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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-57935
FIRST MACON BANK & TRUST COMPANY
501 WALNUT STREET
MACON, GEORGIA 31297
(912) 746-7000
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 25, 1998, AT 10:00 A.M.
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NOTICE IS HEREBY GIVEN that a special meeting of shareholders (the "Special
Meeting") of First Macon Bank & Trust Company ("First Macon") will be held at
First Macon Bank Annex, Second Floor Training Center, 111 Third Street, Macon,
GA. 31201, on Tuesday, August 25, 1998, at 10:00 a.m., local time, for the
following purposes:
1. Merger. To consider and vote upon an Agreement and Plan of Merger,
dated as of May 14, 1998, between First Macon, The Colonial BancGroup, Inc.
("BancGroup") and Colonial Bank, a wholly owned subsidiary of BancGroup
(the "Agreement"), and the proposed merger (the "Merger") of First Macon
with and into Colonial Bank, pursuant to the Agreement. Colonial Bank will
be the surviving corporation in the Merger. Each share of common stock of
First Macon, par value $1.00 (the "First Macon Common Stock"), outstanding
at the time the Merger becomes effective (the "Effective Date") will be
converted into a number of shares of common stock of BancGroup, par value
$2.50 per share (the "BancGroup Common Stock"), equal to $56.66 divided by
the "Market Value" of BancGroup Common Stock. The "Market Value" means the
average of the closing prices for BancGroup Common Stock as reported on the
New York Stock Exchange for the ten trading days ending on the day that is
the fifth trading day before the Effective Date. However, if BancGroup is
acquired by another entity or merged with another entity so that BancGroup
is not the surviving corporation, which acquisition or merger is publicly
announced before the Effective Date, the Market Value shall be the closing
price of BancGroup Common Stock as reported on the NYSE on the day prior to
the public announcement of such a transaction. Cash will be paid in lieu of
fractional shares at the Market Value of such fractional shares, as
described more fully in the accompanying Proxy Statement and Prospectus. A
copy of 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 First Macon has fixed the close of business on
July 21, 1998, as the record date (the "Record Date") for the determination of
shareholders entitled to notice of and to vote at the Special Meeting.
Under Georgia law, holders of First Macon Common Stock are eligible to
exercise dissenters rights of appraisal and demand payment in cash at the fair
value of his or her shares of First Macon Common Stock if the Merger is
consummated. The right of First Macon shareholders to receive such payment is
contingent upon strict compliance with Article 13 of the Georgia Business
Corporation Code, a copy of which is attached to the enclosed Proxy Statement
and Prospectus as Appendix C.
You are cordially invited to attend the Special Meeting, but whether or not
you plan to attend, please complete and sign the enclosed proxy card 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 First Macon, by executing a
later dated proxy and delivering it to the Secretary of First Macon, or by
attending the Special Meeting and voting in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ BARNEY A. SMITH, JR.
Chairman
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PROSPECTUS
COMMON STOCK, $2.50 PAR VALUE
THE COLONIAL BANCGROUP, INC.
PROXY STATEMENT
FOR SPECIAL MEETING OF SHAREHOLDERS OF
FIRST MACON BANK & TRUST COMPANY
This Proxy Statement and Prospectus (the "Prospectus") relates to the
proposed merger (the "Merger") of First Macon Bank & Trust Company ("First
Macon"), a Georgia state bank, with and into Colonial Bank, an Alabama banking
corporation ("Colonial Bank"). Colonial Bank is a wholly owned subsidiary of The
Colonial BancGroup, Inc. ("BancGroup"), a Delaware corporation. This Prospectus
is being furnished to the shareholders of First Macon in connection with the
solicitation of proxies by the Board of Directors of First Macon for use at a
special meeting of the shareholders of First Macon (the "Special Meeting") to be
held on August 25, 1998, at 10:00 a.m., local time, at First Macon Bank Annex,
Second Floor Training Center, 111 Third Street, Macon, GA. 31201, including any
adjournments or postponements thereof. At the Special Meeting, shareholders of
First Macon will consider and vote upon the matters set forth in the preceding
Notice of Special Meeting of 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 May 14, 1998, by and between BancGroup, Colonial
Bank and First Macon (the "Agreement"). The Agreement provides that, subject to
the approval of the Agreement by the shareholders of First Macon 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, First Macon
will be merged with and into Colonial Bank, and Colonial Bank will be the
surviving corporation. Each issued and outstanding share of common stock, par
value $1.00 per share (the "First Macon Common Stock"), will be converted into a
number of shares of common stock of BancGroup, $2.50 par value per share (the
"BancGroup Common Stock"), equal to $56.66 divided 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 New York Stock Exchange (the
"NYSE") on each of the ten consecutive trading days ending on the day that is
the fifth trading day before the day on which the Merger becomes effective (the
"Effective Date"). However, if BancGroup is acquired by another entity or merged
with another entity so that BancGroup is not the surviving corporation, which
acquisition or merger is publicly announced before the Effective Date, the
Market Value shall be the closing price of BancGroup Common Stock as reported on
the NYSE on the day prior to the public announcement of such a transaction. Cash
will be paid in lieu of fractional shares at the Market Value of such fractional
shares. See "The Merger -- Conversion of First Macon Common Stock." The shares
of BancGroup Common Stock are listed on the NYSE. The closing price per share of
the BancGroup Common Stock on the NYSE on July 21, 1998 was $34.0625.
Consummation of the Merger requires, among other things, the affirmative
vote of the holders of at least two-thirds of the shares of First Macon Common
Stock issued and outstanding on the Record Date.
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 First Macon in connection with the solicitation
of proxies by First Macon for the Special Meeting and a Prospectus of BancGroup
with respect to the BancGroup Common Stock to be issued in the Merger. This
Prospectus and accompanying proxy card are first being mailed to shareholders of
First Macon on or about the date set forth below.
THE BOARD OF DIRECTORS OF FIRST MACON UNANIMOUSLY RECOMMENDS
APPROVAL OF THE AGREEMENT.
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THE SECURITIES TO WHICH THIS PROSPECTUS RELATES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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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 of First Macon is located at 501 Walnut Street, Macon,
Georgia 31297 and the mailing address for First Macon is P.O. Box 49, Macon,
Georgia 31294-6299 (telephone 912-746-7000), 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 JULY 21, 1998.
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AVAILABLE INFORMATION
BancGroup is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and information statements, and other information
with the Securities and Exchange Commission (the "Commission"). Such reports and
other information filed by BancGroup, including proxy and information
statements, can be inspected and copied at the public reference facilities of
the Commission, Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, and at certain regional offices: 7 World Trade Center, 13th Floor,
New York, New York 10048; Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511; 1401 Brickell Avenue, Suite 200, Miami, Florida
33131; 1801 California Street, Suite 4800, Denver, Colorado 80202-2648; and 5670
Wilshire Boulevard, 11th Floor, Los Angeles, California 90036-3648. 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, of which
this Prospectus forms a part, 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
First Macon has been furnished by First Macon.
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 First Macon, nor have such
accountants applied any procedures thereto. Accordingly, such accountants do not
express an opinion or any other form of assurance on them. 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. 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.
ii
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF
SECURITIES MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY BANCGROUP OR FIRST MACON.
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 FIRST MACON 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.
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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 Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998;
(3) BancGroup's Registration Statement on Form 8-A dated November 22,
1994, effective February 22, 1995, containing a description of the
BancGroup Common Stock.
(4) BancGroup's Reports on Forms 8-K dated March 16, 1998, April 15,
1998, June 2, 1998 and July 17, 1998;
(5) The description of the current management and Board of Directors
contained in the Proxy Statement 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 First Macon regarding the
Merger described herein. Various provisions of the Agreement are summarized or
referred to in this Prospectus, and are qualified in their entirety by reference
to the Agreement which 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
36101 (telephone 334-240-5000).
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TABLE OF CONTENTS
<TABLE>
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SUMMARY..................................................... 1
THE SPECIAL MEETING......................................... 11
General................................................... 11
Record Date; Shares Entitled to Vote; Vote Required for
the Merger............................................. 11
Solicitation, Voting and Revocation of Proxies............ 12
Effect of Merger on Outstanding BancGroup Common Stock.... 12
THE MERGER.................................................. 13
General................................................... 13
Background of the Merger.................................. 13
First Macon's Board of Director's Reasons for Approving
the Merger............................................. 14
Opinion of Financial Advisor.............................. 15
Recommendation of the Board of Directors of First Macon... 16
BancGroup's Reasons for the Merger........................ 16
Related Transactions -- Stock Option...................... 16
Interests of Certain Persons in the Merger................ 17
Conversion of First Macon Common Stock.................... 19
Surrender of First Macon Common Stock Certificates........ 19
Certain Federal Income Tax Consequences................... 20
Other Possible Consequences............................... 21
Conditions to Consummation of the Merger.................. 21
Amendment or Termination.................................. 22
Regulatory Approvals...................................... 23
Conduct of Business Pending the Merger.................... 24
Commitments with Respect to Other Offers.................. 25
Rights of Dissenting Shareholders......................... 25
Resale of BancGroup Common Stock Issued in the Merger..... 27
Accounting Treatment...................................... 28
NYSE Reporting of BancGroup Common Stock Issued in the
Merger................................................. 28
COMPARATIVE MARKET PRICES AND DIVIDENDS..................... 28
BancGroup................................................. 28
First Macon............................................... 29
BANCGROUP CAPITAL STOCK AND DEBENTURES...................... 29
BancGroup Common Stock.................................... 30
Preference Stock.......................................... 30
1986 Debentures........................................... 30
Other Indebtedness........................................ 31
Changes in Control........................................ 31
COMPARATIVE RIGHTS OF SHAREHOLDERS.......................... 33
Director Elections........................................ 33
Removal of Directors...................................... 33
Voting.................................................... 34
Preemptive Rights......................................... 34
Directors' Liability...................................... 34
Indemnification........................................... 34
Special Meetings of Shareholders; Action Without a
Meeting................................................ 35
Mergers, Share Exchanges and Sales of Assets.............. 35
Amendment of Certificate of Incorporation and Bylaws...... 36
Rights of Dissenting Shareholders......................... 37
Preferred Stock........................................... 37
Effect of the Merger on First Macon Shareholders.......... 37
</TABLE>
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THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES............... 38
Condensed Pro Forma Statements of Condition (Unaudited)... 38
COMPLETED BUSINESS COMBINATION.............................. 39
PENDING BUSINESS COMBINATIONS............................... 40
Condensed Pro Forma Statements of Income (Unaudited)...... 42
Selected Financial and Operating Information.............. 51
FIRST MACON BANK & TRUST COMPANY............................ 54
Selected Financial Data................................... 54
Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 55
General................................................... 55
Liquidity................................................. 55
Capital Resources......................................... 56
Results of Operations..................................... 57
Asset/Liability Management................................ 60
Financial Condition....................................... 62
Impact of Inflation and Changing Prices................... 71
Future Accounting Requirements............................ 71
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITIONS.................... 72
Net Interest Income....................................... 72
Provisions for Loan Losses................................ 72
Noninterest Income........................................ 72
Noninterest Expense....................................... 72
Provision for Income Taxes................................ 73
Statement of Condition.................................... 73
Asset Quality............................................. 73
Provision for Loan Losses................................. 73
BUSINESS OF BANCGROUP....................................... 74
General................................................... 74
Recently Completed and Other Proposed Business
Combinations........................................... 74
Year 2000 Compliance...................................... 75
Voting Securities and Principal Shareholders.............. 76
Security Ownership of Management.......................... 76
Management Information.................................... 77
BUSINESS OF FIRST MACON..................................... 78
General................................................... 78
Market Area............................................... 78
Properties................................................ 78
Competition............................................... 78
Year 2000 Compliance...................................... 78
Principal Holders of Common Stock......................... 79
ADJOURNMENT OF SPECIAL MEETING.............................. 79
OTHER MATTERS............................................... 80
DATE FOR SUBMISSION OF BANCGROUP SHAREHOLDER PROPOSALS...... 80
LEGAL MATTERS............................................... 80
EXPERTS..................................................... 80
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INDEX TO FINANCIAL STATEMENTS............................... F-1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.......... F-2
FIRST MACON BANK & TRUST COMPANY FINANCIAL STATEMENTS....... F-3
APPENDIX A -- Agreement and Plan of Merger.................. A-1
APPENDIX B -- Fairness Opinion of T. Stephen Johnson &
Associates, Inc. ......................................... B-1
APPENDIX C -- Article 13 of the Georgia Business Corporation
Code Regarding Dissenters' Rights......................... C-1
APPENDIX D -- Stock Option Agreement........................ D-1
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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 First Macon 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 First Macon with and into Colonial
Bank, a wholly owned subsidiary of BancGroup.
THE SPECIAL MEETING
The Special Meeting will be held at First Macon Bank Annex, Second Floor
Training Center, 111 Third Street, Macon, GA. 31201, on August 25, 1998, at
10:00 a.m., local time, for the purpose of considering and voting upon the
Agreement and the Merger. Only holders of record of First Macon Common Stock at
the close of business on July 21, 1998 (the "Record Date") are entitled to the
notice of and to vote at the Special Meeting. As of the Record Date, 1,076,604
shares of First Macon Common Stock were issued and outstanding. See "The Special
Meeting."
THE COMPANIES
BancGroup. BancGroup is a bank holding company within the meaning of the
Bank Holding Company Act of 1956, as amended (the "BHCA"). It was organized in
Delaware in 1974 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, Georgia, Nevada, Florida and Tennessee. Colonial
Bank conducts a full service commercial banking business through 134 branches in
Alabama, five branches in Tennessee, 14 branches in Georgia, 75 branches in
Florida and three branches in Nevada. BancGroup has also entered into agreements
to acquire four additional banks. Colonial Mortgage Company, a subsidiary of
Colonial Bank, is a mortgage banking company which services approximately $13.8
billion in residential loans and which originates residential mortgages in 34
states through four divisional offices. At March 31, 1998, BancGroup had
consolidated total assets of $8.0 billion and consolidated shareholders' equity
of $571.6 million.
First Macon. First Macon is a Georgia state bank which is headquartered in
Macon, Georgia. Currently, First Macon operates five branches located in
metropolitan Macon, Georgia. At March 31, 1998, First Macon had total assets of
approximately $195.2 million, total deposits of approximately $177.3 million and
total shareholders' equity of approximately $15.3 million. See "Business of
First Macon."
THE MERGER
The Agreement provides for the Merger of First Macon with and into Colonial
Bank, with Colonial Bank to be the surviving corporation. Upon the date of
consummation of the Merger (the "Effective Date"), each outstanding share of
First Macon 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 a number of shares of BancGroup Common Stock equal to $56.66
divided by the "Market Value." The "Market Value" will be the average of the
closing prices of BancGroup Common Stock as reported by the NYSE on each of the
ten trading days ending on the day that is the fifth trading day immediately
preceding the Effective Date. However, if BancGroup is acquired by another
entity or merged with another entity so that BancGroup is not the surviving
corporation, which acquisition or merger is publicly announced before the
Effective Date, the Market Value shall be the closing price of BancGroup Common
Stock as reported on the NYSE on the day prior to the public announcement of
such a transaction. Assuming (i) a Market Value of $33.5125 (the ten-day average
of closing prices of BancGroup Common Stock, as of July 21, 1998), (ii)
1,076,604 shares of First Macon Common Stock outstanding on the Effective Date
and (iii) that no dissenters' rights of appraisal are
1
<PAGE> 10
exercised, each share of First Macon Common Stock will be converted into 1.6907
shares of BancGroup Common Stock, and a total of 1,916,368 shares of BancGroup
Common Stock will be issued in the Merger.
On July 15, 1998, BancGroup announced that its Board of Directors had
declared a two for one split of BancGroup's Common Stock to be effected in the
form of a 100% stock dividend (the "Stock Split"). Stockholders of record of
BancGroup Common Stock will receive one share of BancGroup Common Stock for each
share they hold as of the close of business on July 31, 1998. The additional
shares will be distributed pursuant to the Stock Split on August 14, 1998. As
provided in the Agreement, the shareholders of First Macon will receive in the
Merger an appropriate adjustment to reflect the Stock Split.
No fractional shares of BancGroup Common Stock will be issued in the
Merger. Each shareholder of First Macon 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.
Promptly after the Effective Date, First Macon shareholders will be given
notice of the consummation of the Merger and instructions for the exchange of
such shareholders' certificates representing shares of First Macon Common Stock
for certificates representing shares of BancGroup Common Stock. Certificates for
the shares of BancGroup Common Stock issued will not be distributed or dividends
paid on such shares until shareholders surrender their certificates representing
their shares of First Macon Common Stock in accordance with those instructions.
FIRST MACON SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE THE INSTRUCTIONS. See "The Merger -- Conversion of First Macon Common
Stock," "-- Surrender of First Macon Common Stock Certificates."
For certain information concerning dissenters' rights, voting at the
Special Meeting, and management of BancGroup and First Macon, see "The
Merger -- Rights of Dissenting Shareholders," "-- Conversion of First Macon
Common Stock;" "The Special Meeting -- Solicitation, Voting and Revocation of
Proxies," "-- Record Date; Shares Entitled to Vote; Vote Required;" "Business of
BancGroup -- Voting Securities and Principal Shareholders," "-- Security
Ownership of Management;" and "Business of First Macon -- Principal Holders of
Common Stock."
OPINION OF FINANCIAL ADVISOR
First Macon has received an opinion from T. Stephen Johnson & Associates,
Inc. that the terms of the Agreement are fair, from a financial point of view,
to the shareholders of First Macon. The full text of such opinion is set forth
in Appendix B to this Prospectus and should be read in its entirety by First
Macon shareholders. For additional information regarding such opinion, see "The
Merger -- Opinion of Financial Advisor."
RECOMMENDATION OF FIRST MACON'S BOARD OF DIRECTORS
The Board of Directors of First Macon has unanimously approved the
Agreement. THE BOARD OF DIRECTORS OF FIRST MACON BELIEVES THAT THE MERGER IS
FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF FIRST MACON AND
RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE APPROVAL OF THE AGREEMENT. For a
discussion of the factors considered by the Board of Directors in reaching its
conclusions, see "The Merger -- Background of the Merger" and "-- First Macon's
Board of Director's Reasons for Approving the Merger."
RELATED TRANSACTIONS -- STOCK OPTION
In connection with the Agreement, First Macon has granted to BancGroup an
option to purchase up to 19.9% of the First Macon Common Stock at a purchase
price of $56.66 per share. The option will become exercisable upon the
occurrence of certain events which are generally related to the potential
acquisition of First Macon 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 First Macon while
BancGroup is seeking to consummate the Merger. See "The Merger -- Related
Transactions -- Stock Option."
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of First Macon's management and its Board of Directors have
interests in the Merger in addition to, or different from, the interests of
shareholders of First Macon generally. These interests relate to certain
agreements and arrangements described below.
Edward P. Loomis, Jr., First Macon's President, has agreed to enter into an
employment contract with Colonial Bank. The agreement will commence on the
Effective Date and will terminate on the third anniversary of the Effective
Date. Mr. Loomis will serve as President of the Central Georgia Region of
Colonial Bank. Mr. Loomis will receive a base salary of $300,000 annually and
will be granted options under BancGroup's stock option plans respecting 20,000
shares of BancGroup Common Stock with an exercise price equal to the market
price as of the Effective Date. The options granted to Mr. Loomis shall vest
ratably over a period of five years from the date of the grant. See "The
Merger -- Interests of Certain Person in the Merger -- Employment Contracts."
Each person, except Mr. Loomis, who was a member of the Board of Directors
of First Macon as of December 31, 1997 has agreed to execute on or before the
Effective Date an agreement with BancGroup and Colonial Bank providing that he
or she will not compete with BancGroup or Colonial Bank in certain geographic
areas for a period of at least three years from the Effective Date. As
consideration, each of the directors shall receive $35,000 in a lump-sum
payment. The employment agreement of Mr. Loomis referred to above contains
noncompete provisions which apply during this same three year period.
BancGroup has agreed to grant, on the Effective Date, incentive stock
options to acquire BancGroup Common Stock to Mark Stevens, Carol Soto, Mark
Bikus and Jordan Michael, each a key employee of First Macon. Each such key
employee will be granted 10,000 incentive stock options with an exercise price
equal to the closing price of BancGroup Common Stock as reported by the NYSE on
the Effective Date. The options will vest ratably over a period of five years.
On the Effective Date and subject to the existing agreements discussed
above, all employees of First Macon will, at BancGroup's option, either become
employees of BancGroup or its subsidiaries or be entitled to severance benefits
in accordance with Colonial Bank's severance policy as of the date of the
Agreement. All employees of First Macon who become employees of BancGroup or its
subsidiaries on the Effective Date will be entitled, to the extent permitted by
applicable law, to participate in all benefit plans of BancGroup to the same
extent as BancGroup's employees.
Under the Agreement, BancGroup has agreed under certain conditions for a
period of four years after the Effective Date to indemnify persons entitled to
indemnification against certain claims and liabilities arising out of or
pertaining to matters existing or occurring at or prior to the Effective Date.
Except as indicated above, none of the directors or executive officers of
First Macon, and no associate of any such person, has any substantial direct or
indirect interest in the Merger, other than an interest arising from the
ownership of First Macon Common Stock. See "The Merger -- Interests of Certain
Persons in the Merger."
VOTE REQUIRED
Under Georgia law, the Agreement must be approved by the affirmative vote
of the holders of at least two-thirds of First Macon Common Stock issued and
outstanding as of the Record Date. Each share of First Macon 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, Alabama, Georgia 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 First Macon 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, 1,076,604 shares of First Macon Common Stock were issued and
outstanding. As of the Record Date, the directors and executive officers of
First Macon beneficially owned approximately 41.3% of the outstanding shares of
First Macon Common
3
<PAGE> 12
Stock. As of the same date, the directors, executive officers and affiliates of
BancGroup held no shares of First Macon Common Stock. See "The Special Meeting."
As of the Record Date, the directors of First Macon beneficially owned
445,204 shares of First Macon Common Stock which represented approximately 41%
of the outstanding shares have agreed with BancGroup to vote their shares in
favor of the Agreement. See "The Special Meeting." As of February 27, 1998,
Directors and executive officers of BancGroup beneficially owned in the
aggregate 4,965,923 shares of BancGroup Common Stock representing approximately
10.24% of BancGroup's outstanding shares.
Shareholders of First Macon submitting proxies may revoke their proxies by
(i) giving notice of such revocation in writing to the Secretary of First Macon
at or prior to the Special Meeting, (ii) by executing and delivering a proxy
bearing a later date to the Secretary of First Macon at or prior to the Special
Meeting, or (iii) by attending the Special Meeting and voting in person. Because
approval of the Agreement requires the approval of at least two-thirds of the
shares of First Macon Common Stock issued and outstanding on the Record Date,
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
Any holder of First Macon Common Stock may dissent from the Merger and
obtain the fair value of such holder's First Macon Common Stock in cash rather
than receive shares of BancGroup common stock if such shareholder (i) has
delivered notice in writing to First Macon before the vote is taken at the
Special Meeting that he or she intends to demand payment of his or her shares if
the Merger is consummated, and (ii) votes against the Merger or refrains from
voting on the Merger. If a shareholder votes against the Merger or refrains from
voting on the Merger but does not deliver the notice in writing to First Macon
before the shareholder vote on the Merger occurs, such shareholder will lose his
or her appraisal rights. If the Merger is authorized at the Special Meeting,
First Macon will deliver a written dissenters notice within ten days of the
Effective Date to all holders of First Macon Common Stock who have provided
notice that they intend to seek payment. Shareholders wishing to exercise
dissenters rights must follow properly all requirements for the exercise of such
rights as set forth in Article 13 of the Georgia Business Corporation Code, a
copy of which is attached as Appendix C hereto.
Any shareholder who properly exercises appraisal rights and receives fair
market value for his or her shares will encounter income tax treatment different
than the treatment for shareholders who do not exercise appraisal rights. See
"Approval of the Merger -- Certain Federal Income Tax Consequences" and "The
Merger -- Rights of Dissenting Shareholders." A condition to consummation of the
Merger includes a condition that the number of shares as to which holders of
First Macon Common Stock exercise dissenters' rights not exceed 10% of the
outstanding shares of First Macon Common Stock. See "-- Conditions to the
Merger."
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. See "The Merger -- Conditions to
Consummation of the Merger."
The obligations of First Macon 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 shares of First Macon Common Stock; (ii)
the approval of the Merger by the Board of Governors of the Federal Reserve
Board (the "Federal Reserve") and the Alabama Banking Department (the "Alabama
Department"), (iii) each party's having obtained consents of third parties
required for the consummation of the Merger or for the prevention of default
under material contracts or permits of such party; (iv) the Registration
Statement of which this Prospectus forms a part having become effective, with no
stop order or proceedings for such purpose suspending the effectiveness of the
Registration Statement pending or in effect; (v) the absence of pending or
threatened litigation with a view to restraining or prohibiting consummation of
the Merger or in which it is sought to obtain divestiture, rescission or damages
in connection with the Merger; (vi) the absence
4
<PAGE> 13
of any investigation by any governmental agency which might result in any such
proceeding; (vii) consummation of the Merger no later than December 31, 1998;
(viii) receipt of an opinion of PricewaterhouseCoopers LLP regarding certain tax
matters; and, (ix) receipt of opinions of counsel.
The obligation of First Macon to consummate the Merger is further subject
to several other conditions, including, among others: (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 having
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.
The obligation of BancGroup to consummate the Merger is subject to several
other conditions, including, among others: (i) the absence of any material
adverse change in the financial condition or affairs of First Macon; (ii) the
number of shares as to which holders of First Macon Common Stock exercise
dissenters' rights not exceeding 10% of the outstanding shares of First Macon
Common Stock; (iii) the receipt of a letter from PricewaterhouseCoopers LLP
concurring with the conclusions of BancGroup's and First Macon's management that
no conditions exist with respect to each company which would preclude accounting
for the Merger as a pooling of interests; (iv) the accuracy in all material
respects of the representations and warranties of First Macon contained in the
Agreement and the performance by First Macon of all of its covenants and
agreements under the Agreement; (v) the execution and delivery to BancGroup of
certain agreements between BancGroup and/or Colonial Bank and certain directors
and members of management of First Macon (see "The Merger -- Interests of
Certain Persons in the Merger"); and, (vi) the receipt by BancGroup of certain
undertakings from holders of First Macon Common Stock who may be deemed to be
"affiliates" of First Macon pursuant to the rules of the Commission.
Applications for appropriate regulatory approvals by the Federal Reserve
and the Alabama Department were filed with such agencies on June 29, 1998. The
Federal Reserve's approval is expected to be received on or about August 12,
1998, and approval of the Alabama Department is anticipated before the Effective
Date, subject to approval of the Agreement and the Merger by the shareholders of
First Macon. It is currently anticipated that the Merger will be consummated on
October 1, 1998. No assurance can be provided that the necessary shareholder and
regulatory approvals can be obtained or that the other conditions precedent to
the Merger can or will be satisfied, or that the consummation of the Merger may
not occur earlier than or be delayed beyond October 1, 1998. 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, under applicable law, after
approval of the Agreement and the Merger by the holders of First Macon Common
Stock, no amendment decreasing the consideration to be received by First Macon
shareholders may be made without the further approval of such shareholders. Such
amendments may require the filing with the Commission of an amendment of the
Registration Statement, of which this Prospectus forms a part. The Agreement may
be terminated at any time prior to or on the Effective Date, whether before or
after approval of the Agreement by the shareholders of First Macon, by the
mutual consent of the respective Boards of Directors of First Macon and
BancGroup, or by the Board of Directors of either BancGroup or First Macon under
certain circumstances including, but not limited to, the failure of the
transactions contemplated by the Agreement to be consummated on or before
December 31, 1998, if such failure to consummate is not caused by any breach of
the Agreement by the party electing to terminate. See "The Merger -- Amendment
or Termination of Agreement."
COMPARATIVE RIGHTS OF SHAREHOLDERS
The rights of the holders of the First Macon 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."
5
<PAGE> 14
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"). No ruling with respect to the federal income tax
consequences of the Merger to First Macon's shareholders will be requested from
the Internal Revenue Service (the "IRS"). First Macon has received an opinion
from PricewaterhouseCoopers LLP, that, among other things, a shareholder of
First Macon who exchanges shares of First Macon Common Stock for BancGroup
Common Stock will not recognize gain, except that shareholders of First Macon
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 First Macon Common Stock upon perfection of dissenters' rights
also will realize gain or loss for federal income tax purposes with respect to
such shares. See "Approval of the Merger -- Certain Federal Income Tax
Consequences." TAX CONSEQUENCES OF THE MERGER FOR INDIVIDUAL TAX PAYERS CAN
VARY, HOWEVER, AND FIRST MACON 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 First Macon into BancGroup will be treated as a
"pooling-of-interests" transaction by BancGroup for accounting purposes. See
"The Merger -- Accounting Treatment."
RECENT PER SHARE MARKET PRICES
First Macon. There is no established public trading market for the First
Macon Common Stock. The shares of First Macon Common Stock are not actively
traded, and such trading activity, as it occurs, takes place in privately
negotiated transactions. Management of First Macon is aware of certain
transactions in shares of First Macon that have occurred since January 1, 1996,
although the trading prices of all stock transactions are not known. The
following table sets forth the trading prices for the shares of First Macon
Common Stock that have occurred since January 1, 1996 for transactions in which
the trading prices are known to management of First Macon:
<TABLE>
<CAPTION>
PRICE PER SHARE
OF COMMON STOCK(1)
-------------------
HIGH LOW
------- -------
<S> <C> <C>
1996
First Quarter............................................. $15.50 $12.75
Second Quarter............................................ 15.75 15.75
Third Quarter............................................. 20.00 16.00
Fourth Quarter............................................ 20.00 20.00
1997
First Quarter............................................. $20.00 $20.00
Second Quarter............................................ 20.00 20.00
Third Quarter............................................. 20.63 20.63
Fourth Quarter............................................ 30.13 30.13
1998
First Quarter............................................. $31.19 $31.19
Second Quarter............................................ N/A N/A
Third Quarter (through July 21, 1998)..................... N/A N/A
</TABLE>
- ---------------
(1) Restated to reflect the impact of a two-for-one stock split in the form of a
100% stock dividend paid May 1, 1996.
6
<PAGE> 15
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 for the last two full
fiscal years and the first quarter of 1998.
<TABLE>
<CAPTION>
PRICE PER SHARE OF
COMMON STOCK(1)
--------------------
HIGH LOW
-------- -------
<S> <C> <C> <C> <C>
1996
First Quarter......................................... $18 1/4 $15
Second Quarter........................................ 18 1/16 15 5/8
Third Quarter......................................... 17 15/16 15 5/8
Fourth Quarter........................................ 20 1/8 17 3/18
1997
First Quarter......................................... 24 18 2/3
Second Quarter........................................ 24 7/8 22
Third Quarter......................................... 29 3/16 24 1/4
Fourth Quarter........................................ 35 1/16 28 15/16
1998
First Quarter......................................... 36 1/4 31 1/2
Second Quarter........................................ 37 9/16 29 1/2
Third Quarter (through July 21, 1998)................. 34 5/8 32 5/8
</TABLE>
- ---------------
(1) Restated to reflect the impact of a two-for-one stock split effected in the
form of a 100% stock dividend paid February 11, 1997.
On April 23, 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 $36.6875 per share. The following table presents the market value
of BancGroup Common Stock per share on that date, and the per share market value
and equivalent per share value of First Macon Common Stock on that date:
<TABLE>
<CAPTION>
EQUIVALENT
BANCGROUP FIRST MACON BANCGROUP
COMMON STOCK(1) COMMON STOCK(2) COMMON STOCK(3)
--------------- --------------- ---------------
<S> <C> <C> <C>
Comparative Market Value.............. $36.6875 $31.19 $56.66
</TABLE>
- ---------------
(1) Closing price as reported by the NYSE on April 23, 1998.
(2) There is no established public trading market for the shares of First Macon
Common Stock. The value shown is the price at which shares of First Macon
Common Stock were sold on January 30, 1998, which was the last sale price
prior to the public announcement of the Merger on April 24, 1998, of which
management of First Macon is aware.
(3) The ten-day average of the closing price of BancGroup Common Stock,
calculated in the same manner as the Market Value will be calculated, was
$36.925 on April 23, 1998. Therefore, if the Merger had closed on April 23,
1998, 1.5345 ($56.66 divided by 36.925) shares of BancGroup Common Stock
would have been exchanged for each share of First Macon 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 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 Bylaws (the "BancGroup Bylaws") also contain provisions which
may deter or prevent a takeover of BancGroup that is not
7
<PAGE> 16
supported by BancGroup's Board of Directors. These provisions include: (i) a
classified board of directors, (ii) super majority voting requirements for
certain "business combinations" that exceed the provisions of Delaware law
described above, (iii) flexibility for the Board of Directors to consider
non-economic and other factors in evaluating a "business combination," (iv)
inability of shareholders to call special meetings and act by written consent,
and (v) certain advance notice provisions for the conduct of business at
shareholder meetings. See "BancGroup Capital Stock and Debentures" and
"Comparative Rights of Shareholders."
8
<PAGE> 17
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 First Macon 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 these pro forma
statements.
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MARCH 31, 1998 MARCH 31, 1997 1997 1996 1995
-------------- -------------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
BANCGROUP -- HISTORICAL (AS RESTATED*):
Net income
Basic................................... $ 0.38 $ 0.42 $ 1.77 $ 1.31 $ 1.27
Diluted................................. 0.37 0.41 1.72 1.27 1.18
Book value at end of period............... 11.88 10.64 11.52 10.23 9.38
Dividends per share:
Common Stock............................ 0.17 0.15 0.60 0.54 0.3375
Common A(a)............................. 0.1125
Common B(a)............................. 0.0625
FIRST MACON
Net Income
Historical:
Basic................................ .63 .59 2.55 1.97 1.69
Diluted.............................. .63 .59 2.55 1.97 1.69
Pro forma equivalent assuming
combination with First Macon and
completed business combination(b):
Basic................................ 0.64 0.71 2.96 2.21 2.10
Diluted.............................. 0.63 0.68 2.87 2.13 1.96
Pro forma equivalent assuming
combination with First Macon,
completed business combination and
other probable business
combinations(b):
Basic................................ 0.64 0.69 2.94 2.20 2.08
Diluted.............................. 0.63 0.68 2.86 2.13 1.94
Book value at end of period
Historical.............................. 14.23 11.86 13.59 11.29 9.63
Pro forma equivalent assuming
combination with First Macon and
completed business combination(b):... 19.86 N/A N/A N/A N/A
Pro forma equivalent assuming
combination with First Macon,
completed business combination and
other probable business
combinations(b)...................... 19.63 N/A N/A N/A N/A
Dividends per share
Historical.............................. -- -- 0.30 0.22 0.15
Pro forma equivalent assuming
combination with First Macon and
completed business combination(b).... 0.29 0.25 1.01 0.91 0.76
Pro forma equivalent assuming
combination with First Macon,
completed business combination and
other probable business
combinations(c)...................... 0.29 0.25 1.01 0.91 0.76
</TABLE>
9
<PAGE> 18
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MARCH 31, 1998 MARCH 31, 1997 1997 1996 1995
-------------- -------------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
BANCGROUP -- PRO FORMA COMBINED (FIRST
MACON AND COMPLETED BUSINESS
COMBINATION):
Net Income
Basic................................... $ 0.38 $ 0.42 $ 1.75 $ 1.31 $ 1.24
Diluted................................. 0.37 0.40 1.70 1.26 1.16
Book value at end of period............... 11.75 N/A N/A N/A N/A
BANCGROUP -- PRO FORMA COMBINED (FIRST
MACON, COMPLETED BUSINESS COMBINATION
AND OTHER PROBABLE BUSINESS
COMBINATIONS):
Net Income
Basic................................... $ 0.38 $ 0.41 $ 1.74 $ 1.30 $ 1.23
Diluted................................. 0.37 0.40 1.69 1.26 1.15
Book value at end of period............... 11.61 N/A N/A N/A N/A
</TABLE>
- ---------------
<TABLE>
<C> <S>
* Restated to give retroactive effect to the February 1998 pooling-of-interests method business combinations with United
American Holding Corporation, First Central Bank and South Florida Banking Corp.
N/A Not applicable due to pro forma balance sheet being presented only at March 31, 1998 which assumes the transaction consummated
on the latest balance sheet date in accordance with Rule 11.02(b) of Regulation S-X.
(a) Before February 21, 1995, BancGroup had two classes of common stock outstanding, Class A and Class B. Class B was not publicly
traded. Class A was traded on the Nasdaq National Market System under the symbol of "CLBGA" until February 24, 1995. On
February 21, 1995, the Class A and Class B common stock were reclassified into the BancGroup Common Stock. Trading on the NYSE
commenced on February 24, 1995.
(b) Pro forma equivalent per share amounts are calculated by multiplying the pro forma combined total income per share and the
pro forma combined total book value per share of BancGroup by the conversion ratio so that the per share amounts are equated
to the respective values for one share of First Macon. For these pro forma equivalent per share amounts, a 1.6907 BancGroup
common stock conversion ratio is utilized.
(c) Pro forma equivalent dividends per share are shown at BancGroup's Common Stock dividend per share rate multiplied by the 1.690
7 conversion ratio per share of First Macon 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.
</TABLE>
10
<PAGE> 19
THE SPECIAL MEETING
GENERAL
This Prospectus is being furnished to the shareholders of First Macon in
connection with the solicitation of proxies by the Board of Directors of First
Macon for use at the Special Meeting and 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 First Macon with and into
Colonial Bank. Colonial Bank will be the surviving corporation in the Merger.
THE BOARD OF DIRECTORS OF FIRST MACON BELIEVES THAT THE MERGER IS IN THE
BEST INTERESTS OF FIRST MACON 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 First Macon has fixed the close of business on
July 21, 1998, as the Record Date for determination of shareholders entitled to
vote at the Special Meeting. As of the Record Date, there were 314 record
holders of First Macon Common Stock and 1,076,604 shares of First Macon Common
Stock outstanding, each entitled to one vote per share.
The presence at the Special Meeting, in person or by proxy, of the holders
of majority of the outstanding shares of First Macon 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 First Macon shareholders holding the requisite
number of shares of First Macon Common Stock are represented in person or by
proxy. If a quorum is present, the affirmative vote of the holders of at least
717,736 shares of First Macon Common Stock is required to approve the Agreement.
Broker nonvotes 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 First Macon 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.
Under Georgia law, a holder of First Macon Common Stock who properly
exercises dissenters' rights will receive for each such share of First Macon
Common Stock the "fair value" of such share, assuming the Merger is consummated.
Fair value is defined as the value of such shares immediately before the
effectuation of the Merger, excluding any appreciation or depreciation in
anticipation of the Merger. See "The Merger -- Rights of Dissenting
Shareholders."
As of the Record Date, directors of First Macon beneficially owned 445,204
shares of First Macon Common Stock representing approximately 41% of the
outstanding shares. These individuals have agreed with BancGroup to vote their
shares in favor of the Merger. As of the Record Date, the directors, executive
officers and affiliates of BancGroup held no shares of First Macon Common Stock.
If the Agreement is approved at the Special Meeting, First Macon is
expected to merge with and into Colonial Bank promptly after the other
conditions to the Agreement are satisfied. See "The Merger -- Conditions to
Consummation of the Merger."
THE BOARD OF DIRECTORS OF FIRST MACON URGES THE SHAREHOLDERS OF FIRST MACON
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.
11
<PAGE> 20
SOLICITATION, VOTING AND REVOCATION OF PROXIES
In addition to soliciting proxies by mail, directors, officers and other
employees of First Macon, without receiving special compensation therefor, may
solicit proxies from First Macon's shareholders by telephone, by telegram or in
person. Arrangements will also be made with brokerage firms and other
custodians, nominees and fiduciaries, if any, to forward solicitation materials
to any beneficial owners of shares of First Macon Common Stock.
First Macon will bear the cost of assembling and mailing this Prospectus
and other materials furnished to shareholders of First Macon. It will also pay
all other expenses of solicitation, including the expenses of brokers,
custodians, nominees, and other fiduciaries who, at the request of First Macon,
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 First Macon 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 First Macon 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 First Macon 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 First Macon, prior to or at the Special Meeting,
a written notice revoking the proxy; (ii) delivering to the Secretary of First
Macon, 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 First Macon's proxies should be
addressed to:
FIRST MACON BANK & TRUST COMPANY
P.O. Box 49
Macon, Georgia 31294-6299
Attention: President
Proxies marked as abstentions and shares held in a 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 First Macon 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 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 approval of the Agreement. Proxies voted against
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 (i) that 1,076,604 shares of First Macon Common Stock are
outstanding on the Effective Date, (ii) that no dissenters' rights of appraisal
are exercised in the Merger, and (iii) a Market Value of $33.5125 on the
Effective Date ($33.5125 was the ten-day average of closing prices of BancGroup
Common Stock at July 21, 1998), BancGroup will issue approximately 1,820,214
shares of BancGroup Common Stock to the shareholders of First Macon in the
Merger. Based on those assumptions, the 1,820,214 shares of BancGroup Common
Stock would represent approximately 3.57% of the total number of shares of
BancGroup Common Stock outstanding following the Merger, not counting any
additional shares BancGroup may issue pursuant to other pending acquisitions or
for any other reason. The foregoing example does not give effect to the Stock
Split.
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THE MERGER
The following sets forth a summary of the material provisions of the
Agreement and the Option 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 and the Option Agreement, copies of which are
attached hereto as Appendix A and Appendix D, respectively, and certain
provisions of Georgia law relating to the rights of dissenting shareholders, a
copy of which is attached hereto as Appendix C. All First Macon 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
First Macon, receipt of necessary regulatory approval and satisfaction of
certain other conditions described below at "Conditions to Consummation of the
Merger," First Macon will merge with and into Colonial Bank. Upon completion of
the Merger, the corporate existence of First Macon will cease, and Colonial Bank
will succeed to the business formerly conducted by First Macon.
BACKGROUND OF THE MERGER
Beginning during the third quarter of 1997, the Chief Executive Officer and
Board of Directors of First Macon, as a part of their regular long term
planning, recognized and evaluated the increasing valuations of community banks
and consolidation activity affecting community banks. The Board of Directors
accordingly began a more active consideration of the strategic alternatives
available to First Macon and commenced the process of selecting expert financial
advisors to assist the Board of Directors in such processes.
At the end of 1997 and during the first quarter of 1998, First Macon
received unsolicited and informal indications of interest to acquire First Macon
from five financial institutions. None of these institutions included BancGroup
or any of its affiliates. Each of these indications of interest was considered
by First Macon's Board of Directors and, after careful consideration, the Board
either declined to engage in further acquisition discussions with various of
such financial institutions due to the inadequate nature of such proposals or
deferred further consideration of various other of such proposals pending the
engagement by First Macon of expert financial advice.
After careful consideration of the qualifications and experience of various
financial advisory firms, First Macon engaged T. Stephen Johnson & Associates,
Inc. ("Advisor") to provide to First Macon financial advice, develop a bid
package, and advise the Board concerning potential suitable merger partners. As
a result of such engagement and the bid process initiated by Advisor, on April
9, 1998, Advisor presented First Macon with bids from two financial
institutions, including BancGroup. The bid from BancGroup valued First Macon at
$61.0 million, and the competing bid valued First Macon at $58.0 million.
Following the receipt and initial consideration of such bids, Edward P.
Loomis, Jr., the President and Chief Executive Officer of First Macon, T.
Stephen Johnson and W. James Stokes, the Chairman and Chief Executive Officer
and the Senior Vice President of Advisor, respectively, met with Robert E.
Lowder and W. Flake Oakley, the Chairman and Chief Executive Officer and the
Executive Vice President of BancGroup, respectively, in Montgomery, Alabama to
evaluate and further discuss BancGroup's bid. Subsequent to these meetings, on
April 19, 1998, BancGroup prepared and presented to First Macon a non-binding
letter of intent summarizing the terms of the transaction proposed by BancGroup.
On April 20, 1998, after careful consideration, the Board of Directors
authorized and directed Mr. Loomis to negotiate, complete and sign the letter of
intent on behalf of First Macon and take such other appropriate steps to proceed
with the negotiation of a definitive acquisition agreement with BancGroup.
BancGroup's letter of intent, dated as of April 22, 1998, was subsequently
signed by First Macon on April 23, 1998, and First Macon and BancGroup
concurrently announced the execution of such letter of intent.
Following the completion of due diligence activities and negotiation of the
Merger Agreement and Option Agreement, a special meeting of the Board of
Directors of First Macon was held on May 14, 1998. Upon further consideration of
the proposed transaction with BancGroup, and following a summary by legal
counsel
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of various matters (including duties of the Board of Directors in acting upon
the merger proposal, the terms of the Merger Agreement and Option Agreement, and
other factors relevant to such transaction) a presentation by the Advisor of its
opinion that the consideration to be received by the shareholders of First Macon
in the proposed merger is fair to such shareholders from a financial point of
view, the Board unanimously determined that the transaction with BancGroup was
in the best interests of First Macon, its shareholders and other constituencies
and approved the Merger Agreement and Option Agreement.
FIRST MACON'S BOARD OF DIRECTOR'S REASONS FOR APPROVING THE MERGER
The terms of the Merger Agreement, including the consideration to be paid
to the First Macon shareholders, were the result of arms length negotiations
between representatives of First Macon and BancGroup. Among factors considered
by the Board of Directors of First Macon in deciding to approve and recommend to
the shareholders of First Macon the Merger Agreement and the transaction
contemplated thereby were:
(a) the consideration to be paid to First Macon shareholders in
relation to the respective market values, book values, earnings per share
and dividend rates of First Macon Common Stock and BancGroup Common Stock,
and in relation to other bids received by First Macon;
(b) information concerning the respective financial conditions,
results of operations, capital levels, asset quality and prospects of First
Macon and BancGroup;
(c) the marketability of BancGroup Common Stock;
(d) the general structure of the transaction;
(e) the compatibility of management and business philosophy;
(f) the likelihood of receiving requisite regulatory approvals in a
timely manner and the relative certainty of consummating the transaction;
(g) the generally tax-free nature of the Merger to shareholders of
First Macon;
(h) the ability of the combined enterprise to compete in relevant
banking and non-banking markets;
(i) industry and economic conditions, including trends in the
consolidation of the financial services industry;
(j) the impact of the merger on depositors, employees, customers of
and communities served by First Macon; and
(k) the opinion of the Advisor as to the fairness, from a financial
point of view, of the consideration provided for in the Merger Agreement to
be paid to First Macon stockholders.
In adopting the Merger Agreement and approving the transactions
contemplated thereby, First Macon's Board of Directors was aware that the Merger
Agreement contains provisions prohibiting First Macon from soliciting other
offers to acquire First Macon, and that BancGroup would be able to exercise its
rights under the Option Agreement under certain circumstances generally relating
to the failure of First Macon to consummate the Merger because of another offer
for First Macon or a material change in the ownership of First Macon. The First
Macon Board of Directors was also aware that such terms were specifically
bargained for and insisted upon by BancGroup as inducements to enter into the
Merger Agreement.
The above factors are not exhaustive of those factors considered by First
Macon's Board of Directors. In reaching its determination to approve the Merger,
First Macon's Board of Directors did not assign any relative or specific weights
to different factors.
First Macon's Board of Directors unanimously recommends that First Macon's
shareholders vote for adoption of the Merger Agreement.
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OPINION OF FINANCIAL ADVISOR
First Macon engaged Advisor to provide to First Macon financial advise
relative to potential acquisition transactions, develop a bid package and advise
the Board of Directors of First Macon relative to potential suitable merger
partners. First Macon selected Advisor as its financial advisor after
considering various financial advisory firms based on Advisor's experience and
expertise in representing community banks in acquisition transactions. First
Macon and Advisor did not enter into a formal written engagement at the
commencement of the advisory services provided by Advisor. In connection with
the conclusion of the letter of intent, First Macon and Advisor agreed with
BancGroup that Advisor would be paid a fee of $305,000 by Colonial Bank,
BancGroup's wholly owned subsidiary, conditioned upon conclusion of the Merger.
In considering the fairness opinion of Advisor, the First Macon Board of
Directors was aware of the potential bias posed by such fee arrangements. Except
for such engagement, no material relationship has existed between First Macon
and Advisor over the past two years.
Advisor is an investment banking and financial services firm located in
Atlanta, Georgia. As a part of its investment banking business, Advisor engages
in the review of the fairness of bank acquisition transactions from a financial
perspective and the valuation of banks and other businesses and their securities
in connection with mergers, acquisitions and other transactions. In rendering
its opinion, no instructions were given or limitations imposed by First Macon
upon Advisor.
On May 14, 1998, Advisor delivered its oral opinion to the Board of
Directors of First Macon that the consideration provided for in the Merger
Agreement is fair, from a financial point of view, to the shareholders of First
Macon. Advisor subsequently, confirmed such opinion (the "Fairness Opinion") in
writing. A copy of the Fairness Opinion, which sets forth certain assumptions
made, matters considered and limitations on the review undertaken, is attached
as Appendix B to this Prospectus and should be read in its entirety. The
following summary of the Fairness Opinion is qualified in its entirety by
reference to the text of the Fairness Opinion.
In connection with rendering the Fairness Opinion, Advisor performed a
variety of financial analyses, including those summarized below. The summary set
forth below does not purport to be a complete description of the analyses
performed by Advisor. The preparation of a Fairness Opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of these methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to summary
description. Accordingly, notwithstanding the separate factors summarized below,
Advisor believes that its analyses must be considered as a whole and that
selecting portions of its analyses and the factors considered by it, without
considering all analyses and factors, could create an incomplete view of the
valuation process underlying its opinion. In performing its analyses, Advisor
made numerous assumptions with respect to industry performance, business and
economic conditions and other matters, many of which are beyond the control of
First Macon and BancGroup. The analyses performed by Advisor are not necessarily
indicative of actual values or future results which may be significantly more or
less favorable than suggested by such analyses. No company or transaction
considered as a comparison in the analyses is identical to First Macon,
BancGroup or the Merger. Accordingly, analyses of the results of such
comparisons is not mathematical; rather, it involves complex considerations and
judgments concerning differences in financial and operating characteristics of
companies and other factors that could affect the public trading value of the
companies involved in such comparisons. In addition, the analyses do not purport
to be appraisals or reflect the process by which or the prices at which
businesses actually may be sold or the prices at which any securities may trade
at the present or any future time.
The Merger consideration is set at $56.66 per share for each of the
1,076,604 First Macon common shares outstanding for a total of $61.0 million,
converted into BancGroup common shares at the current Market Value. Advisor
calculated an exchange ratio based on current conditions. The closing price for
BancGroup common stock on July 21, 1998 was $34.0625 per share. Using this
closing price as the Market Value in the Merger, each First Macon common share
would be converted into the right to receive 1.6634 shares of BancGroup common
stock. The actual number of shares to be received will be based on the Market
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Value that will be determined just prior to closing. The number of shares
received has an inverse relationship with the Market Value.
Regardless of the number of shares received, the total merger consideration
equals 3.99 times the March 31, 1998 book value of First Macon common stock and
22.22 times 1997 earnings.
BancGroup currently pays a quarterly dividend of $0.17 per share to its
shareholders equal to $0.68 per share, annualized. During the second quarter,
1998, First Macon paid a dividend of $0.40 per share. Assuming an exchange ratio
of 1.9085 shares to one, each equivalent First Macon common share would begin to
receive $1.30 per share on an annualized basis.
Advisor reviewed the Merger as of May 13, 1997, for the purpose of
determining purchase premiums that could be used in comparing the Merger with
other announced transactions. Advisor reviewed the purchase premiums paid in 45
transactions that were announced since January 1, 1998 involving selling
institutions headquartered in the southeastern United States. Of these
transactions, 5 involved selling institutions that have been determined to be
comparable transactions. They include institutions representing commercial bank
institutions with total assets between $100 million and $300 million with total
equity less than 10.00 percent of total assets. A listing of these transactions
is attached as part of Appendix B. The purchase premiums in the Merger rank
within the range of the purchase premiums paid in the comparable transactions.
On average, the five comparable transactions reported an announced deal price to
book value of 3.7517 times and an announced deal price to earnings of 29.34
times.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF FIRST MACON
The Board of Directors of First Macon has determined that the Merger is in
the best interests of First Macon and its shareholders. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF FIRST MACON VOTE IN FAVOR OF THE
APPROVAL AND ADOPTION OF THE AGREEMENT AND THE MERGER.
BANCGROUP'S REASONS FOR THE MERGER
The Boards of Directors of BancGroup and Colonial Bank have unanimously
approved the Agreement and the Merger. BancGroup currently operates Colonial
Bank as a network of "community banks" in the Southeastern United States and
Nevada, and operates Colonial Mortgage Company, a subsidiary of Colonial Bank,
as a mortgage banking company in 34 states. BancGroup has been actively
exploring opportunities to expand the operations of Colonial Bank in the Georgia
market in general and to establish a presence in the Central Georgia market in
particular. The proposed acquisition of First Macon provides such an
opportunity.
In approving the Merger and the Agreement, the Board of Directors of
BancGroup took into account, among other things: (i) the size and strength of
the Georgia economy and banking market, (ii) the experience of Colonial Bank in
portions of the Georgia market, (iii) the financial performance and condition of
First Macon, including its strong capital and good asset quality, (iv)
similarities in the philosophies of First Macon and BancGroup, including First
Macon's commitment to delivering high quality personalized financial services to
its customers, and (v) First Macon's management's knowledge of and experience in
the Central Georgia market.
RELATED TRANSACTIONS -- STOCK OPTION
First Macon and BancGroup have entered into a stock option agreement dated
as of May 14, 1998 (the "Option Agreement") whereby First Macon has granted to
BancGroup an option to purchase up to 214,244 shares, or 19.9% of First Macon
Common Stock at a purchase price of $56.66 per share. The Option Agreement is
attached hereto as Appendix D. 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, BancGroup's execution of the Agreement. The
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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 First Macon.
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
termination of the Agreement. If the option becomes exercisable, First Macon 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 First Macon.
The term "Purchase Event" is defined in the Option Agreement to include:
(i) First Macon's agreement, without BancGroup's prior written consent, to
effect an "Acquisition Transaction" with any person other than BancGroup, or
First Macon'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 First Macon Common Stock. The term
"Acquisition Transaction" is defined to include: (i) a merger, consolidation, or
other business combination involving First Macon; (ii) the disposition, by sale,
exchange, lease, or otherwise, of substantially all of the consolidated assets
of First Macon; or (iii) the issuance of securities representing 25% or more of
the voting power of First Macon.
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 First Macon
Common Stock or the failure of First Macon'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 First Macon 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 First Macon or the failure to occur of
certain conditions precedent to the consummation of the Merger.
To the knowledge of First Macon, no event that would permit the exercise of
the option has occurred as of the date hereof. The rights and obligations of
First Macon 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 First Macon's agreement not to
negotiate or entertain any proposals for the sale of First Macon or its
subsidiaries to another party (see "The Merger -- Commitments with Respect to
Other Offers"), 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 First Macon from considering or proposing such an acquisition, even if such
persons were prepared to pay a higher price per share for the First Macon 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 First Macon. The
possibility that BancGroup might exercise the option, and thus acquire a
substantial block of First Macon Common Stock, might deter offers of other
persons or entities interested in such an acquisition.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of First Macon's management and its Board of Directors have
interests in the Merger in addition to, or different from, the interests of
shareholders of First Macon generally. These interests relate to certain
agreements and arrangements described below.
Employment Agreement. Edward P. Loomis, Jr., First Macon's Chief Executive
Officer and President, has agreed to enter into an Employment Agreement with
Colonial Bank to serve as the President of Colonial Bank's Central Georgia
Region. The Employment Agreement will be effective as of the Effective Date and
will have a term of three years. Pursuant to the Employment Agreement, Mr.
Loomis will receive $300,000
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annual base salary and will be entitled to receive such adjustments in salary
and bonuses as Colonial Bank may grant from time to time. Mr. Loomis will be
eligible to participate in those benefit plans that are available to executive
officers of Colonial Bank and shall receive a grant of options to acquire 20,000
shares of BancGroup Common Stock, at an exercise price of the fair market price
as of the Effective Date under BancGroup's stock option plans. The options will
vest ratably over a five-year period from the date of grant and will be
exercisable at the closing price of BancGroup Common Stock on the Effective
Date. The Employment Agreement will also provide that Mr. Loomis will not for a
period (generally, three years) specified in the Employment Agreement serve as a
consultant to, serve as a management official of, or be or become the beneficial
owner of 4% or more of the equity securities of, any financial institution
having an office in Bibb or Jones Counties, Georgia, or any counties contiguous
thereto. BancGroup has agreed to pay Mr. Loomis severance benefits if his
employment is terminated by BancGroup other than for cause, as set forth in the
Employment Agreement.
Noncompetition Agreements. Walter H. Bush, Jr., Robert E. Chanin, Charles
F. Heard, Bertram Maxwell, III, Albert W. McKay, Jr., Daniel L. Pike, Barney A.
Smith, Jr., Jerry L. Stephens, John H. Taylor, Jr., and Charles H. Yates, Jr.
who were members of First Macon's Board of Directors as of December 31, 1997,
have agreed to enter into non-competition agreements with BancGroup and Colonial
Bank. The agreements provide that such directors will not, for a period of three
years from the Effective Date, serve as a consultant to, serve as a director or
management official of, or be or become a beneficial owner of 4% or more of
voting stock or equity securities in, any financial institution having an office
in Bibb or Jones Counties, Georgia, or any counties contiguous thereto. In
consideration for the agreement not to compete, each of the Directors will
receive a lump-sum payment of $35,000 on or about the Effective Date.
Stock Options. Mark Stevens, Carol Soto, Mark Bikus and Jordan Michael,
each a "key employee" of First Macon, will each receive, as post-merger
retention incentives, options to acquire 10,000 shares of BancGroup Common
Stock. The options will vest in accordance with a five-year schedule and will
have an exercise price equal to the closing price of BancGroup Common Stock as
reported on the NYSE on the Effective Date.
On the Effective Date, all employees of First Macon (including its
executive officers) will, at BancGroup's option, either become employees of
BancGroup or its subsidiaries 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 (as though such employees had been employees of BancGroup since such
employees' respective initial employment date with First Macon). All employees
of First Macon who become employees of BancGroup or its subsidiaries on the
Effective Date will be entitled, to the extent permitted by applicable law, to
participate in all benefit plans of BancGroup to the same extent as BancGroup's
employees, unless otherwise specifically stated in the Agreement.
Indemnification. Subject to certain conditions, for a period of four years
after the Effective Date, BancGroup has agreed in the Merger Agreement to
indemnify, advance costs and expenses and hold harmless each person entitled to
indemnification from First Macon against all liabilities arising out of actions
or omissions accruing prior to the Effective Date (1) to the extent authorized
under First Macon's Articles of Incorporation and Bylaws (without regard to
Section 10.4 of the Bylaws requiring a third party approval of a particular
indemnified claim as a condition to payment of sums by way of indemnification)
of First Macon and Georgia law, and (2) to the extent arising out of the
transactions contemplated by the Merger Agreement. Any proceeds received by an
indemnified party from First Macon's Directors and Officers and Company
Liability Insurance Policy shall reduce BancGroup's indemnity obligations. If
BancGroup or Colonial Bank receives any proceeds under such policy which relate
to indemnified claims, such proceeds will be paid to the indemnified party
unless such proceeds are received by BancGroup or Colonial Bank by way of
reimbursement for providing indemnification payment. In the event an indemnified
party suffers an uncompensated loss solely due to the deductible amount under
such policy, BancGroup has agreed in the Merger Agreement to reimburse such
indemnified party for such loss.
Except as described above, none of the directors or executive officers of
First Macon, and no associate of any such person, has any substantial direct or
indirect interest in the Merger, other than an interest arising from the
ownership of First Macon Common Stock.
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CONVERSION OF FIRST MACON COMMON STOCK
On the Effective Date, each share of First Macon Common Stock outstanding
and held by First Macon's shareholders (except shares as to which dissenters'
rights of appraisal are perfected) will be converted by operation of law and
without any action by any holder thereof into a number of shares of BancGroup
Common Stock equal to $56.66 divided by the Market Value. The Market Value shall
be the average of the closing prices of BancGroup Common Stock as reported on
the NYSE on each of the ten consecutive trading days ending on the trading day
that is the fifth trading day immediately preceding the Effective Date. However,
if BancGroup is acquired by another entity or merged with another entity so that
BancGroup is not the surviving corporation, which acquisition or merger is
publicly announced before the Effective Date, the Market Value shall be the
closing price of BancGroup Common Stock as reported on the NYSE on the day prior
to the public announcement of such a transaction. On July 21, 1998, the ten-day
average of the closing prices of BancGroup Common Stock as reported on the NYSE
was $33.5125. Assuming the Market Value is $33.5125, each share of First Macon
Common Stock will be converted into 1.6907 ($56.66 / $33.5125) shares of
BancGroup Common Stock.
No fractional shares of BancGroup Common Stock will be issued in the
Merger. Each shareholder of First Macon 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.
As of July 21, 1998, the ten-day average of the closing prices of BancGroup
Common Stock was $33.5125. Shareholders are advised to obtain current market
quotations for BancGroup Common Stock. The Market Value of BancGroup Common
Stock at the Effective Date, or the market price of BancGroup Common Stock on
the date on which First Macon shareholders receive certificates representing
such shares, 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,
an appropriate and proportional adjustment will be made in the number of shares
of BancGroup Common Stock into which the First Macon Common Stock will be
converted in the Merger.
On July 15, 1998, BancGroup announced that its Board of Directors had
declared a two for one split of BancGroup's Common Stock to be effected in the
form of a 100% stock dividend (the "Stock Split"). Stockholders of record of
BancGroup Common Stock will receive one share of BancGroup Common Stock for each
share they hold as of the close of business on July 31, 1998. The additional
shares will be distributed pursuant to the Stock Split on August 14, 1998. In
accordance with the Agreement, the shareholders of First Macon will receive an
appropriate adjustment in the amount of BancGroup Common Stock they will receive
in connection with the Merger to reflect the Stock Split.
SURRENDER OF FIRST MACON COMMON STOCK CERTIFICATES
Upon the Effective Date and subject to the conditions described at "The
Merger -- Conditions to Consummation of the Merger," First Macon's shareholders
(except to the extent that such holders perfect dissenters' rights of appraisal)
will automatically, and without further action by such shareholders or by
BancGroup, become holders of BancGroup Common Stock as described herein.
Certificates representing outstanding shares of the First Macon Common Stock
will represent shares of BancGroup Common Stock. Thereafter, upon surrender of
the certificates formerly representing shares of First Macon Common Stock, the
holders will be entitled to receive certificates for the BancGroup Common Stock.
Dividends on the shares of BancGroup Common Stock will accumulate without
interest and will not be distributed to any former shareholder of First Macon
unless and until such shareholder surrenders for cancellation his certificate
for First Macon 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 First Macon Common Stock surrendered in connection with the
Merger.
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A detailed explanation of these arrangements will be mailed to First Macon
shareholders promptly following the Effective Date. STOCK CERTIFICATES SHOULD
NOT BE SENT TO THE EXCHANGE AGENT UNTIL SUCH NOTICE IS RECEIVED.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to qualify as a "reorganization" for federal income
tax purposes under Section 368(a)(1)(A) of the Code. The obligation of the
parties to consummate the Merger is conditioned on the receipt of an opinion in
form and substance reasonably satisfactory to First Macon and BancGroup from
PricewaterhouseCoopers LLP, which serves as BancGroup's independent public
accountant, to the effect that the Merger will constitute such a reorganization.
A copy of such opinion has been delivered to First Macon. In delivering its
opinion, PricewaterhouseCoopers LLP, has received and relied upon certain
representations contained in certificates of officers of BancGroup and First
Macon and certain other information, data, documentation and other materials as
it deems necessary. The tax opinion is based upon customary assumptions
contained therein, including the assumption that First Macon has no knowledge of
any plan or intention on the part of the First Macon 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 First Macon Common Stock outstanding immediately
upon consummation of the Merger.
Neither First Macon nor BancGroup intends to seek a ruling from the IRS as
to the federal income tax consequences of the Merger. First Macon's shareholders
should be aware that the opinion of Pricewaterhouse-Coopers LLP will not be
binding on the IRS or the courts. First Macon'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 First Macon's shareholders who exchange their shares of First Macon
Common Stock for shares of BancGroup Common Stock:
(i) No gain or loss will be recognized by First Macon's shareholders
on the exchange of shares of First Macon Common Stock for shares of
BancGroup Common Stock;
(ii) The aggregate basis of BancGroup Common Stock received by each
First Macon 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 First Macon Common Stock
surrendered in exchange therefor;
(iii) The holding period of the shares of BancGroup Common Stock
received by each First Macon shareholder will include the period during
which the shares of First Macon Common Stock exchanged therefor were held,
provided that the shares of First Macon Common Stock were a capital asset
in the holder's hands as of the Effective Date;
(iv) Cash payments received by each First Macon 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 First Macon Common Stock is a capital asset in the hands of
the holder;
(v) No gain or loss will be recognized by First Macon upon the
transfer of its assets and liabilities to BancGroup. No gain or loss will
be recognized by Colonial Bank upon the receipt of the assets and
liabilities of First Macon;
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(vi) The basis of the assets of First Macon acquired by Colonial Bank
will be the same as the basis of the assets in the hands of First Macon
immediately prior to the Merger;
(vii) The holding period of the assets of First Macon in the hands of
Colonial Bank will include the period during which such assets were held by
First Macon; and
(viii) A First Macon 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 First Macon Common Stock converted, if the shares of First Macon
Common Stock were held as capital assets. However, a First Macon
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 First Macon 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 FIRST MACON, TO
FIRST MACON 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, SHAREHOLDERS WHO DO NOT HOLD THEIR SHARES OF FIRST MACON COMMON
STOCK AS "CAPITAL ASSETS" WITHIN THE MEANING OF SECTION 1221 OF THE CODE, AND
SHAREHOLDERS WHO ACQUIRED THEIR SHARES OF FIRST MACON 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. FIRST MACON 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 First Macon, a Georgia
state bank, will become shareholders of BancGroup, a Delaware business
corporation.
For a discussion of the differences in the rights, preferences, and
privileges attaching to First Macon Common Stock as compared with 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 First Macon 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 outstanding First Macon Common Stock; (ii) the
approval of the Merger by the Federal Reserve, the Georgia Commissioner and the
Alabama Department; (iii) the Registration Statement of which this Prospectus
forms a part having become effective, with no stop order or proceedings for the
purpose of suspending the effectiveness of the Registration Statement pending or
in effect; (iv) the absence of pending or threatened litigation with a view to
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restraining or prohibiting consummation of the Merger or to obtaining
divestiture, rescission or damages in connection with the Merger; (v) the
absence of any investigation by any governmental agency which might result in
any such proceeding; (vi) consummation of the Merger no later than December 31,
1998; (vii) receipt of an opinion of PricewaterhouseCoopers LLP regarding
certain tax matters; and, (viii) receipt of opinions of counsel.
The obligation of First Macon to consummate the Merger is further subject
to several other conditions, including, among others: (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.
The obligation of BancGroup to consummate the Merger is subject to several
other conditions, including, among others: (i) the absence of any material
adverse change in the financial condition or affairs of First Macon; (ii) the
number of shares as to which holders of First Macon Common Stock exercise
dissenters' rights not exceeding 10% of the outstanding shares of First Macon
Common Stock; (iii) the receipt of a letter from PricewaterhouseCoopers LLP
concurring with the conclusions of BancGroup's and First Macon's management that
no conditions exist with respect to each company which would preclude accounting
for the Merger as a pooling of interests; (iv) the accuracy in all material
respects of the representations and warranties of First Macon contained in the
Agreement, and the performance by First Macon of all of its covenants and
agreements under the Agreement; (v) the execution and delivery to Colonial Bank
or BancGroup of Mr. Loomis's Employment Agreement and the noncompetition
agreements of certain directors of First Macon; and, (vi) the receipt by
BancGroup of certain undertakings from holders of First Macon Common Stock who
may be deemed to be "affiliates" of First Macon pursuant to the rules of the
Commission.
It is anticipated that the foregoing conditions, as well as certain other
conditions contained in the Agreement, such as the receipt of certificates of
officers of each party as to compliance with the Agreement and satisfaction by
each party of all representations, warranties and covenants, will be satisfied.
The Agreement provides that First Macon and BancGroup may waive all conditions
to their respective obligations to consummate the Merger, other than the receipt
of the requisite approvals of regulatory authorities and First Macon shareholder
approval of the Merger. In making any decision regarding a waiver of one or more
conditions to consummation of the Merger or an amendment of the Agreement, the
members of the Boards of Directors of First Macon and BancGroup would be subject
to the fiduciary duties owed by directors pursuant to applicable law that would
require such directors to act in the best interests of their respective
corporations and its shareholders. First Macon and BancGroup anticipate that the
Effective Date will occur on October 1, 1998, however no assurance can be made
that the Effective Date will not occur earlier than or be delayed beyond October
1, 1998.
AMENDMENT OR TERMINATION
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 approval of the Merger by the holders of First
Macon Common Stock, no amendment decreasing the consideration to be received by
First Macon shareholders may be made without the further approval of such
shareholders. Such amendments may require the filing with the Commission of an
amendment of the Registration Statement, of which this Prospectus forms a part.
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 First
Macon, by the mutual consent of the respective Boards of Directors of First
Macon and BancGroup, or by the Board of Directors of either BancGroup or First
Macon under certain circumstances including, but not limited to, the failure of
the transactions contemplated by the Agreement to be consummated on or prior to
December 31, 1998, if such failure to consummate is not caused by any breach of
the Agreement by the party electing to terminate.
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REGULATORY APPROVALS
The approval of the Federal Reserve and the Alabama Department must be
obtained prior to consummation of the Merger. In order to obtain such approvals,
an application and a notification were filed with the Federal Reserve, and an
application was filed with the Alabama Department on June 29, 1998.
Alabama State Banking Department Approval. The 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 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
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 Merger shall be approved by the Superintendent.
Federal Reserve Approval. Pursuant to the requirements of the Bank Merger
Act, the Federal Reserve is prohibited from approving the 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 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 Merger are clearly outweighed in the public interest by the
probable effect of the 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 Merger constitutes an interstate bank merger, certain
additional requirements are applicable to the Merger. For example, subject to
certain exceptions, the Federal Reserve is prohibited from approving the Merger
if Colonial Bank materially fails to comply with filing requirements imposed by
the Georgia Department of Banking and Finance for interstate bank merger
transactions. In addition, the Federal Reserve is prohibited from approving the
Merger if the bank resulting from the 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 Merger if either party to the Merger has a
branch in any state in which any other bank involved in the Merger has a branch,
and the resulting bank, upon consummation of the 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 Merger.
The Bank Merger Act imposes a waiting period which prohibits consummation
of the Merger, in ordinary circumstances, for a period ranging from 15-30 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.
As the result of the Merger, Colonial Bank will acquire directly, and
BancGroup will acquire indirectly, a one-third interest in a corporation,
Pro-Image, Inc., currently owned by First Macon which engages in permissible
non-banking activities. As a result, the approval of the Federal Reserve must
also be obtained pursuant to Section 4 of the BHCA, and regulations promulgated
pursuant thereto, prior to the Merger and BancGroup's indirect acquisition of
this interest resulting therefrom.
The Federal Reserve is required to consider whether performance of the
activity by a bank holding company or a subsidiary of such company can
reasonably be expected to produce benefits to the public, such as greater
convenience, increased competition, or gains in efficiency, that outweigh
possible adverse effects, such as undue concentration of resources, decreased or
unfair competition, conflicts of interests, or unsound
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banking practices. The Federal Reserve's consideration of these factors includes
an evaluation of the financial and managerial resources of the notificant,
including its subsidiaries and any company to be acquired, the effect of the
proposed transaction on those resources, and the management expertise, internal
control and risk-management systems, and capital of the entity conducting the
activity.
The Agreement provides that the obligation of each of BancGroup, Colonial
Bank and First Macon to consummate the Merger is conditioned upon the receipt of
all necessary regulatory approvals. There can be no assurance that the
applications necessary for Colonial Bank to consummate the Merger with First
Macon will be approved, and, if such approvals are received, that such approvals
will not be conditioned upon terms and conditions that would cause the parties
to abandon the Merger.
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 other governmental approvals or actions that
may be required for consummation of the Merger except for the approvals of the
Federal Reserve and the Alabama 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 contains certain restrictions on the conduct of the business
of First Macon pending consummation of the Merger. The Agreement prohibits First
Macon 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 First Macon:
(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);
(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 (except for cash dividends at then-current rates in accordance
with past practice) or distributions of any assets of any kind whatsoever
to shareholders, or purchasing or redeeming or agreeing to purchase or
redeem, any of its outstanding securities, provided that, if the Effective
Date is not on or before October 30, 1998, First Macon may pay a dividend
timed to coincide with and equal to the dividend paid by BancGroup in the
fourth quarter of 1998 ($0.085 per share after giving effect to the Stock
Split) multiplied by the result obtained by dividing $56.66 by the closing
price of BancGroup Common Stock as reported by the NYSE on October 30,
1998.
(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 are material;
(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;
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(ix) Except in accordance with normal and usual practice, making any
accrual or arrangement for or payment of bonuses or special compensation of
any kind or any severance or termination pay to any present or former
officer or employee;
(x) Except in accordance with normal and usual practice, increasing
the rate of compensation payable to or to become payable to any of its
officers or employees or making any material increase in any
profit-sharing, bonus, deferred compensation, savings, insurance, pension,
retirement or other employee benefit plan, payment or arrangement made to,
for or with any of its officers or employees;
(xi) Failing to operate its business in the ordinary course so as to
preserve its business intact and to preserve the goodwill of its customers
and others with whom it has business relations; and
(xii) Entering into any other material transaction other than in the
ordinary course of business.
The Agreement provides that prior to the Effective Date, no director or
officer of First Macon 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 with the business of First Macon or its subsidiaries.
The Agreement also provides that (i) First Macon will consult with
BancGroup respecting loan requests outside the ordinary course of business or in
excess of $250,000, except for single-family residential loan requests and
renewals of existing loans which do not increase the outstanding principal
amount of the loan, and (ii) First Macon will consult with BancGroup respecting
business issues on a basis mutually satisfactory to BancGroup and First Macon.
COMMITMENTS WITH RESPECT TO OTHER OFFERS
Until the termination of the Agreement, and except for the Merger, neither
First Macon nor any of its directors or officers (or any person representing any
of the foregoing) shall solicit or encourage inquiries or proposals with respect
to, furnish any information relating to or participate in any negotiations or
discussions concerning, any acquisition or purchase of all or of a substantial
portion of the assets of, or of a substantial equity interest in, First Macon or
any business combination involving First Macon (collectively, an "Acquisition
Proposal") other than as contemplated by the Agreement. First Macon will notify
BancGroup immediately if any such inquiries or proposals are received by First
Macon, if any such information is requested from First Macon, or if any such
negotiations or discussions are sought to be initiated with First Macon. First
Macon is required to instruct its officers, directors, agents or affiliates or
their subsidiaries to refrain from doing any of the above. First Macon may
communicate information about an Acquisition Proposal to its shareholders if and
to the extent that legal counsel provides a written opinion to First Macon that
it is required to do so in order to comply with its legal obligations.
In connection with the Agreement, First Macon has granted to BancGroup the
option to purchase up to 19.9% of the First Macon Common Stock at a purchase
price of $56.66 per share. The option will become exercisable upon the
occurrence of certain events which are generally related to the potential
acquisition of First Macon 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 First Macon. See "The
Merger -- Related Transactions -- Stock Option."
RIGHTS OF DISSENTING SHAREHOLDERS
Article 13 of the Georgia Business Corporation Code provides for rights of
appraisal for the value of the shares of a shareholder who (i) has delivered
notice in writing to First Macon before the vote is taken that the shareholder
intends to demand payment for his or her shares if the Merger is consummated and
(ii) either votes against the Merger or refrains from voting on the Merger. The
notice must be delivered to First Macon Bank & Trust Company, which has a
mailing address at P.O. Box 49, Macon, Georgia 31294-6299, Attention: President.
If a shareholder votes against the Merger or refrains from voting on the Merger,
but does not also
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deliver the notice in writing to First Macon before the shareholder vote on the
Merger occurs, such shareholder will lose his or her appraisal rights.
Within ten (10) days after the Effective Date of the Merger, Colonial, as
the corporation surviving the Merger, will send to each First Macon shareholder
who has given such notice a written dissenter's notice (the "Dissenter's
Notice") stating, among other things, a date not less than thirty (30) days nor
more than sixty (60) days after the date of the Dissenter's Notice by which the
shareholder must submit a written payment demand. The Dissenter's Notice will
also include where and when stock certificates for shares of First Macon Common
Stock must be deposited. A First Macon shareholder who does not demand payment
or deposit stock certificates where required by the date set in the Dissenter's
Notice shall lose his or her right to dissent and will not be entitled to
payment for his or her shares.
Within ten (10) days of the later of the Effective Date or receipt of a
payment demand by the dissenting shareholders, Colonial will offer to pay each
dissenting shareholder who has complied with the requirements of the Georgia
Business Corporation Code the amount which Colonial estimates to be the fair
value of the shares, plus accrued interest. A shareholder may agree to accept
such offer.
If a dissenting shareholder is dissatisfied with Colonial's offer of
payment, the shareholder may notify Colonial in writing within thirty (30) days
of the offer of his or her own estimate of the fair value plus interest and
demand that such payment be made. A dissenting shareholder waives his or her
right to demand payment of a different amount than that offered by Colonial and
is deemed to have accepted Colonial's offer unless such written notification is
provided to Colonial within such period.
In the event a dissenting shareholder's second payment demand remains
unsettled within sixty (60) days after Colonial receives such demand, Colonial
will commence a nonjury equitable valuation proceeding in the Bibb County
Superior Court to determine the fair value of the shares and accrued interest.
Colonial will make all dissenting shareholders whose second payment demand
remains unsettled parties to the court proceeding. In the proceeding, the court
will fix a value of the shares and may appoint one or more appraisers to receive
evidence and recommend a decision on the question of fair value. If Colonial
does not commence the proceeding within sixty (60) days after receiving the
dissenting shareholder's second payment demand, Colonial shall pay each
dissenting shareholder whose second payment demand remains unsettled the amount
demanded by each such dissenting shareholder in his or her second payment
demand.
The determination of a "fair value" necessarily involves matters of
judgment upon which reasonable persons may disagree. No allowance is permitted
for any increase or decrease in the value of the First Macon Common Stock which
may be attributed to the proposed Merger.
A record shareholder may assert dissenters' rights as to fewer than all
shares registered in such holder's name, but only if the record holder dissents
with respect to all shares beneficially owned by any one beneficial shareholder
and provides written notice to First Macon of the name and address of each
person on whose behalf the dissenting rights are asserted. A "beneficial
shareholder" is defined in the Georgia Business Corporation Code as a "person
who is a beneficial owner of shares held in a voting trust or by a nominee as
the record shareholder." The rights of a partial dissenter are determined as if
the shares as to which such holder dissents and other shares held by the holder
are registered in different names of shareholders. Thus, if a beneficial
shareholder holds shares of First Macon Common Stock through a bank, broker, or
other nominee, such beneficial holder may assert dissenters' rights, but only if
the nominee dissents with respect to all shares beneficially owned by such
shareholder through the bank, broker or nominee and provides First Macon with
the name and address of each such person wishing to assert dissenters' rights. A
person holding First Macon Common Stock through a bank, broker or other nominee
should act promptly to cause such bank, broker or nominee to follow the proper
procedures to perfect any dissenters' rights on behalf of such person.
A dissenting shareholder may not challenge the Merger unless First Macon
fails to comply with appropriate procedures under Georgia law or First Macon's
Articles of Incorporation and Bylaws or unless the shareholder vote to approve
the Merger was obtained by fraudulent and deceptive means.
Any shareholder who properly exercises appraisal rights and receives fair
market value for his or her shares will encounter income tax treatment different
than the treatment for shareholders who do not exercise
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appraisal rights. See "-- Certain Federal Income Tax Consequences." A condition
to consummation of the Merger includes a condition that the number of shares as
to which holders of First Macon Common Stock exercise dissenters' rights not
exceed 10% of the outstanding shares of First Macon Common Stock. See
"-- Conditions to the Merger."
THE FOREGOING DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES
TO BE FOLLOWED BY HOLDERS OF FIRST MACON 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 APPLICABLE GEORGIA LAW, EACH
SHAREHOLDER WHO MAY DESIRE TO EXERCISE APPRAISAL RIGHTS IS ADVISED INDIVIDUALLY
TO CONSULT THE LAW (AS SET FORTH IN APPENDIX C HERETO) AND COMPLY WITH THE
PROVISIONS THEREOF.
HOLDERS OF THE FIRST MACON 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 GEORGIA LAW.
RESALE OF BANCGROUP COMMON STOCK ISSUED IN THE MERGER
The issuance of the shares of BancGroup Common Stock pursuant to the Merger
has been registered under the Securities Act. As a result, shareholders of First
Macon who are not "affiliates" of First Macon (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 First Macon are subject to restrictions on the resale of
the BancGroup Common Stock which they receive in the Merger.
The BancGroup Common Stock received by affiliates of First Macon 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 First Macon affiliate has held the BancGroup
Common Stock for at least one year. BancGroup Common Stock held by affiliates of
First Macon who become affiliates of BancGroup, if any, will be subject to
additional restrictions on the ability of such persons to resell such shares.
First Macon will provide BancGroup with such information as may be
reasonably necessary to determine the identity of those persons (primarily
executive officers, directors and principal shareholders) who may be deemed to
be affiliates of First Macon. First Macon 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. The undertaking will
also require each affiliate of First Macon to agree not to 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 Commission's Codification of Financial Reporting Policies.
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
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appropriate restrictive legend, and appropriate stock transfer orders will be
given to BancGroup's stock transfer agent.
ACCOUNTING TREATMENT
BancGroup will account for the Merger as a pooling-of-interests transaction
in accordance with generally accepted accounting principles, which, among other
things, require that the number of shares of First Macon Common Stock acquired
for cash pursuant to the exercise of dissenters' rights or in lieu of fractional
shares not exceed 10% of the outstanding shares of First Macon Common Stock.
Under this accounting treatment, assets and liabilities of First Macon will be
added to those of BancGroup at their recorded book values, and the shareholders'
equity of the two companies will be combined in BancGroup's consolidated balance
sheet. Financial statements of BancGroup issued after the Effective Date may be
restated to reflect the consolidated operations of BancGroup and First Macon as
if the Merger had taken place prior to the periods covered by the financial
statements.
NYSE REPORTING OF BANCGROUP COMMON STOCK ISSUED IN THE MERGER
Sales of BancGroup Common Stock to be issued in the Merger will be reported
on the NYSE.
COMPARATIVE MARKET PRICES AND DIVIDENDS
BANCGROUP
BancGroup Common Stock is listed for trading on the NYSE. The following
tables shows the dividends paid per share and indicates the high and low closing
prices for BancGroup Common Stock as reported by the NYSE.
<TABLE>
<CAPTION>
PRICE(1)
--------------
HIGH LOW DIVIDENDS
---- --- ---------
<S> <C> <C> <C>
1996
First Quarter............................................... $18 1/4 $15 $0.135
Second Quarter.............................................. 18 1/16 15 5/8 0.135
Third Quarter............................................... 17 15/16 15 5/8 0.135
Fourth Quarter.............................................. 20 1/8 17 3/8 0.135
1997
First Quarter............................................... 24 7/8 18 2/3 0.15
Second Quarter.............................................. 24 7/8 23 0.15
Third Quarter............................................... 29 3/16 24 1/4 0.15
Fourth Quarter.............................................. 35 1/16 28 15/16 0.15
1998
First Quarter............................................... 36 1/46 31 1/2 0.17
Second Quarter.............................................. 37 9/16 29 1/2 0.17
Third Quarter (through July 21, 1998)....................... 34 5/8 32 5/8 --
</TABLE>
- ---------------
(1) Price and dividends have been restated to reflect the impact of a
two-for-one stock split effected in the form of a 100% stock dividend paid
February 11, 1997.
On April 23, 1998, the business day immediately prior to the public
announcement of the Merger, the closing price as reported on the NYSE of the
BancGroup Common Stock was $36.6875 per share.
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
bank may pay without regulatory approval. In addition, federal statutes restrict
the ability of the subsidiary bank to make loans to BancGroup, and regulatory
policies may also restrict such dividends.
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FIRST MACON
There is no established public trading market for the First Macon Common
Stock. The shares of First Macon Common Stock are not actively traded, and such
trading activity, as it occurs, takes place in privately negotiated
transactions.
Management of First Macon is aware of certain transactions in shares of
First Macon that have occurred since January 1, 1996, although the trading
prices of all stock transactions are not known. The following table sets forth
the trading prices for the shares of First Macon Common Stock that have occurred
since January 1, 1996 for transactions in which the trading prices are known to
management of First Macon:
<TABLE>
<CAPTION>
PER SHARE OF
COMMON STOCK(1) DIVIDENDS
----------------- PER
HIGH LOW SHARE(1)
------ ------ ---------
<S> <C> <C> <C>
1996
First Quarter......................................... $15.50 $12.75 $ --
Second Quarter........................................ 15.75 15.75 .22
Third Quarter......................................... 20.00 16.00 --
Fourth Quarter........................................ 20.00 20.00 --
1997
First Quarter......................................... $20.00 $20.00 $ --
Second Quarter........................................ 20.00 20.00 .30
Third Quarter......................................... 20.63 20.63 --
Fourth Quarter........................................ 30.13 30.13 --
1998
First Quarter......................................... $31.19 $31.19 $ --
Second Quarter........................................ N/A N/A .40
Third Quarter (through July 21, 1998)................. N/A N/A --
</TABLE>
- ---------------
(1) On May 1, 1996, First Macon paid a two for one stock split effected in the
form of a share dividend. The high and low trading price and dividends per
share reflected in this table have been retroactively adjusted to reflect
such stock split.
The Agreement restricts First Macon's ability to pay dividends prior to the
Effective Date. See "The Merger -- Conduct of Business Pending the Merger."
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 49,116,133 shares of BancGroup Common Stock.
No shares of Preference Stock are issued and outstanding. In 1986, BancGroup
issued $28,750,000 in principal amount of its 7 1/2% Convertible Subordinated
Debentures due 2011 (the "1986 Debentures") of which $4,204,686 were outstanding
as of March 31, 1998 and convertible at any time into approximately 300,335
shares of BancGroup Common Stock, subject to adjustment. On February 5, 1998,
BancGroup issued subordinated debentures in the aggregate principal amount of
$7,725,000 with a ten-year maturity that rank pari passu with the 1986
Debentures. As of March 31, 1998, there were 2,024,957 shares of BancGroup
Common Stock subject to issue upon exercise of options under BancGroup's stock
option plans. In addition to BancGroup Common Stock to be issued in the Merger,
BancGroup will issue additional shares of its Common Stock in pending
acquisitions. See "Business of BancGroup -- Proposed Affiliate Banks." On
January 29, 1997, BancGroup issued, through a special purpose trust, $70.0
million of Trust Preferred Securities, all of which was outstanding at March 31,
1998.
On July 15, 1998, BancGroup announced that its Board of Directors had
declared a two for one split of BancGroup's Common Stock to be effected in the
form of a 100% stock dividend. Stockholders of record of
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<PAGE> 38
BancGroup Common Stock will receive one share of BancGroup Common Stock for each
share they hold as of the close of business on July 31, 1998. The additional
shares will be distributed pursuant to the Stock Split on August 14, 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 BancGroup's Preference
Stock, if any, to receive certain dividends prior to the declaration of
dividends on shares of BancGroup Common Stock, when and as dividends, payable in
cash, stock or other property, are declared by the BancGroup Board of Directors,
the holders of BancGroup Common Stock are entitled to share ratably in such
dividends.
Voting Rights. Each holder of BancGroup Common Stock has one vote for each
share held on matters presented for consideration by the shareholders.
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 shareholder approval. However, BancGroup's Common Stock is listed on the
NYSE, which requires shareholder 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 shareholders 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 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
In 1986, BancGroup issued 7 1/2% Convertible Subordinated Debentures due
2011 (the "1986 Debentures") in the total principal amount of $28,750,000. The
1986 Debentures were issued under a trust indenture (the "1986 Indenture")
between BancGroup and SunTrust Bank, Atlanta, Georgia, as Trustee.
The 1986 Debentures will mature on March 31, 2011, and are convertible at
any time into shares of BancGroup Common Stock at the option of a holder
thereof, at the conversion price of $14.00 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 March 31, 1998, approximately 300,335 shares of
such BancGroup
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<PAGE> 39
Common Stock will be issued. The 1986 Debentures are redeemable, in whole or in
part, at the option of BancGroup at certain premiums until 1996, when the
redemption price shall be equal to 100% of the face amount of the 1986
Debentures, plus accrued interest. The payment of principal and interest on the
1986 Debentures is subordinate, to the extent provided in the 1986 Indenture, to
the prior payment when due of all Senior Indebtedness of BancGroup. "Senior
Indebtedness' is defined as any indebtedness of BancGroup for money borrowed, or
any indebtedness incurred in connection with an acquisition or with a merger or
consolidation, outstanding on the date of execution of the 1986 Indenture as
originally executed, or thereafter created, incurred or assumed, and any
renewal, extension, modification or refunding thereof, for the payment of which
BancGroup (which term does not include BancGroup's consolidated or
unconsolidated subsidiaries) is at the time of determination responsible or
liable as obligor, guarantor or otherwise. Senior Indebtedness does not include
(i) indebtedness as to which, in the instrument creating or evidencing the same
or pursuant to which the same is outstanding, it is provided that such
indebtedness is subordinate in right of payment to any other indebtedness of
BancGroup, and (ii) indebtedness which by its terms states that such
indebtedness is subordinate to or equally subordinate with the 1986 Debentures.
At 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 borrowing 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 at any time after
January 29, 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 "BancGroup Capital Stock
and Debentures." The debentures are redeemable by BancGroup with the consent of
the holders thereof. A holder 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 BancGroup's Board of Directors to issue
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 and "-- 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 shareholders each year. With this provision, two annual elections
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<PAGE> 40
are required in order to change a majority of the Board of Directors. There are
currently 22 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 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 shareholders. As
of February 27, 1998, the Board of Directors of BancGroup as a group
beneficially 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.
Director Authority. The BancGroup Certificate prohibits shareholders from
calling special shareholders' meetings and acting by written consent. It also
provides that only BancGroup's Board of Directors has the authority to undertake
certain actions with respect to governing BancGroup such as appointing
committees, electing officers, and establishing compensation of officers, and it
allows the Board to act by majority vote.
Bylaw Provisions. The BancGroup Bylaws provide that shareholders 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 shareholder meetings but could make it more
difficult for shareholders to nominate directors or introduce business at
shareholder meetings.
Delaware Business Combination Statute. Subject to some exceptions,
Delaware law prohibits BancGroup from entering into certain "business
combinations" (as defined in the statute) involving persons beneficially owning
15% or more of the outstanding BancGroup Common Stock (or who are affiliates of
BancGroup and have over the past three years beneficially owned 15% or more of
such stock) (either, for the purpose of this paragraph, an "Interested
Shareholder"), unless the BancGroup Board has approved either (i) the business
combination or (ii) prior to the stock acquisition by which such person's
beneficial ownership interest reached 15% (a "Stock Acquisition"), the Stock
Acquisition. The prohibition lasts for three years from the date of the Stock
Acquisition. Notwithstanding the preceding, Delaware law allows BancGroup to
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<PAGE> 41
enter into a business combination with an Interested Shareholder if (i) the
business combination is approved by the BancGroup Board of Directors and
authorized by an affirmative vote of at least 66 2/3% of the outstanding voting
stock of BancGroup which is not owned by the Interested Shareholder or (ii) upon
consummation of the transaction which resulted in the shareholder becoming an
Interested Shareholder, such shareholder owned at least 85% of the outstanding
stock of BancGroup (excluding BancGroup stock held by officers and directors of
BancGroup or by certain BancGroup stock plans). These provisions of Delaware law
apply simultaneously with the provisions of 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 First Macon (except those
perfecting dissenters' rights of appraisal) will become holders of BancGroup
Common Stock. The rights of the holders of the First Macon Common Stock who
become holders of the 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 shareholders of First
Macon Common Stock with the rights of the holders of the BancGroup Common Stock.
For a more complete description of the rights of the holders of BancGroup Common
Stock, particularly provisions in BancGroup's Certificate that may limit or
discourage changes in control of BancGroup, see "BancGroup Capital Stock and
Debentures."
The following information is qualified in its entirety by the BancGroup
Certificate, the BancGroup Bylaws, and First Macon's Articles of Incorporation
and bylaws, the Delaware General Corporation Law (the "DGCL") and the Financial
Institutions Code of Georgia ("FICG").
DIRECTOR ELECTIONS
First Macon. First Macon's directors are elected to terms of one year.
There is no cumulative voting in the election of directors.
BancGroup. BancGroup's directors are elected to terms of three years with
approximately one-third of the Board of Directors 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
First Macon. Under the FICG, the entire Board of Directors or an
individual director may be removed without cause by the vote of shareholders
entitled to cast at least a majority of the votes which all shareholders will be
entitled to cast at an annual election of directors.
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<PAGE> 42
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
First Macon. Each shareholder of First Macon is entitled to one vote for
each share of First Macon Common Stock held, and such holders are not entitled
to cumulative voting in the election of directors.
BancGroup. Each shareholder 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
First Macon. The holders of First Macon Common Stock have no preemptive
rights to acquire any additional shares of First Macon Common Stock or any other
shares of First Macon capital stock.
BancGroup. The holders of BancGroup Common Stock have no preemptive rights
to acquire any additional shares of BancGroup Common Stock or any other shares
of BancGroup capital stock.
DIRECTORS' LIABILITY
First Macon. The provisions for liability of directors of First Macon are
set forth in the FICG, and are generally similar to provisions applicable to the
liability of directors of a business corporation incorporated under the Georgia
Business Corporation Code. First Macon has not amended its Articles of
Incorporation to provide for a limitation of personal liability of a director as
provided by Chapter 2 of the Georgia Business Corporation Code; however, First
Macon's Bylaws provide for mandatory indemnification of directors under certain
circumstances described under "Comparative Rights of
Shareholders -- Indemnification".
BancGroup. The BancGroup Certificate provides that a director of BancGroup
will have no personal liability to BancGroup or its shareholders 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 shareholders, (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 shareholders, and it would not affect the availability of
injunctive or other equitable relief as a remedy.
INDEMNIFICATION
First Macon. First Macon's Bylaws provide that First Macon shall indemnify
any person who was or is a party or who is threatened to be made a party to any
proceeding by reason of the fact that such person is or was director, officer,
employee or agent of First Macon if such person acted in a manner he or she
reasonably believed to be in or not opposed to the best interest of First Macon
and, with respect to any criminal action, had no reasonable cause to believe his
or her conduct was unlawful. In actions brought by or in the right of First
Macon, no such indemnification shall be made in respect of any claim as to which
such person shall have been adjudged to be liable for negligence or misconduct
in the performance of such person's duties unless and only to the extent that
the court in which such action or suit was brought shall determine that, in view
of all of the circumstances, such person is fairly and reasonably entitled to
indemnity. Any indemnification shall be made by First Macon only as authorized
in the specific case upon determination that the indemnified person met all the
applicable standards of conduct which are a condition to the rights to
indemnification set forth in the Bylaws. Such determination is required to be
made by any of (i) the Board of Directors by a majority vote of a quorum
consisting of directors who are not parties to such proceeding, (ii) by
independent legal counsel in a written opinion, or (iii) the affirmative vote of
a majority of the shares entitled to vote thereon.
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<PAGE> 43
To the extent that the indemnitee has been successful, on the merits or
otherwise, in the defense of any proceeding, such person is required to be
indemnified against expenses (including attorneys fees) actually and reasonably
incurred by him or her in connection therewith.
First Macon maintains an officers and directors insurance policy. The
provisions for indemnification contained in First Macon's Bylaws are not
exclusive of other rights to indemnification to which such persons may be
entitled. In addition to the foregoing indemnification provisions, the Agreement
provides for mandatory indemnification by BancGroup of each person entitled to
indemnification from First Macon under certain circumstances more particularly
described under "The Merger -- Interests of Certain Persons in the Merger."
BancGroup. The BancGroup Certificate provides that BancGroup shall
indemnify its officers, directors, agents and employees 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 indemnitee acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of BancGroup
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his or her conduct was unlawful. In actions brought by or in the
right of BancGroup, such indemnification is limited to expenses (including
attorneys' fees) actually and reasonably incurred in the defense or settlement
of such action if the indemnitee acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of BancGroup
and except that no indemnification shall be made in respect of any claim, issue
or matter as to which such person has been adjudged to be liable to BancGroup
unless and only to the extent that the Delaware Court of Chancery or the court
in which the action was brought determines upon application that in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
To the extent that the proposed indemnitee has been successful on the
merits or otherwise in defense of any action, suit or proceeding (or any claim,
issue or matter therein), 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 directors and certain
officers 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.
SPECIAL MEETINGS OF SHAREHOLDERS; ACTION WITHOUT A MEETING
First Macon. A special meeting of First Macon shareholders may be called
at any time by the Chairman of the Board of Directors, by the President, by a
majority of the Board of Directors, or by the holders of not less than 25% of
the issued and outstanding Common Stock of First Macon. Any action which could
be taken at a meeting by shareholders may also be taken without a meeting if a
written consent setting forth the actions so taken signed by all of the
shareholders entitled to vote with respect to the subject matter thereof.
BancGroup. Under the BancGroup Certificate, a special meeting of
BancGroup's shareholders may only be called by a majority of the Board of
Directors of BancGroup 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
First Macon. The FICG provides that mergers and sales of substantially all
of the assets of a Georgia banking corporation must be approved by shareholders
entitled to cast two-thirds of the votes which all shareholders are entitled to
cast thereon, in the case of a merger, and the vote of the holders of a majority
of the shares entitled to the vote thereon, in the case of a sale substantially
all of the assets of such corporation.
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<PAGE> 44
In addition, the Articles of Incorporation of First Macon include certain
provisions which have the effect of rendering more difficult or possibly
preventing a merger or sale of substantially all of the assets of First Macon.
These provisions prohibit such transactions with a "Related Person" (defined as
any person, together with such person's associates or affiliates, who
beneficially owns shares of First Macon Common Stock equal to 20% or more of the
outstanding shares of First Macon Common Stock) absent the affirmative vote of
at least 80% of the voting power of all shares of First Macon Common Stock
entitled to vote upon such transaction, and the affirmative vote of the holders
of at least two-thirds of all outstanding shares that are not owned or
controlled by such Related Person. Such super-majority approval requirements do
not apply under certain circumstances set forth in First Macon's Articles of
Incorporation in the event either (1) certain detailed provisions intended to
ensure the fairness of such transaction shall have been complied with or (2)
certain provisions prohibiting self-dealing by such Related Person and the
approval of such transaction by a majority of the independent directors then in
office shall have been satisfied.
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 shareholders 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.
AMENDMENT OF CERTIFICATE OF INCORPORATION AND BYLAWS
First Macon. The FICG generally permits amendments to First Macon's
Articles of Incorporation upon the affirmative vote of shareholders entitled to
cast at least a majority of the votes which all shareholders are entitled to
cast thereon, except that if such amendment will result in the change of the
location of First Macon, such amendment requires the affirmative vote of at
least two-thirds of all the shares entitled to vote thereon. Amendments are also
subject to certain review and approval procedures with the Department of Banking
and Finance of the State of Georgia.
First Macon's Bylaws provide that such Bylaws may be amended by the Board
of Directors; provided, however, that any Bylaws adopted by the Board of
Directors may be amended by the affirmative vote of not less than 80% of each
class of capital stock of First Macon having voting power. First Macon
shareholders may prescribe that any bylaw adopted by them may not be amended by
the Board of Directors.
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 "supermajority" shareholder approval to amend or repeal any
provision of, or adopt any provision inconsistent with, certain provisions in
the BancGroup Certificate governing (i) the election or removal of directors,
(ii) business combinations between BancGroup and a Related Person, and (iii)
board of director evaluation of business combination procedures. See "BancGroup
Capital Stock and Debentures -- Changes in Control."
As is permitted by the DGCL, the BancGroup Certificate gives the Board of
Directors the power to adopt, amend or repeal the bylaws. The shareholders
entitled to vote have concurrent power to adopt, amend or repeal the BancGroup
Bylaws.
36
<PAGE> 45
RIGHTS OF DISSENTING SHAREHOLDERS
First Macon. Under the FICG, shareholders of First Macon have the right
under certain circumstances, including a merger by or sale of substantially all
of the assets of First Macon, to dissent from such transaction and receive the
fair value of his or her shares in cash in lieu of the consideration he or she
would otherwise have received in the transaction. The statutory provisions
setting forth such dissenters rights are more fully described under "The
Merger -- Rights of Dissenting Shareholders."
BancGroup. Under the DGCL, a shareholder 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 shareholders of a
corporation (i) if the shares are listed on a national securities exchange (as
is BancGroup Common Stock) or quoted on the Nasdaq National Market System, or
held of record by more than 2,000 shareholders (as is BancGroup Common Stock),
and (ii) shareholders 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 shareholders,
(c) cash in lieu of fractional shares of such stock, or (d) any combination
thereof. Shareholders are not permitted appraisal rights in a merger if such
corporation is the surviving corporation and no vote of its shareholders is
required.
PREFERRED STOCK
First Macon. First Macon has no authorized classes of capital stock other
than First Macon Common Stock.
BancGroup. The BancGroup Certificate authorizes the issuance of 1,000,000
shares of Preference Stock from time to time by resolution of the BancGroup
Board of Directors. Currently, no shares of Preference Stock are issued and
outstanding. See "BancGroup Capital Stock and Debentures -- Preference Stock."
EFFECT OF THE MERGER ON FIRST MACON SHAREHOLDERS
As of the Record Date, First Macon had 314 shareholders of record and
1,076,604 outstanding shares of common stock. As of February 27, 1998, BancGroup
had 48,092,093 shares of BancGroup Common Stock outstanding with 8,476
shareholders of record.
Assuming that no dissenters' rights of appraisal are exercised in the
Merger, that 1,076,604 shares of First Macon Common Stock are outstanding on the
Effective Date and a Market Value of BancGroup Common Stock of $33.5125 on the
Effective Date (as of July 21, 1998, the ten-day average of the closing prices
of BancGroup Common Stock was $33.5125 per share), BancGroup will issue to
shareholders of First Macon a total of 1,820,214 shares of BancGroup Common
Stock in the Merger. Based on those assumptions, the 1,820,214 shares of
BancGroup Common Stock would represent approximately 3.57% of the total number
of shares of BancGroup Common Stock outstanding following the Merger, not
counting any additional shares BancGroup may issue. The foregoing example does
not give effect to the Stock Split.
The issuance of the BancGroup Common Stock pursuant to the Merger will
reduce the percentage interest of the BancGroup Common Stock currently held by
each principal shareholder and each director and officer of BancGroup. Based
upon the foregoing assumptions, as a group, the directors and executive officers
of BancGroup who owned, as of June 30, 1998, approximately 9.72% of BancGroup's
outstanding shares would own approximately 9.39% after the Merger.
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."
37
<PAGE> 46
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 March 31, 1998, (ii) the condensed
consolidated statement of condition of Commercial Bank of Nevada ("Completed
Business Combination") as of March 31, 1998, (iii) adjustments to give effect to
the completed pooling-of-interests method business combination with Commercial
Bank of Nevada (iv) the condensed statement of condition of First Macon as of
March 31, 1998, (v) adjustments to give effect to the proposed
pooling-of-interests method business combination with First Macon, (vi) the
combined presentation of the condensed statements of condition of the other
probable business combinations with CNB Holding Company, FirstBank and Prime
Bank of Central Florida ("Other Probable Business Combinations") as of March 31,
1998, (v) adjustments to give effect to the proposed pooling-of-interests method
business combinations with the Other Probable Business Combinations, (vi) the
pro forma combined condensed statement of condition of BancGroup and
subsidiaries as if such combinations had occurred on March 31, 1998.
The pro forma statement of condition excludes the effect of an immaterial
pending business combination with Interwest Bancorp located in Reno, Nevada.
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>
MARCH 31, 1998
---------------------------------------------------------------------------------------
CONSOLIDATED COMPLETED
COLONIAL BUSINESS ADJUSTMENTS/ FIRST MACON ADJUSTMENTS/
BANCGROUP COMBINATION (DEDUCTIONS) BANK & TRUST (DEDUCTIONS) SUBTOTAL
------------ ----------- ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks........... $ 311,523 $ 7,313 $ 10,000 $ 328,836
Interest-bearing deposits in
banks............................ 17,949 31,455 9,120 58,524
Securities held for trading....... 24,824 24,824
Securities available for sale..... 745,655 3,000 18,323 766,978
Investment securities............. 265,711 4,652 16,792 287,155
Mortgage loans held for sale...... 455,716 455,716
Loans, net of unearned income..... 5,724,844 82,414 134,450 5,941,708
Less: Allowance for possible loan
losses........................... (69,680) (1,139) (1,700) (72,519)
---------- -------- ------- -------- -------- ----------
Loans, net........................ 5,655,164 81,275 -- 132,750 -- 5,869,189
Premises and equipment, net....... 146,448 2,677 6,148 155,273
Excess of cost over tangible and
identified intangible assets
acquired, net.................... 78,861 78,861
Mortgage servicing rights......... 151,412 151,412
Other real estate owned........... 12,530 27 12,557
Accrued interest and other
assets........................... 140,566 976 2,061 143,603
---------- -------- ------- -------- -------- ----------
Total Assets................ $8,006,359 $131,348 $ -- $195,221 $ -- $8,332,928
========== ======== ======= ======== ======== ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Deposits.......................... $6,082,744 $119,693 $177,273 $6,379,710
FHLB short-term borrowings........ 460,000 460,000
Other short-term borrowings....... 287,468 287,468
Subordinated debt................. 13,125 13,125
Trust preferred securities........ 70,000 70,000
FHLB long-term debt............... 283,693 283,693
Other long-term debt.............. 93,608 93,608
Other liabilities................. 144,135 1,006 $ 159(1) 2,665 $ 624(2) 148,589
---------- -------- ------- -------- -------- ----------
Total liabilities........... 7,434,773 120,699 159 179,938 624 7,736,193
Preferred Stock
Common Stock...................... 120,323 842 (842)(1) 537 (537)(2) 126,979
2,105(1) 4,551(2)
Additional paid in capital........ 230,682 8,264 (8,264)(1) 9,521 (9,521)(2) 243,190
7,001(1) 5,507(2)
Retained earnings................. 221,544 1,543 (159)(1) 5,105 (624)(2) 227,409
Treasury Stock.................... -- -- -- -- --
Unearned compensation............. (3,604) -- (3,604)
Unrealized gain (loss) on
securities available for sale,
net of taxes..................... 2,641 -- -- 120 2,761
---------- -------- ------- -------- -------- ----------
Total shareholders'
equity..................... 571,586 10,649 (159) 15,283 (624) 596,735
---------- -------- ------- -------- -------- ----------
Total liabilities and
equity..................... $8,006,359 $131,348 $ -- $195,221 $ -- $8,332,928
========== ======== ======= ======== ======== ==========
Capital Ratios:
Capital Ratio.................... 8.10%
Tangible Leverage Ratio.......... 7.36
Tier One Capital Ratio*.......... 9.77
Total Capital Ratio*............. 11.08
<CAPTION>
MARCH 31, 1998
--------------------------------------------
OTHER PROBABLE PRO FORMA
BUSINESS ADJUSTMENTS/ COMBINED
COMBINATIONS (DEDUCTIONS) TOTAL
-------------- ------------ ----------
<S> <C> <C> <C>
ASSETS
Cash and due from banks........... $ 26,704 $ 355,540
Interest-bearing deposits in
banks............................ 55,554 114,078
Securities held for trading....... 24,824
Securities available for sale..... 40,917 807,895
Investment securities............. 34,824 321,979
Mortgage loans held for sale...... 455,716
Loans, net of unearned income..... 156,231 6,097,939
Less: Allowance for possible loan
losses........................... (1,504) (74,023)
---------- ------- ----------
Loans, net........................ 154,727 -- 6,023,916
Premises and equipment, net....... 5,998 161,271
Excess of cost over tangible and
identified intangible assets
acquired, net.................... 44 78,905
Mortgage servicing rights......... 151,412
Other real estate owned........... 22 12,579
Accrued interest and other
assets........................... 2,540 146,143
---------- ------- ----------
Total Assets................ $ 321,330 -- $8,654,258
========== ======= ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Deposits.......................... $ 281,148 $6,660,858
FHLB short-term borrowings........ 460,000
Other short-term borrowings....... 15,005 302,473
Subordinated debt................. 13,125
Trust preferred securities........ 70,000
FHLB long-term debt............... 283,693
Other long-term debt.............. 93,608
Other liabilities................. 1,302 $ 68(3) 150,970
649(4)
362(5)
---------- ------- ----------
Total liabilities........... 297,455 1,079 8,034,727
Preferred Stock
Common Stock...................... 2,253 (1,700)(3) 133,425
(153)(4)
(400)(5)
3,133(3)
2,076(4)
1,237(5)
Additional paid in capital........ 9,333 (4,800)(3) 247,610
(762)(4)
(3,771)(5)
3,367(3)
(1,881)(4)
2,934(5)
Retained earnings................. 12,810 (68)(3) 239,140
(649)(4)
(362)(5)
Treasury Stock.................... (720) 720 --
Unearned compensation............. (3,604)
Unrealized gain (loss) on
securities available for sale,
net of taxes..................... 199 2,960
---------- ------- ----------
Total shareholders'
equity..................... 23,875 (1,079) 619,531
---------- ------- ----------
Total liabilities and
equity..................... $ 321,330 $ -- $8,654,258
========== ======= ==========
Capital Ratios:
Capital Ratio.................... 8.10%
Tangible Leverage Ratio.......... 7.41
Tier One Capital Ratio*.......... 9.90
Total Capital Ratio*............. 11.19
</TABLE>
- ---------------
* Based on risk weighted assets.
38
<PAGE> 47
COMPLETED BUSINESS COMBINATION
COMMERCIAL BANK OF NEVADA
(pooling of interests)
(1) (A) To record the issuance of 842,157 shares of BancGroup Common Stock in
exchange for all of the outstanding shares of Commercial Bank of Nevada
<TABLE>
<CAPTION>
OUTSTANDING
SHARES
-----------
<S> <C> <C>
Commercial Bank of Nevada outstanding shares................ 842,157
Conversion ratio............................................ 1.000
--------
BancGroup shares to be issued............................... 842,157
Par value of 842,157 shares issued at $2.50 per share....... $ 2,105
Shares issued at par value.................................. $ 2,105
Total capital stock of Commercial Bank of
Nevada.......................................... 9,106
--------
Excess recorded as an increase to contributed capital....... 7,001
--------
$ 9,106
To eliminate Commercial Bank of Nevada
Common stock, at par value................................ $ (842)
Contributed capital....................................... (8,264)
--------
(9,106)
--------
Net change in equity...................................... $ --
========
(B) To record possible nonrecurring charges associated with contract
buy-outs, professional fees and other nonrecurring one-time
restructuring charges, net of taxes.................................. $ (159)
========
</TABLE>
39
<PAGE> 48
PENDING BUSINESS COMBINATIONS
FIRST MACON BANK & TRUST
(pooling of interests)
(2) (A) To record the issuance of 1,820,214 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............................................ 1.6907
----------
BancGroup shares to be issued............................... 1,820,214
Par value of 1,820,214 shares issued at $2.50 per share..... $ 4,551
Shares issued at par value.................................. $ 4,551
Total capital stock of First Macon Bank & Trust... 10,058
----------
Excess recorded as an increase to contributed capital....... 5,507
----------
$ 10,058
To eliminate First Macon Bank & Trust
Common stock, at par value................................ $ (537)
Contributed capital....................................... (9,521)
----------
(10,058)
----------
Net change in equity.............................. $ --
==========
(B) To record possible nonrecurring charges associated with severence
payable to terminated employees, contract buy-outs, fixed assets
write-offs and other nonrecurring one-time restructuring charges,
net of taxes........................................................ $ (624)
==========
</TABLE>
FIRSTBANK
(pooling of interests)
(3) (A) To record the issuance of 1,253,270 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.......................................... 3.6861
--------
BancGroup shares to be issued............................. 1,253,270
Par value of 1,253,270 shares issued at $2.50 per share... $ 3,133
Shares issued at par value................................ $ 3,133
Total capital stock of FirstBank.................. 6,500
--------
Excess recorded as an increase to contributed capital..... 3,367
----------
$ 6,500
To eliminate FirstBank
Common stock, at par value............................. $ (1,700)
Contributed capital.................................... (4,800)
----------
(6,500)
----------
Net change in equity.............................. $ --
==========
(B) To record possible nonrecurring charges associated with
professional fees, fixed asset write-offs and other nonrecurring
one-time restructuring charges, net of taxes...................... $ (68)
==========
</TABLE>
40
<PAGE> 49
CNB HOLDING COMPANY
(pooling of interests)
(4) (A) To record the issuance of 830,526 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...................... 145,418
Conversion ratio............................................ 5.7113
--------
BancGroup shares to be issued............................... 830,526
Par value of 830,526 shares issued at $2.50 per share....... $ 2,076
Shares issued at par value.................................. $ 2,076
Total capital stock of CNB Holding Company........ $ 195
--------
Excess recorded as a decrease to contributed capital........ (1,881)
--------
$ 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 severence
payable to terminated employees, noncompete agreements, fixed
assets write-offs and other nonrecurring one-time restructuring
charges, net of taxes............................................. $ (649)
========
</TABLE>
PRIME BANK OF CENTRAL FLORIDA
(pooling of interests)
(5) (A) To record the issuance of 494,621 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............................................ 1.2366
--------
BancGroup shares to be issued............................... 494,621
Par value of 494,621 shares issued at $2.50 per share....... $ 1,237
Shares issued at par value.................................. $ 1,237
Total capital stock of Prime Bank of Central
Florida......................................... $ 4,171
--------
Excess recorded as an increase to contributed capital....... 2,934
--------
$ 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 severence
payable to terminated employees, contract buy-outs, fixed assets
write-offs and other nonrecurring one-time restructuring charges,
net of taxes...................................................... $ (362)
========
</TABLE>
41
<PAGE> 50
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 three months
ended March 31, 1998 and 1997 and for the years ended December 31, 1997, 1996
and 1995,(ii) the condensed statements of income Commercial Bank of Nevada for
the three months ended March 31, 1998 and 1997 and for the years ended December
31, 1997, 1996 and 1995, (iii) adjustments to give effect to the completed
pooling-of interests method business combination with Commercial Bank of Nevada,
(iv) the condensed statements of income of First Macon for the three months
ended March 31, 1998 and 1997 and for the years ended December 31, 1997, 1996
and 1995, (v) adjustments to give effect to the proposed pooling-of-interests
method business combination with First Macon Bank & Trust (vi) the combined
presentation of the condensed statements of income of CNB Holding Company,
FirstBank and Prime Bank of Central Florida ("Other Probable Business
Combinations") for the three months ended March 31, 1998 and 1997 and for the
years ended December 31, 1997, 1996 and 1995, (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, 1995.
The pro forma statements of income exclude the effect of an immaterial
pending business combination with Interwest Bancorp located in Reno, Nevada.
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>
THREE MONTHS ENDED MARCH 31, 1998
-------------------------------------------------------------------------------------
CONSOLIDATED COMPLETED
COLONIAL BUSINESS ADJUSTMENTS/ FIRST MACON ADJUSTMENTS/
BANCGROUP COMBINATION (DEDUCTIONS) BANK & TRUST (DEDUCTIONS) SUBTOTAL
------------ ----------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Interest income...... $ 146,034 $ 2,736 $ -- $ 3,789 $ -- $ 152,559
Interest expense..... 72,602 1,077 -- 1,812 -- 75,491
----------- -------- --------- ---------- ----------- -----------
Net interest
income.............. 73,432 1,659 -- 1,977 -- 77,068
Provision for
possible loan
losses.............. 3,670 80 90 3,840
----------- -------- --------- ---------- ----------- -----------
Net interest income
after provision for
loan losses......... 69,762 1,579 -- 1,887 -- 73,228
----------- -------- --------- ---------- ----------- -----------
Noninterest income... 26,075 95 -- 402 -- 26,572
Noninterest
expense............. 66,934 1,116 -- 1,292 -- 69,342
----------- -------- --------- ---------- ----------- -----------
Income before income
taxes............... 28,903 558 -- 997 -- 30,458
Applicable income
taxes............... 10,953 199 -- 324 11,476
----------- -------- --------- ---------- ----------- -----------
Net income........... $ 17,950 $ 359 $ -- $ 673 $ -- $ 18,982
=========== ======== ========= ========== =========== ===========
Average basic shares
outstanding......... 47,779,000 842,157 (842,157) 1,073,854 (1,073,854) 50,436,722
842,157 1,815,565
Average diluted
shares
outstanding......... 49,178,000 842,157 (842,157) 1,073,854 (1,073,854) 51,835,722
842,157 1,815,565
Earnings per share:
Basic............. $ 0.38 $ 0.38
Diluted........... $ 0.37 $ 0.37
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
------------------------------------------
OTHER
PROBABLE PRO FORMA
BUSINESS ADJUSTMENTS/ COMBINED
COMBINATIONS (DEDUCTIONS) TOTAL
------------ ------------ -----------
<S> <C> <C> <C>
Interest income...... $ 5,437 $ -- $ 157,996
Interest expense..... 2,111 -- 77,602
-------- ---------- -----------
Net interest
income.............. 3,326 -- 80,394
Provision for
possible loan
losses.............. 49 3,889
-------- ---------- -----------
Net interest income
after provision for
loan losses......... 3,277 -- 76,505
-------- ---------- -----------
Noninterest income... 289 26,861
Noninterest
expense............. 1,797 -- 71,139
-------- ---------- -----------
Income before income
taxes............... 1,769 -- 32,227
Applicable income
taxes............... 196 352(1) 12,024
-------- ---------- -----------
Net income........... $ 1,573 $ (352) $ 20,203
======== ========== ===========
Average basic shares
outstanding......... 885,142 (885,142) 53,013,586
2,576,864
Average diluted
shares
outstanding......... 885,142 (885,142) 54,430,450
2,594,728
Earnings per share:
Basic............. $ 0.38
Diluted........... $ 0.37
</TABLE>
42
<PAGE> 51
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1997
-------------------------------------------------------------------------------------
CONSOLIDATED
COLONIAL COMPLETED
BANCGROUP BUSINESS ADJUSTMENTS/ FIRST MACON ADJUSTMENTS/
(RESTATED)* COMBINATION (DEDUCTIONS) BANK & TRUST (DEDUCTIONS) SUBTOTAL
------------ ----------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Interest income...... $ 127,044 $ 1,616 $ -- $ 3,233 $ -- $ 131,893
Interest expense..... 62,969 620 -- 1,414 -- 65,003
----------- -------- --------- ---------- ----------- -----------
Net interest
income.............. 64,075 996 -- 1,819 -- 66,890
Provision for
possible loan
losses.............. 3,056 241 111 3,408
----------- -------- --------- ---------- ----------- -----------
Net interest income
after provision for
loan losses......... 61,019 755 -- 1,708 -- 63,482
----------- -------- --------- ---------- ----------- -----------
Noninterest income... 20,105 74 -- 341 -- 20,520
Noninterest
expense............. 50,631 662 -- 1,136 -- 52,429
----------- -------- --------- ---------- ----------- -----------
Income before income
taxes............... 30,493 167 -- 913 -- 31,573
Applicable income
taxes............... 11,021 57 -- 282 11,360
----------- -------- --------- ---------- ----------- -----------
Net income........... $ 19,472 $ 110 $ -- $ 631 $ -- $ 20,213
=========== ======== ========= ========== =========== ===========
Average basic shares
outstanding......... 45,969,000 842,157 (842,157) 1,070,933 (1,070,933) 48,621,783
842,157 1,810,626
Average diluted
shares
outstanding......... 47,845,000 842,157 (842,157) 1,070,933 (1,070,933) 50,497,783
842,157 1,810,626
Earnings per share:
Basic............. $ 0.42 $ 0.42
Diluted........... $ 0.41 $ 0.40
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1997
-------------------------------------------
OTHER PROBABLE PRO FORMA
BUSINESS ADJUSTMENTS/ COMBINED
COMBINATIONS (DEDUCTIONS) TOTAL
-------------- ------------ -----------
<S> <C> <C> <C>
Interest income...... $ 4,415 $ -- $ 136,308
Interest expense..... 1,691 -- 66,694
-------- --------- -----------
Net interest
income.............. 2,724 -- 69,614
Provision for
possible loan
losses.............. 35 3,443
-------- --------- -----------
Net interest income
after provision for
loan losses......... 2,689 -- 66,171
-------- --------- -----------
Noninterest income... 284 20,804
Noninterest
expense............. 1,653 -- 54,082
-------- --------- -----------
Income before income
taxes............... 1,320 -- 32,893
Applicable income
taxes............... 491 -- 11,851
-------- --------- -----------
Net income........... $ 829 $ -- $ 21,042
======== ========= ===========
Average basic shares
outstanding......... 890,729 (890,729) 51,223,917
2,602,134
Average diluted
shares
outstanding......... 890,729 (890,729) 53,122,037
2,624,254
Earnings per share:
Basic............. $ 0.41
Diluted........... $ 0.40
</TABLE>
- ---------------
* Restated to give retroactive effect to the February 1998 pooling-of-interests
business combinations with United American Holding Corporation, First Central
Bank and South Florida Banking Corp.
43
<PAGE> 52
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------------------------------------------------------
CONSOLIDATED
COLONIAL COMPLETED
BANCGROUP BUSINESS ADJUSTMENTS/ FIRST MACON ADJUSTMENTS/
(RESTATED)* COMBINATION (DEDUCTIONS) BANK & TRUST (DEDUCTIONS) SUBTOTAL
------------ ----------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Interest income...... $ 540,699 $ 8,381 $ -- $ 14,407 $ -- $ 563,487
Interest expense..... 267,084 3,286 -- 6,657 -- 277,027
----------- -------- --------- ---------- ----------- -----------
Net interest
income.............. 273,615 5,095 -- 7,750 -- 286,460
Provision for
possible loan
losses.............. 14,860 874 178 15,912
----------- -------- --------- ---------- ----------- -----------
Net interest income
after provision for
loan losses......... 258,755 4,221 -- 7,572 -- 270,548
----------- -------- --------- ---------- ----------- -----------
Noninterest income... 92,550 362 -- 1,559 -- 94,471
Noninterest
expense............. 220,232 3,108 -- 5,055 -- 228,395
----------- -------- --------- ---------- ----------- -----------
Income before income
taxes............... 131,073 1,475 -- 4,076 -- 136,624
Applicable income
taxes............... 48,557 507 -- 1,335 50,399
----------- -------- --------- ---------- ----------- -----------
Net income........... $ 82,516 $ 968 $ -- $ 2,741 $ -- $ 86,225
=========== ======== ========= ========== =========== ===========
Average basic shares
outstanding......... 46,536,000 842,157 (842,157) 1,072,977 (1,072,977) 49,192,239
842,157 1,814,082
Average diluted
shares
outstanding......... 48,158,000 842,157 (842,157) 1,072,977 (1,072,977) 50,814,239
842,157 1,814,082
Earnings per share:
Basic............. $ 1.77 $ 1.75
Diluted........... $ 1.72 $ 1.70
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------------
OTHER PROBABLE PRO FORMA
BUSINESS ADJUSTMENTS/ COMBINED
COMBINATIONS (DEDUCTIONS) TOTAL
-------------- ------------ -----------
<S> <C> <C> <C>
Interest income...... $ 19,286 $ -- $ 582,773
Interest expense..... 7,437 -- 284,464
-------- ---------- -----------
Net interest
income.............. 11,849 -- 298,309
Provision for
possible loan
losses.............. 210 16,122
-------- ---------- -----------
Net interest income
after provision for
loan losses......... 11,639 -- 282,187
-------- ---------- -----------
Noninterest income... 1,343 95,814
Noninterest
expense............. 6,550 -- 234,945
-------- ---------- -----------
Income before income
taxes............... 6,432 -- 143,056
Applicable income
taxes............... 1,480 913(1) 52,792
-------- ---------- -----------
Net income........... $ 4,952 $ (913) $ 90,264
======== ========== ===========
Average basic shares
outstanding......... 887,921 (887,921) 51,783,338
2,591,099
Average diluted
shares
outstanding......... 887,921 (887,921) 53,424,888
2,610,649
Earnings per share:
Basic............. $ 1.74
Diluted........... $ 1.69
</TABLE>
- ---------------
* Restated to give retroactive effect to the February 1998 pooling-of-interests
business combinations with United American Holding Corporation, First Central
Bank and South Florida Banking Corp.
44
<PAGE> 53
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------------------------------------------
CONSOLIDATED
COLONIAL COMPLETED
BANCGROUP BUSINESS ADJUSTMENTS/ FIRST MACON ADJUSTMENTS/
(RESTATED)* COMBINATION (DEDUCTIONS) BANK & TRUST (DEDUCTIONS) SUBTOTAL
------------ ----------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Interest income......... $ 444,082 $ 4,031 $ -- $ 11,384 $ -- $ 459,497
Interest expense........ 219,494 1,194 -- 5,017 -- 225,705
----------- -------- --------- ---------- ----------- -----------
Net interest income..... 224,588 2,837 -- 6,367 -- 233,792
Provision for possible
loan losses............ 13,564 344 376 14,284
----------- -------- --------- ---------- ----------- -----------
Net interest income
after provision for
loan losses............ 211,024 2,493 -- 5,991 -- 219,508
----------- -------- --------- ---------- ----------- -----------
Noninterest income...... 74,860 225 -- 1,339 -- 76,424
Noninterest expense..... 198,971 1,896 -- 4,337 -- 205,204
----------- -------- --------- ---------- ----------- -----------
Income before income
taxes.................. 86,913 822 -- 2,993 -- 90,728
Applicable income
taxes.................. 30,631 93 -- 883 31,607
----------- -------- --------- ---------- ----------- -----------
Net income.............. $ 56,282 $ 729 $ -- $ 2,110 $ -- $ 59,121
=========== ======== ========= ========== =========== ===========
Average basic shares
outstanding............ 42,839,000 658,452 (658,452) 1,063,789 (1,063,789) 45,296,000
658,452 1,798,548
Average diluted shares
outstanding............ 44,776,000 658,452 (658,452) 1,063,789 (1,063,789) 47,267,038
692,490 1,798,548
Earnings per share:
Basic................ $ 1.31 $ 1.31
Diluted.............. $ 1.27 $ 1.26
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------------------
OTHER PROBABLE PRO FORMA
BUSINESS ADJUSTMENTS/ COMBINED
COMBINATIONS (DEDUCTIONS) TOTAL
-------------- ------------ -----------
<S> <C> <C> <C>
Interest income......... $ 16,516 $ -- $ 476,013
Interest expense........ 6,238 -- 231,943
-------- ---------- -----------
Net interest income..... 10,278 -- 244,070
Provision for possible
loan losses............ 156 14,440
-------- ---------- -----------
Net interest income
after provision for
loan losses............ 10,122 -- 229,630
-------- ---------- -----------
Noninterest income...... 1,151 77,575
Noninterest expense..... 6,348 -- 211,552
-------- ---------- -----------
Income before income
taxes.................. 4,925 -- 95,653
Applicable income
taxes.................. 1,766 -- 33,373
-------- ---------- -----------
Net income.............. $ 3,159 $ -- $ 62,280
======== ========== ===========
Average basic shares
outstanding............ 892,209 (892,209) 47,902,822
2,606,822
Average diluted shares
outstanding............ 892,209 (892,209) 49,896,625
2,629,587
Earnings per share:
Basic................ $ 1.30
Diluted.............. $ 1.26
</TABLE>
- ---------------
* Restated to give retroactive effect to the February 1998 pooling-of-interests
business combinations with United American Holding Corporation, First Central
Bank and South Florida Banking Corp.
45
<PAGE> 54
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-------------------------------------------------------------------------------------
CONSOLIDATED
COLONIAL COMPLETED
BANCGROUP BUSINESS ADJUSTMENTS/ FIRST MACON ADJUSTMENTS/
(RESTATED)* COMBINATION (DEDUCTIONS) BANK & TRUST (DEDUCTIONS) SUBTOTAL
------------ ----------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Interest income......... $ 371,985 $ 1,492 $ -- $ 9,339 $ -- $ 382,816
Interest expense........ 182,441 297 -- 4,062 -- 186,800
----------- -------- --------- ---------- ----------- -----------
Net interest income..... 189,544 1,195 -- 5,277 -- 196,016
Provision for possible
loan losses............ 10,180 192 325 10,697
----------- -------- --------- ---------- ----------- -----------
Net interest income
after provision for
loan losses............ 179,364 1,003 -- 4,952 -- 185,319
----------- -------- --------- ---------- ----------- -----------
Noninterest income...... 63,479 76 -- 1,062 -- 64,617
Noninterest expense..... 164,739 1,316 -- 3,556 -- 169,611
----------- -------- --------- ---------- ----------- -----------
Income before income
taxes.................. 78,104 (237) -- 2,458 -- 80,325
Applicable income
taxes.................. 27,462 -- -- 714 28,176
----------- -------- --------- ---------- ----------- -----------
Net income.............. $ 50,642 $ (237) $ -- $ 1,744 $ -- $ 52,149
=========== ======== ========= ========== =========== ===========
Average basic shares
outstanding............ 39,787,000 508,088 (508,088) 1,027,392 (1,027,392) 42,032,100
508,088 1,737,012
Average diluted shares
outstanding............ 43,649,000 508,088 (508,088) 1,027,392 (1,027,392) 45,894,100
508,088 1,737,012
Earnings per share:
Basic................ $ 1.27 $ 1.24
Diluted.............. $ 1.18 $ 1.16
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-------------------------------------------
OTHER PROBABLE PRO FORMA
BUSINESS ADJUSTMENTS/ COMBINED
COMBINATIONS (DEDUCTIONS) TOTAL
-------------- ------------ -----------
<S> <C> <C> <C>
Interest income......... $ 14,721 $ $ 397,537
Interest expense........ 5,592 -- 192,392
-------- ---------- -----------
Net interest income..... 9,129 -- 205,145
Provision for possible
loan losses............ 237 10,934
-------- ---------- -----------
Net interest income
after provision for
loan losses............ 8,892 -- 194,211
-------- ---------- -----------
Noninterest income...... 1,039 65,656
Noninterest expense..... 5,663 -- 175,274
-------- ---------- -----------
Income before income
taxes.................. 4,268 -- 84,593
Applicable income
taxes.................. 1,506 -- 29,682
-------- ---------- -----------
Net income.............. $ 2,762 $ -- $ 54,911
======== ========== ===========
Average basic shares
outstanding............ 897,518 (897,518) 44,659,395
2,627,295
Average diluted shares
outstanding............ 897,518 (897,518) 48,531,401
2,637,301
Earnings per share:
Basic................ $ 1.23
Diluted.............. $ 1.15
</TABLE>
- ---------------
* Restated to give retroactive effect to the February 1998 pooling-of-interests
business combinations with United American Holding Corporation, First Central
Bank and South Florida Banking Corp.
PRO FORMA ADJUSTMENTS
Adjustments applicable to the pooling-of-interests method 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.
46
<PAGE> 55
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 COMBINATION
(1) Possible adjustments applicable to the pooling of interest method business
combination with Commercial Bank:
<TABLE>
<S> <C>
Increase in expense:
Contract buy-outs......................................... $ (24)
Professional fees......................................... (103)
Write-off of fixed assets................................. (128)
------
Net decrease in income before tax........................... (255)
Tax effect of the pro forma adjustments..................... 96
------
Net decrease in income............................ $ (159)
======
</TABLE>
47
<PAGE> 56
PENDING BUSINESS COMBINATIONS
(2) Possible adjustments applicable to the pooling of interest method business
combination with First Macon:
<TABLE>
<S> <C>
Increase in expense:
Contract buy-outs......................................... $(153)
Potential severence 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>
(3) Possible adjustments applicable to the pooling of interest method business
combination with FirstBank:
<TABLE>
<S> <C>
Increase in expense:
Professional fees......................................... $(100)
Write-off of fixed assets................................. (8)
-----
Net decrease in income before tax........................... (108)
Tax effect of the pro forma adjustment...................... 40
-----
Net decrease in income............................ $ (68)
=====
</TABLE>
(4) Possible adjustments applicable to the pooling of interest method business
combination with CNB Holding Company:
<TABLE>
<S> <C>
Increase in expense:
Write-off of fixed assets................................. $ (199)
Potential severence to terminated employees............... (52)
Non-compete 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>
(5) Possible adjustments applicable to the pooling of interest method business
combination with Prime Bank:
<TABLE>
<S> <C>
Decrease (increase) in expense:
Contract buy-outs......................................... $ (92)
Potential severence 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>
48
<PAGE> 57
RECENT DEVELOPMENTS -- BANCGROUP
BancGroup -- Recent Unaudited Results
The following table presents certain unaudited data for BancGroup for the
period ended June 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
JUNE 30, JUNE 30, JUNE 30,
1998 1997 1997 TO 1998
---------- ---------- ------------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
STATEMENT OF CONDITION SUMMARY
Total assets............................................... $8,772,533 $6,917,732 27%
Loans, net of unearned income.............................. 6,027,489 5,174,845 16
Total earnings assets...................................... 7,933,502 6,328,766 25
Deposits................................................... 6,193,818 5,460,471 13
Shareholders' equity....................................... 601,771 501,386 20
Book value per share....................................... 12.25 10.53 16
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
------------------------------
% CHANGE
1998 1997 97 TO 98
-------- -------- --------
<S> <C> <C> <C>
EARNINGS SUMMARY
Net interest income (taxable equivalent).................... $154,620 $135,026 15%
Provision for loan losses................................... 7,543 7,288 3
Noninterest income.......................................... 57,420 42,524 35
Noninterest expense......................................... 134,850 106,163 27
Net Income.................................................. 42,411 39,680 7
Net income excluding acquisition and restructuring costs and
Year 2000 expenses........................................ $ 49,438 $ 41,787 18
Average primary shares outstanding.......................... 48,841 46,894
Average fully diluted shares outstanding.................... 50,146 48,532
EARNINGS PER SHARE
Income excluding acquisition and restructuring costs and
Year 2000 expenses:
Basic..................................................... $ 1.01 $ 0.89 13
Diluted................................................... 0.99 0.86 15
Net income:
Basic..................................................... 0.87 0.85 2
Diluted................................................... 0.85 0.82 4
</TABLE>
49
<PAGE> 58
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
---------------
1998 1997
------ ------
<S> <C> <C>
SELECTED RATIOS
Income excluding acquisition and restructuring costs and
Year 2000 expenses to:
Average assets............................................ 1.24% 1.25%
Average equity............................................ 17.16 17.15
Net income to:
Average assets............................................ 1.13 1.19
Average equity............................................ 15.64 16.29
Efficiency ratio (excluding acquisition and Year 2000
expenses)................................................. 58.60 58.31
Equity to assets............................................ 6.86 7.25
Total capital............................................... 7.77 8.22
Tier one leverage........................................... 7.41 7.90
</TABLE>
Operating earnings for the six months ended June 30, 1998 were $49,438,000
compared to $41,787,000 for the same period in 1997, an 18% increase. Diluted
operating earnings per share, net income excluding acquisition and restructuring
costs and Year 2000 expenses, for the six months ended June 30, 1998 was $0.99,
a 15% 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 17.16% compared with 17.15% in 1997 and 1.24% compared
to 1.25% for 1997, respectively.
50
<PAGE> 59
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL AND OPERATING INFORMATION
The following tables present certain financial information for BancGroup on
a historical and pro forma basis. The first table presents historical and pro
forma information for the three months ended March 31, 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 information for the years
ended December 31, 1994 and 1993. The final table presents proforma and
historical statement of condition data and selected ratios as of March 31, 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 Commercial Bank of Nevada, CNB Holding Company, FirstBank, First Macon and
Prime Bank of Central Florida. The pro forma balance sheet data gives effect to
the combinations as if they had occurred on March 31, 1998 and the pro forma
operating data gives effect to the combinations as if they occurred at the
beginning of the earliest period presented.
The following selected financial information should be read in conjunction
with the discussion set forth in "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and all 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>
THREE MONTHS ENDED MARCH 31,
-----------------------------------------------
BANCGROUP BANCGROUP BANCGROUP BANCGROUP
PRO FORMA HISTORICAL PRO FORMA HISTORICAL
1998 1998 1997 1997
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
STATEMENT OF INCOME
Interest income...................................... $157,996 $146,034 $136,308 $127,044
Interest expense..................................... 77,602 72,602 66,694 62,969
-------- -------- -------- --------
Net interest income.................................. 80,394 73,432 69,614 64,075
Provision for possible loan losses................... 3,889 3,670 3,443 3,056
-------- -------- -------- --------
Net interest income after provision for loan
losses............................................. 76,505 69,762 66,171 61,019
Noninterest income................................... 26,861 26,075 20,804 20,105
Noninterest expense.................................. 62,690 58,485 53,325 49,874
Acquisition and restructuring costs and Year 2000
expenses........................................... 8,449 8,449 757 757
-------- -------- -------- --------
Income before income taxes........................... 32,227 28,903 32,893 30,493
Applicable income taxes.............................. 12,024 10,953 11,851 11,021
-------- -------- -------- --------
Net income........................................... $ 20,203 $ 17,950 $ 21,042 $ 19,472
======== ======== ======== ========
Income excluding acquisition and restructuring costs
and Year 2000 expenses............................. $ 25,811 $ 23,558 $ 21,648 $ 20,078
======== ======== ======== ========
EARNINGS PER SHARE
Income excluding acquisition and restructuring costs
and Year 2000 expenses:
Basic.............................................. $ 0.49 $ 0.49 $ 0.42 $ 0.44
Diluted............................................ $ 0.47 $ 0.48 $ 0.41 $ 0.42
Net income:
Basic.............................................. $ 0.38 $ 0.38 $ 0.41 $ 0.42
Diluted............................................ $ 0.37 $ 0.37 $ 0.40 $ 0.41
Average shares outstanding
Basic.............................................. 53,014 47,779 51,224 45,969
Diluted............................................ 54,430 49,178 53,122 47,845
Cash dividends:
Common............................................. $ 0.17 $ 0.17 $ 0.15 $ 0.15
</TABLE>
51
<PAGE> 60
<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.............. $582,773 $476,013 $397,537 $540,699 $444,082 $371,985 $278,223 $224,209
Interest expense............. 284,464 231,943 192,392 267,084 219,494 182,441 113,715 88,568
-------- -------- -------- -------- -------- -------- -------- --------
Net interest income.......... 298,309 244,070 205,145 273,615 224,588 189,544 164,508 135,641
Provision for possible loan
losses..................... 16,122 14,440 10,934 14,860 13,564 10,180 8,943 14,437
-------- -------- -------- -------- -------- -------- -------- --------
Net interest income after
provision for loan
losses..................... 282,187 229,630 194,211 258,755 211,024 179,364 155,565 121,204
Noninterest income........... 95,814 77,575 65,656 92,550 74,860 63,479 56,567 53,655
Noninterest expense.......... 228,482 195,169 173,536 213,769 182,588 163,001 154,083 135,471
SAIF special assessment...... -- 4,465 -- -- 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... 143,056 95,653 84,593 131,073 86,913 78,104 56,701 38,428
Applicable income taxes...... 52,792 33,373 29,682 48,557 30,631 27,462 18,610 12,216
-------- -------- -------- -------- -------- -------- -------- --------
Income before extraordinary
items...................... 90,264 62,280 54,911 82,516 56,282 50,642 38,091 26,212
Extraordinary items.......... -- -- -- -- -- -- -- (396)
Cumulative effect of a change
in accounting.............. -- -- -- -- -- -- -- 3,890
-------- -------- -------- -------- -------- -------- -------- --------
Net income................... $ 90,264 $ 62,280 $ 54,911 $ 82,516 $ 56,282 $ 50,642 $ 38,091 $ 29,706
======== ======== ======== ======== ======== ======== ======== ========
Income excluding SAIF special
assessment and acquisition
and restructuring costs.... $ 95,433 $ 74,718 $ 56,300 $ 87,686 $ 68,719 $ 52,032 $ 39,169 $ 26,980
======== ======== ======== ======== ======== ======== ======== ========
EARNINGS PER SHARE
Income excluding SAIF special
assessment and acquisition
and restructuring costs:
Basic...................... $ 1.84 $ 1.56 $ 1.26 $ 1.88 $ 1.60 $ 1.31 $ 1.05 $ 0.80
Diluted.................... $ 1.79 $ 1.50 $ 1.16 $ 1.83 $ 1.54 $ 1.22 $ 0.98 $ 0.76
Income before extraordinary
items:
Basic...................... $ 1.74 $ 1.30 $ 1.23 $ 1.77 $ 1.31 $ 1.27 $ 1.02 $ 0.78
Diluted.................... $ 1.69 $ 1.26 $ 1.15 $ 1.72 $ 1.27 $ 1.18 $ 0.96 $ 0.74
Net income:
Basic...................... $ 1.74 $ 1.30 $ 1.23 $ 1.77 $ 1.31 $ 1.27 $ 1.02 $ 0.89
Diluted.................... $ 1.69 $ 1.26 $ 1.15 $ 1.72 $ 1.27 $ 1.18 $ 0.96 $ 0.84
Average shares outstanding
Basic...................... 51,783 47,903 44,659 46,536 42,839 39,787 37,361 33,512
Diluted.................... 53,425 49,897 48,531 48,158 44,776 43,649 40,993 37,465
Cash dividends:
Common**................... $ 0.60 $ 0.54 $ 0.3375 $ 0.60 $ 0.54 $ 0.3375 $ -- $ --
Class A**.................. -- -- $ 0.1125 -- -- $ 0.1125 $ 0.400 $ 0.355
Class B**.................. -- -- $ 0.0625 -- -- $ 0.0625 $ 0.200 $ 0.155
</TABLE>
- ---------------
* Restated to give retroactive effect to the February 1998 pooling-of-interests
business combinations with United American Holding Corporation, First Central
Bank and South Florida Banking Corp.
** The pro forma cash dividends are equal to the historical BancGroup cash
dividends.
52
<PAGE> 61
<TABLE>
<CAPTION>
MARCH 31, 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............. $8,654,258 $8,006,359 $7,442,661 $6,165,691 $5,370,361 $4,214,492 $4,022,477
Loans, net of unearned
inc.................. 6,023,916 5,655,164 5,585,901 4,558,780 3,924,785 2,959,565 2,468,564
Mortgage loans held for
sale................. 455,716 455,716 225,331 157,966 116,688 61,556 368,515
Deposits............... 6,660,858 6,082,744 5,771,702 4,728,896 4,223,539 3,378,252 3,252,771
Long-term debt......... 460,426 460,426 315,252 39,092 48,688 89,040 57,397
Shareholders' equity... 619,531 571,586 543,262 443,391 388,770 298,812 279,300
Average daily balances
Total assets........... 8,299,455 7,620,638 6,911,648 5,742,474 4,756,418 4,028,482 3,308,106
Interest-earning
assets............... 7,519,092 6,881,562 6,325,872 5,253,921 4,347,437 3,645,499 2,945,172
Loans, net of unearned
income............... 6,052,743 5,675,060 5,184,653 4,240,554 3,371,192 2,669,363 1,988,563
Mortgage loans held for
sale................. 254,992 254,992 149,309 135,135 98,785 135,046 248,502
Deposits............... 6,359,861 5,852,198 5,442,818 4,463,015 3,787,613 3,280,208 2,666,025
Shareholders' equity... 612,996 562,172 504,739 423,289 339,734 292,892 220,802
Book value per share..... $ 11.59 $ 11.88 $ 11.52 $ 10.23 $ 9.38 $ 7.88 $ 7.66
Tangible book value per
share.................. 10.11 10.24 10.05 9.54 8.65 7.37 7.21
SELECTED RATIOS
Income excluding SAIF
special assessment,
acquisition and
restructuring costs and
Year 2000 expenses to:
Average assets......... 1.26% 1.25% 1.27% 1.20% 1.09% 0.97% 0.82%
Average stockholders'
equity............... 17.07% 16.99% 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......... 0.99% 0.96% 1.19% 0.98% 1.06% 0.95% 0.79%
Average stockholders'
equity............... 13.41 12.95 16.35 13.30 14.91 13.01 11.87
Net income to:
Average assets......... 0.99 0.96 1.19 0.98 1.06 0.95 0.90
Average stockholders'
equity............... 13.41 12.95 16.35 13.30 14.91 13.01 13.45
Efficiency ratio(1)(2)... 60.65 58.38 57.94 60.46 63.89 69.00 71.23
Dividend payout.......... 43.59 44.74 33.90 41.22 35.43 39.22 39.89
Average equity to average
assets................. 7.39 7.38 7.30 7.37 7.14 7.27 6.67
Allowance for possible
loan losses to total
loans (Net of unearned
income)................ 1.24% 1.22% 1.21% 1.27% 1.29% 1.54% 1.59%
</TABLE>
- ---------------
* Restated to give retroactive effect to the February 1998 pooling-of-interest
business combinations with United American Holding Corporation, First
Central Bank and South Florida Banking Corp.
(1) Legislation approving a one-time special assessment to recapitalize the
Savings Association Insurance Fund ("SAIF") resulted in $4,465,000 in
expense before income taxes and $2,903,000 net of applicable income taxes in
1996.
(2) Acquisition expenses reflect costs and related restructuring expense of
business combinations.
53
<PAGE> 62
FIRST MACON BANK & TRUST CO.
SELECTED FINANCIAL DATA
The following tables present selected historical financial data for First
Macon. This table should be read in conjunction with the historical financial
statements and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AT AND FOR THE
THREE MONTHS
ENDED MARCH 31, 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>
For the Period:
Interest income................................. $ 3,789 $ 3,233 $ 14,407 $ 11,384 $ 9,339 $ 6,745 $ 5,298
Interest expense................................ 1,812 1,414 6,657 5,017 4,062 2,485 2,093
-------- -------- -------- -------- -------- ------- -------
Net interest income............................. 1,977 1,819 7,750 6,367 5,277 4,260 3,205
Provision for credit losses..................... 90 111 178 376 325 391 498
-------- -------- -------- -------- -------- ------- -------
Net interest income after provisions for credit
losses........................................ 1,887 1,708 7,572 5,991 4,952 3,869 2,707
Noninterest income.............................. 402 341 1,559 1,339 1,062 1,013 960
Noninterest expenses............................ 1,292 1,136 5,055 4,337 3,556 3,147 2,734
-------- -------- -------- -------- -------- ------- -------
Income before taxed on income................... 997 913 4,076 2,993 2,458 1,735 933
Taxes on income................................. 324 282 1,335 883 714 500 211
-------- -------- -------- -------- -------- ------- -------
Net income...................................... $ 673 $ 631 $ 2,741 $ 2,110 $ 1,744 $ 1,235 $ 722
======== ======== ======== ======== ======== ======= =======
Per share data(1):
Net income per share(2)....................... $ 2.51 $ 2.36 $ 2.55 $ 1.97 $ 1.69 $ 1.23 $ 0.72
Cash dividends declared....................... 0.00 0.00 0.30 0.22 0.15 0.11 0.10
Book value at end of period................... 14.23 11.86 13.59 11.29 9.63 7.66 7.03
Common shares outstanding at end of period(1)... 1,074 1,071 1,074 1,071 1,042 1,006 1,000
Weighted average common shares outstanding
during period(1) and (3)...................... 1,074 1,071 1,074 1,071 1,053 1,032 1,020
At Period End:
Total assets at end of period................... 195,221 161,719 186,371 152,892 120,070 99,542 78,243
Cash and cash equivalents....................... 19,120 15,005 16,984 14,514 9,185 9,798 5,186
Securities...................................... 35,115 27,652 36,618 28,582 30,390 24,376 19,401
Loans receivable, net........................... 132,750 114,615 124,906 105,843 76,925 62,429 50,903
Deposits........................................ 177,273 146,869 169,055 138,600 108,230 90,468 70,368
Stockholders' Equity............................ 15,283 12,702 14,593 12,092 10,037 7,702 7,030
Selected Ratios:
Allowance for credit losses as a percentage of
period-end total loans........................ 1.26% 1.50% 1.30% 1.53% 1.77% 1.75% 1.59%
Allowance for credit losses as a percentage of
non-performing loans.......................... 354.84 304.99 195.00 314.29 790.29 944.92 269.74
Total non-performing loans as a percentage of
total loans................................... 0.37 0.50 0.66 0.49 0.22 0.19 0.59
Total non-performing loans as a percentage of
total assets.................................. 0.24 0.33 0.45 0.34 0.15 0.12 0.39
Total non-performing loans and real estate owned
as a percentage of total assets............... 0.25 0.37 0.47 0.38 0.35 0.37 0.84
</TABLE>
Note (1) to the above schedule: The respective amounts have been restated
retroactively for the effect of the two-for-one (2:1) stock split paid by the
Bank on May 6, 1996.
Note (2) to the above schedule: The calculations of net income per share
for the quarters ended March 31, 1998 and 1997, respectively, have been
annualized for comparison purposes. Additionally, such computations consider the
effects of common stock equivalents for each of the years ended in computing the
weighted average number of common shares outstanding during the computation
period ended, respectively.
Note (3) to the above schedule: The weighted average common shares
outstanding include the effects of various stock options available to employees
at the periods ended, respectively.
54
<PAGE> 63
FIRST MACON BANK
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion is provided to afford the reader an understanding
of the major elements of First Macon's financial condition, results of
operations, financial statements and notes thereto and other information
appearing elsewhere in this Prospectus.
GENERAL
First Macon is an FDIC-insured, state chartered commercial bank
headquartered in Macon, Georgia. First Macon commenced operations in July 1988.
The Bank operates from facilities located in Macon, Bibb County, Georgia, 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 residential mortgage loans, and the origination of loans
secured by commercial real estate properties.
First Macon Bank & Trust Company conducts commercial banking business
consisting of attracting deposits from the general public and applying those
funds to the origination of commercial, consumer, and real estate loans
(including commercial loans collateralized by real estate). The Bank's
profitability depends primarily on net interest income, which is the excess of
interest income generated from interest-earning assets (i.e., loans,
investments, and federal funds sold) over interest expense incurred on
interest-bearing liabilities (i.e., customer deposits and borrowed funds). Net
interest income is affected by the relative amounts of interest-earning assets
and interest-bearing liabilities, and the interest rate earned and paid on these
balances. Net interest income is dependent upon the Bank's interest-rate spread
which is the excess of average yield earned on its interest-earning assets over
the average rate paid on its interest-bearing liabilities. When interest-
earning assets approximate or exceed interest-bearing liabilities, any positive
interest rate spread will generate net interest income. The interest-rate spread
is impacted by interest rates and the amounts of deposits and loans.
Additionally, the Bank's profitability is affected by such factors as the level
of noninterest income and expenses, the provision for credit losses, and the
effective tax rate. Noninterest income consists primarily of service fees on
deposit accounts, other fees and income from the sale of fixed assets, and
investment securities. Noninterest expense consists primarily of compensation
and employee benefits, occupancy and equipment expenses, directors and advisors
fees, data processing costs, deposit insurance premiums paid to the FDIC, and
other operating expenses.
Management's discussion and analysis of earnings and related financial data
are presented herein to assist investors in understanding the financial
condition of First Macon Bank & Trust Company at, and the results of operations
of First Macon Bank & Trust Company's, for the years ended December 31, 1997 and
1996. The discussions should be read in conjunction with the consolidated
financial statements and related footnotes of First Macon Bank & Trust Company's
presented elsewhere herein.
LIQUIDITY
During the year ended December 31, 1997, First Macon Bank & Trust Company's
cash and cash equivalents increased $2.5 million, to $17.0 million as of
December 31, 1997, from $14.5 million as of December 31, 1996. During 1997,
investing activities used $31.4 million of cash, and financing activities
provided $30.2 million of cash. First Macon Bank & Trust Company total assets
increased $33.5 million to $186.4 million at December 31, 1997 from $152.9
million at December 31, 1996.
Liquidity management involves the ability to meet the cash flow
requirements of customers who may be depositors wanting to withdraw their funds
or borrowers needing assurance that sufficient funds will be available to meet
their credit needs. In the ordinary course of business, the Bank's cash flows
are generated from interest and fee income, as well as from loan repayments and
the maturity of investment securities held-to-maturity. In addition to cash and
due from banks, the Bank considers all securities available-for-sale and federal
funds sold as primary sources of asset liquidity. Many factors affect the
ability to accomplish these liquidity objectives successfully, including
economic environment, and the asset/liability mix within the
55
<PAGE> 64
balance sheet, as well as the Bank's reputation in the community. As of December
31, 1997, the Bank had commitments to originate loans totaling $24.3 million. In
addition, scheduled maturities of certificates of deposit during 1998 totaled
$76.9 million. Management believes the Bank has adequate resources to fund all
of its commitments, that substantially all of its existing commitments will be
funded within 12 months and, if so desired, that the Bank can adjust the rates
and terms on certificates of deposit and other deposit accounts to retain
deposits in a changing interest rate environment.
CAPITAL RESOURCES
First Macon Bank & Trust Company's total stockholders' equity was $14.6
million and $12.1 million as of December 31, 1997 and 1996, respectively, which
represents an increase of $2.5 million. This increase was a result of 1997's net
income of $2.7 million offset by the $23,000 change in unrealized losses at
December 31, 1997 from December 31, 1996, and dividends paid of $321,000. First
Macon Bank & Trust Company's total stockholders' equity was 7.83% and 7.91% of
total assets as of December 31, 1997 and 1996, respectively.
The federal banking regulatory authorities have adopted certain "prompt
corrective action" rules with respect to depository institutions. The rules
establish five capital tiers: "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," and "critically
undercapitalized". The various federal banking regulatory agencies have adopted
regulations to implement the capital rules by, among other things, defining the
relevant capital measures for the five capital categories. An institution is
deemed to be "well capitalized" if it has: a total risk-based capital ratio of
10% or greater; a Tier 1 risk-based capital ratio of 6% or greater; and, a Tier
1 leverage ratio of 5%. Depository institutions which fall below the "adequately
capitalized" category generally are: prohibited from making any capital
distribution; subject to growth limitations; and, required to submit capital
restoration plan. There are a number of requirements and restrictions that may
be imposed on institutions treated as "significantly undercapitalized" and, if
the institution is "critically undercapitalized," the banking regulatory
agencies have the right to appoint a receiver of conservator.
In accordance with risk capital guidelines issued by the FDIC, the Bank is
required to maintain a minimum standard of total capital to risk-weighted assets
of 8%. Additionally, the FDIC requires bank to maintain a minimum
leverage-capital ratio of Tier 1 capital (as defined) to total assets. The
leverage-capital ratio ranges from 3% to 5% based on the bank's rating under the
regulatory rating system. The following table summarized the regulatory capital
levels and ratios for the Bank:
<TABLE>
<CAPTION>
ACTUAL REGULATORY
RATIOS REQUIREMENT
------ -----------
<S> <C> <C>
At March 31, 1998:
Total capital to risk-weighted assets..................... 12% 8%
Tier 1 capital to risk-weighted assets.................... 10 4
Tier 1 capital to total assets-leverage ratio............. 8 4
At December 31, 1997:
Total capital to risk-weighted assets..................... 12% 8%
Tier 1 capital to risk-weighted assets.................... 11 4
Tier 1 capital to total assets-leverage ratio............. 8 4
At December 31, 1996:
Total capital to risk-weighted assets..................... 12% 8%
Tier 1 capital to risk-weighted assets.................... 11 4
Tier 1 capital to total assets-leverage ratio............. 8 4
</TABLE>
56
<PAGE> 65
RESULTS OF OPERATIONS
General
First Macon Bank & Trust Company's net income was $2.7 million, or $2.55
per share, for the year ended December 31, 1997, as compared to $2.1 million, or
$1.97 per share, for the year ended December 31, 1996, or an increase of
$631,000 or 30%. First Macon Bank & Trust Company's income before taxes on
income was $4.1 million for the year ended December 31, 1997, as compared to
$3.0 million for the year ended December 31, 1996, or an increase of $1,083,000
or 36%.
For the years ended December 31, 1997 and 1996, selected ratios were as
follows:
<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C>
Average equity as a percentage of average assets............ 7.75% 8.27%
Return on average assets.................................... 1.60 1.57
Return on average equity.................................... 20.60 19.02
Noninterest expense to average assets....................... 2.94 3.23
</TABLE>
For the years ended December 31, 1997 and 1996, the following table
presents information regarding (i) the total dollar amount of First Macon Bank &
Trust Company's interest income from interest-earning assets and the resultant
average yield; (ii) the total dollar amount of interest expense on
interest-bearing liabilities and the resultant average cost; (iii) net interest
income; (iv) net interest spread; and (v) net interest margin. Please see the
following page:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1997 1996
----------------------------- -----------------------------
AVERAGE AVERAGE
AVERAGE YIELD AVERAGE YIELD
BALANCE INTEREST RATE BALANCE INTEREST RATE
-------- -------- ------- -------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest earning asset:
Loans receivable:
Commercial.............. $ 42,653 $ 4,060 9.52% $ 33,966 $ 3,345 9.85%
Real estate:(1)
Construction and
Mortgage........... 10,327 1,012 9.80 7,085 667 9.41
Consumer and other...... 66,578 6,938 10.42 52,039 5,441 10.46
-------- ------- ----- -------- ------- -----
Total loans, net of
unearned
interest........... 119,558 12,010 10.05 93,090 9,453 10.15
Investments -- taxable.... 20,461 1,272 6.22 19,344 1,223 6.32
Investments -- tax
free(2)................. 9,835 552 7.91 8,568 488 8.03
Federal funds sold........ 10,522 573 5.45 4,020 220 5.47
-------- ------- ----- -------- ------- -----
Total
interest-earning
assets(2).......... $160,376 $14,407 9.12% $125,022 $11,384 9.27%
------- ----- ------- -----
Cash and due from banks... 7,696 6,856
Allowance for credit
losses.................. (1,810) (1,495)
Other non-earning
assets.................. 5,407 3,739
-------- --------
Total assets......... $171,669 $134,122
======== ========
</TABLE>
57
<PAGE> 66
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1997 1996
----------------------------- -----------------------------
AVERAGE AVERAGE
AVERAGE YIELD AVERAGE YIELD
BALANCE INTEREST RATE BALANCE INTEREST RATE
-------- -------- ------- -------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS'
EQUITY
Interest-bearing liabilities:
Money markets............. $ 24,833 $ 1,175 4.73% $ 17,076 $ 741 4.34%
NOW accounts.............. 17,222 429 2.49 14,450 389 2.69
Savings................... 5,311 148 2.79 5,337 147 2.75
Time deposits:
Under $100,000.......... 62,622 3,875 6.19 46,801 2,817 6.02
$100,000 and over....... 21,548 1,030 4.78 16,994 923 5.43
-------- ------- ----- -------- ------- -----
Total
interest-bearing
liabilities........ 131,536 6,657 5.06% 100,658 5,017 4.98%
------- ----- ------- -----
Demand deposits........... 24,656 20,669
Other liabilities......... 2,170 1,698
Stockholders' equity...... 13,307 11,097
-------- --------
Total liabilities and
stockholders'
equity............. $171,669 $134,122
======== ========
SPREAD AND INTEREST
DIFFERENTIAL:
Net interest income............ $ 7,750 $ 6,367
======= =======
Interest rate spread(3)........ 4.06% 4.29%
===== =====
Net interest margin(4)......... 4.83% 5.09%
===== =====
Excess of total
interest-earning assets over
interest-bearing
liabilities.................. $ 28,840 $ 24,364
======== ========
</TABLE>
- ---------------
(1) Interest income on mortgage loans included loan fees recognized as income
during the years ended December 31, 1997 and 1996, respectively.
(2) Yields on tax-free investments are computed on a tax equivalent basis.
(3) Interest-rate spread represents the excess of the average yield on
interest-earning assets over the average cost of interest-bearing
liabilities.
(4) Net interest margin represents net interest income divided by average
interest-earning assets.
Net Interest Income
Net interest income, which constitutes the principal source of income for
First Macon Bank & Trust Company, represents the excess of interest income on
interest-earning assets over interest expense on interest-bearing liabilities.
The principal interest-earning assets are federal funds sold, investment
securities and loans receivable. Interest-bearing liabilities primarily consist
of time deposits, interest-bearing checking accounts ("Now accounts"), savings
deposits, and money market accounts. Funds attracted by these interest-bearing
liabilities are invested in interest-earning assets. Accordingly, net interest
income depends upon the volume of average interest-earning assets and average
interest-bearing liabilities and the interest rates earned or paid on them.
58
<PAGE> 67
The following table sets forth certain information regarding changes in
First Macon Bank & Trust Company's interest income and interest expense during
the year ended December 31, 1997, as compared to the year ended December 31,
1996. For each category of interest-earning assets and interest-bearing
liabilities, information is provided on changes attributable to: (1) changes in
interest rate (change in rate multiplied by prior volume); (2) changes in the
volume (change in volume multiplied by prior rate); and, (3) changes in rate
volume (change in rate multiplied by change in volume).
<TABLE>
<CAPTION>
INCREASE (DECREASE) DUE TO
--------------------------------
RATE/
RATE VOLUME VOLUME TOTAL
----- ------ ------ ------
<S> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans receivable:
Commercial................................................ $(112) $ 856 $(29) $ 715
Real estate............................................... 28 305 12 345
Consumer and other........................................ (21) 1,520 (2) 1,497
----- ------ ---- ------
Total loans receivable............................ (105) 2,681 (19) 2,557
Investments -- taxable...................................... (93) 71 71 49
Investments -- tax free(1).................................. (17) 72 9 64
Federal funds sold.......................................... (1) 356 (2) 353
----- ------ ---- ------
Total interest-earning assets..................... (216) 3,180 59 3,023
----- ------ ---- ------
INTEREST-BEARING LIABILITIES
Money market accounts..................................... 67 337 30 434
NOW accounts.............................................. (29) 75 (6) 40
Savings................................................... 2 (1) 0 1
Time deposits under $100,000.............................. 80 952 26 1,058
Time deposits $100,000 and over........................... (110) 247 (30) 107
----- ------ ---- ------
Total interest-bearing liabilities................ 10 1,610 20 1,640
----- ------ ---- ------
Net change in net interest income........................... $(226) $1,570 $ 39 $1,383
===== ====== ==== ======
</TABLE>
First Macon Bank & Trust Company's net interest income was $7.8 million for
the year ended December 31, 1997, compared with $6.4 million for the year ended
December 31, 1996, or an increase of $1,383,000 or 21.7%. This increase in net
interest income resulted from a growth in earning assets of $35.4 million.
Throughout 1997, management received high priced deposit accounts which they
applied to the origination of loans. The increase in 1997 from 1996 in interest
expense was primarily attributable to the 31% increase in average
interest-bearing liabilities. The interest rate paid on interest bearing
liabilities increased eight (8) basis points primarily due to an increased
amount of deposits as a result of management's policy to price the Bank's
deposits at competitive rates. The overall result was a decrease in the net
interest margin percentage to 4.83% during 1997 from 5.09% during 1996.
Provision for Credit Losses
The provision for credit losses is charged to earnings to bring the
allowance for credit losses to a level deemed appropriate by management, and is
based upon: historical experience; the volume and type of lending conducted by
First Macon Bank & Trust Company; the amounts of non-performing loans; general
economic conditions (particularly as they relate to First Macon Bank & Trust
Company's market area); and, other factors related to the collectibility of
First Macon Bank & Trust Company's loan portfolio. During the year ended
December 31, 1997, the provision for credit losses was $178,000, as compared to
$376,000 during the year ended December 31, 1996, or a decrease of $198,000.
While the provision for credit losses decreased, the allowance for credit losses
remained unchanged at December 31, 1997 from December 31, 1996 with a balance of
$1,650,000. As of December 31, 1997 and 1996, the allowance for credit losses
was 1.30% and 1.53%, respectively, of total loans receivable, and was 195.00%
and 314.00%, respectively, of non-performing loans.
59
<PAGE> 68
Noninterest Income
Other income is primarily composed of deposit service charges and fees.
During the year ended December 31, 1997, other income increased to $1,559,000
from $1,339,000 during the year ended December 31, 1996, or an increase of
$220,000 or 15.0%.
Noninterest Expenses
During the year ended December 31, 1997, other expenses increased to $5.1
million from $4.3 million during the year ended December 31, 1996, or an
increase of $713,000 or 16.6%. The following narrative sets forth additional
information on certain other expense categories which had significant changes:
During the year ended December 31, 1997 compensation and benefits increased
to $2.7 million from $2.2 million during the year ended December 31, 1996, or an
increase of $454,000 or 20.6%. This increase was primarily due to an increase in
the number of employees at the Bank and annual compensation and benefit
increases for existing employees.
Other operating expenses increased during the year ended December 31, 1997
to $1.7 million from $1.4 million during the year ended December 31, 1996, or an
increase of $265,000 or 18.9%. This is due to the increased volume of operations
of the Bank in recognition of opening new branches and increased growth during
the year ended December 31, 1997.
Taxes on Income
During the years ended December 31, 1997 and 1996 First Macon Bank & Trust
Company, recorded taxes on income of $1,335,000 and $883,000, respectively,
reflecting effective income tax rates of 33% in 1997 and 29% in 1996. The
increase in the effective income tax rate during 1996 was primarily due to a
decrease in the prorational tax-exempt interest income as compared to the
overall growth of revenues and expenses.
ASSET/LIABILITY MANAGEMENT
A principal objective of First Macon Bank & Trust Company's asset/liability
management strategy is to minimize its exposure to changes in interest rates by
matching the maturity and repricing horizons of interest-earning assets and
interest-bearing liabilities. The strategy is overseen in part through the
direction of Bank's Asset and Liability Committee (the "ALCO Committee") which
establishes policies and monitors results to control interest rate sensitivity.
Management evaluates interest rate risk and then formulates guidelines
regarding asset generation and repricing, funding sources and pricing, and
off-balance sheet commitments in order to maintain interest rate risk within
target levels for the appropriate level of risk which are determined by the ALCO
Committee.
As a part of First Macon Bank & Trust Company's interest-rate risk
management policy, the ALCO Committee examines the extent to which its assets
and liabilities are "interest-rate sensitive" and monitors the Bank's
interest-rate sensitivity gap. An asset or liability is considered to be
interest-rate sensitive if it will reprice or mature within the time period
analyzed, usually one year or less. The interest-rate sensitivity gap is the
difference between interest-earning assets and interest-bearing liabilities
scheduled to mature or reprise within such time period. A gap is considered
positive when the amount of interest-rate sensitive assets exceeds the amount of
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 tend to
adversely affect net interest income, while a positive gap would tend to
adversely affect net interest income. In addition, any premiums on
mortgage-backed securities are amortized to interest income based on the
estimated remaining life of the related securities. Management periodically
reviews the remaining estimated life of mortgage-backed securities, and adjusts
the amortization of the premiums accordingly, in light of changes in market
interest rates and other factors affecting prepayment rates on the underlying
mortgages. Acceleration of the amortization of premiums on mortgage-backed
securities reduces the effective yield on these investments and, accordingly,
adversely affects net interest income. As of December 31, 1997, the remaining
unamortized premiums on mortgage-backed securities totaled $2,000.
60
<PAGE> 69
The ALCO Committee's policy is to maintain a cumulative one-year gap which
falls in the range of (20%) to 20% of total assets. As of December 31, 1997,
First Macon Bank & Trust Company's cumulative one-year gap was a negative 18.2%
of total assets. Management attempts to conform to this policy by managing the
maturity distribution of its investment portfolio, emphasizing origination's and
purchases of adjustable-interest rate loans, and by managing the product mix and
maturity of its deposit accounts.
A simple interest rate "gap" analysis by itself may not be an accurate
indicator of how net interest income will be affected by changes in interest
rates. Accordingly the ALCO Committee also evaluates how the repayment of
particular assets and liabilities is impacted by changes in interest rates.
Income associated with interest-earning assets and costs associated with
interest-bearing liabilities may not be affected uniformly by changes in
interest rates. In addition, the magnitude and duration of changes in interest
rates may have a significant impact on net interest income. For example,
although certain assets and liabilities may have similar maturities or period of
repricing, they may react in different degrees to changes in market interest
rates. Interest rates on certain types of assets and liabilities fluctuate in
advance of changes in general market interest rates, while interest rates on
other types may lag behind changes in general market rates. In addition, certain
assets, such as adjustable-interest rate mortgage loans, have features
(generally referred to as "interest rate caps") which limit changes in interest
rates on a short-term basis and over the life of the asset. In the event of a
change in interest rates, prepayments (on loans and mortgage-backed securities)
and early withdrawal (of deposit accounts) levels also could deviate
significantly from those assumed in calculating the interest rate gap. The
ability of many borrowers to service their debts also may decrease in the event
of an interest rate increase.
Management's strategy is to maintain a relatively balanced interest-rate
risk position to protect its net interest margin from market fluctuations. To
this end, the ALCO Committee reviews, on a quarterly basis, the maturity and
repricing of assets and liabilities.
Management believes that the type and amount of First Macon Bank & Trust
Company's interest rate sensitive liabilities may reduce the potential impact
that a rise in interest rates might have on First Macon Bank & Trust Company's
net interest income. First Macon Bank & Trust Company seeks to maintain a core
deposit base by providing quality services to its customers without
significantly increasing its cost of funds or operating expenses. First Macon
Bank & Trust Company's noninterest bearing demand deposits, NOW accounts, money
market and savings accounts were 46.1% and 47.4% of total deposits at December
31, 1997 and 1996, respectively. These accounts bore a weighted average interest
rate of 2.43% and 2.22% during the years ended December 31, 1997 and 1996,
respectively. Management anticipates that these accounts will continue to
comprise a significant portion of First Macon Bank & Trust Company's total
deposit base. First Macon Bank & Trust Company, also maintains a relatively
large portfolio of liquid assets in order to reduce its overall exposure to
changes in market interest rates. First Macon Bank & Trust Company, also
maintains a "floor", or minimum rate, on certain of its floating or prime based
loans. These floors allow First Macon Bank & Trust Company, to continue to earn
a higher rate when the floating rate falls below the established floor rate.
61
<PAGE> 70
The following table sets forth certain information relating to First Macon
Bank & Trust Company'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>
0 TO 90 91 TO 365 OVER ONE
DAYS DAYS YEAR TOTALS
------- --------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Loans receivable:(1)
Commercial............................................. $16,333 $ 1,480 $ 5,382 $23,195
Real estate construction............................... 5,836 583 0 6,419
Real estate mortgage................................... 5,689 3,361 8,425 17,475
Commercial real estate................................. 33,908 4,437 25,938 64,283
Consumer and other..................................... 6,118 1,262 7,803 15,183
------- -------- ------- -------
Total loans.................................... 67,884 11,123 47,548 126,555
Federal funds sold..................................... 5,695 0 5,695
Investment Securities:(2)
Available-for-sale.................................. 4,150 3,701 11,273 19,124
Held-to-maturity.................................... 3,423 1,150 12,921 17,494
------- -------- ------- -------
Total rate-sensitive assets.................... 81,152 15,974 71,742 168,868
------- -------- ------- -------
Deposits:
Money market accounts.................................. 30,551 30,551
NOW accounts........................................... 19,784 19,784
Savings accounts....................................... 3,555 3,555
Time deposits:(3)...................................... 0
Under $100,000...................................... 12,850 42,616 10,972 66,438
$100,000 and over................................... 6,934 14,749 2,165 23,848
------- -------- ------- -------
Total rate-sensitive liabilities............... 73,674 57,365 13,137 144,176
------- -------- ------- -------
Gap (repricing differences)............................ 7,478 (41,391) 58,605 24,692
======= ======== ======= =======
Cumulative Gap......................................... $ 7,478 $(33,913) $24,692
======= ======== =======
Cumulative GAP/total assets............................ 4.01% -18.20% 13.25%
======= ======== =======
</TABLE>
- ---------------
(1) In preparing the table above, adjustable-interest rate loans were included
in the period in which the interest rates are next schedule to adjust rather
than in the period in which the loans mature. Fixed-interest rate loans were
schedule according to their contractual maturities.
(2) In preparing the table above, adjustable-interest rate investment securities
were included in the period in which the interest rates are next scheduled
to adjust rather than in the period in which the investment securities
mature. Fixed-interest rate investment securities were scheduled according
to their contractual maturities.
(3) Time deposits were scheduled according to their contractual maturities.
FINANCIAL CONDITION
Lending Activities
A significant source of First Macon Bank & Trust Company's income was in
interest earned on its loan portfolio. At December 31, 1997, First Macon Bank &
Trust Company total assets were $186.4 million and its loans receivable (net)
were $124.9 million or 67% of total assets. At December 31, 1996, First Macon
Bank & Trust Company's total assets were $152.9 million and its loans receivable
(net) were $105.8 million or 69% of total assets. The increase in total loans
receivable to December 31, 1997 from December 31, 1996, was $19.1 million or
18%.
62
<PAGE> 71
For the years ended December 31, 1997 and 1996, the net change in total
loans receivable was approximately as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Balances at beginning of year............................... $107,493 $ 78,308
Net change in loan originations and repayments............ 19,277 29,540
Loans charged-off......................................... (214) (140)
Transfers to other real estate owned...................... 0 (215)
-------- --------
Balance at end of year.................................... $126,556 $107,493
======== ========
</TABLE>
The net increase in loans during 1997 from 1996 was primarily due to the
emphasis placed by Bank's management during 1997 and 1996 on soliciting new
loans and the opening of new branches.
The Bank's primary market area consists of the central portion of Georgia
including Bibb County, Houston County, Jones County, Peach County and Monroe
County. Market risks are minimized by the geographic dispersion of the various
branches. The diverse mixture of customers have incomes derived from a wide
variety of sources. It does not appear that any single adverse economic event
would have a serious negative effect an bank earnings or capital.
Lending activities are conducted pursuant to a written policy which has
been adopted by the Bank. Each loan officer has defined lending authority beyond
which loans, depending upon their type and size, must be reviewed and approved
by the Loan Committee comprised of certain officers and directors of the Bank.
As of December 31, 1997 and 1996, the composition of First Macon Bank &
Trust Company's loan portfolio was as follows:
<TABLE>
<CAPTION>
1997 1996
----------------- -----------------
% OF % OF
AMOUNT TOTAL AMOUNT TOTAL
-------- ------ -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Real Estate:
Construction and land development............. $ 6,632 5.24% $ 5,098 4.74%
Residential................................... 20,999 16.59 20,483 19.06
Business and other............................ 62,434 49.33 47,357 44.06
Commercial...................................... 23,206 18.34 22,102 20.56
Consumer and other.............................. 13,285 10.50 12,453 11.58
-------- ------ -------- ------
Total loans receivable, gross......... $126,556 100.00% $107,493 100.00%
====== ======
Less:
Allowance for credit losses................... (1,650) 1.30% (1,650) 1.53%
-------- ====== -------- ======
Total loans receivable, net........... $124,906 $105,843
======== ========
</TABLE>
63
<PAGE> 72
As of December 31, 1997, the maturities and interest rate sensitivities of
First Macon Bank & Trust Company's loan portfolio based on remaining schedule
principal repayments, were as follows:
<TABLE>
<CAPTION>
DUE AFTER
ONE YEAR
DUE IN ONE THROUGH
YEAR OR 5 DUE AFTER
LESS YEARS 5 YEARS TOTAL
---------- --------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Real Estate:
Construction and land development........... $12,681 $ 8,767 $ 1,759 $ 23,207
Residential................................. 5,773 645 0 6,418
Business and other.......................... 7,565 8,487 1,491 17,543
Commercial.................................... 22,003 32,135 10,593 64,731
Consumer and other............................ 6,829 7,594 234 14,657
------- ------- ------- --------
Total loans receivable, gross....... $54,851 $57,628 $14,077 $126,556
======= ======= ======= ========
Loans with maturities over one year:
Fixed-interest rate......................... $40,117 $ 8,061 $ 48,178
======= ======= ========
</TABLE>
Asset Quality
Management seeks to maintain quality assets through sound underwriting and
sound lending practices. The largest category of loans in First Macon Bank &
Trust Company's loan portfolio is collateralized by real estate mortgages. As of
December 31, 1997 and 1996, 71.2% and 67.9%, respectively, of the total loan
portfolio were collateralized by this type of property. The level of delinquent
loans and other real estate owned also is relevant to the credit quality of a
loan portfolio. As of December 31, 1997, total non-performing assets were
$874,000 or .47% of total assets, compared to $581,000 or .38% of total assets
as of December 31, 1996.
The real estate mortgage loans in First Macon Bank & Trust Company's
portfolio consist of fixed-interest rate loans which were originated at
prevailing market interest rates. The Bank's policy has been to originate real
estate mortgage loans predominantly in its primary market area. Real estate
mortgage loans are generally made in amounts up to 80% of the appraised value of
the property securing the loan. Real estate mortgages are generally made on the
basis of the borrower's ability to make repayment from his employment and other
incomes and are collateralized by real property whose value tends to be readily
ascertainable.
Loan concentrations are defined as amounts loaned to a number of borrowers
engaged in similar activities which would cause them to be similarly impacted by
economic or conditions. First Macon Bank & Trust Company, on a routine basis,
monitors these concentrations in order to consider adjustments in its lending
practices to reflect economic conditions, loan to deposit ratios, and industry
trends. As of December 31, 1997 and 1996, no concentration of loans within any
portfolio category to any group of borrowers engaged in similar activities or in
a similar business exceeded 10% of total loans, except that as of such dates,
loans collateralized with mortgages on real estate represented 71.2% and 67.9%,
respectively, of the loan portfolio and were to borrowers in varying activities
and businesses.
The Loan Committee of the Board of Directors of the Bank concentrates its
efforts and resources and that of its senior management and lending officers on
loan review and underwriting procedures. Internal controls include ongoing
reviews of loans made to monitor documentation and the existence and valuations
of collateral. In addition, management of the Bank has established a review
process with the objective of identifying, evaluating, and initiating necessary
corrective action for marginal loans. The goal of the loan review process is to
address classified and non-performing loans as early as possible.
Classification of Assets
Generally, interest on loans accrues and is credited to income based upon
the principal balance outstanding. It is management's policy to discontinue the
accrual of interest income and classify a loan on nonaccrual status when in the
opinion of management, principal or interest is not likely to be paid in
64
<PAGE> 73
accordance with the terms of the obligation or when principal or interest is
past due 90 days or more unless, in the determination of management, the
principal and interest on the loan are well collateralized and in the process of
collection, Consumer installment loans are generally charged-off after 90 days
of delinquency unless adequately collateralized and in the process of
collection. Loans are not returned to accrual status until principal and
interest payments are brought current and future payments appear reasonably
certain. Interest accrued and unpaid at the time a loan is placed on nonaccrual
status is charged against interest income.
Real estate acquired by First Macon Bank & Trust Company, as a result of
foreclosure or by deed in lieu of foreclosure is classified as other real estate
owned ("OREO"). OREO properties are recorded at the lower of cost or fair value
less estimated selling costs, and the estimated loss, if any, is charged to the
allowance for credit losses at the time it is transferred to OREO. Further
write-downs in OREO are recorded at the time management believes additional
deterioration in value has occurred and are charged to nonintrusion expense.
First Macon Bank & Trust Company has adopted Statements of Financial
Accounting Standards No. 114 and 118. These Statements address the accounting by
creditors for impairment of certain loans and generally require First Macon Bank
& Trust Company to identify loans for which full repayment of principal and
interest will probably not be received, as impaired loans. The Statements
require that impaired loans be valued at the present value of the value of
expected future cash flows, discounted at the loan's effective interest rate, or
at the observable market price of the loan, or the fair value of the underlying
collateral if the loan is collateral dependent. The total recorded investment in
impaired loans as of December 31, 1997 and 1996 was $535,000 and $425,000,
respectively. None of these loans had related allowances for loan losses at
December 31, 1997 and 1996. The average recorded investment in impaired loans
for the year ended December 31, 1997 and 1996 was $514,000 and $187,000,
respectively. Interest income on impaired loans of $35,000 and $10,000 was
recognized for cash payments received for the years ended December 31, 1997 and
1996, respectively.
As of December 31, 1997 and 1996, loans on nonaccrual status and other real
estate owned, the ratio of such loans and real estate owned to total assets, and
certain other related information were as follows:
<TABLE>
<CAPTION>
1997 1996
------------------- -------------------
% OF TOTAL % OF TOTAL
AMOUNT LOANS AMOUNT LOANS
------ ---------- ------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Loans on non-accrual status:
Real Estate mortgage........................... $102 0.08% $ 0 0.00%
Commercial..................................... 384 0.30 392 0.36
Consumer and other............................. 49 0.03 33 0.03
---- ------ ------ ------
Total loans on non-accrual status...... 535 0.42 425 0.40
Accruing loans over 90 days delinquent:
Real Estate mortgage........................... 245 0.19 48 0.04
Consumer....................................... 62 0.04 52 0.04
---- ------ ------ ------
Total non-performing loans............. $842 0.67% $ 525 0.49%
==== ====== ====== ======
Other real estate owned.......................... $ 32 $ 56
==== ======
Total non-performing assets............ $874 $ 581
==== ======
Loans past-due:
30-59 days delinquent.......................... $717 0.57% $ 951 0.88%
60-89 days delinquent.......................... 180 0.14 84 0.08
---- ------ ------ ------
Total loans past-due 30 to 89 days..... $897 0.71% $1,035 0.96%
==== ====== ====== ======
</TABLE>
65
<PAGE> 74
<TABLE>
<CAPTION>
1997 1996
------------------- -------------------
% OF TOTAL % OF TOTAL
AMOUNT LOANS AMOUNT LOANS
------ ---------- ------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
As a percentage of total assets:
Total non-performing loans..................... 0.45% 0.34%
====== ======
Total non-performing assets.................... 0.47% 0.38%
====== ======
Allowance for credit losses as a percentage of:
Total loans.................................... 1.30% 1.53%
====== ======
Non-performing loans........................... 195.00% 314.00%
====== ======
</TABLE>
As of December 31, 1997 and 1996, there were no loans considered to be
troubled debt restructurings.
Allowance for Credit Losses
In originating loans, First Macon Bank & Trust Company recognizes that
credit losses will be experienced and that the risk of loss will vary with,
among other things, the type of loan being made, the credit worthiness of the
borrower over the term of the loan and, in the case of a collateralized loan,
the quality of the collateral for the loan, as well as general economic
conditions. As a matter of policy, First Macon Bank & Trust Company maintains an
allowance for credit losses. The amount provided for credit losses during any
period is based on an evaluation by management of the amount needed to maintain
the allowance at a level sufficient to cover anticipated losses and the inherent
risk of losses in the loan portfolio. In determining the amount of the
allowance, management considers the dollar amount of loans outstanding, its
assessment of known or potential problem loans, current economic conditions, the
risk characteristics of the various classifications of loans, credit record of
its borrowers, the fair market value of underlying collateral, and other
factors. Specific allowances are provided for individual loans when ultimate
collection is considered questionable by management after reviewing the current
status of loans which are contractually past due and considering the fair value
of the underlying collateral for each loan.
As of December 31, 1997 and 1996, the allocation of the allowance for
credit losses was as follows:
<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
% OF % OF
LOANS LOANS
TO TO
TOTAL TOTAL
AMOUNT LOANS AMOUNT LOANS
------ ------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Real Estate:
Construction and land development................. $ 83 5.04% $ 93 5.63%
Residential....................................... 41 2.48 46 2.79
Business and other................................ 41 2.48 46 2.79
Commercial.......................................... 1,155 70.00 1,165 70.61
Consumer and other.................................. 330 20.00 300 18.18
------ ------ ------ ------
Total allowance for credit losses......... $1,650 100.00% $1,650 100.00%
====== ====== ====== ======
</TABLE>
During the year ended December 31, 1997, the provision for credit losses
was $178,000, compared to $376,000 during the year ended December 31, 1996, or
an decrease of $198,000.
The Bank continued to provide for loan losses throughout 1997. Total
charged-off loans, net of recoveries, were $178,000 for 1997 and $109,000 for
1996.
66
<PAGE> 75
During the years ended December 31, 1997 and 1996, the activity in the
First Macon Bank and Trust Company allowance for credit losses was as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Allowance at beginning of period............................ $ 1,650 $ 1,383
-------- --------
Loan charged-off:
Real Estate mortgage...................................... 13 46
Commercial................................................ 99 41
Consumer and other........................................ 102 53
-------- --------
Total loans charged-off........................... 214 140
-------- --------
Recoveries:
Real Estate mortgage...................................... 0 0
Commercial................................................ 11 12
Consumer and other........................................ 25 19
-------- --------
Total recoveries on loans charged-off............. 36 31
-------- --------
Net loans charged-off..................................... 178 109
-------- --------
Provision for credit losses charged to expense.............. 178 376
-------- --------
Allowance at end of period.................................. $ 1,650 $ 1,650
======== ========
Net charge-offs as a percentage of average loans
outstanding............................................... 0.15% 0.40%
======== ========
Allowance for credit losses as a percentage of period-end
total loans receivable.................................... 1.30% 1.53%
======== ========
Allowance for credit losses as a percentage of period-end
non-performing loans...................................... 195.96% 314.29%
======== ========
Average loans outstanding................................. $119,558 $ 93,090
======== ========
Period-end total loans receivable......................... $126,556 $107,493
======== ========
</TABLE>
Investment Securities
The total investment portfolio increased to $28.2 million as of December
31, 1997, from $26.6 million as of December 31, 1996, or an increase of $1.6
million or 6.02%. This increase was primarily from the increase in deposits
during 1996.
The following table set forth the carrying balances of First Macon Bank and
Trust Company investment portfolio as of December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Securities available-for-sale:
U.S. government and agency securities..................... $ 4,664 $ 5,275
State and municipal securities............................ 4,055 2,894
Mortgage-backed securities................................ 10,407 5,805
------- -------
Total securities available-for-sale............... $19,126 $13,974
======= =======
Securities held-to-maturity:
U.S. government and agency securities..................... 959 1,457
State, county, and municipal securities................... 8,045 5,942
Mortgage-backed securities................................ 8,488 7,209
------- -------
Total held-to-maturity............................ $17,492 $14,608
======= =======
Total investment securities....................... $36,618 $28,582
======= =======
</TABLE>
67
<PAGE> 76
<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Federal funds sold (amount included with "cash and cash
equivalents" in the other schedules included in "Selected
Financial Data").......................................... $ 5,695 $ 5,645
======= =======
Total investment portfolio........................ $42,313 $34,227
======= =======
</TABLE>
First Macon Bank & Trust Company has adopted Statement of Financial
Accounting Standards No. 115 ("SFAS 115"), which requires companies to classify
investment securities, including mortgage-backed securities as either
held-to-maturity, available-for-sale, or trading securities. Securities
classified as held-to-maturity are carried at amortized cost. Securities
classified as available-for-sale are reported at fair value, with unrealized
gains and losses net of tax effect, reported as a separate component of
stockholders' equity. Securities classified as trading securities are recorded
at fair value, with unrealized gains and losses included in earnings.
As of December 31, 1997, the maturity distribution and certain other
information pertaining to investment securities were as follows:
<TABLE>
<CAPTION>
AMORTIZED
COST FAIR VALUE YIELD
--------- ---------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Securities available-for-sale:
U.S. government and agency securities:
Due within one year.................................... $ 1,924 $ 1,918 5.71%
Due one to five years.................................. 994 995 5.79
Due five to ten years.................................. 1,725 1,750 6.67
------- ------- ----
$ 4,643 $ 4,663 5.82%
======= ======= ====
State and municipal securities(1):
Due within one year.................................... $ 612 $ 615 6.29%
Due one to five years.................................. 1,092 1,127 6.15
Due five to ten years.................................. 799 826 5.27
Due after ten years.................................... 1,468 1,488 6.74
------- ------- ----
$ 3,971 $ 4,056 6.21%
======= ======= ====
Mortgage-backed securities
Due within one year.................................... $ 493 $ 492 5.34%
Due one to five years.................................. 1,699 1,720 6.85
Due five to ten years.................................. 1,385 1,370 7.34
Due after ten years.................................... 6,770 6,825 6.49
------- ------- ----
$10,347 $10,407 6.61%
======= ======= ====
Total securities available-for-sale:
Due within one year.................................... $ 3,029 $ 3,025 5.36%
Due one to five years.................................. 3,785 3,842 6.37
Due five to ten years.................................. 3,909 3,946 6.62
Due after ten years.................................... 8,238 8,313 6.53
------- ------- ----
$18,961 $19,126 6.33%
======= ======= ====
Securities held-to-maturity:
U.S. government and agency securities:
Due within one year.................................... $ 296 $ 298 6.85%
Due five to ten years.................................. 354 357 6.39
Due after ten years.................................... 309 311 7.53
------- ------- ----
$ 959 $ 966 6.74%
======= ======= ====
</TABLE>
68
<PAGE> 77
<TABLE>
<CAPTION>
AMORTIZED
COST FAIR VALUE YIELD
--------- ---------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
State and municipal securities(1):
Due one to five years..................................... $ 1,534 $ 1,545 4.32%
Due five to ten years..................................... 3,455 3,601 5.43
Due after ten years....................................... 3,056 3,194 5.84
------- ------- ----
$ 8,045 $ 8,340 5.37%
======= ======= ====
Mortgage-backed securities:
Due within one year.......................................
Due one to five years..................................... $ 955 $ 946 6.14%
Due five to ten years..................................... 2,853 2,852 6.39
Due after ten years....................................... 4,679 4,716 6.79
------- ------- ----
$ 8,487 $ 8,514 6.58%
======= ======= ====
Total securities held-to-maturity:
Due within one year....................................... $ 296 $ 298 6.85%
Due one to five years..................................... 2,489 2,491 5.15
Due five to ten years..................................... 6,662 6,810 5.89
Due after ten years....................................... 8,044 8,221 6.44
------- ------- ----
$17,491 $17,820 6.34%
======= ======= ====
</TABLE>
- ---------------
(1) Yields on state, county and municipal obligations are not computed on a tax
equivalent basis.
First Macon Bank & Trust Company invests in mortgage-backed securities that
are guaranteed as to principal and interest by the Government National Mortgage
Association ("GNMA"), the Federal Home Loan Mortgage Corporation ("FHLMC"), or
the Federal National Mortgage Association ("FNMA"). Although mortgage-backed
securities generally have a lower yield than loans, mortgage-backed securities
increase the quality of First Macon Bank & Trust Company's assets by virtue of
the guarantees that back them, are more liquid than individual mortgage loans
and may be used to collateralize borrowings or other obligations of First Macon
Bank & Trust Company. Due to repayment and prepayments of the underlying loans,
the actual maturities of mortgage-backed securities are substantially less than
the scheduled maturities. First Macon Bank & Trust Company's portfolio of
mortgage-backed securities was purchased with an anticipated average life of
approximately three years. Changes in interest and prepayment rates may also
affect the average life, yield to maturity, and related market value of First
Macon Bank & Trust Company's mortgage-backed securities. Changes in the market
values of First Macon Bank & Trust Company's mortgage-backed securities may
result in volatility in capital based on how First Macon Bank & Trust Company
classifies the securities.
69
<PAGE> 78
Deposit Activities
Deposits are the major source of First Macon Bank & Trust Company's funds
for lending and other investment purposes. Deposits are attracted principally
from within First Macon Bank & Trust Company's primary market area through the
offering of a broad variety of deposit instruments including checking accounts,
money market accounts, regular savings accounts, term certificate accounts
(including "jumbo" certificates in denominations of $100,000 or more), and
retirement savings plans. As of December 31, 1997 and 1996, the distribution by
type of First Macon Bank & Trust Company's deposit accounts was as follows:
<TABLE>
<CAPTION>
1997 1996
------------------- -------------------
% OF % OF
AMOUNT DEPOSITS AMOUNT DEPOSITS
-------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Demand deposits................................ $ 24,880 14.72% $ 23,311 16.82%
NOW deposits................................... 19,784 11.70 18,647 13.45
Money market deposits.......................... 30,551 18.07 19,777 14.27
Savings accounts............................... 3,554 2.10 5,358 3.87
Time deposits under $100,000................... 66,438 39.30 49,347 35.60
Time deposits $100,000 and over................ 23,848 14.11 22,160 15.99
-------- ------ -------- ------
Total deposits....................... $169,055 100.00% $138,600 100.00%
======== ====== ======== ======
</TABLE>
Time deposits included individual retirement accounts ("IRAs") totaling
$6.6 million and $5.5 million at December 31, 1997 and 1996, all of which are in
the form of certificates of deposit.
First Macon Bank & Trust Company's deposits increased to $169.1 million as
of December 31, 1997, from $138.6 million as of December 31, 1996, or an
increase of $30.5 million or 32.3%. This increase was primarily attributable to
the Bank's pricing of deposits at competitive rates, and the opening of several
branches to attract new customers in the primary market area.
Maturity terms, service fees, and withdrawal penalties are established by
the Bank on a periodic basis. The determination of rates and terms is predicated
on funds acquisition and liquidity requirements, rates paid by competitors,
growth goals, and federal regulations.
FDIC regulations limit the ability of certain insured depository
institutions to accept, renew, or rollover deposits of offering rates of
interest which are significantly higher than the prevailing rates of interest on
deposits offered by other insured depository institutions having the same type
of charter in such depository institutions' normal market area. Under these
regulations: "well capitalized" depository institutions may accept, renew, or
rollover deposits at such rates without restriction; "adequately capitalized"
depository institutions may accept, renew or rollover deposits at such rates
with a waiver from the FDIC (subject to certain restrictions on payments of
rates); and, "undercapitalized" depository institutions may not accept, renew or
rollover deposits at such rates. As of December 31, 1997, the Bank met the
definition of a "well capitalized" depository institution.
First Macon Bank & Trust Company does not have a concentration of deposits
from any one source, the loss of which would have a material adverse effect on
the Bank. Management believes that substantially all of First Macon Bank & Trust
Company's depositors are residents in its primary market area. First Macon Bank
& Trust Company, currently does accept brokered deposits.
Time deposits of $100,000 and over, public fund deposits, and other large
deposit accounts tend to be short-term in nature and more sensitive to changes
in interest rates than other types of deposits and, therefore, may be a less
stable source of funds. In the event that exiting short-term deposits are not
renewed, the resulting loss of the deposited funds could adversely affect First
Macon Bank & Trust Company's liquidity. In a rising interest rate market, such
short-term deposits may prove to be a costly source of funds because their
short-term nature facilities renewal at increasingly higher interest rates,
which may adversely affect First Macon Bank & Trust Company's earnings. However,
the converse is true in a falling interest-rate market where such short-term
deposits are more favorable to First Macon Bank & Trust Company.
70
<PAGE> 79
As of December 31, 1997 and 1996, time deposits of $100,000 and over mature
as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Due in three months or less................................. $ 6,934 $ 4,775
Due from three to one year.................................. 14,749 14,290
Due over one year........................................... 2,165 3,095
------- -------
Total time deposits $100,000 and over............. $23,848 $22,160
======= =======
</TABLE>
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements and related data concerning First Macon Bank &
Trust Company have been prepared in accordance with generally accepted
accounting principles which require 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. The principal
element of First Macon Bank & Trust Company's earnings is interest income which
may be significantly affected by the level of inflation and by government
monetary and fiscal policies adopted in response to inflationary or deflationary
pressures.
Inflation affects the reported financial condition and results of
operations of all companies. However, the majority of assets and liabilities of
financial institutions are monetary in nature and, therefore, differ greatly
from most commercial and industrial companies that have significant investments
in fixed assets or inventories. Inflation does have an important impact on the
growth of total assets and the resulting need to increase equity capital at
higher than normal rates in order to maintain an appropriate equity to assets
ratio. Inflation also is a factor which may influence interest rates, yet the
frequency and magnitude of interest rate fluctuations do not necessarily
coincide with changes in the general inflation rate. In an effort to cope with
the effects of inflation, First Macon Bank & Trust Company, attempts to monitor
its interest-rate sensitivity gap position as discussed above. In addition, a
periodic review of banking services and products is conducted to adjust pricing
in view of current costs.
FUTURE ACCOUNTING REQUIREMENTS
Statement of Financial Accounting Standards No. 125 ("SFAS 125"),
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities" as amended by SFAS 127 provides accounting and reporting
standards for transfers and servicing of financial assets and extinguishments of
liabilities based on consistent application of a financial components approach
that focuses on control. This statement provides standards for distinguishing
transfers of financial assets from transfers that are secured borrowing. The
accounting and disclosure requirements of SFAS 127 became effective for First
Macon Bank & Trust Company beginning January 1, 1998. Management has evaluated
SFAS 127, and believes that SFAS 127 does not have a material impact on First
Macon Bank & Trust Company's financial statements for the year ending December
31, 1998 nor the quarter ended March 31, 1998.
In addition to the above statement, SFAS 130, "Reporting Comprehensive
Income" establishes standards for reporting and reflecting comprehensive income
and its components in a full set of general purpose financial statements. The
term "comprehensive income" is used in SFAS 130 to describe the total of all
components of comprehensive income including net income. "Other comprehensive
income" refers to revenues, expenses, gains and losses that are included in
comprehensive income but excluded from earnings under current accounting
standards. Currently, "other comprehensive income" for the First Macon Bank &
Trust Company consists of items previously recorded directly in equity under
SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities".
SFAS 130 is effective for financial statements beginning after December 15,
1997. Management has evaluated SFAS 130, and believes that SFAS 130 will not
have a material impact on First Macon Bank & Trust Company's financial
statements for the year ending December 31, 1998 nor the quarter ended March 31,
1998.
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<PAGE> 80
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
Results of Operations for the Three Months Ended March 31, 1998, compared
to the Three Months Ended March 31, 1997.
First Macon Bank & Trust Company's net income for the three months ended
March 31, 1998 was $673,000, an increase of 6.66% from net income of $631,000
reported in the first three months of 1997. Net income per share was also up
6.36% to $2.51 for the three months ended March 31, 1998 from $2.36 reported in
the three months ended March 31, 1997. Such net income per share was calculated
based on the weighted average common shares outstanding during the period
amounting to 1,074,000 shares and 1,071,000 shares as of March 31, 1998 and
1997, respectively. The principal reasons for this improvement were the growth
of assets and liabilities (due to increased market penetration).
NET INTEREST INCOME
Net interest income totaled $1,976,000 for the first three months of 1998,
or 8.63% higher than $1,819,000 in the first three months of 1997. The increase
in net interest income was due to: an increase of $18.1 million or 15.83% in
loans; an increase of $7.5 million or 26.99% in securities; an increase of $2.1
million or 30.2% in Federal funds sold; and, an increase of $30.4 million or
20.70% in deposits. Earning assets as of the end of the first quarter of 1998
were $178.7 million, up 18.36% or $27.7 million from the $151.0 million reported
at March 31, 1997. Net loans at the end of the first quarter of 1998 were $132.8
million reflecting the $18.1 million increase from March 30, 1997.
As noted previously, total deposits at March 31, 1998, were $177.3 million,
up $30.4 million or 20.70% from the $146.9 million reported at March 31, 1997.
The increase resulted from: a small increase of $1.1 million or 4.15% in
non-interest bearing deposits; and, an increase of $29.3 million in
interest-bearing deposits or 24.34%. The increase interest bearing deposits was
due to attractive and competitively priced deposit products and an expanded
market base. The positive effect of the increase in deposits in funding the
growth of earning assets was furthered by a $690,000 increase in stockholders'
equity.
The net interest income for the first three months of 1998 was $1,976,000
compared to $1,819,000 in the first three months of 1997. This increase was due
to the impact of overall Bank growth in all areas of operations including
earning assets and interest-bearing deposits.
PROVISIONS FOR LOAN LOSSES
The provision for loan losses was $90,000 during the first three months of
1998, compared to $111,000 for the first three months of 1997.
NONINTEREST INCOME
Noninterest income for the first three months of 1998 totaled $402,000,
which was 17.88% more than the $341,000 reported in the same period of the prior
year. The change was primarily due to First Macon Bank & Trust Company service
charges being charged to a larger volume of customers in 1998.
NONINTEREST EXPENSE
Noninterest expenses totaled $1,291,000 for the first three months of 1998,
up 13.64% or $155,000 from the $1,136,000 reported for the first three months of
1997. The major factor in the change was an increase in personnel expense due to
the new branches.
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<PAGE> 81
PROVISION FOR INCOME TAXES
The income tax provision for the first three months of 1998 totaled
$324,000 compared with $282,000 for the same period in 1997. The $90,000
increase from the prior year was attributable to an increase in First Macon Bank
& Trust Company's net income.
STATEMENT OF CONDITION
Total assets as of March 31, 1998 were $195.2 million, up 20.72% from
$161.7 million on March 31, 1997. The growth in total assets paralleled the
growth in deposits discussed above. The increase in loans was due to increased
business development and favorable economic conditions. The increase in
investment securities and Federal funds sold was also due to the growth of
deposits discussed above.
The continuing profitability of First Macon Bank & Trust Company resulted
in an increase of stockholders' equity to $15.3 million as of March 31, 1998, or
20.47% more than the $12.7 million at March 31, 1997.
ASSET QUALITY
The total non-performing assets at March 31, 1998 and 1997, were $465,000
and $597,000, respectively.
PROVISION FOR LOAN LOSSES
The provision for loan losses for the three months ended March 31, 1998 was
$90,000, as compared to $111,000 for the first three months of 1997. The
allowance for loan losses was $1,700,000 on March 31, 1998 which equaled 1.26%
of outstanding loans. This compares with $1,749,000 or 1.50% of outstanding
loans at March 31, 1997, and $1,650,000 or 1.30% of outstanding loans at
December 31, 1997. The low level of loan loss reserves (relative to outstanding
loans) is attributable to the quality of the loan portfolio.
The quality of the loan portfolio remains sound, and the reserve for loan
losses is considered to be adequate to cover current credit related
uncertainties. Established credit review procedures ensure that close attention
is given to commercial real estate loans as well as other credit exposures which
may be adversely affected by a significant increase in interest rates and/or
downturns of segments of the local economy.
73
<PAGE> 82
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 a wholly owned commercial
banking subsidiary, Colonial Bank, in the states of Alabama, Georgia, Florida
and Tennessee and Nevada. Colonial Bank conducts a full service commercial
banking business through 134 branches in Alabama, five branches in Tennessee, 14
branches in Georgia, and 75 branches in Florida and three branches in Nevada.
BancGroup has also entered into agreements to acquire four additional banks
(excluding First Macon). Colonial Mortgage Company, a subsidiary of Colonial
Bank, is a mortgage banking company which services approximately $13.8 billion
in residential loans and which originates residential mortgages in 34 states
through four divisional offices. The amounts and numbers set forth above were
calculated as of March 31, 1998. At March 31, 1998, BancGroup had consolidated
total assets of $8.0 billion and consolidated stockholders' equity of $571.6
million. Since March 31, 1998, BancGroup has acquired one banking institution
with aggregate assets of $131.3 million and aggregate stockholders' equity of
$10 million. This acquisition is included in the pro forma statements included
herein. See "Business of BancGroup." BancGroup's commercial bank 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
States of Alabama and Florida, BancGroup's growth in loans over the past several
years has been concentrated in commercial and residential real estate loans.
RECENTLY COMPLETED AND OTHER PROPOSED BUSINESS COMBINATIONS
Since March 31, 1998, BancGroup has acquired one banking institution, with
aggregate assets and stockholders' equity acquired of $131.3 million and $10.6
million.
BancGroup acquired Commercial Bank of Nevada ("Commercial") on June 15,
1998. Commercial was a Nevada bank located in Las Vegas, Nevada. Commercial
merged with BancGroup's bank subsidiary, Colonial Bank. BancGroup issued 842,157
shares of its Common Stock at the time of such merger. At March 31, 1998,
Commercial had assets of $131.3 million, deposits of $119.7 million and
stockholders' equity of $10.6 million.
On March 26, 1998, BancGroup entered into a definitive agreement with CNB
Holding Company ("CNB"). CNB is located in Daytona Beach, Florida. CNB will
merge with BancGroup. BancGroup expects to issue a maximum of 972,291 shares of
its Common Stock to the shareholders of CNB. This transaction is subject to,
among other things, approval by the shareholders of CNB and by the appropriate
regulatory authorities and is expected to be accounted for as a pooling of
interests. At March 31, 1998, CNB had assets of $88.0 million, deposits of $79.4
million and stockholders' equity of $8.5 million.
On May 5, 1998, BancGroup entered into a definitive agreement with
FirstBank ("FirstBank"). FirstBank is located in Dallas, Texas. CBG Acquisition
Corp., a subsidiary of BancGroup, will be merged into FirstBank, and FirstBank
will become a banking subsidiary, of BancGroup. BancGroup expects to issue
approximately 1,200,000 shares of its Common Stock to the shareholders of
FirstBank. This transaction is subject to, among other things, approval by the
shareholders of FirstBank and by the appropriate regulatory authorities and is
expected to be accounted for as a pooling of interests. At March 31, 1998,
FirstBank had assets of $162.9 million, deposits of $138.1 million and
stockholders' equity of $8.8 million.
On May 21, 1998, BancGroup entered into a definitive agreement with Prime
Bank of Central Florida ("Prime Bank"). Prime Bank is located in Titusville,
Florida. Prime Bank will merge with Colonial Bank. BancGroup expects to issue a
maximum of 586,560 shares of BancGroup Common Stock to the shareholders of Prime
Bank. This transaction is subject to, among other things, approval by the
shareholders of Prime Bank and by the appropriate regulatory authorities and is
expected to be accounted for as a pooling of interests. At March 31, 1998, Prime
Bank had assets of $70.5 million, deposits of $63.6 million and stockholders'
equity of $6.6 million.
74
<PAGE> 83
On June 16, 1998, BancGroup entered into a definitive agreement with
InterWest Bancorp ("InterWest"). InterWest is located in Reno Nevada. BancGroup
expects to issue a maximum of approximately 735,000 shares of BancGroup Common
Stock to the shareholders of InterWest. This transaction is subject to, among
other things, approval by the shareholders of InterWest and by the appropriate
regulatory authorities and is expected to be accounted for as a pooling of
interests. At March 31, 1998, InterWest had assets of $116.2 million, deposits
of $102.3 million and stockholders' equity of $7.3 million.
See "The Colonial BancGroup, Inc. and Subsidiaries -- Condensed Pro Forma
Statements of Condition (Unaudited)."
YEAR 2000 COMPLIANCE
Most computer software programs and processing systems, including 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. Currently BancGroup is
in the process of implementing its plans to bring all major computer systems
into Year 2000 compliant status by December 31, 1998, allowing the full year
1999 for testing of any systems changes. The major computer systems involved
are:
- Colonial Bank's mainframe based systems: These systems are provided by
third-party vendors of national stature. Upgrades to these systems are in
progress which will bring the systems into Year 2000 compliant status and
provide enhancements to current capabilities. The costs associated with
these upgrades are part of BancGroup's ongoing operating costs.
- Colonial Mortgage Company's (CMC) servicing and production systems: CMC's
systems are primarily in-house systems and are currently being rewritten
to Year 2000 compliant status. The cost of the rewrites is estimated to
be $1.0 million and is incremental to the Company's ongoing operating
costs. In addition, CMC's computer hardware is being upgraded to Year
2000 compliant status. This upgrade will also provide additional capacity
for the servicing systems as well as an enhanced capability for the
servicing systems and an enhanced capability for production. The
additional annual costs of the mainframe upgrade (approximately $240,000)
are expected to be absorbed through growth in the servicing portfolio and
through increased production. CMC expects to maintain an average
servicing cost per loan below $48.00 in 1998 and future years.
- Branch automation operating systems: Colonial Bank's branch automation
operating systems are being converted to Windows NT from OS/2. This
conversion along with establishment of any Internet and increased
capacity of communication lines is the most cost effective method of
bringing the operating system to Year 2000 compliant status while
allowing for more efficient flow of information to and from the branches
and providing the highest assurance of continuing vendor support for the
Company's branch automation solution. The incremental operating cost for
these upgrades (approximately $400,000 annually) is expected to be
absorbed through operational efficiencies and increased revenue. The
Company will incur a one-time pretax charge of approximately $2.0 million
to write off the remaining book value of the current branch automation
equipment that is not Windows NT compatible.
BancGroup expects to incur additional third-party costs totaling
approximately $300,000 related to assessing the status of the Company's systems
and defining its strategy to bring all systems in to Year 2000
75
<PAGE> 84
compliance. These costs have been and will continue to be expensed as incurred
and are not significant to BancGroup's on-going operating costs. The costs to
bring other miscellaneous systems into Year 2000 compliance are not expected to
be material.
This discussion 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 SHAREHOLDERS
As of February 27, 1998, BancGroup had issued and outstanding 48,092,093
shares of BancGroup Common Stock with 8,476 shareholders of record. Each such
share is entitled to one vote. In addition, as of that date, 2,072,913 shares of
BancGroup Common Stock were subject to issue upon exercise of options pursuant
to BancGroup's stock option plans and up to 349,500 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 OF CLASS
NAME AND ADDRESS COMMON STOCK OUTSTANDING(1)
- ---------------- ------------ -------------------
<S> <C> <C>
Robert E. Lowder(2)......................................... 2,903,654 6.01%
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 who owned,
as of February 27, 1998, 2,200,372 and 2,146,488 shares of BancGroup Common
Stock, respectively. Robert E. Lowder disclaims any beneficial ownership
interest in the shares owned by his brothers and in shares
owned by his mother.
(3) Includes 191,020 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 February 27,
1998.
<TABLE>
<CAPTION>
SHARES OF BANCGROUP BENEFICIALLY OWNED
---------------------------------------
PERCENTAGE OF CLASS
DIRECTORS NAME COMMON STOCK OUTSTANDING
- -------------- ------------ -------------------
<S> <C> <C>
Lewis Beville............................................ 1,816 *
Young J. Boozer.......................................... 16,226(1) *
William Britton.......................................... 15,616 *
Jerry J. Chesser......................................... 149,196 *
Augustus K. Clements, III................................ 18,708 *
Robert S. Craft.......................................... 17,458 *
Patrick F. Dye........................................... 30,960(2) *
James L. Hewitt.......................................... 440,692(3) *
</TABLE>
76
<PAGE> 85
<TABLE>
<CAPTION>
SHARES OF BANCGROUP BENEFICIALLY OWNED
---------------------------------------
PERCENTAGE OF CLASS
DIRECTORS NAME COMMON STOCK OUTSTANDING
- -------------- ------------ -------------------
<S> <C> <C>
Clinton O. Holdbrooks.................................... 276,400(4) *
D. B. Jones.............................................. 21,989(5) *
Harold D. King........................................... 148,581 *
Robert E. Lowder......................................... 2,903,654(6) 6.01%
John Ed Mathison......................................... 29,454 *
Milton E. McGregor....................................... 0 *
John C. H. Miller, Jr.................................... 38,352(7) *
Joe D. Mussafer.......................................... 20,679 *
William E. Powell, III................................... 14,353 *
J. Donald Prewitt........................................ 222,924(8) *
Jack H. Rainer........................................... 2,690 *
Jimmy Rane............................................... 1,108(9) *
Frances E. Roper......................................... 366,814 *
Simuel Sippial........................................... 2,882 *
Ed V. Welch.............................................. 30,949 *
CERTAIN EXECUTIVE OFFICERS WHO ARE NOT ALSO DIRECTORS
Young J. Boozer, III..................................... 71,665(1)(10) *
Michelle Condon.......................................... 19,098(10) *
P. L. ("Mac") McLeod, Jr................................. 62,343(10) *
W. Flake Oakley, IV...................................... 42,316(10) *
All Executive Officers & Directors as a Group............ 4,965,923 10.24%
</TABLE>
- ---------------
* Represents less than 1%.
(1) Includes 1,000 shares of Common Stock out of 2,000 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 25,000 shares of Common Stock subject to options exercisable under
BancGroup's stock option plans.
(3) Includes 62,682 shares of Common Stock subject to stock options.
(4) Includes 24,524 shares of Common Stock subject to options under BancGroup's
stock option plans and 64,498 shares held by Mr. Holdbrooks as trustee.
(5) Mr. Jones holds power to vote 20,733 of these shares as trustee.
(6) Includes 191,020 shares of Common Stock subject to options under
BancGroup's stock option plans.
(7) Includes 20,000 shares of Common Stock subject to options under BancGroup's
stock option plans.
(8) Includes 63,604 shares of Common Stock subject to stock options.
(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 25,000, 9,245, 28,000 and 18,000
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.
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.
77
<PAGE> 86
BUSINESS OF FIRST MACON
GENERAL
First Macon is a commercial bank organized under the laws of Georgia with
its principal executive offices located at 501 Walnut Street, Macon, Georgia. In
addition to the branch located at its principal executive offices, First Macon
maintains four other branches located in metropolitan Macon, Georgia. As of
March 31, 1998, First Macon had total assets of $195.2 million and stockholders'
equity of $15.3 million. First Macon's telephone number at the main office is
(912) 746-7000.
First Macon offers a full range of traditional commercial banking services
including demand, savings and time deposits, consumer, commercial and real
estate loans, safe deposit boxes, drive-in banking facilities and access to
24-hour teller machines through various networks. First Macon owns all of its
operating facilities with the exception of a ground lease on one of its branch
banking facilities.
MARKET AREA
First Macon services exclusively the Macon, Georgia market area, which is
the county seat for Bibb County, Georgia. The 1990 census reported a total
population in Bibb County, Georgia of approximately 150,000. There are
approximately 50,000 households in Bibb County, Georgia with an average
household income of approximately $44,000.
PROPERTIES
In addition to the banking services provided at First Macon's main office
location, First Macon maintains four other branches located in metropolitan
Macon, Georgia. The main office building contains approximately 10,800 square
feet and includes a full service lobby, administrative offices and three
drive-in lanes. Each of the other four branch offices includes a full service
lobby, three to four drive-in lanes and range in size from 2,350 square feet to
3,250 square feet. All of such facilities are owned, except one branch bank is
operated on a leased site under a lease which expires in July, 2001 with two
ten-year renewal options.
In addition to such branch banking offices, First Macon owns a 65,000
square foot building adjacent to its main office in which First Macon maintains
its personnel, training, credit and operations departments. Approximately 35,000
square feet of space in this facility has been leased to third parties.
COMPETITION
First Macon encounters vigorous competition in its market area from a
number of sources, including bank holding companies, commercial banks and
federal savings banks, credit unions and other financial institutions and
financial intermediaries. Regional interstate banking laws and other recent
federal and state laws have resulted in increased competition from both
conventional banking institutions and other businesses offering financial
services and products. First Macon also competes for interest bearing funds with
a number of other financial intermediaries and investment alternatives including
brokerage firms, money market funds, and other financial institutions, some of
which have greater financial resources than First Macon. As of March 31, 1998,
there were approximately 51 commercial bank branches, seven savings bank
branches and 14 credit union branches competing in Macon, Georgia.
YEAR 2000 COMPLIANCE
First Macon 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 date-field recognition in and
after the year 2000. First Macon's plan complies with Federal Financial
Institutions Examination Council Year 2000 compliance guidelines as promulgated
by First Macon's principal regulatory agency. First Macon contracts with and
hires third-party vendors to provide certain computer and data processing
services related to its business operations. Some of these services are year
2000 sensitive. First Macon, in cooperation with its service providers and
vendors, has met all applicable regulatory deadlines and intends to meet the
remaining regulatory deadlines promulgated by First Macon's principal regulatory
agency.
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<PAGE> 87
PRINCIPAL HOLDERS OF COMMON STOCK
The following table sets forth certain information with respect to the
beneficial ownership of First Macon's common stock as of the date of the Record
Date for (a) each person who is known by First Macon to beneficially own the
more than five percent of the outstanding shares of First Macon common stock,
(b) each director and executive officer of First Macon and (c) all directors and
executive officers of First Macon as a group. Under the rules of the Securities
and Exchange Commission, a person is deemed to be a "beneficial" owner of
securities if, without limitation, he or she has or shares the power to vote or
direct the voting of such security or the power to dispose or direct the
disposition of such securities. The address for each of the persons named in
such table is First Macon's business address. Unless otherwise indicated, all
persons shown in the table have sole voting and investment power with regard to
the shares shown:
SHARES OF FIRST MACON BENEFICIALLY OWNED
<TABLE>
<CAPTION>
PERCENTAGE
COMMON OF CLASS
DIRECTORS NAME STOCK OUTSTANDING
- -------------- ------- -----------
<S> <C> <C>
Walter H. Bush, Jr., Director, Secretary(1)................. 66,900 6.2%
Robert E. Chanin, Director(2)............................... 21,868 2.0
Charles F. Heard, Director.................................. 21,480 2.0
Edward P. Loomis, Jr., President, Chief Executive Officer
and Director.............................................. 70,050 6.5
Bertram Maxwell, III, Director.............................. 14,002 1.3
Albert W. McKay, Jr. Director(3)............................ 29,920 2.8
Daniel L. Pike, Director(4)................................. 12,200 1.1
Barney A. Smith, Jr., Director.............................. 99,000 9.2
Jerry L. Stephens, Director................................. 104,784 9.7
John H. Taylor, Jr., Director............................... 5,000 *
All directors and executive officers as a group
(10 persons).............................................. 445,204 41%
</TABLE>
- ---------------
* Represents beneficial ownership of less than one percent of the First Macon
common stock.
(1) Includes 46,400 shares of First Macon common stock over which Mr. Bush may
share voting or dispositive power.
(2) Includes 2,448 shares of First Macon common stock over which Mr. Chanin may
share voting or dispositive power.
(3) Includes 5,000 shares of First Macon common stock over which Mr. McKay may
share voting or dispositive power.
(4) Includes 700 shares over which Mr. Pike may share voting or dispositive
power.
First Macon's authorized capital stock consists of 25,000,000 shares of
First Macon Common Stock, par value $1.00 per share, of which 1,076,604 shares
are issued and outstanding as of the Record Date.
ADJOURNMENT OF SPECIAL MEETING
Approval of the Merger Agreement by First Macon shareholders requires the
affirmative vote of at least two-thirds of the outstanding shares of First Macon
Common Stock. In the event there is an insufficient number of shares of First
Macon Common Stock present in person or by proxy at the Special Meeting to
approve the Agreement, First Macon's Board of Directors intends to adjourn the
Special Meeting to a later date to 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, 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.
79
<PAGE> 88
The effect of any such adjournment would be to permit First Macon 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 First
Macon time to solicit additional proxies in favor of the Agreement.
OTHER MATTERS
The Board of Directors of First Macon is not aware of any business to come
before the Special Meeting other than those matters described above in this
Prospectus. If, however, any other matters not now known should properly come
before the Special Meeting, the proxy holders named in the accompanying proxy
will vote such proxy on such matters as determined by a majority of the Board of
Directors of First Macon.
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 shareholders, any shareholder 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 14, 1998.
LEGAL MATTERS
Certain legal matters 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 February
27, 1998 beneficially owned 38,352 shares of BancGroup 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 First
Macon by the law firm of Arnall, Golden & Gregory, L.L.P. of which Walter H.
Bush, Jr., a director of First Macon, is a partner. Mr. Bush beneficially owns
66,900 shares of First Macon Common Stock as described under "Business of First
Macon -- Principal Holders of Common Stock."
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 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.
First Macon's financial statements as of December 31, 1997 and 1996, and
for each of the two years ended December 31, 1997, included in this Prospectus
have been audited by Mauldin & Jenkins, LLC, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports.
PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE
ACCOMPANYING ENVELOPE AS PROMPTLY AS POSSIBLE. YOU MAY REVOKE THE PROXY BY
GIVING WRITTEN NOTICE OF REVOCATION TO THE SECRETARY OF FIRST MACON PRIOR TO THE
SPECIAL MEETING, BY EXECUTING A LATER DATED PROXY AND DELIVERING IT TO THE
SECRETARY OF FIRST MACON PRIOR TO THE SPECIAL MEETING OR BY ATTENDING THE
SPECIAL MEETING VOTING IN PERSON.
80
<PAGE> 89
FIRST MACON BANK & TRUST COMPANY
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT AUDITOR'S REPORT................................ F-2
FINANCIAL STATEMENTS
Balance Sheets as of December 31, 1997 and 1996........... F-3
Statements of Income for the years ended December 31, 1997
and 1996............................................... F-4
Statements of Stockholders' Equity for the years ended
December 31, 1997 and 1996............................. F-5
Statements of Cash Flows for the years ended December 31,
1997 and 1996.......................................... F-6
Notes to Financial Statements for the years ended December
31, 1997 and 1996...................................... F-7
UNAUDITED INTERIM FINANCIAL STATEMENTS
Balance Sheet as of March 31, 1998........................ F-18
Statements of Income for the three months ended March 31,
1998 and 1997.......................................... F-19
Statement of Changes in Stockholders' Equity for the three
months ended March 31, 1998............................ F-20
Statements of Cash Flows for the three months ended March
31, 1998 and 1997...................................... F-21
Notes to Unaudited Financial Statements for the three
months ended March 31, 1998 and 1997................... F-22
</TABLE>
F-1
<PAGE> 90
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
First Macon Bank & Trust Company
Macon, Georgia
We have audited the accompanying balance sheets of First Macon Bank & Trust
Company as of December 31, 1997 and 1996, and the related statements of income,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Bank'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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of First Macon Bank & Trust
Company as of December 31, 1997 and 1996, and the results of its operations and
its cash flows for the years then ended, in conformity with generally accepted
accounting principles.
/s/ Mauldin & Jenkins, LLC
MAULDIN & JENKINS, LLC
Macon, Georgia
January 14, 1998
F-2
<PAGE> 91
FIRST MACON BANK & TRUST COMPANY
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks..................................... $ 11,289,339 $ 8,868,630
Federal funds sold.......................................... 5,695,000 5,645,000
Securities available for sale............................... 19,126,350 13,973,760
Securities held for investment (estimated fair value of
$17,820,359 and $14,737,017).............................. 17,491,167 14,608,089
Loans, less allowance for loan losses $1,650,000 and
$1,650,000, respectively.................................. 124,905,871 105,843,330
Premises and equipment, net................................. 6,146,375 2,284,399
Accrued interest and other assets........................... 1,716,681 1,668,784
------------ ------------
$186,370,783 $152,891,992
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing demand................................ $ 24,879,623 $ 23,310,821
Interest-bearing demand................................... 50,335,032 38,424,484
Savings................................................... 3,554,463 5,358,161
Time, $100,000 and over................................... 23,847,958 22,159,638
Other time................................................ 66,437,576 49,346,729
------------ ------------
Total deposits.................................... 169,054,652 138,599,833
Accrued interest and other liabilities...................... 2,722,902 2,199,819
------------ ------------
Total liabilities................................. 171,777,554 140,799,652
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, par value $.50; 25,000,000 shares
authorized; 1,073,854 and 1,070,933 shares issued and
outstanding............................................ 536,927 535,467
Surplus................................................... 9,521,493 7,435,045
Retained earnings......................................... 4,432,004 4,042,128
Unrealized gains on securities available for sale, net of
taxes.................................................. 102,805 79,700
------------ ------------
Total stockholders' equity........................ 14,593,229 12,092,340
------------ ------------
$186,370,783 $152,891,992
============ ============
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE> 92
FIRST MACON BANK & TRUST COMPANY
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Interest income
Interest and fees on loans................................ $12,009,361 $ 9,452,712
Interest on taxable securities............................ 1,280,745 1,226,261
Interest on nontaxable securities......................... 543,155 481,808
Interest on deposits in banks............................. 8,884 2,610
Interest on Federal funds sold............................ 564,587 220,633
----------- -----------
14,406,732 11,384,024
----------- -----------
Interest expense on deposits................................ 6,656,961 5,017,181
----------- -----------
Net interest income.................................... 7,749,771 6,366,843
Provision for loan losses................................... 177,959 375,884
----------- -----------
Net interest income after provision for loan losses.... 7,571,812 5,990,959
----------- -----------
Other income
Service charges on deposit accounts....................... 1,300,462 1,154,183
Other service charges, commissions and fees............... 35,615 39,444
Other..................................................... 223,286 129,086
Gain on sales of securities............................... -- 16,049
----------- -----------
1,559,363 1,338,762
----------- -----------
Other expense
Salaries and employee benefits............................ 2,661,547 2,207,814
Equipment and occupancy expense........................... 723,811 723,469
Other operating expenses.................................. 1,670,173 1,405,195
----------- -----------
5,055,531 4,336,478
----------- -----------
Income before income taxes............................. 4,075,644 2,993,243
Income taxes................................................ 1,335,000 883,000
----------- -----------
Net income............................................. $ 2,740,644 $ 2,110,243
=========== ===========
Per common and common equivalent share
Net income............................................. $ 2.55 $ 1.97
=========== ===========
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE> 93
FIRST MACON BANK & TRUST COMPANY
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
UNREALIZED
GAINS
(LOSSES) ON
SECURITIES
COMMON STOCK AVAILABLE
--------------------- RETAINED FOR SALE,
SHARES PAR VALUE SURPLUS EARNINGS NET OF TAXES TOTAL
--------- --------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1995.................... 521,000 $521,000 $7,266,500 $ 2,166,626 $ 83,128 $10,037,254
Net income.............. -- -- -- 2,110,243 -- 2,110,243
Net change in unrealized
gains (losses) on
securities available
for sale, net of
taxes................ -- -- -- -- (3,428) (3,428)
Issuance of 12,500
shares of common
stock upon the
exercise of
options.............. 12,500 12,500 112,500 -- -- 125,000
2-for-1 stock split..... 533,500 -- -- -- -- --
Cash dividend paid, $.22
per share............ -- -- -- (234,741) -- (234,741)
Issuance of 3,933 shares
of common stock upon
the exercise of
options.............. 3,933 1,967 56,045 -- -- 58,012
--------- -------- ---------- ----------- -------- -----------
Balance, December 31,
1996.................... 1,070,933 535,467 7,435,045 4,042,128 79,700 12,092,340
Net income.............. -- -- -- 2,740,644 -- 2,740,644
Net change in unrealized
gains (losses) on
securities available
for sale, net of
taxes................ -- -- -- -- 23,105 23,105
Issuance of 2,921 shares
of common stock
through employee
stock purchase
plan................. 2,921 1,460 56,959 -- -- 58,419
Cash dividend paid, $.30
per share............ -- -- -- (321,279) -- (321,279)
Transfer from retained
earnings to
surplus.............. -- -- 2,029,489 (2,029,489) -- --
--------- -------- ---------- ----------- -------- -----------
Balance, December 31,
1997.................... 1,073,854 $536,927 $9,521,493 $ 4,432,004 $102,805 $14,593,229
========= ======== ========== =========== ======== ===========
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE> 94
FIRST MACON BANK & TRUST COMPANY
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................................................ $ 2,740,644 $ 2,110,243
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation........................................... 326,886 238,630
Amortization of premium and accretion of discount on
securities, net....................................... (7,837) 4,507
Gain on sale of premises and equipment................. (1,023) --
Gain on sale of securities............................. -- (16,049)
Provision for loan losses.............................. 177,959 375,884
Deferred income tax benefits........................... (41,000) (148,000)
Changes in assets and liabilities:
Increase in accrued interest receivable.............. (143,460) (123,988)
Decrease in other assets............................. 122,552 303,232
Increase in accrued interest payable................. 398,298 376,119
Increase in other liabilities........................ 124,785 20,840
------------ ------------
Net cash provided by operating activities......... 3,697,804 3,141,418
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in interest-bearing deposits................. -- 100,000
Purchases of securities available for sale................ (5,352,860) (3,250,255)
Proceeds from sales of securities available for sale...... 1,450,000 3,203,326
Purchases of securities held for investment............... (8,356,746) (2,447,208)
Proceeds from maturity of securities held for
investment............................................. 4,268,891 4,308,210
Net increase in loans..................................... (19,240,500) (29,293,964)
Purchase of premises and equipment........................ (4,203,959) (650,625)
Proceeds from sales of premises and equipment............. 16,120 --
------------ ------------
Net cash used in investing activities............. (31,419,054) (28,030,516)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits.................................. 30,454,819 30,369,461
Proceeds from issuance of common stock.................... 58,419 183,012
Dividends paid............................................ (321,279) (234,741)
------------ ------------
Net cash provided by financing activities......... 30,191,959 30,317,732
------------ ------------
Net increase in cash and cash equivalents................... 2,470,709 5,428,634
Cash and cash equivalents at beginning of year.............. 14,513,630 9,084,996
------------ ------------
Cash and cash equivalents at end of year.................... $ 16,984,339 $ 14,513,630
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest............................................... $ 6,258,663 $ 4,641,062
Income taxes........................................... 1,201,977 919,787
NONCASH TRANSACTION
Net change in unrealized (gains) losses on securities
available for sale..................................... (35,008) 5,194
</TABLE>
See Notes to Financial Statements.
F-6
<PAGE> 95
FIRST MACON BANK & TRUST COMPANY
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
First Macon Bank & Trust Company provides a full range of banking services
to individual and corporate customers in its primary market of Macon, Georgia
and the surrounding area. The Bank is subject to competition from other
financial institutions and the regulations of certain federal and state
agencies. The Bank is periodically examined by certain regulatory authorities.
BASIS OF PRESENTATION
The accounting and reporting policies of the Bank conform to generally
accepted accounting principles and general practices within the financial
services industry. In preparing the financial statements, management is required
to make estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet and revenues and expenses for
the period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash on hand, cash items in process of collection, amounts due from banks
and Federal funds sold are included in cash and cash equivalents.
The Bank maintains amounts due from banks which, at times, may exceed
Federally insured limits. The Bank has not experienced any losses in such
accounts.
SECURITIES
Securities are classified based on management's intention on the date of
purchase. Securities which management has the intent and ability to hold to
maturity are classified as held for investment and reported at amortized cost.
All other debt securities are classified as available for sale and carried at
fair value with net unrealized gains and losses included in stockholders'
equity, net of tax.
Interest and dividends on securities, including amortization of premiums
and accretion of discounts, are included in interest income. Realized gains and
losses from the sale of securities are determined using the specific
identification method.
LOANS
Loans are carried at their principal amounts outstanding less the allowance
for loan losses. Interest income on loans is credited to income based on the
principal amount outstanding.
Loan origination fees and certain direct costs of most loans are recognized
at the time the loan is recorded. Loan origination fees and costs incurred for
other loans are deferred and recognized as income over the life of the loan.
Because net origination loan fees and costs are not material, the results of
operations are not materially different than the results which would be obtained
by accounting for all loan fees and costs in accordance with generally accepted
accounting principles.
The allowance for loan losses is maintained at a level that management
believes to be adequate to absorb potential losses in the loan portfolio.
Management's determination of the adequacy of the allowance is based on an
evaluation of the portfolio, past loan loss experience, current economic
conditions, volume, growth, composition of the loan portfolio, and other risks
inherent in the portfolio. In addition, regulatory agencies, as an integral part
of their examination process periodically review the Bank's allowance for loan
losses, and may require the Bank to record additions to the allowance based on
their judgement about information available to them at the time of their
examinations.
F-7
<PAGE> 96
FIRST MACON BANK & TRUST COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The accrual of interest on impaired loans is discontinued when, in
management's opinion, the borrower may be unable to meet payments as they become
due. Interest income is subsequently recognized only to the extent cash payments
are received.
A loan is impaired when it is probable the Bank will be unable to collect
all principal and interest payments due in accordance with the terms of the loan
agreement. Individually identified impaired loans are measured based on the
present value of payments expected to be received, using the contractual loan
rate as the discount rate. Alternatively, measurement may be based on observable
market prices or, for loans that are solely dependent on the collateral for
repayment, measurement may be based on the fair value of the collateral. If the
recorded investment in the impaired loan exceeds the measure of fair value, a
valuation allowance is established as a component of the allowance for loan
losses. Changes to the valuation allowance are recorded as a component of the
provision for loan losses.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed principally on the declining-balance and straight-line
methods over the estimated useful lives of the assets.
OTHER REAL ESTATE OWNED
Other real estate owned represents properties acquired through foreclosure.
Other real estate owned is held for sale and is carried at the lower of the
recorded amount of the loan or fair value of the properties less estimated
selling costs. Any write-downs to fair value at the time of transfer to other
real estate owned is charged to the allowance for loan losses. Subsequent gains
or losses on sale and any subsequent adjustment to the value are recorded as
other expense.
INCOME TAXES
Income tax expense consists of current and deferred taxes. Current income
tax provisions approximate taxes to be paid or refunded for the applicable year.
Deferred tax assets and liabilities are recognized on the temporary differences
between the bases of assets and liabilities as measured by tax laws and their
bases as reported in the financial statements. Deferred tax expense or benefit
is then recognized for the change in deferred tax assets or liabilities between
periods.
Recognition of deferred tax balance sheet amounts is based on management's
belief that it is more likely than not that the tax benefit associated with
certain temporary differences will be realized. A valuation allowance is
recorded for those deferred tax items for which it is more likely than not that
realization will occur.
EARNINGS PER COMMON SHARE
Basic earnings per common share are computed by dividing net income by the
weighted-average number of shares of common stock outstanding. Diluted earnings
per share are computed by dividing net income minus the income effect of
potential common shares that are dilutive by the sum of the weighted-average
number of shares of common stock outstanding and potential common shares. No
potential common shares exist which would dilute the earnings per share
computation.
RECENT DEVELOPMENTS
The Financial Accounting Standards Board (FASB) has issued, and the Bank
has adopted, Statement of Financial Accounting Standards (SFAS) No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities". SFAS No. 125 was amended by SFAS No. 127, which defers the
effective date of certain provisions of SFAS No. 125 until January 1, 1998. This
statement provides accounting
F-8
<PAGE> 97
FIRST MACON BANK & TRUST COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
and reporting standards for transfers and servicing of financial assets and
extinguishments of liabilities based on consistent application of a
financial-components approach that focuses on control. It distinguishes
transfers of financial assets that are sales from transfers that are secured
borrowings. The adoption of this statement did not have a material effect on the
Bank's financial statements.
The FASB has issued, and the Bank has adopted, SFAS No. 128 "Earnings Per
Share". SFAS No. 128 supersedes Accounting Principles Board Opinion No. 15
"Earnings Per Share" and specifies the computation, presentation, and disclosure
requirements for earnings per share (EPS) for entities with publicly held common
stock or potential issuable common stock. SFAS No. 128 replaces the presentation
of primary EPS with a presentation of basic EPS and fully diluted EPS with
Diluted EPS. It also requires dual presentation of basic and diluted EPS on the
face of the income statement for all entities with complex capital structures
and requires a reconciliation of the numerator and denominator for the basic EPS
computation to the numerator and denominator of the diluted EPS computation.
SFAS No. 128 is effective for financial statements for both interim and annual
periods ending after December 15, 1997. The adoption of this statement did not
have a material effect on the Bank's financial statement.
The FASB has issued SFAS No. 130 "Reporting Comprehensive Income". This
statement establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
SFAS No. 130 requires all items that are required to be recognized under
accounting standards as components of comprehensive income to be reported in a
financial statement that is displayed in equal prominence with the other
financial statements. The term "comprehensive income" is used in the SFAS to
describe the total of all components of comprehensive income including net
income. "Other comprehensive income" refers to revenues, expenses, gains and
losses that are included in comprehensive income but excluded from earnings
under current accounting standards. Currently, "Other comprehensive income" for
the Bank consists of items previously recorded directly in equity under SFAS No.
115, "Accounting for Certain Investments in Debt and Equity Securities". SFAS
No. 130 is effective for financial statements beginning after December 15, 1997.
F-9
<PAGE> 98
FIRST MACON BANK & TRUST COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SECURITIES
The amortized cost and fair value of securities are summarized as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Securities Available for Sale
December 31, 1997:
U.S. government and agency
securities........................ $ 4,642,977 $ 30,913 $(10,383) $ 4,663,507
State and municipal securities...... 3,971,667 83,755 -- 4,055,422
Mortgage-backed securities.......... 10,346,558 83,897 (23,034) 10,407,421
----------- -------- -------- -----------
$18,961,202 $198,565 $(33,417) $19,126,350
=========== ======== ======== ===========
December 31, 1996:
U.S. government and agency
securities........................ $ 5,302,823 $ 1,829 $(29,524) $ 5,275,128
State and municipal securities...... 2,752,659 141,613 -- 2,894,272
Mortgage-backed securities.......... 5,790,246 63,060 (48,946) 5,804,360
----------- -------- -------- -----------
$13,845,728 $206,502 $(78,470) $13,973,760
=========== ======== ======== ===========
Securities Held for Investment
December 31, 1997:
U.S. government agency securities... $ 958,656 $ 8,234 $ -- $ 966,890
State and municipal securities...... 8,045,440 294,253 (32) 8,339,661
Mortgage-backed securities.......... 8,487,071 62,977 (36,240) 8,513,808
----------- -------- -------- -----------
$17,491,167 $365,464 $(36,272) $17,820,359
=========== ======== ======== ===========
December 31, 1996:
U.S. government agency securities... $ 1,457,265 $ 9,385 $ (3,713) $ 1,462,937
State and municipal securities...... 5,941,524 153,685 (11,836) 6,083,373
Mortgage-backed securities.......... 7,209,300 51,923 (70,516) 7,190,707
----------- -------- -------- -----------
$14,608,089 $214,993 $(86,065) $14,737,017
=========== ======== ======== ===========
</TABLE>
The amortized cost and fair value of securities as of December 31, 1997 by
contractual maturity are shown below. Maturities may differ from contractual
maturities in mortgage-backed securities because the mortgages underlying the
securities may be called or prepaid with or without penalty. Therefore, these
securities are not included in the maturity categories in the following maturity
summary.
<TABLE>
<CAPTION>
SECURITIES AVAILABLE FOR SALE SECURITIES HELD FOR INVESTMENT
----------------------------- -------------------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Due in one year or less..................... $ 2,535,614 $ 2,533,443 $ 295,847 $ 298,313
Due from one year to five years............. 2,086,182 2,122,455 1,533,718 1,544,836
Due from five to ten years.................. 2,523,951 2,575,827 3,809,302 3,958,055
Due after ten years......................... 1,468,897 1,487,204 3,365,229 3,505,347
Mortgage-backed securities.................. 10,346,558 10,407,421 8,487,071 8,513,808
----------- ----------- ----------- -----------
$18,961,202 $19,126,350 $17,491,167 $17,820,359
=========== =========== =========== ===========
</TABLE>
Securities with a carrying value of $8,039,084 and $8,192,871 at December
31, 1997 and 1996, respectively, were pledged to secure public deposits and for
other purposes.
F-10
<PAGE> 99
FIRST MACON BANK & TRUST COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Gains and losses on sales of securities available for sale consist of the
following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------
1997 1996
------- --------
<S> <C> <C>
Gross gains on sale of securities........................... $ -- $ 54,290
Gross losses on sale of securities.......................... -- (38,241)
------- --------
Net realized gains on sales of securities available for
sale...................................................... $ -- $ 16,049
======= ========
</TABLE>
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of loans is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1997 1996
------------ ------------
<S> <C> <C>
Real estate:
Construction and land development....................... $ 6,632,083 $ 5,098,102
Residential............................................. 20,999,506 20,483,175
Business and other...................................... 62,433,398 47,356,482
Commercial................................................ 23,205,891 22,102,119
Consumer.................................................. 13,232,122 12,382,635
Other..................................................... 52,871 70,817
------------ ------------
126,555,871 107,493,330
Allowance for loan losses................................. (1,650,000) (1,650,000)
------------ ------------
Loans, net................................................ $124,905,871 $105,843,330
============ ============
</TABLE>
Changes in the allowance for loan losses for the years ended December 31
were as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Balance, beginning of year.................................. $1,650,000 $1,383,000
Provision for loan losses................................. 177,959 375,884
Loans charged off......................................... (214,130) (140,059)
Recoveries of loans previously charged off................ 36,171 31,175
---------- ----------
Balance, end of year........................................ $1,650,000 $1,650,000
========== ==========
</TABLE>
The total recorded investment in impaired loans was $534,630 and $424,814
at December 31, 1997 and 1996, respectively. None of these loans had related
allowances for loan losses at December 31, 1997 and 1996. The average recorded
investment in impaired loans for 1997 and 1996 was $514,487 and $186,782.
Interest income on impaired loans of $34,692 and $9,760 was recognized for cash
payments received for the years ended 1997 and 1996, respectively.
F-11
<PAGE> 100
FIRST MACON BANK & TRUST COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Bank has granted loans to certain directors, executive officers, and
related entities of the Bank. The interest rates on these loans were
substantially the same as rates prevailing at the time of the transaction and
repayment terms are customary for the type of loan involved. Changes in related
party loans for the year ended December 31, 1997 are as follows:
<TABLE>
<S> <C>
Balance, beginning of year.................................. $2,128,317
Advances.................................................. 902,693
Repayments................................................ (532,029)
Transactions due to changes in related parties............ (49,492)
----------
Balance, end of year........................................ $2,449,489
==========
</TABLE>
NOTE 4. PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
Land........................................................ $1,248,286 $ 510,098
Building.................................................... 3,792,605 645,575
Leasehold improvements...................................... 370,254 602,925
Equipment................................................... 1,994,158 1,468,004
---------- ----------
7,405,303 3,226,602
Accumulated depreciation.................................... (1,258,928) (942,203)
---------- ----------
$6,146,375 $2,284,399
========== ==========
</TABLE>
NOTE 5. INCOME TAXES
The components of the income tax provision are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
Current..................................................... $1,376,000 $1,031,000
Deferred.................................................... (41,000) (148,000)
---------- ----------
$1,335,000 $ 883,000
========== ==========
</TABLE>
The Bank's provision for income taxes differs from the amounts computed by
applying the Federal income tax statutory rates to income before income taxes. A
reconciliation of the differences is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------
1997 1996
-------------------- --------------------
AMOUNT PERCENT AMOUNT PERCENT
---------- ------- ---------- -------
<S> <C> <C> <C> <C>
Tax provision at statutory rate................ $1,385,719 34% $1,017,703 34%
Increase (decrease) resulting from:
Tax exempt interest.......................... (161,525) (4) (158,467) (5)
State income taxes........................... 97,841 2 86,712 3
Adjustment for effect of exercised stock
options................................... -- -- (47,187) (2)
Other items, net............................. 12,965 1 (15,761) (1)
---------- -- ---------- --
Provision for income taxes..................... $1,335,000 33% $ 883,000 29%
========== == ========== ==
</TABLE>
F-12
<PAGE> 101
FIRST MACON BANK & TRUST COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Net deferred income tax assets of $395,657 and $368,668 at December 31,
1997 and 1996, respectively, are included in other assets. The components of
deferred income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1997 1996
-------- --------
<S> <C> <C>
Deferred tax assets:
Loan loss reserves........................................ $518,000 $496,000
Deferred loan fee income.................................. 6,000 --
Interest on nonaccrual loans.............................. 13,000 6,000
-------- --------
537,000 502,000
-------- --------
Deferred tax liabilities:
Depreciation and amortization............................. 79,000 85,000
Securities available for sale............................. 62,343 48,332
-------- --------
141,343 133,332
-------- --------
Net deferred tax assets........................... $395,657 $368,668
======== ========
</TABLE>
NOTE 6. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Bank has entered into off balance
sheet financial instruments which are not reflected in the financial statements.
These financial instruments include commitments to extend credit and standby
letters of credit. Such financial instruments are recorded in the financial
statements when funds are disbursed or the instruments become payable. These
instruments involve, to varying degrees, elements of credit risk in excess of
the amount recognized in the balance sheet.
The Bank's exposure to credit losses in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual amount of those
instruments. A summary of the Bank's commitments is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Commitments to extend credit................................ $22,690,353 $17,656,644
Standby letters of credit................................... 1,629,544 1,116,524
----------- -----------
$24,319,897 $18,773,168
=========== ===========
</TABLE>
Commitments to extend credit generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The
credit risk involved in issuing these financial instruments is essentially the
same as that involved in extending other loans to customers. The Bank evaluates
each customer's creditworthiness on a case-by-case basis. The amount of
collateral obtained, is based on management's credit evaluation of the customer.
Collateral held varies but may include real estate and improvements, marketable
securities, accounts receivable, inventory, equipment and personal property.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers. Collateral held varies
as specified above and is required in instances which the Bank deems necessary.
F-13
<PAGE> 102
FIRST MACON BANK & TRUST COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In the normal course of business, the Bank is involved in various legal
proceedings. In the opinion of management of the Bank, any liability resulting
from such proceedings would not have a material effect on the Bank's financial
statements.
The Bank leases a parcel of land on which it constructed a branch building.
The lease expires August 1, 2001 with the option to renew for up to two
additional consecutive periods of ten years each. This lease is accounted for by
the Bank as an operating lease.
The total minimum rental commitment at December 31, 1997 under the
operating lease mentioned in the preceding paragraph was $81,700, due as
follows:
<TABLE>
<CAPTION>
TOTAL MINIMUM
RENTAL
DURING THE YEAR ENDING DECEMBER 31, COMMITMENTS
- ----------------------------------- -------------
<S> <C>
1998............................................. $22,800
1999............................................. 22,800
2000............................................. 22,800
2001............................................. 13,300
-------
$81,700
=======
</TABLE>
The total rental expense included in the statements of income for the years
ended December 31, 1997 and 1996 is $115,686 and $169,900, respectively.
NOTE 7. CONCENTRATIONS OF CREDIT
The Bank originates construction, land development, commercial, residential
and consumer loans to customers primarily in its market area of Macon, Georgia
and the surrounding area. The ability of the majority of the Bank's customers to
honor their contractual commitments is dependent on the economy in this area.
A substantial portion of the Bank's loan portfolio is secured by real
estate in the Bank's primary market area. In addition, all of the other real
estate owned is located in those same markets. Accordingly, the ultimate
collectibility of the loan portfolio and the recovery of the carrying amount of
other real estate owned are susceptible to changes in market conditions in the
Bank's primary market area. The other significant concentrations of credit by
type of loan are set forth in Note 3.
The Bank, as a matter of policy, does not generally extend credit to any
single borrower or group of related borrowers in excess of 25% of statutory
capital, or approximately $2,500,000.
NOTE 8. RETAINED EARNINGS AND CAPITAL
The Bank is subject to certain restrictions on the amount of dividends that
may be declared without prior regulatory approval. At December 31, 1997,
approximately $1,370,000 of retained earnings were available for dividend
declaration without regulatory approval.
The Bank is subject to various regulatory capital requirements administered
by the 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 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 assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank capital amounts and classification are also
subject to qualitative judgements by the regulators about components, risk
weightings, and other factors.
F-14
<PAGE> 103
FIRST MACON BANK & TRUST COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios of total and Tier I
capital to risk-weighted assets and of Tier I capital to average assets.
Management believes, as of December 31, 1997, the Bank meets all capital
adequacy requirements to which it is subject.
As of December 31, 1997, the most recent notification from the FDIC
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective 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 following table. There are no conditions or events since
that notification that management believes have changed the Bank's category.
The Bank's actual capital amounts and ratios as of December 31, 1997 are
presented in the following table:
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL 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)....... $16,140,424 12% $10,894,395 8% $13,617,994 10%
Tier I Capital (to Risk
Weighted Assets)....... 14,490,424 11 5,447,197 4 8,170,796 6
Tier I Capital (to Average
Assets)................ 14,490,424 8 7,454,831 4 9,318,539 5
</TABLE>
The Bank's actual capital amounts and ratios as of December 31, 1996 are
presented in the following table:
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED
UNDER PROMPT
FOR CAPITAL CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
------------------- ------------------ -------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
----------- ----- ---------- ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996
Total Capital (to Risk
Weighted Assets).......... $13,742,249 12% $8,814,344 8% $11,017,930 10%
Tier I Capital (to Risk
Weighted Assets).......... 12,092,140 11 4,407,172 4 6,610,758 6
Tier I Capital (to Average
Assets)................... 12,092,140 8 6,115,660 4 7,644,575 5
</TABLE>
NOTE 9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Bank in estimating
its fair value disclosures for financial instruments. In cases where quoted
market prices are not available, fair values are based on estimates using
discounted cash flow methods. Those methods are significantly affected by the
assumptions used, including the discount rates and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, could not be realized
in immediate settlement of the instrument. The use of different methodologies
may have a material effect on the estimated fair value amounts. Also, the fair
value estimates presented herein are based on pertinent information available to
management as of December 31, 1997 and 1996. Such amounts have not been
F-15
<PAGE> 104
FIRST MACON BANK & TRUST COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
revalued for purposes of these financial statements since those dates and,
therefore, current estimates of fair value may differ significantly from the
amounts presented herein.
The following methods and assumptions were used by the Bank in estimating
fair values of financial instruments as disclosed herein:
CASH, DUE FROM BANKS, AND FEDERAL FUNDS SOLD
The carrying amounts of cash, due from banks, and Federal funds sold
approximate their fair value.
AVAILABLE FOR SALE AND HELD FOR INVESTMENT SECURITIES
Fair values for securities are based on quoted market prices.
LOANS
For variable rate loans that reprice frequently and have no significant
change in credit risk, fair values are based on carrying values. For other
loans, the fair values are estimated using discounted cash flow methods, using
interest rates currently being offered for loans with similar terms to borrowers
of similar credit quality. Fair values of impaired loans are estimated using
discounted cash flow methods or underlying collateral values.
DEPOSITS
The carrying amounts of demand deposits, savings deposits, and
variable-rate certificates of deposit approximate their fair values. Fair values
for fixed-rate certificates of deposit are estimated using discounted cash flow
methods, using interest rates currently being offered on certificates.
ACCRUED INTEREST
The carrying amounts of accrued interest approximate their fair values.
OFF-BALANCE SHEET INSTRUMENTS
Fair values of the Bank's off-balance sheet financial instruments are based
on fees charged to enter into similar agreements. However, commitments to extend
credit and standby letters of credit do not represent a significant value to the
Bank until such commitments are funded. The Bank has determined that these
instruments do not have a distinguishable fair value and no fair value has been
assigned.
F-16
<PAGE> 105
FIRST MACON BANK & TRUST COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The estimated fair values of the Bank's financial instruments were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
--------------------------- ---------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and short-term
investments.............. $ 16,984,339 $ 16,984,339 $ 14,513,630 $ 14,513,630
============ ============ ============ ============
Securities................. $ 36,617,517 $ 36,946,709 $ 28,581,849 $ 28,710,777
============ ============ ============ ============
Loans...................... $126,555,871 $126,533,085 $107,493,330 $105,769,000
Allowance for loan
losses................... 1,650,000 -- 1,650,000 --
------------ ------------ ------------ ------------
Loans, net............ $124,905,871 $126,533,085 $105,843,330 $105,769,000
============ ============ ============ ============
Accrued interest
receivable............... $ 1,342,316 $ 1,342,316 $ 1,198,856 $ 1,198,856
============ ============ ============ ============
Financial liabilities:
Noninterest-bearing
demand................... $ 24,879,623 $ 24,879,623 $ 23,310,821 $ 23,310,821
Interest-bearing demand.... 50,335,032 50,335,032 38,424,484 38,424,484
Savings.................... 3,554,463 3,554,463 5,358,161 5,358,161
Time deposits.............. 90,285,534 90,074,555 71,506,367 71,342,000
------------ ------------ ------------ ------------
Time deposits......... $169,054,652 $168,843,673 $138,599,833 $138,435,466
============ ============ ============ ============
</TABLE>
F-17
<PAGE> 106
FIRST MACON BANK & TRUST COMPANY
BALANCE SHEET (UNAUDITED)
MARCH 31, 1998
<TABLE>
<CAPTION>
1998
----------
(IN
THOUSANDS)
<S> <C>
ASSETS
Cash and due from banks..................................... $ 10,000
Federal funds sold.......................................... 9,120
Securities available for sale............................... 18,323
Securities held for investment (estimated fair value of
$17,109).................................................. 16,792
Loans, less allowance for loan losses of $1,700............. 132,750
Premises and equipment, net................................. 6,148
Accrued interest and other assets........................... 2,088
--------
$195,221
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing demand................................ $ 27,581
Interest-bearing demand................................... 52,645
Savings................................................... 3,843
Time, $100,000 and over................................... 24,706
Other time................................................ 68,498
--------
Total deposits.................................... 177,273
Accrued interest and other liabilities...................... 2,665
--------
Total liabilities................................. 179,938
--------
Commitments and contingencies
Stockholders' equity
Common stock, par value $.50; 25,000,000 shares
authorized; 1,073,854 shares issued and outstanding.... 537
Surplus................................................... 11,521
Retained earnings......................................... 3,105
Unrealized gains on securities available for sale, net of
taxes.................................................. 120
--------
Total stockholders' equity........................ 15,283
--------
$195,221
========
</TABLE>
See Notes to Financial Statements.
F-18
<PAGE> 107
FIRST MACON BANK & TRUST COMPANY
STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Interest income
Interest and fees on loans................................ $ 3,170 $ 2,766
Interest on taxable securities............................ 365 298
Interest on nontaxable securities......................... 166 131
Interest on Federal funds sold............................ 88 38
---------- ----------
3,789 3,233
---------- ----------
Interest expense on deposits................................ 1,813 1,414
---------- ----------
Net interest income............................... 1,976 1,819
Provision for loan losses................................... 90 111
---------- ----------
Net interest income after provision for loan
losses.......................................... 1,886 1,708
---------- ----------
Other income
Service charges on deposit accounts....................... 328 280
Other service charges, commissions and fees............... 60 37
Other..................................................... 14 24
---------- ----------
402 341
---------- ----------
Other expense
Salaries and employee benefits............................ 764 608
Equipment and occupancy expense........................... 126 168
Other operating expenses.................................. 401 360
---------- ----------
1,291 1,136
---------- ----------
Income before income taxes........................ 997 913
Income taxes................................................ 324 282
---------- ----------
Net income........................................ $ 673 $ 631
========== ==========
Per common and common equivalent share
Net income (annualized)........................... $ 2.51 $ 2.36
========== ==========
</TABLE>
See Notes to Financial Statements.
F-19
<PAGE> 108
FIRST MACON BANK & TRUST COMPANY
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNREALIZED
GAINS
(LOSSES) ON
SECURITIES
COMMON STOCK AVAILABLE FOR
------------------ RETAINED SALE, NET OF
SHARES PAR VALUE SURPLUS EARNINGS TAXES TOTAL
------ --------- ------- -------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997.............. 1,074 $537 $ 9,521 $ 4,432 $103 $14,593
Net income............................ -- -- -- 673 -- 673
Net change in unrealized gains
(losses) on securities available
for sale, net of taxes............. -- -- -- -- 17 17
Transfer of retained earnings to
surplus............................ -- -- 2,000 (2,000) -- --
----- ---- ------- ------- ---- -------
Balance, March 31, 1998................. 1,074 $537 $11,521 $ 3,105 $120 $15,283
===== ==== ======= ======= ==== =======
</TABLE>
See Notes to Financial Statements.
F-20
<PAGE> 109
FIRST MACON BANK & TRUST COMPANY
STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................ $ 673 $ 631
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation........................................... 99 67
Amortization of premium and accretion of discount on
securities, net....................................... 5 (11)
Provision for loan losses.............................. 90 90
Changes in assets and liabilities:
Decrease in accrued interest receivable.............. 59 21
Increase (decrease) in other assets.................. (440) 5
Increase in accrued interest payable................. 309 250
Decrease in other liabilities........................ (367) (302)
------- -------
Net cash provided by operating activities......... 428 751
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities available for sale................ -- (511)
Proceeds from sales of securities available for sale...... 892 1,895
Purchases of securities held for investment............... (738) (1,068)
Proceeds from maturity of securities held for
investment............................................. 1,371 591
Net increase in loans..................................... (7,934) (8,862)
Purchase of premises and equipment........................ (101) (574)
------- -------
Net cash used in investing activities............. (6,510) (8,529)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits.................................. 8,218 8,269
------- -------
Net cash provided by financing activities......... 8,218 8,269
------- -------
Net increase in cash and cash equivalents................... 2,136 491
Cash and cash equivalents at beginning of the period........ 16,984 14,514
------- -------
Cash and cash equivalents at end of the period.............. 19,120 15,005
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest............................................... $ 1,504 $ 1,164
======= =======
Income taxes........................................... 460 285
======= =======
NONCASH TRANSACTION
Net change in unrealized (gains) losses on securities
available for sale..................................... $ (27) $ 34
======= =======
</TABLE>
See Notes to Financial Statements.
F-21
<PAGE> 110
FIRST MACON BANK & TRUST COMPANY
NOTES TO UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of the Bank, the financial
statements reflect all adjustments which are of a normal recurring nature and
which are necessary to present fairly the financial position of the Bank as of
March 31, 1998 and the results of operations for the three months ended March
31, 1998 and 1997 and cash flows for the three months ended March 31, 1998 and
1997. The results of operations for the three months ended March 31, 1998 are
not necessarily indicative of the results which may be expected for the entire
fiscal year.
F-22
<PAGE> 111
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
THE COLONIAL BANCGROUP, INC.,
COLONIAL BANK
AND
FIRST MACON BANK & TRUST COMPANY
DATED AS OF
MAY 14, 1998
<PAGE> 112
TABLE OF CONTENTS
<TABLE>
<CAPTION>
CAPTION PAGE
- ------- ----
<C> <S> <C>
ARTICLE 1 -- NAME
1.1 Name........................................................ A-1
ARTICLE 2 -- MERGER TERMS AND CONDITIONS
2.1 Applicable Law.............................................. A-1
2.2 Corporate Existence......................................... A-1
2.3 Articles of Incorporation and Bylaws........................ A-1
2.4 Resulting Corporation's Officers and Board.................. A-2
2.5 Stockholder Approval........................................ A-2
2.6 Further Acts................................................ A-2
2.7 Effective Date and Closing.................................. A-2
ARTICLE 3 -- CONVERSION OF ACQUIRED BANK STOCK
3.1 Conversion of Acquired Bank Stock........................... A-2
3.2 Surrender of Acquired Bank Stock............................ A-2
3.3 Fractional Shares........................................... A-3
3.4 Adjustments................................................. A-3
3.5 BancGroup Stock............................................. A-3
3.6 Dissenting Rights........................................... A-3
ARTICLE 4 -- REPRESENTATIONS, WARRANTIES AND COVENANTS OF BANCGROUP
4.1 Organization................................................ A-3
4.2 Capital Stock............................................... A-4
4.3 Financial Statements; Taxes................................. A-4
4.4 No Conflict with Other Instrument........................... A-5
4.5 Absence of Material Adverse Change.......................... A-5
4.6 Approval of Agreements...................................... A-5
4.7 Tax Treatment............................................... A-5
4.8 Title and Related Matters................................... A-5
4.9 Subsidiaries................................................ A-5
4.10 Contracts................................................... A-5
4.11 Litigation.................................................. A-5
4.12 Compliance.................................................. A-6
4.13 Registration Statement...................................... A-6
4.14 SEC Filings................................................. A-6
4.15 Form S-4.................................................... A-6
4.16 Brokers..................................................... A-7
4.17 Government Authorization.................................... A-7
4.18 Absence of Regulatory Communications........................ A-7
4.19 Disclosure.................................................. A-7
ARTICLE 5 -- REPRESENTATIONS, WARRANTIES AND COVENANTS OF ACQUIRED
BANK
5.1 Organization................................................ A-7
5.2 Capital Stock............................................... A-7
5.3 Subsidiaries................................................ A-7
5.4 Financial Statements; Taxes................................. A-7
5.5 Absence of Certain Changes or Events........................ A-8
5.6 Title and Related Matters................................... A-9
5.7 Commitments................................................. A-10
5.8 Charter and Bylaws.......................................... A-10
5.9 Litigation.................................................. A-10
</TABLE>
A-i
<PAGE> 113
<TABLE>
<CAPTION>
CAPTION PAGE
- ------- ----
<C> <S> <C>
5.10 Material Contract Defaults.................................. A-11
5.11 No Conflict with Other Instrument........................... A-11
5.12 Governmental Authorization.................................. A-11
5.13 Absence of Regulatory Communications........................ A-11
5.14 Absence of Material Adverse Change.......................... A-11
5.15 Insurance................................................... A-11
5.16 Pension and Employee Benefit Plans.......................... A-11
5.17 Buy-Sell Agreement.......................................... A-12
5.18 Brokers..................................................... A-12
5.19 Approval of Agreements...................................... A-12
5.20 Disclosure.................................................. A-12
5.21 Registration Statement...................................... A-12
5.22 Loans; Adequacy of Allowance for Loan Losses................ A-12
5.23 Environmental Matters....................................... A-13
5.24 Transfer of Shares.......................................... A-13
5.25 Collective Bargaining....................................... A-13
5.26 Labor Disputes.............................................. A-13
5.27 Derivative Contracts........................................ A-13
5.28 Non-Terminable Contracts or Severance Agreements............ A-13
ARTICLE 6 -- ADDITIONAL COVENANTS
6.1 Additional Covenants of BancGroup........................... A-14
6.2 Additional Covenants of Acquired Bank....................... A-16
ARTICLE 7 -- MUTUAL COVENANTS AND AGREEMENTS
7.1 Best Efforts; Cooperation................................... A-18
7.2 Press Release............................................... A-18
7.3 Mutual Disclosure........................................... A-18
7.4 Access to Properties and Records............................ A-19
7.5 Notice of Adverse Changes................................... A-19
ARTICLE 8 -- CONDITIONS TO OBLIGATIONS OF ALL PARTIES
8.1 Approval by Shareholders.................................... A-19
8.2 Regulatory Authority Approval............................... A-19
8.3 Litigation.................................................. A-19
8.4 Registration Statement...................................... A-19
8.5 Tax Opinion................................................. A-20
ARTICLE 9 -- CONDITIONS TO OBLIGATIONS OF ACQUIRED BANK
9.1 Representations, Warranties and Covenants................... A-20
9.2 Adverse Changes............................................. A-20
9.3 Closing Certificate......................................... A-20
9.4 Opinion of Counsel.......................................... A-21
9.5 NYSE Listing................................................ A-21
9.6 Other Matters............................................... A-21
9.7 Material Events............................................. A-21
9.8 Fairness Opinion............................................ A-21
ARTICLE 10 -- CONDITIONS TO OBLIGATIONS OF BANCGROUP
10.1 Representations, Warranties and Covenants................... A-21
10.2 Adverse Changes............................................. A-21
10.3 Closing Certificate......................................... A-22
10.4 Opinion of Counsel.......................................... A-22
10.5 Controlling Shareholders.................................... A-22
10.6 Other Matters............................................... A-22
</TABLE>
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<TABLE>
<CAPTION>
CAPTION PAGE
- ------- ----
<C> <S> <C>
10.7 Dissenters.................................................. A-22
10.8 Material Events............................................. A-22
10.9 Pooling of Interests........................................ A-23
10.10 Stock Options............................................... A-23
10.11 Employment Agreement........................................ A-23
10.12 NonCompete Agreement........................................ A-23
ARTICLE 11 -- TERMINATION OF REPRESENTATIONS AND WARRANTIES........... A-23
ARTICLE 12 -- NOTICES................................................. A-23
ARTICLE 13 -- AMENDMENT OR TERMINATION
13.1 Amendment................................................... A-24
13.2 Termination................................................. A-24
13.3 Damages..................................................... A-24
ARTICLE 14 -- DEFINITIONS............................................. A-25
ARTICLE 15 -- MISCELLANEOUS
15.1 Expenses.................................................... A-29
15.2 Benefit..................................................... A-29
15.3 Governing Law............................................... A-29
15.4 Counterparts................................................ A-29
15.5 Headings.................................................... A-29
15.6 Severability................................................ A-29
15.7 Construction................................................ A-30
15.8 Return of Information....................................... A-30
15.9 Equitable Remedies.......................................... A-30
15.10 Attorneys' Fees............................................. A-30
15.11 No Waiver................................................... A-30
15.12 Remedies Cumulative......................................... A-30
15.13 Entire Contract............................................. A-30
</TABLE>
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of this the
14th day of May 1998, by and among FIRST MACON BANK & TRUST COMPANY ("Acquired
Bank"), a Georgia state bank, COLONIAL BANK, an Alabama banking corporation, and
THE COLONIAL BANCGROUP, INC. ("BancGroup"), a Delaware corporation.
WITNESSETH
WHEREAS, Acquired Bank operates as a Georgia state bank with its principal
office in Macon, Georgia; and
WHEREAS, BancGroup is a bank holding company and with its Subsidiary bank,
Colonial Bank, operating in Alabama, Florida, Georgia and Tennessee; and
WHEREAS, Acquired Bank wishes to merge with Colonial Bank as of the
Effective Date; and
WHEREAS, it is the intention of BancGroup and Acquired Bank 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
"Colonial Bank."
ARTICLE 2
MERGER -- TERMS AND CONDITIONS
2.1 Applicable Law. On the Effective Date, Acquired Bank shall be merged
with and into Colonial Bank (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 Financial Institutions Code of Georgia ("FICG"). The offices and
facilities of Acquired Bank and of Colonial Bank shall become the offices and
facilities of Colonial Bank.
2.2 Corporate Existence. On the Effective Date, the corporate existence of
Acquired Bank and of Colonial Bank shall, as provided in the FICG, as
applicable, be merged into and continued in the Resulting Corporation, and the
Resulting Corporation shall be deemed to be the same corporation as Acquired
Bank and Colonial Bank. All rights, franchises and interests of Acquired Bank
and Colonial Bank, respectively, in and to every type of property (real,
personal and mixed) and choses in action shall be transferred to and vested in
the Resulting Corporation by virtue of the Merger without any deed or other
transfer. The Resulting Corporation on the Effective Date, and without any order
or other action on the part of any court or otherwise, shall hold and enjoy all
rights of property, franchises and interests, including appointments,
designations and nominations and all other rights and interests as trustee,
executor, administrator, transfer agent and registrar of stocks and bonds,
guardian of estates, assignee, and receiver and in every other fiduciary
capacity and in every agency, and capacity, in the same manner and to the same
extent as such rights, franchises and interests were held or enjoyed by Acquired
Bank and Colonial Bank, respectively, on the Effective Date.
2.3 Articles of Incorporation and Bylaws. On the Effective Date, the
certificate of incorporation and bylaws of the Resulting Corporation shall be
the articles of incorporation and bylaws of Colonial Bank as they exist
immediately before the Effective Date.
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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 Colonial Bank as of the Effective
Date.
2.5 Stockholder Approval. This Agreement shall be submitted to the
shareholders of Acquired Bank 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 Bank 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 Bank or Colonial Bank, acquired
as a result of the Merger, or (ii) otherwise to carry out the purposes of this
Agreement, Colonial Bank 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 Bank or
Colonial Bank, or otherwise, to take any and all such action.
2.7 Effective Date and Closing. Subject to the terms of all requirements
of Law and the conditions specified in this Agreement, the Merger shall become
effective on the date specified in the Certificate of Merger to be issued by the
appropriate authority under the FICG, (such time being herein called the
"Effective Date"). Assuming all other conditions to the Closing have been or
will be satisfied as of the Closing, the Closing shall take place at the offices
of BancGroup, in Montgomery, Alabama, at 11:00 a.m. on a date specified by
BancGroup that shall be as soon as reasonably practicable after the later to
occur of the Stockholder Meeting or all required regulatory approvals under
Section 8.2, or at such other place and time that the Parties may mutually
agree.
ARTICLE 3
CONVERSION OF ACQUIRED BANK STOCK
3.1 Conversion of Acquired Bank Stock. On the Effective Date, each share
of common stock of Acquired Bank outstanding and held by Acquired Bank's
shareholders (the "Acquired Bank Stock"), shall be converted by operation of law
and without any action by any holder thereof (subject to Sections 3.3 and 3.6
hereof), into such number of shares of BancGroup Common Stock (the "Merger
Consideration") equal to $56.66 divided by the Market Value (the "Exchange
Ratio"). The "Market Value" of the BancGroup Common Stock at the Effective Date
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 that is the fifth trading day
preceding the Effective Date. However, if BancGroup shall
(i) be acquired by another entity or
(ii) shall be merged with an entity in a transaction in which
BancGroup is not the surviving corporation, which acquisition or merger is
publicly announced between the date of this Agreement and the Effective
Date, the "Market Value" shall be the closing price of BancGroup Common
Stock as reported by the NYSE on the day prior to the public announcement
of such a transaction.
3.2 Surrender of Acquired Bank Stock. After the Effective Date, each
holder of an outstanding certificate or certificates which prior thereto
represented shares of Acquired Bank Stock who is entitled to receive BancGroup
Common Stock shall be entitled, upon surrender to BancGroup of their certificate
or certificates representing shares of Acquired Bank 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,
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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 Bank Stock so surrendered
shall have been converted, such certificates to be of such denominations and
registered in such names as such holder may reasonably request. Until so
surrendered and exchanged, each such outstanding certificate which, prior to the
Effective Date, represented shares of Acquired Bank 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 Bank Stock shall have been properly tendered. As
soon as practical after the Effective Date, BancGroup shall mail or otherwise
make available to each record holder (other than such holders who have exercised
dissenting rights) who, as of the Effective Date, was the holder of an
outstanding certificate or certificates which immediately prior to the Effective
Date represented shares of Acquired Bank Stock, a form of letter of transmittal
and instructions for use in effecting the surrender of such certificates for
conversion.
3.3 Fractional Shares. No fractional shares of BancGroup Common Stock
shall be issued, and each holder of shares of Acquired Bank 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 Bank 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, an appropriate and proportionate adjustment shall be made in the
number of shares of BancGroup Common Stock into which the Acquired Bank 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 BancGroup after the Effective Date.
3.6 Dissenting Rights. Any shareholder of Acquired Bank who shall not have
voted in favor of this Agreement and who has complied with the applicable
procedures set forth in the FICG, relating to rights of dissenting shareholders,
shall be entitled to receive payment for the fair value of his Acquired Bank
Stock in lieu of the Merger Consideration. If after the Effective Date a
dissenting shareholder of Acquired Bank fails to perfect, or effectively
withdraws or loses, his right to appraisal and payment for his shares of
Acquired Bank Stock, BancGroup shall issue and deliver the consideration to
which such holder of shares of Acquired Bank Stock is entitled under Section 3.1
(without interest) upon surrender of such holder of the certificate or
certificates representing shares of Acquired Bank Stock held by him.
ARTICLE 4
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BANCGROUP
BancGroup represents, warrants and covenants to and with Acquired Bank 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.
(b) Colonial Bank is an Alabama state banking corporation duly organized,
validly existing and in good standing under the Laws of the State of Alabama.
Colonial Bank has the necessary corporate powers to carry on its business as
presently conducted.
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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 April 29, 1998, 48,189,317 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 Bank.
(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
Bank copies of the following financial statements of BancGroup.
(i) Consolidated balance sheets as of December 31, 1996, and December
31, 1997;
(ii) Consolidated statements of operations for each of the three years
ended December 31, 1995, 1996 and 1997;
(iii) Consolidated statements of cash flows for each of the three
years ended December 31, 1995, 1996 and 1997; and
(iv) Consolidated statements of changes in shareholders' equity for
the three years ended December 31, 1995, 1996 and 1997.
All such financial statements are in all material respects in accordance
with the books and records of BancGroup and have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods indicated, all as more particularly set forth in the
notes to such statements. Each of the consolidated balance sheets presents
fairly as of its date the consolidated financial condition of BancGroup and its
Subsidiaries. Except as and to the extent reflected or reserved against in such
balance sheets (including the notes thereto), BancGroup did not have, as of the
dates of such balance sheets, any material Liabilities or obligations (absolute
or contingent) of a nature customarily reflected in a balance sheet or the notes
thereto. The statements of consolidated income, shareholders' equity and changes
in consolidated financial position present fairly the results of operations and
changes in financial position of BancGroup and its Subsidiaries for the periods
indicated.
(b) All Tax returns required to be filed by or on behalf of BancGroup have
been timely filed (or requests for extensions therefor have been timely filed
and granted and 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 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).
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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 Agreements. The board of directors of Colonial Bank has
approved this Agreement and the transactions contemplated by it. BancGroup has
authorized its executive officers to negotiate and enter into this Agreement.
This Agreement constitutes the legal, valid and binding obligation of BancGroup
and Colonial Bank, enforceable against them 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 and Colonial Bank have no present plan to
sell or otherwise dispose of any of the Assets of Acquired Bank, subsequent to
the Merger, and BancGroup intends to continue the historic business of Acquired
Bank.
4.8 Title and Related Matters. BancGroup and Colonial Bank have good and
marketable title to all the properties, interests in properties and Assets, real
and personal, reflected in the most recent balance sheet referred to in section
4.3(a), or acquired after the date of such balance sheet (except properties,
interests and Assets sold or otherwise disposed of since such date, in the
ordinary course of business), free and clear of all mortgages, Liens, pledges,
charges or encumbrances except (i) mortgages and other encumbrances referred to
in the notes of such balance sheet, (ii) liens for current Taxes not yet due and
payable and (iii) such imperfections of title and easements as do not materially
detract from or interfere with the present use of the properties subject thereto
or affected thereby, or otherwise materially impair present business operations
at such properties. To the Knowledge of BancGroup, the material structures and
equipment of BancGroup comply in all material respects with the requirements of
all applicable Laws.
4.9 Subsidiaries. Each Subsidiary of BancGroup has been duly incorporated
and is validly existing as a corporation in good standing under the Laws of the
jurisdiction of its incorporation and each Subsidiary has been duly qualified as
a foreign corporation to transact business and is in good standing under the
Laws of each other jurisdiction in which it owns or leases properties, or
conducts any business so as to require such qualification and in which the
failure to be duly qualified could have a Material Adverse Effect upon BancGroup
and its Subsidiaries considered as one enterprise; each of the banking
Subsidiaries of BancGroup has its deposits fully insured by the Federal Deposit
Insurance Corporation to the extent provided by the Federal Deposit Insurance
Act; and the businesses of the non-bank Subsidiaries of BancGroup are permitted
to subsidiaries of registered bank holding companies.
4.10 Contracts. Neither BancGroup nor any of its Subsidiaries 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 BancGroup, 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.
4.11 Litigation. Except as disclosed in or reserved for in BancGroup's
financial statements, there is no Litigation before or by any court or Agency,
domestic or foreign, now pending, or, to the Knowledge of
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<PAGE> 120
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 may 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. To the Knowledge of
BancGroup, each of BancGroup and its Subsidiaries 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 BancGroup and its
Subsidiaries taken as a whole.
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, except where the failure to so comply would not have a
Material Adverse Effect.
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 Bank or any of its representatives expressly
for use in the Proxy Statement or information included in the Proxy Statement
regarding the business of Acquired Bank, its operations, Assets and capital.
4.14 SEC Filings. (a) BancGroup has heretofore delivered to Acquired Bank
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; and (iii) all
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.
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
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<PAGE> 121
Registration Statement prior to and upon mailing of the Proxy Statement to the
Shareholders of Acquired Bank.
4.16 Brokers. A fee of $305,000 for its assistance in negotiating the
Merger will be paid to T. Stephen Johnson & Associates, Inc., by the Resulting
Corporation on the Effective Date. Except for the assistance of T. Stephen
Johnson & Associates, Inc., all negotiations relative to this Agreement and the
transactions contemplated by this Agreement have been carried on by BancGroup
directly with Acquired Bank 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 Bank by BancGroup, contains
or will contain any untrue statement of a material fact, or omits or will omit
to state a material fact necessary to make the statements contained in this
Agreement or in any such statement or certificate not misleading.
ARTICLE 5
REPRESENTATIONS, WARRANTIES AND COVENANTS OF ACQUIRED BANK
Acquired Bank represents, warrants and covenants to and with BancGroup, as
follows:
5.1 Organization. Acquired Bank is a Georgia state bank. Each Acquired
Bank 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. (i) As of the date of this Agreement, the authorized
capital stock of Acquired Bank consisted of 25,000,000 shares of common stock,
$1.00 par value per share, 1,076,604 shares of which are issued and outstanding.
All of such shares which are outstanding are validly issued, fully paid and
nonassessable and not subject to preemptive rights. Except for the Stock Option
Agreement, Acquired Bank 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, including
options or warrants to purchase Acquired Bank Stock.
5.3 Subsidiaries. Except for a 33% interest in ProImage, Inc., Acquired
Bank has no Subsidiaries.
5.4 Financial Statements; Taxes. (a) Acquired Bank has delivered to
BancGroup copies of the following financial statements of Acquired Bank:
(i) Statements of financial condition as of December 31, 1996 and
1997;
(ii) Statements of income for each of the three years ended December
31, 1995, 1996 and 1997;
(iii) Statements of stockholders' equity for each of the three years
ended December 31, 1995, 1996, and 1997; and
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(iv) Statements of cash flows for the three years ended December 31,
1995, 1996 and 1997.
All of the foregoing financial statements are in all material respects in
accordance with the books and records of Acquired Bank and have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated, except for changes required by GAAP, all
as more particularly set forth in the notes to such statements. Each of such
balance sheets presents fairly as of its date the financial condition of
Acquired Bank. Except as and to the extent reflected or reserved against in such
balance sheets (including the notes thereto), Acquired Bank 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, stockholders' equity and cash flows
present fairly the results of operation, changes in shareholders equity and cash
flows of Acquired Bank for the periods indicated.
(b) Except as set forth on Schedule 5.4(b), all Tax returns required to be
filed by or on behalf of Acquired Bank 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 Bank, 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 Bank
accrued for or applicable to the period ended on the dates thereof, and all
years and periods prior thereto and for which Acquired Bank 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
Bank, threatened by any taxing authority which is likely to result in a material
Tax Liability, no material unpaid Tax deficiencies or additional liability of
any sort have been proposed by any governmental representative and no agreements
for extension of time for the assessment of any material amount of Tax have been
entered into by or on behalf of Acquired Bank. Acquired Bank 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 Bank Company has withheld from its employees (and timely
paid to the appropriate governmental entity) proper and accurate amounts for all
periods in material compliance with all Tax withholding provisions of applicable
federal, state, foreign and local Laws (including without limitation, income,
social security and employment Tax withholding for all types of compensation).
Each Acquired Bank 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 and in connection with the transactions set forth in this Agreement, since
the date of the most recent balance sheet provided under section 5.4(a)(i)
above, no Acquired Bank Company has
(a) issued, delivered or agreed to issue or deliver any stock, bonds
or other corporate securities (whether authorized and unissued or held in
the treasury);
(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; except that Acquired Bank may pay cash dividends on dates and
times consistent with past practices. In no event shall the
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shareholders of Acquired Bank be entitled to both Acquired Bank's regular
dividend and to BancGroup's regular dividend during the quarter in which
the Effective Date occurs. However, if Closing has not occurred by October
30, 1998, Acquired Bank may declare a per share dividend equal to the
dividend that BancGroup currently contemplates paying in the fourth quarter
of 1998 (which is expected to be 17c per share) multiplied by the Exchange
Ratio. The record date and payment date for such Acquired Bank dividend
shall be the same as for BancGroup's dividend. Such dates are expected to
be October 30,1998 and November 13, 1998, respectively. For the purpose of
this subsection 5.5(d) only, the "Exchange Ratio" shall equal $56.66
divided by the closing price of BancGroup Common Stock as reported by the
NYSE on October 30, 1998.
(e) except in the ordinary course of business, sold or transferred, or
agreed to sell or transfer, any of its Assets, or canceled, or agreed to
cancel, any debts or claims;
(f) except in the ordinary course of business, entered or agreed to
enter into any agreement or arrangement granting any preferential rights to
purchase any of its Assets, or requiring the consent of any party to the
transfer and assignment of any of its Assets;
(g) suffered any Losses or waived any rights of value which in either
event in the aggregate are material considering its business as a whole;
(h) except in the ordinary course of business, made or permitted any
amendment or termination of any Contract, agreement or license to which it
is a party if such amendment or termination is material considering its
business as a whole;
(i) except in accordance with normal and usual practice, made any
accrual or arrangement for or payment of bonuses or special compensation of
any kind or any severance or termination pay to any present or former
officer or employee;
(j) except in accordance with normal and usual practice, increased the
rate of compensation payable to or to become payable to any of its officers
or employees or made any material increase in any profit sharing, bonus,
deferred compensation, savings, insurance, pension, retirement or other
employee benefit plan, payment or arrangement made to, for or with any of
its officers or employees;
(k) received notice or had Knowledge or reason to believe that any of
its substantial customers has terminated or intends to terminate its
relationship, which termination would have a Material Adverse Effect on its
financial condition, results of operations, business, Assets or properties;
(l) failed to operate its business in the ordinary course so as to
preserve its business intact and to preserve the goodwill of its customers
and others with whom it has business relations;
(m) entered into any other material transaction other than in the
ordinary course of business; or
(n) agreed in writing, or otherwise, to take any action described in
clauses (a) through (m) above.
Between the date hereof and the Effective Date, no Acquired Bank 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 Bank Company will
enter into or amend any material Contract, other than Loans or renewals thereof
entered into in the ordinary course of business, or otherwise where not material
to the operation of Acquired Bank as a whole, without the express written
consent of BancGroup.
5.6 Title and Related Matters.
(a) Title. Except as set forth in Schedule 5.6(a), Acquired Bank has good
and marketable title to all the properties, interest in properties and Assets,
real and personal, reflected in the most recent balance sheet referred to in
section 5.4(a)(i), or acquired after the date of such balance sheet (except
properties, interests and Assets sold or otherwise disposed of since such date,
in the ordinary course of business), free and clear of all mortgages, Liens,
pledges, charges or encumbrances except (i) mortgages and other encumbrances
referred to in the notes to such balance sheet, (ii) Liens for current Taxes not
yet due and payable and
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(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 Bank, the material structures and
equipment of each Acquired Bank 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 Bank Company, either as
lessor or lessee. Complete and accurate copies of all such leases have been made
available to BancGroup for inspection.
(c) Personal Property. Schedule 5.6(c) sets forth a depreciation schedule
of each Acquired Bank Company's fixed Assets as of April 30, 1998.
(d)(i) Computer Hardware and Software. Schedule 5.6(d) contains a
description of all agreements relating to data processing computer software and
hardware now being used in the business operations of any Acquired Bank Company.
Acquired Bank 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 Bank Company. Complete and accurate copies of
all contracts, plans and other items so listed have been made available to
BancGroup for inspection.
(ii) Year 2000 Compliance. Except as described in Schedule 5.6 (d)(ii),
Acquired Bank's computer hardware and software (working independently or as a
system) are able to accurately process date data as intended without
interruption (including, but not limited to, calculating, comparing and
sequencing) from, into and between the twentieth and twenty-first centuries,
including leap year calculations, when used in the normal course of business.
Except as set forth in Schedule 5.6 (d)(ii), Acquired Bank has formulated and
begun execution of a plan that complies with FFEIC Year 2000 compliance
guidelines as promulgated by Acquired Bank's principal regulatory agency.
Acquired Bank has met all deadlines and is in full compliance with this plan.
5.7 Commitments. Except as set forth in Schedule 5.7, no Acquired Bank
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 Bank Company. Complete and accurate copies of all
Contracts, plans and other items so listed have been made or will be made
available to BancGroup for inspection. Except as set forth on Schedule 5.7,
Acquired Bank has made no guaranty or any other commitment or agreement
providing for recourse against Acquired Bank for liabilities of or in any way
related to ProImage, Inc.
5.8 Charter and Bylaws. Schedule 5.8 contains true and correct copies of
the articles of incorporation and bylaws of each Acquired Bank 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 forth on Schedule 5.9, there is no
Litigation (whether or not purportedly on behalf of Acquired Bank) pending or,
to the Knowledge of Acquired Bank, threatened against or affecting any Acquired
Bank Company (nor does Acquired Bank 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 Bank, and no Acquired Bank
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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 Bank. To the Knowledge of
Acquired Bank, each Acquired Bank 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 Bank.
5.10 Material Contract Defaults. Except as disclosed on Schedule 5.10, no
Acquired Bank 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 Bank,
there is no event which, with notice or lapse of time, or both, may be or become
an event of Default under any such material Contract, agreement, lease or other
commitment in respect of which adequate steps have not been taken to prevent
such a Default from occurring.
5.11 No Conflict with Other Instrument. The consummation of the
transactions contemplated by this Agreement will not result in the breach of any
term or provision of or constitute a Default under any material Contract,
indenture, mortgage, deed of trust or other material agreement or instrument to
which any Acquired Bank Company is a party and will not conflict with any
provision of the charter or bylaws of any Acquired Bank Company.
5.12 Governmental Authorization. Each Acquired Bank Company has all
Permits that, to the Knowledge of Acquired Bank, are legally required to enable
any Acquired Bank Company to conduct its business in all material respects as
now conducted by each Acquired Bank Company.
5.13 Absence of Regulatory Communications. Except as provided in Schedule
5.13, no Acquired Bank Company is subject to, nor has any Acquired Bank Company
received during the past three years, any written communication directed
specifically to it from any Agency to which it is subject or pursuant to which
such Agency has imposed or has indicated it may impose any material restrictions
on the operations of it or the business conducted by it or in which such Agency
has raised any material question concerning the condition, financial or
otherwise, of such company.
5.14 Absence of Material Adverse Change. To the Knowledge of Acquired
Bank, 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 Bank Company.
5.15 Insurance. Each Acquired Bank Company has in effect insurance
coverage and bonds with reputable insurers which, in respect to amounts, types
and risks insured, management of Acquired Bank reasonably believes to be
adequate for the type of business conducted by such company. Except as set forth
on Schedule 5.15, no Acquired Bank Company is liable for any material
retroactive premium adjustment. All insurance policies and bonds are valid,
enforceable and in full force and effect, and no Acquired Bank 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,
and except as set forth on Schedule 5.15, no Acquired Bank 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 Bank 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
Bank, all employee benefit plans of each Acquired Bank 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 Bank Company sponsors or otherwise maintains a "pension plan" within
the meaning of sec-
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tion 3(2) of ERISA or any other retirement plan other than the 401(k) plan of
Acquired Bank 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 Bank, 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 Bank Company.
(b) To the Knowledge of Acquired Bank, no amounts payable to any employee
of any Acquired Bank Company will fail to be deductible for federal income tax
purposes by virtue of Section 280G of the Code and regulations thereunder.
5.17 Buy-Sell Agreement. To the Knowledge of Acquired Bank, there are no
agreements among any of its shareholders granting to any person or persons a
right of first refusal in respect of the sale, transfer, or other disposition of
shares of outstanding securities by any shareholder of Acquired Bank, any
similar agreement or any voting agreement or voting trust in respect of any such
shares.
5.18 Brokers. A fee of $305,000 for its assistance in negotiating the
merger will be paid to T. Stephen Johnson & Associates, Inc. after the Effective
Date by the Resulting Corporation. To the Knowledge of Acquired Bank, except for
the assistance of T. Stephen Johnson & Associates all negotiations relative to
this Agreement and the transactions contemplated by this Agreement have been
carried on by Acquired Bank directly with BancGroup and without the intervention
of any other person, either as a result of any act of Acquired Bank, or
otherwise, in such manner as to give rise to any valid claim against Acquired
Bank for a finder's fee, brokerage commission or other like payment.
5.19 Approval of Agreements. The board of directors of Acquired Bank has
approved this Agreement and the transactions contemplated by this Agreement and
has authorized the execution and delivery by Acquired Bank of this Agreement.
Subject to the matters referred to in section 8.2, Acquired Bank has full
corporate power, authority and legal right to enter into this Agreement, and,
upon appropriate vote of the shareholders of Acquired Bank in accordance with
this Agreement, Acquired Bank shall have full corporate power, authority and
legal right to consummate the transactions contemplated by this Agreement.
5.20 Disclosure. No representation or warranty, nor any statement or
certificate furnished or to be furnished to BancGroup by Acquired Bank, contains
or will contain any untrue statement of a material fact, or omits or will omit
to state a material fact necessary to make the statements contained in this
Agreement or in any such statement or certificate not misleading.
5.21 Registration Statement. At the time the Registration Statement
becomes effective and at the time of the Stockholders Meeting, the Registration
Statement, including the Proxy Statement which shall constitute part thereof,
will not contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, however,
that the representations and warranties in this section shall only apply to
statements in or omissions from the Proxy Statement relating to descriptions of
the business of Acquired Bank, its Assets, properties, operations, and capital
stock or to information furnished in writing by Acquired Bank 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 Bank
have been calculated in accordance with prudent and customary banking practices
and are to the Knowledge of Acquired Bank adequate in all material respects to
reflect the risk inherent in the loans of Acquired Bank. Acquired Bank 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. To the Knowledge of Acquired Bank, each
loan reflected as an Asset on the financial statements of Acquired Bank 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. Acquired Bank does not have in
its portfolio any loan exceeding its legal lending limit, and except
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as disclosed on Schedule 5.22, Acquired Bank 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 Bank, each Acquired Bank 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 Bank has no Knowledge
that any Acquired Bank Company has not complied with all regulations and
requirements promulgated by the Occupational Safety and Health Administration
that are applicable to any Acquired Bank Company. To the Knowledge of Acquired
Bank, there is no Litigation pending or threatened with respect to any violation
or alleged violation of the Environmental Laws. To the Knowledge of Acquired
Bank, with respect to Assets of or owned by any Acquired Bank Company, including
any Loan Property, (i) there has been no spillage, leakage, contamination or
release of any substances for which the appropriate remedial action has not been
completed; (ii) no owned or leased property is contaminated with or contains any
hazardous substance or waste; and (iii) there are no underground storage tanks
on any premises owned or leased by any Acquired Bank Company. Acquired Bank has
no Knowledge of any facts which might suggest that any Acquired Bank 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 Bank
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
Bank, no Acquired Bank Company has extended credit, either on a secured or
unsecured basis, to any person or other entity engaged in any activities which
would require or requires such person or entity to obtain any Permits which are
required under any Environmental Law which has not been obtained.
5.24 Transfer of Shares. Acquired Bank has no Knowledge of any plan or
intention on the part of Acquired Bank's shareholders to sell or otherwise
dispose of any of Acquired Bank Common Stock, or the BancGroup Common Stock to
be received by them in the Merger, that could cause the Merger to fail to
qualify for the pooling of interest 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 Bank Company and any union or labor organization
covering any of Acquired Bank 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 Bank, each Acquired Bank
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 Bank Company is or has been engaged in any unfair labor
practice, and, to the Knowledge of Acquired Bank, no unfair labor practice
complaint against any Acquired Bank Company is pending before the National Labor
Relations Board. Relations between management of each Acquired Bank Company and
the employees are amicable and there have not been, nor to the Knowledge of
Acquired Bank, are there presently, any attempts to organize employees, nor to
the Knowledge of Acquired Bank, are there plans for any such attempts.
5.27 Derivative Contracts. No Acquired Bank 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 Bank'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 provided
in Schedule 5.28, no Acquired Bank Company is a party to or has agreed to enter
into a vendor or employment 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 Bank
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 Bank Company employee.
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ARTICLE 6
ADDITIONAL COVENANTS
6.1 Additional Covenants of BancGroup. BancGroup covenants to and with
Acquired Bank as follows:
(a) Registration Statement and Other Filings. As soon as practicable
BancGroup shall prepare and file with the SEC the Registration Statement on
Form S-4 (or such other form as may be appropriate) and all amendments and
supplements thereto, in form reasonably satisfactory to Acquired Bank and
its counsel, with respect to the Common Stock to be issued pursuant to this
Agreement. BancGroup shall use reasonable good faith efforts to prepare all
necessary filings with any Agencies which may be necessary for approval to
consummate the transactions contemplated by this Agreement. BancGroup shall
provide to counsel for Acquired Bank (i) copies of drafts of all filings
made pursuant to this section 6.1(a) in advance of filing, (ii) copies of
documents as filed, and (iii) copies of any correspondence between
BancGroup and any Agencies, including the SEC, respecting the filings made
pursuant to this section 6.1(a).
(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 Bank:
(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 Bank may reasonably request.
(d) No Control of Acquired Bank by BancGroup. Notwithstanding any
other provision hereof, until the Effective Date, the authority to
establish and implement the business policies of Acquired Bank shall
continue to reside solely in Acquired Bank'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. (i) On the Effective Date, all
employees of any Acquired Bank Company (other than ProImage, Inc.) 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 set forth on Schedule 6.1(f) (as though
such employees had been an employee of BancGroup since such employees'
respective initial employment date with Acquired Bank). All employees of
any Acquired Bank 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 Bank Company
who become employees of
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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 of Acquired Bank Company who are
employed at least 30 hours per week with any Acquired Bank 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 Bank Company of all employees who become employees of the
Resulting Corporation or its Subsidiaries on the Effective Date shall be
recognized only for vesting and eligibility purposes under Colonial Bank's
benefit plans. In addition, if the Effective Date falls within an annual
period of coverage under any group health plan of the Resulting Corporation
and its Subsidiaries, each such Acquired Bank Company employee shall be
given credit for covered expenses paid by that employee under comparable
employee benefit plans of the Acquired Bank 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.
Notwithstanding anything to the contrary contained earlier in this
paragraph, BancGroup agrees to provide Mark Bikus health insurance during
the course of his employment without any pre-existing condition limitations
either (1) under BancGroup's existing plan, (2) by paying the premiums for
his current plan or (3) by purchasing coverage from a different carrier.
(g) Indemnification. (i) Subject to the conditions set forth in the
succeeding paragraphs, for a period of four (4) years after the Effective
Date BancGroup shall, and shall cause the Resulting Corporation to,
indemnify, defend and hold harmless each person entitled to indemnification
from the Acquired Bank (each being an "Indemnified Party") against all
liabilities arising out of actions or omissions occurring upon or prior to
the Effective Date (x) to the extent authorized under the articles of
incorporation and bylaws (without regard to Section 10.4 of such bylaws) of
Acquired Bank and Georgia law and (y) to the extent arising out of the
transactions contemplated by this Agreement. In the event that the
Indemnified Party receives insurance proceeds under Acquired Bank's
Directors and Officers and Company Liability Policy (the "Policy") relating
to claims under Subsections (x) and (y) above, the obligations of BancGroup
and the Resulting Corporation shall be reduced by the amount of such
insurance proceeds. In the event that Resulting Corporation receives
insurance proceeds under the Policy which relate to claims under
Subsections (x) and (y) above, Resulting Corporation shall pay these
proceeds to Indemnified Party unless they have been made to reimburse
Resulting Corporation for payments already made to Indemnified Party by
Resulting Corporation under Subsections (x) and (y) above. Further, in the
event that Indemnified Party suffers an uncompensated loss solely due to
the retention amount (deductible under the Policy) in the Policy, then
BancGroup shall, or BancGroup shall cause Resulting Corporation to pay the
amount of such loss up to the retention amount.
(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 the
Resulting Corporation 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 the Resulting
Corporation 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 Acquired 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
(ii) to pay for only one firm of 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 Acquired 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
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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 the Acquired Bank, such director
or officer of the Acquired Bank 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 Bank. 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 Bank 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 Bank;
(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 Bank 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 Bank Company after the date of the letter.
(iv) Acquired Bank 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.
6.2 Additional Covenants of Acquired Bank. Acquired Bank covenants to and
with BancGroup as follows:
(a) Operations. (i) Acquired Bank will conduct its business and the
business of each Acquired Bank 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 Bank 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 Bank 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 Bank 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 Bank 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 with the meaning
of Section 368 of the Code.
(ii) If requested by BancGroup, Acquired Corporation shall use its
best efforts to cause all executive 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 Bank will cooperate
with BancGroup in the preparation of the Registration Statement 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
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of the Registration Statement, and will use its best efforts (subject to
paragraph 6.2(c) below) 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 Bank Company nor any
affiliate thereof nor any investment banker, attorney, accountant, or other
representative (collectively, "Representatives") retained by an Acquired
Bank 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 Bank's Board of Directors as advised in writing by
counsel to such Board of Directors, no Acquired Bank 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 the Acquired
Bank shall direct and use its reasonable efforts to cause all of its
Representatives not to engage in any of the foregoing, but Acquired Bank
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 Bank shall promptly notify BancGroup orally
and in writing in the event that it receives any inquiry or proposal
relating to any such Acquisition Proposal. Acquired Bank shall immediately
cease and cause to be terminated any existing activities, discussions, or
negotiations with any Persons other than BancGroup conducted heretofore
with respect to any of the foregoing. Acquired Bank 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 Bank agree to support publicly the Merger.
(e) Shareholder Voting. Acquired Bank shall on the date of execution
of this Agreement obtain and submit to BancGroup an agreement substantially
in the form set forth in Exhibit A from each of the persons set forth in
Schedule 6.2(e).
(f) Financial Statements and Monthly Status Reports. Acquired Bank
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 each fiscal year, consolidated statements of operations of Acquired
Bank 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 Bank 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 Bank by independent auditors in connection with
each annual, interim or special audit of the books of Acquired Bank 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 Bank 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) the actions taken during the preceding month
with respect to its compliance or non-compliance with the terms of this
section 6.2, together with its then current estimate of the
out-of-pocket costs and expenses incurred or reasonably accruable in
connection with
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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 Bank Company; (c) copies of minutes of any meeting of the
board of directors of any Acquired Bank 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 forth on Schedule 6.2(g), prior
to the Effective Date, (i) no director or officer (each an "Executive") of
any Acquired Bank 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 Bank Company, (ii) all
Executives, at all times, shall satisfy their fiduciary duties to Acquired
Bank and its Subsidiaries, and (iii) such Executives shall not (except as
required in the course of his or her employment with any Acquired Bank
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 Bank, any confidential information
which is possessed, owned or used by or licensed by or to any Acquired Bank
Company or confidential information belonging to third parties which any
Acquired Bank 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 Bank
Company.
(h) Certain Practices. At the request of BancGroup, (i) Acquired Bank
shall consult with BancGroup and advise BancGroup of all of the Acquired
Bank's loan requests over $250,000 that are not single-family residential
loan requests or of any other loan request outside the normal course of
business, and (ii) Acquired Bank will consult with BancGroup to coordinate
various business issues on a basis mutually satisfactory to Acquired Bank
and BancGroup. Acquired 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 Bank 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.
7.2 Press Release. Each Party hereto agrees that, unless approved by the
other Parties in advance, such Party will not make any public announcement,
issue any press release or other publicity or confirm any statements by any
person not a party to this Agreement concerning the transactions contemplated
hereby. Notwithstanding the foregoing, each Party hereto reserves the right to
make any disclosure if such Party, in its reasonable discretion, deems such
disclosure required by Law. In that event, such Party shall provide to the other
Party the text of such disclosure sufficiently in advance to enable the other
Party to have a reasonable opportunity to comment thereon.
7.3 Mutual Disclosure. Each Party hereto agrees to promptly furnish to
each other Party hereto its public disclosures and filings not precluded from
disclosure by Law including but not limited to call reports,
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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 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 Bank to cause the transactions
contemplated by this Agreement to be consummated shall be subject to the
satisfaction, in the sole discretion of the Party relying upon such conditions,
on or before the Effective Date of all the following conditions, except as such
Parties may waive such conditions in writing:
8.1 Approval by Shareholders. At the Stockholders Meeting, this Agreement
and the matters contemplated by this Agreement shall have been duly approved by
the vote of the holders of not less than the requisite number of the issued and
outstanding voting securities of Acquired Bank as is required by applicable Law
and Acquired Bank's articles of incorporation and bylaws.
8.2 Regulatory Authority Approval. Orders, Consents and approvals, in form
and substance reasonably satisfactory to BancGroup and Acquired Bank, shall have
been entered by the Board of Governors of the Federal Reserve System and other
appropriate bank regulatory Agencies (i) granting the authority necessary for
the consummation of the transactions contemplated by this Agreement and (ii)
satisfying all other requirements prescribed by Law. 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.
8.3 Litigation. There shall be no pending or threatened Litigation in any
court or any pending or threatened proceeding by any governmental commission,
board or Agency, with a view to seeking or in which it is sought to restrain or
prohibit consummation of the transactions contemplated by this Agreement or in
which it is sought to obtain divestiture, rescission or damages in connection
with the transactions contemplated by this Agreement and no investigation by any
Agency shall be pending or threatened which might result in any such suit,
action or other proceeding.
8.4 Registration Statement. The Registration Statement shall be effective
under the 1933 Act and no stop order suspending the effectiveness of the
Registration Statement shall be in effect; no proceedings for such purpose, or
under the proxy rules of the SEC or any bank regulatory authority or pursuant to
the 1934 Act, with respect to the transactions contemplated hereby, shall be
pending before or threatened by the SEC or any bank regulatory authority; and
all approvals or authorizations for the offer of BancGroup Common Stock shall
have been received or obtained pursuant to any applicable state securities Laws,
and no stop order
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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 Coopers & Lybrand L.L.P., shall have been
received in form and substance reasonably satisfactory to the Acquired Bank 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 Bank; (iii) no gain or loss will be
recognized by the shareholders of Acquired Bank 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
Bank 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 Bank common stock exchanged in the Merger and the amount of gain, if
any, which was recognized by the exchanging Acquired Bank 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
Bank common stock exchanged therefor if such shares of Acquired Bank common
stock were capital assets in the hands of the exchanging Acquired Bank
shareholder; and (vi) cash received by an Acquired Bank 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 Bank common stock was a capital asset in his or her hands as of the
Effective Date).
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF ACQUIRED BANK
The obligations of Acquired Bank 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
Bank may waive such conditions in writing:
9.1 Representations, Warranties and Covenants. Notwithstanding any
investigation made by or on behalf of Acquired Bank, all representations and
warranties of BancGroup or Colonial Bank contained in this Agreement shall be
true in all material respects on and as of the Effective Date as if such
representations and warranties were made on and as of such Effective Date, and
BancGroup or Colonial Bank shall have performed in all material respects all
agreements and covenants required by this Agreement to be performed by it on or
prior to the Effective Date.
9.2 Adverse Changes. There shall have been no changes after the date of
the most recent balance sheet provided under section 4.3(a)(i) hereof in the
results of operations (as compared with the corresponding period of the prior
fiscal year), Assets, Liabilities, financial condition or affairs of BancGroup
which in their total effect constitute a Material Adverse Effect, nor shall
there have been any material changes in the Laws governing the business of
BancGroup which would impair the rights of Acquired Bank or its shareholders
pursuant to this Agreement.
9.3 Closing Certificate. In addition to any other deliveries required to
be delivered hereunder, Acquired Bank 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;
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(c) the certificate of incorporation and bylaws of BancGroup
referenced in section 4.4 hereof remain in full force and effect without
modification or amendment thereof;
(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 Bank'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 Bank for
inclusion in such Proxy Statement); and
(f) the conditions set forth in this Article 9 insofar as they relate
to BancGroup have been satisfied.
9.4 Opinion of Counsel. Acquired Bank 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 Bank certified copies of such corporate records of BancGroup and copies
of such other documents as such counsel may reasonably have requested for such
purpose.
9.7 Material Events. There shall have been no determination by the board
of directors of Acquired Bank 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.
9.8 Fairness Opinion. Acquired Bank shall have received prior to the
mailing of the Proxy Statement a letter from an investment banking firm
generally recognized as qualified for such purpose setting forth its opinion
that the consideration to be received by the shareholders of Acquired Bank under
the terms of this Agreement is fair to them from a financial point of view, and
such opinion shall not have been withdrawn as of the Effective Date.
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 Bank contained in this Agreement shall be true in all
material respects on and as of the Effective Date as if such representations and
warranties were made on and as of the Effective Date, and Acquired Bank shall
have performed in all material respects all agreements and covenants required by
this Agreement to be performed by it on or prior to the Effective Date.
10.2 Adverse Changes. There shall have been no changes after the date of
the most recent balance sheet provided under section 5.4(a)(i) hereof in the
results of operations (as compared with the corresponding period of the prior
fiscal year), Assets, Liabilities, financial condition, or affairs of Acquired
Bank which
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constitute a Material Adverse Effect, nor shall there have been any material
changes in the Laws governing the business of Acquired Bank 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 Bank executed by the President or Vice President and from the Secretary
or Assistant Secretary of Acquired Bank dated as of the Closing certifying that:
(a) the Board of Directors of Acquired Bank 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) the shareholders of Acquired Bank have duly adopted resolutions
authorizing 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 Bank is
an officer of Acquired Bank 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 Bank 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 Bank'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 Bank for
inclusion in such Proxy Statement); and
(f) the conditions set forth in this Article 10 insofar as they relate
to Acquired Bank have been satisfied.
10.4 Opinion of Counsel. BancGroup shall have received an opinion of
Arnall, Golden & Gregory, LLP, counsel to Acquired Bank, dated as of the
Closing, substantially as set forth in Exhibit C hereto.
10.5 Controlling Shareholders. Each shareholder of Acquired Bank who is an
"affiliate" of Acquired Bank, 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 and that such Common Stock will be held
subject to all applicable provisions of the 1933 Act and the rules and
regulations of the SEC thereunder, and that such person will not sell or
otherwise reduce 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 Bank 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 Bank 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
Bank have exercised dissenters rights of appraisal under section 3.6 does not
exceed 10 percent of the outstanding shares of common stock of Acquired Bank.
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.
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10.9 Pooling of Interests. BancGroup shall have received the written
opinion of Coopers & Lybrand L.L.P., that the Merger will qualify for the
pooling of interests method of accounting under generally accepted accounting
principles.
10.10 Stock Options. BancGroup's management will grant 10,000 BancGroup
incentive stock options, with a 5-year vesting schedule, to each of four key
employees, Mark Stevens, Carol Soto, Mark Bikus and Jordan Michael, as post
merger retention incentives in accordance with the standard stock option form
used for such purposes by BancGroup. The exercise price of the options will be
the closing price of BancGroup Common Stock as reported by the NYSE on the
Effective Date. BancGroup does not guarantee any of the aforementioned key
employees employment for a five-year term.
10.11 Employment Agreement. Mr. Edward P. Loomis, Jr. will, on the
Effective Date, execute an employment agreement in the form attached hereto as
Exhibit D. Mr. Loomis shall be granted 20,000 BancGroup options with an exercise
price equal to the market value of BancGroup common stock on the date of close.
The options will vest ratably over a five-year period. To the extent permitted
by law, such options may be incentive stock options if so elected by Mr. Loomis.
The shares underlying such options and the options under Sections 10.10 and
10.11 shall be subject to an effective registration statement on Form S-8.
10.12 NonCompete Agreement. Each member of the Acquired Bank's Board of
Directors as it was constituted on December 31, 1997 (other than Edward P.
Loomis, Jr.) will, on the Effective Date, execute agreements in the form
attached hereto as Exhibit E. In consideration for this agreement such directors
will each receive compensation in the amount of $35,000. The agreement executed
by Mr. Robert Chanin will contain a provision that allows him to continue
serving as an employee of The Robinson-Humphrey Company, LLC.
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
Sections 7.2, 7.4, 13.3, Article 11, 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.
Information provided in such Exhibits and Schedules is provided only in response
to the specific section of this Agreement which calls for such information.
ARTICLE 12
NOTICES
All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given and
legally sufficient, if delivered by hand, sent by facsimile (receipt confirmed)
or mailed, first class postage prepaid:
(a) If to Acquired Bank to First Macon Bank & Trust, 501 Walnut
Street, Macon, Georgia 31297, facsimile (912) 743-5241 (or in the case of
delivery by mail, to P.O. Box 49, Macon, Georgia 31294-6299), with copies
to Walter H. Bush, Jr. Esq., Arnall, Golden and Gregory, 201 Second Street,
Suite 1000, Macon, Georgia 31201, facsimile (912) 743-0239, or as may
otherwise be specified by Acquired Bank in writing to BancGroup.
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<PAGE> 138
(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 Bank.
ARTICLE 13
AMENDMENT OR TERMINATION
13.1 Amendment. This Agreement may be amended by the mutual consent of
BancGroup and Acquired Bank before or after approval of the transactions
contemplated herein by the shareholders of Acquired Bank provided, that, after
any such approval by the holders of the Acquired Bank Stock, there shall be no
amendment decreasing the consideration received by the Acquired Bank
stockholders without the further approval of such stockholder as required by
Law.
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 Bank, as follows:
(a) by the mutual consent of the respective boards of directors of
Acquired Bank 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 Bank;
(c) by the board of directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the
event of a material breach by the other Party of any covenant or agreement
contained in this Agreement which cannot be or has not been cured within
thirty (30) days after the giving of written notice to the breaching Party
of such breach, or if any of the conditions to the obligations of such
Party contained in this Agreement in Article 9 as to Acquired Bank or
Article 10 as to BancGroup shall not have been satisfied in full;
(d) by the board of directors of either BancGroup or Acquired Bank if
all transactions contemplated by this Agreement shall not have been
consummated on or prior to December 31, 1998, if the failure to consummate
the transactions provided for in this Agreement on or before such date is
not caused by any breach of this Agreement by the Party electing to
terminate pursuant to this section 13.2(d); or
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.
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<PAGE> 139
ARTICLE 14
DEFINITIONS
(a) The following terms, which are capitalized in this Agreement, shall
have the meanings set forth below for the purpose of this Agreement:
Acquired Bank.............. First Macon Bank and Trust Company, a Georgia state
bank.
Acquired Bank Company...... Shall mean Acquired Bank, any Subsidiary of
Acquired Bank, or any person or entity acquired
as a Subsidiary of Acquired Bank in the future
and owned by Acquired Bank at the Effective Date.
Representations in Article 5 on behalf of
ProImage, Inc. shall be based on Acquired Bank's
Knowledge, except that the investigation
conducted by Acquired Bank has been restricted by
the fact that Acquired Bank is not involved in
the operations of ProImage, Inc. and has not
necessarily otherwise obtained all information
which would be disclosed if it were involved in
such operations. Compliance with covenants under
Section 5.5 and Article 6 as they apply to
ProImage, Inc. shall only be to the extent that
they are within the control of Acquired Bank.
Acquired Bank Stock........ Shares of common stock, par value $1.00 per share,
of Acquired Bank.
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 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
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.
Closing.................... The closing of the transactions contemplated hereby
as described in section 2.7 of this Agreement.
Code....................... The Internal Revenue Code of 1986, as amended.
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<PAGE> 140
Colonial Bank.............. Colonial Bank, an Alabama state banking
corporation, which is a wholly owned Subsidiary
of BancGroup.
Common Stock............... BancGroup's Common Stock authorized and defined in
the restated certificate of incorporation of
BancGroup, as amended.
Consent.................... Any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any
Person pursuant to any Contract, Law, Order, or
Permit.
Contract................... Any written or oral agreement, arrangement,
authorization, commitment, contract, indenture,
instrument, lease, obligation, plan, practice,
restriction, understanding or undertaking of any
kind or character, or other document to which any
Person is a party or that is binding on any
Person or its capital stock, Assets or business.
Default.................... Shall mean (i) any breach or violation of or
default under any Contract, Order or Permit, (ii)
any occurrence of any event that with the passage
of time or the giving of notice or both would
constitute a breach or violation of or default
under any Contract, Order or Permit, or (iii) any
occurrence of any event that with or without the
passage of time or the giving of notice would
give rise to a right to terminate or revoke,
change the current terms of, or renegotiate, or
to accelerate, increase, or impose any Liability
under, any Contract, Order or Permit.
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 obtained by dividing $56.66 by the Market
Value, subject to Section 3.1 hereof
FICG....................... Georgia Banking Code.
Exhibits................... A through E, inclusive, shall mean the Exhibits so
marked, copies of which are attached to this
Agreement. Such Exhibits are hereby incorporated
by reference herein and made a part hereof, and
may be referred to in this Agreement and any
other related instrument or document without
being attached hereto.
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 Bank it means the actual knowledge (or
the knowledge which should have been obtained)
after due investigation and inquiry by Edward P.
Loomis, Jr., President and Chief Executive
Officer, Mark Stevens, Senior Vice President,
Mark Bikus, Vice President, Jordan Michael, Vice
President and Carol Soto, Vice President and
Cashier in the case of knowledge of Acquired
Bank.
Law........................ Any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute
applicable to a Person or its Assets, Liabilities
or
A-26
<PAGE> 141
business, including those promulgated,
interpreted or enforced by any Agency.
Liability.................. Any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty,
cost or expense (including costs of
investigation, collection and defense),
deficiency, guaranty or endorsement of or by any
Person (other than endorsements of notes, bills,
checks, and drafts presented for collection or
deposit in the ordinary course of business) of
any type, whether accrued, absolute or
contingent, liquidated or unliquidated, matured
or unmatured, or otherwise.
Lien....................... Any conditional sale agreement, default of title,
easement, encroachment, encumbrance,
hypothecation, infringement, lien, mortgage,
pledge, reservation, restriction, security
interest, title retention or other security
arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on,
or with respect to any property or property
interest, other than (i) Liens for current
property Taxes not yet due and payable, (ii) for
depository institution Subsidiaries of a Party,
pledges to secure deposits and other Liens
incurred in the ordinary course of the banking
business, and (iii) Liens in the form of
easements and restrictive covenants on real
property which do not materially adversely affect
the use of such property by the current owner
thereof.
Litigation................. Any action, arbitration, complaint, criminal
prosecution, governmental or other examination or
investigation, hearing, inquiry, administrative
or other proceeding relating to or affecting a
Party, its business, its Assets (including
Contracts related to it), or the transactions
contemplated by this Agreement.
Loan Property.............. Any property owned by the Party in question or by
any of its Subsidiaries or in which such Party or
Subsidiary holds a security interest, and, where
required by the context, includes the owner or
operator of such property, but only with respect
to such property.
Loss....................... Any and all direct or indirect payments,
obligations, recoveries, deficiencies, fines,
penalties, interest, assessments, losses,
diminution in the value of Assets, damages,
punitive, exemplary or consequential damages
(including, but not limited to, lost income and
profits and interruptions of business),
liabilities, costs, expenses (including without
limitation, reasonable attorneys' fees and
expenses, and consultant's fees and other costs
of defense or investigation), and interest on any
amount payable to a third party as a result of
the foregoing.
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 calendar 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.
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<PAGE> 142
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
impact" shall not be deemed to include the impact
of (x) changes in banking and similar laws of
general applicability or interpretations thereof
by courts or governmental authorities, (y)
changes in generally accepted accounting
principles or regulatory accounting principles
generally applicable to banks and their holding
companies, and (z) the Merger and compliance with
the provisions of this Agreement on the operating
performance of the Parties.
Merger..................... The merger of Acquired Bank with Colonial Bank as
contemplated in this Agreement.
Merger Consideration....... The distribution of BancGroup Common Stock for each
share of Acquired Bank Stock (and cash for
fractional shares) as provided in section 3.1(a)
hereof.
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 Bank, or BancGroup, and
"Parties" shall mean Acquired Bank, Colonial Bank
and BancGroup.
Permit..................... Any federal, state, local, and foreign governmental
approval, authorization, certificate, easement,
filing, franchise, license, notice, permit, or
right to which any Person is a party or that is
or may be binding upon or inure to the benefit of
any Person or its securities, Assets or business.
Person..................... A natural person or any legal, commercial or
governmental entity, such as, but not limited to,
a corporation, general partnership, joint
venture, limited partnership, limited liability
company, trust, business association, group
acting in concert, or any person acting in a
representative capacity.
Proxy Statement............ The proxy statement used by Acquired Bank 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 Bank.
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 Bank, to register the shares of
BancGroup Common Stock offered to stockholders of
the Bank pursuant to his Agreement, including the
Proxy Statement.
Resulting Corporation...... Colonial Bank, as the surviving corporation
resulting from the Merger.
SEC........................ United States Securities and Exchange Commission.
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<PAGE> 143
Shareholders Meeting....... The special meeting of shareholders of Acquired
Bank called to approve the transactions
contemplated by this Agreement.
Stock Option Agreement..... The agreement dated as of the date hereof between
BancGroup and Acquired Bank granting to BancGroup
the right to acquire up to 19.9% of Acquired Bank
common stock.
Subsidiaries............... Shall mean all those corporations, banks,
associations, or other entities of which the
entity in question owns or controls 5% or more of
the outstanding equity securities either directly
or through an unbroken chain of entities as to
each of which 5% or more of the outstanding
equity securities is owned directly or indirectly
by its parent; provided, however, there shall not
be included any such entity acquired through
foreclosure or any such entity the equity
securities of which are owned or controlled in a
fiduciary capacity.
Tax or Taxes............... Means any federal, state, county, local, foreign,
and other taxes, assessments, charges, fares, and
impositions, including interest and penalties
thereon or with respect thereto.
1933 Act................... The Securities Act of 1933, as amended.
1934 Act................... The Securities Exchange Act of 1934, as amended.
ARTICLE 15
MISCELLANEOUS
15.1 Expenses. (a) Each Party hereto shall bear its own legal, auditing,
trustee, investment banking, regulatory and other expenses in connection with
this Agreement and the transactions contemplated hereby, except that BancGroup
shall bear the expenses of filing the S-4 Registration Statement and satisfying
the conditions set forth in Section 8.2 hereof.
(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. This Agreement shall inure to the benefit of and be binding
upon Acquired Bank, Colonial Bank and BancGroup, and their respective
successors. This Agreement shall not be assignable by any Party without the
prior written consent of the other Party.
15.3 Governing Law. This Agreement shall be governed by, and construed in
accordance with the Laws of the State of Alabama.
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.
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<PAGE> 144
15.7 Construction. Use of the masculine pronoun herein shall be deemed to
refer to the feminine and neuter genders and the use of singular references
shall be deemed to include the plural and vice versa, as appropriate. No
inference in favor of or against any Party shall be drawn from the fact that
such Party or such Party's counsel has drafted any portion of this Agreement.
15.8 Return of Information. In the event of termination of this Agreement
prior to the Effective Date, each Party shall return to the other, without
retaining copies thereof, all confidential or non-public documents, work papers
and other materials obtained from the other Party in connection with the
transactions contemplated in this Agreement and shall keep such information
confidential, not disclose such information to any other person or entity, and
not use such information in connection with its business.
15.9 Equitable Remedies. The parties hereto agree that, in the event of a
breach of this Agreement by either Party, the other Party may be without an
adequate remedy at law owing to the unique nature of the contemplated
transactions. In recognition thereof, in addition to (and not in lieu of) any
remedies at law that may be available to the non-breaching Party, the
non-breaching Party shall be entitled to obtain equitable relief, including the
remedies of specific performance and injunction, in the event of a breach of
this Agreement by the other Party, and no attempt on the part of the
non-breaching Party to obtain such equitable relief shall be deemed to
constitute an election of remedies by the non-breaching Party that would
preclude the non-breaching Party from obtaining any remedies at law to which it
would otherwise be entitled.
15.10 Attorneys' Fees. If any Party hereto shall bring an action at law or
in equity to enforce its rights under this Agreement (including an action based
upon a misrepresentation or the breach of any warranty, covenant, agreement or
obligation contained herein), the prevailing Party in such action shall be
entitled to recover from the other Party its reasonable 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.
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<PAGE> 145
IN WITNESS WHEREOF, Acquired Bank 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: FIRST MACON BANK & TRUST COMPANY
BY: /s/ CAROL W. SOTO BY: /s/ EDWARD P. LOOMIS, JR.
--------------------------------------------- ---------------------------------------------------
ITS: Vice President ITS: President
--------------------------------------------------------
- --------------------------------------------------
(CORPORATE SEAL)
ATTEST: THE COLONIAL BANCGROUP, INC.
BY: /s/ CARLA TOMLIN BY: /s/ W. FLAKE OAKLEY
--------------------------------------------- ---------------------------------------------------
ITS: Assistant Secretary ITS: Chief Financial Officer
- -------------------------------------------- --------------------------------------------------
(CORPORATE SEAL)
ATTEST: THE COLONIAL BANK
BY: /s/ CARLA TOMLIN BY: /s/ W. FLAKE OAKLEY
--------------------------------------------- ---------------------------------------------------
ITS: Assistant Secretary ITS: Chief Financial Officer
-------------------------------------------- --------------------------------------------------
</TABLE>
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<PAGE> 146
APPENDIX B
(T. STEPHEN JOHNSON & ASSOCIATES, INC. LETTERHEAD)
July 24, 1998
Board of Directors
First Macon Bank & Trust Company
501 Walnut Street
Macon, Georgia 31297
Dear Directors:
T. Stephen Johnson & Associates, Inc., Roswell, Georgia ("TSJ&A") has been
asked to render an opinion as to the fairness from a financial point of view of
the consideration to be received by the shareholders of First Macon Bank & Trust
Company ("First Macon") in connection with the proposed merger of First Macon
with and into Colonial BancGroup, Inc. ("BancGroup"), pursuant to an Agreement
and Plan of Merger (the "Merger Agreement") dated as of May 14, 1998 (the
"Merger"). The Merger Agreement calls for each outstanding share of First Macon
common stock to be converted into a number of shares of BancGroup common stock
equal to $56.66 divided 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 New York Stock Exchange ("NYSE") on each of the ten
consecutive trading days ending on the day that is the fifth trading day before
the day on which the Merger becomes effective. However, if BancGroup Common
Stock is acquired by another entity or merged with another entity so that
BancGroup is not the surviving corporation, which acquisition or merger is
publicly announced before the Merger becomes effective, the Market Value shall
be the closing price of BancGroup common stock as reported by the NYSE on the
day prior to the public announcement of such transaction.
TSJ&A is an investment banking and consulting firm that specializes in the
valuation of closely-held corporations and provides fairness opinions as part of
its practice. Because of its prior experience in the appraisal of Southeastern
financial institutions involved in mergers, TSJ&A has developed an expertise in
fairness opinions related to the securities of Southeastern financial
institutions.
TSJ&A was engaged by First Macon March, 1998 to provide to First Macon
financial advise, develop a bid package, and advise First Macon concerning
potential merger partners. As a result of such engagement and the bid process
initiated by TSJ&A, TSJ&A presented First Macon with bids from two financial
institutions, including BancGroup. The BancGroup bid was valued at $61.0 million
and was the highest bid received.
In performing its analysis, TSJ&A relied upon and assumed without
independent verification, the accuracy and completeness of all information
provided to it. TSJ&A has not performed any independent appraisal or evaluation
of the assets of First Macon and BancGroup or any of its subsidiaries. As such,
TSJ&A does not express an opinion as to the fair market value of First Macon.
The opinion of financial fairness expressed herein is necessarily based on
market, economic and other relevant considerations as they exist and can be
evaluated as of July 22, 1998.
In arriving at its opinion, TSJ&A reviewed and analyzed audited and
unaudited financial information through March 31, 1998, regarding First Macon
and BancGroup, various management reports including asset quality reports,
investment market value reports and a 1998 budget for First Macon, current
trading, dividend and analyst earnings projections for BancGroup, the Merger,
Merger Agreement, a draft of this proxy material as well as publicly available
information regarding actual comparable transactions.
The Merger consideration is set at $56.66 per share for each of the
1,076,604 First Macon common shares outstanding for a total of $61.0 million,
converted into BancGroup common shares at the current Market Value. The closing
price for BancGroup common stock on June 15, 1998 was $29.6875 per share. Using
this closing price as the Market Value in the Merger, each First Macon common
share would be converted into the right to receive 1.9085 shares of BancGroup
common stock. The actual number of shares to
B-1
<PAGE> 147
July 24, 1998
Board of Directors
First Macon Bank & Trust Company
Page 2
be received will be based on the Market Value that will be determined just prior
to closing. The number of shares received has an inverse relationship with the
Market Value.
Regardless of the number of shares received, the total merger consideration
equals 3.99 times the March 31, 1998 book value of First Macon common stock and
22.22 times 1997 earnings.
BancGroup currently pays a quarterly dividend of $0.17 per share to its
shareholders equal to $0.68 per share, annualized. During the second quarter,
1998, First Macon paid a dividend of $0.40 per share. Assuming the above
calculated exchange ratio of 1.9085 shares to one, each equivalent First Macon
common share would begin to receive $1.30 per share on an annualized basis.
TSJ&A reviewed the Merger as of May 13, 1998, for the purpose of
determining purchase premiums that could be used in comparing the Merger with
other announced transactions. TSJ&A reviewed the purchase premiums paid in 45
transactions that were announced since January 1, 1998 involving selling
institutions headquartered in the southeastern United States. Of these
transactions, 5 involved selling institutions that have been determined to be
comparable transactions. They include institutions representing commercial bank
institutions with total assets between $100 million and $300 million with total
equity less than 10.00 percent of total assets. A listing of these transactions
is attached. The purchase premiums in the Merger rank with in the range of the
purchase premiums paid in the comparable transactions. On average, the 5
comparable transactions reported an announced deal price to book value of 3.7517
times and an announced deal price to earnings of 29.34 times.
Therefore, in consideration of the above, it is the opinion of TSJ&A that,
based on the structure of the Merger and the analyses that have been performed,
the consideration to be received by the shareholders of First Macon is fair from
a financial point of view.
Sincerely,
/s/ T. STEPHEN JOHNSON & ASSOCIATES, INC.
-------------------------------------
T. Stephen Johnson & Associates, Inc.
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<PAGE> 148
SOUTHEASTERN DEALS
JANUARY 1, 1997 TO PRESENT
<TABLE>
<CAPTION>
ANN'D ANN'D ANN'D
DEAL TGBKPREM/ DEAL
BANK/ BANK/ ANNOUNCE VALUE COREDEPS PR/BK
BUYER ST THRIFT SELLER ST THRIFT DATE STATUS ($M) (%) (%)
- ----- --- ------ ------------------- --- ------ -------- ---------- --------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First Cmnty Bkg
Regions Financial.... AL Bank Svcs GA Bank 02/13/98 Pending 36.4 27.74 318.41
BancorpSouth, Inc.... MS Bank Merchants Capital MS Bank 05/04/98 Pending 63.1 26.42 338.90
Anchor Fin'l Corp.... SC Bank ComSouth Bankshares SC Bank 04/14/98 Pending 83.3 45.37 477.57
Anchor Fin'l Corp.... SC Bank M&M Financial Corp SC Bank 05/01/98 NonBinding 35.7 21.30 313.16
Regions Financial.... AL Bank Village Bankshares FL Bank 03/24/98 Pending 55.4 26.78 427.83
Averages: 29.52 375.17
Medians: 26.78 338.90
<CAPTION>
ANN'D ANN'D SELLER: SELLER: SELLER:
DEAL PR/ DEAL PR/ 1:TOTAL 1:EQTY/ 1:YTD
TG BK 4-QTR ASSETS ASSETS ROAA
BUYER (%) EPS (X) ($000) (%) (%)
- ----- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Regions Financial.... 330.00 21.45 120,630 8.51 1.29
BancorpSouth, Inc.... 347.33 21.01 223,995 6.31 1.40
Anchor Fin'l Corp.... 477.57 36.26 205,572 7.79 1.24
Anchor Fin'l Corp.... 313.16 36.54 156,200 7.30 0.68
Regions Financial.... 427.83 31.46 190,863 6.78 1.10
379.18 29.34 179,452 7.74 1.14
347.33 31.46 190,863 7.79 1.24
</TABLE>
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APPENDIX C
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial
owner of shares held in a voting trust or by a nominee as the record
shareholder.
(2) "Corporate Action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right
when and in the manner required by Code Sections 14-2-1320 through
14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the
value of the shares immediately before the effectuation of the corporate
action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable
under all the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on file
with a corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
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(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's rights.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
SEC. 14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
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(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
SEC. 14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
SEC. 14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
SEC. 14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
SEC. 14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
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SEC. 14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
SEC. 14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
SEC. 14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing under subsection (a) of
this Code section within 30 days after the corporation offered payment for his
or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
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(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
PART 3. JUDICIAL APPRAISAL OF SHARES
SEC. 14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
SEC. 14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation,
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the court may award to these attorneys reasonable fees to be paid out of the
amounts awarded the dissenters who were benefitted.
SEC. 14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
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APPENDIX D
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of May 14, 1998 (the "Agreement"), by and
between First Macon Bank & Trust Company, a Georgia state bank ("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 even date herewith, (the "Merger Agreement"), providing for,
among other things, the merger of Issuer with and into Colonial Bank, a wholly
owned subsidiary of Grantee, with Colonial Bank 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 214,244 shares (as adjusted as set forth herein) (the
"Option Shares"), of Common Stock, par value $1.00 per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (the "Purchase Price")
equal to $56.66; 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.
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, 9.8, 10.1, 10.3, 10.4, 10.6,
10.7 or 10.9 of the Merger Agreement), or (D) eighteen 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's Board of
Directors 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
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subsidiaries representing in either case all or 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 Issue, in any such case other than with Grantee or an
affiliate of Grantee; 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
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of all liens, claims, charges, and encumbrances of any kind whatsoever and
subject to no pre-emptive rights, 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 MAY 14, 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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<PAGE> 159
(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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<PAGE> 160
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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<PAGE> 161
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 state
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.
D-7
<PAGE> 162
(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):
<TABLE>
<S> <C>
If to Issuer to: First Macon Bank & Trust Company
501 Walnut Street
Macon, Georgia 31297
Telecopy Number: (912) 743-5241
Attention: Edward P. Loomis
with a copy to: Arnall, Golden and Gregory
201 Second Street
Suite 1000
Macon, Georgia 31201
Telecopy Number: (912) 743-0239
Attention: Walter H. Bush, Jr. Esq.
If to Grantee to: The Colonial BancGroup, Inc.
P.O. Box 1108
Montgomery, Alabama 36101
Telecopy Number: (334) 240-5315
Attention: W. Flake Oakley, IV
Chief Financial Officer
William A. McCrary
Vice President & Legal Counsel
with a copy to: Willard H. Henson
Miller, Hamilton, Snider & Odom, L.L.C.
One Commerce Street, Suite 305
Montgomery, Alabama 36104
Telecopy Number: (334) 265-4533
</TABLE>
(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.
D-8
<PAGE> 163
(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: FIRST MACON BANK & TRUST COMPANY
By: /s/ CAROL W. SOTO By: /s/ EDWARD P. LOOMIS, JR.
------------------------------------------------- -------------------------------------------------
Its: Vice President Its: President and CEO
-----------------------------------------------------
- -----------------------------------------------------
[CORPORATE SEAL]
ATTEST: THE COLONIAL BANCGROUP, INC.
By: /s/ CARLA TOMLIN By: /s/ W. FLAKE OAKLEY
------------------------------------------------- -------------------------------------------------
Assistant Secretary W. Flake Oakley, IV
Chief Financial Officer
[CORPORATE SEAL]
</TABLE>
D-9
<PAGE> 164
SOLICITED BY
THE BOARD OF
DIRECTORS
PROXY
FIRST MACON BANK & TRUST COMPANY
SPECIAL MEETING OF SHAREHOLDERS
AUGUST 25, 1998
The undersigned hereby appoints Walter H. Bush, Edward P. Loomis, Jr. and
Barney A. Smith, Jr., and either of them, or such other persons as the board of
directors of First Macon Bank & Trust Company ("First Macon"), may designate,
proxies for the undersigned, with full power of substitution, to represent the
undersigned and to vote all of the shares of common stock of First Macon at the
special meeting of shareholders to be held at 10:00 a.m. on August 25, 1998, and
at any and all adjournments thereof.
1. To ratify, adopt, and approve the Agreement and Plan of Merger dated as of
May 14, 1998, pursuant to which First Macon will be merged with and into
Colonial Bank, a wholly owned subsidiary of The Colonial BancGroup, Inc.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. In their discretion, to vote on such other matters as may properly come
before the meeting and to vote upon matters incident to the conduct of the
meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF FIRST MACON
AND WILL BE VOTED AS DIRECTED HEREIN. IF NO DIRECTION IS GIVEN, THIS PROXY WILL
BE VOTED FOR PROPOSAL 1 AND IN ACCORDANCE WITH THE DISCRETION OF THE PROXY
HOLDERS RESPECTING SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE SPECIAL
MEETING AND TO VOTE UPON MATTERS INCIDENT TO THE CONDUCT OF THE SPECIAL MEETING.
Dated: , 1998
----------------------
Phone No:
---------------------
------------------------------
(Signature of Shareholder)
------------------------------
(Signature of Shareholder, if
more than one)
Please sign exactly as your
name appears on the envelope
in which this material was
mailed. If shares are held
jointly, each shareholder must
sign. Agents, executors,
administrators, guardians and
trustees must give full title
as such. Corporations should
sign by their president or
authorized officer.
