SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
November 10, 1997
________________________________________________
Southern Security Bank Corporation
___________________________________________
(Exact name of registrant as specified in its charter)
Delaware 0-22911 65-0325364
_____________________________________________________________
(State or other jurisdiction Commission (IRS Employer
of incorporation) File Number) Identification
No.)
3475 Sherridan Street, Hollywood, Florida 33021
_______________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (561) 416-1100
______________
Southern Security Financial Corporation
_______________________________________
(Former name, if changed since last report)
278-A New Dorp Lane, Staten Island, New York 10306-3036
_______________________________________________________
(Former address, if changed since last report)
<PAGE>
Item 1. Changes in Control of Registrant
On November 10, 1997, Southern Security Bank
Corporation, a Florida corporation ("SSB"), was merged with and
into (the "Merger") the Registrant, pursuant to the terms of a
Merger Agreement, dated as of October 30, 1997, between SSB and
the Registrant (the "Merger Agreement"). On November 13, 1997,
the name of the Registrant was changed to Southern Security Bank
Corporation.
TERMS OF THE MERGER
Under the terms of the Merger, the following changes
were effected.
1. Each of the 602,500 issued and outstanding shares
of Class A Common Stock of the Registrant was converted into
0.4250423 shares of Class A Common Stock of the Registrant.
Accordingly, the 602,500 shares of Class A Common Stock of the
Registrant that were outstanding immediately prior to the Merger
became 256,088 shares of Class A Common Stock immediately after
the Merger as a result of the Merger. Except for this
proportionate reduction in number of all outstanding shares of
Class A Common Stock, no other changes were made in the rights or
privileges of the Class A Common Stock of the Registrant. The
Class B Common Stock and the Preferred Stock of the Registrant,
none of which was outstanding prior to the Merger, was unaffected
by the Merger.
2. Immediately prior to the Merger, SSB had 4,970,204
shares of Class A Common Stock Outstanding which, as a result of
the Merger, were converted into 4,970,204 shares of Class A
Common Stock of the Registrant. Thus, as a result of the Merger,
the shareholders of the Registrant immediately prior to the
merger became the owners of an aggregate of 256,088 shares of
Class A Common Stock, or 4.9% of the amount outstanding, and the
shareholders of SSB immediately prior to the Merger became the
holders of 4,970,204 shares of Common Stock of the Registrant, or
95.1% of the amount outstanding, immediately after the offering.
Immediately prior to the Merger, there were 279 shareholders of
record of the Registrant and 110 shareholders of record of SSB;
accordingly, there were 389 shareholders of record of the
Registrant immediately after the Merger.
3. Immediately prior to the Merger, the Registrant was
a shell corporation without any business operations or
substantial assets. As a result of the Merger, the business and
assets of SSB became the business and assets of the Registrant.
See "The Company" and "Business," below.
4. As a result of the Merger, the each of the persons
who served as an officer or director of the Registrant
immediately prior to the Merger ceased to be an officer or
director of the Registrant. Each of the officers and directors
of SSB became an officer or director of the Registrant, serving
in the same position with the Registrant that he or she had
served with SSB immediately prior to the Merger. Each of such
persons will serve the Registrant under exactly the same terms
and conditions as he or she served SSB immediately prior to the
Merger. See "Management," below.
5. As a result of the Merger, the principal
shareholders of SSB immediately prior to the Merger became the
principal shareholders of the Registrant immediately after the
Merger. See "Beneficial Ownership of the Company's Common
Stock," below.
6. As a result of the Merger, the persons who were the
Management and the principal beneficial owners SSB Class A Common
Stock, and who are identified under "Management" and "Beneficial
Ownership of the Company's Common Stock" acquired control of the
Registrant as indicated therein. The persons who were the
officers and directors of the Registrant no longer hold any
position with the Registrant, no is there any plan, arrangement
or understanding pursuant to which they will have any control or
receive any compensation from the Registrant after or as a result
of the Merger. The principal shareholders of the Registrant
immediately prior to the Merger have no right to receive anything
other than their pro rata share of the 256,088 shares of Class A
Common Stock of the Registrant held by the shareholders of the
Registrant immediately prior to the Merger.
7. From the perspective of SSB, the purpose of the
Merger was to place it in a posture that would aid in the
eventual development of a trading market in the Company's Class A
Common Stock through: (i) registering the Class A Common Stock
under the 1934 Act; (ii) increasing the number of stockholders
from 110 to 389; and (iii) reincorporating the Holding
Corporation under the law of Delaware.
8. Reference is made to the Amended Form 10-SB of the
Registrant and to the information provided under "Item 4.
Security Ownership of Certain Beneficial Owners and Management"
and "Item 5. Directors, Executive Officers, Promoters and Control
Persons," which information is incorporated herein by reference,
for the identities of the persons from whom control of the
Registrant was assumed. Except for the receipt of Class A Common
Stock of the Registrant pursuant to the terms of the Merger
Agreement, neither the persons from whom control was assumed nor
the persons who assumed control as a result of the Merger gave or
received any consideration for the transaction.
9. No loans or pledges were made in connection with
the Merger. Other than the terms of the Merger Agreement, there
are no understandings or arrangements among members of the former
and new control groups and their associates with respect to
election of directors or otherwise with respect to the Merger.
Except as otherwise described herein, there are no arrangements
by SSB, the Registrant or their affiliates that may result in a
change of control in the Registrant.
BUSINESS
The following discussion describes the business of SSB
immediately prior to the Merger. Because the Registrant was a
shell corporation without operations or substantial assets prior
to the Merger, the following discussion also describes the
business of the Registrant immediately after the Merger.
General
Southern Security Bank Corporation (the "Company" or
the "Holding Corporation") is a bank holding company that owns
96.6% of the outstanding capital stock of Southern Security Bank
(the "Bank"). The Holding Corporation is organized under the law
of Delaware, while the Bank is a Florida State Chartered Bank
that is a member of the Federal Reserve System whose deposits are
insured by the Federal Deposit Insurance Corporation. The Bank
provides a full range of commercial banking and consumer banking
services to businesses and individuals. On June 30, 1997, the
Holding Corporation and its subsidiary Bank (collectively,
referred to herein as the "Company") had consolidated total
assets of $19,295,875, total deposits of $17,733,293, total loans
of $10,035,227, stockholders equity of $1,101,875, and a net
operating loss carry-forward of $6,849,000. The Company is
regulated by the Federal Reserve, its affiliate Bank is regulated
by the Florida Department of Banking and Finance.
The Company, including the Bank and the offices of the
Holding Corporation, is located at 3475 Sherridan Street,
Hollywood, Florida 33021. Its telephone number is (954) 985-
3900.
Historical Development
The predecessor of the Holding Corporation was
incorporated under the law of Florida on April 8, 1992 under the
name PCM Acquisition Group, Inc ("PCM"). The Holding Corporation
acquired the Bank (then named Florida First International Bank),
on December 16, 1993 (the "Acquisition"), through the purchase of
95.6% of its outstanding common stock. Subsequent to the date of
the Acquisition, the name of PCM was changed to Southern Security
Bank Corporation ("SSB"), and the name of the Bank was changed to
Southern Security Bank.
During the period since the Acquisition, management has
strived to bring the Bank into compliance with regulatory guide-
lines and to position the Company for growth. Classified and
non-performing assets were liquidated as quickly as possible
consistent with the avoidance of undue losses. New procedures
were adopted and old procedures were updated and rewritten for
the purpose of verifying the quality of all new loans.
Management believes that the following Bank statistics are
indicative of the progress that has been achieved since the time
of the Acquisition.
At 12/31/93 At 12/31/96
___________ ___________
Loan Portfolio Balance at
end of Period $ 6,951,096 $ 11,610,913
Charge-Off Devalued/
Impaired Earning Assets $ 1,202,000 $ 77,037
Total Classified Assets
and Owned Real Estate $ 3,970,999 $ 546,428
Total Assets of Bank
affiliate 12/31/93
and 12/31/96 $13,089,724 $ 19,599,351
Total Classified Loans as
a Percent of Total Loans 48.46% 4.71%
Total Capital of Bank
affiliate 12/31/93
and 12/31/96 $ 288,381 $ 1,075,403
On November 10, 1997, SSB was merged (the "Merger")
with Southern Security Financial Corporation, a Delaware
corporation ("SSF"), with the Holding Corporation being the
surviving corporation under the name Southern Security Bank
Corporation.
Prior to the Merger, SSF had 279 shareholders of
record, no substantial assets and no operating history. The
Class A Common Stock of SSF was registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), on
September 29, 1997. As a result of the Merger, the former
shareholders of SSB obtained 95.6% of the outstanding capital
stock of the Holding Corporation, and the former shareholders of
SSF obtained 4.9% of the outstanding capital stock of the Holding
Corporation.
The Bank
The Bank, which is the sole subsidiary of the Holding
Corporation, is a state chartered banking association engaging in
a general commercial and consumer banking business.
The Bank's services are provided through its full-
service community banking office. The Bank engages in general
commercial banking providing a wide range of loan and deposit
services. As of December 31, 1996, the Bank had approximately
1,100 deposit accounts and 400 loans outstanding. Retail
services offered by the Bank include installment loans, credit
cards, checking accounts, savings accounts, NOW accounts, and
various types of time-deposit instruments. Mortgage lending
activities include commercial, industrial, and residential loans
secured by real estate. Commercial lending activities include
originating secured and unsecured loans and lines of credit, and
providing cash management and accounts receivable financing
services to a variety of businesses. The Bank also operates a
merchant credit card program. The Bank's installment loan
department makes direct auto, home equity, home improvement, and
personal loans to individuals. The Bank also offers safe deposit
box services.
CORRESPONDENT BANKING. Correspondent banking involves
one bank providing services to another bank which cannot provide
that service for itself for economic or organizational reasons.
The Bank purchases correspondent services offered by larger
banks, including check collections, purchase of federal funds,
security safekeeping, investment service, coin and currency
supplies, overline and liquidity loan participations, and sales
of loans to or loan participation with correspondent banks. The
Bank also sells loan participations to correspondent banks with
respect to loans which exceed the Bank's lending limit. The Bank
has established correspondent relationships with Compass Bank of
Birmingham, Alabama and Independent Bankers Bank of Orlando,
Florida with respect to the foregoing services. As compensation
for services provided by a correspondent, the Bank maintains
certain balances with the correspondent in non-interest bearing
accounts. Such compensating balances are not considered signifi-
cant to the Bank's operations.
Market Area
The Bank has one office, which is located in Hollywood,
Florida. The Bank considers its primary market and service area
to be the City of Hollywood and surrounding towns of Broward and
Palm Beach Counties. The population of Hollywood is
approximately 125,000, with 53,000 households, and a civilian
labor force of 60,000. The density of population is
approximately 4,463 persons per square mile. Public school
enrollment is at 20,000, with a pupil to teacher ratio of 19.5 to
one. Real estate property assessed valuations are approximately
$5.8 billion.
Employees
The Company has 11 full time employees at the Bank
level and two employees at the Holding Corporation level. The
Company's employees are not unionized, and the Company considers
its employee relations to be excellent.
Supervision and Regulation
Upon its initial acquisition (change of control
occurred 12/16/93) of the Bank, the Company "obtained" a charter
from the State of Florida for a State bank and a member of the
Federal Reserve System. As a Fed-member State Bank, the Bank is
subject to the provisions of the Federal Reserve Bank regulations
and administrative practices and the Florida Banking Code which
is administered by the Florida Department of Banking and Finance
(the "FDBF"). The Bank has its deposit obligations insured by
the Federal Deposit Insurance Company ("FDIC") in the maximum
individual amounts of $100,000 each, and is subject to regulation
by the FDIC.
The FDBF supervises and regulates all areas of the
Bank's operations, including, without limitation, its loans,
mortgages, issuance of securities, annual shareholders meetings,
capital adequacy requirements, payment of dividends and the
establishment or termination of branches. As a state-chartered
banking institution in the State of Florida, the Bank is
empowered by statute, subject to limitations expressed therein,
to take savings and time deposits, to accept checking accounts,
to pay interest on such deposits, to make loans on residential
and other real estate, to make consumer and commercial loans, to
invest, with certain limitations, in equity securities and in
debt obligations of Companies and to undertake other various
banking services on behalf of its customers.
BANK HOLDING COMPANY REGULATION. The Holding
Corporation is a one-bank holding company, registered with the
Federal Reserve Board under the Bank Holding Company Act of 1956,
as amended (the "BHC Act"). As such, the Holding Corporation and
the Bank are subject to the supervision, examination, and
reporting requirements of the BHC Act and the regulations of the
Board of Governors of the Federal Reserve System (the "FRB").
The Holding Corporation is required to file quarterly and annual
reports with the FRB and such additional information as the FRB
may require pursuant to the BHC Act. The FRB may conduct
examinations of the Holding Corporation and the Bank.
Under FRB regulations, the Holding Corporation is
required to serve as a source of financial and managerial
strength to the Bank and may not conduct its operations in an
unsafe or unsound manner. In addition, it is the FRB's policy
that in serving as a source of strength to its subsidiary banks,
a bank holding company should stand ready to use available
resources to provide adequate capital funds to its subsidiary
banks during periods of financial stress or adversity and should
maintain the financial flexibility and capital-raising capacity
to obtain additional resources for assisting its subsidiary
banks. A bank holding company's failure to meet its obligations
to serve as a source of strength to its subsidiary banks will
generally be considered by the FRB to be an unsafe and unsound
banking practice or a violation of the FRB's regulations or both.
The BHC Act requires every bank holding company to
obtain the prior approval of the FRB before (i) it may acquire
direct or indirect ownership or control of any voting shares of
any bank if, after such acquisition, the bank holding company
will directly or indirectly own or control 5% or more of the
total voting shares of the bank, (ii) it or any of its
subsidiaries, other than a bank, may acquire all or substantially
all of the assets of the bank, or (iii) it may merge or
consolidate with any other bank holding company.
The BHC Act further provides that the Federal Reserve
may not approve any transaction that would result in a monopoly
or would be in furtherance of any combination or conspiracy to
monopolize or attempt to monopolize the business of banking in
any section of the United States, or the effect of which may be
substantially to lessen competition or to tend to create a
monopoly in any section of the country, or that in any other
manner would be in restraint of trade, unless the anti-
competitive effects of the proposed transaction are clearly
outweighed by the public interest in meeting the convenience and
needs of the community to be served. The Federal Reserve is also
required to consider the financial and managerial resources and
future prospects of the bank holding companies and banks
concerned and the convenience and needs of the community to be
served.
The BHC Act generally prohibits the Holding Corporation
from engaging in activities other than banking or managing or
controlling banks or other permissible subsidiaries and from
acquiring or retaining direct or indirect control of any company
engaged in any activities other than those activities determined
by the FRB to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto. In
determining whether a particular activity is permissible, the FRB
must consider whether the performance of such an activity
reasonably can be expected to produce benefits to the public,
such as greater convenience, increased competition, or gains in
efficiency, that outweigh possible adverse effects, such as undue
concentration of resources, decreased or unfair competition,
conflicts of interests, or unsound banking practices. For
example, factoring accounts receivable, acquiring or servicing
loans, leasing personal property, conducting discount securities
brokerage activities, performing certain data processing
services, acting as agent or broker in selling credit life
insurance and certain other types of insurance in connection with
credit transactions, and performing certain insurance
underwriting activities all have been determined by the FRB to be
permissible activities of bank holding companies. Despite prior
approval, the FRB has the power to order a bank holding company
or its subsidiaries to terminate any activity or to terminate its
ownership or control of any subsidiary when it has reasonable
cause to believe that continuation of such activity or such
ownership or control constitutes a serious risk to the financial
safety, soundness, or stability of any bank subsidiary of that
bank holding company.
BANK REGULATION. The Bank is chartered under the laws
of the State of Florida and its deposits are insured by the FDIC
to the extent provided by law. The Bank is subject to
comprehensive regulation, examination and supervision by the FDBF
and the FRB and to other laws and regulations applicable to
banks. Such regulations including limitations on loans to a
single borrower and to its directors, officers and employees;
restrictions on the opening and closing of branch offices; the
maintenance of required capital and liquidity ratios; the
granting of credit under equal and fair conditions; and the
disclosure of the costs and terms of such credit. The Bank is
examined periodically by both the FDBF and the FRB, to each of
whom it submits periodic reports regarding its financial
condition and other matters. Both the FDBF and the FRB have a
broad range of powers to enforce regulations under their
respective protection of the safety and soundness of the Bank,
including the institution of cease and desist orders and the
removal of directors and officers. These regulatory agencies
also have the authority to approve or disapprove mergers,
consolidations, and similar corporate actions.
There are various statutory and contractual limitations
on the ability of the Bank to pay dividends, extend credit, or
otherwise supply funds to the Holding Corporation. The FDIC and
the FDBF also have the general authority to limit the dividends
paid by insured banks and bank holding companies if such payment
may be deemed to constitute an unsafe and unsound practice.
Dividends and management fees from the Bank constitute the sole
source of funds for dividends to be paid by the Holding Corpora-
tion. Under Florida law applicable to banks and subject to
certain limitations, after charging off bad debts, depreciation
and other worthless assets, if any, and making provisions for
reasonably anticipated future losses on loans and other assets,
the board of directors of a bank may declare a dividend of so
much of the bank's aggregate net profits for the current year
combined with its retained earnings (if any) for the preceding
two years as the board shall deem to be appropriate and, with the
approval of the FDBF, may declare a dividend from retained
earnings for prior years. Before declaring a dividend, a bank
must carry 20% of its net profits for any preceding period as is
covered by the dividend to its surplus fund, until the surplus
fund is at least equal to the amount of its common stock then
issued and outstanding. No dividends may be paid at any time
when a bank's net income from the preceding two years is a loss
or which would cause the capital accounts of the bank to fall
below the minimum amount required by law, regulation, order or
any written agreement with the FDBF or a federal regulatory
agency. Florida law applicable to companies (including the
Holding Corporation) provides that dividends may be declared and
paid only if, after giving it effect, (i) the company is able to
pay its debts as they become due in the usual course of business,
and (ii) the company's total assets would be greater than the sum
of its total liabilities plus the amount that would be needed if
the company were to be dissolved at the time of the dividend to
satisfy the preferential rights upon dissolution of shareholders
whose preferential rights are superior to those receiving the
dividend. The Bank is subject to agreements with the FRB and
with the State Comptroller and Banking Commissioner of Florida
pursuant to which the Bank is prohibited from declaring or paying
any dividends without their prior written consent.
Under federal law, federally insured banks are subject,
with certain exceptions, to certain restrictions on any extension
of credit to their parent holding companies or other affiliates,
on investment in the stock or other securities of affiliates, and
on the taking of such stock or securities as collateral from any
borrower. In addition, such banks are prohibited from engaging
in certain tie-in arrangements in connection with any extension
of credit or the providing of any property or service.
The FDIC Improvement Act of 1991 ("FDICIA") made a
number of reforms addressing the safety and soundness of deposit
insurance funds, supervision, accounting, and prompt regulatory
action, and implemented other regulatory improvements. FDICIA
also recapitalized the Bank Insurance Fund ("BIF"), under which
the Bank pays a quarterly statutory assessment. Under FDICIA,
annual full-scope, on-site examinations are required of all
insured depository institutions. The cost for conducting an
examination of an institution may be assessed to that
institution, with special consideration given to affiliates and
any penalties imposed for failure to provide information
requested. Insured state banks also are precluded from engaging
as principal in any type of activity that is impermissible for a
national bank, including activities relating to insurance and
equity investments. FDICIA also recodifies current law
restricting extensions of credit to insiders under the Federal
Reserve Act.
The policies of regulatory authorities have had a
significant effect on the operating results of commercial banks
in the past, and may be expected to do so in the future. An
important function of the FRB System is to regulate aggregate
national credit and money supply through such means as open
market dealings in securities, establishment of the discount rate
on bank borrowing, changes in reserve requirements against bank
deposits, and limitations on the deposits on which a bank may pay
interest. Policies of these agencies may be influenced by many
factors including inflation, unemployment, short-term and long-
term changes in the international trade balance, and fiscal
policies of the United States Government.
Loans made by the Bank are also subject to numerous
other federal and state laws and regulations, including the Truth
in Lending Act, the Community Reinvestment Act, the Equal Credit
Opportunity Act, the Real Estate Settlement Procedures Act, and
the Financial Institutions Reform, Recovery, and Enforcement Act
of 1989.
The federal bank regulatory agencies have an array of
powers to enforce laws, rules, regulations and orders. Among
other things, the agencies may require that institutions cease
and desist from certain activities, may preclude persons from
participating in the affairs of insured depository institutions,
may suspend or remove deposit insurance, and may impose civil
money penalties against institution-affiliated parties for
certain violations.
The foregoing is a brief summary of certain statutes,
rules, and regulations affecting the Company and the Bank.
Numerous other statutes and regulations have an impact on the
operations of the Company and the Bank. Supervision, regulation,
and examination of banks by the bank regulatory agencies are
intended primarily for the protection of depositors, not
shareholders.
INSURANCE OF DEPOSITS. The Bank's deposit accounts are
insured by the FDIC up to a maximum of $100,000 per insured
depositor. The FDIC issues regulations, conducts periodic
examinations, requires the filing of reports and generally
supervises the operation of its insured banks. Any insured bank
which is not operated in accordance with or does not conform to
FDIC regulations, policies and directives may be sanctioned for
non-compliance. Proceedings may be instituted against any
insured bank or any director, officer, or employee of such bank
engaging in unsafe and unsound practices, including the violation
of applicable laws and regulations. The FDIC has the authority
to terminate insurance of accounts pursuant to procedures
established for that purpose.
BANK BRANCHING. Florida banks are permitted by statute
to branch statewide. Such branch banking, however, is subject to
prior approval by the FDBF and the FDIC. Any approval by the
FDBF and the FDIC of branching by the Bank would take into
consideration several factors, including the Bank's level of
capital, the prospects and economics of the proposed branch
office, and other considerations deemed relevant by the FDBF and
the FDIC for purposes of determining whether approval should be
granted to open a branch office.
Competition
The Company operates in a competitive environment,
where it must compete with numerous other financial entities. In
one or more aspects of its business, the Company competes with
other commercial banks, savings and loan associations, credit
unions, finance companies, mutual funds, insurance companies,
brokerage and investment banking companies, and other financial
intermediaries operating in the Company's market area. Most of
these competitors, some of which are affiliated with bank holding
companies, have substantially greater resources and lending
limits, and may offer certain services that the Bank does not
currently provide. In addition, many of the Bank's non-bank
competitors are not subject to the same extensive federal
regulations that govern bank holding companies and federally
insured banks.
The primary factors in the competition for deposits are
interest rates, personalized services, the quality and range of
financial services, convenience of office locations and office
hours. Competition for deposits comes primarily from other
commercial banks, savings associations, credit unions, money
market mutual funds and other investment alternatives.
Competition for loans emanates from other commercial banks,
savings associations, mortgage banking firms, credit unions and
other financial intermediaries. Many of the financial
institutions operating in the Company's market area offer certain
services, such as trust, investment and international banking,
which the Company does not offer.
To compete, the Bank relies upon specialized services,
responsive handling of customer needs, and personal contacts by
its officers, directors and staff. In those instances where the
Company is unable to provide services a customer needs, it seeks
to arrange for those services to be provided by other banks with
which it has a correspondent relationship.
Recent changes in federal banking laws are facilitating
interstate branching and merger activities among banks. Since
September 1995, certain bank holding companies are authorized to
acquire banks throughout the United States. In addition, on
since June 1, 1997, certain banks will be permitted to merge with
banks organized under the law of other states. These changes,
together with economic developments in the United States, have
lead to a period of consolidation in the banking industry, and
may be expected to lead to even greater competition for the
Company and for the Company to be placed in competition in the
future with financial institutions with which it does not
currently compete. As a result, the Company may be expected to
encounter intense competition within its market area for the
foreseeable future.
MANAGEMENT
The following discussion provides information
concerning the management of SSB immediately prior to the Merger
and of the Registrant immediately after the Merger.
Company Officers and Directors
Name Term Age Position
Position Since
________________ _____ ____ __________
Philip C. Modder 3yr 56 Chairman of the Board
November 1997 President
James L. Wilson 3yr 52 Vice Chairman
November 1997 Chief Executive Officer
Timothy S. Butler* 2yr 46 Director
December 1992
Eugene J. Strasser 2yr 50 Director
December, 1992
Harold C. Friend 1yr 50 Director
December, 1994
Robert D. Butler, Jr* 1yr 48 Director
December, 1994
* Timothy S. Butler and Robert D. Butler, Jr. are cousins.
Each director is elected for a period of three years.
The term of directorships are staggered as to expiration date,
such that for the present board of directors, each year one-third
of the directorship is subject to re-election, providing for
additional stability and continuity. Vacancies and newly created
directorships resulting from any increase in the number of
authorized directors may be filed by a majority vote of the
directors then remaining in office; however, any additional
Directors or vacancies filled may not take office nor serve,
until proper applications and disclosures are filed with the FRB,
for prior approval therefrom. Once approval is obtained from the
FRB, director(s) may thereafter take office and serve in that
capacity.
Certain information with respect to the background of each
director and the three executive officers of the Company is set
forth below.
PHILIP C. MODDER: Mr. Modder served as the Chairman of
the Board and Chief Executive Officer of the Company and the Bank
from the commencement of the Company's operations in June 1992
until he became Chairman of the Board and President of the
Company and the Bank on November 21, 1997. Mr. Modder has been
involved in the banking industry in Palm Beach County for over 25
years. Modder was educated at the University of Wisconsin,
Racine Wisconsin, Evangel College, Springfield, Mo., Palm Beach
Junior College, Lake Worth, Fl., and Florida Atlantic University,
which granted him a B.S. Degree in 1969, in the academic areas of
Finance and Accounting. Prior to organizing the subject Company,
Mr. Modder was President and Chief Executive Officer and
organizing director of Mizner Bank located in Boca Raton,
Florida, from March 1987 to May 1992. Prior thereto, Mr. Modder
served as Senior Vice President of Caribank of Palm Beach County.
In 1988, Caribank of Palm Beach County was merged into its
parent, Caribank of Dania. Prior to that time, Modder previously
served as Senior Vice President and Area Manager of Atlantic
National Bank for five years and Vice President and Branch
Manager for eight years at Sun Bank. Mr. Modder serves as a
Director and was a past Chairman of the Boca Raton Chamber of
Commerce, and also serves as Chairman of the Boca Raton Airport
Authority. Mr. Modder has also served as an instructor for the
American Institute of Banking.
JAMES L. WILSON: Mr. Wilson served as the President
and Chief Operating Officer of the Company and the Bank from the
time of commencement of the Company's operations in June of 1992
until he became the Vice Chairman of the Board and Chief
Executive Officer of the Company and the Bank on November 21,
1997. Mr. Wilson has been involved in banking and the finance
industry in Florida since 1970, was educated at Union College
with degree granted in 1968 in the academic areas of Mathematics
and Organic Chemistry. Prior to organizing the Company, Mr.
Wilson was Executive Vice President and Senior Lending Officer of
Boca Bancorp in Boca Raton, Florida from June 1990 to June 1992.
Prior thereto, from June 1985 to May 1990, Wilson was a Principal
of Bayshore Investments, Tampa, Florida, a real estate finance
and property management company. Wilson in the mid 1980's was
Vice President, and Senior Real Estate Lending Officer for
Southeast Bank, Tampa, Florida. Wilson also held various
positions with Royal Trust Bank (Canada), N.A. with USA offices
in Miami; while at Royal Trust, Wilson was a member of the Bank
Acquisition team, which purchased over a billion dollars in
banking companies. Wilson's biography has been published in
multiple editions of Who's Who of America, the South and South
West, and the World since 1984. Mr. Wilson has also served as an
instructor for the American Institute of Banking.
TIMOTHY S. BUTLER: Mr. Butler was born in Fort
Lauderdale and graduated from Pompano Beach High School in 1967.
He attended Broward Community College and Florida State
University. He has served as President of Butler Properties Ltd.
since 1971. That Company manages the family assets consisting of
farm land and various other real estate holdings. From January
1989 to June 1992, he served as an Associate Director of Mizner
Bank in Boca Raton.
EUGENE J. STRASSER, M.D.: Dr. Strasser did his
undergraduate and Pre-Med work at Loyola College and the
University of Maryland where he graduated in 1968. He attended
the University of Maryland Medical School in Baltimore, MD. where
he graduated in 1972. He is licensed by the American Medical
Board as a Board Certified General Surgeon and a Board Certified
Plastic and Reconstructive Surgeon. He has established his own
small, private hospital, CosmoPlast Center, in Coral Springs,
Florida, where he has practiced medicine since 1981.
HAROLD C. FRIEND, M.D.: Dr. Friend has been a resident
of South Florida for 21 years. He received his B.A. from the
University of Texas, and his M.D. degree from the University of
Texas Southwestern Medical School in 1972. Friend is a board-
certified Neurologist, practicing in Boca Raton. He has been
active in numerous business activities, including past membership
of the Mizner Bank's Advisory Board, President of Puget Sound
Yellow Taxi, a transportation company located in Seattle,
Washington from October 1990 to June 1993, and President of the
Neuroscience Center in Boca Raton, Florida from June 1985 to the
present. As to civic involvement, Dr. Friend has held past and
present positions with the Southern Region of the Boy Scouts,
Executive Board of United Way, and the Local and International
Rotary. Dr. Friend's biography is published in multiple editions
of Who's Who of the South and South West, and the World.
ROBERT DAVID BUTLER, JR.: Mr. Butler was born in Boca
Raton, Florida and was reared in Deerfield Beach, Florida. He
attended Carson-Newman College and the University of Tennessee
and was graduated with degrees in Business Administration,
English, and Music. After retiring from Eastern Airlines after
fifteen years of service as a flight services representative, in
June of 1991 he established Pegasus Travel Management, a division
of Regit Enterprises, Inc., of which he is President and Chief
Executive Officer. Mr. Butler resides in Coconut Grove, Florida,
this city also being the location of the corporate headquarters
of Regit Enterprises.
FLOYD HARPER: Vice President of the Company (and
Senior Vice President and Cashier of the Bank), 47, graduated in
1972 with honors from Northwood University, West Palm Beach,
Florida with a Business Administration Degree, received a Degree
from University of Virginia Graduate School of Retail Bank
Management, and has been designated a Certified Consumer Credit
Executive thereby. From January 1993 to October 1994, Harper was
engaged by the Resolution Trust Corporation in the disposition of
failed banking institutions of over $12 Billion, as Regional Vice
President, Branch Administration, and dealt with deposit acquisi-
tion and operational efficiency. Prior to 1993, Harper was
Executive Vice President, Chief Operating Officer for Southern
National Bank, was Vice President & District Manager for Chase
Manhattan Bank (Florida) handling upscale lending, and served
with Atlantic National Bank and Barnett Bank in South Florida.
LIMITATION OF OFFICERS' AND DIRECTORS' LIABILITIES: Pursuant to
the Company's Certificate of Incorporation and under Delaware
Law, directors of the Company are not liable to the Company or
its stockholders for monetary damages for breach of fiduciary
duty, except for liability in connection with breach of duty or
loyalty, for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, or for
dividend payments or stock repurchases in violation of Delaware
or for any transaction in which a director has derived an
improper personal benefit.
Officers of the Bank
[1] Peter Stec, Senior Vice President and Senior
Lending Officer, 44, has been involved in community
banking since 1980 and is experienced in rehabilitating
loan portfolios and in originating new borrowing
relationships. Stec was educated at the University of
Dayton, Ohio, where he received a degree in Business
Administration granted in 1975. He has attended the
Stonier Graduate School of Banking and is a Certified
Lender-Business Banking, recognized by the American
Bankers Association. From June 1987 to October 1989,
Stec managed a 75 employee lending unit consisting of
Commercial Lending, Loan Operations, Credit Administra-
tion, as Senior Vice President of First American Bank,
a $1.5 Billion Florida banking company. From November
1989 to March 1993, Stec served as Vice President and
Commercial Lending Manager for Boca Bank, Boca Raton,
Florida, and from June 1985 to May 1987 served as a
Loan Officer for Southeast Bank and Florida Coast Bank
in South Florida.
[2] Floyd Harper, Senior Vice President and Cashier.
Mr. Harper is also a Vice President of the Company. See
above.
Compensation of Management
The following Table shows information concerning annual and long-
term compensation to certain Executive Officers for services to
the Company for the years ended December 31, 1996, 1995 and 1994.
The table includes information on the Company's Chairman and
Chief Executive Officer, Philip C. Modder, and its President and
Chief Operating Officer, James L. Wilson, (collectively, the
"Named Executive Officers") during the periods indicated. No
other current executive officer earned more than $100,000 in
salary and bonus in 1996.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensa- All Oth-
Name and tion er Com-
Principal Posi- pensat-
tion Year Salary Other Securities LTIP Pa- tion
Annual Underlying youts
Compen- Options/ ($)
sation SARs (#)
<S> <C> <C> <C> <C> <C> <C>
Philip C. Mod- 1996 $127,000 $17,000(1) 27,349 -0- $19,208
der, Chairman & 1995 $149,000 $17,000(1) 35,224 -0- $19,208
Chief Executive 1994 $139,000 $17,000(1) 116,438 $46,000 $19,208
Officer
James L. Wil- 1996 $103,000 $17,000(1) 27,246 -0- $16,708
son, President 1995 $125,000 $17,000(1) 28,371 -0- $16,708
1994 $132,000 $17,000(1) 109,579 $46,000 $16,708
</TABLE>
(1) Includes automobile allowances in the amount of $10,800 per
year for each of Messrs. Modder and Wilson.
The following table shows information concerning
options granted to Named Executive Officers during the fiscal
year ended December 31, 1996.
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
Number of
Securities % of Total Exercise
Underlying Options/SAR's or
Op- Granted to Base
tions/SAR's Employees in Price Expiration
Name Granted Fiscal Year ($/Share) Date
<S> <C> <C> <C> <C>
Philip Modder 27,439 48.5% $0.10 06/29/2006
James Wilson 27,246 51.5% $0.10 06/29/2006
</TABLE>
In addition, as Directors of the Company's Bank
subsidiary, each Messrs. Modder and Wilson received 17,200
options to purchase shares of common stock of the Bank. Such
options are exercisable at 110% of the fair market value of the
Bank's shares on the date of grant and are exercisable for a
period of ten years from the date of grant.
The following table shows information concerning option
exercises and year-end option values for options held by the
Named Executive Officers.
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year
and
Fiscal Year-End Option SAR Values
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SAR's Options/SAR's
at FY-End at FY-End
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable
<S> <C> <C> <C> <C>
Philip Modder -0- -0- 234,044/0 $-0-(1)
James Wilson -0- -0- 191,895 $-0-(1)
</TABLE>
(1) Average option exercise price was $.10 per share, the
approximate book value of the shares. There is no market for the
Company's Common Stock, and any shares issued upon exercise of
the options would have been restricted under the Securities Act.
Employment Agreements
Philip C. Modder and James L. Wilson have Employment
Agreements with the Company dated June 11, 1992 as amended June
30, 1997 (as so amended, the "Employment Agreements"). The
Employment Agreements provide that Modder shall serve as the
Company's Chief Executive Officer and Chairman of the Board, and
that Wilson shall serve as the Company's President, Senior Loan
Officer, and Chief Operating Officer. By order of the Board of
Directors of the Company on September 23, 1997 and subject to
approval by bank regulators, the positions of Messrs. Modder and
Wilson were changed to Chairman of the Board and President, and
Vice Chairman of the Board and Chief Executive Officer,
respectively.
The Employment Agreements provide that Modder and Wilson
shall each serve for a five year term from June 11, 1997, except
that the if the Company does not deliver written notice to the
respective executive at least six months prior to the end of the
term it shall automatically renew for an additional five year
term. Each Employment Agreement provides for the following
compensation to the executive: (i) the executive will be paid a
base salary of $175,000 per year, subject to annual increase by
the greater of the change in the Consumer Price Index ("CPI") or
5%; (ii) the executive will be paid a bonus equal to 2.5% of the
pre-tax net income of the Company; (iii) if the Company acquires
the assets of any existing financial institution, the executive
shall receive a bonus equal to 0.20% of the gross assets for each
such transaction; (iv) the executive shall during term of the
Agreement receive semi-annual grants on July 1st and January 1st
of stock options equal to 0.6% of the outstanding Class A Common
Stock of the Company exercisable at 110% of per share book value
of such stock on the day preceding the grant; (v) if permitted by
law and in accordance with applicable federal and state
regulations, loans equal to the exercise price of the options
granted at interest rates not greater than prime plus 1% with a
term of not less than 30 months; (vi) if any of the options is
not an "incentive stock option" under the Internal Revenue Code,
reimbursement of any taxes the executive is required to pay by
reason thereof; (vii) disability insurance coverage providing for
benefits in the amount of 60% of the executives total annual
compensation subject to cost of living adjustments equal to the
lesser of the change in the CPI or 12% per annum; (viii) a whole
life insurance annuity policy in the face amount of $1,750,000
plus reimbursement of any income taxes the executive is required
to pay as a result of payment of the premiums on such insurance
policy; (viii) family membership in two country clubs; (ix) an
automobile allowance of $900 per month adjusted annual in
accordance with the CPI plus sales taxes, insurance and operating
costs of the auto; and (ix) comprehensive medical and dental
insurance.
Termination payments.
The Employment Agreements contain provisions for
additional compensation to the executive or his legal represen-
tatives in the event of termination, including: (i) if an Employ-
ment Agreement terminates for any reason, all options provided
for thereunder become fully vested and exercisable for a period
of ten years from the date of such termination; (ii) if an
Employment Agreement is terminated for any reason other than
death or permanent disability, the Company will pay for the
executive's comprehensive medical and dental insurance for two
years following the date of termination; (iii) in the event of
the death or permanent disability of the executive, the
executive's annual compensation shall be paid to him or his legal
representatives for a period of 12 months following termination;
(iv) in the event of a Change of Control of the Company (defined
to include the acquisition of 20% or more of the combined voting
power or the Company's outstanding stock after the date of the
agreement, a change in the majority of the Board of Directors of
the Company in connection with a business combination, sale of
assets or related transaction), if the executive may terminates
the agreement on 60 days written notice he shall receive a lump
sum payment of 200% of his total annual compensation for the
preceding 12 months; and (v) upon 60 days written notice before
termination by the executive, the executive shall receive a lump
sum payment of 200% of his annual compensation for the preceding
12 months together with continuation of employee benefits for the
periods described above.
Compensation of Directors: At present the Company does not
compensate any of its directors for their services to the Company
as directors, although they may do so in the future, subject to
applicable regulatory approval. The Company may reimburse its
directors for their costs incurred for attending meetings of the
Board of Directors. The Company's Bank subsidiary compensates
its directors, some of whom are directors of the Company, by the
grant of 17,200 options to purchase Bank common stock at 110% of
fair market value of the Bank on the date of grant. Such options
are exercisable for a period of ten years from the date of grant.
Certain Transactions
On September 30, 1993, the Company received from Philip
Modder, the Chairman of the Company, and James Wilson, the
President of the Company, $100,000 and $50,000, respectively, in
services and assistance in payment of organizational expenses of
the Company, and they received non interest bearing notes
therefor (the "Notes"). On June 30, 1997, the Company sold
945,269 shares of Common Stock to Philip Modder, and 472,634
shares of Common Stock to James Wilson, in each case at a price
of $0.10579 per share (110% of then book value per share), in
exchange for the elimination of the Notes.
Also as of June 30, 1997, Messrs. Modder and Wilson
entered into an agreement with the Board of Directors pursuant to
which they eliminated obligations for unpaid wages and benefits
under the terms of their employment agreements ($78,563 in the
case of Mr. Modder and $128,563 in the case of Mr. Wilson) for
Common Stock at $.10579 per share, or 742,632 shares and
1,215,266 shares, respectively. The Board agreed that Messrs.
Modder and Wilson may in the future eliminate unpaid back wages
and benefits for shares of Common Stock at 110% of book value at
the time of the elimination. As of June 30, 1997, the Company
owed Mr. Modder $208,000 for unpaid back wages and benefits.
The Company currently owes $100,00 to a trust
affiliated with John E. Butler, one of its Directors, pursuant to
the terms of a note that bears interest at the rate of 8% per
annum payable quarterly (the "Butler Note"). The Butler Note was
issued on December 29, 1993 and matures every six months, when it
is automatically renewed for an additional six months unless the
trust notifies the Company of its intention to call the note
sixty days prior to such maturity date. The next maturity date
of the Butler Note is on December 31, 1997.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information
regarding the beneficial ownership of the Company's Common Stock
as of November 12, 1997 after giving effect to the Merger, by
each person known by the Company to be the beneficial owner of
more than five percent of all Classes of the Company's voting
securities.
<TABLE>
<CAPTION>
% of
Name and Address of Number of Outstanding
Beneficial Owner Shares Shares
<S> <C> <C>
Philip C. Modder 1,456,357(1) 26.4%
3475 Sherridan Street
Hollywood, FL 33021
James L. Wilson
3475 Sherridan Street
Hollywood, FL 33021 1,360,645 (2) 25.0%
Jack E. & Molly W. Butler,
TTE's
U/A dtd 11/13/90
2363 Loblolly Lane
Deerfield Beach, FL 33442 309,343 (3) 5.9%
Robert D. & Martha L. Butler,
TTE's
U/A dtd 3/29/90
84 Southeast 4th Avenue
Deerfield Beach, FL 33441 312,948 (4) 6.0%
Linda K. Strasser
6770 N.W. 87th Avenue
Parkland, FL 33067 398,128 (5) 7.5%
Timothy S. Butler
H.C. 10, Box 580
Lakemont, GA 30552 449,738 (6) 8.4%
Harold C. Friend 281,688 (7) 5.4%
3475 Sherridan Street
Hollywood, FL 33021
</TABLE>
__________________________________________
(1) Includes options to purchase 292,965 shares that
are exercisable within 60 days, and 67,511 shares
owned by Mr. Modder's wife.
(2) Includes options to purchase 210,586 shares that
are exercisable within 60 days, and 40,844 shares
owned by Mr. Wilson's wife.
(3) Jack E. and Molly W. Butler share voting and investment
power with respect to such shares.
(4) Robert D. and Martha L. Butler share voting and invest-
ment power with respect to such shares.
(5) Includes 16,667 shares owned by Linda Strasser's
husband and options owned by him to purchase 100,841
shares that are exercisable within 60 days.
(6) Includes 250,000 shares owned by a trust as to which
Mr. Butler has sole voting and investment power and
options to purchase 134174 shares that are exercisable
within 60 days.
(7) Includes options to purchase 19,953 shares that are
exercisable within 60 days, 40,993 shares owned by Mr.
Friend's wife, and 152,467 shares owned by Mr. Friend
as custodian for his children.
The following table sets forth information concerning
the beneficial ownership of the Company's Common Stock benefi-
cially owned by each director of the Company, by each executive
officer of the Company named in the compensation table, and by
all directors and executive officers of the Company as a group,
as of November 12, 1997 and after giving effect to the Merger.
<TABLE>
<CAPTION>
Shares of Class A % of Class
Name (1) Common Stock
<S> <C> <C>
Philip C. Modder 1,456,357 (2) 26.4%
James L. Wilson 1,360,645 (2) 25.0%
Eugene J. Strasser 398,128 (3) 7.5%
Harold C. Friend 281,688 (2) 5.4%
Robert D. Butler 42,890 (4) 0.8%
Timothy S. Butler 449,738 (2) 7.1%
All directors and
executive officers
as a group (7 per- 3,988,446 (5) 66.5%
sons)
</TABLE>
(1) The business address of each of the persons identified
above is at Southern Security Bank Corporation, 3475
Sherridan Street, Hollywood, Florida 33021.
(2) See footnotes to preceding table.
(3) Includes 272,620 shares owned by Eugene Strasser's wife
and options to purchase 100,841 shares that are
exercisable within 60 days.
(4) Includes options to purchase 11,841 shares that are
exercisable within 60 days.
(5) Except as otherwise indicated in the footnotes above,
members of the group have sole voting and investment
power as to such shares.
Item 2. Acquisition or Disposition of Assets
Reference is made to the information appearing under
"Item 1. Change in Control of Registrant," above, which is
incorporated herein by reference. The principle followed in
determining the amount of consideration given in the Merger,
which consisted solely of the receipt of shares in accordance
with the Merger Agreement, was the bargained agreement between
the persons controlling the Registrant and SSB. The controlling
persons of the Registrant and SSB prior to the Merger were not
affiliated or associated in any manner, and there was no material
relationship between them. The only funds expended by SSB in
connection with the Merger were for transactional expenses, and
such funds were or will be paid from its working capital.
Item 4. Change in Registrant's Certifying Accountant
The following discussion relates to a change of
certifying accountants by SSB prior to the Merger. As a result
of the Merger, the certifying accounts of SSB will be the
certifying accountants of the Registrant. The certifying
accountants of the Registrant prior to the Merger have never been
retained or dismissed by SSB, nor have there been discussions of
any kind between SSB and such accountants concerning the
financial statements of SSB or the Registrant.
On September 24, 1996, the Board of Directors selected
McGladrey & Pullen, LLP ("McGladrey & Pullen") as the Company's
independent public accountants for the 1996, 1997 and 1998 fiscal
years. Deloitte & Touche, LLP. ("Deloitte") had been under a
three year commitment with the Company for the production of
audited financial statements for the Bank for the years 1993,
1994 and 1995, which commitment expired with the completion of
the 1995 audit. After a review of several competitive audit
proposals, the Board of Directors decided by unanimous vote at
its September 24, 1996 Board meeting that McGladrey & Pullen
would be the accountants for the Company for the next three
years, beginning with the 1996 audit.
Deloitte was the independent accounting firm which
audited the financial statements of the Bank for each fiscal year
from 1993 through 1995. Deloitte's reports on the Bank's
financial statements for the past two fiscal year's did not
contain an adverse opinion or disclaimer of opinion, and was not
qualified or modified for uncertainty, audit scope, or accounting
principles.
1. During the Company's two most recent fiscal years
and any subsequent interim period preceding the date of the
selection of McGladrey & Pullen, there were no disagreements
between the Company and Deloitte on any matter of accounting
principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of the Deloitte, would have caused it to make
reference to the subject matter of the disagreement in connection
with its report.
2. During the Company's two most recent fiscal years
and any subsequent interim period preceding the date of the
selection of McGladrey & Pullen, NONE of the following events
occurred:
(a) Deloitte advised the Company that the internal
controls necessary for the Bank to develop
reliable financial statements did not exist;
(b) Deloitte having advised the Bank that information
has come to its attention that had led it to no
longer be able to rely on management's
representations, or that made it unwilling to be
associated with the financial statements prepared
by management;
(c) (1) Deloitte having advised the Bank of the need
to expand significantly the scope of its audit, or
that information had come to its attention during
the such time period, that if further investigated
might (i) materially impact the fairness or
reliability of either: a previously issued audit
report or the underlying financial statements; or
the financial statements issued or to be issued
covering the fiscal periods subsequent to the date
of the most recent financial statements covered by
an audit report (including information that may
prevent it from rendering an unqualified audit
report on those financial statements), or (ii)
cause it to be unwilling to rely on management's
representations or be associated with the
registrant's financial statements; and (2) due to
the failure to reappoint Deloitte as accountants
for the Bank or for any other reason, Deloitte did
not so expand the scope or its audit or conduct
such further investigation; or
(d) (1) Deloitte having advised the Bank that
information has come to its attention and that it
had concluded that the information materially
impacts the fairness or reliability of either (i)
a previously issued audit report or the underlying
financial statements, or (ii) the financial
statements issued or to be issued covering the
fiscal period(s) subsequent to the date of the
most recent financial statements covered by an
audit report (including information that unless
resolved to Deloitte's satisfaction, would prevent
it from rendering an unqualified audit report on
those financial statements; and (2) due to the
failure to reappoint Deloitte as accountants for
the Bank or for any other reason, the issue has
not been resolved to its satisfaction.
During the Company's two most recent fiscal years and
any interim period prior to March 30, 1996, the Company (or
someone acting on its behalf) did not consult McGladrey & Pullen
regarding either any matter that was either (i) the subject of a
disagreement as described in paragraph number "1" above, or (ii)
the subject of any event described in paragraph number "2" above.
Item 7. Financial Statements and Exhibits
(a) Financial statements of business acquired. Filed
herewith are (i) audited, consolidated financial statements of
SSB for the year ended December 31, 1997, and (i) unaudited
interim consolidated financial statements for SSB for the periods
ended June 30, 1997 and June 30, 1996. Unaudited interim
consolidated financial statements for the periods ended September
3, 1997 and September 30, 1996 will be filed by amendment not
later than 60 days after the date that this initial report on
Form 8-K was required to be filed.
(b) Pro forma financial information. Pro forma financial
information required by this report will be filed not later than
60 days after the date of this initial report on Form 8-K was
required to be filed.
(c) Filed herewith are the following Exhibits:
2.1 Agreement and Plan of Merger by and between Southern
Security Financial Corporation and Southern Security Bank
Corporation, dated as of October 31, 1997.
2.2 Certificate of Merger of Southern Security Bank Corporation
into Southern Security Financial Corporation (under Section
252 of the General Corporation Law of the State of
Delaware), dated November 10, 1997.
2.3 Articles of Merger of Southern Security Bank Corporation
into Southern Security Financial Corporation, under Florida
law, dated November 12, 1997.
3.1 Certificate of Amendment of Certificate of Incorporation of
Southern Security Financial Corporation, dated November 12,
1997 (filed under Delaware law) to change name to Southern
Security Bank Corporation.
<PAGE>
SOUTHERN SECURITY BANK CORPORATION
AND SUBSIDIARY
CONSOLIDATED FINANCIAL REPORT
DECEMBER 31, 1996
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Southern Security Bank Corporation and Subsidiary
Boca Raton, Florida
We have audited the accompanying consolidated balance sheet of
Southern Security Bank Corporation and subsidiary as of December
31, 1996, and the related consolidated statements of income,
stockholders' equity, and cash flows for the year then ended.
These financial statements are the responsibility of the Bank's
management. Our responsibility is to express an opinion on these
financial statements based on our audit. The financial
statements of the Company for the year ended December 31, 1995,
were audited by other auditors whose report, dated June 10, 1997,
expressed an unqualified opinion on those statements.
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, the 1996 consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of Southern Security Bank Corporation and
subsidiary as of December 31, 1996, and the results of their
operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
As discussed in Note 15 to the financial statements, the Company
entered into a written agreement with the Federal Reserve Bank
("FRB") which requires, among other things, that the Bank meet
prescribed minimum capital requirements. Although the Bank met
these capital requirements at December 31, 1996, the Bank's
ability to meet the prescribed capital requirements in the future
is uncertain. Failure to meet these requirements may result in
one or more regulatory sanctions, including restricting as to the
source of deposits and the appointment of a conservator.
Management's plans concerning these matters are described in Note
15.
/s/ McGladrey & Pullen, LLP
______________________________________
Fort Lauderdale, Florida
March 14, 1997, except for reference to prior
auditor, as to which the date is June 10, 1997
<PAGE>
<TABLE>
<CAPTION>
SOUTHERN SECURITY BANK CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
ASSETS 1996 1995
____ ____
<S> <C> C>
Cash and due from banks (Note 2) $ 3,005,602 $1,392,862
Federal funds sold 1,231,000 1,012,000
_________ _________
Total cash and cash equivalents 4,236,602 2,404,862
Securities held to maturity (Note 3) 2,108,882 1,644,863
Securities available for sale (Note 3) 1,377,545 3,363,079
Federal Reserve Bank stock, at cost 59,500 53,800
Loans, net (Notes 4, 11 and 15) 11,414,773 9,343,107
Premises and equipment (Note 5) 430,275 439,156
Other real estate owned 489,804 489,804
Accrued interest receivable 106,715 130,654
Other assets 96,896 198,209
_________ _________
20,320,992 18,067,534
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
____ ____
<S> <C> <C>
Liabilities:
Noninterest-bearing deposits $ 5,847,168 $ 3,615,650
Interest-bearing deposits (Note 6) 12,409,035 12,820,529
__________ __________
Total deposits 18,256,203 16,436,179
Securities sold under repurchase 750,000 -
agreements
Notes Payable (Note 8) 250,000 250,000
Other liabilities 305,805 349,778
_______ _______
Total liabilities 19,562,008 17,035,957
__________ __________
Commitments and contingencies (Note 15)
Minority interest in subsidiary 37,816 45,800
______ ______
Stockholders' equity (Notes 3, 9, 10,
and 13):
Series A voting convertible preferred
stock, $.01 par
value; $1.50 liquidation value;
1,200,000 shares
authorized; issued and outstanding
1996 596,622 shares;
1995 1,002,624 shares 5,966 10,026
Class A voting common stock, $.01 par
value; 20,000,000 1,644,988
shares authorized; issued and
outstanding 1996
9,856,664 shares; 1995 8,893,442 98,567 88,934
shares
Capital surplus 3,259,822 2,933,995
Accumulated (deficit) (2,619,576) (2,064,237)
_________ _________
744,779 968,718
Unrealized gain (loss) on securities
available for
sale, net (Note 3) (23,611) 17,059
______ ______
Total stockholders' equity 721,168 985,777
_______ _______
$ 20,320,992 $18,067,534
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SOUTHERN SECURITY BANK CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1996 and 1995
1996 1995
____ ____
<S> <C> <C>
Interest income:
Interest and fees on loans $ 1,077,786 $ 883,351
Interest and dividends on securities 280,152 158,756
Interest on federal funds sold 46,831 118,105
_____ _______
1,404,769 1,160,212
Interest expense:
Deposits 591,883 524,592
_______ _______
Net interest income 812,886 635,620
Provision for loan losses (Note 4) 8,000 -
_____ ___
Net interest income after 804,886 635,620
provision for loan losses _______ _______
Other income:
Service charges on deposit accounts 70,062 51,108
Securities losses, net (Note 3) (6,697) -
Other 44,162 83,111
______ ______
Total other income 107,527 134,219
_______ _______
Other expenses:
Salaries and employee benefits 685,646 701,575
Occupancy and equipment 333,710 367,838
Other 454,877 427,890
_______ _______
Total other expenses 1,474,233 1,497,303
_________ _________
Net (loss) before minority
interest in
net income of subsidiary (561,820) (727,464)
Minority interest in net income of 6,481 13,332
subsidiary _____ ______
Net (loss) $ (555,339) $ (714,132)
======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
SOUTHERN SECURITY BANK CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1996 and 1995
Gain (Loss)
on
Securities
Available
Preferred Stock Common Stock Paid-in Accumulated for
Shares Amount Shares Amount Capital (Deficit) Sale, Net Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, 624,264 $ 6,243 7,632,244 $ 76,322 $ 2,004,490 $ (1,350,105) $ (8,461) $ 728,489
December 31,
1994
Net (loss) - - - - - (714,132) - (714,132)
Issuance of 378,360 3,783 1,261,198 12,612 929,505 - - 945,900
stock in
private
placements
Net change in - - - - - - 25,520 25,520
unrealized
gain (loss)
on securities
available-
for-sale
(Note 3)
Balance, 1,002,624 $ 10,026 8,893,442 $ 88,934 $ 2,933,995 $ (2,064,237) $ 17,059 $ 985,777
December 31,
1995
Net (loss) - - - - - (555,339) - (555,339)
Issuance of 29,558 296 527,662 5,277 325,827 - - 331,400
stock in
private
placements
Conversion (435,560) (4,356) 435,560 4,356 - - - -
of preferred
stock
(Note 9)
Net change in - - - - - - (40,670) (40,670)
unrealized
gain (loss) on
securities
available-for
for-sale
(Note 3)
Balance, 596,622 $ 5,966 9,856,664 $ 98,567 $ 3,259,822 $ (2,619,576) $(23,611) $ 721,168
December 31,
1996 ======= ===== ========= ====== ========= ========= ====== =======
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
SOUTHERN SECURITY BANK CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996 and 1995
1996 1995
____ ____
<S> <C> <C>
Cash Flows From Operating Activities
Net (loss) $ (555,339) $ (714,132)
Adjustments to reconcile net (loss) to
net cash provided by
operating activities:
Net (accretion) on securities (1,931) (4,126)
Provision for loan losses 8,000 -
Depreciation and amortization 65,254 58,707
Securities losses, net 6,697 -
Minority interest in net income of (6,481) (13,332)
subsidiary
Decrease (increase) in:
Accrued interest receivable 23,939 (70,230)
Other assets 21,105 54,983
Increase in other liabilities 36,235 147,155
______ _______
Net cash (used in) operating (402,521) (540,975)
activities _______ _______
Cash Flows From Investing Activities
Net cash flows from securities (Note 1,474,576 (3,411,905)
16)
Purchase of Federal Reserve Bank stock (5,700) (16,400)
Loan originations and principal (289,132) (1,918,981)
collections on loans
Purchases of loans (1,790,534) -
Purchase of premises and equipment (56,373) (57,374)
Proceeds from sale of other real estate - 206,065
owned
Net cash (used in) investing (667,163) (5,198,595)
activities _______ _________
Cash Flows From Financing Activities
Proceeds from notes payable 750,000 -
Net increase in deposits 1,820,024 5,753,170
Proceeds from issuance of stock 331,400 945,900
_______ _______
Net cash provided by financing 2,901,424 6,699,070
activities _________ _________
Increase in cash and cash 1,831,740 959,500
equivalents
Cash and cash equivalents
Beginning 2,404,862 1,445,362
_________ _________
Ending $ 4,236,602 $2,404,862
========= ===========
</TABLE>
<PAGE>
See Notes to Consolidated Financial Statements.
Note 1. Summary of Significant Accounting Policies
Description of business: Southern Security Bank Corporation (the
"Corp.") provides a full range of banking services to individual
and corporate customers in Southeast Florida through its
subsidiary bank.
Basis of presentation: The financial statements of Southern
Security Bank Corporation and its subsidiary have been prepared
in conformity with generally accepted accounting principles and
conform to predominate practice within the banking industry. In
preparing the financial statements, the Corp.'s management is
required to make estimates and assumptions which significantly
affect the amounts reported in the financial statements.
Significant estimates which are particularly susceptible to
change in a short period of time include the determination of the
allowance for loan losses and the fair value of securities.
Actual results could differ from those estimates.
Principles of consolidation: The accompanying consolidated
financial statements include the accounts of Southern Security
Bank Corporation and its majority-owned subsidiary, Southern
Security Bank of Hollywood (the "Bank"). All significant
intercompany balances and transactions have been eliminated in
consolidation.
Cash and cash flows: Cash and cash equivalents includes cash and
due from banks, and federal funds sold. For purposes of
reporting cash flows, loans and deposits are reported net.
Securities held to maturity: Debt securities for which the Bank
has both the positive intent and ability to hold to maturity are
classified as held to maturity and reported at amortized cost.
Amortization of premiums and accretion of discounts, computed by
the interest method over their contractual lives, is included in
interest income.
In November 1995, the FASB issued a Special Report on
implementation of SFAS No. 115. The Special Report included a
transition provision which permitted all entities to reassess the
appropriateness of securities classifications and permitted the
transfer of securities between classifications by December 31,
1995. On December 28, 1995, $1.2 million of securities held to
maturity with aggregate unrealized losses of $2,600 were
transferred to securities available for sale.
Securities available for sale: Securities classified as
available-for-sale are those debt securities that the Bank
intends to hold for an indefinite period of time, but not
necessarily to maturity. Any decision to sell a security
classified as available-for-sale would be based on various
factors, including significant movements in interest rates,
changes in the maturity mix of the Bank's assets and liabilities,
liquidity needs, regulatory capital considerations, and other
similar factors.
Securities available for sale are reported at fair value with
unrealized gains or losses reported as a separate component of
stockholders' equity, net of the related deferred tax effect.
The amortization of premiums and accretion of discounts, computed
by the interest method over the contractual lives of the
applicable securities are included in interest income. Realized
gains or losses, determined on the basis of the cost of specific
securities sold, are included in earnings.
Declines in the fair value of individual securities classified as
either held to maturity or available for sale below their
amortized cost that are determined to be other than temporary
result in write-downs of the individual securities to their fair
value with the resulting write-downs included in current earnings
as realized losses.
Loans: Loans receivable that management has the intent and
ability to hold for the foreseeable future or until maturity or
payoff are stated at the amount of unpaid principal, net of
unearned discount, net loan origination fees and costs, and an
allowance for loan losses.
Loan origination and commitment fees and certain direct loan
origination costs are being deferred and recognized over the
expected life of the related loan as an adjustment of yield. The
Bank is generally amortizing these amounts over the contractual
life. Commitment fees based upon a percentage of a customer's
unused line of credit and fees related to standby letters of
credit are recognized over the commitment period.
Interest on loans is calculated by using the simple interest
method on daily balances of the principal amount outstanding.
For impaired loans, accrual of interest is discontinued on a loan
when management believes, after considering collection efforts
and other factors, that the borrower's financial condition is
such that collection of interest is doubtful. Interest income is
recognized on those loans only upon receipt.
A loan is impaired when it is probable the Bank will be unable to
collect all contractual principal and interest payments due in
accordance with the terms of the loan agreement. Impaired loans
are measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate or, as a
practical expedient, at the loan's observable market price or the
fair value of the collateral if the loan is collateral dependent.
The amount of impairment, if any, and any subsequent changes are
included in the allowance for loan losses.
The allowance for loan losses is established through a provision
for loan losses charged to expense. Loans are charged against
the allowance for loan losses when management believes that
collectibility of the principal is unlikely. The allowance is an
amount that management believes will be adequate to absorb
estimated losses on existing loans, based on an evaluation of the
collectibility of loans and prior loss experience. This
evaluation also takes into consideration such factors as changes
in the nature and volume of the loan portfolio, overall portfolio
quality, review of specific problem loans, and current economic
conditions that may affect the borrower's ability to pay. While
management uses the best information available to make its
evaluation, future adjustments to the allowance may be necessary
if there are significant changes in economic conditions.
Premises and equipment: Premises and equipment are stated at
cost less accumulated depreciation. Depreciation is computed
principally by the straight-line methods over the following
estimated useful lives:
Years
Leasehold improvements 5 - 10
Furniture and equipment 3 - 12
Other real estate owned: Real estate acquired through
foreclosure or deed in lieu of foreclosure represents specific
assets to which the Company has acquired legal title in
satisfaction of indebtedness. Such real estate is recorded at
the property's fair value at the date of foreclosure (cost).
Initial valuation adjustments, if any, are charged against the
allowance for loan losses. Property is evaluated regularly to
ensure the recorded amount is supported by its current fair value
and valuation allowances to reduce the carrying amount to fair
value less estimated cost to dispose are recorded as necessary.
Revenues and expenses related to holding and operating these
properties are included in operations.
Income taxes: Deferred taxes are provided on a liability method
whereby deferred tax assets are recognized for deductible
temporary differences, and operating loss or tax credit
carryforwards and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it
is more likely than not that some portion or all of the deferred
tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment.
Current accounting development: The Financial Accounting
Standards Board has issued Statement No. 125, Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities, which becomes effective for certain transactions
occurring after December 31, 1996 and for other transactions
occurring after December 31, 1997. The Statement does not permit
earlier or retroactive application. The Statement distinguishes
transfers of financial assets that are sales from transfers that
are secured borrowings. A transfer of financial assets in which
the transferor surrenders control over those assets is accounted
for as a sale to the extent that consideration other than
beneficial interests in the transferred assets is received in
exchange. The Statement also establishes standards on the
initial recognition and measurement of servicing assets and other
retained interests and servicing liabilities, and their
subsequent measurement.
The Statement requires that debtors reclassify financial assets
pledged as collateral and that secured parties recognize those
assets and their obligation to return them in certain
circumstances in which the secured party has taken control of
those assets. In addition, the Statement requires that a
liability be derecognized only if the debtor is relieved of its
obligation through payment to the creditor or by being legally
released from being the primary obligor under the liability
either judicially or by the creditor.
Management does not believe the application of the Statement to
transactions of the Bank that have been typical in the past will
materially affect the Bank's financial position and results of
operations.
Note 2. Restrictions on Cash and Due From Banks
The Bank is required to maintain reserve balances in cash or on
deposit with the Federal Reserve Bank, based on a percentage of
deposits. Required reserve balances were completely satisfied by
cash on hand at December 31, 1996 and 1995.
<PAGE>
Note 3. Investment Securities
Securities held to maturity: The amortized cost and fair values
of securities held to maturity as of December 31, 1996 and 1995
are summarized as follows:
<TABLE>
<CAPTION>
1996
_______________________________
Gross Gross
Unrealized Unrealized
Ammortized Gains Losses
Cost _________ __________ Fair Values
_________ ___________
<S> <C> <C> <C> <C>
U. S. Government
corporations and $ 1,399,327 $ - (22,708) $ 1,376,619
agencies
Mortgage-backed 709,555 7,518 - 717,073
securities _______ _____ _______
$ 2,108,882 $7,518 (22,708) $ 2,093,692
========= ===== ====== =========
</TABLE>
<TABLE>
<CAPTION>
1995
____
Gross Gross
Unrealized Unrealized
Ammortized Gains Losses Fair
Cost Values
---------- ---------- ---------- ------
<S> <C> <C> <C> <C>
U. S. Government
corporations $ 1,401,642 $ 6,732 (937) $ 1,407,436
and agencies
Mortgage-backed 243,222 4,720 - 247,942
securities
_______ _____ _______
$ 1,644,863 $ 11,452 (937) $ 1,655,378
========= ===== === =========
</TABLE>
The amortized cost and fair values of securities held to maturity
at December 31, 1996, by contractual maturity, are shown below.
Amortized Fair
Cost Values
_________ ______
Due after five years through $ 899,327 $ 887,089
ten years
Due after ten years 500,000 489,530
Mortgage-backed securities 709,555 717,073
$ 2,108,882 $ 2,093,692
Gross losses of $1,453 were recognized on securities held to
maturity in the year ended December 31, 1996 as a result of the
disposition of a security that was called by the maker.
Securities held to maturity with a carrying amount of
approximately $475,000 and $402,000 at December 31, 1996 and
1995, respectively, were pledged as collateral on trustee
deposits and repurchase agreements.
Securities available for sale: The amortized cost and fair
values of securities available for sale as of December 31, 1996
and 1995 are summarized as follows.
1996
____
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
_________ __________ __________ _____
Mortgage-backed
securities $1,390,201 $ 2,852 (15,508) $1,377,545
<TABLE>
<CAPTION>
1995
_______________
Gross Gross
Unrealized Unrealized
Amortized Fair
Cost Gains Losses Values
__________ _________
_________ _______
<S> <C> <C> <C> <C>
U.S. Government 1,690,860 $ - $(12,795) $ 1,678,065
corporations and
agencies
Mortgage-backed 1,654,475 31,594 (1,055) 1,685,014
securities
_________ ______ ______
$ 3,345,335 $ 31,594 $(13,850) $ 3,363,079
========= ====== ======= =========
</TABLE>
Contractual maturities of mortgage-backed securities available
for sale are not disclosed because borrowers have the right to
call or repay obligations with or without call or repayment
penalties.
Gross realized losses from the sale of securities available for
sale for the year ended December 31, 1996 were $5,244. No
securities available for sale were sold in the year ended
December 31, 1995.
Securities available for sale with a carrying amount of
approximately $715,000 and $250,000 at December 31, 1996 and
1995, respectively, were pledged as collateral on trustee
deposits and for repurchase agreements.
Changes in the unrealized loss on securities available for sale
are as follows:
<TABLE>
<CAPTION>
Years Ended
December 31,
1996 1995
________ _________
<S> <C> <C>
Balance, beginning $ 17,059 $ (8,461)
Net change in unrealized gains (42,373) 26,712
(losses) during the year
Amortization of unrealized loss on
security transferred
to held to maturity 145 -
Allocation of changes to minority 1,558 (1,192)
interest in subsidiary
Balance, ending $(23,611) $17,059
</TABLE>
Note 4. Loans
The composition of net loans as of December 31, 1996 and 1995 is
as follows:
<TABLE>
<CAPTION>
1996 1995
____ ____
<S> <C> <C>
Commercial $3,641,451 $2,734,280
Commercial real estate 3,342,084 1,815,355
Residential real estate 3,627,871 3,183,972
Consumer 915,062 1,745,659
Other 57,953 19,900
11,584,421 9,499,256
__________ _________
Allowance for loan losses (196,140) (182,832)
Deferred loan costs, net 26,492 26,683
______ ______
Loans, net $11,414,773 $9,343,107
========== =========
</TABLE>
Activity in the allowance for loan losses for the years ended
December 31, 1996 and 1995 was as follows:
1996 1995
__________ __________
Balance, beginning $ 182,832 $ 168,767
Provision for loan losses 8,000 -
Recoveries of amounts charged off 10,634 14,065
Amounts charged off (5,326) -
Balance, ending $ 196,140 $ 182,832
The Bank's recorded investment in impaired loans was $56,124 and
none at December 31, 1996 and 1995, respectively. The specific
SFAS No. 114 allowance associated with impaired loans, and
included in the allowance for loan losses, at December 31, 1996
was $24,073. The average recorded investment in impaired loans
during 1996 and 1995 was $45,000 and $50,000, respectively.
Interest income on impaired loans, recognized for cash payments
received in 1996 and 1995, was not significant.
Note 5. Premises and Equipment
The major classes of premises and equipment and the total
accumulated depreciation as of December 31, 1996 and 1995 are as
follows:
1996 1995
________ ________
Leasehold improvements $ 675,332 $671,007
Furniture, fixtures, and 536,105 578,937
equipment
_________ _______
1,211,437 1,249,944
Less accumulated depreciation 781,162 810,788
and amortization _________ ________
$ 430,275 $ 439,156
Note 6. Deposits
The composition of interest-bearing deposits at December 31, 1996
and 1995 is as follows:
1996 1997
__________ __________
Now accounts $1,167,277 $1,220,545
Money markets 3,584,884 3,400,278
Savings accounts 363,789 297,727
Certificates of deposit less than 5,203,073 5,801,979
$100,000
Certificates of deposit of 2,090,012 2,100,000
$100,000 or more ___________ ___________
Total $12,409,035 $12,820,529
=========== ===========
At December 31, 1996, the scheduled maturities of certificates of
deposit are as follows:
Years ending December 31,
1997 $ 6,358,240
1998 928,845
2001 6,000
$ 7,293,085
Note 7. Income Taxes
The net cumulative tax effects of the primary temporary
differences as of December 31, 1996 and 1995 are shown in the
following table:
<TABLE>
<CAPTION>
1996 1995
________ ________
<S> <C> <C>
Deferred tax assets:
Allowances for loan losses - 1,800
Other real estate owned 25,200 25,200
writedowns
Premises and equipment 47,900 49,600
Net operating loss carryforward 2,568,900 2,382,700
Accrual to cash conversion for 40,100 8,000
income taxes
Unrealized loss on securities 4,800 -
available for sale
Other 2,300 2,300
_________ _________
Total deferred tax assets 2,689,200 2,469,600
__________ _________
Deferred tax liabilities:
Allowances for loan losses (6,800) -
Deferred loan costs (9,900) (10,000)
Unrealized gain on securities - (6,700)
available for sale _______ ________
Total deferred tax (16,700) (16,700)
liabilities ________ ________
2,672,500 2,452,900
Valuation allowance for deferred (2,672,500) (2,452,900)
tax assets
___________ ___________
Net deferred tax assets - -
=========== ===========
</TABLE>
The Company has recorded a valuation allowance on the deferred
tax assets to reduce the total to an amount that management
believes will ultimately be realized. Realization of deferred
tax assets is dependent upon sufficient future taxable income
during the period that deductible temporary differences and
carryforwards are expected to be available to reduce taxable
income. No income tax benefits have been provided for the years
ended December 31, 1996 and 1995, because of the net operating
losses available for carryforward.
The Bank has available federal net operating loss carryforwards
approximating the following at December 31, 1996:
Expiring December 31,
_____________________
2002 143,000
2003 998,000
2004 500,000
2005 759,000
2006 526,000
2007 935,000
2008 905,000
2009 872,000
2010 898,000
2011 313,000
________
$6,849,000
=========
Note 8. Notes Payable
The Company has an unsecured note payable to a trust affiliated
with a shareholder in the amount of $100,000 at December 31,
1996. The note is due June 30, 1997 and interest is payable
quarterly at 8.0%. The due date of the note is automatically
extended for additional periods of six months at each due date
unless the lender provides 30 days notice of its intent not to
permit additional extensions.
The Company also has unsecured notes payable to two directors and
officers in the total amount of $150,000 at December 31, 1996.
The notes are due on demand and are noninterest bearing.
Note 9. Preferred Stock
The Series A preferred stock is convertible into common stock on
a share-for-share basis upon the occurrence of certain events.
Dividends are payable quarterly, when declared by the Board of
Directors, on the Series A preferred stock at an annual rate of
$.05 per share. Accumulated but unpaid dividends for any past
quarterly dividend periods will be cumulative and accrue without
interest. No dividends may be declared or paid on common stock
of the Company and no common stock shall be redeemed until all
dividends in arrears on the Series A preferred stock have been
paid. In addition, holders of Series A preferred stock shall
also receive a dividend any time a dividend is declared on the
Class A common stock generally on a share for share basis. No
dividends have been declared on the Series A preferred stock
since the inception of the Company. Accrued but unpaid dividends
at December 31, 1996 and 1995 totaled approximately $120,000 and
$70,000, respectively.
Shares of Series A preferred stock may be either converted to
Class A common stock, generally on a share for share basis, or
redeemed at a price of $1.50 per share plus the amount of any
dividends in arrears, in the event the Company files a
registration statement. Shares of Series A preferred stock may
be redeemed at a price of $1.50 per share plus the amount of any
dividends in arrears, in the event the Company (1) merges with
another company and does not remain as the continuing
corporation, (2) sells or transfers all or substantially all of
its assets to another corporation, or (3) the Company is
liquidated, dissolved or otherwise winds up its business. In the
event of a stock split, reverse stock split or stock dividend
resulting in an increase or decrease in the number of shares of
common stock outstanding, the conversion price of the Series A
preferred stock shall be correspondingly increased or decreased
proportionately.
In addition, 5 million shares of Class B nonvoting convertible
common stock have been authorized by the Company. No such shares
have been issued and none were outstanding at either December 31,
1996 or 1995.
Note 10. Stock Options
Under the Incentive Stock Option Plan (the "Plan") adopted by the
Bank in 1988, the Bank is authorized to grant options for the
purchase of up to 20% of the outstanding common shares of the
Bank, or 380,000 shares at December 31, 1996. All directors,
officers and employees of the Bank are eligible to receive
options to purchase shares of common stock at the fair value of
the stock at the date of grant, but in no event may the price be
less than the par value of such stock. The Plan expires March
19, 1998 and no additional options may be granted after that date
under the Plan. The weighted-average remaining life of options
outstanding at December 31, 1996 and 1995 is 6.9 years and 7.5
years, respectively.
A summary of the options for the purchase of common stock of the
Bank outstanding as of December 31, 1996 and 1995, and changes
during the years then ended is presented below. The fair value
of each option grant is estimated on the date of grant using the
present value with the following weighted-average assumptions
used for grants in 1996 and 1995: risk-free interest rates of 7
percent and expected lives of 6 years for 1996 and 7 years for
1995.
<TABLE>
<CAPTION>
1996 1995
____ ____
Weighted-Average Weighted-Average
Exercise Exercise
Shares Price Shares Price
<S> <C> <C> <C> <C>
Outstanding at 193,930 $1.00 3,130 $1.00
beginning of year
Granted 137,760 1.00 194,520 1.00
Exercised - -
Forfeited (12,000) (3,720)
______ ____
Outstanding at end 319,690 1.00 193,930 1.00
of year
======= =======
Options exercisable 319,690 1.00 193,930 1.00
at year-end
======= =======
Weighted-average
fair value of
options granted
during the year $0.09 $0.10
</TABLE>
In addition to the plan discussed above, the Company has granted
stock options for the purchase of shares of common stock of the
Company to directors of the Company under various compensation
agreements and actions of the Board of Directors, representing a
majority of the shareholders. All options for the purchase of
common stock of the Company expire 10 years from the date of
issue. The weighted-average remaining life of options
outstanding at December 31, 1996 and 1995 was 7.6 years and 8.6
years, respectively.
A summary of the options for the purchase of common stock of the
Company outstanding as of December 31, 1996 and 1995, and changes
during the years then ended is presented below. The fair value
of each option grant is estimated on the date of grant using the
present value with the following weighted-average assumptions
used for grants in 1996 and 1995: risk-free interest rates of 7
percent and expected lives of 9 years for both years.
<TABLE>
<CAPTION>
1996 1995
____ _____
Weighted-Average Weighted-Average
Shares Exercise Shares Exercise
Price Price
<S> <C> <C> <C> <C>
Outstanding at 1,898,402 $0.09 1,628,000 $0.08
beginning of year
Granted 103,000 0.09 270,402 0.09
Exercised - -
Forfeited - -
________ _______
Outstanding at end 2,001,402 0.09 1,898,402 0.09
of year ========= =========
Options exercisable 2,001,402 0.09 1,774,949 0.09
at year-end ========= =========
Weighted-average
fair value of
options granted
during the year $0.04 $0.04
</TABLE>
The Company and its subsidiary apply APB Opinion 25 and related
Interpretations in accounting for their plans. Accordingly, no
compensation cost has been recognized for the stock options
discussed above. Had compensation cost for the Company's stock
options been determined based on the fair value at the grant
dates for awards under those plans, the Company's net loss for
the years ended December 31, 1996 and 1995 would have increased
by approximately $16,000 and $30,000, respectively.
Note 11. Related-Party Transactions
The Bank has had, and may be expected to have in the future,
banking transactions in the ordinary course of business with
directors, significant stockholders, principal officers, their
immediate families and affiliated companies in which they are
principal stockholders (commonly referred to as related parties).
Aggregate loans to, or guaranteed by, these related parties
totaled approximately $705,000 and $836,000 at December 31, 1996
and 1995, respectively.
Note 12. Leases
The Bank leases its facilities under a noncancelable agreement
which expires December 31, 2003, with one ten-year renewal
option. The approximate future minimum lease payments, as
reduced by minimum sublease income, under this lease as of
December 31, 1996, are as follows:
Years ending December 31 Amount
________________________ _________
1997 $ 232,016
1998 268,650
1999 294,735
2000 303,577
2001 312,684
Thereafter 653,792
Total minimum lease $ 2,065,454
payments =========
Total lease expense for the years ended December 31, 1996 and
1995 approximated $226,900 and $203,600, respectively, net of
sublease income of approximately $40,600 and $58,700,
respectively, and is included in occupancy and equipment expense
in the accompanying consolidated statements of income.
Note 13. Restrictions on Retained Earnings and Regulatory
Capital Requirements
The Bank is subject to certain restrictions on the amount of
dividends that may be declared without prior regulatory approval.
At December 31, 1996, no retained earnings were available for
dividend declaration without regulatory approval.
The Bank is subject to various capital requirements administered
by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory - and possibly
additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the Bank's
financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must
meet specific capital guidelines that involve quantitative
measures of the Bank's assets, liabilities, and certain off-
balance-sheet items as calculated under regulatory accounting
practices. The Bank's capital amounts and classification are
also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios
(set forth in the table below) of total and Tier I capital to
risk-weighted assets, and of Tier I capital to average assets
(all defined in the regulations). Management believes the Bank
meets all capital adequacy requirements to which it is subject as
of December 31, 1996.
As of December 31, 1996, the most recent notification from the
Federal Reserve categorized the Bank as well capitalized under
the regulatory framework for prompt corrective action. To be
categorized as well capitalized the Bank must maintain minimum
total risk-based, Tier I risk-based, and Tier I leverage ratios
as set forth in the table below. There are no conditions or
events since that notification that management believes have
changed the Bank's category.
The Bank's actual capital amounts and ratios are also presented
in the table below:
<TABLE>
<CAPTION>
To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
Purposes Action Provisions
Actual
<S> <C> <C> <C> <C> <C> <C>
As of December 31,
1996:
Total Capital
(to Risk- $1,238,319 11.2% $881,360 8.0% $1,101,700 10.0%
Weighted Assets)
Tier I Capital
(to Risk- $1,099,885 10.0% $440,680 4.0% $661,020 6.0%
Weighted Assets) Tier I Capital
(to Average
$1,099,885 6.6% $670,440 4.0% $838,050 5.0% Assets)
As of December 31,
1995:
Total Capital
(to Risk-
$1,303,647 13.7% $763,775 8.0% $954,719 10.0% Weighted Assets)
Tier I Capital
(to Risk-
$1,183,523 12.4% $381,888 4.0% $572,832 6.0% Weighted Assets)
Tier I Capital
(to Average $1,183,523 6.7% $710,440 4.0% $888,050 5.0%
Assets)
</TABLE>
Note 14. Regulatory Matters and Going Concern Considerations
On April 13, 1995, the Company entered into a written agreement
(the "Agreement") with the Federal Reserve Bank of Atlanta (the
"FRB"). Among other items, the written agreement:
a. Prohibits the declaration or payment of dividends by the
Company without the prior written approval of the FRB;
b. Requires the Company to submit a written plan to maintain an
adequate capital position which, at a minimum, addresses and
considers (i) current and future capital requirements of the
Bank, including the maintenance of adequate capital ratios,
(ii) the volume of the Bank's adversely classified assets,
(iii) the Bank's anticipated level of earnings, and (iv) the
source and timing of additional funds that may be necessary
to fulfill future capital requirements;
c. Prohibits any additional borrowings by the Company, or any
payments on existing debt of the Company, without the prior
written approval of the FRB;
d. Prohibits the Company from entering into new financial
transactions, or amending the terms of existing agreements,
with related parties, without the prior written approval of
the FRB; and,
e. Prohibits the Company from entering into any transaction
with the Bank without the prior written approval of the FRB.
On March 17, 1992, the Bank entered into a written agreement (the
"Agreement") with the Federal Reserve Bank of Atlanta (the "FRB")
and the State of Florida Department of Banking and Finance (the
"Department"). In addition to requiring the Bank to implement
certain operating administrative policy and procedure changes,
the written agreement:
a. Prohibits the declaration or payment of dividends by the
Bank without the prior written approval of the FRB and the
Department;
b. Requires the Bank to submit a written plan to maintain an
adequate capital position which, at a minimum, addresses and
considers (a) current and future capital requirements
including the maintenance of minimum capital ratios, (b) the
volume of adversely classified assets, (c) the Bank's
anticipated level of retained earnings, and (d) the source
and timing of additional funds that fulfill future capital
requirements;
c. Requires that, in the event the Bank's leverage ratio falls
below 6.25%, the Bank notify the FRB and the Department
about the capital deficiency and submit a written statement
detailing the steps to be taken to increase the leverage
ratio; and,
d. Requires the Bank to maintain at all times an allowance for
loan losses not less than 1.53% of total loans.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern which
contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the
financial statements, the Company incurred net losses of $555,339
and $714,132 during the years ended December 31, 1996 and 1995,
respectively. Although the Bank met the minimum regulatory
capital requirements prescribed by the Federal Reserve Board,
Federal Deposit Insurance Corporation, and the State of Florida
Department of Banking and Finance at December 31, 1996, the
Bank's ability to meet the prescribed capital requirements in the
future is uncertain. Failure to meet these capital requirements
may result in one or more regulatory sanctions, including
restrictions as to the source of deposits and the appointment of
a conservator. In the Company's written plan submitted to the
FRB, as well as the Bank's written plan submitted to the FRB and
the State of Florida Department of Banking and Finance,
management has indicated that it intends to raise additional
capital through the sale of common stock. It is the opinion of
management that the future of the Company is dependent on
additional capital to be raised through this sale of additional
common stock. There can be no assurance that such sale can be
accomplished. The financial statements do not include the
adjustments, if any (such as those related to the recovery of
reported asset amounts), that might result from the outcome of
this uncertainty.
Note 15. Commitments and Contingencies
Financial instruments with off-balance-sheet risk: The Bank is a
party to financial instruments with off-balance-sheet risk in the
normal course of business, to meet the financing needs of its
customers. These financial instruments include commitments to
extend credit and standby letters of credit. These instruments
involve, to varying degrees, elements of credit and interest rate
risk in excess of the amounts recognized on the consolidated
balance sheet. The Bank's exposure to credit loss in the event
of nonperformance by the counterparty to the financial
instruments for commitments to extend credit and letters of
credit is represented by the contractual amounts of those
instruments. The Bank uses the same credit policies in making
commitments and conditional obligations as it does for on-
balance-sheet instruments.
These commitments were as follows at December 31, 1996 and 1995:
Commitments to extend credit $1,536,653 $ 1,391,395
Standby letters of credit 58,632 -
__________ ____________
$1,594,985 $1,391,395
========= =========
Commitments to extend credit are commitments to lend to a
customer as long as there is no violation of any condition
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require
payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. The Bank
evaluates each customer's creditworthiness on a case-by-case
basis. The amount of collateral obtained, if any, is based on
management's credit evaluation of the counterparty. Collateral
held varies, but may include cash, accounts receivable,
inventory, property, plant and equipment, and residential and
commercial real estate.
Standby letters of credit are conditional commitments issued by
the Bank to guarantee the performance of a customer to a third
party. These guarantees are primarily issued to support public
and private borrowing arrangements, including commercial paper,
construction bonding, and similar transactions. The credit risk
involved in issuing letters of credit is essentially the same as
that involved in extending loans to customers. The collateral
varies but may include accounts receivable, inventory, property,
plant and equipment, and residential and commercial real estate.
Contingencies: In the normal course of business, the bank is
involved in various legal proceedings. In the opinion of
management, any liability resulting from such proceedings would
not have a material adverse effect on the Bank's financial
statements.
In addition, the Company has executed employment agreements with
two individuals who are both officers and directors of the
Company. Under the terms of the employment agreements, the
Company has agreed to pay base salaries and certain other
benefits and compensation to the two officers. The actual
amounts paid through December 31, 1996 are less than the amount
contractually due under the employment agreements by
approximately $385,000. The two individuals have voluntarily
agreed not to demand the payment of such additional amounts due
to them until such time, if ever, that certain conditions are
met.
The employment agreements also include provisions requiring the
payment of certain amounts upon the occurrence of certain events
leading to the termination of employment such as a change in
control of the Company, death or disability.
Financial instruments with concentration of credit risk: The
Bank makes commercial, residential and consumer loans to
customers primarily in Southeast Florida. A substantial portion
of its debtors' abilities to honor their contracts is dependent
upon the local economy. The economy of the Bank's primary market
area is not heavily dependent on any individual economic sector.
Interest rate risk: The Bank assumes interest rate risk as a
result of its normal operations. As a result, the fair values of
the Bank's financial instruments will change when interest rate
levels change, and that change may be either favorable or
unfavorable to the Bank. Management attempts to match maturities
of assets and liabilities to the extent believed necessary to
manage interest rate risk. However, borrowers with fixed-rate
obligations are more likely to prepay in a falling rate
environment and less likely to prepay in a rising rate
environment. Conversely, depositors who are receiving fixed
rates are more likely to withdraw funds before maturity in a
rising rate environment and less likely to do so in a falling
rate environment. Management monitors rates and maturities of
assets and liabilities and attempts to manage interest rate risk
by adjusting terms of new loans and deposits and by investing in
securities with terms that mitigate the Bank's overall interest
rate risk.
Note 16. Additional Cash Flow Information
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995
____ ____
<S> <C> <C>
Cash flows from securities:
Securities available for sale:
Sales $1,173,016 $ -
Maturities and paydowns 252,964 551,155
Purchases -
(2,317,981)
Securities held to maturity:
Maturities and paydowns 447,846 555,751
Purchases (399,250) (2,200,830)
_______ _________
$1,474,576 $(3,411,905)
========= =========
Supplemental disclosures of cash flow $ 632,532 $ 524,592
information: =======
=======
Cash payments for interest
</TABLE>
<PAGE>
SOUTHERN SECURITY BANK CORPORATION
AND SUBSIDIARY
CONSOLIDATED FINANCIAL REPORTS
JUNE 30, 1997 AND 1996
<PAGE>
<TABLE>
<CAPTION>
SOUTHERN SECURITY BANK CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 30, 1996 and 1997
ASSETS 1997 1996
_______ _________ _________
<S> <C> <C>
Cash and due from banks (Note 2) $2,079,381 $1,673,482
2,259,000 1,392,000
Federal funds sold _________ _________
Total cash and cash
equivalents 4,338,381 3,065,482
Securities held to maturity
(Note 3) 2,333,805 1,617,098
Securities available for sale
(Note 3) 1,274,246 2,310,026
Federal Reserve Bank stock, at
cost 61,000 59,500
Loans, net (Notes 4, 11 and 15) 10,035,227 10,543,127
Premises and equipment (Note 5) 405,692 436,251
Other real estate owned 515,465 489,804
Accrued interest receivable 128,221 108,011
203,838 154,827
Other assets ________ _______
$19,295,875 $18,784,126
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
SOUTHERN SECURITY BANK CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
June 30, 1997 and 1996
LIABILITIES AND STOCKHOLDERS'
EQUITY
1997 1996
___________________________________ _________ _________
<S> <C> <C>
Liabilities:
Noninterest-bearing deposits $4,376,967 $3,449,396
Interest-bearing deposits 13,356,326 13,748,082
(Note 6)
__________ __________
Total deposits 17,733,293 17,197,478
Notes Payable (Note 8) 100,000 250,000
Other liabilities 328,223 368,936
__________ __________
Total Liabilities 18,161,516 17,816,414
__________ __________
Commitments and contingencies (Note
15)
Minority interest in subsidiary 32,597 40,944
__________ __________
Stockholders' equity (Notes 3, 9,
10, and 17):
Series A voting convertible
preferred stock, $.01 par
value; $1.50 liquidation
value; 1,200,000 shares
authorized; 564,982 and
5,650 10,321 1,032,182 shares issued and
outstanding
Class A voting common
stock, $.01 par value;
20,000,000 shares
authorized; 14,148,453 and
9,257,271 shares issued and
outstanding 141,485 92,573
Capital surplus 3,898,135 3,163,161
Accumulated (deficit) (2,932,188) (2,340,114)
Unrealized gain (loss) on (11,320) 827
securities available for
___________ ___________
Total stockholders' 1,101,762 926,768
equity ___________ ___________
$19,295,875 $18,784,126
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SOUTHERN SECURITY BANK CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
Six Months Ended June 30, 1997 and 1996
1997 1996
________ ________
<S>
Interest income: <C> <C>
Interest and fees on loans $ 573,688 $ 533,333
Interest and dividends on 122,614 151,661
securities
Interest on federal funds sold 26,652 26,944
_________ _________
722,954 711,938
Interest expense:
Deposits 289,452 309,960
_________ _________
Net interest income 433,502 401,978
_________ ________
Provision for loan losses (Note 8,000
4) _________ ________
Net interest income after
provision for loan losses 433,502 393,978
_________ ________
Other income:
Service charges on deposit 40,850 36,183
accounts
Securities losses, net (Note 3) (5,774)
Other 25,348 15,603
_________ ________
Total other income 66,198 46,012
_________ ________
Other expenses:
Salaries and employee benefits 381,965 343,181
Occupancy and equipment 155,990 165,270
Other 277,700 211,621
________ _______
Total other expenses 815,655 720,072
________ _______
Net (loss) before
minority interest in
(315,055) (280,082)
net income of subsidiary
Minority interest in net income 3,343 4,205
of subsidiary ________ ________
Net (loss) $ (312,612) $ (275,877)
========== =========
See Notes to Consolidated Financial Statements.
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
SOUTHERN SECURITY BANK CORPORATION AND
SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
EQUITY
SIX MONTHS ENDED JUNE 30, 1997
AND 1996
Gain (Loss)
on
Securities
Available
Preferred Stock Common Stock Paid-in Accumulated for
Shares Amount Shares Amount Capital (Deficit) Sale, Net Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, 1,002,624 $ 10,026 8,893,442 $ 88,934 $2,933,995 $(2,064,237) $ 17,059 985,777
December 31,
1995
Net (loss) -- -- -- -- -- (275,877) -- (275,877)
Issuance of Stock 29,558 295 363,829 3,639 229,166 -- -- 233,100 in Private
Placements
Net Change in -- -- -- -- -- (16,232) (16,232)
unrealized gain
(loss) on
securities
available-for-
sale
(Note 3)
Balance, June 30, 1,032,182 $10,321 9,257,271 $92,573 $3,163,161 $(2,340,114) $827 $926,768
1996
========= ======= ========= ======= ========== ============ ========= ========
Balance, December 596,622 $5,966 9,856,664 $98,567 $3,259,822 $(2,619,576) $(23,611) $721,168
31, 1996
Net (loss) -- -- -- -- -- (312,612) -- (312,612)
Issuance of Stock -- -- 884,859 8,849 522,066 -- -- 530,915
in Private Placements
Conversion (31,640) (316) 31,640 316 -- -- -- --
Preferred Stock
(Note 9)
Exchange of stock -- -- 3,375,290 33,753 116,247 -- -- 150,000
for unpaid
salaries, benefits
and notes payable
(Note 8)
Net Change in -- -- -- -- -- -- 12,291 12,291
unrealized gain
(loss) on
securities
available-for
sale (Note 3)
__________ ________ _________ _______ __________ ___________ ________ __________
Balance, 564,982 $5,650 14,148,453 $141,485 $3,898,135 $(2,932,188)$(11,320) $1,101,762
June 30, 1997 ========== ======== ========== ======= ========= =========== ======== =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SOUTHERN SECURITY BANK CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1997 and 1996
1997 1996
________ _________
<S> <C> <C>
Cash Flows From Operating
Activities
Net (loss) $(312,612) $(275,877)
Adjustments to reconcile net
(loss) to net cash provided by
operating activities:
Write-Up of other real estate (25,661) -
owned
Provision for loan losses -- 8,000
Depreciation and amortization 37,283 33,512
Securities losses, net -- 5,774
Minority interest in net loss (3,343) (4,205)
of subsidiary
(Increase) decrease in (21,506) 22,643
accrued interest receivable
(Increase) decrease in (106,942) 43,382
other assets
Decrease in notes payable (150,000) --
(Note 8)
Increase in other liabilities 22,418 19,158
__________ _______
Net cash (used in) (560,363) (147,613)
operating activities ========= =========
Cash Flows From Investing
Activities:
Net cash flows from securities (110,229) 1,080,818
(Note 16)
Purchase of Federal Reserve (1,500) (5,700)
Bank stock
Net decrease (increase) in 1,379,546 (1,208,020)
loans
Purchase of premises (13,680) (53,264)
and equipment _________ __________
Net cash (used in) investing 1,254,137 (186,166)
activities _________ __________
Cash Flows From Investing
Activities
Securities sold under (750,000) -
repurchase agreements
Net increase (decrease) in (522,910) 761,299
deposits
Proceeds from issuance of stock 680,915 233,100
__________ ________
Net cash provided by (591,995) 994,399
financing activities _________ ________
Increase in cash and cash 101,779 660,620
equivalents
Cash and cash equivalents
Beginning 4,236,602 2,404,862
_________ _________
Ending $4,338,381 $3,065,482
======== ========
<PAGE>
SOUTHERN SECURITY BANK CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
___________________________________________________________
See Notes to Consolidated Financial Statements.
Note 1. Summary of Significant Accounting Policies
DESCRIPTION OF BUSINESS: Southern Security Bank Corporation
(the "Company") provides a full range of banking services to
individual and corporate customers in Southeast Florida through
its subsidiary bank.
BASIS OF PRESENTATION: The financial statements of Southern
Security Bank Corporation and its subsidiary have been prepared
in conformity with generally accepted accounting principles and
conform to predominate practice within the banking industry. In
preparing the financial statements, the Company's management is
required to make estimates and assumptions which significantly
affect the amounts reported in the financial statements.
Significant estimates which are particularly susceptible to
change in a short period of time include the determination of the
allowance for loan losses and the fair value of securities.
Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION: The accompanying consolidated
financial statements include the accounts of Southern Security
Bank Corporation and its majority-owned subsidiary, Southern
Security Bank of Hollywood (the "Bank"). All significant
intercompany balances and transactions have been eliminated in
consolidation.
CASH AND CASH FLOWS: Cash and cash equivalents includes cash
and due from banks, and federal funds sold. For purposes of
reporting cash flows, loans and deposits are reported net.
SECURITIES HELD TO MATURITY: Debt securities for which the
Company has both the positive intent and ability to hold to
maturity are classified as held to maturity and reported at
amortized cost. Amortization of premiums and accretion of
discounts, computed by the interest method over their contractual
lives, is included in interest income.
SECURITIES AVAILABLE FOR SALE: Securities classified as
available-for-sale are those debt securities that the Company
intends to hold for an indefinite period of time, but not
necessarily to maturity. Any decision to sell a security
classified as available-for-sale would be based on various
factors, including significant movements in interest rates,
changes in the maturity mix of the Company's assets and
liabilities, liquidity needs, regulatory capital considerations,
and other similar factors. Securities available for sale are
reported at fair value with unrealized gains or losses reported
as a separate component of stockholders' equity, net of the
related deferred tax effect. The amortization of premiums and
accretion of discounts, computed by the interest method over the
contractual lives of the applicable securities are included in
interest income. Realized gains or losses, determined on the
basis of the cost of specific securities sold, are included in
earnings. Declines in the fair value of individual securities
classified as either held to maturity or available for
sale below their amortized cost that are determined to be other
than temporary result in write-downs of the individual securities
to their fair value with the resulting write-downs included in
current earnings as realized losses.
LOANS: Loans receivable that management has the intent and
ability to hold for the foreseeable future or until maturity or
payoff are stated at the amount of unpaid principal, net of
unearned discount, net loan origination fees and costs, and an
allowance for loan losses. Loan origination and commitment fees
and certain direct loan origination costs are being deferred and
recognized over the expected life of the related loan as an
adjustment of yield. The Bank is generally amortizing these
amounts over the contractual life. Commitment fees based upon a
percentage of a customer's unused line of credit and fees related
to standby letters of credit are recognized over the commitment
period. Interest on loans is calculated by using the simple
interest method on daily balances of the principal amount
outstanding. For impaired loans, accrual of interest is
discontinued on a loan when management believes, after
considering collection efforts and other factors, that the
borrower's financial condition is such that collection of
interest is doubtful. Interest income is recognized on those
loans only upon receipt. A loan is impaired when it is probable
the Bank will be unable to collect all contractual principal and
interest payments due in accordance with the terms of the loan
agreement. Impaired loans are measured based on the present
value of expected future cash flows discounted at the loan's
effective interest rate or, as a practical expedient, at the
loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. The amount of
impairment, if any, and any subsequent changes are included in
the allowance for loan losses. The allowance for loan losses is
established through a provision for loan losses charged to
expense. Loans are charged against the allowance for loan losses
when management believes that collectibility of the principal is
unlikely. The allowance is an amount that management believes
will be adequate to absorb estimated losses on existing loans,
based on an evaluation of the collectibility of loans and prior
loss experience. This evaluation also takes into consideration
such factors as changes in the nature and volume of the loan
portfolio, overall portfolio quality, review of specific problem
loans, and current economic conditions that may affect the
borrower's ability to pay. While
management uses the best information available to make its
evaluation, future adjustments to the allowance may be necessary
if there are significant changes in economic conditions.
PREMISES AND EQUIPMENT: Premises and equipment are stated at
cost less accumulated depreciation. Depreciation is computed
principally by the straight-line methods over the following
estimated useful lives:
Years
______
Leasehold improvements 5 - 10
Furniture and equipment 3 - 12
OTHER REAL ESTATE OWNED: Real estate acquired through
foreclosure or deed in lieu of foreclosure represents specific
assets to which the Bank has acquired legal title in satisfaction
of indebtedness. Such real estate is recorded at the property's
fair value at the date of foreclosure (cost). Initial valuation
adjustments, if any, are charged against the allowance for loan
losses. Property is evaluated regularly to ensure the recorded
amount is supported by its current fair value and valuation
allowances to reduce the carrying amount to fair value less
estimated cost to dispose are recorded as necessary. Revenues
and expenses related to holding and operating these properties
are included in operations.
INCOME TAXES: Deferred taxes are provided on a liability method
whereby deferred tax assets are recognized for deductible
temporary differences, and operating loss or tax credit
carryforwards and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it
is more likely than not that some portion or all of the deferred
tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment.
CURRENT ACCOUNTING DEVELOPMENT: The Financial Accounting
Standards Board has issued Statement No. 125, Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities, which becomes effective for certain transactions
occurring after December 31, 1996 and for other transactions
occurring after December 31, 1997. The Statement does not permit
earlier or retroactive application. The Statement distinguishes
transfers of financial assets that are sales from transfers that
are secured borrowings. A transfer of financial assets in which
the transferor surrenders control over those assets is accounted
for as a sale to the extent that consideration other than
beneficial interests in the transferred assets is received in
exchange. The Statement also establishes standards on the
initial recognition and measurement of servicing assets and other
retained interests and servicing liabilities, and their
subsequent measurement. The Statement requires that debtors
classify financial assets pledged as collateral and that secured
parties recognize those assets and their obligation to return
them in certain circumstances in which the secured party has
taken control of those assets. In addition, the Statement
requires that a liability be derecognized only if the debtor is
relieved of its obligation through payment to the creditor or by
being legally released from being the primary obligor under the
liability either judicially or by the creditor. Management does
not believe the application of Statement to transactions of the
Company that have been typical in the past will materially affect
the Company's financial position and results of operations.
Note 2. Restrictions on Cash and Due From Banks
The Bank is required to maintain reserve balances in cash or on
deposit in compliance with the Federal Reserve Bank, based on a
percentage of deposits. Required reserve balances were
completely satisfied by cash on hand at June 30, 1997 and 1996.
Note 3. Investment Securities
Securities held to maturity: The amortized cost and fair values
of securities held to maturity as of June 30, 1997 and 1996 are
summarized as follows:
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
June 30, 1997 Cost Gains Losses Values
_________________ _________ __________ __________ _______
<S> <C> <C> <C> <C>
U.S. Government
corporations and
agencies $2,160,740 $ 2,339 $ 17,186 $2,145,893
Mortgage-backed
securities 173,065 2,509 - 175,574
__________ _________ ________ __________
$2,333,805 $ 4,848 $ 17,186 $2,321,467
========== ========= ======== ==========
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
June 30, 1996 Cost Gains Losses Values
_________________ _________ __________ __________ _______
<S> <C> <C> <C> <C>
U.S. Government
corporations and
agencies $1,399,285 $ - $ 76,004 $1,323,281
Mortgage-backed
securities 217,813 - 5,574 212,239
__________ _________ ________ __________
$1,617,098 $ - $ 81,578 $1,535,520
========== ========= ======== ==========
</TABLE>
The amortized cost and fair values of securities held to maturity
at June 30, 1997 and 1996, by contractual maturity, are shown
below.
Amortized Fair
June 30, 1997 Cost Values
_______________________ __________ ________
Due after five years
through ten years $1,318,649 $1,314,050
Due after ten years 1,015,156 1,007,417
__________ __________
$2,333,805 $2,321,467
========== ==========
Amortized Fair
June 30, 1996 Cost Values
_____________________ _________ ___________
Due after five years
through ten years $1,117,098 $1,063,828
Due after ten years 500,000 471,692
__________ __________
$1,617,098 $1,535,520
Security held to maturity with an amortized cost approximately
$1,246,000 at June 30, 1997 and $1,399,000 at June 30, 1996 were
pledged as collateral on trustee deposits and for repurchase
agreements.
Securities available for sale: The amortized cost and fair
values of securities available for sale as of June 30, 1997 and
1996 are summarized as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
June 30, 1997 Cost Gains Losses Values
_________________ _________ __________ __________ _______
<S> <C> <C> <C> <C>
U.S. Government
agencies $ 647,851 $ 530 $ 5,388 $ 642,993
Mortgage-backed
securities 637,715 - 6,462 631,253
__________ _________ ________ __________
$1,285,566 $ 530 $ 11,850 $1,274,246
========== ========= ======== ==========
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
June 30, 1996 Cost Gains Losses Values
_________________ _________ __________ __________ _______
<S> <C> <C> <C> <C>
U.S. Government
agencies $1,063,965 $ 1,006 $ 149 $1,064,822
Mortgage-backed
securities 1,245,172 258 226 1,245,204
__________ _________ ________ __________
$2,309,137 $ 1,264 $ 375 $2,310,026
========== ========= ======== ==========
</TABLE>
The amortized cost and fair values of securities available for
sale, by contractual maturity, are shown below:
Amortized Fair
June 30, 1997 Cost Values
_______________________ __________ ________
Within one year $ 70,109 $ 70,109
One to five years 1,215,457 1,204,137
__________ __________
$1,285,566 $1,274,246
========== ==========
Amortized Fair
June 30, 1996 Cost Values
_____________________ _________ ___________
Within one year $ 321,487 $ 321,467
One to five years - -
After ten years 1,987,650 1,988,559
__________ __________
$2,309,137 $2,310,026
========== ==========
Changes in the unrealized loss on securities available for sale
for the six months ended June 30, 1997 and 1996 are as follows:
June 30, 1997 1996
________________________ ___________ _____________
Balance, beginning $ (23,611) $ 17,059
Net change in unrealized gains
(losses) during the year 12,703 (16,830)
Allocation of changes to minority
interest in subsidiary ( 412) 598
___________ _____________
Balance, ending $ (11,320) $ 827
========== =============
Note 4. Loans
The composition of net loans as of June 30, 1997 and 1996 are as
follows:
June 30, 1997 1996
________________________ _________ ____________
Commercial $ 3,278,173 $ 3,628,768
Commercial real estate 3,130,939 4,016,504
Residential real estate 3,033,748 1,829,599
Consumer 745,732 1,222,427
Other 9,317 10,211
__________ ____________
10,197,909 10,707,509
Allowance for loan losses (188,870) (188,754)
Deferred loan costs, net 26,188 24,372
__________ _____________
Loans, net $ 10,035,227 $ 10,543,127
========== ============
There was no recorded investment in impaired loans at June 30,
1997 and 1996. Interest income on impaired loans, recognized for
cash payments received, was not significant.
Activity in the allowance for loan losses for the six months
ended June 30, 1997 and 1996 were as follows:
June 30, 1997 1996
________________________ ___________ _____________
Balance, beginning $ 188,754 $ 182,832
Net charges (recoveries) of
amounts charged off 116 (2,078)
Provision for loan losses - 8,000
___________ _____________
Balance, ending $ 188,870 $ 188,754
========== =============
Note 5. Premises and Equipment
The major classes of premises and equipment and the total
accumulated depreciation as of June 30, 1997 and 1996 are as
follows:
June 30, 1997 1996
_________________________ ___________ _____________
Leasehold improvements $ 677,222 $ 675,332
Furniture, fixtures, and equipment 546,915 506,770
___________ _____________
1,224,137 1,182,102
Less accumulated depreciation
and amortization 818,445 745,851
___________ _____________
$ 405,692 $ 436,251
=========== =============
Note 6. Deposits
The composition of interest-bearing deposits at June 30, 1997 and
1996 are as follows:
June 30, 1997 1996
___________________________ ___________ _____________
NOW accounts $ 1,169,415 $ 2,082,374
Money market accounts 4,163,239 3,254,854
Savings accounts 420,166 255,382
Certificates of deposit less
than $100,000 5,903,494 6,365,460
Certificates of deposit of
$100,000 or more 1,700,012 1,790,012
___________ ____________
Total $13,356,326 $ 13,748,082
=========== ============
At June 30, 1997 and 1996, the scheduled maturities of
certificates of deposit are as follows:
June 30, 1997 1996
________________________ ___________ _____________
1996 $ - $ 461,246
1997 430,196 4,339,526
1998 4,363,130 3,014,181
1999 2,810,180 350,519
___________ _____________
$ 7,603,506 $ 8,155,472
=========== =============
Note 7. Income Taxes
The net cumulative tax effects of the primary temporary
differences as of December 31, 1996 and 1995, which are the most
recent taxable year-ends, are shown in the following table:
December 31, 1996 1995
_________________________ ___________ _____________
Deferred tax assets:
Allowance for loan losses $ - $ 1,800
Other real estate owned
writedowns 25,200 25,200
Premises and equipment 47,900 46,600
Net operating loss carryforward 2,568,900 2,382,700
Accrual to cash conversion for
income taxes 40,100 8,000
Unrealized loss on securities
available for sale 4,800 -
Other 2,300 2,300
___________ ___________
Total deferred tax assets 2,689,200 2,469,600
___________ ___________
Deferred tax liabilities:
Allowances for loan losses (6,800) -
Deferred loan costs (9,900) (10,000)
Unrealized gain on securities
available for sale - (6,700)
___________ ___________
Total deferred tax
liabilities (16,700) (16,700)
___________ ___________
2,672,500 2,452,900
Valuation allowance for deferred
tax assets (2,672,500) (2,452,900)
___________ ___________
Net deferred tax assets $ $
=========== ===========
The Company has recorded a valuation allowance on the deferred
tax assets to reduce the total to an amount that management
believes will ultimately be realized. Realization of deferred
tax assets is dependent upon sufficient future taxable income
during the period that deductible temporary differences and
carryforwards are expected to be available to reduce taxable
income. No income tax benefits have been provided for the six
months ended June 30, 1997 and 1996 because of the net operating
losses available for carryforward.
The Company has available federal net operating loss
carryforwards approximating the following at December 31, 1996,
the most current taxable year-end.
Expiring December 31,
2002 $ 143,000
2003 998,000
2004 500,000
2005 759,000
2006 526,000
2007 935,000
2008 905,000
2009 872,000
2010 898,000
2011 313,000
__________
$ 6,849,000
===========
Note 8. Notes Payable
The Company has an unsecured note payable to a trust affiliated
with a stockholder in the amount of $100,000 at June 30, 1997 and
1996. The note is due December 31, 1997 and interest is payable
quarterly at 8.0%. The due date of the note is automatically
extended for additional periods of six months at each due date
unless the lender provides 30 days notice of its intent not to
permit additional extensions. The Company had unsecured notes
payable to two Directors and Officers in the total amount of
$150,000 at June 30, 1996. At June 30, 1997 the notes payable
plus unpaid salaries and benefits of $207,072 were exchanged for
3,375,290 shares of Class-A Common Stock.
Note 9. Preferred Stock
The Series A preferred stock is convertible into common stock on
a share-for-share basis upon the occurrence of certain events.
Dividends are payable quarterly, when declared by the Board of
Directors, on the Series A preferred stock at an annual rate of
$.05 per share. Accumulated but unpaid dividends for any past
quarterly dividend periods will be cumulative and accrue without
interest. No dividends may be declared or paid on common stock
of the Company and no common stock shall be redeemed until all
dividends in arrears on the Series A preferred stock have been
paid. In addition, stockholders of Series A preferred stock
shall also receive a dividend any time a dividend is declared on
the Class A common stock generally on a share for share basis.
No dividends have been declared on the Series A preferred stock
since the inception of the Company. Accrued but unpaid dividends
at June 30, 1997 and 1996 totaled approximately $120,000 and
$90,000. Shares of Series A preferred stock may be either
converted to Class A common stock, generally on a share for share
basis, or redeemed at a price of $1.50 per share plus the amount
of any dividends in arrears, in the event the company files a
registration statement. Shares of Series A preferred stock may
be redeemed at a price of $1.50 per share plus the amount of any
dividends in arrears, in the event the Company (1) merges with
another company and does not remain as the continuing
corporation, (2) sells or transfers all or substantially all of
its assets to another corporation, or (3) the Company is
liquidated, dissolved or otherwise winds up its business. In the
event of a stock split, reverse stock split or stock dividend
resulting in an increase or decrease in the number of shares of
common stock outstanding, the conversion price of the Series A
preferred stock shall be correspondingly increased or decreased
proportionately. In addition, 5 million shares of Class B
nonvoting convertible common stock have been authorized by the
Company. No such shares have been issued and none were
outstanding at June 30, 1997 and 1996.
Note 10. Stock Options
Under the Incentive Stock Option Plan (the "Plan") adopted by the
Bank in 1988, the Bank is authorized to grant options for the
purchase of up to 20% of the outstanding common shares of the
Bank, or 420,390 shares at June 30, 1997. All directors,
officers and employees of the Bank are eligible to receive
options to purchase shares of common stock at the fair value of
the stock at the date of grant, but in no event may the price be
less than the par value of such stock. The Plan expires March
19, 1998 and no additional options may be granted after that date
under the Plan. The weighted-average remaining life of options
outstanding at June 30, 1997 and 1996 is 6.6 years and 7.2 years,
respectively. A summary of the options for the purchase of
common stock of the Bank outstanding as of June 30, 1997 and
1996, and changes during the six months then ended is presented
below. The fair value of each option grant is estimated on the
date of grant using the present value with the following
weighted-average assumptions used for grants in 1997 and 1996:
risk-free interest rates of 7 percent and expected lives of 6
years for 1997 and 7 years for 1996.
<TABLE>
<CAPTION>
Shares Shares Weighted-Average
1997 1996 Exercise Price
__________ __________ ________________
<S> <C> <C> <C>
Outstanding at beginning
of year 319,690 193,930 $1.00
Granted 69,040 73,880 1.00
Exercised -
Forfeited 60 -
_______ _______ _________
Outstanding at end of period 388,670 267,810 1.00
======= =======
Options exercisable at
period-end 388,670 267,810 1.00
======= =======
Weighted-average fair value
of options granted during
the years $0.09
</TABLE>
In addition to the plan discussed above, the Company has granted
stock options for the purchase of shares of common stock of the
Company to directors of the Company under various compensation
agreements and actions of the Board of Directors, representing a
majority of the stockholders. All options for the purchase of
common stock of the Company expire 10 years from the date of
issue. The weighted-average remaining life of options
outstanding at June 30, 1997 and 1996 was 7.1 years and 8.1
years, respectively.
A summary of the options for the purchase of common stock of the
Company outstanding as of June 30, 1997 and 1996, and changes
during the six months then ended is presented below. The fair
value of each option grant is estimated on the date of grant
using the present value with the following weighted-average
assumptions used for grants in 1997 and 1996: risk-free interest
rates of 7 percent and expected lives of 8 years and 9 years,
respectively.
<TABLE>
<CAPTION>
Shares Shares Weighted-Average
1997 1996 Exercise Price
__________ __________ ________________
<S> <C> <C> <C>
Outstanding at beginning
of period 2,001,402 1,898,402 $0.09
Granted 309,678 103,000 0.09
Exercised - -
Forfeited - - 0.09
_______ _______ _______
Outstanding at end of period 2,311,080 2,001,402 0.09
======= =======
Options exercisable at
period-end 2,001,402 1,898,402 0.09
======= =======
Weighted-average fair value
of options granted during
the years $0.04
</TABLE>
The Company and its subsidiary apply APB Opinion 25 and related
Interpretations in accounting for their plans. Accordingly, no
compensation cost has been recognized for the stock options
discussed above. Had compensation cost for the Company's stock
options been determined based on the fair value at the grant
dates for awards under those plans, the Company's net loss for
the six months ended June 30, 1997 and 1996 would have increased
by approximately $14,000 and $9,500, respectively.
Note 11. Related-Party Transactions
The Bank has had, and may be expected to have in the future,
banking transactions in the ordinary course of business with
directors, significant stockholders, principal officers, their
immediate families and affiliated companies in which they are
principal stockholders (commonly referred to as related parties).
Aggregate loans to, or guaranteed by, these related parties
totaled approximately $792,300 and $627,300 at June 30, 1997 and
1996.
Note 12. Leases
The Bank leases its facilities under a noncancelable agreement
which expires December 31, 2003, with one ten-year option. The
approximate future minimum lease payments, as reduced by minimum
sublease income, under this lease as of June 30, 1997 are as
follows:
December 31,
______________________________
1997 $ 105,744
1998 217,836
1999 224,371
2000 231,102
2001 238,035
Thereafter 497,807
________
Total minimum lease payments $ 1,514,895
===========
Total lease expense for the six months ended June 30, 1997 and
1996 approximated $112,899 and $116,947, net of sublease income
of approximately $22,918 and $18,458, and is included in
occupancy and equipment expense in the accompanying consolidated
statement of income.
Note 13. Restrictions on Retained Earnings and Regulatory
Capital Requirements
The Bank is subject to certain restrictions on the amount of
dividends that may be declared without prior regulatory approval.
At June 30, 1997 and 1996, no retained earnings were available
for dividend declaration without regulatory approval. The Bank
is subject to various capital requirements administered by the
federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the Bank's
financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must
meet specific capital guidelines that involve quantitative
measures of the Bank's assets, liabilities, and certain off-
balance-sheet items as calculated under regulatory accounting
practices. The Bank's capital amounts and classification are
also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors. Quantitative
measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set
forth in the table below) of total and Tier I capital to risk-
weighted assets, and of Tier I capital to average assets (all
defined in the regulations). Management believes the Bank meets
all capital adequacy requirements to which it subject as of June
30, 1997 and 1996. As of June 30, 1997 and 1996, the most recent
notification from the Federal Reserve categorized the Bank as
well capitalized under the regulatory framework for prompt
corrective action. To be categorized as well capitalized the
Bank must maintain minimum total risk-based, and Tier I leverage
ratios as set forth in the table below. There are no conditions
or events since that notification that management believes have
changed the Bank's category.
The Bank's actual capital amounts and ratios are also presented
in the tables below:
<TABLE>
<CAPTION>
To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
_____________________ __________________ _______________________
<S> <C> <C> <C>
As of June 30, 1997:
Total Capital (to
Risk-Weighted Assets $ 1,250,570 11.80% $ 848,042 8.0% $ 1,060,052 10.0%
Tier I Capital (to
Risk-Weighted Assets) $ 1,117,368 10.54% $ 424,021 4.0% $ 636,031 6.0%
Tier I Capital (to
Average Assets) $1,117,368 6.35% $ 703,640 4.0% $ 879,550 5.0%
</TABLE>
<TABLE>
<CAPTION>
To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
_____________________ __________________ _______________________
<S> <C> <C> <C>
As of June 30, 1996:
Total Capital (to
Risk-Weighted Assets) $ 1,349,380 12.44% $ 867,979 8.0% $ 1,084,974 10.0%
Tier I Capital (to
Risk-Weighted Assets) $ 1,213,102 11.18% $ 433,990 4.0% $ 650,985 6.0%
Tier I Capital (to
Average Assets) $ 1,213,102 6.83% $ 710,560 4.0% $ 888,200 5.0%
</TABLE>
Note 14. Regulatory Matters and Going Concern Considerations
On April 13, 1995, the Company entered into a written agreement
(the Agreement) with the Federal Reserve Bank of Atlanta (the
AFRB). Among other items, the written agreement:
a. Prohibits the declaration or payment of dividends by the
Company without the prior written
approval of the FRB;
b. Requires the Company to submit a written plan to maintain an
adequate capital position which, at a minimum, addresses and
considers (I) current and future capital requirements of the
Bank, including the maintenance of adequate capital ratios,
(ii) the volume of the Bank's adversely classified assets,
(iii) the Bank's anticipated level of earnings, and (iv) the
source and timing of additional funds that may be necessary
to fulfill future capital requirements;
c. Prohibits any additional borrowings by the Company, or any
payments on existing debt of the Company, without the prior
written approval of the FRB;
d. Prohibits the Company from entering into new financial
transactions, or amending the terms of existing agreements,
with related parties, without the prior written approval of
the FRB; and,
e. Prohibits the Company from entering into any transaction
with the Bank without the prior written approval of the FRB.
On March 17, 1992, the Bank entered into a written agreement (the
Agreement) with the Federal Reserve Bank of Atlanta (the AFRB)
and the State of Florida Department of Banking and Finance (the
Department). In addition to requiring the Bank to implement
certain operating administrative policy and procedure changes,
the written agreement:
a. Prohibits the declaration or payment of dividends by the
Bank without prior written approval of the FRB and the
Department;
b. Requires the Bank to submit a written plan to maintain an
adequate capital position which, at a minimum, addresses and
considers (I) current and future capital requirements
including the maintenance of minimum capital ratios, (ii)
the volume of adversely classified assets, (iii) the Bank's
anticipated level of retained earnings, and (iv) the source
and timing of additional funds that fulfill future capital
requirements;
c. Requires that, in the event the Bank's leverage ratio falls
below 6.25%, the Bank notify the FRB and the Department
about the capital deficiency and submit a written statement
detailing the steps to be taken to increase the leverage
ratio; and,
d. Requires the Bank to maintain at all times an allowance for
loan losses not less than 1.53% of total loans.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern which
contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the
financial statements, the Company incurred a net loss of $312,612
and $275,877 during the six months ended June 30, 1997 and 1996.
Although the Bank met the minimum regulatory capital requirements
prescribed by the Federal Reserve Board, Federal Deposit
Insurance Corporation, and the State of Florida Department of
Banking and Finance at June 30, 1997, the Bank's ability to meet
the prescribed capital requirements in the future is uncertain.
Failure to meet these capital requirements may result in one or
more regulatory sanctions, including restrictions as to the
source of deposits and the appointment of a conservator. In the
Company's written plan submitted to the FRB, as well as the
Bank's written plan submitted to the FRB and the State of Florida
Department of Banking and Finance, management has indicated that
it intends to raise additional capital through the sale of common
stock. It is the opinion of management that the future of the
Company is dependent on additional capital to be raised through
this sale of additional common stock. There can be no assurance
that such sale can be accomplished. The financial statements do
not include the adjustments, if any (such as those related to the
recovery of reported asset amounts), that might result from the
outcome of this uncertainty.
Note 15. Commitments and Contingencies
Financial instruments with off-balance-sheet risk: The Bank is
a party to financial instruments with off-balance-sheet risk in
the normal course of business, to meet the financing needs of its
customers. These financial instruments include commitments to
extend credit and standby letters of credit. These instruments
involve, to varying degrees, elements of credit and interest rate
risk in excess of the amounts recognized on the consolidated
balance sheet. The Bank's exposure to credit loss in the event
of nonperformance by the counterparty to the financial
instruments for commitments to extend credit and letters of
credit is represented by the contractual amounts of those
instruments. The Bank uses the same credit policies in making
commitments and conditional obligations as it does for on-
balance-sheet instruments. Commitments to extend credit are
commitments to lend to a customer as long as there is no
violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many
of the commitments are expected to expire without being drawn
upon, the total commitment amounts do not necessarily represent
future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of
collateral obtained, if any, is based on management's credit
evaluation of the counterparty. Collateral held varies, but may
include cash, accounts receivable, inventory, property, plant and
equipment, and residential and commercial real estate.
Commitments to fund loans and standby letters of credit amounted
to $1,600,613 and $1,304,539 at June 30, 1997 and 1996.
Contingencies: In the normal course of business, the Company is
involved in various legal proceedings. In the opinion of
management, any liability resulting from such proceedings would
not have a material adverse effect on the Company's financial
statements. In addition, the Company has executed employment
agreements with two individuals who are both officers and
directors of the Company. Under the terms of the employment
agreements, the Company has agreed to pay base salaries and
certain other benefits and compensation to the two officers. The
actual amounts paid through June 30, 1997 are less than the
amount contractually due under the employment agreement of one
individual by approximately $213,000. The individual has
voluntarily agreed not to demand the payment of such additional
amounts due to him until such time, if ever, that certain
conditions are met. The employment agreements also include
provisions requiring the payment of certain amounts upon the
occurrence of certain events leading to the termination of
employment such as a change in control of the Company, death or
disability.
Financial instruments with concentration of credit risk: The
Bank makes commercial, residential and consumer loans to
customers primarily in Southeast Florida. A substantial portion
of its debtors' abilities to honor their contracts is dependent
upon the local economy. The economy of the Bank's primary market
area is not heavily dependent on any individual economic sector.
Interest rate risk: The Bank assumes interest rate risk as a
result of its normal operations. As a result, the fair values of
the Bank's financial instruments will change when interest rate
levels change, and that change may be either favorable or
unfavorable to the Bank. Management attempts to match maturities
of assets and liabilities to the extent believed necessary to
manage interest rate risk. However, borrowers with fixed-rate
obligations are more likely to prepay in a falling rate
environment and less likely to prepay in a rising rate
environment. Conversely, depositors who are receiving fixed rates
are more likely to withdraw funds before maturity in a rising
rate environment and less likely to do so in a falling rate
environment. Management monitors rates and maturities of assets
and liabilities and attempts to manage interest rate risk by
adjusting terms of new loans and deposits and by investing in
securities with terms that mitigate the Bank's overall interest
rate risk.
Note 16. Additional Cash Flow Information
Six Months Ending June 30, 1997 1996
__________________________ __________ __________
Cash flows from securities:
Securities available for sale:
Sales $ - $ 928,730
Maturities and paydowns 114,709 88,813
Purchases - -
Securities held to maturity:
Sales - 400,000
Maturities and paydowns 20,921 3,275
Purchases (245,859) (400,000)
_________ _________
$(110,229) $1,080,818
========= =========
Supplemental disclosures of
cash flow information:
cash payments for interest $ 289,452 $ 309,960
========= =========
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
SOUTHERN SECURITY BANK CORPORATION
__________________________________
(Registrant)
Dated: November 24, 1997 By: s/James L. Wilson
______________________________
Name: James L. Wilson
Title: Vice Chairman and
Chief Executive Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
2.1 Agreement and Plan of Merger by (69)
and between Southern Security
Financial Corporation and
Southern Security Bank
Corporation, dated as of
October 31, 1997.
2.2 Certificate of Merger of (103)
Southern Security Bank
Corporation into Southern
Security Financial Corporation
(under Section 252 of the
General Corporation Law of the
State of Delaware), dated
November 10, 1997
2.3 Articles of Merger of Southern (105)
Security Bank Corporation into
Southern Security Financial
Corporation, under Florida law,
dated November 12, 1997.
3.1 Certificate of Amendment of (108)
Certificate of Incorporation of
Southern Security Financial
Corporation, dated November 12,
1997 (filed under Delaware law)
to change name to Southern
Security Bank Corporation.
EXHIBIT 2.1
Agreement and Plan of
Merger By and Between
Southern Security Financial Corporation
and
Southern Security Bank Corporation
<PAGE>
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
SOUTHERN SECURITY FINANCIAL CORPORATION,
AND
SOUTHERN SECURITY BANK CORPORATION
DATED AS OF OCTOBER 31, 1997
THIS AGREEMENT AND PLAN OF MERGER is made and entered into
as of this the 31st day of October 1997, by and between SOUTHERN
SECURITY BANK CORPORATION ("Acquired Corporation"), a Florida
corporation, and SOUTHERN SECURITY FINANCIAL CORPORATION
("SSFC"), a Delaware corporation.
WITNESSETH:
WHEREAS, Acquired Corporation operates as a bank holding
company for its subsidiary, Southern Security Bank of Hollywood
(the "Bank"), with its principal office in Hollywood, Florida;
and
WHEREAS, SSFC is desirous of becoming a bank holding
company; and
WHEREAS, Acquired Corporation wishes to merge into SSFC and
SSFC wishes Acquired Corporation to merge into SSFC;
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, the Parties hereto agree as follows:
ARTICLE 1
MERGER-TERMS AND CONDITIONS
1.1 Applicable Law
On the Effective Date, Acquired Corporation shall be merged
with and into SSFC which shall be the surviving corporation in
the merger (the "Merger") and shall continue its corporate
existence under the laws of the State of Delaware. The Merger
shall be undertaken pursuant to the provisions of and with the
effect provided in the Delaware General Corporation Law ("DGCL")
and, to the extent applicable, the Florida Business Corporation
Act ("FBCA"). The offices and facilities of Acquired Corporation
shall become the offices and facilities of SSFC.
1.2 Corporate Existence; Name of Surviving Corporation.
On the Effective Date, the corporate existence of Acquired
Corporation shall be merged into and continued in SSFC. All
rights, franchises and interests of Acquired Corporation and
SSFC, respectively, in and to every type of property (real,
personal and mixed) and chooses in action shall be transferred to
and vested in SSFC by virtue of the Merger without any deed or
other transfer SSFC on the Effective Date, and without any order
or other action on the part of any court or otherwise, shall hold
and enjoy all rights of property, franchises and interests,
including appointments, designations and nominations and all
other rights and interests as trustee, executor, administrator,
transfer agent and registrar of stocks and bonds, guardian of
estates, assignee, and receiver and in every other fiduciary
capacity and in every agency, and capacity, in the same manner
and to the same extent as such rights, franchises and interests
were held or enjoyed by Acquired Corporation on the Effective
Date. Simultaneously with the effective time and date of the
merger, or as soon thereafter as is reasonably practicable the
name of SSFC shall be changed to Southern Security Bank
Corporation.
1.3 Articles of Incorporation and Bylaws.
On the Effective Date, the certificate of incorporation and
bylaws of SSFC shall be the restated certificate of incorporation
and bylaws of SSFC as they exist immediately before the Effective
Date.
1.4 SSFC's Officers and Board
The members of the Board of Directors and the officers of
the Surviving Corporation immediately at the effective time and
date of the Merger shall be those persons who were members of the
Board of Directors and the officers of the Acquired Corporation
at the Effect Date of the Merger. SSFC's stockholders and Board
of Directors shall take all actions necessary to accomplish the
foregoing.
1.5 Stockholder Approval.
This Agreement shall be submitted to the shareholders of
Acquired Corporation at a stockholders meeting ("Stockholder
Meeting") to be held as promptly as practicable consistent with
the satisfaction of the conditions set forth in this Agreement.
Upon approval by the requisite vote of the shareholders of
Acquired Corporation as required by applicable Law, the Merger
shall become effective as soon as practicable thereafter in the
manner provided in section 1.7 hereof.
1.6 Further Acts.
If, at any time after the Effective Date, SSFC shall
consider or be advised that any further assignments or assurances
in law or any other acts are necessary or desirable (i) to vest,
perfect, confirm or record, in SSFC, title to and possession of
any property or right of Acquired Corporation, acquired as a
result of the Merger, or (ii) otherwise to carry out the purposes
of this Agreement, Acquired Corporation's officers and directors
shall execute and deliver all such proper deeds, assignments and
assurances in law and do all acts necessary or property to vest,
perfect or confirm title to, and possession of, such property or
rights in SSFC and otherwise to carry out the purposes of this
Agreement; and the proper officers and directors of SSFC are
fully authorized in the name of Acquired Corporation to take any
and all such action.
1.7 Effective Date.
Subject to the terms of all requirements of Law and the
conditions specified in this Agreement, the Merger shall become
effective on the date specified in the Certificate of Merger to
be issued by the Secretary of State of the State of Delaware
(such time being herein called the "Effective Date"). On the
Effective Date or as soon as practicable thereafter, SSFC shall
cause itself to be qualified to conduct business as a foreign
corporation in the State of Florida.
ARTICLE 2
CONVERSION OF ACQUIRED CORPORATION STOCK
2.1 Conversion of Acquired Corporation Stock.
(a) On the Effective Date, each share of Class A common
stock of Acquired Corporation outstanding and held by
Acquired Corporation's shareholders shall be converted
by operation of law and without any action by any
holder thereof into one-third the number of shares of
SSFC Class A Common Stock.
(b) On the Effective Date, each of Series A convertible
preferred stock of Acquired Corporation outstanding and
held by Acquired Corporation's shareholders shall be
converted by operation of law and without any action by
the holder thereof into one-third the number of SSFC
Series A Convertible Preferred Stock.
(c)
(i) On the Effective Date, SSFC shall assume all
Acquired Corporation Options outstanding, and each
such option shall cease to represent a right to
acquire Acquired Corporation common stock and
shall, instead, represent the right to acquire
SSFC Common Stock on substantially the same terms
applicable to the Acquired Corporation Options
except that the number of shares of SSFC Common
Stock to be issued pursuant to such options shall
equal one-third the number of shares of Acquired
Corporation's Class A common stock subject to such
Acquired Corporation Options.
(ii) Subsequent to becoming a reporting company under
the rules of the Securities Exchange Act of 1934,
SSFC shall file at its expense a registration
statement in an appropriate form with respect to
the shares of the SSFC's Common Stock to be issued
pursuant to such options and shall use its
reasonable best efforts to secure and maintain the
effectiveness of such registration statement for
so long as such options remain outstanding. Such
shares shall also be registered or qualified for
sale under the securities laws of any state in
which registration or qualification is necessary.
2.2 Surrender of Acquired Corporation Stock
After the Effective Date, each holder of an outstanding
certificate or certificates which prior thereto represented
shares of Acquired Corporation Stock who is entitled to receive
SSFC Common or Preferred Stock shall be entitled, upon surrender
to SSFC of his certificate or certificates representing shares of
Acquired Corporation Stock (or an affidavit or affirmation by
such holder of the loss, theft, or destruction of such
certificate or certificates in such form as SSFC may reasonably
require and, if SSFC reasonably requires, a bond of indemnity in
form and amount, and issued by such sureties, as SSFC may
reasonably require), to receive in exchange therefor a
certificate or certificates representing the number of whole
shares of SSFC Common or Preferred Stock into and for which the
shares of Acquired Corporation Stock so surrendered shall have
been converted, such certificates to be of such denominations and
registered in such names as such holder may reasonably request.
Until so surrendered and exchanged, each such outstanding
certificate which, prior to the Effective Date, represented
shares of Acquired Corporation Stock and which is to be converted
into SSFC Common or Preferred Stock shall for all purposes
evidence ownership of SSFC Common or Preferred Stock into and for
which shares shall have been so converted, except that no
dividends or other distributions with respect to such SSFC Common
or Preferred Stock shall be made until the certificates
previously representing shares of Acquired Corporation Stock
shall have been properly tendered.
2.3 Fractional Shares.
No fractional shares of SSFC Common or Preferred Stock shall
be issued, and each holder of shares of Acquired Corporation
Stock having fractional interest arising upon the conversion of
such shares into SSFC Common or Preferred Stock shall, at the
time of surrender of the certificates previously representing
Acquired Corporation Stock, be paid by SSFC an amount in cash
equal to the book value of such fractional share on the financial
statements of SSFC as of the Effective Date.
2.4 Adjustments.
In the event that prior to the Effective Date SSFC Common
Stock shall be changed into a different number of shares or a
different class of shares by reason of any recapitalization or
reclassification, stock dividend, combination, stock split, or
reverse stock split of the SSFC Common Stock, an appropriate and
proportionate adjustment shall be made in the number of shares of
SSFC Common Stock into which the Acquired Corporation Stock shall
be converted.
2.5 SSFC Stock.
The shares of Common issued and outstanding immediately
before the Effective Date shall continue to be issued and
outstanding shares of SSFC, subject to Section 3.2 below. No
shares of Preferred Stock of SSFC shall be issued and outstanding
immediately before the Effective Date.
2.6 Dissenting Rights.
Any shareholder of Acquired Corporation who shall not have
voted in favor of this Agreement and who has complied with the
applicable procedures set forth in the FBCA relating to rights of
dissenting shareholders, shall be entitled to receive payment for
the fair value of his/her/its Acquired Corporation stock. If,
after the Effective Date, a dissenting shareholder of Acquired
Corporation fails to perfect, or effectively withdraws or loses,
his/her/its right to appraisal and payment for his shares of
Acquired Corporation Stock is entitled under Section 2.1 (without
interest) upon surrender of such holder of the certificate or
certificates representing shares of Acquired Corporation Stock
held by him/her/it.
ARTICLE 3
REPRESENTATIONS, WARRANTIES AND COVENANTS OF SSFC
SSFC represents, warrants and covenants to and with Acquired
Corporation as follows:
3.1 Organization.
SSFC is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. SSFC
has the necessary corporate powers to carry on its business as
presently conducted and is qualified to do business in every
jurisdiction in which the character and location of the assets
owned by it or the nature of the business transacted by it
requires qualification or in which the failure to qualify could,
individually or in the aggregate, have a material adverse effect.
3.2 Capital Stock.
The authorized capital stock of SSFC consists of (a)
30,000,000 shares of Class A Common Stock, $0.01 par value per
share, of which, 602,500 shares are validly issued and
outstanding, fully paid and nonassessable and are not subject to
preemptive rights, (b) 5,000,000 shares of Class B Common Stock,
$0.01 par value, none of which are issued and outstanding, and
(c) 5,000,000 shares of Preferred Stock $0.01 par value per
share, none of which are issued and outstanding. Prior to the
Effective Date SSFC shall effectuate a 2.352707 to 1 reverse
split of its outstanding and issued Class A Common Stock. The
shares of SSFC Common Stock to be issued in the Merger are or
will be upon the stockholder approval referenced in the following
sentence duly authorized and, when so issued, will be validly
issued and outstanding, fully paid and nonassessable.
3.3 Financial Statements; Taxes.
(a) SSFC has delivered to Acquired Corporation copies of
the audited financial statements dated as of June 30,
1997.
All such financial statements are in all material
respects in accordance with the books and records of
SSFC and have been prepared in accordance with
generally accepted accounting principles applied on a
consistent basis throughout the periods indicated, all
as more particularly set forth in the notes to such
statements.
(b) All tax returns required to be filed by or on behalf of
SSFC have been timely filed (or requests for extensions
therefor have been timely filed and granted and have
not expired), and all returns filed are complete and
accurate in all material respects. All taxes shown on
these returns to be due and all additional assessments
received have been paid.
3.4 No Conflict with Other Instruments.
The consummation of the transactions contemplated by this
Agreement will not result in a breach of or constitute a default
(without regard to the giving of notice or the passage of time)
under any material contract, indenture, mortgage, deed of trust
or other material agreement or instrument to which SSFC is a
party or by which its assets may be bound; will not conflict with
any provision of the amended certificate of incorporation or
bylaws of SSFC; and will not violate any provision of any Law,
regulation, judgment or decree binding on it or any of its
assets.
3.5 Absence of Material Adverse Change.
Since the date of the most recent balance sheet provided
under section 3.3(a) above, there have been no events, changes,
or occurrences which have had or are reasonably likely to have,
individually or in the aggregate, a material adverse effect on
SSFC.
3.6 Approval of Agreements.
The Board of Directors of SSFC and the stockholders of SSFC
have approved this Agreement and the transactions contemplated by
it and has authorized the execution and delivery by SSFC of this
Agreement. This Agreement constitutes the legal, valid and
binding obligation of SSFC, enforceable against it in accordance
with its terms. Subject to the matters referred to in section
7.2 hereof, SSFC has full power, authority and legal right to
enter into this Agreement and to consummate the transactions
contemplated by this Agreement. SSFC has no knowledge of any
fact or circumstance under which the appropriate regulatory
approvals required by section 7.2 will not be granted without the
imposition of material conditions or material delays.
3.7 Tax Treatment.
SSFC has no present plan to sell or otherwise dispose of any
of the assets of Acquired Corporation, subsequent to the Merger,
and SSFC intends to continue the historic business of Acquired
Corporation.
3.8 Title and Related Matters.
SSFC has good and marketable title to all the properties,
interests in properties and assets, real and personal, reflected
in the most recent balance sheet referred to in section 3.3(a),
or acquired after the date of such balance sheet (except
properties, interests and assets sold or otherwise disposed of
since such date, in the ordinary course of business), free and
clear of all mortgages, liens, pledges, charges or encumbrances
except (i) mortgages and other encumbrances referred to in the
notes of such balance sheet, (ii) lines for current taxes not yet
due and payable and (iii) such imperfections of title and
easements as do not materially detract from or interfere with the
present use of the properties subject thereto or affected
thereby, or otherwise materially impair present business
operations at such properties. To the knowledge of SSFC, the
material structure and equipment of SSFC comply in all material
respects with the requirements of all applicable laws.
3.9 Contracts.
SSFC is not in default in any material respect under the
terms of any material contract, agreement, lease or other
commitment which is or may be material to the business,
operations, properties or assets, or the condition, financial or
otherwise, of such company and, to the knowledge of SSFC, there
is no event which, with notice or lapse of time, or both, may be
or become an event of default under any such material contract,
agreement, lease or other commitment in respect of which adequate
steps have not been taken to prevent such a default from
occurring.
3.10 Litigation.
There is no litigation before or by any court or agency,
domestic or foreign, now pending, nor, to the knowledge of SSFC,
threatened against or affecting (nor is SSFC aware of any facts
which could give rise to any such litigation).
3.11 Compliance.
SSFC to the knowledge of SSFC, is in material compliance
with all material federal, state or local laws applicable to
their or the conduct of its business.
3.12 Registration Statement.
SSFC has filed a registration statement on Form 10SB which,
when it becomes effective, will comply in all material respects
with the requirements of the Securities Exchange Act of 1934 and
the rules and regulations thereunder, will not contain an untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light
of the circumstances under which they were made; not misleading.
3.13 Brokers.
All negotiations relative to this Agreement and the
transactions contemplated by this Agreement have been carried on
by SSFC directly with Acquired Corporation and without the
intervention of any other person, either as a result of any act
of SSFC or otherwise in such manner as to give rights to any
valid claim against SSFC for finders fees, brokerage commissions
or other like payments.
3.14 Disclosure.
No representation or warranty, or any statement or
certificate furnished or to be furnished to Acquired Corporation
by SSFC, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact
necessary to make the statements contained in this Agreement or
in any such statement or certificate not misleading.
ARTICLE 4
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF ACQUIRED CORPORATION
Acquired Corporation represents, warrants and covenants to
and with SSFC, as follows:
4.1 Organization.
Acquired Corporation is a Florida corporation, and the Bank
is a Florida state bank. The Acquired Corporation and the Bank
are duly organized, validly existing and in good standing under
the respective Laws of their jurisdictions of incorporation and
each has all requisite power and authority to carry on its
business as it is now being conducted and is qualified to do
business in every jurisdiction in which the character and
location of the assets owned by it or the nature of the business
transacted by it requires qualification or in which the failure
to qualify could, individually, or in the aggregate, have a
material adverse effect.
4.2 Capital Stock.
The authorized capital stock of Acquired Corporation
consists of 20,000,000 shares of Class A common stock $0.01 par
value per share, of which 14,910,613 shares are issued and
outstanding; 5,000,000 shares of Class B common stock $0.01 par
value, none of which are issued and outstanding; 1.200,000 shares
of Series A preferred convertible shares, $0.01 par value, of
which no shares are issued and outstanding. In addition, the
Acquired Corporation has authorized and issued to its Officers
and directors options that expire over ten year terms, at option
exercise prices when granted equating to 110% of the then net
book value per share for common stock, 2,311,080 of which options
have been granted as of September 30, 1997.
Except for the foregoing, Acquired Corporation does not have
any other arrangements or commitments obligating it to issue
shares of its capital stock or any securities convertible into or
having the right to purchase shares of its capital stock, other
than the stock option plans incorporated in the employment
contracts entered into with Philip C. Modder and James L. Wilson.
4.3 Subsidiaries.
Acquired Corporation has not direct Subsidiaries other than
the Bank, and there are no Subsidiaries of the Bank. Acquired
Corporation owns 96.6% of the issued and outstanding capital
stock of the Bank fee and clear of any liens, claims or
encumbrances of any kind. All of the issued and outstanding
shares of capital stock of the Subsidiaries have been validly
issued and are fully paid and nonassessable. The Bank has no
arrangements or commitments obligating it to issue shares of its
capital stock or any securities convertible into or having the
right to purchase shares of its capital stock, other than its
stock option plan for its officers and directors.
4.4 Financial Statements; Taxes.
(a) Acquired Corporation has delivered to SSFC copies of
its audited financial statements dated December 31,
1996.
All of the foregoing financial statements are in all
material respects in accordance with the books and
records of Acquired Corporation and have been prepared
in accordance with generally accepted accounting
principles applied on a consistent basis throughout the
periods indicated, except for changes required by GAAP,
all as more particularly set forth in the notes to such
statements.
Each of such balance sheet presents fairly as of its
date the financial condition of Acquired Corporation.
Except as and to the extent reflected or reserved
against in such balance sheets (including the notes
thereto), Acquired Corporation did not have, as of the
date of such balance sheets, any material Liabilities
or obligations (absolute or contingent) of a nature
customarily reflected in a balance sheet or the notes
thereto. The statements of income, stockholders'
equity and cash flows present fairly the results of
operation, changes in shareholders equity and cash
flows of Acquired Corporation for the periods
indicated.
(b) All tax returns required to be filed by or on behalf of
Acquired Corporation have been timely filed (or
requests for extensions therefor have been timely filed
and granted and have not expired), and all returns
filed are complete and accurate in all material
respects. All Taxes shown on these returns to be due
and all additional assessments received have been paid.
The amounts recorded for Taxes on the balance sheets
provided under section 4.4(a) are, to the knowledge of
Acquired Corporation, sufficient in all material
respects for the payment of all unpaid federal, state,
county, local, foreign and other Taxes (including any
interest or penalties) of Acquired Corporation accrued
for or applicable to the period ended on the dates
thereof, and all years and periods prior thereto and
for which Acquired Corporation may at such dates have
been liable in its own right or as a transferee of the
assets of, or as successor to, any other corporation or
other party. No audit, examination or investigation is
presently being conducted or, to the knowledge of
Acquired Corporation, threatened by any taxing
authority which is likely to result in a material tax
liability, no material unpaid tax deficiencies or
additional liability of any sort have been proposed by
any governmental representative and no agreements for
extension of time for the assessment of any material
amount of Tax have been entered into by or on behalf of
Acquired Corporation. Acquire Corporation has not
executed an extension or waiver of any statute of
limitations on the assessment or collection of any tax
due that is currently in effect.
(c) Acquired Corporation and the Bank have withheld from
their employees (and timely paid to the appropriate
governmental entity) proper and accurate amounts for
all periods in material compliance with all Tax
withholding provisions of applicable federal, state,
foreign and local Laws (including without limitation,
income, social security and employment tax withholding
for all types of compensation).
4.5 Absence of Certain Changes or Events.
Since the date of the most recent balance sheet provided
under section 4.4(a) above, neither Acquired Corporation nor the
Bank have
(a) issued, delivered or agreed to issue or deliver any
stock, bonds or other corporate securities (whether
authorized and unissued or held in the treasury) except
shares of common stock issued upon the exercise of
Acquired Corporation. Options and shares issued as
director's qualifying shares;
(b) borrowed or agreed to borrow any funds or incurred, or
become subject to, any liability (absolute or
contingent) except borrowings, obligations (including
purchase of federal funds) and Liabilities incurred in
the ordinary course of business and consistent with
past practice;
(c) paid any material obligation or Liability (absolute or
contingent) other than current liabilities reflected in
or shown on the most recent balance sheet referred to
in section 4.4(a) and current liabilities incurred
since that date in the ordinary course of business and
consistent with past practice;
(d) declared or made, or agreed to declare or make, any
payment of dividends or distributions of any assets of
any kind whatsoever to shareholders, or purchased or
redeemed, or agreed to purchase or redeem, directly or
indirectly, or otherwise acquire, any of its
outstanding securities;
(e) except in the ordinary course of business, sold or
transferred, or agreed to sell or transfer, any of its
assets, or canceled, or agreed to cancel any debts or
claims;
(f) except in the ordinary course of business, entered or
agreed to enter into any agreement or arrangement
granting any preferential rights to purchase any of its
assets, or requiring the consent of any party to the
transfer and assignment of any of its assets;
(g) suffered any Losses or waived any rights of value which
in either event in the aggregate are material
considering its business as a whole;
(h) except in the ordinary course of business, made or
permitted any amendment or termination of any contract,
agreement or license to which it is a party if such
amendment or termination is material considering its
business as a whole;
(i) except in accordance with normal and usual practice,
made any accrual or arrangement for or payment of
bonuses or special compensation of any kind or any
severance or termination pay to any present or former
officer or employee;
(j) except in accordance with normal and usual practice,
increased the rate of compensation payable to or to
become payable to any of its officers or employees or
made any material increase in any profit sharing,
bonus, deferred compensation, savings, insurance,
pension, retirement or other employee benefit plan,
payment or arrangement made to, for or with any of its
officers or employees;
(k) received notice or had knowledge or reason to believe
that any of its substantial customers has terminated or
intends to terminate its relationship, which
termination would have a material adverse effect on its
financial condition, results of operations, business,
assets or properties;
(l) failed to operate its business in the ordinary course
so as to preserve its business intact and to preserve
the goodwill of its customers and others with whom it
has business relations;
(m) entered into any other material transaction other than
in the ordinary course of business; or
(n) agreed in writing, or otherwise, to take any action
described in clauses (a) through (m) above.
Between the date hereof and the Effective Date, neither
Acquired Corporation nor the Bank, without the express written
approval of SSFC, will do any of the things listed in clauses (a)
through (n) of this section 4.5 except as permitted therein or as
contemplated in this Agreement, and no Acquired Corporation
Company will enter into or amend any material Contract, other
than Loans or renewals thereof entered into in the ordinary
course of business, without the express written consent of SSFC.
4.6 Title.
Acquired Corporation has good and marketable title to all
the properties, interest in properties and assets, real and
personal, reflected in the most recent balance sheet referred to
in section 4.4(a) hereof, or acquired after the date of such
balance sheet (except properties, interests and assets sold or
otherwise disposed of since such date, in the ordinary course of
business), free and clear of all mortgages, liens, pledges,
charges or encumbrances except (i) mortgages and other
encumbrances referred to in the notes to such balance sheet, (ii)
liens for current taxes not yet due and payable and (iii) such
imperfections of title and easements as do not materially detract
from or interfere with the present use of the properties subject
thereto or affected thereby, or otherwise materially impair
present business operations at such properties. To the knowledge
of Acquired Corporation, the material structures and equipment of
the Bank comply in all material respects with the requirements of
all applicable Laws.
4.7 Commitments.
Neither Acquired Corporation and the bank are a party to any
undisclosed oral or written (i) Contracts for the employment of
any officer or employee which is not terminable on 30 days' (or
less) notice, other than the employment contracts recited in
section 9.7 hereof, (ii) profit retirement plan, agreement or
arrangement, (iii) loan agreement, indenture or similar agreement
relating to the borrowing of money by such party, (iv) guaranty
of any obligation for the borrowing of money or otherwise,
excluding endorsements made for collection, and guaranties made
in the ordinary course of business, (v) consulting or other
similar material Contract, (vi) collective bargaining agreement,
(vii) agreement with any present or former officer, director or
shareholder of such party, or (viii) other contract, agreement or
other commitment which is material to the business, operations,
property, prospects or assets or to the condition, financial or
otherwise, of the Bank. Complete and accurate copies of all
contracts, plans and other items so listed have been made or will
be made available to SSFC for inspection.
4.8 Charter and Bylaws.
The articles of incorporation and bylaws of Acquired
Corporation and the Bank, including all amendments thereto,
previously provided to SSFC, are currently in effect. There will
be no changes in such articles of incorporation or bylaws prior
to the Effective Date, without the prior written consent of SSFC.
4.9 Litigation.
There is no Litigation (whether or not purportedly on behalf
of Acquired Corporation) pending or, to the knowledge of Acquired
Corporation, threatened against or affecting Acquired Corporation
and the Bank (nor is Acquired Corporation aware of any facts
which are likely to give rise to any such Litigation) at law or
in equity, or before or by any governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, or before any arbitrator of any kind, which involves the
possibility of any judgment or Liability not fully covered by
insurance in excess of a reasonable deductible amount or which
may have a material adverse effect on Acquired Corporation, and
neither Acquired Corporation nor the Bank is in default with
respect to any judgement, order, writ, injunction, decree, award,
rule or regulation of any court, arbitrator or governmental
department, commission, board, bureau, agency or instrumentality,
which default would have material adverse effect on Acquired
Corporation. To the knowledge of Acquired Corporation, each
Acquired Corporation Company has complied in all material
respects with all material applicable laws and regulations
including those imposing Taxes, of any applicable jurisdiction
and of all states, municipalities, other political subdivisions
and agencies, in respect of the ownership of its properties and
the conduct of its business, which, if not complied with, would
have material adverse effect on Acquired Corporation.
4.10 Material Contract Defaults.
Neither Acquired Corporation nor the Bank is in default in
any material respect under the terms of any material contract,
agreement, lease or other commitment which is or may be material
to the business, operations, properties or assets, or the
condition, financial or otherwise, of such company and, to the
knowledge of Acquired Corporation, there is no event which, with
notice or lapse of time, or both, may be or become an event of
default under any such material contract, agreement, lease or
other commitment in respect of which adequate steps have not been
taken to prevent such a default from occurring.
4.11 No Conflict with Other Instrument.
The consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision
of or constitute a default under any material contract,
indenture, mortgage, deed of trust or other material agreement or
instrument to which either Acquired Corporation or the Bank is a
party and will not conflict with any provision of the charter or
bylaws of Acquired Corporation or the Bank.
4.12 Governmental Authorization.
Acquired Corporation and the Bank have all permits that, to
the knowledge of Acquired Corporation, are or will be legally
required to enable Acquired Corporation and the Bank to conduct
their business in all material respects as now conducted by
Acquired Corporation and the Bank.
4.13 Absence of Regulatory Communications.
Neither Acquired Corporation nor the Bank is subject to, nor
has Acquired Corporation or the Bank received during the past
three years, any written communication directed specifically to
it from any agency to which it is subject or pursuant to which
such agency has imposed or has indicated it may impose any
material restrictions on the operations of it or the business
conducted by it or in which such Agency has raised any material
question concerning the condition, financial or otherwise, of
such company.
4.14 Absence of Material Adverse Change.
To the knowledge of Acquired Corporation, since the date of
the most recent balance sheet provided under section 4.4(a)
hereof, there have been no events, changes or occurrences which
have had, or are reasonably likely to have, individually or in
the aggregate, a material adverse effect on Acquired Corporation
or the Bank.
4.15 Insurance.
Acquired Corporation and the Bank have in effect insurance
overage and bonds with reputable insurers which, in respect to
amounts, types and risks insured, management of Acquired
Corporation reasonably believes to be adequate for the type of
business conducted by Acquired Corporation and the Bank. Neither
Acquired nor the Bank is liable for any material retroactive
premium adjustment. All insurance policies and bonds are valid,
enforceable and in full force and effect, and neither Acquired
Corporation nor the Bank has received any notice of any material
premium increase or cancellation with respect to any of its
insurance policies or bonds. Within the last three years,
neither Acquired Corporation nor the Bank has been refused any
insurance coverage which it has sought or applied for, and it has
no reason to believe that existing insurance coverage cannot be
renewed as and when the same shall expire, upon terms and
conditions as favorable as those presently in effect, other than
possible increases in premiums that do not result from any
extraordinary loss experience. All policies of insurance
presently held or policies containing substantially equivalent
coverage will be outstanding and in full force with respect to
Acquired Corporation and the Bank at all times from the date
hereof to the Effective Date.
4.16 Pension and Employee Benefit Plans.
(a) To the knowledge of Acquired Corporation, all employee
benefit plans of Acquired Corporation and the Bank have
been established in compliance with, and such plans
have been operated in material compliance with, all
applicable Laws.
Except as may have been previously disclosed to SSFC,
neither Acquired Corporation nor the Bank sponsors or
otherwise maintains a "pension plan" within the meaning
of section 3(2) of ERISA or any other retirement plan
other than the defined benefit plan of
Acquired Corporation that is intended to qualify under
section 401 of the Code, nor do any unfunded
Liabilities exist with respect to any employee benefit
plan, past or present. To the knowledge of Acquired
Corporation, no employee benefit plan, any trust
created thereunder or any trustee or administrator
thereof has engaged in a "prohibited transaction," as
defined in section 4975 of the Code, which may have a
material adverse effect on the condition, financial or
otherwise, of any Acquired Corporation Company.
(b) To the knowledge of Acquired Corporation, no amounts
payable to any employee of Acquired Corporation or the
Bank will fail to be deductible for federal income tax
purposes by virtue of Section 280G of the Code and
regulations thereunder.
4.17 Buy-Sell Agreement.
To the knowledge of Acquired Corporation, there are no
agreements among any of its shareholders granting to any person
or persons a right of first refusal in respect of the sale,
transfer, or other disposition of shares of outstanding
securities by any shareholder of Acquired Corporation, any
similar agreement or any voting agreement or voting trust in
respect of any such shares.
4.18 Brokers.
All negotiations relative to this Agreement and the
transactions contemplated by this Agreement have been carried on
by Acquired Corporation directly with SSFC and without the
intervention of any other person, either as a result of any act
of Acquired Corporation, or otherwise, in such manner as to give
rise to any valid claim against Acquired Corporation for a
finder's fee, brokerage commission or other like payment.
4.19 Approval of Agreement.
The Board of Directors of Acquired Corporation has approved
this Agreement and the transactions contemplated by this
Agreement and has authorized the execution and delivery by
Acquired Corporation of this Agreement.
Subject to the matters referred to in section 7.2, Acquired
Corporation has full power, authority and legal right to enter
into this Agreement, and, upon appropriate vote of the
shareholders of Acquired Corporation in accordance with this
Agreement, Acquired Corporation shall have full power, authority
and legal right to consummate the transactions contemplated by
this Agreement.
4.20 Disclosure.
No representation or warranty, nor any statement or
certificate furnished or to be furnished to SSFC by Acquired
Corporation, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact
necessary to make the statements contained in this Agreement or
in any such statement or certificate not misleading.
4.21 Registration Statement.
At the time the registration statement on Form 10SB becomes
effective and at the time of the stockholders meeting, the
Registration Statement will not contain an untrue statement of a
material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
4.22 Loans; Adequacy of Allowance for Loan Losses.
All reserves for loan losses shown on the most recent
financial statements furnished by Acquired Corporation have been
calculated in accordance with prudent and customary banking
practices and are adequate in all material respects to reflect
the risk inherent in the loans of Acquired Corporation. Acquired
Corporation has no knowledge of any fact which is likely to
require a future material increase in the provision for loan
losses or a material decrease in the loan loss reserve reflected
in such financial statements. Each loan reflected as an asset on
the financial statements of Acquired Corporation is the legal,
valid and binding obligation of the obligor or each loan,
enforceable in accordance with its terms subject to the effect of
bankruptcy, insolvency, reorganization, moratorium, or other
similar laws relating to creditors' rights generally and to
general equitable principles. Acquired Corporation does not have
in its portfolio any loan exceeding its legal lending limit, and,
Acquired Corporation has no known significant delinquent,
substandard, doubtful, loss, non performing or problem loans
which have not been disclosed to SSFC.
4.23 Environmental Matters.
To the knowledge of Acquired Corporation, Acquired
Corporation and the bank each is in material compliance with all
Laws and other governmental requirements relating to the
generation, management, handling, transportation, treatment,
disposal, storage, delivery, discharge, release or emission of
any waste, pollution, or toxic, hazardous or other substance (the
"Environmental Laws") and Acquired Corporation has no knowledge
that Acquired Corporation or the Bank have not complied with all
regulations and requirements promulgated by the Occupational
Safety and Health Administration that are applicable to any
Acquired Corporation Company. To the knowledge of Acquired
Corporation, there is no Litigation pending or threatened with
respect to any violation or alleged violation of the
Environmental Laws. To the knowledge of Acquired Corporation,
with respect to assets of or owned by Acquired Corporation or the
Bank, including any Loan Property, (i) there has been no
spillage, leakage, contamination or release of any substances for
which the appropriate remedial action has not been completed;
(ii) no owned or leased property is contaminated with or contains
any hazardous substance or waste; and (iii) there are no
underground storage tanks on any premises owned or leased by
Acquired Corporation or the Bank. Acquired Corporation has no
knowledge of any facts which might suggest that either Acquired
Corporation or the Bank has engaged in any management practice
with respect to any of its past or existing borrowers which could
reasonably be expected to subject Acquired Corporation or the
Bank to any liability.
4.24 Transfer of Shares.
Acquired Corporation has no knowledge of any plan or
intention on the part of Acquired Corporation's shareholders to
sell or otherwise dispose of any of the SSFC Common Stock to be
received by them in the Merger that would reduce such
shareholders' ownership to a number of shares having, in the
aggregate, a fair market value of less than fifty (50%) percent
of the total fair market value of Acquired Corporation common
stock outstanding immediately before the Merger.
4.25 Collective Bargaining.
There are no labor contracts, collective bargaining
agreements, letters of undertakings or other arrangements, formal
or informal, between Acquired Corporation and the Bank and any
union or labor organization covering any employees of Acquired
Corporation or the Bank and none of said employees are
represented by any union or labor organization.
4.26 Labor Disputes.
To the knowledge of Acquired Corporation, Acquired
Corporation and the Bank are in material compliance with all
federal and state laws respecting employment and employment
practices, terms and conditions of employment, wages and hours.
Neither Acquired Corporation nor the Bank is or has been engaged
in any unfair labor practice, and to the knowledge of Acquired
Corporation, no unfair labor practice complaint against Acquired
Corporation or the Bank is pending before the National Labor
Relations Board. Relations between management of Acquired
Corporation and the Bank and their employees are amicable and
there have not been, nor to the knowledge of Acquired
Corporation, are there presently, any attempts to organize
employees, nor to the knowledge of Acquired Corporation, are
there plans for any such attempts.
ARTICLE 5
ADDITIONAL COVENANTS
5.1 Additional Covenants of SSFC.
SSFC covenants to and with Acquired Corporation as follows:
(a) Registration Statement and Other Filings. SSFC has
prepared and filed with the SEC the Registration Statement and
all amendments and supplements thereto, in form reasonably
satisfactory to Acquired Corporation and its counsel, with
respect to the Common Stock to be issued pursuant to this
Agreement. SSFC shall use reasonable good faith efforts to
prepare all necessary filings with any Agencies which may be
necessary for approval to consummate the transactions
contemplated by this Agreement. SSFC shall provide to counsel
for Acquired Corporation for review and comment (i) copies of
drafts of all filings made pursuant to this section 5.1(a) in
advance of filing, (ii) copies of documents as filed, and (iii)
copies of any correspondence between SSFC and any Agencies,
including the SEC, respecting the filings made pursuant to this
section 5.1(a).
(b) Financial Statements. With reasonable promptness, SSFC
shall furnish Acquired Corporation with such additional financial
data as Acquired Corporation may reasonably request.
(c) No Control of Acquired Corporation by SSFC.
Notwithstanding any other provision hereof, until the Effective
Date, the authority to establish and implement the business
policies of Acquired Corporation shall continue to reside solely
in Acquired Corporation's officers and Board of Directors.
(d) Employee Benefit Matters. On the Effective Date, all
employees of Acquired Corporation shall either become employees
of SSFC or be entitled to severance benefits in accordance with
the severance policy of Acquired Corporation as of the date of
this Agreement.
(e) Indemnification.
(i) Subject to the conditions set forth in the
succeeding paragraph, for a period of six years
after the Effective Date SSFC shall indemnify,
defend and hold harmless each person entitled to
indemnification from the Acquired Corporation
(each being an "Indemnified Party") against all
liabilities arising out of actions or omissions
occurring upon or prior to the Effective Date
(including without limitation the transactions
contemplated by this Agreement) to the extent
authorized under the articles of incorporation and
bylaws of Acquired Corporation and Florida law.
(ii) Any Indemnified Party wishing to claim
indemnification under this subsection (g), upon
learning of any such liability or Litigation,
shall promptly notify SSFC thereof. In the event
of any such Litigation (whether arising before or
after the Effective Date) (i) SSFC shall have the
right to assume the defense thereof with counsel
reasonably acceptable to such Indemnified Party
and, upon assumption of such defense, SSFC shall
not be liable to such Indemnified Parties for any
legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified
Parties in connection with the defense thereof,
except that if SSFC elects not to assume such
defense or counsel for the Indemnified Parties
advises that there are substantive issues which
raise conflicts of interest between SSFC and the
Indemnified Parties, the Indemnified Parties may
retain counsel satisfactory to them, and SSFC
shall pay all reasonable fees and expenses of such
counsel for the Indemnified Parties promptly as
statements therefor are received; provided, that
SSFC shall be obligated pursuant to this
subsection to pay for only one firm of counsel for
all Indemnified Parties in any jurisdiction, (ii)
the Indemnified Parties will cooperate in the
defense of any such litigation; and (iii) SSFC
shall not be liable for any settlement effected
without its prior consent; and provided further
provided that SSFC shall not have any obligation
hereunder to any Indemnified Party when and if a
court of competent jurisdiction shall determine,
and such determination shall have become final,
that the indemnification of such Indemnified Party
in the manner contemplated hereby is prohibited by
applicable Law.
(iii)In consideration of and as a condition precedent
to the effectiveness of the indemnification
obligations provided by SSFC in this section to a
director or officer of the Acquired Corporation,
such director or officer of the Acquired
Corporation shall have delivered to SSFC on or
prior to the Effective Date a letter in form
reasonably satisfactory to SSFC concerning claims
such directors or officers may have against
Acquired Corporation. In the letter, the
directors or officers shall: (i) acknowledge the
assumption by SSFC as of the Effective Date of all
Liability (to the extent Acquired Corporation is
so liable) for claims for indemnification arising
under section 5.1(e) hereof; (ii) affirm that they
do not have nor are they aware of any claims they
might have (other than those referred to in the
following clause (iii)) against Acquired
Corporation; (iv) identify any claims or any facts
or circumstances of which they are aware that
could give rise to a claim for indemnification
under section 5.1(e) hereof; and (iv) release as
of the Effective Date any and all claims that they
may have against Acquired Corporation or the Bank
other than (A) those referred to in the foregoing
clause (iii) and disclosed in the letter of the
director or officer, (B) claims by third parties
which have not yet been asserted against such
director or officer (other than claims arising
from facts and circumstances of which such
director or officer is aware but which are not
disclosed in such director or executive officer's
letter), (C) claims by third parties arising from
any transaction contemplated by this Agreement and
(D) claims by third parties arising in the
ordinary course of business of Acquired
Corporation after the date of the letter.
(iv) Acquired Corporation hereby represents and
warrants to SSFC that it has no knowledge of any
claim, pending or threatened, or of any facts or
circumstances that could give rise to any
obligation by SSFC to provide the indemnification
required by this section 5.1(e) other than as
disclosed in the letters of the directors and
executive officers referred to in section
5.1(e)(iii) hereof and claims arising from any
transaction contemplated by this Agreement.
5.2 Additional Covenants of Acquired Corporation.
Acquired Corporation covenants to and with SSFC as follows:
(a) Operations. Acquired Corporation will conduct its
business and the business of the Bank in a proper and
prudent manner and will use its best efforts to
maintain its relationships with its depositors,
customers and employees. Neither Acquired Corporation
nor the Bank will engage in any material transaction
outside the ordinary course of business or make any
material change in its accounting policies or methods
of operation, nor will Acquired Corporation permit the
occurrence of any change or event which would render
any of the representations and warranties in Article 4
hereof untrue in any material respect at and as of the
Effective Date with the same effect as though such
representations and warranties had been made at and as
of such Effective Date.
(b) Stockholders Meeting; Best Efforts. Acquired
Corporation will cooperate with SSFC in the preparation
of the Registration Statement and any regulatory
filings and will cause the stockholders meeting to be
held for the purpose of approving the Merger as soon as
practicable after the effective date of the
Registration Statement, and will use its best efforts
to bring about the transactions contemplated by this
Agreement, including stockholder approval of this
Agreement, as soon as practicable unless this Agreement
is terminated as provided herein.
(c) Director Recommendation. The members of the Board of
Directors of Acquired Corporation agree to support
publicly the Merger.
(d) Financial Statements. Acquired Corporation shall
furnish to SSFC with reasonable promptness, such
additional financial data as SSFC may reasonably
request; and
(e) Fiduciary Duties. Prior to the Effective Date, (i) no
director or officer (each an "Executive") of Acquired
Corporation shall, directly or indirectly, own, manage,
operate, join, control, be employed by or participate
in the ownership, proposed ownership, management,
operation or control of or be connected in any manner
with, any business, corporation or partnership which is
competitive to the business of Acquired Corporation,
except that a director or officer may own stock in a
publicly traded competitive business, (ii) all
Executives, at all times, shall satisfy their fiduciary
duties to Acquired Corporation and the Bank, and (iii)
such Executives shall not (except as required in the
course of his or her employment with Acquired
Corporation or the Bank) communicate or divulge to, or
use for the benefit of himself or herself or any other
person, firm, association or corporation, without the
express written consent of Acquired Corporation, any
confidential information which is possessed, owned or
used by or licensed by or to Acquired Corporation or
the Bank or confidential information belonging to third
parties which Acquired Corporation or the Bank shall be
under obligation to keep secret or which may be
communicated to, acquired by or learned of by the
Executive in the course of or as a result of his or her
employment with Acquired Corporation or the Bank.
ARTICLE 6
MUTUAL COVENANTS AND AGREEMENTS
6.1 Best Efforts; Cooperation
Subject to the terms and conditions herein provided, SSFC
and Acquired Corporation each agrees to use its best efforts
promptly to take, or cause to be taken, all actions and do, or
cause to be done, all things necessary, proper or advisable under
applicable Laws or otherwise, including, without limitation,
promptly making required deliveries of stockholder lists and
stock transfer reports and attempting to obtain all necessary
Consents and waivers and regulatory approvals, including the
holding of any regular or special board meetings, to consummate
and make effective, as soon as practicable, the transactions
contemplated by this Agreement. The officers of each Party to
this Agreement shall fully cooperate with officers and employees,
accountants, counsel and other representatives of the other
Parties not only in fulfilling the duties hereunder of the Party
of which they are officers but also in assisting, directly or
through direction of employees and other persons under their
supervision or control, such as stock transfer agents for the
Party, the other Parties requiring information which is
reasonably available from such Party.
6.2 Press Release.
Each Party hereto agrees that, unless approved by the other
Parties in advance, such Party will not make any public
announcement, issue any press release or other publicity or
confirm any statements by any person not a party to this
Agreement concerning the transactions contemplated hereby.
Notwithstanding the foregoing, each Party hereto reserves the
right to make any disclosure if such Party, in its reasonable
discretion, deems such disclosure required by Law. In that
event, such Party shall provide to the other Party the text of
such disclosure sufficiently in advance to enable the other Party
to have a reasonable opportunity to comment thereon.
6.3 Access to Properties and Records.
Each Party hereto shall afford the officers and authorized
representatives of the other Party full access to the assets,
books and records of such Party in order that such other Parties
may have full opportunity to make such investigation as they
shall desire of the affairs of such Party and shall furnish to
such Parties such additional financial and operating data and
other information as to its businesses and assets as shall be
from time to time reasonably requested. All such information
that may be obtained by such Party will be held in confidence by
such party, will not be disclosed by such Party or any of its
representatives except in accordance with this Agreement, and
will not be used by such Party for any purpose other than the
accomplishment of the Merger as provided herein.
6.4 Notice of Adverse Changes.
Each Party agrees to give written notice promptly to the
other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of
its Subsidiaries which (i) is reasonably likely to have,
individually or in the aggregate, a material adverse effect on it
or (ii) would cause or constitute a material breach of any of its
representations, warranties, or covenants contained herein, and
to use its reasonable efforts to prevent or promptly to remedy
the same.
ARTICLE 7
CONDITIONS TO OBLIGATIONS OF ALL PARTIES
The obligations of SSFC and Acquired Corporation to cause
the transactions contemplated by this Agreement to be consummated
shall be subject to the satisfaction, in the sole discretion of
the Party relying upon such conditions, on or before the
Effective Date of all the following conditions, except as such
Parties may waive such conditions in writing:
7.1 Approval by Shareholders.
At the Stockholders Meeting, this Agreement and the matters
contemplated by this Agreement shall have been duly approved by
the vote of the holders of not less than the requisite number of
the issued and outstanding voting securities of Acquired
Corporation as is required by applicable Law and Acquired
Corporation's articles of incorporation and bylaws.
7.2 Regulatory Authority Approval.
Orders, consents and approvals, in form and substance
reasonably satisfactory to SSFC and Acquired Corporation, shall
have been entered by the Board of Governors of the Federal
Reserve System and other appropriate bank regulatory Agencies (i)
granting the authority necessary for the consummation of the
transactions contemplated by this Agreement hereof and (ii)
satisfying all other requirements prescribed by Law. No order,
consent or approval so obtained which is necessary to consummate
the transactions as contemplated hereby shall be conditioned or
restricted in a manner which in the reasonable good faith
judgment of the Board of Directors of SSFC or Acquired
Corporation would so materially adversely impact the economic
benefits of the transaction as contemplated by this Agreement so
as to render inadvisable the consummation of the Merger.
7.3 Litigation.
There shall be no pending or threatened litigation in any
court or any pending or threatened proceeding by any governmental
commission, board or agency, with a view to seeking or in which
it is sought to restrain or prohibit consummation of the
transactions contemplated by this Agreement or in which it is
sought to obtain divestiture, rescission or damages in connection
with the transactions contemplated by this Agreement and no
investigation by any Agency shall be pending or threatened which
might result in any such suit, action or other proceeding.
7.4 Registration Statement
The registration statement on Form 10SB filed pursuant to
the Securities Exchange Act of 1934 shall have become effective
and no stop order suspending the effectiveness of the
Registration Statement shall be in effect; no proceedings for
such purpose, or under the proxy rules of the SEC or any bank
regulatory authority with respect to the transactions
contemplated hereby, shall be pending before or threatened by the
SEC or any bank regulatory authority; and all approvals or
authorizations for the offer of SSFC Common Stock shall have been
received or obtained pursuant to any applicable state securities
Laws, and no stop order or proceeding with respect to the
transactions contemplated hereby shall be pending or threatened
under any such state Law.
ARTICLE 8
CONDITIONS TO OBLIGATIONS OF ACQUIRED CORPORATION
The obligations of Acquired Corporation to cause the
transactions contemplated by this Agreement to be consummated
shall be subject to the satisfaction on or before the Effective
Date of all the following conditions except as Acquired
Corporation may waive such conditions in writing:
8.1 Representations, Warranties and Covenants.
Notwithstanding any investigation made by or on behalf of
Acquired Corporation, all representations and warranties of SSFC
contained in this Agreement shall be true in all material
respects on and as of the Effective Date as if such
representations and warranties were made on and as of such
Effective Date, and SSFC shall have performed in all material
respects all agreements and covenants required by this Agreement
to be performed by it on or prior to the Effective Date.
8.2 Adverse Changes.
Thereto shall have been no changes after the date of the
most recent balance sheet provided under section 4.4(a) hereof in
the results of operations (as compared with the corresponding
period of the prior fiscal year), assets, liabilities, financial
condition or affairs of SSFC which in their total effect
constitute a material adverse effect, nor shall there have been
any material changes in the Laws governing the business of SSFC
or which would impair the rights of Acquired Corporation or its
shareholders pursuant to this Agreement.
8.3 Certificate.
In addition to any other deliveries required to be delivered
hereunder, Acquired Corporation shall have received a certificate
from the President or a Vice President and from the Secretary or
Assistant Secretary of SSFC certifying that:
(a) the Board of Directors of SSFC has duly adopted
resolutions approving the substantive terms of this
Agreement and authorizing the consummation of the
transactions contemplated by this Agreement and such
resolutions have not been amended or modified and
remain in full force and effect;
(b) each person executing this Agreement on behalf of SSFC
is an officer of SSFC holding the office or offices
specified therein and the signature of each person set
forth on such certificate is his or her genuine
signature;
(c) the certificate of incorporation and bylaws of Acquired
Corporation and the Bank referenced in Section 4.8
hereof remain in full force and effect;
(d) such persons have no knowledge of a basis for any
material claims in any court or before any Agency or
arbitration or otherwise against, by or affecting SSFC
or the business, prospects, condition (financial or
otherwise), or assets of SSFC or which would prevent
the performance of this Agreement or the transactions
contemplated by this Agreement or declare the same
unlawful or cause the rescission thereof;
(e) to such persons' knowledge, the Proxy Statement
delivered to Acquired Corporation's shareholders, or
any amendments or revisions thereto so delivered, as of
the date thereof, did not contain or incorporate by
reference any untrue statement of a material fact or
omit to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading in light of the circumstances under which
they were made (it being understood that such persons
need not express a statement as to information
concerning or provided by Acquired Corporation for
inclusion in such Proxy Statement); and
(f) the conditions set forth in this Article 8 insofar as
they relate to SSFC have been satisfied.
8.4 Other Matters.
There shall have been furnished to such counsel for Acquired
Corporation certified copies of such corporate records of SSFC
and copies of such other documents as such counsel may reasonably
have requested for such purpose.
8.5 Material Events.
There shall have been no determination by the Board of
Directors of Acquired Corporation that the transactions
contemplated by this Agreement have become impractical because of
any state of war, declaration of a banking moratorium in the
United States or a general suspension of trading on the exchange
on which SSFC Common Stock may be traded.
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF SSFC
The obligations of SSFC to cause the transactions
contemplated by this Agreement to be consummated shall be subject
to the satisfaction on or before the Effective Date of all of the
following conditions except as SSFC may waive such conditions in
writing:
9.1 Representations, Warranties and Covenants
Notwithstanding any investigation made by or on behalf of
SSFC, all representations and warranties of Acquired Corporation
contained in this Agreement shall be true in all material
respects on and as of the Effective Date as if such
representations and warranties were made on and as of the
Effective Date, and Acquired Corporation shall have performed in
all material respects all agreements and covenants required by
this Agreement to be performed by it on or prior to the Effective
Date.
9.2 Adverse Changes.
There shall have been no changes after the date of the most
recent balance sheet provided under section 4.4(a) hereof in the
results of operations (as compared with the corresponding period
of the prior fiscal year), assets, liabilities, financial
condition, or affairs of Acquired Corporation which constitute a
material adverse effect, nor shall there have been any material
changes in the Laws governing the business of Acquired
Corporation which would impair SSFC's rights pursuant to this
Agreement.
9.3 Certificate.
In addition to any other deliveries required to be delivered
hereunder, SSFC shall have received a certificate from Acquired
Corporation executed by the President or Vice President and from
the Secretary or Assistant Secretary of Acquired Corporation
certifying that:
(a) the Board of Directors of Acquired Corporation has duly
adopted resolutions approving the substantive terms of
this Agreement and authorizing the consummation of the
transactions contemplated by this Agreement and such
resolutions have not been amended or modified and
remain in full force and effect;
(b) the shareholders of Acquired Corporation have duly
adopted resolutions approving the substantive terms of
the Merger and the transactions contemplated thereby
and such resolutions have not been amended or modified
and remain in full force and effect;
(c) each person executing this Agreement on behalf of
Acquired Corporation is an officer of Acquired
Corporation holding the office or offices specified
therein and the signature of each person set forth on
such certificate is his or her genuine signature.
(d) the articles of incorporation and bylaws of Acquired
Corporation and the Bank referenced in section 4.8
hereof remain in full force and effect and have not
been amended or modified since the date hereof;
(e) to such persons' knowledge, the Proxy Statement
delivered to Acquired Corporation's shareholders, or
any amendments or revisions thereto so delivered, as of
the date thereof, did not contain or incorporate by
reference any untrue statement of a material fact or
omit to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading in light of the circumstances under which
they were made (it being understood that such persons
need only express a statement as to information
concerning or provided by Acquired Corporation for
inclusion in such Proxy Statement); and
(f) the conditions set forth in this Article 9 insofar as
they related to Acquired Corporation have been
satisfied.
9.4 Other Matters.
There shall have been furnished to counsel for SSFC
certified copies of such corporate records of Acquired
Corporation and copies of such other documents as such counsel
may reasonably have requested.
9.5 Dissenters.
The number of shares as to which shareholders of Acquired
Corporation have exercised dissenters rights of appraisal under
section 2.6 does not exceed 10% of the outstanding shares of
common stock of Acquired Corporation.
9.6 Material Events.
There shall have been no determination by the Board of
Directors of SSFC that the transactions contemplated by this
Agreement have become impractical because of any state of war,
declaration of a banking moratorium in the United States or
general suspension of trading on the NYSE or on any market on
which SSFC Common Stock may be traded.
9.7 Employment Agreements.
The President and Chairman of the Board of the Acquired
Corporation, respectively James L. Wilson and Philip C. Modder,
are employed by the Acquired Corporation under long-term
employment agreements. At the consummation and Effective Date
and time of the Merger contemplated hereunder, the employment
agreements shall immediately become the liability of SSFC. Any
contractual obligations and liabilities of the Acquired
Corporation shall immediately become the contractual obligations
and liabilities of SSFC upon the consummation and Effective Date
and time of the Merger contemplated hereunder.
ARTICLE 10
TERMINATION OF REPRESENTATIONS AND WARRANTIES
All representations and warranties provided in Articles 3
and 4 of this Agreement or in any certificate pursuant to
Articles 8 and 9 shall terminate and be extinguished at and shall
not survive the Effective Date. All covenants, agreements and
undertakings required by this Agreement to be performed by any
Party hereto following the Effective Date shall survive such
Effective Date and be binding upon such Party. If the Merger is
not consummated, all representations, warranties, obligations,
covenants, or agreements hereunder or in any certificate
delivered hereunder relating to the transaction which is not
consummated shall be deemed to be terminated or extinguished,
except that
Sections 6.2, 6.4, 12.3 and 13.4, and Article 10 shall
survive. Items disclosed in the Exhibits and Schedules attached
hereto are incorporated into this Agreement and form a part of
the representations, warranties, covenants or agreements to which
they relate. Information provided in such Exhibits and Schedules
is provided only in response to the specific section of this
Agreement which calls for such information.
ARTICLE 11
NOTICES
All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to
have been duly given at the time given or mailed, first class
postage prepaid:
(a) If to Acquired Corporation, to:
P.O. Box 520
Boca Raton, Florida 33429
with a courtesy copy to:
Hodgson, Russ, Andrews, Woods & Goodyear, LLP
2000 Glades Road - Suite 400
Boca Raton, Florida 33431-4303
may otherwise be specified by or as Acquired
Corporation in writing to SSFC
(B) If to SSFC, to:
278A New Dorp Lane
Staten Island, New York 10306-9117
with a courtesy copy to:
Joel Pensley, Esq.
276 Fifth Avenue-Suite 715
New York, New York 10001
or as may otherwise be specified in writing by SSFC to
Acquired Corporation.
ARTICLE 12
AMENDMENT OR TERMINATION
12.1 Amendment.
This Agreement may be amended by the mutual consent of SSFC
and Acquired Corporation before or after approval of the
transactions contemplated herein by the shareholders of Acquired
Corporation.
12.2 Termination.
This Agreement may be terminated at any time prior to or on
the Effective Date whether before or after action thereon by the
shareholders of Acquired Corporation, as follows:
(a) by the mutual consent of the respective boards of
directors of Acquired Corporation and SSFC;
(b) by the Board of Directors of either Party (provided
that the terminating Party is not then in material
breach of any representation, warranty, covenant, or
other agreement contained in this Agreement) in the
event of a material breach by the other Party of any
representation or warranty contained in this Agreement
which cannot be or has not been cured within thirty
(30) days after the giving of written notice to the
breaching Party of such breach and which breach would
provide the non-breaching Party the ability to refuse
to consummate the Merger under the standard set forth
in section 9.1 of this Agreement in the case of SSFC
and section 8.1 of this Agreement in the case of
Acquired Corporation;
(c) by the Board of Directors of either Party (provided
that the terminating Party is not then in material
breach of any representation, warranty, covenant, or
other agreement contained in this Agreement) in the
event of a material breach by the other Party of any
covenant or agreement contained in this Agreement which
cannot be or has not been cured within thirty (30) days
after the giving of written notice to the breaching
Party of such breach, or if any of the conditions to
the obligations of such Party contained in this
Agreement in Article 8 as to Acquired Corporation or
Article 9 as to SSFC shall not have been satisfied in
full; or
(d) by the Board of Directors of either SSFC or Acquired
Corporation if all transactions contemplated by this
Agreement shall not have been consummated on or prior
to October 31, 1997, if the failure to consummate the
transactions provided for in this Agreement on or
before such date is not caused by any breach of this
Agreement by the Party electing to terminate pursuant
to this section 12.2(d).
12.3 Damages.
In the event of termination pursuant to section 12.2,
Acquired Corporation and SSFC shall not be liable for damages for
any breach of a covenant, warranty or representation contained in
this Agreement made in good faith, and, in that case, the
expenses incurred shall be borne as set forth in section 13.1
hereof.
ARTICLE 13
MISCELLANEOUS
13.1 Expenses.
Each Party hereto shall bear its own legal, auditing,
trustee, investment banking, regulatory and other expenses in
connection with this Agreement and the transactions contemplated
hereby.
13.2 Benefit.
This Agreement shall inure to the benefit of and be binding
upon Acquired Corporation and SSFC, and their respective
successors. This Agreement shall not be assignable by any Party
without the prior written consent of the other Party.
13.3 Federal Tax Attributes.
This Merger for tax and other purposes shall be construed as
a form of reorganization, and therefor the tax attributes of the
Acquired Corporation and the Bank shall carry over to and
consolidate with SSFC, from that of the Acquired Corporation and
the Bank which file consolidated Federal Income Tax returns. It
is anticipated that SSFC will file consolidated Federal Income
Tax returns involving those entities contemplated by this Merger
Agreement, thereby preserving the tax attributes in Acquired
Corporation and the Bank.
13.4 Governing Law.
Except to the extent that the laws of the State of Florida
apply to the Merger, this Agreement shall be governed by, and
construed in accordance with the Laws of the State of Delaware
without regard to any conflicts of law.
13.5 Counterparts.
This Agreement may be executed in counterparts, each of
which shall be deemed to constitute an original. Each such
counterpart shall become effective when one counterpart has been
signed by each Party thereto.
13.6 Headings.
The headings of the various articles and sections of this
Agreement are for convenience of reference only and shall not be
deemed a part of this Agreement or considered in construing the
provisions thereof.
13.7 Severability.
Any term or provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining terms and
provisions thereof or affecting the validity or enforceability of
such provision in any other jurisdiction, and if any term or
provision of this Agreement is held by any court of competent
jurisdiction to be void, voidable, invalid or unenforceable in
any given circumstance or situation, then all other terms and
provisions, being severable, shall remain in full force and
effect in such circumstance or situation and the term or
provision shall remain valid and in effect in any other
circumstances or situation.
13.8 Construction.
Use of the masculine pronoun herein shall be deemed to refer
to the feminine and neuter genders and the use of singular
references shall be deemed to include the plural and vice versa,
as appropriate. No inference in favor of or against any Party
shall be drawn from the fact that such Party or such Party's
counsel has drafted any portion of this Agreement.
13.9 Return of Information.
In the event of termination of this Agreement prior to the
Effective Date, each Party shall return to the other, without
retaining copies thereof, all confidential or nonpublic
documents, work papers and other materials obtained from the
other Party in connection with the transactions contemplated in
this Agreement and shall keep such information confidential, not
disclose such information to any other person or entity, and not
use such information in connection with its business.
13.10 Equitable Remedies.
The Parties agree that, in the event of a breach of this
Agreement by either party, the other Party may be without an
adequate remedy at law owing to the unique nature of the
contemplated transactions. In recognition thereof, in addition
to (and not in lieu of) any remedies at law that may be available
to the non-breaching Party, the non-breaching Party shall be
entitled to obtain equitable relief, including the remedies of
specific performance and injunction, in the event of breach of
this Agreement by the other Party, and no attempt on the part of
the non-breaching Party to obtain such equitable relief shall be
deemed to constitute an election of remedies by the non-breaching
Party that would preclude the non-breaching Party from obtaining
any remedies at law to which it would otherwise be entitled.
13.11 Attorneys' Fees.
If any Party hereto shall bring an action at law or in
equity to enforce its rights under this Agreement (including an
action based upon a misrepresentation or the breach of any
warranty, covenant, agreement or obligation contained herein),
the prevailing Party in such action shall be entitled to recover
from the other Party its costs and expenses incurred in
connection with such action (including fees, disbursements and
expenses of attorneys and costs of investigation).
13.12 No Waiver.
No failure, delay or omission of or by any Party in
exercising any right, power or remedy upon any breach or default
of any other Party shall impair any such rights, powers or
remedies of the Party not in breach or default, nor shall it be
construed to be a waiver of any such right, power or remedy, or
an acquiescence in any similar breach or default; nor shall any
waiver of any single breach or default be deemed a waiver of any
other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on
the part of any Party of any provisions of this Agreement must be
in writing and be executed by the Parties to this Agreement and
shall be effective only to the extent specifically set forth in
such writing.
13.13 Remedies Cumulative.
All remedies provided in this Agreement, by law or
otherwise, shall be cumulative and not alternative.
13.14 Entire Contract.
This Agreement and the documents and instruments referred to
herein constitute the entire contract between the parties to this
Agreement and supersede all other understandings with respect to
the matter of this Agreement.
IN WITNESS WHEREOF, Acquired Corporation and SSFC have
caused this Agreement to be signed by their respective duly
authorized officers as of the date first above written.
SOUTHERN SECURITY FINANCIAL CORPORATION
By: S/Nancy Montanaro
Its:
SOUTHERN SECURITY BANK CORPORATION
By: S/James L. Wilson
Its:
EXHIBIT 2.2
___________
Articles of Merger of Southern Security Bank Corporation
into Southern Security Financial Corporation (under Delaware Law)
<PAGE>
CERTIFICATE OF MERGER
OF
SOUTHERN SECURITY FINANCIAL CORPORATION
INTO
SOUTHERN SECURITY FINANCIAL CORPORATION
(UNDER SECTION 252 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE)
Southern Security Financial Corporation hereby
certifies that:
(1) The name and state of incorporation of each of the
constituent corporations are:
(a) Southern Security Bank Corporation, a Florida
corporation; and
(b) Southern Security Financial Corporation, a Delaware
corporation.
(2) A Plan and Agreement of merger has been approved, adopted,
certified, executed and acknowledged by Southern Security
Bank Corporation and by Southern Security Financial
Corporation in accordance with the provisions of subsection
(c) of Section 252 of the General Corporation Law of the
State of Delaware.
(3) The effective date of the merger shall be the filing date of
this Certificate of Merger.
(4) The name of the surviving corporation is Souther Security
Financial Corporation.
(5) The certificate of incorporation of southern Security
Financial Corporation shall be the certificate of the
surviving corporation.
(6) The surviving corporation is a corporation of the State of
Delaware.
(7) The executed agreement of merger is on file at the principal
place of business of Southern Security Financial Corporation
at 278A New Dorp Lane, Staten Island, New York.
(8) A copy of the agreement of merger will be furnished by
Southern Security Financial Corporation on request and
without cost, to any stockholder of Southern Security
Financial Corporation or Southern Security Bank Corporation.
(9) The authorized capital stock of Southern Security Financial
Corporation is 30,000,000 shares of Class A Common Stock,
$0.01 par value per share, 5,000,000 shares of Class B
Common Stock, $0.01 par value per share, and 5,000,000
shares of Preferred Stock, $0.01 par value per share. The
authorized capital stock of Southern Security Bank
Corporation is 20,000,000 shares of Class A Common Stock,
$0.01 par value per share, 5,000,000 shares of Class B
Common Stock, $0.01 par value per share, 1,200,000 shares of
Series A Preferred Stock, $0.01 par value per share.
IN WITNESS WHEREOF, Southern Security Financial Corporation has
caused this certificate to be signed by Nancy Montanaro, its
authorized officer, on the 10th day of November, 1997.
SOUTHERN SECURITY FINANCIAL CORPORATION
By: s/Nancy Montanaro
___________________________________
Nancy Montanaro, President
EXHIBIT 2.3
___________
Articles of Merger of Southern Security Bank Corporation
into Southern Security Financial Corporation (under Florida Law)
<PAGE>
ARTICLES OF MERGER
OF
SOUTHERN SECURITY BANK CORPORATION
(a Florida corporation)
into
SOUTHERN SECURITY FINANCIAL CORPORATION
(a Delaware corporation)
Pursuant to the provisions of Sections 607.1105 and
607.1107, Florida Statutes, these Articles of Merger provide
that:
1. SOUTHERN SECURITY BANK CORPORATION, a Florida
corporation ("SSBC"), shall be merged with and into SOUTHERN
SECURITY FINANCIAL CORPORATION, a Delaware corporation ("SSFC"),
which shall be the surviving corporation.
2. The merger shall become effective at 3:00 p.m. on
filing , 1997 (the "Effective Date").
_________
3. The Agreement and Plan of Merger dated as of
October 31, 1997, pursuant to which SSBC shall be merged with and
into SSFC was adopted by the shareholders of SSFC on 10/31/97 and
adopted by the shareholders of SSBC on 10/31/97.
IN WITNESS WHEREOF, these Articles of Merger have been
executed on behalf of the constituent corporations by their
authorized officers as of 11/12/97.
SOUTHERN SECURITY FINANCIAL CORPORATION
By s/James Wilson
_____________________________________
James Wilson
President
THIS INSTRUMENT PREPARED BY:
Susan K. Baumel, Esq.
Hodgson, Russ, Andrews, Woods & Goodyear, LLP
2000 Glades Road, Suite 400
Boca Raton, Florida 33431
Telephone (561) 394-0500
Florida Bar No. 284351
SOUTHERN SECURITY BANK CORPORATION
By s/James L. Wilson
_____________________________________
James L. Wilson
President
STATE OF FLORIDA )
) SS
COUNTY OF PALM BEACH)
The foregoing instrument was acknowledged before me
this 12th day of November, 1997 by James Wilson, as President of
SOUTHERN SECURITY BANK CORPORATION, a Florida corporation, and
Southern Security Financial Corporation, a Delaware corporation,
on behalf of the corporation. He is personally known to me or
has produced ___________________________ as identification and
did take an oath.
NOTARY PUBLIC
sign s/Tracey A. Testa
print Tracey A. Testa
_________________________
State of Florida at Large (Seal)
My Commission Expires: 3/16/01
________
EXHIBIT 3.0
___________
Certificate of Amendment of Certificate of Incorporation
of Southern Security Financial Corporation
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
SOUTHERN SECURITY FINANCIAL CORPORATION
SOUTHERN SECURITY FINANCIAL CORPORATION (the
"Corporation"), a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY THAT:
1. The certificate of incorporation of the
corporation is hereby amended by striking out Article FIRST
thereof and by substituting in lieu of said Article the following
new Article:
FIRST
The name of this Corporation is SOUTHERN SECURITY BANK
CORPORATION.
2. The aforesaid amendment was duly adopted in
accordance with the applicable provisions of Section 242 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this
Certificate to be signed by James Wilson, its president, this
____ day of November, 1997.
SOUTHERN SECURITY FINANCIAL CORPORATION
By: s/James Wilson
____________________________________
James Wilson, President
