As filed with the Securities and Exchange Commission on
March 4, 1998 Registration No. ________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
SOUTHERN HERITAGE BANCORP, INC.
(Name of Small Business Issuer in its Charter)
GEORGIA 6712 58-2352014
(State or other juris- (Primary Standard I.R.S. Employer
diction of incorporation Industrial Classifi- Identification
or organization cation Code Number) No.)
3461 Atlanta Highway
Flowery Branch, Georgia 30542
(770) 532-4537
_________________________________________________________________
(Address and telephone number of principal executive offices
including zip code)
3461 Atlanta Highway
Flowery Branch, Georgia 30542
(770) 532-4537
________________________________________
(Address of principal place of business or
intended principal place of business)
Copy to:
Gary H. Anderson T. Treadwell Syfan
P. O. Box 907 Stewart, Melvin & Frost, LLP
Oakwood, Georgia 30566 200 Main Street
(770) 532-4537 P. O. Box 3280
Gainesville, Georgia 30503
(770) 536-0101
(Name, address and
telephone number, of
agent for service)
Approximate date of proposed sale to the public; As soon as
practicable after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
number of the earlier effective registration statement for the
same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check this following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If the delivery of the prospectus is expected to be made pursuant
to Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE:
<TABLE>
<S> <C> <C> <C> <C>
Title of Amount to Proposed Proposed Amount of
Each Class be Registered Maximum Maximum Registration
of Securities Offering Aggregate Fee
to be Price Per Offering
Registered Unit Price
Common Stock 1,000,000 $10.00 $10,000,000 $2,950.00
$5.00 par Shares
value
</TABLE>
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective date
until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
Exhibit Index on page ______ Page 1 of ______
<PAGE>
SOUTHERN HERITAGE BANCORP, INC.
CROSS-REFERENCE SHEET
Registration Statement Item Caption in Prospectus
Number and Heading
1. Front of the Registration Statement
and Outside Front Cover Page
of Prospectus....................... Cover page; Outside
Front Cover Page
of Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus................. Inside Front Cover
Page of Prospectus;
Additional
Information; Outside
Back Cover Page of
Prospectus
3. Summary Information and
Risk Factors........................ Summary; Risk Factors
4. Use of Proceeds..................... Use of Proceeds
5. Determination of Offering Price..... Risk Factors
6. Dilution............................ Not Applicable
7. Selling Security Holders............ Not Applicable
8. Plan of Distribution................ Terms of the Offering
9. Legal Proceedings................... Not Applicable
10. Directors, Executive Officers,
Promoters and Control Persons....... Management - Proposed
Directors and Officers
11. Securities Ownership of Certain
Beneficial Owners and Management.... Management - Proposed
Directors and Officers
12. Description of the Securities....... Dividends; Description
of Common Stock of the
Company; Certain
Provisions of the
Company's Articles of
Incorporation and
Bylaws
Registration Statement Item
and Heading Caption in Prospectus
13. Interests of Named Experts
and Counsel......................... Legal Matters
14. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities......................... Certain Provisions of
the Company's Articles
of Incorporation and
Bylaws-Indemnification
15. Organization Within Last
Five Years.......................... Management
16. Description of Business............. Summary; Business;
Supervision and
Regulation
17. Management's Discussion and Analysis
or Plan of Operation................ Business
18. Description of Property............. Business - Facilities
19. Certain Relationships and Related
Transactions........................ Management- Certain
Transactions
20. Market for Common Equity and
Related Stockholder Matters......... Description of Common
Stock of the Company
21. Executive Compensation.............. Management
22. Financial Statements................ Financial Statements
of Southern Heritage
Bancorp, Inc.
23. Changes in and Disagreement With
Accountants on Accounting and
Financial Disclosure................ Not Applicable
<PAGE>
PROSPECTUS
SOUTHERN HERITAGE BANCORP, INC.
A Proposed Bank Holding Company for
SOUTHERN HERITAGE BANK (In Organization)
1,000,000 Shares of Common Stock
(Par Value $5.00 Per Share)
(Minimum Purchase: 100 Shares)
This Prospectus relates to the offering by SOUTHERN HERITAGE
BANCORP, INC., a Georgia corporation (the "Company"), of a minimum
of 800,000 shares and a maximum of 1,000,000 shares of its Common
Stock, $5.00 par value per share (the "Common Stock"), at $10.00
per share. The Company has been organized to hold, upon receipt of
regulatory approvals, all of the common stock of Southern Heritage
Bank (In Organization) (the "Bank"), Oakwood, Hall County, Georgia.
The organizers (the directors) of the Company and the Bank intend
to subscribe for an aggregate of at least 86,500 shares of the
Common Stock sold in this offering (10.81% of the minimum and 8.65%
of the maximum number of shares to be sold). In the event that the
minimum number of shares in this offering are not sold, the
organizers may acquire additional shares of Common Stock, up to a
maximum aggregate number for all organizers of 400,000 shares (50%
of the minimum and 40% of the maximum number of shares to be sold).
The Company and the Bank have not conducted active business
operations. The commencement of business operations is contingent
upon various regulatory approvals by state and federal agencies and
the sale of a minimum of 800,000 shares of the Common Stock offered
hereby. All subscriptions are binding and irrevocable until the
"Expiration Date" as defined herein. In the event (a) that the
Company is unable to sell 800,000 shares of Common Stock or (b)
that the Company and the Bank do not satisfy, or do not make a
determination that they will satisfy the conditions included in
their respective regulatory approvals, the organizers of the
Company will pay all incurred expenses, and all escrowed
subscription proceeds will be returned to investors with interest.
See "THE OFFERING - Release from Escrow" - Page 7.
INVESTMENT IN THESE SECURITIES INVOLVES A SUBSTANTIAL
DEGREE OF RISK. SEE "RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
<TABLE>
<S> <C> <C> <C>
Underwriting
Price to Discounts and Proceeds to
Public(1) Commissions(2) Company(3)
Per Share $ 10.00 -0- $ 10.00
Total Minimum(4) $ 8,000,000.00 -0- $ 8,000,000.00
Total Maximum(5) $10,000,000.00 -0- $ 10,000,000.00
</TABLE>
(1) The offering price has been arbitrarily established by the
Company. See "RISK FACTORS - Offering Price."
(2) Offers and sales of the Common Stock will be made on behalf of
the Company on a best-efforts basis by its officers and
directors, who will receive no commissions or other remuneration
in connection with such activities, but they will be reimbursed
for their reasonable expenses incurred in the offering. In
reliance on Rule 3a4-1 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), the Company believes such
officers and directors will not be deemed to be brokers and/or
dealers under the Exchange Act.
(3) Before deduction of expenses payable by the Company estimated at
$35,000 for registration fees, legal and accounting fees,
printing costs and other offering expenses.
(4) Subscription proceeds will be deposited promptly in an escrow
account with The Bankers Bank, Atlanta, Georgia, pending receipt
of subscriptions for not less than 800,000 shares and completion
of certain other matters on or before ________, 1998, the
expiration date of the offering (unless the offering is
terminated sooner or extended). Subscription funds will be
released from escrow (a) upon the receipt of $8,000,000 of
subscription proceeds and (b) upon a determination by the
organizers that the remaining conditions set forth in the
preliminary approvals issued by the applicable regulatory
agencies will be satisfied. See "THE OFFERING - Terms of the
Offering." The Company will return to each subscriber, with
interest, the amount of any proceeds received in full with
respect to subscriptions that are not accepted.
(5) The Company reserves the right to issue up to 1,000,000 shares
at $10.00 per share. See "THE OFFERING - Terms of the
Offering."
The date of this Prospectus is ___________________
<PAGE>
REPORTS TO SHAREHOLDERS
The Company is not a reporting company as defined by the
Securities and Exchange Commission ("SEC"). The Company will
furnish its shareholders with annual reports containing audited
financial information for each fiscal year on or before the date of
the annual meeting of shareholders as required by Rule 80-6-1.05 of
the Georgia Department of Banking and Finance ("Department of
Banking"). The Company's fiscal year ends on December 31.
Additionally, the Company will also furnish such other reports as
it may determine to be appropriate or as otherwise may be required
by law.
Upon the effective date of the Registration Statement, the
Company will be subject to the reporting requirements of the
Securities Exchange Act of 1934 (the "Exchange Act"), which include
requirements to file annual reports on Form 10-K and quarterly
reports on Form 10-Q with the SEC. This reporting obligation will
exist for at least one year and will continue for fiscal years
thereafter, except that such reporting obligations may be suspended
for any subsequent fiscal year if at the beginning of such year the
Common Stock of the Company is held of record by less than three
hundred persons.
ADDITIONAL INFORMATION
The Company has filed with the SEC a Registration Statement
under the Securities Act of 1933, as amended, with respect to the
Common Stock offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement. For
further information with respect to the Company and the Common
Stock, reference is made to the Registration Statement and the
exhibits thereto. The Registration Statement may be examined at,
and copies of the Registration Statement may be obtained at
prescribed rates from, the Public Reference Section of the SEC,
Room 1024, 450 Fifth Street, N.W., Washington, DC 20549.
The Company and the Organizers have filed various applications
with the Federal Deposit Insurance Corporation, the Federal Reserve
Bank of Atlanta and the Department of Banking. Prospective
investors should rely only on information contained in this
Prospectus and in the Company's related Registration Statement in
making an investment decision. To the extent that other available
information not presented in this Prospectus, including information
available from the Company and information in public files and
records maintained by the Federal Deposit Insurance Corporation,
the Federal Reserve Bank of Atlanta and the Department of Banking,
is inconsistent with information presented in this Prospectus or
provides additional information, such other information is
superseded by the information presented in this Prospectus and
should not be relied on. Projections appearing in the applications
are based on assumptions that the organizers believe are
reasonable, but as to which no assurances can be made. The Company
specifically disaffirms those projections for purposes of this
Prospectus and cautions prospective investors against placing
reliance on them for purposes of making an investment decision.
SUMMARY
The following Summary is qualified in its entirety by the more
detailed information appearing elsewhere in this Prospectus.
The Company
The Company was incorporated under the laws of the State of
Georgia on February 13, 1998, primarily to serve as the holding
company for a state bank. The Company is in the process of filing
applications with the Federal Reserve Bank of Atlanta (the "Federal
Reserve") and the Department of Banking for prior approval to
become a bank holding company by using the proceeds of this
offering to acquire all of the capital stock of the Bank. The
organizers anticipate receiving such approvals during July, 1998.
Such approvals will require the Company to sell at least 800,000
shares of its Common Stock, but are not expected to contain other
material conditions. See "RISK FACTORS - Regulatory Approvals
Required." Following acquisition of the Bank, the initial business
of the Company will be conducted through the Bank. See "BUSINESS
OF THE COMPANY AND THE BANK."
The Bank
The Bank is in the process of being organized as a state-chartered bank
under Georgia law. It has filed an application with
the Department of Banking for this purpose and with the Federal
Deposit Insurance Corporation (the "FDIC") for deposit insurance,
and such applications were approved on October 31, 1998 and
____________, 1998, respectively. The Bank will not be authorized
to conduct its banking business until it receives a permit to begin
business from the Department of Banking. The issuance of the
permit to begin business will depend, among other things, upon the
Bank's receiving $8,000,000 in capital from the Company and upon
compliance with certain standard conditions that have been imposed
by the FDIC and the Department of Banking which are generally
designed to familiarize the Bank with certain applicable operating
requirements (e.g., no directors' fees are payable until the Bank
earns a cumulative profit) and to prepare the Bank to commence
business operations (e.g., the adoption of loan, investment and
other policies to govern the Bank's operations). The Bank expects
to satisfy all conditions of each requirement for organizing the
Bank and to open for business during the third quarter of 1998, or
as soon thereafter as practicable. See "RISK FACTORS - Regulatory
Approvals Required" and "USE OF PROCEEDS." The Bank intends to
engage in a general commercial banking business, emphasizing the
banking needs of individuals and small to medium-sized businesses
in its primary service area. See"USE OF PROCEEDS" and "BUSINESS OF
THE COMPANY AND THE BANK."
The philosophy of the management of the Bank with respect to its
initial operations will be to emphasize prompt and responsive
personal service to the residents of Oakwood, Georgia and the other
communities located in Hall County in order to attract customers
and acquire market share now controlled by other financial
institutions in the Bank's market area. The organizers believe
that the Bank offers the residents of Oakwood and the surrounding
areas the opportunity to have an ownership interest in a community
bank, while also receiving the benefits associated with a locally
owned and managed community bank. Through ownership in the
Company, the residents of the community will have a greater role in
the development of the Bank.
The offices of the Bank will be located at 3461 Atlanta Highway,
P. O. Box 907, Oakwood, Georgia 30566. The Company's current
principal executive office is located as follows: 3155 Frontage
Road, Oakwood, Georgia 30566 and its telephone number at that
address is (770) 535-2835 (Ext. 323).
The Offering
Security Common Stock, $5.00 par value, of
the Company
Offering Price $10.00 per share
Number of Shares Offered Minimum: 800,000
Maximum: 1,000,000
Use of Proceeds To purchase 100% of the Common Stock
of the Bank; the remaining proceeds
will be applied to working capital
and used to pay organizational
expenses of the Company and of this
offering. The Bank will use the
proceeds of this offering to pay
organizational and pre-opening
expenses; to build a building and
furnish it for the Bank's main
office; to provide working capital
to be used for business purposes,
including paying officers' and
employees' salaries, making loans
and other investments. See "USE OF
PROCEEDS."
Risk Factors
Investment in the Common Stock involves a significant degree of
risk. See "RISK FACTORS."
RISK FACTORS
Investment in the shares of the Common Stock offered hereby
involves a significant degree of risk. The shares of Common Stock
should be purchased by investors who can afford the loss of their
entire investment. In addition to considering factors set forth
elsewhere in this Prospectus, persons interested in purchasing
shares of the Common Stock should carefully consider the following
risks before making a decision to subscribe.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS
ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
Regulatory Approvals Required
The Company must receive the approval of the Federal Reserve and
the Department of Banking before it can become the holding company
of the Bank. Applications for such approvals have been filed with
such agencies and are pending. The organizers anticipate receiving
such approvals during July, 1998. Such approvals will require the
Company to sell at least 800,000 shares of its Common Stock but are
not expected to contain other material conditions.
The Bank's application to organize a new state bank and for
federal deposit insurance was filed with the Department of Banking
and the FDIC on June 16, 1997. The Department of Banking and the
FDIC issued their approvals on October 31, 1997 and ____________,
1998, respectively. Both approvals are subject to the condition
that at least $8,000,000 of capital be raised by the Company and
that such amount, net of the expenses of this offering and
organizational expenses of the Company, be invested in the Bank by
the Company. Both approvals are also subject to a number of other
standard conditions which are regularly imposed by the Department
of Banking and the FDIC which are generally designed to familiarize
the Bank with certain applicable operating requirements (e.g., no
directors' fees are payable until the Bank earns a cumulative
profit) and to prepare the Bank to commence business operations
(e.g., the adoption of loan, investment and other policies to
govern the Bank's operations).
New Enterprise
The Bank, which will be the sole subsidiary of the Company, is
in organization and has no operating history on which to base any
estimate of its future prospects. The Company's initial
profitability will depend entirely upon the Bank's operations. The
Bank's proposed operations are subject to risks inherent in the
establishment of a new business and, specifically, of a new bank.
While the Bank's pro forma financial statements project a profit by
the end of the second year of operations, unforeseen circumstances
could delay such profit. If the Bank is ultimately unsuccessful,
there is no assurance that shareholders will recover all or any
part of their investment in the Common Stock of the Company.
Competitive Industry
The banking business is highly competitive. The Bank will
compete as a financial intermediary with other commercial banks,
savings and loan associations, credit unions, finance companies,
mutual funds, insurance companies, and brokerage and investment
banking firms soliciting business from residents of Hall County,
Georgia, many of which have greater resources than will be
available to the Bank or the Company. Recent federal legislation
permits commercial banks to establish operations nationwide,
further increasing competition from out-of-state financial
institutions. Furthermore, recently enacted Georgia legislation
greatly diminishes the historical legal restrictions on
establishing branch banks across county lines in Georgia, thus
creating further opportunities for other financial institutions to
compete with the Bank. Generally, from July 1, 1996 to July 1,
1998 any bank located in Georgia may branch into any three
additional Georgia counties regardless of the location of the
parent bank. After July 1, 1998, banks may establish banks
statewide in Georgia without limitation. In addition, on-line
computer banking via the Internet or otherwise may also become an
increasing source of competition for community financial
institutions such as the Bank. There is no assurance that the Bank
will achieve the market share necessary to become profitable in the
near future. See "BUSINESS OF THE COMPANY AND THE BANK - The Bank
- - Competition and Historical Deposit Trends."
Highly Regulated Industry
The potential success or failure of the Bank will depend not
only upon competitive factors, but also upon state and federal
regulations affecting banks and bank holding companies generally.
Regulations now affecting the Company and the Bank may be changed
at any time, and there is no assurance that such changes will not
adversely affect the business of the Company and the Bank. See
"SUPERVISION AND REGULATION."
Effect of Monetary Policies
The results of operations of the Bank will be affected by credit
policies of monetary authorities, particularly the Board of
Governors of the Federal Reserve System. There can be no assurance
that the effect of actions by monetary and fiscal authorities,
including the Federal Reserve, will not have an adverse effect on
the deposit levels, loan demand or the business and earnings of the
Bank. See "SUPERVISION AND REGULATION - Monetary Policies."
Success Depends on Economic Conditions
The success of the Bank will depend largely on the general
economic conditions in the Bank's primary service area of Hall
County, Georgia. Although the Bank expects favorable economic
development in this market area, there is no assurance that
favorable economic development will occur or that the Bank's
expectation of corresponding growth will be achieved. See
"BUSINESS OF THE COMPANY AND THE BANK."
Offering Price Arbitrarily Determined
Since the Company and the Bank are in the process of being
organized, the offering price of $10.00 per share has been
determined arbitrarily by the organizers without particular
reference to historical or projected earnings, book value or other
customary criteria. The organizers did not retain an independent
investment banking firm to assist in determining the offering
price. Should a market develop for the Common Stock of the
Company, there is no assurance that any of the Common Stock offered
hereby could be resold for the offering price or any other amount.
No Dividends
Since the Company and the Bank are both start-up operations, it
will be the policy of the Board of Directors of the Company to
reinvest earnings for the period of time necessary to help ensure
the success of their operations. As a result, the Company has no
current plans to initiate the payment of cash dividends, and its
future dividend policy will depend on the Bank's earnings, capital
requirements, financial condition and other factors considered
relevant by the Board of Directors of the Company. See
"SUPERVISION AND REGULATION - Bank Regulation."
No Established Trading Market
There is no public trading market for the shares of the Common
Stock of the Company, and it is not anticipated that a market for
the shares will develop as a result of this offering. As a result,
investors who may wish or need to dispose of all or a part of their
investment in the Common Stock may not be able to do so except by
private direct negotiations with third parties assuming that third
parties are willing to purchase the Common Stock.
Dilution
Investors purchasing shares of Common Stock in this offering may
incur possible dilution of their interest in the Company to the
extent that officers, directors and key employees are issued
performance stock options and they exercise such options to
purchase common stock at a price below the market value of such
stock. See "MANAGEMENT - Stock Option Plan."
THE OFFERING
Terms of the Offering
Minimum/Maximum. The Company is offering a minimum of 800,000
shares and a maximum of 1,000,000 shares of its Common Stock for a
price of $10.00 per share, for an aggregate minimum price of
$8,000,000 and an aggregate maximum price of $10,000,000. The
minimum purchase for any investor (together with the investor's
affiliates) is 100 shares of Common Stock ($1,000) unless the
Company, in its sole discretion, accepts a subscription for a
lesser number of shares. The maximum purchase for any investor
(together with the investor's affiliates and relatives) is 80,000
shares ($800,000) of Common Stock, unless the Company, in its sole
discretion, accepts a subscription for a greater number of shares.
80,000 shares represents 10% of the minimum and 8% of the maximum
number of shares to be sold.
Organizer Subscriptions. The organizers (the directors) of the
Company intend to purchase an aggregate of 86,500 shares of Common
Stock sold in the offering (10.81% of the minimum and 8.65% of the
maximum number of shares to be sold). No organizer intends to
individually purchase more than 10% of shares sold in this
offering. In the event, however, that the minimum number of shares
in this offering are not sold, the organizers may acquire
additional shares of the Common Stock, up to a maximum aggregate
number for all organizers of 400,000 shares (50% of the minimum and
40% of the maximum number of shares to be sold).
Offering Period and Expiration Date. The offering period for
the shares will terminate at the earlier of the date all shares
offered hereby are sold or 5:00 p.m. Oakwood, Georgia time, on
________, 1998. [90 days from beginning of sale of securities]
This date may be extended at the discretion of the Company for
additional periods not exceeding an aggregate of 180 days (i.e.,
until __________, 1998). Written notice of any such extension will
be given to all persons who are already subscribers at the time of
the extension. The date on which this offering terminates plus any
extension thereof is referred to in this Prospectus as the
"Expiration Date."
Subscription. As indicated below under "How to Subscribe," upon
execution and delivery of a subscription agreement for shares of
the Common Stock, subscribers will be required to deliver to the
Company a check in the amount of $10.00 times the number of shares
subscribed. All subscriptions will be binding and irrevocable
until the Expiration Date.
Escrow. Subscription proceeds will be deposited in an escrow
account with The Bankers Bank, Atlanta, Georgia, as escrow agent
(the "Escrow Agent") for the Company pending completion of this
offering. Subscription proceeds held in the escrow account will be
invested in short-term United States Government securities or
interest bearing accounts insured by the FDIC or in such other
short-term investments as may be agreed upon by the Company and the
Escrow Agent from time to time. The Escrow Agent has not
investigated the desirability or advisability of an investment in
the Company, and has not approved, endorsed or passed upon the
merits of the Common Stock.
Company Discretion. The Company reserves the right, in its sole
discretion, to accept or reject any subscription in whole or in
part on or before the Expiration Date. Without limiting the
generality of the foregoing, the Company also reserves the right to
accept subscriptions on a prorated basis if it receives
subscriptions for more than 1,000,000 shares. The Company will
notify all subscribers no later than five business days after the
Expiration Date whether their subscriptions have been accepted.
With respect to any subscriptions which are not accepted, in whole
or in part, by the Company, the notification will be accompanied by
the unaccepted portion of the subscription funds, with interest
payable at a rate equal to the rate NationsBank, Atlanta, Georgia,
pays its passbook savings account holders (___% at _______________,
1998).
Termination. The Company reserves the right to terminate the
offering at any time after 800,000 shares have been subscribed for
if the Company determines that the total amount of subscriptions
will provide adequate capitalization for the Company after payment
of expenses.
Release from Escrow. Subscription proceeds will be released
from escrow to the Company upon the occurrence of all of the
following events: (a) the sale by the Company of at least 800,000
shares of its Common Stock, (b) receipt by the Company of approval
of the Federal Reserve and the Department of Banking to become a
bank holding company, (c) satisfaction by the Company of, or a
determination by the Company that it will satisfy, all of the
conditions that the Federal Reserve and the Department of Banking
may impose in their approvals to the Company, (d) receipt by the
Bank of approval from the Department of Banking and the FDIC of the
Bank's application to organize a new state bank and for deposit
insurance, and (e) satisfaction by the Bank of, or a determination
by the Bank that it will satisfy, all of the conditions that the
FDIC and the Department of Banking have imposed in their approvals
to the Bank.
If the above conditions are met, the Company may instruct the
Escrow Agent to release to the Company the amount of subscription
proceeds relating to subscriptions or portions thereof accepted by
the Company, together with any interest earned thereon. Any
subscription proceeds received after the above conditions are met
but before termination of this offering will not be deposited in
the escrow account, but will be available for immediate use by the
Company, to the extent accepted by the Company.
The Bank received approvals from the Department of Banking and
the FDIC on October 31, 1997 and ____________, 1998. The Company
expects to receive approvals from the Federal Reserve and the
Department of Banking during July, 1998. In the opinion of the
organizers, the only significant condition to all of the foregoing
approvals will be that a minimum of 800,000 shares of Common Stock
of the Company has to be sold in this offering. If the requisite
shares are not sold, or if the Company or the Bank determine that
they cannot satisfy the other conditions included in the approvals
by the Expiration Date, then the subscription agreements will be of
no further force or effect, and the full amount of all subscription
funds of the subscribers, with interest payable at a rate
comparable to the rate NationsBank, Atlanta, Georgia, pays its
passbook savings account holders, will be returned to the
subscribers (other than organizers) within five business days of
the Expiration Date.
It is possible that subsequent to the release of the
subscription funds from escrow (the requisite shares having been
sold and the determination having been made the other regulatory
conditions will be satisfied) events could occur which could have
the effect of preventing the Bank from commencing business. If
that were to occur, the Company intends to liquidate and would
return to the then shareholders of the Company the portion of their
investment which is equal to their total investment less their
prorata share of the expenses incurred by the Company and the Bank.
See "USE OF PROCEEDS" and "CAPITALIZATION." While no assurance can
be given that the foregoing will not take place, the organizers
cannot foresee any such events and believe it is highly unlikely
that such events will occur. After consulting with applicable
regulatory authorities, the organizers are not aware of any Georgia
state banks which failed to commence business after they or their
holding companies had raised the required capital. Additionally,
based on conversations with applicable regulatory authorities,
there are no indications that the Company and the Bank will have
any difficulty in satisfying the applicable regulatory conditions.
Plan of Distribution. Offers and sales of the Common Stock will
be made on behalf of the Company primarily by certain of its
officers and directors. The officers and directors will receive no
commissions or other remuneration in connection with such
activities, but they will be reimbursed for their reasonable
expenses incurred in the offering. In reliance on Rule 3a4-1 of
the Exchange Act, the Company believes such officers and directors
will not be deemed to be brokers and/or dealers under the Exchange
Act.
The Company has no present arrangements or agreements with any
brokers and/or dealers with respect to this offering. The Company
presently anticipates that no sales of Common Stock will require
the use of brokers and/or dealers. In the event that
broker/dealers are used, all such funds will be promptly
transmitted to the Escrow Agent under the terms of the escrow
agreement.
It is expected that the organizers (the directors of the
Company) will purchase a total of 86,500 shares of Common Stock
offered hereby; however, the organizers may, subject to regulatory
approval, purchase up to 50% of the minimum number of shares
offered hereby if necessary to complete the offering. Any shares
purchased by the organizers in excess of their original commitment
will be purchased for investment and not with a view to the resale
of such shares, and any such purchases will be subject to
regulatory approval.
Founders Club. Each investor shall be deemed to be a member of
the "Founders Club" of the Bank, which will entitle the investor to
a personal checking account with no service charge for as long as
the investor owns a minimum of 100 shares of Company Common Stock.
The initial order of checks for such account will be complimentary,
and the check design will identify the account holder as a member
of the Founders Club.
How to Subscribe
Each prospective investor who (together with the investor's
affiliates) desires to purchase 100 or more shares must:
1. Complete, date and execute the Subscription Agreement,
which is attached as Exhibit A to this Prospectus.
2. Make a check payable to "The Bankers Bank - Escrow
Account for Southern Heritage Bancorp, Inc." in an amount
equal to the full subscription price of $10.00 times the
number of shares subscribed for.
3. Return the completed Subscription Agreement and check as
follows:
HAND OR MAIL DELIVERY
Southern Heritage Bancorp, Inc.
3461 Atlanta Highway
P. O. Box 907
Oakwood, Georgia 30566
Attn: Gary H. Anderson
USE OF PROCEEDS
The net proceeds from the sale of the shares offered hereby
after deducting estimated offering expenses of $35,000 will be
between $7,965,000 if the minimum of 800,000 shares are sold and
$9,965,000 if the maximum of 1,000,000 shares are sold. Offering
expenses will be paid by the Company through draws on the
organization loan described below and repaid from the gross
proceeds of this offering.
The organizers also expect the Company and the Bank to incur
approximately $55,000 of organizational expenses and pre-opening
expenses of approximately $196,500 (assuming the minimum offering
is completed on July 1, 1998 and the Bank begins operation on
August 1, 1998), which would be offset in part by estimated pre-opening
investment income on offering proceeds of approximately
$7,500. Offering, organizational and pre-opening expenses incurred
prior to the conclusion of the offering will be paid through draws
by the Company on the organization loan (which has been guaranteed
by the organizers). To the extent such amounts and accrued
interest thereon exceeds $286,500, additional offering,
organizational and pre-opening expenses will be paid through draws
on the organization loan established for the Company by the
organizers, with all of such amounts to be repaid by the Company
together with accrued interest from net offering proceeds.
The Company will use a portion of the net offering proceeds to
the organization loan, which monies were and will be used to pay
organizational, pre-opening, and offering expenses for the Company
and the Bank. In addition, the Bank will use a portion of the
proceeds it receives from the sale of its stock to the Company to
reimburse the Company for amounts advanced by the Company to pay
organizational and pre-opening expenses of the Bank.
To facilitate the Company's formation and the Bank's formation,
the organizers (all directors of the Company) arranged a line of
credit (the "organization loan") from The Bankers Bank, Atlanta,
Georgia, in the aggregate amount of $500,000 to pay organizational
and pre-opening expenses for the Bank and the Company. The
organization loan bears interest at the lender's prime rate
(presently 8.5% per annum) and has a 360-day term. The organizers
have personally guaranteed the organization loan. The organization
loan and interest costs will be repaid from the offering proceeds
when the conditions to the offering have been satisfied.
The Company will capitalize the Bank with a minimum of
$8,000,000 (net of offering and Company organizational expenses) of
the net offering proceeds by purchasing approximately 795,000
shares of the Bank's stock at a price of $10.00 per share. After
the anticipated expenditure of approximately $1,838,770 in the
aggregate for organizational and pre-opening operation expenses and
the costs of the Bank's proposed facility, the Bank will have
remaining working capital of approximately $6,111,230 to be used
for the purposes of making loans and investments in the course of
the Bank's operations and to pay operating expenses (to the extent
such expenses are not met by operating income).
The remaining balance of the net proceeds of the offering of not
in excess of approximately $2,000,000 (depending on the number of
shares sold) will be retained to establish the Company's working
capital and for general corporate purposes, including supporting
the Bank's growth and engaging in other permitted activities.
The following table sets forth in tabular form the estimated use
by the Company and the Bank of the gross proceeds of the minimum
and maximum offerings based on the estimate of management at this
time and assuming that the offering is concluded as of July 1, 1998
and that the Bank commences operations on August 1, 1998, for
purposes of projecting offering, organizational and pre-opening
expenses and for computing interest payable. Pre-opening expenses
will increase, with a corresponding reduction in working capital
available to the Company and Bank, in the event completing the
offering is delayed for any reason. Management believes that the
Bank will commence operations by August 1, 1998 since all
regulatory approvals should be received several months before that
date as set forth herein and based on the installation of a
temporary bank facility in June, 1998 on a portion of the land
which will be the site of the permanent bank building to be built
by the Bank. The Bank has received permission from the Department
of Banking to begin operations in the temporary bank facility,
assuming the other conditions required by the Department of Banking
are met. The proposed permanent bank building will be built in
approximately eight months and construction is projected to begin
in July, 1998. The site of the bank building is a 1.3359 acre
tract of land which the Company has leased from one of its
directors under a 40-year ground lease. See "MANAGEMENT - Certain
Transactions and Relationships."
<PAGE>
Use of Proceeds
<TABLE>
<S> <C> <C>
Minimum Maximum
Gross Proceeds From
This Offering(1) $8,000,000 $10,000,000
Anticipated Use of Proceeds
by the Company:
Offering Expenses 35,000 35,000
Organizational Expenses(2) 15,000 15,000
Working Capital 0 2,000,000
Capitalization of Bank
through Purchase of Common
Stock of the Bank 7,950,000 7,950,000
Total $ 8,000,000 $10,000,000
Anticipated Use of Capital
by the Bank:
Organization Expenses(2) $ 40,000 $ 40,000
Pre-opening Operating
Expenses(2)(3) 189,000 189,000
Land and Bank Premises 1,250,270 1,250,270
Furniture, Fixtures &
Equipment 359,500 359,500
Working Capital 6,111,230 6,111,230
Total $7,950,000 $ 7,950,000
</TABLE>
_______________________
(1) Assuming sale of 800,000 shares and 1,000,000 shares,
respectively, at $10.00 per share.
(2) Organizational expenses consist primarily of consulting fees for
market analysis and feasibility studies, filing fees,
accounting, appraisal and legal fees and expenses. Pre-opening
expenses consist primarily of salaries and benefits, printing,
promotion, supplies, rent and occupancy expense, and interest
expense. Such expenses have been estimated through July, 1998.
All of such expenses as well as those for premises and leasehold
improvements, and for furniture, fixtures and equipment are
expected to be incurred provided that the offering proceeds are
released from escrow.
(3) Assuming $189,000 of expenses, net of anticipated preopening
income of $7,500.
CAPITALIZATION
The following table sets forth the capitalization of the Company
as of December 31, 1997, and as adjusted to give pro forma effect
to the sale by the Company of the minimum offering of 800,000
shares and the maximum offering of 1,000,000 shares (as of the
completion of the offering) and the receipt of the net proceeds
anticipated by the Company from such sale, which will result in
initial compliance with all regulatory capital requirements. All
offering proceeds, with interest, will be returned to subscribers
in the event the minimum offering is not completed.
<TABLE>
<S> <C> <C> <C> <C>
PRESENTLY AS OF COMPLETION
OUTSTANDING OF THE OFFERING
SHARES AMOUNT SHARES AMOUNT
ASSUME MINIMUM OFFERING:
Common Stock, $5 par value
10,000,000 shares authorized;
one share issued, 800,000 to be
issued as adjusted 1 $ 5 800,000 $4,000,000
Capital surplus 5 3,965,000
Accumulated deficit $(56,344) $ (56,344)
Total equity $(56,334) $7,908,656
ASSUME MAXIMUM OFFERING:
Common stock, $5 par value;
10,000,000 shares authorized;
one shares issued, 1,200,000
to be issued as adjusted 1 $ 5 1,000,000 $5,000,000
Capital surplus 5 4,965,0002
Accumulated deficit (56,344) (56,344)3
Total equity $(56,334) $9,908,656
</TABLE>
___________________________
1 In February, 1998, the Compnay issued one share of Common Stock to
Mr. Cagle for $10 in connection with the organization of the Company.
2 Expenses related to this offering are estimated to be $35,000 and
will be charged to the capital surplus upon completion of the offering.
3 Accumulated deficit represents organizational and pre-opening
expenses incurred as of December 31, 1997, which were funded by the
organization loan from The Bankers Bank.
DIVIDENDS
Since the Company and the Bank are both start-up operations, it
will be the policy of the Board of Directors of the Company to
reinvest earnings for the period of time necessary to help ensure
the success of their operations. As a result, the Company has no
current plans to initiate the payment of cash dividends, and its
future dividend policy will depend on the Bank's earnings, capital
requirements, financial condition and other factors considered
relevant by the Board of Directors of the Company. See
"SUPERVISION AND REGULATION - Bank Regulation."
BUSINESS OF THE COMPANY
AND THE BANK
The Company
The Company was incorporated as a Georgia business corporation
on February 13, 1998 to become a bank holding company by acquiring
all the common stock of the Bank upon its formation. Initially,
the Bank will be the sole operating subsidiary of the Company. The
Company has applied to the Federal Reserve and the Department of
Banking for prior approval to use $7,950,000 of the proceeds of
this offering to acquire the Bank. If such approvals are granted,
upon its acquisition of the common stock of the Bank, the Company
will become a bank holding company within the meaning of the Bank
Holding Company Act of 1956, as amended, and the Georgia Bank
Holding Company Act. See "SUPERVISION AND REGULATION."
The Company has been organized to facilitate the Bank's ability
to serve its future customers' requirements for financial services.
The holding company structure will provide flexibility for
expansion of the Company's banking business through the possible
acquisition of other financial institutions and the provision of
additional banking-related services which the traditional
commercial bank may not provide under present laws. For example,
banking regulations require that the Bank maintain a minimum ratio
of capital to assets. In the event that the Bank's growth is such
that this minimum ratio is not maintained, the Company may borrow
funds, subject to capital adequacy guidelines of the Federal
Reserve, and contribute them to the capital of the Bank and
otherwise raise capital in a manner which is unavailable to the
Bank under existing banking regulations.
The Company has no present plans to acquire any operating
subsidiaries other than the Bank. It is expected, however, that
the Company may make additional acquisitions in the future in the
event that the Company becomes profitable and such acquisitions are
deemed to be in the best interest of the Company and its
shareholders. Such acquisitions, if any, will be subject to
certain regulatory approvals and requirements. See "SUPERVISION
AND REGULATION."
The Bank
General. The organizers filed an application with the Department
of Banking and with the FDIC on June 16, 1997, for authority to
organize as a state bank, the deposits of which will be federally
insured, and to conduct a commercial banking business from Oakwood,
Georgia. The organizers received approvals from the Department of
Banking on October 31, 1997 and the FDIC on ____________, 1998.
The Bank intends to be a full service commercial bank. The Bank
plans to offer personal and business checking accounts, interest-bearing
checking accounts, savings accounts, money market funds and
various types of certificates of deposit. The Bank also plans to
offer installment loans, real estate loans, second mortgage loans,
commercial loans and home equity lines of credit. In addition, the
Bank intends to provide such services as official bank checks and
money orders, Mastercard and Visa credit cards, safe deposit box,
traveler's checks, bank by mail, direct deposit of payroll and
social security checks, and US Savings Bonds.
Philosophy. The philosophy of the management of the Bank with
respect to its initial operations will be to emphasize prompt and
responsive personal service to the residents of Oakwood, Georgia
and the other communities located in Hall County in order to
attract customers and acquire market share now controlled by other
financial institutions in the Bank's market area. The organizers
believe that the Bank offers the residents of Oakwood and the
surrounding areas the opportunity to have an ownership interest in
a community bank, while also receiving the benefits associated with
a locally owned and managed community bank. Through ownership in
the Company, the residents of the community will have a greater
role in the development of the Bank.
Management of the Bank intends to implement an active officer and
director call program to promote these efforts. The purpose of
this call program will be to describe the products, services and
philosophy of the Bank to both existing and new business prospects.
In addition, the President of the Bank has substantial banking
experience in Hall County, which will be an asset in providing both
products and services designed to meet the needs of the Bank's
customer base. All of the organizers are active members of the
business community in Oakwood and the areas located around Hall
County, and their continued active community involvement will
provide an opportunity to promote the Bank and its products and
services. The organizers intend to utilize effective advertising
and superior selling efforts in order to build a distinct
institutional image for the Bank and to capture a customer base.
Bank Location and Facilities. The Bank will be located at 3461
Atlanta Highway, P. O. Box 907, Oakwood, Georgia 30566 in Hall
County. The Bank plans to provide services to Hall County
residents, as well as to residents from the adjacent counties of
Jackson and Gwinnett.
On February 4, 1998, the Company entered into a ground lease with
M. Milton Robson, one of the Company's directors, for a 40-year
ground lease of a 1.3359 acre tract of land located at 3461 Atlanta
Highway in the City of Oakwood, Georgia. The tract of land is the
site where the Company and the Bank intend to construct the main
office of the Bank. The terms of the ground lease are set out in
more detail under the section entitled "MANAGEMENT - Certain
Transactions and Relationships" below. Upon termination of the
lease due to certain defaults by the lessees or normal expiration,
the real property improvements (the building) will revert to and
become the property of the lessor. Final termination is expected
to occur in Summer, 2038, but could occur earlier if lessees
default in the payment of rent for three consecutive months or fail
to exercise the extension options.
The directors of the Company have obtained two appraisals of the
proposed site of the bank building and of the ground lease. Both
appraisals determined that the rental under the ground lease was
reasonable and at market rental rate for comparable ground leases.
Copies of the appraisals, together with the ground lease agreement,
were filed with the Department of Banking and the FDIC.
The Company and the Bank plan to have a 10,000 square foot, two-story
building constructed on the property for the Bank. There
will be four teller stations inside and four drive through
stations. There will also be a stand-alone automatic teller
machine accessible by automobile. The directors estimate that the
cost of construction of the building will be approximately
$1,250,270. The furniture, fixtures and equipment necessary for
operation of the Bank are projected to cost approximately $359,500.
Construction, equipping and occupancy of the bank building is
projected to occur by March, 1999. As set forth above, the
directors anticipate that the Bank will open for business by August
1, 1998, in a temporary building to be located on a portion of the
site of the permanent bank building.
Primary Service Area. The Bank's Primary Service Area ("PSA")
is defined as south Hall County. The Bank has defined its local
community as Oakwood and Hall County, Georgia and portions of the
surrounding counties of Jackson and Gwinnett.
Economic and Demographic Factors. According to the Georgia
Economic Profile (April, 1997), Hall County has grown during each
census since 1950. From 1980 to 1990, Hall County grew by 26.1%.
The adjacent counties of Jackson and Gwinnett Counties have also
experienced significant positive population growth. The projected
population of Hall County in 2000 is 120,000 persons. According to
Georgia Economic Profile, 26% of the employment base of Hall County
are employed in manufacturing. Manufacturing jobs provide 29% of
the employment earnings for the county. Service employment is the
next largest contributor to employment in the county, providing 22%
of the jobs employment earnings. Retail trade employment is also
important to the county's economy, providing 16% of the jobs and
11% of employment earnings. Hall County's annual unemployment rate
for 1996 was lower than the State of Georgia's mark, averaging 3.3%
compared with the State's average of 4.6%. Nationwide,
unemployment for the same period averaged 5.4%. The per capita
income in the county in 1995 was $21,165, which ranked 14th among
Georgia's 159 counties. The City of Gainesville, the county seat
and largest municipality in the county, issued 525 building permits
in 1997, with an estimated total cost of construction of
$79,115,750. Hall County issued 2,806 building permits in 1997,
with an estimated total cost of construction of $191,408,010.
Competition and Historical Deposit Trends. Hall County has ten
commercial banks and three Federal credit unions with a total of 36
offices. Five of the banks are regional banks. They are SunTrust
Bank, Regions Bank, Wachovia Bank, NationsBank, and First Market
Bank of Tennessee. The other banks operating in Hall County are
Gainesville Bank & Trust, Lanier National Bank, Georgia First Bank,
Community Bank & Trust, and Central and Southern Bank. Total
deposits in Hall County for these 13 financial institutions as of
January 1, 1997 are estimated to exceed $1,500,000,000.
Deposits in Hall County among the banks have grown from 1993 to
1997, and the growth in deposits in Hall County for 1996 was 9.49%.
The organizers believe that this indicates a growing demand for
bank services within the county. Projections prepared for the Bank
and submitted to the Department of Banking indicate that the Bank
could grow to $10,800,000 in deposits in the first twelve months of
operation. There is no assurance, however, that the Bank's
projections will be realized.
Recent federal legislation permits commercial banks to establish
operations nationwide, further increasing competition from out-of-state
financial institutions. Furthermore, recently enacted
Georgia legislation greatly diminishes the historical legal
restrictions on establishing branch banks across county lines in
Georgia, thus creating further opportunities for other financial
institutions to compete with the Bank. Generally, from July 1,
1996 to July 1, 1998, any bank located in Georgia may branch into
any three additional Georgia counties regardless of the location of
the parent bank. After July 1, 1998, banks may establish branch
banks statewide without limitation. In addition, on-line computer
banking via the Internet or otherwise may also become an increasing
source of competition for community financial institutions such as
the Bank. As a result of these competitive factors, the Bank may
have to pay higher rates of interest to attract deposits. The
organizers believe that the Bank will be able to compete
effectively with these institutions in the Bank's proposed markets,
but no assurances can be given in this regard.
The organizers believe that a locally owned bank where decisions
are made within Hall County will be more cognizant of the
community's needs and more responsive in meeting those needs and
local expectations. The Bank will operate from a modern facility
offering convenient hours and competitive services delivered in a
friendly manner. In addition, management believes that having a
local board of directors and wide community ownership of the
Company's Common Stock will enable the Bank to be successful.
Lending Policy. The Bank is being established to support Hall
County and the immediately-surrounding counties of Jackson and
Gwinnett. Consequently, the Bank will aggressively seek good loans
within a limited geographic area. The Bank's primary commercial
lending function will be to make consumer loans to individuals and
commercial loans to small and medium-sized businesses and
professional concerns. In addition, the Bank plans to make real-estate-
related loans, including construction loans for residential
and commercial properties, and primary and secondary mortgage loans
for the acquisition or improvement of personal residences. The
Bank plans to avoid concentrations of loans to a single industry or
based on a single type of collateral.
Real Estate Loans. The Bank will make and hold real estate
loans, consisting primarily of single-family residential
construction loans for one-to-four unit family structures. The
Bank will require a first lien position on the land associated with
the construction project and will offer these loans to professional
building contractors and homeowners. Loan disbursements will
require on-site inspections to assure the project is on budget and
that the loan proceeds are being used for the construction project
and not being diverted to another project. The loan-to-value ratio
for such loans will be predominantly 75% of the lower of the as-built
appraised value or project cost, and will be a maximum of 80%
if the loan is amortized. Loans for construction can present a
high degree of risk to the lender, depending upon, among other
things, whether the builder can sell the home to a buyer, whether
the buyer can obtain permanent financing, whether the transaction
produces income in the interim and the nature of changing economic
conditions.
Consumer Loans. The Bank plans to make consumer loans,
consisting primarily of installment loans to individuals for
personal, family and household purposes, including loans for
automobiles, home improvements and investments. Risks associated
with consumer loans include, but are not limited to, fraud,
deteriorated or non-existing collateral, general economic downturn
and customer financial problems.
Commercial Loans. Commercial lending will be directed
principally toward small to mid-size businesses whose demand for
funds fall within the legal lending limits of the Bank. This
category of loans includes loans made to individual, partnership or
corporate borrowers, and obtained for a variety of business
purposes. Risks associated with these loans can be significant and
include, but are not limited to, fraud, bankruptcy, economic
downturn, deteriorated or non-existing collateral and changes in
interest rates.
Investments. In addition to loans, the Bank will make other
investments primarily in obligations of the United States or
obligations guaranteed as to principal and interest by the United
States and other taxable securities. No investment in any of those
instruments will exceed any applicable limitation imposed by law or
regulation.
Deposits. The Bank plans to establish solid core deposits,
including checking accounts, money market accounts, a variety of
certificates of deposit, and IRA accounts. The primary means used
to attract deposits will be an aggressive marketing plan in the
overall service area, a broad product line, and competitive
services. The primary sources of deposits will be residents of,
and businesses and their employees located in, Hall County, and to
a lesser extent, Jackson County and Gwinnett County, obtained
through personal solicitation by the Bank's officers and directors,
direct mail solicitations and advertisements published in the local
media. Deposits will be generated by offering a broad array of
competitively priced deposit services, including demand deposits,
regular savings accounts, money market deposits (transaction and
investment), certificates of deposit, retirement accounts, and
other deposit or funds transfer services which may be permitted by
law or regulation and which may be offered to remain competitive in
the market.
Asset and Liability Management. The Bank intends to manage its
assets and liabilities to provide an optimum and stable net
interest margin, a profitable after-tax return on assets and return
on equity, and adequate liquidity. These management functions will
be conducted within the framework of written loan and investment
policies which the Bank will adopt. The Bank will attempt to
maintain a balanced position between rate sensitive assets and rate
sensitive liabilities. Specifically, it will chart assets and
liabilities on a matrix by maturity, effective duration, and
interest adjustment period, and endeavor to manage any gaps in
maturity ranges.
Employees. Upon commencement of operations, the Bank is expected
to have approximately 12 full-time employees. The Company is not
expected to have any employees who are not also employees of the
Bank.
MANAGEMENT
Proposed Officers and Directors
On February 19, 1998, the Board of Directors of the Company
elected the following persons as officers of the Company:
Lowell S. Cagle Chairman of the Board
Gary H. Anderson President, Chief Executive Officer
James E. Palmour III Secretary
Jeanie Bridges Treasurer, C.A.O. and C.F.O.
The following table sets forth for the initial members of the
Board of Directors of the Company, (a) their names, addresses and
ages, (b) the positions they will hold in the Bank, (c) the number
of shares of Common Stock for which they intend to subscribe, and
(d) the percentage of outstanding shares such number will represent
if the minimum number of shares are sold in this offering and if
the maximum number of shares are sold in this offering. The Board
of Directors is divided into three classes, with each class being
as nearly equal in number as possible, and the directors serve for
staggered three-year terms. The present term of office of each
director in Class One will expire at the annual shareholders
meeting of the Company to be held in April, 1999; the present term
of office of each director in Class Two will expire at the annual
shareholders meeting of the Company to be held in April, 2000; and
the present term of office of each director in Class Three will
expire at the annual shareholders meeting of the Company to be held
in April, 2001. These persons will also serve as directors of the
Bank for the same staggered terms. The Class in which each
director belongs is indicated below.
<TABLE>
<S> <C> <C> <C> <C>
NAME AND POSITION NUMBER % OF %OF
ADDRESS (AGE)[CLASS] TO BE HELD OF SHARES1 MINIMUM1 MAXIMUM1
Gary H. Anderson (46) Director/ 6,0002 .750% .600%
4006 Covey Trail [3] President
Oakwood, GA 30566 and C.E.O.
Lowell S. (Casey) Director/ 5,000 .625 .500
Cagle (32)[3] Chairman
4615 Hunters Court
Gainesville, GA 30507
Earl Gilleland (52)[2] Director 20,000 2.50 2.00
3997 Sloan Mill Road
Gainesville, GA 30507
Terry Hayes (43)[2] Director 2,500 .312 .250
Highway 323
P. O. Box 357
Hoschton, GA 30548
Wm. David Merritt (48) Director 10,000 1.25 1.00
6620 Stringer Road [2]
Clermont, GA 30527
Harold Nichols (55)[1] Director 2,000 .250 .200
4431 Benefield Road
Braselton, GA 30502
James E. Palmour Director/ 10,000 1.25 1.00
III (61)[3] Secretary
255 Sorrento Circle,
N.W.
Gainesville, GA 30506
Dr. Edward Quillian (42) Director 1,000 .125 .100
4207 Bob White Lane [1]
Oakwood, GA 30566
Milton Robson (55)[1] Director 25,000 3.125 2.50
3509 Tanners Mill Circle
Gainesville, GA 30507
Donald W. Smith (43)[3] Director/Vice 5,000 .625 .500
4129 Cherokee Trail Chairman
Gainesville, GA 30504
<PAGE>
Jeanie Bridges (49) Treasurer, 5,000 .625 .500
100 Sang Road C.A.O. and
Cleveland, GA 30528 C.F.O.
All Proposed Directors 91,500 11.44 9.15
and Officers, as a
Group3
</TABLE>
________________________________
1 In the event that the minimum number of shares in this offering
are not sold, the organizers may purchase additional shares of
Common Stock for an aggregate of 400,000 shares of Common Stock
(50% of the minimum and 40% of the maximum number of shares to be
sold).
2 Under his employment agreement, Mr. Anderson also has stock
options to purchase 15,000 shares of Common Stock of the Company.
See "MANAGEMENT - Cash Compensation" below. The number of shares
shown above for Mr. Anderson does not include the 15,000 shares
subject to stock options.
3 These figures are different from the sum of the individual
percentages because of rounding.
Biographical information concerning the directors (the
organizers) and executive officers is set forth below. None of the
directors and officers are related.
Gary H. Anderson - Gary H. Anderson has been a resident of
Oakwood, Hall County, Georgia since 1963. Mr. Anderson was born in
Clarkesville, Georgia in 1951. Mr. Anderson has over 23 years
banking experience in Hall County, Georgia. Mr. Anderson served as
City Vice-President for SunTrust Bank of Northeast Georgia,
Gainesville, Georgia from 1981 through 1996. Mr. Anderson is a
graduate of Gainesville College and C&S Commercial Lending School.
Mr. Anderson has also attended the Georgia Banking School at the
University of Georgia. He is a member of the Oakwood Rotary Club,
Councilman of the City of Oakwood, and a member of the Greater Hall
Camber of Commerce. Mr. Anderson has previously served on many
civic, social and community organizations, including Hall County
Boys Club Board of Directors, Gainesville College Foundation,
United Way of Hall County, Oakwood Development Authority.
Lowell S. (Casey) Cagle - Mr. Cagle is a native of Hall County,
Georgia, a seventh generation resident. Mr. Cagle graduated from
Johnson High School and attended Gainesville College and Georgia
Southern University. A self-employed businessman, Mr. Cagle is
President and co-owner of Strateia Group Atlanta, Inc., a
management and business consulting firm, which he co-founded. He
is also co-owner of Jean's Bridal and Tux of Class. Mr. Cagle is
a member of Westside Baptist Church, Gainesville, Georgia. Mr.
Cagle is a Georgia State Senator for the 49th District, which
includes Hall County and portions of Forsyth County.
Earl Gilleland - Mr. Gilleland is a native Hall Countian, having
lived his entire life in South Hall County. His entire business
career has been with Gilleland Concrete Company and in 1968 he
became sole owner and President of the company. In 1997, Mr.
Gilleland sold Gilleland Concrete to a Florida company, and he
remains as manager of the local company. He is a member of Poplar
Springs Baptist Church.
Terry Hayes - Mr. Hayes has been a resident of Jackson County,
Georgia for over 12 years. Mr. Hayes was born in DeKalb County.
He is Manager of Hayes Chrysler-Plymouth-Dodge-Jeep in Oakwood,
Georgia. Mr. Hayes has worked in the family business of Hayes
Chrysler-Plymouth-Dodge-Jeep in Gwinnett County and Hall County for
over 25 years. Mr. Hayes is a member of the South Hall Rotary Club
and the Georgia Cattlemen's Association.
William David Merritt - Mr. Merritt is a long-time (40 year)
resident of Hall County, Georgia. Mr. Merritt is President/Owner
of Merritt Contracting, Inc. since 1982; President/Owner of
Southern Curb, Inc. since 1987; President of MCI Management Company
since 1989. Mr. Merritt is also Vice-President of Gilleland &
Merritt, Inc., a real estate development company, and a partner in
The Windmill Partnership, a real estate development company in
north Hall County. Mr. Merritt is a member of the Georgia Utility
Contractors Association and the Georgia Highway Contractors
Association. He is a member of the Greater Hall Chamber of
Commerce and the Rocky Mountain Elk Association.
Harold Nichols - Mr. Nichols is a 35-year resident of Hall
County, Georgia. He has been the Engineer Products Sales Manager
of Macklanburg-Duncan, Gainesville, Georgia since 1969. He is a
member of Gainesville Masonic Lodge #219 and is an active member of
the Johnson High School Booster Club.
James E. Palmour III - Mr. Palmour was born in and is a resident
of Gainesville, Hall County, Georgia, and has been a resident for
all but four years of his life. He graduated from Gainesville High
School, University of Georgia and Atlanta Law School. Mr. Palmour
has been an attorney at law since 1964 and has practiced general
law since that time with the exception of the period of 1976
through 1984 during which he was Judge of the Superior Court of the
Northeastern Judicial Circuit. Mr. Palmour's major field of law is
government law and he is attorney for the City of Gainesville,
Georgia, White County, Georgia, and the Barrow County Airport
Authority. He is a member of the Rotary Club of Gainesville, State
Bar of Georgia, Gainesville-Northeastern Bar Association, and has
previously served as a member of the Lanier Area Technical School
Board.
Dr. Edward Quillian - Dr. Quillian is a native of Hall County,
Georgia and is a graduate of the University of Georgia School of
Veterinary Medicine in 1983. Dr. Quillian was a partner in the
Cumming Veterinary Clinic from 1983 to 1987. He has been CEO/Owner
of Quillian Family Pet Clinic in Oakwood, Georgia since 1987. He
is a Trustee of the Gainesville College Foundation. He is also a
member of the American Animal Hospital Association, Georgia
Veterinary Medical Association, American Veterinary Medical
Association, and the Georgia Academy of Veterinary Practice.
Milton Robson - Mr. Robson has been a resident of Hall County,
Georgia for over 50 years. He has resided in south Hall County for
over 25 years. Mr. Robson founded Milton's Institutional Foods in
1962, which he sold in 1995 to Progressive Food Services. Mr.
Robson is the owner of Mule Camp Springs, a commercial retail
center, in Gainesville, Georgia and is the owner/developer of
Robson Crossing Shopping Center in Oakwood, Georgia. He is Vice-President
of Prime Pak Foods, Inc., a wholesale frozen meat
distributor, which he founded in 1975.
Donald W. Smith - Mr. Smith is a native of Hall County, Georgia.
He is a 1975 graduate of West Georgia College. Mr. Smith is
President and Owner of Arrow Auto Sales, and he has over 19 years
experience in retail auto sales. He is President of Arrow
Mitsubishi in Gainesville, Georgia, and he also has served as
President of Oakwood Arrow Auto Auction since 1990. Mr. Smith is
a past President and serves on the Board of Directors of the
Georgia Automobile Dealers Association. Mr. Smith is a member of
the Gainesville Jaycees and the Greater Hall Chamber of Commerce.
Jeanie Bridges - Ms. Bridges was born in Guilford County, North
Carolina, but has lived in Georgia since her teens. She resided in
the metro Atlanta area for 20 years, Hall County for 10 years and
has lived in White County for the past 3 years. Until resigning to
take her position with the Company, Ms. Bridges was employed with
SunTrust Bank, Northeast Georgia, N.A. since March, 1986 in many
capacities from lender of consumer and mortgage loans to Branch
Administrator. Prior to her resignation, she was First Vice
President, Security Officer, and Compliance Officer. Ms. Bridges
is a member of the First Baptist Church of Cleveland and the Truth
Seekers Sunday School Class. She is also a member of the Georgia
Department of Labor Advisory Council and is involved in Financial
Women International (formerly NABW) and the White County League of
Women Voters.
Cash Compensation
Gary H. Anderson has an employment agreement with the Company and
the Bank under which he will serve as President and Chief Executive
Officer of the Company and of the Bank. The employment agreement
provides for an initial term of three years and can be extended
annually by the Company and the Bank at the end of each year of the
term for an additional year, so that the remaining term shall
continue to be three years. He will be paid an initial annual
salary of $105,000. Once the Bank begins operations he will also
be entitled to certain performance bonuses. The criteria for
earning performance bonuses will be established by the Board of
Directors.
Under Mr. Anderson's employment agreement, he also has the option
to purchase 15,000 shares of Common Stock of the Company at the
price of the lesser of $10.00 or book value of the stock during the
first five (5) years of operation of the Bank.
Mr. Anderson will also receive health insurance with dependents
coverage and disability insurance paid in full by the Bank. The
Company will maintain a term life insurance policy on Mr. Anderson
providing for death benefits in the amount of $500,000 payable to
the Company and $500,000 payable to Mr. Anderson's family. He will
receive a mid-size automobile to be used primarily for business
purposes, and the Bank will pay operating, maintenance and
insurance expenses for the automobile. The Bank will pay monthly
membership dues for Mr. Anderson at all service organizations and
professional associations.
If the Company terminates Mr. Anderson's employment, the Company
will be obligated to pay him severance pay equal to one year's base
salary and insurance benefits. If Mr. Anderson's employment is
terminated due to a sale, merger or other change of control of the
Company or the Bank, the Company will be obligated to pay him
severance pay equal to two times his then existing annual base
salary. Furthermore, the Company must remove any restrictions on
outstanding incentive awards so that all such awards vest
immediately.
In addition, Mr. Anderson's employment agreement provides that
following termination of his employment with the Bank and for a
period of twelve months thereafter if terminated without cause and
for a period of six months thereafter if terminated for cause, Mr.
Anderson may not: (i) be employed in the banking business or any
related field thereto in Oakwood, Georgia or Hall County, Georgia,
(ii) solicit customers of the Bank for the purpose of providing
financial services; (ii) solicit employees of the Bank for
employment; (iv) furnish anyone or use any list of customers of the
Bank for banking purposes; or (v) furnish, use or divulge to anyone
any information acquired by him from the Bank relating to the
Bank's methods of doing business.
Mr. Anderson will also receive other employment benefits under
his employment agreement with the Company and the Bank as spelled
out in his employment agreement.
Officers and directors of the Company will not be separately
compensated for their services to the Company until the Company
earns a cumulative profit.
Directors will not be compensated for their services as directors
until the Bank earns a cumulative profit.
Certain Transactions and Relationships
It is possible that the Company and the Bank will have banking
and other business transactions in the ordinary course of business
with directors and officers of the Company and the Bank, including
members of their families or corporations, partnerships or other
organizations in which such directors and officers have a
controlling interest. If such transactions occur, they will be on
substantially the same terms (including price, or interest rate and
collateral) as those prevailing at the time for comparable
transactions with unrelated parties, and any banking transactions
will not be expected to involve more than the normal risk of
collectibility or present other unfavorable features to the Company
and the Bank.
To facilitate the Bank's formation, three of the organizers (all
directors of the Company) arranged a line of credit from Citizens
Bank, Cumming, Georgia, in the aggregate amount of $50,000 to pay
organizational and pre-opening expenses for the Company and the
Bank. The line of credit interest rate was the lender's prime rate
(8.50% per annum) plus .5% and had a 180-day term. The three
organizers personally guaranteed the line of credit. The line of
credit and interest costs were repaid from proceeds of the
organization loan described in the following paragraph.
To facilitate the Company's formation and the Bank's formation,
the organizers (all director's of the Company) arranged a line of
credit (the "organization loan") from The Bankers Bank, Atlanta,
Georgia, in the aggregate amount of $500,000 to pay organizational
and pre-opening expenses for the Bank and the Company. Proceeds
from the organization loan were also used to repay the line of
credit from Citizens Bank, Cumming, Georgia. The organization loan
bears interest at the lender's prime rate (presently 8.5% per
annum) and has a 360-day term. The organizers have personally
guaranteed the organization loan. The organization loan and
interest costs will be repaid from the offering proceeds when the
conditions to the offering have been satisfied. See "USE OF
PROCEEDS."
The Company and the Bank have entered into a ground lease, dated
February 4, 1998, with Milton Robson, as lessor. Mr. Robson serves
as a director of the Company and will serve as a director of the
Bank. The ground lease provides for the lease of a 1.3359 acre
tract of land located at 3461 Atlanta Highway in the City of
Oakwood, Georgia. The lease is for a term of 20 years, with four
options to extend the term for five years upon each extension. The
lease provides for annual rent of $40,000, payable in monthly
installments of $3,333.33, beginning once the Company's temporary
office facility is located on the site and placed in use by the
Company. After the third lease year, the rent increases annually
by the amount of increase in the Consumer Price Index during the
prior year times the prior year's annual rent, but not in excess of
a 5% increase. In addition, the Bank and the Company are required
to pay the ad valorem taxes on the land and improvements built on
the site and to keep the land and improvements insured against
normal casualties and for general liability. The Bank intends to
build and equip a 10,000 square foot, two-story bank building on
the 1.3359 acre site at its expense. Upon termination of the lease
due to certain defaults by the lessees or normal expiration, the
real property improvements (the building) will revert to and become
the property of the lessor. Final termination is expected to occur
in Summer, 2038, but could occur earlier if lessees default in the
payment of rent for three consecutive months or fail to exercise
the extension options. The directors of the Company have obtained
two appraisals of the proposed site of the bank building and of the
ground lease. Both appraisals determined that the rental under the
ground lease was reasonable and at market rental rate for
comparable ground leases. Copies of the appraisals, together with
the ground lease agreement, were filed with the Department of
Banking and the FDIC.
Stock Option Plan
Although the Company has no specific plans, the Company may adopt
a stock option plan pursuant to which officers, directors, and key
employees of the Company and the Bank may be granted options to
purchase shares of the Company's stock as compensation for past
services or as incentive for services to be rendered. The plan has
not yet been adopted, and if adopted by the Board of Directors,
will be submitted to the shareholders of the Company for approval
or ratification. The organizers contemplate that the number of
shares of the Company's Common Stock authorized to be issued
pursuant to any stock option plan will not exceed 20% of the shares
to be issued by the Company if this offering (160,000 shares if the
minimum number of shares are sold in the offering and 200,000 if
the maximum number are sold). Exercise of any such options could
have a dilutive effect on the shareholders' interest in the
Company's earnings and book value. In the future, it is possible
that the Company could issue additional shares of its Common Stock.
Any such stock offering by its nature could be dilutive to the
holdings of purchasers in this offering.
MARKET FOR COMMON STOCK AND RELATED SHAREHOLDER MATTERS
There is currently no market for the shares of Common Stock and
it is not likely that an active trading market will develop for the
shares in the future. There are no present plans for the Company's
Common Stock to be traded on any stock exchange or over-the-counter
market. As a result, investors who need or wish to dispose of all
or part of their shares may be unable to do so except in private,
directly negotiated sales.
DESCRIPTION OF COMMON STOCK OF THE COMPANY
General
The Company's Articles of Incorporation authorize the Company to
issue up to 10,000,000 shares of Common Stock, par value $5.00 per
share, of which a minimum of 800,000 shares and a maximum of
1,000,000 shares will be issued pursuant to this offering.
All shares of Common Stock of the Company will be entitled to
share equally in dividends from funds legally available therefor,
when, as and if declared by the Board of Directors, and upon
liquidation or dissolution of the Company, whether voluntary or
involuntary, to share equally in all assets of the Company
available for distribution to the shareholders. It is not
anticipated that the Company will pay any cash dividends on the
Common Stock in the near future. See "DIVIDENDS." Each holder of
Common Stock will be entitled to one vote for each share on all
matters submitted to the shareholders. Holders of Common Stock
will not have any preemptive right to acquire authorized but
unissued capital stock of the Company. There is no cumulative
voting, redemption right, sinking fund provision, or right of
conversion in existence with respect to the Common Stock. All
shares of the Common Stock issued in accordance with the terms of
this offering as described in this Prospectus will be fully-paid
and non-assessable.
Shares Held by Affiliates
Upon completion of this offering, the Company will have a minimum
of 800,000 shares and a maximum of 1,000,000 shares outstanding.
All of these shares will be freely tradeable without restriction or
registration under the Securities Act of 1933, as amended (the
"1933 Act"), except for shares purchased in this offering by the
organizers.
The organizers (the directors of the Company) are "affiliates"
of the Company (as that term is defined in Rule 144 adopted under
the 1933 Act), and, as a result, their shares will be subject to
certain resale restrictions.
Rule 144 generally provides that a person (including an affiliate
of the Company) who has beneficially owned shares for at least two
years would be entitled to sell within any three-month period a
number of shares that does not exceed the greater of 1% of the then
outstanding shares of the Common Stock or the average weekly
trading volume of the Common Stock during the four calendar weeks
preceding such sale, whichever is greater. While affiliates may
generally sell non-restricted shares under Rule 144 without regard
to the length of their holding period, all shares purchased by the
organizers will be purchased for investment purposes and not with
a present intention of redistribution.
There can be no assurance that a public market for the Common
Stock will exist at any time subsequent to this offering. As a
result, investors who may wish or who need to dispose of all or a
part of their investment in the Common Stock may not be able to do
so except for private direct negotiations with third parties,
assuming that third parties are willing to purchase the Common
Stock.
CERTAIN PROVISIONS OF THE COMPANY'S
ARTICLES OF INCORPORATION AND BYLAWS
The Articles of Incorporation of the Company contain certain
provisions which would have the effect of impeding an attempt to
change or remove management of the Company or to gain control of
the Company in a transaction not supported by its Board of
Directors. The Articles of Incorporation of the Company also
contain a provision which eliminates the potential personal
liability of directors for monetary damages. The Bylaws of the
Company contain certain provisions which provide indemnification
for directors of the Company. Each of these provisions is
discussed more fully below.
The Bylaws of the Company provide that the Company's Board of
Directors is divided into three classes, with each class to be as
nearly equal in number as possible. The directors in each class
serve three-year terms of office. The effect of the Company's
having a classified Board of Directors is that only approximately
one-third of the members of the Board are elected each year, which
effectively requires two annual meetings for the Company's
shareholders to change a majority of the members of the Board.
Change in Number of Directors
Article 7 of the Articles of Incorporation of the Company
provides that any change in the number of directors of the Company,
as set forth in its Bylaws, would have to be made by the
affirmative vote of 2/3 of the entire Board of Directors or by the
affirmative vote of the holders of at least 2/3 of the outstanding
shares of Common Stock.
Under Georgia law, the number of directors may be increased or
decreased from time to time by amendment to the Bylaws, unless the
Articles of Incorporation provide otherwise or unless the number of
directors is otherwise fixed by the shareholders.
Removal of Directors
Article 8 of the Articles of Incorporation of the Company
provides that directors of the Company may be removed during their
terms with cause by the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock or without cause
by the affirmative vote of the holders of at least 2/3 of the
outstanding shares of Common Stock. "Cause" for this purpose is
defined as final conviction of a felony, request or demand for
removal by any bank regulatory authority having jurisdiction over
the Company, or determination by at least 2/3 of the incumbent
directors of the Company that the conduct of the director to be
removed has been inimical to the best interests of the Company.
Under Georgia law, any or all of the directors of a corporation
may be removed with or without cause by the affirmative vote of a
majority of the shares represented at a meeting at which a quorum
is represented and entitled to vote thereon, unless the Articles of
Incorporation provide otherwise.
Limitation of Liability
Article 10 of the Company's Article of Incorporation, subject
to certain exceptions, eliminates the potential personal liability
of a director for monetary damages to the Company and to the
shareholders of the Company for breach of a duty as a director.
There is no elimination of liability for (a) a breach of duty
involving appropriation of a business opportunity of the Company,
(b) an act or omission not in good faith or involving intentional
misconduct or a knowing violation of law, (c) a transaction from
which the director derives an improper material tangible personal
benefit, or (d) as to any payment of a dividend or approval of a
stock repurchase that is illegal under the Georgia Business
Corporation Code. Article 10 does not eliminate or limit the right
of the Company or its shareholders to seek injunctive or other
equitable relief not involving monetary damages.
Article 10 was adopted by the Company pursuant to the Georgia
Business Corporation Code which allows Georgia corporations, with
the approval of their shareholders, to include in their Articles of
Incorporation a provision eliminating or limiting the liability of
directors, except in the circumstances described above. Article 10
was included in the Company's Articles of Incorporation to
encourage qualified individuals to serve and remain as directors of
the Company. While the Company has not experienced any problems in
locating directors, it could experience difficulty in the future as
the Company's business activities increase and diversify. Article
10 was also included to enhance the Company's ability to secure
liability insurance for its directors at a reasonable cost. While
the Company intends to obtain liability insurance covering actions
taken by its directors in their capacities as directors, the Board
of Directors believes that the current director's liability
insurance environment, and the environment for the foreseeable
future, is characterized by increasing premiums, reduced coverage
and an increasing risk of litigation and liability. The Board of
Directors believes that Article 10 will enable the Company to
secure such insurance on terms more favorable than if such a
provision were not included in the Articles of Incorporation.
Supermajority Voting on Certain Transactions
Under Article 12 of the Articles of Incorporation of the Company,
with certain exceptions, any merger or consolidation involving the
Company or any sale or other disposition of all or substantially
all of its assets will require the affirmative vote of the holders
of at least 2/3 of the outstanding shares of Common Stock.
However, if the Board of Directors of the Company has approved the
particular transaction by the affirmative vote of 2/3 of the entire
Board, then the applicable provisions of Georgia law would govern
and shareholder approval of the transaction would require the
affirmative vote of the holders of only a majority of the
outstanding shares of Common Stock entitled to vote thereon.
The primary purpose of this Article is to discourage any party
from attempting to acquire control of the Company through the
acquisition of a substantial number of shares of Common Stock
followed by a forced merger or sale of assets without negotiation
with management. Such a merger or sale might not be in the best
interests of the Company or its shareholders. This provision may
also serve to reduce the risk of a potential conflict of interest
between a substantial shareholder on the one hand and the Company
and its other shareholders on the other.
The foregoing provision could enable a minority of the Company
shareholders to prevent a transaction favored by the majority of
the shareholders. Also, in some, circumstances, the directors
could cause a 2/3 vote to be required to approve the transaction by
withholding their consent to such a transaction, thereby enhancing
their positions with the Company and the Bank. However, of the ten
persons who are directors of the Company, only one will be
affiliated with the Company and the Bank in a full-time management
position.
Evaluation of an Acquisition Proposal
Article 13 of the Company's Articles of Incorporation provides
that the response of the Company to any acquisition proposal made
by another party will be based on the Board's evaluation of the
best interests of the Company and its shareholders. As used
herein, the term "acquisition proposal" refers to any offer of
another party (a) to make a tender offer or exchange offer for any
equity security of the Company, (b) to merge or consolidate the
Company with another corporation, or (c) to purchase or otherwise
acquire all or substantially all of the properties and assets owned
by the Company.
Article 13 charges the Board, in evaluating an acquisition
proposal, to consider all relevant factors, including (a) the
expected social and economic effects of the transaction on the
employees, customers and other constituents (e.g., suppliers of
goods and services) of the Company and the Bank, (b) the expected
social and economic effects on the communities within which the
Company and the Bank operate, and (c) the consideration being
offered by the other corporation in relation (i) to the then
current value of the Company as determined by a freely negotiated
transaction and (ii) to the Board of Directors' then estimate of
the Company's future value as an independent entity. The
enumerated factors are not exclusive, and the Board may consider
other relevant factors.
This Article has been included in the Company's Articles of
Incorporation because the Bank is charged with providing support to
and being involved with the communities it serves, and the Board
believes its obligations in evaluating an acquisition proposal
extend beyond evaluating merely the consideration being offered in
relation to the then market or book value of the Common Stock. No
provisions of Georgia law specifically enumerate the factors a
corporation's board of directors should consider in the event the
corporation is presented with an acquisition proposal.
While the value of the consideration offered to shareholders is
the main factor when weighing the benefits of an acquisition
proposal, the Board believes it appropriate also to consider all
other relevant factors. For example, this Article directs the
Board to evaluate the consideration being offered in relation to
the then current value of the Company determined in a freely
negotiated transaction and in relation to the Board's then estimate
of the future value of the Company as an independent concern. A
takeover bid often places the target corporation virtually in the
position of making a forced sale, sometimes when the market price
of its stock may be depressed. The Board believes that frequently
the consideration offered in such a situation, even though it may
be in excess of the then market value (i.e., the value at which
shares are then currently trading), it is less than that which
could be obtained in a freely negotiated transaction. In a freely
negotiated transaction, management would have the opportunity to
seek a suitable partner at a time of its choosing and to negotiate
for the most favorable price and terms which reflect not only the
current value, but also the future value of the Company.
One effect of this Article may be to discourage a tender offer
in advance. Often an offeror consults the Board of a target
corporation prior to or after commencing a tender offer in an
attempt to prevent a contest from developing. In the opinion of
the Board, this provision will strengthen its position in dealing
with any potential offeror which might attempt to acquire the
Company through a hostile tender offer. Another effect of this
Article may be to dissuade shareholders who might be displeased
with the Board's response to an acquisition proposal from engaging
the company in costly litigation. This provision, however, does
not affect the right of a shareholder displeased with the Board's
response to an acquisition proposal to institute litigation against
the Company and to allege that the Board breached an obligation to
shareholders by not limiting its evaluation of an acquisition
proposal to the value of the consideration being offered in
relation to the then market or book value of the Common Stock.
Article 13 would not make an acquisition proposal regarded by the
Board as being in the best interests of the Company more difficult
to accomplish. It would, however, permit the Board to determine
that an acquisition proposal was not in the best interests of the
Company (and thus to oppose it) on the basis of the various factors
deemed relevant. In some cases, such opposition by the Board might
have the effect of maintaining the positions of incumbent
management.
Amendment of Provisions
Any amendment of Articles 7, 8, 10, 12, and 13 of the Company's
Articles of Incorporation requires the affirmative vote of the
holders of at least 2/3 of the outstanding shares of Common Stock,
unless 2/3 of the entire Board of Directors approves the amendment.
If 2/3 of the Board approves the amendment, the applicable
provisions of Georgia law would govern, and the approval of only a
majority of the outstanding shares of Common Stock would be
required.
Indemnification
The Bylaws of the Company contain certain indemnification
provisions which provide that directors, officers, employees or
agents of the Company will be indemnified against expenses actually
and reasonably incurred by them if they are successful on the
merits of a claim or proceedings.
When a case or dispute is not ultimately determined on its merits
(i.e., it is settled), the indemnification provisions provide that
the Company will indemnify directors when they meet the applicable
standard of conduct. The applicable standard of conduct is met if
the director acted in a manner he or she reasonably believed to be
in or not opposed to the best interests of the Company and, with
respect to any criminal action or proceeding, if the director had
no reasonable cause to believe his or her conduct was unlawful.
Whether the applicable standard of conduct has been met is
determined by the Board of Directors, the shareholders or
independent legal counsel in each specific case.
The Bylaws of the Company also provide that the indemnification
rights set forth therein are not exclusive of other indemnification
rights to which a director may be entitled under any bylaw,
resolution or agreement either specifically or in general terms
approved by the affirmative vote of the holders of a majority of
the shares entitled to vote thereon. The Company can also provide
for greater indemnification than that set forth in the Bylaws if it
chooses to do so, subject to approval by the Company's
shareholders. The Company may not, however, indemnify a director
for liability arising out of circumstances which constitute
exceptions to limitation of a director's liability for monetary
damages. See "CERTAIN PROVISIONS OF THE COMPANY'S ARTICLES AND
BYLAWS - Limitation of Liability."
The indemnification provisions of the Bylaws specifically provide
that the Company may purchase and maintain insurance on behalf of
any director against any liability asserted against such person and
incurred by him in any such capacity, whether or not the Company
would have had the power to indemnify against such liability.
The Company is not aware of any pending or threatened action,
suit or proceeding involving any of its directors or officers for
which indemnification from the Company may be sought.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "1933 Act") may be permitted to
directors, officers and controlling persons of the Company pursuant
to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the SEC such indemnification is
against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities other than the payment by
the Company of expenses incurred or paid by the director, officer
or controlling person of the Company in the successful defense of
any action, suit or proceedings is asserted by such director,
officer or controlling person in connection with the securities
being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the 1933 Act and will be governed by the final adjudication of such
issue.
SUPERVISION AND REGULATION
Bank holding companies and banks are extensively regulated under
both federal and state law. The following is a brief summary of
certain statutes, rules and regulations affecting the Company and
the Bank. This summary is qualified in its entirety by reference
to the particular statutory and regulatory provision referred to
below and is not intended to be an exhaustive description of the
statutes or regulations applicable to the business of the Company
and the Bank. Supervision regulation and examination of the
Company and the Bank by the bank regulatory agencies are intended
primarily for the protection of depositors rather than shareholders
of the Company.
Bank Holding Company Regulation
The Company will be a registered holding company under the Bank
Holding Company act of 1956 (the "BHC Act") and the Georgia Bank
Holding Company Act (the "Georgia BHC Act") and will be regulated
under such acts by the Board of Governors of the Federal Reserve
System (the "Federal Reserve") and by the Department of Banking,
respectively.
As a bank holding company, the Company is required to file annual
reports with the Federal Reserve and the Department of Banking and
such additional information as the applicable regulator may require
pursuant to the BHC Act and the Georgia BHC Act. The Federal
Reserve and the Department of Banking may also conduct examinations
of the Company to determine whether it is in compliance with both
BHC Acts and the regulations promulgated thereunder.
The BHC Act also requires every bank holding company to obtain
prior approval from the Federal Reserve before acquiring direct or
indirect ownership or control of more than 5% of the voting shares
of any bank which is not already majority owned or controlled by
that bank holding company. Acquisition of any additional banks
would also require prior approval from the Department of Banking.
On September 29, 1994, President Clinton signed the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Act") which amends federal law to permit bank holding
companies to acquire existing banks in any state effective
September 29, 1995, and any interstate bank holding company is
permitted to merge its various bank subsidiaries into a single bank
with interstate branches effective June 1, 1997. States have the
authority to authorize interstate branching prior to June 1, 1997
or alternatively, to opt out of interstate branching prior to that
date.
In response to the Interstate Act, recently enacted Georgia
legislation permits interstate branching where the branch banks are
acquired by merger or acquisition between an out-of-state bank and
a Georgia bank. Furthermore, recent Georgia legislation greatly
diminishes the historical legal restrictions on establishing branch
banks across county lines in Georgia. Generally, from July 1, 1996
to July 1, 1998, any bank located in Georgia may branch into any
three additional Georgia counties regardless of the location of the
parent bank. After July 1, 1998, banks may establish branch banks
statewide without limitation.
In addition to having the right to acquire ownership or control
of other banks, a bank holding company is authorized to acquire
ownership or control of nonbanking companies, provided the
activities of such companies are so closely related to banking or
managing or controlling banks that the Federal Reserve considers
such activities to be proper to the operation and control of banks.
Regulation Y, promulgated by the Federal Reserve, sets forth those
activities which are regarded as closely related to banking or
managing or controlling banks and, thus, are permissible activities
for bank holding companies, subject to approval by the Federal
Reserve in individual cases.
Federal Reserve policy requires a bank holding company to act as
a source of financial strength and to take measures to preserve and
protect bank subsidiaries in situations where additional
investments in a troubled bank may not be warranted. Under these
provisions, a bank holding company may be required to loan money to
its subsidiaries in the form of capital notes or other instruments
which qualify for capital under regulatory rules. Any loans by the
holding company to such subsidiary banks are likely to be unsecured
and subordinated to such bank's depositors and perhaps to its other
creditors.
Bank Regulation
The Company will initially have one subsidiary bank. The Bank
will be a state bank chartered under the laws of the State of
Georgia and will be subject to examination by the Department of
Banking. The Department of Banking regulates or monitors all areas
of a bank's operations and activities, including reserves, loans,
mergers, issuance of securities, payment of dividends, interest
rates and establishment of branches.
The Bank will also be insured and regulated by the Federal
Deposit Insurance Corporation (the "FDIC"). The major functions of
the FDIC with respect to insured banks include paying depositors to
the extent provided by law in the event an insured bank is closed
without adequately providing for payment of the claims of
depositors, acting as a receiver of state banks placed in
receivership when so appointed by state authorities, and preventing
the continuance or development of unsound and unsafe banking
practices. In addition, the FDIC is authorized to examine insured
state banks which are not members of the Federal Reserve to
determine the condition of such banks for insurance purposes. The
FDIC also approves conversions, mergers consolidations and
assumption of deposit liability transactions between insured banks
and noninsured banks or institutions to prevent capital or surplus
diminution in such transactions where the resulting, continued or
assuming bank is an insured non-member state bank.
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the BHC Act on any extension of credit to
the bank holding company or any of its subsidiaries, on investment
in the stock or other securities of the bank holding company or its
subsidiaries, and on the taking of such stock or securities as
collateral for loans to any borrower. In addition, a bank holding
company and its subsidiaries are prohibited for engaging in certain
tying arrangements in connection with any extension of credit or
provision of any property or services.
Capital Requirements
Regulatory agencies measure capital adequacy with a framework
that makes capital requirements sensitive to the risk profile of
the individual banking institution. The guidelines define capital
as either Tier 1 capital (primary shareholders equity) or Tier 2
capital (certain debt instruments and a portion of the reserve for
loan losses). There are two measures of capital adequacy for bank
holding companies and their subsidiary banks: the Tier 1 leverage
ratio and the risk-based capital requirements. Bank holding
companies and their subsidiary banks must maintain a minimum Tier
1 leverage ratio of 4%. In addition, Tier 1 capital must equal 4%
of risk-weighted assets, and total capital (Tier 1 plus Tier 2)
must equal 8% of risk-weighted assets. These are minimum
requirements, however, and institutions experiencing internal
growth (which will initially be the case for the Bank) or making
acquisitions, as well as institutions with supervisory or
operational weaknesses, will be expected to maintain capital
positions well above these minimum levels.
The federal banking agencies have proposed amending the capital
adequacy standards to provide for the consideration of interest
rate risk in the overall determination of a bank's capital ratio
and to require banks with greater interest rate risk to maintain
adequate capital for the risk. It is uncertain what effect these
regulations, when implemented, would have on the Company and the
Bank.
The Federal Deposit Insurance Corporation Improvements Act of
1991 (the "1991 Act") imposes a regulatory matrix which requires
the federal banking agencies to take prompt corrective action to
deal with depository institutions that fail to meet their minimum
capital requirements or are otherwise in a troubled condition. The
prompt corrective action provisions require undercapitalized
institutions to become subject to an increasingly stringent array
of restrictions, requirements and prohibitions, as their capital
levels deteriorate and supervisory problems mount. Should these
corrective measures provide unsuccessful in recapitalizing the
institution and correcting its problems, the 1991 Act mandates that
the institution be placed in receivership.
Pursuant to regulations promulgated under the 1991 Act, the
corrective actions that the banking agencies either must or may
take are tied primarily to an institution's capital levels. In
accordance with the framework adopted by the 1991 Act, the banking
agencies have developed a classification system, pursuant to which
all banks and thrifts are placed into one of five categories:
well-capitalized institutions, adequately capitalized institutions,
undercapitalized institutions, significantly undercapitalized
institutions and critically undercapitalized institutions. The
capital thresholds established for each of the categories are as
follows:
<TABLE>
<S> <C> <C> <C> <C>
Capital Tier 1 Total Risk Tier 1 Risk
Category Capital Based Capital Based Capital Other
Well 5% or more 10% or more 6% or more Not
Capitalized Subject to
a capital
directive
Adequately 4% or more 8% or more 4% of more -
Capitalized
Undercapit- less than 4% less than 8% less than 4% -
alized
Significantly less than 3% less than 6% less than 3% -
Undercapitalized
Critically 2% or less - - -
Undercapit- tangible equity
alized
</TABLE>
The capital guidelines can affect the Company in several ways.
After completion of this offering, the Company's capital levels
will initially be more than adequate. However, rapid growth, poor
loan portfolio performance, poor earnings performance, or a
combination of these factors, could change the Company's capital
position in a relatively short period of time, making an additional
capital infusion necessary.
The Department of Banking will require the Bank to maintain a
ratio (the "primary capital ratio") of total capital (which is
essentially Tier 1 capital plus the allowance for loan losses) to
total assets (defined as balance sheet assets plus the allowance
for loan losses) of at least 6%. In addition, the Bank expects
that, in accordance with the Department of Banking policy, the Bank
will be required to maintain a primary capital ratio of 8% during
its first three years of operation.
CRA and Fair Lending
On April 19, 1995, the federal bank regulatory agencies adopted
revisions to the regulations promulgated pursuant to the Community
Reinvestment At (the "CRA"), which are intended to set distinct
assessment standard for financial institutions. The revised
regulation contains three evaluation tests: (a) a lending test
which will compare the institution's market share of loans in low-
and moderate-income areas to its market share of loans in its
entire service area and the percentage of a bank's outstanding
loans to low- and moderate-income areas or individuals, (b) a
services test which will evaluate the provision of services that
promote the availability of credit to low- and moderate-income
areas, and (c) an investment test, which will evaluate an
institution's record of investments in organizations designed to
foster community development, small- and minority-owned businesses
and affordable housing lending, including state and local
government housing or revenue bonds. The regulation is designed to
reduce the paperwork requirements of the current regulations and
provide regulators, institutions and community groups with a more
objective and predictable manner with which to evaluate the CRA
performance of financial institutions. The rule became effective
on January 1, 1996, at which time evaluation under streamlined
procedures began for institutions with assets of less than $250
million that are owned by a holding company with total assets of
less than $1 billion.
Congress and various federal agencies (including, in addition
to the bank regulatory agencies, the Department of Housing and
Urban Development, the Federal Trade Commission and the Department
of Justice) (collectively the "Federal Agencies") responsible for
implementing the nation's fair lending laws have been increasingly
concerned that prospective home buyers and other borrowers are
experiencing discrimination in their efforts to obtain loans. In
recent years, the Department of Justice has filed suit against
financial institutions which it determined had discriminated,
seeking fines and restitution for borrowers who allegedly suffered
from discriminatory practices. Most, if not all, of these suits
have been settled (some for substantial sums) without a full
adjudication on the merits.
On March 8, 1994, the Federal Agencies, in an effort to clarify
what constitutes lending discrimination and to specify the factors
the agencies will consider in determining if lending discrimination
exists, announced a joint policy statement detailing specific
discriminatory practices prohibited under the Equal Credit
Opportunity Act and the Fair Housing Act. In the policy statement,
three methods of proving lending discrimination were identified:
(a) overt evidence of discrimination, when a lender blatantly
discriminates on a prohibited basis, (b) evidence of disparate
treatment, when a lender treats applicants differently based on a
prohibited factor even where there is no showing that the treatment
was motivated by prejudice or a conscious intention to discriminate
against a person, and (c) evidence of disparate impact, when a
lender applies a practice uniformly to all applicants, but the
practice has a discriminatory effect, even where such practices are
neutral on their face and are applied equally, unless the practice
can be justified on the basis of business necessity.
FDIC Insurance Assessments
The Bank will be subject to FDIC deposit insurance assessments
for the Bank Insurance Fund. The FDIC has implemented a risk-based
assessment system whereby banks are assessed on a sliding scale
depending on their placement in nine separate supervisory
categories. The highest-rated institutions pay the statutory
annual minimum of $2,000 for FDIC insurance. Rates for all other
institutions are reduced by four cents per $100 as well, leaving a
premium range of 3 cents to 27 cents per $100 of deposits. For
FDIC deposit insurance, the Bank will initially pay an annual FDIC
deposit insurance assessment of .43 cents per $100 of deposits.
<PAGE>
Future Requirements
Statutes and regulations are regularly proposed which contain
wide-ranging proposals for altering the structures, regulations and
competitive relationship of the nation's financial institutions.
It cannot be predicted whether or what form any proposed statute or
regulation will be adopted or the extent to which the business of
the Company and the Bank may be affected by such statute or
regulation.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed
upon for the Company by James E. Palmour III, Esquire, Gainesville,
Georgia. Mr. Palmour is one of the organizers and serves as a
director of the Company. He will also serve as a director of the
Bank. He has provided legal services to the Company during 1997,
and it is anticipated that he will provide legal services to the
Company and the Bank during 1998. Mr. Palmour also intends to
purchase 10,000 shares of Common Stock of the Company in the
offering.
EXPERTS
The financial statements of the Company at December 31, 1997
and for the period from February 24, 1997 (inception) until
December 31, 1997, set forth herein have been so included in
reliance on the report of Henry & Company, LLP, independent
certified public accountants, given on the authority of that firm
as experts in accounting and auditing.
<PAGE>
SOUTHERN HERITAGE BANCORP, INC.
(A Development Stage Corporation)
FINANCIAL STATEMENTS
For the Period from February 24, 1997 (inception)
to December 31, 1997
<PAGE>
SOUTHERN HERITAGE BANCORP, INC.
(A Development Stage Corporation)
For the Period from February 24, 1997 (inception)
to December 31, 1997
TABLE OF CONTENTS
Page
Independent Accountants' Report 1
Balance Sheet 2
Statement of Operations 3
Statement of Stockholders' Equity 4
Statement of Cash Flows 5
Notes to the Financial Statements 6 - 10
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Southern Heritage Bancorp, Inc.
We have audited the accompanying balance sheet of Southern Heritage
Bancorp, Inc. (a development stage corporation) as of December 31,
1997, and the related statements of operations, changes in
shareholders' equity and cash flows for the period from February
24, 1997 (inception) to December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
Southern Heritage Bancorp, Inc. as of December 31, 1997 and the
results of operations and its cash flows from February 24, 1997
(inception) to December 31, 1997 in conformity with generally
accepted accounting principles.
HENRY & COMPANY, LLP
Gainesville, Georgia
February 27, 1998<PAGE>
SOUTHERN HERITAGE BANCORP, INC.
(A Development Stage Company)
BALANCE SHEET
December 31, 1997
<TABLE>
<S> <C>
Assets
Current assets:
Cash $ 12,643
Prepaid expenses (Note 3) 46,141
Total current assets 58,784
Property and equipment (Note 5):
Furniture and fixtures 1,000
Vehicles 18,909
Accumulated depreciation (315)
Total property and equipment 19,594
Other assets:
Deferred stock offering costs (Note 2) 2,245
Organization costs (Note 2) 63,175
Construction in progress (Note 4) 48,413
Total other assets 113,833
Total assets $ 192,211
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $ 20,268
Accrued liabilities 872
Total current liabilities 21,140
Noncurrent liabilities:
Line of credit (Note 6) 227,415
Total noncurrent liabilities 227,415
Total liabilities 248,555
Commitments and Contingencies
Stockholders' deficit:
Common stock, $5.00 par value;
10,000,000 shares authorized;
no shares issued and outstanding -
Deficit accumulated during the development stage (56,344)
Total liabilities and stockholders' deficit $ 192,211
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
SOUTHERN HERITAGE BANCORP, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
For the Period from February 24, 1997 (inception) to December 31, 1997
<TABLE>
<S> <C>
Income: $ -
Expenses:
Consulting expense 21,000
Salaries expense 17,500
Legal and accounting expenses 4,000
Interest expense 4,593
Other pre-opening expenses 9,251
Total expenses 56,344
Net Loss $ (56,344)
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
SOUTHERN HERITAGE BANCORP, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
For the Period from February 24, 1997 (inception) to December 31, 1997
<TABLE>
<S> <C> <C> <C>
Deficit
Accumulated
During
Common Development
Stock Stage Total
February 24, 1997 $ - $ - $ -
Net loss - Inception to
December 31, 1997 - (56,344) (56,344)
December 31, 1997 $ - (56,344) $ (56,344)
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
SOUTHERN HERITAGE BANCORP, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the Period from February 24, 1997 (inception) to December 31, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (56,344)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 315
Increase in prepaid expenses (46,141)
Increase in accounts payable 20,268
Increase in accrued liabilities 872
Net Cash Used by Operating Activities (81,030)
CASH FLOWS FROM INVESTING ACTIVITIES
Organization costs, capitalized (63,175)
Capital expenditures (68,322)
Net Cash Used by Investing Activities (131,497)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from organizers 85,000
Repayment to organizers (85,000)
Draws on line of credit 225,000
Interest capitalized to line of credit 2,415
Increase in deferred stock offering costs (2,245)
Net Cash Provided by Financing Activities 225,170
NET INCREASE IN CASH 12,643
Cash, at beginning of period -
Cash, at end of period $ 12,643
Supplemental information:
Cash paid for interest during the period $ 2,178
Interest capitalized during the period $ 2,415
</TABLE>
The accompanying notes are an integral part of these financial statements.
SOUTHERN HERITAGE BANCORP, INC.
(A Development Stage Corporation)
NOTES TO FINANCIAL STATEMENTS
For the Period from February 24, 1997 (inception) to
December 31, 1997
NOTE 1 ORGANIZATION
Southern Heritage Bancorp, Inc. ("the Company") was formed on
February 13, 1998 for the purpose of becoming a bank holding
company. The Company intends to acquire 100% of the
outstanding common stock of Southern Heritage Bank ("the
Bank") which will operate as a full service community bank in
Oakwood, Georgia. The organizers of the Bank have received
preliminary regulatory approval to charter the Bank with the
Department of Banking and Finance and the Federal Deposit
Insurance Corporation.
Prior to the filing of the Company's Articles of Incorporation
with the Georgia Secretary of State on February 13, 1998,
organizational and pre-opening activities were conducted by
the organizers. The FDIC is expected to approve the Company's
application to operate as a federally insured banking company.
Provided that the application is approved timely and necessary
capital is raised, it is expected that the operations of the
Company through the Bank will commence in 1998.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Pre-opening and Organization Costs
Pre-opening costs such as salaries and other operating
expenses are initial expenses incurred to prepare the Company
to commence business as a financial institution. These costs
are included in the current period's operating results as
expense items in the Statement of Operations.
Costs incurred for the organization of the Company (consisting
principally of legal, accounting, consulting, and
incorporation fees) are being capitalized and will be
amortized over five years. Amortization of the organization
costs will begin when banking operations commence.
Stock offering costs, consisting of direct, incremental costs
of the offering, have been deferred and will be charged to
additional paid-in capital when the stock offering is
completed.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Property and Equipment
Property and equipment is stated at cost. Depreciation is
computed using the straight-line method over the estimated
useful lives of the assets for financial reporting purposes
and on an accelerated method for tax reporting purposes.
Income Taxes
The Company is subject to federal and state income taxes.
No taxes have been accrued or paid because of operating
losses incurred during the pre-opening stage. During the
development stage, the Company has recognized a valuation
allowance equal to 100% of the tax benefit arising from the
operating loss carryforwards.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could
differ from those estimates.
Advertising Costs
Advertising costs are expensed when incurred by the Company.
NOTE 3 PREPAID EXPENSES
Prepaid expenses of $46,141 at December 31, 1997 consists of
prepaid rent of $45,600 and prepaid insurance of $541. The
prepaid rent represents payment for the lease of a temporary
building for one year. See Note 7 for more details.
NOTE 4 CONSTRUCTION IN PROGRESS
The Company plans to build a permanent facility upon final
regulatory approval. Expenses have been incurred related to
architectural fees for the design of this building and have
been capitalized as construction in progress. Upon final
completion of the building, the amounts will be reported as
fixed assets and will be depreciated over the estimated useful
life of the building.
NOTE 5 PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at
December 31, 1997:
Furniture and fixtures $ 1,000
Vehicles 18,909
19,909
Less: accumulated
depreciation (315)
Total property and
equipment $ 19,594
Depreciation expense charged to operations was $315 in 1997.
NOTE 6 DEBT
Organization and pre-opening expenses have been funded with
borrowings under two $50,000 lines of credit at another
financial institution. These lines were in the name of the
organizers of the Company, but all proceeds were used for
organization and pre-opening expenses. The first line of
credit originated on May 3, 1997 and carried an interest rate
of 9% and a maturity date of October 30, 1997. The second
line originated on September 10, 1997 and also carried a 9%
interest rate and a maturity date of October 30, 1997. Both
were repaid in full on their due date with proceeds from a
line of credit with The Banker's Bank.
The line of credit with The Banker's Bank originated on
October 23, 1997 in the amount of $500,000 and carries an
interest rate of the Prime rate published in the Wall Street
Journal or 8.5% at December 31, 1997. The outstanding balance
is due in full on October 23, 1998. As of December 31, 1997,
the outstanding balance totaled $227,415 of which 2,415 is
capitalized interest. The line is guaranteed by the
organizers of the Company. It is the intent of the Company's
organizers to repay the debt with proceeds from the stock
sale.
NOTE 7 COMMITMENTS AND RELATED PARTY TRANSACTIONS
Organization costs and pre-opening expenses have been funded
with a loan acquired by the organizers of the Company, as
described in Note 5.
The Bank entered into an employment agreement with the
President\Chief Executive Officer on November 5, 1997. The
employment agreement provides for a three year term and is
annually renewable thereafter. The President will be paid an
initial base annual salary of $105,000. Once the Bank begins
operations, he will also be entitled to certain
performance bonuses based on regulatory ratings of the Bank
and deposit growth, return on average assets ("ROA"), and
return on average equity ("ROE") of the
Bank for the year. Based on these factors, the calculated
bonus may range from 0 to 50% of the base salary.
Further, the employment agreement requires the President to
purchase 6,000 shares of the initial offering of Common Stock
of the Company at the same time as the other initial
directors. The President will also have the right to purchase
an additional 15,000 shares at book value or $10.00 per share,
whichever is less, during the first five years of operation of
the Bank.
The Bank also entered into an employment agreement with the
Senior Vice President\Chief Lending Officer of the Bank on
January 1, 1998; however, this employee's actual start date
has not yet been determined. The employment agreement
provides for a two year term and is annually renewable
thereafter. The Senior Vice President\Chief Lending Officer
will be paid an initial base annual salary of $63,500. Once
the Bank begins operations, the employee will also be entitled
to certain performance bonuses based upon mutually agreed upon
goals such as a pre-determined formula consisting of
regulatory compliance, deposit growth, and other factors.
Based on these factors, the calculated bonus may range from 0
to 15% of the base salary. Further, the contract gives the
Senior Vice President\Chief Lending Officer the right and
option to purchase 5,000 shares of the Company's common stock
at book value or $10.00 per share, whichever is less, for the
first five years of employment and if extended by the board
not to exceed ten years.
NOTE 7 COMMITMENTS AND RELATED PARTY TRANSACTIONS
(Continued)
On January 7, 1998, the Bank entered into an employment
agreement with the Senior Vice President\Chief Operations
Officer of the Bank. The agreements provides for a three year
term and is annually renewable thereafter. The Senior Vice
President\Chief Lending Officer will receive an annual
salary of $65,000 for the first twelve months. Thereafter,
annual performance reviews will determine the amount of
increase in the initial base salary. Once the Bank begins
operations, the employee will be entitled to performance
bonuses ranging from 0% to 15% of the annual base salary. In
addition, the employee shall have the right and option to
purchase 5,000 shares of the Company's common stock at book
value or $10.00 per share, whichever is less, for the first
five years of employment and if extended by the board not to
exceed ten years.
On June 1, 1997, the Bank entered into a lease agreement with
Bank and Business Systems, Inc. for a temporary office
facility. The entire agreement is contingent upon the receipt
of final government regulatory approvals. The lease calls for
monthly rent in the amount of $3,800 per month for a twelve
month term payable in advance ($45,600). This
amount was paid by the Company in 1997 and is shown as prepaid
rent on the balance sheet at December 31, 1997. In addition,
the lease requires the Company to maintain insurance on the
temporary facility and well as on its contents.
On November 21, 1997, the Bank entered into an architectural
contract with Hussey, Gay, Bell & Deyoung International, Inc.,
Jacobs-Hlavenka Division to design the Company's permanent
facility in Oakwood, Georgia. The total construction cost of
the building is estimated to be $1 million. The contract
calls for a base fee of 6% of the estimated total construction
cost, payable in progress payments as the work is completed,
as well as extra charges for increases from executed change
orders and extra services. As of December 31, 1997, the
Company has made $40,500 in payments to Jacobs-Hlavenka which
are shown as a component of construction in progress on the
balance sheet.
NOTE 7 COMMITMENTS AND RELATED PARTY TRANSACTIONS
(Continued)
On February 4, 1998, the Company entered into a lease with a
related party (an organizer and a director of the Company) for
the land which will be the site of the permanent facility.
The lease calls for a twenty year term (beginning on the rent
commencement date) which can be extended for four additional
periods of five years each. The base annual rent is $40,000,
payable in monthly installments of $3333.33 each. The rent
commencement date shall be the earlier of the day the Company
locates its temporary office facility of the premises and said
facility is placed in use by the Company's employees or 120
days after the date of the lease.
<PAGE>
SUBSCRIPTION AGREEMENT EXHIBIT "A"
Southern Heritage Bancorp, Inc.
3461 Atlanta Highway
P. O. Box 907
Oakwood, Georgia 30566
Attn: Gary H. Anderson
Gentlemen:
The undersigned hereby subscribes for and agrees to purchase
the number of shares of Common Stock, par value $5.00 per share
(the "Common Stock"), of Southern Heritage Bancorp, Inc., a Georgia
corporation (the "Company"), indicated below. The undersigned has
executed and delivered this Subscription Agreement in connection
with the Company's offering of Common Stock described in its
Prospectus dated ______, 1998. (Such Prospectus, including any
amendments and supplements thereto, is herein called the
"Prospectus").
The undersigned agree to purchase the shares of Common Stock
subscribed for herein for the purchase price of $10.00 per share.
All checks should be made payable to "The Bankers Bank - Escrow
Account for Southern Heritage Bancorp, Inc." A check in an amount
equal to the full subscription price is enclosed with this
Subscription Agreement.
The undersigned acknowledges receipt of a copy of the
Prospectus. The undersigned further acknowledges that the Company
has not yet begun operations and that an investment in the Common
Stock involves significant risks, as set forth under "Risk Factors"
in the Prospectus. The undersigned understands that no federal or
state agency has made any finding or determination regarding the
fairness of the offering of the Common Stock, the accuracy or
adequacy of the Prospectus, or any recommendations or endorsement
concerning an investment in the Common Stock.
The undersigned agrees that this subscription is binding on the
undersigned and is irrevocable by the undersigned until the
Expiration Date as defined in the Prospectus. The undersigned
acknowledges that this Subscription Agreement shall not constitute
a valid and binding obligation of the Company until accepted by the
Company in writing, and that the Company has the right to reject
this Subscription Agreement, either in whole or in part, in its
sole discretion.
Number of Shares
(minimum 100 shares): ________ ____________________________
Please PRINT or TYPE exact
name(s) in which undersigned
desires to be registered
Total Subscription
Price (at $10.00 per
share): $_______
<PAGE>
SUBSTITUTE W-9
Under the penalties of perjury, I certify that: (a) the Social
Security Number or Taxpayer Identification Number given below is
correct; and (2) I am not subject to backup withholding.
INSTRUCTION: YOU MUST CROSS OUT #2 ABOVE IF YOU HAVE BEEN NOTIFIED
BY THE INTERNAL REVENUE SERVICE THAT YOU ARE SUBJECT TO BACKUP
WITHHOLDING BECAUSE OF UNDER-REPORTING INTEREST OR DIVIDENDS ON
YOUR TAX RETURN.
_____________________________ ____________________________
Date Signature(s)*
_____________________________ ____________________________
Area Code and Telephone No. Please indicate form of
ownership the undersigned
desires for the shares
(individual, joint tenants
with right of survivorship,
tenants in common, trust,
corporation, partnership,
custodian, etc.)
_____________________________
Social Security or Federal
Taxpayer Identification No. ____________________________
Street Address
____________________________
City/State/Zip Code
TO BE COMPLETED BY THE COMPANY
Accepted as of __________________, 1998, as to ____________ shares.
SOUTHERN HERITAGE BANCORP, INC.
By___________________________
Signature
_____________________________
Print Name
*When signing as attorney, trustee, administrator, or guardian,
please give your full title as such. If a corporation, please sign
in full corporate name by president or other authorized officer.
In case of joint tenants, each joint owner must sign.
<PAGE>
______________________________________________
The Company reserves the right, in its sole
discretion to reject any and all
subscriptions, and no subscription will be
effective until accepted by the Company.
No person has been authorized by the Company
to give any information or to make any
representations not contained in this
Prospectus, and any information or statement
not contained herein must not be relied upon
as having been authorized by the Company. The
delivery of this Prospectus does not imply
that the information contained herein is
correct as of any time subsequent to its date.
The Company has undertaken to update this
Prospectus to reflect any facts or events
arising after the date hereof, which
individually or in the aggregate represent a
fundamental change in the information set
forth herein and to include any material
information with respect to the plan of
distribution not previously disclosed in the
Prospectus or any material changes to such
information.
Subscribers should not construe the contents
of this Prospectus or any communication from
the Company, whether written or oral, as
legal, tax accounting, or other expert advice.
Each subscriber should consult his or her own
counsel, accountants and other professional
advisors as to all matters concerning his or
her investment in shares of the Common Stock.
The shares of Common Stock of the Company
offered hereby are not deposits insured by the
Federal Deposit Insurance Corporation.
This Prospectus does not constitute an offer
to sell in any jurisdiction or a solicitation
of an offer to buy any of the shares of the
Common Stock to any person in any jurisdiction
in which such offer or solicitation is
unlawful.
TABLE OF CONTENTS
Page
Summary...................................
Risk Factors..............................
The Offering..............................
Use of Proceeds...........................
Capitalization............................
Dividends.................................
Business of the Company and the Bank......
Management................................
Market for Common Stock and Related
Shareholder Matters.......................
Description of Common Stock of the
Company.................................
Certain Provisions of the Company's
Articles of Incorporation and
ByLaws..................................
Supervision and Regulation................
Legal Matters.............................
Experts...................................
Financial Statements...................... F-1
Subscription Agreement................. Exhibit "A"
_____________________________________________________
<PAGE>
_____________________________________________________
SOUTHERN HERITAGE BANCORP, INC.
A Proposed Bank Holding Company
for
SOUTHERN HERITAGE BANK
A Proposed State Bank
1,000,000
Shares of
Common Stock
PROSPECTUS
______________________________
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Consistent with the pertinent provisions of the laws of Georgia,
the Registrant's Articles of Incorporation provide that the
Registrant shall have the power to indemnify its directors and
officers against expenses (including attorney's fees) and
liabilities arising from actual or threatened actions, suits or
proceedings, whether or not settled, to which they become subject
by reason of having served in such role if such director or officer
acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the Registrant
and, with respect to a criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
Advances against expenses shall be made so long as the person
seeking indemnification agrees to refund the advances if it is
ultimately determined that he or she is not entitled to
indemnification. A determination of whether indemnification of a
director or officer is proper because he or she met the applicable
standard of conduct shall be made (a) by the Board of Directors of
the Registrant, (b) in certain circumstances, by independent legal
counsel in a written opinion, or (c) by the affirmative vote of a
majority of the shares entitled to vote.
Item 25. Other Expenses of Issuance and Distribution.
Expenses of the sale of the Registrant's Common Stock, $5.00 par
value, are as follows:
Registration Fee $ 2,950
Legal Fees and Expenses (Estimate) 20,000
Accounting Fees and Expenses (Estimate) 4,000
Printing and Engraving Expenses (Estimate) 2,500
Miscellaneous (Estimate) 6,050
Total $ 35,000
Item 26. Recent Sales of Unregistered Securities.
On February 19, 1998, the Registrant issued to Lowell S. Cagle,
in a private placement one share of the Registrant's Common Stock,
$5.00 par value per share, for an aggregate purchase price of $10
in connection with the organization of the Company. The sale to
Mr. Cagle was exempt from registration under the Securities Act of
1933 pursuant to Section 4(2) of such Act because it was a
transaction by an issuer which did not involve a public offering.
<PAGE>
Item 27. Exhibits.
Exhibit Description
Number
3.1 Articles of Incorporation
3.2 Bylaws
5.1 Legal Opinion of James E. Palmour, III
10.1 Ground Lease
10.2 Employment Agreement of Gary H. Anderson
10.3 Escrow Agreement
21.1 Subsidiaries of Southern Heritage Bancorp, Inc.
23.1 Consent of Henry & Company, LLP
23.2 Consent of James E. Palmour, III
27 Financial Data Schedule
Item 28. Undertakings.
The undersigned Registrant hereby undertakes as follows:
(a) (1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events which,
individually or together represent a fundamental change
in the information set forth in the Registration
Statement, and notwithstanding the foregoing, any
increase or decrease in volume of securities offered
(if the total dollar value of securities offered would
not exceed that which was registered) and any deviation
from the low or high end of the estimated offering rate
may be reflected in the form of prospectus filed with
the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in column and price represent no
more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration
Statement;
(iii) To include any additional or changed material
information the plan of distribution.
(2) For the purpose of determining any liability under the
Securities Act of 1933, to treat each post-effective amendment
as a new Registration Statement of the securities offered, and
the offering of the securities at the time shall be deemed to be
the initial bona fide offering.
(3) To file a post-effective amendment to remove from
registration any of the securities being registered which remain
unsold at the termination of this offering.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors,
officers and controlling persons of the Registrant pursuant to
the provisions set forth in Item 24, or otherwise, the Registrant
has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of
1933, the registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements of filing on Form SB-2 and
authorized this registration statement to be signed on its
behalf by the undersigned, in the City of Oakwood, State of
Georgia, on March 3, 1998.
SOUTHERN HERITAGE BANCORP, INC.
By: s/Gary H. Anderson
Print Name: Gary H. Anderson
Title: President and Chief
Executive Officer
Pursuant to the requirements to the Securities Act of 1933, this
Registration Statement has been signed by the following persons in
the capacities and on the date indicated.
Name Position Date
s/Gary H. Anderson Director; President 3/3/98
Gary H. Anderson and C.E.O.
s/Jeanie Bridges Corporate Treasurer, 3/3/98
Jeanie Bridges C.A.O. and C.F.O.
s/Lowell S. Cagle Director; Chairman 3/3/98
Lowell S. Cagle of the Board
s/James E. Palmour, III Director; Corporate 3/3/98
James E. Palmour, III Secretary
s/Earl Gilleland Director 3/3/98
Earl Gilleland
s/Terry Hayes Director 3/3/98
Terry Hayes
s/David Merritt Director 3/3/98
David Merritt
s/Harold Nichols Director 3/3/98
Harold Nichols
<PAGE>
s/Edward Quillian Director 3/3/98
Edward Quillian
s/M. Milton Robson Director 3/3/98
M. Milton Robson
s/Donald W. Smith Director 3/3/98
Donald W. Smith <PAGE>
INDEX OF EXHIBITS
Exhibit Sequential
Number Description Page
3.1 Articles of Incorporation ______
3.2 ByLaws ______
5.1 Legal Opinion of James E. Palmour, III ______
10.1 Ground Lease ______
10.2 Employment Agreement of Gary H. Anderson ______
10.3 Escrow Agreement ______
21.1 Subsidiaries of Southern Heritage Bancorp,
Inc. ______
23.1 Consent of Henry & Company, LLP ______
23.2 Consent of James E. Palmour, III ______
27 Financial Data Schedule (providing
information for the fiscal year ended
December 31, 1997). As of December 31,
1997, neither the Company nor Southern
Heritage Bank had commenced their
respective operations as a bank holding
company or as a commercial bank, and
neither will do so unless regulatory
approvals are obtained and the required
capitalization of the Bank by the Company
is obtained from proceeds of the sale
of the Company's stock ______
<PAGE>
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
SOUTHERN HERITAGE BANCORP, INC.
1.
The name of the Corporation is: "Southern Heritage Bancorp, Inc."
2.
The Corporation is organized pursuant to the provisions of the
Georgia Business Corporation Code.
3.
The object of the Corporation is pecuniary gain and profit, and
the Corporation is formed for the purpose of becoming and operating
as a bank holding company and engaging in such related and
permissible activities in connection therewith as the Board of
Directors may from time to time specify by resolution.
4.
The Corporation shall have authority to issue Ten Million
(10,000,000) shares of common stock (the "Common Stock"), $5.00 par
value.
5.
The initial registered office of the Corporation shall be at 410
Hunt Tower, 200 Main Street, Gainesville, Hall County, Georgia
30501. The initial registered agent of the Corporation at such
address shall be James E. Palmour III.
<PAGE>
6.
The mailing address of the initial principal office of the
corporation is P. O. Box 907, Oakwood, Georgia 30566.
7.
(a) Except as provided in paragraph (b) of this Article 7, the
Board of Directors shall have the right to adopt, amend or repeal
the bylaws of the Corporation by the affirmative vote of a majority
of all directors then in office, and the shareholders shall have
such right by the affirmative vote of a majority of the issued and
outstanding shares of the Corporation entitled to vote in an
election of directors.
(b) Notwithstanding paragraph (a) of this Article 7, any
amendment of the bylaws of the Corporation changing the number of
directors shall require the affirmative vote of two-thirds (2/3)
of all directors then in office or the affirmative vote of the
holders of two-thirds (2/3) of the issued and outstanding shares
of the Corporation entitled to vote in an election of directors,
at any regular or special meeting of the shareholders, and notice
of the proposed change must be contained in the notice of the
meeting.
8.
(a) At any shareholders' meeting with respect to which notice
of such purpose has been given, the entire Board of Directors or
any individual director may be removed without cause only by the
affirmative vote of the holders of a majority of the issued and
outstanding shares of the Corporation.
(b) At any shareholders' meeting with respect to which notice
of such purpose has been given, the entire Board of Directors or
any individual director may be removed with cause only by the
affirmative vote of the holders of a majority of the shares of the
Corporation represented at the meeting either in person or by
proxy.
(c) For purposes of this Article 8, a director of the
Corporation may be removed for cause if (i) the director has been
convicted of a felony; (ii) any bank regulatory authority having
jurisdiction over the Corporation requests or demands the removal;
or (iii) at least two-thirds (2/3) of the directors of the
Corporation then in office, excluding the director to be removed,
determine that the director's conduct has been inimical to the best
interests of the Corporation.
(d) Unless two-thirds (2/3) of the directors then in office
shall approve the proposed change, this Article 8 may be amended
or rescinded only by the affirmative vote of the holders of at
least two-thirds (2/3) of the issued and outstanding shares of the
Corporation entitled to vote in an election of directors, at any
regular or special meeting of the shareholders, and notice of the
proposed change must be contained in the notice of the meeting.
9.
The initial Board of Directors of the Corporation shall consist
of ten (10) members who shall be and whose addresses are:
Gary H. Anderson
4006 Covey Trail
Oakwood, GA 30566
Lowell S. (Casey) Cagle
4615 Hunters Court
Gainesville, GA 30507
Earl Gilleland
3997 Sloan Mill Road
Gainesville, GA 30507
Terry Hayes
Highway 323, P. O. Box 357
Hoschton, GA 30548
David Merritt
6620 Stringer Road
Clermont, GA 30527
Harold Nichols
4431 Benefield Road
Braselton, GA 30502
<PAGE>
James E. Palmour III
255 Sorrento Circle, N.W.
Gainesville, GA 30506
Dr. Edward Quillian
4207 Bob White Lane
Oakwood, GA 30566
Milton Robson
3509 Tanners Mill Circle
Gainesville, GA 30507
Donald W. Smith
4129 Cherokee Trail
Gainesville, GA 30504
10.
(a) A director of the Corporation shall not be personally liable
to the Corporation or its shareholders for monetary damages, for
breach of any duty as a director, except for liability for:
(i) any appropriation, in violation of his or her duties, of
any business opportunity of the Corporation;
(ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
(iii) the types of liability set forth in Section 14-2-832 of
the Georgia Business Corporation Code dealing with
unlawful distributions of corporate assets to
shareholders; or
(iv) any transaction from which the director derived an
improper material tangible personal benefit.
(b) Any repeal or modification of this Article by the
shareholders of the Corporation shall be prospective only and shall
not adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification.
(c) Unless two-thirds (2/3) of the directors then in office
shall approve the proposed change, this Article 10 may be amended
or rescinded only by the affirmative vote of the holders of at
least two-thirds (2/3) of the issued and outstanding shares of the
Corporation entitled to vote thereon, at any regular or special
meeting of the shareholders, and notice of the proposed change must
be contained in the notice of the meeting.
11.
Any action required by law or by the Bylaws of the Corporation
to be taken at a meeting of the shareholders of the Corporation,
and any action which may be taken at such a meeting, may be taken
without a meeting, if written consent, setting forth the action so
taken, is signed by persons entitled to vote at a meeting those
shares having sufficient voting power to cast not less than the
minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote
were present and voted. Notice of such action without a meeting
by less than unanimous written consent shall be given within ten
(10) days after taking such action to those shareholders of record
on the date when the written consent is first executed and whose
shares were not represented on the written consent.
<PAGE>
12.
(a) Approval of any merger or share exchange of the Corporation
with or into any other corporation, or any sale, lease, exchange
or other disposition of all or substantially all of the assets of
the Corporation to any other corporation, person or other entity,
shall require either:
(i) the affirmative vote of two-thirds (2/3) of the directors
of the Corporation then in office and the affirmative vote
of a majority of the issued and outstanding shares of the
Corporation entitled to vote; or
(ii) the affirmative vote of a majority of the directors of the
Corporation then in office and the affirmative vote of the
holders of at least two-thirds (2/3) of the issued and
outstanding shares of the Corporation entitled to vote.
(b) The Board of Directors shall have the power to determine
for the purposes of this Article 12, on the basis of information
known to the Corporation, whether any sale, lease, exchange or
other disposition of part of the assets of the Corporation involves
substantially all of the assets of the Corporation.
(c) Unless two-thirds (2/3) of the directors then in office
shall approve the proposed change, this Article 12 may be amended
or rescinded only by the affirmative vote of the holders of at
least two-thirds (2/3) of the issued and outstanding shares of the
Corporation entitled to vote thereon at any regular or special
meeting of the shareholders, and notice of the proposed change must
be contained in the notice of the meeting.
13.
(a) The Board of Directors, when evaluating any offer of
another party (i) to make a tender offer or exchange offer for any
equity security of the Corporation, (ii) to merge or consolidate
any other corporation with the Corporation, or (iii) to purchase
or otherwise acquire all or substantially all of the assets of the
Corporation, shall, in determining what is in the best interests
of the Corporation and its shareholders, give due consideration to
all relevant factors, including without limitation: (A) the short-term
and long-term social and economic effects on the employees,
customers, shareholders and other constituents of the Corporation
and its subsidiaries, and on the communities within which the
Corporation and its subsidiaries operate (it being understood that
any subsidiary bank of the Corporation is charged with providing
support to and being involved in the communities it serves); and
(B) the consideration being offered by the other party in relation
to the then-current value of the Corporation in a freely negotiated
transaction and in relation to the Board of Directors' then-estimate of
the future value of the Corporation as an independent
entity.
(b) Unless two-thirds (2/3) of the directors then in office
shall approve the proposed change, this Article 13 may be amended
or rescinded only by the affirmative vote of the holders of at
least two-thirds (2/3) of the issued and outstanding shares of the
Corporation entitled to vote thereon, at any regular or special
meeting of the shareholders, and notice of the proposed change must
be contained in the notice of the meeting.
14.
Should any provision of these Articles of Incorporation, or any
clause hereof, be held to be invalid, illegal or unenforceable, in
whole or in part, the remaining provisions and clauses of these
Articles of Incorporation shall remain valid and fully enforceable.
15.
The name and address of the incorporator of the Corporation is
James E. Palmour III, 410 Hunt Tower, 200 Main Street, Gainesville,
Georgia 30501.
IN WITNESS WHEREOF, the undersigned has caused these Articles of
Incorporation to be executed, this 11th day of February, 1998.
s/James E. Palmour, III
JAMES E. PALMOUR III,
Incorporator
410 Hunt Tower
200 Main Street
Gainesville, GA 30501
(770) 535-0222
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
SOUTHERN HERITAGE BANCORP, INC.
I.
The name of the corporation is Southern Heritage Bancorp, Inc.
II.
Effective the date hereof, paragraph (a) of Article 8 of the
Articles of Incorporation of Southern Heritage Bancorp, Inc. is
amended to read as follows:
(a) At any shareholders' meeting with respect to which
notice of such purpose has been given, the entire Board of
Directors or any individual director may be removed without
cause only by the affirmative vote of the holders of two-thirds
(2/3) of the issued and outstanding shares of the Corporation.
All other provisions of the Articles of Incorporation shall
remain in full force and effect.
III.
This amendment was duly approved on February 19, 1998, by written
consent of the sole shareholder and by the written consent of all
the directors of the corporation in accordance with the provisions
of Section 14-2-1003 of the Georgia Business Corporation Code.
<PAGE>
IN WITNESS WHEREOF, the corporation has caused these Articles of
Amendment to be executed and attested by its duly authorized
officers, this 19th day of February, 1998.
SOUTHERN HERITAGE BANCORP, INC.
By: s/Gary H. Anderson
President
Attest: s/James E. Palmour, III
Secretary
(CORPORATE SEAL)
<PAGE>
EXHIBIT 3.2
BYLAWS OF SOUTHERN HERITAGE BANCORP, INC.
<PAGE>
BYLAWS OF
SOUTHERN HERITAGE BANCORP, INC.
INDEX
Page
ARTICLE ONE - OFFICES....................................
ARTICLE TWO - SHAREHOLDERS' MEETINGS.....................
2.1 Annual Meeting....................................
2.2 Special Meeting...................................
2.3 Place.............................................
2.4 Notice............................................
2.5 Quorum............................................
2.6 Proxies; Required Vote............................
2.7 Presiding Officer and Secretary...................
2.8 Shareholder List..................................
2.9 Action in Lieu of Meeting.........................
ARTICLE THREE - DIRECTORS.................................
3.1 Management........................................
3.2 Number of Directors...............................
3.3 Vacancies.........................................
3.4 Election of Directors.............................
3.5 Removal...........................................
3.6 Resignation.......................................
3.7 Compensation......................................
3.8 Honorary and Advisory Directors...................
ARTICLE FOUR - COMMITTEES.................................
4.1 Executive Committee...............................
4.2 Other Committees..................................
4.3 Removal...........................................
ARTICLE FIVE - MEETINGS OF THE BOARD OF DIRECTORS.........
5.1 Time and Place....................................
5.2 Regular Meetings..................................
5.3 Special Meetings..................................
5.4 Content and Waiver of Notice......................
5.5 Quorum; Participation by Telephone................
5.6 Action in Lieu of Meeting.........................
5.7 Interested Directors and Officers.................<PAGE>
ARTICLE SIX - OFFICERS, AGENTS AND EMPLOYEES..............
6.1 General Provisions................................
6.2 Powers and Duties of the Chairman of the
Board of Directors and the President..............
6.3 Powers and Duties of Vice Presidents..............
6.4 Powers and Duties of the Secretary................
6.5 Powers and Duties of the Treasurer................
6.6 Appointment, Powers and Duties of
Assistant Secretaries.............................
6.7 Appointment, Powers and Duties of
Assistant Treasurers..............................
6.8 Delegation of Duties..............................
ARTICLE SEVEN - CAPITAL STOCK.............................
7.1 Certificates......................................
7.2 Shareholder List..................................
7.3 Transfer of Shares................................
7.4 Record Dates......................................
7.5 Registered Owner..................................
7.6 Transfer Agent and Registrars.....................
7.7 Lost Certificates.................................
7.8 Fractional Shares or Scrip........................
ARTICLE EIGHT - BOOKS AND RECORDS; SEAL;
ANNUAL STATEMENTS.....................................
8.1 Inspection of Books and Records...................
8.2 Seal..............................................
8.3 Annual Statements.................................
ARTICLE NINE - INDEMNIFICATION...........................
9.1 Authority to Indemnify............................
9.2 Mandatory Indemnification.........................
9.3 Advances for Expenses.............................
9.4 Court-ordered Indemnification and Advances
for Expenses......................................
9.5 Determination of Indemnification..................
9.6 Authorization of Indemnification..................
9.7 Other Rights......................................
9.8 Insurance.........................................
9.9 Continuation of Expenses..........................
ARTICLE TEN - NOTICES; WAIVERS OF NOTICE..................
10.1 Notices...........................................
10.2 Waivers of Notice.................................
<PAGE>
ARTICLE ELEVEN - EMERGENCY POWERS.........................
11.1 Bylaws............................................
11.2 Lines of Succession...............................
11.3 Head Office.......................................
11.4 Period of Effectiveness...........................
11.5 Notices...........................................
11.6 Officers as Directors Pro Tempore.................
11.7 Liability of Officers, Directors and Agents.......
ARTICLE TWELVE - CHECKS, NOTES, DRAFTS, ETC. .............
ARTICLE THIRTEEN - AMENDMENTS.............................
<PAGE>
BYLAWS
OF
SOUTHERN HERITAGE BANCORP, INC.
ARTICLE ONE
OFFICES
The corporation shall at all times maintain its principal office
in Oakwood, Georgia, its registered office in the State of Georgia
and its registered agent at that address, but it may have other
offices located within or outside the State of Georgia as the Board
of Directors may determine.
ARTICLE TWO
SHAREHOLDERS' MEETING
2.1 Annual Meeting. A meeting of shareholders of the
corporation shall be held annually, within six (6) months after the
end of each fiscal year of the corporation. The annual meeting
shall be held at such time and place and on such date as the
Directors shall determine from time to time and as shall be
specified in the notice of the meeting.
2.2 Special Meetings. Special meetings of the shareholders may
be called at any time by the corporation's Board of Directors, its
President, and by the corporation upon the written request of any
one or more shareholders, owning an aggregate of not less than
twenty-five percent of the outstanding capital stock of the
corporation. Special meetings shall be held at such time and place
and on such date as shall be specified in the notice of the
meeting.
2.3 Place. Annual or special meetings of shareholders may be
held within or without the State of Georgia.
2.4 Notice. Notice of annual or special shareholders meetings
stating place, day and hour of the meeting shall be given in
writing not less than ten or more than sixty days before the date
of the meeting, either mailed to the last known address or
personally given to each shareholder. Notice of any special
meeting of shareholders shall state the purpose or purposes for
which the meeting is called. The notice of any meeting at which
amendments to or restatements of the articles of incorporation,
merger or share exchange of the corporation, or the disposition of
corporate assets requiring shareholder approval are to be
considered shall state such purpose, and shall further comply with
all requirements of law. Notice of a meeting may be waived by an
instrument in writing executed before or after the meeting. The
waiver need not specify the purpose of the meeting or the business
transacted, unless one of the purposes of the meeting concerns a
plan of merger or share exchange or any subject matter included in
Paragraph 8 of the Articles of Incorporation, in which event the
waiver shall comply with the further requirements of law concerning
such waivers. Attendance at such meeting in person or by proxy
shall constitute a waiver of notice thereof.
2.5 Quorum. At all meetings of shareholders a majority of the
outstanding shares of stock shall constitute a quorum for the
transaction of business, and no resolution or business shall be
transacted without the favorable vote of the holders of a majority
of the shares represented at the meeting and entitled to vote. A
lesser number may adjourn from day to day, and shall announce the
time and place to which the meeting is adjourned.
2.6 Proxies; Required Vote. At every meeting of the
shareholders, including meetings of shareholders for the election
of Directors, any shareholder having the right to vote shall be
entitled to vote in person or by proxy, but not proxy shall be
voted after eleven months from its date, unless said proxy provides
for a longer period. Each shareholder shall have one vote for each
share of stock having voting power, registered in his or her name
on the books of the corporation. If a quorum is present, the
affirmative vote of the majority of the shares represented at the
meeting and entitled to vote on the subject matter shall be the act
of the shareholders, except as otherwise provided by law, by the
Articles of Incorporation or by these bylaws.
2.7 Presiding Officer and Secretary. At every meeting of
shareholders, the Chairman or the President, or, if such officers
shall not be present, then the person appointed by one of them
shall preside. The Secretary or an Assistant Secretary, or if such
officers shall not be present, the appointee of the presiding
officer of the meeting, shall act as secretary of the meeting.
2.8 Shareholder List. The officer or agent having charge of
the stock transfer books of the corporation shall produce for
inspection by any shareholder at, and continuously during, every
meeting of the shareholders, a complete alphabetical list of
shareholders showing the address and share holdings of each
shareholder. If the record of shareholders readily shows such
information, it may be produced in lieu of such a list.
2.9 Action in Lieu of Meeting. Any action to be taken at a
meeting of the shareholders of the corporation, or any action that
may be taken at a meeting of the shareholders, may be taken without
a meeting if a consent in writing setting forth the action so taken
shall be signed by those persons who would be entitled to vote at
a meeting those shares having voting power to cast not less than
the minimum number (or numbers, in the case of voting by class) of
votes that would be necessary to authorize or take such action at
a meeting at which all shares entitled to vote were present and
voted.
ARTICLE THREE
DIRECTORS
3.1 Management. Subject to these bylaws, or any lawful
agreement between the shareholders, the full and entire management
of the affairs and business of the corporation shall be vested in
the Board of Directors, which shall have and may exercise all of
the powers that may be exercised or performed by the corporation.
3.2 Number of Directors. The Board of Directors shall consist
of not less than nine (9) nor more than twenty-five (25) members.
The number of Directors may be fixed or changed from time to time,
within the minimum and maximum, by the shareholders by the
affirmative vote of two-thirds (66 2/3%) of the issued and
outstanding shares of the corporation entitled to vote in an
election of Directors, or by the Board of Directors by the
affirmative vote of two-thirds (66 2/3%) of all Directors then in
office. Any increase or decrease in the number of Directors shall
be so apportioned among the Classes as to make all Classes
authorized by the requisite vote of shareholders as nearly equal
in number as possible. When any directorships are created pursuant
to an increase in the number of Directors and such directorships
are filled by the Board of Directors, there shall be no
classification of the additional Directors until the next election
of Directors by the shareholders, and the Directors so chosen shall
hold office for a term expiring at the next annual meeting of
shareholders at which a successor shall be elected and qualify.
3.3 Vacancies. The Directors, even though less than a quorum,
may fill any vacancy on the Board of Directors, including a vacancy
created by an increase in the number of directors. Such
appointment by the Directors shall continue until the expiration
of the term of the Director whose place has become vacant or, in
the case of an increase in the number of directors, until the next
meeting of the shareholders.
3.4 Election of Directors. The Directors shall be divided into
three classes, as nearly as equal in number as possible, with
respect to the times for which they shall severally hold office.
Directors of Class One first chosen shall hold office until the
first annual meeting of shareholders following their election;
Directors of Class Two first chosen shall hold office until the
second annual meeting of shareholders following their election; and
Directors of Class Three first chosen shall hold office until the
third annual meeting of shareholders following their election. At
each annual meeting of the shareholders after the Directors are
first chosen by Classes, the successors to the Class of Directors
whose terms shall expire at that time shall be elected to hold
office until the third succeeding annual meeting after their
election, so that the term of office of one Class of Directors
shall expire in each year. Each Director elected shall hold office
until his successor shall be elected and shall qualify. This
Section 3.4 may be amended only by the affirmative vote of the
holders of at least two-thirds (2/3) of the issued and outstanding
shares of the corporation entitled to vote thereon at any regular
or special meeting of the shareholders, and notice of the proposed
change must be contained in the notice of the meeting.
3.5 Removal. Any Director may be removed from office, at a
meeting with respect to which notice of such purpose is given (a)
without cause, only upon the affirmative vote of the holder of a
two-thirds (2/3) majority of the issued and outstanding shares of
the corporation, and (b) with cause, only upon the affirmative vote
of the holders of a majority of the issued and outstanding shares
of the corporation represented at the meeting either in person or
by proxy.
3.6 Resignation. Any Director may resign at any time either
orally at any meeting of the Board of Directors or by so advising
the Chairman of the Board of Directors or the President or by
giving written notice to the corporation. A Director who resigns
may postpone the effectiveness of his or her resignation to a
future date or upon the occurrence of a future event specified in
a written tender of resignation. If no time of effectiveness is
specified therein, a resignation shall be effective upon tender.
A vacancy shall be deemed to exist at the time a resignation is
tendered, and the Board of Directors or the shareholders may, then
or thereafter, elect a successor to the office when the resignation
by its terms become effective.
3.7 Compensation. Directors may be allowed such compensation
for their services as Directors as may from time to time be fixed
by resolution of the Board of Directors.
3.8 Honorary and Advisory Directors. When a Director of the
corporation retires under the retirement policies of the
corporation as established from time to time by the Board of
Directors, such Director automatically shall become an Honorary
Director of the corporation following his or her retirement. The
Board of Directors of the corporation also may appoint any
individual an Honorary Director, Director Emeritus, or member of
any advisory board established by the Board of Directors. Any
individual automatically becoming an Honorary Director or appointed
an Honorary Director, Director Emeritus, or member of an advisory
board as provided by this Section 3.8 may be compensated as
provided in Section 3.7, but such individual may not vote at any
meeting of the Board of Directors or be counted in determining a
quorum as provided in Section 5.5 and shall not have any
responsibility or be subject to any liability imposed upon a
Director, or otherwise be deemed a Director.
ARTICLE FOUR
COMMITTEES
4.1 Executive Committee. (a) The Board of Directors may, by
resolution adopted by a majority of the entire Board of Directors,
designate an Executive Committee consisting of one or more
Directors. Each Executive Committee member shall hold office until
the first meeting of the Board of Directors after the annual
meeting of shareholders and until the member's successor is elected
and qualified, or until the member's death, resignation or removal,
or until the member shall cease to be a Director.
(b) During the intervals between the meetings of the Board of
Directors, the Executive Committee may exercise all the authority
of the Board of Directors; provided, however, that the Executive
Committee shall not have the power to amend or repeal any
resolution of the Board of Directors that by its terms shall not
be subject to amendment or repeal by the Executive Committee, and
the Executive Committee shall not have the authority of the Board
of Directors in reference to (i) the amendment of the Articles of
Incorporation or bylaws of the corporation; (ii) the adoption of
a plan of merger or consolidation; (iii) the sale, lease, exchange
or other disposition of all or substantially all the property and
assets of the corporation; or (iv) a voluntary dissolution of the
corporation or the revocation of any such voluntary dissolution.
(c) The Executive Committee shall meet from time to time on
call of the Chairman of the Board of Directors or the President or
of any two or more members of the Executive Committee. Meetings
of the Executive Committee may be held at such place or places,
within or without the State of Georgia, as the Executive Committee
shall determine or as may be specified or fixed in the respective
notices or waivers of such meetings. The Executive Committee may
fix its own rules of procedure, including provision for notice of
its meetings. It shall keep a record of its proceedings and shall
report these proceedings to the Board of Directors at the meeting
thereof held next after they have been taken, and all such
proceedings shall be subject to revision or alteration by the Board
of Directors except to the extent that action shall have been taken
pursuant to or in reliance upon such proceedings prior to any such
revision or alteration.
(d) The Executive Committee shall act by majority vote of its
members; provided, however, that contracts or transactions of and
by the corporation in which officers or Directors of the
corporation are interested shall require the affirmative vote of
a majority of the disinterested members of the Executive Committee
at a meeting of the Executive Committee at which the material facts
as to the interest and as to the contract or transaction are
disclosed or known to the members of the Executive Committee prior
to the vote.
(e) Members of the Executive Committee may participate in
committee proceedings by means of conference telephone or similar
communications equipment by means of which all persons
participating in the proceedings can hear each other, and such
participation shall constitute presence in person at such
proceedings.
(f) The Board of Directors, by resolution adopted in accordance
with paragraph (a) of this section, may designate one or more
Directors as alternate members of the Executive Committee who may
act in the place and stead of any absent member or members at any
meeting of said committee.
4.2 Other Committees. The Board of Directors, by resolution
adopted by a majority of the entire Board of Directors, may
designate one or more additional committees, each committee to
consist of one or more of the Directors of the corporation, which
shall have such name or names, and shall have and may exercise such
powers of the Board of Directors, except the powers denied to the
Executive Committee, as may be determined from time to time by the
Board of Directors. Such committees shall provide for their own
rules of procedure, subject to the same restrictions thereon as
provided above for the Executive Committee.
4.3 Removal. The Board of Directors shall have power at any
time to remove any member of any committee, with or without cause,
and to fill vacancies in and to dissolve any such committee.
ARTICLE FIVE
MEETINGS OF THE BOARD OF DIRECTORS
5.1 Time and Place. Meetings of the Board of Directors may be
held at any place either within or without the State of Georgia.
5.2 Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such time and place, within
or without the State of Georgia, as shall be determined by the
Board of Directors from time to time.
5.3 Special Meetings. Regular meetings of the Board of
Directors may be called by the Chairman of the Board of Directors
or the President on not less than one day's notice by mail,
telegram, cablegram, personal delivery or telephone to each
Director and shall be called by the Chairman of the Board of
Directors or the President in like manner and on like notice on
written request of any two or more Directors. Any such special
meeting shall be held at such time and place, within or without the
State of Georgia, as shall be stated in the notice of the meeting.
5.4 Content and Waiver of Notice. No notice of any meeting of
the Board of Directors need state the purposes thereof, except as
may be otherwise provided in these bylaws. Notice of any meeting
may be waived by an instrument in writing executed before or after
the meeting. Attendance in person at any such meeting shall
constitute a waiver of notice thereof unless the director at the
beginning of the meeting (or promptly upon his or her arrival)
objects to holding the meeting or transacting business at the
meeting and does not thereafter vote for or assent to action taken
at the meeting.
5.5 Quorum; Participation by Telephone. At all meetings of the
Board of Directors, the presence of a majority of the authorized
number of Directors shall be necessary and sufficient to constitute
a quorum for the transaction of business. Directors may
participate in any meeting by means of conference telephone or
similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation
in a meeting by means of such communications equipment shall
constitute the presence in person at such meeting. Except as may
be otherwise specifically provided by law, the Articles of
Incorporation or these bylaws, all resolutions adopted and all
business transacted by the Board of Directors shall require the
affirmative vote of a majority of the Directors present at the
meeting. In the absence of a quorum, a majority of the Directors
present at any meeting may adjourn the meeting from time to time
until a quorum is present. Notice of any adjourned meeting need
only be given by announcement at the meeting at which the
adjournment is taken.
5.6 Action in Lieu of Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors or
of any committee thereof may be taken without a meeting if a
written consent thereto is signed by all members of the Board of
Directors or of such committee, as the case may be, and such
written consent is filed with the minutes of the proceedings of the
Board of Directors and upon compliance with any further
requirements of law pertaining to such consents.
5.7 Interested Directors and Officers. An interested Director
or officer is one who is a party to a contract or transaction with
the corporation or who is an officer or Director of, or has a
financial interest in, another corporation, partnership or
association which is a party to a contract or transaction with the
corporation. Contracts and transactions between the corporation
and one or more interested Directors or officers shall not be void
or voidable solely because of the involvement or vote of such
interested persons as long as (a) the contract or transaction is
approved in good faith by the Board of Directors or appropriate
committee by the affirmative vote of a majority of disinterested
Directors, even if the disinterested Directors be less than a
quorum, at a meeting of the Board of Directors or committee at
which the material facts as to the interested person or persons and
the contract or transaction are disclosed or known to the Board of
Directors or committee prior to the vote; or (b) the contract or
transaction is approved in good faith by the shareholders after the
material facts as to the interested person or persons and the
contract or transaction have been disclosed to them; or (c) the
contract or transaction is fair as to the corporation as of the
time it is authorized, approved or ratified by the Board of
Directors, committee or shareholders. Interested Directors may be
counted in determining the presence of a quorum at a meeting of the
Board of Directors or committee which authorizes the contract or
transaction.
ARTICLE SIX
OFFICERS, AGENTS AND EMPLOYEES
6.1 General Provisions. The officers of the corporation shall
be a President and a Secretary, and may include a Treasurer,
Chairman of the Board of Directors, one or more Vice Presidents,
one or more Assistant Secretaries, and one or more Assistant
Treasurers. The officers shall be elected by the Board of
Directors at the first meeting of the Board of Directors after the
annual meeting of the shareholders in each year or shall be
appointed as provided in these bylaws. The Board of Directors may
elect other officers, agents and employees, who shall have such
authority and perform such duties as may be prescribed by the Board
of Directors. All officers shall hold office until the meeting of
the Board of Directors following the next annual meeting of the
shareholders after their election or appointment and until their
successors shall have been elected or appointed and shall have
qualified. Any two or more offices may be held by the same person.
Any officer, agent or employee of the corporation may be removed
by the Board of Directors with or without cause. Removal without
cause shall be without prejudice to such person's contract rights,
if any, but the election or appointment of any person as an
officer, agent or employee of the corporation shall not of itself
create contract rights. The compensation of officers, agents and
employees elected by the Board of Directors shall be fixed by the
Board of Directors or by a committee thereof, and this power may
also be delegated to any officer, agent or employee as to persons
under his or her direction or control. The Board of Directors may
require any officer, agent or employee to give security for the
faithful performance of his or her duties.
6.2 Powers and Duties of the Chairman of the Board of Directors
and the President. The powers and duties of the Chairman of the
Board of Directors and the President, subject to the supervision
and control of the Board of Directors, shall be those usually
appertaining to their respective offices and whatever other powers
and duties are prescribed by these bylaws or by the Board of
Directors.
(a) The Chairman of the Board of Directors shall preside at all
meetings of the Board of Directors and at all meetings of the
shareholders. The Chairman of the Board shall perform such other
duties as the Board of Directors may from time to time direct.
The Vice-Chairman shall act as Chairman of the Board of Directors
unless another Director is elected Chairman.
(b) The President shall, unless otherwise provided by the Board
of Directors, be the chief executive officer of the corporation.
The President shall have general charge of the business and
affairs of the corporation and shall keep the Board of Directors
fully advised. The President shall employ and discharge
employees and agents of the corporation, except such as shall be
elected by the Board of Directors, and he or she may delegate
these powers. The President shall have such powers and perform
such duties as generally pertain to the office of the President,
as well as such further powers and duties as may be prescribed
by the Board of Directors. The President may vote the shares or
other securities of any other domestic or foreign corporation of
any type or kind which may at any time be owned by the
corporation, may execute any shareholders' or other consents in
respect thereof and may in his or her discretion delegate such
powers by executing proxies, or otherwise, on behalf of the
corporation. The Board of Directors, by resolution from time to
time, may confer like powers upon any other person or persons.
6.3 Powers and Duties of Vice Presidents. Each Vice President
shall have such powers and perform such duties as the Board of
Directors or the President may prescribe and shall perform such
other duties as may be prescribed by these bylaws. In the absence
or inability to act of the President, unless the Board of Directors
shall otherwise provide, the Vice President who has served in that
capacity for the longest time and who shall be present and able to
act, shall perform all duties and may exercise any of the powers
of the President. The performance of any such duty by a Vice
President shall be conclusive evidence of his or her power to act.
6.4 Powers and Duties of the Secretary. The Secretary shall
have charge of the minutes of all proceedings of the shareholders
and of the Board of Directors and shall keep the minutes of all
their meetings at which he or she is present. Except as otherwise
provided by these bylaws, the Secretary shall attend to the giving
of all notices to shareholders and Directors. He or she shall have
charge of the seal of the corporation, shall attend to its use on
all documents the execution of which on behalf of the corporation
under its seal is duly authorized and shall attest the same by his
or her signature whenever required. The Secretary shall have
charge of the record of shareholders of the corporation, of all
written requests by shareholders that notices be mailed to them at
an address other than their addresses on the record of
shareholders, and of such other books and papers as the Board of
Directors may direct. Subject to the control of the Board of
Directors, the Secretary shall have all such powers and duties as
generally are incident to the position of Secretary or as may be
assigned to the Secretary by the President or the Board of
Directors.
6.5 Powers and Duties of the Treasurer. The Treasurer shall
have charge of all funds and securities of the corporation, shall
endorse the same for deposit or collection when necessary and
deposit the same to the credit of the corporation in such banks or
depositaries as the Board of Directors may authorize. The
Treasurer may endorse all commercial documents requiring
endorsements for or on behalf of the corporation and may sign all
receipts and all commercial documents requiring endorsements for
or on behalf of the corporation and may sign all receipts and
vouchers for payments made to the corporation. The Treasurer shall
have all such powers and duties as generally are incident to the
position of Treasurer or as may be assigned to the Treasurer by the
President or by the Board of Directors.
6.6 Appointment, Powers and Duties of Assistant Secretaries.
Assistant Secretaries may be appointed by the President or elected
by the Board of Directors. In the absence or inability of the
Secretary to act, any Assistant Secretary may perform all the
duties and exercise all the powers of the Secretary. The
performance of any such duty shall be conclusive evidence of the
Assistant Secretary's power to act. An Assistant Secretary shall
also perform such other duties as the Secretary or the Board of
Directors may assign to him or her.
6.7 Appointment, Powers and Duties of Assistant Treasurers.
Assistant Treasurers may be appointed by the President or elected
by the Board of Directors. In the absence or inability of the
Treasurer to act, an Assistant Treasurer may perform all the duties
and exercise all the powers of the Treasurer. The performance of
any such duty shall be conclusive evidence of the Assistant
Treasurer's power to act. An Assistant Treasurer shall also
perform such other duties as the Treasurer or the Board of
Directors may assign to him or her.
6.8 Delegation of Duties. In case of the absence of any
officer of the corporation, or for any other reason that the Board
of Directors may deem sufficient, the Board of Directors (or in the
case of Assistant Secretaries or Assistant Treasurers only, the
President) may confer for the time being the powers and duties, or
any of them, of such officer upon any other officer or elect or
appoint any new officer to fill a vacancy created by death,
resignation, retirement or termination of any officer. In such
latter event, such new officer shall serve until the next annual
election of officers.
ARTICLE SEVEN
CAPITAL STOCK
7.1 Certificates. (a) The interest of each shareholder shall
be evidenced by a certificate or certificates representing shares
of the corporation which shall be in such form as the Board of
Directors may from time to time adopt and shall be numbered and
shall be entered in the books of the corporation as they are
issued. Each certificate representing shares shall set forth upon
the face thereof the following:
(i) the name of this corporation;
(ii) that the corporation is organized under the laws of
the State of Georgia;
(iii) the name or names of the person or persons to whom
the certificate is issued;
(iv) the number and class of shares, and the designation
of the series, if any, which the certificate
represents;
(v) if any shares represented by the certificate are
nonvoting shares, a statement or notation to that
effect; and, if the shares represented by the
certificate are subordinate to shares of any other
class or series with respect to dividends or amounts
payable on liquidation, the certificate shall further
set forth on either the face or back thereof a clear
and concise statement to that effect.
(b) Each certificate shall be signed by the President or a Vice
President and the Secretary or an Assistant Secretary and may be
sealed with the seal of the corporation or a facsimile thereof.
If a certificate is countersigned by a transfer agent or registered
by a registrar, other than the corporation itself or an employee
of the corporation, the signature of any such officer of the
corporation may be a facsimile. In case any other officer or
officers who shall have signed, or whose facsimile signature or
signatures shall have been used on, any such certificate or
certificates shall cease to be such officer or officers of the
corporation, whether because of death, resignation or otherwise,
before such certificate or certificates shall have been delivered
by the corporation, such certificate or certificates may
nevertheless be delivered as although the person or persons who
signed such certificate or certificates or whose facsimile
signatures shall have been used thereon had not ceased to be such
officer or officers.
7.2 Shareholder List. The corporation shall keep or cause to
be kept a record of the shareholders of the corporation which
readily shows, in alphabetical order or by alphabetical index, and
by classes or series of stock, if any, the names of the
shareholders entitled to vote, with the address of and the number
of shares held by each. Said record shall be presented and kept
open at all meetings of the shareholders.
7.3 Transfer of Shares. Transfers of stock shall be made on
the books of the corporation only by the person named in the
certificate, or by power of attorney lawfully constituted in
writing, and upon surrender of the certificate, or in the case of
a certificate alleged to have been lost, stolen or destroyed, upon
compliance with the provisions of Section 7.7 of these bylaws.
7.4 Record Dates. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or entitled to receive payment of any
dividend, or in order to make a determination of shareholders for
any other proper purpose, the Board of Directors may fix in advance
a date as the record date for any such determination of
shareholders, such date to be not more than seventy days and, in
case of a meeting of shareholders, not less than ten days, prior
to the date on which the particular action requiring such
determination of shareholders is to be taken.
7.5 Registered Owner. The corporation shall be entitled to
treat the holder of record of any share of stock of the corporation
as the person entitled to vote such share, to receive any dividend
or other distribution with respect to such share, and for all other
purposes and accordingly shall not be bound to recognize any
equitable or other claim or interest in such share on the part of
any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by law.
7.6 Transfer Agent and Registrars. The Board of directors may
appoint one or more transfer agents and one or more registrars and
may require each stock certificate to bear the signature or
signatures of a transfer agent or a registrar or both.
7.7 Lost Certificates. Any person claiming a certificate of
stock to be lost, stolen or destroyed shall make an affidavit or
affirmation of the fact in such manner as the Board of Directors
may require and, if the Directors so require, shall give the
corporation a bond of indemnity in form and amount and with one or
more sureties satisfactory to the Board of Directors, whereupon an
appropriate new certificate may be issued in lieu of the
certificate alleged to have been lost, stolen or destroyed.
7.8 Fractional Shares or Scrip. The corporation may, when and
if authorized so to do by its Board of Directors, issue
certificates for fractional shares or scrip in order to effect
share transfers, share distributions or reclassifications, mergers,
consolidations or reorganizations. Holders of fractional shares
shall be entitled, in proportion to their fractional holdings, to
exercise voting rights, receive dividends and participate in any
of the assets of the corporation in the event of liquidation.
Holders of scrip shall not, unless expressly authorized by the
Board of directors, be entitled to exercise any rights of a
shareholder of the corporation, including voting rights, dividend
rights or the right to participate in any assets of the corporation
in the event of liquidation. In lieu of issuing fractional shares
or scrip, the corporation may pay in cash the fair value of
fractional interests as determined by the Board of Directors; and
the Board of Directors may adopt resolutions regarding rights with
respect to fractional shares or scrip as it may deem appropriate,
including without limitation the right for persons entitled to
receive fractional shares to sell such fractional shares or
purchase such additional fractional shares as may be needed to
acquire one full share, or sell such fractional shares or scrip for
the account of such persons.
ARTICLE EIGHT
BOOKS AND RECORDS; SEAL; ANNUAL STATEMENTS
8.1 Inspection of Books and Records. (a) Any person who shall
be the holder of record of, or authorized in writing by the holders
of record of, at least two (2%) percent of the outstanding shares
of any class or series of the corporation, upon written demand
stating the purpose thereof, shall have the right to examine in
person or by agent or attorney, at any reasonable time or times,
for any proper purpose, the books and records of account, minutes
and records of shareholders and to make extracts therefrom.
(b) A shareholder may inspect and copy the records described in
the immediately preceding paragraph only if (i) his or her demand
is made in good faith and for a proper purpose that is reasonably
relevant to his or her legitimate interest as a shareholder; (ii)
the shareholder describes with reasonable particularity his or her
purpose and the records he or she desires to inspect; (iii) the
records are directly connected with the stated purpose; and (iv)
the records are to be used only for that purpose.
(c) If the Secretary or a majority of the corporation's Board
of Directors or Executive Committee members find that the request
is proper, the Secretary shall promptly notify the shareholder of
the time and place at which the inspection may be conducted.
(d) If said request is found by the Secretary, the Board of
Directors or the Executive Committee to be improper, the Secretary
shall so notify the requesting shareholder on or prior to the date
on which the shareholder requested to conduct the inspection. The
Secretary shall specify in said notice the basis for the rejection
of the shareholder's request.
(e) The Secretary, the Board of Directors and the Executive
Committee shall at all times be entitled to rely on the corporate
records in making any determination hereunder.
8.2 Seal. The corporate seal shall be in such form as the
Board of Directors may from time to time determine. In the event
it is inconvenient to use such a seal at any time, the signature
of the corporation followed by the word "Seal" enclosed in
parentheses or scroll shall be deemed the seal of the corporation.
8.3 Annual Statements. Not later than four months after the
close of each fiscal year, and in any case prior to the next annual
meeting of shareholders, the corporation shall prepare:
(a) A balance sheet showing in reasonable detail the financial
condition of the corporation as of the close of its fiscal year,
and
(b) A profit and loss statement showing the results of its
operations during its fiscal year. Upon written request, the
corporation promptly shall mail to any shareholder of record a copy
of its most recent balance sheet and profit and loss statement.
ARTICLE NINE
INDEMNIFICATION
9.1 Authority to Indemnify. The corporation shall indemnify or
obligate itself to indemnify an individual made a party to a
proceeding because he or she is or was a director, officer,
employee or agent of the corporation (or was serving at the request
of the corporation as a director, officer or employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise) for reasonable expenses, judgments, fines, penalties
and amounts paid in settlement (including attorney's fees),
incurred in connection with the proceeding if the individual acted
in a manner he or she believed in good faith to be in or not
opposed to the best interests of the corporation and, in the case
of any criminal proceeding, he or she had no reasonable cause to
believe his or her conduct was unlawful. The termination of a
proceeding by judgment, order, settlement, or conviction, or upon
a plea of nolo contendere or its equivalent is not, of itself,
determinative that the director, officer, employee or agent did not
meet the standard of conduct set forth above. Indemnification
permitted under this section in connection with a proceeding by or
in the right of the corporation is limited to reasonable expenses
incurred in connection with the proceeding.
9.2 Mandatory Indemnification. To the extent that a director,
officer, employee or agent of the corporation has been successful,
on the merits or otherwise, in the defense of any proceeding to
which he or she was a party, or in defense of any claim, issue, or
matter therein, because he or she is or was a director, officer,
employee or agent of the corporation, the corporation shall
indemnify the director, employee or agent against reasonable
expenses incurred by him or her in connection therewith.
9.3 Advance for Expenses. The corporation shall pay for or
reimburse the reasonable expenses incurred by a director, officer,
employee or agent of the corporation who is a party to a proceeding
in advance of final disposition of the proceeding if (a) he or she
furnishes the corporation written affirmation of his or her good
faith belief that he or she has met the standard of conduct set
forth in Section 9.1 of this article, and (b) he or she furnishes
the corporation a written undertaking, executed personally or on
his or her behalf, to repay any advances if it is ultimately
determined that he or she is not entitled to the indemnification.
The undertaking required by this section must be an unlimited
general obligation but need not be secured and may be accepted
without reference to financial ability to make repayment.
9.4 Court-ordered Indemnification and Advances for Expenses.
A director, officer, employee or agent of the corporation who is
a party to a proceeding may apply for indemnification or advances
for expenses to the court conducting the proceeding or to another
court of competent jurisdiction.
9.5 Determination of Indemnification. Except as provided in
Section 9.2 and except as may be ordered by the court, the
corporation may not indemnify a director, officer, employee or
agent under Section 9.1 unless authorized thereunder and a
determination has been made in the specific case that
indemnification of the director, officer, employee or agent is
permissible in the circumstances because he or she has met the
standard of conduct set forth in Section 9.1. The determination
shall be made:
(a) By the Board of Directors by majority vote of a quorum
consisting of directors not at the time parties to the proceedings;
(b) If a quorum cannot be obtained, by majority vote of a
committee duly designated by the Board of Directors (in which
designation directors who are parties may participate), consisting
solely of two or more directors not at the time parties to the
proceedings;
(c) By special legal counsel:
(i) Selected by the Board of Directors or its committee
in the manner prescribed in paragraph (a) or (b) of
this Section; or
(ii) If a quorum of the Board of Directors cannot be
obtained and a committee cannot be designated,
selected by majority vote of the full Board of
Directors (in which selection directors who are
parties may participate); or
(d) By the shareholders, but shares owned by or voted under the
control of directors who are at the time parties to the proceeding
may not be voted on the determination.
9.6 Authorization of Indemnification. Authorization of
indemnification or an obligation to indemnify and evaluation as to
the reasonableness of expenses shall be made in the same manner as
the determination that indemnification is permissible, except that
if the determination is made by special legal counsel,
authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled under
subsection (c) of Section 9.5 to select counsel.
9.7 Other Rights. The indemnification and advancement of
expenses provided by or granted pursuant to this Article Nine shall
not be deemed exclusive of any other rights, in respect of
indemnification or otherwise, to which those seeking
indemnification or advancement of expenses may be entitled under
any bylaw, resolution, agreement or contract either specifically
or in general terms approved by the affirmative vote of the holders
of a majority of the shares entitled to vote thereon taken at a
meeting the notice of which specified that such bylaw, resolution
or agreement would be placed before the stockholders, both as to
action by a director, trustee, officer, employee or agent in his
or her official capacity and as to action in another capacity while
holding such office or position; except that no such other rights,
in respect to indemnification or otherwise, may be provided or
granted to a director, trustee, officer, employee, or agent
pursuant to this Section 9.7 by the corporation for liability for
(a) any appropriation, in violation of his or her duties, of any
business opportunity of the corporation; (b) acts or omissions not
in good faith or which involve intentional misconduct or a knowing
violation of law; (c) the types of liability set forth in Section
14-2-832 of the Georgia Business Corporation code dealing with
illegal and unauthorized distributions of corporate assets, whether
as dividends or in liquidation of the corporate assets, whether as
dividends or in liquidation of the corporation or otherwise; or (d)
any transaction from which the director derived an improper
material tangible personal benefit.
9.8 Insurance. The corporation may purchase and maintain
insurance on behalf of an individual who is or was a director,
officer, employee, or agent of the corporation or who, while a
director, officer, employee, or agent of the corporation, is or was
serving at the request of the corporation as a director, officer,
partner, trustee, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit
plan, or other enterprise against liability asserted against or
incurred by him or her in that capacity or arising from hie or her
status as a director, officer, employee, or agent whether or not
the corporation would have power to indemnify him or her against
the same liability under this Article Nine.
9.9 Continuation of Expenses. The indemnification and
advancement of expenses provided by or granted pursuant to this
Article Nine shall continue as to a person who has ceased to be a
director, trustee, officer, employee, or agent and shall inure to
the benefit of the heirs, executors, and administrators of such a
person.
<PAGE>
ARTICLE TEN
NOTICES; WAIVERS OF NOTICE
10.1 Notices. Except as otherwise specifically provided in
these bylaws, whenever under the provisions of these bylaws notice
is required to be given to any shareholder, Director or officer it
shall not be construed to mean personal notice, but such notice may
be given by personal notice, by telegram or cablegram, or by mail
by depositing the same in the post office or letter box in a
postage prepaid sealed wrapper, addressed to such shareholder,
Director or officer at such address as appears on the books of the
corporation, and such notice shall be deemed to be given at the
time when the same shall be thus sent or mailed.
10.2 Waivers of Notice. Except as otherwise provided in these
bylaws, when any notice is required to be given by law, by the
Articles of Incorporation or by these bylaws, a written waiver
thereof, signed by the person entitled to notice, whether before
or after the time stated therein, shall be deemed equivalent to
notice. In the case of a shareholder, such waiver of notice may
be signed by the shareholder's attorney or proxy duly appointed in
writing.
ARTICLE ELEVEN
EMERGENCY POWERS
11.1 Bylaws. The Board of Directors may adopt emergency bylaws,
subject to repeal or change by action of the shareholders, which
shall, notwithstanding any provision of law, the Articles of
Incorporation or these bylaws, be operative during any emergency
in the conduct of the business of the corporation resulting from
an attack on the United States or on a locality in which the
corporation conducts its business or customarily holds meetings of
its Board of Directors or its shareholders, or during any nuclear
or atomic disaster, or during the existence of any catastrophe, or
other similar emergency condition, as a result of which a quorum
of the Board of Directors or a standing committee thereof cannot
readily be convened for action. The emergency bylaws may make any
provision that may be practical and necessary for the circumstances
of the emergency.
11.2 Lines of Succession. The Board of Directors, either before
or during any such emergency, may provide, and from time to time
modify, lines of succession in the event that during such an
emergency any or all officers or agents of the corporation shall
for any reason be rendered incapable of discharging their duties.
11.3 Head Office. The Board of Directors, either before or
during any such emergency, may (effective during the emergency)
change the head office or designate several alternative head
offices or regional offices, or authorize the officer to do so.
11.4 Period of Effectiveness. To the extent not inconsistent
with any emergency bylaws so adopted, these bylaws shall remain in
effect during any such emergency and upon its termination, the
emergency bylaws shall cease to be operative.
11.5 Notices. Unless otherwise provided in emergency bylaws,
notice of any meeting of the Board of Directors during any such
emergency may be given only to such of the Directors as it may be
feasible to reach at the time, and by such means as may be feasible
at the time, including publication, radio or television.
11.6 Officers as Directors Pro Tempore. To the extent required
to constitute a quorum at any meeting of the Board of Directors
during any such emergency, the officers of the corporation who are
present shall, unless otherwise provided in emergency bylaws, be
deemed, in order of rank and within the same rank in order of
seniority, Directors for such meeting.
11.7 Liability of Officers, Directors and Agents. No officer,
Director, agent or employee acting in accordance with any emergency
bylaw shall be liable except for willful misconduct. No officer,
Director, agent or employee shall be liable for any action taken
by him or her in good faith in such an emergency in furtherance of
the ordinary business affairs of the corporation even though not
authorized by the bylaws then in effect.
ARTICLE TWELVE
CHECKS, NOTES, DRAFTS, ETC.
Checks, notes, drafts, acceptances, bills of exchange and other
orders or obligations for the payment of money shall be signed by
such officer or officers or person or persons as the Board of
Directors by resolution shall from time to time designate.
ARTICLE THIRTEEN
AMENDMENTS
The bylaws of the corporation may be altered or amended and new
bylaws may be adopted by the shareholders at any annual or special
meeting of the shareholders or by the Board of Directors at any
regular or special meeting of the Board of Directors; provided,
however, that, if such action is to be taken at a meeting of the
shareholders, notice of the general nature of the proposed change
in the bylaws shall be given in the notice of meeting. The
shareholders may provide by resolution that any bylaw provision
repealed, amended, adopted or altered by them may not be repealed,
amended, adopted or altered by the Board of Directors. Except as
otherwise provided in the Articles of Incorporation or these
bylaws, action by the shareholders with respect to bylaws shall be
taken by an affirmative vote of a majority of all shares entitled
to elect Directors, and action by the Board of Directors with
respect to bylaws shall be taken by an affirmative vote of a
majority of all Directors then holding office.
<PAGE>
EXHIBIT 5.1
JAMES E. PALMOUR, III
Attorney at Law
February 3, 1998
Southern Heritage Bancorp, Inc.
3461 Atlanta Highway
P. O. Box 907
Oakwood, Georgia 30566
Ladies and Gentlemen:
I am acting as counsel to Southern Heritage Bancorp, Inc., a
Georgia corporation (the "Company"), Oakwood, Georgia. In such
capacity, I have supervised certain proceedings taken by the
Company in connection with the registration under the Securities
Act of 1933, as amended, and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder
(collectively, the "Act"), of the offer and sale of a minimum of
800,000 shares and a maximum of 1,000,000 shares (the "Shares") of
common stock, $5.00 par value, of the Company.
I have examined originals or copies, certified or otherwise
identified to my satisfaction, of the documents and corporate
records relating to the authorization, issuance of sale of the
Shares and have made such other investigation as I have deemed
appropriate and relevant in order to furnish the opinion set forth
below.
In my examination, I have assumed the genuiness of all
signatures, the authenticity of all documents submitted to us as
original documents, and the conformity to original documents of all
documents submitted to me as certified or photostatic copies. As
to questions of fact material and relevant to my opinion, where
such facts were not independently verified by me, I have relied,
to the extent I deemed such reliance proper, upon certificates or
representations of officers and representatives of the Company and
appropriate federal, state and local officials.
Based upon the foregoing, I am of the opinion that the Shares
have been duly authorized and when sold, will be validly issued,
fully paid and nonassessable.
This letter is furnished solely to you and may not be relied upon
by any third party.
Very truly yours,
s/James E. Palmour, III
James E. Palmour, III
EXHIBIT 10.1
GROUND LEASE
THIS GROUND LEASE (this "Lease"), made and entered into this 4th
day of February, 1998 between M. MILTON ROBSON ("Lessor") an
individual, and SOUTHERN HERITAGE BANK, a State Banking
corporation, and SOUTHERN HERITAGE BANCORP, INC. (collectively
"Lessee").
ARTICLE I: DEMISE OF PREMISES
Section 1.01. Demise of Premises. For and in consideration of the
payment of rent herein reserved to be paid by Lessee and the
performance of the covenants and agreements herein contained on the
part of Lessee to be kept, observed and performed, Lessor hereby
demises and leases to Lessee, and Lessee hereby takes and hires,
upon and subject to the terms and conditions herein contained, that
certain tract of land lying and being in Robson Crossing, Oakwood,
Georgia and being more particularly described in Exhibit "A"
attached hereto and incorporated herein and all appurtenances
thereto (the "Premises"), all subject to the encumbrances set forth
in Exhibit "B" attached hereto and incorporated herein.
ARTICLE II: TERM OF LEASE
Section 2.01. Term of Lease. The term of this Lease (the "Term")
shall commence ("Commencement Date") on the date hereof and, unless
sooner terminated, shall continue thereafter for twenty (20) years
ending on the last day of the twentieth Lease Year. Lessee may
extend the Term of this Lease on the same terms and conditions
contained herein for four (4) additional periods of five (5) years
each, by notifying Lessor in writing, at least twelve (12) months
prior to the end of the Term. During any extension period, all
Sections of this Lease shall be effective (including Article IV
hereof), and references to Term will incorporate the extensions.
The term "Lease Year" shall mean each consecutive twelve (12)
calendar month period beginning with the Commencement Date, if that
day is the first day of a calendar month. If the Commencement Date
is not the first day of a calendar month, then the first Lease Year
will commence on the first day of the next succeeding calendar
month after the Commencement Date, and each Lease Year thereafter
shall commence on the anniversary thereof.
ARTICLE III: COVENANTS AND WARRANTIES OF LESSOR
Section 3.01. Conveyance of Leasehold Estate by Lessor. Lessor
warrants that it has full right and lawful authority to enter into
this Lease; and that it is lawfully seized of good and marketable
record fee simple title to the land described in Exhibit "A"
hereof, subject to the encumbrances set forth in Exhibit "B"
hereof.
ARTICLE IV: ANNUAL RENT AND ADDITIONAL RENTAL
Section 4.01. Rent. (a) Preliminary Rent for that portion of the
Term beginning on the date hereof and ending on the Rent
Commencement Date shall be $1.00, receipt of which is hereby
acknowledged; (b) Commencing on the Rent Commencement Date, Lessee
covenants and agrees to pay Lessor, in lawful money of the United
States of America, during the Term as rent hereunder, a base annual
rent (the "Rent"), payable in equal monthly installments on the
first day of each calendar month at the office of Lessor, 3509
Tanners Mill Circle, Gainesville, Georgia 30507, or at such other
address as Lessor may from time to time designate in writing to
Lessee as follows:
From the Rent Commencement Date until the end of the third
Lease Year - the annual amount of forty thousand and 00/100
($40,000.00) dollars, paid in monthly installments of three
thousand three hundred thirty-three and 33/100 ($3,333.33)
dollars.
Rent for the first and last months of the Term shall be prorated
if the Term shall begin or end on a day other than the first or
last day of the calendar month.
Section 4.02. Rent Commencement Date. The Rent Commencement Date
shall be the earlier of the day Lessee locates its temporary office
facility on the Premises and said facility is placed in use by
Bancorp employees or 120 days after the Commencement Date.
Section 4.03. CPI Adjustment. Beginning on the first day of the
fourth Lease Year and on the first day of each Lease Year
thereafter ("Change Date"), Rent shall increase by the percentage
by which the Average CPI (as defined below) for the previous Lease
Year exceeds the Average CPI for the year preceding the previous
Change Date, but not to exceed 5% in any event. For the first
Change Date the year preceding the previous Change Date shall be
assumed to be the twelve (12) month period prior to the
Commencement Date. In no event shall Rent be less than it was for
the prior Lease Year. For this Lease, the "Average CPI" shall be
the average monthly Consumer Price Index for the particular Lease
Year in question during the Term of this Lease. If during any
portion of any Lease Year, the Average CPI for the prior Lease Year
has not yet been determined, then until so determined Lessee shall
pay an amount equal to the prior Lease Year's Rent increased by the
same percentage as Rent was increased on the last Change Date,
until the calculation is made, then the parties shall make an
appropriate adjustment to the Rent to reflect the correct amount.
Lessee shall pay any shortage. These obligations of Lessor and
Lessee shall survive the expiration of the Term. In no event shall
the increase in Rent for the Lease Year exceed 5%.
"Consumer Price Index" or "CPI" shall mean the Consumer Price
Index for All Urban Wage Earners and Clerical Workers-Revised,
published by the Bureau of Labor Statistics of the United States
Department of Labor for Atlanta, Georgia, All Items (base year
1982-84=100). If the Bureau of Labor Statistics revises the manner
in which the CPI is determined, an adjustment shall be made to the
revised index to produce results equivalent, as nearly as possible,
to those which would be obtained if the CPI had not been so
revised. If the 1982-84 average shall no longer be used as an index
of 100, such change shall constitute such a revision. If the CPI
becomes unavailable to the public because publication is
discontinued or otherwise, or if equivalent data is not readily
available, then a comparable index based upon changes in the cost
of living or purchasing power of the consumer dollar published by
any governmental agency or, if no such index is available, then a
comparable index published by a major bank, other financial
institution, university or recognized financial publication shall
be substituted therefor.
Section 4.04. Additional Rental. Lessee covenants and agrees to
pay to Lessor, from time to time as provided in this Lease, and as
"Additional Rental": (a) interest (hereinafter called "Interest")
at the annual rate equal to ten percent (10%) per annum on all
installments of Rent and/or Supplemental Rent not paid within ten
(10) days after the due date, until the date of payment; (b) all
other sums which Lessee herein agrees to assume and pay to third
parties in those circumstances where Lessee shall fail or refuse
to pay such third parties and the same is paid by Lessor; and (c)
Interest on the sums described in subsection (b) above, from the
due date until paid or, if demand is required therefor by the terms
of this Lease, from the date of demand until paid.
Section 4.05. Net Lease; Non-Termination. This Lease is a net
Lease, and Rent and Additional Rental shall be paid without notice
or demand (except as expressly provided herein in the case of
certain Additional Rental). Except as otherwise provided in this
Lease, this Lease shall not terminate nor shall Lessee have any
right to terminate this Lease or be entitled to the abatement of
any Rent hereunder or any reduction thereof, nor shall the
obligations of Lessee under this Lease be otherwise affected,
because of: (a) the entry of a decree or order for relief by a
court having jurisdiction in the Premises regarding Lessee in an
involuntary case under the federal bankruptcy laws, as now or
hereafter constituted, or any other applicable federal or state
bankruptcy, insolvency or other similar law, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of Lessee or for any substantial part of its
property, or ordering the winding-up or liquidation of its affairs
and the continuance of any such decree or order unstayed and in
effect for a period of sixty (60) consecutive days, or (b) the
commencement by Lessee of a voluntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or any
other applicable federal or state bankruptcy, insolvency or other
similar law, or the consent by it to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of Lessee or for any
substantial part of its property, or the making by it of any
assignment for the benefit of creditors, or the failure of Lessee
generally to pay its debts as such debts become due, or the taking
of corporate action by Lessee in furtherance of any of the
foregoing.
ARTICLE V: TAXES, ASSESSMENTS AND CHARGES
Section 5.01. Taxes and Assessments. Subject to the provisions
of 14.01 hereof (concerning "Permitted Contests"), Lessee covenants
and agrees to discharge and pay before they become delinquent and
before any fine, penalty, or interest may be added for nonpayment,
any and all taxes, assessments, license or permit fees, excises,
imposts and charges of every nature and classification (all or any
one of which are hereinafter referred to as "Taxes") that at any
time during the Term are levied, assessed, charged or imposed upon
Lessor's fee simple and/or reversionary interest in the Premises,
the Premises themselves, this Lease, the leasehold estate of Lessee
created hereby or any Rent or Additional Rental reserved or payable
hereunder (including any gross receipts or other taxes levied upon,
assessed against or measured by the Rent or Additional Rental);
provided, however, that Lessee shall not be obligated to pay any
municipal, state or federal income, inheritance or estate tax or
any tax imposed, levied or assessed for or because of the income,
appreciation or other benefit derived by Lessor from or because of
this Lease or the estate of Lessor under this Lease under currently
existing applicable laws and regulations.
Section 5.02. Charges. Subject to the provisions of 14.01 hereof
(concerning Permitted Contests), Lessee covenants and agrees that
it shall pay when due all charges for all public or private utility
services including, but not limited to, water, sewer, gas, light,
heat and air conditioning, telephone, electricity, trash removal,
power and other utility and communications services (all or anyone
of which are hereinafter referred to as "Charge") that at any time
during the Term are rendered or become due and payable for the
Premises.
Section 5.03. General. As relates to the Premises, Lessee shall
prepare and file all reports and returns required by law and
governmental regulations for any Tax and shall furnish copies
thereof to Lessor. Likewise, Lessee shall promptly forward to
Lessor, upon receipt by Lessee, copies of any bill or assessment
respecting any Tax. Upon request of Lessor, Lessee agrees to
furnish and deliver to Lessor receipts evidencing the payment of
any Tax and/or Charge payable by Lessee as in 5.01 and 5.02
provided. If any Tax and/or Charge may be paid in installments,
Lessee shall be obligated to pay only such installments as they
become due; provided, however, that all installments which are to
become due and payable after the expiration of the Term shall be
paid ninety (90) days prior to the expiration of the Term, or, if
the Lease is terminated this obligation to pay any Tax or Charge
shall survive a termination of this Lease. Any Tax for the year in
which this Lease commences and terminates shall be prorated between
Lessor and Lessee as of such dates. If Lessee fails to pay any Tax
and/or Charge (or any installment thereof) when due, Lessor,
without declaring a default hereunder, may, but shall not be
obligated to, pay any such Tax and/or Charge (or any installment
thereof) and any amount so paid by Lessor, together with all costs
and expenses incurred by Lessor in connection therewith, shall
constitute Additional Rental hereunder and shall be paid by Lessee
to Lessor on demand with Interest thereon in the manner provided
in Article IV . Lessee's obligation to pay Taxes and Charges which
accrue during the Term shall survive any termination of this Lease.
ARTICLE VI: CONDITION AND USE OF THE PREMISES
Section 6.01. Condition of the Premises. Lessor shall provide
Lessee copies of any environmental study report, soil test report,
and any other engineering report relating to the Premises and in
Lessor's possession. The land which constitutes part of the
Premises shall be suitable and adequate for construction of
Lessee's Improvements without undue expense to Lessee. In the
event Lessee finds that the land is not suitable and adequate for
such construction, then Lessee may terminate this Lease, and upon
such termination this Lease shall be of no force and effect.
Section 6.02. Permitted Use of the Premises. Subject to the terms
and conditions hereof, Lessee may use the Premises for operating
a commercial bank and any and all other related services as offered
by a commercial bank and its holding company, and for no other uses
unless agreed to by Lessor, which agreement shall not be
unreasonably withheld or delayed. Lessee at its option, may
construct a drive-through banking facility and/or an automated
teller machine facility. Lessee covenants and agrees that Lessee
shall not: (a) erect any walls, fences or barricades which would
obstruct access to any improvements now or hereafter located on
sites owned or leased by Lessor in the vicinity of the Premises;
(b) use or occupy the Premises or any part thereof for any unlawful
purpose or in such a manner as to: (i) violate any certificate of
occupancy, certificate of compliance, certificate or policy of
insurance (or conduct activities which would void or increase the
cost of Lessor's insurance), permit, license or franchise; (ii)
cause the value or usefulness of the Premises to diminish; or (iii)
constitute a public or private nuisance or waste; (c) cause, suffer
or permit: (i) any waste, damage, disfigurement or injury to the
Premises of any portion thereof; (ii) the Premises or any portion
thereof to be used by the public, as such, without restriction or
in such a manner as might reasonably: (A) tend to impair Lessor's
title to the Premises or any portion thereof; or, (B) make possible
a claim or claims of adverse usage or adverse possession by the
public, as such, or of implied dedication of the Premises or any
portion thereof; (d) construct, erect or maintain buildings or
improvements on the Premises which are greater than two (2) stories
in height or any buildings or improvements greater than fifty (50)
feet in height; (e) cause, suffer or permit the Premises, or any
part thereof, or any construction undertaken thereon, or any
activities conducted or permitted thereon, to be done, conducted
and performed other than in accordance with all applicable laws,
rules, ordinances and regulations of all governmental bodies having
jurisdiction; (f) construct or maintain above-ground utilities at
the Premises, or fail to screen all garbage and refuse containers
from public view.
Section 6.03. Lessee's Construction Lessor acknowledges that
Lessee intends to construct a commercial bank and a drive-through
facility on the Premises ("Lessee's Improvements"). Lessee shall
complete Lessee's Improvements in accordance with plans and
specifications approved by Lessor and in compliance with all
applicable laws, statutes, codes, ordinances, rules, regulations
and standards including, without limitation, the Americans With
Disabilities Act. Prior to commencing Lessee's Improvements Lessee
shall submit plans and specifications for Lessee's Improvements to
Lessor for its review and approval. The plans and specifications
shall be submitted in duplicate. Lessor's review and/or approval
of any plans and specifications for Lessee's Improvements, shall
create no responsibility or liability on the part of Lessor, nor
shall such review or approval evidence or constitute a
representation or warranty by Lessor regarding the action or
undertaking approved or the completeness, accuracy, design
sufficiency, or compliance of such plans or specifications with
laws, ordinances, rules, and/or regulations of any governmental
agency or authority. The parties specifically agree that no work
by Lessee shall be started or performed until after Lessee receives
Lessor's written approval of the required plans and specifications.
Lessor shall not be accountable for any enhancement or work
performed, any such enhancement shall be the sole expense and
responsibility of the Lessee. Lessee shall provide its own trash
container or containers for construction debris; promptly remove
all construction and related debris from the Premises.
In the event Lessor does not give approval to the plans and
specifications for Lessee's Improvements within sixty (60) days
after submission of such to Lessor by Lessee, Lessee may terminate
this Lease by giving Lessor notice, upon which this Lease be of no
further force and effect.
Neither Lessee nor its agents or any other party acting on behalf
of Lessee may erect or install signs until Lessor gives specific
approval of the signs selected. If any governmental approval shall
be required for the erection of any such sign, Lessee hereby agrees
to obtain and pay the cost of obtaining all such government
approvals and or permits.
Section 6.04. Covenants, Conditions and Restrictions. Lessee
acknowledges that the Premises are subject to the restrictions of
record against the property, including, but not limited to, the
covenants, conditions and restrictions contained in that certain
Memo of Lease dated February 19, 1997, from M. Milton Robson to
Publix Super Markets, Inc. recorded in Deed Book 2813, page 290,
Hall County, Georgia deed records.
ARTICLE VII: COMPLIANCE WITH LAWS: LIENS AND ENCUMBRANCES
Section 7.01. Compliance with Laws. Subject to the provisions of
14.01 hereof (concerning Permitted Contests), Lessee, at its sole
cost and expense, shall comply with and cause the Premises and any
improvements located thereon, to comply with (a) all federal,
state, county, municipal and other governmental statutes, laws,
rules, orders, regulations and ordinances affecting the Premises
or any part thereof, or the use thereof, including those which
require "Repairs," as that term is defined in 8.01 hereof, and (b)
the requirements of all policies of public liability, fire and
other insurance which at any time may be in force for the Premises
(all or any one of the items enumerated in this 7.01 are
hereinafter referred to as a "Regulation").
Section 7.02. Liens and Encumbrances. Subject to the provisions
of 14.01 hereof (concerning Permitted Contests), Lessee shall not
create or permit to be created or to remain, and, shall promptly
discharge within thirty (30) days after notice by Lessor, at its
sole cost and expense, any lien, encumbrance or charge (each or all
of which are herein referred to as "Lien") upon the Premises, or
any part thereof or upon Lessee's leasehold estate hereunder that
arises from the use or occupancy of the Premises by Lessee or
because of any labor, service or material furnished or claimed to
have been furnished to Lessee or because of any construction,
Repair or demolition by Lessee. Notice is hereby given that Lessor
shall not be liable for the cost and expense of any labor, services
or material furnished or to be furnished for the Premises at or by
the direction of Lessee or anyone holding the Premises or any part
thereof by, through or under Lessee and that no laborer's,
mechanic's or materialman's or other lien for any such labor,
services or materials shall attach to or affect the interest of
Lessor in and to the Premises. Nothing in this Lease contained
shall be deemed or construed in any way as constituting the consent
or request of Lessor, express or implied, by inference or
otherwise, to any contractor, subcontractor, laborer or materialman
for the performance of any labor or the furnishing of any materials
for any specific improvements or Repair to or of the Premises or
any part thereof, nor as giving Lessee any right, power or
authority on behalf of Lessor to contract for or permit the
rendering of any services or the furnishing of any materials that
would give rise to the filing of any lien against the Premises or
any part thereof. If Lessee fails to discharge any Lien or to pay
the cost of compliance with any Regulation as hereinabove provided
or to bond off any lien, Lessor, without declaring a default
hereunder and without relieving Lessee of any liability hereunder,
may, but shall not be obligated to, discharge or pay the same,
either by paying the amount claimed to be due or by procuring the
discharge of such Lien by deposit or by bonding proceedings, and
any amount so paid by Lessor and all costs and expenses incurred
by Lessor in connection therewith shall constitute Additional
Rental hereunder and shall be paid by Lessee to Lessor on demand
with Interest thereon.
ARTICLE VIII: REPAIRS AND ALTERATIONS
Section 8.01. Maintenance and Repair. Lessee, at all times during
the Term, at its expense, shall keep the Premises in good order,
condition and repair, ordinary wear and tear excepted, and shall
promptly make or cause to be made any and all necessary or
appropriate repairs, replacements, or renewals (herein collectively
referred to as "Repairs"). All Repairs shall be at least equal in
quality and class to the original work. Lessor shall not be
required to make any Repairs in, on, or to the Premises during the
Term. Lessee hereby waives any right to make Repairs at the expense
of Lessor which may now or hereafter be provided by statute or law.
Section 8.02. Alterations by Lessee. Except for the initial
construction of Lessees' Improvements and any nonstructural
interior alterations, additions or improvements which cost Two
Hundred Thousand and No/100 Dollars ($200,000) or less, in the
aggregate in any period of twelve (12) consecutive months, Lessee
shall not make any alterations, additions, or improvements in or
to the Premises, without the prior written consent of Lessor, which
consent shall not be unreasonably withheld or delayed. Any such
alterations, additions, or improvements consented to by Lessor,
shall be made at Lessee's sole cost and expense. Lessee shall
provide its own trash container or containers for construction
debris; promptly remove all construction and related debris from
the Premises; and immediately following completion of construction,
Lessee shall return the Premises to the condition it was in
immediately prior to construction and shall repair and restore any
portions of the Premises damaged as a result of the construction
activities to the condition they were in immediately prior to
construction. Lessee shall secure all governmental permits,
approvals, or authorizations required for any such work and shall
defend, indemnify, and hold Lessor harmless from and against any
and all liability, costs, damages (including any damage to the
Premises ), expenses (including reasonable attorneys' fees), and
any and all liens resulting therefrom, arising out of or in
connection with any such work; provided, however, such indemnity
shall not extend to any liability or damages caused by the willful
actions or negligence of Lessor. Lessor's review and/or approval
of any request for alterations, additions, or improvements in or
to the Premises, and/or the plans or specifications with respect
thereto, shall create no responsibility or liability on the part
of Lessor, nor shall such review or approval evidence or constitute
a representation or warranty by Lessor with respect to the action
or undertaking approved or the completeness, accuracy, design
sufficiency, or compliance of such plans or specifications with
laws, ordinances, rules, and/or regulations of any governmental
agency or authority.
ARTICLE IX: DAMAGE AND DESTRUCTION
Section 9.01. Notice. If all or any part of the Premises are
damaged or destroyed, Lessee will promptly notify Lessor in writing
generally describing the nature and extent of such damage or
destruction.
Section 9.02. Restoration. If any improvements on the Premises
are partially or totally damaged or destroyed by fire or other
cause, Lessee shall promptly either: (i) repair, restore, or
rebuild the improvements to substantially the same condition as
existed immediately prior to the casualty; or (ii) raze the
improvements, fill any excavation, landscape the area to match
adjacent landscaping, and perform any other work necessary to
restore that Premises to a clean, sightly and safe condition. The
work in this Section whether restoration or razing shall be
completed within three hundred sixty-five (365) days of the
casualty. Regardless of any casualty to the improvements on the
Premises, Lessee's obligation to pay Rent and Additional Rent shall
continue unabated.
ARTICLE X: INSURANCE
Section 10.01. Classes of Insurance. At all times during the
Term, Lessee shall keep the Premises and all improvements thereon
insured or shall cause the Premises to be insured against the risks
and hazards and with coverage in amounts not less than those
specified as follows:
(a) Property insurance against the risks customarily included
under extended coverage or all risks policies for properties
similar to the Premises; and
(b) Commercial general liability and property damage insurance
(including, but not limited to, coverage for any construction on
or about the Premises) covering the legal liability of Lessor and
Lessee against all claims for any bodily injury or death of persons
and for damage to or destruction of property occurring on, in or
about the Premises and the adjoining streets, sidewalks and
passageways and arising out of the use or occupation of the
Premises by Lessee in the minimum amounts of Two Million and 00/100
Dollars ($2,000,000.00) for each occurrence in connection with any
one death or bodily injury, One Million and 00/100 Dollars
($1,000,000.00) in connection with any single occurrence, and Five
Hundred Thousand and 00/100 Dollars ($500,000.00) in connection
with claims for property damage.
Section 10.02. Requirements. All insurance required under 10.01
hereof shall be written by companies rated A and a finance rating
of at least Class X or better in the most current edition of Best's
Insurance Reports which are authorized to do insurance business in
the State of Georgia; shall name as the insured parties Lessor and
Lessee as their respective interests may appear; shall be
reasonably satisfactory to Lessor in all respects and shall
specifically provide that no cancellation, reduction in amount or
material change in coverage thereof shall be effective until at
least ten (10) days after receipt by Lessor and Lessee of written
notice thereof. A copy of each policy or acceptable certificate of
insurance in force, issued by the insured, shall be delivered to
Lessor. Lessee may obtain the insurance required hereunder by
endorsement on its or its sub-tenant's blanket insurance policies,
provided that the policies fulfill the requirements of this 10.02,
and that Lessor receives satisfactory written proof of coverage.
Lessee shall permit Lessor to examine all policies evidencing the
insurance required to be maintained by Lessee under this Lease.
Section 10.03. Certificates. Lessee shall deliver to Lessor
promptly after the execution and delivery of this Lease and on each
anniversary of the date of this Lease, a certificate addressed to
Lessor, signed by Lessee, and dated within thirty (30) days prior
to the delivery thereof (a) listing the insurers and policy numbers
evidencing all the insurance then required to be maintained by
Lessee hereunder, and (b) warranting that the insurance is in full
force and that such insurance and the policies evidencing the
insurance comply with the requirements of this Lease. Lessee's
failure to effect, maintain or renew any insurance provided for in
this Article X or to pay the premiums therefor, or to deliver to
Lessor any of the certificates, shall entitle Lessor, at its option
but without obligation, upon thirty (30) days' notice to Lessee,
to procure such insurance, pay the premiums therefor or obtain such
certificates, and any sums expended by Lessor for such purposes
shall be Additional Rental hereunder and shall be repaid by Lessee
upon demand of Lessor.
ARTICLE XI: INDEMNIFICATION
Section 11.01. Indemnification. Lessee covenants and agrees to
pay, defend, indemnify and save harmless Lessor from and against
any and all liability, loss, damage, cost, expense (including all
attorneys' fees and expenses of Lessor), causes of action, suits,
claims, demands or judgments of any nature whatsoever (a) in any
manner arising out of or connected with the use, possession,
operation, maintenance, management, occupation of, or construction
on the Premises or any part thereof, (b) any negligence on the part
of the Lessee or its agents, contractors, servants, employees,
licensees or invitees, or (c) resulting from the violation by
Lessee of any term, condition or covenant of this Lease or of any
contract, agreement, restriction, or Regulation affecting the
Premises or any part thereof or the ownership, occupancy or use
thereof. The obligations of Lessee under this 11.01 shall survive
any termination of this Lease and any transfer or assignment by
Lessor or Lessee of this Lease or any interest hereunder.
Notwithstanding the foregoing, such indemnity shall not extend to
any liability or damages caused by the willful actions or
negligence of Lessor.
ARTICLE XII: SURRENDER
Section 12.01. Surrender. When this Lease terminates, Lessee
shall peaceably quit and surrender the Premises to Lessor, and all
improvements, machinery and equipment constructed, installed or
placed by Lessee thereon, excepting trade fixtures, inventory,
merchandise and other personalty owned by occupancy tenants,
ordinary wear and tear excepted. If Lessee is not then in default
under this Lease, Lessee and any occupancy tenants shall have the
right when this Lease terminates to remove from the Premises all
personal property and equipment used in Lessee's or such occupancy
tenants' business, as distinguished from improvements, machinery
and equipment used in and necessary to the operation of the
Premises, and placed, installed or used by Lessee or such occupancy
tenants thereon. Any machinery and equipment not removed by Lessee
on or before termination of this Lease shall become the property
of Lessor.
ARTICLE XIII: ASSIGNMENT AND SUBLETTING
Section 13.01. Assignment; Prior Consent. Neither this Lease nor
the interest of Lessee in this Lease or in the Premises, or any
part thereof, shall be sold, assigned or otherwise transferred by
Lessee, whether by operation of law or otherwise, without the
express prior written consent of Lessor, which consent shall not
be unreasonably withheld. Notwithstanding the foregoing, the
interest of Lessee in this Lease and in the Premises may be
transferred or assigned to another commercial bank or bank holding
company for use by such institution as a banking facility without
the consent of Lessor, and Lessee shall be relieved from liability
hereunder upon such Assignee's assumption of Lessee's obligations
hereunder, and also the Lessee may pledge or mortgage the interest
of Lessee in this Lease and in the Premises as set forth in Section
18.19. Except as otherwise provided in 13.02 and 18.19 hereof,
neither this Lease nor the interest of Lessee in this Lease or in
the Premises, or any part thereof, shall be mortgaged, pledged or
hypothecated by Lessee, without the express prior written consent
of Lessor. Any consent given by Lessor to any sale, assignment,
mortgage, pledge, hypothecation or other transfer shall apply only
to the specific transaction thereby authorized and shall not
relieve Lessee or any approved successor of Lessee from the
requirement of obtaining the prior written consent of Lessor to any
further transfer or subletting. No assignment of this Lease or of
Lessee's interest under this Lease or in the Premises, or any part
thereof, or any sublease shall be effective until there shall have
been delivered to Lessor an agreement in recordable form, executed
by Lessee and the proposed assignee, or subtenant, as the case may
be, wherein: (a) any assignee assumes due performance of this Lease
on Lessee's part to be done and performed for the balance then
remaining in the Term, or, (b) any subtenant acknowledges the right
of Lessor to continue or terminate any sublease when this Lease
terminates, in Lessor's sole discretion and such subtenant shall
agree to recognize and attorn to Lessor if Lessor elects to
continue such sublease. Any attempt by Lessee to make any such
sale, assignment, mortgage, pledge, hypothecation or other transfer
or to sublet the Premises without full compliance with all
requirements set forth in this Lease shall be an Event of Default
hereunder. Any person who, by operation of law or otherwise,
becomes an assignee of this Lease or becomes vested with a
leasehold interest hereunder shall be bound by and be liable upon
all the terms, covenants, provisions and conditions contained in
this Lease, during the Term, whether of the nature of covenants
ordinarily running with the land or not, but neither Lessee, nor
any subsequent lessee whose interest is assigned or divested, shall
be relieved of liability hereunder otherwise than by an express
release from liability executed in writing by Lessor, except as
provided above.
Section 13.02. Subletting. Subject to the provisions of Sections
13.01 and 13.02, Lessee shall have the right to sublet the
Premises; provided, however, Lessee shall not have the right to
sublet more than 50% of the Premises based upon square footage of
the building except with Lessor's written consent based solely on
the creditworthiness of the subtenant(s), which consent shall not
be unreasonably withheld. Lessee will perform and observe every
term and condition to be performed and observed as "sublessor"
under such sublease and shall and does hereby indemnify and agree
to hold Lessor harmless from any and all liability, claims and
causes of action arising thereunder. No subletting, approved or
otherwise, shall relieve Lessee of its obligations hereunder and
Lessee assumes and shall be responsible for and liable to Lessor
for all acts and omissions on the part of any sublessee, and any
violation of any of the terms, provisions and conditions of this
Lease by any sublessee, whether by act or omission, shall
constitute a violation by Lessee.
ARTICLE XIV: RIGHT TO CONTEST
Section 14.01. Permitted Contests. Lessee, at its expense, may
contest by appropriate legal proceedings conducted in good faith
and with due diligence the amount, validity or application, in
whole or in part, of any Tax or Charge referred to in 5.01 and 5.02
hereof, any Regulation referred to in 7.01 hereof or any Lien
referred to in 7.02 hereof; provided that: (a) Lessee shall notify
Lessor in writing prior to beginning such contest; (b) Lessee shall
first make all contested payments (under protest if it desires)
unless such proceeding shall suspend the collection thereof from
Lessor or from the Premises; (c) no part of the Premises or any
interest therein shall be subjected thereby to sale, forfeiture,
foreclosure or interference; (d) Lessor shall not be exposed
thereby to any civil or criminal liability for failure to comply
with any Regulation and the Premises shall not be subject to the
imposition of any Lien as a result of such failure; and (e) Lessee
has furnished any security required in such proceeding or under
this Lease or reasonably requested by Lessor to insure payment of
any Tax, Charge, Lien or compliance with any Regulation. Lessee
agrees that it shall pay, and save Lessor harmless from and
against, all losses, judgments, decrees and costs (including all
attorneys' fees and expenses) from any Permitted Contest and that,
promptly after the final determination of every Permitted Contest,
Lessee shall fully pay and discharge the amounts which shall be
levied, assessed, charged or imposed or be determined to be payable
therein, together with all penalties, fines, interests, costs and
expenses resulting therefrom and will promptly comply with any
Regulation under which compliance is required.
ARTICLE XV: DEFAULT
Section 15.01. Events of Default. The occurrence of any of the
following acts, events or conditions shall constitute an "Event of
Default" under this Lease:
(a) Lessee fails at any time during the Term to pay Rent or
Additional Rental when due and such failure shall continue
without correction for a period of ten (10) days after written
notice from Lessor; or
(b) Lessee fails or refuses at any time during the Term to
fulfill or perform any other covenant, agreement or obligation
of Lessee hereunder and such failure or refusal shall continue
without correction for a period of thirty (30) days after
written notice from Lessor; or
(c) The estate or interest of Lessee in the Premises, or any
portion thereof, or in this Lease is levied upon or attached
in any proceedings and such process is not vacated or
discharged within ninety (90) days after the date of such levy
or attachment; or
(d) There is any entry of a decree or order for relief by a
court having jurisdiction in the premises in respect of Lessee
in an involuntary case under the federal bankruptcy laws, as
now or hereafter constituted, or any other applicable federal
or state bankruptcy, insolvency or other similar law, or
appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of Lessee or for
any substantial part of its property, or ordering the winding-up or
liquidation of its affairs and the continuance of any
such decree or order unstayed and in effect for a period of
sixty (60) consecutive days; or
(e) Lessee commences a voluntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or
any other applicable federal or state bankruptcy, insolvency
or other similar law.
Section 15.02. Termination. If any Termination Default occurs,
Lessor shall have the right, at his election, to notify Lessee in
writing (then or at any time thereafter while any such default
exists or continues) of the termination of this Lease as of the
date specified in such notice of termination, which date shall be
not less than ten (10) days after the date of the giving of such
notice. On such termination date this Lease and the Term and estate
herein granted shall, subject to the provisions of 15.05 hereof,
expire and terminate by limitation, and all rights of Lessee under
this Lease shall expire and terminate, unless prior to such
termination date Lessee pays to Lessor all arrears of Rent and
Additional Rental payable by Lessee under this Lease (together with
Interest thereon) and all costs and expenses (including, without
limitation, attorneys' fees and expenses) incurred by or on behalf
of Lessor because of any Termination Default and fully cures and
corrects any Termination Default then existing hereunder to the
satisfaction of Lessor. Upon termination pursuant to this Section
15.02, Lessor may enter upon and repossess the Premises by
reasonable force, summary proceedings, ejectment or otherwise, and
may dispossess Lessee and remove Lessee and all other persons and
any and all property therefrom. Lessor shall not be liable to
Lessee or to any person or entity claiming by, through or under
Lessee for or because of any such entry, repossession or removal.
Section 15.03. Termination Default. The occurrence of any of
the following acts, events or conditions shall constitute a
"Termination Default" under this Lease:
(a) Lessee fails at any time during the Term to pay Rent due
for three (3) consecutive months, and such failure shall continue
without correction for a period of thirty (30) days after written
notice from Lessor sent after the due date of the third
consecutive months' Rent; provided, however, Lessee shall be
entitled to cure such a failure to pay Rent for three (3)
consecutive months only once in any eighteen (18) month period;
or
(b) Lessee fails at any time during the Term to pay Additional
Rental when due, and such failure shall continue without
correction for a period of ninety (90) days after written notice
from Lessor; or
(c) Lessee fails at any time during the Term to fulfill its
obligation to keep the Premises and all improvements thereon
insured as required under Article X hereof, and such failure
shall continue without correction for a period of ninety (90)
days after written notice from Lessor.
Section 15.04. Late Charge. Lessee covenants and agrees to pay
to Lessor, from time to time as provided in this Lease and as
"Additional Rental" a late charge of ten percent (10%) of the
monthly Rent payment for any Rent payment received by Lessor after
the tenth (10th) day after the due date for the particular payment.
The late charge shall be paid with the late Rent payment. Section 15.05.
Liability of Lessee. No termination of this Lease
pursuant to 15.02 hereof or by operation of law or otherwise and
no repossession of the Premises or any part thereof shall relieve
Lessee of its liability and obligations hereunder arising during
and accrued for the period prior to termination, all of which shall
survive such termination or repossession. Lessor shall be entitled,
at its election, to sue for and receive each increment of Rent and
Additional Rental as and when they become due, but only for the
period prior to termination in the event of termination of this
Lease pursuant to 15.02 hereof.
Section 15.06. Right of Lessor to Perform for Lessee.
Notwithstanding any other provision of this Lease to the contrary,
if an Event of Default occurs, Lessor may, at its exclusive option,
take, on behalf of Lessee, whatever steps it deems reasonably
necessary to cure such Event of Default and to charge Lessee for
the costs and expenses attributable thereto. Lessee shall pay all
costs and expenses immediately upon receipt of a statement thereof
from Lessor. Any such amounts, paid or unpaid, shall be deemed
Additional Rental hereunder.
Section 15.07. General. Each right, power and remedy of Lessor
provided in this Lease or now or hereafter existing at law or in
equity or by statute or otherwise shall be cumulative and
concurrent and shall be in addition to every other right, power or
remedy provided in this Lease or now or hereafter existing at law
or in equity or by statute or otherwise. In addition to any other
remedy provided in this Lease, Lessor shall be entitled, to the
extent permitted by applicable law, to injunctive relief in the
event of the violation or attempted or threatened violation of any
term, condition or covenant of this Lease or to a decree compelling
performance thereof. The exercise by Lessor of any one or more of
the rights, powers or remedies provided in this Lease or now or
hereafter existing at law or in equity or by statute or otherwise
shall not preclude the simultaneous or later exercise by Lessor of
any such right, power or remedy.
ARTICLE XVI: CONDEMNATION
Section 16.01. Total Condemnation. If, during the Term, all or
such portion of the Premises as makes the residue thereof of
substantially no commercial value as reasonably determined by
Lessee, is condemned or taken by the United States or any other
legal entity having the power of eminent domain, this Lease shall
terminate as of the date that title to the Premises or portion
thereof vests in the condemnor; provided, however, that such
termination shall not benefit the condemnor and shall be without
prejudice to the rights of either Lessor or Lessee to recover just
and adequate compensation from the condemning authority. The
residue shall be deemed to have substantially no commercial value
in the event the building constituting part of Lessee's
Improvements is condemned or taken.
Section 16.02. Partial Condemnation. If, during the Term, a
portion of the Premises is condemned or taken by the United States
or any other legal entity having the power of eminent domain and
the residue of the Premises is of some commercial value and remains
commercially suitable for use as a commercial bank building, then
Lessee and Lessor, sharing the cost on an equitable basis based on
the remaining period of time in the Term of the Lease (including
extensions) and the estimated actual useful life of the restoration
improvements, shall forthwith cause the Premises to be restored,
by effecting Restoration as provided in 9.02, to as nearly the same
condition as existed prior to such taking. Regardless of any such
partial condemnation of the Premises, Lessee's obligation to pay
Rent and Additional Rent shall continue unabated, except Rent shall
be decreased by the percentage of land taken by condemnation in
relation to the size of the original tract leased hereunder.
Notwithstanding the foregoing set forth in this first paragraph of
Section 16.02, if the condemnation of a portion of the Premises has
the sole effect of reducing the parking spaces on the Premises by
not more than fifteen (15) spaces, then in that event Lessor shall
be required to provide Lessee the use of the same number of parking
spaces as taken in the condemnation, said substituted parking
spaces to be located reasonably adjacent to the Premises on other
property of Lessor, with such location to be approved by Lessee,
which approval shall not be unreasonably withheld. If Lessor does
not provide Lessee the use of substituted parking spaces as set
forth above, then the provisions of the second paragraph of Section
16.02 shall be deemed to be applicable as a result of the
condemnation.
If during the Term, a portion of the Premises is condemned or
taken by the United States or any other legal entity having the
power of eminent domain and the residue of the Premises is of some
commercial value but is not commercially suitable for use as a
commercial bank building, then Lessor shall forthwith substitute
additional real property for parking spaces, a drive-through
banking facility, automated teller machine, and/or other banking
facility as reasonably necessary to be replaced due to the
condemnation, and said property shall be located reasonably
adjacent to the Premises on other property of Lessor, with said
substituted property to be approved by Lessee, which approval shall
not be unreasonably withheld. The substituted real property shall
become part of the Premises for purposes of this Lease. In that
event Lessee and Lessor, sharing the cost on an equitable basis
based on the remaining period of time in the Term of the Lease
(including extensions) and the estimated actual useful life of the
restoration improvements, shall forthwith cause the Premises
(including the substituted real property) to be restored, by
effecting Restoration as provided in 9.02, to as nearly the same
condition as existed prior to such taking, and Lessee's obligation
to pay Rent and Additional Rent shall continue unabated. In the
event that Lessor fails to provide said substituted property for
use by Lessee as part of the Premises, Lessee shall have the right
to terminate this Lease. In the event of such termination, Lessor
shall be required to pay Lessee as liquidated damages the value of
Lessee's interest in this Lease and the Premises as of the date
immediately prior to condemnation, less the amount of the
condemnation award received by Lessee. The value of Lessee's
interest in this Lease and in the Premises shall be agreed upon in
good faith by the parties. If the parties cannot agree upon the
value of Lessee's interest, then the value of Lessee's interest
shall be determined by appraisal of the fair market value of
Lessee's interest in the Lease and the Premises. Lessor shall
appoint one appraiser, and Lessee shall appoint one appraiser. If
the appraisers cannot agree on the value of Lessee's interest, then
a review appraiser shall be appointed by the Senior Judge of the
Hall County Superior Court to review the appraisals of the other
two appraisers and to establish the value of Lessee's interest
based upon a review of the two appraisals. The value established
by the review appraiser shall be binding on the parties. The
appraisers shall be licensed commercial real estate appraisers
having been so licensed by the State of Georgia for at least ten
(10) years. Any "comparables" used by the appraisers shall be
sales of property located in Hall County, Georgia. Alternatively,
in the event of such termination, at Lessor's election Lessor shall
sell the residue of the Premises in a commercially reasonable
manner in good faith using reasonable due diligence. The proceeds
of sale shall be equitably divided between Lessor and Lessee, such
division to be agreed upon in good faith by the parties. If the
parties cannot agree upon such division, then the division shall
be determined by appraisers, with each party appointing an
appraiser and the two appraisers appointing a third appraiser. The
decision of a majority of the appraisers shall be final and
conclusive of the division of the sales proceeds between the
parties. The appraisers shall be licensed commercial real estate
appraisers having been so licensed by the State of Georgia for at
least ten (10) years. The division shall be determined based on
the value of each party's interest in this Lease and the Premises
as of the date of closing of the sale (but as if this Lease had not
terminated). If the closing of the sale occurs more than twelve
(12) months after the date of termination of this Lease by Lessee,
the Lessee's interest in this Lease and the Premises shall be
valued as if the date of closing of the sale occurred twelve (12)
months after the date of termination of this Lease.
Section 16.03. Awards. The court in any condemnation proceeding
shall, if not prohibited by law, be requested to make separate
awards to Lessor and Lessee. Lessor and Lessee agree to request
such action of the court. In addition, any termination of this
Lease under Section 16.01 or 16.02 shall be without prejudice to
the rights of either Lessor or Lessee to recover from the condemnor
compensation for the respective damage to each party's interest in
the Premises caused by the condemnation. If for any reason the
court is unwilling or unable to make separate awards, Lessor and
Lessee agree that there shall be an equitable division between
them, dividing the one award to reflect the respective interest of
the two parties. If they cannot agree on the division, the
division of the award shall be determined in the same manner as
provided for the division of the proceeds of a sale set forth in
Section 16.02.
Section 16.04. General. Nothing contained in this Lease to the
contrary shall be deemed to prohibit Lessor or Lessee from
introducing into any condemnation proceeding or proceedings for the
Premises such appraisals or other estimates of value, loss and/or
damage as each may in its discretion determine.
ARTICLE XVII: BROKERAGE PROVISIONS
Section 17.01. No Broker. Lessor and Lessee represent and warrant
that no broker, commission agent, real estate agent or salesman
other than The Sembler Company (which shall be paid compensation
pursuant to a separate agreement) has participated in the
negotiation of this Lease, its procurement or in the procurement
of Lessor or Lessee and that no such person, firm or corporation
is or shall be entitled to the payment of any fee, commission,
compensation or other form of remuneration for this Lease in any
manner. Lessor and Lessee shall and do hereby mutually indemnify
and hold harmless each other from and against all loss, cost,
claim, damage or expense (including court costs and reasonable
attorneys' fees) arising from and out of or in any manner connected
with this Lease or any claim (meritorious or otherwise), demand or
assertion which is in the nature of a brokerage fee, commission or
other compensation for services rendered. The terms of this 17.01
shall survive any termination of this Lease.
ARTICLE XVIII: MISCELLANEOUS
Section 18.01. Right of Lessee to Grant Utility Easements. The
Lessee shall be entitled and is hereby authorized to grant
easements, for general utility purposes, ingress and egress, and
water and sewage purposes, to and as may be reasonably required by
any public or private utility company or other authority in order
to provide service to the Premises; provided, however, all of which
shall be subject to prior approval of the Lessor. Notwithstanding
the foregoing, Lessee shall not have the authority to grant any
easement which would adversely affect Lessor's title to the
Premises, the reversionary interest thereon or Lessor's interest
under this Lease.
Section 18.02. Waiver. Failure of Lessor to insist upon the
strict performance by Lessee of any term, condition or covenant on
Lessee's part to be performed pursuant to the terms of this Lease
or to exercise any option, right, power, or remedy of Lessor
contained in this Lease shall not be deemed to be nor be construed
as a waiver of such performance or relinquishment of such right now
or subsequent hereto. The receipt by Lessor of any Rent or
Additional Rental required to be paid by Lessee hereunder with
knowledge of any default by Lessee hereunder shall not be deemed
a waiver of such default. No waiver by Lessor of any provision of
this Lease shall be deemed to have been made unless expressed in
writing and signed by Lessor.
Section 18.03. [Reserved].
Section 18.04. Estoppel Certificates. Upon written request of
Lessor, Lessee shall from time to time execute, acknowledge and
deliver to Lessor and to any mortgagee of or prospective purchaser
from Lessor, a written certificate certifying: (a) that this Lease
is unmodified and in full force (or if there have been
modifications, that the Lease is in full force as modified, and
stating the modifications); (b) the dates to which Rent and
Additional Rental payable by Lessee hereunder have been paid; (c)
that no notice has been received by Lessee of any default by Lessee
hereunder which has not been cured, except as to any default
specified in the certificate; and (d) no default of Lessor. Upon
written request of Lessee, Lessor shall from time to time execute,
acknowledge and deliver to Lessee a written certificate certifying:
(i) that this Lease is unmodified and in full force (or if there
have been modifications, that this Lease is in full force as
modified, and stating the modifications); (ii) the dates to which
Rent and Additional Rental payable by Lessee hereunder have been
paid; and (iii) whether or not, to the knowledge of Lessor, there
is then existing a default by Lessee under this Lease (and if so,
specifying the same).
Section 18.05. [Reserved].
Section 18.06. Transfer by Lessor. After compliance with the
provisions of Section 19.01 hereof, if Lessor transfers or assigns
or otherwise disposes of his interest in the Premises or in this
Lease, Lessor shall thereupon be released and discharged from all
liabilities and obligations under this Lease (except those accruing
prior to such transfer, assignment or other disposition) and such
liabilities and obligations shall thereafter be binding upon the
assignee of Lessor's interest under this Lease.
Section 18.07. Mortgaging the Fee. Any provision term or
condition of this Lease which is, or which may appear to be, to the
contrary notwithstanding, Lessor shall at all times and from time
to time during the Term have the express right, power and privilege
to pledge, convey, assign or mortgage Lessor's fee simple title in
and to the Premises and/or Lessor's reversionary right to the
Premises upon any termination, to obtain financing, credit, or as
security for any financing or entity accepting such pledge,
conveyance, assignment or mortgage as security shall take subject
to the rights of Lessee so long as Lessee is not in default
hereunder and Lessee, in the event of any foreclosure or deed in
lieu of foreclosure or other final conveyance and transfer of
Lessor's interest, as aforesaid, shall recognize and attorn to the
grantee thereof as "lessor" under this Lease. Likewise, and to
similar effect, Lessor shall at all times and from time to time
during the Term, have the express right, power and privilege of
assigning only the Lessor's interest in this Lease or in the Rent
and Additional Rental to be paid hereunder. If permitted by law,
the transfer of Lessor's interest in the Premises by foreclosure
shall not occur without compliance with Lessee's right of first
refusal set forth in Section 19.01. If foreclosure sale with
compliance with Lessee's right of first refusal is not permitted
by law, in the event of a transfer of Lessor's interest in the
Premises by foreclosure, the purchaser at foreclosure, upon taking
title to Lessor's interest in the Premises, shall own said interest
subject to this Lease and Lessee's right of first refusal under
Section 19.01.
Section 18.08. Separability. Every covenant and agreement
contained in this Lease shall be for all purposes hereof construed
as separate and independent and the breach of any covenant by
Lessor shall not discharge or relieve Lessee from its obligation
to perform every covenant and agreement to be performed by Lessee
under this Lease. All rights, powers and remedies provided herein
may be exercised only to the extent that the exercise thereof does
not violate applicable law and shall be limited to the extent
necessary to render this Lease valid and enforceable. If any term,
provision or covenant of this Lease or the application thereof to
any person or circumstance shall be held to be invalid, illegal or
unenforceable, by a court of last resort having jurisdiction in the
premises, the validity of the remainder of this Lease shall not be
affected; this Lease shall not terminate, and there shall be
substituted for such illegal, invalid or unenforceable provision
a like provision which is legal, valid and enforceable within the
limits established by such court's final opinion and which most
nearly accomplishes and reflects the original intention of the
parties.
Section 18.09. Notices, Demands and Other Instruments. All
notices, demands, requests, consents, and approvals desired,
necessary, required or permitted to be given pursuant to the terms
of this Lease shall be in writing and shall be deemed to have been
properly given if personally delivered or sent, postage prepaid,
by first class registered or certified United States mail, return
receipt requested, or nationally recognized overnight carrier,
addressed to each party hereto at the following address:
Lessor: M. Milton Robson
3509 Tanners Mill Circle
Oakwood, Georgia 30507
Copy: The Sembler Company
11 Piedmont Center
Suite 918
3495 Piedmont Road
Atlanta, Georgia 30305
Attention: Mr. Jeff Fuqua
Lessee: Southern Heritage Bank
and Southern Heritage Bancorp, Inc.
P.O. Box 907
Oakwood, Georgia 30566
Attention: Mr. Gary H. Anderson
or at such other address in the United States as Lessor or Lessee
may from time to time designate by like notice. Any such notice,
demand, request or other communication shall be considered given
or delivered, as the case may be, on the date of personal delivery
or on the date of deposit in the United States mail as provided
above. Rejection or other refusal to accept or inability to deliver
because of changed address of which no notice was given shall be
deemed to be receipt of the notice, demand, request or other
communication.
Section 18.10. Successors and Assigns. Every covenant, term,
condition and obligation contained in this Lease shall apply to and
be binding upon and inure to the benefit or detriment of the
respective legal representatives, heirs, successors and assigns of
Lessor and Lessee. Whenever reference to the parties hereto is made
in this Lease, such reference shall be deemed to include the legal
representatives, successors, heirs and assigns of that party the
same as if in each case expressed. The term "person" when used in
this Lease shall mean any individual, corporation, partnership,
firm, trust, joint venture, business association, syndicate,
government or governmental organization or any other entity.
Section 18.11. Headings. The headings to the various Articles and
Sections of this Lease have been inserted for reference only and
shall not limit or define or otherwise affect the express terms and
provisions of this Lease.
Section 18.12. Counterparts. This Lease may be executed in any
number of counterparts, each of which is an original, but all of
which shall constitute one instrument.
Section 18.13. Applicable Law. This Lease shall be construed
under and enforced in accordance with the laws of the State of
Georgia.
Section 18.14. Entire Agreement; Amendments. This Lease sets
forth the entire understanding and agreement of Lessor and Lessee
for the Premises; all courses of dealing, usage of trade and all
prior representations, promises, understandings and agreements,
whether oral or written, are superseded by and merged into this
Lease. No modification or amendment of this Lease shall be binding
upon Lessor and Lessee, or either of them, unless in writing and
fully executed.
Section 18.15. All Genders and Numbers Included. Whenever the
singular or plural number, or masculine, feminine, or neuter gender
is used in this Lease, it shall equally apply to, extend to, and
include the other.
Section 18.16. Time is of Essence. Time is of the essence of this
Lease. Whenever a day certain is provided for the payment of any
sum of money or the performance of any act or thing, the same
enters into and becomes a part of the consideration for this Lease.
Section 18.17. Short Form Lease. Lessor and Lessee hereby agree
that this Lease shall not be recorded in the public records of Hall
County, Georgia. Lessor and Lessee shall, upon Lessee's request,
execute a Short Form Lease, in recordable form satisfactory to
Lessor and Lessee, wherein a legal description of the Premises, the
Term and certain other terms and provisions hereof, excepting,
however, the provisions hereof relating to the amount of Rent
payable hereunder, shall be set forth. The Short Form Lease shall
be filed for record with the Clerk of the Superior Court, Hall
County, Georgia. All recording cost and tax, if any, required to
record the Short Form Lease shall be at the sole cost and expense
of Lessee.
Section 18.18. Holding Over, No Extension, Tenant From Month to
Month and Treble Rent. If Lessee holds the Premises after the Term
expires without the express written consent of the Lessor, such
holding shall be deemed to have created a tenancy from month to
month terminable on thirty (30) days' written notice by either
party to the other, upon a monthly rental basis, and otherwise
subject to all terms and provisions of this Lease, except as
contemplated to the contrary in this 18.18. Such monthly rental
shall be the product of: (a) the total rental payable by Lessee to
Lessor during the last twelve month period of the Term, including,
but not limited to, Rent, Additional Rental and all other
additional charges provided by this Lease, multiplied by (b)
thirty-three and one-third percent (33-1/3%).
If the Lessee fails to surrender the Premises when this Lease
terminates, then Lessee shall, in addition to any other liabilities
to Lessor accruing therefrom, indemnify and hold Lessor harmless
from any loss or liability resulting from such failure, including,
without limitation, any claims made by any succeeding tenant
founded on such failure.
Section 18.19. Financing by Lessee. Lessee shall have the right
to mortgage or pledge Lessee's interest in this Lease, the
leasehold estate of Lessee created by this Lease, and Lessee's
interest in the Premises. Each such mortgage or pledge, however,
shall be a leasehold mortgage only, it being distinctly understood
and agreed that the Lessee has no right to mortgage or pledge the
fee of the Premises or Lessor's interest in this Lease, and that
each mortgage or pledge shall be subject to this Lease and to all
rights and interests of Lessor herein. The loan which any such
mortgage or pledge secures must be made by a reputable and
financially responsible lending institution regularly engaged in
the business of lending funds or extending credit to others.
Section 18.20. Right of Entry. Lessor or Lessor's employees,
agents, and/or invitees shall have the right to enter the Premises
at any reasonable time during Lessee's normal business hours to
examine the Premises and to show them to prospective purchasers (so
long as Lessor does not unreasonably interfere with Lessee's
business operation). Nothing contained herein shall be construed
to impose upon Lessor any duty of repair of the Premises.
ARTICLE XIX: RIGHT OF FIRST REFUSAL
Section 19.01. Right of First Refusal to Purchase.
(a) The Lessor agrees not to sell to anyone other than Lessee
or grant options to anyone other than Lessee with respect to
Lessor's interest in the Premises unless Lessor shall have (i)
received a bona fide good faith, arm's length offer from an
unaffiliated party for the sale or disposition of Lessor's interest
in the Premises separate from any other property of Lessor, (ii)
notified Lessee in writing of the identity and address of the
offeror and all of the provisions of such offer, and (iii) afforded
to Lessee the prior option to purchase or to otherwise acquire
Lessor's interest in the demised Premises on the same provisions
as those contained in the offer.
(b) Such option shall be exercisable by written notice given
within the thirty (30) days next following the receipt by the
Lessee of Lessor's notice of such offer, which shall be given by
the Lessor within ten (10) days after receipt of such offer. If
the Lessee shall fail to exercise such option and if the Lessor
shall not thereafter sell or dispose of Lessor's interest in the
Premises pursuant to the provisions of such offer, the foregoing
prohibition against sale or other disposition by the Lessor shall
continue in full force and affect, and the Lessee's foregoing
option shall thereafter apply to any subsequent offer on the same
terms as set forth above.
(c) The notice provided in subparagraph (b) above shall set
forth therein the time of closing and a place of closing (which may
not be more than fifty (50) miles from the Premises unless the
Lessor consents thereto). The time of closing shall be designated
in the notice of exercise but not later than sixty (60) days after
the giving of such notice.
(d) At such closing conference (i) the Lessee shall pay
to Lessor (by good certified check or an official check of a bank
or trust company) the applicable purchase price; (ii) the Lessor
shall convey good and marketable title to the Premises to the
Lessee free and clear of all encumbrances and title defects other
than those which arose at the Lessee's request or by virtue of the
Lessee's tenancy; and (iii) the Lessor and Lessee shall execute any
and all documents which may be necessary to effectuate such closing
and the transfer of title contemplated hereunder.
(e) Notwithstanding anything in this Section 19.01 to the
contrary, Lessor and Lessor's family members by blood or marriage
may transfer interests in the Premises among themselves by gift or
by will or succession without giving to Lessee the right of first
refusal to purchase; provided, however, upon any such transfer
Lessor's interest in this Lease and the Premises shall remain
subject to Lessee's right of first refusal to purchase set forth
in this Section 19.01. A transfer to an entity owned by Lessor
and/or any of Lessor's family members shall be deemed to be a
transfer among family members permitted hereunder. A sale or
transfer of any interest in such entity to a third party other than
a family member shall be deemed to be a sale or disposition giving
rise to Lessee's right of first refusal hereunder.
ARTICLE XX: HAZARDOUS SUBSTANCES
Section 20.1. Presence and Use of Hazardous Substances. Except
for Hazardous Substances (as hereinafter defined) used in Lessee's
normal business operations, but then only in such quantities as
allowed under and subject to all applicable laws, neither Lessee
nor Lessee's agents or contractors shall, without Lessor's prior
written consent, which consent may be withheld or conditioned
within Lessor's discretion, keep on or around the Premises for use,
handling, transport, disposal, treatment, generation, storage, or
sale, any of the following: hazardous materials, hazardous
substances, toxic wastes, toxic substances, pollutants, petroleum
products, underground tanks, oils, pollution, asbestos, PCB's,
materials or contaminants, as those terms are commonly used or as
defined by federal, state, and/or local law or regulation related
to protection of health or the environment, including, but not
limited to, the Resource Conservation and Recovery Act ( RCRA) (42
U.S.C. Section 6901, et. seq.); the Comprehensive Environmental
Response, Compensation and Liability Act (CERCLA) (42 U.S.C.
Section 9601, et. seq.); the Toxic Substances Control Act (15
U.S.C. Section 2601, et. seq.); the Clean Water Act (33 U.S.C.
Section 1251, et. seq.); and the Clean Air Act (42 U.S.C. Section
7401, et. seq.); and as any of the same may be amended from time
to time, and/or by any rules and regulations promulgated thereunder
(collectively referred to as Hazardous Substances.), and/or is
subject to regulation by any federal, state, or local law,
regulation, statute, ordinance, or management plan. Lessor
represents to Lessee that to the best of Lessor's knowledge, the
Premises does not presently contain and is free from all hazardous
substances and/or wastes, toxic and non toxic hazardous pollutants
and contaminants including, but not limited to, petroleum products
and asbestos. Lessor shall not, nor grant anyone else the right
or permission to, store, manufacture, use or sell any such
hazardous substances on or in the Premises. Lessor shall
indemnify, defend (with counsel selected by Lessee) and hold
harmless Lessee and Lessee's successors and assigns from and
against any and all liability arising from any and all claims,
demands, litigation, or governmental action involving any breach
of the representations, warranties and covenants of Lessor relating
to hazardous substances.
Section 20.2 Clean-Up Costs, Default, and Indemnification.
(a) Lessee shall be liable to Lessor for any and all clean-up
costs and any and all other charges, fees, or penalties (civil and
criminal) imposed by any governmental authority with respect to
Lessee's, its agents', servants', employees', contractors',
assignees' and/or subtenants' use, transportation, generation,
storage, and/or sale of Hazardous Substances in or about the
Premises. (b) Lessee shall defend, indemnify, and hold Lessor
harmless from and against any and all costs, fees, penalties, and
charges assessed against, incurred by, or imposed upon Lessor (as
well as Lessor's reasonable attorneys' and consultants' fees and
costs) as a result of such use, transportation, generation,
storage, and/or sale of Hazardous Substances.
(c) Upon Lessee's default under this Section, in addition to
the rights and remedies set forth elsewhere in this Lease, Lessor
shall be entitled to recover any and all damages associated with
the default, including, but not limited to, clean-up costs and
charges, civil and criminal penalties and fees, loss of business
and sales by Lessor, any and all damages and claims asserted by
third parties, and Lessor's reasonable attorneys' and consultants'
fees and costs.
Section 21. F.D.I.C. Provision.
Notwithstanding any other provisions contained in this Lease,
in the event (a) Lessee or its successors or assignees shall
become insolvent or bankrupt, or if it or their interests under
this Lease shall be levied upon or sold under execution or other
legal process, or (b) the depository institution then operating
on the Premises is closed, or is taken over by any depository
institution supervisory authority ("Authority"), Lessor may, in
either such event, terminate this Lease only with the
concurrence of any Receiver or Liquidator appointed by such
Authority; provided, that in the event this Lease is terminated
by the Receiver or Liquidator, the maximum claim of Lessor for
rent, damages, or indemnity for injury resulting from the
termination, rejection, or abandonment of the unexpired Lease
shall by law in no event be in an amount greater than all
accrued and unpaid rent to the end of the then current term,
plus reasonable attorneys' fees and expenses. This Lease is
expressly conditioned on the receipt by Lessee of any required
approvals from applicable regulatory bodies having supervisory
or regulatory authority over Lessee, and in the event any such
required approvals are not obtained after diligent pursuit of
such approvals by Lessee, this Lease shall automatically
terminate and be of no force and effect.
IN WITNESS WHEREOF, Lessor and Lessee have executed this
Lease, have affixed their seals hereunto and have delivered
same, all in duplicate (or triplicate) original, as of the day
and year first above written.
LESSOR:
s/M. Milton Robson (SEAL)
M. MILTON ROBSON, INDIVIDUALLY
LESSEE:
SOUTHERN HERITAGE BANK,
a State Banking corporation
By: s/Lowell S. Cagle
Name: Lowell S. Cagle
Title: Chairman
SOUTHERN HERITAGE BANCORP,
INC.
By: s/Lowell S. Cagle
Name: Lowell S. Cagle
Title: Chairman
<PAGE>
EXHIBIT 10.2
Southern Heritage Bank
(In Organization)
EMPLOYMENT AGREEMENT
This Agreement made and entered into this 5th day of November,
1997, between Southern Heritage Bank (the "Bank") and Gary H.
Anderson ("Employee");
WHEREAS, the Bank is a state bank, regulated by the Georgia
Department of Banking and Finance , insured by the Federal Deposit
Insurance Corporation, and located in Oakwood, Georgia; and
WHEREAS, the Bank wants to employ the Employee as President and
Chief Executive Officer of the Bank; and
WHEREAS, the parties desire to enter into this Agreement setting
forth the terms and conditions of the employment relationship of
the Bank and the Employee;
NOW, THEREFORE, it is agreed as follows:
I. RELATIONSHIP ESTABLISHED AND DUTIES
The Bank and the Bank Holding Company hereby will employ the
employee as President and Chief Executive Officer, to hold the
title of President and Chief Executive Officer, and to perform such
services and duties as the Board of Directors may, from time to
time, designate during the term hereof. Subject to the terms and
conditions hereof, Employee will perform such duties and exercise
such authority as are customarily performed and exercised by
persons holding such office, subject to the general direction of
the Board of Directors of the Bank, exercised in good faith in
accordance with standards of reasonable business judgment.
Employee shall serve on the Board of Directors of the Bank and
the Bank Holding Company, and shall serve as a non-voting member
of its Executive Committee, subject to the terms hereof.
Employee accepts such employment and shall devote his full time,
attention, and efforts to the diligent performance of his duties
herein specified and as an officer and director of the Bank and
will not accept employment with any other individual, corporation,
partnership, governmental authority, or any other entity, or engage
in any other venture for profit which the Bank may consider to be
in conflict with his or its best interest or to be in competition
with the Bank's business, or which may interfere in any way with
the Employee's performance of his duties hereunder excepting
passive investment in personal real estate, stocks, and bonds. Any
exception to this must be made by notification and approval of the
Board.
II. TERMS OF EMPLOYMENT
The initial term of employment under this Agreement shall
continue for three (3) years from the charter date of this
Agreement unless such is terminated pursuant to the terms hereof
or by the first to occur of the conditions to be stated
hereinafter. The Board of Directors may allow for a one year
extension to this agreement upon an annual review. The employee
shall purchase 6000 shares of the initial offering of common stock
at the same time as the other initial directors. This Agreement
will become effective and all provisions will be in effect and
employee will start employment when official tentative written
approval is received from the Department of Banking and Finance of
Georgia. The term previously stated notwithstanding this contract
shall be terminated by the earlier to occur of any of the
following:
(a) the death of the Employee;
(b) the complete disability of Employee; "Complete disability"
as used herein shall mean the inability of Employee, due to
illness, accident, or other physical or mental incapacity to
perform the services provided for hereunder for an aggregate of
sixty days within any period of 120 consecutive days during the
term hereof; however, these provisions will be coordinated with
and conformed to the disability policy provided for all
employees;
(c) the discharge of Employee by the Bank for cause; "Cause" as
used herein shall mean:
(1) such negligence or misconduct as shall constitute, as
a matter of law, a breach of the covenants and
obligations of Employee hereunder;
(2) failure or refusal of Employee to comply with the
provisions of this Agreement;
(3) Employee being convicted by any duly constituted
court with competent jurisdiction of a crime
involving moral turpitude;
(4) at the discretion of the Board, this contract may be
terminated if there are acts the Board feels are
moral turpitude;
(5) termination of the contract at the discretion of the
Board for failure to perform at acceptable levels of
deposit growth, regulator compliance, and other
performance standards as set by the Board.
Termination of Employee's employment other than for "Cause" as
defined in paragraph 1[c] above shall constitute a tender by
Employee of his resignation as an officer and director of the Bank
and the Bank Holding Company. In the event of termination the
Employee is entitled to severance pay equal to one (1) year base
salary and insurance (employee and dependents) and long term
disability for one (1) year.
III. COMPENSATION
For all services which Employee may render to the Bank during the
term hereof, the Bank shall pay to Employee, subject to such
deductions as may be required by law:
1. Base Salary: An annual salary of one hundred five thousand
($105,000) payable in equal semi-monthly installments and
subject to such deductions as may be required by law, for
the first 12 months. Thereafter, annual increase reviews
will be done during the month of December and for a January
1st effective increase date during the term of this
Agreement so that for the 12 months beginning on each such
anniversary date, the employee's salary increases will take
effect. The Board has sole discretion as to the amount of
the CEO's compensation.
2. Performance Bonuses: Each year, a performance bonus,
ranging from 0% to 50% of annual base salary will be
awarded, based upon mutually agreed upon goals such as a
pre-determined formula consisting of regulatory compliance,
deposit growth, ROA & ROE.
3. Stock Options: The Employee shall have the right and option
to purchase an additional number of shares of common stock
of the Bank Holding Company if approved by the Board of
Directors as follows:
(a) 15,000 shares at book value or $10.00 per share,
whichever is less, for the first five (5) years and
if extended by the board not to exceed ten (10)
years.
The option granted to the Employee pursuant to this paragraph 3
may be exercised by the Employee, in whole or in part, at any time
or from time to time during the period this Agreement is in effect
beginning on the first day of the second month following the close
of the Bank's fiscal year to which such grant is attributable.
Notwithstanding anything contained herein to the contrary, if the
shareholders of the Bank or the Bank Holding Company approve of a
capital reorganization of the common stock of the Bank Holding
Company or a merger or consolidation of the Bank Holding Company
with or into another corporation, or the sale of all or
substantially all of the assets of the Bank; or the Bank Holding
Company, then Employee shall have the right and option to purchase
all stock options that would have been paid to the Employee for the
remaining term of this Agreement pursuant to the terms of this
paragraph. Employee will be considered 100% vested should any of
these occurrences happen.
IV. OTHER BENEFITS
1. The Employee shall be entitled to participate in any plan
of the Bank relating to stock options, stock purchases,
profit sharing, group life insurance, medical coverage,
education, or other retirement or employee benefits that
the Bank may adopt for the benefit of its employees. In
addition, Employer agrees to purchase an immediate long-term
disability policy which will be fair to the Employee
in terms of protection.
2. The Employee shall be eligible to participate in any other
benefits which may be or become applicable to the Bank's
executive employees. Employee shall be furnished a car with
all expenses of maintenance to cover all automobile use, a
reasonable expense account, the payment of reasonable
approved expenses for attending annual and periodic
meetings of trade associations, and any other benefits
which are commensurate with the responsibilities and
functions to be performed by the Employee under this
Agreement. The Employer agrees to pay all medical insurance
for Employee and dependents, including, but not limited to
medical, dental and prescription card. Employer also agrees
to pay all reasonable approved expenses in connection with
the attendance and participation at said trade association
meetings by Employee's spouse. The Employer will furnish a
"Key Man" insurance policy on said Employee for an amount
of one million dollars ($1,000,000.00), the total will be
five hundred thousand ($500,000.00) with employees estate
as beneficiary and five hundred thousand ($500,000.00) with
the bank as beneficiary. The Employer will furnish to
Employee a car phone, a personal beeper and a home computer
with modem and other communications equipment which may be
deemed necessary by the Board in the future.
3. At such reasonable times as the Board of Directors shall in
its discretion permit, the Employee shall be entitled,
without loss of pay, to absent himself voluntarily from the
performance of his employment under this Agreement, all
such voluntary absences to count as vacation time, provided
that:
(a) The Employee shall be entitled to an annual vacation
of four (4) weeks per year. The Employee shall
schedule at least two consecutive weeks of vacation
each year.
(b) The timing of vacations shall be scheduled in a
reasonable manner by the Employee. The Employee shall
not be entitled to receive any additional
compensation from the Bank on account of his failure
to take a vacation; nor shall he be entitled to
accumulate unused vacation time from one calendar
year to the next.
(c) In addition to the aforesaid paid vacations, the
Employee shall be entitled, without loss of pay to
absent himself voluntarily from the performance of
his employment with the Bank for such additional
periods of time and for such valid and legitimate
reasons as the Board of Directors in its discretion
may determine. Further, the Board of Directors shall
be entitled to grant to the Employee a leave or
leaves of absence with or without pay at such time or
times and upon such terms and conditions as the
Board, in its discretion, may determine.
V. CHANGE OF CONTROL
1. If during the term of this Agreement there is a change of
control (COC) of the Bank, the Employee shall be entitled
to termination or severance pay in the event the Employee's
employment is terminated, except for just cause as defined
in Section II, paragraph 1[c], after the change in control.
In the event the Employee is terminated after 365 days from
the charter date of this Agreement as a result of COC, the
Employee shall be entitled to receive his salary through
the last day of the calendar month of the termination, or
payment in lieu of the notice period. In addition, the
terminated Employee shall receive an amount equal to two
(2) times his then existing annual base salary. This
payment shall also be made in connection with, or within
120 days after, a change in control of the Bank if such
change in control was opposed by the Employee or the Bank's
Board of Directors. This payment shall be in addition to
any amount otherwise owed to the Employee pursuant to this
Agreement.
2. The following items are automatically considered due and
payable in the event that change of control occurs:
(a) Non-forfeitable deferred compensation shall be paid
out in full.
(b) Long-term performance plan objective payments as
described in Section II, 2(f), shall be declared
accomplished and earned based upon performance up to
date of the COC.
(c) In the event that the Employee is a participant in a
restricted stock plan, or share option plan, and such
plan is terminated involuntarily as a result of the
COC, all stock and options shall be declared 100%
vested, and distributed. The term "control" shall
refer to the acquisition of 25 percent or more of the
voting securities of the Bank by any person, or
persons acting as a group within the meaning of
Section 13(d) of the Securities Exchange Act of 1934,
or to such acquisition of a percentage between 10
percent and 25 percent if the Board of Directors of
the Bank or the Comptroller of the Currency, the
FDIC, or the Federal Reserve Bank have made a
determination that such acquisition constitutes or
will constitute control of the Bank. The term
"person" refers to an individual, corporation, Bank,
Bank Holding Company, or other entity.
VI. POST TERMINATION COVENANTS
1. If during the term hereof Employee shall cease employment
hereunder for any reason, then Employee agrees that for six
months if dismissed for cause and one year without cause
following such termination he will not be employed in the
banking business or any related field thereto in Oakwood,
Georgia or Hall County, Georgia. Furthermore, following
such termination Employee agrees that he will not, without
the prior written consent of the Bank:
(a) furnish anyone with the name of, or any list or lists
of customers of the Bank or utilize such list or
information himself for banking purposes; or
(b) furnish, use, or divulge to anyone any information
acquired by him from the Bank relating to the Bank's
methods of doing business; or
(c) contact directly or indirectly any customer of the
Bank for banking solicitation purposes; or
(d) hire for any other Bank or Employee (including
himself/herself) any Employee of the Bank or directly
or indirectly cause such Employee to leave his or her
employment to work for another.
2. It is understood and agreed by the parties hereto that the
provisions of this section are independent of each other,
and the invalidity of any such provision or portion thereof
shall not affect the validity or enforceability of any
other provisions of this Agreement.
VII. WAIVER OF PROVISIONS
Failure of any of the parties to insist, in one or more
instances, on performance by the others in strict accordance with
the terms and conditions of this Agreement shall not be deemed a
waiver or relinquishment of any right granted hereunder of the
future performance of any such term or condition or of any other
term or condition of this Agreement, unless such waiver is
contained in writing signed by or on behalf of all the parties.
VIII. GOVERNING LAW
This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of Georgia. If for any
reason provision of this Agreement shall be held by a court of
competent jurisdiction to void or unenforceable, the same shall not
affect the remaining provisions thereof.
IX. MODIFICATION AND AMENDMENT
This Agreement contains the sole and entire agreement among the
parties hereto and supersedes all prior discussions and agreements
among the parties, and any such prior agreements shall, from and
after the date hereof, be null and void. This Agreement shall not
be modified or amended except by an instrument in writing signed
by or on behalf of the parties hereto.
X. COUNTERPARTS AND HEADINGS
This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same instrument. The headings
set out herein are for convenience of reference and shall not be
deemed a part of this Agreement.
XI. CONTRACT NONASSIGNABLE
This Agreement may not be assigned or transferred by any party
hereto, in whole or in part, without the prior written consent of
the other.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the year and date first above written.
EMPLOYEE:
s/M. Milton Robson s/Gary H. Anderson
Witness Employee
November 5, 1997 November 5, 1997
Date Date
BANK:
s/Donald Bloom s/Lowell S. Cagle
Witness Employee
November 5, 1997 November 5, 1997
Date Date
<PAGE>
EXHIBIT 10.3
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is entered into and
effective as of the 2nd day of March, 1998, by and between SOUTHERN
HERITAGE BANCORP, INC., a Georgia corporation (the "Company"), and
THE BANKERS BANK (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Company proposes to offer and sell (the "Offering")
up to 1,000,000 shares of Common Stock, $5.00 par value per share
(the "Shares"), to investors at $10.00 per Share pursuant to a
registered public offering; and
WHEREAS, the Company desires to establish an escrow for funds
forwarded by subscribers for Shares, and the Escrow Agent is
willing to serve as Escrow Agent upon the terms and conditions
herein set forth.
NOW, THEREFORE, in consideration of the premises and other good
and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. Deposit with Escrow Agent.
(a) The Escrow Agent agrees that it will from time to time
accept, in its capacity as escrow agent, subscription funds for the
Shares (the "Escrowed Funds") received by it from subscribers or
from the Company when it has received checks from subscribers. All
checks shall be made payable to the Escrow Agent. If any check
does not clear normal banking channels in due course, the Escrow
Agent will promptly notify the Company. Any check which does not
clear normal banking channels and is returned by the drawer's bank
to Escrow Agent will be promptly turned over to the Company along
with all other subscription documents relating to such check. Any
check received that is made payable to a party other than the
Escrow Agent shall be returned to the Company for return to the
proper party. The Company in its sole and absolute discretion may
reject any subscription for shares for any reason and upon such
rejection it shall notify and instruct the Escrow Agent in writing
to return the Escrowed Funds, with interest at a rate equal to the
minimum rate that NationsBank, Atlanta, Georgia, pays its passbook
savings account holders, by check made payable to the subscriber.
The Escrow Agent shall distribute any additional interest earned
on such Escrowed Funds to the Company to help defray organizational
costs.
(b) Subscription agreements for the Shares shall be reviewed
for accuracy by the Company and, immediately thereafter, the
Company shall deliver to the Escrow Agent the following
information: (i) the name and address of the subscriber; (ii) the
number of Shares subscribed for by such subscriber; (iii) the
subscription price paid by such subscriber; (iv) the subscriber's
tax identification number certified by such subscriber; and (v) a
copy of the subscription agreement.
2. Investment of Escrowed Funds. Upon collection of each
check by the Escrow Agent, the Escrow Agent shall invest the funds
in deposit accounts or certificates of deposit which are fully
insured by the Federal Deposit Insurance Corporation or another
agency of the United States government, short-term securities
issued or fully guaranteed by the United States government,
federal funds, or such other investments as the Escrow Agent and
the Company shall agree. The Company shall provide the Escrow
Agent with instructions from time to time concerning in which of
the specific investment instruments described above the Escrowed
Funds shall be invested, and the Escrow Agent shall adhere to such
instructions. Unless and until otherwise instructed by the
Company, the Escrow Agent shall by means of a "Sweep" or other
automatic investment program invest the Escrowed Funds in blocks
of $10,000 in federal funds. Interest and other earnings shall
start accruing on such funds as soon as such funds would be deemed
to be available for access under applicable banking laws and
pursuant to the Escrow Agent's own banking policies.
3. Distribution of Escrowed Funds. The Escrow Agent shall
distribute the Escrowed Funds in the amounts, at the times, and
upon the conditions hereinafter set forth in this Agreement.
(a) If at any time on or prior to the expiration date of the
offering as described in the prospectus relating to the offering,
(the "Closing Date"), (i) the Escrow Agent has certified to the
Company in writing that the Escrow Agent has received at least
$8,000,000 in Escrowed Funds, and (ii) the Escrow Agent has
received a certificate from the President or the Chairman of the
Board of the Company that all other conditions to the release of
funds as described in the Company's Registration Statement filed
with the Securities and Exchange Commission pertaining to the
public offering have been met, then the Escrow Agent shall deliver
the Escrowed Funds to the Company to the extent such Escrowed Funds
are collected funds. If any portion of the Escrowed Funds are not
collected funds, then the Escrow Agent shall notify the Company of
such facts and shall distribute such funds to the Company only
after such funds become collected funds. For purposes of this
Agreement, "collected funds" shall mean all funds received by the
Escrow Agent which have cleared normal banking channels. In all
events, the Escrow Agent shall deliver not less than $8,000,000 in
collected funds to the Company, except as provided in Paragraph
3(b) hereof.
(b) If the Escrowed Funds do not, on or prior to the Closing
Date, become deliverable to the Company based on failure to meet
the conditions described in Paragraph 3(a), or if the Company
terminates the offering at any time prior to the Closing Date and
delivers written notice to the Escrow Agent of such termination
(the "Termination Notice"), the Escrow Agent shall return the
Escrowed Funds which are collected funds as directed in writing by
the Company to the respective subscribers that provided such
Escrowed Funds, in amounts equal to the subscription amount
theretofore paid by each of them, with interest at a rate equal to
the minimum rate that NationsBank, Atlanta, Georgia, pays its
passbook savings account holders. The Escrow Agent shall
distribute any additional interest earned on such Escrowed Funds
to the Company. All uncleared checks representing Escrowed Funds
which are not collected funds as of the Initial Closing Date shall
be collected by the Escrow Agent, and together with all related
subscription documents thereof shall be delivered to the Company
by the Escrow Agent, unless the Escrow Agent is otherwise
specifically directed in writing by the Company.
4. Distribution of Interest. Except as otherwise provided
herein, any interest earned on the Escrowed Funds shall be retained
by the Company.
5. Fee of Escrow Agent. The Company shall pay the Escrow
Agent a fee of $2,000 for its services hereunder. In addition, the
escrow account will accrue a service charge of $15.00 per month.
In addition, a $20.00 per check fee will be charged if the escrow
account has to be refunded due to a failure to complete the
subscription. All of these fees are payable upon the release of
the Escrowed Funds, and the Escrow Agent is hereby authorized to
deduct such fees from the Escrowed Funds prior to any release
thereof pursuant to Section 3 hereof.
6. Liability of Escrow Agent.
(a) In performing any of its duties under the Agreement, or
upon the claimed failure to perform its duties hereunder, the
Escrow Agent shall not be liable to anyone for any damages, losses
or expenses which it may incur as a result of the Escrow Agent so
acting, or failing to act; provided, however, the Escrow Agent
shall be liable for damages arising out of its willful default or
misconduct or its gross negligence under this Agreement.
Accordingly, the Escrow Agent shall not incur any such liability
with respect to (i) any action taken or omitted to be taken in good
faith upon advice of its counsel or counsel for the Company which
is given with respect to any questions relating to the duties and
responsibilities of the Escrow Agent hereunder ; or (ii) any action
taken or omitted to be taken in reliance upon any document,
including any written notice or instructions provided for this
Escrow Agreement, not only as to its due execution and to the
validity and effectiveness of its provisions but also as to the
truth and accuracy of any information contained therein, if the
Escrow Agent shall in good faith believe such document to be
genuine, to have been signed or presented by a proper person or
persons, and to conform with the provisions of this Agreement.
(b) The Company agrees to indemnify and hold harmless the
Escrow Agent against any and all losses, claims, damages,
liabilities and expenses, including, without limitation, reasonable
costs of investigation and counsel fees and disbursements which may
be imposed by the Escrow Agent or incurred by it in connection with
its acceptance of this appointment as Escrow Agent hereunder or the
performance of its duties hereunder, including, without limitation,
any litigation arising from this Escrow Agreement or involving the
subject matter thereof; except, that if the Escrow Agent shall be
found guilty of willful misconduct or gross negligence under this
agreement, then, in that event, the Escrow agent shall bear all
such losses, claims, damages and expenses.
(c) If a dispute ensues between any of the parties hereto
which, in the opinion of the Escrow Agent, is sufficient to justify
its doing so, the Escrow Agent shall retain legal counsel of its
choice as it reasonably may deem necessary to advise it concerning
its obligations hereunder and to represent it in any litigation to
which it may be a part by reason of this Agreement. The Escrow
Agent shall be entitled to tender into the registry or custody of
any court of competent jurisdiction all money or property in its
hands under the terms of this Agreement, and to file such legal
proceedings as it deems appropriate, and shall thereupon by
discharged from all further duties under this Agreement. Any such
legal action may be brought in any such court as the Escrow Agent
shall determine to have jurisdiction thereof. In connection with
such dispute, the Company shall indemnify the Escrow Agent against
its court costs and reasonable attorney's fees incurred.
(d) The Escrow Agent may resign at any time upon giving thirty
(3) days written notice to the Company. If a successor escrow
agent is not appointed by Company within thirty (3) days after
notice of resignation, the Escrow Agent may petition any court of
competent jurisdiction to name a successor escrow agent and the
Escrow Agent herein shall be fully relieved of all liability under
this Agreement to any and all parties upon the transfer of the
Escrowed Funds and all related documentation thereto, including
appropriate information to assist the successor escrow agent with
the reporting of earnings of the Escrowed Funds to the appropriate
state and federal agencies in accordance with the applicable state
and federal income tax laws, to the successor escrow agent
designated by the Company appointed by the court.
7. Appointment of Successor. The Company may, upon the
delivery of thirty (30) days written notice appointing a successor
escrow agent to the Escrow Agent, terminate the services of the
Escrow Agent hereunder. In the event of such termination, the
Escrow Agent shall immediately deliver to the successor escrow
agent selected by the Company, all documentation and Escrowed Funds
including interest earnings thereon in its possession, less any
fees and expenses due to the Escrow Agent or required to be paid
by the Escrow Agent to a third party pursuant to this Agreement.
8. Notice. All notices, requests, demands and other
communications or deliveries required or permitted to be given
hereunder shall be in writing and shall be deemed to have been duly
given three days after having been deposited for mailing if sent
by registered mail, or certified mail return receipt requested, or
delivery by courier, to the respective addresses set forth below:
If to the subscribers To their respective addresses as
for Shares: specified in their Subscription
Agreements.
<PAGE>
The Company: Southern Heritage Bancorp, Inc.
3461 Atlanta Highway
P. O. Box 907
Oakwood, Georgia 30566
Attention: Gary H. Anderson
With a copy to: James E. Palmour, III
410 Hunt Tower
200 Main Street
Gainesville, Georgia 30501
The Escrow Agent: The Bankers Bank
2410 Paces Ferry Road
600 Paces Summit
Atlanta, Georgia 30339
Attention: Mr. William R. Burkett
Senior Vice President
9. Representations of the Company. The Company hereby
acknowledges that the status of the Escrow Agent with respect to
the offering of the Shares is that of agent only for the limited
purposes herein set forth, and hereby agrees it will not represent
or imply that the Escrow Agent, by serving as the Escrow Agent
hereunder or otherwise, has investigated the desirability or
advisability in an investment in the Shares, or has approved,
endorsed or passed upon the merits of the Shares, nor shall the
Company use the name of the Escrow Agent in any manner whatsoever
in connection with the offer or sale of the Shares, other than by
acknowledgment that it has agreed to serve as Escrow Agent for the
limited purposes herein set forth.
10. General.
(a) This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Georgia.
(b) The section headings contained herein are for reference
purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
(c) This Agreement sets forth the entire agreement and
understanding of the parties with regard to this escrow transaction
and supersedes all prior agreements, arrangements and
understandings relating to the subject matter hereof.
(d) This Agreement may be amended, modified, superseded or
canceled, and any of the terms or conditions hereof may be waived,
only by a written instrument executed by each party hereto or, in
the case of a waiver, by the party waiving compliance. The failure
of any part at any time or times to require performance of any
provision hereof shall in no manner affect the right at a later
time to enforce the same. No waiver in any one or more instances
by any part of any condition, or of the breach of any term
contained in this Agreement, whether by conduct or otherwise, shall
be deemed to be, or construed as, a further or continuing waiver
of any such condition or breach, or a waiver of any other condition
or of the breach of any other terms of this Agreement.
(e) This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
(f) This Agreement shall inure to the benefit of the parties
hereto and their respective administrators, successors and assigns.
The Escrow Agent shall be bound only by the terms of this Escrow
Agreement and shall not be bound by or incur any liability with
respect to any other agreement or understanding between the parties
except as herein expressly provided. The Escrow Agent shall not
have any duties hereunder except those specifically set forth
herein.
(g) No interest in any part to this Agreement shall be
assignable in the absence of a written agreement by and between all
the parties to this Agreement, executed with the same formalities
as this original Agreement.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as the date first written above.
COMPANY: ESCROW AGENT:
SOUTHERN HERITAGE BANCORP, INC. THE BANKERS BANK
By:s/ Gary H. Anderson By: s/William R. Burkett
Gary H. Anderson William R. Burkett
President Senior Vice President
<PAGE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES
OF REGISTRANT
Southern Heritage Bank (In Organization)
3461 Atlanta Highway
P. O. Box 907
Oakwood, Georgia 30566
<PAGE>
EXHIBIT 23.1
Independent Auditors' Consent
We consent to the inclusion in this Registration Statement on Form
SB-2 of our report dated February 27, 1998 on our examination of
the financial statements of Southern Heritage Bancorp, Inc. as of
and for the period ended December 31, 1998. We also consent to the
reference to our firm under the heading "Experts" in the
prospectus.
/s/ HENRY & COMPANY, LLP
Gainesville, Georgia
March 2, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF COUNSEL
To the Board of Directors
Southern Heritage Bancorp, Inc.
I hereby consent to the filing of my opinion regarding validity
of shares as an exhibit to the Registration Statement to which this
consent is attached and further consent to the use of my name under
the heading "Legal Matters" in the Registration Statement and the
Prospectus which is a part thereof.
Very truly yours,
s/James E. Palmour, III
James E. Palmour, III
Date: February 3, 1998
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF THE COMPANY FOR THE PERIODS FROM 2/24/97 (INCEPTION) TO
12/31/97 FILED ON FORM SB-2, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 12,643<F1>
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 0
<ALLOWANCE> 0
<TOTAL-ASSETS> 192,211
<DEPOSITS> 0
<SHORT-TERM> 0
<LIABILITIES-OTHER> 248,555
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 192,211
<INTEREST-LOAN> 0
<INTEREST-INVEST> 0
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 0
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 4,593
<INTEREST-INCOME-NET> (4,593)
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 51,751
<INCOME-PRETAX> (56,344)
<INCOME-PRE-EXTRAORDINARY> (56,344)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (56,344)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>As of December 31, 1997, neither the Company nor Southern Heritage Bank had
commenced their respective operations as a bank holding company or as a
commercial bank, and neither will do so unless final regulatory approvals are
obtained and the Bank is capitalized by the Company with the proceeds from the
Company's stock offering.
</FN>
</TABLE>
