SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. ___)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240-14a-119(c)or 240 14a-12
BG Financial Group, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
T. Don Waddell (423) 636-1555
Payment of Filing Fee (Check the Appropriate box):
[X] No fee required
[ ] Fee computed on the table below per Exchange Act Rules 14a6(I)(4) and 0-11
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11(1):
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Proposed maximum aggregate value of transaction:
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4. Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the
date of its filing.
(1) Amount Previously Paid:_____________________
(2) Form, Schedule or Registration Statement No:__________________
(3) Filing Party:______________________________
Registrant believes that it qualifies as a "small business issuer" as defined by
Rule 12b-2 of the Securities Exchange Act of 1934, as amended.
BG Financial Group, Inc.
P.O. Box 610
Greeneville, Tennessee 37744
May 25, 2004
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
BG Financial Group, Inc. (the "Company") to be held at 10:00 a.m., Eastern
Daylight Time on Tuesday, June 15,2004, at the General Morgan Inn, 111 North
Main Street, Greeneville, Tennessee. As you will recall, this past January, the
shareholders of Bank of Greeneville (the "Bank") approved the formation of a
bank holding company for the Bank, BG Financial Group, Inc. The Bank is now the
subsidiary of BG Financial Group, Inc.
At the meeting you will be asked to:
- Elect three Class III directors to serve until the 2007 annual meeting
of shareholders;
- Ratify the appointment of Dent K. Burk Associates, P.C. as the
Company's independent accountants and auditors for fiscal year 2004;
and
- Transact such other business as may properly come before the meeting
or any adjournment thereof.
We have enclosed a notice of annual meeting of shareholders, a proxy
statement, and a form of proxy. The matters listed in the notice of annual
meeting are more fully described in the proxy statement. Detailed information
relating to the Bank's activities and operating performance during fiscal 2003
is contained in the Bank's Annual Report on Form 10-KSB, which is being mailed
to you with this proxy statement, but is not a part of the proxy soliciting
material. If you do not receive or have access to the 2003 Annual Report on Form
10-KSB, you may request a copy from J. Robert Grubbs, President, Bank of
Greeneville, P.O. Box 610, Greeneville, Tennessee 37744, (423) 636-1555. In
addition, you may access and review our annual financial statements for the year
ended December 31, 2003 at our website www.bankofgreeneville.com.
It is important that your shares are represented and voted at the meeting,
regardless of the size of your holding. We would appreciate your completing the
enclosed form of proxy so that your shares can be voted in the event you are
unable to attend the meeting. If you are present at the meeting and desire to
vote your shares personally, your form of proxy will be withheld from voting
upon your request. Whether or not you plan to attend the meeting, it is
important that you promptly complete, sign, date and return the enclosed form of
proxy as soon as possible to:
BG Financial Group, Inc.
P. O. Box 610
Greeneville, Tennessee 37744
Please RSVP to Leanna Harrison on or before June 11, 2004 at (423) 636-1555
if you plan on personally attending the annual meeting. If you have any
questions in the interim, please do not hesitate to contact me.
Bank of Greeneville performed well in 2003. There were several highlights
for the Bank this past year. Effective April 25, 2003, shareholders were
rewarded with a three for one stock split which allowed shareholders to multiply
their shares by three, while the lower stock price results in the opportunity
for greater liquidity for the shares. The common stock price of the Bank
continues to steadily grow. As of the date of this letter, the common stock is
selling at $16 per share. This represents a stock price appreciation of 380% for
shares held since the inception of the Bank, and a stock price appreciation of
60% since the stock split last April. On January 15, 2004, shareholders voted to
form a holding company, BG Financial Group, Inc. This new holding company
structure will allow our institution to expand into new markets and to provide
additional services.
Total assets of the Bank at December 31, 2003, grew to $85,075,150 an
increase of $32,029,712 or 60% over 2002 total assets of $53,045,438. Deposits
and other liabilities of the Bank grew to $77,867,863 an increase of $31,723,627
or 69% over 2002 total deposits and liabilities of $46,144,236. Loans as of
December 31, 2003, grew to $69,889,501 an increase of $27,061,765 or 63% over
December 31, 2002, loan totals of $42,827,736.
Bank of Greeneville's net operating income improved to $343,206 at year end
December 31, 2003. This represents an increase of $213,097 or 164% over 2002's
net operating income of $130,109. It is important to note that the Bank received
an extraordinary one time non-operational accounting benefit (FASB 109) of
$510,006 for the 2002 year. This accounting rule, FASB 109, permitted the Bank
to defer for income tax purposes certain organizational expenses as opposed to
writing them off as organizational costs in 2001. The effect of the
reclassification of the 2001 expenses was to add $510,006 to net income in 2002
that was not from the 2002 operations of the Bank.
While the Bank appears to have made more operating revenue in 2002 than in
2003 because of the FASB 109 reclassification, the Bank actually made more
revenue from operations in 2003. A close review of the included financial
statements will exhibit that the Bank has shown strong, steady growth in assets
and revenue in all three years since inception, and the year 2003 is not an
exception from that trend.
Bank of Greeneville continues to grow in the investment, insurance, and
retirement sectors in addition to the more traditional banking related areas.
Our goal is to continuously look for new opportunities to expand markets,
products, and services in order to increase shareholder value. We encourage our
shareholders to call on Bank of Greeneville to meet all of their financial
needs.
I want to thank the Board of Directors for their guidance and commitment,
and our employees for their dedication and hard work. Everyone at Bank of
Greeneville appreciates the trust and confidence that each shareholder has
placed in us. We will continue to strive to increase the value of your
investment.
Sincerely,
/s/ J. Robert Grubbs
--------------------------
J. Robert Grubbs
President & CEO
BG Financial Group, Inc.
P.O. Box 610
Greeneville, Tennessee 37744
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 15, 2004
Notice is hereby given that the Annual Meeting of Shareholders of BG
Financial Group, Inc. (the "Company") will be held on Tuesday, June 15, 2004, at
10:00 a.m. Eastern Daylight Time, at the General Morgan Inn, 111 North Main
Street, Greeneville, Tennessee, for the following purposes:
1. To elect three Class III directors to serve until the 2007
annual meeting of shareholders;
2. To ratify the appointment of Dent K. Burk Associates, P.C. as
the Company's independent accountants and auditors for fiscal
year 2004; and
3. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Only shareholders of record at the close of business on April 30, 2004 are
entitled to notice of and to vote at the annual meeting and any adjournment
thereof.
By Order of the Board of Directors
/s/ T. Don Waddell
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T. Don Waddell
Secretary
May 25, 2004
YOUR VOTE IS IMPORTANT
Whether you expect to attend the meeting or not, please mark, sign, date, and
return the enclosed proxy as promptly as possible to BG Financial Group, Inc.,
P.O. Box 610, Greeneville, Tennessee 37744. In the event you attend the meeting,
you may revoke your proxy at any time before balloting and vote your shares in
person.
BG Financial Group, Inc.
P.O. Box 610
Greeneville, Tennessee 37744
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
INTRODUCTION
This Proxy Statement and accompanying proxy are being furnished to
shareholders of BG Financial Group, Inc. (the "Company") in connection with the
solicitation of proxies by the board of directors to be used at the annual
meeting of shareholders. Your vote is very important. For this reason, the board
of directors is requesting that, if you are not able to attend the annual
meeting of shareholders, you allow your common stock to be represented at the
meeting by the proxies named in the enclosed proxy card. This proxy statement,
notice of annual meeting and proxy will be mailed to all shareholders on or
about May 25, 2004.
BG Financial Group, Inc., is a bank holding company for Bank of Greeneville
(the "Bank"), headquartered in Greeneville, Tennessee.
Information About the Annual Meeting
When is the annual meeting?
Tuesday, June 15, 2004 at 10:00 a.m. Eastern Daylight Time.
Where will the annual meeting be held?
General Morgan Inn, 111 North Main Street, Greeneville, Tennessee.
What items will be voted upon at the annual meeting?
You will be voting upon the following matters:
1. Election of three Class III directors to serve until the 2007
annual meeting of shareholders;
2. Ratification of the appointment of Dent K. Burk Associates,
P.C. as the Company's independent accountants and auditors for
fiscal year 2004; and
3. Transaction of such other business as may properly come before
the meeting or any adjournment thereof.
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Who can vote?
You are entitled to vote your common stock if our records show that you
held your shares as of the close of business on April 30, 2004, the record date.
Each shareholder is entitled to one vote for each share of common stock held on
April 30, 2004. On that date, there were 2,295,775 shares of common stock
outstanding and entitled to vote. The common stock is our only class of
outstanding voting securities.
How do I vote by proxy?
If you sign, date and return your signed proxy card before the annual
meeting, we will vote your shares as you direct. For the election of directors,
you may vote for (1) all of the nominees, (2) none of the nominees, or (3) all
of the nominees except those you designate. For the ratification of the
Company's auditors, you may vote "for" or "against" or you may "abstain" from
voting.
If you return your signed proxy card but do not specify how you want to
vote your shares, we will vote them "for" the election of the nominees for
directors, and "for" the ratification of Dent K. Burk Associates, P.C. as the
Company's auditors.
The board of directors knows of no other business to be presented at the
annual meeting. If any matters other than those set forth above are properly
brought before the annual meeting, the individuals named in your proxy card may
vote your shares in accordance with their best judgment.
How do I change or revoke my proxy?
You can change or revoke your proxy at any time before it is voted at the
annual meeting by:
1. submitting another proxy with a more recent date than that of
the proxy first given; or
2. sending written notice of revocation to our corporate
secretary, T. Don Waddell, c/o BG Financial Group, Inc., P.O.
Box 610, Greeneville, Tennessee 37744; or
3. attending the annual meeting and voting in person, although
attending the meeting will not by itself revoke your
previously granted proxy.
If I plan to attend the annual meeting, should I still vote by proxy?
Yes. Casting your vote in advance does not affect your right to attend the
meeting. Written ballots will be available at the annual meeting for
shareholders of record. If you send in your proxy card and also attend the
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meeting, you do not need to vote again at the meeting unless you want to change
your vote.
How many votes are required?
If a quorum is present at the annual meeting, the director nominees will be
elected by a plurality of the votes cast in person or by proxy at the meeting
and the ratification of the independent auditors and any other matters submitted
to the shareholders will require the affirmative vote of a majority of the votes
cast in person or by proxy at the meeting. Our shareholders do not have
cumulative voting rights with respect to the election of directors.
What constitutes as a "quorum" for the meeting?
A majority of the issued and outstanding shares of common stock, present or
represented by proxy, constitutes a quorum. A quorum is necessary to conduct
business at the annual meeting. You are part of the quorum if you have voted by
proxy. As of April 30, 2004, there were 2,295,775 shares of common stock issued
and outstanding, so 1,147,888 shares are necessary to constitute a quorum.
What is the effect of abstentions and broker non-votes?
Abstentions and broker non-votes will be treated as present for purposes of
determining a quorum but as unvoted shares for purposes of determining the
approval of any matter submitted to the shareholders for a vote.
Who pays for the solicitation of proxies?
This proxy statement is being furnished in connection with the solicitation
of proxies by the Company's board of directors. The Company will pay the cost of
preparing, printing and mailing material in connection with this solicitation of
proxies. In addition to being solicited through the mails, proxies may be
solicited personally or by telephone, facsimile, electronic mail, or telegraph
by officers, directors, and employees of the Company and the Bank who will
receive no additional compensation for such activities. Arrangements will also
be made with brokerage houses and other custodians, nominees, and fiduciaries to
forward solicitation materials to the beneficial owners of shares held of record
by such persons. Such brokerage houses and other custodians, nominees, and
fiduciaries will be reimbursed for their reasonable expenses incurred in such
connection.
When are shareholder proposals for next year's annual meeting due?
Proposals by shareholders to be considered for inclusion in the proxy
materials solicited by the directors for the annual meeting in 2005 must be
received by the Secretary of the Company at P.O. Box 610, Greeneville, Tennessee
37744, no later than February 15, 2005. The use of certified mail, return
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receipt requested, is advised. To be eligible for inclusion, a proposal must
comply with Rule 14a-8 and all other applicable provisions of Regulation 14A
under the Securities Exchange Act of 1934.
If a shareholder, rather than placing a proposal in our proxy materials as
discussed above, commences his or her own proxy solicitation for the 2005 annual
meeting or seeks to nominate a candidate for election or propose business for
consideration at such meeting, the shareholder must notify the Company of such
proposal at the address above by or before May 15, 2005. If notice is not
received by this date, the Company may exercise discretionary voting authority
as to that matter under proxies solicited for the 2005 annual meeting.
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Proposal 1 - Election of Directors
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The Board of Directors is divided into three classes, designated Classes I,
II, and III, as nearly equal in number as the then total number of directors
permits. The Board has nominated the following three persons to serve as Class
III directors: William J. Smead, Wendy C. Warner, and Roger A. Woolsey, and if
elected they will serve until the 2007 annual meeting of shareholders. We do not
anticipate that any of these nominees will be unavailable for election but, if
such a situation arises, the proxy will be voted in accordance with the best
judgment of the named proxies unless you have directed otherwise. The remaining
members of the Board listed below will continue as members of the Board until
their respective terms expire, as indicated below. All of the current directors
and nominees have served as directors of the Bank since it began operations in
July 2001, and have been members of the Board of the Company since it was formed
in 2003. Assuming a quorum is present, the election of directors requires a
plurality of the votes cast by the shares of common stock entitled to vote in
the election of directors.
Information about the individuals nominated as directors and the remaining
members of the Board is provided below. Shares of common stock represented by
proxy cards returned to us will be voted for the nominees listed below unless
you specify otherwise.
CLASS III nominees for election
(Terms Expiring 2007)
Business Experience During
Past Five Years and Position
Held with the Bank and the
Name Age Company Director Since
---- --- ---------------------------- --------------
William J. Smead 58 Physician; Director 2001*
Wendy C. Warner 43 Real Estate; Director 2001*
Roger A. Woolsey 49 Attorney; Director; and 2001*
Chairman of the Board
___________________
* Includes time served on Bank of Greeneville board of directors
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William J. Smead is a director of the Company and the Bank. Dr. Smead is a
physician and principal in The Greeneville Eye Clinic in Greeneville, Tennessee.
He received his undergraduate degrees from University of Arkansas in
Fayetteville, Arkansas, and he also received his Medical Degree from University
of Arkansas.
Wendy C. Warner is a director of the Company and the Bank. Ms. Warner is
the President of Warner Realty Company, West Main Cash, Inc. and SAWLEW Inc.,
all in Greeneville, Tennessee. She graduated from East Tennessee State
University in 1986 with a B.S. in business administration. She has received the
CCIM designation.
Roger A. Woolsey is a director and Chairman of the Board of the Company and
the Bank. Mr. Woolsey practices law in Greeneville, Tennessee, with Woolsey &
Woolsey attorneys at law. He received both his undergraduate degree and his law
degree from the University of Tennessee in Knoxville.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE "FOR"
THE ELECTION OF THE NOMINEES LISTED ABOVE.
CLASS I INCUMBENT DIRECTORS
(Terms Expiring 2005)
Business Experience During
Past Five Years and Position
Held with the Bank and the
Name Age Company Director Since
---- --- ---------------------------- --------------
Don E. Claiborne 49 Veterinarian; Director and Senior 2001*
Vice President of Bank
J. Robert Grubbs 50 Bank President; President and 2001*
Chief Executive Officer; Director
Leonard B. Lawson 47 General Manager, Chevrolet 2001*
Dealership; Director
Don E. Claiborne is a director of the Company and the Bank. Mr. Claiborne
serves as Senior Vice President and Loan Officer of the Bank. A retired
veterinarian, he is the former owner of Brookfield Animal Hospital in
Greeneville, Tennessee. Mr. Claiborne received both his doctor of veterinary
medicine degree and his undergraduate degree from the University of Tennessee in
Knoxville.
_____________________
* Includes time served on Bank of Greeneville board of directors
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J. Robert Grubbs serves as the President and Chief Executive Officer of the
Bank and the Company, and is a director of the Bank and the Company. Prior to
joining the Bank, Mr. Grubbs was an Executive Vice President with Andrew Johnson
Bank in Greeneville, Tennessee, and prior to that was a Senior Vice President
with Greene County Bank in Greeneville, Tennessee. Mr. Grubbs received his
undergraduate degree from the University of Tennessee in 1975 and has a law
degree from the Nashville School of Law.
Leonard B. Lawson is a director of the Company and the Bank. He is the Vice
President and General Manager of Lawson Chevrolet and Mazda, Inc. in
Greeneville, Tennessee, the Vice President Dealer-Operator of Lawson Mountain
Mazda Mitsubishi, and the Vice President of Lawson Chevrolet-Oldsmobile. Mr.
Lawson received his B.S. degree in marketing from the University of Tennessee in
1978 and graduated from the General Motors School of Merchandising and
Management.
CLASS II INCUMBENT DIRECTORS
(Terms Expiring 2006)
Business Experience During
Past Five Years and Position
Held with the Bank and the
Name Age Company Director Since
---- --- ---------------------------- --------------
Rance P. Merkel 40 Construction; Director 2001*
Rance P. Merkel is a director of the Company and the Bank. He is the
President of Merkel Brothers Construction Company in Greeneville, Tennessee, a
utility construction company. Mr. Merkel received his B.S. in business at the
University of Tennessee in Chattanooga in 1986.
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*Includes time served on Bank of Greeneville board of directors
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Executive Officers
Our board of directors has the power to appoint our officers. Each officer
will hold office for such term as may be prescribed by the board of directors
and until such person's successor is chosen and qualified or until such person's
death, resignation, or removal. The Company has the following executive officer
in addition to Mr. Grubbs, whose description is detailed above in Proposal 1.
Election of Directors.
Name Age Present Position
---- --- ----------------
T. Don Waddell 56 Chief Financial Officer, Secretary
T. Don Waddell serves as the Chief Financial Officer and Secretary of the
Bank and the Company. Prior to joining the Bank, Mr. Waddell was a Certified
Public Accountant in private practice and was the Chief Financial Officer of
Greene County Bancshares, Inc., Greeneville, Tennessee, for eight years. Mr.
Waddell received his undergraduate degree from East Tennessee State University
in 1973.
Information about the Board of Directors
Role of the Board
Pursuant to Tennessee law, the Company's business, property and affairs are
managed under the direction of our board of directors. The Board has
responsibility for establishing broad corporate policies and for the overall
performance and direction of the Company, but is not involved in day-to-day
operations. Members of the Board keep informed of our business by participating
in Board and committee meetings, by reviewing analyses and reports sent to them
regularly, and through discussions with our executive officers.
Board Structure
The Company's bylaws provide that the board of directors shall consist of
no fewer than five nor more than 25 members. The Board is currently composed of
7 members. The directors are divided into three classes, each of which is as
nearly equal in number as possible. The directors in each class hold office for
staggered terms of three years each. Staggered terms make it more difficult for
shareholders, including those holding a majority of the Company's common stock,
to force an immediate change in the composition of a majority of the board of
directors. Since the terms of only one-third of the incumbent directors expire
each year, two annual meetings of shareholders would be required to change a
majority of the Company's directors, provided that no directors resigned, were
removed, or died during their terms of office and the vacancies created thereby
were not filled by an affirmative vote of majority of the board of directors.
7
2003 Board and Committee Meetings
During 2003 the Bank's board of directors held 14 meetings, the Audit
Committee held 2 meetings, and the Compensation Committee held 7 meetings. All
board members attended at least 75% of our board meetings, except for Mr.
Merkel.
Attendance at Annual Shareholders' Meeting
All directors are expected to attend the annual shareholders' meeting and
their attendance is recorded in the minutes. All board members attended the
annual shareholders' meeting last year.
Board Committees
The Board has 2 standing committees: the Audit Committee and the
Compensation Committee.
Audit Committee. The Audit Committee consists of Messrs. Merkel, Lawson,
Woolsey and Smead and Ms. Warner. The Audit Committee has the authority and
responsibility to insure the accuracy and reliability of the Company's financial
statements; adequate internal controls and operating procedures; and compliance
with all laws, regulations, and policies.
Compensation Committee. The Compensation Committee consists of Messrs.
Grubbs, Claiborne, Lawson, Woolsey and Smead. The Compensation Committee
evaluates the performance of the Bank's executive officers and determines their
compensation.
The Company currently has no standing nominating committee because of the
long tenure of the current directors, because a majority of the members of the
Board are independent and because the Company has determined that the entire
Board of Directors itself adequately serves the function of a nominating
committee.
The Board had determined that all of the directors, other than Messrs.
Claiborne and Grubbs, are independent under the New York Stock Exchange
requirements. Vacancies on the Board may be filled by a majority of the
remaining directors.
With respect to the nominating process, the Board discusses and evaluates
possible candidates in detail. The Board selects new nominees for the position
of an independent director based on the following criteria:
- Personal qualities and characteristics, experience, accomplishments
and reputation in the business community.
- Current knowledge and contacts in Greeneville and in the banking
industry or other industries relevant to the Company's business.
8
- Diversity of viewpoints, background, experience and other
demographics.
- Ability and willingness to commit adequate time to Board and committee
matters.
- The fit of the individual's skills and personality with those of other
directors and potential directors in building a Board that is
effective and responsive to its duties and responsibilities.
The Board does not set specific, minimum qualifications that nominees must meet
in order for the Board to select them as nominees, but rather believes that each
nominee should be evaluated based on his or her individual merits, taking into
account the needs of the Company and the composition of the Board of Directors.
Once a candidate is identified whom the Board wants seriously to consider
and move toward nomination, the Chairman of the Board, the Chief Executive
Officer and/or other directors will enter into a discussion with that nominee.
Shareholder Nominations of Directors
The Board will consider nominees recommended by shareholders, and any such
nominee is given appropriate consideration in the same manner as other nominees
using the same criteria described above and considering the additional
information referred to below. Shareholders who wish to submit nominees for
director for consideration by the Board for election may do so by submitting in
writing such nominees' names in compliance with the procedures as described
below, to the Chairperson of the Board, in care of the Corporate Secretary. A
shareholder's nomination must contain:
- A statement that the writer is a shareholder and is proposing a
candidate for consideration by the Board;
- The name of and contact information for the candidate;
- A statement of the candidate's business and educational experience;
- Information regarding each of the factors listed above, sufficient to
enable the Board to evaluate the candidate;
- A statement detailing any relationship or understanding between the
proposing shareholder and the candidate;
- A statement that the candidate is willing to be considered and willing
to serve as a director if nominated and elected; and
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- A statement of the number of shares of the Company's common stock that
the nominating shareholder holds of record or in which shareholder has
a beneficial interest and the number of such shares that have been
held for more than one year.
The Company does not pay a fee to any third party to identify or evaluate
or assist in the identification or evaluation of potential nominees to its
Board. All directors are expected to attend the annual meeting and their
attendance is recorded in the minutes.
Shareholder Communication with the Board of Directors
Shareholders desiring to communicate with our Board of Directors on matters
other than director nominations should submit their communication in writing to
the Chairperson of the Board of Directors, c/o Corporate Secretary, BG Financial
Group, Inc. 3095 Andrew Johnson Highway, Greeneville, Tennessee 37745 and
identify themselves as a shareholder. The Corporate Secretary will forward all
such communication to the Chairperson of the Board for a determination as to how
to proceed.
Director Compensation
During 2003, the Bank did not pay director fees.
Other Directorships and Family Relationships
No director of the Company currently serves as a director of any other
public company. We are not aware of any family relationships between any of our
directors and executive officers.
- --------------------------------------------------------------------------------
Proposal 2 - Ratification of the Appointment of Dent K. Burk Associates, P.C.
as the Company's Independent Accountants and Auditors for Fiscal 2004
- --------------------------------------------------------------------------------
The board of directors has confirmed the appointment by the audit committee
of Dent K. Burk Associates, P.C. as the Company's independent accountants and
auditors for fiscal 2004. Dent K. Burk Associates, P.C. has served as
independent accountants and auditors of the Bank since its organization in July
2001, and independent accountants and auditors of the Company since it was
formed in 2003.
Representatives of Dent K. Burk Associates, P.C. will be present at the
shareholders' meeting, will have the opportunity to make a statement if they
desire to do so, and will be available to respond to appropriate questions.
10
Assuming a quorum is present, a majority of the votes cast at the annual
meeting is required to ratify the appointment of Dent K. Burk Associates, P.C.
as the Company's independent accountants and auditors for fiscal year 2004.
For services rendered in 2003 and 2002 by Dent K. Burk Associates, P.C.,
our principal independent auditors, we incurred the following fees:
Audit Fees
The aggregate fees billed by Dent K. Burk Associates, P.C. for audit of our
annual financial statements and the reviews of the financial statements included
in our Forms 10-QSB for fiscal years 2003 and 2002 were $25,440 and $18,400
respectively.
Tax Fees
The aggregate fees billed by Dent K. Burk Associates, P.C. in fiscal years
2003 and 2002 for professional services for tax compliance, tax advice and tax
planning were $1,200 and $1,200, respectively.
Financial Information Systems Design and Implementation
The aggregate fees billed by Burk Consulting, Inc. (a related entity) in
fiscal years 2003 and 2002 for Financial Information Systems Design and
Implementation services were $20,719 and $34,900, respectively.
All Other Fees
The aggregate fees billed by Dent K. Burk Associates, P.C. for other
services rendered in 2003 and 2002 were $3,700 and $3,250, respectively. These
services were primarily general consultancy related services.
The Audit Committee approved the above services to be performed by Dent K.
Burk Associates, P.C. for the current year ended.
The Audit Committee has adopted pre-approval policies and procedures for
audit and non-audit services to be performed by Dent K. Burk Associates, P.C.,
as the registered public accounting firm that performs the audit of our
consolidated financial statements that are filed with the SEC. All services by
Dent K. Burk Associates, P.C. must be pre-approved by the Audit Committee.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" RATIFICATION OF
THE APPOINTMENT OF DENT K. BURK ASSOCIATES, P.C. AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS AND AUDITORS FOR FISCAL 2004.
11
Certain Relationships and Related Transactions
Some directors and officers of the Bank and the Company are customers of
the Bank and have had and expect to have loan transactions with the Bank in the
ordinary course of business. In addition, some of the directors and officers of
the Company and the Bank are, at present, as in the past, affiliated with
businesses which are customers of the Bank and which have had and expect to have
loan transactions with the Bank in the ordinary course of business. As of
December 31, 2003, the largest aggregate amount of loan transactions with
directors and officers of the Bank and their affiliates during the year totaled
approximately $1,172,419, which amount is equal to 16.3% of the equity capital
accounts of the Bank. These loans were made in the ordinary course of business
and were made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other parties. In the opinion of the board of directors, these loans do not
involve more than a normal risk of collectibility or present other unfavorable
features.
In 2001, the Bank paid to J. Robert Grubbs $100,000 for Mr. Grubbs's book
of business consisting of brokerage clients from Raymond James Investment Bank,
which consisted of $10 million in assets purchased at below-market rate. Such
sale of Mr. Grubbs's book of business was pursuant to an FDIC directive that the
President's compensation should not be commission based during the
organizational phase of the Bank.
Executive Compensation
Summary Compensation
The following table sets forth the aggregate remuneration paid by the Bank
for services for the year ended December 31, 2003, 2002, and 2001 to the chief
executive officer of the Bank. No other officer of the Bank received
compensation in excess of $100,000 during 2003, 2002, or 2001.
Summary Compensation Table
Long-Term
Compensation
Annual Compensation Awards
Other Annual Securities
Compensation Underlying
Name and Principal Position Year Salary ($) Bonus ($) ($) Options (#)
J. Robert Grubbs . . . . . . . . . . . 2003 $ 157,147 $ 20,000 (1) $ 10,239 (2) -
President and Chief Executive Officer 2002 $ 146,432 $ 14,700 (1) $ 2,071 (2) -
2001 $ 66,883 (3) $ - $ - 50,000 (4)
-
(1) Amount received through profit-sharing plan in which all full-time employees
of the Bank participate based on a percentage of annual base salary.
(2) Automobile allowance.
12
(3) Includes salary paid from July 2001, when the Bank began its operations,
through December 31, 2001.
(4) 150,000 as adjusted for the 2003 stock split.
Employment Agreements
There are currently no employment agreements in place with respect to the
Bank's executive officers or the Company's executive officers.
Option Grants in Fiscal Year 2003
No stock options were granted to the Bank's executive officers or the
Company's executive officers in fiscal year 2003.
Aggregated Option Exercises in 2003
The following table sets forth information regarding the exercise of stock
options during 2003 and the option values as of December 31, 2003 for the
executive officers of the Company and the Bank.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
---------------------------------
Number of Securities Value of Unexercised In-The-
Underlying Unexercised Money Options at FY-End
Options at FY-End 2003(#) 2003($)(1)
------------------------- ----------------------------
Shares
Acquired on Value
Name Exercise Realized(2) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------- ----------- ----------- ----------- ------------- ----------- -------------
J. Robert Grubbs . . . . . . . . . 3,175 $37,042 26,825 90,000 $313,048 $1,050,300
T. Don Waddell . . . . . . . . . . 4,500 $39,000 4,500 13,500 $ 52,515 $ 157,545
(1) Dollar values were calculated by determining the difference between the
price of the common stock on December 31, 2003 ($15.00 per share) and the
exercise price of such options.
(2) Dollar values were calculated by determining
the difference between the price of the common stock at the time of exercise and
the exercise price of such options.
Equity Compensation Plans
The following table summarizes as of December 31, 2003 the shares of the
Company's common stock subject to outstanding awards or available for future
awards under the Bank's equity compensation plans and arrangements. The Bank
does not have a formal stock option plan; however, certain executive officers
and key employees of the Bank have been granted options pursuant to stock option
agreements approved by the Bank's board of directors.
13
Number of Shares of
Common Stock
Number of Shares of Remaining
Common Stock to be Issued Weighted-Average Available for Future
Upon Exercise of Exercise Price of Issuance Under
Outstanding Options, Outstanding Options, Equity
Plan Category Warrants and Rights Warrants and Rights Compensation Plans
------------- -------------------------- -------------------- --------------------
Equity compensation plans
approved by security holders N/A N/A N/A
Equity compensation plans not
approved by security holders 248,725 $4.08 82,600
Total 248,725 $4.08 82,600
Non-qualified stock option agreement with J. Robert Grubbs. On July 16,
2001, Mr. Grubbs was granted an option to purchase 150,000 shares of the
Company's common stock at an exercise price of $3.33 per share (as adjusted for
the 2003 stock split). This option vests in 20% equal increments over five years
beginning on the first anniversary of the grant date for so long as Mr. Grubbs
serves as an employee of the Bank. The option will become fully vested upon the
death or disability of Mr. Grubbs or upon a change of control of the Bank. The
option will expire on the tenth anniversary of the grant date or, if earlier, 90
days after Mr. Grubbs ceases to be an employee of the Bank. On December 23,
2003, Mr. Grubbs exercised his option to purchase 3,175 shares.
Non-qualified stock option agreement with T. Don Waddell. On July 16, 2001,
Mr. Waddell was granted an option to purchase 22,500 shares of the Company's
common stock at an exercise price of $3.33 per share (as adjusted for the 2003
stock split). This option vests in 20% equal increments over five years
beginning on the first anniversary of the grant date for so long as Mr. Waddell
serves as an employee of the Bank. The option will become fully vested upon the
death or disability of Mr. Waddell or upon a change of control of the Bank. The
option will expire on the tenth anniversary of the grant date or, if earlier, 90
days after Mr. Waddell ceases to be an employee of the Bank. On June 6, 2003,
Mr. Waddell exercised his option to purchase 4,500 shares.
A number of non-qualified stock option agreements were entered into with
various non-executive officers and employees of the Bank. In each of the
agreements, the option vests in 20% equal increments over five years beginning
on the first anniversary of the grant date for so long as the individual serves
as an employee of the Bank. The option will become fully vested upon the death
or disability of the individual or upon a change of control of the Bank. The
option will expire on the tenth anniversary of the grant date or, if earlier, 90
days after the individual ceases to be an employee of the Bank. The following
chart sets forth the grant date, the exercise price and number of shares
available under each option agreement.
14
Non-Qualified Option Exercise price Number of shares of Company's
Agreement Grant Date per share common stock underlying option
--------- ---------- -------------- ------------------------------
Agreement No. 1 July 16, 2001 $3.33 (1) 22,500 (1)
Agreement No. 2 July 16, 2001 $3.33 (1) 9,000 (1)
Agreement No. 3 July 16, 2001 $3.33 (1) 15,000 (1)
Agreement No. 4 July 16, 2001 $3.33 (1) 15,000 (1)
Agreement No. 5 July 16, 2001 $3.33 (1) 1,500 (1)
Agreement No. 6 July 16, 2001 $3.33 (1) 600 (1)
Agreement No. 7 February 16, 2002 $5.33 (1) 15,000 (1)
Agreement No. 8 September 3, 2002 $7.33 (1) 15,000 (1)
Agreement No. 9 September 3, 2002 $7.33 (1) 300 (1)
Agreement No. 10 November 12, 2002 $7.67 (1) 1,500 (1)
Agreement No. 11 November 12, 2002 $7.67 (1) 2,400 (1)
Agreement No. 12 December 6, 2002 $8.00 (1) 15,000 (1)
Agreement No. 13 November 12, 2002 $7.67 (1) 2,400 (1)
Agreement No. 14 December 6, 2002 $8.00 (1) 15,000 (1)
Agreement No. 15 October 14, 2003 $13.00 700
Agreement No. 16 October 14, 2003 $13.00 100
Agreement No. 17 October 14, 2003 $13.00 100
Agreement No. 18 October 14, 2003 $13.00 500
(1) As adjusted for the 2003 stock split.
15
Compensation Committee Interlocks and Insider Participation
The compensation committee consists of Messers. J.Robert Grubbs, Don E.
Claiborne, Leonard B. Lawson, Roger A. Woolsey and William J. Smead. None of our
executive officers have served as a director or member of the compensation
committee of any other entity whose executive officers served on our board of
directors. This committee evaluates the performance of the Bank's executive
officers and determines their compensation.
Security Ownership of Certain Beneficial Owners and Management
As of March 31, 2004, the Company's records indicate the following number
of shares of common stock were beneficially owned by (i) each person who is a
director or a named executive officer of the Company and (ii) all directors and
executive officers as a group. Management is not aware of any change in control
of the Company which has occurred since the Bank commenced operations on July 9,
2001, or any arrangement which may, at a subsequent date, result in a change in
control of the Company. Management of the Company does not know of any person
who owns, beneficially or of record, more than 5% of the Company's outstanding
common stock. Except as otherwise indicated, each shareholder listed below has
sole voting and investment power as to the shares owned by that person.
Amount and Nature of Percent of
Name and Address of Beneficial Owner Beneficial Ownership (#) Class (%)(1)
- ------------------------------------ ------------------------ ------------
Don E. Claiborne 81,876 (2) 3.57
3888 Buckingham Road
Greeneville, TN 37745
J. Robert Grubbs 30,039 (3) 1.31
1706 Brentwood Drive
Greeneville, TN 37743
Leonard B. Lawson 38,289 (4) 1.67
290 Meadowwood
Greeneville, TN 37745
Rance P. Merkel 74,693 3.25
497 Claude Simmons Road
Johnson City, TN 37604
16
Amount and Nature of Percent of
Name and Address of Beneficial Owner Beneficial Ownership (#) Class (%)(1)
- ------------------------------------ ------------------------ ------------
William J. Smead 109,936 (5) 4.79
330 Patricia Lane
Greeneville, TN 37743
T. Don Waddell 10,500 (6) *
231 Fairfield Drive
Greeneville, TN 37745
Wendy C. Warner 30,239 1.32
401 Oak Grove Avenue
Greeneville, TN 37745
Roger A. Woolsey 34,036 (7) 1.48
3104 Charlie Doty Road
Greeneville, TN 37743
Directors and Executive Officers 409,608 17.84
(eight total)
___________________
(*) Less than 1% of the Bank's outstanding common stock.
(1) Based on 2,295,775 shares of issued and outstanding common stock as of March
31, 2004, plus, for each person, any shares of common stock that person has the
right to acquire within 60 days pursuant to stock options.
(2) Includes 30,000 shares beneficially owned by Dr. Claiborne's wife, 3,940
shares beneficially owned by Dr. Claiborne's daughter and 4,000 shares
beneficially owned by Dr. Claiborne's son, and 3,000 exercisable stock options.
(3) Includes 26,825 exercisable stock options.
(4) Includes 30,750 shares held in Lawson Chevrolet Retirement Fund.
(5) Includes 54,500 shares beneficially owned by Dr. Smead's wife and 300 shares
beneficially owned by each of Dr. Smead's three daughters to which Dr. Smead
disclaims beneficial ownership of 600 shares.
(6) Includes 4,500 exercisable stock options.
(7) Includes 1,800 shares beneficially owned by each of Mr. Woolsey's two
children and 400 shares beneficially owned by Mr. Woolsey's wife.
There are no arrangements known to the Company, the operation of which may
at a subsequent date result in a change of control in the Company.
Audit Committee Report
of the Board of Directors
The Audit Committee consists of 5 directors: Messrs. Merkel, Lawson,
Woolsey and Smead and Ms. Warner. Each member meets the independence and
qualification standards required by the New York Stock Exchange. During the
17
fiscal year ended December 31, 2003, the Committee met 2 times. The Audit
Committee has not adopted a written charter.
Notwithstanding anything to the contrary set forth in any of our previous
filings under the Securities Exchange Act of 1934, as amended, that might
incorporate future filings by reference, including this proxy statement, in
whole or in part, the following Audit Committee Report and the statements
regarding the independence of the members of the Committee shall not be
incorporated by reference into any such filings.
The Audit Committee monitors and reviews the performance of the independent
auditors and the quality and integrity of the Company's internal accounting,
auditing and financial reporting practices. The Committee's chief duties are to:
- hire one or more independent public accountants to audit the Company's
books, records and financial statements and to review its system of
accounting, including its systems of internal control;
- monitor and evaluate, independently and objectively, the Company's
internal financial controls and financial reporting procedure;
- discuss with the independent accountants the results of their audits
and reviews;
- periodically communicate the Committee's findings to the Board of
Directors; and
- facilitate communication among the Board of Directors, the independent
auditors, and the Company's management.
The Committee has obtained from the independent auditors, Dent K. Burk
Associates, P.C., a formal written statement describing all relationships
between the auditors and the Company that might bear on the auditors'
independence. This statement conforms to Independence Standards Board Standard
No. 1, "Independence Discussions with Audit Committees." The Committee has also
discussed with the auditors any relationships that may impact their objectivity
and independence, and satisfied itself that the auditors are independent of the
Company.
The Committee has discussed with management the Company's audited financial
statements for the year ended December 31, 2003. The Committee has also
discussed with the independent auditors the matters required to be discussed by
Statement on Auditing Standards No. 61, as amended (Communication with Audit
Committees) and, with and without management present, discussed and reviewed the
18
results of the independent auditors' examination of the Company's financial
statements. The Committee has also discussed with the independent auditors their
evaluation of the Company's internal controls, and the overall quality of the
Company's financial reporting.
Based upon the results of the inquiries and actions discussed above, the
Audit Committee recommended to the Board of Directors that the Company's audited
financial statements be included in its annual report on Form 10-KSB for the
year ended December 31, 2003, for filing with the Federal Deposit Insurance
Corporation. The Committee has also recommended the reappointment, subject to
shareholder approval, of the independent auditors, Dent K. Burk Associates, P.C.
Members of the Audit Committee:
Rance P. Merkel
Leonard B. Lawson
William J. Smead
Wendy C. Warner
Roger A. Woolsey
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 (the "Act") requires
the Company's executive officers and directors and persons who own more than 10%
of the common stock to file initial reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC"), as well as to
furnish the Company with a copy of such report. It is the policy of the Company
to file these reports with the SEC on behalf of its directors and executive
officers. Additionally, SEC regulations require the Company to identify in its
Proxy Statement those individuals for whom one of the referenced reports was not
filed on a timely basis during the most recent fiscal year. During 2003, to our
knowledge, all directors and executive officers of the Company and the Bank made
timely filings of all required forms.
Other Matters
The board of directors, at the time of the preparation of this proxy
statement, knows of no business to come before the meeting other than that
referred to herein. If any other business should come before the meeting, the
persons named in the enclosed proxy will have discretionary authority to vote
all proxies in accordance with their best judgment.
19
By Order Of The Board Of Directors,
/s/ T. Don Waddell
-----------------------------------
T. Don Waddell
Secretary
Greeneville, Tennessee
May 25, 2004
20
PROXY BG Financial Group, Inc.
P.O. Box 610
Greeneville, Tennessee 37744
ANNUAL MEETING OF SHAREHOLDERS
June 15, 2004
PLEASE SIGN AND RETURN PROMPTLY TO THE BG FINANCIAL GROUP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints J. Robert Grubbs or Roger A. Woolsey as
proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all of the shares of common
stock of BG Financial Group, Inc., which the undersigned is entitled to vote at
the Annual Meeting of Shareholders to be held at the General Morgan Inn, 111
North Main Street, Greeneville, Tennessee on Tuesday, June 15, 2004, at 10:00
a.m. Eastern Daylight Time, or any adjournment thereof.
(1) As to the election of the board of directors listed in the proxy statement
delivered in connection with the annual meeting:
For all nominees listed below Withhold Authority to vote
------ ------- for all nominees listed below
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below)
William J. Smead, Wendy C. Warner, and Roger A. Woolsey
(2) As to the ratification of the appointment of Dent K. Burk Associates, P.C.
as BG Financial Group, Inc.'s independent accountants and auditors for
fiscal 2004.
For Against Abstain
-------- ------- ------
(3) In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder(s). If no direction is made, this proxy will be
voted for proposals 1 and 2.
Please Sign below and Return to BG Financial Group, Inc., P.O. Box 610,
Greeneville, Tennessee 37744.
This Is the Only Document You Need to Return at this Time.
Date:
------------------------------- ---------------------------------
Signature of Shareholder(s)
Date:
------------------------------- ---------------------------------
Signature of Joint Shareholder(s)
______________ I will attend shareholder meeting
______________ I will not attend shareholder meeting