<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 25, 1997
REGISTRATION NO. 333-23717
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
NET.B@NK, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
GEORGIA 6712 58-2224352
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification No.)
incorporation or
organization)
</TABLE>
7000 PEACHTREE DUNWOODY ROAD
BUILDING 10, SUITE 300
ATLANTA, GEORGIA 30328
(770) 392-4990
------------------------
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
DONALD S. SHAPLEIGH, JR.
7000 PEACHTREE DUNWOODY ROAD
BUILDING 10, SUITE 300
ATLANTA, GEORGIA 30328
(770) 392-4990
------------------------
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
<TABLE>
<S> <C>
WALTER G. MOELING, IV, ESQ. ALAN J. PRINCE, ESQ.
POWELL, GOLDSTEIN, FRAZER & MURPHY LLP KING & SPALDING
191 Peachtree Street, N.E. 191 Peachtree Street, N.E.
Atlanta, Georgia 30303 Atlanta, Georgia 30303
(404) 572-6600 (404) 572-4600
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, 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, please 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(c)
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 the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
CALCULATION OF REGISTRATION FEE:
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE(3)
<S> <C> <C> <C> <C>
3,450,000
Common Stock, $.01 par value Shares $12.00 $41,400,000 $12,546
</TABLE>
(1) Includes 450,000 shares that may be purchased pursuant to the over-allotment
option granted to the Underwriters.
(2) Estimated solely for the purpose of determining the registration fee.
(3) Previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
NET.B@NK, INC.
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
REGISTRATION STATEMENT ITEM NUMBER AND HEADING CAPTION IN PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Forepart Front of the Registration Statement and
Outside Front Cover Page of Prospectus............. Cover Page; Cross-Reference Sheet; Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus......................................... Inside Front Cover Page of Prospectus; Outside Back
Cover Page of Prospectus
3. Summary Information and Risk Factors Summary; Risk
Factors............................................ Prospectus Summary; Risk Factors
4. Use of Proceeds...................................... Use of Proceeds
5. Determination of Offering Price...................... Underwriting
6. Dilution............................................. Dilution
7. Selling Security Holders............................. Cover Page of Prospectus; Principal Shareholders
8. Plan of Distribution................................. Underwriting
9. Description of the Securities........................ Description of Capital Stock
10. Interests of Named Experts and Counsel............... Legal Matters; Experts
11. Information with Respect to the Registrant........... Prospectus Summary; Risk Factors; Dividend Policy;
Capitalization; Selected Financial Data;
Management's Discussion and Analysis of Financial
Condition and Results of Operations; Business;
Management; Certain Transactions; Principal
Shareholders; Underwriting; Financial Statements
12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities..................... Part II of the Registration Statement
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
<PAGE>
SUBJECT TO COMPLETION
, 1997
3,000,000 SHARES
[LOGO]
NET.B@NK, INC.
COMMON STOCK
All of the 3,000,000 shares of Common Stock, $.01 par value ("Common
Stock"), offered hereby (the "Offering") are being sold by Net.B@nk, Inc., a
Georgia corporation (the "Company"). Prior to this Offering, there has been no
public market for the Common Stock. The initial public offering price is
estimated to be between $10.00 and $12.00 per share. See "Underwriting" for
information relating to factors to be considered in determining the initial
public offering price.
The Company has applied to list the Common Stock on the Nasdaq National
Market under the symbol "NTBK."
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. THESE SECURITIES ARE NOT INSURED BY THE FDIC
OR ANY OTHER GOVERNMENTAL AGENCY.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
Per Share.................. $ $ $
Total(3)................... $ $ $
</TABLE>
(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $500,000.
(3) The Company and the Selling Shareholder named herein (the "Selling
Shareholder") have granted to the several Underwriters an option for 30 days
to purchase up to an additional 300,000 and 150,000 shares of Common Stock,
respectively, at the Price to Public, less Underwriting Discount, solely to
cover over-allotments, if any. If such option is exercised in full, the
Price to Public, Underwriting Discount, Proceeds to Company and Proceeds to
Selling Shareholder will be $ , $ , $ and
$ , respectively. See "Underwriting."
------------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, and subject to
certain other conditions. The Underwriters reserve the right to withdraw, cancel
or modify such offer and to reject orders in whole or in part. It is expected
that delivery of the shares of Common Stock will be made on or about
, 1997.
------------------------
MORGAN KEEGAN & COMPANY, INC. INTERSTATE/JOHNSON LANE
Corporation
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>
Bank Customer Interfaces
Customers can access the Bank on a seven-day-a-week, 24-hour-a-day basis
from any personal computer, wherever located, by means of a secure Web browser
or by ATM, telephone, fax or U.S. mail. The chart depicts these methods of
access as well as the Bank's relationships with its primary service and
technology providers.
[FLOW CHART APPEARS HERE DESCRIBING THE VARIOUS METHODS BY WHICH CUSTOMERS
INTERFACE WITH THE BANK]
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ STOCK MARKET, IN THE OVER- THE-
COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED
AT ANY TIME.
2
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE
DETAILED INFORMATION AND FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO)
APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED HEREIN, THE
INFORMATION CONTAINED IN THIS PROSPECTUS GIVES EFFECT TO THE 33.125-FOR-ONE
STOCK SPLIT EFFECTED AS A STOCK DIVIDEND ON MARCH 17, 1997 AND ASSUMES THAT THE
UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED.
THE COMPANY
Upon completion of the Offering, Net.B@nk, Inc. (the "Company") will own and
operate the Atlanta Internet Bank (the "Bank"), which provides convenient,
cost-effective and secure banking services to the growing number of consumers
utilizing the Internet for commercial and financial services. Customers can
access the Bank on a seven-day-a-week, 24-hour-a-day ("7x24") basis from any
personal computer ("PC"), wherever located, by means of a secure Web browser or
by ATM, telephone or U.S. mail. The Company has assembled a management team with
experience in both banking and technology to implement its strategy to become a
leading provider of financial services through the Internet.
The Bank commenced operations in October 1996 as a service of Carolina First
Bank ("CFB"), a Greenville, South Carolina-based bank. As of April 23, 1997, the
Bank had 1,991 accounts and approximately $43.8 million in deposits. The Bank
has operated under the trade name "Atlanta Internet Bank" pending regulatory
approval of the transactions described in "The Reorganization."
The Company's objective is to offer a broad range of banking and financial
service products through the Internet and alternative delivery channels.
Customer convenience and operating efficiency are two key components of the
Company's strategy. The Bank does not incur the cost of supporting a branch
system, which management believes will benefit customers through the Bank's
ability to offer attractive deposit rates. Management believes the Bank's lower
overhead, customer convenience and ability to provide a broad choice of products
and services cost-effectively through alternative delivery systems give the Bank
a competitive advantage over traditional banks and banks offering PC-based home
banking.
In the initial phase of the Company's operations, management concentrated
its efforts on developing, testing and implementing an Internet banking
platform. Once the platform structure was in place, management established
deposit-oriented products that include electronic bill paying, interest checking
and money market accounts and certificates of deposit. During 1997, management
intends to offer a broad array of consumer loan products, such as personal
credit lines, mortgages, home equity and secured loans, credit cards and other
fee generating products. Management also plans to continue to pursue other
revenue generating opportunities through partnerships and strategic alliances
where appropriate.
Management intends to implement the following strategies in order to become
a leading provider of financial services through the Internet. No assurance can
be given, however, that the Company will be successful in implementing these
strategies or in achieving its stated objectives.
- LEVERAGE LOW COST STRUCTURE. The absence of a branch system and the
Company's low cost per transaction enable it to offer attractive deposit
rates without significantly impacting profitability.
- OUTSOURCE OPERATIONAL FUNCTIONS. The Company has entered into agreements
with companies that provide a variety of specialized services and
technologies to the Bank. In each of these relationships, the Bank
benefits from the service provider's expertise and economies of scale
while retaining the flexibility to take advantage of changes in available
technology without impacting customer service.
- PROVIDE CONVENIENT, REAL-TIME TRANSACTIONS. Management believes the Bank
provides its customers with a higher level of convenience than can be
achieved in a traditional branch or through PC-based home banking. The
Internet allows Bank customers to conduct banking activities on a
real-time 7x24 basis from any PC, wherever located, using a secure Web
browser. This technology gives
3
<PAGE>
Internet banking an advantage over PC-based home banking, which utilizes
PC-based software, requires repeated downloading and backup and limits the
user to a specific PC.
- EMPLOY ADVANCED SECURITY. The Bank uses sophisticated technology to
provide what management believes to be among the most advanced security
measures currently available in the electronic banking industry. All
banking transactions are encrypted and routed from the Internet server
through a "firewall" that limits access to the Bank server. The Bank's
systems automatically detect attempts by third parties to access other
users' accounts and feature a high degree of physical security, secure
modem access, service continuity and transaction monitoring.
- OFFER A BROAD ARRAY OF PRODUCTS AND SERVICES. Management intends to
attract customers to the Bank by offering a variety of traditional
consumer loan and deposit products. Management intends to expand the
Bank's product and service offerings to include asset management with
money market sweeps, direct purchase capability with selected Internet
"mall" venues and reloadable cash cards.
- DEPLOY MULTI-FACETED MARKETING STRATEGY. The Company's target market
includes on-line users, on-line shoppers and special niche customers. In
addition to the Bank's on-line advertising relationships with AT&T Corp.'s
WorldNet Service and Digital Cities, Inc., a subsidiary of America Online
Incorporated ("Digital Cities/AOL"), several other marketing initiatives
are being employed. These initiatives include an emphasis on marketing the
Bank's products and services through alliances with selected professional
organizations, colleges, alumni associations and consumer service
providers and on targeted print advertising.
- CROSS-SELL FINANCIAL SERVICES. Management intends to market loans,
brokerage services and other income generating products to its depositors
through various direct marketing techniques, such as bank e-mail, on-line
advertising and telemarketing. Management believes that this strategy will
enable the Bank to generate additional earning assets and fee income.
Management further believes that selling multiple products will enhance
customer loyalty and strengthen customer relationships with the Bank.
The Internet is a global web of computer networks. Use of the Internet and
the World Wide Web (the "Web") has grown rapidly during the 1990s and is
expected to continue to grow. In addition, a fall 1995 Internet demographic
study by Commerce Net/Nielsen Media Research revealed that in the U.S., nearly
two-thirds of Web users have a college education, over 50% of Web users are 35
years of age or younger and 25% of Web users' households have annual incomes of
over $80,000.
Electronic banking encompasses both Internet banking, which can be conducted
on a real-time basis from any PC, wherever located, using a secure Web browser,
and PC-based home banking, which utilizes PC-based software. According to an
August 1996 report by Forrester Research, Inc., the number of electronic banking
households is expected to grow from 1.1 million in 1996 to 9.7 million in 2001.
The report further indicates that the percentage of such households utilizing
Internet banking is projected to rise to over 75% in 2001. Management believes
this growth, combined with the demographic characteristics of Internet users and
the relative flexibility and convenience of Internet banking, represents a
market opportunity for the Company because it is one of the world's first
providers of Internet banking services.
The principal executive offices of the Company and the Bank are located at
7000 Peachtree Dunwoody Road, Building 10, Suite 300, Atlanta, Georgia 30328,
and the telephone number is (770) 392-4990. The Bank can be reached on the Web
at www.atlantabank.com.
4
<PAGE>
RISK FACTORS
An investment in the Company involves a high degree of risk, including risks
relating to: (i) the Company's limited operating history and operating deficit;
(ii) the new and evolving market for Internet banking; (iii) the Company's
ability to implement its business strategy; (iv) the Company's dependence on new
products and services; (v) systems failure and security; (vi) customer
attrition; (vii) the Company's reliance on third party service providers; (viii)
the Company's dependence on and need to hire additional qualified personnel;
(ix) control of the Company by its affiliates; (x) management's discretion as to
the use of unallocated net proceeds; (xi) the need for additional capital; (xii)
potential effects of changes in interest rates; and (xiii) competition. For a
more complete discussion of these and other risk factors, see "Risk Factors"
beginning on page 7.
THE REORGANIZATION
Pending a variety of regulatory approvals (all of which had been granted as
of , 1997, ), the Bank has been operated as a service of CFB
pursuant to the terms of an agreement among the Company, CFB and certain
organizers and investors in the Company. The Company has entered into an
agreement with Premier Bancshares, Inc. ("Premier") pursuant to which the
Company will purchase all of the issued and outstanding stock of Premier Bank,
FSB ("Premier Bank"), a federal savings bank and a wholly owned subsidiary of
Premier.
Upon consummation of the Premier stock purchase, CFB will transfer the
assets and liabilities relating to the operation of the Bank to the Company's
newly acquired federal savings bank subsidiary, Atlanta Internet Bank, FSB
(formerly Premier Bank). Upon completion of the transfer of assets and
liabilities, CFB will pay to the Bank 100% of the total amount of deposits with
the Bank, less certain adjustments, and CFB will beneficially own 1,325,000
shares, or 23.5%, of the outstanding Common Stock of the Company. The agreement
also gives CFB certain rights with respect to the nomination of members of the
Company's Board of Directors. The foregoing transactions, collectively referred
to as the "Reorganization," will be consummated simultaneously with the Offering
and are more fully described in "The Reorganization."
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.......... 3,000,000 shares
Common Stock to be outstanding after the
Offering................................... 5,645,562 shares(1)
Use of Proceeds.............................. To contribute capital to the Bank, fund a
portion of the purchase price for the
outstanding capital stock of Premier Bank,
reimburse certain organizational and
operational expenses, pay bonuses to officers
and employees and use for working capital and
general corporate purposes.
Proposed Nasdaq National Market symbol....... NTBK
</TABLE>
- ------------------------
(1) Includes 1,269,218 shares issued and outstanding as of March 31, 1997, 9,938
shares issued subsequent to March 31, 1997, 1,366,406 shares to be issued in
the Reorganization and 3,000,000 shares to be issued in the Offering. Does
not include 354,438 shares subject to employee stock options, none of which
are presently exercisable. Of the indicated options, 140,782 will become
exercisable upon consummation of the Offering, but are not expected to be
exercised at that time.
5
<PAGE>
SUMMARY FINANCIAL DATA
The summary historical financial information presented below, except for the
summary pro forma financial information, is derived from the Company's audited
financial statements as of December 31, 1996 and for the period February 20,
1996 (date of incorporation) to December 31, 1996 and the Company's unaudited
financial statements as of and for the three months ended March 31, 1997 and the
period February 20, 1996 (date of incorporation) to March 31, 1996. The summary
historical financial information and summary pro forma financial information
should be read in conjunction with the Company's financial statements and
condensed pro forma balance sheet and condensed pro forma statement of
operations and the related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FOR THE PERIOD
FEBRUARY 20, 1996
(DATE OF INCORPORATION)
TO FOR THE PERIOD FOR THE THREE MONTHS
DECEMBER 31, 1996 FEBRUARY 20, ENDED MARCH 31, 1997
---------------------------- 1996 TO MARCH ----------------------------
PRO FORMA 31, 1996 PRO FORMA
FOR THE -------------- FOR THE
ACTUAL REORGANIZATION(3) ACTUAL ACTUAL REORGANIZATION(3)
---------- ---------------- -------------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues(1)............................ $ 67,709 $ 67,709 $ 40,000 $ 5,775 $ 5,775
Expenses(2)............................ 3,906,891 3,916,058 16,266 1,805,800 1,808,550
---------- ---------------- -------------- ----------
Net income (loss)...................... $(3,839,182) $ (3,848,349) $ 23,734 $(1,800,025) $ (1,802,775)
---------- ---------------- -------------- ---------- ----------------
---------- ---------------- -------------- ---------- ----------------
Net income (loss) per common share..... $ (1.42) $ (1.38) $ .01 $ (.67) $ (.65)
---------- ---------------- -------------- ---------- ----------------
---------- ---------------- -------------- ---------- ----------------
Weighted average common and common
equivalent shares outstanding........ 2,699,331 2,793,100 2,699,331 2,699,331 2,793,100
---------- ---------------- -------------- ---------- ----------------
---------- ---------------- -------------- ---------- ----------------
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
---------------------------------------------
AS OF PRO FORMA
DECEMBER 31, FOR THE
1996 PRO FORMA REORGANIZATION
------------ FOR THE AND THE
ACTUAL ACTUAL REORGANIZATION(3) OFFERING(4)
------------ ----------- ---------------- --------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit).......................... $ (598,423) ($1,458,559) $ (1,608,559) $ 28,131,441
Total assets....................................... 1,246,449 778,442 48,115,357 76,995,291
Long-term debt, less current portion............... -- -- -- --
Total shareholders' equity (deficit)............... (386,073) (1,278,631) (1,153,631) 28,586,369
</TABLE>
- ------------------------
(1) Revenues primarily reflect management fees paid to the Company by CFB
related to certain consulting and support services performed by the Company
for CFB.
(2) Expenses include $2,400,000 of amortization relating to an agreement with
CFB.
(3) To give effect to the acquisition of the charter of Premier Bank and
consummation of the transfer of the assets and liabilities relating to the
operation of the Bank from CFB to the Company.
(4) Adjusted to give effect to the sale of the Common Stock offered hereby by
the Company at an assumed offering price of $11.00 per share and the
application of the net proceeds therefrom. See "Use of Proceeds." The
unaudited pro forma for the Reorganization and the Offering data includes
one-time charges of approximately $450,000 for bonuses expected to be paid
to certain officers and employees and $224,045 for non-cash compensation
related to accelerated vesting of nonqualified options to purchase Common
Stock upon consummation of the Offering, and gives effect to the receipt of
approximately $30.2 million of net proceeds from the Offering of which
$860,000 will be used to repay liabilities of the Company. See "Pro Forma
Condensed Balance Sheet" and "Certain Transactions."
6
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE COMPANY INVOLVES A HIGH DEGREE OF RISK. PROSPECTIVE
PURCHASERS SHOULD GIVE CAREFUL CONSIDERATION TO THE SPECIFIC FACTORS SET FORTH
BELOW, AS WELL AS THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS, BEFORE
PURCHASING THE COMMON STOCK OFFERED HEREBY.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
LIMITED OPERATING HISTORY; OPERATING DEFICIT
The Company was incorporated in February 1996, and the Bank commenced
operations as a service of CFB in October 1996. Accordingly, the Company has no
history of operations as a bank or thrift holding company and the Bank has only
a limited operating history upon which an evaluation of the Company and its
prospects can be based. The Company's prospects must be considered in light of
the risks, expenses and difficulties frequently encountered by companies in
their early stages of development, particularly companies in the new and rapidly
evolving market for electronic banking. To address these risks, the Company
must, among other things, build its customer base, respond to competitive
developments, continue to attract, retain and motivate qualified employees, and
continue to upgrade its technologies, products and services. There can be no
assurance that the Company will be successful in addressing such risks. The
Company has incurred operating losses since inception and expects to incur
operating losses through 1997 and may incur additional operating losses in the
future. There can be no assurance that the Company will achieve or continue to
sustain profitability. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
NEW AND EVOLVING MARKET FOR INTERNET BANKING
The market for Internet banking services has only recently begun to develop,
is rapidly evolving and is characterized by an increasing number of market
entrants who have introduced or developed such services. As is typical in the
case of a new and rapidly evolving industry, demand and market acceptance for
Internet banking is subject to a high level of uncertainty. The industry is
young and has few proven competitors. Moreover, security and other critical
issues concerning the commercial use of the Internet (including security,
reliability, cost, ease of use and access and quality of service) remain
unresolved and may impact the growth of Internet use. While management believes
Internet banking offers significant advantages over traditional branch and
PC-based home banking, there can be no assurance that Internet banking will
become widespread.
In addition, market acceptance of Internet banking is substantially
dependent upon the adoption of the Internet for general commerce and financial
services transactions. The adoption of the Internet for these purposes,
particularly by those individuals and enterprises that have historically relied
upon traditional banking services, requires the acceptance of a new way of
conducting business and exchanging information. There can be no assurance that
PC users will adopt the Internet for electronic banking or commerce.
Because the market for Internet banking is new and evolving, it is difficult
to predict the future growth rate, if any, and size of this market. There can be
no assurance that the market for Internet banking will develop or that the
Bank's services will be accepted. If the market fails to develop, develops more
slowly than expected or becomes saturated with competitors, or if Internet
banking does not achieve market acceptance, the Company's business, operating
results and financial condition could be materially adversely affected. See
"Business--Industry Background" and "--Market Opportunity."
7
<PAGE>
ABILITY TO IMPLEMENT BUSINESS STRATEGY
The Company's business strategy is dependent upon its ability to offer
secure, convenient, cost-effective and comprehensive financial services on the
Internet. The growth and expansion of the Bank's business have placed, and are
expected to continue to place, significant demands on the Company's management,
operational and financial resources. Successful implementation of the Company's
business strategy requires continued growth of the Internet banking market and
will depend on the Company's ability to (i) increase significantly the number of
customers using the Bank for their financial service requirements; (ii)
implement an earning asset strategy; (iii) develop new strategic alliances for
products and services; (iv) implement and improve the Bank's operational,
financial and management information systems; and (v) hire and train additional
qualified personnel. There can be no assurance that the Company will be
successful in the implementation of its business strategy. See
"Business--Strategy."
DEPENDENCE UPON NEW PRODUCTS AND SERVICES
The Company's success will depend in part upon the Bank's ability to offer
new products and provide new financial services that meet changing customer
requirements. The Bank presently offers interest-bearing checking accounts,
money market accounts and certificates of deposit and provides ATM, direct
deposit, monthly statement, on-line transfer, wire transfer, bank e-mail and
electronic bill paying services. There can be no assurance that the Company can
successfully develop and bring new products and services to market in a timely
manner. Furthermore, PC-based home banking systems have been marketed in the
past by other banking companies and have not enjoyed widespread consumer demand.
Accordingly, there can be no assurance that there will be widespread consumer
acceptance of banking systems such as those offered by the Bank. See
"Business--Industry Background," "--Market Opportunity" and "--Competition."
RISK OF SYSTEMS FAILURE; SECURITY RISKS
The computer systems and network infrastructure utilized by the Bank could
be vulnerable to unforeseen problems. The Bank's operations are dependent upon
its ability to protect its computer equipment against damage from fire, power
loss, telecommunications failure or a similar catastrophic event. Any damage or
failure that causes an interruption in the Bank's operations could have a
material adverse effect on the Company's business, operating results and
financial condition.
In addition, the Bank's operations are dependent upon its ability to protect
the computer systems and network infrastructure utilized by the Bank against
damage from physical break-ins, security breaches and other disruptive problems
caused by the Internet or other users. Such computer break-ins and other
disruptions would jeopardize the security of information stored in and
transmitted through such computer systems and network infrastructure, which may
result in significant liability to the Bank and deter potential customers.
Although management intends to continue to implement security technology and
establish operational procedures to prevent such damage, there can be no
assurance that these security measures will be successful. A failure of such
security measures could have a material adverse effect on the Company's
business, operating results and financial condition. See "Business--Security."
The Bank is also part of a developing and rapidly evolving market for
Internet and Web-based electronic banking. Market acceptance of Internet banking
is substantially dependent upon the adoption of the Internet for general
commerce and financial services transactions. If another provider of financial
services through the Internet were to suffer damage from a physical break-in,
security breach or other disruptive problem caused by the Internet or other
users, such event could harm the growth and acceptance among the public of the
Internet for financial services transactions. Such an event could deter
potential customers of the Bank or cause customers to leave the Bank and thereby
have a material adverse effect on the Company's business, operating results and
financial condition.
8
<PAGE>
CUSTOMER ATTRITION
The market for Internet banking is new and evolving. Therefore, management
is unable to predict whether customers will continue to use the Internet or the
Bank. In addition, the attractive rates offered by the Bank may attract
short-term depositors who close their accounts in pursuit of higher rates
elsewhere. Management expects that some customer attrition will occur within the
first few months after a new customer begins to use the Bank's services.
Management believes that customers who experience difficulty in accessing the
Bank or in conducting transactions early in their relationship with the Bank may
terminate the relationship. Customer attrition could have a material adverse
effect on the Company's business, operating results and financial condition.
RELIANCE ON THIRD PARTY SERVICE PROVIDERS
The Company receives essential technical, marketing and customer service
support from AT&T's Advanced Network Solutions Division through a bundled
product and service offering called "Personal Financial Services" pursuant to an
agreement between the Company and AT&T. The Bank also receives professional
programming services from Edify Corporation ("Edify") and electronic bill
payment processing services from CheckFree Corporation ("CheckFree") under this
agreement. Although the AT&T agreement expires in February 1998, it may be
terminated without cause by either party upon six months' prior written notice.
The Bank's systems processing is performed by BISYS under an agreement between
BISYS and the Company. The BISYS agreement expires in July 1999, subject to
automatic renewal for successive three-year periods absent six months' prior
written notice to the contrary by either party. If the Company were unable to
replace AT&T, Edify, CheckFree or, in particular, BISYS, with another service
provider prior to the effective termination of services under the applicable
agreement, the Company's operations would be interrupted. If such interruption
were to continue for a significant period of time, the Company's business,
operating results and financial condition could be materially adversely
affected. See "Business--Operations."
DEPENDENCE UPON KEY PERSONNEL; NEED TO HIRE ADDITIONAL QUALIFIED PERSONNEL
The Company's success will depend upon the continued service of its senior
management team, which consists of D. R. Grimes, Vice Chairman and Chief
Executive Officer of the Company and the Bank; Donald S. Shapleigh, Jr.,
President and Chief Operating Officer of the Company and the Bank; Robert E.
Bowers, Chief Financial Officer of the Company and the Bank; and Belinda L.
Morgan, Chief Operations Officer of the Company and the Bank. The Company's
success also will depend upon its ability to attract and retain additional
highly qualified technical personnel. The Bank's employees may voluntarily
terminate their employment at any time, and competition for qualified employees
is intense. The Company does not carry key person life insurance on any of its
executives. The loss of the services of key personnel, or the inability to
attract additional qualified personnel, could have a material adverse effect
upon the Company's business, operating results and financial condition. See
"Management."
CONTROL BY AFFILIATES
Following the sale of the Common Stock offered hereby, the directors and
executive officers of the Company will beneficially own 2,096,252 shares,
representing 36.2% of the outstanding Common Stock of the Company. These totals
include 1,325,000 shares, representing 23.5% of the Common Stock outstanding
after the Offering, that will be beneficially owned by CFB. As a result, the
directors and executive officers of the Company and their affiliates will be
able to exercise significant control over the management and the affairs of the
Company and will have the power to block certain business combinations. In
addition, CFB has the right to nominate four directors to the Company's Board of
Directors. The right expires upon the initial appointment of the nominated
director or a director elected in opposition to the nominee. Pursuant to this
right, CFB nominated three of the Company's current directors and retains the
right to nominate one additional director in the future. Of the three CFB
nominees currently serving as
9
<PAGE>
directors, one has a term expiring in 1998, one has a term expiring in 1999 and
one has a term expiring in 2000. Carolina First Corporation ("Carolina First"),
the bank holding company of CFB, is deemed to control the Company for purposes
of the Bank Holding Company Act of 1956, as amended. See "Management--Directors
and Executive Officers" and "Certain Transactions."
MANAGEMENT'S DISCRETION AS TO USE OF UNALLOCATED NET PROCEEDS
The Company has designated only limited specific uses for the net proceeds
from the sale of Common Stock described in this Prospectus. The Company expects
to use the net proceeds from the Offering as follows: (i) approximately
$25,000,000 as a contribution to capital for the Bank; (ii) $2,150,000 to fund a
portion of the purchase price for the outstanding capital stock of Premier Bank;
(iii) approximately $1,500,000 to reimburse CFB for expenses incurred in
operating the Bank prior to the Reorganization; (iv) approximately $500,000 to
reimburse TSJ&A for expenses incurred for management, consulting, regulatory and
accounting services, as well as office space and clerical support during the
Bank's organization and its ongoing operations prior to the Reorganization; (v)
payment of up to $450,000 in bonuses to certain officers and employees; and (vi)
the remaining $590,000 for working capital and other general corporate purposes.
Consequently, the Board of Directors and management of the Company will have
broad discretion in allocating a significant portion of the net proceeds of the
Offering. See "The Reorganization" and "Use of Proceeds."
ADDITIONAL CAPITAL NEEDS
Management anticipates that its existing capital resources, including the
net proceeds of the sale of the Common Stock offered hereby, will adequately
satisfy the foreseeable capital requirements of the Company and the Bank. Future
capital requirements, however, depend on many factors, including the Bank's
ability to successfully attract new customers and provide additional services.
To the extent that the funds generated by the Offering are insufficient to fund
future operating requirements, it may be necessary to raise additional funds
through public or private financings. Any equity or debt financings, if
available at all, may be on terms which are not favorable to the Company and, in
the case of equity financings, could result in dilution to the Company's
shareholders. If adequate capital is not available, the Bank will be subject to
an increased level of regulatory supervision and the Company's business,
operating results and financial condition could be adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Supervision and Regulation."
POTENTIAL EFFECTS OF CHANGES IN INTEREST RATES
The operations of the Bank are substantially dependent on its net interest
income, which is the difference between the interest income earned on its
interest-earning assets and the interest expense paid on its interest-bearing
liabilities. Like most depository institutions, the Bank's earnings are affected
by changes in market interest rates and other economic factors beyond its
control. If an institution's interest-earning assets have longer effective
maturities than its interest-bearing liabilities, the yield on the institution's
interest-earning assets generally will adjust more slowly than the cost of its
interest-bearing liabilities and, as a result, the institution's net interest
income generally would be adversely affected by material and prolonged increases
in interest rates and positively affected by comparable declines in interest
rates. In recent years, the assets of many financial institutions have been
negatively "gapped"--which means that the dollar amount of interest-bearing
liabilities which reprice within specific time periods, either through maturity
or rate adjustment, exceeds the dollar amount of interest-earning assets which
reprice within such time periods. As a result, the net interest income of these
savings institutions, including the Bank, would be expected to be negatively
impacted by increases in interest rates.
In addition to affecting interest income and expense, changes in interest
rates also can affect the value of the Bank's interest-earning assets, which are
comprised of fixed and adjustable-rate instruments, and the
10
<PAGE>
ability to realize gains from the sale of such assets. Generally, the value of
fixed-rate instruments fluctuates inversely with changes in interest rates.
COMPETITION
The market for electronic banking has only recently begun to develop, is
rapidly evolving and has few proven competitors. Management expects that
competition will intensify in the future. Management believes that its ability
to compete successfully depends upon a number of factors, including market
presence; customer service and satisfaction; the capacity, reliability and
security of its network infrastructure; ease of access to and navigation of the
Internet; the pricing policies of its competitors; the timing of introductions
of new products and services by the Company and its competitors; and industry
and general economic trends. In addition, the Bank faces substantial competition
for its loan and deposit products from traditional financial institutions and
will also face substantial competition for its brokerage and asset management
services from firms specializing in those services. Many of these competitors
are larger than the Bank and have greater financial and other resources. These
competitors include commercial banks, savings and loan associations, credit
unions, brokerage firms, mutual fund companies and other financial services
companies. See "Business--Competition."
GOVERNMENT REGULATION
Upon consummation of the Reorganization, the Company will be subject to
regulation by the Federal Reserve Board ("Federal Reserve") and the Georgia
Department of Banking and Finance (the "Department of Banking") and the Bank
will be regulated by the Office of Thrift Supervision ("OTS") and the Federal
Deposit Insurance Corporation ("FDIC"). In conducting various aspects of its
business, the Bank is subject to various laws and regulations relating to
commercial transactions generally, such as the Uniform Commercial Code, and is
also subject to the electronic funds transfer rules embodied in Regulation E,
promulgated by the Federal Reserve. Given the expansion of the electronic
commerce market, it is possible that any of the foregoing agencies could revise
existing regulations or adopt new regulations governing or affecting the Bank's
ability to conduct its business via the Internet. Additionally, Congress has
held hearings on whether to regulate providers of services and transactions in
the electronic commerce market, and it is possible that Congress or individual
states could enact laws regulating Internet banking. If enacted, such laws,
rules and regulations could have a material adverse effect on the Company's
business, operating results and financial condition. See "Business--Supervision
and Regulation."
DIVIDEND POLICY
The Company does not intend to pay cash dividends in the foreseeable future,
as any earnings are expected to be retained for use in developing and expanding
the Bank's business. See "Dividend Policy."
ANTITAKEOVER PROVISIONS OF THE COMPANY'S ARTICLES OF INCORPORATION AND BYLAWS
Certain provisions of the Company's Amended and Restated Articles of
Incorporation and Bylaws may be deemed to have the effect of making more
difficult an acquisition of control of the Company in a transaction not approved
by the Company's Board of Directors. These provisions include the ability of the
Board of Directors to issue shares of preferred stock in one or more series
without further authorization of the Company's shareholders, a supermajority
shareholder approval requirement for certain transactions and provisions
requiring a classified Board of Directors.
The Company's Amended and Restated Articles of Incorporation authorize the
issuance of "blank check" preferred stock with such designations, rights and
preferences as may be determined from time to time by its Board of Directors.
Accordingly, the Company's Board of Directors is empowered, without shareholder
approval, to issue preferred stock with dividend, liquidation, conversion,
voting or other rights which could adversely affect the voting power or other
rights of the holders of Common Stock. In the event
11
<PAGE>
of such issuance, the preferred stock could also be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. Although management has no current intention to issue
any shares of preferred stock, there can be no assurance that the Company will
not do so in the future. See "Description of Capital Stock."
The Amended and Restated Articles of Incorporation require the affirmative
vote of the holders of two-thirds of the voting stock to approve certain
mergers, share exchanges and dispositions of the assets of the Company unless at
least two-thirds of the members of the Board of Directors approve the proposed
transaction. If such approval by the Board of Directors is obtained, approval by
the vote of a majority of the outstanding shares entitled to vote is required.
This provision may tend to discourage attempts by third parties to acquire the
Company in a hostile takeover effort. It may also permit a minority of directors
and shareholders to prevent a business combination regardless of the terms of
the proposed transaction.
The Amended and Restated Articles of Incorporation also provide that the
Board of Directors will be divided into three classes serving staggered
three-year terms and that a director may only be removed by the vote of
two-thirds of the outstanding shares entitled to vote in an election of
directors or by the vote of at least two-thirds of the directors then in office.
These provisions could enable a minority of the Company's shareholders to
prevent the removal of a director sought to be removed by a majority of the
shareholders and may tend to enhance management's ability to retain control over
the Company's affairs and to preserve the director's present position on the
Board.
NO PRIOR MARKET; VOLATILITY OF STOCK PRICE
Prior to this Offering, there has been no market for the Common Stock, and
there can be no assurance that an active market will develop or be sustained.
The trading price of the Common Stock could be subject to significant
fluctuations in response to quarterly variations in the Company's actual or
anticipated operating results, changes in general market conditions and other
factors. In recent years, significant price and volume fluctuations have
occurred in the stock prices of companies that often have been unrelated or
disproportionate to their operating performance. There can be no assurance that
the market price of the Common Stock will not decline below the initial public
offering price. The initial public offering price of the Common Stock will be
determined by negotiations among the Company and the Representatives of the
Underwriters. See "Underwriting."
SHARES ELIGIBLE FOR FUTURE SALE
Upon the completion of this Offering, there will be 5,645,562 shares of
Common Stock outstanding. Of these shares, the 3,000,000 shares sold in this
Offering will be freely tradeable without restriction, except for any shares
purchased by an "affiliate" of the Company. The remaining 2,645,562 shares of
Common Stock will be "restricted securities" as that term is defined in Rule 144
promulgated under the Securities Act of 1933, as amended (the "Securities Act").
The Company and each of its directors, officers and existing shareholders have
agreed, for a period of 180 days from the date of this Prospectus, not to sell
or otherwise dispose, directly or indirectly, of any shares of Common Stock,
without the prior consent of the Representatives. As a result, commencing 180
days after the completion of this Offering, 1,249,342 restricted shares of
Common Stock will be eligible for sale in the public market pursuant to Rule
144. The remaining 1,396,220 restricted shares of Common Stock must be held for
one year before they may be resold pursuant to Rule 144, unless the resale of
such shares is made pursuant to an effective registration statement under the
Securities Act or another exemption from registration is available. Of these
shares, 1,325,000 will be held by CFB, which has agreed, for a period of one
year, not to sell or otherwise dispose, directly or indirectly, of those shares
without the prior consent of the Representatives. The market price of the
Company's Common Stock could be materially adversely affected by the sale or
availability for sale of shares now held by the existing shareholders of the
Company or of shares which may be issued under the Company's 1996 Stock
Incentive Plan. See "Management," "Shares Eligible for Future Sale" and
"Underwriting."
12
<PAGE>
DILUTION
Purchasers in this Offering will incur an immediate and substantial dilution
in the net tangible book value of the Common Stock from the initial public
offering price. Without taking into account any changes in net tangible book
value after March 31, 1997, other than to give effect to the sale by the Company
of 3,000,000 shares of Common Stock in this Offering, based upon the assumed
initial public offering price of $11.00 per share and after deducting the
underwriting discounts and commissions and the estimated offering expenses, the
net tangible book value of the Company at March 31, 1997 would have been
approximately $28,311,369, or $5.02 per share. This represents an immediate
increase in net tangible book value of $5.56 per share to the existing
shareholders and an immediate net tangible book value dilution of $5.98 per
share to purchasers in this Offering. See "Dilution."
THE REORGANIZATION
The Company was incorporated as a Georgia corporation on February 20, 1996.
Its primary business purpose is the operation of the Bank as a wholly owned
federal savings bank subsidiary of the Company. The transactions described below
are collectively referred to as the "Reorganization." All of the transactions
comprising the Reorganization will be consummated contemporaneously with the
consummation of the Offering.
The Company entered into a Stock Purchase Agreement on June 17, 1996, which
was amended and restated as of December 19, 1996 and which was further amended
on February 25, 1997, with Premier, pursuant to which the Company will purchase
all of the issued and outstanding stock of Premier Bank, a federal savings bank
and a wholly owned subsidiary of Premier. The Company decided to purchase
Premier's outstanding stock because the Company needed a charter for the Bank
and, due to a pending internal reorganization, Premier's charter was available.
In exchange for the stock of Premier Bank, Premier will receive from the Company
$2,150,000 in cash and 41,406 shares of Common Stock. The consideration purchase
price was negotiated at arms length by the parties based on their respective
assessments of the market value of the Premier Bank charter.
The Company's purchase of the Premier Bank stock (the "Stock Purchase") and
certain transactions contemplated thereby are subject to the approval of the
OTS, the Department of Banking and the FDIC. These agencies issued their
approvals on , 1997, , 1997 and , 1997, respectively.
The Bank has been operated as a service of CFB pursuant to the terms of an
agreement dated July 15, 1996, which was amended on December 6, 1996 and which
was further amended on March 18, 1997 (the "Operation Agreement") among the
Company, CFB and certain organizers and investors in the Company. The Operation
Agreement provides that CFB will operate the Bank as a service of CFB under the
trade name "Atlanta Internet Bank" and that the Company will manage the
operations of the Bank. Under the terms of the Operation Agreement, CFB will
provide funding for the reasonable expenses of operation of the Bank up to the
amount of $1,325,985 or until July 31, 1997. As of April 22, 1997, CFB had
funded $1,197,007 for the operations of the Bank. CFB will be reimbursed for
these expenses from the net proceeds of the Offering.
Upon consummation of the Stock Purchase, CFB will transfer the assets and
liabilities relating to the operation of the Bank to the Company's newly
acquired federal savings bank subsidiary, Atlanta Internet Bank, FSB (formerly
Premier Bank, FSB). As consideration for the transfer, and for operating the
Bank as a service of CFB, the Company will pay $1.00 to CFB and will issue to
CFB 1,325,000 shares of Common Stock. Based on the appraised fair market value
of the Common Stock on the date of the Agreement, the shares to be received by
CFB were valued at $3,840,000. Upon completion of the transfer of assets and
liabilities as contemplated by the Operation Agreement (the "CFB Transfer"), CFB
will transfer to the Bank 100% of the total amount of deposits with the Bank,
less the sum of: (i) all cash items; (ii) net interest income based upon the
Bank's cost of deposits and the interest income allocated by CFB to the Bank's
operations, which is not expected to exceed a cost of $200,000; (iii)
unreimbursed reasonable expenses (including the funding advanced by CFB under
the terms of the Operation Agreement described above) to the extent not
reflected in (ii) above, not expected to exceed $1,500,000; and (iv) the net
book
13
<PAGE>
value of loans, if any, issued by the Bank. The only unreimbursed expenses
incurred or to be incurred by CFB from its operation of the Bank consists of
$31,232 in contributed services from an affiliate that the Company recorded as
additional paid-in capital in fiscal 1996. The CFB Transfer is subject to
approval by the Federal Reserve, which was received on , 1997.
The Operation Agreement gives CFB the right to nominate four directors to
the Company's Board of Directors. The right expires upon the initial appointment
of the nominated director or a director elected in opposition to the nominee.
Pursuant to this right, CFB nominated three of the Company's current directors
and retains the right to nominate one additional director in the future. Of the
three CFB nominees currently serving as directors, one has a term expiring in
1998, one has a term expiring in 1999 and one has a term expiring in 2000. Upon
completion of the Offering, CFB will beneficially own 1,325,000 shares, or
23.5%, of the outstanding Common Stock of the Company. The Company and CFB
intend to maintain a normal correspondent relationship following the
consummation of the Reorganization and the Offering. Correspondent services and
transactions, which are expected to include purchases by the Company of loans
and loan participations, will be on terms no less favorable than could be
obtained from an unaffiliated third party for comparable transactions and as a
matter of Company policy, must be approved by a majority of the Company's
directors who are not affiliated with CFB.
The following chart depicts the participants in the Reorganization and the
Company's organization structure before and after the Reorganization.
PRIOR TO THE REORGANIZATION
[CHART]
AFTER THE REORGANIZATION
[CHART]
See "Selected Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for financial information
regarding the Company and the Bank and "Principal Shareholders" for information
regarding the ownership of the Company's Common Stock before and after the
Reorganization and the Offering.
14
<PAGE>
USE OF PROCEEDS
The net proceeds (assuming an offering price of $11.00 per share) from the
sale of 3,000,000 shares of Common Stock offered by the Company are estimated to
be $30,190,000 ($33,259,000 if the Underwriters' over-allotment option is
exercised in full) after deducting the underwriting discount and estimated
offering expenses payable by the Company. The Company plans to use the net
proceeds of the Offering as follows: (i) $25,000,000 as a contribution to
capital for the Bank; (ii) $2,150,000 to fund a portion of the purchase price
for the outstanding capital stock of Premier Bank; (iii) approximately
$1,500,000 to reimburse CFB for expenses incurred in operating the Bank prior to
the Reorganization; (iv) approximately $500,000 to reimburse TSJ&A for expenses
incurred for management, consulting, regulatory and accounting services, as well
as office space and clerical support during the Bank's organization, and its
ongoing operations prior to the Reorganization; (v) payment of up to $450,000 in
bonuses to certain officers and employees; and (vi) the remaining $590,000 for
working capital and other general corporate purposes. The capital contributed to
the Bank will constitute common equity capital of the Bank for regulatory
capital purposes and will be used for general corporate purposes. See "Risk
Factors--Management's Discretion as to Use of Unallocated Net Proceeds," "The
Reorganization" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
DIVIDEND POLICY
The Company currently intends to retain any future earnings to finance the
growth and development of its business and therefore does not anticipate paying
any cash dividends in the foreseeable future. In addition, OTS regulations
govern the dividends that may be paid by the Bank. See "Business--Supervision
and Regulation--Capital Distributions."
15
<PAGE>
DILUTION
As of March 31, 1997, the pro forma for the Reorganization net tangible book
value (total tangible assets less total liabilities) of the Company was
approximately $(1,428,631), or $(.54) per share of Common Stock. After giving
effect to the receipt of approximately $30.2 million of estimated net proceeds
from this Offering (net of estimated underwriting discounts and offering
expenses), the pro forma net tangible book value of the Common Stock outstanding
at March 31, 1997 would have been $5.02 per share, representing an immediate
increase in the net tangible book value of $5.56 per share to the existing
shareholders and an immediate dilution of $5.98 per share (the difference
between the assumed initial public offering price and the net tangible book
value per share after this Offering) to persons purchasing Common Stock at the
initial public offering price. The following table illustrates such per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share(1).......... $ 11.00
---------
Pro forma for the Reorganization net tangible book value
per share before the Offering(2)........................ $ (.54)
---------
Increase in net tangible book value per share attributable
to the sale of Common Stock in the Offering(3).......... $ 5.56
---------
Pro forma net tangible book value per share after giving
effect to the Reorganization and the Offering(4).......... $ 5.02
---------
Dilution in pro forma net tangible book value to the
purchasers of Common Stock offered hereby(5).............. $ 5.98
---------
---------
</TABLE>
The foregoing computations do not include 354,438 shares of Common Stock
issuable upon exercise of outstanding stock options at an average exercise price
of $5.79 per share and 9,938 shares of Common Stock previously subscribed at a
purchase price of $.14 per share. Assuming the exercise of all such options and
stock subscriptions, the pro forma net tangible book value per share before the
Offering would be $.21, the pro forma net tangible book value per share after
the Offering would be $5.06, and the dilution per share to new investors would
be $5.94.
- ------------------------
(1) Before deduction of estimated underwriting discounts and expenses to be paid
by the Company.
(2) Pro forma for the Reorganization net tangible book value per share is
determined by dividing the net tangible book value of the Company after the
Reorganization of ($1,428,631) by the number of shares of Common Stock
outstanding after the Reorganization of 2,635,624.
(3) Increase in net tangible book value per share attributable to the sale of
Common Stock in the Offering is determined by deducting the net tangible
book value per share before the Offering of $(.54) from the net tangible
book value per share after giving effect to the Reorganization and the
Offering of $5.02.
(4) Pro forma net tangible book value per share after giving effect to the
Reorganization and the Offering is determined by dividing the net tangible
of the Company after the Reorganization and the Offering of 28,311,369 by
the number of shares of Common Stock outstanding after the Reorganization
and the Offering of 5,635,624.
(5) Dilution is determined by subtracting the pro forma for the Reorganization
and Offering net tangible book value per share at March 31, 1997 of $5.02
from the assumed initial public offering price of $11.00 paid by a new
investor for a share of Common Stock.
16
<PAGE>
The following table sets forth on a pro forma basis as of March 31, 1997,
the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid by the existing
shareholders (including persons receiving shares of Common Stock in the
Reorganization) and by the new investors purchasing shares of Common Stock in
this Offering (assuming an initial public offering price of $11.00 per share):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------------ ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(IN THOU- (IN THOU-
SANDS) SANDS)
Existing Shareholders....................................... 2,636 46.8 % $ 5,062 13.3 % $ 1.92
New Investors............................................... 3,000 53.2 33,000 86.7 11.00
----- ----- --------- -----
Total................................................. 5,636 100.0 % $ 38,062 100.0 %
----- ----- --------- -----
----- ----- --------- -----
</TABLE>
17
<PAGE>
CAPITALIZATION
The following table sets forth (i) the historical capitalization of the
Company as of March 31, 1997, (ii) the pro forma capitalization of the Company
as of March 31, 1997 after giving effect to the issuance of 1,366,406 shares of
Common Stock in the Reorganization, and (iii) the pro forma capitalization of
the Company as of March 31, 1997, as adjusted to give effect to the sale by the
Company of 3,000,000 shares of Common Stock in the Offering and the application
of the net proceeds therefrom as described in "Use of Proceeds." This table
should be read in conjunction with the Company's financial statements and notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Pro Forma Condensed Balance Sheet" included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
---------------------------------------------
<S> <C> <C> <C>
PRO FORMA
FOR THE
PRO FORMA REORGANIZATION
HISTORICAL FOR AND THE
CONSOLIDATED REORGANIZATION OFFERING(1)
------------- -------------- --------------
Long-term debt, less current portion............................... $ -- $ -- $ --
------------- -------------- --------------
------------- -------------- --------------
Shareholders' Equity (Deficit):
Preferred Stock, no par value; 10,000,000 shares authorized; none
issued and outstanding........................................... -- -- --
Common Stock, $.01 par value; 100,000,000 shares authorized; issued
and outstanding 1,269,218; pro forma for the Reorganization
2,635,624; and pro forma for the Reorganization and the Offering
5,635,624........................................................ $ 12,692 $ 26,356 $ 56,356
Additional paid-in capital......................................... 1,307,929 5,259,265 35,419,265
Common stock subscribed, 1,334,938 shares and 9,938 shares pro
forma............................................................ 3,841,395 1,395 1,395
Stock subscriptions receivable (9,938 shares)...................... (1,395) (1,395) (1,395)
Unamortized affiliate service contract expense..................... (576,000) --
Unamortized stock plan expense..................................... (224,045) (224,045)
Deficit accumulated during the development stage................... (5,639,207) (6,215,207) (6,889,252)
------------- -------------- --------------
Total shareholders' equity (deficit)......................... $ (1,278,631) $ (1,153,631) $ 28,586,369
------------- -------------- --------------
Total capitalization......................................... $ (1,278,631) $ (1,153,631) $ 28,586,369
------------- -------------- --------------
------------- -------------- --------------
</TABLE>
- ------------------------
(1) The pro forma for the Reorganization and the Offering data includes one-time
charges of approximately $450,000 for bonuses expected to be paid to certain
officers and employees and $224,045 for non-cash compensation related to
accelerated vesting of nonqualified options to purchase Common Stock upon
consummation of the Offering.
18
<PAGE>
SELECTED FINANCIAL DATA
The following selected historical financial information should be read in
conjunction with the Company's financial statements and condensed pro forma
balance sheet and statement of operations and the related notes thereto included
elsewhere in this Prospectus and with "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The selected financial statement
data set forth below as of December 31, 1996 and with respect to the period from
February 20, 1996 (date of incorporation) to December 31, 1996 is derived from
the audited financial statements of the Company included elsewhere in this
Prospectus. The selected financial statement data set forth below as of March
31, 1997 and with respect to the period February 20, 1996 (date of
incorporation) to March 31, 1996, the three months ended March 31, 1997 and for
the period February 20, 1996 (date of incorporation) to March 31, 1997 is
derived from the unaudited financial statements of the Company included
elsewhere in this Prospectus. The pro forma statement of operations information
for the period February 20, 1996 to December 31, 1996 was derived from the
audited historical financial statements and for the three months ended March 31,
1997 was derived from the unaudited financial statements of the Company and
adjusted to give effect to the acquisition of the outstanding capital stock of
Premier Bank. The pro forma balance sheet information as of March 31, 1997 was
derived from the unaudited historical financial statements of the Company and
the unaudited statement of assets and liabilities generated by the Internet
banking operations of the Company and held and serviced by CFB, adjusted to give
effect to the Reorganization as of March 31, 1997 and further adjusted to give
effect to the Reorganization and the Offering as of March 31, 1997. The pro
forma information as of March 31, 1997 and for the period February 20, 1996 to
December 31, 1996 and for the three months ended March 31, 1997 does not purport
to represent what the Company's financial position or results of operations
would have been had the agreements been consummated at earlier dates, nor is
such information intended to be indicative of the Company's future financial
position or results of operations.
<TABLE>
<CAPTION>
FOR THE PERIOD
FEBRUARY 20, 1996 FOR THE PERIOD
(DATE OF INCORPORATION) FEBRUARY 20,
TO 1996 (DATE OF THREE MONTHS FOR THE PERIOD
DECEMBER 31, 1996 INCORPORATION) ENDED MARCH 31, 1997 FEBRUARY 20,
---------------------------- TO MARCH 31, ----------------------------- 1996 (DATE OF
PRO FORMA 1996 PRO FORMA INCORPORATION)
FOR THE -------------- FOR THE TO MARCH 31,
ACTUAL REORGANIZATION(3) ACTUAL ACTUAL REORGANIZATION(3) 1997
---------- ---------------- -------------- ----------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenues(1)........... $ 67,709 $ 67,709 $ 40,000 $ 5,775 $ 5,775 $ 73,484
Expenses.............. 3,906,891(2) 3,916,058(2) 16,266 1,805,800(4) 1,808,550(4) 5,712,691
---------- ---------------- -------------- ----------- ---------------- --------------
Net income (loss)..... $(3,839,182) $ (3,848,349) $ 23,734 ($1,800,025) $ (1,802,775) $ (5,639,207)
---------- ---------------- -------------- ----------- ---------------- --------------
---------- ---------------- -------------- ----------- ---------------- --------------
Net income (loss) per
common share........ $ (1.42) $ (1.38) $ .01 $ (.67) $ (.65)
---------- ---------------- -------------- ----------- ----------------
---------- ---------------- -------------- ----------- ----------------
Weighted average
common and common
equivalent shares
outstanding......... 2,699,331 2,793,100 2,699,331 2,699,331 2,793,100
---------- ---------------- -------------- ----------- ----------------
---------- ---------------- -------------- ----------- ----------------
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
---------------------------------------------
AS OF PRO FORMA
DECEMBER 31, FOR THE
1996 PRO FORMA REORGANIZATION
------------ FOR THE AND THE
ACTUAL ACTUAL REORGANIZATION(3) OFFERING(5)
------------ ----------- ---------------- --------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit).......................... $ (598,423) ($1,458,559) $ (1,608,559) $ 28,131,441
Total assets....................................... 1,246,449 778,442 48,115,357 76,995,291
Total shareholders' equity (deficit)............... (386,073) (1,278,631) (1,153,631) 28,586,369
</TABLE>
- ------------------------
(1) Revenues primarily reflect management fees paid to the Company by CFB
related to certain consulting and support services performed by the Company
for CFB.
(2) Expenses include $2,400,000 of amortization relating to an agreement with
CFB and pro forma expenses include $9,167 of amortization related to the
cost of the bank charter acquired with the acquisition of the outstanding
capital stock of Premier Bank.
(3) To give effect to the acquisition of the outstanding capital stock of
Premier Bank and consummation of the transfer of the assets and liabilities
relating to the operation of the Bank from CFB to the Bank.
(4) Expenses include $864,000 of amortization relating to an agreement with CFB
and pro forma expenses include $2,750 of amortization related to the cost of
the bank charter acquired with the acquisition of the outstanding capital
stock of Premier Bank.
(5) Adjusted to give effect to the sale of the Common Stock offered hereby by
the Company at an offering price of $11.00 per share and the application of
the net proceeds therefrom. See "Use of Proceeds." The unaudited pro forma
for Reorganization and the Offering data includes one-time charges of
approximately $450,000 for bonuses expected to be paid to certain officers
and employees and $224,045 for non-cash compensation related to accelerated
vesting of nonqualified options to purchase Common Stock upon consummation
of the Offering, and gives effect to the receipt of approximately $30.2
million in net proceeds from the Offering including the payment of
approximately $860,000 in liabilities from such proceeds. See "Pro Forma
Condensed Balance Sheet" and "Certain Transactions."
20
<PAGE>
PRO FORMA CONDENSED BALANCE SHEET
The following unaudited condensed pro forma balance sheet as of March 31,
1997 gives effect to the consummation of the agreement between the Company and
CFB and the acquisition of the outstanding capital stock of Premier Bank. The
pro forma condensed balance sheet should be read in conjunction with the
Company's financial statements and related notes thereto and the statement of
assets and liabilities generated by the Internet banking operations of the
Company and held and serviced by CFB and related note thereto included elsewhere
in the Prospectus.
The unaudited pro forma condensed balance sheet presented below does not
purport to represent what the Company's balance sheet would have been had the
agreement with CFB and the acquisition of Premier Bank been consummated at an
earlier date.
<TABLE>
<CAPTION>
MARCH 31, 1997
----------------------------------------------------------------------------------------
STATEMENT OF
ASSETS AND
LIABILITIES
COMPANY GENERATED BY PRO FORMA PREMIER
ASSETS (HISTORICAL) BANK(1) ADJUSTMENTS BANK PRO FORMA ADJUSTMENTS
------------ ------------- -------------- ----------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents...... $ 194,668 $43,408,922 $ 2,000,000 $ (1,197,007)(2) $ (2,150,000)(3)
License agreements--current.... 133,378
Other current assets........... 270,468
Loans.......................... 5,000,000
------------ ------------- -------------- ----------- -------------- --------------
Total current assets......... 598,514 43,408,922 -- 7,000,000 (1,197,007) (2,150,000)
------------ ------------- -------------- ----------- -------------- --------------
Investment in Premier............ 2,275,000(3) (2,275,000)(4)
Bank Charter..................... 275,000(4)
License Agreements............... 30,306
Furniture and Equipment--Net..... 149,622
------------ ------------- -------------- ----------- -------------- --------------
Total assets................. $ 778,442 $43,408,922 -- $ 7,000,000 $ 1,077,993 $ (4,150,000)
------------ ------------- -------------- ----------- -------------- --------------
------------ ------------- -------------- ----------- -------------- --------------
LIABILITIES AND SHAREHOLDERS'
DEFICIT
Current liabilities:
Amounts due to affiliate....... $1,197,007 $ (1,197,007)(2)
Other payables and accrued
liabilities.................. 860,066
Deposits....................... $43,408,922 $ 5,000,000
------------ ------------- -------------- ----------- -------------- --------------
Total current liabilities.... 2,057,073 43,408,922 -- 5,000,000 (1,197,007) --
------------ ------------- -------------- ----------- -------------- --------------
SHAREHOLDERS' EQUITY (DEFICIT):
Preferred stock..................
Common stock..................... 12,692 $ 13,250(5) 414(3)
Additional paid-in capital....... 1,307,929 3,826,750(5) $ 2,000,000 124,586(3) (2,000,000)(4)
Common stock subscribed.......... 3,841,395 (3,840,000)(5)
Stock subscription receivable.... (1,395)
Unamortized affiliate service
contract expense............... (576,000) 576,000
Unamortized stock plan expense... (224,045)
Deficit accumulated during
development stage.............. (5,639,207) (576,000)(5)
------------ ------------- -------------- ----------- -------------- --------------
Total shareholders' equity
(deficit).................. (1,278,631) -- -- 2,000,000 125,000 (2,000,000)
------------ ------------- -------------- ----------- -------------- --------------
Total liabilities and
shareholders' equity
(deficit).................. $ 778,442 $43,408,922 $ -- $ 7,000,000 $ (1,072,007) $ (2,000,000)
------------ ------------- -------------- ----------- -------------- --------------
------------ ------------- -------------- ----------- -------------- --------------
<CAPTION>
PRO FORMA
FOR THE
PRO FORMA REORGANIZATION
FOR THE PRO FORMA AND THE
ASSETS REORGANIZATION ADJUSTMENTS OFFERING
--------------- --------------- ---------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents...... $ 42,256,583 $ 30,190,000(9) $ 71,136,517
(860,066)(8)
(450,000)(6)
License agreements--current.... 133,378 133,378
Other current assets........... 270,468 270,468
Loans.......................... 5,000,000 5,000,000
--------------- --------------- ---------------
Total current assets......... 47,660,429 28,879,934 76,540,363
--------------- --------------- ---------------
Investment in Premier............
Bank Charter..................... 275,000 275,000
License Agreements............... 30,306 30,306
Furniture and Equipment--Net..... 149,622 149,622
--------------- --------------- ---------------
Total assets................. $ 48,115,357 $ 28,879,934 $ 76,995,291
--------------- --------------- ---------------
--------------- --------------- ---------------
LIABILITIES AND SHAREHOLDERS'
DEFICIT
Current liabilities:
Amounts due to affiliate.......
Other payables and accrued
liabilities.................. $ 860,066 $ (860,066)(8)
Deposits....................... 48,408,922 $ 48,408,922
--------------- --------------- ---------------
Total current liabilities.... 49,268,988 (860,066) 48,408,922
--------------- --------------- ---------------
SHAREHOLDERS' EQUITY (DEFICIT):
Preferred stock..................
Common stock..................... 26,356 30,000(9) 56,356
Additional paid-in capital....... 5,259,265 30,160,000(9) 35,419,265
Common stock subscribed.......... 1,395 1,395
Stock subscription receivable.... (1,395) (1,395)
Unamortized affiliate service
contract expense...............
Unamortized stock plan expense... (224,045) 224,045(7) --
Deficit accumulated during
development stage.............. (6,215,207) (224,045)(7) (6,889,252)
(450,000)(6)
--------------- --------------- ---------------
Total shareholders' equity
(deficit).................. (1,153,631) 29,740,000 28,586,369
--------------- --------------- ---------------
Total liabilities and
shareholders' equity
(deficit).................. $ 48,115,357 $ 28,879,934 $ 76,995,291
--------------- --------------- ---------------
--------------- --------------- ---------------
</TABLE>
- ------------------------
(1) Represents assets and liabilities generated by the Company's Internet
banking operations as held and serviced by CFB.
(2) Adjustment to settle amounts due to CFB for $1,197,007
21
<PAGE>
(3) Adjustments to reflect the investment in Premier Bank based on the estimated
purchase price of approximately $2,150,000 in cash plus 27,593 shares of
Common Stock valued at $2.81 a share and 13,813 shares of Common Stock
valued at $3.47 a share for a total purchase price of $2,275,000
representing $2,000,000 of unimpaired capital and $275,000 for the cost of
the bank charter.
(4) Adjustment to consolidate the investment in Premier Bank by allocating the
purchase price to the fair market value of assets acquired and liabilities
assumed. The following allocation is based upon current estimates which will
be subsequently adjusted based upon final determination of the fair value of
assets acquired and liabilities assumed as of the closing date.
The purchase price has been allocated to the assets acquired and liabilities
assumed as follows:
<TABLE>
<S> <C>
Cash.................................................................................................. $ 2,000,000
Loans................................................................................................. 5,000,000
Deposits.............................................................................................. (5,000,000)
Bank charter.......................................................................................... 275,000
------------
Total estimated purchase price.................................................................. $ 2,275,000
------------
------------
</TABLE>
(5) Adjustment to reflect the issuance of 1,325,000 shares of the Company's
Common Stock in consummation of the agreement with CFB.
(6) Adjustment to reflect one-time charge of approximately $450,000 for bonuses
expected to be paid to certain officers upon the completion of the Offering.
(7) Adjustment to reflect one-time charges of approximately $224,045 for
non-cash compensation related to accelerated vesting of nonqualified options
to purchase Common Stock upon consummation of the Offering.
(8) Adjustment to pay off the liabilities of the Company using the proceeds of
the Offering. See "Use of Proceeds."
(9) Adjustment to give effect to the receipt of approximately $30,190,000 of net
proceeds from the Offering.
22
<PAGE>
PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
The following pro forma condensed statements of operations give effect to
the consummation of the agreement between the Company and CFB and the
acquisition of the outstanding capital stock of Premier Bank. The pro forma
condensed statements of operations should be read in conjunction with the
Company's financial statements and related notes thereto, and the statements of
assets and liabilities generated by the Internet banking operations of the
Company and held and serviced by CFB and related note thereto.
The unaudited pro forma condensed statements of operations presented below
do not purport to represent what the Company's statements of operations would
have been had the agreement with CFB and the acquisition of the outstanding
capital stock of Premier Bank been consummated at an earlier date.
<TABLE>
<CAPTION>
FOR THE PERIOD
FEBRUARY 20, 1996
(DATE OF INCORPORATION) FOR THE THREE
TO MONTHS ENDED
DECEMBER 31, 1996 MARCH 31, 1997
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
ACTUAL PRO FORMA ACTUAL PRO FORMA
------------ -------------- ------------ --------------
Total revenues............................... $ 67,709 $ 67,709 $ 5,775 $ 5,775
Total expenses............................... 3,906,891 3,916,058(1) 1,805,800 1,808,550(2)
------------ -------------- ------------ --------------
Net loss..................................... $ 3,839,182 $ 3,848,349(1) $ 1,800,025 $ 1,802,775
------------ -------------- ------------ --------------
------------ -------------- ------------ --------------
Net loss per common and common equivalent
share...................................... $ 1.42 $ 1.38 $ .67 $ .65
------------ -------------- ------------ --------------
------------ -------------- ------------ --------------
Weighted average common and common equivalent
shares outstanding......................... 2,699,331 2,793,100(3) 2,699,331 2,793,100(3)
------------ -------------- ------------ --------------
------------ -------------- ------------ --------------
</TABLE>
- ------------------------
(1) Includes ten months of amortization expense of $9,167 related to the
$275,000 of cost of the bank charter recorded in conjunction with the
acquisition of the outstanding capital stock of Premier Bank which is being
amortized over a 25-year period.
(2) Includes three months of amortization expense of $2,750 related to the
$275,000 of cost of the bank charter recorded in conjunction with the
acquisition of the outstanding capital stock of Premier Bank which is being
amortized over a 25-year period.
(3) Includes the issuance of 1,325,000 shares of Common Stock which is
subscribed as of December 31, 1996 and March 31, 1997 and the issuance of
41,406 shares to acquire Premier Bank. The 1,325,000 of subscribed shares
represented the equivalent of 1,272,637 shares using the treasury stock
method as of December 31, 1996 and March 31, 1997.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company was incorporated as a Georgia corporation on February 20, 1996.
Its primary business purpose is to operate a bank as a wholly owned federal
savings bank subsidiary. The Company entered into a Stock Purchase Agreement
dated June 17, 1996, which was amended and restated as of December 19, 1996 and
was further amended on February 25, 1997 with Premier to purchase all of the
issued and outstanding stock of Premier Bank, a federal savings bank and a
wholly owned subsidiary of Premier, in exchange for $2,150,000, comprised of
$2,000,000 of unimpaired capital and $150,000 purchase premium, and 41,406
shares of the Company's Common Stock. The transactions contemplated by the Stock
Purchase Agreement are subject to the approval of the OTS, the Department of
Banking and the FDIC. These agencies issued their approvals on , 1997,
, 1997 and , 1997, respectively. The Stock Purchase will take place
simultaneously with the closing of the Company's initial public offering.
Since its opening in October 1996, the Bank has operated as a service of CFB
pursuant to the terms of an agreement dated July 15, 1996. Under the agreement,
CFB operates the Bank as a service of CFB under the trade name "Atlanta Internet
Bank" and the Company manages the operations of the Bank. As part of the
agreement, CFB will receive 1,325,000 shares of Common Stock of the Company and
reimburse actual expenses up to a maximum of $1,325,985. Upon consummation of
the Premier Stock Purchase, CFB will transfer the assets (less any interim
operating loss) and liabilities relating to the operation of the Bank to the
Company's federal savings bank subsidiary, which will be renamed Atlanta
Internet Bank upon consummation of all transactions. As of December 31, 1996 and
March 31, 1997, CFB had funded $883,606 and $1,197,007, respectively, of
operating expenses. As of April 23, 1997, the Bank had 1,991 accounts and
approximately $43.8 million in deposits.
Management believes the Bank will provide convenient, cost-effective and
secure banking services utilizing the Internet as the primary channel for
delivery of its commercial and financial services to the growing number of
consumers who use the Internet. Customer convenience and operating efficiency
are two key components of the Company's strategy. Customers will be able to
access the Bank through the Internet, a telephone or an ATM on a 7x24 basis.
Management does not intend to have a traditional branch/teller system as a
delivery channel, thereby reducing typical salary and overhead occupancy costs.
It is also management's intent to limit internal operating costs for systems
processing and programming services by outsourcing as many operations as
practical. Management believes it can take advantage of the economies of scale
of large providers of these services. In August 1996, the Company entered into a
systems processing agreement with BISYS effective through July 1999, subject to
automatic renewal for three-year periods absent a six-month notice of
termination by either party. Pursuant to agreements with AT&T, the Company
receives technical, marketing and customer service support, including
professional programming services from Edify and electronic bill paying
processing services from CheckFree.
24
<PAGE>
RESULTS OF OPERATIONS
The following table summarizes the results of operations of the Company
since incorporation, February 20, 1996, to December 31, 1996, for the period
from February 20, 1996 to March 31, 1996 and for the three months ended March
31, 1997. The financial statements and related notes should be read in
conjunction with this review.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM FEBRUARY FOR THE PERIOD FROM
20, 1996 FEBRUARY 20, 1996 FOR THE THREE MONTHS
(DATE OF INCORPORATION) (DATE OF INCORPORATION) ENDED
TO DECEMBER 31, 1996 TO MARCH 31, 1996 MARCH 31, 1997
----------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES: $ 67,709 $ 40,000 $ 5,775
---------- ---------- ----------
<CAPTION>
% OF % OF % OF
EXPENSES: EXPENSES EXPENSES EXPENSES
----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Amortization of service contract......... 2,400,000 61.4 0 0.0% 864,000 47.8%
Salaries and consulting fees............. 836,962 21.4 14,353 88.2 524,971 29.1
Marketing................................ 197,111 5.0 0 0.0 60,495 3.4
Professional fees........................ 83,633 2.1 999 6.2 21,277 1.2
Logo/web site............................ 73,326 1.9 0 0.0 18,945 1.1
Monthly user fees........................ 60,452 1.6 0 0.0 52,561 2.9
Travel, meetings and entertainment....... 38,794 1.0 392 2.4 4,404 0.2
Occupancy................................ 17,850 0.5 0 0.0 29,750 1.6
Depreciation............................. 17,406 0.5 0 0.0 6,879 0.4
Other operating expenses................. 181,357 4.6 522 3.2 119,993 6.6
Interest expense......................... 0 0.0 0 0.0 102,525 5.7
---------- ----- ---------- ----- ---------- -----
Total expenses....................... 3,906,891 100.0 16,266 100.0 1,805,800 100.0
---------- ----- ---------- ----- ---------- -----
----- ----- -----
NET INCOME (LOSS).......................... $3,839,182 $ 23,734 $(1,800,025)
---------- ---------- ----------
---------- ---------- ----------
NET INCOME (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE......................... $ (1.42) $ 0.01 $ (0.67)
---------- ---------- ----------
---------- ---------- ----------
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING............ 2,699,331 2,669,331 2,669,331
---------- ---------- ----------
---------- ---------- ----------
DEPOSITS (780 accounts serviced by CFB at
December 31, 1996 and 1,789 accounts
serviced by CFB at March 31, 1997 and
included in CFB Statements of Assets and
Liabilities)............................. $10,366,437 $43,408,922
---------- ----------
---------- ----------
</TABLE>
The statement of operations reflects the initial phase of the Company's
operations, including the acquisition, testing and implementation of the
Internet banking platform, marketing expenses and the accrual of CFB's expense
reimbursements. As noted above, since the Company has not received approval for
its purchase of the outstanding capital stock of Premier, deposits and related
assets resulting from the Company's marketing efforts are reflected in CFB's
financial statements. Therefore, as of December 31, 1996, CFB had recorded
$10,366,437 in deposits for the Bank, $10,164,927 in money market deposit
accounts and $201,510 in interest checking accounts. Under a July 15, 1996
agreement, deposits and related assets resulting from the Company's marketing
efforts, which began in August 1996, are included in CFB's financial statements.
As of March 31, 1997, CFB had recorded $43,408,922 in deposits for the Bank in
1,789 accounts consisting of: $32,534,384 in money market deposit accounts;
$10,492,293 in certificates of deposit; and $382,245 in interest checking
accounts. There were no deposits as of March 31, 1996. The amount of interest
expense net of interest paid to the Bank by CFB for such deposits was not
significant for the period ended December 31, 1996. Only miscellaneous fees and
consulting revenues are included in Revenues.
PERIOD ENDED DECEMBER 31, 1996
AMORTIZATION OF SERVICE CONTRACT. The Company has agreed to issue to CFB
1,325,000 shares of its Common Stock appraised at $3,840,000 on the date of
contract, July 15, 1996. This amount is being
25
<PAGE>
amortized to expense over the estimated eight-month life (August 1996 to March
1997) of the service contract.
SALARIES AND CONSULTING FEES. These expenses include $318,772 of Company
salary and benefit expenses and $160,042 of compensation expense of CFB, as well
as $358,148 of consulting service for accounting, regulatory and service
development expenses of TSJ&A.
MARKETING. These expenses primarily include advertising expenses of
$106,586 and marketing materials of $48,344.
PROFESSIONAL FEES. These expenses include legal and accounting fees.
MONTHLY USER FEES. These expenses include monthly user fees payable to AT&T
covering charges such as Edify's Electronic Banking System, CheckFree's
electronic bill paying system and ongoing customer support. Also, costs for
initial customer support and monthly fees for each customer accessing the Bank
through the Internet are included in these expenses.
OTHER EXPENSES. These expenses include copying costs, office supplies and
general office expenses, as well as monthly processing charges, including
communication charges. Other expenses also include $48,050 paid to AT&T
including amortization related to a $200,000 fee paid to AT&T for programming
services. This $200,000 is being amortized over the 18-month contract period.
STOCK OPTIONS AND OTHER COMPENSATION. The Company adopted its 1996 Stock
Incentive Plan (the "Plan") which provides that key employees, officers,
directors, and consultants of the Company may be granted nonqualified and
incentive stock options to purchase shares of Common Stock of the Company,
derivative securities related to the value of the Common Stock or cash awards.
The Plan limits the total number of shares which may be awarded to 397,500,
which have been reserved for the Plan. Awards to officers and employees under
the Plan were as follows: 16,562 nonqualified stock options at an exercise price
of $1.21 per share on November 25, 1996; 124,219 nonqualified stock options at
an exercise price of $1.21 per share on January 5, 1997; 39,750 incentive stock
options at an exercise price of $3.62 per share and 173,906 incentive stock
options at an exercise price of $10.00 per share on February 25, 1997. In
connection with the awards of the nonqualified options, the Company will record
total compensation of $266,250. Generally, the options vest over a three-year
period; however, when the Offering is completed, all of the nonqualified options
will vest immediately.
The Company has agreed to pay certain officers and employees bonuses of up
to $450,000 when the Offering is completed. See "Certain Transactions."
THREE MONTHS ENDED MARCH 31, 1997
AMORTIZATION OF SERVICE CONTRACT. The agreement with CFB was amended on
February 25, 1997 to extend the service agreement through May 31, 1997.
Therefore, the unamortized service contract balance of $1,440,000 as December
31, 1996 is being amortized in the 1997 statement of operations for the Bank
over the remaining life of the contract.
SALARIES AND CONSULTING FEES. These expenses include $245,852 of Company
salary and benefit expenses, $176,257 of consulting and compensation expense of
CFB, and $71,408 of consulting services for accounting, regulatory and service
development expenses of TSJ&A.
INTEREST EXPENSE. The Company entered into a service contract with CFB to
hold and to service the deposits generated by the Company until the Company's
receipt of regulatory approval for operations. The consideration to CFB includes
reimbursement for net interest expense, if any, on deposits generated by the
Company. For the three months ending March 31, 1997, interest expense calculated
at contracted deposit rates exceeded interest income paid to the Bank by CFB for
such deposits, calculated at Fed Funds rate, by $102,525.
26
<PAGE>
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128").
See Note 7 in the Notes to the Financial Statements included elsewhere in the
Prospectus for the pro forma effect of SFAS 128 on the operations of the
Company.
CAPITAL RESOURCES.
Management believes it has sufficient capital on hand and under the
Operation Agreement with CFB to satisfy working capital needs for 1997.
Concurrent with closing, management intends to immediately purchase the
outstanding shares of Premier Bank and transfer the bank assets and
corresponding liabilities of the "Atlanta Internet Bank" from CFB. The Company
anticipates that $25 million of the Offering proceeds will be contributed to the
Bank for general corporate purposes. The balance of the net proceeds will be
used for the CFB asset transfer ($1.5 million), general corporate purposes ($2.0
million) and repayment of liabilities and registration costs.
27
<PAGE>
BUSINESS
OVERVIEW
Upon completion of the Offering, the Company will own and operate the
Atlanta Internet Bank, which provides convenient, cost-effective and secure
banking services to the growing number of consumers using the Internet for
commercial and financial services. Customers can access the Bank on a 7x24 basis
from any PC, wherever located, by means of a secure Web browser or by ATM,
telephone or U.S. mail.
The Company's objective is to offer a broad range of banking and financial
service products through the Internet and alternative delivery channels.
Customer convenience and operating efficiency are two key components of the
Company's strategy. The Bank does not incur the cost of supporting a physical
branch system, which management believes will benefit customers through the
Bank's ability to offer attractive deposit rates.
In the initial phase of the Company's operations, management concentrated
its efforts on developing, testing and implementing an Internet banking
platform. Once the platform structure was in place, management established
deposit-oriented products that include electronic bill paying, checking and
money market accounts and certificates of deposit. During 1997, management
intends to offer a broad array of consumer loan products, such as personal
credit lines, mortgages, home equity and secured loans, credit cards and other
fee generating products. Management also plans to continue to pursue other
revenue generating opportunities through partnerships and strategic alliances
where appropriate.
Customers can access the Bank through any Internet service provider by means
of an acceptable secure Web browser such as Netscape's NAVIGATOR (Version 2.0 or
higher) or Microsoft's INTERNET EXPLORER (Version 3.0 or higher). Customers can
review account activity, enter transactions into an on-line account register,
pay bills electronically and print bank statement reports, all on a real-time
basis. Unlike PC-based home banking software, which resides on a PC that stores
the data and requires manual downloading and backup, the Bank enables customers
to transact banking business on a real-time basis from any location provided
they have a secure Web browser to connect them to the Bank through the Internet.
The Bank currently offers interest-bearing checking accounts, money market
accounts and certificates of deposit and provides direct deposit, monthly
statement, on-line transfer, wire transfer, bank e-mail and electronic bill
paying services. As of April 23, 1997, the Bank had 1,991 accounts and
approximately $43.8 million in deposits, of which approximately $10.5 million
was invested in certificates of deposit, approximately $32.7 million was
invested in money market accounts and approximately $614,000 was invested in
interest-bearing checking accounts.
The Company was incorporated as a Georgia corporation on February 20, 1996.
The Bank commenced operations in October 1996 as a service of CFB under the
trade name "Atlanta Internet Bank" pending regulatory approval of the Company's
purchase of the outstanding stock of Premier Bank and the transfer of the assets
and liabilities relating to the operation of the Bank from CFB.
INDUSTRY BACKGROUND
THE INTERNET
The Internet is a global web of computer networks. Developed more than 25
years ago, this "network of networks" allows any computer connected to the
Internet to communicate with any other computer using the Internet protocol. The
Internet historically was used by academic institutions, defense contractors and
government agencies primarily for remote access to host computers and for
sending and receiving e-mail. Before the 1990s, communication on the Internet
was conducted in an arcane language requiring a high degree of technical
knowledge. During the 1990s, however, software packages called "browsers" were
developed to allow non-technical users to find, retrieve and link information on
the Internet. Browsers allow highlighted words or icons, called hyperlinks, to
display text, video, graphics and sound on a local
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computer screen no matter where the originating resource is located. In
addition, individuals are connecting directly to the Internet through a variety
of easy-to-use software packages and Internet access gateways provided by
consumer on-line services.
Use of the Internet has grown rapidly during the 1990s and is expected to
continue to grow. According to an industry source, the number of Internet users
is expected to increase from 38 million in 1995 to 199 million in 1999. Much of
the recent growth in Internet use by businesses and individuals has been driven
by the emergence of a network of servers and information available on the
Internet called the "World Wide Web." The Web features a rapidly increasing
number of "home pages" that provide information about a wide variety of
institutions, businesses and individuals. A home page functions primarily as an
advertisement, however, and does not necessarily allow a user to transact
business on a real-time basis with the person or entity sponsoring the page. For
example, although several hundred banks have home pages on the Web, management
believes that only a few have the capability to transact banking business over
the Internet. Management believes the Bank is the only bank that operates solely
on the Internet without branch locations.
ELECTRONIC BANKING
The creation of the Web and the introduction of Web browsers with graphical
presentation and "point and click" navigation have made the Internet a
mainstream global network. A variety of security standards have been developed
to make the Internet safer for general commerce and financial services
transactions. Transactions can now be protected through secure Web servers that
are separated from general purpose Web servers and through encrypted
transmissions between servers and the user's PC.
The increasing amount of commerce transacted on the Web has prompted the
development of electronic banking delivery systems. These forms of electronic
delivery systems provide convenience for customers and allow financial
institutions to lower their overhead costs. The two types of electronic banking,
PC-based home banking and Internet banking, are very different in their
functionality, means of operations and timeliness. The characteristics of each
are described below.
PC-BASED HOME BANKING. PC-based home banking requires PC-based financial
services software products such as Intuit Inc.'s ("Intuit") QUICKEN, Microsoft's
MONEY or Meca Software, LLC's ("Meca") MANAGING YOUR MONEY. Each product carries
its own set of instructions that the customer must learn before commencing any
banking transactions. The software resides on the customer's PC along with his
or her account data and requires a dial-up modem and manual downloading.
Consequently, PC-based home banking must be conducted from the PC containing the
customer's software and account data. The customer must back up his or her
account data at frequent intervals to reduce the risk of losing data. Because
the customer must connect with the financial institution via modem and download
his or her account data, real-time transactions are not possible. The
information presented to the customer is current only as of the time it was
downloaded to the customer's PC.
INTERNET BANKING. Unlike PC-based home banking, Internet banking requires
only a secure Web browser for Internet access to the Internet and the financial
institution. No particular software is required and the customer's operations
are not restricted to a specific PC. Instead, the customer accesses the
financial institution through the Internet and deposits or transfers funds, pays
bills or transacts other business on a real-time basis. Account data remains
stored on the Bank's secure server at all times, protected by technology
designed specifically to safeguard such information. No downloading or back-up
is required, as the Bank's server backs up all data and transactions on a
continuous basis. With Internet banking, the information presented to the
customer remains current at all times.
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The following chart compares the typical features of Internet banking,
PC-based home banking and traditional branch banking:
<TABLE>
<CAPTION>
BANKING SERVICE DELIVERY CHANNEL
<S> <C> <C> <C>
TRADITIONAL BRANCH
INTERNET BANKING PC-BASED HOME BANKING BANKING
--------------------- ----------------------- -----------------------
Accessibility 7 days a week 7 days a week Traditional Banking
24 hours per day 24 hours per day Hours
Real-Time Processing Batch Processing (2)
(1) Batch Processing (2)
-----------------------------------------------------------------------
Convenience Need Only Internet Banking Software and Branches and ATMs
Access and Secure Account Data Reside on
Browser Single PC
No Customer Back-up Requires Frequent
Required Customer Back-up
-----------------------------------------------------------------------
Cost No Branches No Branches Full Overhead Structure
Low Personnel Cost Reduced Personnel
and Other Overhead Cost and Other Overhead
-----------------------------------------------------------------------
Data Security Password/ID Protected Password/ID Protected N/A
Encrypted Dial-up Secure Dial-up Modem N/A
Modem Transmission Transmission
All Data Stored on Data Stored on PC All Data Stored on
Secured System Secured System
-----------------------------------------------------------------------
Technology Program Upgrades Upgrades Require New N/A
Flexibility Centralized and Diskettes to be
Require no Customer Installed on PC by
Installation Customer
</TABLE>
- ------------------------
(1) Customer transfers between their accounts are processed on a real-time
basis.
(2) Customer transfers between their accounts are batched and processed daily.
MARKET OPPORTUNITY
The use of electronic banking delivery systems is growing as consumers find
electronic banking to be convenient and cost-effective. According to Forrester
Research, Inc., the number of electronic banking households is expected to grow
from 1.1 million in 1996 to 9.7 million in 2001, with total assets managed
on-line expected to increase from $5.4 billion to $46.9 billion during that
period. Forrester's report further indicates that while Internet banking was
being used by less than 10% of electronic banking households in 1996, the
percentage of such households utilizing Internet banking is projected to rise to
over 75% in 2001.
A fall 1995 Internet demographic study by CommerceNet/Nielsen Media Research
revealed that in the U.S., nearly two-thirds of Web users have a college
education. The survey also indicated that in the U.S., more than 50% of Web
users are 35 years of age or younger and 25% of Web users' households have
annual household incomes of at least $80,000. Management believes that Internet
users generally carry higher bank balances and use more financial services.
Management believes the increasing number of users of the Internet and the
Web, coupled with the demographic characteristics of those users and the
relative flexibility and convenience of Internet banking, represents a market
opportunity for the Company as one of the world's first providers of Internet
banking services.
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STRATEGY
The Company's objective is to become a leading provider of financial
services through the Internet. Management intends to accomplish this objective
by implementing the following strategies. No assurance can be given, however,
that the Company will be successful in implementing these strategies or in
achieving its stated objective.
- LEVERAGE LOW COST STRUCTURE. The Bank is not required to pay the overhead
expenses necessary to support a traditional branch operation, and
operating costs are therefore generally lower. The absence of a branch
system and the Company's low cost per transaction enable it to offer
attractive deposit rates without significantly impacting profitability.
- OUTSOURCE OPERATIONAL FUNCTIONS. The Company has entered into agreements
with companies that provide a variety of specialized services and
technologies to the Bank. For example, the Bank's Internet technology,
transaction processing, bill payment functions and other services are all
outsourced to third-party service providers. In each of these
relationships, the Bank benefits from the service provider's expertise and
economies of scale while retaining the flexibility to take advantage of
changes in available technology without impacting customer service.
- PROVIDE CONVENIENT, REAL-TIME TRANSACTIONS. Management believes the Bank
provides customers with a higher level of convenience than can be achieved
in a traditional branch or through PC-based home banking. The Internet
allows Bank customers to conduct banking activities on a real-time, 7x24
basis from any PC, wherever located, using a secure Web browser. This
technology gives Internet banking an advantage over PC-based home banking,
which utilizes PC-based software, requires repeated manual downloading and
back-up and limits the user to a specific PC.
- EMPLOY ADVANCED SECURITY. The Bank uses sophisticated technology to
provide what management believes to be among the most advanced security
measures currently available in the electronic banking industry. All
banking transactions are encrypted and all transactions are routed from
the Internet server through a "firewall" that limits access to the Bank
server. The Bank's systems automatically detect attempts by third parties
to access other users' accounts and feature a high degree of physical
security, secure modem access, service continuity and transaction
monitoring. At the Company's request, AT&T is obtaining a Statement of
Accounting Standards 70 ("SAS 70") audit by a national accounting firm. In
an SAS 70 audit, the auditors issue a report addressing whether the
computer systems are being managed and operated in a manner consistent
with accepted practices. The SAS 70 audit procedure is expected to be
completed by summer 1997. See "--Security."
- OFFER A BROAD ARRAY OF PRODUCTS AND SERVICES. The Internet provides an
opportunity for the Bank to deliver a variety of traditional consumer loan
and deposit products. Management intends to expand the Bank's product and
service offerings to include services such as asset management with money
market sweeps, direct purchase capability with selected Internet "mall"
venues and reloadable cash cards.
- DEPLOY MULTI-FACETED MARKETING STRATEGY. The Company's target market
includes on-line users, on-line shoppers and special niche customers. In
addition to the Bank's on-line advertising with AT&T's WorldNet Services
and Digital Cities/AOL, several other marketing initiatives are being
employed. These initiatives include a significant emphasis on marketing
the Bank's services through alliances with selected professional
organizations, colleges, alumni associations and consumer service
providers and on targeted print advertising.
- CROSS-SELL FINANCIAL SERVICES. Management intends to market loans,
brokerage services and other income generating products to its depositors
through various direct marketing techniques, such as bank e-mail, on-line
advertising and telemarketing. Management believes this strategy will
enable the Bank to generate additional earning assets and fee income.
Management further believes that selling multiple products will enhance
customer loyalty and strengthen customer relations with the Bank.
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MARKETING
CURRENT MARKETING STRATEGIES
Prior to its October 1996 launch, the Bank embarked on a marketing campaign
to establish its presence as an Internet-only bank that offers a variety of
services and provides additional convenience and flexibility without the
overhead and operating costs associated with a physical branch system.
The Bank currently markets its services through advertising campaigns in
printed material, such as newspapers and magazines, as well as on various Web
sites through relationships with entities such as AT&T WorldNet. The Bank's
marketing, advertising and public relations campaigns focus on the following
three components:
- VALUE. The Bank's relatively low overhead and operating costs enable it to
offer higher interest rates than those normally offered by traditional
banks. The Bank entered the market in October 1996 with attractive
introductory rates on its money market and checking accounts. This pricing
structure has been successful in attracting depositors who are motivated
by the Bank's rates, as well as by the variety of services the Bank
expects to promote in the future. Consequently, management believes the
Bank's customer base will grow as new product and service offerings
provide additional incentives for banking on-line.
- CONVENIENCE AND SERVICE. Unlike traditional banks, the Bank never closes.
Its products and services are available on a 7x24 basis at the user's
convenience. Unlike depositors in traditional banks, the Bank's depositors
have complete control over when and how they access their accounts.
PC-based home banking, which utilizes PC-based software, requires repeated
manual downloading and back-up and limits the user to a specific PC. The
Bank's customers have real-time, interactive access to their accounts from
any PC, wherever located, by means of a secure Web browser. The Bank's
services offer a solution for busy people who travel, people with
disabilities, college students and their families, employees on
international assignment, and the growing population using the Internet
for a variety of services. The convenience of Internet banking becomes
increasingly valuable as new products and services are offered.
- SERVICE PROVIDERS. The Bank has carefully chosen its service providers in
an effort to ensure the highest quality service possible to its customers.
AT&T's WorldNet Service enabled the Bank to commence its on-line
operations with a well-known Internet service provider. The Bank's
relationship with AT&T also provides efficient end-user technical support
and quick response to on-line e-mail inquiries. See "--Operations--Service
Providers."
FUTURE MARKETING STRATEGIES
Management intends to continue to market the Bank's services through a
combination of special marketing alliances, advertising campaigns and public
relations activities, while expanding joint marketing programs and advertising
with AT&T WorldNet, Digital Cities/AOL and other Internet service providers.
While the key messages of value, convenience, service and reliability will
continue to play a major role in
the Bank's marketing and public relations efforts, management also intends to
focus on targeted groups. The Bank's primary goal will be to grow its account
base to solidify its brand name recognition in multiple market segments.
Management intends to identify and pursue customers through several additional
channels, including, but not limited to:
- ON-LINE USERS. Management believes that current Internet users are
favorably predisposed to Internet services. This is a rapidly growing
demographic group, as increasing numbers of users go on-line every day.
The Bank currently is using AT&T WorldNet and Digital Cities/AOL as banner
sites. Management plans to register the Bank on the Internet's top search
engines, use on-line banner advertising opportunities and establish the
Bank's presence with other Internet service providers and targeted
Internet sites.
- ON-LINE SHOPPERS. The Bank has an arrangement with one of the world's
first on-line retail "malls" to pioneer an on-line shoppers account.
Management believes on-line shopping will become one of
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the fastest growing segments on the Internet over the next two years.
Management intends to actively market the Bank's services to this
population.
- MARKETING ALLIANCES. Management intends to market the Bank's services
through alliances with selected professional organizations, colleges,
alumni associations and consumer service providers. For example, the Bank
recently entered into such an alliance with the Georgia Institute of
Technology Alumni Association. In each case, management will emphasize the
uniqueness of the Bank and its exclusive offerings to a particular group.
- SPECIAL NICHE CUSTOMERS. The Bank is targeting specific market segments
such as college students, U.S. citizens living outside the United States,
disabled persons and residents of large apartment complexes. The Bank is
developing programs that are tailored to fit their demographic profiles.
One example already underway is the Corporate Call program, which offers
special incentives and services to employees of targeted companies, often
in technology-related industries. These services and special rates already
have been used successfully to attract employees of several companies to
the Bank's services.
SPECIFIC PUBLIC RELATIONS ACTIVITIES
A vital part of the Bank's marketing plan is the execution of its public
relations strategy. For each of its targeted marketing campaigns, management
will develop a public relations campaign for advertising and editorial coverage.
Many traditional public relations methods will be used in promoting Bank
services. Management intends to pursue media coverage, including general press,
industry periodicals, television, radio and other media covering banking and
finance, technology, consumer issues and special interests. Press releases,
video news releases, direct mail campaigns, media alerts and presentations will
announce new banking services as they are added, as well as new partnerships and
alliances. Additionally, management plans to develop specific "net campaigns"
for Internet advertising, forum discussions and general electronic public
relations. The Bank also will continue to work with AT&T to develop joint
promotional materials as new services are added. AT&T provided significant
marketing support for the Bank's initial launch and has indicated that it will
continue to work with the Bank to develop marketing strategies.
PRODUCTS AND SERVICES
CURRENT PRODUCTS AND SERVICES
The Bank currently offers interest-bearing checking accounts, money market
accounts and certificates of deposit. Each new Bank customer receives a
password, a checkbook and an ATM card. In addition, the Bank provides electronic
bill paying services, direct deposit, on-line transfer, wire transfer and other
services traditionally associated with checking accounts. The Bank's primary
products and services are described below.
- CHECKING AND MONEY MARKET ACCOUNTS. To attract initial deposits, the Bank
is offering attractive interest rates on checking and money market
accounts. Management expects that the Bank will be able to continue to
offer attractive rates as a result of the Bank's low overhead costs. The
Bank charges customers a service charge, currently set at $4.50 per month,
for an interest-bearing checking account. Management anticipates that the
interest-bearing checking account will be used as the primary account for
transactions and bill payment, with the money market account being used
for more stable savings balances. Overdraft protection is automatically
established between the money market account and the interest-bearing
checking account.
- CERTIFICATES OF DEPOSIT. The Bank offers certificates of deposit with
terms of six, 12 and 30 months. As in the case of checking and money
market accounts, the Bank offers attractive interest rates on its
certificates of deposit.
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- BILL PAYMENT SERVICE. Through services provided by CheckFree, customers
are able to pay their bills on-line through electronic funds transfer or a
written draft prepared and sent to the creditor by CheckFree. No
additional fee is charged for this service.
- OTHER SERVICES. The Bank also offers direct deposit, on-line transfer and
wire transfer services. Customers receive monthly bank statements by mail
and can print their bank statements at any time. Customers also can send
on-line e-mail messages to the Bank and systems administrators who can
respond to their inquiries with return e-mail messages.
FUTURE PRODUCTS AND SERVICES
Management intends to follow the Bank's initial product offerings with new
products and services. Management plans to add credit cards, loans (including
mortgage and other consumer loan products) and brokerage services over the next
several quarters. These products and services are described below. No assurance
can be given, however, that these products and services will be made available
or that, if available, they will be successful.
- CONSUMER LOAN PRODUCTS. Beginning in 1997, the Bank plans to introduce
loan products to current and potential customers via the Internet and
other delivery channels. These products will include mortgages, home
improvement/equity loans, credit cards, personal lines of credit,
overdraft protection and secured loans. Management plans to utilize
decision support systems that respond to inquiries on a 7x24 basis. While
the Bank will set credit criteria, terms and conditions and rates, much of
the closing process and servicing will be provided by contracted third
parties. The Bank also intends to purchase loans as well as participations
in loans.
- CREDIT CARDS. In 1997, the Bank plans to offer credit cards to its most
creditworthy customers. Although the interest rate and other terms have
not yet been determined, management believes its customers will be less
sensitive to the interest rate offered than to the convenience of using
the card along with the other services provided by the Bank. The Bank will
be solely responsible for the credit criteria, pricing, terms, conditions
and funding of credit card accounts, but likely will enter into an
agreement with a third party to process the Bank's credit card accounts.
- BROKERAGE SERVICES. The Bank plans to offer brokerage services to its
customers in 1997. Customers will be able to view their account balances
and conduct banking and brokerage transactions from a single screen.
Management anticipates that combined brokerage and deposit account
statements will eventually be available. Management has not yet identified
specific products or providers or sought regulatory approval for brokerage
services.
- OTHER PRODUCTS AND SERVICES. The Bank plans to offer Individual Retirement
Accounts ("IRAs") and debit cards to its existing and future customers.
Management has not selected specific IRA or debit card products or
providers.
Management estimates the Bank will incur an aggregate of approximately
$500,000 in costs relating to the introduction of the foregoing products and
services in 1997. Management believes these costs will relate primarily to the
development and integration of the technology needed to provide these products
and services in conjunction with those currently provided by the Bank.
Management does not expect to incur significant marketing or advertising expense
in connection with the introduction of new products and services.
LENDING AND INVESTMENT ACTIVITIES
The Bank intends to generate interest income by making consumer loans and
investing in various fixed income securities, loan participations and whole loan
packages. Management's core lending philosophy is to focus on providing its
customer base with convenient access to consumer loan products. Customers will
be able to apply for loan products via the Internet, telephone or U.S. mail.
Through the use
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of automated credit scoring and decision-making technologies, management
believes it can respond quickly to customer requests for loan products.
The Bank will establish a credit committee to set underwriting standards and
criteria for the issuance of loan products and to monitor on an ongoing basis
the Bank's loan portfolio. Management's general philosophy is to focus on credit
quality. In addition, management believes the demographic profile of Internet
users will positively impact the Bank's loan portfolio with respect to net
losses and charge-offs.
While the Bank builds its customer base and loan portfolio, it will invest
excess funds in various fixed income securities, loan participations and whole
loan packages. Management's philosophy of high credit quality will guide its
investment decisions. The Bank's fixed income securities portfolio will be
concentrated primarily in U.S. Treasury obligations and mortgage-backed
securities issued by agencies such as Fannie Mae and Freddie Mac. The Bank may
also invest in loan participations offered from commercial banks that syndicate
loans and invest in packages of whole loans offered by commercial banks and
other financial intermediaries.
COMPETITION
The market for electronic banking has only recently begun to develop, is
rapidly evolving and has few proven competitors. With the expected continued
development of the Internet as an avenue for providing financial services,
management expects competition to intensify. Because of the diverse and changing
competitive marketplace in the financial services industry and for
Internet-related products and services, there can be no assurance that
management has identified or considered all possible present and future
competitors. Many of the Company's known competitors have substantially greater
financial resources than the Company.
Several significant competitors currently offer on-line banking services.
These competitors include financial institutions offering PC-based home banking
and Internet banking services and software companies offering PC-based home
banking services. Management believes the following constitute the Bank's major
competitors:
- Security First Network Bank, FSB ("SFNB"), Atlanta, Georgia, is the first
bank to offer banking services predominantly on the Internet. SFNB opened
for operation in October 1995 and offers deposit and bill payment services
and loan products.
- IBM is teaming up with 18 large banks to offer a full service home banking
package called INTEGRION. The joint venture will connect a customer's PC
with the bank through the IBM Global Communications Network, a private
communications network. The banks that are included in this consortium
will not be limited in the type of financial management software they
offer to their customers, but INTEGRION will control the channels
connecting the financial institution to their customers.
- Management also views the major financial software companies, Intuit and
Microsoft, as competitors. Intuit's QUICKEN software is the most popular
home banking software on the market today. Microsoft's MONEY is also a
well-known home banking software package. These applications enable
customers to access one of the network member banks and download their
account information, transfer funds between accounts and automatically
reconcile account balances.
- Meca Software, LLC is jointly owned by NationsBank, Bank of America
Corporation, Fleet Financial Group, Inc., First Bank Systems, Inc., and
Royal Bank of Canada. Meca is the maker of the financial software,
MANAGING YOUR MONEY. This software will offer home banking as well as
other financial services via the Internet this year.
All of these competitors are larger and have greater financial and other
resources than the Company. Nevertheless, management believes the Bank will be
able to compete effectively with the foregoing
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competitors. Although SFNB is also an Internet bank, management believes the
Bank will be able to compete effectively with SFNB based primarily on the Bank's
sole focus of providing banking services.
Management views the Bank's principal competitive advantages over PC-based
home banking software providers to be, in approximately equal proportions,
speed, simplicity and flexibility. Management believes that the real-time
interface between customers and their account activity, as well as the relative
simplicity of the steps required to transact business with the Bank,
distinguishes the Bank from PC-based home banking providers. Additionally,
customers of the Bank are not restricted to the location of a single PC, as is
the case with PC-based financial services software.
The Bank also competes with traditional banks. Management believes that the
Bank's competitive advantage with respect to these banks is based primarily on
price and secondarily on speed, flexibility and convenience. Because the Bank
does not have the overhead expenses inherent in operating a traditional branch,
it is able to attract new customers by passing its savings on to them. The
growth of the Internet and the speed, flexibility and convenience it offers also
provide the Bank with a competitive advantage over traditional banks.
OPERATIONS
ACCOUNT ACTIVITY
Customers can access the Bank through any Internet service provider,
including but not limited to AT&T's WorldNet Service and Digital Cities/AOL, by
means of an acceptable secure Web browser such as Netscape's NAVIGATOR (Version
2.0 or higher) or Microsoft's INTERNET EXPLORER (Version 3.0 or higher). When
customers access the Bank's service menu, they can open a new account, review
the status of an existing account or engage in a transaction.
To open a new account, the customer can either (i) print out the account
application displayed on the screen, fill it out and send it to the Bank; or
(ii) apply by calling the Bank's toll-free telephone number, 1-888-BKONWEB. The
Bank then establishes an account for the customer through its direct interface
with BISYS, the Bank's systems processor. It also sends a "welcome kit" to the
customer containing AT&T WorldNet software (if requested), a preliminary
password and some basic information about the Bank. The customer is instructed
to deposit funds to his or her account at the Bank by direct deposit, wire
transfer, mail or other means. The Bank then accesses the BISYS network and
records the initial deposit.
Deposits into an open account at the Bank can be made via direct deposit
programs, by transferring funds between accounts at the Bank, by wire transfer,
by mail or in person at the Bank's principal executive offices; however, no
teller line is maintained and the Bank does not intend to establish a physical
branch system. Customers can also make withdrawals and have access to their
accounts at ATMs that are affiliated with the Cirrus Network, which operated
nearly 315,000 ATMs worldwide as of February 27, 1997. Other networks may be
added in the future. On-line customers currently are able to review account
activity, enter transactions into an on-line account register, pay bills
electronically, receive statements by mail and print bank statement reports. In
the future, customers will be able to take advantage of additional product
offerings by the Bank.
GEOGRAPHIC SCOPE
The Bank can accept customers regardless of their residence or location as
long as they have a PC with a secure Web browser. Because the Bank lacks a
physical branch presence, regulatory restrictions based solely on geographic
location will not apply to the Bank. In addition, because the Bank transacts
business only by means of the Internet, ATMs, telephone and U.S. mail, bank
personnel cannot meet with customers to obtain identification or other relevant
information. Consequently, the Bank employs a variety of methods to verify its
customers' identities and the data presented in their account applications. For
example, the Bank verifies the name and address on the account application,
performs a credit check on
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the applicant and verifies the applicant's employment before it accepts a new
account. If the Bank cannot confirm an applicant's identity, determines that the
applicant presents a risk to the Bank or is unable to provide services that will
conform to the particular requirements of a foreign jurisdiction, the Bank will
decline the application.
PRODUCT DELIVERY
Management believes the widespread acceptance of graphical computer
interfaces and Web browsers presents a unique and rapidly growing opportunity to
offer a variety of traditional as well as non-traditional banking and bank
related services via the Internet. To this end, the Company has pursued a
strategy of acquiring and utilizing proven banking systems and technologies
rather than developing new technologies and systems. This enables the Company to
focus on marketing a variety of services in attractive packages to the consumer
while reducing the Company's dependence on one supplier or on the uncertainties
of new technologies.
SERVICE PROVIDERS
Management has negotiated agreements with a select group of service
providers who not only provide the Bank with significant quality, security,
reliability, performance and marketing capabilities, but also play an integral
role in the implementation of the Bank's full financial services strategy.
Moreover, the Company has preserved a degree of flexibility that will enable it
to continually assess and evaluate its product offerings and delivery structure
and incorporate other alliance opportunities as they present themselves. Should
any of these relationships terminate, however, management believes the Company
could secure the required services from an alternative source without material
interruption of the Bank's operations.
- AT&T ADVANCED NETWORK SOLUTIONS DIVISION. Pursuant to an agreement between
the Company and AT&T dated August 16, 1996 (the "AT&T Agreement"), AT&T's
Advanced Network Solutions Division provides technical, marketing and
customer service through a bundled product and service offering called
"Personal Financial Services." Specifically, AT&T provides the Bank with a
secure Internet Web site on AT&T's Easy World Wide Web ("EW3"), computer
software that performs services related to the operation and maintenance
of the Bank's infrastructure and other electronic banking services. AT&T
also provides a toll-free touch-tone voice response service for technical
and bill payment customer support, banking customer service and inbound
telemarketing.
Under the AT&T Agreement, AT&T also provides and maintains the software
products of two other banking software companies--Edify and CheckFree. It
provides the interface necessary to link the Bank's servers with the
servers used by BISYS and CheckFree. Pursuant to a license granted by
Edify, AT&T provides Edify's Electronic Banking System and Electronic
Workforce software applications to the Bank. This software enables the
Bank to offer a variety of automated banking and e-mail services on the
Internet. In addition, pursuant to a separate agreement between AT&T and
CheckFree, the Bank receives bill payment processing services performed by
CheckFree.
The AT&T Agreement required an initial consulting payment and also
requires additional payments for initial customer support, or
"on-boarding." In addition, the Bank pays a monthly fee for each customer
accessing the Bank via the Internet. The AT&T Agreement expires on
February 19, 1998, but may be terminated by either party upon six months'
prior written notice.
- AT&T WORLDNET. AT&T's WorldNet Services Group provides the Bank with
advertising and marketing services. The Bank was initially part of a
select group known as Charter Advertisers. This program provided
advantageous banner advertising and directory listings throughout the
WorldNet site, including the Home Page. Management continues to work
closely with AT&T on additional advertising programs. See "--Marketing."
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<PAGE>
- BISYS. The Bank receives core systems processing services, such as deposit
account, loan processing and year-end processing services, pursuant to an
agreement between the Company and BISYS dated August 22, 1996 (the "BISYS
Agreement"). For these standard services, the Bank pays BISYS a monthly
fee calculated by multiplying the number of customer accounts by a per
account charge. The monthly fee is reviewed on a quarterly basis and
adjusted so that as the number of accounts rises, the per account charge
is reduced. Non-standard services, such as ATM services and the production
of certain reports, are subject to additional monthly charges. In
addition, the Bank paid BISYS an initial conversion fee. The BISYS
Agreement expires on August 22, 1999, but will renew automatically for
successive three-year terms absent six months' prior written notice to the
contrary by either party.
The following chart summarizes the services provided by AT&T, BISYS, Edify
and CheckFree:
<TABLE>
<CAPTION>
COMPANY KEY SERVICES
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
AT&T
- - Advanced Network - Secure hosting of Edify's Electronic Banking System
Solutions Division - CheckFree bill paying services
- Customer care--technical and bill paying support
- Connectivity to banking and bill paying host computers
- - WorldNet - Rotating banner ads on Welcome Page (Main Page)
- Banner advertisements in various WorldNet locations
- - Easy World Wide Web (EW3) - Hosting of the Bank's marketing web site
- - Marketing Advantage - Co-Branded WorldNet Navigator disks provided to Atlanta Internet Bank customers
and used for direct marketing purposes. Displays Atlanta Internet Bank's logo
on WorldNet screen using special registration.
- - Network Voice Response TouchTone voice response service for toll-free inbound routing to:
- Technical and bill paying customer support
- Banking customer service
- Inbound telemarketing
- -----------------------------------------------------------------------------------------------------------------------------------
BISYS - Bank systems processing
- Interface to secure server hosting at AT&T
- Online customer ID/password verification
- ATM and debit card systems
- Items capture/inclearings, other services
- -----------------------------------------------------------------------------------------------------------------------------------
Edify - Electronic Banking System--Licensed to AT&T and run on secure server
- -----------------------------------------------------------------------------------------------------------------------------------
CheckFree - Bill paying services under contract with AT&T Advanced Network Solutions
</TABLE>
SECURITY
The Bank's ability to provide its customers with secure financial services
over the Internet is of paramount importance. Management has reviewed the
Internet systems, services and software used in the Bank's operations to ensure
that they meet the highest standards of security. The following are among the
security measures that are in place:
ENCRYPTED TRANSACTIONS. All banking transactions and Internet
communications are encrypted so that sensitive information is not available on
the Internet in a form that can be read or easily deciphered. Encryption of
Internet communications is accomplished through the use of the Netscape SSL
(Secure
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<PAGE>
Sockets Layer) technology. SSL is the standard for encryption on the Internet
and is currently used by Netscape's NAVIGATOR (Version 2.0 or higher) and
Microsoft's INTERNET EXPLORER (Version 3.0 or higher). Messages between the Bank
server and BISYS are encrypted using DES encryption, which is described in the
section entitled "--Isolated Bank Server" below.
SECURE LOGON. To eliminate the possibility of downloading the Bank's or a
customer's password file, user identification and passwords are not stored on
the Internet, the Web server or the customer's PC. Furthermore, passwords are
variable length strings of six to eight alpha-numeric characters, which makes
the chance that a password can be randomly guessed less than one in one
trillion.
ISOLATED BANK SERVER. The computer that is used to provide the Bank's
services cannot be accessed directly through the Internet. It is on a private
connection, or intranet, that provides two-way communication between the
isolated Bank server and the AT&T EW3 Internet Server. Consequently, an Internet
user cannot directly access the computer that actually provides the Bank's
services.
All banking services are routed from the AT&T EW3 server through a firewall.
The firewall is a combined software and hardware product that precisely defines,
controls and limits the access to "internal" computers from "outside" computers
across a network. Use of this firewall means that only authenticated bank
customers or administrators may send or receive transactions through it, and the
firewall itself is immune to penetration from the network. In other words, the
firewall is a mechanism used to protect the Bank server from the freely
accessible Internet.
Furthermore, all messages sent or received between the AT&T EW3 server and
the Bank server are encrypted using DES encryption. This is a symmetric key
algorithm and is highly secure because it is not susceptible to standard
ciphertext attacks. Thus, even if a perpetrator were able to route a message to
the Bank server through the firewall, the message could not be encrypted in a
way that would be considered valid by the server. As a result, the message would
be rejected.
The following diagram illustrates the layers of security that exist between
a customer's PC and the Bank's server:
[DIAGRAM APPEARS HERE ILLUSTRATING THE SECURITY MEASURES THE BANK USES TO
PROTECT ITS BANKING PLATFORM AND THE INFORMATION FLOWING THROUGH THE BANK FROM
OUTSIDE INTRUSION.]
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<PAGE>
AUTHENTICATED SESSION INTEGRITY. An authenticated user is any user who
signs onto the Bank site with a valid user ID and password. Although the vast
majority of authenticated users will be legitimate Bank customers, the Bank
server is programmed to limit exposure to an authenticated user who is
attempting to defraud the Bank. If the authenticated user alters the URL (the
command or request that is sent from the browser to the server) in any way in an
attempt to gain access to other users' accounts, the Bank server immediately
detects that the session integrity variables have been violated. The Bank server
will immediately stop the session and record the attempt in a log so that Bank
staff can investigate.
PHYSICAL SECURITY. All servers and network computers reside in secure AT&T
facilities. Currently, computer operations supporting the Bank's Internet access
are based in New Jersey. Only employees with proper photographic identification
may enter the primary building. The computer operations are located underground,
with admission only by key card. Access to the Bank server console requires
further password identification.
During the summer of 1997, computer operations will be moved to AT&T's
specialized operations center in rural Virginia. The facility is protected by a
perimeter fence employing electronic surveillance and after-hours security
staff. Secured admission to computer operations and the Bank server are tightly
monitored, as is the case in New Jersey.
SECURE MODEM ACCESS. The Bank server and BISYS are connected by a private
line that is not accessible from the public network. The Bank server is
connected to CheckFree by a one-way modem that permits the server to call
CheckFree, but will not accept incoming calls to the Bank server. A dial-up
maintenance port also permits access to the Bank server. The modem that provides
the only access to this port is specially protected. A person dialing into this
modem must use a device called a "SecureID" card to generate a one-time
password. This SecureID card-protected modem is impenetrable by random dialers
and hackers.
SERVICE CONTINUITY. AT&T and BISYS each provide a fully redundant network
with no single point of failure. The Bank server will also be "mirrored" so that
hardware failures or software bugs should cause no more than a few minutes of
service outage. "Mirroring" means that the Bank server is backed up continuously
so that all data is stored in two physical locations. This network and server
redundancy ensures that access to the Bank will be reliable. However, in case of
any circumstance that results in customers not being able to access the Bank
over the Internet, customers will retain access to their funds through several
means, including checks, ATM cards, customer service and an automated telephone
response system.
MONITORING. All customer transactions on the Bank server in BISYS and in
CheckFree produce one or more entries into transactional logs. AT&T and the Bank
recognize that it is critical to monitor these logs for unusual or fraudulent
activity. As mentioned previously, any attempt by an authenticated user to
modify the command or request that is sent from the browser to the server will
be logged. Additionally, all financial transactions will be logged. Bank
personnel review these logs regularly, and any abnormal or unusual activity will
be noted and appropriate action will be taken either by the Bank, AT&T or both.
Ultimately, vigilant monitoring is the best defense against fraud.
The preceding security measures ensure that the Bank is set up in a secure
manner. However, over the long term, the security of the Bank depends upon the
procedures and standards used for administration of the Internet site. The
Company has asked AT&T to obtain an SAS 70 audit by a national accounting firm.
In an SAS 70 audit, the auditors issue a report addressing whether the computer
systems are being managed and operated in a manner consistent with accepted
practices. The AT&T report is expected by summer 1997. Management expects BISYS
to continue its practice of obtaining an SAS 70 audit.
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<PAGE>
Although the Internet allows a relatively large number of users (i.e.,
anyone, anywhere, who has access to a computer and the Internet) to access the
Bank's Web site, further access to the Bank requires a secure Web browser, user
identification number and password. Management therefore believes the risk of
fraud presented by Internet banking is not materially different from the risk of
fraud inherent in any banking relationship. Management believes the three
principal reasons for a breach in bank security are: (i) misappropriation from
the user of the user's account number or password; (ii) penetration of the
bank's server by an outside "hacker"; and (iii) fraud committed by an employee
of the bank or one of its service providers. Both traditional banks and Internet
banks are vulnerable to these types of fraud. By establishing the security
measures described above, management believes the Bank has minimized its
vulnerability to the first two types of fraud. To counteract fraud by employees,
associates and consultants, management has established internal procedures and
policies designed to ensure that, as in any bank, proper control and supervision
is exercised over employees, associates and consultants. The Bank also
counteracts all three types of fraud through daily examination of the Bank's
transactional logs.
SUPERVISION AND REGULATION
Savings and loan holding companies and federal savings banks are extensively
regulated under both federal and state law. The following is a brief summary of
certain statutes and rules and regulations that will affect the Company and the
Bank upon consummation of the Reorganization. This summary is qualified in its
entirety by reference to the particular statute and regulatory provision
referred to below and is not intended to be an exhaustive description of the
statutes or regulations that will be applicable to the business of the Company
and the Bank. Supervision, regulation and examination of the Company and the
Bank by the regulatory agencies are intended primarily for the protection of
depositors rather than shareholders of the Company. The terms "savings
association," "federal savings bank" and "thrift" are used interchangeably in
the section.
REQUIRED REGULATORY APPROVALS
The Company's purchase of the outstanding stock of Premier Bank and related
transactions necessary to complete the Premier stock purchase are subject to
approval by the OTS, the Department of Banking and the FDIC. These agencies
issued their approvals on , 1997, , 1997 and , 1997,
respectively. The transfer from CFB to the Bank of the assets and liabilities
relating to the operation of the Bank is subject to Federal Reserve approval,
which was issued on , 1997. See "The Reorganization."
HOLDING COMPANY REGULATION
Upon consummation of the Reorganization, Carolina First Corporation will be
deemed to be the bank holding company of the Company and consequently, the
Company will be a registered holding company under both the Bank Holding Company
Act of 1956, as amended (the "BHC Act") and the Georgia Bank Holding Company
Act. The Company will be regulated under such acts by the Federal Reserve and by
the Department of Banking, respectively. As a bank, the Company will be required
to file with the Federal Reserve an annual report and such additional
information as the Federal Reserve may require pursuant to the BHC Act. The
Federal Reserve may also conduct examinations of the Company and each of its
subsidiaries.
The BHC Act makes it unlawful for any bank holding company, directly or
indirectly, or through one or more subsidiaries or one or more transactions, to
acquire control of another bank or another bank holding company without prior
approval from the Federal Reserve. An acquisition by merger, consolidation or
purchase of assets of such an institution or holding company or of substantially
all of the assets of such an institution or holding company is also prohibited
without prior Federal Reserve approval. When considering an application for such
an acquisition, the Federal Reserve takes into consideration the financial and
managerial resources and future prospects of the prospective acquiring company
and the
42
<PAGE>
institution involved. This includes consideration of the competence, experience
and integrity of the officers, directors and principal shareholders of the
acquiring company and savings institution. In addition, the Federal Reserve
considers the effect of the acquisition on the institution and the convenience
and needs of the community to be served.
Bank holding companies are allowed to acquire or to retain as much as 5% of
the voting shares of a bank or bank holding company without regulatory approval.
Because Carolina First is deemed to control the Company under the BHC Act,
the Company has agreed with Carolina First that the Company will not engage in
any activities other than activities which are permissible banking or
non-banking activities under applicable regulations of the Federal Reserve
Board, which in general terms limits the activities of bank holding companies
and their affiliates to those which are determined to be "so closely related to
banking or managing or controlling banks as to be a proper incident thereto."
The Company does not believe that these limitations will impose any material
constraints on its proposed activities.
As of the date of this Prospectus, management believes the Company is in
compliance with all applicable statutes, regulations and rules promulgated or
enforced by the Federal Reserve and the Department of Banking. Upon the
consummation of the Reorganization, the Company believes it will continue to be
in compliance with all statutes, regulations and rules promulgated or enforced
by the Federal Reserve and the Department of Banking.
BANK REGULATION
GENERAL. Upon consummation of the Reorganization, the Bank will be a
federal savings bank organized under the laws of the United States subject to
examination by the OTS. The OTS will regulate all areas of the Bank's banking
operations including reserves, loans, mergers, payment of dividends, interest
rates, establishment of branches, and other aspects of operations. OTS
regulations generally provide that federal savings banks must be examined no
less frequently than every 12 months, unless the federal savings bank (i) has
assets of less than $250 million; (ii) is well capitalized; (iii) was found to
be well managed and its composite condition was found to be outstanding (or
good, if the bank had total assets of not more than $100,000) during its last
examination; (iv) is not subject to a formal enforcement proceeding or an order
from the FDIC or another banking agency; and (v) has not undergone a change of
control during the previous 12-month period, in which event it must be examined
no less frequently than every 18 months. The Bank will also be subject to
assessments by the OTS to cover the costs of such examinations.
The Bank will also be insured and regulated by the FDIC. The major functions
of the FDIC with respect to insured federal savings banks include paying
depositors to the extent provided by law in the event an insured bank is closed
without adequately providing for payment of the claims of depositors and
preventing the continuance or development of unsound and unsafe banking
practices.
Subsidiary institutions of a savings and loan holding company, such as the
Bank upon consummation of the Reorganization, are subject to certain
restrictions imposed by the Federal Reserve Act on any extension of credit to
the holding company or any of its subsidiaries, on investment in the stock or
other securities thereof, and on the taking of such stock or securities as
collateral for loans to any borrower. In addition, a holding company and its
subsidiaries are prohibited from engaging in certain tying arrangements in
connection with any extension of credit or provision of any property or
services.
CAPITAL REQUIREMENTS. OTS regulations require that federal savings banks
maintain (i) "tangible capital" in an amount of not less than 1.5% of total
assets, (ii) "core capital" in an amount not less than 3.0% of total assets, and
(iii) a level of risk-based capital equal to 8% of risk-weighted assets. Under
OTS regulations, the term "core capital" generally includes common stockholders'
equity, noncumulative perpetual preferred stock and related surplus, and
minority interests in the equity accounts of consolidated subsidiaries less
unidentifiable intangible assets (other than certain amounts of supervisory
goodwill) and
43
<PAGE>
certain investments in certain subsidiaries plus 90% of the fair market value of
readily marketable purchased mortgage servicing rights ("PMSRs") and purchased
credit card relationships (subject to certain conditions). "Tangible capital"
generally is defined as core capital minus intangible assets and investments in
certain subsidiaries, except PMSRs.
In determining total risk-weighted assets for purposes of the risk-based
requirement, (i) each off-balance sheet asset must be converted to its
on-balance sheet credit equivalent amount by multiplying the face amount of each
such item by a credit conversion factor ranging from 0% to 100% (depending upon
the nature of the asset), (ii) the credit equivalent amount of each off-balance
sheet asset and each on-balance sheet asset must be multiplied by a risk factor
ranging from 0% to 200% (again depending upon the nature of the asset) and (iii)
the resulting amounts are added together and constitute total risk-weighted
assets. "Total capital," for purposes of the risk-based capital requirement
equals the sum of core capital plus supplementary capital (which, as defined,
includes the sum of, among other items, perpetual preferred stock not counted as
core capital, limited life preferred stock, subordinated debt, and general loan
and lease loss allowances up to 1.25% of risk-weighted assets) less certain
deductions. The amount of supplementary capital that may be counted towards
satisfaction of the total capital requirement may not exceed 100% of core
capital, and OTS regulations require the maintenance of a minimum ratio of core
capital to total risk-weighted assets of 4%.
OTS regulations have been amended to include an interest-rate risk component
to the risk-based capital requirement. Under this regulation, an institution is
considered to have excess interest rate-risk if, based upon a 200-basis point
change in market interest rates, the market value of an institution's capital
changes by more than 2%. This new requirement, application of which has been
delayed indefinitely by the OTS, is not expected to have any material effect on
the ability of the Bank to meet the risk-based capital requirement. The OTS also
revised its risk-based capital standards to ensure that its standards provide
adequately for concentration of credit risk, risk from nontraditional activities
and actual performance and expected risk of loss on multi-family mortgages.
Capital requirements higher than the generally applicable minimum
requirement may be established for a particular savings association if the OTS
determines that the institution's capital was or may become inadequate in view
of its particular circumstances.
Additionally, the Department of Banking requires that savings and loan
holding companies, such as the Company, must maintain a 5% Tier 1 leverage ratio
on a consolidated basis.
Upon consummation of the Reorganization, Management expects that the Company
will have a 35% Tier I leverage ratio on a consolidated basis and will be "well
capitalized."
PROMPT CORRECTIVE ACTION. The Federal Deposit Insurance Corporation
Improvement Act of 1991 (the "FDIC Act") imposes a regulatory matrix which
requires the federal banking agencies, which include the OTS, the FDIC, the
Office of the Comptroller of Currency (the "OCC"), and the Federal Reserve
Board, to take prompt corrective action to deal with depository institutions
that fail to meet their minimum capital requirements or are otherwise in a
troubled condition. The prompt corrective action provisions require
undercapitalized institutions to become subject to an increasingly stringent
array of restrictions, requirements and prohibitions, as their capital levels
deteriorate and supervisory problems mount. Should these corrective measures
prove unsuccessful in recapitalizing the institution and correcting its
problems, the FDIC Act mandates that the institution be placed in receivership.
Pursuant to regulations promulgated under the FDIC Act, the corrective
actions that the banking agencies either must or may take are tied primarily to
an institution's capital levels. In accordance with the framework adopted by the
FDIC Act, the banking agencies have developed a classification system, pursuant
to which all banks and thrifts will be placed into one of five categories:
well-capitalized institutions, adequately capitalized institutions,
undercapitalized institutions, significantly undercapitalized
44
<PAGE>
institutions and critically undercapitalized institutions. The capital
thresholds established for each of the categories are as follows:
<TABLE>
<CAPTION>
TIER 1
RISK-BASED RISK-BASED
CAPITAL CATEGORY TIER 1 CAPITAL CAPITAL CAPITAL OTHER
- --------------------------------- ----------------- ---------------- ---------------- ------------------------
<S> <C> <C> <C> <C>
Well-Capitalized 5% or more 10% or more 6% or more Not subject to a capital
directive
Adequately Capitalized 4% or more 8% or more 4% or more --
Undercapitalized less than 4% less than 8% less than 4% --
Significantly Undercapitalized less than 3% less than 6% less than 3% --
Critically Undercapitalized 2% or less -- -- --
tangible equity
</TABLE>
The undercapitalized, significantly undercapitalized and critically
undercapitalized categories overlap; therefore, a critically undercapitalized
institution would also be an undercapitalized institution and a significantly
undercapitalized institution. This overlap ensures that the remedies and
restrictions prescribed for undercapitalized institutions will also apply to
institutions in the lowest two categories.
The down-grading of an institution's category is automatic in two
situations: (i) whenever an otherwise well-capitalized institution is subject to
any written capital order or directive, and (ii) where an undercapitalized
institution fails to submit or implement a capital restoration plan or has its
plan disapproved. The federal banking agencies may treat institutions in the
well-capitalized, adequately capitalized and undercapitalized categories as if
they were in the next lower capital level based on safety and soundness
considerations relating to factors other than capital levels.
The FDIC Act prohibits all insured institutions regardless of their level of
capitalization from paying any dividend or making any other kind of capital
distribution or paying any management fee to any controlling person if following
the payment or distribution the institution would be undercapitalized. While the
prompt corrective action provisions of the FDIC Act contain no requirements or
restrictions aimed specifically at adequately capitalized institutions, other
provisions of the FDIC Act and the agencies' regulations relating to deposit
insurance assessments, brokered deposits and interbank liabilities treat
adequately capitalized institutions less favorably than those that are
well-capitalized.
A depository institution that is not well capitalized is prohibited from
accepting deposits through a deposit broker. However, an adequately capitalized
institution can apply for a waiver to accept brokered deposits. Institutions
that receive a waiver are subject to limits on the rates of interest they may
pay on brokered deposits.
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<PAGE>
Undercapitalized institutions are prohibited from offering rates of interest
on insured deposits that significantly exceed the prevailing rate in their
normal market area or the area in which the deposits would otherwise be
accepted. Institutions classified as undercapitalized are precluded from
increasing their assets, acquiring other institutions, establishing additional
branches, or engaging in new lines of business without an approved capital plan
and an agency determination that such actions are consistent with the plan.
Savings associations that are significantly undercapitalized may be required
to take one or more of the following actions: (i) raise additional capital so
that the institution will be adequately capitalized; (ii) be acquired by, or
combined with, another institution if grounds exist for appointing a receiver;
(iii) refrain from affiliate transactions; (iv) limit the amount of interest
paid on deposits to the prevailing rates of interest in the region where the
institution is located; (v) further restrict asset growth; (vi) hold a new
election for directors, dismiss any director or senior executive officer who
held office for more than 180 days immediately before the institution became
undercapitalized, or employ qualified senior executive officers; (vii) stop
accepting deposits from correspondent depository institutions; and (viii) divest
or liquidate any subsidiary which the OTS determines poses a significant risk to
the institution.
Significantly undercapitalized institutions are subject to the same
mandatory sanctions and discretionary actions applicable to all undercapitalized
institutions. In addition, a significantly undercapitalized institution is
prohibited from paying any bonus or giving a raise to any senior executive
officer without prior agency approval. A significantly undercapitalized
institution will be required to (i) sell sufficient shares or obligations to
restore its capital compliance or be acquired by another institution, (ii)
restrict the institution's transactions with affiliates, and (iii) limit the
interest rates paid by the institution on its deposits. The banking agencies are
also given the option to impose one or more of the activities restrictions that
are applicable to critically undercapitalized institutions.
Critically undercapitalized institutions must be placed in conservatorship
or receivership within ninety (90) days unless both the institution's regulator
and the FDIC agree that some other course of action ultimately would result in a
lower cost solution. If the regulators decide to keep a critically
undercapitalized institution open, they must reassess their decision every
ninety (90) days and document the reasons why they elected not to appoint a
conservator or receiver. Further, if an institution continues to be critically
undercapitalized on average for four quarters after falling below two percent
(2%) tangible capital, the regulatory agencies are required to place the
institution in receivership, unless it (i) has positive net worth, (ii) is in
substantial compliance with an approved capital restoration plan, (iii) is
profitable or has a sustainable upward trend in earnings, and (iv) has reduced
its ratio of non-performing loans to total loans. In addition, the institution's
regulator and the FDIC must certify that the institution is viable and is not
expected to fail.
Critically undercapitalized institutions that are allowed to remain open are
subject to all the requirements and restrictions discussed above that either
automatically apply to or may be imposed on undercapitalized and significantly
undercapitalized institutions. In addition, beginning sixty (60) days after it
becomes critically undercapitalized, an institution is generally prohibited from
paying any interest or principal on its subordinated debt. Critically
undercapitalized institutions are also required to obtain prior FDIC approval
for a number of activities, including (i) entering into any material transaction
other than in the usual course of business, (ii) extending credit for any highly
leveraged transaction, (iii) amending their charter or bylaws, (iv) making any
material change in accounting methods, (v) engaging in any affiliate
transactions under Section 23A of the Federal Reserve Act, (vi) paying
"excessive" compensation or bonuses, and (vii) paying interest on new or renewed
liabilities so as to increase the institution's weighted average cost of funds
significantly above the prevailing interest rates for deposits in the
institution's normal market.
CAPITAL DISTRIBUTIONS. An OTS rule imposes limitations on all capital
distributions by savings associations (including dividends, stock repurchases
and cash-out mergers). Under the current rule, a savings
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<PAGE>
association is classified as a Tier 1 institution, a Tier 2 institution or a
Tier 3 institution, depending on its level of regulatory capital both before and
after giving effect to a proposed capital distribution. Under a proposed rule,
the OTS would conform its three classifications to the five capital
classifications set forth under the prompt corrective action regulations. Under
the proposal, institutions that are at least adequately capitalized would still
be required to provide prior notice. Well capitalized institutions could make
capital distributions without prior regulatory approval in specified amounts in
any calendar year.
A Tier 1 institution (I.E., one that both before and after a proposed
capital distribution has net capital equal to or in excess of its capital
requirements) may, subject to any otherwise applicable statutory or regulatory
requirements or agreements entered into with the regulators, make capital
distributions in any calendar year up to 100% of its net income to date during
the calendar year plus the amount that would reduce by one-half its "surplus
capital ratio" (I.E., the percentage by which the association's capital-to-
assets ratio exceeds the ratio of its fully phased-in capital requirement to its
assets) at the beginning of the calendar year. No regulatory approval of the
capital distribution is required, but prior notice must be given to the OTS.
A Tier 2 institution (I.E., one that both before and after a proposed
capital distribution has net capital equal to its then-applicable minimum
capital requirement but which fails to meet its fully phased-in capital
requirement either before or after the distribution) may, after prior notice but
without the approval of the OTS, make capital distributions of up to: (i) 75% of
its net income over the most recent four quarter period if it satisfies the
applicable risk-based capital standard; or (ii) 50% of its net income over the
most recent four quarter period if it satisfies the applicable risk-based
capital standard. In calculating an institution's permissible percentage of
capital distributions, previous distributions made during the previous four
quarter period must be included. Tier 2 institutions may not make capital
distributions in excess of the above limitations without the prior written
approval of the OTS.
A Tier 3 institution (I.E., one that either before or after a proposed
capital distribution fails to meet its then applicable minimum capital
requirement) may not make any capital distributions without the prior written
approval of the OTS. In addition, the OTS may prohibit a proposed capital
distribution, which would otherwise be permitted by the regulation, if the OTS
determines that such distribution would constitute an unsafe or unsound
practice. Also, an institution meeting the Tier 1 criteria which has been
notified that it needs more than normal supervision will be treated as a Tier 2
or Tier 3 institution, unless the OTS deems otherwise.
LIQUIDITY. Under applicable federal regulations, savings associations are
required to maintain an average daily balance of liquid assets (including cash,
certain time deposits, certain bankers' acceptances, certain corporate debt
securities and highly rated commercial paper, securities of certain mutual funds
and specified United States government, state or federal agency obligations)
equal to a monthly average of not less than a specified percentage of the
average daily balance of the savings association's net withdrawable deposits
plus short-term borrowings. Under HOLA, this liquidity requirement may be
changed from time to time by the OTS to any amount within the range of 4% to 10%
depending upon economic conditions and the deposit flows of member institutions,
and currently is 5%. Savings institutions also are required to maintain an
average daily balance of short-term liquid assets at a specified percentage
(currently 1%) of the total of the average daily balance of its net withdrawable
deposits and short-term borrowings. After the Reorganization, the Bank will be
in compliance with these liquidity requirements.
EQUITY INVESTMENTS. The OTS has revised its risk-based capital regulation
to modify the treatment of certain equity investments and to clarify the
treatment of other equity investments. Equity investments that are permissible
for both savings banks and national banks will no longer be deducted from
savings associations' calculations of total capital over a five-year period.
Instead, permissible equity investments will be placed in the 100% risk-weight
category, mirroring the capital treatment prescribed for those investments when
made by national banks under the regulations of the OCC. Equity investments held
by
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savings associations that are not permissible for national banks must still be
deducted from assets and total capital.
QUALIFIED THRIFT LENDER REQUIREMENT. A federal savings bank is deemed to be
a "qualified thrift lender" ("QTL") as long as its "qualified thrift
investments" equal or exceed 65% of its "portfolio assets" on a monthly average
basis in nine out of every 12 months. Qualified thrift investments generally
consist of (i) various housing related loans and investments (such as
residential construction and mortgage loans, home improvement loans, mobile home
loans, home equity loans and mortgage-backed securities), (ii) certain
obligations of the FDIC (including the Federal Savings and Loan Insurance
Corporation) and (iii) shares of stock issued by any FHLB, the FHLMC or the
FNMA. In addition, the following assets may be categorized as qualified thrift
investments in an amount not to exceed 20% in the aggregate of portfolio assets:
(i) 50% of the dollar amount of residential mortgage loans originated and sold
within 90 days of origination; (ii) investments in securities of a service
corporation that derives at least 80% of its income from residential housing
finance; (iii) 200% of loans and investments made to acquire, develop or
construct starter homes or homes in credit needy areas (subject to certain
conditions); (iv) loans for the purchase or construction of churches, schools,
nursing homes and hospitals; and (v) consumer loans (in an amount up to 20% of
portfolio assets). For purposes of the QTL test, the term "portfolio assets"
means the savings institution's total assets minus goodwill and other intangible
assets, the value of property used by the savings institution to conduct its
business, and liquid assets held by the savings institution in an amount up to
20% of its total assets.
OTS regulations provide that any savings association that fails to meet the
definition of a QTL must either convert to a national bank charter or limit its
future investments and activities (including branching and payments of
dividends) to those permitted for both savings associations and national banks.
Further, within one year of the loss of QTL status, a holding company of a
savings association that does not convert to a bank charter must register as a
bank holding company and will be subject to all statutes applicable to bank
holding companies. In order to exercise the powers granted to federally
chartered savings associations and maintain full access to FHLB advances, the
Bank must meet the definition of a QTL. After the Reorganization, the Bank will
qualify as a QTL under the current test.
LOANS TO ONE BORROWER LIMITATIONS. HOLA generally requires savings
associations to comply with the loans to one borrower limitations applicable to
national banks. National banks generally may make loans to a single borrower in
amounts up to 15% of their unimpaired capital and surplus, plus an additional
10% of capital and surplus for loans secured by readily marketable collateral.
HOLA provides exceptions under which a savings association may make loans to one
borrower in excess of the generally applicable national bank limits. A savings
association may make loans to one borrower in excess of such limits under one of
the following circumstances: (i) for any purpose, in any amount not to exceed
$500,000; or (ii) to develop domestic residential housing units, in an amount
not to exceed the lesser of $30 million or 30% of the savings association's
unimpaired capital and unimpaired surplus, provided other conditions are
satisfied. The Federal Institutions Reform, Recovery, and Enforcement Act of
1989 provided that a savings association could make loans to one borrower to
finance the sale of real property acquired in satisfaction of debts previously
contracted in good faith in amounts up to 50% of the savings association's
unimpaired capital and unimpaired surplus. The OTS, however, has modified the
third standard by limiting loans to one borrower to finance the sale of real
property acquired in satisfaction of debts to 15% of unimpaired capital and
surplus. That rule provides, however, that purchase money mortgages received by
a savings association to finance the sale of such real property do not
constitute "loans" (provided no new funds are advanced and the savings
association is not placed in a more detrimental position holding the note than
holding the real estate) and, therefore, are not subject to the loans to one
borrower limitations.
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COMMERCIAL REAL PROPERTY LOANS.
HOLA limits the aggregate amount of commercial real estate loans that a
federal savings association may make to an amount not in excess of 400% of the
savings association's capital. The Bank does not intend to make loans in excess
of this limit.
COMMUNITY REINVESTMENT. Under the Community Reinvestment Act (the "CRA")
and the implementing OTS regulations, federal savings banks have a continuing
and affirmative obligation to help meet the credit needs of its local community,
including low and moderate-income neighborhoods, consistent with the safe and
sound operation of the institution. The CRA requires the board of directors of
financial institutions, such as the Bank, to adopt a CRA statement for each
assessment area that, among other things, describes its efforts to help meet
community credit needs and the specific types of credit that the institution is
willing to extend. The regulations promulgated pursuant to CRA, contain three
evaluation tests: (i) a lending test which will compare the institution's market
share of loans in low-and moderate-income areas to its market share of loans in
its entire service area and the percentage of a bank's outstanding loans to low-
and moderate-income areas or individuals, (ii) a services test which will
evaluate the provision of services that promote the availability of credit to
low- and moderate-income areas, and (iii) an investment test, which will
evaluate an institution's record of investments in organizations designed to
foster community development, small- and minority-owned businesses and
affordable housing lending, including state and local government housing or
revenue bonds. The regulation is designed to reduce the paperwork requirements
of the current regulations and provide regulators, institutions and community
groups with a more objective and predictable manner with which to evaluate the
CRA performance of financial institutions.
Traditional approaches to compliance with the Community Reinvestment Act, as
well as the applicable regulations, are premised upon the establishment of
geocentrically-established physical locations and the provision of banking
services to those locations. As presently written, the regulations provide no
clear guidance for the establishment of CRA compliance by a bank such as the
Bank, which focuses on alternative delivery systems. The Regulation does contain
provisions which contemplate the adoption of a strategic CRA plan by banks who
desire to establish their own specified approach to serving their community. The
Bank intends to establish a CRA Strategic Plan which takes into account its
unique physical structure and the delivery mechanisms it intends to utilize, and
the Bank anticipates that its Strategic Plan, as adopted will be approved by
OTS.
FAIR LENDING. Congress and various federal agencies (including, in addition
to the bank regulatory agencies, the Department of Housing and Urban
Development, the Federal Trade Commission and the Department of Justice)
(collectively the "Federal Agencies") responsible for implementing the nation's
fair lending laws have been increasingly concerned that prospective home buyers
and other borrowers are experiencing discrimination in their efforts to obtain
loans. In recent years, the Department of Justice has filed suit against
financial institutions that it determined had discriminated, seeking fines and
restitution for borrowers who allegedly suffered from discriminatory practices.
Most, if not all, of these suits have been settled (some for substantial sums)
without a full adjudication on the merits.
On March 8, 1994, the Federal Agencies, in an effort to clarify what
constitutes lending discrimination and to specify the factors the agencies will
consider in determining if lending discrimination exits, announced a joint
policy statement detailing specific discriminatory practices prohibited under
the Equal Credit Opportunity Act and the Fair Housing Act. In the policy
statement, three methods of proving lending discrimination were identified: (i)
overt evidence of discrimination, when a lender blatantly discriminates on a
prohibited basis, (ii) evidence of disparate treatment, when a lender treats
applicants differently based on a prohibited factor even where there is no
showing that the treatment was motivated by prejudice or a conscious intention
to discriminate against a person, and (iii) evidence of disparate impact, when a
lender applies a practice uniformly to all applicants, but the practice has a
discriminatory
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effect, even where such practices are neutral on their face and are applied
equally, unless the practice can be justified on the basis of business
necessity.
SAFETY AND SOUNDNESS GUIDELINES. The federal banking agencies have adopted
safety and soundness regulations relating to (i) internal controls, information
systems, and internal audit systems; (ii) loan documentation; (iii) credit
underwriting; (iv) interest rate exposure; (v) asset growth; and (vi)
compensation and benefit standards for officers, directors, employees and
principal shareholders. Subsequent legislation, however, required that the
agencies adopt guidelines in lieu of the regulations. Such guidelines impose
standards based upon an institution's asset quality and earnings. The guidelines
are intended to set out standards that the agencies will use to identify and
address problems at institutions before capital becomes impaired. Institutions
are required to establish and maintain a system to identify problem assets and
prevent deterioration of those assets in a manner commensurate with its size and
the nature and scope of their operations. Furthermore, institutions must
establish and maintain a system to evaluate and monitor earnings and ensure that
earnings are sufficient to maintain adequate capital and reserves in a manner
commensurate with their size and the nature and scope of its operation.
Under the guidelines, an institution not meeting one or more of the safety
and soundness standards would be required to file a compliance plan with the
appropriate federal banking agency. Nonetheless, in the event that an
institution, such as the Bank, were to fail to submit an acceptable compliance
plan or fail in any material respect to implement an accepted compliance plan
within the time allowed by the agency, the institution would be required to
correct the deficiency and the appropriate federal agency would also be
authorized to: (i) restrict asset growth; (ii) require the institution to
increase its ratio of tangible equity to assets; (iii) restrict the rates of
interest that the institution may pay; or (iv) take any other action that would
better carry out the purpose of the corrective action.
POLICY ON GROWTH. It is the general policy of the OTS to ensure that asset
and liability growth of federal savings banks is prudent, adequately capitalized
and conducted in a manner that is consistent with safety and soundness and the
interests of the insurance fund. Excessive asset growth by any institution, as
determined by the OTS on the basis of the institution's management and asset
quality, capital adequacy, interest rate risk profile and operating controls and
procedures, is an unsafe and unsound practice. As a general rule, institutions
"requiring more than normal supervision" or "subject to greater restrictions"
will be permitted little to no growth under OTS policy, subject to OTS
discretion and waiver authority. In addition, all institutions except those
whose regulatory capital already exceeds the "fully phased-in" requirement must
increase their tangible, core and total capital by the capital requirements
applicable at the time to support the growth at the time the assets are
increased. Institutions that meet the "fully phased-in" capital requirements
must ensure that proposed growth will not cause them to fall below those
requirements in the future. On a case-by-case basis, where appropriate, the OTS
retains the authority and flexibility to impose more stringent growth
restrictions.
Furthermore, without the prior written approval of the OTS, any institution
requiring more than normal supervision is not permitted to increase its total
assets during any quarter in excess of an amount equal to net interest credited
on deposit liabilities (or earnings credited on share accounts) during the
quarter. Also, under HOLA growth is prohibited by any institution not in
compliance with its capital standards.
FDIC INSURANCE OF DEPOSITS. Federal deposit insurance is required for all
federally chartered savings associations. Deposits at the Bank are insured to a
maximum of $100,000 for each depositor by Savings Association Insurance Fund
(the "SAIF"). As a SAIF-insured institution, the Bank will be subject to
regulation and supervision by the FDIC, to the extent deemed necessary by the
FDIC to ensure the safety and soundness of the SAIF. The FDIC is entitled to
have access to reports of examination of the Bank made by the OTS and all
reports of condition filed by the Bank with the OTS. The FDIC also may require
the Bank to file such additional reports as it determines to be advisable for
insurance purposes.
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Additionally, the FDIC may determine by regulation or order that any specific
activity poses a serious threat to the SAIF and that no SAIF member may engage
in the activity directly.
Insurance premiums are paid in semiannual assessments. Under a risk-based
assessment system, the FDIC is required to calculate a savings association's
semiannual assessment based on (i) the probability that the insurance fund will
incur a loss with respect to the institution (taking into account the
institution's asset and liability concentration), (ii) the potential magnitude
of any such loss, and (iii) the revenue and reserve needs of the insurance fund.
The semiannual assessment imposed on the Bank may be higher depending on the
SAIF revenue and expense levels, and the risk classification applied to the
Bank. Effective January 1, 1998, the FDIC is required to set SAIF semiannual
assessments rates in an amount sufficient to increase the reserve ratio of the
SAIF to 1.25% of insured deposits over no more than a 15-year period. The FDIC
also has the authority to establish a higher reserve ratio.
The deposit insurance assessment rate was increased from 23 cents per one
hundred dollars of SAIF assessable deposits (generally all insured accounts
subject to certain adjustments) to an assessment rate within the range of 23
cents to 31 cents, depending on the assessment risk classification assigned to
each institution. Under the risk-classification system, each SAIF member is
assigned to one of three capital groups: "well capitalized," "adequately
capitalized," or "less than adequately capitalized," as such terms are defined
under the OTS's prompt corrective action regulation (discussed above), except
that "less than adequately capitalized" includes any institution that is not
well capitalized or adequately capitalized. Within each capital group,
institutions are assigned to one of three supervisory subgroups--"healthy"
(institutions that are financially sound with only a few minor weaknesses),
"supervisory concern" (institutions with weaknesses which, if not corrected
could result in significant deterioration of the institution and increased risk
to the SAIF) or "substantial supervisory concern" (institutions that pose a
substantial probability of loss to the SAIF unless corrective action is taken).
The FDIC will place each institution into one of nine assessment risk
classifications based on the institution's capital group and supervisory
subgroup classification.
Until recently, SAIF premiums had been equivalent to deposit insurance
premiums paid by banks on deposits to the Bank Insurance Fund ("BIF"). Deposit
insurance premiums were set to facilitate each fund's achieving its designated
reserve ratios. As each fund achieves its designated reserve ratio, however, the
FDIC has the authority to lower the premium assessments for that fund to a rate
that would be sufficient to maintain the designated reserve ratio. In August
1995, the FDIC determined that the BIF had achieved its designated reserve ratio
and approved lower BIF premium rates for deposit insurance by the BIF for all
but the riskiest institutions. On November 14, 1995, the FDIC determined that
BIF deposit insurance premiums for well capitalized banks would be further
reduced to the statutory minimum of $2,000 per institution per year, effective
January 1, 1996. Because the SAIF remained significantly below its designated
reserve ratio, insurance premiums for assessable SAIF deposits were not reduced
in either FDIC action.
The current financial condition of the SAIF resulted in the adoption of the
Deposit Insurance Funds Act of 1996 ("DIFA"), which was enacted on September 30,
1996 as part of the Omnibus Consolidated Appropriations Act. Under DIFA, a
special one-time assessment of 65.7 cents per $100 of assessable SAIF deposits
was collected on November 27, 1996 and applied retroactively to SAIF deposits as
of March 31, 1995. DIFA provides that special assessments will be deductible
under Section 162 of the Internal Revenue Code in the year in which the
assessment is paid. After collection of the special assessment, it is expected
that the SAIF would achieve its designated reserve ratio and SAIF premium rates
would then become the same as BIF rates. DIFA further provides that BIF and SAIF
are to be merged, creating the "Deposit Insurance Fund," on January 1, 1999,
provided that bank and savings association charters are combined by that date.
The Treasury Department is required to prepare a report to be submitted to
Congress by March 31, 1997 on the development of a common charter for all
insured depository institutions. See
"--Supervision and Regulation--Elimination of Federal Savings Charter."
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DIFA further assesses premiums for Financing Corporation Bond debt service
("FICO"). Beginning January 1, 1997, FICO premiums for BIF and SAIF were set at
1.3 and 6.4 basis points, respectively. Full pro rata sharing of FICO will begin
no later than January 1, 2000.
Effective January 1, 1997, SAIF members have the same risk-based assessment
schedule as BIF members, which is 0 to 27 cents per $100 of deposits. FICO
assessments of 1.3 cents for BIF deposits and 6.4 cents for SAIF deposits will
be added to the BIF-assessable base and SAIF-assessable base, respectively,
until December 31, 1999. Thereafter, approximately 2.4 cents would be added to
each regular assessment for all insured depositors, thereby achieving full pro
rata FICO sharing.
The SAIF-assessable base previously was assessed at a rate of 23 to 31 basis
points for the fourth quarter as part of the regular annual deposit insurance
assessment. Following the adoption of DIFA, the special assessment was booked as
an asset by the FDIC effective October 1, 1996, fully capitalizing SAIF as of
that date. Consequently, the proposed regular assessment rate for SAIF-member
savings associations has been lowered retroactively to 18 to 27 basis points
effective October 1, 1996, which represents the amount necessary to cover FICO
obligations.
Until January 1, 1997, under the FDIC's interpretation of existing law, FICO
payments could be met only from assessments on SAIF-member savings associations.
Any overpayment of fourth quarter assessments from such institutions, estimated
at approximately 1.25 cents per $100 of deposits, was refunded or credited, with
interest, using regular quarterly payment procedures.
The federal banking agencies are required to take action to prevent insured
institutions from facilitating or encouraging the shifting of SAIF deposits to
BIF deposits for purposes of evading the assessments imposed on SAIF-assessable
deposits.
Insurance of deposits may be terminated by the FDIC after notice and
hearing, upon a finding by the FDIC that the savings association has engaged in
unsafe or unsound practices, is in an unsafe or unsound condition to continue
operations, or has violated any applicable law, rule, regulation, order or
condition imposed by, or written agreement with, the FDIC. Additionally, if
insurance termination proceedings are initiated against a savings association,
the FDIC may temporarily suspend insurance on new deposits received by an
institution under certain circumstances.
FEDERAL HOME LOAN BANK SYSTEM. The FHLB System consists of 12 regional
FHLBs, each subject to supervision and regulation by the Federal Housing Finance
Board (the "FHFB"). The FHLBs provide a central credit facility for member
savings associations. After the Reorganization, the Bank will be a member of the
FHLB of Atlanta and will be required to own shares of capital stock in the FHLB
of Atlanta in an amount at least equal to 1% of the aggregate principal amount
of unpaid residential mortgage loans, home purchase contracts and similar
obligations at the beginning of each year, or 1/20 of their advances
(borrowings) from the FHLB, whichever is greater. The maximum amount that the
FHLB of Atlanta will advance fluctuates from time to time in accordance with
changes in policies of the FHFB and the FHLB of Atlanta, and the maximum amount
generally is reduced by borrowings from any other source. In addition, the
amount of FHLB advances that a savings association may obtain will be restricted
in the event the institution fails to constitute a QTL.
FEDERAL RESERVE SYSTEM. The Federal Reserve has adopted regulations that
require savings associations to maintain nonearning reserves against their
transaction accounts (primarily NOW and regular checking accounts). After the
Reorganization, the Bank will be in compliance with these requirements. These
reserves may be used to satisfy liquidity requirements imposed by the OTS.
Because required reserves must be maintained in the form of cash or a
non-interest-bearing account at a Federal Reserve Bank, the effect of this
reserve requirement is to reduce the amount of the Bank's interest-earning
assets.
Savings institutions also have the authority to borrow from the Federal
Reserve "discount window." Federal Reserve regulations, however, require savings
associations to exhaust all FHLB sources before borrowing from a Federal Reserve
bank.
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The Federal Reserve also has adopted regulations to implement the Electronic
Funds Transfer Act ("EFTA"), the basic framework establishing rights,
liabilities and responsibilities of participants in electronic funds transfer
systems. The Bank's proposed banking activities over the Internet would be as
electronic funds transfers. The Federal Reserve has proposed amending its
regulations implementing the EFTA in order to simplify the burdens that the EFTA
places on financial institutions. Although most of the regulatory provisions
remain unchanged, the Federal Reserve Board has proposed raising the asset-size
test for the small-institution exemption from $25 million to $100 million in
assets. Under the small institution exemption pre-authorized transfers are
exempt from the EFTA and the regulations promulgated thereunder. All other
electronic fund transfers, however, remain subject to the EFTA. The Bank will
qualify as a small institution under the proposed amendment and will remain
eligible for the small institution exemption until one-year from the end of the
calendar year in which its assets exceeded $100 million.
RESTRICTIONS ON MANAGEMENT INTERLOCKS. The Bank will also be subject to the
restrictions of the Depository Institution Management Interlocks Act ("DIMIA"),
which is intended to foster competition among depository institutions by
prohibiting a management official from serving two nonaffiliated depository
organizations (holding companies or institutions) in situations where the
management interlock likely would have an anticompetitive effect. Under DIMIA,
management officials, including directors and executive officers, are precluded
from serving as a management official of a depository organization at the same
time they are serving as a management official of an unaffiliated organization,
if the depository organizations (or institution subsidiary thereof) are in the
same community or have offices in the same relevant metropolitan statistical
area ("RMSA") and each depository organization has total assets of $20 million
or more. A management official of a depository organization with assets
exceeding $2.5 billion may not serve at the same time as a management official
of an unaffiliated depository organization with total assets exceeding $1.5
billion, regardless of the location of the two depository organizations.
Interlocking relationships permitted by DIMIA include institutions under
receivership, conservatorship, liquidation, or which are to be closed or in
danger of being closed, for the 5-year period following the acquisition of a
failed institution, organizations that do not conduct business within the United
States except as incident to activities outside of the United States and for
management officials of diversified savings and loan holding companies. Other
interlocking relationships are permitted for specified time periods by agency
order, if one of the organizations is located or is to be located in a
low-income or other economically depressed area, or is controlled or managed by
persons who are members of minority groups or by women, or is a newly-chartered
organization and the interlocking relationship is necessary to provide
management or operating expertise to the newly created organization, or if one
of the organizations faces conditions endangering the organizations safety and
soundness.
The OTS, along with the other federal banking agencies, recently proposed
amendments to the regulations implementing DIMIA that would narrow the
circumstances under which an exception could be granted by agency order. Such
changes were required to implement changes to DIMIA that were adopted in the
Riegle Community Development and Regulatory Improvement Act of 1994, and will
require that persons seeking an exemption meet either a "regulatory standards
exemption" or a "management consignment exemption." Agency approval under the
regulatory standards exemption will require that an institution certify that it
has undertaken reasonable efforts to locate any other qualified candidates who
are not prohibited from service under DIMIA. Agencies will not object to such an
interlock if it involves institutions that, if merged, would not trigger a
challenge from the agencies on anticompetitive grounds, as measured under the
Herfindahl-Hirschman Index. The management consignment exemption is permissible
if the management official will strengthen either a newly chartered institution
(defined as charted for less than two years from the date of filing for the
exemption) or an institution that is an unsafe or unsound condition.
Mack I. Whittle, Jr. is the President and Chief Executive Officer of
Carolina First and is a director of Carolina First and CFB. Mr. Whittle will
serve as a director of the Company upon consummation of this
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Offering. The Company, Carolina First and CFB believe that no violation of DIMIA
exists since CFB is deemed to control the Bank for federal regulatory purposes.
TRANSACTIONS WITH AFFILIATES RESTRICTIONS. Transactions engaged in by a
savings association or one of its subsidiaries with affiliates of the savings
association generally are subject to the affiliate transaction restrictions
contained in Sections 23A and 23B of the Federal Reserve Act in the same manner
and to the same extent as such restrictions apply to transactions engaged in by
a member bank or one of its subsidiaries with affiliates of the member bank.
Section 23A of the Federal Reserve Act imposes both quantitative and qualitative
restrictions on transactions engaged in by a member bank or one of its
subsidiaries with an affiliate, while Section 23B of the Federal Reserve Act
requires, among other things that all transactions with affiliates be on terms
substantially the same, and at least as favorable to the member bank or its
subsidiary, as the terms that would apply to, or would be offered in, a
comparable transaction with an unaffiliated party. Exemptions from, and waivers
of, the provisions of Sections 23A and 23B of the Federal Reserve Act may be
granted only by the Federal Reserve. The HOLA and OTS regulations promulgated
thereunder contain other restrictions on loans and extension of credit to
affiliates, and the OTS is authorized to impose additional restrictions on
transactions with affiliates if it determines such restrictions are necessary to
ensure the safety and soundness of any savings association. Current OTS
regulations are similar to Sections 23A and 23B of the Federal Reserve Act.
The Company anticipates that CFB will continue to provide the Company with
various resources on an arms-length basis. In addition to purchasing various
services from CFB from time to time, the Company may also purchase selected
loans from CFB as well as other financial institutions. As a matter of Company
policy, any transaction with CFB must be approved by a majority of the directors
of the Company not affiliated with CFB.
FUTURE REQUIREMENTS. Statutes and regulations are regularly introduced
which contain wide-ranging proposals for altering the structures, regulations
and competitive relationships of financial institutions. It cannot be predicted
whether or what form any proposed statute or regulation will be adopted or the
extent to which the business of the Company and the Bank may be affected by such
statute or regulation.
ELIMINATION OF FEDERAL SAVINGS ASSOCIATION CHARTER
Legislation has been introduced that would eliminate the federal savings
association charter. If such legislation is enacted, the Bank would be required
to convert its federal savings bank charter to either a national bank charter or
to a state depository institution charter. Pending legislation also may provide
relief as to recapture of the bad debt deduction for federal tax purposes that
otherwise would be applicable if the Bank converted its charter, provided that
the Bank meets a proposed residential loan origination requirement. Various
legislative proposals also may result in the restructuring of federal regulatory
oversight, including, for example, consolidation of the OTS into another agency,
or creation of a new Federal banking agency to replace the various agencies
which presently exist. The Bank is unable to predict whether such legislation
will be enacted or, if enacted, whether it will contain relief as to bad debt
deductions previously taken.
PROPERTY
The Company entered into a Lease Agreement (the "Lease"), dated as of June
18, 1996, amended as of December 12, 1996, with The Griffin Company (the
"Landlord"), pursuant to which the Company leases approximately 2,100 square
feet of office space for its principal executive offices in Atlanta, Georgia.
The monthly rental rate is $2,975, subject to annual adjustment in accordance
with the CONSUMER PRICE INDEX FOR THE UNITED STATES FOR ALL CONSUMERS. The
monthly rental rate cannot be increased by less than 4% or more than 10% from
the prior year's rental rate.
The Lease expires on June 30, 1999. The Company has the right to renew the
lease for an additional two-year term under the same terms and at the then
current rental rate, as adjusted in accordance with the
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terms of the Lease. Additionally, the Company has the right to terminate the
lease on December 31, 1997 by giving notice to the Landlord and paying a penalty
in the amount of eight times the then current monthly rental rate.
EMPLOYEES
As of April 1, 1997, the Company had 15 full-time employees and no part-time
employees. Management expects to hire a Chief Technology Officer in the second
or third quarter of 1997 and additional personnel at a rate commensurate with
the Company's growth following completion of the Reorganization and the
Offering. The Company's employees are not parties to a collective bargaining
agreement, and management believes its relationship with employees is good.
LEGAL PROCEEDINGS
Neither the Company nor the Bank is a party to any material legal
proceedings.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the directors
and executive officers of the Company. T. Stephen Johnson and Donald S.
Shapleigh, Jr. have served as directors since the Company's inception in
February 1996. The other directors listed below were elected to the Board on
April 23, 1997.
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------- --- -------------------------------------------------------------------------------
<S> <C> <C>
T. Stephen Johnson 47 Chairman of the Board
D. R. Grimes 50 Vice Chairman, Chief Executive Officer and Director
Donald S. Shapleigh, Jr. 49 President, Chief Operating Officer and Director
Robert E. Bowers 40 Chief Financial Officer and Director
Belinda L. Morgan 50 Operations Officer
Ward H. Clegg 45 Director
J. Stephen Heard 54 Director
Robin C. Kelton 62 Director
John T. Moore 47 Director
Thomas H. Muller, Jr. 55 Director
W. James Stokes 38 Director
Mack I. Whittle, Jr. 48 Director
</TABLE>
The Board of Directors is divided into three classes. Class I directors
(Messrs. Grimes, Johnson and Whittle) will serve an initial term expiring at the
1998 Annual Meeting of Shareholders; Class II directors (Messrs. Bowers, Clegg,
Heard and Stokes) will serve an initial term expiring at the 1999 Annual Meeting
of Shareholders; and Class III directors (Messrs. Kelton, Moore, Muller and
Shapleigh) will serve an initial term expiring at the 2000 Annual Meeting of
Shareholders. Thereafter, the members of each class will be elected for a
three-year term. In addition, CFB has the right to nominate four directors. The
right expires upon the initial appointment of the nominated director or a
director elected in opposition to the nominee. Pursuant to this right, CFB
nominated Messrs. Clegg, Moore and Whittle as directors and retains the right to
nominate one additional director in the future.
T. STEPHEN JOHNSON is President of TSJ&A, a bank consulting firm located in
Roswell, Georgia. The firm specializes in mergers, acquisitions and regulatory
consulting. TSJ&A has served as advisor and consultant in the formation of
approximately 70 banks in the southeastern United States. Mr. Johnson served in
a management capacity for two large Atlanta banks before forming TSJ&A in 1987.
Mr. Johnson also serves as Chairman and Founder of the Southeast Bank Fund,
Inc., a privately held corporation that invests in the stock of banks located in
the Southeast ("Southeast Bank Fund"). In addition, he is principal owner of
Bank Assets Inc., a provider of benefit programs for directors and officers of
banks.
D. R. GRIMES has served as Vice Chairman and Chief Executive Officer of the
Company since January 1997. From March 1996 to January 1997, he was an
independent management consultant, and from 1978 to March 1996, he served in
various capacities with Servantis Systems, Inc., which provides electronic funds
transfer and home banking software to the financial services industry, including
Executive Vice President of Technology and Chief Information Officer
(1995-1996); Executive Vice President of Technology and Marketing (1993-1995);
President, Treasury Products Division (1994); and President, Financial Products
Division (1988-1993).
DONALD S. SHAPLEIGH, JR. has served as President of the Company and the Bank
since January 1996. He has also served as a director of the Company since its
incorporation. Mr. Shapleigh has been involved in banking since 1971, having
spent 23 years in various senior positions with Bank South, N.A. and SouthTrust
Bank. From November 1994 to December 1995, Mr. Shapleigh served as Director of
Sales for Creative
56
<PAGE>
Solutions Group/A BISYS Company, an Atlanta-based company that sells its
patented automated voice response technology to retail financial service
companies.
ROBERT E. BOWERS has served as Chief Financial Officer of the Company since
February 18, 1997. Prior to joining the Company, Mr. Bowers was the Chief
Financial Officer of CheckFree Corporation, which provides electronic bill
payment processing for the financial services industry, from January 1996
through August 1996. From September 1984 until January 1996, he served as the
Chief Financial Officer and a director of Servantis Systems, Inc., which
provides electronic funds transfer and home banking software to the financial
services industry. His experience includes initial public offerings, strategic
business planning and investor relations.
BELINDA L. MORGAN has served as Operations Officer of the Company and the
Bank since June 1996. From 1965 to 1995, she was employed by Bank South,
Atlanta, Georgia, and its predecessors in various management capacities,
including Programming and Product Development Manager, Operations Director and
General Manager of Operations and Technology. From June 1995 to May 1996, she
served as an independent consultant in the area of bank operations.
WARD H. CLEGG has served as a director of Resource BancShares Corporation
("Resource Bancshares") since September 1986. Resource Bancshares is the owner
of specialty assets companies that engage in commercial mortgage banking, credit
card transaction processing and origination and small ticket equipment leasing.
He also works with Carolina First (the holding company for CFB) on a consulting
basis.
J. STEPHEN HEARD has served as President of Heard Systems, Inc., which
provides information systems consulting services and Scrip ATM Services to the
retail industry, since January 1, 1994. In 1995 he retired from IBM after a
30-year career in marketing, sales and systems engineering.
ROBIN C. KELTON is Chairman of Kelton International Ltd. ("Kelton
International"), an investment banking firm formed in January 1996 specializing
in the banking and insurance industries. Mr. Kelton is a founder and former
Chairman and Chief Executive Officer of Fox-Pitt, Kelton Ltd. and the Fox-Pitt,
Kelton Group, and President of Fox-Pitt, Kelton, Inc. These companies were
formed in 1970 and comprise an international investment banking and brokerage
group based in London and New York.
JOHN T. MOORE has practiced law in Columbia, South Carolina since 1975 and
has been a partner in the law firm of Nelson Mullins Riley & Scarborough, LLP
since 1982. His practice is concentrated in the area of debtor and creditor
rights and creditor regulatory compliance issues.
THOMAS H. MULLER, JR. has served as the Chief Financial Officer of SpectRx,
Inc., a medical device company since December 1996. Mr. Muller has also served
as President of Muller & Associates, a firm providing financial management
services to entrepreneurial enterprises, since 1992 and Chief Financial Officer
of Nurse On Call, Inc., a healthcare software company, from 1993 to 1996. From
1993 to 1995, Mr. Muller also served as Chief Financial Officer of Amstell,
Inc., a beverage manufacturing and marketing company. From 1991 to 1992, Mr.
Muller served as Chief Financial Officer of HBO & Company, a leading healthcare
information systems company.
W. JAMES STOKES has served as Senior Vice President of TSJ&A since 1987. He
serves as Head of Analysis, with a focus on mergers and acquisitions, stock
valuations, fairness opinions and regulatory assistance. Mr. Stokes also serves
as the Chief Analyst for Southeast Bank Fund.
MACK I. WHITTLE, JR. has served as President and Chief Executive Officer of
Carolina First since 1986. Mr. Whittle is also a director of Carolina First and
CFB. Mr. Whittle began his banking career in 1969 with Bankers Trust of South
Carolina. From 1969 to 1986, he served in several capacities including Trust
Officer, Vice President of Commercial Business Development, City Executive for
Myrtle Beach, and Senior Vice President and Regional Officer. In January 1986,
Bankers Trust of South Carolina merged with NCNB Corp. Mr. Whittle resigned from
NCNB Corp. in May 1986 to form Carolina First.
57
<PAGE>
COMMITTEES OF THE BOARD OF DIRECTORS
Prior to the consummation of this Offering, the Board of Directors will
establish a Compensation Committee. The Compensation Committee will establish
remuneration levels for officers of the Company, review management organization
and development, review significant employee benefit programs and establish and
administer executive compensation programs.
Prior to the consummation of this Offering, the Board of Directors will
establish an Audit Committee. The Audit Committee will recommend to the Board of
Directors the independent public accountants to be selected to audit the
Company's annual financial statements and approve any special assignments given
to such accountants. The Audit Committee will also review the planned scope of
the annual audit, any changes in accounting principles and the effectiveness and
efficiency of the Company's internal accounting staff.
The Board of Directors may from time to time establish certain other
committees to facilitate the management of the Company.
DIRECTOR COMPENSATION
Directors of the Company do not receive any fees or other compensation for
their services as directors. The Company may reimburse directors for reasonable
expenses incurred in connection with attending meetings of the Board of
Directors.
The Company has paid $67,032 in consulting fees to Mr. Clegg for
technological consulting services. Mr. Clegg will continue to perform these
services in the future and will be paid on a project-by-project basis.
Management believes the Company has obtained Mr. Clegg's consulting services on
terms that are no less favorable than those that could have been obtained from
an unaffiliated third party.
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation awarded to, earned by or paid to the Company's Chief Executive
Officer from the Company's incorporation on February 20, 1996 through December
31, 1996. D. R. Grimes became Chief Executive Officer of the Company on January
5, 1997. Prior to that time Donald S. Shapleigh, Jr. served as Chief Executive
Officer of the Company. No other officer of the Company received annual
compensation in excess of $100,000. Mr. Shapleigh did not receive or hold any
stock options or other long-term incentives during that period. In November
1996, Mr. Grimes received nonqualified stock options to purchase 16,563 shares
of the Company's Common Stock.
58
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION(2)
ANNUAL COMPENSATION(1) ----------------
SECURITIES
NAME AND ---------------------- UNDERLYING ALL OTHER
PRINCIPAL POSITION FISCAL YEAR SALARY($) BONUS($) OPTIONS/SARS(#) COMPENSATION($)
- ----------------------------------------------------- ----------- ---------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Donald S. Shapleigh, Jr. 1996 82,284 -- -- --
President and Chief Executive Officer(3)
</TABLE>
- ------------------------
(1) Information with respect to certain perquisites and other personal benefits
has been omitted because the aggregate value of such items does not meet the
minimum amount required for disclosure under SEC regulations.
(2) The Company has not awarded any restricted stock or long-term incentives
other than stock options. Accordingly, columns relating to such awards have
been omitted.
(3) Mr. Shapleigh, the Company's President and Chief Operating Officer, also
served as Chief Executive Officer until January 1997.
STOCK INCENTIVE PLAN
The Board of Directors has reserved 397,500 shares of Common Stock for
issuance pursuant to awards that may be made under the Company's 1996 Stock
Incentive Plan. The term of the Plan is indefinite.
Awards under the Plan are determined by a committee of no less than two
members of the Board of Directors (the "Committee"), the members of which are
selected by the Board of Directors. Committee members satisfy the criteria
required for "non-employee directors" set forth in Rule 16b-3, under the
Securities Exchange Act of 1934, as amended, and "outside directors" within the
meaning of Section 162(m) of the Internal Revenue Code. Rules, regulations and
interpretations necessary for the ongoing administration of the Plan are made by
the Committee.
Key employees, officers, directors and consultants of the Company or an
affiliate are eligible for awards under the Plan. The Plan permits the Committee
to make awards of shares of Common Stock, awards of derivative securities
related to the value of the Common Stock and certain cash awards to eligible
persons. These discretionary awards may be made on an individual basis, or
pursuant to a program approved by the Committee for the benefit of a group of
eligible persons. The Plan permits the Committee to make awards of a variety of
equity-based incentives, including (but not limited to) stock awards, options to
purchase shares of Common Stock and to sell shares of Common Stock back to the
Company, stock appreciation rights, so-called "cash-out" or "limited stock
appreciation rights" (which the Committee may make exercisable in the event of
certain changes in control of the Company or other events), phantom shares,
performance incentive rights, dividend equivalent rights and similar rights
(hereinafter, "Stock Incentives"). The number of shares of Common Stock as to
which a Stock Incentive is granted and to whom any Stock Incentive is granted is
determined by the Committee, subject to the provisions of the Plan. Stock
Incentives issuable may be made exercisable or settled at such prices and may be
made terminable under such terms as are established by the Committee, to the
extent not otherwise inconsistent with the terms of the Plan.
The Committee has the discretion to allow a Stock Incentive to be settled in
various ways, depending upon the type of Stock Incentive, including payment in
cash, payment by the delivery of previously-owned shares of Common Stock,
payment through a cashless exercise executed through a broker or payment by
having withheld a number of shares of Common Stock otherwise issuable pursuant
to the Stock Incentive. The terms of particular Stock Incentives may provide
that they terminate, among other reasons, upon the
59
<PAGE>
holder's termination of employment or other status with respect to the Company
and any affiliate, upon a specified date, upon the holder's death or disability,
or upon the occurrence of a change in control of the Company. Stock Incentives
may also include exercise, conversion or settlement rights to a holder's estate
or personal representative in the event of the holder's death or disability. At
the Committee's discretion, Stock Incentives that are held by an employee who
suffers a termination of employment may be cancelled, accelerated, paid or
continued, subject to the terms of the applicable Stock Incentive agreement and
to the provisions of the Plan. Stock Incentives generally shall not be
transferable or assignable during a holder's lifetime. The Committee may make
cash awards designed to cover tax obligations of employees that result from the
receipt or exercise of a Stock Incentive. Delivery of any shares of Common Stock
issuable pursuant to the Plan may be conditioned upon compliance with available
exemptions from registration under applicable federal and state securities laws.
The maximum number of shares of Common Stock with respect to which options
or stock appreciation rights may be granted during any fiscal year of the
Company as to any eligible employee shall not exceed 100,000, to the extent
required by Section 162(m) of the Internal Revenue Code for the grant to qualify
as qualified performance-based compensation.
The number of shares of Common Stock reserved for issuance in connection
with the grant or settlement of Stock Incentives or to which a Stock Incentive
is subject, as the case may be, and the exercise price of each option are
subject to adjustment in the event of any recapitalization of the Company or
similar event, effected without the receipt of consideration. In the event of
certain corporate reorganizations and similar events, Stock Incentives may be
substituted, cancelled, accelerated, cashed-out or otherwise adjusted by the
Committee, provided such adjustment is not inconsistent with the express terms
of the Plan or the applicable Stock Incentive agreement.
Although the Plan may be amended or terminated by the Board of Directors
without shareholder approval, the Board of Directors also may condition any such
amendment or termination upon shareholder approval if shareholder approval is
deemed necessary or appropriate in consideration of tax, securities or other
laws.
A total of 354,438 options have been granted under the Plan. The following
directors and executive officers of the Company have been granted options with
the following terms:
<TABLE>
<CAPTION>
TYPE OF SHARES SUBJECT EXERCISE
NAME OPTION(1) TO OPTION PRICE
- ---------------------------------------------------------------- ---------------- --------------- -------------
<S> <C> <C> <C>
D. R. Grimes.................................................... Nonqualified 82,812 $ 1.21
D. R. Grimes.................................................... Incentive 66,250 $ 10.00
Robert E. Bowers................................................ Nonqualified 57,969 $ 1.21
Robert E. Bowers................................................ Incentive 57,969 $ 10.00
Donald S. Shapleigh, Jr......................................... Incentive 49,687 $ 10.00
Belinda L. Morgan............................................... Incentive 16,563 $ 3.62
</TABLE>
- ------------------------
(1) Incentive stock options vest in equal one-third annual increments beginning
on the first anniversary of the grant date, provided, however, that vesting
accelerates on certain profitability conditions. Nonqualified stock options
vest in equal one-third annual increments beginning on the first anniversary
of the grant date, the completion of a recapitalization (including a public
offering) or a change in control of the Company, whichever is first to
occur.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Board of Directors set the compensation of the Company's
executive officers from the Company's inception until April 22, 1997, when the
Board delegated that function to the Compensation Committee of the Board of
Directors. Until that time, the Company's Board of Directors consisted of
Messrs. Johnson and Shapleigh and Mary E. Johnson.
60
<PAGE>
T. Stephen Johnson is the Chairman of the Board of Directors of the Company
and the President of TSJ&A. W. James Stokes is a director of the Company and a
Senior Vice President of TSJ&A. TSJ&A provides certain operating services to the
Company such as management, consulting, regulatory and accounting services, as
well as office space and clerical support. TSJ&A expects to incur approximately
$500,000 in expenses as a result of providing such operating services.
Management believes the Company has obtained these services on terms no less
favorable than could be obtained from an unaffiliated third party. The Company
intends to reimburse TSJ&A with a portion of the net proceeds of the Offering
and plans to continue to utilize TSJ&A's services on the same terms after the
Offering.
Mr. Shapleigh has served as President of the Company since February 1996.
61
<PAGE>
CERTAIN TRANSACTIONS
The Bank has been operated as a service of CFB pursuant to the terms of the
Operation Agreement. The Operation Agreement provides that CFB will operate the
Bank as a service of CFB under the trade name "Atlanta Internet Bank" and that
the operations of the Bank will be managed by the Company. CFB agreed to provide
funding for the reasonable expenses and operations of the Bank up to the amount
of $1,325,985 or until July 31, 1997, whichever is first to occur. CFB will be
reimbursed for these expenses from the net proceeds of the Offering.
Simultaneously with the consummation of the Offering, CFB will transfer the
assets and liabilities relating to the operations of the Bank to the Company's
newly acquired federal savings bank subsidiary. In consideration for the
transfer and for operating the Bank as a service of CFB, the Company will pay
$1.00 to CFB and will issue 1,325,000 shares of the Company's Common Stock to
CFB. The Common Stock issued to CFB has been valued at $3,840,000 based on the
appraised fair market value of the Common Stock on the date of the Agreement.
Upon completion of the transfer of the assets and liabilities of the Bank as
contemplated by the Operation Agreement, CFB will pay to the Bank 100% of the
total amount of deposits with the Bank, less the sum of: (i) all cash items;
(ii) net interest income based upon the Bank's cost of deposits and interest
income allocated by CFB to the Bank's operations, which is not expected to
exceed a cost of $200,000; (iii) unreimbursed reasonable expenses (including the
funding advanced by CFB) under the terms of the Operation Agreement to the
extent not reflected in (ii) above not expected to exceed $1,500,000; and (iv)
the net book value of loans issued by the Bank. The only unreimbursed expenses
incurred or to be incurred by CFB from its operation of the Bank consist of
$31,232 in contributed services from an affiliate that the Company recorded as
additional paid-in capital in fiscal 1996.
The Operation Agreement gives CFB the right to nominate four directors to
the Company's Board of Directors. The right expires upon the initial appointment
of the nominated director or a director elected in opposition to the nominee.
Pursuant to this right, CFB nominated three of the Company's current directors
and retains the right to nominate one additional director in the future. Of the
three CFB nominees currently serving as directors, one has a term expiring in
1998, one has a term expiring in 1999 and one has a term expiring in 2000. Upon
completion of the Offering, CFB will beneficially own 1,325,000 shares, or
23.5%, of the outstanding Common Stock of the Company. The Company and CFB
intend to maintain a normal correspondent relationship following the
consummation of the Reorganization and the Offering. Correspondent services and
transactions, which are expected to include purchases by the Company of loans
and loan participations, will be on terms no less favorable than could be
obtained from an unaffiliated third party for comparable transactions and
approved by a majority of the Company's directors who are not affiliated with
CFB.
The Company intends to pay up to $450,000 of the net proceeds of the
Offering as bonuses to certain officers and employees upon completion of the
Offering. Mr. Grimes will receive a bonus of $250,000 and Mr. Bowers will
receive a bonus of $100,000. Other bonus payments have not yet been determined.
The bonuses are not part of a formal compensation program adopted by the
Company, but are instead being issued based on the Board's subjective evaluation
of individual contributions to the Company's performance.
See "Management--Compensation Committee Interlocks and Insider
Participation" and "--Director Compensation" for a description of other
transactions between the Company and its affiliates.
62
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock as of April 24, 1997 and
adjusted to reflect the sale of the shares offered hereby, by (i) each director
and director nominee; (ii) each executive officer; (iii) each person known to
the Company to be the beneficial owner of more than five percent of the
outstanding Common Stock of the Company; and (iv) all of the directors and
executive officers as a group. Unless otherwise specified, each shareholder has
sole voting and investment power with respect to the indicated shares and the
address of each shareholder is the same as the address of the Company.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
------------------------------------
PERCENT
------------------------
PRIOR TO AFTER
NAME OF BENEFICIAL OWNER NUMBER OFFERING OFFERING
- ------------------------------------------------------------------------------------- ---------- ----------- -----------
<C> <S> <C> <C> <C>
(i) Directors and Director Nominees
Robert E. Bowers(1)(2).................................................... 57,969 4.3 1.0
Ward H. Clegg............................................................. 49,688 3.9 0.9
D. R. Grimes(1)(2)........................................................ 82,812 6.1 1.4
J. Stephen Heard.......................................................... 9,938 0.8 0.2
T. Stephen Johnson(3)..................................................... 292,593 22.9 5.2
Robin C. Kelton........................................................... 142,438 11.1 2.5
John T. Moore............................................................. 9,938 0.8 0.2
Thomas H. Muller, Jr...................................................... 9,938 0.8 0.2
Donald S. Shapleigh, Jr.(1)............................................... 66,250 5.2 1.2
W. James Stokes........................................................... 33,125 2.6 0.6
Mack I. Whittle(4)........................................................ 0 0.0 23.5
(ii) Non-Director, Executive Officer
Belinda L. Morgan......................................................... 16,563 1.3 0.3
(iii) Non-Directors, 5% Beneficial Owners
Carolina First Bank(5).................................................... 0 0.0 23.5
Mary E. Johnson(6)........................................................ 292,593 22.9 5.2
Edward J. Sebastian(7).................................................... 292,593 22.9 5.2
(iv) All Executive Officers and Directors as a Group (12 persons).............. 771,252 54.3 36.2
</TABLE>
- ------------------------
(1) Mr. Bowers, Mr. Grimes and Mr. Shapleigh are also executive officers of the
Company.
(2) Includes outstanding options for executive officers as follows:
D. R. Grimes 82,812
Robert E. Bowers 57,969
(3) Includes 146,280 shares owned of record by Mr. Johnson's spouse, Mary E.
Johnson.
(4) Mr. Whittle serves as Chairman of the Board of CFB. As a result, he may be
deemed to beneficially own any shares owned by CFB. See Note (5).
(5) Carolina First Bank is located at 102 South Main Street, Greenville, South
Carolina 29601. Although CFB does not presently own any shares of Common
Stock, it will own 1,325,000 shares (representing 23.5%) of the Common Stock
outstanding after the Offering and the Reorganization. In addition, the
Underwriters' over-allotment option is exercised, CFB (the "Selling
Shareholder") will sell 150,000 shares of Common Stock in the Offering. In
such event, CFB will beneficially own 1,175,000 shares of Common Stock after
the Offering, representing approximately 19.3% of the then-outstanding
Common Stock.
(6) Includes 146,313 shares owned of record by Ms. Johnson's spouse, T. Stephen
Johnson.
(7) Includes 146,280 shares owned of record by Mr. Sebastian's spouse. Mr.
Sebastian disclaims beneficial ownership of such shares. Mr. Sebastian's
address is 1901 Main Street, Suite 620, Columbia, South Carolina 29201.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 100,000,000 shares of
common stock, $.01 par value, and 10,000,000 shares of preferred stock, no par
value. As of April 23, 1997, there were 1,279,156 shares of Common Stock
outstanding held by 29 holders of record. The following summary is qualified by
reference to the Amended and Restated Articles of Incorporation (the "Articles")
and Bylaws (the "Bylaws") of the Company, which are filed as an exhibit to the
Registration Statement of which this Prospectus is a part.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share in the election
of directors and on all other matters submitted to a vote of the holders of
Common Stock and do not have cumulative voting rights. The holders of Common
Stock are entitled to receive dividends, if any, as may be declared from time to
time by the Board of Directors out of funds legally available therefor, and in
the event of liquidation, dissolution or winding-up of the Company, to share
ratably in all assets available for distribution.
PREFERRED STOCK
The authorized Preferred Stock may be issued from time to time in one or
more designated series or classes. The Board of Directors, without approval of
the shareholders, is authorized to establish the voting, dividend, redemption,
conversion, liquidation and other relative provisions as may be provided in a
particular series or class. The issuance of Preferred Stock, while providing
flexibility in connection with possible acquisitions and other corporate
purposes, could, among other things, adversely affect the voting power of the
holders of Common Stock and, under certain circumstances, make it more difficult
for a third party to acquire, or discourage a third party from acquiring, a
majority of the outstanding voting stock of the Company. The Company has no
present intention to issue any series or class of Preferred Stock.
SPECIAL MEETINGS OF SHAREHOLDERS
The Bylaws of the Company provide that special meetings of the shareholders
may be called at any time for any purpose by the Chief Executive Officer or by
the presiding officer of the Board. Either the Chief Executive Officer or the
Secretary of the Company is required to call a special meeting when (i)
requested in writing by any two or more of the directors; or (ii) requested in
writing by shareholders owning shares representing at least twenty-five percent
(25%) of all the votes entitled to be cast on any issue proposed to be
considered at such meeting.
SUPERMAJORITY APPROVAL OF CERTAIN TRANSACTIONS
The Articles require the affirmative vote of the holders of two-thirds of
the voting stock to approve certain mergers, share exchanges and dispositions of
the assets of the Company unless at least two-thirds of the members of the Board
of Directors approve the proposed transaction. If such approval by the Board of
Directors is obtained, approval by the vote of a majority of the outstanding
shares entitled to vote is required. This provision may tend to discourage
attempts by third parties to acquire the Company in a hostile takeover effort.
It may also permit a minority of directors and shareholders to prevent a
business combination regardless of the terms of the proposed transaction.
CLASSIFIED BOARD AND REMOVAL OF DIRECTORS
The Articles also provide that the Board of Directors will be divided into
three classes serving staggered three-year terms and that a director may only be
removed by the vote of two-thirds of the outstanding shares entitled to vote in
an election of directors. These provisions could enable a minority of the
Company's shareholders to prevent the removal of a director sought to be removed
by a majority of the
64
<PAGE>
shareholders and may tend to enhance management's ability to retain control over
the Company's affairs and to preserve the director's present position on the
Board.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Bylaws of the Company contain certain indemnification provisions
providing that directors, officers, and employees or agents of the Company will
be indemnified against expenses actually and reasonably incurred by them if they
are successful on the merits of a claim or proceeding.
When a case or dispute is not ultimately determined on its merits (I.E., it
is settled), the indemnification provisions provide that the Company will
indemnify directors when they meet the applicable standard of conduct. The
applicable standard of conduct is met if the director 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 Company, and with respect to an employee benefit plan, for a
purpose the director believed in good faith to be in the interests of the
participants and beneficiaries of the plan. The standard of conduct with respect
to any criminal action or proceeding is met if the director had no reasonable
cause to believe his or her conduct was unlawful. Whether the applicable
standard of conduct has been met is determined by the Board of Directors, the
shareholders or independent legal counsel in each specific case.
The Company can also provide for greater indemnification than that set forth
in the Bylaws if it chooses to do so, subject to approval by the Company's
shareholders. The Company may not, however, indemnify a director for liability
arising out of circumstances which constitute exceptions to limitation of a
director's liability for monetary damages. See "--Limitation of Liability".
The indemnification provisions of the Bylaws specifically provide that the
Company may purchase and maintain insurance on behalf of any director against
any liability asserted against such person and incurred by him or her in any
such capacity, whether or not the Company would have had the power to indemnify
against such liability.
Management is not aware of any pending or threatened action, suit or
proceeding involving any of its directors or officers for which indemnification
from the Company may be sought.
LIMITATION OF LIABILITY
Article X of the Company's Articles, subject to certain exceptions,
eliminates the potential personal liability of a director for monetary damages
to the Company and to the shareholders of the Company for breach of a duty as a
director. There is no elimination of liability for (a) a breach of duty
involving appropriation of a business opportunity of the Company, (b) an act or
omission not in good faith or involving intentional misconduct or a knowing
violation of law, (c) a transaction from which the director derives an improper
material tangible personal benefit, or (d) as to any payment of a dividend or
approval of a stock repurchase that is illegal under the Georgia Business
Corporation Code. The Articles do not eliminate or limit the right of the
Company or its shareholders to seek injunctive or other equitable relief not
involving monetary damages.
Article X was adopted by the Company pursuant to the Georgia Business
Corporation Code which allows Georgia corporations, with the approval of their
shareholders, to include in their Articles of Incorporation a provision
eliminating or limiting the liability of directors, except in the circumstances
described above. Article X was included in the Company's Articles to encourage
qualified individuals to serve and remain as directors of the Company. Article X
was also included to enhance the Company's ability to secure liability insurance
for its directors at a reasonable cost. The Company intends to obtain liability
insurance covering actions taken by its directors in their capacities as
directors. The Board of Directors believes that Article X will enable the
Company to secure such insurance on terms more favorable than if such a
provision were not included in the Articles.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have 5,645,562 shares of
Common Stock outstanding. The shares sold in this Offering will be freely
tradeable without restriction or further registration, except for shares owned
by "affiliates" of the Company as such term is defined under the Securities Act)
which may be sold subject to the resale limitations of Rule 144 promulgated
under the Securities Act ("Rule 144"). The remaining 2,645,562 outstanding
shares constitute "restricted securities" within the meaning of Rule 144. Such
shares must be held for one year before they may be resold pursuant to Rule 144,
unless the resale of such shares is made pursuant to an effective registration
statement under the Securities Act or another exemption from registration is
available.
Generally, Rule 144 provides that beginning 90 days after the date of this
Prospectus, a person (or persons whose shares are aggregated) who has
beneficially owned "restricted" securities for at least one year, including a
person who may be deemed an "affiliate" of the Company, as the term "affiliate"
is defined under the Securities Act, is entitled to sell in "broker's
transactions" or in transactions directly with a "market maker," within any
three-month period, a number of shares that does not exceed the greater of one
percent of the then outstanding shares of Common Stock or the average weekly
trading volume of the Common Stock on any national securities exchange and/or
over-the-counter market during the four calendar weeks preceding such sale.
Sales under Rule 144 are also subject to certain notice requirements and the
availability of current public information about the Company. A person (or
persons whose shares are aggregated) who is not deemed an "affiliate" of the
Company would be entitled to sell such shares under Rule 144 without regard to
the volume, public information, manner of sale or notice provisions and
limitations described above, once a period of at least two years had elapsed
since the later of the date the shares were acquired from the Company or from an
"affiliate" of the Company.
There are currently outstanding options to purchase 354,438 shares of Common
Stock under the Company's 1996 Stock Incentive Plan. After this Offering, the
Company intends to file a registration statement on Form S-8 under the
Securities Act to register the shares of Common Stock issuable upon exercise of
such options. Accordingly, such shares will be freely tradeable by holders who
are not affiliates of the Company and, subject to the volume and manner of sale
limitations of Rule 144, by holders who are affiliates of the Company.
Prior to this Offering, there has been no public market for the Common Stock
of the Company, and no prediction can be made as to the effect, if any, that
future sales of shares or the availability of shares for sale will have on the
market price for Common Stock prevailing from time to time. Sales of substantial
amounts of Common Stock in the public market, or the perception of the
availability of shares for sale, could adversely affect the prevailing market
price of the Common Stock and could impair the Company's ability to raise
capital through the sale of its equity securities.
66
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement among the
Company and the Underwriters named below (the "Underwriting Agreement"), the
Company has agreed to sell to each of such Underwriters named below, and each of
such Underwriters, for whom Morgan Keegan & Company, Inc. and Interstate/Johnson
Lane Corporation are acting as representatives, has severally agreed to purchase
from the Company, the respective number of shares of Common Stock set forth
opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
UNDERWRITER COMMON STOCK
- ------------------------------------------------------------------------- -------------------
<S> <C>
Morgan Keegan & Company, Inc.............................................
Interstate/Johnson Lane Corporation......................................
----------
Total................................................................ 3,000,000
----------
----------
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the shares of Common Stock
offered hereby, if any are taken.
The Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus, and in part to certain securities dealers at such
price less a concession of $ per share. The Underwriters may allow, and
such dealers may allow, a concession not in excess of $ per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time to
time be varied by the representatives.
The Company and the Selling Shareholder have granted the Underwriters an
option exercisable for 30 days after the date of this Prospectus to purchase up
to an aggregate of 300,000 and 150,000 additional shares of Common Stock,
respectively, solely to cover over-allotments, if any. If the Underwriters
exercise their overallotment option, the Underwriters have severally agreed,
subject to certain conditions, to purchase approximately the same percentage
thereof that the number of shares of Common Stock to be purchased by each of
them, as shown in the table above, bears to the 3,000,000 shares of Common
Stock.
The Company and all of its officers, directors and existing shareholders
have agreed, during the period beginning from the date of this Prospectus and
continuing to and including the date 180 days (one year with respect to CFB)
after the date of the Prospectus, not to offer, sell, contract to sell or
otherwise dispose of any securities of the Company (other than, with respect to
the Company, pursuant to employee stock option plans existing, or on the
conversion or exchange of convertible or exchangeable securities outstanding, on
the date of this Prospectus) which are substantially similar to the shares of
Common Stock or which are convertible or exchangeable into securities which are
substantially similar to the shares of Common Stock without the prior consent of
the representatives.
The representatives of the Underwriters have informed the Company that the
Underwriters do not expect sales to accounts over which the Underwriters
exercise discretionary authority to exceed five percent of the total number of
shares of Common Stock offered by them.
Prior to this Offering, there has been no public market for the Common
Stock. The initial public offering price of the Common Stock will be negotiated
between the Company and the representatives of the Underwriters. Among the
factors to be considered in determining the initial public offering price of the
Common Stock, in addition to prevailing market conditions, are the history of,
and prospects for, the industry in which the Company operates, the price
earnings multiples of publicly traded common stocks of comparable companies, the
cash flow and earnings of the Company and comparable companies in recent periods
and the Company's business potential and cash flow and earnings prospects.
The Company and the Selling Shareholder have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act.
67
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby is being passed
upon for the Company by Powell, Goldstein, Frazer & Murphy LLP, Atlanta,
Georgia. The validity of the shares of Common Stock offered hereby will be
passed upon for the Underwriters by King & Spalding, Atlanta, Georgia.
EXPERTS
The financial statements as of December 31, 1996 and for the period February
20, 1996 (Date of Incorporation) to December 31, 1996 included in this
Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports appearing herein in this Registration Statement, and are
included in reliance upon the reports of such firm given upon their authority as
experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has not previously been subject to the reporting requirements of
the Securities Exchange Act of 1934, as amended. The Company has filed with the
Commission a Registration Statement on Form S-1 (the "Registration Statement")
under the Securities Act, with respect to the offer and sale of Common Stock
pursuant to this Prospectus. This Prospectus, filed as a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement or the exhibits and schedules thereto in accordance with
the rules and regulations of the Commission and reference is hereby made to such
omitted information. Statements made in this Prospectus concerning the contents
of any contract, agreement or other document filed as an exhibit to the
Registration Statement are summaries of the terms of such contract, agreement or
document. Reference is made to each such exhibit for a more complete description
of the matters involved and such statements shall be deemed qualified in their
entirety by such reference. The Registration Statement and the exhibits and
schedules thereto filed with the Commission may be inspected, without charge,
and copies may be obtained at prescribed rates, at the public reference facility
maintained by the Commission at Judiciary Plaza, Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the regional offices of the Commission at 7
World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center,
Suite 1400, 500 West Madison Street, Chicago, Illinois 60661. This Registration
Statement was filed with the Commission electronically. The Commission maintains
a site on the World Wide Web that contains documents filed with the Commission
electronically. The address of such site is http://www.sec.gov, and the
Registration Statement may be inspected at such site. For further information
pertaining to the Common Stock offered by this Prospectus and the Company,
reference is made to the Registration Statement.
The Company and its organizers have filed or will file various applications
with the OTS and the Federal Reserve. Prospective investors should rely only on
information contained in this Prospectus and in the Company's related
Registration Statement in making an investment decision. To the extent that
other available information not presented in this Prospectus, including
information available from the Company and information in public files and
records maintained by the OTS and the Federal Reserve, is inconsistent with
information presented in this Prospectus or provides additional information,
such other information is superseded by the information presented in this
Prospectus and should not be relied on. Projections appearing in the
applications are based on assumptions that the organizers believe are
reasonable, but as to which no assurances can be made. The Company specifically
disaffirms those projections for purposes of this Prospectus and cautions
prospective investors against placing reliance on them for purposes of making an
investment decision.
The Company will furnish its shareholders with annual reports containing
audited financial information for each fiscal year on or before the date of the
annual meeting of shareholders as required by the Commission and by Rule
80-6-1-.05 of the Department of Banking. The Company also intends to furnish its
shareholders with quarterly reports containing unaudited consolidated financial
statements for the first three quarters of each fiscal year. The Company's
fiscal year ends on December 31. Additionally, the Company will also furnish
such other reports as it may determine to be appropriate or as otherwise may be
required by law.
68
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors of Net.B@nk, Inc.:
We have audited the accompanying balance sheet of Net.B@nk, Inc. (the
"Company") (a development stage enterprise) as of December 31, 1996 and the
related statements of operations, shareholders' deficit, and cash flows for the
period from February 20, 1996 (date of incorporation) to December 31, 1996.
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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1996 and the
results of its operations and its cash flows for the period from February 20,
1996 (date of incorporation) to December 31, 1996 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
March 18, 1997
F-1
<PAGE>
NET.B@NK, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------- MARCH 31,
1997
-------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................................................... $ 768,666 $ 194,668
License agreements--current....................................................... 155,600 133,378
Other assets--current............................................................. 109,833 270,468
------------- -------------
Total current assets............................................................ 1,034,099 598,514
LICENSE AGREEMENTS.................................................................. 46,366 30,306
FURNITURE AND EQUIPMENT--Net........................................................ 165,984 149,622
------------- -------------
$ 1,246,449 $ 778,442
------------- -------------
------------- -------------
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Amounts due to affiliate.......................................................... $ 883,606 $ 1,197,007
Other payables and accrued liabilities............................................ 748,916 860,066
------------- -------------
Total current liabilities....................................................... 1,632,522 2,057,073
------------- -------------
------------- -------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIT:
Preferred stock, no par (10,000,000 shares authorized, none outstanding).......... -- --
Common stock, $.01 par (100,000,000 shares authorized, 1,249,342 and 1,269,218
shares issued and outstanding).................................................. 12,493 12,692
Additional paid-in capital........................................................ 1,069,088 1,307,929
Common stock subscribed (1,354,814 and 1,334,938 shares).......................... 3,844,185 3,841,395
Stock subscriptions receivable (29,814 and 9,938 shares).......................... (4,185) (1,395)
Unamortized affiliate service contract expense.................................... (1,440,000) (576,000)
Unamortized stock plan expense.................................................... (28,472) (224,045)
Deficit accumulated during the development stage.................................. (3,839,182) (5,639,207)
------------- -------------
Total shareholders' deficit..................................................... (386,073) (1,278,631)
------------- -------------
$ 1,246,449 $ 778,442
------------- -------------
------------- -------------
</TABLE>
See notes to financial statements.
F-2
<PAGE>
NET.B@NK, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 20, 1996
(DATE OF
INCORPORATION) TO
DECEMBER 31, 1996
--------------------- PERIOD FROM THREE MONTHS PERIOD FROM
FEBRUARY 20, 1996 ENDED FEBRUARY 26, 1996
(DATE OF MARCH 31, (DATE OF
INCORPORATION) TO 1997 INCORPORATION) TO
MARCH 31, 1996 ------------- MARCH 31, 1997
--------------------- (UNAUDITED) ---------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES:
Management fees from affiliate....... $ 60,000 $ 40,000 $ -- $ 60,000
Interest income...................... 7,709 -- 5,775 13,484
----------- ----------- ------------- -----------
Total revenues..................... 67,709 40,000 5,775 73,484
EXPENSES:
Amortization of service contract with
affiliate.......................... 2,400,000 -- 864,000 3,264,000
Salaries and consulting fees......... 836,962 14,353 524,971 1,361,933
Marketing............................ 197,111 -- 60,495 257,606
Professional fees.................... 83,633 999 21,277 104,910
Logo/web site........................ 73,326 -- 18,945 92,271
Monthly user fees.................... 60,452 -- 52,561 113,013
Travel, meetings, and
entertainment...................... 38,794 392 4,404 43,198
Occupancy............................ 17,850 -- 29,750 47,600
Depreciation......................... 17,406 -- 6,879 24,285
Other operating expenses............. 181,357 522 119,993 301,350
Interest Expense..................... 102,525 102,525
----------- ----------- ------------- -----------
Total expenses..................... 3,906,891 16,266 1,805,800 5,712,691
----------- ----------- ------------- -----------
NET INCOME (LOSS)...................... $ (3,839,182) $ 23,734 $(1,800,025) $ (5,639,207)
----------- ----------- ------------- -----------
----------- ----------- ------------- -----------
NET INCOME (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE..................... $ (1.42) $ .01 $ (.67)
----------- ----------- -------------
----------- ----------- -------------
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT
SHARES OUTSTANDING................... 2,699,331 2,699,331 2,699,331
----------- ----------- -------------
----------- ----------- -------------
</TABLE>
See notes to financial statements.
F-3
<PAGE>
NET.B@NK, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF SHAREHOLDERS' DEFICIT
<TABLE>
<CAPTION>
UNAMORTIZED
AFFILIATE
COMMON PREFERRED ADDITIONAL COMMON STOCK SERVICE
COMMON STOCK STOCK PAID-IN STOCK SUBSCRIPTIONS CONTRACT
SHARES ($.01 PAR) (NO PAR) CAPITAL SUBSCRIBED RECEIVABLE EXPENSE
----------- ----------- ----------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE-- February 19, 1996........ $ -- $ -- $ -- $ -- $ -- $ --
Proceeds from issuance of common
stock:
Incorporation, February 20,
1996......................... 759,094 7,591 (7,362)
March 15, 1996,................ 49,688 497 (482)
April 1, 1996,................. 142,438 1,424 18,571
September 17, 1996,............ 298,122 2,981 997,129
Contribution of services from
affiliate.................... 31,232
Issuance of 1,354,814 shares of
common stock subscriptions..... 3,844,185 (4,185) (3,840,000)
Issuance of 16,562 compensatory
stock options.................. 30,000
Amortization of stock plan
expense........................
Net loss, including amortization
of service contract............ 2,400,000
----------- ----------- ----------- ----------- ----------- ------------- ------------
BALANCE--December 31, 1996......... 1,249,342 $ 12,493 $ -- $ 1,069,088 $ 3,844,185 $ (4,185) $(1,440,000)
----------- ----------- ----------- ----------- ----------- ------------- ------------
Proceeds from issuance of common
stock March 31, 1997
(unaudited)...................... 19,876 199 2,591 (2,790) 2,790
Issuance of 124,219 compensatory
stock options (unaudited)........ 236,250
Amortization of service contract
(unaudited)...................... 864,000
Amortization of stock plan expense
(unaudited)......................
Net loss for the three months ended
March 31, 1997 (unaudited).......
----------- ----------- ----------- ----------- ----------- ------------- ------------
BALANCE--March 31, 1997
(unaudited)...................... 1,269,218 $ 12,692 $ -- $ 1,307,929 $ 3,841,395 $ (1,395) $ (576,000)
----------- ----------- ----------- ----------- ----------- ------------- ------------
----------- ----------- ----------- ----------- ----------- ------------- ------------
<CAPTION>
DEFICIT
ACCUMULATED
UNAMORTIZED DURING THE
STOCK PLAN DEVELOPMENT
EXPENSE STAGE TOTAL
------------ ------------ -----------
<S> <C> <C> <C>
BALANCE-- February 19, 1996........ $ -- $ -- $ --
Proceeds from issuance of common
stock:
Incorporation, February 20,
1996......................... 229
March 15, 1996,................ 15
April 1, 1996,................. 19,995
September 17, 1996,............ 1,000,110
Contribution of services from
affiliate.................... 31,232
Issuance of 1,354,814 shares of
common stock subscriptions..... --
Issuance of 16,562 compensatory
stock options.................. (30,000) --
Amortization of stock plan
expense........................ 1,528 1,528
Net loss, including amortization
of service contract............ (3,839,182) (1,439,182)
------------ ------------ -----------
BALANCE--December 31, 1996......... $ (28,472) $(3,839,182) $ (386,073)
------------ ------------ -----------
Proceeds from issuance of common
stock March 31, 1997
(unaudited)...................... 2,790
Issuance of 124,219 compensatory
stock options (unaudited)........ (236,250) --
Amortization of service contract
(unaudited)...................... 864,000
Amortization of stock plan expense
(unaudited)...................... 40,677 40,677
Net loss for the three months ended
March 31, 1997 (unaudited)....... (1,800,025) (1,800,025)
------------ ------------ -----------
BALANCE--March 31, 1997
(unaudited)...................... $ (224,045) $(5,639,207) $(1,278,631)
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
See notes to financial statements.
F-4
<PAGE>
NET.B@NK, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 20, 1996
(DATE OF
INCORPORATION) TO
DECEMBER 31, 1996
----------------- PERIOD FROM THREE MONTHS PERIOD FROM
FEBRUARY 20, ENDED MARCH FEBRUARY 20, 1996
1996 (DATE OF 31, 1997 (DATE OF
INCORPORATION) ------------- INCORPORATION) TO
TO MARCH 31, MARCH 31, 1997
1996 (UNAUDITED) -------------------
---------------- (UNAUDITED)
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)...................... $ (3,839,182) $ 23,734 $(1,800,025) $ (5,639,207)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation......................... 17,406 6,879 24,285
Amortization of service contract..... 2,400,000 864,000 3,264,000
Contribution of services from
affiliate.......................... 31,232 -- 31,232
Amortization of stock plan expense... 1,528 40,677 42,205
Changes in assets and liabilities
which provide (use) cash:
Other assets, current.............. (265,433) (138,413) (403,846)
License agreements-- noncurrent.... (46,366) 16,060 (30,306)
Payables and accrued liabilities... 748,916 100 111,150 860,066
----------------- ------- ------------- -------------------
Net cash provided by (used in)
operating activities........... (951,899) 23,834 (899,672) (1,851,571)
----------------- ------- ------------- -------------------
INVESTING ACTIVITIES:
Capital expenditures................... (183,390) (8,255) (191,645)
Proceeds from return of equipment...... 17,738 17,738
----------------- ------- ------------- -------------------
Net cash, provided by (used in)
investing activities........... (183,390) 9,483 (173,907)
----------------- ------- ------------- -------------------
FINANCING ACTIVITIES:
Advances from affiliate................ 883,606 313,401 1,197,007
Proceeds from the sale of stock........ 1,020,349 2,790 1,023,139
----------------- ------- ------------- -------------------
Net cash provided by financing
activities..................... 1,903,955 316,191 2,220,146
----------------- ------- ------------- -------------------
NET INCREASE IN CASH AND CASH
EQUIVALENTS............................ 768,666 23,834 (573,998) 194,668
CASH AND CASH EQUIVALENTS:
Beginning of Period.................... -- -- 768,666 --
----------------- ------- ------------- -------------------
End of Period.......................... $ 768,666 $ 23,834 $ 194,668 $ 194,668
----------------- ------- ------------- -------------------
----------------- ------- ------------- -------------------
</TABLE>
See notes to financial statements.
F-5
<PAGE>
NET.B@NK, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
INFORMATION AS OF MARCH 31, 1997, FOR THE PERIOD FEBRUARY 20, 1996 TO
MARCH 31, 1996, FOR THE THREE MONTHS ENDED MARCH 31, 1997, AND FOR THE PERIOD
FEBRUARY 20, 1996 TO MARCH 31, 1997 IS UNAUDITED
1. ORGANIZATION AND BASIS OF PRESENTATION
Net.B@nk, Inc. (the "Company") was incorporated on February 20, 1996 as a
Georgia corporation. Its primary business purpose is the formation and,
ultimately, the operation of Atlanta Internet Bank ("AIB"). The Company expects
to operate AIB as a federal savings bank and a wholly owned subsidiary, pending
its purchase of the charter and certain assets and liabilities of Premier Bank,
FSB ("Premier Bank") and obtaining regulatory approvals from the Office of
Thrift Supervision ("OTS"), the Federal Deposit Insurance Corporation (the
"FDIC"), and the Federal Reserve Board.
The Company entered into an agreement as of July 15, 1996 with Carolina
First Bank ("CFB") in which CFB would hold and service the deposit accounts
generated by the Internet banking operations which are managed by the Company.
The original term of the Agreement was to expire on March 31, 1997. The
Agreement has been extended to July 31, 1997 by an amendment dated March 18,
1997. Also, CFB has agreed to provide funding for reasonable expenses of the
Company up to an amount of $1,325,985. Upon AIB obtaining the regulatory
approvals necessary to operate a federal savings bank, the deposit accounts
generated will be transferred to AIB. As of December 31, 1996 and March 31,
1997, CFB held and serviced deposit accounts totaling $10,366,437 and
$43,408,922, respectively, that were generated by the Internet banking
operations and managed by the Company.
For the services contract with CFB, the Company has agreed to issue CFB
1,325,000 shares of its common stock valued at $3,840,000. Such amount is being
amortized to expense over the life of the contract which is expected to be in
effect until May 31, 1997. Since the common stock is not expected to be issued
until the second quarter of 1997, the Company has credited subscriptions for
common stock.
The Company has entered into an agreement dated June 17, 1996, as amended
and restated December 19, 1996 and February 25, 1997, with First
Alliance/Premier Bancshares, Inc. ("First Alliance") pursuant to which the
Company will purchase the charter of its subsidiary, Premier Bank, and a minimum
amount of assets and liabilities. The purchase price will be equal to the amount
of Premier Bank's unimpaired capital of $2,000,000 plus $150,000 of purchase
premium and 41,406 shares of the Company's common stock valued at $125,000. The
Company's purchase is subject to the approval of the OTS. The Company and First
Alliance have filed applications for approval of the purchase with the OTS. The
transaction is expected to be accounted for as a purchase.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of the Company conform with generally
accepted accounting principles. The following is a summary of the more
significant accounting policies.
USE OF ESTIMATES--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 and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS--Cash equivalents include money market instruments
and time deposits with an original maturity of 90 days or less. Interest bearing
certificates of deposit and money market
F-6
<PAGE>
NET.B@NK, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
INFORMATION AS OF MARCH 31, 1997, FOR THE PERIOD FEBRUARY 20, 1996 TO
MARCH 31, 1996, FOR THE THREE MONTHS ENDED MARCH 31, 1997, AND FOR THE PERIOD
FEBRUARY 20, 1996 TO MARCH 31, 1997 IS UNAUDITED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
accounts totaled $500,000 and $242,103, respectively, at December 31, 1996. At
March 31, 1997, cash and cash equivalents primarily consisted of money market
accounts.
FURNITURE AND EQUIPMENT--Premises and equipment are stated at cost less
accumulated depreciation. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets, generally five to seven
years.
ORGANIZATIONAL COSTS--Organizational costs are included in other assets and
are stated at cost, net of accumulated amortization and are being amortized over
a 60-month period using the straight-line method.
LICENSE AGREEMENTS--The costs of license agreements to utilize certain
distribution channels and processors are amortized over the term of such
agreements ranging from 18 months to 36 months using the straight-line method.
INCOME TAXES--Provisions for income taxes are based upon amounts reported in
the statement of operations and include deferred taxes on temporary differences
between financial statement and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to reverse. A valuation allowance is provided for deferred tax assets when it is
more likely than not that such assets will not be realized.
NET LOSS PER COMMON AND COMMON EQUIVALENT SHARE--Net loss per common and
common equivalent share is computed based on the weighted average number of
common and common equivalent shares outstanding during the period. All common
and common equivalent shares issued have been considered to be outstanding for
all periods in accordance with Staff Accounting Bulletin No. 83.
UNAUDITED INTERIM FINANCIAL STATEMENTS--The financial statements as of March
31, 1997, for the period February 20, 1996 (Date of Incorporation) to March 31,
1996, for the three months ended March 31, 1997, and for the period February 20,
1996 to March 31, 1997 were prepared on the same basis as the audited
consolidated financial statements and, in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial position and results of operations for these
periods. Operating results for the interim periods included herein are not
necessarily indicative of the results that may be expected for the entire year.
3. FURNITURE AND EQUIPMENT
Furniture and equipment at December 31, 1996 is summarized as follows:
<TABLE>
<S> <C>
Furniture and fixtures.................................................... $ 40,741
Equipment................................................................. 142,649
---------
Furniture and equipment................................................... 183,390
Less accumulated depreciation............................................. 17,406
---------
Furniture and equipment--net............................................ $ 165,984
---------
---------
</TABLE>
F-7
<PAGE>
NET.B@NK, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
INFORMATION AS OF MARCH 31, 1997, FOR THE PERIOD FEBRUARY 20, 1996 TO
MARCH 31, 1996, FOR THE THREE MONTHS ENDED MARCH 31, 1997, AND FOR THE PERIOD
FEBRUARY 20, 1996 TO MARCH 31, 1997 IS UNAUDITED
4. LEASES
The Company leases its facilities and certain other equipment under
operating lease agreements. Future minimum payments as of December 31, 1996
under these leases follow:
<TABLE>
<S> <C>
1997...................................................................... $ 73,500
1998...................................................................... 73,500
1999...................................................................... 36,750
---------
$ 183,750
---------
---------
</TABLE>
Rent expense for the period from February 20, 1996 (date of incorporation)
to December 31, 1996 was $17,850.
5. COMMITMENTS
The Company is a party to an agreement with AT&T Corporation ("AT&T"), which
provides the Company with technical, marketing, and customer services. The
Company also received professional programming services from Edify Corporation
and electronic bill paying processing services from CheckFree Corporation under
this agreement. Under the terms of the agreement, the Company has paid or agreed
to pay an initial payment of $200,000 and ongoing (monthly) payments for
customer support. The implementation fees paid have been capitalized as other
assets and are being amortized over the 18-month term of the agreement. Although
the agreement expires in February 1998, the agreement is terminable at will by
either party upon six months' written notice.
AT&T's WorldNet Service division provides the Company with advertising and
marketing services under AT&T's "Charter Membership" program. The Company pays
AT&T monthly user fees and has the right to continue this relationship
indefinitely.
The Company is a party to an agreement with BISYS to receive core bank
processing services. Under the terms of the agreement, the Company paid an
initial conversion fee of $66,800 and must pay a monthly service fee. The
service fee is adjusted on a quarterly basis based on the number of customer
accounts serviced. Although the agreement expires in July 1999, the agreement
renews automatically for successive three-year terms absent six months' prior
written notice to the contrary by either party.
The Company entered into an agreement with a provider of on-line services
effective January 31, 1997 for certain Internet advertising services. Under the
terms of the agreement, which expires on the earlier of May 17, 1997 or upon the
Company securing 1,250 applicants, the Company has agreed to pay approximately
$31,000 over the term of the agreement.
The Company has agreed to pay officers and employees bonuses of up to
$450,000 when the initial public offering of the Company's Common Stock is
completed.
6. INCOME TAXES
As of December 31, 1996, the Company had state and federal net operating
loss carryforwards of approximately $837,591 which will expire in 2011 if not
utilized.
F-8
<PAGE>
NET.B@NK, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
INFORMATION AS OF MARCH 31, 1997, FOR THE PERIOD FEBRUARY 20, 1996 TO
MARCH 31, 1996, FOR THE THREE MONTHS ENDED MARCH 31, 1997, AND FOR THE PERIOD
FEBRUARY 20, 1996 TO MARCH 31, 1997 IS UNAUDITED
6. INCOME TAXES (CONTINUED)
As of December 31, 1996, the Company had deferred tax assets as follows:
<TABLE>
<S> <C>
Net operating loss carryforward......................................... $ 318,285
Service contract expense................................................ 912,000
Start-up costs.......................................................... 216,297
Other--net.............................................................. 12,308
---------
Total................................................................. 1,458,890
Less valuation allowance................................................ 1,458,890
---------
Total................................................................. $ --
---------
---------
</TABLE>
7. SHAREHOLDERS' DEFICIT
The Company's authorized capital stock consists of 100,000,000 shares of
common stock, $.01 par value and 10,000,000 shares of preferred stock, no par
value. As of December 31, 1996, there were 1,249,342 shares of common stock
outstanding and no shares of preferred stock outstanding. Both the authorized
common and preferred stock may be issued from time to time in one or more
designated series or classes. The Board of Directors, without approval of the
shareholders, is authorized to establish the voting, dividend, redemption,
conversion, liquidation, and other relative provisions as may be provided in a
particular series or class of stock.
On March 17, 1997, the Company declared a 33.125 for 1 stock split of its
common stock effected in the form of a stock dividend payable on the effective
date of the initial public offering. All references to share and per share
amounts have been retroactively adjusted to reflect the split. Also, additional
paid-in capital has been charged and common stock has been credited
retroactively with $12,116 to reflect the stock split.
Effective November 25, 1996, the shareholders of the Company approved the
1996 Stock Incentive Plan (the "Plan"), which provides that key employees,
officers, directors, and consultants of the Company may be granted nonqualified
and incentive stock options to purchase shares of common stock of the Company,
derivative securities related to the value of the common stock, or cash awards.
The Plan limits the total number of shares which may be awarded under the Plan
to 397,500, which have been reserved for the Plan. Generally, the options expire
ten years from the date of grant. On November 25, 1996, 16,562 nonqualified
stock options were granted at an exercise price of $1.21 per share. The options
vest one-third on the first anniversary of the date of issuance, one-third on
the second anniversary of the date of issuance and one-third on the third
anniversary of the date of issuance. In connection with the 16,562 options
granted, $30,000 of stock plan expense is being amortized over the vesting
period. The option agreement contains a provision for accelerating vesting if
certain events occur. As of December 31, 1996, none of the options are
exercisable.
On January 5, 1997, the Company granted under the Plan 124,219 nonqualified
stock options to officers of the Company at an exercise price of $1.21 per
share. Also on February 25, 1997, the Company
F-9
<PAGE>
NET.B@NK, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
INFORMATION AS OF MARCH 31, 1997, FOR THE PERIOD FEBRUARY 20, 1996 TO
MARCH 31, 1996, FOR THE THREE MONTHS ENDED MARCH 31, 1997, AND FOR THE PERIOD
FEBRUARY 20, 1996 TO MARCH 31, 1997 IS UNAUDITED
7. SHAREHOLDERS' DEFICIT (CONTINUED)
granted under the Plan 39,751 incentive stock options to officers and employees
of the Company at an exercise price of $3.62 per share and 173,906 incentive
stock options to officers of the Company at an exercise price of $10.00 per
share. The options vest one-third on the first anniversary of the date of
issuance, one-third on the second anniversary of the date of issuance, and
one-third on the third anniversary of the date of issuance. The vesting of the
options accelerate if certain events occur.
As of March 31, 1997, the Company had 354,438 options to purchase common
stock outstanding at a weighted average exercise price of $5.79, and none of the
options are exercisable.
The Company accounts for its stock-based compensation plan under APB No. 25.
The Company has adopted SFAS No. 123 for disclosure purposes. For SFAS No. 123
purposes, the fair value of each option grant of $.97 has been estimated as of
the date of the grant using the Black-Scholes option pricing model with the
weighted average assumptions:
<TABLE>
<S> <C>
Expected life (years)................................................ 5
Risk-free interest rate.............................................. 6.2%
Dividend rate........................................................ 0.0%
Expected volatility.................................................. 0.0%
</TABLE>
Had compensation cost for the Company's stock options granted been
determined based on the fair value at the grant dates for awards under those
plans consistent with a method prescribed in SFAS No. 123 utilizing the
assumptions described above and assuming that such stock options had been
outstanding for the entire period of February 20, 1996 to December 31, 1996 in
accordance with Staff Accounting Bulletin No. 83 ("SAB 83"), the Company's net
loss and net loss per share would have been increased to the pro forma amounts
indicated below:
<TABLE>
<S> <C>
Net loss:
As reported........................................................... $3,839,182
Pro forma............................................................. 4,014,062
Net loss per share:
As reported........................................................... $ 1.42
Pro forma............................................................. 1.49
</TABLE>
F-10
<PAGE>
NET.B@NK, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
INFORMATION AS OF MARCH 31, 1997, FOR THE PERIOD FEBRUARY 20, 1996 TO
MARCH 31, 1996, FOR THE THREE MONTHS ENDED MARCH 31, 1997, AND FOR THE PERIOD
FEBRUARY 20, 1996 TO MARCH 31, 1997 IS UNAUDITED
7. SHAREHOLDERS' DEFICIT (CONTINUED)
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS 128") was issued. Included below are pro forma
disclosures related to earnings per share as if SFAS 128 had been effective for
all periods presented and in compliance with SAB 83:
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD FOR THE THREE-
FEBRUARY 20, 1996 FEBRUARY 20, 1996 MONTH PERIOD ENDED
TO DECEMBER 31, 1996 TO MARCH 31, 1996 MARCH 31, 1997
-------------------------- -------------------------- --------------------------
SHARES NET LOSS PER SHARE NET LOSS PER SHARE NET LOSS PER SHARE
(DENOMINATOR) (NUMERATOR) AMOUNT (NUMERATOR) AMOUNT (NUMERATOR) AMOUNT
------------- ------------- ----------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Basic income (loss) per
share.................... 1,279,156 $ (3,839,182) $ (3.00) $ 23,734 $ .02 $ (1,800,025) $ (1.41)
------------- ----------- ------------- ----------- ------------- -----------
------------- ----------- ------------- ----------- ------------- -----------
Effect of dilutive
securities:
Common stock
subscriptions......... 1,272,636
Stock options
outstanding........... 147,539
-------------
Diluted income (loss) per
share.................... 2,699,331 $ (3,839,182) $ (1.42) $ 23,734 $ .01 $ (1,800,025) $ (.67)
------------- ------------- ----------- ------------- ----------- ------------- -----------
------------- ------------- ----------- ------------- ----------- ------------- -----------
</TABLE>
8. RELATED PARTY TRANSACTIONS
TRANSACTIONS WITH CFB--Certain of the Company's cash accounts and time
deposits are on deposit with CFB. The Company received $7,709 in interest income
related to these accounts during the period from February 20, 1996 to December
31, 1996. For the period from February 20, 1996 (date of incorporation) to
December 31, 1996, the Company received $60,000 in management fees from CFB. The
Company expensed $883,606 for the period from February 20, 1996 to December 31,
1996 and $313,401 for the three months ended March 31, 1997 for fees paid to CFB
for various advisory, consulting, custodial services, and net interest expense
which were included in accrued expenses. In addition, the Company recorded
$31,232 in consulting expense and contributed capital for consulting services
contributed by CFB during the period ended December 31, 1996.
OTHER TRANSACTIONS--The Company paid $67,032 and $30,102 for the period from
February 20, 1996 to December 31, 1996 and for the three months ended March 31,
1997, respectively, in consulting fees to an advisory director. In addition, as
of December 31, 1996, the Company had expensed and included in accrued expenses,
$278,418 for amounts due to a company owned by the Chairman of the Board of the
Company for accounting and management services provided to the Company during
the period from February 20, 1996 to December 31, 1996. For the three months
ended March 31, 1997, an additional $71,407 relating to the same type services
was expensed bringing the total accrued liability to $349,825.
F-11
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors of Net.B@nk, Inc.:
We have audited the accompanying Statement of Assets and Liabilities
Generated by the Internet banking operations of Net.B@nk, Inc. (the "Company")
and Held and Serviced by Carolina First Bank as of December 31, 1996. This
statement of assets and liabilities is the responsibility of the Company's
management. Our responsibility is to express an opinion on this statement of
assets and liabilities based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of assets and liabilities is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the statement of assets and liabilities. We believe that our
audit provides a reasonable basis for our opinion.
The accompanying statement of assets and liabilities was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the registration statement on Form S-1 of
Net.B@nk, Inc. as described in the Note to such statement and is not intended to
be a complete presentation of Carolina First Bank's assets and liabilities.
In our opinion, such statement of assets and liabilities referred to above
presents fairly, in all material respects, the assets and liabilities generated
by the Internet banking operations of the Company as of December 31, 1996 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
March 18, 1997
F-12
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
GENERATED BY THE INTERNET BANKING OPERATIONS OF NET.B@NK, INC.
AND HELD AND SERVICED BY CAROLINA FIRST BANK
<TABLE>
<CAPTION>
MARCH 31,
1997
DECEMBER 31, -------------
1996
------------- (UNAUDITED)
<S> <C> <C>
ASSETS
CASH AND DUE FROM BANKS............................................................ $ 10,366,437 $ 43,408,922
------------- -------------
------------- -------------
LIABILITIES
DEPOSITS:
Demand deposits.................................................................. $ -- $ 10,945
Interest checking................................................................ 201,510 371,300
Money Market deposit accounts.................................................... 10,164,927 32,534,384
Time Deposits.................................................................... -- 10,492,293
------------- -------------
Total.......................................................................... $ 10,366,437 $ 43,408,922
------------- -------------
------------- -------------
</TABLE>
NOTE:
BASIS OF PRESENTATION
The above statements have been prepared to comply with Rule 3-05 of the
Securities and Exchange Commission.
Carolina First Bank ("CFB") entered into an agreement dated July 15, 1996
with Net.B@nk, Inc. (the "Company") to hold and service the deposit accounts
generated by the Internet banking operations of Atlanta Internet Bank ("AIB").
AIB began accepting deposits on August 1, 1996 and the original agreement with
CFB expires on March 31, 1997. The Agreement has been extended to July 31, 1997
by an amendment dated March 18, 1997. Also, under the agreement CFB has agreed
to provide funding for reasonable expenses of the Company up to an amount of
$1,325,985. Upon the Company obtaining the regulatory approvals necessary to
operate a Federal Savings Bank, the deposit accounts will be transferred to AIB,
which will become a wholly owned subsidiary of the Company.
Funds related to customer deposits serviced for AIB are combined with the
general funds of CFB for investment purposes. The interest income paid to the
Company by CFB on such deposits approximates interest expense related to the
deposit accounts for the period ended December 31, 1996. The interest expense on
such deposits exceeded the interest paid to the Company by CFB on such deposits
by $102,525 (unaudited) for the three months ended March 31, 1997, and such
amount has been recorded as a payable by the Company as of March 31, 1997.
F-13
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SHARES OF COMMON STOCK OFFERED
HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKE SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
SOLICITATION OR OFFER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREBY SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN
NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary................................................................... 3
Risk Factors.............................................................. 7
The Reorganization........................................................ 13
Use of Proceeds........................................................... 15
Dividend Policy........................................................... 15
Dilution.................................................................. 16
Capitalization............................................................ 18
Selected Financial Data................................................... 19
Pro Forma Condensed Balance Sheet......................................... 21
Pro Forma Condensed Statement of Operations............................... 23
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 24
Business.................................................................. 28
Management................................................................ 56
Certain Transactions...................................................... 62
Principal Shareholders.................................................... 63
Description of Capital Stock.............................................. 64
Shares Eligible for Future Sale........................................... 66
Underwriting.............................................................. 67
Legal Matters............................................................. 68
Experts................................................................... 68
Available Information..................................................... 68
Financial Statements...................................................... F-1
</TABLE>
------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
3,000,000 SHARES
[LOGO]
NET.B@NK, INC.
COMMON STOCK
---------------------
P R O S P E C T U S
---------------------
MORGAN KEEGAN & COMPANY, INC.
INTERSTATE/JOHNSON LANE
Corporation
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following are the estimated expenses, other than underwriting discounts
and commissions, to be borne by the Company in connection with the issuance and
distribution of the Common Stock being registered.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............... $ 15,000
National Association of Securities Dealers, Inc. Filing Fee....... 10,000
Nasdaq Stock Market Listing Fee................................... 10,000
Blue Sky Fees and Expenses........................................ 10,000
Legal Fees and Expenses........................................... 200,000
Accounting Fees and Expenses...................................... 140,000
Printing and Engraving Expenses................................... 70,000
Transfer Agent and Registrar Fee.................................. 25,000
Miscellaneous..................................................... 20,000
---------
TOTAL......................................................... $ 500,000
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Bylaws contain certain indemnification provisions providing
that directors, officers, and employees or agents of the Company will be
indemnified against expenses actually and reasonably incurred by them if they
are successful on the merits of a claim or proceeding.
When a case or dispute is not ultimately determined on its merits (i.e., it
is settled), the indemnification provisions provide that the Company will
indemnify directors when they meet the applicable standard of conduct. The
applicable standard of conduct is met if the director 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 Company, and with respect to an employee benefit plan, for a
purpose the director believed in good faith to be in the interests of the
participants and beneficiaries of the plan. The standard of conduct with respect
to any criminal action or proceeding is met if the director had no reasonable
cause to believe his or her conduct was unlawful. Whether the applicable
standard of conduct has been met is determined by the Board of Directors, the
shareholders or independent legal counsel in each specific case.
The Company can also provide for greater indemnification than that set forth
in the Bylaws if it chooses to do so, subject to approval by the Company's
shareholders. The Company may not, however, indemnify a director for liability
arising out of circumstances which constitute exceptions to limitation of a
director's liability for monetary damages. See "Description of Capital
Stock--Limitation of Liability".
The indemnification provisions of the Bylaws specifically provide that the
Company may purchase and maintain insurance on behalf of any director against
any liability asserted against such person and incurred by him or her in any
such capacity, whether or not the Company would have had the power to indemnify
against such liability.
In addition, Article X of the Company's Amended and Restated Articles of
Incorporation (the "Articles"), subject to certain exceptions, eliminates the
potential personal liability of a director for monetary damages to the Company
and to the shareholders of the Company for breach of a duty as a director. There
is no elimination of liability for (a) a breach of duty involving appropriation
of a business opportunity of the Company, (b) an act or omission not in good
faith or involving intentional misconduct or a knowing violation of law, (c) a
transaction from which the director derives an improper material
II-1
<PAGE>
tangible personal benefit, or (d) as to any payment of a dividend or approval of
a stock repurchase that is illegal under the Georgia Business Corporation Code.
The Articles do not eliminate or limit the right of the Company or its
shareholders to seek injunctive or other equitable relief not involving monetary
damages.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since its inception in February 1996, the Registrant has issued and sold
(without payment of any selling commission to any person) the following
unregistered securities. The share figures and prices reflect retroactively the
effect of the Company's March 17, 1997 33.125-for-one stock split effected as a
stock dividend.
On February 20, 1996, the Registrant issued to the organizers of the Company
(11 persons), in a private placement exempt from registration under Section 4(2)
of the Securities Act of 1993, as amended (the "Securities Act"), an aggregate
of 808,780 shares of the Registrant's Common Stock, for an aggregate purchase
price of $244.16 in connection with the organization of the Company.
On April 1, 1996, the Registrant issued to foreign investors, in a
transaction exempt from registration as an offshore private placement, 142,438
shares of the Registrant's Common Stock for an aggregate purchase price of
$19,995 .
On May 20, 1996, the Registrant issued to three director nominees, in a
transaction exempt from registration under Section 4(2) of the Securities Act,
29,813 shares of the Registrant's Common Stock for an aggregate purchase price
of $4,185.
On September 17, 1996, the Registrant issued to foreign investors, in a
transaction exempt from registration as an offshore private placement, 298,125
shares of the Registrant's Common Stock for an aggregate purchase price of
$1,080,000.
The Registrant is contractually obligated to issue to Carolina First Bank,
1,325,000 shares of the Registrant's Common Stock for consideration valued at
$3,840,000. Such issuance will be made contemporaneously with the Offering
pursuant to an exemption provided by Section 4(2) of the Securities Act.
The Registrant is contractually obligated to issue 41,406 shares of its
Common Stock to Premier Bancshares, Inc. for consideration valued at $125,000.
Such issuance will be made pursuant to the exemption provided by Section 4(2) of
the Securities Act.
All of the securities were acquired by the recipients for investment and
with no view toward the resale or distribution thereof. In each instance, the
recipient was either an organizer of the Registrant or a sophisticated investor,
the offers and sales were made without any public solicitation and the stock
certificates bear restrictive legends. No underwriter was involved in the
transactions and no commissions were paid.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement
3.1 Amended and Restated Articles of Incorporation of the
Registrant*
3.2 Bylaws of the Registrant*
3.3 Amendments to Bylaws of the Registrant adopted April 22,
1997
4.1 Specimen Stock Certificate of the Registrant
4.2 See Exhibits 3.1, 3.2 and 3.3 for provisions of the
Registrant's Articles of Incorporation and Bylaws governing
the rights of holders of securities of the Registrant*
5.1 Opinion of Powell, Goldstein, Frazer & Murphy LLP
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- ------------------------------------------------------------
<C> <S>
10.1 Amended and Restated Stock Purchase Agreement among the
Registrant and First Alliance/ Premier Bancshares, Inc.
dated as of December 19, 1996, as amended by Amendment No. 1
dated as of February 25, 1997, with exhibits
10.2 Operation Agreement among the Registrant and Carolina First
Bank dated July 15, 1996, as amended December 6, 1996 and
March 18, 1997.*
10.3 1996 Stock Incentive Plan of the Registrant*
10.4 Lease Agreement dated as of June 18, 1996 by and between The
Griffin Company and the Registrant, as amended on December
12, 1996
10.5 Memorandum dated June 11, 1996 from T. Stephen Johnson, T.
Stephen Johnson & Associates, Inc., to Don Shapleigh,
Internet Organizing Group, Inc.
10.6 Trial Agreement, dated August 19, 1996 by and between the
Registrant and AT&T Corp., with attachments and letter dated
August 6, 1996++
10.7 Services Agreement, dated as of August 21, 1996 by and
between the Registrant and BISYS, Inc. with related
addenda++
10.8 BISYS Standard Services Price list and Special Services
Price List, dated December 1, 1991++
11.1 Schedule Regarding Computation of Per Share Loss
23.1 Consent of Deloitte & Touche, LLP
23.2 Consent of Powell, Goldstein, Frazer & Murphy LLP (included
in its opinion filed as Exhibit 5.1)
24.1 Power of Attorney (appears on the signature page to this
Registration Statement)
27.1 Financial Data Schedule (for SEC use only)*
</TABLE>
- ------------------------
* Previously Filed.
++ Confidential portions have been omitted pursuant to the rules and
regulations under the Securities Act of 1933, as amended.
(b) Financial Statement Schedules
The financial statement schedules for which provision is made in the
applicable accounting regulations of the Commission are either not required
under the related instructions or are inapplicable and have therefore been
omitted.
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant, 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 Act 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.
II-3
<PAGE>
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus 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-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
caused this Amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Atlanta, State of
Georgia on April 25, 1997.
NET.B@NK, INC.
By: /s/ D. R. GRIMES
-----------------------------------------
D. R. Grimes
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears on
the signature pages to this Registration Statement constitutes and appoints
Donald S. Shapleigh and D. R. Grimes, and each of them, his or her true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the undersigned and in his or her name, place, and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement, and to file the same, with all exhibits hereto and other documents in
connection herewith with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents and each of them, full power and authority to
do so 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 or
she might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or either of them, or their 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 POSITION DATE
- ------------------------------ --------------------------- -------------------
/s/ D. R. GRIMES Chief Executive Officer
- ------------------------------ (Principal executive April 25, 1997
D. R. Grimes officer) and Director
Chief Financial Officer
/s/ ROBERT E. BOWERS* (Principal financial and
- ------------------------------ accounting officer) and April 25, 1997
Robert E. Bowers Director
/s/ T. STEPHEN JOHNSON* Chairman of the Board
- ------------------------------ April 25, 1997
T. Stephen Johnson
/s/ DONALD S. SHAPLEIGH, President, Chief Operating
JR.* Officer and Director
- ------------------------------ April 25, 1997
Donald S. Shapleigh, Jr.
II-5
<PAGE>
NAME POSITION DATE
- ------------------------------ --------------------------- -------------------
/s/ WARD H. CLEGG Director
- ------------------------------ April 25, 1997
Ward H. Clegg
Director
- ------------------------------ April 25, 1997
J. Stephen Heard
/s/ ROBIN C. KELTON Director
- ------------------------------ April 25, 1997
Robin C. Kelton
/s/ JOHN T. MOORE Director
- ------------------------------ April 25, 1997
John T. Moore
/s/ THOMAS H. MULLER, JR. Director
- ------------------------------ April 25, 1997
Thomas H. Muller, Jr.
/s/ W. JAMES STOKES Director
- ------------------------------ April 25, 1997
W. James Stokes
/s/ MACK I. WHITTLE, JR. Director
- ------------------------------ April 25, 1997
Mack I. Whittle, Jr.
*By: /s/ D. R. GRIMES
- ------------------------------
D. R. Grimes
ATTORNEY-IN-FACT
II-6
<PAGE>
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement
3.1 Amended and Restated Articles of Incorporation of the Registrant*
3.2 Bylaws of the Registrant*
3.3 Amendments to the Bylaws of the Registrant adopted April 22, 1997
4.1 Specimen Stock Certificate of the Registrant
4.2 See Exhibits 3.1, 3.2 and 3.3 for provisions of the Registrant's Articles of Incorporation and Bylaws
governing the rights of holders of securities of the Registrant*
5.1 Opinion of Powell, Goldstein, Frazer & Murphy LLP
10.1 Amended and Restated Stock Purchase Agreement among the Registrant and First Alliance/ Premier
Bancshares, Inc. dated as of December 18, 1996, as amended by Amendment No. 1 dated as of February 25,
1997, with exhibits
10.2 Operation Agreement among the Registrant and Carolina First Bank dated July 17, 1996 as amended December
6, 1996 and March 19, 1997*
10.3 1996 Stock Incentive Plan of the Registrant*
10.4 Lease Agreement dated as of June 18, 1996 by and between The Griffin Company and the Registrant, as
amended on December 12, 1996
10.5 Memorandum dated June 11, 1996 from T. Stephen Johnson, T. Stephen Johnson & Associates, Inc., to Don
Shapleigh, Internet Organizing Group, Inc.
10.6 Trial Agreement, dated August 19, 1996 by and between the Registrant and AT&T Corp., with attachments
and letter dated August 6, 1996++
10.7 Services Agreement, dated as of August 21, 1996 by and between the Registrant and BISYS, Inc. with
related addenda++
10.8 BISYS Standard Services Price List and Special Services Price List, dated December 1, 1991++
11.1 Schedule Regarding Computation of Per Share Loss
23.1 Consent of Deloitte & Touche, LLP
23.2 Consent of Powell, Goldstein, Frazer & Murphy LLP (included in its opinion filed as Exhibit 5.1)
24.1 Power of Attorney (appears on the signature page to this Registration Statement)
27.1 Financial Data Schedule (for SEC use only)*
</TABLE>
- ------------------------
* Previously Filed.
++ Confidential portions have been omitted pursuant to the rules and
regulations under the Securities Act of 1933, as amended.
<PAGE>
NET.B@NK, INC.
(A GEORGIA CORPORATION)
COMMON STOCK
UNDERWRITING AGREEMENT
DATED: MAY __, 1997
<PAGE>
NET.B@NK, INC.
UNDERWRITING AGREEMENT
May __, 1997
MORGAN KEEGAN & COMPANY, INC.
INTERSTATE/JOHNSON LANE CORPORATION
As Representatives of the Several
Underwriters Named in Schedule A hereto
c/o Morgan Keegan & Company, Inc.
50 Front Street
Memphis, Tennessee 38103
Dear Sirs:
Net.B@nk, Inc., a Georgia corporation (the "Company"), proposes to issue
and sell to the underwriters named in SCHEDULE A (collectively, the
"Underwriters") an aggregate of 3,000,000 shares of Common Stock, $.01 par value
per share (the "Common Stock"), of the Company (the "Firm Shares"). The Firm
Shares are to be sold to each Underwriter, acting severally and not jointly, in
such amounts as are set forth in SCHEDULE A opposite the name of such
Underwriter.
The Company and Carolina First Bank, a bank organized under the laws of the
State of South Carolina (the "Selling Shareholder") also grant to the
Underwriters, severally and not jointly, the option described in Section 3 to
purchase, on the same terms as the Firm Shares, up to an aggregate of 450,000
additional shares of Common Stock (the "Option Shares") solely to cover
over-allotments. The Firm Shares, together with all or any part of the Option
Shares, are collectively herein called the "Shares."
Section 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to and agrees with each of the Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-23717) with
respect to the Shares, including a preliminary form of prospectus, has been
prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "1933 Act"), and the applicable
rules and regulations (the "1933 Act Regulations") of the Securities and
Exchange Commission (the "Commission"), and has been filed with the
Commission; and such amendments to such registration statement as may have
been required prior to the date hereof have been filed with the Commission,
and such amendments have been similarly prepared. Copies of such
registration statement and amendment or amendments and of each related
preliminary prospectus, and the exhibits, financial statements and
schedules, as finally amended and revised, have been delivered to you. The
Company has prepared in the same manner, and proposes so to file with the
Commission, one of the following: (i) prior to effectiveness of such
registration statement, a further amendment thereto, including the form of
final prospectus, (ii) if the Company does not rely on Rule 434 of the 1933
Act, a final
<PAGE>
prospectus in accordance with Rules 430A and 424(b) of the 1933 Act
Regulations or (iii) if the Company relies on Rule 434 of the 1933 Act, a
term sheet relating to the Shares that shall identify the preliminary
prospectus that it supplements containing such information as is required
or permitted by Rules 434, 430A and 424(b) of the 1933 Act. The Company
also may file a related registration statement with the Commission pursuant
to Rule 462(b) of the 1933 Act for the purpose of registering certain
additional shares of Common Stock, which registration statement will be
effective upon filing with the Commission. As filed, such amendment, any
registration statement filed pursuant to Rule 462(b) of the 1933 Act and
any term sheet and form of final prospectus, or such final prospectus,
shall include all Rule 430A Information (as defined below) and, except to
the extent that you shall agree in writing to a modification, shall be in
all respects in the form furnished to you prior to the date and time that
this Agreement was executed and delivered by the parties hereto, or, to the
extent not completed at such date and time, shall contain only such
specific additional information and other changes (beyond that contained in
the latest preliminary prospectus) as the Company shall have previously
advised you in writing would be included or made therein.
The term "Registration Statement" as used in this Agreement shall mean
such registration statement at the time such registration statement becomes
effective and, in the event any post-effective amendment thereto becomes
effective prior to the Closing Time (as hereinafter defined), shall also
mean such registration statement as so amended; provided, however, that
such term shall also include all Rule 430A Information contained in any
Prospectus and any Term Sheet (as hereinafter defined) and deemed to be
included in such registration statement at the time such registration
statement becomes effective as provided by Rule 430A of the 1933 Act
Regulations. The term "Preliminary Prospectus" shall mean any preliminary
prospectus referred to in the preceding paragraph and any preliminary
prospectus included in the Registration Statement at the time it becomes
effective that omits Rule 430A Information. The term "Prospectus" as used
in this Agreement shall mean (a) if the Company relies on Rule 434 of the
1933 Act, the Term Sheet relating to the Shares that is first filed
pursuant to Rule 424(b)(7) of the 1933 Act, together with the Preliminary
Prospectus identified therein that such Term Sheet supplements or (b) if
the Company does not rely on Rule 434 of the 1933 Act, the prospectus
relating to the Shares in the form in which it is first filed with the
Commission pursuant to Rule 424(b) of the 1933 Act Regulations or, if no
filing pursuant to Rule 424(b) of the 1933 Act Regulations is required,
shall mean the form of final prospectus included in the Registration
Statement at the time such Registration Statement becomes effective. The
term "Rule 430A Information" means information with respect to the Shares
and the offering thereof permitted pursuant to Rule 430A of the 1933 Act
Regulations to be omitted from the Registration Statement when it becomes
effective. The term "462(b) Registration Statement" means any registration
statement filed with the Commission pursuant to Rule 462(b) under the 1933
Act (including the Registration Statement and any Preliminary Prospectus or
Prospectus incorporated therein at the time such registration statement
becomes effective). The term "Term Sheet" means any term sheet that
satisfies the requirements of Rule 434 of the 1933 Act. Any reference to
the "date" of a Prospectus that includes a Term Sheet shall mean the date
of such Term Sheet.
2
<PAGE>
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and no proceedings for that
purpose have been instituted or threatened by the Commission or the state
securities or blue sky authority of any jurisdiction, and each Preliminary
Prospectus and any amendment or supplement thereto, at the time of filing
thereof, conformed in all material respects to the requirements of the 1933
Act and the 1933 Act Regulations, and did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter expressly
for use in the Registration Statement or any 462(b) Registration Statement.
(c) When the Registration Statement and any 462(b) Registration
Statement shall become effective, or any Term Sheet that is part of the
Prospectus is filed with the Commission pursuant to Rule 434, when the
Prospectus is first filed pursuant to Rule 424(b) of the 1933 Act
Regulations, when any amendment to the Registration Statement or any 462(b)
Registration Statement becomes effective, and when any supplement to the
Prospectus or any Term Sheet is filed with the Commission and at the
Closing Time and Date of Delivery (as hereinafter defined), (i) the
Registration Statement, the 462(b) Registration Statement, the Prospectus,
the Term Sheet and any amendments thereof and supplements thereto will
conform in all material respects with the applicable requirements of the
1933 Act and the 1933 Act Regulations, and (ii) neither the Registration
Statement, the 462(b) Registration Statement, the Prospectus, any Term
Sheet nor any amendment or supplement thereto will 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 not
misleading; provided, however, that this representation and warranty shall
not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter expressly for use in the Registration Statement or any 462(b)
Registration Statement.
(c) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the state of Georgia with
all requisite corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Registration
Statement and the Prospectus. The Company is duly registered under the
Savings and Loan Holding Company Act ("SLHCA") and will be duly registered
under the Georgia Bank Holding Company Act ("GBHCA"). The Company is duly
qualified to transact business as a foreign corporation and is in good
standing in each of the jurisdictions in which the ownership or leasing of
its properties or the nature or conduct of its business as described in the
Registration Statement and the Prospectus requires such qualification,
except where the failure to do so would not have a material adverse effect
on the condition (financial or other), business, properties, net worth or
results of operations of the Company and the Bank (as hereinafter defined)
taken as a whole.
3
<PAGE>
(d) At the Closing Time and Date of Delivery (as hereinafter
defined), the Company's sole subsidiary will be Atlanta Internet Bank, a
federally-chartered stock savings bank (the "Bank"). The Bank has been
duly organized and is validly existing as a federally-chartered stock
savings bank under the laws of the United States, with all requisite power
and authority to own, lease and operate its properties and conduct its
business as described in the Registration Statement and the Prospectus. The
Bank is duly qualified to do business in each jurisdiction in which the
ownership or leasing of its properties or the nature or conduct of its
business as described in the Registration Statement and the Prospectus
conducted requires such qualification, except where the failure to do so
would not have a material adverse effect on the condition (financial or
other), business, properties, net worth or results of operations of the
Bank.
(f) The Company has full corporate right, power and authority to
enter into this Agreement, to issue, sell and deliver the Shares as
provided herein and to consummate the transactions contemplated herein.
This Agreement has been duly authorized, executed and delivered by the
Company and constitutes a valid and binding agreement of the Company,
enforceable in accordance with its terms, except to the extent that
enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or other laws of general applicability relating to or
affecting creditors' rights, or by general principles of equity whether
considered at law or at equity and except to the extent enforcement of the
indemnification provisions set forth in Section 8 of this Agreement may be
limited by federal or state securities laws or the public policy underlying
such laws.
(g) Each consent, approval, authorization, order, license,
certificate, permit, registration, designation or filing by or with any
governmental agency or body necessary for the valid authorization,
issuance, sale and delivery of the Shares, the execution, delivery and
performance of this Agreement and the consummation by the Company of the
transactions contemplated hereby has been made or obtained and is in full
force and effect, except as may be required under applicable state
securities laws or by the NASD. All terms, conditions, requirements, and
provisions precedent to the Reorganization (as defined in the Prospectus)
imposed on the Company, the Bank, or the Selling Shareholder by any of the
Board of Governors of the Federal Reserve System ("FRB"), the Office of
Thrift Supervision ("OTS"), the Federal Deposit Insurance Corporation
("FDIC"), and the Georgia Department of Banking and Finance ("DBF") have
been satisfied or waived. To the knowledge of the Company and the Bank, no
person has sought to obtain review of the final actions of the FRB, OTS,
FDIC or DBF in approving the Reorganization or threatened or initiated
legal proceedings to challenge such approvals of the Reorganization.
(h) The Bank is a member in good standing of the Federal Home Loan
Bank of Atlanta, and the Bank's deposit accounts are insured by the FDIC to
the fullest extent provided under applicable law, and no proceeding for the
termination or revocation of such issuance is pending or, to the knowledge
of the Company or the Bank, threatened.
4
<PAGE>
(i) Neither the issuance, sale and delivery by the Company of the
Shares, nor the execution, delivery and performance of this Agreement, nor
the consummation of the transactions contemplated hereby will conflict with
or result in a breach or violation of any of the terms and provisions of,
or (with or without the giving of notice or the passage of time or both)
constitute a default under the charter or bylaws of the Company or the
Bank, respectively, or under any indenture, mortgage, deed of trust, loan
agreement, note, lease or other material agreement or instrument to which
the Company or the Bank, respectively, is a party or to which the Company
or the Bank, respectively, any of their respective properties or other
assets is subject; or any applicable statute, judgment, decree, order, rule
or regulation of any court or governmental agency or body applicable to any
of the foregoing or any of their respective properties, the violation of
which would have a material adverse effect on the Company and the Bank
taken as a whole; or result in the creation or imposition of any lien,
charge, claim or encumbrance upon any property or asset of the Company or
the Bank, respectively.
(j) The Shares to be issued and sold to the Underwriters hereunder
have been duly authorized by the Company. When issued and delivered
against payment therefor as provided in this Agreement, the Shares will be
duly and validly issued, fully paid and nonassessable. No preemptive
rights of shareholders exist with respect to any of the Shares which have
not been satisfied or waived. No person or entity holds a right to require
or participate in the registration under the 1933 Act of the Shares
pursuant to the Registration Statement which has not been satisfied or
waived; and, except as set forth in the Prospectus, no person holds a right
to require registration under the 1933 Act of any shares of Common Stock of
the Company at any other time which has not been satisfied or waived.
(k) The Company's authorized, issued and outstanding capital stock is
as disclosed in the Prospectus. All of the issued shares of capital stock
of the Company have been duly authorized and validly issued, are fully paid
and nonassessable and conform to the description of the Company's capital
stock contained in the Prospectus.
(l) All of the issued shares of capital stock of the Bank have been
duly authorized and validly issued, are fully paid and nonassessable and are
owned directly by the Company free and clear of all liens, security
interests, pledges, charges, encumbrances, defects, shareholders'
agreements, voting trusts, equities or claims of any nature whatsoever.
Other than the Bank, the Company does not own, directly or indirectly,
any capital stock or other equity securities of any other corporation or
any ownership interest in any partnership, joint venture or other
association.
(m) Except as disclosed in the Prospectus, there are no outstanding
(i) securities or obligations of the Company or the Bank convertible into
or exchangeable for any capital stock of the Company or the Bank, (ii)
warrants, rights or options to subscribe for or purchase from the Company
or the Bank any such capital stock or any such convertible or exchangeable
5
<PAGE>
securities or obligations, or (iii) obligations of the Company or the Bank
to issue any shares of capital stock, any such convertible or exchangeable
securities or obligation, or any such warrants, rights or options.
(n) The Company and the Bank have good and marketable title in fee
simple to all real property, if any, and good title to all personal
property owned by them, in each case free and clear of all liens, security
interests, pledges, charges, encumbrances, mortgages and defects, except
such as are disclosed in the Prospectus or such as do not materially and
adversely affect the value of such property and do not interfere with the
use made or proposed to be made of such property by the Company and the
Bank; and any real property and buildings held under lease by the Company
or the Bank are held under valid, existing and enforceable leases, with
such exceptions as are disclosed in the Prospectus or are not material and
do not interfere with the use made or proposed to be made of such property
and buildings by the Company or the Bank.
(o) The financial statements of the Company included in the
Registration Statement and Prospectus present fairly the financial position
of the Company as of the dates indicated and the results of operations and
cash flows for the Company for the periods specified, all in conformity
with generally accepted accounting principles applied on a consistent
basis. The Statement of Assets and Liabilities Generated by the Internet
Banking Operations of the Company Held and Serviced by Carolina First Bank
presents fairly, in all material respects, the assets and liabilities
generated by the Internet Banking Operations of the Company as of the dates
specified in conformity with generally accepted accounting principles. The
financial statement schedules, if any, included in the Registration
Statement and the amounts in the Prospectus under the captions "Prospectus
Summary -- Summary Financial Data", "Pro Forma Condensed Balance Sheet",
"Pro Forma Condensed Statement of Operations" and "Selected Financial Data"
fairly present the information shown therein and have been compiled on a
basis consistent with the financial statements included in the Registration
Statement and the Prospectus. The unaudited pro forma financial
information (including the related notes) included in the Prospectus or any
Preliminary Prospectus complies as to form in all material respects to the
applicable accounting requirements of the 1933 Act and the 1933 Act
Regulations, and management of the Company believes that the assumptions
underlying the pro forma adjustments are reasonable. Such pro forma
adjustments have been properly applied to the historical amounts in the
compilation of the information and such information fairly presents the
financial position, results of operations and other information purported
to be shown therein at the respective dates and for the respective periods
specified.
(p) Deloitte & Touche, LLP, who have examined and are reporting upon
the audited financial statements and schedules included in the Registration
Statement, are, and were during the periods covered by their reports
included in the Registration Statement and the Prospectus, independent
public accountants within the meaning of the 1933 Act and the rules and
regulations of the Commission thereunder.
6
<PAGE>
(q) Neither the Company nor the Bank has sustained, since December
31, 1996, any material loss or interference with its business from fire,
explosion, flood, hurricane, accident or other calamity, whether or not
covered by insurance, or from any labor dispute or arbitrators' or court or
governmental action, order or decree; and, since the respective dates as of
which information is given in the Registration Statement and the
Prospectus, and except as otherwise stated in the Registration Statement
and Prospectus, there has not been (i) any material change in the capital
stock, long-term debt, obligations under capital leases or short-term
borrowings of the Company or the Bank; (ii) any material increase in the
aggregate dollar or principal amount of the Bank's assets which are
classified by the Bank as substandard, doubtful, or loss, or the Bank's
loans which are 90 days or more past due or real estate acquired by
foreclosure; (iii) any dividends or other distributions paid or declared by
the Company or the Bank with respect to its capital stock or any default by
the Company or the Bank in the payment of principal or interest or any
outstanding debt obligations; or (iv) any material adverse change, or any
development which could reasonably be seen as involving a prospective
material adverse change, in or affecting the business, prospects,
properties, assets, results of operations or condition (financial or other)
of the Company or the Bank.
(r) Neither the Company nor the Bank is in violation of its
respective charter, or by-laws, and no default exists, and no event has
occurred, nor state of facts exists, which, with notice or after the lapse
of time to cure or both, would constitute a default in the due performance
and observance of any obligation, agreement, term, covenant, consideration
or condition contained in any indenture, mortgage, deed of trust, loan
agreement, note, lease or other material agreement or instrument to which
any such entity is a party or to which any such entity or any of its
properties is subject. Neither the Company nor the Bank is in violation
of, or in default with respect to, any statute, rule, regulation, order,
judgment or decree, except as may be properly described in the Prospectus
or such as in the aggregate do not now have and will not in the future have
a material adverse effect on the financial position, results of operations
or business of each such entity, respectively.
(s) There is not pending or, to the Company's knowledge, threatened,
any action, suit, proceeding, inquiry or investigation against the Company,
the Bank or, to the Company's knowledge, any of their respective officers
and directors or to which the properties, assets or rights of any such
entity are subject, before or brought by any court or governmental agency
or body or board of arbitrators that are required to be described in the
Registration Statement or the Prospectus but are not described as required.
(t) The descriptions in the Registration Statement and the Prospectus
of the contracts, leases and other legal documents therein described
present fairly the information required to be shown, and there are no
contracts, leases, or other documents of a character required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement which are not described or filed as
required.
7
<PAGE>
(u) The Company and the Bank own, possess or have obtained all
material permits, licenses, franchises, certificates, consents, orders,
approvals and other authorizations of governmental or regulatory
authorities or other entities as are necessary to own or lease, as the case
may be, and to operate their respective properties and to carry on their
respective businesses as presently conducted, or as contemplated in the
Prospectus to be conducted, and neither the Company nor the Bank has
received any notice of proceedings relating to revocation or modification
of any such licenses, permits, franchises, certificates, consents, orders,
approvals or authorizations.
(v) The Company and the Bank own or possess adequate licenses or
other rights to use all patents, trademarks, service marks, trade names,
copyrights, software and design licenses, trade secrets, manufacturing
processes, other intangible property rights and know-how (collectively
"Intangibles") necessary to entitle the Company and the Bank to conduct
their respective businesses as described in the Prospectus, and neither the
Company nor the Bank has received notice of infringement of or conflict
with (and neither knows of such infringement of or conflict with) asserted
rights of others with respect to any Intangibles which could materially and
adversely affect the business, prospects, properties, assets, results of
operations or condition (financial or otherwise) of the Company or the
Bank.
(w) Each of the Company's and the Bank's respective systems of
internal accounting controls taken as a whole is sufficient to meet the
broad objectives of internal accounting control insofar as those objectives
pertain to the prevention or detection of errors or irregularities in
amounts that would be material in relation to the Company's or the Bank's
financial statements; and, none of the Company, the Bank, or, to the
knowledge of the Company, any employee or agent thereof, has made any
payment of funds of the Company or the Bank, or received or retained any
funds, and no funds of the Company or the Bank have been set aside to be
used for any payment, in each case in violation of any law, rule or
regulation.
(x) Each of the Company and the Bank has filed on a timely basis all
necessary federal, state, local and foreign income and franchise tax
returns required to be filed through the date hereof and have paid all
taxes shown as due thereon; and no tax deficiency has been asserted against
any such entity, nor does any such entity know of any tax deficiency which
is likely to be asserted against any such entity which if determined
adversely to any such entity, could materially adversely affect the
business, prospects, properties, assets, results of operations or condition
(financial or otherwise) of any such entity, respectively. All tax
liabilities are adequately provided for on the respective books of such
entities.
(y) Each of the Company and the Bank maintain insurance (issued by
insurers of recognized financial responsibility) of the types and in the
amounts generally deemed adequate for their respective businesses and,
consistent with insurance coverage maintained by similar companies in
similar businesses, including, but not limited to, insurance covering real
and personal property owned or leased by the Company and the Bank against
theft,
8
<PAGE>
damage, destruction, acts of vandalism and all other risks customarily
insured against, all of which insurance is in full force and effect.
(z) Except as described in the Prospectus, there are no contractual
encumbrances or material restrictions on the ability of the Bank (i) to pay
dividends or make any other distributions on its capital stock or to pay
any indebtedness owed, (ii) to make any loans or advances to, or
investments in, any subsidiary, or (iii) to transfer any of its property or
assets to any subsidiary. The Bank meets the qualifications to make
capital distributions as a "Tier 1 Association" under 12 C.F.R. Section
563.134.
(aa) Each of the Company, the Bank, and their officers, directors or
affiliates has not taken and will not take, directly or indirectly, any
action designed to, or that might reasonably be expected to, cause or
result in or constitute the stabilization or manipulation of any security
of the Company or to facilitate the sale or resale of the Shares.
(bb) The Company is not, will not become as a result of the
transactions contemplated hereby, or will not conduct its respective
businesses in a manner in which the Company would become, "an investment
company," or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
Section 2. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDER. The
Selling Shareholder represents and warrants to, and agrees with, each of the
several Underwriters and the Company that:
(a) The Selling Shareholder has full right, power and authority to
enter into this Agreement, the Power of Attorney and the Custody Agreement
(as hereinafter defined) and to sell, assign, transfer and deliver to the
Underwriters the Shares to be sold by the Selling Shareholder hereunder;
and the execution and delivery of this Agreement, the Power of Attorney and
the Custody Agreement have been duly authorized by all necessary action of
the Selling Shareholder.
(b) The Selling Shareholder has duly executed and delivered this
Agreement, the Power of Attorney and the Custody Agreement, and each
constitutes the valid and binding agreement of the Selling Shareholder
enforceable against the Selling Shareholder in accordance with its terms,
subject, as to enforcement, to applicable bankruptcy, insolvency,
reorganization and moratorium laws and other laws relating to or affecting
the enforcement of creditors' rights generally and to general equitable
principles.
(c) No consent, approval, authorization, order or declaration of or
from, or registration, qualification or filing with, any court or
governmental agency or body is required for the sale of the Shares to be
sold by the Selling Shareholder or the consummation of the transactions
contemplated by this Agreement, the Power of Attorney or the Custody
9
<PAGE>
Agreement, except the registration of such Shares under the 1933 Act
(which, if the Registration Statement is not effective as of the time of
execution hereof, shall be obtained as provided in this Agreement) and such
as may be required under state securities or blue sky laws in connection
with the offer, sale and distribution of such Shares by the Underwriters.
(d) The sale of the Shares to be sold by such Selling Shareholder and
the performance of this Agreement, the Power of Attorney and the Custody
Agreement and the consummation of the transactions herein and therein
contemplated will not conflict with, or (with or without the giving of
notice or the passage of time or both) result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument to which the Selling Shareholder is a party or to
which any of its properties or assets is subject, nor will such action
conflict with or violate any provision of the charter or bylaws or other
governing instruments of the Selling Shareholder, if any, or any statute,
rule or regulation or any order, judgment or decree of any court or
governmental agency or body having jurisdiction over the Selling
Shareholder or any of the Selling Shareholder's properties or assets.
(e) The Selling Shareholder has, and at the Closing Time or, at the
Date of Delivery, as the case may be, the Selling Shareholder will have,
good and valid title to the Shares to be sold by the Selling Shareholder
hereunder, free and clear of all liens, security interests, pledges,
charges, encumbrances, defects, shareholders' agreements, voting trusts,
equities or claims of any nature whatsoever; and, upon delivery of such
Shares against payment therefor as provided herein, good and valid title to
such Shares, free and clear of all liens, security interests, pledges,
charges, encumbrances, defects, shareholders' agreements, voting trusts,
equities or claims of any nature whatsoever, will pass to the several
Underwriters.
(f) The Selling Shareholder has not (i) taken, directly or
indirectly, any action designed to cause or result in, or that has
constituted or might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Shares or (ii) since the filing of
the Registration Statement (A) sold, bid for, purchased or paid anyone any
compensation for soliciting purchases of, the Shares or (B) paid or agreed
to pay to any person any compensation for soliciting another to purchase
any other securities of the Company.
(g) When any Preliminary Prospectus was filed with the Commission it
(i) contained all statements required to be stated therein in accordance
with, and complied in all material respects with the requirements of, the
1933 Act and the rules and regulations of the Commission thereunder, and
(ii) did not include any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading. When the Registration Statement or any amendment thereto or
any 462(b) Registration Statement or any amendment thereto was or is
declared effective and at the Closing Time or the Date of Delivery, as the
case may be,
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it (i) contained or will contain all statements required to be stated
therein in accordance with, and complied or will comply in all material
respects with the requirements of, the 1933 Act and the rules and
regulations of the Commission thereunder and (ii) did not or will not
include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading.
When the Prospectus or any amendment or supplement thereto is filed with
the Commission pursuant to Rule 424(b) (or, if the Prospectus or such
amendment or supplement is not required to be so filed, when the
Registration Statement or the amendment thereto containing such amendment
or supplement to the Prospectus was or is declared effective), and at the
Closing Time or the Date of Delivery, as the case may be, the Prospectus,
as amended or supplemented at any such time, (i) contained or will contain
all statements required to be stated therein in accordance with, and
complied or will comply in all material respects with the requirements of,
the 1933 Act and the rules and regulations of the Commission thereunder and
(ii) did not or will not include any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The foregoing provisions of this paragraph (g) do not apply to
statements or omissions made in any Preliminary Prospectus, the
Registration Statement, any 462(b) Registration Statement or any amendment
thereto or the Prospectus or any amendment or supplement thereto in
reliance upon and in conformity with written information furnished to the
Company by any Underwriter through you specifically for use therein.
In order to document the Underwriters' compliance with the reporting and
withholding provisions of the Internal Revenue Code of 1986, as amended, with
respect to the transactions herein contemplated, the Selling Shareholder agrees
to deliver to you prior to or at the Closing Time (as hereinafter defined) a
properly completed and executed United States Treasury Department form W-9 (or
other applicable form or statement specified by Treasury Department regulations
in lieu thereof).
The Selling Shareholder represents and warrants that certificates in
negotiable form representing all of the Shares to be sold by such Selling
Shareholder hereunder have been placed in custody under a custody agreement (the
"Custody Agreement"), in the form heretofore furnished to and approved by you,
duly executed and delivered by such Selling Shareholder to [INSERT NAME OF
CUSTODIAN], as custodian (the "Custodian"), and that such Selling Shareholder
has duly executed and delivered a Power of Attorney (the "Power of Attorney"),
in the form heretofore furnished to and approved by you, appointing [INSERT
NAME(S) OF ATTORNEYS-IN-FACT] as such Selling Shareholder's attorneys-in-fact
(the "Attorneys-in-Fact") with authority to execute and deliver this Agreement
on behalf of such Selling Shareholder, to determine the purchase price to be
paid by the Underwriters to the Selling Shareholders as provided in Section 3
hereof, to authorize the delivery of the Shares to be sold by such Selling
Shareholder hereunder and otherwise to act on behalf of such Selling Shareholder
in connection with the transactions contemplated by this Agreement and the
Custody Agreement.
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The Selling Shareholder specifically agrees that the Shares represented by
the certificates held in custody for such Selling Shareholder under the Custody
Agreement are subject to the interests of the Underwriters hereunder, and that
the arrangements made by such Selling Shareholder for such custody, and the
appointment by such Selling Shareholder of the Attorneys-in-Fact by the Power of
Attorney, are irrevocable. The Selling Shareholder specifically agrees that the
obligations of the Selling Shareholder hereunder shall not be terminated by
operation of law, whether by the death or incapacity of Selling Shareholder or,
in the case of an estate or trust, by the death or incapacity of any executor or
trustee or the termination of such estate or trust, or in the case of a
partnership or corporation, by the dissolution of such partnership or
corporation, or by the occurrence of any other event.
Section 3. SALE AND DELIVERY OF THE SHARES TO THE UNDERWRITERS; CLOSING.
(a) On the basis of the representations and warranties herein
contained, and subject to the terms and conditions herein set forth, the
Company agrees to issue and sell to each of the Underwriters the Firm
Shares, and each Underwriter agrees, severally and not jointly, to purchase
from the Company the number of Firm Shares set forth opposite the name of
such Underwriter in SCHEDULE A (the proportion which each Underwriter's
share of the total number of the Firm Shares bears to the total number of
Firm Shares is hereinafter referred to as such Underwriter's "underwriting
obligation proportion"), at a purchase price of $__________ per share.
(b) In addition, on the basis of the representations and warranties
herein contained, and subject to the terms and conditions herein set forth,
the Company and the Selling Shareholder hereby grant an option to the
Underwriters, severally and not jointly, to purchase up to an additional
450,000 Option Shares (150,000 and 300,000 Option Shares to be sold by the
Selling Shareholder and the Company, respectively) at the purchase price
set forth in Section 3(a) above. Any such election to purchase Option
Shares shall be made (i) first to the 150,000 Option Shares to be sold by
the Selling Shareholder and (ii) then to the Company. The option hereby
granted will expire if not exercised within the thirty (30) day period
after the date of the Prospectus by giving written notice to the Company
and the Selling Shareholder. The option granted hereby may be exercised in
whole or in part (but not more than once), only for the purpose of covering
over-allotments that may be made in connection with the offering and
distribution of the Firm Shares. The notice of exercise shall set forth the
number of Option Shares as to which the several Underwriters are exercising
the option, and the time and date of payment and delivery thereof. Such
time and date of delivery (the "Date of Delivery") shall be determined by
you but shall not be later than three full business days after the exercise
of such option, nor in any event prior to the Closing Time. If the option
is exercised as to all or any portion of the Option Shares, the Option
Shares as to which the option is exercised shall be purchased by the
Underwriters, severally and not jointly, in their respective underwriting
obligation proportions.
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(c) Payment of the purchase price for and delivery of certificates in
definitive form representing the Firm Shares shall be made at the offices
of Morgan Keegan & Company, Inc., 50 Front Street, Memphis, Tennessee 38103
or at such other place as shall be agreed upon by the Company and you, at
10:00 a.m., either (i) on the third full business day after the execution
of this Agreement, or (ii) at such other time not more than ten full
business days thereafter as you and the Company shall determine (unless, in
either case, postponed pursuant to the terms hereof), (such date and time
of payment and delivery being herein called the "Closing Time"). In
addition, in the event that any or all of the Option Shares are purchased
by the Underwriters, payment of the purchase price for and delivery of
certificates in definitive form representing the Option Shares shall be
made at the offices of Morgan Keegan & Company, Inc. in the manner set
forth above, or at such other place as the Company and you shall determine,
on the Date of Delivery as specified in the notice from you to the Company.
Payment for the Firm Shares and the Option Shares shall be made to the
Company and the Selling Shareholder by wire transfer in same-day funds to
the accounts designated to the Underwriters in writing by the Company and
the Selling Shareholder, respectively, against delivery to you for the
respective accounts of the Underwriters of the Shares to be purchased by
them.
(d) The certificates representing the Shares to be purchased by the
Underwriters shall be in such denominations and registered in such names as
you may request in writing at least two full business days before the
Closing Time or the Date of Delivery, as the case may be. The certificates
representing the Shares will be made available at the offices of Morgan
Keegan & Company, Inc. or at such other place as Morgan Keegan & Company,
Inc. may designate for examination and packaging not later than 10:00 a.m.
at least one full business day prior to the Closing Time or the Date of
Delivery as the case may be.
(e) After the Registration Statement becomes effective, you intend to
offer the Shares to the public as set forth in the Prospectus, but after
the initial public offering of such Shares you may in your discretion vary
the public offering price.
Section 4. CERTAIN COVENANTS OF THE COMPANY. The Company covenants and
agrees with each Underwriter as follows:
(a) The Company will use its best efforts to cause the Registration
Statement to become effective (if not yet effective at the date and time
that this Agreement is executed and delivered by the parties hereto). If
the Company elects to rely upon Rule 430A of the 1933 Act Regulations or
the filing of the Prospectus is otherwise required under Rule 424(b) of the
1933 Act Regulations, the Company will comply with the requirements of Rule
430A and will file the Prospectus, properly completed, pursuant to the
applicable provisions of Rule 424(b), or a Term Sheet pursuant to and in
accordance with Rule 434, within the time period prescribed. If the
Company elects to rely upon Rule 462(b), the Company shall file a 462(b)
Registration Statement with the Commission in compliance with Rule 462(b)
by 10:00 p.m., Washington, D.C. time on the date of this Agreement, and the
Company shall at the time of filing either pay
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to the Commission the filing fee for the Rule 462(b) Registration Statement
or give irrevocable instructions for the payment of such fee. The Company
will notify you immediately (i) when the Registration Statement, 462(b)
Registration Statement or any post-effective amendment to the Registration
Statement, shall have become effective, or any supplement to the Prospectus
or any amended Prospectus shall have been filed, (ii) of the receipt of any
comments from the Commission, (iii) of any request by the Commission to
amend the Registration Statement or 462(b) Registration Statement or amend
or supplement the Prospectus or for additional information, and (iv) of the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or any 462(b) Registration Statement or of
any order preventing or suspending the use of any Preliminary Prospectus or
the suspension of the qualification of the Shares for offering or sale in
any jurisdiction, or of the institution or threatening of any proceeding
for any such purposes. The Company will use every reasonable effort to
prevent the issuance of any such stop order or of any order preventing or
suspending such use and, if any such order is issued, to obtain the
withdrawal thereof at the earliest possible moment.
(b) The Company will not at any time file or make any amendment to
the Registration Statement, or any amendment or supplement (i) to the
Prospectus, if the Company has not elected to rely upon Rule 430A, (ii) if
the Company has elected to rely upon Rule 430A, to either the Prospectus
included in the Registration Statement at the time it becomes effective or
to the Prospectus filed in accordance with Rule 424(b) or any Term Sheet
filed in accordance with Rule 434, or (iii) if the Company has elected to
rely upon Rule 462(b), to any 462(b) Registration Statement in any case if
you shall not have previously been advised and furnished a copy thereof a
reasonable time prior to the proposed filing, or if you or counsel for the
Underwriters shall object to such amendment or supplement.
(c) The Company has furnished or will furnish to you, at its expense,
as soon as available, three copies of the Registration Statement as
originally filed and of all amendments thereto, whether filed before or
after the Registration Statement becomes effective, copies of all exhibits
and documents filed therewith and signed copies of all consents and
certificates of experts, as you may reasonably request, and has furnished
or will furnish to each Underwriter, one conformed copy of the Registration
Statement as originally filed and of each amendment thereto.
(d) The Company will deliver to each Underwriter, at the Company's
expense, from time to time, as many copies of each Preliminary Prospectus
as such Underwriter may reasonably request, and the Company hereby consents
to the use of such copies for purposes permitted by the 1933 Act. The
Company will deliver to each Underwriter, at the Company's expense, as soon
as the Registration Statement shall have become effective and thereafter
from time to time as requested during the period when the Prospectus is
required to be delivered under the 1933 Act, such number of copies of the
Prospectus (as supplemented or amended) as each Underwriter may reasonably
request. The Company will comply to the best of its ability with the 1933
Act and the 1933 Act Regulations so as to permit the completion of the
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distribution of the Shares as contemplated in this Agreement and in the
Prospectus. If the delivery of a prospectus is required at any time prior
to the expiration of nine months after the time of issue of the Prospectus
or any Term Sheet in connection with the offering or sale of the Shares and
if at such time any events shall have occurred as a result of which the
Prospectus or any Term Sheet as then amended or supplemented would include
an untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made when such Prospectus or any Term
Sheet is delivered not misleading, or, if for any reason it shall be
necessary during such same period to amend or supplement the Prospectus or
any Term Sheet in order to comply with the 1933 Act or the rules and
regulations thereunder, the Company will notify you and upon your request
prepare and furnish without charge to each Underwriter and to any dealer in
securities as many copies as you may from time to time reasonably request
of an amended Prospectus or any Term Sheet or a supplement to the
Prospectus or any Term Sheet or an amendment or supplement to any such
incorporated document which will correct such statement or omission or
effect such compliance, and in case any Underwriter is required to deliver
a prospectus in connection with sales of any of the Shares at any time nine
months or more after the time of issue of the Prospectus or any Term Sheet,
upon your request but at the expense of such Underwriter, the Company will
prepare and deliver to such Underwriter as many copies as you may request
of an amended or supplemented Prospectus or any Term Sheet complying with
Section 10(a)(3) of the 1933 Act.
(e) The Company will use its best efforts to qualify the Shares for
offering and sale under the applicable securities laws of such states and
other jurisdictions as you may designate and to maintain such
qualifications in effect for as long as may be necessary to complete the
distribution of the Shares; provided, however, that the Company shall not
be obligated to file any general consent to service of process or to
qualify as a foreign corporation in any jurisdiction in which it is not so
qualified or to make any undertakings in respect of doing business in any
jurisdiction in which it is not otherwise so subject. The Company will file
such statements and reports as may be required by the laws of each
jurisdiction in which the Shares have been qualified as above provided.
(f) The Company will make generally available to its securityholders
as soon as practicable, but in any event not later than the end of the
fiscal quarter first occurring after the first anniversary of the
"effective date of the Registration Statement" (as defined in Rule 158(c)
of the 1933 Act Regulations), an earnings statement (in reasonable detail
but which need not be audited) complying with the provisions of Section
11(a) of the 1933 Act and Rule 158 thereunder and covering a period of at
least 12 months beginning after the effective date of the Registration
Statement.
(g) The Company will use the net proceeds received by it from the
sale of the Shares in the manner specified in the Prospectus under the
caption "Use of Proceeds."
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(h) The Company will furnish to its securityholders, as soon as
practicable after the end of each respective period, annual reports
(including financial statements audited by independent public accountants)
and unaudited quarterly reports of operations for each of the first three
quarters of the fiscal year. During a period of five years after the date
hereof, the Company will furnish to you: (i) concurrently with furnishing
such reports to its securityholders, statements of operations of the
Company for each of the first three quarters in the form furnished to the
Company's securityholders; (ii) concurrently with furnishing to its
securityholders, a balance sheet of the Company as of the end of such
fiscal year, together with statements of operations, of cash flows and of
securityholders' equity of the Company for such fiscal year, accompanied by
a copy of the certificate or report thereon of independent public
accountants; (iii) as soon as they are available, copies of all reports
(financial or otherwise) mailed to securityholders; (iv) as soon as they
are available, copies of all reports and financial statements furnished to
or filed with the Commission, any securities exchange or the National
Association of Securities Dealers, Inc. (the "NASD"); (v) every material
press release in respect of the Company or its affairs which is released by
the Company; and (vi) any additional information of a public nature
concerning the Company or its business that you may reasonably request.
During such five-year period, the foregoing financial statements shall be
on a consolidated basis to the extent that the accounts of the Company are
consolidated with any subsidiaries, and shall be accompanied by similar
financial statements for any significant subsidiary that is not so
consolidated.
(i) During the period beginning from the date hereof and continuing
to and including the date 180 days after the date of the Prospectus, the
Company will not, without the prior written consent of Morgan Keegan &
Company, Inc., offer, pledge, issue, sell, contract to sell, grant any
option for the sale of, or otherwise dispose of, or announce any offer,
pledge, sale, grant of any option to purchase or other disposition,
directly or indirectly, any shares of Common Stock or securities
convertible into, exercisable or exchangeable for, shares of Common Stock,
except as provided in Section 3 of this Agreement and other than _______
shares pursuant to the Company's stock option plans.
(j) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar (which
may be the same entity as the transfer agent) for its Common Stock.
(k) The Company will cause the Shares to be listed, subject to notice
of issuance, on the Nasdaq Stock Market and will maintain the listing of
the Shares on the Nasdaq Stock Market.
(l) [THE COMPANY IS FAMILIAR WITH THE INVESTMENT COMPANY ACT OF 1940,
AS AMENDED, AND THE RULES AND REGULATIONS THEREUNDER, AND HAS IN THE PAST
CONDUCTED ITS AFFAIRS, AND WILL IN THE FUTURE CONDUCT ITS AFFAIRS, IN SUCH
A MANNER SO AS TO ENSURE THAT THE COMPANY WAS NOT AND WILL NOT BE AN
"INVESTMENT COMPANY" OR AN ENTITY
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"CONTROLLED" BY AN "INVESTMENT COMPANY" WITHIN THE MEANING OF THE
INVESTMENT COMPANY ACT OF 1940, AS AMENDED.]
(m) The Company will not, and will use its best efforts to cause its
officers, directors and affiliates not to, (i) take, directly or indirectly
prior to termination of the underwriting syndicate contemplated by this
Agreement, any action designed to stabilize or manipulate the price of any
security of the Company, or which may cause or result in, or which might in
the future reasonably be expected to cause or result in, the stabilization
or manipulation of the price of any security of the Company, to facilitate
the sale or resale of any of the Shares, (ii) sell, bid for, purchase or
pay anyone any compensation for soliciting purchases of the Shares or (iii)
pay or agree to pay to any person any compensation for soliciting any order
to purchase any other securities of the Company.
(n) If at any time during the 30-day period after the Registration
Statement becomes effective, any rumor, publication or event relating to or
affecting the Company shall occur as a result of which in your reasonable
opinion the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus) and after
written notice from you advising the Company to the effect set forth above,
the Company agrees to forthwith prepare, consult with you concerning the
substance of, and disseminate a press release or other public statement,
reasonably satisfactory to you, responding to or commenting on such rumor,
publication or event.
(o) The Company will file timely and accurate reports on Form SR with
the Commission in accordance with Rule 463 of the Commission under the 1933
Act or any successor provision.
(p) The Company will use its best efforts to become duly registered
under the GBHCA.
Section 5. COVENANTS OF THE SELLING SHAREHOLDER. The Selling Shareholder
covenants and agrees with each of the Underwriters:
(a) During the period beginning from the date hereof and continuing
to and including the date 365 days after the date of the Prospectus, the
Selling Shareholder will not, without the prior written consent of Morgan
Keegan & Company, Inc., offer, pledge, issue, sell, contract to sell, grant
any option for the sale of, or otherwise dispose of, (or announce any
offer, pledge, sale, grant of an option to purchase or other disposition,
directly or indirectly) any shares of Common Stock or securities
convertible into, exercisable or exchangeable for, shares of Common Stock,
except as provided in Section 3 of this Agreement.
(b) The Selling Shareholder will not (i) take, directly or
indirectly, prior to the termination of the underwriting syndicate
contemplated by this Agreement, any action
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designed to cause or to result in, or that might reasonably be expected to
constitute, the stabilization or manipulation of the price of any security
of the Company to facilitate the sale or resale of any of the Shares, (ii)
sell, bid for, purchase or pay anyone any compensation for soliciting
purchases of, the Shares or (iii) pay to or agree to pay any person any
compensation for soliciting another to purchase any other securities of the
Company.
Section 6. PAYMENT OF EXPENSES. The Company will pay and bear all costs,
fees and expenses incident to the performance of its obligations under this
Agreement (excluding fees and expenses of counsel for the Underwriters, except
as specifically set forth below), including (a) the preparation, printing and
filing of the Registration Statement (including financial statements and
exhibits), as originally filed and as amended, the Preliminary Prospectuses, the
Prospectus and any Term Sheet and any amendments or supplements thereto, and the
cost of furnishing copies thereof to the Underwriters, (b) the preparation,
printing and distribution of this Agreement, the certificates representing the
Shares, the Blue Sky Memoranda and any instruments relating to any of the
foregoing, (c) the issuance and delivery of the Shares to the Underwriters,
including any transfer taxes payable upon the sale of the Shares to the
Underwriters (other than transfer taxes on resales by the Underwriters), (d) the
fees and disbursements of the Company's counsel and accountants, (e) the
qualification of the Shares under the applicable securities laws in accordance
with the terms of this Agreement, including filing fees and fees and
disbursements of counsel for the Underwriters in connection therewith and in
connection with the Blue Sky Memoranda, (f) all costs, fees and expenses in
connection with the notification to the Nasdaq Stock Market of the proposed
issuance of the Shares, (g) filing fees relating to the review of the offering
by the NASD, (h) the transfer agent's and registrar's fees and all miscellaneous
expenses referred to in Part II of the Registration Statement, (i) costs related
to travel and lodging incurred by the Company and its representatives relating
to meetings with and presentations to prospective purchasers of the Shares
reasonably determined by the Underwriters to be necessary or desirable to effect
the sale of the Shares to the public, and (j) all other costs and expenses
incident to the performance of the Company's obligations hereunder (including
costs incurred in closing the purchase of the Option Shares, if any) that are
not otherwise specifically provided for in this section. The Company, upon your
request, will provide funds in advance for filing fees in connection with "blue
sky" qualifications.
If the sale of the Shares provided for herein is not consummated because
any condition to the obligations of the Underwriters set forth in Section 7
hereof is not satisfied, because of any termination pursuant to Section 10
hereof or because of any refusal, inability or failure on the part of the
Company to perform any agreement herein or comply with any provision hereof
other than by reason of default by any of the Underwriters, the Company will
reimburse the Underwriters severally on demand for all reasonable out-of-pocket
expenses, including fees and disbursements of Underwriters' counsel, reasonably
incurred by the Underwriters in reviewing the Registration Statement and the
Prospectus, and in investigating and making preparations for the marketing of
the Shares, but the Company will not in such event be liable to any of the
several Underwriters for loss of anticipated profits from the sale of them by
the Shares.
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Section 7. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of
the Underwriters to purchase and pay for (i) the Firm Shares that they have
respectively agreed to purchase pursuant to this Agreement (and any Option
Shares as to which the option granted in Section 3 has been exercised and the
Date of Delivery determined by you is the same as the Closing Time) at the
Closing Time and (ii) the Option Shares at the Date of Delivery of the Option
Shares, are subject to the accuracy of the representations and warranties of the
Company and the Selling Shareholder contained herein as of the Closing Time or
the Date of Delivery, as the case may be, and to the accuracy of the
representations and warranties of the Company and the Selling Shareholder
contained in certificates of any officer of the Company and the Selling
Shareholder delivered pursuant to the provisions hereof, to the performance by
the Company and the Selling Shareholder of their obligations hereunder, and to
the following further conditions:
(a) The Registration Statement shall have become effective not later
than 5:30 p.m. on the date of this Agreement or, with your consent, at a
later time and date not later, however, than 5:30 p.m. on the first
business day following the date hereof, or at such later time or on such
later date as you may agree to in writing; if the Company has elected to
rely upon Rule 462(b), the 462(b) Registration Statement shall have become
effective by 10:00 p.m., Washington, D.C. time, on the date of this
Agreement; and at the Closing Time no stop order suspending the
effectiveness of the Registration Statement or any 462(b) Registration
Statement shall have been issued under the 1933 Act and no proceedings for
that purpose shall have been instituted or shall be pending or, to your
knowledge or the knowledge of the Company, shall be contemplated by the
Commission, and any request on the part of the Commission for additional
information shall have been complied with to the satisfaction of counsel
for the Underwriters. If the Company has elected to rely upon Rule 430A, a
Prospectus or a Term Sheet containing the Rule 430A Information shall have
been filed with the Commission in accordance with Rule 424(b) (or a
post-effective amendment providing such information shall have been filed
and declared effective in accordance with the requirements of Rule 430A).
(b) At the Closing Time, you shall have received a favorable opinion
of Powell, Goldstein, Frazer & Murphy LLP, counsel for the Company, dated
as of the Closing Time, together with signed or reproduced copies of such
opinion for each of the other Underwriters, in form and substance
satisfactory to counsel for the Underwriters, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the
laws of the State of Georgia with the corporate power
and authority to own, lease and operate its properties
and to conduct its business as described in the
Registration Statement and the Prospectus. The Company
is duly registered under the SLHCA. Neither the
Company nor the Bank is subject to any current formal
arrangement or memorandum of understanding with, or
cease and desist order by, any banking or similar
agency. The Company is qualified to transact business
as a foreign corporation
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and is in good standing in each of the jurisdictions in
which the ownership or leasing of the Company's
properties or the nature or conduct of its business
requires such qualification, except where the failure
to do so would not have a material adverse effect on
the condition (financial or other), business,
properties, net worth or results of operations of the
Company and the Bank taken as a whole.
(ii) The Bank has been duly organized and is validly
existing as a federally-chartered stock savings bank
under the laws of the United States. The Bank has all
requisite power and authority to own, lease and operate
its properties and conduct its business as described in
the Registration Statement and the Prospectus. The Bank
is duly qualified to do business in each jurisdiction
in which the ownership or leasing of its properties or
the nature or conduct of its business requires such
qualification, except where the failure to do so would
not have a material adverse effect on the condition
(financial or other), business, properties, net worth
or results of operations of the Company and the Bank
taken as a whole. The Bank is a member of the Federal
Home Loan Bank of Atlanta, and its deposits are insured
by the FDIC and, to such counsel's knowledge, no
proceedings for the termination or revocation of such
insurance are pending or currently threatened.
(iii) The Company has the corporate power and authority to
enter into this Agreement, to issue, sell and deliver
the Shares as provided herein and to consummate the
transactions contemplated herein. This Agreement has
been duly authorized, executed and delivered by the
Company and, assuming due authorization, execution and
delivery by the Underwriters, constitutes a valid and
binding agreement of the Company, enforceable in
accordance with its terms, except to the extent
enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization or other laws
affecting creditors' rights or by general principles of
equity whether considered at law or in equity and
except to the extent that enforcement of the
indemnification provisions set forth in Section 8 of
this Agreement may be limited by federal or state
securities laws or the public policy underlying such
laws.
(iv) Each consent, approval, authorization, order, license,
certificate, permit, registration, designation or
filing by or with any governmental agency or body
necessary for the valid authorization, issuance, sale
and delivery of the Shares, the execution, delivery and
performance of this Agreement and the consummation by
the Company of the transactions contemplated hereby,
has been made or
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obtained and is in full force and effect, except such
as may be necessary under state securities laws or
required by the NASD in connection with the purchase
and distribution of the Shares by the Underwriters, as
to which such counsel need express no opinion.
(v) Neither the issuance, sale and delivery by the Company
of the Shares, nor the execution, delivery and
performance of this Agreement, nor the consummation of
the transactions contemplated hereby will conflict with
or result in a breach or violation of any of the terms
and provisions of, or (with or without the giving
notice or the passage of time or both) constitute a
default under, the charter or by-laws of the Company or
the Bank, respectively, or, under any indenture,
mortgage, deed of trust, loan agreement, note, lease or
other material agreement or instrument to which the
Company or the Bank, respectively, is a party or to
which the Company or the Bank, respectively, any of
their respective properties or other assets, is
subject; or, to such counsel's knowledge, any
applicable statute, judgment, decree, order, rule or
regulation of any court or governmental agency or body,
the violation of which would have a material adverse
effect on the Company and the Bank taken as a whole; or
to such counsel's knowledge, result in the creation or
imposition of any lien, charge, claim or encumbrance
upon any property or asset of the Company or the Bank,
respectively.
(vi) The Reorganization has been duly authorized by the
board of directors of the Company. No action has been
taken, or, to such counsel's knowledge, is pending or
threatened to revoke such authorization or challenge
the Reorganization. The Company and the Bank have
conducted the Reorganization in all material respects
in accordance with all applicable laws, regulations,
decisions and orders and have satisfied all material
terms, conditions, requirements and provisions
precedent to the Reorganization imposed upon the
Company and the Bank by the FRB, OTS, and FDIC.
(vii) The Common Stock conforms in all material respects as
to legal matters to the description thereof contained
in the Registration Statement and the Prospectus under
the heading "Description of Capital Stock."
(viii) The Shares to be issued and sold to the Underwriters
hereunder have been duly authorized by the Company.
When issued and delivered against payment therefor as
provided in this Agreement, such shares will be validly
issued, fully paid and nonassessable. To such
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counsel's knowledge, no preemptive rights of
shareholders exist with respect to any of the Shares
which have not been satisfied or waived. To such
counsel's knowledge, no person or entity holds a right
to require or participate in the registration under the
1933 Act of the Shares pursuant to the Registration
Statement which has not been satisfied or waived; and,
except as set forth in the Prospectus, no person holds
a right to require registration under the 1933 Act of
any shares of Common Stock of the Company at any other
time which has not been satisfied or waived. The form
of certificates evidencing the Shares complies with all
applicable requirements of Georgia law.
(ix) The Company has an authorized capitalization as set
forth in the Prospectus under the caption
"Capitalization." All of the issued shares of capital
stock of the Company have been duly authorized and
validly issued, are fully paid and nonassessable. None
of the issued shares of capital stock of the Company
has been issued or is owned or held in violation of any
preemptive rights of shareholders. All offers and
sales of the Company's capital stock prior to the date
hereof were at all relevant times duly registered under
the 1933 Act or were exempt from the registration
requirements of the 1933 Act and were duly registered
or the subject of an available exemption from the
registration requirements of the applicable state
securities or blue sky laws, provided, however, that
such counsel need not express any opinion with respect
to the registration or availability of an exemption
under applicable state securities or blue sky laws for
shares of Common Stock issued pursuant to an
underwritten public offering.
(x) All of the issued shares of capital stock of the Bank
have been duly authorized and validly issued, are fully
paid and nonassessable and are owned directly by the
Company free and clear of all liens, security
interests, pledges, charges, encumbrances, defects,
shareholders' agreements, voting trusts, equities or
claims of any nature whatsoever. Other than the Bank,
the Company does not own, directly or indirectly, any
capital stock or other equity securities of any other
corporation or any ownership interest in any
partnership, joint venture or other association.
(xi) Except as disclosed in the Prospectus, to the knowledge
of such counsel, there are no outstanding
(i) securities or obligations of the Company or the
Bank convertible into or exchangeable for any capital
stock of the Company or the Bank, (ii) warrants, rights
or options to subscribe for or purchase from the
Company or the Bank
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any such capital stock or any such convertible or
exchangeable securities or obligations, or (iii)
obligations of the Company or the Bank to issue any
shares of capital stock, any such convertible or
exchangeable securities or obligation, or any such
warrants, rights or options.
(xii) [THE COMPANY AND THE BANK HAVE GOOD TITLE TO ALL
PERSONAL PROPERTY OWNED BY THEM, IN EACH CASE FREE AND
CLEAR OF ALL LIENS, SECURITY INTERESTS, PLEDGES,
CHARGES, ENCUMBRANCES, MORTGAGES AND DEFECTS, EXCEPT
SUCH AS ARE DISCLOSED IN THE PROSPECTUS OR SUCH AS DO
NOT MATERIALLY AND ADVERSELY AFFECT THE VALUE OF SUCH
PROPERTY AND DO NOT INTERFERE WITH THE USE MADE OR
PROPOSED TO BE MADE OF SUCH PROPERTY BY THE COMPANY AND
THE BANK; AND ANY REAL PROPERTY AND BUILDINGS HELD
UNDER LEASE BY THE COMPANY OR THE BANK ARE HELD UNDER
VALID, EXISTING AND ENFORCEABLE LEASES, WITH SUCH
EXCEPTIONS AS ARE DISCLOSED IN THE PROSPECTUS OR ARE
NOT MATERIAL AND DO NOT INTERFERE WITH THE USE MADE OR
PROPOSED TO BE MADE OF SUCH PROPERTY AND BUILDINGS BY
THE COMPANY OR THE BANK.]
(xiii) Neither the Company nor the Bank is in violation of
their respective charter or by-laws, and, to the
knowledge of such counsel, no material default exists,
and no event has occurred nor state of facts exist
which, with notice or after the lapse of time to cure
or both, would constitute a material default in the due
performance and observance of any obligation,
agreement, term, covenant, or condition contained in
any indenture, mortgage, deed of trust, loan agreement,
note, lease or other material agreement or instrument
to which any such entity is a party or to which any
such entity or any of its properties is subject.
(xiv) To such counsel's knowledge, there is not pending or
threatened any action, suit, proceeding, inquiry or
investigation against the Company, the Bank or any of
their respective officers and directors or to which the
properties, assets or rights of any such entity are
subject, before or brought by any court or governmental
agency or body or board of arbitrators, that are
required to be described in the Registration Statement
or the Prospectus but are not described as required.
(xv) The descriptions in the Registration Statement and the
Prospectus of the contracts, leases and other legal
documents therein described present fairly the
information required to be shown and there are no
contracts, leases or other documents known to such
counsel of a
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character required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits
to the Registration Statement which are not described
or filed as required.
(xvi) The Common Stock has been approved for trading on the
Nasdaq Stock Market.
(xvii) The Registration Statement and any 462(b) Registration
Statement have become effective under the 1933 Act and,
to the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration
Statement or any 462(b) Registration Statement has been
issued and no proceeding for that purpose has been
instituted or is pending or contemplated under the 1933
Act. Other than financial statements and other
financial and operating data and schedules contained
therein, as to which counsel need express no opinion,
the Registration Statement, any 462(b) Registration
Statement, all Preliminary Prospectuses, the Prospectus
and any amendment or supplement thereto, appear on
their face to conform as to form in all material
respects with the requirements of the 1933 Act and the
rules and regulations thereunder.
(xviii) The Company is not, or solely as a result of the
consummation of the transactions contemplated hereby
will not become, an "investment company," or a company
"controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as
amended.
(xix) The descriptions in the Prospectus of statutes,
regulations or legal or governmental proceedings are
accurate and present fairly a summary of the
information required to be shown under the 1933 Act and
the 1933 Act Regulations. The information in the
Prospectus under the captions "The Reorganization,"
"Business -- Supervision and Regulation" and "Shares
Available for Future Sale" to the extent that it
constitutes matters of law or legal conclusions, has
been reviewed by such counsel, is correct and presents
fairly the information required to be disclosed therein
under the 1933 Act and the 1933 Act Regulations.
Such counsel also shall state that they have no reason to believe
that the Registration Statement, any 462(b) Registration Statement or
any further amendment thereto made prior to the Closing Time or the
Date of Delivery, as the case may be, on its effective date and as of
the Closing Time or the Date of Delivery, as the case may be,
contained or contains any untrue statement of a material fact or
omitted or
24
<PAGE>
omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, or that the
Prospectus, or any amendment or supplement thereto made prior to the
Closing Time or the Date of Delivery, as the case may be, as of its
issue date and as of the Closing Time or the Date of Delivery, as the
case may be, contained or contains any untrue statement of a material
fact or omitted or omits to state a material fact necessary in order
to make the statements therein, in light of the circumstances under
which they were made, not misleading (provided that such counsel need
express no belief regarding the financial statements and related
schedules and other financial data contained in the Registration
Statement, any 462(b) Registration Statement, any amendment thereto,
or the Prospectus, or any amendment or supplement thereto). With
respect to such statement, such counsel may state that their belief is
based upon the procedures set forth therein, but is without
independent check or verification.
(c) You shall have received an opinion, dated such Time of Delivery,
of _____________________, counsel for the Selling Shareholder, in form and
substance satisfactory to you and your counsel, to the effect that:
(i) The Power of Attorney and the Custody Agreement have
been duly executed and delivered by the Selling
Shareholder, and each is enforceable against the
Selling Shareholder in accordance with its terms
subject, as to enforcement, to applicable bankruptcy,
insolvency, reorganization and moratorium laws and
other laws relating to or affecting the enforcement of
creditors' rights generally and to general equitable
principles.
(ii) This Agreement has been duly executed and delivered by
or on behalf of the Selling Shareholder; the sale of
the Shares to be sold by the Selling Shareholder at
such Time of Delivery and the performance of this
Agreement, the Power of Attorney and the Custody
Agreement and the consummation of the transactions
herein and therein contemplated will not conflict with
or (with or without the giving of notice or the passage
of time or both) result in a breach or violation of any
of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to
which the Selling Shareholder is a party or to which
any of its properties or assets is subject, nor will
such action conflict with or violate any provision of
the charter or bylaws or other governing instruments of
the Selling Shareholder or any statute, rule or
regulation or any order, judgment or decree of any
court or governmental agency or body having
jurisdiction over the Selling Shareholder or any of the
Selling Shareholder's properties or assets.
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<PAGE>
(iii) No consent, approval, authorization, order or
declaration of or from, or registration, qualification
or filing with, any court or governmental agency or
body is required for the issue and sale of the Shares
being sold by the Selling Shareholder or the
consummation of the transactions contemplated by this
Agreement, the Power of Attorney or the Custody
Agreement, except the registration of such Shares under
the Act and such as may be required under state
securities or blue sky laws in connection with the
offer, sale and distribution of such Shares by the
Underwriters.
(iv) The Selling Shareholder has, and immediately prior to
such Closing Time the Selling Shareholder will have,
good and valid title to the Shares to be sold by the
Selling Shareholder hereunder, free and clear of all
liens, security interests, pledges, charges,
encumbrances, defects, shareholders' agreements, voting
trusts, equities or claims of any nature whatsoever;
and, upon delivery of such Shares against payment
therefor as provided herein, good and valid title to
such Shares, free and clear of all liens, security
interests, pledges, charges, encumbrances, defects,
shareholders' agreements, voting trusts, equities or
claims of any nature whatsoever, will pass to the
several Underwriters.
In rendering the opinions set forth in Sections 7(b) and 7(c),
such counsel may rely on the following:
(A) as to matters involving the application of laws
other than the laws of the United States and jurisdictions
in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, upon an
opinion or opinions (in form and substance reasonably
satisfactory to Underwriters' counsel) of other counsel
familiar with the applicable laws, and
(B) as to matters of fact, to the extent they deem
proper, on certificates of responsible officers of the
Company and certificates or other written statements of
officers or departments of various jurisdictions, having
custody of documents respecting the existence or good
standing of the Company or the Bank, provided that copies of
all such opinions, statements or certificates shall be
delivered to Underwriters' counsel. The opinion of counsel
for the Company shall state that the opinion of any other
counsel, or certificate or written statement, on which such
counsel is relying is in form satisfactory to such counsel
and that you and they are justified in relying thereon.
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<PAGE>
(d) At the Closing Time, you shall have received a favorable opinion
from King & Spalding, counsel for the Underwriters, dated as of the Closing
Time, with respect to the incorporation of the Company, the issuance and
sale of the Shares, the Registration Statement, the Prospectus and other
related matters as the Underwriters may reasonably require, and the Company
shall have furnished to such counsel such documents as they may reasonably
request for the purpose of enabling them to pass on such matters.
(e) At the Closing Time, (i) the Registration Statement, any 462(b)
Registration Statement, and the Prospectus, as they may then be amended or
supplemented, shall contain all statements that are required to be stated
therein under the 1933 Act and the 1933 Act Regulations and in all material
respects shall conform to the requirements of the 1933 Act and the 1933 Act
Regulations; the Company shall have complied in all material respects with
Rule 430A (if it shall have elected to rely thereon) and neither the
Registration Statement, any 462(b) Registration Statement, nor the
Prospectus, as they may then be amended or supplemented, shall contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading, (ii) there shall not have been, since the respective dates
as of which information is given in the Registration Statement, any
material adverse change in the business, prospects, properties, assets,
results of operations or condition (financial or otherwise) of the Company,
whether or not arising in the ordinary course of business, (iii) no action,
suit or proceeding at law or in equity shall be pending or, to the
Company's knowledge, threatened against the Company that would be required
to be set forth in the Prospectus other than as set forth therein and no
proceedings shall be pending or, to the knowledge of the Company,
threatened against the Company before or by any federal, state or other
commission, board or administrative agency wherein an unfavorable decision,
ruling or finding could materially adversely affect the business,
prospects, assets, results of operations or condition (financial or
otherwise) of the Company, other than as set forth in the Prospectus, (iv)
the Company shall have complied with all agreements and satisfied all
conditions on their part to be performed or satisfied at or prior to the
Closing Time, and (v) the representations and warranties of the Company set
forth herein shall be accurate as though expressly made at and as of the
Closing Time. At the Closing Time, you shall have received a certificate
executed by the Chief Executive Officer and the Chief Financial Officer of
the Company, dated as of the Closing Time, to such effect and with respect
to the following additional matters: (A) the Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or preventing or suspending the
use of the Prospectus has been issued, and no proceedings for that purpose
have been instituted or are pending or, to their knowledge, threatened
under the 1933 Act; and (B) they have reviewed the Registration Statement
and the Prospectus and, when the Registration Statement and any 462(b)
Registration Statement became effective and at all times subsequent thereto
up to the delivery of such certificate, the Registration Statement, any
462(b) Registration Statement and the Prospectus and any amendments or
supplements thereto contained all statements and information required to be
included therein or necessary to make the statements therein not
misleading and neither the
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<PAGE>
Registration Statement, any 462(b) Registration Statement, nor the
Prospectus nor any amendment or supplement thereto included any untrue
statement of a material fact or omitted to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading, and, since the effective date of the Registration Statement,
there has occurred no event required to be set forth in an amended or
supplemented Prospectus that has not been so set forth. The
representations and warranties of the Selling Shareholder set forth herein
shall be accurate as though expressly made at and as of the Closing Time.
At the Closing Time, you shall have received a certificate executed on
behalf of the Selling Shareholder to such effect.
(f) You shall have received from Deloitte & Touche, LLP, letters
dated, respectively, the date hereof (or, if the Registration Statement has
been declared effective prior to the execution and delivery of this
Agreement, dated such effective date and the date of this Agreement) and
the Closing Time and the Date of Delivery, in form and substance
satisfactory to you, to the effect set forth in Annex I hereto. In the
event that the letters referred to in this subsection set forth any
changes, decreases or increases in the items specified in paragraph (iv)
of Annex I, it shall be a further condition to the obligations of the
Underwriters that (i) such letters shall be accompanied by a written
explanation by the Company as to the significance thereof, unless the
Underwriters deem such explanation unnecessary, and (ii) such changes,
decreases or increases do not, in your sole judgment, make it impracticable
or inadvisable to proceed with the purchase, sale and delivery of the
Shares as contemplated by the Registration Statement, as amended as of the
date of such letter.
(g) At the Closing Time, you shall have received from Deloitte &
Touche, LLP, a letter, in form and substance satisfactory to you and dated
as of the Closing Time, to the effect that they reaffirm the statements
made in the letter furnished pursuant to subsection (f) above, except that
the specified date referred to shall be a date not more than five days
prior to the Closing Time.
(h) At the Closing Time, counsel for the Underwriters shall have been
furnished with all such documents, certificates and opinions as they may
request for the purpose of enabling them to pass upon the issuance and sale
of the Shares as contemplated in this Agreement and the matters referred to
in Section 7(d) and in order to evidence the accuracy and completeness of
any of the representations, warranties or statements of the Company, the
performance of any of the covenants of the Company, or the fulfillment of
any of the conditions herein contained; and all proceedings taken by the
Company at or prior to the Closing Time in connection with the
authorization, issuance and sale of the Shares as contemplated in this
Agreement shall be reasonably satisfactory in form and substance to you and
to counsel for the Underwriters. The Company will furnish you with such
number of conformed copies of such opinions, certificates, letters and
documents as you shall reasonably request.
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(i) The NASD, upon review of the terms of the public offering of the
Shares, shall not have objected to such offering, such terms or the
Underwriters' participation in the same.
(j) Subsequent to the date hereof, there shall not have occurred any
of the following: (i) if there has occurred or accelerated any outbreak of
hostilities or other national or international calamity or crisis or change
in economic or political conditions the effect of which on the financial
markets of the United States is such as to make it, in your judgment,
impracticable to market the Shares or enforce contracts for the sale of the
Shares, or (ii) if trading in any securities of the Company has been
suspended by the Commission or by the Nasdaq Stock Market, or if trading
generally on the New York Stock Exchange or in the over-the-counter market
has been suspended, or limitations on prices for trading (other than
limitations on hours or numbers of days of trading) have been fixed, or
maximum ranges for prices for securities have been required, by such
exchange or the NASD or by order of the Commission or any other
governmental authority, or (iii) if there has been any downgrading in the
rating of any of the Company's debt securities or preferred stock by any
"nationally recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the 1933 Act), or (iv) if a banking
moratorium has been declared by federal or New York or Tennessee
authorities, or (v) any federal or state statute, regulation, rule or order
of any court or other governmental authority has been enacted, published,
decreed or otherwise promulgated which in your reasonable opinion
materially adversely affects or will materially adversely affect the
business or operations of the Company, or (vi) any action has been taken by
any federal, state or local government or agency in respect of its monetary
or fiscal affairs which in your reasonable opinion has a material adverse
effect on the securities markets in the United States.
(k) The Bank shall have guaranteed the obligations of the Company
under this agreement, in such form reasonably satisfactory to you.
If any of the conditions specified in this Section 7 shall not have been
fulfilled when and as required by this Agreement to be fulfilled, this Agreement
may be terminated by you on notice to the Company at any time at or prior to the
Closing Time, and such termination shall be without liability of any party to
any other party, except as provided in Section 6. Notwithstanding any such
termination, the provisions of Section 8 shall remain in effect.
The several obligations of the Underwriters to purchase Option Shares
hereunder are subject to the satisfaction on and as of any Date of Delivery for
Option Shares of the conditions set forth in this Section 7, except that, if any
Date of Delivery for Option Shares is other than the Closing Time, the
certificates, opinions and letters referred to in paragraphs (b), (c), (d) and
(e) shall be revised to reflect the sale of Option Shares.
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Section 8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to
which such Underwriter may become subject under the 1933 Act, or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) (i) arise out of or are based upon any breach of any
warranty or covenant of the Company herein contained, (ii) arise out of or
are based upon any untrue statement or alleged untrue statement of a
material fact contained in (A) any Preliminary Prospectus, the Registration
Statement, any 462(b) Registration Statement or the Prospectus, or any
amendment or supplement thereto, or (B) any application or other document,
or any amendment or supplement thereto, executed by the Company or based
upon written information furnished by or on behalf of the Company filed in
any jurisdiction in order to qualify the Shares under the securities or
blue sky laws thereof or filed with the Commission or any securities
association or securities exchange (each an "Application"), or (iii) arise
out of or are based upon the omission or alleged omission to state in any
Preliminary Prospectus, the Registration Statement, any 462(b) Registration
Statement, the Prospectus, or any amendment or supplement thereto, or any
Application a material fact required to be stated therein or necessary to
make the statements therein not misleading, and will reimburse each
Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company
shall not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made
in any Preliminary Prospectus, the Registration Statement, any 462(b)
Registration Statement or the Prospectus, or any such amendment or
supplement, in reliance upon and in conformity with written information
furnished to the Company by any Underwriter expressly for use therein. In
addition to its other obligations under this Section 8(a), the Company
agrees that, as an interim measure during the pendency of any such claim,
action, investigation, inquiry or other proceeding arising out of or based
upon any statement or omission, or any alleged statement or omission,
described in this Section 8(a), it will reimburse the Underwriters on a
monthly basis for all reasonable legal and other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of
a judicial determination as to the propriety and enforceability of the
Company's obligation to reimburse the Underwriters for such expenses and
the possibility that such payments might later be held to have been
improper by a court of competent jurisdiction. Any such interim
reimbursement payments that are not made to an Underwriter within 30 days
of a request for reimbursement shall bear interest at the prime rate (or
reference rate or other commercial lending rate for borrowers of the
highest credit standing) published from time to time by The Wall Street
Journal (the "Prime Rate") from the date of such request. This indemnity
agreement shall be in addition to any liabilities that the Company may
otherwise have. The Company will not, without the prior written consent of
each Underwriter, settle or compromise or consent to the entry of any
judgment in any pending or threatened action or claim or related cause of
action or portion of such cause of action in respect of which
indemnification may be
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sought hereunder (whether or not such Underwriter is a party to such action
or claim), unless such settlement, compromise or consent includes an
unconditional release of such Underwriter from all liability arising out of
such action or claim (or related cause of action or portion thereof).
The indemnity agreement in this Section 8(a) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each
person, if any, who controls any Underwriter within the meaning of the 1933
Act to the same extent as such agreement applies to the Underwriters.
(b) The Selling Shareholder will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject under the 1933 Act,
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) (i) arise out of or are based upon any breach
of any warranty or covenant of the Selling Shareholder herein contained,
(ii) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in (A) any Preliminary Prospectus,
the Registration Statement, any 462(b) Registration Statement or the
Prospectus, or any amendment or supplement thereto, or (B) any Application,
or (iii) arise out of or are based upon the omission or alleged omission to
state in any Preliminary Prospectus, the Registration Statement, any 462(b)
Registration Statement, the Prospectus, or any amendment or supplement
thereto, or any Application a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will
reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that
the Selling Shareholder shall not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Prospectus, the Registration Statement,
any 462(b) Registration Statement, or the Prospectus, or any such amendment
or supplement, in reliance upon and in conformity with written information
furnished to the Company by any Underwriter expressly for use therein;
provided, further, however, that the Selling Shareholder shall be liable
hereunder in any case only to the extent of the total net proceeds from the
offering (before deducting expenses) received by the Selling Shareholder
from the Underwriters for the Shares sold by such Selling Shareholder
hereunder, unless any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in the Registration Statement, any 462(b)
Registration Statement or any amendment or supplement thereto, any
Preliminary Prospectus, the Prospectus or any amendment or supplement
thereto or any Application in reliance upon and in conformity with written
information furnished to the Company by the Selling Shareholder expressly
for use therein, in which case such limitation of the liability of the
Selling Shareholder shall not apply. In addition to their other
obligations under this Section 8(b), the Selling Shareholder agrees that,
as an interim measure during the pendency of any such claim, action,
investigation, inquiry or other proceeding arising out of or based upon any
statement or omission, or any alleged
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statement or omission, described in this Section 8(b), the Selling
Shareholder will reimburse the Underwriters on a monthly basis for all
reasonable legal and other expenses incurred in connection with
investigating or defending any such claim, action, investigation, inquiry
or other proceeding, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the Selling
Shareholder's obligation to reimburse the Underwriters for such expenses
and the possibility that such payments might later be held to have been
improper by a court of competent jurisdiction. Any such interim
reimbursement payments that are not made to an Underwriter within 30 days
of a request for reimbursement shall bear interest at the prime rate (or
reference rate or other commercial lending rate for borrowers of the
highest credit standing) published from time to time by The Wall Street
Journal (the "Prime Rate") from the date of such request. This indemnity
agreement shall be in addition to any liabilities that the Selling
Shareholder may otherwise have. The Selling Shareholder will not, without
the prior written consent of each Underwriter, settle or compromise or
consent to the entry of any judgment in any pending or threatened action or
claim or related cause of action or portion of such cause of action in
respect of which indemnification may be sought hereunder (whether or not
such Underwriter is a party to such action or claim), unless such
settlement, compromise or consent includes an unconditional release of such
Underwriter from all liability arising out of such action or claim (or
related cause of action or portion thereof).
The indemnity agreement in this Section 8(b) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each
person, if any, who controls any Underwriter within the meaning of the 1933
Act to the same extent as such agreement applies to the Underwriters.
(c) Each Underwriter, severally but not jointly, will indemnify and
hold harmless the Company and the Selling Shareholder against any losses,
claims, damages or liabilities to which the Company and the Selling
Shareholder may become subject, under the 1933 Act, or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any breach of any warranty or
covenant by such Underwriter herein contained or any untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement, any 462(b) Registration Statement
or the Prospectus, or any amendment or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any such amendment or
supplement thereto in reliance upon and in conformity with written
information furnished to the Company by such Underwriter expressly for use
therein; and will reimburse the Company and the Selling Shareholder for any
legal or other expenses reasonably incurred by the Company and the Selling
Shareholder in connection with investigating or defending any such loss,
claim, damage, liability or action. In addition to its other obligations
under this Section 8(c), the Underwriters agree that, as an
32
<PAGE>
interim measure during the pendency of any such claim, action,
investigation, inquiry or other proceeding arising out of or based upon any
statement or omission, or any alleged statement or omission, described in
this Section 8(c), they will reimburse the Company and the Selling
Shareholder on a monthly basis for all reasonable legal and other expenses
incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the
absence of a judicial determination as to the propriety and enforceability
of their obligation to reimburse the Company for such expenses and the
possibility that such payments might later be held to have been improper by
a court of competent jurisdiction. Any such interim reimbursement payments
that are not made to the Company within 30 days of a request for
reimbursement shall bear interest at the Prime Rate from the date of such
request. This indemnity agreement shall be in addition to any liabilities
that the Underwriters may otherwise have. No Underwriter will, without the
prior written consent of the Company, settle or compromise or consent to
the entry of judgment in any pending or threatened action or claim or
related cause of action or portion of such cause of action in respect of
which indemnification may be sought hereunder (whether or not the Company
is a party to such action or claim), unless such settlement, compromise or
consent includes an unconditional release of the Company from all liability
arising out of such action or claim (or related cause of action or portion
thereof).
The indemnity agreement in this Section 8(c) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each
officer and director of the Company and each person, if any, who controls
the Company and the Selling Shareholder within the meaning of the 1933 Act
to the same extent as such agreement applies to the Company and the Selling
Shareholder.
(d) Promptly after receipt by an indemnified party under subsection
(a), (b) or (c) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify the
indemnifying party in writing of the commencement thereof; no
indemnification provided for in subsection (a), (b) or (c) shall be
available to any party who shall fail to give notice as provided in this
subsection (d) if the party to whom notice was not given was unaware of the
proceeding to which such notice would have related and was prejudiced by
the failure to give such notice, but the omission so to notify the
indemnifying party will not relieve the indemnifying party from any
liability that it may have to any indemnified party otherwise than under
Section 8. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof
with counsel satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying
party shall not be liable to such indemnified party under such subsection
for any legal or other expenses subsequently incurred by such indemnified
party in connection
33
<PAGE>
with the defense thereof other than reasonable costs of investigation,
except that if the indemnified party has been advised by counsel in writing
that there are one or more defenses available to the indemnified party
which are different from or additional to those available to the
indemnifying party, then the indemnified party shall have the right to
employ separate counsel and in that event the reasonable fees and expenses
of such separate counsel for the indemnified party shall be paid by the
indemnifying party; provided, however, that if the indemnifying party is
the Company, the Company shall only be obligated to pay the reasonable fees
and expenses of a single law firm (and any reasonably necessary local
counsel) employed by all of the indemnified parties. The indemnifying party
shall not be liable for any settlement of any proceeding effected without
its written consent, but if settled with such consent or if there be a
final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by
reason of such settlement or judgment.
(e) It is agreed that any controversy arising out of the operation of
the interim reimbursement arrangements set forth in Section 8(a), (b) and
(c) hereof, including the amounts of any requested reimbursement payments,
the method of determining such amounts and the basis on which such amounts
shall be apportioned among the indemnifying parties, shall be settled by
arbitration conducted pursuant to the Code of Arbitration Procedure of the
NASD. Any such arbitration must be commenced by service of a written demand
for arbitration or a written notice of intention to arbitrate, therein
electing the arbitration tribunal. In the event the party demanding
arbitration does not make such designation of an arbitration tribunal in
such demand or notice, then the party responding to said demand or notice
is authorized to do so. Any such arbitration will be limited to the
operation of the interim reimbursement provisions contained in Sections
8(a), (b) and (c) hereof and will not resolve the ultimate propriety or
enforceability of the obligation to indemnify for expenses that is created
by the provisions of Sections 8(a), (b) and (c).
(f) In order to provide for just and equitable contribution in
circumstances under which the indemnity provided for in this Section 8 is
for any reason judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to
appeal or the denial of the right of appeal) to be unenforceable by the
indemnified parties although applicable in accordance with its terms, the
Company and the Selling Shareholder, on the one hand and the Underwriters
on the other shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such indemnity incurred
by the Company and the Selling Shareholder, and one or more of the
Underwriters, as incurred, in such proportions that (a) the Underwriters
are responsible pro rata for that portion represented by the percentage
that the underwriting discount appearing on the cover page of the
Prospectus bears to the public offering price (before deducting expenses)
appearing thereon, and (b) the Company and the Selling Shareholder is
responsible for the balance, provided, however, that no person guilty of
fraudulent misrepresentations (within the meaning of Section 11(f) of the
1933 Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation; provided, further, that
34
<PAGE>
if the allocation provided above is not permitted by applicable law, the
Company and the Selling Shareholder, on the one hand, and the Underwriters
on the other shall contribute to the aggregate losses in such proportion as
is appropriate to reflect not only the relative benefits referred to above
but also the relative fault of the Company and the Selling Shareholder, on
the one hand and the Underwriters on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations.
Relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Company and the Selling Shareholder, on the one hand or by the Underwriters
on the other hand and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The Company, the Selling Shareholder and the Underwriters agree
that it would not be just and equitable if contributions pursuant to this
Section 8(f) were determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to above in this Section 8(f). The amount paid or
payable by a party as a result of the losses, claims, damages or
liabilities referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with
investigating or defending such action or claim. Notwithstanding the
provisions of this Section 8(f), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at
which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. The Underwriters'
obligations in this Section 8(f) to contribute are several in proportion to
their respective underwriting obligations and not joint. For purposes of
this Section 8(f), each person, if any, who controls an Underwriter within
the meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as such Underwriter, and each director of the Company, each
officer of the Company who signed the Registration Statement, and each
person, if any, who controls the Company or the Selling Shareholder, within
the meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as the Company or the Selling Shareholder.
Section 9. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY.
The representations, warranties, indemnities, agreements and other statements of
the Company and the Selling Shareholder, or their officers set forth in or made
pursuant to this Agreement will remain operative and in full force and effect
regardless of any investigation made by or on behalf of the Company, the Selling
Shareholder or any Underwriter or controlling person, and with respect to an
Underwriter or the Company and the Selling Shareholder, will survive delivery of
and payment for the Shares or termination of this Agreement.
Section 10. EFFECTIVE DATE OF AGREEMENT AND TERMINATION.
35
<PAGE>
(a) This Agreement shall become effective immediately as to Sections
6 and 8 and, as to all other provisions, (i) if at the time of execution of
this Agreement the Registration Statement has not become effective, at
10:00 a.m., on the first full business day following the effectiveness of
the Registration Statement, or (ii) if at the time of execution of this
Agreement the Registration Statement has been declared effective, at 10:00
a.m. on the first full business day following the date of execution of this
Agreement; but this Agreement shall nevertheless become effective at such
earlier time after the Registration Statement becomes effective as you may
determine on and by notice to the Company or by release of any of the
Shares for sale to the public. For the purposes of this Section 10, the
Shares shall be deemed to have been so released upon the release of
publication of any newspaper advertisement relating to the Shares or upon
the release by you of telegrams (i) advising the Underwriters that the
Shares are released for public offering, or (ii) offering the Shares for
sale to securities dealers, whichever may occur first. By giving notice
before the time this Agreement becomes effective, you, as representative of
the several Underwriters, or the Company, may prevent this Agreement from
becoming effective, without liability of any party to any other party,
except that the Company shall remain obligated to pay costs and expenses to
the extent provided in Section 6 hereof.
(b) You may terminate this Agreement, by notice to the Company, at
any time at or prior to the Closing Time (i) in accordance with the last
paragraph of Section 7 of this Agreement, or (ii) if there has been since
the respective dates as of which information is given in the Registration
Statement, any material adverse change, or any development involving a
prospective material adverse change, in or affecting the business,
prospects, management, properties, assets, results of operations or
condition (financial or otherwise) of the Company, whether or not arising
in the ordinary course of business, or (iii) if there has occurred or
accelerated any outbreak of hostilities or other national or international
calamity or crisis or change in economic or political conditions the effect
of which on the financial markets of the United States is such as to make
it, in your judgment, impracticable to market the Shares or enforce
contracts for the sale of the Shares, or (iv) if trading in any securities
of the Company has been suspended by the Commission or by the Nasdaq Stock
Market or if trading generally on the New York Stock Exchange or in the
over-the-counter market has been suspended, or limitations on prices for
trading (other than limitations on hours or numbers of days of trading)
have been fixed, or maximum ranges for prices for securities have been
required, by such exchange or the NASD or by order of the Commission or any
other governmental authority, or (v) if there has been any downgrading in
the rating of any of the Company's debt securities or preferred stock by
any "nationally recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the 1933 Act), or (vi) if a banking
moratorium has been declared by federal or New York or Tennessee
authorities, or (vii) any federal or state statute, regulation, rule or
order of any court or other governmental authority has been enacted,
published, decreed or otherwise promulgated which in your reasonable
opinion materially adversely affects or will materially adversely affect
the business or operations of the Company, or (viii) any action has been
taken by any federal, state or local government or agency in respect of its
monetary or fiscal affairs which in your reasonable opinion has a material
adverse effect on the securities markets in the United States.
36
<PAGE>
(c) If this Agreement is terminated pursuant to this Section 10, such
termination shall be without liability of any party to any other party,
except to the extent provided in Section 6. Notwithstanding any such
termination, the provisions of Section 8 shall remain in effect.
Section 11. DEFAULT BY ONE OR MORE OF THE UNDERWRITERS. If one or more of
the Underwriters shall fail at the Closing Time to purchase the Shares that it
or they are obligated to purchase pursuant to this Agreement (the "Defaulted
Securities"), you shall have the right, within 36 hours thereafter, to make
arrangements for one or more of the non-defaulting Underwriters, or any other
underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms set forth in
this Agreement; if, however, you have not completed such arrangements within
such 36-hour period, then:
(a) If the aggregate number of Firm Shares which are Defaulted
Securities does not exceed 10% of the aggregate number of Firm Shares to be
purchased pursuant to this Agreement, the non-defaulting Underwriters shall
be obligated to purchase the full amount thereof in the proportions that
their respective underwriting obligation proportions bear to the
underwriting obligations of all non-defaulting Underwriters, and
(b) If the aggregate number of Firm Shares which are Defaulted
Securities exceeds 10% of the aggregate number of Firm Shares to be
purchased pursuant to this Agreement, this Agreement shall terminate
without liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section 11 shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default that does not result in a termination of
this Agreement, either you or the Company shall have the right to postpone the
Closing Time for a period not exceeding seven days in order to effect any
required changes in the Registration Statement or Prospectus or in any other
documents or arrangements, and the Company agrees promptly to file any
amendments to the Registration Statement or supplements to the Prospectus that
may thereby be made necessary. As used in this Agreement, the term "Underwriter"
includes any person substituted for an Underwriter under this Section 11.
Section 12. DEFAULT BY THE COMPANY. If the Company shall fail at the
Closing Time to sell and deliver the aggregate number of Firm Shares that it is
obligated to sell, then this Agreement shall terminate without any liability on
the part of any non-defaulting party, except to the extent provided in Section 6
and except that the provisions of Section 8 shall remain in effect.
No action taken pursuant to this Section shall relieve the Company from
liability, if any, in respect to such default.
37
<PAGE>
Section 13. NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered, mailed or transmitted by any standard form of telecommunication.
Notices to the Underwriters shall be directed c/o Morgan Keegan & Company, Inc.,
50 Front Street, Memphis, Tennessee 38103, Attention: Mr. Chip Grayson (with a
copy sent in the same manner to King & Spalding, 191 Peachtree Street, Atlanta,
Georgia 30303, Attention: Alan J. Prince, Esq.); and notices to the Company
shall be directed to it at Net.B@nk, Inc., 7000 Peachtree-Dunwoody Road,
Building 10, Suite 300, Atlanta, Georgia 30328, Attention: Mr. D.R. Grimes
(with a copy sent in the same manner to Powell, Goldstein, Frazer & Murphy, 191
Peachtree Street, Atlanta, Georgia 30303, Attention: Walter G. Moeling, IV,
Esq.).
Section 14. PARTIES. This Agreement is made solely for the benefit of and
is binding upon the Underwriters, the Company and the Selling Shareholder, to
the extent provided in Section 8, any person controlling the Company, the
Selling Shareholder or any of the Underwriters, the officers and directors of
the Company, and their respective executors, administrators, successors and
assigns and subject to the provisions of Section 8, no other person shall
acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include any purchaser, as such purchaser,
from any of the several Underwriters of the Shares.
All of the obligations of the Underwriters hereunder are several and not
joint.
Section 15. GOVERNING LAW AND TIME. This Agreement shall be governed by
the laws of the State of Tennessee. Specified time of the day refers to United
States Eastern Time. Time shall be of the essence of this Agreement.
Section 16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and when a counterpart has been executed by each party, all such
counterparts taken together shall constitute one and the same agreement.
38
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us a counterpart hereof, and upon the acceptance
hereof by Morgan Keegan & Company, Inc., on behalf of each of the Underwriters,
this instrument will become a binding agreement among the Company, the Selling
Shareholder and the several Underwriters in accordance with its terms. It is
understood that your acceptance of this letter on behalf of each of the
Underwriters is pursuant to the authority set forth in the Master Agreement
among Underwriters, a copy of which shall be submitted to the Company for
examination, upon request, but without warranty on your part as to the authority
of the signers thereof.
Very truly yours,
NET.B@NK, INC.
By:________________________________
Name: D.R. Grimes
Title: Chief Executive Officer
CAROLINA FIRST BANK
By:________________________________
Name: Mack I. Whittle, Jr.
Title: Chief Executive Officer
The foregoing Agreement is hereby
confirmed and accepted as of the
date first written above:
MORGAN KEEGAN & COMPANY, INC.
INTERSTATE/JOHNSON LANE CORPORATION
By: Morgan Keegan & Company, Inc.
By:_________________________________
(Authorized Representative)
On behalf of each of the Underwriters
39
<PAGE>
SCHEDULE A
Number of
Firm Shares
to be Purchased
---------------
Underwriter
- -----------
Morgan Keegan & Company, Inc. _____________________________
Interstate/Johnson Lane Corporation _____________________________
TOTAL _____________________________
<PAGE>
ANNEX I
Pursuant to Section 7(f) of the Underwriting Agreement, Deloitte & Touche,
LLP shall furnish letters to the Underwriters to the effect that:
(i) they are independent public accountants with respect to the
Company and the Assets and Liabilities Generated by the Internet Operations
of the Company and Held by Carolina First Bank (collectively, the "CFB
Assets and Liabilities") within the meaning the 1933 Act and the applicable
published rules and regulations thereunder;
(ii) in their opinion, the consolidated financial statements and
schedules and statement of CFB Assets and Liabilities audited by them and
included in the Prospectus, the Registration Statement and any 462(b)
Registration Statement comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act and the related
published rules and regulations thereunder;
(iii) The financial statements of the Company as of and for the three
month period ended March 31, 1997 and the Statement of CFB Assets and
Liabilities as of and for the same period were reviewed by them in
accordance with the standards established by the American Institute of
Certified Public Accountants and based upon their review, they are not
aware of any material modifications that should be made to such financial
statements for them to be in confirmity with generally accepted accounting
principles, and such financial statements comply as to form in all material
respects with the applicable accounting requirements of the 1933 Act and
the applicable rules and regulations thereunder;
(iv) on the basis of limited procedures, not constituting an audit
in accordance with generally accepted auditing standards, consisting of a
reading of the unaudited financial statements and other information
referred to below, a reading of the latest available interim financial
statements of the Company and the latest available interim statement of CFB
Assets and Liabilities, inspection of the minute books of the Company since
the date of the latest audited financial statements included in the
Prospectus, inquiries of officials of the Company responsible for financial
accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused them
to believe that:
(A) as of a specified date not more than 5 days prior to
the date of such letter, there were any changes in the capital stock
(other than the issuance of capital stock upon exercise of options
which were outstanding on the date of the latest balance sheet
included in the Prospectus) or any increase in the long-term debt or
short-term debt of the Company, or any decreases in net current assets
or net assets or other items specified by the Underwriters, or any
increases in any items specified by the Underwriters, in each case as
compared with amounts shown in the latest balance sheet included in
the Prospectus, except in each case for changes, increases or
decreases which the Prospectus discloses have occurred or may occur or
which are described in such letter; and
<PAGE>
(B) for the period from the date of the latest financial
statements included in the Prospectus to the specified date referred
to in clause (A) there were any decreases in interest income or net
interest income or the total or per share amounts of net income or
other items specified by the Underwriters, or any increases in any
items specified by the Underwriters, in each case as compared with the
comparable period of the preceding year and with any other period of
corresponding length specified by the Underwriters, except in each
case for increases or decreases which the Prospectus discloses have
occurred or may occur which are described in such letter;
(v) in addition to the audit referred to in their report(s)
included in the Prospectus and the limited procedures, inspection of minute
books, inquiries and other procedures referred to in paragraph (iv) above,
they have carried out certain specified procedures, not constituting an
audit in accordance with generally accepted auditing standards, with
respect to certain amounts, percentages and financial information specified
by the Underwriters included in the Registration Statement and the
Prospectus, or which appear in Part II of, or in exhibits and schedules to,
the Registration Statement specified by the Underwriters, and have compared
certain of such amounts, percentages and financial information with the
accounting records of the Company or other documents and have found them to
be in agreement;
(vi) on the basis of a reading of the unaudited pro forma combined
financial statements included in the Registration Statement and the
Prospectus, carrying out certain specified procedures that would not
necessarily reveal matters of significance with respect to the comments set
forth in this paragraph (vi), inquiries of certain officials of the
Company, the Selling Shareholder and Premier who have responsibility for
financial and accounting matters and proving the arithmetic accuracy of the
application of the pro forma adjustments to the historical amounts in the
unaudited pro forma combined financial statements, nothing came to their
attention that caused them to believe that the unaudited pro forma combined
financial statements do not comply as to form in all material respects with
the applicable accounting requirements of Rule 11-02 of Regulation S-X or
that the pro forma adjustments have not been properly applied to the
historical amounts in the compilation of such statements.
References to the Registration Statement and the Prospectus in this
Annex I shall include any amendment or supplement thereto at the date of
such letter.
2
<PAGE>
EXHIBIT 3.3
EXCERPT FROM
RESOLUTIONS ADOPTED BY
THE BOARD OF DIRECTORS
OF NET.B@NK, INC.
AS OF APRIL 22, 1997
AMENDMENT TO BYLAWS
WHEREAS, Article XIII permits the Board of Directors to amend provisions of
the Bylaws of the Company unless the shareholders have adopted, amended or
repealed a particular provision and have expressly reserved to the shareholders
the amendment or repeal therefor;
WHEREAS, the Board of Directors of the Company desires to amend the Bylaws
to change the name of the Company, to allow the Board to fix the number of
directors and to eliminate, upon completion of the Company's initial public
offering, requirements regarding reports to be sent to the shareholders;
WHEREAS, the best interest of the Company will be served by adopting the
amendments to the Bylaws listed below;
RESOLVED, that the following amendments to the Bylaws are approved and are
hereby adopted:
(a) The name of the Company shall be changed from Internet Organizing
Group, Inc. to Net.B@nk, Inc. throughout the Bylaws.
(b) The first sentence of Article IV, Section 2 shall be deleted in its
entirety and amended to be as follows:
"The Board shall consist of one or more individuals, with the precise
number to be fixed by the Board of Directors from time to time."
(c) Article IX shall be amended to include the following provision:
"(c) The foregoing requirements of Article IX will cease to apply to
the Corporation at such time as the Corporation becomes subject to the
reporting requirements of the Securities Exchange Act of 1934, as
amended."
RESOLVED, that all other provisions of the Bylaws shall remain in full
force and effect; and
RESOLVED, that the Secretary or Assistant Secretary of the Company is
authorized and directed to place the amendments to Bylaws with the corporate
records of the Company.
<PAGE>
NUMBER SHARES
NB
COMMON STOCK
NET.B@NK, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF GEORGIA
CUSIP 640933 10 7
THIS CERTIFIES THAT
SEE REVERSE FOR
CERTAIN DEFINITIONS
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES, OF THE PAR VALUE OF ONE CENT ($0.01)
EACH, OF COMMON STOCK OF
NET.B@NK,INC.
a corporation organized under the laws of the State of Georgia, transferable
on the books of the Corporation by the holder hereof in person or by duly
authorized attorney upon surrender of this Certificate properly endorsed.
This Certificate and the shares represented hereby are subject to all the
terms, conditions and limitations of the Articles of Incorporation of the
Corporation and amendments thereto. This Certificate is not valid unless
countersigned by the Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
/s/ Mary E. Johnson
Secretary
[[email protected] 1996]
/S/ D.R. GRIMES
VICE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED:
SUNTRUST BANK, ATLANTA
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE>
NET.BANK, INC.
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - ......Custodian......
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act..........................
in common (State)
Additional abbreviations may also be used though not in the above list.
For value received, __________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
--------------------------------------------
--------------------------------------------
--------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE.)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
------------------------------------------------------------------- Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
----------------------------------------------------------------- Attorney
to transfer the said stock on the books of the within named Corporation
with full power of substitution in the premises.
Dated
---------------------------------
-------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE GUARANTEED:
-----------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP
IN AN APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAMED, PURSUANT TO sec FILE 17ad-15.
<PAGE>
POWELL, GOLDSTEIN, FRAZER & MURPHY LLP
191 Peachtree Street N.E.
Suite 1600
Atlanta, Georgia 30303
(404) 572-6600
Net.B@nk, Inc.
7000 Peachtree Dunwoody Road
Building 10, Suite 300
Atlanta, Georgia 30328
RE: REGISTRATION OF 3,450,000 SHARES OF COMMON STOCK;
REGISTRATION STATEMENT ON FORM S-1 (REG. NO. 333-23717)
-------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Net.B@nk, Inc., a Georgia corporation (the
"Company") in connection with the registration under the Securities Act of 1933,
as amended, pursuant to the Company's Registration Statement on Form S-1 (the
"Registration Statement"), of an initial public offering of 3,000,000 shares of
common stock, $.01 par value ("Common Stock"), of the Company. In addition, the
Company and the Selling Shareholder named in the Underwriting Agreement among
the Company, Morgan Keegan & Company, Interstate/Johnson Lane Corporation (for
themselves and as representatives of the several underwriters named therein) and
the Selling Shareholder (the "Underwriting Agreement") will grant to the
Underwriters an option to purchase up to an additional 300,000 and 150,000
shares of Common Stock, respectively, to cover over-allotments, if any (the
"Option Shares"). The Common Stock and the Option Shares are referred to
collectively as the "Shares." Capitalized terms used herein but not otherwise
described shall have the meanings ascribed to them in the Registration
Statement.
In this capacity, we have examined the Registration Statement in the form
filed by the Company with the Securities and Exchange Commission (the
"Commission") on March 21, 1997, Amendment No. 1 to the Registration Statement
in the form to be filed with the Commission on the date hereof and the proposed
form of Underwriting Agreement and originals or copies, certified or otherwise
identified to our satisfaction, of such corporate records, agreements, documents
and other instruments of the Company relating to the authorization and issuance
of the Shares and such other matters as we have deemed relevant and necessary as
a basis for the opinion hereinafter set forth.
In conducting our examination, we have assumed the genuineness of all
signatures, the legal capacity of all natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such documents.
Based upon the foregoing, and in reliance thereon, and subject to the
limitations and qualifications set forth herein, we are of the opinion that:
<PAGE>
(1) the Option Shares to be sold by the Selling Shareholder are legally
and validly issued, fully paid and non-assessable; and
(2) the Shares to be sold by the Company, when issued and delivered
against payment therefor in accordance with the terms of the Underwriting
Agreement, will be legally and validly issued, fully paid and
non-assessable.
We hereby consent to the use of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to our firm under the heading "Legal
Matters" in the Prospectus which is a part of the Registration Statement. We
further consent to the use of this opinion as an exhibit to applications to
securities commissioners of various states of the United States for registration
or qualification of the States under the securities or "blue sky" laws of such
states.
Very truly yours,
/s/ POWELL, GOLDSTEIN, FRAZER & MURPHY LLP
<PAGE>
EXHIBIT 10.1
AMENDED AND RESTATED STOCK PURCHASE AGREEMENT
AMONG THE REGISTRANT
AND FIRST ALLIANCE/PREMIER BANCSHARES, INC.
DATED AS OF DECEMBER 19, 1996,
AS AMENDED BY
AMENDMENT NO. 1 DATED
AS OF FEBRUARY 25, 1997
<PAGE>
AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
NET.B@NK, INC.
AND
FIRST ALLIANCE/PREMIER BANCSHARES, INC.
<PAGE>
AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
THIS AMENDED AND RESTATED STOCK PURCHASE AGREEMENT ("Agreement") is made
and entered into as of the 19th day of December, 1996, by and between NET.B@NK,
INC. (the "Company"), a corporation organized and existing under the laws of the
State of Georgia and FIRST ALLIANCE/PREMIER BANCSHARES, INC., a corporation
organized and existing under the laws of the State of Georgia ("Bancshares").
PREAMBLE
WHEREAS, a majority of the entire Board of Directors of each of the Company
and Bancshares have, respectively, approved and made this Agreement and
authorized its execution; and
WHEREAS, Bancshares is the sole shareholder of Premier Bank, F.S.B.
("Bank"); and
WHEREAS, Bancshares anticipates that it will consolidate the operations of
First Alliance Bank and Bank pursuant to a Purchase and Assumption Agreement;
and
WHEREAS, the Boards of Directors of the Company and Bancshares are of the
opinion that the transactions described herein are in the best interests of the
parties to this Agreement and their respective stockholders; and
WHEREAS, the stock purchase described herein is subject to regulatory
approval and the satisfaction of certain other conditions described in this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants and agreements set forth herein, the parties agree as
follows:
ARTICLE ONE
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:
1.1 "Agreement" shall mean this Stock Purchase Agreement.
1.2 "Bancshares" shall mean First Alliance/Premier Bancshares, Inc.
1.3 "Bank" shall mean Premier Bank, F.S.B.
1.4 "Bank Financial Statement" shall mean the financial statement of Bank
described in Section 4.4 of this Agreement.
<PAGE>
1.5 "BHC Act" shall mean the federal Bank Holding Company Act of 1956, as
amended.
1.6 "Closing" shall mean the closing of the transactions contemplated
hereunder which, unless the Parties otherwise agree, will take place on the
Effective Date, as described in Section 3.1 of this Agreement.
1.7 "Common Stock" shall mean the $8.00 par value common stock of the
Bank.
1.8 "Effective Date" shall mean the date and time on which the stock
purchase contemplated by this Agreement becomes effective pursuant to the laws
of the State of Georgia as defined in Section 3.2 of this Agreement.
1.9 "ERISA" shall mean Public Law No. 93406, the Employee Retirement
Income Security Act of 1974, as amended.
1.10 Exhibits 1 and 2, inclusive, and the Schedules referenced herein,
shall mean the respective Exhibits and Schedules so marked, each of which has
been initialed for identification by an officer of the Company and an officer of
the Bank, and bound sets of which have been delivered to the respective Parties.
Such Exhibits and Schedules 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.
1.11 "Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System.
1.12 "GAAP" shall mean generally accepted accounting principles.
1.13 "Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended.
1.14 "OTS" shall mean the Office of Thrift Supervision.
1.15 "Party" shall mean either the Company or Bancshares and "Parties"
shall mean collectively the Company and Bancshares.
1.16 "Previously Disclosed" shall mean information delivered prior to the
date of this Agreement in the manner and to the counsel described in Section
11.7 of this Agreement and describing in reasonable detail the matters contained
therein.
1.17 "Purchase and Assumption Transaction" shall mean the transaction
described in Section 9.12 hereof pursuant to an agreement substantially in the
form of Exhibit 1 attached hereto.
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<PAGE>
1.18 "Regulatory Authorities" shall mean the applicable federal and state
regulatory authorities.
1.19 "Subsidiaries" or "Subsidiary" shall mean those corporations,
associations or other entities of which the entity in question owns or controls
80% or more of the outstanding equity securities either directly or through an
unbroken chain of entities as to each of which 80% or more of the outstanding
equity securities is owned directly or indirectly by its parent; provided,
however, there shall not be included any such entity acquired through
foreclosure, any such entity which owns or operates an automatic teller machine
interchange network or any such entity the equity securities of which are owned
or controlled in a fiduciary capacity.
ARTICLE TWO
PURCHASE OF STOCK
2.1 TRANSFER OF CERTIFICATES. Subject to the terms and conditions of this
Agreement, on the Effective Date Bancshares agrees to sell, assign, transfer and
deliver all of the $8.00 par value common stock of the Bank (the "Common Stock")
to the Company, and the Company agrees to purchase the Common Stock from
Bancshares. The certificates representing the Common Stock shall be duly
endorsed in blank, or accompanied by a stock power duly executed in blank, by
Bancshares, with all necessary transfer tax and other revenue stamps, acquired
at Bancshares' expense, affixed and cancelled. Bancshares agrees to cure at any
time after closing, without further compensation, any deficiencies with respect
to the endorsement of the certificates representing the Common Stock or with
respect to the stock power accompanying such certificate.
2.2 PURCHASE PRICE. In full consideration for the purchase by the Company
of the Common Stock, the Company shall on the Effective Date (i) pay to
Bancshares an amount in cash equal to the sum of the amount of the Bank's
unimpaired capital at Closing plus $100,000, and (ii) transfer to Bancshares 833
shares of the common stock of the Company (the "Company Common Stock") valued at
$120.00 per share which is the "agreed-upon" value of shares issued to certain
of the Company's investors by the Company. For the purpose of this Agreement,
the term "unimpaired capital" shall mean the sum of the Bank's paid in capital,
capital surplus, retained earnings and allocation for loan and lease losses with
respect to any loans and leases, immediately following consummation of the
Purchase and Assumption Transaction.
2.3 ANTI-DILUTION PROVISIONS. In the event that the Company changes the
number of shares of the Company Common Stock issued and outstanding prior to the
Effective Date as a result of a stock split, stock dividend or similar
recapitalization with respect to the Company Common Stock, the number of shares
issued to Bancshares as described in Section 2.2 shall be proportionately
adjusted.
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<PAGE>
2.4 DIRECTOR AND OFFICERS OF THE BANK. Effective as of the Effective
Date, Bancshares shall deliver to the Company the resignations of all directors
and officers of the Bank.
ARTICLE THREE
CLOSING AND EFFECTIVE DATE
3.1 TIME AND PLACE OF CLOSING. A Closing will take place at 11:00 a.m. on
the Effective Date, or at such other time as the Parties may mutually agree.
The place of Closing shall be the offices of Bancshares at 2180 Atlanta Plaza,
950 East Paces Ferry Road, Atlanta, Georgia 30326, or at such other place as may
be mutually agreed upon by the Parties.
3.2 EFFECTIVE DATE. Upon the terms and subject to the conditions hereof,
as soon as practicable after receipt of the requisite regulatory approvals
following consummation of the Purchase and Assumption Transaction, but not later
than March 31, 1997, the parties shall designate an Effective Date on which the
Closing shall take place.
ARTICLE FOUR
REPRESENTATIONS AND WARRANTIES OF BANCSHARES
Bancshares hereby represents and warrants to the Company as follows:
4.1 ORGANIZATION, STANDING AND AUTHORITY. The Bank is a federal savings
bank duly organized, validly existing and in good standing under the laws of the
United States, is duly qualified to do business and is in good standing in the
States of the United States and jurisdictions where its ownership or leasing of
property or the conduct of its business requires it to be so qualified and in
which the failure to be duly qualified could have a material adverse effect upon
the Bank, and has corporate power and authority to carry on its business as now
conducted and to own, lease and operate its assets, properties and businesses,
and to execute and deliver this Agreement and perform its terms. The Bank is an
"insured bank" as defined in the Federal Deposit Insurance Act and applicable
regulations thereunder. The Bank has in effect all federal, state, local and
foreign governmental authorization necessary for it to own or lease its
properties and assets and to carry on its businesses as they are now being
conducted, the absence of which, either individually or in the aggregate, would
have a material adverse effect on the financial condition or operations of the
Bank.
4.2 CAPITAL STOCK.
(a) The authorized capital stock of the Bank consists of 1,000,000 shares
of Common Stock, $8.00 par value, of which 320,550 shares are issued and
outstanding as of the date of this Agreement. The Bank holds no shares of its
Common Stock in its treasury. As of the date of
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<PAGE>
this Agreement, the Bank has reserved no shares of its Common Stock for issuance
to directors, officers and employees subject to options.
(b) All of the issued and outstanding shares of the Bank's Common Stock
are duly and validly issued and outstanding and are fully paid and
non-assessable. None of the outstanding shares of the Bank's Common Stock has
been issued in violation of any preemptive rights of the current or past
stockholders of the Bank. Except as set forth above, there are no shares of
capital stock or other equity securities of the Bank 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 the Bank,
or contracts, commitments, understandings or arrangements by which the Bank was
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.
4.3 AUTHORITY.
(a) The execution and delivery of this Agreement and the consummation of
the transactions contemplated herein have been duly and validly authorized by
all necessary corporate action in respect thereof on the part of Bancshares.
This Agreement represents a legal, valid and binding obligation of Bancshares
enforceable against Bancshares 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 Bancshares,
nor the consummation by Bancshares of the transactions contemplated herein, nor
compliance by Bancshares with any of the provisions hereof will (i) conflict
with or result in a breach of any provision of Bancshares' or the Bank's
Articles of Incorporation or Bylaws, or (ii) constitute or result in the breach
of any term, condition or provision of, or constitute a default under, or give
rise to any right of termination, cancellation, or acceleration with respect to,
or result in the creation of any lien, charge or encumbrance upon, any property
or assets of Bancshares or the Bank, pursuant to any note, bond, mortgage,
indenture, license, agreement, lease, or other instrument or obligation to which
they are a party or by which they or any of their properties or assets may be
subject, and that would, in any such events, have a material adverse effect on
the financial condition or operations of the Bank or the transactions
contemplated hereby, or (iii) subject to receipt of the requisite approvals
referred to in Section 9.5 of this Agreement, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Bank or any of
its properties or assets.
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<PAGE>
(c) Other than (i) in connection or compliance with the provisions of
applicable state corporate law, (ii) notices to, consents, authorizations,
approvals, or exemptions required from the Regulatory Authorities and (iii)
notices to or filings with the Internal Revenue Service or the Pension Benefit
Guaranty Corporation with respect to any employee benefit plans, no notice to,
filing with, authorization of, or exemption by, or consent or approval of any
public body or authority is necessary for the consummation by the Bank of the
transactions contemplated in this Agreement.
4.4 FINANCIAL STATEMENT. The Bank has delivered to the Company prior to
the execution of this Agreement the following financial statement (a copy of
which is attached hereto as Exhibit 2) of the Bank (referred to herein, together
with the footnotes thereto, as the "Bank's Financial Statement"): A pro forma
balance sheet giving effect to the asset purchase transaction pursuant to the
Purchase and Assumption Transaction referred to in Section 9.12 hereof.
The Bank's Financial Statement (as of the date thereof) is in accordance
with the books and records of the Bank, which are complete and accurate in all
material respects and which have been maintained in accordance with sound and
prudent business practices.
4.5 ABSENCE OF UNDISCLOSED LIABILITIES. Giving effect to the Purchase and
Assumption Transaction, the Bank has no obligation or liability (contingent or
otherwise) that has not been fully assumed by First Alliance Bank, except as
disclosed in the Bank's Financial Statement.
4.6 TAX MATTERS. All federal, state and local tax returns required to be
filed by or on behalf of Bancshares, the Bank and any affiliated group (as
defined in Section 1504 of the Internal Revenue Code) of which the Bank is a
member have been timely filed or requests for extensions have been timely filed,
granted and have not expired for periods ending on or before March 31, 1995, and
all returns filed are complete and accurate to the best information and belief
of Bancshares's management and the Bank's management. All taxes due on filed
returns have been paid. As of the date of this Agreement, there is no audit
examination, deficiency or refund litigation or matter in controversy with
respect to any taxes that might result in a determination adverse to the Bank,
except as reserved for in the Bank's Financial Statements. All taxes, interest,
additions and penalties due with respect to completed and settled examinations
or concluded litigation have been paid. No federal income tax returns for
Bancshares, the Bank or any affiliated group (as defined in Section 1504 of the
Internal Revenue Code) of which the Bank is a member have been audited by the
Internal Revenue Service.
4.7 LOANS. To the best knowledge and belief of management of the Bank, as
of the date of this Agreement, each loan reflected as an asset of the Bank in
the Bank's Financial Statement is the legal, valid and binding obligation of the
obligor named therein, and no loan, is subject to any asserted defense, offset
or counterclaim known to the Bank, except as disclosed on Schedule 4.7.
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<PAGE>
4.8 ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance for possible loan
losses shown on the Bank's Financial Statement is adequate in all material
respects to provide for possible losses on the loans referred to in Section 4.7
(including accrued interest receivable) as of the date hereof.
4.9 EMPLOYEE BENEFIT PLANS.
(a) The Company does not adopt or assume, and shall have no obligation to
adopt or assume, and shall have no liability whatsoever to the Bank, employees
of the Bank, or any other person, with respect to any Benefit Plan (as
hereinafter defined) currently maintained by, or contributed to, by the Bank, or
by which the Bank is or ever has been bound, for the benefit of the Bank's
employees, retirees, dependents, spouses, directors, independent contractors,
leased employees or the beneficiaries of all such persons, whether arrived at
through collective bargaining or otherwise, including, without limitation: (i)
any retirement, profit-sharing, deferred compensation, bonus, stock option,
stock purchase, stock appreciation, pension, retainer, consulting, severance,
welfare or incentive plan, agreement or arrangement, or (ii) any plan, agreement
or arrangement providing for "fringe benefits" or perquisites, including but not
limited to benefits relating to Bank automobiles, clubs, seminars, vacations,
parking, financial planning, child care, parenting, sabbatical, sick leave,
medical, dental, hospitalization, life insurance and other types of insurance,
or (iii) any employment agreement written or otherwise, or (iv) any
"multiemployer plan" within the meaning of ERISA Section 3(37), or (v) any other
"employee benefit plan" within the meaning of ERISA Section 3(3). For purposes
of this Section 4.9, the term "Bank" includes all employers (whether or not
incorporated) which are treated, together with the Bank, as a single employer by
reason of Sections 414(b), (c), (m) or (o) of the Internal Revenue Code.
(b) First Alliance Bank or Bancshares shall furnish such notices and
comply with such other requirements under the Bank's Benefit Plans regarding
health continuation coverage for its employees as are imposed by state or
federal law, including, without limitation, COBRA, ERISA, the Internal Revenue
Code, and other statutes affecting health continuation coverage.
(c) The Bank shall, prior to the Closing Date, take all actions necessary
to properly terminate, as of the Closing Date, its participation in or
sponsorship of the Bank's Benefit Plans, such action to include all necessary
corporate authorizations, amendment of Benefit Plan documents, advance written
notification to employee-participants (including, if applicable, a written
notice under ERISA Section 204(h)), and filings with regulatory agencies, all as
required by law and by such Benefit Plans. Employees of the Bank shall accrue
no additional benefits under the Bank's Benefit Plans on or after the Closing
Date. All employee benefits accrued up to and including the Closing Date under
the Bank's Benefit Plans shall be the obligation of First Alliance Bank (or be
reflected on the Bank's Financial Statement as liabilities).
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<PAGE>
4.10 MATERIAL CONTRACTS. Except as otherwise reflected in the Bank's
Financial Statement, neither the Bank, nor any of its assets, businesses or
operations is as of the date of this Agreement a party to, or is bound or
affected by, or receives benefits under, (i) any agreement, arrangement or
commitment not cancelable by it without penalty other than agreements,
arrangements or commitments to be fully assumed by First Alliance Bank pursuant
to the Purchase and Assumption Transaction, (ii) any agreement, arrangement or
commitment relating to the employment, election or retention in office of any
director or officer, or (iii) any contract, agreement or understanding with any
labor union.
4.11 LEGAL PROCEEDINGS. Except as set forth below and except as related to
normal foreclosure actions relating to collateral pledged to secure loans, there
are no actions, suits or proceedings instituted or pending, or to the knowledge
of the Bank's management, threatened (or unasserted but considered probable of
assertion) against the Bank or against any properties, assets, interests, or
rights of the Bank, that are reasonably expected to have either individually or
in the aggregate a material adverse effect on the businesses, operations or
financial condition of the Bank or that are reasonably expected to threaten or
impede the consummation of the transactions contemplated by this Agreement. The
Bank is not a party to any agreement or instrument or subject to any charter or
other corporate restriction or any judgment, order, writ, injunction, decree,
rule, regulation, code or ordinance that threatens or might impede the
consummation of the transactions contemplated by this Agreement.
4.12 REPORTS. Since the date the Bank commenced business, the Bank has
filed all reports and statements, together with any amendments required to be
made with respect thereto, that it was required to file with the Regulatory
Authorities and the Internal Revenue Service. Each of such reports and
documents, including the financial statements, exhibits and schedules thereto,
are responsive to applicable requirements and the instructions of the applicable
form.
4.13 STATEMENTS TRUE AND CORRECT. No representation or warranty made by the
Bank nor any statement or certificate or instrument furnished as information
which is Previously Disclosed or included in an Exhibit or Schedule by
Bancshares or the Bank in connection with this Agreement nor any statement or
certificate to be furnished by Bancshares or the Bank to the Company pursuant to
this Agreement or in connection with the transactions contemplated by this
Agreement, contains or will contain any untrue statement of material fact or
omits or will omit to state a material fact necessary to make the statements
contained therein not misleading. None of the information supplied or to be
supplied by Bancshares or the Bank for inclusion in any documents to be filed
with any Regulatory Authority in connection with the transactions contemplated
hereby, will, at the respective times such documents are filed, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements therein not misleading. All documents
that Bancshares or the Bank 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.
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<PAGE>
4.14 REGULATORY APPROVALS. Bancshares knows of no reason why the
regulatory approvals required to be obtained in order to consummate the
transactions contemplated hereunder and referred to in Section 9.5 of this
Agreement should not be obtained without imposition of a condition or
restriction of the type referred to in the last sentence of such Section.
ARTICLE FIVE
COVENANTS AND AGREEMENTS OF BANCSHARES
Bancshares hereby covenants and agrees with the Company as follows:
5.1 CONDUCT OF BUSINESS; NEGATIVE COVENANTS. Unless contemplated by this
Agreement, from the date of this Agreement until the earlier of the Effective
Date or until the termination of this Agreement, Bancshares covenants and agrees
that it will not do or agree to commit to do, any of the following without the
prior written consent of the Company, which consent shall not be unreasonably
withheld:
(a) Amend the Bank's Articles of Incorporation or Bylaws; or
(b) Repurchase, redeem, or otherwise acquire or exchange, directly or
indirectly, any shares of its capital stock or any securities convertible into
any shares of the Bank's capital stock; or
(c) Take any action whatsoever which would prevent it or the Bank
from being able to consummate this Agreement in accordance with its terms and
conditions.
5.2 CONDUCT OF BUSINESS; AFFIRMATIVE COVENANTS. Unless the prior written
consent of the Company shall have been obtained and except as otherwise
contemplated herein, the Bank will operate its business only in the usual,
regular and ordinary course; and take no action which would (i) adversely affect
the ability of the Bank to obtain any necessary approvals of governmental
authorities required for the transactions contemplated hereby without imposition
of a condition or restriction of the type referred to in Section 9.5 of this
Agreement, or (ii) adversely affect the ability of the Bank to perform its
covenants and agreements under this Agreement.
5.3 ADVERSE CHANGES IN CONDITION. Bancshares hereby agrees to give
written notice promptly to the Company concerning any material adverse change in
its condition from the date of this Agreement until the Effective Date that
might adversely affect the consummation of the transactions contemplated hereby
or upon becoming aware of the occurrence or impending occurrence of any event or
circumstance which would cause or constitute a material breach of any of the
representations, warranties or covenants contained herein.
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<PAGE>
5.4 COOPERATION. Bancshares hereby covenants and agrees to cooperate
fully with the Company to provide such support, assistance and information to
the Company as may be reasonably requested by it in connection with its
application for all necessary approvals by public authorities, federal, state or
local, in connection with the transactions contemplated hereby.
5.5 INVESTIGATION AND CONFIDENTIALITY. Prior to the Effective Date, the
Company may make or cause to be made such investigation, if any, of the business
and properties of the Bank and of its financial and legal condition as the
Company reasonably deems necessary or advisable to familiarize itself and its
advisers with such business, properties, and other matters, provided that such
investigation shall be reasonably related to the transactions contemplated
hereby and shall not interfere unnecessarily with normal operations. Bancshares
agrees to furnish the Company and the Company's advisers with such financial and
operating data and other information with respect to its businesses, properties,
and employees as the Company shall from time to time reasonably request. No
investigation by the Company shall affect the representations and warranties of
Bancshares, and subject to Section 10.3 of this Agreement, each such
representation and warranty shall survive any such investigation. The Company
shall, and shall cause its advisers and agents to, maintain the confidentiality
of all confidential information furnished to it by Bancshares concerning the
Bank's businesses, operations and financial condition 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 Date, the Company shall promptly return all documents and copies
thereof and all work papers containing confidential information received from
Bancshares.
5.6 REPORTS. Bancshares shall file and shall cause the Bank to file all
reports required to be filed with the Regulatory Authorities by the Bank between
the date of this Agreement and the Effective Date and shall deliver to the
Company copies of all such reports promptly after the same are filed. The
financial statements provided by the Bank will fairly present the financial
position of the Bank as of the dates indicated and the results of operations and
changes in financial position for the period then ended in accordance with GAAP
applicable to banks applied on a consistent basis (subject in the case of
interim financial statements to normal recurring year-end adjustments).
5.7 CURRENT INFORMATION. During the period from the date of this
Agreement to the Effective Date, Bancshares shall cause one or more of its
representatives to confer on a regular and frequent basis with representatives
of the Company and to report on the general status of the Bank's ongoing
operations. Bancshares shall promptly notify the Company of any material change
in (a) the normal course of the Bank's business, or (b) in the operation of its
properties, and of any material governmental complaints, investigations or
hearings (or communications indicating that the same may be contemplated) or the
institution or the threat of any material litigation involving the Bank, and
will keep the Company fully informed with respect to such events.
5.8 CAPITAL STOCK. Without the prior written consent of the Company, from
the date of this Agreement to the earlier of the Effective Date or the
termination of this Agreement,
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<PAGE>
Bancshares shall not, and shall not enter into any agreement to, issue, sell, or
otherwise permit to become outstanding any additional shares of Common Stock, or
any other capital stock of the Bank, including any shares of capital stock held
in the Bank's treasury, or any stock appreciation rights, or any option,
warrant, conversion, or other right to purchase any such stock, or any security
convertible into any such stock.
5.9 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and
conditions of this Agreement, Bancshares hereby agrees to use all reasonable
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 and
regulations to consummate and make effective, as soon as practicable after the
date of this Agreement, the transactions contemplated by this Agreement,
including, but not limited to, the Purchase and Assumption Transaction referred
to in Section 9.12 hereof.
ARTICLE SIX
REPRESENTATIONS AND WARRANTS OF THE COMPANY
The Company hereby represents and warrants to Bancshares as follows:
6.1 ORGANIZATION, STANDING AND AUTHORITY OF THE COMPANY. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Georgia, is duly qualified to do business and is in good
standing in the states of the United States and foreign jurisdictions where its
ownership or leasing of property or the conduct of its business requires it to
be so qualified and in which the failure to be duly qualified could have a
material adverse effect upon the Company and its Subsidiaries on a consolidated
basis, and has corporate power and authority to carry on its business as now
conducted and to own, lease and operate its assets, properties and businesses,
and to execute and deliver this Agreement and perform its terms. The Company has
in effect all federal, state, local and foreign governmental authorization
necessary for it to own or lease its properties and assets and to carry on its
businesses as they are now being conducted, the absence of which, either
individually or in the aggregate, would have a material adverse effect on the
financial condition or operations of the Company and its Subsidiaries on a
consolidated basis.
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<PAGE>
6.2 AUTHORITY.
(a) The execution and delivery of this Agreement and the consummation of
the transactions contemplated herein have been duly and validly authorized by
all necessary corporate action in respect thereof on the part of the Company.
This Agreement represents a legal, valid and binding obligation of the Company,
enforceable against the Company 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 the Company or
its Subsidiaries, nor the consummation by the Company or its Subsidiaries of the
transactions contemplated herein, nor compliance by the Company with any of the
provisions hereof will (i) conflict with or result in a breach of any provision
of the Company's Articles of Incorporation, Articles of Association or Bylaws,
or (ii) constitute or result in the breach of any term, condition or provision
of, or constitute a default under, or give rise to any right of termination,
cancellation, or acceleration with respect to, or result in the creation of any
lien, charge or encumbrance upon, any property or assets of the Company,
pursuant to any note, bond, mortgage, indenture, license, agreement, lease, or
other instrument or obligation to which it is a party or by which it or any of
its properties or assets may be subject, and that would, in any such event, have
a material adverse effect on the financial condition or operations of the
Company and its Subsidiaries on a consolidated basis or the transactions
contemplated hereby, or (iii) subject to receipt of the requisite approvals
referred to in Section 9.5 of this Agreement, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company or any
of its Subsidiaries or any of their properties or assets.
(c) Other than (i) in connection or compliance with the provisions of
applicable state corporate law, (ii) consents, authorizations, approvals, or
exemptions required from the Regulatory Authorities, and (iii) notices to or
filings with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation with respect to any employee benefit plans, no notice to, filing
with, authorization of, or exemption by, or consent or approval of any public
body or authority is necessary for the consummation by the Company of the
transactions contemplated in this Agreement.
6.3 STATEMENTS TRUE AND CORRECT. No representation or warranty made by
the Company nor any statement or certificate or instrument furnished as
information which is Previously Disclosed or included in an Exhibit or Schedule
in connection with this Agreement nor any statement or certificate to be
furnished by the Company to Bancshares pursuant to this Agreement or in
connection with the transactions contemplated by this Agreement, contains or
will contain any untrue statement of material fact or omits or will omit to
state a material fact necessary to make the statements contained therein not
misleading. None of the information supplied or to be supplied by the Company
for inclusion in any documents to be filed with any
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<PAGE>
Regulatory Authority in connection with the transactions contemplated hereby,
will, at the respective times such documents are filed, be false or misleading
with respect to any material fact, or omit to state any material fact necessary
in order to make the statements therein not misleading. All documents that the
Company 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.
6.4 REGULATORY APPROVALS. The Company knows of no reason why the
regulatory approvals referred to in Section 9.5 of this Agreement should not be
obtained without imposition of a condition or restriction of the type referred
to in the last sentence of such Section.
ARTICLE SEVEN
COVENANTS AND AGREEMENTS OF THE COMPANY
7.1 APPLICATIONS. The Company shall prepare and file, or shall cause to
be prepared and filed, applications with the Regulatory Authorities seeking the
requisite approvals necessary to consummate the transactions contemplated by
this Agreement, and shall take such other steps and actions in furtherance
thereof as it deems appropriate in order to be able to secure such approvals.
7.2 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and
conditions of this Agreement, the Company agrees to use all reasonable 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 and regulations to
consummate and make effective, as soon as practicable after the date of this
Agreement, the transactions contemplated by this Agreement. The Company shall
use all reasonable efforts to obtain consents of (and agreements with) all third
parties and governmental bodies necessary or desirable for the consummation of
the transactions contemplated by this Agreement.
7.3 ADVERSE CHANGES IN CONDITION. The Company hereby agrees to give
written notice promptly to Bancshares concerning any material adverse change in
its condition from the date of this Agreement until the Effective Date that
might adversely affect the consummation of the transactions contemplated hereby,
or upon becoming aware of the occurrence or impending occurrence of any event or
circumstance which would cause or constitute a material breach of any of the
representations, warranties or covenants contained herein.
7.4 COOPERATION. The Company hereby covenants and agrees to cooperate
fully with Bancshares to provide such support, assistance and information to
Bancshares as may be reasonably requested by it in connection with its
application for all necessary approvals of the Regulatory Authorities in
connection with the transactions contemplated hereby.
7.5 INVESTIGATION AND CONFIDENTIALITY. Prior to the Effective Date,
Bancshares may make or cause to be made such investigation, if any, of the
business and properties of the
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Company and of its financial and legal condition as Bancshares reasonably deems
necessary or advisable to familiarize itself and its advisors with such
business, properties, and other matters, provided that such investigation shall
be reasonably related to the transactions contemplated hereby and shall not
interfere unnecessarily with normal operations. The Company agrees to furnish
Bancshares and Bancshares' advisors with such financial and operating data and
other information with respect to its businesses, properties, and employees as
Bancshares shall, from time to time, reasonably request. No investigation by
Bancshares shall affect the representations and warranties of the Company, and
subject to Section 10.3 of this Agreement, each such representation and warranty
shall survive any such investigation. Bancshares shall, and shall cause its
advisors and agents to, maintain the confidentiality of all confidential
information furnished to it by the Company concerning the Company's businesses,
operations and financial condition 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 Date,
Bancshares shall promptly return all documents and copies thereof and all work
papers containing confidential information received from the Company.
7.6 REPORTS. The Company shall file all reports required to be filed with
the Regulatory Authorities between the date of this Agreement and the Effective
Date and shall deliver to Bancshares copies of all such reports promptly after
the same are filed.
7.7 CURRENT INFORMATION. During the period from the date of this
Agreement to the Effective Date, the Company shall cause one or more of its
representatives to confer on a regular and frequent basis with representatives
of Bancshares and to report on the general status of the Company's ongoing
operations. The Company shall promptly notify Bancshares of any material change
in (a) the normal course of the Company's business, or (b) any operations of its
properties, and of any material governmental complaints, investigations or
hearings (or communications indicating that the same may be contemplated) or the
institution or the threat of any material litigation involving the Company, and
will keep Bancshares fully informed with respect to such events.
ARTICLE EIGHT
ADDITIONAL AGREEMENTS
8.1 PRESS RELEASES. Prior to the Effective Date, the Company and
Bancshares shall consult with each other as to the form and substance of any
press release or other public disclosure related to this Agreement or any other
transaction contemplated hereby. All such press releases, announcements and
other public disclosures must be reviewed in advance by the other Party prior to
distribution; provided, however, that nothing in this Section 8.1 shall be
deemed to prohibit any Party from making any disclosure after such consultation
which its counsel deems necessary or advisable in order to satisfy such Party's
disclosure obligations imposed by law.
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ARTICLE NINE
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
The obligations of the Company and Bancshares to perform this Agreement are
subject to the satisfaction of the following conditions, unless waived in
writing by the Party for whose benefit such condition exists pursuant to Section
11.5 of this Agreement:
9.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
each Party set forth or referred to in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and as of the
Effective Date with the same effect as though all such representations and
warranties had been made on and as of the Effective Date, except for any such
representations and warranties confined to a specified date, which shall be true
and correct in all material respects as of such date.
9.2 PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
covenants and agreements of each Party to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby prior to
the Effective Date shall have been duly performed and complied with in all
material respects.
9.3 CERTIFICATES. Each of the Parties shall have delivered to the other a
certificate, dated as of the Effective Date and signed on its behalf by its
Chairman of the Board, or its President, and its Treasurer, Cashier or other
principal, to the effect that (i) the conditions of its obligations set forth in
Section 9.1 and Section 9.2 of this Agreement have been satisfied, and (ii) with
respect to each of the Parties, that there has been no material adverse change
in the financial condition or results of operations of either Party from that
reflected on the most recent financial statements referred to in Section 4.4,
all in such reasonable detail as the other Party shall request.
9.4 CORPORATE AUTHORIZATION. All action necessary to authorize the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby shall have been duly and validly taken by
the Parties. Each Party shall have furnished to the other certified copies of
resolutions duly adopted by such Party's Board of Directors evidencing the same.
9.5 CONSENTS AND APPROVALS. All approvals and authorizations of, filings
and registrations with, and notifications to, all federal and state authorities
required for consummation of the transactions contemplated hereby and for the
preventing of any termination of any right, privilege, license or agreement of
either Party which, if not obtained or made, would have a material adverse
impact on the financial condition or results of operation of such Party, shall
have been obtained or made and shall be in full force and effect and all waiting
periods required by law shall have expired. To the extent that any lease,
license, loan or financing agreement or other contract or agreement to which the
Bank is a party requires the consent of or waiver from the other party thereto
as a result of the transactions contemplated by this Agreement, such consent or
waiver shall have been obtained, unless waived by the Company in accordance with
Section 11.5 of this Agreement. Any approval obtained from any Regulatory
Authority which is
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necessary to consummate the transactions contemplated hereby shall not be
conditioned or restricted in a manner which in the judgment of the Board of
Directors of all Parties would make it impractical to consummate the
transactions contemplated hereby.
9.6 LEGAL PROCEEDINGS. No action, proceeding or any restrictive orders
shall have been instituted or issued by any governmental authority or to the
knowledge of the Parties threatened by any governmental authority seeking to
restrain the consummation of the transactions contemplated by this Agreement
which, in the opinion of the Board of Directors of the Company or Bancshares,
render it impossible or inadvisable to consummate the transactions provided for
in this Agreement.
9.7 MATERIAL ADVERSE CHANGE. There shall have been no determination by
the Board of Directors of any Party that the transactions contemplated by this
Agreement have become impractical because any state of war, national emergency,
or banking moratorium shall have been declared in the United States or a general
suspension of trading on the New York Stock Exchange shall have occurred. At
the Effective Date, the Assets and Liabilities and unimpaired capital of the
Bank shall be identical in nature and amount to the figures shown on the Bank's
Financial Statement.
9.8 INDEMNIFICATION BY BANCSHARES. Bancshares shall indemnify and hold
harmless the Company and each of their directors, officers, agents and
successors and assigns against all losses, damages and expenses (including
reasonable attorneys' fees), caused by or arising out of (i) any breach or
default in the performance by Bancshares of any covenant or agreement of
Bancshares contained in this Agreement, (ii) any breach of any warranty or
material misrepresentation made by Bancshares herein or in any schedule attached
hereto or in any certificate or other instrument delivered by or on behalf of
Bancshares pursuant hereto which relates to a warranty which pursuant to Section
10.3 survives the Closing, (iii) any liability of the Bank for taxes
attributable to any period or portion thereof that ends on or before the
Effective Date, and (iv) any liability for taxes of any affiliated group (as
defined in Section 1504 of the Internal Revenue Code) of which the Bank is a
member that are assessed against the Bank (or any successor by merger thereof or
any deemed purchaser of the assets of the Bank pursuant to Treas. Reg. Section
1.1502-6, by contract, as transferee or successor, or otherwise, and (v) any and
all actions, suits, proceedings, claims, demands, judgments, costs and expenses
(including reasonable legal and accounting fees) whatsoever not expressly
included and identified by nature and amount in the liabilities section of the
Bank's Financial Statement caused by or arising out of any business or
activities of the Bank prior to the Effective Date. The party to be indemnified
hereunder shall give to the indemnifying party prompt written notice of the
assertion of any third-party claim which might give rise to an indemnification
obligation hereunder and the indemnifying party may undertake the defense
thereof by representatives chosen by it, but acceptable to the indemnified
party, which acceptance shall not be unreasonably withheld. If the indemnifying
party, within a reasonable time after notice of any such claim, fails to defend,
the indemnified party will have the right to undertake the defense, and
compromise or settle any such claim on behalf of and for the account and risk of
the indemnifying party, subject to the right of the indemnifying party to assume
the defense of such claim at any time prior to settlement,
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compromise or final determination. Notwithstanding the foregoing, if there is a
reasonable probability that a claim may materially and adversely affect the
indemnified party, other than as a result of money damages or other payments,
the indemnified party shall have the right, at the cost and expense of the
indemnifying party, to defend, compromise or settle such claim.
9.9 INDEMNIFICATION BY COMPANY. The Company shall indemnify and hold
harmless Bancshares and each of its directors, officers, agents and successors
and assigns against all losses, damages and expenses (including reasonable
attorneys' fees), caused by or arising out of (i) any breach or default in the
performance by the Company of any covenant or agreement of the Company contained
in this Agreement or (ii) any breach of any warranty or any material
misrepresentation made by the Company herein or in any schedule attached hereto
or in any certificate or other instrument delivered by or on behalf of the
Company pursuant hereto which relates to a warranty which pursuant to Section
10.3 survives the Closing. The party to be indemnified hereunder shall give to
the indemnifying party prompt written notice of the assertion of any third-party
claim which might give rise to an indemnification obligation hereunder and the
indemnifying party may undertake the defense thereof by representatives chosen
by it, but acceptable to the indemnified party, which acceptance shall not be
unreasonable withheld. If the indemnifying party, within a reasonable time
after notice of any such claim, fails to defend, the indemnified party will have
the right to undertake the defense, and compromise or settle any such claim on
behalf of and for the account and risk of the indemnifying party, subject to the
right of the indemnifying party to assume the defense of such claim at any time
prior to settlement, compromise or final determination. Notwithstanding the
foregoing, if there is a reasonable probability that a claim may materially or
adversely affect the indemnified party, other than as a result of monetary
damages or other payments, the indemnified party shall have the right, at the
cost and expense of the indemnifying party, to defend, compromise or settle such
claim.
9.10 RELOCATION OF BANK HEADQUARTERS. Receipt by the Bank of regulatory
approval from the OTS for the relocation of its headquarters from Acworth,
Georgia, to Columbia, South Carolina.
9.11 PURCHASE AND ASSUMPTION. The Bank and First Alliance Bank shall have
entered into and shall, prior to or contemporaneously with the Closing hereof,
consummate the Purchase and Assumption Transaction pursuant to an agreement
substantially in the form of Exhibit 1 attached hereto, as a result of which the
financial position of the Bank will conform to the Bank Financial Statement
referred to in Section 4.4 hereof.
9.12 SUBSCRIPTION BY BANCSHARES. Bancshares shall have executed a
subscription agreement for 833 shares of the Company Common Stock at the time of
the Closing of this Agreement on terms and conditions mutually satisfactory to
Bancshares and the Company.
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ARTICLE TEN
TERMINATION
10.1 TERMINATION. This Agreement may be terminated in any of the following
ways:
(a) By a vote of a majority of the Board of Directors of the Company or
Bancshares in the event of a material breach by another Party of any
representation, warranty, covenant or agreement contained herein which cannot be
cured at or prior to the Effective Date; or
(b) By a vote of a majority of the Board of Directors of the Company or
Bancshares in the event that the stock purchase described herein shall not have
been consummated by March 31, 1997, which date may be extended upon the mutual
agreement of the Parties; or
(c) By a vote of a majority of the Board of Directors of the Company or
Bancshares in the event any approval of any governmental or other Regulatory
Authority required for consummation of the transactions contemplated hereby
shall have been denied by final non-appealable action of such authority or if
any action taken by such authority is not appealed within the time limit for
appeal.
10.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.1 of this Agreement, this
Agreement shall become void and have no effect, except that the provisions of
Sections 5.5, 7.5 and 11.1 of this Agreement shall survive any such termination
and abandonment.
10.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The respective
representations, warranties, obligations, covenants and agreements of the
Parties shall not survive the Effective Date except Sections 2.1, 4.1, 4.3,
4.13, 6.1, 6.2, 6.3, 9.8, 9.9, 11.1 and 11.2 of this Agreement. The
representations, warranties, obligations, covenants and agreements of the
Parties (a) under Sections 2.1, 11.1 and 11.2 of this Agreement shall survive
only for a period of six months following the Closing, (b) under Sections 4.1
and 6.1 shall survive only for a period of three years following the Closing,
and (c) under the remaining Sections shall survive only for the period during
which a claim which serves as a basis for an asserted misrepresentation or,
where applicable, a breach of warranty, obligation, covenant or agreement could
be brought as an action under applicable law.
ARTICLE ELEVEN
MISCELLANEOUS
11.1 EXPENSES. Each of the Parties shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial or
other consultants, investment bankers, accountants and counsel.
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11.2 BROKERS AND FINDERS. 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 his or its
representing or being retained by or allegedly representing or being retained by
either the Company or Bancshares, as the case may be, agrees to indemnify and
hold the other Party harmless of and from any such claim.
11.3 ENTIRE AGREEMENT. Except as otherwise expressly provided herein, this
Agreement contains the entire agreement between the Parties with respect to the
transactions contemplated hereunder, and this Agreement supersedes all prior
arrangements or understandings with respect thereto, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the Parties and their respective successors. Nothing in this Agreement,
expressed or implied, is intended to confer upon any party, other than the
Parties or their respective successors, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
11.4 AMENDMENTS. To the extent permitted by law, this Agreement may be
amended by a subsequent writing signed by all of the Parties upon the approval
of the Boards of Directors of each of the Parties.
11.5 WAIVERS. Prior to or on the Effective Date, the Company shall have
the right to waive any default in the performance of any term of this Agreement
by Bancshares, to waive or extend the time for the compliance or fulfillment by
Bancshares of any and all of its obligations under this Agreement, and to waive
any or all of the conditions precedent to the obligations of the Company under
this Agreement, except any condition which, if not satisfied, would result in
the violation of any law or applicable governmental regulation. Prior to or on
the Effective Date Bancshares shall have the right to waive any default in the
performance of any term of this Agreement by the Company, to waive or extend the
time for the compliance or fulfillment by the Company of any and all of its
obligations under this Agreement, and to waive any or all of the conditions
precedent to the obligations of Bancshares under this Agreement, except any
condition which, if not satisfied, would result in the violation of any law or
applicable governmental regulation.
11.6 NO ASSIGNMENT. None of the Parties may assign any of its rights or
obligations under this Agreement to any other person without the prior written
consent of the other Party.
11.7 NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or by facsimile transmission or by registered or certified mail, postage
prepaid, 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:
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COMPANY:
Donald S. Shapleigh, Jr.
President
7000 Peachtree Dunwoody Road
Building 10, Suite 300
Atlanta, GA 30328
Copy to Counsel:
Walter G. Moeling, IV, Esq.
Powell, Goldstein, Frazer & Murphy
Sixteenth Floor
191 Peachtree Street, N.E.
Atlanta, GA 30303
BANCSHARES:
Darrell D. Pittard
Chairman of the Board and Chief Executive Officer
2180 Atlanta Plaza
950 East Paces Ferry Road
Atlanta, GA 30326
Copy to Counsel:
Steven S. Dunlevie, Esq.
Womble Carlyle Sandridge & Rice, PLLC
Suite 700
1275 Peachtree Street, N.E.
Atlanta, GA 30309
11.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia except to the extent federal
law shall be applicable.
11.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute one and the same instrument.
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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 officers hereunto duly authorized, all as of the day and year first
above written.
COMPANY:
NET.B@NK, INC.
By: /s/ Donald S. Shapleigh, Jr.
-------------------------------------
Print Name: Donald S. Shapleigh, Jr.
-----------------------------
Attest:
/s/ Mary E. Johnson
- -----------------------------------
Secretary
[CORPORATE SEAL]
FIRST ALLIANCE/PREMIER
BANCSHARES, INC.
By: /s/ Darrell D. Pittard
-------------------------------------
Print Name: Darrell D. Pittard
-----------------------------
Attest:
/s/ Barbara J. Burtt
- -----------------------------------
Secretary
[CORPORATE SEAL]
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FIRST AMENDMENT TO
AMENDED AND RESTATED STOCK PURCHASE AGREEMENT
This FIRST AMENDMENT (the "Amendment") to the Amended and Restated Stock
Purchase Agreement (the "Agreement"), dated as of December 19, 1996, by and
between NET.B@NK, Inc. (the "Company") and PREMIER BANCSHARES, INC. (formerly
known as First Alliance/Premier Bancshares, Inc., "Bancshares") is entered
into and made effective as of February 25, 1997. Capitalized terms used
herein and not otherwise defined shall have the meaning ascribed to them in
the Agreement.
WHEREAS, the parties hereto desire to amend the Agreement for the
purpose of extending the termination date and modifying the amount of
consideration the Company will pay to Bancshares.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and Bancshares agree to amend
the Agreement as follows:
1. Section 2.2 of the Agreement is hereby amended by deleting the
existing Section 2.2 thereof in its entirety and substituting in lieu thereof
the following new Section 2.2:
2.2 PURCHASE PRICE. In full consideration for the purchase by the
Company of the Common Stock, the Company shall on the Effective Date
(i) pay to Bancshares an amount in cash equal to the sum of the Bank's
unimpaired capital at closing, and (ii) transfer to Bancshares 1,250
shares of the common stock of the Company (the "Company Common Stock")
valued at $115.00 per share, which is the "agreed-upon" value of shares
issued to certain of the Company's investors by the Company and is equal
to not less than one and one-half percent (1.50%) of the Company Common
Stock issued and outstanding as of February 25, 1997. For the purpose of
this Agreement, the term "unimpaired capital" shall mean the sum of the
Bank's paid in capital, capital surplus, retained earnings, and allocation
for loan and lease losses with respect to any loans and leases,
immediately following consummation of the Purchase and Assumption
Transaction.
2. Section 3.2 of the Agreement is hereby amended to extend the
expiration of the permissible Effective Date to May 31, 1997.
3. Section 9.12 of the Agreement is hereby amended to increase the
number of shares referenced in the subscription agreement required of
Bancshares to 1,250 of the Company Common Stock.
4. Section 10.1(b) of the Agreement is hereby amended to extend the
termination of the Agreement to May 31, 1997.
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5. Section 11.1 is hereby amended to provide at the end of Section 11.1
an additional sentence which provides as follows: "Notwithstanding anything
contained herein to the contrary, the Company shall pay to Bancshares an
amount in cash equal to $150,000.00 for the purpose of reimbursing Bancshares
for its expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement, $30,000.00 of which shall be
non-refundable and due and payable upon execution hereof and the remaining
$120,000.00 shall be due and payable on the Effective Date."
6. Except as hereinabove amended, the Agreement shall remain otherwise
in full force and effect.
7. This Amendment 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.
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers hereunto duly authorized all as of the day and year
first above written.
NET.B@NK, INC.
Attest:
/s/ D.R. Grimes
By: ------------------------------------
D.R. Grimes, Chief Executive Officer
/s/ Mary E. Johnson
- ------------------------------------
Secretary
[CORPORATE SEAL]
PREMIER BANCSHARES, INC.
Attest:
/s/ Darrell D. Pittard
By: ------------------------------------
Darrell D. Pittard, Chairman of the
Board and Chief Executive Officer
/s/ Barbara J. Burtt
- ------------------------------------
Secretary
[CORPORATE SEAL]
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PURCHASE AND ASSUMPTION AGREEMENT
BETWEEN
PREMIER BANK, F.S.B.
AS SELLER
AND
FIRST ALLIANCE BANK
AS PURCHASER
EXHIBIT 1
<PAGE>
PURCHASE AND ASSUMPTION AGREEMENT
TABLE OF CONTENTS
Page
----
SECTION 1
DEFINED TERMS
1.1 Defined Terms......................................................... 1
SECTION 2
TRANSFER OF ASSETS
2.1 Assets Sold........................................................... 2
2.2 Documents of Transfer................................................. 2
2.3 Breaches with Third Parties........................................... 3
2.4 Payments Accepted After the Closing................................... 3
SECTION 3
ASSUMPTION OF ACQUIRED DEPOSITS AND LIABILITIES
3.1 Acquired Deposits..................................................... 3
3.2 Overdrafts............................................................. 3
3.3 Documentation of Assumption............................................ 3
3.4 Assumption Subject to Certain Terms................................... 4
3.5 Payment of Items by the Seller After Closing.......................... 4
3.6 Payment of Items by the Purchaser After Closing....................... 4
3.7 Transfer of Credits by the Seller..................................... 4
3.8 The Seller Not Liable to Pay.......................................... 4
3.9 The Purchaser Responsible for Returned Items.......................... 4
3.10 Acquired Liabilities.................................................. 4
SECTION 4
ASSUMPTION OF RISKS
4.1 Insurance Policies..................................................... 4
4.2 Persons and Property................................................... 4
SECTION 5
PURCHASE PRICE AND SETTLEMENT
5.1 Purchase Price........................................................ 5
5.2 Payment of Acquired Deposits and Assumption of
Acquired Liabilities by the Seller.................................... 5
5.3 Preliminary Settlement................................................ 5
5.4 Final Settlement....................................................... 5
5.5 Interest Paid and Earned as of the Closing Date........................ 5
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Page
----
SECTION 6
ACCESS TO THE BRANCHES' PROPERTIES AND RECORDS AND DUE DILIGENCE
6.1 Access and Confidential Treatment..................................... 6
6.2 The Purchaser's Due Diligence......................................... 6
6.3 Recordkeeping and Access Following the Closing........................ 6
SECTION 7
REPRESENTATIONS AND WARRANTIES OF SELLER
7.1 Corporate Organization................................................. 6
7.2 Corporate Authority to Carry On Business............................... 6
7.3 Corporate Authority to Enter into this Agreement....................... 6
7.4 Execution and Delivery; Enforceability................................. 6
7.5 Status of the Acquired Deposits....................................... 7
7.6 Status of the Purchased Loans......................................... 7
7.7 Status of the Purchased Securities..................................... 7
7.8 No Violations.......................................................... 7
7.9 No Adverse Litigation.................................................. 7
7.10 Limitations of Warranties............................................. 8
SECTION 8
REPRESENTATIONS AND WARRANTIES OF PURCHASER
8.1 Corporate Organization................................................. 8
8.2 Corporate Authority to Carry On Business............................... 8
8.3 Corporate Authority to Enter this Agreement............................ 8
8.4 Execution and Delivery; Enforceability................................. 8
8.5 No Violations.......................................................... 8
8.6 No Adverse Litigation.................................................. 8
SECTION 9
ADDITIONAL UNDERTAKINGS OF THE SELLER
9.1 Conduct of Business Pending Closing................................... 9
9.2 Documentation at the Closing and Further Assurances.................... 9
SECTION 10
ADDITIONAL UNDERTAKINGS OF THE PURCHASER
10.1 The Purchaser's Contact with Customers................................. 9
10.2 Regulatory Filings.................................................... 10
SECTION 11
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASER
11.1 Representations and Warranties True................................... 10
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11.2 Obligations Performed................................................. 10
11.3 Certificate of Compliance............................................. 10
11.4 No Adverse Litigation................................................. 10
11.5 Regulatory Approvals.................................................. 10
SECTION 12
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER
12.1 Representations and Warranties True................................... 10
12.2 Obligations Performed................................................. 11
12.3 Certificate of Compliance............................................. 11
12.4 No Adverse Litigation................................................. 11
12.5 Regulatory Approvals.................................................. 11
SECTION 13
THE CLOSING
13.1 Time and Place........................................................ 11
SECTION 14
TERMINATION
14.1 Methods of Termination................................................ 11
14.2 Procedure Upon Termination............................................ 12
14.3 Automatic Termination................................................. 12
SECTION 15
MISCELLANEOUS
15.1 Entire Agreement...................................................... 12
15.2 Modifications and Waivers............................................. 12
15.3 No Broker or Finder................................................... 12
15.4 No Survival of Representations and Warranties......................... 12
15.5 Binding Effect........................................................ 12
15.6 Counterparts.......................................................... 12
15.7 Expenses.............................................................. 12
15.8 Notices............................................................... 12
15.9 Time of the Essence................................................... 13
15.10 Governing Law......................................................... 13
15.11 Headings.............................................................. 13
15.12 Severability.......................................................... 13
15.13 Public Announcements.................................................. 13
15.14 Assignability......................................................... 13
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Schedule A - Loans to be Acquired by Net.B@nk (Whereas Clause)
Schedule B - Other Assets to be Acquired by Net.B@nk (Whereas Clause)
Schedule C - Deposits and Other Liabilities to be Acquired by Net.B@nk
(Whereas Clause)
Exhibit A - Assumption of Liabilities (Section 3.3)
Exhibit B-1 - Preliminary Settlement Statements (Section 5.3)
Exhibit B-2 - Final Settlement Statement (Section 5.4)
Exhibit C - Seller's Compliance Certificate (Section 11.3)
Exhibit D - Purchaser's Compliance Certificate (Section 12.3)
Exhibit E - Notices (Section 15.8)
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PURCHASE AND ASSUMPTION AGREEMENT
This Purchase and Assumption Agreement (the "Agreement") is made and entered
into as of the 19th day of December, 1996 between PREMIER BANK, F.S.B. (the
"Seller" or "Premier"), a federal savings bank organized under the laws of the
United States, and FIRST ALLIANCE BANK (the "Purchaser" or the "Bank"), a
commercial bank organized under the laws of the State of Georgia:
WHEREAS, pursuant to that certain Amended and Restated Stock Purchase
Agreement, of even date herewith, between Net.B@nk, Inc. ("Net.B@nk") and First
Alliance/Premier Bancshares, Inc. ("Bancshares"), the sole shareholder of the
Seller, Net.B@nk has agreed to purchase all of the outstanding common stock of
Seller now owned by Bancshares;
WHEREAS, the (a) loans, (b) other assets and (c) deposits and other
liabilities which will be owned by Seller when it is acquired by Net.B@nk are
set forth on SCHEDULES A, B AND C, respectively;
WHEREAS, the Bank, as Purchaser, has agreed to purchase and assume, and the
Seller has agreed to sell, all of Premier's assets and liabilities which are not
being acquired by Net.B@nk as a result of its acquisition of the stock of
Premier;
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
covenants and provisions herein contained, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINED TERMS
1.1 DEFINED TERMS. The following terms used in this Agreement shall have
the meanings specified below:
(a) "Acquired Deposits" means all of the deposit liabilities of
Seller which are not to be acquired by Net.B@nk and which the Purchaser shall
assume at the Closing and shall also include Seller's routing and transit number
which is #261191363.
(b) "Acquired Liabilities" means all of the liabilities, contingent
or otherwise, of Seller, however created or arising, other than the Acquired
Deposits and the liabilities to be owned by Net.B@nk which are set forth on
Exhibit C.
(c) "Branches" shall mean the offices of Seller.
(d) "Closing" means the closing of the purchase of the assets and
assumption of liabilities of the Branches, and "Closing Date" means the date on
which the Closing takes place.
(e) "Fixed Assets" means the Furniture, Fixtures and Equipment (as
defined below) and the Real Property (as defined below) which the Purchaser
shall purchase at Closing.
(f) "Furniture, Fixtures and Equipment" means the furniture, fixtures
and equipment in the Branches and elsewhere (including safe deposit boxes),
together with any
<PAGE>
manufacturers' warranties which are assignable and are in effect, none of which
are to be acquired by Net.B@nk, and all of which the Purchaser shall purchase at
the Closing.
(g) "Purchased Assets" shall have the meaning set forth in Section
2.1.
(h) "Purchased Loans" means all of the loans of Seller which are not
to be acquired by Net.B@nk and which the Purchaser shall purchase at the
Closing.
(i) "Purchased Securities" means all of the securities of Seller,
which are not to be acquired by Net.B@nk and which the Purchaser shall purchase
at the Closing.
(j) "Real Property" means the real property and improvements located
thereon at the Branches, together with all easements and appurtenances belonging
thereto, and all intangible rights, licenses and permits pertaining thereto or
to the use thereof, which the Purchaser shall purchase at the Closing.
(k) "Schedules" referenced herein shall mean the Schedules so marked,
each of which has been initialed for identification by an officer of the
Purchaser, the Seller and Net.B@nk, and bound sets of which have been delivered
to the Seller, the Purchaser and Net.B@nk. Such Schedules are hereby
incorporated by reference herein and made a part hereof, and may be referred to
in this Agreement and in any other related instrument or document without being
attached hereto.
SECTION 2
TRANSFER OF ASSETS
2.1 ASSETS SOLD. On the terms and subject to the conditions of this
Agreement, at the Closing, the Seller shall transfer, convey, assign and deliver
to the Purchaser (without recourse, except as specifically provided in Section 3
and otherwise herein) the following assets (the Purchased Assets):
(a) The Purchased Loans and the Purchased Securities;
(b) All of the Seller's right, title and interest in the Fixed
Assets;
(c) All of the cash on hand at the Branches as of the Closing Date;
and
(d) All intangible assets, including, without limitation, all rights
to the name "Premier" and to the Premier Bank routing and transit number.
2.2 DOCUMENTS OF TRANSFER. The sale, transfer, assignment and delivery of
the Purchased Assets shall be effected by the execution and delivery by the
Seller to the Purchaser of general warranty deeds, bills of sale, endorsements,
assignments and other instruments of transfer and conveyance reasonably
satisfactory in form and substance to counsel for the Seller and the Purchaser.
At the Closing, the Seller shall take steps necessary to put the Purchaser in
possession and operating control of the Purchased Assets, and shall deliver
keys, combinations, codes and other necessary
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access devices and information relating to the Branches. Good and marketable
fee simple title to the Real Property shall be conveyed. The Seller shall cause
all deeds to secure debt and other liens encumbering title to the Real Property
to be paid in full and cancelled of record at or before the Closing; in the
event the Seller fails to do so, the Purchaser may, at its option (without
obligation) cause the same to be paid and released of record, and the Purchaser
shall receive a credit against the Purchase Price for all amounts expended in
connection therewith.
2.3 BREACHES WITH THIRD PARTIES. Nothing in this Agreement shall
constitute an agreement to assign any claim, contract, license, lease,
commitment, sales order or purchase order or any claim or right or any benefit
arising thereunder or resulting therefrom if an attempted assignment thereof,
without the consent of a third party thereto, would constitute a breach thereof
or in any way affect the rights of the Purchaser or the Seller thereunder. If
such consent is not obtained, or if an attempted assignment thereof would be
ineffective or would affect the rights of the Seller thereunder so that the
Purchaser would not in fact receive all such rights, the Seller shall cooperate
with the Purchaser in any arrangement desired to provide for the benefits under
any such claims, contracts, licenses, leases, commitments, sales orders or
purchase orders, including enforcement at the cost and for the benefit of the
Purchaser of any and all rights of the Seller against a third party thereto
arising out of the breach or cancellation by such third party or otherwise. Any
transfer or assignment to the Purchaser or the Seller of any property or
property rights or any contract or agreement which shall require the consent or
approval of any third party, shall be made subject to such consent or approval
being obtained.
2.4 PAYMENTS ACCEPTED AFTER THE CLOSING. The Seller shall forward
promptly to the Purchaser:
(a) Any payments (properly endorsed without recourse as necessary)
which are accepted by it on or after the Closing Date that relate in any way to
the Purchased Loans and to provide sufficient information so that any such
payments may be properly applied; and
(b) Any notices or other correspondence which are received on or
after the Closing Date that relate in any way to the Purchased Loans.
SECTION 3
ASSUMPTION OF ACQUIRED DEPOSITS AND LIABILITIES
3.1 ACQUIRED DEPOSITS. At the Closing, the Purchaser shall assume and
agree to pay and discharge the Acquired Deposits. No assurance can be given by
the Seller that the present deposit customers of the Branches shall become or
continue to be customers of the Purchaser, the same being at the sole discretion
of the customers.
3.2 OVERDRAFTS. If any of the accounts which comprise the Acquired
Deposits are overdrawn as of the Closing, the Purchaser shall assume such
accounts without recourse to the Seller and shall pay the Seller the amount of
the overdrafts for those overdrawn accounts assumed.
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3.3 DOCUMENTATION OF ASSUMPTION. At the Closing, the Purchaser shall
deliver to the Seller an undertaking substantially in the form of EXHIBIT A,
attached hereto and made a part hereof, under which the Purchaser shall assume
and agree to discharge and pay the Acquired Deposits and the Acquired
Liabilities.
3.4 ASSUMPTION SUBJECT TO CERTAIN TERMS. The Acquired Deposits being
assumed by the Purchaser pursuant to this Section shall be assumed in accordance
with the terms and conditions of the contracts of deposit and the laws, rules
and regulations applicable thereto.
3.5 PAYMENT OF ITEMS BY THE SELLER AFTER CLOSING. If, subsequent to the
assumption of Acquired Deposits pursuant to this Section, the Seller shall honor
any properly drawn check or withdrawal from a transferred account, the Purchaser
shall pay to the Seller any moneys so paid by the Seller to or for the benefit
or account of the said depositor but not in excess of collected funds in the
depositor's account.
3.6 PAYMENT OF ITEMS BY THE PURCHASER AFTER CLOSING. The Purchaser agrees
that it shall pay all properly drawn checks, drafts and withdrawal orders drawn
by the account holders of the depository accounts of customers of the Seller
assumed hereunder, to the extent that the collected balance of the account is
sufficient to permit payment thereof. The Purchaser will promptly forward to
the Seller (or its successor) any checks received by the Purchaser drawn by the
account holders of the depository accounts of customers of the Seller not
assumed hereunder for a period of 30 days following the Closing.
3.7 TRANSFER OF CREDITS BY THE SELLER. The Seller agrees that it shall
transfer to the Purchaser any deposits accepted by it after the Closing Date for
credit to transferred accounts, but the Seller shall be under no obligation to
accept such deposits.
3.8 THE SELLER NOT LIABLE TO PAY. In the event any deposit customer
(whose account has been transferred from the Seller to the Purchaser with the
Branches) instead of accepting the obligation of the Purchaser to pay the
deposit liabilities assumed, shall demand payment for all or any part of any
such assumed deposit liabilities, the Purchaser shall be liable or responsible
for making such payment.
3.9 THE PURCHASER RESPONSIBLE FOR RETURNED ITEMS. The Purchaser shall pay
promptly to the Seller an amount equal to the amount of any checks, drafts or
withdrawal orders credited to an assumed account as of the Closing Date which
are returned to the Seller after the Closing Date.
3.10 ACQUIRED LIABILITIES. At the Closing, the Purchaser shall assume and
agree to pay and discharge the Acquired Liabilities.
SECTION 4
ASSUMPTION OF RISKS
4.1 INSURANCE POLICIES. Effective on the Closing Date, the Seller shall
discontinue its insurance coverage currently maintained in connection with the
Branches. The Purchaser shall be
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responsible for all casualty and liability insurance protection for the
Branches' premises and the activities conducted there as of the Closing Date.
4.2 PERSONS AND PROPERTY. As of the Closing Date, the Seller shall
discontinue providing the security for persons and property in and around the
Branches' premises it may have provided previous to the Closing Date.
SECTION 5
PURCHASE PRICE AND SETTLEMENT
5.1 PURCHASE PRICE. The purchase price to be paid by the Purchaser to the
Seller at the Closing for the Purchased Assets shall be (a) an amount equal to
the outstanding principal balance of the Purchased Loans plus the accrued and
unpaid interest on the Purchased Loans, (b) the fair market value of the
Purchased Securities as of the day immediately preceding the Closing Date,(c)
the book value of the Fixed Assets, and (d) any cash on hand at the Branches
(the "Purchase Price").
5.2 PAYMENT OF ACQUIRED DEPOSITS AND ASSUMPTION OF ACQUIRED LIABILITIES BY
THE SELLER.
(a) The deposit liabilities to be paid by the Seller to the Purchaser
at the Closing shall be an amount equal to the aggregate principal balance of
the Acquired Deposits and accrued interest thereon less the aggregate amount of
overdrafts for any overdrawn accounts assumed by the Purchaser at the Closing
pursuant to Section 3.2 of this Agreement.
(b) The Acquired Liabilities to be assumed by the Purchaser at the
Closing shall be valued at an amount equal to the amount of the Acquired
Liabilities shown on the Premier balance sheet on the Closing Date.
(c) The Seller shall deduct the Purchase Price to be paid to it by
the Purchaser pursuant to Section 5.1 of this Agreement from the amount provided
for in Section 5.2(a) hereof and shall pay such net amount by wire transfer of
funds to the Purchaser. Such wire transfer of funds shall be received by the
Purchaser by noon of the next business day following the Closing Date.
5.3 PRELIMINARY SETTLEMENT. The amount of cash to be received by and from
the Purchaser at the Closing shall be calculated in accordance with Section 5.1
and Section 5.2 of this Agreement and the Preliminary Settlement Statement
attached hereto and made a part hereof as EXHIBIT B-1. At the Closing, the
Seller shall deliver to the Purchaser a copy of the Preliminary Settlement
Statement set forth as EXHIBIT B-1 hereto which shall set forth the computation
of the cash due to or from the Seller.
5.4 FINAL SETTLEMENT. Not more than thirty (30) calendar days following
the Closing Date, the parties shall make a final settlement by making any pro
rata adjustments provided for in Section 5.5 of this Agreement. Such
calculations shall be set forth on the Final Settlement Statement attached
hereto and made a part hereof as EXHIBIT B-2.
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<PAGE>
5.5 INTEREST PAID AND EARNED AS OF THE CLOSING DATE. All of the accrued
but unpaid interest earned on the Purchased Loans on the Closing Date shall be
paid by the Purchaser to the Seller and all of the accrued but unpaid interest
earned on the Acquired Deposits or owing on any of the Acquired Liabilities on
the Closing Date shall be paid by the Seller to the Purchaser. Following the
Closing Date, all of the interest earned on the Purchased Loans shall be paid to
the Purchaser and all of the interest paid on the Acquired Deposits shall be the
obligation of the Purchaser.
SECTION 6
ACCESS TO THE BRANCHES' PROPERTIES AND RECORDS AND DUE DILIGENCE
6.1 ACCESS AND CONFIDENTIAL TREATMENT. From and after the date of this
Agreement until the Closing, the Seller shall afford to the agents and
representatives of the Purchaser full access, during normal business hours and
upon reasonable notice, to all assets, properties, books, records, information
and materials (including market surveys) relating to the Branches, the Purchased
Loans and the Acquired Deposits, and the Seller shall furnish representatives of
the Purchaser during such period with all such information concerning the
affairs of the Branches as the Purchaser may reasonably request.
6.2 THE PURCHASER'S DUE DILIGENCE. The Purchaser shall have the right to
conduct in good faith a due diligence investigation concerning the Branches, the
Acquired Deposits and the Purchased Assets and to satisfy itself that such
matters are not materially and adversely different from the facts and conditions
represented by the Seller.
6.3 RECORDKEEPING AND ACCESS FOLLOWING THE CLOSING. The Purchaser shall
preserve and safely keep, for as long as may be required by applicable law, all
of the files, books of account and records delivered to the Purchaser at the
Closing with the Branches for the joint benefit of itself and the Seller, and it
shall permit the Seller or its representatives, at any reasonable time and at
the Seller's expense to inspect, make extracts from or copies of, any such
files, books of account or records as the Seller shall deem reasonably
necessary. Following the Closing, the Seller shall permit the Purchaser or its
representatives, at any reasonable time and at the Purchaser's expense to
inspect, make extracts from or copies of any nonconfidential files, books of
account or records in the Seller's possession containing information concerning
the Branches, the Acquired Deposits and the Purchased Loans.
SECTION 7
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as disclosed in writing by the Seller to the Purchaser and acceptable
to the Purchaser, the Seller represents and warrants to the Purchaser as
follows:
7.1 CORPORATE ORGANIZATION. The Seller is a federal savings bank duly
organized, validly existing and in good standing under the laws of the United
States.
7.2 CORPORATE AUTHORITY TO CARRY ON BUSINESS. The Seller has the
requisite corporate power and authority to carry on its business as the same is
now being conducted.
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<PAGE>
7.3 CORPORATE AUTHORITY TO ENTER INTO THIS AGREEMENT. The Seller has the
requisite corporate power and authority to enter into and to perform this
Agreement and the transactions contemplated by this Agreement, and to sell,
transfer, assign and deliver the Purchased Assets to the Purchaser and to vest
in the Purchaser good and marketable title to the Purchased Assets.
7.4 EXECUTION AND DELIVERY; ENFORCEABILITY. The execution, delivery and
performance of this Agreement and the transactions contemplated by this
Agreement by the Seller have been duly and validly authorized by all requisite
corporate action, and this Agreement is binding and enforceable against the
Seller in accordance with its terms.
7.5 STATUS OF THE ACQUIRED DEPOSITS. All of the Acquired Deposits were
obtained and remain in material compliance with all applicable laws and
regulations, and are properly documented in a manner materially consistent with
such laws and regulations and with good banking practices.
7.6 STATUS OF THE PURCHASED LOANS.
(a) The Seller is the sole owner of each Purchased Loan except for
those Purchased Loans in which participation interests have been sold. No
Purchased Loan has been pledged or encumbered, except as collateral for Acquired
Liabilities to be assumed by Purchaser. The principal balance of each Purchased
Loan as shown on the Seller's books and records is true and correct as of the
last date shown thereon.
(b) To the best knowledge of the Seller: (i) each Purchased Loan is a
valid loan and was made and remains in compliance in all material respects with
all applicable laws and regulations, (ii) each Purchased Loan is properly
documented in a manner consistent with applicable laws and regulations and with
good working practice and all purported signatures on and executions of any
document in connection with such loan are genuine and (iii) all loan
documentation has been actually signed or executed by all necessary parties, and
the Seller has custody of all documents or microfilm records thereof related to
such loan.
(c) All Purchased Loans (and any notes, other evidences of
indebtedness or security agreements associated therewith) transferred at the
Closing by the Seller to the Purchaser shall be transferred without recourse and
without any warranties or representations as to the collectability of any such
loans, the value of the collateral securing same or the creditworthiness of any
of the obligors.
7.7 STATUS OF THE PURCHASED SECURITIES. All of the Purchased Securities
were acquired and remain in material compliance with all applicable laws and
regulations, and are properly documented in a manner materially consistent with
such laws and regulations and with good banking practices.
7.8 NO VIOLATIONS. The execution, delivery and performance of this
Agreement and the transactions contemplated by this Agreement do not and shall
not violate any provision of law to which the Seller is subject and do not and
shall not conflict with or result in the violation or breach of any condition or
provision of, or constitute a default under, any contract, right, lease (except
as previously disclosed to the Purchaser and with respect to which the Seller
shall obtain the necessary consents),
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<PAGE>
pledge, lien, security interest, instrument, indenture, mortgage, charge,
encumbrance, agreement, order, writ, injunction, decree or judgment to which the
Seller is a party or which is binding on the Seller or to which any of the
property or assets of the Seller is subject. No consent, license, approval or
authorization of or designation, declaration or filing with any governmental
authority or other person or entity is required on the part of the Seller (other
than as provided for or contemplated hereby) in connection with the execution,
delivery or performance of this Agreement or the consummation of the
transactions contemplated by this Agreement. The Seller is not in default under
any lease, agreement, contract, commitment or other obligation which the
Purchaser is assuming or which affects the property rights being transferred to
the Purchaser.
7.9 NO ADVERSE LITIGATION. Except as previously disclosed to the
Purchaser, there is no investigation, action, arbitration, suit, proceeding or
claim pending or threatened against the Seller with respect to, or adversely
affecting, the Branches or the Purchased Assets or the Acquired Deposits or the
consummation of the transactions contemplated by this Agreement before or by any
federal, state, municipal or other governmental department, commission, board,
agency or instrumentality, domestic or foreign, nor does there exist any basis
or grounds for any such investigation, action, arbitration, suit, proceeding or
claim.
7.10 LIMITATIONS OF WARRANTIES. Except as may be expressly represented or
warranted in this Agreement by the Seller, the Seller makes no representations
or warranties whatsoever, express or implied, with regard to any Purchased
Asset, any Acquired Deposits or any other liability or obligation being assumed
by the Purchaser, and all Fixed Assets are sold and conveyed in "AS IS"
condition, with no warranties by the Seller as to their future performance or
condition.
SECTION 8
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Except as disclosed in writing by the Purchaser to the Seller and acceptable
to the Seller, the Purchaser represents and warrants to the Seller as follows:
8.1 CORPORATE ORGANIZATION. The Purchaser is a commercial bank validly
existing and in good standing under the laws of the State of Georgia.
8.2 CORPORATE AUTHORITY TO CARRY ON BUSINESS. The Purchaser has the
requisite corporate power and authority to carry on its business as the same is
now being conducted.
8.3 CORPORATE AUTHORITY TO ENTER THIS AGREEMENT. The Purchaser has full
corporate power and authority to enter into and to perform this Agreement and
the transactions contemplated by this Agreement.
8.4 EXECUTION AND DELIVERY; ENFORCEABILITY. The execution, delivery and
performance of this Agreement by the Purchaser have been duly and validly
authorized by all requisite corporate action, and this Agreement is binding and
enforceable against the Purchaser in accordance with its terms.
-8-
<PAGE>
8.5 NO VIOLATIONS. The execution, delivery and performance of this
Agreement and the transactions contemplated by this Agreement do not and shall
not violate any provision of law to which the Purchaser is subject and do not
and shall not conflict with or result in the violation or breach of any
condition or provision of, or constitute a default under, any contract, right,
lease, pledge, lien, security interest, instrument, indenture, mortgage, charge,
encumbrance, agreement, order, writ, injunction, decree or judgment to which the
Purchaser is a party or which is binding on the Purchaser or to which any of the
property or assets of the Purchaser is subject. No consent, license, approval
or authorization of or designation, declaration or filing with any governmental
authority or other person or entity is required on the part of the Purchaser
(other than as provided by or contemplated hereby) in connection with execution,
delivery or performance of this Agreement or the consummation of the
transactions contemplated by this Agreement.
8.6 NO ADVERSE LITIGATION. There is no investigation, action,
arbitration, suit, proceeding or claim pending or threatened against or
affecting the Purchaser that might materially and adversely affect or might
impair the consummation of the transactions contemplated by this Agreement
before or by any federal, state, municipal or other governmental department,
commission, board, agency or instrumentality, domestic or foreign, nor does
there exist any basis or grounds for any such investigation, action,
arbitration, suit, proceeding or claim.
SECTION 9
ADDITIONAL UNDERTAKINGS OF THE SELLER
9.1 CONDUCT OF BUSINESS PENDING CLOSING. From the date of this Agreement
to the Closing Date, the Seller shall:
(a) Use its best efforts to promote the successful operations of the
Branches and avoid any act that would materially and adversely affect the value
of the Purchased Assets;
(b) Operate the business of the Branches only in an ordinary and
usual businesslike manner consistent with safe and sound banking practices and
the Seller's ordinary course of business;
(c) Not discriminate against the Branches with respect to
advertising, products offered, or staffing and operations support;
(d) Seek the concurrence of the Purchaser prior to hiring or
replacing any manager of the Branches; and
(e) Not take any action which would cause any representation or
warranty to be untrue as if made at the Closing Date.
9.2 DOCUMENTATION AT THE CLOSING AND FURTHER ASSURANCES. At the Closing,
the Seller shall transfer, assign and deliver to the Purchaser all existing
records, books, papers, collateral and agreements of the Seller relating to the
Purchased Assets and the Acquired Deposits including but not limited to
signature cards, orders, contracts, deposit slips, cancelled checks, withdrawal
orders and
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<PAGE>
records of accounts. The Seller agrees that it shall, at the Closing and at any
time and from time to time after the Closing, upon request of the Purchaser do,
execute, acknowledge and deliver, or cause to be done, executed, acknowledged
and delivered, all such further acts, deeds, assignments, transfers,
conveyances, powers of attorney and assurances as may be required for the better
assigning, transferring, granting, conveying, assuring and confirming to the
Purchaser, or to its successors and assigns, or for aiding and assisting in
collecting and reducing to possession, any or all of the Purchased Assets and
the Acquired Deposits and the performance of any or all obligations of the
Seller hereunder.
SECTION 10
ADDITIONAL UNDERTAKINGS OF THE PURCHASER
10.1 THE PURCHASER'S CONTACT WITH CUSTOMERS. Prior to the Closing, the
Purchaser at its expense may notify the customers of the Branches of the pending
transfer of his, her or its deposit account or loan. The Purchaser agrees to
use its best efforts to work with deposit customers of the Branches in securing
new checks, deposit slips and other items with the routing and code numbers of
the Purchaser prior to the Closing Date.
10.2 REGULATORY FILINGS. The Purchaser shall file all necessary filings,
applications and notices concerning the transactions contemplated by this
Agreement with the appropriate regulatory authorities by February 15, 1997.
SECTION 11
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASER
The obligation of the Purchaser to close under this Agreement shall be
subject to the following conditions (all or any of which may be waived, in whole
or in part, by the Purchaser).
11.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties made by the Seller in this Agreement shall have been true and correct
when made and shall be true and correct on and as of the Closing Date with the
same force and effect as though such representations and warranties had been
made on and as of such date.
11.2 OBLIGATIONS PERFORMED. The Seller shall have performed all covenants
and obligations and complied with all conditions required by this Agreement to
be performed or complied with by it on or before the Closing Date.
11.3 CERTIFICATE OF COMPLIANCE. The Seller shall have executed and
delivered to the Purchaser a certificate of compliance substantially in the form
and substance of EXHIBIT C attached hereto and made a part hereof, dated as of
the Closing Date.
11.4 NO ADVERSE LITIGATION. No action, suit or proceeding shall have been
instituted or threatened against the Seller or the Purchaser by or before any
court or governmental agency to restrain or prohibit, or to obtain damages in
respect of, or which is related to or arises out of, this
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<PAGE>
Agreement or the consummation of the transactions contemplated hereby which in
the opinion of the Purchaser makes it inadvisable to proceed to the Closing
under this Agreement.
11.5 REGULATORY APPROVALS. The Purchaser shall have obtained, from all
necessary governmental and regulatory authorities, all necessary consents to and
authorizations and approvals of this Agreement and the transactions contemplated
by this Agreement and the related transfer of ownership and control of all
licenses, permits or other governmental authorizations necessary to carry on all
aspects of the business of the Branches.
SECTION 12
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER
The obligation of the Seller to close under this Agreement shall be subject
to the following conditions (all or any of which may be waived, in whole or in
part, by the Seller except Section 12.5):
12.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties made by the Purchaser in this Agreement shall have been true and
correct when made and shall be true and correct on and as of the Closing Date
with the same force and effect as though such representations and warranties had
been made on and as of such date.
12.2 OBLIGATIONS PERFORMED. The Purchaser shall have performed all
covenants and obligations and complied with all conditions required by this
Agreement to be performed or complied with by it on or before the Closing Date.
12.3 CERTIFICATE OF COMPLIANCE. The Purchaser shall have executed and
delivered to the Seller a certificate in substantially the form and substance of
EXHIBIT D attached hereto and made a part hereof, dated as of the Closing Date.
12.4 NO ADVERSE LITIGATION. No action, suit or proceeding shall have been
instituted or threatened against the Seller or the Purchaser by or before any
court or governmental agency to restrain or prohibit, or to obtain damages in
respect of, or which is related to or arises out of, this Agreement or the
consummation of the transactions contemplated hereby which in the opinion of the
Seller makes it inadvisable to proceed to the Closing under this Agreement.
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<PAGE>
12.5 REGULATORY APPROVALS. The Seller shall have obtained, from all
necessary governmental and regulatory authorities, all necessary consents to and
authorizations and approvals of this Agreement and the transactions contemplated
by this Agreement and the related transfers of ownership and control of all
licenses, permits or other governmental authorizations necessary to carry on all
aspects of the business of the Branches.
SECTION 13
THE CLOSING
13.1 TIME AND PLACE. The Closing of this Agreement shall take place as
soon as practicable after the parties have received all required approvals from
their respective regulatory authorities, but not later than as of March 31,
1997. The Closing shall be held at an hour and location to be agreed upon by
the parties hereto prior to the date set for the Closing.
SECTION 14
TERMINATION
14.1 METHODS OF TERMINATION. This Agreement may be terminated in any of
the following ways:
(a) At or prior to the Closing, by the mutual consent in writing of
the Purchaser and the Seller;
(b) At the Closing, by the Purchaser in writing, if the conditions
set forth in Section 11 of this Agreement shall not have been met by the Seller
or waived in writing by the Purchaser;
(c) At the Closing, by the Seller in writing, if the conditions set
forth in Section 12 of this Agreement shall not have been met by the Purchaser
or waived in writing by the Seller; or
(d) By the Seller or the Purchaser in writing at any time after any
of the regulatory authorities has denied or has indicated its intent to deny any
application of the Purchaser for approval of the transaction(s) contemplated
herein.
14.2 PROCEDURE UPON TERMINATION. In the event of termination pursuant to
Section 14.1 hereof, written notice thereof shall forthwith be given to the
other party, and this Agreement shall terminate upon receipt of such notice
immediately unless an extension is consented to by the party having the right to
terminate.
14.3 AUTOMATIC TERMINATION. Unless mutually extended by the Board of
Directors (or any duly authorized Committee of the Board) of the Purchaser and
the Seller, and any provision of this Agreement to the contrary notwithstanding,
this Agreement shall terminate, and the purchase, sale, and assumption
contemplated hereby shall be abandoned, automatically and without action on the
part
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<PAGE>
of either party, and without liability of either party to the other party,
unless the purchase, sale and assumption contemplated hereby is consummated as
of or before March 31, 1997.
SECTION 15
MISCELLANEOUS
15.1 ENTIRE AGREEMENT. This Agreement, including any exhibits and
schedules hereto, represents the entire agreement of the parties relating to the
subject matter hereof. All prior negotiations between the parties are merged
into this Agreement and there are no understandings or agreements other than
those incorporated herein.
15.2 MODIFICATIONS AND WAIVERS. This Agreement may not be modified except
by an instrument in writing duly executed by the parties. Any waiver must be in
writing.
15.3 NO BROKER OR FINDER. The Purchaser and the Seller each represents and
warrants to the other that no broker or finder has acted for it in connection
with this Agreement or the transactions contemplated hereby.
15.4 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties set forth in this Agreement shall not survive the Closing Date.
15.5 BINDING EFFECT. All terms of this Agreement shall be binding upon,
and inure to the benefit of, the parties hereto and their respective successors
and permitted assigns.
15.6 COUNTERPARTS. This Agreement may be executed simultaneously 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.
15.7 EXPENSES. Each party shall bear its own out-of-pocket expenses
incurred in connection with this Agreement and all transactions contemplated
hereunder.
15.8 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered or mailed, certified, return receipt requested, with postage prepaid,
to the other party at its respective address reflected on EXHIBIT E attached
hereto, and shall be effective when delivered or when the first attempt is made
to deliver the same by mail, whichever is earlier.
15.9 TIME OF THE ESSENCE. The parties hereto acknowledge that time is of
the essence with respect to the performance of this Agreement.
15.10 GOVERNING LAW. Except to the extent governed by federal law, this
Agreement shall be construed in accordance with the laws of the State of Georgia
applicable to agreements made and to be performed in Georgia.
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<PAGE>
15.11 HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation hereof. The
use of the singular in this Agreement shall be deemed to be or include the
plural (and vice versa), whenever appropriate.
15.12 SEVERABILITY. If any provision of this Agreement is invalid or
unenforceable, the balance of this Agreement shall remain in effect.
15.13 PUBLIC ANNOUNCEMENTS. The parties hereto agree that all public
announcements relating to this Agreement or to the transactions contemplated
hereby, including announcements to employees, shall be made only as may be
agreed upon in advance by the parties hereto.
15.14 ASSIGNABILITY. The rights of the Purchaser in and to this Agreement
and the transactions contemplated hereunder shall be assignable by the Purchaser
only with the Seller's prior consent.
[Remainder of this page intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be executed by their duly authorized officers and their corporate
seals to be affixed hereto as of the day and year first above written.
SELLER:
ATTEST: PREMIER BANK, F.S.B.
___________________________________
Secretary By:_____________________________________
Name:___________________________________
[SEAL] Title:__________________________________
PURCHASER:
ATTEST: FIRST ALLIANCE BANK
___________________________________
Secretary By:___________________________________
Name:_________________________________
[SEAL]
Title:________________________________
-15-
<PAGE>
SCHEDULE A
The loans which will be acquired by Net.B@nk, Inc., pursuant to that certain
Amended and Restated Stock Purchase Agreement of even date herewith, between
Net.B@nk, Inc. and First Alliance/Premier Bancshares, Inc., shall consist of the
following:
1. Five Million Dollars ($5,000,000.00) in mortgage loans held for sale
to be more particularly identified at Closing.
<PAGE>
SCHEDULE B
The remaining assets to be acquired by Net.B@nk, Inc., pursuant that certain
Amended and Restated Stock Purchase Agreement of even date herewith, between
Net.B@nk, Inc. and First Alliance/Premier Bancshares, Inc. shall consist of the
following:
1. The Federal Stock Charter of Premier Bank, FSB (Charter Number 6205);
2. One Hundred Thousand Dollars ($100,000.00) in capital which will be
paid to First Alliance/Premier Bancshares, Inc. at book value in
connection with the consummation of the Amended and Restated Stock
Purchase Agreement; and
3. Other miscellaneous assets, to be more particularly identified at
Closing.
<PAGE>
SCHEDULE C
The Deposits and Other Liabilities to be acquired by Net.B@nk, Inc., pursuant
that certain Amended and Restated Stock Purchase Agreement of even date
herewith, between Net.B@nk, Inc. and First Alliance/Premier Bancshares, Inc.
shall consist of Five Million Dollars ($5,000,000.00) in certificates of deposit
to be more particularly identified at Closing.
<PAGE>
EXHIBIT A
ASSUMPTION OF LIABILITIES
FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby
acknowledged, First Alliance Bank (the "Purchaser"), pursuant to SECTION 3.3 of
the Purchase and Assumption Agreement , between the Purchaser and Premier Bank,
FSB (the "Seller"), dated December 19, 1996 (the "Agreement"), has executed and
delivered this Assumption of Liabilities. Unless otherwise defined herein, all
capitalized terms used in this Assumption of Liabilities shall have the meanings
attributed to them in the Agreement.
From and after the close of business on the Closing Date, the Purchaser
hereby assumes and agrees to pay and discharge the following liabilities of the
Seller originated at or otherwise attributable to the Branches.
(a) The Acquired Deposits being transferred by the Seller, with accrued
interest, as of the date shown below; and
(b) All Acquired Liabilities, including, without limiting the generality
of the foregoing, all leases of personal property, assigned, sold, transferred
and delivered to Purchaser.
This Assumption of Liabilities shall not create in any third parties
(including, but not limited to, holders of the Acquired Deposits or the Acquired
Liabilities) (a) any rights or remedies against the Purchaser which such parties
did not have against the Seller prior to the execution and delivery of this
Assumption of Liabilities with respect to the Acquired Deposits or the Acquired
Liabilities other than for payment of principal and accrued interest as of the
date hereof, and interest hereafter accrued in accordance with the terms of the
Acquired Deposits.
IN WITNESS WHEREOF, the Purchaser acting through its duly authorized
officers has executed this Assumption of Liabilities in accordance with . of the
Agreement, this _____ day of __________, 1997.
ATTEST: FIRST ALLIANCE BANK
___________________________________ By:________________________________
Secretary Name:______________________________
Title:_____________________________
[SEAL]
Accepted this _____ day of __________, 1997.
PREMIER BANK, F.S.B.
By:________________________________________
Name:______________________________________
Title:_____________________________________
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<PAGE>
EXHIBIT B-1
PRELIMINARY SETTLEMENT STATEMENT
Pursuant to SECTION 5.3 of that certain Purchase and Assumption Agreement,
between First Alliance Bank (the "Purchaser") and Premier Bank, FSB (the
"Seller"), dated December 19, 1996 (the "Agreement"), the Seller hereby delivers
this Preliminary Settlement Statement to the Purchaser. Unless otherwise
defined herein, all capitalized terms used in this Preliminary Settlement
Statement shall have the meanings attributed to them in the Agreement.
The Seller and the Purchaser agree that the following is the computation
of the cash due to the Purchaser (or if negative, to the Seller) in settlement
at the Closing:
Total Acquired Deposits assumed by
the Purchaser at the Closing (including
accrued interest) $_________
MINUS: Aggregate amount of overdrafts for any
overdrawn accounts assumed by the
Purchaser at the Closing $__________
Net Acquired Deposits assumed by the
Purchaser at the Closing $__________
Plus: All Acquired Liabilities $__________
MINUS: The Purchase Price:
An amount equal to the outstanding
principal balance of the Purchased
Loans plus the accrued and unpaid
interest on the Purchased Loans
(net of reserve allocable to the
Purchased Loans) $_________
An amount equal to the fair market
value of the Purchased Securities $_________
An amount equal to the book value of
the Fixed Assets $_________
Any cash on hand at the Branches $_________
The Purchase Price $_________
EQUALS: Net cash due to Purchaser (or if
negative, to Seller) $_________
-1-
<PAGE>
The Seller and the Purchaser agree that the above computation is based on
the general ledger balances, other financial information available and estimates
made therefrom at the Closing and all figures and computations herein shall be
subject to adjustment to the extent the parties deem appropriate. The Purchaser
and the Seller agree that there shall be a Final Settlement Statement,
containing all necessary or required adjustments to this Preliminary Settlement
Statement, made and delivered by the Seller (and to be reviewed and agreed to by
the Purchaser) within thirty (30) calendar days following the Closing Date. The
form and substance of the Final Statement can be found at EXHIBIT B-2 of the
Agreement.
The Seller and the Purchaser agree that the computation as set forth above
has been done in accordance with the Agreement and that the Final Settlement
Statement shall be calculated and delivered in accordance with the Agreement.
IN WITNESS WHEREOF, the Purchaser and the Seller acting through their duly
authorized officers have executed this Preliminary Settlement Statement in
accordance with SECTION 5.3 of the Agreement, this _____ day of __________,
1997.
PREMIER BANK, F.S.B.
ATTEST: By:_______________________________
Name:_____________________________
Title:____________________________
___________________________________
Secretary
[SEAL]
FIRST ALLIANCE BANK
ATTEST: By:_______________________________
Name:_____________________________
Title:____________________________
___________________________________
Secretary
[SEAL]
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<PAGE>
EXHIBIT B-2
FINAL SETTLEMENT STATEMENT
Pursuant to SECTION 5.4 of that certain Purchase and Assumption Agreement,
between First Alliance Bank (the "Purchaser") and Premier Bank, FSB (the
"Seller"), dated December 19, 1996 (the "Agreement"), the Seller hereby delivers
this Final Settlement Statement to the Purchaser. Unless otherwise defined
herein, all capitalized terms used in this Final Settlement Statement shall have
the meanings attributed to them in the Agreement.
The Seller and the Purchaser agree that the following is the final
computation of the cash due to (or from) the Purchaser in settlement of the
Purchase of the Branches:
Cash due to the Purchaser from the Seller
Total Acquired Deposits and Acquired
Liabilities assumed by the Purchaser
after the Closing Date (including
accrued interest) $________
PLUS: Deposits accepted by the Seller after
the Closing Date for deposit in
accounts assumed by the Purchaser at
the Closing and not previously
delivered to the Purchaser by the
Seller
$________
PLUS: Pro-rata Expenses*
Expenses accrued by the Seller but
unpaid prior to the Closing Date $________
MINUS: Expenses incurred after the Closing
Date but prepaid by the Seller $________
Net Pro-Rata Expenses $____________
PLUS: Other Adjustments (if any) $____________
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<PAGE>
PLUS: Aggregate amount of any checks,
drafts or withdrawal orders which
had been credited to an account
assumed by the Purchaser as of the
Closing Date but were returned to
the Seller after the Closing Date
and have not been previously paid
by the Purchaser to the Seller $____________
PLUS: Other Adjustments (if any) $____________
EQUALS: Cash due to/from Purchaser $____________
*Including property taxes, rents, utility payments and similar expenses relating
to the physical plant of the Branches and other expenses relating to the
Acquired Deposits.
IN WITNESS WHEREOF, the Purchaser and the Seller acting through their
duly authorized officers have executed this Final Settlement Statement in
accordance with SECTION 5.4 of the Agreement, this _____ day of __________,
1997.
PREMIER BANK, F.S.B.
ATTEST: By:______________________________
Name:____________________________
Title:___________________________
___________________________________
Secretary
[SEAL]
FIRST ALLIANCE BANK
ATTEST: By:_______________________________
Name:_____________________________
Title:____________________________
___________________________________
Secretary
[SEAL]
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<PAGE>
EXHIBIT C
SELLER'S COMPLIANCE CERTIFICATE
Premier Bank, FSB (the "Seller") hereby certifies that:
(1) The representations and warranties made by the Seller in SECTION 7 of
the Purchase and Assumption Agreement, between the Seller and First
Alliance Bank, dated December 19, 1996 (the "Agreement"), are true and
correct as of the date hereof.
(2) The Seller has complied with or satisfied the conditions required by
SECTION 11 of the Agreement to be complied with or satisfied by it prior to
or as of the date hereof.
IN WITNESS WHEREOF, the Seller has caused this Certificate to be executed
by its duly authorized officers and its seal to be affixed hereto as of the
_____ day of __________, 1997.
PREMIER BANK, F.S.B.
By:_______________________________
Name:_____________________________
Title:____________________________
ATTEST:
___________________________________
Secretary
[SEAL]
<PAGE>
EXHIBIT D
PURCHASER'S COMPLIANCE CERTIFICATE
First Alliance Bank (the "Purchaser") hereby certifies that:
(1) The representations and warranties made by the Purchaser in SECTION 8
of the Purchase and Assumption Agreement, between Premier Bank, F.S.B. and
Purchaser, dated December 19, 1996 (the "Agreement"), are true and correct
as of the date hereof.
(2) The Purchaser has complied with or satisfied the conditions required
by SECTION 12 of the Agreement to be complied with or satisfied by it prior
to or as of the date hereof.
IN WITNESS WHEREOF, the Seller has caused this Certificate to be executed
by its duly authorized officers and its seal to be affixed hereto as of the
_____ day of __________, 1997.
FIRST ALLIANCE BANK
By:_______________________________
Name:_____________________________
Title:____________________________
ATTEST:
___________________________________
Secretary
[SEAL]
<PAGE>
EXHIBIT E
NOTICES
1. ADDRESSES:
FOR SELLER:
Premier Bank, FSB
2180 Atlanta Plaza
950 East Paces Ferry Road
Atlanta, Georgia 30326
Attn: Darrell D. Pittard
WITH COPY TO:
Womble, Carlyle, Sandridge & Rice, PLLC
Suite 700
1275 Peachtree Street
Atlanta, Georgia 30309
Attn: Steven S. Dunlevie, Esq.
FOR PURCHASER:
First Alliance Bank
63 Barrett Parkway
P. O. Box 670148
Marietta, Georgia 30066-0120
Attn: Frank H. Roach
Executive Vice President
<PAGE>
[NOTE: THE INFORMATION ON THIS PAGE HAS BEEN SUPERSEDED BY
INFORMATION PROVIDED IN SCHEDULES TO EXHIBIT 1 OF THE AMENDED AND RESTATED STOCK
PURCHASE AGREEMENT]
Pro Forma
Figures in Thousands
Purchase of Premier Bank, FSB, Marietta, Georgia ("Premier")
PREMIER
ASSETS
Cash and due from Banks $1,400
Investments 0
Net Loans 0
Fixed Assets 0
Other Assets 0
TOTAL
ASSETS $1,400
------
LIABILITIES
AND CAPITAL
Deposits 1,000
Other Liabilities 100
---
TOTAL
LIABILITIES $1,100
------
Common Stock 300
Surplus 0
Retained Earnings 0
TOTAL
CAPITAL $300
----
TOTAL
LIABILITIES
AND
CAPITAL $1,400
------
Premier Bancshares, Inc. will sell Premier after a corporate reorganization
where Premier will transfer essentially all assets and liabilities and effect
a return of capital. For purposes of this transaction, it is assumed that OIG
will acquire the capital account totaling $300,000. Total assets will include
$1,300,000 in cash and cash equivalents, and total liabilities will include
deposits of $1,000,000. Actual figures at closing may differ. AIB will
purchase the capital for the book value of the capital accounts plus
$200,000. The transaction assumes purchase accounting.
EXHIBIT 2
<PAGE>
EXHIBIT 10.4
LEASE AGREEMENT
THIS LEASE, made and entered into as of this 18th day of June 1996, by and
between THE GRIFFIN COMPANY (hereinafter referred to as the "Landlord") and
INTERNET ORGANIZING GROUP, INC., a Georgia corporation (hereinafter referred to
as the "Tenant"):
W I T N E S S E T H:
1. PREMISES. The Landlord, for and in consideration of the rents,
covenants, agreements and stipulations hereinafter mentioned, reserved and
contained, to be paid, kept and performed by the Tenant, and by these presents
does lease and rent unto the said Tenant, and said Tenant hereby agrees to lease
and take upon the terms and conditions which hereinafter appear, the following
described property (hereinafter referred to as the "Premises') containing
approximately 2,100 rental square feet on the Third Floor of Building 10
(hereinafter referred to as the "Building"), located in LAKE RIDGE 400 OFFICE
PARK OFFICE PARK (hereinafter referred to as the "Office Park"), and being known
as 7000 Peachtree Dunwoody Road, Building 10, Suite 300, Atlanta, Fulton County,
Georgia 30328. The floor plan attached hereto as Exhibit "A" represents an
approximation of the Premises to be leased pursuant to this Lease.
2. TERM. To have and to hold the same for a term of three (3) years
beginning on the 1st day of July, 1996, and ending on the 30th day of June 1999,
at midnight (hereinafter referred to as the "Lease Term").
In the event the Premises are ready for occupancy prior to the commencement
date of the Lease Term and Tenant chooses to occupy the Premises at that time,
all terms, covenants and conditions of this Lease shall be in full force and
effect as of such date. Tenant shall pay a prorated share of the monthly rental
payment for any partial calendar month during which Tenant occupies the
Premises.
3. RENTAL. Tenant agrees to pay Landlord, by payments to Griffin
Management Services, Inc. (hereinafter referred to as "Managing Agent"), and
delivered to Griffin Management Services, Inc., 750 Hammond Drive, Building Two,
Atlanta, Georgia 30128, promptly on the first day of each month, in advance,
during the Lease Term a monthly rental of Two Thousand Nine Hundred Seventy-Five
and No/100 ($2,975.00) DOLLARS.
Tenant hereby acknowledges that if any monthly payment of rent or any
monies due hereunder from Tenant shall not be received by Landlord or the
Managing Agent of Landlord within five (5) days after such payment is due, then
Tenant shall pay a late charge equal to five percent (5%) of such delinquent
amount. Any amounts payable hereunder by Tenant to
<PAGE>
Landlord which are not paid on or before the date due as provided in this Lease
shall bear interest at the rate of one and one-half percent (1 1/2%) per month
from said due date until paid.
4. FIRST AND LAST MONTHS' RENT IN ADVANCE. Upon execution of this Lease
by Tenant, Tenant shall pay the first and last months' rent, receipt of which is
acknowledged by Landlord. Interest shall not accrue on said monies and in the
event of any default by Tenant hereunder, such amounts may be applied to any
amounts owed by Tenant to Landlord.
5. UTILITIES AND TAXES. Landlord shall pay all utility bills, including,
but not limited to, gas, electricity, fuel, light, and heat bills for the
Premises, and all charges for water, sewer and five (5) nights per week
janitorial services rendered to the Premises. Landlord shall furnish to the
Premises general cleaning and janitorial services required as a result of
normal, prudent use of the Premises and only on Monday through Fridays,
inclusive, with New Year's Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, Christmas Day, and any other recognized bank holiday (herein
collectively referred to as the "Holidays") excepted. This paragraph is subject
to Paragraph 14 of the Rules and Regulations attached hereto and incorporated
herein by this reference (the "Rules and Regulations").
Landlord shall be responsible for and shall pay when due all taxes levied
against the Premises or levied against any larger unit of real property
(including without limitation land, buildings, and other permanent improvements
that are deemed by the taxing authorities to constitute real property), such as
the Building or the Office Park, of which the Premises are a part. Tenant shall
be responsible for and shall pay when due all taxes levied against any personal
property or trade fixtures placed by Tenant in the Premises.
6. COMMON AREA. Landlord and Tenant agree that Tenant shall have access
to and the use of the parking lot of the Office Park, sidewalks, and common
grounds provided Tenant is not in violation of any section of this Lease.
7. RETURNED CHECKS. Tenant shall be charged the sum of Fifteen ($15.00)
Dollars for any check returned to Landlord by Tenant's bank for non-payment of
funds or any other reason whatsoever. Landlord may thereafter, at its sole
option, insist upon payment of any sums due hereunder (including, without
limitation, the monthly rental) by cashier or certified funds only.
8. USE OF THE PREMISES. The Premises shall be used for general office
purposes and for no other purposes, and in accordance with the Rules and
Regulations. The Premises shall not be used for any illegal purposes, nor in
any manner which will violate any requirements of Landlord's insurance or
increase the rate of insurance on the Premises. At no time shall the Premises
be used in any manner to create any nuisance or trespass.
<PAGE>
9. ABANDONMENT OF LEASED PREMISES. Tenant agrees not to abandon or
vacate the Premises during the Lease Term, and agrees to use said Premises for
the purpose set forth herein until the expiration of the Lease Term.
10. REPAIRS BY LANDLORD. Landlord agrees to keep in good repair the roof,
heating and cooling systems, foundations and exterior walls of or serving the
Premises (exclusive of all glass and exterior doors), and underground utility
and sewer pipes outside the exterior walls of the Building, except repairs
rendered necessary by the negligence or intentional acts of Tenant, its agents,
employees or invitees. Landlord gives to Tenant exclusive control of the
Premises and Landlord shall be under no obligation to inspect the Premises.
Tenant shall promptly report in writing to Landlord any defective condition
known to it which Landlord is required to repair, and failure to report such
defects shall make Tenant responsible to Landlord for any liability incurred by
Landlord by reason of such defects. Landlord shall not be liable, under any
circumstances, for any interruption or failure whatsoever in utility services.
11. REPAIRS BY TENANT. Tenant agrees to return said Premises to Landlord
at the expiration or prior termination of this Lease in as good condition as
when first received, normal wear and tear excepted. Tenant shall make no
alterations, additions or improvements to the Premises or the systems therein
without the prior written consent of Landlord. All alterations, additions and
improvements made by, for, or at the direction of Tenant shall, when made,
become the property of Landlord and shall remain upon and be surrendered with
the Premises as a part thereof at the expiration or earlier termination of the
Lease.
12. RENT ADJUSTMENT. Commencing one year from the date of the initial
Lease Term hereof and continuing on the same day of each year during the initial
and any renewal term hereof, the annual rental for the next succeeding twelve
(12) month period shall be increased by an amount sufficient to provide an
annual rental for said next succeeding twelve (12) month period (each successive
twelve (12) month period to be hereinafter referred to as the "Adjustment
Period") equal to the purchasing power of the annual rental for the month in
which the initial Lease Term hereof commenced (hereinafter referred to as the
"Base Month"). As soon as possible after the publication and issuance thereof,
Landlord shall deliver to Tenant a true copy of the Consumer Price Index for the
United States for All Urban Consumers for all items on the Bureau of Labor
Statistics of the U.S. Department of Labor (hereinafter referred to as the
"Index") for the Base Month and for the calendar month in which the Adjustment
Period commences (the "Initial Adjustment Month"). If the Index for the Initial
Adjustment Month shows an increase in consumer purchasing power as compared to
that for the Base Month, Landlord shall deliver to Tenant a computation showing
the increase in the annual rent for the Adjustment Period, said increase to be
an amount equal to the percentage increase in the Index for the Initial
Adjustment Month over the Index for the Base Month, multiplied by the annual
rental in effect for the initial Lease Term hereof. Any such increase shall be
payable by Tenant against amounts otherwise due from Tenant in equal monthly
installments in advance on the first day of each month during the Adjustment
Period; provided, however, that the first and second monthly installments of
said increase shall be paid by Tenant on the date Tenant receives the
computation showing the amount of said increase. If the Adjustment Period
begins
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on a day other than the first day of the month, Tenant shall pay to Landlord, on
demand, a prorated monthly installment of said increase. The adjusted monthly
rental under this paragraph shall not be increased in any year by less than four
percent (4%) nor greater than ten percent (10%) from the prior year's rental
rate. For the purpose of this Lease, the "Base Month" will be July 1996.
Notwithstanding anything to the contrary contained herein, in no event shall the
base rent be adjusted in an amount less than set forth in Paragraph 3.
13. INDEMNITY. Tenant agrees to indemnify and hold harmless the Landlord,
its agents and employees, against any and all claims of any and every nature for
damages to persons or property by reason of Tenant's use or occupancy of the
Premises, and all claims, damages, judgments, costs, or expenses of any nature
or description incurred by Landlord, its agents and employees, as a result
thereof, including attorney's fees, court costs, and attorney's fees and court
costs incurred in enforcing this indemnity provision of the Lease.
14. GOVERNMENTAL ORDERS. Tenant agrees, at its own expense, to promptly
comply with all requirements of any legally constituted public authority imposed
by reason of Tenant's occupancy of the Premises, whether or not said
requirements shall presently exist or shall hereinafter become effective.
Landlord agrees to promptly comply with any such requirements if not made
necessary by reason of Tenant's occupancy. It is mutually agreed, however,
between Landlord and Tenant that if, in order to comply with such requirements,
the cost to Landlord or Tenant, as the case may be, shall exceed a sum equal to
one year's rent to be paid under this Lease, then whichever of Landlord or
Tenant is obligated to comply with such requirements shall have the right to
terminate this Lease by giving written notice of termination to the other party
by certified mail, which termination shall become effective sixty (60) days
after receipt of such notice, and which notice shall eliminate the necessity of
compliance with such requirement by the party giving such notice unless the
party receiving such notice of termination shall, before said termination
becomes effective, pay to the party giving notice all costs of compliance in
excess of one year's rent, or secure payment of said sum in a manner
satisfactory to the party giving notice.
15. CONDEMNATION. If the whole of the Premises, or such portion thereof
as will make the Premises unusable for the purposes herein leased, be condemned
by any legally constituted condemnation authority, or sold to said authority by
private sale under threat of condemnation, for any public use or purpose, then,
in either of said events, the Lease shall terminate as of the date when
possession thereof is taken or accepted by condemnation authorities, and rental
shall be accounted for as between Landlord and Tenant as of said date. Such
termination, however, shall be without prejudice to the rights of either
Landlord or Tenant to recover compensation and damages relating to such
condemnation. It is further understood and agreed that neither the Tenant nor
the Landlord shall have any rights in any award made to the other by any
condemnation authority notwithstanding the termination or rights accepted by
condemnation authorities, and rental shall be accounted for as between Landlord
and Tenant as of said date.
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16. ASSIGNMENT AND SUBLETTING. Tenant may sublease portions of the
Premises to others provided such sublessee's operation is a part of the general
operation of Tenant and under the supervision and control of Tenant, and
provided such operation is within the purpose for which said Premises shall be
used. Except as provided in the preceding sentence, Tenant shall not, without
the prior written consent of Landlord, assign this Lease or any interest
hereunder, or sublease the Premises, or any part thereof, or permit the use of
Premises by any party other than Tenant. Consent to any assignment or sublease
shall not terminate the continued effect of this paragraph, and all later
assignments or subleases shall be made likewise only with the prior written
consent of Landlord. An assignee or sublessee of Tenant shall, at the sole
option of Landlord, become directly liable to Landlord for all obligations of
Tenant hereunder, but no assignment or sublease by Tenant, or acceptance or
acknowledgment of such assignment or sublease by Landlord, shall relieve the
person or entity which was the original party and Tenant to the Lease of any
liability hereunder. Landlord's acceptance of rent from such assignee or
sublessee or other such party as an assignee or sublessee shall not relieve the
original party who executed this Lease as Tenant from liability under this
Lease.
Requests for sublease or assignment shall be accompanied by a minimum
service fee of $500 and Tenant agrees to reimburse Landlord for all legal fees
and other expenses incurred by Landlord in connection with the request. Tenant
shall make no profit on a sublease or assignment of this Lease and any increase
in rent, bonus or other fee charged or received, which is higher than, or in
addition to, the rent, and fees due under this Lease shall be paid to Landlord.
17. REMOVAL OF PERSONAL PROPERTY. Tenant may, if not in default
hereunder, prior to the expiration of this Lease, or any extension thereof,
remove all unattached and movable personal property and equipment which it has
placed in the Premises, provided Tenant repairs all damages to the Premises
caused by such removal. All personal property of Tenant remaining in the
Premises after the end of the Lease Term shall be deemed conclusively abandoned,
excepting equipment leased from third party vendors, notwithstanding the title
to or a security interest in such personal property may be held by an individual
or entity other than Tenant, and Landlord may dispose of such personal property
in any manner it deems proper, in its sole discretion. Tenant hereby waives and
releases any claim against Landlord arising out of the removal or disposition of
such personal property and waives and releases any claim to the personal
property. Tenant shall indemnify and hold Landlord harmless for any costs,
expenses or fees incurred by Landlord in connection with the removal and
disposition of such personal property. Tenant shall reimburse Landlord for the
cost of removing such personal property.
18. SIGNS. Tenant shall not place signs nor decals upon or in the
grounds, outside walls, windows, roofs, exterior building doors, or interior
suite doors of the Premises, except with the written consent of Landlord or
Landlord's Managing Agent which shall be granted in such party's sole
discretion. Landlord agrees to provide Tenant, at Landlord's expense, one (1)
exterior Building standard identification sign. Any additional signs shall be
provided at Tenant's expense. Any and all signs placed within the Premises by
Tenant shall be maintained in
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compliance with the rules and regulations governing such signs and the Tenant
shall be responsible to Landlord for any damages caused by the installation,
use, or maintenance of said sign, and Tenant agrees, upon removal of said signs,
to repair all damage incident to such removal.
19. ENTRY FOR CARDING, ETC. Landlord may card the Premises for "For Rent"
or "For Sale" sixty (60) days before the termination date of this Lease.
Landlord may enter the Premises at reasonable hours at any time during the Lease
Term to exhibit same to prospective purchasers or tenants and to make repairs to
Landlord's adjoining property, if any.
20. EFFECT OF TERMINATION OF LEASE. No termination of this Lease prior to
the expiration of the Lease Term by lapse of time or otherwise, shall affect
Landlord's right to collect rent for the period prior to the termination of this
Lease.
21. MORTGAGEE'S RIGHTS. Tenant's rights shall be subject to any bona fide
mortgage or deed to secure debt which is now or may hereafter be placed upon the
Premises by Landlord. The terms of this paragraph shall be self-operative;
provided, however, that Tenant, upon the request of any party in interest, shall
promptly execute, deliver and record such instruments or certificates as may be
reasonably required to carry out the intent of this paragraph. In addition, at
the request of Landlord, Tenant shall execute and deliver instruments which
provide that in any foreclosure proceedings under any security deed or mortgage,
or in the event of transfer of title by deed in lieu of foreclosure to any
mortgagee or designee thereof, Tenant, at the election and request of any
mortgagee or designee thereof, shall attorn to the purchaser at foreclosure
under the security deed or mortgage or to any mortgagee or designee thereof to
whom title is so transferred by deed in lieu of foreclosure, as the case may be,
as the Landlord or mortgagee under this Lease.
22. NO ESTATE IN LAND. This Lease shall create only the relationship of
Landlord and Tenant between the parties hereto and no estate shall pass out of
Landlord. Tenant shall have only a usufruct, not subject to levy and sale, and
not assignable or transferrable by Tenant except with Landlord's express written
consent.
23. LATE MOVE-IN. In the event Landlord fails, for any reason whatsoever,
to deliver possession of the Premises to Tenant on or before the commencement
date of the Lease Term hereof, this Lease shall not be void or voidable, nor
shall Landlord be liable to Tenant for any loss or damage resulting therefrom.
In the event Landlord fails, for any reason whatsoever, to deliver possession of
the Premises to Tenant by July 25, 1996, than this Lease shall become null and
void.
24. HOLDING OVER. Should Tenant or any of its successors in interest
continue to hold the Premises after termination of this Lease, whether such
termination occurs by lapse of time or otherwise, with Landlord's acquiescence,
and without any distinct agreement between the parties, such holding over shall
constitute and be constructed as a tenancy at sufferance at a monthly rental
equal to one and one-half (1 1/2) times the monthly rental (including Base
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Rental and any adjusted and additional rental) provided herein at the time of
such termination, if Landlord elects to accept such rent. During such time as
Tenant shall continue to hold the Premises after the termination hereof, Tenant
shall be regarded as a tenant at sufferance and not a tenant at will; subject,
however, to all the terms, provisions, covenants and agreements on the part of
Tenant hereunder. No payments of money by Tenant to Landlord after the
termination of this Lease shall reinstate, continue, renew or extend the Lease
Term and no extension of this Lease after the termination hereof shall be valid
unless and until the same shall be reduced to writing and signed by both
Landlord and Tenant. Tenant shall be liable to Landlord for all damage which
Landlord shall suffer by reason of Tenant's holding over and Tenant shall
indemnify, defend and hold Landlord harmless against all claims made by any
other tenant or prospective tenant against Landlord resulting from delay by
Landlord in delivering possession of the Premises to such other tenant or
prospective tenant. If Landlord accepts rent pursuant to this paragraph,
Landlord shall always have the right to terminate Tenant's possession under this
paragraph upon thirty (30) days' prior written notice to Tenant.
25. ATTORNEY'S FEES AND HOMESTEAD EXEMPTION. If any rent or additional
rental, or any other obligation of Tenant hereunder is collected by or through
an attorney at law, Tenant agrees to pay FIFTEEN (15%) PERCENT thereof as
attorney's fees. Tenant hereby waives any and all homestead rights and
exemptions which it may have under any laws as against its obligation owing
Landlord under this Lease. Tenant hereby assigns to Landlord its homestead and
exemptions.
26. RIGHTS CUMULATIVE. All rights, powers and privileges conferred
hereunder upon the parties shall be cumulative, but not restrictive, to those
given by operation of law.
27. NOTICES. Tenant hereby appoints as its agent to receive service of
all dispossessory or distraint proceedings and notices hereunder, and all
notices required under this Lease, the person in charge of the Premises at the
time, or occupying said Premises; and if no person is in charge of, or occupying
said Premises, then such service or notice may be made by attaching the same on
the main entrance to said Premises. All written notices, other than notice of
dispossessory or distraint proceedings required under the Lease shall be sent
certified mail, return receipt requested, or by hand delivery, and shall be
deemed given at the time it is placed in the U.S. mail, postage prepaid, or if
delivered by hand, upon actual delivery. A copy of all notices under this Lease
shall also be sent to Tenant's last known address, if different from said
Premises. If notice address is different from the address of the Premises, all
notices shall be sent to the address below.
28. WAIVER OF RIGHTS. No failure of Landlord to exercise any power given
Landlord hereunder, or to insist upon strict compliance by Tenant with its
obligations hereunder, and no custom or practice of the parties at variance with
the terms hereof shall constitute a waiver of Landlord's rights to demand strict
compliance with the terms hereof.
29. TIME IS OF THE ESSENCE. Time is of the essence of this Lease.
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30. DEFINITIONS. "Landlord" as used in this Lease shall include its
heirs, representatives, assigns and successors in title to the Premises.
"Tenant" as used in this Lease shall include its heirs, representatives and
successors, and if this Lease shall be validly assigned or sublet, shall also
include Tenant's assignees or sublessees as to the Premises covered by such
assignment or sublease. "Broker" or "Co-Broker" as used in this Lease shall
include its successors, assigns, heirs, and representatives. "Landlord,"
"Tenant," "Broker," and "Co-Broker" shall include male and female, singular and
plural, corporation, partnership or individual, as it may pertain to the
particular parties.
31. DESTRUCTION OR DAMAGE TO THE PREMISES. If the Premises are totally
destroyed by storm, fire, lighting, earthquake or other casualty, this Lease
shall terminate as of the date of such destruction, and rental shall be
accounted for as between Landlord and Tenant as of that date. If the Premises
are damaged but not wholly destroyed by any such casualties, rental shall abate
in such proportion as use of the Premises has been destroyed, and Landlord shall
restore the Premises to substantially the same condition as before the damage as
soon as reasonably possible, whereupon full rental shall commence. Provided,
however, should the Premises be totally or partially destroyed as a result of
the negligence or intentional acts of Tenant, its employees, agents, licensees,
invitees, assignees, or sublessees, then Tenant shall be liable for any and all
such damage to the Premises and the rental set forth herein shall not be abated.
32. LIABILITY INSURANCE. Tenant shall carry fire and extended coverage
insurance insuring Tenant's interest in its improvements and betterments to the
Premises and any and all furniture, equipment, supplies, and other property
owned, leased, held or possessed by it and contained therein, such insurance
coverage to be in an amount equal to the full insurable value of such
improvements and property.
Tenant also agrees to carry a policy or policies of workers' compensation
and comprehensive general liability insurance, including personal injury and
property damage, with contractual liability endorsement, in an amount of not
less than Five Hundred Thousand and No/100 ($500,000.00) Dollars for the
property damage and One Million and No/100 ($1,000,000.00) Dollars per
occurrence for personal injuries or deaths of persons occurring in or about the
Premises. Said policies shall (i) name Landlord as an additional insured and
insure Landlord's contingent liability under this Lease (except for the worker's
compensation policy, which shall instead include waiver of subrogation
endorsement in favor of Landlord); (ii) be issued by an insurance company which
is acceptable to Landlord and licensed to do business in the State of Georgia;
and (iii) provide that said insurance shall not be cancelled unless thirty (30)
days' prior written notice shall have been given to Landlord. Said policy, or
policies, or certificate thereof, shall be delivered to Landlord by Tenant upon
commencement of the Lease Term and upon each removal and/or modification of said
insurance.
33. WAIVER OF SUBROGATION. Landlord and Tenant each hereby release the
other from any and all liability or responsibility to the other or anyone
claiming through or under them by way of subrogation or otherwise for any loss
or damage to property caused by
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fire or any other perils insured in policies of insurance covering such
property, even if such loss or damage shall have been caused by the fault or
negligence of the other party, or anyone for whom such party may be responsible,
including, without limitation, any other tenants or occupants of the remainder
of the Building in which the Premises are located; provided, however, that this
release shall be applicable and in force and effect only to the extent that such
release shall be lawful at that time and in any event only with respect to loss
or damage occurring during such time as the releasor's policies shall contain a
clause or endorsement to the effect that any such release shall not adversely
affect or impair said policies or prejudice the right of the releasor to recover
thereunder and then only to the extent of the insurance proceeds payable under
such policies. Landlord and Tenant each agree that it will request its
insurance carriers to include in its policies such a clause of endorsement. If
extra costs shall be charged therefor, each party shall advise the other thereof
and of the amount of the extra costs, and the other party, at its election, may
pay the same, but shall not be obligated to do so. If such other party fails to
pay such extra costs, the release provisions of this paragraph shall be
inoperative against such other party to the extent necessary to avoid
invalidation of such releasor's insurance.
34. RULES AND REGULATIONS. Tenant and Tenant's agents, employees,
contractors, licensees and invitees shall fully comply with all requirements of
the Rules and Regulations attached hereto and incorporated herein by this
reference (as changed from time to time as hereinafter provided). Landlord
shall at all times have the right to change such Rules and Regulations or to
promulgate other rules and regulations in such reasonable manner as Landlord, in
its sole discretion, may deem advisable; provided, however, that such changes
shall not become effective and a part of this Lease until a copy thereof shall
have been delivered to Tenant. Tenant shall further be responsible for
compliance with such Rules and Regulations by Tenant's agents, employees,
contractors, licensees and invitees.
35. DEFAULT. a) The following events shall be deemed to be Events of
Default by Tenant under this Lease: (i) Tenant shall fail to pay any
installment of rent or any other charge or assessment against Tenant pursuant to
the terms hereof when due and shall not cure such failure within five (5)
business days after notice thereof to Tenant; (ii) Tenant shall fail to comply
with any term, provision, covenant or warranty made under this Lease by Tenant,
other than the payment of rent or any other charge or assessment payable by
Tenant, and shall not cure such failure within thirty (30) days after notice
thereof to Tenant; (iii) any court or competent jurisdiction shall enter, with
regard to Tenant, a decree or order for relief in an involuntary case under the
federal bankruptcy laws, as now or hereafter constituted, or any other
applicable federal or state bankruptcy, insolvency or other similar law, or a
decree or order appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of Tenant or for any substantial part of
Tenant's property or for a decree or order ordering the winding-up or
liquidation of Tenant's affairs, and any such decree or order shall continue
unstayed and in effect for a period of thirty (30) days, (iv) Tenant shall
commence a voluntary case under the federal bankruptcy laws, as now constituted
or hereafter amended, or any other applicable federal or state bankruptcy,
insolvency or other similar law, or Tenant shall consent to the appointment of
or taking possession by a receiver, liquidator, assignee, trustee, custodian,
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sequestrator (or other similar official) of Tenant or for any substantial part
of Tenant's property; (v) Tenant shall abandon or vacate all or any portion of
the Premises or fail to take possession thereof as provided in this Lease; or
(vi) Tenant shall do or permit to be done anything which creates a lien of any
nature or whatsoever upon the Premises and shall not cure such lien within
thirty (30) days after notice thereof to Tenant.
b) Upon the occurrence of any of the aforesaid Events of Default,
Landlord shall have the option to pursue any one or more of the following causes
of action without any notice of demand whatsoever: (i) Terminate this Lease, in
which event Tenant shall immediately surrender the Premises to Landlord, but if
Tenant fails to do so, Landlord may, without prejudice to any other remedy which
it may have for possession or arrearage in rent, enter upon and take possession
the Premises and expel or remove Tenant and its effects and any other person, by
force if necessary, without being liable for prosecution or any claim of damages
therefor; and Tenant hereby agrees to pay to Landlord on demand the amount of
all loss and damage which Landlord may suffer by reason of such termination,
whether through inability to relet Premises or through decrease in rent or
otherwise; or (ii) Terminate this Lease and declare the entire amount of the
rent required to paid hereunder by Tenant, which in Landlord's reasonable
determination, would become due and payable during the remainder of the Lease
Term, discounted to present value by using a discount factor of eight percent
(8%) per annum, to be due and payable immediately. Upon acceleration of such
amounts, Tenant agrees to pay the same at once together with all rents
theretofore due, at Landlord's address as provided herein; provided, however
that such payment shall not constitute a penalty or forfeiture, but shall
constitute liquidated damages for Tenant's failure to comply with the terms and
provisions of this Lease (Landlord and Tenant agreeing that Landlord's actual
damages in such event are impossible to ascertain and that the amount set forth
above is a reasonable estimate thereof). Upon making such payment, Tenant shall
receive from Landlord all rents received by Landlord from other tenants renting
the Premises, or portion thereof, during the Lease Term (with appropriate
allocations of such rents in the event other tenants lease space in addition to
the Premises), provided that the monies to which Tenant shall so become entitled
shall in no event exceed the entire amount actually paid by Tenant to Landlord
pursuant to the preceding sentence, less all costs, expenses and attorney's fees
of Landlord incurred in connection with the termination of this Lease. Eviction
of Tenant and reletting of the Premises and the acceptance of such payment by
Landlord shall not constitute a waiver of any failure of Tenant thereafter
occurring to comply with any term, provision, condition or covenant of this
Lease; or (iii) Terminate Tenant's rights of possession (but not this Lease) and
enter upon and take possession of the Premises and expel or remove Tenant and
any other person who may be occupying the Premises or any portion thereof, by
entry (including the use of force if necessary), dispossessory suit or
otherwise, without thereby releasing Tenant from any liability hereunder,
without terminating this Lease and without being liable to prosecution of any
claim for damages therefor, and Landlord may, but shall be under no obligation
to do so, relet the Premises or portion thereof to the agent of Tenant and
receive the rent therefor, and Tenant shall pay Landlord any deficiency that may
arise by reason of such reletting on demand at the office of Landlord; or (iv)
As agent of Tenant, do whatever Tenant is obligated to do by the provisions of
this Lease and Landlord may enter the Premises, by force is necessary, without
being liable
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to prosecution of any claims for damages therefor, in order to accomplish this
purpose on behalf of Tenant, and Tenant further agrees that Landlord shall not
be liable for any damages to Tenant for such action, unless caused by the
negligence of Landlord or otherwise; or (v) Dispossess the Tenant by Summary
Proceedings and receive all the rents and other charges up to the time of such
re-entry by dispossession and Landlord may relet the Premises or any part or
parts thereof, either in the name of Landlord or otherwise, but for the account
of Tenant, for a term which may, at Landlord's option, be less than or exceed
the period which would otherwise have constituted the balance of the Lease Term
and Tenant shall also pay Landlord, as liquidated damages for the failure of
Tenant to observe and perform said Tenant's covenants herein contained, for each
month of the period which would otherwise have constituted the balance of the
Lease Term, any deficiency between (i) the sum of one monthly installment of
rent and all charges that otherwise would have become due, and (ii) the net
amount if any, of the monthly rents collected on account of the Lease of the
Premises for the balance of the Lease Term.
c) Any reletting of the Premises by Landlord in Landlord's name or
Tenant's name shall not terminate this Lease, shall not release Tenant from any
liability hereunder, and may be for such a term, rent amount and other
conditions as Landlord deems desirable, without advertisement and by private
negotiations. Tenant shall reimburse Landlord for all Landlord's costs,
expenses and attorney's fees in connection with such reletting, including
without limitation, all commissions and advertising costs. No action taken by
or on behalf of Landlord shall be construed to be an acceptance of a surrender
of the Premises and no agreement to accept a surrender of the Premises shall be
valid unless in writing and executed by Landlord. In determining the amount of
loss or damage which Landlord may suffer by reason of termination of this Lease
or the deficiency arising by reason of any reletting of the Premises by Landlord
as provided above, allowance shall be made for expense of repossession and any
repairs or remodeling undertaken by Landlord following repossession and there
shall be added to the amount of rent due to Landlord as herein provided, all
costs and expenses incurred by Landlord in the enforcement of this Lease,
including, without limitation, the fees of Landlord's attorneys.
d) Notwithstanding anything herein to the contrary, no termination of
Tenant's right of possession of the Premises by dispossessory action or
otherwise shall release Tenant from the performance of Tenant obligations under
this Lease, including, without limitation, the timely payment of all rent
reserved hereunder for the balance of the Lease Term following such termination
of Tenant's right of possession.
36. ENTIRE AGREEMENT. This document contains the entire agreement between
the parties as to the subject matter hereof. No other document or agreement
shall be effective to change, modify or terminate this Lease, whether in whole
or in part, unless such agreement is in writing and signed by both Landlord and
Tenant hereto. Tenant agrees and acknowledges that Landlord has not made any
promises, representations or covenants which are not contained in this document.
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37. ESTOPPEL LETTER. Tenant shall, upon request from Landlord at any
time, and from time to time execute, acknowledge and deliver to Landlord within
five (5) working days, a written statement certifying as follows:
(a) that this lease is unmodified and in full force and effect or if there
has been modification thereof, that the same is in full force and effect as
modified and stating the nature thereof; (b) that to the best of its knowledge
there are no uncured defaults on the part of Landlord (or if any such defaults
exist, the specific nature and extent thereof); (c) the date to which any rents
and other charges have been paid in advance, if any; and (d) such other matter
as Landlord may reasonably request.
38. SUBORDINATION AND ATTORNMENT. This Lease is expressly subject to the
lien of any holder of a first mortgage or a first priority deed to secure debt.
Tenant, upon the request of any holder of such mortgage or deed to secure debt,
or any person or entity succeeding to the interest of any such holder, agrees
that it will automatically become the Tenant of such holder or its successor in
interest, without change in the terms or other provisions of this Lease;
provided, however, that neither the holder nor any such successor in interest
shall be bound by (a) any payment of rental or additional rental for more than
one (1) month in advance, except prepayments in the nature of security for the
performance by said Tenant of its obligations under this Lease (and then only if
such prepayments have been deposited with and are under the control of the
holder); or (b) any amendment or modification of this Lease made without the
express written consent of the holder or said successor in interest. It is
further agreed that the rights of the parties under this Lease are expressly
subordinate to all the rights and title of any holder. The parties further
expressly recognize and agree that, notwithstanding any such subordination, the
holder of any prior mortgage or deed to secure debt may sell the Premises in the
manner provided under its loan documents, promissory notes, mortgage or deed to
secure debt, and thereby, at the option of the holder of such mortgage or deed
to secure debt, sell the same subject to this Lease.
39. FORCE MAJEURE. In the event of strike, labor trouble, civil
commotion, act of God, of any other cause (collectively hereinafter referred to
as "Force Majeure") outside and beyond Landlord's control, resulting in the
impairment of Landlord's ability to perform any obligation or provide any
service hereunder, this Lease shall not terminate, except at Landlord's
election, and Tenant obligation to pay annual rental, additional rental and all
other charges and sums due and payable by Tenant shall not be altered or
excused, and Landlord shall not be considered to be in default under this Lease
or liable in damages to Tenant in any manner.
40. PHONE SYSTEM INSTALLATION. Installation of any phone system is to be
totally at Tenant's expense. Coordination of dates, installation scheduling and
specific requirements must be initiated by the Tenant and/or the phone company
with the Landlord or Landlord's Managing Agent.
41. TENANT CORPORATION PARTNERSHIP OR INDIVIDUAL. If Tenant executes this
Lease as a corporation, each of the persons executing this Lease on behalf of
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Tenant does hereby covenant, warrant and represent that Tenant is a duly
organized and validly existing corporation, that Tenant has and is qualified to
do business in Georgia, that the corporation has full right and authority to
enter this Lease, and that each and all persons signing on behalf of the
corporation are authorized to do so. Upon Landlord's request, Tenant shall
provide Landlord with evidence reasonably satisfactory to Landlord confirming
the foregoing covenants and warranties. If Tenant executes this Lease as a
partnership, Tenant does hereby covenant, warrant and represent that all the
persons who are general or managing partners in said partnership have executed
this Lease on behalf of Tenant, and that this Lease has been executed and
delivered pursuant to and in conformity with a valid and effective authorization
therefor, by all of the general or managing partners of such partnership, and is
and constitutes the valid and binding agreement of the partnership and each and
every partner therein in accordance with its terms. It is also agreed that each
and every present and future partner of Tenant shall remain, at all times,
jointly and severally liable hereunder, and that the death, resignation, or
withdrawal of any partner shall not release the liability of such partner under
the terms of this Lease unless and until Landlord consents in writing to such
release. If Tenant executes this Lease as an individual, Tenant does hereby
covenant, warrant and represent that its legal residence address is that as set
forth below its signature on this Lease.
42. TENANT'S ACCEPTANCE. Tenant acknowledges that it has been afforded an
opportunity to inspect the Premises and accepts the Premises "as is" and is
suited for Tenant's intended use thereof, subject only to the completion of
tenant improvements, if any, as described in this Lease. Upon completion of the
tenant improvements, if any, contemplated by this Lease, or occupancy of the
Premises by Tenant, whichever first occurs, Tenant shall be deemed to have
accepted any improvements made since the date hereof.
43. SPECIAL STIPULATIONS. The Special Stipulations, if any, attached
hereto and initialed by Landlord and Tenant are hereby incorporated herein and
made a part hereof. In the event the Special Stipulations conflict with any of
the foregoing provisions of this Lease, the Special Stipulations shall control.
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands and seals
hereunder and have caused this Lease to be executed in their names and their
corporate seals to be affixed by their officers duly authorized thereunto, the
day and year set forth below.
TENANT:
Signed, sealed and delivered INTERNET ORGANIZING GROUP, INC., a Georgia
corporation
in the presence of:
/s/ Rick Rich By:/s/ Donald S. Shapleigh, Jr.
- ------------------------------ ----------------------------------------
Notary Public or Witness
Name:Donald S. Shapleigh, Jr.
---------------------------------
(Please Print)
Rick Rich
- ------------------------------
Name (Please Print) Title:President and CEO
--------------------------------
Date:6/24/96
---------------------------------
LANDLORD:
Signed, sealed and delivered THE GRIFFIN COMPANY
in the presence of:
/s/ Laurie Goin By:/s/ John S. Dryman
- ----------------------------------- -----------------------------------
Notary Public or Witness
Name:John S. Dryman
---------------------------------
(Please Print)
Laurie Goin
- -----------------------------------
Name (Please Print) Title:President
--------------------------------
Date:6/24/96
---------------------------------
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RULES AND REGULATIONS
Tenant shall observe the following Rules and Regulations (as amended, modified
or supplemented from time to time by Landlord as provided in this Lease):
1. Excepting microwave ovens, coffee pots and refrigerators, Tenant shall
not permit in the Premises any cooking nor the use of any apparatus for the
preparation of food or beverage, nor the use of any electrical apparatus likely
to cause an overload of electrical circuits. No article deemed extra hazardous
on account of fire and no explosive shall be brought into said Premises. No
offensive gases or liquids will be permitted.
2. The sidewalks, entries, passages, elevators and staircases shall not
be obstructed or used by Tenant, its agents, servants, contractor, invitees or
employees for any purpose other than ingress to and egress from the Premises.
Landlord reserves entire control of all parts of the Building (as defined in the
Lease) employed for the common benefit of the tenants including, without
restricting the generality of the foregoing, sidewalks, entries, corridors and
passages not within the Premises, washrooms, lavatories, air conditioning
closets, fan rooms, janitor's closets and other closets, stairs, flumes, stacks,
pipe shafts and ducts, and shall have the right to place such signs and
appliances therein as it may deem advisable, provided that ingress to and egress
from the Premises is not unduly impaired thereby.
3. Tenant, its agents, servants, contractors, invitees or employees,
shall not bring in or take out, position, construct, install or move any safe,
business machine or other heavy office equipment without first obtaining the
consent of the Landlord. In giving such consent, Landlord shall have the right,
in its sole discretion, to prescribe the weight permitted and the position
thereof, and the use and design of planks, skids or platforms to distribute the
weight thereof. All damages done to the Building by removing or using any such
heavy equipment or other office equipment or furniture must be repaired at the
expense of Tenant. The moving of all heavy equipment or other office equipment
or furniture shall occur at reasonable hours and the persons employed to move
the same in an out of the Building must be acceptable to Landlord. Safes and
other heavy office equipment will be moved through the halls and corridors only
upon steel bearing plates.
4. Tenant shall not rekey existing locks, place, nor cause to be placed,
any additional locks upon any doors of the Premises without the approval of
Landlord and subject to any conditions imposed by Landlord. Additional keys may
be obtained from Landlord at the cost of Tenant.
<PAGE>
5. The water closet and other water apparatus shall not be used for any
purpose other than those for which they were constructed and no sweepings,
rubbish, rags, ashes or other substances shall be thrown therein. Any damages
resulting form misuses of such facilities by Tenant or Tenant's servants or
employees shall be borne by Tenant. Tenant shall not let the water run unless
it is in actual use.
6. Tenant shall not deface or mark any part of the Building or drive
nails, spikes, hooks or screws into the wall or woodwork of the Building, except
for installation of decorative items.
7. No one shall use the Premises for sleeping apartments or residential
purposes, or for the storage of personal effects or articles other than those
required for business purposes.
8. Canvassing, soliciting and pedalling in the Office Park is prohibited.
9. Any hand trucks, carryalls, or similar equipment used in the Building
shall be equipped with rubber tires, side guards and other safeguards as
Landlord shall require.
10. No animals or birds shall be brought into the Premises.
11. Tenant shall not install or permit the installation or use of any
machine dispensing goods for sale in the Premises or the Building without the
approval of Landlord or in contravention of any regulation fixed by Landlord.
12. Tenant shall, at the end of each business day, leave the Premises in a
reasonably tidy condition for the purpose of the performance of Landlord's
cleaning services as provided in this Lease.
13. "Normal business hours" shall mean the days Monday through Friday,
inclusive, except legal holiday, during the hours from 8:00 a.m. to 6:00 p.m.,
and Saturdays, except legal holidays, from 8:00 a.m. to 1:.00 p.m.
14. In the use of electricity, Tenant shall not exceed the capacity of
existing feeders, risers, electricity or wiring, which are designed to provide
lighting and current for small business machines only, using 110 volt, 20 AMI'
circuits. If any additional circuitry or wiring is required by Tenant, and
Landlord approves the installation of the same in writing, such work shall be
performed at Tenant's expense by Landlord's electrician or under Landlord's
control and supervision, and Tenant shall pay Landlord for such additional work
as billed. In the event the Tenant utilizes electric current or other utilities
in excess of the amount which would be typically utilized by normal business
office use in the Premises (excluding from the definition of such normal
business office use, computers and data processing equipment), then Landlord
shall have the right to charge Tenant as additional rent a reasonable sum as
reimbursement for the direct cost of such additional use or services. In the
event of a disagreement as to the reasonableness of the amount of such
additional rent, the opinion of a qualified or local
2
<PAGE>
independent professional engineer selected by Landlord in good faith shall be
binding upon Landlord and Tenant.
15. Tenant shall have all curtains and window treatments approved by
Landlord before installing on the Premises.
3
<PAGE>
LAKE RIDGE 400 OFFICE PARK - BUILDING #10, SUITE 300
INTERNET ORGANIZING GROUP, INC.
SPECIAL STIPULATIONS
--------------------
1. Landlord and Tenant agree that Tenant shall accept the Premises in an "as
is" condition per Exhibit "A" attached hereto, except for the renovations
shown and listed on Exhibit "A" which Landlord agrees to provide, at its
expense.
2. Tenant shall have the right, at its expense, to construct additional
improvements to the Premises. Landlord and Tenant agree that the
improvements to the Premises performed by Tenant shall be subject to the
prior written approval of Landlord and shall be inspected by Landlord upon
completion. In the event that Landlord determines that the completed work
does not meet Landlord's standards, then any corrections to the
improvements specified by Landlord shall be immediately remedied, at
Tenant's expense, and shall again be subject to Landlord's approval.
3. Landlord and Tenant agree that Landlord shall hold the 2,100 square feet of
office space on the Second Floor of Building (hereinafter referred to as
"Suite 200" and as outlined on Exhibit "B" attached hereto) off the market
and Tenant shall pay additional rent in the amount of Two Thousand Nine
Hundred Seventy-Five ($2,975.00) Dollars per month from September 1, 1996
through November 30, 1996.
4. Landlord and Tenant agree that until November 30, 1996, provided Tenant is
not in default hereof, Tenant shall have the right to expand into Suite
200. If Tenant exercises its right to lease such Suite 200, the monthly
rental shall be Three Thousand One Hundred Fifty and No/100 ($3,150.00)
Dollars, as adjusted by Paragraph 12 of the Lease. The term shall be
coterminous with this Lease. Tenant agrees to accept the Suite 200 is an
"as is" condition, except Landlord agrees to paint walls only to match
existing color, excluding base, door, windows, and trim and steam clean
existing carpet. In the event Tenant does not exercise its right to lease
such Suite 200 on or before November 15, 1996, the Tenant's right shall
terminate and be of no further force or effect.
5. Pursuant to Stipulation #4, Landlord agrees to grant Tenant the right of
first refusal to lease Suite 200. Upon Landlord presenting a lease
proposal for the Suite 200 to a third party tenant, Tenant shall have three
(3) business days within which to notify Landlord, in writing, of its
decision to lease or not to lease the Suite 200. In the event that a third
party tenant does not lease Suite 200, then this right of first refusal
shall be ongoing. If Tenant exercises said right of first refusal, then
Tenant agrees to execute an Amendment to this Lease for such Suite 200 upon
the same terms and conditions as set froth above for a minimum term of
three (3) years from the amendment date. Landlord
4
<PAGE>
and Tenant agree that the initial Lease Term shall become co-terminus with
the term of the lease for the Suite 200. The monthly rent for the amended
Premises shall be increased by $3,150.00 for the period July 1, 1996
through June 30, 1997; by $3,276.00 for the period July 1, 1997 through
June 30, 1998; and by $3,407.04 for the period July 1, 1998 through June
30, 1999. The rent shall be adjusted annually pursuant to Paragraph 12 of
the Lease.
6. Landlord agrees to grant to Tenant, but not any assignee or sublessee, the
right to renew this Lease for one (1) two year period under the same terms
and conditions as set forth in this Lease, at the then current rental rate,
as adjusted by Paragraph 12 of this Lease; provided Tenant is not in
default at the time of Tenant's exercise of said right, and provided Tenant
has not previously had an Event of Default during the Term of this Lease.
Tenant shall give written notice to Landlord of Tenant's exercise of said
option on or before March 1, 1999 or said right to renew shall expire.
7. Landlord and Tenant agree that Tenant shall have the right to terminate
this Lease at midnight on December 31, 1997 by giving written notice to
Landlord of its intent to terminate on or before September 1, 1997 and by
paying, at the time of notice, a penalty in the amount of an amount equal
to eight (8) times the then current monthly rental; provided Tenant is not
in default under this Lease at the time of Tenant's exercise of said right.
If Tenant does not exercise this right to terminate, as specified above,
then this right shall become null and void and the Lease shall remain in
full force and effect.
8. Landlord and Tenant acknowledged that the monthly rent is inclusive of
$1.00 per square foot for estimated increased utility usage. In the event
the Tenant utilizes electric current or other utilities in excess of the
amount which has been estimated, then Landlord shall have the right to
charge Tenant as additional rent a reasonable sum as reimbursement for the
direct cost of such additional use or services. In the event of a
disagreement as o the reasonableness of the amount of such additional rent,
the opinion of a qualified or local independent professional engineer
selected by Landlord in good faith shall be binding upon landlord and
Tenant.
9. Landlord and Tenant agree that Tenant shall have access and use of the
Premises 24 hours per day, seven days per week, and 365 days per year.
10. Tenant agrees to observe and abide by the rules and regulations of the
Declaration of Condominium and By-Laws that establish and govern Lake Ridge
400 Condominium Office Park.
11. Tenant acknowledges that the principals of Landlord are licensed real
estate brokers, and are receiving a real estate commission in connection
with this transaction.
12. Landlord and Tenant agree that Landlord shall provide and install up to two
(2) high pressure sodium exterior lighting fixtures on the exterior of the
Building.
5
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13. Landlord and Tenant agree that the landscaped areas immediately adjacent to
the Building will be maintain in a manner consistent with other comparable
office buildings in the North Central Atlanta office market.
14. Landlord and Tenant agree that Tenant may, at its expense, perform the work
explained in the Scope of Work Memorandum from Ms. Belinda Morgan dated
June 6, 1996 attached hereto as Exhibit "C". It is further agreed that
Tenant shall not install any security devices to the exterior of the
Building other than those outlined in Stipulation #12.
6
<PAGE>
STATE OF GEORGIA
COUNTY OF FULTON
FIRST AMENDMENT
---------------
THE FIRST AMENDMENT (hereinafter called the "Amendment") made and entered
into as of this 12th day of December, 1996 by and between THE GRIFFIN COMPANY
(hereinafter called the "Landlord") and INTERNET ORGANIZING GROUP, INC.
(hereinafter called the "Tenant");
W I T N E S S E T H:
-------------------
WHEREAS, Landlord and Tenant entered into a certain Lease Agreement dated
June 18, 1996 (hereinafter called the "Lease") for approximately, 2,100 square
feet on the Third Floor of Building #10 (hereinafter called the "Premises") in
LAKE RIDGE 400 OFFICE PARK, and being further described as 7000 Peachtree
Dunwoody Road, Building #10, Suite 300, Atlanta, Fulton County, Georgia 30328;
and
WHEREAS, Landlord and Tenant desire to amend the Lease in order to make the
following modifications:
NOW, THEREFORE, it is hereby agreed that for and in consideration of the
additional terms and conditions set forth below, said Lease is hereby modified
and amended as follows:
1. Special Stipulation #3 is hereby amended by deleting the words and
numbers November 30, 1996 appearing in Line 5 and substituting the words and
numbers February 28, 1997 in lieu thereof.
2. Special Stipulation #4 is hereby amended by deleting the words and
numbers November 30, 1996 appearing in Line 1 and substituting the words and
numbers February 28, 1997 in lieu thereof, and by deleting the words and numbers
November 15, 1996 appearing in Line 8 thereof, and substituting the words and
numbers February 15, 1997 in lieu thereof.
It is mutually agreed that the above provisions shall be effective December
1, 1996.
Except as herein provided, all terms and conditions of the Lease shall
remain the same.
7
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have caused their duly authorized
representative to execute this Amendment under seal as of the dates set forth
below.
TENANT:
Signed, sealed and delivered INTERNET ORGANIZING GROUP,
in the presence of: INC.
/s/ Belinda L. Morgan /s/ Donald S. Shapleigh, Jr.
- ----------------------------------- --------------------------------------
Witness
Belinda L. Morgan Name:/s/ Donald S. Shapleigh, Jr.
- ----------------------------------- ---------------------------------
Name (Please Print) (Please Print)
Date: 12/30/96
LANDLORD:
Signed, sealed and delivered THE GRIFFIN COMPANY
in the presence of:
/s/ Laurie Goin /s/ John S. Dryman
- ----------------------------------- --------------------------------------
Witness John S. Dryman
President
Laurie Goin Name: 1/6/97
- ------------------------------ ---------------------------------
Name (Please Print) (Please Print)
Date:
8
<PAGE>
MEMORANDUM
TO: Don Shapleigh, Internet Organizing Group, Inc. ("IOG")
FROM: T. Stephen Johnson, T. Stephen Johnson & Associates, Inc. ("TSJ&A")
RE: Consulting Services to IOG
Date: June 11, 1996
- --------------------------------------------------------------------------------
This memo sets in writing that TSJ&A will provide regulatory, accounting,
bookkeeping, marketing, organizational, and capital procurement support to IOG
until such time as the company is fully capitalized and staffed. TSJ&A will be
reimbursed for time and expenses associated with this support based on the
normal hourly rate charged by TSJ&A individuals and actual documented
out-of-pocket expenses. TSJ&A will be reimbursed only upon a successful
capitalization of IOG.
Hourly Rate:
Steve Johnson $250
Jim Stokes 180
All Other Staff 60
<PAGE>
CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO THE RULES
AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION
EXHIBIT 10.6
TRIAL AGREEMENT
This Agreement is made and entered into as of the date it is signed by
both parties (hereinafter referred to as the "Effective Date") by and between
AT&T Corp., having offices at 295 North Maple Avenue, Basking Ridge, New Jersey
07920, on behalf of itself and its affiliated companies (hereinafter referred to
collectively as "AT&T"), and Internet Operating Group, Inc., having offices at
7000 Peachtree Dunwoody Rd., Bldg. 10, Suite 310, Atlanta, Georgia 30328
(hereinafter referred to as "Customer").
RECITALS
WHEREAS, AT&T desires to conduct a marketing and technical trial
(hereinafter referred to as the "Trial") for AT&T's proposed Personal Financial
Services offer (hereinafter referred to as the "Service") in advance of
introducing it in the marketplace to determine its feasibility for various types
of service applications and to identify and develop necessary or desirable
refinements to the Service, and
WHEREAS, Customer wishes to determine the utility and feasibility of
utilizing the Service to meet some of its business needs and the needs of its
end user customers ("Users"),
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants set forth herein, AT&T and Customer agree as follows:
1. AT&T RESPONSIBILITIES
(a) AT&T will conduct the Trial of the Service with the Customer
in accordance with the parameters described in this Agreement.
(b) AT&T will provide to Customer, at the charges specified in
Attachment B, the services, equipment and software described in Attachment A, as
amended from time to time by the parties. Title to all such equipment and/or
software provided by AT&T for the purposes of this Trial shall remain with AT&T
and its suppliers. Risk of loss or damage to such equipment and/or software
shall remain with AT&T except to the extent that such loss or damage is
attributable to Customer's willful or intentional misconduct.
2. CUSTOMER'S RESPONSIBILITIES
(a) Customer shall cooperate with AT&T in all aspects of the
Trial as reasonably required by AT&T. Cooperation shall include: evaluating the
Service while the Trial is in progress and informing AT&T of Customer's views
concerning the virtues and shortcomings of the Service; participating in focus
groups and surveys and seeking Customer's Users participation in same; and,
providing testimonials concerning Customer's opinions regarding the Service.
Customer will make available to AT&T
<PAGE>
Customer's Users so that user data can be gathered directly from them. During
the Trial, Customer shall permit AT&T, upon reasonable request, to perform such
maintenance, tests, experiments and measurements relating to the Service as AT&T
deems appropriate.
(b) Customer acknowledges that nothing in this Agreement shall
be construed as a commitment by AT&T to offer the Service to Customer or to
anyone else following the termination of the Trial.
(c) Customer has sole responsibility for purchasing, leasing or
operating, and adequately protecting and maintaining the equipment, software,
data, and other property specified as Customer provided in Attachment A. Title
and risk of loss for such Customer supplied equipment, software, data and other
property shall remain with Customer.
(d) Unless otherwise stated, Customer shall bear its own
expenses associated with the Trial. Customer will also pay AT&T the Service
charges specified in Attachment B.
(e) Customer shall include in its participating User
documentation provisions that are comparable to and at least as restrictive as
the Software License and Intellectual Property, Warranty and Limitations of
Liability Sections of this Agreement and shall assure that such provisions
extend to all suppliers of the Service (including AT&T). Customer shall deliver
to its participating Users the AT&T specified SOFTWARE along with its associated
documentation (including end user license terms and conditions) which
accompanies such SOFTWARE. Customer shall require its participating Users to
provide the equipment, software and services identified in Attachment A as a
User deliverable.
(f) The Trial and the data made available through the Trial will
not affect, in any way, Customer's obligation to pay AT&T for any tariffed
services which it receives from AT&T or any goods or services provided to
Customer by AT&T under any other contracts or agreements.
3. SOFTWARE LICENSE AND INTELLECTUAL PROPERTY
(a) AT&T grants to Customer for the Term of this Agreement a
personal, non-transferable, and non-exclusive right to use in object code form
the AT&T provided software described in Attachment A (hereafter the "SOFTWARE"),
with the right to sublicense solely to Customer's Users that participate in the
Trial for use solely by Customer and such Users for the purpose of beta testing
the Service. All SOFTWARE and related documentation and all copies thereof, are
and will remain the sole property of AT&T and its suppliers. Customer and Users
shall not modify, reverse engineer, disassemble, or decompile the
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<PAGE>
SOFTWARE; or remove any proprietary rights legend from the SOFTWARE or the
documentation; or cause or permit copying, display, loan, disclosure,
publication, transfer of possession or other dissemination of the SOFTWARE,
except as expressly permitted by the terms of this Agreement. The terms of any
license agreement packaged with any non-AT&T owned SOFTWARE shall govern the use
of such SOFTWARE.
(b) AT&T shall have the right to use Customer and participating
User suggested enhancements, changes and modifications to the Service, at AT&T's
discretion, including, but not limited to, the incorporation of such
enhancements, changes or modifications into the Service, and to assign, license
or otherwise transfer to third parties the enhanced, changed or modified Service
or components thereof.
(c) Customer agrees that upon expiration or termination of this
Agreement, Customer will promptly return all copies of SOFTWARE and associated
documentation to AT&T in the same condition as received, reasonable wear and
tear excepted, and shall erase all computer programs from the personal computer
on which they were loaded.
(d) Customer and its suppliers will retain the exclusive rights
to their respective intellectual property in the Customer systems and
applications which were in existence prior to the Effective Date of this
Agreement. AT&T and its suppliers will retain the exclusive rights to their
respective intellectual property in the AT&T Service which were in existence
prior to the Effective Date of this Agreement. If AT&T creates custom-developed
software which is paid for by AT&T under this Agreement ("Custom Proprietary
Software"), then AT&T will own the copyright and all other intellectual
proprietary rights in the Custom Proprietary Software. Except as otherwise
expressly agreed to by the parties, Custom Proprietary Software shall include
any customization work, the development of interfaces between Customer's systems
and applications and the AT&T Service and any enhancements, improvements and
modifications to the AT&T Service described in Attachment A, as amended from
time to time. In the event that during the Term of this Agreement the parties
agree upon additional custom development work that is not covered by Attachment
A, then a separate development addendum to this Agreement is required to reflect
the description of the work, the deliverables, milestones, any associated
charges, and the rights of the respective parties.
4. TERM AND TERMINATION
(a) The term of this Agreement shall commence with the Effective
Date of this Agreement and shall expire eighteen (18) months thereafter, unless
terminated earlier as provided below. The parties may mutually agree in writing
prior to said expiration date to renew this Agreement for a specified term,
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<PAGE>
provided that neither party shall be obligated to agree to any such renewal.
(b) This Agreement shall terminate at the earlier to occur of
the following:
(1) the expiration date of the Term, or
(2) upon 6 months prior written notice without cause by
either party to the other party, provided that such notice shall not be served
by either party before 6 months following the commencement of the friendly-user
trial described in Attachment A, or
(3) upon 30 business days' prior written notice by either
party to the other party if the other party is in default of a material term or
condition of this Agreement and has failed to cure such default within the
notice period, or
(4) immediately upon written notice by either party if:
(i) the other party has intentionally or in a willful,
wanton or reckless manner made any material, false representation or violated
the other's tradenames, trademarks or service marks;
(ii) the other party has been placed in conservatorship
or receivership, become insolvent or involved in a liquidation or termination of
its business, or adjudicated bankrupt, or been involved in an assignment for the
benefit of creditors; or
(iii) mandated by governmental or regulatory
authority.
(c) Upon expiration or termination of this Agreement:
(1) neither party shall be relieved of any obligations due
at the time of such expiration or termination, nor shall such expiration or
termination prejudice any claim of either party accrued on account of any
default or breach by the other; and
(2) each party shall immediately return to the other party,
if requested to do so, or destroy, all promotional materials and all Information
protected under Article 5 which has been supplied by the other party; and
(3) each party shall cease using the other party's Marks,
for which permission to use had been granted during the term of this Agreement
under Article 13; and
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<PAGE>
(4) in the event that termination has been initiated by
either party pursuant to Section 4(b)(2), then both parties will continue to
perform their respective obligations pursuant to the terms and conditions of
this Agreement for the duration of the 6 month period between service of notice
by the terminating party and the effective date of termination ("6 Month Notice
Timeframe"). During the 6 Month Notice Timeframe, Customer shall continue to
pay the charges in Attachment B with respect to all Users and shall continue to
be subject to the monthly cap on add-on live users as stated in Attachment A.
However, in the event that Customer adds new Users during the 6 Month Notice
Timeframe in excess of the lesser of 5,000 new Users per month or the total new
Users which were added by Customer during the 3 months immediately preceding the
service of notice of termination, then Customer shall also reimburse AT&T for
AT&T's actual incremental costs incurred to enable AT&T to add such excess new
Users to the Service.
(5) in the event termination has been initiated by AT&T
without cause pursuant to Section 4(b)(2) or by Customer due to AT&T's breach
pursuant to Section 4(b)(3), AT&T will provide Customer reasonable assistance in
migrating to an alternative service provider and Customer will compensate AT&T
for such assistance at AT&T's prevailing time and materials rates, provided that
the parties reach mutual agreement in writing within 30 days following their
mutual receipt of notice of termination, concerning the scope and duration of
support that AT&T will provide and the applicable charges that Customer will
pay.
5. CONFIDENTIALITY
(a) Both parties, for their mutual benefit, desire to disclose
or have disclosed to the other, certain specifications, designs, plans,
drawings, software, data prototypes, or other business and/or technical
information (hereinafter collectively referred to as "Information") which is
proprietary to the disclosing party or its affiliated companies or suppliers.
The receiving party shall hold such Information in confidence, shall reproduce
or copy such Information only to the extent necessary for its authorized use,
shall restrict disclosure of such Information to its employees who have a need
to know, shall advise such employees of the obligations assumed under this
section, and shall not disclose such Information to any third party without the
prior written approval of the other party and a confidentiality agreement at
least as restrictive as this Article 5.
(b) These restrictions on the use of disclosure of information
shall not apply to any Information:
(1) that is independently developed by the receiving party
or its affiliated companies or lawfully received
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<PAGE>
free of restriction from another source having the right so to furnish such
Information; or
(2) that is or becomes publicly available by means other
than unauthorized disclosure; or
(3) that, at the time of disclosure to the receiving party,
was known to such party or its affiliated companies free of restriction as
evidenced by documentation in such party's possession; or
(4) that the disclosing party agrees in writing is free of
restrictions stated in this Agreement.
(c) Information shall be subject to these confidentiality
restrictions if it is in writing or other tangible form, only if clearly marked
as proprietary when disclosed to the receiving party or, if not in tangible
form, only if summarized in a writing so marked and delivered to the receiving
party within 10 business days of such disclosure, in which case the Information
contained in such summary shall be subject to the restrictions herein.
(d) No license to a party, under any trademark, patent,
copyright, mask work protection right or any other intellectual property right,
is either granted or implied by the conveying or Information to such party.
None of the Information which may be disclosed or exchanged by the parties shall
constitute any representation, warranty, assurance, guarantee or inducement by
either party to the other of any kind, and, in particular, with respect to the
noninfringement of trademarks, patents, copyrights, mask protection rights or
any other intellectual property rights, or other rights of third persons or of
either party.
(e) All Information shall remain the property of the
transmitting party and shall be returned upon written request or upon the
receiving party's determination that it no longer has a need for such
information. Upon expiration or termination of this Agreement, each party shall
return to the transmitting party, or, if agreed to by the transmitting party,
destroy, all Information supplied by the transmitting party, and all copies of
such Information.
(f) Each party agrees that it will not, without the prior
written consent of the other, transmit, directly or indirectly, the Information
received from the other hereunder or any portion thereof to any country outside
of the United States.
(g) Each party agrees that all of its obligations undertaken in
this Section 5 as a receiving party of Information shall survive and continue
for two years after any expiration or termination of this Agreement.
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<PAGE>
(h) Except as stated in Section 3(d), Customer's and its Users'
feedback to AT&T provided pursuant to Section 2(a) relating to the Service shall
be considered Information of both AT&T and Customer. Notwithstanding Section
5(e), Customer may retain a copy of this Agreement following the Agreement's
expiration or termination. Notwithstanding Section 5(c), Customer's User
information generated during transactions using the Service shall be considered
Customer's Information.
6. WARRANTIES
(a) AT&T warrants that: (i) it will provide the Service in a
workmanlike manner; (ii) it and its suppliers own all right, title and interest
in the Service and it has all necessary rights from third parties to provide the
Service in accordance with the terms of this Agreement to Customer; (iii) it
will not knowingly infringe any patent, copyright, trademark, trade secret, mask
work or other intellectual property right of any third party; and (iv) it will
comply at all times with all applicable requirements of federal, state and local
laws and regulations.
(b) EXCEPT FOR THE WARRANTIES STATED IN SECTION 6(a), THE
SERVICE IS OFFERED ON AN "AS IS" BASIS. AT&T MAKES NO WARRANTY, GUARANTEE, OR
REPRESENTATION, EXPRESS OR IMPLIED, RELATING TO THE RELIABILITY, EFFECTIVENESS,
ACCURACY, COMPLETENESS, PERFORMANCE, OR OPERATION OF THE SERVICE, OR OF THE
EQUIPMENT AND SOFTWARE FURNISHED TO CUSTOMER FOR PURPOSES OF THE SERVICE OR THE
TRIAL, AND SPECIFICALLY DISCLAIMS ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE. AT&T DOES NOT GUARANTEE THAT THE SERVICE WILL NOT CAUSE
INTERRUPTIONS IN OR INTERFERENCE WITH CUSTOMER'S OR USERS' TELECOMMUNICATIONS OR
OTHER SERVICES WHICH INTERCONNECT WITH THE SERVICE.
(c) Customer warrants that:
(i) it is a bank organized and authorized to conduct a
banking business under the laws of the State of Georgia, and it is an insured
bank under the Federal Deposit Insurance Act, and it has obtained all necessary
approvals from state and federal banking regulatory authorities to participate
in the Trial and to use and enable Users to use the Service as described in this
Agreement, and will keep AT&T informed in a timely manner about such regulatory
requirements to the extent that they affect the implementation or operation of
the Service in any manner; and
(ii) it will comply at all times with all applicable
requirements of the federal Electronic Fund Transfer Act (12 U.S.C. Sections
1693 et seq.), Federal Reserve Board Regulation E thereunder (12 C.F.R. part
205), and any similar state or local laws or regulations, in connection with the
use of
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<PAGE>
the Service by Users, including such requirements, if any, as may be applicable
thereunder to AT&T; and
(iii) it will comply at all times with all other
applicable requirements of federal, state and local laws and regulations.
7. LIMITATION OF LIABILITY
(a) THE LIABILITY OF EITHER PARTY TO THE OTHER FOR ANY CLAIM
ARISING FROM ANY CAUSE WHATSOEVER (EXCEPTING PERSONAL INJURY AND/OR DEATH)
REGARDLESS OF THE CAUSE OF ACTION, WHETHER IN CONTRACT, TORT OR OTHERWISE, SHALL
BE LIMITED TO DIRECT DAMAGES ACTUALLY PROVEN, NOT TO EXCEED AN AGGREGATE OF
$1,000,000 DURING THE TERM OF THIS AGREEMENT.
(b) AT&T SHALL NOT BE LIABLE FOR ANY DAMAGES ARISING OUT OF:
INABILITY BY CUSTOMER, USERS OR THIRD PARTIES TO USE THE AT&T SERVICE WHICH IS
THE SUBJECT OF THIS AGREEMENT; SERVICE INTERRUPTIONS; INTEROPERABILITY,
INTERACTION OR INTERCONNECTION OF THE AT&T SERVICE WITH APPLICATIONS, SERVICES
OR NETWORKS PROVIDED BY CUSTOMER, USERS OR THIRD PARTIES; OR UNAUTHORIZED ACCESS
TO OR THEFT, ALTERATION, LOSS OR DESTRUCTION OF CUSTOMER'S USERS' OR THIRD
PARTIES' APPLICATIONS, DATA, PROGRAMS, INFORMATION, NETWORK OR SYSTEMS THROUGH
ACCIDENT, FRAUDULENT MEANS OR ANY OTHER METHOD BY ANYONE.
(c) NEITHER PARTY SHALL BE LIABLE FOR INDIRECT, INCIDENTAL,
CONSEQUENTIAL, RELIANCE OR SPECIAL DAMAGES, INCLUDING WITHOUT LIMITATION DAMAGES
FOR LOST PROFITS, SAVINGS OR REVENUES OF ANY KIND OR INCREASED COST OF
OPERATIONS, WHETHER OR NOT IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.
(d) AS USED IN THIS ARTICLE 7, "AT&T" AND "CUSTOMER" SHALL BE
DEEMED TO INCLUDE EACH PARTY'S PARENTS, SUBSIDIARIES, AND AFFILIATES, AND THE
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, REPRESENTATIVES, SUPPLIERS AND
CONTRACTORS OF ALL OF THEM.
8. INDEMNITIES
(a) Subject to the limitations stated in Article 7 above, each
party ("Indemnifying Party") shall defend, indemnify and hold the other party
and its affiliates harmless from any and all claims, suits, actions, demands,
costs, settlements, losses, damages, expenses and all other liabilities
including reasonable attorney's fees (collectively "Claims"), arising out of or
resulting from its breach of this Agreement or the intentionally wrongful or
negligent acts or omissions on the part of the Indemnifying Party, its
employees, officers, suppliers, contractors, agents or affiliated companies in
the performance of or failure to perform the Indemnifying Party's obligations
under this Agreement. In addition, Customer as Indemnifying Party
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<PAGE>
shall also indemnify and hold harmless AT&T from all Claims arising out of or
relating to Customer's or User's use of the Service. The indemnity obligations
under this Section 8(a) are contingent upon: (1) the Indemnifying Party
receiving prompt notice of any Claim for which indemnification is sought
hereunder; (2) the Indemnifying Party having sole control of the defense or
settlement of any such Claim; and (3) the Indemnifying Party receiving the
reasonable cooperation of the indemnified party.
(b) AT&T agrees to defend or settle, at its own expense, any
Claim against Customer alleging that the Service infringes any United States
patent, trademark, copyright or trade secret. Customer agrees to defend or
settle, at its own expense, any Claim against AT&T alleging that Customer
supplied systems or applications interfacing or interconnecting to the Service
or Customer's or Users' content or transmissions using the Service infringe any
United States patent, trademark, copyright or trade secret. The defending party
under this Section 8(b) ("Defending Party") will also pay all damages and costs
(including reasonable attorneys' fees) that by final judgment may be claimed or
assessed against the other party due to such infringement. The obligations
under this Section 8(b) are contingent upon: (1) the Defending Party receiving
prompt notice of any Claim for which indemnification is sought hereunder; (2)
the Defending Party having sole control of the defense or settlement of any such
Claim; (3) the Defending Party receiving the reasonable cooperation of the other
party; and (4) the Claim does not arise from the other party's modifications,
intellectual property or from combinations of services or products provided by
the Defending Party with services or products provided by the other party or
others.
In the event of a claim of infringement, the Defending Party
will, at its option: (1) procure for the other party the right to continue
using the allegedly infringing service or product; (2) replace or modify the
allegedly infringing service or product so that it becomes noninfringing and
substantially complies with this Agreement's requirements; or (3) upon inability
to reasonably perform either of the foregoing, terminate this Agreement without
liability other than as stated in this Section 8(b). THIS SECTION 8(b) STATES
THE ENTIRE LIABILITY OF EITHER PARTY TO THE OTHER FOR INTELLECTUAL PROPERTY
INFRINGEMENT.
(c) As used in this Article 8, "AT&T" and "Customer" shall be
deemed to include each party's parents, subsidiaries and affiliates, and the
directors, officers, employees, agents, representatives, suppliers and
contractors of all of them.
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<PAGE>
9. FORCE MAJEURE
Neither party nor its affiliates, subsidiaries, subcontractors, parent
corporation or any of its parent's affiliates or subsidiaries shall be liable in
any way for delay, failure in performance, loss or damage due to any of the
following force majeure conditions: fire, strike, embargo, explosion, power
blackout, earthquake, flood, war, labor disputes, civil or military authority,
acts of God or the public enemy, inability to secure raw materials, acts or
omissions of other carriers or suppliers, or other causes beyond its reasonable
control, whether or not similar to the foregoing.
10. ASSIGNMENT
Neither party may assign or transfer or attempt to assign or transfer
any part or all of this Agreement, or any of its rights or obligations
hereunder, without the prior written consent of the other party, except that
AT&T may assign this Agreement to its parent, any subsidiary or any affiliate
and Customer may assign this Agreement to a third party bank that is a successor
in interest by merger or acquisition.
11. CHOICE OF LAW
The construction, interpretation and performance of this Agreement
shall be governed by the laws of the State of New Jersey without giving effect
to its choice of law rules.
12. ENTIRE AGREEMENT
The terms and conditions of this Agreement shall constitute the entire
agreement and understanding of the parties with respect to the subject matter
hereof and shall supersede all prior, written or oral agreements, proposals or
understandings. This Agreement shall not be modified, altered, changed or
amended in any respect, except by a writing signed by an authorized
representative of each party.
13. PUBLICITY/TRADEMARKS AND TRADENAMES
Neither party shall use, in any advertising, publicity or User
documentation, any of the other party's trade names, logos, trademarks, trade
devices, service marks, symbols, codes, specifications, abbreviations or
registered marks, or contractions or simulations thereof (hereinafter referred
to collectively as "Marks"), without the other party's advance approval in
writing. Neither party shall claim ownership or any other rights in the other
party's Marks. Upon termination of this Agreement, any and all rights or
privileges of either party to use the other's Marks shall expire and each party
shall discontinue the use of the other's Marks. For purposes of this
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<PAGE>
Article, Marks of AT&T shall include those of the AT&T Corp., its subsidiaries
and affiliates.
14. SECTION HEADINGS
The section headings in this Agreement are inserted for convenience
only and are not intended to affect meaning or interpretation.
15. DISPUTE RESOLUTION
The parties shall follow these dispute resolution processes in
connection with all disputes, controversies or claims, whether based on
contract, tort, statute, fraud, misrepresentation or any other legal theory
(hereinafter collectively "Disputes"), except as otherwise noted, arising out of
or relating to this Agreement or the breach or alleged breach hereof, or to the
products or services covered by this Agreement;
(a) The parties will attempt to settle all Disputes through good
faith negotiations. If those attempts fail to resolve the Dispute within
forty-five (45) days of the date of initial demand for negotiation, then the
parties shall try in good faith to settle the Dispute by mediation conducted in
New Jersey or other mutually agreed location under the Commercial Mediation
Rules of the American Arbitration Association ("AAA"). Each party shall bear
its own expenses; the parties shall equally share the filing and other
administrative fees of the AAA and the expenses of the mediator. The parties
shall be represented in the mediation by representatives having final settlement
authority over the matter in dispute.
(b) Thereafter, any remaining Disputes not finally resolved at
the mediation level shall be settled by binding arbitration conducted in New
Jersey or other mutually agreed location in accordance with the then current
Commercial Arbitration Rules of the American Arbitration Association ("AAA").
Selection of one neutral arbitrator by the parties shall be from the AAA Panel
List in accordance with the appointment rules of the AAA. Each party shall bear
its own expenses; the parties shall equally share the filing and other
administrative fees of the AAA and the expenses of the arbitrator. Any award of
the arbitrator shall be in writing, shall state the reasons for the award
(including any findings of fact and conclusions of law) and shall explain the
breakout of any damages awarded. Judgment upon an award may be entered in any
Court having competent jurisdiction. The arbitrator shall not have the power to
award damages in excess of actual damages, such as punitive damages and damages
excluded under the LIMITATION OF LIABILITY Section of this Agreement. The
Federal Arbitration Act, 9 U.S.C. Sections 1 to 14, shall govern the
interpretation and enforcement of this Section 15(b).
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<PAGE>
(c) Disputes relating to either party's compliance with the
CONFIDENTIALITY and PUBLICITY Sections of this Agreement, a violation of which
would cause the Information owner or marks owner, as applicable, irreparable
harm for which damages would be inadequate, shall be exempt from the dispute
resolution processes described in this Article 15. The Information owner or
marks owner reserves the right, in connection with such disputes, at any time
and in its discretion, to seek injunctive or other judicial relief in a court of
competent jurisdiction.
AT&T and Customer, acting through their duly authorized
representatives, hereby agree to the terms set forth in this Agreement.
INTERNET ORGANIZING GROUP, INC. AT&T CORP.
By: /s/ T. Stephen Johnson By: /s/ Jeffrey Feldman
--------------------------- --------------------------------
T. Stephen Johnson Jeffrey Feldman
- ------------------------------ -----------------------------------
(Printed or Typed Name) (Printed or Typed Name)
Chairman V.P. Marketing - ANS
- ------------------------------ -----------------------------------
(Title) (Title)
8-19-96
- ------------------------------ -----------------------------------
(Date) (Date)
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<PAGE>
ATTACHMENT A
REQUIREMENTS DOCUMENT - Version 1.0
This Requirements Document is intended to be re-evaluated and updated by the
parties at regular intervals during the Term of the Agreement to which this
Attachment is appended. Each update, when mutually agreed to by the parties in
writing, will supersede its prior version and will become an integral part of
this Agreement. Particular open issues requiring further discussion and mutual
agreement in writing before they become commitments on the part of either party
are denoted by either UNDERLINED BOLD-FACE type or CAPITALIZED TEXT (the latter
representing future proposed features and functions beyond the user-friendly
trial phase).
AT&T/AIB Confidential
Attachment A
1
<PAGE>
1. GENERAL
1.1 BACKGROUND
Atlanta Internet Bank (AIB) and AT&T desire to establish an electronic
distribution channel to deliver AlB's products and services to AlB's
end-user customers (Users). This distribution channel will be implemented
through AT&T's Personal Financial Services (PFS) offer (the "Service").
AIB has separately contracted with BiSys to manage AlB's customer accounts
processing. AT&T has separately contracted with Edify Corporation for its
Electronic Workforce and Electronic Banking System applications to access
AlB's customer accounts and to manage information presentation.
1.2 OBJECTIVES
AIB will execute an awareness campaign in connection with the Summer
Olympics. To support AIB's promotion activities, AT&T will advertise the
AIB site in its WorldNet Service and provide a hyperlink to the AIB home
page. Site visitors can learn about AIB, try an Internet banking
demonstration, and apply for an AIB bank account. AIB's goal is to
activate User accounts on the Service after the Olympics, commencing after
a preliminary trial of the Service.
To support the proposed User activation target, the parties desire to trial
the Service. The purpose of the trial is to thoroughly test the Service
solution in a real-usage environment. AIB will select approximately 50
"very close friends of the bank" as trial participants; the AT&T PFS team
will also participate in the friendly-user trial as AIB Users.
This Version 1.0 specifies the features, functionality, and requirements to
initiate a friendly-user trial starting approximately 2 weeks after the
Effective Date of the Agreement. Appendix A represents the architecture
implementation that supports the user-friendly trial as well as the
proposed addition of future enhancements to the Service.
1.3 TRIAL
The trial implementation of the Service will enable Users to open
interest-bearing checking accounts and perform basic electronic
transactions such as account history, internal transfers, and bill payment.
AT&T/AIB Confidential
Attachment A
2
<PAGE>
2. DELIVERABLES
2.1 AT&T
- Delivery of overall Service solution across all AT&T suppliers
- All voice and data network services for Users and connections to AlB's
bank systems. AIB or Users will pay for associated tariff charges, as
applicable. (Tariff services are not provided under this Agreement,
but are solely governed by the terms, conditions and charges in
applicable filed tariffs.)
- Coordination with and connections to CheckFree customer care (via
ROLA)
- Facilities and operations management of Edify hardware and software
- Project management across all AT&T suppliers
- Trouble tracking and issues resolution for the Service
- Database definition with Edify
- Web site hosting services
- Security maintenance and management
- Redundant systems, including servers with RAID drives, modems, various
hardware and communications facilities; support by 7X24 system
administration.
2.2 EDIFY (AT&T SUPPLIER)
- Professional programming services
- Electronic Workforce
- Electronic Banking System ("EBS")
- BiSys interface
- CheckFree interface
- Database
- Phase 2 CheckFree certification
- Definition of BiSys information, screens, and communications
- Edify server development and installation to AT&T architecture
2.3 BISYS (AIB SUPPLIER)
- Bank core processing system service bureau (7 x 24)
- Management and coordination with Edify applications
- Supporting on-line access by AIB personnel
- Maintain secure connection into BiSys system
- Recovery coordination of transaction processing interruptions
AT&T/AIB Confidential
Attachment A
3
<PAGE>
2.4 CHECKFREE (AT&T SUPPLIER)
- Electronic bill payment processing services
- Customer care support to AT&T PFS Customer Care and AIB Customer Care
- Phase 1: Certification testing of Edify's CheckFree application
- Phase 2: Certification testing of Edify's CheckFree application
2.5 AIB
- Development and management of Web site (Folio Z)
- Apply for Verisign Digital ID for SSL registration
- Back-office operations and customer care
- Develop welcome kit for trial and live user implementation
2.6 JOINT (AT&T AND AIB)
- Development of project workplan
- Test plan: unit, integration, system, post implementation, customer
care
- Integration testing
- Security design and implementation
- User scaling plan
- Disaster recovery plan.
AT&T/AIB Confidential
Attachment A
4
<PAGE>
3. PROJECT MILESTONES
AT&T and AIB will mutually agree to a Project Plan, with applicable
milestones and delivery dates, which will be amended from time to time by
the parties, as necessary.
AT&T/AIB Confidential
Attachment A
5
<PAGE>
4. DEVICE SUPPORT
4.1 TRIAL AND LIVE USER IMPLEMENTATION
- Unless otherwise noted, all features and functionality specified in
this document are supported through an Internet browser (Netscape
Navigator-TM- browser"). The exact operation of the user interface
for banking transactions, bill payment, and other EBS features are not
specified in this Attachment. [NOTE: Netscape Navigator is a
trademark of Netscape Communications].
4.2 POST INTRODUCTION
- The banking transaction, bill payment and other features specified in
this document will be implemented as agreed to in the Project Plan.
AT&T/AIB Confidential
Attachment A
6
<PAGE>
5. BISYS HOST CONNECTIVITY
The AT&T PFS Gateway (via the Edify Electronic Workforce) will access BiSys'
processing service bureau to enable the banking transactions as specified below.
The user-interface design of Edify's Electronic Banking System ("EBS") and the
information presented to the User is based on the account information available
via BiSys. Under the AIB - BiSys contract, BiSys provides AIB with the
necessary hardware and software to enable AIB Customer Care representatives to
access User account information.
5.1 ACCOUNT TYPES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Account Type
Date Checking: Regular, MMDA CD: Regular, IRA
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Minimum Maximum Minimum Maximum
- --------------------------------------------------------------------------------
Friendly-
UserTrial 1 TBS TBD TBD
+
- --------------------------------------------------------------------------------
Live
User* 0 per BiSys 0 per BiSys
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
+ Each User must have at least two AIB accounts to test Internal Unscheduled
Transfer, and the account mix across Users must sufficiently test the
operation of each account type.
* It is assumed that the User has at least one Checking or CD Account with
AIB.
5.2 ACCOUNT HISTORY (EDIFY = ACCOUNT STATEMENT)
Currently, BiSys does not provide a transaction that returns the exact
information that would be presented to the User on their typical monthly,
paper statement. BiSys provides AIB account history information for up to
the previous 90 days. To view this information, the User can select several
presentation options including frequency, sort, and filter criteria.
- For the specified Checking or CD account the following information is
displayed:
- Available Balance
- Based on the frequency, sod criteria, and filter criteria the
User selects, display the account information in the following
table format:
-----------------------------------------
-----------------------------------------
Date Check # Transaction Amount
Description
-----------------------------------------
-----------------------------------------
AT&T/AIB Confidential
Attachment A
7
<PAGE>
5.2.1 Frequency (Edify = Statement Type)
- The User can view account history information from a specified date
range (default = last 30 days).
- The User can view a "Quick Summary" of the last 10 account
transactions.
5.2.2 Sort Criteria (Edify = Sort)
- The User can select from the following sort criteria:
- Date
- Amount
- Check #
- Transaction Type
5.2.3 Filter Criteria (Edify = Search)
- The User can select from the following filter criteria:
- Check # (returns exactly one response)
- Amount (may return more than one response)
-
5.3 AUTOMATIC STATEMENT
- FOR EACH ACCOUNT, EBS WILL AUTOMATICALLY DELIVER THE MONTHLY STATEMENT
TO THE USER. THE EXACT OPERATION WILL BE DETERMINED BY AIB, AT&T,
EDIFY, AND BISYS.
5.4 INTERNAL TRANSFERS
An internal transfer is performed between AIB Checking and MMDA Accounts
held by the User.
5.4.1 Unscheduled Variable Transfer (Edify = Immediate Transfer)
- The User can transfer funds between each Checking and each MMDA
Account. The transfer is processed using standard BiSys
operations.
AT&T/AIB Confidential
Attachment A
8
<PAGE>
5.4.2 Scheduled Valuable Transfer (Edify = Future Transfer)
- THE USER CAN ESTABLISH AN AUTOMATIC TRANSFER TO OCCUR ON A DATE
SPECIFIED BY THE USER. THE TRANSFER IS PROCESSED USING STANDARD
BISYS OPERATIONS.
- OPERATING PARAMETERS FOR SETTING DATE TO BE DEFINED.
5.4.3 Recurring Transfer
- THE USER CAN ESTABLISH AN AUTOMATIC TRANSFER BASED ON A FREQUENCY
DETERMINED BY THE USER. THE TRANSFER IS PROCESSED USING STANDARD
BISYS OPERATIONS.
- OPERATING PARAMETERS FOR SETTING FREQUENCY TO BE DEFINED.
5.5 EXTERNAL TRANSFERS
AN EXTERNAL TRANSFER IS PERFORMED BETWEEN AIB CHECKING OR MMDA ACCOUNTS AND
A PRE-DESIGNATED ACCOUNT AT ANOTHER FINANCIAL INSTITUTION.
5.5.1 UNSCHEDULED VARIABLE TRANSFER
- THE USER CAN TRANSFER FUNDS FROM EACH CHECKING OR MMDA ACCOUNT.
THE TRANSFER IS PROCESSED USING STANDARD BISYS OPERATIONS.
5.5.2 SCHEDULED VARIABLE TRANSFER
- THE USER CAN ESTABLISH AN AUTOMATIC TRANSFER TO OCCUR ON A DATE
SPECIFIED BY THE USER. THE TRANSFER IS PROCESSED USING STANDARD
BISYS OPERATIONS.
- OPERATING PARAMETERS FOR SETTING DATE TO BE DEFINED.
5.5.3 RECURRING TRANSFER
- THE USER CAN ESTABLISH AN AUTOMATIC TRANSFER BASED ON A FREQUENCY
DETERMINED BY THE USER. THE TRANSFER IS PROCESSED USING STANDARD
BISYS OPERATIONS.
- OPERATING PARAMETERS FOR SETTING FREQUENCY TO BE DEFINED.
AT&T/AIB CONFIDENTIAL
ATTACHMENT A
9
<PAGE>
5.6 USER PROFILE
- EBS allows the User to change the following information:
- Address 1
- Address 2
- City, State, Zip Code
- Home Phone Number
- Work Phone Number
- BISYS WILL CONFIRM ITS SUPPORT FOR MIRRORING USER PROFILE INFORMATION.
- WHEN A USER CHANGES ANY OF THE ABOVE INFORMATION, EBS AUTOMATICALLY
SENDS THE UNDATED INFORMATION TO CHECKFREE, PER STANDARD CHECKFREE
PROTOCOL.
- WHEN A USER CHANGES ANY OF THE ABOVE INFORMATION, EBS AUTOMATICALLY
SENDS A BANK MAIL MESSAGE CONTAINING THE UNDATED INFORMATION TO THE
AIB AND THE AT&T ADMINISTRATION MAILBOXES.
- FAX NUMBER AND EMAIL ARE DESIRABLE FIELDS.
5.7 Account Profile (Edify = Balance Inquiry)
- For each Checking and CD account, the following information is
displayed in table format. In cases where a particular field is not
applicable (e.g. Maturity Date for a Checking account), display an
empty field.
-
----------------------------------------------------------
----------------------------------------------------------
Account Available YTD Maturity
Description Account # Balance Interest Date
----------------------------------------------------------
----------------------------------------------------------
AT&T/AIB CONFIDENTIAL
ATTACHMENT A
10
<PAGE>
6. BILL PAYMENT
AT&T has contracted with CheckFree Corporation as the bill-payment services
supplier for the Service. AT&T will, at its expense, integrate access to
CheckFree's service through the AT&T Gateway and Edify Electronic
Workforce. Bill payment will be available to friendly-user trial
participants so that each trial participant can initiate bill payments
during at least one statement cycle before live user activation. NOTE: To
allow two statement cycles during the trial, BiSys will set the statement
cycle at two weeks versus the standard one month.
6.1 USER REGISTRATION
- AT&T Customer Care will enter the User's CheckFree account number into
EBS via the Reports administration area.
- If no CheckFree account number has been entered for a given User, EBS
does not display or provide access to any of the bill payment or
maintenance options.
6.2 PAYEE MAINTENANCE
Add Payee
Delete Payee
Edit Payee
6.3 PAYMENT
- Upon account sign-up, the User must specify the single account
(Checking or MMDA) that all electronic bill payments will be debited
against.
- The EBS-CheckFree module automatically schedules payments to account
for long weekends and holidays.
6.3.1 Variable Payments
- For each Checking and MMDA Account, the User can initiate a variable
payment electronic bill payment.
- The payment date is automatically scheduled for four business days
into the future.
- To account for long weekends and holidays, EBS automatically presents
the next soonest appropriate date for which a bill payment can be
scheduled.
AT&T/AIB CONFIDENTIAL
ATTACHMENT A
11
<PAGE>
6.3.2 Recurring Payments
- For each Checking and MMDA Account, the User can initiate a recurring
payment electronic bill payment with the following parameters:
- Next scheduled payment date
- Amount
- Frequency
- Number of payments
6.3.3 Payment Maintenance
- THE USER WILL BE ABLE TO SWITCH AN ELECTRONIC BILL PAYMENT FROM
VARIABLE TO RECURRING, AND VICE VERSA.
6.3.4 Installment Payment
- FOR EACH CHECKING AND MMDA ACCOUNT, THE USER CAN SCHEDULE AN
ELECTRONIC BILL PAYMENT WITH THE FOLLOWING PARAMETERS:
- TERM OF LOAN
- RECURRING PAYMENT
- PAYMENT FREQUENCY
- LAST PAYMENT
6.4 PAYMENT MAINTENANCE
- EVERY HOUR, ON THE HOUR, EBS BATCHES ALL PENDING PAYMENTS TO CHECKFREE
VIA THE STANDARD ANALOG DIAL-UP CONNECTION TO THE COMPUSERVE NETWORK.
6.4.1 Review Pending Payments
- The User can view a list of each electronic bill payment that is
within the four-day payment window that has not been processed by
CheckFree or that has not yet been sent to CheckFree. This list also
includes all pending recurring payments.
6.4.2 Modify Pending Payment
- For each pending electronic bill payment, the User can change the
date, payee, or amount. The User can also delete the scheduled
payment. EBS will determine to simply delete the payment (e.g. not
sent to CheckFree yet) or to issue a Stop Payment request to
CheckFree.
AT&T/AIB CONFIDENTIAL
ATTACHMENT A
12
<PAGE>
6.4.3 Stop Payment: Bill Payment
- When the User issues a delete payment (see 0), if the current date is
at least four days (lead time) before the scheduled payment date, EBS
issues a STOP PAYMENT request to CheckFree per standard CheckFree
protocol.
- If the current date is past the four days (lead time) before the
scheduled payment date, AT&T Customer Care will attempt to stop the
payment via CheckFree's ROLA System. Otherwise, AT&T Customer Care
will contact CheckFree to initiate a stop payment. CheckFree levies a
surcharge to perform this service.
7. SERVICE REQUESTS VIA ELECTRONIC MESSAGE
Users cannot access certain services (described below in this Section 0)
electronically through BiSys, CheckFree, or via another service provider.
Therefore, AIB Customer Care must directly handle these User requests. The
User at its option may call AIB Customer Care for these services.
Additionally, Users can send a message to AIB Customer Care to initiate a
service request. This requires AIB to develop a process for managing
incoming messages and responding to the User in a timely fashion.
7.1 EBS BANK MAIL PROCESS
- All User requests will be via Bank Mail, for Unformatted and Context
Sensitive Messages. Each request is stored in a database with a status
of NEW. To process the requests, AIB Customer Care accesses the
database at intervals determined by AIB. At this point, it is expected
that AIB Customer Care will reply to the User, acknowledging that the
User's request has been received, and AIB Customer Care will enter the
request per standard procedures AIB follows for similar requests
received via phone or post mail. EBS then automatically deletes the
message from the database.
- AIB Customer Care must have Internet service to access EBS and the
Bank Mail subsystem. At the friendly-user trial phase, AT&T WorldNet
Service is the only Internet access that AT&T can technically support.
IS THERE ONE ID AND PASSWORD FOR AIB CUSTOMER CARE?
NOTE: Until secured Internet-based e-mail is viable.
7.2 UNFORMATTED MESSAGE
- The User can send a free-form message to AIB Customer Care. The User
must enter the subject and request.
- For AIB auditing purposes, all messages must be time and date stamped.
AT&T/AIB CONFIDENTIAL
ATTACHMENT A
13
<PAGE>
7.3 CONTEXT SENSITIVE MESSAGE
- THE USER CAN SEND A PREFORMATTED MESSAGE TO AIB CUSTOMER CARE: THE
SUBJECT AND REQUEST WILL BE AUTOMATICALLY ENTERED BASED ON THE
HYPERLINK SELECTED BY THE CUSTOMER.
- THE USER MAY ADD COMMENTS TO THE BODY OF THE E-MAIL.
- For AIB auditing purposes, all messages must be time and date stamped.
7.3.1 Service Requests
- EBS supports the following context sensitive service requests:
7.3.1.1 Stop Payment: Check
7.3.1.2 Check Reorder
7.3.1.3 Set-Up Direct Deposit
7.4. GENERAL MESSAGING
- Any visitor to the AIB Web site can send e-mail to AIB over the Global
Internet. This should be limited to general information queries and
suggestions to enhance the site; Users should not include any account
specific information.
- DOES FRONTPAGE SUPPORT A FORM THAT COLLECTS FREEFORM INPUT FROM THE
USER AND GENERATES AN E-MAIL ADDRESSED TO AIB CUSTOMER CARE? THIS
PROVIDES CONSISTENT MESSAGING SUPPORT IN CASES WHERE THE SITE VISITOR
DOES NOT HAVE INTERNET E-MAIL THROUGH THEIR SERVICE PROVIDER.
- WHAT SOFTWARE DO WE REQUIRE FOR AIB CUSTOMER CARE, GIVEN THAT EW3
SENDS E-MAIL VIA EASYLINK? CAN WE COORDINATE THIS E-MAIL WITH EBS
BANK MAIL? HOW TO RESPOND AND TRACK MESSAGES ACROSS THE DIFFERENT
PLATFORMS?
- THIS REQUIRES AIB TO DEVELOP A PROCESS FOR MANAGING INCOMING MESSAGES
AND RESPONDING IN A TIMELY FASHION.
AT&T/AIB CONFIDENTIAL
ATTACHMENT A
14
<PAGE>
8. CONSUMER INTERNET ACCESS
AT&T will provide AT&T s WorldNet Service (under a WorldNet contract
between AT&T and each individual User), which includes Internet and World
Wide Web access and use of the Netscape Navigator 2.0 browser. AT&T offers
a variety of options to customize the Netscape Navigator browser, including
branding, pre-configured buttons, and pre-loaded bookmarks.
8.1 USER REQUIREMENTS
During the initial 2 months of the friendly-user trial, AIB will require
its Users to subscribe to AT&T WorldNet Service, insofar as that is the
only Internet access that AT&T can technically support at this time and the
parties desire to obtain meaningful trial feedback. Following the initial 2
months, AIB may allow its Users to utilize Internet access other than AT&T
WorldNet, provided that AIB clearly informs such Users: (i) that AT&T does
not provide support for onboarding, or technical support for the browser or
Internet access, and (ii) where and how, other than through AT&T, such
Users can obtain onboarding and technical support for the browser and
Internet access.
8.2 BROWSER CUSTOMIZATION
- AT&T will customize the browser with the following features:
- NETSCAPE NAVIGATOR AUTOMATICALLY CONNECTS TO THE AIB HOME PAGE
- Pre-loaded bookmarks to AIB-targeted Web sites, e.g.
- Olympics
- Atlanta Braves
- Coca-Cola
NOTE: During the friendly-user trial, AT&T Customer Care will assist
Users in manually establishing these bookmarks in Netscape Navigator.
To simplify the onboarding process, AT&T will explore a procedure for
Pre-configuring the Netscape Navigator software before fulfillment to
the User.
- CUSTOMER CARE AND HELP INTEGRATION SCREENS AND TEXTUAL CONTENT
9. INTERNET BANKING
The EBS platform will provide the Internet banking templates and
transaction functionality available through the Edify Electronic Workforce,
which interfaces to the BiSys processing center.
AT&T/AIB CONFIDENTIAL
ATTACHMENT A
15
<PAGE>
- --------------------------------------------------------------------------------
USER SCENARIO
The User enters the AIB web site through AT&T WorldNet Service. When the User
selects the appropriate hyperlink (e.g. "Banking Transactions" or "Pay Bills"),
a secure session to the EBS server will be initiated. The User must
authenticate by entering a USER_ID and PASSWORD, which is verified against the
BISYS FILE. If the User passes authentication, they are allowed access to the
EBS application and their accounts.
- --------------------------------------------------------------------------------
- - AT&T will manage installation and operations of the EBS and Electronic
Workforce software and hardware. AT&T will link the AIB WWW Site to the
Edify EBS server.
- - Through the Service, Edify will provide professional services for the
programming of Edify's systems.
- - The Service will provide AIB Users the banking transaction features as
specified in Section 0 via Edify's EBS interface. By identifying the
browser and HTML support, EBS will present either the frames or non-frames
interface.
- - Edify will customize EBS per defined customizable areas provided to AIB
(e.g. logo and button names).
- - AIB WOULD LIKE TO EXPLORE THE POSSIBILITY OF INCORPORATING THE PFS WEB
TEMPLATES.
AT&T/AIB CONFIDENTIAL
ATTACHMENT A
16
<PAGE>
10. WORLD WIDE WEB SITE HOSTING
The AIB web site represents AlB's Interface with the User and therefore
must be easily accessible, reliable, and attractive.
10.1 FEATURES
The web site supports three main User relationship-building activities -
marketing, bank account application, and web banking demonstration. To
deliver the web site, the following responsibilities are defined:
- AIB is responsible for developing and maintaining the web site through
the Microsoft FrontPage tool and AT&T WorldNet Service Internet
access, both of which are features provided by the Service.
- AT&T will train MB-designated personnel (FolioZ) on the FrontPage
application and the related procedures for staging AlB's web site and
moving that web site to the production environment.
10.1.1 Marketing, Products and Services
This represents the general content of the web site. Visitors
can learn about AIB and its products and features.
10.1.2 Bank Account Application Request
Visitors to the site may wish to apply for an account with AIB.
THE EXACT PROCESS IS TBO BY AIB, AT&T, AND EDIFY. AIB WILL
DEVELOP A PROCESS FLOW PROPOSAL.
10.1.3 Web Banking Demonstration
To show site visitors how easy web banking is, AIB will provide a
demonstration of the basic banking and bill payment transactions.
The demonstration replicates the functionality of the EBS
frames-based and non-frames-based interfaces available to AIB
Users.
- AIB select a subset of the EBS functions to include in the
demonstration. All entry fields are pre-populated and cannot be
changed by the User.
- Edify will provide the HTML content to FolioZ for hosting on EW3
(rather than an EBS Server) to support the expected large number
of site hits.
- AIB will provide marketing text to display in the advertising
frame (upper right).
AT&T/AIB CONFIDENTIAL
ATTACHMENT A
17
<PAGE>
10.2 IMPLEMENTATION
- Refer to the Project Plan regarding the implementation and testing of
the AIB web site. For the purposes of the trial start, the AIB web
site may consist of one simple page with a hyperlink to the banking
and bill payment transaction services (on the EBS server).
AT&T/AIB CONFIDENTIAL
ATTACHMENT A
18
<PAGE>
11. ADDITIONAL FEATURES
11.1 Loan Calculator
AT&T/AIB CONFIDENTIAL
ATTACHMENT A
19
<PAGE>
12. SECURITY
AIB, AT&T, EDIFY, BISYS, AND CHECKFREE MUST REACH A COMMON UNDERSTANDING OF
SECURITY REQUIREMENTS AND THE STEPS NECESSARY TO MAXIMIZE THE SECURITY OF
THE SERVICE AND BANK SYSTEMS.
- All Edify servers hosted by AT&T will be operated from a secure
facility
- Each entry to the transaction server will be authenticated as an AIB
User that is registered for the Internet banking service.
AT&T/AIB CONFIDENTIAL
ATTACHMENT A
20
<PAGE>
13. CUSTOMER CARE
AT&T will, at AIB's expense and at tariffed charges, provide an 800 number
and the Call Prompter advanced network feature to allow the User to select
technical customer care or AIB sales and service customer care.
13.1 AT&T Customer Care
13.1.1 Onboarding Activities
- Manage distribution of User Welcome kits - including welcome letter,
WorldNet Service disks, set-up and user documentation
- Pre-register each User for the following services:
- AT&T WorldNet Service
- AIB Internet Banking
CheckFree Bill Payment
- Onboarding functions described in Exhibit A to this Attachment A
13.1.2 Post-Onboarding User Support
- Provide Tier I and Tier II customer technical support for:
AT&T WorldNet Service
AIB web-banking and bill-payment applications
AIB web marketing site, including the AIB Demo
- Manage User issues and resolution across all AT&T suppliers (AT&T,
Edify, CheckFree)
13.2 AIB CUSTOMER CARE
- Create welcome letter and related user documentation for User Welcome
Kit, and arrange for review and approval by AT&T
- Provide sales and service for banking products and account issue
resolution
- Provide all non-WorldNet onboarding and Tier 1 support
AT&T/AIB CONFIDENTIAL
ATTACHMENT A
21
<PAGE>
13.3 USER REGISTRATION PROCESS
- AT&T and AIB Customer Care will jointly develop the process whereby
AIB notifies AT&T to register a new account. When completed, this
process will be included as an Appendix to this Attachment. That
process will include:
- notification method, e.g. e-mail, fax, ...
- User information
- verification to AIB
- registration notice to User
13.4 USER INITIALIZATION PROCESS
- TBD BY AIB AND AT&T.
- WHAT IS THE PROCESS FOR DETERMINING AND DELIVERING THE DEFAULT
PASSWORD TO THE USER?
- WHAT IS THE PROCESS FOR THE USER TO CHANGE THE DEFAULT PASSWORD
ASSIGNED BY AIB?
13.5 MINIMUM USER CONFIGURATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Trial (Preferred) General Availability
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Computer IBM or 100% Compatible IBM or 100% Compatible
- --------------------------------------------------------------------------------
Processor 486 DX2 50 386 SX
- --------------------------------------------------------------------------------
Operating System Windows 3.1 Windows 3.1
Windows for Workgroups 3.11 Windows for Workgroups
Windows 95 3.11
Windows 95
- --------------------------------------------------------------------------------
RAM 8 MB RAM 8 MB RAM
- --------------------------------------------------------------------------------
Modem 14.4 Kbps 14.4 kbps
- --------------------------------------------------------------------------------
Free disk space
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- To cover the widest number of User configurations, trial participants
should include the preferred trial configuration and the AT&T WorldNet
Service standard configuration.
AT&T/AIB CONFIDENTIAL
ATTACHMENT A
22
<PAGE>
14. LIVE USER IMPLEMENTATION
To execute a smooth User scale-up, especially with respect to customer care
and overall system performance, it is important to phase the live User
ramp-up. This will allow AT&T to manage system scalabiiity and system
performance testing. AIB makes the following projections (which are
non-binding)
---------------------------
---------------------------
Total Users*
---------------------------
---------------------------
MONTH 1 1667
---------------------------
MONTH 2 3334
---------------------------
MONTH 3 5000
---------------------------
---------------------------
---------------------------
NOTE: Total Users means the cumulative number of Users in that month.
During the initial 18 month Term of the Agreement, AIB will not exceed
5,000 add-on live Users per month.
AT&T/AIB CONFIDENTIAL
ATTACHMENT A
23
<PAGE>
15. DATABASE (TBD BY AIB, AT&T, AND EDIFY)
AT&T/AIB CONFIDENTIAL
ATTACHMENT A
24
<PAGE>
16. INTEGRATED USER BILLING
At this time, AT&T is not providing (branded) billing services on behalf of
AIB to AIB Users. AIB will be required to bill its Users for the Service.
AT&T will bill AIB's Users directly only for AT&T WorldNet Services under
the AT&T WorldNet contract between AT&T and each individual User.
AT&T/AIB CONFIDENTIAL
ATTACHMENT A
25
<PAGE>
17. REPORTS ADMINISTRATION
- AT&T Customer Care and AIB Customer Care can access all available
standard EBS reports.
- Each day, Edify will write the following information to a tab
delimited ASCII file. AT&T Customer Care can retrieve this file via
FTP from the EBS Reports administration area.
- ??? TO BE DETERMINED BY AT&T AND EDIFY ???
AT&T/AIB CONFIDENTIAL
ATTACHMENT A
26
<PAGE>
EXHIBIT A TO ATTACHMENT A
AT&T ONBOARDING ACTIVITIES
INITIAL PRE-ONBOARDING PROCESS
1.0 Site Preparation and Staff Readiness
- Establish Onboarding Operations center
- Design and implement support systems
- Staff, train and equip Operations center
- Ensure professional competency levels across all probable PC,
software, telephone platforms
- Replicate common E/U environments
- Establish operation linkages with all pertinent suppliers to
facilitate pre-onboarding system readiness, registration, billing and
security, e.g.: WorldNet, Edify (EBS) and CheckFree and Billing
Platform
- Establish Performance DMOQs and management information requirements
and reports
2.0 Identification & Initial Solicitation for Qualification/Eligibility:
- Establish E/U final technical requirements/criteria released
- Gather E/U technical requirements for WorldNet and EBS registration
- Create data base to establish E/U profiles
- Initial qualification/selection process - E/U candidate targets
identified by PPS Team and Bank Project Manager.
- Create Solicitation Package
Package includes: announcement, information, technical requirements,
application form.
- Develop, design and implement solicitation process.
- Mail solicitation package, announcement, technical requirements and
application form.
AT&T/AIB CONFIDENTIAL
ATTACHMENT A
27
<PAGE>
- Verify E/U receipt verification, AT&T, via phone, confirms receipt of
solicitation package answers questions.
- Obtain E/U completed solicitation information package and forwards
electronically to Life cycle support.
- Capture all positive responses
- Capture negative responses
- Populate E/U candidate profile data base with all information
- Forward electronically a list of nonrespondents to Bank to advise and
begins follow-up call to determine cause of nonparticipation.
- Input or electronically feed positive responses and nonparticipation
data into the E/U profile.
- Final E/U qualification and selection process by AT&T & Bank Project
Manager.
- Potential candidates identified sent to profile manager and Life Cycle
support electronically
- Creates final E/U Target Master List and forwards electronically to
Bank
3.0 PreOnboarding Process (Fulfillment, Registration, Onboarding Support)
- E/U completes requested information and returns electronically or
mails to profile manager
- Review information for completion and forwards to the appropriate
suppliers, archives copies and updates E/U master file.
- Confirm supplier receipt and readiness for E/U prior to scheduled
onboarding appointment with the EIU.
- Electronically transmits master file to profile manager at the Bank
- Send two files:
- "Good to Go" File
- Incomplete E/U file requiring follow-up
- Profile manager manages both files.
- Contact "Good to Go" E/U on scheduled onboarding date.
AT&T/AIB CONFIDENTIAL
ATTACHMENT A
28
<PAGE>
- Incorporate frequently asked questions to support onboarding
experience
- Review overall onboarding experience
- Confirm E/U read instructions
- Determine if self install attempted and status
ONBOARDING PROCESS
4.0 Onboarding Process
PC Onboarding:
- Guide software loading and testing
- Conduct Demo/Tutorial Review
- Guide navigating to WorldNet and EbS site
- Explain and review feature review (only for first 3,000 Users)*
- Conduct pre-disconnect competence test (only for first 3,000 Users)*
- Answer questions
- Conduct pre-disconnect competence test (only for first 3,000 Users)*
- If good, captures experience, pertinent customer comments,
onboarding time (expense). *
- Completes/updates master file*
5.0 Customer Assurance Call (only for first 3,000 Users)*
- Conducts a two week post onboarding assurance call*
- Verify use, no difficulty*
- If no/limited use - gather reason why*
- Update master profile*
Onboarding process completed
NOTE: THESE ACTIVITIES WILL BECOME THE RESPONSIBILITY OF CUSTOMER FOLLOWING
ONBOARDING BY AT&T OF THE first 3,000 Users commencing with the user-friendly
trial.
AT&T/AIB CONFIDENTIAL
ATTACHMENT A
29
<PAGE>
ATTACHMENT B -- SERVICE CHARGES
AT&T will bill Customer the charges specified below, which are exclusive of
any applicable taxes. Customer's payment of all charges, including applicable
taxes, shall be due within 30 days of the invoice date. Customer shall pay all
local, state and Federal taxes, however designated (excluding taxes on AT&T's
net income), imposed on or based upon the provision or use of the Service.
The charges below are subject to change in the event that the parties
mutually agree to change the deliverables or responsibilities of the parties
specified in Attachment A.
1. Implementation Fee $__________
* NOTE: This one-time charge will be invoiced to Customer as follows:
$_______ at the Effective Date of this Agreement, and $_______ upon commencement
of the live user implementation defined in Attachment A.
2. MONTHLY USER FEES $__________
**NOTE: These charges are for Users that register with Customer to use the
Service, pursuant to a separate contract between Customer and User, during the
live user implementation phase identified in Attachment A. Customer will be
invoiced on a monthly basis for fees incurred during the preceding month. There
are no monthly fees for Users that participate during the user-friendly trial
that precedes Live User Activation.
3. CUSTOMER SUPPORT
$__________ per User*** for the initial 3,000 Users, commencing with the
friendly-user trial described in Attachment a.
$__________ per User*** following the initial 3,000 Users.
*** NOTE: These fees cover AT&T onboarding activities described in
Attachment A, Section 13.1.1.
**** NOTE: These fees cover AT&T onboarding activities described in
Attachment A, Section 13.1.1, except for those services which are designated as
Customer obligations following the initial 3,000 Users.
<PAGE>
INTERNET ORGANIZING GROUP
7000 PEACHTREE DUNWOODY ROAD
BUILDING 10, SUITE 310
ATLANTA, GEORGIA 30328
August 16, 1996
AT&T Corp.
295 North Maple Avenue
Basking Ridge, NJ 07920
Re: Trial Agreement dated the date hereof
Ladies and Gentlemen:
AT&T Corp. ("AT&T") and Internet Organizing Group, Inc. ("Internet") have
executed contemporaneously herewith a certain Trial Agreement containing certain
terms and conditions relating to the provision of Internet Banking Services.
Internet is a business corporation organized under the laws of the state of
Georgia. As you are aware, it is presently managing the Internet banking
operations of the "Atlanta Internet Bank," which at the present time is a
product offered by Carolina First Bank, Greenville, South Carolina ("CFB").
Internet has also executed a definitive agreement to acquire Premier Bank,
a federal savings bank. Upon completion of that acquisition, which is scheduled
to occur during the fourth quarter of 1996, CFB will assign the Atlanta Internet
Bank operation to Premier Bank, which will then change its name to Atlanta
Internet Bank.
Internet intends to provide the services provided by the Trial Agreement
only in connection with the operation of the Atlanta Internet Bank as a banking
product presently being offered by CFB, and then subsequently directly through
Premier Bank following the acquisition of that entity.
<PAGE>
AT&T Corp.
August 16, 1996
Page 2
- ------
Notwithstanding the provisions of the Trial Agreement, AT&T acknowledges
the foregoing arrangements and agrees to the provision of Internet banking
services as provided herein by Internet.
With respect to the warranties contained in Section 6(c)(i) of the Trial
Agreement, Internet represents and warrants that such statements are correct
with respect to CFB as of the date of execution hereof except that CFB is a
South Carolina corporation. Internet further represents and warrants that such
statements will be correct upon CFB's transfer of the Atlanta Internet Bank
operation to Internet upon Internet's acquisition of Premier Bank, except that
Premier Bank is a federal savings bank. Notwithstanding the foregoing, both
parties hereto acknowledge that although Internet is making such representations
and warranties about CFB, neither CFB nor any of its affiliates is a party to
the Trial Agreement, and accordingly, can have no liability thereunder. The
parties acknowledge that Internet has no authority to bind CFB.
The parties agree that all notices under the Agreement shall be in writing
and deemed to have been made and received when personally served, or when mailed
by first class mail, postage prepaid and addressed to the other party at the
address set forth on the first page of the Agreement. The parties may change
their addresses for purposes of this notice provision by written advance notice
to the other party at any time.
Very truly yours,
INTERNET ORGANIZING GROUP, INC.
By: /s/ Belinda Morgan
--------------------------
AGREED TO as of the date and year first above written.
AT&T CORP.
By:
-----------------------------------------
<PAGE>
CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO THE RULES
AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION.
SERVICES AGREEMENT
BISYS, INC. Contract No. CHH-2217
11 Greenway Plaza Price List No. 12-91
Houston, Texas 77046-1102
Client INTERNET ORGANIZING GROUP, INC.
------------------------------------------------------------------------
Address 7000 PEACHTREE/DUNWOODY ROAD, BUILDING 10, SUITE 300
-----------------------------------------------------------------------
City ATLANTA State GEORGIA Zip Code 30328
--------------------- -------------------- -------------
1. SCOPE OF AGREEMENT
Client agrees to convert to the BISYS system (defined in Paragraph 2(C) below)
and BISYS, Inc. ("BISYS") shall provide Client, in accordance with this
Agreement, the services selected by Client from BISYS' then applicable Standard
Services Price List and/or Special Services Price List (collectively, the "Price
Lists") (collectively, the "Services"). BISYS shall provide the reports listed
on the Standard Reports List and Special Reports List as applicable to the
Services selected by Client. The current Price Lists are attached hereto and
made a part hereof.
2. TERM OF AGREEMENT
A. The initial term of this Agreement shall commence the date this Agreement
is executed by both parties and end 36 full calendar months after the
"Conversion Date" (as defined in Paragraph 4 (B)) (the "Initial Period").
B. The Agreement shall automatically continue after the Initial Period for
subsequent consecutive terms of three years each unless and until it is
terminated by either party upon written notice to the other given at least
180 days prior to the end of the Initial Period or any additional three
year period.
C. If Client has given BISYS notice pursuant to Paragraph 2(B) and Client
intends to deconvert from the BISYS data processing system ("BISYS
System"), Client may, upon written notice to BISYS given at any time during
the final 120 days of this Agreement (as determined in accordance with 2(B)
above) or any extension hereof pursuant to this Paragraph 2(C), extend the
termination date to the date indicated in such notice, which date shall not
be, in any event, less than 120 days after the date of such notice.
Commencing at the end of the Initial Period or any renewal period (as
applicable), Client shall pay for Services at the prices set forth in the
then current BISYS Price Lists notwithstanding the giving of extension
notice.
D. Continuing obligations under this Agreement including, without limitation,
those relating to "BISYS Products" (defined in Paragraph 10(A));
"Confidential Information" (defined in Paragraph 10(F)) and "Client Files"
(defined in Paragraph 8(A)), shall survive any termination.
3. CHARGES
A. Each month commencing Conversion Date, whether or not Client actually uses
any Services during such month, Client shall pay a minimum monthly amount
equal to the greater of (i) $__________ (ii) BISYS' charges for the
Services actually used by Client during such month; or (iii) ____% the
charges invoiced to Client for the month immediately preceding any
deconversion by Client if Client deconverts from the BISYS System.
B. The initial charges for the Services are specified in the Price Lists, and
shall be recorded by the BISYS System or by any other means used by BISYS
of determining Client's usage. The charges for the Services listed on the
Standard Services Price List as of the date hereof will not be changed by
BISYS until the expiration of the first year following Conversion Date.
Thereafter, during the remaining term of the Initial Period, the charges
for the Services listed on the Standard Services Price List may be changed
by BISYS at any time and from time to time upon at least 90 days prior
written notice to Client. During the Initial Period, the charges for the
Services listed on the Special Services Price List as of the date hereof
may be changed by BISYS at any time after the date hereof upon at least 90
days prior written notice to Client. After the Initial Period, the charges
for the Services listed on the Price Lists shall automatically, and without
notice, be changed to BISYS' standard (non-discounted) list prices then in
effect for the respective Services; such prices may, thereafter, be changed
by BISYS, at any time and from time to time, upon at least 90 days prior
written notice to Client.
C. There shall be added to all charges for the Services furnished Client
hereunder amounts equal to any applicable taxes levied or based on such
Services, exclusive of taxes based on BISYS' income.
D. No later than the 5th day of each calendar month, BISYS shall invoice (the
"Monthly Invoice") Client: (i) for all Services projected to be used by
Client during that billing month (the "Billing Month") which charge will be
based upon either actual usage and number of accounts during the month
prior to the Billing Month or the minimum charge pursuant to Paragraph
3(A); (ii) an amount equal to 100% of the recurring pass through charges
(e.g. communication charges) actually utilized by Client during the prior
month as the estimated pass through charges for the Billing Month; (iii)
adjustments (debits/credits) to the prior month's estimated charges set
forth in (i) and (ii) above and; (iv) all other charges incurred by Client
during the prior month. For the projected portion of the invoice, the
first Monthly Invoice shall be based upon BISYS' estimates of usage and
shall also include for the prior month (during which the Conversion Date
occurred) a full month's charges unless the Conversion Date is after the
15th of the prior month, in which event Client shall be assessed one-half
month's charges for the prior month. Client agrees to pay all amounts set
forth in the Monthly Invoice by automatic debit by BISYS on the last
business day of the Billing Month from a Client bank account established
for this purpose (the "Payment Account"). Client agrees to execute any and
all required documentation to enable BISYS to perform such automatic
debiting of the Payment Account. If Client fails to pay any amounts due
under this Agreement, Client shall, upon demand, pay interest at the rate
of 1-1/2% per month, but in no event more than the highest interest rate
allowable, on such delinquent amounts from their due date until the date of
payment. Client agrees to reimburse BISYS for any and all expenses BISYS
may incur, including reasonable attorney fees, in taking action to collect
any amounts due BISYS hereunder. All amounts due must be paid prior to
Client's deconversion from the BISYS System.
4. CONVERSION TO THE SERVICES
A. BISYS shall, to the extent applicable, convert machine readable Client
Files to make them compatible with the Services selected by Client from the
Standard Services Price List. Client agrees to cooperate with BISYS and
provide all necessary information and assistance required for BISYS to
successfully convert such Client Files. Client will assign a liaison
person to assist and cooperate with BISYS in such conversion.
<PAGE>
B. BISYS shall determine in accordance with its normal acceptance procedures
when the applicable Client Files have been successfully converted and when
the Services selected by Client from the Standard Services Price List are
operational and available for Client's use. The date the first of the
Services selected by Client from the Standard Services Price List is
operational and available for Client's use is the "Conversion Date".
<PAGE>
5. AVAILABILITY OF THE SERVICES
A. Hours for accessing Services on an on-line basis ("On-Line Hours") at the
BISYS data center providing Services to Client ("Data Center") are 7:00
A.M. to 9:00 P.M. Monday through Friday and 7:00 A.M. to 5:00 P.M. Saturday
(Data Center time) exclusive of BISYS holidays (New Years Day, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day). A
particular Service may also be available at other than On-Line Hours; in
which event Client may, at its option and subject to any additional charges
therefor, use that Service at such other times.
B. BISYS will make every reasonable effort to have the Services available
during the On-Line Hours. However, BISYS cannot and does not guarantee
such availability. Accordingly, Client's remedy and BISYS' sole liability
to Client or any third party for claims, notwithstanding the form of such
claims (e.g., contract, negligence or otherwise), arising out of (i) the
unavailability of the BISYS System or (ii) the interruption in or delay of
the Services provided or to be provided by BISYS hereunder, shall be for
BISYS to use all reasonable efforts to make the BISYS System available
and/or to resume the Services as promptly as reasonably practicable.
C. Client shall, at it's expense, be responsible for delivering and
transmitting to and from Client's offices, the offices of the applicable
regulatory authorities and any other location authorized by Client, and the
Data Center all data and information necessary for BISYS to furnish the
Services to Client.
6. USE OF THE SERVICES
A. Client is exclusively responsible for the consequences of its own actions;
for any instructions it gives BISYS; for its failure to access the Services
in the manner prescribed by BISYS, and for its failure to supply accurate
input information. Client is responsible for auditing, balancing,
verifying the correctness of calculation routines (such as interest and
service charges) and reconciling any out-of-balance condition, and for
notifying BISYS of any errors in the foregoing within three business days
after receipt of the incorrect information. Client's remedy and BISYS'
sole liability to Client or any third party for any claims, notwithstanding
the form of such claims (e.g., contract, negligence or otherwise), arising
out of errors or omissions in the Services provided or to be provided by
BISYS hereunder and caused by BISYS shall be for BISYS to furnish the
correct report and/or to correct the applicable Client Files, provided that
Client promptly advises BISYS thereof.
B. Client shall use the Services in accordance with such reasonable
instructions as may be established by BISYS from time to time as set forth
in any written materials furnished by BISYS to Client.
C. Except as otherwise permitted by BISYS, Client will use the Services only
for its own internal and proper business purposes and will not sell or
otherwise provide, directly or indirectly, any of the Services or any
portion thereof to any third party.
D. Client shall not make any alteration, change or modification to any of the
computer programs, data bases and/or BISYS supported files used by BISYS in
connection with providing the Services to Client hereunder, without BISYS'
prior written consent in each instance.
E. BISYS shall give Client written notice of any BISYS system change which
materially affects Client. Nothing herein shall preclude or limit BISYS'
ability to make changes to its data processing system.
7. COMMUNICATION LINES AND EQUIPMENT.
A. BISYS shall order, on Client's behalf and with Client's approval, the
installation of appropriate telephone lines and communications equipment to
enable Client to access the Services. Client shall pay all charges
relating to the installation and use of such telephone lines and
communications equipment.
B. BISYS shall not be responsible for the reliability, or continued
availability, of telephone lines and communications equipment used by
Client in accessing the Services.
8. FILE SECURITY AND RETENTION.
A. Any Client data bases and files or other information provided by Client to
BISYS for use with the Services (the "Client Files") shall remain the
confidential property of Client. BISYS will provide reasonable security
provisions to insure that third parties do not have access to the Client
Files. BISYS reserves the right to issue and change regulations and
procedures from time to time to improve file security. BISYS will instruct
its employees having access to the Client files to keep the same
confidential by using the same care and discretion that BISYS uses with
respect to its own confidential property.
B. BISYS will take reasonable precautions to prevent the loss of, or
alteration to, Client Files, but BISYS cannot guarantee against any such
loss or alteration. Accordingly, Client will, to the extent deemed
necessary by Client, keep copies of all source documents of information
delivered to BISYS and will maintain a procedure external to the BISYS
System for the reconstruction of lost or altered Client Files. In
connection with the foregoing, it is understood that Client shall assume
and be responsible for risk of loss and/or damage to documents and records
while they are in transit to and from the Data Center.
C. During the term of this Agreement, BISYS will retain the Client Files in
accordance with, and to the extent provided by BISYS' then prevailing
records retention policies for the Services, which policies will be
consistent with guidelines covering the Services established by appropriate
regulatory authorities. BISYS will, upon the expiration of any retention
period for Client Files, dispose of Client Files in any manner deemed
appropriate by BISYS unless Client, prior to such disposal, furnishes to
BISYS written instructions for the disposition of such Client Files at
Client's expense. Client shall pay for the provision of Client Files to
Client at BISYS' standard rates for such services and BISYS shall provide
such Client Files provided that BISYS has been paid for all Services
provided hereunder through the date such requested Client Files are
returned to Client.
D. BISYS has a written Disaster Recovery Plan establishing emergency
procedures, including off-premises backup facility. In connection
therewith, BISYS has prepared a Disaster Recovery Manual. The Disaster
Recovery Plan and Disaster Recovery Manual are available at the Data Center
for examination by bank auditors and examiners and, as they may be modified
from time to time, will remain in existence during the term of this
Agreement. BISYS shall provide Client, upon written request, with
information necessary for Client to develop a disaster contingency plan
which will work in concert with BISYS' Disaster Recovery Plan.
9. DUTIES UPON TERMINATION; RETURN OF RECORDS.
A. Upon the termination of this Agreement for any reason, BISYS will dispose
of all Client Files still in the BISYS System in any manner deemed
appropriate by BISYS unless Client, not later than 30 days after such
termination, furnishes to BISYS written instructions for the disposition of
such Client Files at Client's expense as set forth in Paragraph 9(B).
B. At Client's request as set forth in Paragraph 9(A), BISYS shall deliver to
Client all of the Client Files then retained by BISYS including file
layouts and their descriptions in BISYS format and shall provide in
accordance with BISYS deconversion policies, reasonable and necessary
assistance with the deconversion from the BISYS System to a non-BISYS
system ("Deconversion"). Client shall pay BISYS for Deconversion
assistance in accordance with BISYS' then current Deconversion rate
schedule. Payment for Deconversion together with all other payments which
are due, and which will become due pursuant to the provisions of this
Agreement shall be paid to BISYS prior to delivery of such Client Files.
C. Client Files returned to Client shall be in a standard BISYS machine
readable format.
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10. OWNERSHIP, USE AND CONFIDENTIALITY; BISYS PRODUCTS AND CONFIDENTIAL
INFORMATION.
A. All computer programs and related documentation made available, directly or
indirectly, by BISYS to Client as part of the Services (the "BISYS
Products") are the exclusive and confidential property of BISYS or the
third parties from whom BISYS has secured the right to use such computer
programs and documentation.
B. A personal, non-exclusive, non-transferable right and license is being
granted to Client to use, during the term of this Agreement, any
applications software programs included in the BISYS Products (the
"Application Programs") which are delivered to Client as part of the
Services solely for Client's own business usage. Client shall not have any
interest in the Applications Programs except for this limited license.
C. Client shall receive all improvements, enhancements, modifications and
updates to any Applications Programs which are delivered to Client as part
of the Services if, and as, made available by BISYS to its clients
generally. All such improvements, enhancements, modifications and updates
shall be delivered to Client in the form of a computer media, which media
shall be provided to Client by BISYS and shall be installed by Client. If
Client fails to install any such media within 45 days of its receipt from
BISYS, BISYS shall have no further obligation to provide Client with
improvements, enhancements, modifications or updates to such Application
Programs.
D. Client acknowledges that it shall be deemed a sublicensee of BISYS for any
systems software programs included in the BISYS Products (the "Systems
Programs") which are delivered to Client as part of the Services. Client
accepts a sublicense from BISYS of the Systems Programs on a personal,
non-exclusive, non-transferable basis with the right to use, during the
term of this Agreement, such Systems Programs solely in connection with the
Services.
E. Client shall not copy, in whole or in part, any BISYS Products or related
documentation, whether in the form of computer media, printed or in any
other form. Client shall not make any alteration, change or modification
to any BISYS Products.
F. Client shall treat as confidential and will not disclose or otherwise make
available any of the BISYS Products or any trade secrets, processes,
proprietary data, information or documentation related thereto including,
without limitation, any flow charts, logic diagrams or source code
(collectively the "Confidential Information"), in any form, to any person
other than employees of Client. Client will instruct its employees who
have access to the BISYS Products and the Confidential Information to keep
the same confidential by using the same care and discretion that Client
uses with respect to its own confidential property and trade secrets. Upon
the termination of this Agreement for any reason, Client shall return to
BISYS any and all copies of the BISYS Products and the Confidential
Information which are in its possession.
11. GOVERNMENTAL AGENCIES.
A. Client shall provide all required notices to the appropriate regulatory
authorities concerning the initiation or termination of this Agreement, or
of any substantial changes in the Services being provided to Client. BISYS
agrees that any and all Client Files maintained by it for the Client
pursuant to this Agreement shall be available for inspection by the
appropriate regulatory authorities and Client's internal auditors and
independent public accountants, upon prior written notice to BISYS. All
costs incurred by BISYS in the preparation of data for inspection,
examination or audit will be charged to Client at BISYS' then standard
rates for such services.
B. BISYS shall provide annually to the appropriate regulatory authorities any
Third Party Review Reports prepared by independent public accountants with
respect to the Services performed by BISYS at the Data Center and copies of
BISYS' audited financial statements. By entering into this Agreement,
BISYS agrees that it extends to the Office of Thrift Supervision ("OTS")
the same authority and responsibility (as applicable to Client) provided to
the other regulatory agencies pursuant to the Bank Service Corporation Act,
12 U.S.C. 1867(C) relating to services performed by contract or otherwise.
C. If after the date hereof any modifications to the Services shall be
required by law or by any governmental regulatory authority, BISYS shall,
except to the extent such changes may be beyond the capability of the BISYS
System to implement, conform the Services to be in compliance with such
modified laws or governmental regulations. BISYS may, at its discretion,
pass on, in whole or in part, on an equitable basis to all users of the
Services (including Client) affected by any such modification the actual
costs incurred by BISYS in making any such modification to the Services.
12. WARRANTY.
A. BISYS represents and warrants that the Services will conform materially to
their design specifications and user documentation which may be changed
from time to time. This warranty shall not extend to any of the computer
programs, data bases and/or BISYS supported files used by BISYS in
connection with providing the Services to Client hereunder which have been
altered, changed or modified in any way, without BISYS' prior written
consent in each instance.
B. EXCEPT AS SPECIFICALLY PROVIDED HEREIN, THERE ARE NO WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OR
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
13. LIMITATION OF LIABILITY.
A. The remedies specified in this Agreement constitute Client's sole and
exclusive remedies in the event of any alleged defaults by BISYS under this
Agreement. BISYS' sole liability, if any, for damages (monetary or
otherwise) resulting from claims made by Client or any third party arising
from or related to any and all causes not covered by the foregoing remedies
shall be limited to the lesser of (i) the amount of actual damages incurred
by Client or (ii) an amount which shall not exceed the charges paid by
Client during the six (6) month period immediately preceding the event from
which such liability arose for the Services performed which gave rise to
the claim.
B. IN NO EVENT WILL BISYS BE RESPONSIBLE FOR SPECIAL, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES WHICH CLIENT MAY INCUR OR EXPERIENCE ON ACCOUNT OF
ENTERING INTO OR RELYING ON THIS AGREEMENT, EVEN IF BISYS HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES.
14. PATENT AND COPYRIGHT INDEMNIFICATION.
BISYS will hold Client harmless and, at its own expense, will defend any action
brought against Client based on a claim that the Services used within the scope
of this Agreement infringe a United States patent or copyright provided Client
notifies BISYS promptly in writing of the claim, BISYS has sole control of the
defense of the action and all negotiations for its settlement or compromise, and
Client cooperates with BISYS in the defense of the action. In the event any of
the Services becomes, or in BISYS' opinion is likely to become, the subject of a
claim of infringement of patent or copyright, BISYS, at its option, may (i)
secure for Client the right to continue using such Service(s), (ii) replace or
modify such Services to make it or them non-infringing, (iii) cease providing
the affected Service(s) or (iv) if none of the foregoing options is commercially
reasonable, in BISYS' opinion, terminate this Agreement. If BISYS exercises its
option hereunder to terminate this Agreement, such termination shall be at no
penalty to BISYS except that BISYS shall provide the Deconversion assistance
described in Paragraph 9(B) at no charge to Client.
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15. INSURANCE.
BISYS shall maintain, during the term of this Agreement, $10,000,000 of coverage
under a Blanket Crime Policy covering fraudulent and dishonest acts committed by
its employees for which it is legally responsible. BISYS shall maintain, on its
own behalf, insurance coverage for loss from fire, disaster, or other causes
contributing to interruption of normal services. Client, at its own expense,
will maintain all insurance and fidelity bonds required by the applicable
regulatory authorities.
16. DEFAULT; REMEDIES UPON DEFAULT.
A. Any of the following events will constitute an "Event of Default" under the
Agreement: (i) non-payment of any amounts due hereunder to BISYS by
Client; (ii) non-performance of any of Client's or BISYS' other material
obligations hereunder; (iii) if any representation or warranty of Client or
BISYS is materially breached; (iv) if Client or BISYS files a petition for
bankruptcy or becomes the subject of an involuntary bankruptcy petition
which is not vacated within 60 days of filing, or becomes insolvent; or (v)
if any substantial part of Client's or BISYS' property becomes subject to
any levy, seizure, assignment, application or sale for or by any creditor
or governmental agency.
B. Upon occurrence of an Event of Default under the Agreement, the
non-defaulting party may, at its option, terminate this Agreement provided
at least 30 days (or longer period as may be required by the applicable
regulatory authorities) prior written notice has been given to the other
and such default has not been cured within such period. Upon such
termination by BISYS, BISYS may declare all amounts due and to become due
hereunder immediately due and payable. The remedies contained in this
Paragraph 16 are cumulative and in addition to all other rights and
remedies available to the parties under this Agreement or by operation of
law or otherwise.
17. FORCE MAJEURE
BISYS shall not be liable or deemed to be in default for any delay or failure to
perform under this Agreement or for interruption of the Services resulting,
directly or indirectly, from any cause beyond BISYS' reasonable control.
18. GENERAL.
A. BISYS shall provide Client upon written request, copies of The BISYS Group,
Inc.'s (BISYS' parent corporation) current audited financial statements.
B. Client acknowledges that it has not been induced to enter into this
Agreement by any representation or warranty not set forth in this
Agreement. This Agreement contains the entire agreement of the parties
with respect to its subject matter and supersedes all existing agreements
and all other oral, written or other communications between them concerning
its subject matter. This Agreement shall not be modified in any way except
by a writing signed by both parties.
C. The failure by either party hereto to insist upon strict performance of any
of the provisions contained herein shall in no way constitute a waiver of
its rights as set forth herein, at law or equity, or a waiver by either
party of any other provisions or subsequent default by the other party in
the performance of or compliance with any of the terms and conditions set
forth herein.
D. This Agreement may not be assigned by either party, in whole or in part,
without the prior written consent of the other which consent shall not be
unreasonably withheld. It shall not be deemed an assignment requiring
consent if the stock of either is sold, or all, or substantially all, of
the assets are sold so long as such sale does not materially negatively
affect the basis of the financial bargain upon which this Agreement is
based as of the date hereof and such sale does not materially negatively
affect the provision of the Services hereunder. If there is such a
negative impact, then the sale shall be deemed an assignment requiring
consent as set forth above. This Agreement shall be binding upon and shall
inure to the benefit of BISYS and Client and their respective successors
and permitted assigns.
E. If any provision of this Agreement (or any portion thereof) shall be held
to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remainder of this Agreement shall not in any way be
affected or impaired thereby.
F. The headings in this Agreement are intended for convenience of reference
and shall not affect its interpretation.
G. The individuals executing this Agreement on behalf of BISYS and Client do
each hereby represent and warrant that they are duly authorized by all
necessary action to execute this Agreement on behalf of their respective
principals.
H. Client acknowledges that a breach of any of its obligations under this
Agreement relating to the BISYS Products and/or the Confidential
Information will cause BISYS irreparable injury and damage and therefore
may be enjoined through injunctive proceedings in addition to any other
rights or remedies which may be available to BISYS, at law or in equity and
BISYS grants Client the same rights with respect to a breach of BISYS'
obligations relating to the confidentiality of Client Files.
I. During the term of this Agreement, neither party hereto shall, directly or
indirectly, solicit or encourage to leave, any employee of the other
without prior written consent, which consent shall not be unreasonably
withheld.
<TABLE>
BISYS, INC. INTERNET ORGANIZING GROUP, INC.
<S> <C>
Agreed to: /s/ Paul Bourke Agreed to: /s/ T. Stephen Johnson/Donald S. Shapleigh, Jr.
-------------------------------------------- ------------------------------------------------------
(signature-Authorized Officer) (signature-Authorized Representative)
Name: Paul Bourke Name: T. Stephen Johnson/Donald S. Shapleigh, Jr.
-------------------------------------------------- -----------------------------------------------------------
(print or type) (print or type)
Title: President & CEO Date: August 22, 1996 Title: Chairman/President Date: August 21, 1996
---------------------- ------------------- ------------------------------- --------------------
(print or type) (print or type)
- -----------------------------------------------------------------------------------------------------------------------------
THIS AGREEMENT SHALL BECOME EFFECTIVE UPON BEING SIGNED BY AUTHORIZED OFFICERS OF BISYS AND CLIENT.
BISYS' MARKETING REPRESENTATIVES DO NOT HAVE THE AUTHORITY TO BIND BISYS.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
ADDENDUM TO SERVICES AGREEMENT NO. CHH-2217-12-91
SERVICES AGREEMENT DATED AS OF 8/22/96
Reference is made to the above Services Agreement between the undersigned (the
"Agreement") to which this Addendum is attached and made a part thereof.
The Agreement is hereby amended and supplemented as follows:
1. Except as expressly amended and supplemented hereby, all terms defined in
the Agreement shall have the same meanings when used herein.
2. CHARGES
2.1 Section 3 of the Agreement is amended by adding the following new
Paragraphs after Paragraph 3(D):
"E. For purposes of this Agreement and Addendum, the following
definitions shall apply:
1. The term "Exhibit A Services" shall mean the Services
identified on attached Exhibit A (both the Standard Services
and Special Services listed on Exhibit A). The parties
agree that included in the definition of Exhibit A Services
are Client usage of any features associated with the
Services listed on the Standard and Special Services portion
of Exhibit A which features are in existence and available
to Client as of the date of this Addendum. Neither
features, nor Services, listed on the Price Lists as of the
date hereof, but not set forth on Exhibit A shall be deemed
to be part of the Exhibit A Services and such other Services
and/or features shall be billed to Client in accordance with
the provisions of Paragraph 3(G) (set forth in Paragraph 3.2
of this Addendum. The parties also agree that Exhibit A
Services are recurring Services and do not include any
installation charges, training charges, one-time license
fees or any other one-time charges; the charges for which
are not included in the "Fixed Monthly Charge" (as defined
in Paragraph 3(F) below).
2. The term "One Year Period(s)" shall mean each twelve (12)
month period commencing on Conversion Date and the
indication as to which 12 month period is indicated will be
with the addition of an ordinal number preceding the term
One Year Period, i.e., First One Year Period, Second One
Year Period, etc.
3. The term "Base Accounts" shall mean up to ______ Client
accounts.
4. The term "Client Accounts" shall mean the number of
accounts, both asset and liability, on the BISYS System.
F. For any and all Client usage of Exhibit A Services, Client shall
pay BISYS each month a fixed monthly charge (the "Fixed Monthly
Charge"), in accordance with the following:
<PAGE>
1. During the First One Year Period, the Fixed Monthly Charge shall
be $________ for up to _____ Base Accounts, provided, however,
that BISYS shall review the number of Base Accounts on the BISYS
System on a quarterly basis during the First One Year Period and
if at the time of such review the number of Client Accounts
exceeds _____ then the Fixed Monthly Charge will be adjusted and
calculated as (x) $________ plus (y) the number of Base Accounts
in excess of _____ times the appropriate "Per Account Fee" set
forth below.
2. At the end of each One Year Period, BISYS will determine the
number of Client Accounts on the BISYS System (the "Year End
Accounts"), and the Fixed Monthly Charge shall be adjusted for
the next One Year Period based on the number of Year End
Accounts. The Fixed Monthly Charge for the next One Year Period
will be calculated as: (x) the number of Year End Accounts times
(y) the appropriate Per Account Fee set forth below, provided,
however, that during the Second One Year Period, the Fixed
Monthly Charge may be adjusted if the number of Client Accounts
determined by BISYS at the end of the sixth month during the
Second One Year Period exceeds the number of Year End Accounts
determined at the end of the First One Year Period, in which case
the Fixed Monthly Charge would be calculated as (x) the then
current Fixed Monthly Charge plus (y) the number of Client
Accounts determined at the end of the fifth month during the
Second One Year Period in excess of the number of Year End
Accounts determined at the end of the First One Year Period times
the appropriate Per Account Fee below.
Number of Year
End Accounts Per Account Fee
-------------- ---------------
______ - 10,000 $____
10,001 - 20,000 ____
20,001 - 35,000 ____
35,001 - 50,000 ____
50,001 - 70,000 ____
70,001 - 100,000 ____
More than 100,000 ____
3. On the first day of each One Year Period after the First One
Year Period, BISYS may increase the Per Account Fee by a
percentage equal to the percentage increase in the United States
Consumer price Index as published by the Bureau of Labor
Statistics, United States Department of Labor, during the twelve
month period immediately preceding the date of any increase.
G. In addition to the Fixed Monthly Charge, Client shall pay to BISYS
each month:
1. For all usage of Services (both Standard and Special) not
specifically set forth on Exhibit A; and
2. For all pass-through charges at cost incurred by BISYS solely on
behalf of Client; and
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<PAGE>
3. For all telecommunications charges (which equal BISYS' actual
cost plus twenty percent), which charges shall include BISYS'
providing phone line monitoring, consulting services and
administrative services associated with telecommunications
Services.
H. BISYS' standard conversion services listed on the Special Services
Price List as "Conversion of Standard Applications" shall be provided
to Client for $_________. This charge includes, without limitation,
all technical services provided by BISYS to EDIFY, Inc., AT&T Corp.,
Client and Check Free associated with creating an interface between
(a) the Internet and the BISYS System and (b) Client's system and the
BISYS System, prior to Conversion Date. In addition to such fee,
Client agrees to pay all reasonable out-of-pocket expenses directly
related to the Conversion Services not included in BISYS' provided
standard conversion services, including, but not limited to, data
communications, terminal equipment charges and reasonable travel and
lodging expenses.
I. BISYS agrees that the one time installation and licensing charges
associated with the Services selected by Client on Conversion Date are
payable to BISYS as follows: ___________ on the execution date of this
Agreement, and _________ on September 1, 1996.
3. AVAILABILITY OF THE SERVICES.
3.1 Paragraph 5(A) of the Agreement is amended by deleting the Paragraph
in its entirety and replacing it with the following language:
"Hours for accessing Services on an on-line basis at the BISYS
Data Center providing Services to Client ("Data Center") are
twenty-three hours each day, seven days per week ("On-Line
Hours"). BISYS agrees that the one hour of unavailability of the
Services caused by BISYS will occur between the hours of 12:00
A.M. and 6:00 A.M. (Eastern Time). In addition, BISYS agrees to
provide Client prior written notice of any other hours of
unavailability of the Services caused by BISYS for the purpose of
upgrading and maintaining the BISYS System and to limit the hours
of unavailability of the Services caused by such upgrading or
maintenance to between the hours of 12:00 A.M. and 6:00 A.M.
(Eastern Time).".
4. USE OF THE SERVICES.
4.1 Paragraph 6(E) of the Agreement is amended by inserting the words
"ninety days" after the first word "Client".
5. FILE SECURITY AND RETENTION.
5.1 Paragraph 8(D) of the Agreement is amended by inserting the following
language at the end of the first sentence: "...which BISYS agrees to
implement as required by the provisions of the Disaster Recovery
Plan.".
5.2 Paragraph 8(D) of the Agreement is amended by inserting the following
language at the end of the third sentence: "and BISYS agrees to use
commercially reasonably efforts to assist and cooperate with Client
and its other service providers, including, without limitation, AT&T
Corp., Edify, Inc. and Check Free, on an emergency basis
3
<PAGE>
in the event one or more of them suffers a disaster which renders, in
whole or in significant part, the BISYS System unavailable to Client
and Client's customers and BISYS' assistance is needed in the repair
of any BISYS Services or in the migration of BISYS' Services to
alternate equipment. Client agrees to pay BISYS for any such disaster
assistance services rendered in accordance with BISYS' then applicable
standard hourly rates for such services and all reasonable expenses
associated therewith
6. DUTIES UPON TERMINATION; RETURN OF RECORDS.
6.1 Paragraph 9(C) of the Agreement is amended by inserting the following
language at the beginning of that Paragraph: "Except as provided in
Paragraph 9(B),".
7. OWNERSHIP, USE AND CONFIDENTIALITY; BISYS PRODUCTS AND CONFIDENTIAL
INFORMATION.
7.1 Paragraph 10(D) of the Agreement is amended by adding the following
language at the beginning of the second sentence: "BISYS hereby
grants and".
7.2 Paragraph 10(D) of the Agreement is amended by adding the following
language after the word "use" in the second sentence: "and to allow
its customers, employees, agents and independent contractors to use".
7.3 Paragraph 10(D) of the Agreement is amended by adding the following
language after the word "basis" in the second sentence: "(except as
provided in Paragraph 18(D))".
8. GOVERNMENTAL AGENCIES.
8.1 Paragraph 11(B) is amended to add the following sentence after the
first sentence: "Upon written and reasonable request, each party
agrees to provide the other party with all documentation required by
the requesting party for purposes of compliance with Federal, state or
local laws and regulations applicable to the Services."
9. LIMITATION OF LIABILITY.
9.1 The first sentence of Paragraph 13(A) of the Agreement is amended by
substituting the phrase "each party's" for the word "Client's" and by
substituting the phrase "the other party" for the word "BISYS".
9.2 Paragraph 13(B) of the Agreement is amended by deleting the Paragraph
in its entirety and replacing it with the following language:
"IN NO EVENT WILL EITHER PARTY BE RESPONSIBLE FOR SPECIAL,
INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES WHICH THE OTHER
PARTY MAY INCUR OR EXPERIENCE ON ACCOUNT OF ENTERING INTO OR
RELYING ON THIS AGREEMENT, EVEN IF THE SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.".
10. PATENT AND COPYRIGHT INDEMNIFICATION.
10.1 The first line of Paragraph 14 of the Agreement is amended by
adding the phrase "indemnify," after the first word "will".
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<PAGE>
10.2 Paragraph 14 of the Agreement is amended by adding the
followinglanguage at the end of the last sentence: "and Client
will be released from all other payment obligations hereunder
except for Services provided by BISYS in accordance with this
Agreement received by Client prior to the date of any such
termination.".
11. DEFAULT; REMEDIES UPON DEFAULT; TERMINATION.
11.1 Paragraph 16(B) of the Agreement is amended by adding the
following sentence after the second sentence: "Upon such
termination by Client, Client shall be released from all payment
obligations under this Agreement except for Services provided by
BISYS in accordance with this Agreement received by Client prior
to the date of any such termination.".
12. FORCE MAJEURE.
12.1 Paragraph 17 of the Agreement is amended by deleting the word
"BISYS" from the first line and substituting the phrase "Neither
party", by deleting the word "not", and by deleting the word
"BISYS" from the second line and substituting the word "its".
13. GENERAL.
13.1 Paragraph 18(B) of the Agreement is amended by deleting the
word"Client" from the first sentence and substituting the phrase
"Each party".
13.2 Paragraph 18(D) of the Agreement is amended by deleting the
second and third sentences of the Paragraph and replacing them
with the following language: "It shall not be deemed an
assignment requiring consent if at least 50% of the stock of
either is sold or all, or substantially all of the assets are
sold. In addition, it shall not be deemed an assignment
requiring consent if during the Initial Period this Agreement is
assigned to an affiliate of Client (i.e., an affiliate shall mean
a corporation which controls or is controlled by Client or is
under common control with at least 51% common ownership with
Client), provided, however, that Client gives BISYS prior written
notice of such assignment.".
13.3 Paragraph 18(G) of the Agreement is amended by adding the
following language at the end of the Paragraph: "Each party
represents and warrants that its entry into this Agreement does
not violate or constitute a breach of any of its contractual
obligations with third parties.".
14. ADDITIONAL ASSISTANCE.
14.1 BISYS and Client recognize that Client's financial institution
set up through the "Internet" is one of the first financial
institutions of its kind in the United States. If and when
problems or difficulties arise, BISYS and Client agree to use
commercially reasonable efforts to work together and with Client
and Client's vendors, including, but not limited to, AT&T Corp.
and Edify, Inc., in resolving any issues or problems which may
arise during the term of this Agreement affecting the delivery of
BISYS' Services to Client.
15. CAROLINA FIRST BANK.
5
<PAGE>
15.1 BISYS acknowledges that Client is a management company who,
at present, has an agreement with Carolina First Bank to operate
its Internet-based banking services branch (the "Internet
Branch"). Client intends to use the BISYS Services provided
under the Services Agreement for the Internet Branch. However,
Client intends to purchase the Internet Branch from Carolina
First in the near future and continue to operate it, including
through the use of BISYS' Services, either under its own name or
that of an affiliated company. Accordingly, BISYS and Client
agree that Paragraph 6(C) of the Agreement is modified to permit
Client to continue to use BISYS' Services initially in connection
with Carolina First Bank and eventually as a stand-alone entity.
16. DISPUTE RESOLUTION.
16.1 The parties will attempt in good faith to resolve any controversy
or claim arising out of or relating to this Agreement promptly by
negotiations between senior executives of the parties who have
authority to settle the controversy (and who do not have direct
responsibility for administration of this Agreement).
The disputing party shall give the other party written notice of
the dispute. Within 20 days after receipt of such notice, the
receiving party shall submit to the other a written response.
The notice and response shall include (a) a statement of each
party's position and a summary of the evidence and arguments
supporting its position and (b) the name and title of the
executive who will represent that party. The executives shall
meet at a mutually acceptable time and place within 30 days of
the date of the disputing party's notice and thereafter as often
as they reasonably deem necessary to exchange relevant
information and to attempt to resolve the dispute.
If the matter has not been resolved within 60 days of the
disputing party's notice, or if the party receiving such notice
will not meet within 30 days, the controversy shall be settled by
arbitration by arbitrators, of whom each party shall appoint one
and the third shall be selected by the two arbitrators. The
arbitration shall administered by the American Arbitration
Association under its commercial arbitration rules and shall be
governed by the United States Arbitration Act, 9 U.S.C.Section
1-16, and judgment upon the award rendered by the Arbitrator(s)
may be entered by any court having jurisdiction thereof. The
place of arbitration shall be mutually agreed upon by both
parties. The Arbitrator(s) are not empowered to award damages in
excess of actual damages, including punitive damages.
All deadlines specified in this Paragraph 16 may be extended by
mutual agreement.
The procedures specified in this Paragraph 16 shall be the sole
and exclusive procedures for the resolution of disputes between
the parties arising out of or relating to this Agreement;
PROVIDED, HOWEVER, that a party may seek a preliminary injunction
or other preliminary judicial relief if in its judgment such
action is necessary to avoid irreparable damage. Despite such
action the parties will continue to participate in good faith in
the procedures specified in this Paragraph 16. All applicable
statutes of limitation shall be tolled while the procedures
specified in this Paragraph 16 are pending. The parties will
take such action, if any, required to effectuate such tolling.
6
<PAGE>
16.2 This Paragraph 16 shall not apply in the case of a dispute
involving confidentiality or infringement of intellectual
property rights, in which case either party shall be free to seek
available remedies in an appropriate forum.
17. Neither BISYS nor Client shall (except to persons acting on behalf of such
party) disclose, and neither party shall permit any of its employees or
other persons who act or acted in its behalf to disclose, any of the terms
and conditions of the Agreement, including without limitation any Addendum
or pricing terms, except as may be required by law or regulatory authority.
Except as expressly amended and supplemented hereby, the Agreement shall remain
unchanged and continue to be in full force and effect.
This Addendum supersedes and replaces any prior agreement (written or oral) as
to its subject matter. If there is any conflict between the terms and
conditions of this Addendum and the terms and conditions of the Agreement or any
prior addendum to this Agreement, the Terms and Conditions of this Addendum
shall prevail.
BISYS, INC. INTERNET ORGANIZING GROUP, INC.
By: /s/Paul Bourke By: /s/T.Stephen Johnson/Donald S. Shapleigh,Jr.
------------------- --------------------------------------------
Name: Paul Bourke Name:T.Stephen Johnson/Donald S. Shapleigh,Jr.
----------------- -------------------------------------------
Title: President/CEO Title: Chairman/President
---------------- ------------------------------------------
Date: August 22, 1996 Date: August 21, 1996
----------------- -------------------------------------------
- --------------------------------------------------------------------------------
THIS ADDENDUM SHALL BECOME EFFECTIVE UPON BEING SIGNED BY AN AUTHORIZED OFFICER
OF BISYS. BISYS' MARKETING REPRESENTATIVES DO NOT HAVE THE AUTHORITY TO BIND
BISYS. ADDEND.IOGI
7
<PAGE>
INTERNET ORGANIZING GROUP, INC.
EXHIBIT A
EXHIBIT A SERVICES INCLUDE THE STANDARD AND SPECIAL SERVICES LISTED BELOW
Savings Account Processing
Demand Deposit Processing
Certificates of Deposit Processing
NOW, Super NOW, Money Market Processing
Mortgage Loans Processing (including Secondary Market)
Commercial Loans Processing
Installment Loans Processing
Line of Credit Processing
Credit Bureau Processing
CIF Processing
Total Report Manager Optical System
Remote Print Capacity and Usage
TotalMatic Processing
TargetPlus (ReportWriter not to exceed 8 reports per month)
Terminal Operator Security System (TOSS)
Standard Accounts Reconciliation Processing
Interactive Exception Handling
ACH Processing
Total Financial Manager/General Ledger System Interface
Year End Processing Services
<PAGE>
TOTAL ACCESS BANKING
END USER SOFTWARE LICENSE AGREEMENT
This Agreement, made as of March 13, 1997 between BISYS, Inc. (hereinafter
"Licensor"), having an address at 11 Greenway Plaza, Houston, Texas 77046 and
Atlanta Internet Bank CH-2217-12-91, having an address at 7000 Peachtree-
Dunwoody Road, Bldg. 10, Suite 300, Atlanta, Georgia 30328 (hereinafter
"Licensee").
"BISYS LICENSOR" means that company which has licensed this software to BISYS.
BISYS provides to Licensee the computer software and other related data,
including intellectual data, proprietary information and user documentation that
is contained on the medium in the TOTAL ACCESS BANKING product herein referred
to as the "Licensed Materials" and hereby licenses its use. Licensee assumes
responsibility for the selection of the Licensed Materials to achieve Licensee's
intended results, and for the installation, use and results obtained from the
Licensed Materials.
I. SCOPE OF LICENSE
A. Licensor grants and Licensee accepts, a non-exclusive, non-
transferable, perpetual license to use the Licensed Materials in
accordance with the terms of this End User Software License Agreement.
B. Licensor represents that the BISYS Licensor is sole and exclusive
owner to, or has obtained all rights, titles, and interest in and to
the Licensed Materials issued under this license, and to all
modifications and enhancements thereof developed by BISYS Licensor
(including ownership to all trade secrets and copyrights pertaining
thereto). Nothing in this license should be construed to be a grant
of title or ownership of software to Licensee.
C. Licensee agrees that it may (1) use the Licensed Materials only in
conjunction with Syntellect equipment; (2) make one copy of the
Licensed Materials for archival purposes only; and (3) use the
Licensed Materials only for internal purposes.
D. Licensee agrees it may not reverse-engineer, merge, or otherwise
modify the object code, or assign or transfer the Licensed Materials
to any other party except to a successor in interest of the Licensee's
business that assumes all of the Licensee's obligations with respect
to the Licensed Materials.
E. Licensee agrees that the Licensed Materials and all manuals, documents
and other information marked "Confidential Information" will be
accepted by Licensee in confidence, and Licensee will guard against
disclosure of such information, and shall
Page 1 of 6
<PAGE>
TOTAL ACCESS BANKING
END USER SOFTWARE LICENSE AGREEMENT - CONTINUED
use all reasonable efforts to protect and defend the confidential
nature of the software and related materials.
F. Licensee agrees that it will retain and affix as appropriate, all
copyright, patent, or other notices; proprietary legends; trademarks,
logos, and other restrictive markings.
G. Licensee acknowledges that Licensor limits its warranty of the sub-
system software and operating system software (portions of the
Licensed Materials owned by BISYS Licensor) to 180 days after
shipment, and warrants that the software shall not fail in any
material respect to execute its programming instructions due to
defects in materials and workmanship. THE FOREGOING WARRANTY IS IN
LIEU OF ALL WARRANTIES, EXPRESS OR IMPLIED (INCLUDING WITHOUT
LIMITATION), THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
H. Licensee acknowledges that software support is not provided for in
this Agreement, but is available from Licensor upon payment of the
applicable fees, and upon execution of a separate Total Access Banking
Additional Services Addendum.
I. Licensee agrees that Licensor and BISYS Licensor SHALL NOT BE LIABLE
FOR ANY LOSS OF PROFITS, LOSS OF USE, INTERRUPTIONS OF BUSINESS, OR
FOR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY
KIND, WHETHER UNDER THIS LICENSE OF [sic] OTHERWISE.
J. Licensee acknowledges that its obligations remain in effect for as
long as it continues to possess and use the Licensed Materials, and
such obligations shall be for the benefit of, and enforceable by,
Licensor.
LICENSEE MAY NOT USE, COPY, MODIFY, OR TRANSFER THE LICENSED MATERIALS, OR
ANY COPY, MODIFICATION OR MERGED PORTION, IN WHOLE OR IN PART, EXCEPT AS
EXPRESSLY PROVIDED FOR IN THIS LICENSE. IF LICENSEE TRANSFERS POSSESSION
OF ANY COPY, MODIFICATION OR MERGED PORTION OF THE LICENSED MATERIALS OR
ANY RELATED DOCUMENTATION TO ANOTHER PARTY, THIS LICENSE SHALL
AUTOMATICALLY TERMINATE.
Page 2 of 6
<PAGE>
TOTAL ACCESS BANKING
END USER SOFTWARE LICENSE AGREEMENT - CONTINUED
II. TERM
The term of this license is perpetual, unless and until it is terminated
under one of the following conditions:
A. Licensee agrees that Licensor may terminate this License if Licensee
materially breaches any provisions of this agreement or the Total
Access Banking Additional Services Agreement and the breach remains
unresolved for a period of thirty (30) days from receipt of written
notice by the Licensor. Upon such termination, Licensee agrees to
return the Licensed Materials together with all copies in any form.
B. Either party gives the other written notice of cancellation at least
sixty days prior to the effective date of such cancellation. The
Licensee agrees to return the Licensed Materials together with all
copies in any form.
III. DELIVERY AND ACCEPTANCE
A. BISYS shall deliver Licensed Materials to Licensee, in a machine
readable format accompanied by appropriate documentation.
B. The Licensed Materials and related documentation delivered to Licensee
shall be deemed to be accepted by Licensee within 30 days after
delivery unless BISYS is notified in writing to the contrary. Any
notification by Licensee within such 30 day period shall set forth
with particularity any defects or objections to the Licensed
Materials. Within a reasonable period after receipt of such notice,
BISYS shall correct and redeliver the Licensed Materials and if
accepted by Licensee, BISYS shall have no further liability with
respect to delivery of the Licensed Materials.
IV. LIMITED WARRANTY
A. EXCEPT AS STATED ABOVE IN PARAGRAPH I(G) AND IN THIS SECTION THE
LICENSED MATERIALS ARE PROVIDED "AS IS" WITHOUT WARRANTY OF ANY KIND,
EITHER EXPRESSED OR IMPLIED, INCLUDING BUT NOT LIMITED TO THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
THE ENTIRE RISK AS TO THE QUALITY AND PERFORMANCE OF THE LICENSED
MATERIALS IS WITH LICENSEE. SHOULD THE LICENSED
Page 3 of 6
<PAGE>
TOTAL ACCESS BANKING
END USER SOFTWARE LICENSE AGREEMENT - CONTINUED
MATERIALS PROVE DEFECTIVE, LICENSEE (AND NOT BISYS LICENSOR) ASSUMES
THE ENTIRE COST OF ALL NECESSARY SERVICING, REPAIR OR CORRECTION
BEYOND THE WARRANTY PERIOD. SOME STATES DO NOT ALLOW THE EXCLUSION OF
IMPLIED WARRANTIES, SO THE ABOVE EXCLUSION MAY NOT APPLY TO LICENSEE.
THIS WARRANTY GIVES LICENSEE SPECIFIC LEGAL RIGHTS, AND LICENSEE MAY
ALSO HAVE OTHER RIGHTS WHICH VARY FROM STATE TO STATE.
B. BISYS warranty is contingent upon proper use of the Licensed Materials
in accordance with BISYS installation and operating manuals and
(a) does not cover Licensed Materials if modified by anyone other than
BISYS or BISYS' authorized representatives; (b) does not apply if
adjustment, correction, repair or replacement of the Licensed
Materials, wholly or partially, is required because of accident,
neglect or operating conditions outside of specifications; (c) does
not cover defects in any central processing unit, associated software,
terminals, controllers or telephone equipment used with the Licensed
Materials and associated equipment; (d) does not cover malfunctions
caused by defects in or arising from the installation, training or
servicing other than by authorized BISYS representatives; and (e) does
not apply if the Licensee has rejected any corrections, updates or
modifications made available or supplied by BISYS.
C. BISYS and BISYS LICENSOR do not warrant that the functions contained
in the Licensed Materials will meet Licensee requirements or that the
operation of the program will be interrupted or error free.
D. BISYS and BISYS LICENSOR do warrant to Licensee that the tape(s), CD-
ROM(s) or diskette(s) on which the software is furnished, will be free
from defects in materials and workmanship under normal use for a
period of fourteen (14) days from the date of delivery to Licensee.
V. MAINTENANCE
Neither BISYS nor the BISYS LICENSOR shall have any responsibility to
maintain the Licensed Materials unless Licensee executes BISYS' Total
Access Banking Additional Services Addendum (the "Addendum"). Upon
execution of the Addendum, maintenance shall be performed by BISYS pursuant
to the terms and conditions of the Addendum.
Page 4 of 6
<PAGE>
TOTAL ACCESS BANKING
END USER SOFTWARE LICENSE AGREEMENT - CONTINUED
VI. LIMITATION OF LIABILITY AND REMEDIES
A. BISYS and BISYS LICENSOR'S entire liability and Licensee's exclusive
remedies shall be:
1. The replacement of the software pursuant to the warranty in
Paragraph I(G) above. Any notification by Licensee within the
warranty period shall set forth with particularity any defects or
errors to the system software. Within a reasonable period after
receipt of such notice, BISYS or BISYS Licensor shall correct and
redeliver the System Software to the Licensee, and if accepted by
Licensee, BISYS shall have no further liability. If not
corrected, BISYS will continue to provide the correction to
Licensee at no charge.
2. The replacement of any tape(s), CD-ROM(s) or diskette(s) not
meeting the warranty, described in Paragraph IV(C) above, which
are returned to BISYS, or
3. If BISYS is unable to deliver a replacement tape(s), CD-ROM(s) or
diskette(s) which are free of defects in materials or workmanship
within a reasonable time after Licensee has returned such
tape(s), CD-ROM(s) or diskette(s) to BISYS (provided that
Licensee has returned such tape(s), CD-ROM(s) or diskette(s)
within the warranty period described in Paragraph IV(C) above),
Licensee may terminate this Agreement by returning the Licensed
Materials to BISYS and fees paid by Licensee for the Licensed
Materials shall be refunded to Licensee.
B. IN NO EVENT WILL BISYS OR BISYS LICENSOR BE LIABLE TO LICENSEE FOR ANY
DAMAGES, INCLUDING ANY LOST PROFITS, LOST SAVINGS OR OTHER INCIDENTAL
OR CONSEQUENTIAL DAMAGES, ARISING OUT OF THE USE OR INABILITY TO USE
SUCH LICENSED MATERIALS, EVEN IF BISYS OR BISYS LICENSOR HAVE BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES OR FOR ANY CLAIM BY ANY
OTHER PARTY. SOME STATES DO NOT ALLOW THE LIMITATION OR EXCLUSION OF
LIABILITY FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES, SO THE ABOVE
LIMITATION OR EXCLUSION MAY NOT APPLY TO LICENSEE.
Page 5 of 6
<PAGE>
TOTAL ACCESS BANKING
END USER SOFTWARE LICENSE AGREEMENT - CONTINUED
VII. GENERAL
A. Licensee may not sublicense, assign or transfer this license or the
Licensed Materials or any related documentation except as expressly
provided in this Agreement, and any attempt to do so shall be void.
B. Should Licensee have any questions concerning this Agreement, it may
contact BISYS by writing to BISYS, Inc., 11 Greenway Plaza, Houston,
Texas 77046-1102.
C. Licensee acknowledges that it has read this Agreement, understands it
and agrees to be bound by its terms and conditions. It is further
agreed that the BISYS Services Agreement will govern in the event of
any express conflict between the Services Agreement and this Agreement
with respect to the Licensed Materials.
LICENSEE: Atlanta Internet Bank
--------------------------
BISYS, INC. Client's City/State: Atlanta, GA
----------------------
Approved by: /s/ W.W. Neville Approved by: /s/ D.R. Grimes
---------------- ------------------------------
Name: W.W. Neville Name: D.R. Grimes
----------------------- -------------------------------------
Title: SR. V.P. Date: 3/13/97 Title: VICE CHAIRMAN Date: 3/7/97
----------- -------- ------------- -------
Page 6 of 6
<PAGE>
TOTAL ACCESS BANKING
ADDITIONAL SERVICES ADDENDUM TO
SERVICES AGREEMENT NO. CHH-2217-12-91 DATED 3-17-97 ("SERVICES AGREEMENT")
I. ORDER
BISYS, Inc. ("BISYS") agrees to sell the equipment and to license the
computer software programs (the application system software, the sub-system
software, and the operating system software collectively, the "Programs")
collectively known as the Total Access Banking System (the "System") to the
client subject to the terms and conditions set forth herein and in the
separately executed End User Software License Agreement (the "Software
License").
II. TERM
The term of this Addendum shall be coterminous with the term of the
Services Agreement.
III. MAINTENANCE
A. During the term hereof, BISYS agrees to maintain the Programs licensed
to Client pursuant to the terms of an End User Software License
Agreement between Client and BISYS with respect to the Programs. For
purposes of this Addendum, "BISYS" shall include BISYS and any third
party authorized by BISYS to provide hardware and/or software
maintenance on BISYS' behalf.
B. Client shall receive, at no additional charge, all new versions of the
Program(s) and revised documentation as well as all enhancements,
corrections, and alterations produced by BISYS or received by BISYS
from the "BISYS LICENSOR" (as such term is defined in the Software
License) so long as Client does not materially breach, and has not
materially breached, any provisions of the Services Agreement, the End
User Software License Agreement, or this Addendum.
C. BISYS shall use all reasonable efforts to correct any verifiable and
reproducible error or defect in the Program(s) or replace said
defective Program(s) and/or provide assistance or services necessary
to correct any defect that is solely attributable to BISYS or BISYS
Licensor and that significantly affects the use of the Program(s) such
that the System does not materially perform in accordance with its
designed specifications. Such corrections or replacements will be
promptly provided upon written notification to BISYS. At its expense
and if
Page 1 of 7
<PAGE>
TOTAL ACCESS BANKING
ADDITIONAL SERVICES ADDENDUM - CONTINUED
requested by BISYS, Client agrees to provide BISYS with sufficient
support to enable BISYS to determine and diagnose problems encountered
in order to conclude that the problem is in fact with the Program(s)
and to correct the problem or defect. Corrections for defects due to
unauthorized Program changes will be billed at BISYS' standard rates
for such services.
D. As more fully described below, BISYS shall perform such maintenance
service as shall be necessary to keep any equipment purchased or
leased by Client from BISYS for the purpose of utilizing the Programs
(the "Equipment") in, or restore the Equipment to, good working order
operating in accordance with its specifications.
1. If at the date the parties hereto enter into this Addendum, the
Equipment (or any part thereof) is not under an applicable
warranty period from the manufacturer, BISYS may, at its option,
inspect and test the Equipment within 30 days of the date hereof
for such Equipment. If in BISYS' reasonable judgment such
Equipment is not in good working order, BISYS shall restore the
Equipment to good working order, and shall bill Client for such
inspection, test and restoration services at prevailing rates,
plus travel and other direct costs.
2. Client shall give BISYS' representatives full and free access to
the Equipment upon reasonable notice.
3. With respect to Equipment maintenance services hereunder, the
obligations of BISYS and Client shall be as follows:
a. In the event of a malfunction in the Equipment, Client shall
first seek telephone assistance from BISYS. BISYS and
Client shall cooperate in the identification, verification
and possible resolution of Equipment problems;
b. If the malfunction cannot be corrected through telephone
assistance, BISYS, at its option, shall provide on-site
maintenance through its authorized representative. Such
representative shall repair or replace all or part of the
Equipment and shall perform such other services necessary to
return the Equipment to good working order; or, at its
option, BISYS shall provide replacement equipment on a
Page 2 of 7
<PAGE>
TOTAL ACCESS BANKING
ADDITIONAL SERVICES ADDENDUM - CONTINUED
temporary loan basis delivered by overnight courier service,
Monday through Saturday, except holidays. Upon repair and
return of the defective Equipment pursuant to paragraph
III.(D)(3)(c), Client shall within five (5) days pack and
return any loaned equipment according to BISYS'
instructions. Client will pay all packing and
transportation costs for replacement equipment shipments.
c. Client shall, with the authorization and according to the
instructions of BISYS, pack and return by overnight courier
the affected Equipment or part back for repair. Client will
pay all transportation costs for the returned Equipment.
The returned Equipment shall be repaired or replaced with
new or equivalent to new manufactured equipment at BISYS'
option.
d. If the loaned equipment is not returned within five (5)
days, Client will be invoiced for the loaned equipment at
the list price then in effect.
4. Services outside the scope of BISYS' obligations under this
Addendum includes, but is not limited to the following:
a. Maintenance, repair or replacement of any peripheral
equipment, including, but not limited to, personal
computers, video displays, printers, modems, linedrivers or
cables;
b. Electrical work external to the Equipment;
c. Repair or replacement necessitated by damage to or other
defects in the Equipment resulting from causes external to
the Equipment, including neglect or misuse, unauthorized
attachments or modifications, use of the Equipment for other
than its intended purpose, service or repair of Equipment by
persons other than BISYS or other persons authorized by
BISYS;
d. Services in connection with relocating the Equipment or the
addition or removal of item of Equipment attachments,
features,
Page 3 of 7
<PAGE>
TOTAL ACCESS BANKING
ADDITIONAL SERVICES ADDENDUM - CONTINUED
accessories, or other devices, or the service of
alterations, attachments, or other devices not furnished by
BISYS;
e. Furnishing supplies or other accessories, or painting or
refinishing the Equipment;
f. Repair or exchange due to damage, or increase in service
time, caused by events beyond BISYS' control, such as
accident, transportation, water, wind, fire, sabotage,
explosion, vandalism, burglary, and failure of electrical
power, alterations or additions to Equipment not furnished
by BISYS;
g. Repair or exchange caused by the failure to provide a
suitable environment prescribed by BISYS including adequate
space, electrical power, air conditioning, and humidity
control.
IV. HARDWARE WARRANTY
A. BISYS warrants that the Client will acquire good and clear title to
the Equipment purchased. BISYS further warrants that for one-hundred
eighty (180) days after shipment, the Equipment shall be free from
defects in design, material and workmanship and shall not fail in any
material respect to execute its programming instructions. Written
notice of any claimed defect must be received by BISYS within such
180-day period.
THE FOREGOING WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESSED
OR IMPLIED (INCLUDING, WITHOUT LIMITATION, THE WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE).
IN THE EVENT OF ANY LOSS OR DAMAGE TO THE CLIENT, WHETHER UNDER
WARRANTY, CONTRACT OR OTHERWISE, DIRECT OR INDIRECT, INCIDENTAL OR
CONSEQUENTIAL, BISYS SHALL HAVE NO LIABILITY BEYOND REPAIR OR
REPLACEMENT OF DEFECTIVE ITEMS, COMPONENTS OR PARTS AS SET FORTH
HEREIN. IN NO EVENT WILL BISYS BE LIABLE FOR DAMAGES IN EXCESS OF ALL
CHARGES PAID
Page 4 of 7
<PAGE>
TOTAL ACCESS BANKING
ADDITIONAL SERVICES ADDENDUM - CONTINUED
BY THE CLIENT IN RESPECT OF ANY DEFECTIVE ITEM, COMPONENT OR PART
UNDER THIS AGREEMENT.
B. BISYS warranty is contingent upon proper use of the Equipment in
accordance with BISYS installation and operating manuals and (a) does
not cover the Equipment if modified by anyone other than BISYS or
BISYS' authorized representatives; (b) does not apply if adjustment,
correction, repair or replacement of the Equipment, wholly or
partially, is required because of accident, neglect or operating
conditions outside of specifications; (c) does not cover defects in
any central processing unit, associated software, terminals,
controllers or telephone equipment used with the System and associated
equipment; (d) does not cover malfunctions caused by defects in or
arising from the installation, training or servicing other than by
authorized BISYS representatives; and (e) does not apply if the Client
has rejected any corrections, updates or modifications made available
or supplied by BISYS.
V. EXPENSES
Client shall reimburse BISYS for any out-of-pocket expenses incurred by
BISYS in performing its obligations hereunder. Expenses include travel,
lodging, meals, telephone, and shipping as may be necessary to perform
under this Addendum.
VI. TITLE
Any new versions of the Program, including enhancements, modifications,
alterations, or changes thereto provided under this Addendum shall remain
the proprietary property of BISYS LICENSOR to the same extent as do the
Licensed Materials as set forth in the Software License.
Page 5 of 7
<PAGE>
TOTAL ACCESS BANKING
ADDITIONAL SERVICES ADDENDUM - CONTINUED
LICENSEE: Atlanta Internet Bank
---------------------------------
BISYS, INC. Client's City/State: Atlanta, GA
----------------------
Approved by: /s/ W.W. Neville Approved by: /s/ D.R. Grimes
---------------- ------------------------------
Name: W.W. Neville Name: D.R. Grimes
----------------------- -------------------------------------
Title: SR. V.P. Date: 3/17/97 Title: VICE CHAIRMAN Date: 3/13/97
----------- -------- ------------- -------
VII. PRICES AND FEES
Prices and fees are as specified on the attached Price Schedules. The
schedules are subject to change as specified in the Services Agreement.
Client hereby agrees to pay the specified charges in consideration for the
services and products provided hereunder and to abide by the terms of the
attached Total Access Banking End User Software License Agreement; and all
terms and conditions in the Services Agreement shall remain unchanged.
LICENSEE: Atlanta Internet Bank
--------------------------------
BISYS, INC. Client's City/State: Atlanta, GA
----------------------
Approved by: /s/ W.W. Neville Approved by: /s/ D.R. Grimes
---------------- ------------------------------
Name: W.W. Neville Name: D.R. Grimes
----------------------- -------------------------------------
Title: SR. V.P. Date: 3/17/97 Title: VICE CHAIRMAN Date: 3/13/97
----------- -------- ------------- -------
Page 6 of 7
<PAGE>
TOTAL ACCESS BANKING
PRICE SCHEDULE
I. PRODUCT AND ANNUAL SERVICE PURCHASE ANNUAL SUPPORT
-------- --------------
BASE SYSTEM PRICE AND MAINTENANCE
----------- ----- ---------------
4 Line Analog Line Model $ $
- ----- ----- ------
X 8 Line Analog Line Model $ $
- ----- ----- ------
12 Line Analog Line Model $ $
- ----- ----- ------
16 Line Analog Line Model $ $
- ----- ----- ------
24 Line Analog Line Model $ $
- ----- ----- ------
Additional Line Upgrade
-----------------------
_____ 4 Line Analog Upgrade $ $
----- ------
APPLICATION SYSTEM
X Deposits Application $ $
- ----- ----- ------
Mortgage Loan Application $ $
- ----- ----- ------
Installment Loan Application $ $
- ----- ----- ------
SITE LICENSE $
------
INSTALLATION FEE(1) $
Includes two (2) days on-site ----
system installation and training.
II. MONTHLY RECURRING SERVICE FEES
VOICE RESPONSE TRANSACTION FEE
Total Access Banking System ($ $
MINIMUM)/transaction/month ---- ------
Other (Third Party)($___ $
MINIMUM)/transaction/month ------
TERMINAL CONNECT FEE $
/line/month (Each phone line) ------
EXTENDED ON-LINE AVAILABILITY(2) $ /month
The client hereby ____does -----
____does not subscribe to
extended on-line UPDATE
availability
Client currently has extended
availability under contract.
- ---------------------------
(1) Plus travel and lodging expenses.
(2) Under the extended on-line option, the TAB system will be available 7 days
a week, 23+ hours a day, 365 days a year except for periods of
non-availability on selected Saturdays or Sundays for required maintenance
of the BISYS Host system hardware and/or software. BISYS agrees to provide
clients with prior written notice of the scheduled periods of
non-availability.
Client Initials /s/ D.R.G.
------------
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<PAGE>
BISYS, INC.
TOTAL FINANCIAL MANAGER
ADDITIONAL SERVICES AGREEMENT
This Addendum will authorize BISYS, Inc. to provide the Total Financial Manager
System ("TFM") to: Internet Organizing Group, Inc. (Client)
under the terms of our existing Services Agreement, No. CH-2217-12-91.
Fees for the use of the Total Financial Manager System (TFM) will be assessed
per the following schedule:
Total Estimated Recurring TFM Monthly Costs $_______ Per Attachment A
Total Estimated TFM Installation Costs $_______ Per Attachment B
Total Additional Services/Software Costs $_______ Per Attachment C
We hereby agree to pay the above charges in consideration for the services
provided. All terms and conditions in the existing Services Agreement shall
remain unchanged.
Client's Name: Internet Organizing Group, Inc.
-------------------------------
BISYS, INC. Client's City/State: Atlanta, Georgia
-------------------------
Approved by:/s/ Paul Bourke Approved by: /s/ Donald S. Shapleigh Jr.
--------------- ----------------------------------
Name: Paul Bourke Name: Donald S. Shapleigh Jr.
--------------------- ----------------------------------------
Title: Pres. and COO Date: 8/22/96 Title: Pres. and CEO Date: 8/21/96
------------- ------- ------------- -------
Page 1 of 4
<PAGE>
ATTACHMENT A - ESTIMATED RECURRING MONTHLY COSTS FOR
TOTAL FINANCIAL MANAGER SYSTEM
This attachment provides a detailed estimate of anticipated costs which will be
incurred by Client for the purpose of using the Total Financial Manager System
(TFM). Final cost will be billed to the Client on an actual use basis.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. BASE FEE $
----------
Single Station LAN
----------------- ----------------
TFM Core Package / / $________(1) /X/ $________
Includes General Ledger, Accounts Payable,
Fixed Assets, Investment Accounting, and a
Daily Transaction Interface from the BISYS
Host
TFM/TFS Core Package / / $________(2) / / $_________
Includes Accounts Payable, Fixed Assets,
Investment Accounting, and a Transaction
Interface Routine
Independent Copies of TFM Software (If purchased
as individual products exclusive of the Core
Packages above)
Accounts Payable / / $________ / / $________
Accounts Payable Plus / / $________ / / $________
Fixed Asset Accounting / / $________ / / $________
Investment Accounting - IQ Report Writer / / $________ / / $________
Safe Deposit Box Accounting / / $________ / / $________
Shareholder Accounting / / $________ / / $________
Asset Liability - ALBUM
Base / / $________ / / $________
Remote / / $________ / / $________
Budget Synergizer - ALBUM Plus
Base / / $________ / / $________
Remote / / $________ / / $________
Organizational Profitability System
Level One / / $________ / / $________
Level Two / / $________ / / $________
Level Three / / $________ / / $________
Product Profitability System
Level One / / $________ / / $________
Level Two / / $________ / / $________
Level Three / / $________ / / $________
2. PER TRANSACTION FEE $
----------
Based on number of summarized output
transactions processed from the TOTALPLUS-
Registered Trademark- G/L interface:
_____ per transaction
3. ADDITIONAL CHARGES
Asset Liability/ALBUM Data File
__ Accounts @ $____ per download $
----------
Connection Charges
__ Pollable Terminals @ $_____ each(3) $
----------
__ Pollable Terminals @ $_____ each(3) $
----------
TOTAL ESTIMATED RECURRING MONTHLY COSTS $
----------
----------
</TABLE>
- -------------------------------
(1) Monthly charge of $_____ if Accounts Payable Plus is substituted for
regular Accounts Payable.
(2) Monthly charge of $_____ if Accounts Payable Plus is substituted for
regular Accounts Payable.
(3) If PC is already being polled, then do not include as charge is already
being assessed.
Page 2 of 4
<PAGE>
ATTACHMENT B - ESTIMATED SOFTWARE/INSTALLATION COSTS FOR
TOTAL FINANCIAL MANAGER
This attachment provides a detailed estimate of anticipated costs which will be
incurred by Client for the purpose of sublicensing Total Financial Manager
System (TFM), installing, if applicable, at the designated Client site(s) and
training the Client's personnel in the use of the system, as well as other
miscellaneous tasks which may be required for installation. final cost of
sublicensing, installation, or training will be billed to the Client on an
actual basis. The rates of each type of service rendered are listed below.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. BASE FEE $
-----------
Single Station LAN
-------------- ---------------
TFM Core Package (Includes General Ledger, Accounts / / $_______(5) /X/ $_______(5)
Payable, Fixed Assets, Investment Accounting,
and 3 days of training at BISYS Corporate
Center.)
TFM/TFS Core Package / / $_______(3) / / $_______(6)
Includes Accounts Payable, Fixed Assets,
Investment Accounting and 1 day of training at
BISYS.
Independent Products
Accounts Payable(7) / / $_______ / / $_______
Accounts Payable Plus(7) / / $_______ / / $_______
Accounts Payable - ACH Interface Module(7) / / $_______ / / $_______
Fixed Asset(7) / / $_______ / / $_______
Investment Accounting - IQ Report Writer Module(7) / / $_______ / / $_______
Safe Deposit Box Accounting(7) / / $_______ / / $_______
Shareholder Accounting(7) / / $_______ / / $_______
Asset Liability - ALBUM
Base System
Software Charge / / $_______ / / $_______
Installation(4) / / $_______ / / $_______
Each Remote Unit
Software / / $_______ / / $_______
Installation(4) / / $_______ / / $_______
Budget Synergizer - ALBUM Plus
Base System
Software / / $_______ / / $_______
Installation(4) / / $_______ / / $_______
Each Remote Unit
Software / / $_______ / / $_______
Installation(4) / / $_______ / / $_______
Organizational Profitability System
Level One / / $_______ / / $_______
Level Two / / $_______ / / $_______
Level Three / / $_______ / / $_______
Product Profitability System
Level One / / $_______ / / $_______
Level Two / / $_______ / / $_______
Level Three / / $_______ / / $_______
2. ADDITIONAL TRAINING
__ Days at Corporate Training Facility $_______ per day $ (4)
---------
__ Days at Regional Training Facility $_______ per day $ (4)
--------
__ Days at Client Site $_______ per day $ (4)
--------
3. (4)PLUS TRAVEL AND LODGING EXPENSES $
--------
TOTAL ESTIMATED INSTALLATION COSTS $
--------
--------
</TABLE>
(4) Plus travel and lodging expenses (estimated based on number of anticipated
trips, transportation and lodging costs, etc.)
(5) If Client elects to substitute Accounts Payable Plus for Accounts Payable
in Core Package, price is adjusted to $______ and $______, respectively.
(6) If Client elects to substitute Accounts Payable Plus for Accounts Payable
in Core Package, price is adjusted to $______ and $______, respectively.
(7) Installation and training for independent products at special quote (plus
travel and lodging expenses incurred).
Page 3 of 4
<PAGE>
ATTACHMENT C - ADDITIONAL SERVICES/SOFTWARE COSTS FOR
TOTAL FINANCIAL MANAGER
<TABLE>
<CAPTION>
<S> <C> <C>
1. Norton's Norton Advanced Utilities 8.0 Software Copies x $ $
------ ----------
2. Meridian Technology's Carbon Copy Plus Copies x $ $
------ ----------
3. Hayes Smartmodem, 28.88, External (with Fax) Copies x $ $
------ ----------
Please note that the software prices listed above are subject to change.
TOTAL ADDITIONAL SERVICES/SOFTWARE COSTS $SEE HARDWARE
-------------
QUOTE
</TABLE>
Page 4 of 4
<PAGE>
BISYS, INC.
TOTAL REPORT MANAGER
ADDITIONAL SERVICES ADDENDUM
This Addendum will authorize BISYS, Inc. to provide the Total Report Manager
System ("TRM") to: Internet Organizing Group, Inc. (Client)
under the terms of our existing Services Agreement, No. ___________________.
Fees for the use of the Total Report Manager System (TRM) will be assessed per
the following schedule:
Initial Software License Fee $ Per Attachment A
----------
On-Going Maintenance/Usage Fee (per month) $ Per Attachment B
----------
Estimated TRM Training Costs $ Per Attachment C
----------
We hereby agree to pay the above charges in consideration for the services and
products provided. All terms and conditions in the existing Services Agreement
shall remain unchanged.
Client's Name: Internet Organizing Group, Inc.
-------------------------------
BISYS, INC. Client's City/State: Atlanta, Georgia
-------------------------
Approved by: /s/ Paul Beurke Approved by: /s/ Donald S. Shapleigh, Jr.
---------------- ---------------------------------
Name: Paul Beurke Name: Donald S. Shapleigh, Jr.
----------------------- ----------------------------------------
Title: Pres. and COO Date: 8/22/96 Title: Pres. and CEO Date: 8/21/96
------------- -------- --------------- -----------------
Page 1 of 4
<PAGE>
ATTACHMENT A - INITIAL SOFTWARE LICENSE FEE FOR
TOTAL REPORT MANAGER
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SOFTWARE LICENSE FEE (1)
STAND-ALONE COPIES OF TRM Quantity Total
-------- ------
First copy $ each x $
--------- ----------- ----------
2 - 6 copies $ each x $
--------- ----------- ----------
7 or more copies $ MAXIMUM $
--------- ----------
---------
(Institution-wide License)
MULTI-STATION LAN TRM
First copy $ each x 1 $
--------- ----------- ----------
2 - 5 copies $ each x $
--------- ----------- ----------
6 - 9 copies $ each x $
--------- ----------- ----------
10 or more copies $ MAXIMUM $
(Institution-wide License) ----------
TOTAL INITIAL SOFTWARE LICENSE FEE $
----------
----------
</TABLE>
- ---------------------
(1) The price-per-copy fee includes one (1) day of training at BISYS Corporate
Center.
Page 2 of 4
<PAGE>
ATTACHMENT B - ESTIMATED ON-GOING MAINTENANCE/USAGE FEE FOR
TOTAL REPORT MANAGER
<TABLE>
<CAPTION>
<S> <C> <C> <C>
RECURRING MAINTENANCE/USAGE FEE
MAINTENANCE/USAGE FEE ON STAND-ALONG COPIES Quantity Total
-------- -----
First copy $--/month x $
----------- ----------
2 - 6 copies $--/month/copy x $
----------- ----------
7 or more copies $--/month $
(Institution-wide License) ----------
MAINTENANCE/USAGE FEE ON MULTI-STATION LAN COPIES
First copy $--/month x 1 $
----------- ----------
2 - 5 copies $--/month/copy x $
----------- ----------
6 - 9 copies $--/month/copy x $
----------- ----------
10 or more copies $--/month $
(Institution-wide License) ----------
ESTIMATED BISYS HOST INTERFACE CHARGES
(Minimum charge of $
per month) -- per page x $
----------- ----------
TOTAL ESTIMATED RECURRING MAINTENANCE/USAGE FEE (per month) $
----------
----------
</TABLE>
Page 3 of 4
<PAGE>
ATTACHMENT C - ESTIMATED TRAINING COSTS FOR
TOTAL REPORT MANAGER
1. TRAINING
At Client Site (1 day __________ days x $ per day $ (2)
minimum)
----------
2. (2)PLUS TRAVEL AND LIVING $
EXPENSES
----------
TOTAL ESTIMATED TRAINING COSTS $
----------
----------
- ------------------------
(2) Plus travel and lodging expenses (estimated based on number of anticipated
trips, transportation and lodging costs, etc.)
Page 4 of 4
<PAGE>
BISYS, INC.
TERMINAL OPERATOR SECURITY SYSTEM
ADDITIONAL SERVICES AGREEMENT
This Addendum will authorize BISYS, Inc. to provide the Terminal Operator
Security System ("TOSS") to:
Internet Organizing Group, Inc. (Client) under the terms of our existing
Services Agreement, No. CHH-2217-12-91.
Fees for the TOSS system to be assessed as follows:
Software
-------------------
Training
-------------------
-------------------
-------------------
Total $
-------------------
-------------------
We hereby agree to pay the above charges in consideration for the services
provided. All terms and conditions in the existing Services Agreement shall
remain unchanged.
* Plus reasonable travel expenses incurred by BISYS associates in connection
with installation and/or conversion of BISYS Services or Products.
Client's Name: Internet Organizing Group, Inc.
-------------------------------
BISYS, INC. Client's City/State: Atlanta, Georgia
-------------------------
Approved by: /s/ Paul Bourke Approved by: /s/ Donald S. Shapleigh, Jr.
---------------- ---------------------------------
Name: Paul Bourke Name: Donald S. Shapleigh, Jr.
----------------------- ----------------------------------------
Title: Pres. and COO Date: 8/22/96 Title: Pres. and CEO Date: 8/21/96
------------- -------- --------------- -----------------
Page 1 of 1
<PAGE>
ELECTRONICS FUNDS TRANSFER
ADDITIONAL SERVICES ADDENDUM TO
SERVICES AGREEMENT NO. CHH-2217-12-9, DATED 8/22/96 ("SERVICES AGREEMENT")
Client wishes to purchase and BISYS wishes to sell to Client any and all
electronic funds transfer services generally offered by BISYS to its clients as
described in the BISYS ATM Support and Network Access Product Description (the
"EFT Services"), including Client's participation in the VISACHECK debit card
program as provided by VISA U.S.A., Inc., and/or VISA International
(individually and collectively "VISA") and the Master Money debit card program
as provided by MasterCard International ("MasterCard"). Such participation to
be offered to Client, through BISYS, by Electronic Data Systems Corporation
("EDS"). The Agreement is hereby supplemented and clarified as follows:
I. CLIENT EQUIPMENT
Concurrently with its signing of this Addendum, Client will notify BISYS
in writing as to the number and location of any and all Client automatic
teller machines ("ATMs") through which Client will initially access the
EFT Services. BISYS agrees that Client may add additional Client ATMs to
which BISYS agrees to provide the EFT Services provided that Client gives
BISYS at least 90 days prior written notice of the installation and
location of such additional Client equipment and provided that the EFT
Services can be provided through such additional Client equipment in
accordance with BISYS' then prevailing normal procedures. Notice of
such additional Client equipment shall be sent to BISYS at the address
set forth above, Attention: Director of Client Service, or to such other
address as BISYS may direct from time to time.
II. MONITORING AND MAINTENANCE OF COMMUNICATIONS LINES AND CLIENT EQUIPMENT
BISYS agrees to monitor Client ATM and related equipment and the
communications lines attached to such Client ATM equipment in accordance
with BISYS' normal procedures for the purpose of determining their status
and functioning. BISYS shall contact and inform Client of the nature of
any problems detected by BISYS in accordance with BISYS' normal
procedures. BISYS shall contact and inform the appropriate
communications company of the nature of any problems detected by BISYS in
the communications lines in accordance with BISYS' normal procedures.
Clients will supply and maintain all Client ATM equipment. Client's
maintenance services shall include, but not be limited to, replenishing
all cash and supplies required by Client ATM equipment and providing all
required preventative and remedial maintenance.
III. TRAINING AND DOCUMENTATION
BISYS agrees to provide Client's employees with training in the
applicable EFT Services. Such initial training will be at no charge to
Client and will, at BISYS' option, be provided at a BISYS training
facility or at Client's location. Additional training sessions shall be
held at BISYS training facilities from time to time for BISYS' then
prevailing charges for such training. Client shall be responsible for
all travel and out-of-pocket expenses incurred by Client's employees in
attending any such training sessions. BISYS will, in accordance with its
normal procedures, provide Client with copies of all marketing and
training materials relating to the EFT Services being purchased by Client
hereunder which BISYS generally makes available to clients of such EFT
Services.
IV. CARD STANDARDS
Client agrees that all access cards issued to Client's customers to
activate any equipment through which the EFT Services may be accessed
(the "Access Cards") shall conform to the data content, format and
encoding specifications specified by BISYS to Client from time to time
during the term of this Agreement.
<PAGE>
ELECTRONICS FUNDS TRANSFER
ADDITIONAL SERVICES ADDENDUM - CONTINUED
V. ACCESS TO NETWORKS: SETTLEMENT
If, as part of the EFT Services provided by BISYS to Client hereunder,
Client instructs BISYS to provide Client with access to EFT networks
maintained by BISYS and/or third parties, Client agrees to comply with
the rules, regulations, procedures, fees, assessments, penalties and
other membership duties, obligations and costs of such third party
networks, as from time to time in effect, which are applicable to Client.
Client will comply with all BISYS and third party network rules,
regulations, procedures and costs relating to settlement, as from time to
time in effect during the term of this Agreement. If Client is
participating in the VISACHECK or MasterCard debit card program, Client
agrees to maintain a demand deposit account with a financial depository
institution which is capable of receiving and processing debits and
credits initiated by EDS and presented through the automatic Clearing
House ("ACH") system (the "Settlement Account"). Client hereby
authorizes BISYS and/or EDS to charge the Settlement Account for
settlement of all transactions and Client acknowledges that EDS may, in
its sole discretion, delay settlement or require Client to deposit
additional deposits in appropriate amounts with EDS to offset any
shortfall of funds EDS may incur as a result of settling such
transactions. BISYS shall have no liability to Client for any shortfall
of funds in the Settlement Account.
VI. FILE RETENTION
If Client requests BISYS to provide it with EFT transaction data retained
by BISYS in the Client Files in order to aid Client in resolving an
alleged error claimed by a Client customer, and it is determined that
there is no BISYS error in such transaction, Client will pay BISYS its
then prevailing archival retrieval charges in providing Client with the
requested data. If it is determined that there was a BISYS error in any
transaction referred to above, BISYS will provide the archival retrieval
at no charge. While BISYS does not have any responsibility in assisting
Client in resolving any disputed transaction that is brought to BISYS'
attention more than 120 days after the date the alleged error occurred,
BISYS will provide Client the requested data providing such data is
available at its then prevailing archival retrieval charges.
VII. BISYS USE OF CLIENT FILES
Notwithstanding the foregoing, BISYS may use the Client Files in the
completion of statistical data in which the Client Files are not
identifiable, which statistical data shall be the sole and absolute
property of BISYS. BISYS shall have the sole right to use, sell and
distribute such statistical data.
VIII. COMPLIANCE WITH LAWS
A. Client shall be responsible for compliance with all applicable
laws and governmental regulations including, without limitation,
compliance with error and dispute resolution procedures specified
by the Electronic Fund Transfer Act of 1978 and the regulations
and interpretations promulgated thereunder (including, without
limitation, Regulation E of the Board of Governors of the Federal
Reserve System). If Client is participating in the VISACHECK or
MasterCard program, Client represents and warrants that Client's
bank card program complies with all statutes, laws and government
regulations applicable to Client's participation in such bank
card programs and that Client will comply with all VISA and
MasterCard regulations applicable to Client's participation in
such programs. BISYS shall not have any responsibility for
compliance with such procedures or otherwise resolving disputes
between Client and its cusotmers. If, after the date hereof any
modifications to the EFT Services shall be required by law or by
any governmetnal regulatory authority having authority over the
business of Client, BISYS shall, except to the extent such change
may be beyond the capability of the BISYS switch and/or the
Client equipment to implement, conform the EFT Services to be
in compliance with such modified laws or
Page 2 of 7
<PAGE>
ELECTRONICS FUNDS TRANSFER
ADDITIONAL SERVICES ADDENDUM - CONTINUED
governmental regulations, BISYS may, at its discretion, pass on in
whole or in part on an equitable basis to all users the costs of
making any such modification to the EFT Services.
B. If providing any of the EFT Services to Client hereunder
violates, or in BISYS' opinion is likely to violate, any
applicable laws or governmental regulations, BISYS may, upon
written notice to Client, immediately cease providing the
affected EFT Services to Client.
C. BISYS does not have any obligation to make enhancements to the
EFT Services which may hereafter be permitted (but not required)
on account of charges in applicable laws or governmental
regulations. Any and all such enhancements to the EFT Services
will be made by BISYS in its sole discretion.
D. Client shall provide all required notices to the appropriate
regulatory authorities concerning the execution or termination of
this Agreement, or of any substantial changes in the EFT Services
being provided to Client hereunder. BISYS agrees that any and
all Client Files maintained by it for the Client pursuant to this
Agreement shall be available for inspection by the appropriate
regulatory authorities during regular business hours, upon
reasonable prior written notice to BISYS.
IX. LIMITATION OF LIABILITY
BISYS' sole liability under this Agreement for money damages resulting
from claims made by Client, or any third party (including customers of
Client), arising from or related to the EFT Services performed hereunder
shall be limited to (a) the amount of cash erroneously dispensed at a
Client automated teller machine, (b) the loss of funds resulting from
excess amounts erroneously transferred from an account of a customer of
Client account to a third party, and/or (c) the loss of funds resulting
from amounts erroneously transferred from an account of a customer of
Client to an incorrect third party, in each case caused solely by (x)
BISYS' failure to properly service, maintain, program or operate the EFT
Services, or (y) any misconduct or negligence of BISYS' officers,
employees, or agents in performing the EFT Services. Client agrees to
cooperate with BISYS, at BISYS' direction and expense, in taking all
steps necessary to recover any dispensed cash and/or funds lost resulting
from amounts erroneously transferred for which BISYS is liable.
X. INDEMNIFICATION
Client shall indemnify and save harmless BISYS from any claims,
liabilities or losses, including costs and attorney's fees, resulting
from (a) EFT transactions effected with lost, stolen or misused Access
Cards issued by, or on behalf of, Client to access the EFT Services,
and/or (b) action, omissions or commissions of Client's agents and third
party host processors relating to the EFT Services.
Client shall be responsible for the collection of Client's customers'
accounts, all losses from such accounts, all costs or expenses incurred
in connection with the collection efforts relative to such customers'
accounts, the resolution of any controversy, claim or dispute involving
such customers' accounts made by the customer relative to the debit
card program, the taking of action relative to the misuse or abuse of
Client's customers' accounts, and the establishment and maintenance of
the Client customers' authorization limits.
Page 3 of 7
<PAGE>
ELECTRONICS FUNDS TRANSFER
ADDITIONAL SERVICES ADDENDUM - CONTINUED
IX. GENERAL
Except for the additional terms and conditions contained in this EFT
Services Addendum, the Agreement and other Addenda, if any, shall remain
in full force and effect. Client hereby agrees to pay the specified
charges in consideration for the services and products provided. All
terms and conditions in the Services Agreement shall remain unchanged.
If there is any conflict between the terms and conditions of this Addendum
and the other terms and conditions of the Agreement as may be amended to
which the Addendum forms a part, the terms and conditions of this
Addendum shall prevail.
Client's Name: Internet Organizing
Group, Inc.
-----------------------------
BISYS, INC. Client's City/State: Atlanta, Ga.
------------------------
Approved by: /s/ Paul Bourke Approved by: /s/ Donald S. Shapleigh, Jr.
--------------------- --------------------------------
Name: Paul Bourke Name: Donald S. Shapleigh, Jr.
---------------------------- ---------------------------------------
Title: Pres. and CEO Date:8/22/96 Title: Pres. and CEO Date: 8/21/96
-------------- ------- -------------- ------------------
Page 4 of 7
<PAGE>
ELECTRONICS FUNDS TRANSFER
ADDITIONAL SERVICES ADDENDUM - CONTINUED
PRICE SCHEDULE
<TABLE>
<CAPTION>
EXPENSE DESCRIPTION ONETIME RECURRING
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
I. BASE FEES
Basic Service Fees $_______
INCLUDES:
Institution Data File
Standard Daily/Monthly Report
Positive Balance File Backup
Host Support
Card Management
ATM Conversion Support BISYS Platform $_______
Conversion Support non-BISYS Platform $_______
Debit Card Services $_______ $_______
Cardholder File Formatting $_______
Debit Card On-line Terminal License $_______
On-line Terminal Access Fee $_______ per minute
Deconversion Support $_______
Additional Deconversion Files $_______ per file
II. TERMINAL DRIVING
ATM Set-up Fee (First ATM) $_______
Set-up Fee Each additional ATM $_______
Terminal Driving Support:
1 - 10 $_______ each
10 - 20 $_______ each
20 - 30 $_______ each
31 + $_______ each
III. TRANSACTION PROCESSING
ON-US TRANSACTIONS: $_______ each
FOREIGN TRANSACTIONS:
1 - 5,000 $_______ each
5,001 - 10,000 $_______ each
10,001 - 25,000 $_______ each
25,001 - 50,000 $_______ each
50,001 - 100,000 $_______ each
100,001 - 500,000 $_______ each
500,001 - 1,000,000 $_______ each
1,000,001 - 2,500,000 $_______ each
2,500,000 + $_______ each
BATCH POSTING ITEMS $_______ each
OFF-LINE DEBIT CARD TRANSACTIONS:
Debit Card Authorizations $_______ each
Debit Card Transaction Postings $_______ each
Chargebacks/Representment $_______ each
Retrievals $_______ each
</TABLE>
Page 5 of 7
<PAGE>
ELECTRONICS FUNDS TRANSFER
ADDITIONAL SERVICES ADDENDUM - CONTINUED
PRICE SCHEDULE
<TABLE>
<CAPTION>
EXPENSE DESCRIPTION ONETIME RECURRING
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
IV. CARDHOLDER PROCESSING
# of Cardholder Records on File (ATM Card Only) $________ each
# of Cardholder Records on File (Off-line Debit) $________ each
Customer Authorization File Creation $_______
CAF File Conversion runs $_______
Additional CAF Conversion runs $________ per run
Negative Stand-in File $_______ $________ per month
PLUS $________ per record
On-line Debit Card Maintenance Updates $________ each
Cardholder File Purge $_______
Special Reports $_______ $________ per report
Special Statistical Reporting $_______ $________ per report
V. NETWORK INTERFACES
Network Connection $_______ /Network
Network Interface (1-3 Networks) $________ per month
Each Additional Network $________ each
Plus/Cirrus Correspondent Member Fee $________ each
VI. CARD PRODUCTION SERVICES
Programming Development Start Up $_______ per BIN
Card Production and Design per quote
Card Order Processing BISYS Preferred Vendor $________ per month*
Additional Card Orders Above Standard $________ per file
Non-preferred Vendor Card Order $________ per file, plus
$________ per record
Processing:
ATM CARDS:
Standard orders
Card and PIN $________ each
Card only $________ each
PIN only $________ each
Additional Inserts $________ each**
Mass Issue Files (20,000 + Cards)
Card and PIN $________ each
Card only $________ each
PIN only $________ each
Additional Inserts $________ each**
VISA CHECK/MASTERMONEY DEBIT CARDS
Card and PIN $________ each
Card only $________ each
PIN only $________ each
Additional Inserts $________ each
Phone PIN $________ $________ each
Special Handling Charges
VIP Orders $________ each
Card Pulls $________ each
Custom Card Carrier and envelopes Cost plus
</TABLE>
* Standard equals two files per week per month. Additional files are charged
at $_____ per file.
** Base price includes standard generic carrier and envelope with one insert.
Additional inserts charged at $_____ each.
Page 6 of 7
<PAGE>
ELECTRONICS FUNDS TRANSFER
ADDITIONAL SERVICES ADDENDUM - CONTINUED
PRICE SCHEDULE
<TABLE>
<CAPTION>
EXPENSE DESCRIPTION ONETIME RECURRING
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
VII. SPECIAL SERVICES
Custom Applications:
Programming $____________ per hour
Download Charge $____________ per ATM load
Technical Support $____________ per hour
Consulting Services $____________ /hr. plus expenses
Computer Test Time
Database Changes
30 days notice $____________ per change
5 days notice $____________ per change
24 hours or less notice $____________ per change
Debit Card Compliance Investigations $________ per transaction
Debit Card Quarterly Reporting $________ per report
ATM Foreign Language Support $____________ language $________ per language/ATM
Surcharging $____________ $________ per month/ATM
Expanded Receipt $____________ $________ per month/ATM
VIII. TRAINING
Additional Training Programs $____________ per session, plus expenses
IX. PASS THROUGH CHARGES
Postage ____________
VISA/MasterCard Fees and Assessments ____________
Travel Expenses Incurred on Behalf of Client ____________
Courier Expenses ____________
Communication Charges ____________
Third Party POS Fees ____________
</TABLE>
Page 7 of 7
<PAGE>
BISYS, INC.
NETWORK INSTALLATION
ADDITIONAL SERVICES AGREEMENT
This Addendum will authorize BISYS, Inc. to provide the Network Installation to:
Internet Organizing Group, Inc. (Client) under the terms of our existing
Services Agreement, No. ____________________________.
Fees for Network Installation to be assessed per the following schedule:
<TABLE>
<CAPTION>
Recurring One
Monthly Time
--------- -----------
<S> <C> <C> <C>
Total Network Installation Costs $ $ Per Attachment
--------- ---------- A
Total Local Area Network Costs Per Attachment
--------- ---------- B
Total $ $
--------- ----------
--------- ----------
</TABLE>
We hereby agree to pay the above charges in consideration for the services
provided. All terms and conditions in the existing Services Agreement shall
remain unchanged.
Client's Name: Internet Organizing Group, Inc.
-------------------------------
BISYS, INC. Client's City/State: Atlanta, Georgia
-------------------------
Approved by: /s/ Paul Bourke Approved by: /s/ Donald S. Shapleigh, Jr.
---------------- ---------------------------------
Name: Paul Bourke Name: Donald S. Shapleigh, Jr.
----------------------- ----------------------------------------
Title: Pres. and COO Date: 8/22/96 Title: Pres. and CEO Date: 8/21/96
------------- -------- --------------- -----------------
Page 1 of 5
<PAGE>
ATTACHMENT A - ESTIMATED NETWORK INSTALLATION COSTS
This attachment defines anticipated Network/Data Communication costs which will
be incurred by Client for telephone lines and components required to serve
personal computers operating BISYS Branch Automation software at the designated
client site(s). Final cost will be billed to the Client on an actual use basis.
<TABLE>
<S> <C> <C> <C> <C> <C>
1. MONTHLY ON-LINE COMMUNICATIONS
SUPPORT
a. First Pollable Terminal at x $ $
Each Branch ---- ------ ------
b. 2 - 50 Additional Pollable x $ $
Terminals per location ---- ------ ------
c. 51 or Greater Pollable x $ $
Terminals per location ---- ------ ------
d. TOTAL ESTIMATED MONTHLY $ $
ON-LINE COSTS ------ -------
2. EXTERNAL NETWORK COSTS(1)
a. Communication Facilities $ $
(Monthly) ----- -----
b. Communication Facilities $
Installation -----
c. Communication Equipment x $ $ $
(Monthly) ---- ------ ------ -----
d. Communication Equipment $
Installation -----
3. SITE SURVEY Man Days x $ /DAY $
---- --- -----
4. ADDITIONAL NETWORK $ (1)
HARDWARE/SOFTWARE INSTALLATION -------
COSTS (LABOR)
5. (2)PLUS TRAVEL AND LODGING $ (2)
EXPENSES ------
TOTAL ESTIMATED RECURRING MONTHLY COSTS $
-----
-----
TOTAL ESTIMATED INSTALLATION COSTS $
-----
-----
</TABLE>
- ------------------------
(1) The prices listed are based on the latest published tariffs and/or price
lists of the telephone companies and communications hardware companies
selected to provide the components of the proposed network. These prices
are subject to change to those in effect at the time of installation.
Actual shipping costs and taxes will be added.
(2) Plus travel and lodging expenses (estimated based on number of anticipated
trips, transportation and lodging costs, etc.).
Page 2 of 5
<PAGE>
ATTACHMENT A - ESTIMATED NETWORK INSTALLATION COSTS (CONTINUED)
1. BISYS will perform an analysis of the client's office(s) to establish
terminal quantities and configurations and recommend layouts.
2. BISYS will design a data communications network to serve the terminals
indicated in the survey.
3. BISYS will order the necessary telephone lines and data sets for the
external network, verify and test the phone lines after installation by the
phone company and install the data sets.
4. BISYS will order and install the components of the internal network. The
complexity and size of the internal network in each client office will
depend upon the number of terminals to be used, the number of floors on
which they are located in the building, and the distance between terminals
on each floor.
5. STANDALONE terminals in a close proximity (less than fifty feet apart) will
normally be connected by data cables to a sharing device which in turn is
connected to the data set. In those instances where the distance is
substantially greater than fifty feet or where structural characteristics
of the building (e.g. solid walls) block easy access to the terminals, a
system of line drives and four wire cable will be installed.
LAN terminals will connect to the gateway through the LAN wiring (see
attachments). The gateway will be located in an area that provides the
best access for connection to the communications equipment and retains the
ability to quickly and effectively troubleshoot communications problems.
6. In those instances where cables must be run through walls, over ceilings or
through floor conduits, the services of a local electrician must be
obtained and paid for by the client. If the client wishes BISYS to act as
a cabling contractor, we will do so for an additional agreed upon charge.
This is to insure compliance with local fire and electrical codes. BISYS
will show the electrician where cables are to be located and will install
the proper connectors on the cables after they are run.
7. BISYS recommends that the client provide multiple outlet electrical
surge/spike protectors for use with the terminal equipment.
Page 3 of 5
<PAGE>
ATTACHMENT B - ESTIMATED LOCAL AREA NETWORK COSTS
This attachment provides a detailed estimate of anticipated costs which will be
incurred by Client during the preparation and installation of the Local Area
Network (LAN) corporations. Final costs will be billed to the Client on an
actual use basis.
<TABLE>
<CAPTION>
<S> <C> <C>
1. FILE SERVER SET-UP (Includes Network operating system, BISYS application
software and applicable third-party software configuration and
installation.)
___ Servers at BISYS Corporate Center $ per server $
-----------
___ Servers at Client Site $ per server $ (3)
-----------
2. CUSTOMIZED LAN SET-UP (Items not specified in the attached list)
___ Hours at BISYS Corporate Center $ per hour $
------- -----------
___ Hours at Client Site $ per hour $ (3)
------- -----------
3. SERVER AND WORKSTATION INSTALLATION (LABOR):
___ File Servers $ per server $ (3)
------- -----------
___ Signature Server $ $ (3)
------- -----------
___ Fax Server $ $ (3)
------- -----------
___ Credit Bureau Server $ $ (3)
------- -----------
___ Gateway or RJE PC $ $ (3)
------- -----------
___ Workstations (including local $ per workstation $ (3)
printers)
------- -----------
___ Lan Printer $ per printer $ (3)
------- -----------
4. CABLING $ (3)
-----------
5. (3)PLUS TRAVEL AND LODGING EXPENSES $
-----------
TOTAL ESTIMATED INSTALLATION COSTS $
-----------
-----------
</TABLE>
- ------------------------
(1) Plus travel and lodging expenses (estimated based on number of anticipated
trips, transportation and lodging costs, etc.).
Page 4 of 5
<PAGE>
ATTACHMENT B - ESTIMATED LOCAL AREA NETWORK COSTS (CONTINUED)
1. Labor estimates are for an average installation of pre-assembled PCs. The
following conditions may affect actual labor costs: isolated branch
locations, branches under constructions, delays by local contractors or non
standard hardware configurations.
2. BISYS will prepare a written list of equipment, hardware and software, to
be shipped to the configuration center in Houston. Client will assist
BISYS in working with the necessary vendors to ensure the equipment arrives
in a timely manner.
3. BISYS will generate the file server operating system and workstation shells
based on the customer configurations.
4. Install all required application software including: the BISYS
applications and all BISYS provided third party software. BISYS will
define the SYSTEM LOGIN SCRIPT and all application GROUPS using the Novell
utilities.
5. If the detailed user information can be provided by the client before file
server preparation has been completed, BISYS will define personal HOME
directories for all users who will log into the file server. BISYS will
set the user's PASSWORD, USER LOGIN SCRIPT, and GROUPS BELONGED TO for each
user. BISYS will also define a base menu for each user using the BISYS
menu system.
6. BISYS will define the proper on-line configuration for each PC. If the
detailed PC information cannot be provided by the client before file server
preparation has been completed, BISYS will set up the PCs to default based
on the latest wide area network configuration information (TPOOL).
7. BISYS will test the file server before shipping to the client's site by
logging in as each individual user and executing each base menu application
and testing for correct on-line accesses.
8. BISYS will ship the file server, software and all other hardware used to
setup the local area network (LAN) to the client's site.
9. In those instances where local area network (LAN) cabling must be run
through walls, over ceilings or under the floors, the services of a third
party LAN cable installer must be obtained and paid for by the client. If
the client wishes BISYS to act as a cabling contractor, we will do so for
an additional agreed upon charge. This is to insure compliance with local
fire and electrical codes. BISYS will show the contractor where the cables
should be located and will test for proper connections on the cable after
it has been run.
10. BISYS will provide basic setup, unit testing and additional feature
installation on each machine installed. Additional machine customization
including, but not limited to, integrating third party applications or
memory optimization are part of customized LAN setup and may result in
additional charges as in Section 2.
11. BISYS will install each PC and attached printer(s) in the final locations.
It is expected that client management will work with BISYS in this endeavor
to resolve space conflicts on desks and counters.
12. Because often times the counter surfaces and shelving of the teller line
are not compatible with the space requirements of the PC or printer or
because there are not direct access holes for the cabling between the PC
components, the services of a carpenter may be required and must be paid
for by the client. BISYS will work with the carpenter to insure a proper
understanding of installation.
13. BISYS will install all the necessary BISYS application software at each
workstation and conduct any required network testing.
Page 5 of 5
<PAGE>
BISYS, INC.
TOTAL BRANCH AUTOMATION SYSTEM
ADDITIONAL SERVICES AGREEMENT
This Addendum will authorize BISYS, Inc. to provide the Total Branch Automation
System ("TBS") to:
INTERNET ORGANIZING GROUP, INC. (Client)
under the terms of our existing Services Agreement No._________________________.
Fees for the use of the Total Branch Automation System (TBS) will be assessed
per the following schedule:
<TABLE>
<CAPTION>
Recurring Recurring
Annual Monthly One Time
------ ------ --------
<S> <C> <C> <C> <C>
Total Estimated Recurring TBS Monthly Costs $ $ $ Per Attachment A
---------
Total Estimated TBS Installation Costs Per Attachment B
----------
Total Estimated Customization Costs Per Attachment C
----------
Total Additional Services/Software Costs Per Attachment D
----------
Total TBS Signature Costs Per Attachment E
--------- ----------
Total Estimated Recurring TBS Annual Costs Per Attachment F
----------- --------- ----------
Total TBS Return Item Processing Costs (or $ Month) Per Attachment G
--------- ----------
Total TBS Mortgage Banking Costs Per Attachment H
--------- ----------
Total $ $ $
----------- --------- ----------
----------- --------- ----------
</TABLE>
We hereby agree to pay the above charges in consideration for the services
provided. All terms and conditions in the existing Services Agreement shall
remain unchanged.
Client's Name: Internet Organizing Group, Inc.
--------------------------------
BISYS, INC. Client's City/State: Atlanta, Georgia
-------------------------
Approved by:/s/ Paul Bourke Approved by:/s/ Donald S. Shapleigh, Jr.
---------------- ---------------------------------
Name: Paul Bourke Name: Donald S. Shapleigh, Jr.
----------------------- -----------------------------------------
Title: Pres. and CEO Date:8/22/96 Title: President and CEO Date: 8/21/96
------------- ------- ------------------- ---------------
Page 1 of 9
<PAGE>
ATTACHMENT A - ESTIMATED RECURRING MONTHLY COSTS FOR
TOTAL BRANCH AUTOMATION SYSTEM
This attachment provides a detailed estimate of anticipated costs which will be
incurred by Client for the purpose of using the Total Branch Automation System
(TBS). Final cost will be billed to the Client on an actual use basis.
1. TBS PLATFORM (includes TBS Teller, CRT, TBS Mortgage Banking,
and Return Item Stations; also used by TCM and MLO stations)
0 - 25 Copies x $
------- ------- ----------
26 - 50 Copies x $
------- ------- ----------
51 - 75 Copies x $
------- ------- ----------
76 + Copies x $
------- ------- ----------
2. TBS TELLER (includes TBS CRT)
0 - 50 Copies x $
------- ------- ----------
51 - 100 Copies x $
------- ------- ----------
101 - 150 Copies x $
------- ------- ----------
151 + Copies x $
------- ------- ----------
3. TBS CRT ONLY
0 - 50 Copies x $
------- ------- ----------
51 - 100 Copies x $
------- ------- ----------
101 - 150 Copies x $
------- ------- ----------
151 + Copies x $
------- ------- ----------
Note: Copies defined per BISYS TPOOL terminal definition.
TOTAL ESTIMATED RECURRING MONTHLY COSTS $
- --------------------------------------- ----------
- --------------------------------------- ----------
Page 2 of 9
<PAGE>
ATTACHMENT B - ESTIMATED INSTALLATION COSTS FOR
TOTAL BRANCH AUTOMATION SYSTEM
This attachment provides a detailed estimate of anticipated costs which will be
incurred by Client for the purpose of installing Total Branch Automation System
(TBS) at the designated Client site(s) and training the Client's personnel in
the use of the system, as well as other miscellaneous tasks which may be
required for installation. Final cost of installation will be billed to the
Client on an actual use basis.
1. BASE FEE
<TABLE>
<CAPTION>
<S> <C> <C>
TBS Complete - Platform Software $ $
Includes 1 day of teller system training at --------- ---------
BISYS Corporate Training Facility, up to
2 days of software customization, as
defined by the TBS Data Collection Packet
and 3 days and user training at BISYS
Corporate Training Center.
TBS Teller Software $ $
--------- ---------
Includes 1 day of training at BISYS Corporate
Training Facility and up to 2 days of software
customization, as defined by the Data
Collection Packet.
Client Customization Training $ $
--------- ---------
5 days New Account Customization training at
BISYS Corporate Training Center.
2. TBS LAN SOFTWARE (per TPOOL Branch definition)
1 Branches $ per branch $
--------- ---------
3. SOFTWARE CONFIGURATION includes configuration,
preparation and options required for each PC
(Printer and Communication, etc.). This charge
also applies to additional workstations added
after the initial installation.
(Up to 20) PCs $ per PC $
------------- --------- ---------
4. ADDITIONAL TRAINING (1 day minimum)
Days at Corporate Training Facility $ per day $
----- --------- ---------
Days at Regional Training Facility $ per day $
----- --------- ---------
Days at Client Site $ per day $
----- --------- ---------
5. (2)PLUS TRAVEL AND LODGING EXPENSES $
---------
TOTAL ESTIMATED INSTALLATION COSTS $
- ---------------------------------- ---------
- ---------------------------------- ---------
</TABLE>
- --------------------------------
(1) $_____ may be applied to base fee for Platform (Software training and
customization).
(2) Plus travel and living expenses (estimated based on number of
anticipated trips, transportation and lodging costs, etc.)
Page 3 of 9
<PAGE>
ATTACHMENT C - ESTIMATED CUSTOMIZATION COSTS FOR
TOTAL BRANCH AUTOMATION SYSTEM
TBS TELLER CUSTOMIZATION
Additional customization can be provided by BISYS. Teller customization
includes up to two (2) days software customization defined in detail by Data
Collection.
Customization includes:
Deletions from Applications and Sub-application Menus
Speed Key Definition
Up to 10 Print Documents
Access Level/and/or Override Change Definitions
Passbook Print Alignment Options
Transaction Utilization Options
Transaction Receipt Options
Reconstruct Host Document Options
Printer Options
CRT Options
Account Number Structure Definition
Cash-in/Cash-out Ticket Options
Pre-fill Field Definitions
Smart Help Definitions
Sub-Total Definitions
Group/Linked Transactions
Check List Definitions
1. PRINT DOCUMENTS (each additional) x $ $
-------- ---------
2. ADDITIONAL CUSTOMIZATION AS DEFINED PER x $ $
PAGE BY THE TBS DATA COLLECTION PACKET -------- ---------
(or portion thereof)
TBS COMPLETE CUSTOMIZATION
Additional customization can be provided by BISYS. Utilization of this option
automatically evokes the BISYS customized category (see Attachment H) for annual
maintenance.
3. PRINT DOCUMENTS (each additional) x $ * $
-------- ---------
- Additional cost for digitization of laser forms will be quoted.
ALL OTHER CUSTOMIZATION WILL BE QUOTED ON AN HOURLY BASIS.
4. NON-STANDARD CUSTOMIZATION (8 hour minimum)
Hours at BISYS Data Center $ per hour $ (3)
----- ---------
Hours at Client Site $ per hour $ (3)
----- ---------
5. (3)PLUS TRAVEL AND LODGING EXPENSES $
---------
TOTAL ESTIMATED CUSTOMIZATION COSTS $
---------
(3) Plus travel and living expenses (estimated based on number of anticipated
trips, transportation and lodging costs, etc.)
Page 4 of 9
<PAGE>
ATTACHMENT D - ADDITIONAL SERVICES/SOFTWARE COSTS FOR
TOTAL BRANCH AUTOMATION SYSTEM
1. Norton's Norton Advanced Utilities
8.0 Software Copies x $ $
----- -------------
2. Meridian Technology's Carbon Copy
Plus(4) Copies x $ $
----- -------------
3. Hayes Smartmodem, 28.88, External(4)
(with Fax) Copies x $ $
----- -------------
Contact Corporate Purchasing for current prices.
Please note that the software prices listed above are subject to change.
TOTAL ADDITIONAL SERVICES/SOFTWARE COSTS $ SEE HARDWARE
-------------
QUOTE
- ---------------------
(4) One per Branch is required by Houston Client Site Services in order to
provide Client Support.
Page 5 of 9
<PAGE>
ATTACHMENT E - TBS SIGNATURE COSTS FOR
TOTAL BRANCH AUTOMATION SYSTEM
Per branch prices include ALL branches of the institution.
<TABLE>
<CAPTION>
<S> <C>
1. INITIAL SOFTWARE LICENSE FEE Branches x $ $
----- ------ --------------
Includes 1 day of Signature training at BISYS Corporate
training facility
2. ON-GOING MAINTENANCE/USAGE FEE (per month)
TBS Platform Software (in addition to current monthly TBS charge)
0 - 25 Copies x $ $
------ ------ --------------
26 - 50 Copies x $ $
------ ------ --------------
51 - 75 Copies x $ $
------ ------ --------------
76 + Copies x $ $
------ ------ --------------
TBS Teller Software (in addition to current monthly TBS charge)
0 - 50 Copies x $ $
------ ------ --------------
51 - 100 Copies x $ $
------ ------ --------------
101 - 150 Copies x $ $
------ ------ --------------
151 + Copies x $ $
------ ------ --------------
(TBS CRT ONLY SOFTWARE NOT SUPPORTED WITH SIGNATURE)
3. HOST SIGNATURE FEE
$ per month plus $ per signature $
------ ------ --------------
TOTAL ESTIMATED RECURRING MONTHLY COST (2 + 3) $
- ---------------------------------------------- --------------
- ---------------------------------------------- --------------
</TABLE>
Page 6 of 9
<PAGE>
ATTACHMENT F - ESTIMATED RECURRING ANNUAL COSTS FOR
TOTAL BRANCH AUTOMATION SYSTEM
This attachment provides a detailed estimate of anticipated costs which will be
incurred by Client for the purpose of using the Total Branch Automation System
(TBS). Final cost will be billed to the Client on an actual use basis.
1. TBS COMPLETE ANNUAL MAINTENANCE
BASE SYSTEM OR USER CUSTOMIZED $ $
-------------- --------------
or
2. TBS COMPLETE ANNUAL MAINTENANCE
BISYS CUSTOMIZED $ $
-------------- --------------
3. TBS COMPLETE ANNUAL LASER FORMS MAINTENANCE
<TABLE>
<CAPTION>
<S> <C> <C>
NUMBER OF ANNUAL
NEW ACCOUNTS FEE
------------ ---
0 - 1,000 $
-------
1,001 - 1,500 $
-------
1,501 - 2,000 $
-------
2,001 - 2,500 $
-------
2,501 - 3,000 $
-------
3,001 - 3,500 $
-------
3,501 - 4,000 $
-------
4,001 - 4,500 $
-------
4,501 - 5,000 $
-------
5,001 - 6,000 $
-------
6,001 - 7,000 $
-------
7,001 - 8,000 $
-------
8,001 - 9,000 $
-------
9,001 -10,000 $
-------
10,001 -12,500 $
-------
12,501 -15,000 $
-------
15,001 -17,500 $
-------
17,501 -20,000 $
-------
20,001 -25,000 $
-------
25,001 -30,000 $
-------
Over 30,000 per account $
-------------------
PLEASE COMPLETE THE BSI LICENSE/SUPPORT-LINE AGREEMENT FOR LASER FORMS USAGE ON PAGE 10.
4. TOTAL ESTIMATED RECURRING ANNUAL COSTS $
------------------------------------------------------
*Based on preceding months new account volume.
----
</TABLE>
Page 7 of 9
<PAGE>
ATTACHMENT G - TBS RETURN ITEM PROCESSING COSTS FOR
TOTAL BRANCH AUTOMATION SYSTEM
Per branch prices include ALL branches of the institution.
<TABLE>
<CAPTION>
<S> <C> <C>
1. INITIAL SOFTWARE LICENSE FEE $ $
------- ------------------
Includes 1 day of Return Item training at BISYS Corporate
training facility
2. ON-GOING MAINTENANCE/USAGE FEE (per month)$ $
------- ------------------
In addition to current monthly TBS charge
TOTAL ESTIMATED MONTHLY RECURRING COST (ITEM 2) $
- -------------------------------------- ------------------
- -------------------------------------- ------------------
</TABLE>
- ----------------------------------------
(5) Existing TBS Customers receive a $ credit.
------
Page 9 of 9
<PAGE>
ATTACHMENT H - TBS MORTGAGE BANKING COSTS FOR
TOTAL BRANCH AUTOMATION SYSTEM
<TABLE>
<CAPTION>
<S> <C>
1. INITIAL SOFTWARE LICENSE FEE $ $
------ ------------------
Includes 2 days of Mortgage Banking training at
BISYS Corporate training facility
2. ON-GOING MAINTENANCE/USAGE FEE (per month) $ $
------ ------------------
In addition to current monthly TBS charge
3. CUSTOMIZATION OF LETTERS (per letter) X $ $
------------- ------ ------------------
TOTAL ESTIMATED MONTHLY RECURRING COST (ITEM 2) $
- -------------------------------------- ------------------
- -------------------------------------- ------------------
</TABLE>
Page 9 of 9
<PAGE>
CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO THE RULES
AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION
- --------------------------------------------------------------------------------
BISYS
STANDARD SERVICES PRICE LIST
DECEMBER 1, 1991
- --------------------------------------------------------------------------------
STANDARD SERVICES
DEPOSITS
Savings and Certificates of Deposit................................... A-2
Transaction Accounts (DDA, NOW, Super NOW, Money Market).............. A-2
Government Compliance................................................. A-3
LOANS
Commercial Loans...................................................... A-4
Installment Loans and Savings Account Loans............................ A-4
Mortgage Loans........................................................ A-5
Construction Loans.................................................... A-6
GENERAL LEDGER
Total Financial Manager (TFM)......................................... A-7
TotalPlus Financial System (TFS)...................................... A-7
General Ledger (TFS-GL).......................................... A-7
Accounts Payable (TFS-AP)........................................ A-8
Remote General Ledger................................................. A-8
OTHER SERVICES
Automatic Transactions Generation and Posting.......................... A-9
Customer Information File (CIF)....................................... A-9
Disaster Recovery Services............................................ A-9
On-Line Communication Support......................................... A-9
Standard Documentation................................................ A-10
<PAGE>
SPECIAL SERVICES
SPECIAL RECURRING SERVICES
ATM Services.......................................................... B-2
Deposit Services...................................................... B-2
All Deposits (SV/CD/DDA)......................................... B-2
Savings and Certificates of Deposit............................... B-3
Transaction Accounts (DDA, NOW, Super NOW, Money Market).......... B-3
Loans................................................................. B-4
Installment Loans and Savings Account Loans....................... B-4
Mortgage Loans.................................................... B-4
Report and File Creation and Transfer.................................. B-5
Other (miscellaneous)................................................ B-6
Documentation........................................................ B-9
SPECIAL IMPLEMENTATION/INSTALLATION SERVICES
Deposits............................................................. B-11
Savings and Certificates of Deposit.............................. B-11
Transaction Accounts (DDA, NOW, Super NOW, Money Market)......... B-11
Loans................................................................. B-11
Commercial Loans................................................. B-11
Installment and Savings Account Loans............................ B-11
Mortgage Loans................................................... B-12
General Ledger........................................................ B-12
Terminal Operator Security System (TOSS)............................. B-12
Other (miscellaneous)................................................. B-13
Automatic Transaction Generation and Posting..................... B-13
Terminal Interface............................................... B-13
Training Mode.................................................... B-13
TOTALLINK SUPPORT SERVICES................................................ B-14
CONVERSION/DECONVERSION SERVICES.......................................... B-15
<PAGE>
STANDARD REPORTS
DEPOSIT SYSTEMS............................................................ C-2
Savings and Certificates of Deposit.................................... C-3
DDA.................................................................... C-5
GENERAL LEDGER
TotalPlus Financial Interface.......................................... C-7
TotalPlus Financial System............................................. C-8
Total Financial Manager............................................... C-10
LOANS
Commercial Loans...................................................... C-12
Installment Loans..................................................... C-15
Mortgage Loans........................................................ C-19
Construction Loans/Loan Commitments.............................. C-23
Escrow Analysis and Tax and Insurance Processing................. C-24
Investor Reporting............................................... C-25
Cut-Off Reporting................................................ C-26
OTHER REPORTS
All Applications...................................................... C-28
Totalmatic............................................................ C-29
<PAGE>
SPECIAL REPORTS
DEPOSIT SYSTEMS............................................................ D-2
Savings and Certificates of Deposit.................................... D-2
DDA.................................................................... D-3
LOANS
Commercial Loans....................................................... D-5
Installment Loans...................................................... D-5
Mortgage Loans......................................................... D-6
OTHER REPORTS
All Applications....................................................... D-8
<PAGE>
- --------------------------------------------------------------------------------
BISYS
STANDARD SERVICES PRICE LIST
DECEMBER 1, 1991
- --------------------------------------------------------------------------------
MINIMUMS
All standard services are billed per month except where otherwise indicated.
The minimum charge for Standard Services for each BISYS Client is $3,000.00 per
month.
IMPLEMENTATION FEES
For services introduced after conversion. Implementation Fees are included on
the Special Services Price List.
REPORT PRINTING
BISYS standard prices include Remote Print Transmission to Client's site for
Client-site printing or one original microfiche and one copy of microfiche
(where available) in lieu of Client-site printing.
FORMS
All stock forms used at BISYS' data center where the Services are being
performed (the "BISYS Center") will be supplied to Client by BISYS without
additional charge. All forms that are permitted or specially designed for
Client's exclusive use, all forms bearing Client's name and all forms printed at
Client's location will be supplied to or by Client at Client's expense.
<PAGE>
- --------------------------------------------------------------------------------
DEPOSITS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SAVINGS AND CERTIFICATES OF DEPOSIT
- --------------------------------------------------------------------------------
Account Base
1 - 15,000 --
15,001 - 30,000 --
30,001 - 45,000 --
45,001 - 60,000 --
60,001 + --
Interest Checks --
--
On-line History
Savings (4 months) --
IRA Savings (24 months) --
CDs Term History (term +1 month or 24 months) --
IRA CDs (term + 1 month or 24 months) --
Retirement Accounts (IRA/Keogh) --
--
Statement Production --
--
Variable Interest Capability (variable within term) --
MONTHLY MINIMUM --
NOTE: SEE SPECIAL SERVICES PRICE LIST - SPECIAL RECURRING SERVICES AND
SPECIAL IMPLEMENTATION/INSTALLATION SERVICES FOR RELATED CHARGES.
- --------------------------------------------------------------------------------
TRANSACTION ACCOUNTS (DDA, NOW, SUPER
NOW, MONEY MARKET)
- --------------------------------------------------------------------------------
Account Base
1 - 15,000 --
15,001 - 30,000 --
30,001 - 45,000 --
45,001 - 60,000 --
60,001 + --
Standard Services 12/91 A-2
- ------------------------------------
<PAGE>
Account Analysis --
--
Check Register on Statement --
DDA Statement Production
Per Statement cycle Over five (5) --
Interim Statement (snapshot and reset) --
--
Item Processing Fee (represents item transmitted to
data center from Draft Processor or DPE) --
Line-of-Credit Processing --
--
--
--
Transaction Base
1 - 75,000 --
75,001 - 150,000 --
150,000 + --
Variable Interest Capability --
NOTE: SEE SPECIAL SERVICES PRICE LIST - SPECIAL RECURRING SERVICES AND
SPECIAL IMPLEMENTATION/INSTALLATION SERVICES FOR RELATED CHARGES.
- --------------------------------------------------------------------------------
GOVERNMENT COMPLIANCE
- --------------------------------------------------------------------------------
Tax Compliance - Withholding
Standard Services 12/91 A-3
- ------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
LOANS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMERCIAL LOANS
- --------------------------------------------------------------------------------
Account Base --
--
- --------------------------------------------------------------------------------
INSTALLMENT LOANS AND SAVINGS
ACCOUNT LOANS
- --------------------------------------------------------------------------------
Account Base
1 - 15,000 --
15,001 - 30,000 --
30,001 - 45,000 --
45,001 - 60,000 --
60,001 + --
Adjustable Installment Loans --
--
Commercial Loans (includes special trial balance,
review date tickler, industry code trial balance) --
Coupon Loans MICR/OCR (accepted vendor,
coupons supplied by vendor) --
Customer Notices and Billings (share loan, maturity, --
fixed rate, floating rate, LOC) --
Dealer Reporting and Floor Planning --
--
Investor Reporting --
--
Multi-Investor Reporting --
--
Pool Reporting --
--
Lock Box-Stop Tape Production --
--
Standard Services 12/91 A-4
- ------------------------------------
<PAGE>
On-line History (previous eighteen (18) months) --
Student Loan Processing --
MONTHLY MINIMUM --
NOTE: SEE SPECIAL SERVICES PRICE LIST - SPECIAL RECURRING SERVICES AND
SPECIAL IMPLEMENTATION/INSTALLATION SERVICES FOR RELATED CHARGES.
- --------------------------------------------------------------------------------
MORTGAGE LOANS
- --------------------------------------------------------------------------------
Account Base
1 - 15,000 --
15,001 - 30,000 --
30,001 - 45,000 --
45,001 - 60,000 --
60,001 + --
Tax and Insurance System --
Coupon Loans MICR/OCR (accepted vendor,
coupons supplied by vendor) --
Escrow Analysis --
AML (including buydowns) --
--
Payment/Interest Adjustment Customer Notices --
Bill and Receipt Processing --
--
Bi-Weekly/Weekly Loan Processing --
Collection Loans --
--
Investor Reporting --
--
Multi-Investor Reporting --
--
Automatic Posting of ML Investor Transactions --
to GL and DDA Accounts --
FHLMC MIDANET Remittance Tape (Form 308) --
GNMA Tape
GNMA/FNMA Pools --
--
Standard Services 12/91 A-5
- ------------------------------------
<PAGE>
GNMA Remittance Checks --
--
NDC Tape --
Lock Box-Stop Tape Production --
On-line History (previous eighteen (18) months) --
Report to Credit Bureau of Delinquencies and
Foreclosures --
MONTHLY MINIMUM --
- --------------------------------------------------------------------------------
CONSTRUCTION LOANS
- --------------------------------------------------------------------------------
Account Base --
--
Notices --
On-line History --
NOTE: SEE SPECIAL SERVICES PRICE LIST - SPECIAL RECURRING SERVICES AND
SPECIAL IMPLEMENTATION/INSTALLATION SERVICES FOR RELATED CHARGES.
Standard Services 12/91 A-6
- ------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
GENERAL LEDGER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL FINANCIAL MANAGER (TFM)
- --------------------------------------------------------------------------------
Account Base
1 - 500 --
501 - 1,000 --
1,001 + --
History Inquiry --
--
Local Area Network (LAN) Capability --
TFM/TFS Core Package (Accounts Payable, --
Fixed Assets, and Investment Accounting)
TFM Core Package (General Ledger, Accounts --
Payable, Fixed Asset Accounting, and Investment
Portfolio Accounting)
NOTE: SEE SPECIAL SERVICES PRICE LIST - TOTALLINK SERVICES, TOTALLINK
IMPLEMENTATION/INSTALLATION SERVICES AND TOTALLINK SERVICES FOR
RELATED CHARGES.
- --------------------------------------------------------------------------------
TOTALPLUS FINANCIAL SYSTEM (TFS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GENERAL LEDGER (TFS-GL)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Account Base 1,500.00 Per Month
First 3,000 Master File Accounts .25 Per Account
Per Month
Each Additional Master File Account Over 3,000
Allocation Module 250.00 Per Month
Borderless ReportWriter (TFS-RW) 500.00 Per Month
Multiple Corporation Capability 100.00 Per Corpora-
tion Per Month
On-line Transaction History Query 200.00 Per Month
Standard Services 12/91 A-7
- ------------------------------------
<PAGE>
PC Upload/Download Connection (TFS-PC) 50.00 Per Month
TotalPlus Interfaced Transaction Charges .025 Per Transaction
PC Upload/Download Connection (TFS-PC) 50.00 Per Month
TotalPlus Interfaced Transaction Charges .025 Per Transaction
</TABLE>
NOTE: SEE SPECIAL SERVICES PRICE LIST - SPECIAL RECURRING SERVICES AND
SPECIAL IMPLEMENTATION/INSTALLATION SERVICES FOR RELATED CHARGES.
- --------------------------------------------------------------------------------
ACCOUNTS PAYABLE (TFS-AP)
- --------------------------------------------------------------------------------
Account Base 500.00 Per Month
Vendor Payments .25 Per Payment
NOTE: SEE SPECIAL SERVICES PRICE LIST - SPECIAL RECURRING SERVICES AND
SPECIAL IMPLEMENTATION/INSTALLATION SERVICES FOR RELATED CHARGES.
- --------------------------------------------------------------------------------
REMOTE GENERAL LEDGER
- --------------------------------------------------------------------------------
(Interface to Third Party GL Software Package)
Account Base
1 - 1,000 --
1,001 + --
MONTHLY MINIMUM --
NOTE: SEE SPECIAL SERVICES PRICE LIST - TOTALLINK SERVICES FOR PRICE OF
DAILY FILE TRANSFER TO ON-SITE GL.
- --------------------------------------------------------------------------------
Standard Services 12/91 A-8
- ------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
OTHER SERVICES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AUTOMATIC TRANSACTIONS GENERATION
AND POSTING
- --------------------------------------------------------------------------------
From or to ACH --
--
From Other Sources (approved format: ATM --
networks, payroll, insurance disbursements) --
System-generated Transactions (excludes interest, --
dividends, DDA transactions and DDA service
charges, escrow analysis, and T&I) --
Totalmatic --
--
Internal Transfers or External Drafts --
- --------------------------------------------------------------------------------
CUSTOMER INFORMATION FILE (CIF)
- --------------------------------------------------------------------------------
Account Base --
--
- --------------------------------------------------------------------------------
DISASTER RECOVERY SERVICES
- --------------------------------------------------------------------------------
BISYS Site Standard Disaster Recovery (includes 3% Per Month of Monthly
100% communications recovery and "hot-site" Charges Services
to facilitate periodic testing) Invoiced per the
Standard Services
Price List
Total Integrated Protection System (TIPS+) 4,800.00 One-Time Fee
(PC-based disaster recovery planning product) 600.00 Annual Usage Fee
- --------------------------------------------------------------------------------
ON-LINE COMMUNICATION SUPPORT
- --------------------------------------------------------------------------------
First Terminal 50.00 Each location
Additional Terminals 25.00 Each
Standard Services 12/91 A-9
- ------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
STANDARD DOCUMENTATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MANUALS AND USER AIDS
- --------------------------------------------------------------------------------
Each client receives one copy of the following free of charge upon conversion or
implementation of the particular service:
Account Reconciliation Processing Manual
Commercial Loans Manual
Customer Information File (CIF) Manual
Deposit Systems Manual
General Ledger Manual
Installment Loans Manual
Mortgage Loans Manual
Total Financial Manager (TFM) Manual
Asset Liability
Accounts Payable
Fixed Asset Accounting
General Ledger
Investment Portfolio Accounting
Safe Deposit Box Accounting
Shareholder Accounting
Total Branch Automation System Teller/Platform (TBS) Manual
Total Loan Manager (TLM) Manual
Totallink Operator's Guide (Volume 1)
Totallink Operator's Guide (Volume 1 - TARGET PLUS)
Totalmatic Manual
Transaction Codes Manual
NOTE: SEE SPECIAL SERVICES PRICE LIST - SPECIAL RECURRING SERVICES FOR THE
COST OF ADDITIONAL COPIES.
Standard Services 12/91 A-10
- ------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
TRAINING GUIDES
- --------------------------------------------------------------------------------
Each client receives three copies of the following free of charge upon
conversion or implementation of the particular service:
CIF
Commercial Loans
Deposits
General Ledger
Installment Loans
ML Part 1
ML Part 2
System Overview
NOTE: SEE SPECIAL SERVICES PRICE LIST - SPECIAL RECURRING SERVICES FOR THE
COST OF ADDITIONAL COPIES.
Standard Services 12/91 A-11
- ------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
BISYS
SPECIAL SERVICES PRICE LIST
DECEMBER 1, 1991
- --------------------------------------------------------------------------------
REPORT PRINTING
BISYS standard prices include Remote Report Transmission to Client's site for
Client-site printing or one original microfiche and one copy of microfiche
(where available) in lieu of Client-site printing.
FORMS
All stock forms used at BISYS' data center where the Services are being
performed (the "BISYS Center") will be supplied to Client by BISYS without
additional charge. All forms that are permitted or specially designed for
Client's exclusive use, all forms bearing Client's name, and all forms printed
at Client's location will be supplied to or by Client at Client's expense.
TRAVEL EXPENSES
Reasonable travel expenses incurred by BISYS associates in connection with
installation and/or conversion of BISYS Services or Products will be charged to
Client in accordance with BISYS' standard policy for reimbursement of such
expenses.
Special Services 12/91 B-1
<PAGE>
- --------------------------------------------------------------------------------
SPECIAL RECURRING SERVICES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ATM SERVICES
- --------------------------------------------------------------------------------
See Additional Services Agreement
- --------------------------------------------------------------------------------
DEPOSITS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ALL DEPOSITS (SV/CD/DDA)
- --------------------------------------------------------------------------------
Combined Statements
With Financial Summary Only --
With Financial Summary - SV/CD/DDA Activity --
Daily or Weekly Production of Month-end Reports --
(Branch Activity Analysis (TS3320-03), Deposit
Activity Analysis (TS##@0-02), and Deposit Cash --
Flow Analysis (TS3320-01)
EFT Notices --
History Retention-- Additional --
Over Draft Reminder Notices --
TotalPlus Currency Reporting --
Special Services 12/91 B-2
- ------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
SAVINGS AND CERTIFICATES OF DEPOSIT
- --------------------------------------------------------------------------------
Account Consolidation Report --
--
Anniversary Processing --
--
Bank Check Reconciliation Tape --
CD Renewal Confirmation --
--
Proxy Reporting --
--
Realty Trust/Surrogate Processing --
--
Retirement Account Statements --
--
Service Charges --
--
Tenant Rent Security Processing --
--
- --------------------------------------------------------------------------------
TRANSACTION ACCOUNTS (DDA, NOW, SUPER NOW, MONEY MARKET)
- --------------------------------------------------------------------------------
Account Reconciliation Processing
Full Reconciliation --
Range/Paid Only Reconciliation --
ARP Items Output Tape --
Automatic Data Capture Interface (exception item
pull, daily activity file and statement
rendering)
Transmission from Data Center --
NSF/UCF Qualification Report --
Sweep Accounts --
--
--
Special Services 12/91 B-3
- ------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
LOANS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INSTALLMENT LOANS AND SAVINGS ACCOUNT LOANS
- --------------------------------------------------------------------------------
Annual IL Notice --
--
Annual Statement --
Automatic Student Loan Check Printing --
Classification Report - Monthly Production --
--
Credit Bureau Reporting - Monthly Production by --
Tape
FASB #91 Processing (deferred loan fees and costs) --
--
Loan 10K Report --
--
Overdraft Loan Notice --
Share Loan Trial Balance --
--
Simple Interest Loan Analysis by Rate --
--
- --------------------------------------------------------------------------------
MORTGAGE LOANS
- --------------------------------------------------------------------------------
Additional Coupon Processing Runs --
AML Remainder Worksheet (TS2125) --
--
Annual Mortgage Borrower Statements (if not using --
escrow analysis)
Credit Bureau Reporting - Monthly Production by Tape --
Special Services 12/91 B-4
- ------------------------------------
<PAGE>
FASB #91 Processing (deferred loan fees and costs) --
--
FHLMC Form 11 on Magnetic Tape (sent to FHLMC office) --
FHLMC Submission Schedule --
Instructions for Payer Stuffer --
--
Interest on Escrow Subsystem --
--
Investor Reporting Tape Production --
LASERNET Remittance Tape --
Loan Solicitation Tape Production --
Loan Solicitations on Printed Form --
--
Loan 10K Report --
--
ML Available for Sale Report --
--
Multi-borrower Report (TS5810.10 thru TS5810.13)
Monthly Production --
Weekly/Daily Production --
Tax Bill Processing Tape Production --
- --------------------------------------------------------------------------------
REPORT AND FILE CREATION AND TRANSFER
- --------------------------------------------------------------------------------
Client-site Report Printing Using Total Remote Print N/C
(TRP) in Lieu of Data Center Prepared Output
Client-site Report Printing (TRP) Plus Microfiche --
Originals --
--
Special Services 12/91 B-5
- ------------------------------------
<PAGE>
TARGET-PLUS System (automatic report generator)
Data File Transfers --
--
Remote Print Output (reports) --
--
Remote Print Output (mailing labels) --
(1- or 3-up gummed, or Cheshire) --
Installation Fee (includes one free manual) --
- -------------------------------------------------------------------------------
OTHER (MISCELLANEOUS)
- -------------------------------------------------------------------------------
1098, 1099A, 1099s for OTC Records --
--
1089 Production --
--
1099 Production --
--
--
--
1099R Production --
--
5498 Production --
--
Annual Transaction Journal and Exception Report --
(fiche only) --
Audit Confirmations --
Detail --
Summary --
Notices --
Custom Extracts --
Combined CIF Alpha List --
--
--
Computer Test Time 150.00 Per Half Hour or Part
Thereof
Control Table Updates (eg. SEPART, control charts,
etc.) --
Special Services 12/91 B-6
- ------------------------------------
<PAGE>
Conversion of Special Applications of Time and Expenses or
Application not Converted at Initial Conversion Standard Implementation
Fee if contained Herein
Host Signature Support (signatures only) 50.00 Per Month
.0075 Per Signature on File
Interactive Exceptions Handling --
Keypunch Special Quote
Missing Tax Identification Number --
Request Document (Form 3435) --
Network Support Services Special Quote
(LAN, WAN, and Telecommunications Network
Design, Implementation)
OTS Reports N/C
Quarterly Run --
Additional Runs --
Processing Coordination --
Request for Tax Identification
Deposits --
Trial Balance (on microfiche) --
Cheshire Labels --
Gummed Labels --
W9 Stuffers --
W9 Prestuffed Mailer --
Worksheet --
MLs and ILs --
Missing TIN Report --
TIN Certification Request Notice --
Cheshire Labels --
Gummed Labels --
Special Reports Requested by Auditors or Federal Time and Materials
Examiners
Supplementary Education and Training Programs
Corporate Training Center 500.00 Per Day
Regional Training Center 650.00 Per Day
Client-site 1,000.00 Per Day
Special Services 12/91 B-7
- ------------------------------------
<PAGE>
System Design and Programming 100.00 Per Hour
Third-Party Audit Report -- (2 Copies)
Training Mode Capability --
W9Bs
Notices Received by Report --
Notices Received by Tape --
TIN Flag --
Mailing Label --
Mailer --
Special Services 12/91 B-8
- ------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
DOCUMENTATION (AFTER FIRST COPY)
- -------------------------------------------------------------------------------
Manual Price Subscription Service
------------ --------------------
Account Reconciliation Processing 75.00 15.00
Commercial Loan Processing 80.00 20.00
Reference 100.00 25.00
Reports 100.00 25.00
Customer Information File (CIF) 80.00 20.00
Deposit
Processing Vol. 1 80.00 20.00
Processing Vol. 2 80.00 20.00
Reference 100.00 25.00
Reports 100.00 25.00
DDA 80.00 20.00
Savings/CD 80.00 20.00
Retirement 80.00 20.00
General Ledger 75.00 15.00
Installment Loan
Processing Vol. 1 80.00 20.00
Processing Vol. 2 80.00 20.00
Reference 100.00 25.00
Reports 100.00 25.00
Mortgage Loan
Processing Vol. 1 80.00 20.00
Processing Vol. 2 80.00 20.00
Reference 100.00 25.00
Reports 100.00 25.00
Target/Asset and Liability Analysis 75.00 15.00
Training Guides (additional copies)
CIF 15.00
Commercial Loans 15.00
Deposits Vol. 1 20.00
Deposits Vol. 2 20.00
General Ledger 10.00
Installment Loans Vol. 1 25.00
Installment Loans Vol. 2 25.00
Mortgage Loans Vol. 1 25.00
Mortgage Loans Vol. 2 25.00
System Overview 10.00
Terminal Operator Security System (TOSS) 75.00 15.00
Special Services 12/91 B-9
<PAGE>
Total Marketing Manager 75.00 15.00
Total Financial Manager
Accounts Payable
Asset/Liability Budget Management 75.00 15.00
Fixed Assets Accounting 75.00 15.00
General Ledger 75.00 15.00
Investment Portfolio Accounting 75.00 15.00
Safe Deposit Box Accounting 75.00 15.00
Shareholder Accounting 75.00 15.00
Total Automated Branch System (TBS)
Teller 80.00 20.00
Platform 80.00 20.00
Administrator 100.00 25.00
CAPS Development Kit 60.00
CAPS Reference Manual 60.00
Total Remote Print 75.00 15.00
Totalmatic Electronic Funds Transfer 75.00 15.00
Notices/Forms/Paper Call for Quote
Special Services 12/91 B-10
<PAGE>
- --------------------------------------------------------------------------------
SPECIAL IMPLEMENTATION/INSTALLATION SERVICES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DEPOSITS
- --------------------------------------------------------------------------------
Interactive Exceptions Handling --
Tax Compliance - Withholding (all deposit systems) --
- --------------------------------------------------------------------------------
SAVINGS AND CERTIFICATES OF DEPOSIT
- --------------------------------------------------------------------------------
Combined Interest Checks --
- --------------------------------------------------------------------------------
TRANSACTION ACCOUNTS (DDA, NOW, SUPER NOW, MONEY MARKET
- --------------------------------------------------------------------------------
Account Analysis --
Account Reconciliation Processing --
Document Processing Equipment Interface
Third Party --
Sweep Accounts --
- --------------------------------------------------------------------------------
LOANS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMERCIAL LOANS
- --------------------------------------------------------------------------------
Commercial Loans --
- --------------------------------------------------------------------------------
INSTALLMENT AND SAVINGS ACCOUNT LOANS
- --------------------------------------------------------------------------------
Coupons --
Credit Bureau Reporting (monthly by tape) --
Dealer Reporting and Floor Planning --
FASB #91 Processing (deferred loan fees and costs) --
Installment and Savings Account Loans --
Investor Reporting --
Loan Schedule RC-J Report --
Special Services 12/91 B-11
- ------------------------------------
<PAGE>
Student Loans --
- --------------------------------------------------------------------------------
MORTGAGE LOANS
- --------------------------------------------------------------------------------
AML (including buydowns) --
Automatic Posting of ML Investor Transactions to
GL and DDA Accounts --
Biweekly/Weekly Loan Processing --
Check Writing System --
Coupons --
Credit Bureau Reporting (monthly by tape) --
Escrow Analysis --
FASB #91 Processing (deferred loan fees and costs) --
Investor Reporting --
Loan Schedule RC-J Report --
- --------------------------------------------------------------------------------
GENERAL LEDGER
- --------------------------------------------------------------------------------
PC Connection (TFS-PC) 1,100.00 Per Connection
TFS General Ledger Special Quote
(based on bank
asset size)
- --------------------------------------------------------------------------------
TERMINAL OPERATOR SECURITY SYSTEM (TOSS)
- --------------------------------------------------------------------------------
Installation --
Training --
- --------------------------------------------------------------------------------
OTHER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AUTOMATIC TRANSACTION GENERATION AND POSTING
- --------------------------------------------------------------------------------
From or To ACH --
Totalmatic --
- --------------------------------------------------------------------------------
Special Services 12/91 B-12
- ------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
TERMINAL INTERFACES
- --------------------------------------------------------------------------------
Other Terminal Interface Fee Special Quote
- --------------------------------------------------------------------------------
TRAINING MODE
- --------------------------------------------------------------------------------
Training Mode --
Special Services 12/91 B-13
- ------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
TOTALLINK SUPPORT SERVICES
- --------------------------------------------------------------------------------
Additional Site Surveys 100.00 Per Hour (4 HOUR MINIMUM)
Additional Training
Corporate Training Center 500.00 Per Day
Regional Training Center 650.00 Per Day
Client-site 1,000.00 Per Day
Customized LAN Set-up
At BISYS 100.00 Per Hour
At Client-site 200.00 Per Hour
File Server Set-up
At BISYS 2,000.00 Per Server
At Client-site 3,200.00 Per Server
Internal Network Costs 250.00 Per PC
Network Hardware/Software Installation
(Labor $800.00 per man-day for
normal business hours $1,200.00
per man-day after hours, holidays,
and weekends
1 - 4 PCs 1 day x 800.00 Per Branch
1 day x 1,200.00 Per Branch
5 - 15 PCs 2 days x 800.00 Per Branch
2 days x 1,200.00 Per Branch
16+ PCs+ 3 days x 800.00 Per Branch
3 days x 1,200.00 Per Branch
Network/Software Installation 800.00 Per Day (4 HOUR MINIMUM)
1,200.00 Per Day on Saturday and
Sunday
PC Assembly and Test 125.00 Per PC
Software Configuration 100.00 Per PC
+ For every additional 15 PCs, add an Special Services 12/91 B-14
additional man-day.
<PAGE>
- --------------------------------------------------------------------------------
CONVERSION/DECONVERSION SERVICES
- --------------------------------------------------------------------------------
Deconversion of Standard One-hundred percent (100%) of average of
Applications from BISYS System last twelve (12) months charges exclusive of
discounts for services provided under
Standard Services Price List. Minimum of Ten
Thousand Dollars ($10,000.00).
Deconversion package includes:
- One (1) set of test files of Client's
files in standard BISYS format
- Two (2) sets of Client's files in
standard BISYS format
- One (1) full Trial Balance for each
application (ML, IL, SV, CD, DDA, CLS)
- One (1) set of technical record layouts
per application
- Up to ten (10) hours of telephone
consultation support on BISYS
system/file formats.
Payment shall be made via wire transfer to
BISYS. All past due amounts and related
termination charges per the terms of the
Services Agreement must be brought current
prior to production of final set of files.
Additional consultation support for file
requirements will be billed in accordance
with BISYS' published price schedule then in
effect.
Special Services 12/91 B-15
<PAGE>
Exhibit 11.1
NET B@NK, INC.
Schedule Regarding Computation of Per Share Loss
<TABLE>
<CAPTION>
For The Period For the period
February 20, 1996 February 20, 1996 For the Three
(Date of Incorporation) (Date of Incorporation) Months Ended
ACTUAL To December 31, 1996 to March 31, 1996 March 31, 1997
- ------ ---------------------- ---------------------- --------------
<S> <C> <C> <C>
Net income (loss) $(3,839,182) $ 23,734 $(1,800,025)
---------- ---------- ----------
---------- ---------- ----------
Shares issued and outstanding 1,269,218 1,269,218 1,269,218
Additional shares issued
April 2, 1997 9,938 9,938 9,938
Incremental shares applicable to
common stock subscriptions 1,272,636 1,272,636 1,272,636
Incremental shares applicable to
stock options 147,539 147,539 147,539
---------- ---------- ----------
Weighted average common and
common equivalent shares
outstanding 2,699,331 2,699,381 2,699,331
---------- ---------- ----------
---------- ---------- ----------
Net income (loss) per common
and common equivalent share $(1.42) $.01 $(.67)
---------- ---------- ----------
---------- ---------- ----------
PROFORMA FOR REORGANIZATION
- ---------------------------
Pro forma net loss $3,848,349 $1,802,775
---------- ----------
---------- ----------
Shares issued and outstanding-actual 1,269,218 1,269,218
Shares issued in the Reorganization 1,366,406 1,366,406
---------- ----------
Pro forma shares issued and outstanding 2,635,624 2,635,624
Incremental shares applicable to
common stock subscriptions 9,938 9,938
Incremental shares applicable to stock
options 147,538 147,538
---------- ----------
Weighted average common and common
equivalent shares outstanding 2,793,100 2,793,100
---------- ----------
---------- ----------
Pro forma net loss per common and
common equivalent share $1.38 $.65
---------- ----------
---------- ----------
</TABLE>
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Pre-effective Amendment No. 1 to Registration
Statement No. 333-23717 of Net.B@nk, Inc. on Form S-1 of our reports dated March
18, 1997, appearing in the Prospectus, which is part of such Registration
Statement and to the reference to us under the heading "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
April 24, 1997
