<PAGE> 1
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-64721
(TEXAS BANK & TRUST LOGO)
October 27, 1998
Dear Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders
(the "Special Meeting") of T B & T, Inc. ("T B & T"), which will be held on
Friday, November 27, 1998, at the offices of Texas Bank & Trust, 717 North
Harwood Street, Dallas, Texas, at 8:00 a.m. local time. At the Special Meeting,
shareholders of T B & T will be asked to consider and vote on approval of an
Agreement and Plan of Merger, dated as of August 6, 1998 (the "Agreement"),
between T B & T and The Colonial BancGroup, Inc. ("BancGroup"), pursuant to
which T B & T will be merged with BancGroup (the "Merger"). In the Merger, T B &
T shareholders will receive 0.6406 shares of BancGroup Common Stock in exchange
for each share of T B & T Common Stock held by them. Cash will be paid for any
fractional shares. Please see the attached Proxy Statement and Prospectus for a
detailed description of the terms of the Merger.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AGREEMENT AND THE
MERGER AS BEING IN THE BEST INTERESTS OF T B & T AND ITS SHAREHOLDERS AND
RECOMMENDS THAT YOU VOTE IN FAVOR OF THE APPROVAL OF THE AGREEMENT.
Additional information regarding the Agreement, the Merger, T B & T and
BancGroup is set forth in the attached Proxy Statement, which also serves as the
Prospectus for the shares of BancGroup Common Stock to be issued in connection
with the Merger. Please read these materials and carefully consider the
information contained in them.
The affirmative vote of two-thirds of the issued and outstanding shares of
T B & T Common Stock is required to approve the Agreement. Whether or not you
plan to attend the Special Meeting, you are urged to complete, sign and promptly
return the enclosed Proxy Card to assure that your shares will be voted at the
Special Meeting. If you attend the Special Meeting, you may vote in person if
you wish, and your proxy will not be used.
Sincerely,
/S/ CHARLES B. PHILLIPS
CHARLES B. PHILLIPS
President and Chief Executive Officer
<PAGE> 2
T B & T, INC.
1999 BRYAN STREET
SUITE 100
DALLAS, TEXAS 75201
(214) 969-1999
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 27, 1998, AT 8:00 A.M.
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NOTICE IS HEREBY GIVEN that a special meeting of shareholders (the "Special
Meeting") of T B & T, Inc. ("T B & T") will be held at the offices of Texas Bank
& Trust, 717 North Harwood Street, Dallas, Texas on Friday, November 27, 1998,
at 8:00 a.m., local time, for the following purposes:
1. Merger. To consider and vote upon the proposed merger (the
"Merger") of T B & T with and into The Colonial BancGroup, Inc.
("BancGroup"), in accordance with an Agreement and Plan of Merger, dated as
of August 6, 1998, between T B & T and BancGroup (the "Agreement").
BancGroup will be the surviving corporation in the Merger. Each share of
common stock of T B & T outstanding at the time of the Merger will be
converted into the right to receive 0.6406 shares of BancGroup Common
Stock, with cash paid in lieu of fractional shares as described in greater
detail in the accompanying Proxy Statement and Prospectus. The Agreement is
attached to the 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 T B & T has fixed the close of business on
October 20, 1998, 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 T B & T 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. T B & T shareholders are entitled to
assert dissenters' rights of appraisal pursuant to Article 5.11 of the Texas
Business Corporation Act. T B & T shareholders who comply with the provisions of
applicable Texas law relating to dissenters' rights will be entitled to object
to the Agreement and make written demand that BancGroup pay them in cash the
fair value of their shares. A copy of the dissenters' rights provisions is
attached to the enclosed Proxy Statement and Prospectus as Appendix B.
You are cordially invited to attend the Special Meeting, but whether or not
you plan to attend, please complete and sign the enclosed form of proxy and mail
it promptly in the enclosed envelope. The proxy may be revoked at any time by
filing a written revocation with the Secretary of T B & T, by executing a later
dated proxy and delivering it to the Secretary of T B & T at or prior to the
Special Meeting, or by attending the Special Meeting and voting in person.
BY ORDER OF THE BOARD OF DIRECTORS
/S/ CHARLES B. PHILLIPS
CHARLES B. PHILLIPS
President and Chief Executive Officer
October 27, 1998
<PAGE> 3
PROSPECTUS
COMMON STOCK, $2.50 PAR VALUE
THE COLONIAL BANCGROUP, INC.
------------------
PROXY STATEMENT
FOR SPECIAL MEETING OF SHAREHOLDERS OF
T B & T, INC.
TO BE HELD ON NOVEMBER 27, 1998
This Proxy Statement and Prospectus (the "Prospectus") relates to the
proposed merger (the "Merger") of T B & T, Inc., a Texas corporation ("T B &
T"), with and into The Colonial BancGroup, Inc., a Delaware corporation
("BancGroup"). This Prospectus is being furnished to the shareholders of T B & T
in connection with the solicitation of proxies by the Board of Directors of T B
& T for use at a special meeting of the shareholders of T B & T to be held on
Friday, November 27, 1998, at 8:00 a.m., local time, at the offices of Texas
Bank & Trust, 717 North Harwood Street, Dallas, Texas, and any adjournments or
postponements thereof (the "Special Meeting"). At the Special Meeting,
shareholders of T B & T will consider and vote upon the matters set forth in the
preceding Notice of Special Meeting of the Shareholders, as described in greater
detail in this Prospectus.
The Merger will be consummated pursuant to the terms of a certain Agreement
and Plan of Merger dated as of August 6, 1998 by and between BancGroup and T B &
T (the "Agreement"). The Agreement provides that, subject to the approval of the
Agreement by the shareholders of T B & T 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, T B & T will be merged with and
into BancGroup, and BancGroup will be the surviving corporation. Each issued and
outstanding share of common stock, par value $1.00 per share, of T B & T (the "T
B & T Common Stock"), other than shares held by T B & T or BancGroup other than
in a fiduciary capacity, or shares the holders of which properly perfect
dissenters' rights of appraisal, will be converted into 0.6406 shares of the
common stock, $2.50 par value per share, of BancGroup (the "BancGroup Common
Stock"). Assuming (i) 1,949,050 shares of T B & T Common Stock are outstanding
on the Effective Date, (ii) that no T B & T shareholders exercise dissenters'
rights in the Merger and (iii) that no outstanding options to acquire T B & T
Common Stock are exercised or exchanged in the "Cashless Exchange" before the
Effective Date, 1,248,561 shares of BancGroup Common Stock will be issued in the
Merger. See "The Merger -- Conversion of T B & T Common Stock," "-- Rights of
Dissenting Shareholders, "-- Treatment of T B & T Options." BancGroup Common
Stock is listed on the New York Stock Exchange ("NYSE"). The closing price per
share of the BancGroup Common Stock on the NYSE on October 20, 1998 was
$13.0625.
Consummation of the Merger requires, among other things, the affirmative
vote of at least two-thirds of the outstanding shares of T B & T 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. This document
constitutes a Proxy Statement of T B & T in connection with the solicitation of
proxies by T B & T for use at the Special Meeting, and any adjournments or
postponements thereof, and a Prospectus of BancGroup with respect to the
BancGroup Common Stock to be issued in the Merger. This Prospectus and
accompanying form of proxy are first being mailed to shareholders of T B & T on
or about the date set forth below.
THE BOARD OF DIRECTORS OF T B & T BELIEVES THAT THE MERGER IS IN THE BEST
INTERESTS OF T B & T AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS APPROVAL OF
THE AGREEMENT.
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THE SECURITIES TO WHICH THIS PROSPECTUS RELATE 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 principal office and mailing address of T B & T are 1999 Bryan Street,
Suite 100, Dallas, Texas 75201 (telephone 214-969-1999), and the principal
office and mailing address of BancGroup are Colonial Financial Center, One
Commerce Street, Post Office Box 1108, Montgomery, Alabama 36101 (telephone
334-240-5000).
The date of this Prospectus is October 20, 1998.
<PAGE> 4
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: 2 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 issued 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 T B
& T and its subsidiaries has been furnished by T B & T.
This Prospectus contains certain forward-looking statements with respect to
the financial condition, results of operations, and business of BancGroup
following the consummation of the Merger and the proposed acquisition of other
banking institutions (the "Other Pending Acquisitions"), including statements
relating to the expected impact of the Merger and the Other Pending Acquisitions
on BancGroup's financial performance. These forward-looking statements involve
certain risks and uncertainties. Factors that may cause actual results to differ
materially from those contemplated by such forward-looking statements include,
among other things, the following possibilities: (i) expected cost savings from
the Merger and the Other Pending Acquisitions, if any or all of such
transactions are consummated, cannot be fully realized; (ii) deposit attrition,
customer loss, or revenue loss following the Merger and the Other Pending
Acquisitions is greater than expected; (iii) competitive pressure in the banking
industry increases significantly; (iv) costs or difficulties related to the
integration of the businesses of BancGroup and the institutions to be acquired
are greater than expected; (v) changes in the interest rate environment reduce
margins; (vi) general economic conditions, either nationally or regionally, are
less favorable than expected, resulting in, among other things, a deterioration
in credit quality; (vii) changes occur in the regulatory environment; (viii)
changes occur in business conditions and the rate of inflation; and (ix) changes
occur in the securities markets. Forward looking earnings estimates (if any)
included in this Prospectus have not been examined or compiled by the
independent public accountants of BancGroup and T B & T, nor have such
accountants applied any procedures thereto. Accordingly, such accountants do not
express an opinion or any other form of assurance on them. When used in this
Prospectus, the words "believes," "estimates," "plans," "expects," "should,"
"may," "might," "outlook," and "anticipates," and similar expressions as they
relate to BancGroup (including its subsidiaries), or its management are intended
to identify forward-looking statements. Further information on other factors
that could affect the financial results of BancGroup after the Merger and the
Other Pending Acquisitions is included in the filings with the Commission
incorporated by reference herein.
2
<PAGE> 5
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 T B & T. 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 T B & T 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.
DOCUMENTS INCORPORATED BY REFERENCE
THIS PROSPECTUS INCORPORATES DOCUMENTS OF BANCGROUP BY REFERENCE WHICH ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE,
WITHOUT CHARGE, UPON REQUEST FROM THE PERSONS 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, 1997;
(2) BancGroup's Registration Statement on Form 8-A dated November 22,
1994, effective February 22, 1995, containing a description of the
BancGroup Common Stock.
(3) BancGroup's Quarterly Reports on Form 10-Q for the quarters ended
March 31 and June 30, 1998;
(4) BancGroup's Reports on Form 8-K dated March 16, 1998, April 15,
1998, June 2, 1998 and July 17, 1998; and
(5) The description of the current management and Board of Directors
contained in the Proxy Statement distributed pursuant to Section 14(a) of
the Exchange Act for BancGroup's Annual Meeting of shareholders held on
April 15, 1998.
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, shall be deemed incorporated by reference in this Prospectus
and made a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed incorporated herein by reference
will be deemed to be modified or superseded for the purpose of this Prospectus
to the extent that a statement contained herein or in another 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 T B & T 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). To obtain timely delivery, such request must be
made by November 20, 1998.
3
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SUMMARY..................................................... 6
THE SPECIAL MEETING......................................... 15
General................................................... 15
Record Date; Shares Entitled to Vote; Vote Required for
the Merger............................................. 15
Solicitation, Voting and Revocation of Proxies............ 15
Effect of Merger on Outstanding BancGroup Common Stock.... 16
THE MERGER.................................................. 17
General................................................... 17
Background of the Merger.................................. 17
T B & T's Board of Director's Reasons for Approving the
Merger................................................. 18
Fairness Opinion.......................................... 19
Recommendation of Board of Directors of T B & T........... 22
BancGroup's Reasons for the Merger........................ 22
Interests of Certain Persons in the Merger................ 22
Employee Benefits after the Merger........................ 23
Conversion of T B & T Common Stock........................ 24
Surrender of T B & T Common Stock Certificates............ 24
Certain Federal Income Tax Consequences................... 25
Other Possible Consequences............................... 26
Conditions to Consummation of the Merger.................. 26
Voting Agreements......................................... 27
Amendment or Termination of Agreement..................... 28
Regulatory Approvals...................................... 28
Conduct of Business Pending the Merger.................... 30
No Solicitation........................................... 31
Related Transactions -- Stock Option...................... 31
Rights of Dissenting Shareholders......................... 32
Resale of BancGroup Common Stock Issued in the Merger..... 34
Accounting Treatment...................................... 35
NYSE Reporting of BancGroup Common Stock Issued in the
Merger................................................. 35
Treatment of T B & T Options.............................. 35
Closing; Effective Date of Merger......................... 36
Expenses.................................................. 36
COMPARATIVE MARKET PRICES AND DIVIDENDS..................... 37
BANCGROUP CAPITAL STOCK AND DEBENTURES...................... 38
BancGroup Common Stock.................................... 38
Preference Stock.......................................... 38
1986 Debentures........................................... 39
Other Indebtedness........................................ 39
Changes in Control........................................ 40
COMPARATIVE RIGHTS OF SHAREHOLDERS.......................... 41
Director Elections........................................ 42
Removal of Directors...................................... 42
Voting.................................................... 42
Preemptive Rights......................................... 42
Directors' Liability...................................... 42
Indemnification........................................... 43
Special Meetings of Shareholders; Action Without a
Meeting................................................ 44
Mergers, Share Exchanges and Sales of Assets.............. 44
</TABLE>
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<PAGE> 7
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Amendment of Certificate of Incorporation and Bylaws...... 44
Rights of Dissenting Stockholders......................... 45
Preferred Stock........................................... 45
Effect of the Merger on T B & T Shareholders.............. 45
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES............... 47
Condensed Pro Forma Statements of Condition (Unaudited)... 47
Completed Business Combinations........................... 48
Pending Business Combinations............................. 49
Condensed Pro Forma Statements of Income (Unaudited)...... 52
Pro Forma Adjustments..................................... 54
Nonrecurring Charges...................................... 54
Selected Financial and Operating Information.............. 56
T B & T, INC. SUMMARY CONDENSED CONSOLIDATED FINANCIAL
INFORMATION............................................... 61
Management's Discussion and Analysis of Financial
Condition and Results of Operation..................... 63
BUSINESS OF BANCGROUP....................................... 73
General................................................... 73
Recently Completed and Other Proposed Business
Combinations........................................... 73
Year 2000 Compliance...................................... 73
Voting Securities and Principal Stockholders.............. 74
Security Ownership of Management.......................... 74
Management Information.................................... 76
BUSINESS OF T B & T......................................... 77
General................................................... 77
Market Area............................................... 77
Properties................................................ 78
Competition............................................... 78
Year 2000 Compliance...................................... 78
Principal Holders of Common Stock......................... 78
ADJOURNMENT OF SPECIAL MEETING.............................. 80
OTHER MATTERS............................................... 80
DATE FOR SUBMISSION OF BANCGROUP STOCKHOLDER PROPOSALS...... 80
LEGAL MATTERS............................................... 80
EXPERTS..................................................... 80
INDEX TO FINANCIAL STATEMENTS............................... F-1
APPENDIX A -- Agreement and Plan of Merger.................. A-1
APPENDIX B -- Dissenters' Rights Statute.................... B-1
APPENDIX C -- Stock Option Agreement........................ C-1
APPENDIX D -- Opinion of Hovde Financial, Inc............... D-1
</TABLE>
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<PAGE> 8
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 T B & T are urged to read this
Prospectus, including the Appendices, in full.
GENERAL
This Prospectus relates to the issuance of shares of BancGroup Common Stock
in connection with the proposed Merger of T B & T with and into BancGroup.
THE SPECIAL MEETING
This Prospectus is being furnished to the holders of T B & T Common Stock
in connection with the solicitation by the T B & T Board of Directors of proxies
for use at the Special Meeting and at any and all adjournments and postponements
thereof at which T B & T shareholders will be asked to vote upon (i) a proposal
to approve the Agreement and the Merger; and (ii) such other business as may
properly come before the meeting. The Special Meeting will be held at the
offices of Texas Bank & Trust, 717 North Harwood Street, Dallas, Texas, on
Friday, November 27, 1998, at 8:00 a.m., local time, for the purpose of
considering and voting upon the Merger and the Agreement. Only holders of record
of T B & T Common Stock at the close of business on October 20, 1998 (the
"Record Date") are entitled to the notice of and to vote at the Special Meeting.
As of the Record Date, 1,950,000 shares of T B & T Common Stock were issued and
1,949,050 shares of T B & T Common Stock were 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 and has operated under its current name and management since
1981. BancGroup operates a wholly owned commercial banking subsidiary, Colonial
Bank, in the states of Alabama, Florida, Georgia, Tennessee, Nevada and Texas.
Including acquisitions completed since June 30, 1998, Colonial Bank conducts a
full service commercial banking business through 134 branches in Alabama, five
branches in Tennessee, 19 branches in Georgia, seven branches in Nevada, 84
branches in Florida and one branch in Texas. Colonial Mortgage Company, a
subsidiary of the Colonial Bank in Alabama, is a mortgage banking company which
services approximately $14.7 billion in residential loans and which originates
residential mortgages in 34 states through four divisional offices. At June 30,
1998, BancGroup had consolidated total assets of $8.8 billion and consolidated
stockholders' equity of $601.8 million. See "Business of BancGroup."
T B & T. T B & T is a bank holding company within the meaning of the BHCA
and was incorporated on February 8, 1982. T B & T owns all of the outstanding
capital stock of T B & T Holdings, Inc., a Delaware corporation, which, in turn,
owns all of the outstanding shares of the capital stock of Texas Bank & Trust, a
Texas banking corporation (the "Bank"). Currently, the Bank operates two banking
offices, which are located in Dallas, Texas. At June 30, 1998, T B & T had total
consolidated assets of approximately $104.0 million, total consolidated deposits
of approximately $94.1 million, and total consolidated stockholders' equity of
approximately $8.7 million. See "Business of T B & T."
THE MERGER
The Agreement provides for the Merger of T B & T with and into BancGroup,
with BancGroup to be the surviving corporation and the subsequent merger of the
Bank with and into either Colonial Bank or a Texas-based subsidiary bank of
BancGroup. Upon the date of consummation of the Merger (the "Effective Date"),
each outstanding share of T B & T Common Stock (except shares as to which
dissenters' rights are perfected) will be converted by operation of law and
without any action by any holder thereof into 0.6406 shares of BancGroup Common
Stock (such number is referred to herein as the "Exchange Ratio"). Cash will be
paid in lieu of fractional shares. Assuming (i) 1,949,050 shares of T B & T
Common Stock are outstanding on the
6
<PAGE> 9
Effective Date, (ii) that no T B & T shareholders exercise dissenters' rights in
the Merger and (iii) that none of the 38,000 outstanding options to acquire T B
& T Common Stock are exercised or exchanged in the "Cashless Exchange" before
the Effective Date, 1,248,561 shares of BancGroup Common Stock will be issued in
the Merger. The number of shares of BancGroup Common Stock to be issued in the
Merger will increase proportionally with each share of T B & T Common Stock
issued pursuant to the exercise, before the Effective Date, of certain options
to acquire T B & T Common Stock and will further increase depending upon the
number of shares of BancGroup Common Stock issued pursuant to a "Cashless
Exchange" of options to acquire T B & T Common Stock. See "The
Merger -- Treatment of T B & T Options".
The closing sales price on the NYSE of BancGroup Common Stock on October
20, 1998 was $13.0625 per share. Shareholders are advised to obtain current
market quotations for BancGroup Common Stock. The market price of BancGroup
Common Stock at the Effective Date, or on the date on which certificates
representing such shares are received by T B & T shareholders, may be higher or
lower than the market price of BancGroup Common Stock as of the Record Date or
at the time of the Special Meeting.
No fractional shares of BancGroup Common Stock will be issued in connection
with the Merger. Each shareholder of T B & T otherwise entitled to receive a
fractional share of BancGroup Common Stock will receive instead a cash payment
(without interest) equal to such fractional share multiplied by the "Market
Value" of BancGroup Common Stock. The Market Value will be the average of the
closing prices of BancGroup Common Stock as reported on the NYSE on each of the
ten trading days ending on the trading day five trading days before the
Effective Date.
Promptly after the Effective Date, T B & T shareholders will be given
notice of the consummation of the Merger and instructions for the exchange of
such shareholders' certificates representing shares of T B & T Common Stock for
certificates representing shares of BancGroup Common Stock. Certificates for the
shares of BancGroup Common Stock issued will not be distributed, and BancGroup
will not pay dividends on such shares until shareholders surrender their
certificates representing their shares of T B & T Common Stock in accordance
with those instructions. T B & T SHAREHOLDERS SHOULD NOT SEND IN THEIR T B & T
STOCK CERTIFICATES UNTIL THEY HAVE RECEIVED THE INSTRUCTIONS. See "The
Merger -- Conversion of T B & T Common Stock," "-- Surrender of T B & T Common
Stock Certificates" and "-- Treatment of T B & T Options."
As of the Effective Date of the Merger, each option outstanding under the T
B & T Stock Option Plan shall be converted into an option to purchase the number
of shares of BancGroup Common Stock equal to the number of shares of T B & T
Common Stock issuable immediately prior to the Effective Date upon exercise of
such option multiplied by the Exchange Ratio upon the same terms and conditions
under the relevant option as were applicable immediately prior to the Effective
Date, except that the exercise price will be equal to the exercise price of the
option prior to the Effective Date divided by the Exchange Ratio. In lieu of
this conversion, option holders may elect as part of the Merger to exchange the
option to acquire T B & T Common Stock for shares of BancGroup Common Stock
based on a formula as provided in the Agreement. See "The Merger -- Treatment of
T B & T Options".
For certain information concerning management of BancGroup and T B & T, see
"Business of BancGroup -- Voting Securities and Principal Shareholders,"
"-- Security Ownership of Management," and "Business of T B & T -- Principal
Holders of Common Stock."
RECOMMENDATION OF T B & T'S BOARD OF DIRECTORS
The Board of Directors of T B & T has unanimously approved the Agreement.
THE BOARD OF DIRECTORS OF T B & T BELIEVES THAT THE MERGER IS IN THE BEST
INTERESTS OF THE SHAREHOLDERS OF T B & T AND RECOMMENDS THAT SHAREHOLDERS VOTE
FOR THE APPROVAL OF THE AGREEMENT AND THE MERGER. For a discussion of the
factors considered by the Board of Directors in reaching its conclusions, see
"The Merger -- Background of the Merger" and "-- T B & T's Board of Director's
Reasons for Approving the Merger."
The Board of Directors of T B & T has received the written opinion of Hovde
Financial, Inc. ("Hovde") that as of the date of such opinion, based upon and
subject to the assumptions, factors and limitations set forth
7
<PAGE> 10
therein, the Exchange Ratio to be received by the shareholders of T B & T is
fair from a financial point of view. As discussed in "The Merger -- T B & T's
Board of Directors' Reasons for Approving the Merger," Hovde's opinion and
presentations were among the factors considered by T B & T's Board of Directors
in reaching the determination to approve the Agreement and the Merger. Hovde's
opinion is updated as of the date of this Prospectus. A copy of Hovde's opinion
dated the date of this Prospectus is attached as Appendix D hereto and the
description set forth herein is qualified in its entirety by reference to such
opinion. See "The Merger -- Fairness Opinion."
RELATED TRANSACTIONS -- STOCK OPTION
In connection with the Agreement, T B & T has granted to BancGroup an
option to purchase up to 368,150 shares of T B & T Common Stock (provided that,
in no event, shall the number of shares so acquired exceed 19.9% of the issued
and outstanding T B & T Common Stock) at a purchase price of $11.05 per share
(the "Option Agreement"). The option will become exercisable upon the occurrence
of certain events which are generally related to the potential acquisition of T
B & T by another party. The option is intended to increase the likelihood that
the Merger will be consummated by making it more difficult and expensive for any
third party to acquire control of T B & T while BancGroup is seeking to
consummate the Merger. See "The Merger -- Related Transactions -- Stock Option"
and Appendix C hereto.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of T B & T's and the Bank's management and Board of
Directors have interests in the Merger in addition to their interests as
shareholders of T B & T generally. These interests relate to, among other
things, provisions in the Agreement regarding indemnification and the conversion
of unexercised options to purchase T B & T Common Stock held by directors,
officers and employees of T B & T into either options to purchase shares of
BancGroup Common Stock or a number of shares of BancGroup Common Stock in
accordance with the terms of the Agreement. At the Record Date directors and
officers of T B & T held options to purchase 38,000 shares of T B & T Common
Stock at an exercise price of $3.00 per share. See "The Merger -- Treatment of T
B & T Options." In addition, Guardian Mortgage Company, Inc. ("Guardian"), a
mortgage company wholly-owned by Jack D. Sweet, a director of T B & T, and his
wife, has, as a condition to BancGroup's willingness to enter into the Agreement
entered into an agreement (the "Guardian Agreement") with BancGroup providing
for, among other things, the maintenance by Guardian after the Effective Date of
certain custodial accounts Guardian holds for its borrowers on behalf of others
at Colonial Bank in the form of non-interest bearing deposits and the provision
by Colonial Bank of a warehouse line of credit to Guardian for its operational
requirements. The Guardian Agreement also gives BancGroup a right of first
refusal to acquire the business of Guardian under certain circumstances.
On the Effective Date, BancGroup anticipates that Colonial Bank will enter
into an employment agreement with Charles Phillips, President and CEO of T B &
T. Mr. Phillips' employment agreement is expected to provide that he will, among
other things, assist in the post-merger transition of customer services on
behalf of Colonial Bank in Dallas County, Texas for compensation based upon his
current annual salary of $171,000. The agreement is expected to provide for
employment until March 31, 1999, for severance benefits equal to eighteen months
of salary, and for a non-competition agreement providing that Mr. Phillips will
not compete with Colonial Bank or BancGroup in Dallas and adjoining counties
during the terms of the agreement.
On the Effective Date, BancGroup anticipates that Colonial Bank will enter
into an employment agreement with Linda Bridges, Senior Vice President, Cashier
and Chief Operating Officer of T B & T. Ms. Bridges' employment agreement is
expected to provide that she will assist in post-merger systems conversions on
behalf of Colonial Bank for compensation based upon her current annual salary of
$90,000. The agreement will expire at the later to occur of February 28, 1999 or
30 days after the completion of the computer systems conversion. The agreement
will also provide for severance for Ms. Bridges equal to six months' salary.
8
<PAGE> 11
BancGroup also anticipates that Colonial Bank will enter into a one year
employment agreement with Kevin F. Smith. The agreement is expected to provide
that he will receive initial base annual compensation of $111,700.
See "The Merger -- Interests of Certain Persons in the Merger."
VOTING AGREEMENTS
Each of the directors of T B & T has also entered into a separate agreement
(the "Voting Agreement") with BancGroup whereby each director has agreed to,
among other things, vote all of the shares of T B & T Common Stock over which
such director has voting control in favor of the Agreement and the Merger. The
Voting Agreement also generally restricts each T B & T director during a two
year period following the Effective Date from engaging in or owning a competing
banking business, soliciting BancGroup employees for employment or soliciting
the banking business of BancGroup.
VOTE REQUIRED
Under Texas law, the Agreement must be approved by the affirmative vote of
two-thirds of the outstanding shares of T B & T Common Stock. Each share of T B
& T Common Stock is entitled to one vote on the Agreement. Approval of the
Agreement and the Merger by BancGroup shareholders is not required under
Delaware, Texas 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 T B & T Common Stock at the close of business on
the Record Date are entitled to notice of and to vote at the Special Meeting. As
of such date, 1,950,000 shares of T B & T Common Stock were issued and 1,949,050
shares of T B & T Common Stock were outstanding. As of the Record Date, the
directors and executive officers of T B & T and the Bank held approximately
63.06% of the outstanding shares of T B & T Common Stock. As of the same date,
the directors, executive officers and affiliates of BancGroup held no shares of
T B & T Common Stock. See "The Special Meeting."
As of the Record Date, the directors of T B & T and holders of 5% or more
of the outstanding T B & T Common Stock owned 1,336,934 shares of T B & T Common
Stock representing approximately 70.13% of the outstanding shares and have
agreed with BancGroup to vote their shares in favor of the Agreement. See "The
Special Meeting." As of June 30, 1998, directors and executive officers of
BancGroup beneficially owned in the aggregate 9,967,304 shares of BancGroup
Common Stock representing approximately 10.06% of BancGroup's outstanding
shares.
Proxies should be returned to T B & T in the envelope enclosed herewith.
Shareholders of T B & T submitting proxies may revoke their proxies by (i)
giving notice of such revocation in writing to the Secretary of T B & T at or
prior to the Special Meeting, (ii) executing and delivering a proxy bearing a
later date to the Secretary of T B & T at or prior to the Special Meeting, or
(iii) attending the Special Meeting and voting in person. Because approval of
the Agreement requires the approval of at least two-thirds of the outstanding
shares of T B & T Common Stock, failure to submit a proxy or failure to vote in
person at the Special Meeting 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 T B & T Common Stock are entitled to exercise dissenters' rights
pursuant to Article 5.11 et seq. of the Texas Business Corporation Act (the
"TBCA"). A holder of T B & T Common Stock who files with T B & T prior to the
Special Meeting a written objection to the Merger, does not vote in favor of the
Merger at the Special Meeting and otherwise complies with the procedures
established by these statutory provisions is entitled to demand the fair value
of such shareholder's T B & T Common Stock in cash, subject to a condition of
the Agreement which conditions completion of the Merger on exercise of
dissenters' rights by holders of an aggregate of less than 10% of the total
shares of T B & T Common Stock outstanding. See "The Merger -- Rights of
Dissenting Shareholders." Shareholders who exercise dissenters' rights will not
have the
9
<PAGE> 12
same tax treatment as T B & T shareholders whose T B & T Common Stock is
converted into BancGroup stock. See "The Merger -- Certain Federal Income Tax
Consequences."
CONDITIONS TO THE MERGER
The parties' respective obligations to consummate the Merger are 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
at least two-thirds of the outstanding shares of T B & T Common Stock; (ii) the
approval of the Merger by the Board of Governors of the Federal Reserve System
(the "Federal Reserve"); (iii) the absence of any pending or threatened
litigation which seeks to restrain or prohibit the Merger; (iv) the consummation
of the Merger on or before February 28, 1999; (v) receipt of opinions of counsel
as to certain matters; and (vi) receipt of an opinion from
PricewaterhouseCoopers LLP as to certain tax matters.
The obligation of T B & T 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; and (ii) the shares of
BancGroup Common Stock to be issued under the Agreement having been approved for
listing on the NYSE.
The obligations of BancGroup to consummate the Merger are subject to
various conditions, including: (i) the absence of any material adverse change in
the financial condition or affairs of T B & T; (ii) the number of shares as to
which holders of T B & T Common Stock exercise dissenters' rights not exceeding
10% of the outstanding shares of T B & T Common Stock; and (iii) the execution
and delivery by each shareholder of T B & T deemed to be an "affiliate" of T B &
T of an agreement relating to certain restrictions on resales of BancGroup
Common Stock received by such affiliates in connection with the Merger.
The Agreement provides that BancGroup's obligation to consummate the Merger
is conditioned upon its receipt of a letter from PricewaterhouseCoopers LLP,
BancGroup's independent accountants, to the effect that the independent
accountants concur with the conclusions of BancGroup's and T B & T's respective
managements that no conditions exist with respect to each company which would
preclude accounting for the Merger as a pooling of interests. However, BancGroup
intends to account for the Merger as a purchase and has, consequently, waived
receipt of such a letter from PricewaterhouseCoopers LLP.
Regulatory approvals by the Federal Reserve were received on October 15,
1998. No assurance can be provided that the necessary shareholder can be
obtained or that the other conditions precedent to the Merger can or will be
satisfied. BancGroup and T B & T anticipate that the Merger will be consummated
during the last quarter of 1998. However, delays in the consummation of the
Merger could occur.
See "The Merger -- Conditions to Consummation of the Merger" and
"-- Regulatory Approvals."
AMENDMENT OR TERMINATION OF AGREEMENT
To the extent permitted by law, the Agreement may be amended by a
subsequent writing signed by each of the parties upon the approval of the Boards
of Directors of each of the parties. However, after adoption of the Agreement
and the approval of the Merger by the holders of T B & T Common Stock, no
amendment materially modifying the consideration to be received by T B & T
shareholders may be made without the further approval of such shareholders. The
Agreement may be terminated at any time prior to or on the Effective Date,
whether before or after adoption of the Agreement by the shareholders of T B &
T, by the mutual consent of the respective Boards of Directors of T B & T and
BancGroup or by the Board of Directors of either BancGroup or T B & T under
certain circumstances including, but not limited to: (i) a material breach which
cannot or has not been cured within 30 days of notice of such breach being given
by the non-breaching party; (ii) failure to consummate the transactions
contemplated under the Agreement by February 28, 1999, provided that such
failure to consummate is not caused by any breach of the Agreement by the party
electing to terminate; and (iii) without further action by either party, upon
the execution by T B & T of a legally binding agreement between T B & T and any
third party with respect to any Acquisition Proposal
10
<PAGE> 13
(as defined in the Agreement), that will entitle BancGroup to demand T B & T's
performance of the Option Agreement. See "The Merger -- Related
Transactions -- Stock Option Agreement."
COMPARATIVE RIGHTS OF SHAREHOLDERS
The rights of the holders of the T B & T 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 at "Comparative Rights of
Shareholders."
FEDERAL INCOME TAX CONSEQUENCES
No ruling with respect to the federal income tax consequences of the Merger
to T B & T's shareholders will be requested from the Internal Revenue Service
(the "IRS"). T B & T has received an opinion from PricewaterhouseCoopers LLP
that, among other things, a shareholder of T B & T who exchanges shares of T B &
T Common Stock for BancGroup Common Stock will not recognize gain or loss,
except that shareholders of T B & T will recognize gain to the extent such
shareholders receive cash in lieu of fractional shares of BancGroup Common
Stock. Shareholders who receive cash for their shares of T B & T Common Stock
upon perfection of dissenters' rights will realize gain or loss for federal
income tax purposes with respect to such shares. See "The Merger -- Certain
Federal Income Tax Consequences." T B & T shareholders are urged to consult
their own tax advisors as to the specific tax consequences of the Merger to
them.
ACCOUNTING TREATMENT
The Merger of T B & T into BancGroup will be treated as a "purchase"
transaction by BancGroup for accounting purposes. See "The Merger -- Accounting
Treatment."
RECENT PER SHARE MARKET PRICES
T B & T. There is no established public trading market for the T B & T
Common Stock. The shares of T B & T Common Stock are not actively traded, and
such trading activity, as it occurs, takes place in privately negotiated
transactions. Sales of T B & T Common Stock of which Management of T B & T is
aware since January 1, 1996 have ranged between $4.00-$5.00. Since such
transactions were privately negotiated, such prices do not necessarily reflect
the market price for the T B & T Common Stock. The following table sets forth
the dividends paid on T B & T Common Stock since January 1, 1996:
<TABLE>
<CAPTION>
DIVIDENDS
PER SHARE
---------
<S> <C>
1996
First Quarter............................................. .03
Second Quarter............................................ .04
Third Quarter............................................. .04
Fourth Quarter............................................ .10
1997
First Quarter............................................. .05
Second Quarter............................................ .05
Third Quarter............................................. .05
Fourth Quarter............................................ .10
1998
First Quarter............................................. .05
Second Quarter............................................ .05
Third Quarter............................................. .05
Fourth Quarter (through October 27, 1998)................. --
</TABLE>
11
<PAGE> 14
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 Common Stock as reported on the NYSE since January 1, 1996.
<TABLE>
<CAPTION>
PRICE PER SHARE OF
COMMON STOCK(1)
----------------------
HIGH LOW
--------- ---------
<S> <C> <C> <C> <C>
1996
First Quarter............................................. $ 9 1/8 $ 7 1/2
Second Quarter............................................ 9 1/16 7 13/16
Third Quarter............................................. 9 7 13/16
Fourth Quarter............................................ 10 1/16 8 11/16
1997
First Quarter............................................. 12 9 1/3
Second Quarter............................................ 12 7/16 11
Third Quarter............................................. 14 5/8 12 1/8
Fourth Quarter............................................ 17 9/16 14 1/2
1998
First Quarter............................................. 18 1/8 15 3/4
Second Quarter............................................ 18 13/16 14 3/4
Third Quarter............................................. 17 5/16 11 5/8
Fourth Quarter (through October 20, 1998)................. 13 11/16 10 1/8
</TABLE>
- ---------------
(1) Restated to reflect the impact of the two-for-one stock splits effected in
the form of 100% stock dividends paid February 11, 1997 and August 14, 1998.
On August 5, 1998, the business day immediately prior to the public
announcement of the Merger, the closing price of the BancGroup Common Stock on
the NYSE was $31.125 per share. Giving retroactive effect to a two-for-one stock
split effected in the form of a 100% stock dividend paid by BancGroup on August
14, 1998 to shareholders of record at the close of business on July 31, 1998
(the "Stock Split"), that price would have been $15.5625 per share. The
following table presents the market value per share of BancGroup Common Stock on
that date, and the market value and equivalent per share value of T B & T Common
Stock on that date (giving effect to the Stock Split):
<TABLE>
<CAPTION>
BANCGROUP T B & T EQUIVALENT
COMMON COMMON PRICE PER
STOCK STOCK T B & T
(1) (2) SHARE(3)
--------- ------- ----------
<S> <C> <C> <C>
Comparative Market Value................................. $15.5625 $4.69 $9.97
</TABLE>
- ---------------
(1) Closing price as reported by the NYSE on August 5, 1998.
(2) There is no established public trading market for the shares of T B & T
Common Stock. The value shown is the June 30, 1998 book value of a share of
T B & T Common Stock. Management is unaware of any transaction of T B & T
Common Stock that may have occurred since January 1, 1996.
(3) If the Merger had closed on August 6, 1998 and giving effect to the Stock
Split, 0.6406 shares of BancGroup Common Stock would have been exchanged for
each share of T B & T Common Stock.
See "Comparative Market Prices and Dividends."
CERTAIN LEGAL RESTRICTIONS ON ACQUISITIONS OF CONTROL
Certain restrictions under Delaware law prevent a person who beneficially
owns 15% or more of the BancGroup Common Stock from engaging in a "business
combination" with BancGroup unless certain conditions are satisfied. Also, the
Change in Bank Control Act of 1978 prohibits a person from acquiring "control"
of BancGroup unless certain notice requirements of the Federal Reserve have been
satisfied.
BancGroup's Restated Certificate of Incorporation (the "BancGroup
Certificate") and its Bylaws (the "BancGroup Bylaws") also contain provisions
which may deter or prevent a takeover of BancGroup that is not
12
<PAGE> 15
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 shareholders to call
special meetings and act by written consent, and (5) certain advance notice
provisions for the conduct of business at shareholder meetings.
See "BancGroup Capital Stock and Debentures" and "Comparative Rights of
Shareholders."
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 T B & T on a
historical basis and on a pro forma equivalent basis assuming consummation of
the Merger. 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
ENDED YEAR
JUNE 30, ENDED
1998 1997
---------- -----
<S> <C> <C>
BANCGROUP -- HISTORICAL:
Net Income
Basic(1).................................................. $0.43 $0.89
Diluted(1)................................................ $0.43 $0.86
Book value at end of period(1).............................. 6.13 5.76
Dividends per share:
Common Stock(1)........................................... 0.17 0.30
T B & T
Net Income
Historical:
Basic.................................................. 0.23 0.53
Diluted................................................ 0.21 0.49
Pro forma equivalent assuming combination with T B & T and
completed business combinations(a):
Basic.................................................. 0.28 0.55
Diluted................................................ 0.27 0.54
Pro forma equivalent assuming combination with T B & T,
completed business combinations and other probable
business combinations(a):
Basic.................................................. 0.27 0.54
Diluted................................................ 0.26 0.53
Book value at end of period
Historical................................................ 4.69 4.57
Pro forma equivalent assuming combination with T B & T and
completed business combinations(a)..................... 3.86 N/A
Pro forma equivalent assuming combination with T B & T,
completed business combinations and other probable
business combinations(a)............................... 3.76 N/A
Dividends per share
Historical................................................ 0.10 0.25
Pro forma equivalent assuming combination with T B & T and
completed business combinations(a)..................... 0.11 0.19
Pro forma equivalent assuming combination with T B & T,
completed business combinations and other probable
business combinations(b)............................... 0.11 0.19
</TABLE>
13
<PAGE> 16
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
JUNE 30, ENDED
1998 1997
---------- -----
<S> <C> <C>
BANCGROUP -- PRO FORMA COMBINED (T B & T AND COMPLETED
BUSINESS COMBINATIONS):
Net Income
Basic..................................................... $0.43 $0.86
Diluted................................................... $0.42 $0.84
Book value at end of period................................. 6.10 N/A
BANCGROUP -- PRO FORMA COMBINED (T B & T, COMPLETED BUSINESS
COMBINATIONS AND OTHER PROBABLE BUSINESS COMBINATIONS):
Net Income
Basic..................................................... $0.42 $0.84
Diluted................................................... $0.41 $0.82
Book value at end of period................................. 5.95 N/A
</TABLE>
- ---------------
*Restated to give retroactive effect to the June 1998 pooling-of-interests
method business combination with Commercial Bank of Nevada.
N/A Not applicable due to pro forma balance sheet being presented only at June
30, 1998 which assumes the transaction consummated on the latest balance
sheet date in accordance with Rule 11.02(b) of Regulation S-X.
(1) Restated to reflect the impact of a two-for-one stock split in the form of
a 100% stock dividend paid August 14, 1998.
(a) 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 T B &
T. For these pro forma equivalent per share amounts, a .6406 BancGroup
common stock conversion ratio is utilized.
(b) Pro forma equivalent dividends per share are shown at BancGroup's Common
Stock dividend per share rate multiplied by the .6406 conversion ratio per
share of T B & T common stock (see note (a)). 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.
14
<PAGE> 17
THE SPECIAL MEETING
GENERAL
This Prospectus is being furnished to the shareholders of T B & T in
connection with the solicitation of proxies by the Board of Directors of T B & T
for use at the Special Meeting and at any adjournments or postponements thereof.
The purpose of the Special Meeting is to consider and vote upon the Agreement
which provides for the proposed Merger of T B & T with and into BancGroup.
BancGroup will be the surviving corporation in the Merger.
THE BOARD OF DIRECTORS OF T B & T BELIEVES THAT THE MERGER IS IN THE BEST
INTERESTS OF T B & T AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE AGREEMENT (ITEM 1 ON THE PROXY CARD).
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 shareholders is required to approve the Merger.
RECORD DATE; SHARES ENTITLED TO VOTE; VOTE REQUIRED FOR THE MERGER
The Board of Directors of T B & T has fixed the close of business on
October 20, 1998, as the Record Date for determination of shareholders entitled
to vote at the Special Meeting. There were 158 record holders of T B & T Common
Stock and 1,949,050 shares of T B & T Common Stock are outstanding, each
entitled to one vote per share, as of the Record Date. T B & T is obligated to
issue up to an additional 38,000 shares of T B & T Common Stock upon the
exercise of outstanding T B & T Options.
The presence at the Special Meeting, in person or by proxy, of the holders
of a majority of the outstanding shares of T B & T Common Stock on the Record
Date is necessary to constitute a quorum for the transaction of business at the
Special Meeting. In the absence of a quorum, the Special Meeting may be
postponed from time to time until T B & T shareholders holding the requisite
number of shares of T B & T Common Stock are represented in person or by proxy.
If a quorum is present, the affirmative vote of at least two-thirds of the
outstanding shares of T B & T Common Stock 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, such
non-votes will have the same effect as votes cast "AGAINST" the Agreement. Each
holder of record of shares of T B & T Common Stock is entitled to cast, for each
share registered in his or her name, one vote on the Agreement as well as on
each other matter presented to a vote of shareholders at the Special Meeting.
As of the Record Date, directors of T B & T and holders of 5% or more of
the outstanding T B & T Common Stock owned 1,336,934 shares of T B & T Common
Stock representing approximately 70.13% of the outstanding shares. These
individuals have agreed with BancGroup, subject to the effectiveness of the
Registration Statement of which this prospectus forms a part, to vote their
shares in favor of the Merger.
If the Agreement is approved at the Special Meeting, T B & T is expected to
merge with and into BancGroup promptly after the other conditions to the
Agreement are satisfied. See "The Merger -- Conditions of Consummation of the
Merger."
THE BOARD OF DIRECTORS OF T B & T URGES THE SHAREHOLDERS OF T B & T TO
EXECUTE AND RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE AND UNANIMOUSLY
RECOMMENDS THAT THE SHARES REPRESENTED BY THE PROXY BE VOTED IN FAVOR OF THE
AGREEMENT.
SOLICITATION, VOTING AND REVOCATION OF PROXIES
In addition to soliciting proxies by mail, directors, officers and other
employees of T B & T, without receiving special compensation therefor, may
solicit proxies from T B & T's shareholders by telephone, by telegram or in
person. Arrangements will also be made with brokerage firms and other
custodians, nominees
15
<PAGE> 18
and fiduciaries, if any, to forward solicitation materials to any beneficial
owners of shares of T B & T Common Stock.
T B & T will bear the cost of assembling and mailing this Prospectus and
other materials furnished to shareholders of T B & T. It will also pay all other
expenses of solicitation, including the expenses of brokers, custodians,
nominees, and other fiduciaries who, at the request of T B & T, 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 T B & T 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 T B & T Common Stock
represented by the proxy will be voted "FOR" the proposal to approve the
Agreement and in accordance with the determination of the majority of the Board
of Directors of T B & T as to any other matter which may properly come before
the Special Meeting, including any adjournment or postponement thereof. A
shareholder may revoke any proxy given pursuant to this solicitation by: (i)
delivering to the Secretary of T B & T, prior to or at the Special Meeting, a
written notice revoking the proxy; (ii) delivering to the Secretary of T B & T,
at or prior to the Special Meeting, a duly executed proxy relating to the same
shares and bearing a later date; or (iii) voting in person at the Special
Meeting. Attendance at the Special Meeting will not, in and of itself,
constitute a revocation of a proxy. All written notices of revocation and other
communications with respect to the revocation of T B & T's proxies should be
addressed to:
T B & T, Inc.
1999 Bryan Street
Suite 100
Dallas, Texas 75201
Attention: Kevin F. Smith
Proxies marked as abstentions and shares held in street name which have
been designated by brokers on proxy cards as not voted will not be counted as
votes cast. Such proxies will, however, be counted for purposes of determining
whether a quorum is present at the Special Meeting.
The Board of Directors of T B & T 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 approval of the
Agreement, or 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 approval of the Agreement. Proxies voted
against the approval of the Agreement and abstentions will not be voted for an
adjournment. See "Adjournment of the Special Meeting."
EFFECT OF MERGER ON OUTSTANDING BANCGROUP COMMON STOCK
Assuming that no dissenters' rights of appraisal are exercised in the
Merger, that no additional T B & T Options are exercised prior to the Effective
Date and that no T B & T Options are exchanged in the Cashless Exchange,
BancGroup will issue 1,248,561 shares of BancGroup Common Stock. Subject to
applicable federal and state securities laws, BancGroup expects to purchase a
number of shares sufficient to consummate the Merger in block purchases and
through an accelerated stock repurchase program. The shares so purchased will be
reissued in connection with the Merger. Based on those assumptions, the
1,248,561 shares of BancGroup Common Stock will represent approximately 1.11% of
the total number of shares of BancGroup Common Stock outstanding following the
Merger, not counting any additional shares BancGroup may issue, including shares
to be issued pursuant to other pending acquisitions.
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THE MERGER
The following sets forth a summary of the material provisions of the
Agreement and the transactions contemplated thereby. The description does not
purport to be complete and is qualified in its entirety by reference to the
Agreement, a copy of which is attached hereto as Appendix A and the Option
Agreement, a copy of which is attached hereto as Appendix C, and certain
provisions of Texas law relating to the rights of dissenting shareholders, a
copy of which is attached hereto as Appendix B and the Option Agreement, a copy
of which is attached hereto as Appendix C. All T B & T shareholders are urged to
read the Agreement and the Appendices in their entirety.
GENERAL
The Agreement provides that, subject to approval by the shareholders of T B
& T, receipt of necessary regulatory approvals and satisfaction of certain other
conditions described below at "-- Conditions to Consummation of the Merger," T B
& T will merge with and into BancGroup. Upon completion of the Merger, the
corporate existence of T B & T will cease, and BancGroup will succeed to the
business formerly conducted by T B & T. The Agreement further provides that
following or simultaneous to the consummation of the Merger, the Bank will be
merged with and into Colonial Bank or other Texas-based subsidiary of BancGroup.
BACKGROUND OF THE MERGER
The Bank was organized in 1983 as a national bank and began its banking
operations during that year. T B & T has been the sole shareholder of the Bank
since its inception, although in 1995 T B & T effectuated a reorganization of
the ownership structure through formation of T B & T Holdings, Inc. T B & T
Holdings, Inc. is presently a wholly owned subsidiary of T B & T and T B & T
Holdings, Inc. owns all of the outstanding shares of the Bank's common stock.
During the past several years T B & T received several informal unsolicited
inquiries respecting a business combination transaction and has engaged in
preliminary discussions with certain persons. None of these inquiries or
discussions resulted in the receipt of a formal proposal or offer to effect a
business combination with T B & T and the Bank.
Following BancGroup's execution on May 5, 1998, of a business combination
agreement with FirstBank, a Dallas based commercial bank, a representative of
FirstBank, Roy Gene Evans, on behalf of BancGroup contacted Peter Tart, a
director of T B & T, in early June 1998 to determine whether T B & T had any
interest in effecting a business combination with BancGroup. Mr. Evans was known
to officials of T B & T through prior business dealings. Subsequent discussions
with Mr. Evans indicated that both T B & T, the Bank and FirstBank had similar
operating philosophies which were also consistent with those of BancGroup. There
followed a meeting between the Chairman of the Board and the President of T B &
T with the Chief Executive Officer and Chief Financial Officer of BancGroup on
July 9, 1998 at which meeting basic operating philosophies were discussed.
BancGroup also advised Mr. Sweet of its desire to enter into an agreement with
Guardian respecting future business relationships between the two companies and
that such future business was an integral part of and a condition to BancGroup's
decision to effectuate a merger with T B & T. Following BancGroup's review of
certain information respecting the Bank's operations, a draft terms sheet was
prepared by BancGroup and delivered to T B & T on July 14, 1998. At the T B & T
regular Board meeting on July 15, 1998, the Directors reviewed the draft term
sheet and determined that the proposal while not entirely acceptable to the
Board provided grounds for further discussion. A committee of three directors,
Messrs. Sweet, Tart and Phillips, were authorized to pursue further discussions
with BancGroup and to retain special legal counsel and a financial advisor. On
July 16, 1998 the T B & T Director committee met with Mr. Evans to further
discuss and revise the draft term sheet. As a result of such meeting, BancGroup
agreed, among other things, to increase the proposed exchange ratio.
At a special Board meeting on July 22, 1998, the T B & T Directors, based
on the term of the revised terms sheet, determined to enter into negotiations
with BancGroup respecting a definitive agreement and to allow BancGroup to
conduct a due diligence review. Counsel for T B & T and the Bank as well as
officials
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<PAGE> 20
from each company then entered into extensive discussions and negotiations with
BancGroup and its counsel and officials respecting the terms of the definitive
agreement including the proposed lock up arrangements and director voting
agreements. Mr. Sweet also negotiated the terms of the Guardian Agreement during
this period to ensure inclusion of terms for continuing business relationships
essentially equivalent to the terms already in existence between Guardian and
various third-party entities, including the Bank.
On August 5, 1998, the T B & T Board met with its financial and legal
advisors. All Board members were present in person except for Mr. Carter
Montgomery who had previously signified his approval of the Agreement and the
Merger which consent was later ratified at the August 12, 1998 regular Board
meeting.
T B & T's legal counsel reviewed the terms of the Agreement, the Stock
Option Agreement and the Director Voting Agreements with the Board.
Representatives of Hovde reviewed with the Board the financial terms of the
Merger and related matters. Following discussion, the T B & T Board concluded
the Agreement and the Merger were in the best interests of T B & T and its
shareholders and approved the Agreement unanimously by all Directors present.
On August 6, 1998, T B & T and BancGroup executed the Agreement and the
Option Agreement and the T B & T Directors executed the Director Voting
Agreements. The Guardian Agreement was also entered into at such time. The
Merger was thereafter publicly announced.
T B & T'S BOARD OF DIRECTOR'S REASONS FOR APPROVING THE MERGER
The T B & T Board believes that the Merger is fair to, and in the best
interests of T B & T and its shareholders. Accordingly, the Board unanimously
approved the Agreement and the Merger and recommends that the T B & T
shareholders vote FOR the approval and adoption of the Agreement and the Merger.
In reaching its determination that the Merger is fair to, and in the best
interests of T B & T and its shareholders, the Board considered a number of
factors including, without limitation, the following:
(i) the current condition and growth prospects of T B & T and the
Bank, their historical results of operations and their prospective results
of operations were T B & T and the Bank to remain independent including the
limitations on the ability of T B & T and the Bank to compete in their
market areas due to their relatively small size and capital base and their
need to expend significant capital outlays in order to meet Year 2000
computer requirements and to broaden their product offerings;
(ii) the greater financial and management resources and customer
product offerings of BancGroup which would increase the competitiveness of
the combined institution in the T B & T market area and the ability to
serve the customers of and communities served by T B & T and the Bank;
(iii) the monetary value of the BancGroup Common Stock offered to the
T B & T shareholders;
(iv) the potential value, liquidity and dividend yield of the T B & T
Common Stock if T B & T were to remain independent;
(v) the greater liquidity represented by the BancGroup Common Stock to
be received in the Merger and the higher dividend yield to be generated
from ownership of the BancGroup Common Stock based upon the number of
shares of BancGroup Common Stock to be received in the Merger;
(vi) the historical results of operations and financial condition of
BancGroup and the future prospects for BancGroup, including anticipated
benefits of the Merger;
(vii) the economic, business and competitive climate for banking
institutions in Texas;
(viii) the future growth prospects of BancGroup following the Merger;
(ix) the fact that the Merger will constitute a tax-free exchange to T
B & T shareholders for federal income tax purposes; and
(x) the opinion from Hovde that the Exchange Ratio to be received by
the shareholders of T B & T is fair from a financial point of view.
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<PAGE> 21
FAIRNESS OPINION
Pursuant to a letter agreement dated July 30, 1998, T B & T retained Hovde
to render an opinion (the "Fairness Opinion") as to the fairness, from a
financial point of view, of the Exchange Ratio to be received by the holders of
the T B & T Common Stock in the Merger. At the August 6, 1998 meeting, at which
the T B & T Board of Directors approved the Agreement, Hovde delivered its
written Fairness Opinion to T B & T as of such date, which Fairness Opinion was
subject to the various considerations set forth therein. Hovde has also
delivered to the Board a written Fairness Opinion dated the date of this
Prospectus which is substantially identical to the Fairness Opinion dated August
6, 1998.
The full text of the Fairness Opinion of Hovde, dated the date of this
Prospectus, which describes the procedures followed, assumptions made, matters
considered and limitations on the review undertaken, is attached hereto as
Appendix D. Shareholders of T B & T should read the Fairness Opinion in its
entirety.
HOVDE'S FAIRNESS OPINION IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL
POINT OF VIEW, OF THE EXCHANGE RATIO, AND DOES NOT CONSTITUTE A RECOMMENDATION
TO ANY SHAREHOLDER OF T B & T AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT T B &
T'S SHAREHOLDER MEETING. THE SUMMARY OF THE FAIRNESS OPINION OF HOVDE SET FORTH
IN THIS PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF
SUCH FAIRNESS OPINION.
During the course of its engagement, and as a basis for arriving at its
Fairness Opinion, Hovde reviewed and analyzed material bearing upon the
financial and operating condition of BancGroup and T B & T and material prepared
in connection with the Merger, including, among other things, the following: (i)
the Agreement; (ii) certain publicly available information concerning T B & T
and BancGroup, including the consolidated financial statements of T B & T and
BancGroup for each of the three years ended December 31, 1995, 1996, and 1997,
as well as subsequent financial statements for the periods ended March 31, 1998
and June 30, 1998; (iii) the nature and terms of recent acquisition and merger
transactions involving banks and bank holding companies that Hovde considered
reasonably similar to T B & T in size, financial character, operating character,
historical performance and geographic market; and (iv) financial and other
information provided to Hovde by the management of BancGroup and T B & T. Hovde
also took into account its experience in other transactions as well as its
knowledge of the commercial banking industry and its general experience in
securities valuations.
In rendering its Fairness Opinion, Hovde assumed, without independent
verification, the accuracy and completeness of the financial and other
information and has relied upon the accuracy of the representations of the
parties contained in the Agreement. Hovde has not made any independent
evaluation or appraisal of any properties, assets or liabilities of the T B & T
or BancGroup. Hovde assumed and relied upon the accuracy and completeness of the
publicly available and other financial and other information provided to it,
relied upon the representations and warranties of BancGroup and T B & T made
pursuant to the Agreement, and did not independently attempt to verify any of
such information.
In connection with its Fairness Opinion, Hovde performed various analyses
with respect to T B & T. The following is a brief summary of such analyses,
certain of which were presented to T B & T's Board of Directors by Hovde on or
before the announcement date of August 6, 1998.
Analysis of the Exchange Ratio. Hovde reviewed the value of the Exchange
Ratio to be received by each of T B & T's stockholders. Hovde calculated the
value of the shares of BancGroup Common Stock that would be received pursuant to
the Agreement at $19.6 million, or $10.09 per fully diluted share of all shares
outstanding of T B & T's Common Stock. This calculation results in multiples
based upon T B & T's earnings per share ("EPS") for the 12 months preceding
("LTM"), book value per share, tangible book value per share and tangible book
premium to core deposits of 19.2 times, 230.2%, 230.2%, and 14.4%, respectively.
In calculating the multiples for the Merger, Hovde used T B & T's EPS for the 12
months ended June 30, 1998, book value per share and tangible book value per
share as of June 30, 1998.
Comparable Company Analysis: Colonial BancGroup, Inc. Using publicly
available information, Hovde compared the financial performance and stock market
valuation of BancGroup with the following selected
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<PAGE> 22
banking institutions with assets between $5 billion and $15 billion located in
the southeast and southwest regions of the United States (the "Comparable Bank
Group") deemed relevant by Hovde: Bank United Corp. (TX), BOK Financial Corp.
(OK), Centura Banks Inc. (NC), Compass Bancshares, Inc. (AL), CCB Financial
Corp. (CCB), Cullen/Frost Bankers, Inc. (TX), First Citizens BancShares Inc.
(NC), First Virginia Banks, Inc. (VA), Hibernia Corp (LA), National Commerce
Bancorp. (TN), One Valley Bancorp, Inc. (WV), Synovus Financial Corp. (GA),
Trustmark Corp. (MS) and Zions Bancorporation (UT). Indications of such
financial performance and stock market valuation included profitability (return
on average assets and return on average equity for the latest twelve month
period ended June 30, 1998, of 1.16% and 16.37%, respectively, for BancGroup and
medians of 1.34% and 15.45%, respectively, for the Comparable Bank Group); the
ratio of tangible equity to tangible assets (6.02% for BancGroup and a median of
7.10% for the Comparable Bank Group); the ratio of non-performing assets to
total assets (0.50% for BancGroup and a median of 0.29% for the Comparable Bank
Group); current stock price to earnings for the latest twelve month period ended
June 30, 1998 (17.7 times for BancGroup and a median 19.5 times for the
Comparable Bank Group); current stock price to tangible book value as of June
30, 1998 (298.2% for BancGroup and a median 361.5% for the Comparable Bank
Group).
Comparable Company Analysis: T B & T. Using publicly available
information, Hovde compared the financial performance of T B & T with the
following selected banking institutions with assets between $75 million and $150
million located in Dallas, Texas (the "Comparable Bank Group") deemed relevant
by Hovde: Abrams Centre National Bank, the Bank of the Southwest of Dallas,
Brookhollow National Bank, Founders National Bank, Gateway National Bank,
Reunion Bank, State Bank & Trust Company, Texas Central Bank, N.A., Texas
Community Bank, N.A. and United Texas Bank. Indications of such financial
performance included profitability (return on average assets and return on
average equity for the latest twelve month period ended March 31, 1998, of 1.05%
and 12.42%, respectively, for T B & T and medians of 1.18% and 15.34%,
respectively, for the Comparable Bank Group); the ratio of tangible equity to
tangible assets (8.12% for T B & T and a median of 7.42% for the Comparable Bank
Group); the ratio of non-performing assets to total assets (0.08% for T B & T
and a median of 0.31% for the Comparable Bank Group). These ratios and/or
multiples for T B & T and the Comparable Bank Group are based on bank-level
public financial statements as of March 31, 1998.
Because of the inherent differences in the businesses, operations,
financial conditions and prospects of T B & T, BancGroup and the companies
included in the Comparable Bank Group, Hovde believed that a purely quantitative
comparable company analysis would not be particularly meaningful in the context
of the Merger. Hovde believed that the appropriate use of a comparable company
analysis in this instance would involve qualitative judgments concerning the
differences between T B & T and the companies included in the Comparable Bank
Group which would affect the trading values of the comparable companies and T B
& T.
Analysis of Selected Mergers. As part of its analysis, Hovde reviewed a
comparable group of bank acquisitions, which included all mergers involving
commercial banks headquartered in Texas announced after July 1, 1997 in which
the total assets of the seller were between $75 and $150 million (the "Texas
Mergers"). The Texas Mergers consisted of 14 banks headquartered in Texas. For
each transaction, Hovde calculated the multiple of the offer value to the
acquired company's: (i) LTM EPS for the twelve months preceding the announcement
date of the transaction; (ii) book value per share; (iii) tangible book value
per share; and (iv) the tangible book premium to core deposits.
The calculations of the Texas Mergers yielded a range of multiples of offer
value to LTM EPS of 12.7 times to 21.1 times, with an average of 15.6 times and
a median of 15.1 times; a range of multiples of offer value to book value of
151.5% to 221.5%, with an average of 199.8% and a median of 204.8%; a range of
multiples of offer value to tangible book value of 151.5% to 230.4%, with an
average of 203.7% and a median of 204.8%; and a range of tangible book premium
to core deposits of 7.27% to 24.10%, with an average of 12.83% and a median of
11.38%. Hovde compared these multiples with the corresponding multiples for the
Merger, 19.2 times T B & T's LTM EPS, 230.2% of book value per share, 230.2% of
tangible book value per share and a 14.4% tangible book premium to core
deposits.
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No company or transaction used in the above analysis as a comparison is
identical to T B & T, BancGroup or the Merger. Accordingly, an analysis of the
results of the foregoing is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other facts that could affect the public
trading value of the companies to which they are being compared.
Although the summary set forth above does not purport to be a complete
description of the analysis performed by Hovde, the material analysis performed
by Hovde in rendering its opinion has been summarized above. However, the
preparation of a fairness opinion is not necessarily susceptible to partial
analysis or summary description. Hovde believes that its analysis and the
summary set forth above must be considered as a whole and that selecting
portions of its analysis, without considering all factors and analysis, would
create an incomplete view of the process underlying the analysis by which Hovde
reached its opinion. In addition, Hovde may have given various analyses more or
less weight than other analyses, but no analysis was given materially more
weight than any other analysis. Also, Hovde may have deemed various assumptions
more or less probable than other assumptions so that the ranges of valuations
resulting from any particular analysis described above should not be taken to be
Hovde's view of the actual value of T B & T or the combined company.
In performing its analysis, Hovde made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of T B & T and BancGroup. The
analysis performed by Hovde is not necessarily indicative of actual value or
actual future results, which may be significantly more or less favorable than
suggested by such analysis. Such analysis was prepared solely as part of Hovde's
analysis of the fairness of the Exchange Ratio, from a financial point of view,
to the holders of T B & T's Common Stock. The analysis does not purport to be an
appraisal or to reflect the prices at which a company might actually be sold or
the prices at which any securities may trade at the present time or at any time
in the future. Hovde used in its analysis various projections of future
performance prepared by the management of T B & T. The projections are based on
numerous variables and assumptions which are inherently unpredictable and must
be considered not certain of occurrence as projected. Accordingly, actual
results could vary significantly from those assumed in the projections and any
related analysis. Hovde's opinion does not address the relative merits of the
Merger as compared to any other business combination in which T B & T might
engage. In addition, as described above, Hovde's opinion to T B & T's Board of
Directors was one of many factors taken into consideration by T B & T's Board of
Directors in making its determination to approve the Agreement.
Based upon the foregoing analyses and other investigations and assumptions
set forth in its opinions, without giving specific weightings to any one factor
or comparison, Hovde determined that the Exchange Ratio was fair from a
financial point of view to the shareholders of T B & T.
THE SUMMARY OF THE PRESENTATION BY HOVDE TO T B & T'S BOARD OF DIRECTORS AS
SET FORTH ABOVE DOES NOT PURPORT TO BE A COMPLETE DESCRIPTION OF SUCH
PRESENTATION. THE PREPARATION OF A FAIRNESS OPINION INVOLVES VARIOUS
DETERMINATIONS AS TO THE MOST APPROPRIATE AND RELEVANT METHODS OF FINANCIAL
ANALYSES AND THE APPLICATION OF THOSE METHODS TO THE PARTICULAR CIRCUMSTANCES,
AND, THEREFORE, SUCH AN OPINION IS NOT READILY SUSCEPTIBLE TO SUMMARY
DESCRIPTION. FURTHERMORE, IN ARRIVING AT ITS OPINION, HOVDE DID NOT ATTRIBUTE
ANY PARTICULAR WEIGHT TO ANY ANALYSIS OR FACTOR CONSIDERED BY IT, BUT RATHER
MADE QUALITATIVE JUDGMENTS AS TO THE SIGNIFICANCE AND RELEVANCE OF EACH ANALYSIS
AND FACTOR. ACCORDINGLY, HOVDE BELIEVES THAT ITS ANALYSES AND THE SUMMARY SET
FORTH ABOVE MUST BE CONSIDERED AS A WHOLE AND THAT SELECTING PORTIONS OF ITS
ANALYSES, WITHOUT CONSIDERING ALL FACTORS AND ANALYSES, COULD CREATE AN
INCOMPLETE VIEW OF THE PROCESS UNDERLYING THE ANALYSES SET FORTH IN ITS REPORT
TO T B & T'S BOARD AND ITS FAIRNESS OPINION. IN PERFORMING ITS ANALYSES, HOVDE
MADE NUMEROUS ASSUMPTIONS WITH RESPECT TO INDUSTRY PERFORMANCE, GENERAL BUSINESS
AND ECONOMIC CONDITIONS AND OTHER MATTERS, MANY OF WHICH ARE BEYOND THE
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<PAGE> 24
CONTROL OF BANCGROUP AND T B & T. THE ANALYSES PERFORMED BY HOVDE ARE NOT
NECESSARILY INDICATIVE OF ACTUAL VALUES OR ACTUAL FUTURE PERFORMANCE.
Hovde is a nationally recognized investment banking firm. Hovde, as part of
its investment banking business, is continuously engaged in the valuation of
businesses and securities in connection with mergers and acquisitions,
competitive biddings, private placements and valuations for corporate and other
purposes. Pursuant to the July 30, 1998 agreement between Hovde and T B & T,
Hovde will receive a fee of approximately $30,000, for services rendered in
connection with advising T B & T regarding the Agreement, including the Fairness
Opinion, plus reimbursement of out-of-pocket expenses. As of the date of this
Prospectus, Hovde has received $20,000 of such fee.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF T B & T
The Board of Directors of T B & T has determined that the Merger is in the
best interests of T B & T and its shareholders. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF T B & T VOTE IN FAVOR OF THE
APPROVAL AND ADOPTION OF THE MERGER AND THE AGREEMENT.
BANCGROUP'S REASONS FOR THE MERGER
The Board of Directors of BancGroup has unanimously approved the Merger and
the Agreement. BancGroup recently acquired FirstBank in Dallas, Texas and has
been seeking to expand its banking operations in Texas generally and in the
Dallas market in particular. The acquisition of T B & T will enhance BancGroup's
presence in the Dallas market and should better position BancGroup to benefit
from the large and growing economy of Texas.
In approving the Merger and the Agreement, the Board of Directors of
BancGroup took into account, among other things: (i) the financial performance
and condition of T B & T, including its capital and asset quality; (ii)
similarities in the philosophies of BancGroup and T B & T, including T B & T's
commitment to delivering high quality personalized financial services to its
customers; (iii) the size and growth of the Texas economy; and (iv) T B & T's
management's knowledge of, and experience in, the Texas market.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of T B & T's and the Bank's management and Board of
Directors may be deemed to have certain interests in the Merger in addition to
their interest as shareholders of T B & T generally. T B & T's Board of
Directors was aware of these interests and considered them, among other matters,
in unanimously approving the Agreement and the Merger.
Indemnification of T B & T Management. BancGroup has agreed to indemnify,
for a period of six years after the Effective Date, each director and officer of
T B & T and the Bank against all liabilities arising out of actions or omissions
occurring upon or prior to the Effective Date of the Merger (including with
respect to the Merger) to the extent authorized under the articles of
incorporation or bylaws of such companies and Texas law and subject to receipt
of a letter from each indemnified person on or prior to the Effective Date
identifying any claims known at such time as to which such indemnification
obligation would attach.
Stock Options. There are currently outstanding options to purchase 38,000
shares of T B & T Common Stock at an exercise price of $3.00 per share held by
two officers of T B & T which were issued under the terms of the T B & T Stock
Option Plan. The Agreement provides that the options, to the extent not
exercised prior to the Effective Date, will be assumed by BancGroup on
essentially the same terms as were applicable to such option to acquire T B & T
Common Stock except that the options will thereafter represent options to
acquire BancGroup Common Stock, the number of shares of BancGroup Common Stock
represented by each option will equal the number of shares of T B & T Common
Stock subject to the option multiplied by the Exchange Ratio and the exercise
price of each option to acquire BancGroup Common Stock will be equal to the
exercise price for each share of T B & T Common Stock subject to such option
divided by the Exchange Ratio. Each optionholder may elect, at least five days
prior to the Effective Date of the Merger,
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rather than having the options assumed by BancGroup to convert into options to
acquire BancGroup Common Stock, to have such options convert through the
"cashless exchange" into shares of BancGroup Common Stock at an equivalent
economic value.
On the Effective Date, BancGroup anticipates that Colonial Bank will enter
into an employment agreement with Charles Phillips, President and CEO of T B &
T. Mr. Phillips' employment agreement is expected to provide that he will, among
other things, assist in the post-merger transition of customer services on
behalf of Colonial Bank in Dallas County, Texas for compensation based upon his
current annual salary of $171,000. The agreement is expected to provide for
employment until March 31, 1999, for severance benefits equal to eighteen months
salary and for a non-competition agreement providing that Mr. Phillips will not
compete with Colonial Bank or BancGroup in Dallas and adjoining counties during
the term of the agreement.
On the Effective Date, BancGroup anticipates that Colonial Bank will enter
into an employment agreement with Linda Bridges, Senior Vice President, Cashier
and Chief Operating Officer of T B & T. Ms. Bridges' employment agreement is
expected to provide that she will assist in post-merger systems conversions on
behalf of Colonial Bank for compensation based upon her current annual salary of
$90,000. The agreement will expire at the later to occur of February 28, 1999 or
30 days' after the completion of the computer systems conversion. The agreement
will also provide for severance for Ms. Bridges equal to six months' salary.
BancGroup also anticipates that Colonial Bank will enter into a one year
employment agreement with Kevin F. Smith. The agreement is expected to provide
that he will receive initial base annual compensation of $111,700.
Guardian Agreement. Jack D. Sweet, a director of T B & T and the Bank, is
the sole owner, together with his wife, of Guardian Mortgage Company, a mortgage
banking company. Guardian has from time to time engaged in business
relationships with the Bank including the sale to the Bank of new mortgages
originated by Guardian prior to their sale to secondary sources. At the request
of BancGroup and as a condition to BancGroup's willingness to enter into the
Agreement, Guardian has entered into the Guardian Agreement which is intended to
set forth the basis for a continuing business relationship between BancGroup and
Guardian following the Effective Date. The Guardian Agreement contemplates that
these continuing business relationships will include the maintenance by Guardian
of certain of its custodial funds (which generally represent escrow accounts
from borrowers) at Colonial Bank, or other Texas based financial institution
selected by BancGroup, in the form of non-interest bearing deposit accounts and
the provision by Colonial Bank or other subsidiary bank of BancGroup of a
warehouse line of credit to Guardian to fund its primary operations, the terms
of which line of credit are to be renegotiated from time to time based on
competitive market conditions. The Guardian Agreement generally provides that
the charges to be paid by Guardian for services rendered shall be on generally
competitive terms with credit in certain instances for the interest-free
custodial deposits to be maintained by Guardian at Colonial Bank. These
continuing relationships are intended by Guardian to replace similar preexisting
agreements with various third parties, including the Bank. The Guardian
Agreement further grants to BancGroup the right of first refusal to acquire
Guardian in the event the shareholders of Guardian determine to sell Guardian or
such shareholders receive an offer to sell Guardian which such shareholders
determine to accept.
EMPLOYEE BENEFITS AFTER THE MERGER
On the Effective Date, except as disclosed elsewhere herein, all employees
of the Bank (including its executive officers) will, at BancGroup's option,
remain employees of Colonial Bank or such other subsidiary bank of BancGroup
into which the Bank has been merged, or be entitled to severance benefits in
accordance with the severance policy of Colonial Bank as in effect as of the
date of the Agreement. All employees of the Bank who remain employees of
Colonial Bank or such other subsidiary bank of BancGroup into which the Bank has
been merged on the Effective Date will 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's employees.
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CONVERSION OF T B & T COMMON STOCK
The Agreement provides for the Merger of T B & T with and into BancGroup,
with BancGroup to be the surviving corporation. On the Effective Date, each
outstanding share of T B & T Common Stock (except shares as to which dissenters'
rights are perfected) will be converted by operation of law and without any
action by any holder thereof into 0.6406 shares of BancGroup Common Stock.
Assuming (i) 1,949,050 shares of T B & T Common Stock are outstanding on the
Effective Date, (ii) that no T B & T shareholders exercise dissenters' rights in
the Merger and (iii) that none of the 138,000 T B & T Options are exercised
before the Effective Date and no shares of BancGroup Common Stock are issued in
the Cashless Exchange, 1,248,561 shares of BancGroup Common Stock will be issued
in the Merger. The number of shares of BancGroup Common Stock to be issued in
the Merger will increase proportionally with each share of T B & T Common Stock
issued pursuant to the exercise of T B & T Options and will further increase
depending upon the number of shares of BancGroup Common Stock issued pursuant to
a Cashless Exchange. See "-- Treatment of T B & T Options."
No fractional shares of BancGroup Common Stock will be issued in connection
with the Merger. Each shareholder of T B & T otherwise entitled to receive a
fractional share of BancGroup Common Stock will receive instead a cash payment
(without interest) equal to such fractional interest multiplied by the Market
Value. As an example, assume a Market Value of $11.8688 (which was the ten-day
closing price average calculated as of October 20, 1998). Each share of T B & T
Common Stock will be converted on the Effective Date into 0.6406 shares of
BancGroup Common Stock. As a result, a shareholder of T B & T who owns 500
shares of T B & T Common Stock would be entitled to receive 320.3 shares of
BancGroup Common Stock (500 X 0.6406) and would actually receive 320 shares of
BancGroup Common Stock, with the .30 of a share paid in cash equal to $3.56 (.30
X $11.8688).
The closing sales price on the NYSE of the BancGroup Common Stock on
October 20, 1998 was $13.0625 per share. Shareholders are advised to obtain
current market quotations for BancGroup Common Stock. The market price of
BancGroup Common Stock at the Effective Date, or on the date on which
certificates representing such shares are received by T B & T shareholders, may
be higher or lower than the market price of BancGroup Common Stock as of the
Record Date or at the time of the Special Meeting.
The Agreement provides that if, prior to the Effective Date, BancGroup
Common Stock is 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,
or changed into or exchanged for a different kind or number of securities, an
appropriate and proportionate adjustment will be made in the number of shares of
BancGroup Common Stock (or such other company for which the shares of BancGroup
shall have been exchanged) into which the T B & T Common Stock will be converted
in the Merger.
SURRENDER OF T B & T COMMON STOCK CERTIFICATES
On the Effective Date and subject to the conditions described at
"-- Conditions to Consummation of the Merger," T B & T's shareholders (except
those shareholders who perfect dissenters' rights under applicable law) 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 T B & T Common Stock will represent
shares of BancGroup Common Stock. Thereafter, upon surrender of the certificates
formerly representing shares of T B & T Common Stock, the holders will be
entitled to receive certificates for the whole number of shares of BancGroup
Common Stock to which they are entitled. Dividends on the shares of BancGroup
Common Stock will accumulate without interest and will not be distributed to any
former shareholder of T B & T unless and until such shareholder surrenders for
cancellation his certificate for T B & T Common Stock. SunTrust Bank, Atlanta,
Atlanta, Georgia, transfer agent for BancGroup Common Stock, will act as the
Exchange Agent with respect to the shares of T B & T Common Stock surrendered in
connection with the Merger. The Exchange Agent will mail a detailed explanation
of these arrangements to T B & T shareholders promptly following the Effective
Date. Stock certificates should not be sent to the Exchange Agent until such
notice is received.
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HOLDERS OF T B & T COMMON STOCK SHOULD NOT SURRENDER THEIR CERTIFICATES
UNTIL THEY RECEIVE WRITTEN INSTRUCTIONS FROM THE EXCHANGE AGENT.
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 each of T B & T and BancGroup to
consummate the Merger is conditioned on the receipt of an opinion from
PricewaterhouseCoopers LLP, BancGroup's independent public accountant, to the
effect that the Merger will constitute such a reorganization. The opinion has
been delivered to BancGroup. In delivering its opinion, PricewaterhouseCoopers
LLP has received and relied upon certain representations contained in
certificates of officers of BancGroup and T B & T and certain other information,
data, documentation and other materials as it deemed necessary. The tax opinion
is based upon customary assumptions contained therein, including the assumption
that T B & T has no knowledge of any plan or intention on the part of the T B &
T 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 T B & T Common
Stock outstanding immediately upon consummation of the Merger.
Neither T B & T nor BancGroup intends to seek a ruling from the IRS as to
the federal income tax consequences of the Merger. T B & T's shareholders should
be aware that the opinion will not be binding on the IRS or the courts. T B &
T's shareholders also should be aware that some of the tax consequences of the
Merger are governed by provisions of the Code as to which there are no final
regulations and little or no judicial or administrative guidance. There can be
no assurance that future legislation, administrative rulings, or court decisions
will not adversely affect the accuracy of the statements contained herein.
The tax opinion states that, provided the assumptions stated therein are
satisfied, the Merger will constitute a reorganization as defined in Section
368(a) of the Code, and the following federal income tax consequences will
result to T B & T's shareholders who exchange their shares of T B & T Common
Stock for shares of BancGroup Common Stock:
(i) No gain or loss will be recognized by T B & T's shareholders on
the exchange of shares of T B & T Common Stock for shares of BancGroup
Common Stock;
(ii) The aggregate basis of BancGroup Common Stock received by each T
B & T 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 T B & T Common Stock surrendered in
exchange therefor;
(iii) The holding period of the shares of BancGroup Common Stock
received by each T B & T shareholder will include the period during which
the shares of T B & T Common Stock exchanged therefor were held, provided
that the shares of T B & T Common Stock were a capital asset in the
holder's hands as of the Effective Date;
(iv) Cash payments received by each T B & T 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 T B & T Common Stock is a capital asset in the hands of the
holder;
(v) No gain or loss will be recognized by T B & T 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 T B & T;
(vi) The basis of the assets of T B & T acquired by BancGroup will be
the same as the basis of the assets in the hands of T B & T immediately
prior to the Merger;
(vii) The holding period of the assets of T B & T in the hands of
BancGroup will include the period during which such assets were held by T B
& T;
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(viii) The Cashless Exchange will result in the T B & T Option holders
recognizing ordinary income equal to the fair market value of BancGroup
stock received in the exchange; and
(ix) A T B & T 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 T B & T Common Stock converted, if the shares of T B & T Common
Stock were held as capital assets. However, a T B & T shareholder who
receives only cash may need to consider the effects of Section 302 and 318
of the Code in determining the federal income tax consequences of the
transaction.
Each T B & T shareholder will be required to report on such shareholder's
federal income tax return for the fiscal year of such shareholder in which the
Merger occurs that such shareholder has received BancGroup Common Stock in a
reorganization.
THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF MATERIAL FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER TO THE SHAREHOLDERS OF T B & T, TO T B & T
AND TO BANCGROUP AND DOES NOT PURPORT TO BE A COMPLETE DESCRIPTION OF ALL
POTENTIAL TAX EFFECTS 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,
STOCKHOLDERS WHO DO NOT HOLD THEIR SHARES OF T B & T COMMON STOCK AS "CAPITAL
ASSETS" WITHIN THE MEANING OF SECTION 1221 OF THE CODE, AND SHAREHOLDERS WHO
ACQUIRED THEIR SHARES OF T B & T COMMON STOCK PURSUANT TO THE EXERCISE OF
OPTIONS OR OTHERWISE AS COMPENSATION, NOR ANY CONSEQUENCES ARISING UNDER THE
LAWS OF ANY STATE, LOCALITY OR FOREIGN JURISDICTION. 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 IS SUBJECT TO
CHANGE, AND ANY SUCH CHANGE COULD AFFECT THE CONTINUING VALIDITY OF THIS
DISCUSSION. T B & T 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 T B & T, a Texas
corporation, will become shareholders of BancGroup, a Delaware business
corporation. For a discussion of the differences, if any, in the rights,
preferences, and privileges attaching to T B & T Common Stock as compared to
BancGroup Common Stock, see "Comparative Rights of Shareholders."
CONDITIONS TO CONSUMMATION OF THE MERGER
The parties' respective obligations to consummate the Merger are subject to
the satisfaction (or waiver, to the extent permitted by law) of various
conditions set forth in the Agreement.
The obligations of T B & T and BancGroup to consummate the Merger are
conditioned upon, among other things, (i) the approval of the Agreement by the
holders of at least two-thirds of the outstanding shares of T B & T Common
Stock; (ii) the approval of the Merger by the Federal Reserve; (iii) the absence
of pending or threatened litigation with a view to restraining or prohibiting
consummation of the Merger or 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 February 28, 1999; (vi) receipt of an opinion of
PricewaterhouseCoopers LLP addressing certain tax matters, see "-- Certain
Federal Income Tax Consequences"; (vii) receipt of opinions of counsel regarding
certain matters; and (viii) delivery of certain officer certificates at the
closing of the Merger by each party.
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The obligation of T B & T 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; and (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, except to the extent that the failure to be accurate or to perform
shall not have a material adverse effect on BancGroup.
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 T B & T or material changes in laws
governing T B & T's business which would impair BancGroup's rights under the
Agreement; (ii) the number of shares as to which holders of T B & T Common Stock
exercise dissenters' rights not exceeding 10% of the outstanding shares of T B &
T Common Stock; (iii) the accuracy in all material respects of the
representations and warranties of T B & T contained in the Agreement, and the
performance by T B & T of all of its covenants and agreements under the
Agreement except to the extent that the failure to be accurate or to perform
shall not have a material adverse effect on T B & T; (iv) the receipt by
BancGroup of certain undertakings from holders of T B & T Common Stock who may
be deemed to be "affiliates" of T B & T pursuant to the rules of the Commission;
and (v) the BancGroup Board of Directors shall not have determined that the
transactions contemplated by the Agreement have become impractical due to state
of war, declaration of banking moratorium or general suspension of trading on
the exchange on which BancGroup Common Stock may be traded.
The Agreement provides that BancGroup's obligation to consummate the Merger
is conditioned upon its receipt of a letter from PricewaterhouseCoopers LLP
concurring with the conclusions of BancGroup's and T B & T's management that no
conditions exist with respect to each company which would preclude accounting
for the Merger as a pooling of interests. However, BancGroup intends to account
for the Merger as a purchase and has, consequently, waived receipt of such a
letter from PricewaterhouseCoopers LLP.
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 and satisfaction of
each party of all representations, warranties and covenants, will be satisfied.
The Agreement provides that each of T B & T and BancGroup may waive all
conditions to its respective obligation to consummate the Merger, other than the
receipt of the requisite approvals of regulatory authorities and approval of the
Agreement by the shareholders of T B & T. 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 T B & T and BancGroup would be
subject to the 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.
VOTING AGREEMENTS
As a condition to BancGroup entering into the Agreement, the five directors
of T B & T and Mr. John C. Sellers have each entered into an agreement (the
"Voting Agreement") with BancGroup whereby each such person has agreed to, among
other things, vote all of the shares of T B & T Common Stock over which such
person has voting control in favor of the Agreement and the Merger, and against
any business combination or other reorganization with any entity other than
BancGroup. The Voting Agreement also generally restricts each of the directors
and Mr. Sellers for a two year period following the Effective Date from engaging
in or owning a competing banking business within the Texas counties of Dallas
and Collin, managing, operating, controlling, being employed by or providing
management or consulting services to any entity engaged in the banking business
in Dallas and Collin counties, soliciting BancGroup employees for employment or
soliciting the banking business of BancGroup. There are certain exceptions to
these restrictions with respect to each person's principal line of business or
profession or certain charitable work. The Voting Agreement also contains each
director's and Mr. Sellers' agreement that any sale of the BancGroup Common
Stock received as a result of the Merger will be sold only in compliance with
the Securities Act and the rules and regulations of the Commission thereunder.
See "The Merger -- Resale of BancGroup Common Stock Issued in the
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Merger." Each Voting Agreement provides that the provisions requiring voting of
the T B & T Common Stock will terminate upon the earlier to occur of the
Effective Date of the Merger or the date the Agreement is terminated.
The total number of shares of T B & T Common Stock subject to the Voting
Agreement is 1,336,934 or 70.13% of the total shares outstanding as of the
Record Date and entitled to vote at the Special Meeting.
AMENDMENT OR TERMINATION OF AGREEMENT
To the extent permitted by law, the Agreement may be amended by a
subsequent writing signed by each of the parties upon the approval of the Boards
of Directors of each of the parties. However, under applicable law after
adoption of the Agreement and the approval of Merger by the holders of T B & T
Common Stock, no amendment materially altering the consideration to be received
by T B & T shareholders may be made without the further approval of such
shareholders. The Agreement may be terminated at any time prior to or on the
Effective Date, whether before or after adoption of the Agreement by the
shareholders of T B & T, by the mutual consent of the respective Boards of
Directors of T B & T and BancGroup or by the Board of Directors of either
BancGroup or T B & T under certain circumstances including, but not limited to:
(i) a material breach which cannot or has not been cured within 30 days of
notice of such breach being given by the non-breaching party; (ii) failure to
consummate the transactions contemplated under the Agreement by February 28,
1999, provided that such failure to consummate is not caused by any breach of
the Agreement by the party electing to terminate; and (iii) without further
action by either party, upon the execution by T B & T of a legally binding
agreement between T B & T and any third party with respect to any Acquisition
Proposal, provided that BancGroup will have the right to demand payment of
liquidated damages. See "-- Related Transaction -- Stock Option."
In the event the Agreement is terminated, the Agreement becomes void and
will have no further effect with the exception that the provisions regarding (i)
publicity regarding the Agreement; (ii) payment of expenses; and (iii)
confidentiality, will survive any such termination. In addition, in the event of
termination of the Agreement, such termination will not relieve a breaching
party from liability for a willful breach of a representation, warranty,
covenant or agreement contained in the Agreement.
The representations and warranties of the parties set forth in the
Agreement shall not survive the Effective Date and shall be terminated and
extinguished at the Effective Date.
REGULATORY APPROVALS
Approval of the Merger by the Federal Reserve is required pursuant to
Section 3 of the BHCA and regulations promulgated thereunder. The Federal
Reserve approved the Merger on October 15, 1998. In addition, notification of
the Merger, as required pursuant to Section 38.001 of the Texas Finance Code,
was filed with the Texas Department of Banking (the "Texas Department") on
September 14, 1998.
After the Merger, BancGroup expects to merge the Bank into Colonial Bank
(the "Bank Merger"). Consummation of the Bank Merger requires prior approval of
the Federal Reserve and the Alabama Department, as well as notification to the
Texas Department. The Federal Reserve has approved the Bank Merger. Application
for approval of the Bank Merger by the Alabama Department and notification to
the Texas Department were filed on September 10, 1998. Approval by Alabama
Department is expected prior to consummation of the Merger.
Federal Reserve Approval. The following discussion summarizes the relevant
statutory standards required for Federal Reserve approval of the Merger and the
Bank Merger. Pursuant to Section 3 of the BHCA, 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
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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 the Bank. Finally, the Federal Reserve will
consider the compliance records of BancGroup's subsidiaries under the Community
Reinvestment Act.
In addition, the Federal Reserve is expressly permitted to approve
applications under Section 3 of the BHCA for a bank holding company that is
adequately capitalized and adequately managed to acquire control of a bank
located in a state other than the home state of such bank holding company (an
"Interstate Acquisition"), without regard to whether such transaction is
prohibited under the law of any state. However, if the law of the state in which
the target bank is located requires the target bank to have been in existence
for some minimum period of time, the Federal Reserve is prohibited from
approving an application by a bank holding company to acquire such target bank
if such target bank does not satisfy this state law requirement, so long as the
state law specifying such minimum period of time does not specify a period of
more than five years.
Also, the Federal Reserve is prohibited from approving an Interstate
Acquisition if the acquiring bank holding company controls, or upon consummation
of the acquisition, would control, more than 10% of the total amount of deposits
of insured depository institutions in the United States. Finally, subject to
certain exceptions, the Federal Reserve may not approve an application
pertaining to an Interstate Acquisition if, among other things, the bank holding
company, upon consummation of the acquisition, would control 30% or more of the
total amount of deposits of insured depository institutions in the state where
the target bank is located.
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. Section 11 of the BHCA imposes a waiting period which prohibits
the consummation of the Merger, in ordinary circumstances, for a period ranging
from 15 to 30 days following the Federal Reserve's approval of the 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.
Pursuant to Section 18(c) of the Federal Deposit Insurance Act (the "Bank
Merger Act"), the Federal Reserve 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 Federal Reserve 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 interest by the probable effect of the Bank Merger in meeting the
convenience and needs of the community to be served. The Federal Reserve 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.
In that the Bank Merger constitutes an interstate bank merger, certain
additional requirements are applicable to the Bank Merger. For example, the
Federal Reserve is prohibited from approving the Bank Merger if the bank
resulting from the Bank Merger, including all insured depository institutions
which are affiliates of such resulting bank, upon consummation of the
transaction, would control more than 10% of the total amount of deposits of
insured depository institutions in the United States. The Federal Reserve is
also prohibited from approving the Bank Merger if either party to the Bank
Merger has a branch in any state in which any other bank involved in the Bank
Merger has a branch, and the resulting bank, upon consummation of the Bank
Merger, would control 30% or more of the total amount of deposits of insured
depository institutions in any such state. Finally, the Federal Reserve may
approve the interstate bank merger only if each bank involved in the transaction
is adequately capitalized as of the date the application is filed, and the
Federal Reserve determines that the resulting bank will continue to be
adequately capitalized and adequately managed upon consummation of the Bank
Merger.
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The Bank Merger Act imposes a waiting period which prohibits consummation
of the Bank Merger, in ordinary circumstances, for a period ranging from 15 to
30 days following the Federal Reserve'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.
Alabama Department Approval. The Bank Merger must be approved by the
Alabama Department pursuant to applicable provisions of the Alabama Banking
Code. If the Superintendent of the Alabama Department finds that (1) the
proposed transaction will not be detrimental to the safety and soundness of the
bank resulting from the Bank Merger, (2) any new officers and directors of the
resulting bank are qualified by character, experience, and financial
responsibility to direct and manage the resulting bank, and (3) the proposed
Bank Merger is consistent with the convenience and needs of the communities to
be served by the resulting bank in the State of Alabama and is otherwise in the
public interest, the Bank Merger shall be approved by the Superintendent.
The Agreement provides that the obligation of each of BancGroup and T B & T
to consummate the Merger is conditioned upon the receipt of all necessary
regulatory approvals. There can be no assurance that the application necessary
for BancGroup to consummate the Merger with T B & T will be approved, and, if
such approval is received, that such approval will not be conditioned upon terms
and conditions that would cause the parties to abandon the Merger.
Any approval received from bank regulatory agencies reflects only their
view that the Merger does not contravene applicable competitive standards
imposed by law, and that the Merger is consistent with regulatory policies
relating to safety and soundness. THE APPROVAL OF THE BANK REGULATORY AGENCIES
IS NOT AN ENDORSEMENT OR RECOMMENDATION OF THE MERGER.
BancGroup is not aware of any governmental approvals or actions that may be
required for consummation of the Merger except for the prior approval of the
Federal Reserve and notification to the Texas Department described above. Should
any such approval or action be required, it is presently contemplated that such
approval or action would be sought.
CONDUCT OF BUSINESS PENDING THE MERGER
The Agreement prohibits T B & T and the Bank from engaging in any material
transaction outside the ordinary course of business or making any material
changes in its accounting policies or methods of operation and contains certain
restrictions on the conduct of the business of T B & T pending consummation of
the Merger. The Agreement prohibits T B & T and the Bank from taking, without
the prior written consent of BancGroup, any of the following actions, prior to
the Effective Date, subject to certain limited exceptions previously agreed to
by BancGroup and T B & T:
(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 T B & T Common Stock issued upon
the exercise or exchange of T B & T Options or pursuant to the Option
Agreement;
(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 except as consistent with past practices and as previously
disclosed to BancGroup (in no event shall the shareholders of T B & T be
entitled to payment of a dividend from T B & T and from BancGroup in the
quarter in which the Effective Date occurs), or purchasing or redeeming or
agreeing to purchase or redeem, any of its outstanding securities;
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(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) Waiving any rights of value which in the aggregate would have a
material adverse effect on T B & T;
(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 past 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 past 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, subject to certain specific exceptions, prior
to the Effective Date, no director or officer of T B & T 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 T B & T or
its subsidiaries.
The Agreement also provides that (i) at the request of BancGroup, T B & T
will consult with BancGroup and advise BancGroup in advance of all loan requests
outside the ordinary course of business or in excess of $100,000 that are not
single-family residential loan requests; and (ii) T B & T will consult with
BancGroup respecting business issues that T B & T believes should be brought to
the attention of BancGroup.
NO SOLICITATION
The Agreement provides that neither T B & T nor any affiliate, investment
banker, attorney, accountant, or other of its representatives shall solicit any
"acquisition proposal" (generally any tender offer or proposal for a merger,
acquisition of all or substantially all of the stock or assets of or other
business combination involving T B & T or the Bank). In addition, except to the
extent necessary to comply with its fiduciary duties, the Board of Directors of
T B & T shall not furnish any non-public information that it is not legally
obligated to furnish, negotiate with respect to or enter into any contract
respecting an acquisition proposal, but T B & T may communicate information
about another acquisition proposal to its shareholders if and to the extent it
is required to do so in order to comply with its legal obligations. T B & T must
also promptly notify BancGroup in the event that it receives any inquiry or
proposal relating to an acquisition proposal.
RELATED TRANSACTIONS -- STOCK OPTION
T B & T and BancGroup have entered into the Option Agreement whereby T B &
T has granted to BancGroup an option to purchase up to 368,150 shares, or
18.89%, of T B & T Common Stock at a purchase price of $11.05 per share. The
Option Agreement is attached hereto as Appendix C. Both the number of shares
subject to the option and the purchase price per option share are subject to
adjustment in certain circumstances. The Option Agreement was entered into as an
inducement for, and as a condition to,
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<PAGE> 34
BancGroup's execution of the Agreement. The Option Agreement is intended to
increase the likelihood that the Merger will be consummated by making it more
difficult and expensive for a third party to acquire control of T B & T.
The option granted under the Option Agreement may be exercised by
BancGroup, in whole or in part, in the event a "Purchase Event" precedes the
date upon which the Option Agreement terminates by its terms. If the option
becomes exercisable, T B & T may be required to repurchase the option or any
shares issued thereunder at a price calculated in accordance with the Option
Agreement. In addition, under certain circumstances, the option may be converted
into a similar option to acquire shares of an entity engaging in certain
transactions with T B & T.
The term "Purchase Event" is defined in the Option Agreement to include:
(i) T B & T's agreement, without BancGroup's prior written consent, to effect an
"Acquisition Transaction" with any person other than BancGroup, or T B & T's
authorization, recommendation, or public proposal of (or public announcement of
its intention to authorize, recommend, or propose) such an agreement; or (ii)
the acquisition by any person of beneficial ownership of 25% or more of the
outstanding shares of T B & T Common Stock. The term "Acquisition Transaction"
is defined to include: (i) a merger, consolidation, or other business
combination involving T B & T; (ii) the disposition, by sale, exchange, lease,
or otherwise, of substantially all of the consolidated assets of T B & T; or
(iii) the issuance of securities representing 25% or more of the voting power of
T B & T.
The Option Agreement and the option granted thereunder terminate upon the
earliest to occur of: (i) the Effective Date; (ii) termination of the Agreement
in accordance with its terms prior to the occurrence of a Purchase Event or a
"Preliminary Purchase Event" (generally, a tender offer or exchange offer by a
third party to acquire more than 25% of the outstanding shares of T B & T Common
Stock or the failure of T B & T's shareholders to approve the Agreement
following the public announcement of a proposed Acquisition Transaction or
tender offer); (iii) termination of the Agreement by BancGroup prior to the
occurrence of a Purchase Event or a Preliminary Purchase Event for reasons other
than a breach of the Agreement by T B & T or the failure to occur of certain
conditions precedent to the Merger; or (iv) the passage of eighteen months after
termination of the Agreement by BancGroup because of a material breach of the
Agreement by T B & T or the failure to occur of certain conditions precedent to
the consummation of the Merger.
To the knowledge of T B & T, no event that would permit the exercise of the
option has occurred as of the date hereof. The rights and obligations of T B & T
and BancGroup under the Option Agreement are subject to receipt of any required
regulatory approval, including approval by the Federal Reserve under the BHCA.
The Option Agreement, together with T B & T's agreement not to negotiate or
entertain any proposals for the sale of T B & T or its subsidiaries to another
party (see "-- No Solicitation"), have the effect of discouraging persons who
might now, or prior to the Effective Date, be interested in acquiring all or a
significant interest in T B & T from considering or proposing such an
acquisition, even if such persons were prepared to pay a higher price per share
for the T B & T Common Stock than the price per share to be paid by BancGroup in
the Merger. The option granted to BancGroup under the Option Agreement will
become exercisable in the event of the occurrence of certain proposals to
acquire T B & T. The possibility that BancGroup might exercise the option, and
thus acquire a substantial block of T B & T Common Stock, might deter offers of
other persons or entities interested in such an acquisition.
RIGHTS OF DISSENTING SHAREHOLDERS
A holder of shares of T B & T is entitled under Article 5.11 of the TBCA to
object to the Agreement and the Merger and make written demand that BancGroup
pay in cash the fair value of the shares of T B & T Common Stock held as
determined in accordance with all pertinent statutory provisions. Consummation
of the Merger is subject to, among other things, the holders of no more than 10
percent of the outstanding T B & T Common Stock electing to exercise their
dissenters' rights.
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<PAGE> 35
In order to exercise dissenters' rights, a Dissenting Shareholder of T B &
T (a "Dissenting Shareholder") must strictly comply with the statutory
procedures of TBCA Article 5.11 et seq., which are summarized below. A copy of
the text provisions of these statutes is attached hereto as Appendix B.
Shareholders of T B & T are urged to read these statutes in their entirety and
to consult with their legal advisors. Texas law requires that holders of T B & T
Common Stock follow certain prescribed procedures in the exercise of their
statutory right to dissent in connection with the Merger. The failure to follow
such procedures on a timely basis and in the precise manner required by Texas
law may result in a loss of a shareholder's dissenters' rights. The following
summary does not purport to be a complete statement of the dissenters' rights
provision of Texas law and is qualified in its entirety by reference to the full
text of the provisions of the TBCA pertaining to dissenters' rights attached
hereto as Appendix B.
Overview. Holders of T B & T Common Stock have the right under Texas law
to dissent from the Merger and obtain payment of the fair value of his or her
shares. Fair value means the value of the shares as of the day immediately
before the Special Meeting, excluding any appreciation or depreciation in
anticipation of the Merger. If BancGroup and a Dissenting Shareholder are not
able to agree on a fair value, either BancGroup or a Dissenting Shareholder may
petition a court in Dallas County, Texas for a determination of fair value.
Procedure for Dissenting. A shareholder wishing to dissent from the Merger
must deliver to T B & T, before the Special Meeting, written notice of his or
her objection to the Merger specifying that the right to dissent will be
exercised if the Merger is consummated and giving the shareholder's address. The
written notice should be sent to 1999 Bryan Street, Dallas, Texas 75201, Attn:
Linda Bridges, so that T B & T receives it before the Special Meeting. A
shareholder wishing to dissent may not vote in favor of the Merger. If a
shareholder's written notice of intent to demand payment is not received by T B
& T before the Special Meeting, or if the shareholder votes in favor of the
Merger, such shareholder will not have the right to dissent and will be required
to participate in the Merger.
If the Merger is effected and a Dissenting Shareholder shall have timely
notified T B & T of his or her objection to the Merger and not have voted in
favor of the Merger, then BancGroup shall within ten (10) days after the Merger
is effected deliver or mail the Dissenting Shareholder written notice that the
Merger was effected and that the Dissenting Shareholder may, within ten (10)
days from the delivery or mailing of such notice, make written demand on
BancGroup for payment of the fair value of that shareholder's shares. The demand
shall state the number and class of shares owned by the notifying shareholder
and the fair value of the shares as estimated by the shareholder. Any
shareholder failing to make demand within such ten (10)-day period shall be
bound by the Merger.
Payment for Shares. Within twenty (20) days after receipt by BancGroup of
a demand for payment made by a Dissenting Shareholder as provided above,
BancGroup shall deliver or mail to such shareholder a written notice that shall
either set out that BancGroup accepts the amount claimed in the demand and
agrees to pay that amount within ninety (90) days after the date the Merger was
effected and upon surrender of certificates representing the shares as to which
dissenters' rights were perfected, duly endorsed, or shall contain an estimate
by BancGroup of the fair value of the shares as to which dissenters' rights were
perfected together with an offer to pay the amount of such estimate within
ninety (90) days after the date the Merger was effected upon receipt of notice
within sixty (60) days after the date the Merger was effected that the
Dissenting Shareholder agrees to accept that amount together with surrender of
the certificates representing the shares as to which dissenters' rights were
perfected, duly endorsed.
Court Proceeding to Determine Fair Value. If within a period of sixty (60)
days after the Merger is effected, BancGroup and a Dissenting Shareholder do not
agree on fair value, then either may within sixty (60) days after expiration of
such sixty (60)-day period, period, file a petition in any court of competent
jurisdiction in Dallas County, Texas asking for a finding of determination of
fair value of the Dissenting Shareholders' shares. Costs of the proceeding,
including fees payable to appraisers appointed by the court, may be allocated
between the parties in a manner the court deems fair and equitable. Upon the
filing of any such petition by a Dissenting Shareholder, service of a copy of
the petition shall be made on BancGroup. The Clerk of the Court shall thereafter
give notice of the time and place fixed for the hearing of the petition to both
33
<PAGE> 36
BancGroup and to the Dissenting Shareholder. All Dissenting Shareholders so
notified and BancGroup shall thereafter be bound by the final judgment of the
court.
After the hearing of the petition, the court shall appoint one or more
qualified appraisers to determine the fair value of the shares of T B & T Common
Stock. Thereafter the appraisers shall file their report of that fair value with
the court. This report shall be subject to exceptions both upon law and the
facts. The court shall by its judgment determine the fair value of the shares
held by the Dissenting Shareholder and shall direct the payment of that value by
BancGroup, together with interest, beginning 91 days after the Merger was
effected to the date of such judgment
A Dissenting Shareholder shall not thereafter be entitled to vote or
exercise any rights of a shareholder. Within twenty (20) days after demanding
payment for his or her shares, the Dissenting Shareholder shall submit the
certificates representing shares of T B & T Common Stock to which dissenters
rights have been made applicable to T B & T for proper notation. Failure to so
submit such certificates shall, at the election of T B & T or BancGroup
terminate such shareholder's right to demand appraisal rights unless a reviewing
court for good and sufficient cause shall otherwise direct. A Dissenting
Shareholder may withdraw his or her demand for payment at any time before
payment for the shares, before a petition is filed or after a petition is filed
but only with the consent of BancGroup.
In the absence of fraud in the transaction, these remedies are the
exclusive remedies for the value of shares of BancGroup or money damages to a
shareholder of BancGroup with respect to the Merger.
THE FOREGOING DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES
TO BE FOLLOWED BY HOLDERS OF T B & T COMMON STOCK DESIRING TO EXERCISE APPRAISAL
RIGHTS, AND, IN VIEW OF THE FACT THAT EXERCISE OF SUCH RIGHTS REQUIRES STRICT
ADHERENCE TO THE RELEVANT PROVISIONS OF THE TEXAS BUSINESS CORPORATION ACT, EACH
SHAREHOLDER WHO MAY DESIRE TO EXERCISE APPRAISAL RIGHTS IS ADVISED INDIVIDUALLY
TO CONSULT THE LAW (AS SET FORTH IN APPENDIX B HERETO) AND COMPLY WITH THE
PROVISIONS THEREOF.
HOLDERS OF THE T B & T COMMON STOCK WISHING TO EXERCISE DISSENTERS' RIGHTS
ARE ADVISED TO CONSULT THEIR OWN COUNSEL TO ENSURE THAT THEY FULLY AND PROPERLY
COMPLY WITH THE REQUIREMENTS OF TEXAS LAW.
The foregoing discussion is only a summary of the provisions of Texas law,
does not purport to be complete and is qualified in its entirety by reference to
TBCA Article 5.11 et seq., which is attached hereto as Appendix B. Any
shareholder who intends to dissent from the Merger should review the text of
TBCA Article 5.11 et seq. carefully and should also consult with his or her
attorney. Any shareholder who fails to follow strictly the procedures set forth
in said statute will forfeit dissenters' rights.
Any Dissenting Shareholder who perfects his or her right to be paid the
value of his or her shares will recognize gain or loss, if any, for federal
income tax purposes upon the receipt of cash for such shares. The amount of gain
or loss and its character as ordinary or capital gain or loss will be determined
in accordance with applicable provisions of the Code. See "-- Certain Federal
Income Tax Consequences."
BECAUSE OF THE COMPLEXITY OF THE PROVISIONS OF THE TEXAS LAW RELATING TO
DISSENTERS' APPRAISAL RIGHTS, SHAREHOLDERS WHO ARE CONSIDERING DISSENTING FROM
THE MERGER ARE URGED TO CONSULT WITH THEIR OWN LEGAL ADVISORS.
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 T B & T Options) has been
registered under the Securities Act. As a result, shareholders of T B & T who
are not "affiliates" of T B & T (as such term is defined under the Securities
Act) may resell, without restriction, all shares of BancGroup Common Stock which
they receive in connection with the Merger. Under the Securities Act, only
affiliates of T B & T are subject to restrictions on the resale of the BancGroup
Common Stock which they receive in the Merger.
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<PAGE> 37
The BancGroup Common Stock received by affiliates of T B & T 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 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 or certain other
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 T B & T affiliate has held the BancGroup Common
Stock for at least one year. BancGroup Common Stock held by affiliates of T B &
T who become affiliates of BancGroup, if any, will be subject to additional
restrictions on the ability of such persons to resell such shares.
T B & T 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 T B
& T. T B & T 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 stop transfer orders will be given to BancGroup's stock transfer
agent.
ACCOUNTING TREATMENT
BancGroup will account for the Merger as a purchase transaction in
accordance with generally accepted accounting principles. Accordingly, the
purchase price will be assigned to the fair value of the T B & T net tangible
assets acquired, and any purchase price in excess thereof will be assigned to
intangibles. The valuation of intangibles, if any, will be made as of the
Effective Date of the Merger and will be amortized by charges or credits to
future earnings over a period of approximately fifteen years. Such intangibles
are currently estimated to be in the approximate amount of $7.4 million.
NYSE REPORTING OF BANCGROUP COMMON STOCK ISSUED IN THE MERGER
Sales of BancGroup Common Stock to be issued in the Merger in exchange for
T B & T Common Stock will be reported on the NYSE.
TREATMENT OF T B & T OPTIONS
Assumption of Options. On the Effective Date, BancGroup will assume all T
B & T Options outstanding, and each such option will represent the right to
acquire BancGroup Common Stock on substantially the same terms applicable to the
acquisition of T B & T Common Stock pursuant to the T B & T Options. The shares
of BancGroup Common Stock to be delivered upon the exercise of T B & T Options
granted under the Option Plan will be made available, after the Merger, from the
authorized but unissued shares of BancGroup Common Stock. 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. The Registration Statement, of which this Prospectus forms a
part, 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 T B & T Options assumed by BancGroup. The number of shares of
BancGroup Common Stock to be issued pursuant to such options will equal the
number of shares of T B & T Common Stock subject to such T B & T Options
multiplied by 0.6406, the Exchange Ratio, provided that no fractions of shares
of BancGroup Common Stock will be issued and the number of shares of BancGroup
Common Stock to be issued upon the exercise of T B & T Options, if a fractional
share exists, will
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<PAGE> 38
equal the number of whole shares obtained by rounding to the nearest whole
number, giving account to such fraction, or else such fractional interest shall
be paid in cash at the Market Value as defined below. The exercise price for the
acquisition of BancGroup Common Stock will be the exercise price for each share
of T B & T Common Stock subject to such options divided by the Exchange Ratio,
adjusted appropriately for any rounding to whole shares that may be done.
Cashless Exchange. The Agreement also provides that, no later than five
days prior to the Effective Date, the holders of T B & T Options may provide
written notice to T B & T (in form and substance reasonably satisfactory to
BancGroup) that they wish to exchange their T B & T Options, effective at the
Effective Date and to receive in exchange therefor an amount of BancGroup Common
Stock equal in value to the difference between (i) the number obtained by
multiplying the number of shares of T B & T Common Stock issuable pursuant to
his or her T B & T Options times the Exchange Ratio times the Market Value of
the BancGroup Common Stock and (ii) the number obtained by multiplying the
number of shares of T B & T Common Stock issuable pursuant to his or her T B & T
Options, times the exercise price per shares (as determined pursuant to the
Option Plan). The dollar amount so determined shall then be divided by the
Market Value of the BancGroup Common Stock to determine the number of shares of
BancGroup Common Stock to be received. In the event that the exercise prices of
all T B & T Options are not the same, the above calculation shall be made for
each series of options and the number of shares of BancGroup Common Stock issued
shall be totaled to obtain the aggregate number of shares to be received by that
individual. No fractions of shares shall be issued and fractions shall be paid
in cash at the Market Value. The Market Value of the BancGroup Common Stock will
be the average of the closing prices of the BancGroup Common Stock as reported
on the NYSE on each of the ten consecutive trading days ending on the trading
day five trading days before the Effective Date.
As discussed under "-- Certain Federal Income Tax Consequences," employees
who utilize the Cashless Exchange will recognize ordinary income equal to the
fair market value of BancGroup stock received in the exchange. See "-- Certain
Federal Income Tax Consequences."
CLOSING; EFFECTIVE DATE OF MERGER
As soon as reasonably practicable after the later to occur of (i) the date
of this Special Meeting, (ii) receipt of all required regulatory approvals, and
(iii) satisfaction of all other conditions precedent to each party's obligations
as set forth in the Agreement, a closing shall take place at which the parties
will exchange documents required by the Agreement. The Merger shall become
effective on the date specified in the certificate of merger to be filed with
the secretaries of state of Delaware and Texas.
EXPENSES
Pursuant to the Agreement, each of the parties shall bear and pay all costs
and expenses incurred by it or on its behalf in connection with the transactions
contemplated by the Agreement.
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<PAGE> 39
COMPARATIVE MARKET PRICES AND DIVIDENDS
T B & T. There is no established public trading market for the T B & T
Common Stock. The shares of T B & T Common Stock are not actively traded, and
such trading activity, as it occurs, takes place in privately negotiated
transactions. Sales of T B & T Common Stock of which Management of T B & T is
aware since January 1, 1996 have ranged between $4.00-$5.00. Since such
transactions were privately negotiated, such prices do not necessarily reflect
the market price for the T B & T Common Stock. The following table sets forth
the dividends paid on T B & T Common Stock since January 1, 1996:
<TABLE>
<CAPTION>
DIVIDENDS
PER SHARE
---------
<S> <C>
1996
First Quarter............................................. $.03
Second Quarter............................................ .04
Third Quarter............................................. .04
Fourth Quarter............................................ .10
1997
First Quarter............................................. .05
Second Quarter............................................ .05
Third Quarter............................................. .05
Fourth Quarter............................................ .10
1998
First Quarter............................................. .05
Second Quarter............................................ .05
Third Quarter............................................. .05
Fourth Quarter (through October 27, 1998)................. --
</TABLE>
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 Common Stock as reported on the NYSE since January 1, 1996.
<TABLE>
<CAPTION>
PRICE PER
SHARE OF
COMMON STOCK(1) DIVIDENDS
---------------- PER
HIGH LOW SHARE
------- ------- ---------
<S> <C> <C> <C>
1996
First Quarter........................................... $ 9 1/8 $ 7 1/2 $.068
Second Quarter.......................................... 9 1/16 7 13/16 .068
Third Quarter........................................... 9 7 13/16 .068
Fourth Quarter.......................................... 10 1/16 8 11/16 .068
1997
First Quarter........................................... 12 9 1/3 .075
Second Quarter.......................................... 12 7/16 11 .075
Third Quarter........................................... 14 5/8 12 1/8 .075
Fourth Quarter.......................................... 17 9/16 14 1/2 .075
1998
First Quarter........................................... 18 1/8 15 3/4 .085
Second Quarter.......................................... 18 13/16 14 3/4 .085
Third Quarter........................................... 17 5/16 11 5/8 .085
Fourth Quarter (through October 20, 1998)............... 13 11/16 10 1/8 --
</TABLE>
- ---------------
(1) Restated to reflect the impact of the two-for-one stock splits effected in
the form of 100% stock dividends paid February 11, 1997 and August 14, 1998.
On August 5, 1998, the business day immediately prior to the public
announcement of the Merger, the closing price of the BancGroup Common Stock on
the NYSE was $15.5625 per share after giving effect to the Stock Split.
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<PAGE> 40
At December 31, 1997, BancGroup's subsidiaries accounted for approximately
98% of BancGroup's consolidated assets. BancGroup derives substantially all of
its income from dividends received from its subsidiaries. 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.
BANCGROUP CAPITAL STOCK AND DEBENTURES
BancGroup's authorized capital stock consists of 200,000,000 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 June 30, 1998, there were
issued and outstanding a total of 98,232,266 shares of BancGroup Common Stock.
No shares of Preference Stock are issued and outstanding. BancGroup issued in
1986 $28,750,000 in principal amount of its 7 1/2% Convertible Subordinated
Debentures due 2011 (the "1986 Debentures") of which $3,845,672 were outstanding
as of June 30, 1998 and convertible at any time into 549,382 shares of BancGroup
Common Stock, subject to adjustment. As of June 30, 1998 there were 3,858,122
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 BancGroup Common
Stock in pending acquisitions. On January 20, 1997, BancGroup issued, through a
special purpose trust, $70.0 million of Trust Preferred Securities, all of which
were outstanding at June 30, 1998.
The following statements with respect to BancGroup Common Stock and
Preference Stock are brief summaries of material provisions of Delaware law, the
BancGroup Certificate and the BancGroup Bylaws, 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 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 Board of
Directors of BancGroup 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
The Preference Stock may be issued from time to time as a class without
series, or if so determined by the Board of Directors of BancGroup, 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 Preference Stock (or of the entire class of 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
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<PAGE> 41
by resolution of the Board of Directors of 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 Board
of Directors of BancGroup.
1986 DEBENTURES
BancGroup issued 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, 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 $7.0 principal amount of the 1986 Debentures
for each share of BancGroup Common Stock. The conversion price is, however,
subject to adjustment upon the occurrence of certain events as described in the
1986 Indenture. In the event all of the outstanding 1986 Debentures are
converted into shares of BancGroup Common Stock in accordance with the 1986
Indenture, as of June 30, 1998 approximately 549,382 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 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 December 31, 1997, BancGroup's Senior Indebtedness as defined in the
1986 Indenture aggregated approximately $1.1 billion. 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.
OTHER INDEBTEDNESS
On January 29, 1997, BancGroup issued, through a special purpose trust,
$70.0 million of Trust Preferred Securities. The securities bear interest at
8.92% and are subject to redemption in whole or in part any time after January
2007 through January 2027. It is unlikely that redemption will occur prior to
maturity. The securities are subordinated to substantially all of BancGroup's
indebtedness. In BancGroup's consolidated statement of condition, these
securities are shown as long-term debt.
On February 5, 1998, BancGroup consummated a merger with ASB Bancshares,
Inc., a Delaware corporation ("ASB"). As part of the consideration for the
common stock of ASB, BancGroup issued debentures to three ASB shareholders. The
aggregate principal amount of these debentures is $7,724,813. The debentures pay
a rate of interest equal to the New York Prime Rate minus 1% (but in no event
less than 7% per annum) and are due and payable ten years from the date of
issuance. They are senior to the BancGroup Common Stock upon liquidation, but
are subordinate to BancGroup's Senior Indebtedness. See "-- 1986 Debentures."
The debentures are redeemable by BancGroup with the consent of the holders
thereof. A holder
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<PAGE> 42
of a debenture may, subject to BancGroup's right to decline, request redemption
of any or all of the debentures held by him or her.
CHANGES IN CONTROL
Certain provisions of the BancGroup Certificate and the BancGroup 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 BancGroup's Board of Directors to
prevent a change in control despite a shift in ownership of the BancGroup Common
Stock. See "-- Preference Stock." In addition, the power of BancGroup's Board of
Directors 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 23 directors of BancGroup. This provision of the BancGroup 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 of
Directors 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
of Directors 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
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 Chief Executive Officer 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. As
of February 27, 1998, the Board of Directors of BancGroup owned approximately
10.24% of the outstanding shares of BancGroup Common Stock.
Board Evaluation of Mergers. The BancGroup 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.
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<PAGE> 43
Director Authority. The BancGroup 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 of Directors to act by majority vote.
Bylaw Provisions. The BancGroup 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 shareholders must comply with certain advance
written notice provisions. These bylaw provisions are intended to provide for
the more orderly conduct of stockholders' meetings but could make it more
difficult for shareholders to nominate directors or introduce business at
shareholders' 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 Board of Directors 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 BancGroup's 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 shareholder becoming an
Interested Stockholder, such shareholder owned at least 85% of the outstanding
BancGroup Common Stock (excluding BancGroup Common 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 the BancGroup
Certificate relating to business combinations with a related person, described
above at "Business Combinations," but they are generally less restrictive than
the BancGroup 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 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, shareholders of T B & T (except those
perfecting dissenters' rights) will become holders of BancGroup Common Stock.
The rights of the holders of the T B & T Common Stock who become holders of
BancGroup Common Stock following the Merger will be governed by the BancGroup
Certificate and the BancGroup Bylaws, as well as the laws of Delaware, the state
in which BancGroup is incorporated.
The following summary compares the rights of the holders of T B & T Common
Stock with the rights of the holders of the BancGroup Common Stock. For a more
detailed description of the rights of the holders of BancGroup Common Stock,
including certain features of the BancGroup Certificate and the Delaware
41
<PAGE> 44
General Corporate Law (the "DGCL") that might limit the circumstances under
which a change in control of BancGroup could occur, see "BancGroup Capital Stock
and Debentures."
The following information is qualified in its entirety by the BancGroup
Certificate and the BancGroup Bylaws, and T B & T's Articles of Incorporation
and Bylaws, the DGCL and the TBCA.
DIRECTOR ELECTIONS
T B & T. T B & T's directors are elected annually for one year terms or
until their successors are elected and qualified. T B & T's Articles provide
that cumulative voting is not permitted 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
T B & T. Pursuant to the Bylaws of T B & T, any director of T B & T may be
removed from office at any time, with or without cause, upon the affirmative
vote of a majority of the shares present, in person or by proxy, at any special
or annual meeting of shareholders and entitled to vote if notice of the
intention to act upon such matter shall have been given in the notice provided
to shareholders in connection with such meeting.
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
T B & T. Each stockholder of T B & T is entitled to one vote for each
share of T B & T Common Stock held, and 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
T B & T. Pursuant to the Articles of Incorporation of T B & T, the holders
of T B & T do not have any preemptive rights to acquire any additional shares of
T B & T Common 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.
DIRECTORS' LIABILITY
T B & T. T B & T does not have any provision in its Articles or Bylaws
limiting director liability.
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.
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<PAGE> 45
INDEMNIFICATION
T B & T. T B & T's Articles provide that directors and officers of T B & T
and any person who serves at the request of T B & T as a director or officer of
another corporation in which T B & T owns shares or is a creditor (each, an
"Indemnified Party") and the heirs, executors and administrators of such
Indemnified Parties, may be indemnified by T B & T against reasonable costs and
expenses incurred by him in connection with any action, suit or proceeding to
which an Indemnified Party may be made party by reasons of his having been such
a director or officer. No indemnification may be made, however, in connection
with any actions, suits or proceedings in which the Indemnified Party has been
adjudge liable because of willful misfeasance, bad faith, negligence or reckless
disregard of the duties involved in the conduct of his office. In the event of a
settlement, an Indemnified Party may be indemnified against payments made upon a
determination by two-thirds of the members of the Board of Directors who are not
involved in the action that the Indemnified Party has no liability by reason of
willful misfeasance, bad faith, negligence or reckless disregard of the duties
involved in the conduct of the office. If a majority of the members of the Board
of Directors are involved in the action, suit determination shall be made by a
written opinion of independent legal counsel. Amounts paid in settlement may not
exceed costs, fees and expenses which would have reasonably been incurred had
the subject action been litigated to its conclusion.
T B & T's Articles specifically provide that the indemnification provided
therein is not the exclusive source of indemnification available. Under the
TBCA, Texas corporations are required to indemnify directors and officers
against judgements, fines, settlements and reasonable expenses incurred by them
in connection with any proceeding in which they are named defendants as a result
of their service to the corporation and in which they are wholly successful, on
the merits or otherwise, in the defense of the proceeding. The TBCA also permits
corporations to pay in advance of the final disposition of any proceeding the
reasonable expenses incurred by a director or officer if such party provides the
corporation with a written affirmation of his good faith belief that he has met
the standard of conduct necessary for indemnification and a written undertaking
to repay any amounts paid or reimbursed if it is ultimately determined that
indemnification of such expenses is prohibited. Texas law also permits
corporations to purchase and maintain insurance or other similar arrangement in
connection with their indemnification obligations.
BancGroup. The BancGroup Certificate provides that directors, officers,
employees and agents of BancGroup shall be indemnified to the full extent
permitted under the DGCL. Section 145 of the DGCL 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 DGCL, other than an action brought by or
in the right of BancGroup, such indemnification is available if it is determined
that the proposed indemnity 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 indemnity 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 indemnity 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 DGCL.
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<PAGE> 46
SPECIAL MEETINGS OF SHAREHOLDERS; ACTION WITHOUT A MEETING
T B & T. Pursuant to the Bylaws of T B & T, special meetings of
stockholders of T B & T may be called by the President, the Board of Directors
or the holder or holders of not less than 10% of the outstanding shares of T B &
T Common Stock entitled to vote at such meeting.
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
T B & T. Under the TBCA, mergers, consolidations, shares exchanges and
certain sales of substantially all of the assets of a Texas corporation must be
approved by two-thirds of the outstanding shares of the corporation entitled to
vote thereon unless the corporation's articles of incorporation or bylaws
specify a greater or lesser percentage. Neither T B & T's Articles nor its
Bylaws specifies any alternative vote requirement.
BancGroup. The DGCL 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 DGCL also
provides, however, that the stockholders of the corporation surviving a merger
need not approve the transaction if: (i) the agreement of merger does not amend
in any respect the certificate of incorporation of such corporation; (ii) each
share of stock of such corporation outstanding immediately prior to the
effective date of the merger is to be an identical outstanding or treasury share
of the surviving corporation after the effective date of the merger; and (iii)
either no shares of common stock of the surviving corporation and no shares,
securities or obligations convertible into such stock are to be issued or
delivered under the plan of merger, or the authorized unissued shares or the
treasury shares of common stock of the surviving corporation to be issued or
delivered under the plan of merger plus those initially issuable upon conversion
of any other shares, securities or obligations to be issued or delivered under
such plan do not exceed 20% of the shares of 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
T B & T. Under the TBCA, amendments to T B & T's Articles require the
approval of two-thirds of the outstanding shares of T B & T Common Stock
entitled to vote thereon. T B & T's Bylaws may be amended by a majority vote of
the Board of Directors, subject to repeal or change at any meeting of the
stockholders at which a quorum is present, by the affirmative vote of a majority
of the stockholders present at the meeting.
BancGroup. Under the DGCL, 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 "super-majority" 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 DGCL, the Certificate gives the Board of Directors
the power to adopt, amend or repeal the BancGroup Bylaws. The stockholders
entitled to vote have concurrent power to adopt, amend or repeal the BancGroup
Bylaws.
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<PAGE> 47
RIGHTS OF DISSENTING STOCKHOLDERS
T B & T. Under the TBCA, stockholders of Texas corporations have the right
to dissent from any (i) plan of merger to which the corporation is a party if
stockholder approval is required and the stockholder holds shares of a class or
series entitled to vote thereon as a class or otherwise; (ii) sale, lease,
exchange or other disposition of all or substantially all of the corporation's
property and assets, with or without good will, if authorization of the
stockholders is required by the TBCA and the stockholders hold shares of a class
or series that was entitled to vote thereon as a class or otherwise; or (iii)
plan of share exchange in which the shares of the corporation of the class or
series held by the stockholder are to be acquired. Dissenters' rights are not
available in connection with any plan of merger in which there will be a single
surviving corporation or any plan of share exchange if (i) the shares held by
the stockholder as of the date of the requisite stockholder vote are listed on a
national securities exchange or the Nasdaq Stock Market, or held of record by
not less than 2,000 stockholders; (ii) the stockholder is not required by the
terms of the plan or merger or share exchange to accept any consideration for
his shares that is different from the consideration to be provided to holders of
shares of the same class or series; and (iii) the consideration to be received
consists of (A) shares of a corporation that, immediately after the effective
date of the transaction, will be part of a class or series which are listed or
authorized for listing upon official notice of issuance on a national securities
exchange or approved for quotation on the Nasdaq Stock Market, or will be held
of record by not less than 2,000 holders, (B) cash in lieu of fractional shares,
or (C) any combination of (A) and (B). In connection with their approval of the
Merger and the Agreement, stockholders of T B & T are entitled to dissenters'
rights. See "The Merger -- Rights of Dissenting Shareholders."
BancGroup. Under the DGCL, a stockholder 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
otherwise would have received in the transaction. For this purpose, "fair value"
may be determined by all generally accepted techniques of valuation used in the
financial community, excluding any element of value arising from the
accomplishment or expectation of the transaction, but including elements of
future value that are known or susceptible of proof. Such fair value is
determined by the Delaware Court of Chancery, if a petition for appraisal is
timely filed. Appraisal rights are not available, however, to stockholders of a
corporation (i) if the shares are listed on a national securities exchange (as
is BancGroup Common Stock) or quoted on the Nasdaq NMS, 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
T B & T. T B & T does not have any authorized 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 Board of
Directors of BancGroup. Currently, no shares of Preference Stock are issued and
outstanding. See "BancGroup Capital Stock and Debentures -- Preference Stock."
EFFECT OF THE MERGER ON T B & T SHAREHOLDERS
As of October 20, 1998, T B & T had 158 shareholders of record and
1,949,050 outstanding shares of T B & T Common Stock. As of June 30, 1998, there
were 98,232,266 shares of BancGroup Common Stock outstanding held by 8,910
stockholders of record.
Assuming that no dissenters' rights of appraisal are exercised in the
Merger, that no additional T B & T Options are exercised prior to the Effective
Date and that no T B & T Options are exchanged in the Cashless Exchange, an
aggregate number of 1,248,561 shares of BancGroup Common Stock will be issued to
the shareholders of T B & T pursuant to the Merger. These shares would represent
approximately 1.11% of the total shares of BancGroup Common Stock outstanding
after the Merger, not counting any shares of
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<PAGE> 48
BancGroup Common Stock to be issued in other pending acquisitions. Subject to
applicable federal and state securities laws, BancGroup expects to purchase a
number of shares sufficient to consummate the Merger in block purchases and
through an accelerated stock repurchase program. The shares so purchased will be
reissued in connection with the Merger.
The issuance of the BancGroup Common Stock pursuant to the Merger will not
reduce the percentage interest of the BancGroup Common Stock currently held by
each principal stockholder and each director and officer of BancGroup, provided
that as planned, all shares issued in the Merger are treasury shares acquired by
BancGroup before the Effective Date. Based upon the foregoing assumption, as a
group, the directors and officers of would own approximately 9.45% of
BancGroup's outstanding shares after the Merger. See "Business of
BancGroup -- Voting Securities and Principal Stockholders."
BancGroup has entered into agreements pursuant to which additional shares
of BancGroup Common Stock will be issued. See "Business of BancGroup -- Recently
Completed and Other Proposed Business Combinations."
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<PAGE> 49
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, 1998, (ii) the combined
presentation of the condensed consolidated statement of condition of CNB Holding
Company and FirstBank ("Completed Business Combinations") as of June 30, 1998,
(iii) adjustments to give effect to the completed pooling-of-interests method
business combinations with the Completed Business Combinations (iv) the
condensed statement of condition of Texas Bank & Trust, Inc. ("T B & T") as of
June 30, 1998, (v) adjustments to give effect to the proposed purchase method
business combination with T B & T, (vi) condensed statement of condition of the
other probable business combinations with First Macon Bank & Trust, Prime Bank
of Central Florida and InterWest Bancorp ("Other Probable Business
Combinations") as of June 30, 1998, (vii) adjustments to give effect to the
proposed pooling-of-interests method business combinations with the Other
Probable Business Combinations, (viii) the pro forma combined condensed
statement of condition of BancGroup and subsidiaries as if such combinations had
occurred on June 30, 1998.
These pro forma statements should be read in conjunction with the
accompanying notes and the separate consolidated statements of condition of
BancGroup and subsidiaries, incorporated by reference herein. The pro forma
information provided below may not be indicative of future results.
<TABLE>
<CAPTION>
JUNE 30, 1998
-----------------------------------------------------------------------------------
CONSOLIDATED COMPLETED
COLONIAL BUSINESS ADJUSTMENTS/ ADJUSTMENTS/
BANCGROUP COMBINATIONS (DEDUCTIONS) T B & T (DEDUCTIONS) SUBTOTAL
------------ ------------ ------------ -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks................. $ 344,388 $ 17,805 $ 12,910 $ (15,883)(3) $ 359,220
Interest-bearing deposits in banks...... 20,630 50,100 32,700 103,430
Securities available for sale........... 1,117,946 15,216 11,219 1,144,381
Investment securities................... 235,297 44,404 279,701
Mortgage loans held for sale............ 532,140 532,140
Loans, net of unearned income........... 6,027,489 116,352 46,442 6,190,283
Less: Allowance for possible loan
losses................................. (72,782) (1,058) (321) (74,161)
---------- -------- ---------- -------- ---------- ----------
Loans, net.............................. 5,954,707 115,294 -- 46,121 -- 6,116,122
Premises and equipment, net............. 156,618 3,307 497 (115)(3) 160,307
Excess of cost over tangible and
identified intangible assets acquired,
net.................................... 78,688 7,393(3) 86,081
Mortgage servicing rights............... 174,693 174,693
Other real estate owned................. 10,624 62 10,686
Accrued interest and other assets....... 146,802 1,493 541 98(3) 148,934
---------- -------- ---------- -------- ---------- ----------
Total assets...................... $8,772,533 $247,681 $ -- $103,988 $ (8,507) $9,115,695
========== ======== ========== ======== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits................................ $6,193,818 $215,602 $ 94,066 $6,503,486
FHLB short-term borrowings.............. 640,000 640,000
Other short-term borrowings............. 453,482 13,378 466,860
Subordinated debt....................... 12,716 12,716
Trust preferred securities.............. 70,000 70,000
FHLB long-term debt..................... 448,422 448,422
Other long-term debt.................... 200,075 200,075
Other liabilities....................... 152,249 852 $ 649(1) 1,249 $ 166(3) 155,545
380(2)
---------- -------- ---------- -------- ---------- ----------
Total liabilities................. 8,170,762 229,832 1,029 95,315 166 8,497,104
Minority interest....................... --
Preferred Stock.........................
Common Stock............................ 245,581 1,853 (153)(1) 1,850 (1,850)(3) 256,955
4,419(1)
(1,700)(2)
6,955(2)
Additional paid in capital.............. 115,958 5,702 (762)(1) 5,238 (5,238)(3) 111,419
(4,224)(1)
(4,940)(2)
(315)(2)
Retained earnings....................... 238,996 10,863 (649)(1) 1,575 (1,575)(3) 248,830
(380)(2)
Treasury Stock.......................... (720) 720(1) (5) 5(3) --
15,883(3)
(15,883)(3)
Unearned compensation................... (3,282) -- (3,282)
Unrealized gain on securities available
for sale, net of taxes................. 4,518 151 -- 15 (15)(3) 4,669
---------- -------- ---------- -------- ---------- ----------
Total shareholders' equity........ 601,771 17,849 (1,029) 8,673 (8,673) 618,591
---------- -------- ---------- -------- ---------- ----------
Total liabilities and equity...... $8,772,533 $247,681 $ -- $103,988 $ (8,507) $9,115,695
========== ======== ========== ======== ========== ==========
Capital Ratios:
Capital Ratio.......................... 7.77%
Tangible Leverage Ratio................ 7.15
Tier One Capital Ratio*................ 9.40
Total Capital Ratio*................... 10.76
<CAPTION>
JUNE 30, 1998
-------------------------------------------
OTHER PROBABLE PRO FORMA
BUSINESS ADJUSTMENTS/ COMBINED
COMBINATIONS (DEDUCTIONS) TOTAL
-------------- ------------ ----------
<S> <C> <C> <C>
ASSETS
Cash and due from banks................. $ 22,723 $ (645)(4) $ 381,298
Interest-bearing deposits in banks...... 40,536 143,966
Securities available for sale........... 18,765 1,163,146
Investment securities................... 34,161 313,862
Mortgage loans held for sale............ 532,140
Loans, net of unearned income........... 269,810 6,460,093
Less: Allowance for possible loan
losses................................. (3,198) (77,359)
-------- --------- ----------
Loans, net.............................. 266,612 -- 6,382,734
Premises and equipment, net............. 13,737 174,044
Excess of cost over tangible and
identified intangible assets acquired,
net.................................... 39 86,120
Mortgage servicing rights............... 174,693
Other real estate owned................. 49 10,735
Accrued interest and other assets....... 4,576 153,510
-------- --------- ----------
Total assets...................... $401,198 $ (645) $9,516,248
======== ========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits................................ $355,681 $6,859,167
FHLB short-term borrowings.............. 5,000 645,000
Other short-term borrowings............. 5,216 472,076
Subordinated debt....................... 12,716
Trust preferred securities.............. 70,000
FHLB long-term debt..................... 448,422
Other long-term debt.................... 26 200,101
Other liabilities....................... 4,036 $ 1,018(4) 161,585
624(5)
362(6)
-------- --------- ----------
Total liabilities................. 369,959 2,004 8,869,067
Minority interest....................... 936 (936)(4) --
Preferred Stock.........................
Common Stock............................ 2,485 (1,547)(4) 275,744
(538)(5)
(400)(6)
4,248(4)
11,608(5)
2,933(6)
Additional paid in capital.............. 15,377 (2,701)(4) 110,783
(11,606)(5)
(3,771)(6)
291(4)
536(5)
1,238(6)
Retained earnings....................... 12,275 (1,018)(4) 259,101
(624)(5)
(362)(6)
Treasury Stock.......................... -- -- --
Unearned compensation................... (3,282)
Unrealized gain on securities available
for sale, net of taxes................. 166 4,835
-------- --------- ----------
Total shareholders' equity........ 31,239 (2,649) 647,181
-------- --------- ----------
Total liabilities and equity...... $401,198 $ (645) $9,516,248
======== ========= ==========
Capital Ratios:
Capital Ratio.......................... 7.68%
Tangible Leverage Ratio................ 7.00
Tier One Capital Ratio*................ 9.26
Total Capital Ratio*................... 10.59
</TABLE>
- ---------------
* Based on risk weighted assets
47
<PAGE> 50
COMPLETED BUSINESS COMBINATIONS
CNB HOLDING COMPANY
(pooling of interests)
(1)(A) To record the issuance of 1,767,601 shares of BancGroup Common Stock
in exchange for all of the outstanding shares of CNB Holding Company
<TABLE>
<S> <C> <C>
CNB Holding Company outstanding shares...................... 147,935
Conversion ratio............................................ 11.9485
--------
BancGroup shares to be issued............................... 1,767,601
Par value of 1,767,601 shares issued at $2.50 per share..... $ 4,419
Shares issued at par value.................................. $ 4,419
Total capital stock of CNB Holding Company.................. 195
--------
Excess recorded as a decrease to contributed capital...... (4,224)
----------
195
To eliminate CNB Holding Company
Common stock, at par value................................ $ (153)
Contributed capital....................................... (762)
Treasury stock............................................ 720
----------
(195)
----------
Net change in equity................................ $ --
==========
(B) To record possible nonrecurring charges
associated with severance payable to terminated
employees, salary continuation agreements, fixed
assets write-offs and other nonrecurring
one-time restructuring charges, net of taxes.... $ (649)
==========
</TABLE>
FIRSTBANK
(pooling of interests)
(2)(A) To record the issuance of 2,782,050 shares of BancGroup Common Stock
in exchange for all of the outstanding shares of FirstBank
<TABLE>
<S> <C> <C>
FirstBank outstanding shares................................ 340,000
Conversion ratio............................................ 8.1825
--------
BancGroup shares to be issued............................... 2,782,050
Par value of 2,782,050 shares issued at $2.50 per share..... $ 6,955
Shares issued at par value.................................. $ 6,955
Total capital stock of FirstBank............................ 6,640
--------
Excess recorded as a decrease to contributed capital........ (315)
----------
6,640
To eliminate FirstBank
Common stock, at par value................................ $ (1,700)
Contributed capital....................................... (4,940)
----------
(6,640)
----------
Net change in equity................................ $ --
==========
(B) To record possible nonrecurring charges
associated with professional fees and fixed
asset write-offs, net of taxes.................. $ (380)
==========
</TABLE>
48
<PAGE> 51
PENDING BUSINESS COMBINATIONS
T B & T
(purchase method)
(3)(A) To record the purchase of treasury stock for the purpose of issuance in
the T B & T business combination:
<TABLE>
<S> <C>
Treasury stock......................................... $ 15,883
Cash................................................... (15,883)
(B) To assign the amount by which the estimated value
of BancGroup's investment in T B & T is in excess
of the historical carrying amount of the net assets
acquired, based on the estimated fair value of such
assets and to record the investment in T B & T by
the issuance of approximately 1,239,013 shares of
BancGroup Common Stock for all outstanding shares
of T B & T as follows:
Equity in carrying value of net assets of T B & T.. $ 8,673
Adjustments to state assets at fair value:
Write-off fixed assets............................. (115)
Acquisition accruals:
Severance payable to terminate employees........... (61)
Buyout of data processing contract................. (50)
Other legal, accounting and professional........... (55)
Tax effect of purchase adjustments................. 98
Goodwill........................................... 7,393
--------
Total adjustments.................................. 7,210
--------
Adjusted equity in carrying value of net
assets............................................. 15,883
========
Allocated as follows:
Cost of 1,239,013 shares of BancGroup Common
Stock purchased and re-issued for T B & T
outstanding shares at an assumed market value of
$12.81875 per share................................ 15,883
========
Total purchase price............................. $ 15,883
========
</TABLE>
49
<PAGE> 52
INTERWEST BANCORP
(pooling of interests)
(4)(A) To record the issuance of 1,699,286 shares of BancGroup Common Stock
in exchange for all of the outstanding shares of InterWest
<TABLE>
<S> <C> <C>
InterWest outstanding shares................................ 3,075,075
Conversion ratio............................................ 0.5526
----------
BancGroup shares to be issued............................... 1,699,286
Par value of 1,699,286 shares issued at $2.50 per share..... $ 4,248
Shares issued at par value.................................. $ 4,248
Total capital stock InterWest............................... 1,547
----------
Excess recorded as a decrease to contributed capital........ (2,701)
----------
1,547
To eliminate InterWest
Common stock, at par value.................................. $ (1,547)
Contributed capital......................................... --
----------
(1,547)
----------
Net change in equity................................ $ --
==========
(B) To record purchase of minority interest by
InterWest Bank prior to the merger of InterWest
with BancGroup
Minority interest............................... $ (936)
Additional paid in capital...................... 291
----------
Total purchase price to be paid in cash......... $ (645)
==========
(C) To record possible nonrecurring charges
associated with retention and compensation
agreements, stock options, fixed assets
write-offs and other nonrecurring one-time
restructuring charges, net of taxes............. $ (1,018)
==========
</TABLE>
50
<PAGE> 53
FIRST MACON BANK & TRUST
(pooling of interests)
(5)(A) To record the issuance of 4,643,178 shares of BancGroup Common Stock
in exchange for all of the outstanding shares of First Macon Bank & Trust
<TABLE>
<S> <C> <C>
First Macon Bank & Trust outstanding shares................. 1,076,604
Conversion ratio............................................ 4.3128
----------
BancGroup shares to be issued............................... 4,643,178
Par value of 4,643,178 shares issued at $2.50 per share..... $ 11,608
Shares issued at par value.................................. $ 11,608
Total capital stock of First Macon Bank & Trust............. 12,144
----------
Excess recorded as an increase to contributed capital....... 536
---------
12,144
To eliminate First Macon Bank & Trust
Common stock, at par value.................................. $ (538)
Contributed capital......................................... (11,606)
---------
(12,144)
---------
Net change in equity................................ $ --
=========
(B) To record possible nonrecurring charges
associated with severance payable to terminated
employees, contract buy-outs, fixed assets
write-offs and other nonrecurring one-time
restructuring charges, net of taxes............. $ (624)
=========
</TABLE>
PRIME BANK OF CENTRAL FLORIDA
(pooling of interests)
(6)(A) To record the issuance of 1,173,120 shares of BancGroup Common Stock
in exchange for all of the outstanding shares of Prime Bank of Central
Florida
<TABLE>
<S> <C> <C>
Prime Bank of Central Florida outstanding shares............ 400,000
Conversion ratio............................................ 2.9328
----------
BancGroup shares to be issued............................... 1,173,120
Par value of 1,173,120 shares issued at $2.50 per share..... $ 2,933
Shares issued at par value.................................. $ 2,933
Total capital stock of Prime Bank of Central Florida........ 4,171
----------
Excess recorded as an increase to contributed capital....... 1,238
---------
4,171
To eliminate Prime Bank of Central Florida
Common stock, at par value................................ $ (400)
Contributed capital....................................... (3,771)
---------
(4,171)
---------
Net change in equity.............................. $ --
=========
(B) To record possible nonrecurring charges associated
with severance payable to terminated employees,
contract buy-outs, fixed assets write-offs and other
nonrecurring one-time restructuring charges, net of
taxes................................................ $ (362)
=========
</TABLE>
51
<PAGE> 54
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
CONDENSED PRO FORMA STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS)
The following summary includes (i) the condensed consolidated statements of
income of BancGroup and subsidiaries on a historical basis for the six months
ended June 30, 1998 and for the year ended December 31, 1997, (ii) the condensed
consolidated statements of income Commercial Bank of Nevada for the year ended
December 31, 1997, and CNB Holding Company and FirstBank for the six months
ended June 30, 1998 and for the year ended December 31, 1997, (iii) adjustments
to give effect to the completed pooling-of-interests method business
combinations with Commercial Bank of Nevada, CNB Holding Company and FirstBank,
(iv) the condensed consolidated statements of income of T B & T for the six
months ended June 30, 1998 and for the year ended December 31, 1997, (v)
adjustments to give effect to the proposed purchase method business combination
with T B & T, (vi) the condensed statements of income of First Macon Bank &
Trust, Prime Bank of Central Florida and InterWest ("Other Probable Business
Combinations") for the six months ended June 30, 1998 and for the year ended
December 31, 1997, (vii) adjustments to give effect to the proposed
pooling-of-interests method business combinations with the Other Probable
Business Combinations, (viii) the pro forma statements of income of BancGroup
and subsidiaries as if such business combinations had occurred on January 1,
1997.
These pro forma statements should be read in conjunction with the
accompanying notes and the separate consolidated statements of income of
BancGroup and subsidiaries, incorporated by reference herein. The pro forma
information provided may not necessarily be indicative of future results.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE, 1998
-----------------------------------------------------------------------------------------
CONSOLIDATED COMPLETED
COLONIAL BUSINESS ADJUSTMENTS/ ADJUSTMENTS/
BANCGROUP COMBINATIONS (DEDUCTIONS) T B & T (DEDUCTIONS) SUBTOTAL
------------ ------------ ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Interest income...... $ 306,662 $ 8,658 $ -- $ 3,103 $ (437)(2) $ 317,986
Interest expense..... 153,441 3,324 -- 1,462 -- 158,227
------------ -------- ---------- ---------- ----------- ------------
Net interest
income............. 153,221 5,334 -- 1,641 (437) 159,759
Provision for
possible loan
losses............. 7,543 46 7,589
------------ -------- ---------- ---------- ----------- ------------
Net interest income
after provision for
loan losses........ 145,678 5,288 -- 1,641 (437) 152,170
------------ -------- ---------- ---------- ----------- ------------
Noninterest income... 57,420 392 -- 113 -- 57,925
Noninterest
expense............ 134,850 2,678 -- 1,109 246(2) 138,883
------------ -------- ---------- ---------- ----------- ------------
Income before income
taxes.............. 68,248 3,002 -- 645 (683) 71,212
Applicable income
taxes.............. 25,837 101 732(1) 219 (166)(2) 26,722
------------ -------- ---------- ---------- ----------- ------------
Net income........... $ 42,411 $ 2,901 $ (732) $ 426 $ (517) $ 44,490
============ ======== ========== ========== =========== ============
Average basic shares
outstanding*....... 97,682,000 485,142 (485,142) 1,850,000 (1,850,000) 103,383,389
4,516,279 1,185,110
Average diluted
shares
outstanding*....... 100,292,000 488,270 (488,270) 1,988,000 (1,988,000) 106,119,167
4,553,654 1,273,513
Earnings per share:
Basic*........... $0.43 $0.43
Diluted*......... $0.43 $0.42
<CAPTION>
SIX MONTHS ENDED JUNE, 1998
--------------------------------------------
OTHER PROBABLE PRO FORMA
BUSINESS ADJUSTMENTS/ COMBINED
COMBINATIONS (DEDUCTIONS) TOTAL
-------------- ------------ ------------
<S> <C> <C> <C>
Interest income...... $ 18,939 $ -- $ 336,925
Interest expense..... 7,068 -- 165,295
---------- ----------- ------------
Net interest
income............. 11,871 -- 171,630
Provision for
possible loan
losses............. 328 7,917
---------- ----------- ------------
Net interest income
after provision for
loan losses........ 11,543 -- 163,713
---------- ----------- ------------
Noninterest income... 1,273 59,198
Noninterest
expense............ 9,260 -- 148,143
---------- ----------- ------------
Income before income
taxes.............. 3,556 -- 74,768
Applicable income
taxes.............. 1,221 27,943
---------- ----------- ------------
Net income........... $ 2,335 $ -- $ 46,825
========== =========== ============
Average basic shares
outstanding*....... 4,501,285 (4,501,285) 110,860,785
7,477,396
Average diluted
shares
outstanding*....... 4,501,285 (4,501,285) 113,626,120
7,506,953
Earnings per share:
Basic*........... $0.42
Diluted*......... $0.41
</TABLE>
- ---------------
* Restated to reflect the impact of a two-for-one stock split in the form of a
100% stock dividend paid August 14, 1998.
52
<PAGE> 55
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
---------------------------------------------------------------------------------------
CONSOLIDATED COMPLETED
COLONIAL BUSINESS ADJUSTMENTS/ ADJUSTMENTS/
BANCGROUP COMBINATIONS (DEDUCTIONS) T B & T (DEDUCTIONS) SUBTOTAL
------------ ------------ ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Interest income.................... $ 540,699 $ 22,900 $ -- $ 6,203 $ (874)(2) $ 568,928
Interest expense................... 267,084 8,629 -- 2,939 -- 278,652
----------- ---------- ----------- ---------- ----------- ------------
Net interest income................ 273,615 14,271 -- 3,264 (874) 290,276
Provision for possible loan
losses............................ 14,860 1,012 15,872
----------- ---------- ----------- ---------- ----------- ------------
Net interest income after provision
for loan losses................... 258,755 13,259 -- 3,264 (874) 274,404
----------- ---------- ----------- ---------- ----------- ------------
Noninterest income................. 92,550 1,247 -- 234 -- 94,031
Noninterest expense................ 220,232 7,703 -- 2,024 493(2) 230,458
----------- ---------- ----------- ---------- ----------- ------------
Income before income taxes......... 131,073 6,803 -- 1,474 (1,367) 137,983
Applicable income taxes............ 48,557 1,578 913(1) 495 (331)(2) 51,212
----------- ---------- ----------- ---------- ----------- ------------
Net income......................... $ 82,516 $ 5,225 $ (913) $ 979 $ (1,036) $ 86,771
=========== ========== =========== ========== =========== ============
Average basic shares
outstanding*...................... 93,072,000 1,330,078 (1,330,078) 1,850,000 (1,850,000) 100,487,865
6,230,755 1,185,110
Average diluted shares
outstanding*...................... 96,316,000 1,333,501 (1,333,501) 1,988,000 (1,988,000) 103,861,168
6,271,655 1,273,513
Earnings per share:
Basic*.......................... $0.89 $0.86
Diluted*........................ $0.86 $0.84
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
--------------------------------------------
OTHER PROBABLE PRO FORMA
BUSINESS ADJUSTMENTS/ COMBINED
COMBINATIONS (DEDUCTIONS) TOTAL
-------------- ------------ ------------
<S> <C> <C> <C>
Interest income.................... $ 33,308 $ -- $ 602,236
Interest expense................... 11,671 -- 290,323
---------- ----------- ------------
Net interest income................ 21,637 -- 311,913
Provision for possible loan
losses............................ 520 16,392
---------- ----------- ------------
Net interest income after provision
for loan losses................... 21,117 -- 295,521
---------- ----------- ------------
Noninterest income................. 2,304 96,335
Noninterest expense................ 17,172 -- 247,624
---------- ----------- ------------
Income before income taxes......... 6,249 -- 144,232
Applicable income taxes............ 2,161 -- 53,373
---------- ----------- ------------
Net income......................... $ 4,088 $ -- $ 90,859
========== =========== ============
Average basic shares
outstanding*...................... 4,479,116 (4,479,116) 107,949,713
7,461,848
Average diluted shares
outstanding*...................... 4,479,116 (4,479,116) 111,346,606
7,485,439
Earnings per share:
Basic*.......................... $0.84
Diluted*........................ $0.82
</TABLE>
- ---------------
* Restated to reflect the impact of a two-for-one stock split in the form of a
100% stock dividend paid August 14, 1998.
53
<PAGE> 56
PRO FORMA ADJUSTMENTS
COMPLETED BUSINESS COMBINATIONS
Adjustments applicable to the pooling-of-interests business combination
with FirstBank
1) To record a provision for income taxes for FirstBank as if FirstBank had
merged with BancGroup on January 1, 1995. Subsequent to its S-Corporation
election as of January 1, 1997, FirstBank does not include a provision for
income taxes in their 1998 and 1997 financial statements.
PENDING BUSINESS COMBINATIONS
Adjustments applicable to the purchase method business combination with T B
& T:
2) 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>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
------------- -----------------
<S> <C> <C>
Decrease in income:
Earnings forgone on $15,883,000 cash at an average
interest rate of 5.50%.............................. $(437) $ (874)
----- -------
Increase in expense:
Amortization of goodwill (15 year period).............. $(246) $ (493)
----- -------
Net decrease in income before tax........................ (683) (1,367)
Tax effect of the pro forma adjustments (other than
goodwill amortization)................................. 166 331
----- -------
Net decrease in income.............................. $(517) $(1,036)
===== =======
</TABLE>
NONRECURRING CHARGES
(IN THOUSANDS)
The following table reflects the primary components of the nonrecurring
charges and related tax effect which will result directly from the business
combinations and which will be included in BancGroup's results. These charges
are not reflected in the condensed pro forma statements of income but are
reflected in the condensed pro forma statement of condition. (Please refer to
BancGroup's Current Report on Form 8-K dated March 16, 1998 and incorporated by
reference herein.)
COMPLETED BUSINESS COMBINATIONS
(1) Possible charges applicable to the pooling-of-interests method business
combination with CNB Holding Company:
<TABLE>
<S> <C>
Increase in expense:
Write-off of fixed assets................................. $ (199)
Potential severance to terminated employees............... (52)
Salary continuation agreements............................ (183)
Contract buy-outs......................................... (570)
Write-off of other assets................................. (34)
-------
Net decrease in income before taxes......................... (1,038)
Tax effect of the pro forma adjustment...................... 389
-------
Net decrease in income............................ $ (649)
=======
</TABLE>
54
<PAGE> 57
(2) Possible charges applicable to the pooling-of-interests method business
combination with FirstBank:
<TABLE>
<S> <C>
Increase in expense:
Professional fees......................................... $ (100)
Salary continuation agreements............................ (500)
Write-off of fixed assets................................. (8)
-------
Net decrease in income before tax........................... (608)
Tax effect of the pro forma adjustment...................... 228
-------
Net decrease in income............................ $ (380)
=======
</TABLE>
PENDING BUSINESS COMBINATIONS
(3) Possible charges applicable to the pooling-of-interests method business
combination with InterWest:
<TABLE>
<S> <C>
Increase in expense:
Write-off of fixed assets................................. $ (480)
Retention bonus agreements................................ (250)
Stock option compensation expense adjustment.............. (727)
Other miscellaneous adjustments........................... (40)
-------
Net decrease in income before taxes......................... (1,497)
Tax effect of the pro forma adjustment...................... 479
-------
Net decrease in income............................ $(1,018)
=======
</TABLE>
(4) Possible charges applicable to the pooling-of-interests method business
combination with First Macon:
<TABLE>
<S> <C>
Increase in expense:
Contract buy-outs......................................... $(153)
Potential severance payable to terminated employees....... (162)
Professional fees......................................... (305)
Write-off of other assets................................. (51)
Write-off of fixed assets................................. (328)
-----
Net decrease in income before tax........................... (999)
Tax effect of the pro forma adjustments..................... 375
-----
Net decrease in income............................ $(624)
=====
</TABLE>
(5) Possible adjustments applicable to the pooling-of-interests method
business combination with Prime Bank:
<TABLE>
<S> <C>
Increase in expense:
Contract buy-outs......................................... $ (92)
Potential severance payable to terminated employees....... (35)
Professional fees......................................... (180)
Other noncompete, salary continuation agreements.......... (124)
Deferred tax and interest adjustments..................... 50
Write-off of other assets................................. (88)
Write-off of fixed assets................................. (128)
-----
Net decrease in income before tax........................... (597)
Tax effect of the pro forma adjustments..................... 235
-----
Net decrease in income............................ $(362)
=====
</TABLE>
55
<PAGE> 58
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL AND OPERATING INFORMATION
The following tables present certain financial information for BancGroup on
a historical basis and pro forma basis. The first table presents historical and
pro forma information for the six months ended June 30, 1998 and 1997. The
second table presents historical and pro forma income statements for the years
ended December 31, 1997, 1996 and 1995 as well as historical for the years ended
December 31, 1994 and 1993. The final table presents proforma and historical
statements of condition as June 30, 1998 as well as historical for the years
ended December 31, 1997, 1996, 1995, 1994 and 1993.
The pro forma information includes consolidated BancGroup and subsidiaries
and T B & T, InterWest Bancorp, Commercial Bank of Nevada, CNB Holding Company,
FirstBank, First Macon Bank and Trust and Prime Bank of Central Florida. The pro
forma balance sheet data gives effect to the combinations as if they had
occurred on June 30, 1998 and the pro forma operating data gives effect to the
combinations as if they occurred at the beginning of the earliest period
presented. Note that for the purchase method combination, Article 11 of
Regulation S-X requires pro forma statements be presented for only the most
recent fiscal year and interim period. Accordingly, T B & T is only included in
the pro forma information as of and for the six months ended June 30, 1998 and
the year ended December 31, 1997.
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 financial statements
included elsewhere in this Prospectus and incorporated by reference. The pro
forma information provided below may not be indicative of future results.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------------------------
BANCGROUP BANCGROUP BANCGROUP BANCGROUP
PRO FORMA HISTORICAL PRO FORMA HISTORICAL
1998 1998 1997 1997*
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
STATEMENT OF INCOME
Interest income...................................... $336,925 $306,662 $285,372 $263,403
Interest expense..................................... 165,295 153,441 137,542 129,788
-------- -------- -------- --------
Net interest income.................................. 171,630 153,221 147,830 133,615
Provision for possible loan losses................... 7,917 7,543 7,773 7,288
-------- -------- -------- --------
Net interest income after provision for loan
losses............................................. 163,713 145,678 140,057 126,327
Noninterest income................................... 59,198 57,420 44,028 42,524
Noninterest expense.................................. 137,549 124,256 113,778 103,529
Acquisition and restructuring costs and Year 2000
expenses........................................... 10,594 10,594 2,634 2,634
-------- -------- -------- --------
Income before income taxes........................... 74,768 68,248 67,673 62,688
Applicable income taxes.............................. 27,943 25,837 24,543 23,008
-------- -------- -------- --------
Net income........................................... $ 46,825 $ 42,411 $ 43,130 $ 39,680
======== ======== ======== ========
Income excluding acquisition and restructuring costs
and Year 2000 expenses............................. $ 53,852 $ 49,438 $ 45,237 $ 41,787
======== ======== ======== ========
EARNINGS PER SHARE
Income excluding acquisition and restructuring costs
and Year 2000 expenses:
Basic.............................................. $ 0.49 $ 0.51 $ 0.43 $ 0.45
Diluted............................................ $ 0.47 $ 0.49 $ 0.41 $ 0.43
Net income:
Basic.............................................. $ 0.42 $ 0.43 $ 0.41 $ 0.42
Diluted............................................ $ 0.41 $ 0.43 $ 0.40 $ 0.41
Average shares outstanding
Basic.............................................. 110,861 97,682 105,807 93,788
Diluted............................................ 113,626 100,292 109,156 97,064
Cash dividends:
Common............................................. $ 0.17 $ 0.17 $ 0.15 $ 0.15
</TABLE>
56
<PAGE> 59
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
--------------------------------- --------------------------------------------------------------
BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP
PRO FORMA PRO FORMA PRO FORMA HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
1997 1996 1995 1997 1996 1995 1994 1993
--------- --------- --------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
Interest income.............. $602,236 $487,661 $409,389 $540,699 $444,082 $371,985 $278,223 $224,209
Interest expense............. 290,323 234,493 194,699 267,084 219,494 182,441 113,715 88,568
-------- -------- -------- -------- -------- -------- -------- --------
Net interest income.......... 311,913 253,168 214,690 273,615 224,588 189,544 164,508 135,641
Provision for possible loan
losses..................... 16,392 14,500 11,004 14,860 13,564 10,180 8,943 14,437
-------- -------- -------- -------- -------- -------- -------- --------
Net interest income after
provision for loan
losses..................... 295,521 238,668 203,686 258,755 211,024 179,364 155,565 121,204
Noninterest income........... 96,335 78,012 65,821 92,550 74,860 63,479 56,567 53,655
Noninterest expense.......... 241,161 202,826 181,464 213,769 182,588 163,001 154,083 135,471
SAIF special assessment...... -- 4,754 -- -- 4,465 -- -- --
Acquisition and restructuring
costs...................... 6,463 11,918 1,738 6,463 11,918 1,738 1,348 960
-------- -------- -------- -------- -------- -------- -------- --------
Income before income taxes... 144,232 97,182 86,305 131,073 86,913 78,104 56,701 38,428
Applicable income taxes...... 53,373 33,929 30,415 48,557 30,631 27,462 18,610 12,216
-------- -------- -------- -------- -------- -------- -------- --------
Income before extraordinary
items...................... 90,859 63,253 55,890 82,516 56,282 50,642 38,091 26,212
Extraordinary items.......... -- -- -- -- -- -- -- (396)
Cumulative effect of a change
in accounting.............. -- -- -- -- -- -- -- 3,890
-------- -------- -------- -------- -------- -------- -------- --------
Net income................... $ 90,859 $ 63,253 $ 55,890 $ 82,516 $ 56,282 $ 50,642 $ 38,091 $ 29,706
======== ======== ======== ======== ======== ======== ======== ========
Income excluding SAIF special
assessment and acquisition
and restructuring costs.... $ 96,029 $ 75,877 $ 57,280 $ 87,686 $ 68,719 $ 52,032 $ 39,169 $ 26,980
======== ======== ======== ======== ======== ======== ======== ========
EARNINGS PER SHARE
Income excluding SAIF special
assessment and acquisition
and restructuring costs:
Basic(1)................... $ 0.89 $ 0.77 $ 0.62 $ 0.94 $ 0.80 $ 0.65 $ 0.52 $ 0.40
Diluted(1)................. $ 0.86 $ 0.74 $ 0.57 $ 0.91 $ 0.77 $ 0.61 $ 0.49 $ 0.38
Income before extraordinary
items:
Basic(1)................... $ 0.84 $ 0.64 $ 0.60 $ 0.89 $ 0.66 $ 0.64 $ 0.51 $ 0.39
Diluted(1)................. $ 0.82 $ 0.62 $ 0.57 $ 0.86 $ 0.63 $ 0.59 $ 0.48 $ 0.37
Net income:
Basic(1)................... $ 0.84 $ 0.64 $ 0.60 $ 0.89 $ 0.66 $ 0.64 $ 0.51 $ 0.44
Diluted(1)................. $ 0.82 $ 0.62 $ 0.57 $ 0.86 $ 0.63 $ 0.59 $ 0.48 $ 0.42
Average shares outstanding
Basic(1)................... 107,950 98,974 92,436 93,072 85,678 79,574 74,722 67,024
Diluted(1)................. 111,347 102,971 100,181 96,316 89,552 87,298 81,986 74,930
Cash dividends:
Common**(1)................ $ 0.30 $ 0.27 $ 0.1688 $ 0.30 $ 0.27 $ 0.1688 $ -- $ --
Class A**(1)............. -- -- $ 0.0563 -- -- $ 0.0563 $ 0.200 $ 0.178
Class B**(1)............. -- -- $ 0.0313 -- -- $ 0.0313 $ 0.100 $ 0.078
</TABLE>
- ---------------
* Restated to give retroactive effect to the June 1998 pooling-of-interests
business combination with Commercial Bank of Nevada.
** The pro forma cash dividends are equal to the historical BancGroup cash
dividends.
(1) Restated to reflect the impact of a two-for-one stock split in the form of a
100% stock dividend paid August 14, 1998.
57
<PAGE> 60
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
----------------------- --------------------------------------------------------------
BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP
PRO FORMA HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
1998 1998 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF CONDITION DATA
At period end:
Total assets.................. $9,516,248 $8,772,533 $7,442,661 $6,165,691 $5,370,361 $4,214,492 $4,022,477
Loans, net of unearned
income.................... 6,460,093 6,027,489 5,585,901 4,558,780 3,924,785 2,959,565 2,468,564
Mortgage loans held for
sale...................... 532,140 532,140 225,331 157,966 116,688 61,556 368,515
Deposits.................... 6,859,167 6,193,818 5,771,702 4,728,896 4,223,539 3,378,252 3,252,771
Long-term debt.............. 731,239 731,213 315,252 39,092 48,688 89,040 57,397
Shareholders' equity........ 647,181 601,771 543,262 443,391 388,770 298,812 279,300
Average daily balances
Total assets................ 8,736,861 8,023,494 6,911,648 5,742,474 4,756,418 4,028,482 3,308,106
Interest-earning assets..... 7,910,364 7,247,199 6,325,872 5,253,921 4,347,437 3,645,499 2,945,172
Loans, net of unearned
income.................... 6,249,471 5,826,532 5,184,653 4,240,554 3,371,192 2,669,363 1,988,563
Mortgage loans held for
sale...................... 327,638 327,638 149,309 135,135 98,785 135,046 248,502
Deposits.................... 6,649,652 6,030,070 5,442,818 4,463,015 3,787,613 3,280,208 2,666,025
Shareholders' equity........ 629,105 580,931 504,739 423,289 339,734 292,892 220,802
Book value per share(3)....... 5.95 6.13 5.76 5.12 4.69 3.94 3.83
Tangible book value per
share(3).................... $ 5.07 $ 5.33 $ 5.02 $ 4.77 $ 4.33 $ 3.68 $ 3.61
SELECTED RATIOS
Income excluding SAIF special
assessment, acquisition and
restructuring costs and Year
2000 expenses to:
Average assets.............. 1.23% 1.24% 1.24% 1.20% 1.09% 0.97% 0.82%
Average stockholders'
equity.................... 17.12% 17.16% 17.37% 16.23% 15.32% 13.37% 12.22%
Income before extraordinary
items and the cumulative
effect of a change in
accounting for income taxes
to:
Average assets.............. 1.15% 1.13% 1.19% 0.98% 1.06% 0.95% 0.79%
Average stockholders'
equity.................... 16.00 15.64 16.35 13.30 14.91 13.01 11.87
Net income to:
Average assets.............. 1.15 1.13 1.19 0.98 1.06 0.95 0.90
Average stockholders'
equity.................... 16.00 15.64 16.35 13.30 14.91 13.01 13.45
Efficiency ratio(1)(2)........ 61.71 58.60 57.94 60.46 63.89 69.00 71.23
Dividend payout............... 39.53 39.53 33.90 41.22 35.43 39.22 39.89
Average equity to average
assets...................... 7.20 7.24 7.30 7.37 7.14 7.27 6.67
Allowance for possible loan
losses to total loans (Net
of unearned income)......... 1.20% 1.21% 1.21% 1.27% 1.29% 1.54% 1.59%
</TABLE>
- ---------------
(1) Legislation approving a one-time special assessment to recapitalize the
Savings Association Insurance Fund ("SAIF") resulted in $4,754,000 in
expense before income taxes and $3,090,000 net of applicable income taxes in
1996.
(2) Acquisition expenses reflect costs and related restructuring expense of
business combinations.
(3) Restated to reflect the impact of a two-for-one stock split in the form of a
100% stock dividend paid August 14, 1998.
58
<PAGE> 61
RECENT DEVELOPMENTS -- BANCGROUP
BancGroup -- Recent Unaudited Results
The following table presents certain unaudited data for BancGroup for the
period ended September 30, 1998. Unaudited data reflect, in the opinion of
management, all adjustments (consisting of normal recurring adjustments)
necessary to presentation of such data. The unaudited financial information is
presented for informational purposes only and is not 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
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1997 TO 1998
-------------- -------------- --------------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
STATEMENT OF CONDITION SUMMARY
Total assets......................................... 9,194,893 7,465,882 23%
Loans, net of unearned income........................ 6,441,776 5,530,062 16
Total earnings assets................................ 8,315,285 6,791,292 22
Deposits............................................. 6,482,466 5,888,347 10
Shareholders' equity................................. 639,893 545,054 17
Book value per share................................. 6.20 5.53 12
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
% CHANGE
1998 1997 97 TO 98
-------- -------- ---------
<S> <C> <C> <C>
EARNINGS SUMMARY
Net interest income (taxable equivalent).................... 244,693 210,911 16%
Provision for loan losses................................... 11,516 10,304 12
Noninterest income.......................................... 88,044 65,509 34
Noninterest expense......................................... 212,062 163,682 30
Net Income.................................................. 67,763 63,835 6
Net income excluding acquisition and restructuring costs and
Year 2000 expenses........................................ $ 77,059 $ 66,605 16
Average primary shares outstanding.......................... 102,452 97,147
Average fully diluted shares outstanding.................... 105,022 100,512
EARNINGS PER SHARE
Income excluding acquisition and restructuring costs and
Year 2000 expenses:
Basic..................................................... $ 0.75 0.69 9
Diluted................................................... 0.74 0.66 12
Net income:
Basic..................................................... 0.66 0.66 0
Diluted................................................... 0.65 0.64 2
</TABLE>
59
<PAGE> 62
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
-------------
1998 1997
----- -----
<S> <C> <C>
SELECTED RATIOS
Income excluding acquisition and restructuring costs and
Year 2000 expenses to:
Average assets............................................ 1.21% 1.28%
Average equity............................................ 16.92 17.46
Net income to:
Average assets............................................ 1.10 1.22
Average equity............................................ 15.40 16.73
Efficiency ratio (excluding acquisition and Year 2000
expenses)................................................. 63.73 59.21
Equity to assets............................................ 6.96 7.30
Total capital............................................... 7.84 8.24
Tier one leverage........................................... 6.91 7.59
</TABLE>
Operating earnings for the nine months ended September 30, 1998 were
$77,059,000 compared to $66,605,000 for the same period in 1997, a 16% increase.
Diluted operating earnings per share, net income excluding acquisition and
restructuring costs and Year 2000 expenses, for the nine months ended September
30, 1998 was $0.74 a 12% increase over the same period in 1997. The Company's
return on average equity and average assets, excluding acquisition and
restructuring costs and Year 2000 expenses, was 16.92% compared with 17.46% in
1997 and 1.21% compared to 1.28% for 1997, respectively.
60
<PAGE> 63
T B & T, INC.
SUMMARY CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following tables present selected historical financial data for T B & T,
Inc. With respect to the information for the six-month periods ended June 30,
1998 and 1997, which is unaudited, such interim results are not necessarily
indicative of results for the entire year, but include all adjustments (none of
which were other than normal recurring accruals) which, in the opinion of
management, are necessary for a fair presentation of such results. These tables
should be read in conjunction with the historical financial statements and notes
thereto included elsewhere in this Prospectus.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
At Period End:
Cash and cash equivalents......... $ 45,610 $ 31,462 $ 53,887 $ 9,858 $ 13,057 $ 8,854 $ 16,231
Investment securities............. 11,219 19,846 16,388 16,305 18,036 17,775 7,224
Loans, net........................ 46,121 45,485 46,390 88,054 67,886 59,406 46,578
All other assets.................. 1,038 1,341 1,157 1,643 2,210 2,466 1,444
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total assets................ $ 103,988 $ 98,134 $ 117,822 $ 115,860 $ 101,189 $ 88,501 $ 71,477
========== ========== ========== ========== ========== ========== ==========
Deposit accounts.................. $ 94,066 $ 89,239 $ 108,169 $ 88,445 $ 93,221 $ 57,136 $ 65,567
All other liabilities............. 1,249 707 1,193 19,501 562 24,351 411
Shareholders' equity.............. 8,673 8,188 8,460 7,914 7,406 7,014 5,499
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total liabilities and
shareholders' equity...... $ 103,988 $ 98,134 $ 117,822 $ 115,860 $ 101,189 $ 88,501 $ 71,477
========== ========== ========== ========== ========== ========== ==========
For the Period:
Total interest income............. $ 3,103 $ 3,146 $ 6,203 $ 6,348 $ 5,789 $ 4,262 $ 3,931
Total interest expense............ 1,462 1,549 2,939 3,086 3,155 1,845 1,732
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income................. 1,641 1,597 3,264 3,262 2,634 2,417 2,199
Provision (reduction) for loan
losses............................ 0 0 0 0 0 0 150
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income after provision
for loan losses................... 1,641 1,597 3,264 3,262 2,634 2,417 2,349
Other income........................ 113 103 234 233 172 140 675
Other expenses...................... 1,109 993 2,024 1,979 1,988 1,731 1,992
---------- ---------- ---------- ---------- ---------- ---------- ----------
Earnings before income tax
provisions and extraordinary
item.............................. 645 707 1,474 1,516 818 826 1,032
Income tax provision (benefit)...... 219 240 495 501 302 (758) 371
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net earnings before extraordinary
item.............................. 426 467 979 1,015 516 1,584 661
Extraordinary item (1).............. 0 0 0 0 0 0 608
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net earnings........................ $ 426 $ 467 $ 979 $ 1,015 $ 516 $ 1,584 $ 1,269
========== ========== ========== ========== ========== ========== ==========
Earnings per share before
extraordinary item................ 0.23 0.25 0.53 0.55 0.28 0.86 0.36
Net earnings per share.............. 0.23 0.25 0.53 0.55 0.28 0.86 0.69
Earnings per share -- assuming
dilution: before extraordinary
item.............................. 0.21 0.23 0.49 0.51 0.26 0.80 0.36
Net earnings per share.............. 0.21 0.23 0.49 0.51 0.26 0.80 0.69
Weighted average number of shares
outstanding -- basic.............. 1,850,000 1,850,000 1,850,000 1,850,000 1,850,000 1,850,000 1,850,000
Weighted average number of shares
outstanding -- diluted............ 1,988,000 1,988,000 1,988,000 1,988,667 1,990,000 1,990,000 1,850,000
Ratios and Other Data:
Return on average assets.......... 0.43 0.49 1.03 1.07 0.58 2.11 1.72
Return on average equity.......... 5.08 6.05 12.38 13.88 7.51 27.87 26.37
Average equity to average
assets.......................... 8.53 8.17 8.31 7.73 7.75 7.56 6.52
Interest-rate spread during the
period.......................... 1.97 2.44 2.21 2.30 1.64 2.18 2.24
Net yield on average
interest-earning assets......... 6.95 7.23 7.08 7.21 7.03 6.12 5.88
Noninterest expense to average
assets.......................... 1.13 1.05 2.13 2.09 2.24 2.30 2.70
Ratio of average interest-earning
assets to average
interest-bearing liabilities.... 150% 135% 145% 140% 141% 149% 141%
Dividends declared................ 185,000 185,000 462,500 388,500 185,000 0 0
Actual number of shares........... 1,850,000 1,850,000 1,850,000 1,850,000 1,850,000 1,850,000 1,850,000
Earnings per share................ 0.23 0.25 0.53 0.55 0.28 0.86 0.69
Dividend payout ratio............. 0.39 0.38 0.47 0.38 0.36 0.00 0.00
</TABLE>
61
<PAGE> 64
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Nonperforming loans, in-substance
foreclosure loans, loans
contractually past due and real
estate owned as a percentage of
total assets at end of period... 0.07 0.10 0.07 0.11 0.15 0.23 0.32
Allowance for loan losses as a
percentage of total loans at end
of period....................... 0.69% 0.70% 0.69% 0.36% 0.47% 0.54% 0.58%
Total number of banking offices... 2 2 2 2 1 1 1
Total shares outstanding at end of
period.......................... 1,850,000 1,850,000 1,850,000 1,850,000 1,850,000 1,850,000 1,850,000
Book value per share at end of
period.......................... 4.69 4.43 4.57 4.28 4.00 3.79 2.97
</TABLE>
- ---------------
(1) Cumulative effect in change in accounting principle for income taxes
62
<PAGE> 65
T B & T, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion is provided to afford the reader an understanding
of the major elements of T B & T, Inc.'s financial condition, results of
operation, capital resources and liquidity. It should be read in conjunction
with the financial statements and notes thereto and other information appearing
elsewhere in this Prospectus.
GENERAL
T B & T, Inc. (T B & T) is a one-bank holding company, and its only current
business is the ownership and operation of Texas Bank and Trust (the Bank)
through its wholly owned subsidiary, T B & T Holdings, Inc. The Bank is a
FDIC-insured, state-chartered commercial bank headquartered in Dallas, Texas. It
is also a member of the Federal Reserve System. The Bank commenced operations in
January 1983. The Bank has one branch office located in Dallas County, and its
main business is to attract deposits and to invest those funds in loans,
including both secured and unsecured commercial loans, consumer loans,
construction and permanent residential mortgage loans, loans secured by
commercial real estate properties, SBA loans and student loans.
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 1998, DECEMBER 31, 1997 AND
DECEMBER 31, 1996
At June 30, 1998, the Bank had total assets of $104.0 million, a decrease
of 11.7% over the $117.8 million recorded at December 31, 1997. Total
shareholders' equity at June 30, 1998 of $8.7 million, represented an increase
of 2.5% over the $8.5 million as of December 31, 1997.
During the six-months ended June 30, 1998, net loans receivable decreased
slightly by $269,000 to $46.1 million from $46.4 million at December 31, 1997.
The Bank's portfolio of investment securities decreased to $11.2 million as of
June 30, 1998 from $16.4 million as of December 31, 1997 due to the maturity of
several US Treasury Notes. The Bank's deposits decreased to $94.1 million as of
June 30, 1998 from $108.1 million as of December 31, 1997 due to the timing of a
Bank customer's escrow deposits. This customer, a mortgage banker, has the funds
it escrows for mortgage customers on deposit at the Bank. Typically, these
deposit balances increase during the year until such funds are paid out for real
estate taxes.
At December 31, 1997, the Bank had total assets of $117.8 million, an
increase of 1.7% over the $115.9 million recorded at December 31, 1996. Total
shareholders' equity at December 31, 1997 of $8.5 million, represented an
increase of 6.9% over the $7.9 million as of December 31, 1996. For the year
ended December 31, 1997, T B & T had consolidated net earnings of $979,000, a
decrease of 3.5% from the previous year's total of $1.0 million.
During the year ended December 31, 1997, net loans receivable decreased to
$46.4 million from $88.1 million at December 31, 1996 due to a reduction in the
loans held for sale portfolio. Historically, the Bank had purchased mortgage
loans from Guardian Mortgage and held such loans until the loans were resold in
the secondary market. During 1997, the Bank was informed by its regulators that
such loans should be aggregated for purposes of determining compliance with the
Bank's loans to one borrower limitations. As such, the Bank decided to
discontinue the practice of holding such loans. All loans held for resale were
repurchased by Guardian prior to April 30, 1997. Subsequent to the repurchase by
Guardian, funds previously invested in loans held for resale were reinvested in
short term liquid assets, primarily Federal Funds sold.
63
<PAGE> 66
The following table sets forth selected information relating to the
composition of the Bank's loan portfolio by type of loan on the dates indicated.
As of June 30, 1998, the Bank had no concentrations of loans exceeding 10% of
total loans other than as disclosed below.
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT JUNE 30, ------------------------------------
1998 1997 1996
---------------- ---------------- ----------------
AMOUNT % AMOUNT % AMOUNT %
------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Real estate loans:
Construction loans.................... $ 143 0.31% $ 183 0.39% $ 252 0.29%
Single family loans................... 27,138 58.43 32,200 68.93 37,591 42.54
Loans held for resale................. 0 0.00 0 0.00 38,308 43.35
Home improvement and second liens..... 2,452 5.28 2,102 4.50 1,403 1.59
Commercial............................ 1,108 2.39 419 0.90 370 0.42
Commercial and consumer loans:
Commercial loans...................... 7,756 16.70 5,520 11.82 5,659 6.40
Business manager loans................ 2,628 5.66 1,370 2.93 1,192 1.35
SBA loans............................. 70 0.15 157 0.34 215 0.24
Marketable securities loans........... 2,076 4.47 2,574 5.51 1,108 1.25
Student loans......................... 617 1.33 727 1.56 261 0.30
Automobile loans...................... 892 1.92 805 1.72 821 0.93
CD secured loans...................... 908 1.96 646 1.38 655 0.74
Other loans........................... 654 1.41 8 0.02 540 0.61
------- ------ ------- ------ ------- ------
46,442 100.00% 46,711 100.00% 88,375 100.00%
------- ====== ------- ====== ------- ======
Less:
Allowance for loan losses............. (321) (321) (321)
------- ------- -------
Total......................... $46,121 $46,390 $88,054
======= ======= =======
</TABLE>
The Bank's portfolio of investment securities increased to $16.4 million as
of December 31, 1997 from $16.3 million as of December 31, 1996. The Bank's
deposits increased to $108.1 million as of December 31, 1997 from $88.4 million
as of December 31, 1996 due to the timing of a Bank customer's escrow deposits.
REGULATION AND LEGISLATION
As a state-chartered commercial Bank, the Bank and T B & T are subject to
extensive regulation by the Board of Governors of the Federal Reserve System
(FRB). The Bank files reports with the FRB concerning its activities and
financial condition, in addition to obtaining regulatory approvals prior to
entering into certain transactions such as mergers with or acquisitions of other
financial institutions. Periodic examinations are performed by the FRB to
monitor the Bank's compliance with various regulatory requirements and safety
and soundness. The Bank is also subject to regulation by the FRB with respect to
reserves required to be maintained against deposits and certain other matters.
As a state-chartered bank, the Bank is subject to that state's banking laws and
to certain regulations by the Texas Department of Banking.
CREDIT RISK
The Bank's business activity entails potential loan losses, the magnitude
of which depend on a variety of economic factors affecting borrowers which are
beyond the control of the Bank. While the Bank has instituted underwriting
guidelines and credit review procedures to protect the Bank from avoidable
credit losses, some losses will inevitably occur.
64
<PAGE> 67
The following table sets forth certain information regarding loans
contractually past due 90 days or more and still accruing, non-accrual loans,
and real estate owned, the ratio of such loans and real estate owned to total
assets as of the dates indicated, and certain other related information:
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------------
1997 1996 1995 1994 1993
----- ----- ----- ----- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Loans contractually past due 90 days or more and
still accruing:
Real Estate loans
Residential.................................... $ 0 $ 0 $ 27 $ 0 $ 0
Commercial..................................... 0 0 0 0 0
Consumer and other loans.......................... 0 0 0 0 0
----- ----- ----- ----- ----
Total loans past due 90 days or more...... $ 0 $ 0 $ 27 $ 0 $ 0
===== ===== ===== ===== ====
Non-accrual loans:
Real Estate loans
Residential.................................... $ 0 $ 0 $ 0 $ 0 $ 0
Commercial..................................... 84 117 10 16 24
Consumer and other loans.......................... 2 7 14 20 33
----- ----- ----- ----- ----
Total non-performing loans................ $ 86 $ 124 $ 24 $ 36 $ 57
===== ===== ===== ===== ====
Other real estate owned:
Real estate acquired by foreclosure or deed in
lieu of foreclosure............................ $ 0 $ 0 $ 99 $ 165 $175
Total non-performing assets............... $ 86 $ 124 $ 123 $ 201 $232
Total non-performing loans to total
assets.................................. 0.07 0.11 0.02 0.04 0.08
Total non-performing assets to total
assets.................................. 0.07 0.11 0.11 0.23 0.32
</TABLE>
During the six-months ended June 30, 1998, gross interest income of $5,883
would have been recorded on loans accounted for on a non-accrual basis if the
loans had been current throughout the period. No interest on such loans was
included in income during the period.
The following table sets forth information with respect to activity in the
Bank's allowance for loan losses during the periods indicated:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Average outstanding loans........ $53,569 $66,943 $61,996 $53,790 $49,252
Allowance at beginning of
period......................... $ 321 $ 321 $ 319 $ 271 $ 365
Loans charged-off
Residential real estate
loans..................... 0 0 0 0 0
Commercial real estate
loans..................... 0 0 0 0 61
Commercial loans............ 0 0 0 0 0
Consumer loans.............. 0 0 0 0 0
------- ------- ------- ------- -------
Total loans
charged-off.......... 0 0 0 0 61
Recoveries....................... 0 0 (2) (48) (117)
Net charge-offs (recoveries)..... 0 0 (2) (48) (56)
Provision (benefit) for loan
losses charged to operating
expenses....................... 0 0 0 0 (150)
Allowance at end of year......... $ 321 $ 321 $ 321 $ 319 $ 271
======= ======= ======= ======= =======
Net charge-offs (recoveries) to
average loans outstanding...... .00% .00% .00% (.09)% (.11)%
Allowance to period end loans.... 0.69% 0.36% 0.47% 0.53% 0.58%
Period end loans................. $46,711 $88,375 $68,207 $59,726 $46,849
</TABLE>
65
<PAGE> 68
RESULTS OF OPERATIONS
The operating results of the Bank depend primarily on its net interest
income, which is equal to the difference between interest income on
interest-earning assets and interest expense on interest-bearing liabilities,
consisting primarily of deposits. Net interest income is determined by reference
to (i) the difference between yields earned on interest-earning assets and rates
paid on interest-bearing liabilities ("interest rate spread"), and (ii) the
relative amounts of interest-earning assets and interest-bearing liabilities.
The Bank's interest rate spread is affected by regulatory, economic and
competitive factors that influence interest rates, loan demand and deposit
flows. In addition, the Bank's net earnings are also affected by the level of
non-performing loans and real estate owned, as well as the level of its
non-interest income and non-interest expenses, such as salaries and employee
benefits, occupancy, data processing and equipment costs and income taxes.
The following table sets forth for the periods indicated information
regarding (i) the total dollar amount of interest and dividend income of the
Bank from interest-earning assets and the resultant average yields; (ii) the
total dollar amount of interest expense on interest-bearing liabilities and the
resultant average cost; (iii) net interest/dividend income; (iv) interest-rate
spread; and (v) interest margin. Average balances are based upon daily balances.
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------------
1997 1996 1995
------------------------------- ------------------------------- -------------------------------
AVG BAL INTEREST YIELD/RATE AVG BAL INTEREST YIELD/RATE AVG BAL INTEREST YIELD/RATE
------- -------- ---------- ------- -------- ---------- ------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earning assets:
Loans..................... $53,569 $ 4,237 7.91% $66,943 $5,113 7.64% $61,996 $4,626 7.46%
Investment securities..... 17,505 1,050 6.00 19,608 1,149 5.86 17,940 1,023 5.70
Federal funds sold........ 16,502 916 5.55 1,525 86 5.64 2,482 140 5.64
------- ------- ------- ------ ------- ------
Total earning
assets............ 87,576 6,203 7.08 88,076 6,348 7.21 82,418 5,789 7.02
------- ------ ------
Non-earning assets.......... 7,600 6,600 6,160
------- ------- -------
Total assets........ $95,176 $94,676 $88,578
======= ======= =======
Interest-bearing
liabilities:
Savings accounts.......... $ 822 $ 29 3.53% $ 841 $ 30 3.57% $ 944 $ 33 3.50%
NOW accounts.............. 21,961 1,049 4.78 21,675 1,027 4.74 17,091 886 5.18
Money market deposits..... 13,403 489 3.65 9,744 342 3.51 7,887 276 3.50
Certificates of
deposits:
IRA................. 886 49 5.53 954 51 5.35 941 52 5.53
Over $100,000....... 5,389 307 5.70 5,295 294 5.55 3,707 208 5.61
Under $100,000...... 15,081 867 5.75 17,613 981 5.57 13,657 822 6.02
Borrowings.............. 2,745 149 5.43 6,722 361 5.37 14,368 878 6.11
------- ------- ------- ------ ------- ------
Total
interest-bearing
liabilities....... 60,287 2,939 4.88 62,844 3,086 4.91 58,595 3,155 5.38
------- ------ ------
Non-interest bearing
liabilities....... 26,970 24,508 23,111
Shareholders' equity........ 7,910 7,314 6,868
------- ------- -------
Total liabilities
and equity........ $95,167 $94,666 $88,574
======= ======= =======
Net interest income......... $ 3,264 $3,262 $2,634
======= ====== ======
Net interest spread......... 2.20% 2.30% 1.64%
Ratio of average earning
assets to average
interest-bearing
liabilities............... 145% 140% 141%
</TABLE>
66
<PAGE> 69
RATE/VOLUME ANALYSIS
The following table sets forth certain information regarding changes in
interest income and interest expense of the Bank for the periods indicated. For
each category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (1) changes in rate (change
in rate multiplied by prior volume), (2) changes in volume (changes in volume
multiplied by prior rate) and (3) changes in rate-volume (change in rate
multiplied by change in volume).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 VS 1996
INCREASE (DECREASE) DUE TO
---------------------------
RATE VOLUME MIX TOTAL
---- ------ --- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans..................................................... 181 (1,022) (35) (876)
Investment Securities..................................... 28 (132) 4 (99)
Fed Funds Sold............................................ (4) 896 (62) 830
--- ------ --- ----
Total............................................. 205 (258) (92) (145)
Interest-bearing liabilities
Deposits:
Savings accounts....................................... (0) (1) 0 (1)
NOW accounts........................................... 9 14 (1) 22
Money market accounts.................................. 14 128 5 147
Certificate accounts:
IRA.................................................... (1) (4) 3 (2)
Over $100,000.......................................... 11 5 (3) 13
Under $100,000......................................... 32 (142) (4) (114)
Borrowings................................................ 4 (214) (2) (212)
--- ------ --- ----
Total............................................. 68 (212) (2) (147)
Net change in net interest income........................... 137 (45) (90) 2
</TABLE>
Liquidity management assures that adequate funds are available to meet
deposit withdrawals, loan demand and maturing liabilities. Insufficient
liquidity can result in higher costs of obtaining funds, while excess liquidity
can lead to a decline in earnings due to the cost of foregoing alternative
investments. The ability to renew and acquire additional deposit liabilities is
a major source of liquidity. The Bank's principal source of funds is primarily
within the local market of the Bank and consists of deposits, interest and
principal payments on loans and investments securities and borrowings.
Asset liquidity is provided by cash and assets which are readily
marketable, or which can be pledged, or which will mature in the near future.
These include cash, federal funds sold and U.S. Government backed securities and
U.S. Government agency securities. Total fair market value of all pledged
securities is not included as liquid assets. Liability liquidity is provided by
access to core funding sources, principally various customers' interest bearing
and non-interest bearing deposit accounts. The Bank does not have nor does it
solicit brokered deposits. Federal funds purchased and short-term borrowings are
additional sources of liquidity. These sources are short term in nature and are
used, as necessary, to fund asset growth and meet short-term liquidity needs.
As of December 31, 1997 and December 31, 1996, the Bank's liquidity ratio
was approximately 43.45% and 27.56%, respectively. As of June 30, 1998 and 1997,
the Bank's liquidity ratio was approximately 43.12% and 31.08%, respectively.
The increased liquidity at December 31, 1997 and June 30, 1998 as compared to
prior periods was due to the Bank's decision to discontinue its practice of
purchasing loans from Guardian Mortgage to be held until resale in the secondary
market. Consequently, at December 31, 1997 and June 30, 1998, funds that had
been previously invested in such loans were invested in short term liquid
assets, primarily Federal Funds. See "-- Comparison of Financial Condition at
June 30, 1998, December 31, 1997 and December 31, 1996."
67
<PAGE> 70
The following table sets forth the carrying value of the Bank's investment
portfolio as of the dates indicated:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Securities available for sale:
U.S. Treasury Notes..................................... $14,163 $14,201 $16,014
FHLB Stock.............................................. 2,018 1,902 1,794
FRB Stock............................................... 207 202 228
------- ------- -------
Total investment securities..................... $16,388 $16,305 $18,036
======= ======= =======
</TABLE>
The following table sets forth, by maturity distribution, certain
information pertaining to the Bank's investment securities portfolio at December
31, 1997:
<TABLE>
<CAPTION>
AVAILABLE FOR SALE SECURITIES
-----------------------------
ADJUSTED ESTIMATED
COST FAIR VALUE YIELD
-------- ---------- -----
<S> <C> <C> <C>
Due in one year or less..................................... $ 7,545 $ 7,559 5.95%
Due from one to five years.................................. 6,556 6,604 6.17%
------- ------- ----
$14,101 $14,163 6.05%
======= ======= ====
</TABLE>
The Bank's primary source of funds consisted of principal payments on loans
and investment securities, proceeds from sales and maturities of investment
securities and net increase in deposits. The Bank uses its capital resources
principally to fund existing and continuing loan commitments. At December 31,
1997 and December 31, 1996, the Bank had commitments to originate loans totaling
$3.4 million and $3.8 million, respectively. Scheduled maturities of
certificates of deposits during the twelve months following December 31, 1997
totaled $17.8 million.
REGULATORY CAPITAL REQUIREMENTS
For the purpose of evaluating what should constitute the minimum capital
adequacy of a financial institution, Federal Banking regulators have adopted
regulations, which make reference to the institution's "Tier 1 leverage" capital
and also to its "total" capital. In most instances, "Tier 1 leverage" capital
will consist solely of funds permanently committed to the institution (i.e.,
shareholders' equity), less net intangible assets. Conversely, "total" capital
(comprised of the sum of Tier 1 and supplementary, or Tier 2, capital) includes
not only shareholders' equity, but an allowance for loan losses (subject to
limitations). Under FDIC regulations, the Bank is required to meet certain
minimum capital thresholds.
The following chart compares the minimum capital ratios required by the
FDIC to the ratios maintained by the Bank:
<TABLE>
<CAPTION>
FOR CAPITAL
ADEQUACY
ACTUAL PURPOSES
------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
As of December 31, 1997
Total Capital (to risk weighted assets)................. $8,527 11.6% $5,879 8.0%
Tier 1 Capital (to risk weighted assets)................ 8,206 11.2% 2,940 4.0%
Tier 1 Capital (to average assets)...................... 8,206 7.0% 4,713 4.0%
</TABLE>
ASSET AND LIABILITY MANAGEMENT
As part of its asset and liability management, the Bank has emphasized
establishing and implementing internal asset-liability decision processes, as
well as communications and control procedures to aid in managing the Bank's
earnings. Management believes that these processes and procedures provide the
Bank
68
<PAGE> 71
with better capital planning, asset mix and volume controls, loan-pricing
guidelines, and deposit interest-rate guidelines which should result in tighter
controls and less exposure to interest-rate risk.
The matching of assets and liabilities may be analyzed by examining the
extent to which such assets and liabilities are "interest-rate sensitive" and by
monitoring an institution's interest rate sensitivity "gap". An asset or
liability is said to be interest-rate sensitive within a specific time period if
it will mature or reprice within that time period. The interest-rate sensitivity
gap is defined as the difference between interest-earning assets and
interest-bearing liabilities maturing or repricing within a given time period.
The gap ratio is computed as rate-sensitive assets to rate-sensitive
liabilities. A gap ratio of 1.0% represents perfect matching. A gap is
considered positive when the amount of interest-rate sensitive assets exceeds
interest-rate sensitive liabilities. A gap is considered negative when the
amount of interest-rate sensitive liabilities exceeds interest-rate sensitive
assets. During a period of rising interest rates, a negative gap would adversely
affect net interest income, while a positive gap would result in an increase in
net interest income. During a period of falling interest rates, a negative gap
would result in an increase in net interest income, while a positive gap would
adversely affect net interest income.
In order to minimize the potential for adverse effect of material and
prolonged increases in interest rates on the Bank's results of operation,
management continues to monitor asset and liability management policies to
better match the maturities and repricing terms of the Bank's interest-earning
assets and interest-bearing liabilities. Such policies have consisted primarily
of (i) emphasizing the origination of adjustable-rate loans; (ii) maintaining a
stable core deposit base; and (iii) maintaining a significant portion of liquid
assets (cash and short-term investments).
The Bank seeks to maintain a large stable core deposit base by providing
service to its customers without significantly increasing its cost of funds or
operating expenses. The success of the Bank's core deposit strategy is
demonstrated by the stability of its money-market deposit accounts, savings
accounts and NOW accounts, which, in the aggregate, totaled $41.7 million, or
38.5% of total deposits at December 31, 1997, and $40.0 million or 45.2% of such
deposits at December 31, 1996. These accounts bore a weighted-average nominal
rate of 4.33% at December 31, 1997 and 4.34% at December 31, 1996. Management
anticipates that these accounts will continue to increase and in the future
comprise a significant portion of its deposit base.
As of December 31, 1997, the Bank's cumulative one-year interest-rate
sensitivity gap was 114.09%. Although management believes that the
implementation of the referenced strategies has reduced the potential adverse
effects of changes in interest rates on the Bank's results of operations, any
substantial and prolonged increase in market interest rates could have an
adverse impact on the Bank's results of operations. Management monitors the
Bank's interest-rate sensitivity gap on a quarterly basis, using The Baker
Group's software program to provide both a practical and a theoretical gap
report. The practical gap report is based on the Federal Reserve Board's March
26, 1993 draft for incorporating Interest-Rate Risk into Risk-Based Capital
Standards. Management believes that its present gap position is appropriate for
the current interest-rate environment.
69
<PAGE> 72
The following table sets forth certain information relating to the Bank's
interest-earning assets and interest-bearing liabilities at December 31, 1997
that are estimated to mature or are scheduled to reprice within the period
shown:
<TABLE>
<CAPTION>
MORE THAN MORE
ONE YEAR THAN
ONE YEAR TO FIVE YEARS FIVE YEARS TOTAL
-------- ------------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Earning Assets:
Fixed rate loans............................. $ 2,710 $ 2,553 $ 5,610 $ 10,873
Adjustable rate loans........................ 16,153 13,287 6,390 35,830
Investments (includes federal funds sold).... 48,277 6,604 207 55,088
------- ------- ------- --------
Total earning assets................. $67,419 $22,443 $12,207 $101,791
======= ======= ======= ========
Interest-bearing liabilities:
Certificates of deposit...................... $17,792 $ 4,314 $ 2 $ 22,108
Savings and NOW accounts..................... 23,733 0 0 23,733
Money market accounts........................ 17,917 0 0 17,917
Borrowings................................... 611 0 0 611
------- ------- ------- --------
Total interest bearing liabilities... $60,053 $ 4,314 $ 2 $ 64,369
======= ======= ======= ========
</TABLE>
Loan Maturities. The table below sets forth the contractual maturity of
the Bank's loan portfolio at December 31, 1997. The table does not reflect
anticipated prepayments.
<TABLE>
<CAPTION>
MATURITY SCHEDULE OF LOANS
------------------------------------
0-12 1-5 OVER
MONTHS YEARS 5 YEARS TOTAL
------- ------ ------- -------
<S> <C> <C> <C> <C>
Fixed interest rate................................ $ 2,710 $2,553 $ 5,610 $10,873
Variable interest rate............................. 7,320 676 27,834 35,830
------- ------ ------- -------
Total $10,030 $3,229 $33,444 $46,703
======= ====== ======= =======
</TABLE>
The following table shows the distribution of, and certain other
information relating to the Bank's deposit accounts, by type:
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------------
1997 1996
-------- % OF ------- % OF
AMOUNT DEPOSIT AMOUNT DEPOSIT
-------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Demand deposits................................. $ 44,411 41.06% $27,565 31.17%
Savings and NOW deposits........................ 23,733 21.94 22,906 25.90
Money market deposits........................... 17,917 16.56 17,052 19.28
Certificates of deposit......................... 22,108 20.44 20,922 23.66
-------- ------ ------- ------
Total................................. $108,169 100.00% $88,445 100.00%
======== ====== ======= ======
</TABLE>
70
<PAGE> 73
The following table shows the average amount of and the average rate paid
on each of the following deposit account categories during the periods
indicated:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
---------------------------------------------------------
1997 1996 1995
----------------- ----------------- -----------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE
------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Non-interest bearing checking
accounts..................... $26,107 0.00% $23,749 0.00% $22,548 0.00%
NOW accounts................... 21,961 4.78 21,675 4.74 17,091 5.18
Money market accounts.......... 13,403 3.65 9,744 3.51 7,887 3.50
Certificates of deposit........ 21,356 5.73 23,862 5.56 18,305 5.91
Savings accounts............... 822 3.53 841 3.57 944 3.50
------- ---- ------- ---- ------- ----
Total deposits....... $83,649 4.85% $79,871 4.86% $66,775 5.15%
======= ==== ======= ==== ======= ====
</TABLE>
COMPARISON OF SIX-MONTH PERIODS ENDED JUNE 30, 1998 AND 1997
General. Net earnings for the six months ended June 30, 1998 were $426,000
or, $.23 per share compared to $467,000, or $.25 per share for 1997. The
decrease in earnings was primarily due to a decrease in loans held for resale.
Interest Income and Expense. Total interest income decreased slightly by
$43,000 for the six-month period ended June 30, 1998. Interest on loans
decreased $454,000 to $1.9 million due to a decrease in loans held for resale.
As discussed above, during the year ended December 31, 1997, the Bank's
portfolio of loans held for resale were repurchased by Guardian. During the six
months ended June 30, 1998, the funds received from the liquidation of the loans
held for resale were primarily invested in fed funds sold. Such investments are
lower yielding than the loans held for resale. Interest on investment securities
decreased $78,000 to $432,000 for the six months ended June 30, 1998, due to the
maturity of several investment securities. Interest on other interest-earning
assets increased to $760,000 for the six months ended June 30, 1998 from
$272,000 for the six months ended June 30, 1997, due to an increase in the
average balance of federal funds sold during the period, compared to a year ago.
Interest expense on deposit accounts and borrowed funds decreased $87,000
to $1.5 million for the six months ended June 30, 1998 from $1.5 million in
1997. The decrease is due to a reduction in the average rate paid on deposits
and in average funds borrowed during the period compared to the first six months
of 1997.
Provision for Loan Losses. The provision for loan losses is charged to
earnings to bring the total allowance to a level deemed appropriate by
management and is based upon historical experience, the volume and type of
lending conducted by the Bank, industry standards, the amount of non-performing
loans, general economic conditions, particularly as they relate to the Bank's
market areas, and other factors related to the collectibility of the Bank's loan
portfolio. The Bank made no loan loss provision for the six-months ended June
30, 1998 or June 30, 1997. The allowance for loan losses was $321,000 at June
30, 1998. While management believes the allowance for loan losses is adequate as
of June 30, 1998, future adjustments may be necessary if economic conditions
differ substantially from the assumptions used in making the initial
determination.
Non-interest Expense. Total non-interest expense increased $116,000 to
$1.1 million for the six months ended June 30, 1998 from $993,000 for the six
months ended June 30, 1997. The increase was primarily due to an increase in
salaries and employee benefits attributed to the addition of three employees.
Income Tax Provision. The income tax provision for the six months ended
June 30, 1998 and June 30, 1997 was $219,000 and $240,000, respectively.
71
<PAGE> 74
COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1996.
General. Net earnings for the year ended December 31, 1997 were $979,000
or, $.53 per share compared to $1.0 million, or $.55 per share for 1996. The
slight decrease in earnings was primarily due to an increase in non-interest
expense.
Interest Income and Expense. Total interest income decreased by $145,000
to $6.2 million for the year ended December 31, 1997 compared to $6.3 million
for the year ended December 31, 1996. Interest on loans decreased $875,000 to
$4.2 million due to a $13.4 million decrease in the average balance of loans
outstanding during 1997 as compared to 1996. This decrease in the average
balance reflects the liquidation of the loans held for resale portfolio.
Interest on investment securities decreased $100,000 to $1.0 million for the
year ended December 31, 1997. Interest on other interest-earning assets
increased to $900,000 for the year ended December 31, 1997 from $86,000 for the
year ended December 31, 1996, due to an increase in the average federal funds
sold during the period, compared to a year ago.
Interest expense on deposit accounts and borrowed funds decreased $148,000
to $2.9 million for the year ended December 31, 1997 from $3.1 million in 1996.
The decrease is due to a reduction in the average rate paid on deposits and a
decrease in average funds borrowed during the period compared to a year ago.
Provision for Loan Losses. The provision for loan losses is charged to
earnings to bring the total allowance to a level deemed appropriate by
management and is based upon historical experience, the volume and type of
lending conducted by the Bank, industry standards, the amount of non-performing
loans, general economic conditions, particularly as they relate to the Bank's
market areas, and other factors related to the collectibility of the Bank's loan
portfolio. The Bank made no loan loss provision for the years ended December 31,
1997 or December 31, 1996. The allowance for loan losses was $321,000 at
December 31, 1997. While management believes the allowance for loan losses is
adequate as of December 31, 1997, future adjustments may be necessary if
economic conditions differ substantially from the assumptions used in making the
initial determination.
Non-interest Expense. Total non-interest expense increased slightly by
$45,000 to $2.0 million for the year ended December 31, 1997.
Income Tax Provision. The income tax provision for the year ended December
31, 1997 and December 31, 1996 was $495,000 and $501,000, respectively.
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements and related data presented herein have been
prepared in accordance with GAAP, which requires the measurement of financial
position and operating results in terms of historical dollars, without
considering changes in the relative purchasing power of money over time due to
inflation. Unlike most industrial companies substantially all of the assets and
liabilities of the Bank are monetary in nature. As a result, interest rates have
a more significant impact on the Bank's performance than the effects of general
levels of inflation. Interest rates do not necessarily move in the same
direction or in the same magnitude as the prices of goods and services, since
such prices are affected by inflation to a larger extent than interest rates.
72
<PAGE> 75
BUSINESS OF BANCGROUP
GENERAL
BancGroup is a bank holding company registered under the BHCA. It was
organized in 1974 under the laws of Delaware and has operated under its current
name and management since 1981. BancGroup operates Colonial Bank as its wholly
owned commercial banking subsidiary in the states of Alabama, Georgia, Florida,
Nevada, Texas and Tennessee. Including acquisitions completed since June 30,
1998, Colonial Bank, an Alabama banking corporation, conducts a full service
banking business through 134 branches in Alabama, five branches in Tennessee, 19
branches in Georgia, seven branches in Nevada, 84 branches in Florida and one
branch in Texas. Colonial Mortgage Company, a subsidiary of Colonial Bank in
Alabama, is a mortgage banking company which services approximately $14.7
billion in residential loans and which originates mortgages in 34 states through
four divisional offices. At June 30, 1998, BancGroup had consolidated total
assets of $8.8 billion and consolidated stockholders' equity of $601.8 million.
BancGroup's commercial banking loan portfolio is comprised primarily of
commercial real estate loans (28%) and residential real estate loans (42%), 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.
RECENTLY COMPLETED BUSINESS COMBINATIONS
Since June 30, 1998, BancGroup has acquired five banking institutions, CNB
Holding Company, FirstBank, First Macon Bank & Trust Company, Prime Bank of
Central Florida and InterWest Bancorp with aggregate assets and stockholders'
equity acquired of $648.9 million and $49.1 million, respectively.
YEAR 2000 COMPLIANCE
Many computer software programs and processing systems, including some of
those used by BancGroup and its subsidiaries in their operations, have not been
designed to accommodate entries beyond the year 1999 in date fields. Failure to
address the anticipated consequences of this design deficiency could have
material adverse effects on the business and operations of any business,
including BancGroup, that relies on computers and associated technologies. In
response to the challenges of addressing such consequences in the banking
industry, bank regulatory agencies, including the Federal Reserve, BancGroup's
primary regulator, have established a Year 2000 Supervision Program and
published guidelines for implementing procedures to bring the computer software
programs and processing systems into year 2000 compliance.
In compliance with the guidelines of the Federal Reserve, BancGroup has
established a full time Year 2000 task force to address all Year 2000 compliance
issues as well as enhancements to computer and communications systems resulting
from upgrades initiated in response to Year 2000 issues. During the third
quarter of 1998, BancGroup substantially completed the remediation of its
critical software applications and began testing of internal mission critical
applications. In accordance with the guidelines established by the Federal
Reserve, BancGroup expects to be substantially completed with testing of
internal mission critical software applications by December 31, 1998. Testing of
other nonmission critical applications is also well underway and is expected to
be substantially completed by the end of the first quarter 1999. Additionally,
BancGroup expects to have testing substantially completed with third party
service providers by March 31, 1999.
Throughout 1998, BancGroup has been working to assess Year 2000 readiness
of vendors, business partners and other counterparties focusing on those
considered critical to BancGroup operations. BancGroup began assessing the Year
2000 readiness of loan customers, depositors and other funds providers during
the third quarter of 1998. BancGroup will continue to monitor and evaluate the
Year 2000 readiness of third parties whose Year 2000 noncompliance could have a
material adverse impact on the operations of BancGroup though the first quarter
of the Year 2000. BancGroup will take appropriate measures including development
of contingency plans to mitigate the risk to the company of Year 2000
noncompliance by third parties. However, the impact of Year 2000 noncompliance
by all third parties with whom BancGroup transacts business cannot be assessed
at this time.
73
<PAGE> 76
BancGroup estimates that the total cost of the Year 2000 project will range
from $13.5 million to $15.5 million. Approximately $8.4 million of those costs
relate to the replacement of hardware and software and will therefore be
capitalized while $3 million of the costs will be incremental expenses paid to
third parties. Year 2000 project costs of approximately $3 million were expensed
during the six months ended June 30, 1998 and $432,000 were expensed during the
year ended December 31, 1997. The 1998 expenses included a one-time pretax
charge of approximately $2 million in the first quarter for the write off of the
remaining book value of branch automation equipment that is being replaced with
Year 2000 compliant software.
The above reflects management's current assessment and estimates. Various
factors could cause actual results to differ materially from those contemplated
by such assessments, estimates and forward-looking statements. Some of these
factors may be beyond the control of BancGroup, including but not limited to,
vendor representation, technological advancements, economic factors and
competitive considerations.
Management's evaluation of Year 2000 compliance and technological upgrades
is an on-going process involving continual evaluation. Unanticipated problems
could develop and alternative solutions may be available that could cause
current solutions to be more difficult or costly than currently anticipated.
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
As of June 30, 1998, BancGroup had issued and outstanding 98,232,266 shares
of BancGroup Common Stock with 8,910 stockholders of record. Each such share is
entitled to one vote. In addition, as of that date, 3,858,122 shares of
BancGroup Common Stock were subject to issue upon exercise of options pursuant
to BancGroup's stock option plans and up to 549,382 shares of BancGroup Common
Stock were issuable upon conversion of BancGroup's 1986 Debentures. There are
currently 200,000,000 shares of BancGroup Common Stock authorized.
The following table shows those persons who are known to BancGroup to be
beneficial owners as of February 27, 1998 of more than five percent of
outstanding BancGroup Common Stock.
<TABLE>
<CAPTION>
PERCENTAGE
COMMON OF CLASS
NAME AND ADDRESS STOCK OUTSTANDING(1)
- ---------------- --------- --------------
<S> <C> <C>
Robert E. Lowder(2)......................................... 5,813,590 5.87%
Post Office Box 1108
Montgomery, AL 36101
</TABLE>
- ---------------
(1) Percentages are calculated for each person assuming the issuance of shares
of BancGroup Common Stock pursuant to BancGroup's stock option plans, if
any, that are held by such person.
(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.
(3) Includes 382,040 shares of BancGroup Common Stock subject to options under
BancGroup's stock option plans.
SECURITY OWNERSHIP OF MANAGEMENT
The following table indicates for each director, executive officer, and all
executive officers and directors of BancGroup as a group the number of shares of
outstanding Common Stock of BancGroup beneficially owned as of June 30, 1998.
SHARES OF BANCGROUP BENEFICIALLY OWNED
<TABLE>
<CAPTION>
PERCENTAGE
OF CLASS
DIRECTORS NAME COMMON STOCK OUTSTANDING
- -------------- ------------ -----------
<S> <C> <C>
Lewis Beville............................................... 3,632 *
Young J. Boozer............................................. 33,786(1) *
William Britton............................................. 31,232 *
</TABLE>
74
<PAGE> 77
<TABLE>
<CAPTION>
PERCENTAGE
OF CLASS
DIRECTORS NAME COMMON STOCK OUTSTANDING
- -------------- ------------ -----------
<S> <C> <C>
Jerry J. Chesser............................................ 299,272 *
Augustus K. Clements, III................................... 39,542 *
Robert S. Craft............................................. 35,442 *
Patrick F. Dye.............................................. 61,920(2) *
James L. Hewitt............................................. 901,384(3) *
Clinton O. Holdbrooks....................................... 552,800(4) *
D. B. Jones................................................. 45,178(5) *
Harold D. King.............................................. 297,162 *
Robert E. Lowder............................................ 5,813,590(6) 5.87%
John Ed Mathison............................................ 59,762 *
Milton E. McGregor.......................................... 0 *
John C.H. Miller, Jr........................................ 76,704(7) *
Joe D. Mussafer............................................. 42,058 *
William E. Powell, III...................................... 28,706 *
J. Donald Prewitt........................................... 439,142(8) *
Jack H. Rainer.............................................. 5,380 *
Jimmy Rane.................................................. 2,700(9) *
Frances E. Roper............................................ 735,030 *
Simuel Sippial.............................................. 8,868 *
Ed V. Welch................................................. 62,722 *
CERTAIN EXECUTIVE OFFICERS WHO ARE NOT ALSO DIRECTORS
Young J. Boozer, III........................................ 143,330(1)(10) *
Michelle Condon............................................. 38,196(10) *
P.L. ("Mac") McLeod, Jr..................................... 125,052(10) *
W. Flake Oakley, IV......................................... 84,714(10) *
All Executive Officers & Directors as a Group............... 9,967,304 10.06%
</TABLE>
- ---------------
* Represents less than 1%.
(1) Includes 2,000 shares of Common Stock out of 4,000 shares owned by Young J.
Boozer, and Young J. Boozer, III EX U/W Phyllis C. Boozer. Mr. Boozer
resigned as of July 15, 1998 and currently serves as a Director Emeritus.
(2) Includes 50,000 shares of Common Stock subject to options exercisable under
BancGroup's stock option plans.
(3) Includes 105,364 shares of Common Stock subject to stock options.
(4) Includes 128,996 shares held by Mr. Holdbrooks as trustee.
(5) Mr. Jones holds power to vote 41,466 of these shares as trustee.
(6) Includes 382,040 shares of Common Stock subject to options under
BancGroup's stock option plans.
(7) Includes 40,000 shares of Common Stock subject to options under BancGroup's
stock option plans.
(8) Represents beneficial ownership of shares claimed by Mr. Prewitt as of June
30, 1998. Mr. Prewitt resigned as of September 8, 1998.
(9) Mr. Rane's Keogh Plan owns 1,000 shares of BancGroup Common Stock.
(10) Young J. Boozer, III, Michelle M. Condon, P.L. ("Mac") McLeod, Jr. and W.
Flake Oakley hold options respecting 50,000, 18,490, 56,000 and 36,000
shares of Common Stock, respectively, pursuant to BancGroup's stock option
plans, not counting options that are not exercisable within 60 days due to
vesting requirements.
75
<PAGE> 78
MANAGEMENT INFORMATION
Certain information regarding the biographies of the directors and
executive officers of BancGroup, executive compensation and related party
transactions is included in (i) BancGroup's Annual Report on Form 10-K for the
fiscal year ending December 31, 1997, at item 10 and (ii) BancGroup's Proxy
Statement for its 1998 Annual Meeting, at items 10, 11 and 13.
76
<PAGE> 79
BUSINESS OF T B & T
GENERAL
T B & T Inc. is a bank holding company headquartered in Dallas, Texas. It
is a Texas corporation registered as a bank holding company under the Bank
Holding Company Act of 1956 as amended. The Company was formed in 1982 as
National Centerbanks Inc. The Company acquired the Bank, formerly known as
Centerbank N.A., when the newly organized national bank first opened for
business in 1983. The company changed its name to T B & T Inc. on April 18, 1986
and the Bank changed its name to Texas Bank and Trust N.A. on December 31, 1985.
In January 1998 the Bank converted its charter to a State of Texas commercial
bank named Texas Bank and Trust while retaining its Federal Reserve membership.
Deposits are insured by the FDIC. T B & T does not engage in any other line of
business or activity.
The Bank has operated as a traditional commercial financial institution
attracting checking, savings, and money-market account deposits from individuals
and businesses, and using such deposits to originate consumer and commercial
loans or purchase residential real estate loans which are secured by property
located primarily in Dallas and Collin counties Texas. Its income is primarily
derived from interest received in connection with lending and investment
activities. Interest on deposits and general administrative expenses are the
Bank's major expense items.
The Bank currently employs 20 full and part-time individuals and engages in
general business of personal and commercial banking primarily in Dallas and
Collin counties and the surrounding Dallas PMSA. For its primary source of
funds, the Bank relies on personal and business deposits, money-market deposit
accounts, and certificates of deposits. The Bank's primary source of income is
interest earned on loans and investments. The Bank meets its commercial,
industrial and financial customers' banking needs with a wide range of financial
services. Commercial lending activities include short-term and medium-term
loans, revolving credit arrangements, equipment financing and interim real
estate lending, along with SBA and an accounts receivable purchase program for
small businesses. Other commercial services include checking facilities, cash
management services, certificates of deposit, federal tax depository, VISA and
Master Card merchant accounts, night depository and letter of credit services.
The Bank also provides a full range of consumer banking services, including
savings, accounts, interest-bearing and non-interest-bearing checking accounts,
certificates of deposit, student loans and installment and other personal loans
for home improvements and for purchase of consumer goods, travelers checks and
notary services.
The Bank's current loan portfolio as of June 30, 1998 consists of 58.43%
single family residential mortgage loans. These loans include fixed rate 15 and
30-year loans along with one, three and five year adjustable rate mortgages,
five and seven year reset mortgages, and three-one, five-one, seven-one and
ten-one adjustable rate mortgages underwritten to secondary market standards.
Approximately 79.1% of the mortgage portfolio will reprice at least once by
December 2003. The remainder of the Bank's loan portfolio (excluding business
manager loans of $2.6 million) is split between fixed rate loans of $6.6 million
and variable rate loans of $10.1 million.
MARKET AREA
The Bank operates its business from two locations in the central business
district of the city of Dallas, Texas. Major employers include electronics
manufacturers (Texas Instruments, Fujitsu, and Tandy), defense contractors
(Lockheed, Vought Aircraft, Bell-Textron, and Raytheon E-Systems),
telecommunications companies (SBC Communications, GTE Telephone Operations, MCI,
and Northern Telecom), computer services companies (EDS and Perot systems),
energy companies (Exxon, Oryx, Fina), transportation companies (American
Airlines, Delta Airlines, Southwest Airlines, Union Pacific Railroad, and
Burlington Northern-Santa Fe Railroad), larger retailers (JC Penney, Southland
Corporation, Frito Lay, and CompUSA), and numerous hospitals and universities
(Baylor Medical School, University of Texas at Dallas, Southwestern Medical
School, TCU, and SMU).
77
<PAGE> 80
PROPERTIES
The Bank's main office is located at 1999 Bryan Street, Dallas, Texas with
the Bank leasing approximately 6,872 square feet. The Bank also leases
approximately 4,971 square feet for its branch at 717 North Harwood Street,
Dallas, Texas.
COMPETITION
The Bank's deposits represent approximately 0.25% of total deposits in
Dallas County. Total deposits held by financial institutions in Dallas County
total $35.7 billion based on market share summaries of all FDIC insured
institutions as of June 30, 1997.
In the city of Dallas, the Bank's deposits represent a market share of
.30%. Total deposits held by financial institutions in Dallas totaled $29.90
billion as of June 30, 1997.
The market share leaders in Dallas County include NationsBank with a 37.8%
market share, Banc One with a 15.0% market share, Chase Bank Texas with a 9.46%
market share, Comerica Bank with a 4.71% market share, and Bank of America with
a 3.43% market share.
Total population in Dallas County is estimated at 2,004,200 as of 1997.
Population projections for 2001 indicate 10% growth in Dallas County. The
county's total population is estimated at 2,206,149 individuals by 2001.
YEAR 2000 COMPLIANCE
Texas Bank has formulated and begun implementation of a plan to address
issues related to its mission critical computer hardware, software, and
applications impacted by anticipated problems of the date-field recognition in
and after the year 2000. The Bank's strategy is to comply with all requirements
mandated by the Federal Financial Institutions Examination Council and T B & T's
primary regulatory agency. The Bank's plan includes a testing schedule and
specific critical completion dates as provided under current guidelines.
The Bank's internal desktop PC's are year 2000 compliant and each has been
tested with a NSTL Y2K test program. The majority of the Bank's PC application
programs are standard off-the-shelf software. Vendors have been contacted to
verify year 2000 versions. The Bank has upgraded all critical and/or use
important software to year 2000 compliant versions. The Bank's local area
network uses the Windows NT operating system which also meets Year 2000
requirements.
Since the Bank's core processing system was determined to be noncompliant,
the Bank entered into an agreement with Hewlett Computer Services to outsource
core processing and adopted their testing schedule for the mission critical data
processing of the Bank. However, with the signing of the Agreement with
BancGroup, T B & T exercised a cancellation clause in the Hewlett contract, and
agreed to convert to FISERV which is used by numerous other BancGroup locations
and which has already been deemed Year 2000 compliant.
PRINCIPAL HOLDERS OF COMMON STOCK
T B & T's authorized capital stock consists of 10,000,000 shares of T B & T
Common Stock, of which 1,950,000 shares were issued and 1,949,050 were
outstanding as of the Record Date.
The following table sets forth information as of the Record Date regarding
the ownership of T B & T common stock by each person known to T B & T to be the
beneficial owner of more than 5% of the T B & T Common Stock, by each director
and executive officer and by all directors and executive officers as a group.
Unless otherwise indicated, all persons shown in the table have sole voting and
investment power with regard to the shares shown.
78
<PAGE> 81
PRINCIPAL STOCKHOLDERS
<TABLE>
<CAPTION>
SHARES BENEFICIALLY PERCENTAGE
NAME AND ADDRESS OWNED(1) OWNERSHIP
- ---------------- ------------------- ----------
<S> <C> <C>
Charles B. and Marcia Phillips.............................. 456,103 23.40%
c/o Texas Bank & Trust
1999 Bryan Street
Dallas, Texas 75201
John C. and Suzanne Sellers................................. 137,855(2) 7.07
18512 FM 1253
Lindale, Texas 75771
Jack D. and Margaret D. Sweet............................... 360,000 18.47
7820 Glenshannon Circle
Dallas, Texas 75225
Peter M. Tart............................................... 316,000 16.21
9423 Alva Court
Dallas, Texas 75220
</TABLE>
MANAGEMENT
<TABLE>
<CAPTION>
NAME AND POSITION SHARES BENEFICIALLY PERCENTAGE
OF BENEFICIAL OWNER OWNED(1) OWNERSHIP
- ------------------- ------------------- ----------
<S> <C> <C>
Linda M. Bridges............................................ 35,000(3)(4) 1.78%
Senior VP, Cashier & COO
Carter R. Montgomery........................................ 6,488 0.33
Director
Philip Montgomery........................................... 10,488 0.54
Vice Chairman and Director
Charles B. Phillips......................................... 456,103(3) 23.40
Director, President and CEO
Kevin F. Smith.............................................. 83,000(3) 4.21
Senior Vice President
Jack D. Sweet............................................... 360,000(3)(5) 18.47
Chairman and Director
Peter M. Tart............................................... 316,000 16.21
Director
All Directors and executive officers as a group
(7 persons, including those names above).................. 1,267,079 63.77
</TABLE>
- ---------------
(1) The stock ownership information shown has been furnished to T B & T, Inc. by
the named persons and group. Beneficial ownership as reported in the table
and elsewhere in the Proxy Statement has been determined in accordance with
Commission regulations and includes shares of T B & T Common Stock which may
be acquired upon the exercise of outstanding stock options.
(2) Includes 43,000 registered in the name of MLFP&S Custodian for Sellmark,
Inc. of which Mr. Sellers is the President and owner.
(3) Shares owned jointly with spouse.
(4) Includes 15,000 shares that may be purchased pursuant to the exercise of
options within 60 days of the Record Date.
(5) Includes 23,000 shares that may be purchased pursuant to the exercise of
options within 60 days of the Record Date.
79
<PAGE> 82
ADJOURNMENT OF SPECIAL MEETING
Approval of the Agreement by T B & T shareholders requires the affirmative
vote of at least two-thirds of the outstanding shares of T B & T Common Stock.
In the event there are an insufficient number of shares of T B & T Common Stock
present in person or by proxy at the Special Meeting to approve the Agreement, T
B & T's Board of Directors intends to adjourn the Special Meeting to a later
date provided a majority of the shares present and voting on the motion 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 Agreement 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 not more than 30 days
from the original date of this Special Meeting, no notice of the time and place
of the adjourned meeting need be given the shareholders, other than an
announcement made at the Special Meeting.
The affect of any such adjournment would be to permit T B & T to solicit
additional proxies for approval of the Agreement. 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 Agreement, an adjournment would afford T B & T the
opportunity to solicit additional proxies in favor of the Agreement.
OTHER MATTERS
The Board of Directors of T B & T 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 accompany proxy will
vote such proxy on such matters as determined by a majority of the Board of
Directors of T B & T.
DATE FOR SUBMISSION OF BANCGROUP SHAREHOLDER PROPOSALS
In order to be eligible for inclusion in BancGroup's proxy solicitation
materials for its 1999 annual meeting of stockholders, any stockholder proposal
to take action at such meeting must be received at BancGroup's main office at
One Commerce Street Post Office Box 1108, Montgomery, Alabama 36101, no later
than 120 calendar days in advance of the date of March 21, 1999.
LEGAL MATTERS
Certain legal matter regarding the shares of BancGroup Common Stock of
BancGroup 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, is a partner. Such firm received fees for legal
services performed in 1997 of $1,659,399. John C. H. Miller, Jr., as of June 30,
1998, beneficially owned 76,704 shares of Common Stock. Mr. Miller also received
employee-related compensation from BancGroup in 1997 of $43,485. Certain legal
matters relating to the Merger are being passed upon for T B & T by the law firm
of Housley Kantarian & Bronstein, P.C., Washington, D.C.
EXPERTS
PricewaterhouseCoopers LLP serves as the independent accountants for
BancGroup. The consolidated financial statements of BancGroup as of December 31,
1997 and 1996 and for each of the three years ended December 31, 1997 are
incorporated by reference in this Prospectus, from BancGroup's Form 8-K (dated
June 2, 1998) 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.
80
<PAGE> 83
Belew Averitt, LLP serves as the independent accountants for T B & T. T B &
T's consolidated financial statements as of December 31, 1997 and 1996 and for
each of the two years ended December 31, 1997 are included 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.
81
<PAGE> 84
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT AUDITOR'S REPORT................................ F-2
FINANCIAL STATEMENTS
Consolidated balance sheets at December 31, 1997 and
1996................................................... F-3
Consolidated statements of income for the years ended
December 31, 1997 and 1996............................. F-4
Consolidated statements of shareholders' equity for the
years ended December 31, 1997 and 1996................. F-5
Consolidated statements of cash flows for the years ended
December 31, 1997 and 1996............................. F-6
Notes to consolidated financial statements................ F-7
Consolidated balance sheets at June 30, 1998 and 1997..... F-17
Consolidated statements of income for the six months ended
June 30, 1998 and 1997................................. F-18
Consolidated statements of cash flows for the six months
ended June 30, 1998 and 1997........................... F-19
</TABLE>
F-1
<PAGE> 85
INDEPENDENT AUDITOR'S REPORT
To the Shareholders
T B & T, Inc.
Dallas, Texas
We have audited the consolidated balance sheets of T B & T, Inc. and
Subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of income, shareholders' equity and cash flows for the years then
ended. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above,
present fairly, in all material respects, the financial position of T B & T,
Inc. and Subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and cash flows for the years then ended in conformity with generally
accepted accounting principles.
BELEW AVERITT LLP
January 22, 1998
F-2
<PAGE> 86
T B & T, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
CASH AND DUE FROM BANKS..................................... $ 15,187,337 $ 9,857,727
FEDERAL FUNDS SOLD.......................................... 38,700,000 --
------------ ------------
53,887,337 9,857,727
SECURITIES
Available for sale (Note 2)............................... 16,387,977 16,304,527
LOANS
Commercial and consumer................................... 11,280,468 10,362,823
Real estate............................................... 35,430,170 39,703,294
Loans held for resale..................................... -- 38,308,529
------------ ------------
46,710,638 88,374,646
Allowance for loan losses (Note 3)........................ (320,770) (320,770)
------------ ------------
Net loans......................................... 46,389,868 88,053,876
BANK PREMISES AND EQUIPMENT, net (Note 4)................... 560,704 673,458
ACCRUED INTEREST RECEIVABLE................................. 508,121 578,537
OTHER REAL ESTATE OWNED (Note 5)............................ 3 3
DEFERRED TAX ASSET (Note 8)................................. -- 296,591
OTHER ASSETS................................................ 87,700 95,479
------------ ------------
$117,821,710 $115,860,198
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
DEMAND DEPOSITS............................................. $ 44,411,552 $ 27,565,425
INTEREST-BEARING DEMAND DEPOSITS............................ 22,916,065 21,947,461
SAVINGS DEPOSITS............................................ 18,733,947 18,009,679
TIME DEPOSITS, $100,000 and over (Note 6)................... 6,226,918 5,253,863
TIME DEPOSITS, other (Note 6)............................... 15,880,592 15,668,329
------------ ------------
108,169,074 88,444,757
SHORT-TERM BORROWINGS (Note 7).............................. -- 18,700,000
ACCRUED INTEREST PAYABLE.................................... 191,278 176,999
DEFERRED TAX LIABILITY, net (Note 8)........................ 198,866 --
OTHER LIABILITIES........................................... 802,648 624,914
------------ ------------
Total liabilities................................. 109,361,866 107,946,670
COMMITMENTS AND CONTINGENCIES (Note 13)..................... -- --
SHAREHOLDERS' EQUITY
Common stock; $1 par value, 10,000,000 shares authorized,
1,850,000 shares issued and outstanding................ 1,850,000 1,850,000
Paid-in capital........................................... 5,237,597 5,237,597
Retained earnings (since June 30, 1995) (Note 9).......... 1,334,518 817,556
Unrealized gain on securities available for sale, net of
tax.................................................... 41,229 8,375
------------ ------------
8,463,344 7,913,528
Less Treasury stock (Note 10)............................. (3,500) --
------------ ------------
Total shareholders' equity........................ 8,459,844 7,913,528
------------ ------------
$117,821,710 $115,860,198
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 87
T B & T, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
INTEREST INCOME
Loans..................................................... $4,237,173 $5,112,544
Securities................................................ 1,049,514 1,149,340
Federal funds sold........................................ 916,226 86,104
---------- ----------
6,202,913 6,347,988
INTEREST EXPENSE
Deposits.................................................. 2,789,704 2,725,308
Short-term borrowings..................................... 148,950 361,088
---------- ----------
2,938,654 3,086,396
---------- ----------
Net interest income.................................. 3,264,259 3,261,592
NON-INTEREST INCOME
Service charges........................................... 116,477 111,192
Other income.............................................. 117,508 121,328
---------- ----------
233,985 232,520
NON-INTEREST EXPENSE
Salaries and employee benefits............................ 951,776 958,664
Occupancy and equipment expense........................... 468,013 471,564
Other operating expense................................... 603,845 548,358
---------- ----------
2,023,634 1,978,586
---------- ----------
INCOME BEFORE INCOME TAX.................................... 1,474,610 1,515,526
INCOME TAX EXPENSE (Note 8)................................. 495,253 501,000
---------- ----------
NET INCOME.................................................. $ 979,357 $1,014,526
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 88
T B & T, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
CHANGE IN NET
UNREALIZED GAIN
COMMON STOCK ON SECURITIES
---------------------- PAID-IN RETAINED AVAILABLE TREASURY
SHARES AMOUNT CAPITAL EARNINGS FOR SALE STOCK TOTAL
--------- ---------- ---------- ---------- --------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995.......... 1,850,000 $1,850,000 $5,237,597 $ 192,030 $ 125,896 $ -- $7,405,523
Net income........................ -- -- -- 1,014,526 -- -- 1,014,526
Cash dividends.................... -- -- -- (389,000) -- -- (389,000)
Change in unrealized gain on
securities available for sale,
net of tax...................... -- -- -- -- (117,521) -- (117,521)
--------- ---------- ---------- ---------- --------- ------- ----------
BALANCE, DECEMBER 31, 1996.......... 1,850,000 1,850,000 5,237,597 817,556 8,375 -- 7,913,528
Net income........................ -- -- -- 979,357 -- -- 979,357
Cash dividends.................... -- -- -- (462,395) -- -- (462,395)
Purchase of treasury stock........ -- -- -- -- -- (3,500) (3,500)
Change in unrealized gain on
securities available for sale,
net of tax...................... -- -- -- -- 32,854 -- 32,854
--------- ---------- ---------- ---------- --------- ------- ----------
BALANCE, DECEMBER 31, 1997.......... 1,850,000 $1,850,000 $5,237,597 $1,334,518 $ 41,229 $(3,500) $8,459,844
========= ========== ========== ========== ========= ======= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 89
T B & T, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................ $ 979,357 $ 1,014,526
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Gain on sale of equipment.............................. (3,000) (10,927)
Net realized gain on sale of securities................ -- (41,513)
Loss (gain) on sale of other real estate owned......... (21,503) 6,896
Amortization of premiums and accretion of discounts on
securities, net...................................... 121,677 149,541
Depreciation and amortization.......................... 147,736 147,100
FHLB stock dividends................................... (115,700) (108,100)
Proceeds from sales of loans held for resale........... 113,266,420 389,884,985
Purchases of loans held for resale..................... (74,957,891) (398,372,641)
Deferred income taxes.................................. 478,471 508,389
Changes in assets and liabilities:
Decrease (increase) in accrued interest receivable... 70,416 (32,669)
Decrease (increase) in other assets.................. 7,779 (7,848)
Increase (decrease) in accrued interest payable...... 14,279 (36,547)
Increase in other liabilities........................ 177,734 276,223
------------ -------------
Net cash provided by (used in) operating
activities...................................... 40,165,775 (6,622,585)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of securities available for sale................. (3,539,587) (6,113,359)
Proceeds from the sale of securities available for sale... -- 4,166,483
Proceeds from the maturity of securities available for
sale................................................... 3,500,000 3,500,000
Net decrease (increase) in loans.......................... 3,355,479 (11,594,645)
Purchase of bank premises and equipment................... (34,982) (94,424)
Proceeds from the sale of equipment....................... 3,000 17,200
Proceeds from the sale of other real estate owned......... 21,503 7,104
------------ -------------
Net cash provided by (used in) investing
activities...................................... 3,305,413 (10,111,641)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand and savings deposit
accounts............................................... 18,538,999 (547,537)
Net increase (decrease) in time deposits.................. 1,185,318 (4,228,847)
Dividends paid............................................ (462,395) (389,000)
Purchase of treasury stock................................ (3,500) --
Net increase (decrease) in short-term borrowings.......... (18,700,000) 18,700,000
------------ -------------
Net cash provided by financing activities......... 558,422 13,534,616
------------ -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ $ 44,029,610 $ (3,199,610)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.............. 9,857,727 13,057,337
------------ -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................... $ 53,887,337 $ 9,857,727
============ =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest............................................... $ 2,924,376 $ 3,122,943
============ =============
Federal income taxes................................... $ 25,000 $ 10,000
============ =============
Noncash investing activities --
Loans originated for the sale of other real estate
owned................................................ $ -- $ 85,000
============ =============
Noncash financing activities --
Dividends declared but not paid........................ $ 184,930 $ 185,000
============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 90
T B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business and basis of presentation
T B & T, Inc. (the Company) is a bank holding company established in April
1986, under the laws of the State of Texas. The Company's wholly-owned
subsidiary, T B & T Holdings, Inc. (Holdings), was incorporated in 1995 in the
State of Delaware, and owns 100% of the outstanding shares of Texas Bank &
Trust, N.A. (the Bank). Prior to the formation of Holdings, the Bank was a
direct wholly-owned subsidiary of the Company.
The Bank operates in downtown Dallas. Revenues are derived primarily from
commercial, consumer and residential real estate loans and interest on
investments.
The consolidated financial statements include the accounts of the Company,
Holdings and the Bank. All significant intercompany accounts have been
eliminated.
Quasi-reorganization
The Company, with the approval of its Board of Directors, revalued its
assets and liabilities to estimated fair values and implemented a
quasi-reorganization effective July 1, 1995. As a result, the Company eliminated
its retained deficit at June 30, 1996 by reducing paid-in capital, and its
amortization of premiums and accretion of discounts for debt securities and
depreciation expense for fixed assets is based on new carrying amounts. Use of
the new carrying amounts did not have a material effect on income for the years
ended December 31, 1997 and 1996.
Management estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues and expenses
during the reporting period. Actual results may differ from management's
estimates.
Cash and cash equivalents
The Company has defined cash and cash equivalents as those amounts included
in the balance sheet captions "Cash and due from banks" and "Federal funds
sold." Generally, Federal funds are purchased and sold for one-day periods.
Securities
The Company classifies and accounts for debt and equity securities as
follows:
Held to Maturity: Debt securities that management has the positive
intent and ability to hold until maturity are classified as held to
maturity and are carried at their remaining unpaid principal balance, net
of unamortized premiums or unaccreted discounts. Premiums are amortized and
discounts are accreted using a method that approximates a level yield over
the estimated remaining term of the underlying security. At December 31,
1997 and 1996, the Company had no securities classified as held to
maturity.
Available for Sale: Debt and equity securities that will be held for
indefinite periods of time, including securities that may be sold in
response to changes in market interest or prepayment rates, needs for
liquidity and changes in the availability or yield of alternative
investments are classified as available for sale. These securities are
carried at market value. Market value is determined using published quotes
as of year-end. Unrealized gains and losses net of tax are reported as a
separate component of shareholders' equity until realized.
F-7
<PAGE> 91
T B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company classifies its Federal Reserve Bank (FRB) and Federal Home Loan
Bank (FHLB) stock as available for sale. The stock may be sold only to the
issuer (FRB or FHLB), or to another member institution, and is carried at cost,
which approximates market value.
Gains and losses on the sale of securities are recognized in the year of
sale based on the specific identification method.
Loans
Commercial and real estate loans are carried at their unpaid principal
balance. Loans held for resale are carried at the lower of cost or estimated
market value in the aggregate. All sales are made without recourse.
During 1997, management chose to liquidate the Bank's portfolio of loans
held for resale to increase liquidity for other types of loans.
The allowance for loan losses is based on management's estimate of the
amount required to adequately reflect the risks in the loan portfolio, giving
consideration to existing economic conditions, the Bank's loss experience in
relation to outstanding loans, changes in the loan portfolio, borrowers'
performance in reducing loan principal, adequacy of loan collateral, recoveries
from previously charged-off loans and other relevant factors. The Company
considers the allowance for loan losses adequate to cover losses inherent in the
loan portfolio, commercial and real estate loan commitments and standby
letters-of-credit outstanding.
Interest on loans is credited to income in the period in which it is earned
based upon the principal amount outstanding. Generally, the accrual of interest
is discontinued and any accrued and unpaid interest is reversed when the loan
becomes delinquent greater than 90-days (nonaccrual). Payments ultimately
collected on nonaccrual loans are applied to principal until the outstanding
balance is fully recovered. Any subsequent payments collected are credited to
income in the period received.
Demand deposits which are overdrawn at year-end are reclassified as loans.
For the years ended December 31, 1997 and 1996 approximately $8,500 and $4,000,
respectively, in overdrafts were reclassified as loans.
Bank premises and equipment
Bank premises, including leasehold improvements and equipment, are stated
at cost less accumulated depreciation and amortization. Gains and losses on
sales and retirements of premises and equipment are reflected in current
operations.
Depreciation is provided on the straight-line basis over the estimated
useful lives of the related assets. Amortization of leasehold improvements is
provided on the straight-line basis over the estimated useful lives or lease
terms, whichever is shorter.
Other real estate owned
Real estate acquired in the settlement of loans is recorded at the lower of
the related principal balance upon foreclosure or its fair value less estimated
selling costs. When the property is acquired, any excess of the loan balance
over fair value of the property less estimated selling costs is charged to an
allowance for losses. Any subsequent write-downs and gains and losses from
dispositions of properties are included in noninterest expense.
F-8
<PAGE> 92
T B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Federal income taxes
The Company recognizes deferred tax liabilities and assets for the expected
future tax consequences of temporary differences between the tax and financial
reporting bases of assets, liabilities and net operating loss carryforwards by
applying enacted statutory tax rates.
Reserve balances
Under regulations of the Federal Reserve Board, the Bank is required to
maintain average reserve balances with the FRB based on a percentage of
deposits. The required reserve balances as of December 31, 1997 and 1996 were
$2,058,000 and $1,990,000, respectively.
Stock-based compensation plans
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). SFAS
123 establishes financial accounting and reporting standards for stock-based
employee compensation plans. The Company adopted the disclosure method of
presentation effective January 1, 1996, as allowed under SFAS 123. Such adoption
did not have a material effect on the 1996 financial statements.
Reclassification
Certain 1996 balances have been reclassified to conform to the 1997
presentation.
2. SECURITIES
The amortized cost and aggregate market value of securities as of December
31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED AGGREGATE
1997 COST GAINS LOSSES FAIR VALUE
- ---- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Securities available for sale:
U.S. Treasury Notes............... $14,100,749 $ 62,839 $ 311 $14,163,277
FHLB stock........................ 2,017,700 -- -- 2,017,700
FRB stock......................... 207,000 -- -- 207,000
----------- ---------- ---------- -----------
$16,325,449 $ 62,839 $ 311 $16,387,977
=========== ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED AGGREGATE
1996 COST GAINS LOSSES FAIR VALUE
- ---- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Securities available for sale:
U.S. Treasury Notes..................... $14,188,089 $12,688 $ -- $14,200,777
FHLB stock.............................. 1,902,000 -- -- 1,902,000
FRB stock............................... 201,750 -- -- 201,750
----------- ------- -- -----------
$16,291,839 $12,688 $ -- $16,304,527
=========== ======= ====== ===========
</TABLE>
F-9
<PAGE> 93
T B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The amortized cost and estimated market value of securities available for
sale at December 31, 1997, by contractual maturity, are shown below:
<TABLE>
<CAPTION>
AMORTIZED AGGREGATE
COST FAIR VALUE
----------- -----------
<S> <C> <C>
1998........................................................ $ 7,545,000 $ 7,558,904
1999........................................................ 6,555,749 6,604,373
----------- -----------
$14,100,749 $14,163,277
=========== ===========
</TABLE>
A treasury note with a market value of $513,281 and $525,625 as of December
31, 1997 and 1996, respectively, was pledged to collateralize public deposits as
required by law. Treasury notes with an aggregate market value of $13,649,996
and $13,675,152 were pledged to secure short-term borrowings at December 31,
1997 and 1996, respectively. There were no short-term borrowings outstanding at
December 31, 1997.
3. ALLOWANCE FOR LOAN LOSSES
An analysis of the allowance for loan losses for the years ended December
31, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Balance, beginning of year.................................. $320,770 $320,770
Provision for losses...................................... -- --
Recoveries on loans previously charged-off................ -- --
-------- --------
Balance, end of year........................................ $320,770 $320,770
======== ========
</TABLE>
Nonaccrual loans totaled approximately $86,000 and $124,000 at December 31,
1997 and 1996, respectively. At December 31, 1997, the Bank had no loan
commitments outstanding to borrowers with reduced rate or nonaccrual loans.
4. BANK PREMISES AND EQUIPMENT
Bank premises and equipment as of December 31, 1997 and 1996 consisted of:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Leasehold improvements...................................... $ 414,386 $ 414,386
Furniture and equipment..................................... 334,361 317,459
Automobiles................................................. 97,031 78,951
Software.................................................... 65,714 65,714
--------- ---------
911,492 876,510
Less accumulated depreciation and amortization.............. (350,788) (203,052)
--------- ---------
$ 560,704 $ 673,458
========= =========
</TABLE>
5. OTHER REAL ESTATE OWNED
Other real estate owned (OREO) as of December 31, 1997 and 1996 consisted
of:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Undeveloped commercial property............................. $ 3 $ 3
Less valuation allowance for losses and anticipated selling
costs..................................................... -- --
--- ---
$ 3 $ 3
=== ===
</TABLE>
F-10
<PAGE> 94
T B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
An analysis of the valuation allowance for losses on OREO for the years
ended December 31, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Balance, beginning of year:................................. $ -- $ 390,899
Provision for losses...................................... -- --
Charge-offs, net of recoveries............................ -- (390,899)
--------- ---------
Balance, end of year........................................ $ -- $ --
========= =========
</TABLE>
There was no operating activity from OREO during the year ended December
31, 1997. Net income from OREO was approximately $17,000 for the year ended
December 31, 1996.
6. DEPOSITS
At December 31, 1997, the scheduled maturities of time deposits were
as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C>
1998..................................................... $17,791,643
1999..................................................... 1,853,219
2000..................................................... 760,755
2001..................................................... 351,892
2002 and thereafter...................................... 1,350,001
-----------
$22,107,510
===========
</TABLE>
7. SHORT-TERM BORROWINGS
At December 31, 1997, the Company had no short-term borrowings outstanding.
Short-term borrowings and related interest rates at December 31, 1996
consisted of the following:
<TABLE>
<CAPTION>
INTEREST RATES AMOUNT
-------------- -----------
<S> <C> <C>
FHLB short-term funding advance............................. 5.80% $13,600,000
FHLB overnight liquidity advance............................ 5.82% 5,100,000
---- -----------
Total short-term borrowings....................... $18,700,000
==== ===========
</TABLE>
The FHLB overnight liquidity advance was collateralized by qualifying first
mortgage loans under a blanket floating lien arrangement with the Federal Home
Loan Bank of Dallas. Under the blanket floating lien, the Bank may use or
dispose of its mortgage loan portfolio as long as the lesser of 65% of its
mortgage loan portfolio, or 35% of its total assets exceeds the related balance
outstanding. Additionally, the Bank pledged U.S. Treasury notes with a carrying
value of $13,675,152 to collateralize the FHLB short-term funding advance.
8. FEDERAL INCOME TAXES
The provision (benefit) for income taxes at December 31, 1997 and 1996
consisted of the following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Current..................................................... $ 16,782 $ (7,389)
Deferred.................................................... 478,471 508,389
-------- --------
$495,253 $501,000
======== ========
</TABLE>
F-11
<PAGE> 95
T B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provision for deferred income tax results from changes in the amounts
of deferred tax liabilities and assets arising from the expected future tax
consequences of temporary differences between the tax basis and financial
reporting basis of assets and liabilities.
The components of the net deferred tax assets and liabilities are
summarized below:
<TABLE>
<CAPTION>
1997 1996
----------------------- ----------------------
ASSETS LIABILITIES ASSETS LIABILITIES
--------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Net operating loss carryforward.............. $ 115,229 $ -- $583,403 $ --
Allowance for loan losses.................... -- 226,707 -- 226,707
FHLB stock dividends......................... -- 113,696 -- 74,358
Premises and equipment....................... -- 84,310 -- 103,645
Net unrealized gain on securities available
for sale................................... -- 21,260 -- 4,314
Other........................................ 131,878 -- 122,212 --
--------- -------- -------- --------
Gross deferred tax asset and liability....... 247,107 $445,973 705,615 $409,024
--------- -------- -------- --------
Net deferred tax asset (liability)........... $(198,866) $296,591
========= ========
</TABLE>
At December 31, 1997, the Company had tax operating loss carryforwards of
approximately $340,000. The tax loss carryforwards, if unused, expire in 2006.
The Company also has investment tax credit carryforwards of approximately
$48,000 expiring during the years 1998 through 2000.
9. 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, 1997,
approximately $1,284,000 of retained earnings were available for dividend
declaration without prior regulatory approval.
10. TREASURY STOCK
Treasury stock is shown at cost and consisted of 700 shares of common stock
in 1997. There was no treasury stock in 1996.
11. INCENTIVE STOCK OPTION PLAN
The Company has a fixed employee stock-based compensation plan. Under the
plan, the Company may grant options for up to 500,000 shares of common stock.
The exercise price must be at least equal to the fair market value of the shares
at the date of grant. The maximum term of the options is 10 years, and they vest
at a rate of 20% per year.
As of December 31, 1997, 138,000 options were outstanding, all of which are
exercisable at an exercise price of $3.00 per share. In 1997 and 1996, no
options were granted or exercised. During the year ended December 31, 1996,
2,000 options were canceled.
12. RELATED PARTY TRANSACTIONS
Total loans to officers, directors and entities in which officers and
directors are affiliated, amounted to approximately $1,600,000 and $1,620,000 at
December 31, 1997 and 1996, respectively. During 1997, new loans to such related
parties amounted to approximately $1,550,000 and repayments amounted to
approximately $1,570,000.
F-12
<PAGE> 96
T B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During 1997 and 1996, the Bank purchased first lien single family
residential mortgage loans from Guardian Mortgage Company (Guardian) which is
owned jointly by a director of the Company and his spouse. Guardian services
these loans under a sales and servicing agreement. At December 31, 1997 and
1996, the Bank owned mortgage loans serviced by Guardian of approximately
$30,700,000 and $74,200,000, respectively. At December 31, 1997 these mortgage
loans were included in real estate loans. At December 31, 1996, a portion of
these mortgage loans was reflected as loans held for resale with the remaining
balance included in real estate loans. Interest income on purchased mortgage
loans approximated $2,800,000 and $4,000,000 for the years ended December 31,
1997 and 1996, respectively. Service costs related to these loans were
approximately $103,000 and $123,000 during 1997 and 1996, respectively.
At December 31, 1997 and 1996, the Bank had extended Guardian a
line-of-credit of up to $1,150,000 and $1,600,000, respectively, collateralized
by first lien residential mortgage notes and marketable securities,
respectively. This credit facility had $1,097,850 and $1,140,000 outstanding as
of December 31, 1997 and 1996, respectively. At December 31, 1997 and 1996,
Guardian had approximately $34,800,000 and $21,400,000, respectively, in demand
deposits at the Bank, and approximately $11,550,000 and $8,400,000,
respectively, in savings deposits at the Bank.
13. COMMITMENTS AND CONTINGENCIES
The Bank leases facilities under two separate long-term lease agreements.
One lease expires on December 31, 2002 and has a 5-year renewal option. The
other lease will expire on August 31, 2005. Total rental expense for Bank
facilities was approximately $235,000 and $219,000 during 1997 and 1996,
respectively.
Future minimum lease payments for the above leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C>
1998...................................................... $ 214,257
1999...................................................... 214,257
2000...................................................... 214,257
2001...................................................... 214,257
2002...................................................... 219,228
Thereafter.................................................. 172,334
----------
$1,248,590
==========
</TABLE>
14. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISKS
The Bank is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters-of-credit, which are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third-party. The instruments
involve, to varying degrees, elements of credit risk in excess of the amount
recognized in the financial statements.
In the event of nonperformance by the other party to the financial
instrument for loan commitments and standby letters-of-credit, the Bank's
exposure to credit loss is represented by the contractual amount of those
instruments. The Bank uses the same credit policies in making commitments and
conditional obligations as its does for on-balance-sheet instruments. The Bank
has no significant concentrations of credit risk with any individual
counterparty to originate loans.
F-13
<PAGE> 97
T B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Bank had outstanding unused commitments to extend credit of
approximately $3,429,000 and $3,836,000 at December 31, 1997 and 1996,
respectively. Standby letters-of-credit as of December 31, 1997 and 1996,
totaled $96,500 and $16,500, respectively.
Since many of the loan commitments may expire without being drawn upon, the
total contract amount does not necessarily represent future cash requirements.
Rates on loan commitments range from 7% to 15% and expire on various dates. The
Bank evaluates each customer's credit worthiness on a case-by-case basis. The
amount of collateral obtained, if deemed necessary by the Bank, is based on
management's credit evaluation of the counterparty. Collateral held varies but
may include marketable securities, real estate, equipment, accounts receivable
and certificates of deposit.
15. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Bank estimates the fair value of financial instruments, whether or not
recognized in the balance sheet, for which it is practicable to estimate that
value. In cases where quoted market prices are not available, fair values are
based on estimates using present value or other estimation techniques. Those
techniques are significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. Such techniques and
assumptions, as they apply to individual categories of the Bank's financial
instruments, are as follows:
Cash and Federal funds sold: The carrying amounts for cash, due from
banks, and Federal funds sold are reasonable estimates of those assets'
fair value.
Securities: Fair values for these securities are based on quoted
market prices, where available. If quoted market prices are not available,
fair values are based on quoted market prices for similar securities.
Loans: For adjustable rate loans that reprice frequently and with no
significant change in credit risk, the carrying amounts are a reasonable
estimate of fair value. The fair value of other types of loans is estimated
by discounting the future cash flows using the current rates at which
similar loans would be made to borrowers with similar credit ratings and
for the same remaining maturities.
Deposit liabilities: The fair value of demand deposits, savings
accounts and money market deposits are the amounts on demand at the
reporting date, that is, the carrying value. Fair values for certificates
of deposits are estimated using a discounted cash flow calculation that
applies interest rates currently being offered for deposits of similar
remaining maturities.
Letters-of-credit: The fair values of letters-of-credit are estimated
using the fees currently charged to enter into similar agreements, taking
into account the remaining terms of the agreements and the present
creditworthiness of the counterparties.
F-14
<PAGE> 98
T B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table presents the Bank's financial assets, liabilities and
unrecognized financial instruments at both their respective carrying amounts and
fair values as of December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 IN (000'S) 1996 IN (000'S)
--------------------- ---------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks.......................... $15,187 $15,187 $ 9,858 $ 9,858
Federal funds sold............................... 38,700 38,700 -- --
Available for sale securities.................... 16,388 16,388 16,305 16,305
Loans, net....................................... 46,390 48,259 $88,054 88,534
Accrued interest receivable...................... 508 508 579 579
LIABILITIES
Demand deposits.................................. $44,412 $44,412 $27,565 $27,565
Interest-bearing demand deposits................. 41,650 41,650 39,957 39,957
Other time deposits.............................. 22,108 22,493 20,922 20,253
Short-term borrowings............................ -- -- 18,700 18,700
Accrued interest payable......................... 191 191 177 177
UNRECOGNIZED FINANCIAL INSTRUMENTS
Letters-of-credit................................ $ -- $ -- $ -- $ --
</TABLE>
The fair value estimate of financial instruments, for which quoted market
prices are unavailable, is dependent upon the assumptions used. Consequently,
those estimates cannot be substantiated by comparison to independent markets
and, in many cases, could not be realized in immediate settlement of the
instruments. Accordingly, the aggregate fair value amounts presented in the
above fair value table do not necessarily represent the underlying value of the
Bank.
16. CONCENTRATION OF CREDIT RISK
The Bank's loan portfolio consists of commercial and residential loans to
customers primarily located in Dallas, Collin, Tarrant and Denton Counties. The
majority of these loans are business, consumer or purchased residential mortgage
loans, issued under government agency guidelines.
17. REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements administered
by various Federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional
discretionary-actions by regulators that, if undertaken, could have a direct
material effect on the Bank's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines that involve quantitative measures of the
Bank's assets, liabilities and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Bank's capital amounts and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital to average assets (as
defined). Management believes, as of December 31, 1997, that the Bank met all
capital adequacy requirements to which it was subject.
As of December 31, 1997, the most recent notification from the Office of
the Comptroller of the Currency categorized the Bank as well capitalized under
the regulatory framework for prompt corrective
F-15
<PAGE> 99
T B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
action. To be categorized as well capitalized, the Bank must maintain minimum
total risk-based, Tier I risk-based and Tier I leverage ratios, as set forth in
the table. There are no conditions or events since that notification that
management believes have changed the institution's category.
The Bank's actual capital amounts and ratios as of December 31 are
presented in the following table:
<TABLE>
<CAPTION>
TO BE WELL CAPITALIZED
FOR CAPITAL UNDER PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
------------------ ------------------- -----------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
---------- ----- ----------- ----- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1997:
Total capital (to Risk
Weighted Assets)......... $8,526,746 11.6% $5,879,392 8.0% $7,349,239 10.0%
Tier I Capital (to Risk
Weighted Assets)......... 8,205,976 11.2 2,939,696 4.0 4,409,544 6.0
Tier I Capital (to
Average Assets).......... 8,205,976 7.0 4,712,540 4.0 5,890,675 5.0
As of December 31, 1996:
Total capital (to Risk
Weighted Assets)......... $7,853,009 14.6% $4,294,931 8.0% $5,368,664 10.0%
Tier I Capital (to Risk
Weighted Assets)......... 7,532,239 14.0 2,147,466 4.0 3,221,198 6.0
Tier I Capital (to
Average Assets).......... 7,532,239 6.5 4,622,544 4.0 5,778,180 5.0
</TABLE>
18. SUBSEQUENT EVENT
Effective January 30, 1998, the Bank obtained approval from the State of
Texas to convert its charter to that of a state chartered banking association.
Management believes this will not have a significant impact on the Bank's future
operations.
F-16
<PAGE> 100
T B & T, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
ASSETS
CASH AND DUE FROM BANKS..................................... $ 12,910,140 $ 8,961,968
FEDERAL FUNDS SOLD.......................................... 32,700,000 22,500,000
------------ -----------
45,610,140 31,461,968
SECURITIES
Available for sale........................................ 11,219,443 19,846,483
LOANS
Commercial and consumer................................... 20,892,315 8,648,390
Real estate............................................... 25,549,920 37,157,645
------------ -----------
46,442,235 45,086,035
Allowance for loan losses................................. (321,086) (320,770)
------------ -----------
Net loans......................................... 46,121,149 45,485,265
BANK PREMISES AND EQUIPMENT, net............................ 496,980 608,611
ACCRUED INTEREST RECEIVABLE................................. 457,619 551,761
OTHER REAL ESTATE OWNED..................................... 3 3
DEFERRED TAX ASSET.......................................... -- 60,251
OTHER ASSETS................................................ 82,815 119,761
------------ -----------
$103,988,149 $98,134,103
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
DEMAND DEPOSITS............................................. $ 34,789,109 $26,233,882
INTEREST-BEARING DEMAND DEPOSITS............................ 22,175,781 24,238,236
SAVINGS DEPOSITS............................................ 14,405,771 17,633,261
TIME DEPOSITS, $100,000 and over............................ 7,438,710 5,275,022
TIME DEPOSITS, other........................................ 15,256,135 15,858,309
------------ -----------
94,065,506 89,238,710
ACCRUED INTEREST PAYABLE.................................... 193,120 177,804
DEFERRED TAX LIABILITY...................................... 199,394 --
OTHER LIABILITIES........................................... 856,648 529,199
------------ -----------
Total liabilities................................. 95,314,668 89,945,713
SHAREHOLDERS' EQUITY
Common stock; $1 par value, 10,000,000 shares authorized,
1,850,000 shares issued and outstanding................ 1,850,000 1,850,000
Paid-in capital........................................... 5,237,597 5,237,597
Retained earnings (since June 30, 1995)................... 1,575,794 1,099,708
Unrealized gain on securities available for sale, net of
tax.................................................... 14,840 1,085
------------ -----------
8,678,231 8,188,390
Less treasury stock....................................... (4,750) --
------------ -----------
Total shareholders' equity........................ 8,673,481 8,188,390
------------ -----------
$103,988,149 $98,134,103
============ ===========
</TABLE>
F-17
<PAGE> 101
T B & T, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
INTEREST INCOME
Loans..................................................... $1,910,541 $2,364,705
Securities................................................ 431,847 509,498
Federal funds sold........................................ 760,358 271,737
---------- ----------
3,102,746 3,145,940
INTEREST EXPENSE
Deposits.................................................. 1,461,534 1,411,322
Short-term borrowings..................................... -- 137,215
---------- ----------
1,461,534 1,548,537
---------- ----------
Net interest income............................... 1,641,212 1,597,403
NON-INTEREST INCOME
Service charges........................................... 62,639 54,191
Other income.............................................. 50,482 48,917
---------- ----------
113,121 103,108
NON-INTEREST EXPENSE
Salaries and employee benefits............................ 564,298 466,836
Occupancy and equipment expense........................... 227,300 230,950
Other operating expense................................... 317,547 294,919
---------- ----------
1,109,145 992,705
---------- ----------
INCOME BEFORE INCOME TAX.................................... 645,188 707,806
INCOME TAX EXPENSE.......................................... 219,007 240,654
---------- ----------
NET INCOME.................................................. $ 426,181 $ 467,152
========== ==========
</TABLE>
F-18
<PAGE> 102
T B & T, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................ $ 426,181 $ 467,152
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Amortization of premiums and accretion of discounts on
securities, net....................................... 56,639 59,337
Depreciation and amortization.......................... 71,035 73,198
Provision for possible loan losses..................... 316 --
FHLB stock dividends................................... (35,982) (56,013)
Proceeds from sales of loans held for resale........... -- 113,266,420
Purchases of loans held for resale..................... -- (74,957,891)
Deferred income taxes.................................. 528 236,340
Changes in assets and liabilities:
Decrease in accrued interest receivable.............. 50,502 26,776
Increase in other assets............................. (3,333) (24,282)
Increase in accrued interest payable................. 1,842 805
Increase in federal income tax payable............... 8,218 --
Increase in other liabilities........................ 54,000 (95,719)
------------ ------------
Net cash provided by operating activities......... 629,946 38,996,127
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of securities available for sale................. -- (3,552,570)
Proceeds from the maturity of securities available for
sale................................................... 5,121,488 --
Net decrease in loans..................................... 268,403 4,260,082
Purchase of bank premises and equipment................... (7,311) (8,351)
------------ ------------
Net cash provided by investing activities......... 5,382,580 699,161
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand and savings deposit
accounts............................................... (14,690,903) 582,814
Net increase in time deposits............................. 587,335 211,139
Dividends paid............................................ (184,905) (185,000)
Purchase of treasury stock................................ (1,250) --
Net decrease in short-term borrowings..................... -- (18,700,000)
------------ ------------
Net cash used in financing activities............. (14,289,723) (18,091,047)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.......................................... $ 8,277,197 $(21,604,241)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD................................................. 53,887,337 9,857,727
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 45,610,140 $ 31,461,968
============ ============
</TABLE>
F-19
<PAGE> 103
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
THE COLONIAL BANCGROUP, INC.,
AND
T B & T, INC.
DATED AS OF
AUGUST 6, 1998
<PAGE> 104
TABLE OF CONTENTS
<TABLE>
<CAPTION>
CAPTION PAGE
- ------- ----
<S> <C> <C> <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-2
2.4 Resulting Corporation's Officers and Board.................. A-2
2.5 Stockholder Approval........................................ A-2
2.6 Further Acts................................................ A-2
2.7 Effective Date and Closing.................................. A-2
2.8 Subsidiary Bank Merger...................................... A-2
ARTICLE 3 -- CONVERSION OF ACQUIRED CORPORATION STOCK
3.1 Conversion of Acquired Corporation Stock.................... A-3
3.2 Surrender of Acquired Corporation Stock..................... A-4
3.3 Fractional Shares........................................... A-4
3.4 Adjustments................................................. A-4
3.5 BancGroup Stock............................................. A-4
3.6 Dissenting Rights........................................... A-4
ARTICLE 4 -- REPRESENTATIONS, WARRANTIES AND
COVENANTS OF BANCGROUP
4.1 Organization................................................ A-5
4.2 Capital Stock............................................... A-5
4.3 Financial Statements; Taxes................................. A-5
4.4 No Conflict with Other Instrument........................... A-6
4.5 Absence of Material Adverse Change.......................... A-6
4.6 Approval of Agreement....................................... A-6
4.7 Tax Treatment............................................... A-6
4.8 Title and Related Matters................................... A-6
4.9 Subsidiaries................................................ A-6
4.10 Contracts................................................... A-7
4.11 Litigation.................................................. A-7
4.12 Compliance.................................................. A-7
4.13 Registration Statement...................................... A-7
4.14 SEC Filings................................................. A-7
4.15 Form S-4.................................................... A-8
4.16 Brokers..................................................... A-8
4.17 Government Authorization.................................... A-8
4.18 Absence of Regulatory Communications........................ A-8
4.19 Disclosure.................................................. A-8
4.20 Computer Hardware and Software.............................. A-8
ARTICLE 5 -- REPRESENTATIONS, WARRANTIES AND
COVENANTS OF ACQUIRED CORPORATION
5.1 Organization................................................ A-8
5.2 Capital Stock............................................... A-8
</TABLE>
i
<PAGE> 105
<TABLE>
<CAPTION>
CAPTION PAGE
- ------- ----
<S> <C> <C> <C>
5.3 Subsidiaries................................................ A-8
5.4 Financial Statements; Taxes................................. A-9
5.5 Absence of Certain Changes or Events........................ A-10
5.6 Title and Related Matters................................... A-11
5.7 Commitments................................................. A-11
5.8 Charter and Bylaws.......................................... A-12
5.9 Litigation.................................................. A-12
5.10 Material Contract Defaults.................................. A-12
5.11 No Conflict with Other Instrument........................... A-12
5.12 Governmental Authorization.................................. A-12
5.13 Absence of Regulatory Communications........................ A-12
5.14 Absence of Material Adverse Change.......................... A-12
5.15 Insurance................................................... A-12
5.16 Pension and Employee Benefit Plans.......................... A-13
5.17 Buy-Sell Agreements......................................... A-13
5.18 Brokers..................................................... A-13
5.19 Approval of Agreements...................................... A-13
5.20 Disclosure.................................................. A-13
5.21 Registration Statement...................................... A-14
5.22 Loans; Adequacy of Allowance for Loan Losses................ A-14
5.23 Environmental Matters....................................... A-14
5.24 Transfer of Shares.......................................... A-14
5.25 Collective Bargaining....................................... A-15
5.26 Labor Disputes.............................................. A-15
5.27 Derivative Contracts........................................ A-15
5.28 Non-Terminable Contracts and Severance Agreements........... A-15
ARTICLE 6 -- ADDITIONAL COVENANTS
6.1 Additional Covenants of BancGroup........................... A-15
6.2 Additional Covenants of Acquired Corporation................ A-18
ARTICLE 7 -- MUTUAL COVENANTS AND AGREEMENTS
7.1 Best Efforts; Cooperation................................... A-20
7.2 Press Release............................................... A-20
7.3 Mutual Disclosure........................................... A-20
7.4 Access to Properties and Records............................ A-20
7.5 Notice of Adverse Changes................................... A-21
ARTICLE 8 -- CONDITIONS TO OBLIGATIONS OF ALL PARTIES
8.1 Approval by Shareholders.................................... A-21
8.2 Regulatory Authority Approval............................... A-21
8.3 Litigation.................................................. A-21
8.4 Registration Statement...................................... A-21
8.5 Tax Opinion................................................. A-22
ARTICLE 9 -- CONDITIONS TO OBLIGATIONS OF ACQUIRED CORPORATION
9.1 Representations, Warranties and Covenants................... A-22
9.2 Adverse Changes............................................. A-22
9.3 Closing Certificate......................................... A-23
9.4 Opinion of Counsel.......................................... A-23
</TABLE>
ii
<PAGE> 106
<TABLE>
<CAPTION>
CAPTION PAGE
- ------- ----
<S> <C> <C> <C>
9.5 NYSE Listing................................................ A-23
9.6 Other Matters............................................... A-23
9.7 Material Events............................................. A-23
ARTICLE 10 -- CONDITIONS TO OBLIGATIONS OF BANCGROUP
10.1 Representations, Warranties and Covenants................... A-24
10.2 Adverse Changes............................................. A-24
10.3 Closing Certificate......................................... A-24
10.4 Opinion of Counsel.......................................... A-25
10.5 Controlling Shareholders.................................... A-25
10.6 Other Matters............................................... A-25
10.7 Dissenters.................................................. A-25
10.8 Material Events............................................. A-25
10.9 Pooling of Interest......................................... A-25
ARTICLE 11 -- TERMINATION OF REPRESENTATIONS
AND WARRANTIES.............................................. A-25
ARTICLE 12 -- NOTICES......................................................... A-26
ARTICLE 13 -- AMENDMENT OR TERMINATION
13.1 Amendment................................................... A-26
13.2 Termination................................................. A-26
13.3 Damages..................................................... A-27
ARTICLE 14 -- DEFINITIONS..................................................... A-27
ARTICLE 15 -- MISCELLANEOUS
15.1 Expenses.................................................... A-31
15.2 Benefit and Assignment...................................... A-32
15.3 Governing Law............................................... A-32
15.4 Counterparts................................................ A-32
15.5 Headings.................................................... A-32
15.6 Severability................................................ A-32
15.7 Construction................................................ A-32
15.8 Return of Information....................................... A-32
15.9 Equitable Remedies.......................................... A-32
15.10 Attorneys' Fees............................................. A-32
15.11 No Waiver................................................... A-33
15.12 Remedies Cumulative......................................... A-33
15.13 Entire Contract............................................. A-33
</TABLE>
iii
<PAGE> 107
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of this the
6th day of August, 1998, by and between T B & T, INC. ("Acquired Corporation"),
a Texas corporation, and THE COLONIAL BANCGROUP, INC. ("BancGroup"), a Delaware
corporation.
WITNESSETH
WHEREAS, Acquired Corporation operates as a bank holding company for its
indirect 100% owned subsidiary, Texas Bank & Trust (the "Bank"), with its
principal office in Dallas, Texas; and
WHEREAS, BancGroup is a bank holding company with a Subsidiary bank,
Colonial Bank, operating in Alabama, Florida, Georgia, Tennessee, and Nevada;
and
WHEREAS, both BancGroup and Acquired Corporation wish to merge (the
"Merger") with each other; and
WHEREAS, BancGroup and its wholly owned subsidiary, CBG Acquisition Corp.
have entered into an Agreement and Plan of Merger with FirstBank, a Texas State
Bank, whereby it is anticipated that FirstBank will become a wholly owned
subsidiary by September 30, 1998; 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 Delaware General Corporation Law (the "DGCL")
and, to the extent applicable, the Texas Business Corporation Act (the "TBCA").
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
TBCA, 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 chooses 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
A-1
<PAGE> 108
rights, franchises and interests were held or enjoyed by Acquired Corporation
and BancGroup, respectively, on the Effective Date. At and after the Effective
Date, the Merger shall also have the effects set forth in Section 5.06 of the
TBCA.
2.3 Certificate of Incorporation and Bylaws. On the Effective Date, the
certificate of incorporation and bylaws of the Resulting Corporation shall be
the restated certificate of incorporation and bylaws of BancGroup as they exist
immediately before the Effective Date.
2.4 Resulting Corporation's Officers and Board. The board of directors and
the officers of the Resulting Corporation on the Effective Date shall consist of
those persons serving in such capacities of BancGroup as of the Effective Date.
2.5 Stockholder 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, the Merger 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, 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 filed with
the Secretary of State of the State of Delaware (such time being herein called
the "Effective Date"), which shall be the date of the Closing unless the parties
otherwise agree. Assuming all other conditions stated in this Agreement have
been or will be satisfied as of the Closing, the Closing shall take place at the
offices of BancGroup, in Montgomery, Alabama, at 5:00 p.m. on a date agreed to
by Acquired Corporation and BancGroup that shall be as soon as reasonably
practicable after the later to occur of (i) the Shareholder Meeting, (ii)
receipt of all required regulatory approvals under Section 8.2, and satisfaction
of all other conditions precedent set forth in Articles 8 and 9, which are
required to be satisfied prior to Closing, or at such other place and time that
the Parties may mutually agree. If these conditions are all met in the fourth
quarter of 1998, then BancGroup may postpone Closing until the first full week
of January 1999.
2.8 Subsidiary Bank Merger. BancGroup and Acquired Corporation anticipate
that on the Effective Date the Bank will merge with and into either Colonial
Bank or a Texas state bank which may be wholly owned by BancGroup on the
Effective Date ("FirstBank") ("the Bank Merger"). The exact timing and structure
of the Bank Merger have not been finalized at this time, and BancGroup in its
sole discretion will finalize such timing and structure at a later date,
including whether the Bank shall be merged into Colonial Bank or alternatively
FirstBank ("Resulting Bank"). Acquired Corporation, as sole shareholder of TB& T
Holdings, Inc., which is the sole shareholder of Bank, will cause all necessary
steps be taken to consummate the Bank Merger, including the calling of any
special meetings of the board of directors or shareholders of the Bank, voting
its shares of stock of the Bank in favor of the Bank Merger and the filing of
any regulatory applications.
A-2
<PAGE> 109
ARTICLE 3
CONVERSION OF ACQUIRED CORPORATION STOCK
3.1 Conversion of Acquired Corporation Stock. (a) On the Effective Date,
and subject to Section 3.3, each share of common stock of Acquired Corporation
outstanding and held of record by Acquired Corporation's shareholders, other
than shares held by any Acquired Corporation Company or BancGroup other than in
a fiduciary capacity (the "Acquired Corporation Stock"), shall be converted by
operation of law and without any action by any holder thereof into .3203 shares
(.6406 shares after giving effect to the Stock Split as defined in Article 14
hereof) of BancGroup Common Stock (the "Merger Consideration").
(b) (i) On the Effective Date, and subject to section 3.1(c) below,
BancGroup shall assume all Acquired Corporation Options outstanding in
accordance with the terms of the Acquired Corporation Stock Option plan pursuant
to when it was issued and the stock option agreement by which it is evidenced,
and each such option shall cease to represent a right to acquire Acquired
Corporation common stock and shall, instead, 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, 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, or by paying for such fraction in cash, based upon the
Market Value. 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 whole shares that may be done. It is intended that the
assumption by BancGroup of the Acquired Corporation Options shall be undertaken
in a manner that will not constitute a "modification", "extension", or "renewal"
as defined in Section 424 of the Internal Revenue Code of 1986, as amended (the
"Code") as to any stock option which is an "incentive stock option." Schedule
3.1 hereto sets forth the names of all persons holding 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. As
soon as reasonably practicable after the Effective Date, BancGroup shall deliver
to each shareholder an appropriate notice setting forth such person's rights and
the number of shares and the exercise price thereof of BancGroup common stock
applicable to such option. Schedule 3.1 also contains complete and accurate
copies of all Acquired Corporation's Stock Option Plans and forms of Stock
Option Agreements used, and the most recent prospectus sent to stock option
holders, if applicable.
(ii) Prior to Effective Date, BancGroup shall file at its expense a
registration statement with the SEC on Form S-8 or such other appropriate form
(including the Form S-4 to be filed in connection with the Merger) 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.
(c) In lieu of the conversion specified in paragraph (b)(i) of Section 3,
no later than five days prior to the Effective Date, each holder of outstanding
Acquired Corporation Options should provide written notice to Acquired
Corporation (in form and substance reasonably satisfactory to BancGroup) that he
or she wishes to exchange his or her Acquired Corporation Options, as of the
Effective Date, and, to receive an amount of BancGroup Common Stock in exchange
therefor determined by calculating the difference between (i) the number
obtained by multiplying the number of shares of Acquired Corporation Common
Stock issuable pursuant to his or her Acquired Corporation Options times the
Exchange Ratio times "Market Value" and (ii) the number obtained by multiplying
the number of shares of Acquired Corporation Common Stock issuable pursuant to
his or her Acquired Corporation Options, times exercise price per share (as
determined pursuant to the applicable stock option plan of the Acquired
Corporation). The dollar amount so determined shall then be divided by "Market
Value" to determine the number of shares of BancGroup Common Stock to
A-3
<PAGE> 110
be received. In the event that the exercise prices of all Acquired Corporation
Options is not the same, the above calculation shall be made for each series of
options and the number of shares of BancGroup Common Stock issued shall be
totaled to obtain the aggregate number of shares to be received by that
individual. No fractions of shares shall be issued and fractions shall be paid
in cash at the market value.
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, or an
exchange agent appointed by BancGroup, of their certificate or certificates
representing shares of Acquired Corporation Stock (or an affidavit or
affirmation by such holder of the loss, theft, or destruction of such
certificate or certificates in such form as BancGroup may reasonably require
and, if BancGroup reasonably requires, a bond of indemnity in form and amount,
and issued by such sureties, as BancGroup may reasonably require), 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. Such holder shall receive cash for fractional shares. 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, but upon surrender such dividends and distributions shall be
paid. Within a reasonable time after the Effective Date, the Exchange Agent
shall send a notice and transmittal form to each Acquired Corporation
shareholder advising as to the effectiveness of the Merger and the procedure for
exchange of stock certificates.
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 BancGroup
Common Stock, or changed into or exchanged for a different kind or number of
securities, then an appropriate and proportionate adjustment shall be made in
the number of shares of BancGroup Common Stock (or such other company the shares
of BancGroup Common Stock shall have been changed or exchanged for) into which
the Acquired Corporation Stock 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 TBCA, 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 by such holder of the certificate or certificates
representing shares of Acquired Corporation Stock held by him or her.
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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 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.
4.2 Capital Stock. (a) The authorized capital stock of BancGroup consists
of (A) 200,000,000 shares of Common Stock, $2.50 par value per share, of which
as of June 30, 1998, 49,116,133 shares were validly issued and outstanding,
fully paid and nonassessable and are not subject to preemptive rights (not
counting additional shares subject to issue pursuant to stock option and other
plans and convertible debentures), 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 BancGroup Common Stock to be issued in 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. The common stock of BancGroup is not subject to
preemptive rights.
(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, 1996, December 31,
1997, and March 31, 1998;
(ii) Consolidated statements of operations for each of the three years
ended December 31, 1995, 1996 and 1997, and for the three months ended
March 31, 1998;
(iii) Consolidated statements of cash flows for each of the three
years ended December 31, 1995, 1996 and 1997, and for the three months
ended March 31, 1998;
(iv) Consolidated statements of changes in shareholders' equity for
the three years ended December 31, 1995, 1996 and 1997, and for the three
months ended March 31, 1998.
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. 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, 1998, 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 these 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
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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 such dates have
been liable in its own right or as transferee of the Assets of, or as successor
to, any other corporation or other party. No audit, examination or investigation
is presently being conducted or, to the Knowledge of BancGroup, threatened by
any taxing authority which is likely to result in a material Tax Liability, no
material unpaid Tax deficiencies or additional liabilities of any sort have been
proposed by any governmental representative and no agreements for extension of
time for the assessment of any material amount of Tax have been entered into by
or on behalf of BancGroup. BancGroup has withheld from its employees (and timely
paid to the appropriate governmental entity) proper and accurate amounts for all
periods in material compliance with all Tax withholding provisions of applicable
federal, state, foreign and local Laws (including without limitation, income,
social security and employment Tax withholding for all types of compensation).
4.4 No Conflict with Other Instrument. The consummation of the
transactions contemplated by this Agreement will not result in a breach of or
constitute a Default (without regard to the giving of notice or the passage of
time) under any material Contract, 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 Agreement. 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 has, 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, 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, that
are material to the business of BancGroup, 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
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Federal Deposit Insurance Act; and the businesses of the non-bank Subsidiaries
of BancGroup are permitted to subsidiaries of registered bank holding companies.
4.10 Contracts. Neither BancGroup nor any of its Subsidiaries is in
violation of its respective certificate of incorporation or bylaws 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 BancGroup's SEC filings 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, 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, 1997; (ii) 1997 Annual Report to Shareholders; (iii) the
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1998; and
(iv) any reports on Form 8-K, filed by BancGroup with the SEC since December 31,
1997. Since December 31, 1997, 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 necessary to make the statements
therein not misleading at the time the Registration Statement becomes effective
or at the time of the Stockholders Meeting.
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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 fees,
brokerage commissions or other like payments.
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.
4.20 Computer Hardware and Software. BancGroup has formulated and begun
execution of a plan that complies with FFIEC Year 2000 compliance guidelines as
promulgated by the principal regulatory agencies of BancGroup and Colonial Bank.
To date, BancGroup and Colonial Bank have met all regulatory deadlines and are
executing the plan.
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 Texas corporation, and the
Bank is a Texas chartered bank. Acquired Corporation wholly owns T B & T
Holdings, Inc. ("Holdings"), a Delaware corporation, and Holdings is the sole
shareholder of the Bank. 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.
5.2 Capital Stock. As of the date of this Agreement, the authorized
capital stock of Acquired Corporation consisted of 10,000,000 shares of common
stock, $1.00 par value, 1,850,000 shares of which are issued and 1,849,050
shares of which are outstanding. All of such shares which are outstanding are
validly issued, fully paid and nonassessable and not subject to preemptive
rights. Acquired Corporation has 138,000 shares of its common stock subject to
exercise pursuant to stock options under its stock option plans. Except for the
foregoing and the Stock Option Agreement, 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. Except for Holdings, Acquired Corporation has no direct
Subsidiaries. Holdings owns all of the issued and outstanding shares of the
Bank, and there are no 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
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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 the date of this Agreement, there were 750,000 shares of
the common stock, $5.00 par value, authorized by the Bank, and 690,000 of which
are issued and outstanding. The Bank has no 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. As of the date
of this Agreement, there were 1,000 shares of the common stock, $1.00 par value,
authorized by Holdings, and 1,000 of which are issued and outstanding. Holdings
has no 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.
5.4 Financial Statements; Taxes (a) Acquired Corporation has delivered to
BancGroup copies of the following financial statements of Acquired Corporation:
(i) Consolidated balance sheet as of December 31, 1996, and December
31, 1997;
(ii) Consolidated statements of income for each of the three years
ended December 31, 1995, 1996 and 1997;
(iii) Consolidated statements of shareholders' equity for each of the
three years ended December 31, 1995, 1996, and 1997; and
(iv) An unconsolidated balance sheet, statement of income, and
statement of shareholders' equity as of and for the six-month period ended
June 30, 1998.
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 GAAP 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. The statements of income, shareholders' equity and cash flows present
fairly the results of operation, changes in shareholders equity and cash flows
of Acquired Corporation for the periods indicated. The foregoing
representations, insofar as they relate to the unaudited interim financial
statements of Acquired Corporation for the six months ended June 30, 1998, are
subject in all cases to normal recurring year-end adjustments and the omission
of footnote disclosure.
(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 these 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 such 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 has 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,
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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.
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 or other
corporate equity securities (whether authorized and unissued or held in the
treasury) except shares of common stock issued upon the exercise of existing
Acquired Corporation Options, the stock option agreement, 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
(including purchase of federal funds) and Liabilities incurred in the ordinary
course of business and consistent with past practice;
(c) paid any material obligation or Liability (absolute or contingent)
other than current Liabilities reflected in or shown on the most recent balance
sheet referred to in section 5.4(a)(i) and current Liabilities incurred since
that date in the ordinary course of business and consistent with past practice;
(d) declared or made, or agreed to declare or make, any payment of
dividends or distributions of any Assets of any kind whatsoever to shareholders,
or purchased or redeemed, or agreed to purchase or redeem, directly or
indirectly, or otherwise acquire, any of its outstanding securities. In no event
shall the shareholders of Acquired Corporation be entitled to both an Acquired
Corporation dividend and to BancGroup's regular dividend during the quarter in
which the Effective Date occurs.
(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 would have a Material Adverse Effect on Acquired Corporation
considering its business as a whole;
(h) except in the ordinary course of business, made or permitted any
amendment or termination of any Contract, agreement or license to which it is a
party if such amendment or termination would have a Material Adverse Effect on
Acquired Corporation considering its business as a whole;
(i) except as set forth in Schedule 5.5(i) or 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;
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(m) other than this Agreement and the stock option agreement, entered into
any 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, other than Loans or
renewals thereof entered into in the ordinary course of business, without the
express written consent of BancGroup.
5.6 Title and Related Matters. (a) Title. Each Acquired Corporation
Company has good and marketable title to all the properties, interest in
properties and Assets, real and personal, that are material to the business of
such Acquired Corporation Company, 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. Complete and accurate copies of all such leases are
attached to Schedule 5.6(b).
(c) Personal Property. Schedule 5.6(c) sets forth a depreciation schedule
of each Acquired Corporation Company's fixed Assets as of the latest practicable
date.
(d) (i) Computer Hardware and Software. Schedule 5.6(d) contains a listing
of all agreements relating to data processing computer software and hardware now
being used in the business operations of any Acquired Corporation Company.
Except as set forth in Schedule 5.6(d), 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. Complete and accurate copies of all Contracts,
plans and other items so listed have been attached to Schedule 5.6(d).
(ii) Year 2000 Compliance. Except as disclosed in Schedule 5.6(d),
Acquired Corporation has formulated and begun execution of a plan that complies
with FFIEC Year 2000 compliance guidelines as promulgated by the principal
regulatory agencies of Acquired Corporation and the Bank. To date, Acquired
Corporation and the Bank have met all regulatory deadlines and are executing the
plan.
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 available to
BancGroup for inspection.
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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. Except as set out in Schedule 5.9, 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 does Acquired Corporation have Knowledge 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 Acquired Corporation, and no Acquired
Corporation Company is in Default with respect to any judgment, order, writ,
injunction, decree, award, rule or regulation of any court, arbitrator or
governmental department, commission, board, bureau, agency or instrumentality,
which Default would have a Material Adverse Effect on Acquired Corporation.
Except as set out in Schedule 5.9, 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, of 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 on Acquired Corporation.
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. Except as disclosed in Schedule
5.11, 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 material 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 disclosed 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. Except as disclosed in Schedule
5.14, 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
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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.
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 Schedule
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
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) 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 Agreements. To the Knowledge of Acquired Corporation, there
are no agreements among any shareholder of any Acquired Corporation Company
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 Company, any similar agreement or any voting
agreement or voting trust in respect of any such shares.
5.18 Brokers. Except with respect to payment of fees for issuance of a
fairness opinion, 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. However, Acquired
Corporation will pay fees to a financial advisor for the issuance of a fairness
opinion as described on Schedule 5.18.
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. (a) 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.
(b) On or before the date hereof the Acquired Corporation has delivered to
BancGroup its Disclosure Schedules setting forth, among other things, exceptions
to any and all of its representations and warranties in Article 5. While
Acquired Corporation has used its best efforts to identify in the Disclosure
Schedule the particular representation or warranty to which each such disclosure
or exception relates, each such disclosure
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or exception shall be deemed disclosed for purposes of all representations and
warranties in Article 5 and the Disclosure Schedule. The mere inclusion of an
exception in the Disclosure Schedule shall not be deemed an admission by
Acquired Corporation that such exception represents a material fact, event, or
circumstance.
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 in all material respects to reflect all known
and reasonably anticipated risk inherent in the loans of Acquired Corporation to
the Knowledge 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 subject to
the effect of bankruptcy, insolvency, reorganization, moratorium, or other
similar laws relating to creditors' rights generally and to general equitable
principles and complies with all Laws to which it is subject. 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 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 now or
previously 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. Acquired Corporation has not
inquired of its residential loan customers with regard to environmental
liabilities affecting those customers' home sites.
5.24 Transfer of Shares. Acquired Corporation has no Knowledge of any plan
or intention on the part of any affiliate of Acquired Corporation to sell or
otherwise dispose of any of Acquired Corporation Common Stock, or the BancGroup
Common Stock to be received by them in the Merger, that could cause the Merger
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to fail to qualify for the pooling of interests method of accounting under
generally accepted accounting principles.
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 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. Except for the Stock Option Agreements, 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).
5.28 Non-Terminable Contracts or Severance Agreements. Except as listed in
Schedule 5.28, no Acquired Corporation Company is a party to or has agreed to
enter into an employment or vendor contract that is not terminable without
penalty within 90 days or contains an extraordinary buyout. With the exception
of certain agreements otherwise referenced in this Agreement, no Acquired
Corporation Company is a party to or has agreed to enter into any employment
agreement, non-competition agreement, salary continuation plan or severance
agreement or similar arrangement with any Acquired Corporation Company employee.
Complete and accurate copies to all contracts or agreements listed in Schedule
5.28 are attached thereto.
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. As soon as reasonably
practicable after the execution of this Agreement, BancGroup shall prepare,
with the assistance of Acquired Corporation, 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, which filing shall
include the prospectus and proxy statement for the Shareholders Meeting, in
form reasonably satisfactory to Acquired Corporation and its counsel, with
respect to the Common Stock to be issued pursuant to this Agreement and the
matters to be considered at the Shareholders Meeting. BancGroup shall, as
soon as practicable, prepare, with the assistance of Acquired Corporation,
all necessary filings with any Federal or State banking Agencies which may
be necessary for approval to consummate the transactions contemplated by
this Agreement and shall use its reasonable efforts to secure all such
approvals as soon as practicable, and shall also use its reasonable efforts
to cause the Registration Statement to become effective under the 1933 Act
as soon as reasonably practicable after the filing thereof and take any
action required to be taken under other applicable securities Laws in
connection with the issuance of the shares of BancGroup Common Stock upon
consummation of the Merger. A first draft of all filings with any Federal
or State agencies shall be furnished a reasonable time in advance to
Acquired Corporation and its counsel, unless otherwise agreed by counsel
for Acquired Corporation. BancGroup shall provide Acquired Corporation with
any correspondence with any Agency (including the SEC) relating to this
transaction.
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(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. On the Effective Date, all employees of
any Acquired Corporation Company shall, at BancGroup's option, either
become 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, except as
stated otherwise in this section. Employees of any Acquired Corporation
Company who become employees of the Resulting Corporation or its
Subsidiaries on the Effective Date shall be allowed to participate as of
the Effective Date in the medical and dental benefits plan of Colonial Bank
as 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 as of the Effective Date shall be counted as employment under 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 the medical 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 of the Resulting Corporation and its
Subsidiaries.
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(g) Indemnification. (i) Subject to the conditions set forth in the
succeeding paragraph, for a period of six (6) years after the Effective
Date, BancGroup shall, and shall cause Resulting Bank to, indemnify,
defend, and hold harmless (including advancement of expenses consistent
with Texas Law) each director and officer of each Acquired Corporation
Company (each being an "Indemnified Party") against all liabilities arising
out of actions or omissions occurring upon or prior to the Effective Date
(including without limitation the transactions contemplated by this
Agreement) to the extent authorized under the articles of incorporation and
bylaws of the applicable Acquired Corporation Company and Texas Law.
(ii) Any Indemnified Party wishing to claim indemnification under this
subsection (g), upon learning of any such liability or Litigation, shall
promptly notify BancGroup thereof. In the event of any such Litigation
(whether arising before or after the Effective Date) (i) BancGroup or
Resulting Bank shall have the right to assume the defense thereof with
counsel reasonably acceptable to such Indemnified Party and, upon
assumption of such defense, 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 the defense thereof, except that if BancGroup or Resulting Bank elects
not to assume such defense, or counsel for the Indemnified Parties advises
that there are substantive issues which raise conflicts of interest between
BancGroup and the Indemnified Parties, the Indemnified Parties may retain
counsel satisfactory to them, and BancGroup or Resulting Bank shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided, that BancGroup
shall be obligated pursuant to this subsection to pay for only one firm or
counsel for all Indemnified Parties in any jurisdiction; (ii) the
Indemnified Parties will cooperate in the defense of any such Litigation;
and (iii) BancGroup shall not be liable for any settlement effected without
its prior consent; and provided further that BancGroup and Resulting Bank
shall not have any obligation hereunder to any Indemnified Party when and
if a court of competent jurisdiction shall determine, and such
determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by
applicable law.
(iii) In consideration of and as a condition precedent to the
effectiveness of the indemnification obligations provided by BancGroup in
this section to a director or officer of any Acquired Corporation Company,
such director or officer of the Acquired Corporation Company shall have
delivered to BancGroup on or prior to the Effective Date a letter in form
reasonably satisfactory to BancGroup concerning claims such directors or
officers may have against Acquired Corporation Company. In the letter, the
directors or officers shall (i) acknowledge the assumption by BancGroup as
of the Effective Date of all Liability (to the extent Acquired Corporation
Company is so liable) for claims for indemnification arising under Section
6.1(g) hereof; (ii) affirm that they do not have nor are they aware of any
claims they might have (other than those referred to in the following
clause (iii)) against Acquired Corporation Company; (iii) identify any
claims or any facts or circumstances of which they are aware that could
give rise to a claim for indemnification under section 6.1(g)(i) hereof;
and (iv) release as of the Effective Date any and all claims that they may
have against any Acquired Corporation Company other than (A) those referred
to in the foregoing clause (iii) and disclosed in the letter of the
director or officer, (B) claims by third parties which have not yet been
asserted against such director or officer (other than claims arising from
facts and circumstances of which such director or officer is aware but
which are not disclosed in such director or executive officer's letter),
(C) claims by third parties arising from any transaction contemplated by
this Agreement or disclosed in any schedule to this Agreement, and (D)
claims by third parties arising in the ordinary course of business of any
Acquired Corporation Company after the date of the letter.
(iv) Acquired Company hereby represents and warrants to BancGroup that
it has no knowledge of any claim, pending or threatened, or of any facts or
circumstances that could give rise to any obligation by BancGroup to
provide the indemnification required by this Section 6.1(g) other than as
disclosed in the letters of the directors and executive officers referred
to in Section 6.1(g)(iii) hereof or described in any schedule to this
Agreement and claims arising from any transaction contemplated by this
Agreement.
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(v) The obligations of BancGroup under this Section 6.1(g) are
intended to be enforceable against BancGroup directly by the Indemnified
Parties and shall be binding on all respective successors and assigns of
BancGroup.
6.2 Additional Covenants of Acquired Corporation. Acquired Corporation
covenants to and with BancGroup as follows:
(a) Operations. (i) 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. Acquired
Corporation shall contact any person who may be required to execute an
undertaking under Section 10.5 hereof to request such undertaking and shall
take all such reasonable steps as are necessary to obtain such undertaking.
Acquired Corporation will take no action that would prevent or impede the
Merger from qualifying (i) for pooling of interests accounting treatment or
(ii) as a tax-free reorganization within the meaning of Section 368 of the
Code.
(ii) If requested by BancGroup, Acquired Corporation shall use its
best efforts to cause all officers and directors that own any stock of
Acquired Corporation and all other shareholders of Acquired Corporation
who own more than five percent (5%) of Acquired Corporation Stock, to
execute an acknowledgment that such person has no plan, intention, or
binding commitment to sell or otherwise dispose Acquired Corporation
Common Stock or of the BancGroup Common Stock to be received in the
Merger from the date of this Agreement to financial results concerning
at least 30 days of Post-Merger combined operations have been published
by BancGroup within the meaning of Section 201.01 of the SEC's
codification of Financial Reporting Policies.
(b) Stockholders Meeting; Best Efforts. Acquired Corporation will
cooperate with BancGroup in the preparation of the Registration Statement
(which shall include the prospectus/proxy statement for the Shareholder
Meeting) and any regulatory filings and 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 (subject to compliance with their fiduciary duties) 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. Except with respect to this Agreement
and the transactions contemplated hereby, no Acquired Corporation Company
nor any affiliate thereof nor any investment banker, attorney, accountant,
or other representative (collectively, "Representatives") retained by an
Acquired Corporation Company shall directly or indirectly solicit any
Acquisition Proposal by any Person. Except to the extent necessary to
comply with the fiduciary duties of Acquired Corporation's Board of
Directors as advised in writing by counsel to such Board of Directors, no
Acquired Corporation Company or any Representative thereof shall furnish
any non-public information that it is not legally obligated to furnish,
negotiate with respect to, or enter into any Contract with respect to, any
Acquisition Proposal, and each Acquired Corporation Company shall direct
and use its reasonable efforts to cause all of its Representatives not to
engage in any of the foregoing, but Acquired Corporation may communicate
information about such an Acquisition Proposal to its shareholders if and
to the extent that it is required to do so in order to comply with its
legal obligations as advised in writing by counsel to such Board of
Directors. Acquired Corporation shall promptly notify BancGroup orally and
in writing in the event that any Acquired Corporation Company receives any
inquiry or proposal relating to any such Acquisition Proposal. Acquired
Corporation shall immediately cease and cause to be terminated any existing
activities, discussions, or negotiations with any Persons other than
BancGroup conducted heretofore with
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respect to any of the foregoing. Acquired Corporation shall enter into the
Stock Option Agreement with BancGroup dated as of the date of this
Agreement.
(d) Director Recommendation. The members of the Board of Directors of
Acquired Corporation agree to publicly support the Merger subject to
compliance with their fiduciary duties upon written advice of counsel.
(e) Shareholder Voting. Acquired Corporation shall, on or before the
date of execution of this Agreement, obtain and submit to BancGroup an
agreement from certain of its directors, executive officers and affiliates
substantially in the form set forth in Exhibit A.
(f) Financial Statements and Monthly Status Reports. Acquired
Corporation shall furnish to BancGroup:
(i) As soon as practicable and in any event within 45 days after
the end of each quarterly period (other than the last quarterly period
in which event the period shall be ninety (90) days) 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 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;
(iv) With reasonable promptness, such additional financial data as
BancGroup may reasonably request; and
(v) Within 10 calendar days after the end of each month (or, if the
financial statements referred to in clause (d) are not then available,
as soon as possible thereafter) commencing with the next calendar month
following the date of this Agreement and ending at the Effective Date, a
written description of (a) any non-compliance with the terms of this
Agreement, together with its then current estimate of the out-of-pocket
costs and expenses incurred or reasonably accruable in connection with
the transactions contemplated by this Agreement; (b) the status, as of
the date of the report, of all existing or threatened litigation against
any Acquired Corporation Company; (c) copies of minutes of any meeting
of the board of directors of any Acquired Corporation Company and any
committee thereof occurring in the month for which such report is made,
including all documents presented to the directors at such meetings; and
(d) monthly financial statements, including a balance sheet and income
statement.
(g) Fiduciary Duties. Except as set out in Schedule 6.2(g), prior to
the Effective Date, (i) 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, (ii) all
Executives, at all times, shall satisfy their fiduciary duties to Acquired
Corporation and its Subsidiaries, and (iii) 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
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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 shall consult with BancGroup and advise BancGroup of all of the
Bank's loan requests over $100,000 that are not single-family residential
loan requests or of any other loan request outside the normal course of
business, and (ii) Acquired Corporation will consult with BancGroup to
coordinate various business issues on a basis mutually satisfactory to
Acquired Corporation and BancGroup. Acquired Corporation and the 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.
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, including the holding
of any regular or special board meetings, 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. No Acquired Corporation Company shall take any action
which would cause the merger to either (i) fail to qualify as a reorganization
within the meaning of Section 368 of the Code, or (ii) fail to qualify to be
treated as a "pooling-of-interests" under Generally Accepted Accounting
Principles. BancGroup agrees to use reasonable efforts to cause the Merger to
qualify to be treated as a pooling-of-interests under Generally Accepted
Accounting Principles. No Acquired Corporation Company shall take any action
which would materially affect or delay receipt of the approval contemplated in
Section 8.2 herein or materially delay performance of its covenants under this
Agreement.
7.2 Press Release. Each Party hereto agrees that, unless approved by the
other Parties in advance, such Party will not make any public announcement,
issue any press release or other publicity or confirm any statements by any
person not a party to this Agreement concerning the transactions contemplated
hereby. Notwithstanding the foregoing, each Party hereto reserves the right to
make any disclosure if such Party, in its reasonable discretion and as advised
by counsel, 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-3 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 the other Party 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. All such information
that may be obtained by any such Party will be held in confidence by such party,
will not be disclosed by such Party or any of its representatives except in
accordance with this Agreement and the July 21, 1998, Confidentiality
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Agreement, and will not be used by such Party for any purpose other than the
accomplishment of the Merger as provided herein.
7.5 Notice of Adverse Changes. Each Party agrees to give written notice
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
material breach of any of its representations, warranties, or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
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 or Parties relying upon
such conditions, on or before the Effective Date of all the following
conditions, except as such Party or 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 bylaws.
8.2 Regulatory Authority Approval. (a) 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 Merger, and (ii) satisfying all
other requirements prescribed by Law. No Order, Consent or approval so obtained
which is necessary to consummate the transactions as contemplated hereby shall
be conditioned or restricted in a manner which in the reasonable good faith
judgment of the Board of Directors of BancGroup would so materially adversely
impact the economic benefits of the transaction as contemplated by this
Agreement so as to render inadvisable the consummation of the Merger.
(b) Each Party shall have obtained any and all other Consents required for
consummation of the Merger (other than those referred to in Section 8.2(a) of
this Agreement) for the preventing of any Default under any Contract or Permit
of such Party which, if not obtained or made, is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on such Party. No
Consent obtained which is necessary to consummate the transactions contemplated
hereby shall be conditioned or restricted in a manner which in the reasonable
judgment of the Board of Directors of BancGroup would so materially adversely
impact the economic or business benefits of the transactions contemplated by
this Agreement so as to render inadvisable the consummation of the Merger.
8.3 Litigation. None of the Parties shall be subject to any order, decree,
or injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the Merger. There shall be no pending or threatened
Litigation in any court or any pending or threatened proceeding by any
governmental commission, board or Agency, with a view to seeking or in which it
is sought to restrain or prohibit consummation of the transactions contemplated
by this Agreement or in which it is sought to obtain divestiture, rescission or
damages in connection with the transactions contemplated by this Agreement and
no investigation by any Agency shall be pending or threatened which might result
in any such suit, action or other proceeding.
8.4 Registration Statement. The Registration Statement shall be effective
under the 1933 Act and no stop order suspending the effectiveness of the
Registration Statement shall be in effect; no proceedings for such purpose, or
under the proxy rules of the SEC or any bank regulatory authority pursuant to
the 1934 Act, with respect to the transactions contemplated hereby, shall be
pending before or threatened by the SEC or any
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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 PricewaterhouseCoopers LLP, 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 BancGroup or Acquired Corporation; (iii) no gain or
loss will be recognized by 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 an 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). BancGroup shall pay the fees of
PricewaterhouseCoopers LLP incurred in preparing and issuing the above mentioned
opinion.
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, except to the extent that
the failure to be true shall not either individually or in the aggregate have a
Material Adverse Effect on BancGroup and its subsidiaries, taken as a whole, 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, except to the extent that the failure to perform shall not have
a Material Adverse Effect either individually or in the aggregate on BancGroup
and its subsidiaries as a whole.
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 which would impair the rights of Acquired Corporation or its
shareholders pursuant to this Agreement.
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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
approving the substantive terms of this Agreement and authorizing the
consummation of the transactions contemplated by this Agreement and such
resolutions have not been amended or modified and remain in full force and
effect;
(b) each person executing this Agreement on behalf of BancGroup is an
officer of BancGroup holding the office or offices specified therein and
the signature of each person set forth on such certificate is his or her
genuine signature;
(c) the certificate of incorporation and bylaws of BancGroup
referenced in section 4.4 hereof remain in full force and effect;
(d) such persons have no knowledge of a basis for any material claim,
in any court or before any Agency or arbitration or otherwise against, by
or affecting BancGroup or the business, prospects, condition (financial or
otherwise), or Assets of BancGroup which would prevent the performance of
this Agreement or the transactions contemplated by this Agreement or
declare the same unlawful or cause the rescission 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.
(g) BancGroup has authorized sufficient shares of its common stock for
issuance to satisfy its obligations under this Agreement.
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, substantially in the form set forth in Exhibit B hereto.
9.5 NYSE Listing. The shares of BancGroup Common Stock to be issued under
this Agreement shall have been approved for listing on the NYSE.
9.6 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. All documents required to be executed and delivered by BancGroup
as provided in this Agreement shall have been so executed and delivered.
9.7 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.
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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, except to the extent that
the failure to be true shall not, either individually or in the aggregate, have
a Material Adverse Effect on Acquired Corporation and its subsidiaries taken as
a whole, as if such representations and warranties were made on and as of the
Effective Date, and Acquired Corporation 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, except to the extent that the failure
to perform shall not have a Material Adverse Effect on Acquired Corporation and
its subsidiaries, either individually or in the aggregate taken as a whole.
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
Acquired Corporation executed by 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 approving the substantive terms of this Agreement and
authorizing the consummation of the Merger 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 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 articles of incorporation and bylaws of Acquired Corporation
and the Bank referenced in section 5.8 hereof remain 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.
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10.4 Opinion of Counsel. BancGroup shall have received the opinions of
Housley, Kantarian & Bronstein, P.C., counsel to Acquired Corporation, and Peter
M. Tart, Esquire, dated as of the Closing, substantially as set forth in
Exhibits C-1 and C-2 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 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 except in compliance with
the 1933 Act and the rules and regulations of the SEC thereunder, and that such
person will not sell or otherwise reduce 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 within the meaning of Section 201.01 of the SEC's Codification of
Financial Reporting Policies. Acquired Corporation recognizes and acknowledges
that BancGroup Common Stock issued to such persons may bear a legend evidencing
the agreement described above.
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 10% of the outstanding shares of common stock of Acquired
Corporation.
10.8 Material Events. There shall have been no determination by the board
of directors of BancGroup that the transactions contemplated by this Agreement
have become impractical because of any state of war, declaration of a banking
moratorium in the United States or general suspension of trading on the NYSE or
any exchange on which BancGroup Common Stock may be traded.
10.9 Pooling of Interest. BancGroup shall have received the written
opinion of PricewaterhouseCoopers LLP, that the Merger will qualify for the
pooling of interests method of accounting under generally accepted accounting
principles.
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
the last sentences of Section 7.4 and 6.2(c), and Sections 7.2, 13.3, Article
11, Article 12, Article 15, 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.
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ARTICLE 12
NOTICES
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered by hand, by facsimile
transmission, by registered or certified mail, postage pre-paid, or by courier
or overnight carrier, to the persons at the addresses set forth below (or at
such other address as may be provided hereunder), and shall be deemed to have
been delivered as of the date so received:
(a) If to Acquired Corporation, to Charles B. Phillips, President,
Texas Bank & Trust, 1999 Bryan Street, Suite 100, Dallas, Texas 75201,
facsimile (214) 855-5447, and Harry K. Kantarian, Housley, Kantarian &
Bronstein, P.C., 1220 19th Street NW; Suite 700, Washington, DC 20036,
facsimile (202) 822-0140, 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 803, Montgomery, Alabama, 36104, facsimile (334) 240-5069, with
copies to William A. McCrary, Esquire, One Commerce Street, Suite 303,
Montgomery, Alabama 36104, facsimile (334) 240-5326, and Willard H. Henson,
Miller, Hamilton, Snider & Odom, L.L.C., One Commerce Street, Suite 305,
Montgomery, Alabama 36104, facsimile (334) 265-4533, or as may otherwise be
specified in writing by BancGroup to Acquired Corporation.
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, provided that
after any such approval by the shareholders of Acquired Corporation, no
amendment shall be made that modifies in any material respect the consideration
to be received by the shareholders of Acquired Corporation without the further
approval of such shareholders.
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 material 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, 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, or if any of the
conditions to the obligations of such Party contained in this Agreement in
Article 9 as to Acquired Corporation or Article 10 as to BancGroup shall
not have been satisfied in full;
(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 February 28, 1999, if
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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);
(e) without further action by either Party, upon the execution by
Acquired Corporation of an agreement which is legally binding on Acquired
Corporation with any third party (other than BancGroup or its Subsidiaries)
with respect to an Acquisition Proposal if, in connection therewith,
BancGroup will have the right to demand Acquired Corporations' performance
under the Stock Option Agreement.
13.3 Damages. In the event of termination pursuant to section 13.2, this
Agreement shall become void and have no effect except as provided in Article 11,
and except that Acquired Corporation and BancGroup shall be liable for damages
for any wilful breach of warranty, representation, covenant or other agreement
contained in this Agreement.
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....... T B & T, Inc.
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 a maximum of
138,000 shares of Acquired Corporation common stock
pursuant to Acquired Corporation's stock option
plans.
Acquired Corporation
Stock...................... Shares of common stock, $1.00 par value, of
Acquired Corporation.
Acquisition Proposal....... Shall mean, with respect to a Party, any tender
offer or exchange offer or any proposal for a
merger, acquisition of all of the stock or assets
of, or other business combination involving such
Party or any of its Subsidiaries or the acquisition
of a substantial equity interest in, or a
substantial portion of the assets of, such Party or
any of its Subsidiaries.
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 (including those of the
States of Texas and Alabama) having jurisdiction
over the Parties and their respective Subsidiaries,
HUD, the VA, the FHA, the GNMA, the FNMA, the
FHLMC, the NYSE, and the SEC.
Agreement.................. Shall mean this Agreement and Plan of Merger and
the Exhibits and Schedules delivered pursuant
hereto and incorporated herein by reference.
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
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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....................... Texas Bank & Trust.
Bank Merger................ The merger of Bank into Resulting Bank, as
described in Section 2.8.
Closing.................... The submission of the certificates of officers,
legal opinions and other actions required to be
taken in order to consummate the Merger in
accordance with 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.
Confidentiality
Agreement.................. Confidentiality Agreement executed by BancGroup and
Acquired Corporation on or around July 21, 1998.
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.
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 used to calculate the Merger
Consideration as set forth in section 3.1(a).
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.
FFIEC...................... The Federal Financial Institutions Examination
Council.
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GAAP....................... Means generally accepted accounting principles
applicable to banks and bank holding companies
consistently applied during the periods involved.
Guardian................... Guardian Mortgage Company
Knowledge.................. Means the actual knowledge (or the knowledge which
should have been obtained) after due investigation
and inquiry of the Chairman, President, Chief
Financial Officer, or any Senior or Executive Vice
President of BancGroup, in the case of knowledge of
BancGroup. In the case of Acquired Corporation it
means the actual knowledge (or the knowledge which
should have been obtained) after due investigation
and inquiry by the Chairman, President, Chief
Financial Officer, or any other Executive Officer
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, without limitation, those promulgated,
interpreted or enforced by any Agency, or any
interpretations thereof by courts and/or
governmental authorities.
Liability.................. Any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost
or expense (including, without limitation, 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, (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, and (iv) Liens which are not
reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on a Party.
Litigation................. Any action, arbitration, complaint, criminal
prosecution, governmental or other examination or
investigation, hearing, inquiry, administrative or
other proceeding but shall not include regular,
periodic examinations of depository institutions
and their Affiliates by Regulatory Authorities,
relating to or affecting a Party, its business, its
Assets (including Contracts related to it), or the
transactions con templated by this Agreement.
relating to or affecting a Party, its business, its
Assets (including Contracts related to it), or the
transactions contemplated by this Agreement.
Loan Property.............. Any property owned by the Party in question or by
any of its Subsidiaries or in which such Party or
Subsidiary holds a security interest, and, where
required by the context, includes the owner or
operator of such property, but only with respect to
such property.
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Loss....................... Any and all direct or indirect payments,
obligations, recoveries, deficiencies, fines,
penalties, interest, assessments, losses,
diminution in the value of Assets, damages,
punitive, exemplary or consequential damages
(including, but not limited to, lost income and
profits and interruptions of business),
liabilities, costs, expenses (including without
limitation, reasonable attorneys' fees and
expenses, and consultant's fees and other costs of
defense or investigation), and interest on any
amount payable to a third party as a result of the
foregoing.
Market Value............... Shall 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 ten (10)
consecutive trading days ending on the trading day
five trading days preceding the Effective Date.
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, Assets, 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 effect" shall not
be deemed to include the impact of (w) changes in
generally accepted accounting principles or
regulatory accounting principles generally
applicable to banks and their holding companies,
(x) actions and omissions of a Party (or any of its
Subsidiaries) taken with the prior informed consent
of the other Party in contemplation of the
transactions contemplated hereby, and (y) 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.
Merger Consideration....... The distribution of BancGroup Common Stock for each
share of Acquired Corporation Stock (and cash for
fractional shares) as provided in section 3.1(a)
hereof.
Net Income................. Net income in accordance with GAAP.
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.
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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 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 this Agreement, including the Proxy
Statement.
Resulting Bank............. Either Colonial Bank or FirstBank, as provided in
Section 2.8.
Resulting Corporation...... BancGroup, as the surviving corporation resulting
from the Merger.
SEC........................ United States Securities and Exchange Commission.
Shareholders............... Meeting The special meeting of shareholders of
Acquired Corporation called to approve the
transactions contemplated by this Agreement.
Stock Option Agreement..... The agreement dated as of the date hereof between
BancGroup and Acquired Corporation granting to
BancGroup the right to acquire up to 19.9% of
Acquired Corporation common stock.
Stock Split................ Shall mean that stock split declared by BancGroup
on July 15, 1998, to be effective in the form of a
100% stock dividend to be distributed on August 14,
1998, to shareholders of record at the close of
business on July 31, 1998.
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.
TBCA....................... Texas Business Corporation Act
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. (a) Except as otherwise provided in this Section 15.1, each
of the Parties shall bear and pay all direct costs and expenses incurred by it
or on its behalf in connection with the transactions
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contemplated hereunder, including filing, registration and application fees,
printing fees, and fees and expenses of its own financial or other consultants,
investment bankers, accountants, and counsel, except that BancGroup shall bear
and pay the filing fees payable in connection with the Registration Statement
and printing costs incurred in connection with the printing of the Registration
Statement.
(b) Nothing contained in this Section 15.1 shall constitute or shall
be deemed to constitute liquidated damages for the willful breach by a
Party of the terms of this Agreement or otherwise limit the rights of the
nonbreaching Party.
15.2 Benefit and Assignment. Except as expressly contemplated hereby,
neither this Agreement nor any of the rights, interests, or obligations
hereunder shall be assigned by any Party hereto (whether by operation of Law or
otherwise) without the prior written consent of the other Party. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the Parties and their respective successors and
assigns.
15.3 Governing Law. Except to the extent the Laws of the State of Delaware
and the State of Texas apply to the Merger, 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, then all other terms and provisions, being severable,
shall remain in full force and effect in such circumstance or situation and the
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
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recover from the other Party its costs and expenses incurred in connection with
such action (including reasonable 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.
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: T B & T, INC.
By: /s/ LINDA M. BRIDGES By: /s/ CHARLES B. PHILLIPS
-------------------------------------------------- --------------------------------------------------
Its: Assistant Secretary Its: President and Chief Financial Officer
(CORPORATE SEAL)
ATTEST: THE COLONIAL BANCGROUP, INC.
By: /s/ GLENDA ALLRED By: /s/ W. FLAKE OAKLEY, IV
-------------------------------------------------- --------------------------------------------------
Its: Assistant Secretary W. Flake Oakley, IV
Its: Executive Vice President, Chief
Financial Officer, and Secretary
(CORPORATE SEAL)
</TABLE>
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APPENDIX B
ART. 5.11. RIGHTS OF DISSENTING SHAREHOLDERS IN THE EVENT OF CERTAIN CORPORATE
ACTIONS
A. Any shareholder of a domestic corporation shall have the right to
dissent from any of the following corporate actions:
(1) Any plan of merger to which the corporation is a party if
shareholder approval is required by Article 5.03 or 5.16 of this Act and
the shareholder holds shares or a class or series that was entitled to vote
thereon as a class or otherwise;
(2) Any sale, lease, exchange or other disposition (not including any
pledge, mortgage, deed of trust or trust indenture unless otherwise
provided in the articles of incorporation) of all, or substantially all,
the property and assets, with or without good will, of a corporation if
special authorization of the shareholders is required by this Act and the
shareholders hold shares of a class or series that was entitled to vote
thereon as a class or otherwise;
(3) Any plan of exchange pursuant to Article 5.02 of this Act in which
the shares of the corporation of the class or series held by the
shareholder are to be acquired.
B. Notwithstanding the provisions of Section A of this Article, a
shareholder shall not have the right to dissent from any plan of merger in which
there is a single surviving or new domestic or foreign corporation, or from any
plan of exchange, if:
(1) the shares held by the shareholder are part of a class or series,
shares of which are on the record date fixed to determine the shareholders
entitled to vote on the plan of merger or plan of exchange:
(a) listed on a national securities exchange;
(b) listed on the Nasdaq Stock Market (or successor quotation
system) or designated as a national market security on an interdealer
quotation system by the National Association of Securities Dealers,
Inc., or successor entity; or
(c) held of record by not less than 2,000 holders;
(2) the shareholder is not required by the terms of the plan of merger
or plan of exchange to accept for the shareholder's shares any
consideration that is different than the consideration (other than cash in
lieu of fractional shares that the shareholder would otherwise be entitled
to receive) to be provided to any other holder of shares of the same class
or series of shares held by such shareholder; and
(3) the shareholder is not required by the terms of the plan of merger
or the plan of exchange to accept for the shareholder's shares any
consideration other than:
(a) shares of a domestic or foreign corporation that, immediately
after the effective time of the merger or exchange, will be part of a
class or series, shares of which are:
(i) listed, or authorized for listing upon official notice of
issuance, on a national securities exchange;
(ii) approved for quotation as a national market security on an
interdealer quotation system by the National Association of
Securities Dealers, Inc., or successor entity; or
(iii) held of record by not less than 2,000 holders;
(b) cash in lieu of fractional shares otherwise entitled to be
received; or
(c) any combination of the securities and cash described in
Subdivisions (a) and (b) of this subsection.
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ART. 5.12. PROCEDURE FOR DISSENT BY SHAREHOLDERS AS TO SAID CORPORATE ACTIONS
A. Any shareholder of any domestic corporation who has the right to dissent
from any of the corporate actions referred to in Article 5.11 of this Act may
exercise that right to dissent only by complying with the following procedures:
(1)(a) With respect to proposed corporate action that is submitted to
a vote of shareholders at a meeting, the shareholder shall file with the
corporation, prior to the meeting, a written objection to the action,
setting out that the shareholder's right to dissent will be exercised if
the action is effective and giving the shareholder's address, to which
notice thereof shall be delivered or mailed in that event. If the action is
effected and the shareholder shall not have voted in favor of the action,
the corporation, in the case of action other than a merger, or the
surviving or new corporation (foreign or domestic) or other entity that is
liable to discharge the shareholder's right of dissent, in the case of a
merger, shall, within ten (10) days after the action is effected, deliver
or mail to the shareholder written notice that the action has been
effected, and the shareholder may, within ten (10) days from the delivery
or mailing of the notice, make written demand on the existing, surviving,
or new corporation (foreign or domestic) or other entity, as the case may
be, for payment of the fair value of the shareholder's shares. The fair
value of the shares shall be the value thereof as of the day immediately
preceding the meeting, excluding any appreciation or depreciation in
anticipation of the proposed action. The demand shall state the number and
class of the shares owned by the shareholder and the fair value of the
shares as estimated by the shareholder. Any shareholder failing to make
demand within the ten (10) day period shall be bound by the action.
(b) With respect to proposed corporate action that is approved
pursuant to Section A of Article 9.10 of this Act, the corporation, in the
case of action other than a merger, and the surviving or new corporation
(foreign or domestic) or other entity that is liable to discharge the
shareholder's right of dissent, in the case of a merger, shall, within ten
(10) days after the date the action is effected, mail to each shareholder
of record as of the effective date of the action notice of the fact and
date of the action and that the shareholder may exercise the shareholder's
right to dissent from the action. The notice shall be accompanied by a copy
of this Article and any articles or documents filed by the corporation with
the Secretary of State to effect the action. If the shareholder shall not
have consented to the taking of the action, the shareholder may, within
twenty (20) days after the mailing of the notice, make written demand on
the existing, surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, for payment of the fair value of the
shareholder's shares. The fair value of the shares shall be the value
thereof as of the date the written consent authorizing the action was
delivered to the corporation pursuant to Section A of Article 9.10 of this
Act, excluding any appreciation or depreciation in anticipation of the
action. The demand shall state the number and class of shares owned by the
dissenting shareholder and the fair value of the shares as estimated by the
shareholder. Any shareholder failing to make demand within the twenty (20)
day period shall be bound by the action.
(2) Within twenty (20) days after receipt by the existing, surviving,
or new corporation (foreign or domestic) or other entity, as the case may
be, of a demand for payment made by a dissenting shareholder in accordance
with Subsection (1) of this Section, the corporation (foreign or domestic)
or other entity shall deliver or mail to the shareholder a written notice
that shall either set out that the corporation (foreign or domestic) or
other entity accepts the amount claimed in the demand and agrees to pay
that amount within ninety (90) days after the date on which the action was
effected, and, in the case of shares represented by certificates, upon the
surrender of the certificates duly endorsed, or shall contain an estimate
by the corporation (foreign or domestic) or other entity of the fair value
of the shares, together with an offer to pay the amount of that estimate
within ninety (90) days after the date on which the action was effected,
upon receipt of notice within sixty (60) days after that date from the
shareholder that the shareholder agrees to accept that amount and, in the
case of shares represented by certificates, upon the surrender of the
certificates duly endorsed.
3. If, within sixty (60) days after the date on which the corporate
action was effected, the value of the shares is agreed upon between the
shareholder and the existing, surviving, or new corporation (foreign or
domestic) or other entity, as the case may be, payment for the shares shall
be made within ninety (90)
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days after the date of which the action was effected and, in the case of
shares represented by certificates, upon surrender of the certificates duly
endorsed. Upon payment of the agreed value, the shareholder shall cease to
have any interest in the shares or in the corporation.
B. If, within the period of sixty (60) days after the date on which the
corporate action was effected, the shareholder and the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may be, do
not so agree, then the shareholder or the corporation (foreign or domestic) or
other entity may, within sixty (60) days after the expiration of the sixty (60)
day period, file a petition in any court of competent jurisdiction in the county
in which the principal office of the domestic corporation is located, asking of
a finding and determination of the fair value of the shareholder's shares. Upon
the filing of any such petition by the shareholder, service of a copy thereof
shall be made upon the corporation (foreign or domestic) or other entity, which
shall, within ten (10) days after service, file in the office of the clerk of
the court in which the petition was filed a list containing the names and
addresses of all shareholders of the domestic corporation who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the corporation (foreign or domestic) or other
entity. If the petition shall be filed by the corporation (foreign or domestic)
or other entity, the petition shall be accompanied by such a list. The clerk of
the court shall give notice of the time and place fixed for the hearing of the
petition by registered mail to the corporation (foreign or domestic) or other
entity and to the shareholders named on the list at the addresses therein
stated. The forms of the notices by mail shall be approved by the court. All
shareholders thus notified and the corporation (foreign or domestic) or other
entity shall thereafter be bound by the final judgment of the court.
C. After the hearing of the petition, the court shall determine the
shareholders who have complied with the provisions of this Article and have
become entitled to the valuation of and payment for their shares, and shall
appoint one or more qualified appraisers to determine that value. The appraisers
shall have power to examine any of the books and records of the corporation the
shares of which they are charged with the duty of valuing, and they shall make a
determination of the fair value of the shares upon such investigation as to them
may seem proper. The appraisers shall also afford a reasonable opportunity to
the parties interested to submit to them pertinent evidence as to the value of
the shares. The appraisers shall also have such power and authority as may be
conferred on Masters in Chancery by the Rules of Civil Procedure or by the order
of their appointment.
D. The appraisers shall determine the fair value of the shares of the
shareholders adjudged by the court to be entitled to payment for their shares
and shall file their report of that value in the office of the clerk of the
court. Notice of the filing of the report shall be given by the clerk to the
parties in interest. The report shall be subject to exceptions to be heard
before the court both upon the law and the facts. The court shall by its
judgment determine the fair value of the shares of the shareholders entitled to
payment for their shares and shall direct the payment of that value by the
existing, surviving, or new corporation (foreign or domestic) or other entity,
together with interest thereon, beginning 91 days after the date on which the
applicable corporate action from which the shareholder elected to dissent was
effected to the date of such judgment, to the shareholders entitled to payment.
The judgment shall be payable to the holders of uncertificated shares
immediately but to the holders of shares represented by certificates only upon,
and simultaneously with, the surrender to the existing, surviving, or new
corporation (foreign or domestic) or other entity, as the case may be, of duly
endorsed certificates for those shares. Upon payment of the judgment, the
dissenting shareholders shall cease to have any interest in those shares or in
the corporation. The court shall allow the appraisers a reasonable fee as court
costs, and all court costs shall be allotted between the parties in the manner
that the court determines to be fair and equitable.
E. Shares acquired by the existing, surviving, or new corporation (foreign
or domestic) or other entity, as the case may be, pursuant to the payment of the
agreed value of the shares or pursuant to payment of the judgment entered for
the value of the shares, as in this Article provided, shall, in the case of a
merger, be treated as provided in the plan of merger and, in all other cases,
may be held and disposed of by the corporation as in the case of other treasury
shares.
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F. The provisions of this Article shall not apply to a merger if, on the
date of the filing of the articles of merger, the surviving corporation is the
owner of all the outstanding shares of the other corporations, domestic or
foreign, that are parties to the merger.
G. In the absence of fraud in the transaction, the remedy provided by this
Article to a shareholder objecting to any corporate action referred to in
Article 5.11 of this Act is the exclusive remedy for the recovery of the value
of his shares or money damages to the shareholder with respect to the action. If
the existing, surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, complies with the requirements of this Article, any
shareholder who fails to comply with the requirements of this Article shall not
be entitled to bring suit for the recovery of the value of his shares or money
damages to the shareholder with respect to the action.
ART. 5.13. PROVISIONS AFFECTING REMEDIES OF DISSENTING SHAREHOLDERS
A. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act shall not thereafter be entitled to
vote or exercise any other rights of a shareholder except the right to receive
payment for his shares pursuant to the provisions of those articles and the
right to maintain an appropriate action to obtain relief on the ground that the
corporate action would be or was fraudulent, and the respective shares for which
payment has been demanded shall not thereafter be considered outstanding for the
purposes of any subsequent vote of shareholders.
B. Upon receiving a demand for payment from any dissenting shareholder, the
corporation shall make an appropriate notation thereof in its shareholder
records. Within twenty (20) days after demanding payment for his shares in
accordance with either Article 5.12 or 5.16 of this Act, each holder of
certificates representing shares so demanding payment shall submit such
certificates to the corporation for notation thereon that such demand has been
made. The failure of holders of certificated shares to do so shall, at the
option of the corporation, terminate such shareholder's rights under Articles
5.12 and 5.16 of this Act unless a court of competent jurisdiction for good and
sufficient cause shown shall otherwise direct. If uncertificated shares for
which payment has been demanded or shares represented by a certificate on which
notation has been so made shall be transferred, any new certificate issued
therefor shall bear similar notation together with the name of the original
dissenting holder of such shares and a transferee of such shares shall acquire
by such transfer no rights in the corporation other than those which the
original dissenting shareholder had after making demand for payment of the fair
value thereof.
C. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act may withdraw such demand at any
time before payment for his shares or before any petition has been filed
pursuant to Article 5.12 or 5.16 of this Act asking for a finding and
determination of the fair value of such shares, but no such demand may be
withdrawn after such payment has been made or, unless the corporation shall
consent thereto, after any such petition has been filed. If, however, such
demand shall be withdrawn as hereinbefore provided, or if pursuant to Section B
of this Article the corporation shall terminate the shareholder's rights under
Article 5.12 or 5.16 of this Act, as the case may be, or if no petition asking
for a finding and determination of fair value of such shares by a court shall
have been filed within the time provided in Article 5.12 or 5.16 of this Act, as
the case may be, or if after the hearing of a petition filed pursuant to Article
5.12 or 5.16, the court shall determine that such shareholder is not entitled to
the relief provided by those articles, then, in any such case, such shareholder
and all persons claiming under him shall be conclusively presumed to have
approved and ratified the corporate action from which he dissented and shall be
bound thereby, the right of such shareholder to be paid the fair value of his
shares shall cease, and his status as a shareholder shall be restored without
prejudice to any corporate proceedings which may have been taken during the
interim, and such shareholder shall be entitled to receive any dividends or
other distributions made to shareholders in the interim.
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APPENDIX C
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of August 6, 1998 (the "Agreement"), by
and between T B & T, Inc., a Texas corporation ("Issuer"), and The Colonial
BancGroup, Inc., a Delaware corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger dated as of August 6, 1998 (the "Merger Agreement"), providing for, among
other things, the merger of Issuer with and into Grantee, with Grantee as the
surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the Merger
Agreement, Grantee has required that Issuer agree, and Issuer has agreed, to
grant Grantee the Option (as defined below);
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, and agreements set forth herein and in
the Merger Agreement, and intending to be legally bound hereby, Issuer and
Grantee agree as follows:
1. Defined Terms. Capitalized terms which are used but not defined herein
shall have the meanings ascribed to such terms in the Merger Agreement.
2. Grant of Option. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase
from time to time up to 368,150 shares (as adjusted as set forth herein) (the
"Option Shares"), of Common Stock, without par value ("Issuer Common Stock"), of
Issuer at a purchase price per Option Share (the "Purchase Price") equal to
$11.05; provided, however, that in no event shall the number of shares for which
this option is exercisable exceed 19.9% of the outstanding shares of Issuer
Common Stock, prior to exercise of the Option.
3. Exercise of Option. (a) Provided that (i) Grantee shall not be in
material breach of the agreements or covenants contained in this Agreement or
the Merger Agreement, and (ii) no preliminary or permanent injunction or other
order against the delivery of shares covered by the Option issued by any court
of competent jurisdiction in the United States shall be in effect, Grantee may
exercise the Option, in whole or in part, at any time and from time to time
following the occurrence of a Purchase Event (as defined below); provided that
the Option shall terminate and be of no further force or effect upon the
earliest to occur of (A) the Effective Date, or (B) termination of the Merger
Agreement in accordance with the terms thereof prior to the occurrence of a
Purchase Event or a Preliminary Purchase Event, (C) termination of the Merger
Agreement in accordance with the terms thereof after the occurrence of a
Purchase Event or a Preliminary Purchase Event (other than a termination of the
Merger Agreement by Grantee due to a material breach by Issuer in accordance
with Section 13.2(b) of the Merger Agreement or a termination due to the failure
to fulfill conditions set forth in Sections 8.1, 10.1, 10.3, 10.4, 10.5,
10.6,10.7, or 10.9 (but only if such failure was not due to an act of Grantee),
of the Merger Agreement, or (D) eighteen (18) months after termination of the
Merger Agreement following the occurrence of a Purchase Event or a Preliminary
Purchase Event, provided that the termination of the Merger Agreement was due to
one of the reasons listed in the parenthetical of Clause (C) above; and provided
further, that any purchase of shares upon exercise of the Option shall be
subject to compliance with applicable law including, without limitation, the
Bank Holding Company Act of 1956, as amended (the "BHC Act"). The rights set
forth in Section 8 shall terminate when the right to exercise the Option
terminates (other than as a result of a complete exercise of the Option) as set
forth herein.
(b) As used herein, a "Purchase Event" means any of the following events:
(i) Without Grantee's prior written consent, Issuer shall have
authorized, recommended, publicly proposed, or publicly announced an
intention to authorize, recommend, or propose, or shall have entered into
any agreement with any person (other than Grantee or any subsidiary of
Grantee) to effect an Acquisition Transaction (as defined below). As used
herein, the term Acquisition Transaction shall mean (A) a merger,
consolidation, or other business combination involving Issuer, (B) the
disposition, by sale, lease, exchange, or otherwise, of assets of Issuer or
any of its subsidiaries representing in either case all or
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substantially all of the consolidated assets of Issuer, or (C) the
issuance, sale, or other disposition of (including by way of merger,
consolidation, share exchange, or any similar transaction) securities
representing 25% or more of the voting power of Issuer; or
(ii) any person (other than Grantee or any subsidiary of Grantee)
shall have acquired beneficial ownership (as such term is defined in Rule
13d-3 promulgated under the Securities Exchange Act of 1934 (the "1934
Act")) of or the right to acquire beneficial ownership of, or any "group"
(as such term is defined under the 1934 Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, 25%
or more of the then outstanding shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) any person (other than Grantee or any subsidiary of Grantee) shall
have commenced (as such term is defined in Rule 14d-2 under the 1934 Act),
or shall have filed a registration statement under the 1933 Act with
respect to, a tender offer or exchange offer to purchase any shares of
Issuer Common Stock such that, upon consummation of such offer, such person
would own or control 25% or more of the then outstanding shares of Issuer
Common Stock (such an offer being referred to herein as a "Tender Offer" or
an "Exchange Offer," respectively); or
(ii) (1) the holders of Issuer Common Stock shall not have approved
the Merger Agreement at the meeting of such stockholders held for the
purpose of voting on the Merger Agreement, (2) such meeting shall not have
been held or shall have been canceled prior to termination of the Merger
Agreement, (3) the Issuer's Board of Directors or any person representing
such Board shall have commenced negotiations with any person other than
Grantee regarding an Acquisition Transaction, or (4) Issuer's Board of
Directors shall have withdrawn or modified in a manner adverse to Grantee
the recommendation of Issuer's Board of Directors with respect to the
Merger Agreement, in each case after it shall have been publicly announced
(or otherwise disclosed to the Issuer prior to such public announcement)
that any person (other than Grantee or any subsidiary of Grantee) shall
have (A) made, or disclosed to Issuer an intention to make, a proposal to
engage in an Acquisition Transaction, (B) commenced a Tender Offer or filed
a registration statement under the 1933 Act with respect to an Exchange
Offer, or (C) filed an application (or given a notice), whether in draft or
final form, under the BHC Act, the Bank Merger Act, or the Change in Bank
Control Act of 1978, or other appropriate banking agency, for approval to
engage in an Acquisition Transaction.
As used in this Agreement, "person" shall have the meaning specified in
Sections 3(a)(9) and 13(d)(3) of the 1934 Act.
(d) In the event Grantee wishes to exercise the Option, it shall send to
Issuer a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of Option Shares it intends to
purchase pursuant to such exercise and (ii) a place and date not earlier than
three business days nor later than 15 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"). If prior
notification to or approval of the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") or any other regulatory authority is
required in connection with such purchase, Issuer shall cooperate with Grantee
in the filing of the required notice or application for approval and the
obtaining of such approval and the Closing shall occur immediately following
such regulatory approvals (and any mandatory waiting periods).
4. Payment and Delivery of Certificates. (a) On each Closing Date, Grantee
shall (i) pay to Issuer, in immediately available funds by wire transfer to a
bank account designated by Issuer, an amount equal to the Purchase Price
multiplied by the number of Option Shares to be purchased on such Closing Date,
and (ii) present and surrender this Agreement to the Issuer at the address of
the Issuer specified in Section 11(f) hereof.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a), (i)
Issuer shall deliver to Grantee (A) a certificate or certificates representing
the Option Shares to be purchased at such Closing, which Option Shares shall be
free and clear of all liens, claims, charges, and encumbrances of any kind
whatsoever and subject to no pre-emptive rights,
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and (B) if the Option is exercised in part only, an executed new agreement with
the same terms as this Agreement evidencing the right to purchase the balance of
the shares of Issuer Common Stock purchasable hereunder, and (ii) Grantee shall
deliver to Issuer a letter agreeing that Grantee shall not offer to sell or
otherwise dispose of such Option Shares in violation of applicable federal and
state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by applicable law,
certificates for the Option Shares delivered at each Closing shall be endorsed
with a restrictive legend which shall read substantially as follows:
THE STOCK REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE LAW AND THE TRANSFER OF THE STOCK
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO RESTRICTIONS ARISING UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND PURSUANT TO THE TERMS OF A
STOCK OPTION AGREEMENT DATED AS OF AUGUST 6, 1998. A COPY OF SUCH AGREEMENT
WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY THE
ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that: (i) the reference to restrictions arising
under the 1933 Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if Grantee shall have delivered
to Issuer a copy of a letter from the staff of the United States Securities and
Exchange Commission ("SEC"), or an opinion of counsel in form and substance
reasonably satisfactory to Issuer and its counsel, to the effect that such
legend is not required for purposes of the 1933 Act; and (ii) the reference to
restrictions pursuant to this Agreement in the above legend shall be removed by
delivery of a substitute certificate without such reference if the Option Shares
evidenced by such certificate containing such reference have been sold or
transferred in compliance with the provisions of this Agreement under
circumstances that do not require the retention of such reference.
5. Representations and Warranties of Issuer. Issuer hereby represents and
warrants to Grantee as follows:
(a) Issuer has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals referred to herein, to
consummate the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the
part of Issuer. This Agreement has been duly executed and delivered by
Issuer.
(b) Issuer has taken all necessary corporate and other action to
authorize and reserve and to permit it to issue (and at all times from the
date hereof until the obligation to deliver Issuer Common Stock upon the
exercise of the Option terminates, will have reserved for issuance), upon
exercise of the Option, the number of shares of Issuer Common Stock
necessary for Grantee to exercise the Option, and Issuer will take all
necessary corporate action to authorize and reserve for issuance all
additional shares of Issuer Common Stock or other securities which may be
issued pursuant to Section 7 upon exercise of the Option. The shares of
Issuer Common Stock to be issued upon due exercise of the Option, including
all additional shares of Issuer Common Stock or other securities which may
be issuable pursuant to Section 7, upon issuance pursuant hereto, shall be
duly and validly issued, fully paid and nonassessable, and shall be
delivered free and clear of all liens, claims, charges, and encumbrances of
any kind or nature whatsoever, including any statutory preemptive rights of
any stockholder of Issuer.
6. Representations and Warranties of Grantee. Grantee hereby represents
and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Grantee. This Agreement has been duly executed and
delivered by Grantee.
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(b) This Option is not being, and any Option Shares or other
securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the 1933 Act.
7. Adjustment upon Changes in Capitalization, etc. (a) In the event of a
change in Issuer Common Stock by reason of a stock dividend, stock split,
split-up, recapitalization, combination, exchange of shares, or similar
transaction, the type and number of shares or securities subject to the Option,
and the Purchase Price therefor, shall be adjusted appropriately, subject to the
limitation set forth in Section 2 hereof, and proper provision shall be made in
the agreements governing such transaction so that Grantee shall receive, upon
exercise of the Option, the number and class of shares or other securities or
property that Grantee would have received in respect of Issuer Common stock if
the Option had been exercised immediately prior to such event, or the record
date therefor, as applicable. If any additional shares of Issuer Common Stock
are issued after the date of this Agreement (other than pursuant to an event
described in the first sentence of this Section 7(a) or a sale of the Issuer
Common Stock for cash at its fair market value), the number of shares of Issuer
Common Stock subject to the Option shall be adjusted so that, after such
issuance, the shares of Issuer Common Stock subject to the Option, together with
any shares of Issuer Common Stock previously issued pursuant hereto, equal 19.9%
of the number of shares of Issuer Common Stock then issued and outstanding.
(b) In the event that Issuer shall enter into an agreement: (I) to
consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger; (ii) to permit any person, other than Grantee or one of
its subsidiaries, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then-outstanding
shares of Issuer Common Stock shall be changed into or exchanged for stock or
other securities of the Issuer or any other person or cash or any other property
or the outstanding shares of Issuer Common Stock immediately prior to such
merger shall after such merger represent less than 50% of the outstanding shares
and share equivalents of the merged company; or (iii) to sell or otherwise
transfer all or substantially all of its assets to any person, other than
Grantee or one of its subsidiaries, then, and in each such case, the agreement
governing such transaction shall make proper provisions so that the Option
shall, upon the consummation of any such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of Grantee, of either (x) the Acquiring
Corporation (as defined below), (y) any person that controls the Acquiring
Corporation, or (z) in the case of a merger described in clause (ii), the Issuer
(in each case, such person being referred to as the "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the Option, provided
that, if the terms of the Substitute Option cannot, for legal reasons, be the
same as the Option, such terms shall be as similar as possible and in no event
less advantageous to Grantee. The Substitute Option Issuer shall also enter into
an agreement with the then-holder or holders of the Substitute Option in
substantially the same form as this Agreement, which shall be applicable to the
Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
the Substitute Common Stock (as hereinafter defined) as is equal to the Assigned
Value (as hereinafter defined) multiplied by the number of shares of the Issuer
Common Stock for which the Option was theretofore exercisable, divided by the
Average Price (as hereinafter defined). The exercise price of the Substitute
Option per share of the Substitute Common Stock (the "Substitute Purchase
Price") shall then be equal to the Purchase Price multiplied by a fraction in
which the numerator is the number of shares of the Issuer Common Stock for which
the Option was theretofore exercisable and the denominator is the number of
shares for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (x) the continuing or surviving
corporation of a consolidation or merger with the Issuer (if other than the
Issuer), (y) the Issuer in a merger in which the Issuer is the continuing
or surviving person, and (z) the transferee of all or substantially all of
the Issuer's assets.
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(ii) "Substitute Common Stock" shall mean the common stock issued by
the Substitute Option Issuer upon exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the highest of (x) the price per
share of the Issuer Common Stock at which a Tender Offer or Exchange Offer
therefor has been made by any person after the date hereof (other than
Grantee), (y) the price per share of the Issuer Common Stock to be paid by
any person (other than the Grantee) pursuant to an agreement with the
Issuer, or (z) the highest closing sales price per share of Issuer Common
Stock quoted on the National Association of Securities Dealers Automated
Quotation National Market System ("NASDAQ/NMS") (or if Issuer Common Stock
is not quoted on the NASDAQ/NMS, the highest bid price per share on any day
as quoted on the principal trading market or securities exchange on which
such shares are traded as reported by a recognized source chosen by Grantee
or, if there is no such information available, the value of such shares as
determined by a nationally recognized investment banking firm compensated
and selected by Grantee) within the six-month period immediately preceding
the Agreement; provided, however, that in the event of a sale of all or
substantially all of the Issuers' assets, the Assigned Value shall be the
sum of the price paid in such sale for such assets and the current market
value of the remaining assets of the Issuer as determined by a nationally
recognized investment banking firm selected by Grantee (or by a majority in
interest of the Grantees if there shall be more than one Grantee (a
"Grantee Majority")), divided by the number of shares of the Issuer Common
Stock outstanding at the time of such sale.
(iv) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event-higher than the
closing price of the shares of the Substitute Common Stock on the day
preceding such consolidation, merger, or sale, provided that if Issuer is
the issuer of the Substitute Option, the Average Price shall be computed
with respect to a share of common stock issued by the Issuer, the person
merging into the Issuer or by any company which controls or is controlled
by such merger person, as Grantee may elect, and provided further that if
there is no such trading information available, the price of such shares
shall be determined by a nationally recognized investment banking firm
selected by Grantee.
(f) In no event pursuant to any of the foregoing paragraphs shall the
Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of the Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the aggregate of the shares of Substitute Common Stock
but for this clause (f), the Substitute Option Issuer shall make a cash payment
to Grantee equal to the excess of (I) the value of the Substitute Option without
giving effect to the limitation in this clause (f) over (ii) the value of the
Substitute Option after giving effect to the limitation in this clause (f). This
difference in value shall be determined by a nationally recognized investment
banking firm selected by Grantee (or a Grantee Majority).
(g) Issuer shall not enter into any transaction described in subsection (b)
of this Section 7 unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assumes in writing all the obligations of Issuer
hereunder and takes all other actions that may be necessary so that the
provisions of this Section 7 are given full force and effect (including, without
limitation, any action that may be necessary so that the shares of Substitute
Common Stock are in no way distinguishable from or have lesser economic value
than other shares of common stock issued by the Substitute Option Issuer) (other
than any diminution in value resulting from the fact that the shares of
Substitute Common Stock are restricted securities as defined in Rule 144 under
the 1933 Act or any successor provision).
(h) The provisions of Sections 8, 9, and 10 shall apply, with appropriate
adjustments, to any securities for which the Option becomes exercisable pursuant
to this Section 7 and, as applicable, references in such sections to "Issuer,"
"Option," "Purchase Price," and "Issuer Common Stock" shall be deemed to be
references to "Substitute Option Issuer," "Substitute Option," "Substitute
Purchase Price," and "Substitute Common Stock," respectively.
8. Repurchase at the Option of Grantee. (a) Subject to the last sentence
of Section 3(a), at the request of Grantee at any time commencing upon the first
occurrence of a Repurchase Event (as defined in Section 8(d)) and ending 30 days
immediately thereafter, Issuer shall, to the extent permitted by applicable
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law, repurchase from Grantee the Option and all shares of Issuer Common Stock
purchased by Grantee pursuant hereto with respect to which Grantee then has
beneficial ownership. The date on which Grantee exercises its right under this
Section 8 is referred to as the "Request Date". Such repurchase shall be at an
aggregate price (the "Section 8 Repurchase Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Grantee for any shares of
Issuer Common Stock acquired pursuant to the Option with respect to which
Grantee then has beneficial ownership;
(ii) The excess, if any, of (x) the Applicable Price (as defined
below) for each share of Issuer Common Stock over (y) the Purchase Price
(subject to adjustment pursuant to Section 7), multiplied by the number of
shares of Issuer Common Stock with respect to which the Option has not been
exercised; and
(iii) the excess, if any, of the Applicable Price over the Purchase
Price (subject to adjustment pursuant to Section 7) paid (or, in the case
of Option Shares with respect to which the Option has been exercised but
the Closing Date has not occurred, payable) by Grantee for each share of
Issuer Common Stock with respect to which the Option has been exercised and
with respect to which Grantee then has beneficial ownership, multiplied by
the number of such shares.
(b) If Grantee exercises its right under this Section 8, Issuer shall, to
the extent permitted by applicable law, within 10 business days after the
Request Date, pay the Section 8 Repurchase Consideration to Grantee in
immediately available funds, and contemporaneously with such payment Grantee
shall surrender to Issuer the Option and the certificates evidencing the shares
of Issuer Common Stock purchased thereunder with respect to which Grantee then
has beneficial ownership, and Grantee shall warrant that it has sole record and
beneficial ownership of such shares and that the same are then free and clear of
all liens, claims, charges, and encumbrances of any kind whatsoever.
Notwithstanding the foregoing, to the extent that prior notification to or
approval of the Board of Governors of the Federal Reserve System or other
regulatory authority is required in connection with the payment of all or any
portion of the Section 8 Repurchase Consideration, Grantee shall have the
ongoing option to revoke its request for repurchase pursuant to this Section 8,
in whole or in part, or to require that Issuer deliver from time to time that
portion of the Section 8 Repurchase Consideration that it is not then so
prohibited from paying and promptly file the required notice or application for
approval and expeditiously process the same (and each party shall cooperate with
the other in the filing of any such notice or application and the obtaining of
any such approval). If the Board of Governors of the Federal Reserve System or
any other regulatory authority disapproves of any part of Issuer's proposed
repurchase pursuant to this Section 8, Issuer shall promptly give notice of such
fact to Grantee. If the Board of Governors of the Federal Reserve System or
other agency prohibits the repurchase in part but not in whole, then Grantee
shall have the right (I) to revoke the repurchase request, or (ii) to the extent
permitted by the Board of Governors of the Federal Reserve System or other
agency, determine whether the repurchase should apply to the Option and/or
Option Shares and to what extent to each, and Grantee shall thereupon have the
right to exercise the Option as to the number of Options Shares for which the
Option was exercisable at the Request Date less the sum of the number of shares
covered by the Option in respect of which payment has been made pursuant to
Section 8(a)(ii) and the number of shares covered by the portion of the Option
(if any) that has been repurchased. Grantee shall notify Issuer of its
determination under the preceding sentence within five (5) days of receipt of
notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of the Grantee's
rights under this Section 8 shall terminate on the date of termination of this
Option pursuant to Section 3(a).
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (I) the highest price per share of Issuer Common Stock paid for any
such share by the person or groups described in Section 8(d)(I); (ii) the price
per share of Issuer Common Stock received by holders of Issuer Common Stock in
connection with any merger or other business combination transaction described
in Section 7(b)(I), 7(b)(ii) or 7(b)(iii); or (iii) the highest closing sales
per share of Issuer Common Stock quoted on the NASDAQ/NMS (or if Issuer Common
Stock is not quoted on the market or securities exchange on which such shares
are traded as reported by a recognized source chosen by Grantee and reasonably
acceptable to Issuer) during the 60 business days preceding the Request Date;
provided, however, that in the event of a sale
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of less than all of Issuer's assets, the Applicable Price shall be the sum of
the price paid in such sale for such assets and the current market value of the
remaining assets of Issuer as determined by a nationally recognized investment
banking firm selected by Grantee, divided by the number of shares of the Issuer
Common Stock outstanding at the time of such sale. If the consideration to be
offered, paid or received pursuant to either of the foregoing clauses (I) or
(ii) shall be other than in cash, the value of such consideration shall be
determined in good faith by an independent nationally recognized investment
banking firm selected by Grantee and reasonably acceptable to Issuer, which
determination shall be conclusive for all purposes of the Agreement.
(d) As used herein, "Repurchase Event" shall occur if (I) any person (other
than Grantee or any subsidiary of Grantee) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3 promulgated under the 1934
Act), or the right to acquire beneficial ownership of, or any "group" (as such
term is defined under the 1934 Act) shall have been formed which beneficially
owns or has the right the acquire beneficial ownership of, 50% or more of the
then outstanding shares of Issuer Common Stock, or (ii) any of the transactions
described in Section 7(b)(I), 7(b)(ii), or 7(b)(iii) shall be consummated.
(e) In connection with the application of the provisions of this Section 8,
Grantee acknowledges that Issuer's ability to fund the Section 8 Repurchase
Consideration in accordance with the provisions of this Section 8 may be
dependant upon the ability of Issuer to obtain the prior approval of the Board
of Governors of the Federal Reserve System and applicable provisions of Texas
law and that, unless there has been an agreement of the type described in
Section 7(b), Issuer's obligations under this Section 8 do not impose on the
Issuer an obligation to otherwise finance the payment of the Section 8
Repurchase Consideration through the incurrence of indebtedness or the issuance
of capital instruments or securities by Issuer in either case sufficient in
amount to satisfy the payment of the Section 8 Repurchase Consideration.
Accordingly, Issuer shall not be deemed to be in breach of this Section 8 if,
after making its best efforts to obtain regulatory authorization for a capital
distribution required to pay the Section 8 Repurchase Consideration, it is
unable to do so.
9. Quotation: Listing. If the Issuer Common Stock or any other securities
to be acquired upon exercise of the Option are then authorized for quotation or
trading or listing on the NASDAQ/NMS or any securities exchange, Issuer, upon
the request of Grantee, will promptly file an application, if required, to
authorize for quotation or trading or listing shares of Issuer Common Stock or
other securities to be acquired upon exercise of the Option on the NASDAQ/NMS or
such other securities exchange and will use its best efforts to obtain approval,
if required, of such quotation or listing as soon as practicable.
10. Division of Option. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the Option of the Grantee, upon presentation
and surrender of this Agreement at the principal office of Issuer for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any other Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction, or mutilation of
this Agreement, and (in the case of loss, theft, or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of the Issuer, whether or not
the Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
11. Miscellaneous. (a) Expenses. Each of the parties hereto shall bear
and pay all costs and expenses incurred by it or on its behalf in connection
with the transactions contemplated hereunder, including fees and expenses of its
own financial consultants, investment bankers, accountants and counsel.
(b) Waiver and Amendments. Any provision of this Agreement may be waived
at any time in writing by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered, or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
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(c) Entire Agreement: No Third-Party Beneficiary: Severability. This
Agreement, together with the Merger Agreement and the other documents and
instruments referred to herein and therein, between Grantee and Issuer (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and (b) is not intended to confer upon any person other
than the parties hereto (other than any transferee of the Option Shares or any
permitted transferee of this Agreement pursuant to Section 11(h)) any rights or
remedies hereunder. If any terms, provision, covenant, or restriction of this
Agreement is held by a court of competent jurisdiction or a federal or state
regulatory agency to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants, and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired, or invalidated.
If for any reason such court or regulatory agency determines that the Option
does not permit Grantee to Acquire, or does not require Issuer to repurchase,
the full number of shares of Issuer Common Stock as provided in Sections 3 and 8
(as adjusted pursuant to Section 7), it is the express intention of Issuer to
allow Grantee to Acquire or to require Issuer to repurchase such lesser number
of shares as may be permissible without any amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Alabama without regard to any
applicable conflicts of law rules.
(e) Descriptive Headings. The description headings contained herein are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
If to Issuer to: T B & T, Inc.
Texas Bank & Trust
1999 Bryan Street; Suite 100
Dallas, Texas 75201
Telecopy Number: 214/855-5447
Attention: Charles B. Phillips
with a copy to: Housley Kantarian & Bronstein, PC
1220 19th Street NW; Suite 700
Washington, DC 20036
Telecopy Number: 202/822-0140
Attention: Harry W. Kantarian
If to Grantee to: The Colonial BancGroup, Inc.
P.O. Box 1108
Montgomery, Alabama 36101
Telecopy Number: (334) 240-5069
Attention: W. Flake Oakley, IV
Chief Financial Officer
with a copy to: William A. McCrary
Vice President & Legal Counsel
One Commerce Street; Third Floor
Montgomery, Alabama 36104
Telecopy Number: (334) 240-5326
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(g) Counterparts. This Agreement and all amendments hereto may be executed
in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
(h) Assignment. Neither this Agreement nor any of the rights, interests,
or obligations hereunder or under the Option shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party, except that Grantee may assign this
Agreement to a wholly owned subsidiary of Grantee. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
(i) Further Assurances. In the event of any exercise of the Option by
Grantee, Issuer and Grantee shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(j) Specific Performance. The parties hereto agree that this Agreement may
be enforced by either party through specific performance, injunctive relief, and
other equitable relief. Both parties further agree to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any such
equitable relief and that this provision is without prejudice to any other
rights that the parties hereto may have for any failure to perform this
Agreement.
IN WITNESS WHEREOF, Issuer and Grantee have caused this agreement to be
signed by their respective officers thereunto duly authorized, all as of the day
and year first written above.
<TABLE>
<S> <C>
ATTEST: T B & T, INC.
By: /s/ LINDA M. BRIDGES By: /s/ CHARLES B. PHILLIPS
- -------------------------------------------- --------------------------------------------
Assistant Secretary President and Chief
Executive Officer
[CORPORATE SEAL]
ATTEST: THE COLONIAL BANCGROUP, INC.
By: /s/ GLENDA ALLRED By: /s/ W. FLAKE OAKLEY, IV
- -------------------------------------------- --------------------------------------------
Assistant Secretary W. Flake Oakley, IV
Chief Financial Officer
[CORPORATE SEAL]
</TABLE>
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APPENDIX D
HOVDE FINANCIAL, INC.
INVESTMENT BANKERS & FINANCIAL ADVISORS
October 27, 1998
Board of Directors
TB&T, Inc.
1999 Bryan Street
Dallas, TX 75201
Members of the Board:
We have reviewed the Agreement and Plan of Merger (the "Merger Agreement")
dated as of August 6, 1998 between The Colonial BancGroup ("BancGroup") and
TB&T, Inc. (the "TB&T") pursuant to which, among other things, Acquired
Corporation shall be merged with and into BancGroup. As is set forth in the
Merger Agreement, each share of Acquired Corporation shall be converted into the
right to receive .3203 shares of BancGroup (.6406 shares after giving effect to
the "Stock Split," as defined in the Merger Agreement"), the "Exchange Ratio."
Hovde Financial, Inc. ("Hovde") specializes in providing investment banking
and financial advisory services to commercial bank and thrift institutions. Our
principals are experienced in the independent valuation of securities in
connection with negotiated underwritings, subscription and community offerings,
private placements, merger and acquisition transactions and recapitalizations.
Pursuant to a Consulting Agreement dated July 30, 1998 between Acquired
Corporation and Hovde, Hovde was engaged to provide its opinion as to the
fairness, from a financial point of view, of the Exchange Ratio to the common
shareholders of the Acquired Corporation.
During the course of our engagement, we reviewed and analyzed material
bearing upon the financial and operating conditions of BancGroup and Acquired
Corporation, and material prepared in connection with the proposed transaction,
including the following: the Merger Agreement; certain publicly available
information concerning BancGroup and Acquired Corporation, including
consolidated financial statements for each of the three years ended December 31,
1997, as well as available information filed for the two quarterly periods ended
March 31, and June 30, 1998 with various regulatory agencies, including the
Securities and Exchange Commission and Federal Deposit Insurance Corporation;
the nature and terms of recent sale and merger transactions involving banks and
bank holding companies that we consider relevant; historical and current market
data for the common shares of BancGroup and Acquired Corporation, as
appropriate; and financial and any other information provided to us by the
management of either BancGroup or Acquired Corporation.
We also took into account our assessment of general economic, market and
financial conditions and our experience in other similar transactions as well as
our overall knowledge of the banking industry and our general experience in
securities valuations. In rendering this opinion, we have assumed, without
independent verification, the accuracy and completeness of the financial and
other information and representations contained in the materials provided to us
BancGroup and Acquired Corporation.
Based on the foregoing and our experience as investment bankers, we are of
the opinion that, as of the date hereof, the Exchange Ratio to be received by
the shareholders of Acquired Corporation as described in the Merger Agreement is
fair from a financial point of view.
Sincerely,
/s/ HOVDE FINANCIAL, INC.
--------------------------------------
HOVDE FINANCIAL, INC.
<PAGE> 154
PROXY FOR SPECIAL SHAREHOLDERS MEETING OF TB&T, INC.
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned shareholder of TB&T,
Inc. ("TB&T"), do hereby nominate, constitute, and appoint, Jack D. Sweet,
Charles B. Phillips and Kevin F. Smith, or any one of them (with full power and
substitution for me and in my name, place and stead) to vote all the common
stock of TB&T standing in my name on its books at the close of business on
October 20, 1998 at the Special Meeting of its shareholders to be held at the
offices of Texas Bank & Trust, 717 North Harwood Street, Dallas, Texas, on
Friday, November 27, 1998 at 8:00 a.m., local time, or any adjournments thereof
with all the powers the undersigned would possess if personally present as
follows:
1. To ratify, confirm, approve and adopt an Agreement and Plan of Merger
dated as of August 6, 1998 (the "Agreement"), by and between TB&T and The
Colonial BancGroup, Inc. ("BancGroup"), with such agreement providing
for, among other things, the merger of TB&T with and into BancGroup, with
BancGroup to be the surviving corporation. Each outstanding share of TB&T
common stock will be converted into common shares of BancGroup in
accordance with the terms of the Agreement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. To transact such other business as may properly come before the meeting
or any adjournment thereof.
This proxy confers authority to vote "FOR" the propositions listed above
unless "AGAINST" or "ABSTAIN" is indicated. If any business is presented at said
meeting, this proxy shall be voted in accordance with the recommendations of
management. All shares represented by properly-executed proxies will be voted as
directed.
The Board of Directors recommends a vote "FOR" the propositions. THIS PROXY
IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS and may be revoked prior to its
exercise by either written notice or personally at the meeting or by a
subsequently-dated proxy.
Date: , 1998
--------------------------
-------------------------------
-------------------------------
(Signature of Shareholder(s))
(When signing as Attorney,
Executor, Administrator, Trustee
or Guardian, please give full
title. If more than one Trustee,
all should sign. All joint
owners must sign.)
