As filed with the Securities and Exchange Commission on June 19, 2001.
Registration No. 333-60066
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
Amendment No. 1 to
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
--------------
ABC BANCORP
(Exact name of registrant as specified in its charter)
--------------
Georgia 6022 58-1456434
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification Number)
24 2nd Avenue, S.E.
Moultrie, Georgia 31768
(229) 890-1111
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Kenneth J. Hunnicutt
Chairman of the Board and Chief Executive Officer
24 2nd Avenue, S.E.
Moultrie, Georgia 31768
(229) 890-1111
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------
Copies to:
Steven E. Fox, Esq. Edward J. Harrell, Esq.
Rogers & Hardin LLP Martin, Snow, Grant & Napier, LLP
2700 International Tower 240 Third Street
229 Peachtree Street NE Macon, Georgia 31202-1606
Atlanta, Georgia 30303-1601 (478) 749-1700
(404) 522-4700
--------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
--------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Proposed
Proposed maximum
Title of each class of Amount maximum aggregate Amount of
securities to be to be offering price offering registration
registered Registered(1) per share price(2) fee(3)
- -----------------------------------------------------------------------------------
Common Stock, par value 1,241,204
$1.00 per share....... shares N/A $23,026,281.25 $5,756.57
- -----------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Represents the maximum number of shares of common stock, $1.00 par value
per share, of ABC Bancorp issuable in the merger described herein to
holders of shares of common stock, no par value per share, of Golden Isles
Financial Holdings, Inc. ("Golden Isles").
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Section 6(b) of the Securities Act of 1933, as amended (the
"Securities Act"), and computed pursuant to Rule 457(f)(1) promulgated
under the Securities Act by multiplying (i) $8.75, the average of the high
and low sales prices of a share of Golden Isles common stock as quoted on
The NASDAQ Small Cap Market on April 27, 2001, and (ii) the maximum number
of shares of Golden Isles common stock, assuming the exercise of all
options to acquire shares of Golden Isles common stock which are
exercisable prior to the effective time of the merger (2,631,575 shares).
(3) Registration fee was paid in connection with a previous filing of this
Registration Statement.
--------------
THIS REGISTRATION STATEMENT SHALL HEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH THE PROVISIONS OF SECTION 8(a) OF THE SECURITIES ACT OF 1933.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
3811 FREDERICA ROAD
ST. SIMONS ISLAND, GEORGIA 31522
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
To our Shareholders:
The boards of directors of ABC Bancorp and Golden Isles Financial Holdings,
Inc. have unanimously agreed to a merger that will result in Golden Isles
merging with and into ABC. This transaction provides Golden Isles with growth
and strategic opportunities that would not be available to Golden Isles on a
stand-alone basis.
If the merger is completed, each Golden Isles shareholder and optionholder
will receive a pro-rata share of an aggregate of $10,159,349 in cash and
1,241,204 shares of stock of ABC for the shares of Golden Isles that they own
just before the merger, subject to adjustment as described in the merger
agreement. The actual price to be paid in the merger for each Golden Isles
share will depend upon the average closing price of ABC's stock during a
specific period before the merger.
For example, if the average closing price of ABC's stock was $11.875 per
share, which was the closing price of the ABC common stock on the date the
merger agreement was executed, each Golden Isles share would be exchanged in
the merger for $4.08 in cash and approximately 0.4982 of a share of ABC stock
valued at $11.875 per share (or an aggregate merger consideration of $10.00
per Golden Isles share).
ABC common stock trades on The Nasdaq National Market under the symbol
"ABCB."
A special meeting of shareholders of Golden Isles is scheduled to be held on
July 23, 2001 at 11:00 a.m., local time, at the Comfort Inn, 5308 New Jesup
Highway, Brunswick, Georgia 31523, so that the Golden Isles shareholders may
consider and vote upon a proposal to adopt the merger agreement which is
attached as APPENDIX A to this proxy statement/prospectus. We cannot complete
the merger unless the shareholders of Golden Isles adopt the merger agreement.
Golden Isles' board of directors unanimously recommends that Golden Isles'
shareholders vote FOR 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 sign,
date and mail your proxy card without indicating how you want to vote, your
proxy will be counted as a vote in favor of the proposal submitted at the
special meeting. If you fail to return your proxy card or do not vote in
person at the Golden Isles shareholders' special meeting, the effect will be a
vote against the proposal.
If the merger is completed, shareholders of Golden Isles who dissent from
the merger will be entitled to be paid the "fair value" of their shares if
they follow certain statutory provisions of Article 13 of the Georgia Business
Corporation Code. A copy of the dissenters' rights provisions under Georgia
law is attached as APPENDIX B to this proxy statement/prospectus.
Golden Isles' board of directors has unanimously approved the merger
agreement. Golden Isles' board of directors believes that the merger is fair
to, and in the best interest of, Golden Isles and its shareholders and
strongly encourages you to vote "FOR" the proposal. The Carson Medlin Company,
Golden Isles' financial advisor, has issued its opinion to Golden Isles' board
of directors that the consideration to be paid by ABC pursuant to the merger
agreement is fair, from a financial point of view, to Golden Isles and its
shareholders.
J. Thomas Whelchel
Chairman of the Board and Chief Executive
Officer,
Golden Isles Financial Holdings, Inc.
SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS
THAT YOU SHOULD CONSIDER BEFORE APPROVING THE MERGER.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this Proxy Statement/Prospectus. Any representation to
the contrary is a criminal offense.
The shares of ABC Bancorp common stock are not savings or deposit accounts
or other obligations of any bank or non-bank subsidiary of any of the parties,
and they are not insured by The Federal Deposit Insurance Corporation, the
Bank Insurance Fund or any other Governmental Agency.
The date of this proxy statement/prospectus is June 21, 2001, and it is
being mailed or otherwise delivered to Golden Isles shareholders on or about
June 25, 2001.
This Proxy Statement/Prospectus incorporates important business and
financial information about ABC Bancorp that is not included in or delivered
with this Proxy Statement/Prospectus. This information is available at no
charge upon written or oral request at the following address:
ABC Bancorp
24 2nd Avenue, S.E.
Moultrie, Georgia 31768
Attention: Cindi H. Lewis
Telephone: (229) 890-1111
In order to receive timely delivery of this information, you must request
this information no later than July 16, 2001.
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
3811 FREDERICA ROAD
ST. SIMONS ISLAND, GEORGIA 31522
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of Golden
Isles Financial Holdings, Inc. will be held at the Comfort Inn, 5308 New Jesup
Highway, Brunswick, Georgia 31523 at 11:00 a.m., local time, on July 23, 2001,
for the following purposes:
1. To consider and vote upon a proposal to approve the agreement and
plan of merger between ABC Bancorp and Golden Isles Financial Holdings,
Inc. In the merger, all of the issued and outstanding shares of Golden
Isles common stock and all outstanding options to purchase shares of Golden
Isles common stock on the effective date of the merger will be converted
into an aggregate of $10,159,349 in cash and 1,241,204 shares of the common
stock of ABC Bancorp, subject to adjustment. You can find a copy of the
agreement and plan of merger attached as APPENDIX A to this proxy
statement/prospectus.
2. To transact such other business, if any, that may properly come
before the special shareholders' meeting or any adjournment or postponement
of the special shareholders' meeting.
Only shareholders of record at the close of business on June 18, 2001, are
entitled to receive notice of and vote at the special shareholders' meeting or
any adjournment or postponement of the special shareholders' meeting. Approval
of the merger agreement requires the affirmative vote of at least a majority
of all of the votes entitled to be cast at the special shareholders' meeting.
Dissenters' rights are available under Georgia law to the Golden Isles
shareholders with respect to the merger. Please see the section entitled
"Statutory Provisions for Dissenting Shareholders" on page 49 of the
accompanying proxy statement/prospectus for a discussion of the availability
of dissenters' rights and the procedures required to be followed to assert
dissenters' rights in connection with the merger.
We look forward to seeing you at the special shareholders' meeting. Your
vote is important. Please mark, sign and return your proxy card, whether or
not you plan to attend the special shareholders' meeting.
GOLDEN ISLES' BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" APPROVAL OF THE MERGER.
By Order of the board of directors,
/s/ J. Thomas Whelchel
J. Thomas Whelchel
Chairman of the Board of Directors
Enclosures
June 19, 2001
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE SPECIAL SHAREHOLDERS' MEETING
IN PERSON, PLEASE VOTE, SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY IN
THE ENCLOSED BUSINESS REPLY ENVELOPE. IF YOU DO ATTEND THE SPECIAL
SHAREHOLDERS' MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON.
IMPORTANT. THE PROMPT RETURN OF PROXIES WILL SAVE GOLDEN ISLES THE EXPENSE
OF FURTHER REQUESTS FOR PROXIES IN ORDER TO INSURE A QUORUM AT THE SPECIAL
SHAREHOLDERS' MEETING. A SELF-ADDRESSED POSTAGE-PAID ENVELOPE IS ENCLOSED FOR
YOUR CONVENIENCE.
TABLE OF CONTENTS
Page
----
QUESTIONS AND ANSWERS ABOUT THE MERGER.................................... 1
A WARNING ABOUT FORWARD-LOOKING STATEMENTS................................ 3
SUMMARY................................................................... 4
Information About ABC and Golden Isles.................................. 4
The Merger.............................................................. 4
Reasons for the Merger.................................................. 5
Golden Isles Special Shareholders' Meeting.............................. 5
Golden Isles Record Date and Voting..................................... 5
Golden Isles' Board Unanimously Recommends Shareholder Approval......... 6
ABC's Dividend Policy Following the Merger.............................. 6
Interests of Golden Isles' Management and Directors in the Merger....... 6
Comparative Rights of Shareholders...................................... 6
Certain Federal Income Tax Considerations............................... 6
Accounting Treatment.................................................... 7
Fairness Opinion of Golden Isles' Financial Advisor..................... 7
Fairness Opinion of ABC's Financial Advisor............................. 7
Conditions to the Merger................................................ 7
Termination of the Merger Agreement..................................... 7
New ABC Shares to be Listed on NASDAQ................................... 7
Regulatory Approvals.................................................... 8
Golden Isles Share Ownership............................................ 8
Dissenting Shareholders' Rights......................................... 8
SELECTED CONSOLIDATED FINANCIAL INFORMATION............................... 8
COMPARATIVE PER SHARE DATA................................................ 11
COMPARISON OF CERTAIN UNAUDITED PER SHARE DATA............................ 11
COMPARATIVE STOCK PRICES AND DIVIDENDS.................................... 12
ABC Stock Information................................................... 12
Golden Isles Stock Information.......................................... 13
RISK FACTORS.............................................................. 14
ABC's operating costs after the merger and other recent acquisitions may
be greater than expected, and ABC's costs savings from the merger and
other recent acquisitions may be less than expected, and may not be
achieved as soon as expected........................................... 14
ABC may be unable to successfully integrate Golden Isles and other
acquired businesses or may have more trouble integrating acquired
businesses than expected............................................... 14
Changes in ABC's allowance for loan losses could affect ABC's
profitability.......................................................... 14
The trading volume in ABC Stock has been low............................ 15
Changes in interest rates could have an adverse effect on ABC's income.. 15
Competition in the banking industry is intense.......................... 15
Success of ABC depends upon local economic conditions................... 15
ABC and its subsidiary banks operate in a regulated environment......... 15
ABC is affected by recent bank reform legislation....................... 16
The merger consideration is fixed....................................... 16
ABC heavily dependent on its Chairman of the Board and Chief Executive
Officer................................................................ 16
ABC directors and executive officers own a significant portion of the
ABC stock.............................................................. 17
Future sales of ABC stock can affect its price.......................... 17
ABC's quarterly operating results may fluctuate......................... 17
ABC subject to certain "anti-takeover" provisions....................... 17
GOLDEN ISLES SPECIAL SHAREHOLDERS' MEETING................................ 17
Date, Time and Place.................................................... 17
Page
----
Matters to be Considered at the Special Shareholders' Meeting............ 17
Record Date; Shares Outstanding; Quorum.................................. 18
Vote Required............................................................ 18
Voting of Proxies........................................................ 18
Effect of Abstentions and Broker Non-Votes............................... 18
Revocability of Proxies.................................................. 19
Solicitation of Proxies.................................................. 19
THE MERGER................................................................. 19
Overview................................................................. 19
Background of the Merger................................................. 20
REASONS FOR THE MERGER..................................................... 21
ABC's Reasons for the Merger............................................. 21
Golden Isles' Reasons for the Merger..................................... 22
Recommendation of the Golden Isles Board of Directors.................... 23
OPINION OF FINANCIAL ADVISOR TO GOLDEN ISLES............................... 23
Valuation Methodologies.................................................. 25
Summary of Merger and Analysis........................................... 25
Industry Comparative Analysis............................................ 26
Comparable Transaction Analysis.......................................... 27
Present Value Analysis................................................... 28
Historical Stock Performance Analysis.................................... 28
OPINION OF FINANCIAL ADVISOR TO ABC........................................ 29
Financial Performance Overview........................................... 30
Valuation Multiples...................................................... 31
Similar Actual Transactions.............................................. 31
Contribution Analysis.................................................... 31
Financial Impact Analysis................................................ 32
Market Share Analysis.................................................... 32
Selected Peer Group Analysis............................................. 32
Net Present Value Analysis............................................... 33
EXCHANGE OF GOLDEN ISLES STOCK CERTIFICATES................................ 34
EFFECTIVE TIME OF THE MERGER............................................... 34
TERMS OF THE MERGER........................................................ 35
Fractional Shares........................................................ 35
Representations and Warranties........................................... 36
Conduct of Business Pending the Merger................................... 36
Steering Committee....................................................... 37
Conditions to the Merger................................................. 37
Required Regulatory Approvals............................................ 38
NASDAQ Listing........................................................... 38
Waiver, Amendment and Termination........................................ 38
Expenses and Fees in Connection with the Merger.......................... 39
Management and Operations After the Merger............................... 39
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION........................ 40
CERTAIN IMPORTANT FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER............ 47
Consequences to Golden Isles' Shareholders............................... 47
Consequences to Golden Isles and ABC..................................... 49
Dissenting Shareholders.................................................. 49
Backup Withholding....................................................... 49
ACCOUNTING TREATMENT....................................................... 49
STATUTORY PROVISIONS FOR DISSENTING SHAREHOLDERS........................... 49
ii
Page
----
RESTRICTIONS ON RESALES BY AFFILIATES..................................... 51
INTERESTS OF CERTAIN PERSONS IN THE MERGER................................ 51
General................................................................. 51
Employment Agreement of Michael D. Hodges............................... 51
Agreement with J. Thomas Whelchel....................................... 52
Sale of Promissory Note................................................. 52
Employee Benefits....................................................... 52
Shares Owned by Management and the Golden Isles Board................... 52
DESCRIPTION OF THE ABC STOCK.............................................. 53
General................................................................. 53
Common Stock............................................................ 53
Preferred Stock......................................................... 53
Limitation of Directors' Liability...................................... 53
Certain Antitakeover Provisions of ABC's Articles of Incorporation...... 54
Transfer Agent.......................................................... 54
SUPERVISION AND REGULATION................................................ 54
General................................................................. 54
Payment of Dividends.................................................... 56
Financial Relationship Between ABC and Golden Isles and their
Subsidiaries........................................................... 57
Capital Adequacy........................................................ 57
Prompt Corrective Action................................................ 58
Community Reinvestment Act.............................................. 59
Privacy................................................................. 59
Legislative and Regulatory Changes...................................... 59
Fiscal and Monetary Policy.............................................. 60
INFORMATION ABOUT ABC..................................................... 60
INFORMATION ABOUT GOLDEN ISLES............................................ 60
General................................................................. 60
The First Bank of Brunswick............................................. 61
Market Area and Competition............................................. 61
Deposits................................................................ 62
Loan Portfolio.......................................................... 62
Community Reinvestment Act.............................................. 63
Correspondent Banking................................................... 63
Facilities.............................................................. 63
Data Processing......................................................... 65
Employees............................................................... 65
Monetary Policies....................................................... 65
Legal Proceedings....................................................... 65
Golden Isles Security Ownership......................................... 66
GOLDEN ISLES' MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION... 68
Forward-Looking Statements.............................................. 68
General................................................................. 68
Results From Operations for Years Ended December 31, 2000 and 1999 ..... 68
Net Interest Income..................................................... 69
Allowance for Loan Losses............................................... 69
Noninterest Income...................................................... 70
Noninterest Expense..................................................... 70
Results of Operations for the Three Month Periods ended March 31, 2001
and 2000............................................................... 70
Liquidity and Capital Resources......................................... 71
SELECTED STATISTICAL INFORMATION OF GOLDEN ISLES.......................... 73
Average Balances and Net Income Analysis From Continuing Operations..... 73
iii
Page
----
Rate and Volume Analysis From Continuing Operations..................... 74
Asset/Liability Management.............................................. 74
GOLDEN ISLES' INVESTMENT PORTFOLIO........................................ 76
Types of Investments.................................................... 76
Maturities.............................................................. 76
GOLDEN ISLES' LOAN PORTFOLIO.............................................. 77
Types of Loans.......................................................... 77
Nonperforming Loans..................................................... 78
Commitments and Lines of Credit......................................... 78
SUMMARY OF GOLDEN ISLES' LOAN LOSS EXPERIENCE............................. 79
Allocation of the Allowance for Loan Losses............................. 79
GOLDEN ISLES' DEPOSITS.................................................... 80
GOLDEN ISLES' RETURN ON ASSETS AND STOCKHOLDERS' EQUITY................... 80
DIRECTORS OF GOLDEN ISLES................................................. 81
Board Committees........................................................ 81
Members of the Golden Isles' Board of Directors......................... 81
Director Compensation................................................... 82
GOLDEN ISLES' EXECUTIVE COMPENSATION...................................... 83
Golden Isles 401(K) Profit Sharing Plan................................. 84
Option Grants Table..................................................... 84
Option Exercise and Fiscal Year-End Option Value Table.................. 84
Restricted Stock and Stock Options Granted Under Plans.................. 85
Certain Transactions.................................................... 85
COMPARISON OF THE RIGHTS OF HOLDERS OF GOLDEN ISLES STOCK AND ABC STOCK... 85
Liquidity and Marketability............................................. 86
Reporting Requirements.................................................. 86
Preemptive, Voting and Liquidation Rights............................... 86
Mergers, Consolidations and Sales of Assets............................. 86
Dissenters' Rights...................................................... 86
Taxation................................................................ 87
Distributions........................................................... 87
Liability............................................................... 87
Assessments............................................................. 87
Fiduciary Duties........................................................ 88
Indemnification......................................................... 88
Management.............................................................. 88
Special Meetings........................................................ 88
Right to Compel Dissolution............................................. 89
Continuity of Existence................................................. 89
Certain Legal Rights.................................................... 89
Right to List of Holders and Inspection of Books and Records............ 89
LEGAL MATTERS............................................................. 90
EXPERTS................................................................... 90
SHAREHOLDER PROPOSALS AND OTHER MATTERS................................... 90
WHERE YOU CAN GET MORE INFORMATION........................................ 90
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 91
INDEX TO FINANCIAL STATEMENTS............................................. F-1
APPENDIX A: AGREEMENT AND PLAN OF MERGER.................................. A-1
APPENDIX B: GEORGIA DISSENTERS' RIGHTS STATUTES........................... B-1
APPENDIX C: OPINION OF THE CARSON MEDLIN COMPANY.......................... C-1
APPENDIX D: OPINION OF STERNE, AGEE & LEACH, INC. ........................ D-1
iv
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: Why are we proposing that Golden Isles be acquired by ABC?
A: We believe that the proposed acquisition of Golden Isles by ABC will
provide our shareholders with substantial benefits and will enable us to
better serve our customers. Our products and markets generally are
complementary. The combined company should be in a better position to take
advantage of opportunities within our market. To review the reasons for
the merger in more detail, see "Reasons for the Merger" at page 21.
Q: What do I need to do now?
A: Carefully read this document, then indicate on your proxy card how you
want to vote, and sign, date and return it as soon as possible. If you
sign and send in your proxy card and do not indicate how you want to vote,
your proxy will be voted in favor of the merger.
You may attend the special shareholders' meeting and vote your shares in
person rather than completing and returning your proxy card. If you do
complete and return your proxy card, you may revoke it at any time prior
to the vote at the shareholders' meeting by following the directions
described under "Golden Isles Special Shareholders' Meeting--Revocability
of Proxies" at page 19.
THE BOARD OF DIRECTORS OF GOLDEN ISLES HAS UNANIMOUSLY VOTED TO RECOMMEND
THAT YOU VOTE IN FAVOR OF THE MERGER PROPOSAL.
Q: My shares are held in my broker's name. How do I go about voting?
A: Copies of this proxy statement/prospectus have been sent to your broker,
who must forward one to you. The broker will request instructions from you
as to how you want your shares to be voted, and the broker will vote your
shares according to your instructions. Your broker cannot vote your shares
without your instructions.
Q: Please explain the exchange ratio in the transaction.
A: The aggregate merger price will be fixed at an amount somewhere between
$20.1 million and $25.2 million, depending upon the average closing price
per share of ABC's common stock for the 30 highest-volume trading days
during the 60 calendar-day period ending five calendar days prior to the
merger, and will be paid approximately 41% in cash and approximately 59%
in shares of ABC's common stock. If the average closing price of the ABC
common stock during this defined period is less than or equal to $12.00
per share, then each Golden Isles shareholder and each Golden Isles
optionholder (after giving effect to a hypothetical cashless exercise of
his or her options) will receive $4.08 in cash and approximately 0.4982 of
a share of ABC common stock for each share of Golden Isles common stock.
If the average price of the ABC stock during the applicable period is more
than $12.00 per share, then the number of shares of ABC common stock and
the amount of cash consideration to be paid in the merger will be
proportionally reduced such that the total cash consideration and the
total value of the ABC common stock paid for each share of Golden Isles
common stock will not be more than $10.06 in the aggregate. By way of
illustration only, if the average closing price per share of the ABC
common stock for the applicable period were $11.875, which was the closing
price of the ABC common stock on the date the merger agreement was
executed, the total merger price would be $24,898,646.50 (which price is
subject to reduction under certain circumstances as described under "Terms
of the Merger" at page 35), and each share of Golden Isles common stock
would be exchanged for $4.08 in cash and approximately 0.4982 of a share
of ABC common stock for each share of Golden Isles common stock (or an
aggregate per share merger consideration of $10.00). The actual merger
price may be higher or lower than the price shown in this example. Golden
Isles has the right to terminate the merger agreement in the event that
the average closing price of ABC's common stock during the applicable
period falls below $8.00 per share or rises above $14.00 per share.
1
We will not issue fractional shares. Golden Isles shareholders who would
otherwise be entitled to receive a fractional share of ABC common stock
instead will receive cash based on the average price of the ABC common
stock over the above-mentioned period immediately preceding the merger.
Q: Will ABC pay dividends to shareholders?
A: After the merger, ABC anticipates paying dividends at the current
quarterly rate of $0.12 per share. However, the directors of ABC will use
their discretion to decide whether to declare dividends and the amount of
any dividends.
Q: What are the tax consequences to Golden Isles shareholders?
A: Generally, the exchange of shares by Golden Isles shareholders for shares
of ABC common stock will be tax-free to Golden Isles' shareholders for
federal income tax purposes, except for taxes on cash received for
fractional shares. The cash received by Golden Isles' shareholders
generally will be taxable to the extent of any gain realized. Please see
"Certain Important Federal Income Tax Consequences of the Merger" at
page 47 for a description of certain federal income tax consequences of
the merger.
Q: What will happen if I don't send in my proxy card?
A: If you don't send in your proxy card, your shares will not be voted unless
you attend the special shareholders' meeting and vote in person. If a
significant number of shareholders do not return their proxy cards, there
may not be enough shares represented at the special shareholders' meeting
to approve the merger even if all those present are in favor of approval.
In that case, the merger could not take place at that time. The failure to
return your proxy card or vote in person at the special shareholders'
meeting will have the same effect as a vote against the merger.
Q: Should I send in my stock certificates now?
A: No. After the merger is completed, we will send all Golden Isles
shareholders written instructions for exchanging their share certificates.
Q: If I lost my Golden Isles stock certificate, can I still get my new stock?
A: Yes. However, you will have to provide a paid surety bond that will
protect ABC against a loss in the event someone finds or has your lost
certificate and is able to transfer it. To avoid having to pay for a
surety bond, you should do everything you can to find your Golden Isles
certificate before the time comes to send it in.
Q: When do you expect to complete the merger?
A: We are working toward completing the merger as quickly as possible. In
addition to Golden Isles shareholder approval, we must also obtain
regulatory approvals. We hope the merger will be completed immediately
following the special shareholders' meeting.
Q: Who should I call with questions about the merger?
A: You should call Cindi H. Lewis at ABC at (229) 890-1111 if you have any
questions.
2
A WARNING ABOUT FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this document, and in documents
that we incorporate by reference, that are subject to risks and uncertainties.
These forward-looking statements include the information concerning possible
or assumed future results of operations of ABC or Golden Isles or the combined
company. When we use words such as "believes," "expects," "estimates,"
"projects," "anticipates," "should" or similar expressions, we are making
forward-looking statements.
You should note that many factors, some of which are discussed elsewhere in
this document, could affect our future financial results and performance.
THESE FACTORS COULD CAUSE THOSE RESULTS TO DIFFER MATERIALLY FROM THOSE
EXPRESSED IN OUR FORWARD-LOOKING STATEMENTS CONTAINED OR INCORPORATED BY
REFERENCE IN THIS DOCUMENT. You should consider these important factors when
you vote on the merger agreement. These factors include the following:
. integrating the businesses and technologies of ABC and Golden Isles and
retaining key personnel may be more difficult than we expect;
. our revenues after the merger may be lower than we expect, and our
operating costs may be higher than we expect;
. expected cost savings from the merger may not be fully realized or may
not be realized when expected;
. we may lose business and customers after the merger;
. competition among depository and other financial institutions may
increase significantly;
. changes in the interest rate environment may reduce interest margins;
. increases in interest rates generally may reduce loan demand and the
values of our assets and assets securing loans;
. general economic conditions, either nationally or where the combined
company will be doing business, and conditions in securities markets,
may be less favorable than we anticipate;
. legislation and regulatory changes may adversely affect our business;
and
. technological changes may increase competitive pressures and increase
our costs.
3
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROXY
STATEMENT/PROSPECTUS. IT DOES NOT CONTAIN ALL THE INFORMATION THAT IS IMPORTANT
TO YOU. EACH ITEM IN THIS SUMMARY REFERS TO A PAGE WHERE THAT SUBJECT IS
DISCUSSED IN MORE DETAIL. TO UNDERSTAND THE MERGER FULLY, AND FOR A MORE
COMPLETE DESCRIPTION OF THE LEGAL TERMS OF THE MERGER, YOU SHOULD READ
CAREFULLY THIS ENTIRE PROXY STATEMENT/PROSPECTUS AND THE DOCUMENTS TO WHICH WE
HAVE REFERRED YOU. SEE "WHERE YOU CAN GET MORE INFORMATION" AT PAGE 90 AND
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" AT PAGE 91. IN ADDITION, THE
MERGER AGREEMENT IS ATTACHED AS APPENDIX A TO THIS PROXY STATEMENT/PROSPECTUS.
WE URGE YOU TO READ THE MERGER AGREEMENT IN ITS ENTIRETY; IT IS THE LEGAL
DOCUMENT THAT GOVERNS THE MERGER. UNLESS THE CONTEXT REQUIRES OTHERWISE, THE
TERMS "WE," "OUR," AND "US" REFER TO ABC AND GOLDEN ISLES TOGETHER.
Information about ABC (page 60) and Golden Isles (page 60)
ABC BANCORP, 24 2nd AVENUE, S.E., MOULTRIE, GEORGIA 31768, (229) 890-
1111. ABC is a Georgia bank holding company headquartered in Moultrie, Georgia.
It owns all of the outstanding capital stock of ten subsidiary banks: American
Banking Company, Heritage Community Bank, Bank of Thomas County, Citizens
Security Bank, Cairo Banking Company, Southland Bank, Central Bank and Trust
Company, First National Bank of South Georgia, Merchants & Farmers Bank and
Tri-County Bank. As of March 31, 2001 and December 31, 2000, ABC had total
consolidated assets of $828.6 million and $826.6 million, respectively.
American Banking Company conducts operations through four full service
branches in Colquitt County, Georgia. Heritage Community Bank conducts
operations through two full service branches in Brooks County, Georgia. Bank of
Thomas County conducts operations through one full service branch in Thomas
County, Georgia. Citizens Security Bank conducts operations through four full
service branches in Tift, Irwin and Coffee Counties, Georgia. Cairo Banking
Company conducts operations through three full service branches in Grady and
Thomas Counties, Georgia. Southland Bank conducts operations through seven full
service branches in Houston, Henry and Barbour Counties, Alabama. Central Bank
and Trust Company conducts operations through two full service branches in
Crisp County, Georgia. First National Bank of South Georgia conducts operations
through two full service branches in Dougherty and Lee Counties, Georgia.
Merchants & Farmers Bank conducts operations through two full service branches
in Seminole County, Georgia. Tri-County Bank conducts operations through one
full service branch in Gilchrist County, Florida. All ten banks engage in
commercial and retail banking. ABC, through its subsidiary banks, is engaged in
a full range of traditional banking, mortgage banking, investment and insurance
services to individual and corporate customers through its 30 locations.
GOLDEN ISLES FINANCIAL HOLDINGS, INC., 3811 FREDERICA ROAD, ST. SIMONS
ISLAND, GEORGIA 31522, (912) 634-1270. Golden Isles is a Georgia bank holding
company headquartered in St. Simons Island, Georgia. It owns all of the
outstanding capital stock of The First Bank of Brunswick. As of March 31, 2001
and December 31, 2000, Golden Isles had total assets of $151.3 million and
$146.6 million, respectively.
The First Bank of Brunswick conducts operations through four full service
banking locations in Glynn County, Georgia. Golden Isles, through it wholly-
owned bank subsidiary, is engaged in the business of providing a full range of
traditional and mortgage banking services to individual and corporate
customers.
The Merger (page 19)
The acquisition of Golden Isles by ABC is governed by a merger agreement. The
merger agreement provides that, if all of the conditions set forth in the
merger agreement are satisfied or waived, Golden Isles will
4
merge with and into ABC, ABC will be the surviving corporation after the merger
and The First Bank of Brunswick will be a wholly-owned subsidiary of ABC.
When the merger is complete, all of the issued and outstanding shares of the
Golden Isles common stock and all outstanding options to purchase shares of
Golden Isles common stock will be converted into the right to receive an
aggregate merger consideration of between $20.1 million and $25.2 million,
depending upon the average closing price per share of the ABC common stock
during the 30 highest-volume trading days during the 60 calendar-day period
ending five calendar days prior to the closing date of the merger, payable in
cash and whole shares of ABC common stock. If this average closing price per
share is less than or equal to $12.00, then each Golden Isles shareholder and
optionholder (after giving effect to a hypothetical cashless exercise of his or
her options) will receive $4.08 in cash and approximately 0.4982 of a share of
ABC common stock for each share of Golden Isles common stock. If this average
closing price per share exceeds $12.00, then the total cash consideration and
the total value of the ABC common stock to be paid in the merger will be
proportionately reduced such that the total cash consideration per share and
the total value of the ABC common stock per share paid in exchange for each
share of Golden Isles common stock will not be more than $10.06 in the
aggregate.
All of Golden Isles' outstanding stock options will be converted at the
effective time of the merger into the right to receive a portion of the
aggregate merger consideration equal to the pro-rata portion of such merger
consideration that each option holder would have received had such holder
converted all of his or her outstanding options into shares of Golden Isles
common stock on a cashless basis and then participated in the merger with the
other Golden Isles shareholders.
Cash payments will be made instead of issuing fractional shares. For example,
if you would be entitled to receive less than one full share of ABC common
stock as a result of the merger, you will receive instead cash equal to that
fractional share interest multiplied by the average price referred to above at
the time of the merger.
Following the merger, Golden Isles' existing shareholders will own
approximately 12% of the total outstanding shares of ABC common stock.
We encourage you to read the merger agreement, which is attached as APPENDIX
A to this proxy statement/prospectus, in its entirety.
Reasons for the Merger (page 21)
We believe that by becoming part of a larger organization with greater
resources, we will be able to serve our customers and communities better and
provide more competitive services. The merger provides ABC with a natural
extension of its central and south Georgia community bank franchise into the
Glynn County, Georgia market area.
Golden Isles Special Shareholders' Meeting (page 17)
Golden Isles will hold its special shareholders' meeting on July 23, 2001 at
11:00 a.m. local time, at the Comfort Inn, 5308 New Jesup Highway, Brunswick,
Georgia 31523. At the special shareholders' meeting, the Golden Isles
shareholders will be entitled to vote on the merger.
Golden Isles Record Date and Voting (page 18)
If you owned shares of Golden Isles common stock at the close of business on
June 18, 2001, the record date, you are entitled to vote on the merger
agreement and any other matters considered at the special shareholders'
meeting. On the record date, there were 2,456,300 shares of Golden Isles common
stock outstanding. You will have one vote at the special shareholders' meeting
for each share of Golden Isles common stock you owned on the record date. The
affirmative vote of shareholders owning at least a majority of the
5
outstanding Golden Isles common stock is required to approve the merger
agreement. As of the close of business on the record date for the special
shareholders' meeting, directors and executive officers of Golden Isles and
their respective affiliates may be deemed to be the beneficial owners of shares
of Golden Isles common stock representing approximately 28% of the outstanding
voting power of Golden Isles. Each of the directors and executive officers of
Golden Isles has indicated that such person intends to vote or direct the vote
of all the shares of Golden Isles common stock over which such person has
voting control in favor of the merger proposal. In addition, concurrently with
the execution of the merger agreement, Golden Isles directors (who beneficially
own approximately 28% of the outstanding shares of Golden Isles common stock)
entered into an Irrevocable Proxy Agreement pursuant to which the Golden Isles
directors granted to ABC the right to vote all voting securities of Golden
Isles held by the Golden Isles directors in favor of the merger proposal.
Golden Isles' Board Unanimously Recommends Shareholder Approval (page 23)
The Golden Isles board of directors believes that the merger is in the best
interest of Golden Isles and its shareholders and unanimously recommends that
you vote "FOR" the proposal to approve the merger agreement.
ABC's Dividend Policy Following the Merger (page 12)
ABC currently pays quarterly dividends of $0.12 per share of common stock.
Depending upon the final exchange ratio in the merger, this could be equivalent
to a quarterly dividend of $0.06 per share, or an annual dividend of $0.24 per
share, on the Golden Isles common stock. Golden Isles currently pays an annual
dividend, which was $.08 per share on the Golden Isles common stock in 2001.
ABC expects that it will continue to pay the per share amount in quarterly
dividends that it is currently paying, but it may change that policy based on
business conditions, its financial condition or other factors.
Interests of Golden Isles' Management and Board of Directors in the Merger
(page 51)
When considering the recommendation of the Golden Isles board of directors,
you should be aware that certain directors and officers have interests in the
merger that may differ from the interests of other shareholders.
Upon consummation of the merger, ABC will enter into an employment agreement
with Michael D. Hodges. Also upon consummation of the merger, J. Thomas
Whelchel will be paid a one-time fee of $13,611 for his services to Golden
Isles in connection with the merger. The Golden Isles board was aware of these
and other interests and considered them before adopting the merger agreement.
Comparative Rights of Shareholders (page 85)
Both ABC and Golden Isles are incorporated under the laws of the State of
Georgia and are subject to the Georgia Business Corporation Code and the
Georgia Financial Institutions Code. Upon consummation of the merger, the
shareholders of Golden Isles will become shareholders of ABC, and the Articles
of Incorporation and Bylaws of ABC will govern their rights. ABC's Articles of
Incorporation and Bylaws differ somewhat from the Articles of Incorporation and
Bylaws of Golden Isles.
Certain Federal Income Tax Considerations (page 47)
Golden Isles' shareholders will not recognize gain or loss for federal income
tax purposes on the receipt of shares of ABC common stock that they receive in
the merger in exchange for shares of Golden Isles common stock surrendered.
Golden Isles' shareholders will, however, recognize any gain realized for
federal income tax purposes on the receipt of cash in exchange for shares of
Golden Isles common stock surrendered and in lieu of any fractional shares.
ABC's attorneys will issue a legal opinion to this effect. In addition, Golden
Isles' shareholders who properly exercise their right to dissent from the
merger will generally be taxed on the cash that they receive in excess of the
adjusted basis in their Golden Isles common stock. Tax matters are complicated,
and the tax consequences of the merger may vary among shareholders. We urge you
to contact your own tax advisor to fully understand how the merger will affect
you.
6
Accounting Treatment (page 49)
We expect to account for the merger as a "purchase" transaction under
generally accepted accounting principles.
Fairness Opinion of Golden Isles' Financial Advisor (page 23)
The Carson Medlin Company has given an opinion to Golden Isles' board of
directors that, as of the date of the merger agreement, the consideration to be
received in the merger was fair, from a financial point of view, to Golden
Isles' shareholders. This opinion is attached as APPENDIX C to this proxy
statement/prospectus. Golden Isles shareholders should read this opinion
completely to understand the assumptions made, matters considered and
limitations of the review undertaken by The Carson Medlin Company.
Fairness Opinion of ABC's Financial Advisor (page 29)
Sterne, Agee & Leach, Inc. has given an opinion to ABC's board of directors
that, as of the date of the merger agreement, the consideration to be paid in
the merger to the Golden Isles shareholders was fair, from a financial point of
view, to ABC's shareholders. This opinion is attached as APPENDIX D to this
proxy statement/prospectus.
Conditions to the Merger (page 37)
We will complete the merger only if several conditions are satisfied,
including the following:
. at least a majority of Golden Isles' outstanding shares are voted in
favor of the merger agreement and no more than 5% of Golden Isles'
outstanding shares exercise dissenters' rights under Article 13 of the
Georgia Business Corporation Code;
. the representations and warranties made by ABC and Golden Isles in the
merger agreement are materially true and correct as of the effective
date of the merger;
. we receive all necessary regulatory approvals and any waiting periods
required by law have passed; and
. ABC's counsel delivers an opinion that Golden Isles' shareholders will
not recognize gain or loss for federal income tax purposes on the
receipt of shares of ABC common stock that they receive in the merger.
Termination of the Merger Agreement (page 38)
Notwithstanding the approval of the merger agreement by Golden Isles'
shareholders at the special shareholders' meeting, our boards of directors can
jointly agree to terminate the merger agreement at any time. In addition,
either company can terminate the merger agreement if:
. we do not complete the merger by September 1, 2001;
. the other party materially breaches its representations, warranties or
covenants it made or obligations it has under the merger agreement and
fails to cure the breach;
. the conditions to completing the merger are not satisfied; or
. any applicable regulatory agency denies approval of the merger.
New ABC Shares to be Listed on NASDAQ (page 38)
The shares of ABC common stock to be issued in the merger will be listed on
The Nasdaq National Market.
7
Regulatory Approvals (page 38)
We cannot complete the merger unless it is approved by the Board of Governors
of the Federal Reserve System and the Georgia Department of Banking and
Finance. ABC has filed applications with the Federal Reserve and the Georgia
Department of Banking for approval of the merger. We cannot be certain when or
if we will obtain the regulatory approvals. However, we do not know of any
reason why we should not obtain them in a timely manner.
Golden Isles Share Ownership (page 66)
As of the close of business on the record date for the special shareholders'
meeting, directors and executive officers of Golden Isles and their respective
affiliates may be deemed to be the beneficial owners of shares of Golden Isles
common stock representing approximately 28% of the outstanding voting power of
Golden Isles. Each of the directors and executive officers of Golden Isles has
indicated that such person intends to vote or direct the vote of all the shares
of Golden Isles common stock over which such person has voting control in favor
of the merger proposal. In addition, concurrently with the execution of the
merger agreement, Golden Isles directors (who together beneficially own
approximately 28% of the outstanding shares of Golden Isles common stock)
entered into an Irrevocable Proxy Agreement pursuant to which the Golden Isles
directors granted to ABC the right to vote all voting securities of Golden
Isles held by the Golden Isles directors in favor of the merger proposal.
Dissenting Shareholders' Rights (page 49)
Golden Isles shareholders may dissent from the merger and, upon following the
requirements of Georgia law, receive cash in the amount of the fair value of
their Golden Isles shares instead of the cash and shares of ABC stock offered
pursuant to the merger agreement.
Any Golden Isles shareholder who wishes to exercise dissenters' rights:
. must file a written notice of intent to dissent prior to the vote;
. must not vote in favor of the merger agreement; and
. must strictly comply with the procedural requirements of Georgia law.
A copy of the dissenters' rights statutes is attached as APPENDIX B to this
proxy statement/prospectus. We encourage you to read the statutes carefully and
to consult with legal counsel if you desire to exercise your dissenters'
rights.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
We are providing the following information to help you analyze the financial
aspects of the merger. We derived this information from audited consolidated
financial statements for 1996 through 2000 and unaudited financial data for the
three months ended March 31, 2000 and 2001. The information has been adjusted
to reflect all stock splits and stock dividends declared through the date of
this proxy statement/prospectus. This information is only a summary, and you
should read it in conjunction with the historical financial statements and
related notes included in this document for Golden Isles and in ABC's
historical financial statements and quarterly reports which are incorporated by
reference into this document and which are on file with the SEC. See "Where You
Can Get More Information" at page 90 and "Golden Isles Financial Holdings, Inc.
Financial Statements" at page F-2.
8
ABC BANCORP AND SUBSIDIARIES
Three Months
Ended March 31, Year Ended December 31,
------------------ ------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
-------- -------- -------- -------- -------- -------- --------
(Dollars in Thousands, except per share data)
Selected Balance Sheet
Data:
Total assets........... $828,570 $772,153 $826,197 $789,460 $724,946 $691,886 $673,162
Total loans............ 606,286 553,235 587,381 530,225 477,194 490,244 452,844
Total deposits......... 688,482 652,878 679,885 640,658 633,325 600,711 577,905
Investment securities.. 149,824 148,790 162,105 143,538 154,546 123,219 135,266
Shareholders' equity... 83,474 75,515 80,656 76,016 71,834 68,153 62,970
Selected Income
Statement Data:
Interest income........ $ 17,796 $ 16,163 $ 68,976 $ 59,781 $ 59,894 $ 58,649 $ 50,586
Interest expense....... 8,245 6,575 30,805 24,400 26,444 25,950 22,324
-------- -------- -------- -------- -------- -------- --------
Net interest
income............. 9,551 9,588 38,171 35,381 33,450 32,699 28,262
Provision for loan
losses................ 493 378 1,712 2,154 5,505 2,731 1,919
Other income........... 2,175 2,016 8,215 7,962 9,699 7,736 6,532
Other expenses......... 7,844 7,684 30,233 27,942 27,996 27,139 22,878
-------- -------- -------- -------- -------- -------- --------
Income before tax...... 3,389 3,542 14,441 13,247 9,648 10,565 9,997
Income tax expense..... 1,091 1,137 4,343 4,291 2,735 3,119 2,839
-------- -------- -------- -------- -------- -------- --------
Net income.......... $ 2,298 $ 2,405 $ 10,098 $ 8,956 $ 6,913 $ 7,446 $ 7,158
======== ======== ======== ======== ======== ======== ========
Per Share Data:
Net income--basic...... $ 0.27 $ 0.28 $ 1.19 $ 1.03 $ 0.79 $ 0.86 $ 0.85
Net income--diluted.... 0.27 0.28 1.19 1.03 0.79 0.85 0.84
Book value............. 9.93 8.80 9.66 8.71 8.29 7.83 7.24
Tangible book value.... 9.14 7.93 8.84 7.84 7.32 6.76 6.41
Dividends.............. 0.12 0.10 0.46 0.35 0.33 0.32 0.27
Profitability Ratios:
Net income to average
total assets.......... 1.11% 1.26% 1.27% 1.23% 0.99% 1.10% 1.21%
Net income to average
shareholders' equity.. 11.18% 12.76% 13.19% 11.93% 10.07% 11.35% 12.19%
Net interest margin.... 4.99% 5.44% 5.14% 5.28% 5.25% 5.36% 5.24%
Efficiency ratio....... 66.89% 66.22% 65.18% 64.47% 64.88% 67.12% 65.75%
Loan Quality Ratios:
Net charge-offs to
total loans........... 0.01% 0.01% 0.30% 0.46% 0.62% 0.48% 0.39%
Reserve for loan losses
to total loans and
OREO.................. 1.69% 1.84% 1.67% 1.86% 2.13% 1.55% 1.60%
Nonperforming assets to
total loans and OREO.. 1.09% 1.11% 0.95% 1.15% 1.99% 2.41% 1.39%
Reserve for loan losses
to nonperforming
loans................. 183.52% 179.98% 202.18% 178.26% 116.25% 75.86% 135.34%
Reserve for loan losses
to total nonperforming
assets................ 156.02% 165.95% 175.38% 162.59% 107.25% 64.38% 115.59%
Liquidity Ratios:
Loans to total
deposits.............. 88.06% 84.74% 86.39% 82.76% 75.35% 81.61% 78.36%
Loans to average
earning assets........ 79.21% 78.43% 79.05% 79.17% 74.85% 80.43% 84.04%
Noninterest-bearing
deposits to total
deposits.............. 12.66% 13.85% 13.96% 16.12% 15.78% 15.00% 15.06%
Capital Adequacy Ratios:
Common shareholders'
equity to total
assets................ 10.07% 9.78% 9.76% 9.63% 9.91% 9.85% 9.35%
Avg. total
shareholders' equity
to total assets....... 9.97% 9.87% 9.59% 10.29% 9.81% 9.70% 9.95%
Dividend payout ratio.. 44.44% 35.71% 38.66% 33.98% 41.77% 37.21% 31.76%
9
GOLDEN ISLES FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Three Months
Ended March 31, Year Ended December 31,
------------------ ------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
-------- -------- -------- -------- -------- -------- --------
(Dollars in Thousands, except per share data)
Selected Balance Sheet
Data:
Total assets........... $151,267 $134,738 $146,617 $132,397 $122,233 $115,533 $112,648
Total loans............ 115,995 103,294 113,403 98,246 90,774 89,252 84,293
Total deposits......... 125,029 112,925 120,815 112,743 101,272 90,791 82,808
Investment securities.. 20,444 20,067 18,931 19,245 23,043 16,788 10,079
Shareholders' equity... 14,282 13,453 14,002 13,215 13,463 10,750 9,749
Selected Income
Statement Data:
Interest income........ $ 3,073 $ 2,781 $ 12,085 $ 10,239 $ 10,070 $ 10,949 $ 9,267
Interest expense....... 1,749 1,452 6,594 5,331 5,326 5,337 4,440
-------- -------- -------- -------- -------- -------- --------
Net interest
income............. 1,324 1,329 5,491 4,908 4,744 5,612 4,827
Provision for loan
losses................ 75 75 335 1,470 886 540 975
Other income........... 237 191 856 698 776 1,281 1,738
Other expenses......... 1,190 977 4,419 3,705 3,326 5,278 7,237
-------- -------- -------- -------- -------- -------- --------
Income from continuing
operations before
tax................... 296 468 1,593 431 1,308 1,075 (1,647)
Income tax expense..... 101 159 511 156 452 87 (438)
-------- -------- -------- -------- -------- -------- --------
Income (loss) from
continuing
operations............ $ 195 $ 309 $ 1,082 $ 275 $ 856 $ 988 $ (1,209)
Loss from operations
net of income tax
benefit.............. -- -- -- -- (128) -- --
Gain from disposal of
business segment..... -- -- -- -- 357 -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)... $ 195 $ 309 $ 1,082 $ 275 $ 1,085 $ 988 $ (1,209)
======== ======== ======== ======== ======== ======== ========
Per Share Data:
Basic earnings (loss):
Income (loss) from
continuing operations
before tax........... $ 0.08 $ 0.12 $ 0.44 $ 0.11 $ 0.35 $ 0.43 $ (0.52)
Net income (loss)--
basic................ 0.08 0.12 0.44 0.11 0.45 0.43 (0.52)
Diluted earnings
(loss):
Income (loss) from
continuing
operations........... 0.08 0.12 0.44 0.11 0.35 0.42 (0.51)
Net income (loss)--
diluted.............. 0.08 0.12 0.44 0.11 0.44 0.42 (0.51)
Book value............. 5.87 5.38 5.75 5.27 5.44 4.65 4.16
Tangible book value.... 5.87 5.38 5.75 5.27 5.44 4.65 4.16
Dividends.............. 0.00 0.00 0.08 0.08 0.00 0.00 0.00
Profitability Ratios:
Net income to average
total assets.......... 0.53% 0.94 % 0.77% 0.22% 0.93% 0.89% (1.19)%
Net income to average
shareholders' equity.. 5.51% 9.28 % 8.03% 2.05% 8.76% 9.64% (11.48)%
Net interest margin.... 3.79% 4.26 % 4.09% 4.11% 4.32% 5.44% 5.52 %
Efficiency ratio....... 76.23% 64.28 % 69.62% 66.09% 60.25% 76.57% 110.24 %
Loan Quality Ratios:
Net charge-offs to
total loans........... 0.05% (0.03)% 0.61% 0.75% 0.29% 0.53% 0.84 %
Reserve for loan losses
to total loans and
OREO.................. 1.89% 2.55 % 1.93% 2.58% 2.01% 1.69% 1.71 %
Nonperforming assets to
total loans and OREO.. 3.17% 2.60 % 3.56% 3.24% 1.56% 1.84% 1.23 %
Reserve for loan losses
to nonperforming
loans................. 82.79% 157.17 % 70.70% 116.27% 130.73% 95.04% 141.67 %
Reserve for loan losses
to total nonperforming
assets................ 59.71% 98.23 % 54.11% 79.47% 129.16% 91.92% 139.34 %
Liquidity Ratios:
Loans to total
deposits.............. 92.77% 91.47 % 93.87% 87.14% 89.63% 98.30% 101.79 %
Loans to average
earning assets........ 83.03% 82.77 % 84.44% 82.22% 82.59% 86.48% 96.33 %
Noninterest-bearing
deposits to total
deposits.............. 9.51% 10.16 % 10.56% 9.15% 9.62% 7.99% 8.64 %
Capital Adequacy Ratios:
Common shareholders'
equity to total
assets................ 9.44% 9.98 % 9.55% 9.98% 11.01% 9.30% 8.65 %
Avg. total
shareholders' equity
to Avg. total assets.. 9.55% 10.13 % 9.56% 10.69% 10.57% 9.22% 10.32 %
Dividend payout ratio.. 0.00% 0.00 % 18.18% 72.73% 0.00% 0.00% 0.00 %
10
COMPARATIVE PER SHARE DATA
The table below presents the high and low sales prices per share of ABC
common stock on The Nasdaq National Market and Golden Isles common stock on The
Nasdaq Small Cap Market on February 20, 2001, the last full trading day
immediately preceding the public announcement of the proposed merger, and on
June 18, 2001 or ABC and June 12, 2001 for Golden Isles, the most recent
practicable date before this proxy statement/prospectus was printed and mailed,
as well as the "equivalent stock price" of shares of Golden Isles common stock
on those dates. The "equivalent stock price" of shares of Golden Isles common
stock represents the per share sales price for ABC's common stock on The Nasdaq
National Market at the specified date, multiplied by 0.4982, plus $4.08, which
is the number of shares of ABC common stock and cash that a Golden Isles
shareholder would receive for each share of Golden Isles common stock, assuming
that the average closing price per share of the ABC common stock during the 30
highest-volume trading days during the 60 calendar-day period ending five
calendar days prior to the closing date of the merger is less than or equal to
$12.00. If this average closing price per share exceeds $12.00, then the total
cash consideration and the total value of the ABC common stock to be paid in
the merger will be proportionately reduced such that the total cash
consideration per share and the total value of the ABC common stock per share
paid in exchange for each share of Golden Isles common stock will not be more
than $10.06 in the aggregate. Keep in mind that because of market price
fluctuations the "equivalent stock price" may be higher than or lower than the
value of the ABC common stock and cash in lieu of fractional shares that a
Golden Isles shareholder will receive for each share of Golden Isles common
stock in connection with the merger. Shareholders should obtain current market
quotations for shares of ABC common stock and Golden Isles common stock before
making any decision with respect to the merger.
ABC Golden Isles
Common Stock Common Stock Golden Isles Equivalent
(price per (price per Stock Price
share) share) (price per share)
---------------- ------------- ------------------------
High Low High Low High Low
------- -------- ------- ----- ------------ -----------
February 20, 2001....... $11.875 $11.1875 $8.1875 $7.50 $ 10.00 $ 9.65
June 18, 2001 for
ABC/June 12, 2001 for
Golden Isles........... $ 11.50 $ 11.35 $ 9.25 $9.00 $ 9.81 $ 9.73
Following consummation of the merger, shares of Golden Isles common stock
will cease to be traded on The Nasdaq Small Cap Market. An application has been
filed with Nasdaq to include the additional shares of ABC common stock to be
issued in the merger on The Nasdaq National Market.
COMPARISON OF CERTAIN UNAUDITED PER SHARE DATA
The following tables present unaudited selected historical, pro forma
combined and equivalent Golden Isles per share data for ABC on a pro forma
basis, as if the merger transaction between ABC's wholly-owned subsidiary, Tri-
County Merger Sub, Inc., and Tri-County Bank had been consummated on the dates
indicated. The information is based on the historical financial statements of
ABC, Tri-County and Golden Isles. The pro forma data does not purport to be
indicative of the results of operations or the actual results that would have
occurred had the ABC mergers been consummated at the beginning of the periods
presented. The pro forma data gives effect to the ABC mergers based on numerous
assumptions and estimates. If the Golden Isles merger is consummated as
anticipated, it will be accounted for as a purchase. The information presented
below should be read in conjunction with, and is qualified in its entirety by,
the separate consolidated financial statements, including applicable notes, of
ABC and Golden Isles, and the Unaudited Pro Forma Condensed Consolidated
Financial Data, and notes thereto, appearing elsewhere herein.
As of and for the Year Ended December 31, 2000
-------------------------------------------------------------
ABC/Tri-County Pro Forma Equivalent
Pro Forma(3) Golden Isles Combined(1) Golden Isles Share(2)
-------------- ------------ ----------- ---------------------
Net income per common
share.................. $1.18 $0.44 $1.03 $0.91
Dividends per common
share.................. 0.44 0.08 0.41 0.36
Book value per common
share.................. 9.74 5.75 9.96 8.75
11
As of and for the Three Months Ended March 31, 2001
-------------------------------------------------------------
ABC/Tri-County Pro Forma Equivalent
Pro Forma(3) Golden Isles Combined(1) Golden Isles Share(2)
-------------- ------------ ----------- ---------------------
Net income per common
share.................. $0.27 $0.08 $ 0.22 $0.19
Dividends per common
share.................. 0.12 0.00 0.10 0.09
Book value per common
share.................. 9.93 5.87 10.17 8.94
- --------
(1) See unaudited Pro Forma Condensed Consolidated Financial Data included
elsewhere in this proxy statement/prospectus.
(2) The equivalent share information for Golden Isles in the above table is
computed assuming an exchange ratio of 1,241,204 shares of ABC common stock
(with an assumed market value of $11.50) per share) and cash for all of the
shares of Golden Isles common stock determined in the following manner:
(a) approximately 42% of the shares of Golden Isles common stock (including
shares with respect to which dissenters' rights have been perfected) will
be converted into cash; and (b) approximately 58% of the shares of Golden
Isles common stock will be converted into shares of ABC common stock, plus
cash in lieu of any fractional shares.
(3) Represents ABC on a pro forma basis to give effect to the Tri-County merger
as if it had been consummated as of January 1, 2000 and assumes that ABC
issued an aggregate of 347,405 shares of ABC common stock for 55% of Tri-
County shares and cash for 45% of Tri-County shares in connection
therewith.
COMPARATIVE STOCK PRICES AND DIVIDENDS
ABC Stock Information
As of December 31, 2000, there were approximately 1,530 holders of record of
ABC common stock. The following table sets forth the quarterly range of high
and low closing sale prices per share of the ABC common stock from January 1,
1999 through June 18, 2001, as reported on The Nasdaq National Market, together
with the amount of cash dividends per share declared by ABC during each such
quarter. For a discussion of ABC's policies concerning the declaration of
dividends and regulatory restrictions on such declaration, see "Description of
the ABC Stock--Common Stock" at page 53. The per share information presented
below and elsewhere in this proxy statement/prospectus has been adjusted to
reflect all stock splits and stock dividends of ABC.
Prices of
Common Stock
--------------- Cash
2001 High Low Dividends
- ---- ------- ------- ---------
Second Quarter (through June 18, 2001)................ $ 12.62 $ 11.00 $ .12
First Quarter......................................... $ 12.00 $ 9.125 $ .12
2000
- ----
First Quarter......................................... $11.125 $ 9.625 $ .10
Second Quarter........................................ 11.00 9.50 .12
Third Quarter......................................... 10.75 8.50 .12
Fourth Quarter........................................ 10.50 8.00 .12
1999
- ----
First Quarter......................................... $10.828 $ 9.797 $.083
Second Quarter........................................ 12.50 10.109 .083
Third Quarter......................................... 11.766 10.672 .083
Fourth Quarter........................................ 12.125 10.25 .10
After the merger, ABC intends to pay dividends at its current rate of $0.12
per share per quarter. However, the payment of any future dividends will be
subject to ABC's earnings, capital adequacy, liquidity and other factors that
the ABC board of directors deems appropriate.
12
On June 18, 2001, the last day on which ABC common stock was traded prior to
the mailing of this proxy statement/prospectus, the last reported sales price
of ABC common stock as reported on The Nasdaq National Market was $11.45 per
share. On February 20, 2001, the date immediately prior to the public
announcement of the merger with Golden Isles, the last reported sales price of
ABC common stock as reported on The Nasdaq National Market was also $11.875 per
share.
Because the amount of merger consideration payable to the Golden Isles
shareholders in the merger is subject to adjustment based on an average of the
closing price per share of the ABC common stock over a defined period
immediately preceding the merger, and because the closing price of the ABC
common stock is subject to fluctuation, the market value of the shares of ABC
common stock that you may receive in the merger may increase or decrease prior
to or following the merger. You are urged to obtain current market quotations
for ABC common stock.
Golden Isles Stock Information
As of December 31, 2000, there were approximately 730 holders of record of
Golden Isles common stock. The following table sets forth the quarterly range
of high and low closing sale prices per share of the Golden Isles common stock
from January 1, 1999 through June 12, 2001, the date of the last reported sale
of Golden Isles common stock before the mailing of this proxy
statement/prospectus, as reported on The Nasdaq Small Cap Market, together with
the amount of cash dividends per share declared by Golden Isles during each
such quarter. The per share information presented below and elsewhere in this
proxy statement/prospectus has been adjusted to reflect all stock splits and
stock dividends of Golden Isles.
Prices of Common Stock
---------------------- Cash
2001 High Low Dividends
- ---- ----------- ---------- ---------
Second Quarter (through June 12, 2001)........ $ 9.25 $ 7.875 $.08
First Quarter................................. $ 9.25 $ 6.125 $ --
2000
- ----
First Quarter................................. $ 6.875 $ 6.00 $ --
Second Quarter................................ 8.00 6.0312 .08
Third Quarter................................. 7.125 6.00 --
Fourth Quarter................................ 7.00 5.50 --
1999
- ----
First Quarter................................. $ 10.1875 $ 9.0625 $ --
Second Quarter................................ 9.5625 8.75 .08
Third Quarter................................. 9.25 8.375 --
Fourth Quarter................................ 8.4375 6.50 --
On June 12, 2001, the last day on which Golden Isles common stock was traded
prior to the mailing of this proxy statement/prospectus, the last reported
sales price of Golden Isles common stock as reported on The Nasdaq Small Cap
Market was $9.25 per share. On February 20, 2001, the date immediately prior to
the public announcement of the merger with ABC, the last reported sales price
of Golden Isles common stock as reported on The Nasdaq Small Cap Market was
$7.50 per share.
13
RISK FACTORS
In addition to the other information contained or incorporated by reference
in this Proxy Statement/ Prospectus, we urge you to consider the following
factors before deciding how to vote at the Golden Isles special shareholders'
meeting.
ABC's operating costs after the merger and other recent acquisitions may be
greater than expected, and ABC's costs savings from the merger and other
recent acquisitions may be less than expected and may not be achieved as soon
as expected.
ABC's rapid growth over the last several years resulting from acquisitions
it has made--as well as the possibility of future growth from acquisitions--
produces risks of unknown liabilities that may cause costs after the merger
and other past and potential future acquisitions to be higher than expected.
Expectations concerning future earnings depend in part on ABC being able to
combine the operations of acquired institutions with ABC's own operations
promptly and efficiently and also on ABC being correct in its assumptions
about the financial impact of its acquisitions. ABC expects that it can
achieve cost savings as a result of its acquisition of Golden Isles and its
other recently completed acquisitions. There is a risk that the anticipated
savings may not be realized or that they may be less than ABC expects.
ABC may be unable to successfully integrate Golden Isles and other acquired
businesses or may have more trouble integrating acquired businesses than
expected
There is a risk that ABC will be unable to maintain an acquired
institution's--including Golden Isles'--key customers and personnel and that
the conversion of its systems and procedures to ABC's systems and procedures
may not be possible or completed on schedule or may be more difficult and
costly than expected, which could cause the acquired operations to perform
below expectations. Maintaining an acquired institution's key customers and
personnel and converting its systems and procedures to ABC's systems and
procedures are important parts of ABC's acquisition program. Prior to
acquiring an institution, ABC frequently estimates that it will be able to
maintain most of the institution's key customers and personnel and convert its
systems and procedures. There is a risk that integrating Golden Isles and
other acquired businesses may take more resources than ABC expects.
Changes in ABC's allowance for loan losses could affect ABC's profitability
In originating loans, there is a substantial likelihood that credit losses
will be experienced. The risk of loss varies with, among other things, general
economic conditions, the type of loan being made, the creditworthiness of the
borrower over the term of the loan and, in the case of a collateralized loan,
the quality of the collateral for the loan. ABC's management maintains an
allowance for loan losses based on, among other things, historical experience,
an evaluation of economic conditions and regular reviews of delinquencies and
loan portfolio quality. Based upon these factors, management makes various
assumptions and judgments about the ultimate chance of collection of ABC's
loan portfolio and provides an allowance for potential loan losses based upon
a percentage of the outstanding balances and for specific loans when their
ultimate chance of being collected is considered questionable. Because certain
lending activities involve greater risks, the percentage applied to specific
loan types may vary. Historically, agricultural-related loans have been more
risky than real estate mortgage loans. In recent years, the banking industry
has experienced significant credit losses with respect to agricultural-related
loans. As of March 31, 2001 and December 31, 2000, ABC had approximately $95.0
million and $92.0 million, respectively, in agricultural-related loans, of
which $35.9 million and $34.8 million, respectively, were either loans to
finance crop production expenses or to finance the purchase of farm-related
equipment, and $59.1 million and $57.2 million, respectively, were loans
secured by mortgages on farmland. In addition, ABC's management believes that,
due to the predominance of the agricultural industry in its market area, a
significant portion of its commercial and industrial loans should be
considered to be agricultural-related.
As of March 31, 2001, and December 31, 2000, ABC's allowance for loan losses
was approximately $10.3 million and $9.8 million, respectively, which
represented 1.70% and 1.67%, respectively, of the total amount of loans. As of
March 31, 2001, non-performing loans were approximately $5.6 million and non-
performing assets were approximately $6.6 million. As of December 31, 2000,
non-performing loans were
14
approximately $4.9 million and total non-performing assets were approximately
$5.6 million. The allowance for loan losses provides coverage of 184% of total
non-performing loans and 156% of total non-performing assets at March 31, 2001
and 200% of total non-performing loans and 175% of total non-performing assets
at December 31, 2000. ABC actively manages its non-performing loans in an
effort to minimize credit losses and monitors its asset quality to maintain an
adequate loan loss allowance. Although management believes that its allowance
for loan losses is adequate, there can be no assurance that the allowance will
prove sufficient to cover future loan losses. Further, although management
uses the best information available to make determinations with respect to the
allowance for loan losses, future adjustments may be necessary if economic
conditions differ substantially from the assumptions used or adverse
developments arise with respect to ABC's non-performing or performing loans.
Material additions to ABC's allowance for loan losses would result in a
decrease in ABC's net income and, possibly, its capital and could result in
its inability to pay dividends, among other adverse consequences.
The trading volume in ABC Stock has been low
The trading volume in ABC stock on The Nasdaq National Market has been
relatively low when compared with larger companies listed on The Nasdaq
National Market or other stock exchanges. We cannot say with any certainty
that a more active and liquid trading market for ABC stock will develop.
Because of this, it may be more difficult for you to sell a substantial number
of shares for the same price at which you could sell a smaller number of
shares.
Changes in interest rates could have an adverse effect on ABC's income
The combined company's profitability depends to a large extent upon its net
interest income. Net interest income is the difference between interest income
on interest-earning assets, such as loans and investments, and interest
expense on interest-bearing liabilities, such as deposits and borrowings. Our
net interest income will be adversely affected if market interest rates change
such that the interest the combined company has to pay on deposits and
borrowings increases faster than the interest we earn on loans and
investments. See "Supervision and Regulation--Fiscal and Monetary Policy" at
page 60.
Competition in the banking industry is intense
Competition in the banking and financial services industry is intense. In
their primary market areas, ABC's subsidiary banks compete with other
commercial banks, savings and loan associations, credit unions, finance
companies, mutual funds, insurance companies and brokerage and investment
banking firms operating locally and elsewhere. Many of these competitors have
substantially greater resources and lending limits than ABC's subsidiary banks
and may offer certain services that ABC's subsidiary banks do not or cannot
provide. The profitability of ABC depends upon its subsidiary banks' continued
ability to compete in their market areas.
Success of ABC depends upon local economic conditions
ABC's success is dependent to a certain extent upon the general economic
conditions in the geographic markets served by ABC's subsidiary banks,
primarily including south central and southwestern Georgia, southeastern
Alabama, north central Florida and the immediate surrounding areas. Although
ABC expects that economic conditions will continue to improve in these market
areas, ABC cannot assure you that favorable economic development will occur or
that ABC's expectation of corresponding growth will be achieved. Adverse
changes in the geographic markets that ABC's subsidiary banks serve would
likely impair their ability to collect loans and could otherwise have a
negative effect on the financial condition of ABC. Examples of potential
unfavorable changes in economic conditions which could affect south central
and southwestern Georgia, southeastern Alabama and north central Florida
include, among other things, the adverse effects of weather on agricultural
production and a substantial decline in agricultural commodity prices.
ABC and its subsidiary banks operate in a regulated environment
Bank holding companies and banks operate in a highly regulated environment
and are subject to the supervision and examination by several federal and
state regulatory agencies. ABC is subject to The Bank
15
Holding Company Act of 1956 and to regulation and supervision by the Federal
Reserve. ABC's subsidiary banks are also subject to the regulation and
supervision of the Federal Deposit Insurance Corporation (or the "FDIC"), the
Office of the Comptroller of the Currency (or the "OCC"), the Georgia
Department of Banking and Finance, the Alabama State Banking Department and
the Florida Department of Banking and Finance. Federal and state laws and
regulations govern matters ranging from the regulation of certain debt
obligations, changes in control of bank holding companies and the maintenance
of adequate capital for the general business operations and financial
condition of ABC's subsidiary banks, including permissible types, amounts and
terms of loans and investments, the amount of reserves against deposits,
restrictions on dividends, establishment of branch offices, and the maximum
rate of interest that may be charged by law. The Federal Reserve also
possesses cease and desist powers over bank holding companies to prevent or
remedy unsafe or unsound practices or violations of law. These and other
restrictions limit the manner by which ABC and its subsidiary banks may
conduct their businesses and obtain financing. Furthermore, the commercial
banking business is affected not only by general economic conditions but also
by the monetary policies of the Federal Reserve. These monetary policies have
had, and are expected to continue to have, significant effects on the
operating results of commercial banks. Changes in monetary or legislative
policies may affect the ability of ABC's subsidiary banks to attract deposits
and make loans.
ABC is affected by recent bank reform legislation
In November 1999, the Gramm-Leach-Bliley Financial Services Modernization
Act of 1999 was enacted. The Gramm-Leach-Bliley Act is intended to modernize
the financial services industry by establishing a comprehensive framework to
permit affiliations among commercial banks, insurance companies, securities
firms and other financial service providers. Since the Gramm-Leach-Bliley Act
now permits banks, securities firms and insurance companies to affiliate, the
financial services industry may experience further consolidation. This could
result in the establishment and proliferation in ABC's market areas of a
number of larger financial institutions and other corporations that offer a
wider variety of financial services than ABC currently offers and that can
aggressively compete in the markets ABC currently serves, which could hurt
ABC's profitability.
The merger consideration is fixed
Each share of Golden Isles common stock owned by you will be converted into
the right to receive a pro-rata share of cash and shares of ABC common stock
based on a formula that fixes the aggregate merger consideration at
$10,159,349 in cash and 1,241,204 shares of ABC common stock, unless the per
share closing price of the ABC common stock averaged over a certain period
prior to the merger rises above $12.00. Accordingly, there is a risk that you
will receive fewer shares of ABC common stock if ABC's average closing price
increases. In addition, if the price of the ABC common stock falls, the value
of the ABC common stock you will receive in the merger will also fall. The
price of ABC common stock prior to the consummation of the merger may vary
from its price at the date of this proxy statement/prospectus and at the date
of Golden Isles' special shareholders' meeting. Such variations in the price
of ABC common stock may result from changes in the business, operations or
prospects of ABC, regulatory considerations, general market and economic
conditions and other factors. At the time of Golden Isles' special
shareholders' meeting, you will not know the exact value of the consideration
you will receive when the merger is completed.
ABC heavily dependent on its Chairman of the Board and Chief Executive Officer
The continued success of ABC is dependent in large part upon the services of
Kenneth J. Hunnicutt, Jr., Chairman of the Board and Chief Executive Officer
of ABC. If the services of Mr. Hunnicutt were to become unavailable for any
reason, the operation of ABC could be adversely affected. The successful
development of ABC's business will depend, in part, on its ability to attract
and retain qualified officers and employees, including a successor to Mr.
Hunnicutt.
16
ABC directors and executive officers own a significant portion of the ABC
stock
ABC's directors and executive officers, as a group, beneficially owned
approximately 10% of the outstanding ABC common stock as of March 22, 2001,
the record date for ABC's 2001 annual meeting. There are no agreements or
understandings between or among any of ABC's directors or executive officers
to vote their ABC common stock. As a result of their ownership, however, the
directors and executive officers will have the ability, by voting their shares
in concert, to significantly influence the outcome of all matters submitted to
ABC's shareholders for approval, including the election of directors.
Future sales of ABC Stock can affect its price
ABC cannot predict the effect, if any, that future sales of outstanding ABC
common stock or the availability of ABC common stock for sale will have on its
market price from time to time. Sales of substantial amounts of ABC common
stock in the public market following the merger, or the perception that such
sales could occur, could adversely affect prevailing market prices of ABC
common stock.
ABC's quarterly operating results may fluctuate
ABC's quarterly operating results have varied in the past and are expected
to do so in the future. As changes occur in outside market forces, such as the
weather, the general economy and the agricultural industry in the southeastern
United States, the regulation of banks and the financial services industry and
other similar forces, ABC's future quarterly operating results may vary
significantly. In response to competitive pressures or new product or service
introductions, ABC may take certain pricing or marketing actions that could
adversely affect ABC's quarterly operating results. ABC's expense levels are
based, in part, on ABC's expectations as to margins and fee revenues from its
subsidiary banks' customers. If such margins and fees are below expectations,
then ABC may be unable to adjust spending sufficiently in a timely manner to
compensate for the unexpected shortfall. In future quarters, ABC's operating
results may be below the expectations of public market analysts and investors.
In such event, the price of ABC common stock would likely fall.
ABC subject to certain "anti-takeover" provisions
Certain provisions of ABC's Articles of Incorporation, as amended, restated
Bylaws and the Georgia Business Corporation Code could, together or
separately, discourage potential acquisition proposals or delay or prevent a
change in control of ABC. Those provisions include a classified board of
directors, special provisions for notice to ABC of nominations for director
and the authorization to issue up to 5,000,000 shares of preferred stock and
up to 30,000,000 shares of ABC common stock. Authorized and unissued preferred
stock and common stock, while providing desirable flexibility for possible
acquisitions and for other corporate purposes, could delay, discourage, hinder
or preclude an unsolicited acquisition of ABC, could make it less likely that
the ABC shareholders receive a premium for their shares as a result of any
such attempt and could adversely affect the market price of, and the voting
and other rights of, the holders of outstanding ABC common stock.
GOLDEN ISLES SPECIAL SHAREHOLDERS' MEETING
Date, Time and Place
The Golden Isles special shareholders' meeting will be held at the Comfort
Inn, 5308 New Jesup Highway, Georgia 31523 at 11:00 a.m., local time, on July
23, 2001.
Matters to be Considered at the Special Shareholders' Meeting
At the Golden Isles special shareholders' meeting, holders of Golden Isles
stock will be asked to consider and vote upon the approval and adoption of the
merger agreement. Shareholders may also consider such other
17
matters as may properly be brought before the meeting. Finally, Golden Isles
shareholders may be asked to vote on a proposal to adjourn or postpone the
shareholders' meeting, which could be used to allow more time for soliciting
additional votes to approve the merger agreement.
THE BOARD OF DIRECTORS OF GOLDEN ISLES HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND RECOMMENDS A VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
Record Date; Shares Outstanding; Quorum
Only shareholders of record of Golden Isles common stock at the close of
business on June 18, 2001, will be entitled to notice of, and to vote at, the
Golden Isles special shareholders' meeting. On June 18, 2001, Golden Isles had
outstanding 2,456,300 shares of Golden Isles common stock. There is no other
class of Golden Isles common stock outstanding. Each share of Golden Isles
common stock entitles the holder to one vote. The presence at the Golden Isles
special shareholders' meeting, in person or by proxy, of shareholders entitled
to cast a majority of all the votes entitled to be cast at the special
shareholders' meeting will constitute a quorum. There must be a quorum present
in order for the vote on the merger agreement to occur.
Vote Required
The approval of the merger agreement will require the affirmative vote of at
least a majority of the outstanding shares of Golden Isles (i.e., at least
1,228,151 shares). As of the record date for the Golden Isles special
shareholders' meeting, directors, executive officers and their affiliates of
Golden Isles, who together beneficially own approximately 683,230 shares, or
approximately 28%, of the outstanding Golden Isles common stock, have granted
to ABC an irrevocable proxy to vote their Golden Isles common stock in favor
of the merger.
Voting of Proxies
All executed proxies received at or prior to the special shareholders'
meeting will be voted at the meeting in the manner specified, unless the proxy
is revoked prior to the vote. Properly executed proxies that do not contain
voting instructions will be voted "FOR" the proposal to approve the merger
agreement.
It is not expected that any other matter will be brought before the special
shareholders' meeting. If, however, other matters are properly presented, the
persons named as proxies will vote in accordance with their best judgment with
respect to such matters.
If a quorum is not obtained, the special shareholders' meeting may be
adjourned for the purpose of obtaining additional proxies. At any reconvening
of the meeting, all proxies will be voted in the same manner as the proxies
would have been voted at the original convening of the meeting (except for any
proxies which have been revoked or withdrawn).
Effect of Abstentions and Broker Non-Votes
You may abstain from voting on the merger agreement. Abstentions will be
considered shares present and entitled to vote at the special shareholders'
meeting but will not be counted as votes cast at the meeting. Broker non-votes
with respect to the merger agreement also will not be counted as votes cast at
the meeting.
BECAUSE APPROVAL OF THE MERGER AGREEMENT REQUIRES THE AFFIRMATIVE VOTE OF AT
LEAST A MAJORITY OF ALL SHARES ENTITLED TO VOTE AT THE GOLDEN ISLES SPECIAL
SHAREHOLDERS' MEETING, ABSTENTIONS BY GOLDEN ISLES SHAREHOLDERS AND BROKER
NON-VOTES WILL HAVE THE SAME EFFECT AS VOTES AGAINST THE MERGER AGREEMENT.
ACCORDINGLY, YOU ARE URGED TO COMPLETE, DATE AND SIGN THE ACCOMPANYING FORM OF
PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
18
Revocability of Proxies
The grant of a proxy on the enclosed Golden Isles form does not preclude you
from voting in person or otherwise revoking a proxy. You may revoke a proxy at
any time prior to its exercise by:
. filing with the secretary of Golden Isles a duly executed revocation of
proxy;
. submitting a duly executed proxy bearing a later date; or
. appearing at the special shareholders' meeting and voting in person at
the meeting.
Attendance at the special shareholders' meeting will not, in and of itself,
constitute a revocation of a proxy. All written notices of revocation and
other communications with respect to the revocation of proxies should be
addressed to: Golden Isles Financial Holdings, Inc., 3811 Frederica Road, St.
Simons Island, Georgia 31522, Attention: Secretary.
Solicitation of Proxies
Golden Isles will bear one-half of the cost of the solicitation of proxies
from its shareholders and one-half of the costs associated with filing the
registration statement with the SEC, of which this proxy statement/prospectus
is a part. In addition to solicitation by mail, the directors, officers and
employees of Golden Isles may solicit proxies from Golden Isles' shareholders
by telephone or telegram or in person without compensation other than
reimbursements of their actual and reasonable expenses. Golden Isles will
reimburse any custodians, nominees and fiduciaries for their reasonable out-
of-pocket expenses in connection with forwarding proxy solicitation material
to beneficial owners of the stock they hold.
GOLDEN ISLES SHAREHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR
PROXY CARDS. AS DESCRIBED BELOW UNDER THE CAPTION "EXCHANGE OF GOLDEN ISLES
STOCK CERTIFICATES," AT PAGE 34, EACH GOLDEN ISLES SHAREHOLDER WILL BE
PROVIDED WITH MATERIALS FOR EXCHANGING SHARES OF GOLDEN ISLES AS PROMPTLY AS
PRACTICABLE AFTER THE CONSUMMATION OF THE MERGER.
THE MERGER
THE FOLLOWING INFORMATION DESCRIBES INFORMATION PERTAINING TO THE MERGER.
THE DESCRIPTIONS OF THE TERMS AND CONDITIONS OF THE MERGER, THE MERGER
AGREEMENT AND ANY RELATED DOCUMENTS IN THIS PROXY STATEMENT/PROSPECTUS ARE NOT
COMPLETE AND ARE QUALIFIED IN THEIR ENTIRETY BY THE MORE DETAILED APPENDICES
TO THIS PROXY STATEMENT/PROSPECTUS WHICH ARE INCORPORATED BY REFERENCE,
INCLUDING THE MERGER AGREEMENT ATTACHED AS APPENDIX A. WE URGE YOU TO READ THE
APPENDICES IN THEIR ENTIRETY.
Overview
The merger agreement provides for a transaction in which Golden Isles will
merge with and into ABC. ABC will be the surviving corporation resulting from
the merger, and The First Bank of Brunswick, a wholly-owned subsidiary of
Golden Isles, will become a wholly-owned subsidiary of the ABC after the
merger. At the effective time of the merger, all of the issued and outstanding
shares of the Golden Isles common stock (excluding shares held by ABC or
Golden Isles or any wholly-owned subsidiary of either of them and shares held
by shareholders who have perfected dissenters' rights) and all outstanding
options to purchase shares of Golden Isles common stock will cease to be
outstanding and will be converted into the right to receive an aggregate
merger consideration of between $20.1 million and $25.2 million, depending
upon the average closing price per share of the ABC common stock during the 30
highest-volume trading days during the 60 calendar-day period ending
19
five calendar days prior to the closing date of the merger, payable in cash
and whole shares of ABC common stock. If this average closing price per share
is less than or equal to $12.00, then each Golden Isles shareholder and
optionholder (after giving effect to a hypothetical cashless exercise of his
or her options) will receive $4.08 in cash and approximately 0.4982 of a share
of ABC common stock for each share of Golden Isles common stock. If this
average closing price per share exceeds $12.00, then the total cash
consideration and the total value of the ABC common stock to be paid in the
merger will be proportionately reduced such that the total cash consideration
per share and the total value of the ABC common stock per share paid in
exchange for each share of Golden Isles common stock will not exceed $10.06 in
the aggregate.
All of Golden Isles' outstanding stock options shall be converted at the
effective time of the merger into the right to receive a portion of the
aggregate merger consideration equal to the pro-rata portion of such merger
consideration that each option holder would have received had such holder
converted all of his or her outstanding options into shares of Golden Isles
common stock on a cashless basis and then participated in the merger with the
other Golden Isles shareholders.
Background of the Merger
During the past several years, there has been a trend toward consolidation
in the banking industry. This trend has enabled participants in business
combinations to benefit from the economies of scale and greater efficiencies
resulting from the shared services, technology and purchasing power of the
combined entities. Banks have increasingly sought suitable acquisition
candidates as a means of utilizing excess capital and obtaining the benefits
described above.
Since 1994, ABC has been reviewing and analyzing possible acquisition
opportunities in the southern Georgia, southeastern Alabama and north central
Florida areas. ABC's strategic plan has been to enhance shareholder value by
creating a larger organization in that area. ABC's goal has been to provide
broader and more comprehensive services to its customers, create efficiencies
in the administration and service functions and provide a larger shareholder
base with a more liquid security trading in a national market.
Over the past several years, various regional bank holding companies have
approached Golden Isles with inquiries of interest regarding a possible merger
with or other acquisition of Golden Isles. These inquiries resulted only in
informal discussions because it was the opinion of the Golden Isles board of
directors that it was not in the best interest of the Golden Isles
shareholders to expand those preliminary inquiries at that time. One of the
companies making such inquiry was ABC.
During the last quarter of 2000, Golden Isles' management was contacted by
and held discussions with the management or representatives of management of
two regional bank holding companies. Both bank holding companies were
interested in the possible acquisition of Golden Isles. In consultation with
the Golden Isles board, management negotiated confidentiality agreements with
both bank holding companies and exchanged financial and other information. The
President of Golden Isles met with the Chief Financial Officer and President
of one of the interested bank holding companies on or about November 7, 2000
to discuss the financial condition of both organizations. The Chairman,
President, and a majority of the Golden Isles board met with management and
several board members of the same bank holding company on or about November
20, 2000 to discuss general company philosophy and the possible terms under
which Golden Isles might be acquired. The President of Golden Isles met with
management of the second interested bank holding company on or about December
27, 2000 to discuss the financial conditions of both organizations.
Prior to those discussions, ABC's management had made initial inquiries
concerning Golden Isles' interest in a possible acquisition. The President and
the Senior Credit Officer of ABC had met with the Chairman, President and one
other board member of Golden Isles on or about July 14, 2000 at an informal
luncheon. ABC's President expressed ABC's desire to have a coastal Georgia
presence. During late October 2000, ABC's President contacted Golden Isles'
Chairman to reiterate ABC's interest. In light of the other bank holding
companies' interest, the Golden Isles Chairman invited discussions between
management of both ABC and
20
Golden Isles to explore the desirability of a merger of Golden Isles with and
into ABC in light of their respective goals. The conclusion of those initial
talks was that such a merger could offer substantial growth opportunities for
the shareholders of both ABC and Golden Isles. In light of this perceived
opportunity, management of ABC and Golden Isles informed their respective
boards of directors that they believed further discussion was appropriate, and
a confidentiality agreement was negotiated. Financial and other information
was then exchanged between ABC and Golden Isles, and numerous conversations
followed between the Chairman and President of Golden Isles and various senior
officers of ABC. The Chairman and President of Golden Isles met with the
Senior Credit Officer of ABC on or about December 11, 2000 to discuss possible
procedures for due diligence. During the course of these discussions, it
became apparent to Golden Isles' management and board of directors that
discussions with the other two regional bank holding companies had not
progressed as successfully as had talks with ABC. The Golden Isles board met
on January 15, 2001 to discuss the status of all negotiations.
The board, after much discussion, voted to engage The Carson Medlin Company
to render a fairness opinion in connection with a merger with ABC and for
guidance in continuing negotiations. The Golden Isles board decided that it
would consider an offer and ABC determined that it would execute a definitive
agreement only after due diligence matters were concluded. Subsequent to that
board meeting, a due diligence agreement was negotiated with ABC and signed on
January 18, 2001. The due diligence process began on January 22, 2001 with a
team of ABC management visiting Golden Isles' Brunswick and St. Simons Island
offices. The due diligence period ended January 30, 2001.
A meeting was held between ABC management and the Golden Isles board of
directors on February 7, 2001 on Jekyll Island, Georgia to negotiate a final
definitive agreement. An agreement was reached and the final draft of the
merger agreement was distributed to Golden Isles' board of directors on
February 16, 2001.
At the February 20, 2001 meeting of ABC's board of directors, the board
considered a financial analysis of the merger. ABC's legal counsel presented a
discussion of the legal aspects of the merger agreement, its ancillary
documents and the proposed employment agreement with Michael D. Hodges.
Sterne, Agee & Leach, Inc., ABC's financial advisor, also delivered its oral
opinion that, as of the date of the merger agreement, the merger consideration
to be paid in the merger was fair, from a financial point of view, to the
shareholders of ABC. ABC's board of directors thoroughly reviewed the
information provided, and there was a full discussion by the board of
directors and its financial and legal advisors regarding the specific effects
of the merger proposal, including the employment agreement for Mr. Hodges.
Following this discussion, the board of directors of ABC voted unanimously to
approve the merger agreement. Approval by the shareholders of ABC is not
required under Georgia law.
On February 20, 2001, Golden Isles' board of directors met to consider the
merger agreement. Golden Isles' legal counsel presented to Golden Isles' board
of directors a summary of the merger agreement. At that meeting, the board of
directors reviewed the terms of the merger agreement with its legal counsel
and received The Carson Medlin Company's written opinion that, as of the date
of the merger agreement, the consideration to be paid to the Golden Isles
shareholders by ABC was fair, from a financial point of view, to Golden Isles'
shareholders. After extensive discussion, the board of directors of Golden
Isles unanimously approved the merger agreement.
The definitive merger agreement was executed on February 20, 2001 following
the meetings of the boards of directors of ABC and Golden Isles.
REASONS FOR THE MERGER
ABC's Reasons for the Merger
In deciding whether to enter into the merger agreement, ABC's board of
directors considered a number of factors, including the following:
. the financial condition and operating results of ABC and Golden Isles;
. a comparison of the terms of the proposed merger with comparable
transactions, both in the southeastern United States and elsewhere;
21
. the fact that the merger provides ABC with a natural extension of its
existing south Georgia community bank franchises by expanding its
presence into Glynn County, Georgia; and
. the opinion rendered by Sterne, Agee & Leach, Inc. to ABC's board of
directors that, as of the date of the merger agreement, the merger
consideration to be paid by ABC in the proposed merger was fair to ABC
from a financial point of view.
In approving the transaction, ABC's board of directors did not specifically
identify any one factor or group of factors as being more significant than any
other factor in the decision making process, although individual directors may
have given one or more factors more weight than other factors.
Golden Isles' Reasons for the Merger
Golden Isles' board of directors, with the assistance of outside financial
and legal advisors, evaluated the financial, legal and market considerations
bearing on the decision to recommend the merger. The terms of the merger,
including the aggregate merger consideration to be received for the shares of
Golden Isles common stock and options to purchase Golden Isles common stock,
are the result of arm's-length negotiations between representatives of Golden
Isles and ABC. In reaching its conclusion that the merger agreement is in the
best interest of Golden Isles and its shareholders, Golden Isles' board of
directors considered, without assigning any relative or specific values, a
number of factors, including:
. the fact that the ABC common stock is traded on The Nasdaq National
Market and has enjoyed a consistent dividend payout;
. alternatives to the merger, including continuing to operate Golden Isles
on a stand-alone basis, considering the breadth of its product line,
economic conditions and the prospects for community banking and
competition in the financial services area;
. the merger consideration to be received in the proposed merger,
including the fact that although the cash received generally will be
taxable, the Golden Isles shareholders will not recognize any gain or
loss for federal income tax purposes on the receipt of ABC's common
stock in the merger;
. a comparison of the terms of the proposed merger with comparable
transactions, both in the southeastern United States and elsewhere;
. information concerning the business, financial condition, results of
operations and prospects of Golden Isles and ABC;
. competitive factors and trends toward consolidation in the banking
industry; and
. the opinion rendered by The Carson Medlin Company to Golden Isles' board
of directors that, as of the date of the merger agreement, the merger
consideration to be received in the proposed merger was fair, from a
financial point of view, to the holders of Golden Isles' common stock.
Golden Isles' board of directors believes that by becoming part of a larger
organization with greater resources, Golden Isles will be able to serve its
customers and communities better and to provide services that will be
competitive in the combined company's market and elsewhere. Similarly, a
larger organization will be able to provide greater career opportunities for
Golden Isles' employees.
Golden Isles' board of directors also considered the separate agreements and
benefits proposed for employees and management and concluded that those terms
were reasonable. See "Interests of Certain Persons in the Merger" on page 51.
The foregoing discussion of the information and factors considered by Golden
Isles' board of directors is not intended to be exhaustive. Golden Isles'
board of directors did not assign any relative or specific weights to the
foregoing factors, and individual directors may have given different weights
to different factors. Golden Isles'
22
board of directors collectively made its determination with respect to the
merger based on the conclusion reached by its members, in light of the factors
that each of them considered appropriate, that the merger is in the best
interest of Golden Isles' shareholders.
Recommendation of the Golden Isles Board of Directors
THE BOARD OF DIRECTORS OF GOLDEN ISLES BELIEVES THAT THE TERMS OF THE MERGER
ARE IN THE BEST INTEREST OF GOLDEN ISLES AND ITS SHAREHOLDERS AND HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT. THE BOARD OF DIRECTORS OF GOLDEN
ISLES UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF GOLDEN ISLES APPROVE THE
MERGER AGREEMENT.
OPINION OF FINANCIAL ADVISOR TO GOLDEN ISLES
Golden Isles has retained The Carson Medlin Company to act as its financial
advisor in connection with the merger. Golden Isles engaged Carson Medlin on
January 10, 2001 to serve as its financial advisor in its negotiations with
ABC and to render its opinion as to the fairness, from a financial point of
view, of the consideration received by the shareholders of Golden Isles in the
merger. Golden Isles selected Carson Medlin as its financial adviser on the
basis of Carson Medlin's historical relationship with Golden Isles and Carson
Medlin's experience and expertise in representing community banks in similar
transactions. Carson Medlin is an investment banking firm which specializes in
the securities of financial institutions located in the southeastern and
western United States. As part of its investment banking activities, Carson
Medlin is regularly engaged in the valuation of financial institutions and
transactions relating to their securities, including mergers and acquisitions.
Representatives of Carson Medlin participated in a meeting of Golden Isles'
board of directors held on February 20, 2001. At that meeting Carson Medlin
delivered its written opinion to the effect that, as of such date, the
consideration provided for in the merger agreement was fair, from a financial
point of view, to the shareholders of Golden Isles. Carson Medlin subsequently
confirmed its opinion in writing as of the date of this proxy
statement/prospectus.
THE FULL TEXT OF THE CARSON MEDLIN COMPANY'S WRITTEN OPINION IS ATTACHED AS
APPENDIX C TO THIS PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY
REFERENCE. THE DESCRIPTION OF THE OPINION SET FORTH HEREIN IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO APPENDIX C. GOLDEN ISLES SHAREHOLDERS ARE URGED TO
READ THE OPINION IN ITS ENTIRETY FOR A DESCRIPTION OF THE PROCEDURES FOLLOWED,
ASSUMPTIONS MADE, MATTERS CONSIDERED, AND QUALIFICATIONS AND LIMITATIONS ON
THE REVIEW UNDERTAKEN BY THE CARSON MEDLIN COMPANY IN CONNECTION THEREWITH.
The Carson Medlin Company's opinion is directed to the Golden Isles board of
directors only and is directed only to the merger consideration and merger
agreement terms and does not constitute a recommendation to any Golden Isles
shareholder regarding how such shareholders should vote at the special
shareholders' meeting. Carson Medlin neither established nor recommended the
amount of consideration payable under the merger agreement.
You should consider the following when reading the discussion of the Carson
Medlin opinion in this document:
. The summary of the opinion of Carson Medlin set forth in this proxy
statement/prospectus is qualified in its entirety by reference to the
full text of the opinion that is attached as APPENDIX C to this proxy
23
statement/prospectus. You should read the opinion in its entirety for a
full discussion to the procedures followed, assumptions made, matters
considered and qualification and limitation on the review undertaken by
Carson Medlin in connection with its opinion.
. Carson Medlin's opinion does not address the merits of the merger
relative to other business strategies, whether or not considered by
Golden Isles' board, nor does it address the decision by Golden Isles'
board to proceed with the merger.
. Carson Medlin's opinion to Golden Isles' board of directors rendered in
connection with the merger does not constitute a recommendation to any
Golden Isles shareholder as to how he or she should vote at the special
shareholders' meeting.
No limitations were imposed by Golden Isles' board of directors or its
management upon Carson Medlin with respect to the investigations made or the
procedures followed by Carson Medlin in rendering its opinion.
The preparation of a financial fairness opinion involves various
determinations as to the most appropriate methods of financial analysis and
the application of those methods to the particular circumstances. It is
therefore not readily susceptible to partial analysis or summary description.
In connection with rendering its opinion, Carson Medlin performed a variety of
financial analyses. Carson Medlin believes that its analyses must be
considered together as a whole and that selecting portions of its analyses and
the facts considered in its analyses, without considering all other factors
and analyses, could create an incomplete or inaccurate view of the analyses
and the process underlying the rendering of Carson Medlin's opinion.
In performing its analyses, Carson Medlin made numerous assumptions with
respect to industry performance, business and economic conditions, and other
matters, many of which are beyond the control of ABC and Golden Isles, and may
not be realized. Any estimates contained in Carson Medlin's analyses are not
necessarily predictive of future results or values, which may be significantly
more or less favorable than the estimates. Estimates of values of companies do
not purport to be appraisals or necessarily reflect the prices at which the
companies or their securities may actually be sold. Except as described below,
none of the analyses performed by Carson Medlin was assigned a greater
significance by Carson Medlin than any other. The relative importance or
weight given to these analyses by Carson Medlin is not necessarily reflected
by the order of presentation of the analyses herein (and the corresponding
results). The summaries of financial analyses include information presented in
tabular format. The tables should be read together with the text of those
summaries.
Carson Medlin has relied, without independent verification, upon the
accuracy and completeness of the information it reviewed for the purpose of
rendering its opinion. Carson Medlin did not undertake any independent
evaluation or appraisal of the assets and liabilities of ABC or Golden Isles,
nor was it furnished with any appraisals.
Carson Medlin is not an expert in the evaluation of loan portfolios,
including under-performing or non-performing assets, charge-offs or the
allowance for loan losses; it has not reviewed any individual credit files of
ABC or Golden Isles; and it has assumed that the allowances of ABC and Golden
Isles are in the aggregate adequate to cover losses. Carson Medlin's opinion
is necessarily based on economic, market and other conditions existing on the
date of its opinion, and on information as of various earlier dates made
available to it which is not necessarily indicative of current market
conditions.
In rendering its opinion, Carson Medlin made the following assumptions:
. that the merger will be accounted for as a purchase in accordance with
generally accepted accounting principles;
. that all material governmental, regulatory and other consents and
approvals necessary for the consummation of the merger would be obtained
without any adverse effect on Golden Isles, ABC or on the anticipated
benefits of the merger;
24
. that Golden Isles had provided it with all of the information prepared
by Golden Isles or its other representatives that might be material to
Carson Medlin in its review; and
. that the financial projections it reviewed were reasonably prepared on a
basis reflecting the best currently available estimates and judgement of
the management of Golden Isles as to the future operating and financial
performance of Golden Isles.
In connection with its opinion dated February 20, 2001, Carson Medlin
reviewed:
. the merger agreement;
. the annual reports to shareholders of ABC, including the audited
financial statements of ABC for the five years ended December 31, 2000;
. the audited financial statements of Golden Isles for the five years
ended December 31, 2000; and
. financial and operating information with respect to the business,
operations and prospects of ABC and Golden Isles.
In addition, Carson Medlin:
. held discussions with members of management of ABC and Golden Isles
regarding the historical and current business operations, financial
condition and future prospects of their respective companies;
. reviewed the historical market prices and trading activity for the
common stock of ABC, as well as the Golden Isles common stock;
. compared the results of operations of ABC and Golden Isles with those of
certain financial institutions which it deemed to be relevant;
. compared the financial terms of the merger with the financial terms, to
the extent publicly available, of certain other recent business
combinations of financial institutions; and
. conducted such other studies, analyses, inquiries and examinations as
Carson Medlin deemed appropriate.
Valuation Methodologies
The following is a summary of all material analyses performed by Carson
Medlin in connection with its opinion provided to Golden Isles' board of
directors as of February 20, 2001. The summary does not purport to be a
complete description of the analyses performed by Carson Medlin.
Summary of Merger and Analysis
Carson Medlin reviewed the terms of the proposed merger, including the form
of consideration, and the resulting price per share of Golden Isles common
stock pursuant to the proposed merger. Under the terms of the merger
agreement, ABC will pay up to $10,237,960 in cash and issue up to 1,241,204
shares of ABC common stock for all outstanding common stock and options of
Golden Isles. The aggregate merger price will be fixed at an amount between
$20,167,592 and $25,132,408. Carson Medlin assumed that each Golden Isles
common shareholder would receive approximately $4.13 per share in cash and 0.5
shares of ABC common stock.
Based on the ABC stock price of $11.50 per share on February 16, 2001 (the
last trading day prior to the date of the merger agreement), the aggregate
merger price would be $24,511,806, and Golden Isles common shareholders would
receive cash and stock with an aggregate value of $9.88 per share as of such
date.
Carson Medlin calculated that the indicated value on February 20, 2001
represented:
. a 54.9% premium to Golden Isles' market value one day prior to
announcement and a 67.9% premium to Golden Isles' market value three
months prior to announcement;
. 175.1% of stated book value at December 31, 2000;
25
. 22.7 times earnings for the twelve months ending December 31, 2000;
. 20.3% of total deposits at December 31, 2000;
. a 10.8% core deposit premium at December 31, 2000; and
. 16.7% of total assets of Golden Isles at December 31, 2000.
Carson Medlin also analyzed the same pricing indicators for the minimum and
maximum merger price as shown below.
Minimum Maximum
Price Price
($20,167,592) ($25,132,408)
------------- ------------
Stock Price Premium--One Day.................... 27.5% 58.9%
Three Months.................................... 38.1% 72.1%
Price to Earnings............................... 18.6x 23.2x
Price to Book Value............................. 144.0% 179.5%
Price to Total Deposits......................... 16.7% 20.8%
Core Deposit Premium............................ 6.3% 11.5%
Price to Total Assets........................... 13.8% 17.1%
Industry Comparative Analysis
In connection with rendering its opinion, Carson Medlin compared selected
operating results of both Golden Isles and ABC to those of 59 publicly-traded
community commercial banks in Alabama, Florida, Georgia, Mississippi, North
Carolina, South Carolina, Tennessee, Virginia and West Virginia, which appear
in the Southeastern Independent Bank Review, a proprietary research
publication prepared by Carson Medlin quarterly since 1991. The banks reviewed
by Carson Medlin range in asset size from $155 million to $5.1 billion and in
shareholders' equity from approximately $12 million to $477 million. Carson
Medlin considers this group of financial institutions more comparable to
Golden Isles and ABC than larger, more widely traded regional financial
institutions. Carson Medlin compared, among other factors, profitability,
capitalization and asset quality of Golden Isles and ABC to these financial
institutions. Carson Medlin noted the following returns based on results at or
for the nine months ended September 30, 2000 (most recent available) for the
banks reviewed and for the 12 months ended December 31, 2000 for Golden Isles
and ABC:
Golden Average for
Isles ABC Peer Group
------ ----- -----------
Return on Average Assets........................... 0.77% 1.27% 1.12%
Return on Average Equity........................... 8.03% 13.19% 12.00%
Equity to Assets................................... 9.56% 9.75% 9.50%
Efficiency Ratio................................... 69.6% 65.2% 60.3%
Non-Performing Assets* to Total Loans,
net of unearned income and other real estate...... 3.61% 0.95% 0.92%
- --------
* Defined as 90 days past due, nonaccrual loans and other real estate.
This comparison indicated that Golden Isles financial performance, with the
exception of capitalization, was below the peer group for each factor
analyzed. Carson Medlin noted that ABC's financial performance was at or above
the peer group for each factor analyzed.
26
Comparable Transaction Analysis
Carson Medlin reviewed certain information relating to the following
selected merger transactions involving commercial banks in certain coastal
markets in the southeast United States, including Florida, Georgia and South
Carolina, announced since January 1, 1999:
Seller Buyer
- ----------------------------- ---------------------------------------------------
Citizens First National
Bank FL Carolina First Corporation SC
Grady Holding Company GA Capital City Bank Group, Inc. FL
Exchange Bank of South
Carolina SC First Citizens Bancorporation of South Carolina SC
First Bancorporation,
Inc. SC First National Corp. SC
Ready Bank of Fort
Walton Beach HC FL Synovus Financial Corp. GA
South Carolina Community
Bancshares, Inc. SC Union Financial Bancshares, Inc. SC
Horizon Bancshares, Inc. FL Synovus Financial Corp. GA
First Banking Company of
Southeast Georgia GA BB&T Corporation NC
Friendship Community
Bank FL PAB Bankshares, Inc. GA
First Bank Holding
Company FL SouthTrust Corporation AL
Peoples State Bank of
Groveland FL Alabama National BanCorporation AL
Tri-County Bank FL ABC Bancorp GA
In evaluating these factors, Carson Medlin considered, among other factors,
the earnings, capital level, asset size and quality of assets of the acquired
financial institutions. Carson Medlin compared the transaction prices at the
time of announcement to the stated book value, earnings, total and core
deposits and total assets of the acquired institutions.
Purchase Price as a Percentage of Stated Book
Value Low High Average
--------------------------------------------- ----- ------ -------
Comparable Transactions.............................. 103.8% 436.1% 224.1%
Range of Values (based on Golden Isles' stated book
value
of $5.75 per share at December 31, 2000)............ $5.97 $25.08 $12.89
The implied consideration of the merger based on ABC's February 16, 2000
stock price of $11.50 per share was approximately $9.88 per share, or 175.1%
of stated book value, which is below the average of the range for the
comparable transactions.
Purchase Price as a Multiple of Earnings Low High Average
---------------------------------------- ----- ------ -------
Comparable Transactions................................ 12.5 47.9 22.6
Range of Values (based on Golden Isles' earnings per
share of $0.44 for 12 months ended December 31,
2000)................................................. $5.50 $21.08 $9.94
The implied consideration of the merger based on ABC's February 16, 2000
stock price of $11.50 per share was approximately $9.88 per share, or 22.7
times earnings for the twelve months ended December 31, 2000, is just above
the average for the comparable transactions.
Comparable
Transactions
Golden Isles -------------------
Other Pricing Multiples Indicator Low High Average
----------------------- ------------ --- ---- -------
Purchase Price % of Total Deposits.......... 20.3% 16.0% 39.8% 26.6%
Core Deposit Premium........................ 10.8% 1.9% 30.1% 15.4%
Purchase Price % of Total Assets............ 16.7% 13.3% 34.7% 22.8%
The purchase price as a percentage of total deposits implied by the merger
is 20.3%, which is slightly below the average of the range for the comparable
transactions. The core deposit premium, which is the aggregate transaction
value minus stated book value divided by core deposits, is 10.8% and also
slightly below the average of the range for the comparable transactions. The
purchase price as a percentage of total assets implied by the merger is 16.7%,
which is also below the average of the range for the comparable transactions.
27
No company or transaction used in Carson Medlin's analyses is identical to
Golden Isles or the proposed merger. Accordingly, the results of these
analyses necessarily involves complex considerations and judgments concerning
differences in financial and operating characteristics of Golden Isles and
other factors that could affect the value of the companies to which they have
been compared.
Present Value Analysis
Carson Medlin calculated the present value of Golden Isles assuming that
Golden Isles remained an independent bank. For purposes of this analysis,
Carson Medlin utilized certain projections of Golden Isles' future growth of
assets, earnings and dividends and assumed that Golden Isles' common stock
would be sold at the end of five years at a price ranging from 180% to 220% of
book value. These values were then discounted to present value utilizing
discount rates of 14% to 16%. These rates were selected because, in Carson
Medlin's experience, they represent the rates that investors in securities
such as Golden Isles' common stock would demand in light of the potential
appreciation and risks.
Present Value Analysis
-------------------------------------------------------------------------------
1.80 1.90 2.00 2.10 2.20
------- ------- ------- ------- -------
($ in millions)
14% $22.203 $23.361 $24.519 $25.677 $26.835
15% $21.275 $22.384 $23.493 $24.601 $25.710
16% $20.395 $21.457 $22.518 $23.580 $24.642
On the basis of these assumptions, Carson Medlin calculated that the present
value of Golden Isles as an independent bank ranged from $20.395 million to
$26.835 million. The consideration implied by the terms of the merger
agreement based on ABC's stock price on February 16, 2001 was $24.512 million,
which is just below the high end of the range indicated under the present
value analysis. Carson Medlin also noted that was the aggregate merger price
will be fixed at an amount between $20.168 million and $25.132 million, which
Carson Medlin considers within the range indicated under present value
analysis.
Carson Medlin noted that it included present value analysis because it is a
widely used valuation methodology, but also noted that the results of this
methodology are highly dependent upon the numerous assumptions that must be
made, including assets and earnings growth rates, dividend payout rates,
terminal values and discount rates.
Historical Stock Performance Analysis
Carson Medlin reviewed and analyzed the historical trading prices and
volumes of ABC common stock since 1996. Carson Medlin noted that ABC's stock
traded as high as $17.00 per share in early 1998 and had declined since then
and traded as low as $8.00 per share in late 2000. Carson Medlin noted that
most financial institution stocks peaked in mid-1998 and had been declining
over the same period. ABC's stock price has generally been rising in 2001 and
traded at $11.50 per share on February 16, 2001. ABC's volume has remained
steady over the period analyzed with trading volume of approximately 7,500
shares per day.
Carson Medlin compared the recent trading prices of ABC's stock to the
recent market values of the comparable financial institutions. This comparison
showed that:
. at February 16, 2001, ABC's price to trailing 12 months earnings was 9.7
times (range of 7.2 to 22.8 times) compared to a mean of 12.0 times for
the banks reviewed by Carson Medlin at December 31, 2000; and
. at February 16, 2001, ABC's price was 119% of book value compared to a
mean of 133% (range of 49% to 302%) for the banks reviewed by Carson
Medlin at December 31, 2000.
Carson Medlin noted that ABC's common stock currently trades, and has over
the past several years traded, at a discount based on earnings and book value
multiples compared to the banks reviewed by Carson Medlin.
28
Carson Medlin also examined the trading prices and volumes of Golden Isles'
common stock, which has traded on The Nasdaq Small Cap Market since 1996.
Carson Medlin noted that the consideration to be received in the merger
represented a premium over the recent trading price for Golden Isles' common
stock.
The opinion expressed by Carson Medlin was based upon market, economic and
other relevant considerations as they existed and could be evaluated as of the
date of the opinion. Events occurring after the date of issuance of the
opinion, including, but not limited to, changes affecting the securities
markets, the results of operations or material changes in the assets or
liabilities of Golden Isles or ABC, could materially affect the assumptions
used in preparing the opinion. In addition, Carson Medlin did not consider
changes in the cash consideration payable to the Golden Isles shareholders
since the date of its opinion. In the opinion of Carson Medlin, these changes
have no meaningful effect on Carson Medlin's analysis.
In connection with its opinion, dated as of the date of this proxy
statement/prospectus, Carson Medlin confirmed the appropriateness of its
reliance on the analyses used to render its February 20, 2001 opinion by
performing procedures to update certain of such analyses and reviewing the
assumptions on which its analyses were based and the factors considered in
connection therewith.
Golden Isles has agreed to pay Carson Medlin a fee equal to $40,000, payable
upon Carson Medlin's delivery of its opinion to Golden Isles, regardless of
whether the merger is consummated. In addition to the foregoing fee, Golden
Isles has agreed to reimburse Carson Medlin for its reasonable out-of-pocket
expenses, including counsel, incurred in connection with its retention and has
agreed to indemnify Carson Medlin against certain liabilities, including
liabilities under federal securities laws.
OPINION OF FINANCIAL ADVISOR TO ABC
ABC retained Sterne, Agee & Leach, Inc. to advise the ABC board of directors
in connection with the merger. ABC selected Sterne Agee to serve as its
financial advisor because Sterne Agee is a recognized regional investment
banking firm with expertise in financial institutions. As part of its
investment banking business, Sterne Agee is regularly involved in the
valuation of financial institutions and their securities. On February 20,
2001, Sterne Agee rendered its oral opinion to the board of directors of ABC
that, as of such date, subject to certain assumptions, factors and
limitations, the consideration proposed to be paid by ABC pursuant to the
Merger Agreement was fair, from a financial point of view, to the shareholders
of ABC. Sterne Agee reconfirmed its opinion dated February 20, 2001, by
delivering a written opinion to the board of directors of ABC dated the date
of this proxy statement/prospectus.
A copy of Sterne Agee's opinion letter is included in this document as
Appendix D and is incorporated herein by reference. The description of the
opinion set forth herein is qualified in its entirety by reference to Appendix
D. Sterne Agee's opinion is provided exclusively for the information and
benefit of the board of directors of ABC.
In rendering its opinion, Sterne Agee reviewed, analyzed and relied upon
certain materials relating to the financial and operating condition of ABC and
Golden Isles, including, among other things, the following:
. the Merger Agreement dated February 20, 2001, and certain related
documents;
. Annual Reports to shareholders and Annual Reports on Form 10-K of ABC
and Golden Isles for the three years ended December 31, 1999;
. certain interim reports to shareholders of ABC and Golden Isles,
including quarterly reports on Form 10-Q and certain other
communications;
. other financial information concerning the businesses and operations of
ABC and Golden Isles furnished to Sterne Agee by the respective
companies for purposes of Sterne Agee's analysis, including certain
internal financial analyses and forecasts for ABC and Golden Isles
prepared by the senior managements of the respective companies;
29
. certain publicly-available information concerning the historical price,
price/earnings and price/book ratios as well as the trading activity for
the common stocks of ABC and Golden Isles;
. certain publicly-available information with respect to banking companies
and the types and terms of other transactions that Sterne Agee
considered relevant to its analysis; and
. certain deposit data available as of June 30, 2000, published by the
FDIC with regard to the deposits and market shares held by the bank
subsidiaries of ABC and Golden Isles.
Sterne Agee also held discussions with the senior management of ABC and
Golden Isles regarding their past, current and prospective operations,
financial condition, regulatory examinations, audits and other matters and
considered such other financial factors as Sterne Agee deemed appropriate
under the circumstances, including general economic, market and financial
conditions, its knowledge of similar transactions and its experience in
securities valuation of financial institutions. Sterne Agee's opinion was
based upon conditions as they existed on the date of the opinion and the
information made available up to such date.
In conducting its review and arriving at its opinion, Sterne Agee relied
upon and assumed, without independent verification, the accuracy and
completeness of all of the financial and other information provided to it or
publicly available. Sterne Agee relied upon the management of ABC and Golden
Isles as to the reasonableness and achievability of the financial and
operating budgets and forecasts (and the related assumptions and bases
underlying such forecasts) provided to Sterne Agee and assumed that such
budgets and forecasts reflected the best available estimates and judgments of
such management and that such budgets and forecasts will be realized in the
amounts and in the time periods estimated by such management. Sterne Agee also
assumed, without independent verification, that the aggregate allowances for
loan losses for ABC and Golden Isles are adequate to cover such losses. Sterne
Agee did not make or obtain any evaluations or appraisals of the property of
ABC or Golden Isles, nor did Sterne Agee examine any loan credit files. Sterne
Agee was informed by ABC and assumed in rendering its opinion that the merger
would be accounted for as a purchase under generally accepted accounting
principles.
The preparation of a fairness opinion involves various determinations of the
most appropriate and relevant methods of financial analysis and the
application of those methods to particular circumstances, and, therefore, such
an opinion is not readily susceptible to summary description. In arriving at
their fairness opinion, Sterne Agee did not attribute any particular weight to
any analysis or factor considered by it, but rather made qualitative judgments
about the significance and relevancy of each analysis and factor. None of the
analyses performed by Sterne Agee was assigned a greater significance by
Sterne Agee than any other and, therefore, you should not attribute any
greater importance to one analysis versus another as a result of the order in
which they are discussed herein. Accordingly, Sterne Agee believes that their
analyses must be considered as a whole and that a review of selected portions
of such analyses and the factors considered therein, without considering all
analyses and factors, could create a misleading or incomplete view of the
processes underlying Sterne Agee's opinion. In its analyses, Sterne Agee made
numerous assumptions with respect to industry performance, general business
and economic conditions and other matters, many of which are beyond ABC's
control. Any estimates contained in Sterne Agee's analyses are not indicative
of actual values or predictive of future results or values that may be
significantly more or less favorable than such estimates. Estimates of values
of companies do not purport to be appraisals or necessarily reflect the prices
at which companies or their securities actually may be sold.
The following is a brief summary of the material financial analyses reviewed
by Sterne Agee in connection with its opinion; it does not purport to be a
complete description of all analyses performed.
Financial Performance Overview
Sterne Agee reviewed financial performance ratios, stock trading history,
income statement and balance sheet information, per share financial results
and other information for both ABC and Golden Isles and the
30
combined company before and after acquisition adjustments, cost savings and
revenue enhancements. Sterne Agee also relied upon unaudited pro forma
financial information as provided by the management of ABC with respect to
ABC's then-pending acquisition of Tri-County Bank in performing its financial
analyses.
Valuation Multiples
Sterne Agee calculated the merger consideration to be paid pursuant to the
exchange ratio of shares of ABC common stock per share of Golden Isles common
stock and the cash consideration per share of Golden Isles common stock as a
multiple of Golden Isles' stock price on February 16, 2001, the last trading
day before Sterne Agee rendered its oral opinion to the board of directors of
ABC; as a multiple of latest twelve months earnings per share and estimated
earnings per share for the year ended December 31, 2001; as a multiple of book
value and tangible book value as of December 31, 2000; and as a percentage of
assets as of December 31, 2000. Assuming a price per share of ABC common stock
of $11.50 and of Golden Isles common stock of $6.50 (the closing prices per
share, respectively, on February 16, 2001) and an exchange ratio of 0.5 shares
of common stock of ABC and $4.13 in cash for each share of common stock of
Golden Isles, or $9.89 for each share of Golden Isles common stock held, such
amount would represent 152.1% of Golden Isles' stock price on February 16,
2001; 22.7 times latest twelve months earnings per share, 25.9 times estimated
earnings per share for the year ended December 31, 2001; 1.72 times book value
and 1.72 times tangible book value as of December 31, 2000; 16.7% of total
assets on December 31, 2000 and 20.12% of total deposits as of December 31,
2000.
Similar Actual Transactions
Sterne Agee analyzed certain financial data related to 32 acquisitions of
banks in the Southeast with assets between approximately $40 million and $1
billion, from January 1, 2000 through February 2, 2001.
Sterne Agee calculated average valuation multiples for the Southeast bank
acquisitions as follows: 22.2 times trailing twelve months earnings per share;
1.97 times prior quarter-end book value; 1.99 times prior quarter-end tangible
book value; 20.0% of quarter-end assets; and 24.1% of quarter-end deposits.
Sterne Agee calculated median valuation multiples for the Southeast bank
acquisitions as follows: 20.4 times trailing twelve months earnings per share;
1.81 times prior quarter-end book value; 1.82 times prior quarter-end tangible
book value; 19.5% of quarter-end assets; and 23.7% of quarter-end deposits.
Sterne Agee analyzed certain financial data related to 28 acquisitions of
bank and thrift institutions in Georgia from January 1, 1999 through February
2, 2001.
Sterne Agee calculated average valuation multiples for the Georgia bank and
thrift acquisitions as follows: 23.3 times trailing twelve months earnings per
share; 2.57 times prior quarter-end book value; 2.64 times prior quarter-end
tangible book value; 26.2% of quarter-end assets; and 31.4% of quarter-end
deposits. Sterne Agee calculated median valuation multiples for the Georgia
bank and thrift acquisitions as follows: 22.5 times trailing twelve months
earnings per share; 2.54 times prior quarter-end book value; 2.55 times prior
quarter-end tangible book value; 26.7% of quarter-end assets; and 32.1% of
quarter-end deposits.
In calculating the average valuation multiples, Sterne Agee made certain
statistical adjustments to make the averages more meaningful for comparison
purposes.
Contribution Analysis
Sterne Agee analyzed the relative contribution of ABC and Golden Isles to
certain balance sheet and income statement items, including assets, deposits,
common equity and latest twelve months net income. Sterne Agee then compared
the relative contribution of such balance sheet and income statement items
with the estimated pro forma ownership of 12.2% for Golden Isles shareholders
based on an exchange ratio of 0.5 shares of ABC common stock and $4.13 in cash
for each share of Golden Isles common stock. The contribution analysis showed
that Golden Isles would contribute approximately 15.0% of the combined assets,
14.8% of the combined deposits, 14.8% of the combined common equity and 9.7%
of the combined latest twelve months net income (before cost savings, revenue
enhancements and merger-related charges).
31
Financial Impact Analysis
Sterne Agee reviewed pro forma income statement and balance sheet and
certain pro forma financial information contained in analyses prepared by the
management of ABC and Golden Isles. Such pro forma financial information was
discussed with the management of both ABC and Golden Isles. The actual results
achieved by the combined company after the merger may vary from the projected
results and the variations may be material.
Sterne Agee calculated the pro forma effects of the merger on ABC's earnings
per share estimates for 2001 and 2002 based on earnings estimates for ABC and
Golden Isles as supplied by the management of each of the companies, because
no earnings estimates were available from Zacks, First Call or the
Institutional Brokers Estimate System. Such pro forma effects included after-
tax benefits from cost savings and revenue enhancements and excluded merger-
related charges. Sterne Agee calculated that the pro forma fully diluted
earnings per share would result in dilution of $0.01 per share, or 0.9%, to
ABC's estimated 2001 earnings per share. The estimated accretion represented
by pro forma earnings per share was estimated to be $0.03, or 1.6%, for
earnings per share in 2002.
Sterne Agee also reviewed ABC's pro forma combined book value per share for
December 31, 2000, of $9.90, which compared with the actual December 31, 2000,
book value of $9.66. The accretion represented by the pro forma figure equaled
2.5%.
Market Share Analysis
Sterne Agee calculated the effect on ABC's deposit market share in Glynn
County, Georgia that would result from the merger. Based on FDIC deposit data
as of June 30, 2000, Sterne Agee calculated that ABC's deposit market share in
Glynn County would represent a 13.6% share, behind SunTrust Bank, Inc. at
21.0%, First Georgia Holding, Inc. at 18.5% and Bank of America Corp. at
16.1%, and ahead of Synovus Financial Corporation at 12.8% and three other
depository institution competitors.
Selected Peer Group Analysis
Sterne Agee compared the financial performance and market performance of
Golden Isles based on selected measures of profitability, asset quality,
capital adequacy, liquidity, efficiency and various measures of market
performance, including price/earnings ratios, price/book ratios and dividend
yields to those of a group of comparable banks. For purposes of this analysis,
the financial data used by Sterne Agee was compiled for the latest twelve
months ended December 31, 2000 (if available), and the market data was
compiled as of February 16, 2001. The peer group, which consists of banks
headquartered in the southeastern United States with total assets ranging from
approximately $75 million to approximately $250 million, included the
following: Admiralty Bancorp, Inc., Bank of South Carolina Corporation, BOE
Financial Services of VA, Britton & Koontz Capital Corporation, CCF Holding
Company, Central Virginia Bankshares, Inc., Commonwealth Bankshares, Inc.,
Crescent Banking Company, Eufaula BancCorp, Inc., Fauquier Bankshares, Inc.,
First West Virginia Bancorp, Inc., Pinnacle Bancshares, Inc., Premier
Commercial Bankshares, Inc., RHBT Financial Corporation, Shore Financial
Corporation, Southwest Georgia Financial Corporation, Summit Financial
Corporation and United Financial Holdings, Inc.
Sterne Agee's analysis showed the following concerning Golden Isles'
relative performance:
. that its return on equity of 7.5% compared with an average of 11.1% for
the peer group;
. that its return on assets of 0.74% compared with an average of 1.01% for
the peer group;
. that its net interest margin of 4.10% compared with an average of 4.68%
for the peer group;
. that its net chargeoffs to average loans were 0.64% compared with an
average of 0.22% for the peer group;
32
. that its ratio of loan loss reserve to total loans was 1.94% compared
with an average of 1.17% for the peer group;
. that its ratio of nonperforming assets and loans 90 days past due to
total loans and other real estate owned was 3.35% compared with an
average of 0.74% for the peer group;
. that its ratio of equity to assets of 9.6% compared with an average of
9.0% for the peer group;
. that its ratio of loans to deposits of 93.9% compared with an average of
82.5% for the peer group; and
. that its efficiency ratio of 69.6% compared with an average of 65.4% for
the peer group.
Sterne Agee's analysis further showed the following regarding Golden Isles'
market performance:
. that its price/earnings multiple, based on the latest twelve months
fully diluted earnings per share of $0.44, was a multiple of 14.9
compared to an average multiple of 13.5 for the peer group;
. that its price/book ratio, based on December 31, 2000 book value of
$5.75, was a multiple of 1.13 compared to an average multiple of 1.25
for the peer group;
. that its price/tangible book ratio, based on December 31, 2000 tangible
book value of $5.75, was a multiple of 1.13 compared to an average
multiple of 1.30 for the peer group; and
. that its dividend yield was 1.2% compared to an average of 2.6% for the
peer group.
Net Present Value Analysis
Sterne Agee performed a discounted cash flow analysis to determine a range
of net present values per share of Golden Isles. In its calculations, Sterne
Agee used net income growth rates as provided by Golden Isles' management,
terminal price-to-earnings multiples from 9.0 to 12.0 times, and discount
rates ranging from 10.0% to 15.0%. This analysis produced net present values
of Golden Isles' share price that ranged from $8.07 to $13.75.
In connection with its written opinion as of the date of this proxy
statement/prospectus, Sterne Agee confirmed the appropriateness of its
reliance on the analyses used to render its February 20, 2001 oral opinion to
the board of directors of ABC by performing procedures to update certain of
its analyses and by reviewing the assumptions on which the analyses were based
and the factors considered in connection with them.
Sterne Agee's opinion, dated as of June 19, 2001, a copy of which is
attached as APPENDIX D to this proxy statement/prospectus, is based solely
upon the information available to Sterne Agee and the economic, market and
other circumstances as they existed as of such date. Events occurring after
that date could materially affect the assumptions and conclusions contained in
Sterne Agee's opinion. Sterne Agee has not undertaken to reaffirm or revise
its opinion or otherwise comment on any events occurring after the date of its
opinion.
Sterne Agee was retained by the board of directors of ABC to act as its
financial advisor with respect to the merger. ABC and Sterne Agee entered into
a letter agreement dated January 29, 2001 relating to the services to be
provided by Sterne Agee in connection with the merger. ABC agreed to pay
Sterne Agee a nonrefundable retainer of $25,000 at the time of the execution
of the letter agreement and an additional fee of $75,000 at the time of any
public dissemination of Sterne Agee's opinion. In addition, ABC agreed to
reimburse Sterne Agee for out-of-pocket expenses incurred in connection with
its engagement and to indemnify Sterne Agee against certain liabilities,
including liabilities under the federal securities laws.
In the ordinary course of business, Sterne Agee trades the equity securities
of ABC and Golden Isles for its own account and for the accounts of its
customers and, accordingly, may at any time hold a long or short position in
such securities. Sterne Agee and its officers, employees, consultants and
agents may have long or short positions in the securities of ABC and Golden
Isles. Sterne Agee has regularly followed and provided research concerning ABC
to its clients.
33
EXCHANGE OF GOLDEN ISLES STOCK CERTIFICATES
As soon as practicable after the consummation of the merger, a letter of
transmittal furnishing instructions for exchanging Golden Isles stock
certificates (and for replacing any lost, stolen or destroyed certificates)
will be mailed to each Golden Isles shareholder of record as of the close of
business on the effective date of the merger. Each Golden Isles shareholder
will be urged to return this letter of transmittal, as soon as possible,
together with his or her stock certificates to SunTrust Bank, the exchange
agent for ABC. As soon as practicable after receipt by the exchange agent of
your Golden Isles stock certificates, you will be mailed the cash and ABC
common stock (including cash for any fractional share interest or dividends or
distributions) to which you are entitled pursuant to the merger agreement.
As of the effective date of the merger, each Golden Isles stock certificate
will be deemed for all corporate purposes only to evidence the right to
receive cash and certificates representing shares of ABC common stock pursuant
to the merger agreement. Until your Golden Isles stock certificate is
surrendered (or suitable arrangements made for any lost, stolen or destroyed
certificate) you:
. will not be issued a certificate representing the shares of ABC common
stock which you are otherwise entitled to receive;
. will not be paid the cash which you are otherwise entitled to receive;
and
. will not be paid dividends or other distributions in respect of the
shares of ABC common stock which you are otherwise entitled to receive.
Any dividends or distributions or other cash payable to you will be
retained, without interest, for your account until you surrender your stock
certificate in accordance with the letter of transmittal.
If any certificates for shares of ABC common stock are to be issued in a
name other than that for which a Golden Isles share certificate surrendered or
exchanged is issued, the Golden Isles share certificate so surrendered must be
properly endorsed and otherwise in proper form for transfer, and the person
requesting the exchange must affix any requisite stock transfer tax stamps to
such certificate surrendered, provide funds for their purchase, or establish
to the satisfaction of the exchange agent that such taxes are not payable.
To the extent permitted by law, former Golden Isles shareholders will be
entitled to vote after the effective time of the merger at any meeting of
ABC's shareholders the number of shares of ABC common stock into which their
Golden Isles stock are converted, regardless of whether they have exchanged
certificates representing their Golden Isles stock for certificates
representing ABC common stock.
There will be no transfers of shares of Golden Isles common stock on Golden
Isles' stock transfer books after the effective time of the merger. Golden
Isles common stock certificates presented for transfer after the effective
time of the merger will be canceled and exchanged for cash and shares of ABC
common stock certificates.
Existing ABC shareholders will keep their existing stock certificates and
should not deliver any certificates for ABC common stock.
EFFECTIVE TIME OF THE MERGER
The merger will be consummated if it is approved by the shareholders of
Golden Isles and if ABC and Golden Isles obtain all required consents and
approvals, including the approvals of the Federal Reserve and the Georgia
Department of Banking and Finance, and satisfy the other conditions to the
obligations of the parties to consummate the merger. The merger will become
effective on the date and at the time that a certificate of merger is issued
by the Secretary of State of Georgia. We presently expect that the effective
date will occur in the third quarter of 2001.
34
TERMS OF THE MERGER
Upon completion of the merger, the separate legal existence of Golden Isles
will cease. All property, rights, powers, duties, obligations, debts and
liabilities of Golden Isles will automatically be transferred to ABC. The
Articles of Incorporation of ABC will govern the combined entities.
Upon the consummation of the merger, all outstanding shares of Golden Isles
common stock and all options to purchase shares of Golden Isles common stock
will be automatically converted into, and become a right to receive, an
aggregate merger consideration of between $20.1 million and $25.2 million,
payable in cash and whole shares of stock of ABC (subject to adjustment as
described in the merger agreement). This is the "aggregate merger price" or
"aggregate merger consideration." Existing shares of ABC held by ABC
shareholders immediately prior to the merger will not be converted and will
continue to be issued and outstanding.
In addition, upon the consummation of the merger, all of Golden Isles'
outstanding stock options will be converted at the effective time of the
merger into the right to receive a portion of the aggregate merger
consideration equal to the pro-rata portion of such merger consideration that
each option holder would have received had such holder converted all of his or
her outstanding options into shares of Golden Isles common stock on a cashless
basis and then participated in the merger with the other Golden Isles
shareholders.
The aggregate merger consideration will be adjusted at the effective time of
the merger if the average closing price per share of the ABC common stock for
the 30 highest-volume trading days during the 60 calendar-day period ending
five calendar days prior to the closing date of the merger is higher than
$12.00. If this average closing price is higher than $12.00 per share, then
the aggregate merger consideration will be adjusted by (i) reducing the cash
portion by an amount equal to one-half of the difference between the value of
the stock consideration at the average price described above and the value of
such stock at $12.00 per share, and (ii) reducing the stock portion by the
number of shares equal to one-half of the difference between the value of such
stock at the average price described above and the value of such stock at
$12.00 per share, divided by such average price. In addition, the cash portion
of the aggregate merger consideration will be reduced at the effective time of
the merger by an amount equal to:
. $13,611.00, which represents fees payable to J. Thomas Whelchel, the
Chairman of the board of directors of Golden Isles;
. all fees in excess of $40,000.00 and all costs and expenses in excess of
$2,500.00 of The Carson Medlin Company;
. all fees, costs and expenses of Martin, Snow, Grant & Napier, LLP,
Golden Isles' legal counsel, in excess of $30,000.00; and
. $65,000.00, which represents all payments made by Golden Isles to Fleet
Mortgage Corp. in respect of recently-settled litigation involving
Golden Isles in excess of $25,000.00.
The merger agreement provides that the $65,000.00 reduction in the aggregate
merger consideration referred to above will itself be reduced (resulting in a
corresponding increase in the cash paid to the Golden Isles shareholders) by
the amount of any cash received by Golden Isles prior to the effective time of
the merger from the sale or collection of a promissory note executed in favor
of First Bank Mortgage Corporation. If Golden Isles cannot sell or collect
such promissory note prior to the effective time of the merger, then certain
of Golden Isles' directors may choose to purchase the promissory note,
provided that a committee of disinterested members of the Golden Isles board
of directors approves such transaction.
Fractional Shares
ABC will not issue any fractional shares of ABC common stock to former
Golden Isles shareholders. Instead, you will receive cash, without interest,
for any fractional share interest. The amount of cash received will be
determined by multiplying the fraction by the average of the closing sales
prices of ABC common stock on The Nasdaq National Market for the 30 highest-
volume trading days during the 60 calendar-day period ending on the date that
is five calendar days prior to the closing date of the merger. You will not be
entitled to dividends, voting rights or any other shareholder rights with
respect to any fractional share interest.
35
Representations and Warranties
The merger agreement contains customary representations and warranties
relating to, among other things:
. the organization and capital structures of ABC and Golden Isles;
. the contracts, employees, employee benefits, labor relations,
litigation, real property, intangible assets and environmental
compliance of Golden Isles;
. the due authorization, execution, delivery, performance and
enforceability of the merger agreement;
. consents or approvals of regulatory authorities and third parties
necessary to complete the merger;
. certain financial statements through the period ended December 31, 2000
fairly presenting the financial condition and results of operations of
the respective parties in conformity with generally accepted accounting
principles applied on a consistent basis; and
. the absence of material adverse changes, since December 31, 2000, in the
consolidated assets, business, liabilities, financial condition and
results of operations of ABC (and its subsidiaries) or Golden Isles (and
its subsidiaries) or in any of their respective relationships with
customers, employees, lessors or others.
Conduct of Business Pending the Merger
Pursuant to the merger agreement, ABC and Golden Isles have each agreed to
use reasonable efforts to preserve their business organizations intact and to
maintain satisfactory relationships with its customers, suppliers, regulators
and employees. In addition, ABC and Golden Isles agreed to conduct their
businesses and to engage in transactions only in the ordinary course of
business as conducted at the date of the merger agreement and in compliance in
all material respects with all applicable laws and regulations and all
contracts to which either is a party.
Among other things, without ABC's prior written consent (which will not
unreasonably withheld or delayed), Golden Isles has agreed not to:
. amend its Articles of Incorporation, Bylaws or other governing
instruments;
. repurchase, redeem or otherwise acquire or declare or pay any dividend
or make any other distribution in respect of the capital stock of Golden
Isles, except that Golden Isles may declare and pay a dividend in cash
to its shareholders during the second quarter of 2001 in an amount in
the aggregate equal to the lesser of (i) Golden Isles' net income for
the first calendar quarter of 2001, and (ii) the aggregate dividend paid
to its shareholders during calendar year 2000;
. engage in certain activities such as selling, leasing, mortgaging or
otherwise disposing of property having a book value exceeding $50,000 or
incur indebtedness (except in the ordinary course of business for
reasonable and adequate consideration);
. enter into any compensation agreements or increase salaries, employee
benefits, directors' fees or bonuses, except to the extent consistent
with past practices;
. increase any compensation or benefits payable to Golden Isles' officers
and employees, pay any bonuses, enter into or amend any severance
protection agreements or pay or grant bonuses to any of the directors of
Golden Isles;
. adopt or change employee benefit plans unless required by law,
regulation or judicial interpretation or as deemed necessary or
advisable, in the opinion of counsel, to maintain its tax status;
. acquire direct control of any other person or entity except under
certain circumstances;
. modify or amend any material contracts;
36
. adjust, split, combine or reclassify any of the capital stock of Golden
Isles or sell, lease, dispose of or otherwise encumber any shares of the
capital stock of Golden Isles or any asset with a book value in excess
of $50,000; or
. commence or settle any litigation with a potential liability to Golden
Isles in excess of $50,000.
Golden Isles has agreed, among other things:
. subject to the terms of the merger agreement, to take all actions
necessary to complete the transactions contemplated by the merger
agreement;
. to maintain accurate books and records;
. to file all reports required to be filed with regulatory agencies; and
. to operate its business in the usual, regular and ordinary course and to
preserve intact its business organization and assets.
Steering Committee
The merger agreement provides for a steering committee consisting of three
individuals designated by the Chairman of the board of directors of ABC and
three individuals designated by the Chairman of the board of directors of
Golden Isles. As of the date of this document, the steering committee consists
of W. Edwin Lane, Jr., Jon C. Edwards and either Kenneth J. Hunnicutt or Mark
D. Thomas from time to time as designees of ABC and Michael D. Hodges, Robert
Cable and Donna Gowen as designees of Golden Isles. The purpose of the
steering committee is to facilitate the full exchange of information
concerning the business, operations, capital spending, budgets and financial
results of ABC and Golden Isles until the closing of the merger and to
facilitate the efficient transition and combination of the two businesses. ABC
chairs the steering committee, and all material decisions of the steering
committee, which will be dissolved at the effective time of the merger, must
be approved by ABC and Golden Isles.
Conditions to the Merger
The obligations of Golden Isles and ABC to consummate the merger are subject
to various conditions, which include the following:
. the merger agreement shall have been duly approved by the Golden Isles
shareholders;
. all necessary governmental approvals for the merger shall have been
obtained, and all waiting periods required by law or imposed by any
governmental authority with respect to the merger shall have expired
(see "Terms of the Merger-Required Regulatory Approvals" at page 38);
. no action, suit, proceeding or claim shall have been instituted, made or
threatened relating to the merger;
. Golden Isles shall have received an opinion of ABC's tax counsel dated
as of the effective date of the merger to the effect that, among other
things, the merger will be treated for federal income tax purposes as a
tax-free "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code of 1986 (see "Certain Important Federal Income Tax
Consequences of the Merger" at page 47);
. the aggregate number of shares of Golden Isles stock dissenting from the
merger shall not exceed 5% of the total number of issued and outstanding
shares of Golden Isles stock;
. the accuracy in all material respects as of February 20, 2001 and as of
the effective date of the merger of the representations and warranties
made, except as otherwise contemplated by the merger agreement;
. the performance by ABC and Golden Isles in all material respects of all
covenants and obligations required to be performed by each at or prior
to the effective date of the merger;
37
. the registration statement registering the shares of ABC common stock to
be received by Golden Isles shareholders, of which this proxy
statement/prospectus is a part, shall have been declared effective by
the SEC, no stop order suspending the effectiveness of the registration
statement shall have been issued, no action, suit, proceeding or
investigation by the SEC to suspend the effectiveness of the
registration statement shall have been initiated and be continuing and
all necessary approvals under federal and state securities laws relating
to the issuance or trading of shares of ABC common stock issuable
pursuant to the merger shall have been received; and
. other conditions which are customary for transactions of the type
contemplated by the merger agreement.
See "Terms of the Merger--Representations and Warranties" at page 36 and
"Terms of the Merger-- Conduct of Business Pending the Merger" at page 36.
Required Regulatory Approvals
The merger may not proceed unless we receive the required regulatory
approvals. We know of no reason why such approvals will not be obtained, but
we cannot assure you that such regulatory approvals will be obtained or when
we will obtain them. Applications for the approvals described in this section
were filed with the Federal Reserve and with the Georgia Department of Banking
and Finance on April 24, 2001. We are not aware of any other regulatory
approvals or actions that are required for consummation of the merger. Should
any other approval or action be required, we presently contemplate that such
approval or action would be sought.
In evaluating the merger, the Federal Reserve must consider, among other
factors, the financial and managerial resources and future prospects of the
institutions and the convenience and needs of the communities to be served.
The relevant statutes prohibit the Federal Reserve from approving the merger
if:
. it would result in a monopoly or be in furtherance of any combination or
conspiracy to monopolize or attempt to monopolize the business of
banking in any part of the United States; or
. its effect in any section of the country could be to lessen
substantially competition or to tend to create a monopoly, or if it
would result in a restraint of trade in any other manner, unless the
Federal Reserve should find that any anti-competitive effects are
outweighed clearly by the public interest and the probable effect of the
transaction in meeting the convenience and needs of the communities to
be served.
The merger may not be consummated until the fifteenth day following the date
of approval by the Federal Reserve, during which time the United States
Department of Justice will be afforded the opportunity to challenge the
transaction on antitrust grounds. The commencement of any antitrust action
will stay the effectiveness of the approval of the agencies, unless a court of
competent jurisdiction should specifically order otherwise.
The Georgia Department of Banking and Finance also must approve the merger.
In its evaluation of the merger, the Georgia Department of Banking and Finance
will take into account considerations similar to those taken into account by
the Federal Reserve.
NASDAQ Listing
The ABC common stock is currently listed on The Nasdaq National Market, and
the shares to be issued to Golden Isles shareholders will also be listed on
The Nasdaq National Market.
Waiver, Amendment and Termination
We may agree to amend the merger agreement. However, after approval of the
merger agreement by the Golden Isles shareholders, we cannot enter into any
amendment that decreases the merger consideration payable in exchange for the
Golden Isles shares without the approval of the Golden Isles shareholders. One
party may waive any breach of the merger agreement by the other party or the
failure of the other party to meet any conditions or terms of the merger
agreement.
38
The merger agreement may be terminated and the merger abandoned at any time
prior to the effective date, even though we have received the approval of
Golden Isles shareholders:
. by our mutual consent;
. by either one of us if, without the fault of the terminating party, the
closing of the merger does not occur on or before September 1, 2001;
. by either of us (if the terminating party is not in material breach) if
regulatory approval is denied;
. by either of us if: (i) the other party materially breaches its
representations, warranties or covenants under the merger agreement and
the breach is not corrected within 30 days after notice; (ii) an event
or circumstance arises as a result of which the other party will be
unable to satisfy certain conditions of the merger agreement; or (iii)
if, at the closing of the merger, any condition to the obligations of
such party is not met;
. by Golden Isles if it has entered into a definitive agreement to be
acquired by another party, so long as Golden Isles complies with the
terms of the merger agreement and pays ABC the fee described in "Terms
of the Merger--Expenses and Fees in connection with the Merger" at page
39; or
. by Golden Isles if the average closing price of the ABC common stock for
the 30 highest-volume trading days during the 60 calendar-day period
ending five calendar days prior to the closing date of the Merger is
less than $8.00 per share or more than $14.00 per share.
If the merger is terminated as described above, the merger agreement will
have no effect, except for certain provisions of the merger agreement,
including those relating to the obligations to maintain the confidentiality of
certain information and to return all documents obtained from the other party
under the merger agreement.
Expenses and Fees in Connection with the Merger
Golden Isles and ABC each will bear their respective costs and expenses
incurred in connection with the merger, including the fees, expenses and
disbursements of their respective counsel and auditors and one-half of the
printing expenses and filing fees in connection with this proxy
statement/prospectus, whether or not the merger is consummated. However, in
the event that the merger agreement is terminated by Golden Isles upon
execution of a definitive agreement with a third party or in the event that,
prior the termination of the merger agreement, Golden Isles receives a
takeover proposal and, within one year of such termination, enters into,
approves, recommends or takes action with respect to a merger, consolidation
or other business combination with any other person, then Golden Isles will
have to pay to ABC the sum of $400,000. Also, if the merger agreement is
terminated because either ABC or Golden Isles materially breaches its
representations, warranties or covenants thereunder, the non-breaching party
is entitled to receive $300,000 as liquidated damages.
Management and Operations After the Merger
After the merger, the ABC board of directors and management will remain
unchanged, and the board of directors will have 10 members.
39
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
The unaudited pro forma condensed consolidated financial data included
herein give effect to the merger. Golden Isles' information is combined in
this proxy statement/prospectus with ABC using the purchase method of
accounting.
The historical amounts of ABC were derived from the consolidated financial
statements of ABC incorporated herein by reference, and the historical amounts
of Golden Isles were derived from the consolidated financial statements of
Golden Isles included herein.
The unaudited pro forma condensed consolidated financial data do not purport
to present the financial position of ABC had the various transactions
indicated above actually been consummated on the dates indicated. In addition,
the unaudited pro forma condensed consolidated financial data are not
necessarily indicative of the future results of operations of ABC and should
be read in conjunction with the historical financial statements of Golden
Isles, including the notes thereto, included herein and with the historical
financial statements of ABC, including the notes thereto, incorporated herein
by reference. See "Where You Can Get More Information" at page 90 and "Golden
Isles Financial Holdings, Inc. Financial Statements" at page F-2.
40
ABC BANCORP AND SUBSIDIARIES
COMBINED WITH TRI-COUNTY BANK
PRO FORMA CONDENSED BALANCE SHEET
MARCH 31, 2001
(Unaudited)
(Dollars in Thousands)
The following unaudited pro forma condensed balance sheet as of March 31,
2001 has been prepared to reflect the acquisition by ABC of 100% of Tri-County
Bank after giving effect to the adjustments described in the notes to the pro
forma condensed financial statements. The acquisition will be accounted for as
a purchase transaction. These statements should be read in conjunction with
the other financial statements and notes thereto included elsewhere in this
proxy statement/prospectus.
Pro Forma
ABC Tri-County Adjustments Pro Forma
Historical Historical (Notes A and B) Combined
---------- ---------- --------------- ---------
Assets
- ------
Cash and due from banks........ $ 29,207 $ 2,015 $ -- $ 31,222
Interest bearing deposits in
banks.......................... 11,684 -- -- 14,760
Federal funds sold............. -- 4,331 (3,229)(1) 1,102
Investment securities.......... 149,824 9,716 -- 159,540
Loans, net..................... 595,998 28,125 -- 624,123
Premises and equipment......... 19,461 268 -- 19,729
Investment in Tri-County....... -- -- 7,188 (1) --
-- -- (7,188)(2) --
Excess cost over fair value of
assets acquired................ 6,631 -- 2,109 (2) 8,740
Other assets................... 15,765 1,136 -- 16,901
-------- ------- ------- --------
$828,570 $48,667 $(1,120) $876,117
======== ======= ======= ========
Liabilities and Equity
- ----------------------
Deposits....................... $688,482 $43,153 $ -- $731,635
Federal funds purchased and
securities sold under
agreements to repurchase...... 3,937 -- -- 3,937
Other borrowings............... 45,464 -- -- 45,464
Other liabilities.............. 7,213 435 -- 7,648
-------- ------- ------- --------
Total liabilities............ 745,096 43,558 -- 788,684
-------- ------- ------- --------
Equity
- ------
Common stock................... 9,200 -- 348 (1) 9,548
Capital surplus................ 29,828 -- 3,611 (1) 33,439
Retained earnings.............. 49,699 -- -- 49,699
Other comprehensive income..... 2,110 -- -- 2,110
Unearned compensation.......... (1,143) -- -- (1,143)
Treasury stock................. (6,220) -- -- (6,220)
Equity of Tri-County Bank...... -- 5,079 (5,079)(2) --
-------- ------- ------- --------
Total equity................. 83,474 5,079 (1,120) 87,433
$828,570 $48,667 $(1,120) $876,117
======== ======= ======= ========
41
ABC BANCORP AND SUBSIDIARIES
COMBINED WITH TRI-COUNTY BANK
PRO FORMA CONDENSED STATEMENTS OF INCOME
(Unaudited)
(Dollars in Thousands, Except Per Share Data)
The following unaudited pro forma condensed statements of income have been
prepared to reflect the acquisition by ABC of 100% of Tri-County Bank after
giving effect to the adjustments described in the notes to the pro forma
condensed financial statements. The acquisition will be accounted for as a
purchase transaction. These statements should be read in conjunction with the
other financial statements and notes thereto included elsewhere in this proxy
statement/prospectus.
Three Months Ended March 31, 2001
--------------------------------------------
Pro Forma
ABC Tri-County Adjustments Pro Forma
Historical Historical (Note B) Combined
---------- ---------- ----------- ---------
Interest income.................. $17,796 $ 963 $ (34)(4) $18,725
Interest expense................. 8,245 564 -- 8,809
------- ------ ----- -------
Net interest income.............. 9,551 399 (34) 9,916
Provision for loan loss.......... 493 -- -- 493
------- ------ ----- -------
Net interest income after
provision for loan losses....... 9,058 399 (34) 9,423
Other income..................... 2,175 63 -- 2,238
Other expense.................... 7,844 282 35 (3) 8,161
------- ------ ----- -------
Income from continuing operations
before income taxes............. 3,389 180 (69) 3,500
Income taxes..................... 1,091 58 (12)(5) 1,137
------- ------ ----- -------
Income from continuing
operations...................... $ 2,298 $ 122 $ (57) $ 2,363
======= ====== ===== =======
Income per share from continuing
operations...................... $ 0.27
=======
Year Ended December 31, 2000
--------------------------------------------
Pro Forma
ABC Tri-County Adjustments Pro Forma
Historical Historical (Note B) Combined
---------- ---------- ----------- ---------
Interest income.................. $68,976 $3,858 $(192)(4) $72,642
Interest expense................. 30,805 2,015 -- 32,820
------- ------ ----- -------
Net interest income.............. 38,171 1,843 (192) 39,822
Provision for loan loss.......... 1,712 58 -- 1,770
------- ------ ----- -------
Net interest income after
provision for loan losses....... 36,459 1,785 (192) 38,052
Other income..................... 8,215 283 -- 8,498
Other expense.................... 30,233 1,095 150 (3) 31,478
------- ------ ----- -------
Income from continuing operations
before income taxes............. 14,441 973 (342) 15,072
Income taxes..................... 4,343 393 (65)(5) 4,671
------- ------ ----- -------
Income from continuing
operations...................... $10,098 $ 580 $(277) $10,401
======= ====== ===== =======
Income per share from continuing
operations...................... $ 1.18
=======
42
ABC BANCORP AND SUBSIDIARIES
COMBINED WITH TRI-COUNTY BANK
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
(Unaudited)
A. The pro forma condensed balance sheet has been prepared assuming the Tri-
County Bank merger transaction was consummated on March 31, 2001. The pro
forma condensed statements of income have been prepared assuming the
transaction was consummated at the beginning of the periods indicated.
B. The following pro forma adjustments have been applied to give effect to the
Tri-County Bank merger transaction:
Balance Sheet:
(1) Payment of $3,229,000 in cash (representing approximately 45% of total
consideration) and issuance of 347,504 shares of ABC common stock in
exchange for 100% of the equity of Tri-County for a total consideration
of $7,188,000.
(2) Elimination of investment in Tri-County and allocation of purchase
price as follows:
The excess of purchase price over the fair value of net assets acquired
amounting to $2,109,000 has been allocated to goodwill. Upon
consummation of the merger, portions of the excess of the purchase
price over the fair value of net assets acquired may be allocated to
specific assets based on the fair market value of these assets on the
effective date of the merger.
Statement of Income:
(3) Pro forma adjustments to income resulting from the allocation of the
purchase price of Tri-County as follows:
Amortization of goodwill using the straight-line method over a period
of 15 years.
(4) Loss of interest on federal funds used to fund the acquisition using an
average rate of 4.25% for the three months ended March 31, 2001 and
6.00% for the year ended December 31, 2000.
(5) Tax effect of pro forma adjustment for reduction in interest income
using a tax rate of 34%. No tax effect has been recorded for
amortization of goodwill because ABC is acquiring the stock of Tri-
County and will not be allowed any tax benefit for the amortization of
goodwill.
C. Based on the assumption that the excess purchase price over the fair value
of the net assets acquired will be allocated to goodwill, the effect of the
purchase adjustments described in Note B(3) above would result in a
decrease in net income for each of the next five years of $141,000 assuming
that the transaction was consummated at the beginning of the three months
ended March 31, 2001 and $150,000 assuming that the transaction was
consummated at the beginning of the year ended December 31, 2000.
43
ABC BANCORP AND SUBSIDIARIES AND TRI-COUNTY BANK
COMBINED WITH GOLDEN ISLES FINANCIAL HOLDINGS, INC.
PRO FORMA CONDENSED BALANCE SHEET
MARCH 31, 2001
(Unaudited)
(Dollars in Thousands)
The following unaudited pro forma condensed balance sheet as of March 31,
2001 has been prepared to reflect the acquisition by ABC (after the
acquisition of Tri-County Bank) of 100% of Golden Isles after giving effect to
the adjustments described in the notes to the pro forma condensed financial
statements, the acquisition will be accounted for as a purchase transaction.
These statements should be read in conjunction with the other financial
statements and notes thereto included elsewhere in this proxy
statement/prospectus.
ABC
Tri- Golden Pro Forma
County Isles Adjustments Pro Forma
Combined Historical (Notes A and B) Combined
-------- ---------- --------------- ----------
Assets
- ------
Cash and due from banks..... $ 31,222 $ 6,104 $ -- $ 37,326
Interest bearing deposits in
banks...................... 14,760 142 (10,238)(1) 4,664
Federal funds sold.......... 1,102 3,259 -- 4,361
Investment securities....... 159,540 20,444 -- 179,984
Loans, net.................. 624,123 113,782 -- 737,905
Premises and equipment...... 19,729 4,621 -- 24,350
Investment in Golden Isles.. -- -- 24,512 (1) --
-- -- (24,512)(2) --
Excess cost over fair value
of assets acquired......... 8,740 -- 10,230 (2) 18,970
Other assets................ 16,901 2,915 -- 19,816
-------- -------- -------- ----------
$876,117 $151,267 $ (8) $1,027,376
======== ======== ======== ==========
Liabilities and Equity
- ----------------------
Deposits.................... $731,635 $125,029 $ -- $ 856,664
Federal funds purchased and
securities sold under
agreements to repurchase... 3,937 -- -- 3,937
Other borrowings............ 45,464 11,240 -- 56,704
Other liabilities........... 7,648 716 -- 8,364
-------- -------- -------- ----------
Total liabilities......... 788,684 136,985 -- 925,669
-------- -------- -------- ----------
Equity
- ------
Common stock................ 9,548 -- 1,241 (1) 10,789
Capital surplus............. 33,439 -- 13,033 (1) 46,472
Retained earnings........... 49,699 -- -- 49,699
Other comprehensive income.. 2,110 -- -- 2,110
Unearned compensation....... (1,143) -- -- (1,143)
Treasury stock.............. (6,220) -- -- (6,220)
Equity of Golden Isles...... -- 14,282 (14,282)(2) --
-------- -------- -------- ----------
Total equity.............. 87,433 14,282 (8) 101,707
-------- -------- -------- ----------
$876,117 $151,267 $ (8) $1,027,376
======== ======== ======== ==========
44
ABC BANCORP AND SUBSIDIARIES AND TRI-COUNTY BANK
COMBINED WITH GOLDEN ISLES FINANCIAL HOLDINGS, INC.
PRO FORMA CONDENSED STATEMENTS OF INCOME
(Unaudited)
(Dollars in Thousands, Except Per Share Data)
The following unaudited pro forma condensed statements of income have been
prepared to reflect the acquisition by ABC (after the acquisition of Tri-
County Bank) of 100% of Golden Isles after giving effect to the adjustments
described in the notes to the pro forma condensed financial statements. The
acquisition will be accounted for as a purchase transaction. These statements
should be read in conjunction with the other financial statements and notes
thereto included elsewhere in this proxy statement/prospectus.
Three Months Ended March 31, 2001
----------------------------------------------
ABC Pro Forma
Tri-County Golden Isles Adjustments Pro Forma
Combined Historical (Note B) Combined
---------- ------------ ----------- ---------
Interest income................ $18,725 $3,073 $(109)(4) $21,689
Interest expense............... 8,809 1,749 -- 10,558
------- ------ ----- -------
Net interest income............ 9,916 1,324 (109) 11,131
Provision for loan loss........ 493 75 -- 568
------- ------ ----- -------
Net interest income after
provision for loan losses..... 9,423 1,249 (109) 10,563
Other income................... 2,238 237 -- 2,475
Other expense.................. 8,161 1,190 171 (3) 9,522
------- ------ ----- -------
Income from continuing
operations before income
taxes......................... 3,500 296 (280) 3,516
Income taxes................... 1,137 101 (37)(5) 1,201
------- ------ ----- -------
Income from continuing
operations.................... $ 2,363 $ 195 $(243) $ 2,315
======= ====== ===== =======
Income per share from
continuing operations......... $ 0.22
=======
Year Ended December 31, 2000
-----------------------------------------------
ABC Pro Forma
Tri-County Golden Isles Adjustments Pro Forma
Combined Historical (Note B) Combined
---------- ------------ ----------- ---------
Interest income............... $72,642 $12,085 $ (665)(4) $84,062
Interest expense.............. 32,820 6,594 -- 39,414
------- ------- ------- -------
Net interest income........... 39,822 5,491 (665) 44,648
Provision for loan loss....... 1,770 335 -- 2,105
------- ------- ------- -------
Net interest income after
provision for loan losses.... 38,052 5,156 (665) 42,543
Other income.................. 8,498 856 -- 9,354
Other expense................. 31,478 4,419 701 (3) 36,598
------- ------- ------- -------
Income from continuing
operations before income
taxes........................ 15,072 1,593 (1,366) 15,299
Income taxes.................. 4,671 511 (226)(5) 4,956
------- ------- ------- -------
Income from continuing
operations................... $10,401 $ 1,082 $(1,140) $10,343
======= ======= ======= =======
Income per share from
continuing operations........ $ 1.03
=======
45
ABC BANCORP AND SUBSIDIARIES AND TRI-COUNTY BANK
COMBINED WITH GOLDEN ISLES FINANCIAL HOLDINGS, INC.
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
(Unaudited)
A. The pro forma condensed balance sheet has been prepared assuming the
proposed merger transaction was consummated on March 31, 2001. The pro
forma condensed statements of income have been prepared assuming the
proposed merger transaction was consummated at the beginning of the periods
indicated.
B. The following pro forma adjustments have been applied to give effect to the
proposed merger transaction described in this proxy statement/prospectus.
Balance Sheet:
(1) Payment of $10,238,000 in cash (representing approximately 42% of
total consideration) and issuance of 1,241,204 shares of ABC common
stock in exchange for 100% of the equity of Golden Isles for a total
consideration of $24,512,000.
(2) Elimination of investment in Golden Isles and allocation of purchase
price as follows:
The excess of purchase price over the fair value of net assets
acquired amounting to $10,230,000 has been allocated to goodwill. Upon
consummation of this transaction, portions of the excess of the
purchase price over the fair value of net assets acquired may be
allocated to specific assets based on the fair value of these assets
on the day of acquisition.
Statement of Income:
(3) Pro forma adjustments to income resulting from the allocation of the
purchase price of Golden Isles as follows:
Amortization of goodwill using the straight-line method over a period
of 15 years.
(4) Loss of interest on investment securities used to fund the acquisition
using an average rate of 4.25% for the three months ended March 31,
2001 and 6.00% for the year ended December 31, 2000.
(5) Tax effect of pro forma adjustment for reduction in interest income
using a tax rate of 34%. No tax effect has been recorded for
amortization of goodwill because ABC is acquiring the stock of Tri-
County Bank and will not be allowed any tax benefit for the
amortization of goodwill.
C. Based on the assumption that the excess purchase price over the fair value
of the net assets acquired will be allocated to goodwill, the effect of the
purchase adjustments described in Note B (3) above and in Note B (3) of
Notes to Pro Forma Condensed Financial Statements of ABC Bancorp and
Subsidiaries Combined with Tri-County would result in a decrease in net
income for each of the next five years of $823,000 assuming that the
transaction was consummated at the beginning of the three months ended
March 31, 2001 and $851,000 assuming that the transaction was consummated
at the beginning of the year ended December 31, 2000.
46
CERTAIN IMPORTANT FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a summary of the material anticipated federal income tax
consequences of the merger. This summary is based on the federal income tax
laws now in effect and as currently interpreted. This summary does not take
into account possible changes in these laws or interpretations, including
amendments to applicable statutes or regulations or changes in judicial or
administrative rulings, some of which may have retroactive effect. This
summary does not address all aspects of the possible federal income tax
consequences of the merger and is not intended as tax advice to any person.
In particular, this summary does not address the federal income tax
consequences of the merger to Golden Isles shareholders in light of their
particular circumstances or status. For example, this summary does not address
the federal income taxation of the merger to Golden Isles shareholders who are
foreign persons, tax-exempt entities, dealers in securities, insurance
companies or corporations, among others. Nor does this summary address any
consequences of the merger under any state, local or foreign laws, or the tax
treatment of shares of Golden Isles or options or other rights to purchase
shares of Golden Isles stock that are or have been received as compensation.
YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISOR AS TO THE SPECIFIC TAX
CONSEQUENCES OF THE MERGER TO YOU, INCLUDING TAX RETURN REPORTING
REQUIREMENTS, THE APPLICATION AND EFFECT OF FEDERAL, FOREIGN, STATE, LOCAL AND
OTHER TAX LAWS, AND THE IMPLICATIONS OF ANY PROPOSED CHANGES IN THE TAX LAWS.
In connection with the filing of the registration statement of which this
document is a part, Rogers & Hardin LLP, counsel to ABC, delivered a tax
opinion to Golden Isles to the effect that, on the basis of certain
representations, and subject to certain assumptions and limitations as stated
therein, the merger will qualify as a tax-free reorganization under Section
368(a) of the Internal Revenue Code and that a Golden Isles shareholder will
not recognize gain on the exchange of shares of Golden Isles common stock in
the merger in excess of the amount of cash received by the shareholder in the
merger. It is a condition to Golden Isles' and ABC's obligations to effect the
merger that such tax opinion shall have been reissued in substantially the
same form as of the effective date of the merger. Although the condition to
receive the tax opinion at the closing of the merger is waivable, if such
condition is waived by both Golden Isles and ABC, then the Golden Isles
shareholders shall be re-solicited with respect to the merger.
The tax opinion of Rogers & Hardin LLP is based upon the Internal Revenue
Code of 1986, the applicable regulations promulgated or proposed thereunder,
current rulings of the Internal Revenue Service and judicial decisions as in
effect on the date of such opinion, all of which are subject to modification
or challenge at any time and perhaps with retroactive effect.
Consequences to Golden Isles' Shareholders
Each Golden Isles shareholder who receives a combination of ABC common stock
and cash pursuant to the merger will realize gain or loss equal to the
difference between (i) the sum of the cash plus the fair market value of the
ABC common stock received and (ii) such shareholder's adjusted tax basis in
the shares of Golden Isles common stock surrendered. Any such gain will only
be recognized to the extent of the cash received. However, any such loss will
not be recognized, but will be reflected in the tax basis of the ABC common
stock received. Accordingly, a Golden Isles shareholder generally will be able
to recognize any such loss as an offset to the amount realized upon a
subsequent sale or exchange of such ABC common stock. For this purpose, gain
or loss must be calculated separately for each identifiable block of shares
surrendered in the exchange, and a loss recognized on one block of shares of
Golden Isles common stock cannot be used to offset a gain recognized on
another block of shares of Golden Isles common stock.
Any gain recognized by a Golden Isles shareholder in the merger will be
eligible for capital gain treatment (assuming the Golden Isles shareholder's
shares of Golden Isles common stock are held as a capital asset by the
shareholder) unless the receipt of cash has "the effect of the distribution of
a dividend" (within the meaning of
47
Section 356 of the Internal Revenue Code taking into account the constructive
ownership rules of Section 318 of the Internal Revenue Code), in which case
such gain will be taxable as ordinary income to the extent of the
shareholder's ratable share of Golden Isles' undistributed earnings and
profits. The principles applicable under Section 302 of the Internal Revenue
Code and the United States Supreme Court decision in Clark v. Commissioner,
109 S. Ct. 1455, 89-1 U.S.T.C. (P) 9230 (1989), will serve as guidelines in
determining whether the receipt of cash has the effect of the distribution of
a dividend under Section 356 of the Internal Revenue Code. Under those
principles, the distribution to a shareholder will not be considered to have
the effect of the distribution of a dividend if it is "substantially
disproportionate" with respect to the shareholder or if it is "not essentially
equivalent to a dividend" to the shareholder. For purposes of these tests and
under Clark, a Golden Isles shareholder will be treated as if he or she
received solely ABC common stock pursuant to the merger and then received cash
through a redemption by ABC of a number of such shares having a value equal to
the cash amount.
Under Clark and Section 302(b)(2) of the Internal Revenue Code, a
distribution will be "substantially disproportionate" with respect to a Golden
Isles shareholder if the shareholder's proportionate interest in ABC common
stock actually held by the shareholder after the merger is less than 80% of
what the shareholder's proportionate interest in the ABC common stock would
have been if solely ABC common stock had been distributed in the merger. In
applying this test for purposes of Section 356 of the Internal Revenue Code,
any shares of ABC common stock already owned by a Golden Isles shareholder
(i.e., shares acquired outside of the merger and held at the effective time of
the merger) are taken into account. In addition, the constructive ownership
rules of Section 318 of the Internal Revenue Code (under which shareholders
are treated as holding not only their own shares but also shares held by
certain related persons and entities) are applicable. Accordingly, even if a
Golden Isles shareholder receives less than 80% of his or her respective
aggregate merger consideration in the form of ABC common stock (and thus more
than 20% in cash), the shareholder may not satisfy the "substantially
disproportionate" test if such shareholder or a related person or entity
already owns any shares of ABC common stock prior to the merger.
Even if the merger distribution does not satisfy the "substantially
disproportionate" test with respect to a particular Golden Isles shareholder,
the distribution still may be "not essentially equivalent to a dividend" to
the shareholder within the meaning of Section 302(b)(1) of the Internal
Revenue Code (and thus may nevertheless qualify for capital gain treatment)
if, given the shareholder's particular facts and circumstances, the merger
distribution results in a "meaningful reduction" in the shareholder's deemed
percentage stock ownership of ABC. The Internal Revenue Service has ruled that
a reduction in the percentage stock ownership of a minority stockholder in a
publicly held corporation whose relative stock interest is minimal and who
exercises no control with respect to corporate affairs constitutes a
"meaningful reduction".
A Golden Isles shareholder who receives ABC common stock and cash will
receive a basis in the ABC common stock equal to the basis of the Golden Isles
stock surrendered in the exchange, decreased by the amount of cash received,
and increased by the amount of any gain recognized on the exchange. The
holding period of the ABC common stock received by such a shareholder will
include the holding period of the shares of Golden Isles stock surrendered in
the exchange, provided the surrendered shares were held as a capital asset as
of the effective time of the merger.
The payment of cash to Golden Isles shareholders in lieu of fractional
shares of ABC common stock will be treated as if such fractional shares were
distributed as part of the exchange and then redeemed for cash. That means
that, in general, gain or loss will be recognized, measured by the difference
between the amount of cash received for such fractional shares and the basis
of the Golden Isles stock allocable to such fractional shares. In general,
such gain or loss will constitute capital gain or loss if the shares of Golden
Isles stock were held as capital assets immediately prior to the effective
time of the merger, which gain or loss will be long-term in nature if the
shares of Golden Isles stock exchanged therefor have been held (or are deemed
to have been held) for more than one year.
48
Consequences to Golden Isles and ABC
If, in accordance with the tax opinion of Rogers & Hardin LLP referred to
above, the merger is treated as a reorganization within the meaning of Section
368(a) of the Code, then no gain or loss will be recognized by ABC or Golden
Isles in the merger.
Dissenting Shareholders
Any stockholder who dissents from the merger and receives solely cash in
exchange for such shareholder's Golden Isles common stock will realize gain or
loss equal to the difference between the cash received (other than amounts, if
any, which are or are deemed to be interest for U.S. federal income tax
purposes, which amounts will be taxed as ordinary income) and the
shareholder's adjusted tax basis in the Golden Isles common stock surrendered.
Any such gain or loss generally should be capital in nature, although any
dissenting shareholder who will directly or constructively (under the
attribution rules of Section 318 of the Internal Revenue Code) own any shares
of ABC common stock immediately after the merger should consult his own tax
advisor to determine whether any such gain could constitute dividend income in
whole or in part.
Backup Withholding
Absent an applicable exemption, ABC's exchange agent must withhold 31% of
the cash consideration to which any Golden Isles shareholder is entitled in
the merger, unless the shareholder provides his or her tax identification
number and certifies, under penalties of perjury, that such number is correct.
Accordingly, if requested by the exchange agent, each Golden Isles shareholder
should complete an IRS Form W-9 or substitute form to provide the information
and certification necessary to avoid this "backup withholding". This
information will be distributed to the Golden Isles shareholders with the
letter of transmittal.
ACCOUNTING TREATMENT
It is anticipated that the merger will be accounted for as a purchase
transaction under accounting principles generally accepted in the United
States. The unaudited pro forma financial information contained in this proxy
statement/prospectus has been prepared using the purchase method of
accounting.
STATUTORY PROVISIONS FOR DISSENTING SHAREHOLDERS
THE FOLLOWING DISCUSSION IS NOT A COMPLETE DESCRIPTION OF THE LAW RELATING
TO APPRAISAL RIGHTS AVAILABLE UNDER GEORGIA LAW AND IS QUALIFIED BY THE FULL
TEXT OF ARTICLE 13 OF THE GEORGIA BUSINESS CORPORATION CODE. ARTICLE 13 IS
REPRINTED IN ITS ENTIRETY AS APPENDIX B TO THIS PROXY STATEMENT/PROSPECTUS. IF
YOU DESIRE TO EXERCISE APPRAISAL RIGHTS, YOU SHOULD REVIEW CAREFULLY ARTICLE
13 AND ARE URGED TO CONSULT A LEGAL ADVISOR BEFORE ELECTING OR ATTEMPTING TO
EXERCISE THESE RIGHTS.
Any holder of record of Golden Isles stock who objects to the merger, and
who fully complies with all of the provisions of Article 13 of the Georgia
Business Corporation Code (but not otherwise), shall be entitled to demand and
receive payment for all (but not less than all) of his or her shares of Golden
Isles stock if the proposed merger is consummated.
A shareholder of Golden Isles who objects to the merger and desires to
receive payment of the "fair value" of his or her Golden Isles stock:
. must file a written objection to the merger with Golden Isles either
prior to the Golden Isles special shareholders' meeting or at the
meeting but before the vote is taken, and the written objection must
contain a statement that the shareholder intends to demand payment for
his or her shares if the merger is approved; AND
49
. must not vote his or her shares in favor of the merger agreement; AND
. must demand payment and deposit his or her certificate(s) in accordance
with the terms of the dissenters' notice sent to the dissenting
shareholder by Golden Isles following approval of the merger.
A VOTE AGAINST THE MERGER ALONE WILL NOT CONSTITUTE THE SEPARATE WRITTEN
NOTICE AND DEMAND FOR PAYMENT REFERRED TO IMMEDIATELY ABOVE. DISSENTING
SHAREHOLDERS MUST SEPARATELY COMPLY WITH ALL THREE CONDITIONS.
Any notice required to be given to Golden Isles must be forwarded to Golden
Isles Financial Holdings, Inc., 3811 Frederica Road, St. Simons Island, Georgia
31522, Attention: Corporate Secretary.
If the merger is approved, Golden Isles will mail, no later than 10 days
after the approval, by certified mail to each shareholder who has complied with
the three conditions above, written notice of such approval, addressed to the
shareholder at such address as the shareholder has furnished Golden Isles in
writing or, if none, at the shareholder's address as it appears on the records
of Golden Isles. Golden Isles will set a date by which it must receive the
payment demand, which date may not be fewer than 30 nor more than 60 days after
the date the dissenters' notice is delivered. The shareholder must make the
written election to dissent and demand for payment described in the third
condition above by the payment demand date as set by Golden Isles.
If all three conditions above are satisfied in full, Golden Isles is required
to make a written offer within 10 days of receiving the payment demand, or
within 10 days after the consummation of the merger, whichever is later, to
each dissenting shareholder to purchase all of such shareholder's shares of
Golden Isles stock at a specific price. If Golden Isles and any dissenting
shareholder are unable to agree on the fair value of the shares within 60 days,
Golden Isles will commence a proceeding in superior court of the county where
its main office is located to determine the rights of the dissenting
shareholders and the fair value of his or her shares. If Golden Isles does not
commence the proceeding within the 60-day period, it must pay each dissenter
whose demand remains unsettled the amount demanded.
In the event of a court proceeding, the court shall determine all costs of
the proceeding, including the reasonable compensation and expenses of
appraisers appointed by the court, but not including fees and expenses of
attorneys and experts for the respective parties. The court will assess these
costs against Golden Isles, except that the court may assess these costs
against all or some of the dissenters in amounts the court finds equitable to
the extent the court finds the dissenters acted arbitrarily or not in good
faith in demanding payment under the dissenters' provisions. The court may also
assess the fees and expenses of attorneys and experts for the respective
parties in amounts the court finds equitable: (a) against Golden Isles and in
favor of any or all dissenters if the court finds Golden Isles did not
substantially comply with the dissenters' provisions; or (b) against Golden
Isles or a dissenter in favor of any other party if the court finds that the
party against whom fees and expenses are assessed acted arbitrarily or not in
good faith with respect to the rights provided by the dissenters' provisions.
If the court finds that the services of attorneys for any dissenter were of
substantial benefit to other dissenters similarly situated and that the fees
for those services should not be assessed against Golden Isles, the court may
award these attorneys reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
One of the conditions to the merger is that the aggregate number of shares of
Golden Isles stock dissenting from the merger shall not exceed five percent of
the outstanding Golden Isles stock. If this condition is not satisfied, ABC
will not be required to consummate the merger, in which event the dissenters'
rights described in this section would also terminate.
Upon compliance with the statutory procedures, dissenting shareholders will
not have any rights as shareholders of Golden Isles or of ABC, including, among
other things, the right to receive dividends and the right to vote on matters
submitted for shareholder consideration.
Golden Isles' shareholders should note that cash paid to dissenting
shareholders in satisfaction of the fair value of their shares will be
recognized as gain or loss for federal income tax purposes.
50
FAILURE BY A GOLDEN ISLES SHAREHOLDER TO FOLLOW THE STEPS REQUIRED BY THE
GEORGIA BUSINESS CORPORATION CODE FOR PERFECTING APPRAISAL RIGHTS MAY RESULT IN
THE LOSS OF SUCH RIGHTS. IN VIEW OF THE COMPLEXITY OF THESE PROVISIONS AND THE
REQUIREMENT THAT THEY BE STRICTLY COMPLIED WITH, IF YOU HOLD GOLDEN ISLES
COMMON STOCK AND ARE CONSIDERING DISSENTING FROM THE APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT AND EXERCISING YOUR APPRAISAL RIGHTS UNDER THE GEORGIA
BUSINESS CORPORATION CODE, YOU SHOULD CONSULT YOUR LEGAL ADVISORS.
RESTRICTIONS ON RESALES BY AFFILIATES
The shares of ABC common stock to be issued in the merger will be freely
transferable under the Securities Act of 1933. However, this will not be the
case for shares issued to any shareholder who may be deemed to be an
"affiliate" of Golden Isles for purposes of Rule 145 under the Securities Act
of 1933 as of the date of the special shareholders' meeting. Affiliates may
resell their ABC common stock only in transactions registered under the
Securities Act of 1933 or permitted by the resale provisions of Rule 145 under
the Securities Act of 1933 or as otherwise permitted thereby. These rules also
apply to ABC common stock owned by affiliates of ABC. Affiliates generally
include individuals or entities that directly, or indirectly through one or
more intermediaries, control, are controlled by or are under common control
with ABC or Golden Isles and include directors, certain executive officers and
principal shareholders. The restrictions on resales by an affiliate extend also
to certain related parties of the affiliate, including spouses, relatives and
spouse's relatives who in each case have the same home as the affiliate.
The merger agreement requires Golden Isles to use its best efforts to cause
each of its affiliates to deliver a written agreement to ABC to the effect
generally that the affiliate will not offer or otherwise dispose of any shares
of ABC stock owned by the affiliate, except in compliance with the Securities
Act of 1933 and the rules and regulations issued thereunder.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
General
Some of Golden Isles' employees and directors may be deemed to have interests
in the merger in addition to their interests as shareholders generally. These
interests include, among others, an employment agreement with Michael D.
Hodges, President and Chief Operating Officer of Golden Isles, an agreement
with J. Thomas Whelchel, Chairman of the Board and Chief Executive Officer of
Golden Isles, relating to certain services rendered by him in connection with
the merger, proposed employee benefits for those who become employees of an ABC
subsidiary after the merger and directors and officers insurance coverage.
Employment Agreement of Michael D. Hodges
Upon consummation of the merger, The First Bank of Brunswick, which will at
that time and thereafter be a wholly-owned subsidiary of ABC, will enter into
an employment agreement with Michael D. Hodges. Mr. Hodges will be employed as
the President and Chief Executive Officer of The First Bank of Brunswick. His
term of employment will be for a period of one year and, on the first
anniversary and on each anniversary thereafter, the term will be extended for
an additional one-year period, provided that either party, by providing 90 days
advance written notice to the other, may cause the term of employment to cease
to extend automatically. Once either party provides such notice, the employment
relationship will terminate when the current term, including any prior
extensions, ends.
Mr. Hodges' initial annual base salary will be $130,000, subject to annual
increases as may be approved by the Compensation Committee of the board of
directors of ABC in its sole discretion. Mr. Hodges will also be eligible for
an annual bonus based on performance criteria established from year to year by
the Compensation
51
Committee of the board of directors of ABC. If Mr. Hodges terminates the
employment agreement for "good reason" within a period of one year after a
"change of control" of ABC occurs, then ABC will:
. pay to Mr. Hodges for three more years his base salary at the time plus
an annual bonus equal to 40% of his base salary at the time;
. continue to provide Mr. Hodges with the employee benefits he received at
termination and make the maximum contributions allowable under ABC's
Money Purchase Pension Plan and 401(k) Profit Sharing Plan for a period
of three years after termination; and
. reimburse Mr. Hodges for reasonable relocation expenses within 500 miles
of St. Simons Island, Georgia if such relocation occurs within 180 days
after termination.
The employment agreement also contains restrictions on the ability of Mr.
Hodges to compete with The First Bank of Brunswick for a period of two years
following the date of termination for cause, as defined in the employment
agreement, or by Mr. Hodges without good reason. He is also restricted with
respect to the disclosure and use of The First Bank of Brunswick's
confidential information and trade secrets. In addition, he is restricted for
a period of two years in his ability to solicit the bank's customers with whom
he had material contact during his employment with the bank.
Agreement with J. Thomas Whelchel
In March 2001, Golden Isles' board of directors agreed to compensate Mr.
Whelchel for his time spent in connection with exploring Golden Isles'
possibilities for merger and for time spent in negotiating and consummating
the merger over and above his time spent serving Golden Isles as a director.
The Golden Isles board of directors agreed to pay Mr. Whelchel $13,611.00. Mr.
Whelchel will receive no further compensation in connection with his services
to Golden Isles in connection with the merger.
Upon consummation of the merger, Mr. Whelchel will remain as a director of
The First Bank of Brunswick, but will resign his position as Chief Executive
Officer.
Sale of Promissory Note
The merger agreement provides that the cash portion of the aggregate merger
consideration will be reduced by the amount of all payments made by Golden
Isles to Fleet Mortgage Corp. in respect of recently-settled litigation
involving Golden Isles in excess of $25,000.00 and the amount of any cash
received by Golden Isles prior to the effective time of the merger from the
sale or collection of a promissory note executed in favor of First Bank
Mortgage Corporation. Accordingly, at the effective time of the merger, the
cash portion of the aggregate merger consideration will be reduced by
$65,000.00 unless Golden Isles can sell or collect such promissory note prior
to the merger. If Golden Isles cannot sell or collect such promissory note
prior to the merger, then certain of Golden Isles' directors may choose to
purchase the promissory note prior to the merger, provided that a committee of
disinterested members of the Golden Isles board of directors approves such
transaction.
Employee Benefits
The merger agreement generally provides that ABC will allow Golden Isles
employees who remain employees after the effective time of the merger to
participate in employee benefit plans and policies on terms that, when taken
as a whole, are substantially similar to those currently provided by Golden
Isles to employees in comparable positions. For purposes of calculating an
employee's accrual of sick time, vacation time, eligibility for and vesting
under any ABC employee benefit plans, service with Golden Isles prior to the
effective time of the merger will be treated as service with ABC.
Shares Owned by Management and the Golden Isles Board
As of the record date, the directors and executive officers of Golden Isles
beneficially own approximately 683,230 shares, or approximately 28%, of the
issued and outstanding Golden Isles common stock.
52
DESCRIPTION OF THE ABC STOCK
General
ABC's authorized capital stock consists of 30,000,000 shares of common
stock, $1.00 par value per share, of which 8,638,902 shares were issued and
outstanding as of the record date for the Golden Isles special shareholders'
meeting, and 5,000,000 shares of preferred stock, none of which are issued and
outstanding. ABC has reserved 637,500 shares of ABC common stock for issuance
pursuant to outstanding options to purchase such shares.
Common Stock
The holders of ABC common stock are entitled to receive dividends when, as
and if declared by ABC's board of directors and paid by ABC out of funds
legally available therefor and to share ratably in the assets of ABC available
for distribution after the payment of all prior claims in the event of any
liquidation, dissolution or winding-up of ABC. All outstanding shares of ABC
common stock are duly authorized and validly issued, fully paid and
nonassessable.
Under Federal Reserve policy, a bank holding company is expected to act as a
source of financial strength to each of its subsidiary banks and to commit
resources to support each such bank. Consistent with this policy, the Federal
Reserve has stated that, as a matter of prudent banking, a bank holding
company generally should not maintain a rate of cash dividends, unless the
available net income of the bank holding company is sufficient to fully fund
the dividends and the prospective rate of earnings retention appears to be
consistent with its capital needs, asset quality and overall financial
condition.
The ability of ABC to pay cash dividends is currently influenced, and in the
future could be further influenced, by bank regulatory policies or agreements
and by capital guidelines. Accordingly, the actual amount and timing of future
dividends, if any, will depend on, among other things, future earnings, the
financial condition of ABC and each of its subsidiary banks, the amount of
cash on hand at the holding company level, outstanding debt obligations, if
any, and the requirements imposed by regulatory authorities.
Holders of ABC common stock are entitled to one vote per share on all
matters requiring a vote of shareholders. The ABC common stock does not have
cumulative voting rights, which means that the holders of more than 50% of the
outstanding ABC common stock voting for the election of directors can elect
100% of the directors if they choose to do so. In such event, the holders of
the remaining ABC common stock will not be able to elect any of the directors.
Preferred Stock
No shares of ABC's preferred stock have been issued. ABC's board of
directors is authorized to issue the preferred stock, without shareholder
approval, in one or more series and to fix and determine, among other things:
the dividend payable with respect to such shares of preferred stock, including
whether and in what manner such dividend shall be accumulated; whether such
shares shall be redeemable and, if so, the prices, terms and conditions of
such redemption; the amount payable on such shares in the event of voluntary
or involuntary liquidation; the nature of any purchase, retirement or sinking
fund provisions; the nature of any conversion rights with respect to such
shares; and the extent of the voting rights, if any, of such shares. Certain
of such rights may, under certain circumstances, adversely affect the rights
or interests of holders of ABC common stock. In addition, the preferred stock
may be issued as a defensive device to thwart an attempted hostile takeover of
ABC.
Limitation of Directors' Liability
ABC's Articles of Incorporation provide that no director of ABC shall be
liable to ABC or its shareholders for monetary damages for breach of the duty
of care or other duty as a director, except for liability (i) for any
appropriation, in violation of the director's duties, of any business
opportunity of ABC, (ii) for acts or omissions
53
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) in respect of certain unlawful dividend payments or
stock redemptions or repurchases, or (iv) for any transaction from which the
director derived an improper personal benefit. The effect of these provisions
is to eliminate the rights of ABC and its shareholders (through shareholders'
derivative suits on behalf of ABC) to recover monetary damages against a
director for breach of fiduciary duty as a director (including breaches
resulting from grossly negligent behavior), except in the situations described
above. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
ABC pursuant to the foregoing, ABC has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable.
Certain Antitakeover Provisions of ABC's Articles of Incorporation
The issuance of shares of ABC common stock or preferred stock may place ABC
in a position to deter a future takeover attempt that some shareholders may
favor. In the event of a proposed merger, tender offer or other attempt to
gain control of ABC, it will be possible for the board of directors to
authorize the issuance of ABC's preferred stock to impede completion of the
proposed merger, tender offer or other attempt to gain control. The ABC board
of directors, however, did not consider the potential deterrent as a reason
for establishing the number of its authorized shares.
ABC's Articles of Incorporation provide that the board of directors of ABC
be divided into three classes of directors as nearly equal in number as
possible. At each annual meeting of shareholders, one class of directors is
elected for a three-year term. Classification of directors has the effect of
making it more difficult for shareholders to change the composition of the ABC
board of directors. At least two annual meetings of shareholders, instead of
one, will generally be required to effect a change in the majority of the
board of directors of ABC. Such classification provisions, therefore, could
also have the effect of discouraging a third party from initiating a proxy
contest, making a tender offer or otherwise attempting to obtain control of
ABC.
On February 23, 1998, the board of directors of ABC declared a dividend
distribution of one preferred share purchase right on each outstanding share
of its common stock. The purchase rights are designed to assure that all of
ABC's shareholders receive fair and equal treatment in the event of any
proposed takeover of ABC and to guard against partial tender offers, squeeze-
outs, open market accumulations and other abusive tactics to gain control of
ABC without paying all ABC shareholders the full value of their investment.
The purchase rights will not prevent a takeover; however, they should
encourage anyone seeking to acquire ABC to negotiate with ABC's board of
directors prior to attempting a takeover.
Transfer Agent
SunTrust Bank, Atlanta currently acts as the transfer agent for the ABC
common stock.
SUPERVISION AND REGULATION
The following discussion sets forth certain of the material elements of the
regulatory framework applicable to banks and bank holding companies and
provides certain specific information relevant to ABC and Golden Isles. A
change in applicable statutes, regulations or regulatory policy may have a
material effect on the business of ABC.
General
ABC and Golden Isles are both bank holding companies registered with the
Federal Reserve and the Georgia Department of Banking and Finance under The
Bank Holding Company Act and The Georgia Bank Holding Company Act,
respectively. As a result, our companies are subject to the supervision,
examination and
54
reporting requirements of these acts and the regulations of the Federal
Reserve and the Georgia Department of Banking and Finance issued under these
acts. ABC's subsidiary banks are Georgia, Alabama, Florida and Federally
chartered commercial banks, and The First Bank of Brunswick is a Georgia
chartered bank. Each of our bank subsidiaries is insured by the FDIC to the
full extent permitted by law. As a result, our banks are subject to the
supervision, examination and reporting requirements of the Georgia Department
of Banking and Finance, the Alabama State Banking Department, the Florida
Department of Banking and Finance, the FDIC and the OCC.
The Bank Holding Company Act requires every bank holding company to obtain
the prior approval of the Federal Reserve before:
. it may acquire direct or indirect ownership or control of any voting
shares of any bank if, after the acquisition, the bank holding company
will directly or indirectly own or control more than 5% percent of the
voting shares of the bank;
. it or any of its subsidiaries, other than a bank, may acquire all or
substantially all of the assets of any bank; or
. it may merge or consolidate with any other bank holding company.
The Bank Holding Company Act further provides that the Federal Reserve may
not approve any transaction that would result in a monopoly or that would
substantially lessen competition in the banking business, unless the public
interest in meeting the needs of the communities to be served outweighs the
anti-competitive effects. The Federal Reserve is also required to consider the
financial and managerial resources and future prospects of the bank holding
companies and banks involved and the convenience and needs of the communities
to be served. Consideration of financial resources generally focuses on
capital adequacy, and consideration of convenience and needs issues focuses,
in part, on the performance under The Community Reinvestment Act of 1977, both
of which are discussed in more detail below.
The Bank Holding Company Act generally prohibits a bank holding company from
engaging in activities other than:
. banking;
. managing or controlling banks or other permissible subsidiaries; and
. acquiring or retaining direct or indirect control of any company engaged
in any activities other than activities closely related to banking or
managing or controlling banks.
The activities in which holding companies and their affiliates are permitted
to engage were substantially expanded by The Gramm-Leach-Bliley Act, which
then-President Clinton signed on November 12, 1999. The Gramm-Leach-Bliley Act
repeals the anti-affiliation provisions of The Glass-Steagall Act to permit
the common ownership of commercial banks, investment banks and insurance
companies. The Gramm-Leach-Bliley Act also amends The Bank Holding Company Act
to permit a financial holding company to, among other things, engage in any
activity that the Federal Reserve determines to be (i) financial in nature or
incidental to such financial activity or (ii) complementary to a financial
activity and not a substantial risk to the safety and soundness of depository
institutions or the financial system generally. The Federal Reserve must
consult with the Secretary of the Treasury in determining whether an activity
is financial in nature or incidental to a financial activity. Holding
companies may continue to own companies conducting activities which had been
approved by federal order or regulation on the day before The Gramm-Leach-
Bliley Act was enacted. Effective August 24, 2000, pursuant to a previously-
filed election with the Federal Reserve, ABC became a financial holding
company.
In determining whether a particular activity is permissible, the Federal
Reserve considers whether performing the activity can be expected to produce
benefits to the public that outweigh possible adverse effects, such as undue
concentration of resources, decreased or unfair competition, conflicts of
interest or unsound banking practices. The Federal Reserve has the power to
order a bank holding company or its subsidiaries to terminate any activity or
control of any subsidiary when the continuation of the activity or control
constitutes a serious risk to the financial safety, soundness or stability of
any bank subsidiary of that bank holding company.
55
Our banks are also subject to numerous state and federal statutes and
regulations that affect their business, activities and operations, and each is
supervised and examined by one or more state or federal bank regulatory
agencies. Our subsidiary banks are subject to regulation, supervision and
examination by the FDIC, the OCC, the Georgia Department of Banking and
Finance, the Alabama State Banking Department and the Florida Department of
Banking and Finance. The FDIC, the OCC, the Georgia Department of Banking and
Finance, the Alabama State Banking Department and the Florida Department of
Banking and Finance regularly examine the operations of our banks and are
given the authority to approve or disapprove mergers, consolidations, the
establishment of branches and similar corporate actions. The FDIC, the OCC,
the Georgia Department of Banking and Finance, the Alabama State Banking
Department and the Florida Department of Banking and Finance also have the
power to prevent the continuance or development of unsafe or unsound banking
practices or other violations of law.
Payment of Dividends
ABC and Golden Isles are legal entities separate and distinct from their
bank subsidiaries. Substantially all of ABC's and Golden Isles' revenues
result from amounts paid as dividends to ABC and Golden Isles by their
subsidiary banks. Our banking subsidiaries are subject to statutory and
regulatory limitations on the payment of dividends to ABC and Golden Isles.
ABC and Golden Isles are also subject to statutory and regulatory limitations
on dividend payments to their shareholders.
If, in the opinion of the federal banking regulators, a depository
institution under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice, the regulatory authority may require, after notice
and hearing, that the institution cease and desist from the practice. The
federal banking agencies have indicated that paying dividends that deplete a
depository institution's capital base to an inadequate level would be an
unsafe and unsound banking practice. Under the Federal Deposit Insurance
Corporation Improvement Act of 1991, a depository institution may not pay any
dividend if payment would cause it to become undercapitalized or if it already
is undercapitalized. The federal agencies have also issued policy statements
that provide that bank holding companies and insured banks should generally
only pay dividends out of current operating earnings. See "Prompt Corrective
Action" at page 58.
The Georgia Financial Institutions Code and the Georgia Department of
Banking and Finance's regulations provide:
. that dividends of cash or property may be paid only out of the bank's
retained earnings;
. that dividends may not be paid if the banks' paid-in capital and
retained earnings which are set aside for dividend payment and other
distributions do not, in combination, equal at least 20% of the bank's
capital stock; and
. that dividends may not be paid without prior approval of the Georgia
Department of Banking and Finance if
. the bank's total classified assets at its most recent examination
exceed 80% of its equity capital;
. the aggregate amount of dividends to be declared exceeds 50% of the
bank's net profits after taxes but before dividends for the previous
calendar year; or
. the ratio of equity capital to total adjusted assets is less than
6%.
Applying these dividend restrictions, and without prior approval of the
Georgia Department of Banking and Finance, and (in the case of ABC) applying
similar rules of the Alabama State Banking Department and without its prior
approval, as of December 31, 2000, all of ABC's bank subsidiaries paid cash
dividends to ABC, and The First Bank of Brunswick paid cash dividends to
Golden Isles.
The payment of dividends by our bank holding companies and our subsidiaries
may also be affected or limited by other factors, such as a requirement by a
regulatory agency to maintain adequate capital above regulatory guidelines.
56
Financial Relationship Between ABC and Golden Isles and their Subsidiaries
There are also various legal restrictions on the extent to which ABC or
Golden Isles can borrow or otherwise obtain credit from their banking
subsidiaries. In general, these restrictions require that any such extensions
of credit must be secured by designated amounts of specified collateral and
are limited to 10% of any banking subsidiary's capital stock and surplus.
Under Federal Reserve policy, ABC and Golden Isles are expected to act as a
source of financial strength to their banking subsidiaries and to commit
resources to support each banking subsidiary. This support may be required at
times when, absent such Federal Reserve policy, ABC or Golden Isles may not
find itself willing or able to provide it.
Any capital loans by a bank holding company to a subsidiary bank are
subordinate in right of payment to deposits and to certain other indebtedness
of the subsidiary bank. In the event of a bank holding company's bankruptcy,
any commitment by the bank holding company to a federal bank regulatory agency
to maintain the capital of a subsidiary bank will be assumed by the bankruptcy
trustee and entitled to a priority of payment.
Capital Adequacy
ABC and Golden Isles must comply with the Federal Reserve's established
capital adequacy standards, and our subsidiary banks are required to comply
with the capital adequacy standards established by the FDIC and the OCC. The
Federal Reserve has promulgated two basic measures of capital adequacy for
bank holding companies: a risk-based measure and a leverage measure. A bank
holding company must be satisfy all applicable capital standards 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;
. account for off-balance-sheet exposure; and
. 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
is 8%. At least half of total capital must be comprised of Tier 1 Capital,
which is common stock, undivided profits, minority interests in the equity
accounts of consolidated subsidiaries and noncumulative perpetual preferred
stock, less goodwill and certain other intangible assets. The remainder may
consist of Tier 2 Capital, which is subordinated debt, other preferred stock
and a limited amount of loan loss reserves. At March 31, 2001, ABC's total
risk-based capital ratio and its Tier 1 risk-based capital ratio were 14.50%
and 13.25%, respectively. On an ABC and Golden Isles combined basis, such
ratios at December 31, 2000, would have been 12.75% and 11.46%, respectively.
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 Capital to average assets, less goodwill and certain other
intangible assets, of 3% for bank holding companies that meet specified
criteria. All other bank holding companies generally are required to maintain
a minimum leverage ratio of 4%. ABC's ratio at December 31, 2000 was 9.89%. On
an ABC and Golden Isles combined basis, such ratio at December 31, 2000 would
have been 8.24%. The guidelines also provide that bank holding companies
experiencing internal growth or making acquisitions will be expected to
maintain strong capital positions substantially above the minimum supervisory
levels without significant reliance on intangible assets. Furthermore, the
Federal Reserve has indicated that it will consider a "tangible Tier 1 Capital
leverage ratio" and other indicia of capital strength in evaluating proposals
for expansion or new activities. The Federal Reserve has not advised ABC of
any specific minimum leverage ratio or tangible Tier 1 Capital leverage ratio
applicable to it.
57
ABC's and Golden Isles' subsidiary banks are subject to risk-based and
leverage capital requirements adopted by the FDIC and the OCC which are
substantially similar to those adopted by the Federal Reserve for bank holding
companies. Our banks were in compliance with applicable minimum capital
requirements as of December 31, 2000.
Neither of our bank holding companies nor any of our bank subsidiaries has
been advised by any federal banking agency of any specific minimum capital
ratio requirement applicable to it.
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 taking brokered
deposits, and certain other restrictions on its business. As described below,
the FDIC can impose substantial additional restrictions upon FDIC-insured
depository institutions that fail to meet applicable capital requirements. See
"Prompt Corrective Action", below.
Prompt Corrective Action
The Federal Deposit Insurance Act, among other things, requires the federal
regulatory agencies to take "prompt corrective action" if a depository
institution does not meet minimum capital requirements. The FDI Act
establishes five capital tiers: "well capitalized", "adequately capitalized",
"undercapitalized", "significantly undercapitalized" and "critically
undercapitalized". A depository institution's capital tier will depend upon
how its capital levels compare to various relevant capital measures and
certain other factors, as established by regulation.
The federal bank regulatory agencies have adopted regulations establishing
relevant capital measures and relevant capital levels applicable to FDIC-
insured banks. The relevant capital measures are the Total Capital ratio, Tier
1 Capital ratio and the leverage ratio. Under the regulations, a FDIC-insured
bank will be:
. "well capitalized" if it has a Total Capital ratio of 10% or greater, a
Tier 1 Capital ratio of 6% or greater and a leverage ratio of 5% or
greater and is not subject to any order or written directive by the
appropriate regulatory authority to meet and maintain a specific capital
level for any capital measure;
. "adequately capitalized" if it has a Total Capital ratio of 8% or
greater, a Tier 1 Capital ratio of 4% or greater and a leverage ratio of
4% or greater (3% in certain circumstances) and is not "well
capitalized";
. "undercapitalized" if it has a Total Capital ratio of less than 8%, a
Tier 1 Capital ratio of less than 4% or a leverage ratio of less than 4%
(3% in certain circumstances);
. "significantly undercapitalized" if it has a Total Capital ratio of less
than 6%, a Tier 1 Capital ratio of less than 3% or a leverage ratio of
less than 3%; and
. "critically undercapitalized" if its tangible equity is equal to or less
than 2% of average quarterly tangible assets.
An institution may be downgraded to, or deemed to be in, a capital category
that is lower than is indicated by its capital ratios if it is determined to
be in an unsafe or unsound condition or if it receives an unsatisfactory
examination rating with respect to certain matters. As of March 31, 2001 and
December 31, 2000, ABC's subsidiary banks had capital levels that qualify each
as being "well capitalized", and The First Bank of Brunswick had a capital
level that qualifies it as "well-capitalized" under such regulations.
The FDI Act generally prohibits an FDIC-insured bank from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the bank would thereafter be "undercapitalized".
"Undercapitalized" banks are subject to growth limitations and are required to
submit a capital restoration plan. The federal regulators 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 bank's
capital. In
58
addition, for a capital restoration plan to be acceptable, the bank's parent
holding company must guarantee that the institution will comply with such
capital restoration plan. The aggregate liability of the parent holding
company is limited to the lesser of: (i) an amount equal to 5% of the bank's
total assets at the time it became "undercapitalized"; and (ii) the amount
which is necessary (or would have been necessary) to bring the institution
into compliance with all capital standards applicable with respect to such
institution as of the time it fails to comply with the plan. If a bank fails
to submit an acceptable plan, it is treated as if it is "significantly
undercapitalized".
"Significantly undercapitalized" insured banks 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" institutions are subject to the appointment of a receiver or
conservator. A bank that is not "well capitalized" is subject to certain
limitations relating to so-called "brokered" deposits.
Community Reinvestment Act
The Community Reinvestment Act requires federal bank regulatory agencies to
encourage financial institutions to meet the credit needs of low- and
moderate-income borrowers in their local communities. An institution's size
and business strategy determines the type of examination that it will receive.
Large, retail-oriented institutions are examined using a performance-based
lending, investment and service test. Small institutions are examined using a
streamlined approach. All institutions may opt to be evaluated under a
strategic plan formulated with community input and pre-approved by the bank
regulatory agency.
The Community Reinvestment Act regulations provide for certain disclosure
obligations. Each institution must post a notice advising the public of its
right to comment to the institution and its regulator on the institution's
Community Reinvestment Act performance and to review the institution's
Community Reinvestment Act public file. Each lending institution must maintain
for public inspection a public file that includes a listing of branch
locations and services, a summary of lending activity, a map of its
communities and any written comments from the public on its performance in
meeting community credit needs. The Community Reinvestment Act requires public
disclosure of a financial institution's written Community Reinvestment Act
evaluations. This promotes enforcement of Community Reinvestment Act
requirements by providing the public with the status of a particular
institution's community reinvestment record.
The Gramm-Leach-Bliley Act makes various changes to The Community
Reinvestment Act. Among other changes, Community Reinvestment Act agreements
with private parties must be disclosed and annual Community Reinvestment Act
reports must be made to a bank's primary federal regulator. A bank holding
company will not be permitted to become a financial holding company and no new
activities authorized under the Gramm-Leach-Bliley Act may be commenced by a
holding company or by a bank financial subsidiary if any of its bank
subsidiaries received less than a "satisfactory" Community Reinvestment Act
rating in its latest Community Reinvestment Act examination.
Privacy
Financial institutions are required to disclose their policies for
collecting and protecting confidential information. Customers generally may
prevent financial institutions from sharing personal financial information
with nonaffiliated third parties except for third parties which market the
institutions' own products and services. Additionally, financial institutions
generally may not disclose consumer account numbers to any nonaffiliated third
party for use in telemarketing, direct mail marketing or other marketing
through electronic mail to consumers.
Legislative and Regulatory Changes
The Gramm-Leach-Bliley Act allows bank holding companies that are "well
managed" and "well capitalized" and whose depositor subsidiaries have
"satisfactory" or better Community Reinvestment Act
59
ratings to become financial holding companies that may engage in a
substantially broader range of nonbanking activities than are currently
permissible, including insurance underwriting and securities activities.
Fiscal and Monetary Policy
Banking is a business which depends on interest rate differentials. In
general, the difference between the interest paid by a bank on its deposits
and its other borrowings, and the interest received by a bank on its loans and
securities holdings, constitutes the major portion of a bank's earnings. Thus,
the earnings and growth of ABC will be subject to the influence of economic
conditions generally, both domestic and foreign, and also to the monetary and
fiscal policies of the United States and its agencies, particularly the
Federal Reserve. The Federal Reserve regulates the supply of money through
various means, including open market dealings in United States government
securities, the discount rate at which banks may borrow from the Federal
Reserve and the reserve requirements on deposits. The nature and timing of any
changes in such policies and their effect on ABC cannot be predicted.
Current and future legislation and the policies established by federal and
state regulatory authorities will affect ABC's future operations. Banking
legislation and regulations may limit our growth and the return to our
investors by restricting certain of our activities.
In addition, capital requirements could be changed and have the effect of
restricting our activities or requiring additional capital to be maintained.
We cannot predict what changes, if any, will be made to existing federal and
state legislation and regulations or the effect that such changes may have on
ABC's business.
INFORMATION ABOUT ABC
Financial and other information relating to ABC, including information
relating to ABC's current directors and executive officers, are set forth in
ABC's 2000 Annual Report on Form 10-K, ABC's Proxy Statement for the 2001
Annual Meeting of Shareholders filed on April 6, 2001, ABC's 2000 and 2001
Quarterly Reports on Form 10-Q and ABC's 2000 and 2001 Current Reports on Form
8-K, which are incorporated by reference herein and copies of which may be
obtained from ABC as indicated under "Where You Can Get More Information" at
page 90. See "Incorporation of Certain Documents by Reference" at page 91.
ABC is a ten-bank holding company that engages through its subsidiaries,
American Banking Company, Heritage Community Bank, Bank of Thomas County,
Citizens Security Bank, Cairo Banking Company, Southland Bank, Central Bank
and Trust Company, First National Bank of South Georgia, Merchants & Farmers
Bank and Tri-County Bank, in providing full banking services to customers of
the subsidiary banks. ABC is engaged in a full range of traditional banking,
mortgage banking, investment and insurance services to individual and
corporate customers through its 30 banking locations.
INFORMATION ABOUT GOLDEN ISLES
General
Golden Isles Financial Holdings, Inc. was incorporated under the laws of
Georgia on September 8, 1987, but conducted only organizational activities
until its initial public offering closed on January 31, 1990. Upon the
approval of its application by the Federal Reserve under The Bank Holding
Company Act, Golden Isles became a bank holding company. Golden Isles used the
proceeds of its initial public offering to acquire all of the capital stock of
The First Bank of Brunswick, a de novo bank chartered by the State of Georgia.
The First Bank of Brunswick opened for business on July 2, 1990, to engage
in a general commercial banking business in its office in Brunswick (Glynn
County), Georgia. Since that date, The First Bank of
60
Brunswick has engaged in a general commercial banking business, emphasizing
the banking needs of individuals and small-to medium sized businesses in its
primary service area. In 1995, The First Bank of Brunswick opened a second
full service office in St. Simons Island, Georgia.
In September 1993, Golden Isles received approval from the Federal Reserve
to establish and operate First Bank Mortgage Corporation as a wholly-owned
subsidiary of Golden Isles to engage in originating, making, acquiring and
servicing mortgage loans. On January 1, 1996, First Bank Mortgage Corporation
had offices in St. Simons Island, Georgia, Savannah (Chatham County), Georgia
and Blairsville (Union County), Georgia. In January 1996, First Bank Mortgage
Corporation opened a fourth office in Memphis, Tennessee. Until 1996, First
Bank Mortgage Corporation engaged in various aspects of the mortgage loan
business. As discussed below, in the second half of 1996, Golden Isles decided
to discontinue certain of First Bank Mortgage Corporation's activities and
incorporate the remaining function within the real estate lending function of
The First Bank of Brunswick. As of December 31, 1996, First Bank Mortgage
Corporation had only two offices on St. Simons Island, Georgia and in Memphis,
Tennessee. The Memphis office closed on March 1, 1997. The St. Simons Island
office closed in April, 1997. Golden Isles completed its restructuring of its
mortgage banking activities in 1998 by reorganizing all mortgage banking
activities within the bank, liquidating the assets of First Bank Mortgage
Corporation and discontinuing its operations.
In September, 1993, Golden Isles received approval from the Federal Reserve
to establish and operate First Credit Service Corporation as a wholly-owned
subsidiary of Golden Isles to engage in originating, making, acquiring and
servicing consumer loans, as well as offering credit-related insurance on such
loans. First Credit Service Corporation has, since then, engaged in the
consumer loan business. As of December 31, 1996, First Credit Service
Corporation had six Georgia offices, in Brunswick, Kingsland, Savannah,
Waycross, Martinez and Garden City. The Waycross and Garden City offices of
First Credit Service Corporation were closed in December and September,
respectively, 1997, and First Credit Service Corporation continued to conduct
its operations from its Brunswick, Savannah, Martinez and Kingsland, Georgia,
offices. In August, 1998, substantially all of the assets of First Credit
Service Corporation were sold, and Golden Isles discontinued its operations.
Golden Isles continues to own all of the outstanding capital stock of The
First Bank of Brunswick, First Bank Mortgage Corporation and First Credit
Service Corporation.
The First Bank of Brunswick
The First Bank of Brunswick conducts a general commercial and retail banking
business, emphasizing in its marketing its local management and ownership. The
First Bank of Brunswick accepts demand, savings and time deposits of
individuals, partnerships and corporations and offers commercial and retail
checking accounts, Super NOW accounts, money market accounts, individual
retirement accounts and certificates of deposit. The First Bank of Brunswick
makes various types of level term and installment loans, both personal and
commercial, and makes and services long-term mortgage loans and individual and
business loans. The First Bank of Brunswick acts as an issuing agent for U.S.
savings bonds, traveler's checks, money orders and cashier's checks and offers
collection teller services, including wire transfer services. The First Bank
of Brunswick also offers safe deposit boxes and a night depository facility.
During 2000, The First Bank of Brunswick began offering the sale of nondeposit
investment and annuity products through Raymond James Financial Services, Inc.
and currently provides these services from its main office and branches in
North Glynn County, Jekyll Island and St. Simons Island, Georgia. Bank
deposits are insured by the FDIC up to applicable limits.
Market Area and Competition
The primary service area of Golden Isles is the Brunswick area banking
market, consisting of Brantley, Glynn and McIntosh Counties, Georgia, which is
approximately 75 miles south of Savannah, Georgia and 80 miles north of
Jacksonville, Florida. Golden Isles encounters competition in its primary
service area and in surrounding areas from eight other commercial banks. These
competitors offer a full range of banking services and vigorously compete for
all types of services, especially deposits.
61
While Golden Isles experiences competition from financial institutions
headquartered in Glynn County, it also encounters competition from banks
outside of Glynn County, including Internet-only banks, seeking to make loans
in, and obtain deposits from, Golden Isles' primary service area. In addition,
in certain aspects of its banking business, Golden Isles also competes with
credit unions, small loan companies, consumer finance companies, brokerage
houses, insurance companies, money market funds and other financial
institutions which have recently entered the traditional banking markets.
The extent to which other types of financial institutions compete with
commercial banks has increased significantly within the past few years as a
result of federal and state legislation which has, in several respects,
deregulated financial institutions. See "Supervision and Regulation" at page
54. The full impact of this legislation and subsequent laws that will continue
to deregulate the financial services industry even further cannot be fully
assessed or predicted.
Deposits
Golden Isles offers a wide range of commercial and consumer interest bearing
and non-interest bearing deposit accounts, including checking accounts, money
market accounts, negotiable order of withdrawal (or "NOW") accounts,
individual retirement accounts, certificates of deposit and regular savings
accounts. The sources of deposits are residents, businesses and employees of
businesses within Golden Isles' market area, obtained through the personal
solicitation of Golden Isles' officers and directors, direct mail solicitation
and advertisements published in the local media. Golden Isles pays competitive
interest rates on time and savings deposits. In addition, Golden Isles has
implemented a service charge fee schedule competitive with other financial
institutions in Golden Isles' market area, covering such matters as
maintenance fees on checking accounts, per item processing fees on checking
accounts, returned check charges and the like.
Loan Portfolio
Golden Isles engages in a full complement of lending activities, including
commercial, consumer/ installment and real estate loans.
Lending is directed principally towards individuals and businesses whose
demands for funds fall within Golden Isles' legal lending limits and which are
potential deposit customers of Golden Isles. This category of loans includes
loans made to individual, partnership or corporate borrowers and obtained for
a variety of business purposes. Particular emphasis is placed on small and
middle market commercial loans and owner-occupied commercial and residential
real estate loans. Golden Isles has no foreign loans outstanding.
Golden Isles may originate loans and participate with other banks with
respect to loans which exceed Golden Isles' lending limits. Management of
Golden Isles does not believe that loan participations necessarily pose any
greater risk of loss than loans which Golden Isles originates.
No material portion of Golden Isles' outstanding loans was concentrated
within a single industry or group of related industries, with the exception of
residential and commercial mortgage loans. As of December 31, 2000, 81% of
Golden Isles' outstanding loans consisted of residential and commercial
mortgage loans. There are no material seasonal factors that would have an
adverse impact on Golden Isles' outstanding loans. However, because Golden
Isles derives a substantial portion of its business from mortgage loans, to
the extent that fluctuations and changes occur in the housing industry, Golden
Isles' business could fluctuate as well.
The following is a description of each of the major categories of loans in
Golden Isles' loan portfolio:
Commercial and Financial. These loans are customarily granted to local
business customers on a fully collateralized basis to meet local credit needs.
The risks of these types of loans depend on the general business conditions of
the local economy and the local business borrower's ability to sell its
products and services in order to generate sufficient business profits to
repay Golden Isles under the agreed upon terms and conditions. The value of
the collateral held by Golden Isles as a measure of safety against loss is
most volatile in this loan category.
62
Real Estate-Construction. These loans are made for the construction of
single family residences in Golden Isles' market area. The loans are granted
to qualified individuals with down payments of at least 20% of the appraised
value or contract price, whichever is less. These loans generally command
higher rates and fees commensurate with the risk warranted in the construction
lending field. The risk in construction lending is dependent upon the
performance of the builder in building the project to the plans and
specifications of the borrower and Golden Isles' ability to administer and
control all phases of the construction disbursements. Upon completion of the
construction period, the mortgage is converted to a permanent loan and
normally sold to an investor in the secondary mortgage market.
Real Estate-Mortgage. Golden Isles' adjustable rate mortgages include
lifetime interest rate caps. All such loans are qualified and underwritten to
meet FHLMC guidelines, and no negative amortized loans are offered. No loans
carry a prepayment penalty clause and, therefore, can be paid out or
refinanced at a fixed rate, thus reducing the default risk. These loans are
priced according to proper index and margin and should not lag behind funding
costs.
Installment Loans. These loans are granted to individuals for the purchase
of personal goods such as automobiles, recreational vehicles, mobile homes and
for the improvement of single family real estate in the form of second
mortgages. Golden Isles obtains a lien against the item purchased by the
consumer and holds title until the loan is repaid in full. Loss or decline of
income by the borrower due to layoffs, divorce or unexpected medical expenses
represent unplanned occurrences that may represent risk of default to Golden
Isles. In the event of default, a shortfall in the value of the collateral may
pose a loss to Golden Isles in this loan category.
Home Equity Loans. Golden Isles also offers home equity loans to qualified
borrowers. Golden isles requires a first or second mortgage position and loans
are made on principal residences only.
Community Reinvestment Act
Golden Isles and The First Bank of Brunswick are subject to the provisions
of the Community Reinvestment Act and the federal banking agencies'
regulations issued thereunder. Interagency CRA regulations provide that an
institution evaluated under a given test will receive one of five ratings:
(i) outstanding; (ii) high satisfactory; (iii) low satisfactory; (iv) needs to
improve; and (v) substantial noncompliance. An institution will receive a
certain number of points for its rating on each test, and points are combined
to produce an overall composite rating. Evidence of discriminatory or other
illegal credit practices would adversely affect an institution's overall
rating. As a result of The First Bank of Brunswick's most recent CRA
examination, The First Bank of Brunswick received a "satisfactory" CRA rating.
Correspondent Banking
Correspondent banking involves the providing of services by one bank to
another bank which cannot provide that service for itself from an economic or
practical standpoint. Golden Isles is required to purchase correspondent
services offered by larger banks, including check collections, purchase of
Federal Funds, security safekeeping, investment services, coin and currency
supplies, overline and liquidity loan participations and sales of loans to or
participations with correspondent banks.
Golden Isles may sell loan participations to correspondent banks with
respect to loans which exceed Golden Isles' lending limit. As of March 31,
2001 and December 31, 2000, $5.5 million and $4.9 million, respectively, in
principal amount had been sold to other banks.
Facilities
As of July 1997, Golden Isles relocated its executive offices to the second
floor of The First Bank of Brunswick's St. Simons branch at 3811 Frederica
Road, St. Simons Island, Georgia. Golden Isles leases this space from the bank
on a month-to-month basis. Previously, Golden Isles' executive offices were
housed in a two-story, freestanding building which was part of an office
condominium complex at 200 Plantation Chase, St. Simons Island, Georgia 31522.
Golden Isles purchased the building in February 1996 and sold it in July 1997.
63
The following table sets forth the distribution of the repricing of Golden
Isles' earning assets and interest-bearing liabilities as of December 31,
2000, the interest rate sensitivity gap (i.e., interest rate sensitive assets
less interest rate sensitive liabilities), the cumulative interest rate
sensitivity gap ratio (i.e., interest rate sensitive assets divided by
interest rate sensitive liabilities) and the cumulative sensitivity gap ratio.
The table also sets forth the time periods in which earning assets and
liabilities will mature or may reprice in accordance with their contractual
terms. However, the table does not necessarily indicate the impact of general
interest rate movements on the net interest margin since the repricing of
various categories of assets and liabilities is subject to competitive
pressures and the needs of The First Bank of Brunswick's customers. In
addition, various assets and liabilities indicated as repricing within the
same period may in fact reprice at different times within such period and at
different rates.
At December 31, 2000
-----------------------------------------------------
Maturing or Repricing
-----------------------------------------------------
Within Zero Within Three Within One Over
to Three Months to Year to Three
Months One Year Three Years Years Total
----------- ------------ ----------- ------- --------
(Dollars in Thousands)
Earning assets:
Interest-bearing
deposits in banks..... $ 98 $ -- $ -- $ -- $ 98
Federal funds sold..... 4,303 -- -- -- 4,303
Investment securities.. 2,430 501 6,232 9,768 18,931
Loans.................. 52,092 18,144 19,730 23,437 113,403
------- -------- ------- ------- --------
58,923 18,645 25,962 33,205 136,735
------- -------- ------- ------- --------
Interest-bearing
liabilities:
Interest-bearing demand
deposits.............. 26,678 -- -- -- 26,678
Savings................ 2,911 -- -- -- 2,911
Certificates less than
$100,000.............. 12,330 33,144 4,566 325 50,365
Certificates, $100,000
and over.............. 5,631 17,098 5,263 111 28,103
Other borrowings....... 3,046 444 2,268 5,527 11,285
------- -------- ------- ------- --------
50,596 50,686 12,097 5,963 119,342
------- -------- ------- ------- --------
Interest rate
sensitivity gap........ $ 8,327 $(32,041) $13,865 $27,242 $ 17,393
======= ======== ======= ======= ========
Cumulative interest rate
sensitivity gap........ $ 8,327 $(23,714) $(9,849) $17,393
======= ======== ======= =======
Interest rate
sensitivity gap ratio.. 1.16 0.37 2.15 5.57
======= ======== ======= =======
Cumulative interest rate
sensitivity gap ratio.. 1.16 0.77 0.91 1.15
======= ======== ======= =======
Golden Isles manages the mix of asset and liability maturities in an effort
to control the effects of changes in the general level of interest rates on
net interest income. Except for its effect on the general level of interest
rates, inflation does not have a material impact on Golden Isles due to the
rate variability and short-term maturities of its earning assets. In
particular, approximately 62% of its loan portfolio is comprised of loans
which mature or reprice within one year or less. Mortgage loans, primarily
with five to 15 year maturities, are also made on a variable rate basis with
rates being adjusted every one to five years.
The First Bank of Brunswick owns the building which houses its main branch
and support service facilities. It is located at 3440 Cypress Mill Road,
Brunswick, Georgia, adjacent to the Cypress Mill Square. The one and one-half
story free-standing structure is configured for retail banking operations as
well as for executive offices for officers of The First Bank of Brunswick. In
addition, The First Bank of Brunswick owns a building located at 3811
Frederica Road, St. Simons Island, Georgia, and operates a full service branch
in this building. As noted above, The First Bank of Brunswick also leases
space within the St. Simons branch to Golden Isles for use as executive
offices.
64
Management of Golden Isles believes that all of its properties are suitable
and adequate for their intended purposes and that Golden Isles has adequate
insurance in place as would be considered prudent for their uses. Management
further believes that all of the properties leased for terms, as well as those
occupied on a month-to- month basis, could be replaced with other suitable and
adequate facilities available from time to time in the market place.
In November 1999, The First Bank of Brunswick purchased 1.3 acres of
property in north Glynn County located at 5340 New Jesup Highway. During
December 1999, The First Bank of Brunswick applied for consent to establish a
full-service branch office. Approval for the branch application was obtained
from the FDIC and the Georgia Department of Banking and Finance in January
2000. The First Bank of Brunswick opened a temporary banking facility on the
site in September 2000. The total cost of establishing this branch was
approximately $1.5 million.
During July 2000, The First Bank of Brunswick successfully bid to provide
banking services for the Jekyll Island Authority at a leased facility on
Jekyll Island, Georgia and obtained approval from the necessary regulatory
authorities in August 2000. A full service branch was opened in the leased
location on Jekyll Island in October 2000. The lease is for a period of five
years at a rate of $28,000 annually.
Data Processing
Golden Isles handles all of its data processing needs in-house and has no
agreements for data processing services with any third-party service
companies.
Employees
Golden Isles employs the equivalent of 51 full-time employees. Golden Isles
hires additional persons as needed on a full-time or part-time basis,
including additional tellers and customer service representatives. Golden
Isles' employees are not represented by a collective bargaining unit. Golden
Isles' management believes that Golden Isles' relationship with its employees
is good.
Monetary Policies
The results of operations of Golden Isles are affected by credit policies of
monetary authorities, particularly the Federal Reserve. The instruments of
monetary policy employed by the Federal Reserve include open market operations
in U.S. Government securities, changes in the discount rate on member bank
borrowings, changes in reserve requirements against member bank deposits and
limitations on interest rates which member banks may pay on time and savings
deposits. In view of changing conditions in the national economy and in the
money markets, as well as the effect of action by monetary and fiscal
authorities, including the Federal Reserve, no prediction can be accurately
made as to possible future changes in interest rates, deposit levels, loan
demand or the business and earnings of Golden Isles.
Legal Proceedings
In the ordinary course of operations, Golden Isles is a party to various
legal proceedings relating to claims arising in the ordinary course of its
business. In the opinion of Golden Isles' management, there are no proceedings
pending, or to its knowledge, threatened in which an adverse decision would
have a material adverse effect on Golden Isles' financial condition or results
of operations.
65
Golden Isles Security Ownership
The following table sets forth certain information as of the record date
with respect to ownership of the outstanding common stock of Golden Isles by
(i) all persons known to Golden Isles to own beneficially more than 10% of the
outstanding shares of common stock of Golden Isles; (ii) each director of
Golden Isles; and (iii) all directors and executive officers of Golden Isles
as a group.
Name and Address of Beneficial Owner Number of Shares Percent of Class
- ------------------------------------ ---------------- ----------------
L. McRee Harden(1).......................... 24,745 1.01%
P.O. Box 2369
Darien, GA 31305
Michael D. Hodges(2)........................ 93,838 3.82%
207 Dunbarton Drive
St. Simons Island, GA 31522
Russell C. Jacobs, Jr.(3)................... 24,769 1.01%
308 Oak Grove Island Drive
Brunswick, GA 31525
C. Kermit Keenum(4)......................... 23,687 .96%
100 Old Mountain Road
Powder Springs, GA 30073
Michael J. Kistler(5)....................... 165,000 6.72%
109 Modena Island Drive
Savannah, GA 31411
Jimmy D. Veal(6)............................ 92,458 3.76%
290 Osprey
Brunswick, GA 31525
J. Thomas Whelchel(7)....................... 59,999 2.44%
22 Boundary Lane
St. Simons Island, GA 31522
Charles R. Acosta(8)........................ 36,173 1.47%
226 Medinah St.
Simons Island, GA 31522
James M. Fiveash(9)......................... 16,167 .66%
605 King Cotton Row
Brunswick, GA 31525
Charles K. Werk(10)......................... 148,394 6.04%
203 Medinah
St. Simons Island, GA 31522
All Directors and Executive Officers as a
Group (9 persons).......................... 683,230 27.81%
- --------
* Information relating to beneficial ownership of Golden Isles common stock
is based upon "beneficial ownership" concepts set forth in rules of the
SEC under Section 13(d) of the Securities Exchange Act of 1934. Under
such rule, a person is deemed to be a "beneficial owner" of a security if
that person has or shares "voting power," which includes the power to
vote or direct the voting of such security, or "investment power," which
includes the power to dispose of, or to direct the disposition of, such
security. A person is also deemed to be a beneficial owner of any
security of which that person has the right to acquire beneficial
ownership within 60 days. Under the rules, more than one person may be
deemed to be a beneficial owner of the same securities, and a person may
be deemed to be a beneficial owner of securities as to which he has no
beneficial interest. For instance, beneficial ownership includes spouses,
minor children and other relatives residing in the same household, and
trusts, partnerships, corporations or deferred compensation plans which
are affiliated with the principal.
66
(Footnotes continued)
(1) Includes 1,250 shares owned by Mr. Harden's wife, as to which he
disclaims beneficial ownership. Also includes the right to acquire 9,745
shares pursuant to vested options, for which Mr. Harden will receive,
upon the cashless exercise of these options pursuant to the terms of the
merger agreement, 1,190.534 equivalent shares of Golden Isles common
stock that will be exchanged for cash and ABC common stock pursuant to
Section 3.7 of the merger agreement.
(2) Includes 14,500 shares owned by Mr. Hodges' wife, as to which he
disclaims beneficial ownership. Also includes the right to acquire 23,410
shares pursuant to vested options, for which Mr. Hodges will receive,
upon the cashless exercise of these options pursuant to the terms of the
merger agreement, 6,084.604 equivalent shares of Golden Isles common
stock that will be exchanged for cash and ABC common stock pursuant to
Section 3.7 of the merger agreement.
(3) Includes the right to acquire 9,269 shares pursuant to vested options,
for which Mr. Jacobs will receive, upon the cashless exercise of these
options pursuant to the terms of the merger agreement, 1,124.479
equivalent shares of Golden Isles common stock that will be exchanged for
cash and ABC common stock pursuant to Section 3.7 of the merger
agreement.
(4) Includes the right to acquire 8,187 shares pursuant to vested options,
for which Mr. Keenum will receive, upon the cashless exercise of these
options pursuant to the terms of the merger agreement, 999.5 equivalent
shares of Golden Isles common stock that will be exchanged for cash and
ABC common stock pursuant to Section 3.7 of the merger agreement.
(5) Includes 3,000 shares deemed beneficially owned by Mr. Kistler in
custodian accounts for minor children.
(6) Includes the right to acquire 12,518 shares pursuant to vested options
and 18,875 shares owned by Mr. Veal's two adult sons as to which he
disclaims beneficial ownership, for which Mr. Veal will receive, upon the
cashless exercise of these options pursuant to the terms of the merger
agreement, 1,693.755 equivalent shares of Golden Isles common stock that
will be exchanged for cash and ABC common stock pursuant to Section 3.7
of the merger agreement. Also includes 18,875 shares owned by Mr. Veal's
two adult sons, as to which he disclaims beneficial ownership.
(7) Includes 25 shares owned by Mr. Whelchel's daughter and 1,500 owned by
his wife as to which he disclaims beneficial ownership, and 26,221 shares
pursuant to vested options, for which Mr. Whelchel will receive, upon the
cashless exercise of these options pursuant to the terms of the merger
agreement, 3,110.257 equivalent shares of Golden Isles common stock that
will be exchanged for cash and ABC common stock pursuant to Section 3.7
of the merger agreement.
(8) Includes the right to acquire 5,547 shares pursuant to vested options,
for which Mr. Acosta will receive, upon the cashless exercise of these
options pursuant to the terms of the merger agreement, 436.692 equivalent
shares of Golden Isles common stock that will be exchanged for cash and
ABC common stock pursuant to Section 3.7 of the merger agreement.
(9) Includes 8,000 shares owned individually by Mr. Fiveash and 1,250 shares
deemed beneficially owned by him in custodian accounts for a minor child.
Also includes the right to acquire 6,917 shares pursuant to vested
options, for which Mr. Fiveash will receive, upon the cashless exercise
of these options pursuant to the terms of the merger agreement, 568.343
equivalent shares of Golden Isles common stock that will be exchanged for
cash and ABC common stock pursuant to Section 3.7 of the merger
agreement.
(10) Includes the right to acquire 1,264 shares pursuant to vested options,
for which Mr. Werk will receive, upon the cashless exercise of these
options pursuant to the terms of the merger agreement, 264.184 equivalent
shares of Golden Isles common stock that will be exchanged for cash and
ABC common stock pursuant to Section 3.7 of the merger agreement. Also
includes 1,000 shares owned by Mr. Werk's wife, as to which he disclaims
beneficial ownership.
67
GOLDEN ISLES' MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following is a discussion of Golden Isles' financial condition at
December 31, 2000 and 1999 and the results of operations for the two year
period ended December 31, 2000 and the three months ended March 31, 2001 and
2000. The purpose of this discussion is to focus on information about Golden
Isles' financial condition and results of operations which are not otherwise
apparent from the audited financial statements. Reference should be made to
those statements and the selected financial data presented elsewhere in this
proxy statement/prospectus for an understanding of the following discussion
and analysis.
Forward-Looking Statements
The following discussion contains certain forward-looking statements which
are based on certain assumptions and describe future plans, strategies and our
expectations. These forward-looking statements are generally identified by use
of the words "believe," "expect," "intend," "anticipate," "estimate,"
"project," or similar expressions. Our ability to predict results or the
actual effect of future plans or strategies is inherently uncertain. Factors
which could have a material adverse effect on our operations include, but are
not limited to, changes in interest rates, general economic conditions,
legislation and regulation, monetary and fiscal policies of the U.S.
Government, including policies of the U.S. Treasury and the Federal Reserve,
the quality or composition of our loan or investment portfolios, demand for
loan products, deposit flows, competition, demand for financial services in
our market area and accounting principles and guidelines. You should consider
these risks and uncertainties in evaluating forward-looking statements and
should not place undue reliance on such statements. We will not publicly
release the result of any revisions which may be made to any forward-looking
statements to reflect events or circumstances after the date of such
statements or to reflect the occurrence of anticipated or unanticipated
events.
General
Golden Isles' principal asset is its ownership of The First Bank of
Brunswick. Accordingly, Golden Isles' results of operations are primarily
dependent upon the results of operations of The First Bank of Brunswick. The
First Bank of Brunswick's activities consist of attracting deposits from the
general public and applying those funds to the origination of commercial,
consumer and real estate loans (including commercial loans collateralized by
real estate). The First Bank of Brunswick's profitability depends primarily on
net interest income, which is the difference between interest income generated
from interest-earning assets (i.e., loans and investments) less the interest
expense incurred on interest-bearing liabilities (i.e., customer deposits and
borrowed funds). Net interest income is affected by the relative amounts of
interest-earning assets and interest-bearing liabilities, and the interest
rate paid and earned on these balances. Net interest income is dependent upon
The First Bank of Brunswick's interest rate spread, which is the difference
between the average yield earned on its interest-earning assets and the
average rate paid on its interest-bearing liabilities. When interest-earning
assets approximates or exceeds interest-bearing liabilities, any positive
interest rate spread will generate interest income. The interest rate spread
is impacted by interest rates, deposit flows and loan demand. Additionally,
and to a lesser extent, The First Bank of Brunswick's profitability is
affected by such factors as the level of noninterest income and expenses, the
provision for loan losses and the effective tax rate. Noninterest income
consists primarily of service charges on deposit accounts and loan origination
fees and other fees charged to bank customers. Noninterest expenses consist of
compensation and benefits, occupancy-related expenses and other operating
expenses.
Results From Operations for Years Ended December 31, 2000 and 1999
Golden Isles' results of operations are determined by its ability to
effectively manage interest income and expense, to minimize loan and
investment losses, to generate noninterest income and to control noninterest
expense. Since interest rates are determined by market forces and economic
conditions beyond the control of Golden Isles, the ability to generate net
interest income is dependent upon The First Bank of Brunswick's ability to
obtain an adequate spread between the rate earned on interest-earning assets
and the rate paid on interest-
68
bearing liabilities. Thus, the key performance measure for net interest income
is the interest margin or net yield, which is net interest income divided by
average earning assets.
Net Interest Income
The primary component of consolidated earnings is net interest income, or
the difference between interest income on interest-earning assets and interest
paid on interest-bearing liabilities. The net interest margin is net interest
income expressed as a percentage of average interest-earning assets. Interest-
earning assets consist of loans, investment securities and Federal funds sold.
Interest-bearing liabilities consist of deposits and other borrowings.
Golden Isles' net interest margin decreased by two basis points to 4.09% in
2000 as compared to 4.11% in 1999. The yield on average interest-earning
assets increased 43 basis points, or 5.02%, to 9.00% in 2000 as compared to
8.57% in 1999. The interest rate paid on average interest-bearing liabilities
increased 46 basis points, or 8.76%, to 5.71% in 2000 as compared to 5.25% in
1999. As a result of the disproportionate increase in the average interest
paid on interest-bearing liabilities as compared with the average rate earned
on interest-earning assets, the interest rate spread decreased three basis
points to 3.29% in 2000 as compared to 3.32% in 1999. A significant increase
in volume of interest-earning assets and interest-bearing liabilities resulted
in an increase in net interest income of $583,000, or 11.88%, to $5,491,000 in
2000 as compared to $4,908,000 in 1999, representing an increase of $708,000,
or 14.43%, due to volume and a decrease of $125,000, or 2.55%, due to changes
in interest rates.
Average interest-earning assets increased $14,801,000, or 12.39%, to
$134,293,000 in 2000 from $119,492,000 in 1999. Average loans increased
$17,850,000; average investments decreased $1,504,000; average Federal funds
sold decreased $1,734,000; and average interest-bearing deposits in banks
increased $189,000. The increase in average interest-earning assets was funded
by an increase of $11,915,000 or 11.33% in average deposits to $117,049,000 in
2000 from $105,134,000 in 1999. Approximately 90% of the total increase in
deposits represented an increase in time deposits for which the average
interest rate paid on such deposits increased 61 basis points, or 10.68%, over
the average rate paid in 1999. This shift in time deposits with increased
interest rates contributed to the overall increase in average interest rate
paid on interest-bearing deposits of 46 basis points, or 8.76%, in 2000 over
1999. Approximately 9.67% and 9.43% of the average deposits were noninterest-
bearing deposits in 2000 and 1999, respectively.
Allowance for Loan Losses
The allowance for loan losses represents a reserve for potential losses in
the loan portfolio. The adequacy of the allowance for loan losses is evaluated
periodically based on a review of all significant loans, with a particular
emphasis on nonaccruing, past due and other loans that management believes
require attention.
The provision for loan losses is a charge to earnings in the current period
to replenish the allowance and maintain it at a level management has
determined to be adequate. The provision for loan losses charged to earnings
amounted to $335,000 in 2000 as compared to $1,470,000 in 1999, representing a
decrease of 77% in the provision. The significant provision charged to
earnings in 1999 resulted from the replenishment of $736,000 for net charge-
offs during the year and the addition of $886,000 to cover an increase in
average loans during the year and to cover an increase in nonperforming loans
of approximately $938,000 in 1999. The allowance for loan losses as a
percentage of total loans outstanding amounted to 1.94% at December 31, 2000
as compared to 2.60% at December 31, 1999.
The determination of the amounts allocated for loan losses is based upon
Golden Isles' management's judgment concerning factors affecting loan quality
and assumptions about the local and national economy. Golden Isles' management
considers the year-end allowances adequate to cover potential losses in the
loan portfolio.
69
Noninterest Income
Noninterest income amounted to $856,000 and $698,000 for the years ended
December 31, 2000 and 1999, respectively. As a percent of total average
assets, noninterest income increased to .61% in 2000 from .56% in 1999.
Following is a summary of noninterest income for the years ended December
31, 2000 and 1999.
2000 1999
-------- --------
Noninterest income
Income from origination of mortgage loans, less related
expenses................................................... $169,000 $170,000
Service charges on deposit accounts......................... 475,000 440,000
Net realized gain on sales of securities.................... -- 8,000
Other....................................................... 212,000 80,000
-------- --------
Total noninterest income................................. $856,000 $698,000
======== ========
The increase in service charges on deposit accounts of $35,000, or 7.95%, to
$475,000 in 2000 from $440,000 in 1999 resulted from an increase in average
deposits on which service charges are earned. The increase in other
noninterest income was attributable primarily to other real estate owned
transactions.
Noninterest Expense
Noninterest expense amounted to $4,419,000 and $3,704,000 for the years
ended December 31, 2000 and 1999, respectively, representing an increase of
$715,000, or 19.30%. As a percent of total average assets, noninterest expense
amounted to 3.14% in 2000 as compared to 2.95% in 1999.
Following is a summary of noninterest expense for the years ended December
31, 2000 and 1999.
2000 1999
---------- ----------
Noninterest expense
Salaries and employee benefits.......................... $2,440,000 $2,085,000
Equipment and occupancy expense......................... 659,000 559,000
Advertising and business development.................... 176,000 160,000
Legal and professional.................................. 252,000 220,000
Supplies and printing................................... 231,000 154,000
Other operating expenses................................ 661,000 526,000
---------- ----------
Total noninterest expense............................ $4,419,000 $3,704,000
========== ==========
Salaries and employee benefits increased $355,000 to $2,440,000 in 2000 from
$2,085,000 in 1999, representing an increase of 17.03%. The increase in
salaries and employee benefits is the result of an increase in the average
number of full-time equivalent employees of The First Bank of Brunswick from
50 in 1999 to 65 in 2000, a 30% increase. Equipment and occupancy expense
increased $100,000, or 17.89%, to $659,000 in 2000 as compared to $559,000 in
1999. The increase in occupancy expense was attributable to the opening of two
new branches in 2000. The opening of the two new branches also accounted for
increases in supplies and printing expense. All other noninterest expenses
increased $151,000 during 2000.
For the year ended December 31, 2000, Golden Isles realized net income from
operations of $1,082,000 as compared to net income from operations of $275,000
for the year ended December 31, 1999. Net income for 1999 was adversely
affected by the significant provision for loan losses charged against income
in the amount of $1,470,000.
Results of Operations for the Three-Month Periods ended March 31, 2001 and
2000
The net interest margin was 3.85% and 4.19% during the three months ended
March 31, 2001 and 2000, respectively, representing a decrease of 34 basis
points. The decrease is due to an increase in the cost of funds
70
and a decrease in yield on loans. Average loans increased from $99.4 million
for the first quarter 2000 with a yield of 9.64% to $114.3 million for the
first quarter 2001 with a yield of 9.40%. The yield on average earning assets
was 8.84% and 8.87% during the three months ended March 31, 2001 and 2000,
respectively. Cost of funds increased to 5.69% for the three months ended
March 31, 2001 as compared to 5.45% for the three months ended March 31, 2000.
This increase in cost of funds is due to competition and high cost of funds in
the local market area.
Net interest income decreased $6,000 or 4.14% during the three months ended
March 31, 2001 as compared to the three months ended March 31, 2000. This
decrease is due primarily to the decrease in yield on average loans.
Noninterest income for the three months ended March 31, 2001 and 2000
amounted to $237,000 and $191,000, respectively. Service charges on deposit
accounts increased by $11,000 or 9.32%. This increase in service charges is
reflective of the increase in balances of non-interest bearing deposits which
increased 3.66% from $11,468,000 at March 31, 2000 to $11,888,000 at March 31,
2001.
Noninterest expense for the three months ended March 31, 2001 increased
21.68% to $1,190,000 as compared to $978,000 for the three months ended March
31, 2000. Salaries and employee benefits increased due to the increase in the
number of full-time equivalent employees of 57 at March 31, 2000 to 61 at
March 31, 2001. Additional operating expenses were incurred during the first
quarter 2001 as a result of the opening of two new branches in 2000 which were
not in operation during the first quarter of 2000. Depreciation expenses
increased in 2001 over 2000 as a result of additional equipment purchases to
accommodate the two new branches.
Liquidity and Capital Resources
Liquidity management involves the matching of the cash flow requirements of
customers who may be either depositors desiring to withdraw funds or borrowers
needing assurance that sufficient funds will be available to meet their credit
needs and the ability of Golden Isles to meet those needs. Golden Isles seeks
to meet liquidity requirements primarily through management of short-term
investments (principally federal funds sold) and monthly amortizing loans.
Another source of liquidity is the repayment of maturing single payment loans.
The First Bank of Brunswick also maintains relationships with correspondent
banks that can provide funds on short notice, if needed.
The liquidity and capital resources of Golden Isles and The First Bank of
Brunswick are monitored on a periodic basis by state and federal regulatory
authorities. As determined under guidelines established by these regulatory
authorities, The First Bank of Brunswick's liquidity ratio at December 31,
2000 was considered satisfactory. At that date, The First Bank of Brunswick's
short-term investments were adequate to cover any reasonable anticipated
immediate need for funds. Golden Isles was aware of no events or trends likely
to result in a material change in its liquidity. During 2000, Golden Isles'
capital increased $787,000 to $14,002,000 at December 31, 2000 as compared to
$13,215,000 at December 31, 1999. After the payment of cash dividends of
$198,000, Golden Isles retained $884,000 of its net earnings for 2000 as
equity capital. After recording an increase in capital of $36,000 from the
vesting of restricted stock, an increase in capital of $342,000 from
unrealized gains on securities available for sale and a decrease in capital of
$475,000 for the purchase of treasury stock, total capital increased by
$787,000.
The March 31, 2001 consolidated financial statements evidence a fair
liquidity position as total cash, interest-bearing deposits and federal funds
sold amounted to $9.5 million, representing 6.3% of total assets. Investment
securities amounted to $20.4 million, representing 13.5% of total assets.
These securities provide a secondary source of liquidity because they can be
converted into cash in a timely manner. For the three-month period ended March
31, 2001, total deposits increased $4.2 million, from $120.8 million to $125.0
million, and borrowings from the Federal Home Loan Bank decreased slightly.
At March 31, 2001 and December 31, 2000, Golden Isles had no binding
commitments for capital expenditures.
71
In accordance with risk capital guidelines issued by the Federal Reserve
Board, Golden Isles is required to maintain a minimum standard of total
capital to weighted risk assets of 8%. Additionally, all member banks must
maintain "core" or "Tier 1" capital of at least 4% of total assets ("leverage
ratio"). Member banks operating at or near the 4% capital level are expected
to have well-diversified risks, including no undue interest rate risk
exposure, excellent control systems, good earnings, high asset quality, and
well managed on- and off-balance sheet activities; and, in general, be
considered strong banking organizations with a composite 1 rating under the
CAMEL rating system of banks. For all but the most highly rated banks meeting
the above conditions, the minimum leverage ratio is 4% plus an additional 100
to 200 basis points.
The following table summarizes the regulatory capital levels of Golden Isles
at December 31, 2000.
Actual Required Excess
--------------- -------------- --------------
Amount Percent Amount Percent Amount Percent
------- ------- ------ ------- ------ -------
(Dollars in Thousands)
Leverage capital.................. $14,034 10.0% $5,636 4.0% $8,398 6.0%
Risk-based capital:
Core capital...................... 14,034 13.8 4,083 4.0 9,951 9.8
Total capital................. 15,321 15.0 8,165 8.0 7,156 7.0
The First Bank of Brunswick also met its individual regulatory capital
requirements at March 31, 2001.
72
SELECTED STATISTICAL INFORMATION OF GOLDEN ISLES
The following statistical information should be read in conjunction with
"Golden Isles' Management's Discussion and Analysis or Plan of Operation" at
page 68 and the financial statements and related notes included elsewhere in
this proxy statement/prospectus and in the documents incorporated herein by
reference.
Average Balances and Net Income Analysis From Continuing Operations
The following tables set forth the amount of Golden Isles' interest income
or interest expense from continuing operations for each category of interest-
earning assets and interest-bearing liabilities and the average interest rate
for total interest-earning assets and total interest-bearing liabilities, net
interest spread and net yield on average interest-earning assets. Federally
tax-exempt income is presented on a taxable-equivalent basis assuming a 34%
federal tax rate.
Year Ended December 31,
---------------------------------------------------------
2000 1999
---------------------------- ----------------------------
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Paid Balance Expense Rate Paid
-------- -------- --------- -------- -------- ---------
(Dollars in Thousands)
Assets
Interest-earning assets:
Loans, net of unearned
interest.............. $108,615 $10,480 9.65% $ 90,765 $ 8,569 9.44%
Investment securities,
taxable............... 20,513 1,276 6.22 22,017 1,334 6.06
Federal funds sold..... 4,852 310 6.39 6,586 329 5.00
Interest-bearing
deposits in banks..... 313 19 6.07 124 7 5.65
-------- ------- -------- -------
Total interest-
earning assets..... 134,293 12,085 9.00 119,492 10,239 8.57
-------- ------- -------- -------
Noninterest-earning
assets:
Cash................... 2,983 3,022
Allowance for loan
losses................ (2,669) (2,007)
Unrealized gain (loss)
on available for sale
securities............ (567) (120)
Other assets........... 6,901 5,117
-------- --------
6,648 6,012
-------- --------
Total assets........ $140,941 $125,504
======== ========
Liabilities and
Stockholders' Equity
Interest-bearing
liabilities:
Savings and interest-
bearing demand
deposits.............. $ 28,087 $ 1,080 3.85% $ 28,154 $ 1,136 4.03%
Time deposits.......... 77,640 4,905 6.32 67,065 3,828 5.71
Other borrowings....... 9,789 609 6.22 6,237 367 5.88
-------- ------- -------- -------
Total interest-
bearing
liabilities........ 115,516 6,594 5.71 101,456 5,331 5.25
-------- ------- -------- -------
Noninterest-bearing
liabilities and
stockholders' equity:
Demand deposits........ 11,322 9,915
Other liabilities...... 623 719
Stockholders' equity... 13,480 13,414
-------- --------
Total noninterest-
bearing liabilities
and stockholders'
equity............. 25,425 24,048
-------- --------
Total liabilities
and stockholders'
equity............. $140,941 $125,504
======== ========
Interest rate spread.... 3.29% 3.32%
==== ====
Net interest income..... $ 5,491 $ 4,908
======= =======
Net interest margin..... 4.09% 4.11%
==== ====
73
Rate and Volume Analysis From Continuing Operations
The following table reflects the changes in net interest income from
continuing operations resulting from changes in interest rates and from asset
and liability volume. Federally tax-exempt interest is presented on a taxable-
equivalent basis assuming a 34% federal tax rate. The change in interest
attributable to rate has been determined by applying the change in rate
between years to average balances outstanding in the later year. The change in
interest due to volume has been determined by applying the rate from the
earlier year to the change in average balances outstanding between years.
Thus, changes that are not solely due to volume have been consistently
attributed to rate.
Year Ended December 31,
--------------------------------------------------
2000 vs. 1999 1999 vs. 1998
------------------------ ------------------------
Changes Due Changes Due
To To
Increase ------------- Increase -------------
(Decrease) Rate Volume (Decrease) Rate Volume
---------- ----- ------ ---------- ----- ------
(Dollars in Thousands)
Increase (decrease) in:
Income from earning assets:
Interest and fees on
loans.................... $ 1,911 $ 226 $1,685 $ 53 $(636) $ 689
Interest on taxable
securities............... (58) 33 (91) 80 (21) 101
Interest on federal
funds.................... (19) 68 (87) 53 (23) 76
Interest on deposits in
banks.................... 12 1 11 (17) -- (17)
------- ----- ------ ----- ----- -----
Total interest income... 1,846 328 1,518 169 (680) 849
------- ----- ------ ----- ----- -----
Expense from interest-
bearing liabilities:
Interest on savings and
interest-bearing demand
deposits.................. (56) (53) (3) 404 20 384
Interest on time deposits.. 1,077 473 604 (275) (169) (106)
Interest on other
borrowings................ 242 33 209 15 (11) 26
Interest on debt........... -- -- -- (140) -- (140)
------- ----- ------ ----- ----- -----
Total interest expense.. 1,263 453 810 4 (160) 164
------- ----- ------ ----- ----- -----
Net interest income..... $ 583 $(125) $ 708 $ 165 $(520) $ 685
======= ===== ====== ===== ===== =====
Asset/Liability Management
It is the objective of Golden Isles to manage assets and liabilities to
provide a satisfactory, consistent level of profitability within the framework
of established cash, loan investment, borrowing and capital policies. Certain
of the officers of Golden Isles are responsible for monitoring policies and
procedures that are designed to ensure acceptable composition of the
asset/liability mix, stability and leverage of all sources of funds while
adhering to prudent banking practices. It is the overall philosophy of Golden
Isles' management to support asset growth primarily through growth of core
deposits of all categories made by individuals, partnerships and corporations.
Management of Golden Isles seeks to invest the largest portion of Golden
Isles' assets in commercial, consumer and real estate loans.
Golden Isles' asset/liability mix is monitored on a daily basis. A monthly
report reflecting interest-sensitive assets and interest-sensitive liabilities
is prepared and presented to Golden Isles' board of directors. The objective
of this policy is to control interest-sensitive assets and liabilities so as
to minimize the impact of substantial movements in interest rates on Golden
Isles' earnings.
As of December 31, 2000, Golden Isles' cumulative one-year interest rate
sensitivity gap ratio was 77%. This indicates that Golden Isles' interest-
bearing liabilities will reprice during this period at a rate slightly faster
than Golden Isles' interest-earning assets. Certain assumptions regarding the
interest sensitivity of these assets and liabilities have been incorporated
into this analysis. Golden Isles believes that it has positioned itself to
maintain its net interest margin in the event of changes in interest rates.
There can be no assurance, however, that this strategy will be successful.
74
The following table sets forth the distribution of the repricing of Golden
Isles' earning assets and interest-bearing liabilities as of December 31,
2000, the interest rate sensitivity gap (i.e., interest rate sensitive assets
less interest rate sensitive liabilities), the cumulative interest rate
sensitivity gap ratio (i.e., interest rate sensitive assets divided by
interest rate sensitive liabilities) and the cumulative sensitivity gap ratio.
The table also sets forth the time periods in which earning assets and
liabilities will mature or may reprice in accordance with their contractual
terms. However, the table does not necessarily indicate the impact of general
interest rate movements on the net interest margin since the repricing of
various categories of assets and liabilities is subject to competitive
pressures and the needs of The First Bank of Brunswick's customers. In
addition, various assets and liabilities indicated as repricing within the
same period may in fact reprice at different times within such period and at
different rates.
At December 31, 2000
-----------------------------------------------------
Maturing or Repricing
-----------------------------------------------------
Within Zero Within Three Within One Over
to Three Months to Year to Three
Months One Year Three Years Years Total
----------- ------------ ----------- ------- --------
(Dollars in Thousands)
Earning assets:
Interest-bearing
deposits in banks..... $ 98 $ -- $ -- $ -- $ 98
Federal funds sold..... 4,303 -- -- -- 4,303
Investment securities.. 2,430 501 6,232 9,768 18,931
Loans.................. 52,092 18,144 19,730 23,437 113,403
------- -------- ------- ------- --------
58,923 18,645 25,962 33,205 136,735
------- -------- ------- ------- --------
Interest-bearing
liabilities:
Interest-bearing demand
deposits.............. 26,678 -- -- -- 26,678
Savings................ 2,911 -- -- -- 2,911
Certificates less than
$100,000.............. 12,330 33,144 4,566 325 50,365
Certificates, $100,000
and over.............. 5,631 17,098 5,263 111 28,103
Other borrowings....... 3,046 444 2,268 5,527 11,285
------- -------- ------- ------- --------
50,596 50,686 12,097 5,963 119,342
------- -------- ------- ------- --------
Interest rate
sensitivity gap........ $ 8,327 $(32,041) $13,865 $27,242 $ 17,393
======= ======== ======= ======= ========
Cumulative interest rate
sensitivity gap........ $ 8,327 $(23,714) $(9,849) $17,393
======= ======== ======= =======
Interest rate
sensitivity gap ratio.. 1.16 0.37 2.15 5.57
======= ======== ======= =======
Cumulative interest rate
sensitivity gap ratio.. 1.16 0.77 0.91 1.15
======= ======== ======= =======
Golden Isles manages the mix of asset and liability maturities in an effort
to control the effects of changes in the general level of interest rates on
net interest income. Except for its effect on the general level of interest
rates, inflation does not have a material impact on Golden Isles due to the
rate variability and short-term maturities of its earning assets. In
particular, approximately 62% of its loan portfolio is comprised of loans
which mature or reprice within one year or less. Mortgage loans, primarily
with five to 15 year maturities, are also made on a variable rate basis with
rates being adjusted every one to five years.
75
GOLDEN ISLES' INVESTMENT PORTFOLIO
Types of Investments
The amortized cost and fair value of investments in securities available for
sale at the dates indicated are summarized as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -------
(Dollars in Thousands)
December 31, 2000:
U.S. Government and agency
securities........................... $15,130 $24 $ (76) $15,078
Mortgage-backed securities............ 3,266 13 (9) 3,270
Restricted equity securities.......... 583 -- -- 583
------- --- ----- -------
$18,979 $37 $ (85) $18,931
======= === ===== =======
December 31, 1999:
U.S. Government and agency
securities........................... $16,646 $ 3 $(534) $16,115
Mortgage-backed securities............ 2,800 -- (36) 2,764
Restricted equity securities.......... 366 -- -- 366
------- --- ----- -------
$19,812 $ 3 $(570) $19,245
======= === ===== =======
Maturities
The amounts of investments in securities in each category as of December 31,
2000 are shown in the following table according to contractual maturity
classifications (i) one year or less, (ii) after one year through five years,
(iii) after five years through ten years, and (iv) after ten years.
U. S. Treasury and Other
U. S. Government State and
Agencies and Corporations Political Subdivisions
--------------------------- -----------------------
Amount Yield(1) Amount Yield
------------- ------------- ----------- ----------
(Dollars in Thousands)
Maturity:
One year or less...... $ 2,076 6.54% $ -- --%
After one year through
five years........... 10,568 6.29 -- --
After five years
through ten years.... 6,287 6.24 -- --
After ten years....... -- -- -- --
------------- ----------- ----------- ----------
$18,931 6.30% $ -- --%
============= =========== =========== ==========
- --------
(1) Yields were computed using coupon interest, adding discount accretion or
subtracting premium amortization, as appropriate, on a ratable basis over
the life of each security. The weighted average yield for each maturity
range was computed using the acquisition price of each security in that
range.
76
GOLDEN ISLES' LOAN PORTFOLIO
Types of Loans
Golden Isles' management believes that Golden Isles' loan portfolio is
adequately diversified. The loan portfolio contains no foreign or energy-
related loans or significant concentrations in any one industry, with the
exception of real estate mortgage loans, which constituted approximately 81%
of Golden Isles' loan portfolio as of December 31, 2000. The amount of loans
outstanding at the indicated dates is shown in the following table according
to type of loans.
December 31,
------------------------
2000 1999
----------- -----------
(Dollars in Thousands)
Commercial, financial and agricultural.............. $ 14,067 $ 15,197
Real estate--construction........................... 10,319 7,472
Real estate--mortgage............................... 81,456 70,302
Consumer installment................................ 7,412 5,166
Other............................................... 149 109
----------- ----------
113,403 98,246
Allowance for loan losses........................... (2,201) (2,559)
----------- ----------
Loans, net.......................................... $111,202 $95,687
=========== ==========
Total loans as of December 31, 2000 are shown in the following table
according to maturity or repricing opportunities (i) one year or less, (ii)
after one year through three years, and (iii) after three years.
(Dollars
in
Thousands)
----------
Maturity or Repricing:
Within one year or less......................................... $ 70,236
After one year through three years.............................. 19,730
After three years............................................... 23,437
--------
$113,403
========
Records were not available to present the above information in each category
listed in the first paragraph above and could not be reconstructed without
undue burden.
The following table summarizes loans at December 31, 2000 with the due dates
after one year which (i) have predetermined interest rates and (ii) have
floating or adjustable interest rates.
(Dollars
in
Thousands)
----------
Maturity or Repricing:
Predetermined interest rates.................................... $43,167
Floating or adjustable interest rates........................... --
-------
$43,167
=======
77
Nonperforming Loans
The following table presents, at the dates indicated, the aggregate of
nonperforming loans for the categories indicated from continuing operations.
December 31,
-----------------------
2000 1999
----------- -----------
(Dollars in Thousands)
Loans accounted for on a nonaccrual basis........... $ 2,899 $ 1,809
Installment loans and term loans contractually past
due ninety days or more as to interest or principal
payments and still accruing........................ 214 392
Loans, the terms of which have been renegotiated to
provide a reduction or deferral of interest or
principal because of deterioration in the financial
position of the borrower........................... 216 632
In the opinion of Golden Isles' management, any loans classified by
regulatory authorities as doubtful, substandard or special mention that have
not been disclosed above do not (i) represent or result from trends or
uncertainties which Golden Isles' management reasonably expects will
materially impact future operating results, liquidity or capital resources, or
(ii) represent material credits about which Golden Isles' management is aware
of any information which causes Golden Isles' management to have serious
doubts as to the ability of such borrowers to comply with the loan repayment
terms. Any loans classified by regulatory authorities as loss have been
charged off.
Commitments and Lines of Credit
In the ordinary course of business, The First Bank of Brunswick has granted
commitments to extend credit to approved customers. Generally, these
commitments to extend credit have been granted on a temporary basis for
seasonal or inventory requirements and have been approved by The First Bank of
Brunswick's board of directors. The First Bank of Brunswick has also granted
commitments to approved customers for standby letters of credit. These
commitments are recorded in the financial statements when funds are disbursed
or the financial instruments become payable. The First Bank of Brunswick uses
the same credit policies for these off balance sheet commitments as it does
for financial instruments that are recorded in the consolidated financial
statements. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of the
commitment amounts expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements.
Following is a summary of the commitments outstanding at December 31, 2000
and 1999.
2000 1999
----------- -----------
(Dollars in Thousands)
Commitments to extend credit........................ $ 14,350 $ 12,304
Standby letters of credit........................... 610 705
----------- -----------
$14,960 $13,009
=========== ===========
78
SUMMARY OF GOLDEN ISLES' LOAN LOSS EXPERIENCE
The provision for possible loan losses is created by direct charges to
operations. Losses on loans are charged against the allowance in the period in
which such loans, in management's opinion, become uncollectible. Recoveries
during the period are credited to this allowance. The factors that influence
Golden Isles' management's judgment in determining the amount charged to
operating expense are past loan experience, composition of the loan portfolio,
evaluation of possible future losses, current economic conditions and other
relevant factors. Golden Isles' allowance for loan losses was approximately
$2,201,000 at December 31, 2000, representing 1.94% of year end total loans
outstanding, compared with $2,559,000 at December 31, 1999, which represented
2.60% of year end total loans outstanding. The allowance for loan losses is
reviewed monthly based on management's evaluation of current risk
characteristics of the loan portfolio, as well as the impact of prevailing and
expected economic business conditions. Golden Isles' management considers the
allowance for loan losses adequate to cover possible loan losses on the loans
outstanding.
Allocation of the Allowance for Loan Losses
The following table sets forth the breakdown of the allowance for loan
losses by loan category for the periods indicated. Golden Isles' management
believes the allowance can be allocated only on an approximate basis. The
allocation of the allowance to each category is not necessarily indicative of
future losses and does not restrict the use of the allowance to absorb losses
in any other category.
At December 31,
-----------------------------------------------
2000 1999
----------------------- -----------------------
Percent of Loans Percent of Loans
in Category to in Category to
Amount Total Loans Amount Total Loans
------ ---------------- ------ ----------------
(Dollars in Thousands)
Commercial, financial,
Industrial and agricultural.. $1,430 12% $1,756 16%
Real estate................... 594 81 688 79
Consumer...................... 110 7 115 5
Unallocated................... 67 -- -- --
------ --- ------ ---
$2,201 100% $2,559 100%
====== === ====== ===
The following table presents an analysis of Golden Isles' loan loss
experience for the periods indicated:
December 31,
-----------------
2000 1999
-------- -------
(Dollars in
Thousands)
Average amount of loans outstanding........................ $108,615 $90,765
======== =======
Balance of reserve for possible loan losses at beginning of
period.................................................... $ 2,559 $ 1,825
-------- -------
Charge-offs:
Commercial, financial and agricultural................... (613) (460)
Real estate.............................................. -- (210)
Consumer................................................. (252) (134)
Recoveries:
Commercial, financial and agricultural................... 112 21
Real estate.............................................. -- 14
Consumer................................................. 59 33
-------- -------
Net charge-offs........................................ (694) (736)
-------- -------
Additions to reserve charged to operating expenses......... 335 1,470
-------- -------
Balance of reserve for possible loan losses............ $ 2,200 $ 2,559
-------- -------
Ratio of net loan charge-offs to average loans............. 0.64% 0.81%
======== =======
79
GOLDEN ISLES' DEPOSITS
Average amount of deposits and average rate paid thereon, classified as to
noninterest-bearing demand deposits, interest-bearing demand and savings
deposits and time deposits, for the periods indicated are presented below.
Year Ended December 31,
----------------------------
2000 1999
------------- -------------
Amount Rate Amount Rate
-------- ---- -------- ----
(Dollars in Thousands)
Noninterest-bearing demand deposits.............. $ 11,322 -- % $ 9,915 -- %
Interest-bearing demand and savings deposits..... 28,087 3.85 28,154 4.03
Time deposits.................................... 77,640 6.32 67,065 5.71
-------- --------
Total deposits............................... $117,049 $105,134
======== ========
The amounts of time certificates of deposit issued in amounts of $100,000 or
more as of December 31, 2000, are shown below by category, which is based on
time remaining until maturity of (i) three months or less, (ii) over three
through twelve months and (iii) over twelve months.
(Dollars in
Thousands)
-----------
Three months or less............................................. $ 5,631
Over three through twelve months................................. 17,098
Over twelve months............................................... 5,374
-------
Total........................................................ $28,103
=======
GOLDEN ISLES' RETURN ON ASSETS AND STOCKHOLDERS' EQUITY
The following rate of return information for the periods indicated is
presented below.
Year Ended
December 31,
--------------
2000 1999
------ ------
Return on assets(1).......................................... 0.77% 0.22%
Return on equity(2).......................................... 8.03 2.05
Dividend payout ratio(3)..................................... 18.26 72.35*
Equity to assets ratio(4).................................... 9.56 10.69
- --------
(1) Net income divided by average total assets.
(2) Net income divided by average equity.
(3) Dividends declared per share divided by net income per share.
(4) Average equity divided by average total assets.
* The 1999 dividends of $.08 per share were based on the 1998 earnings of
$1,085,000, or $.45 per share
80
DIRECTORS OF GOLDEN ISLES
Board Committees
The business and affairs of Golden Isles are managed by or under the
direction of its board of directors. Golden Isles' board of directors has five
standing committees, consisting of the Asset and Liability Committee, the
Audit Committee, the Committee on Directors, the Electronic Data Processing
Steering Committee and the Loan Committee. Golden Isles has no separate
Nominating Committee, and the board of directors of Golden Isles serves as the
Nominating Committee for the purpose of nominating persons to serve on the
board of directors.
Asset and Liability Committee. The Asset and Liability Committee assists the
Board in adopting policies regarding the pricing, maturity and makeup of
Golden Isles' deposits, loans and investments. Messrs. Jacobs (Chairman),
Hodges, Veal and Whelchel were members of this Committee and met two times
during the 2000 fiscal year.
Audit Committee. The Audit Committee reviews with our independent
accountants the scope and results of their audit engagement and management
letter, consults with management concerning our accounting methods and the
adequacy of our internal controls, and oversees and reviews our internal
auditing procedures. The objective of the Audit Committee is to prevent losses
by Golden Isles from fraud, defalcation and/or operating deficiencies. Messrs.
Harden (Chairman), Jacobs and Fiveash were members of this committee during
the 2000 fiscal year. This committee met three times during the 2000 fiscal
year.
Committee on Directors. The Committee on Directors is charged with the
responsibility for oversight of, nominations for, and compensation of, Golden
Isles' directors and senior officers. Messrs. Acosta, Jacobs, Veal, Hodges,
Whelchel and Keenum (Chairman) were members of this committee during the 2000
fiscal year, during which this committee met one time.
Electronic Data Processing Steering Committee. The Electronic Data
Processing Steering Committee is responsible for approving Golden Isles' major
purchases of equipment. Messrs. Harden, Werk, Hodges, Whelchel and Fiveash
(Chairman) were members of this committee during the 2000 fiscal year, during
which this committee met four times.
Loan Committee. The Loan Committee is responsible for reviewing loan
applications. Messrs. Fiveash, Werk, Acosta, Hodges, Whelchel and Veal
(Chairman) were members of this committee during the 2000 fiscal year. This
committee met 35 times during the 2000 fiscal year.
Members of the Golden Isles' Board of Directors
Set forth below are the names, ages and business experience for the past
five years of each member of the Golden Isles board of directors.
Charles R. Acosta (age 60). Mr. Acosta has been employed by Georgia Power
Company since 1964. He has been Region Manager for the Coastal Region, a 10-
county service area, since 1993. Prior to that time, he was District Manager
for the Brunswick District from 1977 to 1993. Mr. Acosta is Past President and
Campaign Chairman of the United Way of Brunswick and Glynn County, and past
Chairman of the Brunswick and Glynn County Development Authority. Mr. Acosta
was one of the original directors of Golden Isles and served as a director of
Golden Isles from 1987 to 1994. He also served as a director of The First Bank
of Brunswick from 1990 to 1994. Mr. Acosta was reelected as a director of
Golden Isles at the 1997 Annual Meeting of Shareholders.
James M. Fiveash (age 70). Mr. Fiveash initially served as a director of
Golden Isles from 1989 until his resignation in 1994, and was elected as a
director of Golden Isles at the 1997 Annual Meeting of Shareholders. Mr.
Fiveash is retired and serves as part-time president of The Fiveash Company,
which is in the business of renting trucking terminals.
81
L. McRee Harden (age 45). Mr. Harden has been a director of Golden Isles
since July 1988, a director of The First Bank of Brunswick since February
1990. Mr. Harden is the Secretary and Treasurer of Friendly Express, Inc., a
company which operates a chain of approximately 65 convenience stores in south
Georgia and Florida.
Michael D. Hodges (age 47). Mr. Hodges has been a director of Golden Isles
since 1991 and a director of The First Bank of Brunswick since June 1990. On
February 20, 1997, Mr. Hodges became President and Chief Executive Officer of
The First Bank of Brunswick. He is also President and Chief Operating Officer
of Golden Isles. Prior to that time, he had been Senior Vice President of The
First Bank of Brunswick since June 1990, with principal responsibilities for
its loan portfolio.
Russell C. Jacobs, Jr. (age 65). Mr. Jacobs has been a director of Golden
Isles since July 1988, a director of The First Bank of Brunswick since
February 1990. He also has been a Vice Chairman of The First Bank of Brunswick
since July 1995. Mr. Jacobs is self-employed as an agent for the Equitable
Financial Companies, and as a registered representative with Equico
Securities, Inc. Mr. Jacobs holds both the Chartered Life Underwriter ("CLU")
and Chartered Financial Consultant ("CHFC") designations.
Claude Kermit Keenum (age 65). Mr. Keenum has been a director of Golden
Isles since July 1988, a director of The First Bank of Brunswick since
February 1990. He was the Superintendent of the Glynn County School System
from 1980 to 1989 and the Superintendent of the Cobb County School System in
metropolitan Atlanta from 1989 to 1992. Mr. Keenum was most recently President
of Southeastern Communication Systems, Inc. and Keenum's Educational Services,
Inc., and is now retired.
Michael J. Kistler (age 49). Mr. Kistler, a director of Golden Isles since
July 2000, obtained his Juris Doctorate from the Thomas M. Cooley Law School
in Lansing, Michigan in 1976 and practiced law until 1980. Mr. Kistler
currently develops real estate with a company he formed in 1982, Development
Associates, Inc., located in Savannah, Georgia. Development Associates, Inc.
focuses on conventional investment property acquisitions, acquiring properties
in Georgia and Alabama.
Jimmy D. Veal (age 52). Mr. Veal has been a Vice Chairman of Golden Isles
since July 1995. He has been a director of Golden Isles since June 1987 and
Secretary/Treasurer of Golden Isles since September 1992. He has been a Vice
Chairman of The First Bank of Brunswick since July 1995 and a director of The
First Bank of Brunswick since July 1990. He is owner of a hotel on Jekyll
Island, Georgia.
Charles K. Werk (age 50). Mr. Werk is the Chief Executive Officer of Coastal
Sleeve Label, Inc., located in Brunswick, Georgia. Additionally, Mr. Werk is
the owner of Trans Link Motor Express, Inc., a transportation and distribution
company located in Albany, Georgia and has owned and operated various
operating companies in the printing, warehousing and food manufacturing
industries. Prior to his experience with operating companies, Mr. Werk spent
15 years in the Investment Banking and Commercial Banking Industry with
various institutions, including SunTrust Bank, Manufacturers Hanover, Mellon
Bank, and First Chicago. Mr. Werk received his Bachelor's Degree from The
University of Georgia and an MBA Degree in Finance from Georgia State
University. Mr. Werk serves on the Board of Trustees of Coastal Georgia
Community College and is a member of Wesley United Methodist Church.
J. Thomas Whelchel (age 66). Mr. Whelchel has been the Chairman and Chief
Executive Officer of Golden Isles since October 17, 1996. Prior to that time,
Mr. Whelchel was a Vice Chairman of Golden Isles between July 1995 and October
1996. From July 1988 through July 1995, he served as President of Golden
Isles. Mr. Whelchel has been a director of Golden Isles since July 1988, and
Chairman and a director of The First Bank of Brunswick since February 1990. He
is a senior partner in the Brunswick law firm of Whelchel, Brown, Readdick and
Bumgartner.
Director Compensation
The outside directors of Golden Isles receive a fee of $500.00 per month.
82
GOLDEN ISLES' EXECUTIVE COMPENSATION
The following table is a summary of compensation paid during the past three
years to the individual serving as Golden Isles' Chief Executive Officer
during 2000 and any other executive officer who during 2000 earned in excess
of $100,000 in annual salary and bonus.
Securities
Underlying
Other Annual Restricted(1)(2)(3) Options/ LTIP All Other
Name and Position Year Salary Bonus Compensation Stock Awards SARS($) Payouts Compensation
- ----------------- ---- -------- ----- ------------ ------------------- ---------- ------- ------------
J. Thomas Whelchel...... 2000 -- -- -- -- $ 3,000 -- $6,000(4)
Chief Executive 1999 -- -- -- -- $ 7,825 -- $6,000(4)
Officer 1998 -- -- -- -- $14,006(5) -- $1,500(4)
Michael D. Hodges....... 2000 $130,000 -- -- -- -- -- $3,290(6)
President, First Bank 1999 $130,000 -- -- -- $ 1,668 -- $3,300(6)
of Brunswick 1998 $130,000 -- -- -- $10,368(5) -- $2,995(6)
- --------
(1) In the event that Golden Isles declares a dividend on its outstanding
shares of common stock, then such dividend will be equally applicable to
all restricted stock reported.
(2) The aggregate number of shares of restricted stock held by Mr. Whelchel as
of December 31, 2000, is 10,325 shares, and the value of such shares is
$44,710 based on the terms of the following vesting schedule: one-seventh
of such shares (1,475) vested on each of July 25, 1996, 1997, 1998, 1999
and 2000 and an additional one-seventh of such shares will vest on July 25
of each year thereafter until all such shares have vested. If at any time
Mr. Whelchel is neither a director nor an executive officer of Golden
Isles or any subsidiary of Golden Isles, then he must forfeit any shares
of restricted stock which have not already vested at the time of the event
which triggers such forfeiture.
(3) The aggregate number of shares of restricted stock held by Mr. Hodges as
of December 31, 2000, is 2,390 shares, and the value of such shares is
$11,670, based on the following vesting schedule: 775 shares vested on
August 16, 1999; of the remaining 1,615 shares, one-seventh of such shares
(230 shares) vested on each of July 25, 1996, 1997, 1998, 1999 and 2000;
and an additional one-seventh of such shares will vest on July 25 of each
year thereafter until all such shares have vested. If at any time Mr.
Hodges is neither a director nor an executive officer of Golden Isles or
any subsidiary of Golden Isles, then he must forfeit any shares of
restricted stock which have not already vested at the time of the event
which triggers such forfeiture.
(4) These amounts represent director's fees paid to Mr. Whelchel in 1998,
1999, and 2000.
(5) These options are incentive stock options which have been granted pursuant
to the Golden Isles Financial Holdings, Inc. 1995 Stock Option Plan
adopted by Golden Isles on July 25, 1995 (the "1995 Plan"). The 1995 Plan
provides for the granting of certain options that are intended to qualify
as incentive stock options within the meaning of Section 422(b) of the
Internal Revenue Code, as well as certain nonstatutory stock options that
are not intended to qualify as incentive stock options within the meaning
of Section 422(b) of the Internal Revenue Code. These options may be
exercised at any time before the earlier of (i) within ten years from the
date of the grant of the option or (ii) the date upon which the optionee
ceases to be an employee of Golden Isles; provided, however, that if the
Optionee's employment with Golden Isles is terminated for any reason other
than (a) the optionee's death or disability, (b) the optionee's voluntary
termination of his employment with Golden Isles' consent, or (c) the
termination of optionee's employment by Golden Isles for cause, then, in
such event, the optionee may exercise his or her incentive stock options
for up to three months after termination of his or her employment (but in
no event later than ten years from the date of the grant of the option).
(6) These amounts represent Golden Isles' matching contribution to Golden
Isles 401(k) plan for Mr. Hodges in 1998, 1999 and 2000.
83
Golden Isles 401(K) Profit Sharing Plan
All employees of Golden Isles who meet age, hours and employment tenure
requirements are eligible to participate in the Golden Isles 401(k) profit
sharing plan. Participants may make voluntary contributions of up to 10% of
their salary through payroll deductions or through cash payments. Golden Isles
matches voluntary contributions made by participants at the discretion of the
Golden Isles board of directors.
Option Grants Table
The following table sets forth certain information regarding the grant of
stock options in the 2000 fiscal year to the persons named in the summary
compensation table above.
OPTION GRANTS IN LAST FISCAL YEAR
(Individual Grants)
Number of Securities Percent of Total
Underlying Options/SARs Options/SARs Exercise or Base Expiration Date
Name Granted (#) Granted to Employees Price ($/share) in Fiscal Year
- ---- ----------------------- -------------------- ---------------- ---------------
J. Thomas Whelchel...... 3,000 50% $6.54 01/26/10
Michael D. Hodges....... -- -- -- --
Option Exercise and Fiscal Year-End Option Value Table
The following table sets forth certain information regarding the exercise of
stock options in the 2000 fiscal year by the persons named in the summary
compensation table above and the value of options held by such persons at the
end of such fiscal year. No stock options were exercised by the listed
individuals and there were no outstanding SARs during fiscal year 2000. Golden
Isles does not have any Long Term Incentive Plans in effect.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of securities Value of Unexercised in
underlying Unexercised the-money options
Shares acquired Options/SARS at FY-End SARs at FY-End
Name on exercise (#) Value Realized (#) (Exercisable/Unexercisable) (Exercisable/Unexercisable)
- ---- --------------- ------------------ --------------------------- ---------------------------
J. Thomas Whelchel...... -- -- 26,221(1) $ 695/$0(2)
Michael D. Hodges....... -- -- 42,160(3) $50,154/$0(2)
- --------
(1) On January 18, 1996, options on 1,390 shares at $6.00 per share were
awarded to Mr. Whelchel as compensation with respect to his services as a
director. In 1998, Mr. Whelchel was granted options on 3,836 shares at
$9.36 per share, 2,500 shares at $9.54 per share, 2,500 shares at $9.71
per share, 2,500 shares at $9.17 per share and 2,620 shares at $9.64 per
share. The 3,000 options granted in 2000 are listed in the table above. In
1999, Mr. Whelchel was granted options on 2,500 shares at $9.49 per share,
385 shares at $9.40 per share, 565 shares at $9.23 per share, 300 shares
at $9.16 per share, 658 shares at $8.36 per share, and 713 shares at $6.84
per share. In 2000, Mr. Whelchel was granted options on 3,000 shares at
$6.54 per share.
(2) Dollar values have been calculated by determining the difference between
the estimated fair market value of Golden Isles' common stock at February
16, 2001 ($6.50) and the exercise prices of the options.
(3) On May 20, 2001, Mr. Hodges exercised options to purchase 18,750 shares of
Golden Isles common stock at an exercise price of $4.00 per share. Mr.
Hodges has the right to acquire 23,410 shares of Golden Isles' common
stock pursuant to stock options issued by Golden Isles to Mr. Hodges. Of
the 23,410 stock options, 1,003 are exercisable at $4.60 per share, 1,408
are exercisable at $6.25 per share, 6,921 are exercisable at $6.50 per
share, 2,042 are exercisable at $6.00 per share, 5,000 are exercisable at
$7.60 per share, 3,165 are exercisable at $9.36 per share and 2,203 are
exercisable at $9.64 per share, 265 are exercisable at $9.40 per share,
406 are exercisable at $9.23 per share, 449 are exercisable at $8.36 per
share, and 548 are exercisable at $6.84 per share. No options were granted
to Mr. Hodges in 2000.
84
Restricted Stock and Stock Options Granted Under Plans
In August 1994, Golden Isles granted 9,260 shares of restricted stock to
four key employees. Of these shares, 8,100 were forfeited in 1997, and the
remaining 1,160 shares vested in August 1999. In July 1995, Golden Isles
granted 62,570 shares of restricted stock to eight directors. In 1997, 22,558
of these shares were forfeited. In December 1998, Golden Isles granted 4,000
shares of restricted stock to two directors. All of the remaining 44,012
shares will be fully vested by the end of the seventh year from the date of
the grant. The cost of the restricted stock is being amortized on the
straight-line method over the applicable vesting periods. The amortization
expense on restricted stock was $37,164 and $32,466 for the years ended
December 31, 1999 and 1998, respectively, and the same amounts were credited
to capital surplus.
Golden Isles has options outstanding under three stock option plans. The
1991 Incentive Stock Option Plan ("Plan A") and the 1991 Nonstatutory Stock
Option Plan ("Plan B") were discontinued in 1995 and replaced by the 1995
Stock Option Plan (the "1995 Plan"). Options granted under Plan A and Plan B
at the date of replacement by the 1995 Plan remain outstanding and can be
exercised during the terms of the option agreements unless such options are
forfeited by the optionee. The option price for shares granted under Plan A
were at least equal to the fair value of such shares on the date granted
unless the optionee was a restricted shareholder, in which case the options
price was at least equal to 110% of the fair value of the shares on the date
granted. The option price for shares of common stock to be issued under Plan B
was determined by the Golden Isles board of directors, but in no event was it
less than the fair value of the shares on the date granted.
Options granted under the 1995 Plan are one of two types: (i) those which
qualify for treatment as incentive stock options under Section 422 of the
Internal Revenue Code (called "Incentive Stock Options"); or (ii) those which
do not so qualify (called "Nonqualified Options"). The 1995 Plan provides that
not more than 250,000 shares in the aggregate be issued for Incentive Stock
Options and Nonqualified Options. The exercise price of an Incentive Stock
Option cannot be less than the fair value at the date of grant. The fair value
is determined from the trading price on a national securities exchange,
NASDAQ, or over-the-counter markets, if so traded. If not so traded, the
Golden Isles board or directors determines the fair value based upon recent
sales reported to Golden Isles. The exercise price of a Nonqualified Option is
determined by the Golden Isles board of directors on the date granted.
Certain Transactions
Golden Isles' directors and certain business organizations and individuals
associated with them are customers and have banking transactions with The
First Bank of Brunswick in the ordinary course of business. Such transactions
include loans, commitments, lines of credit and letters of credit. All of
these transactions are made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other persons, and do not involve more than normal risk of
collectibility or present any other unfavorable features. Additional
transactions with these persons are anticipated in the future.
COMPARISON OF THE RIGHTS OF HOLDERS OF GOLDEN ISLES STOCK AND ABC STOCK
Upon consummation of the merger, shareholders of Golden Isles (other than
those shareholders exercising dissenters' rights) will automatically become
shareholders of ABC. The shareholders of ABC will be governed by and subject
to the Articles of Incorporation and Bylaws of ABC rather than the Articles of
Incorporation and Bylaws of Golden Isles.
ABC and Golden Isles are both Georgia corporations organized and existing
under the Georgia Business Corporation Code. The following is a summary of the
material differences in the rights of holders of ABC and Golden Isles common
stock. The summary is necessarily general, and it is not intended to be a
complete
85
statement of all differences affecting the rights of shareholders and
respective entities. It is qualified in its entirety by reference to the
Georgia Business Corporation Code, as well as the Articles of Incorporation
and Bylaws of each corporation. Golden Isles shareholders should consult with
their own legal counsel with respect to specific differences and changes in
their rights as shareholders which will result from the proposed merger.
Liquidity and Marketability
ABC common stock. All of the 8,638,902 issued and outstanding shares of ABC
common stock are freely tradeable, except for approximately 879,703 shares
held by "affiliates" of ABC, as such term is defined in Rule 144 under the
Securities Act of 1933, which shares may only be sold pursuant to an effective
registration statement under the Securities Act of 1933 or in compliance with
Rule 144 or another applicable exemption from the registration requirements of
the Securities Act of 1933.
Golden Isles common stock. All of the 2,456,300 issued and outstanding
shares of Golden Isles common stock are freely tradeable, except for
approximately 683,230 shares held by "affiliates" of Golden Isles, which
shares may only be sold pursuant to an effective registration statement under
the Securities Act of 1933 or in compliance with Rule 144 or another
applicable exemption from the registration requirements of the Securities Act
of 1933.
Reporting Requirements
ABC common stock and Golden Isles common stock. ABC and Golden Isles are
reporting companies under the Securities Exchange Act of 1934 and file annual
and quarterly financial reports with the SEC. ABC and Golden Isles also file
certain reports with the Federal Reserve and the Georgia Department of Banking
and Finance.
Preemptive, Voting and Liquidation Rights
ABC common stock and Golden Isles common stock. Neither the ABC common stock
nor the Golden Isles common stock has preemptive rights. Each share of ABC
common stock and Golden Isles common stock has the right to cast one vote on
all matters voted upon by the ABC shareholders and the Golden Isles
shareholders, respectively. Under the Georgia Business Corporation Code, a
majority of the outstanding shares entitled to vote must approve any
dissolution or liquidation of a corporation, unless the articles of
incorporation or bylaws require a greater vote. Neither ABC's Articles of
Incorporation or its Bylaws nor Golden Isles' Articles of Incorporation or its
Bylaws imposes any such requirement.
Mergers, Consolidations and Sales of Assets
Under the Georgia Business Corporation Code, a merger (other than a merger
of a subsidiary in which the parent owns at least 90% of each class of
outstanding stock), a disposition of all or substantially all of a
corporation's property and a share exchange generally must be approved by a
majority of the outstanding shares entitled to vote, unless the articles of
incorporation or bylaws requires otherwise.
ABC common stock and Golden Isles common stock. Neither ABC's Articles of
Incorporation or its Bylaws nor Golden Isles' Articles of Incorporation or its
Bylaws imposes any such requirement.
Dissenters' Rights
Under the Georgia Business Corporation Code, a shareholder of a corporation
participating in certain transactions may, under certain circumstances,
receive the fair value of his or her shares in cash, in lieu of the
consideration he or she would otherwise have received in the transaction. The
Georgia Business Corporation Code recognizes dissenters' rights in connection
with mergers, share exchanges, sales of all or substantially all
86
of the corporation's property and certain amendments to the articles of
incorporation that materially and adversely affect a shareholder's rights.
Appraisal rights are not available (unless otherwise provided in the
corporation's articles of incorporation): (i) if the shares of the corporation
are listed on a national securities exchange or held of record by more than
2,000 shareholders, and shareholders by the terms of the merger or
consolidation are not required to accept in exchange for their shares anything
other than shares of stock of the surviving or resulting corporation, or
shares of stock of any other corporation listed on a national securities
exchange or held of record by more than 2,000 stockholders, other than cash in
lieu of fractional shares of stock; or (ii) in a merger if the corporation is
the surviving corporation and no vote of its shareholders thereon is required.
ABC common stock. Under the Georgia Business Corporation Code, the ABC
shareholders are not entitled to dissenters' rights with respect to the
proposed merger.
Golden Isles common stock. Although the Golden Isles common stock is listed
on The Nasdaq Small Cap Market, holders of Golden Isles common stock have
dissenters' rights because they will be receiving cash in exchange for their
shares of Golden Isles common stock in addition to the cash they will receive
in lieu of fractional shares. See "Statutory Provisions for Dissenting
Shareholders" on page 49.
Taxation
ABC common stock and Golden Isles common stock. ABC and Golden Isles are
both taxable entities under the Internal Revenue Code and are taxed on their
respective income and entitled to the deductions allowed under the Internal
Revenue Code. A sale of ABC common stock or Golden Isles common stock will
normally result in a capital gain or loss for federal income tax purposes.
Shareholders of ABC or Golden Isles who receive dividends are expected to
receive a copy of Form 1099 filed with the Internal Revenue Service prior to
January 31 of the following year.
Distributions
ABC common stock and Golden Isles common stock. The holders of ABC common
stock and Golden Isles common stock are entitled to receive dividends when, as
and if declared by ABC's board of directors and Golden Isles' board of
directors, respectively, and paid by ABC and Golden Isles, respectively, out
of funds legally available therefor. Under Federal Reserve policy, a bank
holding company is expected to act as a source of financial strength to each
of its subsidiary banks and to commit resources to support each such bank.
Consistent with this policy, the Federal Reserve has stated that, as a matter
of prudent banking, a bank holding company generally should not maintain a
rate of cash dividends unless the available net income of the bank holding
company is sufficient to fully fund the dividends, and the prospective rate of
earnings retention appears to be consistent with its capital needs, asset
quality, and overall financial condition. The ability of ABC and Golden Isles
to pay cash dividends is currently influenced, and in the future could be
further influenced, by bank regulatory policies or agreements and by capital
guidelines. Accordingly, the actual amount and timing of future dividends, if
any, will depend on, among other things, future earnings, the financial
condition of ABC and Golden Isles and each of their respective subsidiary
banks, the amount of cash on hand at the holding company level, outstanding
debt obligations, if any, and the requirements imposed by regulatory
authorities.
Liability
ABC common stock and Golden Isles common stock. Neither the ABC shareholders
nor the Golden Isles shareholders are personally liable for the obligations of
ABC and Golden Isles, respectively.
Assessments
ABC common stock and Golden Isles common stock. All issued and outstanding
shares of ABC common stock and Golden Isles common stock are fully paid and
nonassessable.
87
Fiduciary Duties
ABC common stock and Golden Isles common stock. ABC's Articles of
Incorporation and Golden Isles' Articles of Incorporation, as amended, provide
that, with certain exceptions mandated by the Georgia Business Corporation
Code, officers and directors are not liable to ABC or Golden Isles,
respectively, or their respective shareholders for monetary damages for breach
of their fiduciary duty of care.
Indemnification
The Georgia Business Corporation Code permits a corporation to indemnify a
director if the director seeking indemnification acted in a manner he or she
believed in good faith to be in or not opposed to the best interest of the
corporation and, in the case of any criminal proceedings, that he or she had
no reasonable cause to believe his conduct was unlawful, provided that
indemnification in connection with a proceeding by or in the right of the
corporation is limited to reasonable expenses incurred in connection with the
proceeding.
ABC common stock and Golden Isles common stock. ABC's Articles of
Incorporation and Golden Isles' Articles of Incorporation, as amended, provide
that no director shall be personally liable to ABC or Golden Isles,
respectively, or their respective shareholders for monetary damages for any
breach of the duty of care or other duty as a director, except that such
liability shall not be eliminated: (i) for any appropriation, in violation of
a director's duties, of any business opportunity of the corporation, (ii) for
acts or omissions which involve intentional misconduct or a knowing violation
of law, (iii) for certain unlawful distributions, or (iv) for any transaction
from which the director derived an improper personal benefit.
Management
ABC common stock. The business and affairs of ABC are managed by or under
the direction of its board of directors. ABC has a provision in its Articles
of Incorporation for a staggered board, and each director is elected every
third year at the annual meeting of the ABC shareholders and may be removed
and replaced, with or without cause, by a majority vote of ABC shareholders at
any meeting of such holders.
Golden Isles common stock. Golden Isles has a provision in its Bylaws that
the board of directors shall consist of not fewer than three nor more than
twenty-five persons, with the exact number within such minimum and maximum
number to be fixed and determined from time to time by resolution of the board
of directors or by resolution of the shareholders at any annual or special
meeting of the shareholders. Except as provided in the case of a vacancy, the
director shall be elected by act of the shareholders at the annual meeting of
the shareholders. Each director, except in the case of his or her earlier
death, resignation, retirement, disqualification or removal, shall serve until
the next succeeding annual meeting and thereafter until a successor shall have
been elected and qualified. The entire board of directors or any individual
director may be removed from office with or without cause by the affirmative
vote of the holders of two-thirds of the shares entitled to vote an election
of directors. In addition, the board of directors may remove a director from
office if such director is adjudicated incompetent by a court, if he or she is
convicted of a felony, if he or she does not within 60 days of his election,
accept the office in writing or by attendance at a meeting of the board of
directors and fulfill any other requirements for holding the office of
director, or he or she fails to attend regular meetings of the board of
directors for six consecutive meetings without having been excused by the
board of directors. A vacancy occurring in the board of directors through
death, resignation, retirement, disqualification or removal may be filled for
the unexpired term and until the shareholders have elected a successor by the
affirmative vote of the majority of the directors remaining in the office
though less than a quorum of the board of directors.
Special Meetings
ABC common stock. Special meetings of the ABC shareholders may be called at
any time by ABC's Chairman of the Board, Vice Chairman of the Board,
President, Secretary or a majority of the directors of ABC. Special meetings
of the ABC shareholders also shall be called upon the written request of the
holders of 50% or more of all shares of capital stock of ABC entitled to vote
in an election of directors.
88
Golden Isles common stock. Special meetings of Golden Isles' shareholders or
a special meeting in lieu of the annual meeting of Golden Isles' shareholders
shall be called upon the written request of the holders of 25% or more of all
the shares of capital stock of the corporation entitled to vote in an election
of directors. Special meetings of Golden Isles' shareholders or a special
meeting in lieu of the annual meeting of Golden Isles' shareholders may be
called at any time by the president, chairman of the board, or the board of
directors.
Right to Compel Dissolution
ABC common stock and Golden Isles common stock. Under the Georgia Business
Corporation Code, neither the ABC shareholders nor the Golden Isles
shareholders may compel the dissolution of ABC or Golden Isles, respectively,
without prior action by their respective boards of directors proposing such
dissolution.
Continuity of Existence
ABC common stock and Golden Isles common stock. ABC's Articles of
Incorporation and Golden Isles' Articles of Incorporation each provide for
perpetual existence, subject to termination or dissolution as provided by the
Georgia Business Corporation Code.
Certain Legal Rights
ABC common stock. The Georgia Business Corporation Code affords ABC
shareholders the right to bring a legal action on behalf of ABC (a shareholder
derivative action) to recover damages from a third party or an officer or
director of ABC if the ABC shareholder was a shareholder of ABC at the time of
the act or omission complained of or became a shareholder through transfer by
operation of law from one who was a shareholder at that time and fairly and
adequately represents the interest of ABC in enforcing its rights. In
addition, a shareholder may not commence a derivative proceeding until a
written demand has been made upon the corporation to take suitable action and
90 days have expired from the date the demand was made (unless the demand has
been rejected by the corporation or irreparable injury to the corporation
would result by waiting for the expiration of that 90-day period). In
addition, ABC shareholders may bring class actions to recover damages from
directors for violations of their fiduciary duties.
Golden Isles common stock. The Golden Isles shareholders have the same legal
rights as the ABC shareholders described immediately above.
Right to List of Holders and Inspection of Books and Records
ABC common stock and Golden Isles common stock. Under the Georgia Business
Corporation Code, ABC shareholders and Golden Isles shareholders are generally
entitled to inspect and copy ABC's and Golden Isles' respective Articles of
Incorporation, Bylaws, shareholder resolutions, board of directors
resolutions, lists of names and addresses of board members, all written
communications to shareholders, lists of names and business addresses of
current directors and officers, and the Annual Registration filed with the
Secretary of State of the State of Georgia. An ABC shareholder or a Golden
Isles shareholder must make a written request at least five business days in
advance of such inspection, which must occur during regular business hours at
ABC's or Golden Isles' (as the case may be) principal office. Other ABC and
Golden Isles records are generally available to an ABC shareholder or a Golden
Isles shareholder for inspection and copying during regular business hours at
a reasonable location specified by ABC or Golden Isles (as the case may be)
upon written demand at least five business days in advance if the shareholder
makes a demand in good faith and for a proper purpose that is reasonably
relevant to his or her legitimate interests as a shareholder, describes with
reasonable particularity the purpose and the records desired to be inspected,
and the records requested are directly connected with a stated purpose and are
to be used only for that stated purpose. A Georgia corporation may limit these
latter inspection rights to shareholders owning more than 2% of the
outstanding stock of the corporation. ABC's Articles of Incorporation do not
contain any such limitation, while Golden Isles' Articles of Incorporation do
contain such a limitation.
89
LEGAL MATTERS
Certain federal income tax consequences of the proposed merger and the
legality of the authorization and issuance under Georgia law of the ABC common
stock to be issued in the proposed merger will be passed upon by counsel to
ABC, Rogers & Hardin LLP, 2700 International Tower, 229 Peachtree Street,
N.E., Atlanta, Georgia 30303.
Martin, Snow, Grant & Napier, LLP, 240 Third Street, Macon, Georgia 31202-
1606, has acted as counsel to Golden Isles in connection with certain legal
matters relating to the proposed merger.
EXPERTS
The consolidated financial statements of ABC as of December 31, 2000 and
1999 incorporated by reference in this proxy statement/prospectus have been
audited by Mauldin & Jenkins, Certified Public Accountants and Consultants,
LLC, independent auditors, as set forth in their report thereon. Such
financial statements are incorporated herein by reference in reliance upon
such report given on its authority as an expert in accounting and auditing.
Mauldin & Jenkins, Certified Public Accountants and Consultants, LLC has
also audited Golden Isles' financial statements as of December 31, 2000 and
1999 appearing in this proxy statement/prospectus, as set forth in its report
thereon, appearing elsewhere herein. Such financial statements are included in
reliance upon such report given on its authority as an expert in accounting
and auditing.
SHAREHOLDER PROPOSALS AND OTHER MATTERS
In order to be eligible for inclusion in Golden Isles' proxy materials for
next year's annual meeting of shareholders, if the merger is not consummated,
any shareholder proposal to take action at the meeting must be received at
Golden Isles' main office at 3811 Frederica Road, St. Simons Island, Georgia
31522, no later than February 1, 2002.
Any shareholder proposal intended for inclusion in ABC's proxy statement for
next year's annual meeting of shareholders must be received at the principal
offices of ABC no later than November 16, 2001.
WHERE YOU CAN GET MORE INFORMATION
ABC files annual, quarterly and special reports, proxy statements and other
information with the SEC. The reports, proxy statements and other information
filed by ABC with the SEC can be inspected and copied at the offices of the
SEC Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the SEC's regional offices located at Seven World Trade Center, New York, New
York 10048, and Citicorp Center, 500 West Madison Avenue, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material also can be obtained from the
Public Reference Room of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates, and from the web site that the SEC maintains at
http://www.sec.gov. You may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. ABC's stock is quoted on
The Nasdaq National Market. The reports, proxy statements and other
information concerning ABC can be inspected at the offices of Nasdaq
Operations, 1735 K Street, N.W., Washington, D.C. 20006.
ABC has filed a registration statement on Form S-4 to register with the SEC
the ABC common stock to be issued to shareholders of Golden Isles in the
merger. This proxy statement/prospectus is a part of the registration
statement and constitutes a prospectus of ABC in addition to being a proxy
statement of Golden Isles for its special shareholders' meeting. As allowed by
SEC rules, this proxy statement/prospectus does not contain all the
90
information you can find in the registration statement or the exhibits to the
registration statement. Copies of the registration statement and the exhibits
and schedules thereto may be inspected, without charge, at the offices of the
SEC, or obtained at prescribed rates from the Public Reference Section of the
SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, or obtained from the SEC web site.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows ABC to incorporate by reference information into this proxy
statement/prospectus. This means that we can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this proxy
statement/prospectus, except for any information superseded by information in
this proxy statement/prospectus. This proxy statement/prospectus incorporates
by reference the documents set forth below that ABC has previously filed with
the SEC:
. ABC's Annual Report on Form 10-K for the year ended December 31, 2000;
. ABC's Quarterly Report on Form 10-Q for the three months ended March 31,
2001;
. Proxy Statement in connection with ABC's 2001 Annual Meeting of
Shareholders, filed on April 6, 2001;
. Current Report on Form 8-K filed by ABC on February 23, 2001; and
. The description of ABC's securities contained under the caption
"Description of Capital Stock" found on pages 55-56 of the Preliminary
Prospectus dated as of April 21, 1994 filed as part of ABC's
Registration Statement on Form SB-2 (Registration No. 33-77930) filed
with the SEC on April 21, 1994, and ABC's Registration Statement on Form
8-A12B (File No. 001-13901) filed with the SEC on February 25, 1998.
All documents filed by ABC with the SEC pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934 after the date of this
proxy statement/prospectus and prior to the special shareholders' meeting
shall be deemed to be incorporated by reference into this proxy
statement/prospectus from the date of filing of such documents.
Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this proxy
statement/prospectus to the extent that a statement contained in this proxy
statement/prospectus, or in any other subsequently filed document which is
also incorporated herein by reference, modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed to constitute
a part of this proxy statement/prospectus except as so modified or superseded.
The information relating to ABC and Golden Isles contained in this proxy
statement/prospectus should be read together with the information in the
documents incorporated herein by reference.
DOCUMENTS INCORPORATED BY REFERENCE ARE AVAILABLE FROM ABC WITHOUT CHARGE,
EXCLUDING ALL EXHIBITS UNLESS WE HAVE SPECIFICALLY INCORPORATED BY REFERENCE
AN EXHIBIT IN THIS PROXY STATEMENT/PROSPECTUS. GOLDEN ISLES SHAREHOLDERS MAY
OBTAIN DOCUMENTS INCORPORATED BY REFERENCE BY ABC IN THIS PROXY
STATEMENT/PROSPECTUS BY REQUESTING THEM IN WRITING OR BY TELEPHONE FROM CINDI
H. LEWIS, ABC BANCORP, 24 2ND AVENUE, S.E., MOULTRIE, GEORGIA 31768 (229-890-
1111). IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY JULY 16, 2001
TO RECEIVE THEM BEFORE THE SPECIAL SHAREHOLDERS' MEETING.
All information concerning ABC and its subsidiaries has been furnished by
ABC, and all information concerning Golden Isles has been furnished by Golden
Isles.
91
You should rely only on the information contained or incorporated by
reference in this proxy statement/prospectus to vote on the merger. We have
not authorized anyone to provide you with information that is different from
what is contained in this proxy statement/prospectus. This proxy
statement/prospectus is dated June 21, 2001. You should not assume that the
information contained in this proxy statement/prospectus is accurate as of any
date other than such date, and neither the mailing of this proxy
statement/prospectus to shareholders nor the issuance of ABC stock in the
merger shall create any implication to the contrary. This proxy
statement/prospectus does not constitute an offer to sell, or a solicitation
of an offer to buy, any securities, or the solicitation of a proxy, in any
jurisdiction to or from any person to whom it is not lawful to make any such
offer or solicitation in such jurisdiction. Neither the delivery of this proxy
statement/prospectus nor any distribution of securities made hereunder shall,
under any circumstances, create an implication that there has been no change
in the affairs of ABC or Golden Isles since the date hereof or that the
information herein is correct as of any time subsequent to its date.
92
INDEX TO FINANCIAL STATEMENTS
Golden Isles Financial Holdings, Inc. Financial Statements............... F-2
Unaudited Consolidated Balance Sheets as of March 31, 2001 and December
31, 2000................................................................ F-3
Unaudited Consolidated Statements of Income for the three months ended
March 31, 2001 and 2000................................................. F-4
Unaudited Consolidated Statements of Cash Flows for the three months
ended March 31, 2001
and 2000................................................................ F-5
Notes to Unaudited Consolidated Financial Satatements.................... F-6
Independent Auditor's Report............................................. F-7
Consolidated Balance Sheets as of December 31, 2000 and 1999............. F-8
Consolidated Statements of Income for years ended December 31, 2000 and
1999.................................................................... F-9
Consolidated Statements of Comprehensive Income (Loss) for years ended
December 31, 2000 and 1999.............................................. F-10
Consolidated Statement of Stockholders' Equity for years ended December
31, 2000 and 1999....................................................... F-11
Consolidated Statements of Cash Flows for years ended December 31, 2000
and 1999................................................................ F-12
Notes to Financial Statements............................................ F-13
F-1
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
F-2
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2001 2000
------------- ------------
(Unaudited) (Audited)
------------- ------------
Assets
Cash and due from banks.......................... $ 6,104,155 $ 4,598,403
Interest-bearing deposits in banks............... 141,542 97,752
Federal funds sold............................... 3,259,000 4,303,000
Securities available for sale, at fair value..... 19,860,909 18,348,224
Other investments, at cost....................... 582,700 582,700
Loans............................................ 115,995,099 113,402,556
Less allowance for loan losses................... 2,213,111 2,200,529
------------- ------------
Loans, net.................................... 113,781,988 111,202,027
------------- ------------
Property and equipment, net...................... 4,620,584 4,676,129
Other assets..................................... 2,916,152 2,809,223
------------- ------------
Total assets.................................. $ 151,267,030 $146,617,458
============= ============
Liabilities and Shareholders' Equity
Deposits
Non-interest bearing demand...................... $ 11,887,996 $ 12,758,007
Interest-bearing demand.......................... 10,968,489 9,270,312
Savings.......................................... 2,990,988 2,911,097
Time, $100,000 and over.......................... 29,731,022 23,642,798
Other time....................................... 69,450,563 72,233,129
------------- ------------
Total deposits................................. 125,029,058 120,815,343
------------- ------------
Federal Home Loan Bank borrowings................ 11,239,657 11,285,157
Other liabilities................................ 716,649 514,526
------------- ------------
Total liabilities.............................. 136,985,364 132,615,026
------------- ------------
Shareholders' Equity
Common stock, no par value 50 million shares
authorized, 2,505,500 shares issued and
outstanding..................................... 1,094,338 1,094,338
Capital surplus.................................. 11,739,088 11,730,014
Retained earnings................................ 1,880,561 1,685,222
Accumulated other comprehensive income (loss).... 43,154 (31,667)
Less cost of shares acquired for the treasury,
71,700 shares................................... (475,475) (475,475)
------------- ------------
Total shareholders' equity.................... 14,281,666 14,002,432
------------- ------------
Total liabilities and shareholders' equity....... $ 151,267,030 $146,617,458
============= ============
F-3
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND
2000
(Unaudited)
Three Months Ended
March 31,
---------------------
2001 2000
---------- ----------
Interest income
Interest and fees on loans............................ $2,686,077 $2,382,073
Interest and dividends on taxable securities.......... 298,562 308,957
Other interest income................................. 88,240 90,145
---------- ----------
Total interest income............................... 3,072,879 2,781,175
---------- ----------
Interest expense
Interest on deposits.................................. 1,582,234 1,361,564
Interest on other borrowings.......................... 166,687 90,147
---------- ----------
Total interest expense.............................. 1,748,921 1,451,711
---------- ----------
Net interest income............................... 1,323,958 1,329,464
Provision for possible loan losses...................... 75,000 75,000
---------- ----------
Net interest income after provision for loan
losses........................................... 1,248,958 1,254,464
---------- ----------
Other income
Income from origination of mortgage loans, less
related expenses..................................... 77,417 40,675
Service charges on deposit accounts................... 129,165 117,907
Other................................................. 30,352 32,621
---------- ----------
Total other income.................................. 236,934 191,203
---------- ----------
Other expense
Salaries and employee benefits........................ 691,939 586,301
Equipment and occupancy expense....................... 149,405 136,658
Advertising and business development.................. 32,265 37,443
Legal and professional................................ 35,243 53,835
Supplies and printing................................. 44,110 39,814
Other operating expenses.............................. 236,762 123,548
---------- ----------
Total other expense................................. 1,189,724 977,599
---------- ----------
Income before income tax.......................... 296,168 468,068
---------- ----------
Applicable income tax................................... 100,828 159,109
---------- ----------
Net income........................................ 195,340 308,959
Other comprehensive income (loss), net of tax:
Net unrealized holding income (losses) arising during
period............................................... 74,821 (79,460)
---------- ----------
Comprehensive income.................................... $ 270,161 $ 229,499
========== ==========
Income per share--Basic................................. $ .08 .12
Income per share--Diluted............................... .08 .12
Average shares outstanding.............................. 2,433,800 2,501,500
F-4
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
------------------------
2001 2000
----------- -----------
OPERATING ACTIVITIES
Net income.......................................... $ 195,340 $ 308,959
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization...................... 97,951 67,661
Provision for loan losses.......................... 75,000 75,000
Net change in other prepaids and accruals.......... 104,268 163,153
----------- -----------
Net cash provided by operating activities...... 472,559 614,773
----------- -----------
INVESTING ACTIVITIES
Increase in interest-bearing deposits in banks...... (43,790) (1,932,433)
Decrease in federal funds sold...................... 1,044,000 4,825,000
Available for sale securities:
Proceeds from maturities and paydowns.............. 5,972,014 64,736
Purchases.......................................... (7,418,953) (983,750)
Purchase of FHLB stock............................. -- (23,600)
Increase in loans, net............................. (2,654,961) (5,018,622)
Purchases of premises and equipment................ (42,406) (212,925)
----------- -----------
Net cash used in investing activities.......... (3,144,096) (3,281,594)
----------- -----------
FINANCING ACTIVITIES
Net increase in deposits............................ 4,213,715 182,583
Net increase (decrease) in FHLB borrowings.......... (45,500) 1,910,500
Vesting of restricted stock, net.................... 9,074 9,072
----------- -----------
Net cash provided by financing activities...... 4,177,289 2,102,155
----------- -----------
Net increase (decrease) in cash and due from banks... 1,505,752 (564,666)
Cash and due from banks at beginning of period....... 4,598,403 4,017,512
----------- -----------
Cash and due from banks at end of period............. $ 6,104,155 $ 3,452,846
=========== ===========
F-5
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
AND SUBSIDIARY
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Summary of Significant Accounting Policies
The accounting and reporting policies of Golden Isles Financial Holdings,
Inc. ("the Company") conform to generally accepted accounting principles and
to general practices within the banking industry. The interim consolidated
financial statements included herein are unaudited, but reflect all
adjustments which, in the opinion of management, are necessary for a fair
presentation of the consolidated financial position and results of operations
for the interim periods presented. All adjustments reflected in the interim
financial statements are of a normal, recurring nature. Such financial
statements should be read in conjunction with the financial statements and
notes thereto and the report of the independent auditors included in the
Company's Form 10-KSB Annual Report for the year ended December 31, 2000. The
results of operations for the three months ended March 31, 2001 are not
necessarily indicative of the results to be expected for the full year.
Note 2. Pending Merger
The directors of the Company have entered into a definitive merger agreement
with ABC Bancorp, a multi-bank holding company with headquarters in Moultrie,
Georgia, whereby ABC Bancorp would acquire all of the outstanding common stock
of the Company in exchange for a combination of cash and common stock of ABC
Bancorp. The merger is subject to approval by the Company's shareholders and
certain regulatory authorities.
F-6
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Golden Isles Financial Holdings, Inc. and Subsidiary
St. Simons Island, Georgia
We have audited the accompanying consolidated balance sheets of Golden Isles
Financial Holdings, Inc. and Subsidiary as of December 31, 2000 and 1999 and
the related consolidated statements of income, comprehensive income (loss),
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Golden
Isles Financial Holdings, Inc. and Subsidiary as of December 31, 2000 and
1999, and the results of their operations and their cash flows for the years
then ended, in conformity with generally accepted accounting principles.
/s/ Mauldin & Jenkins
Albany, Georgia
January 31, 2001, except for Note 14, as to which the date is February 23,
2001
F-7
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
2000 1999
------------ ------------
Assets
Cash and due from banks............................ $ 4,598,403 $ 4,017,512
Interest-bearing deposits in banks................. 97,752 13,888
Federal funds sold................................. 4,303,000 6,945,000
Securities available for sale, at fair value....... 18,930,924 19,244,799
Loans.............................................. 113,402,556 98,246,349
Less allowance for loan losses..................... 2,200,529 2,559,153
------------ ------------
Loans, net..................................... 111,202,027 95,687,196
------------ ------------
Premises and equipment, net........................ 4,676,129 3,408,237
Other assets....................................... 2,809,223 3,080,575
------------ ------------
Total assets................................... $146,617,458 $132,397,207
============ ============
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing.............................. $ 12,758,007 $ 10,316,942
Interest-bearing................................. 108,057,336 102,425,964
------------ ------------
Total deposits................................. 120,815,343 112,742,906
Federal Home Loan Bank borrowings................ 11,285,157 5,888,829
Other liabilities................................ 514,526 550,780
------------ ------------
Total liabilities.............................. 132,615,026 119,182,515
============ ============
Commitments and Contingencies
Stockholders' equity
Common stock, no par value; 50,000,000 shares
authorized; 2,505,500 issued.................... 1,094,338 1,094,338
Capital surplus.................................. 11,730,014 11,693,718
Retained earnings................................ 1,685,222 800,904
Accumulated other comprehensive loss............. (31,667) (374,268)
------------ ------------
14,477,907 13,214,692
Less cost of shares acquired for the treasury,
71,700 shares..................................... (475,475) --
------------ ------------
Total stockholders' equity....................... 14,002,432 13,214,692
------------ ------------
Total liabilities and stockholders' equity....... $146,617,458 $132,397,207
============ ============
See Notes to Consolidated Financial Statements.
F-8
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2000 AND 1999
2000 1999
----------- -----------
Interest income
Interest and fees on loans........................... $10,479,773 $ 8,568,537
Interest and dividends on taxable securities......... 1,276,407 1,334,074
Other interest income................................ 328,700 335,991
----------- -----------
Total interest income.............................. 12,084,880 10,238,602
----------- -----------
Interest expense
Interest on deposits................................. 5,985,497 4,963,675
Interest on other borrowings......................... 608,542 367,243
----------- -----------
Total interest expense............................. 6,594,039 5,330,918
----------- -----------
Net interest income................................ 5,490,841 4,907,684
Provision for loan losses.............................. 335,000 1,470,000
----------- -----------
Net interest income after provision for loan
losses.......................................... 5,155,841 3,437,684
----------- -----------
Other income
Income from origination of mortgage loans, less
related expenses.................................... 168,605 169,903
Service charges on deposit accounts.................. 475,288 440,074
Net realized gain on sales of securities............. -- 8,257
Other................................................ 212,023 79,751
----------- -----------
Total other income................................. 855,916 697,985
----------- -----------
Other expense
Salaries and employee benefits....................... 2,439,504 2,085,017
Equipment and occupancy expense...................... 658,678 559,123
Advertising and business development................. 176,576 159,802
Legal and professional............................... 251,789 220,274
Supplies and printing................................ 231,418 154,243
Other operating expenses............................. 660,831 525,769
----------- -----------
Total other expense................................ 4,418,796 3,704,228
----------- -----------
Income before income tax........................... 1,592,961 431,441
Applicable income tax.................................. 511,019 156,322
----------- -----------
Net income....................................... $ 1,081,942 $ 275,119
=========== ===========
Basic earnings per common share:
Net income........................................... $ 0.44 $ 0.11
=========== ===========
Diluted earnings per common share:
Net income........................................... $ 0.44 $ 0.11
=========== ===========
See Notes to Consolidated Financial Statements.
F-9
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
YEARS ENDED DECEMBER 31, 2000 AND 1999
2000 1999
---------- ---------
Net income................................................ $1,081,942 $ 275,119
---------- ---------
Other comprehensive income (loss):
Net unrealized holding gains (losses) on securities
available for sale arising during period, net of taxes
(benefits) of $176,491 and $(273,425), respectively.... 342,601 (530,228)
Reclassification adjustment for gains included in net
income, net of taxes of $2,807......................... -- (5,450)
---------- ---------
Total other comprehensive income (loss)................... 342,601 (535,678)
---------- ---------
Comprehensive income (loss)............................... $1,424,543 $(260,559)
========== =========
See Notes to Consolidated Financial Statements.
F-10
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2000 AND 1999
Accumulated
Common Stock Retained Other Treasury Stock Total
-------------------- Capital Earnings Comprehensive ---------------- Stockholders'
Shares Par Value Surplus (Deficit) Income (Loss) Shares Cost Equity
--------- ---------- ----------- ---------- ------------- ------ --------- -------------
Balance, December 31,
1998................... 2,474,377 $1,094,338 $11,482,666 $ 724,462 $ 161,410 -- $ -- $13,462,876
Net income............. -- -- -- 275,119 -- -- -- 275,119
Dividends paid, $0.08
per share............. -- -- -- (198,677) -- -- -- (198,677)
Vesting of restricted
stock................. -- -- 37,164 -- -- -- -- 37,164
Issuance of restricted
stock................. 4,000 -- -- -- -- -- -- --
Proceeds from exercise
of stock options...... 27,123 -- 173,888 -- -- -- -- 173,888
Other comprehensive
loss.................. -- -- -- -- (535,678) -- -- (535,678)
--------- ---------- ----------- ---------- --------- ------ --------- -----------
Balance, December 31,
1999................... 2,505,500 1,094,338 11,693,718 800,904 (374,268) -- -- 13,214,692
Net income............. -- -- -- 1,081,942 -- -- -- 1,081,942
Dividends paid, $0.08
per share............. -- -- -- (197,624) -- -- -- (197,624)
Vesting of restricted
stock................. -- -- 36,296 -- -- -- -- 36,296
Net treasury stock
transactions.......... -- -- -- -- -- 71,700 (475,475) (475,475)
Other comprehensive
income................ -- -- -- -- 342,601 -- -- 342,601
--------- ---------- ----------- ---------- --------- ------ --------- -----------
Balance, December 31,
2000................... 2,505,500 $1,094,338 $11,730,014 $1,685,222 $ (31,667) 71,700 $(475,475) $14,002,432
========= ========== =========== ========== ========= ====== ========= ===========
See Notes to Consolidated Financial Statements
F-11
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000 AND 1999
2000 1999
------------ ------------
OPERATING ACTIVITIES
Net income........................................ $ 1,081,942 $ 275,119
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation..................................... 303,736 292,102
Provision for loan losses........................ 335,000 1,470,000
Provision for deferred taxes..................... 141,625 (159,224)
Net gain (loss) on disposal of premises and
equipment....................................... (2,000) 21,346
Net realized gain on securities transactions..... -- (8,257)
Decrease (increase) in interest receivable....... (160,636) 60,181
Increase in interest payable..................... 117,351 16,728
Decrease (increase) in taxes receivable.......... 126,894 (126,894)
Decrease in taxes payable........................ -- (445,442)
Net change in other prepaids and accruals........ (166,628) (43,563)
------------ ------------
Net cash provided by operating activities....... 1,777,284 352,096
------------ ------------
INVESTING ACTIVITIES
Decrease (increase) in interest-bearing deposits
in bank.......................................... (83,864) 108,866
Decrease (increase) in federal funds sold......... 2,642,000 (4,395,000)
Available for sale securities:
Proceeds from sales and calls..................... -- 11,015,465
Proceeds from maturities and paydowns............. 1,500,000 3,281,826
Proceeds from redemption of Federal Home Loan Bank
stock............................................ -- 186,100
Purchases......................................... (667,032) (11,488,695)
Increase in loans, net............................ (15,849,831) (9,217,529)
Purchase of premises and equipment................ (1,571,628) (705,988)
Proceeds from sales of premises and equipment..... 2,000 295
------------ ------------
Net cash used in investing activities........... (14,028,355) (11,214,660)
------------ ------------
FINANCING ACTIVITIES
Net increase in deposits.......................... $ 8,072,437 $ 11,470,985
Net (decrease) increase in Federal Home Loan Bank
borrowings....................................... 5,396,328 (611,671)
Dividends paid.................................... (197,624) (198,677)
Vesting of restricted stock....................... 36,296 37,164
Proceeds from exercise of stock options........... -- 173,888
Purchase of treasury shares....................... (475,475) --
------------ ------------
Net cash provided by financing activities....... 12,831,962 10,871,689
------------ ------------
Net increase in cash and due from banks............ 580,891 1,009,125
Cash and due from banks at beginning of year....... 4,017,512 3,008,387
------------ ------------
Cash and due from banks at end of year............. $ 4,598,403 $ 4,017,512
============ ============
SUPPLEMENTAL DISCLOSURES
Cash paid for:
Interest......................................... $ 6,476,688 $ 5,314,190
Income taxes..................................... $ 242,500 $ 887,882
NONCASH TRANSACTIONS
Unrealized (gains) losses on securities available
for sale......................................... $ (519,093) $ 811,910
Principal balances of loans transferred to other
real estate owned................................ $ -- $ 1,009,165
See Notes to Consolidated Financial Statements.
F-12
GOLDEN ISLES FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary Of Significant Accounting Policies
Nature of Business
Golden Isles Financial Holdings, Inc. (the "Company") is a bank holding
company whose business is conducted by its wholly-owned subsidiary, The First
Bank of Brunswick (the "Bank"). The Bank is a commercial bank located in
Brunswick, Glynn County, Georgia with branches located on St. Simons Island,
Georgia, Jekyll Island, Georgia and in Brunswick, Georgia. The Bank provides a
full range of banking services in its primary market area of Glynn County and
surrounding counties.
Basis of Presentation
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of
the balance sheet date and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change in
the near term relate to the determination of the allowance for loan losses,
the valuation of foreclosed real estate, and deferred taxes.
The Company's consolidated financial statements include the accounts of the
Company and the Bank. All significant intercompany transactions and accounts
have been eliminated in consolidation.
Reclassification of Certain Items
Certain items in the consolidated financial statements as of and for the
year ended December 31, 1999 have been reclassified, with no effect on total
assets, total capital or net income, to be consistent with the classifications
adopted for the year ended December 31, 2000.
Cash, Due From Banks and Cash Flows
For purposes of reporting cash flows, cash and due from banks includes cash
on hand, cash items in process of collection and amounts due from banks. Cash
flows from loans, federal funds sold and deposits are reported net.
The Company maintains amounts due from banks which, at times, may exceed
federally insured limits. The Company has not experienced any losses in such
accounts.
Securities
Debt securities that management has the positive intent and ability to hold
to maturity are classified as held-to-maturity and recorded at amortized cost.
Securities not classified as held-to-maturity, including equity securities
with readily determinable fair values, are classified as available-for-sale
and recorded at fair value with unrealized gains and losses excluded from
earnings and reported in other comprehensive income. Equity securities,
including restricted stock, without a readily determinable fair value are
classified as available-for-sale and recorded at cost.
Interest and dividends, including amortization of premiums and accretion of
discounts, are recognized in interest income. Gains and losses on the sale of
securities are determined using the specific identification method. Declines
in the fair value of held-to-maturity and available-for-sale securities below
their cost that are deemed to be other than temporary are reflected in
earnings as realized losses.
F-13
GOLDEN ISLES FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 1. Summary of Significant Accounting Policies (Continued)
Loans
Loans are reported at their outstanding unpaid principal balances less
unearned income, deferred fees or costs on originated loans, and the allowance
for loan losses. Interest income is accrued on the unpaid balance.
Loan origination fees, net of certain direct origination costs of consumer
and instalment loans are recognized at the time the loan is placed on the
books. Because these loan fees are not significant and the majority of loans
have maturities of one year or less, the results of operations are not
materially different than the results which would be obtained by accounting
for loan fees and costs in accordance with generally accepted accounting
principles. Loan origination fees net of certain direct loan origination costs
for all other loans are deferred and recognized as an adjustment of the yield
over the life of the loan.
The accrual of interest on loans is discontinued when, in management's
opinion, the borrower may be unable to meet payments as they become due,
unless the loan is well-secured. All interest accrued but not collected for
loans that are placed on nonaccrual or charged off is reversed against
interest income. Interest income on nonaccrual loans is subsequently
recognized only to the extent cash payments are received until the loans are
returned to accrual status.
The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged against the allowance when
management believes the collectibility of the principal is unlikely.
Subsequent recoveries are credited to the allowance.
The allowance is an amount that management believes will be adequate to
absorb estimated losses in the loan portfolio. The allowance for loan losses
is evaluated on a regular basis by management and is based upon management's
periodic review of the collectibility of the loans in light of historical
experience, the nature and volume of the loan portfolio, adverse situations
that may affect the borrower's ability to repay, estimated value of any
underlying collateral and prevailing economic conditions. This evaluation is
inherently subjective as it requires estimates that are susceptible to
significant revision as more information becomes available. In addition,
regulatory agencies, as an integral part of their examination process,
periodically review the Bank's allowance for loan losses, and may require the
Bank to make additions to the allowance based on their judgment about
information available to them at the time of their examinations.
A loan is considered impaired when it is probable the Bank will be unable to
collect all principal and interest payments due in accordance with the
contractual terms of the loan agreement. Impaired loans are measured based on
the present value of expected future cash flows discounted at the loan's
effective interest rate, the loan's observable market price, or the fair value
of the collateral if the loan is collateral dependent. The amount of
impairment, if any, and any subsequent changes are included in the allowance
for loan losses.
Premises and Equipment
Land is carried at cost. Premises and equipment are carried at cost less
accumulated depreciation computed principally by the straight-line method over
the estimated useful lives of the assets.
Other Real Estate Owned
Other real estate owned represents properties acquired through foreclosure.
Other real estate owned is held for sale and is carried at the lower of cost
or fair value less estimated costs of disposal. Any write-down to fair value
at the time of transfer to other real estate owned is charged to the allowance
for loan losses. Revenue and
F-14
GOLDEN ISLES FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 1. Summary of Significant Accounting Policies (Continued)
Other Real Estate Owned (Continued)
expenses from operations and changes in the valuation allowance are included
in net expenses from foreclosed assets. The carrying amount of other real
estate owned at December 31, 2000 and 1999 was $789,307 and $1,047,785,
respectively.
Income Taxes
Deferred income tax assets and liabilities are determined using the balance
sheet method. Under this method, the net deferred tax asset or liability is
determined based on the tax effects of the temporary differences between the
book and tax bases of the various balance sheet assets and liabilities and
gives current recognition to changes in tax rates and laws.
Earnings Per Common Share
Basic earnings per common share are computed by dividing net income by the
weighted average number of shares of common stock outstanding. Diluted
earnings per share are computed by dividing net income after adjustments for
the after-tax income effect of the issuance of potential common shares that
are dilutive by the sum of the weighted-average number of shares of common
stock outstanding and potential common shares. The weighted-average number of
shares outstanding for the years ended December 31, 2000 and 1999 was
2,469,192 and 2,488,236, respectively. The weighted-average number of shares
outstanding and potential common shares for the years ended December 31, 2000
and 1999 was 2,478,797 and 2,512,884, respectively.
Comprehensive Income (Loss)
Accounting principles generally require that recognized revenue, expenses,
gains and losses be included in net income. Although certain changes in assets
and liabilities, such as unrealized gains and losses on available-for-sale
securities, are reported as a separate component of the equity section of the
balance sheet, such items, along with net income, are components of
comprehensive income.
Recent Developments
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, effective for fiscal years beginning after
June 15, 2000. This Statement establishes accounting and reporting standards
for derivative instruments and hedging activities, including certain
derivative instruments embedded in other contracts, and requires that an
entity recognize all derivatives as assets or liabilities in the balance sheet
and measure them at fair value. If certain conditions are met, an entity may
elect to designate a derivative as follows: (a) a hedge of the exposure to
changes in the fair value of a recognized asset or liability or an
unrecognized firm commitment, (b) a hedge of the exposure to variable cash
flows of a forecasted transaction, or (c) a hedge of the foreign currency
exposure of an unrecognized firm commitment, an available-for-sale security, a
foreign currency denominated forecasted transaction, or a net investment in a
foreign corporation. The Statement generally provides for matching the timing
of the recognition of the gain or loss on derivatives designated as hedging
instruments with the recognition of the changes in the fair value of the item
being hedged. Depending on the type of hedge, such recognition will be in
either net income or other comprehensive income. For a derivative not
designated as a hedging instrument, changes in fair value will be recognized
in net income in the period of change. Management is currently evaluating the
impact of adopting this Statement on the financial statements, but does not
anticipate that it will have a material impact.
F-15
GOLDEN ISLES FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 2. Securities
The amortized cost and fair value of securities are summarized as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ---------- -----------
Securities Available for Sale
December 31, 2000:
U. S. Government and agency
securities.................... $15,129,958 $24,250 $ (76,565) $15,077,643
Mortgage-backed securities..... 3,266,245 13,296 (8,961) 3,270,581
Restricted equity securities... 582,700 -- -- 582,700
----------- ------- --------- -----------
$18,978,903 $37,546 $ (85,526) $18,930,924
=========== ======= ========= ===========
December 31, 1999:
U. S. Government and agency
securities.................... $16,645,505 $ 2,963 $(534,368) $16,114,100
Mortgage-backed securities..... 2,799,966 -- (35,667) 2,764,299
Restricted equity securities... 366,400 -- -- 366,400
----------- ------- --------- -----------
$19,811,871 $ 2,963 $(570,035) $19,244,799
=========== ======= ========= ===========
Securities with a carrying value of $3,110,926 and $3,034,765 at December
31, 2000 and 1999, respectively, were pledged to secure public deposits and
for other purposes required or permitted by law.
The amortized cost and fair value of debt securities as of December 31, 2000
by contractual maturity are shown below. Maturities may differ from
contractual maturities in mortgage-backed securities because the mortgages
underlying the securities may be called or repaid with or without penalty.
Therefore, these securities are not included in the maturity categories in the
following maturity summary.
Amortized Fair
Cost Value
----------- -----------
Due in one year or less............................. $ 499,689 $ 501,404
Due from one year to five years..................... 9,142,134 9,144,839
Due from five to ten years.......................... 5,488,135 5,431,400
Mortgage-backed securities.......................... 3,266,245 3,270,581
Restricted equity securities........................ 582,700 582,700
----------- -----------
$18,978,903 $18,930,924
=========== ===========
Gains and losses on sales of securities available for sale consist of the
following:
Years Ended
December
31,
-----------
2000 1999
---- ------
Gross gains on sales of securities............................... $-- $8,257
Gross losses on sales of securities.............................. -- --
---- ------
Net realized gain on sales of securities available for sale.... $-- $8,257
==== ======
F-16
GOLDEN ISLES FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 3. Loans And Allowance For Loan Losses
The composition of loans is summarized as follows:
December 31,
-------------------------
2000 1999
------------ -----------
Commercial and financial.......................... $ 14,066,945 $15,197,054
Real estate--construction......................... 10,318,960 7,472,027
Real estate--mortgage............................. 81,455,681 70,302,250
Consumer installment.............................. 7,411,971 5,166,018
Other............................................. 148,999 109,000
------------ -----------
113,402,556 98,246,349
Allowance for loan losses......................... (2,200,529) (2,559,153)
------------ -----------
Loans, net........................................ $111,202,027 $95,687,196
============ ===========
Changes in the allowance for loan losses are as follows:
Years Ended December
31,
----------------------
2000 1999
---------- ----------
Balance, beginning of year........................... $2,559,153 $1,825,319
Provision for loan losses.......................... 335,000 1,470,000
Loans charged off.................................. (864,984) (803,942)
Recoveries of loans previously charged off......... 171,360 67,776
---------- ----------
Balance, end of year................................. $2,200,529 $2,559,153
========== ==========
The Bank had no loans which it considered to be impaired other than the
loans on which the accrual of interest had been discontinued. The total
recorded investment in impaired loans was $2,835,824 and $1,808,864 at
December 31, 2000 and 1999, respectively. These loans had related allowances
for loan losses of approximately $853,000 and $661,000 at December 31, 2000
and 1999, respectively. The average recorded investment in impaired loans for
2000 and 1999 was approximately $3,069,000 and $1,507,000, respectively. There
was no significant amount of interest income recognized on impaired loans in
2000 or 1999.
In the ordinary course of business, the Bank has granted loans to certain
related parties, including directors, executive officers, and their
affiliates. The interest rates on these loans were substantially the same as
rates prevailing at the time of the transaction and repayment terms are
customary for the type of loan. Changes in related party loans for the years
ended December 31, 2000 and 1999 are as follows:
2000 1999
----------- ----------
Balance, beginning of year.......................... $ 2,214,344 $1,736,075
Advances.......................................... 2,417,524 665,881
Repayments........................................ (1,654,825) (187,612)
----------- ----------
Balance, end of year................................ $ 2,977,043 $2,214,344
=========== ==========
F-17
GOLDEN ISLES FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 4. Premises and Equipment
Premises and equipment are summarized as follows:
December 31,
---------------------
2000 1998
---------- ----------
Land.................................................. $1,050,428 $ 514,235
Buildings and improvements............................ 2,821,352 2,077,578
Furniture and equipment............................... 2,273,935 1,404,614
Leasehold improvements................................ 14,468 --
Construction in progress.............................. 56,557 661,409
---------- ----------
6,216,740 4,657,836
Accumulated depreciation.............................. 1,540,611 1,249,599
---------- ----------
$4,676,129 $3,408,237
========== ==========
Note 5. Lease Commitment
The Company has leased office space under a noncancellable agreement which
expires in September 2005 and requires minimum annual rental payments.
Total minimum rental payments at December 31, 2000 are due as follows:
During the year ending December 31,
2001............................................................. $ 27,660
2002............................................................. 27,660
2003............................................................. 27,660
2004............................................................. 27,660
2005............................................................. 20,745
--------
$131,385
========
Note 6. Deposits
The aggregate amount of time deposits in denominations of $100,000 or more
at December 31, 2000 and 1999 was $28,103,111 and $20,354,848, respectively.
The scheduled maturities of time deposits at December 31, 2000 are as follows:
2001............................................................. $72,661,173
2002............................................................. 4,549,260
2003............................................................. 623,898
2004............................................................. 194,968
2005............................................................. 15,997
Due after five years............................................. 422,931
-----------
$78,468,227
===========
Brokered deposits of $13,851,305 and $3,800,995 are included in time
deposits at December 31, 2000 and 1999, respectively.
F-18
GOLDEN ISLES FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 7. Federal Home Loan Bank Borrowings
During 2000 and 1999, the Bank obtained funding for mortgage loans from the
Federal Home Loan Bank of Atlanta ("FHLB"). At December 31, 2000 and 1999, the
advances had a weighted average interest rate of 6.20% and 5.81%,
respectively. The Bank's advances from the FHLB are collateralized by a
blanket floating lien on qualifying first mortgage loans and pledging of the
Bank's stock in the FHLB. A summary of the Bank's borrowings from the FHLB for
the years ended December 31, 2000 and 1999 follows:
2000 1999
----------- -----------
Balance, beginning of year......................... $ 5,888,829 $ 6,500,500
Advances......................................... 7,000,000 1,000,000
Repayments....................................... (1,603,672) (1,611,671)
----------- -----------
Balance, end of year............................... $11,285,157 $ 5,888,829
=========== ===========
At December 31, 2000, scheduled maturities of FHLB borrowings are as
follows:
For the year ending December 31,
--------------------------------
2001............................................................ $ 2,490,035
2002............................................................ 147,002
2003............................................................ 3,121,043
2004............................................................ 1,011,014
2005............................................................ 22,000
Due after five years............................................ 4,494,063
-----------
$11,285,157
===========
Note 8. Employee Benefit Plan
The Company provides a 401(k) plan for qualified employees to defer up to
10% of their salary with matching contributions from the Company made at the
discretion of the Board of Directors. Contributions and administrative
expenses charged to expense during 2000 and 1999 amounted to $36,489 and
$31,560, respectively.
Note 9. Income Taxes
The provision for income taxes consists of the following:
Years Ended December 31,
------------------------
2000 1999
------------------------
Current............................................ $ 369,394 $ 315,546
Deferred........................................... 141,625 (159,224)
----------- ------------
$ 511,019 $ 156,322
=========== ============
F-19
GOLDEN ISLES FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 9. Income Taxes (Continued)
The Company's provision for income tax differs from the amounts computed by
applying the federal income tax statutory rates to income before income tax. A
reconciliation of the differences is as follows:
Years Ended December 31,
----------------------------------
2000 1999
----------------- ----------------
Amount Percent Amount Percent
-------- ------- -------- -------
Income tax at statutory rate............ $541,606 34% $146,690 34%
Miscellaneous permanent differences,
net.................................. (30,587) (2) 9,632 2
-------- --- -------- ---
Provision for income taxes.............. $511,019 32% $156,322 36%
======== === ======== ===
The components of deferred income taxes are as follows:
December 31,
------------------
2000 1999
-------- ---------
Deferred tax assets:
Allowance for loan losses.............................. $574,403 $ 738,733
Nonaccrual loan interest receivable.................... 65,200 38,635
Securities available for sale.......................... 16,313 192,804
-------- ---------
655,916 970,172
-------- ---------
Deferred tax liabilities:
Premises and equipment................................. 91,383 87,523
-------- ---------
Net deferred tax assets.................................. $564,533 $ 882,649
======== =========
Note 10. Earnings Per Common Share
The following is a reconciliation of net income (the numerator) and the
weighted average shares outstanding (the denominator) used in determining basic
and diluted earnings per share.
Year Ended December 31, 2000
-----------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
Basic earnings per share
Net income............................. $1,081,942 2,469,192 $0.44
=====
Effect of Dilutive Securities
Stock options.......................... -- 9,605
---------- ---------
Dilutive earnings per share
Net income............................. $1,081,942 2,478,797 $0.44
========== ========= =====
Year Ended December 31, 1999
-----------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
Basic earnings per share
Net income............................. $ 275,119 2,488,236 $ 0.11
======
Effect of Dilutive Securities
Stock options.......................... -- 24,648
--------- ---------
Dilutive earnings per share
Net income............................. $ 275,119 2,512,884 $ 0.11
========= ========= ======
F-20
GOLDEN ISLES FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 11. Commitments and Contingencies
The Bank is party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. They involve, to varying degrees, elements of credit risk
and interest rate risk in excess of the amount recognized in the balance
sheets.
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual amount of those
instruments. The Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments. A summary
of the Bank's commitments is as follows:
December 31,
-----------------------
2000 1999
----------- -----------
Commitments to extend credit........................ $14,349,504 $12,304,272
Standby letters of credit........................... 610,455 705,405
----------- -----------
$14,959,959 $13,009,677
=========== ===========
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Since many
of the commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The
Bank evaluates each customer's creditworthiness on a case-by-case basis. The
amount of collateral obtained, if deemed necessary by the Bank upon extension
of credit, is based on management's credit evaluation of the customer.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loans to customers. Collateral held varies as
specified above and is required in instances which the Bank deems necessary.
In the normal course of business, the Company is involved in various legal
proceedings. In the opinion of management, any liability resulting from such
proceedings would not have a material effect on the Company's financial
statements.
Note 12. Concentrations of Credit
The Company originates primarily commercial, residential, and consumer loans
to customers in and around Glynn County, Georgia. The ability of the majority
of the Company's customers to honor their contractual loan obligations is
dependent on the economy in the Glynn County area.
Approximately 81% of the Company's loan portfolio is concentrated in real
estate loans, of which 9% consists of construction loans. A substantial
portion of these loans are secured by real estate in the Company's primary
market area. Accordingly, the ultimate collectibility of the loan portfolio is
susceptible to changes in market conditions in the Company's primary market
area. The other significant concentrations of credit by type of loan are set
forth in Note 3.
The Bank, as a matter of policy, does not generally extend credit to any
single borrower or group of related borrowers in excess of 25% of statutory
capital, or approximately $1,525,000.
F-21
GOLDEN ISLES FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 13. Restricted Stock, Stock Options and Stock Warrants
Restricted Stock
In August 1994, the Company granted 9,260 shares of restricted stock to four
key employees. Of the above shares, 8,100 were forfeited in 1997, and the
remaining 1,160 shares vested in August 1999. In July 1995, the Company
granted 62,570 shares of restricted stock to eight directors. In 1997, 22,558
of these shares were forfeited. In December 1998, the Company granted 4,000
shares of restricted stock to two directors. All of the remaining 44,012
shares will be fully vested by the end of the seventh year from the date of
the grant. The cost of the restricted stock is being amortized on the
straight-line method over the applicable vesting periods. The amortization
expense on restricted stock was $36,296 and $37,164 for the years ended
December 31, 2000 and 1999, respectively, and the same amounts were credited
to capital surplus.
Stock Options
The Company has options outstanding under three stock option plans. The 1991
Incentive Stock Option Plan ("Plan A") and the 1991 Nonstatutory Stock Option
Plan ("Plan B") were discontinued in 1995 and replaced by the 1995 Stock
Option Plan (the "1995 Plan"). Options granted under the two prior plans at
the date of replacement by the 1995 Plan remain outstanding and can be
exercised during the terms of the option agreements unless such options are
forfeited by the optionee. The option price for shares granted under Plan A
were at least equal to the fair value of such shares on the date granted
unless the optionee was a restricted shareholder, in which case the options
price was at least equal to 110% of the fair value of the shares on the date
granted. The option price for shares of common stock to be issued under Plan B
was determined by the Board, but under no circumstances could the option price
be less than the fair value of the shares on the date granted.
Options granted under the 1995 Plan are one of two types: (i) those which
qualify for treatment as incentive stock options under Section 422 of the
Internal Revenue Code of 1986, as amended ("Incentive Stock Options") or (ii)
those which do not so qualify ("Nonqualified Options"). The 1995 Plan provides
that not more than 250,000 shares in the aggregate be issued for Incentive
Stock Options and Nonqualified Options. The exercise price of an Incentive
Stock Option shall not be less than the fair value at the date of grant. The
fair value shall be determined from the trading price on a national securities
exchange, NASDAQ, or over-the-counter markets, if so traded. If not so traded,
the Board will determine the fair value based upon recent sales reported to
the Company. The exercise price of a Nonqualified Option shall be determined
by the Board on the date granted.
A summary of the status of the three plans at December 31, 2000 and 1999,
and changes during the years ended on those dates, is as follows:
2000 1999
------------------ ------------------
Weighted- Weighted-
Average Average
Exercise Exercise
Number Price Number Price
------- --------- ------- ---------
Under option, beginning of the year..... 188,775 $7.63 149,805 $6.89
Granted............................... 6,000 6.27 79,258 8.43
Exercised............................. -- -- (27,123) 6.41
Forfeited............................. (2,000) 6.84 (13,165) 6.65
------- -------
Under option, end of year............... 192,775 7.54 188,775 7.63
======= =======
Exercisable at end of year.............. 164,939 148,275
======= =======
Weighted-average fair value per option
of options granted during year......... $ 3.44 $ 3.60
======= =======
F-22
GOLDEN ISLES FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 13. Restricted Stock, Stock Options and Stock Warrants (Continued)
Stock Options (Continued)
Additional information about options outstanding at December 31, 2000 is as
follows:
Options Outstanding Options Exercisable
----------------------------------------------------------------------------
Weighted- Weighted-
Range of Average Weighted- Average
Exercise Number Contractual Average Number Exercise
Prices Outstanding Life in Years Exercise Price Outstanding Price
------------ ----------- ------------- -------------- ----------- ---------
$4.00--$4.99 24,254 1.51 $4.04 24,254 $4.04
$6.00--$6.99 67,049 7.71 6.51 50,047 6.45
$7.00--$7.99 10,000 8.02 7.30 10,000 7.30
$8.00--$8.99 4,966 9.76 8.36 4,966 8.36
$9.00--$9.99 86,506 8.79 9.41 75,672 9.44
------- -------
192,775 164,939
======= =======
As permitted under generally accepted accounting principles, grants under
the plans are accounted for following the provisions of APB Opinion No. 25 and
its related interpretations. Accordingly, no compensation cost has been
recognized for grants made to date. Had compensation cost been determined
based on the fair value method prescribed in FASB Statement No. 123, reported
net income and earnings per share would have been reduced as follows:
December 31,
--------------------------------------------
2000 1999
---------------------- ---------------------
Basic Basic
Net Net Income Net Net Income
Income Per Share Income Per Share
---------- ---------- --------- ----------
As reported................... $1,081,942 $0.44 $ 275,119 $ 0.11
Stock based compensation, net
of related tax effect........ (37,401) (.02) (111,392) (0.04)
---------- ----- --------- ------
As adjusted................... $1,044,541 $ .42 $ 163,727 $ 0.07
========== ===== ========= ======
The fair value of the options granted in 2000 was based upon the discounted
value of future cash flows of the options using the following assumptions:
Risk-free interest rate............................................. 5.65%
Expected life of the options........................................ 10 years
Expected dividend yield............................................. 1.22%
Expected volatility................................................. 44.28%
Note 14. Regulatory Matters
The Bank is subject to certain restrictions on the amount of dividends that
may be declared without prior regulatory approval. At December 31, 2000,
approximately $600,800 of the Bank's retained earnings were available for
dividend declaration without regulatory approval.
The Company and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory, and possibly
additional discretionary, actions by regulators that, if undertaken, could
have a direct material effect on
F-23
GOLDEN ISLES FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 14. Regulatory Matters (Continued)
the financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Bank must meet specific capital
guidelines that involve quantitative measures of the assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. The capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings, and
other factors. Prompt corrective action provisions are not applicable to bank
holding companies.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios of
total and Tier I capital to risk-weighted assets and of Tier I capital to
average assets. Management believes, as of December 31, 2000, the Company and
the Bank met all capital adequacy requirements to which it is subject.
As of December 31, 2000, the most recent notification from the Federal
Deposit Insurance Corporation categorized the Bank as well capitalized under
the regulatory framework for prompt corrective action. To be categorized as
well capitalized, the Bank must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as set forth in the following table.
There are no conditions or events since that notification that management
believes have changed the Bank's category.
The Company and Bank's actual capital amounts and ratios are presented in
the following table.
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
----------------- ----------------- ------------------
Amount Ratio Amount Ratio Amount Ratio
----------- ----- ----------- ----- ------------ -----
As of December 31, 2000
Total Capital to Risk
Weighted Assets
Consolidated.......... $15,321,300 15.0% $ 8,164,900 8.0% N/A N/A
Bank.................. $12,690,600 12.4% $ 8,162,000 8.0% $10,202,500 10.0%
Tier I Capital to Risk
Weighted Assets
Consolidated.......... $14,034,100 13.8% $ 4,082,500 4.0% N/A N/A
Bank.................. $11,403,800 11.2% $ 4,081,000 4.0% $ 6,121,500 6.0%
Tier I Capital to
Average Assets
Consolidated.......... $14,034,100 10.0% $ 5,636,200 4.0% N/A N/A
Bank.................. $11,403,800 8.1% $ 5,634,700 4.0% $ 7,043,400 5.0%
As of December 31, 1999
Total Capital to Risk
Weighted Assets
Consolidated.......... $14,767,500 15.9% $ 7,432,000 8.0% N/A N/A
Bank.................. $11,401,300 12.3% $ 7,416,600 8.0% $ 9,270,800 10.0%
Tier I Capital to Risk
Weighted Assets
Consolidated.......... $13,589,000 14.6% $ 3,716,000 4.0% N/A N/A
Bank.................. $10,225,200 11.0% $ 3,708,300 4.0% $ 5,562,500 6.0%
Tier I Capital to
Average Assets
Consolidated.......... $13,589,000 10.8% $ 5,020,200 4.0% N/A N/A
Bank.................. $10,225,200 8.2% $ 5,016,300 4.0% $ 6,270,400 5.0%
F-24
GOLDEN ISLES FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 15. Pending Merger
The Company has entered into a definitive merger agreement with ABC Bancorp,
Inc., a financial institutions holding company with headquarters in Moultrie,
Georgia, whereby ABC would acquire all of the outstanding stock of the Company
in exchange for a combination of cash and ABC's common stock. The merger is
subject to approval by the Company's shareholders and certain regulatory
authorities and the registration of ABC's common stock to be issued in
connection with the merger. As a result of the merger, The First Bank of
Brunswick, a wholly-owned subsidiary of the Company, will become a wholly-
owned subsidiary of ABC. The First Bank of Brunswick will continue to conduct
its normal operations as a wholly-owned subsidiary of ABC.
Note 16. Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be
exchanged between willing parties, other than in a forced liquidation. Fair
value is best determined based upon quoted market prices. However, in many
instances, there are no quoted market prices for the Bank's various financial
instruments. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation
techniques. Those techniques are significantly affected by the assumptions
used, including the discount rate and estimates of future cash flows.
Accordingly, the fair value estimates may not be realized in an immediate
settlement of the instrument. SFAS 107 excludes certain financial instruments
and all nonfinancial instruments from its disclosure requirements.
Accordingly, the aggregate fair value amounts presented may not necessarily
represent the underlying fair value of the Bank.
Cash and Due From Banks, Interest-Bearing Deposits in Banks and Federal Funds
Sold
The carrying amounts of cash and due from banks, interest-bearing deposits
in banks and federal funds sold approximate fair value.
Securities
Fair values for securities available for sale are based on available quoted
market prices. The carrying values of other investments with no readily
determinable fair value approximate fair values.
Loans
For variable-rate loans that reprice frequently and have no significant
change in credit risk, fair values are based on carrying values. For other
loans, the fair values are estimated using discounted cash flow analyses,
using interest rates currently being offered for loans with similar terms to
borrowers with similar credit quality. Fair values for impaired loans are
estimated using discounted cash flow analyses or underlying collateral values.
Deposits:
The carrying amounts of demand deposits, savings deposits, and variable-rate
certificates of deposit approximate their fair values. Fair values for fixed-
rate certificates of deposit are estimated using a discounted cash flow
calculation that applies interest rates currently being offered on
certificates to a schedule of aggregated expected monthly maturities on time
deposits.
Federal Home Loan Bank Borrowings
The fair values of the Company's borrowings from the FHLB are estimated
using discounted cash flow models, using current market interest rates offered
on similar types of borrowing arrangements.
F-25
GOLDEN ISLES FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 16. Fair Value of Financial Instruments (Continued)
Off-Balance-Sheet Instruments
Fair values of the Bank's off-balance-sheet financial instruments are based
on fees currently charged to enter into similar agreements. Since the majority
of the Bank's off-balance-sheet instruments consist of nonfee-producing,
variable-rate commitments, the Bank has determined they do not have a
distinguishable fair value.
The estimated fair values and related carrying values of the Company's
financial instruments were as follows:
December 31, 2000 December 31, 1999
------------------------- -------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------ ------------ ------------ ------------
Financial assets:
Cash and due from banks,
interest-bearing
deposits in banks, and
federal funds sold...... $ 8,999,155 $ 8,999,155 $ 10,976,400 $ 10,976,400
Securities............... 18,930,924 18,930,924 19,244,799 19,244,799
Loans.................... 111,202,027 111,837,000 95,687,196 94,784,000
Financial liabilities:
Deposits................. 120,815,343 122,716,000 112,742,906 111,556,000
FHLB borrowings.......... 11,285,157 11,653,000 5,888,829 5,572,000
Note 17. Parent Company Financial Information
The following information presents the condensed balance sheets, statements of
income and cash flows for Golden Isles Financial Holdings, Inc. as of and for
the years ended December 31, 2000 and 1999.
CONDENSED BALANCE SHEETS
2000 1999
----------- -----------
Assets
Cash................................................... $ 2,619,178 $ 3,269,789
Investment in subsidiary............................... 11,372,155 9,850,933
Premises and equipment, net............................ -- 3,922
Other assets........................................... 35,836 104,202
----------- -----------
Total assets......................................... $14,027,169 $13,228,846
=========== ===========
Liabilities and Stockholders' Equity
Liabilities, other..................................... $ 24,737 $ 14,154
----------- -----------
Stockholders' equity................................... 14,002,432 13,214,692
----------- -----------
Total liabilities and stockholders' equity........... $14,027,169 $13,228,846
=========== ===========
F-26
GOLDEN ISLES FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 17. Parent Company Financial Information (continued)
CONDENSED STATEMENTS OF INCOME
2000 1999
----------- ----------
Income
Interest............................................ $ 61 $ 66,866
Other............................................... 19,635 20,645
----------- ----------
Total income...................................... 19,696 87,511
----------- ----------
Expense
General and administrative.......................... 225,520 311,597
----------- ----------
Total expense..................................... 225,520 311,597
----------- ----------
Loss before income tax benefits and equity in
undistributed income of subsidiary............... (205,824) (224,086)
Income tax benefits................................... (109,145) (73,365)
----------- ----------
Loss before equity in undistributed income of
subsidiary....................................... (96,679) (150,721)
Equity in undistributed income of subsidiary.......... 1,178,621 425,840
----------- ----------
Net income........................................ $ 1,081,942 $ 275,119
=========== ==========
CONDENSED STATEMENTS OF CASH FLOWS
2000 1999
----------- ----------
Operating Activities
Net income............................................ $ 1,081,942 $ 275,119
Adjustments to reconcile net income to net cash used
in operating activities:
Depreciation........................................ 1,626 6,752
Undistributed income of subsidiaries................ (1,178,621) (425,840)
Net loss on disposal of premises and equipment...... 2,296 4,716
Change in other prepaids, receivables, deferrals and
accruals, net...................................... 78,949 (328,137)
----------- ----------
Net cash used in operating activities............. (13,808) (467,390)
----------- ----------
Financing Activities
Purchase of treasury shares......................... (475,475) --
Dividends paid...................................... (197,624) (198,677)
Vesting of restricted stock......................... 36,296 37,164
Proceeds from exercise of stock options............. -- 173,888
----------- ----------
Net cash provided by (used in) financing
activities......................................... (636,803) 12,375
----------- ----------
Net decrease in cash.................................. (650,611) (455,015)
Cash at beginning of year............................. 3,269,789 3,724,804
----------- ----------
Cash at end of year................................... $ 2,619,178 $3,269,789
=========== ==========
[REMAINDER OF PAGE INTENTIONALLY BLANK]
F-27
APPENDIX A TO
PROXY STATEMENT/PROSPECTUS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Execution Copy
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
ABC BANCORP
AND
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
As of February 20, 2001
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-1
TABLE OF CONTENTS
Page
----
Article 1. TERMS OF MERGER
Section 1.1 Merger...................................................... A-5
Section 1.2 Time and Place of Closing................................... A-5
Section 1.3 Effective Time.............................................. A-5
Article 2. ARTICLES, BYLAWS, MANAGEMENT
Section 2.1 Articles of Incorporation................................... A-6
Section 2.2 Bylaws...................................................... A-6
Section 2.3 Directors and Officers...................................... A-6
Article 3. MANNER OF CONVERTING AND EXCHANGING SHARES
Section 3.1 Conversion of Shares........................................ A-6
Section 3.2 Exchange of Shares.......................................... A-7
Section 3.3 Anti-Dilution Provisions.................................... A-7
Section 3.4 Shares Held by TARGET or PURCHASER.......................... A-7
Section 3.5 TARGET Bank................................................. A-7
Section 3.6 Rights of Former TARGET Shareholders........................ A-7
Section 3.7 Options..................................................... A-8
Article 4. REPRESENTATIONS AND WARRANTIES OF TARGET
Section 4.1 Organization, Standing and Power............................ A-8
Section 4.2 Authority; No Breach........................................ A-8
Section 4.3 Capital Stock............................................... A-9
Section 4.4 TARGET Subsidiaries......................................... A-9
Section 4.5 Financial Statements........................................ A-10
Section 4.6 Absence of Undisclosed Liabilities.......................... A-10
Section 4.7 Absence of Certain Changes or Events........................ A-10
Section 4.8 Tax Matters................................................. A-10
Section 4.9 TARGET Allowance for Possible Loan Losses................... A-11
Section 4.10 Assets...................................................... A-11
Section 4.11 Environmental Matters....................................... A-11
Section 4.12 Compliance with Laws........................................ A-12
Section 4.13 Labor Relations............................................. A-13
Section 4.14 Employee Benefit Plans...................................... A-13
Section 4.15 Material Contracts.......................................... A-14
Section 4.16 Legal Proceedings........................................... A-15
Section 4.17 Reports..................................................... A-15
Section 4.18 Statements True and Correct................................. A-15
Section 4.19 Accounting, Tax and Regulatory Matters...................... A-16
Section 4.20 Charter Provisions.......................................... A-16
Article 5. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 5.1 Organization, Standing and Power............................ A-16
Section 5.2 Authority; No Breach........................................ A-16
Section 5.3 Capital Stock............................................... A-17
Section 5.4 PURCHASER Subsidiaries...................................... A-17
Section 5.5 Financial Statements........................................ A-18
Section 5.6 Absence of Undisclosed Liabilities.......................... A-18
A-2
Page
----
Section 5.7 Absence of Certain Changes or Events...................... A-18
Section 5.8 Tax Matters............................................... A-18
Section 5.9 PURCHASER Allowance for Possible Loan Losses.............. A-19
Section 5.10 Assets.................................................... A-19
Section 5.11 Environmental Matters..................................... A-19
Section 5.12 Compliance with Laws...................................... A-20
Section 5.13 Labor Relations........................................... A-21
Section 5.14 Employee Benefit Plans.................................... A-21
Section 5.15 Legal Proceedings......................................... A-22
Section 5.16 Reports................................................... A-22
Section 5.17 Statements True and Correct............................... A-23
Section 5.18 Accounting, Tax and Regulatory Matters.................... A-23
Section 5.19 Charter Provisions........................................ A-23
Article 6. CONDUCT OF BUSINESS PENDING CONSUMMATION
Section 6.1 Affirmative Covenants of TARGET........................... A-23
Section 6.2 Negative Covenants of TARGET.............................. A-24
Section 6.3 Cooperation; Steering Committee........................... A-25
Section 6.4 Covenants of PURCHASER.................................... A-25
Section 6.5 Adverse Changes in Condition.............................. A-25
Section 6.6 Reports................................................... A-26
Article 7. ADDITIONAL AGREEMENTS
Registration Statement; Proxy Statement; Shareholder
Section 7.1 Approval.................................................. A-26
Section 7.2 Listing................................................... A-26
Section 7.3 Applications.............................................. A-26
Section 7.4 Filings with State Offices................................ A-26
Section 7.5 Agreement as to Efforts to Consummate..................... A-26
Section 7.6 Investigation and Confidentiality......................... A-27
Section 7.7 Press Releases............................................ A-27
Section 7.8 No Solicitation........................................... A-27
Section 7.9 Tax Treatment............................................. A-29
Section 7.10 Agreement of Affiliates................................... A-29
Section 7.11 Employee Benefits and Contracts........................... A-29
Section 7.12 Large Deposits............................................ A-29
Section 7.13 Indemnification........................................... A-30
Section 7.14 Irrevocable Proxies....................................... A-30
Section 7.15 TARGET Options............................................ A-30
Section 7.16 Adjustment to the TARGET Allowance........................ A-30
Article 8. CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
Section 8.1 Conditions to Obligations of Each Party................... A-30
Section 8.2 Conditions to Obligations of PURCHASER.................... A-31
Section 8.3 Conditions to Obligations of TARGET....................... A-32
Article 9. TERMINATION
Section 9.1 Termination............................................... A-33
Section 9.2 Effect of Termination..................................... A-33
Article 10. MISCELLANEOUS
Section 10.1 Definitions............................................... A-34
Section 10.2 Expenses.................................................. A-40
A-3
Page
----
Section 10.3 Brokers and Finders........................................ A-41
Section 10.4 Entire Agreement........................................... A-41
Section 10.5 Amendments................................................. A-41
Section 10.6 Waivers.................................................... A-41
Section 10.7 Assignment................................................. A-41
Section 10.8 Notices.................................................... A-42
Section 10.9 Governing Law.............................................. A-42
Section 10.10 Counterparts............................................... A-42
Section 10.11 Captions................................................... A-42
Section 10.12 Enforcement of Agreement................................... A-42
Section 10.13 Severability............................................... A-43
Section 10.14 Survival................................................... A-43
LIST OF EXHIBITS
Exhibit
Number Description
------- -----------
A List of Holders of TARGET Options ((S) 3.7).
Form of Agreement of Affiliates of Golden Isles Financial Holdings,
B Inc. ((S) 7.10).
C Irrevocable Proxy ((S) 7.14).
D Forms of Letters from Holders of TARGET Options ((S) 7.15).
E Form of Employment Agreement ((S) 8.2(d)).
Matters as to which Martin, Snow, Grant & Napier, LLP will opine ((S)
F 8.2(e)).
G Matters as to which Rogers & Hardin LLP will opine ((S) 8.3(d)).
A-4
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered into
as of February 20, 2001, by and between GOLDEN ISLES FINANCIAL HOLDINGS, INC.
("TARGET"), a corporation organized and existing under the laws of the State
of Georgia, with its principal office located on St. Simons Island, Georgia,
and ABC BANCORP ("PURCHASER"), a corporation organized and existing under the
laws of the State of Georgia, with its principal office located in Moultrie,
Georgia.
Preamble
Certain terms used in this Agreement are defined in Section 10.1 hereof.
The Boards of Directors of TARGET and PURCHASER are of the opinion that the
transactions described herein are in the best interests of TARGET and
PURCHASER and their respective shareholders. This Agreement provides for the
combination of TARGET with PURCHASER pursuant to the merger of TARGET with and
into PURCHASER, as a result of which the outstanding shares of the capital
stock of TARGET shall be converted into the right to receive cash and shares
of the common stock of PURCHASER (except as provided herein), and the
shareholders of TARGET shall become shareholders of PURCHASER (except as
provided herein). The transactions described in this Agreement are subject to
the approvals of the shareholders of TARGET, the Board of Governors of the
Federal Reserve System, the Georgia Department of Banking and Finance and the
satisfaction of certain other conditions described in this Agreement. It is
the intention of the parties to this Agreement that the Merger for federal
income tax purposes shall qualify as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code.
Simultaneous with the Closing of the Merger, The First Bank of Brunswick, a
wholly-owned Georgia state bank subsidiary of TARGET, will be operated as a
separate subsidiary of PURCHASER.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants and agreements set forth herein, the parties agree
as follows:
ARTICLE 1.
TERMS OF MERGER
SECTION 1.1 Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time, TARGET shall be merged with and into PURCHASER in
accordance with the provisions of Section 14-2-1101 of the GBCC and with the
effect provided in Section 14-2-1106 of the GBCC (the "Merger"). PURCHASER
shall be the Surviving Corporation resulting from the Merger. The Merger shall
be consummated pursuant to the terms of this Agreement, which has been
approved and adopted by the respective Boards of Directors of TARGET and
PURCHASER.
SECTION 1.2 Time and Place of Closing. The Closing shall take place at 10:00
a.m. on the date that the Effective Time occurs or at such other time as the
Parties, acting through their chief executive officers or chief financial
officers, may mutually agree (the "Closing Date"). The place of Closing shall
be at the main office of The First Bank of Brunswick, Brunswick, Georgia, or
such other place as may be mutually agreed upon by the Parties.
SECTION 1.3 Effective Time. The Merger and other transactions contemplated
by this Agreement shall become effective on the date and at the time the
Georgia Articles of Merger reflecting the Merger shall become effective with
the Secretary of State of the State of Georgia (the "Effective Time"). Subject
to the terms and conditions hereof, unless otherwise mutually agreed upon in
writing by the chief executive officers of each Party,
the Parties shall use their reasonable efforts to cause the Effective Time to
occur on (a) the last Business Day of the month in which occurs the last to
occur of (i) the effective date (including expiration of any applicable
waiting period) of the last required Consent of any Regulatory Authority
having authority over and approving or exempting the Merger and (ii) the date
on which the shareholders of TARGET approve this Agreement to the extent such
approval is required by applicable Law; or (b) such later date as may be
mutually agreed upon in writing by the chief executive officer or chief
financial officer of each Party.
A-5
ARTICLE 2.
ARTICLES, BYLAWS, MANAGEMENT
SECTION 2.1 Articles of Incorporation. The Articles of Incorporation of
PURCHASER in effect immediately prior to the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation until otherwise amended
or repealed.
SECTION 2.2 Bylaws. The Bylaws of PURCHASER in effect immediately prior to
the Effective Time shall be the Bylaws of the Surviving Corporation until
otherwise amended or repealed.
SECTION 2.3 Directors and Officers. The directors of PURCHASER in office
immediately prior to the Effective Time shall serve as the directors of the
Surviving Corporation from and after the Effective Time in accordance with the
Bylaws of the Surviving Corporation. The officers of PURCHASER in office
immediately prior to the Effective Time, together with such additional persons
as may thereafter be elected, shall serve as the officers of PURCHASER from
and after the Effective Time in accordance with the Bylaws of PURCHASER. The
directors and officers of TARGET Bank immediately prior to the Effective Time
shall serve as the initial directors and officers of TARGET Bank from and
after the Effective Time in accordance with the Bylaws of TARGET Bank.
ARTICLE 3.
MANNER OF CONVERTING AND EXCHANGING SHARES
SECTION 3.1 Conversion of Shares. Subject to the provisions of this Article
3, at the Effective Time, by virtue of the Merger and without any action on
the part of the holders thereof, the shares of PURCHASER and TARGET shall be
converted as follows:
(a) Each share of PURCHASER Common Stock issued and outstanding immediately
prior to the Effective Time shall remain issued and outstanding from
and after the Effective Time.
(b) Each share of TARGET Common Stock (including any shares currently
subject to options which are exercised prior to the Effective Time)
outstanding immediately prior to the Effective Time, other than shares
with respect to which the holders thereof, prior to the Effective Time,
met the requirements of, and perfected their dissenters' rights under,
Article 13 of the GBCC with respect to shareholders dissenting from the
Merger (the "Dissenting Shares"), and shares held by TARGET or by
PURCHASER or any of the PURCHASER Subsidiaries, in each case other than
in a fiduciary capacity or as a result of debts previously contracted
(each an "Outstanding TARGET Share" and, collectively, the "Outstanding
TARGET Shares"), shall automatically be converted at the Effective Time
into the right to receive its Pro-Rata Share of the Cash Consideration
and the Stock Consideration (plus cash in lieu of fractional shares
pursuant to subsection (c) below, if applicable), respectively.
(c) Notwithstanding any other provision of this Agreement, each holder of
Outstanding TARGET Shares exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of
PURCHASER Common Stock (after taking into account all certificates
delivered by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share of
PURCHASER Common Stock multiplied by $10.00. No such holder will be
entitled to dividends, voting rights, or any other rights as a
shareholder in respect of any fractional shares.
(d) Each share of the TARGET Common Stock that is not an Outstanding TARGET
Share as of the Effective Time shall be cancelled without consideration
therefor.
(e) No Dissenting Shares shall be converted in the Merger. All such shares
shall be cancelled and the holders thereof shall thereafter have only
such rights as are granted to dissenting shareholders under Article 13
of the GBCC; provided, however, that if any such shareholder fails to
perfect his or her rights as a dissenting shareholder with respect to
his or her Dissenting Shares in accordance with
A-6
Article 13 of the GBCC, such shares held by such shareholder shall, upon
the happening of that event, be treated the same as all other holders of
TARGET Common Stock who at the Effective Time held Outstanding TARGET
Shares.
SECTION 3.2 Exchange of Shares. Prior to the Effective Time, PURCHASER shall
select a bank or trust company reasonably acceptable to TARGET to act as
exchange agent (the "Exchange Agent") to effectuate the delivery of the Merger
Consideration to holders of TARGET Common Stock. Promptly following the
Effective Time, the Exchange Agent shall send to each holder of Outstanding
TARGET Shares immediately prior to the Effective Time a form of letter of
transmittal (the "Letter of Transmittal") for use in exchanging certificates
previously evidencing shares of TARGET Common Stock ("Old Certificates"). The
Letter of Transmittal will contain instructions with respect to the surrender
of Old Certificates and the distribution of any cash and certificates
representing PURCHASER Common Stock, which certificates shall be deposited
with the Exchange Agent by PURCHASER as of the Effective Time. If any
certificates for shares of PURCHASER Common Stock are to be issued in a name
other than that for which an Old Certificate surrendered or exchanged is
issued, the Old Certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer and the person requesting such exchange
shall affix any requisite stock transfer tax stamps to the Old Certificate
surrendered or provide funds for their purchase or establish to the
satisfaction of the Exchange Agent that such taxes are not payable. Unless and
until Old Certificates or evidence that such certificates have been lost,
stolen or destroyed accompanied by such security or indemnity as shall be
requested by TARGET) are presented to the Exchange Agent, the holder thereof
shall not be entitled to the consideration to be paid in exchange therefor
pursuant to the Merger, to any dividends payable on any PURCHASER Common Stock
to which he or she is entitled, or to exercise any rights as a shareholder of
PURCHASER Common Stock. Subject to applicable law and to the extent that the
same has not yet been paid to a public official pursuant to applicable
abandoned property laws, upon surrender of his or her Old Certificates, the
holder thereof shall be paid the consideration to which he or she is entitled.
All such property, if held by the Exchange Agent for payment or delivery to
the holders of unsurrendered Old Certificates and unclaimed at the end of one
(1) year from the Effective Time, shall at such time be paid or redelivered by
the Exchange Agent to PURCHASER, and after such time any holder of an Old
Certificate who has not surrendered such certificate shall, subject to
applicable laws and to the extent that the same has not yet been paid to a
public official pursuant to applicable abandoned property laws, look as a
general creditor only to PURCHASER for payment or delivery of such property.
In no event will any holder of TARGET Common Stock exchanged in the Merger be
entitled to receive any interest on any amounts held by the Exchange Agent or
PURCHASER.
SECTION 3.3 Anti-Dilution Provisions. In the event PURCHASER changes the
number of shares of PURCHASER Common Stock issued and outstanding prior to the
Effective Time as a result of a stock split, stock dividend or similar
recapitalization with respect to such stock and the record date therefor (in
the case of a stock dividend) or the effective date therefor (in the case of a
stock split or similar recapitalization) shall be prior to the Effective Time,
the aggregate number of shares of PURCHASER Common Stock that constitutes the
Stock Consideration shall be proportionately adjusted.
SECTION 3.4 Shares Held by TARGET or PURCHASER. Each of the shares of TARGET
Common Stock held by any TARGET Company or by any PURCHASER Company, in each
case other than in a fiduciary capacity or as a result of debts previously
contracted, shall be canceled and retired at the Effective Time and no
consideration shall be issued in exchange therefor.
SECTION 3.5 TARGET Bank. After consummation of the Merger, TARGET Bank shall
be a separate subsidiary of PURCHASER.
SECTION 3.6 Rights of Former TARGET Shareholders. At the Effective Time, the
stock transfer books of TARGET shall be closed as to holders of TARGET Common
Stock immediately prior to the Effective Time, and no transfer of TARGET
Common Stock by any such holder shall thereafter be made or recognized. Until
surrendered for exchange in accordance with the provisions of Section 3.2 of
this Agreement, each Old Certificate (other than shares to be canceled
pursuant to Section 3.1(d) of this Agreement) shall from and after
A-7
the Effective Time represent for all purposes only the right to receive the
consideration provided in Section 3.1 of this Agreement in exchange therefor.
To the extent permitted by Law, former shareholders of record of TARGET shall
be entitled to vote after the Effective Time at any meeting of shareholders of
PURCHASER the number of whole shares of PURCHASER Common Stock into which
their respective shares of TARGET Common Stock are converted, regardless of
whether such holders have exchanged their certificates representing TARGET
Common Stock for certificates representing PURCHASER Common Stock in
accordance with the provisions of this Agreement. Whenever a dividend or other
distribution is declared by PURCHASER on the PURCHASER Common Stock, the
record date for which is at or after the Effective Time, the declaration shall
include dividends or other distributions on all shares issuable pursuant to
this Agreement, but no dividend or other distribution payable to the holders
of record of PURCHASER Common Stock as of any time subsequent to the Effective
Time shall be delivered to the holder of any certificate representing shares
of TARGET Common Stock issued and outstanding at the Effective Time until such
holder surrenders such certificate for exchange as provided in Section 3.2 of
this Agreement. However, upon surrender of such TARGET Common Stock
certificate, the PURCHASER Common Stock certificate (together with all such
undelivered dividends or other distributions without interest), the Cash
Consideration (without interest) and any undelivered cash payments to be paid
for fractional share interests (without interest) shall be delivered and paid
with respect to each share represented by such certificate.
SECTION 3.7 Options. Each option, if any, to purchase shares of TARGET
Common Stock issued by TARGET that is outstanding and unexercised immediately
prior to the Effective Time ("TARGET Option") shall be cancelled upon
consummation of the Merger, and all rights in respect thereof will cease to
exist. As consideration for the cancellation of all of the TARGET Options, as
of the Effective Time, each holder of TARGET Options (each, a "Holder") shall
be entitled to receive a portion of the Aggregate Merger Consideration (plus
cash in lieu of fractional shares pursuant to subparagraph 3.1(c) above, if
applicable) equal to the aggregate number of Option Shares to which such
Holder is entitled hereunder multiplied by a Pro-Rata Share of the Cash
Consideration and the Stock Consideration, respectively. The name of each
Holder and the number of TARGET Options owned by such Holder is set forth on
Exhibit A hereto.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF TARGET
TARGET hereby represents and warrants to PURCHASER as follows:
SECTION 4.1 Organization, Standing and Power. TARGET is a corporation duly
organized, validly existing, and in good standing under the Laws of the State
of Georgia, and is duly registered as a bank holding company under the BHC
Act. TARGET has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its Assets. TARGET is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where
the character of its assets or the nature or conduct of its business requires
it to be so qualified or licensed, except for such jurisdictions in which the
failure to be so qualified or licensed is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET.
SECTION 4.2 Authority; No Breach.
(a) TARGET has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated herein, including the Merger, have been duly
and validly authorized by all necessary corporate action in respect
thereof on the part of TARGET, subject to the approval of this
Agreement by the holders of the outstanding TARGET Common Stock.
Subject to such requisite shareholder approval, this Agreement
represents a legal, valid and binding obligation of TARGET, enforceable
against TARGET in accordance with its terms (except in all cases as
such enforceability may be
A-8
limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar Laws affecting the enforcement of creditors' rights generally
and except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of the
court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by TARGET, nor the
consummation by TARGET of the transactions contemplated hereby, nor
compliance by TARGET with any of the provisions hereof, will (i)
conflict with or result in a breach of any provision of TARGET's
Articles of Incorporation or Bylaws, or (ii) constitute or result in a
Default under, or require any Consent pursuant to, or result in the
creation of any Lien on any Asset of any TARGET Company under, any
Contract or Permit of any TARGET Company, where such Default or Lien,
or any failure to obtain such Consent, is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET,
or (iii) subject to receipt of the requisite approvals referred to in
Section 8.1(b) of this Agreement, violate any Law or Order applicable
to any TARGET Company or any of their respective Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate Laws, and other than
Consents required from Regulatory Authorities, and other than notices
to or filings with the IRS or the Pension Benefit Guaranty Corporation
with respect to any employee benefit plans, and other than Consents,
filings or notifications which, if not obtained or made, are not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on TARGET, no notice to, filing with, or Consent of, any
public body or authority is necessary for the consummation by TARGET of
the Merger and the other transactions contemplated in this Agreement.
SECTION 4.3 Capital Stock.
(a) The authorized capital stock of TARGET consists of 50,000,000 shares of
TARGET Common Stock, of which 2,433,800 shares are issued and
outstanding as of the date of this Agreement. All of the issued and
outstanding shares of capital stock of TARGET are duly and validly
issued and outstanding and are fully paid and nonassessable under the
GBCC. None of the outstanding shares of capital stock of TARGET has
been issued in violation of any preemptive rights of the current or
past shareholders of TARGET.
(b) There are no shares of capital stock or other equity securities of
TARGET outstanding and, except as set forth in Exhibit "A" to this
Agreement, no outstanding options, warrants, scrip, rights to subscribe
to, calls, or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of
the capital stock of TARGET or contracts, commitments, understandings
or arrangements by which TARGET is or may be bound to issue additional
shares of its capital stock or options, warrants or rights to purchase
or acquire any additional shares of its capital stock.
SECTION 4.4 TARGET Subsidiaries. TARGET has Previously Disclosed all of the
TARGET Subsidiaries as of the date of this Agreement. TARGET owns all of the
issued and outstanding shares of capital stock of each TARGET Subsidiary. No
equity securities of any TARGET Subsidiary are or may become required to be
issued (other than to a TARGET Company) by reason of any options, warrants,
scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of the capital stock of any such Subsidiary, and
there are no Contracts by which any TARGET Subsidiary is bound to issue (other
than to a TARGET Company) additional shares of its capital stock or options,
warrants or rights to purchase or acquire any additional shares of its capital
stock or by which any TARGET Company is or may be bound to transfer any shares
of the capital stock of any TARGET Subsidiary (other than to a TARGET
Company). There are no Contracts relating to the rights of any TARGET Company
to vote or to dispose of any shares of the capital stock of any TARGET
Subsidiary. All of the shares of capital stock of each TARGET Subsidiary held
by a TARGET Company are fully paid and nonassessable
A-9
under the applicable corporation Law of the jurisdiction in which such
Subsidiary is incorporated or organized and are owned by the TARGET Company
free and clear of any Lien. Each TARGET Subsidiary is either a bank or a
corporation, and is duly organized, validly existing, and (as to corporations)
in good standing under the Laws of the jurisdiction in which it is
incorporated or organized, and has the corporate power and authority necessary
for it to own, lease and operate its Assets and to carry on its business as
now conducted. Each TARGET Subsidiary is duly qualified or licensed to
transact business as a foreign corporation in good standing in the States of
the United States and foreign jurisdictions where the character of its Assets
or the nature or conduct of its business requires it to be so qualified or
licensed, except for such jurisdictions in which the failure to be so
qualified or licensed is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on TARGET. Each TARGET Subsidiary that is
a depository institution is an insured institution as defined in the Federal
Deposit Insurance Act and applicable regulations thereunder.
SECTION 4.5 Financial Statements. TARGET has Previously Disclosed, and
delivered to PURCHASER prior to the execution of this Agreement, copies of all
TARGET Financial Statements and will deliver to PURCHASER copies of all
financial statements, audited or unaudited, of TARGET prepared subsequent to
the date hereof. The TARGET Financial Statements (as of the dates thereof and
for the periods covered thereby) (a) are or, if dated after the date of this
Agreement, will be in accordance with the books and records of the TARGET
Companies, which are or will be, as the case may be, complete and correct and
which have been or will have been, as the case may be, maintained in
accordance with good business practices, and (b) present or will present, as
the case may be, fairly the consolidated financial position of the TARGET
Companies as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity, and cash flows of the TARGET
Companies for the periods indicated, in accordance with GAAP (subject to any
exceptions as to consistency specified therein or as may be indicated in the
notes thereto or, in the case of interim financial statements, to normal
recurring year-end adjustments that are not material).
SECTION 4.6 Absence of Undisclosed Liabilities. Except as Previously
Disclosed, no TARGET Company has any Liabilities that are reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on TARGET,
except Liabilities which are accrued or reserved against in the consolidated
balance sheets of TARGET as of December 31, 2000 included in the TARGET
Financial Statements or reflected in the notes thereto. Except as Previously
Disclosed, no TARGET Company has incurred or paid any Liability since December
31, 2000, except for such Liabilities incurred or paid in the ordinary course
of business consistent with past business practice and which are not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on TARGET.
SECTION 4.7 Absence of Certain Changes or Events. Since December 31, 2000,
(a) there have been no events, changes or occurrences which have had, or are
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on TARGET, and (b) the TARGET Companies have not taken any
action, or failed to take any action, prior to the date of this Agreement,
which action or failure, if taken after the date of this Agreement, would
represent or result in a material breach or violation of any of the covenants
and agreements of TARGET provided in Article 7 of this Agreement.
SECTION 4.8 Tax Matters.
(a) All Tax returns required to be filed by or on behalf of any of the
TARGET Companies have been duly filed or requests for extensions have
been timely filed, granted and have not expired for periods ended on or
before December 31, 1999, and on or before the date of the most recent
fiscal year end immediately preceding the Effective Time, except to the
extent that all such failures to file, taken together, are not
reasonably likely to have a Material Adverse Effect on TARGET, and all
returns filed are complete and accurate to the Knowledge of TARGET. All
Taxes shown on filed returns have been paid. As of the date of this
Agreement, there is no audit examination, deficiency or refund
Litigation with respect to any Taxes that is reasonably likely to
result in a determination that would have, individually or in the
aggregate, a Material Adverse Effect on TARGET, except as reserved
against in
A-10
the TARGET Financial Statements delivered prior to the date of this
Agreement. All Taxes and other Liabilities due with respect to completed
and settled examinations or concluded Litigation have been paid.
(b) None of the TARGET Companies has executed an extension or waiver of any
statute of limitations on the assessment or collection of any Tax due
that is currently in effect, and no unpaid tax deficiency has been
asserted in writing against or with respect to any TARGET Company,
which deficiency is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on TARGET.
(c) Adequate provision for any Taxes due or to become due for any of the
TARGET Companies for the period or periods through and including the
date of the respective TARGET Financial Statements has been made and is
reflected on such TARGET Financial Statements.
(d) Deferred Taxes of the TARGET Companies have been provided for in
accordance with GAAP.
(e) Each of the TARGET Companies is in compliance with, and its records
contain all information and documents (including, without limitation,
properly completed IRS Forms W-9) necessary to comply with, all
applicable information reporting and Tax withholding requirements under
federal, state and local Tax Laws, and such records identify with
specificity all accounts subject to backup withholding under Section
3406 of the Internal Revenue Code, except for such instances of
noncompliance and such omissions as are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET.
SECTION 4.9 TARGET Allowance for Possible Loan Losses. The allowance for
possible loan or credit losses (the "TARGET Allowance") shown on the
consolidated balance sheets of TARGET included in the most recent TARGET
Financial Statements dated prior to the date of this Agreement was, and the
TARGET Allowance shown on the consolidated balance sheets of TARGET included
in the financial statements of TARGET as of dates subsequent to the execution
of this Agreement will be, maintained in accordance with, and are in the
amounts required by, GAAP and applicable regulatory requirements or guidelines
as of the dates thereof, except where the failure of such TARGET Allowance to
be so maintained is not reasonably likely to have a Material Adverse Effect on
TARGET.
SECTION 4.10 Assets. Except as Previously Disclosed or as disclosed or
reserved against in the TARGET Financial Statements, or where the failure to
own good and marketable title is not reasonably likely to have a Material
Adverse Effect on TARGET, the TARGET Companies have good and marketable title,
free and clear of all Liens, to all of their respective Assets. All material
tangible properties used in the businesses of the TARGET Companies are in good
condition, reasonable wear and tear excepted, and are usable in the ordinary
course of business consistent with TARGET's past practices. All Assets which
are material to TARGET's business on a consolidated basis, held under leases
or subleases by any of the TARGET Companies are held under valid Contracts
enforceable in accordance with their respective terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceedings may be brought), and each
such Contract is in full force and effect. The policies of fire, theft,
liability and other insurance maintained with respect to the Assets or
businesses of the TARGET Companies provide adequate coverage under current
industry practices against loss or Liability, and the fidelity and blanket
bonds in effect as to which any of the TARGET Companies is a named insured are
reasonably sufficient. The Assets of the TARGET Companies include all assets
required to operate the business of the TARGET Companies as presently
conducted.
SECTION 4.11 Environmental Matters.
(a) Each TARGET Company, its Participation Facilities and its Loan
Properties are, and have been, in compliance with all Environmental
Laws, except for violations which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET.
A-11
(b) There is no Litigation pending or, to the Knowledge of TARGET,
threatened before any court, governmental agency or authority or other
forum in which any TARGET Company or any of its Participation
Facilities has been or, with respect to threatened Litigation, may be
named as a defendant (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release
into the environment of any Hazardous Material or oil, whether or not
occurring at, on, under or involving a site owned, leased or operated
by any TARGET Company or any of its Participation Facilities, except
for such Litigation pending or, to the Knowledge of TARGET, threatened
that is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on TARGET.
(c) There is no Litigation pending or, to the Knowledge of TARGET,
threatened before any court, governmental agency or board or other
forum in which any of its Loan Properties (or any TARGET Company in
respect of such Loan Property) has been or, with respect to threatened
litigation, may be named as a defendant or potentially responsible
party (i) for alleged noncompliance (including by any predecessor) with
any Environmental Law or (ii) relating to the release into the
environment of any Hazardous Material or oil, whether or not occurring
at, on, under or involving a Loan Property, except for such Litigation
pending or, to the Knowledge of TARGET, threatened that is not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on TARGET.
(d) To the Knowledge of TARGET, there is no reasonable basis for any
Litigation of a type described in subsections (b) or (c) above, except
such as is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on TARGET.
(e) During the period of (i) any TARGET Company's ownership or operation of
any of their respective current properties, (ii) any TARGET Company's
participation in the management of any Participation Facility, or (iii)
any TARGET Company's holding of a security interest in a Loan Property,
there have been no releases of Hazardous Material or oil in, on, under
or affecting any such property, Participation Facility, or to the
Knowledge of TARGET, Loan Property, except such as are not reasonably
likely to have, individually or in the aggregate, a Material Adverse
Effect on TARGET.
(f) Prior to the period of (i) any TARGET Company's ownership or operation
of any of their respective current properties, (ii) any TARGET
Company's participation in the management of any Participation
Facility, or (iii) any TARGET Company's holding of a security interest
in a Loan Property, to the Knowledge of TARGET, there were no releases
of Hazardous Material or oil in, on, under or affecting any such
property, Participation Facility or Loan Property, except such as are
not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on TARGET.
SECTION 4.12 Compliance with Laws.
(a) TARGET is duly registered as a bank holding company under the BHC Act.
Each TARGET Company has in effect all Permits necessary for it to own,
lease or operate its Assets and to carry on its business as now
conducted, except for those Permits the absence of which are not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on TARGET, and there has occurred no Default under any
such Permit, other than Defaults which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on
TARGET.
(b) Except as Previously Disclosed, no TARGET Company:
(i) is in violation of any Laws, Orders or Permits applicable to its
business or employees conducting its business, except for
violations which are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on TARGET; and
(ii) has received any notification or communication from any agency or
department of federal, state or local government or any Regulatory
Authority or the staff thereof (A) asserting that any
A-12
TARGET Company is not in compliance with any of the Laws or Orders
which such governmental authority or Regulatory Authority enforces,
where such noncompliance is reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on TARGET, (B)
threatening to revoke any Permits, the revocation of which is
reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on TARGET, or (C) requiring any TARGET
Company to enter into or consent to the issuance of a cease and
desist order, formal agreement, directive, commitment or memorandum
of understanding, or to adopt any Board resolution or similar
undertaking, which restricts materially the conduct of its business,
or in any manner relates to its capital adequacy, its credit or
reserve policies, its management, or the payment of dividends.
SECTION 4.13 Labor Relations. No TARGET Company is the subject of any
Litigation asserting that it or any other TARGET Company has committed an
unfair labor practice (within the meaning of the National Labor Relations Act
or comparable state law) or seeking to compel it or any other TARGET Company
to bargain with any labor organization as to wages or conditions of
employment, nor is there any strike or other labor dispute involving any
TARGET Company, pending or, to its Knowledge, threatened nor, to its
Knowledge, is there any activity involving any TARGET Company's employees
seeking to certify a collective bargaining unit or engaging in any other
organization activity
SECTION 4.14 Employee Benefit Plans.
(a) TARGET has Previously Disclosed, and delivered or made available to
PURCHASER prior to the execution of this Agreement, copies in each case
of all pension, retirement, profit-sharing, deferred compensation,
stock option, employee stock ownership, severance pay, vacation, bonus
or other incentive plans all other written employee programs,
arrangements or agreements, all medical, vision, dental or other health
plans, all life insurance plans, and all other employee benefit plans
or fringe benefit plans, including, without limitation, "employee
benefit plans," as that term is defined in Section 3(3) of ERISA,
currently adopted, maintained by, sponsored in whole or in part by, or
contributed to by any TARGET Company or Affiliate thereof for the
benefit of employees, retirees, dependents, spouses, directors,
independent contractors or other beneficiaries and under which
employees, retirees, dependents, spouses, directors, independent
contractors or other beneficiaries are eligible to participate
(collectively, the "TARGET Benefit Plans"). Any of the TARGET Benefit
Plans which is an "employee pension benefit plan," as that term is
defined in Section 3(2) of ERISA, is referred to herein as a "TARGET
ERISA Plan." Each TARGET ERISA Plan which is also a "defined benefit
plan" (as defined in Section 414(j)) of the Internal Revenue Code) is
referred to herein as a "TARGET Pension Plan." No TARGET Pension Plan
is or has been a multi-employer plan within the meaning of Section
3(37) of ERISA.
(b) All TARGET Benefit Plans are in compliance with the applicable terms of
ERISA, the Internal Revenue Code and any other applicable Laws the
breach or violation of which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET.
Each TARGET ERISA Plan which is intended to be qualified under Section
401(a) of the Internal Revenue Code has received a favorable
determination letter from the IRS, and TARGET is not aware of any
circumstances likely to result in revocation of any such favorable
determination letter. To the Knowledge of TARGET, no TARGET Company has
engaged in a transaction with respect to any TARGET Benefit Plan that,
assuming the taxable period of such transaction expired as of the date
hereof would subject any TARGET Company to a tax or penalty imposed by
either Section 4975 of the Internal Revenue Code or Section 502(i) of
ERISA in amounts which are reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on TARGET.
(c) No TARGET ERISA Plan which is a defined benefit pension plan has any
"unfunded current liability," as that term is defined in Section
302(d)(8)(A) of ERISA, based on actuarial assumptions set forth for
such plan's most recent actuarial valuation. Since the date of the most
recent actuarial
A-13
valuation, there has been (i) no material change in the financial
position of any TARGET Pension Plan, (ii) no change in the actuarial
assumptions with respect to any TARGET Pension Plan, and (iii) no
increase in benefits under any TARGET Pension Plan as a result of plan
amendments or changes in applicable law, which is reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on
TARGET or materially adversely affect the funding status of any such
plan. Neither any TARGET Pension Plan nor any "single-employer plan,"
within the meaning of Section 4001(a)(15) of ERISA, currently or
formerly maintained by any TARGET Company, or the single-employer plan
of any entity which is considered one employer with TARGET under Section
4001 of ERISA or Section 414 of the Internal Revenue Code or Section 302
of ERISA (whether or not waived) (an "ERISA Affiliate") has an
"accumulated funding deficiency" within the meaning of Section 412 of
the Internal Revenue Code or Section 302 of ERISA, which is reasonably
likely to have a Material Adverse Effect on TARGET. No TARGET Company
has provided, or is required to provide, security to a TARGET Pension
Plan or to any single-employer plan of an ERISA Affiliate pursuant to
Section 401(a)(29) of the Code.
(d) Within the six-year period preceding the Effective Time, no Liability
under Subtitle C or D of Title IV or ERISA has been or is expected to
be incurred by any TARGET Company with respect to any ongoing, frozen
or terminated single-employer plan or the single-employer plan of any
ERISA Affiliate, which Liability is reasonably likely to have a
Material Adverse Effect on TARGET. Except as Previously Disclosed, no
TARGET Company has incurred any withdrawal Liability with respect to a
multi-employer plan under Subtitle B of Title IV or ERISA (regardless
of whether based on contributions of an ERISA Affiliate), which
Liability is reasonably likely to have a Material Adverse Effect on
TARGET. No notice of a "reportable event," within the meaning of
Section 4043 of ERISA for which the 30-day reporting requirement has
not been waived, has been required to be filed for any TARGET Pension
Plan or by any ERISA Affiliate within the 12-month period ending on the
date hereof.
(e) No TARGET Company has any obligations for retiree health and life
benefits under any of the TARGET Benefit Plans, and there are no
restrictions on the rights of such TARGET Company to amend or terminate
any such Plan without incurring any Liability thereunder, which
Liability is reasonably likely to have a Material Adverse Effect on
TARGET.
(f) Except as Previously Disclosed, neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any payment (including, without limitation,
severance, unemployment compensation, golden parachute or otherwise)
becoming due to any director or any employee of any TARGET Company from
any TARGET Company under any TARGET Benefit Plan or otherwise, (ii)
increase any benefits otherwise payable under any TARGET Benefit Plan,
or (iii) result in any acceleration of the time of payment or vesting
of any such benefit.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including, without limitation, entitlements under any
executive compensation, supplemental retirement or employment
agreement) of employees and former employees of any TARGET Company and
their respective beneficiaries, other than entitlements accrued
pursuant to funded retirement plans subject to the provisions of
Section 412 of the Internal Revenue Code or Section 302 of ERISA, have
been fully reflected on the TARGET Financial Statements to the extent
required by and in accordance with GAAP.
SECTION 4.15 Material Contracts. Except as Previously Disclosed or otherwise
reflected in the TARGET Financial Statements, none of the TARGET Companies,
nor any of their respective Assets, businesses or operations, is a party to,
or is bound or affected by, or receives benefits under, (a) any employment,
severance, termination, consulting or retirement Contract providing for
aggregate payments to any Person in any
A-14
calendar year, (b) any Contract relating to the borrowing of money by any
TARGET Company or the guarantee by any TARGET Company of any such obligation
(other than Contracts evidencing deposit liabilities, purchases of federal
funds, fully secured repurchase agreements, trade payables and Contracts
relating to borrowings or guarantees made in the ordinary course of business),
and (c) any Contracts between or among TARGET Companies (together with all
Contracts referred to in Sections 4.10 and 4.14(a) of this Agreement, the
"TARGET Contracts"). None of the TARGET Companies is in Default under any
TARGET Contract, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET. All of
the indebtedness of any TARGET Company for money borrowed is prepayable at any
time by such TARGET Company without penalty or premium.
SECTION 4.16 Legal Proceedings. Except for the Lawsuit and otherwise as
Previously Disclosed, there is no Litigation instituted or pending or, to the
Knowledge of TARGET, threatened (or unasserted but considered probable of
assertion and which, if asserted, would have at least a reasonable probability
of an unfavorable outcome) against any TARGET Company, or against any Asset,
interest or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET, nor are
there any Orders of any Regulatory Authorities, other governmental authorities
or arbitrators outstanding against any TARGET Company, that are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
TARGET.
SECTION 4.17 Reports. Except as Previously Disclosed, since January 1, 1997,
each TARGET Company has timely filed all reports and statements, together with
any amendments required to be made with respect thereto, that it was required
to file with (a) the SEC, including, without limitation, Forms 10-K, Forms 10-
Q and proxy statements, (b) other Regulatory Authorities, and (c) any
applicable state securities or banking authorities (except, in the case of
state securities authorities, failures to file which are not reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on
TARGET). As of their respective dates, each of such reports and documents,
including, without limitation, the financial statements, exhibits, and
schedules thereto, complied in all material respects with all applicable Laws.
As of their respective dates, none of such reports or documents 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.
SECTION 4.18 Statements True and Correct. No statement, certificate,
instrument or other writing furnished or to be furnished by any TARGET Company
or any Affiliate thereof to PURCHASER pursuant to this Agreement or any other
document, agreement or instrument referred to herein contains or will contain
any untrue statement of material fact or will omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of the information supplied or to
be supplied by any TARGET Company or any Affiliate thereof for inclusion in
the Registration Statement to be filed by PURCHASER with the SEC, will, when
the Registration Statement becomes effective, be false or misleading with
respect to any material fact, or omit to state any material fact necessary to
make the statements therein not misleading. None of the information supplied
or to be supplied by any TARGET Company or any Affiliate thereof for inclusion
in the Proxy Statement to be mailed to the TARGET shareholders in connection
with the Shareholders' Meeting, and any other documents to be filed by any
TARGET Company or any Affiliate thereof with the SEC or any other Regulatory
Authority in connection with the transactions contemplated hereby, will, at
the respective time such documents are filed, and with respect to the Proxy
Statement, when first mailed to the shareholders of TARGET, be false or
misleading with respect to any material fact, or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or, in the case of the Proxy
Statement or any amendment thereof or supplement thereto, at the time of the
Shareholders' Meeting, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to correct any statement in
any earlier communication with respect to the solicitation of any proxy for
the Shareholders' Meeting. All documents that any TARGET Company or any
Affiliate thereof is responsible for filing with any Regulatory Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable Law.
A-15
SECTION 4.19 Accounting, Tax and Regulatory Matters. Except as Previously
Disclosed, no TARGET Company or any Affiliate thereof has taken any action, or
has any Knowledge of any fact or circumstance that is reasonably likely, to
(a) prevent the transactions contemplated hereby, including, without
limitation, the Merger, from qualifying as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code, or (b) materially impede or
delay receipt of any Consents of Regulatory Authorities referred to in Section
8.1(b) of this Agreement or result in the imposition of a condition or
restriction of the type referred to in the second sentence of such Section. To
the Knowledge of TARGET, there exists no fact, circumstance, or reason why the
requisite Consents referred to in Section 8.1(b) of this Agreement cannot be
received in a timely manner without the imposition of any condition or
restriction of the type described in the second sentence of such Section
8.1(b).
SECTION 4.20 Charter Provisions. Each TARGET Company has taken all action so
that the entering into of this Agreement and the consummation of the Merger
and the other transactions contemplated by this Agreement do not and will not
result in the grant of any rights to any Person under the Articles of
Incorporation, Bylaws or other governing instruments of any TARGET Company or
restrict or impair the ability of PURCHASER to vote, or otherwise to exercise
the rights of a shareholder with respect to, shares of any TARGET Company that
may be acquired or controlled by it.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
PURCHASER hereby represents and warrants to TARGET as follows:
SECTION 5.1 Organization, Standing and Power. PURCHASER is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Georgia, and is duly registered as a bank holding company under the
BHC Act. PURCHASER has the corporate power and authority to carry on its
business as now conducted and to own, lease and operate its Assets. PURCHASER
is duly qualified or licensed to transact business as a foreign corporation in
good standing in the States of the United States and foreign jurisdictions
where the character of its Assets or the nature or conduct of its business
requires it to be so qualified or licensed, except for such jurisdictions in
which the failure to be so qualified or licensed is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on
PURCHASER.
SECTION 5.2 Authority; No Breach.
(a) PURCHASER has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated herein, including the Merger, have been duly
and validly authorized by all necessary corporate action in respect
thereof on the part of PURCHASER. This Agreement represents a legal,
valid and binding obligation of PURCHASER, enforceable against
PURCHASER in accordance with its terms (except in all cases as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the
equitable remedy of specific performance or injunctive relief is
subject to the discretion of the court before which any proceeding may
be brought).
(b) Neither the execution and delivery of this Agreement by PURCHASER, nor
the consummation by PURCHASER of the transactions contemplated hereby,
nor compliance by PURCHASER with any of the provisions hereof, will (i)
conflict with or result in a breach of any provision of PURCHASER's
Articles of Incorporation or Bylaws, or (ii) constitute or result in a
Default under, or require any Consent pursuant to, or result in the
creation of any Lien on any Asset of any PURCHASER Company under, any
Contract or Permit of any PURCHASER Company, where such Default or
Lien, or any
A-16
failure to obtain such Consent, is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on
PURCHASER, or, (iii) subject to receipt of the requisite approvals
referred to in Section 8.1(b) of this Agreement, violate any Law or
Order applicable to any PURCHASER Company or any of their respective
Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate Laws and rules of the NASD,
and other than Consents required from Regulatory Authorities, and other
than notices to or filings with the IRS or the Pension Benefit Guaranty
Corporation with respect to any employee benefit plans, and other than
Consents, filings or notifications which, if not obtained or made, are
not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on PURCHASER, no notice to, filing with, or
Consent of, any public body or authority is necessary for the
consummation by PURCHASER of the Merger and the other transactions
contemplated in this Agreement.
SECTION 5.3 Capital Stock.
(a) The authorized capital stock of PURCHASER consists of (i) 15,000,000
shares of PURCHASER Common Stock, of which 8,347,008 shares are issued
and outstanding as of the date of this Agreement, and (ii) 5,000,000
shares of Preferred Stock, none of which are issued or outstanding as
of the date of this Agreement. All of the issued and outstanding shares
of PURCHASER Common Stock are, and all of the shares of PURCHASER
Common Stock to be issued in exchange for shares of TARGET Common Stock
upon consummation of the Merger, when issued in accordance with the
terms of this Agreement, will be, duly and validly issued and
outstanding and fully paid and nonassessable under the GBCC. None of
the outstanding shares of PURCHASER Common Stock has been, and none of
the shares of PURCHASER Common Stock to be issued in exchange for
shares of TARGET Common Stock upon consummation of the Merger will be,
issued in violation of any preemptive rights of the current or past
shareholders of PURCHASER. PURCHASER has reserved 637,500 shares of
PURCHASER Common Stock for issuance under the PURCHASER Stock Plans,
pursuant to which options to purchase not more than 270,155 shares of
PURCHASER Common Stock are outstanding as of the date of this
Agreement.
(b) Except as set forth in Section 5.3(a) of this Agreement or as
Previously Disclosed, and except for the shares of PURCHASER Common
Stock to be issued to the shareholders of Tri-County Bank upon the
consummation of the transactions contemplated by that certain Agreement
and Plan of Merger among PURCHASER, Tri-County Bank and Tri-County
Merger Sub, Inc. dated as of November 28, 2000, there are no shares of
capital stock or other equity securities of PURCHASER outstanding and
no outstanding options, warrants, scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, shares of the capital
stock of PURCHASER or contracts, commitments, understandings or
arrangements by which PURCHASER is or may be bound to issue additional
shares of its capital stock or options, warrants or rights to purchase
or acquire any additional shares of its capital stock.
SECTION 5.4 PURCHASER Subsidiaries. PURCHASER has Previously Disclosed all
of the PURCHASER Subsidiaries as of the date of this Agreement. PURCHASER owns
all of the issued and outstanding shares of capital stock of each PURCHASER
Subsidiary. No equity securities of any PURCHASER Subsidiary are or may become
required to be issued (other than to a PURCHASER Company) by reason of any
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of the capital stock of any such Subsidiary, and
there are no Contracts by which any PURCHASER Subsidiary is bound to issue
(other than to a PURCHASER Company) additional shares of its capital stock or
options, warrants or rights to purchase or acquire any additional shares of
its capital stock or by which any PURCHASER Company is or may be bound to
transfer any shares of the capital stock of any PURCHASER Subsidiary (other
than to a PURCHASER Company). There are no Contracts relating to the rights of
any PURCHASER Company to vote
A-17
or to dispose of any shares of the capital stock of any PURCHASER Subsidiary.
All of the shares of capital stock of each PURCHASER Subsidiary held by a
PURCHASER Company are fully paid and nonassessable under the applicable
corporation Law of the jurisdiction in which such Subsidiary is incorporated
or organized and are owned by the PURCHASER Company free and clear of any
Lien. Each PURCHASER Subsidiary is either a bank or a corporation, and is duly
organized, validly existing, and (as to corporations) in good standing under
the Laws of the jurisdiction in which it is incorporated or organized, and has
the corporate power and authority necessary for it to own, lease and operate
its Assets and to carry on its business as now conducted. Each PURCHASER
Subsidiary is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of
its business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on PURCHASER. Each PURCHASER Subsidiary that is a depository
institution is an insured institution as defined in the Federal Deposit
Insurance Act and applicable regulations thereunder.
SECTION 5.5 Financial Statements. PURCHASER has Previously Disclosed and
delivered to TARGET prior to the execution of this Agreement copies of all
PURCHASER Financial Statements and will deliver to TARGET copies of all
financial statements, audited and unaudited, of PURCHASER prepared subsequent
to the date hereof. The PURCHASER Financial Statements (as of the dates
thereof and for the periods covered thereby) (a) are or, if dated after the
date of this Agreement, will be in accordance with the books and records of
the PURCHASER Companies, which are or will be, as the case may be, complete
and correct and which have been or will have been, as the case may be,
maintained in accordance with good business practices, and (b) present or will
present, as the case may be, fairly the consolidated financial position of the
PURCHASER Companies as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity, and cash flows of the PURCHASER
Companies for the periods indicated, in accordance with GAAP (subject to
exceptions as to consistency specified therein or as may be indicated in the
notes thereto or, in the case of interim financial statements, to normal
recurring year-end adjustments that are not material).
SECTION 5.6 Absence of Undisclosed Liabilities. No PURCHASER Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PURCHASER, except Liabilities which
are accrued or reserved against in the consolidated balance sheets of
PURCHASER as of December 31, 2000 included in the PURCHASER Financial
Statements or reflected in the notes thereto. No PURCHASER Company has
incurred or paid any Liability since December 31, 2000, except for such
Liabilities incurred or paid in the ordinary course of business consistent
with past business practice and which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PURCHASER.
SECTION 5.7 Absence of Certain Changes or Events. Since December 31, 2000,
except as disclosed in SEC Documents filed by PURCHASER prior to the date of
this Agreement, (a) there have been no events, changes or occurrences which
have had, or are reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on PURCHASER, and (b) the PURCHASER Companies have
not taken any action, or failed to take any action, prior to the date of this
Agreement, which action or failure, if taken after the date of this Agreement,
would represent or result in a material breach or violation of any of the
covenants and agreements of PURCHASER provided in Article 7 of this Agreement.
SECTION 5.8 Tax Matters.
(a) All Tax returns required to be filed by or on behalf of any of the
PURCHASER Companies have been timely filed or requests for extensions
have been timely filed, granted and have not expired for periods ended
on or before December 31, 1999, and on or before the date of the most
recent fiscal year end immediately preceding the Effective Time, except
to the extent that all such failures to file, taken together, are not
reasonably likely to have a Material Adverse Effect on PURCHASER, and
all returns filed are complete and accurate to the Knowledge of
PURCHASER. All Taxes shown on filed returns have been paid. As of the
date of this Agreement, there is no audit examination, deficiency or
refund Litigation with respect to any Taxes that is reasonably likely
to result in a determination that would
A-18
have, individually or in the aggregate, a Material Adverse Effect on
PURCHASER, except as reserved against in the PURCHASER Financial
Statements delivered prior to the date of this Agreement. All Taxes and
other Liabilities due with respect to completed and settled examinations
or concluded Litigation have been paid.
(b) None of the PURCHASER Companies has executed an extension or waiver of
any statute of limitations on the assessment or collection of any Tax
due that is currently in effect, and no unpaid tax deficiency has been
asserted in writing against or with respect to any PURCHASER Company,
which deficiency is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PURCHASER.
(c) Adequate provision for any Taxes due or to become due for any of the
PURCHASER Companies for the period or periods through and including the
date of the respective PURCHASER Financial Statements has been made and
is reflected on such PURCHASER Financial Statements.
(d) Deferred Taxes of the PURCHASER Companies have been provided for in
accordance with GAAP.
SECTION 5.9 PURCHASER Allowance for Possible Loan Losses. The allowance for
possible loan or credit losses (the "PURCHASER Allowance") shown on the
consolidated balance sheets of PURCHASER included in the most recent PURCHASER
Financial Statements dated prior to the date of this Agreement was, and the
PURCHASER Allowance shown on the consolidated balance sheets of PURCHASER
included in the financial statements of PURCHASER as of dates subsequent to
the execution of this Agreement will be, as of the dates thereof, adequate
(within the meaning of GAAP and applicable regulatory requirements or
guidelines) to provide for losses relating to or inherent in the loan and
lease portfolios (including accrued interest receivables) of the PURCHASER
Companies and other extensions of credit (including letters of credit and
commitments to make loans or extend credit) by the PURCHASER Companies as of
the dates thereof except where the failure of such PURCHASER Allowance to be
so adequate is not reasonably likely to have a Material Adverse Effect on
PURCHASER.
SECTION 5.10 Assets. Except as Previously Disclosed or as disclosed or
reserved against in the PURCHASER Financial Statements, the PURCHASER
Companies have good and marketable title, free and clear of all Liens, to all
of their respective Assets. All material tangible properties used in the
businesses of the PURCHASER Companies are in good condition, reasonable wear
and tear excepted, and are usable in the ordinary course of business
consistent with PURCHASER's past practices. All Assets which are material to
PURCHASER's business on a consolidated basis, held under leases or subleases
by any of the PURCHASER Companies, are held under valid Contracts enforceable
in accordance with their respective terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other Laws affecting the enforcement of creditors' rights generally and except
that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceedings may be brought), and each such Contract is in full force and
effect. The policies of fire, theft, liability and other insurance maintained
with respect to the Assets or businesses of the PURCHASER Companies provide
adequate coverage under current industry practices against loss or Liability,
and the fidelity and blanket bonds in effect as to which any of the PURCHASER
Companies is a named insured are reasonably sufficient. The Assets of the
PURCHASER Companies include all assets required to operate the business of the
PURCHASER Companies as presently conducted.
SECTION 5.11 Environmental Matters.
(a) Each PURCHASER Company, its Participation Facilities and its Loan
Properties are, and have been, in compliance with all Environmental
Laws, except for violations which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on
PURCHASER.
(b) There is no Litigation pending or, to the Knowledge of PURCHASER,
threatened before any court, governmental agency or authority or other
forum in which any PURCHASER Company or any of its
A-19
Participation Facilities has been or, with respect to threatened
Litigation, may be named as a defendant (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law or
(ii) relating to the release into the environment of any Hazardous
Material (as defined below) or oil, whether or not occurring at, on,
under or involving a site owned, leased or operated by any PURCHASER
Company or any of its Participation Facilities, except for such
Litigation pending or, to the Knowledge of Purchaser, threatened that is
not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on PURCHASER.
(c) There is no Litigation pending or, to the Knowledge of Purchaser,
threatened before any court, governmental agency or board or other
forum in which any of its Loan Properties (or any PURCHASER Company in
respect of such Loan Property) has been or, with respect to threatened
Litigation, may be named as a defendant or potentially responsible
party (i) for alleged noncompliance (including by any predecessor),
with any Environmental Law or (ii) relating to the release into the
environment of any Hazardous Material or oil, whether or not occurring
at, on, under or involving a Loan Property, except for such Litigation
pending or, to the Knowledge of Purchaser, threatened that is not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on PURCHASER.
(d) To the Knowledge of PURCHASER, there is no reasonable basis for any
Litigation of a type described in subsections (b) or (c) above, except
such as is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PURCHASER.
(e) During the period of (i) any PURCHASER Company's ownership or operation
of any of their respective current properties, (ii) any PURCHASER
Company's participation in the management of any Participation
Facility, or (iii) any PURCHASER Company's holding of a security
interest in a Loan Property, there have been no releases of Hazardous
Material or oil in, on, under or affecting such property, Participation
Facility or Loan Property, except such as are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on
PURCHASER.
(f) Prior to the period of (i) any PURCHASER Company's ownership or
operation of any of their respective current properties, (ii) any
PURCHASER Company's participation in the management of any
Participation Facility, or (iii) any PURCHASER Company's holding of a
security interest in a Loan Property, to the Knowledge of PURCHASER,
there were no releases of Hazardous Material or oil in, on, under or
affecting any such property, Participation Facility or Loan Property,
except such as are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on PURCHASER.
SECTION 5.12 Compliance with Laws. PURCHASER is duly registered as a bank
holding company under the BHC Act. Each PURCHASER Company has in effect all
Permits necessary for it to own, lease or operate its Assets and to carry on
its business as now conducted, except for those Permits the absence of which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on PURCHASER, and there has occurred no Default under
any such Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PURCHASER. No
PURCHASER Company: (a) is in violation of any Laws, Orders or Permits
applicable to its business or employees conducting its business, except for
violations which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PURCHASER; or (b) has received any
notification or communication from any agency or department of federal, state
or local government or any Regulatory Authority or the staff thereof
(i) asserting that any PURCHASER Company is not in compliance with any of the
Laws or Orders which such governmental authority or Regulatory Authority
enforces, where such noncompliance is reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on PURCHASER, (ii) threatening
to revoke any Permits, the revocation of which is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PURCHASER, or
(iii) requiring any PURCHASER Company to enter into or consent to the issuance
of a cease and desist order, formal agreement, directive, commitment or
memorandum of understanding,
A-20
or to adopt any Board resolution or similar undertaking, which restricts
materially the conduct of its business, or in any manner relates to its
capital adequacy, its credit or reserve policies, its management, or the
payment of dividends.
SECTION 5.13 Labor Relations. No PURCHASER Company is the subject of any
Litigation asserting that it or any other PURCHASER Company has committed an
unfair labor practice (within the meaning of the
National Labor Relations Act or comparable state law) or seeking to compel it
or any other PURCHASER Company to bargain with any labor organization as to
wages or conditions of employment, nor is there any strike or other labor
dispute involving any PURCHASER Company, pending or, to its Knowledge,
threatened, nor, to its Knowledge, is there any activity involving any
PURCHASER Company's employees seeking to certify a collective bargaining unit
or engaging in any other organization activity.
SECTION 5.14 Employee Benefit Plans.
(a) PURCHASER has Previously Disclosed and delivered or made available to
TARGET prior to the execution of this Agreement copies in each case of
all pension, retirement, profit-sharing, deferred compensation, stock
option, employee stock ownership, severance pay, vacation, bonus or
other incentive plans, all other written employee programs,
arrangements or agreements, all medical, vision, dental or other health
plans, all life insurance plans, and all other employee benefit plans
or fringe benefit plans, including, without limitation, "employee
benefit plans," as that term is defined in Section 3(3) of ERISA,
currently adopted, maintained by, sponsored in whole or in part by, or
contributed to by any PURCHASER Company or Affiliate thereof for the
benefit of employees, retirees, dependents, spouses, directors,
independent contractors or other beneficiaries and under which
employees, retirees, dependents, spouses, directors, independent
contractors or other beneficiaries are eligible to participate
(collectively, the "PURCHASER Benefit Plans"). Any of the PURCHASER
Benefit Plans which is an "employee pension benefit plan," as that term
is defined in Section 3(2) of ERISA, is referred to herein as a
"PURCHASER ERISA Plan." Each PURCHASER ERISA Plan which is also a
"defined benefit plan" (as defined in Section 414(j)) of the Internal
Revenue Code) is referred to herein as a "PURCHASER Pension Plan." No
PURCHASER Pension Plan is or has been a multi-employer plan within the
meaning of Section 3(37) of ERISA.
(b) All PURCHASER Benefit Plans are in compliance with the applicable terms
of ERISA, the Internal Revenue Code, and any other applicable Laws the
breach or violation of which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on
PURCHASER. Each PURCHASER ERISA Plan which is intended to be qualified
under Section 401(a) of the Internal Revenue Code has received a
favorable determination letter from the IRS, and PURCHASER is not aware
of any circumstances likely to result in revocation of any such
favorable determination letter. To the Knowledge of PURCHASER, no
PURCHASER Company has engaged in a transaction with respect to any
PURCHASER Benefit Plan that, assuming the taxable period of such
transaction expired as of the date hereof would subject any PURCHASER
Company to a tax or penalty imposed by either Section 4975 of the
Internal Revenue Code or Section 502(i) of ERISA in amounts which are
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on PURCHASER.
(c) No PURCHASER ERISA Plan which is a defined benefit pension plan has any
"unfunded current liability," as that term is defined in Section
302(d)(8)(A) of ERISA, based on actuarial assumptions set forth for
such plan's most recent actuarial valuation. Since the date of the most
recent actuarial valuation, there has been (i) no material change in
the financial position of any PURCHASER Pension Plan, (ii) no change in
the actuarial assumptions with respect to any PURCHASER Pension Plan,
and (iii) no increase in benefits under any PURCHASER Pension Plan as a
result of plan amendments or changes in applicable Law which is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on PURCHASER or materially adversely affect the funding
status of any such plan. Neither any PURCHASER Pension Plan nor any
"single-employer plan," within the meaning of Section 4001(a)(15) of
ERISA, currently or formerly maintained by any PURCHASER Company,
A-21
or the single-employer plan of any ERISA Affiliate has an "accumulated
funding deficiency" within the meaning of Section 412 of the Internal
Revenue Code or Section 302 of ERISA, which is reasonably likely to have
a Material Adverse Effect on PURCHASER. No PURCHASER Company has
provided, or is required to provide, security to a PURCHASER Pension
Plan or to any single-employer plan of an ERISA Affiliate pursuant to
Section 401(a)(29) of the Code.
(d) No Liability under Subtitle C or D of Title IV or ERISA has been or is
expected to be incurred by any PURCHASER Company with respect to any
ongoing, frozen or terminated single-employer plan or the single-
employer plan of any ERISA Affiliate, which Liability is reasonably
likely to have a Material Adverse Effect on PURCHASER. No PURCHASER
Company has incurred any withdrawal Liability with respect to a multi-
employer plan under Subtitle B of Title IV or ERISA (regardless of
whether based on contributions of an ERISA Affiliate), which Liability
is reasonably likely to have a Material Adverse Effect on PURCHASER. No
notice of a "reportable event" within the meaning of Section 4043 of
ERISA for which the 30-day reporting requirement has not been waived,
has been required to be filed for any PURCHASER Pension Plan or by any
ERISA Affiliate within the 12-month period ending on the date hereof.
(e) Except as Previously Disclosed, (i) no PURCHASER Company has any
obligations for retiree health and life benefits under any of the
PURCHASER Benefit Plans and (ii) there are no restrictions on the
rights of such PURCHASER Company to amend or terminate any such Plan
without incurring any Liability thereunder, which Liability is
reasonably likely to have a Material Adverse Effect on PURCHASER.
(f) Except as Previously Disclosed, neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any payment (including, without limitation,
severance, unemployment compensation, golden parachute or otherwise)
becoming due to any director or any employee of any PURCHASER Company
from any PURCHASER Company under any PURCHASER Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any
PURCHASER Benefit Plan, or (iii) result in any acceleration of the time
of payment or vesting of any such benefit.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including, without limitation, entitlements under any
executive compensation, supplemental retirement or employment
agreement) of employees and former employees of any PURCHASER Company
and their respective beneficiaries, other than entitlements accrued
pursuant to funded retirement plans subject to the provisions of
Section 412 of the Internal Revenue Code or Section 302 of ERISA, have
been fully reflected on the PURCHASER Financial Statements to the
extent required by and in accordance with GAAP.
SECTION 5.15 Legal Proceedings. There is no Litigation instituted or pending
or, to the Knowledge of PURCHASER, threatened (or unasserted but considered
probable of assertion and which if asserted would have at least a reasonable
probability of an unfavorable outcome) against any PURCHASER Company, or
against any Asset, interest, or right of any of them, that is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
PURCHASER, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any PURCHASER
Company, that are reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on PURCHASER.
SECTION 5.16 Reports. Since January 1, 1997, each PURCHASER Company has
timely filed all reports and statements, together with any amendments required
to be made with respect thereto, that it was required to file with (a) the
SEC, including, without limitation, Forms 10-K, Forms 10-Q, Forms 8-K and
proxy statements, (b) other Regulatory Authorities, and (c) any applicable
state securities or banking authorities (except, in the case of state
securities authorities, failures to file which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on
PURCHASER). As of their respective dates, each of such reports and documents,
including, without limitation, the financial statements, exhibits and
schedules thereto, complied in all material respects with all applicable Laws.
As of its respective date, none of such reports and documents
A-22
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.
SECTION 5.17 Statements True and Correct. No statement, certificate,
instrument or other writing furnished or to be furnished by any PURCHASER
Company or any Affiliate thereof to TARGET pursuant to this Agreement or any
other document, agreement or instrument referred to herein contains or will
contain any untrue statement of material fact or will omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. None of the information supplied
or to be supplied by any PURCHASER Company or any Affiliate thereof for
inclusion in the Registration Statement to be filed by PURCHASER with the SEC,
will, when the Registration Statement becomes effective, be false or
misleading with respect to any material fact, or omit to state any material
fact necessary to make the statements therein not misleading. None of the
information supplied or to be supplied by any PURCHASER Company or any
Affiliate thereof for inclusion in the Proxy Statement to be mailed to
TARGET's shareholders in connection with the Shareholders' Meeting, and any
other documents to be filed by any PURCHASER Company or any Affiliate thereof
with the SEC or any other Regulatory Authority in connection with the
transactions contemplated hereby, will, at the respective time such documents
are filed, and with respect to the Proxy Statement, when first mailed to the
shareholders of TARGET, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or, in the case of the Proxy Statement or any amendment thereof or
supplement thereto, at the time of the Shareholders' Meeting, be false or
misleading with respect to any material fact, or omit to state any material
fact necessary to correct any statement in any earlier communication with
respect to the solicitation of any proxy for the Shareholders' Meeting. All
documents that any PURCHASER Company or any Affiliate thereof is responsible
for filing with any Regulatory Authority in connection with the transactions
contemplated hereby will comply as to form in all material respects with the
provisions of applicable Law.
SECTION 5.18 Accounting, Tax and Regulatory Matters. No PURCHASER Company or
any Affiliate thereof has taken any action, or has any Knowledge of any fact
or circumstance that is reasonably likely, to (a) prevent the transactions
contemplated hereby, including, without limitation, the Merger, from
qualifying as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, or (b) materially impede or delay receipt of any
Consents of Regulatory Authorities referred to in Section 8.1(b) of this
Agreement or result in the imposition of a condition or restriction of the
type referred to in the second sentence of such Section. To the Knowledge of
PURCHASER, there exists no fact, circumstance or reason why the requisite
Consents referred to in Section 8.1(b) of this Agreement cannot be received in
a timely manner without the imposition of any condition or restriction of the
type described in the second sentence of such Section 8.1(b).
SECTION 5.19 Charter Provisions. Each PURCHASER Company has taken all action
so that the entering into of this Agreement and the consummation of the Merger
and the other transactions contemplated by this Agreement do not and will not
result in the grant of any rights to any Person under the Articles of
Incorporation, Bylaws or other governing instruments of any PURCHASER Company
or restrict or impair the ability of any TARGET shareholder to vote, or
otherwise to exercise the rights of a shareholder with respect to, shares of
PURCHASER Common Stock that may be acquired or controlled by it.
ARTICLE 6.
CONDUCT OF BUSINESS PENDING CONSUMMATION
SECTION 6.1 Affirmative Covenants of TARGET. Unless the prior written
consent of PURCHASER shall have been obtained, and except as otherwise
contemplated herein, TARGET shall and shall cause each TARGET Subsidiary to:
(a) operate its business in the usual, regular, and ordinary course; (b)
preserve intact its business organization and Assets and maintain its rights
and franchises; (c) use its reasonable efforts to cause its representations
and warranties to be correct at all times; and (d) to take no action which
would (i) adversely
A-23
affect the ability of any Party to obtain any Consents required for the
transactions contemplated hereby without imposition of a condition or
restriction of the type referred to in the second sentence of Section 8.1(b)
of this Agreement or (ii) adversely affect in any material respect the ability
of either Party to perform its covenants and agreements under this Agreement.
SECTION 6.2 Negative Covenants of TARGET. From the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement,
TARGET covenants and agrees that it will not do or agree or commit to do, or
permit any of its Subsidiaries to do or agree or commit to do, any of the
following without the prior written consent of the chief executive officer or
chief financial officer of PURCHASER, which consent shall not be unreasonably
withheld or delayed:
(a) amend the Articles of Incorporation, Bylaws or other governing
instruments of any TARGET Company; or
(b) incur any additional debt obligation or other obligation for borrowed
money (other than indebtedness of a TARGET Company to another TARGET
Company) (for the TARGET Companies on a consolidated basis) except in
the ordinary course of the business of TARGET Companies consistent with
past practices (which shall include, for TARGET Subsidiaries that are
depository institutions, creation of deposit liabilities, purchases of
federal funds, receipt of Federal Home Loan Bank advances, and entry
into repurchase agreements fully secured by U.S. government or agency
securities), or impose, or suffer the imposition, on any share of stock
held by any TARGET Company of any Lien or permit any such Lien to
exist; or
(c) repurchase, redeem or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans),
directly or indirectly, any shares, or any securities convertible into
any shares, of the capital stock of any TARGET Company, or declare or
pay any dividend or make any other distribution in respect of TARGET's
capital stock; provided, however, that TARGET may declare and pay a
dividend in cash to the TARGET shareholders during the second calendar
quarter of 2001 in an amount in the aggregate equal to the lesser of
(i) the net income of TARGET for the first calendar quarter of 2001,
and (ii) the aggregate dividend paid to the TARGET shareholders during
calendar year 2000; or
(d) except for this Agreement, or pursuant to the exercise of stock options
outstanding as of the date hereof and pursuant to the terms thereof in
existence on the date hereof, or as Previously Disclosed, issue, sell,
pledge, encumber, authorize the issuance of or enter into any Contract
to issue, sell, pledge, encumber or authorize the issuance of or
otherwise permit to become outstanding, any additional shares of TARGET
Common Stock or any other capital stock of any TARGET Company, or any
stock appreciation rights, or any option, warrant, conversion or other
right to acquire any such stock, or any security convertible into any
such stock; or
(e) adjust, split, combine or reclassify any capital stock of any TARGET
Company or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of TARGET Common Stock or
sell, lease, mortgage or otherwise dispose of or otherwise encumber (i)
any shares of capital stock of any TARGET Subsidiary (unless any such
shares of stock are sold or otherwise transferred to another TARGET
Company) or (ii) any Asset having a book value in excess of $50,000
other than in the ordinary course of business for reasonable and
adequate consideration; or
(f) acquire direct or indirect control over any Person, other than in
connection with (i) internal reorganizations or consolidations
involving existing Subsidiaries, (ii) foreclosures in the ordinary
course of business, or (iii) acquisitions of control by a depository
institution Subsidiary in its fiduciary capacity; or
(g) grant any increase in compensation or benefits to the employees or
officers of any TARGET Company (including such discretionary increases
as may be contemplated by existing employment agreements), except in
accordance with past practice Previously Disclosed or as required by
Law; pay any bonus
A-24
except to employees in accordance with past practice Previously
Disclosed or the provisions of any applicable program or plan adopted by
its Board of Directors prior to the date of this Agreement; enter into
or amend any severance agreements with officers of any TARGET Company;
or pay any bonus to, or grant any increase in fees or other increases in
compensation or other benefits to, directors of any TARGET Company; or
(h) enter into or amend any employment Contract between any TARGET Company
and any Person (unless such amendment is required by Law) that the
TARGET Company does not have the unconditional right to terminate
without Liability (other than Liability for services already rendered),
at any time on or after the Effective Time; or
(i) adopt any new employee benefit plan of any TARGET Company or make any
material change in or to any existing employee benefit plans of any
TARGET Company other than any such change that is required by Law or
that, in the opinion of counsel, is necessary or advisable to maintain
the tax qualified status of any such plan; or
(j) make any significant change in any accounting methods or systems of
internal accounting controls, except as may be appropriate to conform
to changes in regulatory accounting requirements or GAAP; or
(k) commence any Litigation other than in accordance with past practice,
settle any Litigation involving any Liability of any TARGET Company for
money damages in excess of $50,000 or which involves material
restrictions upon the operations of any TARGET Company; or
(l) except in the ordinary course of business, modify, amend or terminate
any material Contract or waive, release, compromise or assign any
material rights or claims.
SECTION 6.3 Cooperation; Steering Committee. Upon the execution and delivery
of this Agreement, PURCHASER and TARGET shall establish a committee (the
"Steering Committee") for the purpose of facilitating the full exchange of
information concerning the business, operations, capital spending, budgets and
financial results of TARGET between such date and the Closing Date and
otherwise facilitating the Merger and the combination of the respective
businesses of PURCHASER and TARGET as promptly as practicable following the
Effective Time. The Steering Committee shall consist of three (3) individuals
to be designated by the Chairman of the Board of Directors of PURCHASER
(provided, that PURCHASER's designated members may be substituted and re-
substituted from the time to time) and three (3) individuals to be designated
by the Chairman of the Board of Directors of TARGET and shall be chaired by
PURCHASER. All material decisions of the Steering Committee, which shall be
dissolved as of the Effective Time, shall be approved by PURCHASER and TARGET.
SECTION 6.4 Covenants of PURCHASER. From the date of this Agreement until
the earlier of the Effective Time or the termination of this Agreement,
PURCHASER covenants and agrees that it shall continue to conduct its business
and the business of its Subsidiaries in a manner designed in its reasonable
judgment, to enhance the long-term value of the PURCHASER Common Stock and the
business prospects of the PURCHASER Companies and, to the extent consistent
therewith, to use all reasonable efforts to preserve intact the PURCHASER
Companies' core businesses and goodwill with their respective employees and
the communities they serve.
SECTION 6.5 Adverse Changes in Condition. Each Party agrees (a) to give
written notice promptly to the other Party upon becoming aware of the
occurrence or impending occurrence of any event or circumstance relating to it
or any of its Subsidiaries which (i) is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on it or (ii) is
reasonably likely to cause or constitute a material breach of any of its
representations, warranties or covenants contained herein, and (b) to use its
reasonable efforts to prevent or promptly to remedy the same.
A-25
SECTION 6.6 Reports. Each Party and its Subsidiaries shall file all reports
required to be filed by it with Regulatory Authorities between the date of
this Agreement and the Effective Time and shall deliver to the other Party
copies of all such reports promptly after the same are filed. If financial
statements are contained in any such reports filed with the SEC, such
financial statements will fairly present the consolidated financial position
of the entity filing such statements as of the dates indicated and the
consolidated results of operations, changes in shareholders' equity and cash
flows for the periods then ended in accordance with GAAP (subject in the case
of interim financial statements to normal recurring year-end adjustments that
are not material). As of their respective dates, such reports filed with the
SEC will comply in all material respects with the Securities Laws and will not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Any financial statements contained in any other reports to
another Regulatory Authority shall be prepared in accordance with Laws
applicable to such reports.
ARTICLE 7.
ADDITIONAL AGREEMENTS
SECTION 7.1 Registration Statement; Proxy Statement; Shareholder
Approval. As soon as practicable after execution of this Agreement, PURCHASER
shall file the Registration Statement with the SEC, and shall use its best
efforts to cause the Registration Statement to become effective under the 1933
Act and take any action required to be taken under applicable Securities Laws
in connection with the issuance of the shares of PURCHASER Common Stock upon
consummation of the Merger. TARGET shall furnish all information concerning it
and the holders of its capital stock as PURCHASER may reasonably request in
connection with such action. TARGET shall call a Shareholders' Meeting, to be
held as soon as reasonably practicable after the Registration Statement is
declared effective by the SEC, for the purpose of voting upon approval of the
Merger and this Agreement and such other related matters as it deems
appropriate. In connection with the Shareholders' Meeting, (a) PURCHASER shall
prepare and file on TARGET's behalf a Proxy Statement (which shall be included
in the Registration Statement and which shall include an explanation of the
restrictions on resale with respect to the shares of PURCHASER Common Stock
received by the holders of TARGET Common Stock in the Merger) with the SEC and
mail it to its shareholders, (b) the Parties shall furnish to each other all
information concerning them that they may reasonably request in connection
with such Proxy Statement, (c) the Board of Directors of TARGET shall
recommend to its shareholders that they approve this Agreement, and (d) the
Board of Directors and officers of TARGET shall use their reasonable efforts
to obtain such shareholders' approval.
SECTION 7.2 Listing. PURCHASER shall use its best efforts to list, prior to
the Effective Time, on the NASDAQ/NMS, the shares of PURCHASER Common Stock to
be issued to the holders of TARGET Common Stock pursuant to the Merger.
SECTION 7.3 Applications. PURCHASER shall promptly prepare and file, and
TARGET shall cooperate in the preparation and, where appropriate, filing of,
applications with all Regulatory Authorities having jurisdiction over the
transactions contemplated by this Agreement seeking the requisite Consents
necessary to consummate the transactions contemplated by this Agreement.
SECTION 7.4 Filings with State Offices. Upon the terms and subject to the
conditions of this Agreement, PURCHASER shall execute and file the Georgia
Articles of Merger with the Secretary of State of the State of Georgia in
connection with the Closing.
SECTION 7.5 Agreement as to Efforts to Consummate. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable under applicable Laws, as promptly as practicable so as to permit
consummation of the Merger at the earliest possible date and to otherwise
enable consummation of the transactions contemplated hereby and shall
cooperate fully with the other Party hereto to that end (it being understood
that any amendments to the Registration Statement filed by
A-26
PURCHASER in connection with the PURCHASER Common Stock to be issued in the
Merger or a resolicitation of proxies as a consequence of an acquisition
agreement by PURCHASER or any of its Subsidiaries shall not violate this
covenant), including, without limitation, using its efforts to lift or rescind
any Order adversely affecting its ability to consummate the transactions
contemplated herein and to cause to be satisfied the conditions referred to in
Article 9 of this Agreement. Each Party shall use, and shall cause each of its
Subsidiaries to use, its best efforts to obtain all Consents necessary or
desirable for the consummation of the transactions contemplated by this
Agreement.
SECTION 7.6 Investigation and Confidentiality.
(a) Prior to the Effective Time, each Party will keep the other Party
advised of all material developments relevant to its business and to
the consummation of the Merger and shall permit the other Party to make
or cause to be made such investigation of the business and properties
of it and its Subsidiaries and of their respective financial and legal
conditions as the other Party reasonably requests, provided that such
investigation shall be reasonably related to the transactions
contemplated hereby and shall not interfere unnecessarily with normal
operations.
(b) Except as may be required by applicable Law or legal process, and
except for such disclosure to those of its directors, officers,
employees and representatives as may be appropriate or required in
connection with the transactions contemplated hereby, each Party shall
hold in confidence all nonpublic information obtained from the other
Party (including work papers and other material derived therefrom) as a
result of this Agreement or in connection with the transactions
contemplated hereby (whether so obtained before or after the execution
hereof) until such time as the Party providing such information
consents to its disclosure or such information becomes otherwise
publicly available. Promptly following any termination of this
Agreement, each of the Parties agrees to use its best efforts to cause
its respective directors, officers, employees and representatives to
destroy or return to the providing party all such nonpublic information
(including work papers and other material retrieved therefrom),
including all copies thereof. Each Party shall, and shall cause its
advisers and agents to, maintain the confidentiality of all
confidential information furnished to it by the other Party concerning
its and its Subsidiaries' businesses, operations and financial position
and shall not use such information for any purpose except in
furtherance of the transactions contemplated by this Agreement. If this
Agreement is terminated prior to the Effective Time, each Party shall
promptly return all documents and copies thereof and all work papers
containing confidential information received from the other Party.
(c) Each Party agrees to give the other Party notice as soon as practicable
after any determination by it of any fact or occurrence relating to the
other Party which it has discovered through the course of its
investigation and which represents, or is reasonably likely to
represent, either a material breach of any representation, warranty,
covenant or agreement of the other Party or which has had or is
reasonably likely to have a Material Adverse Effect on the other Party.
SECTION 7.7 Press Releases. Prior to the Effective Time, TARGET and
PURCHASER shall consult with each other as to the form and substance of any
press release or other public disclosure materially related to this Agreement
or any other transaction contemplated hereby; provided, however, that nothing
in this Section 7.7 shall be deemed to prohibit any Party from making any
disclosure which its counsel deems necessary or advisable in order to satisfy
such Party's disclosure obligations imposed by Law.
SECTION 7.8 No Solicitation.
(a) TARGET shall not, nor shall it permit any of its Subsidiaries to, nor
shall it authorize or permit any officer, director of employee of, or
any investment banker, attorney or other advisor or representative of,
TARGET or any of its Subsidiaries to, (i) solicit or initiate, or
encourage the submission of, any Takeover Proposal or (ii) participate
in any discussions or negotiations regarding, or furnish to any person
any information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Takeover Proposal;
A-27
provided, however, that, subject to compliance with subsection (c) below
and after receiving the written opinion of independent outside legal
counsel to the effect that the failure to do so would constitute a
breach by the TARGET Board of Directors of its fiduciary duties to
TARGET shareholders under applicable law, TARGET may, in response to an
unsolicited Takeover Proposal that (i) was not received in violation of
this Section 7.8, (ii) is not subject to financing and (iii) the TARGET
Board of Directors determines in good faith, after receipt of a written
opinion of a financial advisor of nationally recognized reputation to
such effect, would result in a transaction more favorable to TARGET
shareholders than the Merger, (A) furnish information with respect to
TARGET to any Person pursuant to a confidentiality agreement and (B)
participate in negotiations regarding such Takeover Proposal. Without
limiting the foregoing, it is understood that any violation of the
restrictions set forth in the immediately preceding sentence by any
executive officer of TARGET or any of its Subsidiaries or any investment
banker, attorney or other advisor or representative of TARGET or any of
its Subsidiaries, whether or not such person is purporting to act on
behalf of TARGET or any of its Subsidiaries or otherwise, shall be
deemed to be a breach of this Section 7.8 by TARGET. For purposes of
this Agreement, "Takeover Proposal" means an inquiry, proposal or
acquisition or purchase of a substantial amount of assets of TARGET or
any of its Subsidiaries (other than investors in the ordinary course of
business) or of over 15% of any class of equity securities of TARGET or
any of its Subsidiaries or any tender offer or exchange offer that if
consummated would result in any Person beneficially owning 15% or more
of any class of equity securities of TARGET or any of its Subsidiaries,
or any merger, consolidation, business combination, sale of
substantially all assets, recapitalization, liquidation, dissolution or
similar transaction involving TARGET or any of its Subsidiaries other
than the transactions contemplated by this Agreement, or any other
transaction the consummation of which would reasonably be expected to
impede, interfere with, prevent or materially delay the Merger or which
would reasonably be expected to dilute materially the benefits to
PURCHASER of the transactions contemplated hereby.
(b) Except as set forth herein, neither the Board of Directors of TARGET
nor any committee thereof shall (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to PURCHASER, the approval or
recommendation of such Board of Directors or any such committee of this
Agreement or the Merger, (ii) approve or recommend, or propose to
approve or recommend, any Takeover Proposal or (iii) enter into any
agreement with respect to any Takeover Proposal. Notwithstanding the
foregoing, upon receipt of the written opinion of independent outside
legal counsel to the effect that failure to do so would constitute a
breach of its fiduciary duties to TARGET shareholders under applicable
law, then, prior to the Shareholders' Meeting, the TARGET Board of
Directors may (subject to the terms of this and the following
sentences) approve or recommend (and, in connection therewith, withdraw
or modify its approval or recommendation of this Agreement or the
Merger) a Superior Proposal, or enter into an agreement with respect to
a Superior Proposal, in each case at any time after the second Business
Day following PURCHASER's receipt of written notice (a "Notice of
Superior Proposal") advising PURCHASER that the TARGET Board of
Directors has received a Superior Proposal, specifying the material
terms and conditions of such Superior Proposal and identifying the
Person making such Superior Proposal; provided that TARGET shall not
enter into an agreement with respect to a Superior Proposal unless
TARGET shall have furnished PURCHASER with written notice no later than
12:00 noon one (1) day in advance of any date that it intends to enter
into such agreement. For purposes of this Agreement, a "Superior
Proposal" means any bona fide proposal (not subject to financing) to
acquire, directly or indirectly, for consideration consisting of cash
and/or securities, more than 50% of the shares of TARGET Common Stock
or TARGET Bank then outstanding or all or substantially all of the
assets of TARGET or TARGET Bank and otherwise on terms that the TARGET
Board of Directors determines in its good faith judgment (after receipt
of a written opinion of a financial advisor of nationally recognized
reputation to such effect) to be more favorable to TARGET shareholders
than the Merger.
(c) In addition to the obligations of TARGET set forth in subsection (b)
above, TARGET shall immediately advise PURCHASER orally and in writing
of any request for information or of any
A-28
Takeover Proposal, or any inquiry with respect to or which could lead to
any Takeover Proposal, the material terms and conditions of such
request, Takeover Proposal or inquiry, and the identity of the person
making any Takeover Proposal or inquiry. TARGET shall keep PURCHASER
fully informed of the status and details (including amendments or
proposed amendments) of any such request, Takeover Proposal or inquiry.
(d) Nothing contained in this Section 7.8 shall prohibit TARGET from making
any disclosure to TARGET's shareholders if the TARGET Board of
Directors determines in good faith, after receipt of the written advice
of outside counsel to such effect, that it is required to do so in
order to discharge properly its fiduciary duties to shareholders under
applicable law; provided that TARGET does not, except as permitted by
subsection (b) above, withdraw or modify, or propose to withdraw or
modify, its position with respect to the Merger or approve or
recommend, or propose to approve or recommend, a Takeover Proposal.
SECTION 7.9 Tax Treatment. Each of the Parties undertakes and agrees to use
its reasonable efforts to cause the Merger to, and to take no action which
would cause the Merger not to, qualify for treatment as a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code for federal
income tax purposes.
SECTION 7.10 Agreement of Affiliates. TARGET has Previously Disclosed all
Persons whom it reasonably believes are "affiliates" of TARGET for purposes of
Rule 145 under the 1933 Act. TARGET shall use its best efforts to cause each
such Person to deliver to PURCHASER not later than thirty (30) days after the
date of this Agreement, a written agreement, substantially in the form of
Exhibit B hereto, providing that such Person will not sell, pledge, transfer
or otherwise dispose of the shares of TARGET Common Stock held by such Person
except as contemplated by such agreement or by this Agreement and will not
sell, pledge, transfer or otherwise dispose of the shares of PURCHASER Common
Stock to be received by such Person upon consummation of the Merger except in
compliance with applicable provisions of the 1933 Act and the rules and
regulations thereunder. Regardless of whether each such affiliate has provided
the written agreement referred to in this Section, PURCHASER shall be entitled
to place restrictive legends upon certificates for shares of PURCHASER Common
Stock issued to affiliates of TARGET pursuant to this Agreement to enforce the
provisions of this Section.
SECTION 7.11 Employee Benefits and Contracts. Following the Effective Time,
PURCHASER shall provide generally to officers and employees of the TARGET
Companies employee benefits under employee benefit plans (other than stock
option or other plans involving the potential issuance of PURCHASER Common
Stock) on terms and conditions which when taken as a whole are substantially
similar to those currently provided by the PURCHASER Companies to their
similarly situated officers and employees, provided that for a period of
twelve (12) months after the Effective Time, PURCHASER shall provide generally
to officers and employees of TARGET Companies severance benefits in accordance
with the policies of either (i) TARGET as Previously Disclosed, or (ii)
PURCHASER, whichever of (i) or (ii) will provide the greater benefit to the
officer or employee. For purposes of participation and vesting under such
employee benefit plans, the service of the employees of the TARGET Companies
prior to the Effective Time shall be treated as service with a PURCHASER
Company participating in such employee benefit plans. PURCHASER also shall
honor in accordance with their terms all employment, severance, consulting and
other compensation Contracts Previously Disclosed to PURCHASER between any
TARGET Company and any current or former director, officer or employee thereof
and all provisions for vested benefits or other vested amounts earned or
accrued through the Effective Time under the TARGET Benefit Plans.
SECTION 7.12 Large Deposits. Prior to the Closing, TARGET will provide
PURCHASER with a list of all certificates of deposit or checking, savings or
other deposits owned by persons who, to the Knowledge of TARGET, had deposits
aggregating more than $100,000 and a list of all certificates of deposit or
checking,
A-29
savings or other deposits owned by directors and officers of TARGET and the
TARGET Bank and their affiliates in an amount aggregating more than $100,000
as of the last day of the calendar month immediately prior to the Closing.
SECTION 7.13 Indemnification. PURCHASER agrees that all rights to
indemnification and all limitations of liability existing in favor of the
officers and directors of TARGET and TARGET Bank ("Indemnified Parties") as
provided in their respective articles of incorporation and bylaws as of the
date hereof with respect to matters occurring prior to the Effective Time
shall survive the Merger and shall continue in full force and effect, without
any amendment thereto, for a period of not less than six (6) years from the
Effective Time; provided, however, that all rights to any indemnification in
respect of any claim asserted or made within such period shall continue until
the final disposition of such claim.
SECTION 7.14 Irrevocable Proxies. Concurrent with the execution hereof,
TARGET shall obtain and deliver to PURCHASER irrevocable proxies in
substantially the form of Exhibit C hereto from each member of TARGET's Board
of Directors and from certain other affiliates of TARGET, which proxies shall
represent not less than 25% of the outstanding shares of TARGET Common Stock.
SECTION 7.15 TARGET Options. No later than five (5) calendar days after the
date of this Agreement, TARGET shall obtain from each Holder of TARGET Options
listed on Exhibit A hereto a fully executed letter in the form of Exhibit D-1
hereto or Exhibit D-2 hereto, as the context requires, signed by such Holder
and shall deliver such executed letters to PURCHASER.
SECTION 7.16 Adjustment to the TARGET Allowance. Immediately prior to the
Effective Time, TARGET shall adjust the TARGET Allowance in accordance with
PURCHASER's instructions if PURCHASER, in its sole discretion, determines that
the TARGET Allowance has not been calculated in accordance with PURCHASER's
policies, procedures and guidelines with respect to the calculation of the
allowance for possible loan and credit losses for its Subsidiaries.
ARTICLE 8.
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
SECTION 8.1 Conditions to Obligations of Each Party. The respective
obligations of each Party to perform this Agreement and consummate the Merger
and the other transactions contemplated hereby are subject to the satisfaction
of the following conditions, unless waived by both Parties pursuant to Section
10.6 of this Agreement:
(a) Shareholder Approval. The shareholders of TARGET shall have approved
this Agreement, and the consummation of the transactions contemplated
hereby, including the Merger, as and to the extent required by Law or
by the provisions of any governing instruments.
(b) Regulatory Approvals. All Consents of, filings and registrations with,
and notifications to, all Regulatory Authorities required for
consummation of the Merger shall have been obtained or made and shall
be in full force and effect, and all waiting periods required by Law
shall have expired. No Consent obtained from any Regulatory Authority
which is necessary to consummate the transactions contemplated hereby
shall be conditioned or restricted in a manner (including, without
limitation, requirements relating to the raising of additional capital
or the disposition of Assets) which, in the reasonable judgment of the
Board of Directors of either Party, would so materially adversely
impact the economic or business benefits of the transactions
contemplated by this Agreement so as to render inadvisable the
consummation of the Merger; provided, however, that no such condition
or restriction shall be deemed to be materially adverse unless it
materially differs from terms and conditions customarily imposed by any
Regulatory Authority in connection with similar transactions.
A-30
(c) Consents and Approvals. Each Party shall have obtained any and all
Consents required for consummation of the Merger (other than those
referred to in Section 8.1(b) of this Agreement) or for the preventing
of any Default under any Contract or Permit of such Party which, if not
obtained or made, is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on such Party.
(d) Legal Proceedings. No court or governmental or Regulatory Authority of
competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any Law or Order (whether temporary, preliminary or
permanent) or taken any other action which prohibits, materially
restricts or makes illegal consummation of the transactions
contemplated by this Agreement.
(e) Registration Statement. The Registration Statement shall be effective
under the 1933 Act, no stop orders suspending the effectiveness of the
Registration Statement shall have been issued, no action, suit,
proceeding or investigation by the SEC to suspend the effectiveness
thereof shall have been initiated and be continuing, and all necessary
approvals under all Securities Laws relating to the issuance or trading
of the shares of PURCHASER Common Stock issuable pursuant to the Merger
shall have been received.
(f) NASD Listing. The shares of PURCHASER Common Stock issuable pursuant to
the Merger shall have been approved for listing (subject to issuance)
on the NASDAQ/NMS.
(g) Tax Matters. TARGET shall have received a written opinion of counsel
from Rogers & Hardin LLP, in form reasonably satisfactory to it,
substantially to the effect that for federal income tax purposes
(a) the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, and (b) the exchange in
the Merger of TARGET Common Stock for PURCHASER Common Stock will not
give rise to gain or loss to the shareholders of TARGET with respect to
such exchange (except to the extent of any cash received).
SECTION 8.2 Conditions to Obligations of PURCHASER. The obligations of
PURCHASER to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by PURCHASER pursuant to Section 10.6(a)
of this Agreement:
(a) Representations and Warranties. The representations and warranties of
TARGET set forth or referred to in this Agreement shall be true and
correct in all respects as of the date of this Agreement and as of the
Effective Time with the same effect as though all such representations
and warranties had been made on and as of the Effective Time (provided
that representations and warranties which are confined to a specified
date shall speak only as of such date), except (i) as expressly
contemplated by this Agreement, or (ii) for representations and
warranties (other than the representations and warranties set forth in
Section 4.3 of this Agreement, which shall be true in all respects) the
inaccuracies of which relate to matters that are not reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on
TARGET.
(b) Performance of Agreements and Covenants. Each and all of the agreements
and covenants of TARGET to be performed and complied with pursuant to
this Agreement and the other agreements contemplated hereby prior to
the Effective Time shall have been duly performed and complied with in
all material respects.
(c) Certificates. TARGET shall have delivered to PURCHASER (i) a
certificate, dated as of the Effective Time and signed on its behalf by
its chief executive officer, to the effect that the conditions of its
obligations set forth in Sections 8.2(a) and 8.2(b) of this Agreement
have been satisfied, and (ii) certified copies of resolutions duly
adopted by TARGET's Board of Directors and shareholders evidencing the
taking of all corporate action necessary to authorize the execution,
delivery and performance of this Agreement, and the consummation of the
transactions contemplated hereby, all in such reasonable detail as
PURCHASER and its counsel shall reasonably request.
A-31
(d) Executive Employment Agreement. Michael D. Hodges shall have executed
and delivered an Executive Employment Agreement substantially in the
form of the agreement attached hereto as Exhibit E.
(e) Opinion of Counsel. TARGET shall have delivered to PURCHASER an opinion
of Martin, Snow, Grant & Napier, LLP, counsel to TARGET, dated as of
the Closing Date, covering those matters set forth in Exhibit F hereto,
which opinion may be rendered in accordance with the Interpretive
Standards on Legal Opinions to Third Parties in Corporate Transactions
promulgated by the Corporate and Banking Law Section of the State Bar
of Georgia (January 1, 1992) (the "Interpretive Standards").
(f) Accountant's Letters. PURCHASER shall have received from Mauldin &
Jenkins, Certified Public Accountants and Consultants, LLC, letters
dated not more than five (5) days prior to (i) the date of the Proxy
Statement and (ii) the Effective Time, with respect to certain
financial information regarding TARGET, in form and substance
reasonably satisfactory to PURCHASER, which letters shall be based upon
customary specified procedures undertaken by such firm.
(g) Dissenting Shareholders. Holders of not more than 5% of the issued and
outstanding shares of TARGET Common Stock shall have perfected their
rights as dissenting shareholders pursuant to Article 13 of the GBCC.
SECTION 8.3 Conditions to Obligations of TARGET. The obligations of TARGET
to perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following
conditions, unless waived by TARGET pursuant to Section 10.6(b) of this
Agreement:
(a) Representations and Warranties. The representations and warranties of
PURCHASER set forth or referred to in this Agreement shall be true and
correct in all respects as of the date of this Agreement and as of the
Effective Time with the same effect as though all such representations
and warranties had been made on and as of the Effective Time (provided
that representations and warranties which are confined to a specified
date shall speak only as of such date), except (i) as expressly
contemplated by this Agreement, or (ii) for representations and
warranties (other than the representations and warranties set forth in
Section 5.3 of this Agreement, which shall be true in all respects) the
inaccuracies of which relate to matters that are not reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on
PURCHASER.
(b) Performance of Agreements and Covenants. Each and all of the agreements
and covenants of PURCHASER to be performed and complied with pursuant
to this Agreement and the other agreements contemplated hereby prior to
the Effective Time shall have been duly performed and complied with in
all material respects.
(c) Certificates. PURCHASER shall have delivered to TARGET (i) a
certificate, dated as of the Effective Time and signed on its behalf by
its chief executive officer and its chief financial officer, to the
effect that the conditions of its obligations set forth in Section
8.3(a) and 8.3(b) of this Agreement have been satisfied, and (ii)
certified copies of resolutions duly adopted by PURCHASER's Board of
Directors evidencing the taking of all corporate action necessary to
authorize the execution, delivery and performance of this Agreement,
and the consummation of the transactions contemplated hereby, all in
such reasonable detail as TARGET and its counsel shall reasonably
request.
(d) Opinion of Counsel. PURCHASER shall have delivered to TARGET an opinion
of Rogers & Hardin LLP, counsel to PURCHASER, dated as of the Closing
Date, covering those matters set forth in Exhibit G hereto, which
opinion may be rendered in accordance with the Interpretive Standards.
(e) Delivery of Cash Consideration. PURCHASER shall have delivered the Cash
Consideration to the Exchange Agent.
A-32
ARTICLE 9.
TERMINATION
SECTION 9.1 Termination. Notwithstanding any other provision of this
Agreement, and notwithstanding the approval of this Agreement by the
shareholders of TARGET, this Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) By mutual consent of the Board of Directors of PURCHASER and the Board
of Directors of TARGET; or
(b) By the Board of Directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant or other agreement contained in this Agreement) in
the event of a material breach by the other Party of any representation
or warranty contained in this Agreement which cannot be or has not been
cured within thirty (30) days after the giving of written notice to the
breaching Party of such breach and which breach would provide the non-
breaching party the ability to refuse to consummate the Merger under
the standard set forth in Section 8.2(a) of this Agreement in the case
of PURCHASER and Section 8.3(a) of this Agreement in the case of
TARGET; or
(c) By the Board of Directors of either Party (provided that the
terminating Party is not then in Material breach of any representation,
warranty, covenant or other agreement contained in this Agreement) in
the event of a material breach by the other Party of any covenant or
agreement contained in this Agreement which cannot be or has not been
cured within (30) days after the giving of written notice to the
breaching Party of such breach; or
(d) By the Board of Directors of either Party (provided that the
terminating Party is not then in Material breach of any representation,
warranty, covenant or other agreement contained in this Agreement) in
the event (i) any Consent of any Regulatory Authority required for
consummation of the Merger and the other transactions contemplated
hereby has been denied by final nonappealable action of such authority
or if any action taken by such authority is not appealed within the
time limit for appeal, or (ii) if the shareholders of TARGET fail to
approve this Agreement and the transactions contemplated hereby as
required by the GBCC at the Shareholders' Meeting where the
transactions were presented to such shareholders for approval and voted
upon (assuming, for this purpose, that PURCHASER votes the proxies
granted to it pursuant to Section 7.14 hereof in favor thereof); or
(e) By the Board of Directors of either Party in the event that the Merger
shall not have been consummated by September 1, 2001, provided the
failure to consummate the Merger on or before such date was not caused
by any breach of this Agreement by the Party electing to terminate
pursuant to this Section 9.1(e); or
(f) By the Board of Directors of either Party (provided that the
terminating Party is not then in Material breach of any representation,
warranty, covenant or other agreement contained in this Agreement) in
the event that any of the conditions precedent to the obligations of
such Party to consummate the Merger cannot be satisfied or fulfilled by
the date specified in Section 9.1(e) of this Agreement; or
(g) By the Board of Directors of TARGET in connection with entering into a
definitive agreement in accordance with Section 7.8(b), provided that
it has complied with all provisions thereof, including the notice
provisions therein, and that it makes simultaneous payment of the
Termination Fee; or
(h) By the Board of Directors of TARGET if the Average Stock Price on the
Closing Date is (x) less than $8.00, or (y) greater than $14.00.
SECTION 9.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 9.1 of this Agreement, this
Agreement shall become void and have no effect, except (i) as provided in
Sections 10.2 and 10.14, and (ii) a termination pursuant to Section 9.1(b) or
(c) of this Agreement shall entitle the non-breaching Party to the sum of
$300,000 to be paid by the breaching Party, as
A-33
and for liquidated damages, which shall be sole remedy of either Party against
the other under this Agreement pursuant to O.C.G.A. (S)13-6-7. The Parties
agree that the amount specified as liquidated damages hereunder represents a
good faith and reasonable estimate by the Parties of the amount of damages
that the non-breaching Party would expect to incur in the event of a default
under this Agreement and is not intended as a penalty.
ARTICLE 10.
MISCELLANEOUS
SECTION 10.1 Definitions. Except as otherwise provided herein, the
capitalized terms set forth below (in their singular and plural forms as
applicable) shall have the following meanings:
"Affiliate" of a Person shall mean (a) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person or (b) any officer, director, partner,
employer, or direct or indirect beneficial owner of any 10% or greater equity
or voting interest of such Person.
"Agreement" shall mean this Agreement and Plan of Merger and the Exhibits
delivered pursuant hereto and incorporated herein by reference.
"Aggregate Merger Consideration" shall mean the Cash Consideration and the
Stock Consideration together.
"Assets" of a Person shall mean all of the assets, properties, businesses
and rights of such Person of every kind, nature, character and description,
whether real, personal or mixed, tangible or intangible, accrued or
contingent, or otherwise relating to or utilized in such Person's business,
directly or indirectly, in whole or in part, whether or not carried on the
books and records of such Person, and whether or not owned in the name of such
Person or any Affiliate of such Person and wherever located.
"Average Stock Price" shall mean the arithmetic average closing price per
share of the PURCHASER Common Stock for the thirty (30) highest-volume trading
days (as reported on the internet website, http://www.nasdaq.com/) during the
sixty (60) consecutive calendar day period immediately preceding the date that
is five (5) calendar days prior to the Closing Date.
"BHC Act" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"Business Day" shall mean any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the State
of Georgia generally are authorized or required by law or other government
actions to close.
"Cash Consideration" shall mean TEN MILLION TWO HUNDRED THIRTY-SEVEN
THOUSAND NINE HUNDRED SIXTY DOLLARS ($10,237,960.00), subject to adjustment
pursuant to Section 10.2 of this Agreement; provided, however, that if the
Average Stock Price is greater than $12.00, then the foregoing amount shall be
reduced at the Effective Time by an amount equal to one-half (1/2) of the
product obtained by multiplying 1,241,204 by the difference between the
Average Stock Price and $12.00.
"Change of Control" shall mean any of the following events: (a) all or
substantially all of PURCHASER's assets are sold as an entirety to any Person
or related group of Persons; (b) there shall be consummated any consolidation
or merger of PURCHASER (1) in which PURCHASER is not the continuing or
surviving corporation (other than a consolidation or merger with a wholly-
owned Subsidiary of PURCHASER in which all PURCHASER Common Stock outstanding
immediately prior to the effectiveness thereof are changed into or exchanged
for the same consideration) or (2) pursuant to which the PURCHASER Common
Stock is converted into cash, securities or other property, in each case other
than a consolidation or merger of
A-34
PURCHASER in which it is contemplated at the time of signing an agreement with
respect to such consolidation or merger that (x) the holders of the PURCHASER
Common Stock immediately prior to such consolidation or merger have, directly
or indirectly, at least a majority of the common shares of the continuing or
surviving corporation immediately after such consolidation or merger, or (y)
the members of the Board of Directors of PURCHASER immediately prior to such
consolidation or merger continue to constitute at least a majority of the
Board of Directors of the continuing or surviving corporation immediately
after such consolidation or merger; or (c) any Person, or any Persons acting
together which would constitute a "group" for purposes of Section 13(d) of the
Securities Exchange Act of 1934, as amended, together with any Affiliates
thereof, shall acquire beneficial ownership (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934, as amended) of at least 50% of the total
voting power of all classes of capital shares of PURCHASER entitled to vote
generally in the election of directors of PURCHASER; provided, however, that a
Change in Control shall not be deemed to have occurred under this clause (c)
solely by virtue of a recapitalization or a leveraged buyout or similar
transaction involving members of the current management of PURCHASER or their
Affiliates.
"Closing" shall mean the closing of the transactions contemplated hereby, as
described in Section 1.2 of this Agreement.
"Closing Date" shall have the meaning provided in Section 1.2 of this
Agreement.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order or Permit.
"Contract" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease, obligation,
plan, practice, restriction, understanding or undertaking of any kind or
character, or other document to which any Person is a party or that is binding
on any Person or its capital stock, Assets or business.
"Default" shall mean (a) any breach or violation of or default under any
Contract, Order or Permit, (b) any occurrence of any event that with the
passage of time or the giving of notice or both would constitute a breach or
violation of or default under any Contract, Order or Permit, or (c) any
occurrence of any event that with or without the passage of or the giving of
notice would give rise to a right to terminate or revoke, change the current
terms of, or renegotiate, or to accelerate, increase or impose any Liability
under, any Contract, Order or Permit.
"Effective Time" shall mean the date and time at which the Merger becomes
effective as defined in Section 1.3 of this Agreement.
"Environmental Laws" shall mean all Laws which are administered, interpreted
or enforced by the United States Environmental Protection Agency and state and
local agencies with primary jurisdiction over pollution or protection of the
environment.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall have the meaning provided in Section 4.14(c) of this
Agreement.
"ERISA Plan" shall have the meaning provided in Section 4.14 of this
Agreement.
"Exchange Agent" shall have the meaning provided in Section 3.2 of this
Agreement.
"Exhibits" A through G, inclusive, shall mean the Exhibits so marked, copies
of which are attached to this Agreement. Such Exhibits are hereby incorporated
by reference herein and made a part hereof and may be referred to in this
Agreement and any other related instrument or document without being attached
hereto.
"GAAP" shall mean generally accepted accounting principles, consistently
applied during the periods involved.
A-35
"Georgia Articles of Merger" shall mean the Articles of Merger or
Certificate of Merger, if applicable, to be executed by PURCHASER and filed
with the Secretary of State of the State of Georgia relating to the Merger as
contemplated by Section 1.3 of this Agreement.
"GBCC" shall mean the Georgia Business Corporation Code.
"Hazardous Material" shall mean any pollutant, contaminant, or hazardous
substance within the meaning of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. (S) 9601 et
seq., or any similar federal, state or local Law.
"Holder" shall have the meaning provided in Section 3.7 of this Agreement.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"Interpretive Standards" shall have the meaning provided in Section 8.2(d)
of this Agreement.
"IRS" shall mean the United States Internal Revenue Service.
"Knowledge" as used with respect to a Person shall mean the Knowledge after
reasonable due inquiry of the Chairman, President, Chief Financial Officer,
Chief Accounting Officer, Chief Credit Officer or any Senior or Executive Vice
President of such Person.
"Law" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its Assets,
Liabilities or business, including, without limitation, those promulgated,
interpreted or enforced by any of the Regulatory Authorities.
"Lawsuit" shall mean the action pending in the Court of Common Pleas, Fifth
Judicial Circuit, State of South Carolina, County of Richland, styled Fleet
Mortgage Corp., Plaintiff, vs. First Bank Mortgage Corporation and Golden
Isles Financial Holdings, Inc., Defendant, Civil Action No.: 00-CP-40-4033.
"Letter of Transmittal" shall have the meaning provided in Section 3.2 of
this Agreement.
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including,
without limitation, costs of investigation, collection and defense), claim,
deficiency, guaranty or endorsement of or by any Person (other than
endorsements of notes, bills, checks and drafts presented for collection or
deposit in the ordinary course of business) of any type, whether accrued,
absolute or contingent, liquidated or unliquidated, matured or unmatured, or
otherwise.
"Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention
or other security arrangement, or any adverse right or interest, charge or
claim of any nature whatsoever of, on, or with respect to any property or
property interest, other than (i) Liens for current property Taxes not yet due
and payable, (ii) for depository institution Subsidiaries of a Party, pledges
to secure deposits and other Liens incurred in the ordinary course of the
banking business, and (iii) Liens which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on a Party.
"Litigation" shall mean any action, arbitration, cause of action, claim,
complaint, criminal prosecution, demand letter, governmental or other
examination or investigation, hearing, inquiry, administrative or other
proceeding, or notice (written or oral) by any Person alleging potential
Liability or requesting information relating to or affecting a Party, its
business, its Assets (including, without limitation, Contracts related to it),
or the transactions contemplated by this Agreement, but shall not include
regular, periodic examinations of depository institutions and their Affiliates
by Regulatory Authorities.
A-36
"Loan Property" shall mean any property owned by the Party in question or by
any of its Subsidiaries or in which such Party or Subsidiary holds a security
interest, and, where required by the context, includes the owner or operator
of such property, but only with respect to such property.
"Material" or "Materially" for purposes of this Agreement shall be
determined in light of the facts and circumstances of the matter in question,
provided that any specific monetary amount stated in this Agreement shall
determine materiality in that instance.
"Material Adverse Effect" on a Party shall mean an event, change or
occurrence which has a material adverse impact on (a) the financial position,
business, or results of operations of such Party and its Subsidiaries taken as
a whole, or (b) the ability of such Party to perform its obligations under
this Agreement or to consummate the Merger or the other transactions
contemplated by this Agreement, provided that "material adverse impact" shall
not be deemed to include the impact of (x) changes in banking and similar Laws
of general applicability or interpretations thereof by courts or governmental
authorities, (y) changes in generally accepted accounting principles or
regulatory accounting principles generally applicable to banks and their
holding companies, and (z) the Merger and compliance with the provisions of
this Agreement on the operating performance of the Parties.
"Merger" shall mean the merger of TARGET with and into PURCHASER referred to
in Section 1.1 of this Agreement.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ/NMS" shall mean The National Market System of the National
Association of Securities Dealers Automated Quotations System.
"1933 Act" shall mean the Securities Act of 1933, as amended, and the rules
and regulations promulgated by the SEC thereunder.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the SEC thereunder.
"Old Certificates" shall have the meaning provided in Section 3.2 of this
Agreement.
"Option Shares" shall mean, with respect to each Holder, the number of
shares of TARGET Common Stock determined by dividing (a) the total number of
shares of TARGET Common Stock that such Holder would be entitled to receive
upon the exercise of all of such Holder's outstanding TARGET Options (whether
or not such options are then exercisable) multiplied by the difference between
$10.00 and the Weighted Average Strike Price for such Holder's TARGET Options,
by (b) $10.00.
"Order" shall mean any administrative decision or award, decree, injunction,
judgment, order, quasi-judicial decision or award, ruling, or writ of any
federal, state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency or Regulatory Authority.
"Outstanding TARGET Shares" shall mean all shares of TARGET outstanding
immediately prior to the Effective Time, other than shares held in TARGET's
treasury which shall be cancelled without consideration at the Effective Time.
"Participation Facility" shall mean any facility or property in which the
Party in question or any of its Subsidiaries participates in the management
(including, without limitation, any property or facility held in a joint
venture) and, where required by the context, said term means the owner or
operator of such facility or property, but only with respect to such facility
or property.
"Party" shall mean either TARGET or PURCHASER, and "Parties" shall mean both
TARGET and PURCHASER.
A-37
"Permit" shall mean any federal, state, local and foreign governmental
approval, authorization, certificate, easement, filing, franchise, license,
notice, permit or right to which any Person is a party or that is or may be
binding upon or inure to the benefit of any Person or its capital stock,
Assets, Liabilities or business.
"Person" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in
a representative capacity.
"Previously Disclosed" shall mean information (a) delivered in writing prior
to the date of this Agreement in the manner and to the Party and counsel
described in Section 10.8 of this Agreement and describing in reasonable
detail the matters contained therein, provided that in the case of
Subsidiaries acquired after the date of this Agreement, such information may
be so delivered by the acquiring Party to the other Party prior to the date of
such acquisition, (b) disclosed prior to the date of this Agreement by one
Party to the other Party in an SEC Document delivered to such other Party in
which the specific information has been identified by the delivering Party, or
(c) disclosed in writing during PURCHASER's due diligence investigation
pursuant to Sections 7.6(a) by TARGET to PURCHASER in the manner described in
Section 10.8 of this Agreement and describing in reasonable detail the matters
contained therein.
"Pro-Rata Share" shall mean the quotient obtained by dividing (a) the number
one (1), by (b) the sum of (i) the total number of Outstanding TARGET Shares
as of the Effective Time plus (ii) the aggregate number of Option Shares into
which all of the TARGET Options outstanding as of the Effective Time could
have been converted immediately prior to the Effective Time (whether or not
such TARGET Options are then exercisable).
"Proxy Statement" shall mean the proxy statement used by TARGET to solicit
the approval of its shareholders of the transactions contemplated by this
Agreement and shall include the prospectus of PURCHASER relating to shares of
PURCHASER Common Stock to be issued to the shareholders of TARGET.
"PURCHASER Allowance" shall have the meaning provided in Section 5.9 of this
Agreement.
"PURCHASER Benefit Plans" shall have the meaning set forth in Section 5.14
of this Agreement.
"PURCHASER Common Stock" shall mean the $1.00 par value common stock of
PURCHASER.
"PURCHASER Companies" shall mean, collectively, PURCHASER and all PURCHASER
Subsidiaries.
"PURCHASER Financial Statements" shall mean (a) the unaudited consolidated
statements of condition (including related notes and schedules, if any) of
PURCHASER as of December 31, 2000, and as of December 31, 1999 and 1998, and
the related statements of income, changes in shareholders' equity, and cash
flows (including related notes and schedules, if any) for the year ended
December 31, 2000, and for each of the three years ended December 31, 1999,
1998 and 1997, as filed by PURCHASER in its SEC Documents and (b) the
consolidated statements of condition of PURCHASER (including related notes and
schedules, if any) and related statements of income, changes in shareholders'
equity, and cash flows (including related notes and schedules, if any)
included in SEC Documents filed with respect to periods ended subsequent to
December 31, 2000.
"PURCHASER Stock Plans" shall mean the existing stock option and other
stock-based compensation plans.
"PURCHASER Subsidiaries" shall mean the Subsidiaries of PURCHASER.
"Record Date" shall have the meaning provided in Section 3.1(e) of this
Agreement.
"Registration Statement" shall mean the Registration Statement on Form S-4,
or other appropriate form, filed with the SEC by PURCHASER under the 1933 Act
in connection with the transactions contemplated by this Agreement.
A-38
"Regulatory Authorities" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the Board of the
Governors of the Federal Reserve System, the Office of the Comptroller of the
Currency, the Federal Deposit Insurance Corporation, all state banking and
other regulatory agencies having jurisdiction over the Parties and their
respective Subsidiaries, the NASD and the SEC.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC Documents" shall mean all reports and registration statements filed, or
required to be filed, by a Party or any of its Subsidiaries with any
Regulatory Authority pursuant to the Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the Investment
Company Act of 1940, as amended, the Investment Advisers Act of 1940, as
amended, the Trust Indenture Act of 1939, as amended, state blue sky laws, and
the rules and regulations of any Regulatory Authority promulgated thereunder.
"Shareholders' Meeting" shall mean the meeting of the shareholders of TARGET
to be held pursuant to Section 7.1 of this Agreement, including any
adjournment or postponement thereof.
"Steering Committee" shall have the meaning provided in Section 6.3 of this
Agreement.
"Stock Consideration" shall mean 1,241,204 shares of PURCHASER Common Stock
(subject to adjustment pursuant to Sections 3.3 and 10.2 of this Agreement);
provided, however, that (a) if the Average Stock Price is greater than $12.00,
then the foregoing number of shares shall be reduced at the Effective Time by
an amount equal to one-half ( 1/2) of the product obtained by multiplying
1,241,204 times the quotient obtained by dividing (x) the difference between
the Average Stock Price and $12.00 by (y) the Average Stock Price; and (b) in
the event that PURCHASER executes and delivers a definitive agreement prior to
the Effective Time pursuant to which a Change of Control will result upon the
consummation of the transactions contemplated by such definitive agreement,
then the foregoing number of shares shall be fixed at 1,241,204 without
adjustment other than as provided in Section 3.3 hereof.
"Subsidiaries" shall mean all those corporations, banks, associations or
other entities of which the entity in question owns or controls 5% or more of
the outstanding equity securities either directly or through an unbroken chain
of entities as to each of which 5% or more of the outstanding equity
securities is owned directly or indirectly by its parent; provided, however,
that there shall not be included any such entity acquired through foreclosure
or any such entity the equity securities of which are owned or controlled in a
fiduciary capacity.
"Superior Proposal" shall have the meaning provided in Section 7.8(b) of
this Agreement.
"Surviving Corporation" shall mean PURCHASER as the surviving corporation
resulting from the Merger.
"Takeover Proposal" shall have the meaning provided in Section 7.8(a) of
this Agreement.
"TARGET Allowance" shall have the meaning provided in Section 4.9 of this
Agreement.
"TARGET Bank" shall mean The First Bank of Brunswick, a Georgia state-
chartered bank and a TARGET Subsidiary.
"TARGET Benefit Plans" shall have the meaning set forth in Section 5.14 of
this Agreement.
"TARGET Common Stock" shall mean the no par value Common Stock of TARGET.
"TARGET Companies" shall mean, collectively, TARGET and all TARGET
Subsidiaries.
"TARGET Financial Statements" shall mean (a) the consolidated statements of
condition (including related notes and schedules, if any) of TARGET as of
December 31, 2000, and as of December 31, 1999 and 1998, and the related
statements of income, changes in shareholders' equity, and cash flows
(including related
A-39
notes and schedules, if any) for the year ended December 31, 2000, and for
each of the three years ended December 31, 1999, 1998 and 1997, as filed by
TARGET in its SEC Documents and (b) the consolidated statements of condition
of TARGET (including related notes and schedules, if any) and related
statements of income, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) included in SEC Documents
filed with respect to periods ended subsequent to December 31, 2000.
"TARGET Options" shall have the meaning provided in Section 3.7 of this
Agreement.
"TARGET Stock Plans" shall mean the existing stock option and other stock-
based compensation plans of TARGET.
"TARGET Subsidiaries" shall mean the Subsidiaries of TARGET, which shall
include the TARGET Subsidiaries described in Section 4.4 of this Agreement and
any Person acquired as a Subsidiary of TARGET in the future and owned by
TARGET at the Effective Time.
"Taxes" shall mean any federal, state, county, local, foreign and other
taxes, assessments, charges, fares, and impositions, including interest and
penalties thereon or with respect thereto.
"Termination Fee" shall have the meaning provided in Section 10.2 of this
Agreement.
"Weighted Average Strike Price" shall mean, with respect to all of the
TARGET Options held by any Holder, the number obtained by dividing (a) the
total amount that would be received by TARGET upon the exercise of such TARGET
Options, by (b) the total number of shares of TARGET Common Stock issuable
upon the exercise of such TARGET Options, in each case whether or not such
TARGET Options are then exercisable.
SECTION 10.2 Expenses.
(a) Except as otherwise provided in this Section 10.2, each of the Parties
shall bear and pay all direct costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder,
including filing, registration and application fees, printing fees, and
fees and expenses of its own financial or other consultants, investment
bankers, accountants and counsel; provided, however, that (i) the
Aggregate Merger Consideration shall be reduced by an amount equal to
(A) all fees paid to J. Thomas Whelchel, Esq.; (B) all of the fees in
excess of $40,000.00 and all of the costs and expenses in excess of
$2,500.00 of The Carson Medlin Company, TARGET's financial adviser; (C)
all of the fees, costs and expenses of Martin, Snow, Grant & Napier,
LLP, TARGET's legal counsel, in excess of $30,000.00; and (D) either
(x) all payments to Fleet Mortgage Corp. in respect of the Lawsuit and
all fees, costs and expenses associated therewith in excess of the
total of (1) $25,000.00 and (2) all cash received by TARGET prior to
the Effective Time from the sale or collection of that certain
Promissory Note dated April 1, 1997, delivered by Eddie Gillon and
Muriel Gillon in favor of First Bank Mortgage Corporation in the event
that the Lawsuit is dismissed with prejudice or fully and finally
discharged by non-appealable judgment prior to the Effective Time, or
(y) in the event that the Lawsuit has not been so dismissed or
discharged by the Effective Time, $150,000.00; and (ii) each of the
Parties shall bear and pay one-half of the filing fees payable in
connection with the Registration Statement and the Proxy Statement and
the printing costs incurred in connection with the printing of the
Registration Statement and the Proxy Statement.
(b) TARGET shall pay, or cause to be paid, in same day funds to PURCHASER,
cash in the amount of $400,000.00 (the "Termination Fee") upon demand
if (A) TARGET terminates this Agreement pursuant to Section 9.1(g), or
(B) prior to the termination of this Agreement (other than by TARGET
pursuant to Section 9.1(c)), a Takeover Proposal shall have been made
and within one (1) year of such termination, TARGET enters into an
agreement with respect to, or approves or recommends or takes any
action to facilitate, such Takeover Proposal. If TARGET terminates this
Agreement pursuant to Section 9.1(d)(2) under circumstances where
clause (B) of the immediately preceding sentence is not applicable,
TARGET shall pay, or cause to be paid, in same day funds to PURCHASER,
cash in the amount of $100,000.00, but shall not be obligated to pay
the Termination Fee.
A-40
SECTION 10.3 Brokers and Finders. Except for The Carson Medlin Company and
as otherwise Previously Disclosed, each of the Parties represents and warrants
that neither it nor any of its officers, directors, employees or Affiliates
has employed any broker or finder or incurred any Liability for any financial
advisory fees, investment bankers' fees, brokerage fees, commissions or
finders' fees in connection with this Agreement or the transactions
contemplated hereby. In the event of a claim by any broker or finder based
upon its representing or being retained by or allegedly representing or being
retained by TARGET or PURCHASER, each of TARGET and PURCHASER, as the case may
be, agrees to indemnify and hold the other Party harmless of and from any
Liability in respect of any such claim.
SECTION 10.4 Entire Agreement. Except as otherwise expressly provided
herein, this Agreement (including the documents and instruments referred to
herein) constitutes the entire agreement between the Parties with respect to
the transactions contemplated hereunder and supersedes all prior arrangements
or understandings with respect thereto, written or oral. Nothing in this
Agreement, expressed or implied, is intended to confer upon any Person, other
than the Parties or their respective successors, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, other than as
provided in Section 7.13 of this Agreement.
SECTION 10.5 Amendments. To the extent permitted by Law, this Agreement may
be amended by a subsequent writing signed by each of the Parties upon the
approval of the Boards of Directors of each of the Parties; provided, however,
that after any such approval by the holders of TARGET Common Stock, there
shall be made no amendment decreasing the consideration to be received by
TARGET shareholders without the further approval of such shareholders.
SECTION 10.6 Waivers.
(a) Prior to or at the Effective Time, PURCHASER, acting through its Board
of Directors, chief executive officer or other authorized officer,
shall have the right to waive any Default in the performance of any
term of this Agreement by TARGET, to waive or extend the time for the
compliance or fulfillment by TARGET of any and all of its obligations
under this Agreement, and to waive any or all of the conditions
precedent to the obligations of PURCHASER under this Agreement, except
any condition which, if not satisfied, would result in the violation of
any Law. No such waiver shall be effective unless in writing signed by
a duly authorized officer of PURCHASER.
(b) Prior to or at the Effective Time, TARGET, acting through its Board of
Directors, chief executive officer or other authorized officer, shall
have the right to waive any Default in the performance of any term of
this Agreement by PURCHASER, to waive or extend the time for the
compliance or fulfillment by PURCHASER of any and all of its
obligations under this Agreement, and to waive any or all of the
conditions precedent to the obligations of TARGET under this Agreement,
except any condition which, if not satisfied, would result in the
violation of any Law. No such waiver shall be effective unless in
writing signed by a duly authorized officer of TARGET.
(c) The failure of any Party at any time or times to require performance of
any provision hereof shall in no manner affect the right of such Party
at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term
contained in this Agreement in one or more instances shall be deemed to
be or construed as a further or continuing waiver of such condition or
breach or a waiver of any other condition or of the breach of any other
term of this Agreement.
SECTION 10.7 Assignment. Except as expressly contemplated hereby, neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any Party hereto (whether by operation of Law or otherwise)
without the prior written consent of the other Party; provided, however, that
if PURCHASER is acquired before the Closing, this Agreement may be assigned by
PURCHASER and assumed by the acquiring Person without TARGET's consent.
Subject to the immediately preceding sentence, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by the Parties and their
respective successors and assigns.
A-41
SECTION 10.8 Notices. All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if delivered by
hand, by facsimile transmission, by registered or certified mail, postage pre-
paid, or by courier or overnight carrier, to the persons at the addresses set
forth below (or at such other address as may be provided hereunder), and shall
be deemed to have been delivered as of the date so delivered:
PURCHASER: ABC Bancorp
24 2nd Avenue, S.E.
Moultrie, Georgia 31768
Telecopy Number: (912) 890-2235
Attention: President
Copy to (which copy will not constitute notice to PURCHASER):
Rogers & Hardin LLP
2700 International Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Telecopy Number: (404) 525-2224
Attention: Steven E. Fox, Esq.
TARGET: Golden Isles Financial Holdings, Inc.
3811 Frederica Road
St. Simons Island, Georgia 31522
Telecopy Number: (912) 638-3395
Attention: President
Copy to (which copy will not constitute notice to TARGET):
Martin, Snow, Grant & Napier, LLP
240 Third Street
P.O. Box 1606
Macon, Georgia 31202
Telecopy Number: (912) 743-4204
Attention: Edward J. Harrell, Esq.
SECTION 10.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Georgia, without regard
to any applicable conflicts of Laws, except to the extent that the federal
laws of the United States may apply to the Merger.
SECTION 10.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument. Executed
counterparts of this Agreement may be delivered by the Parties via facsimile
transmission.
SECTION 10.11 Captions. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
SECTION 10.12 Enforcement of Agreement. The Parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the Parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of
the United States or any state having jurisdiction, this being in addition to
any other remedy to which they are entitled at law or in equity.
A-42
SECTION 10.13 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
SECTION 10.14 Survival. The respective representations, warranties,
obligations, covenants and agreements of the Parties shall not survive the
Effective Time or the termination and abandonment of this Agreement, except
that (i) Articles Two, Three and Ten and Sections 7.6(b), 7.9, 7.11 and 7.13
of this Agreement shall survive the Effective Time; and (ii) Sections 7.6(b),
7.8(b), 9.2, 10.2 and 10.14 shall survive the termination and abandonment of
this Agreement.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by its officers as of the day and year first above written.
ATTEST: ABC BANCORP
/s/ Cindi H. Lewis /s/ Kenneth J. Hunnicutt
___________________________________ By: _________________________________________
Secretary
President and CEO
Its: ________________________________________
[CORPORATE SEAL]
ATTEST: GOLDEN ISLES FINANCIAL HOLDINGS, INC.
/s/ Michael D. Hodges /s/ J. Thomas Whelchel
___________________________________ By: _________________________________________
President
Chairman
Its: ________________________________________
[CORPORATE SEAL]
A-43
EXHIBIT A
LIST OF HOLDERS OF TARGET OPTIONS
Equivalent
Ex Total Options @ Pur Total by
Holder Granted Price Price 10 Price 10 Holder
- ------ ------- ----- -------- ---------- ----- ---------
HODGES........................ 18750 4 75000 11250
1003 4.6 4613.8 541.62
1408 6.25 8800 528
6921 6.5 44986.5 2422.35
1042 6 6252 416.8
1000 6 6000 400
5000 7.6 38000 1200
3165 9.36 29624.4 202.56
2203 9.64 21236.92 79.308
265 9.4 2491 15.9
406 9.23 3747.38 31.262
449 8.36 3753.64 73.636
548 6.84 3748.32 173.168 17334.604
GOWEN......................... 3750 4 15000 2250
751 4.6 3454.6 405.54
732 6.25 4575 274.5
4614 6.5 29991 1614.9
167 6 1002 66.8
1050 6 6300 420
3000 7 21000 900
5000 6.84 34200 1580 7511.74
MORAN......................... 1000 6.25 6250 375
4614 6.5 29991 1614.9
585 6 3510 234
1000 7 7000 300 2523.9
HICKEY........................ 2769 6.5 17998.5 969.15
415 6 2490 166 1135.15
POGUE......................... 1000 6.5 6500 350
500 6 3000 200 550
ALDRIDGE...................... 1000 7 7000 300 300
CABLE......................... 7500 9.53 71475 352.5
5000 9.11 45550 445
5000 6.84 34200 1580 2377.5
HARDEN........................ 1385 6 8310 554
3966 9.36 37121.76 253.824
2735 9.64 26365.4 98.46
372 9.4 3496.8 22.32
406 9.23 3747.38 31.262
314 8.36 2625.04 51.496
567 6.84 3878.28 179.172 1190.534
JACOBS........................ 1263 6 7578 505.2
3526 9.36 33003.36 225.664
2748 9.64 26490.72 98.928
319 9.42 998.6 19.14
487 9.23 4495.0 137.499
359 8.36 3001.24 58.876
567 6.84 3878.28 179.172 1124.479
A-44
Total Equivalent Pur Total by
Holder Granted Ex Price Price Options @ 10 Price 10 Holder
- ------ ------- -------- ---------- ------------ ----- ---------
KEENUM................ 1045 6 6270 418
3152 9.36 29502.72 201.728
2268 9.64 21863.52 81.648
265 9.4 2491 15.9
460 9.23 4245.8 35.42
449 8.36 3753.64 73.636
548 6.84 3748.32 173.168 999.5
VEAL.................. 1958 6 11748 783.2
4514 9.36 42251.04 288.896
3176 9.64 30616.64 114.336
372 9.4 3496.8 22.32
731 9.23 6747.13 56.287
853 8.36 7131.08 139.892
914 6.84 6251.76 288.824 1693.755
WHELCHEL.............. 1390 6 8340 556
3836 9.36 35904.96 245.504
2500 9.54 23850 115
2500 9.71 24275 72.5
2500 9.17 22925 207.5
2670 9.64 25738.8 96.12
2500 9.49 23725 127.5
385 9.4 3619 23.1
569 9.23 5251.87 43.813
3000 9.16 27480 252
658 8.36 5500.88 107.912
713 6.84 4876.92 225.308
3000 6.54 19620 1038 3110.257
ACOSTA................ 1536 9.36 14376.96 98.304
2203 9.64 21236.92 79.308
345 9.4 3243 20.7
528 9.23 4873.44 40.656
643 8.36 5375.48 105.452
292 6.84 1997.28 92.272 436.692
FIVEASH............... 1710 9.36 16005.6 109.44
3059 9.64 29488.76 110.124
398 9.4 3741.2 23.88
555 9.23 5122.65 42.735
628 8.36 5250.08 102.992
567 6.84 3878.28 179.172 568.343
WERK.................. 176 9.23 1624.48 13.552
613 8.36 5124.68 100.532
475 6.84 3249 150.1 264.184
HUNDLEY............... 7500 9.16 68700 630
5000 6.84 34200 1580 2210
BLALOCK............... 3000 6.84 20520 948 948
STRICKLAND............ 3000 6.84 20520 948 948
GALLAGHER............. 3000 6 18000 1200 1200
THOMAS................ 5000 6.0625 30312.50 1968.75 1968.75
GRAND TOTALS.......... 197775 7.553008 1493796.12 48395.388 48395.388
A-45
EXHIBIT B
AFFILIATE AGREEMENT
ABC Bancorp
24 2nd Avenue, S.E.
Moultrie, Georgia 31768
Attention: President
Ladies and Gentlemen:
The undersigned is a shareholder of Golden Isles Financial Holdings, Inc.
("Target"), a corporation organized under the laws of the State of Georgia and
located on St. Simons Island, Georgia, and will become a shareholder of ABC
Bancorp ("Purchaser") pursuant to the transactions described in the Agreement
and Plan of Merger, dated as of February 20, 2001 (the "Agreement"), by and
between Target and Purchaser. Under the terms of the Agreement, Target will be
merged into and with Purchaser (the "Merger"), and the shares of the no par
value common stock of Target ("Target Common Stock") will be converted into
and exchanged for cash and shares of the $1.00 par value common stock of
Purchaser ("Purchaser Common Stock"). This Affiliate Agreement represents an
agreement between the undersigned and Purchaser regarding certain rights and
obligations of the undersigned in connection with the shares of Purchaser
Common Stock to be received by the undersigned as a result of the Merger.
In consideration of the Merger and the mutual covenants contained herein,
the undersigned and Purchaser hereby agree as follows:
1. Affiliate Status. The undersigned understands and agrees that as to
Target the undersigned is an "affiliate" under Rule 145(c) as defined in Rule
405 of the Rules and Regulations of the Securities and Exchange Commission
("SEC") under the Securities Act of 1933, as amended ("1933 Act"), and the
undersigned anticipates that the undersigned will be such an "affiliate" at
the time of the Merger.
2. Covenants and Warranties of Undersigned. The undersigned represents,
warrants and agrees that:
(a) The Purchaser Common Stock received by the undersigned as a result of
the Merger will be taken for his or her own account and not for
others, directly or indirectly, in whole or in part.
(b) Purchaser has informed the undersigned that any distribution by the
undersigned of Purchaser Common Stock has not been registered under the
1933 Act and that shares of Purchaser Common Stock received pursuant to
the Merger can only be sold by the undersigned (i) following
registration under the 1933 Act, or (ii) in conformity with the volume
and other requirements of Rule 145(d) promulgated by the SEC as the
same now exist or may hereafter be amended, or (iii) to the extent some
other exemption from registration under the 1933 Act might be
available. The undersigned understands that Purchaser is under no
obligation to file a registration statement with the SEC covering the
disposition of the undersigned's shares of Purchaser Common Stock.
3. Restrictions on Transfer.
(a) The undersigned understands and agrees that stop transfer instructions
with respect to the shares of Purchaser Common Stock received by the
undersigned pursuant to the Merger will be given to Purchaser's
Transfer Agent and that there will be placed on the certificates for
such shares, or shares issued in substitution thereof, a legend stating
in substance:
"The shares represented by this certificate may not be sold, transferred
or otherwise disposed of except or unless (i) covered by an effective
registration statement under the Securities Act of 1933, as amended,
(ii) in accordance with (x) Rule 145(d) (in the case of shares issued to
an individual who is
A-46
not an affiliate of Purchaser) or (y) Rule 144 (in the case of shares
issued to an individual who is an affiliate of Purchaser) of the Rules
and Regulations of such Act, or (iii) in accordance with a legal opinion
satisfactory to counsel for Purchaser that such sale or transfer is
otherwise exempt from the registration requirements of such Act."
(b) Such legend will also be placed on any certificate representing
Purchaser securities issued subsequent to the original issuance of the
Purchaser Common Stock pursuant to the Merger as a result of any stock
dividend, stock split or other recapitalization as long as the
Purchaser Common Stock issued to the undersigned pursuant to the Merger
has not been transferred in such manner to justify the removal of the
legend therefrom. In addition, if the provisions of Rules 144 and 145
are amended to eliminate restrictions applicable to the Purchaser
Common Stock received by the undersigned pursuant to the Merger, or at
the expiration of the restrictive period set forth in Rule 145(d),
Purchaser, upon the request of the undersigned, will cause the
certificates representing the shares of Purchaser Common Stock issued
to the undersigned in connection with the Merger to be reissued free of
any legend relating to the restrictions set forth in Rules 144 and
145(d) upon receipt by Purchaser of an opinion of its counsel to the
effect that such legend may be removed.
4. Understanding of Restrictions on Dispositions. The undersigned has
carefully read the Agreement and this Affiliate Agreement and discussed their
requirements and impact upon his or her ability to sell, transfer or otherwise
dispose of the shares of Purchaser Common Stock received by the undersigned in
connection with the Merger, to the extent he or she believes necessary, with
his or her counsel or counsel for Target.
5. Filing of Reports by Purchaser. Purchaser agrees, for a period of three
years after the effective date of the Merger, to file on a timely basis all
reports required to be filed by it pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), so that the public
information provisions of Rule 145(d) promulgated by the SEC as the same are
presently in effect will be available to the undersigned in the event the
undersigned desires to transfer any shares of Purchaser Common Stock issued to
the undersigned pursuant to the Merger.
6. Transfer Under Rule 145(d). If the undersigned desires to sell or
otherwise transfer the shares of Purchaser Common Stock received by him or her
in connection with the Merger at any time during the restrictive period set
forth in Rule 145(d), the undersigned will provide the necessary
representation letter to the Transfer Agent for Purchaser Common Stock,
together with such additional information as the Transfer Agent may reasonably
request. If Purchaser's counsel concludes that such proposed sale or transfer
complies with the requirements of Rule 145(d), Purchaser shall cause such
counsel, at Purchaser's expense, to provide such opinions as may be necessary
to Purchaser's Transfer Agent so that the undersigned may complete the
proposed sale or transfer.
7. Acknowledgments. The undersigned recognizes and agrees that the foregoing
provisions also apply with respect to Target Common Stock held by, and
Purchaser Common Stock issued in connection with the Merger to, (a) the
undersigned's spouse, (b) any relative of the undersigned or of the
undersigned's spouse who has the same home as the undersigned, (c) any trust
or estate in which the undersigned, the undersigned's spouse, and any such
relative collectively own at least a 10% beneficial interest or of which any
of the foregoing serves as trustee, executor or in any similar capacity, and
(d) any corporation or other organization in which the undersigned, the
undersigned's spouse and any such relative collectively own at least 10% of
any class of equity securities or of the equity interest. The undersigned
further recognizes that, in the event that the undersigned is a director or
executive officer of Purchaser or becomes a director or executive officer of
Purchaser upon consummation of the Merger, among other things, any sale of
Purchaser Common Stock by the undersigned within a period of less than six
months following the effective time of the Merger may subject the undersigned
to liability pursuant to Section 16(b) of the 1934 Act.
A-47
8. Miscellaneous. This Affiliate Agreement is the complete agreement between
Purchaser and the undersigned concerning the subject matter hereof. Any notice
required to be sent to any party hereunder shall be sent by registered or
certified mail, return receipt requested, using the addresses set forth herein
or such other address as shall be furnished in writing by the parties. This
Affiliate Agreement shall be governed by the laws of the State of Georgia.
This Affiliate Agreement is executed as of the day of , 2001.
Very truly yours,
-------------------------------------
Signature
-------------------------------------
Print Name
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
Address
-------------------------------------
Telephone No.
AGREED TO AND ACCEPTED as of
, 2001
ABC BANCORP
By:
Its:
A-48
EXHIBIT C
IRREVOCABLE PROXY
This Irrevocable Proxy is given by the undersigned, ("Shareholder"), in
favor of ABC Bancorp, a Georgia corporation ("ABC"), as of the day of ,
2001.
WHEREAS, ABC and Golden Isles Financial Holdings, Inc., a Georgia
corporation ("Target"), have entered into an Agreement and Plan of Merger
dated as of February 20, 2001 (the "Merger Agreement") (capitalized terms used
but not defined herein shall have the same meaning assigned to such terms in
the Merger Agreement), pursuant to which ABC proposes to acquire the entire
equity interest in Target by means of a merger (the "Merger") of Target with
and into ABC;
WHEREAS, Shareholder owns, as of the date hereof, shares of Target Common
Stock (the "Existing Shares", together with any shares of Target Common Stock
acquired after the date hereof and prior to the termination hereof,
hereinafter collectively referred to as the "Shares"); and
WHEREAS, ABC has entered into the Merger Agreement in reliance on
Shareholder's agreement to support the Merger, including the granting of
Shareholder's Irrevocable Proxy hereunder.
NOW, THEREFORE, with respect to the Merger Agreement and the transactions
contemplated thereby and in accordance with the GBCC, Shareholder hereby
irrevocably makes, constitutes and appoints ABC to act as Shareholder's true
and lawful proxy and attorney-in-fact in the name and on behalf of
Shareholder, solely for the limited purpose set forth herein, with full power
to appoint a substitute or substitutes solely for the limited purpose set
forth herein. Shareholder further directs ABC, and ABC hereby agrees, to vote
all of the Shares which are entitled to vote at any meeting of the
shareholders of Target (whether annual or special and whether or not an
adjourned meeting), or by written consent in the place and stead of
Shareholder, in favor of the Merger and the Merger Agreement. ABC shall have
no right to vote the shares with respect to any other matter. By giving this
proxy, Shareholder hereby revokes any other proxy granted by Shareholder at
any time with respect to the Shares, and no subsequent proxies will be given
with respect thereto by Shareholder. THE PROXY GRANTED HEREBY IS COUPLED WITH
AN INTEREST AND IS IRREVOCABLE. The proxy granted hereby shall not be
terminated by any act of Shareholder or by operation of law, by lack of
appropriate power of authority, or by the occurrence of any other event or
events and shall be binding upon all beneficiaries, heirs at law, legatees,
distributees, successors, assigns and legal representatives of Shareholder.
Shareholder agrees to use all good faith efforts to cause any record owner of
the Shares of which Shareholder is the beneficial owner to grant to ABC a
proxy of the same effect as that contained herein. Shareholder shall perform
such further acts and execute such further documents as may be required to
vest in ABC the sole power to vote the Shares during the term of the proxy
granted herein. The proxy granted herein shall expire on the earlier of (i)
the date on which ABC and Shareholder mutually consent in writing to terminate
this Irrevocable Proxy, (ii) the date of the Closing, or (iii) the termination
of the Merger Agreement in accordance with the terms thereof. Notwithstanding
anything herein to the contrary, the proxy granted hereby and power herein
conferred upon ABC (or any substitute or substitutes) may not be exercised
prior to the receipt by ABC and Target of the Consents of the Regulatory
Authorities (as contemplated by the Merger Agreement).
IN WITNESS WHEREOF, Shareholder has executed and delivered this Irrevocable
Proxy as of the date first set forth above.
_______________________________
(Name)
_______________________________
(Witness)
_______________________________
(Signature)
A-49
EXHIBIT D-1
[LETTERHEAD OF GOLDEN ISLES FINANCIAL HOLDINGS, INC.]
, 2001
RE: Options for Shares of Common Stock of
Golden Isles Financial Holdings, Inc.
Dear :
As you know, Golden Isles Financial Holdings, Inc. ("Golden Isles") has
entered into an Agreement and Plan of Merger dated as of February 20, 2001
(the "Merger Agreement") with ABC Bancorp ("ABC") which provides for the
merger of Golden Isles with and into ABC (the "Merger"). In connection with
the Merger, shareholders of Golden Isles will receive in exchange for each
share of common stock of Golden Isles ("Golden Isles Common Stock") cash and
shares of common stock of ABC ("ABC Common Stock"). Pursuant to the terms of a
Stock Option Agreement between you and Golden Isles, granted under the Golden
Isles Financial Holdings, Inc. 1991 Incentive Stock Option Plan, you have
options to purchase shares of Golden Isles Common Stock. This letter
will clarify the status of your options in connection with the Merger.
The option price set forth in your Stock Option Agreement is $ per
share ("Option Price"). If you were to exercise your options prior to the
closing date of the Merger, you would receive in exchange for each share of
Golden Isles Common Stock your Pro-Rata Share (as defined in the Merger
Agreement) of the Cash Consideration and the Stock Consideration (each as
defined in the Merger Agreement).
Paragraph 9(a) of your Stock Option Agreement provides as follows:
"9. (a) In the event that the shares of stock of the Company, as
presently constituted, shall be changed into or exchanged for a different
number or kind of shares of stock or other securities of the corporation or
of another kind of shares of stock or other securities of the corporation
or of another corporation (whether by reason of the merger, consolidation,
recapitalization, reclassification, split up, combination of shares, or
otherwise) or if the number of such shares of stock shall be increased
through the payment of a stock dividend, then there shall be substituted
for or added to each share of stock of the Company which was theretofore
appropriated, or which thereafter may be subject to an option under the
plan, the number and kind of shares of stock or other securities into which
each outstanding share of the Company shall be so changed or for which each
such share shall be exchanged or to which each such share shall be
entitled, as the case may be. Outstanding options shall also be
appropriately amended by the Committee, as defined in the Plan, as to price
and other terms, as may be necessary to reflect the foregoing events."
In lieu of giving effect to the provisions of Paragraph 9(a) of your Stock
Option Agreement, ABC has agreed that it will pay cash and issue ABC Common
Stock to you, plus cash in lieu of fractional shares, pursuant to Section 3.7
of the Merger Agreement, for each share of Golden Isles Common Stock which you
have an option to purchase, provided you have not previously exercised your
options. The payment of cash and issuance of ABC Common Stock as described
herein and in the Merger Agreement will be in lieu of your rights pursuant to
Paragraph 9(a) of your Stock Option Agreement and may be taxable to you as
ordinary compensation. You may wish to consult with your tax advisor on the
tax treatment of this transaction.
A-50
Please acknowledge your agreement with the terms of this letter by signing
where indicated below and returning the signed copy to us no later than
February 25, 2001. By signing hereunder, you agree not to exercise any of your
options prior to the effective date of the Merger and acknowledge that, upon
the consummation of the Merger, your options shall be cancelled, and all rights
thereunder shall cease to exist.
If you have any questions, please let me know.
Sincerely,
-------------------------------------
Michael D. Hodges, President
Acknowledged and agreed to this
day of , 2001.
- -------------------------------------
(Signature of Option Holder)
- -------------------------------------
(Print Name of Option Holder)
A-51
EXHIBIT D-2
[LETTERHEAD OF GOLDEN ISLES FINANCIAL HOLDINGS, INC.]
, 2001
RE: Options for Shares of Common Stock of
Golden Isles Financial Holdings, Inc.
Dear :
As you know, Golden Isles Financial Holdings, Inc. ("Golden Isles") has
entered into an Agreement and Plan of Merger dated as of February 20, 2001
(the "Merger Agreement") with ABC Bancorp ("ABC") which provides for the
merger of Golden Isles with and into ABC (the "Merger"). In connection with
the Merger, shareholders of Golden Isles will receive in exchange for each
share of common stock of Golden Isles ("Golden Isles Common Stock") cash and
shares of common stock of ABC ("ABC Common Stock"). Pursuant to the terms of a
Stock Option Agreement between you and Golden Isles, granted under Golden
Isles' 1995 Stock Option Plan (the "Plan"), you have options to purchase
shares of Golden Isles Common Stock. This letter will clarify the status of
your options in connection with the Merger.
The option price set forth in your Stock Option Agreement is $ per share
("Option Price"). If you were to exercise your options prior to the closing
date of the Merger, you would receive in exchange for each share of Golden
Isles Common Stock your Pro-Rata Share (as defined in the Merger Agreement) of
the Cash Consideration and the Stock Consideration (each as defined in the
Merger Agreement).
Paragraph 1.12 of the Plan, which is incorporated into your Stock Option
Agreement, provides as follows:
"In the event of any merger, consolidation, reorganization, division or
other corporate transaction in which the Common Stock is converted into
another security or into the right to receive securities or property of the
Company or of any other entity (an "Ownership Change"), the Company shall
have the right, at its discretion, to provide for the assumption or
substitution of comparable stock options in place of the options
theretofore granted hereunder. In the event such an Ownership Change takes
place and provision is not made for such assumption or substitution, or in
the event that the Company sells all or substantially all of its assets, or
engages in a liquidation of all or substantially all of its assets (a
"Termination Event"), the Committee may, in its discretion, accelerate the
exercisability of any one or more options in accordance with Section 1.7.
It is the policy of the Company that the decision whether to accelerate the
exercisability of outstanding options take into account such factors as the
profitability of the transaction giving rise to the Termination Event to
the shareholders of the Company, the likelihood that the business of the
Company will substantially continue under the same, different or changed
ownership following such transaction, the tenure and performance of
individual Participants, the possibility that some or all of the
Participants receive or are invited to participate in benefits or benefit
plans if they continue as employees of the successor to the Company's
business or other consideration in connection with such transaction, and
any other factors that may be appropriate within the scope of their
business judgment. Whether or not such an acceleration occurs, all
outstanding exercisable and non-exercisable options shall be cancelled to
the extent they remain unexercised at the time such transaction is
consummated. The determination of the Committee in its sole discretion with
respect to all such matters shall be final and binding."
In lieu of giving effect to the provisions of Paragraph 1.12 of the Plan and
your Stock Option Agreement, ABC has agreed that it will pay cash and issue
ABC Common Stock to you, plus cash in lieu of fractional shares,
A-52
pursuant to Section 3.7 of the Merger Agreement, for each share of Golden
Isles Common Stock which you have an option to purchase, provided you have not
previously exercised your options. The payment of cash and issuance of ABC
Common Stock as described herein and in the Merger Agreement will be in lieu
of your rights pursuant to Paragraph 1.12 of the Plan and your Stock Option
Agreement and may be taxable to you as ordinary compensation. You may wish to
consult with your tax advisor on the tax treatment of this transaction.
Please acknowledge your agreement with the terms of this letter by signing
where indicated below and returning the signed copy to us no later than
February 25, 2001. By signing hereunder, you agree not to exercise any of your
options prior to the effective date of the Merger and acknowledge that, upon
the consummation of the Merger, your options shall be cancelled, and all
rights thereunder shall cease to exist.
If you have any questions, please let me know.
Sincerely,
_______________________________
Michael D. Hodges, President
Acknowledged and agreed to this
day of , 2001.
_______________________________
(Signature of Option Holder)
_______________________________
(Print Name of Option Holder)
A-53
EXHIBIT E
FORM OF EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement"), is entered into as of
the day of , 2001, by and between THE FIRST BANK OF BRUNSWICK, a Georgia
state-chartered bank (the "Bank"), and MICHAEL D. HODGES, an individual
resident of the State of Georgia ("Executive").
WITNESSETH:
WHEREAS, ABC Bancorp ("ABC") has acquired all of the equity interest of the
Bank by means of a merger pursuant to an Agreement and Plan of Merger dated as
of February 20, 2001 (the "Merger Agreement");
WHEREAS, the Bank is now a wholly-owned subsidiary of ABC;
WHEREAS, Executive is the President and Chief Executive Officer of the Bank
and desires to continue his employment with the Bank in such capacity;
WHEREAS, ABC desires that Executive continue to serve in the capacity of
President and Chief Executive Officer of the Bank;
WHEREAS, the Bank desires to provide fair and reasonable benefits to
Executive on the terms and subject to the conditions set forth in this
Agreement;
WHEREAS, the Bank desires reasonable protection of its confidential business
and customer information which it has developed over the years at substantial
expense and assurance that Executive will not compete with the Bank for a
reasonable period of time after termination of his employment with the Bank,
except as otherwise provided herein; and
WHEREAS, the Bank and Executive, in conjunction with and pursuant to the
terms of the Merger Agreement, desire to set forth in writing the terms and
conditions of Executive's continued employment with the Bank;
NOW, THEREFORE, in consideration of these premises, the mutual covenants and
undertakings herein contained, the Bank and Executive, each intending to be
legally bound, covenant and agree as follows:
1. Employment. Upon the terms and subject to the conditions set forth in
this Agreement, the Bank agrees to continue to employ Executive as its
President and Chief Executive Officer, and Executive hereby agrees to continue
employment with the Bank in such capacity.
2. Position and Duties. Executive agrees to continue to serve as the
President and Chief Executive Officer of the Bank and to perform such duties
in that office as may reasonably be assigned to him by the Board of Directors
of the Bank (the "Bank Board") or by the Chief Executive Officer or the Chief
Operating Officer of ABC; provided, however, that such duties shall be
performed in or from the offices of the Bank currently located at Brunswick,
Georgia, and shall be of the same character as those generally associated with
the office held by Executive. The Bank shall not, without the written consent
of Executive, relocate or transfer Executive to a location other than a
location within the boundaries of Glynn County, Georgia. During the term of
this Agreement, Executive agrees that he will serve the Bank faithfully and to
the best of his ability and that he will devote his full business time,
attention and skills to the Bank's business; provided, however, that the
foregoing shall not be deemed to restrict Executive from devoting a reasonable
amount of time and attention to the management of his personal affairs and
investments, so long as such activities do not interfere with the responsible
performance of Executive's duties hereunder. The Bank shall nominate Employee
as a director of the Bank during the term hereof consistent with the Bank's
Bylaws. In the event of a voluntary termination pursuant to Subsection 8(C)
hereof, Executive shall, unless otherwise requested by the Bank, immediately
resign as a director of the Bank.
A-54
3. Term. The term of this Agreement shall begin on the date hereof (the
"Effective Date") and, unless otherwise earlier terminated pursuant to Section
8 hereof, shall end on the date which is one (1) year following the Effective
Date (hereinafter referred to as the "Initial Term"). The Initial Term shall
be extended automatically for an additional one (1) year (each an "Additional
Term") on the last day of the Initial Term or each Additional Term hereof
unless either party hereto gives written notice to the other party not to so
extend within ninety (90) days prior to the expiration of the Initial Term or
any subsequent Additional Term, as the case may be, in which case no further
extension shall occur and the term of this Agreement shall end one (1) year
subsequent to the end of such Initial Term or Additional Term; provided,
however, that, notwithstanding any notice by the Bank not to extend, the term
of this Agreement shall not expire prior to the expiration of twelve (12)
months after the occurrence of a Change of Control (as hereinafter defined).
Notwithstanding the foregoing, this Agreement shall automatically terminate
(and the Initial Term or any Additional Term shall thereupon end) without
notice when Executive attains 65 years of age.
4. Compensation.
(A) Executive shall receive an annual salary of One Hundred Thirty Thousand
and No/100 Dollars ($130,000.00) ("Base Compensation") payable at regular
intervals in accordance with the Bank's normal payroll practices now or
hereafter in effect. The Bank may consider and declare from time to time
increases in the salary it pays Executive and thereby increase the Base
Compensation. Prior to (but not after) a Change of Control, the Bank may also
declare decreases in the salary it pays Executive if the operating results of
the Bank are significantly less favorable than those for its immediately
preceding fiscal year, and the Bank makes similar decreases in the salary it
pays to other executive officers of the Bank; provided, however, that the Bank
shall not be permitted to decrease Executive's annual salary below $130,000.00
during the Initial Term hereof. After a Change of Control, the Bank shall
consider and declare salary increases based upon the following standards:
(i) Inflation; (ii) adjustments to the salaries of other senior management
personnel; and (iii) past performance of Executive and the contribution which
Executive makes to the business and profits of the Bank. Any and all increases
or decreases in Executive's salary pursuant to this Section 4(A) shall cause
the level of Base Compensation to be increased or decreased by the amount of
each such increase or decrease for purposes of this Agreement. The increased
or decreased level of Base Compensation as provided in this Section 4(A) shall
become the level of Base Compensation for the remainder of the Initial Term or
any Additional Term until there is a further increase or decrease in Base
Compensation as provided herein; provided, however, that there shall be no
decrease in Executive's annual salary below $130,000.00 during the Initial
Term.
(B) In addition to his Base Compensation, Executive shall be awarded, (i) on
a pro-rata basis for Executive's employment during calendar years 2001 and
2002 if this Agreement is terminated at the end of the Initial Term pursuant
to Section 3 hereof, or (ii) on a pro-rata basis for Executive's employment
during calendar year 2001 and for each calendar year thereafter during the
Initial Term and any Additional Term hereunder if the Initial Term (and any
Additional Term) is extended as provided in Section 3 hereof, as the case may
be, an annual bonus (an "Annual Bonus") either pursuant to a bonus or
incentive plan of the Bank or otherwise on terms no less favorable than those
awarded to other executive officers of the Bank.
5. Other Benefits. So long as Executive is employed by the Bank pursuant to
this Agreement, he shall be included as a participant in all present and
future employee benefit, retirement and compensation plans of ABC generally
available to employees of its banking subsidiaries, consistent with his Base
Compensation and his position as President and Chief Executive Officer of the
Bank, including, without limitation, ABC's Money Purchase Pension Plan and
ABC's 401(k) Profit Sharing Plan, and Executive and his dependents shall be
included in ABC's hospitalization, major medical, disability and group life
insurance plans. Each of the above benefits shall continue in effect on terms
no less favorable than those for other executive officers of ABC's banking
subsidiaries in effect as of the date hereof (as permitted by law) during the
Initial Term or any Additional Term hereof (i) unless prior to a Change of
Control, the operating results of the Bank are significantly less favorable
than those for its immediately preceding fiscal year, or (ii) unless (either
before or after a Change of Control) (a) changes in the accounting or tax
treatment of such plans would materially adversely affect the Bank's operating
results or financial condition, and (b) the Board of Directors of ABC (the
"ABC Board") concludes that modifications to such plans need to be made to
avoid such adverse effects.
A-55
6. Expenses. So long as Executive is employed by the Bank pursuant to this
Agreement, Executive shall receive reimbursement from the Bank for all
reasonable business expenses incurred in the course of his employment by the
Bank, upon proper submission to the Bank of written vouchers and statements
for reimbursement. In addition, the Bank shall provide to Executive an
automobile during the Initial Term and any Additional Term hereof and shall
reimburse Executive for all expenses incurred in connection with the operation
of such automobile. The Bank shall also use its best efforts to provide to
Executive a country club membership for business and personal use and shall
pay for all initiation fees and monthly dues related thereto; provided,
however, that, if such membership is not already owned by Executive as of the
date hereof, then such membership shall be and remain the sole property of the
Bank.
7. Vacation. Executive shall be entitled to three (3) weeks paid vacation
during the Initial Term and during each Additional Term, if any, thereafter,
provided that the foregoing vacation shall be adjusted from time to time so
that Executive receives paid vacation comparable to that given to the other
Presidents of ABC's bank subsidiaries.
8. Termination. Subject to the respective continuing obligations of the
parties, including, but not limited to, those set forth in Subsections 10(A),
10(B), 10(C) and 10(D) hereof, Executive's employment by the Bank hereunder
may be terminated prior to the expiration of the Initial Term or any
Additional Term hereof as follows:
(A) The Bank, by action of the Bank Board and upon written notice to
Executive, may terminate Executive's employment with the Bank immediately for
cause. For purposes of this Subsection 8(A), "cause" for termination of
Executive's employment shall exist (i) if Executive is convicted of (from
which no appeal may be taken), or pleads guilty to, any act of fraud,
misappropriation or embezzlement, or any felony, (ii) if, in the determination
of the Bank Board, Executive has engaged in gross or willful misconduct
materially damaging to the business of the Bank (it being understood, however,
that neither conduct pursuant to Executive's exercise of his good faith
business judgment nor unintentional physical damage to any property of the
Bank by Executive shall be a ground for such a determination by the Bank
Board), or (iii) if Executive has failed, without reasonable cause, to follow
written instructions of the Bank Board consistent with Executive's position as
President and Chief Executive Officer of the Bank and, after written notice
from the Bank of such failure, Executive at any time thereafter again so
fails.
(B) Executive, by written notice to the Bank, may terminate his employment
with the Bank immediately for good reason. For purposes of this Subsection
8(B), "good reason" shall mean a good faith determination by Executive, in
Executive's sole and absolute judgment, that any one or more of the following
events has occurred, without Executive's express written consent, after a
Change of Control:
(i) a change in Executive's reporting responsibilities, titles or offices
as in effect immediately prior to the Change of Control, or any removal of
the Executive from, or any failure to re-elect the Executive to, any of
Executive's positions that Executive held immediately prior to the Change
of Control, which has the effect of diminishing Executive's responsibility
or authority;
(ii) a reduction by the Bank in Executive's Base Compensation as in effect
immediately prior to the Change of Control or as the same may be increased
from time to time or a change in the eligibility requirements or
performance criteria under any bonus, incentive or compensation plan,
program or arrangement under which Executive is covered immediately prior
to the Change of Control which adversely affects Executive;
(iii) the Bank requires Executive to be based anywhere other than a job
location within the boundaries of Glynn County, Georgia, at the time of the
Change of Control;
(iv) without replacement by a plan providing benefits to Executive equal
to or greater than those discontinued, the failure by the Bank to continue
in effect, within its maximum stated term, any pension, bonus, incentive,
stock ownership, purchase, option, life insurance, health, accident
disability, or any other employee benefit plan, program or arrangement in
which Executive is participating at the time of the Change
A-56
of Control, or the taking of any action by the Bank that would adversely
affect Executive's participation or materially reduce Executive's benefits
under any of such plans;
(v) the taking of any action by the Bank that would materially
adversely affect the physical conditions existing at the time of the Change
of Control in or under which Executive performs his employment duties,
provided that the Bank may take action with respect to such conditions
after a Change of Control so long as such conditions are at least
commensurate with the conditions in or under which an officer of
Executive's status would customarily perform his employment duties; or
(vi) a material change in the fundamental business philosophy,
direction and precepts of the Bank and its subsidiaries, considered as a
whole, as the same existed prior to the Change of Control.
Any event described in this Subsection 8(B)(i) through (vi) which occurs
prior to a Change of Control but which Executive reasonably demonstrates (x)
was at the request of a third party who has indicated an intention, or taken
steps reasonably calculated, to effect a Change of Control or (y) otherwise
arose in connection with, or in anticipation of, a Change of Control which
actually occurs, shall constitute good reason for purposes hereof,
notwithstanding that it occurred prior to a Change of Control.
(C) Executive, upon thirty (30) days written notice to the Bank, may
terminate his employment with the Bank without good reason.
(D) Executive's employment with the Bank shall terminate in the event of
Executive's death or disability. For purposes of this Agreement, "disability"
shall be defined as Executive's inability by reason of illness or other
physical or mental incapacity to perform the duties required by his employment
for any consecutive one hundred eighty (180) day period.
(E) A "Change of Control" shall mean any of the following events:
(i) the merger or consolidation of ABC with, or the sale of all or
substantially all of the assets of ABC to, any person or entity or group of
associated persons or entities;
(ii) the direct or indirect beneficial ownership, in the aggregate, of
securities of ABC representing twenty-five percent (25%) or more of the
total combined voting power of ABC's then issued and outstanding securities
by any person or entity, or group of associated persons or entities acting
in concert, not affiliated (within the meaning of the Securities Act of
1933, as amended) with ABC as of the date hereof; provided, however, that
the ABC Board may, at any time and in its sole discretion, increase the
ownership percentage threshold of this item (ii) to an amount not exceeding
forty percent (40%);
(iii) the shareholders of ABC approve any plan or proposal for the
liquidation or dissolution of ABC; or
(iv) a change in the composition of the ABC Board at any time during
any consecutive twelve (12) month period such that the "Continuity
Directors" cease for any reason to constitute at least a seventy percent
(70%) majority of the ABC Board. For purposes of this Agreement,
"Continuity Directors" means those members of the ABC Board who either:
a. were directors at the beginning of such consecutive twenty-four (24)
month period; or
b. were elected by, or on the nomination or recommendation of, at least
a two-thirds (2/3) majority of the ABC Board.
9. Compensation Upon Termination. In the event of the termination of
Executive's employment with the Bank pursuant to Section 8 hereof,
compensation shall continue to be paid by the Bank to Executive as follows:
(A) In the event of a termination pursuant to Subsection 8(A) or Subsection
8(C) hereof, compensation provided for herein (including Base Compensation and
any Annual Bonus) shall continue to be paid, and Executive shall continue to
participate in the employee benefit, retirement and compensation plans and
other
A-57
perquisites as provided in Section 5 hereof, through and including the Date of
Termination (as hereinafter defined) specified in the Notice of Termination
(as hereinafter defined). Any benefits payable under insurance, health,
retirement and bonus plans as a result of Executive's participation in such
plans through such date shall be paid when due under such plans.
(B) In the event of a termination pursuant to Subsection 8(B) hereof,
compensation provided for herein (including Base Compensation and any Annual
Bonus) shall continue to be paid, and Executive shall continue to participate
in the employee benefit, retirement and compensation plans and other
perquisites as provided in Section 5 hereof, through the Date of Termination
specified in the Notice of Termination, and any benefits payable under
insurance, health, retirement and bonus plans as a result of Executive's
participation in such plans through such date shall be paid when due under
those plans. In addition, if the event of termination pursuant to Subsection
8(B) occurs within twelve (12) months after the date of a Change of Control,
then (a) Executive shall be entitled to continue to receive from the Bank for
three (3) additional 12-month periods his Base Compensation at the rates in
effect at the time of termination plus an Annual Bonus in an amount equal to
at least forty percent (40%) of such Base Compensation as of the date of the
event of termination, payable in accordance with the Bank's standard payment
practices then existing; (b) for three (3) additional 12-month periods, ABC
shall maintain in full force and effect for the continued benefit of Executive
each employee welfare benefit plan (as such term is defined in the Employment
Retirement Income Security Act of 1974, as amended) in which Executive was
entitled to participate immediately prior to the date of his termination,
unless an essentially equivalent and no less favorable benefit is provided by
a subsequent employer of Executive, provided that if the terms of any such
employee welfare benefit plan or applicable laws do not permit continued
participation by Executive, the Bank will arrange to provide to Executive a
benefit substantially similar to, and no less favorable than, the benefit he
was entitled to receive under such plan at the end of the period of coverage;
(c) ABC shall also contribute the maximum contributions allowable under ABC's
Money Purchase Pension Plan and ABC's 401(k) Profit Sharing Plan, or any
successor plans thereto, for the benefit of Executive; and (d) Executive shall
also be entitled to receive payment from the Bank for reasonable relocation
expenses if Executive relocates within five hundred (500) miles of St. Simons
Island, Georgia if such relocation occurs within one hundred eighty (180) days
after the Date of Termination specified in the Notice of Termination.
(C) In the event of a termination pursuant to Subsection 8(D) hereof,
compensation provided for herein (including Base Compensation and any Annual
Bonus) shall continue to be paid, and Executive shall continue to participate
in the employee benefit, retirement and compensation plans and other
perquisites as provided in Section 5 hereof, (i) in the event of Executive's
death, through the date of death, or (ii) in the event of Executive's
disability, through the Date of Termination specified in the Notice of
Termination. Any benefits payable under insurance, health, retirement and
bonus plans as a result of Executive's participation in such plans through
such date shall be paid when due under those plans.
(D) The Bank will permit Executive or his personal representative(s) or
heirs, during a period of ninety (90) days following the Date of Termination
(as set forth in the Notice of Termination) of Executive's employment by the
Bank for the reasons set forth in Subsection 8(B) hereof, to purchase all of
the stock of ABC that would be issuable under the outstanding stock options,
if any, previously granted by ABC to Executive under any ABC stock option plan
then in effect, whether or not such options are then exercisable, at a cash
purchase price equal to the purchase price as set forth in such outstanding
stock options.
10. Restrictive Covenants.
(A) Executive acknowledges that (i) the Bank has separately bargained and
paid additional consideration for the restrictive covenants set forth herein;
and (ii) the Bank will provide certain benefits to Executive hereunder in
reliance upon such covenants in view of the unique and essential nature of the
services Executive will perform on behalf of the Bank and the irreparable
injury that would befall the Bank should Executive breach such covenants.
(B) Executive further acknowledges that his services are of a special,
unique and extraordinary character and that his position with the Bank will
place him in a position of confidence and trust with employees of the
A-58
Bank and its subsidiaries and affiliates and with the Bank's other
constituencies and will allow him access to confidential information
concerning the Bank and its subsidiaries and affiliates.
(C) Executive further acknowledges that the type and periods of restrictions
imposed by the covenants in this Section 10 are fair and reasonable and that
such restrictions will not prevent Executive from earning a livelihood.
(D) Having acknowledged the foregoing, Executive covenants and agrees with
the Bank as follows:
(i) While Executive is employed by the Bank and for a period of two (2)
years after termination of such employment for reasons other than those set
forth in Subsection 8(B) of this Agreement, Executive shall not divulge or
furnish any trade secrets (as defined in (S)10-1-761 of the Official Code
of Georgia Annotated) of the Bank or any confidential information acquired
by him while employed by the Bank concerning the policies, plans,
procedures or customers of the Bank to any person, firm or corporation,
other than the Bank or upon its written request, or use any such trade
secret or confidential information (which shall at all times remain the
property of the Bank) directly or indirectly for Executive's own benefit or
for the benefit of any person, firm or corporation other than the Bank.
(ii) For a period of two (2) years after termination of Executive's
employment pursuant to Subsections 8(A) or 8(C) of this Agreement,
Executive shall not directly or indirectly provide banking or bank-related
services to, or solicit the banking or bank-related business of, any
customer of the Bank or any of its subsidiaries at the time of such
provision of services or solicitation which Executive served either alone
or with others while employed by the Bank in any city, town, borough,
township, village or other place in which Executive performed services for
the Bank while employed by it, or assist any actual or potential competitor
of the Bank or any of its subsidiaries to provide banking or bank-related
services to or solicit any such customer's banking or bank-related business
in any such place.
(iii) While Executive is employed by the Bank and for a period of two
(2) years after termination of Executive's employment pursuant to
Subsections 8(A) or 8(C) of this Agreement, Executive shall not, directly
or indirectly, as principal, agent, or trustee, or through the agency of
any corporation, partnership, trade association, agent or agency, engage in
any banking or bank-related business or venture which competes with the
business of the Bank as conducted during Executive's employment by the Bank
within a radius of fifty (50) miles of the Bank's main office.
(iv) If Executive's employment by the Bank is terminated for any
reason other than those set forth in Subsection 8(B) of this Agreement, and
Executive subsequently (1) provides banking or bank-related services to, or
solicits the banking or bank-related business of, any customer of the Bank
or any of its subsidiaries at the time of such provision of services or
solicitation which Executive served either alone or with others while
employed by the Bank in any city, town, borough, township, village or other
place in which Executive performed services for the Bank while employed by
it, or assists any actual or potential competitor of the Bank or any of its
subsidiaries to provide banking or bank-related services to or solicit any
such customer's banking or bank-related business in any such place, or (2)
engages, directly or indirectly, as principal, agent, or trustee, or
through the agency of any corporation, partnership, trade association,
agent or agency, with any banking or bank-related business or venture which
competes with the business of the Bank as conducted during Executive's
employment by the Bank within a radius of fifty (50) miles of the Bank's
main office, then the Bank may immediately terminate and shall not be
required to continue on behalf of the Employee or his dependents and
beneficiaries any compensation provided for herein (including Base
Compensation and any Annual Bonus) and any employee benefit, retirement and
compensation plans and other prerequisites provided in Section 5 hereof
(other than those benefits that the Bank may be required to maintain for
Executive under applicable federal or state law).
(v) If Executive's employment by the Bank is terminated for any of the
reasons set forth in Subsection 8(B) of this Agreement, Executive may
thereafter (1) provide banking or bank-related services to, or solicit the
banking or bank-related business of, any customer of the Bank or any of its
subsidiaries at the time of such provision of services or solicitation
which Executive served either alone or with others while employed
A-59
by the Bank in any location within a radius of fifty (50) miles of the
Bank's main office, or assist any actual or potential competitor of the
Bank or any of its subsidiaries to provide banking or bank-related services
to or solicit any such customer's banking or bank-related business in any
such place, or (2) engage, directly or indirectly, as principal, agent, or
trustee, or through the agency of any corporation, partnership, trade
association, agent or agency, with any banking or bank-related business or
venture which competes with the business of the Bank as conducted during
Executive's employment by the Bank within a radius of fifty (50) miles of
the Bank's main office; provided, however, that, if Executive engages in
any such activities after a termination under Subsection 8(B) hereof, then
the Bank may immediately terminate and shall not be required to continue on
behalf of the Employee or his dependents and beneficiaries any compensation
provided for herein (including Base Compensation and any Annual Bonus) and
any employee benefit, retirement and compensation plans and other
perquisites provided in Section 5 hereof (other than those benefits that
the Bank may be required to maintain for Executive under applicable federal
or state law).
(vi) If Executive's employment by the Bank is terminated for any
reason other than those set forth in Subsection 8(B) of this Agreement,
Executive will turn over immediately thereafter to the Bank all business
correspondence, letters, papers, reports, customers' lists, financial
statements, credit reports or other confidential information or documents
of the Bank or its affiliates in the possession or control of Executive,
all of which writings are and will continue to be the sole and exclusive
property of the Bank or its affiliates, as the case may be.
(vii) If Executive's employment by the Bank is terminated for the
reasons set forth in Subsection 8(B) of this Agreement, Executive shall
have no obligations to the Bank with respect to trade secrets, confidential
information or non-competition under this Section 10.
Executive acknowledges that irreparable loss and injury would result to the
Bank upon the breach of any of the covenants contained in this Section 10 and
that damages arising out of such breach would be difficult to ascertain.
Executive hereby agrees that, in addition to all other remedies provided at
law or at equity, the Bank may petition and obtain from a court of law or
equity, without the necessity of proving actual damages and without posting
bond or other security, both temporary and permanent injunctive relief to
prevent a breach by Executive of any covenant contained in this Section 10,
and shall be entitled to an equitable accounting of all earnings, profits and
other benefits arising out of any such breach. In the event that the
provisions of this Section 10 should ever be deemed to exceed the time,
geographic or any other limitations permitted by applicable law, then such
provisions shall be deemed reformed to the maximum extent permitted thereby.
11. Notice of Termination and Date of Termination. Any termination of
Executive's employment with the Bank as contemplated by Section 8 hereof,
except in the circumstances of Executive's death, shall be communicated by
written "Notice of Termination" by the terminating party to the other party
hereto. Any "Notice of Termination" pursuant to Subsections 8(A), 8(B) or 8(D)
shall indicate the specific provisions of this Agreement relied upon and shall
set forth in reasonable detail the facts and circumstances claimed to provide
a basis for such termination. For purposes of this Agreement, "Date of
Termination" shall mean: (i) if Executive's employment is terminated because
of disability, then thirty (30) days after Notice of Termination is given
(unless Executive shall have returned to the performance of Executive's duties
on a full-time basis during such thirty (30) day period); or (ii) if
Executive's employment is terminated for cause, retirement, good reason or
pursuant to Subsection 8(C) hereof, then the date specified in the Notice of
Termination; provided, however, that if within thirty (30) days after any such
Notice of Termination is given, the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the termination, the
Date of Termination shall be the date on which the dispute is finally resolved
in good faith, either by mutual agreement of the parties or by a final
judgment, order or decree of a court of competent jurisdiction (the time for
appeal therefrom having expired and no appeal having been perfected).
12. Excess Parachute Payments and One Million Dollar Deduction Limit.
(A) Notwithstanding anything contained herein to the contrary, if any
portion of the payments and benefits provided hereunder and benefits provided
to, or for the benefit of, Executive under any other plan or agreement
A-60
of the Bank (such payments or benefits are collectively referred to as the
"Payments") would be subject to the excise tax (the "Excise Tax") imposed
under Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), or would be nondeductible by the Bank pursuant to Section 280G of the
Code, the Payments shall be reduced (but not below zero) if and to the extent
necessary so that no portion of any Payment to be made or benefit to be
provided to Executive shall be subject to the Excise Tax or shall be
nondeductible by the Bank pursuant to Section 280G of the Code (such reduced
amount is hereinafter referred to as the "Limited Payment Amount"). Unless
Executive shall have given prior written notice specifying a different order
to the Bank to effectuate the Limited Payment Amount, the Bank shall reduce or
eliminate the Payments by first reducing or eliminating those payments or
benefits which are not payable in cash and then by reducing or eliminating
cash payments, in each case in reverse order beginning with payments or
benefits which are to be paid the farthest in time from the Determination (as
hereinafter defined). Any notice given by Executive pursuant to the preceding
sentence shall take precedence over the provisions of any other plan,
arrangement or agreement governing Executive's rights and entitlements to any
benefits or compensation.
(B) An initial determination as to whether the Payments shall be reduced to
the Limited Payment Amount pursuant to the Code and the amount of such Limited
Payment Amount shall be made by an accounting firm at the Bank's expense
selected by the Bank which is designated as one of the five largest accounting
firms in the United States (the "Accounting Firm"). The Accounting Firm shall
provide its determination (the "Determination"), together with detailed
supporting calculations and documentation to the Bank and Executive within
thirty (30) days of the Termination Date, if applicable, and if the Accounting
Firm determines that no Excise Tax is payable by Executive with respect to a
Payment or Payments, it shall furnish Executive with an opinion reasonably
acceptable to Executive that no Excise Tax will be imposed with respect to any
such Payment or Payments. Within ten (10) days of the delivery of the
Determination to Executive, Executive shall have the right to dispute the
Determination (the "Dispute"). If there is no Dispute, the Determination shall
be binding, final and conclusive upon the Bank and Executive subject to the
application of Subsection 12(C) below.
(C) As a result of the uncertainty in the application of Sections 4999 and
280G of the Code, it is possible that the Payments to be made to, or provided
for the benefit of, Executive either have been made or will not be made by the
Bank which, in either case, will be inconsistent with the limitations provided
in Section 12(A) (hereinafter referred to as an "Excess Payment" or
"Underpayment", respectively). If it is established pursuant to a final
determination of a court or an Internal Revenue Service (the "IRS") proceeding
which has been finally and conclusively resolved that an Excess Payment has
been made, such Excess Payment shall be deemed for all purposes to be a loan
to Executive made on the date Executive received the Excess Payment, and
Executive shall repay the Excess Payment to the Bank on demand (but not less
than ten (10) days after written notice is received by Executive), together
with interest on the Excess Payment at the "Applicable Federal Rate" (as
defined in Section 1274(d) of the Code) from the date of Executive's receipt
of such Excess Payment until the date of such repayment. In the event that it
is determined (i) by the Accounting Firm, the Bank (which shall include the
position taken by the Bank, or together with its consolidated group, on its
federal income tax return) or the IRS, (ii) pursuant to a determination by a
court, or (iii) upon the resolution of the Dispute to Executive's
satisfaction, that an Underpayment has occurred, the Bank shall pay an amount
equal to the Underpayment to Executive within ten (10) days of such
determination or resolution, together with interest on such amount at the
Applicable Federal Rate from the date such amount would have been paid to
Executive until the date of payment.
(D) Notwithstanding anything contained herein to the contrary, if any
portion of the Payments would be nondeductible by the Bank pursuant to Section
162(m) of the Code, the Payments to be made to Executive in any taxable year
of the Bank shall be reduced (but not below zero) if and to the extent
necessary so that no portion of any Payment to be made or benefit to be
provided to Executive in such taxable year of the Bank shall be nondeductible
by the Bank pursuant to Section 162(m) of the Code. The amount by which any
Payment is reduced pursuant to the immediately preceding sentence, together
with interest thereon at the Applicable Federal Rate, shall be paid by the
Bank to Executive on or before the fifth business day of the immediately
succeeding taxable year of the Bank, subject to the application of the
limitations of the immediately preceding sentence and this Section 12. Unless
Executive shall have given prior written notice specifying a different order
to the Bank
A-61
to effectuate this Section 12, the Bank shall reduce or eliminate the Payments
in any one taxable year of the Bank by first reducing or eliminating those
payments or benefits which are not payable in cash and then by reducing or
eliminating cash payments, in each case in reverse order beginning with
payments or benefits which are to be paid the farthest in time from the
Section 162(m) Determination (as hereinafter defined). Any notice given by
Executive pursuant to the immediately preceding sentence shall take precedence
over the provisions of any other plan, arrangement or agreement governing
Executive's rights and entitlements to any benefits or compensation.
(E) The determination as to whether the Payments shall be reduced pursuant
to Section 12(D) hereof and the amount of the Payments to be made in each
taxable year after the application of Section 12(D) hereof shall be made by
the Accounting Firm at the Bank's expense. The Accounting Firm shall provide
its determination (the "Section 162(m) Determination"), together with detailed
supporting calculations and documentation to the Bank and Executive within
thirty (30) days of the termination date specified in the Notice of
Termination. The Section 162(m) Determination shall be binding, final and
conclusive upon the Bank and Executive.
13. Payments After Death. Should Executive die after termination of his
employment with the Bank while any amounts are payable to him hereunder, this
Agreement shall inure to the benefit of and be enforceable by Executive's
executors, administrators, heirs, distributees, devisees and legatees, and all
amounts payable hereunder shall be paid in accordance with the terms of this
Agreement to Executive's devisee, legatee or other designee or, if there is no
such designee, to his estate.
14. Full Settlement and Legal Expenses. The respective obligations of the
parties hereto to make payments or otherwise to perform hereunder shall not be
affected by any rights of set-off, counterclaim, recoupment, defense or other
claim, right or action which one party hereto may have against the other party
hereto. In no event shall Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts which may be payable
to Executive by the Bank hereunder. If any legal action, proceeding in
arbitration or other proceeding is brought for the enforcement of this
Agreement, or because of any alleged dispute, breach, default or
misrepresentation in connection with any provision of this Agreement, the
successful or prevailing party or parties shall be entitled to recover
reasonable attorneys' fees, court costs and all expenses incurred in that
action or proceeding, even if not taxable as court costs, plus in each case
interest at the Applicable Federal Rate, in addition to any other relief to
which such party or parties may be entitled.
15. Notices. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been given when delivered or mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to Executive: Michael D. Hodges
207 Dunbarton Drive
St. Simons Island, Georgia 31522
If to the Bank: The First Bank of Brunswick
c/o ABC Bancorp
24 2nd Avenue, S.E.
Moultrie, Georgia 31768
Attention: President
or to such address as either party hereto furnishes to the other party in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
16. Governing Law. The validity, interpretation, and performance of this
Agreement shall be governed by the laws of the State of Georgia, without
giving effect to the conflicts of laws principles thereof.
17. Successors. The Bank shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Bank, by agreement in form
A-62
and substance reasonably satisfactory to Executive, to expressly assume and
agree to perform this Agreement in the same manner and same extent that the
Bank would be required to perform it if no such succession had taken place.
Failure of the Bank to obtain such agreement prior to the effectiveness of any
such succession shall be a material intentional breach of this Agreement and
shall entitle Executive to terminate his employment with the Bank for good
reason pursuant to Subsection 8(B) hereof. As used in this Agreement, "the
Bank" shall mean the Bank as hereinbefore defined and any successor to its
business or assets as aforesaid.
18. Modification. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing signed by Executive and the Bank. No waiver by either party hereto at
any time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of dissimilar provisions or conditions at the same or
any prior subsequent time.
19. Severability. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
20. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement. Executed counterparts
may be delivered via facsimile transmission.
21. Assignment. This Agreement is personal in nature and neither party
hereto shall, without consent of the other, assign or transfer this Agreement
or any rights or obligations hereunder except as provided in Sections 13 and
17 above. Without limiting the foregoing, Executive's right to receive
compensation hereunder shall not be assignable or transferable, whether by
pledge, creation of a security interest or otherwise, other than a transfer by
his will or by the laws of descent or distribution as set forth in Section 13
hereof, and in the event of any attempted assignment or transfer contrary to
this Section 21, the Bank shall have no liability to pay any amounts so
attempted to be assigned or transferred.
22. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof.
A-63
IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed and
delivered by its duly authorized officer, and the Executive has executed and
delivered this Agreement, all as of the day and year first above written.
THE FIRST BANK OF BRUNSWICK
By: __________________________
Its: _________________________
_______________________ (SEAL)
MICHAEL D. HODGES
A-64
EXHIBIT F
MATTERS AS TO WHICH
MARTIN, SNOW, GRANT & NAPIER, LLP WILL OPINE
1. Target is a corporation duly organized and validly existing under the
laws of the State of Georgia with corporate power and authority (a) to conduct
its business as described in the Proxy Statement and (b) to own and use its
Assets.
2. Target Bank is a Georgia chartered state bank duly organized and validly
existing under the laws of the State of Georgia with all requisite power and
authority to conduct its business as described in the Proxy Statement, and to
own and use its Assets. The deposits of Target Bank are insured by the Federal
Deposit Insurance Corporation to the extent provided by law.
3. Target's authorized shares consist of 50,000,000 shares of Common Stock,
no par value per share, of which shares were outstanding as of , 2001.
The outstanding shares of Target Common Stock have been duly authorized and
validly issued, were not issued in violation of any statutory preemptive
rights of shareholders, and are fully paid and nonassessable. To our
Knowledge, except as Previously Disclosed, there are no options,
subscriptions, warrants, calls, rights or commitments obligating Target to
issue equity securities or acquire its equity securities.
4. Target owns directly or indirectly all the issued and outstanding shares
of the capital stock of Target Bank. To our Knowledge, there are no options,
subscriptions, warrants, calls, rights or commitments obligating Target Bank
to issue equity securities or acquire its equity securities.
5. The execution and delivery by Target of the Agreement do not, and if
Target were now to perform its obligations under the Agreement such
performance would not, result in any violation of the Articles of
Incorporation or Bylaws of Target or the Articles of Incorporation or Bylaws
of Target Bank or, to our Knowledge, result in any breach of, or default or
acceleration under, any material Contract or Order to which Target or Target
Bank is a party or by which Target or Target Bank is bound.
6. Target has duly authorized the execution and delivery of the Agreement
and all performance by Target thereunder and has duly executed and delivered
the Agreement.
7. The Agreement is enforceable against Target.
A-65
EXHIBIT G
MATTERS AS TO WHICH
ROGERS & HARDIN WILL OPINE
1. Purchaser is a corporation duly organized and validly existing under the
laws of the State of Georgia with corporate power and authority (a) to conduct
its business as described in the Proxy Statement and (b) to own and use its
Assets.
2. Purchaser's authorized shares consist of 15,000,000 shares of Common
Stock, $1.00 par value per share, of which shares were outstanding as of
, 2001, and 5,000,000 shares of Preferred Stock, none of which were
outstanding as of , 2001. The outstanding shares of Purchaser Common
Stock have been duly authorized and validly issued, were not issued in
violation of any statutory preemptive rights of shareholders, and are fully
paid and nonassessable. To our Knowledge, except as Previously Disclosed,
there are no options, subscriptions, warrants, calls, rights or commitments
obligating Purchaser to issue equity securities or acquire its equity
securities. The shares of Purchaser Common Stock to be issued to the
shareholders of Target upon consummation of the Merger have been registered
under the 1933 Act, and when issued in accordance with the Agreement, will be
validly issued, fully paid and nonassessable.
3. The execution and delivery by Purchaser of the Agreement do not, and if
Purchaser were now to perform its obligations under the Agreement such
performance would not, result in any violation of the Articles of
Incorporation or Bylaws of Purchaser or, to our knowledge, result in any
breach of, or default or acceleration under, any material Contract or Order to
which Purchaser is a party or by which Purchaser is bound.
4. Purchaser has duly authorized the execution and delivery of the Agreement
and all performance by Purchaser thereunder and has duly executed and
delivered the Agreement.
5. The Agreement is enforceable against Purchaser.
A-66
APPENDIX B TO
PROXY STATEMENT/PROSPECTUS
GEORGIA DISSENTERS' RIGHTS STATUTE
GEORGIA FINANCIAL INSTITUTIONS CODE
7-1-537. RIGHTS OF DISSENTING SHAREHOLDERS; SURRENDER OF CERTIFICATES.
(a) A shareholder of a bank or trust company which is a party to a plan of
proposed merger or consolidation under this part who objects to the plan
shall be entitled to the rights and remedies of a dissenting shareholder
as determined under Chapter 2 of Title 14, known as the "Georgia Business
Corporation Code."
(b) The bank or trust company into which the other or others have been
merged or consolidated, as the case may be, shall have the right to
require the return of the original certificates of stock held by each
shareholder in each or either of the institutions and in lieu thereof;
(1) To issue to each shareholder new certificates for such number of
shares of the institution into which the others shall have been merged
or consolidated; or
(2) To cause to be paid or delivered to each shareholder the amount of
cash or securities of any other corporation or combination of cash and
such securities as, under the plan of merger or consolidation, the said
sharer may be entitled to receive.
GEORGIA BUSINESS CORPORATION CODE
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner
of shares held in a voting trust or by a nominee as the record
shareholder.
(2) "Corporation" means the issuer of shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that
right when and in the manner required by Code Sections 14-2-1320 through
14-2-1327.
(4) "Fair value," with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate
action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable
under all the circumstances.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on
file with a corporation.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
B-1
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from, and
obtain payment of the fair value of his or her shares in the event of,
any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholder of the corporation is required
for the merger by Code Section 14-2-1103 or 14-2-1104 or the
articles of incorporation and the shareholder is entitled to
vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by
which all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the
redemption or repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by
dilution through issuance of shares or other securities with
similar voting rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be
acquired for cash under Code Section 14-2-604; or
(F) Cancels, redeems or repurchases all or part of the shares of the
class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting
or nonvoting shareholders are entitled to dissent and obtain payment for
their shares.
(b) A shareholder entitled to dissent and obtain payment for his or her
shares under this article may not challenge the corporate action creating
his entitlement unless the corporate action fails to comply with
procedural requirements of this chapter or the articles of incorporation
or bylaws of the corporation or the vote required to obtain approval of
the corporate action was obtained by fraudulent and deceptive means,
regardless of whether the shareholder has exercised dissenter's rights.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series
which, at the record date fixed to determine the shareholders entitled to
receive notice of and to vote at a meeting at which a plan of merger or
share exchange or a
B-2
sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national
securities exchange or held of record by more than 2,000 shareholders,
unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his or her name only if he or she dissents with respect
to all shares beneficially owned by any one beneficial shareholder and
notifies the corporation in writing of the name and address of each person on
whose behalf he or she asserts dissenters' rights. The rights of a partial
dissenter under this Code section are determined as if the shares as to which
he or she dissents and his or her other shares were registered in the names of
different shareholders.
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the
meeting notice must state that shareholders are or may be entitled to
assert dissenters' rights under this article and be accompanied by a copy
of this article.
(b) If corporate action creating dissenters rights under Code Section 14-2-
1302 is taken without a vote of shareholders, the corporation shall
notify in writing all shareholders entitled to assert dissenters' rights
that the action was taken and send them the dissenters' notice described
in Code Section 14-2-1322 no later than ten days after the corporate
action was taken.
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders meeting, a
record shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his or her intent to demand payment for his or her shares if
the proposed action is effectuated; and
(2) Must not vote his or her shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of subsection
(a) of this Code section is not entitled to payment for his or her shares
under this article.
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the
corporation shall deliver a written dissenters' notice to all
shareholders who satisfied the requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
B-3
(3) Set a date by which the corporation must receive the payment demand,
which date may not be fewer than 30 nor more than 60 days after the date
the notice required in subsection (a) of this Code section is delivered;
and
(4) Be accompanied by a copy of this article.
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code Section
14-2-1322 must demand payment and deposit his or her certificates in
accordance with the terms of the notice.
(b) A record shareholder who demands payment and deposits his or her shares
under subsection (a) of this Code Section retains all other rights of a
shareholder until these rights are canceled or modified by the taking of
the proposed corporate action.
(c) A record shareholder who does not demand payment or deposit his or her
share certificates where required, each by the date set in the
dissenters' notice, is not entitled to payment for his or her shares
under this article.
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed
corporate action is taken or the restrictions released under Code Section
14-2-1326.
(b) The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder until these rights are
canceled or modified by the taking of the proposed corporate action.
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a
payment demand, the corporation shall offer to pay each dissenter who
complied with Code Section 14-2-1323 the amount the corporation estimates
to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity
for that year, and the latest available interim financial statements, if
any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer, payment for
his or her shares shall be made within 60 days after the making of the
offer or the taking of the proposed corporate action, whichever is later.
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share
certificates, the corporation shall return the deposited certificates and
release the transfer restrictions imposed on uncertificated shares.
B-4
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a
new dissenters' notice under Code Section 14-2-1322 and repeat the
payment demand procedure.
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his or her own
estimate of the fair value of his or her shares and amount of interest
due, and demand payment of his or her estimate of the fair value of his
or her shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his or her shares or that the
interest due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
Section unless he or she notifies the corporation of his or her demand in
writing under subsection (a) of this Code Section within 30 days after
the corporation made or offered payment for his or her shares, as
provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325;
(1) The shareholder may demand the information required under subsection
(b) of Code Section 14-2-1325, and the corporation shall provide
information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his or her own
estimate of the fair value of his or her shares and the amount of
interest due and demand payment of his or her estimate of the fair value
of his or her shares and interest due.
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after
receiving the payment demand and petition the court to determine the fair
value of the shares and accrued interest. If the corporation does not
commence the proceeding within the 60 day period, it shall pay each
dissenter whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where
a corporation's registered office is located. If the surviving
corporation is a foreign corporation without a registered office in this
state, it shall commence the proceeding in the county in this state where
the registered office of the domestic corporation merged with or whose
shares were acquired by the foreign corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding,
which shall have the effect of an action quasi in rem against their
shares. The corporation shall serve a copy of the petition in the
proceeding upon each dissenting shareholder who is a resident of this
state in the manner provided by law for the service of a summons and
complaint, and upon each nonresident dissenting shareholder either by
registered or certified mail or statutory overnight delivery or by
publication, or in any other matter permitted by law.
B-5
(d) The jurisdiction of the court in which the proceeding is commenced under
subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and
recommend decision on the question of fair value. The appraisers have the
powers described in the order appointing them or in any amendment to it.
Except as otherwise provided in this chapter, Chapter 11 of Title 9,
known as the "Georgia Civil Practice Act," applies to any proceeding with
respect to dissenters' rights under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his or her
shares, plus interest to the date of judgment.
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section 14-2-
1330 shall determine all costs of the proceeding, including the
reasonable compensation and expenses of appraisers appointed by the
court, but not including fees and expenses of attorneys and experts for
the respective parties. The court shall assess the costs against the
corporation, except that the court may assess the costs against all or
some of the dissenters, an amount the court finds equitable, to the
extent the court finds the dissenters acted arbitrarily, vexatiously, or
not in good faith in demanding payment under Code Section 14-2-1327.
(b) The court may also assess the fees and expenses of attorneys and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter were
of substantial benefit to other dissenters similarly situated, and that
the fees for those services should not be assessed against the
corporation, the court may award to these attorneys reasonable fees to be
paid out of the amounts awarded the dissenters who were benefited.
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporation action and of the right to dissent was given
by the corporation in compliance with the provisions of Code Section 14-2-1320
and Code Section 14-2-1322.
*****
B-6
APPENDIX C TO
PROXY STATEMENT/PROSPECTUS
[CARSON MEDLIN COMPANY LETTERHEAD]
June 19, 2001
Board of Directors
Golden Isles Financial Holdings, Inc.
2812 Cypress Mill Road
Brunswick, GA 31521
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, of the consideration to be received by the unaffiliated shareholders of
Golden Isles Financial Holdings, Inc. (the "Company") under the terms of a
certain Agreement and Plan of Merger dated February 20, 2001 (the "Agreement")
pursuant to which the Company will be merged with and into ABC Bancorp ("ABC")
(the "Merger"). Under the terms of the Agreement, ABC will pay up to
$10,159,349 in cash and issue up to 1,241,204 shares of ABC common stock in
exchange for each of the outstanding shares and equivalent stock options of the
Company subject to certain adjustments. The foregoing summary of the Merger is
qualified in its entirety by reference to the Agreement.
The Carson Medlin Company is a National Association of Securities Dealers,
Inc. (NASD) member investment banking firm, which specializes in the securities
of southeastern United States financial institutions. As part of our investment
banking activities, we are regularly engaged in the valuation of southeastern
United States financial institutions and transactions relating to their
securities. We regularly publish our research on independent community banks
regarding their financial and stock price performance. We are familiar with the
commercial banking industry in Georgia and the major commercial banks operating
in that market. We have been retained by the Company in a financial advisory
capacity to render our opinion hereunder, for which we will receive
compensation.
In reaching our opinion, we have analyzed the respective financial positions,
both current and historical, of ABC and the Company. We have reviewed: (i) the
Agreement; (ii) drafts of this proxy statement/prospectus; (iii) the annual
reports to shareholders of ABC, including audited financial statements for the
five years ended December 31, 2000; (iv) unaudited interim financial statements
of ABC for the three months ended March 31, 2001; (v) audited financial
statements of the Company for the five years ended December 31, 2000;
(vi) unaudited interim financial statements of the Company for the three months
ended March 31, 2001; and (vii) certain financial and operating information
with respect to the business, operations and prospects of ABC and the Company.
We also: (a) held discussions with members of management of ABC and the Company
regarding historical and current business operations, financial condition and
future prospects of their respective companies; (b) reviewed the historical
market prices and trading activity for the common stock of ABC and the Company
and compared it with those of certain publicly traded companies which we deemed
to be relevant; (c) compared the results of operations of ABC and the Company
with those of certain banking companies which we deemed to be relevant; (d)
compared the proposed financial terms of the Merger with the financial terms,
to the extent publicly available, of certain other recent business combinations
of commercial banking organizations; and (e) conducted such other studies,
analyses, inquiries and examinations as we deemed appropriate.
We have relied upon and assumed, without independent verification, the
accuracy and completeness of all information provided to us. We have not
performed or considered any independent appraisal or evaluation of the assets
of ABC or the Company. The opinion we express herein is necessarily based upon
market, economic and other relevant considerations as they exist and can be
evaluated as of the date of this letter.
Based upon the foregoing, it is our opinion that the consideration provided
for in the Agreement is fair, from a financial point of view, to the
shareholders of Golden Isles Financial Holdings, Inc.
Very truly yours,
/s/ The Carson Medlin Company
THE CARSON MEDLIN COMPANY
C-1
APPENDIX D TO
PROXY STATEMENT/PROSPECTUS
[STERNE, AGEE & LEACH LETTERHEAD]
June 19, 2001
Board of Directors
ABC Bancorp
24 2nd Avenue, S.E.
Moultrie, Georgia 31768
Members of the Board:
You have requested our opinion as investment bankers as to the fairness, from
a financial point of view, to the shareholders of ABC Bancorp ("ABC"), of the
consideration to be paid by ABC to Golden Isles Financial Holdings, Inc.
("Golden Isles") (the "Merger") pursuant to the Merger Agreement by and among
ABC and Golden Isles dated as of February 20, 2001 (the "Merger Agreement").
Under the terms of the Merger, ABC will exchange 0.5 of its common shares,
subject to adjustment, and $4.13 in cash for each common share of Golden Isles
(the "Exchange Ratio"), as provided for in the Merger Agreement. It is our
understanding the Merger will be accounted for as a purchase under generally
accepted accounting principles.
Sterne, Agee & Leach, Inc. as part of its investment banking business, is
regularly involved in the valuation of financial institutions and their
securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of listed and unlisted securities,
securities trading, private placements and valuations for estate, corporate and
other purposes. In the ordinary course of our business as a broker-dealer, we
may, from time to time, purchase securities from, and sell securities to ABC
and Golden Isles. We may trade the equity securities of ABC and Golden Isles
for our own account and for the accounts of customers and, accordingly, may at
any time hold a long or short position in such securities. Sterne Agee, and its
officers, employees, consultants and agents may have long or short positions in
the securities of ABC and Golden Isles. Sterne Agee has regularly followed and
provided research concerning ABC to its clients. We have acted exclusively for
the board of directors of ABC in rendering this fairness opinion, and for our
services, including the rendering of this opinion, ABC has paid us a non-
refundable retainer fee and will pay us further fees upon the issuance of this
opinion. In addition, ABC has agreed to reimburse us for out-of-pocket expenses
and indemnify us against certain liabilities, including liabilities under
federal and state securities laws.
In connection with this opinion, we have reviewed, analyzed and relied upon
certain materials relating to the financial and operating condition of ABC and
Golden Isles, including, among other things, the Merger Agreement; the annual
reports to shareholders for the three years ended December 31, 1999, certain
interim reports to shareholders of ABC and Golden Isles, including quarterly
reports on Form 10-Q, and certain other communications; other financial
information concerning the businesses and operations of ABC and Golden Isles
furnished to us by the respective companies for the purposes of our analysis,
including certain internal financial analyses and forecasts for ABC and Golden
Isles prepared by the senior managements of the respective companies; certain
publicly available information concerning the historical price, price/earnings
and price/book multiples, as well as the trading activity, for the common
stocks of ABC and Golden Isles; certain publicly available information with
respect to the banking companies; and the types of terms of other transactions
that we considered relevant to our analysis. We further held discussions with
the senior managements of ABC and Golden Isles regarding their past, current
and prospective operations, financial condition, regulatory examinations,
audits and other matters.
D-1
Board of Directors
June 19, 2001
Page 2
In conducting our review and arriving at our opinion, we relied upon and
assumed the accuracy and completeness of all the financial and other
information provided to us or publicly available, and we did not attempt to
verify such information independently. We relied upon the managements of ABC
and of Golden Isles as to the reasonableness and achievability of the financial
and operating budgets and forecasts and related assumptions provided to us and
assumed that such budgets and forecasts reflected the best available estimates
and judgments of such managements and that such budgets and forecasts will be
realized in the amounts and in the time periods estimated by such managements.
We also assumed, without independent verification, that the aggregate
allowances for loan losses for ABC and Golden Isles are adequate to cover such
losses. We did not make or obtain any evaluations or appraisals of the property
of ABC or Golden Isles, nor did we examine any loan credit files.
We have considered such financial and other factors as we have deemed
appropriate under the circumstances, including among others the following: the
historical and current financial position and results of operations of ABC and
Golden Isles; the assets and liabilities of ABC and Golden Isles; and the
nature and terms of certain other merger transactions involving financial
institutions. We have also taken into account our assessment of general
economic, market and financial conditions and our experience in other
transactions, as well as our experience in securities valuation and our
knowledge of the banking industry generally. Our opinion is based upon
conditions as they exist and can be evaluated on the date hereof and the
information made available to us through the date hereof.
The opinion expressed herein is provided for the benefit of the board of
directors of ABC. We express no opinion as to the underlying business decision
of ABC to effect the Merger, the availability or advisability of any
alternatives to the Merger or the price at which the common stock will trade
subsequent to the Merger. This opinion, and any supporting analysis or other
material supplied by us, may not be quoted, referred to or used in any public
filing or in any written document other than the proxy statement/prospectus and
the related registration statement or for any other purposes without the prior
written approval of Sterne, Agee & Leach, Inc.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the consideration to be paid, as proposed in the Merger Agreement
dated February 20, 2001, in the Merger is fair, from a financial point of view,
to the common shareholders of ABC.
Very truly yours,
/s/ Sterne, Agee & Leach, Inc.
STERNE, AGEE & LEACH, INC.
D-2
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Sections 14-2-850 through 14-2-859 of the Georgia Business Corporation Code
set forth provisions pertaining to the indemnification of and insurance for
directors and officers of a corporation. The Georgia Business Corporation Code
provides for the mandatory indemnification of a director, against reasonable
expenses incurred by the director in connection with a proceeding, where a
director is wholly successful in the defense of the proceeding and where the
proceeding is one to which he or she was a party because he or she was a
director of the corporation. The Georgia Business Corporation Code grants the
Registrant the power to indemnify its directors and officers against liability
for certain of their acts.
Article XI of the Articles of Incorporation of the Registrant provides that,
except as may be limited by the Georgia Business Corporation Code or any
successor law, no director shall be personally liable to the Registrant or any
of its shareholders for monetary damages for breach of his or her duty of care
or other duty as a director.
Article VII of the Bylaws of the Registrant provides that every person (and
the heirs and legal representatives of such person) who is or was a director
or officer of the Registrant or any other corporation of which he or she
served as such at the request of the Registrant and of which the Registrant
directly or indirectly is a shareholder or creditor, or in which or in the
stocks, bonds, securities or other obligations of which the Registrant is in
any way interested, may be indemnified for any liability and expense resulting
from any threatened, pending or completed action, suit or proceeding, civil,
criminal, administrative or investigative or derivative or otherwise, or in
connection with any appeal relating thereto, in which he or she may become
involved, as a party or prospective party or otherwise, by reason of any
action taken or not taken in his or her capacity as a director or officer or
as a member of any committee appointed by the board of directors of the
Registrant to act for, in the interest of, or on behalf of the Registrant,
whether or not he or she continues to be a director or officer at the time
such liability or expense is incurred; provided such person acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the Registrant and, in addition, with respect to any
criminal action or proceeding, did not have reasonable cause to believe that
his or her conduct was unlawful. The termination of any claim, action, suit or
proceeding, by judgment, order, compromise, settlement (with or without court
approval) or conviction or upon a plea of guilty or of nolo contendere, or its
equivalent, does not create a presumption that a director or officer did not
meet the standards of conduct set forth in the Bylaws. Expenses incurred with
respect to any claim, action, suit or proceeding of the character described in
Article VII of the Bylaws of the Registrant may be advanced by the Registrant
prior to the final disposition thereof upon receipt of any undertaking by or
on behalf of the recipient to repay such amount, unless it is ultimately
determined that he or she is entitled to indemnification under the Bylaws.
Notwithstanding the foregoing, Article VII of the Registrant's Bylaws
provides that no officer or director who was or is a party to any action or
suit by or in the right of the Registrant to procure a judgment in its favor
by reason of the fact that he or she is or was an officer or director of the
Registrant or such other corporation can be indemnified in respect of any
claim, issue or matter as to which such person is adjudged to be liable for
negligence or misconduct in the performance of his or her duty to the
Registrant, unless the court in which such action or suit was brought
determines that, despite the adjudication of liability and in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
Article VII of the Registrant's Bylaws further provides that every person
(and the heirs and legal representatives of such person) referred to above who
has been wholly successful, on the merits or otherwise, with the respect to
such claim, action, suit or proceeding is entitled to indemnification as of
right without any further action or approval by the board of directors of the
Registrant, and any indemnification pursuant to the Bylaws of the Registrant
will be made at the discretion of the Registrant only if (a) the board of
directors, acting by majority vote of a quorum consisting of directors who
were not parties to such claim, action, suit or
II-1
proceeding, present or voting, finds that the director or officer met the
standard of conduct set forth in the Bylaws, or (b) if no such quorum of the
board of directors exists, independent legal counsel at the request of either
the Registrant or the person seeking indemnification, delivers to the
Registrant such counsel's written opinion that such director or officer met
such standards, or (c) the holders of a majority of stock then entitled to
vote for the election of directors determines by affirmative vote that such
director or officer met such standards.
The rights of indemnification provided in Article VII of the Registrant's
Bylaws are in addition to any rights to which any director or officer may
otherwise be entitled under any bylaw, agreement, vote of shareholders, or
otherwise, and are in addition to the power of the Registrant to purchase and
maintain insurance on behalf of any director or officer against any liability
asserted against him or her and incurred by him or her in such capacity, or
arising out of his or her status as such, regardless of whether the Registrant
would have the power to indemnify against such liability under the Bylaws or
otherwise.
The Registrant's Bylaws further provide that any repeal or modification of
the Bylaws by the shareholders of the Registrant cannot adversely affect any
right or protection of a director of the Registrant existing at the time of
such repeal or modification.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Registrant
pursuant to the foregoing provisions, the Registrant has been informed that,
in the opinion of the Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
Item 21. Exhibits and Financial Statement Schedules.
Exhibit
No. Description
------- -----------
2.1* Agreement and Plan of Merger dated February 20, 2001 between the
Registrant and Golden Isles Financial Holdings, Inc., included as
APPENDIX A to the Proxy Statement/Prospectus set forth in Part I of
the Registration Statement
3.1 Articles of Incorporation of ABC, as amended (incorporated by
reference to Exhibit 2.1 to ABC's Regulation A Offering Statement on
Form 1-A (File No. 24A-2630) filed August 14, 1987).
3.2 Amendment to Amended Articles of Incorporation dated May 26, 1995
(incorporated by reference to Exhibit 3.1.1 to ABC's Form 10-K filed
March 28, 1996).
3.3 Amendment to Amended Articles of Incorporation (filed as Exhibit 4.3
to ABC's Registration on Form S-4 (Registration No. 333-08301), filed
with the Commission on July 17, 1996 and incorporated herein by
reference).
3.4 Bylaws of ABC, as amended (incorporated by reference to Exhibit 2.2 to
ABC's Regulation A Offering Statement on Form 1-A (File No. 24A-2630)
filed August 14, 1987.
3.5 Form of Articles of Amendment to the Articles of Incorporation
(incorporated by reference to Exhibit 3.5 to ABC's Annual Report on
Form 10-K (File No. 001-13901), filed with the Commission on March 25,
1998).
3.6 Form of Amendment to Bylaws (incorporated by reference to Exhibit 3.6
to ABC's Annual Report on Form 10-K (File No. 001-13901), filed with
the Commission on March 25, 1998).
3.7 Form of Articles of Amendment to the Articles of Incorporation
(incorporated by reference to Exhibit 3.7 to ABC'S Annual Report on
Form 10-K (File No. 001-13901), filed with the Commission on March 26,
1999).
3.8 Form of Amendment to Bylaws (incorporated by reference to Exhibit 3.8
to ABC'S Annual Report on Form 10-K (File No. 001-13901), filed with
the Commission on March 26, 1999).
II-2
Exhibit
No. Description
------- -----------
5.1 Opinion of Rogers & Hardin LLP regarding legality of securities being
registered (including their consent).
8.1 Opinion of Rogers & Hardin LLP regarding certain tax matters
(including their consent).
10.1 1985 Incentive Stock Option Plan (filed as Exhibit 5.1 to ABC's
Regulation A Offering Statement on Form 1-A (File No. 24A-2630), filed
with the Commission on August 14, 1987 and incorporated herein by
reference).
10.2 Incentive Stock Option Agreement with Kenneth J. Hunnicutt dated
October 17, 1985 (filed as Exhibit 5.2 to ABC's Regulation A Offering
Statement on Form 1-A (File No. 24A-2630), filed with the Commission
on August 14, 1987 and incorporated herein by reference).
10.3 Deferred Compensation Agreement for Kenneth J. Hunnicutt dated
December 16, 1986 (filed as Exhibit 5.3 to ABC's Regulation A Offering
Statement on Form 1-A (File No. 24A-2630), filed with the Commission
on August 14, 1987 and incorporated herein by reference).
10.4 Security Deed in favor of M.I.A., Co. dated December 31, 1984 (filed
as Exhibit 5.4 to ABC's Regulation A Offering Statement on Form 1-A
(File No. 24A-2630), filed with the Commission on August 14, 1987 and
incorporated herein by reference).
10.5 Loan Agreement and Master Term Note dated December 30, 1986 (filed as
Exhibit 5.5 to ABC's Regulation A Offering Statement on Form 1-A (File
No. 24A-2630), filed with the Commission on August 14, 1987 and
incorporated herein by reference).
10.6 Executive Salary Continuation Agreement dated February 14, 1984 (filed
as Exhibit 10.6 to ABC's Annual Report on Form 10-KSB (File Number 2-
71257), filed herewith with the Commission on March 27, 1989 and
incorporated herein by reference.
10.7 1992 Incentive Stock Option Plan and Option Agreement for K. J.
Hunnicutt (filed as Exhibit 10.7 to ABC's Annual Report on Form 10-KSB
(File Number 0-16181), filed with the Commission on March 30, 1993 and
incorporated herein by reference).
10.8 Executive Employment Agreement with Kenneth J. Hunnicutt dated
September 20, 1994 (filed as Exhibit 10.8 to ABC's Annual Report on
Form 10-KSB (File Number 0-016181), filed with the Commission on March
30, 1995 and incorporated herein by reference).
10.9 Form of Omnibus Stock Ownership and Long-Term Incentive Plan
(incorporated by reference to Exhibit 10.17 to ABC's Annual Report on
Form 10-K (File No. 001-13901), filed with the Commission on March 25,
1998).
10.10 Form of Rights Agreement between ABC Bancorp and SunTrust Bank dated
as of February 17, 1998 (incorporated by reference to Exhibit 10.18 to
ABC's Annual Report on Form 10-K (File No. 001-13901), filed with the
Commission on March 25, 1998).
10.11 ABC Bancorp 2000 Officer/Director Stock Bonus Plan (incorporated by
reference to Exhibit 10.19 to ABC's Annual Report of Form 10-K (File
No. 001-13901), filed with the Commission on March 29, 2000).
10.12 Executive Employment Agreement with Mark D. Thomas dated as of July
12, 1999 (incorporated by reference to Exhibit 10.19 to ABC's Annual
Report on Form 10-K (File No. 001-13901), filed with the Commission on
March 29, 2001).
10.13 Severance Protection Agreement with W. Edwin Lane, Jr. dated as of
November 1, 1998 (incorporated by reference to Exhibit 10.20 to ABC's
Annual Report on Form 10-K (File No. 001-13901), filed with the
Commission on March 29, 2001).
II-3
Exhibit
No. Description
------- -----------
10.14 Agreement and Plan of Merger by and among ABC, Tri-County Bank and
Tri-County Merger Sub, Inc. dated as of November 28, 2000, Amendment
No.1 thereto dated as of January 26, 2001, and Amendment No.2 thereto
dated as of February 20, 2001 (incorporated by reference to Exhibit
2.2 to ABC's Annual Report on Form 10-K (File No. 001-13901), filed
with the Commission on March 29, 2001).
10.15* Proposed Employment Agreement between The First Bank of Brunswick and
Michael D. Hodges to be entered into upon consummation of the merger
of Golden Isles and ABC, included in Exhibit E to the merger agreement
included as APPENDIX A to the Proxy Statement/Prospectus set forth in
Part I of the Registration Statement.
10.16* Form of Purchase and Assumption Agreement by and among ABC Bancorp,
Tri-County Bank and Republic Security Bank dated as of April 13, 2001.
13.1 Registrant's Annual Report on Form 10-K for the year ended December
31, 2000 (incorporated by reference).
13.2 Registrant's Quarterly Report on Form 10-Q for the quarter ended March
31, 2001 (incorporated by reference).
21.1* Schedule of subsidiaries of ABC Bancorp.
23.1 Consents of Rogers & Hardin LLP are contained in its opinions filed as
Exhibits 5.1 and 8.1 hereto.
23.2 Consent of Mauldin & Jenkins, Certified Public Accountants and
Consultants, LLC concerning the financial statements of ABC.
23.3 Consent of Mauldin & Jenkins, Certified Public Accountants and
Consultants, LLC concerning the financial statements of Golden Isles.
23.4 Consent of The Carson Medlin Company.
23.5 Consent of Sterne, Agee & Leach, Inc.
24 A Power of Attorney relating to this Registration Statement is set
forth on the signature pages to this Registration Statement.
99.1* Opinion of The Carson Medlin Company dated as of February 20, 2001
(included as APPENDIX C to the Proxy Statement/Prospectus set forth in
Part I of the Registration Statement).
99.2 Opinion of Sterne, Agee & Leach, Inc. dated as of June 19, 2001
(included as APPENDIX D to the Proxy Statement/Prospectus set forth in
Part I of the Registration Statement).
99.3* Form of Letter of Transmittal and Instructions.
99.4 Exchange Agreement dated as of June 19, 2001 among SunTrust Bank, ABC
and Golden Isles.
99.5* Form of Proxy Card for the Special Meeting of Shareholders of Golden
Isles.
- --------
* Previously filed with the Securities and Exchange Commission.
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
II-4
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver,
or cause to be delivered to each person to whom the prospectus is sent or
given, the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial information.
(d) (1) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of
a prospectus which is a part of this registration statement, by any person
or party who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus will contain
the information called for by the applicable registration form with respect
to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-5
(e) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(f) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(g) The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and Golden Isles
being acquired involved therein, that was not the subject of and included in
the registration statement when it became effective.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Moultrie, State of
Georgia, on the 19th day of June, 2001.
ABC BANCORP
/s/ Kenneth J. Hunnicutt
By: _________________________________
Kenneth J. Hunnicutt
Chairman and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned constitutes and
appoints Kenneth J. Hunnicutt and Mark D. Thomas his true and lawful attorney-
in-fact and agent, with full power of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to sign any and
all amendments to this Registration Statement (including pre- and post-
effective amendments), and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto such attorney-in-fact, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that such attorney-in-
fact, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Name Title Date
---- ----- ----
/s/ Kenneth J. Hunnicutt Chairman and Chief June 19, 2001
------------------------------------ Executive Officer
(Principal Executive
Officer)
Kenneth J. Hunnicutt
/s/ W. Edwin Lane, Jr. Executive Vice President June 19, 2001
------------------------------------ and Chief Financial
Officer (Principal
Financial and Accounting
Officer)
W. Edwin Lane, Jr.
/s/ Mark D. Thomas President, Chief June 19, 2001
------------------------------------ Operating Officer and
Director
Mark D. Thomas
* Director June 19, 2001
------------------------------------
John G. Briggs
* Director June 19, 2001
------------------------------------
Johnny W. Floyd
Director , 2001
------------------------------------
J. Raymond Fulp
* Director June 19, 2001
------------------------------------
Daniel B. Jeter
II-7
Name Title Date
---- ----- ----
Director , 2001
------------------------------------
Robert P. Lynch
* Director June 19, 2001
------------------------------------
Eugene M. Vereen, Jr.
Chairman , 2001
------------------------------------
Doyle Weltzbarker
* Director June 19, 2001
------------------------------------
Henry Wortman
/s/ Kenneth J. Hunnicutt
*By: ________________________________
Attorney-in-Fact
II-8
EXHIBIT INDEX
Exhibit
No. Description
------- -----------
2.1* Agreement and Plan of Merger dated February 20, 2001 between the
Registrant and Golden Isles Financial Holdings, Inc., included as
APPENDIX A to the Proxy Statement/Prospectus set forth in Part I of
the Registration Statement
3.1 Articles of Incorporation of ABC, as amended (incorporated by
reference to Exhibit 2.1 to ABC's Regulation A Offering Statement on
Form 1-A (File No. 24A-2630) filed August 14, 1987).
3.2 Amendment to Amended Articles of Incorporation dated May 26, 1995
(incorporated by reference to Exhibit 3.1.1 to ABC's Form 10-K filed
March 28, 1996).
3.3 Amendment to Amended Articles of Incorporation (filed as Exhibit 4.3
to ABC's Registration on Form S-4 (Registration No. 333-08301), filed
with the Commission on July 17, 1996 and incorporated herein by
reference).
3.4 Bylaws of ABC, as amended (incorporated by reference to Exhibit 2.2 to
ABC's Regulation A Offering Statement on Form 1-A (File No. 24A-2630)
filed August 14, 1987.
3.5 Form of Articles of Amendment to the Articles of Incorporation
(incorporated by reference to Exhibit 3.5 to ABC's Annual Report on
Form 10-K (File No. 001-13901), filed with the Commission on March 25,
1998).
3.6 Form of Amendment to Bylaws (incorporated by reference to Exhibit 3.6
to ABC's Annual Report on Form 10-K (File No. 001-13901), filed with
the Commission on March 25, 1998).
3.7 Form of Articles of Amendment to the Articles of Incorporation
(incorporated by reference to Exhibit 3.7 to ABC'S Annual Report on
Form 10-K (File No. 001-13901), filed with the Commission on March 26,
1999).
3.8 Form of Amendment to Bylaws (incorporated by reference to Exhibit 3.8
to ABC'S Annual Report on Form 10-K (File No. 001-13901), filed with
the Commission on March 26, 1999).
5.1 Opinion of Rogers & Hardin LLP regarding legality of securities being
registered (including their consent).
8.1 Opinion of Rogers & Hardin LLP regarding certain tax matters
(including their consent).
10.1 1985 Incentive Stock Option Plan (filed as Exhibit 5.1 to ABC's
Regulation A Offering Statement on Form 1-A (File No. 24A-2630), filed
with the Commission on August 14, 1987 and incorporated herein by
reference).
10.2 Incentive Stock Option Agreement with Kenneth J. Hunnicutt dated
October 17, 1985 (filed as Exhibit 5.2 to ABC's Regulation A Offering
Statement on Form 1-A (File No. 24A-2630), filed with the Commission
on August 14, 1987 and incorporated herein by reference).
10.3 Deferred Compensation Agreement for Kenneth J. Hunnicutt dated
December 16, 1986 (filed as Exhibit 5.3 to ABC's Regulation A Offering
Statement on Form 1-A (File No. 24A-2630), filed with the Commission
on August 14, 1987 and incorporated herein by reference).
10.4 Security Deed in favor of M.I.A., Co. dated December 31, 1984 (filed
as Exhibit 5.4 to ABC's Regulation A Offering Statement on Form 1-A
(File No. 24A-2630), filed with the Commission on August 14, 1987 and
incorporated herein by reference).
10.5 Loan Agreement and Master Term Note dated December 30, 1986 (filed as
Exhibit 5.5 to ABC's Regulation A Offering Statement on Form 1-A (File
No. 24A-2630), filed with the Commission on August 14, 1987 and
incorporated herein by reference).
Exhibit
No. Description
------- -----------
10.6 Executive Salary Continuation Agreement dated February 14, 1984 (filed
as Exhibit 10.6 to ABC's Annual Report on Form 10-KSB (File Number 2-
71257), filed herewith with the Commission on March 27, 1989 and
incorporated herein by reference.
10.7 1992 Incentive Stock Option Plan and Option Agreement for K. J.
Hunnicutt (filed as Exhibit 10.7 to ABC's Annual Report on Form 10-KSB
(File Number 0-16181), filed with the Commission on March 30, 1993 and
incorporated herein by reference).
10.8 Executive Employment Agreement with Kenneth J. Hunnicutt dated
September 20, 1994 (filed as Exhibit 10.8 to ABC's Annual Report on
Form 10-KSB (File Number 0-016181), filed with the Commission on March
30, 1995 and incorporated herein by reference).
10.9 Form of Omnibus Stock Ownership and Long-Term Incentive Plan
(incorporated by reference to Exhibit 10.17 to ABC's Annual Report on
Form 10-K (File No. 001-13901), filed with the Commission on March 25,
1998).
10.10 Form of Rights Agreement between ABC Bancorp and SunTrust Bank dated
as of February 17, 1998 (incorporated by reference to Exhibit 10.18 to
ABC's Annual Report on Form 10-K (File No. 001-13901), filed with the
Commission on March 25, 1998).
10.11 ABC Bancorp 2000 Officer/Director Stock Bonus Plan (incorporated by
reference to Exhibit 10.19 to ABC's Annual Report of Form 10-K (File
No. 001-13901), filed with the Commission on March 29, 2000).
10.12 Executive Employment Agreement with Mark D. Thomas dated as of July
12, 1999 (incorporated by reference to Exhibit 10.19 to ABC's Annual
Report on Form 10-K (File No. 001-13901), filed with the Commission on
March 29, 2001).
10.13 Severance Protection Agreement with W. Edwin Lane, Jr. dated as of
November 1, 1998 (incorporated by reference to Exhibit 10.20 to ABC's
Annual Report on Form 10-K (File No. 001-13901), filed with the
Commission on March 29, 2001).
10.14 Agreement and Plan of Merger by and among ABC, Tri-County Bank and
Tri-County Merger Sub, Inc. dated as of November 28, 2000, Amendment
No.1 thereto dated as of January 26, 2001, and Amendment No.2 thereto
dated as of February 20, 2001 (incorporated by reference to Exhibit
2.2 to ABC's Annual Report on Form 10-K (File No. 001-13901), filed
with the Commission on March 29, 2001).
10.15* Proposed Employment Agreement between The First Bank of Brunswick and
Michael D. Hodges to be entered into upon consummation of the merger
of Golden Isles and ABC, included in Exhibit E to the merger agreement
included as APPENDIX A to the Proxy Statement/Prospectus set forth in
Part I of the Registration Statement.
10.16* Form of Purchase and Assumption Agreement by and among ABC Bancorp,
Tri-County Bank and Republic Security Bank dated as of April 13, 2001.
13.1 Registrant's Annual Report on Form 10-K for the year ended December
31, 2000 (incorporated by reference).
13.2 Registrant's Quarterly Report on Form 10-Q for the quarter ended March
31, 2001 (incorporated by reference).
21.1* Schedule of subsidiaries of ABC Bancorp.
23.1 Consents of Rogers & Hardin LLP are contained in its opinions filed as
Exhibits 5.1 and 8.1 hereto.
Exhibit
No. Description
------- -----------
23.2 Consent of Mauldin & Jenkins, Certified Public Accountants and
Consultants, LLC concerning the financial statements of ABC.
23.3 Consent of Mauldin & Jenkins, Certified Public Accountants and
Consultants, LLC concerning the financial statements of Golden Isles.
23.4 Consent of The Carson Medlin Company.
23.5 Consent of Sterne, Agee & Leach, Inc.
24 A Power of Attorney relating to this Registration Statement is set
forth on the signature pages to this Registration Statement.
99.1* Opinion of The Carson Medlin Company dated as of February 20, 2001
(included as APPENDIX C to the Proxy Statement/Prospectus set forth in
Part I of the Registration Statement).
99.2 Opinion of Sterne, Agee & Leach, Inc. dated as of June 19, 2001
(included as APPENDIX D to the Proxy Statement/Prospectus set forth in
Part I of the Registration Statement).
99.3* Form of Letter of Transmittal and Instructions.
99.4 Exchange Agreement dated as of June 19, 2001 among SunTrust Bank, ABC
and Golden Isles.
99.5* Form of Proxy Card for the Special Meeting of Shareholders of Golden
Isles.
- --------
* Previously filed with the Securities and Exchange Commission.