
regulations may indirectly benefit shareholders, they are primarily intended to
protect depositors, the solvency of the BIF and the SAIF, and the banking system
in general.
As a consequence of the extensive regulation of commercial banking in the
United States, the business of Tomoka State Bank is particularly susceptible to
federal and state legislation and regulations that may have the effect of
increasing the cost of doing business and decreasing the revenues earned by
Tomoka State Bank. For example, increases in the premiums assessed by the FDIC
for deposit insurance can increase the cost of doing business for Tomoka State
Bank.
Regulatory Examinations. Both the Florida Department and the FDIC
periodically make unannounced, on-site examinations of Tomoka State Bank. The
supervisory authorities may revalue the assets of Tomoka State Bank, based upon
current appraisals, and require establishment of specific reserves in amounts
equal to the difference between such revaluation and the book value of the
assets.
Capital Adequacy. Tomoka State Bank is subject to capital adequacy
regulations promulgated by the FDIC. To assess the capital adequacy of insured
banks, the FDIC has adopted both minimum supervisory leverage capital-to-asset
ratios and minimum supervisory risk-based capital ratios. The minimum leverage
and risk-based capital standards apply only to the most sound, well-run
institutions. Most institutions are expected to operate with capital ratios
above the minimum standards.
FDICIA and the regulations adopted under it establish five capital
categories as follows, with the category for any institution determined by the
lowest of any of these ratios:
<TABLE>
<CAPTION>
TIER 1 TIER 1 TOTAL
LEVERAGE RISK-BASED RISK-BASED
RATIO RATIO RATIO
---------------- ------------- --------------
<S> <C> <C> <C>
Well Capitalized.................... 5% or Above 6% or Above 10% or Above
Adequately Capitalized.............. 4% or Above(1) 4% or Above 8% or Above
Undercapitalized.................... Less than 4% Less than 4% Less than 8%
Significantly Undercapitalized...... Less than 3% Less than 3% Less than 6%
Critically Undercapitalized......... Less than 2% -- --
</TABLE>
- ---------------
(1) 3% for banks with the highest supervisory rating.
An insured depository institution may be deemed to be in a capitalization
category that is lower than is indicated by the capital position reflected on
its statement of condition if it receives an unsatisfactory rating by its
examiners with respect to its assets, management, earnings or liquidity.
FDICIA requires federal bank regulatory agencies to take "prompt corrective
action" with respect to banks that do not meet minimum capital requirements and
imposes certain restrictions upon banks which meet minimum capital requirements
but are not "well capitalized" for purposes of FDICIA. Under FDICIA, a bank that
is not well capitalized is generally prohibited from accepting or renewing
brokered deposits and offering interest rates on deposits significantly higher
than the prevailing rate in its normal market area or nationally (depending
where deposits are solicited); in addition, "pass-through" insurance coverage
may not be available for certain employee benefit accounts.
FDICIA generally prohibits a depository institution from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized banks are subject to limitation on growth and
are required to submit a capital restoration plan, which must be guaranteed by
the institution's parent company. Institutions that fail to submit an acceptable
plan, or that are significantly undercapitalized, are subject to a host of more
drastic regulatory restrictions and measures.
Tomoka State Bank is in compliance with all applicable capital
requirements. See "TOMOKA'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION FOR THE YEARS ENDED DECEMBER 31, 1995, 1994
and 1993 AND FOR THE SIX MONTHS ENDED JUNE 30, 1996 and 1995 -- Statement of
Condition".
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<PAGE> 86
Risk-Based Insurance. Under the FDIC's risk-based insurance assessment
system, each insured bank is placed in one of nine risk categories based on its
level of capital and other relevant information. Each insured bank's insurance
assessment rate is then determined by the risk category to which it has been
classified by the FDIC.
Reserves and General Operating Restrictions. Under regulations of the FDIC
and Florida law, Tomoka State Bank is required to maintain specified loss and
liquidity reserves. For example, a Florida bank must maintain a liquidity
reserve equal to at least 15% of its total deposit liability. Further, Tomoka
State Bank is subject to limitations on (i) the nature and amount of loans that
may be made, in the aggregate, to all borrowers of Tomoka State Bank, and on
those that may be made to any one person and such person's affiliates, (ii) the
amount of indebtedness that it may incur, and (iii) the nature and amount of
investments that it may make, including investments in real estate and equipment
utilized by Tomoka State Bank in the transaction of its business.
Dividends. The payment of dividends is regulated by Florida and federal
law. In general, a Florida bank may declare dividends without regulatory
approval in an amount up to the sum of net profits in the current year, combined
with retained net profits of the preceding two years.
Regulatory Approvals. A Florida bank must seek approval from the Florida
Department, and in some cases from the FDIC, before increasing or decreasing the
amount of its capital (other than as a result of operating earnings and losses),
establishing a branch office, acquiring the capital stock or substantially all
of the assets, or assuming the liabilities, of another financial institution, or
merging into or consolidating with another capital stock financial institution.
In many cases, such approval is based on a review by the Florida Department and
the FDIC of the financial condition of the bank, taking into consideration
characteristics such as liquidity, capital adequacy, and, in the case of branch
offices, net-profit-to-asset ratios.
Any person or group of persons proposing to acquire a controlling interest
in and thereby to change the control of a Florida bank must first obtain
approval from the Florida Department. Under some circumstances (not including
the Merger), the FDIC also has the power to disapprove a change of control and
the addition of any individual to the board of directors, or the employment of a
senior executive officer, of a Florida bank.
Insider Transactions. Certain provisions of Florida and federal law are
designed, among other things, to prevent abusive transactions between a bank and
its affiliates and insiders. For example, banks are subject to restrictions on:
(i) loans to and other dealings with affiliates, (ii) the issuance of
guarantees, acceptances, or letters of credit on behalf of affiliates, and (iii)
investments in stock or other securities issued by affiliates or acceptance
thereof as collateral for an extension of credit. There are also significant
restrictions and limitations on loans and other extensions of credit by a bank
to its executive officers and directors and the holders of 10% or more of its
voting stock. In many cases, there are substantial monetary penalties for
violations of such restrictions, the maximum limits of which are tied to the
degree of fault of the bank.
76
<PAGE> 87
PRINCIPAL HOLDERS OF TOMOKA COMMON STOCK
The following table sets forth, as of the date of this Prospectus, the
persons known by Tomoka to be beneficial owners of more than five (5%) percent
of the shares of Tomoka Common Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE
OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
- --------------------------------------------------------------- ------------------ ----------
<S> <C> <C>
Robert W. Ahrens............................................... 54,652.6(1) 13.04%
2360 Old Tomoka Rd.
Ormond Beach, FL 32174
P.T. Fleuchaus................................................. 32,021.1(2) 7.64%
855 Mason Ave.
Daytona Beach, FL 32117
Peter B. Heebner............................................... 30,618.0(3) 7.31%
523 N. Halifax Ave.
Daytona Beach, FL 32118
Norman Miller.................................................. 31,646.7(4) 7.55%
200 Palmetto Pines Rd.
Ormond Beach, FL 32174
Sanford Miller................................................. 35,705.1(5) 8.52%
125 Basin St., Ste. 210
Daytona Beach, FL 32114
E. Thomas Torrence............................................. 24,341.6(6) 5.81%
301 Flagler Ave.
New Smyrna Beach, FL 32169
</TABLE>
- ---------------
(1) This amount consists of 46,531.6 shares which Mr. Ahrens owns jointly with
his wife and 8,121 shares which he may purchase under outstanding stock
options.
(2) This amount consists of 23,913.1 shares which Dr. Fleuchaus owns through his
individual retirement account and 8,108 shares which he may purchase under
outstanding stock options.
(3) This amount consists of 8,388 shares which Mr. Heebner owns individually,
1,136 shares which he owns jointly with his wife, 12,986 shares which he
owns through his pension plan, and 8,108 shares which he may purchase under
outstanding stock options.
(4) This amount consists of 16,233.6 shares which Mr. Miller owns individually,
7,305.1 shares owned by his children and grandchildren, and 8,108 shares
which he may purchase under outstanding stock options.
(5) This amount consists of 17,451.1 shares which Mr. Miller owns individually,
10,146 shares which he owns jointly with his wife, and 8,108 shares which
he may purchase under outstanding stock option plans.
(6) This amount consists of 16,233.6 shares which Mr. Torrence owns individually
and 8,108 shares which he may purchase under outstanding stock option
plans.
77
<PAGE> 88
TOMOKA COMMON STOCK OWNED BY MANAGEMENT
The following table sets forth, as of the date of this Prospectus, the
number of shares of Tomoka Common Stock beneficially owned by each director and
executive officer of Tomoka and Tomoka State Bank, and all directors and
executive officers of Tomoka as a group.
<TABLE>
<CAPTION>
POSITIONS WITH NUMBER OF
TOMOKA AND SHARES PERCENTAGE
NAME TOMOKA STATE BANK BENEFICIALLY OWNED OF CLASS
- ----------------------------------- --------------------------------- ------------------ ----------
<S> <C> <C> <C>
Robert W. Ahrens................... Director 54,652.6(1) 13.04%
Thomas H. Dargan................... President, CEO and Director 11,027.3(2) 2.62%
P. T. Fleuchaus.................... Chairman of the Board 32,021.1(3) 7.64%
Peter B. Heebner................... Director 30,618.0(4) 7.31%
Stephen B. McGee................... Vice President, Treasurer & CFO 4,850.0(5) 1.17%
Norman Miller...................... Director 31,646.7(6) 7.55%
Sanford Miller..................... Director 35,705.1(7) 8.52%
David Perryman..................... Director 5,433.5(8) 1.31%
Otis W. Pruett..................... Director 12,712.1(9) 3.04%
S. Craig Suazo..................... Vice President, Secretary &
Senior Lending Officer 5,213.1(10) 1.26%
E. Thomas Torrence................. Director 24,341.6(11) 5.81%
William E. Vaughn.................. Director 5,521.0(12) 1.34%
All Directors and Executive
Officers as a Group.............. (12 Persons) 253,742.1(13) 51.68%
</TABLE>
- ---------------
(1) This amount consists of 46,531.6 shares which Mr. Ahrens owns jointly with
his wife and 8,121 shares which he may purchase under outstanding stock
options.
(2) This amount consists of 1,146.5 shares which Mr. Dargan owns jointly with
his wife, 405.8 shares owned by his father-in-law, and 9,475 shares which
he may purchase under outstanding stock options.
(3) This amount consists of 23,913.1 shares which Dr. Fleuchaus owns through
his individual retirement account and 8,108 shares which he may purchase
under outstanding stock options.
(4) This amount consists of 8,388 shares which Mr. Heebner owns individually,
1,136 shares which he owns jointly with his wife, 12,986 shares which he
owns through his pension plan, and 8,108 shares which he may purchase under
outstanding stock options.
(5) This amount consists of 150 shares which Mr. McGee owns individually, 400
shares he owns jointly with his father, and 4,300 shares which he may
purchase under outstanding stock options.
(6) This amount consists of 16,233.6 shares which Mr. Miller owns individually,
7,305.1 shares owned by his children and grandchildren, and 8,108 shares
which he may purchase under outstanding stock options.
(7) This amount consists of 17,451.1 shares which Mr. Miller owns individually,
10,146 shares which he owns jointly with his wife, and 8,108 shares which
he may purchase under outstanding stock options.
(8) This amount consists of 2,536.5 shares which Mr. Perryman owns jointly with
his wife and 2,897 shares which he may purchase under outstanding stock
options.
(9) This amount consists of 4,058.4 shares which Mr. Pruett owns individually,
507.3 shares which he owns through his business interests, 304.4 shares
owned by his son and daughter-in-law, and 7,842 shares which he may
purchase under outstanding stock options.
(10) This amount consists of 913.1 shares which Mr. Suazo owns jointly with his
wife and 4,300 shares which he may purchase under outstanding stock
options.
(11) This amount consists of 16,233.6 shares which Mr. Torrence owns
individually and 8,108 shares which he may purchase under outstanding stock
options.
78
<PAGE> 89
(12) This amount consists of 304.4 shares which Mr. Vaughn owns jointly with his
wife, 2,616.6 shares which he owns through his business interests, and
2,600 shares which he may purchase under outstanding stock options.
(13) This amount includes 83,000 shares which directors and executive officers
have the right to purchase under outstanding stock options.
ADJOURNMENT OF SPECIAL MEETING
Approval of the Merger by Tomoka's shareholders 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
Tomoka Common Stock present in person or by proxy at the Special Meeting to
approve the Merger, Tomoka's Board of Directors may seek to adjourn the Special
Meeting to a later date provided a majority of the shares present and voting
have voted in favor of such adjournment. The place and date to which the Special
Meeting would be adjourned would be announced at the Special Meeting. Proxies
voted against the Merger and abstentions will not be voted to adjourn the
Special Meeting. Abstentions and broker non votes will not be voted on this
matter but will not count as "no" votes. If it is necessary to adjourn the
Special Meeting and the adjournment is for a period of less than 120 days from
the original date of the Special Meeting, no notice of the time and place of the
adjourned meeting need be given to shareholders other than an announcement at
the Special Meeting.
The effect of any such adjournment would be to permit Tomoka to solicit
additional proxies for approval of the Merger. While such an adjournment would
not invalidate any proxies previously filed as long as the record date for the
adjourned meeting remained the same, including proxies filed by shareholders
voting against the Merger, an adjournment would afford Tomoka the opportunity to
solicit additional proxies in favor of the Merger.
OTHER MATTERS
The Board of Directors of Tomoka 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 Tomoka.
DATE FOR SUBMISSION OF BANCGROUP STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in BancGroup's proxy solicitation
materials for its 1997 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 36192, no later
than 120 calendar days in advance of the date of March 18, 1997.
LEGAL MATTERS
Certain legal matters regarding the shares of BancGroup Common Stock
offered hereby are being passed upon by the law firm of Miller, Hamilton, Snider
& Odom, L.L.C., Mobile, Alabama, of which John C. H. Miller, Jr., a director of
BancGroup and of Colonial Bank, is a partner. Such firm received fees for legal
services performed in 1995 of $1,305,633. John C. H. Miller, Jr. owns 10,243
shares of BancGroup Common Stock. Mr. Miller also received employee-related
compensation from BancGroup in 1995 of $58,070.
EXPERTS
Coopers & Lybrand L.L.P. serves as the independent accountants for
BancGroup. The consolidated financial statements of BancGroup and the
supplemental consolidated financial statements of BancGroup, both as of December
31, 1995 and 1994 and for each of the three years ended December 31, 1995, are
incorporated by reference in this Prospectus in reliance upon the report of such
firm, given on the authority of that firm as experts in accounting and auditing.
It is not expected that a representative of such firm will be present at the
Special Meeting.
Dupree & Camputaro serves as the independent accountants for Tomoka. The
consolidated financial statements of Tomoka as of December 31, 1995 and 1994 and
for each of the years ended December 31, 1995,
79
<PAGE> 90
1994 and 1993 that are in this Prospectus in reliance upon the report of such
firm, are given on the authority of that firm as experts in accounting and
auditing. It is expected that a representative of such firm will be present at
the Special Meeting.
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 SECRETARY OF TOMOKA PRIOR TO THE
SPECIAL MEETING, BY EXECUTING A LATER DATED PROXY AND DELIVERING IT TO THE
SECRETARY OF TOMOKA PRIOR TO THE SPECIAL MEETING OR BY ATTENDING THE SPECIAL
MEETING AND VOTING IN PERSON.
80
<PAGE> 91
INDEX TO FINANCIAL STATEMENTS
COLONIAL BANCGROUP:
All required financial statements have been incorporated by reference into
this prospectus.
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
TOMOKA BANCORP, INC. AND SUBSIDIARY:
Independent Auditors' Report.......................................................... F-2
Consolidated Balance Sheets, December 31, 1995 and 1994............................... F-3
Consolidated Statements of Operations, Years Ended December 31, 1995, 1994 and 1993... F-4
Consolidated Statements of Changes in Stockholders' Equity, Years Ended December 31,
1995, 1994 and 1993................................................................. F-5
Consolidated Statements of Cash Flows, Years Ended December 31, 1995, 1994 and 1993... F-6
Notes to Consolidated Financial Statements............................................ F-7
Consolidated Statements of Financial Condition, June 30, 1996 and December 31, 1995... F-17
Consolidated Statements of Income, Six Months Ended June 30, 1996 and 1995............ F-18
Consolidated Statements of Stockholders' Equity, Six Months ended June 30, 1996....... F-19
Consolidated Statements of Cash Flows, Six Months ended June 30, 1996 and 1995........ F-20
Notes to the Unaudited Condensed Consolidated Financial Statements.................... F-21
</TABLE>
F-1
<PAGE> 92
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
Tomoka Bancorp, Inc.
Ormond Beach, Florida
We have audited the consolidated balance sheets of Tomoka Bancorp, Inc. and
Subsidiary as of December 31, 1995 and 1994, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Tomoka Bancorp, Inc. and
Subsidiary at December 31, 1995 and 1994, and the consolidated results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
DUPREE AND CAMPUTARO
January 25, 1996
F-2
<PAGE> 93
TOMOKA BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks............................................. $ 3,361,762 $ 1,950,501
Federal funds sold.................................................. 4,700,000 2,310,000
----------- -----------
Total cash and cash equivalents........................... 8,061,762 4,260,501
Investment securities:
Available for sale................................................ 12,089,781 4,880,514
Held to maturity.................................................. 2,418,849 11,641,244
Loans, less allowance for loan losses of $386,310 and $327,575,
respectively...................................................... 37,573,852 33,586,872
Property and equipment, net......................................... 1,895,369 1,887,005
Accrued interest receivable......................................... 382,228 357,717
Other assets........................................................ 236,269 362,247
----------- -----------
$62,658,110 $56,976,100
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand............................................................ $ 8,602,020 $ 5,654,676
Interest bearing demand........................................... 5,862,015 8,248,121
Now accounts...................................................... 6,126,469 5,222,567
Savings........................................................... 4,068,696 4,357,966
Time $100,000 and over............................................ 3,188,963 1,861,246
Other Time........................................................ 26,644,552 23,369,954
----------- -----------
54,492,715 48,714,530
Customer repurchase agreements...................................... 1,979,921 3,230,696
Accrued interest, taxes and other liabilities....................... 659,094 420,786
----------- -----------
Total liabilities......................................... 57,131,730 52,366,012
----------- -----------
Commitments and contingent liabilities (Note 8)
Stockholders' equity
Common stock, $5 par value, 1,000,000 shares authorized, 405,000
shares issued and outstanding.................................. 2,025,000 2,025,000
Capital surplus................................................... 1,215,000 1,215,000
Retained earnings................................................. 2,277,352 1,498,835
Unrealized gain (loss) on investment securities available for
sale........................................................... 9,028 (128,747)
----------- -----------
Total stockholders' equity................................ 5,526,380 4,610,088
----------- -----------
$62,658,110 $56,976,100
=========== ===========
</TABLE>
The accompanying Auditors' Report and notes should be
read with the financial statements.
F-3
<PAGE> 94
TOMOKA BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans............................... $3,793,943 $2,696,744 $1,724,349
Interest on investment securities:
U. S. Treasury Securities............................. 22,333 20,601 6,133
Obligations of other U. S. government agencies and
corporations........................................ 771,554 862,468 1,106,671
Obligations of state and political subsidiaries....... 48,690 39,269 38,944
Other securities...................................... -- -- 23,350
Interest on federal funds sold........................... 215,354 84,922 75,186
---------- ---------- ----------
4,851,874 3,704,004 2,974,633
---------- ---------- ----------
Interest expense:
Interest on other borrowings............................. -- 3,974 2,937
Interest on deposits..................................... 1,907,638 1,544,198 1,501,250
---------- ---------- ----------
1,907,638 1,548,172 1,504,187
---------- ---------- ----------
Net interest income.............................. 2,944,236 2,155,832 1,470,446
Provision for loan losses.................................. 130,000 81,689 61,766
---------- ---------- ----------
Net interest income after provision for loan
losses......................................... 2,814,236 2,074,143 1,408,680
---------- ---------- ----------
Noninterest income:
Net gain on sale of securities........................... -- 5,323 97,488
Service fees............................................. 393,424 315,378 343,090
Other.................................................... 256,028 156,187 303,806
---------- ---------- ----------
649,452 476,888 744,384
---------- ---------- ----------
Noninterest expense:
Net loss on sale of securities........................... 39,624 -- --
Salaries and employee benefits........................... 1,028,069 862,610 828,677
Occupancy and equipment.................................. 300,895 279,307 248,623
Other operating expense.................................. 777,542 756,671 947,624
---------- ---------- ----------
2,146,130 1,898,588 2,024,924
---------- ---------- ----------
Income before income taxes and cumulative
effect......................................... 1,317,558 652,443 128,140
Income taxes............................................... 500,323 214,877 34,711
---------- ---------- ----------
Net income before effect of change in accounting
principle...................................... 817,235 437,566 93,429
Cumulative effect on prior years of accounting change...... -- -- 35,431
---------- ---------- ----------
Net income....................................... $ 817,235 $ 437,566 $ 128,860
========== ========== ==========
Net income per share of common stock....................... $ 2.02 $ 1.08 $ .32
========== ========== ==========
Weighted average shares outstanding........................ 405,000 405,000 405,000
========== ========== ==========
</TABLE>
The accompanying Auditors' Report and notes should be
read with the financial statements.
F-4
<PAGE> 95
TOMOKA BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS)
COMMON STOCK ON INVESTMENT
-------------------- SECURITIES
PAR CAPITAL RETAINED AVAILABLE
SHARES VALUE SURPLUS EARNINGS FOR SALE TOTAL
------- ---------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1993.... 405,000 $2,025,000 $1,215,000 $ 932,409 $ -- $4,172,409
Net income.................. -- -- -- 128,860 -- 128,860
------- ---------- ---------- ---------- --------- ----------
Balance, December 31,
1993...................... 405,000 2,025,000 1,215,000 1,061,269 -- 4,301,269
Unrealized loss on
investment securities
available for sale........ -- -- -- -- (128,747) (128,747)
Net income.................. -- -- -- 437,566 -- 437,566
------- ---------- ---------- ---------- --------- ----------
Balance, December 31,
1994...................... 405,000 2,025,000 1,215,000 1,498,835 (128,747) 4,610,088
Change in unrealized gain
(loss) on investment
securities available for
sale...................... -- -- -- -- 137,775 137,775
Net income.................. -- -- -- 817,235 -- 817,235
Dividends paid.............. -- -- -- (38,718) -- (38,718)
------- ---------- ---------- ---------- --------- ----------
Balance, December 31,
1995...................... 405,000 $2,025,000 $1,215,000 $2,277,352 $ 9,028 $5,526,380
======= ========== ========== ========== ========= ==========
</TABLE>
The accompanying Auditors' Report and notes should be
read with the financial statements.
F-5
<PAGE> 96
TOMOKA BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Cash flow from operating activities:
Net income............................................ $ 817,235 $ 437,566 $ 128,860
Adjustments to reconcile net income to cash used by
operating activities:
Cumulative effect of change in accounting
principle........................................ -- -- (35,431)
Loss on disposal of property and equipment......... 2,490 -- --
(Gain) loss on sale of securities.................. 39,624 (5,323) (97,488)
Depreciation and amortization...................... 131,649 136,246 114,281
Provision for loan losses.......................... 130,000 81,689 61,766
Deferred taxes..................................... 12,571 (45,329) 348
(Increase) decrease in other assets................ (3,660) 14,232 (78,912)
Increase in accrued interest receivable............ (24,511) (27,322) (11,133)
Increase in accrued interest, taxes and other
liabilities...................................... 238,308 54,846 148,646
----------- ----------- -----------
Net cash provided by operating activities.......... 1,343,706 646,605 230,937
----------- ----------- -----------
Cash flow from investing activities:
Proceeds from sale of securities available-for-sale... 3,910,436 924,363 3,493,892
Maturities and redemptions of securities
available-for-sale................................. 3,315,163 4,515,206 1,325,000
Maturities and redemptions of securities
held-to-maturity................................... 1,700,000 -- --
Purchases of securities available-for-sale............ (5,504,105) -- (1,047,676)
Purchases of securities held-to-maturity.............. (1,220,264) (291,538) (3,318,480)
Net increase in loans................................. (4,116,980) (9,618,659) (5,293,542)
Purchases of property and equipment................... (115,387) (25,467) (547,691)
----------- ----------- -----------
Net cash used by investing activities.............. (2,031,137) (4,496,095) (5,388,497)
----------- ----------- -----------
Cash flow from financing activities:
Net increase in deposits.............................. 5,778,185 1,158,692 4,045,414
Dividends paid........................................ (38,718) -- --
Note proceeds......................................... -- -- 10,053
Note payment.......................................... -- (10,053) --
Loan from directors................................... -- -- 48,677
Loan payment.......................................... -- (48,677) --
Increase (decrease) in customer repurchase
agreements......................................... (1,250,775) 3,230,696 --
----------- ----------- -----------
Net cash provided by financing activities.......... 4,488,692 4,330,658 4,104,144
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents.... 3,801,261 481,168 (1,053,416)
Cash and cash equivalents at beginning of period........ 4,260,501 3,779,333 4,832,749
----------- ----------- -----------
Cash and cash equivalents at end of period.............. $ 8,061,762 $ 4,260,501 $ 3,779,333
=========== =========== ===========
Supplemental Disclosure of Cash Flow Information:
Interest paid......................................... $ 1,871,991 $ 1,505,784 $ 1,541,143
=========== =========== ===========
Income taxes paid..................................... $ 420,836 $ 34,400 $ 179,480
=========== =========== ===========
Income taxes refunded................................. $ -- $ 122,997 $ --
=========== =========== ===========
</TABLE>
The accompanying Auditors' Report and notes should be
read with the financial statements.
F-6
<PAGE> 97
TOMOKA BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Operations -- The Company is a one bank holding company which
operates out of the main office in Ormond Beach with three other branches in
Port Orange, New Smyrna Beach and Pierson. The bank's primary source of revenue
is providing loans to individuals and businesses in the Volusia county area of
Florida.
Use of Estimates in the Preparation of Financial Statements -- The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period,
actual results could differ from those estimates.
Principles of Consolidation -- The financial statements include the
accounts of the Company and its consolidated subsidiary, Tomoka State Bank. The
acquisition of Tomoka State Bank in 1994 has been accounted for as a pooling of
interest. All significant intercompany accounts and transactions have been
eliminated.
Cash and Cash Equivalents -- For purposes of reporting cash flows, cash and
cash equivalents include cash on hand, amounts due from banks, and federal funds
sold.
Investment Securities -- Investment securities are comprised of securities
classified as available for sale and held to maturity, in conjunction with the
adoption of FASB 115, resulting in investment securities available for sale
being carried at market value and investment securities held to maturity being
carried at cost, adjusted for amortization of premiums and accretions of
discounts.
Gains or losses on disposition are based on the net proceeds and the
adjusted carrying amount of the securities sold, using the specific
identification method.
Loans and Allowance for Loan Losses -- Loans are stated at the amount of
unpaid principal, reduced by allowance for loan losses. Interest on loans is
calculated by using the simple interest method on the principal amounts
outstanding. Loans are charged against the allowance for loan losses when
management believes that the collectibility of the principal is unlikely. The
allowance is an amount that management believes will be adequate to absorb
possible losses on existing loans that may become uncollectible, based on
evaluations of the collectibility of loans and prior loan loss experience. The
evaluations take into consideration such factors as changes in the nature and
volume of the loan portfolio, overall portfolio quality, review of specific
problem loans, and current economic conditions that may affect the borrowers'
ability to pay. Accrual of interest is discontinued on a loan when management
believes, after considering economic and business conditions and collection
efforts, that the borrowers' financial condition is such that collection of
interest is doubtful. Fees and related costs on loans are amortized over the
term of the loan as required by generally accepted accounting principles.
Property and Equipment -- Property and equipment are stated at cost less
accumulated depreciation computed principally on the straight-line method over
the estimated useful lives of the assets, which are 40 years for building, 3 to
12 years for furniture and equipment and 5 years for vehicles.
Income Taxes -- The tax effect of transactions is recorded at current tax
rates in the periods the transactions are reported for financial statement
purposes. Deferred income taxes are established 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. The Company files its income tax returns on a
consolidated basis.
F-7
<PAGE> 98
TOMOKA BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pending Accounting Pronouncements -- The Financial Accounting Standards
Board has issued Statement of Financial Accounting Standards No. 121 (SFAS 121),
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." The Company is required to implement SFAS 121 by December 31,
1996. The provisions of SFAS 121 will require the Company to review long-lived
assets for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. The adoption is not
expected to have a significant impact on the Company.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 122 (SFAS 122), "Mortgage Servicing Rights," as an
amendment to SFAS 65. The Company is required to implement SFAS 122 by December
31, 1996. The provisions of SFAS 122 eliminate the accounting distinction
between rights to service mortgage loans that are acquired through loan
origination and those acquired through purchase. The adoption is not expected to
have a significant impact on the Company.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based
Compensation." The Company is required to implement SFAS 123 in 1996. SFAS 123
establishes a method of accounting for stock compensation plans based on fair
value. Companies are permitted to continue to use the existing method of
accounting but are required to disclose pro forma net income and earnings per
share as if SFAS 123 had been used to measure compensation cost. The adoption of
SFAS 123 is not expected to have a significant impact on the Company.
Earnings per Share -- Net income per share of common stock has been
computed using the weighted average number of shares outstanding during the
year.
Reclassifications -- Certain reclassifications have been made in the 1994
and 1993 financial statements to conform with the 1995 presentation.
2. PENDING MERGER:
Tomoka Bancorp Inc. and The Colonial BancGroup Inc. entered into an
agreement to merge the two companies. The agreement provides that, upon
consummation of the merger, each outstanding share of Tomoka Bancorp Inc. common
stock shall be converted and exchanged for the right to receive the number of
shares of Colonial common stock equal to $32 divided by the market value, as
defined, of Colonial's common stock. The merger will be accounted for as a
pooling of interest. The merger is subject to regulatory and shareholder
approval and is anticipated to be consummated in December, 1996.
F-8
<PAGE> 99
TOMOKA BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. INVESTMENT SECURITIES:
Amortized costs and approximate market values of investment securities are
summarized as follows at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1995
Held to maturity:
U. S. Treasury Securities............. $ 505,292 $ 1,108 $ -- $ 506,400
Obligations of other U.S. government
agencies and corporations.......... 999,767 -- -- 999,767
Other securities...................... 913,790 5,711 -- 919,501
----------- ------- --------- -----------
2,418,849 6,819 -- 2,425,668
----------- ------- --------- -----------
Available for sale:
Obligations of other U.S. government
agencies and corporations.......... 11,071,703 28,529 (30,897) 11,069,335
Other securities........................ 1,003,156 23,310 (6,020) 1,020,446
----------- ------- --------- -----------
12,074,859 51,839 (36,917) 12,089,781
----------- ------- --------- -----------
$14,493,708 $ 58,658 $ (36,917) $14,515,449
=========== ======= ========= ===========
DECEMBER 31, 1994
Held to maturity:
U.S. Treasury Securities.............. $ 498,894 $ -- $ (12,019) $ 486,875
Obligations of other U.S. government
agencies and corporations.......... 10,343,900 -- (520,011) 9,823,889
Other securities...................... 798,450 -- (25,922) 772,528
----------- ------- --------- -----------
11,641,244 -- (557,952) 11,083,292
----------- ------- --------- -----------
Available for sale:
Obligations of other U.S. government
agencies and corporations.......... 5,093,319 731 (213,536) 4,880,514
----------- ------- --------- -----------
$16,734,563 $ 731 $ (771,488) $15,963,806
=========== ======= ========= ===========
</TABLE>
F-9
<PAGE> 100
TOMOKA BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The amortized cost and approximate market values of investment securities
at December 31, 1995, by expected maturity are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
SECURITIES AVAILABLE SECURITIES HELD
FOR SALE TO MATURITY
-------------------------- -------------------------
AMORTIZED AMORTIZED
COST MARKET VALUE COST MARKET VALUE
----------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Due in one year or less.................... $ 1,789,204 $ 1,773,430 $ 505,292 $ 506,400
Due after one year but less than five
years.................................... 3,199,824 3,219,552 1,393,833 1,397,179
Due after five years but less than ten
years.................................... 1,003,332 1,016,662 -- --
Due after ten years........................ -- -- 519,724 522,089
----------- ----------- ---------- ----------
5,992,360 6,009,644 2,418,849 2,425,668
Mortgage backed securities................. 6,082,499 6,080,137 -- --
----------- ----------- ---------- ----------
$12,074,859 $ 12,089,781 $2,418,849 $2,425,668
=========== =========== ========== ==========
</TABLE>
Proceeds from the sale of investments in debt securities, gross realized
gains, gross realized losses and the related income taxes on net realized gains
were as follows:
<TABLE>
<CAPTION>
1995 1994
---------- --------
<S> <C> <C>
Proceeds from sales............................................ $3,910,436 $924,363
Gross realized gains........................................... $ -- $ 5,323
Gross realized losses.......................................... $ 39,624 $ --
Applicable income tax on net realized gains.................... $ -- $ 2,003
</TABLE>
Securities carried at approximately $3,544,518 and $5,092,675 were pledged
to secure deposits and for other purposes.
4. LOANS AND ALLOWANCE FOR LOAN LOSSES:
A summary of loan classifications at December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Commercial loans............................................ $10,915,974 $ 9,214,971
Real estate................................................. 24,803,657 21,635,603
Installment loans........................................... 2,240,531 3,063,873
----------- -----------
37,960,162 33,914,447
Allowance for loan losses................................... (386,310) (327,575)
----------- -----------
$37,573,852 $33,586,872
=========== ===========
</TABLE>
Changes in the allowance for loan losses for the years ended December 31,
1995, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Balance beginning of year.............................. $327,575 $245,886 $206,523
Provision charged to operations........................ 130,000 81,689 61,766
Recoveries on loans previously charged off............. 510 -- --
Loans charged off...................................... (71,775) -- (22,403)
-------- -------- --------
Balance December 31.................................... $386,310 $327,575 $245,886
======== ======== ========
</TABLE>
F-10
<PAGE> 101
TOMOKA BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Most of the Bank's business activity is with customers located within
Volusia County, Florida. As of December 31, 1995 and 1994, the Bank had a
concentration of credit risk aggregating approximately $24,804,000 and
$21,636,000, respectively, in loans secured by real estate.
5. PROPERTY AND EQUIPMENT:
A summary of property and equipment at December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Land.......................................................... $ 776,855 $ 776,855
Building and improvements..................................... 944,987 930,046
Furniture and equipment....................................... 585,336 490,046
Vehicles...................................................... 10,934 10,934
---------- ----------
2,318,112 2,207,881
Less accumulated depreciation and amortization................ 422,743 320,876
---------- ----------
$1,895,369 $1,887,005
========== ==========
</TABLE>
Total depreciation expense for December 31, 1995, 1994 and 1993 was
$104,533, $99,276 and $83,661, respectively.
6. INCOME TAXES:
The components of income tax expense for the years ended December 31, 1995,
1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- -------
<S> <C> <C> <C>
Currently payable:
Federal............................................... $430,797 $234,750 $31,368
State................................................. 56,955 25,456 2,995
-------- -------- -------
487,752 260,206 34,363
-------- -------- -------
Deferred:
Federal............................................... 10,821 (39,017) 299
State................................................. 1,750 (6,312) 49
-------- -------- -------
12,571 (45,329) 348
-------- -------- -------
$500,323 $214,877 $34,711
======== ======== =======
</TABLE>
F-11
<PAGE> 102
TOMOKA BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1995 and
1994 are presented below.
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses.............................................. $124,443 $129,392
Securities amortization and accretion.................................. 50,174 54,757
Market valuation reserve............................................... -- 84,058
-------- --------
174,617 268,207
-------- --------
Deferred tax liabilities:
Fixed assets........................................................... (58,944) (55,905)
Market valuation reserve............................................... (5,894) --
-------- --------
(64,838 (55,905)
-------- --------
Net deferred tax asset................................................... $109,779 $212,302
======== ========
</TABLE>
A reconciliation of income tax computed at the federal statutory income tax
rate to total income taxes is as follows for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---------- -------- --------
<S> <C> <C> <C>
Pre-tax income................................................ $1,317,558 $652,443 $128,140
======== ======== ========
Income tax computed at federal statutory rate................. $ 447,970 $221,831 $ 32,573
Increase (decrease) resulting from:
Nondeductible expenses...................................... 25,307 31,301 13,105
State income taxes, net of federal benefit.................. 37,590 16,801 2,234
Tax exempt interest......................................... (16,555) (13,351) (9,841)
Other, net.................................................. 6,011 (41,705) (3,360)
-------- -------- --------
$ 500,323 $214,877 $ 34,711
======== ======== ========
</TABLE>
7. OTHER FINANCIAL INSTRUMENTS, COMMITMENTS AND CONTINGENCIES:
In the normal course of business, the Bank has entered into
off-balance-sheet financial instruments consisting of commitments to extend
credit, commercial letters of credit and standby letters of credit. Such
financial instruments are recorded in the financial statements when they are
funded or related fees are incurred or received. At December 31, 1995 and 1994
commitments under standby letters of credit and guarantees aggregated $4,184,977
and $2,698,432, respectively.
The Bank is not a defendant in legal actions arising from normal business
activities.
8. RELATED PARTY TRANSACTIONS:
Certain officers, directors, principal shareholders and companies which
have 10 percent or more beneficial ownership, were indebted to the bank at
December 31, 1995 and 1994 in the aggregate amount of $1,224,940 and $2,682,186,
respectively.
9. STOCK OPTION PLANS:
A majority of the stockholders approved the "Tomoka State Bank Directors
Stock Option Plan" on October 23, 1990. On April 26, 1994, a majority of the
stockholders approved the "1994 Tomoka Bancorp, Inc. Directors Stock Option
Plan" which terminated and replaced the old plan. Under the new plan, a
F-12
<PAGE> 103
TOMOKA BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
maximum of 60,000 shares may be issued at an option price equal to the fair
market value of a share of common stock as of the date of the grant. However,
during the first two years after granting the option, the option shall not be
exercisable.
Activity regarding this stock option plan is summarized as follows:
<TABLE>
<CAPTION>
SHARES PRICE PER SHARE
------ ---------------
<S> <C> <C>
Granted, April 26, 1994......................................... 30,000 $ 11.25
Granted, April 26, 1995......................................... 24,400 $ 11.50
Granted, May 25, 1995........................................... 2,500 $ 11.50
Canceled or expired............................................. (400) $ 11.25
------
Outstanding, December 31, 1995................................ 56,500
======
</TABLE>
At December 31, 1995 and 1994, no options were exercisable.
On April 18, 1995, a majority of the stockholders approved the "Tomoka
Bancorp, Inc. Key Employee Stock Option Plan". Under this plan, a maximum of
21,000 shares may be issued at an option price equal to the fair market value of
a share of common stock as of the date of the grant, however, during the first
six months after granting the option, the option shall not be exercisable.
Activity regarding this stock option plan is summarized as follows:
<TABLE>
<CAPTION>
SHARES PRICE PER SHARE
------ ---------------
<S> <C> <C>
Granted, September 26, 1994..................................... 8,650 $ 11.50
Granted, September 26, 1995..................................... 8,425 $ 11.75
Canceled or expired............................................. (550) $ 11.50
------
Outstanding, December 31, 1995................................ 16,525
======
Exercisable, December 31, 1994................................ --
======
Exercisable, December 31, 1995................................ 8,100
======
</TABLE>
10. RESTRICTIONS ON RETAINED EARNINGS:
The Bank is subject to certain restrictions on the amount of dividends that
it may declare without prior regulatory approval. At December 31, 1995,
approximately $1,333,184 of retained earnings were available for dividend
declaration without prior regulatory approval.
11. PROFIT SHARING PLAN:
The Bank has a 401(k) profit sharing plan (the Plan) which it has offered
to all its' employees. Contributions under the Plan are discretionary and are
determined annually by the Bank's board of directors. The Bank's contributions
to the Plan totaled $11,299 for the year ended December 31, 1995. There were no
contributions made to the Plan for the year ended December 31, 1994 and 1993.
F-13
<PAGE> 104
TOMOKA BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following table shows the estimated fair value and the related carrying
values of the Company's financial instruments at December 31, 1995. Items which
are not financial instruments are not included.
<TABLE>
<CAPTION>
1995
---------------------------
CARRYING ESTIMATED
AMOUNT FAIR VALUE
----------- -----------
<S> <C> <C>
Cash and due from banks........................................... $ 3,361,762 $ 3,361,762
Federal Funds sold................................................ 4,700,000 4,700,000
Investment securities available for sale.......................... 12,074,859 12,089,781
Investment securities held to maturity............................ 2,418,849 2,425,668
Loans, net of allowance for loan losses........................... 37,573,852 37,805,120
Accrued interest receivable....................................... 382,228 382,228
Deposit liabilities............................................... 54,492,715 54,728,755
Customer repurchase agreements.................................... 1,979,921 1,979,921
</TABLE>
For purposes of the above disclosures of estimated fair value, the
following assumptions were used as of December 31, 1995. The estimated fair
value for cash and due from banks and federal funds sold is considered to
approximate cost. The estimated fair value for investment securities are based
on quoted market values for the individual securities or for equivalent
securities. In the case of fixed and annually adjustable rate loans, the
prevailing Tomoka State Bank rates of December 31, 1995 for the various
collateral and risk categories, were used as discount rates in calculating the
present values of like instruments. For financial assets and liabilities whose
interest rates are contractually precluded from floating directly with market
rates, market values are calculated in all cases as the present value of
anticipated future cash flows, discounted using an appropriate rate. Market
values for time deposits likewise represent the sum of discounted future cash
flows where the discount rates are Tomoka State Bank's Certificate of Deposit
rates for the various maturities then prevailing at December 31, 1995.
While these estimates of fair value are based on management's judgment of
the most appropriate factors, there is no assurance that were the Company to
have disposed of such items at December 31, 1995, the estimated fair values
would necessarily have been achieved at that date, since market values may
differ depending on various circumstances. The estimated fair values at December
31, 1995 should not necessarily be considered to apply at subsequent dates.
In addition other assets and liabilities of the Company that are not
defined as financial instruments are not included in the above disclosures. Also
non-financial instruments typically not recognized in the financial statements
nevertheless may have value but are not included in the above disclosures. These
include the estimated earning power of core deposit accounts, the trained work
force, customer goodwill and similar items.
13. SUPPLEMENTAL FINANCIAL DATA:
Components of other expense in excess of 1% of total interest and other
income are as follows at December 31:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Legal and professional fees............................ $ 68,071 $ 79,312 $101,744
FDIC assessment and fees............................... 96,152 149,755 133,468
Data processing fees................................... 110,995 112,385 65,460
Stationery and supplies................................ 55,444 49,217 45,212
Postage, freight and courier service................... 49,907 56,002 44,313
Directors fees......................................... 37,889 35,300 38,300
</TABLE>
F-14
<PAGE> 105
TOMOKA BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. TOMOKA BANCORP INC. (PARENT COMPANY ONLY):
Presented below are the financial statements of Tomoka Bancorp Inc.
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
Cash and cash equivalents............................................. $ 15,592 $ 12,182
Investment in subsidiary -- Tomoka State Bank......................... 5,460,593 4,669,356
Other assets.......................................................... 41,167 57,297
---------- ----------
$5,517,352 $4,738,835
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable...................................................... $ -- $ --
Common stock -- par value $5 per share, 1,000,000 shares authorized,
405,000 shares issued and outstanding in 1995 and 1994.............. 2,025,000 2,025,000
Surplus............................................................... 1,215,000 1,215,000
Retained earnings..................................................... 2,277,352 1,498,835
---------- ----------
$5,517,352 $4,738,835
========== ==========
</TABLE>
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Equity in subsidiary's undistributed net income................ $791,237 $364,932 $132,015
Dividends received............................................. 45,000 92,566 --
Interest expense............................................... -- (3,974) (2,937)
Other expense.................................................. (30,470) (27,984) (2,872)
Income tax benefits............................................ 11,468 12,026 2,654
-------- -------- --------
Net income................................................... $817,235 $437,566 $128,860
======== ======== ========
</TABLE>
F-15
<PAGE> 106
TOMOKA BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Cash flow from operating activities:
Net income................................................... $817,235 $437,566 $128,860
Adjustments to reconcile net income to cash used by operating
activities:
Amortization.............................................. 10,881 10,881 907
Undistributed earnings of subsidiary...................... (791,237) (364,932) (132,015)
(Increase) decrease in other assets....................... 5,249 (12,025) (57,060)
Increase (decrease) in accounts payable................... -- (578) 578
-------- -------- --------
Net cash provided by (used in) operating activities.......... 42,128 70,912 (58,730)
-------- -------- --------
Cash flow from investing activities............................ -- -- --
-------- -------- --------
Cash flow from financing activities:
Dividends paid............................................... (38,718) -- --
Proceeds from note payable................................... -- -- 10,053
Proceeds from directors loan payable......................... -- -- 48,677
Retirement of note payable................................... -- (10,053) --
Retirement of directors loan payable......................... -- (48,677) --
-------- -------- --------
Net cash provided by (used in) financing activities............ (38,718) (58,730) 58,730
-------- -------- --------
Net increase in cash and cash equivalents...................... 3,410 12,182 --
Cash and cash equivalents beginning of year.................... 12,182 -- --
-------- -------- --------
Cash and cash equivalents end of year.......................... $ 15,592 $ 12,182 $ --
======== ======== ========
</TABLE>
F-16
<PAGE> 107
TOMOKA BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and due from banks............................................. $ 3,789,258 $ 3,361,762
Federal funds sold.................................................. 5,385,000 4,700,000
Investment securities............................................... 15,031,685 14,508,630
Loans receivable, net............................................... 45,758,786 37,573,852
Property and equipment, net......................................... 1,853,488 1,895,369
Accrued interest receivable......................................... 463,209 382,228
Other assets........................................................ 429,619 236,269
----------- -----------
Total assets.............................................. $72,711,045 $ 62,658,110
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits.......................................................... $64,280,809 $ 54,492,715
Customer repurchase agreements.................................... 2,267,057 1,979,921
Accrued expenses and other liabilities............................ 277,412 659,094
----------- -----------
Total liabilities......................................... 66,825,278 57,131,730
----------- -----------
Stockholders' Equity:
Common stock, $5 par value, 1,000,000 shares authorized, 405,000
shares issued and outstanding.................................. 2,025,000 2,025,000
Capital surplus................................................... 1,215,000 1,215,000
Net unrealized gain (loss) on AFS Securities...................... (116,238) 9,028
Retained earnings................................................. 2,762,005 2,277,352
----------- -----------
Total stockholders' equity................................ 5,885,767 5,526,380
----------- -----------
Total liabilities and stockholders' equity................ $72,711,045 $ 62,658,110
=========== ===========
</TABLE>
The accompanying notes to the consolidated financial statements
should be read with the financial statements.
F-17
<PAGE> 108
TOMOKA BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---------- ----------
(UNAUDITED)
<S> <C> <C>
Interest Income:
Loans............................................................... $2,086,110 $1,817,519
Other investments................................................... 507,992 500,056
---------- ----------
Total interest income....................................... 2,594,102 2,317,575
---------- ----------
Interest Expense:
Deposits............................................................ 1,014,015 908,394
---------- ----------
Total interest expense...................................... 1,014,015 908,394
---------- ----------
Net interest income......................................... 1,580,087 1,409,181
Provision for possible loan losses.................................. 122,000 90,000
---------- ----------
Net interest income after provision for possible loan
losses.................................................... 1,458,087 1,319,181
---------- ----------
Other Income:
Service fees........................................................ 147,303 128,748
Gain (loss) on sale of securities................................... 104 --
Other operating income.............................................. 146,711 102,571
---------- ----------
294,118 231,319
---------- ----------
General and Administrative Expenses:
Salaries and employee benefits...................................... 488,518 450,466
Occupancy and equipment............................................. 165,531 150,038
Other............................................................... 407,937 408,926
---------- ----------
1,061,986 1,009,430
---------- ----------
Income before income taxes....................................... 690,219 541,070
---------- ----------
Income tax expense.................................................... 205,156 213,638
---------- ----------
Net income....................................................... $ 485,063 $ 327,432
========== ==========
</TABLE>
The accompanying notes to the consolidated financial statements
should be read with the financial statements.
F-18
<PAGE> 109
TOMOKA BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
COMMON STOCK NET
-------------------- UNREALIZED
PAR CAPITAL RETAINED GAIN(LOSS)
SHARES VALUE SURPLUS EARNINGS ON AFS TOTAL
------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1995...................... 405,000 $2,025,000 $1,215,000 $2,277,352 $ 9,028 $5,526,380
MVA to AFS Securities --
(unaudited)............... -- -- -- -- (125,266) (125,266)
Dividends paid.............. -- -- -- (410) -- (410)
Net income -- (unaudited)... -- -- -- 485,063 -- 485,063
------- ---------- ---------- ---------- ---------- ----------
Balance, June 31, 1996 --
(unaudited)............... 405,000 $2,025,000 $1,215,000 $2,762,005 $ (116,238) $5,885,767
======= ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes to the consolidated financial statements
should be read with the financial statements.
F-19
<PAGE> 110
TOMOKA BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
(UNAUDITED)
<S> <C> <C>
Cash flow from operating activities:
Net income...................................................... $ 485,063 $ 327,432
Adjustments to reconcile net income to cash used by operating
activities:
Depreciation and amortization................................ 63,755 71,817
Provision for loan losses.................................... 122,000 90,000
Gain on sale of investment securities available for sale..... (104) --
Deferred taxes............................................... (83,980) 27,123
Cash provided by (used in) changes in:
Accrued interest receivable................................ (80,981) (8,950)
Other assets............................................... (38,679) (69,934)
Accrued expenses and other liabilities..................... (381,682) (41,447)
----------- ----------
Net cash provided by operating activities............... 85,392 396,041
----------- ----------
Cash flow from investing activities:
Proceeds from maturities and redemptions of securities held to
maturity..................................................... -- 1,200,000
Proceeds from sales of securities available for sale............ 2,276,307 864,523
Purchases of securities held to maturity........................ -- (193,617)
Purchases of securities available for sale...................... (3,006,309) (200,000)
Net increase in loans........................................... (8,306,934) (1,573,825)
Purchases of property and equipment............................. (10,780) (96,941)
----------- ----------
Net cash provided by (used in) investing activities..... (9,047,716) 140
----------- ----------
Cash flow from financing activities:
Net increase in deposits........................................ 9,788,094 3,337,901
Dividends paid.................................................. (410) (37,678)
Increase (decrease) in customer repurchase agreements........... 287,136 (1,716,726)
----------- ----------
Net cash provided by financing activities............... 10,074,820 1,583,497
----------- ----------
Net increase in cash and cash equivalents......................... 1,112,496 1,979,678
Cash and cash equivalents at beginning of period.................. 8,061,762 4,260,501
----------- ----------
Cash and cash equivalents at end of period........................ $ 9,174,258 $ 6,240,179
=========== ==========
Supplemental Disclosure of Cash Flow Information:
Interest........................................................ $ 996,601 $ 872,743
=========== ==========
Income taxes.................................................... $ 585,956 $ 290,716
=========== ==========
Supplemental Disclosure of non-cash transactions:
Transfer of loans to other real estate owned.................... $ -- $ 33,120
=========== ==========
</TABLE>
The accompanying notes to the consolidated financial statements
should be read with the financial statements.
F-20
<PAGE> 111
TOMOKA BANCORP, INC.
AND SUBSIDIARY
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES:
The accompanying unaudited condensed consolidated financial statements of
Tomoka Bancorp Inc. and its subsidiary (the Company) have been prepared in
accordance with generally accepted accounting principles for interim financial
information. These unaudited interim financial statements should be read in
conjunction with the audited consolidated financial statements and footnotes
included in the Company's 1995 annual report.
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting only of
normal recurring accruals) necessary to present fairly the financial position as
of June 30, 1996 and the results of operations and cash flows for the interim
periods ended June 30, 1996 and 1995. Operating results for the six month period
ended June 30, 1996 are not necessarily indicative of the results of operations
to be expected for the year.
2. COMMITMENTS AND CONTINGENCIES:
The Company's subsidiary bank makes loan commitments and incurs contingent
liabilities in the normal course of business which are not reflected in the
consolidated statements of condition.
3. ACCOUNTING CHANGES:
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The Company is
required to implement SFAS 121 by December 31, 1996. The provisions of SFAS 121
will require the Company to review long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. The adoption is not expected to have a significant
impact on the Company.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 122 (SFAS 122), "Mortgage Servicing Rights," as an
amendment to SFAS 65. The Company is required to implement SFAS 122 by December
31, 1996. The provisions of SFAS 122 eliminate the accounting distinction
between rights to service mortgage loans that are acquired through loan
origination and those acquired through purchase. The adoption is not expected to
have a significant impact on the Company.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based
Compensation." The Company is required to implement SFAS 123 in 1996. SFAS 123
establishes a method of accounting for stock compensation plans based on fair
value. Companies are permitted to continue to use the existing method of
accounting but are required to disclose pro forma net income and earnings per
share as if SFAS 123 had been used to measure compensation cost. The adoption of
SFAS 123 is not expected to have a significant impact on the Company.
F-21
<PAGE> 112
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
THE COLONIAL BANCGROUP, INC.,
AND
TOMOKA BANCORP, INC.
DATED AS OF
JULY 19, 1996
<PAGE> 113
TABLE OF CONTENTS
<TABLE>
<CAPTION>
CAPTION PAGE
- --------------------------------------------------------------------------------------- -----
<C> <S> <C>
ARTICLE 1 -- NAME
1.1 Name......................................................................... A-1
ARTICLE 2 -- MERGER -- TERMS AND CONDITIONS
2.1 Applicable Law............................................................... A-1
2.2 Corporate Existence.......................................................... A-1
2.3 Articles of Incorporation and Bylaws......................................... A-1
2.4 Resulting Corporation's Officers and Board................................... A-2
2.5 Shareholder Approval......................................................... A-2
2.6 Further Acts................................................................. A-2
2.7 Effective Date and Closing................................................... A-2
ARTICLE 3 -- CONVERSION OF ACQUIRED CORPORATION STOCK
3.1 Conversion of Acquired Corporation Stock..................................... A-2
3.2 Surrender of Acquired Corporation Stock...................................... A-3
3.3 Fractional Shares............................................................ A-3
3.4 Adjustments.................................................................. A-3
3.5 BancGroup Stock.............................................................. A-3
3.6 Dissenting Rights............................................................ A-3
ARTICLE 4 -- REPRESENTATIONS, WARRANTIES AND COVENANTS OF BANCGROUP
4.1 Organization................................................................. A-3
4.2 Capital Stock................................................................ A-4
4.3 Financial Statements; Taxes.................................................. A-4
4.4 No Conflict with Other Instrument............................................ A-5
4.5 Absence of Material Adverse Change........................................... A-5
4.6 Approval of Agreements....................................................... A-5
4.7 Tax Treatment................................................................ A-5
4.8 Title and Related Matters.................................................... A-5
4.9 Subsidiaries................................................................. A-5
4.10 Contracts.................................................................... A-6
4.11 Litigation................................................................... A-6
4.12 Compliance................................................................... A-6
4.13 Registration Statement....................................................... A-6
4.14 SEC Filings.................................................................. A-6
4.15 Form S-4..................................................................... A-7
4.16 Brokers...................................................................... A-7
4.17 Government Authorization..................................................... A-7
4.18 Absence of Regulatory Communications......................................... A-7
4.19 Disclosure................................................................... A-7
ARTICLE 5 -- REPRESENTATIONS, WARRANTIES AND COVENANTS OF ACQUIRED CORPORATION
5.1 Organization................................................................. A-7
5.2 Capital Stock................................................................ A-7
5.3 Subsidiaries................................................................. A-7
5.4 Financial Statements; Taxes.................................................. A-8
5.5 Absence of Certain Changes or Events......................................... A-9
5.6 Title and Related Matters.................................................... A-10
5.7 Commitments.................................................................. A-10
5.8 Charter and Bylaws........................................................... A-10
5.9 Litigation................................................................... A-10
</TABLE>
A-i
<PAGE> 114
<TABLE>
<CAPTION>
CAPTION PAGE
- --------------------------------------------------------------------------------------- -----
<C> <S> <C>
5.10 Material Contract Defaults................................................... A-11
5.11 No Conflict with Other Instrument............................................ A-11
5.12 Governmental Authorization................................................... A-11
5.13 Absence of Regulatory Communications......................................... A-11
5.14 Absence of Material Adverse Change........................................... A-11
5.15 Insurance.................................................................... A-11
5.16 Pension and Employee Benefit Plans........................................... A-12
5.17 Buy-Sell Agreement........................................................... A-12
5.18 Brokers...................................................................... A-12
5.19 Approval of Agreements....................................................... A-12
5.20 Disclosure................................................................... A-12
5.21 Registration Statement....................................................... A-12
5.22 Loans; Adequacy of Allowance for Loan Losses................................. A-12
5.23 Environmental Matters........................................................ A-13
5.24 Transfer of Shares........................................................... A-13
5.25 Collective Bargaining........................................................ A-13
5.26 Labor Disputes............................................................... A-13
5.27 Derivative Contracts......................................................... A-13
ARTICLE 6 -- ADDITIONAL COVENANTS
6.1 Additional Covenants of BancGroup............................................ A-14
6.2 Additional Covenants of Acquired Corporation................................. A-16
ARTICLE 7 -- MUTUAL COVENANTS AND AGREEMENTS
7.1 Best Efforts; Cooperation.................................................... A-17
7.2 Press Release................................................................ A-17
7.3 Mutual Disclosure............................................................ A-18
7.4 Access to Properties and Records............................................. A-18
7.5 Payment of Dividends......................................................... A-18
ARTICLE 8 -- CONDITIONS TO OBLIGATIONS OF ALL PARTIES
8.1 Approval by Shareholders..................................................... A-18
8.2 Regulatory Authority Approval................................................ A-18
8.3 Litigation................................................................... A-18
8.4 Registration Statement....................................................... A-19
8.5 Tax Opinion.................................................................. A-19
ARTICLE 9 -- CONDITIONS TO OBLIGATIONS OF ACQUIRED CORPORATION
9.1 Representations, Warranties and Covenants.................................... A-19
9.2 Adverse Changes.............................................................. A-19
9.3 Closing Certificate.......................................................... A-19
9.4 Opinion of Counsel........................................................... A-20
9.5 Fairness Opinion............................................................. A-20
9.6 NYSE Listing................................................................. A-20
9.7 Other Matters................................................................ A-20
9.8 Material Events.............................................................. A-20
ARTICLE 10 -- CONDITIONS TO OBLIGATIONS OF BANCGROUP
10.1 Representations, Warranties and Covenants.................................... A-20
10.2 Adverse Changes.............................................................. A-21
10.3 Closing Certificate.......................................................... A-21
10.4 Opinion of Counsel........................................................... A-21
10.5 Controlling Shareholders..................................................... A-21
10.6 Other Matters................................................................ A-22
10.7 Dissenters................................................................... A-22
</TABLE>
A-ii
<PAGE> 115
<TABLE>
<CAPTION>
CAPTION PAGE
- --------------------------------------------------------------------------------------- -----
<C> <S> <C>
10.8 Severance Agreements......................................................... A-22
10.9 Pooling of Interests......................................................... A-22
10.10 Termination of Shareholders' Agreement....................................... A-22
ARTICLE 11 -- TERMINATION OF REPRESENTATIONS AND WARRANTIES............................ A-22
ARTICLE 12 -- NOTICES.................................................................. A-22
ARTICLE 13 -- AMENDMENT OR TERMINATION
13.1 Amendment.................................................................... A-23
13.2 Termination.................................................................. A-23
13.3 Damages...................................................................... A-23
ARTICLE 14 -- DEFINITIONS.............................................................. A-23
ARTICLE 15 -- MISCELLANEOUS
15.1 Expenses..................................................................... A-27
15.2 Benefit...................................................................... A-27
15.3 Governing Law................................................................ A-27
15.4 Counterparts................................................................. A-27
15.5 Headings..................................................................... A-27
15.6 Severability................................................................. A-27
15.7 Construction................................................................. A-28
15.8 Return of Information........................................................ A-28
15.9 Equitable Remedies........................................................... A-28
15.10 Attorneys' Fees.............................................................. A-28
15.11 No Waiver.................................................................... A-28
15.12 Remedies Cumulative.......................................................... A-28
15.13 Entire Contract.............................................................. A-28
</TABLE>
A-iii
<PAGE> 116
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of this the
19th day of July 1996, by and between Tomoka Bancorp, Inc. ("Acquired
Corporation"), a Florida corporation, and The Colonial Bancgroup, Inc.
("BancGroup"), a Delaware corporation.
WITNESSETH
WHEREAS, Acquired Corporation operates as a bank holding company for its
wholly owned subsidiary, Tomoka State Bank (the "Bank"), with its principal
office in Ormond Beach, Florida; and
WHEREAS, BancGroup is a bank holding company with subsidiary banks in
Alabama, Florida, Georgia and Tennessee; and
WHEREAS, Acquired Corporation wishes to merge with BancGroup; and
WHEREAS, it is the intention of BancGroup and Acquired Corporation 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;
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, Acquired Corporation 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 and the FBCA. The offices and facilities of
Acquired Corporation 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
Acquired Corporation and of BancGroup shall, as provided in the DGCL and the
FBCA, be merged into and continued in the Resulting Corporation, and the
Resulting Corporation shall be deemed to be the same corporation as Acquired
Corporation and BancGroup. All rights, franchises and interests of Acquired
Corporation 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 Acquired
Corporation 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.
A-1
<PAGE> 117
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.
2.5 Shareholder Approval. This Agreement shall be submitted to the
shareholders of Acquired Corporation 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 Acquired Corporation 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 Acquired Corporation or BancGroup,
acquired as a result of the Merger, or (ii) otherwise to carry out the purposes
of this Agreement, Acquired Corporation 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 Acquired Corporation 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 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 ACQUIRED CORPORATION STOCK
3.1 Conversion of Acquired Corporation Stock. (a) On the Effective Date,
and subject to sections 3.3 and 3.6, each share of common stock of Acquired
Corporation outstanding (other than treasury shares) and held by Acquired
Corporation's shareholders (the "Acquired Corporation Stock"), shall be
converted by operation of law and without any action by the holder thereof into
such number of shares of BancGroup Common Stock as shall be equal to $32 divided
by the Market Value. 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
fifth trading day preceding the Effective Date.
(b) On the Effective Date, BancGroup shall assume all Acquired Corporation
Options outstanding, and each such option shall represent the right to acquire
BancGroup Common Stock on substantially the same terms applicable to the
Acquired Corporation Options except as specified below in this section. The
number of shares of BancGroup Common Stock to be issued pursuant to such options
shall equal the number of shares of Acquired Corporation common stock subject to
such Acquired Corporation Options multiplied by the Exchange Ratio, as defined
below, provided that no fractions of shares of BancGroup Common Stock shall be
issued and the number of shares of BancGroup Common Stock to be issued upon the
exercise of Acquired Corporation Options, if a fractional share exists, shall
equal the number of whole shares obtained by rounding to the nearest whole
number, giving account to such fraction. The exercise price for the acquisition
of BancGroup Common Stock shall be the exercise price for each share of Acquired
Corporation common stock subject to such options divided by the Exchange Ratio,
adjusted appropriately for any rounding to the whole shares that may be done.
For purposes of this section 3.1(b), the "Exchange Ratio" shall mean the result
obtained by dividing $32 by the Market Value. Schedule 3.1 hereto sets forth the
names of all persons holding
A-2
<PAGE> 118
Acquired Corporation Options, the number of shares of Acquired Corporation
common stock subject to such options, the exercise price and the expiration date
of such options.
(ii) As soon as practicable after the Effective Date, BancGroup shall file
at its expense a registration statement with the SEC on Form S-8 with respect to
the shares of BancGroup Common Stock to be issued pursuant to such options and
shall use its reasonable best efforts to maintain the effectiveness of such
registration statement for so long as such options remain outstanding. Such
shares shall also be registered or qualified for sale under the securities laws
of any state in which registration or qualification is necessary.
3.2 Surrender of Acquired Corporation Stock. After the Effective Date,
each holder of an outstanding certificate or certificates which prior thereto
represented shares of Acquired Corporation Stock who is entitled to receive
BancGroup Common Stock shall be entitled, upon surrender to BancGroup of their
certificate or certificates representing shares of Acquired Corporation 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 Acquired Corporation 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 so surrendered and exchanged, each such
outstanding certificate which, prior to the Effective Date, represented shares
of Acquired Corporation 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 Acquired
Corporation 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 Acquired Corporation 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 Acquired Corporation 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 Acquired Corporation Stock and
Acquired Corporation Options shall be converted.
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 Acquired Corporation who shall
not have voted in favor of this Agreement and who has complied with the
applicable procedures set forth in the FBCA, relating to rights of dissenting
shareholders, shall be entitled to receive payment for the fair value of his
Acquired Corporation Stock. If after the Effective Date a dissenting shareholder
of Acquired Corporation fails to perfect, or effectively withdraws or loses, his
right to appraisal and payment for his shares of Acquired Corporation Stock,
BancGroup shall issue and deliver the consideration to which such holder of
shares of Acquired Corporation Stock is entitled under Section 3.1 (without
interest) upon surrender of such holder of the certificate or certificates
representing shares of Acquired Corporation Stock held by him.
ARTICLE 4
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BANCGROUP
BancGroup represents, warrants and covenants to and with Acquired
Corporation 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
A-3
<PAGE> 119
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 May 31, 1996,
13,590,085 shares were validly issued and outstanding, fully paid and
nonassessable and are not subject to preemptive rights, and (B) 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 to be issued upon the Merger are duly
authorized and, when so issued, will be validly issued and outstanding, fully
paid and nonassessable, will have been registered under the 1933 Act, and will
have been registered or qualified under the securities laws of all jurisdictions
in which such registration or qualification is required, based upon information
provided by Acquired Corporation.
(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 Acquired Corporation copies of the following
financial statements of BancGroup.
(i) Consolidated balance sheets as of December 31, 1994, and December
31, 1995, and for the three months ending March 31, 1996;
(ii) Consolidated statements of operations for each of the three years
ended December 31, 1993, 1994 and 1995, and for the three months ending
March 31, 1996;
(iii) Consolidated statements of cash flows for each of the three
years ended December 31, 1993, 1994 and 1995, and for the three months
ending March 31, 1996; and
(iv) Consolidated statements of changes in shareholders' equity for
the three years ended December 31, 1993, 1994 and 1995, and for the three
months ending March 31, 1996.
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 GAAP 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. The foregoing representations, insofar
as they relate to the unaudited interim financial statements of BancGroup for
the three months ended March 31, 1996, are subject in all cases to normal
recurring year-end adjustments and the omission of footnote disclosure.
(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 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
A-4
<PAGE> 120
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, 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. This
Agreement constitutes the legal, valid and binding obligation of BancGroup,
enforceable against it in accordance with its terms. Approval of this Agreement
by the stockholders of BancGroup is not required by applicable law. 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 or
material delays.
4.7 Tax Treatment. BancGroup has no present plan to sell or otherwise
dispose of any of the Assets of Acquired Corporation, or to liquidate any
Subsidiaries, subsequent to the Merger, and BancGroup intends to continue the
historic business of Acquired Corporation.
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 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.
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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 affect the properties or Assets thereof or which is
likely to materially affect or delay 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
Statement made in reliance upon and in conformity with information furnished in
writing to BancGroup by Acquired Corporation or any of its representatives
expressly for use in the Proxy Statement or information included in the Proxy
Statement regarding the business of Acquired Corporation, its operations, Assets
and capital.
4.14 SEC Filings.
(a) BancGroup has heretofore delivered to Acquired Corporation copies of
BancGroup's: (i) Annual Report on Form 10-K for the fiscal year ended December
31, 1995; (ii) 1995 Annual Report to Shareholders; (iii) Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1996; and (iv) all other
reports, registration statements and other documents filed by BancGroup with the
SEC since December 31, 1995. Since December 31, 1995, BancGroup has timely filed
all reports and registration statements and the documents required to be filed
with the SEC under the rules and regulations of the SEC and all such reports and
registration statements or other documents have complied in all material
respects, as of their respective filing dates and effective dates, as the case
may be, with all the applicable requirements of the 1933 Act and the 1934 Act.
As of the respective filing and effective dates, none of such reports or
registration statements or other documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) 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
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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 Brokers. All negotiations relative to this Agreement and the
transactions contemplated by this Agreement have been carried on by BancGroup
directly with Acquired Corporation and without the intervention of any other
person, either as a result of any act of BancGroup or otherwise in such manner
as to give rights to any valid claim against BancGroup for finders fee,
brokerage commissions or other like payment.
4.17 Government Authorization. BancGroup and its Subsidiaries have all
Permits that, to the Knowledge of BancGroup and its Subsidiaries, are or will be
legally required to enable BancGroup or any of its Subsidiaries to conduct their
businesses in all material respects as now conducted by each of them.
4.18 Absence of Regulatory Communications. Neither BancGroup nor any of
its Subsidiaries is subject to, or has received during the past three (3) years,
any written 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 a material question
concerning the condition, financial or otherwise, of such company.
4.19 Disclosure. No representation or warranty, or any statement or
certificate furnished or to be furnished to Acquired Corporation 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.
ARTICLE 5
REPRESENTATIONS, WARRANTIES AND COVENANTS OF ACQUIRED CORPORATION
Acquired Corporation represents, warrants and covenants to and with
BancGroup, as follows:
5.1 Organization. Acquired Corporation is a Florida corporation, and the
Bank is a state bank organized under the laws of Florida. Each Acquired
Corporation 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 Acquired Corporation or of Acquired
Corporation and its Subsidiaries taken as a whole.
5.2 Capital Stock. (i) As of March 31, 1996, the authorized capital stock
of Acquired Corporation consists of 1,000,000 shares of common stock, $5.00 par
value per share, 410,913 shares of which are issued and outstanding. All of such
shares which are outstanding are validly issued, fully paid and nonassessable
and not subject to preemptive rights. Acquired Corporation has 83,000 shares of
its common stock subject to exercise at any time pursuant to Acquired
Corporation Options. Except for the foregoing, Acquired Corporation does not
have any other 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. Acquired Corporation has no direct Subsidiaries other
than the Bank, and there are no operating subsidiaries of the Bank. Acquired
Corporation owns all of the issued and outstanding capital stock of the Bank
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, 1996,
there were 1,000,000 shares of the common stock, par value $5.00 per share,
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authorized of the Bank, 405,000 of which are issued and outstanding and wholly
owned by Acquired Corporation.
5.4 Financial Statements; Taxes. (a) Acquired Corporation has delivered to
BancGroup copies of the following financial statements of Acquired Corporation:
(i) Consolidated statements of financial condition as of December 31,
1994 and 1995;
(ii) Consolidated statements of income for each of the three years
ended December 31, 1993, 1994 and 1995;
(iii) Consolidated statements of stockholders' equity for each of the
three years ended December 31, 1993, 1994, and 1995; and
(iv) Consolidated statements of cash flows for the three years ended
December 31, 1993, 1994 and 1995.
All of the foregoing financial statements are in all material respects in
accordance with the books and records of Acquired Corporation 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 Acquired Corporation. Except as and to the extent reflected or
reserved against in such balance sheets (including the notes thereto), Acquired
Corporation did not have, as of the date 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 income, stockholders' equity and cash flows
present fairly the results of operation, changes in shareholders equity and cash
flows of Acquired Corporation 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 Acquired Corporation 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 Acquired
Corporation, 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 Acquired Corporation accrued for or applicable to the period
ended on the dates thereof, and all years and periods prior thereto and for
which Acquired Corporation 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 Acquired Corporation, 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 Acquired Corporation. Acquired Corporation 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 Acquired Corporation 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 Acquired Corporation 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.
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5.5 Absence of Certain Changes or Events. Except as set forth on Schedule
5.5, since the date of the most recent balance sheet provided under section
5.4(a)(i) above, no Acquired Corporation 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
Acquired Corporation Options and shares issued as director's qualifying
shares;
(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) subject to section 7.5 hereof, 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, 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, or requiring the consent of any party to the
transfer and assignment of any of its Assets;
(g) suffered any Losses or waived any rights of value which in either
event in the aggregate are material considering its business as a whole;
(h) except in the ordinary course of business, made or permitted any
amendment or termination of any material Contract, agreement or license to
which it is a party if such amendment or termination is material
considering its business as a whole;
(i) except in accordance with normal and usual practice, 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;
(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;
(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;
(m) entered into any other material transaction other than in the
ordinary course of business; or
(n) agreed in writing, or otherwise, to take any action described in
clauses (a) through (m) above.
Between the date hereof and the Effective Date, no Acquired Corporation
Company, without the express written approval of BancGroup, will do any of the
things listed in clauses (a) through (n) of this section 5.5 except as permitted
therein or as contemplated in this Agreement, and no Acquired Corporation
Company will enter into or amend any material Contract without the express
written consent of BancGroup. Acquired Corporation may request the consent of
BancGroup to any of the foregoing actions by furnishing BancGroup with a written
request which describes the action proposed to be taken by Acquired Corporation.
Such consent shall not be unreasonably withheld. BancGroup shall have a period
of 10 days from the date on which it
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receives such request within which to notify Acquired Corporation of either its
consent or refusal to consent to the proposed action. BancGroup's failure to
respond to any such request within such 10 days period shall be deemed to
constitute a consent to the action proposed in Acquired Corporation's request.
5.6 Title and Related Matters.
(a) Title. Acquired Corporation 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)(i), 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 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 Acquired Corporation, the material
structures and equipment of each Acquired Corporation Company comply in all
material respects with the requirements of all applicable Laws.
(b) Leases. Schedule 5.6(b) sets forth a list and description of all real
and personal property owned or leased by any Acquired Corporation Company,
either as lessor or lessee.
(c) Personal Property. Schedule 5.6(c) sets forth a depreciation schedule
of each Acquired Corporation Company's fixed Assets as of June 30, 1996.
(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 Acquired Corporation Company.
Acquired Corporation 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 Acquired Corporation Company.
5.7 Commitments. Except as set forth in Schedule 5.7, no Acquired
Corporation 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
material 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 Acquired Corporation 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.
5.8 Charter and Bylaws. Schedule 5.8 contains true and correct copies of
the articles of incorporation and bylaws of each Acquired Corporation 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.
5.9 Litigation. There is no Litigation (whether or not purportedly on
behalf of Acquired Corporation) pending or, to the Knowledge of Acquired
Corporation, threatened against or affecting any Acquired Corporation Company
(nor is Acquired Corporation aware of any facts which are likely to 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 Acquired Corporation Company, and no Acquired Corporation
Company is in Default with respect to any judgment, order, writ, injunction,
decree, award, rule or regulation
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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 Acquired Corporation, each
Acquired Corporation 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 Acquired Corporation Company.
5.10 Material Contract Defaults. Except as disclosed on Schedule 5.10, no
Acquired Corporation Company is in Default in any material respect under the
terms of any material 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
Acquired Corporation, there is no event which, with notice or lapse of time, or
both, may be or become an event of Default under any such material 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
Acquired Corporation Company is a party and will not conflict with any provision
of the charter or bylaws of any Acquired Corporation Company.
5.12 Governmental Authorization. Each Acquired Corporation Company has all
Permits that, to the Knowledge of Acquired Corporation, are or will be legally
required to enable any Acquired Corporation Company to conduct its business in
all material respects as now conducted by each Acquired Corporation Company.
5.13 Absence of Regulatory Communications. Except as provided in Schedule
5.13, no Acquired Corporation Company is subject to, nor has any Acquired
Corporation Company received during the past three years, any written
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. To the Knowledge of Acquired
Corporation, 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 Acquired Corporation Company.
5.15 Insurance. Each Acquired Corporation Company has in effect insurance
coverage and bonds with reputable insurers which, in respect to amounts, types
and risks insured, management of Acquired Corporation reasonably believes to be
adequate for the type of business conducted by such company. No Acquired
Corporation 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 Acquired Corporation Company has received any notice of any
material premium increase or cancellation with respect to any of its insurance
policies or bonds. Within the last three years, no Acquired Corporation 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 substantially equivalent coverage will be
outstanding and in full force with respect to each Acquired Corporation Company
at all times from the date hereof to the Effective Date.
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5.16 Pension and Employee Benefit Plans.
(a) To the Knowledge of Acquired Corporation, all employee benefit plans of
each Acquired Corporation Company have been established in compliance with, and
such plans have been operated in material compliance with, all applicable Laws.
Except as set forth in Section 5.16, no Acquired Corporation Company sponsors or
otherwise maintains a "pension plan" within the meaning of section 3(2) of ERISA
or any other retirement plan of Acquired Corporation 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
Acquired Corporation, no employee benefit plan, any trust created thereunder or
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 Acquired Corporation Company.
(b) Except as set forth in Schedule 5.16(b), to the Knowledge of Acquired
Corporation, no amounts payable to any employee of any Acquired Corporation
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. Except as set forth in Schedule 5.17, to the
Knowledge of Acquired Corporation, there are no agreements among any of its
shareholders granting to any person or persons a right of first refusal in
respect of the sale, transfer, or other disposition of shares of outstanding
securities by any shareholder of Acquired Corporation, any similar agreement or
any voting agreement or voting trust in respect of any such shares.
5.18 Brokers. Except for services provided to Acquired Corporation by
Investment Bank Services, Inc., all negotiations relative to this Agreement and
the transactions contemplated by this Agreement have been carried on by Acquired
Corporation directly with BancGroup and without the intervention of any other
person, either as a result of any act of Acquired Corporation, or otherwise, in
such manner as to give rise to any valid claim against Acquired Corporation for
a finder's fee, brokerage commission or other like payment.
5.19 Approval of Agreements. The board of directors of Acquired
Corporation has approved this Agreement and the transactions contemplated by
this Agreement and has authorized the execution and delivery by Acquired
Corporation of this Agreement. Subject to the matters referred to in section
8.2, Acquired Corporation has full power, authority and legal right to enter
into this Agreement, and, upon appropriate vote of the shareholders of Acquired
Corporation in accordance with this Agreement, Acquired Corporation 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 Acquired Corporation,
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.
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 section shall only apply to
statements in or omissions from the Proxy Statement relating to descriptions of
the business of Acquired Corporation, its Assets, properties, operations, and
capital stock or to information furnished in writing by Acquired Corporation 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 Acquired
Corporation have been calculated in accordance with prudent and customary
banking practices and are adequate to reflect the risk inherent in the loans of
Acquired Corporation. Acquired Corporation 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
Acquired Corporation is the legal, valid and binding obligation of the obligor
of each loan, enforceable in accordance with its terms
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subject to the effect of bankruptcy, insolvency, reorganization, moratorium, or
other similar laws relating to creditors' rights generally and to general
equitable principles. Acquired Corporation does not have in its portfolio any
loan exceeding its legal lending limit, and except as disclosed on Schedule
5.22, Acquired Corporation has no known significant delinquent, substandard,
doubtful, loss, nonperforming or problem loans.
5.23 Environmental Matters. Except as provided in Schedule 5.23, to the
Knowledge of Acquired Corporation, each Acquired Corporation 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 Acquired
Corporation has no Knowledge that any Acquired Corporation Company has not
complied with all regulations and requirements promulgated by the Occupational
Safety and Health Administration that are applicable to any Acquired Corporation
Company. To the Knowledge of Acquired Corporation, there is no Litigation
pending or threatened with respect to any violation or alleged violation of the
Environmental Laws. To the Knowledge of Acquired Corporation, with respect to
Assets of or owned by any Acquired Corporation 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 Acquired Corporation Company. Acquired
Corporation has no Knowledge of any facts which might suggest that any Acquired
Corporation 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 Acquired Corporation Company to any Liability, either directly 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 Acquired Corporation, no Acquired Corporation
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 which are required under any
Environmental Law which has not been obtained.
5.24 Transfer of Shares. Acquired Corporation has no Knowledge of any plan
or intention on the part of Acquired Corporation'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 Acquired Corporation's common stock
outstanding immediately before the Merger.
5.25 Collective Bargaining. There are no labor contracts, collective
bargaining agreements, letters of undertakings or other arrangements, formal or
informal, between any Acquired Corporation Company and any union or labor
organization covering any of any Acquired Corporation Company's employees and
none of said employees are represented by any union or labor organization.
5.26 Labor Disputes. To the Knowledge of Acquired Corporation, each
Acquired Corporation Company is in material compliance with all federal and
state laws respecting employment and employment practices, terms and conditions
of employment, wages and hours. No Acquired Corporation Company is or has been
engaged in any unfair labor practice, and, to the Knowledge of Acquired
Corporation, no unfair labor practice complaint against any Acquired Corporation
Company is pending before the National Labor Relations Board. Relations between
management of each Acquired Corporation Company and the employees are amicable
and there have not been, nor to the Knowledge of Acquired Corporation, are there
presently, any attempts to organize employees, nor to the Knowledge of Acquired
Corporation, are there plans for any such attempts.
5.27 Derivative Contracts. No Acquired Corporation Company is a party to
or has agreed to enter into a swap, forward, future, option, cap, floor or
collar financial contract, or any other interest rate or foreign currency
protection contract or derivative security not included in Acquired
Corporation's financial statements delivered under section 5.4 hereof which is a
financial derivative contract (including various combinations thereof).
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ARTICLE 6
ADDITIONAL COVENANTS
6.1 Additional Covenants of BancGroup. BancGroup covenants to and with
Acquired Corporation 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 Acquired Corporation 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.
(c) Financial Statements. BancGroup shall furnish to Acquired
Corporation:
(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
Acquired Corporation may reasonably request.
(d) No Control of Acquired Corporation by BancGroup. Notwithstanding
any other provision hereof, until the Effective Date, the authority to
establish and implement the business policies of Acquired Corporation shall
continue to reside solely in Acquired Corporation'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. Except as provided in section
6.1(f)(ii), on the Effective Date, all employees of any Acquired
Corporation 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 Acquired Corporation
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. Employees of
any Acquired Corporation 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, and the time of employment of such
employees who are employed at least 30 hours per week with any Acquired
Corporation Company shall be counted as employment under
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such dental and medical plans of Colonial Bank for purposes of calculating
any 30 day waiting period and pre-existing condition limitations. To the
extent permitted by applicable Law, the period of service with the
appropriate Acquired Corporation Company of all employees who become
employees of the 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
Acquired Corporation Company employee shall be given credit for covered
expenses paid by that employee under comparable employee benefit plans of
the Acquired Corporation 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.
(g) Indemnification: Directors and Officers Insurance.
(i) From and after the Effective Date, BancGroup shall indemnify
and advance costs and expenses (including reasonable attorneys fees,
disbursements and expenses) and hold harmless each present and former
director and/or officer of Acquired Corporation or its Subsidiaries
determined as of the Effective Date (the "Indemnified Parties"), against
any costs or expenses (including reasonable attorney's fees), judgments,
fines, losses, claims, damages, settlements or liabilities
(collectively, "Costs") incurred in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal,
administrative or investigative (each a "Claim"), arising out of or
pertaining to matters existing or occurring at or prior to the Effective
Date, whether asserted or claimed prior to, at or after the Effective
Date to the fullest extent that Acquired Corporation would have been
permitted under Florida law and its Articles of Incorporation or Bylaws
in effect on the date hereof, to indemnify such person (and also advance
expenses as incurred to the fullest extent permitted under applicable
law).
(ii) Any Indemnified Party wishing to claim indemnification under
Section 6.1(i) shall notify BancGroup within forty-five (45) days of the
Indemnified Party's receipt of a notice of any Claim, but the failure to
so notify shall not relieve BancGroup of any liability it may have to
such Indemnified Party if such failure does not materially prejudice the
indemnifying party. In the event of any claim (whether arising before or
after the Effective Date), (i) BancGroup shall have the right to assume
the defense thereof, and BancGroup shall not be liable to such
Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection
with he defense thereof, except that if the BancGroup elects not to
assume such defense, or counsel for the Indemnified Parties advises that
there are issues which raise conflicts of interest between BancGroup and
the Indemnified Parties, the Indemnified Parties may retain counsel
satisfactory to them, and BancGroup shall pay the reasonable fees and
expenses of such counsel for the Indemnified Parties promptly after
statements therefore are received; provided, however, that BancGroup
shall be obligated pursuant to this paragraph (ii) to pay for only one
firm of counsel for all Indemnified Parties in any jurisdiction unless
the use of one counsel for such Indemnified Parties will present such
counsel with a conflict of interest, (ii) the Indemnified Parties will
cooperate in the defense of any such matter, and (iii) and BancGroup
shall not be liable for any settlement effected without its prior
written consent which shall not be unreasonably withheld. If such
indemnity with any respect to any Indemnified Party is unenforceable
against BancGroup, then BancGroup and the Indemnified Party shall
contribute to the amount payable in such proportion as is appropriate to
reflect relative faults and benefits.
(iii) For a period of three (3) years after the Effective Date,
BancGroup shall cause to be maintain in effect the current policies with
directors and officers liability insurance maintained by Acquired
Corporation (provided that BancGroup may substitute therefore policies
of at least the same coverage and amounts containing terms and
conditions which are no less advantageous to such directors and
officers) with respect to claims arising from facts or events which
occurred before the Effective Date. Provided that such policies may be
maintained at a cost that is comparable to the cost of such policies as
of the date of this Agreement.
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(iv) If BancGroup or any of its successors and assigns, (i) shall
consolidate with or merge into any other corporation or entity and shall
not be the continuing or surviving corporation or entity of such
consolidation or merger, or (ii) shall transfer all or substantially all
of its property and assets to any individual, corporation or other
entity, then, in each such case, proper provision shall be made so that
the successors and assigns of BancGroup and its Subsidiaries shall
assume the obligations set forth in this section.
(v) The provisions of this Section 6.1(g) are intended to be for
the benefit of, and shall be enforceable by each Indemnified Party, and
each Indemnified Party's heirs and representatives.
6.2 Additional Covenants of Acquired Corporation. Acquired Corporation
covenants to and with BancGroup as follows:
(a) Operations. Acquired Corporation will conduct its business and
the business of each Acquired Corporation Company in a proper and prudent
manner and will use its best efforts to maintain its relationships with its
depositors, customers and employees. No Acquired Corporation 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 Acquired Corporation permit the occurrence of any
change or event which would render any of the 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. Acquired Corporation 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 Acquired Corporation nor any of Acquired Corporation'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, Acquired Corporation or
any business combination involving Acquired Corporation or any Acquired
Corporation Company other than as contemplated by this Agreement. Acquired
Corporation will notify BancGroup immediately if any such inquiries or
proposals are received by Acquired Corporation, if any such information is
requested from Acquired Corporation, or if any such negotiations or
discussions are sought to be initiated with Acquired Corporation, and
Acquired Corporation shall instruct Acquired Corporation's officers,
directors, agents or affiliates or their subsidiaries to refrain from doing
any of the above; provided, however, that nothing contained herein shall be
deemed to prohibit any officer or director of Acquired Corporation from
fulfilling his fiduciary duty or from taking any action that is required by
Law.
(d) Director Recommendation. The members of the Board of Directors of
Acquired Corporation agree to support the Merger publicly, provided,
however, that nothing contained herein shall be deemed to prohibit any
officer or director of Acquired Corporation from fulfilling his fiduciary
duty or from taking any action that is required by Law.
(e) Shareholder Voting. Acquired Corporation shall on the date of
execution of this Agreement obtain and submit to BancGroup an agreement
from its directors substantially in the form set forth in Exhibit A.
(f) Financial Statements. Acquired Corporation shall furnish to
BancGroup:
(i) As soon as practicable and in any event within 30 days after
the end of each quarterly period (other than the last quarterly period)
in each fiscal year, consolidated statements of operations of Acquired
Corporation 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
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of financial condition of Acquired Corporation 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 Acquired Corporation by independent auditors in connection
with each annual, interim or special audit of the books of Acquired
Corporation made by such accountants;
(iii) As soon a practicable, copies of all such financial
statements and reports as it shall send to its stockholders and of such
regular and periodic reports as Acquired Corporation may file with the
SEC or any other Agency; and
(iv) With reasonable promptness, such additional financial data as
the BancGroup may reasonably request.
(g) Fiduciary Duties. Prior to the Effective Date, no director or
officer (each an "Executive") of any Acquired Corporation Company shall,
directly or indirectly, own, manage, operate, join, control, be employed by
or participate in the ownership, proposed ownership, management, operation
or control of or be connected in any manner with, any business, corporation
or partnership which is competitive to the business of any Acquired
Corporation Company. All Executives, at all times, shall satisfy their
fiduciary duties to Acquired Corporation and its Subsidiaries in a
fiduciary capacity, and such Executives shall not (except as required in
the course of his or her employment with any Acquired Corporation Company)
communicate or divulge to, or use for the benefit of himself or herself or
any other person, firm, association or corporation, without the express
written consent of Acquired Corporation, any confidential information which
is possessed, owned or used by or licensed by or to any Acquired
Corporation Company or confidential information belonging to third parties
which any Acquired Corporation Company shall be under obligation to keep
secret or which may be communicated to, acquired by or learned of by the
Executive in the course of or as a result of his or her employment with any
Acquired Corporation Company.
(h) Certain Practices. At the request of BancGroup, (i) Acquired
Corporation will consult with BancGroup and advise BancGroup through its
Subsidiary in Florida of all non single-family residential loan requests
over $150,000 or any other loan request out of the normal course of
business and (ii) Acquired Corporation will consult with BancGroup to
coordinate various other business issues on a basis mutually satisfactory
to Acquired Corporation and BancGroup. Acquired Corporation and each
Acquired Corporation Company shall not be required to undertake any of such
activities, however, except as such activities may be in compliance with
existing Law and Regulations.
ARTICLE 7
MUTUAL COVENANTS AND AGREEMENTS
7.1 Best Efforts; Cooperation. Subject to the terms and conditions herein
provided, BancGroup and Acquired Corporation 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.
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
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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 Assets, 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.
7.5 Payment of Dividends. If the Effective Date has not occurred as of six
months from the date of this Agreement, Acquired Corporation may pay a cash
dividend to its shareholders each time that BancGroup pays a cash dividend to
BancGroup stockholders following the date that is six months from the date
hereof. The amount of the dividend that the Acquired Corporation shall be
permitted to pay shall equal, in the aggregate, the total dividend that the
holders of Acquired Corporation Stock would have received from BancGroup had the
holders of Acquired Corporation Stock been holders of BancGroup Common Stock on
the date of record for any dividends paid by BancGroup. For purposes of this
section, the Market Value shall be calculated as if the Effective Date had
occurred on the date of record of the payment of the BancGroup dividend, and,
accordingly, a pro forma calculation of the number of shares of BancGroup Common
Stock that would have been outstanding and held by Acquired Corporation
shareholders will be made to determine the amount of the cash dividend to which
shareholders of Acquired Corporation are entitled.
ARTICLE 8
CONDITIONS TO OBLIGATIONS OF ALL PARTIES
The obligations of BancGroup and Acquired Corporation 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 Acquired Corporation as is required by
applicable Law and Acquired Corporation's articles of incorporation and by-laws.
8.2 Regulatory Authority Approval. Orders, Consents and approvals, in form
and substance reasonably satisfactory to BancGroup and Acquired Corporation
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.
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.
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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 Miller, Hamilton, Snider & Odom, L.L.C.,
counsel to BancGroup, shall have been received in form and substance reasonably
satisfactory to the Acquired Corporation 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 Acquired Corporation;
(iii) no gain or loss will be recognized to the shareholders of Acquired
Corporation who receive shares of BancGroup Common Stock except to the extent of
any taxable "boot" received by such persons from BancGroup, and except to the
extent of any dividends received from Acquired Corporation prior to the
Effective Date; (iv) the basis of the BancGroup Common Stock received in the
Merger will be equal to the sum of the basis of the shares of Acquired
Corporation common stock exchanged in the Merger and the amount of gain, if any,
which was recognized by the exchanging Acquired Corporation shareholder,
including any portion treated as a dividend, less the value of taxable boot, if
any, received by such shareholder in the Merger; (v) the holding period of the
BancGroup Common Stock will include the holding period of the shares of Acquired
Corporation common stock exchanged therefor if such shares of Acquired
Corporation common stock were capital assets in the hands of the exchanging
Acquired Corporation shareholder; and (vi) cash received by a Acquired
Corporation shareholder in lieu of a fractional share interest of BancGroup
Common 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 or she would otherwise be entitled to receive and will qualify as
capital gain or loss (assuming the Acquired Corporation common stock was a
capital asset in his or her hands as of the Effective Date).
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF ACQUIRED CORPORATION
The obligations of Acquired Corporation 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 Acquired Corporation may waive such conditions in writing:
9.1 Representations, Warranties and Covenants. Notwithstanding any
investigation made by or on behalf of Acquired Corporation, 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 Acquired Corporation or its
shareholders pursuant to this Agreement.
9.3 Closing Certificate. In addition to any other deliveries required to
be delivered hereunder, Acquired Corporation 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:
(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
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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
Acquired Corporation's shareholders, 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
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 Acquired
Corporation 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. Acquired Corporation shall have received an
opinion of Miller, Hamilton, Snider & Odom, L.L.C., counsel to BancGroup, dated
as of the Closing, in form reasonably satisfactory to Acquired Corporation, as
to matters set forth in Exhibit B hereto.
9.5 Fairness Opinion. Acquired Corporation shall have received prior to
the mailing of the Proxy Statement from Professional Bank Services, Inc., a
letter setting forth its opinion that the consideration to be received by the
shareholders of Acquired Corporation under the terms of this Agreement is fair
to them from a financial point of view.
9.6 NYSE Listing. The shares of BancGroup Common Stock to be issued under
this Agreement shall have been approved for listing on the NYSE.
9.7 Other Matters. There shall have been furnished to such counsel for
Acquired Corporation certified copies of such corporate records of BancGroup and
copies of such other documents as such counsel may reasonably have requested for
such purpose.
9.8 Material Events. There shall have been no determination by the board
of directors of Acquired Corporation that the transactions contemplated by this
Agreement have become impractical because of any state of war, declaration of a
banking moratorium in the United States or a general suspension of trading on
the NYSE or any other exchange on which BancGroup Common Stock may be traded.
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 on or before
the Effective Date of all 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 Acquired Corporation 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 Acquired
Corporation shall have performed in all material
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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 Acquired
Corporation which constitute a Material Adverse Effect, nor shall there have
been any material changes in the Laws governing the business of Acquired
Corporation which would impair BancGroup's rights pursuant to this Agreement.
10.3 Closing Certificate. 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
Acquired Corporation dated as of the Closing certifying that:
(a) the Board of Directors of Acquired Corporation 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 Acquired Corporation 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 Acquired
Corporation is an officer of Acquired Corporation 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 Acquired Corporation 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
Acquired Corporation's shareholders, 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
statements therein, not misleading in light of the circumstances under
which they were made (it being understood that such persons need only
express a statement as to information concerning or provided by Acquired
Corporation for inclusion in such Proxy Statement); and
(f) the conditions set forth in this Article 10 insofar as they relate
to Acquired Corporation have been satisfied.
10.4 Opinion of Counsel. BancGroup shall have received an opinion of
Shutts & Bowen, L.L.P., counsel to Acquired Corporation, 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 Acquired Corporation
who may be an "affiliate" of Acquired Corporation, within the meaning of Rule
145 of the general rules and regulations under the 1933 Act shall have executed
and delivered an agreement satisfactory to BancGroup in substantially the form
set forth in Exhibit D 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, and that such person will not sell or otherwise reduce the
risk relative to any shares of BancGroup Common Stock received in the Merger
until financial results concerning at least 30 days of post-Merger combined
operations have been published by BancGroup. Acquired Corporation recognizes and
acknowledges that BancGroup Common Stock issued to such persons may bear a
legend evidencing the agreement 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 Acquired Corporation and
copies of such other documents as such counsel may reasonably have requested for
such purpose.
10.7 Dissenters. The number of shares as to which shareholders of Acquired
Corporation have exercised dissenters rights of appraisal under section 3.6 does
not exceed ten percent (10%) of the outstanding shares of common stock of
Acquired Corporation.
10.8 Severance Agreements. A severance agreements, in substantially the
form set forth in Exhibit E, shall have been executed between BancGroup and
Thomas H. Dargan.
10.9 Pooling of Interests. BancGroup shall have received the written
opinion of Coopers & Lybrand, L.L.P., that the Merger will qualify for the
pooling of interests method of accounting under generally accepted accounting
principles.
10.10 Termination of Shareholders' Agreement. The Shareholders' Agreement
dated April 9, 1990 shall have been terminated no later than 30 days from the
date hereof.
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, Article 15 and any applicable definitions of Article
14, shall survive. Items disclosed in the Exhibits and Schedules attached hereto
are incorporated into this Agreement and form a part of the 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 Acquired Corporation to Thomas H. Dargan, President and CEO,
Tomoka Bancorp, Inc., 201 S. Nova Road, Ormond Beach, Florida 32174,
facsimile 904/677-5402, with copies to Rod Jones, Esquire, Shutts & Bowen,
facsimile 407/425-8316, or as may otherwise be specified by Acquired
Corporation 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, Alabama 36104, facsimile (334) 265-4533, or
as may otherwise be specified in writing by BancGroup to Acquired
Corporation.
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ARTICLE 13
AMENDMENT OR TERMINATION
13.1 Amendment. This Agreement may be amended by the mutual consent of
BancGroup and Acquired Corporation before or after approval of the transactions
contemplated herein by the shareholders of Acquired Corporation.
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 Acquired Corporation, as follows:
(a) by the mutual consent of the respective boards of directors of
Acquired Corporation 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 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 Acquired Corporation;
(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 either BancGroup or Acquired
Corporation if all transactions contemplated by this Agreement shall not
have been consummated on or prior to March 31, 1997, 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,
Acquired Corporation and BancGroup shall not be liable for damages for any
breach of warranty or representation contained in this Agreement made in good
faith, and, in that case, the expenses incurred shall be borne as set forth in
section 15.1 hereof.
ARTICLE 14
DEFINITIONS
The following terms, which are capitalized in this Agreement, shall have
the meanings set forth below for the purpose of this Agreement:
Acquired Corporation Tomoka Bancorp, Inc., a Florida corporation.
Acquired Corporation
Company Shall mean Acquired Corporation, the Bank, any
Subsidiary of Acquired Corporation or the Bank, or
any person or entity acquired as a Subsidiary of
Acquired Corporation or the Bank in the future and
owned by Acquired Corporation or the Bank at the
Effective Date.
Acquired Corporation
Options Options respecting the issuance of Acquired
Corporation common stock pursuant to Acquired
Corporation's stock option plans.
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Acquired Corporation Stock Shares of Common stock, par value $5.00 per share,
of Acquired Corporation.
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 Amended and Restated Agreement and
Plan of Merger and the Exhibits and Schedules
delivered pursuant hereto and incorporated herein
by reference.
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 Tomoka State Bank, a Florida bank.
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.
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
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.
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Environmental 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.
Exchange Ratio The ratio of the number of shares of BancGroup
Common Stock to be issued for Acquired Corporation
Options, as defined in section 3.1(b).
Exhibits A through C, 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.
Executive Means those persons covered by section 6.2(g)
hereof.
FBCA The Florida Business Corporation Act
GAAP Generally Accepted Accounting Principles
Knowledge Means the actual knowledge 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 Acquired Corporation and the Bank,
in the case of knowledge of Acquired Corporation.
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 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
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required by the context, includes the owner or
operator of such property, but only with respect to
such property.
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.
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 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 Acquired Corporation with BancGroup
as contemplated in this Agreement.
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 Acquired Corporation or BancGroup, and
"Parties" shall mean both Acquired Corporation and
BancGroup.
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.
Proxy Statement The proxy statement used by Acquired Corporation to
solicit the approval of its stockholders of the
transactions contemplated by this Agreement, which
shall include the prospectus of BancGroup relating
to
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the issuance of the BancGroup Common Stock to the
shareholders of Acquired Corporation.
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 Acquired
Corporation, to register the shares of BancGroup
Common Stock offered to stockholders of the Bank
pursuant to his Agreement, including the Proxy
Statement.
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 Acquired
Corporation 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
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.
1933 Act The Securities Act of 1933, as amended.
1934 Act The Securities Exchange Act of 1934, as amended.
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 Acquired Corporation and BancGroup, and their respective successors. This
Agreement shall not be assignable by any Party without the prior written consent
of the other Party.
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.
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,
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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 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.
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.
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, Acquired Corporation and BancGroup have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first above written.
<TABLE>
<S> <C>
ATTEST: TOMOKA BANCORP, INC.
By: /s/ S. Craig Suazo By: /s/ Thomas H. Dargan
------------------------------------------ ------------------------------------------
Its: Secretary Its: President/CEO
----------------------------------------- -----------------------------------------
CORPORATE SEAL)
ATTEST: THE COLONIAL BANCGROUP, INC.
By: /s/ Teresa Skipper By: W. Flake Oakley
------------------------------------------ ------------------------------------------
Its: Assistant Secretary Its: Chief Financial Officer
----------------------------------------- -----------------------------------------
(CORPORATE SEAL)
</TABLE>
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<PAGE> 145
APPENDIX B
July 15, 1996
Board of Directors
Tomoka Bancorp, Inc.
201 S. Nova Road
Ormond Beach, Florida 32174-6116
Dear Members of the Board:
You have requested our opinion as investment bankers as to the fairness,
from a financial perspective, to the common shareholders of Tomoka Bancorp,
Inc., Ormond Beach, Florida ("Company"), and it's wholly owned subsidiary Tomoka
State Bank ("Bank"), of the proposed merger of the Company with and into The
Colonial BancGroup, Inc., Montgomery, Alabama ("BancGroup"). In the proposed
merger, Company shareholders will receive such number of shares of BancGroup
Common Stock as shall be equal to $32.00 divided by BancGroup's market value,
per each Company common share, subject to certain adjustments as defined in the
Agreement and Plan of Merger ("the Agreement") by and between BancGroup and the
Company.
Professional Bank Services, Inc. ("PBS") is a bank consulting firm and as
part of its investment banking business is continually engaged in reviewing the
fairness, from a financial perspective, of bank acquisition transactions and in
the valuation of banks and other businesses and their securities in connection
with mergers, acquisitions, estate settlements and other purposes. We are
independent with respect to the parties of the proposed transaction.
For purposes of this opinion, PBS reviewed and analyzed the historical
performance of the Company as set forth in: (i) December 31, 1995 and 1994
audited financial statements; (ii) March 26, 1996 Proxy Statement, (iii) March
31, 1996, December 31, 1995 and September 30, 1995 Consolidated Reports of
Condition and Income as filed with the Federal Deposit Insurance Corporation
("FDIC"), by the Bank; (iv) March 31, 1996 unaudited internal reports of
condition and income for the Bank and the Company; (v) June 30, 1995, September
30, 1995, December 31, 1994 and March 31, 1996 Uniform Bank Performance Reports
of the Bank; (vi) the historical common stock trading activity of the Company;
and (vii) the premises and other fixed assets. We have reviewed and tabulated
statistical data regarding the loan portfolio, securities portfolio and other
performance ratios and statistics. Financial projections were prepared and
analyzed, as well as other financial studies, analyses and investigations as
deemed relevant for the purposes of this opinion. We have reviewed and tabulated
consolidated statistical data regarding growth, and growth prospects for service
markets, liquidity, asset composition and quality, profitability, leverage and
capital adequacy. In the review of the aforementioned information, we have taken
into account our assessment of general market and financial conditions, our
experience in other transactions, and our knowledge of the banking industry
generally.
In connection with our opinion, we have analyzed and evaluated the
historical performance and current financial condition of BancGroup as contained
in: (i) December 31, 1995, 1994 and 1993 audited financial statements; (ii)
March 31, 1996 financial data; (iii) historical common stock trading and
dividend activity to date; (iv) the Agreement; and (v) the financial terms of
certain other comparable transactions. We have prepared and analyzed the pro
forma consolidated financial condition of the Company and BancGroup. We have
reviewed and tabulated consolidated statistical data regarding growth prospects
for service markets, liquidity, asset composition and quality, profitability,
leverage and capital adequacy.
We have not compiled, reviewed or audited the financial statements of the
Company, or BancGroup, nor have we independently verified any of the information
reviewed; we have relied upon such information as being complete and accurate in
all material respects. We have not made an independent evaluation of the assets
of the Company, or BancGroup.
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Based on the foregoing and all other factors deemed relevant, it is our
opinion as investment bankers, that, as of the date hereof, the consideration
proposed to be received by the shareholders of the Company under the Agreement
is fair and equitable from a financial perspective.
Very truly yours,
PROFESSIONAL BANK SERVICES, INC.
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APPENDIX C
FLORIDA BUSINESS CORPORATION ACT
SEC. 607.1301-1320
607.1301. DISSENTERS' RIGHTS; DEFINITIONS
The following definitions apply to ss. 607.1302 and 607.1320:
(1) "Corporation" means the issuer of the shares held by a dissenting
shareholder before the corporate action or the surviving or acquiring
corporation by merger or share exchange of that issuer.
(2) "Fair value," with respect to a dissenter's shares, means the
value of the shares as of the close of business on the day prior to the
shareholders' authorization date, excluding any appreciation or
depreciation in anticipation of the corporate action unless exclusion would
be inequitable.
(3) "Shareholders' authorization date" means the date on which the
shareholders' vote authorizing the proposed action was taken, the date on
which the corporation received written consents without a meeting from the
requisite number of shareholders in order to authorize the action, or, in
the case of a merger pursuant to s. 607.1104, the day prior to the date on
which a copy of the plan of merger was mailed to each shareholder of record
of the subsidiary corporation.
607.1302. RIGHT OF SHAREHOLDERS TO DISSENT
(1) Any shareholder of a corporation has the right to dissent from, and
obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party:
1. If the shareholder is entitled to vote on the merger, or
2. If the corporation is a subsidiary that is merged with its
parent under s. 607.1104, and the shareholders would have been entitled
to vote on action taken, except for the applicability of s. 604.1104;
(b) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation, other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale or
exchange pursuant to s. 607.1202, including a sale in dissolution but not
including a sale pursuant to court order or a sale for cash pursuant to a
plan by which all or substantially all of the net proceeds of the sale will
be distributed to the shareholders within 1 year after the date of sale;
(c) As provided in s. 607.0902(11), the approval of a control-share
acquisition;
(d) Consummation of a plan of share exchange to which the corporation
is a party as the corporation the shares of which will be acquired, if the
shareholder is entitled to vote on the plan;
(e) Any amendment of the articles of incorporation if the shareholder
is entitled to vote on the amendment and if such amendment would adversely
affect such shareholder by:
1. Altering or abolishing any preemptive rights attached to any of
his shares;
2. Altering or abolishing the voting rights pertaining to any of
his shares, except as such rights may be affected by the voting rights
of new shares then being authorized of any existing or new class or
series of shares;
3. Effecting an exchange, cancellation, or reclassification of any
of his shares, when such exchange, cancellation, or reclassification
would alter or abolish his voting rights or alter his percentage of
equity in the corporation, or effecting a reduction or cancellation of
accrued dividends or other arrearages in respect to such shares;
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4. Reducing the stated redemption price of any of his redeemable
shares, altering or abolishing any provision relating to any sinking
fund for the redemption or purchase of any of his shares, or making any
of his shares subject to redemption when they are not otherwise
redeemable;
5. Making noncumulative, in whole or in part, dividends of any of
his preferred shares which had theretofore been cumulative;
6. Reducing the stated dividend preference of any of his preferred
shares; or
7. Reducing any stated preferential amount payable on any of his
preferred shares upon voluntary or involuntary liquidation; or
(f) Any corporate action taken, to the extent the articles of
incorporation provide that a voting or nonvoting shareholder is entitled to
dissent and obtain payment for his shares.
(2) A shareholder dissenting from any amendment specified in paragraph
(1)(e) has the right to dissent only as to those of his shares which are
adversely affected by the amendment.
(3) A shareholder may dissent as to less than all the shares registered in
his name. In that event, his rights shall be determined as if the shares as to
which he has dissented and his other shares were registered in the names of
different shareholders.
(4) Unless the articles of incorporation otherwise provide, this section
does not apply with respect to a plan of merger or share exchange or a proposed
sale or exchange of property, to the holders of shares of any class or series
which, on the record date fixed to determine the shareholders entitled to vote
at the meeting of shareholders at which such action is to be acted upon or to
consent to any such action without a meeting, were either registered on a
national securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of Securities
Dealers, Inc., or held of record by not fewer than 2,000 shareholders.
(5) A shareholder entitled to dissent and obtain payment for his shares
under this section may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
607.1320. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
(1)(a) If a proposed corporate action creating dissenters' rights under s.
607.1302 is submitted to a vote at a shareholders' meeting, the meeting notice
shall state that shareholders are or may be entitled to assert dissenters'
rights and be accompanied by a copy of ss. 607.1301, 607.1302, and 607.1320. A
shareholder who wishes to assert dissenters' rights shall:
1. 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. Not vote his shares in favor of the proposed action. A proxy or
vote against the proposed action does not constitute such a notice of
intent to demand payment.
(b) If proposed corporate action creating dissenters' rights under s.
607.1302 is effectuated by written consent without a meeting, the corporation
shall deliver a copy of ss. 607.1301, 607.1302, and 607.1320 to each shareholder
simultaneously with any request for his written consent, or if such a request is
not made, within 10 days after the date the corporation received written
consents without a meeting from the requisite number of shareholders necessary
to authorize the action.
(2) Within 10 days after the shareholders' authorization date, the
corporation shall give written notice of such authorization or consent or
adoption of the plan of merger, as the case may be, to each shareholder who
filed a notice of intent to demand payment for his shares pursuant to paragraph
(1)(a) or, in the case of action authorized by written consent, to each
shareholder, excepting any who voted for, or consented in writing to, the
proposed action.
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(3) Within 20 days after the giving of notice to him, any shareholder who
elects to dissent shall file with the corporation a notice of such election,
stating his name and address, the number, classes, and series of shares as to
which he dissents, and a demand for payment of the fair value of his shares. Any
shareholder failing to file such election to dissent within the period set forth
shall be bound by the terms of the proposed corporate action. Any shareholder
filing an election to dissent shall deposit his certificates for certificated
shares with the corporation simultaneously with the filing of the election to
dissent. The corporation may restrict the transfer of uncertificated shares from
the date the shareholder's election to dissent is filed with the corporation.
(4) Upon filing a notice of election to dissent, the shareholder shall
thereafter be entitled only to payment as provided in this section and shall not
be entitled to vote or to exercise any other rights of a shareholder. A notice
of election may be withdrawn in writing by the shareholder at any time before an
offer is made by the corporation, as provided in subsection (5), to pay for his
shares. After such offer, no such notice of election may be withdrawn unless the
corporation consents thereto. However, the right of such shareholder to be paid
the fair value of his shares shall cease, and he shall be reinstated to have all
his rights as a shareholder as of the filing of his notice of election,
including any intervening preemptive rights and the right to payment of any
intervening dividend or other distribution or, if any such rights have expired
or any such dividend or distribution other than in cash has been completed, in
lieu thereof, at the election of the corporation, the fair value thereof in cash
as determined by the board as of the time of such expiration or completion, but
without prejudice otherwise to any corporate proceedings that may have been
taken in the interim, if:
(a) Such demand is withdrawn as provided in this section;
(b) The proposed corporate action is abandoned or rescinded or the
shareholders revoke the authority to effect such action;
(c) No demand or petition for the determination of fair value by a
court has been made or filed within the time provided in this section; or
(d) A court of competent jurisdiction determines that such shareholder
is not entitled to the relief provided by this section.
(5) Within 10 days after the expiration of the period in which shareholders
may file their notices of election to dissent, or within 10 days after such
corporate action is effected, whichever is later (but in no case later than 90
days from the shareholders' authorization date), the corporation shall make a
written offer to each dissenting shareholder who has made demand as provided in
this section to pay an amount the corporation estimates to be the fair value for
such shares. If the corporate action has not been consummated before the
expiration of the 90-day period after the shareholders' authorization date, the
offer may be made conditional upon the consummation of such action. Such notice
and offer shall be accompanied by:
(a) A balance sheet of the corporation, the shares of which the
dissenting shareholder holds, as of the latest available date and not more
than 12 months prior to the making of such offer; and
(b) A profit and loss statement of such corporation for the 12-month
period ended on the date of such balance sheet or, if the corporation was
not in existence throughout such 12-month period, for the portion thereof
during which it was in existence.
(6) If within 30 days after the making of such offer any shareholder
accepts the same, payment for his shares shall be made within 90 days after the
making of such offer or the consummation of the proposed action, whichever is
later. Upon payment of the agreed value, the dissenting shareholder shall cease
to have any interest in such shares.
(7) If the corporation fails to make such offer within the period specified
therefor in subsection (5) or if it makes the offer and any dissenting
shareholder or shareholders fail to accept the same within the period of 30 days
thereafter, then the corporation, within 30 days after receipt of written demand
from any dissenting shareholder given within 60 days after the date on which
such corporate action was effected, shall, or at its election at any time within
such period of 60 days may, file an action in any court of competent
jurisdiction in
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the county in this state where the registered office of the corporation is
located requesting that the fair value of such shares be determined. The court
shall also determine whether each dissenting shareholder, as to whom the
corporation requests the court to make such determination, is entitled to
receive payment for his shares. If the corporation fails to institute the
proceeding as herein provided, any dissenting shareholder may do so in the name
of the corporation. All dissenting shareholders (whether or not residents of
this state), other than shareholders who have agreed with the corporation as to
the value of their shares, shall be made parties to the proceeding as an action
against their shares. The corporation shall serve a copy of the initial pleading
in such 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 and publication or in such other manner as is permitted by law.
The jurisdiction of the court is plenary and exclusive. All shareholders who are
proper parties to the proceeding are entitled to judgment against the
corporation for the amount of the fair value of their shares. The court may, if
it so elects, appoint one or more persons as appraisers to receive evidence and
recommend a decision on the question of fair value. The appraisers shall have
such power and authority as is specified in the order of their appointment or an
amendment thereof. The corporation shall pay each dissenting shareholder the
amount found to be due him within 10 days after final determination of the
proceedings. Upon payment of the judgment, the dissenting shareholder shall
cease to have any interest in such shares.
(8) The judgment may, at the discretion of the court, include a fair rate
of interest, to be determined by the court.
(9) The costs and expenses of any such proceeding shall be determined by
the court and shall be assessed against the corporation, but all or any part of
such costs and expenses may be apportioned and assessed as the court deems
equitable against any or all of the dissenting shareholders who are parties to
the proceeding, to whom the corporation has made an offer to pay for the shares,
if the court finds that the action of such shareholders in failing to accept
such offer was arbitrary, vexatious, or not in good faith. Such expenses shall
include reasonable compensation for, and reasonable expenses of, the appraisers,
but shall exclude the fees and expenses of counsel for, and experts employed by,
any party. If the fair value of the shares, as determined, materially exceeds
the amount which the corporation offered to pay therefor or if no offer was
made, the court in its discretion may award to any shareholder who is a party to
the proceeding such sum as the court determines to be reasonable compensation to
any attorney or expert employed by the shareholder in the proceeding.
(10) Shares acquired by a corporation pursuant to payment of the agreed
value thereof or pursuant to payment of the judgment entered therefor, as
provided in this section, may be held and disposed of by such corporation as
authorized but unissued shares of the corporation, except that, in the case of a
merger, they may be held and disposed of as the plan of merger otherwise
provides. The shares of the surviving corporation into which the shares of such
dissenting shareholders would have been converted had they assented to the
merger shall have the status of authorized but unissued shares of the surviving
corporation.
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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 officers and all of its directors
insurance policy pursuant to which officers and directors of the Registrant are
entitled to indemnification against certain liabilities, including reimbursement
of certain expenses, and the Registrant has indemnity agreements
("Indemnification 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.
The Indemnification Agreements are intended to provide additional
indemnification to directors and officers of BancGroup beyond the specific
provisions of the Delaware General Corporation Law. Under the Delaware General
Corporation Law, a company may indemnify its directors and officers in
circumstances other than those under which indemnification and the advance of
expenses are expressly permitted by applicable statutory provisions.
Under the Delaware General Corporation Law, a director, officer, employee
or agent of a corporation (i) must be indemnified by the corporation for all
expenses incurred by him (including attorneys' fees) when he is successful on
the merits or otherwise in defense of any action, suit or proceeding brought by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, (ii) may be indemnified by the corporation against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement of
any such proceeding (other than a proceeding by or in the right of the
corporation) even if he is not successful on the merits if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interest of the corporation (and, in the case of a criminal proceeding, had no
reasonable cause to believe his conduct was unlawful), and (iii) may be
indemnified by the corporation for expenses (including attorneys' fees) incurred
by him in the defense or settlement of a proceeding brought by or in the right
of the corporation, if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation;
provided that no indemnification may be made under the circumstances described
in clause (iii) if the director, officer, employee or agent is adjudged liable
to the corporation, unless a court determines that, despite the adjudication of
liability but in view of all of the circumstances, he is fairly and reasonably
entitled to indemnification for the expenses which the court shall deem proper.
The indemnification described in clauses (ii) and (iii) above (unless ordered by
a court) may be made only as authorized in a specific case upon determination by
(i) a majority of a quorum of disinterested directors, (ii) independent legal
counsel in a written opinion, or (iii) the stock holders, that indemnification
is proper in the circumstances because the applicable standard of conduct has
been met. Expenses (including attorneys' fees) incurred by an officer or
director in defending a proceeding may be advanced by the corporation prior to
the final disposition of the proceeding upon receipt of an undertaking by or on
behalf of the director or officer to repay the advance if it is ultimately
determined that he is not entitled to be indemnified by the corporation.
Expenses (including attorneys' fees) incurred by other employees and agents may
be advanced by the corporation upon terms and conditions deemed appropriate by
the board of directors.
The indemnification provided by the Delaware General Corporation Law has at
least two limitations that are addressed by the Indemnification Agreements: (i)
BancGroup is under no obligation to advance expenses to a director or officer,
and (ii) except in the case of a proceeding in which a director or officer is
successful on the merits or otherwise, indemnification of a director or officer
is discretionary rather than mandatory.
The Indemnification Agreements, therefore, cover any and all expenses
(including attorneys' fees and all other charges paid or payable in connection
therewith) incurred in connection with investigating, defending, being a witness
or participating in (including an appeal), or preparing to defend, be a witness
in or participate in, any threatened, pending or completed action, suit or
proceeding, or any inquiry or investigation, whether civil, criminal,
administrative or otherwise, related to the fact that such director or officer
is or was a director,
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officer, employee or agent of BancGroup or is or was serving at the request of
BancGroup as a director, officer, employee, agent, partner, committee member or
fiduciary of another corporation, partnership, joint venture, employee benefit
plan, trust or other enterprise, or by reason of anything done or not done by
such director or officer in any such capacity.
The Indemnification Agreements also provide for the prompt advancement of
all expenses incurred in connection with any proceeding and obligate the
director or officer to reimburse BancGroup for all amounts so advanced if it is
subsequently determined, as provided in the Indemnification Agreements, that the
director or officer is not entitled to indemnification.
The Indemnification Agreements further provide that the director or officer
is entitled to indemnification for, and advancement of, all expenses (including
attorneys' fees) incurred in any proceeding seeking to collect from BancGroup an
indemnity claim or advancement of expenses under the Indemnification Agreements,
BancGroup's Certificate of Incorporation, or the Delaware General Corporation
Law, regardless of whether the director or officer is successful in such
proceeding.
The Indemnification Agreements impose upon BancGroup the burden of proving
that the director or officer is not entitled to indemnification in any
particular case, and the Indemnification Agreements negate certain presumptions
which might otherwise be drawn against a director or officer in certain
circumstances. Further, the Indemnification Agreements provide that if BancGroup
pays a director or officer pursuant to an Indemnification Agreement, BancGroup
will be subrogated to such director's or officer's rights to recover from third
parties.
The Indemnification Agreements stipulate that a director's or officer's
rights under such contracts are not exclusive of any other indemnity rights a
director or officer may have; however, the Indemnification Agreements prevent
double payment. The Indemnification Agreements require the maintenance of
directors' and officers' liability insurance if such insurance can be maintained
on terms, including rates, satisfactory to BancGroup.
The benefits of the Indemnification Agreements would not be available if
(i) the action with respect to which indemnification is sought was initiated or
brought voluntarily by the officer or director (other than an action to enforce
the right to indemnification under the Indemnification Agreements); (ii) the
officer or director is paid for such expense or liability under an insurance
policy; (iii) the proceeding is for an accounting of profits pursuant to Section
16(b) of the Securities Exchange Act of 1934, as amended; (iv) the conduct of
the officer or director is adjudged as constituting an unlawful personal
benefit, or active or deliberate dishonesty or willful fraud or illegality; or
(v) a court determines that indemnification or advancement of expenses is
unlawful under the circumstances.
The Indemnification Agreements would provide indemnification for
liabilities arising under the Securities Act of 1933, as amended. BancGroup has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in such act and is,
therefore, unenforceable.
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.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- -------- -------------------------------------------------------------------------------------
<S> <C> <C>
2 -- Plan of acquisition, reorganization, arrangement, liquidation of successor:
(A) -- Agreement and Plan of Merger between The Colonial BancGroup, Inc. and Tomoka
Bancorp, Inc., dated as of July 19, 1996, included in the Prospectus portion of
this Registration Statement at Appendix A and incorporated herein by reference.
(B) -- (1) Tomoka Bancorp, Inc. Key Employee Stock Option Plan.
-- (2) Tomoka Bancorp, Inc. 1994 Directors' Stock Option Plan.
3 -- Articles of Incorporation and Bylaws:
</TABLE>
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<PAGE> 153
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- -------- -------------------------------------------------------------------------------------
<S> <C> <C>
(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.
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.
(D) -- Trust Indenture dated as of March 25, 1986, included as Exhibit 4 to the
Registrant's Amendment No. 1 to Registration Statement on Form S-2, file number
33-4004, effective March 25, 1986, and incorporated herein by reference.
5 -- Opinion of Miller, Hamilton, Snider & Odom, L.L.C. as to certain Delaware law
issues of the securities being registered.
8 -- Tax Opinion of Miller, Hamilton, Snider & Odom, L.L.C.
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 the Registrant's
Registration Statement as Form S-4, file no. 33-52952, and incorporated herein
by reference.
(B)(2) -- Loan Agreement between the Registrant and SunBank, National Association, dated
August 29, 1995 filed as Exhibit 10(B)(2) to the Registrant's Registration
Statement on Form S-4, registration number 33-01163 and incorporated herein by
reference.
(B)(3) -- 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.
</TABLE>
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<PAGE> 154
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- -------- -------------------------------------------------------------------------------------
<S> <C> <C>
(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.
13 -- Registrant's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1996, and June 30, 1996, and incorporated herein by reference.
21 -- List of subsidiaries of the Registrant.
23 -- Consents of experts and counsel:
(A) -- Consent of Coopers & Lybrand, L.L.P.
(B) -- Consent of Miller, Hamilton, Snider & Odom, L.L.C.
(C) -- Consent of Dupree & Camputaro
(D) -- Consent of Professional Bank Services, Inc.
24 -- Power of Attorney, filed as Exhibit 24 to the registrant's Registration
Statement on Form S-4, Registration No. 333-01345, and incorporated herein by
reference.
99 -- Additional exhibits:
(A) -- Form of Proxy of Tomoka Bancorp, Inc.
</TABLE>
(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.
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
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<PAGE> 155
the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a
director, officer or 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;
(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.
(e) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
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<PAGE> 156
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 25th day of October, 1996.
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 and
Robert E. Lowder Chief Executive Officer
/s/ W. FLAKE OAKLEY, IV Chief Financial Officer, **
- --------------------------------------------- Secretary and Treasurer
W. Flake Oakley, IV (Principal Financial
Officer and Principal
Accounting Officer)
* Director **
- ---------------------------------------------
Young J. Boozer
* 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
</TABLE>
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<PAGE> 157
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- --------------------------------------------- ----------------------------- ------------------
<S> <C> <C>
* Director **
- ---------------------------------------------
Harold D. King
* Director **
- ---------------------------------------------
John Ed Mathison
* Director **
- ---------------------------------------------
Milton E. McGregor
* Director **
- ---------------------------------------------
John C. H. Miller, Jr.
* Director **
- ---------------------------------------------
Joe D. Mussafer
* Director **
- ---------------------------------------------
William E. Powell
Director **
- ---------------------------------------------
Donald J. Prewitt
* Director **
- ---------------------------------------------
Jack H. Rainer
* Director **
- ---------------------------------------------
Frances E. Roper
* Director **
- ---------------------------------------------
Ed V. Welch
/s/ W. FLAKE OAKLEY, IV
- ---------------------------------------------
W. Flake Oakley, IV
Attorney-in-Fact
</TABLE>
- ---------------
* 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.
** Dated: October 25, 1996
II-7
<PAGE> 158
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-------------------------
EXHIBITS 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)
<PAGE> 159
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
- ------- ----
<S> <C>
Exhibit 2 Plan of acquisition, reorganization, arrangement,
liquidation of successor:
(A) Agreement and Plan of Merger between The Colonial BancGroup,
Inc. and Tomoka Bancorp, Inc., dated as of July 19, 1996,
included in the Prospectus portion of this registration
statement at Appendix A and incorporated herein by reference.
(B) (1) Tomoka Bancorp, Inc. Key Employee Stock Option Plan.
(2) Tomoka Bancorp, Inc. 1994 Directors' Stock Option Plan.
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, as amended, filed as Exhibit 4.2 to
the Registrant's Current Report on Form 8-K, dated February
21, 1995, and incorporated herein by reference.
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
</TABLE>
<PAGE> 160
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.
(D) Trust Indenture dated as of March 25, 1986, included as
Exhibit 4 to the Registrant's Amendment No. 1 to Registration
Statement on Form S-2, file number 33-4004, effective March
25, 1986, and incorporated herein by reference.
Exhibit 5 Opinion of Miller, Hamilton, Snider & Odom, L.L.C. as to
certain Delaware law issues of the securities being
registered.
Exhibit 8 Tax Opinion of Miller, Hamilton, Snider & Odom, L.L.C.
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.
<PAGE> 161
(B)(1) Residential Loan Funding Agreement between Colonial Bank and
Colonial Mortgage Company dated January 18, 1988, included
as Exhibit 10(B)(1) to the Registrant's Registration
Statement as Form S-4, file no. 33-52952, and incorporated
herein by reference.
(B)(2) Loan Agreement between the Registrant and SunBank, National
Association, dated August 29, 1995, filed as Exhibit 10(B)(2)
to the Registrant's Registration Statement on Form S- 4,
registration number 33-01163 and incorporated herein by
reference.
(B)(3) 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 Reports on Form 10-Q for the
quarters ended March 31, 1996 and June 30, 1996, and
incorporated herein by reference.
Exhibit 21 List of subsidiaries of the Registrant.
Exhibit 23 Consents of experts and counsel:
<PAGE> 162
(A) Consent of Coopers & Lybrand, L.L.P.
(B) Consent of Miller, Hamilton, Snider & Odom, L.L.C.
(C) Consent of Dupree & Camputaro
(D) Consent of Professional Bank Services, Inc.
Exhibit 24 Power of Attorney, filed as Exhibit 24 to the registrant's
Registration Statement on Form S-4, Registration No. 333-
01345, and incorporated herein by reference.
Exhibit 99 Additional exhibits:
(A) Form of Proxy of Tomoka Bancorp, Inc.
<PAGE> 1
EXHIBIT 2(B)(1)
TOMOKA BANCORP, INC. KEY EMPLOYEE STOCK OPTION PLAN
<PAGE> 2
TOMOKA BANCORP, INC.
KEY EMPLOYEE STOCK OPTION PLAN
SECTION 1. PURPOSE. The purpose of Tomoka Bancorp. Inc's Key Employee Stock
Option Plan ("Employee Plan") is to promote the growth and general prosperity
of Tomoka Bancorp. Inc. and its wholly owned subsidiary, Tomoka State Bank,
(collectively the "Company" ) by permitting the Company to grant options to
purchase shares of its common stock to certain key officers and employees. The
Employee Plan is designed to help attract and retain superior personnel for
positions of responsibility with the Company, and to provide key employees with
an additional incentive to contribute to the success of the Company. The
Company intends that options granted pursuant to the provisions of the Employee
Plan will qualify and will be identified as "incentive stock options" within
the meaning of Section 422A of the Internal Revenue Code of 1986, as amended
("Code").
SECTION 2. ADMINISTRATION. The Employee Plan shall be administered by a
committee which shall consist of three or more members of the Board of
Directors, none of whom is an officer or employee of the Company, and each of
whom shall be a "disinterested person" within the meaning of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended. The
Committee, when acting to administer the Employee Plan, is referred to as the
"Plan Administrators." Any action of the Plan Administrators shall be taken by
majority vote or the unanimous written consent of the Plan Administrators. No
Plan Administrator shall be liable for any action or determination made in good
faith with respect to the Employee Plan or to any option granted thereunder.
SECTION 3. AUTHORITY OF PLAN ADMINISTRATORS. Subject to the other provisions of
this Employee Plan, and with a view to effecting its purpose, the Plan
Administrators shall have sole authority in their absolute discretion: (i) to
construe and interpret the Employee Plan; (ii) to define the terms used herein;
(iii) to prescribe, amend and rescind rules and regulations relating to the
Employee Plan; (iv) to determine the employees to whom options shall be granted
under the Employee Plan; (v) to determine the time or times at which options
shall be granted under the Employee Plan; (vi) to determine the number of
shares subject to any option under the Employee Plan, the option price, the
duration of each option, and any other terms and conditions of options; (vii)
to terminate the Employee Plan; and (viii) to make any other determinations
necessary or advisable for the administration of the Employee Plan. All
decisions, determinations and interpretations made by the Plan Administrators
shall be binding and conclusive on all participants in the Employee Plan and on
their legal representatives, heirs and beneficiaries.
SECTION 4. MAXIMUM NUMBER OF SHARES SUBJECT TO THE EMPLOYEE PLAN. The maximum
aggregate number of shares of common stock available pursuant to the Employee
Plan, subject to adjustment as provided in Section 7 hereof, shall be 21,000 of
the shares of common stock of the Company, par value $5.00 per share. If any of
the options granted under this Employee Plan expire or terminate for any reason
before they have been exercised in full, the unpurchased shares subject to
those expired or terminated options shall
2
<PAGE> 3
again be available for the purposes of the Employee Plan.
SECTION 5. ELIGIBILITY AND PARTICIPATION. Only regular full time employees of
the Company, including officers whether or not directors of the Company or any
subsidiary, shall be eligible for selection by the Plan Administrators to
participate in the Employee Plan. Directors who are not full time, salaried
employees of the Company shall not be eligible to participate in the Employee
Plan. Full time employees are those employees who work more then 20 hours per
week.
SECTION 6. EFFECTIVE DATE AND TERM OF EMPLOYEE PLAN. The Employee Plan shall
become effective upon its adoption by the Board of Directors of the Company and
the approval by a majority of the total votes eligible to be cast at a meeting
of stockholders, which vote shall be taken within 12 months of adoption of the
Employee Plan by the Company's Board of Directors; provided, however, that
options may be granted under this Employee Plan prior to obtaining stockholder
approval of the Employee Plan and, further provided, that any such options
shall be contingent upon such stockholder approval being obtained and may not
be exercised prior to such approval. The Employee Plan shall continue in effect
for a term of ten years, unless sooner terminated under Section 3 herein.
SECTION 7. ADJUSTMENTS. If the shares of common stock of the Company as a whole
are increased, decreased, changed into or exchanged for a different number or
kind of shares or securities through merger, consolidation, combination,
exchange of shares, other reorganization, recapitalization, reclassification,
stock dividend, stock split or reverse stock split, an appropriate and
proportionate adjustment shall be made in the maximum number and kind of shares
as to which options may be granted under this Employee Plan. A corresponding
judgment changing the number or kind of shares allocated to unexercised options
or portions thereof, which shall have been granted prior to any such change,
shall likewise be made. Any such adjustment in outstanding options shall be
made without change in the aggregate purchase price applicable to the
unexercised portion of the option but with a corresponding adjustment in the
price for each share or other unit of any security covered by the option. In
making any adjustment pursuant to this Section 7, any fractional shares shall
be disregarded.
SECTION 8. TERMINATION AND AMENDMENT OF EMPLOYEE PLAN. The Employee Plan shall
terminate no later than ten years from the date such Employee Plan is adopted
by the Board of Directors or the date such Employee Plan is approved by the
stockholders, whichever is earlier. No options shall be granted under the
Employee Plan after that date. Subject to the limitation contained in Section
9, the Plan Administrators may at any time amend or revise the terms of the
Employee Plan; including the form and substance of the option, agreements to be
used hereunder; provided that no amendment or revision shall: (i) increase the
maximum aggregate number of shares that may be sold, appreciated or distributed
pursuant to options granted under this Employee Plan, except as permitted under
Section 7; (ii) change the minimum purchase price for shares under Section 16
herein; (iii) increase the maximum term established under the Employee Plans
for any
3
<PAGE> 4
option, or (iv) permit the granting of an option, to anyone other than as
provided in Section 5 herein.
SECTION 9. PRIOR RIGHTS AND OBLIGATIONS. No amendment, suspension or
termination of the Employee Plan shall, without the consent of the employee who
has received an option, alter or impair any of that employee's rights or
obligations under any option granted under the Employee Plan prior to such
amendment, suspension or termination.
SECTION 10. PRIVILEGES OF STOCK OWNERSHIP. Notwithstanding the exercise of any
options granted pursuant to the terms of this Employee Plan, no employee shall
have any of the rights or privileges of a stockholder of the Company with
respect to any shares of stock issuable upon the exercise of his or her option
until certificates representing the shares have been issued and delivered. No
shares shall be required to be issued and delivered upon exercise of any option
or unless and until all of the requirements of law and of all regulatory
agencies having jurisdiction over the issuance and delivery of the securities
have been met. No adjustment shall be made for dividends or any other
distributions for which the record date is prior to the date on which such
stock certificate is issued.
SECTION 11. RESERVATION OF SHARES OF COMMON STOCK. The Company, during the term
of this Employee Plan, will at all times reserve and keep available such number
of shares of its common stock as shall be sufficient to satisfy the
requirements of the Employee Plan. In addition, the Company will, from time to
time as is necessary to accomplish the purposes of this Employee Plan, seek to
obtain from any regulatory agency having jurisdiction any requisite authority
in order to issue and sell shares of common stock hereunder. The inability of
the Company to obtain from any regulatory agency having jurisdiction, the
authority deemed by the Company's counsel to be necessary, to permit the lawful
issuance and sale of any shares of its stock hereunder shall relieve the
Company of any liability in respect of the non-issuance or sale of the stock as
to which the requisite authority shall not have been obtained.
SECTION 12. TAX WITHHOLDING. The exercise of any option is subject to the
condition that if at any time the Company shall determine, in its discretion,
that the satisfaction of withholding tax or other withholding liabilities under
any state or federal law is necessary or desirable as a condition of, or in any
connection with, such exercise or the delivery or purchase of shares pursuant
thereto, then in such event, the exercise of the option shall not be effective
unless such withholding tax or other withholding liabilities shall have been
satisfied in a manner acceptable to the Company.
SECTION 13. EMPLOYMENT. Nothing in the Employee Plan or in any option, stock
appreciation right or performance share award shall confer upon any eligible
employee any right to continued employment by the Company or by any subsidiary
corporation or limit in any way the right of the Company or its subsidiary
corporations at any time to terminate or alter the terms of that employment.
4
<PAGE> 5
SECTION 14. OPTION TERMS AND CONDITIONS. The terms and conditions of options
granted under the Employee Plan may differ from one another as the Plan
Administrators shall, in their discretion, determine, as long as all options
granted under the Employee Plan satisfy the requirements therein.
SECTION 15. DURATION OF OPTIONS. Each option and all rights thereunder granted
pursuant to the terms of the Employee Plan shall expire on the date determined
by the Plan Administrators, but in no event shall any option granted under the
Employee Plan expire later than ten years from the date on which the option is
granted, except that any employee who owns more than 10% of the combined voting
power of all classes of stock of the Company must exercise any options granted
thereto within three years from the date of grant. In addition, each option
shall be subject to early termination as provided in the Employee Plan.
SECTION 16. PURCHASE PRICE. The purchase price for shares acquired pursuant to
the exercise, in whole or in part, of any option shall not be less than the
fair market value of the shares at the time of the grant of the option or the
book value of the stock as reflected by the records of the Company on the last
day of month immediately preceding the grant, whichever is greater; except that
for any employee who owns more than 10% of the combined voting power of all
classes of stock of the Company, the purchase price shall not be less than 110%
of fair market value or the book value of the stock as reflected by the Company
on the last day of month immediately preceding the grant, whichever is greater.
SECTION 17. MAXIMUM AMOUNT OF OPTIONS IN ANY CALENDAR YEAR. The aggregate fair
market value (determined as of the time the option is granted) of the common
stock with respect to which stock options are exercisable for the first time by
any employee during any calendar year (under the terms of this Employee Plan
and all such plans of the Company) shall not exceed $100,000.
SECTION 18. EXERCISE OF OPTIONS. Each option shall be exercisable in one or
more installments during its term, and the right to exercise may be cumulative
as determined by the Plan Administrators, provided, however, that no option may
be exercisable for the first six months following the date the option is
granted. No option may be exercised for a fraction of a share of common stock.
The purchase price of any shares purchased shall be paid in full in cash or by
certified or cashier's check payable to the order of the Company or by shares
of common stock (including shares acquired pursuant to the exercise of an
option), if permitted by the Plan Administrators, or by a combination of cash,
check or shares of common stock, at the time of exercise of the option,
provided that the form(s) of payment allowed the employee shall be established
when the option is granted. If any portion of the purchase price is paid in
shares of common stock, those shares shall be tendered at their then fair
market value as determined by the Plan Administrators in accordance with
Section 16 herein.
SECTION 19. ACCELERATION OF RIGHT OF EXERCISE OF INSTALLMENTS. Notwithstanding
the first
5
<PAGE> 6
sentence of Section 18 of this Employee Plan with respect to the ability to
exercise options in installments, in the event the Company or its stockholders
enter into an agreement to dispose of all or substantially all of the assets or
stock of the Company by means of a sale, merger or other reorganization,
liquidation or otherwise, any option granted pursuant to the terms of the
Employee Plan shall become immediately exercisable with respect to the full
number of shares subject to that option during the period commencing as of the
date of the agreement to dispose of all or substantially all of the assets or
stock of the Company and, subject to the provisions hereof, ending when the
disposition of assets or stock contemplated by that agreement is consummated or
the option is otherwise terminated in accordance with its provisions or the
provisions of this Employee Plan, whichever occurs first; provided, however,
that no option shall be immediately exercisable under this Section 19 on
account of any agreement to dispose of all or substantially all of the assets
or stock of the Company by means of a sale, merger or other reorganization,
liquidation or otherwise where the stockholders of the Company immediately
before the consummation of the transaction will own at least 50% of the total
combined voting power of all classes of stock of the surviving entity to vote
immediately after the consummation of the transaction whether the Company or
some other entity, and provided further, that the exercisability of an option
may not be accelerated prior to the sixth month anniversary of the date the
option was granted. In the event the transaction contemplated by the agreement
referred to in this Section 19 is not consummated, but rather is terminated,
canceled or expires, the options granted pursuant to the Employee Plan shall
thereafter be treated as if that agreement had never been entered into.
Notwithstanding the first sentence of Section 18 of this Employee Plan
with respect to the ability to exercise options in installments, and subject to
the provisions of the first paragraph of this Section 19, in the event of a
change in control of the Company or threatened change in control of the Company
as determined by a vote of not less than a majority of the Board of Directors
of the Company, all options granted prior to such change in control or
threatened change of control shall become immediately exercisable, except that
any option granted for less than six months shall not become exercisable until
the sixth month anniversary of the date the option was granted. The term
"control" for purposes of this Section shall refer to the acquisition of 10% or
more of the voting securities of the Company by an person or by persons acting
as a group within the meaning of Section 13(d) of the Securities Exchange Act
of 1934, as amended; provided, however, that for purposes of this Employee
Plan, except under the circumstances as set forth in the first paragraph of
this Section 19, no change in control or threatened change in control shall be
deemed to have occurred if prior to the acquisition of or offer to acquire 10%
or more of the voting securities of the Company, the full Board of Directors of
the Company shall have adopted by not less than two-thirds vote a resolution
specifically approving such acquisition or offer. The term "person" for
purposes of this Section refers to an individual or a corporation, partnership,
trust, association, joint venture, pool, syndicate, sole proprietorship,
unincorporated organization or any other form of entity not specifically listed
herein.
SECTION 20. WRITTEN NOTICE REQUIRED. Any option granted pursuant to the terms
of the
6
<PAGE> 7
Employee Plan shall be exercised when written notice of that exercise has been
given to the Company at its principal office by the person entitled to exercise
the option and full payment for the shares with respect to which the option is
exercised has been received by the Company.
SECTION 21. COMPLIANCE WITH SECURITIES LAWS. Shares of common stock shall not
be issued with respect to any option granted under the Employee Plan unless the
exercise of that option and the issuance and delivery of those shares pursuant
to that exercise shall comply with all relevant provisions of state and federal
law including, without limitation, the Securities Act of 1933, as amended, the
rules and regulations promulgated thereunder, and the requirements of any stock
exchange or national quotation system upon which the shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance. The Plan Administrators may also require an
employee to whom an option has been granted under the Employee Plan
("Optionee") to furnish evidence satisfactory to the Company, including a
written and signed representation letter and consent to be bound by any
transfer restriction imposed by law, legend, condition or otherwise, that the
shares are being purchased only for investment and without any present
intention to sell or distribute the shares in violation of any state or federal
law, rule or regulation. Further, each Optionee shall consent to the imposition
of a legend on the shares of common stock subject to his or option restricting
their transferability to the extent required by law or by this Section 21.
SECTION 22. EMPLOYMENT OF OPTIONEE. Each Optionee, if requested by the Plan
Administrators when the option is granted, must agree in writing as a condition
of receiving his or her option that he or she will remain in the employ of the
Company following the date of the granting of that option for a period
specified by the Plan Administrators, which period shall in no event exceed
three years. Nothing in the Employee Plan or in any option granted hereunder
shall confer upon any Optionee any right to continued employment by the
Company, or limit in any way the right of the Company at any time to terminate
or alter the terms of that employment.
SECTION 23. OPTION RIGHTS UPON TERMINATION OF EMPLOYMENT. If an Optionee ceases
to be employed by the Company for any reason other than death, disability or
cause, his or her option shall immediately terminate; provided, however, that
the Plan Administrators may, in their discretion, allow such option to be
exercised (to the extent exercisable on the date of termination or employment)
at any time within three months after the date of termination of employment,
unless either the option or this Employee Plan otherwise provides for earlier
termination. If an Optionee is terminated for cause, any options granted
thereto under the provision of this Employee Plan shall terminate as of the
effective date of such termination of employment.
SECTION 24. OPTION RIGHTS UPON DISABILITY. If an Optionee becomes disabled
within the meaning of Section 22(e)(3) of the Code while employed by the
Company, the option may be exercised, to the extent exercisable on the date of
termination of employment, at any
7
<PAGE> 8
time within one year after the date of termination of employment due to
disability, unless either the option or this Employee Plan otherwise provides
for earlier termination.
SECTION 25. OPTION RIGHTS UPON DEATH OF OPTIONEE. Except as otherwise limited
by the Plan Administrators at the time of the grant of an option, if an
Optionee dies while employed by the Company or within three months after
ceasing to be an employee thereof, his or her option shall expire one year
after the date of death unless by its term it expires sooner. During this one
year or shorter period, the option may be exercised, to the extent that it
remains unexercised on the date of death, by the person or persons to whom the
Optionee's rights under the option shall pass by will or by the laws of descent
and distribution, but only to the extent that the Optionee was entitled to
exercise the option at the date of death.
SECTION 26. OPTIONS NOT TRANSFERABLE. Options granted pursuant to the terms of
this Employee Plan may not be sold, pledged, assigned or transferred in any
manner other wise than by will or by the laws of descent and distribution and
may be exercised during the lifetime of an Optionee only by the Optionee or his
guardian or legal representative.
SECTION 27. CONVERSION OF OPTION GRANTED UNDER EMPLOYEE PLAN. Options granted
pursuant to the terms of this Employee Plan may be converted with the written
consent of the Optionee to compensatory nonqualified stock options.
Adopted by the Board of Directors of the Company at a meeting called
for that purpose on the ______________ day of September 1994.
TOMOKA BANCORP, INC.
By:__________________________________________
P.T. Fleuchaus, Chairman of the Board
8
<PAGE> 1
EXHIBIT 2(B)(2)
TOMOKA BANCORP, INC. 1994 DIRECTORS' STOCK OPTION PLAN
<PAGE> 2
TOMOKA BANCORP, INC.
1994 DIRECTORS' STOCK OPTION PLAN
ARTICLE I
ESTABLISHMENT OF A STOCK OPTION PLAN
SECTION 1.01 GENERAL. Tomoka Bancorp, Inc. ("Company") hereby
establishes this 1994 Directors' Stock Option Plan ("Directors' Plan") upon the
terms and conditions hereinafter stated. The purpose of the Directors' Plan is
to improve the growth and profitability of the Company by attracting and
retaining qualified non-employee directors and providing such directors with a
proprietary interest in the Company through non-discretionary grants of
non-qualified stock options (an "Option" or "Options") to purchase shares of
the Company's common stock, par value $5.00 per share ("Common Stock").
ARTICLE II
ADMINISTRATION OF THE DIRECTORS' PLAN
SECTION 2.01 ADMINISTRATION. The Directors' Plan shall be administered
by a committee of the Board of Directors of the Company (the "Committee"). The
Committee shall be comprised of between three to five directors which shall
have the power, subject to and within the limits of the express provisions of
the Directors' Plan, to exercise such powers and to perform such acts as are
deemed necessary or expedient to promote the best interests of the Company with
respect to the Directors' Plan.
SECTION 2.02 COMPLIANCE WITH LAW AND REGULATIONS. All Options granted
hereunder shall be subject to all applicable federal and state laws, rules and
regulations and to such approvals by any government or regulatory agency as may
be required. The Company shall not be required to issue or deliver any
certificates for shares of Common Stock prior to the completion of any
registration or qualification of or obtaining of consents or approvals with
respect to such shares under any federal or state law or any rule or regulation
of any government body, which the Company shall, in its sole discretion,
determine to be necessary or advisable. Moreover, no Option may be exercised if
such exercise or issuance would be contrary to applicable laws and regulations.
SECTION 2.03 RESTRICTIONS ON TRANSFER. The Company may place a legend
upon any certificate representing shares acquired pursuant to an Option granted
hereunder noting that the transfer of such shares may be restricted by
applicable laws and regulations.
ARTICLE III
ELIGIBILITY
SECTION 3.01 EXISTING DIRECTORS. Options shall be awarded pursuant to
the terms hereof to each director of the Company who is not an employee of the
Company or any subsidiary of the Company ("non-employee director"). No honorary
directors, advisory directors or directors emeritus shall be entitled to
receive Options hereunder.
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SECTION 3.02 NEW DIRECTORS. Directors who are subsequently added to
the Board of Directors after the date of grant would be eligible to participate
in the Directors' Plan to the extent shares may be available for issuance as
provided in Section 5.03 hereof and to the extent such shares are awarded by
the Committee.
ARTICLE IV
COMMON STOCK COVERED BY THE DIRECTORS' PLAN
SECTION 4.01 OPTIONS SHARES. The aggregate number of shares of Common
Stock of the Company which may be issued pursuant to the Directors' Plan,
subject to adjustment as provided in Article VII, shall be 60,000 shares of the
Company's Common Stock. None of such shares shall be the subject of more than
one Option at any time, but if an Option as to any shares is surrendered before
exercise or for any other reason ceases to be exercisable, the number of shares
covered thereby shall again become available for grant under the Directors'
Plan as if no Options had been previously granted with respect to such shares.
SECTION 4.02 SOURCE OF SHARES. The shares of Common Stock issued under
the Directors' Plan shall be authorized but previously unissued shares.
ARTICLE V
OPTION GRANTS
SECTION 5.01 OPTION GRANTS. Non-employee directors of the Company
shall be granted two options to purchase shares of Common Stock. The first
option shall be made on or about April 26, 1994 and the second option shall be
made on or about April 26, 1995. The first option shall be for a number of
shares of Common Stock equal to the number of shares owned directly by each
director on the date of grant, up to 3,000 shares. The second option shall be
for a number of shares of Common Stock equal to the number of shares owned
directly by each director on the date of grant, less the number of any shares
of Common Stock which are the subject of the first option, up to 3,000 shares.
SECTION 5.02 VESTING OF OPTIONS. Each option shall vest and be
exercisable only after the second anniversary of its grant.
SECTION 5.03 ADDITIONAL GRANTS. In the event a director relinquishes
his or her shares or does not satisfy the vesting requirements herein, the
Committee has the authority to reallocate the unexercised shares to the then
directors serving on the Board or to any new directors that may be added to the
Company's Board.
ARTICLE VI
OPTION TERMS AND CONDITIONS
SECTION 6.01 OPTION AGREEMENT. The proper officers of the Company and
each
2
<PAGE> 4
optionee shall execute an Option Agreement which shall set forth the total
number of shares of Common Stock to which it pertains, the exercise price and
such other terms, conditions and provisions as are appropriate, provided that
they are not inconsistent with the terms, conditions and provisions of the
Directors' Plan. Each optionee shall receive a copy of his executed Option
Agreement.
SECTION 6.02 OPTION EXERCISE PRICE. The per share exercise price at
which the shares of Common Stock may be purchased upon exercise of an Option
granted pursuant to this Article VI hereof shall be equal to the fair market
value of a share of Common Stock as of the date of grant. For purposes of the
Directors' Plan, the fair market value of a share of Common Stock shall be the
price of a share of Common Stock on the date of grant as determined by an
independent appraiser chosen by management.
SECTION 6.03 EXERCISE AND DURATION OF OPTIONS. Subject to the vesting
provisions of Section 5.02 herein, each Option, or portion thereof, shall be
exercisable at any time until five (5) years after the date of grant; provided
that no Option or portion thereof may be exercised until the stockholders of
the Company have approved the Directors' Plan by such vote as may be required
by applicable laws and regulations.
SECTION 6.04 ACCELERATION OF EXERCISE FOR TERMINATION DUE TO DEATH,
DISABILITY, RETIREMENT OR RESIGNATION. If an optionee dies while serving as a
non-employee director or terminates his service as a non-employee director as a
result of disability, retirement or resignation without having fully exercised
his Options, the optionee or the executors, administrators, legatees or
distributees of his estate shall have the right to exercise such Options within
one year after the optionee ceases to be a director; provided that no Option
shall be exercisable by such executors, administrators, legatees, or
distributees more than five (5) years from the date of grant.
SECTION 6.05 OPTIONS OF REMOVED DIRECTOR. Options granted to a
non-employee director who is removed for cause pursuant to the Company's
Articles of Incorporation shall terminate as of the effective date of such
removal.
SECTION 6.06 NONASSIGNABILITY. Options shall not be transferable by an
optionee except by will or the laws of descent and distribution, and during an
optionee's lifetime shall be exercisable only by such optionee or the
optionee's guardian or legal representative.
SECTION 6.07 MANNER OF EXERCISE. Options may be exercised in whole or
in part and at one time or from time to time. The procedures for exercise shall
be set forth in a written Option Agreement as provided for in Section 6.01
herein.
SECTION 6.08 PAYMENT OF SHARES. Payment in full of the purchase price
for shares of Common Stock purchased pursuant to the exercise of an Option
shall be made to the Company upon exercise of the Option. Payment for shares
may be made by the optionee in cash or by delivering shares of Common Stock
(including shares acquired pursuant to the
3
<PAGE> 5
exercise of an Option) equal in fair market value to the purchase price of the
shares to be acquired pursuant to the Option, or any combination of the
foregoing.
SECTION 6.09 VOTING AND DIVIDEND RIGHTS. No optionee shall have any
voting or dividend rights or other rights of a stockholder in respect of any
shares of Common Stock covered by an Option prior to the time that his name is
recorded on the Company's stockholder ledger as the holder of record of such
shares acquired pursuant to an exercise of an Option.
ARTICLE VII
ADJUSTMENTS FOR CAPITAL CHANGES
SECTION 7.01 ADJUSTMENTS. The aggregate number of shares of Common
Stock available for issuance under the Directors' Plan, the number of shares to
which any Option relates and the exercise price per share of Common Stock under
any Option shall be proportionately adjusted for any increase or decrease in
the total number of outstanding shares of Common Stock issued subsequent to the
effective date of the Directors' Plan resulting from a split, subdivision or
consolidation of shares or any other capital adjustment, the payment of a stock
dividend, or other increase or decrease in such shares effected without receipt
or payment of consideration by the Company. If, upon a merger, consolidation,
reorganization, liquidation, recapitalization or the like of the Company, the
shares of the Company's Common Stock shall be exchanged for other securities of
the Company or of another corporation, each recipient of an Option shall be
entitled, subject to the conditions herein stated, to purchase or acquire such
number of shares of Common Stock or amount of other securities of the Company
or such other corporation as were exchangeable for the number of shares of
Common Stock of the Company which such optionees would have been entitled to
purchase or acquire except for such action. The appropriate adjustments shall
be made to the per share exercise price of outstanding Options.
ARTICLE VIII
AMENDMENT AND TERMINATION OF THE DIRECTORS' PLAN
SECTION 8.01 AMENDMENT OR TERMINATION. The Board may at any time, by
resolution, terminate, amend or revise the Directors' Plan with respect to any
shares of Common Stock as to which Options have not been granted; provided,
however, that no amendment which (a) changes the maximum number of shares that
may be sold or issued under the Directors' Plan (other than in accordance with
the provisions of Article VIII) or (b) changes the class of persons that maybe
granted Options shall become effective until it receives the approval of the
stockholders of the Company, and further provided that the Board may determine
that stockholder approval for any other amendment to the Directors' Plan may be
advisable for any reason, such as for the purpose of obtaining or retaining any
statutory or regulatory benefits under tax, securities or other laws or
satisfying any applicable stock exchange listing requirements. The Board may
not, without the consent
4
<PAGE> 6
of the Holder of an Option, alter or impair any Option previously granted under
the Directors' Plan as specifically authorized herein. Notwithstanding anything
contained in the Directors' Plan to the contrary, the provisions of Articles
III, V and VI of the Directors' Plan shall not be amended more than once every
six months, other than to comport with changes in the Internal Revenue Code of
1986, as amended, the Employee Retirement Income Security Act of 1974, as
amended, or the rules and regulations promulgated under such statutes.
ARTICLE IX
EFFECTIVE DATE OF THE DIRECTORS' PLAN; TERM
SECTION 9.01 EFFECTIVE DATE OF THE PLAN. The Directors' Plan shall
become effective upon the date of its adoption by the Company's Board
("Effective Date"), provided that no shares of Common Stock may be issued
pursuant to the Directors' Plan until the Directors' Plan is approved by the
stockholders of the Company by a majority vote of the Company's outstanding
shares of Common Stock.
SECTION 9.02 TERM OF PLAN. Unless sooner terminated, the Directors'
Plan shall remain in effect for a period of five (5) years ending on the fifth
anniversary of the Effective Date. Termination of the Directors' Plan shall not
affect any Options previously granted and such Options shall remain valid and
in effect until they (a) have been fully exercised, (b) are surrendered, or (c)
expire or are forfeited in accordance with their terms.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 RIGHTS TO CONTINUE AS A DIRECTOR. Neither the Directors'
Plan nor the grant of any Options hereunder nor any action taken by the Board
in connection with the Directors' Plan shall create any right on the part of
any non-employee director of the Company to continue as such.
SECTION 10.2 WITHHOLDING. The Company may withhold from any cash
payment made under this Plan sufficient amounts to cover any applicable
withholding and employment taxes, and if the amount of such cash payment is
insufficient, the Company may require the optionee to pay to the Company the
amount required to be withheld as a condition to delivering the shares acquired
pursuant to an Option.
The foregoing Directors' Plan was adopted by the Company's Board of
Directors on March ___, 1994.
5
<PAGE> 1
EXHIBIT 5
OPINION AS TO CERTAIN DELAWARE LAW ISSUES OF THE SECURITIES
BEING REGISTERED
<PAGE> 2
October 8, 1996
Montgomery Office
The Colonial BancGroup, Inc.
P. O. Box 1108
Montgomery, AL 36101
Re: Registration Statement on Form S-4 relating to the issuance of
shares of Common Stock of The Colonial BancGroup, Inc., in
connection with the acquisition by merger of Tomoka Bancorp,
Inc. ("Merger")
Gentlemen:
We are familiar with the proceedings taken and proposed to be taken by
The Colonial BancGroup, Inc., a Delaware corporation (the "Company"), in
connection with the proposed issuance by the Company of shares of its Common
Stock, par value of $2.50 per share, in connection with the Merger and in
accordance with an Agreement and Plan of Merger, dated as of July 19, 1996 (the
"Agreement"), by and between the Company and Tomoka Bancorp, Inc. and the
issuance by the Company of its Common Stock pursuant to the Tomoka Bancorp,
Inc. Key Employee Stock Option Plan and Tomoka Bancorp, Inc. 1994 Directors'
Stock Option Plan being assumed by the Company in accordance with the
Agreement. We have also acted as counsel for the Company in connection with the
preparation and filing with the Securities and Exchange Commission under the
Securities Act of 1933, of the Registration Statement on Form S-4 referred to
in the caption above. In this connection we have reviewed such documents and
matters of law as we have deemed relevant and necessary as a basis for the
opinions expressed herein.
Upon the basis of the foregoing, we are of the opinion that:
<PAGE> 3
The Colonial BancGroup
October 8, 1996
Page 1
(i) The Company is a corporation duly organized and existing under the
laws of the State of Delaware;
(ii) The shares of Common Stock of the Company referred to above, to
the extent actually issued pursuant to the Agreement will, when so issued, be
duly and validly authorized and issued and will be fully paid and nonassessable
shares of Common Stock of the Company;
(iii) Under the laws of the State of Delaware, no personal liability
attaches to the ownership of the shares of Common Stock of the Company.
We hereby consent to the filing of this opinion as an exhibit to the
above-referenced registration statement. In consenting to the inclusion of our
opinion in the Registration Statement, we do not thereby admit that we are a
person whose consent is required pursuant to Section 7 of the Securities Act of
1933, as amended.
Sincerely yours,
MILLER, HAMILTON, SNIDER & ODOM, L.L.C.
By: /s/ Michael D. Waters
---------------------------------------
Michael D. Waters
MDW/mfm
<PAGE> 1
EXHIBIT 8
TAX OPINION
<PAGE> 2
October 8, 1996
Tomoka Bancorp, Inc.
201 South Nova Road
Ormond Beach, Florida 32174
The Colonial BancGroup, Inc.
One Commerce Street
Montgomery, AL 36104
Re: Tax Opinion
Gentlemen:
We have acted as counsel to The Colonial BancGroup, Inc., a Delaware
corporation ("BancGroup"), in connection with the merger of Tomoka Bancorp,
Inc., a Florida corporation ("Tomoka") with and into BancGroup, pursuant to the
Agreement and Plan of Merger, dated as of July 19, 1996, (the "Agreement") by
and between BancGroup and Tomoka. This opinion is being rendered to you
pursuant to paragraph 8.5 of the Agreement.
In rendering this opinion, we have relied upon the facts, which are
not restated herein, but rather, as they have been presented to us in the
Agreement, and in a preliminary joint proxy statement-prospectus of Tomoka and
BancGroup to be filed with the Securities and Exchange Commission. We have
assumed that the merger will be consummated on the Effective Date pursuant to
the terms and conditions set forth in the Agreement and as
<PAGE> 3
October 8, 1996
Page 1
described in the preliminary joint proxy statement-prospectus. We have assumed,
with your consent, that the facts presented to us provide an accurate and
complete description of the facts and circumstances concerning the proposed
transaction. Any changes to the facts, representations, or documents referred
to in this opinion may affect the conclusions stated herein.
In connection with this opinion, we have assumed, with your consent,
the following:
(1) BancGroup does not plan to sell or otherwise dispose of any of the
stock of Tomoka State Bank, a wholly owned subsidiary of Tomoka, except that
Tomoka Bank will be merged into Colonial Bank on or after the merger.
(2) BancGroup will continue the historic business of Tomoka and Tomoka
State Bank or will use a significant portion of the historic business assets of
Tomoka and Tomoka State Bank in a business.
(3) Tomoka has no knowledge of any plan or intention on the part of
its shareholders to sell or otherwise dispose of the BancGroup common stock to
be received by them that would reduce their holdings to a number of shares
having, in the aggregate, a fair market value of less than fifty percent of the
total fair market value of Tomoka common stock outstanding immediately before
the merger.
(4) As a result of the merger, each share of the issued and
outstanding Tomoka common stock will be converted into the right to receive
BancGroup common stock.
(5) No fractional shares will be issued in the Merger. In the event
fractional shares result in the exchange, Tomoka shareholders entitled to
fractional shares will be paid cash by BancGroup for their fractional shares.
(6) The fair market value of the BancGroup common stock to be received
by a Tomoka shareholder will be approximately equal to the fair market value of
the Tomoka stock exchanged therefor.
(7) The proposed merger will be effected for substantial non-tax
business purposes.
(8) Tomoka and Tomoka State Bank are not under the jurisdiction of a
court in a Title 11 or similar case within the meaning of ss. 368(a)(3)(A) of
the Internal Revenue Code of 1986, as amended (the "Code").
<PAGE> 4
October 8, 1996
Page 2
On the basis of the foregoing and our consideration of such other
matters as we have considered necessary, we advise you that, in our opinion,
for federal income tax purposes:
(1) The Merger of Tomoka with and into BancGroup in accordance with
the terms of the Agreement will constitute a reorganization within the meaning
of Section 368(a)(1)(A) of the Code. Tomoka and Bancgroup will each be a "party
to a reorganization" under Section 368(b) of the Code.
(2) No gain or loss will be recognized by Tomoka upon the transfer of
its assets and liabilities to BancGroup. Sections 357(a) and 361(a) of the
Code. No gain or loss will be recognized by BancGroup upon receipt of the
assets and liabilities of Tomoka. Section 1032(a) of the Code.
(3) The basis of the assets of Tomoka acquired by BancGroup will be
the same as the basis of the assets in the hands of Tomoka immediately prior to
the Merger. Section 362(b) of the Code.
(4) The holding period of the assets of Tomoka in the hands of
BancGroup will include the period during which such assets were held by Tomoka.
Section 1223(2) of the Code.
(5) A Tomoka shareholder who exchanges shares of Tomoka stock solely
for shares of BancGroup common stock as described in the Agreement will not
recognize gain or loss. Section 354 of the Code.
(6) A dissenting Tomoka shareholder, who is not deemed to own any
shares of BancGroup under the constructive ownership rules of Section 318 of
the Code (see the discussion below of Section 318 of the Code), and who
receives only cash in exchange for his shares of Tomoka stock, will recognize
gain or loss equal to the difference between the amount of cash received and
the shareholder's basis in the shares of Tomoka stock surrendered. Section 1001
of the Code. Such gain or loss will be capital gain or loss if the Tomoka
shares are capital assets in the hands of the shareholder.
(7) The constructive ownership rules of Section 318 of the Code apply
in determining whether the receipt of cash has "the effect of the distribution
of a dividend" and whether a dissenting Tomoka shareholder who actually has
received all cash is deemed to have received a combination of cash and
BancGroup common stock. Under these rules, shares subject to options and shares
owned (or, in some cases, constructively owned) by members of the shareholder's
family, and by related entities (such as corporations, partnerships, trusts,
and estates) in which the shareholder, a member of his family, or a related
entity has an interest, may be counted as owned by the shareholder. Similarly,
an entity may be treated as owning shares owned by related persons or entities
(such as
<PAGE> 5
October 8, 1996
Page 3
shareholders, partners, or beneficiaries).
(8) The tax basis of the BancGroup common stock received by a Tomoka
shareholder will be the same as the adjusted tax basis of the shares of Tomoka
stock exchanged, decreased by the amount of cash received and increased by the
amount treated as a dividend and the amount of gain recognized on the exchange.
Section 358(a)(1) of the Code.
(9) The holding period of the BancGroup common stock received by a
Tomoka shareholder will include the holding period of the shares of Tomoka
stock exchanged therefor if such shares were capital assets in the hands of the
exchanging shareholder.
Section 1223(1) of the Code.
(10) Cash received in lieu of a fractional share interest in BancGroup
common stock will be treated as received in payment for such interest. Rev.
Rul. 66-365, 1996 - 2 C.B. 116. The shareholder will recognize gain or loss
equal to the difference between the cash received and the basis of such
fractional share interest.
This opinion is being rendered solely to the parties to whom it is
addressed. This opinion may not be relied upon nor distributed to any other
person without the written consent of our Firm. We hereby consent to the
reference to our Firm in, and to the filing of this opinion as an exhibit to,
the joint proxy statement-prospectus.
Very truly yours,
/s/ MILLER, HAMILTON, SNIDER & ODOM, L.L.C.
---------------------------------------------
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES OF THE REGISTRANT
SUBSIDIARIES OF THE COLONIAL BANCGROUP, INC.
COLONIAL BANK, AN ALABAMA BANKING CORPORATION.
COLONIAL BANK, A TENNESSEE BANK.
COLONIAL BANK, FSB, DUNWOODY, GEORGIA, A FEDERAL SAVINGS BANK.
COLONIAL BANK, LAWRENCEVILLE, GEORGIA, A GEORGIA STATE BANK
COLONIAL BANK, ORLANDO, FLORIDA, A FLORIDA BANK
THE COLONIAL BANCGROUP BUILDING CORPORATION, AN ALABAMA CORPORATION.
<PAGE> 1
EXHIBIT 23(A)
CONSENT OF COOPERS & LYBRAND, L.L.P.
CONSENT OF INDEPENDENT ACCOUNTANTS
WE CONSENT TO THE INCORPORATION BY REFERENCE IN THIS REGISTRATION STATEMENT ON
FORM S-4 OF OUR REPORT DATED FEBRUARY 23, 1996, ON OUR AUDITS OF THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE COLONIAL BANCGROUP, INC., AS OF
DECEMBER 31, 1995 AND 1994 AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED
DECEMBER 31, 1995 AND OUR REPORT DATED FEBRUARY 23,1996, EXCEPT NOTES 1 AND 2
AS TO WHICH THE DATE IS JULY 3, 1996, ON OUR AUDITS OF THE SUPPLEMENTAL
CONSOLIDATED FINANCIAL STATEMENTS OF THE COLONIAL BANCGROUP INC., AS OF
DECEMBER 31, 1995 AND 1994, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED
DECEMBER 31, 1995. WE ALSO CONSENT TO THE REFERENCE TO OUR FIRM UNDER THE
CAPTION "EXPERTS."
/S/ COOPERS & LYBRAND L.L.P.
- ----------------------------
BIRMINGHAM, ALABAMA
OCTOBER 25, 1996
<PAGE> 1
EXHIBIT 23(B)
CONSENT OF MILLER, HAMILTON, SNIDER & ODOM, L.L.C.
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 HEADINGS "APPROVAL OF THE MERGER -
CERTAIN FEDERAL INCOME TAX CONSEQUENCES" AND "LEGAL MATTERS," TO THE
SUMMARIZATION OF OUR OPINIONS REFERENCED THEREIN, AND TO THE INCLUSION OF OUR
OPINIONS AT EXHIBITS 5 AND 8 OF THE REGISTRATION STATEMENT.
/S/ MILLER, HAMILTON, SNIDER & ODOM, L.L.C.
- -------------------------------------------
OCTOBER 17, 1996
<PAGE> 1
EXHIBIT 23(C)
CONSENT OF DUPREE & CAMPUTARO
CONSENT OF INDEPENDENT ACCOUNTANTS
WE CONSENT TO THE USE IN THIS REGISTRATION STATEMENT ON FORM S-4 OF OUR REPORT
DATED JANUARY 25, 1996, ON OUR AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
OF TOMOKA BANCORP, INC. AND TO THE REFERENCE TO OUR FIRM UNDER THE HEADING
"EXPERTS."
/S/ DUPREE & CAMPUTARO
- -----------------------
OCTOBER 25, 1996
<PAGE> 1
EXHIBIT 23(D)
CONSENT OF PROFESSIONAL BANK SERVICES, INC.
CONSENT OF INVESTMENT BANKER
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 HEADINGS "APPROVAL OF THE MERGER -
OPINION OF FINANCIAL ADVISOR," TO THE SUMMARIZATION OF OUR OPINION REFERENCED
THEREIN, AND TO THE INCLUSION OF SUCH OPINION AT APPENDIX B TO THE PROSPECTUS.
Louisville, Kentucky
- ------------------------------------
OCTOBER 18, 1996
PROFESSIONAL BANK SERVICES, INC.
By: /s/ Christopher L. Hargrove
--------------------------------
Christopher L. Hargrove
Vice President
<PAGE> 1
SOLICITED BY
THE BOARD OF
DIRECTORS
PROXY
TOMOKA BANCORP, INC.
SPECIAL MEETING OF SHAREHOLDERS
_________________, 1996
The undersigned hereby appoints _________________________ and
_________________________, and either of them, or such other persons as the
board of directors of Tomoka Bancorp, Inc. ("Tomoka"), may designate, proxies
for the undersigned, with full power of substitution, to represent the
undersigned and to vote all of the shares of common stock of Tomoka at the
special meeting of stockholders to be held on __________________, 1996, and at
any and all adjournments thereof.
1. To ratify and approve the Agreement and FOR AGAINST ABSTAIN
Plan of Merger dated as of July 19, 1996, -------- -------- --------
pursuant to which Tomoka will be merged | | | | | |
with and into The Colonial BancGroup, Inc. -------- -------- --------
2. In their discretion, to vote on such other matters as may properly come
before the meeting, but which are not now anticipated, and to vote upon
matters incident to the conduct of the meeting
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF TOMOKA AND
WILL BE VOTED AS DIRECTED HEREIN. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1 AND IN ACCORDANCE WITH THE DISCRETION OF THE PROXY HOLDERS
RESPECTING SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING
BUT WHICH ARE NOT NOW ANTICIPATED, AND TO VOTE UPON MATTERS INCIDENT TO THE
CONDUCT OF THE SPECIAL MEETING.
DATED: ____________________________________________, 1996
PHONE NO: _______________________________________________
---------------------------------------------------------
(Signature of Stockholder)
---------------------------------------------------------
(Signature of Stockholder, if more than one)
Please sign exactly as your name appears on the envelope in
which this material was mailed. If shares are held jointly,
each stockholder must sign. Agents, executors,
administrators, guardians and trustees must give full title
as such. Corporations should sign by their president or
authorized officer.
