Registration No. 333-110580
Filed Pursuant to Rule 424(b)(3)
PEOPLES FLORIDA BANKING CORPORATION
32845 U.S. Highway 19
Palm Harbor, Florida 34682
SPECIAL MEETING OF SHAREHOLDERS
You are cordially invited to attend a special meeting of shareholders
of Peoples Florida Banking Corporation to be held at the main office of Peoples
Bank, 32845 U.S. Highway 19, Palm Harbor, Florida 34682, on Monday,
January 5, 2004, at 5:00 p.m. local time.
At the special meeting you will be asked to vote upon a proposal to
approve the acquisition of Peoples by Synovus Financial Corp. by means of the
merger of Peoples with and into Synovus.
In the merger, each share of Peoples common stock, excluding those
shares of Peoples common stock as to which dissenters' rights have been duly and
validly exercised in accordance with Florida law, will be converted into $14.65
in cash and .7478 shares of Synovus common stock. Because the price of Synovus
common stock fluctuates, the value of the securities you will receive will
fluctuate on a day-to-day basis. Assuming the merger had been completed on
November 28, 2003 you would be entitled to receive $14.65 in cash and Synovus
shares with a market value of approximately $21.43 or each share of Peoples
common stock that you own.
Synovus common stock is traded on the New York Stock Exchange and
Synovus has registered 1,785,000 shares of its common stock for issuance in
connection with the merger.
Peoples has received from its financial advisor, Hovde Financial LLC,
an opinion that the terms of the transaction are fair from a financial point of
view to the shareholders of Peoples.
The merger cannot be completed unless holders of a majority of the
outstanding shares of Peoples common stock approve it. The board of directors
urges you to consider the enclosed material carefully and recommends that you
vote "FOR" approval of the merger.
Whether or not you plan to attend the special meeting, please take the
time to vote by completing and mailing the enclosed proxy card to us. If you
fail to return your card or vote in person, the effect will be a vote against
the merger.
On behalf of the Board of Directors of Peoples, we urge you to vote
"FOR" the merger.
/s/David W. Dunbar
David W. Dunbar
President and Chief Executive Officer
Peoples Florida Banking Corporation
Neither the Securities and Exchange Commission nor any state securities
commission has approved of the securities to be issued in the merger or
determined if this document is accurate or adequate. It is illegal to tell you
otherwise. The securities to be issued in the merger are not savings or deposit
accounts and are not insured by the Federal Deposit Insurance Corporation or any
other governmental agency.
Please see "Risk Factors" beginning on page 10 for a description of the
factors that may affect the value of Synovus common stock to be issued in the
merger and that should be considered by Peoples shareholders with respect to the
merger of Peoples with and into Synovus.
The date of this document is December 1, 2003, and it is first being
mailed to the shareholders of Peoples on or about December 4, 2003.
REFERENCES TO ADDITIONAL INFORMATION
This document incorporates important business and financial information
about Synovus from documents that are not included in or delivered with this
document. The information is available to you without charge upon your written
or oral request. You can obtain documents incorporated by reference in this
document, other than certain exhibits to those documents, by requesting them in
writing or by telephone from Synovus at the following address:
Synovus Financial Corp.
901 Front Avenue, Suite 301
Columbus, Georgia 31901
Attn: G. Sanders Griffith, III
Senior Executive Vice President,
General Counsel & Secretary
Telephone: (706) 649-2267
If you would like to request documents, please do so by December 26,
2003 in order to receive them before the special meeting.
Please see "Where You Can Find More Information" on page 43 for further
information.
PEOPLES FLORIDA BANKING CORPORATION
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held on January 5, 2004
To Our Shareholders:
Notice is hereby given that a special meeting of the shareholders of
Peoples Florida Banking Corporation will be held at the main office of Peoples
Bank, 32845 U.S. Highway 19, Palm Harbor, Florida 34682, on Monday, January 5,
2004, at 5:00 p.m. local time, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the merger
agreement, dated as of October 7, 2003, between Synovus Financial Corp.
and Peoples Florida Banking Corporation. Under the terms of the merger
agreement, Peoples Florida Banking Corporation will be merged into
Synovus, and Peoples Florida Banking Corporation shareholders will
receive shares of Synovus common stock and cash, as more fully
described in the accompanying document dated December 1, 2003.
2. To consider and vote upon such other matters as may properly come
before the special meeting or any adjournments or postponements of the
special meeting.
Only shareholders of record on December 1, 2003 are entitled to receive
notice of the special meeting and to vote at the special meeting.
The merger is described in the accompanying document, which you are
urged to read carefully. A copy of the merger agreement is attached as Appendix
"A" to the accompanying document.
EACH SHAREHOLDER OF PEOPLES HAS THE RIGHT TO DISSENT FROM THE MERGER
AND TO OBTAIN THE "FAIR VALUE" OF SUCH SHAREHOLDER'S SHARES, PROVIDED THAT SUCH
SHAREHOLDER PERFECTS HIS, HER OR ITS DISSENTERS' RIGHTS IN ACCORDANCE WITH
SECTION 607.1320 OF THE FLORIDA BUSINESS CORPORATION ACT. PLEASE SEE THE
DISCUSSION OF DISSENTERS' RIGHTS IN THE ACCOMPANYING DOCUMENT AND SECTIONS
607.1301, 607.1302 AND 607.1320 OF THE FLORIDA BUSINESS CORPORATION ACT, COPIES
OF WHICH ARE ATTACHED AS APPENDIX "B" TO THE ACCOMPANYING DOCUMENT.
By Order of the Board of Directors
/s/David W. Dunbar
David W. Dunbar
President and Chief Executive Officer
Palm Harbor, Florida
December 1, 2003
Please mark, date, sign and promptly return the enclosed proxy card so
that your shares may be voted in accordance with your wishes and so that a
quorum may be assured. The giving of a proxy does not affect your right to vote
in person if you attend the special meeting.
The Board of Directors of Peoples Florida Banking Corporation
Unanimously Recommends that You Vote in Favor of the Merger.
Do Not Send Stock Certificates With Your Proxy Card.
TABLE OF CONTENTS
Caption Page
-------- -----
QUESTIONS AND ANSWERS ABOUT THE MERGER............................................................................1
WHO CAN HELP ANSWER YOUR QUESTIONS................................................................................2
SUMMARY...........................................................................................................3
The Companies..................................................................................................3
The Merger.....................................................................................................3
Peoples' Reasons for the Merger................................................................................3
Opinion of Financial Advisor...................................................................................4
Peoples Special Shareholders' Meeting..........................................................................4
Conditions to the Merger.......................................................................................4
Accounting Treatment ..........................................................................................5
Material United States Federal Income Tax Consequences of the Merger...........................................5
Effective Date of Merger.......................................................................................5
Dissenters' Rights.............................................................................................5
Risk Factors...................................................................................................5
Interests of Peoples' Directors and Executive Officers in the Merger...........................................5
Termination of the Merger Agreement............................................................................6
No Solicitation................................................................................................6
Effect of Merger on Rights of Peoples Shareholders.............................................................6
Comparative Market Price Information and Dividends.............................................................6
SELECTED FINANCIAL DATA...........................................................................................8
RISK FACTORS.....................................................................................................10
THE SPECIAL MEETING..............................................................................................10
Date, Time and Place..........................................................................................10
Matters to Be Considered at the Special Meeting...............................................................10
Record Date; Stock Entitled to Vote; Quorum...................................................................10
Vote Required.................................................................................................11
Stock Ownership of Peoples Directors and Executive Officers...................................................11
Voting of Proxies.............................................................................................11
Revoking Proxies..............................................................................................11
Proxy Solicitation............................................................................................12
Recommendation of the Peoples Board...........................................................................12
THE MERGER.......................................................................................................12
Structure of the Merger.......................................................................................12
Terms of the Merger and Effective Date........................................................................12
Background of the Merger......................................................................................13
Recommendation of the Peoples Board and Reasons for the Merger................................................14
Opinion of Peoples' Financial Advisor.........................................................................15
Conditions to the Merger......................................................................................19
No Solicitation...............................................................................................21
Conduct of Business of Peoples Pending the Merger.............................................................21
Regulatory Approvals..........................................................................................21
Waiver and Amendment..........................................................................................22
Termination and Termination Fee...............................................................................22
Interests of Peoples' Directors and Executive Officers in the Merger..........................................23
Employee Benefits.............................................................................................24
Material United States Federal Income Tax Consequences of the Merger..........................................24
Backup Witholding and Information Reporting...................................................................25
Accounting Treatment..........................................................................................25
i
Expenses......................................................................................................25
New York Stock Exchange Listing...............................................................................25
Resales of Synovus Common Stock...............................................................................26
DESCRIPTION OF STOCK AND EFFECT OF MERGER ON RIGHTS OF
PEOPLES SHAREHOLDERS.............................................................................................26
Synovus Common Stock..........................................................................................27
Peoples Common Stock..........................................................................................32
DISSENTERS' RIGHTS...............................................................................................32
DESCRIPTION OF SYNOVUS...........................................................................................33
Business......................................................................................................33
Management and Additional Information.........................................................................34
DESCRIPTION OF PEOPLES...........................................................................................34
Business......................................................................................................34
Market Area...................................................................................................35
Lending Activities............................................................................................35
Competition...................................................................................................35
Employees.....................................................................................................35
Description of Property.......................................................................................36
Legal Proceedings.............................................................................................36
Related Party Transactions....................................................................................36
Principal Shareholders........................................................................................36
REGULATORY MATTERS...............................................................................................38
General.......................................................................................................38
Dividends.....................................................................................................38
Capital Requirements..........................................................................................39
Commitments to Subsidiary Banks...............................................................................40
Prompt Corrective Action......................................................................................40
Safety and Soundness Standards................................................................................41
Depositor Preference Statute..................................................................................41
Gramm-Leach-Bliley Act........................................................................................42
LEGAL MATTERS....................................................................................................42
EXPERTS..........................................................................................................42
OTHER MATTERS....................................................................................................42
SHAREHOLDER PROPOSALS............................................................................................42
WHERE YOU CAN FIND MORE INFORMATION..............................................................................43
FORWARD-LOOKING STATEMENTS.......................................................................................44
PRO FORMA FINANCIAL INFORMATION..................................................................................45
APPENDIX A Agreement and Plan of Merger.....................................................................A-1
APPENDIX B Florida Dissenters' Rights Statute...............................................................B-1
APPENDIX C Fairness Opinion of Hovde Financial LLC .........................................................C-1
APPENDIX D Tax Opinion of KPMG LLP..........................................................................D-1
ii
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: Why is the merger being proposed?
A: Peoples' board of directors believes the merger is in the best
interests of Peoples and will provide significant benefits to its
shareholders. Synovus' board of directors believes that the acquisition
of Peoples will offer Synovus the opportunity to expand its banking
operations in an attractive banking market, the central west coast of
Florida. To review the background and reasons for the merger in greater
detail, see pages 13 through 15.
Q: What will I receive in the merger?
A: Peoples shareholders will receive $14.65 in cash and .7478 shares of
Synovus common stock for each share of Peoples common stock they hold.
Because the market price of Synovus common stock fluctuates, the value
of securities you will receive will fluctuate on a day-to-day basis.
Synovus will not issue fractional shares in the merger. Instead,
Peoples shareholders will receive a cash payment, without interest, for
the value of any fraction of a share of Synovus common stock that they
would otherwise be entitled to receive, based upon the closing price of
Synovus common stock on the last business day immediately prior to the
effective date of the merger.
Q: What happens as the market price of Synovus common stock fluctuates?
A: Since the market price of Synovus common stock fluctuates, at the
time you vote you will not know what the shares will be worth when
issued in the merger.
Q: When is the merger expected to be completed?
A: We expect to complete the merger in the first quarter of 2004.
Q: What are the income tax consequences of the merger to me?
A: KPMG LLP has issued an opinion, which it will confirm as of the
effective date of the merger, that the merger will qualify as a
reorganization under Section 368(a)(1)(A) of the Internal Revenue Code.
Peoples shareholders will recognize gain as a result of the surrender
of Peoples common stock in exchange for the receipt of a combination of
shares of Synovus stock and cash but the amount of the gain recognized
will not exceed the amount of cash received in the merger. Determining
the actual tax consequences of the merger to you as an individual
taxpayer can be complicated. The tax treatment will depend on your
specific situation and many variables not within our control. You
should consult your own tax advisor for a full understanding of the tax
consequences to you of the merger.
Q: What am I being asked to vote upon and what is the required
shareholder vote?
A: You are being asked to approve the merger of Peoples into Synovus.
Approval of the proposal requires the affirmative vote of holders of a
majority of the shares of outstanding common stock of Peoples. Peoples'
board of directors encourages you to vote at the special meeting. The
Peoples board of directors has unanimously approved and adopted the
merger agreement and recommends that Peoples shareholders vote FOR the
approval of the merger.
Q: What should I do now?
A: You should read this document carefully and determine whether you
desire to vote for approval of the merger.
Q: Should I send in my stock certificates now?
A: No. If the merger is completed, we will send you written instructions
for exchanging your Peoples common stock certificates for Synovus
common stock certificates.
1
WHO CAN HELP ANSWER YOUR QUESTIONS
If you want additional copies of this document, or if you want to ask
any questions about the merger, you should contact:
Peoples Florida Banking Corporation
32845 U.S. Highway 19
Palm Harbor, Florida 34682
Attn: Wayne B. Bard
Chief Financial Officer
Telephone: (727) 786-6677
2
SUMMARY
This summary highlights selected information from this document and may
not contain all the information that is important to you. For a more complete
understanding of the merger and for a more complete description of the legal
terms of the merger, you should read this entire document carefully, as well as
the additional documents to which we refer you, including the merger agreement.
The Companies (page 33)
Synovus Financial Corp.
Suite 301, One Arsenal Place
901 Front Avenue
Columbus, Georgia 31901
Telephone: (706) 649-4751
Synovus Financial Corp., a Georgia corporation, is a financial services
company whose stock is traded on the New York Stock Exchange under the symbol
"SNV." Synovus is registered as a bank holding company under the Bank Holding
Company Act of 1956 and became a financial holding company in April 2000. As of
September 30, 2003, Synovus had total assets of approximately $21 billion, total
deposits of $15.5 billion, shareholders' equity of $2.2 billion and net loans of
$15.7 billion. Synovus and its 40 commercial banking affiliates presently
provide banking services at approximately 260 offices located in Georgia,
Alabama, Florida, South Carolina and Tennessee. Synovus also provides a variety
of other financial services including mortgage banking, securities brokerage,
insurance agency, equipment leasing and trust services. In addition, Synovus
holds an 81% interest in Total System Services, Inc. Total System Services, Inc.
is an information technology processor of credit, debit, stored value,
commercial and retail cards whose stock is traded on the New York Stock
Exchange.
Peoples Florida Banking Corporation
32845 U.S. Highway 19
Palm Harbor, Florida 34682
Telephone: (727) 786-6677
Peoples Florida Banking Corporation is registered as a bank holding
company under the Bank Holding Company Act. As of September 30, 2003, Peoples
had total assets of approximately $250 million, total deposits of $196 million,
shareholders' equity of $18 million and net loans of $178 million. Peoples has
one banking subsidiary, Peoples Bank, Palm Harbor, Florida, which provides
services through its four full-service banking offices. All references to
Peoples refer to Peoples Florida Banking Corporation and its subsidiary bank,
unless the context otherwise requires.
The Merger (page 12)
If the merger is approved by Peoples' shareholders, Peoples will be
merged into Synovus, and Peoples' banking subsidiary, through which it operates,
will become a wholly owned subsidiary of Synovus. The merger requires the
approval of the holders of a majority of the Peoples common stock outstanding on
the record date. The directors and executive officers of Peoples together own
approximately 37% of the shares entitled to vote at the meeting, and we expect
them to vote their shares in favor of the merger.
We have attached the merger agreement as Appendix "A" to this document.
We encourage you to read the merger agreement, as it is the legal document that
governs the merger.
Peoples' Reasons for the Merger (page 14)
In reaching its decision to approve and recommend approval of the
merger agreement, the Peoples board of directors considered a number of factors,
including the following:
* the value of the consideration to be received by Peoples shareholders
relative to the book value and earnings per share of Peoples common
stock;
3
* certain information concerning the financial condition, results of
operations and business prospects of Synovus;
* the fact that, immediately following the merger, Peoples Bank would
continue to operate under its existing name and management team;
* the financial terms of recent business combinations in the financial
services industry and a comparison of the multiples of selected
combinations with the terms of the proposed transaction with Synovus;
* the average daily trading volumes of shares of Synovus common stock;
* the alternatives to the merger, including remaining an independent
institution;
* the competitive and regulatory environment for financial institutions
generally;
* the expanded range of banking services that the merger will allow
Peoples Bank to provide its customers;
* the enhanced career opportunities and benefits afforded Peoples Bank
employees as a result of the merger;
* the expected new dividend yield for Peoples shareholders from owning
Synovus common stock;
* the fact that the merger will enable Peoples shareholders to exchange
their shares of Peoples common stock for a combination of cash and
shares of common stock of a regional bank, the stock of which is
widely held and actively traded, and that the stock portion of the
consideration will be received tax-free; and
* the opinion of Hovde Financial LLC, that the consideration to be
received by Peoples shareholders as a result of the merger is fair
from a financial point of view.
Opinion of Financial Advisor (page 15)
Peoples asked its financial advisor, Hovde Financial LLC, for advice on
the fairness, from a financial point of view, of the merger consideration to
Peoples' shareholders. Hovde Financial has delivered its written opinion to the
Peoples board that as of October 7, 2003, the date following the day the Peoples
board approved the merger agreement, the merger consideration was fair, from a
financial point of view, to the shareholders of Peoples. The opinion is attached
as Appendix "C" to this document. You should read this opinion completely to
understand the procedures followed, assumptions made, matters considered and
limitations of the review undertaken by Hovde Financial. Hovde Financial's
opinion is addressed to the Peoples board and does not constitute a
recommendation to any shareholder as to how to vote with respect to matters
relating to the proposed merger. You should also be aware that the opinion of
Hovde Financial does not address the fairness of the merger consideration at the
time the merger is completed or at any time other than October 7, 2003.
Peoples Special Shareholders' Meeting (page 10)
The special meeting will be held at the main office of Peoples Bank,
32845 U.S. Highway 19, Palm Harbor, Florida on Monday,January 5, 2004, at
5:00 p.m. local time.
Conditions to the Merger (page 19)
Consummation of the merger is subject to various conditions, including:
* recipt of Peoples shareholder approval
* receipt of the necessary regulatory approvals;
* receipt of an opinion from KPMG LLP regarding tax aspects of the
merger; and
* satisfaction of other customary closing conditions.
The regulatory approvals necessary to consummate the merger and the
other transactions contemplated by the merger agreement include the approval of
the Board of Governors of the Federal Reserve System, the Georgia
4
Department of Banking and Finance and the Florida Department of Financial
Services. The merger has not yet been approved by the foregoing regulatory
agencies.
Accounting Treatment (page 25)
The merger will be accounted for as a purchase for financial reporting
purposes.
Material United States Federal Income Tax Consequences of the Merger (page 24)
KPMG LLP has issued an opinion, which it will confirm as of the
effective date of the merger, that the merger will qualify as a reorganization
under Section 368(a)(1)(A) of the Internal Revenue Code. A copy of this opinion
is attached to this document as Appendix "D." Peoples shareholders will
recognize gain as a result of the surrender of Peoples common stock in exchange
for the receipt of a combination of shares of Synovus common stock and cash but
the amount of the gain recognized will not exceed the amount of cash received in
the merger. This tax treatment will not apply to any Peoples shareholder that
exercises dissenters' rights. Determining the actual tax consequences of the
merger to you as an individual taxpayer can be complicated. The tax treatment
will depend on your specific situation and many variables not within our
control. You should consult your own tax advisor for a full understanding of the
merger's tax consequences.
Effective Date of Merger (page 12)
The merger will become effective when all of the conditions to the
merger have been satisfied and Articles of Merger are filed with the Georgia
Secretary of State and the Department of State of Florida. Subject to the
conditions specified in the merger agreement, the parties anticipate that the
merger will become effective in the first quarter of 2004. There can be no
assurances, however, as to whether or when the merger will occur.
Dissenters' Rights (page 32)
Holders of Peoples common stock are entitled to dissent from the merger
under Florida law and, if the merger is consummated, to receive payment in cash
for the fair value of their shares, upon compliance with the dissenters' rights
provisions of the Florida Business Corporation Act. To preserve these rights, a
shareholder must not vote in favor of the merger and must deliver to Peoples a
written notice of intent to demand payment for such shareholder's shares before
the vote on the merger at the special meeting of Peoples shareholders. The
delivery of a proxy or vote against the merger is not considered such a notice.
Failure to follow required procedures may result in the loss of statutory
dissenters' rights. Dissenters' Rights are addressed in more detail beginning on
page 32.
Risk Factors (page 10)
In addition to the other information included in this document,
including the matters addressed in "Forward-Looking Statements" on page 44, you
should carefully consider the material risk factors to the merger, beginning on
page 10, in determining whether to vote in favor of the merger.
Interests of Peoples' Directors and Executive Officers in the Merger (page 23)
Certain executive officers of Peoples have interests in the merger that
are different from your interests. For example, David W. Dunbar, Chairman,
President and Chief Executive Officer of Peoples, has entered into an employment
agreement with Synovus, effective on the date the merger is completed, providing
for his continued employment as the Chairman, President and Chief Executive
Officer of Peoples Bank for a period of five years following the merger. In
addition, Mr. Dunbar, James P. Nelson, Executive Vice President of Peoples, and
Wayne B. Bard, Senior Vice President and Chief Financial Officer of Peoples,
will be entitled to the distribution of certain vested deferred compensation
benefits as a result of the "change of control." Also, Mr. Dunbar, Mr. Nelson,
Mr. Bard and each of the members of Peoples' board hold options that will become
exercisable immediately prior to the merger as a result of the "change of
control."
5
Termination of the Merger Agreement (page 22)
Either Peoples or Synovus may terminate the merger agreement under the
following circumstances, among others:
* the mutual consent of Synovus and Peoples;
* the merger is not completed before March 31, 2004, unless the failure
to consummate by this time is due to a breach of the merger agreement
by the party seeking to terminate; or
* failure of any of the conditions set forth in the merger agreement
unless the failure is due to a breach of the merger agreement by the
party seeking to terminate.
Also, Peoples may terminate the merger agreement if:
* during the five (5) business days immediately prior to the effective
date of the merger, the total cash consideration paid by Synovus is
greater than fifty-five (55%) of the sum of the total cash
consideration plus the total stock consideration such that KPMG LLP
cannot issue a tax opinion in which it opines that the merger shall
qualify for a tax-free exchange pursuant to Section 368(a)(1)(A) of
the Internal Revenue Code; or
* the closing price of Synovus common stock on the NYSE decreases by
more than 15% from $24.12 and such decrease as measured from August
19, 2003 exceeds the change in the aggregate closing price per share
of an index of Southeastern Bank Holding Company stocks on any date of
determination by more than 15 percentage points.
Synovus may terminate the merger agreement if the closing price of
Synovus common stock on the NYSE exceeds $24.12 by 15% or more and such
percentage increase over $24.12, as measured from the first date the closing
price of Synovus common stock on the NYSE exceeds $24.12, exceeds the change in
the aggregate closing price per share of the above referenced index of
Southeastern Bank Holding Company stocks by more than 15 percentage points.
No Solicitation (page 21)
Peoples has agreed that until the completion of the merger, Peoples
will not directly or indirectly take any specified actions with respect to any
acquisition proposal. However, notwithstanding these restrictions, Peoples may,
if necessary to comply with its fiduciary obligations and subject to other
qualifications and conditions, furnish information and engage in discussions or
negotiations in response to unsolicited acquisition proposals.
Effect of Merger on Rights of Peoples Shareholders (page 26)
Peoples is a Florida corporation and, therefore, the rights of
shareholders of Peoples currently are determined by reference to the Florida
Business Corporation Act and Peoples' Articles of Incorporation and bylaws. At
the effective time of the merger, shareholders of Peoples will become
shareholders of Synovus, which is a Georgia corporation. As a result, your
rights as shareholders of Synovus will then be determined by reference to the
Georgia Business Corporation Code and Synovus' Articles of Incorporation and
bylaws. The laws of these jurisdictions vary. There are also various differences
between Synovus' Articles of Incorporation and bylaws and Peoples' Articles of
Incorporation and bylaws.
Comparative Market Price Information and Dividends
Synovus common stock is listed on the NYSE under the symbol "SNV." On
September 30, 2003, there were 234 holders of record of Peoples common stock. No
established trading market for Peoples common stock exists. Transactions in
Peoples common stock are infrequent and are negotiated privately between the
persons involved in these transactions. These transactions are not reported on
an exchange or other organized trading system. For these reasons, Peoples lacks
reliable data regarding recent trading activity in Peoples common stock. To the
knowledge of management of Peoples, the last transaction in Peoples common stock
occurred on May 1, 2003 when 1,875 shares were sold at a price of $8.50 per
share.
6
The following table presents, for October 6, 2003 and November 28, 2003:
* the last reported sale price of one share of Synovus common stock, as
reported on the NYSE Composite Transaction Tape;
* the most recent sales price of Peoples common stock to the knowledge
of management of Peoples; and
* the equivalent per share price of Peoples common stock, giving effect
to the merger.
October 6, 2003 was the last full trading day before the public
announcement of the proposed merger, and November 28, 2003, was the last day for
which such information could be calculated before the date of this document. The
equivalent price per share data for Peoples common stock has been determined by
multiplying the last reported sale price of one share of Synovus common stock on
each of these dates by the per share exchange ratio and then adding the cash
portion of the consideration of $14.65.
Equivalent Price Per Share of
Synovus Peoples Peoples
Date Common Stock Common Stock Common Stock
---- ------------ ------------ -----------
October 6, 2003 $26.61 $8.50 $34.55
November 28, 2003 $28.66 $8.50 $36.08
Represents the most recent transaction in the common stock of Peoples, to the knowledge of Peoples,
which occurred on May 1, 2003.
Synovus common stock is listed on the NYSE under the symbol "SNV."
There is no trading market for Peoples common stock. Peoples has never paid a
cash dividend. The table below shows the high and low closing prices of Synovus
common stock and cash dividends declared per share for Synovus for the last two
fiscal years plus the interim period.
7
Synovus
-------
Cash
High Low Dividends
---- --- ---------
Quarter Ended
March 31, 2003 $20.88 $17.89 $.1650
June 30, 2003 23.62 17.31 0.1650
September 30, 2003 26.69 21.35 0.1650
Quarter Ended
March 31, 2002 $31.74 $24.75 $0.1475
June 30, 2002 30.39 24.31 0.1475
September 30, 2002 27.01 20.17 0.1475
December 31, 2002 21.90 16.81 0.1475
Quarter Ended
March 31, 2001 $28.31 $24.04 $0.1275
June 30, 2001 31.77 26.00 0.1275
September 30, 2001 34.45 24.63 0.1275
December 31, 2001 28.00 23.02 0.1275
SELECTED FINANCIAL DATA
The following tables show summary historical financial data for
Synovus. The information in the following tables was derived from historical
financial information contained in annual and quarterly reports and other
information Synovus has filed with the SEC. When you read the summary financial
information provided in the following table, you should also read the historical
financial information contained in annual and quarterly reports and other
information Synovus has filed with the SEC. See "WHERE YOU CAN FIND MORE
INFORMATION" on page 43.
[Rest of page intentionally left blank]
8
SYNOVUS FINANCIAL CORP.
Selected Financial Data
(Dollars in thousands, except per share data)
Nine Months Ended
September 30
(Unaudited) Years Ended December 31,
---------------------------- --------------------------------------------------------------
2003 2002 2002 2001 2000 1999 1998
---------------------------- --------------------------------------------------------------
Income Statement Data:
Net interest income $ 565,633 530,897 $ 717,504 629,791 562,332 513,294 455,065
Provision for losses on loans 51,977 49,497 65,327 51,673 44,341 34,007 26,882
Non-interest income 1,013,739 900,278 1,234,822 1,164,217 1,065,415 944,935 768,385
Non-interest expense 1,057,353 958,183 1,299,470 1,232,483 1,155,176 1,061,719 881,983
Net income 286,286 260,919 365,347 311,616 262,557 225,307 196,465
Balance Sheet Data:
Investment securities $ 2,431,950 2,162,135 $ 2,237,725 2,088,287 2,077,928 1,993,957 1,877,473
Loans, net of unearned income 15,918,573 14,058,387 14,463,909 12,417,917 10,751,887 9,068,239 7,603,605
Total assets 21,023,394 18,510,215 19,036,246 16,654,891 14,908,092 12,547,001 10,811,592
Deposits 15,524,087 13,644,457 13,928,834 12,146,198 11,161,710 9,440,087 8,797,412
Long-term debt 1,684,798 1,294,091 1,336,200 1,052,943 840,859 318,620 131,802
Average total shareholders' 2,149,914 1,804,206 1,855,492 1,548,030 1,303,634 1,165,426 1,013,334
equity
Average total assets 20,205,385 17,034,528 17,414,654 15,375,004 13,466,385 11,438,696 9,827,925
Per Share Data:
Net income - basic $ 0.95 0.88 $ 1.23 1.07 0.93 0.80 0.72
Net income - diluted 0.94 0.87 1.21 1.05 0.92 0.80 0.71
Cash dividends declared 0.50 0.44 0.59 0.51 0.44 0.36 0.29
Book value per share 7.22 6.54 6.79 5.75 4.98 4.35 3.99
Ratios:
Return on assets 1.89 % 2.05 2.10 % 2.03 1.95 1.97 2.00
Return on equity 17.80 19.34 19.69 20.13 20.14 19.33 19.39
Dividend payout ratio 53.19 50.57 48.76 48.57 47.83 45.00 40.85
Average shareholders'
equity to average assets 10.64 10.59 10.65 10.07 9.68 10.19 10.31
--------------------------------
Ratios for the nine month periods have been annualized.
Determined by dividing dividends declared per share (excluding pooled
subsidiaries) by net income per diluted share.
9
RISK FACTORS
In addition to the other information included in this document, Peoples
shareholders should carefully consider the matter described below in voting on
the issuance of shares of Synovus common stock in the merger.
You may receive shares of Synovus common stock with a market value
lower than you expected.
Synovus is offering to a pay a total net consideration of $14.65 in
cash and .7478 shares of Synovus common stock for each share of Peoples common
stock. This exchange ratio will not be adjusted for changes in the market price
of Synovus common stock. Any change in the price of Synovus common stock prior
to the merger will affect the value that Peoples shareholders will receive in
the merger. If the market price of Synovus common stock declines, then the value
of the total net consideration you will receive will decline as well. Stock
price variations may result from a variety of factors that are beyond our
control, including changes in, or market perceptions of changes in, the
business, operations or prospects of Synovus, market assessments of the
likelihood the merger will be consummated, regulatory considerations, general
market and economic conditions and other factors.
The price of Synovus common stock at the effective date of the merger
may vary from its prices on (a) October 7, 2003, the date the merger agreement
was executed and the fairness opinion was rendered, (b) the date of this
document and (c) the date of Peoples' special meeting of shareholders. Because
the effective date of the merger will follow the date of Peoples' special
meeting of shareholders, at the time of the special meeting you will not know
the market value of the Synovus common stock that you may receive upon
completion of the merger.
THE SPECIAL MEETING
We are furnishing this document to shareholders of Peoples in
connection with the solicitation of proxies by the board of directors of Peoples
for use at the special meeting of its shareholders.
Date, Time and Place
The special meeting will be held at the main office of Peoples Bank,
32845 U.S. Highway 19, Palm Harbor, Florida 34684 on Monday, January 5, 2004,
at 5:00 p.m. local time.
Matters to Be Considered at the Special Meeting
At the special meeting, the shareholders of Peoples will be asked to
consider and vote upon the approval of the merger, and such other matters as may
properly be brought before the special meeting.
The Peoples board has unanimously approved the merger agreement and the
transactions contemplated by the merger agreement and recommends that you vote
"FOR" approval of the merger.
Record Date; Stock Entitled to Vote; Quorum
Only holders of record of Peoples common stock at the close of business
on December 1, 2003, the record date for the Peoples special meeting, are
entitled to receive notice of the special meeting and to vote at the special
meeting. Holders of record of shares of Peoples common stock on the record date
are each entitled to one vote per share on each matter to be considered at the
special meeting.
On the record date, December 1, 2003, 2,119,434 shares of Peoples
common stock were issued and outstanding and were held by 234 holders of record.
A majority of all the issued and outstanding shares of Peoples common
stock, present in person or by proxy, will constitute a quorum for the special
meeting.
10
Vote Required
The approval of the merger requires the affirmative vote of the holders
of a majority of the outstanding shares of Peoples common stock.
The merger does not require the approval of Synovus' shareholders.
Synovus' board of directors approved the merger on October 7, 2003.
Stock Ownership of Peoples Directors and Executive Officers
At the close of business on the record date, the directors and
executive officers of Peoples owned and were entitled to vote approximately
785,326 shares of Peoples common stock. This ownership represents approximately
37% of the shares of Peoples common stock outstanding on that date.
Voting of Proxies
Shares represented by all properly executed proxies received in time
for the special meeting will be voted at the special meeting according to the
voting instructions of the shareholder who executed the proxy. Properly executed
proxies which do not contain voting instructions will be voted in favor of the
merger.
Peoples intends to count shares of Peoples common stock present in
person at the special meeting but not voting, and shares of Peoples common stock
for which proxies are received but with respect to which holders of shares have
abstained from voting on or voted against any matter, as present at the special
meeting for purposes of determining the presence or absence of a quorum for the
special meeting.
For voting purposes at the special meeting, only shares voted in favor
of approval of the merger will be counted as favorable votes for such approval
and adoption. A shareholder's failure to submit a proxy, failure to vote in
person, or abstention from voting with respect to the approval of the merger
will have the same effect as if the shareholder voted against approval of the
merger.
Shares held in street name that have been designated by brokers on
proxy cards as not voted with respect to the merger ("broker non-votes") will
not be counted as votes cast on the merger. Shares with respect to which proxies
have been marked as abstentions also will not be counted as votes cast on the
merger. Shares with respect to which proxies have been marked as abstentions and
broker non-votes will, however, be treated as shares present for purposes of
determining whether a quorum is present.
The proposal to adopt the merger agreement is a non-discretionary item,
meaning that brokerage firms may not vote shares in their discretion on behalf
of a client if the client has not furnished voting instructions. Because the
merger must be approved by the holders of a majority of the outstanding shares
of Peoples common stock, abstentions and broker non-votes will have the same
effect as a vote against the merger at the meeting. Accordingly, the Peoples
board urges Peoples shareholders to complete, date and sign the accompanying
proxy and return it promptly in the enclosed postage prepaid envelope.
We do not expect that any matters other than the proposal to approve
the merger will be brought before the special meeting. However, if other matters
are properly presented for a vote, the persons named as proxies will vote in
accordance with their judgment with respect to those matters.
The persons named as proxies by a Peoples shareholder may propose and
vote for one or more adjournments of the special meeting to permit further
solicitations of proxies in favor of approval of the merger. However, the
persons named as proxies will not vote any shares which are voted against the
approval of the merger in favor of such an adjournment.
Revoking Proxies
Peoples shareholders of record may revoke their proxies at any time
before the time their proxies are voted at the special meeting. A shareholder
may revoke a proxy by taking any of the following actions:
11
* sending a written notice indicating his or her intention to revoke the
proxy, including by telegram or facsimile, to the Corporate Secretary
of Peoples;
* submitting a later-dated signed proxy; or
* attending the special meeting and voting or abstaining from voting in
person.
Attendance at the special meeting alone without voting or abstaining
from the vote on the merger will not revoke a proxy. Any written notice of a
revocation of a proxy must be sent so that it will be delivered to the Corporate
Secretary of Peoples, at Peoples' principal executive offices, before the voting
begins at the special meeting.
Proxy Solicitation
Peoples will pay the costs of printing this document and all other
costs of soliciting proxies. In addition to solicitation by mail, the directors,
officers and employees of Peoples may solicit proxies from shareholders of
Peoples by telephone or by other means of communication. These directors,
officers and employees will not be additionally compensated but may be
reimbursed for reasonable out-of-pocket expenses in connection with the
solicitation. Peoples will arrange with brokerage firms and other custodians,
nominees and fiduciaries for the forwarding of solicitation material to the
beneficial owners of stock held of record by such persons, and Peoples will
reimburse these record holders for their reasonable out-of-pocket expenses.
Recommendation of the Peoples Board
The Peoples board has unanimously adopted the merger agreement and
believes that the proposed transaction is fair to and in the best interests of
Peoples and its shareholders. The Peoples board unanimously recommends that
Peoples shareholders vote "FOR" approval of the merger.
THE MERGER
The following is a description of the material information pertaining
to the merger. This description is qualified in its entirety by reference to the
full text of the merger agreement, a copy of which is attached as Appendix "A"
to this document and is incorporated by reference. All shareholders are urged to
read carefully the merger agreement, as well as the other appendices, in their
entirety.
The boards of directors of Synovus and Peoples have approved, and the
proper officers of Synovus and Peoples have executed and delivered, the merger
agreement.
Structure of the Merger
On the effective date of the merger, Peoples will merge with and into
Synovus, with Synovus as the surviving corporation and retaining the name
Synovus Financial Corp. The articles of incorporation and bylaws of Synovus in
effect immediately prior to the effective date of the merger will remain the
articles of incorporation and bylaws of the surviving corporation after the
effective date.
Terms of the Merger and Effective Date
On the effective date of the merger, which will be specified in the
Articles of Merger to be filed with the Georgia Secretary of State and the
Department of State of Florida, each issued and outstanding share of Peoples
common stock as to which a dissenters' right has not been exercised will be
converted into the right to receive $14.65 in cash and .7478 shares of Synovus
common stock.
You should obtain current stock price quotations for Synovus common
stock. The market price of Synovus common stock will fluctuate before and after
completion of the merger. You will not know when you vote on the merger
precisely what the shares of Synovus common stock will be worth when issued in
the merger.
12
After the effective date of the merger, outstanding certificates
representing shares of Peoples common stock will represent shares of Synovus
common stock and cash. Certificates representing shares of Peoples common stock
may be surrendered to Synovus by the Peoples shareholders on or after the
effective date of the merger for new certificates representing shares of Synovus
common stock and cash. Until so surrendered to Synovus, the certificates which
previously represented shares of Peoples common stock will be deemed for all
corporate purposes to evidence the ownership of the respective number of shares
of Synovus common stock and cash which the holders are entitled to receive upon
their surrender to Synovus except for the payment of dividends, which is subject
to the exchange of stock certificates.
Until the stock certificates nominally representing shares of Peoples
common stock are surrendered to Synovus in exchange for certificates
representing shares of Synovus common stock and cash, no dividends payable as of
any date after the effective date of the merger on the shares of Synovus common
stock represented by the Peoples common stock certificates will be paid.
However, Forms 1099 reporting the payment of such dividends will be filed with
the Internal Revenue Service and mailed to each shareholder. Upon the surrender
to Synovus of the Peoples common stock certificates, Synovus will pay to the
record holders the cash consideration and the amount of dividends which
previously had become payable, without interest, upon the shares of Synovus
common stock represented by the outstanding Peoples common stock certificates.
Synovus will not issue fractional shares of Synovus common stock in the
merger. Instead, Synovus will pay cash, without interest, in lieu of fractional
shares, in an amount equal to such fractional part of a share of Synovus common
stock multiplied by the closing price per share of Synovus common stock on the
last business day immediately prior to the effective date of the merger.
The delivery of Synovus stock certificates and other amounts may be
subject to forfeiture under applicable escheat laws if Peoples stock
certificates are not surrendered for exchange within the legally specified
periods of time, which vary with the state of residence of the certificate
holder. Therefore, we urge all Peoples shareholders to surrender their Peoples
stock certificates at the earliest possible date after consummation of the
merger in accordance with instructions provided to you by Synovus in the letter
of transmittal described in the following paragraph.
As soon as practicable following consummation of the merger, Synovus
will send each shareholder of Peoples common stock a letter of transmittal
explaining the procedure to be followed in exchanging certificates representing
shares of Peoples common stock for certificates representing shares of Synovus
common stock and cash. Until the letter of transmittal is received, shareholders
of Peoples should continue to hold their certificates representing shares of
Peoples common stock. Do not send any Peoples stock certificates with your proxy
card.
After the effective date of the merger, each outstanding Peoples stock
option will be converted into an option to acquire shares of Synovus common
stock. The exercise price of the converted options shall be equal to the
exercise price per share of the Peoples common stock under the original option
divided by 1.3372. The number of shares subject to the converted options shall
be equal to the product of the number of shares of Peoples common stock subject
to the original option multiplied by 1.3372.
Background of the Merger
The board of directors of Peoples has, over time, considered the
possibility of strategic combinations with a number of other financial
institutions in assessing the means by which to maximize the value of Peoples
stock to its shareholders. The factors which the board of directors of Peoples
have taken into account in evaluating potential combinations have included, but
were not limited to, financial terms of proposed mergers, trading volume of
shares of potential acquirors, employee and credit cultures, as well as the
comparability of business lines and geographic locations. As part of its ongoing
operations, management and the board of directors of Peoples regularly assess
the financial services industry as a whole, including the regulatory and
competitive environments for banking services.
In May, 2003, Peoples engaged Hovde Financial LLC to explore its
strategic options, including potential merger partners. Pursuant to this
engagement, in June, 2003, Hovde Financial contacted a number of financial
institutions, including Synovus, regarding their interest in Peoples and the
banking market in Pinellas and Pasco Counties, Florida. Indications of interest
were received from several financial institutions, and were analyzed and
considered by management and the board of directors of Peoples with the
assistance of its financial and legal advisors.
13
On August 21, 2003, the Peoples board held a meeting to consider the
initial bids submitted by potential acquirors. At this meeting, the board of
directors authorized Hovde Financial to invite Synovus to conduct due diligence
at Peoples. On August 26, 2003, Synovus submitted a letter of interest to pursue
a merger with Peoples.
During the week of September 8, 2003, Synovus conducted preliminary due
diligence of Peoples. During the following weeks, management of the two
companies and their respective legal and financial advisors negotiated the terms
of a proposed merger agreement under which Peoples would merge with and into
Synovus. During this time period, Peoples conducted due diligence with respect
to Synovus, and Synovus concluded its due diligence with respect to Peoples.
On October 6, 2003, the board of directors of Peoples held a special
meeting to consider the proposed merger with Synovus. Hovde Financial summarized
certain financial information with respect to Synovus and the proposed
transaction for the Peoples board and rendered an opinion that, as of October 7,
2003, the terms of the merger as set forth in the proposed merger agreement were
fair to Peoples shareholders from a financial point of view. Also, the board
engaged Pennington, Moore, Wilkinson, Bell & Dunbar, P. A., Peoples' outside
legal counsel, to review the terms of the merger and the definitive agreement
documenting the proposed transaction. After questions by and discussions among
the members of the Peoples board of directors, and after consideration of the
strategic factors described below, Peoples' board voted unanimously to approve
the merger agreement and the transactions contemplated thereby and to recommend
the approval of the merger agreement and the transactions contemplated by the
merger agreement to Peoples shareholders. Following the conclusion of the
meeting, Synovus and Peoples executed and delivered the merger agreement.
Recommendation of the Peoples Board and Reasons for the Merger
On October 6, 2003, the board of directors of Peoples unanimously
approved and adopted the merger agreement. The board of directors of Peoples
believes that the merger and the terms and provisions of the merger agreement
are fair to and in the best interests of Peoples shareholders. The board of
directors of Peoples unanimously recommends that you vote to approve the merger.
In reaching its decision to adopt and recommend approval of the merger
agreement, the Peoples board considered a number of factors, including the
following:
* the value of the consideration to be received by Peoples shareholders
relative to the book value and earnings per share of Peoples common
stock;
* certain information concerning the financial condition, results of
operations and business prospects of Synovus;
* the fact that, immediately following the merger, Peoples Bank would
continue to operate under its existing name and management team;
* the financial terms of recent business combinations in the financial
services industry and a comparison of the multiples of selected
combinations with the terms of the proposed transaction with Synovus;
* the average daily trading volume of shares of Synovus common stock;
* the alternatives to the merger, including remaining an independent
institution;
* the competitive and regulatory environment for financial institutions
generally;
* the expanded range of banking services that the merger will allow
Peoples Bank to provide its customers;
* the enhanced career opportunities and benefits afforded Peoples Bank
employees as a result of the merger;
14
* the expected new dividend yield for Peoples shareholders from owning
Synovus common stock;
* the fact that the merger will enable Peoples shareholders to exchange
their shares of Peoples common stock for a combination of cash and
shares of common stock of a regional bank, the stock of which is
widely held and actively traded, and that the stock portion of the
consideration will be received tax-free; and
* the opinion of Hovde Financial that the consideration to be received
by Peoples shareholders as a result of the merger is fair from a
financial point of view.
The foregoing discussion of the information and factors considered by
the Peoples board is not intended to be exhaustive, but includes the material
factors considered. In view of the variety of factors considered in connection
with its evaluation of the merger and the offer price, the Peoples board did not
find it practicable to, and did not, quantify or otherwise assign relative
weights to the specific factors considered in reaching its determinations and
recommendations, and individual directors may have given differing weights to
different factors.
Each member of the board of directors of Peoples has indicated that he
intends to vote his shares of Peoples common stock in favor of the merger.
PEOPLES' BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT PEOPLES
SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE THE MERGER AGREEMENT.
Management of Synovus believes that the merger will provide Synovus
with expanded market share opportunities for profitable long-term growth and
result in the addition of a well-suited and positioned banking organization into
Synovus' existing organization.
Opinion of Peoples' Financial Advisor
Hovde Financial has delivered to the Peoples board its opinion that,
based upon and subject to the various considerations set forth in its written
opinion dated October 7, 2003, the transaction is fair from a financial point of
view to the holders of Peoples common stock as of such date. In requesting Hovde
Financial's advice and opinion, no limitations were imposed by Peoples upon
Hovde Financial with respect to the investigations made or procedures followed
by it in rendering its opinion. The full text of the opinion of Hovde Financial,
dated October 7, 2003, which describes the procedures followed, assumptions
made, matters considered and limitations on the review undertaken, is attached
hereto as Appendix "C." Peoples shareholders should read this opinion in its
entirety.
Hovde Financial is a nationally recognized investment banking firm and,
as part of its investment banking business, is continually engaged in the
valuation of financial institutions in connection with mergers and acquisitions,
private placements and valuations for other purposes. As a specialist in
securities of financial institutions, Hovde Financial has experience in, and
knowledge of, banks, thrifts and bank and thrift holding companies. Peoples'
board of directors selected Hovde Financial to act as its financial advisor in
connection with the merger on the basis of the firm's reputation and expertise
in transactions such as the merger.
Hovde Financial will receive a fee contingent upon the completion of
the merger for services rendered in connection with advising Peoples regarding
the merger, including the fairness opinion and financial advisory services
provided to Peoples. As of October 7, 2003, such fee would have been
approximately $1.1 million. Hovde Financial will receive the entirety of such
fee upon the closing of the transaction.
Hovde Financial's opinion is directed only to the fairness,
from a financial point of view, of the transaction, and does not constitute a
recommendation to any Peoples shareholders as to how the shareholder should vote
at the Peoples meeting. The summary of the opinion of Hovde Financial set forth
in this document is qualified in its entirety by reference to the full text of
the opinion.
15
The following is a summary of the analyses performed by Hovde Financial
in connection with its fairness opinion. The summary set forth below does not
purport to be a complete description of the analyses performed by Hovde
Financial in rendering its opinion to the Peoples board, but it does summarize
all of the material analyses performed by Hovde Financial.
The preparation of a fairness opinion involves various determinations
as to the most appropriate and relevant methods of financial analyses and the
application of those methods to the particular circumstances. In arriving at its
opinion, Hovde Financial did not attribute any particular weight to any analysis
and factor considered by it, but rather made qualitative judgments as to the
significance and relevance of each analysis and factor. Hovde Financial may have
given various analyses more or less weight than other analyses. Accordingly,
Hovde Financial believes that its analyses and the following summary must be
considered as a whole and that selecting portions of its analyses, without
considering all factors and analyses, could create an incomplete view of the
process underlying the analyses set forth in its report to the Peoples board and
its fairness opinion.
In performing its analyses, Hovde Financial made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of Peoples and Synovus.
The analyses performed by Hovde Financial are not necessarily indicative of
actual value or actual future results, which may be significantly more or less
favorable than suggested by such analyses. Such analyses were prepared solely as
part of Hovde Financial's analysis of the fairness of the transaction, from a
financial point of view, to the Peoples shareholders. The analyses do not
purport to be an appraisal or to reflect the prices at which a company might
actually be sold or the prices at which any securities may trade at the present
time or at any time in the future. Hovde Financial's opinion does not address
the relative merits of the merger as compared to any other business combination
in which Peoples might engage. In addition, as described above, Hovde
Financial's opinion to the Peoples board was one of many factors taken into
consideration by the Peoples board in making its determination to approve the
merger agreement.
During the course of its engagement, and as a basis for arriving at its
opinion, Hovde Financial reviewed and analyzed material bearing upon the
financial and operating condition of Peoples and Synovus and material prepared
in connection with the merger, including, among other things, the following:
* the merger agreement;
* certain historical publicly available information concerning Peoples
and Synovus;
* the nature and terms of recent merger transactions; and
* financial and other information provided to Hovde Financial by the
management of Peoples and Synovus. Hovde Financial conducted meetings
and had discussions with members of senior management of Peoples and
Synovus for purposes of reviewing the future prospects of Peoples and
Synovus. Hovde Financial also took into account its experience in
other transactions, as well as its knowledge of the commercial banking
industry and its general experience in securities valuations.
In rendering its opinion, Hovde Financial assumed, without independent
verification, the accuracy and completeness of the financial and other
information and relied upon the accuracy of the representations of the parties
contained in the merger agreement. Hovde Financial also assumed that the
financial forecasts furnished to or discussed with Hovde Financial by Peoples or
Synovus were reasonably prepared and reflected the best currently available
estimates and judgments of senior management of Peoples and Synovus as to the
future financial performance of Peoples, Synovus or the combined entity, as the
case may be. Hovde Financial has not made any independent evaluation or
appraisal of any properties, assets or liabilities of Peoples. Hovde Financial
assumed and relied upon the accuracy and completeness of the publicly available
and other financial and other information provided to it, relied upon the
representations and warranties of Peoples and Synovus made pursuant to the
merger agreement, and did not independently attempt to verify any of such
information.
Analysis of Selected Mergers. As part of its analysis, Hovde Financial
reviewed comparable mergers involving banks in Florida announced in the two year
period since October 7, 2001, in which the selling institution had assets
between $100 million and $1 billion (the "Florida Merger Group"). This Florida
Merger Group consisted of the following 8 transactions:
16
Buyer Seller
---- ------
Colonial BancGroup Inc. (AL) Sarasota Bancorp.
F.N.B. Corp. (FL) Charter Banking Corp.
South Financial Group Inc. (SC) Central Bank of Tampa
Synovus Financial Corp. (GA) United Financial Holdings Inc.
Royal Bank of Canada (Can) Admiralty Bancorp Inc.
Colonial BancGroup Inc. (AL) Palm Beach National Holding Co.
South Financial Group Inc. (SC) Gulf West Banks Inc.
F.N.B. Corp. (FL) Central Bank Shares Inc.
Hovde Financial also reviewed comparable mergers involving banks
headquartered in the Southeast United States announced in the two year period
since October 7, 2001, in which the total assets of the seller were between $200
million and $500 million (the "Southeast Merger Group"). This Southeast Merger
Group consisted of the following 10 transactions:
Buyer Seller
----- ------
CNB Holdings Inc. (GA) First Capital Bancorp Inc. (GA)
Southern Community Financial (NC) Community Bank (NC)
BancTrust Financial Group Inc. (AL) CommerceSouth Inc. (AL)
United Community Banks Inc. (GA) First Georgia Holding Inc. (GA)
Main Street Banks Inc. (GA) First Colony Bancshares Inc. (GA)
SNB Bancshares Inc. (GA) Bank of Gray (GA)
Synovus Financial Corp. (GA) FNB Newton Bankshares, Inc. (GA)
First Citizens Bancorp. of SC (SC) First Banks, Inc. (GA)
Synovus Financial Corp. (GA) Community Financial Group Inc. (TN)
Yadkin Valley Bank and Trust (NC) Main Street BankShares Inc. (NC)
Hovde Financial calculated the medians and averages for the following
relevant transaction ratios in the Florida Merger Group and the Southeast Merger
Group: the percentage of the offer value to the acquired company's total assets,
the multiple of the offer value to the acquired company's earnings per share for
the twelve months preceding the announcement date of the transaction; the
multiple of the offer value to the acquired company's tangible book value per
share; and the tangible book value premium to core deposits, each as of the
announcement date of the transaction. Hovde Financial compared these multiples
with the corresponding multiples for the merger, valuing the total consideration
that would be received pursuant to the merger agreement, as of October 7, 2003,
at $78.1 million ($30 million in cash and $48.1 million in Synovus common
stock), or $34.69 per share of Peoples common stock. In calculating the
multiples for the merger, Hovde Financial used Peoples' earnings per share for
the 12 month period ended June 30, 2002, and Peoples' tangible book value per
share, total assets, and total deposits as of June 30, 2002. The results of this
analysis are as follows:
Offer Value to
--------------------------------------
12 months Ratio of Tangible
Tangible Preceding Book Value
Total Book Value Earnings Premium to Core
Assets Per Share Per Share Deposits
(%) (x) (x) (%)
--------------- -------------- -------------- -------------------
Peoples Florida Banking Corporation 31.5 4.56 26.7 37.2
Florida Merger Group median 25.3 3.26 25.7 28.8
Florida Merger Group average 26.7 3.21 27.2 28.3
Florida Merger Group high 34.5 3.92 37.7 37.3
Florida Merger Group low 20.0 2.38 16.8 20.4
Southeast Merger Group median 23.4 2.07 23.4 16.96
17
Southeast Merger Group average 22.7 2.43 22.8 20.25
Southeast Merger Group high 32.3 4.00 36.5 37.97
Southeast Merger Group low 12.3 1.68 14.5 7.06
Discounted Earnings Stream Analysis. Hovde Financial estimated the
present value of the Peoples common stock by estimating the value of Peoples'
estimated future earnings stream beginning in 2004. Reflecting Peoples internal
projections, Hovde Financial assumed net income in 2004 and 2005 of $3.8 million
and $4.4 million, respectively. Subsequently, from 2006 through 2008, Hovde
Financial assumed earnings would grow at an annually compounded rate of 15.4%,
resulting in net income estimates for 2006, 2007, and 2008 of $5.0 million, $5.8
million, and $6.6 million, respectively. The present value of these earnings was
calculated based on a range of discount rates of 10.5%, 12.0%, and 13.5%. In
order to derive the terminal value of Peoples' earnings steam beyond 2008, Hovde
Financial assumed an average earnings growth rate of 4% into perpetuity. This
present value of this terminal amount was then calculated based on the range of
discount rates mentioned above. These rates and values were chosen to reflect
different assumptions regarding the required rates of return of holders or
prospective buyers of Peoples common stock. This analysis and its underlying
assumptions yielded a range of value for the Company of approximately $74.4
million (at a 10.5% discount rate) to $49.6 million (at a 13% discount rate),
compared to total merger consideration of $78.1 million.
History of Publicly Traded Stock. Hovde Financial reviewed the history
of reported prices of Synovus' common stock and the Standard & Poor's 500 Index
("S&P 500") on a one-year, five-year, 10-year, and 20-year basis. Synovus
outperformed the S&P 500 on each of the periods to which it was compared.
Comparable Company Analysis. Using publicly available information,
Hovde Financial compared the financial performance and stock market valuation of
Synovus with the following Southeastern publicly traded banking institutions
with assets greater than $15 billion:
Company Name Headquarters Total Assets ($mm)
------------ ------------ -------------------
BB&T Corporation Winston-Salem, NC 80,445
SunTrust Banks, Inc. Atlanta, GA 120,857
SouthTrust Corporation Birmingham, AL 51,708
Compass Bancshares, Inc. Birmingham, AL 25,623
Hibernia Corporation New Orleans, LA 17,920
Colonial BancGroup, Inc. Montgomery, AL 16,208
Regions Financial Corporation Birmingham, AL 49,548
Union Planters Corporation Memphis, TN 34,987
Indications of such financial performance and stock market valuation
included profitability (return on average assets and return on average equity)
for the three months ended June 30, 2003, the ratio of tangible equity to
tangible assets (TER) and non-performing assets (NPAs) to total assets at June
30, 2003, the market price per share divided by the last twelve months earnings
per share (Price to LTM EPS) and 2004 estimated earnings per share (Price to
2004 Est. EPS) as of October 6, 2003. The calculation of price-to-2004 estimated
earnings used estimates from "First Call" as of October 6, 2003.
NPAs Price to Price to Price to
ROAA ROAE TER Assets Tang. Book LTM EPS 2004 Est.
(%) (%) (%) (%) Value (x) (x) EPS (x)
------ ------- ----- ------- ----------- --------- ----------
Synovus 1.88 17.69 8.91 0.55 4.21 20.3 18.3
Comparable Company Median 1.38 13.86 6.93 0.50 2.83 13.4 12.2
Pro Forma Merger Analysis. Hovde Financial analyzed certain potential
pro forma effects of the merger, based upon 1) the assumption that 39% of the
Peoples shares are exchanged for a) cash at the value of $14.65 per share (which
totals $30 million) and b) 61% of the Peoples shares are exchanged for Synovus
common stock at an exchange ratio of 0.7478 (which totals an aggregate of
1,785,000 shares), 2) the earnings per share estimates and projections of
Peoples and Synovus, and 3) assumptions regarding the economic environment,
accounting and tax treatment of the merger, charges and transaction costs
associated with the merger and cost savings determined by the senior managements
of Peoples and
18
Synovus. The analysis indicated that for the year ending December 31,
2004, the first full year following the merger, the merger would be slightly
accretive to the combined company's projected earnings per share and dilutive to
tangible book value per share. The actual results achieved by the company may
vary from projected results and the variations may be material.
Based upon the foregoing analyses and other investigations and
assumptions set forth in its opinion, without giving specific weight to any one
factor or comparison, Hovde Financial determined that the transaction was fair
from a financial point of view to the Peoples shareholders.
Conditions to the Merger
Each party's obligation to effect the merger is subject to the
satisfaction or waiver of conditions which include, in addition to other closing
conditions, the following:
* approval of the merger agreement and the transactions contemplated by
the merger agreement by the affirmative vote of the holders of a
majority of the shares of Peoples common stock;
* approval of the merger agreement and the transactions contemplated by
the merger agreement by the Federal Reserve Board, the Georgia
Department of Banking and Finance and the Florida Department of
Financial Services, and the receipt of all other regulatory consents
and approvals that are necessary to the consummation of the
transactions contemplated by the merger agreement;
* the satisfaction of all other statutory or regulatory requirements,
including the requirements of the New York Stock Exchange or other
self regulating organizations, which are necessary to the consummation
of the transactions contemplated by the merger agreement;
* no party shall be subject to any order, decree or injunction or any
other action of a United States federal or state court or a United
States federal or state governmental, regulatory or administrative
agency or commission restraining, enjoining or otherwise prohibiting
the transactions contemplated by the merger agreement;
* the registration statement of which this document forms a part will
have become effective and no stop order suspending the effectiveness
of the registration statement will have been issued and no proceedings
for that purpose will have been initiated or threatened by the SEC or
any other regulatory authority; and
* each party shall have received an opinion from KPMG LLP to the effect
that the merger will be treated for federal income tax purposes as a
tax-free reorganization within the meaning of Section 368(a)(1)(A) of
the Internal Revenue Code.
The obligation of Synovus to effect the merger is subject to the
satisfaction or waiver of conditions, which include, in addition to the other
closing conditions, the following:
* each of the representations, warranties and covenants of Peoples
contained in the merger agreement will be true on, or complied with
by, the effective date of the merger in all material respects as if
made on such date, or on the date when made in the case of any
representation or warranty which specifically relates to an earlier
date, and Synovus will have received a certificate signed by the Chief
Executive Officer of Peoples, dated the effective date, to such
effect;
* there will be no discovery of facts, or actual or threatened causes of
action, investigations or proceedings by or before any court or other
governmental body that relates to or involves Peoples: (a) which, in
the reasonable judgment of Synovus, would, or which may be forseen to
have, a material adverse effect upon Peoples or the consummation of
the transactions contemplated by the merger agreement; (b) that
challenges the validity or legality of the merger agreement or the
consummation of the transactions contemplated by the merger agreement;
or (c) that seeks to restrain or invalidate the consummation of the
transactions contemplated by the merger agreement or seeks damages in
connection therewith;
* Synovus will not have learned of any fact or condition with respect to
the business, properties, assets, liabilities, deposit relationships
or earnings of Peoples which, in the reasonable judgment of Synovus,
is
19
materially at variance with one or more of the warranties or
representations set forth in the merger agreement or which, in the
reasonable judgment of Synovus, has or will have a material adverse
effect on Peoples;
* David W. Dunbar will have entered into an employment agreement with
Synovus;
* on the effective date of the merger, Peoples Bank will have a CAMELS
rating of at least 2 and a Compliance Rating and Community
Reinvestment Act Rating of at least Satisfactory;
* on the effective date of the merger, Peoples will have a
non-performing assets ratio of not more than .50%, an annualized
charge off ratio of not more than .25% and an allowance for loan
losses which will be adequate in all material respects under generally
accepted accounting principles applicable to banks;
* the results of any regulatory exam of Peoples or Peoples Bank
occurring between the date the merger agreement was signed and the
closing date of the merger shall be reasonably satisfactory to
Synovus;
* Peoples will have delivered to Synovus certain environmental reports;
and
* each of the directors and officers of Peoples will have delivered a
letter to Synovus to the effect that such person is not aware of any
claims he might have against Peoples other than routine compensation,
benefits and the like as an employee, or ordinary rights as a
customer.
The obligation of Peoples to effect the merger is subject to the
satisfaction or waiver of conditions, which include, in addition to other
closing conditions, the following:
* each of the representations, warranties and covenants of Synovus
contained in the merger agreement will be true on, or complied with
by, the effective date of the merger in all material respects as if
made on such date, or on the date when made in the case of any
representation or warranty which specifically relates to an earlier
date, and Peoples will have received a certificate signed by the Chief
Executive Officer of Synovus, dated the effective date, to such
effect;
* the listing for trading of the shares of Synovus common stock to be
issued pursuant to the terms of the merger agreement on the NYSE shall
have been approved by the NYSE subject to official notice of issuance;
* there will be no discovery of facts, or actual or threatened causes of
action, investigations or proceedings by or before any court or other
governmental body that relates to or involves Synovus: (a) which, in
the reasonable judgment of Peoples, would, or which may be forseen to
have, a material adverse effect upon either Synovus or the
consummation of the transactions contemplated by the merger agreement;
(b) that challenges the validity or legality of the merger agreement
or the consummation of the transactions contemplated by the merger
agreement; or (c) that seeks to restrain or invalidate the
consummation of the transactions contemplated by the merger agreement
or seeks damages in connection therewith;
* Peoples will not have learned of any fact or condition with respect to
the business, properties, assets, liabilities, deposit relationships
or earnings of Synovus which, in the reasonable judgment of Peoples,
is materially at variance with one or more of the warranties or
representations set forth in the merger agreement or which, in the
reasonable judgment of Peoples, has or will have a material adverse
effect on Synovus;
* Peoples shall have received from the Senior Deputy General Counsel of
Synovus an opinion to the effect that, among other opinions, the
shares of Synovus common stock to be issued in the merger are duly
authorized, validly issued, fully paid, nonassessable, and not subject
to any preemptive rights;
* Peoples shall have received a letter from Hovde Financial to the
effect that, in the opinion of such firm, the per share cash
consideration and the per share stock consideration is fair from a
financial point of view to the holders of Peoples common stock; and
* Synovus will not have issued any shares of stock with preferences
superior to those of the Synovus common stock to be issued to the
shareholders of Peoples in connection with the merger.
20
No Solicitation
In the merger agreement, Peoples has agreed that it will not solicit or
encourage any inquiry or proposal relating to the disposition of its business or
assets, or the acquisition of its voting securities, or the merger of Peoples or
any of its subsidiaries with any individual, corporation or other entity, or,
subject to the fiduciary duties of the board of directors of Peoples, provide
any individual, corporation or other entity with information or assistance or
negotiate with any individual, corporation or other entity in furtherance of
such inquiries or to obtain such a proposal. Peoples has also agreed that it
will promptly notify Synovus in the event it receives any inquiry or proposal
relating to any such transaction. These provisions are intended to increase the
likelihood that the merger will be consummated in accordance with the terms of
the merger agreement and may have the effect of discouraging persons who might
now or prior to the effective date of the merger be interested in acquiring all
of or a significant interest in Peoples from considering or proposing such an
acquisition.
Conduct of Business of Peoples Pending the Merger
The merger agreement provides that prior to the effective date of the
merger, Peoples and its subsidiaries will conduct business only in the ordinary
course and will not, without the prior written consent of Synovus:
* issue any options to purchase capital stock or issue any shares of
capital stock, other than shares of Peoples common stock issued in
connection with the exercise of currently outstanding options to
purchase shares of Peoples common stock;
* declare, set aside, or pay any dividend or distribution with respect
to the capital stock of Peoples;
* directly or indirectly redeem, purchase or otherwise acquire any
capital stock of Peoples or its subsidiaries;
* effect a split or reclassification of the capital stock of Peoples or
its subsidiaries or a recapitalization of Peoples or its subsidiaries;
* amend the Articles of Association or bylaws of Peoples or its
subsidiaries;
* grant any increase in the salaries payable or to become payable by
Peoples or its subsidiaries to any employee other than normal, annual
salary increases to be made with regard to employees;
* make any change in any bonus, group insurance, pension, profit
sharing, deferred compensation, or other benefit plan, payment or
arrangement made to, for or with respect to any employees or
directors, except to the extent such changes are required by
applicable laws or regulations;
* enter into, terminate, modify or amend any contract, lease or other
agreement with any officer or director of Peoples or its subsidiaries
or any "associate" of any such officer or director, as such term is
defined in Regulation 14A under the Securities Exchange Act of 1934,
as amended, other than in the ordinary course of Peoples' banking
business;
* incur or assume any liabilities, other than in the ordinary course of
business;
* dispose of any of its assets or properties, other than in the ordinary
course of business; or
* take any other action not in the ordinary course of business.
Regulatory Approvals
Consummation of the merger and the other transactions contemplated by
the merger agreement is subject to, and conditioned upon, receipt of the
approvals from the Federal Reserve Board, the Georgia Department of Banking and
Finance and the Florida Department of Financial Services. Applications in
connection with the merger were filed with the regulatory agencies on or about
November 3, 2003. The merger has not yet been approved by the regulatory
agencies.
There can be no assurance that the regulatory agencies will approve or
take other required action with respect to the merger. Synovus and Peoples are
not aware of any governmental approvals or actions that are required in order to
consummate the merger except as described above. Should other approvals or
actions be required, it is contemplated that
21
Synovus and Peoples would seek the approval or action. There can be no
assurance as to whether or when any other approval or action, if required, could
be obtained.
Waiver and Amendment
Before the effective date of the merger, any provision of the merger
agreement may be waived in writing by the party entitled to the benefits of such
provision or by both parties, to the extent allowed by law. In addition, the
merger agreement may be amended at any time, to the extent allowed by law, by an
agreement in writing between the parties after approval of their respective
boards of directors.
Termination and Termination Fee
The merger agreement may be terminated prior to the effective date
either before or after its approval by the shareholders of Peoples. The merger
agreement may be terminated by Synovus or Peoples:
* by mutual consent of Synovus and Peoples;
* if consummation of the merger does not occur by reason of the failure
of any of the conditions precedent set forth in the merger agreement
unless the failure to meet the conditions precedent is due to a breach
of the merger agreement by the terminating party; or
* if the merger is not consummated by March 31, 2004, unless the failure
to consummate by such time is due to the breach of the merger
agreement by the terminating party.
In addition, the merger agreement may be terminated by Peoples if:
* during the five (5) business days immediately prior to the effective
date of the merger, the total cash consideration paid by Synovus is
greater than fifty-five (55%) of the sum of the total cash
consideration plus the total stock consideration such that KPMG LLP
cannot issue a tax opinion in which it opines that the merger shall
qualify for a tax-free exchange pursuant to Section 368(a)(1)(A) of
the Internal Revenue Code; or
* the closing price of Synovus common stock on the NYSE decreases by
more than 15% from $24.12 and such decrease as measured from August
19, 2003 exceeds the change in aggregate closing price per share of an
index of Southeastern Bank Holding Company stocks consisting of BB&T
Corporation, SunTrust Banks, Inc., SouthTrust Corporation, Compass
Bancshares, Inc., Hibernia Corporation, The Colonial BancGroup, Inc.,
Regions Financial Corporation, Union Planters Corporation, AmSouth,
National Commerce and First Tennessee National on any date of
determination, including the effective date, by more than 15
percentage points.
The merger agreement may be terminated by Synovus if the closing price
of Synovus common stock on the NYSE exceeds $24.12 by 15% or more and such
percentage increase over $24.12, as measured from the first date the closing
price of Synovus common stock on the NYSE exceeds $24.12, exceeds the change in
the aggregate closing price per share of the index of Southeastern Bank Holding
Company stocks in the paragraph above, on any date of determination, including
the effective date, by more than 15 percentage points.
If either party terminates the merger agreement due to the failure of
the other party to satisfy its representations, warranties or covenants in the
agreement, the terminating party will be entitled to a cash payment from the
other party in the amount of the terminating party's expenses related to the
merger, up to a maximum of $150,000. This amount, with respect to either Synovus
or Peoples, is not deemed an exclusive remedy or liquidated damages, in the
event of a termination of the merger agreement due to the failure of Synovus or
Peoples, as the case may be, to satisfy any of its representations, warranties
or covenants contained in the merger agreement.
22
Interests of Peoples' Directors and Executive Officers in the Merger
Some members of the Peoples board of directors and management have
interests in the merger in addition to their interests generally as shareholders
of Peoples. The Peoples board of directors was aware of these interests and
considered them, in addition to other matters, in approving the merger
agreement.
Employment agreement. It is a condition to the merger that David W.
Dunbar, Chairman, President and Chief Executive Officer of Peoples, enter into
an employment agreement with Synovus before the effective date of the merger. On
November 7, 2003, Mr. Dunbar entered into the employment agreement, effective on
the date the merger is completed with Synovus. The employment agreement provides
for Mr. Dunbar's employment as the Chairman, President and Chief Executive
Officer of Peoples Bank for a period of five years following the merger. Under
the employment agreement, Synovus will pay Mr. Dunbar base annual compensation
of $198,640 and Mr. Dunbar will be eligible to be chosen as a participant in,
and eligible to receive a bonus under, Synovus' incentive bonus plan. The
employment agreement also provides Mr. Dunbar with certain additional benefits,
including an automobile allowance and reimbursement for business expenses, along
with other perquisites. Additionally, Mr. Dunbar will be granted options to
purchase 10,000 shares of Synovus common stock at fair market value in
connection with the employment agreement. As part of Mr. Dunbar's employment
agreement, Synovus and Mr. Dunbar have also agreed to enter into Synovus'
standard change of control agreement. The change of control agreement provides
severance pay and continuation of certain benefits in the event of a change of
control of Synovus. In order to receive benefits under the change of control
agreement, the executive's employment must be terminated involuntarily and
without cause, whether actually or constructively, within one year following a
change of control or the executive may voluntarily or involuntarily terminate
employment during the thirteenth month following a change of control.
In addition, Mr. Dunbar, James P. Nelson, Executive Vice President of
Peoples, and Wayne B. Bard, Senior Vice President and Chief Financial Officer of
Peoples, will be entitled to the distribution of certain vested deferred
compensation benefits as a result of the "change of control."
Directors' and officers' insurance and indemnity. Prior to the
completion of the merger, Peoples will purchase for, and on behalf of, its
current and former officers and directors, extended coverage under the current
directors' and officers' liability insurance policy maintained by Peoples to
provide for continued coverage of such insurance for a period of four years
following the completion of the merger with respect to matters occurring prior
to the completion of the merger. In addition, subject to certain conditions set
forth in the merger agreement, for a period of four years after the effective
date of the merger Synovus has agreed to indemnify each person entitled to
indemnification from Peoples and its subsidiaries against any liability arising
out of actions or omissions occurring at or prior to the effective date of the
merger, including the transactions contemplated by the merger agreement, to the
fullest extent permitted under Florida law and by the applicable articles of
incorporation and bylaws as in effect on the date of the merger agreement,
including provisions relating to advances of expenses incurred in the defense of
any litigation.
Peoples stock and options ownership. Peoples' executive officers and
members of its board of directors beneficially own in the aggregate
approximately 38% of the outstanding shares of Peoples common stock. In
addition, Peoples' executive officers and members of Peoples' board of directors
hold options under Peoples' stock option plan for an aggregate of 137,250 shares
of Peoples common stock with an exercise price of approximately $4.47 per share.
All options under the stock option plan will become exercisable immediately
prior to the merger.
23
Employee Benefits
Synovus has agreed in the merger agreement that, following the
effective date of the merger, Synovus will provide to employees of Peoples
employee benefits, including without limitation pension benefits, health and
welfare benefits, life insurance and vacation and severance arrangements, on
terms and conditions that are substantially similar to those currently provided
by Peoples and its subsidiaries. As soon as administratively and financially
practicable following the effective date of the merger, Synovus has agreed to
provide generally to employees of Peoples and its subsidiaries employee benefits
which are substantially similar to those provided by Synovus and its
subsidiaries to their similarly situated employees.
Material United States Federal Income Tax Consequences of the Merger
The following is a summary description of the material anticipated
federal income tax consequences of the merger generally applicable to the
shareholders of Peoples. This summary is not intended to be a complete
description of all of the federal income tax consequences of the merger. No
information is provided with respect to the tax consequences of the merger under
any other tax laws, including applicable state, local and foreign tax laws,
other than certain state tax laws. In addition, the following discussion may not
be applicable with respect to specific categories of shareholders, including but
not limited to persons who are corporations, trusts, dealers in securities,
financial institutions, insurance companies or tax exempt organizations; persons
who are not United States citizens or resident aliens or domestic entities
(partnerships or trusts); persons who are subject to alternative minimum tax (to
the extent that tax affects the tax consequences of the merger) or are subject
to the "golden parachute" provisions of the Internal Revenue Code (to the extent
that tax affects the tax consequences of the merger); persons whose shares of
Peoples stock are treated as "section 306 stock" under Section 306 of the
Internal Revenue Code; persons who acquired shares of Peoples stock by
exercising employee stock options or otherwise as compensation; persons who do
not hold their shares as capital assets; or persons who hold their shares as
part of a "straddle" or "conversion transaction. No ruling has been or will be
requested from the IRS with respect to the tax effects of the merger. The
federal income tax laws are complex, and a shareholder's individual
circumstances may affect the tax consequences to the shareholder.
Synovus and Peoples have received an opinion from KPMG LLP, which it
will confirm as of the effective date of the merger, to the effect that:
* The merger will qualify as a reorganization under Section 368(a)
of the Internal Revenue Code.
* Peoples shareholders will recognize gain, if any, as a result of
the merger, only to the extent of the cash (other than cash
received in lieu of fractional shares) received for their stock in
Peoples, pursuant to the merger agreement. Any gain recognized by
a Peoples shareholder will be capital gain provided that such
Peoples shareholder held the Peoples common stock as a capital
asset on the date of the merger. Any capital gain recognized will
be long-term capital gain, if such Peoples shareholder held the
Peoples common stock for more than one year as of the date of the
merger.
* The aggregate tax basis of Synovus common stock received by a
shareholder of Peoples in the merger, including any fractional
share deemed to have been received, will be the same as the
aggregate tax basis of the Peoples stock being exchanged in
connection with the merger, less the amount of any cash
consideration received by the shareholder in the merger, other
than cash received in lieu of a fractional share, plus any gain or
dividend income recognized by the shareholder in the merger.
* The holding period of Synovus common stock received by a
shareholder of Peoples in the merger, including any fractional
share deemed to have been received, will include the holding
period of the shares of Peoples stock being exchanged in
connection with the merger, provided that the Peoples stock was
held as a capital asset at the time of the merger.
* A shareholder of Peoples who receives cash in lieu of a fractional
share of Synovus common stock will be treated as if such
fractional share was issued in the merger and then redeemed by
Synovus in a separate transaction governed by Section 302 of the
Internal Revenue Code. The cash payments will be treated as having
been received as distributions in payment for the fractional
shares interests and redeemed.
* It is more likely than not that Synovus' shareholders rights plan
will be treated for federal income tax purposes as an attribute of
the Synovus common stock and that the Peoples shareholders who
receive
24
Synovus common stock in the merger will not recognize gain
for federal income tax purposes attributable to Synovus'
shareholders rights plan.
* The State of Florida for income tax purposes will treat the merger
in the same manner as treated by the Internal Revenue Service for
federal income tax purposes.
* The State of Georgia for income tax purposes will treat the merger
in the same manner as treated by the Internal Revenue Service for
federal income tax purposes.
The tax opinion was issued on November 18, 2003, and is based upon
assumptions and representations by the management of Synovus and Peoples. KPMG
LLP serves Synovus as its independent public accounting firm.
The tax opinion will need to be confirmed by KPMG LLP on the proposed
effective date of the merger. If, at that time, the aggregate fair market value
of the Synovus common stock to be issued in the merger does not represent at
least 45% of the aggregate merger consideration, KPMG will not confirm its tax
opinion, and the merger will not be completed.
All shareholders of Peoples are urged to consult their own tax advisors
as to the specific consequences to them of the merger under federal, state,
local and any other applicable income tax laws.
Backup Withholding and Information Reporting
Cash received in the merger may be subject to backup withholding at a
28% rate. Backup withholding will not apply, however, to a taxpayer who (1)
furnishes a correct taxpayer identification number on IRS Form W-9 or an
appropriate substitute form and certifies on such form that he or she is not
subject to backup withholding, (2) provides a certificate of foreign status on
IRS Form W-8BEN or an appropriate substitute form, or (3) is otherwise exempt
from backup withholding. Any amount paid as backup withholding will be credited
against the taxpayer's federal income tax liability.
As shareholders of Peoples who will receive shares of Synovus common
stock in the merger, shareholders also must comply with the information
reporting requirements of the Treasury Regulations under Section 368 of the
Internal Revenue Code. In general, these regulations require any taxpayer who
receives stock, securities or other property, including cash, in a
reorganization described in Section 368(a) of the Internal Revenue Code to
include with his or her federal income tax return a complete statement of the
facts pertaining to the nonrecognition of gain or loss, including (1) the cost
or other basis of the stock transferred in the exchange and (2) the amount of
stock, securities or other property received by the taxpayer, and the taxpayer
is required to maintain permanent records. All shareholders of Peoples are
encouraged to consult their own tax advisors to determine the specific
information required to be filed by them.
Accounting Treatment
The merger will be accounted for by Synovus as a purchase transaction
in accordance with generally accepted accounting principles in the United States
of America. One effect of such accounting treatment is that the earnings of
Peoples will be combined with the earnings of Synovus only from and after the
effective date of the merger.
Expenses
The merger agreement provides that Synovus and Peoples will each pay
its own expenses in connection with the merger and related transactions,
including, but not limited to, the fees and expenses of its own investment
bankers, legal counsel and accountants.
New York Stock Exchange Listing
Synovus common stock is listed on the NYSE. The shares of Synovus
common stock to be issued to the shareholders of Peoples in the merger will be
listed on the NYSE.
25
Resales of Synovus Common Stock
The shares of Synovus common stock issued pursuant to the merger
agreement will be freely transferable under the Securities Act of 1933, except
for shares issued to any shareholder who may be deemed to be an "affiliate" of
Peoples for purposes of Rule 145 under the Securities Act as of the date of the
Peoples special meeting. Affiliates may not sell their shares of Synovus common
stock acquired in connection with the merger except pursuant to an effective
registration statement under the Securities Act covering the resale of such
shares or in compliance with Rule 145 promulgated under the Securities Act or
another applicable exemption from the registration requirements of the
Securities Act. Rule 145 imposes restrictions on the manner in which an
affiliate may resell and the quantity of any resale of any of the shares of
Synovus common stock received by the affiliate in the merger. Persons who may be
deemed to be affiliates of Peoples generally include individuals or entities
that control, are controlled by or are under common control with Peoples and may
include executive officers and directors of Peoples as well as principal
shareholders of Peoples.
Peoples has agreed in the merger agreement to use its best efforts to
cause each director, executive officer and other person who is an affiliate of
Peoples to enter into an agreement with Synovus providing that such person will
not sell, pledge, transfer or otherwise dispose of shares of Peoples common
stock owned by such person or Synovus common stock to be received by such person
in the merger except in compliance with Rule 145 or in a transaction exempt
under the Securities Act. This prospectus does not cover resales of Synovus
common stock following consummation of the merger, and no person may make use of
this prospectus in connection with any such resale.
DESCRIPTION OF STOCK AND EFFECT OF MERGER ON RIGHTS OF
PEOPLES SHAREHOLDERS
If the merger is completed, all holders of Peoples common stock and
options will become holders of shares of Synovus common stock or holders of
options for shares of Synovus common stock. The rights of a holder of Synovus
common stock are similar in some respects and different in other respects from
the rights of a holder of Peoples common stock. The rights of Peoples
shareholders are currently governed by the Florida Business Corporation Act and
the Articles of Incorporation and bylaws of Peoples. The rights of Synovus
shareholders are currently governed by the Georgia Business Corporation Code and
the Articles of Incorporation and bylaws of Synovus. The following discussion
summarizes the material differences between the current rights of Peoples
shareholders and the rights they will have as Synovus shareholders following the
merger.
The following comparison of shareholders' rights is necessarily a
summary, is not intended to be complete or to identify all differences that may,
under given situations, be material to shareholders and is subject, in all
respects, and is qualified by reference to the Florida Business Corporation Act,
Peoples' Articles of Incorporation and bylaws, the Georgia Business Corporation
Code and Synovus' Articles of Incorporation and bylaws.
SYNOVUS PEOPLES
------- -------
* Ten votes for each share held, except in limited * One vote for each share held
circumstances described below
* No cumulative voting rights in the election of * Same as Synovus
directors, meaning that the holders of a plurality of
the shares elect the entire board of directors
* Dividends may be paid from funds legally * Same as Synovus
available, subject to contractual and regulatory
restrictions
* Right to participate pro rata in distribution of * Same as Synovus
assets upon liquidation
* No pre-emptive or other rights to subscribe for * Same as Synovus
any additional shares or securities
26
* No conversion rights * Same as Synovus
* Directors serve staggered 3-year terms * Directors serve one-year terms
* Some corporate actions, including business * Corporate actions, including business
combinations, require the affirmative combinations,require the affirmative
action or vote of 66-2/3% of the votes entitled to be vote of amajority of the votes entitled to
cast by the shareholders of all voting stock be cast at the meeting
* No preferred stock is authorized * Same as Synovus
* Common Stock Purchase Rights trade with shares as * No comparable provision
described below
Synovus Common Stock
Synovus is incorporated under the Georgia Business Corporation Code.
Synovus is authorized to issue 600,000,000 shares of Synovus common stock, of
which 301,441,645 shares were outstanding on September 30, 2002. Synovus has no
preferred stock authorized. Synovus' board of directors may at any time, without
additional approval of the holders of Synovus common stock, issue authorized but
unissued shares of Synovus common stock.
As described below, Synovus' Articles of Incorporation and bylaws
presently contain several provisions which may make Synovus a less attractive
target for an acquisition of control by an outsider who lacks the support of
Synovus' board of directors.
Voting Rights; Anti-Takeover Effects; The Voting Amendment
Under an amendment to Synovus' Articles of Incorporation and bylaws
which became effective on April 24, 1986, referred to in this document as the
"voting amendment," shareholders of Synovus common stock are entitled to ten
votes on each matter submitted to a vote at a meeting of shareholders for each
share of Synovus common stock which:
* has had the same beneficial owner since April 24, 1986;
* was acquired by reason of participation in a dividend reinvestment
plan offered by Synovus and is held by the same beneficial owner for
whom it was acquired under such plan;
* is held by the same beneficial owner to whom it was issued as a result
of an acquisition of a company or business by Synovus where the
resolutions adopted by Synovus' board of directors approving such
issuance specifically reference and grant such rights, including
shares of Synovus common stock to be issued to the former shareholders
of Peoples upon consummation of the merger;
* was acquired under any employee, officer and/or director benefit plan
maintained for one or more employees, officers and/or directors of
Synovus and/or its subsidiaries, and is held by the same beneficial
owner for whom it was acquired under such plan;
* is held by the same beneficial owner to whom it was issued by Synovus,
or to whom it was transferred by Synovus from treasury shares, and the
resolutions adopted by Synovus' board of directors approving such
issuance and/or transfer specifically reference and grant such rights;
* has been beneficially owned continuously by the same shareholder for a
period of forty-eight (48) consecutive months before the record date
of any meeting of shareholders at which the share is eligible to be
voted;
* was acquired as a direct result of a stock split, stock dividend or
other type of share distribution if the share as to which it was
distributed has had the same beneficial owner for a period of
forty-eight (48) consecutive months before the record date of any
meeting of shareholders at which the share is eligible to be voted; or
27
* is owned by a holder who, in addition to shares which are beneficially
owned under any of the other requirements set forth above, is the
beneficial owner of less than 1,139,063 shares of Synovus common
stock, which amount has been appropriately adjusted to reflect the
stock splits which have occurred subsequent to April 24, 1986 and with
such amount to be appropriately adjusted to properly reflect any other
change in Synovus common stock by means of a stock split, a stock
dividend, a recapitalization or other similar action occurring after
April 24, 1986.
Holders of shares of Synovus common stock not described above are
entitled to one vote per share for each such share. A shareholder may own both
ten-vote shares and one-vote shares, in which case he or she will be entitled to
ten votes for each ten-vote share and one vote for each one-vote share.
In connection with various meetings of Synovus' shareholders,
shareholders are required to submit to Synovus' board of directors satisfactory
proof necessary for it to determine whether such shareholders' shares of Synovus
common stock are ten-vote shares. If such information is not provided to
Synovus' board of directors, shareholders who would, if they had provided such
information, be entitled to ten votes per share, are entitled to only one vote
per share.
As Synovus common stock is registered with the SEC and is listed on the
NYSE, Synovus common stock is subject to the provisions of an NYSE rule, which,
in general, prohibits a company's common stock and equity securities from being
authorized or remaining authorized for listing on the NYSE if the company issues
securities or takes other corporate action that would have the effect of
nullifying, restricting or disparately reducing the voting rights of existing
shareholders of the company. However, such rule contains a "grandfather"
provision, under which Synovus' voting amendment qualifies, which, in general,
permits grandfathered disparate voting rights plans to continue to operate as
adopted. Synovus' management believes that all current shareholders of Synovus
common stock are entitled to ten votes per share, and as such, the further
issuance of any ten-vote shares would not disenfranchise any existing
shareholders. In the event it is determined in the future that Synovus cannot
continue to issue ten-vote shares in mergers and acquisitions, Synovus will
consider repealing the voting amendment and restoring the principle of one
share/one vote.
If the merger is approved, present shareholders of Peoples common
stock, as future shareholders of Synovus common stock, will, under the voting
amendment described above, be entitled to ten votes per share for each share of
Synovus common stock received by them on the effective date of the merger. Each
shareholder of Peoples may also acquire by purchase, stock dividend or
otherwise, up to 1,139,063 additional shares of Synovus common stock which will
also be entitled to ten votes per share. However, if a Peoples shareholder
acquires by purchase, stock dividend or otherwise, more than 1,139,063
additional shares of Synovus common stock, he or she will be entitled to only
receive one vote per share for each of the shares in excess of 1,139,063 shares
until they have been held for four years.
Except with respect to voting, ten-vote shares and one-vote shares are
identical in all respects and constitute a single class of stock, i.e., Synovus
common stock. Neither the ten-vote shares nor the one-vote shares have a
preference over the other with regard to dividends or upon liquidation. Synovus
common stock does not carry any pre-emptive rights enabling a holder to
subscribe for or receive shares of Synovus common stock.
The Rights Plan
Synovus has adopted a shareholder rights plan under which holders of
shares of Synovus common stock also hold rights to purchase securities that may
be exercised upon the occurrence of "triggering events." Shareholder rights
plans such as Synovus' plan are intended to encourage potential hostile
acquirors to negotiate with the board of directors of the target corporation to
avoid occurrence of the "triggering events" specified in such plans. Shareholder
rights plans are intended to give the directors of a target corporation the
opportunity to assess the fairness and appropriateness of a proposed transaction
to determine whether or not it is in the best interests of the corporation and
its shareholders. Notwithstanding these purposes and intentions of shareholder
rights plans, such plans, including that of Synovus, could have the effect of
discouraging a business combination that shareholders believe to be in their
best interests. The provisions of Synovus' shareholder rights plan are discussed
below.
On April 27, 1999, the board of directors of Synovus adopted a rights
plan and authorized and declared a dividend of one common stock purchase right
with respect to each outstanding share of Synovus common stock outstanding on
May 4, 1999, and to each holder of common stock issued thereafter until the date
the rights become
28
exercisable or the expiration or earlier redemption of the rights. Each right
entitles the registered holder to purchase from Synovus one share of common
stock at a price of $225.00 per share, subject to adjustment, once rights become
exercisable. The description and terms of the rights are set forth in the rights
agreement between Synovus and Mellon Investor Services LLC, as the rights agent.
Initially, the rights will attach to all certificates of outstanding
shares of common stock, and no separate right certificates will be distributed.
The rights will become exercisable and separate from the shares of common stock
upon the earlier to occur of:
* ten days after the date of a public announcement that a person or
group of affiliated or associated persons has acquired beneficial
ownership of 15% or more of the outstanding common stock, such date
being referred to in this document as the "stock acquisition date" and
such person or group as an "acquiring person"; or
* ten business days, or such later date as the board may determine,
following the commencement of, or announcement of an intention to
make, a tender offer or exchange offer, the consummation of which
would result in a person or group becoming the beneficial owner of 15%
or more of the outstanding common stock, the earlier of such date and
the stock acquisition date being the "distribution date."
Shares of common stock beneficially owned by Synovus or any subsidiary
of Synovus will not be considered outstanding for purposes of calculating the
percentage ownership of any person.
Each of the following persons will not be deemed to be an acquiring
person even if they have acquired, or obtained the right to acquire beneficial
ownership of 15% or more of the outstanding common stock:
* Synovus, any subsidiary of Synovus, or any employee benefit plan of
Synovus or of any subsidiary of Synovus;
* any shareholder who is a descendant of D. Abbott Turner, any
shareholder who is affiliated or associated with the Turner family and
any person who would otherwise become an acquiring person as a result
of the receipt of common stock or a beneficial interest in common
stock from one or more members of the Turner family by way of gift,
devise, descent or distribution, but not by way of sale, unless any
such person, together with his affiliates and associates, becomes the
beneficial owner of more than 30% of the outstanding shares of common
stock;
* any person who would otherwise become an acquiring person solely by
virtue of a reduction in the number of outstanding shares of common
stock unless and until such person becomes the beneficial owner of any
additional shares of common stock; and
* any person who as of May 4, 1999 was the beneficial owner of 15% or
more of the outstanding common stock unless and until such person
shall become the beneficial owner of any additional shares of common
stock.
Until the distribution date or earlier redemption or expiration of the
rights:
* the rights will be evidenced by the certificates for the common stock;
* the rights will be transferred with, and only with, the shares of
common stock;
* new common stock certificates issued after the record date upon
transfer or new issuance of shares of common stock will contain a
notation incorporating the rights agreement by reference; and
* the surrender for transfer of any certificates for shares of common
stock outstanding as of the record date, even without such notation,
will also constitute the transfer of the rights associated with the
shares of common stock represented by such certificate.
As soon as practicable following the distribution date, separate
certificates evidencing the rights will be mailed
29
to holders of record of the shares of common stock as of the close of business
on the distribution date, and such separate right certificates alone will
evidence the rights. The rights are not exercisable until the distribution date.
The rights will expire at the close of business on May 5, 2009, unless earlier
redeemed by Synovus.
If any person becomes an acquiring person, each holder of a right will
thereafter have the "flip-in right" to receive, upon payment of the purchase
price of the right, shares of common stock, or in some circumstances, cash,
property or other securities of Synovus, having a value equal to two times the
purchase price of the right. Notwithstanding the foregoing, all rights that are,
or were, beneficially owned by an acquiring person or any affiliate or associate
of an acquiring person will be null and void and not exercisable.
If, at any time following the stock acquisition date: (1) Synovus is
acquired in a merger or other business combination transaction in which the
holders of all of the outstanding shares of common stock immediately before the
consummation of the transaction are not the holders of all of the surviving
corporation's voting power, or (2) more than 30% of Synovus' assets, cash flow
or earning power is sold or transferred other than in the ordinary course of
Synovus' business, then each holder of a valid right shall thereafter have the
"flip-over right" to receive, in lieu of shares of common stock and upon
exercise and payment of the purchase price, common shares of the acquiring
company having a value equal to two times the purchase price of the right. If a
transaction would otherwise result in a holder's having a flip-in as well as a
flip-over right, then only the flip-over right will be exercisable. If a
transaction results in a holder's having a flip-over right after a transaction
resulting in a holder's having a flip-in right, a holder will have flip-over
rights only to the extent such holder's flip-in rights have not been exercised.
The purchase price payable, and the number of shares of common stock or
other securities or property issuable, upon exercise of the rights are subject
to adjustment from time to time to prevent dilution (1) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the common
stock, (2) upon the grant to holders of the common stock of rights or warrants
to subscribe for common stock or convertible securities at less than the current
market price of the common stock, or (3) upon the distribution to holders of the
common stock of evidences of indebtedness or assets, excluding dividends payable
in common stock, or of subscription rights or warrants, other than those
referred to above. However, no adjustment in the purchase price will be required
until cumulative adjustments require an adjustment of at least 1%.
The number of outstanding rights and the number of shares of common
stock issuable upon exercise of each right are also subject to adjustment in the
event of a stock split of the common stock or a stock dividend on the common
stock payable in common stock or subdivisions, consolidations or combinations of
the common stock occurring, in any such case, before the distribution date.
At any time after a person becomes an acquiring person and before the
acquisition by a person of 50% or more of the outstanding common stock of
Synovus, the board of directors may, at its option, issue common stock or common
stock equivalents of Synovus in mandatory redemption of, or in exchange for, all
or part of the then outstanding exercisable rights, other than rights owned by
such acquiring person which would become null and void, at an exchange ratio of
one share of common stock, or common stock equivalents equal to one share of
common stock, per right, subject to adjustment.
To the extent that, after the triggering of flip-in rights,
insufficient shares of common stock are available for the exercise in full of
the rights, holders of rights will receive upon exercise shares of common stock
to the extent available and then cash, property or other securities of Synovus,
in proportions determined by Synovus, so that the aggregate value received is
equal to twice the purchase price.
Synovus is not required to issue fractional shares of common stock.
Instead, a payment in cash will be made to the holder of such rights equal to
the same fraction of the current value of a share of common stock. Following the
triggering of the flip-in rights, Synovus will not be required to issue
fractional shares of common stock upon exercise of the rights. Instead, a
payment in cash will be made to the holder of such rights equal to the same
fraction of the current market value of a share of common stock.
At any time before the distribution date, the board of directors of
Synovus may redeem all, but not less than all, of the then outstanding rights at
a price of $.001 per right. The redemption of the rights may be made effective
at such time, on such basis and with such conditions as the board of directors
in its sole discretion may establish. Immediately
30
upon the action of the board of directors ordering redemption of the rights, the
right to exercise the rights will terminate and the only right of the holders of
rights will be to receive the redemption price.
Until a right is exercised, the holder of the right, as such, will have
no rights as a shareholder of Synovus, including, without limitation, the right
to vote or to receive dividends.
The issuance of the rights is not taxable to Synovus or to shareholders
under presently existing federal income tax law, and will not change the way in
which shareholders can presently trade Synovus' shares of common stock. If the
rights should become exercisable, shareholders, depending on then existing
circumstances, may recognize taxable income.
Before the stock acquisition date, the rights agreement generally may
be amended by Synovus without the consent of the holders of the rights or the
common stock. On or after the stock acquisition date, Synovus may amend the
rights agreement only to (1) cure any ambiguity, (2) correct or supplement any
provision which may be defective or inconsistent with the other provisions of
the rights agreement, or (3) change or supplement the rights agreement in any
other manner which Synovus may deem necessary or desirable, provided that no
amendment shall adversely affect the interests of the holders of rights, other
than an acquiring person and its affiliates and associates.
A copy of the rights agreement has been filed with the SEC as an
exhibit to Synovus' Registration Statement on Form 8-A with respect to the
rights filed with the SEC. The Form 8-A and the rights agreement are
incorporated by reference in this document, and reference is made to them for
the complete terms of the rights agreement and the rights. This summary
description of the rights does not purport to be complete and is qualified in
its entirety by reference to the rights agreement. If the merger is approved,
rights will attach to Synovus common stock issued to the present shareholders of
Peoples.
Staggered Board of Directors; Supermajority Approvals
Under Synovus' Articles of Incorporation and bylaws, Synovus' board of
directors is divided into three classes of directors serving staggered three
year terms, with the terms of each class of directors to expire each succeeding
year. Also under Synovus' Articles of Incorporation and bylaws, the vote or
action of shareholders possessing 66-2/3% of the votes entitled to be cast by
the holders of all the issued and outstanding shares of Synovus common stock is
required to:
* call a special meeting of Synovus shareholders;
* fix, from time to time, the number of members of Synovus' board of
directors;
* remove a member of Synovus' board of directors;
* approve any merger or consolidation of Synovus with or into any other
corporation, or the sale, lease, exchange or other disposition of all,
or substantially all, of Synovus' assets to or with any other
corporation, person or entity, with respect to which the approval of
Synovus' shareholders is required by the provisions of the corporate
laws of the State of Georgia; and
* alter, delete or rescind any provision of Synovus' Articles of
Incorporation.
This allows directors to be removed only for cause by 66-2/3% of the
votes entitled to be cast at a shareholders' meeting called for that purpose.
Vacancies or new directorships can only be filled by a majority vote of the
directors then in office. Synovus' staggered board of directors, especially when
combined with the voting amendment, makes it more difficult for its shareholders
to force an immediate change in the composition of the majority of the board. A
potential acquiror with shares recently acquired, and not entitled to 10 votes
per share under the voting amendment, may be discouraged or prevented from
soliciting proxies for the purpose of electing directors other than those
nominated by current management for the purpose of changing the policies or
control of Synovus.
Evaluation of Business Combinations
Synovus' Articles of Incorporation also provide that in evaluating any
business combination or other action, Synovus' board of directors may consider,
in addition to the amount of consideration involved and the effects on
31
Synovus and its shareholders, the interests of the employees, customers,
suppliers and creditors of Synovus and its subsidiaries, the communities in
which offices of the corporation or its subsidiaries are located, and any other
factors the board of directors deems pertinent.
Peoples Common Stock
The Articles of Incorporation of Peoples authorize the issuance of
3,000,000 shares of Peoples common stock. At September 30, 2003, there were
2,047,184 shares of Peoples common stock issued and outstanding. The remaining
authorized shares of Peoples common stock may be issued from time to time in
such amounts as the board of directors determines. Each holder of Peoples common
stock has one vote per share upon all matters voted upon by shareholders. Voting
rights are noncumulative so that shareholders holding a majority of the
outstanding shares of Peoples common stock are able to elect all members of the
board of directors. All shares of Peoples common stock, when issued and fully
paid, are non-assessable and are not subject to redemption or conversion and
have no preemptive rights. Upon the liquidation, dissolution or winding up of
Peoples, whether voluntary or involuntary, holders of Peoples common stock are
entitled to share ratably, after satisfaction in full of all liabilities, in all
remaining assets of Peoples available for distribution. All shares of Peoples
common stock are entitled to share equally in such dividends as the board of
directors may declare on the Peoples common stock from sources legally available
therefor. Peoples is a holding company and conducts almost all of its operations
through its bank subsidiary. Accordingly, Peoples depends on the cash flow of
its subsidiary bank to meet its obligations. Peoples' subsidiary bank is limited
in the amount of dividends it can pay to Peoples without prior regulatory
approval. Also, bank regulators have the authority to prohibit Peoples'
subsidiary bank from paying dividends if they think the payment would be an
unsafe and unsound banking practice.
Required Shareholder Vote
Under Peoples' Articles of Incorporation and bylaws, Peoples' board of
directors is elected by the affirmative vote of a majority of shares represented
at each annual meeting. There are no provisions requiring supermajority approval
for any shareholder vote or action under Peoples' Articles of Incorporation and
bylaws,. Therefore, provisions of Florida law relating to shareholder approval
of merger and share exchange prescribe the shareholder vote required to approve
the merger. Florida law requires that Peoples shareholders approve the merger
agreement adopted by the board of directors. The merger agreement must be
approved by a majority of all the votes entitled to be cast on the merger
agreement by all shares entitled to vote on the plan. All shares of Peoples are
entitled to vote on the merger agreement.
The preceding descriptive information concerning Synovus common stock
and Peoples capital stock outlines certain provisions of Synovus' Articles of
Incorporation and bylaws, Peoples' Articles of Incorporation and bylaws and
certain statutes regulating the rights of holders of Synovus and Peoples capital
stock. The information is not a complete description of those documents and
statutes and is subject in all respects to provisions of the Articles of
Incorporation and bylaws of Synovus, the Articles of Incorporation and bylaws of
Peoples and the laws of the State of Georgia.
DISSENTERS' RIGHTS
Pursuant to Sections 607.1302 and 607.1320 of the Florida Business
Corporation Act, any shareholder of record of Peoples common stock who objects
to the merger, and who fully complies with all the provisions of Section
607.1320, will be entitled to demand and receive payment in cash of an amount
equal to the fair value of his or her shares of Peoples common stock if the
merger is consummated.
Any Peoples shareholder desiring to receive payment of the fair value
of his or her Peoples common stock in accordance with the requirements of
Section 607.1320:
* must deliver to Peoples prior to the special meeting at which the
vote will be taken on the merger, or at the special meeting, but
before the vote is taken, written notice of intent to demand
payment for his or her Peoples shares if the merger is
consummated; and
* must not vote in favor of the merger.
A vote against the merger by itself will not satisfy the notice
requirements of Section 607.1320.
Within 10 days after the special meeting at which the vote is taken
approving the merger, Peoples must give written notice of the adoption of the
merger agreement to each Peoples common shareholder who filed a notice of intent
32
to demand payment for his or her shares. Within 20 days after the giving of
notice to him or her any Peoples shareholder who elects to dissent must file
with Peoples a notice of his or her election stating:
* the shareholder's name and address;
* the number, classes, and series of Peoples shares as to which he o
she dissents; and
* a demand for the payment of the fair value of his or her Peoples
shares.
Any shareholder failing to file an election to dissent within the
20-day period will be bound by the terms of the merger agreement. Any
shareholder filing an election to dissent must deposit his or her certificates
with Peoples simultaneously with the filing of the election to dissent. The
notices referred to above should be sent to: Peoples Florida Banking
Corporation, Attn: Corporate Secretary, 32845 U.S. Highway 19, Palm Harbor,
Florida 34682.
Upon filing of a notice of election to dissent, a Peoples shareholder
will thereafter be entitled only to payment of the fair value of his or her
shares of Peoples common stock and will not be entitled to vote or exercise any
of the rights of a shareholder. A notice of election may be withdrawn in writing
by the Peoples shareholder at any time before an offer is made by Peoples to pay
for his or her shares.
Within 10 days after the expiration of the period in which Peoples
shareholders may file their notice of election to dissent, or within 10 days
after the merger takes place, whichever is later (but in no case later than 90
days from the date of the special meeting), Peoples will make a written offer to
each dissenting shareholder who has made proper demand to pay an amount Peoples
estimates to be the fair value of the Peoples shares. If the merger has not been
consummated before the expiration of the 90-day period after the special
meeting, the offer may be made conditional upon the consummation of the merger.
The notice and offer will be accompanied by: (1) a consolidated balance sheet of
Peoples as of the latest available date and not more than 12 months prior to the
making of the offer; and (2) a consolidated profit and loss statement of Peoples
for the 12-month period ended on the date of the balance sheet.
If within 30 days after the making of the offer the fair value of the
shares of Peoples stock is agreed upon between any dissenting shareholder and
Peoples, payment therefor shall be made within 90 days after the making of the
offer, or the consummation of the merger, whichever is later. Upon payment of
the agreed value, dissenting shareholders shall cease to have any interest in
their shares of Peoples stock.
If Peoples fails to make an offer within the period specified above, or
if it makes the offer and any dissenting shareholder fails to accept the same
within the period of 30 days thereafter, then Peoples, within 30 days after
receipt of written demand from any dissenting shareholder given within 60 days
after the merger is consummated, shall, or at its election at any time within
such 60 days may, file an action in any court of competent jurisdiction in
Pinellas County, Florida, requesting that the fair value of the shares be
determined. The court shall also determine whether each dissenting shareholder,
as to whom Peoples requested the court to make a determination, is entitled to
receive payment for his or her shares. If Peoples fails to institute the
proceeding, any dissenting shareholder may do so in the name of Peoples. Peoples
will pay each dissenting shareholder the amount found to be due him or her
within 10 days after final determination of the proceedings.
The foregoing does not purport to be a complete statement of the
provisions of Florida law relating to statutory dissenters' rights and is
qualified in its entirety by reference to these provisions, the relevant
portions of which are reproduced in full in Appendix "B" to this document.
DESCRIPTION OF SYNOVUS
Business
The disclosures made in this document, together with the following
information which is specifically incorporated by reference into this document,
describe the business of Synovus:
1. Synovus' Annual Report on Form 10-K for the fiscal year ended December
31, 2002 (which incorporates certain portions of Synovus' Proxy
Statement, including the Financial Appendix thereto, for its Annual
Meeting of Shareholders held on April 24, 2003), as amended by
Synovus' Annual Report on Form 10-K/A filed on April 22, 2003.
33
2. Synovus' Quarterly Reports on Form 10-Q for the quarters ended March
31, 2003, June 30, 2003 and September 30, 2003.
3. Synovus' Current Reports on Form 8-K dated January 15, 2003, April 16,
2003, July 17, 2003 and October 15, 2003.
Management and Additional Information
Information relating to executive compensation, various benefit plans,
voting securities and the principal holders of voting securities, relationships
and related transactions and other related matters as to Synovus is incorporated
by reference or set forth in Synovus' Annual Report on Form 10-K for the year
ended December 31, 2002 which is incorporated into this document by reference.
See "Where You Can Find More Information" on page 43. Shareholders desiring
copies of such documents may contact Synovus at its address or phone number
indicated under "Where You Can Find More Information."
DESCRIPTION OF PEOPLES
Business
Peoples Florida Banking Corporation is a one-bank holding company and
is the parent company of its wholly owned subsidiary, Peoples Bank. The holding
company was established September 17, 1999 under authority of the Bank Holding
Company Act through approval by the Federal Reserve Board.
Peoples Bank is a state chartered commercial bank organized and founded
in 1996 and member of the Federal Deposit Insurance Corporation. The bank
operates four full service banking offices serving Pinellas and Pasco Counties
in the Tampa Bay Area of Florida. Peoples Bank provides a comprehensive range of
financial services to individuals, corporations, professional associations,
non-profit organizations and local governments throughout its market area.
The business of Peoples Bank consists of attracting deposits from the
general public in the areas served by its banking offices and using those
deposits, together with funds derived from other sources, to fund a variety of
consumer, commercial and residential real estate loans in Pinellas and Pasco and
surrounding areas. The revenues of Peoples Bank are derived primarily from
interest on, and fees received in connection with, its lending activities and
from interest and dividends from investment securities and short-term
investments. The principal expenses of Peoples Bank are the interest paid on
deposits and operating and general and administrative expenses.
As a general commercial bank, Peoples Bank offers a broad range of
commercial consumer and residential real estate loans, and provides a variety of
corporate and personal banking services to individuals, businesses and other
institutions located in its market area. In order to attract funds for loans,
Peoples Bank's deposit services include certificates of deposit, individual
retirement accounts and other time deposits, checking and other demand deposit
accounts, interest paying checking accounts, savings accounts and money market
accounts. The transaction accounts and time certificates are tailored to the
principal market areas at rates competitive to those in the area. All deposit
accounts are insured by the FDIC up to the maximum limits permitted by law.
Peoples Bank also offers ATM cards, allowing access to local, state, national,
and international networks, safe deposit boxes, wire transfers, direct deposit,
and automatic drafts for various accounts.
Peoples Bank is subject to examination and comprehensive regulation by
the Florida Department of Financial Services. In addition, the FDIC conducts
periodic examinations of Peoples Bank. As is the case with banking institutions
generally, Peoples Bank's operations are materially and significantly influenced
by general economic conditions and by related monetary and fiscal policies of
financial institution regulatory agencies, including the FDIC and the Federal
Reserve Board. Deposit flows and cost of funds are influenced by interest rates
on competing investments and general market rates of interest. Lending
activities are affected by the demand for financing of real estate and other
types of loans, which in turn are affected by the interest rates at which such
financing may be offered and other factors affecting local demand and
availability of funds.
34
Market Area
Peoples Bank's operations are based in Palm Harbor, Florida and its
market area consists of Pinellas and Pasco counties and the surrounding area.
Management of Peoples Bank believes that its principal markets have been the
expanding residential market within its primary market area, and the established
commercial, small business, and professional markets in its market area.
Businesses and individuals are solicited through the personal efforts of the
bank's directors and officers.
Lending Activities
The primary source of income generated by Peoples Bank is the interest
earned from both its loan and investment portfolios. To develop business,
Peoples Bank relies to a great extent on the personalized approach of its
directors and officers who have extensive business and personal contacts in the
community. Peoples Bank has attempted to maintain diversification when
considering investments and the approval of loan requests. Emphasis has been
placed on the borrower's ability to generate cash flow sufficient to support its
debt obligations and other cash related expenses.
Lending activities include commercial and consumer loans, and loans for
residential purposes. Commercial loans include collateralized loans for the
purchase of automobiles, boats, home improvement, and personal investments.
Peoples Bank provides personal and corporate credit cards issued by a
correspondent bank, which assumes all liabilities relating to underwriting of
the credit applicant. Peoples Bank also originates a variety of residential real
estate loans, including the origination of conventional mortgages collateralized
by first mortgage loans to enable borrowers to purchase, refinance, or to
improve homes or real property. In addition, such loans include those made to
individual borrowers collateralized by first mortgage interests on unimproved
parcels of real estate zoned for residential homes on which such borrowers
intend to erect their personal residences. To a lesser extent, Peoples Bank also
has made land acquisition and development loans and construction loans to
developers of residential properties for construction of residential
subdivisions and multi-family residential projects.
At September 30, 2003, Peoples Bank's net loan portfolio was $180
million, representing 72% of total assets. As of such date, Peoples Bank's net
loan portfolio consisted of 13% commercial loans, 70% real estate secured loans,
excluding construction and land development loans, 15% real estate construction
and land development loans and 2% installment or consumer loans.
Competition
Peoples Bank encounters strong competition both in attracting deposits
and in the origination of loans. The deregulation of the banking industry and
the widespread enactment of state laws which permit multi-bank holding companies
as well as the availability of nationwide interstate banking has created a
highly competitive environment for financial service providers in Peoples Bank's
primary market area. In one or more aspects of its business, Peoples Bank has
competed with other commercial banks, savings and loan associations, credit
unions, finance companies, mutual funds, insurance companies, brokerage and
investment banking companies and other financial intermediaries operating in its
market area and elsewhere. Most of these competitors, some of which are
affiliated with large bank holding companies, have substantially greater
resources and lending limits, and may offer certain services that Peoples Bank
does not provide. In addition, many of Peoples Bank's non-bank competitors are
not subject to the same extensive federal regulations that govern bank holding
companies and federally chartered and insured banks.
Competition among financial institutions is based upon interest rates
offered on deposit accounts, interest rates charged on loans and other credit
and service charges, the quality of the services rendered, the convenience of
banking facilities, and, in the case of loans to commercial borrowers, relative
lending limits.
Employees
As of September 30, 2003, Peoples Bank employed 71 full-time equivalent
employees. None of these employees is covered by a collective bargaining
agreement and management believes that its employee relations are good.
35
Description of Property
Peoples Bank has designated as its main office its freestanding 11,291
square foot building located at 32845 US Highway 19 N., Palm Harbor, FL. The
facility has 4 inside teller stations and 4 drive-thru lanes, private offices,
new accounts area, vault, drive-up night depository, walk-up ATM, and storage
area on the first floor. The second floor contains a boardroom, loan department
with private offices and workstations, document vault, storage area, and
mortgage department with private offices. The facility is owned by the bank.
Pasco County branch is a 7,680 square foot freestanding building
located at 6435 Ridge Road, Port Richey, FL. The facility contains private
offices, 3 teller stations, 2 drive-thru lanes, walk-up ATM, vault, drive-up
night depository, new account area, storage area and employee break room. The
second floor contains a boardroom, private offices, three third-party tenants
and employee break room. The facility is owned by the bank.
Clearwater branch is a 4,539 square foot freestanding building located
at 1680 Gulf-to-Bay Blvd., Clearwater, FL. The facility contains private
offices, 5 teller stations, 3 drive-thru lanes, walk-up ATM, vault, drive-up
night depository, new account area, storage area, boardroom and employee break
room. The facility is owned by the bank.
Oldsmar branch is a 4,000 square foot freestanding building located at
4018 Tampa Road, Oldsmar, FL. The facility contains private offices, 4 teller
stations, 3 drive-thru lanes, walk-up ATM, vault, drive-up night depository, new
account area, a storage area, boardroom and employee break room. The facility is
owned by the bank.
The Bank's Operations Center is a 3,750 square foot freestanding
building located at 32804 U.S Highway 19 N., Palm Harbor adjacent to the Palm
Harbor Main Office. The facility contains 5 offices, 8 employee stations,
training room, document vault, storage area and employee break room. The
facility is owned by the bank.
Legal Proceedings
Peoples is periodically a party to or otherwise involved in legal
proceedings arising in the normal course of business, such as claims to enforce
liens or foreclose on loan defaults, claims involving the making and servicing
of real property loans, and other issues incident to its business. Management is
not aware of any proceeding threatened or pending against Peoples which, if
determined adversely, would have a material adverse effect on its business or
financial position.
Related Party Transactions
Peoples Bank has had various loan and other banking transactions in the
ordinary course of business with the directors, executive officers, and
principal shareholders of Peoples Bank, or an associate of such person. All such
transactions: (a) have been made in the ordinary course of business; (b) have
been made on substantially the same terms, including interest rates and
collateral on loans, as those prevailing at the time for comparable transactions
with unrelated persons; and (c) in the opinion of management do not involve more
than the normal risk of collectibility or present other unfavorable features. At
September 30, 2003, the total dollar amount of extensions of credit to
directors, executive officers and Peoples Bank principal shareholders identified
below, and any of their associates, excluding extensions of credit which were
less than $60,000 to any one such person and their associates, were $7,913,746
which represented approximately 43.9% of total capital.
Principal Shareholders
The following table sets forth, as of September 30, 2003, the stock
ownership by each of Peoples' directors, by all directors and executive officers
as a group, and by each owner of more than 5% of the outstanding shares of
Peoples common stock.
Name Shares Beneficially Owned Percentage of Class
------ ------------------------- -------------------
David L. Brandon 111,250 5.43%
David W. Dunbar 148,807 7.02%
36
Donald F. Kaltenbach 111,250 5.43%
Woodrow J. Latvala 111,250 5.43%
Ken Marks, Jr. 104,750 5.12%
David F. Nelson 104,750 5.12%
Daniel R. Schmitt 111,250 5.43%
Robert B. Spence 53,362 2.61%
Wayne B. Bard 21,532 1.04%
James P. Nelson 21,626 1.05%
All directors and
executive officers as a group 899,827 43.95%
---------------------------------------
Comprised of the following shares: 110,375 shares held by David L.
Brandon and Dana K. Brandon, Trustee, David L. Brandon and Dana K.
Brandon, Trust UAD 12/30/92. Includes exercisable options of 875
shares. Does not include additional options held but not exercisable of
1,125 shares. (All options held by directors and officers will become
exercisable immediately prior to the merger as a result of the "change
of control."
Comprised of the following shares: 15,557 shares in the name of David
W. Dunbar; 46,500 shares in the name of Prudential Securities C/F David
W. Dunbar; 12,300 shares in the name of David W. Dunbar, Trustee, David
Dunbar SERP Plan PS Plan Dtd 9/4/01; 2,700 shares in the name of
Prudential Securities C/F David W. Dunbar IRA Acct. #EW-R36203.
Includes exercisable options of 71,750 shares. Does not include
additional options held but not exercisable of 10,750 shares.
Comprised of the following shares: 8,000 shares in the name of Donald
F. Kaltenbach; 102,375 shares in the name of Cetrus and Co. FBO Donald
F. Kaltenbach, IRA. Includes exercisable options of 875 shares. Does
not include additional options held but not exercisable of 1,125
shares.
Comprised of the following shares: 7,031 in the name of Susan Latvala
(spouse); 103,344 shares in the name of Woodrow J. Latvala. Includes
exercisable options of 875 shares. Does not include additional options
held but not exercisable of 1,125 shares.
Comprised of the following shares: 104,375 in the name of O. Ken Marks,
Jr. Includes exercisable options of 375 shares. Does not include
additional options held but not exercisable of 125 shares.
Comprised of the following shares: 104,375 in the name of David F.
Nelson. Includes exercisable options of 375 shares. Does not include
additional options held but not exercisable of 125 shares.
Comprised of the following shares: 110,375 shares in the name of Daniel
R. Schmitt, Trustee, Daniel R. Schmitt Trust UAD 8/20/93. Includes
exercisable options of 875 shares. Does not include additional options
held but not exercisable of 1,125 shares.
Comprised of the following shares: 10,080 shares in the name of Robert
B. Spence Profit Sharing Plan UAD 1/1/92; 42,407 shares in the name of
Robert B. Spence. Includes exercisable options of 875 shares. Does not
include additional options held but not exercisable of 1,125 shares.
Comprised of the following shares: 844 shares in the name of Wayne B.
Bard and Betty G. Bard, Jt Ten; 1,875 shares in the name of PTC Cust
Rollover IRA FBO IRA Wayne B. Bard. Includes exercisable options of
18,813 shares. Does not include additional options held but not
exercisable of 3,062 shares.
37
Comprised of the following shares: 938 shares in the name of James P.
Nelson and Patricia A. Nelson, Jt. Ten; 1,875 shares in the name of
Morgan Stanley DW, Inc. Includes exercisable options of 18,813 shares.
Does not include additional options held but not exercisable of 3,062
shares.
REGULATORY MATTERS
General
Synovus is a registered bank holding company subject to supervision and
regulation by the Board of Governors of the Federal Reserve System under the
Bank Holding Company Act of 1956 and by the Georgia Department of Banking and
Finance under the bank holding company laws of the State of Georgia. Synovus
became a financial holding company under the Gramm-Leach-Bliley Act of 1999 in
April 2000. Financial holding companies may engage in a variety of activities,
some of which are not permitted for other bank holding companies that are not
financial holding companies. Synovus' affiliate national banking associations
are subject to regulation and examination primarily by the Office of the
Comptroller of the Currency and, secondarily, by the FDIC and the Federal
Reserve Board. Synovus' state-chartered banks are subject to primary federal
regulation and examination by the FDIC and, in addition, are regulated and
examined by their respective state banking departments. Numerous other federal
and state laws, as well as regulations promulgated by the Federal Reserve, the
state banking regulators, the OCC and the FDIC govern almost all aspects of the
operations of the banks. Various federal and state bodies regulate and supervise
Synovus' non-banking subsidiaries including its brokerage, investment advisory,
insurance agency and processing operations. These include, but are not limited
to, the SEC, the National Association of Securities Dealers, Inc., federal and
state banking regulators and various state regulators of insurance and brokerage
activities.
Dividends
Under the laws of the State of Georgia, Synovus, as a business
corporation, may declare and pay dividends in cash or property unless the
payment or declaration would be contrary to restrictions contained in its
Articles of Incorporation, and unless, after payment of the dividend, it would
not be able to pay its debts when they become due in the usual course of its
business or its total assets would be less than the sum of its total
liabilities. Synovus is also subject to regulatory capital restrictions that
limit the amount of cash dividends that it may pay. Additionally, Synovus is
subject to contractual restrictions that limit the amount of cash dividends it
may pay. Under the laws of the State of Florida, Peoples is subject to similar
dividend restrictions.
The primary sources of funds for Synovus' payment of dividends to its
shareholders are dividends and fees to Synovus from its banking and nonbanking
affiliates. Similarly, the primary source of funds for Peoples' payment of
dividends to its shareholders are dividends to Peoples from its banking
affiliate, Peoples Bank. Various federal and state statutory provisions and
regulations limit the amount of dividends that the subsidiary banks of Synovus
and Peoples may pay. Under the regulations of the Georgia Department of Banking
and Finance, a Georgia bank must have approval of the Georgia Department of
Banking and Finance to pay cash dividends if, at the time of such payment:
* the ratio of Tier 1 capital to adjusted total assets is less than 6%;
* the aggregate amount of dividends to be declared or anticipated to be
declared during the current calendar year exceeds 50% of its net
after-tax profits for the previous calendar year; or
* its total classified assets in its most recent regulatory examination
exceeded 80% of its Tier 1 capital plus its allowance for loan losses,
as reflected in the examination.
In general, the approval of the Alabama Banking Department, Florida
Department of Financial Services and Tennessee Department of Financial
Institutions is required if the total of all dividends declared by an Alabama,
Florida or Tennessee bank, as the case may be, in any year would exceed the
total of its net profits for that year combined with its retained net profits
for the preceding two years less any required transfers to surplus. In addition,
the approval of the OCC is required for a national bank to pay dividends in
excess of the bank's retained net income for the current year plus retained net
income for the preceding two years. Approval of the Federal Reserve Board is
required for payment of any dividend by a state chartered bank that is a member
of the Federal Reserve System and sometimes referred to as a state member bank,
if the total of all dividends declared by the bank in any calendar year would
exceed the total of its net
38
profits, as defined by regulatory agencies, for that year combined with its
retained net profits for the proceeding two years. In addition, a state member
bank may not pay a dividend in an amount greater than its net profits then on
hand.
Some of Synovus' banking affiliates have in the past been required to
secure prior regulatory approval for the payment of dividends to Synovus in
excess of regulatory limits and may be required to seek approval for the payment
of dividends to Synovus in excess of those limits in the future. If prior
regulatory approvals are sought, there is no assurance that any such regulatory
approvals will be granted.
Federal and state banking regulations applicable to Synovus and its
banking subsidiaries require minimum levels of capital which limit the amounts
available for payment of dividends. Synovus' objective is to pay out at least
one-third of prior year's earnings in cash dividends to its shareholders.
Synovus and its predecessors have paid cash dividends on their common stock in
every year since 1891. Under restrictions imposed under federal and state laws,
Synovus' subsidiary banks could declare aggregate dividends to Synovus of
approximately $162.6 million during 2003 without obtaining regulatory approval.
Capital Requirements
Synovus and Peoples are required to comply with the capital adequacy
standards established by the Federal Reserve Board and their banking
subsidiaries must comply with similar capital adequacy standards established by
the OCC and FDIC, as applicable. There are two basic measures of capital
adequacy for bank holding companies and their banking subsidiaries that have
been promulgated by the Federal Reserve Board, the FDIC and the OCC: a
risk-based measure and a leverage measure. All applicable capital standards must
be satisfied for a bank holding company or a bank to be considered in
compliance.
The risk-based capital standards are designed to make regulatory
capital requirements more sensitive to differences in risk profile among banks
and bank holding companies, to account for off-balance-sheet exposure, and to
minimize disincentives for holding liquid assets. Assets and off-balance-sheet
items are assigned to broad risk categories, each with appropriate weights. The
resulting capital ratios represent capital as a percentage of total
risk-weighted assets and off-balance-sheet items.
The minimum guideline for the ratio of total capital to risk-weighted
assets, including certain off-balance-sheet items, such as standby letters of
credit, is 8.0%. At least half of total capital must comprise common stock,
minority interests in the equity accounts of consolidated subsidiaries,
noncumulative perpetual preferred stock and a limited amount of cumulative
perpetual preferred stock, less goodwill and certain other intangible assets,
referred to as Tier 1 Capital. The remainder may consist of subordinated debt,
other preferred stock and a limited amount of loan loss reserves, referred to as
Tier 2 Capital. The Federal Reserve Board also requires certain bank holding
companies that engage in trading activities to adjust their risk-based capital
to take into consideration market risk that may result from movements in market
prices of covered trading positions in trading accounts, or from foreign
exchange or commodity positions, whether or not in trading accounts, including
changes in interest rates, equity prices, foreign exchange rates or commodity
prices. Any capital required to be maintained under these provisions may consist
of new Tier 3 Capital consisting of certain short term subordinated debt. In
addition, the Federal Reserve Board has issued a policy statement, under which a
bank holding company that is determined to have weaknesses in its risk
management processes or a high level of interest rate risk exposure may be
required to hold additional capital.
The Federal Reserve Board has also established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
leverage ratio of Tier 1 Capital to average assets, less goodwill and certain
other intangible assets, of 3.0% for bank holding companies that meet certain
specified criteria, including having the highest regulatory rating. All other
bank holding companies generally are required to maintain a leverage ratio of at
least 4.0%. Bank holding companies are expected to maintain higher-than- minimum
capital ratios if they have supervisory, financial, operational or managerial
weaknesses, or if they are anticipating or experiencing significant growth.
Synovus has not been advised by the Federal Reserve Board of any specific
minimum leverage ratio applicable to it.
At September 30, 2003, Synovus' total capital ratio was 12.97%, its
Tier 1 Capital ratio was 10.30% and its Tier 1 leverage ratio was 9.84%.
Assuming the merger had been consummated on September 30, 2003, the total
capital ratio of Synovus would have been 12.95%, its Tier 1 Capital ratio would
have been 10.29% and its Tier 1 leverage ratio would
39
have been 9.81%. Each of these ratios exceeds the current requirements under the
Federal Reserve Board's capital guidelines.
At September 30, 2003, Peoples' total capital ratio was 10.43%, its
Tier 1 Capital ratio was 9.29% and its Tier 1 leverage ratio was 7.45%. Each of
these ratios exceeds the current requirements under the Federal Reserve Board's
capital guidelines.
Each of Synovus' and Peoples' banking subsidiaries is subject to
similar risk-based and leverage capital requirements adopted by its applicable
federal banking agency, and each was in compliance with the applicable minimum
capital requirements as of September 30, 2003.
Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including issuance of a capital directive, the termination
of deposit insurance by the FDIC, a prohibition on the taking of brokered
deposits and other restrictions on its business. As described below, substantial
additional restrictions can be imposed upon FDIC-insured depository institutions
that fail to meet applicable capital requirements. See "Prompt Corrective
Action" below.
Commitments to Subsidiary Banks
Under the Federal Reserve Board's policy, Synovus is expected to act as
a source of financial strength to its subsidiary banks and to commit resources
to support its subsidiary banks in circumstances when it might not do so absent
that policy. In addition, any capital loans by Synovus to any of its subsidiary
banks would also be subordinate in right of payment to depositors and to certain
other indebtedness of that bank.
In the event of Synovus' bankruptcy, any commitment by Synovus to a
federal bank regulatory agency to maintain the capital of a banking subsidiary
will be assumed by the bankruptcy trustee and entitled to a priority of payment.
In addition, the Federal Deposit Insurance Act provides that any financial
institution whose deposits are insured by the FDIC generally will be liable for
any loss incurred by the FDIC in connection with the default of, or any
assistance provided by the FDIC to, a commonly controlled financial institution.
Prompt Corrective Action
The Federal Deposit Insurance Corporation Improvement Act of 1991
establishes a system of prompt corrective action to resolve the problems of
undercapitalized institutions. Under this system the federal banking regulators
are required to rate supervised institutions on the basis of five capital
categories as described below. The federal banking regulators are also required
to take mandatory supervisory actions, and are authorized to take other
discretionary actions, with respect to institutions in the three
undercapitalized categories, the severity of which will depend upon the capital
category in which the institution is placed. Generally, subject to a narrow
exception, the Federal Deposit Insurance Corporation Improvement Act requires
the banking regulator to appoint a receiver or conservator for an institution
that is critically undercapitalized. The federal banking agencies have specified
by regulation the relevant capital level for each category.
Under the Federal Deposit Insurance Corporation Improvement Act, the
Federal Reserve Board, the FDIC, the OCC and the Office of Thrift Supervision
have adopted regulations setting forth a five-tier scheme for measuring the
capital adequacy of the financial institutions they supervise. Under the
regulations, an institution would be placed in one of the following capital
categories:
* Well Capitalized - an institution that has a total capital ratio of at
least 10%, a Tier 1 Capital ratio of at least 6% and
a Tier 1 leverage ratio of at least 5%;
* Adequately Capitalized - an institution that has a total capital ratio
of at least 8%, a Tier 1 Capital ratio of at least 4% and a Tier 1
leverage ratio of at least 4%;
* Undercapitalized - an institution that has a total capital ratio of
under 8%, a Tier 1 Capital ratio of under 4% or a Tier 1 leverage
ratio of under 4%;
* Significantly Undercapitalized - an institution that has a total
capital ratio of under 6%, a Tier 1 Capital ratio of under 3% or a
Tier 1 leverage ratio of under 3%; and
40
* Critically Undercapitalized - an institution whose tangible equity is
not greater than 2% of total tangible assets.
The regulations permit the appropriate federal banking regulator to
downgrade an institution to the next lower category if the regulator determines
(1) after notice and opportunity for hearing or response, that the institution
is in an unsafe or unsound condition or (2) that the institution has received
and not corrected a less-than-satisfactory rating for any of the categories of
asset quality, management, earnings or liquidity in its most recent examination.
Supervisory actions by the appropriate federal banking regulator depend upon an
institution's classification within the five categories. Synovus' management
believes that Synovus and its bank subsidiaries have the requisite capital
levels to qualify as well capitalized institutions under the Federal Deposit
Insurance Corporation Improvement Act regulations.
The Federal Deposit Insurance Corporation Improvement Act generally
prohibits a depository institution from making any capital distribution,
including payment of a dividend, or paying any management fee to its holding
company if the depository institution would thereafter be undercapitalized.
Undercapitalized depository institutions are subject to restrictions on
borrowing from the Federal Reserve System. In addition, undercapitalized
depository institutions are subject to growth limitations and are required to
submit capital restoration plans. A depository institution's holding company
must guarantee the capital plan, up to an amount equal to the lesser of 5% of
the depository institution's assets at the time it becomes undercapitalized or
the amount of the capital deficiency when the institution fails to comply with
the plan. Federal banking agencies may not accept a capital plan without
determining, among other things, that the plan is based on realistic assumptions
and is likely to succeed in restoring the depository institution's capital. If a
depository institution fails to submit an acceptable plan, it is treated as if
it is significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject
to a number of requirements and restrictions, including orders to sell
sufficient voting stock to become adequately capitalized, requirements to reduce
total assets and cessation of receipt of deposits from correspondent banks.
Critically undercapitalized depository institutions are subject to appointment
of a receiver or conservator.
Safety and Soundness Standards
The Federal Deposit Insurance Act, as amended by the Federal Deposit
Insurance Corporation Improvement Act and the Riegle Community Development and
Regulatory Improvement Act of 1994, requires the federal bank regulatory
agencies to prescribe standards, by regulations or guidelines, relating to
internal controls, information systems and internal audit systems, loan
documentation, credit underwriting, interest rate risk exposure, asset growth,
asset quality, earnings, stock valuation and compensation, fees and benefits and
such other operational and managerial standards as the agencies deem
appropriate. The federal bank regulatory agencies have adopted a set of
guidelines prescribing safety and soundness standards under the Federal Deposit
Insurance Corporation Improvement Act. The guidelines establish general
standards relating to internal controls and information systems, internal audit
systems, loan documentation, credit underwriting, interest rate exposure, asset
growth and compensation, fees and benefits. In general, the guidelines require,
among other things, appropriate systems and practices to identify and manage the
risks and exposures specified in the guidelines. The guidelines prohibit
excessive compensation as an unsafe and unsound practice and describe
compensation as excessive when the amounts paid are unreasonable or
disproportionate to the services performed by an executive officer, employee,
director or principal shareholder. The federal banking agencies determined that
stock valuation standards were not appropriate. In addition, the agencies have
adopted regulations that authorize, but do not require, an agency to order an
institution that has been given notice by an agency that it is not satisfying
any of such safety and soundness standards to submit a compliance plan. If,
after being so notified, an institution fails to submit an acceptable compliance
plan, the agency must issue an order directing action to correct the deficiency
and may issue an order directing other actions of the types to which an
undercapitalized institution is subject under the prompt corrective action
provisions of the Federal Deposit Insurance Corporation Improvement Act. See
"Prompt Corrective Action" above. If an institution fails to comply with such an
order, the agency may seek to enforce such order in judicial proceedings and to
impose civil money penalties.
Depositor Preference Statute
Federal law provides that deposits and certain claims for
administrative expenses and employee compensation against an insured depository
institution would be afforded a priority over other general unsecured claims
against such an
41
institution, including federal funds and letters of credit, in the liquidation
or other resolution of such an institution by any receiver.
Gramm-Leach-Bliley Act
On November 12, 1999, legislation was enacted which allows bank holding
companies to engage in a wider range of non-banking activities, including
greater authority to engage in securities and insurance activities. Under the
Gramm-Leach-Bliley Act, a bank holding company that elects to become a financial
holding company may engage in any activity that the Federal Reserve Board, in
consultation with the Secretary of the Treasury, determines by regulation or
order is: (1) financial in nature; (2) incidental to any such financial
activity; or (3) complementary to any such financial activity and does not pose
a substantial risk to the safety or soundness of depository institutions or the
financial system generally. The legislation makes significant changes in United
States banking law, principally by repealing restrictive provisions of the 1933
Glass-Steagall Act. The legislation specifies certain activities that are deemed
to be financial in nature, including lending, exchanging, transferring,
investing for others, or safeguarding money or securities; underwriting and
selling insurance; providing financial, investment or economic advisory
services; underwriting, dealing in or making a market in, securities; and any
activity currently permitted for bank holding companies by the Federal Reserve
Board under Section 4(c)(8) of the Bank Holding Company Act. The legislation
does not authorize banks or their affiliates to engage in commercial activities
that are not financial in nature. A bank holding company may elect to be treated
as a financial holding company only if all depository institution subsidiaries
of the holding company are well-capitalized, well-managed and have at least a
satisfactory rating under the Community Reinvestment Act. Synovus became a
financial holding company in April 2000.
In addition to the Gramm-Leach-Bliley Act, there have been a number of
legislative and regulatory proposals that would have an impact on bank/financial
holding companies and their bank and nonbank subsidiaries. It is impossible to
predict whether or in what form these proposals may be adopted in the future and
if adopted, what their effect will be on Synovus.
LEGAL MATTERS
The validity of the Synovus common stock to be issued in connection
with the merger will be passed upon by Kathleen Moates, Senior Vice President
and Senior Deputy General Counsel of Synovus. Ms. Moates beneficially owns
shares of Synovus common stock and options to purchase additional shares of
Synovus common stock. As of the date of this document, the number of shares Ms.
Moates owns or has the right to acquire upon exercise of her options is, in the
aggregate, less than 0.1% of the outstanding shares of Synovus common stock.
EXPERTS
The consolidated financial statements of Synovus Financial Corp. and
subsidiaries as of December 31, 2002 and 2001 and for each of the years in the
three-year period ended December 31, 2002 have been incorporated by reference
herein in reliance upon the report of KPMG LLP, independent accountants,
incorporated by reference herein and upon the authority of said firm as experts
in accounting and auditing. The audit report covering the December 31, 2002
consolidated financial statements refers to a change in the method of accounting
for goodwill in 2002 and a change in the method of accounting for derivative
instruments and hedging activities in 2001.
OTHER MATTERS
Peoples' board of directors does not know of any matters to be
presented at the special meeting other than the proposal to approve the merger.
If any other matters are properly brought before the special meeting or any
adjournment of the special meeting, the enclosed proxy will be deemed to confer
discretionary authority on the individuals named as proxies to vote the shares
represented by the proxy as to any such matters.
SHAREHOLDER PROPOSALS
Synovus' 2004 annual meeting of shareholders will be held in April
2004. Any shareholder satisfying the Securities and Exchange Commission
requirements and wishing to submit a proposal to be included in the proxy
42
statement for the 2004 annual meeting of shareholders should submit the proposal
in writing to the Secretary, Synovus Financial Corp., 901 Front Avenue, Suite
301, Columbus, Georgia 31901. Synovus must receive a proposal by November 15,
2003 to consider it for inclusion in the proxy statement for the 2004 annual
meeting of shareholders.
If the merger is not consummated, Peoples will inform its shareholders
of the date and time of the 2004 annual meeting of shareholders of Peoples.
WHERE YOU CAN FIND MORE INFORMATION
Synovus files annual, quarterly and special reports, proxy statements
and other information with the Securities and Exchange Commission. You may read
and copy any reports, statements or other information that Synovus files with
the SEC at the SEC's public reference rooms at 450 Fifth Street, NW, Washington,
D.C. 20549, 233 Broadway, New York, New York 10048 and Suite 1400, 500 West
Madison Street, Chicago, Illinois 60601-2511. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. These SEC
filings are also available to the public from commercial document retrieval
services and at the Internet world wide web site maintained by the SEC at
http://www.sec.gov. Reports, proxy statements and other information should also
be available for inspection at the offices of the NYSE.
Synovus filed a registration statement to register with the SEC the
Synovus common stock to be issued to Peoples shareholders in the merger. This
document is a part of that registration statement and constitutes a prospectus
of Synovus. As allowed by SEC rules, this document does not contain all the
information you can find in Synovus' registration statement or the exhibits to
that registration statement.
The SEC allows Synovus to "incorporate by reference" information into
this document, which means that Synovus can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is considered part of this document,
except for any information superseded by information contained directly in this
document or in later filed documents incorporated by reference in this document.
This document incorporates by reference the documents set forth below
that Synovus has previously filed with the SEC. These documents contain
important information about Synovus and its business.
Synovus SEC Filings (File No. 1-10312)
(1) Synovus' Annual Report on Form 10-K for the year ended December 31,
2002, as amended on April 22, 2003;
(2) Synovus' Quarterly Reports on Form 10-Q for the quarters ended March
31, 2003, June 30, 2003 and September 30, 2003;
(3) Synovus' Current Reports on Form 8-K dated January 15, 2003, April 16,
2003, July 16, 2003 and October 15, 2003;
(4) the description of Synovus common stock contained in Synovus'
Registration Statement on Form 8-A filed with the SEC on August 21,
1989; and
(5) the description of the shareholder rights plan of Synovus contained in
Synovus' Registration Statement on Form 8-A filed with the SEC on
April 28, 1999.
Synovus also incorporates by reference additional documents that may be
filed with the SEC between the date of this document and the consummation of the
merger or termination of the merger agreement. These include periodic reports,
such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K, as well as proxy statements.
Synovus has supplied all information contained or incorporated by
reference in this document relating to Synovus, and Peoples has supplied all
information contained in this document relating to Peoples.
43
You can obtain any of the documents incorporated by reference from
Synovus, the SEC or the SEC's Internet web site as described above. Documents
incorporated by reference are available from Synovus without charge, excluding
all exhibits, except that if Synovus has specifically incorporated by reference
an exhibit in this document, the exhibit will also be available without charge.
You may obtain documents incorporated by reference in this document by
requesting them in writing or by telephone from Synovus at the following
addresses:
Synovus Financial Corp.
901 Front Avenue, Suite 301
Columbus, Georgia 31901
Attn: G. Sanders Griffith, III
Senior Executive Vice President,
General Counsel & Secretary
Telephone: (706) 649-2267
If you would like to request documents, please do so by December 26,
2003 to receive them before the Peoples special meeting.
You should rely only on the information contained or incorporated by
reference in this document. Synovus and Peoples have not authorized anyone to
provide you with information that is different from what is contained in this
document. This document is dated December 1, 2003. You should not assume that
the information contained in this document is accurate as of any date other than
that date. Neither the mailing of this document to shareholders nor the issuance
of Synovus common stock in the merger creates any implication to the contrary.
FORWARD-LOOKING STATEMENTS
Synovus and Peoples make forward-looking statements in this document,
and Synovus makes such statements in its public documents, that are subject to
risks and uncertainties. These forward-looking statements include information
about possible or assumed future results of our operations. Also, when we use
any of the words "believes," "expects," "anticipates" or similar expressions, we
are making forward-looking statements. Many possible events or factors could
affect the financial results and performance of each of our companies. This
could cause results or performances to differ materially from those expressed in
our forward-looking statements. The Private Securities Litigation Reform Act of
1995 provides a "safe harbor" for such forward-looking statements. In order to
comply with the terms of the safe harbor, we note that a variety of factors
could cause our actual results and experience to differ materially from the
anticipated results or other expectations expressed in such forward-looking
statements. The risks and uncertainties that may affect the operations,
performance, development and results of our businesses include, but are not
limited to, those described below. You should consider these risks when you vote
on the merger. These possible events or factors include the following:
* our cost savings from the merger are less than we expect, or we are
unable to obtain those cost savings as soon as we expect;
* costs or difficulties relating to the integration of Peoples may be
greater than expected;
* we lose more deposits, customers, or business than we expect;
* competition in the banking industry increases significantly;
* our integration costs are higher than we expect or our operating costs
after the merger are greater than we expect;
* the merger does not generate the synergies we expect;
* technological changes and systems integration are harder to make or
more expensive than we expect;
* changes in the interest rate environment reduce our margins;
* general economic or business conditions are worse than we expect;
44
* legislative or regulatory changes occur which adversely affect our
business;
* changes occur in business conditions and inflation; and
* changes occur in the securities markets.
Management of each of Synovus and Peoples believes the forward-looking
statements about its company are reasonable; however, you should not place undue
reliance on them. Forward-looking statements are not guarantees of performance.
They involve risks, uncertainties and assumptions. The future results and
shareholder values of Synovus following completion of the merger may differ
materially from those expressed or implied in these forward-looking statements.
Many of the factors that will determine these results and values are beyond
Synovus' and Peoples' ability to control or predict.
PRO FORMA FINANCIAL INFORMATION
Pro forma financial information reflecting the acquisition of Peoples
by Synovus is not presented in this document since the pro forma effect is not
significant.
Acq\Peoples\s-4.doc
45
Appendix "A"
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of the 7th day of October, 2003
(the "Plan" or the "Agreement") by and between SYNOVUS FINANCIAL CORP.
("Synovus") and PEOPLES FLORIDA BANKING CORPORATION ("Peoples").
RECITALS:
A. Synovus. Synovus has been duly incorporated and is an existing
corporation in good standing under the laws of Georgia, with its principal
executive offices located in Columbus, Georgia. As of August 31, 2003, Synovus
had 600,000,000 authorized shares of common stock, par value $1.00 per share
("Synovus Common Stock"), of which 301,320,726 shares were outstanding on said
date. All of the issued and outstanding shares of Synovus Common Stock are duly
and validly issued and outstanding and are fully paid and nonassessable and not
subject to any preemptive rights. Synovus has 40 wholly-owned banking
subsidiaries (as defined in Rule 1-02 of Regulation S-X promulgated by the
Securities and Exchange Commission, a "Subsidiary") and other non-banking
Subsidiaries as of the date hereof. Each Subsidiary that is a depository
institution is an "insured institution" as defined in the Federal Deposit
Insurance Act and the applicable regulations thereunder, and the deposits in
which are insured by the Federal Deposit Insurance Corporation.
B. Peoples. Peoples has been duly incorporated and is an existing
corporation in good standing under the laws of Florida, with its principal
executive offices located in Tampa, Florida. As of August 31, 2003, Peoples had
3,000,000 authorized shares of common stock, par value $.10 per share ("Peoples
Common Stock"), of which 2,047,184 shares are outstanding as of the date hereof.
All of the issued and outstanding shares of Peoples Common Stock are duly and
validly issued and outstanding and are fully paid and nonassessable and not
subject to any preemptive rights. Peoples has one wholly-owned banking
Subsidiary, Peoples Bank, which Subsidiary is an "insured institution" as
defined in the Federal Deposit Insurance Act and the applicable regulations
thereunder, and the deposits in which are insured by the Federal Deposit
Insurance Corporation and one non-banking subsidiary.
C. Rights, Etc. Neither Synovus nor Peoples has any shares of its
capital stock reserved for issuance, any outstanding option, call or commitment
relating to shares of its capital stock or any outstanding securities,
obligations or agreements convertible into or exchangeable for, or giving any
person any right (including, without limitation, preemptive rights) to subscribe
for or acquire from it, any shares of its capital stock except, in the case of
Synovus, as described in filings made with the Securities and Exchange
Commission ("SEC") and except, in the case of Peoples, as described in its
audited financial statements for the year ended December 31, 2002 or in its
unaudited financial statements for the period ended June 30, 2003 or except as
otherwise disclosed in the Disclosure Schedules referred to in Article III
below.
A-1
D. Board Approvals. The respective Boards of Directors of Synovus and
Peoples have unanimously approved and adopted the Plan and have duly authorized
its execution. In the case of Peoples, the Board of Directors has unanimously
voted to recommend to its stockholders that the Plan be approved.
E. Materiality. Unless the context otherwise requires, any reference in
this Agreement to materiality with respect to any party shall be deemed to be
with respect to such party and its Subsidiaries taken as a whole.
F. Material Adverse Effect. For the purposes of this Plan, the
capitalized term "Material Adverse Effect" as used in relation to a person,
means an adverse effect on the business, results of operations or financial
condition of that person or its Subsidiaries which is material to it and its
Subsidiaries, taken as a whole, provided that "Material Adverse Effect" shall
not include or be deemed to include: (1) the impact of changes which are made
and become effective after the date of this Plan in banking or similar laws of
general applicability or interpretations thereof by courts or governmental
authorities; or (2) changes which are made and become effective after the date
of this Plan in generally accepted accounting principles applicable to banks and
their holding companies.
In consideration of their mutual promises and obligations hereunder,
and intending to be legally bound hereby, Synovus and Peoples adopt the Plan and
prescribe the terms and conditions hereof and the manner and basis of carrying
it into effect, which shall be as follows:
I. THE MERGER
(A) Structure of the Merger. On the Effective Date (as defined in
Article VII), Peoples will merge (the "Merger") with and into Synovus, with
Synovus being the surviving corporation (the "Surviving Corporation") under the
name Synovus Financial Corp. pursuant to the applicable provisions of the
Georgia Business Corporation Code ("Georgia Act") and the Florida Business
Corporation Act ("Florida Act"). On the Effective Date, the articles of
incorporation and bylaws of the Surviving Corporation shall be the articles of
incorporation and bylaws of Synovus in effect immediately prior to the Effective
Date.
(B) Effect on Outstanding Shares. By virtue of the Merger,
automatically and without any action on the part of the holder thereof, subject
to paragraph (A)(4) of Article VI, each share of Peoples Common Stock issued and
outstanding on the Effective Date, other than shares of Peoples Common Stock as
to which dissenters' rights have been duly and validly exercised in accordance
with the Florida Act, shall be converted into and exchangeable for the right to
receive both:
(a) .7478 shares of Synovus Common Stock ("Per Share Stock
Consideration"); and
A-2
(b) cash in an amount equal to $14.65 (the "Per Share Cash
Consideration).
As of the Effective Date, each share of Peoples Common Stock held as
treasury stock of Peoples shall be canceled, retired and cease to exist, and no
payment shall be made in respect thereof.
No fractional shares of Synovus Common Stock shall be issued
in connection with the Merger. Each holder of Peoples Common Stock who would
otherwise have been entitled to receive a fraction of a share of Synovus Common
Stock shall receive, in lieu thereof, cash (without interest) in an amount equal
to such fractional part of a share of Synovus Common Stock multiplied by the
closing price per share of Synovus Common Stock on the NYSE on the last business
day immediately preceding the Effective Date.
Each holder of Peoples Common Stock will be entitled to ten (10) votes
for each share of Synovus Common Stock to be received by him/her on the
Effective Date pursuant to a set of resolutions adopted by the Board of
Directors of Synovus on October 7, 2003, in accordance with and subject to those
certain Articles of Amendment to Synovus' Articles of Incorporation, dated April
24, 1986. Synovus shall provide Peoples with certified copies of such
resolutions prior to the Effective Date.
The shares of Synovus Common Stock issued and outstanding immediately
prior to the Effective Date shall remain outstanding and unchanged after the
Merger.
If, between the date of this Agreement and the Effective Date,
the outstanding shares of Synovus Common Stock shall be increased, decreased,
changed into or exchanged for a different number or class of shares by reason of
any reorganization, reclassification, recapitalization, stock dividend, stock
split, reverse stock split, or other like changes in Synovus' capitalization,
then an appropriate and proportionate adjustment shall be made to the Per Share
Cash Consideration and the Per Share Stock Consideration so as to prevent the
dilutive effect of such transaction on a percentage of ownership basis.
(C) General Procedures. Certificates which represent shares of Peoples
Common Stock that are outstanding on the Effective Date (each, a "Certificate")
and are converted into shares of Synovus Common Stock or cash pursuant to the
Plan shall, after the Effective Date, be deemed to represent shares of the
Synovus Common Stock or cash into which such shares have become converted and
shall be exchangeable by the holders thereof in the manner provided in the
transmittal materials described below for new certificates representing the
shares of Synovus Common Stock or cash into which such shares have been
converted.
A-3
As promptly as practicable after the Effective Date, Synovus shall send
to each holder of record of shares of Peoples Common Stock outstanding on the
Effective Date transmittal materials for use in exchanging the Certificates for
such shares for certificates for shares of the Synovus Common Stock and cash
into which such shares of the Peoples Common Stock have been converted pursuant
to the Plan. Upon surrender of a Certificate, duly endorsed as Synovus may
require, the holder of such Certificate shall be entitled to receive in exchange
therefor the consideration set forth in paragraph (B) of Article I and such
Certificate shall forthwith be canceled. No dividend or other distribution
payable after the Effective Date with respect to the Synovus Common Stock shall
be paid to the holder of any unsurrendered Certificate until the holder thereof
surrenders such Certificate, at which time such holder shall receive all
dividends and distributions, without interest thereon, previously withheld from
such holder pursuant hereto. After the Effective Date, there shall be no
transfers on the stock transfer books of Peoples of shares of Peoples Common
Stock which were issued and outstanding on the Effective Date and converted
pursuant to the provisions of the Plan. If after the Effective Date,
Certificates are presented for transfer to Peoples, they shall be canceled and
exchanged for the shares of Synovus Common Stock and cash deliverable in respect
thereof as determined in accordance with the provisions of paragraph (B) of
Article I and in accordance with the procedures set forth in this paragraph. In
the case of any lost, mislaid, stolen or destroyed Certificate, the holder
thereof may be required, as a condition precedent to the delivery to such holder
of the consideration described in paragraph (B) of Article I, to deliver to
Synovus a bond in such sum as Synovus may direct as indemnity against any claim
that may be made against the exchange agent, Synovus or Peoples with respect to
the Certificate alleged to have been lost, mislaid, stolen or destroyed.
After the Effective Date, holders of Peoples Common Stock shall cease
to be, and shall have no rights as, stockholders of Peoples, other than to
receive shares of Synovus Common Stock and cash into which such shares have been
converted, fractional share payments pursuant to the Plan and any dividends or
distributions with respect to such shares of Synovus Common Stock. Until sixty
(60) days after the Effective Date, former shareholders of record of Peoples
shall be entitled to vote at any meeting of Synovus shareholders the number of
shares of Synovus Common Stock into which their respective Peoples Common Stock
are converted regardless of whether such holders have exchanged their
certificates pursuant to the Plan.
Notwithstanding the foregoing, neither Synovus nor Peoples nor any
other person shall be liable to any former holder of shares of Peoples Common
Stock for any amounts paid or property delivered in good faith to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(D) Options. On the Effective Date, each option granted by Peoples to
purchase shares of Peoples Common Stock (each a "Peoples Stock Option"), whether
vested or unvested, which is outstanding and unexercised immediately prior
thereto, shall be assumed by Synovus and converted automatically into an option
to purchase shares of Synovus Common Stock (each a
A-4
"Synovus Stock Option") in an amount and at an exercise price determined as
provided below (and otherwise having the same duration and other terms as the
original option):
(1) The number of shares of Synovus Common Stock
to be subject to the new option shall be
equal to the product of the number of shares
of Peoples Common Stock subject to the
original option multiplied by 1.3372
("Synovus Option Value Multiple"), unless
adjusted pursuant to paragraph (A)(6) of
Article VI, provided that any fractional
shares of Synovus Common Stock resulting
from such multiplication shall be rounded to
the nearest whole share; and
(2) The exercise price per share of Synovus
Common Stock under the new option shall be
equal to the exercise price per share of
Peoples Common Stock under the original
option divided by 1.3372 ("Synovus Option
Price Divisor"), unless adjusted pursuant to
paragraph (A)(6) of Article VI, provided
that such exercise price shall be rounded up
to the nearest cent.
The adjustment provided herein with respect to any options which are
"incentive stock options" (as defined in Section 422 of the Internal Revenue
Code of 1986 (the "Code")) shall be and is intended to be effected in a manner
which is consistent with Section 424(a) of the Code.
Within thirty (30) days after the Effective Date, Synovus shall notify
each holder of an option to purchase Peoples Common Stock of the assumption of
such options by Synovus and the revisions to the options shall be effected
thereby. No payment shall be made for fractional interests. From and after the
date hereof, no additional options to purchase Peoples Common Stock shall be
granted. Synovus shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Synovus Common Stock for delivery upon
exercise of the Synovus Stock Options. As soon as practicable after the
Effective Date, Synovus shall file a registration statement on Form S-8 (or any
successor or other appropriate forms) with respect to the shares of Synovus
Common Stock subject to any Synovus Stock Options held by persons who are or
were directors, officers or employees of Peoples or its Subsidiaries.
II. ACTIONS PENDING MERGER
(A) Peoples covenants to Synovus that Peoples and its Subsidiaries
shall conduct their business only in the ordinary course and shall not, without
the prior written consent of Synovus, which consent will not be unreasonably
withheld: (1) issue any options to purchase capital stock or issue any shares of
capital stock, other than shares of Peoples Common Stock issued in connection
with the exercise of currently outstanding options to purchase shares of Peoples
Common Stock; (2)
A-5
declare, set aside, or pay any dividend or distribution with respect to the
capital stock of Peoples; (3) directly or indirectly redeem, purchase or
otherwise acquire any capital stock of Peoples or its Subsidiaries; (4) effect a
split or reclassification of the capital stock of Peoples or its Subsidiaries or
a recapitalization of Peoples or its Subsidiaries; (5) amend the articles of
incorporation or bylaws of Peoples or its Subsidiaries; (6) grant any increase
in the salaries payable or to become payable by Peoples or its Subsidiaries to
any employee and other than normal, annual salary increases to be made with
regard to the employees of Peoples or its Subsidiaries; (7) make any change in
any bonus, group insurance, pension, profit sharing, deferred compensation, or
other benefit plan, payment or arrangement made to, for or with respect to any
employees or directors of Peoples or its Subsidiaries, except to the extent such
changes are required by applicable laws or regulations; (8) enter into,
terminate, modify or amend any contract, lease or other agreement with any
officer or director of Peoples or its Subsidiaries or any "associate" of any
such officer or director, as such term is defined in Regulation 14A under the
Securities Exchange Act of 1934, as amended ("Exchange Act"), other than in the
ordinary course of their business; (9) incur or assume any liabilities, other
than in the ordinary course of their business; (10) dispose of any of their
assets or properties, other than in the ordinary course of their business; (11)
solicit, encourage or authorize any individual, corporation or other entity,
including its directors, officers and other employees, to solicit from any third
party any inquiries or proposals relating to the disposition of its business or
assets, or the acquisition of its voting securities, or the merger of it or its
Subsidiaries with any corporation or other entity other than as provided by this
Agreement, or subject to the fiduciary obligations of its Board of Directors,
provide any individual, corporation or other entity with information or
assistance or negotiate with any individual, corporation or other entity in
furtherance of such inquiries or to obtain such a proposal (and Peoples shall
promptly notify Synovus of all of the relevant details relating to all inquiries
and proposals which it may receive relating to any of such matters); (12) take
any other action or permit its Subsidiaries to take any action not in the
ordinary course of business of it and its Subsidiaries; or (13) directly or
indirectly agree to take any of the foregoing actions.
(B) Synovus covenants to Peoples that without the prior written consent
of Peoples, which consent will not be unreasonably withheld, Synovus will not
take any action that would: (a) delay or adversely affect the ability of Synovus
to obtain any necessary approvals of regulatory authorities required for the
transactions contemplated hereby; or (b) adversely affect its ability to perform
its covenants and agreements on a timely basis under this Plan.
III. REPRESENTATIONS AND WARRANTIES
Synovus hereby represents and warrants to Peoples, and Peoples
represents and warrants to Synovus, that, except as previously disclosed in the
Synovus and Peoples Disclosure Schedules of even date herewith delivered to the
other party:
A-6
(A) the representations set forth in Recitals A through D of the Plan
with respect to it are true and correct and constitute representations and
warranties for the purpose of Article V hereof;
(B) the outstanding shares of capital stock of it and its Subsidiaries
are duly authorized, validly issued and outstanding, fully paid and (subject to
12 U.S.C. ss.55 in the case of a national bank subsidiary) non-assessable, and
subject to no preemptive rights of current or past shareholders;
(C) each of it and its Subsidiaries has the power and authority, and is
duly qualified in all jurisdictions (except for such qualifications the absence
of which either individually or in the aggregate, will not have a Material
Adverse Effect) where such qualification is required to carry on its business as
it is now being conducted, to own all its material properties and assets, and
has all federal, state, local, and foreign governmental authorizations necessary
for it to own or lease its properties and assets and to carry on its business as
it is now being conducted, except for such authorizations the absence of which,
either individually or in the aggregate, would not have a Material Adverse
Effect;
(D) the shares of capital stock of each of its Subsidiaries are owned
by it (except for director's qualifying shares) free and clear of all liens,
claims, encumbrances and restrictions on transfer;
(E) subject, in the case of Peoples, to the receipt of any required
shareholder approval of this Plan, the Plan has been authorized by all necessary
corporate action of it and, subject to receipt of such approvals of
shareholders, filing of all required governmental filings and notices, receipt
of all required regulatory approvals and compliance with all applicable
securities and banking laws, is a legal, valid and binding agreement of it
enforceable against it in accordance with its terms, subject as to enforcement
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles including the remedies of specific performance
or injunctive relief;
(F) subject to receipt of all required shareholder approvals, filing of
all required governmental filings and notice, receipt of all required regulatory
approvals and compliance with all applicable securities and banking laws, the
execution, delivery and performance of the Plan by it does not, and the
consummation of the transactions contemplated hereby by it will not, constitute:
(1) a breach or violation of, or a default under, any law, rule or regulation or
any judgment, decree, order, governmental permit or license, or agreement,
indenture or instrument of it or its Subsidiaries or to which it or its
Subsidiaries (or any of their respective properties) is subject which breach,
violation or default would have a Material Adverse Effect, or enable any person
to enjoin any of the transactions contemplated hereby; or (2) a breach or
violation of, or a default under, the certificate or articles of incorporation
or bylaws of it or any of its Subsidiaries; and the consummation of the
transactions contemplated hereby will not require any consent or approval under
any such law, rule, regulation, judgment, decree, order, governmental permit or
license or the consent or approval of any
A-7
other party to any such agreement, indenture or instrument, other than the
required approvals of applicable regulatory authorities and the approval of the
shareholders of Peoples, both of which are referred to in paragraph (A) of
Article V and any consents and approvals the absence of which will not have a
Material Adverse Effect;
(G) in the case of Synovus, since December 31, 2001, it has filed all
forms, reports and documents with the SEC required to be filed by it pursuant to
the federal securities laws and SEC rules and regulations thereunder (the "SEC
Reports"), each of which complied as to form, at the time such form, report or
document was filed, in all material respects with the applicable requirement of
the Securities Act of 1933, as amended ("Securities Act"), the Exchange Act and
the applicable rules and regulations thereunder. As of their respective dates,
none of the SEC Reports, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which they
were made, not misleading. Each of the balance sheets in or incorporated by
reference into the SEC Reports (including the related notes and schedules)
fairly presents the financial position of the entity or entities to which it
relates as of its date and each of the statements of operations and retained
earnings and of cash flows and changes in financial position or equivalent
statements in or incorporated by reference into the SEC Reports (including any
related notes and schedules) fairly presents the results of operations, retained
earnings and cash flows and changes in financial position, as the case may be,
of the entity or entities to which it relates for the periods set forth therein
(subject, in the case of unaudited interim statements, to normal year-end audit
adjustments that are not material in amount or effect), in each case in
accordance with generally accepted accounting principles applicable to bank
holding companies consistently applied during the periods involved, except as
may be noted therein. It has no material obligations or liabilities (contingent
or otherwise) except as disclosed in the SEC Reports. For purposes of this
paragraph, material shall have the meaning as defined under the Securities Act,
the Exchange Act and the rules promulgated thereunder;
(H) in the case of Peoples: (1) it has previously delivered to Synovus
copies of the financial statements of Peoples, and of Peoples' Subsidiaries, as
of and for each of the years ended December 31, 2001 and 2002, and for the
period ended June 30, 2003, and Peoples shall deliver to Synovus, as soon as
practicable following the preparation of additional financial statements for
each subsequent calendar quarter of Peoples and Peoples' Subsidiaries, the
additional financial statements of Peoples and Peoples' Subsidiaries (including,
with respect to Peoples Bank, call reports of Peoples Bank) as of and for each
subsequent calendar quarter (such financial statements, unless otherwise
indicated, being hereinafter referred to collectively as the "Financial
Statements of Peoples" and the "Financial Statements of Peoples' Subsidiaries,"
respectively); and (2) each of the Financial Statements of Peoples and each of
the Financial Statements of Peoples' Subsidiaries (including the related notes),
have been or will be prepared in all material respects in accordance with
generally accepted accounting principles, which principles have been and will be
consistently applied during the periods involved, except as otherwise noted
therein, and all the books and records
A-8
of Peoples and Peoples' Subsidiaries have been, are being, and will be
maintained in all material respects in accordance with applicable legal and
accounting requirements and reflect only actual transactions. Each of the
Financial Statements of Peoples and each of the Financial Statements of Peoples'
Subsidiaries (including the related notes) fairly present or will fairly present
the financial position of Peoples on a consolidated basis and the financial
position of Peoples' Subsidiaries as of the respective dates thereof and fairly
present or will fairly present the results of operations of Peoples on a
consolidated basis and the results of operations of Peoples' Subsidiaries for
the respective periods therein set forth. Peoples and Peoples' Subsidiaries have
no material obligations (contingent or otherwise) except as disclosed in the
Financial Statements of Peoples and the Financial Statements of Peoples'
Subsidiaries.
(I) it has no material liabilities and obligations secured or
unsecured, whether accrued, absolute, contingent or otherwise, known or unknown,
due or to become due, including, but not limited to tax liabilities, that should
have been but are not reflected in or reserved against in its audited financial
statements as of December 31, 2002 or disclosed in the notes thereto;
(J) there has not been the occurrence of one or more events,
conditions, actions or statements of fact which have caused a Material Adverse
Effect with respect to it since December 31, 2002;
(K) all material federal, state, local, and foreign tax returns
required to be filed by or on behalf of it or any of its Subsidiaries have been
timely filed or requests for extensions have been timely filed and any such
extension shall have been granted and not have expired; and to the best of its
knowledge, all such returns filed are complete and accurate in all material
respects. All taxes shown on returns filed by it have been paid in full or
adequate provision has been made for any such taxes on its balance sheet (in
accordance with generally accepted accounting principles). As of the date of the
Plan, there is no audit, examination, deficiency, or refund litigation with
respect to any taxes of it that would result in a determination that would have
a Material Adverse Effect. All taxes, interest, additions, and penalties due
with respect to completed and settled examinations or concluded litigation
relating to it have been paid in full or adequate provision has been made for
any such taxes on its balance sheet (in accordance with generally accepted
accounting principles). It has not executed an extension or waiver of any
statute of limitations on the assessment or collection of any material tax due
that is currently in effect. Deferred taxes have been provided for in its
financial statements in accordance with generally accepted accounting principles
applied on a consistent basis;
(L)(1) no litigation, proceeding or controversy before any
court or governmental agency is pending, and there is no pending claim, action
or proceeding against it or any of its Subsidiaries, which is likely to have a
Material Adverse Effect or to prevent consummation of the transactions
contemplated hereby, and, to the best of its knowledge, no such litigation,
proceeding, controversy, claim or action has been threatened or is contemplated;
and (2) neither it nor any of its Subsidiaries is subject to any agreement,
memorandum of understanding, commitment letter, board resolution or
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similar arrangement with, or transmitted to, any regulatory authority materially
restricting its operations as conducted on the date hereof or requiring that
certain actions be taken which could reasonably be expected to have a Material
Adverse Effect;
(M) neither it nor its Subsidiaries are in default in any material
respect under any material contract (as defined in Item 601(b)(10)(i) and (ii)
of Regulation S-K) and there has not occurred any event that with the lapse of
time or the giving of notice or both would constitute such a default;
(N) all "employee benefit plans," as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA"), that cover any of its
or its Subsidiaries' employees, comply in all material respects with all
applicable requirements of ERISA, the Code and other applicable laws; neither it
nor any of its Subsidiaries has engaged in a "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) with respect to any
such plan which is likely to result in any material penalties or taxes under
Section 502(i) of ERISA or Section 4975 of the Code; no material liability to
the Pension Benefit Guaranty Corporation has been or is expected by it or them
to be incurred with respect to any such plan which is subject to Title IV of
ERISA ("Pension Plan"), or with respect to any "single-employer plan" (as
defined in Section 4001(a)(15) of ERISA) currently or formerly maintained by it,
them or any entity which is considered one employer with it under Section 4001
of ERISA or Section 414 of the Code; no Pension Plan had an "accumulated funding
deficiency" (as defined in Section 302 of ERISA (whether or not waived) as of
the last day of the end of the most recent plan year ending prior to the date
hereof; the fair market value of the assets of each Pension Plan exceeds the
present value of the "benefit liabilities" (as defined in Section 4001(a)(16) of
ERISA) under such Pension Plan as of the end of the most recent plan year with
respect to the respective Plan ending prior to the date hereof, calculated on
the basis of the actuarial assumptions used in the most recent actuarial
valuation for such Pension Plan as of the date hereof; to the actual knowledge
of its executive officers, there are no pending or anticipated material claims
against or otherwise involving any of its employee benefit plans and no suit,
action or other litigation (excluding claims for benefits incurred in the
ordinary course of activities of such plans) has been brought against or with
respect to any such plan, except for any of the foregoing which would not have a
Material Adverse Effect; no notice of a "reportable event" (as defined in
Section 4043 of ERISA) for which the 30-day reporting requirement has not been
waived has been required to be filed for any Pension Plan within the 12-month
period ending on the date hereof; it and its Subsidiaries have not contributed
to a "multi-employer plan", as defined in Section 3(37) of ERISA; and it and its
Subsidiaries do not have any obligations for retiree health and life benefits
under any benefit plan, contract or arrangement, except as required by Section
4980B of the Code and Part 6 of Subtitle B of Title I of ERISA;
(O) each of it and its Subsidiaries has good and marketable title to
its respective properties and assets, tangible or intangible (other than
property as to which it is lessee), except for such defects in title which would
not, in the aggregate, have a Material Adverse Effect;
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(P) it knows of no reason why the regulatory approvals referred to in
paragraphs (A)(2) and (A)(3) of Article V should not be obtained without the
imposition of any condition of the type referred to in the proviso following
such paragraphs (A)(2) and (3) and it has taken no action or agreed to take any
action that is reasonably likely to prevent the Merger from qualifying for
treatment as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code for federal income tax purposes;
(Q) in the case of Synovus, its reserve for possible loan and lease
losses as shown in its audited financial statements as of December 31, 2002 was,
and its reserve for possible loan and lease losses as shown in all Quarterly
Reports on Form 10-Q filed prior to the Effective Date will be, adequate in all
material respects under generally accepted accounting principles applicable to
banks and bank holding companies, and in the case of Peoples, its reserve for
possible loan and lease losses as shown in its audited financial statements as
of December 31, 2002 was, and its reserve for possible loan and lease losses as
shown in its unaudited quarterly financial statements prepared for all quarters
ending prior to the Effective Date will be, adequate in all material respects
under generally accepted accounting principles applicable to banks and bank
holding companies;
(R) it and each of its Subsidiaries has all material permits, licenses,
certificates of authority, orders, and approvals of, and has made all filings,
applications, and registrations with, federal, state, local, and foreign
governmental or regulatory bodies that are required in order to permit it to
carry on its business as it is presently conducted and the absence of which
would have a Material Adverse Effect; all such permits, licenses, certificates
of authority, orders, and approvals are in full force and effect, and to the
best knowledge of it no suspension or cancellation of any of them is threatened;
(S) in the case of Synovus, the shares of capital stock to be issued
pursuant to the Plan, when issued in accordance with the terms of the Plan, will
be duly authorized, validly issued, fully paid and nonassessable and subject to
no preemptive rights of any current or past shareholders;
(T) neither it nor any of its Subsidiaries is a party to, or is bound
by, any collective bargaining agreement, contract, or other agreement or
understanding with a labor union or labor organization, nor is it or any of its
Subsidiaries the subject of a proceeding asserting that it or any such
Subsidiary has committed an unfair labor practice or seeking to compel it or
such Subsidiary to bargain with any labor organization as to wages and
conditions of employment, nor is there any strike or other labor dispute
involving it or any of its Subsidiaries pending or threatened;
(U) other than services provided by Hovde Financial, L.L.C., which has
been retained by Peoples and the arrangements with which, including fees, have
been disclosed to Synovus prior to the date hereof, neither it nor any of its
Subsidiaries, nor any of their respective officers, directors, or employees, has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions, or finder's fees, and no broker or
finder has acted directly or
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indirectly for it or any of its Subsidiaries, in connection with the Plan or the
transactions contemplated hereby;
(V) the information to be supplied by it for inclusion in: (1) the
Registration Statement on Form S-4 and/or such other form(s) as may be
appropriate to be filed under the Securities Act, with the SEC by Synovus for
the purpose of, among other things, registering the Synovus Common Stock to be
issued to the shareholders of Peoples in the Merger (the "Registration
Statement"); or (2) the proxy statement to be filed with the SEC under the
Exchange Act and distributed in connection with Peoples' meeting of its
shareholders to vote upon this Plan (as amended or supplemented from time to
time, the "Proxy Statement", and together with the prospectus included in the
Registration Statement, as amended or supplemented from time to time, the "Proxy
Statement/Prospectus") will not at the time such Registration Statement becomes
effective, and in the case of the Proxy Statement/Prospectus at the time it is
mailed and at the time of the meeting of shareholders contemplated under this
Plan, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading;
(W) for purposes of this section, the following terms shall have the
indicated meaning:
"Environmental Law" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any governmental
entity relating to: (1) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource); and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Hazardous Substances. The term
Environmental Law includes without limitation: (1) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
ss. 9601, et seq; the Resource Conservation and Recovery Act, as amended, 42
U.S.C. ss. 6901, et seq; the Clean Air Act, as amended, 42 U.S.C. ss. 7401, et
seq; the Federal Water Pollution Control Act, as amended, 33 U.S.C. ss. 1251, et
seq; the Toxic Substances Control Act, as amended, 15 U.S.C. ss. 9601, et seq;
the Emergency Planning and Community Right to Know Act, 42 U.S.C. ss. 11001, et
seq; the Safe Drinking Water Act, 42 U.S.C. ss. 300f, et seq; all accompanying
federal regulations and all comparable state and local laws; and (2) any common
law (including without limitation common law that may impose strict liability)
that may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any Hazardous
Substance.
"Hazardous Substance" means any substance or waste presently listed,
defined, designated or classified as hazardous, toxic, radioactive or dangerous,
or otherwise regulated,
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under any Environmental Law, whether by type or by quantity, including any
material containing any such substance as a component. Hazardous Substances
include without limitation petroleum or any derivative or by-product thereof,
asbestos, radioactive material, and polychlorinated biphenyls.
"Loan Portfolio Properties and Other Properties Owned" means those
properties owned or operated by Synovus or Peoples as applicable, or any of
their respective Subsidiaries.
(1) there are no actions, suits, demands, notices, claims,
investigations or proceedings pending or, to the actual knowledge of its
executive officers, threatened against it and its Subsidiaries relating to the
Loan Portfolio Properties and Other Properties Owned by it or its Subsidiaries
under any Environmental Law, including without limitation any notices, demand
letters or requests for information from any federal or state environmental
agency relating to any such liabilities under or violations of Environmental
Law, nor, in the actual knowledge of its executive officers and the executive
officers of its Subsidiaries, are there any circumstances which could lead to
such actions, suits, demands, notices, claims, investigations or proceedings,
except such which will not have, or result in, a Material Adverse Effect; and
(X) in the case of Peoples, all securities issued by it (or any other
person), convertible into Peoples Common Stock shall, as a result and upon
consummation of the Merger be convertible only into Synovus Common Stock.
IV. COVENANTS
Synovus hereby covenants to Peoples, and Peoples hereby covenants to
Synovus, that:
(A) it shall take or cause to be taken all action necessary or
desirable under the Plan on its part as promptly as practicable, including the
filing of all necessary applications and the Registration Statement, so as to
permit the consummation of the transactions contemplated by the Plan at the
earliest possible date and cooperate fully with the other party hereto to that
end;
(B) in the case of Peoples, it shall: (1) take all steps necessary to
duly call, give notice of, convene and hold a meeting of its shareholders for
the purpose of approving the Plan as soon as is reasonably practicable; (2)
distribute to its shareholders the Proxy Statement/Prospectus in accordance with
applicable federal and state law and with its articles of incorporation and
bylaws; (3) recommend to its shareholders that they approve the Plan (unless it
has been advised in writing that to do so would constitute a breach of fiduciary
or legal duties of its Board of Directors); and (4) cooperate and consult with
Synovus with respect to each of the foregoing matters;
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(C) it will cooperate in the preparation and filing of the Proxy
Statement/Prospectus and Registration Statement in order to consummate the
transactions contemplated by the Plan as soon as is reasonably practicable;
(D) Synovus will advise Peoples, promptly after Synovus receives notice
thereof, of the time when the Registration Statement has become effective or any
supplement or amendment has been filed, of the issuance of any stop order or the
suspension of the qualification of the shares of Synovus Common Stock issuable
pursuant to the Plan for offering or sale in any jurisdiction, of the initiation
or threat of any proceeding for any such purpose or of any request by the SEC
for the amendment or supplement of the Registration Statement or for additional
information;
(E) in the case of Synovus, it shall take all actions to obtain, prior
to the effective date of the Registration Statement, all applicable state
securities law or "Blue Sky" permits, approvals, qualifications or exemptions
for the Synovus shares to be issued pursuant to this Plan;
(F) subject to its disclosure obligations imposed by law or regulatory
authority, unless reviewed and agreed to by the other party hereto in advance,
it will not issue any press release or written statement for general circulation
relating to the transactions contemplated hereby; provided however, that nothing
in this paragraph (F) shall be deemed to prohibit either party from making any
disclosure which its counsel deems necessary or advisable in order to satisfy
such party's disclosure obligations imposed by law;
(G) from and subsequent to the date hereof, it will: (1) give to the
other party hereto and its respective counsel and accountants reasonable access
to its premises and books and records during normal business hours for any
reasonable purpose related to the transactions contemplated hereby; and (2)
cooperate and instruct its respective counsel and accountants to cooperate with
the other party hereto and with its respective counsel and accountants with
regard to the formulation and production of all necessary information,
disclosures, financial statements, registration statements and regulatory
filings with respect to the transactions encompassed by the Plan;
(H) it shall notify the other party hereto as promptly as practicable
of: (1) any breach of any of its representations, warranties or agreements
contained herein; (2) any occurrence, or impending occurrence, of any event or
circumstance which would cause or constitute a material breach of any of the
representations, warranties or agreements of it contained herein; and (3) any
material adverse change in its financial condition, results of operations or
business; and (4) it shall use its best efforts to prevent or remedy the same;
(I) it shall cooperate and use its best efforts to promptly prepare and
file all necessary documentation, to effect all necessary applications, notices,
petitions, filings and other documents, and to obtain all necessary permits,
consents, approvals and authorizations of all third parties and governmental
bodies or agencies, including, in the case of Synovus, submission of
applications for
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approval of the Plan and the transactions contemplated hereby to the Board of
Governors of the Federal Reserve System (the "Board of Governors") in accordance
with the provisions of the Bank Holding Company Act of 1956, as amended (the
"BHC Act"), the Georgia Department of Banking and Finance ("Georgia
Department"), the Florida Department of Financial Services ("Florida
Department") and to such other regulatory agencies as required by law;
(J) it will use its best efforts to cause the Merger to qualify as a
reorganization within the meaning of Section 368(a) of the Code for federal
income tax purposes;
(K) Synovus shall use its best efforts to cause the shares of Synovus
Common Stock to be issued pursuant to the terms of this Plan to be approved for
listing on the NYSE, and each such share shall be entitled to ten (10) votes per
share in accordance with and subject to those certain Articles of Amendment to
Synovus' Articles of Incorporation dated April 24, 1986;
(L) following the Effective Date, Synovus shall continue to provide
generally to officers and employees of Peoples and its Subsidiaries employee
benefits, including without limitation pension benefits, health and welfare
benefits, life insurance and vacation and severance arrangements (collectively,
"Employee Benefits"), on terms and conditions which, when taken as a whole, are
substantially similar to those currently provided by Peoples and its
Subsidiaries. As soon as administratively and financially practicable following
the Effective Date, Synovus shall provide generally to officers and employees of
Peoples and its Subsidiaries Employee Benefits which, when taken as a whole, are
substantially similar to those provided from time to time by Synovus and its
Subsidiaries to their similarly situated officers and employees. With respect to
Employee Benefits maintained by Synovus in which Peoples participates after the
Effective Date, Synovus agrees: (1) to treat service by Peoples employees prior
to the Effective Date as service with Synovus for eligibility and vesting
purposes only; and (2) to waive pre-existing condition limitations, if any, as
would otherwise be applied to participating employees of Peoples upon the
implementation of such Employee Benefits constituting "group health plans"
within the meaning of Section 5000(b)(i) of the Code;
(M) in the case of Synovus, it shall promptly furnish Peoples with
copies of all documents filed prior to the Effective Date with the SEC and all
documents filed with other governmental or regulatory agencies or bodies in
connection with the Merger and, in the case of Peoples, it will furnish to
Synovus, promptly after the preparation and/or receipt by Peoples thereof,
copies of its unaudited monthly financial statements and shall furnish to
Synovus, promptly after the preparation and/or receipt by Peoples or its
Subsidiaries copies of all monthly financial statements of its Subsidiaries, and
all call reports of Peoples Bank for the applicable periods then ended, and such
financial statements and call reports shall, upon delivery to Synovus, be
treated for purposes of paragraph (H) of Article III hereof, as among the
Financial Statements of Peoples and Financial Statements of Peoples'
Subsidiaries;
A-15
(N) Peoples shall use its best efforts to cause each director,
executive officer and other person who is an "affiliate" (for purposes of Rule
145 under the Securities Act) to deliver to Synovus as soon as practicable after
the date hereof, but in no event after the date of the Peoples shareholders'
meeting called to approve the Merger, a written agreement providing that such
person will not sell, pledge, transfer or otherwise dispose of any shares of
Peoples Common Stock held by such "affiliate" except as contemplated by this
Agreement and will not sell, pledge, transfer or otherwise dispose of the shares
of Synovus Common Stock to be received by such "affiliate" in the Merger, except
in compliance with the applicable provisions of the Securities Act and the rules
and regulations thereunder. The certificates of Synovus Common Stock issued to
affiliates of Peoples will bear an appropriate legend reflecting the foregoing;
(O) it will not directly or indirectly take any action or omit to take
any action to cause any of its representations and warranties made in this Plan
to become untrue;
(P) in the case of Synovus, it shall take no action which would cause
the shareholders of Peoples to recognize gain or loss as a result of the Merger
to the extent such shareholders would not otherwise recognize gain or loss as
described in paragraph (A)(8) of Article V;
(Q) Peoples will, within thirty (30) days after the date hereof, engage
a firm satisfactory to Synovus to conduct: (a) a Phase I environmental site
assessment of the banking facilities currently owned by Peoples upon which
Peoples is conducting a banking business, which assessment shall meet the
standards of ASTM E1527-00 and shall include at a minimum a site history,
on-site inspection, asbestos sampling of presumed asbestos containing material,
evaluation of surrounding properties and soil tests if the results of the Phase
I indicate a need therefor; and (b) a transaction screen that meets the
standards of ASTM E 1528 for the property that Peoples leases, and in addition,
Peoples agrees to conduct a Phase I assessment of the leased property if, in
Synovus' reasonable judgment, the transaction screen indicates potential
environmental liabilities associated with the leased properties accruing to
Peoples or Peoples' successor. Synovus has requested such inspection and testing
in an effort to reasonably determine whether potential liabilities exist
relating to Environmental Law. Delivery of the Phase I assessments and
transaction screen satisfactory to Synovus is an express condition precedent to
the consummation of the Merger. Within fifteen (15) days after receipt of these
reports, Synovus shall notify Peoples in writing whether or not, in the
reasonable judgment of Synovus, the potential liabilities identified in such
reports will have a Material Adverse Effect on Peoples. In the event that
Synovus determines, in its reasonable judgment, that the results of such reports
will have a Material Adverse Effect on Peoples, such written notification shall
include a statement by Synovus regarding whether or not it intends to terminate
this Agreement based upon the results of such reports. The Parties agree that
Synovus has given Peoples good and valuable consideration for its agreement to
obtain and pay the cost of such inspection and testing, and Synovus shall be
entitled to rely on same;
A-16
(R) Prior to the Effective Date, Peoples shall purchase for, and on
behalf of, its current and former officers and directors, extended coverage
under the current directors' and officers' liability insurance policy maintained
by Peoples to provide for continued coverage of such insurance for a period of
four years following the Effective Date with respect to matters occurring prior
to the Effective Date;
(S) (1) In the case of Synovus, subject to the conditions set forth in
paragraph (S)(2) below, for a period of four (4) years after the Effective Date,
Synovus shall indemnify, defend and hold harmless each person entitled to
indemnification from Peoples and its Subsidiaries (each, an "Indemnified Party")
against all liabilities arising out of actions or omissions occurring at or
prior to the Effective Date (including the transactions contemplated by this
Agreement) to the fullest extent permitted under Florida law and by Peoples' and
its Subsidiaries' Articles of Incorporation and bylaws as in effect on the date
hereof, including provisions relating to advances of expenses incurred in the
defense of any litigation. Without limiting the foregoing, in any case in which
approval by Synovus is required to effectuate any indemnification, Synovus shall
direct, at the election of the Indemnified Party, that the determination of any
such approval shall be made by independent counsel mutually agreed upon between
Synovus and the Indemnified Party;
(2) Any Indemnified Party wishing to claim indemnification under
paragraph (S)(1) above Article IV(S)(1) upon learning of any such liability or
litigation, shall promptly notify Synovus thereof. In the event of any such
litigation (whether arising before or after the Effective Date), (a) Synovus
shall have the right to assume the defense thereof, and Synovus 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 Synovus elects not to assume
such defense or counsel for the Indemnified Parties advises that there are
substantive issues which raise conflicts of interest between Synovus and the
Indemnified Parties, the Indemnified Parties may retain counsel satisfactory to
them, and Synovus shall pay all reasonable fees and expenses of such counsel for
the Indemnified Parties promptly as statements therefor are received; provided,
that Synovus shall be obligated pursuant to this paragraph (S)(2) to pay for
only one firm of counsel for all Indemnified Parties in any jurisdiction, (b)
the Indemnified Parties will cooperate in the defense of any such litigation,
and (c) Synovus shall not be liable for any settlement effected without its
prior written consent, which will not unreasonably be withheld; and provided
further, that Synovus shall not have any obligation hereunder to any Indemnified
Party when and if a court of competent jurisdiction shall determine, and such
determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
law; and
(T) prior to the Effective Date, Peoples will use its best efforts to
take all steps required to exempt the transactions contemplated by this
Agreement from any applicable state anti-takeover law.
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V. CONDITIONS TO CONSUMMATION
(A) The respective obligations of Synovus and of Peoples to effect the
Merger shall be subject to the satisfaction prior to the Effective Date of the
following conditions:
(1) the Plan and the transactions contemplated hereby shall
have been approved by the requisite vote of the shareholders of Peoples in
accordance with applicable law and Peoples shall have furnished to Synovus
certified copies of resolutions duly adopted by Peoples' shareholders evidencing
the same;
(2) the procurement by Synovus and Peoples of approval of the
Plan and the transactions contemplated hereby by the Board of Governors, the
Georgia Department and the Florida Department;
(3) procurement of all other regulatory consents and approvals
which are necessary to the consummation of the transactions contemplated by the
Plan; provided, however, that no approval or consent in paragraphs (A)(2) and
(A)(3) of this Article V shall be deemed to have been received if it shall
include any conditions or requirements (other than conditions or requirements
which are customarily included in such an approval or consent which do not have
a Material Adverse Effect) which would have such a Material Adverse Effect on
the economic or business benefits of the transactions contemplated hereby as to
render inadvisable the consummation of the Merger in the reasonable opinion of
the Board of Directors of Synovus or Peoples;
(4) the satisfaction of all other statutory or regulatory
requirements, including the requirements of NYSE or other self regulating
organizations, which are necessary to the consummation of the transactions
contemplated by the Plan;
(5) no party hereto shall be subject to any order, decree or
injunction or any other action of a United States federal or state court of
competent jurisdiction permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement;
(6) no party hereto shall be subject to any order, decree or
injunction or any other action of a United States federal or state governmental,
regulatory or administrative agency or commission permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement;
(7) the Registration Statement shall have become effective
under the Securities Act and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been initiated or threatened by the SEC, and Synovus shall
have received all state securities law and "Blue Sky" permits, approvals,
qualifications or exemptions necessary to consummate the transactions
contemplated hereby;
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(8) each party shall have received an opinion ("Tax Opinion")
from KPMG LLP, certified public accountants ("KPMG"), on or before the Effective
Date, to the effect that the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a)(1)(A) of the
Code and that, accordingly: (i) no gain or loss will be recognized by Synovus or
Peoples as a result of the Merger; and (ii) gain, but not loss, will be
recognized by each shareholder of Peoples who exchanges his or her shares of
Peoples Common Stock for shares of Synovus Common Stock pursuant to the Merger
equal to the lesser of (A) the cash received by such shareholder or (B) the gain
realized (but not less than zero) by such shareholder from such exchange, which
will equal the sum of the cash and the fair market value of the Synovus Common
Stock received by such shareholder over such shareholder's basis in his or her
Peoples Common Stock; and
(9) each party shall have delivered to the other party a
certificate, dated as of the Effective Date, signed by its Chief Executive
Officer and its Chief Financial Officer, to the effect that, to the best
knowledge and belief of such officers, the statement of facts and
representations made on behalf of the management of such party, presented to
KPMG, in delivering the Tax Opinion, were at the date of such presentation true,
correct and complete. Each party shall have received a copy of the Tax Opinion
referred to in paragraph (A)(8) of this Article V.
(B) The obligation of Synovus to effect the Merger shall be subject to
the satisfaction prior to the Effective Date of the following additional
conditions:
(1) the representations and warranties of Peoples contained in
this Agreement shall be true and correct in all material respects, in each case
on the date hereof and on the Effective Date (unless the representations and
warranties address matters as of a particular date, in which case they shall
remain true and correct in all material respects as of such date) and the
covenants contained herein shall be complied with by the Effective Date;
provided, however, if any such representation or warranty shall be subject to a
qualification as to materiality, such qualified representation and warranty
shall be true and correct in all respects, in each case on the date hereof and
on the Effective Date (unless the representations and warranties address matters
as of a particular date, in which case they shall remain true and correct in all
respects as of such date);
(2) there shall be no discovery of facts, or actual or
threatened causes of action, investigations or proceedings by or before any
court or other governmental body that relates to or involves either Peoples or
its Subsidiaries: (a) which, in the reasonable judgment of Synovus, would have a
Material Adverse Effect, or which may be foreseen to have a Material Adverse
Effect on, either Peoples or the consummation of the transactions contemplated
by this Agreement; (b) that challenges the validity or legality of this
Agreement or the consummation of the transactions contemplated by this
Agreement; or (c) that seeks to restrain or invalidate the consummation of the
transactions contemplated by this Agreement or seeks damages in connection
therewith;
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(3) Synovus shall not have learned of any fact or condition
with respect to the business, properties, assets, liabilities, deposit
relationships or earnings of Peoples which, in the reasonable judgment of
Synovus, is materially at variance with one or more of the warranties or
representations set forth in this Agreement or which, in the reasonable judgment
of Synovus, has or will have a Material Adverse Effect on Peoples;
(4) David W. Dunbar shall have entered into an employment
agreement with Synovus as proposed by Synovus and approved by Mr. Dunbar which
will become effective as of the Effective Date;
(5) on the Effective Date, Peoples Bank will have a CAMELS
rating of at least 2 and a Compliance Rating and Community Reinvestment Act
Rating of at least Satisfactory;
(6) on the Effective Date, Peoples will have a non-performing
assets ratio (with such ratio to be determined as follows: nonaccrual and
restructured loans plus other real estate divided by total loans net of unearned
income plus other real estate) of not more than .50%, an annualized charge off
ratio (based on the six month period ending on the Effective Date) of not more
than .25% and an allowance for loan losses which will be adequate in all
material respects under generally accepted accounting principles applicable to
banks;
(7) Peoples shall have delivered to Synovus the environmental
reports referenced in Article IV(R);
(8) the results of any regulatory exam of Peoples and its
Subsidiaries occurring between the date hereof and the Effective Date shall be
reasonably satisfactory to Synovus; and
(9) each of the officers and directors of Peoples shall have
delivered a letter to Synovus to the effect that such person is not aware of any
claims he might have against Peoples other than routine compensation, benefits
and the like as an employee, or ordinary rights as a customer.
(C) The obligation of Peoples to effect the Merger shall be subject to
the satisfaction prior to the Effective Date of the following additional
conditions:
(1) the representations and warranties of Synovus contained in
this Agreement shall be true and correct in all material respects, in each case
on the date hereof and on the Effective Date (unless the representations and
warranties address matters as of a particular date, in which case they shall
remain true and correct in all material respects as of such date) and the
covenants contained herein shall be complied with by the Effective Date;
provided, however, if any such representation or warranty shall be subject to a
qualification as to materiality, such qualified representation and warranty
shall be true and correct in all respects, in each case on the date hereof
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and on the Effective Date (unless the representations and warranties address
matters as of a particular date, in which case they shall remain true and
correct in all respects as of such date);
(2) the listing for trading of the shares of Synovus Common
Stock which shall be issued pursuant to the terms of this Plan on the NYSE,
shall have been approved by the NYSE subject to official notice of issuance and
the Board of Directors of Synovus shall have adopted a resolution granting 10
votes per share with respect to the shares constituting the Stock Consideration
under this Agreement;
(3) there shall be no discovery of facts, or actual or
threatened causes of action, investigations or proceedings by or before any
court or other governmental body that relates to or involves either Synovus or
its Subsidiaries: (a) which, in the reasonable judgment of Peoples, would have a
Material Adverse Effect on, or which may be foreseen to have a material Adverse
Effect on, either Synovus or the consummation of the transactions contemplated
by this Agreement; (b) that challenges the validity or legality of this
Agreement or the consummation of the transactions contemplated by the Agreement;
or (c) that seeks to restrain or invalidate the consummation of the transactions
contemplated by this Agreement or seeks damages in connection therewith;
(4) Peoples shall not have learned of any fact or condition
with respect to the business, properties, assets, liabilities, deposit
relationships or earnings of Synovus which, in the reasonable judgment of
Peoples, is materially at variance with one or more of the warranties or
representations set forth in this Agreement or which, in the reasonable judgment
of Peoples, has or will have a Material Adverse Effect on Synovus;
(5) Peoples shall have received from the Senior Deputy General
Counsel of Synovus an opinion to the effect that Synovus is duly organized,
validly existing and in good standing, the Plan has been duly and validly
authorized by all necessary corporate action on the part of Synovus, has been
duly and validly executed and delivered by Synovus, is the valid and binding
obligation of Synovus, enforceable in accordance with its terms except as such
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors' rights generally and
that the shares of Synovus Common Stock to be issued in the Merger are duly
authorized, validly issued, fully paid, nonassessable, and not subject to any
preemptive rights of any current or past shareholders;
(6) Peoples shall have received from Hovde Financial, L.L.C. a
letter to the effect that, in the opinion of such firm, the Per Share Cash
Consideration and the Per Share Stock Consideration are fair, from a financial
point of view, to the holders of Peoples Common Stock; and
(7) Synovus shall not have issued any shares of stock with
preferences superior to those of the Synovus Common Stock to be issued to the
shareholders of Peoples in connection with the Merger.
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VI. TERMINATION
A. The Plan may be terminated prior to the Effective Date, either
before or after its approval by the stockholders of Peoples:
(1) by the mutual consent of Synovus and Peoples, if the Board
of Directors of each so determines by vote of a majority of the members of its
entire Board;
(2) by Synovus or Peoples if consummation of the Merger does
not occur by reason of the failure of any of the conditions precedent set forth
in Article V hereof unless the failure to meet such condition precedent is due
to a breach of the Plan by the party seeking to terminate;
(3) by Synovus or Peoples if its Board of Directors so
determines by vote of a majority of the members of its entire Board in the event
that the Merger is not consummated by March 31, 2004 unless the failure to so
consummate by such time is due to the breach of the Plan by the party seeking to
terminate; and
(4) by Peoples if the closing price of Synovus Common Stock on
the NYSE decreases by more than 15% from $24.12 and such decrease as measured
from August 19, 2003 exceeds the change in the aggregate closing price per share
of an index of Southeastern Bank Holding Company stocks consisting of BB&T
Corporation, SunTrust Banks, Inc., SouthTrust Corporation, Compass Bancshares,
Inc., Hibernia Corporation, The Colonial BancGroup, Inc., Regions Financial
Corporation, Union Planters Corporation, AmSouth, National Commerce, and First
Tennessee National on any date of determination, including the Effective Date,
by more than 15 percentage points. Synovus shall perform such calculation on a
monthly basis and notify Peoples of any such change and Peoples shall thereafter
have ten business days in which to make a determination to terminate this
Agreement;
(5) by Synovus, if the closing price of Synovus Common Stock
on the NYSE exceeds $24.12 by 15% or more and such percentage increase over
$24.12, as measured from the first date the closing price of Synovus Common
Stock on the NYSE exceeds $24.12, exceeds the change in the aggregate closing
price per share of the index of Southeastern Bank Holding Company stocks in the
paragraph (A)(4) above, on any date of determination, including the Effective
Date, by more than 15 percentage points. Synovus shall perform such calculation
on a monthly basis and notify Peoples of any such change and Synovus shall
thereafter have ten business days in which to make a determination to terminate
this Agreement.
(6) by Peoples,
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(a) if, during the five (5) business days immediately
prior to the Effective Date, the Total Cash
Consideration is greater than fifty-five percent
(55%) of the Tax-Free Calculation Denominator such
that the KPMG cannot issue the Tax Opinion pursuant
to paragraph (A)(8) of Article V, then Peoples can
either terminate the Agreement or negotiate with
Synovus to adjust the Per Share Cash Consideration
and/or the Per Share Stock Consideration as well as
the Synovus Option Value Multiple and the Synovus
Option Price Divisor so as to enable KPMG to issue
the Tax Opinion.
(b) Definitions:
(i) "Tax-Free Calculation Denominator"
shall be equal to the sum of the
Total Cash Consideration plus the
Total Stock Consideration.
(ii) "Total Cash Consideration" shall be
equal to the Per Share Cash
Consideration multiplied by
2,047,184 (or the then outstanding
number of shares of Peoples Common
Stock), plus any additional cash
paid by Synovus pursuant to
dissenters rights exercised in
accordance with the Florida Act.
(iii) "Total Stock Consideration" shall be
equal to the Per Share Stock
Consideration multiplied by
2,047,184 (or the then outstanding
number of shares of Peoples Common
Stock), multiplied by the closing
price of Synovus Common Stock on the
New York Stock Exchange on the
Effective Date.
B. In the event of the termination and abandonment of this Agreement
pursuant to paragraph (A) of Article VI of this Agreement, this Agreement shall
become void and have no effect, except as set forth in paragraph (A) of Article
VIII, and there shall be no liability on the part of any party hereto or their
respective officers or directors; provided, however, that: (1) Peoples shall be
entitled to a cash payment from Synovus for Peoples' reasonable out-of-pocket
expenses relating to the Merger in an amount not to exceed $150,000, which
amount shall not be deemed an exclusive remedy or liquidated damages, in the
event of the termination of this Agreement due to the failure by Synovus to
satisfy any of its representations, warranties or covenants set forth herein;
and (2) Synovus shall be entitled to a cash payment from Peoples for Synovus'
reasonable out-of-pocket expenses relating to the Merger and for reimbursement
of the fair market value of services provided by internal counsel and due
diligence team members in connection with the Merger in an amount not to exceed
$150,000, which amount shall not be deemed an exclusive remedy or liquidated
damages,
A-23
in the event of the termination of this Agreement due to the failure by
Peoples to satisfy any of its representations, warranties or covenants set forth
herein.
VII. EFFECTIVE DATE
The "Effective Date" shall be the date on which the Merger becomes
effective as specified in the Certificate of Merger to be filed with the
Secretary of State of Georgia and the Department of State of Florida.
VIII. OTHER MATTERS
(A) The agreements and covenants of the parties which by their terms
apply in whole or in part after the Effective Date shall survive the Effective
Date. Except for paragraph (S) of Article III, and paragraph (N) of Article IV
which shall survive the Effective Date, no other representations, warranties,
agreements and covenants shall survive the Effective Date. If the Plan shall be
terminated, the agreements of the parties in paragraph (G) of Article IV,
paragraph (B) of Article VI and paragraphs (E) and (F) of this Article shall
survive such termination.
(B) Prior to the Effective Date, any provision of the Plan may be: (1)
waived by the party benefited by the provision or by both parties; or (2)
amended or modified at any time (including the structure of the transaction) by
an agreement in writing between the parties hereto approved by their respective
Boards of Directors (to the extent allowed by law) or by their respective Boards
of Directors.
(C) This Plan may be executed in multiple and/or facsimile originals,
and each copy of the Plan bearing the manually executed, facsimile transmitted
or photocopied signature of each of the parties hereto shall be deemed to be an
original.
(D) The Plan shall be governed by, and interpreted in accordance with,
the laws of the State of Georgia.
(E) Each party hereto will bear all expenses incurred by it in
connection with the Plan and the transactions contemplated hereby, including,
but not limited to, the fees and expenses of its respective counsel and
accountants.
(F) Each of the parties and its respective agents, attorneys and
accountants will maintain the confidentiality of all information provided in
connection herewith which has not been publicly disclosed unless it is advised
by counsel that any such information is required by law to be disclosed.
(G) All notices, requests, acknowledgments and other communications
hereunder to a party shall be in writing and shall be deemed to have been duly
given when delivered by hand,
A-24
telecopy, telegram or telex (confirmed in writing), by overnight courier or sent
by registered or certified mail, postage paid, to such party at its address set
forth below or such other address as such party may specify by notice to the
other party hereto.
If to Synovus:
Mr. Thomas J. Prescott
Chief Financial Officer
Synovus Financial Corp.
901 Front Avenue, Suite 301
Columbus, Georgia 31901
Fax (706) 649-2342
With a copy to:
Ms. Kathleen Moates
Senior Deputy General Counsel
Synovus Financial Corp.
901 Front Avenue, Suite 202
Columbus, Georgia 31901
Fax (706) 644-1957
If to Peoples:
David W. Dunbar
President and Chief Executive Officer
32845 U.S. Highway 19
Palm Harbor, FL 34684
With a copy to:
Cathi C. Wilkinson
Pennington, Moore, Wilkinson, Bell &
Dunbar, P.A.
P.O. Box 10095
Tallahassee, FL 32302-2095
(H) All terms and provisions of the Plan shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns. Except as expressly provided for herein, nothing in this Plan is
intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Plan.
(I) The Plan represents the entire understanding of the parties hereto
with reference to the transactions contemplated hereby and supersedes any and
all other oral or written agreements heretofore made.
A-25
(J) This Plan may not be assigned by either party hereto without the
written consent of the other party.
In Witness Whereof, the parties hereto have caused this instrument to
be executed in counterparts by their duly authorized officers as of the day and
year first above written.
SYNOVUS FINANCIAL CORP.
By: /s/ Thomas J. Prescott
-----------------------------------------------------
Title: Executive V.P. and CFO
--------------------------------------------
Attest: /s/Kathy Moates
------------------------------------------------------
Title: Assistant Secretary
--------------------------------------------
PEOPLES FLORIDA BANKING CORPORATION
By: /s/David W. Dunbar
-----------------------------------------------------
Title: Chairman and CEO
---------------------------------------------
Attest: /s/William B. Bard
-----------------------------------------------------
Title: Senior V.P. and CFO
---------------------------------------------
acq\Peoples\ appendix A.doc
A-26
Appendix "B"
Florida Statutes
Dissenters' Rights
607.1301 Dissenters' rights; definitions. -- The following definitions apply to
ss. 607.1302 and 607.1320
(1) "Corporation" means the issuer of the shares held by a dissenting
shareholder before the corporate action or the surviving or acquiring
corporation by merger or share exchange of that issuer.
(2) "Fair value," with respect to a dissenter's shares, means the value of
the shares as of the close of business on the day prior to the
shareholders' authorization date, excluding any appreciation or
depreciation in anticipation of the corporate action unless exclusion
would be inequitable.
(3) "Shareholders' authorization date" means the date on which the
shareholders' vote authorizing the proposed action was taken, the date
on which the corporation received written consents without a meeting
from the requisite number of shareholders in order to authorize the
action, or, in the case of a merger pursuant to s.607.1104, the day
prior to the date on which a copy of the plan of merger was mailed to
each shareholder of record of the subsidiary corporation.
607.1302 Right of shareholders to dissent. --
(1) Any shareholder of a corporation has the right to dissent from, and
obtain payment of the fair value of his or her shares in the event of,
any of the following corporate actions:
(a) Consummation of a plan of merger to which the corporation is
a party:
1. If the shareholder is entitled to vote on the merger,
or
2. If the corporation is a subsidiary that is merged
with its parent under s.607.1104, and the
shareholders would have been entitled to vote on
action taken, except for the applicability of
s.607.1104;
(b) Consummation of a sale or exchange of all, or substantially
all, of the property of the corporation, other than in the
usual and regular course of business, if the shareholder is
entitled to vote on the sale or exchange pursuant to
s.607.1202, including a sale in dissolution but not including
a sale pursuant to court order or a sale for cash pursuant to
a plan by which all or substantially all of the net proceeds
of the sale will be distributed to the shareholders within 1
year after the date of sale;
(c) As provided in s. 607.0902(11), the approval of a
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control-share acquisition;
(d) Consummation of a plan of share exchange to which the
corporation is a party as the corporation the shares of which
will be acquired, if the shareholder is entitled to vote on
the plan;
(e) Any amendment of the articles of incorporation if the
shareholder is entitled to vote on the amendment and if such
amendment would adversely affect such shareholder by:
1. Altering or abolishing any preemptive rights attached to
any of his or her shares;
2. Altering or abolishing the voting rights pertaining to
any of his or her shares, except as such rights may be
affected by the voting rights of new shares then being
authorized of any existing or new class or series of
shares;
3. Effecting an exchange, cancellation, or reclassification
of any of his or her shares, when such exchange,
cancellation, or reclassification would alter or abolish
the shareholder's voting rights or alter his or her
percentage of equity in the corporation, or effecting a
reduction or cancellation of accrued dividends or other
arrearages in respect to such shares;
4. Reducing the stated redemption price of any of the
shareholder's redeemable shares, altering or abolishing
any provision relating to any sinking fund for the
redemption or purchase of any of his or her shares, or
making any of his or her shares subject to redemption
when they are not otherwise redeemable;
5. Making noncumulative, in whole or in part, dividends of
any of the shareholder's preferred shares which had
theretofore been cumulative;
6. Reducing the stated dividend preference of any of the
shareholder's preferred shares; or
7. Reducing any stated preferential amount payable on any
of the shareholder's preferred shares upon voluntary or
involuntary liquidation; or
(f) Any corporate action taken, to the extent the articles of
incorporation provide that a voting or nonvoting shareholder
is entitled to dissent and obtain payment for his or her
shares.
(2) A shareholder dissenting from any amendment specified in paragraph
(1)(e) has the right to dissent only as to those of his
or her shares which are adversely affected by the amendment.
(3) A shareholder may dissent as to less than all the shares registered in
his or her name. In that event, the shareholder's rights shall be
determined as if the shares as to which he or she has dissented and his
or her other shares were registered in the names of different
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shareholders.
(4) Unless the articles of incorporation otherwise provide, this section
does not apply with respect to a plan of merger or share exchange or a
proposed sale or exchange of property, to the holders of shares of any
class or series which, on the record date fixed to determine the
shareholders entitled to vote at the meeting of shareholders at which
such action is to be acted upon or to consent to any such action
without a meeting, were either registered on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc., or held of record by not fewer than 2,000 shareholders.
(5) A shareholder entitled to dissent and obtain payment for his or her
shares under this section may not challenge the corporate action
creating his or her entitlement unless the action is unlawful or
fraudulent with respect to the shareholder or the corporation.
607.1320 Procedure for exercise of dissenters' rights. --
(1)(a) If a proposed corporate action creating dissenters' rights under s.
607.1302 is submitted to a vote at a shareholders' meeting, the meeting
notice shall state that shareholders are or may be entitled to assert
dissenters' rights and be accompanied by a copy of ss.607.1301,
607.1302, and 607.1320. A shareholder who wishes to assert dissenters'
rights shall:
1. Deliver to the corporation before the vote is taken written
notice of the shareholder's intent to demand payment for his
or her shares if the proposed action is effectuated, and
2. Not vote his or her shares in favor of the proposed action. A
proxy or vote against the proposed action does not constitute
such a notice of intent to demand payment.
(b) If proposed corporate action creating dissenters' rights under s.
607.1302 is effectuated by written consent without a meeting, the
corporation shall deliver a copy of ss.607.1301, 607.1302, and 607.1320
to each shareholder simultaneously with any request for the
shareholder's written consent or, if such a request is not made, within
10 days after the date the corporation received written consents
without a meeting from the requisite number of shareholders necessary
to authorize the action.
(2) Within 10 days after the shareholders' authorization date, the
corporation shall give written notice of such authorization or consent
or adoption of the plan of merger, as the case may be, to each
shareholder who filed a notice of intent to demand payment for his or
her shares pursuant to paragraph (1)(a) or, in the case of action
authorized by written consent, to each shareholder, excepting any who
voted for, or consented in writing to, the proposed action.
(3) Within 20 days after the giving of notice to him or her, any
shareholder who elects to dissent shall file with the corporation a
notice of such election, stating the shareholder's name and address,
the number, classes, and series of shares as to which he or she
dissents, and a demand for payment of the fair value of his or her
shares. Any shareholder failing to file such election to dissent within
the period set forth shall be bound by the terms of the proposed
corporate action. Any shareholder filing an election to dissent shall
B-3
deposit his or her certificates for certificated shares with the
corporation simultaneously with the filing of the election to dissent.
The corporation may restrict the transfer of uncertificated shares from
the date the shareholder's election to dissent is filed with the
corporation.
(4) Upon filing a notice of election to dissent, the shareholder shall
thereafter be entitled only to payment as provided in this section and
shall not be entitled to vote or to exercise any other rights of a
shareholder. A notice of election may be withdrawn in writing by the
shareholder at any time before an offer is made by the corporation, as
provided in subsection (5), to pay for his or her shares. After such
offer, no such notice of election may be withdrawn unless the
corporation consents thereto. However, the right of such shareholder to
be paid the fair value of his or her shares shall cease, and the
shareholder shall be reinstated to have all his or her rights as a
shareholder as of the filing of his or her notice of election,
including any intervening preemptive rights and the right to payment of
any intervening dividend or other distribution or, if any such rights
have expired or any such dividend or distribution other than in cash
has been completed, in lieu thereof, at the election of the
corporation, the fair value thereof in cash as determined by the board
as of the time of such expiration or completion, but without prejudice
otherwise to any corporate proceedings that may have been taken in the
interim, if:
(a) Such demand is withdrawn as provided in this section;
(b) The proposed corporate action is abandoned or rescinded or the
shareholders revoke the authority to effect such action;
(c) No demand or petition for the determination of fair value by a
court has been made or filed within the time provided in this
section; or
(d) A court of competent jurisdiction determines that such
shareholder is not entitled to the relief provided by this
section.
(5) Within 10 days after the expiration of the period in which shareholders
may file their notices of election to dissent, or within 10 days after
such corporate action is effected, whichever is later (but in no case
later than 90 days from the shareholders' authorization date), the
corporation shall make a written offer to each dissenting shareholder
who has made demand as provided in this section to pay an amount the
corporation estimates to be the fair value for such shares. If the
corporate action has not been consummated before the expiration of the
90-day period after the shareholders' authorization date, the offer may
be made conditional upon the consummation of such action. Such notice
and offer shall be accompanied by:
(a) A balance sheet of the corporation, the shares of which the
dissenting shareholder holds, as of the latest available date
and not more than 12 months prior to the making of such offer;
and
(b) A profit and loss statement of such corporation for the
12-month period ended on the date of such balance sheet or, if
the corporation was not in existence
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throughout such 12-month period, for the portion thereof
during which it was in existence.
(6) If within 30 days after the making of such offer any shareholder
accepts the same, payment for his or her shares shall be made within 90
days after the making of such offer or the consummation of the proposed
action, whichever is later. Upon payment of the agreed value, the
dissenting shareholder shall cease to have any interest in such shares.
(7) If the corporation fails to make such offer within the period specified
therefor in subsection (5) or if it makes the offer and any dissenting
shareholder or shareholders fail to accept the same within the period
of 30 days thereafter, then the corporation, within 30 days after
receipt of written demand from any dissenting shareholder given within
60 days after the date on which such corporate action was effected,
shall, or at its election at any time within such period of 60 days
may, file an action in any court of competent jurisdiction in the
county in this state where the registered office of the corporation is
located requesting that the fair value of such shares be determined.
The court shall also determine whether each dissenting shareholder, as
to whom the corporation requests the court to make such determination,
is entitled to receive payment for his or her shares. If the
corporation fails to institute the proceeding as herein provided, any
dissenting shareholder may do so in the name of the corporation. All
dissenting shareholders (whether or not residents of this state), other
than shareholders who have agreed with the corporation as to the value
of their shares, shall be made parties to the proceeding as an action
against their shares. The corporation shall serve a copy of the initial
pleading in such proceeding upon each dissenting shareholder who is a
resident of this state in the manner provided by law for the service of
a summons and complaint and upon each nonresident dissenting
shareholder either by registered or certified mail and publication or
in such other manner as is permitted by law. The jurisdiction of the
court is plenary and exclusive. All shareholders who are proper parties
to the proceeding are entitled to judgment against the corporation for
the amount of the fair value of their shares. The court may, if it so
elects, appoint one or more persons as appraisers to receive evidence
and recommend a decision on the question of fair value. The appraisers
shall have such power and authority as is specified in the order of
their appointment or an amendment thereof. The corporation shall pay
each dissenting shareholder the amount found to be due him or her
within 10 days after final determination of the proceedings. Upon
payment of the judgment, the dissenting shareholder shall cease to have
any interest in such shares.
(8) The judgment may, at the discretion of the court, include a fair rate
of interest, to be determined by the court.
(9) The costs and expenses of any such proceeding shall be determined by
the court and shall be assessed against the corporation, but all or any
part of such costs and expenses may be apportioned and assessed as the
court deems equitable against any or all of the dissenting shareholders
who are parties to the proceeding, to whom the corporation has made an
offer to pay for the shares, if the court finds that the action of such
shareholders in failing to accept such offer was arbitrary, vexatious,
or not in good faith. Such expenses shall include reasonable
compensation for, and reasonable expenses of, the appraisers, but shall
exclude the fees and expenses of counsel for, and experts employed by,
any party. If
B-5
the fair value of the shares, as determined, materially
exceeds the amount which the corporation offered to pay therefor or if
no offer was made, the court in its discretion may award to any
shareholder who is a party to the proceeding such sum as the court
determines to be reasonable compensation to any attorney or expert
employed by the shareholder in the proceeding.
(10) Shares acquired by a corporation pursuant to payment of the agreed
value thereof or pursuant to payment of the judgment entered therefor,
as provided in this section, may be held and disposed of by such
corporation as authorized but unissued shares of the corporation,
except that, in the case of a merger, they may be held and disposed of
as the plan of merger otherwise provides. The shares of the surviving
corporation into which the shares of such dissenting shareholders would
have been converted had they assented to the merger shall have the
status of authorized but unissued shares of the surviving corporation.
Peoples\appendixB.doc
B-6
Appendix "C"
Hovde Financial LLC
Investment Bankers & Financial Advisors
October 7, 2003
Board of Directors
Peoples Florida Banking Corporation
32845 U.S. Highway 19 North
Palm Harbor, FL 34684
Dear Members of the Board:
We understand that Synovus Financial Corporation ("Synovus"), a Georgia
corporation, and Peoples Florida Banking Corporation ("Peoples"), a Florida
corporation, have entered into an Agreement and Plan of Merger (the "Agreement")
dated October 7, 2003, pursuant to which the Board of Directors of both Synovus
and Peoples have determined that it is in the best interests of their respective
shareholders to merge their respective holding companies in a transaction
pursuant to which Peoples will be merged with and into Synovus (the "Merger").
As set forth in paragraphs (B)(a) and (B)(b) of Article I of the Agreement, at
the Effective Date of the Merger (as defined in the Agreement) each share of
Peoples Common Stock issued and outstanding on the Effective Date shall be
converted into and exchangeable for the right to receive both 0.7478 shares of
Synovus Common Stock ("Per Share Stock Consideration") and cash in the amount
equal to $14.65 ("Per Share Cash Consideration"). Additionally, each Peoples
Stock Option outstanding shall be converted into an option to purchase shares of
Synovus Common Stock pursuant to Article I, paragraphs (D)(1) and (D)(2) of the
Agreement. In connection therewith, you have requested our opinion as to the
fairness, from a financial point of view, of the Merger to the shareholders of
Peoples.
Hovde Financial LLC ("Hovde"), as part of its investment banking
business, is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive bidding, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. We are familiar with Peoples, having acted as its financial
advisor in connection with, and having participated in the negotiations leading
to, the Agreement. We are also familiar with Synovus, through our continued
Merger negotiations and due diligence.
1826 Jefferson Place, N.W. * Washington, DC 20036 * Telephone 202.775.8109
* Facsimile 202.775.8365
1629 Colonial Parkway * Inverness, IL 60067 * Telephone 847.991.6622
* Facsimile 847.991.5928
1801 North Flagler Drive * Suite 207 * West Palm Beach Fl 33407 * Telephone
561.659.0061 * Facsimile 561.805.9889
C-1
Board of Directors
Peoples Florida Banking Corporation
October 7, 2003
Page 2 of 4
We were retained by Peoples to act as its financial advisor in
connection with the Merger. We will receive compensation from Peoples in
connection with our services, a significant portion of which is contingent upon
the consummation of the Merger. Peoples has agreed to indemnify us for certain
liabilities arising out of our engagement.
During the course of our engagement and for the purposes of the opinion
set forth herein, we have:
(i) reviewed the Agreement;
(ii) reviewed certain historical publicly available business and
financial information concerning Synovus and Peoples;
(iii) reviewed certain internal financial statements and other
financial and operating data concerning Synovus and Peoples;
(iv) analyzed certain financial projections prepared by the
managements of Synovus and Peoples;
(v) conducted meetings with members of the senior management of
Synovus and Peoples for the purpose of reviewing the future
prospects of Synovus and Peoples, including financial
forecasts related to the respective businesses, earnings,
assets, liabilities and the amount and timing of cost savings
and revenue enhancements (the "Synergies") expected to be
achieved as a result of the Merger;
(vi) evaluated the pro forma contribution of Peoples's assets,
liabilities, equity and earnings to the pro forma company;
(vii) reviewed the terms of recent merger and acquisition
transactions, to the extent publicly available, involving
banks and bank holding companies that we considered relevant;
(viii) analyzed the pro forma impact of the Merger on the combined
company's earnings per share, consolidated capitalization and
financial ratios; and
C-2
Board of Directors
Peoples Florida Banking Corporation
October 7, 2003
Page 3 of 4
(ix) performed such other analyses and considered such other
factors as we have deemed appropriate.
We also took into account our assessment of general economic, market
and financial conditions and our experience in other transactions, as well as
our knowledge of the banking industry and our general experience in securities
valuations.
In rendering this opinion, we have assumed, without independent
verification, the accuracy and completeness of the financial and other
information and representations contained in the materials provided to us by
Synovus and Peoples and in the discussions with the Synovus and Peoples
management teams. In that regard, we have assumed that the financial forecasts,
including, without limitation, the Synergies and projections regarding
under-performing and non-performing assets and net charge-offs have been
reasonably prepared on a basis reflecting the best currently available
information and judgments and estimates of Synovus and Peoples and that such
forecasts will be realized in the amounts and at the times contemplated thereby.
We are not experts in the evaluation of loan and lease portfolios for purposes
of assessing the adequacy of the allowances for losses with respect thereto and
have assumed that such allowances for Synovus and Peoples are in the aggregate
adequate to cover such losses. We were not retained to and did not conduct a
physical inspection of any of the properties or facilities of Synovus or
Peoples. In addition, we have not reviewed individual credit files nor have we
made an independent evaluation or appraisal of the assets and liabilities of
Synovus and Peoples and we were not furnished with any such evaluations or
appraisals.
We have assumed that the Merger will be consummated substantially in
accordance with the terms set forth in the Agreement. We have further assumed
that the Merger will be accounted for as a purchase-of-interests under generally
accepted accounting principles. We have assumed that the Merger is, and will be,
in compliance with all laws and regulations that are applicable to Synovus and
Peoples. In rendering this opinion, we have been advised by Synovus and Peoples
and we have assumed that there are no factors that would impede any necessary
regulatory or governmental approval of the Merger and we have further assumed
that, in the course of obtaining the necessary regulatory and governmental
approvals, no restriction will be imposed on Peoples or the contemplated
benefits of the Merger that would have a material adverse effect on Synovus or
the surviving corporation. We have also assumed that there would not occur any
change in applicable law or regulation that would cause a material adverse
change in the prospects or operations of Synovus or the surviving corporation
after the Merger.
C-3
Board of Directors
Peoples Florida Banking Corporation
October 7, 2003
Page 4 of 4
Our opinion is based solely upon the information available to us and
the economic, market and other circumstances as they exist as of the date
hereof. Events occurring and information that becomes available after the date
hereof could materially affect the assumptions and analyses used in preparing
this opinion. We have not undertaken to reaffirm or revise this opinion or
otherwise comment upon any events occurring or information that becomes
available after the date hereof.
This letter is solely for the information of the Board of Directors of
Peoples and is not to be used, circulated, quoted or otherwise referred to for
any other purpose, nor is it to be filed with, included in or referred to in
whole or in part in any registration statement, proxy statement or any other
document, except in each case in accordance with our prior written consent which
shall not be unreasonably withheld; provided, however, that we hereby consent to
the inclusion and reference to this letter in any registration statement, proxy
statement, information statement or tender offer document to be delivered to the
holders of Peoples Stock in connection with the Merger if and only if this
letter is quoted in full or attached as an exhibit to such document and this
letter has not been withdrawn prior to the date of such document.
Subject to the foregoing and based on our experience as investment
bankers, our activities and assumptions as described above, and other factors we
have deemed relevant, we are of the opinion as of the date hereof that the Per
Share Stock Consideration and the Per Share Cash Consideration detailed in the
Agreement and payable to the shareholders of Peoples by Synovus is fair for
Peoples' shareholders, from a financial point of view.
Sincerely,
/s/Hovde Financial LLC
HOVDE FINANCIAL LLC
C-4
Appendix "D"
KPMG [Logo]
303 Peachtree Street Telephone 404.222.3000
Suite 2000 Fax 404.222.3050
Atlanta, GA 30308
November 18, 2003
Board of Directors
Synovus Financial Corp.
901 Front Avenue
Suite 301
Columbus, GA 31901
Board of Directors
Peoples Florida Banking Corporation
32845 U. S. Highway 19
Palm Harbor, FL 34682
Ladies and Gentlemen:
You have requested the opinion of KPMG LLP ("KPMG") regarding certain federal
income tax consequences resulting from the merger of Peoples Florida Banking
Corporation ("Peoples") with and into Synovus Financial Corp. ("Synovus"), a
bank holding company (the "Merger"). Upon the consummation of the Merger, the
separate existence of Peoples will cease and Peoples shareholders will receive a
combination of Synovus Common Stock and cash, as described in the Merger
Agreement.
You have submitted for our consideration:
* certain representations as to the proposed transactions;
* a copy of the Agreement and Plan of Merger, dated October 7, 2003 (the
"Merger Agreement"); and
* a copy of the Form S-4 Registration Statement filed with the SEC (the
Merger Agreement and the Form S-4 collectively being the "Documents").
We have not reviewed the legal documents necessary to effectuate the steps to be
undertaken and we assume that all steps will be effectuated under state and
federal law and will be consistent with the legal documentation and with the
description of the steps in the Documents.
You have the consent of KPMG LLP to include a copy of this opinion letter in the
Form S-4 Registration Statement relating to the merger discussed in this opinion
letter.
D-1
November 18, 2003
Page 2
Facts and Representations
Synovus is a registered bank holding company organized under the laws of the
State of Georgia. Synovus has authorized 600,000,000 shares of common stock, par
value $1.00 per share ("Synovus Common Stock"), of which 301,441,645 shares were
outstanding as of September 30, 2003.
Peoples has been duly incorporated and is an existing corporation in good
standing under the laws of Florida, with its principal executive offices located
in Tampa, Florida. As of August 31, 2003, Peoples had 3,000,000 authorized
shares of common stock, par value $.10 per share ("Peoples Common Stock"), of
which 2,047,184 shares are outstanding on September 30, 2003. Peoples has one
wholly-owned banking Subsidiary, Peoples Bank, which subsidiary is an "insured
institution" as defined in the Federal Deposit Insurance Act and the applicable
regulations thereunder, and the deposits in which are insured by the Federal
Deposit Insurance Corporation and one non-banking subsidiary.
For valid corporate business purposes, pursuant to the Merger Agreement and on
the Effective Date (as that term is defined in the Merger Agreement), Peoples
will merge with and into Synovus, with Synovus being the surviving corporation.
The Merger Agreement provides that upon the Merger, subject to provisions of the
Merger Agreement, each share of Peoples Common Stock outstanding as to which a
dissenter's right has not been duly and validly exercised shall be converted
into and exchangeable for the right to receive, as provided in and subject to
provisions of the Merger Agreement: (1) .7478 shares of Synovus Common Stock
("Per Share Stock Consideration") and (2) $14.65 in cash ("Per Share Cash
Consideration").
Synovus will not issue any fractional shares of Synovus Common Stock in
connection with the Merger. Instead, each holder of Peoples Common Stock who
would otherwise have been entitled to receive a fraction of a share of Synovus
Common Stock shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of Synovus Common Stock
multiplied by the closing price per share of Synovus Common Stock on the New
York Stock Exchange ("NYSE") on the last business day immediately preceding the
Effective Date of the Merger.
On the Effective Date, each option granted by Peoples to purchase shares of
Peoples Common Stock (each a "Peoples Stock Option"), whether vested or
unvested, which is outstanding and unexercised immediately prior thereto, shall
be assumed by Synovus and converted automatically into an option to purchase
shares of Synovus Common Stock (each a "Synovus Stock Option") in an amount and
at an exercise price determined as provided below (and otherwise having the same
duration and other terms as the original option): (1) the number of shares of
Synovus Common Stock to be subject to the new option shall be equal to the
product of the number of shares of Peoples Common Stock
D-2
November 18, 2003
Page 3
subject to the original option multiplied by 1.3372, (unless otherwise adjusted
pursuant to the terms of the Merger Agreement) provided that any fractional
shares of Synovus Common Stock resulting from such multiplication shall be
rounded to the nearest whole share; and (2) the exercise price per share of
Synovus Common Stock under the new option shall be equal to the exercise price
per share of Peoples Common Stock under the original option divided by 1.3372,
(unless otherwise adjusted pursuant to the terms of the Merger Agreement)
provided that such exercise price shall be rounded up to the nearest cent. The
adjustment provided herein with respect to any options which are "incentive
stock options" (as defined in Section 422 of the Internal Revenue Code of 1986
(the "Code")) shall be and is intended to be effected in a manner which is
consistent with Section 424(a) of the Code.
Effective April 27, 1999, the Board of Directors of Synovus adopted a plan that
provides the common shareholders of Synovus with Common Stock Purchase Rights
("poison pill rights"), i.e. rights to acquire the stock of Synovus or its
successor. Under the terms of the plan, holders of Synovus Common Stock received
a poison pill right for each share of Synovus Common Stock held by them. A
shareholder's ability to exercise his rights is contingent upon the occurrence
of either a tender offer for 15% or more, or the actual acquisition of 15% or
more, of Synovus Common Stock by a corporation or individual (the "acquiring
person") without the approval of Synovus's Board of Directors.
In general, the rights become exercisable on the earlier of (1) ten days
following a public announcement that, without prior approval of Synovus, a
person or group of affiliated persons has acquired, or obtained the right to
acquire, beneficial ownership of 15% or more of the outstanding common stock of
Synovus, or (2) ten days following the commencement or announcement of an
intention to make a tender offer or exchange offer, without the prior written
consent of Synovus, for 15% or more of the outstanding shares of Synovus Common
Stock. Until the rights become exercisable, they cannot be transferred
separately from the underlying common stock on which they were distributed, nor
are the rights represented by any certificate other than the underlying stock
certificate itself. In addition, Synovus may redeem the poison pill rights for 1
cent per right until the date that specified events occur. The poison pill
rights expire on May 5, 2009.
Once they become exercisable, the poison pill rights entitle the holder to
purchase from Synovus one share of common stock. No fractional shares of common
stock will be issued upon exercise of a poison pill right. In lieu thereof, a
payment in cash will be made to the holder of such poison pill right equal to
the same fraction of the current market value of a share of common stock.
If, after the rights become exercisable, a "flip-in" or "flip-over" event
occurs, all holders of such rights, except the acquiring person, are entitled to
purchase, at a 50 percent discount, the stock of either Synovus or the acquiring
corporation (whichever is applicable). A "flip-in" event is either (1) the
acquisition by the acquiring person of 15%
D-3
November 18, 2003
Page 4
or more of the outstanding stock of Synovus, or (2) the conduct of certain
self-dealing transactions between an acquiring person or any of its affiliates
or associates and Synovus. A "flip-over" event is either (1) a merger or other
business combination in which Synovus is not the surviving corporation, or (2) a
sale or transfer of more than 30% of the assets or earning power of Synovus and
its subsidiaries (taken as a whole) in one or a series of transactions.
In the event that, subsequent to the date of the Merger Agreement but prior to
the Effective Date, the outstanding shares of Synovus Common Stock shall have
been increased, decreased, changed into or exchanged for a different number or
kind of shares or securities through reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split, or other
like changes in Synovus' capitalization, then an appropriate and proportionate
adjustment shall be made to the Per Share Stock Consideration and the Per Share
Cash Consideration so as to prevent the dilutive effect of such transaction on a
percentage of ownership basis.
The Merger has been approved by the Boards of Directors of Peoples and Synovus
and is subject to the receipt of regulatory approval from appropriate parties,
including the Board of Governors of the Federal Reserve System, the Georgia
Department of Banking and Finance and by the Florida Department of Financial
Services.
In addition to the foregoing statement of facts, Synovus and/or Peoples have
made the following representations, as applicable, to KPMG in connection with
the Merger. KPMG has not independently verified the completeness and accuracy of
any of the following representations. KPMG is relying on these representations
in rendering the opinion contained herein.
With Respect to the Merger
(a) The fair market value of Synovus Common Stock and other consideration, if
any, received by each shareholder of Peoples will be approximately equal
to the fair market value of Peoples Common Stock surrendered in the
exchange.
(b) None of Synovus, Peoples, or any subsidiary or related person has any
plan or intention to reacquire any of Synovus shares issued in the Merger
or (other than the share for share exchanges described above) to acquire
any share of Peoples prior to the Merger. Peoples is not aware of any
plan or intention on the part of its shareholders to sell Peoples Common
Stock to Peoples, Synovus, or any person related to Peoples or Synovus
prior to the transaction, or to sell Synovus Common Stock to any such
person after the transaction. In addition, Peoples does not intend to
redeem any Peoples Common Stock or declare an extraordinary dividend with
respect to Peoples Common Stock prior to the transaction.
D-4
November 18, 2003
Page 5
For purposes of this representation, two persons are "related" if the
persons are corporations and either immediately before or immediately
after a transaction are members of the same "affiliated group."
"Affiliated group" for these purposes generally means two or more
corporations currently linked or which pursuant to a plan will be linked
with a common parent through ownership chains comprising at least 80
percent of the voting power of each corporation and 80 percent of the
value of each corporation's shares. In addition, "related person"
includes two or more corporations for whom a purchase of the stock of one
corporation by another corporation would be treated as a distribution in
redemption of the stock of the first corporation. This treatment as a
distribution in redemption occurs (a) when a person holding any amount of
shares in a parent corporation or, (b) when a person in control of each
of two corporations sells shares of one controlled corporation to the
other corporation. For these purposes, "control" means the ownership of
shares possessing at least 50 percent of the value (or vote) of all
classes of shares. Ownership of shares is determined with reference to
constructive ownership provisions, which attribute ownership between
corporations and their five-percent or greater shareholders, partnerships
and their partners, and trusts and their beneficiaries, and between
certain members of a family. In the case of an acquisition by a
partnership, each partner shall be treated as owning or acquiring any
stock owned or acquired, as the case may be, by the partnership in
accordance with that partner's interest in the partnership.
(c) Synovus has no plan or intention to sell or otherwise dispose of any of
the assets of Peoples acquired in the transaction, except for
dispositions made in the ordinary course of business or transfers
described in Section 368(a)(2)(C). (Unless otherwise stated, all
"Section" and "Regulation Section." references herein are to the Internal
Revenue Code of 1986, as amended, and the regulations thereunder.)
(d) The liabilities of Peoples assumed by Synovus and the liabilities to
which the transferred assets of Peoples are subject were incurred by
Peoples in the ordinary course of its business.
(e) Following the Merger, Synovus will continue the historical business of
Peoples (including the business of its subsidiaries) or use a significant
portion of the historic business assets of Peoples (including the
historic business assets of its subsidiaries) in a business.
(f) Synovus, Peoples, and the shareholders of Peoples will pay their
respective expenses, if any, incurred in connection with the Merger.
(g) No inter-corporate indebtedness exists between Synovus and Peoples that
was issued, acquired, or will be settled at a discount.
D-5
November 18, 2003
Page 6
(h) No two parties to the Merger are investment companies as defined in
Section 368(a)(2)(F)(iii) and (iv). For purposes of the foregoing, an
"investment company" is a corporation that is a regulated investment
company, a real estate investment trust, or a corporation fifty
percent or more of the value of whose total assets are stock and
securities and eighty percent or more of the value of whose total
assets are assets held for investment. In making the fifty percent and
eighty percent determinations under the preceding sentence, stock and
securities in any subsidiary corporation shall be disregarded and the
parent corporation shall be deemed to own its ratable share of the
subsidiary's assets, and a corporation shall be considered a
subsidiary if the parent owns fifty percent or more of the combined
voting power of all classes of stock entitled to vote or fifty percent
or more of the total value of shares of all classes of stock
outstanding. In determining total assets for purposes of this
representation, there shall be excluded cash and cash items (including
receivables), government securities, and assets acquired (through
incurring indebtedness or otherwise) for the purposes of ceasing to be
an investment company.
(i) On the date of the Merger, the fair market value of the assets of Peoples
transferred to Synovus will equal or exceed the sum of the liabilities
assumed by Synovus, plus the amount of liabilities, if any, to which the
transferred assets are subject.
(j) No event has occurred that would make the poison pill rights exercisable.
(k) Neither Synovus nor Peoples is under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A).
(l) None of the compensation received by any shareholder-employees of Peoples
will be separate consideration for, or allocable to, any of their shares
of Peoples Common Stock; none of the shares of Synovus Common Stock
received by any shareholder-employee of Peoples will be separate
consideration for, or allocable to, any employment agreement and the
compensation paid to any shareholder-employees of Peoples will be for
services actually rendered and will be commensurate with amounts paid to
third parties bargaining at arm's length for similar services.
(m) The distribution of cash proceeds to Peoples shareholders in lieu of
fractional shares of Synovus will be made solely for the purpose of
avoiding the expense and inconvenience to Synovus of issuing fractional
shares and does not represent separately bargained for consideration. The
total cash consideration that Synovus will pay in the transaction to
Peoples shareholders instead of issuing fractional shares will not exceed
one percent of the total consideration that Synovus will issue in the
transaction to Peoples shareholders in exchange for their shares of
Peoples. The fractional share interests of each Peoples shareholder will
be aggregated, and
D-6
November 18, 2003
Page 7
no Peoples shareholder will receive cash in an amount equal to or greater
than the value of one full share of Synovus Common Stock.
(n) Synovus Common Stock issued pursuant to the Merger will represent at
least 45% of the value of the consideration received by Peoples
shareholders (including cash in lieu of fractional shares). This
representation is true even if the poison pill rights are not treated as
part of Synovus Common Stock, but rather as other property.
(o) On November 17, 2003, and the Effective Date, the exercise of the poison
pill rights is remote and speculative.
(p) The Merger will qualify as a statutory merger under Georgia and Florida
law.
(q) Synovus will be the surviving entity as a result of the Merger.
(r) The Merger is being effected for bona fide corporate business reasons.
(s) The Merger Agreement represents the full and complete agreement among
Synovus and Peoples regarding the Merger and there are no other written
or oral agreements regarding the Merger, except as otherwise described in
the Documents.
(t) Synovus and Peoples adopted the Merger Agreement as their plan of
reorganization.
(u) The excess of the aggregate fair market value of the Synovus Stock
Options immediately after the exchange over the aggregate option price of
such shares is not more than the excess of the aggregate fair market
value of the Peoples Stock Options immediately before the exchange over
the aggregate option price of such shares, and a Synovus Stock Option
does not give the employee additional benefits which he did not have
under a Peoples Stock Option.
(v) At the time of the Merger, no Peoples shareholder will own more than 1%
of the then outstanding Synovus Common Stock. Ownership of Synovus Common
Stock is determined with reference to constructive ownership provisions
of Section 318, which attribute ownership between corporations and their
shareholders, partnerships and their partners, and trusts and their
beneficiaries, and between certain members of a family.
D-7
November 18, 2003
Page 8
Discussion
Classification as a Reorganization
Section 368(a)(1)(A) provides that the term "reorganization" includes a
statutory merger. The term statutory merger refers to a merger effected pursuant
to the corporate laws of the United States, a state or territory, or the
District of Columbia. Regulation Section 1.368-2(b). Based on representation "p"
above, the Merger will qualify as a statutory merger under Georgia and Florida
law and will thus satisfy the statutory merger requirement.
Requisite to all reorganizations under Section 368(a)(1) are a (1) valid
business purpose; (2) continuity of the business enterprise under the modified
corporate form; and (3) continuity of interest in the corporation surviving the
merger. Regulation Section 1.368-1(b). The term "reorganization" does not
embrace the mere purchase by one corporation of the properties of another.
Regulation Section 1.368-2(a). These regulations reflect well-developed judicial
interpretation of the statutory definition of a reorganization, the purpose of
which is to exclude from the scope of the reorganization provisions those
transactions that are in fact sales.
With respect to the valid business purpose requirement, Regulation Section
1.368-2(g) states that reorganizations must be "undertaken for reasons germane
to the continuation of the business of a corporation," and that the statute
"contemplates genuine corporate reorganizations which are designed to effect a
readjustment of continuing interests under modified corporate forms." Based on
the statement of facts and representation "r" above, the Merger is being
effected for bona fide business purposes and thus will satisfy the valid
business purpose requirement.
Continuity of business enterprise requires that the transferee corporation
either continue the transferor corporation's historical business or use a
significant portion of the transferor corporation's historical business assets.
Regulation Section 1.368-1(d)(2). Based on representation "e" above, Synovus
intends to continue the historical business of Peoples so that the Merger will
satisfy the continuity of business enterprise requirement.
With respect to the continuity of interest requirement, the regulations under
Section 368(a) do not establish the amount of qualifying consideration necessary
to satisfy such requirement. However, the Service has promulgated a safe harbor
for purposes of obtaining a private letter ruling. Under Revenue Procedure
77-37, 1977-2 C.B. 568, the continuity of interest requirement of Regulation
Section 1.368-1(b) is satisfied if:
There is continuing interest through stock ownership in the acquiring or
transferee corporation...on the part of the former shareholders of the
acquired or transferor corporation which is equal in value, as of the
effective date of the
D-8
November 18, 2003
Page 9
reorganization, to at least 50 percent of the value
of all the formerly outstanding stock of the acquired or transferor
corporation as of the same date. It is not necessary that each shareholder
of the acquired or transferor corporation receive in the exchange, stock
of the acquiring or transferee corporation...which is equal in value to at
least 50 percent of the value of his former stock interest in the acquired
or transferor corporation, so long as one or more of the shareholders of
the acquired or transferee corporation have a continuing interest through
stock ownership in the acquiring or transferor corporation...which is, in
the aggregate, equal in value to at least 50 percent of the value of all
of the formerly outstanding stock of the acquired or transferor
corporation.
The 50 percent test of the revenue procedure does not as a matter of law
establish the amount of qualifying consideration necessary to meet the
continuity of interest requirement of Regulation Section 1.368-1(b). In other
words, the continuation of a common stock ownership in the acquiring corporation
equal to less than 50 percent of the value of the stock of the acquired
corporation does not itself mark a discontinuity of interest. It is only
necessary that the shareholders continue to have a definite and substantial
equity interest in the assets of the acquiring corporation. Rev. Rul. 61-156,
1961-2 C.B. 62. Thus, the Supreme Court in John A. Nelson C. v. Helvering, 296
U.S. 374 (1935), 36-1 U.S.T.C. para 9019, held that a reorganization satisfied
the continuity of interest requirement even though the shareholders of the
acquired corporation received only 38.8 percent of their total consideration in
the form of stock, in that case nonvoting preferred stock, of the acquiring
corporation. Based on representation "n" above, at least 45 percent of the value
of consideration received by the Peoples shareholders will consist of Synovus
Common Stock. In addition, based on representation "b" above, there will be no
transactions that could cause the continuity of interest requirement to be
failed under Regulation Section 1.368-1(b). Accordingly, the Merger will meet
the continuity of interest requirement.
In that (1) the merger of Peoples with and into Synovus will qualify as a
statutory merger under Georgia and Florida law; (2) the Merger is motivated by a
valid business purpose as stated in the above facts; (3) after the transaction,
Synovus will continue the historical business of Peoples; and (4) Peoples
shareholders will exchange for Synovus Common Stock an amount of Peoples Common
Stock meeting the continuity of shareholder interest test; the merger of Peoples
with and into Synovus will constitute a reorganization within the meaning of
Section 368(a)(1)(A). Synovus and Peoples will each be "a party to a
reorganization" within the meaning of Section 368(b).
Federal Income Tax Consequences to Exchanging Shareholders
Section 354(a)(1) provides that no gain or loss will be recognized if stock of a
corporation that is a party to a reorganization is, pursuant to the plan or
reorganization, exchanged solely for stock of such corporation or of another
corporation that is a party to
D-9
November 18, 2003
Page 10
the reorganization. Section 356(a)(1) in relevant part provides that, if money
or other property is received in an exchange to which Section 354 would
otherwise apply, then the recipient shall recognize gain, if any, to the extent
of the sum of the money and the fair market value of the property received. If
the exchange has the effect of the distribution of a dividend, then the amount
of gain recognized that is not in excess of each distributee shareholder's
ratable share of the undistributed earnings and profits of the acquired
corporation will be treated as a dividend. Section 356(a)(2). No loss will be
recognized on the exchange. Section 356(c).
The payment of cash in lieu of fractional share interests of Synovus Common
Stock will be treated as if the fractional share interests of Synovus Common
Stock were distributed as part of the Merger to Peoples shareholder and then
redeemed by Synovus. The cash payments will be treated as having been received
as distributions in full payment for the fractional share interests redeemed.
Section 302(a), Rev. Rul. 66-365, 1966-2 C.B.116 and Rev. Proc. 77-41, 1977-2
C.B. 574.
Based on the Merger's qualification under Section 368(a)(1)(A), Peoples common
shareholders will recognize gain only to the extent of cash received in the
Merger. Section 356(a)(1). The tax basis these Peoples common shareholders will
have in their newly received Synovus Common Stock (including the fractional
shares of Synovus Common Stock they are deemed to receive) will be the same as
their tax basis in Peoples Common Stock immediately prior to the merger under
Section 358(a), less the value of any other property received (not including the
cash received in lieu of fractional shares), plus any gain (including gain
treated as a dividend, but not gain associated with the fractional shares) that
is recognized on the exchange. Section 358(a).
If the property received in an exchange (i.e., Synovus Common Stock) has the
same (i.e., carryover) basis as the property given up, then Section 1223(1)
applies to determine the holding period for the property received. Section
1223(1) provides that the period during which the taxpayer held the property
surrendered in the exchange is added to the period he or she holds the property
received in the exchange in order to determine the holding period of the
property received.
This tacking of the previous holding period applies only if the property
exchanged (i.e., Peoples Common Stock) was a capital asset in the taxpayer's
hands at the time of the exchange. Section 1223(1). The status of the property
as capital asset is determined under Section 1221, which defines "capital asset"
as any property of a taxpayer other than property within specified
classifications. As a general rule, stock of a corporation would be treated as a
capital asset under this section. Provided that his or her Peoples Common Stock
is a capital asset, then each Peoples shareholder will be able to include his or
her respective ownership period of Peoples Common Stock in determining the
holding period of Synovus Common Stock received in the proposed transaction.
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Poison Pill Rights
The shares of Synovus Common Stock to be issued to Peoples shareholders entitle
such shareholders to receive the poison pill rights, which will become
exercisable upon the happening of future events as described above. An issue
with respect to the poison pill rights is whether the rights should be
considered separable from Synovus Common Stock and therefore "other property"
within the meaning of Section 356(a) or rather as an attribute of Synovus Common
Stock, that is, a right to a future dividend inseparable from the other rights
inherent in the stock and not personal to the shareholders.
Presently the Service has not published any direct authoritative position
regarding the treatment of poison pill rights in the context of a corporate
reorganization that can be cited as precedent. Nor are there any judicial
opinions specifically addressing poison pill rights in the context of a
corporate reorganization.
The only available guidance consists of Private Letter Rulings ("PLRs") that
address the shareholder tax consequences upon the receipt of common stock
incorporating a poison pill rights plan in the context of a corporate
reorganization. Under Section 6110(j)(3), PLRs may not be used or cited as
precedent. If the Service issues further authority, such authority could be
prospective only in accordance with the provisions of Section 7805.
In PLR 8808081, the Service ruled that poison pill rights incorporated in the
terms of common stock issued in a corporate reorganization constituted "other
property" within the meaning of Section 356(a). Accordingly, the filing held
that the acquired corporation's shareholders recognized gain, to the extent of
the fair market value of the poison pill rights, in the exchange for common
stock of the acquiring corporation.
Subsequently, however, the Service reversed its position and ruled in PLR
8925087, PLR 8925088, PLR 9040069, PLR 9040042, PLR 9120006, and PLR 199904013
(among others) that poison pill rights did not constitute other property within
the meaning of Section 356(a).
Indirect support for the proposition that poison pill rights do not constitute
"other property" can also be found in Revenue Ruling 90-11, 1990-1 C.B. 10.
Although not in the context of a corporate reorganization, the Service concluded
that the initial issuance of poison pill rights is not a distribution of
property that would give rise to current tax to the shareholders. The terms of
the poison pill plan described in the ruling are comparable to the terms of
Synovus plan. This ruling is a published ruling, and therefore, may be cited as
precedent. This published ruling indicates that the more recent private letter
rulings cited immediately above reflect the current thinking of the Service,
i.e., that poison pill rights do not constitute other property when associated
with stock received in a corporate reorganization. Should the Service
successfully maintain that the poison pill
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rights are other property, then gain, if any, realized by a common shareholder
receiving such rights would be recognized to the extent of the fair market value
of such rights.
Opinions
Based solely on the Documents, the above Facts and Representations and subject
to the Scope of the Opinions below, it is the opinion of KPMG that:
Federal Income Tax Consequences
(1) The Merger will constitute a reorganization within the meaning of
Section 368(a).
(2) Peoples and Synovus will each be a party to the reorganization within
the meaning of Section 368(b).
(3) Synovus will recognize no gain or loss upon the receipt of the assets
of Peoples, a party to the reorganization, subject to its liabilities,
in exchange for cash and its common stock in the Merger. Section
1032(a); Treas. Reg. Section 1.1032-1.
(4) Peoples's shareholders will recognize gain, if any, as a result of the
Merger, only to the extent of the cash (other than cash received in
lieu of fractional shares) received for their stock in Peoples,
pursuant to the Merger Agreement. Section 354(a)(1); Section 356(a)(1).
Any gain recognized by a Peoples shareholder will be capital gain
provided that such Peoples shareholder held their Peoples Common Stock
as a capital asset on the date of the Merger. Any capital gain
recognized will be long-term capital gain, if such Peoples shareholder
held their Peoples Common Stock for more than one year as of the date
of the Merger.
(5) We believe it is more likely than not that Synovus' poison pill rights
plan adopted April 27, 1999, will be treated for federal income tax
purposes as an attribute of Synovus Common Stock, a right that is
inseparable from other rights inherent in the stock, that does not
constitute "other property" within the meaning of Section 356(a)
received by the Peoples common shareholders in exchange for their
Peoples Common Stock, and, the Peoples shareholders will not recognize
gain for federal income tax purposes attributable to the poison pill
rights upon the Merger. However, in view of the lack of precedent,
there can be no assurance that the Service will agree with this
conclusion. In the event that the Service ultimately establishes that
such poison pill rights constitute other property, then Peoples
shareholders, who realize gain on the exchange of their shares for
Synovus Common Stock, will recognize such gain to the extent of the
value of the poison pill rights received.
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(6) The basis of a share of Synovus Common Stock received by a shareholder
of Peoples (including any fractional share interests which they are
deemed to receive under opinion (8), below) will be the same as the
basis in Peoples Common Stock surrendered in the exchange therefor
decreased by the amount of money and value of other property (but not
including cash received in lieu of fractional shares) received and
increased by the amount of any gain recognized (including gain treated
as a dividend, but not gain associated with the fractional shares).
Section 358(a)(1).
(7) The holding period of a share of Synovus Common Stock received by a
shareholder of Peoples (including any fractional share interests that
they are deemed to receive under opinion (8), below) will include the
shareholder's holding period of Peoples Common Stock surrendered in
exchange therefor, provided that the Peoples Common Stock is held as a
capital asset in the hands of the shareholder of Peoples on the date of
the Merger. Section 1223(1).
(8) The payment of cash in lieu of fractional share interests of Synovus
Common Stock will be treated as if the fractional share interests of
Synovus Common Stock were distributed as part of the Merger to the
Peoples shareholder and then redeemed by Synovus. The cash payments
will be treated as having been received as distributions in full
payment for the fractional share interests redeemed as provided in
Section 302(a). Rev. Rul. 66-365, 1966-2 C.B. 116 and Rev. Proc. 77-41,
1977-2 C.B. 574.
(9) Peoples will recognize no gain or loss upon the transfer of its assets,
subject to its liabilities, to Synovus in the Merger. Sections 357(a)
and 361(a). The deemed distribution of qualified property by Peoples to
its shareholders will be nontaxable. Section 361(c). Peoples will
recognize no gain upon the distribution of any other consideration
received from Synovus because such property will have a fair market
value tax basis. Section 358(a)(2).
(10) The basis of the assets of Peoples in the hands of Synovus will be the
same, in each instance, as the basis of such assets in the hands of
Peoples immediately prior to the Merger. Section 362(b).
(11) The holding period of the assets of Peoples in the hands of Synovus
will include, in each instance, the period during which Peoples held
such assets immediately prior to the Merger. Section 1223(2).
(12) For purposes of Section 381, Synovus will be the acquiring corporation
in the Merger. Treas. Reg. Section 1.381(a)-1(b)(2). Thus, subject to
the conditions and limitations specified in Sections 381, 382, 383, and
384,
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and the regulations thereunder, Synovus will succeed to and take
into account the items of Peoples described in Section 381(c). Section
381(a) and Treas. Reg. Section 1.381(a)-1.
State Income Tax Consequences
It is our opinion that the State of Florida for income tax purposes will treat
the Merger in the same manner as treated under the Internal Revenue Code for
federal income tax purposes as set forth in the Opinions relating to Federal
Income Tax Consequences contained in this opinion letter. Fla. Stat. chs.
220.11, 12 and 13; Fla. Admin. Code Ann. r. 12C-1.0511.
It is our opinion that the State of Georgia for income tax purposes will treat
the Merger in the same manner as treated under the Internal Revenue Code for
federal income tax purposes as set forth in the Opinions relating to Federal
Income Tax Consequences contained in this opinion letter. Ga. Code Ann. Sections
48-7-21 and -27.
Scope of the Opinions
The opinions contained herein are effective as of the Effective Date of the
Merger and are based upon the facts, assumptions and representations set forth
in this letter, as well as the information contained in the Documents. You
represented to us that you have provided us with all facts and circumstances
that you know or have reason to know are pertinent to this opinion letter. If
any of these facts, assumptions or representations is not entirely complete or
accurate, it is imperative that we be informed immediately in writing because
the incompleteness or inaccuracy could cause us to change our opinions.
Our advice in this opinion letter is limited to the conclusions specifically set
forth herein under the heading Opinions. KPMG expresses no opinion with respect
to any other federal, state, local, or foreign tax or legal aspect of the
transactions described herein. No inference should be drawn on any matter not
specifically opined on above. In addition, this opinion letter may not be
applicable with respect to specific categories of shareholders, including but
not limited to persons who are corporations, trusts, dealers in securities,
financial institutions, insurance companies or tax exempt organizations; persons
who are not United States citizens or resident aliens or domestic entities
(partnerships or trusts); persons who are subject to alternative minimum tax (to
the extent that tax affects the tax consequences of the merger) or are subject
to the "golden parachute" provisions of the Internal Revenue Code of 1986 (to
the extent that tax affects the tax consequences of the merger); persons whose
shares of Peoples stock are treated as "section 306 stock" under Section 306 of
the Internal Revenue Code; persons who acquired Peoples common stock with
employee stock options or otherwise as compensation if such shares are subject
to any restriction related to employment; persons who do not hold their shares
as capital assets; or persons who hold their shares as part of
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Page 15
a "straddle" or "conversion transaction." No ruling has been or will be
requested from the IRS with respect to the tax effects of the merger. The
federal income tax laws are complex, and a shareholder's individual
circumstances may affect the tax consequences to the shareholder.
In rendering our opinions, we are relying upon the relevant provisions of the
Internal Revenue Code of 1986, as amended, the Florida Statues, the Code of
Georgia, the regulations thereunder, and judicial and administrative
interpretations thereof, all as in effect on the date of this letter. These
authorities are subject to change or modification retroactively and/or
prospectively and any such changes could affect the validity or correctness of
our opinion. We will not update our advice for subsequent changes or
modifications to the law and regulations or to the judicial and administrative
interpretations thereof, unless you separately engage us to do so in writing
after such subsequent change or modification. These opinions are not binding on
the Internal Revenue Service, any other tax authority, or any court, and no
assurance can be given that a position contrary to that expressed herein will
not be asserted by a tax authority and ultimately sustained by a court.
Very truly yours,
KPMG LLP
/s/KPMG LLP
Thomas W. Avent, Jr.
Partner-in-Charge, Southeast M&A Tax Practice
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