<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1997
[ ] Transition Report Pursuant to 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission File Number 0-22891.
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PINNACLE BANCSHARES, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
GEORGIA 58-2326075
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(State or other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
110 East Hill Street, Thomson, Georgia 30824
--------------------------------------------
(Address of Principal Executive Offices)
Issuers Telephone Number (706) 595-1600
--------------
Not Applicable
----------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES NO X
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Class Outstanding at November 7, 1997
- ----------------------------- -------------------------------
Common Stock, $.001 Par Value 635,380 shares
Transitional Small Business Disclosure Format: Yes No X
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<PAGE> 2
PINNACLE BANCSHARES, INC.
Form 10-QSB
Index
<TABLE>
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet as of September 30, 1997 1
Condensed Consolidated Statements of Income for the Three Months
Ended September 30, 1997 and 1996, and the Nine Months Ended
September 30, 1997 and 1996 2
Condensed Consolidated Statement of Cash Flows for the Nine Months
Ended September 30, 1997 and 1996 3
Notes to Condensed Consolidated Financial Statements 4 - 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 6 - 9
PART II. OTHER INFORMATION
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
Index to Exhibits 12
</TABLE>
<PAGE> 3
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PINNACLE BANCSHARES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(UNAUDITED)
(dollars in thousands)
<TABLE>
<S> <C>
ASSETS
Cash and due from banks $ 1,132
Federal funds sold 5,080
Interest-bearing deposits in banks 199
Securities available for sale 11,219
Loans, net of allowance for loan losses of $883 17,887
Bank premises and fixed assets 1,439
Accrued interest receivable 308
Foreclosed real estate, net of allowance 452
Deferred tax benefit 261
Other assets 100
-------
TOTAL ASSETS $38,077
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS:
Non-interest bearing $ 3,786
Interest-bearing:
NOW accounts 4,776
Savings 1,688
Money market accounts 2,720
Time deposits of $100,000, and over 4,681
Other time deposits 12,900
-------
Total deposits 30,551
Accrued expenses and other liabilities 334
------
TOTAL LIABILITIES 30,885
------
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.001; 1,000,000 shares authorized; none issued --
Common stock, par value $.001; 9,000,000 shares authorized;
635,380 shares issued and outstanding 1
Additional paid-in capital 6,355
Retained earnings 879
Unrealized loss on securities available-for-sale, net of tax (43)
-------
TOTAL STOCKHOLDERS' EQUITY 7,192
-------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $38,077
=======
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE> 4
PINNACLE BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Nine Three Nine
Months Months Months Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1997 1997 1996 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $494 $1,513 $556 $1,632
Interest on taxable securities 161 504 181 503
Interest on nontaxable securities 21 67 24 71
Interest on Federal funds sold 57 96 19 76
Interest on deposits in other banks 4 9 7 15
---- ------ ---- ------
TOTAL INTEREST INCOME 737 2,189 787 2,297
---- ------ ---- ------
INTEREST EXPENSE
Interest on time deposits of $100,000 or more 73 206 87 204
Interest on other deposits 234 689 260 839
Interest on Federal funds purchased -- 2 -- --
---- ------ ---- ------
TOTAL INTEREST EXPENSE 307 897 347 1,043
---- ------ ---- ------
NET INTEREST INCOME 430 1,292 440 1,254
PROVISION FOR LOAN LOSSES 3 15 6 53
---- ------ ---- ------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 427 1,277 434 1,201
---- ------ ---- ------
NONINTEREST INCOME
Service charges on deposits 51 162 64 179
Other income 13 33 17 37
Net realized gain (loss), sales of available-for-sale securities 2 2 (7) 1
---- ------ ---- ------
66 197 74 217
---- ------ ---- ------
NONINTEREST EXPENSE
Salaries and employee benefits 213 602 179 538
Occupancy expenses 42 121 68 157
Other expenses 191 453 129 367
---- ------ ---- ------
446 1,176 376 1,062
---- ------ ---- ------
INCOME BEFORE INCOME TAXES 47 298 132 356
INCOME TAX EXPENSE 13 93 41 109
---- ------ ---- ------
NET INCOME $ 34 $ 205 $ 91 $ 247
==== ====== ==== ======
NET INCOME PER SHARE OF COMMON STOCK $.05 $ .32 $.14 $ .39
==== ====== ==== ======
DIVIDENDS PER SHARE OF COMMON STOCK $ -- $ .20 $ -- $ .10
==== ====== ==== ======
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 5
PINNACLE BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(dollars in thousands)
<TABLE>
<CAPTION>
Nine Months
Ended September 30
------------------
1997 1996
----- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 205 $ 247
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 62 90
Provision for loan loss 15 53
Deferred income tax 32 104
Adjustment to foreclosed real estate 5 2
Net decrease in accrued interest receivable 101 14
Net (increase) decrease in other assets (52) 12
Net increase in other liabilities 95 59
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 463 581
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in federal funds sold (3,660) 5,950
Net increase in interest-bearing deposits with banks (99) (398)
Net (increase) decrease in loans, net 2,085 (1,272)
Purchases of available for sale securities (1,726) (5,360)
Proceeds from sales and maturities of available-for-sale securities 3,085 3,204
Net purchases of premises and equipment (61) (41)
Proceeds from sale of foreclosed real estate 188 --
------- -------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (188) 2,083
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in federal funds purchased -- 270
Net decrease in deposits (104) (2,783)
Dividends paid (127) (63)
------- -------
NET CASH USED IN FINANCING ACTIVITIES (231) (2,576)
------- -------
NET INCREASE IN CASH AND DUE FROM BANKS 44 88
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD 1,088 2,640
------- -------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 1,132 $ 2,728
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 6
PINNACLE BANCSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial statements include the accounts of Pinnacle
Bancshares, Inc. (the "Company") and its wholly-owned subsidiary, McDuffie Bank
& Trust (the "Bank"). Significant intercompany transactions and accounts are
eliminated in consolidation.
The financial statements as of and for the three and nine months ended September
30, 1997 and 1996 are unaudited and have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. These consolidated financial
statements should be read in conjunction with the audited financial statements
and notes thereto included in the Bank's annual report for the year ended
December 31, 1996.
The financial information included herein reflects all adjustments (consisting
of normal recurring adjustments) which are, in the opinion of management,
necessary to a fair presentation of the financial position and results for
interim periods.
NOTE 2 - REORGANIZATION OF THE BUSINESS
On June 6, 1997, the Bank's plan of corporate reorganization (the
"Reorganization"), under which the Bank became a wholly-owned subsidiary of the
Company was consummated. Consummation of the Reorganization was conditioned upon
(i) the approval by the shareholders of the Bank as required by law and (ii) the
receipt of any required regulatory approvals, including approvals from the Board
of Governors of the Federal Reserve System, the Federal Deposit Insurance
Corporation and the Georgia Department of Banking and Finance.
The Reorganization was accomplished by merging Pinnacle Interim Corp.
("Interim") with the Bank under the Bank's charter and with the title of
McDuffie Bank & Trust. On June 6, 1997, each outstanding share of common stock
of the Bank was effectively exchanged for one share of common stock of the
Company. As a result, the shareholders of the Bank became shareholders of the
Company and the Bank became a wholly-owned subsidiary of the Company. Further,
the officers and directors of the Bank became the officers and directors of the
Company.
NOTE 3 - EARNINGS PER SHARE
Earnings per share are calculated on the basis of the weighted average number of
shares outstanding in accordance with Accounting Principles Board "APB" Opinion
No. 15. Fully diluted earnings per share are not presented because stock options
outstanding are not materially dilutive and did not effect presented earnings
per share.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standard "SFAS" No. 128, "Earnings Per Share". This Statement
provides for changes in the calculation and presentation of earnings per share
information and is effective for interim and annual financial statements of
periods ending after December 15, 1997. Management of the Company has not yet
determined the effect of the adoption of this Statement on the consolidated
financial statements.
4
<PAGE> 7
PINNACLE BANCSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1997
(UNAUDITED)
NOTE 4 - STOCK OPTION PLAN
On April 28, 1997, at the Annual Meeting of shareholders of the Bank, the Bank's
shareholders adopted an employee stock option plan (the "Plan") that provides
incentive stock options and nonqualified stock options to directors and key
employees of the Bank. On the effective date of the Reorganization, the Plan was
transferred to the Company and was renamed the "Pinnacle Bancshares, Inc. 1997
Stock Option Plan". During the quarter ended September 30, 1997, options on
8,500 shares of stock were granted to key employees of the Bank and the Company.
The Company has adopted SFAS 123, "Accounting for Stock-Based Compensation".
SFAS 123 establishes a "fair-value" based method of accounting for stock-based
compensation plans. SFAS 123 encourages entities to adopt the fair-value method
in place of the intrinsic value method currently in effect under the provisions
of APB Opinion No. 25.
Under the fair value method of accounting, all arrangements under which
employees receive shares of stock or other equity instruments or under which
employers incur liabilities to employees in amounts based on the price of its
stock result in the measurement of compensation cost at the grant date of the
award which is recognized over the service period, usually the vesting period.
Under the intrinsic value method, compensation cost is measured by the excess of
the quoted market price of the stock, if any, over the amount the employee must
pay to acquire the stock.
As permitted by SFAS 123, the Company has elected to continue its current method
of using the intrinsic value method. However, the Company will be required to
present pro forma disclosures of net income and earnings per share as if the
Company had adopted the recognition provisions of SFAS 123 beginning with the
1997 Form 10-KSB and related financial statements.
5
<PAGE> 8
PINNACLE BANCSHARES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
In January 1997, the Board of Directors of McDuffie Bank and Trust (the "Bank"),
determined that it was in the best interests of the Bank to reorganize the Bank
into a holding company structure. Accordingly, on January 31, 1997, Pinnacle
Bancshares, Inc. (the "Company") was incorproated under the laws of the State of
Georgia to operate as a bank holding company pursuant to the Federal Bank
Holding Company Act of 1956, as amended, and to purchase 100% of the issued and
outstanding capital stock of the Bank. On April 28, 1997, the shareholders of
the Bank, at the Bank's Annual Meeting of Shareholders, duly approved and
authorized the Reorganization and, after receipt of final regulatory approvals,
the Reorganization was consummated on June 6, 1997.
The Company's net income was $34,000 for the third quarter of 1997, a decrease
of $57,000 (62.6%) compared to net income of $91,000 for the third quarter of
1996. Earnings per share were $0.05 for the third quarter of 1997, a decrease of
$0.09 (64.3%) compared to $0.14 for the third quarter of 1996. Total assets at
September 30, 1997 was $38,077,000. An increase of $51,000 (1.3%) from December
31, 1996 and a decrease of $1,930,000 (4.8%) from September 30, 1996.
The decline in net income resulted from decreases in net interest income (2.2%)
and noninterest income (10.8%), and an increase in noninterest expense (18.6%).
The provision for loan losses for the third quarter of 1997 was $3,000 compared
to $6,000 for the third quarter of 1996. Income before income taxes decreased
$85,000 (64.4%) compared to the third quarter of 1996.
The return on average assets was 0.36% (annualized) for the quarter ended
September 30, 1997, compared to 0.95% (annualized) for the same period in 1996.
The return on average equity for the third quarter of 1997 was 1.8%
(annualized), compared to 5.2% (annualized) for the third quarter of 1996.
Further discussion of significant items affecting net income are discussed in
detail below.
NET INTEREST INCOME
Net interest income is the difference between the interest and fees earned on
loans, securities, and other interest-bearing assets (interest income) and the
interest paid on deposits and borrowed funds (interest expense). Higher net
interest income is a result of the relationship between the interest-earning
assets and the interest-bearing liabilities.
Net interest income decreased $10,000 (2.2%) during the third quarter from the
comparable period in 1996, primarily due to a change in the composition of
interest-earning assets. Interest-earning assets were $34,385,000 at September
30, 1997. Loans, the highest yielding component of interest-earning assets,
decreased $2,229,000 (11.1%) from December 31, 1996 and decreased $3,058,000
(14.6%) from September 30, 1996. At September 30, 1997 loans represented 52.0%
of interest-earning assets compared to 58.8% at December 31, 1996 and 62.9% at
September 30, 1996. The decrease from September 1996 was a result of the
maturity of several large loans and the maturity of term federal funds that were
matched with the expected maturity of the public funds deposits described below.
Investments in securities decreased $1,384,000 (11.0%) from December 31, 1996
and decreased $1,148,000 (9.1%) from September 30, 1996. Interest-bearing
deposits at September 30, 1997 were $26,765,000. This represents a decrease of
$794,000 (2.9%) from December 31, 1996 and a decrease of $2,610,000 (8.9%) from
September 30, 1996. The decrease primarily resulted from a withdrawal of a large
deposit of public funds from the Bank.
6
<PAGE> 9
PINNACLE BANCSHARES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
INTEREST INCOME
Interest income for the third quarter of 1997 decreased $50,000 (6.4%) from the
comparable quarter in 1996 primarily due to the change in the composition of
interest-earning assets previously described. Interest income on loans decreased
$62,000 (11.2%) and interest income on securities decreased $23,000 (11.2%)
compared to the third quarter of 1996.
INTEREST EXPENSE
Interest expense for the third quarter of 1997 decreased $40,000 (11.5%) from
the third quarter of 1996, primarily as a result of the decline in
interest-bearing deposit accounts as previously discussed.
NONINTEREST INCOME
Noninterest income for the third quarter of 1997 decreased $8,000 (10.8%) from
the comparable quarter in 1996 primarily from a decrease in income from service
charges on deposit accounts.
NONINTEREST EXPENSE
Noninterest expense for the third quarter of 1997 increased $70,000 (18.6%) from
the comparable quarter of 1996. The increase was attributable to an increase in
salaries and benefits of $34,000 (19.0%) and an increase in other operating
expenses of $62,000 (48.1%). The increase in other operating expenses included
approximately $50,000 of non-recurring expenses related to the organization of
the newly-formed bank holding company. Occupancy expenses declined $26,000
(38.2%), primarily from decreased maintenance costs and depreciation expense
estimates.
INCOME TAXES
Income tax expense for the third quarter of 1997 totaled $13,000, representing a
decrease of $28,000 (68.3%) from the comparable quarter in 1996. The decrease
primarily results from lower taxable income attributable to the items previously
discussed.
REVIEW OF FINANCIAL CONDITION
OVERVIEW
Management continuously monitors the financial condition of the Bank in order to
protect depositors, increase retained earnings and protect current and future
earnings. Further discussion of significant items affecting the Bank's financial
condition are discussed in detail below.
ASSET QUALITY
A major key to long-term earnings growth is the maintenance of a high-quality
loan portfolio. The Bank's directive in this regard is carried out through its
policies and procedures for extending credit to the Bank's customers. The goal
and result of these policies and procedures is to provide a sound basis for new
credit extensions and an early recognition of problem assets to allow the most
flexibility in their timely disposition.
7
<PAGE> 10
PINNACLE BANCSHARES, INC. AND SUBSIDIARY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Non-performing assets were $502,000 at September 30, 1997, compared to $659,000
at December 31, 1996 and $695,000 at September 30, 1996. The composition of
non-performing assets for each date is shown below.
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1997 1996 1996
-------- -------- --------
<S> <C> <C> <C>
Non-accrual loans $ 50,000 $143,000 $ 65,000
OREO, net of valuation allowance 452,000 516,000 630,000
-------- -------- --------
$502,000 $659,000 $695,000
======== ======== ========
</TABLE>
The ratio of non-performing assets to total loans and other real estate was 2.7%
at September 30, 1997, 3.2% at December 31, 1996, and 3.6% at September 30,
1996.
Reduction of non-performing assets continues to be a management priority.
Additions to the allowance for loan losses are made periodically to maintain the
allowance at an appropriate level based upon management's analysis of potential
risk in the loan portfolio. The amount of the loan loss provision is determined
by an evaluation of the level of loans outstanding, the level of non-performing
loans, historical loan loss experience, delinquency trends, the amount of actual
losses charged to the reserve in a given period, and assessment of present and
anticipated economic conditions. A provision for losses in the amount of $3,000
was charged to expense for the quarter ended September 30, 1997. At September
30, 1997, the ratio of allowance for loan losses to total loans was 4.7%. At
December 31, 1996 the ratio was 4.2%, and was 4.4% at September 30, 1996.
Management considers the current allowance for loan losses appropriate based
upon its analysis of the potential risk in the portfolio, although there can be
no assurance that the assumptions underlying such analysis will continue to be
correct.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is the ability of an organization to meet its financial commitments
and obligations on a timely basis. These commitments and obligations include
credit needs of customers, withdrawals by depositors, and payment of operating
expenses and dividends. The Bank does not anticipate any events which would
require liquidity beyond that which is available through deposit growth, federal
funds balances, or investment portfolio maturities. The Bank actively manages
the levels, types and maturities of earning assets in relation to the sources
available to fund current and future needs to ensure that adequate funding will
be available at all times.
The Bank's liquidity remains adequate to meet operating and loan funding
requirements. The Bank's liquidity ratio at September 30, 1997 was 56.0%,
compared to 46.4% at December 31, 1996, and 42.0% at September 30, 1996.
Management is committed to maintaining capital at a level sufficient to protect
depositors, provide for reasonable growth, and fully comply with all regulatory
requirements. Management's strategy to achieve this goal is to retain sufficient
earnings while providing a reasonable return on equity. Federal banking
regulations establish certain capital adequacy standards required to be
maintained by banks. These regulations set minimum requirements for risk-based
capital of 4% for core capital ("Tier I"), 8% for total risk-based capital and
3% for the leverage ratio. At September 30, 1997, the Bank's Tier I capital was
31.6% and total risk-based capital was 32.4%, compared to 30.8% and 32.1% at
year-ended December 31, 1996,
8
<PAGE> 11
PINNACLE BANCSHARES, INC. AND SUBSIDIARY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
respectively. At September 30, 1997, the Bank's leverage ratio was 18.3%
compared to 17.4% at December 31, 1996.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The Company may, from time to time, make written or oral forward-looking
statements, including statements contained in the Company's filings with the
Securities and Exchange Commission (the "Commission") and its reports to
stockholders. Such forward-looking statements are made based on management's
belief as well as assumptions made by, and information currently available to,
management pursuant to "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. The Company's actual results may differ
materially from the results anticipated in these forward-looking statements due
to a variety of factors, including governmental monetary and fiscal policies,
deposit levels, loan demand, loan collateral values, securities portfolio values
and interest rate risk management; the effects of competition in the banking
business from other commercial banks, savings and loan associations, mortgage
banking firms, consumer finance companies, credit unions, securities brokerage
firms, insurance companies, money market mutual funds and other financial
institutions operating in the Company's market area and elsewhere, including
institutions operating through the Internet; changes in government regulations
relating to the banking industry, including regulations relating to branching
and acquisitions; failure of assumptions underlying the establishment of
reserves for loan losses, including the value of collateral underlying
delinquent loans, and other factors. The Company cautions that such factors are
not exclusive. The Company does not undertake to update any forward-looking
statements that may be made from time to time by, or on behalf of, the Company.
9
<PAGE> 12
PART II
OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On October 7, 1997, the Company entered into an agreement (the "Agreement") with
a group of Augusta, Georgia businessmen including Ray Brown, Arthur J. Gay, Jr.,
J. Randal Hall, George H. Inman, John W. Lee, A. Montague Miller and Julian W.
Osbon (collectively, the "Augusta Group") whereby, subject to approval by the
Company's shareholders and certain other conditions, the Company has agreed to
register a number of shares of its Common Stock having a minimum aggregate value
of $7 million for offering to the public. If the offering conditions are met,
all of the shares in the offering will be offered and sold on a best-efforts
basis by certain officers and directors of the Company, who will receive no
commissions for such sales. The proceeds of the offering will be principally
used to expand the Company's banking operations. Further, subject to required
regulatory approvals and certain other conditions, certain members or
representatives of the Augusta Group will be named to the Board of Directors of
the Company and the Board of Directors of the Bank. Under the Agreement, Patrick
G. Blanchard has been named President and Chief Executive Officer of the
Company. Heyward Horton, Jr., former President and Chief Executive Officer of
the Company, continues to serve the Company as President and Chief Executive
Officer of the Bank.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit No. Description
10.1 Employment Agreement dated October 6, 1997 by and
among McDuffie Bank & Trust, Pinnacle Bancshares,
Inc., and Patrick G. Blanchard, Sr.
10.2 Agreement dated October 6, 1997 among Ray Brown, RDB
Limited Partnership, Arthur J. Gay, Jr., J. Randal
Hall, George H. Inman, John W. Lee, A. Montague
Miller and Julian W. Osbon as the Augusta Group and
Pinnacle Bancshares, Inc.
27 Financial Data Schedule (for SEC use only)
(b) No reports on Form 8-K were filed during the quarter ended
September 30, 1997.
10
<PAGE> 13
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PINNACLE BANCSHARES, INC.
November 13, 1997 By: /s/ Patrick G. Blanchard, Sr.
- -------------------------- --------------------------------------
Date Patrick G. Blanchard, Sr.
President and Chief Executive Officer
(principal executive officer)
November 13, 1997 By: /s/ J. Harold Ward, Jr.
- -------------------------- --------------------------------------
Date J. Harold Ward, Jr.
Senior Vice President, Chief Financial
Officer (principal financial and
accounting officer)
11
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Description Sequential Page Number
<S> <C> <C>
10.1 Employment Agreement dated October 6, 1997 by
and among McDuffie Bank & Trust, Pinnacle
Bancshares, Inc., and Patrick G. Blanchard, Sr.
10.2 Agreement dated October 6, 1997 among Ray Brown,
RDB Limited Partnership, Arthur J. Gay, Jr., J. Randal
Hall, George H. Inman, John W. Lee, A. Montague
Miller and Julian W. Osbon as the Augusta Group and
Pinnacle Bancshares, Inc.
27 Financial Data Schedule (for SEC use only).
</TABLE>
12
<PAGE> 1
EXHIBIT 10.1
AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") made and entered into on
the 6th day of October, 1997 by and among McDuffie Bank and Trust, Thomson,
Georgia, a bank chartered under the laws of the State of Georgia, (hereinafter
the "Bank"), Pinnacle Bancshares, Inc., a corporation chartered under the laws
of the State of Georgia (hereinafter the "Company") (the Bank and the Company
collectively referred to as the "Employer"), and Patrick G. Blanchard, Sr., an
individual residing in Richmond County, Georgia (hereinafter the "Executive").
W I T N E S S E T H:
WHEREAS, the Board of Directors (hereinafter the "Board") of the
Employer recognizing the experience and knowledge of the Executive in the
banking industry, desire to retain the services and business counsel of the
Executive, therefore, it being in the best interest of the Employer to arrange
terms of employment for the Executive with the Employer for the term hereof; and
WHEREAS, the Executive is willing to provide his services to the
Employer in accordance with the terms and conditions hereinafter set forth:
NOW, THEREFORE, for and in consideration of the mutual premises and
covenants herein contained, the parties hereto agree as follows:
1. EMPLOYMENT - For the Term of Employment, as hereinafter
defined, the Employer hereby employs the Executive as President and Chief
Executive Officer of the Company and Vice-Chairman of the Bank during the term
of this Agreement, and the Executive agrees to accept such employment and to
perform such duties and functions as may be assigned to the Executive from time
to time, commensurate with the Executive's past experience and performance
level. Executive agrees to devote such of his time and energy to the business of
the Employer as is needed, and shall perform his duties in a trustworthy and
businesslike manner. Additionally, the Executive will be elected to the Board of
Directors of both the Bank and the Company.
The Board of the Bank shall review the Executive's performance
annually. The Board of the Bank shall also have the authority to terminate the
Executive, subject to the terms of this Agreement as outlined in Paragraph 2.1
of this Agreement.
2. TERM OF EMPLOYMENT - The term of employment of the Executive
under this Agreement shall be the period commencing as of October 6, 1997 and
continuing through December 31, 2000. On February 28, 1998, and on the last day
of February of each succeeding calendar year, the term of employment under this
Agreement shall be automatically extended to the last day of December of the
third calendar year thereafter, unless earlier terminated in accordance with
Section 2.1 of this Agreement, or unless either party shall have elected to fix
the expiration date of the Executive's term of employment hereunder. Each party
to this Agreement shall have the right, exercisable by written notice to the
other, to terminate the automatic renewal of this Agreement and thereby fix the
expiration of the term of employment under this Section 2, provided that such
notice be delivered by January 31 in any calendar year. Upon notice of
termination of automatic renewal of this Agreement, the term of employment of
the Executive under this Section 2 shall continue until the end of February of
the second calendar year from the year in which such notice is given.
1
<PAGE> 2
2.1 TERMINATION OF EMPLOYMENT - Notwithstanding the Term of Employment
stated above, the employment of the Executive under this Agreement shall be
terminated by the earliest to occur of any of the following:
(A) the death of the Executive;
(B) the disability of the Executive ("Disability" as used herein shall
be defined as the inability of the Executive whether due to physical or
mental impairment to perform his normal duties);
(C) voluntary retirement by the Executive or mandatory retirement at
age 65;
(D) the discharge of the Executive by the Employer
(i) "For Cause" - This Agreement may be terminated by the
Board without further obligation other than for monies already due to be paid,
for any of the following reasons:
(a) gross negligence or willful misconduct by the
Executive which is materially damaging to the business of the
Employer;
(b) conviction of the Executive of any crime
involving breach of trust or moral turpitude;
(c) a consistent pattern of failure by the Executive
to follow the reasonable written instructions or policies of
the Board of Directors of the Employer; or
(d) receipt of any written notice from the Georgia
Department of Banking and Finance or the Federal Deposit
Insurance Corporation, or the Board of Governors of the
Federal Reserve System requiring the removal of the Executive.
In the event that the Board discharges the
Executive alleging "cause" under this Paragraph 2.1(D)(i),
such notice of discharge shall be in writing and shall be
accompanied by a written description of the circumstances
alleging such "cause". The termination of the Executive for
"cause" shall entitle the Employer to enforcement of the Post
Termination Covenants as found in Paragraph 6 of this
Agreement. In the event that the Board discharges the
Executive alleging "cause" under this Paragraph 2.1(D)(i) and
it is subsequently determined judicially that the termination
was "without cause", then such discharge shall be deemed a
discharge "without cause" subject to the provisions of Section
2.1(D)(ii) hereof.
2
<PAGE> 3
(ii) "Without Cause": After the initial term of
employment, December 31, 2000, the Employer, subject to the
approval of a majority vote of the Board of Directors of the
Employer, may, upon thirty (30) days written notice to the
Executive, terminate this Agreement without cause at any time
during the term of this Agreement, upon the condition that the
Executive shall be entitled, as liquidated damages in lieu of
all claims to not less than twelve (12) months salary at the
then prevailing Base Salary level, with all insurance benefits
as identified in Paragraph 3.3 of this Agreement to be
maintained for a period of twelve (12) months, or until the
Executive is employed in a full-time position, whichever first
occurs. The termination of the Executive "without cause" shall
entitle the Employer to enforcement of the Post Termination
Covenants contained in Paragraph 6 hereof.
(E) the voluntary termination of employment by the Executive, whether
or not due to the Employer's Material Breach ("Employer's Material Breach" as
used herein means the material breach of the terms of the Agreement by the
Employer which remains uncured after the expiration of 30 days following the
delivery of written notice of such breach to the Employer by the Executive);
(F) the Execution of a mutual, written agreement of the Employer and
the Executive terminating the Executive's employment.
2.2 EFFECT OF TERMINATION
(A) Executive shall have the right to receive compensation and other
benefits under Paragraph 2.1(D)(ii) if terminated without cause.
(B) Executive shall have no right to receive any compensation or other
benefits under this Agreement, if terminated;
(i) by the Board "for cause" (as defined in
Paragraph 2.1(D)(i) "for cause");
(ii) voluntarily by the Executive in writing, if not
due to the Employer's Material Breach,
(iii) by mutual, written agreement of the Employer
and the Executive, or
(iv) because of the Executive's death or disability.
3. COMPENSATION
3.1 BASE SALARY - During the term of employment, the Executive shall be
paid an annual salary (hereinafter "Base Salary") which shall be paid in equal
installments not less frequently than monthly, and subject to such deductions as
may be required by law. Executive's annual Base Salary shall not be less than
$120,000 per year unless agreed to in writing by both parties. Base Salary will
be reviewed by the compensation committee of the Board and annual increase
determined, if any, on or before January 31st of each year beginning January 31,
1999.
3
<PAGE> 4
3.2 INCENTIVE BONUSES
(A) For the period ending December 31, 1998, or 12 months from
the opening of branches in Richmond and Columbia County, the Employer
will pay a cash bonus to the Executive of $12,000 upon the achievement
of the following:
1. Opening of two branches of the Bank in Richmond
and Columbia Counties by December 31, 1998;
2. By December 31, 1998, or 12 months from the
opening of branches in Richmond and Columbia County, the
Richmond and Columbia County branches having total deposits of
$30,000,000 and $24,000,000 in loans;
3. A prorated part of the bonus will be paid if at
least 80% of Item 2 is achieved. No bonus will be paid if
less than 80% of goals in Item 2 are not achieved.
4. An increase in the $12,000 bonus may be paid if
goals in Item 2 are exceeded.
(B) Incentive bonuses for the subsequent years will be
determined by the compensation committee of the Board.
5. STOCK OPTIONS - As of the date of the Company's successful
completion of its proposed public offering, referred to in
Section 4, below, the Employer will grant to the Executive a
stock option to purchase, at a per-share purchase price equal
to the Company's public offering price, a number of shares of
the Company's common equal to 2.5% of the number of shares of
the Company's common stock which are sold in its public
offering. The option will become exercisable in one-fourth
(1/4) increments as follows:
a. One-fourth (1/4) at the closing of the public
offering
b. One-fourth (1/4) at the end of the calender year
when the Bank's average assets exceed $100,000,000
c. One-fourth (1/4) at the end of the calendar year
when the Bank's average assets exceed $150,000,000
d. One-fourth (1/4) at the end of the calendar year
when the Bank's average assets exceed $200,000,000
The option shall expire on the tenth anniversary of the date
of grant; provided, however, that in the event of the
termination of employment of Executive, Executive shall have
ninety (90) days to exercise all of the then presently
exercisable options. On the ninety-first day after the
termination of employment of Executive, all unexercised
options shall terminate.
4
<PAGE> 5
3.3 OTHER BENEFITS - During the term of this Agreement, the Employer
shall furnish for the benefit of the Executive the following:
(A) Automobile - Employer shall furnish to the Executive a
mutually acceptable automobile. The cost of maintenance, fuel,
insurance and upkeep to be borne by the Employer.
(B) Life Insurance - The Employer shall provide for the
Executive term life insurance as presently exists or like coverage
under any subsequent plan which may replace the current plan, with the
beneficiary to be designated by the Executive.
(C) Health Insurance - The Employer shall provide for the
Executive and his dependents major medical health insurance coverage
through such insurance provider as the Employer may choose.
(D) Long-Term Disability - The Employer shall provide for the
Executive a long-term disability insurance policy for benefits of at
least 60% of the Executive's Base Salary.
(E) Club Dues - The Employer shall pay the monthly Club dues
for three (3) organizations and business related charges during the
Executive's employment with the Employer. The Employer will also
provide the Executive with membership in other civic, service and
professional organizations.
(F) Other Expenses - The Employer shall reimburse the
Executive for reasonable expenses incurred in promoting the business of
the Employer, and continuing his banking or professional education
including expenses for attending bank meetings, conventions and
seminars, and other reasonable expenses incurred for continuing
education, business entertainment, and travel.
(G) Vacation - The Executive shall be entitled to four (4)
weeks paid vacation or such period as may be provided by the Board or
the Employer's Personnel Policy and he shall also be entitled to
vacation days on all official holidays observed by the Bank.
4. CHANGE IN CONTROL
For the purposes of this Section 4, the term "change in
control" shall mean the first to occur of any of the following:
(A) The effective date of any transaction or series
of transactions (other than a transaction to which only the
Company and one or more of its subsidiaries or its parent
holding company, if any, are parties) pursuant to which the
Company becomes a subsidiary of a bank holding company, or
substantially all of the assets of the Company are sold to or
acquired by a person, corporation, or group of associated
5
<PAGE> 6
persons acting in concert who are not members of the present
Board of Directors of the Company; or
(B) The date upon which any person, corporation, or
group of associated persons acting in concert becomes a direct
or indirect beneficial owner of shares of stock of the Company
representing an aggregate of more than twenty-five percent
(25%) of the votes then entitled to be cast at an election of
Directors of the Company; or
(C) The date upon which the persons who were members
of the Board of Directors of the Company as of the date of
this Agreement (the "Original Directors") cease to constitute
a majority of the Board of Directors; provided, however, that
any new director whose nomination or selection has been
approved by the unanimous affirmative vote of the Original
Directors then in office shall also be deemed an Original
Director.
If, during the three-year period immediately following a
"change in control" of the Company, as defined in this Section 4, the
Executive's employment with the Employer is terminated either; (a) by the
Company for no reason or for any reason other than "for cause" as defined in
Section 2.1(D)(i); (b) by the Executive as a result of and within thirty (30)
days following; (i) a reduction in his rate of regular compensation from the
Employer to an amount below the rate of his regular compensation as in effect
immediately prior to the change in control; or (ii) a requirement that the
Executive relocate to a county other than Richmond, Columbia and McDuffie County
in which he was employed immediately prior to the change in control; or (iii) a
reduction in the Executive's duties, title, and/or responsibilities, as were
previously set prior to the change in control, then the Employer shall pay the
Executive an amount equal to two (2) times his Base Salary, as defined in
Section 3.1, as in effect immediately prior to the change in control, plus an
amount representing the "in-the-money" portion (defined as the excess, if any,
of the fair market value of the common stock underlying the Executive's stock
options minus the option price) of any unexercised stock options, whether or not
then exercisable, granted to the Executive; or (c) by the Executive for no
reason, then the Employer shall pay the Executive an amount equal to his Base
Salary, as then in effect, plus the in-the-money portion of any unexercised
stock options whether or not then exercisable. Such compensation shall be paid
in a lump sum within thirty (30) days after such termination.
(D) Notwithstanding anything to the contrary set
forth in this Section 4, "change in control" shall not include
any sale of common stock by the Company in connection with the
proposed expansion of the Bank's business into Columbia and
Richmond Counties.
5. POST TERMINATION COVENANTS - Executive agrees that for a
period of twelve (12) months after leaving the employment of the Employer,
except a provided in Paragraph 2.1 of this Agreement or a termination of this
Agreement as provided in Paragraph 5(ii) of this Agreement, he will adhere to
the following:
(A) Executive agrees that he will not, without the prior
written consent of the Board of Directors of the Employer, serve as an
executive officer of any bank or other financial institution in
McDuffie, Richmond, and Columbia Counties, Georgia and Aiken
6
<PAGE> 7
County, South Carolina.
(B) Executive agrees that he will not without prior written
consent of the Employer solicit directly or indirectly any business
from any of the customers of the Employer.
6. SEVERABILITY - The Employer and the Executive agree that each of
the provisions included in this Agreement is separate, distinct, and severable
from the other provisions of this Agreement, and that the invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement. Further, if
any provision of this Agreement is ruled invalid or unenforceable by a court of
competent jurisdiction because of a conflict between the provisions and any
applicable law, both parties to this Agreement will make every reasonable effort
to redraw the provision so as to make the provision consistent with the original
intent of this Agreement and consistent, valid and enforceable under such law.
7. ASSIGNMENT - Neither the Employer nor the Executive may assign nor
delegate this Agreement or any of its rights and obligations hereunder without
the prior written consent of the other party hereto.
8. AMENDMENT - This Agreement may only be amended in writing duly
executed by both parties hereto.
9. WAIVER - A waiver by either party or any breach of this Agreement
by the other party shall not be effective unless in writing, and no waiver shall
operate or be construed as a waiver of the same or another breach on a
subsequent occasion.
10. GOVERNING LAW - This Agreement shall in all respects be
interpreted, construed and governed by and in accordance with the laws of the
State of Georgia.
11. NOTICES - Any notice or other document or communication permitted
or required to be given to the Executive pursuant to the terms hereof shall be
deemed given if personally delivered to the Executive or sent to him certified
mail at 2802 Hillcrest Avenue, Augusta, GA 30909, or any such other address as
the Executive shall have provided to the Employer in writing. Any notice or
other document or other communication permitted or required to be given to the
Employer pursuant to the terms hereof shall be deemed given if personally
delivered to the Employer or sent certified mail to 110 E. Hill Street, Thomson,
Georgia, 30824 or at such other address as the Employer shall have notified the
Executive in writing.
12. ENTIRE AGREEMENT - This Agreement embodies the entire and final
agreement of the parties on the subject matter stated in this Agreement.
7
<PAGE> 8
IN WITNESS WHEREOF, the Bank and the Executive have executed and
delivered this Agreement as of the date first shown above.
"Bank"
MCDUFFIE BANK & TRUST
By: /s/ David W. Joesbury, Sr.
-------------------------------------
Chairman
ATTEST: /s/ Heyward Horton, Jr.
------------------------------
"Company"
PINNACLE BANCSHARES, INC.
By: /s/ David W. Joesbury, Sr.
-------------------------------------
Chairman
ATTEST: /s/ Heyward Horton, Jr.
------------------------------
EXECUTIVE
/s/ Patrick G. Blanchard, Sr.
-------------------------------------
Patrick G. Blanchard, Sr.
8
<PAGE> 1
AGREEMENT
AMONG
RAY BROWN
RDB FAMILY LIMITED PARTNERSHIP
ARTHUR J. GAY, JR.
J. RANDAL HALL
GEORGE H. INMAN
JOHN W. LEE
A. MONTAGUE MILLER
AND
JULIAN W. OSBON
AS THE AUGUSTA GROUP
AND
PINNACLE BANCSHARES, INC.
FOR THE PURCHASE OF
CAPITAL STOCK OF
PINNACLE BANCSHARES, INC.
DATED AS OF OCTOBER 6, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I OFFER FOR SALE OF COMMON STOCK
1.1 Structure of Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Facilitation of Sale by Augusta Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Regulatory Approval and Proposed Purchase of Common Stock
by Augusta Group Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Restrictions on Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Escrow of Subscription Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Issue Price of the Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF PINNACLE
2.1 Due Incorporation and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Outstanding Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Options or Other Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4 Title to Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 Authority of Pinnacle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE AUGUSTA GROUP
3.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Assistance in Making Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE IV APPOINTMENT OF DIRECTORS AND OFFICERS
4.1 Regulatory Approval for Appointment of Directors . . . . . . . . . . . . . . . . . . . . . . . 4
4.2 Appointment of Certain Directors to be Named By the Augusta Group . . . . . . . . . . . . . . . 4
4.3 Appointment of David W. Joesbury, Sr. as Chairman of Pinnacle's Board . . . . . . . . . . . . . 5
4.4 Appointment of Joseph D. Greene, Sr. to Pinnacle's Board . . . . . . . . . . . . . . . . . . . 5
4.5 Selection of Executive Committee Members . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.6 Selection of Chairman of Bank's Board of Directors . . . . . . . . . . . . . . . . . . . . . . 6
4.7 Information Regarding the Augusta Group Director Nominees . . . . . . . . . . . . . . . . . . . 7
4.8 Selection of President and CEO of Pinnacle . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.9 Selection of President and CEO of the Bank . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE V CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES
5.1 Compliance with Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.2 Regulatory Approvals and Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.3 Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.4 Pinnacle Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE VI MISCELLANEOUS
6.1 Repurchase of the A.H. Dallas Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.2 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.4 Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.5 Standard for Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.6 Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.8 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.9 Waivers and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.10 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.11 Rights of Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.12 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.13 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.14 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.15 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.16 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
LIST OF SCHEDULES
Schedule 2.2 - Outstanding Capital Stock
Schedule 2.3 - Options or Other Rights
LIST OF EXHIBITS
Exhibit A - Director Resignation Agreement
Exhibit B - Employment Agreement with Patrick G. Blanchard, Sr.
(ii)
<PAGE> 4
AGREEMENT
THIS AGREEMENT (the "Agreement") dated as of the 6th day of October,
1997, is made and entered into among RAY BROWN, RDB FAMILY LIMITED PARTNERSHIP,
ARTHUR J. GAY, JR., J. RANDAL HALL, GEORGE H. INMAN, JOHN W. LEE, A. MONTAGUE
MILLER, and JULIAN W. OSBON (collectively, the "Augusta Group"), and PINNACLE
BANCSHARES, INC. ("Pinnacle").
W I T N E S S E T H :
WHEREAS, Pinnacle is a bank holding company owning one hundred percent
(100%) of the issued and outstanding common stock of McDuffie Bank & Trust, a
Georgia state bank (the "Bank"), Pinnacle's sole subsidiary; and
WHEREAS, Pinnacle will authorize, subject to shareholder approval, the
sale and issuance in a public offering primarily to purchasers in Columbia and
Richmond County, Georgia of a number of shares of Pinnacle's Common Stock (the
"Offering"), $.001 par value (the "Common Stock") to be determined after
consultation with a reputable investment banking firm, such Common Stock having
a minimum value of $7,000,000;
WHEREAS, each member of the Augusta Group desires to purchase Common
Stock in the Offering, subject to review of a prospectus, having a minimum
purchase price of $50,000 (giving effect to the purchase of the A.H. Dallas
stock), the aggregate minimum purchase price of all members of the Augusta
Group being $700,000 (subject to adjustment as set forth in this Agreement);
and
WHEREAS, the Augusta Group desires to have certain persons represent its
interests on the Boards of Directors of Pinnacle and the Bank;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements contained in this Agreement and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto covenant and agree as follows:
ARTICLE I
OFFER FOR SALE OF COMMON STOCK
1.1 Structure of Offering. Pinnacle shall offer for sale in the
Offering an amount of the Common Stock having a minimum value of $7,000,000
(the "Minimum Offering Amount"). All shares sold in the Offering shall be sold
pursuant to a Registration Statement to be filed by Pinnacle as soon as
practicable after the date of this Agreement with the Securities and Exchange
Commission.
1.2 Facilitation of Sale by Augusta Group. Certain members of the
Augusta Group shall use their best efforts to facilitate within the boundaries
of applicable state and federal securities laws, the sale of the Common Stock
in the Offering to individuals, partnerships, corporations or other entities
not already owners of the Common Stock primarily residing or
<PAGE> 5
located in Columbia County, Georgia and Richmond County, Georgia. Pinnacle
shall pay no compensation to the Augusta Group for such services.
Notwithstanding the foregoing, existing shareholders of Pinnacle may purchase
shares in the Offering subject to Section 1.4, below.
1.3 Regulatory Approval and Proposed Purchase of Common Stock by
Augusta Group Members. The Augusta Group shall file all necessary applications
and make such other filings with the appropriate state and federal bank
regulatory agencies as are necessary to approve the purchase of Common Stock in
the Offering by the Augusta Group and each of the members thereof, and shall
present proof of such regulatory approval(s) to Pinnacle. Upon Pinnacle's
satisfaction that all necessary regulatory approval(s) have been obtained, and
subject to review by the Augusta Group members of a prospectus, the Augusta
Group shall purchase Common Stock in the Offering having an aggregate value
greater than or equal to $700,000, each Augusta Group member agreeing to
purchase, subject to the foregoing, Common Stock having a value of not less
than $50,000; provided however, that the dollar amount of Common Stock to be
purchased by the Augusta Group may be reduced once the issue price has been
established pursuant to Section 1.6 in order to comply with the 5% restriction
in Section 1.4. The purchase price paid by subscribers, including the Augusta
Group, shall be held in escrow pursuant to Section 1.5.
1.4 Restrictions on Sale. All subscriptions for purchase of the
Common Stock shall be subject to acceptance by Pinnacle, with Pinnacle having
the exclusive and unqualified right to reject or reduce any subscription for
any reason prior to acceptance. In addition, no subscriber for shares in the
Offering shall be permitted to buy an amount of the Common Stock which is, or
will cause such person's holdings of the Common Stock to be, greater than 5% of
the outstanding Common Stock of Pinnacle as of the Expiration Date (defined
below). The offer to accept subscriptions for purchase of the Common Stock in
the Public Offering shall expire at 5:00 p.m. Eastern Time, on June 30, 1998
(the "Expiration Date"), subject to the right of Pinnacle to extend such date.
If, as of the Expiration Date, less than the Minimum Offering Amount of Common
Stock offered for sale has been subscribed for in subscriptions received and
accepted by Pinnacle prior to the Expiration Date, Pinnacle shall have the
unqualified right to cancel the Offering and terminate this Agreement.
1.5 Escrow of Subscription Funds. All subscription funds tendered
in the Offering, including subscription funds received from the Augusta Group,
if any, shall be deposited in an escrow account (the "Subscription Escrow
Account") maintained at the Bank. If the minimum subscription amount of
$7,000,000 is attained on or before the Expiration Date, the escrow agent
having control over the Subscription Escrow Account (the "Escrow Agent") shall
release all subscription funds to Pinnacle. In the event the minimum offering
of $7,000,000 is not attained by the Expiration Date and Pinnacle elects to
terminate the Offering as contemplated in this Section 1.5, the Escrow Agent
shall promptly return to the subscribers, including the Augusta Group, their
respective subscription funds. Any income earned on the investment of the
subscription funds will be retained by Pinnacle.
1.6 Issue Price of the Common Stock. The issue price per share of
the Common Stock to be offered in the Offering shall be determined by the Board
of Directors of Pinnacle upon consultation with a reputable investment banking
firm chosen by Pinnacle's Board of Directors.
2
<PAGE> 6
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PINNACLE
As an inducement to the Augusta Group to enter into this Agreement and to
consummate the transactions contemplated hereby, and with the knowledge that
the Augusta Group shall rely thereon, Pinnacle, represents and warrants to the
Augusta Group, subject to Section 6.4, the following as of the date of this
Agreement:
2.1 Due Incorporation and Qualification. Pinnacle is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Georgia, and has the corporate power and lawful authority to own and
operate its properties and assets, to carry on its business as now being
conducted, and to execute and deliver this Agreement and to perform the terms
hereof. Pinnacle has taken all corporate action necessary to authorize the
execution and delivery of this Agreement.
2.2 Outstanding Capital Stock. The title, par value, number of
authorized shares and number of issued and outstanding shares of each class of
capital stock of Pinnacle are set forth on Schedule 2.2 annexed hereto. No
other class of capital stock of Pinnacle is authorized or outstanding. All of
the issued and outstanding shares of the Common Stock are duly authorized and
are validly issued, fully paid and non-assessable from all taxes, liens and
charges with respect to the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously with such issue).
2.3 Options or Other Rights. Except as provided in Pinnacle's
Schedule 2.3, There is no outstanding right, subscription, warrant, conversion
right, call, unsatisfied preemptive right, commitment, option or other
agreement or right of any kind pursuant to which any person or entity has the
right or option to purchase or otherwise to receive from Pinnacle any shares of
the Common Stock or any other security of Pinnacle and there is no outstanding
security of any kind convertible into or redeemable or exchangeable for any
shares of the Common Stock of Pinnacle.
2.4 Title to Common Stock. Pinnacle has full power and authority to
convey free and clear of all liens, encumbrances, equities, restrictions,
claims and obligations of every kind, all of the shares of the Common Stock
contemplated to be issued in the Offering and, upon delivery of and payment for
such Common Stock as herein provided, all subscribers therefor will acquire
good and marketable title thereto, free and clear of all liens, encumbrances,
equities, restrictions, claims and obligations of every kind.
2.5 Authority of Pinnacle. Pinnacle has full power and legal
capacity to execute and deliver this Agreement and the other agreements
required to be executed and delivered by Pinnacle hereunder and, subject to the
receipt of approvals, if any, required under applicable banking regulation, to
carry out the transactions contemplated hereby.
3
<PAGE> 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE AUGUSTA GROUP
As an inducement to Pinnacle to enter into this Agreement and to
consummate the transactions contemplated hereby, and with the knowledge that
Pinnacle shall rely thereon, the members of the Augusta Group, jointly and
severally, represent and warrant to Pinnacle the following:
3.1 Authorization. This Agreement when executed and delivered by
the Augusta Group will constitute a valid and legally binding obligation of the
Augusta Group and each of them, enforceable in accordance with its terms,
subject to (i) laws of general application relating to bankruptcy, insolvency,
and relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief, and other equitable remedies.
3.2 Assistance in Making Offering. The Augusta Group shall use its
best efforts to assist Pinnacle in locating primarily in Columbia County and
Richmond County, Georgia, individuals, partnerships, corporations, or other
entities not already owners of any of the Common Stock of Pinnacle and
satisfactory to Pinnacle, to facilitate the sale of subscriptions for the
Common Stock in the Public Offering to the extent necessary to sell the Minimum
Offering Amount.
ARTICLE IV
APPOINTMENT OF DIRECTORS AND OFFICERS
4.1 Regulatory Approval for Appointment of Directors. The Augusta
Group shall file all necessary applications and make such other filings with
the appropriate state and federal bank regulatory agencies as are necessary to
approve the appointments of the members of the Pinnacle Board of Directors and
Bank Board of Directors contemplated in this Article IV. Prior to the
appointment of any proposed Augusta Group Director or Augusta Group Bank
Director (as defined in Section 4.2), Pinnacle shall have received proof of
such regulatory approval(s). The failure of the Augusta Group to obtain the
requisite regulatory approvals shall relieve Pinnacle of any of its obligations
under this Article IV.
4.2 Appointment of Certain Directors to be Named By the Augusta
Group.
(a) Pinnacle shall as promptly as practicable following
the execution of this Agreement by the parties hereto and the receipt of all
necessary regulatory approvals, as provided in Section 4.1, undertake to call
a special meeting of the Board of Directors of Pinnacle, at which meeting the
Board of Directors of Pinnacle shall take all such action necessary to increase
the number of members of the Pinnacle's Board of Directors from nine (9) to
sixteen (16) members and shall cause eight (8) persons designated by the
Augusta Group willing so to serve, reasonably satisfactory to Pinnacle and
approved, if necessary, by the Department of Banking and Finance and the
Federal Reserve Bank of Atlanta ("the Augusta Group Directors") to be appointed
as directors of Pinnacle. As a condition to such appointment, each Augusta
Group Director and any approved substitute therefor shall sign a self-executing
resignation having substantially the terms and form as that set forth in
Exhibit "A" (a
4
<PAGE> 8
"Director's Resignation"). Subject to a reduction inthe number of the Augusta
Group Directors pursuant to the terms of subparagraph (c) of this Section 4.2,
at the first annual meeting of the Shareholders of Pinnacle subsequent to the
sale of the Minimum Offering Amount, Pinnacle shall take all corporate action
necessary to, and shall, renominate each of the Augusta Group Directors, or any
person or persons substituted therefor by the Augusta Group, reasonably
satisfactory to Pinnacle and approved, if necessary, by the Department of
Banking and Finance and the Federal Reserve Bank of Atlanta, and shall
recommend that the Pinnacle's stockholders vote for the election of such
individuals as directors.
(b) Pinnacle shall as promptly as practicable following
the execution of this Agreement by the parties hereto and the receipt of all
necessary regulatory approvals, as provided in Section 4.1, cause to be called
a special meeting of the shareholders of the Bank, at which meeting Pinnacle,
as sole shareholder of the Bank, shall resolve and vote its shares of the Bank
("Pinnacle's Bank Shares") to amend the Bylaws of the Bank to increase the size
of the Bank's Board of Directors from nine (9) members to eighteen (18) members
and shall take such other and further action as is necessary to cause nine (9)
persons designated by the Augusta Group and willing so to serve, reasonably
satisfactory to Pinnacle and approved, if necessary, by the Department of
Banking and Finance and the Federal Deposit Insurance Corporation ("Augusta
Group Bank Directors") to be appointed as directors of the Bank. As a
condition to such appointment, each Augusta Group Bank Director and any
approved substitute therefor shall sign a self-executing resignation having
substantially the terms and form as that set forth in Exhibit B (a "Director's
Resignation"). Subject to a reduction in the numbers of Augusta Group Bank
Directors pursuant to the terms of subparagraph (c) of this Section 4.2, at the
first annual meeting of shareholders of the Bank subsequent to the sale of the
Minimum Offering Amount, Pinnacle shall cause the Augusta Group Bank Directors
or any person or persons substituted therefor by the Augusta Group, reasonably
satisfactory to Pinnacle and approved, if necessary, by the Department of
Banking and Finance and the Federal Deposit Insurance Corporation, to be
renominated and shall vote Pinnacle's Bank Shares for the election of such
individuals as members of the Bank's Board of Directors for a term of one year.
(c) The number of the Augusta Group Directors and the
Augusta Group Bank Directors appointed to Pinnacle's Board of Directors and the
Bank's Board of Directors, respectively, pursuant to subparagraphs (a) and (b)
of this Section, shall be automatically reduced on the Expiration Date if, on
the Expiration Date, the Minimum Offering Amount of the Common Stock has not
been sold in the Offering. Upon the occurrence of the foregoing, all of the
Augusta Group Directors and the Augusta Group Bank Directors shall
automatically resign, effective at 12:01 a.m. on the Expiration Date, from
Pinnacle's Board of Directors and the Bank's Board of Directors, respectively,
pursuant to the terms of the Director's Resignation executed by each of them.
4.3 Appointment of David W. Joesbury, Sr. as Chairman of Pinnacle's
Board. Pinnacle shall as promptly as practicable following the execution of
this Agreement by the parties hereto and the receipt of all necessary
regulatory approvals, as provided in Section 4.1, appoint David W. Joesbury,
Sr. as Chairman of Pinnacle's Board of Directors.
4.4 Appointment of Joseph D. Greene, Sr. to Pinnacle's Board.
Pinnacle shall as promptly as practicable following the execution of this
Agreement by the parties hereto and the receipt of all necessary regulatory
approvals, as provided in Section 4.1, take such action as is
5
<PAGE> 9
necessary to cause Joseph D. Greene, Sr. to be appointed, as a representative
of the Bank, to Pinnacle's Board of Directors.
4.5 Selection of Executive Committee Members. Pinnacle shall as
promptly as practicable following the execution of this Agreement by the
parties hereto and the receipt of all necessary regulatory approvals, as
provided in Section 4.1, take such action as is necessary to cause Pinnacle's
Executive Committee and the Bank's Executive Committee to have the following
composition and to have the respective members of each elected in the following
manner:
(a) Pinnacle's Executive Committee shall be comprised of four
(4) members. Pinnacle shall independently select two (2)
members from Pinnacle's Board of Directors to fill two (2)
seats on Pinnacle's Executive Committee and the Augusta
Group shall independently select two (2) members from
Pinnacle's Board of Directors to fill the two (2) remaining
seats on Pinnacle's Executive Committee. Patrick G.
Blanchard, Sr. and Heyward Horton, Jr. shall serve as ex
officio, non-voting members of Pinnacle's Executive
Committee. Pinnacle's Executive Committee members so
chosen shall serve until Pinnacle's 1998 Annual Meeting of
Shareholders after which time the members of Pinnacle's
Executive Committee shall be elected by the members of
Pinnacle's Board of Directors.
(b) The Bank's Executive Committee shall be comprised of four
(4) members. The Augusta Group shall independently select
from the Bank's Board of Directors two (2) persons to sit
on the Bank's Executive Committee and Pinnacle shall
independently select from the Bank's Board of Directors two
(2) persons to sit on the Bank's Executive Committee.
Patrick G. Blanchard, Sr. and Heyward Horton, Jr. shall
serve as ex officio, non-voting members of the Bank's
Executive Committee. The Bank's Executive Committee
members so chosen shall serve until the Bank's 1998 Annual
Meeting of Shareholders after which time the members of the
Bank's Executive Committee shall be elected by the members
of the Bank's Board of Directors.
(c) Pursuant to Section 4.2(c) of this Agreement, if the
Minimum Offering Amount is not subscribed for prior to the
Expiration Date, all of the Augusta Group Executive
Committee members shall resign from their respective
positions on Pinnacles' Executive Committee and the Bank's
Executive Committee and Pinnacle shall be under no further
or continuing obligation to maintain the size or
composition of the Executive Committees as described in
subparagraphs (a) and (b) of this Section.
4.6 Selection of Chairman of Bank's Board of Directors. Pinnacle
shall as promptly as practicable following the execution of this Agreement by
the parties hereto and the receipt of all
6
<PAGE> 10
necessary regulatory approvals, as provided in Section 4.1, cause John W. Lee
to be appointed as Chairman of the Bank's Board of Directors.
4.7 Information Regarding the Augusta Group Director Nominees. The
Augusta Group shall hereby provide to Pinnacle not later than November 1, 1997
such biographical and financial information respecting each of the Augusta
Group's proposed nominees to the boards of directors of Pinnacle and the Bank,
as provided for in this Article IV, as is required to be disclosed to the
Georgia Department of Banking and Finance and the Federal Reserve Bank of
Atlanta.
4.8 Selection of President and CEO of Pinnacle. Pinnacle shall as
promptly as practicable following the execution of this Agreement by the
parties hereto cause Patrick G. Blanchard, Sr. to be appointed as the President
and Chief Executive Officer of Pinnacle, which position shall report to and be
under the direct supervision of the Executive Committee of Pinnacle, and to
enter into an employment agreement with Pinnacle in substantially the form and
upon the terms as set forth in Exhibit B hereto.
4.9 Selection of President and CEO of the Bank. Pinnacle shall as
promptly as practicable following the execution of this Agreement by the
parties hereto cause Heyward Horton, Jr. to be appointed as the President and
Chief Executive Officer of the Bank which position shall report to and be under
the direct supervision of the Executive Committee of the Bank.
ARTICLE V
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES
5.1 Compliance with Securities Laws. Pinnacle shall not be under
any obligation to complete the transactions contemplated under this Agreement
unless and until Pinnacle shall have satisfied all requirements under any
federal or state securities laws necessary for the offer and sale of the Common
Stock in the Offering.
5.2 Regulatory Approvals and Filings. Pinnacle shall not be under
any obligation to complete the transactions contemplated under this Agreement
unless and until Pinnacle or the Augusta Group (as set forth in Section 4.1)
shall have made all filings and registrations with and obtained all approvals
from all federal and state bank regulatory agencies respecting the transactions
contemplated herein which approvals shall be in full force and effect and all
waiting periods required by law shall have expired. In addition, if Pinnacle
or the Augusta Group shall have received notification from any state or federal
bank regulatory agency which in the reasonable judgment of Pinnacle is
materially adverse to the transactions contemplated herein and which requires
Pinnacle to undertake to make any filing or to take other measures which are
unduly onerous to Pinnacle, Pinnacle shall not be under any obligation to
complete that transaction contemplated by this Agreement.
5.3 Fairness Opinion. Pinnacle shall have received a fairness
opinion satisfactory to Pinnacle from The Robinson-Humphrey Company, Inc. that
the price of the Common Stock to be sold in the Offering is fair from a
financial point-of-view to the shareholders of Pinnacle existing prior to the
Offering.
7
<PAGE> 11
5.4 Pinnacle Shareholder Approval. The Offering of the Common Stock
contemplated herein is subject to the approval of the shareholders of Pinnacle
which approval shall be sought at a Special Meeting of Pinnacle Shareholders to
be held as soon as practicable following the execution of this Agreement. The
failure of the Pinnacle shareholders entitled to vote at the Special Meeting to
approve the issuance of the Common Stock in the Offering shall terminate this
Agreement without further action on the part of Pinnacle or the Augusta Group
and shall release the parties hereto from all of their respective rights and
obligations hereunder.
ARTICLE VI
MISCELLANEOUS
6.1 Repurchase of the A.H. Dallas Stock. In the event that this
Agreement is terminated pursuant to Section 1.4 or a failure to satisfy the
conditions set forth in Article II of this Agreement, then within thirty (30)
days from such termination of this Agreement, Pinnacle shall purchase 51,058
shares of Pinnacle's Common Stock which the Augusta Group acquired on June 13,
1997, from Albert H. Dallas, Albert H. Dallas Pension and Profit Sharing Plans
and Trusts, Susan J. Dallas, Susan J. Dallas Nominee, Susan J. Dallas Custodian
for Albert H. Dallas, III and Susan J. Dallas Custodian for Susan Joy Dallas,
for the same price as the Augusta Group paid for such shares.
6.2 Survival of Representations and Warranties. All of the
representations and warranties of Pinnacle and the Augusta Group contained in
this Agreement shall survive the termination of this Agreement or the sale of
the Minimum Offering Amount, which ever is the first to occur, for the period
permitted under applicable law.
6.3 Publicity. Except as otherwise required by law or applicable
stock exchange rules, none of the parties hereto shall issue any press release
or make any other public statement, in each case relating to or in connection
with or arising out of this Agreement or the matters contained herein, without
obtaining the prior written approval of all parties hereto as to the contents
and manner of presentation and publication thereof.
6.4 Knowledge. Where any representation or warranty contained in
this Agreement is expressly qualified by reference to the knowledge,
information or belief of the party or parties making such representation or
warranty, each of the representing or warranting parties confirms that he has
made due and diligent inquiry as to the matters that are the subject of such
representations and warranties.
6.5 Standard for Representations and Warranties. No representation
or warranty of Pinnacle or the Augusta Group contained in this Agreement shall
be deemed untrue or incorrect, and no party hereto shall be deemed to have
breached a representation or warranty as a consequence of the existence of any
fact, circumstance or event, individually or taken together with all other
facts, circumstances or events inconsistent with any representation or warranty
made in Article II by Pinnacle or Article III by the Augusta Group of this
Agreement, unless such inconsistent fact, circumstance, or event has had or is
expected to have a material adverse effect on the other party.
6.6 Gender. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the identity of the
person or persons may require.
8
<PAGE> 12
6.7 Expenses. The Augusta Group and Pinnacle shall pay their own
respective expenses, including the fees and disbursements of their respective
counsel in connection with the negotiation, preparation and execution of this
Agreement and the consummation of the transactions contemplated hereby;
provided, however, that if the transactions contemplated by this Agreement are
not completed as a consequence of the withdrawal of either party to this
Agreement otherwise than as expressly provided for herein or due to any other
intentional act in material contravention of this Agreement by either of the
parties hereto, such withdrawing or intentionally acting party (the "Breaching
Party") shall reimburse the other party (the "Nonbreaching Party") for all
expenses incurred by the Nonbreaching Party with respect to the transactions
contemplated by this Agreement, including the preparation of this Agreement and
all ancillary documents thereto and the enforcement of this provision.
6.8 Entire Agreement. This Agreement, including all schedules and
exhibits hereto, constitutes the entire agreement of the parties with respect
to the subject matter hereof, supersedes all prior agreements, negotiations or
letters of intent, and may not be modified, amended or terminated except by a
written instrument specifically referring to this Agreement signed by each of
the parties hereto.
6.9 Waivers and Consents. All waivers and consents given hereunder
shall be in writing. No waiver by any party hereto of any breach or
anticipated breach of any provision hereof by any other party shall be deemed a
waiver of any other contemporaneous, preceding or succeeding breach or
anticipated breach, whether or not similar, on the part of the same or any
other party.
6.10 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been given only if and when (i)
personally delivered or (ii) three (3) business days after mailing, postage
prepaid, by certified mail or (iii) when delivered (as evidenced by a receipt)
by a nationally recognized overnight delivery service, addressed in each case
as follows:
(a) If to the Pinnacle to:
McDuffie Bank & Trust
110 East Hill Street
Thomson, Georgia 30824
Telecopy Number: 706-595-2074
Attention: Heyward Horton, Jr.
copy to counsel:
Smith, Gambrell & Russell, LLP
1230 Peachtree Street, NE
Suite 3100, Promenade II
Atlanta, Georgia 30309-3592
Telecopy Number: 404-815-3509
Attention: Robert C. Schwartz
9
<PAGE> 13
(b) If to the Augusta Group to:
Ray Brown
RDB Family Limited Partnership
410 Carolina Springs Road
North Augusta, South Carolina 29841
Arthur J. Gay, Jr.
3643 Pebble Beach Drive
Augusta, Georgia 30907
J. Randal Hall
1202 First Union Bank Building
699 Broad Street
Augusta, Georgia 30901
George H. Inman
P.O. Box 204658
Augusta, Georgia 30917
John W. Lee
807 Carriage Court
Augusta, Georgia 30909
A. Montague Miller
4384 Deer Run
Evans, Georgia 30809
Julian W. Osbon
P.O. Box 1447
Augusta, Georgia 30903
Each party may change its address for the giving of notices and communications
to it, and/or copies thereof, by written notice to the other parties in
conformity with the foregoing.
6.11 Rights of Third Parties. All conditions of the obligations of
the parties hereto, and all undertakings herein, are solely and exclusively for
the benefit of the parties hereto and their respective successors,
representatives and permitted assigns, and no other person or entity shall have
standing to require satisfaction of such conditions or to enforce such
undertakings in accordance with their terms, or be entitled to assume that any
party hereto will refuse to consummate the purchase and sale contemplated
hereby in the absence of strict compliance with any or all thereof, and no
other person or entity shall, under any circumstances, be deemed a beneficiary
of such conditions or undertakings, any or all of which may be freely waived in
whole or in part, by mutual consent of the parties hereto at any time, if in
their sole discretion they deem it desirable to do so.
6.12 Headings. The Table of Contents and Article and Section
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
10
<PAGE> 14
6.13 Governing Law. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the internal
laws of the State of Georgia.
6.14 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by the Augusta Group or any one of them,
other than by operation of law or with the consent of Pinnacle. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective heirs, executors, administrators, successors and permitted
assigns.
6.15 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
6.16 Severability. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
11
<PAGE> 15
IN WITNESS WHEREOF, the parties have executed this agreement under seal
as of the date first above written.
PINNACLE BANCSHARES, INC.
By: /s/ David W. Joesbury, Sr.
-----------------------------
Name: /s/ David W. Joesbury, Sr.
-----------------------------
Title: Chairman
-----------------------------
Attest: /s/ Heyward Horton, Jr.
-----------------------------
Title: President
-----------------------------
[CORPORATE SEAL]
<TABLE>
<CAPTION>
AUGUSTA GROUP MEMBERS:
<S> <C>
/s/ Sharon L. Key /s/ Ray Brown
- ------------------------------------------- --------------------------------------------------
Witness Ray Brown
RDB Family Limited Partnership
/s/ Sharon L. Key By: /s/ R.D. Brown
- ------------------------------------------- --------------------------------------------------
Witness General Partner
/s/ Karon B. Clark /s/ Arthur J. Gay, Jr.
- ------------------------------------------- --------------------------------------------------
Witness Arthur J. Gay, Jr.
/s/ Karon B. Clark /s/ J. Randal Hall
- ------------------------------------------- --------------------------------------------------
Witness J. Randal Hall
/s/ John W. Lee /s/ George H. Inman
- ------------------------------------------- --------------------------------------------------
Witness George H. Inman
/s/ Sharon L. Key /s/ John W. Lee
- ------------------------------------------- --------------------------------------------------
Witness John W. Lee
/s/ John W. Lee /s/ A. Montague Miller
- ------------------------------------------- --------------------------------------------------
Witness A. Montague Miller
/s/ John W. Lee /s/ Julian W. Osbon
- ------------------------------------------- --------------------------------------------------
Witness Julian W. Osbon
</TABLE>
<PAGE> 16
SCHEDULE 2.2
STOCKHOLDERS' EQUITY
June 30, 1997
<TABLE>
<S> <C>
Preferred Stock, $.001 par value per share; $ 0
1,000,000 shares authorized,
no shares issued and outstanding
Common Stock, $.001 par value per share; $ 635
9,000,000 shares authorized,
635,380 shares issued and outstanding
Paid-in Capital $ 7,160,544
-----------
Total Capital $ 7,161,179
===========
</TABLE>
<PAGE> 17
SCHEDULE 2.3
PINNACLE BANCSHARES, INC.
1997 STOCK OPTION PLAN
<TABLE>
<S> <C> <C>
1. Authorized number of shares . . . . . . . . . . . . . . . . . . . . . . 100,000
2. Number of shares under option . . . . . . . . . . . . . . . . . . . . . 8,500
3. Book Value as of June 4, 1997 . . . . . . . . . . . . . . . . . . . . . $ 11.00
4. Approved Options:*
</TABLE>
Heyward Horton, Jr., 5,000 shares @ $12.10 per share, ten year option
J. Harold Ward, Jr., 2,500 shares @ $12.10 per share, ten year option
Joseph E. Gore, 1,000 shares @ $12.10 per share, ten year option
TOTAL APPROVED INCENTIVE STOCK OPTIONS: 8,500 SHARES
* For the purposes of determining the Fair Market Value of shares, a
factor of 110% has been applied to the Book Value of the
Corporation's stock as of the date of grant.
OTHER OPTIONS
Options to acquire 16,000 shares at various prices held by Prime Group, Inc.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 30, 1997 10-QSB FINANCIAL STATEMENTS OF PINNACLE BANCSHARES, INC. AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 1,132
<INT-BEARING-DEPOSITS> 199
<FED-FUNDS-SOLD> 5,080
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 11,219
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 18,770
<ALLOWANCE> 883
<TOTAL-ASSETS> 38,077
<DEPOSITS> 30,551
<SHORT-TERM> 0
<LIABILITIES-OTHER> 334
<LONG-TERM> 0
0
0
<COMMON> 1
<OTHER-SE> 7,191
<TOTAL-LIABILITIES-AND-EQUITY> 38,077
<INTEREST-LOAN> 1,513
<INTEREST-INVEST> 676
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 2,189
<INTEREST-DEPOSIT> 895
<INTEREST-EXPENSE> 897
<INTEREST-INCOME-NET> 1,292
<LOAN-LOSSES> 15
<SECURITIES-GAINS> 2
<EXPENSE-OTHER> 1,176
<INCOME-PRETAX> 349
<INCOME-PRE-EXTRAORDINARY> 349
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 205
<EPS-PRIMARY> .32
<EPS-DILUTED> .32
<YIELD-ACTUAL> 6.37
<LOANS-NON> 50
<LOANS-PAST> 1
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 889
<CHARGE-OFFS> 118
<RECOVERIES> 97
<ALLOWANCE-CLOSE> 883
<ALLOWANCE-DOMESTIC> 883
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
