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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 1, 1999
REGISTRATION NO. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CHEROKEE BANKING COMPANY
------------------------
(Name of Small Business Issuer in its Charter)
<TABLE>
<S> <C> <C>
GEORGIA 6021 58-2432974
- ------------------------------ ---------------------------- ------------------------------------
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
</TABLE>
P. O. BOX 1314
CANTON, GEORGIA 30114
(770) 479-3400
--------------
(Address, and telephone number of principal executive offices)
1275 RIVERSTONE PARKWAY
CANTON, GEORGIA 30114
(770) 479-3400
---------------------
(Address of principal place of business or intended principal place of business)
DENNIS W. BURNETTE COPIES TO:
205 WALESKA ROAD, SUITE 2A KATHRYN L. KNUDSON, ESQ.
CANTON, GEORGIA 30114 POWELL GOLDSTEIN FRAZER & MURPHY LLP
(770) 479-3400 191 PEACHTREE STREET, N.E., 16/TH/ FLOOR
--------------------- ATLANTA, GEORGIA 30303
(Name, address, and (404) 572-6600
telephone number, of
agent for service)
Approximate date of proposed sale to the public: AS SOON AS PRACTICABLE AFTER
THIS REGISTRATION STATEMENT IS DECLARED 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 statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If the delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Title of Each Class of Amount to be Proposed Maximum Offering Proposed Maximum Aggregate Amount of Registration
Securities to be Registered Registered Price per Unit(1) Offering Price (1) Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, no par value 1,000,000 shares $10.00 $10,000,000 $2,780
====================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933, as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
The information contained in this Prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PRELIMINARY PROSPECTUS DATED FEBRUARY 1, 1999; SUBJECT TO COMPLETION
CHEROKEE BANKING COMPANY
A Proposed Bank Holding Company for
[LOGO] CHEROKEE BANK, N.A.
(Proposed)
1,000,000 SHARES OF COMMON STOCK
(Minimum Purchase: 100 Shares)
Cherokee Banking Company is offering a minimum of 650,000 shares and a
maximum of 1,000,000 shares of its common stock to organize Cherokee Bank, N.A.,
a proposed national bank. Cherokee Banking Company's organizers will offer and
sell the common stock on a best-efforts basis without compensation. Prior to
this offering, Cherokee Banking Company has not conducted active business
operations, and there has not been a public market for the shares of common
stock.
INVESTING IN THE COMMON STOCK INVOLVES RISKS WHICH ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 7 OF THIS PROSPECTUS.
The shares of common stock offered are not deposits, savings accounts, or
other obligations of a bank or savings association and are not insured by the
Federal Deposit Insurance Corporation or any other governmental agency.
<TABLE>
<CAPTION>
Total
Per Share Minimum Total Maximum
--------- ------- -------------
<S> <C> <C> <C>
Price to public..................................................... $10.00 $6,500,000 $10,000,000
Fees and commissions................................................ -- -- --
Net proceeds, before expenses, to $10.00 $6,500,000 $10,000,000
Cherokee Banking Company............................................
</TABLE>
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
We will promptly deposit subscription proceeds in an escrow account with
our escrow agent, The Bankers Bank, Atlanta, Georgia. The escrow agent will
hold the subscription proceeds until we receive subscriptions for at least
650,000 shares and satisfy certain other conditions. We plan to end the
offering on ____________, 1999, unless we decide to end it sooner or extend it.
If we are unable to sell 650,000 shares of common stock or satisfy the other
conditions, the escrow agent will return all subscription proceeds to investors,
without interest, and we will pay all of Cherokee Banking Company's expenses.
THE DATE OF THIS PROSPECTUS IS _________, 1999
<PAGE>
[MAP APPEARS HERE]
THE PRIMARY MARKET AREA OF
CHEROKEE BANK, N.A. (PROPOSED)
IS CHEROKEE COUNTY.
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SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary and does not contain all the information you should consider before
investing in the common stock. You should read carefully the entire prospectus.
IN GENERAL
Cherokee Banking Company is a Georgia corporation that was incorporated to
serve as the holding company for Cherokee Bank, a proposed national bank.
Cherokee Bank will operate as a full service commercial bank emphasizing
prompt, personalized customer service to the individuals and businesses located
in Cherokee County, Georgia. Cherokee Bank expects to operate out of a
temporary modular office located at 1275 Riverstone Parkway, Canton, Georgia,
until a permanent facility at that location is constructed. We expect to begin
construction of the permanent facility by July 1, 1999, and we plan to open that
facility in December of 1999.
Cherokee Banking Company and Cherokee Bank must receive all necessary
regulatory approvals before Cherokee Banking Company may purchase Cherokee
Bank's common stock and before Cherokee Bank may begin business. We have filed
all of the necessary applications with the banking regulators, and they are
pending. We anticipate that we will receive the necessary approvals and begin
business in the third quarter of 1999.
THE CHEROKEE MARKET
Cherokee Bank will be located in Canton, Georgia. Our primary market will
consist of the geographic area of Cherokee County, which includes the cities of
Ball Ground, Canton, Holly Springs, Waleska, and Woodstock. The city of Canton
is the key economic focal point of Cherokee Bank's primary market area.
We believe the degree of success of any community bank is determined by the
growth rate of its market and the level of local competition. Over the last
five years, Cherokee County has had an average deposit growth rate of almost 14%
per year. This is one of the top growth rates not only in Georgia, but also in
the entire United States. In addition, two banks that had many Cherokee County
residents as shareholders have recently sold to large bank holding companies --
Regions Financial Corporation and Synovus Financial Corp. Throughout the
Southeast, new locally-owned and managed banks are doing well under these
circumstances.
We also believe that the proper strategy for Cherokee Bank is to emphasize
customer relationships more than products. The large banks tend to emphasize
products. By contrast, if we emphasize customer relationships, we think our
customers will be more likely to bank with us for a long time and will not be as
sensitive to the price of our services. We also think a bank can differentiate
itself from other banks by identifying certain underserved but profitable
groups, developing customer relationships within those groups, and then
developing products to satisfy
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the financial needs of those customers. In Cherokee County, we believe that
small businesses are underserved by other banks, and we plan to focus on them as
customers.
PRODUCTS AND SERVICES
We plan to offer Cherokee Bank's products and services through high
quality, personalized delivery systems, with a focus on community involvement
while providing our customers with the financial sophistication and array of
products typically offered by a larger bank. Cherokee Bank's lending services
will include commercial loans to small- and medium-sized businesses and
professional concerns, consumer loans to individuals, and real estate-related
loans.
Cherokee Bank will offer a broad array of competitively priced deposit
services, including interest-bearing and non-interest bearing checking accounts,
statement savings accounts, money market deposits, certificates of deposit and
individual retirement accounts. To complement our lending and deposit services,
we will also provide ATM and debit cards, travelers checks, official checks,
MasterCard(R) and VISA(R) credit cards, direct deposit, automatic transfer,
savings bonds, night depository, stop payments, collections, wire transfer,
overdraft protection, and courier services.
DIRECTORS AND OFFICERS
Our management team includes individuals who have significant experience in
the banking industry in Georgia. Dennis W. Burnette is the President and Chief
Executive Officer of Cherokee Banking Company and will serve as the President
and the Chief Executive Officer of Cherokee Bank. Mr. Burnette has over 30
years of banking experience, including 20 years as President and Chief Executive
Officer of a bank in neighboring Pickens County. While working in Pickens
County, Mr. Burnette also established many banking relationships in Cherokee
County.
A. R. (Rick) Roberts, III will be the Chief Financial Officer and Chief
Operations Officer of Cherokee Bank. Mr. Roberts served in various positions at
Citizens Bank, Ball Ground, Georgia, for 19 years, including as Executive Vice
President and Chief Financial Officer. Mr. Roberts also serves as Mayor of Ball
Ground, Georgia.
The directors of Cherokee Banking Company and Cherokee Bank consist of the
10 organizers. Except for Mr. Burnette, all of the organizers live, work,
and/or own businesses in Cherokee County. Mr. Burnette lives in the adjoining
county of Pickens and will be relocating to Cherokee County. The directors
expect to utilize their diverse backgrounds and their extensive local business
relationships to attract customers from all segments of the community. The
directors and executive officers also intend to purchase approximately 152,000
shares of the common stock offered by this prospectus (23% of the minimum and
15% of the maximum number of shares to be sold). The directors' financial
interest in Cherokee Banking Company and Cherokee Bank should encourage their
active participation in growing our franchise.
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BUSINESS STRATEGY
Our strategy as an independent bank holding company will be carried out
through the operations and growth of Cherokee Bank. In an effort to emphasize
prompt, responsive service to our target customers and to expand our presence in
the Cherokee market, our strategies are to:
OPERATING STRATEGY:
. Hire and retain highly experienced and qualified banking personnel;
. Capitalize on the directors' and officers' diverse community
involvement and business experience;
. Provide individual service and attention with local decision-making;
. Implement a targeted marketing program;
GROWTH STRATEGY:
. Seek to hire employees with established customer relationships;
. Construct a building that will support the hiring of additional
lending officers;
. Utilize technology and strategic outsourcing to provide a broad array
of banking products and services;
. Expand our presence in the Cherokee County market by opening branch
offices in strategic locations as appropriate; and
. Evaluate strategic acquisition opportunities on an ongoing basis.
EXECUTIVE OFFICES
Our offices will be located at 1275 Riverstone Parkway, Canton, Georgia
30114. Our telephone number is (770) 479-3400. Until we begin operations, our
offices will be located at 205 Waleska Road, Suite 2A, Canton, Georgia 30114.
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THE OFFERING
Common stock offered...................... Common stock, no par value, of
Cherokee Banking Company
Common stock to be outstanding after the
offering................................. Minimum 650,000 shares;
Maximum 1,000,000 shares
Offering price............................ $10.00 per share
Use of proceeds........................... To capitalize Cherokee Bank, to pay
organizational, offering and pre-
opening expenses, to construct
Cherokee Bank's main office and to
provide working capital for Cherokee
Bank to be used for business
purposes, including making loans and
other investments. See "Use of
Proceeds" (page 16).
The number of shares to be outstanding after the offering does not include the
shares of common stock issuable upon the exercise of organizer warrants nor the
shares of common stock issuable upon the exercise of an option granted to the
President of Cherokee Banking Company and Cherokee Bank. See "Executive
Compensation" (page 40).
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RISK FACTORS
An investment in the common stock involves a significant degree of risk.
You should not invest in the common stock unless you can afford to lose your
entire investment. You should consider carefully the following risk factors and
other information in this prospectus before deciding to invest in the common
stock.
The following paragraphs describe all of the material risks of an
investment in the common stock. You should also carefully read the cautionary
statement following the Risk Factors regarding the use of forward-looking
statements.
WE HAVE NO OPERATING HISTORY, ANTICIPATE LOSSES AND MAY NOT BE ABLE TO IMPLEMENT
OUR BUSINESS STRATEGY
Cherokee Bank's proposed operations are subject to the risks inherent in
establishing a new business and specifically to those of opening a new bank.
Certain of these inherent risks, including the lack of an operating history, the
anticipation of losses and the potential inability to implement business
strategies, are discussed in more detail below.
NO OPERATING HISTORY. Neither Cherokee Banking Company nor Cherokee Bank
has any operating history on which to base any estimate of their future earnings
prospects. Cherokee Banking Company was only recently formed, and Cherokee Bank
will not receive regulatory approval to begin operations until after this
offering is completed. Consequently, you will not have access to historical
information that would be helpful in deciding whether to invest in Cherokee
Banking Company.
ANTICIPATED LOSSES. Typically, most new banks incur substantial start-up
expenses, are not profitable in the first year of operation and, in some cases,
are not profitable for several years. If we are ultimately unsuccessful, you
may not recover all or any part of your investment in the common stock.
Additionally, many of Cherokee Bank's loans initially will be unseasoned -- new
loans to new borrowers. Accordingly, it will take several years to determine
the borrowers' payment histories, and, accordingly, management will not be able
to evaluate reliably the quality of the loan portfolio until that time. Our
profitability will depend on Cherokee Bank's profitability, and we can give no
assurance that Cherokee Bank will ever operate profitably. Additionally, if we
are ultimately unsuccessful, you may not recover all or any part of your
investment in the common stock. See "Management's Discussion and Analysis of
Financial Condition and Plan of Operations" (page 19).
POTENTIAL INABILITY TO IMPLEMENT BUSINESS STRATEGIES. We have developed a
business plan that describes the strategy we intend to implement to achieve
profitable operations. The strategy includes hiring and retaining experienced
and qualified employees. If we cannot hire or retain qualified employees, or
otherwise cannot implement our business strategy, we will be hampered in our
ability to develop business and serve our customers, which could have an adverse
affect on our financial performance. Even if we successfully implement this
strategy, it may not have the favorable impact on operations that we anticipate.
See "Proposed Business of Cherokee Banking Company and Cherokee Bank--Business
Strategy" (page 26).
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POTENTIAL DELAY IN OPENING MAY INCREASE OUR ACCUMULATED DEFICIT
Any delay in Cherokee Bank's opening for business will increase its pre-
opening expenses and postpone its realization of potential revenues. Such a
delay will cause our accumulated deficit to continue to increase as a result of
continuing operating expenses such as salaries and other administrative
expenses. Although we expect to receive all regulatory approvals and to open
for business in the third quarter of 1999, we can give no assurance as to when,
if at all, these events will occur.
WE MAY DISSOLVE AND LIQUIDATE IF REGULATORY CONDITIONS ARE NOT SATISFIED
Although we have applied for all regulatory approvals required to begin
operations, we may not receive final approvals in a timely manner if at all.
The closing of this offering is not conditioned upon our receiving final
approval to being business. If after the close of this offering, we do not
receive final approval to start banking operations or we do not satisfy other
regulatory requirements, we will solicit shareholder approval for dissolution
and liquidation of Cherokee Banking Company under Georgia law. If Cherokee
Banking Company is dissolved and liquidated, we will distribute to shareholders
our net assets remaining after payment or provision for payment of all claims
against Cherokee Banking Company. Shareholders will receive only a portion, if
any, of their original investment because we will have used the proceeds of the
offering to pay all expenses and capital costs incurred by Cherokee Banking
Company. These expenses would include the expenses of the offering, the
organizational and pre-opening expenses of Cherokee Banking Company and Cherokee
Bank and the claims of creditors.
CHANGES IN OUR KEY PERSONNEL OR DIRECTORS MAY HAVE AN ADVERSE EFFECT ON OUR
SUCCESS
Dennis W. Burnette and A. R. (Rick) Roberts are important to our success
and if either leaves his position with Cherokee Banking Company or Cherokee
Bank, our financial condition and results of operations may be adversely
affected. Mr. Burnette has been instrumental in our organization and will be
the key management official in charge of daily business operations. Mr. Roberts
has also been instrumental in our organization and will be the Chief Financial
Officer and Chief Operations Officer of Cherokee Bank. We have entered into an
employment agreement with Mr. Burnette, but cannot be assured of the continued
service of either Mr. Burnette or Mr. Roberts. Additionally, our directors'
community involvement, diverse backgrounds and extensive local business
relationships are important to our success. If the composition of our Board of
Directors changes materially, our growth could be adversely affected. See
"Management" (page 35).
INDUSTRY COMPETITION MAY HAVE AN ADVERSE EFFECT ON OUR SUCCESS
The banking business is highly competitive. Our profitability will depend
on our ability to compete successfully. Cherokee Bank will compete with
numerous other lenders and deposit-takers, including other commercial banks,
savings and loan associations, credit unions, finance companies, mutual funds,
insurance companies and brokerage and investment banking
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firms. We will compete primarily with other financial institutions in the
Cherokee County market, but may also compete with internet banks and financial
institutions located throughout the United States for products such as large
certificates of deposit. All of our competitors actively solicit business from
residents of Cherokee County. Some of these institutions are not subject to the
same degree of regulation as we will be and have greater resources than will be
available to us. See "Proposed Business of Cherokee Banking Company and Cherokee
Bank--Market Opportunities--Competition" (page 25).
UNANTICIPATED CHANGES IN INTEREST RATES MAY HAVE AN ADVERSE EFFECT ON OUR NET
INTEREST INCOME
Cherokee Bank's operations will depend substantially on its net interest
income, which is the difference between the interest income earned on its
interest-earning assets and the interest expense paid on its interest-bearing
liabilities, such as deposits and borrowings. Additionally, an increase or
decrease in interest rates could have a material adverse effect on the Bank's
net income, capital and liquidity. Like most depository institutions, Cherokee
Bank's earnings and net interest income will be affected by changes in market
interest rates and other economic factors beyond its control. While we intend
to take measures to guard against interest rate risk, these measures may not be
effective in minimizing the exposure to interest rate risk. Also Cherokee
Bank's results of operations will be affected by credit policies of monetary
authorities, particularly the Board of Governors of the Federal Reserve System
and other fiscal authorities. See "Management's Discussion and Analysis of
Financial Condition and Plan of Operations--Liquidity and Interest Rate
Sensitivity" (page 20).
POTENTIAL ADVERSE EFFECT OF UNPREDICTABLE ECONOMIC CONDITIONS MAY HAVE AN
ADVERSE EFFECT ON OUR SUCCESS
The majority of Cherokee Bank's borrowers and depositors will be
individuals and businesses located and doing business in the Cherokee County
area. Cherokee Bank's success will therefore depend on the general economic
conditions in Cherokee County, which management cannot predict with certainty.
Factors that adversely affect the Cherokee County economy could adversely affect
Cherokee Bank's performance. For example, an adverse change in the local
economy would make it more difficult for borrowers to repay their loans, which
could lead to loan losses for Cherokee Bank. See "Proposed Business of Cherokee
Banking Company and Cherokee Bank" (page 22).
LOW LENDING LIMITS MAY LIMIT OUR ABILITY TO GROW
At least during its first years of operations, Cherokee Bank's legally
mandated lending limits will be lower than those of many of its competitors
because it will initially have less capital than many of its competitors. Our
lower lending limits may discourage potential borrowers who have lending needs
that exceed our limits, which may restrict our ability to grow. We may try to
serve the needs of these borrowers by selling loan participations to other
institutions, but this strategy may not succeed. See "Proposed Business of
Cherokee Banking Company and Cherokee Bank--Lending Services-Lending Limits"
(page 29).
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OUR ABILITY TO PAY DIVIDENDS IS LIMITED
We do not plan to pay dividends until we recover any losses that we have
incurred and until we become profitable. Cherokee Banking Company will
initially have no source of income other than dividends that it receives from
Cherokee Bank. Our ability to pay dividends to you will therefore depend on
Cherokee Bank's ability to pay dividends to Cherokee Banking Company. Bank
holding companies and national banks are both subject to significant regulatory
restrictions on the payment of cash dividends. In light of these restrictions
and the need for Cherokee Banking Company and Cherokee Bank to retain and build
capital, it will be the policy of each of their Boards of Directors to reinvest
earnings for the period of time necessary to help support the success of their
operations. In the future, Cherokee Banking Company may begin income-producing
operations independent from those of Cherokee Bank, which may provide another
source of income from which Cherokee Banking Company could pay dividends to you.
We can give no assurance, however, as to when, if at all, these operations may
begin or whether they will be profitable. Additionally, our future dividend
policy will depend on our earnings, capital requirements, financial condition
and other factors that the Boards of Directors of Cherokee Banking Company and
Cherokee Bank consider relevant. See "Dividends" (page 19).
OFFERING PRICE ARBITRARILY DETERMINED
Because we were only recently formed and Cherokee Bank is in the process of
being organized, the offering price of $10.00 per share could not be set with
reference to historical measures of Cherokee Banking Company's financial
performance. Therefore, the offering price was determined arbitrarily by the
organizers. We did not retain an independent investment banking firm to assist
in determining the offering price. Shareholders may not be able to resell the
common stock for the offering price or any other amount. See "The Offering"
(page 14).
UNLIKELY THAT AN ACTIVE TRADING MARKET WILL DEVELOP
Prior to the offering, there has been no public trading market for Cherokee
Banking Company's common stock, and an active trading market is not likely to
develop or continue to develop after the offering. If an active trading market
does not develop or continue after the offering, you may not be able to sell
your shares at or above the price at which these shares are being offered to the
public. You should consider carefully the limited liquidity of your investment
before purchasing any shares of common stock.
POTENTIAL ADVERSE EFFECT OF GOVERNMENT REGULATION
Bank holding companies and banks are subject to extensive state and federal
government supervision and regulation. Existing state and federal banking laws
and regulations subject us to substantial limitations relating to making loans,
purchasing securities, paying dividends and many other aspects of our banking
business, and therefore may affect our ability to achieve profitability and to
grow. Many of these laws and regulations are intended to protect depositors,
the public, and the FDIC, not shareholders. In addition, the burden imposed by
federal and state laws and regulations may place us at a competitive
disadvantage compared to competitors who are less regulated. Applicable laws,
regulations, interpretations and enforcement policies have
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been subject to significant, and sometimes retroactively applied, changes in
recent years, and may be subject to significant future changes. Future
legislation or government policy may adversely affect the banking industry, our
operations and our shareholders. See "Supervision and Regulation" (page 49).
POTENTIAL DILUTION RESULTING FROM EXERCISE OF STOCK OPTIONS AND WARRANTS
As part of his employment agreement with Cherokee Banking Company and
Cherokee Bank, Dennis W. Burnette will be granted a stock option to purchase
30,000 shares of common stock at an exercise price of $10.00 per share. In
addition, the organizers will be issued warrants to purchase the same number of
shares of common stock as they purchase in this offering at an exercise price of
$10.00 per share.
The holders of the option and warrant will have the opportunity to profit
from any rise in the market value of the common stock or any increase in
Cherokee Banking Company's net worth. They can be expected to exercise the
option and warrants, if at all, when the exercise would result in the dilution
of the interests of investors who purchase shares in this offering. In
addition, the exercise of the option or warrants could adversely affect the
terms on which we are able to obtain additional capital. For instance, the
holders of the option or warrants could exercise them when we could have
obtained capital by offering additional securities on terms more favorable to
Cherokee Banking Company than those provided for by the option or warrants. See
"Executive Compensation" (page 40).
POTENTIAL INABILITY TO RAISE ADDITIONAL CAPITAL
We believe that the net proceeds of the offering will satisfy Cherokee
Banking Company's cash requirements for the five-year period following the
opening of Cherokee Bank. However, the Board of Directors may determine from
time to time that we need to obtain additional capital through the issuance of
additional shares of common stock or other securities. We can give no assurance
that we will be able to access the capital markets in the future to obtain this
additional capital or that any newly issued shares will be sold at prices or on
terms better than or equal to those you receive in this offering. In addition,
such issuance would dilute your ownership interests in Cherokee Banking Company.
DETERRENT EFFECT OF ANTITAKEOVER PROVISIONS
Our Articles of Incorporation and Bylaws contain antitakeover provisions
that may deter an attempt to change or gain control of Cherokee Banking Company.
As a result, you may be deprived of opportunities to sell some or all of your
shares at prices that represent a premium over market prices. These
antitakeover provisions include the existence of preferred stock, staggered
terms for the directors, restrictions on the ability to change the number of
directors or to remove a director, supermajority voting requirements, and
flexibility in evaluating acquisition proposals. See "Description of Capital
Stock of Cherokee Banking Company--Certain Provisions of the Articles of
Incorporation and Bylaws" (page 43).
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ABILITY OF DIRECTORS AND OFFICERS TO INFLUENCE CORPORATE ACTIONS
After the offering, we anticipate that our directors and executive officers
will directly or indirectly own at least 152,000 shares, representing 23% of the
minimum and 15% of the maximum number of shares to be sold in this offering. As
a result, our directors and executive officers will be able to exercise
significant control over Cherokee Banking Company's management and affairs. See
"Description of Capital Stock of Cherokee Banking Company--Certain Provisions of
the Articles of Incorporation and Bylaws" (page 43).
YEAR 2000 DEVELOPMENTS MAY HAVE AN ADVERSE EFFECT ON OUR SUCCESS
Banks are heavily dependent on complex computer systems for all phases of
their operations. The year 2000 issue common to most corporations concerns the
inability of certain software and databases to recognize date-sensitive
information after the year 1999. If not corrected, this problem could result in
a disruption to the operations of financial institutions, which are particularly
sensitive to such disruptions. Such disruptions could include events ranging
from electrical or water failure to computer systems failure, with any of these
events potentially resulting in a cessation of Cherokee Bank's activities until
the problem is resolved.
We will rely on software and hardware developed by independent third
parties to provide the information systems used by us. As a result, we will
depend on the efforts of those vendors to ensure that their data processing
systems accommodate year 2000 information. Although we intend to require vendor
certification regarding year 2000 readiness before we purchase any equipment, we
cannot verify independently that the equipment will in fact be year 2000
compliant. Additionally, Cherokee Bank could be adversely affected by year 2000
problems experienced by others over which it has no control, including
customers, service providers, vendors, customers' vendors, correspondent banks,
government agencies, and the financial services industry in general. If, for
example, one of Cherokee Bank's major borrowers were unable to conduct its
operations as a result of a year 2000 problem, that borrower could be unable to
maintain its cash flow and might default on its loan, which would lead to loan
losses for Cherokee Bank. Consequently, if Cherokee Banking Company, Cherokee
Bank or any of their service providers, correspondents, vendors or customers
experiences a disruption of business resulting from a year 2000 problem, the
financial condition, results of operations and liquidity of Cherokee Banking
Company and Cherokee Bank could be materially adversely affected. See "Proposed
Business of Cherokee Banking Company and Cherokee Bank--Information Systems and
the Year 2000" (page 32).
MANAGEMENT'S DISCRETION AS TO USE OF UNALLOCATED NET PROCEEDS
Cherokee Banking Company and Cherokee Bank intend to use the net proceeds
of this offering to capitalize Cherokee Bank, purchase the land and building for
Cherokee Bank's main office, construct Cherokee Bank's permanent facility, repay
Cherokee Banking Company's line of credit, purchase equipment and other assets
for Cherokee Bank's operations, fund loans, provide working capital for general
corporate purposes, and pay offering, pre-opening and initial operating
expenses. The Office of the Comptroller of the Currency will require Cherokee
Banking Company to contribute a minimum of $6.0 million to Cherokee Bank as
initial capital. Consequently, if we raise $10.0 million, our Board of
Directors will have broad discretion in
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allocating up to $4.0 million or up to 40% of the net proceeds of this offering.
See "Use of Proceeds" (page 16).
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
Certain statements in this prospectus under the captions "Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and Plan
of Operations" and "Proposed Business of Cherokee Banking Company and Cherokee
Bank" and elsewhere in this prospectus are "forward-looking statements."
Forward-looking statements include, among other things, statements about the
competitiveness of the banking industry, potential regulatory obligations,
Cherokee Banking Company's strategies and other statements that are not
historical facts. When used in this prospectus, the words "anticipate,"
"believe," "estimate" and similar expressions generally identify forward-looking
statements. Because forward-looking statements involve risks and uncertainties,
there are important factors that could cause actual results to differ materially
from those expressed or implied by the forward-looking statements. These
factors include, among other things, risks associated with starting a new
business, a potential delay in beginning operations, a risk that Cherokee
Banking Company will be dissolved if regulatory conditions are not satisfied,
our dependence on our directors and key personnel, the potential adverse affect
of competition, interest rate risks, the potential adverse affect of
unpredictable economic conditions, potential limitations on our growth resulting
from low lending limits, risks associated with the year 2000 and other factors
discussed under "Risk Factors."
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<PAGE>
THE OFFERING
MINIMUM/MAXIMUM
Cherokee Banking Company is offering a minimum of 650,000 shares and a
maximum of 1,000,000 shares of its common stock for a price of $10.00 per share,
for a total minimum price of $6,500,000 and a total maximum price of
$10,000,000. The minimum purchase for any investor is 100 shares of common
stock, unless Cherokee Banking Company, in its sole discretion, accepts a
subscription for a lesser number of shares. The maximum purchase for any
investor is 25,000 shares of common stock, unless Cherokee Banking Company, in
its sole discretion, accepts a subscription for a greater number of shares.
ORGANIZER SUBSCRIPTIONS
The organizers of Cherokee Banking Company intend to purchase a total of
152,000 shares of common stock in this offering. This represents 23% of the
minimum and 15% of the maximum number of shares to be sold in this offering.
The organizers may also acquire additional shares of the common stock, up to a
maximum aggregate number for all organizers of 650,000 shares, in order to
achieve the minimum subscription level necessary to release subscription
proceeds from escrow.
OFFERING PERIOD
The offering period for the shares will end when all of the shares of the
common stock are sold or 5:00 p.m. Canton, Georgia time, on ____________, 1999,
whichever occurs first. We may extend this date at our discretion for
additional periods not exceeding a total of 180 days (i.e., until ____________,
1999). We will promptly notify subscribers of any extensions. The date on
which this offering ends plus any extension is referred to in this prospectus as
the "expiration date."
We also reserve the right to end the offering at any time after 650,000
shares have been subscribed if we determine that the total amount of
subscriptions will provide adequate capitalization for Cherokee Banking Company
after payment of expenses.
HOW TO SUBSCRIBE
PRELIMINARY NONBINDING SUBSCRIPTION. Since this is a preliminary
prospectus, the preliminary subscription agreements received by Cherokee Banking
Company will not be binding on subscribers. Preliminary subscription agreements
should not be accompanied by any subscription funds.
FINAL BINDING SUBSCRIPTION. When this prospectus is finalized, we will ask
investors who have already submitted preliminary subscription agreements to send
us a check in the amount of $10.00 multiplied by the number of shares
subscribed. Our receipt of the check will convert the subscriber's preliminary
nonbinding subscription agreement into a final binding subscription agreement.
All other investors who wish to subscribe will need to send us a completed and
signed final subscription agreement and a check in the amount of $10.00
multiplied by the number of
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<PAGE>
shares subscribed. All checks should be payable to "The Bankers Bank - Escrow
Account for Cherokee Banking Company." ALL FINAL BINDING SUBSCRIPTIONS WILL BE
IRREVOCABLE UNTIL THE CLOSE OF THE OFFERING.
COMPANY DISCRETION
We reserve the right, in our sole discretion, to accept or reject any
subscription in whole or in part on or before the expiration date. If the
offering is over subscribed, plan to give preference to subscribers who are
residents of Cherokee County. We also reserve the right to accept subscriptions
on a first-come, first-served basis or on a prorated basis if we receive
subscriptions for more than 650,000 shares. We will notify all subscribers
within five business days after the expiration date whether their subscriptions
have been accepted. If we do not accept all or a portion of a subscription, we
will also return the unaccepted portion of the subscription funds, without
interest.
ESCROW
We will promptly deposit all subscription proceeds in an escrow account
with our escrow agent, The Bankers Bank, located in Atlanta, Georgia. The
escrow agent will invest the subscription proceeds in short-term United States
Government securities, or interest bearing accounts offered by the escrow agent,
or in other short-term investments as we may agree upon with the escrow agent.
The escrow agent has not investigated the desirability or advisability of an
investment in Cherokee Banking Company, and has not approved, endorsed, or
passed upon the merits of the common stock.
RELEASE FROM ESCROW
The escrow agent will release the subscription proceeds to us when all of
the following events have occurred: (1) we have received subscriptions and
subscription proceeds for a total of at least 650,000 shares of common stock,
(2) the Board of Governors of the Federal Reserve System and the Georgia
Department of Banking and Finance have approved Cherokee Banking Company's
application to become a bank holding company, and (3) the Office of the
Comptroller of the Currency has preliminarily approved Cherokee Bank's
application to operate as a national bank. If the above conditions are met, we
may instruct the escrow agent to release to us the amount of subscription
proceeds in excess of $6.5 million. We will not deposit in the escrow account
any subscription proceeds we receive after the above conditions are met but
before this offering ends. Instead, those funds will be available for our
immediate use.
If we do not meet the conditions to release the funds from the escrow
account by the expiration date, then the escrow agent will return the
subscription agreements and the full amount of all subscription funds, without
interest, to subscribers within five business days after the expiration date.
Although we have applied for all regulatory approvals required to begin
operations, we may not receive final approvals in a timely manner, if at all.
The closing of this offering is not conditioned upon our receiving final
approval to being business. If after the close of this
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<PAGE>
offering, we do not receive final approval to start banking operations or we do
not satisfy other regulatory requirements, we will solicit shareholder approval
for dissolution and liquidation of Cherokee Banking Company under Georgia law.
If Cherokee Banking Company is dissolved and liquidated, we will distribute to
shareholders our net assets remaining after payment or provision for payment of
all claims against Cherokee Banking Company. Shareholders will receive only a
portion, if any, of their original investment because we will have used the
proceeds of the offering to pay all expenses and capital costs incurred by
Cherokee Banking Company. These expenses would include the expenses of the
offering, the organizational and pre-opening expenses of Cherokee Banking
Company and Cherokee Bank and the claims of creditors.
PLAN OF DISTRIBUTION
Cherokee Banking Company's organizers will offer and sell the common stock
on a best-efforts basis without compensation. We may find it desirable to
utilize the services of brokers and/or dealers to sell the common stock. We
have no present arrangements with any brokers or dealers relating to this
offering. If we use brokers or dealers, they would sell the common stock on a
best-efforts basis, and we would pay them a commission based on the shares sold
by them. We believe that the range of possible commissions to be paid to
brokers or dealers is $.50 to $.75 per share and that the maximum average
commission payable in the offering when all shares subject to this offering are
taken into account is $0.23. We do not except that sales of common stock
through brokers or dealers will comprise a major part of this offering.
USE OF PROCEEDS
We estimate that the minimum net proceeds of the offering to Cherokee
Banking Company will be $6.5 million and the maximum will be $10.0 million. The
table illustrates how we intend to use the net proceeds of this offering.
<TABLE>
<CAPTION>
Minimum Maximum
------- -------
<S> <C> <C>
Repay amounts drawn on line of credit $ 250,000 (1) $ 250,000 (1)
Working capital 6,250,000 (2) 9,250,000 (2)
------------- -------------
Total $ 6,500,000 $ 10,000,000
============= =============
</TABLE>
________________
(1) At December 31, 1993, Cherokee Banking Company had drawn $60,000 under its
line of credit and had used these funds to pay organizational and pre-
opening expenses.
(2) Cherokee Banking Company will contribute $6.0 million of this amount to
Cherokee Bank as capital when Cherokee Bank receives final regulatory
approval.
Cherokee Banking Company's offering expenses will consist primarily of
registration fees and legal, accounting, and printing expenses. Cherokee
Banking Company will use its
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<PAGE>
working capital initially for liquidity and thereafter for expansion and for
general purposes such as payment of operating expenses, the provision of
additional capital for Cherokee Bank or the purchase of certificates of deposit
from Cherokee Bank, if necessary or deemed desirable by Cherokee Banking
Company.
After Cherokee Bank receives the necessary regulatory approvals, Cherokee
Banking Company will purchase all of Cherokee Bank's common stock for a minimum
of $6.0 million. Cherokee Bank intends to use these proceeds for the following
purposes:
<TABLE>
<S> <C>
Purchase of land for Cherokee Bank's
main office $ 450,000
Construction of the main office
building 980,000
Furniture, fixtures and equipment
for Cherokee Bank's main office 478,600
Funds to be used for loans to
customers, for investments and
for other general purposes 4,091,400
----------
Total $6,000,000
==========
</TABLE>
We estimate that Cherokee Bank's organizational expenses will be $97,400
and will include consulting fees, expenses for market analysis and feasibility
studies, and legal fees and expenses. Assuming Cherokee Bank opens for business
on its target date of July 1, 1999, we estimate that its pre-opening expenses
will be $180,180 and will include officers' and employees' salaries and
benefits, as well as lease payments for the modular facility expected to be used
temporarily by Cherokee Bank, marketing expenses, interest expenses, accounting
and other pre-opening expenses. Until we apply the net proceeds of this
offering to the specific purposes described above, we plan to invest them in
short-term, investment-grade securities, federal funds, certificates of deposit
or guaranteed obligations of the United States government.
CAPITALIZATION
The following table shows Cherokee Banking Company's capitalization as of
December 31, 1998 and its pro forma consolidated capitalization, as adjusted to
give effect to the receipt of the net proceeds from the sale of a minimum of
650,000 shares and a maximum of 1,000,000 shares of common stock in this
offering.
A. R. (Rick) Roberts, III purchased 10 shares of common stock upon Cherokee
Banking Company's incorporation. Cherokee Banking Company will redeem these
shares for $10.00, which is the price Mr. Roberts paid for the 10 shares, upon
the issuance of shares in this offering. The number of shares shown as
outstanding after giving effect to this offering do not include the
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shares of common stock issuable upon exercise of the warrants or the option that
have been or may be granted by Cherokee Banking Company. For additional
information concerning the number and terms of these warrants and options, see
"Executive Compensation."
<TABLE>
<CAPTION>
Actual Minimum Maximum
Shareholders' Equity December 31, 1998 As Adjusted As Adjusted
-------------------- ----------------- ------------ -----------
<S> <C> <C> <C>
Preferred stock, no par value; 2,000,000
shares authorized; no shares issued or $ -- $ -- $ --
outstanding
Common stock, no par value; 10,000,000
shares authorized; 10 shares issued
($1.00 each) and outstanding; 650,000 and
1,000,000 shares, respectively, issued 10 6,435,100 /(1)/ 9,935,100 /(1)/
($10.00 each) and outstanding as adjusted
Accumulated deficit (40,414) /(2)/ (212,680)/(3)/ (212,680)/(3)/
-------------- ------------ ------------
Total shareholders' deficit $ (40,404) $ 6,222,420 $ 9,722,420
============== ============ ============
Book value per share $ (4,040) $ 9.57 /(4)/ $ 9.72 /(4)/
============== ============ ============
</TABLE>
_____________________________
(1) We will charge the expenses of the offering against this account. We
estimate that our offering expenses will be $64,900, including
legal, accounting, printing and filing fees.
(2) This deficit reflects pre-opening expenses incurred through December
31, 1998, consisting primarily of professional and filing fees.
(3) The "As Adjusted" accumulated deficit results from estimated pre-
opening expenses of $212,680 which we expect to incur through July
1, 1999, Cherokee Bank's target opening date. Actual pre-opening
expenses may be higher and may therefore increase the deficit
accumulated during the pre-opening stage and further reduce
shareholders' equity.
(4) After giving effect to the net proceeds from this offering, there is
an immediate dilution in the book value per share of $0.43 if we
sell 650,000 shares and $0.28 if we sell 1,000,000 shares, resulting
from the pre-opening expenses and the offering expenses.
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<PAGE>
DIVIDENDS
Cherokee Banking Company will initially have no source of income other than
dividends that Cherokee Bank pays to it. Cherokee Banking Company's ability to
pay dividends to its shareholders will therefore depend on Cherokee Bank's
ability to pay dividends to Cherokee Banking Company. In the future, Cherokee
Banking Company may begin income-producing operations independent from those of
Cherokee Bank, which may provide another source of income from which Cherokee
Banking Company could pay dividends to you. We can give no assurance, however,
as to when, if at all, these operations may begin or whether they will be
profitable. Bank holding companies and national banks are both subject to
significant regulatory restrictions on the payment of cash dividends. In light
of these restrictions and the need for Cherokee Banking Company and Cherokee
Bank to retain and build capital, it will be the policy of each of their Boards
of Directors to reinvest earnings for the period of time necessary to help
support the success of their operations. As a result, we do not plan to pay
dividends until we recover any losses that we have incurred and until we become
profitable. Additionally, our future dividend policy will depend on our
earnings, capital requirements, financial condition and other factors that the
Boards of Directors of Cherokee Banking Company and Cherokee Bank consider
relevant.
Additionally, regulatory authorities may determine, under certain
circumstances relating to the financial condition of Cherokee Bank or Cherokee
Banking Company, that the payment of dividends would be an unsafe or unsound
practice and to prohibit dividend payment. See "Supervision and Regulation--
Payment of Dividends."
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND PLAN OF OPERATIONS
Cherokee Banking Company's financial statements and related notes, which
are included in this prospectus, provide additional information relating to the
following discussion of its financial condition. See "Index to Financial
Statements."
Cherokee Banking Company was organized on October 9, 1998, to serve as a
holding company for a proposed national bank. Since it was organized, the main
activities of Cherokee Banking Company have been centered on seeking,
interviewing and selecting its directors and officers, applying for a national
bank charter, applying for FDIC deposit insurance, applying to become a bank
holding company and raising equity capital through this offering.
Cherokee Banking Company's operations from October 9, 1998 through the
close of the offering have been and will continue to be funded through a line of
credit from SunTrust Bank, Atlanta. The total amount available on the line of
credit is $250,000, of which approximately $60,000 was outstanding at December
31, 1998. This loan bears interest at the prime rate of SunTrust Bank, minus
1.00%, and is due on December 21, 1999. Cherokee Banking Company plans to repay
the line of credit after the closing of this offering.
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<PAGE>
From October 9, 1998 through December 31, 1998, Cherokee Banking Company's
net loss amounted to $40,414. The estimated net loss for the period from
October 9, 1998 through July 1, 1999, the anticipated opening date of Cherokee
Bank, is $212,680, which is attributable to the following estimated noninterest
expenses:
<TABLE>
<S> <C>
Salaries and benefits: $135,367
Legal and professional fees: 12,600
Other pre-opening expenses: 64,713
--------
Total $212,680
</TABLE>
On December 11, 1998, Cherokee Banking Company executed a Purchase and Sale
Agreement for the purchase of approximately 1.06 acres of land at 1275
Riverstone Parkway, Canton, Georgia, at a purchase price of $450,000. Cherokee
Bank will use this property as the site for its main office. Cherokee Banking
Company intends to close the purchase and sale on or before May 1, 1999, using
either the net proceeds of this offering or borrowings under the line of credit.
After Cherokee Banking Company contributes $6.0 million to Cherokee Bank as
capital, Cherokee Bank will purchase the property from Cherokee Banking Company
for the same price that Cherokee Banking Company paid for it. Management
anticipates that Cherokee Bank will operate a modular banking office on the
property while a permanent building is under construction, and expects to begin
construction in July 1999 and complete construction in December 1999. Cherokee
Bank will fund the construction of the main building, estimated at $980,000,
with the proceeds received from the issuance of its stock to Cherokee Banking
Company.
LIQUIDITY AND INTEREST RATE SENSITIVITY
Since Cherokee Banking Company has been in the organizational stage, there
are no results to present at this time. Nevertheless, once Cherokee Bank starts
operations, net interest income, Cherokee Banking Company's primary source of
earnings, will fluctuate with significant interest rate movements. To lessen
the impact of these margin swings, we intend to structure the balance sheet so
that repricing opportunities exist for both assets and liabilities in roughly
the same amounts at approximately the same time intervals. Imbalance in these
repricing opportunities at any point in time constitutes interest rate
sensitivity.
Interest rate sensitivity refers to the responsiveness of interest-bearing
assets and liabilities to change in market interest rates. The rate sensitive
position, or gap, is the difference in the volume of rate sensitive assets and
liabilities at a given time interval. The general objective of gap management
is to manage actively rate sensitive assets and liabilities to reduce the impact
of interest rate fluctuations on the net interest margin. Management will
generally attempt to maintain a balance between rate sensitive assets and
liabilities as the exposure period is lengthened to minimize Cherokee Bank's
overall interest rate risk.
Management will regularly evaluate the asset mix of the balance sheet in
terms of several variables: yield, credit quality, appropriate funding sources
and liquidity. To effectively manage the balance sheet's liability mix,
management plans to focus on expanding Cherokee Bank's deposit base and other
sources of funds.
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<PAGE>
As Cherokee Bank continues to grow, management will continuously structure
its rate sensitivity position to best hedge against rapidly rising or falling
interest rates. Cherokee Bank's Asset and Liability Management Committee will
meet on a quarterly basis to develop a strategy for the upcoming period. The
committee's strategy will include anticipating future interest rate movements.
Liquidity represents the ability to provide steady sources of funds for
loan commitments and investment activities, as well as to maintain sufficient
funds to cover deposit withdrawals and payment of debt and operating
obligations. Management can obtain these funds by converting assets to cash or
by attracting new deposits. Cherokee Bank's ability to maintain and increase
deposits will serve as its primary source of liquidity.
Other than the offering, management knows of no trends, demands,
commitments, events or uncertainties that should result in or are reasonably
likely to result in Cherokee Banking Company's liquidity increasing or
decreasing in any material way in the foreseeable future.
CAPITAL ADEQUACY
There are now two primary measures of capital adequacy for banks and bank
holding companies: (1) risk-based capital guidelines and (2) the leverage
ratio.
The risk-based capital guidelines measure the amount of a bank's required
capital in relation to the degree of risk perceived in its assets and its off-
balance sheet items. Note that under the risk-based capital guidelines, capital
is divided into two "tiers." Tier 1 capital consists of common shareholders'
equity, noncumulative and cumulative (bank holding companies only) perpetual
preferred stock and minority interests. Goodwill is subtracted from the total.
Tier 2 capital consists of the allowance for loan losses, hybrid capital
instruments, term subordinated debt and intermediate term preferred stock.
Banks are required to maintain a minimum risk-based capital ratio of 8.0%, with
at least 4.0% consisting of tier 1 capital.
The second measure of capital adequacy relates to the leverage ratio. The
Office of the Comptroller of the Currency has established a 3.0% minimum
leverage ratio requirement. The leverage ratio is computed by dividing tier 1
capital into total assets. In the case of Cherokee Bank and other banks that
have not received the highest regulatory rating by their primary regulator, the
minimum leverage ratio should be 3.0% plus an additional cushion of at least 1%
to 2%, depending upon risk profiles and other factors.
The Board of Governors of the Federal Reserve System, the Office of the
Comptroller of the Currency and the FDIC recently established a rule that adds a
measure of interest rate risk to the determination of supervisory capital
adequacy. In connection with this new rule, the agencies have also proposed a
measurement process to measure interest rate risk. Under this proposal, all
items on the balance sheet, as well as off-balance sheet items, would be
reported according to maturity, repricing dates and cash flow characteristics.
The bank would then multiply its reporting position by duration-based risk
factors that weight its position according to rate sensitivity. The appropriate
supervisory agency would access capital adequacy using this
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<PAGE>
net risk weighted position. The objective of this complex proposal is to
determine a bank's sensitivity to various rising and falling interest rate
scenarios.
We believe that the net proceeds of the offering will satisfy our cash
requirements for at least the five-year period following the opening of Cherokee
Bank. Accordingly, we do not anticipate that it will be necessary to raise
additional funds to operate Cherokee Banking Company or Cherokee Bank over the
next five years. For additional information about planned expenditures, see
"Use of Proceeds." For additional information about our plan of operations, see
"Proposed Business of Cherokee Banking Company and Cherokee Bank" and
"Management."
PROPOSED BUSINESS OF CHEROKEE BANKING COMPANY
AND CHEROKEE BANK
BACKGROUND
CHEROKEE BANKING COMPANY. Cherokee Banking Company was incorporated as a
Georgia corporation on October 9, 1998, to serve as a bank holding company for
Cherokee Bank. Cherokee Banking Company plans to use $6.0 million of the net
proceeds of this offering to capitalize Cherokee Bank. In return, Cherokee Bank
will issue all of its common stock to Cherokee Banking Company, and Cherokee
Banking Company will be Cherokee Bank's sole shareholder. Cherokee Banking
Company has applied to the Federal Reserve Bank of Atlanta and the Georgia
Department of Banking and Finance for prior approval to capitalize Cherokee
Bank. If these agencies grant the necessary approvals, Cherokee Banking Company
will become a bank holding company within the meaning of the Bank Holding
Company Act of 1956, as currently in effect, and the Georgia Bank Holding
Company Act upon its purchase of Cherokee Bank's common stock. See "Supervision
and Regulation--General."
Cherokee Banking Company has been organized to make it easier for Cherokee
Bank to serve its future customers. The holding company structure will provide
flexibility for expansion of Cherokee Banking Company's banking business through
the possible acquisition of other financial institutions and the provision of
additional capital and banking-related services that are permissible for bank
holding companies and for national banks. A holding company structure will make
it easier to raise capital for Cherokee Bank because Cherokee Banking Company
will be able to issue securities without the need for prior banking regulatory
approval and the proceeds of debt securities issued by Cherokee Banking Company
can be invested in Cherokee Bank as primary capital.
CHEROKEE BANK. The organizers filed applications on behalf of Cherokee
Bank with the Office of the Comptroller of the Currency and with the FDIC on
December 14, 1998 for authority to organize as a national bank with federally
insured deposits. Cherokee Bank will not be authorized to conduct its banking
business until it obtains a charter from the Office of the Comptroller of the
Currency. The issuance of the charter will depend, among other things, upon
Cherokee Bank's receiving at least $6.0 million in capital from Cherokee Banking
Company and upon compliance with other standard conditions expected to be
imposed by the FDIC and the
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<PAGE>
Office of the Comptroller of the Currency. These conditions are generally
designed to familiarize Cherokee Bank with certain operating requirements and to
prepare it to begin business. The Office of the Comptroller of the Currency
requires that a new national bank open for business within 18 months after
receipt of preliminary approval from the Office of the Comptroller of the
Currency. Cherokee Bank's application to the Office of the Comptroller of the
Currency to form a national bank is pending. Cherokee Bank's application to the
FDIC for deposit insurance also is pending.
MARKET OPPORTUNITIES
PRIMARY SERVICE AREA. Cherokee Bank's primary service area is Cherokee
County which includes the cities of Ball Ground, Canton, Holly Springs, Waleska,
and Woodstock. Cherokee County lies northwest of the city of Atlanta and
directly north of Cobb County. Current population projections indicate that
Cherokee County will reach over 130,650 persons by the year 2000. Interstate
575 opened in 1984 and allows Cherokee County residents direct access to
employment opportunities in the northern metropolitan Atlanta area.
ECONOMIC AND DEMOGRAPHIC FACTORS. The city of Canton is the key economic
focal point of Cherokee Bank's primary service area. According to the 1990
Census, the population of Cherokee County at that time was 90,204 persons.
According to information compiled by Information Decision System, the median age
of the population is 32.8 and the median family income is $50,989.
EMPLOYMENT. Cherokee County's economy is strong and growing. Its
employment sectors are diversified, representing poultry processing and
agriculture, apparel manufacturing, construction, electronics, services
industries, and aerospace. Service employment is the largest sector, providing
22% of the jobs and 21% of employment earnings. Retail trade is the next
largest contributor, providing 18% of the jobs and 14% of employment earnings.
Construction is also important to Cherokee County's economy, providing 15% of
the jobs and 18% of employment earnings. Approximately 31% of Cherokee County's
workforce is employed within Cherokee County while the balance, 69%, commutes
out of Cherokee County. Cherokee County's unemployment rates have traditionally
been low compared to unemployment rates in Georgia. The May 1998 unemployment
rate was 2.2% as compared to the Georgia unemployment rate of 4.6%.
Cherokee County's ten largest corporations include Seaboards Farms of
Canton, Evenflo, L.A.T. Sportswear, MVE, Y.D.K. America, Piolax, ERB Industries,
Siemens Energy & Automation, Underwood Mold, and Universal Alloy. The presence
of these corporations has led to the significant growth experienced by the
entrepreneurs and/or small businesses in Cherokee County. The strength of the
economy in Cherokee County relies on its large, diversified small business
community.
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<PAGE>
RESIDENTIAL AND COMMERCIAL ACTIVITY. New residential and commercial
development is prevalent in all areas of Cherokee County. The majority of this
activity is in progress or has been completed in the last 18 months. Highlights
of this activity follow:
. Riverstone Plaza Development -- a 500 acre regional shopping complex.
Phase 1 of the project represents 280,000 square feet that will
include a Publix, Belk Department Store, J.C. Penney's, Goody's
Department Store, Home Depot, new Canton Post Office, 16-screen
Carmike Cinema, and numerous restaurants. Phase 2 of the project
encompassing 100 acres is being cleared, with about 40 acres under
contract to R. T. Jones Hospital. The remainder of the land will be
developed for commercial and retail use. The Riverstone Plaza
Development is expected to employ about 2,000 people.
. A new Super Wal-Mart.
. Improvements to Reinhardt College Parkway.
. The new realignment of Georgia Highway 140, connecting Georgia 140 to
Old Georgia 5.
. Universal Alloy Corporation, a Swiss-owned aircraft parts supplier,
has announced plans to build a $10 million 105,000 square foot
aluminum extrusion plant on a 17-acre site in the Canton-Cherokee
Industrial Park. The plant will initially employ 75 workers but is
expected to grow to about 350.
. Herman Miller, a large office furniture manufacturer, has announced
plans to build a 330,000 square foot regional office located on 70
acres near Georgia 5, north of Exit 11 on Interstate 575.
. Canton Textile Mill No. 2, a 400,000 square foot historic building,
has been purchased for $1.5 million. The owner plans to convert it
into offices, stores and loft apartments.
. Downtown revitalization of small businesses sponsored by the Canton
Downtown Development Authority.
. Mayor's plans for River 2000 -- to develop a 5 mile stretch of the
Etowah River as a recreational area.
. New restaurants:
Applebee's Neighborhood Grill & Bar O'Charley's
Buffalo's Cafe Long Horn Steakhouse
Starbucks Tanner's
Zaxby's Outback Steakhouse
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<PAGE>
. Residential activity:
Name # Houses Price Range Development Status
---- -------- ----------- ------------------
Bridge Mill 4,000 $150,000-$400,000 Less than 1 Year
The Preserve 30 $170,000-$220,000 Less than 1 Year
Governors Walk 14 $150,000-$300,000 Developing
Cherokee Overlook 60 $ 70,000-$ 90,000 5th Year, still
developing
Whispering Hills 60 $110,000-$130,000 3rd Year
Camden Woods 30 $120,000-$160,000 2nd Year
Fieldstone 35 $120,000-$170,000 Less than 1 Year
BANK SITE. Cherokee Bank will be located at 1275 Riverstone Parkway,
Canton, Georgia, which is part of the new Riverstone Plaza Development on
Interstate 575. Riverstone Parkway is also Georgia Business Highway 5, which is
one of the major thoroughfares through Cherokee County and Canton. We selected
the site because of its convenience to Interstate 575 which will allow us to
reach small business customers throughout Cherokee County and consumers
traveling to Riverstone Plaza, the newest major retail area in Cherokee County
and the primary destination point in the market. We propose to build a 7,000
square foot building at this location and to operate in a temporary, modular
facility at this location while the building is under construction.
COMPETITION. The banking business is highly competitive. Cherokee Bank
will compete with other commercial banks, savings and loan associations, credit
unions, and money market mutual funds operating in Cherokee County. Cherokee
County is currently served by 12 financial institutions with a total of 33
branches. The 12 financial institutions represent 10 commercial banks and 2
savings banks. Of these, the three largest are Regions Bank, Bank of Canton,
and Synovus Financial Corp.
The regional holding companies represented in Cherokee County are: Regions
Bank, which is the largest with deposit market share of 31.54%; Synovus
Financial Corp., which is the third largest with market share of 12.76%;
Wachovia Bank; SunTrust Bank; First Union National Bank; SouthTrust;
NationsBank; and Tucker Federal Savings Bank. We do not believe that the
regional banks will be significant competitors because their retail products are
designed for the masses and their commercial products are oriented toward large
companies. In addition, each of the regional banks typically maintains a
centralized process for customer relations, which sometimes has resulted in
fewer employees and a reduction in the level of personal service. Also, the
centralized credit process that many of the larger banks use has not appeared to
be responsive to the needs of customers. We believe that many customers move
their banking
25
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relationships from the large banks because of pricing changes and the level of
personal service. We expect that the recent acquisition of two local community
banks in Cherokee County will reduce the high quality service which had been
available to small businesses and consumers.
The independent community banks represented in Cherokee County are Bank of
Canton, First National Bank of Cherokee, and Security State Bank. We believe
that each of these independent banks do offer some level of competition.
However, we do not believe these banks represent a significant threat to the
growth plans for Cherokee Bank because our executive management team has proven
successful banking experience in North Georgia. In addition, the future growth
prospects of Cherokee County will offer Cherokee Bank and its competitors
significant opportunities for new business.
All of the banks in Cherokee County have grown rapidly over the past five
years and indications are that this growth will continue. The large banks are
likely to continue doing what they do best, which is to market to the masses and
to very large businesses. The community banks are likely to continue to grow
rapidly by competing for customers that want a more personal approach to
transacting business, as well as by generating new business from the rapidly
increasing population.
BUSINESS STRATEGY
MANAGEMENT PHILOSOPHY. Cherokee Bank's philosophy will be to operate as a
community bank emphasizing prompt, personalized customer service to the
individuals and businesses located in Cherokee County. Cherokee Bank has
adopted this philosophy in order to attract customers and to acquire market
share now controlled by other financial institutions operating in the market.
We believe that local ownership and control will allow Cherokee Bank to serve
customers more efficiently and will aid in Cherokee Bank's growth and success.
Additionally, we believe that the expansion and growth of Cherokee Bank's
operations will be a significant factor in the success of Cherokee Banking
Company. Accordingly, we will implement the following operating and growth
strategies.
OPERATING STRATEGY. In order to achieve the level of prompt, responsive
service that we believe will be necessary to attract customers and to develop
Cherokee Bank's image as a local bank with an individual focus, we will employ
the following operating strategies:
. QUALITY EMPLOYEES. We will strive to hire highly trained and seasoned
staff. We plan to train our staff to answer questions about all of our
products and services so that the first employee the customer
encounters can resolve any questions the customer may have. We are
committed to hiring experienced and qualified staff, although this may
result in higher personnel costs than those of similar financial
institutions.
. EXPERIENCED SENIOR MANAGEMENT. Cherokee Bank's senior management
possesses extensive experience in the banking industry as well as
substantial business and banking contacts in Cherokee County. For
example, Cherokee Banking Company's President, Dennis W. Burnette, has
over 30 years of banking experience in North
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Georgia; and Cherokee Bank's Chief Financial Officer, A. R. (Rick)
Roberts, III, has over 20 years of banking experience in Cherokee
County. See "Management."
. COMMUNITY-ORIENTED BOARD OF DIRECTORS. The Board of Directors consists
of long-time residents of the area who represent Cherokee Bank's
target markets and will be sensitive and responsive to the needs of
the community. Additionally, the Board of Directors represents a wide
array of business experience and community involvement. We expect that
the directors will bring substantial business and banking contacts to
Cherokee Bank.
. COMMUNITY INVOLVEMENT. All of the officers and directors of Cherokee
Banking Company are active in the Cherokee County community, and their
continued active community involvement will provide an opportunity to
promote Cherokee Bank and its products and services.
. HIGHLY VISIBLE SITE. Cherokee Bank's main office is highly visible and
located in close proximity to a high concentration of the targeted
commercial businesses and residential areas. We believe this will
enhance Cherokee Bank's image as a strong competitor.
. INDIVIDUAL CUSTOMER FOCUS. Cherokee Bank will focus on providing
individual service and attention to its target customers, which
include individuals and small to medium-sized businesses. As the
employees, officers and directors become familiar with Cherokee Bank's
customers on an individual basis, Cherokee Bank will be able to
respond to credit requests more quickly and be more flexible in
approving complex loans based on collateral quality and personal
knowledge of the customer.
. OFFICER AND DIRECTOR CALL PROGRAM. We intend to implement an active
officer and director call program to promote Cherokee Bank's
philosophy. The purpose of this call program will be to visit
prospective customers and to describe Cherokee Bank's products,
services and philosophy.
. MARKETING AND ADVERTISING. We plan to develop Cherokee Bank's image as
a community oriented bank with an emphasis on quality service and
personal contact. We also plan to use a target marketing approach
through local newspapers, radio advertisements during peak driving
times, direct mail campaigns, and television spots to promote Cherokee
Bank.
. GROWTH STRATEGY. Because we believe that growth and expansion of
Cherokee Bank's operations will be a significant factor in the success of
Cherokee Banking Company, we plan to implement the following growth strategies:
. CAPITALIZE ON TREND TOWARD CONSOLIDATION. We plan to capitalize on
Cherokee Bank's position as one of a limited number of community banks
headquartered in Cherokee County to attract individuals and small- to
medium-sized business customers that may be underserved as a result of
recent bank consolidations.
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<PAGE>
. ATTRACT EMPLOYEES WITH ESTABLISHED CUSTOMER BASES. We will seek to
hire employees who have, through their experience in banking,
established significant customer bases. By hiring employees with
established customer bases, Cherokee Bank will be able to grow much
more rapidly than it would if it were to hire inexperienced employees
who would require time to develop a customer base.
. ALLOW SPACE FOR EXPANSION. Cherokee Bank will construct a main office
building with sufficient room to allow for the future expansion of
Cherokee Bank. The size of the proposed main office for Cherokee Bank
will allow for additional loan officers and for the addition of a
mortgage lending department.
. OFFER FEE-GENERATING PRODUCTS AND SERVICES. Cherokee Bank's range of
services, pricing strategies, interest rates paid and charged, and
hours of operation will be structured to attract Cherokee Bank's
target customers and increase its market share. Cherokee Bank will
strive to offer the small business person, professional, entrepreneur
and consumer the best loan services available while charging
aggressively for such services and utilizing technology and strategic
outsourcing to increase fee revenues.
. OPEN ADDITIONAL BRANCHES. In the future, Cherokee Bank intends to
expand its presence in the Cherokee County market by opening new
offices in strategic locations as appropriate. By adding these
branches, Cherokee Bank will gain new channels through which it can
build its deposit base and solicit new customers.
LENDING SERVICES
LENDING POLICY. Cherokee Bank is being established to support Canton and
surrounding areas of Cherokee County. Consequently, Cherokee Bank will
aggressively seek creditworthy borrowers within a limited geographic area.
Cherokee Bank's primary lending function will be to make consumer loans to
individuals and commercial loans to small and medium-sized businesses and
professional concerns. In addition, Cherokee 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. We project that consumer loans to
individuals will comprise 17% of the portfolio, commercial loans to small to
medium-sized businesses will comprise 18% of the portfolio, and real estate-
related loans will comprise 66% of the portfolio.
LOAN APPROVAL AND REVIEW. Cherokee Bank's loan approval policies will
provide for various levels of officer lending authority. When the total amount
of loans to a single borrower exceeds that individual officer's lending
authority, an officer with a higher lending limit or Cherokee Bank's Loan
Committee will determine whether to approve the loan request. Initially,
however, all loans regardless of amount will go to the Loan Committee. Cherokee
Bank will not make a loan to its directors or executive officers unless the
Board of Directors approves the loan and the terms of the loan are no more
favorable than would be available to any other borrower.
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LENDING LIMITS. Cherokee Bank's lending activities will be subject to a
variety of lending limits imposed by federal law. Differing limits apply in
certain circumstances based on the type of loan or the nature of the borrower,
including the borrower's relationship to Cherokee Bank. In general, however,
Cherokee Bank will be able to loan any one borrower a maximum amount equal to
either: (1) 15% of Cherokee Bank's capital and surplus or (2) 25% of its
capital and surplus if the excess over 15% is within federal guidelines, which
provide an exception to the 15% limit for certain secured debt. Based on the
proposed capitalization of Cherokee Bank and its projected pre-opening expenses,
Cherokee Bank's initial lending limit will be approximately $850,000 for loans
not fully secured plus an additional $550,000, for a total of approximately $1.4
million, for loans that meet the federal guidelines. Cherokee Bank has not yet
established any minimum or maximum loan limits other than the statutory lending
limits described above. These limits will increase or decrease as Cherokee
Bank's capital increases or decreases as a result of its earnings or losses,
among other reasons. Cherokee Bank will need to sell loan participations to
other financial institutions to meet the needs of customers requiring loans
above these limits.
CREDIT RISKS. The principal economic risk associated with each category of
the loans that Cherokee Bank expects to make is the creditworthiness of the
borrower. Borrower creditworthiness is affected by general economic conditions
and the strength of the services and retail market segments. Risks associated
with real estate loans also include fluctuations in the value of real estate,
new job creation trends, tenant vacancy rates and, in the case of commercial
borrowers, the quality of the borrower's management. In addition, a commercial
borrower's ability both to evaluate properly changes in the supply and demand
characteristics affecting its markets for products and services and to respond
effectively to such changes are significant factors in the creditworthiness of a
commercial borrower. General economic factors affecting a borrower's ability to
repay include interest, inflation and employment rates, as well as other factors
affecting a borrower's customers, suppliers and employees.
The well established banks in Cherokee County are likely to make
proportionately more loans to medium to large-sized businesses than Cherokee
Bank. Many of the commercial loans that Cherokee Bank expects to make will
likely be made to small- to medium-sized businesses which may be less able to
withstand competitive, economic and financial pressures than larger borrowers.
REAL ESTATE LOANS. Cherokee Bank will make commercial real estate loans,
construction and development loans, and residential real estate loans in and
around Cherokee County. These loans include certain commercial loans where
Cherokee Bank takes a security interest in real estate out of an abundance of
caution and not as the principal collateral for the loan, but will exclude home
equity loans, which are classified as consumer loans. Interest rates may be
fixed or adjustable. Cherokee Bank will generally charge an origination fee.
We will attempt to reduce the credit risk of our commercial real estate loans by
emphasizing loans on owner-occupied office and retail buildings where the ratio
of the amount of the loan to the value of the collateral, established by
independent appraisals, does not exceed 80%. In addition, we may require
personal guarantees from the principal owners of the property backed with a
review by Cherokee Bank's management of the personal financial statements of the
principal owners.
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Cherokee Bank will compete for real estate loans with competitors that are well
established in Cherokee County.
Cherokee Bank may also originate mortgage loans for sale to institutional
investors in the secondary market. Cherokee Bank intends to limit interest rate
risk and credit risk on these loans by locking in the interest rate for each
loan with the secondary market investor and receiving the investor's
underwriting approval before making the loan.
COMMERCIAL LOANS. We expect that loans for commercial purposes in various
lines of businesses will be one of the primary components of Cherokee Bank's
loan portfolio. The terms of these loans will vary by their purpose and by
their underlying collateral, if any. Cherokee Bank will typically make
equipment loans for a term of seven years or less at fixed or variable rates,
with the loan fully amortized over the term. Equipment loans generally will be
secured by the financed equipment, and the ratio of the amount of the loan to
the value of the financed equipment or other collateral will generally be 80% or
less. Loans to support working capital will typically have terms of one year or
less and will usually be secured by accounts receivable, inventory or personal
guarantees of the principals of the business. For loans secured by accounts
receivable or inventory, principal will typically be repaid as the assets
securing the loan are converted into cash, and for loans secured with other
types of collateral, principal will typically be due at maturity.
CONSUMER LOANS. Cherokee Bank will make a variety of loans to individuals
for personal, family and household purposes, including secured and unsecured
installment and term loans, home equity loans and lines of credit. We expect
that the principal competitors for consumer loans will be the established banks
in Cherokee County.
LENDING OFFICERS. In addition to its President who will be a lender,
Cherokee Bank intends to hire a commercial lender and a consumer lender in order
to develop its loan portfolios. Each lender will have experience in Cherokee
County and will be expected to bring substantial contacts to Cherokee Bank.
INVESTMENTS
In addition to loans, Cherokee 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. The Asset and Liability Management Committee will review the
investment portfolio on an ongoing basis to ensure that investments are
profitable and conform to Cherokee Bank's policy set by the Board of Directors.
ASSET AND LIABILITY MANAGEMENT
Cherokee Bank intends to establish an Asset and Liability Management
Committee to manage its assets and liabilities. This committee will strive to
provide an optimum and stable net interest margin, a profitable after-tax return
on assets and return on equity, and adequate liquidity. The committee will
conduct these management functions within the framework of
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written loan and investment policies that Cherokee Bank will adopt. The
committee 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 attempt to manage any gaps in maturity ranges.
DEPOSIT SERVICES
Cherokee Bank will seek to establish solid core deposits, including
checking accounts, money market accounts, a variety of certificates of deposit
and IRA accounts. To attract deposits, Cherokee Bank will employ an aggressive
marketing plan in Cherokee County, and will feature a broad product line and
competitive services. The primary sources of deposits will be residents of, and
businesses and their employees located in, Cherokee County. Cherokee Bank plans
to obtain these deposits primarily through personal solicitation by its officers
and directors, direct mail solicitations, radio advertisements during peak
driving times, and advertisements published in the local media. It plans to
generate deposits by offering a broad array of competitively priced deposit
services, including demand deposits, regular savings accounts, money market
deposits, certificates of deposit, retirement accounts and other legally
permitted deposit or funds transfer services that may be offered to remain
competitive in the market.
OTHER BANKING SERVICES
Cherokee Bank also intends to provide traveler's checks, direct deposit of
payroll and social security checks, and automatic transfers for various
accounts. Cherokee Bank also plans to become associated with a shared network
of automated teller machines that Bank customers will be able to use throughout
Georgia and other regions. We plan to offer MasterCard/(R)/ and VISA/(R)/
credit card services through a correspondent bank as an agent for Cherokee Bank.
Cherokee Bank does not plan to exercise trust powers during its initial years of
operation. In the future, it may offer a full-service trust department, but
cannot do so without the prior approval of the Office of the Comptroller of the
Currency.
MARKETING AND ADVERTISING
Cherokee Bank's target customers will be the residents and the small to
medium-sized businesses and their employees located in Cherokee County. Several
of our directors and officers have developed business contacts with numerous
professionals within the medical services industry. We intend to develop a
niche in providing banking services to these and other medical providers.
We plan to use a targeted marketing approach through local newspapers,
radio advertisements during peak driving times, direct mail campaigns, and
television spots as necessary. Additionally, we plan to sponsor community
activities on an active, ongoing basis.
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INFORMATION SYSTEMS AND THE YEAR 2000
THE YEAR 2000 PROBLEM. The year 2000 issue confronting Cherokee Banking
Company, Cherokee Bank and its suppliers, customers, customers' suppliers and
competitors centers on the inability of computer systems to recognize the year
2000 and other year 2000 sensitive dates such as September 9, 1999, December 31,
1999 and February 29, 2000. Many existing computer programs and systems
originally were programmed with six-digit dates that provided only two digits to
identify the calendar year in the date field. With the impending new
millennium, these programs and computers will recognize "00" as the Year 1900
rather than the year 2000. Like most financial service providers, Cherokee
Banking Company and its operations may be affected significantly by the year
2000 issue because it depends on computer-generated financial information.
Software, hardware and equipment both within and outside our direct control, and
third parties with whom we electronically or operationally interface are likely
to be affected. These third parties include customers and third-party vendors
providing data processing, information systems management, computer systems
maintenance and credit bureau information. If computer systems are not able to
identify the year 2000, many computer applications could fail or create
incorrect results. Consequently, many calculations that rely on date-related
information, such as interest, payment or due dates and other operating
functions, could generate significantly misstated results, and we could lose our
ability to process transactions, prepare statements or engage in similar normal
business activities. In addition, under certain circumstances, the failure to
address adequately the year 2000 issue could adversely affect the viability of
our suppliers and creditors and the creditworthiness of our borrowers. If not
adequately addressed, the year 2000 issue could ultimately have a significant
adverse impact on our products, services, and competitive condition and, in
turn, our financial condition and results of operations.
REGULATORY OVERSIGHT. Financial institution regulators recently have
increased their focus on year 2000 compliance issues and have issued guidance
concerning the responsibilities of senior management and directors. The Federal
Financial Institutions Examination Council has issued several interagency
statements on the year 2000. These statements require, among other things, that
financial institutions examine the year 2000 implications of relying on vendors
and the potential impact of the year 2000 issue on their customers, suppliers
and borrowers. These statements also require each federally regulated financial
institution to survey its exposure, measure its risk, and prepare a plan to
address the year 2000 issue. In addition, the federal banking regulators have
issued safety and soundness guidelines to be followed by insured depository
institutions to ensure resolution of any year 2000 problems. The federal
banking agencies have asserted that year 2000 testing and certification is a key
safety and soundness issue in regulatory examinations. Consequently, an
institution's failure to address appropriately the year 2000 issue could result
in supervisory action, including the reduction of the institution's supervisory
ratings, disapproval of mergers or acquisitions, and the imposition of civil
money penalties.
Because Cherokee Banking Company is still pending regulatory approval
regarding its status as a bank holding company and Cherokee Bank has not yet
started operations, federal banking regulators are focusing on Cherokee Banking
Company's and Cherokee Bank's year 2000 readiness as part of the regulatory
approval process. Once Cherokee Banking Company
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and Cherokee Bank have obtained the necessary regulatory approvals, the federal
banking regulators will continue to monitor their status on year 2000 issues as
described above.
OUR READINESS. Because Cherokee Banking Company is a start-up entity and
Cherokee Bank has not yet started business, Cherokee Banking Company does not
have existing systems or equipment requiring year 2000 testing and remediation.
Rather, we are purchasing all of our office equipment, hardware and software and
obtaining service commitments only from vendors and service providers that can
certify that their products and services are year 2000 compliant. For example,
we will purchase applications software, microcomputers, teller equipment, and a
network file server only from vendors that can provide year 2000 compliance
certificates relating to those products. We plan to obtain data processing
services, automatic teller machine applications, a voice response system,
internet banking services, document imaging solutions and bond accounting
systems from third party service providers that can certify that the products
and services they provide will be year 2000 compliant. We believe that we will
be able to obtain these products and services from vendors and service providers
that can supply the necessary certification. If we are unable to do so,
however, we will either forego acquiring the product or service until we receive
the required certification or, if the product or service is essential to our
operations, arrange for independent testing and verification of year 2000
compliance.
As we acquire our equipment and systems and start operations, we will test
their year 2000 readiness on an ongoing basis. Although we do not anticipate
that we will encounter difficulties in this area, we will require our vendors
and service providers to upgrade or replace any equipment that proves to be non-
compliant. If we do not receive the necessary upgrades or equipment, we will
obtain new equipment or engage a new service provider with demonstrated year
2000 compliance.
Although our internal systems, equipment, and operations require
significant oversight relating to year 2000 issues, we believe that our
customers' year 2000 readiness could also have a significant effect on our
operations. For example, if a customer with an outstanding loan from Cherokee
Bank is unable to maintain its cash flow as a result of disruption caused by its
own or its customers' year 2000 problems, the customer could default in the
repayment of the loan, which would lead to increased loan losses for Cherokee
Bank. Although we plan to consider this possibility when we establish loan loss
reserves for Cherokee Bank, the potential losses could exceed our estimate and
ultimately cause a net loss to Cherokee Bank. To address this concern, we will
communicate with customers on an ongoing basis regarding their year 2000
readiness and attempt to identify at the earliest opportunity those customers
that are likely to encounter year 2000 problems. We plan to work with these
customers to ensure, to the greatest extent possible, that their year 2000
compliance issues do not disrupt Cherokee Bank's operations.
RESOURCES ALLOCATED. To ensure that senior members of management continue
to monitor our year 2000 readiness on a consistent basis, Cherokee Banking
Company's Board of Directors established a Year 2000 Committee on January 13,
1999. The members of the committee will establish guidelines for the
acquisition of new equipment and services that will be year 2000 compliant;
communicating with potential borrowers, vendors and service providers regarding
year 2000 issues; and monitoring our progress in this area. Members of the
committee will also attend conferences and information sharing sessions to gain
additional insight into the
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year 2000 issue and potential strategies for addressing it. The committee's work
will continue until the year 2000 and, in the event a year 2000 problem occurs,
thereafter until the problem is resolved. The members of the committee are
Dennis W. Burnette, Albert Louis Evans, Jr. and A. R. (Rick) Roberts, III.
Because our year 2000 compliance program will principally involve ensuring
that we initially acquire systems, equipment and outsourced services that are
year 2000 compliant, we do not expect that Cherokee Banking Company or Cherokee
Bank will incur material year 2000 compliance costs. Rather, these costs will
be included in the initial cost of obtaining the equipment or services that we
will need in order to start operations. Consequently, we have not established a
separate budget for year 2000 compliance expenses. The year 2000 committee
will, however, monitor our needs in this area and will establish a budget for
year 2000 expenses if it believes that such costs will prove to be material.
CONTINGENCY PLANS. We believe that our only mission-critical, or "core,"
system is our host application processing system, which will be provided and
operated by a third party service provider. If this system is unable to process
data reliably, we will be forced to obtain the same services from another
service provider or, in the alternative, cease operations until the existing
system becomes year 2000 compliant. A failure in this system or any other date
sensitive system could have a material adverse effect on our results of
operations, liquidity and financial condition.
EMPLOYEES
Cherokee Bank expects to have approximately 14 employees when it opens for
business. Cherokee Banking Company does not expect to have any employees who
are not also employees of Cherokee Bank.
Dennis W. Burnette is the President and Chief Executive Officer of Cherokee
Banking Company and will be the President and Chief Executive Officer of
Cherokee Bank. Mr. Burnette has over 30 years of banking experience, including
20 years as President and Chief Executive Officer of a bank in neighboring
Pickens County. While working in Pickens County, Mr. Burnette also established
many banking relationships in Cherokee County.
A. R. (Rick) Roberts, III will be the Chief Financial Officer and Chief
Operations Officer of Cherokee Bank. Mr. Roberts has over 20 years of banking
experience, including extensive experience in the areas of finance and
operations.
FACILITIES
Cherokee Bank will be located at 1275 Riverstone Parkway in Canton, Georgia
in Cherokee County. On December 11, 1998 Cherokee Banking Company executed a
Purchase and Sale Agreement for the purchase of approximately 1.06 acres of land
at the above address, at a purchase price of $450,000. The construction of the
permanent facility is planned to begin in July 1999, with a completion date
planned for December 1999. The permanent facility will
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consist of approximately 7,000 square feet and will include three drive-up
windows and one automated teller machine. The estimated construction costs of
the building total $980,000.
Cherokee Bank's proposed location offers high visibility in an area with
significant traffic, and is located within the main shopping and retail area in
Cherokee County. The general area is the central location for medical,
professional, government and shopping in Cherokee County and is near the
interstate highway that runs north and south through the middle of the county.
Cherokee Bank initially expects to operate out of a modular facility that
we plan to locate on the site of the permanent facility. The monthly rental fee
for the modular facility will be approximately $4,000.
MANAGEMENT
PROPOSED EXECUTIVE OFFICERS AND DIRECTORS OF CHEROKEE BANKING COMPANY AND
CHEROKEE BANK
The following table sets forth, for the initial members of the Board of
Directors of both Cherokee Banking Company and Cherokee Bank, (1) their names,
addresses, and ages at December 31, 1998, (2) their respective positions with
Cherokee Banking Company and Cherokee Bank, (3) the number of shares of common
stock they intend to purchase in the offering, (4) the percentage of the minimum
number of 650,000 shares and the maximum number of 1,000,000 shares that such
number will represent, and (5) the number of shares subject to warrants, and an
option for Mr. Burnette, that they will receive because of their expected
purchase of common stock in this offering.
<TABLE>
<CAPTION>
MINIMUM/
MAXIMUM
PERCENTAGE OF SHARES
POSITION(S) NUMBER OUTSTANDING SUBJECT TO
NAME AND ADDRESS (AGE): TO BE HELD OF SHARES SHARES WARRANTS
- ----------------------- ----------------- --------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Dennis W. Burnette (52) President, 10,000 1.5%/1.0% 40,000(1)
7007 Wilderness Parkway/ Chief Executive
656 Big Canoe Officer and
Big Canoe, Georgia 30143 Director
William Lee Early (45) Director 20,000 3.1%/2.0% 20,000
173 Indian River Trail
Ball Ground, Georgia 30107
</TABLE>
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<TABLE>
<CAPTION>
MINIMUM/
MAXIMUM
PERCENTAGE OF SHARES
POSITION(S) NUMBER OUTSTANDING SUBJECT TO
NAME AND ADDRESS (AGE): TO BE HELD OF SHARES SHARES WARRANTS
- ----------------------- ----------------- --------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Albert Louis Evans, Jr. (52) Director 25,000 3.8%/2.5% 25,000
2268 Reinhardt College Parkway
Canton, Georgia 30114
J. Calvin Hill (51) Director 12,000 1.8%/1.2% 12,000
817 Clubhouse Pointe
Woodstock, Georgia 30188
Roger M. Johnson (56) Director 10,000 1.5%/1.0% 10,000
1300 Tom Hulsey Drive
Canton, Georgia 30115
J. David Keller (51) Director 10,000 1.5%/1.0% 10,000
1237 Indian Bunting Trail
Big Canoe, Georgia 30143
Wanda P. Roach (50) Director 10,000 1.5%/1.0% 10,000
229 Breeze Hill Court
Canton, Georgia 30114
A. R. (Rick) Roberts, III (45) Chief Financial 15,000 1.5%/1.0% 15,000
3030 Canton Highway Officer, Chief
Ball Ground, Georgia 30107 Operations
Officer and
Director
Donald F. Stevens (55) Chairman of the 25,000 3.1%/2.0% 25,000
9295 E. Cherokee Drive Board
Canton, Georgia 30115
Edwin I. Swords, III (39) Director 15,000 2.3%/1.5% 15,000
891 Ivey Drive
Canton, Georgia 30114
All proposed directors and 152,000 23%/15% 182,000
executive officers as a group (10
persons)
</TABLE>
___________________
(1) Includes an option to purchase 30,000 shares to be issued to Mr. Burnette.
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Each person listed above has been a director of Cherokee Banking Company
since October 9, 1998 and is a proposed director of Cherokee Bank. Directors of
Cherokee Banking Company serve staggered terms which means that one-third of the
directors will be elected each year at Cherokee Banking Company's annual meeting
of shareholders. The initial terms of the Class I directors will expire in
1999, the initial terms of the Class II directors will expire in 2000, and the
initial terms of the Class III directors will expire in 2001. Thereafter, each
director will serve for a term of three years. Cherokee Banking Company's
officers are appointed by the Board of Directors and hold office at the will of
the Board. See "Certain Provisions of the Articles of Incorporation and Bylaws-
- -Staggered Terms for Board of Directors."
Each of Cherokee Bank's proposed directors will, upon approval by the
Office of the Comptroller of the Currency, serve until Cherokee Bank's first
shareholders meeting, which will be held shortly after Cherokee Bank receives
its charter. Cherokee Banking Company, as the sole shareholder of Cherokee
Bank, will nominate each proposed director to serve as director of Cherokee Bank
at that meeting. After the first shareholders meeting, directors of Cherokee
Bank will serve for a term of one year and will be elected by Cherokee Banking
Company each year at Cherokee Bank's annual meeting of shareholders. Cherokee
Bank's officers will be appointed by its Board of Directors and will hold office
at the will of its Board.
Additional information about the directors of Cherokee Banking Company and
Cherokee Bank follows.
DENNIS W. BURNETTE. Dennis Burnette resides in Big Canoe, Georgia. Mr.
Burnette has a Bachelor of Sciences Degree in Business Administration from West
Georgia College and attended the Graduate School of Banking at Louisiana State
University. He has been involved in various aspects of banking since 1967 and
has 20 years of experience as a bank president. His banking career began as a
banking officer of The Citizens and Southern National Bank, Atlanta, Georgia.
From 1972 to 1976, Mr. Burnette served as Vice President and Chief Financial
Officer of the First National Bank of DeKalb County, Decatur, Georgia. In 1976,
Mr. Burnette organized and served as a Director, Chief Executive Officer and
President of Pickens County Bank, Jasper, Georgia, until 1996 when the bank was
purchased by Regions Financial Corporation, Birmingham, Alabama. Since the
sale, he has been an executive search consultant with Sanford Rose Associates in
Atlanta. Mr. Burnette's consulting practice has been based exclusively within
the banking industry with clients primarily in Georgia and the Carolinas. Mr.
Burnette has also served as a past Chairman of the Georgia Bankers Association
and as a past Trustee of the Graduate School of Banking at Louisiana State
University.
WILLIAM LEE EARLY. Bill Early has lived in Cherokee County for the past 20
years. Dr. Early is a physician, and is also the Founder, President and
Managing Partner of Medical Associates of North Georgia. Medical Associates now
employs 14 physicians and 100 employees. Dr. Early has a Bachelor of Sciences
Degree in biochemistry from the University of Georgia and received his Medical
Degree from the Medical College of Georgia.
ALBERT LOUIS EVANS, JR. Al Evans has lived in Cherokee County for over 20
years. He has a Bachelor of Arts Degree from Yale University, a M.Ed. from the
University of Florida, and a
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Ph.D from Georgia State University. Dr. Evans currently serves as Chief
Financial Officer of Emergency Medicine Associates, P.C., Canton, Georgia. As a
former educator, Dr. Evans has been involved in numerous professional
activities, has written educational-related dissertations and publications, and
serves on the Education Committee of the Walker School in Marietta, Georgia. In
addition, Dr. Evans has been coaching youth soccer in the Cherokee County area
for the last eight years.
J. CALVIN HILL. Calvin Hill is President of Gila Distributing - GA, Inc., a
distributing business located in Canton, Georgia. Mr. Hill resides in Woodstock
and is active in many community activities in Cherokee County. Mr. Hill is a
Director of the Cherokee County Chamber of Commerce; the Chairman of United Way
of Cherokee County and the Campaign Chairman in 1997; a Director and past
Chairman of YMCA, Cherokee; a Director of March of Dimes - Northwest; and the
President-Elect of the Rotary Club of Canton. Mr. Hill serves on the Board of
Advisors for Reinhardt College; is a Regional Leadership Institute graduate and
Leadership Cherokee graduate; and serves on the Atlanta Regional Commission. He
also served on the board of Regions Bank of Cherokee County until 1998. Mr.
Hill is a past Mayor of Ball Ground, Georgia, having served two terms.
ROGER M. JOHNSON. Roger Johnson has lived in Cherokee County for over 40 years
and resides in Canton, Georgia. He has been an attorney in private practice
since 1972 and a partner with the firm of Bray & Johnson in Canton since
February 1973. Prior to starting his law practice, he was the owner and manager
of the Credit Bureau of Canton from 1967 to 1972. Mr. Johnson has been a member
of the Canton Bar Association since 1973 and formerly served as its President.
He has also been a member of the State Bar Association of Georgia since 1973.
Other community activities include serving as a past member and director of the
Cherokee County Recreation Association for 4 years; a former member of the
Georgia General Assembly from 1975-76; an active member of the Cherokee County
Chamber of Commerce for 15 years or more; and a past member of the Canton
Jaycees for 15 years serving as a director of the Jaycees for 5 years. Mr.
Johnson attended Reinhardt College and received a Bachelor of Law Degree from
John Marshall Law School.
J. DAVID KELLER. David Keller is President and Secretary of L.A.T. Sportswear,
Inc. in Canton. Recently, L.A.T. Sportswear successfully completed a public
stock offering and is now publicly traded. Mr. Keller serves on the Advisory
Board for the Cherokee County Children's Advocacy Council and is a former Board
Member of the Cherokee County division of the American Cancer Society. Mr.
Keller has a BA in Business Administration from Georgia State University.
WANDA P. ROACH. Wanda Roach has been a real estate agent with Century 21- Max
Stancil Realty since 1989. Mrs. Roach currently serves on the Cherokee County
Chamber of Commerce; Cherokee County Family Violence Center as a director; City
of Canton Downtown Development Authority Board; Canton First United Methodist
Church - Building Committee; and Reinhardt College - A-Day Advance Gifts
Committee. Her previous experience includes serving as President and Treasurer
for the Service League of Cherokee County; serving as President of the Cherokee
Association of Realtors; being selected as Cherokee County Realtor of the Year
(l994); serving as Finance & Stewardship Chairman for Canton First United
Methodist
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Church; serving as a member of the Cherokee County Land Use Plan Committee
(1997); serving as Co-Chair of the Christmas Tour of Homes for R.T. Jones
Memorial Hospital; serving as a director of the Cherokee County Cancer Society;
and serving on A-Day Committee for Reinhardt College.
A. R. (RICK) ROBERTS, III. Rick Roberts is the proposed Chief Financial Officer
and Chief Operations Officer of Cherokee Bank. He is a lifelong resident of
Cherokee County and serves as Mayor of Ball Ground. Mr. Roberts served in
various positions at Citizens Bank in Ball Ground for 19 years. His career
began as a teller in 1977 and progressed with increasing responsibility to
Executive Vice President and Chief Financial Officer. Mr. Roberts'
responsibilities as Executive Vice President and Chief Financial Officer
included finance, control, accounting, and data processing. He also served as
Marketing and Human Resources Officer, Controller, Asset Liability Manager, and
Audit Coordinator. Mr. Roberts' community activities include Rotary Club of
Canton member, Vice Chairman of Cherokee Parks and Recreation Authority,
Cherokee County Chamber of Commerce Board of Directors, A Day for Reinhardt
College Committee Member, Reinhardt College Board of Advisors, Cherokee County
Municipal Planning Commission, Cherokee Municipal Association, and Cherokee
Chamber of Commerce Leadership Class. Mr. Roberts was recently appointed to the
Executive Council of the District Boy Scouts of America. Mr. Roberts is a
graduate of the University of Georgia.
DONALD F. STEVENS. Don Stevens is a 20-year resident of Cherokee County. He
retired in 1997 from Delta Air Lines Inc. after serving since 1968 as a pilot
and captain. Currently he is President of Terry & Stevens, Inc. and 84 West,
Inc. which are companies involved in building residential homes. He is
presently a member of the Cherokee County Chamber of Commerce and the Chairman
Elect for 1999; the Co-Founder of Cherokee Thanksgiving; a member of the
Cherokee County Airport Authority; a member of the Cherokee County Water and
Sewer Authority; and member of various committees of the Canton First United
Methodist Church. In the past he has served on committees of the Cherokee
County Sheriff Department, the Canton Kiwanis Club, and is a graduate of
Leadership Cherokee. He served on the Advisory Board of Directors of North
Georgia National Bank, Woodstock, Georgia, from 1990 to 1994.
EDWIN I. SWORDS, III. Edwin Swords has been a dentist with Swords, Swords, and
Phelps which is a dental practice in Canton, Georgia since 1985. He served on
the Advisory Board of Directors of Etowah Bank, Canton, Georgia from 1995 to
1998. Dr. Swords is a past President of the Canton Optimist Club; is a past
Board member of Flying Doctor of America; and is also a past member of the
Canton Rotary Club. Dr. Swords graduated from the Emory University School of
Dentistry.
COMMITTEES OF THE BOARDS OF DIRECTORS
The Board of Directors of Cherokee Banking Company has established the
committees described below. The members of each committee will be the same for
Cherokee Bank and Cherokee Banking Company.
COMPENSATION COMMITTEE. The Compensation Committee establishes
compensation levels for officers of Cherokee Banking Company and Cherokee Bank,
reviews management
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organization and development, reviews significant employee benefit programs and
establishes and administers executive compensation programs. The members of the
Compensation Committee are William Lee Early, Albert Louis Evans, Jr. and Donald
F. Stevens.
SITE SELECTION COMMITTEE. The Site Selection Committee decided on a
location for Cherokee Bank's main office and will review and decide on locations
for any future branches. The members of the Site Selection Committee are Wanda
P. Roach and Edwin I. Swords, III, with A. R. (Rick) Roberts, III and Dennis W.
Burnette as unofficial members.
The Board of Directors of Cherokee Bank expects to establish the following
additional committees: Audit and Compliance Committee, Loan Committee, and
Asset and Liability Management Committee.
EXECUTIVE COMPENSATION
1998 COMPENSATION
The following table shows information for 1998 with regard to compensation
for services rendered in all capacities to Cherokee Banking Company and Cherokee
Bank by its Chief Executive Officer. No executive officer earned more than
$100,000 in salary and bonus in 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------------
Name and Other Annual
Principal Position Year Salary ($) Bonus ($) Compensation ($)
- --------------------- ---- ----------- --------- ----------------
<S> <C> <C> <C> <C>
Dennis W. Burnette 1998 -0- -0- -0-
President and Chief
Executive Officer
</TABLE>
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EMPLOYMENT AGREEMENT
Effective January 1, 1999, we entered into an employment agreement with
Dennis W. Burnette that provides that he will serve as President and Chief
Executive Officer of Cherokee Banking Company and Cherokee Bank. Under the
terms of the employment agreement, Cherokee Bank will pay Mr. Burnette a salary
of $90,000 per year until Cherokee Bank opens for business and $120,000 per year
thereafter during the term of the agreement. Beginning with the year 2000 and
for each calendar year thereafter during the term of the agreement, Cherokee
Bank will pay Mr. Burnette a cash bonus based on pre-established performance
standards determined by the Board of Directors of Cherokee Bank. Cherokee
Banking Company will grant Mr. Burnette a nonqualified stock option to purchase
30,000 shares of common stock. The option will become exercisable in annual
increments of 6,000 shares each, beginning on January 1, 1999 and will have an
exercise price of $10.00 per share. When Cherokee Bank opens for business,
Cherokee Bank will provide Mr. Burnette with a $600 per month automobile
allowance. Prior to that time, Cherokee Banking Company will reimburse Mr.
Burnette for business mileage at the IRS-approved rate.
The initial term of Mr. Burnette's employment begins on January 1, 1999 and
will continue for a period of three years. At the end of the initial term and
at the end of each succeeding 12-month term, the agreement will automatically
extend for an additional 12-month period unless Cherokee Bank or Mr. Burnette
elects not to extend it. If Mr. Burnette dies or Cherokee Bank abandons its
organizational efforts, neither Cherokee Banking Company nor Cherokee Bank will
have any further obligations under the agreement. Mr. Burnette's employment may
be terminated (1) by Cherokee Bank for cause, as defined in the agreement; (2)
by Mr. Burnette if Cherokee Bank breaches any material provision of the
agreement or if it materially lessens Mr. Burnette's powers, responsibilities or
duties; or (3) upon Mr. Burnette's death or disability. If Cherokee Bank
terminates Mr. Burnette's employment without cause or elects not to extend the
term of the agreement, or if Mr. Burnette terminates his employment with cause,
Cherokee Bank will be required to pay Mr. Burnette's base salary for a period of
12 months. During the term of the agreement and for 12 months following its
termination, Mr. Burnette is prohibited from soliciting Cherokee Bank's
customers or employees. In addition, during the term of the agreement and for
12 months following its termination, if the agreement is not terminated by
Cherokee Bank for cause, and not terminated by Mr. Burnette because of a change
in control, as defined in the agreement, Mr. Burnette is prohibited from
competing with Cherokee Bank in Cherokee County.
DIRECTOR COMPENSATION
Cherokee Banking Company and Cherokee Bank will not separately compensate
their directors for their service as directors until Cherokee Banking Company
has recovered all of its losses. Thereafter, Cherokee Banking Company and
Cherokee Bank will adopt compensatory policies for their directors that conform
to applicable law.
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ORGANIZERS' WARRANTS
The organizers intend to purchase a total of 152,000 shares of common stock
in the offering at a price of $10.00 per share. This represents 23% of the
minimum and 15% of the maximum number of shares to be sold in this offering. In
addition, in recognition of the efforts made and financial risks undertaken by
the organizers in organizing Cherokee Banking Company and Cherokee Bank,
Cherokee Banking Company will issue to the organizers warrants to purchase
additional shares of common stock. The organizers will be issued warrants at a
rate of one warrant for each share of common stock purchased in the offering.
As a result, Cherokee Banking Company currently expects to issue 152,000
warrants to the organizers but may issue more warrants if the organizers
purchase more shares of common stock in this offering. The warrants will become
exercisable in equal annual increments of 33-1/3% each, beginning on the first
anniversary of the closing of this offering. Exercisable warrants will remain
exercisable for the ten-year period following the closing of this offering or
for 90 days after a warrant holder ceases to be a director, whichever is
shorter. Each warrant will be exercisable at $10.00 per share.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Cherokee Banking Company and Cherokee Bank will have banking and other
business transactions in the ordinary course of business with their directors
and officers, including members of the directors' and officers' families or
corporations, partnerships or other organizations in which their directors and
officers have a controlling interest. If these transactions occur, each
transaction: (1) 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 Cherokee Bank, (2) will be on terms no less favorable
than could be obtained from an unrelated party, and (3) will be approved by a
majority of the directors, including a majority of the directors who do not have
an interest in the transaction.
DESCRIPTION OF CAPITAL STOCK OF CHEROKEE BANKING COMPANY
COMMON STOCK
Cherokee Banking Company's Articles of Incorporation authorize it to issue
up to 10,000,000 shares of common stock, no par value, of which a minimum of
650,000 and a maximum of 1,000,000 shares will be issued in this offering.
Cherokee Banking Company has reserved an additional 30,000 shares of common
stock to be issued upon the exercise of the stock option granted to Dennis W.
Burnette, and an additional 152,000 shares of common stock to be issued upon the
exercise of the warrants to be granted to the organizers. Cherokee Banking
Company will reserve additional shares for issuance on exercise of warrants if
the organizers become entitled to more warrants because they purchase more
shares of common stock in this offering.
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All shares of common stock will be entitled to share equally in dividends
from legally available funds, when, as and if declared by Cherokee Banking
Company's Board of Directors. Upon Cherokee Banking Company's voluntary or
involuntary liquidation or dissolution, all shares of common stock will be
entitled to share equally in all of Cherokee Banking Company's assets available
for distribution to the shareholders. We do not anticipate that Cherokee
Banking Company will pay any cash dividends on the common stock in the near
future. 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 right to acquire authorized but unissued capital stock of Cherokee
Banking Company whenever it issues new shares of capital stock. No cumulative
voting, redemption, sinking fund or conversion rights or provisions apply to the
common stock. All shares of the common stock issued in the offering will be
fully paid and non-assessable.
PREFERRED STOCK
Cherokee Banking Company's Articles of Incorporation authorize its Board of
Directors to issue 2,000,000 shares of preferred stock, no par value. The Board
of Directors may determine the terms of the preferred stock. Preferred stock
may have voting rights, subject to applicable law and a determination by the
Board of Directors. Cherokee Banking Company has not issued any preferred stock
and will not issue any preferred stock to the organizers except on the same
terms as it may be offered to all other existing shareholders or to new
shareholders. Although Cherokee Banking Company has no present plans to issue
any preferred stock, the ownership and control of Cherokee Banking Company by
the holders of the common stock would be diluted if Cherokee Banking Company
were to issue preferred stock that had voting rights.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION AND BYLAWS
PROTECTIVE PROVISIONS
GENERAL. Shareholders' rights and related matters are governed by the
Georgia Business Corporation Code and Cherokee Banking Company's Articles of
Incorporation and Bylaws. All references in this prospectus to Cherokee Banking
Company's "Articles of Incorporation" mean its Amended and Restated Articles of
Incorporation as filed with the Georgia Secretary of State on January 6, 1999.
Cherokee Banking Company's Articles of Incorporation and Bylaws contain certain
protective provisions that would have the effect of impeding an attempt to
change or remove Cherokee Banking Company's management or to gain control of
Cherokee Banking Company in a transaction not supported by its Board of
Directors. These provisions are discussed in more detail below. In general,
one purpose of these provisions is to assist Cherokee Banking Company's Board of
Directors in playing a role in connection with attempts to acquire control of
Cherokee Banking Company. They allow the Board of Directors to further and
protect Cherokee Banking Company's interests and those of its shareholders as
appropriate under the circumstances, including if the Board of Directors
determines that a sale of control is in the best interests of
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Cherokee Banking Company and its shareholders, by enhancing the Board's ability
to maximize the value to be received by the shareholders upon a sale.
Although Cherokee Banking Company's management believes the protective
provisions are beneficial to shareholders of Cherokee Banking Company, they also
may tend to discourage some takeover bids. As a result, Cherokee Banking
Company's shareholders may be deprived of opportunities to sell some or all of
their shares at prices that represent premiums over prevailing market prices.
On the other hand, defeating undesirable acquisition offers can be a very
expensive and time-consuming process. To the extent that the protective
provisions discourage undesirable proposals, Cherokee Banking Company may be
able to avoid those expenditures of time and money.
The protective provisions also may discourage open market purchases by a
potential acquirer. These purchases could increase the market price of the
common stock temporarily, enabling shareholders to sell their shares at a price
higher than that which otherwise would prevail. In addition, the protective
provisions may decrease the market price of the common stock by making the stock
less attractive to persons who invest in securities in anticipation of price
increases from potential acquisition attempts. The provisions also may make it
more difficult and time consuming for a potential acquirer to obtain control of
Cherokee Banking Company through replacing its Board of Directors and
management. Furthermore, the provisions may make it more difficult for
shareholders of Cherokee Banking Company to replace the Board of Directors or
management, even if a majority of the shareholders believes that replacing them
would be in Cherokee Banking Company's best interests. As a result, the
protective provisions may tend to keep the incumbent Board of Directors and
management in place.
The Articles of Incorporation of Cherokee Banking Company also contain a
provision which eliminates the potential personal liability of directors for
monetary damages. In addition, the Bylaws of Cherokee Banking Company contain
certain provisions which provide indemnification for directors of Cherokee
Banking Company. The Protective Provisions and the provisions relating to
elimination of liability and indemnification of directors are discussed more
fully below.
PREFERRED STOCK. The existence of preferred stock could impede the takeover
of Cherokee Banking Company without the approval of its Board of Directors.
Cherokee Banking Company's Board of Directors could issue shares of preferred
stock to persons friendly to current management, which could render more
difficult or discourage any attempt to gain control of Cherokee Banking Company
through a proxy contest, tender offer, merger or otherwise. In addition, the
issuance of shares of preferred stock with voting rights may adversely affect
the rights of the holders of common stock and, in certain circumstances, could
decrease the market price of the common stock.
STAGGERED TERMS FOR BOARD OF DIRECTORS. Article 7 of the Articles of
Incorporation provides that the Board of Directors of Cherokee Banking Company
will be divided into three classes and that the directors in each class will
serve for staggered terms, which means that one-third of the directors will be
elected each year at Cherokee Banking Company's annual meeting of shareholders.
The initial term of the Class I directors expires in 2000, the initial term of
the Class II directors expires in 2001, and the initial term of the Class III
directors expires in 2002. Thereafter, each director will serve for a term of
three years. This means that unless the existing
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directors were to resign, it would take at least two annual meetings of Cherokee
Banking Company's shareholders to replace a majority of its directors.
Under Georgia law, directors are elected annually for a term of one year
unless the articles of incorporation provide otherwise.
CHANGE IN NUMBER OF DIRECTORS. Article 8 of Cherokee Banking Company's
Articles of Incorporation provides that any change in the number of directors,
as contained 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 by
the shareholders or the directors, unless the articles of incorporation provide
otherwise or unless the number of directors is otherwise fixed by the articles
of incorporation.
REMOVAL OF DIRECTORS. Article 9 of Cherokee Banking Company's Articles of
Incorporation of provides that one or more directors of may be removed for cause
during their terms only by the affirmative vote of the holders of a majority of
the issued and outstanding shares of common stock entitled to vote in an
election of directors. Article 9 also provides that directors of Cherokee
Banking Company may be removed during their terms without cause only by the
affirmative vote of the holders of 2/3 of the issued and outstanding shares of
Cherokee Banking Company entitled to vote in an election of directors.
Under Georgia law, one or more directors of a corporation may be removed
with or without cause by the affirmative vote of a majority of the shares
present and entitled to vote at a meeting at which a quorum is present, unless
the articles of incorporation or a bylaw adopted by the shareholders provides
otherwise.
SUPERMAJORITY VOTING ON CERTAIN TRANSACTIONS. Under Article 13 of Cherokee
Banking Company's Articles of Incorporation, with certain exceptions, any merger
or consolidation involving Cherokee Banking Company or any sale or other
disposition of all or substantially all of its assets will require the
affirmative vote of a majority of Cherokee Banking Company's directors and the
affirmative vote of the holders of at least 2/3 of its outstanding shares of
common stock. However, if Cherokee Banking Company's Board of Directors 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 on the transaction.
EVALUATION OF AN ACQUISITION PROPOSAL. Article 14 of Cherokee Banking
Company's Articles of Incorporation provides the factors that the Board of
Directors must consider in evaluating whether any acquisition proposal made by
another party is in the best interests of Cherokee Banking Company and its
shareholders. The term "acquisition proposal" refers to any offer of another
party (1) to make a tender offer or exchange offer for the common stock or any
other equity security of Cherokee Banking Company, (2) to merge or consolidate
Cherokee
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Banking Company with another corporation, or (3) to purchase or otherwise
acquire all or substantially all of the properties and assets owned by Cherokee
Banking Company.
Article 14 charges the Board, in evaluating an acquisition proposal, to
consider all relevant factors, including (1) the expected social and economic
effects of the transaction on the employees, customers, shareholders, and other
constituents, such as suppliers of goods and services to Cherokee Banking
Company and Cherokee Bank, (2) the expected social and economic effects on the
communities within which Cherokee Banking Company and Cherokee Bank operate, and
(3) the payment being offered by the other corporation in relation to the
current value of Cherokee Banking Company as determined in a freely negotiated
transaction and to the Board of Directors' estimate of Cherokee Banking
Company's future value as an independent company at the time of the proposal.
The Board may also consider other relevant factors.
This Article has been included in Cherokee Banking Company's Articles of
Incorporation because Cherokee Bank is charged with providing support to and
being involved with the communities it serves. As a result, the Board believes
its obligations in evaluating an acquisition proposal extend beyond evaluating
merely the payment being offered in relation to the market or book value of the
common stock at the time of the proposal. Georgia law does not specifically
list 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 payment being offered to shareholders in exchange for
their stock 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 payment
being offered in relation to the current value of Cherokee Banking Company
determined in a freely negotiated transaction and in relation to the Board's
estimate of the future value of Cherokee Banking Company as an independent
concern at the time of the proposal. 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 payment offered in such a situation, even though it may exceed
the value at which shares are then trading, is less than the payment that 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
that would reflect not only Cherokee Banking Company's current value, but also
its future value.
One effect of this Article may be to discourage a tender offer in advance.
Often an offeror consults the Board of a target corporation before or after
beginning 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 that might attempt to acquire Cherokee Banking
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 Cherokee Banking Company in costly
litigation.
Article 14 of the Articles of Incorporation would not make an acquisition
proposal regarded by the Board as being in Cherokee Banking Company's best
interests more difficult to accomplish. It would, however, permit the Board to
determine that an acquisition proposal was not in Cherokee
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Banking Company's best interests, and thus to oppose it, on the basis of the
various factors that the Board deems relevant. In some cases, opposition by the
Board might have the effect of maintaining the incumbent management.
INDEMNIFICATION
Cherokee Banking Company's Bylaws contain certain indemnification
provisions which provide that directors, officers, employees or agents of
Cherokee Banking Company (collectively, the "insiders") will be indemnified
against expenses that they actually and reasonably incur if they are successful
on the merits of a claim or proceeding.
When a case or dispute is settled or otherwise not determined on its
merits, the indemnification provisions provide that Cherokee Banking Company
will indemnify insiders when they meet the applicable standard of conduct. The
applicable standard of conduct is met if the insider acted in a manner he or she
in good faith believed to be in or not opposed to the best interests of Cherokee
Banking Company and, in case of a criminal action or proceeding, if the insider
had no reasonable cause to believe his or her conduct was unlawful. Cherokee
Banking Company's Board of Directors, its shareholders, or independent legal
counsel determines whether the insider has met the applicable standard of
conduct in each specific case.
Cherokee Banking Company's Bylaws also provide that the indemnification
rights contained in the Bylaws do not exclude other indemnification rights to
which an insider 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. Cherokee Banking Company
can also provide for greater indemnification than is provided in the Bylaws if
it chooses to do so, subject to approval by its shareholders. Cherokee Banking
Company may not, however, indemnify an insider for liability arising out of
circumstances that would cause the insider to remain liable for his or her
actions as described under "--Limitation of Liability" below.
The indemnification provisions of the Bylaws specifically provide that
Cherokee Banking Company may purchase and maintain insurance on behalf of any
director against any liability asserted against and incurred by him or her in
his or her capacity as a director, whether or not Cherokee Banking Company would
have had the power to indemnify against the liability.
Cherokee Banking Company is not aware of any pending or threatened action,
suit or proceeding involving any of its insiders for which indemnification from
Cherokee Banking Company may be sought.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as currently in effect, may be permitted to directors, officers and
controlling persons of Cherokee Banking Company as a result of the foregoing
provisions, or otherwise, Cherokee Banking Company 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 Cherokee Banking Company of expenses incurred or paid by a
director, officer or controlling person of Cherokee Banking Company in the
successful defense of any action, suit or proceeding
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is asserted by such director, officer or controlling person in connection with
the securities being registered, Cherokee Banking 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 Act and will
be governed by the final adjudication of such issue.
LIMITATION OF LIABILITY
Article 11 of Cherokee Banking Company's Articles of Incorporation
eliminates, with certain exceptions, the potential personal liability of a
director for monetary damages to Cherokee Banking Company and to its
shareholders for breach of a duty as a director. There is no elimination of
liability for (1) a breach of duty involving appropriation of a business
opportunity of Cherokee Banking Company, (2) an act or omission not in good
faith or involving intentional misconduct or a knowing violation of law, (3) a
transaction from which the director derives an improper material tangible
personal benefit, or (4) as to any payment of a dividend or approval of a stock
repurchase that is illegal under the Georgia Business Corporation Code. Article
11 does not eliminate or limit the right of Cherokee Banking Company or its
shareholders to seek injunctive or other equitable relief not involving monetary
damages.
The Georgia Business Corporation Code allows Georgia corporations to
include in their articles of incorporation a provision eliminating or limiting
the liability of directors, except in the circumstances described above. As a
result, to encourage qualified individuals to serve and remain as directors of
Cherokee Banking Company, Cherokee Banking Company included Article 11 in its
Articles of Incorporation. While Cherokee Banking Company has not experienced
any problems in locating directors, it could experience difficulty in the future
as its business activities increase and diversify. Cherokee Banking Company also
adopted Article 11 to enhance its ability to secure liability insurance for its
directors at a reasonable cost. Cherokee Banking Company intends to obtain
liability insurance covering actions taken by its directors in their capacities
as directors. The Board of Directors believes that Article 11 will enable
Cherokee Banking Company to secure such insurance on terms more favorable than
if it were not included in the Articles of Incorporation.
AMENDMENTS
Any amendment of Articles 7, 9, 11, 13 and 14 of Cherokee Banking 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.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, Cherokee Banking Company will have a
minimum of 650,000 and a maximum of 1,000,000 shares of common stock
outstanding. These shares will be freely tradable without restriction, except
that "affiliates" of Cherokee Banking Company
48
<PAGE>
must comply with the resale limitations of Rule 144 issued under the Securities
Act of 1933, as currently in effect.
Rule 144 defines an affiliate of a company as a person who directly or
indirectly controls, or is controlled by, or is under common control with, the
company. Affiliates of a company generally include its directors, officers and
principal shareholders.
Each of Cherokee Banking Company's affiliates who purchases common stock in
this offering may sell, within any three-month period, a number of shares of
common stock that does not exceed the greater of (1) 1% of the outstanding
shares of common stock or (2) Cherokee Banking Company's average weekly trading
volume during the four calendar weeks preceding the affiliate's proposed sale.
Sales by affiliates under Rule 144 are also subject to certain manner of sale
provisions, notice requirements and the availability of current public
information about Cherokee Banking Company.
Prior to the offering, there has not been a public market for the common
stock, and we cannot predict the effect, if any, that the sale of shares or the
availability of shares for sale will have on the market price prevailing from
time to time. Nevertheless, sales of substantial amounts of common stock on the
public market could adversely affect prevailing market prices and the ability of
Cherokee Banking Company to raise equity capital in the future.
SUPERVISION AND REGULATION
The following discussion sets forth the material elements of the regulatory
framework that applies to banks and bank holding companies and provides certain
specific information related to Cherokee Banking Company.
GENERAL
Cherokee Banking Company will be a bank holding company registered with the
Board of Governors of the Federal Reserve System under the Bank Holding Company
Act of 1956, as currently in effect. As a result, Cherokee Banking Company and
any future non-bank subsidiaries it establishes will be subject to the
supervision, examination, and reporting requirements of the Bank Holding Company
Act and the regulations of the Federal Reserve.
The Bank Holding Company Act requires every bank holding company to obtain
the Federal Reserve's prior approval before: (1) it may acquire direct or
indirect ownership or control of any voting shares of any bank if, after the
acquisition, the bank holding company will directly or indirectly own or control
more than 5% of the bank's voting shares; (2) it or any of its non-bank
subsidiaries may acquire all or substantially all of the assets of any bank; or
(3) it may merge or consolidate with any other bank holding company.
The Bank Holding Company Act further provides that the Federal Reserve may
not approve any transaction that would result in or tend to create a monopoly,
substantially lessen competition or otherwise function as a restraint of trade,
unless the anticompetitive effects of the
49
<PAGE>
proposed transaction are clearly outweighed by the public interest in meeting
the convenience and needs of the community to be served. The Federal Reserve is
also required to consider the financial and managerial resources and future
prospects of the bank holding companies and banks concerned and the convenience
and needs of the community to be served. The Federal Reserve's consideration of
financial resources generally focuses on capital adequacy, which is discussed
below.
Cherokee Banking Company and any other bank holding company located in
Georgia may acquire a bank located in any other state, and any bank holding
company located outside of Georgia may acquire any Georgia-based bank,
regardless of state law to the contrary. In either case, certain deposit-
percentage, aging requirements, and other restrictions apply. National and
state-chartered banks may branch across state lines by acquiring banks in other
states. By adopting legislation prior to June 1, 1997, a state could elect
either to "opt in" and accelerate the date after which interstate branching
would be permissible or "opt out" and prohibit interstate branching altogether.
The Georgia Interstate Banking Act provides that interstate acquisitions by or
of institutions located in Georgia are permitted in states that also allow
national interstate acquisitions. The Georgia Interstate Branching Act permits
Georgia-based banks and bank holding companies owning or acquiring banks outside
of Georgia and all non-Georgia banks and bank holding companies owning or
acquiring banks in Georgia to merge any lawfully acquired bank into an
interstate branch network. The Georgia Interstate Branching Act also allows
banks to establish new branches throughout Georgia.
The Bank Holding Company Act generally prohibits Cherokee Banking Company
from engaging in activities other than banking or managing or controlling banks
or other permissible subsidiaries and from acquiring or keeping direct or
indirect control of any company engaged in any activities other than those
activities that the Federal Reserve determines that to be closely related to
banking or managing or controlling banks. In determining whether a particular
activity is permissible, the Federal Reserve must consider whether the activity
reasonably can be expected to produce benefits to the public, such as greater
convenience, increased competition, or gains in efficiency, that outweigh
possible adverse effects, such as undue concentration of resources, decreased or
unfair competition, conflicts of interest, or unsound banking practices. For
example, the Federal Reserve has determined that factoring accounts receivable,
acquiring or servicing loans, leasing personal property, conducting discount
securities brokerage activities, performing certain data processing services,
acting as agent or broker in selling credit life insurance and certain other
types of insurance in connection with credit transactions, and performing
certain insurance underwriting activities are permissible activities of bank
holding companies. The Bank Holding Company Act does not place territorial
limitations on permissible non-banking activities of bank holding companies.
Despite prior approval, the Federal Reserve may order a holding company or its
subsidiaries to terminate any activity or ownership or control of any subsidiary
when it has reasonable cause to believe that the holding company's continued
activity, ownership or control constitutes a serious risk to the financial
safety, soundness, or stability of any bank subsidiaries.
Cherokee Bank's deposits will be insured by the FDIC to the maximum extent
provided by law. Cherokee Bank will also be subject to numerous state and
federal statutes and regulations
50
<PAGE>
that will affect its business, activities and operations, and it will be
supervised and examined by one or more state or federal bank regulatory
agencies.
The Office of the Comptroller of the Currency will regularly examine the
operations of Cherokee Bank and has the authority to approve or disapprove
mergers, the establishment of branches, and similar corporate actions. The
Office of the Comptroller of the Currency also has the power to prevent the
continuance or development of unsafe or unsound banking practices or other
violations of law.
PAYMENT OF DIVIDENDS
Cherokee Banking Company is a legal entity separate and distinct from
Cherokee Bank. The principal sources of Cherokee Banking Company's cash flow,
including cash flow to pay dividends to its shareholders, are dividends that
Cherokee Bank pays to its sole shareholder, Cherokee Banking Company. Statutory
and regulatory limitations apply to Cherokee Bank's payment of dividends to
Cherokee Banking Company as well as to Cherokee Banking Company's payment of
dividends to its shareholders.
If, in the opinion of the Office of the Comptroller of the Currency,
Cherokee Bank were engaged in or about to engage in an unsafe or unsound
practice, such authority could require, after notice and a hearing, that
Cherokee Bank cease and desist from its practice. The federal banking agencies
have indicated that paying dividends that deplete a depository institution's
capital base to an inadequate level would be an unsafe and unsound banking
practice. Under the Federal Deposit Insurance Corporation Improvement Act of
1991, a depository institution may not pay any dividend if payment would cause
it to become undercapitalized or if it already is already undercapitalized.
Moreover, the federal agencies have issued policy statements that provide that
bank holding companies and insured banks should generally only pay dividends out
of current operating earnings. See "--Prompt Corrective Action" below.
The payment of dividends by Cherokee Banking Company and Cherokee Bank may
also be affected or limited by other factors, such as the requirement to
maintain adequate capital above regulatory guidelines.
CAPITAL ADEQUACY
Cherokee Banking Company and Cherokee Bank will be required to comply with
the capital adequacy standards established by the Federal Reserve in the case of
Cherokee Banking Company and the Office of the Comptroller of the Currency in
the case of Bank. The Federal Reserve has established two basic measures of
capital adequacy for bank holding companies -- a risk-based measure and a
leverage measure. A bank holding company must satisfy all applicable capital
standards to be considered in compliance.
The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profiles among banks and bank
holding companies, to account for off-balance-sheet exposure, and to minimize
disincentives for holding liquid assets. Assets and off-balance-sheet items are
assigned to broad risk categories, each with appropriate
51
<PAGE>
weights. The resulting capital ratios represent capital as a percentage of total
risk-weighted assets and off-balance-sheet items.
The minimum guideline for the ratio of total capital to risk-weighted
assets is 8%. At least half of total capital must comprise common stock,
minority interests in the equity accounts of consolidated subsidiaries,
noncumulative perpetual preferred stock, and a limited amount of cumulative
perpetual preferred stock, less goodwill and certain other intangible assets
("Tier 1 Capital"). The remainder may consist of subordinated debt, other
preferred stock, and a limited amount of loan loss reserves ("Tier 2 Capital").
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 Capital to average assets, less goodwill and certain other
intangible assets, of 3% for bank holding companies that meet certain specified
criteria including having the highest regulatory rating. All other bank holding
companies generally are required to maintain a leverage ratio of at least 3%,
plus an additional cushion of 100 to 200 basis points. The guidelines also
provide that bank holding companies experiencing internal growth, as will be the
case for Cherokee Banking Company, or making acquisitions will be expected to
maintain strong capital positions substantially above the minimum supervisory
levels without significant reliance on intangible assets. Furthermore, the
Federal Reserve has indicated that it will consider a bank holding company's
Tier 1 Capital leverage ratio, after deducting all intangibles, and other
indicators of capital strength in evaluating proposals for expansion or new
activities.
Cherokee Bank will be subject to risk-based and leverage capital
requirements adopted by the Office of the Comptroller of the Currency, which are
substantially similar to those adopted by the Federal Reserve for bank holding
companies.
Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including the issuance of a capital directive, the
termination of deposit insurance by the FDIC, a prohibition on the taking of
brokered deposits, and certain other restrictions on its business. As described
below, substantial additional restrictions can be imposed on FDIC-insured
depository institutions that fail to meet applicable capital requirements. See
"--Prompt Corrective Action."
SUPPORT OF SUBSIDIARY INSTITUTIONS
Under Federal Reserve policy, Cherokee Banking Company is expected to act
as a source of financial strength for, and to commit resources to support,
Cherokee Bank. This support may be required at times when, without this Federal
Reserve policy, Cherokee Banking Company might not be inclined to provide it.
In addition, any capital loans by a bank holding company to its subsidiary bank
will be repaid only after its deposits and certain other indebtedness are repaid
in full. In the event of a bank holding company's bankruptcy, any commitment by
the bank holding company to a federal bank regulatory agency to maintain the
capital of a banking subsidiary will be assumed by the bankruptcy trustee and
entitled to a priority of payment.
52
<PAGE>
PROMPT CORRECTIVE ACTION
The Federal Deposit Insurance Corporation Improvement Act of 1991
established a system of prompt corrective action to resolve the problems of
undercapitalized institutions. Under this system, the federal banking
regulators have established five capital categories (well capitalized,
adequately capitalized, undercapitalized, significantly undercapitalized and
critically undercapitalized), and are required to take certain mandatory
supervisory actions, and are authorized to take other discretionary actions,
relating to institutions in the three undercapitalized categories. The severity
of the action will depend upon the capital category in which the institution is
placed. Generally, subject to a narrow exception, the banking regulator must
appoint a receiver or conservator for an institution that is critically
undercapitalized. The federal banking agencies have specified by regulation the
relevant capital level for each category.
An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency.
A bank holding company must guarantee that a subsidiary depository institution
meets its capital restoration plan, subject to certain limitations. The
controlling holding company' obligation to fund a capital restoration plan is
limited to the lesser of 5% of an undercapitalized subsidiary's assets or the
amount required to meet regulatory capital requirements. An undercapitalized
institution is also generally prohibited from increasing its average total
assets, making acquisitions, establishing any branches, or engaging in any new
line of business, except under an accepted capital restoration plan or with FDIC
approval. In addition, the appropriate federal banking agency may treat an
undercapitalized institution in the same manner as it treats a significantly
undercapitalized institution, if it determines that those actions are necessary.
FDIC INSURANCE ASSESSMENTS
The FDIC has adopted a risk-based assessment system for insured depository
institutions that takes into account the risks attributable to different
categories and concentrations of assets and liabilities. The system assigns an
institution to one of three capital categories: (1) well capitalized; (2)
adequately capitalized; and (3) undercapitalized. These three categories are
substantially similar to the prompt corrective action categories described
above, with the "undercapitalized" category including institutions that are
undercapitalized, significantly undercapitalized, and critically
undercapitalized for prompt corrective action purposes. The FDIC also assigns
an institution to one of three supervisory subgroups within each capital group.
The supervisory subgroup to which an institution is assigned is based on a
supervisory evaluation that the institution's primary federal regulator provides
to the FDIC and information that the FDIC determines to be relevant to the
institution's financial condition and the risk posed to the deposit insurance
funds. The FDIC determines an institution's insurance assessment rate based on
the institution's capital category and supervisory category. Under the risk-
based assessment system, there are nine combinations of capital groups and
supervisory subgroups to which different assessment rates are applied.
Assessments range from 0 to 27 cents per $100 of deposits, depending on the
institution's capital group and supervisory subgroup.
53
<PAGE>
Effective January 1, 1997, the FDIC imposed assessments to help repay the
$780 million in annual interest payments on the $8 billion of Financing
Corporation bonds issued in the late 1980s as part of the government rescue of
the thrift industry. The FDIC will assess banks at a rate of 1.3 cents per $100
of deposits until December 31, 1999. Thereafter, it will add approximately 2.4
cents per $100 of deposits to each assessment.
The FDIC may terminate an institution's deposit insurance if it finds that
the institution has engaged in unsafe and unsound practices, is in an unsafe or
unsound condition to continue operations, or has violated any applicable law,
regulation, rule, order or condition imposed by the FDIC.
PROPOSED LEGISLATION AND REGULATORY ACTION
New regulations and statutes are regularly proposed that contain wide-
ranging proposals for altering the structures, regulations and competitive
relationships of the nation's financial institutions. We cannot predict whether
or in what form any proposed regulation or statute will be adopted or the extent
to which our business may be affected by any new regulation or statute.
LEGAL MATTERS
Powell, Goldstein, Frazer and Murphy LLP, Atlanta, Georgia, will pass upon
the validity of the shares of common stock offered by this prospectus.
EXPERTS
Cherokee Banking Company's audited financial statements at December 31,
1998, and for the period from October 9, 1998 (inception) until December 31,
1998, included in this prospectus have been included in reliance on the report
of Porter Keadle Moore, LLP, independent certified public accountants, given on
the authority of that firm as experts in accounting and auditing.
REPORTS TO SHAREHOLDERS
Upon the effective date of the Registration Statement on Form SB-2 that
registers the shares of common stock offered by this prospectus with the
Securities and Exchange Commission, Cherokee Banking Company will be subject to
the reporting requirements of the Securities Exchange Act of 1934, as currently
in effect, which include requirements to file annual reports on Form 10-KSB and
quarterly reports on Form 10-QSB with the Securities and Exchange Commission.
This reporting obligation will exist for at least one year and will continue for
fiscal years thereafter, except that these reporting obligations may be
suspended for any subsequent fiscal year if at the beginning of the year the
common stock is held of record by less than 300 persons.
54
<PAGE>
At any time that Cherokee Banking Company is not a reporting company, it
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. Cherokee Banking Company's fiscal year ends on December 31.
Additionally, Cherokee Banking Company will also furnish such other reports as
it may determine to be appropriate or as otherwise may be required by law.
ADDITIONAL INFORMATION
Cherokee Banking Company has filed with the Securities and Exchange
Commission a Registration Statement on Form SB-2 under the Securities Act of
1933, as currently in effect, relating to the shares of common stock offered by
this prospectus. This prospectus does not contain all of the information
contained in the Registration Statement. For further information about Cherokee
Banking Company and the common stock, we refer you to the Registration Statement
and its exhibits. The Registration Statement may be examined and copied at the
public reference facilities maintained by the Securities and Exchange Commission
at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549
and at the regional offices of the Securities and Exchange Commission located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511 and Seven World Trade Center, 13th Floor, New York, New York 10048. Copies
of the Registration Statement are available at prescribed rates from the Public
Reference Section of the Securities and Exchange Commission, Room 1024, 450
Fifth Street, N.W., Judiciary Plaza, Washington, DC 20549. The Securities and
Exchange Commission also maintains a Web site (http://www.sec.gov) that contains
registration statements, reports, proxy and information statements and other
information regarding registrants, such as Cherokee Banking Company, that file
electronically with the Securities and Exchange Commission.
Cherokee Banking Company and the organizers have filed or will file various
applications with the FDIC, the Federal Reserve, the Georgia Department of
Banking and Finance, and the Office of the Comptroller of the Currency. These
applications and the information they contain are not incorporated into this
prospectus. You should rely only on information contained in this prospectus
and in the related Registration Statement in making an investment decision. To
the extent that other available information not presented in this prospectus,
including information available from Cherokee Banking Company and information in
public files and records maintained by the FDIC, the Federal Reserve, the
Georgia Department of Banking and Finance, and the Office of the Comptroller of
the Currency, is inconsistent with information presented in this prospectus or
provides additional information, that 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 we
believe are reasonable, but as to which we can make no assurances. We
specifically disaffirm those projections for purposes of this prospectus and
caution you against relying on them for purposes of making an investment
decision.
55
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants F-2
Balance Sheet - December 31, 1998........................................ F-3
Statement of Operations for the Period from Inception (October 9, 1998)
to December 31, 1998................................................... F-4
Statement of Changes in Stockholders' Equity for the Period from
Inception (October 9, 1998) to December 31, 1998....................... F-5
Statement of Cash Flows for the Period from Inception (October 9, 1998)
to December 31, 1998................................................... F-6
Notes to Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Cherokee Banking Company
We have audited the accompanying balance sheet of Cherokee Banking Company (a
development stage corporation) as of December 31, 1998, and the related
statements of operations, changes in stockholder's deficit and cash flows for
the period from October 9, 1998 (inception) to December 31, 1998. 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 Cherokee Banking Company as of
December 31, 1998 and the results of its operations and its cash flows from
October 9, 1998 (inception) to December 31, 1998 in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that Cherokee
Banking Company will continue as a going concern. As discussed in note 1 to the
financial statements, the Company is in the organization stage and has not
commenced operations. Also, as discussed in note 3, the Company's future
operations are dependent on obtaining capital through an initial stock offering
and obtaining the necessary final regulatory approvals. These factors and the
expense associated with development of a new banking institution raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are described in note 3. The
financial statements do not include any adjustments relating to the
recoverability of reported asset amounts or the amount of liabilities that might
result from the outcome of this uncertainty.
/s/ Porter Keadle Moore, LLP
Atlanta, Georgia
January 6, 1999
F-2
<PAGE>
CHEROKEE BANKING COMPANY
(A DEVELOPMENT STAGE CORPORATION)
BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<S> <C>
Assets
------
Cash $ 9,596
Other assets 10,000
--------
$ 19,596
========
Liabilities and Stockholder's Deficit
-------------------------------------
Note payable - line of credit $ 60,000
--------
Current liabilities 60,000
--------
Stockholder's deficit:
Preferred stock, no par value, 2,000,000 shares authorized;
no shares issued or outstanding -
Common stock, no par value, 10,000,000 shares authorized;
10 shares issued and outstanding 10
Deficit accumulated during the development stage (40,414)
Total stockholder's deficit (40,404)
-------
$ 19,596
=======
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
CHEROKEE BANKING COMPANY
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM OCTOBER 9, 1998 (INCEPTION) TO DECEMBER 31, 1998
<TABLE>
<S> <C>
Expenses:
Regulatory fees $ 17,400
Legal and consulting 21,250
Other operating 1,764
-------
Net loss $ 40,414
=======
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
CHEROKEE BANKING COMPANY
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF CHANGES IN STOCKHOLDER'S DEFICIT
FOR THE PERIOD FROM OCTOBER 9, 1998 (INCEPTION) TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
Deficit
Accumulated
During the
Preferred Common Development
Stock Stock Stage Total
-----------------------------------------
<S> <C> <C> <C> <C>
Issuance of common stock
to organizer $ - 10 - 10
Net loss - - (40,414) (40,414)
----- ----- ------- -------
Balance, December 31, 1998 $ - 10 (40,414) (40,414)
===== ===== ======= =======
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
CHEROKEE BANKING COMPANY
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM OCTOBER 9, 1998 (INCEPTION) TO DECEMBER 31, 1998
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss $(40,414)
Adjustments to reconcile net loss to net cash used in
operating activities:
Increase in other assets (10,000)
--------
Net cash used in operating activities (50,414)
--------
Cash flows from financing activities:
Sale of organization shares of common stock 10
Proceeds from note payable 60,000
--------
Net cash provided by financing activities 60,010
--------
Net increase in cash 9,596
Cash at beginning of period --------
Cash at end of period $ 9,596
========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
CHEROKEE BANKING COMPANY
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION
------------
Cherokee Banking Company (the Company) was incorporated for the purpose of
becoming a bank holding company. The Company intends to acquire 100% of the
outstanding common stock of Cherokee Bank, N.A. (the Bank) (Proposed),
which will operate in the Cherokee County, Georgia area. The organizers of
the Bank filed a joint application to charter the Bank with the Office of
the Comptroller of Currency and the Federal Deposit Insurance Corporation
on December 14, 1998. Provided that the application is timely approved and
necessary capital is raised, it is expected that operations will commence
in the third quarter of 1999.
Operations through December 31, 1998 relate primarily to expenditures by
the organizers for incorporating and organizing the Company. Prior to
January 6, 1999, when the Company changed its name, the organizers had been
operating under the corporate name of Cherokee Organizing Group, Inc. All
expenditures by the organizers are considered expenditures of the Company.
The Company plans to raise between $6,500,000 and $10,000,000 through an
offering of its common stock at $10 per share, of which $6,000,000 will be
used to capitalize the Bank. The organizers and directors expect to
subscribe for a minimum of approximately $1,520,000 of the Company's stock.
In connection with the Company's formation and initial offering, warrants
will be issued to the organizing stockholders. The warrants allow each
holder to purchase one additional share of common stock for each share
purchased in connection with the initial offering and are exercisable on
each of the three succeeding anniversaries of the date of opening of the
Bank at the initial offering price of $10 per share. These warrants expire
ten years after the date of grant. The Company has also reserved 30,000
shares for the issuance of options under an employee incentive stock option
plan.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
ORGANIZATION COSTS
Costs incurred for the organization of the Company and the Bank (consisting
principally of legal, accounting, consulting and incorporation fees) are
being expensed as incurred.
DEFERRED OFFERING EXPENSES
Costs incurred in connection with the stock offering, consisting of direct,
incremental costs of the offering, are being deferred and will be offset
against the proceeds of the stock sale as a charge to additional paid in
capital.
PRE-OPENING EXPENSES
Costs incurred for overhead and other operating expenses are included in the
current period's operating results.
F-7
<PAGE>
CHEROKEE BANKING COMPANY
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
PRO FORMA NET LOSS PER COMMON SHARE
Pro forma net loss per common share is calculated by dividing net loss by
the minimum number (650,000) of common shares, which would be outstanding
should the offering be successful, as prescribed in Staff Accounting
Bulletin Topic 1:B. The pro forma net loss per share for the period ended
December 31, 1998 was $0.06 per share.
(3) LIQUIDITY AND GOING CONCERN CONSIDERATIONS
------------------------------------------
The Company incurred a net loss of $40,414 for the period from October 9,
1998 (inception) to December 31, 1998. At December 31, 1998, liabilities
exceeded assets by $40,404.
At December 31, 1998, the Company is funded by a line of credit from a
bank. Management believes that the current level of expenditures is well
within the financial capabilities of the organizers and adequate to meet
existing obligations and fund current operations, but obtaining final
regulatory approvals and commencing banking operations is dependent on
successfully completing the stock offering.
To provide permanent funding for its operation, the Company is currently
offering a minimum of 650,000 and a maximum of 1,000,000 shares of its no
par value common stock at $10 per share in an initial public offering.
Costs related to the organization and registration of the Company's common
stock will be paid from the gross proceeds of the offering. Shares issued
which are outstanding at December 31, 1998 will be redeemed concurrently
with the consummation of the offering. Should subscriptions for the minimum
offering not be obtained, amounts paid by the subscribers with their
subscriptions will be returned and the offer withdrawn.
(4) LINE OF CREDIT
--------------
Organization, offering and pre-opening costs incurred prior to the opening
for business will be funded under a $250,000 line of credit. The terms of
the existing line of credit, which is guaranteed by the organizers, include
a maturity of December 21, 1999 and interest, payable quarterly, calculated
at one percent below the prime interest rate.
(5) PREFERRED STOCK
---------------
Shares of preferred stock may be issued from time to time in one or more
series as established by resolution of the Board of Directors of the
Company. Each resolution shall include the number of shares issued,
preferences, special rights and limitations as determined by the Board.
(6) COMMITMENTS AND RELATED PARTY TRANSACTIONS
------------------------------------------
A contract for the land on which the main office will be constructed has
been entered into with a total purchase price of $450,000, of which $10,000
has been paid as earnest money.
The Company intends to enter into an employment agreement with its
President and Chief Executive Officer, providing for an initial term of
three years commencing January 1, 1999. The agreement provides for a base
salary, an incentive bonus based on the Company's performance, stock
options, and other perquisites commensurate with his employment
F-8
<PAGE>
CHEROKEE BANKING COMPANY
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(7) INCOME TAXES
------------
The following summarizes the sources and expected tax consequences of
future taxable deductions which comprise the net deferred taxes at December
31, 1998:
<TABLE>
<S> <C>
Deferred tax assets:
Pre-opening expenses $ 15,516
--------
Total gross deferred tax assets 15,516
Less valuation allowance (15,516)
--------
Net deferred taxes $ -
========
</TABLE>
The future tax consequences of the differences between the financial
reporting and tax basis of the Company's assets and liabilities resulted in
a net deferred tax asset. A valuation allowance was established for the net
deferred tax asset, as the realization of these deferred tax assets is
dependent on future taxable income.
F-9
<PAGE>
PRELIMINARY SUBSCRIPTION AGREEMENT EXHIBIT A
Cherokee Banking Company
P.O. Box 1314
Canton, GA 30114
Ladies and Gentlemen:
I hereby subscribe to purchase the number of shares of Cherokee Banking
Company's common stock indicated below.
I have received a copy of Cherokee Banking Company's preliminary
prospectus, dated February 1, 1999. I understand that my purchase of Cherokee
Banking Company's common stock involves significant risk, as described under
"Risk Factors" in the preliminary prospectus. I also understand that no federal
or state agency has made any finding or determination regarding the fairness of
Cherokee Banking Company's offering of common stock, the accuracy or adequacy of
the preliminary prospectus, or any recommendation or endorsement concerning an
investment in the common stock.
I am not sending the purchase price for the shares I wish to buy at this
time. After I receive the final prospectus, if I still wish to purchase shares,
I will send Cherokee Banking Company a check in the amount of $10.00 multiplied
by the number of shares I wish to buy. My check will be made payable to "The
Bankers Bank - Escrow Account for Cherokee Banking Company."
WHEN CHEROKEE BANKING COMPANY RECEIVES MY CHECK, THIS SUBSCRIPTION
AGREEMENT WILL BECOME FINAL AND BINDING AND WILL BE IRREVOCABLE UNTIL THE
OFFERING IS CLOSED.
Number of Shares
(minimum 100 shares): __________
Total Subscription Price
(at $10.00 per share): $ __________
-------------------------------------------
Please PRINT or TYPE exact name(s) in
----- -----
which the shares should be registered
(Over)
A-1
<PAGE>
SUBSTITUTE W-9
Under the penalties of perjury, I certify that: (1) 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 UNDERREPORTING INTEREST OR DIVIDENDS ON YOUR TAX
RETURN.
- -------------------------- ---------------------------
Date Signature(s)*
- --------------------------
Area Code and Telephone No.
--------------------------------------------------
Please indicate the form of ownership desired 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
* 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.
TO BE COMPLETED BY CHEROKEE BANKING COMPANY
Accepted as of ______________________, 1999, as to __________ shares.
CHEROKEE BANKING COMPANY
By:__________________
Signature
_____________________
Print Name
A-2
<PAGE>
- --------------------------------------------------------------------------------
Prospective investors may rely only on the information contained in this
prospectus. No one has authorized anyone to provide prospective investors with
information different from that contained in this prospectus. This prospectus is
not an offer to sell, nor is it seeking an offer to buy, these securities in any
jurisdiction where the offer or sale is not permitted. The information contained
in this prospectus is correct only as of the date of this prospectus, regardless
of the time of any delivery of this prospectus or any sale of these securities.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary.................................................................... 3
Risk Factors............................................................... 7
Cautionary Statement About
Forward-Looking Statements................................................ 13
The Offering............................................................... 14
Use of Proceeds............................................................ 16
Capitalization............................................................. 17
Dividends.................................................................. 19
Management's Discussion and
Analysis of Financial Condition and
Plan of Operations........................................................ 19
Proposed Business of Cherokee Banking
Company and Cherokee Bank................................................. 22
Management................................................................. 35
Executive Compensation..................................................... 40
Certain Relationships and Related
Transactions.............................................................. 42
Description of Capital Stock of
Cherokee Banking Company.................................................. 42
Certain Provisions of the Articles of
Incorporation and Bylaws.................................................. 43
Shares Eligible for Future Sale............................................ 48
Supervision and Regulation................................................. 49
Legal Matters.............................................................. 54
Experts.................................................................... 54
Reports to Shareholders.................................................... 54
Additional Information..................................................... 55
Index to Financial Statements.............................................. F-1
Preliminary Subscription Agreement......................................... A-1
</TABLE>
Until ___________, 1999 (40 days after the date of this prospectus), all dealers
that buy, sell or trade the common stock, whether or not participating in this
offering, may be required to deliver a prospectus.
CHEROKEE BANKING COMPANY
A PROPOSED BANK HOLDING COMPANY
FOR
[LOGO] CHEROKEE BANK, N.A.
(PROPOSED)
1,000,000
SHARES OF
COMMON STOCK
PROSPECTUS
_________, 1999
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Consistent with the applicable provisions of the laws of Georgia, the
Registrant's Bylaws provide that the Registrant shall have the power to
indemnify its directors and officers against expenses (including attorneys'
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 met the applicable
standard of conduct shall be made (1) by the Board of Directors of the
Registrant, (2) in certain circumstances, by independent legal counsel in a
written opinion or (3) by the affirmative vote of a majority of the shares
entitled to vote.
In addition, Article 11 of the Registrant's Articles of Incorporation,
subject to certain exceptions, eliminates the potential personal liability of a
director for monetary damages to the Registrant and to the shareholders of the
Registrant for breach of a duty as a director. There is no elimination of
liability for (1) a breach of duty involving appropriation of a business
opportunity of the Registrant, (2) an act or omission involving intentional
misconduct or a knowing violation of law, (3) a transaction from which the
director derives an improper material tangible personal benefit or (4) as to any
payment of a dividend or approval of a stock repurchase that is illegal under
the Georgia Business Corporation Code. The Articles of Incorporation do not
eliminate or limit the right of the Registrant or its shareholders to seek
injunctive or other equitable relief not involving monetary damages.
Item 25. Other Expenses of Issuance and Distribution.
Estimated expenses, other than underwriting discounts and commissions, of
the sale of the Registrant's common stock, no par value, are as follows:
Securities and Exchange Commission Registration Fee $ 2,780
Legal Fees and Expenses 25,000
Accounting Fees and Expenses 2,500
Printing and Engraving Expenses 3,000
Mail and Distribution*
Miscellaneous* _______
Total $
=========
*To be filed by amendment.
II-1
<PAGE>
Item 26. Recent Sales of Unregistered Securities.
On December 30, 1998, the Registrant issued to A. R. (Rick) Roberts, III,
in a private placement, ten shares of the Registrant's common stock, no par
value per share, for a total price of $10.00 in connection with the organization
of Cherokee Banking Company. The sale to Mr. Roberts was exempt from
registration under the Securities Act pursuant to Section 4(2) of the Act
because it was a transaction by an issuer that did not involve a public
offering.
Item 27. Exhibits.
Exhibit
Number Description
- ------ -----------
3.1 Amended and Restated Articles of Incorporation, filed January 6, 1999
3.2 Bylaws
4.1 See Exhibits 3.1 and 3.2 for provisions of the Articles of
Incorporation and Bylaws defining rights of holders of the common
stock
5.1 Legal Opinion of Powell, Goldstein, Frazer & Murphy LLP
10.1 Purchase and Sale Agreement (main office property), dated December 11,
1998
10.3 Employment Agreement, dated as of January 1, 1999, among Cherokee
Bank, N.A. (Proposed), Cherokee Banking Company, and Dennis W.
Burnette
10.5 Form of Cherokee Banking Company Organizers' Warrant Agreement
*10.6 Escrow Agreement, dated as of _______ __, 1999, among Cherokee Banking
Company and The Bankers Bank
21.1 List of Subsidiaries
23.1 Consent of Porter Keadle Moore, LLP
23.2 Consent of Powell, Goldstein, Frazer & Murphy LLP (contained in
Exhibit 5.1)
24.1 Power of Attorney (refer to page II-5)
27.1 Financial Data Schedule (for SEC use only)
99.1 Final Subscription Letter
99.2 Final Subscription Agreement
* To be filed by amendment.
II-2
<PAGE>
Item 28. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to foregoing provisions, 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 Securities 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 Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes as follows:
(a)(1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) 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. 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 maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume 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) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each post-
effective amendment as a new registration statement of the securities offered,
and the offering of the securities at that time to be the initial bona fide
offering.
(3) File a post-effective amendment to remove from registration any of
the securities being registered that remain unsold at the end of the offering.
The Registrant hereby undertakes as follows:
II-3
<PAGE>
(b)(1) For determining any liability under the Securities Act, to treat the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant under Rule 424(b)(1), or (4) or 497(h) under
the Securities Act as part of this Registration Statement as of the time the
Commission declared it effective.
(2) For determining any liability under the Securities Act, to treat
each post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the Registration Statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned in the city
of Canton, State of Georgia, on January 29, 1999.
CHEROKEE BANKING COMPANY
By: /s/ Dennis W. Burnette
-------------------------------
Dennis W. Burnette
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints jointly and severally, Dennis W. Burnette
and A. R. Roberts, III their respective attorneys-in-fact with the power of
substitution, for him or her in any and all capacities, to sign any and all
amendments to this Registration Statement (including post-effective amendments)
and any Registration Statement filed pursuant to Rule 462(b) of the Securities
Act of 1933, as amended, and to file the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons in
the capacities and on the dates stated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Dennis W. Burnette President, Chief Executive January 29, 1999
- ----------------------
Dennis W. Burnette Officer and Director
(principal executive officer)
/s/ William L. Early Director January 29, 1999
- --------------------
William L. Early
II-5
<PAGE>
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Albert L. Evans, Jr. Director January 29, 1999
- -----------------------------
Albert L. Evans, Jr.
/s/ J. Calvin Hill Director January 29, 1999
- -----------------------------
J. Calvin Hill
/s/ Roger M. Johnson January 29, 1999
- ----------------------------- Director
Roger M. Johnson
/s/ J. David Keller Director January 29, 1999
- -----------------------------
J. David Keller
/s/ Wanda P. Roach Director January 29, 1999
- -----------------------------
Wanda P. Roach
/s/ A. R. (Rick) Roberts, III Chief Financial Officer, January 29, 1999
- -----------------------------
A. R. (Rick) Roberts, III Chief Operations Officer
and Director (principal
financial and accounting officer)
/s/ Donald F. Stevens Director January 29, 1999
- -----------------------------
Donald F. Stevens
/s/ Edwin I. Swords, III Director January 29, 1999
- -----------------------------
Edwin I. Swords, III
II-6
<PAGE>
INDEX TO EXHIBITS
3.1 Amended and Restated Articles of Incorporation, filed January 6, 1999
3.2 Bylaws
4.1 See Exhibits 3.1 and 3.2 for provisions of the Articles of
Incorporation and Bylaws defining rights of holders of the common
stock.
5.1 Legal Opinion of Powell Goldstein Frazer & Murphy LLP
10.1 Purchase and Sale Agreement (main office property), dated December 11,
1998
10.3 Employment Agreement, dated as of January 1, 1999, among Cherokee
Bank, N.A. (Proposed), Cherokee Banking Company, and Dennis W.
Burnette
10.5 Form of Cherokee Banking Company Organizers' Warrant Agreement
10.6* Escrow Agreement, dated as of _______ __, 1999, among Cherokee Banking
Company and The Bankers Bank
21.1 List of Subsidiaries
23.1 Consent of Porter Keadle Moore, LLP
23.2 Consent of Powell, Goldstein, Frazer & Murphy LLP
(contained in Exhibit 5.1)
24.1 Power of Attorney (refer to page II-5)
27.1 Financial Data Schedule (for SEC use only)
99.1 Final Subscription Letter
99.2 Final Subscription Agreement
* To be filed by amendment.
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
CHEROKEE ORGANIZING GROUP, INC.
1.
The name of the Corporation is: "Cherokee Banking Company."
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.
(a) The Corporation shall have the authority to issue ten million
(10,000,000) shares of common stock (the "Common Stock"), no par value, and two
million (2,000,000) shares of preferred stock (the "Preferred Stock").
(b) The Board of Directors of the Corporation is authorized, subject to
limitations prescribed by law and the provisions of this Article, to provide for
the issuance of the shares of
<PAGE>
Preferred Stock in series, and by filing a certificate pursuant to the
applicable law of the State of Georgia to establish from time to time the number
of shares to be included in each such series, and to fix the designation,
powers, preferences, and relative rights of the shares of each such series and
the qualifications, or restrictions thereof. The authority of the Board of
Directors with respect to each series shall include, but not be limited to,
determination of the following:
(i) The number of shares constituting that series and the
distinctive designation of that series;
(ii) The dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or
dates, and the relative rights of priority, if any, of payments
of dividends on shares of that series;
(iii) Whether that series shall have voting rights, in addition
to the voting rights provided by law, and, if so, the terms of
such voting rights;
(iv) Whether that series shall have conversion privileges, and,
if so, the terms and conditions of such conversion, including
provisions for adjustment of the conversion rate in such events
as the Board of Directors shall determine;
(v) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such
redemption, including the date or dates upon or after which they
shall be redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions and
at different redemption rates;
2
<PAGE>
(vi) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the
terms and amount of such sinking fund;
(vii) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding-up
of the Corporation, and the relative rights of priority, if any,
of payment of shares of that series; and
(viii) Any other relative rights, preferences and limitations of
that series.
5.
The initial registered office of the Corporation shall be at 10 North
Street, Canton, Cherokee County, Georgia 30114. The initial registered agent of
the Corporation at such address shall be Roger M. Johnson.
6.
The mailing address of the initial principal office of the corporation is
10 North Street, Canton, Georgia 30114.
7.
(a) The Board of Directors shall be divided into three (3) classes, Class
I, Class II and Class III, which shall be as nearly equal in number as possible.
Each director in Class I shall be elected to an initial term of one (1) year,
each director in Class II shall be elected to an initial term of two (2) years,
each director in Class III shall be elected to an initial term of three (3)
years, and each director shall serve until the election and qualification of his
or her successor or until his or her earlier resignation, death or removal from
office. Upon the expiration of the initial terms of office
3
<PAGE>
for each Class of directors, the directors of each Class shall be elected for
terms of three (3) years, to serve until the election and qualification of their
successors or until their earlier resignation, death or removal from office.
(b) Unless two-thirds (2/3) of the directors then in office shall approve
the proposed change, this Article 7 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.
8.
(a) Except as provided in paragraph (b) of this Article 8, 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 8, any amendment of the
bylaws of the Corporation establishing or 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.
9.
(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
4
<PAGE>
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.
(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 at
least a majority of the issued and outstanding shares of the Corporation
entitled to vote in an election of directors.
(c) For purposes of this Article 9, 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 9 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.
10.
The initial Board of Directors of the Corporation shall consist of ten (10)
members who shall be and whose addresses are:
Dennis W. Burnette 7007 Wilderness Parkway
656 Big Canoe
Big Canoe, Georgia 30143
William Lee Early 173 Indian River Trail
Ball Ground, Georgia 30107
Albert Louis Evans, Jr. 2268 Reinhardt College Parkway
Canton, Georgia 30114
5
<PAGE>
J. Calvin Hill, Jr. 817 Clubhouse Pointe
Woodstock, Georgia 30188
Roger M. Johnson 1300 Tom Hulsey Drive
Canton, Georgia 30115
J. David Keller 1237 Indigo Bunting Trail
Big Canoe, Georgia 30143
Wanda P. Roach 229 Breeze Hill Court
Canton, Georgia 30114
Alfred R. Roberts, III 3030 Canton Hwy.
Ball Ground, Georgia 30107
Donald F. Stevens 9295 E. Cherokee Drive
Canton, Georgia 30115
Edwin I. Swords, III 891 Ivey Drive
Canton, Georgia 30114
11.
(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.
6
<PAGE>
(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 11 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.
12.
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.
13.
(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
substantially all of the assets of the Corporation to any other corporation,
person or other entity, shall require either:
7
<PAGE>
(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 13, on the basis of information known to the
Corporation, whether any sale, lease or 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 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.
(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
8
<PAGE>
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 14 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.
15.
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.
9
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused these Amended and Restated
Articles of Incorporation to be executed, this 5/th/ day of January, 1998.
CHEROKEE BANKING COMPANY
/s/ Dennis W. Burnette
------------------------------------
DENNIS W. BURNETTE
President
10
<PAGE>
EXHIBIT 3.2
BYLAWS
CHEROKEE BANKING COMPANY
<PAGE>
BYLAWS
CHEROKEE BANKING COMPANY
INDEX
-----
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE ONE - OFFICES..................................................... 1
ARTICLE TWO - SHAREHOLDERS' MEETINGS...................................... 1
2.1 Annual Meeting
2.2 Special Meetings................................................. 1
2.3 Place............................................................ 1
2.4 Notice........................................................... 1
2.5 Quorum........................................................... 2
2.6 Proxies; Required Vote........................................... 2
2.7 Presiding Officer and Secretary.................................. 2
2.8 Shareholder List................................................. 2
2.9 Action in Lieu of Meeting........................................ 2
ARTICLE THREE - DIRECTORS................................................. 2
3.1 Management....................................................... 2
3.2 Number of Directors.............................................. 3
3.3 Vacancies........................................................ 3
3.4 Election of Directors............................................ 3
3.5 Removal.......................................................... 3
3.6 Resignation...................................................... 3
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
3.7 Compensation...................................................... 3
3.8 Honorary and Advisory Directors................................... 3
ARTICLE FOUR - COMMITTEES.................................................. 4
4.1 Executive Committee............................................... 4
4.2 Other Committees.................................................. 5
4.3 Removal........................................................... 5
ARTICLE FIVE - MEETINGS OF THE BOARD OF DIRECTORS.......................... 5
5.1 Time and Place.................................................... 5
5.2 Regular Meetings.................................................. 5
5.3 Special Meetings.................................................. 5
5.4 Content and Waiver of Notice...................................... 6
5.5 Quorum; Participation by Telephone................................ 6
5.6 Action in Lieu of Meeting......................................... 6
5.7 Interested Directors and Officers................................. 6
ARTICLE SIX - OFFICERS, AGENTS AND EMPLOYEES............................... 7
6.1 General Provisions................................................ 7
6.2 Powers and Duties of the Chairman of the Board and the President.. 7
6.3 Powers and Duties of Vice Presidents.............................. 8
6.4 Powers and Duties of the Secretary................................ 8
6.5 Powers and Duties of the Treasurer................................ 8
6.6 Appointment, Powers and Duties of Assistant Secretaries........... 8
6.7 Appointment, Powers and Duties of Assistant Treasurers............ 9
6.8 Delegation of Duties.............................................. 9
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE SEVEN - CAPITAL STOCK............................................ 9
7.1 Certificates..................................................... 9
7.2 Shareholder List................................................. 10
7.3 Transfer of Shares............................................... 10
7.4 Record Dates..................................................... 10
7.5 Registered Owner................................................. 10
7.6 Transfer Agent and Registrars.................................... 10
7.7 Lost Certificates................................................ 10
7.8 Fractional Shares or Scrip....................................... 11
ARTICLE EIGHT - BOOKS AND RECORDS; SEAL; ANNUAL STATEMENTS................ 11
8.1 Inspection of Books and Records.................................. 11
8.2 Seal............................................................. 12
8.3 Annual Statements................................................ 12
ARTICLE NINE - INDEMNIFICATION............................................ 12
9.1 Authority to Indemnify........................................... 12
9.2 Mandatory Indemnification........................................ 12
9.3 Advances for Expenses............................................ 12
9.4 Court-ordered Indemnification and Advances for Expenses.......... 13
9.5 Determination of Indemnification................................. 13
9.6 Authorization of Indemnification................................. 14
9.7 Other Rights..................................................... 14
9.8 Insurance........................................................ 14
</TABLE>
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<TABLE>
<S> <C>
9.9 Continuation of Expenses.......................................... 14
ARTICLE TEN - NOTICES: WAIVERS OF NOTICE................................. 14
10.1 Notices......................................................... 14
10.2 Waivers of Notice............................................... 15
ARTICLE ELEVEN - EMERGENCY POWERS......................................... 15
11.1 Bylaws.......................................................... 15
11.2 Lines of Succession............................................. 15
11.3 Head Office..................................................... 15
11.4 Period of Effectiveness......................................... 15
11.5 Notices......................................................... 15
11.6 Officers as Directors Pro Tempore............................... 16
11.7 Liability of Officers, Directors and Agents..................... 16
ARTICLE TWELVE - CHECKS, NOTES, DRAFTS, ETC............................... 16
ARTICLE THIRTEEN - AMENDMENTS............................................. 16
</TABLE>
iv
<PAGE>
BYLAWS
OF
CHEROKEE BANKING COMPANY
ARTICLE ONE
OFFICES
The corporation shall at all times maintain its principal office in Canton,
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' MEETINGS
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, or by the
corporation upon the written request of any one or more shareholders owning an
aggregate of not less than twenty-five percent (25%) of the outstanding capital
stock of the corporation. Special meetings shall be held at such a 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
------
the place, day and hour of the meeting shall be given in writing not less than
ten nor more than sixty (60) 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, 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.
<PAGE>
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 no 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 of 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 five (5) 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 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 of
all Directors then in office.
2
<PAGE>
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 Board of Directors shall be divided into
---------------------
three (3) classes, Class I, Class II and Class III, which shall be nearly equal
in number as possible. Each Director in Class I shall be elected to an initial
term of one (1) year, each Director in Class II shall be elected to an initial
term of two (2) years and each Director in Class III shall be elected to an
initial term of three (3) years, and each Director shall serve until the
election and qualification of his or her successor or until his or her earlier
resignation, death or removal from office. Upon the expiration of the initial
terms of office for each Class of Directors, the Directors of each Class shall
be elected for terms of three (3) years, to serve until the election and
qualification of their successors or until their earlier resignation, death or
removal from office. No person shall be eligible to stand for election as a
Director, nor may be elected as a Director, if such person is seventy (70) years
of age or greater at the time of such election.
3.5 Removal. Any Director may be removed from office, at a meeting with
-------
respect to which notice of such purpose is given, with cause, only upon the
affirmative vote of the holders of a majority of the issued and outstanding
shares of the corporation. Any Director may be removed from office, at a meeting
with respect to which notice of such purpose is given, without cause, only upon
the affirmative vote of two-thirds of the holders of a majority of the issued
and outstanding shares of the corporation.
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 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 take office when the
resignation by its terms becomes 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, the Board of Directors may appoint such
retiring Director to be an Honorary Director, Director Emeritus, or member of an
advisory board established by the Board of Directors. 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 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.
3
<PAGE>
ARTICLE FOUR
COMMITTEES
4.1 Executive Committee. (a) The Board of Directors may, by resolution
-------------------
adopted by a majority of the entire Board, 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 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
<PAGE>
4.2 Other Committees. The Board of Directors, by resolution adopted by a
----------------
majority of the entire Board, 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. Special meetings of the Board of Directors may be
----------------
called by the Chairman of the Board or the President on not less than one (1)
day's notice by mail, telegram, cablegram, personal delivery or telephone to
each Director and shall be called by the Chairman of the Board or the President
in like manner and on like notice on the 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. 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
<PAGE>
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 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 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, committee or shareholders. Interested Directors may be counted in
determining the presence of a quorum at a meeting of the Board 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,
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 and the President.
----------------------------------------------------------------
The powers and duties of the Chairman of the Board 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.
6
<PAGE>
(a) The Chairman of the Board 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, but shall not participate in any major policy-making functions of
the corporation other than in his or her capacity as a director.
(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.
7
<PAGE>
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; and
(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.
8
<PAGE>
(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 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 though 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 (70) days
and, in case of a meeting of shareholders, not less than ten (10) 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.
9
<PAGE>
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 percent (2%) 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
record 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.
10
<PAGE>
8.3 Annual Statements. Not later than four (4) 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 attorneys' fees), incurred in connection with the
proceeding if the individual acted in 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 action 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. 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 section, 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 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
11
<PAGE>
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 proceeding;
(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 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 or unauthorized distributions of
12
<PAGE>
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 his 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.
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 meeting 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.
13
<PAGE>
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
officers 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,
action by the shareholders with respect to bylaws shall be taken by an
affirmative vote
14
<PAGE>
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.
15
<PAGE>
EXHIBIT 5.1
POWELL, GOLDSTEIN, FRAZER & MURPHY LLP
191 PEACHTREE STREET, N.E.
SUITE 1600
ATLANTA, GEORGIA 30303
February 1, 1999
Cherokee Banking Company
P. O. Box 1314
Canton, Georgia 30114
Ladies and Gentlemen:
We are acting as special counsel to Cherokee Banking Company, a Georgia
corporation (the "Company"), located in Canton, Georgia. In such capacity, we
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 650,000 shares
and a maximum of 1,000,000 shares (the "Shares") of common stock, no par value,
of the Company.
We have examined originals or copies, certified or otherwise identified to
our satisfaction, of the documents and corporate records relating to the
authorization, issuance and sale of the Shares and have made such other
investigation as we have deemed appropriate and relevant in order to furnish the
opinion set forth below.
This opinion letter is limited by, and is in accordance with, the January
1, 1992 edition of the Interpretive Standards applicable to Legal Opinions to
Third Parties in Corporate Transactions adopted by the Legal Opinion Committee
of the Corporate and Banking Law Section of the State Bar of Georgia, which are
incorporated in the opinion letter by this reference. Capitalized terms used in
this opinion letter and not otherwise defined herein shall have the meanings
assigned to them in the Interpretive Standards.
In our examination we have assumed the genuineness 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 us as certified
or photostatic copies. As to questions of fact material and relevant to our
opinion, where such facts were not independently verified by us, we have relied,
to the extent we 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, we are of the opinion that the Shares have been
duly authorized and when sold, will be validly issued, fully paid and
nonassessable.
We hereby consent to the reference to our firm under the heading "Legal
Matters" in, and to the filing of this opinion as Exhibit 5.1 to, the
Registration Statement on Form SB-2 filed with the
<PAGE>
Cherokee Banking Company
February 1, 1999
Page 2
Securities and Exchange Commission by the Company in connection with the offer
and sale of the Shares.
This letter is furnished solely to you and may not be relied upon by any
third party.
Very truly yours,
/S/ POWELL, GOLDSTEIN, FRAZER & MURPHY LLP
<PAGE>
EXHIBIT 10.1
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT is made this 11th day of December, 1998, by Bright-Sasser
Canton, L.L.C. ("Seller"), a Georgia limited liability company, and Cherokee
Organizing Group, Inc. d/b/a Cherokee Bank, N.A. ("Purchaser") The parties
agree as follows:
ARTICLE ONE
PROPERTY TO BE SOLD
1.1 The Property. Subject to the following terms and conditions, Seller
------------
shall sell to Purchaser, and Purchaser shall buy from Seller, all that tract or
parcel of land more particularly described on the attached EXHIBIT A together
with any improvements located on it and all the appurtenances, rights,
easements, and rights-of-way incident to it (collectively, the "Property").
1.2 Restrictive Covenants and Cross Easements. All construction on the
-----------------------------------------
Property and the development, use, and maintenance of the Property shall be in
accordance with a Riverstone Development Declaration of Restrictive Covenants
(the "Declaration"), a draft of which is attached as EXHIBIT B. Seller reserves
the right to make changes in the draft Declaration before Closing and will
submit the final Declaration to Purchaser for its approval (which approval will
not be unreasonably withheld). At or before Closing, Seller will grant and
reserve cross easements for access, parking, drainage, and utilities benefiting
and burdening the Property and the two lots immediately adjoining the Property
to the West and North. At Closing, Seller will also grant Purchaser a temporary
access easement over the road to be constructed immediately East and adjacent to
the Property until such time as such road is completed and dedicated to public
use. Seller will be responsible for any expense relating to the preparation of
such easements. The form and content of such easements shall be subject to
Purchaser's reasonable approval.
1.3 Temporary Use. Seller permits (through this contract, or Restrictive
-------------
Covenants if necessary) the placement of a modular banking office on the
Property while the permanent building is under construction. But in no case
shall the modular office remain on the Property past July 1, 2000.
ARTICLE TWO
PURCHASE PRICE
2.1 Purchase Price. Purchaser shall pay Seller $450,000.00 (the "Purchase
--------------
Price") for the Property.
2.2 Cash Portion. Purchaser shall pay the Purchase Price in cash at
------------
Closing or by certified check or wire transfer to Seller's account, which cash
amount due at Closing shall be reduced by the Earnest Money paid and any closing
adjustments and prorations that are in its favor.
<PAGE>
ARTICLE THREE
EARNEST MONEY
Within 5 days of the Effective Date, Purchaser shall deliver to the Escrow
Agent $10,000.00 (the "Earnest Money"), which the Escrow Agent will hold in
trust pending the Closing. At Closing, the Earnest Money shall be applied
towards payment of the Purchase Price. The Earnest Money shall be non-
refundable unless this Agreement is terminated or fails to close due to Seller's
breach. The Escrow Agent shall be John G. Grubb, Jr.
ARTICLE FOUR
SELLER'S REPRESENTATIONS,
WARRANTIES, AND COVENANTS
To induce Purchaser to enter into this Agreement and purchase the Property,
Seller makes the following representations, warranties, and covenants, each of
which is material to this Agreement and is relied upon by Purchaser:
4.1 Authority to Sell. Seller has the right, power, and authority to enter
-----------------
into this Agreement and to sell the Property to Purchaser, and Seller has not
granted any options or entered into any contracts with others for the sale of
all or any part of the Property.
4.2 Title. Seller is the sole owner of good, fee simple, marketable, and
-----
insurable title to all of the Property (or will be prior to Closing), subject
only to real estate taxes not yet due and payable, easements, rights-of-way, and
the final Declaration (collectively, the "Permitted Encumbrances").
4.3 Liens. At Closing, the Property will be free and clear of all liens.
-----
4.4 Operating Agreements. There are no operating or maintenance
--------------------
agreements for the Property.
4.5 Litigation. No litigation or administrative proceedings are pending
----------
or threatened with respect to the Property.
4.6 Leases. There are no leases for any part of the Property.
------
4.7 Condition of Closing. On the date of Closing, unless Seller otherwise
--------------------
notifies Purchaser in writing, all representations and warranties made by Seller
in this Agreement shall be true and accurate, and such accuracy shall be an
express condition to Purchaser's obligation to close.
4.8 Utilities. Seller warrants that water, sanitary sewer and storm sewer
---------
are available at the site's property line. Seller warrants that the storm
detention access is in place.
4.9 Rough Grading. Seller warrants that compaction will be appropriate
-------------
for construction of a two-story building for stated use. The cost of any
compaction tests will be borne by Purchaser.
4.10 Site Improvements. (a) After approval of the preliminary site plan
-----------------
(pursuant to section 5.2), Seller will apply to the Georgia D.O.T. for a
-2-
<PAGE>
permit for a curb cut for a driveway to be located at the southwest corner of
the Property (the Driveway). If Seller has not obtained such permit by the date
of Closing, Purchaser may terminate this Contract and receive the return of the
Earnest Money. If this transaction closes, Purchaser shall be responsible for
making the curb cut and constructing the Driveway in accordance with the plans
approved by Seller pursuant to section 5.3, which plans shall include a separate
cost for making the curb cut and constructing the Driveway, which cost must be
reasonably acceptable to Seller. If the curb cut and Driveway are partially
located on the property adjacent to the Property. Seller will deposit at Closing
with the Escrow Agent one-half of the approved cost of the Driveway and curb cut
(which deposit may be made with proceeds from the sale of the Property), which
deposit Escrow Agent shall hold until receipt of written notice from Seller that
Seller has sold the property that is immediately adjacent to the Property on the
West. Seller shall provide Escrow Agent with such notice within seven (7) days
of the date that the sale of such adjacent property closes. Upon receipt of that
notice, Escrow Agent shall promptly release the amount held in escrow to
Purchaser. (b) At its sole cost, Seller shall be responsible for constructing a
paved two-lane access road adjacent to the eastern boundary of the Property and
extending 50 feet beyond the northern boundary of the Property and obtaining a
curb cut permit for such road or corridor. When Seller constructs access road,
Seller shall install curb and gutter per Exhibit A to allow for a curb cut on to
the access road at the northeast corner of the Property. Seller shall begin such
construction within thirty (30) days of Closing and will use reasonable efforts
to complete such construction by September 1, 1999.
4.11 Underground Storage Tanks. To the best of Seller's knowledge and
-------------------------
belief, there are no underground storage tanks on the Property.
ARTICLE FIVE
PURCHASER'S REPRESENTATIONS,
WARRANTIES, AND COVENANTS
To induce Seller to enter into this Agreement and to sell the Property to
it, Purchaser makes the following representations, warranties, and covenants,
each of which is material to this Agreement and is relied upon by Seller:
5.1 Bank Charter Approval and Use. Purchaser shall proceed immediately to
-----------------------------
obtain the approval of the location for a two-story bank main office on the
Property by the office of the Comptroller of the Currency. Purchaser shall have
4 months from the Effective Date within which to obtain such approval. If
approval has not been granted by the end of that period, then either party shall
have the right to terminate this Agreement. The Property will initially be
developed and used as a two-story bank main office of Purchaser. If the
Agreement is terminated, neither party shall have any further liability to the
other, except for those obligations which specifically survive the termination
of this Agreement.
5.2 Plan Approvals. Purchaser shall proceed immediately with the
--------------
preparation of a preliminary site plan showing curb cuts and building location
on the site for Seller's use in obtaining D.O.T. approval of curb cuts, as well
as, a silhouette elevation of the two-story bank building for Seller's use in
review of site lines. The above plans must be delivered to Seller within thirty
(30) days of the execution of this Agreement.
-3-
<PAGE>
5.3 Purchaser shall proceed with preparation of Purchaser's site plan,
exterior architectural plan, and signage plan, and any other plans needed to
construct the two-story bank main office and develop the Property in accordance
with this Agreement, all of which plans are subject to the requirements of the
Declaration. Purchaser shall submit all such plans to Seller for its approval
within 45 days of the Closing. If Seller has not notified Purchaser in writing
within 30 days from the date on which plans are submitted that the plans are
approved or disapproved, then they shall be deemed approved.
5.4 The Purchaser shall locate the building structures on the Property to
optimize the visibility into the adjacent property to the rear and the Carmike
Cinema property, which location shall be subject to Seller's approval.
5.5 If Seller does not approve the plan and elevation submitted under
section 5.2 or the building location as submitted under section 5.4, Seller
shall notify Purchaser of its disapproval and the reasons for it and request
that Purchaser make suggested changes. If Purchaser is unwilling to make such
changes and if Seller and Purchaser cannot otherwise reach agreement with
respect to such plan, elevation, and building location, either party shall have
the right to terminate this Agreement by notifying the other in writing, and, if
either party does so, the Earnest Money shall be promptly returned to Purchaser,
and neither party shall have any further liability to the other except for those
obligations that specifically survive the termination of this Agreement.
ARTICLE SIX
DUE DILIGENCE
6.1 Title Examination. Within 30 days of the date of this Agreement,
-----------------
Purchaser shall examine the title to the Property and give Seller written notice
of any title objections disclosed by the examination. If Purchaser fails to
give such notice by the end of the 30-day examination period with respect to any
title objection that is of record and properly indexed, then Purchaser shall be
deemed to have waived any such title objection. Upon receipt of Purchaser's
notice of title objections, Seller shall in good faith endeavor to satisfy or
correct the valid title objections on or before the Closing; provided, however,
Seller shall not be required to institute any lawsuit or other legal proceeding
in order to satisfy or correct any title objection or to pay more than $2,500.00
to satisfy or correct any title objection. At or before the Closing, however,
Seller will pay any indebtedness of Seller secured by an interest in the
Property (or otherwise obtain release of the Property as security for such
indebtedness), and Seller may use all or part of the Purchase Price to do so.
If Seller does not satisfy any valid title objection by Closing, Purchaser shall
have the following options: (a) the right to terminate this Agreement and
receive the return of all Earnest Money, and, in that event, neither party shall
have any further liability to the other, except for those obligations which
specifically survive the termination of this Agreement; or (b) waive the title
objection and proceed to Closing with no reduction in the Purchase Price.
6.2 Survey. At Purchaser's expense, Purchaser shall be responsible for
------
obtaining a survey of the Property, which survey will be completed and a copy
delivered to Seller within 30 days of Purchaser receiving bank charter
-4-
<PAGE>
approval. The Purchase Price will not be increased or reduced as a result of the
Survey.
6.3 Inspection. From and after the Effective Date, Seller hereby grants
----------
Purchaser and its agents and representatives a license to enter upon the
Property for the purpose of making such examinations, inspections, surveys,
tests, and analyses as Purchaser desires. Purchaser shall indemnify and defend
Seller against any liability, claim, or expense incurred by Seller as a result
of the exercise by Purchaser or its agents and representatives of this license,
which indemnification obligation shall survive the termination of this Agreement
or the Closing and shall not be merged in the deed from Seller to Purchaser.
ARTICLE SEVEN
CLOSING
7.1 Closing. The consummation of the purchase and sale of the Property
-------
(the "Closing") shall take place on or before May 1, 1999. Seller will make a
best effort to complete item covered in paragraph 4.9 by April 1, 1999 (to
facilitate an earlier Closing if requested by Purchaser).
7.2 Place of Closing. The Closing shall take place at the location
----------------
specified by Seller, which location shall be in the Atlanta metropolitan area.
7.3 Seller's Deliveries. At Closing, Seller shall deliver to Purchaser
-------------------
the following documents, dated the Closing Date, the delivery and accuracy of
which shall be a condition to Purchaser's obligation to close:
(a) a General Warranty Deed in recordable form duly executed by Seller and
conveying to Purchaser good, fee simple, marketable, and insurable title to the
Property with the legal description acceptable to the title company Purchaser
has chosen to use and subject only to the Permitted Encumbrances; and
(c) such other documents, affidavits, or certificates as may be necessary
to consummate the sale of the Property and for Purchaser to obtain title
insurance.
7.4 Prorations. All real estate taxes, assessments, and similar charges
----------
on the Property (general and special, ordinary and extraordinary) for any prior
year shall either be paid in full by Seller at or before the Closing or credited
against the Purchase Price and assumed by Purchaser. All real estate taxes and
assessments for the year of the Closing shall be prorated between the parties as
of the date of Closing. The proration of current taxes shall be based on the
most recent tax bill, and, if the most recent bill is not the bill for the
current year, the proration of taxes shall be subject to further adjustment upon
receipt of the current bill.
7.5 Closing Costs. Seller shall pay any Real Estate Transfer Tax due in
-------------
connection with the sale of the Property and its attorney's fees. Purchaser
shall pay all other closing costs and fees relating to Closing.
7.6 Commissions. Each party represents to the other that there is no
-----------
broker or other person entitled to a commission or similar fee in connection
with this transaction. Each party covenants and agrees to defend and
-5-
<PAGE>
indemnify the other from any other liability or claim for commissions or similar
compensation for any service rendered at its instance in connection with this
transaction. The foregoing indemnification shall survive the Closing and any
termination of this Agreement.
7.7 Delivery of Possession. Seller shall deliver possession of the
----------------------
Property to Purchaser at the time of Closing.
ARTICLE EIGHT
CONDEMNATION
If any time before Closing all or a material portion of the Property is
condemned or subject to a bona fide notice of condemnation or is taken for any
public use, Purchaser may elect one of the following options in its sole
discretion: (a) terminate this Agreement and receive the Earnest Money, and, in
that event, neither party shall have any further liability to the other, except
for those obligations which specifically survive the termination of this
Agreement; or (b) receive an assignment of Seller's right to any award
resulting from the condemnation and proceed to Closing with no reduction in the
Purchase Price.
ARTICLE NINE
MISCELLANEOUS
9.1 Liquidated Damages. If the purchase and sale of the Property is not
------------------
consummated due to Purchaser's default or breach, the Earnest Money shall be
paid to Seller as Seller's full liquidated damages for such default or breach;
provided, however, the Earnest Money is not intended as liquidated damages for
Purchaser's failure to perform any indemnification or reimbursement obligation
under this Agreement, and Seller may recover all damages recoverable for any
such breach of this Agreement. The parties acknowledge that Seller's actual
damages in the event of a default by Purchaser will be difficult to ascertain
and that such liquidated damages represent the parties' best estimate of such
damages. The parties expressly acknowledge that the foregoing liquidated
damages are intended not as a penalty, but as full liquidated damages as
permitted under O.C.G.A. Section 13-6-7, in the event of Purchaser's default and
as compensation for Seller taking the Property off the market during the term of
this Agreement. Such liquidated damages shall be the sole and exclusive remedy
of Seller for Purchaser's default, and Seller hereby waives and releases any
right to sue Purchaser for specific performance of this Agreement or to prove
that Seller's actual damages exceed the amount of the Earnest Money. If Seller
defaults under this Agreement, the Escrow Agent shall return the Earnest Money
to Purchaser upon demand, and Purchaser shall have all remedies available to it
under Georgia Law.
9.2 Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties with respect to the transaction contemplated by this
Agreement, and it supersedes all prior understandings, promises, or agreements
between the parties.
9.3 Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the parties and their respective heirs, devisees, personal
representatives, successors, and permitted assigns.
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<PAGE>
9.4 Waiver; Modification. Failure by Purchaser or Seller to insist upon
--------------------
or enforce any of its rights shall not constitute a waiver of such right unless
the party with the right so states in writing. Either party may waive any
provision or condition for its benefit contained in this Agreement. No oral
modification of this Agreement shall be binding upon the parties, and any
modification or amendment must be in writing and signed by the parties.
9.5 Time of Essence. TIME IS OF THE ESSENCE OF THIS CONTRACT.
---------------
9.6 Governing Law. This Agreement shall be governed by Georgia law.
-------------
9.7 Remedies Cumulative. Each and every right, benefit, and remedy
-------------------
provided to Purchaser or Seller by this Agreement, or any instrument or
documents executed pursuant to this Agreement, are cumulative and shall not be
exclusive to any other right, remedy, or benefit allowed by law or equity to the
parties, except to the extent provided for in this Agreement.
9.8 Effective Date. For purposes of this Agreement, the "Effective Date"
--------------
of this Agreement shall mean the date on which the last party to sign this
Agreement signs it.
9.9 Assignment. Seller shall have the right to assign this Agreement only
----------
with Purchaser's consent, which consent shall not be unreasonably withheld.
Purchaser shall have the right to assign this Agreement only with the prior
written consent of Seller, which consent will not be unreasonably withheld.
Upon such assignment, the assignor shall be relieved of all obligations under
this Agreement, except for obligations or liabilities accruing prior to the
assignment.
9.10 Notices. All notices, requests, consents, and other communications
-------
between the parties shall be in writing and shall be personally delivered or
mailed by first class certified mail, return receipt requested, postage prepaid
and shall be effective when received.
If to Seller:
Bright-Sasser Canton, L.L.C.
c/o Mike Sasser
1827 Powers Ferry Road, Building 13
Atlanta, Georgia 30339
If to Purchaser:
Cherokee Organizing Group, Inc.
d/b/a Cherokee Bank, N.A. (proposed)
P.O. Box 1314
Canton, Georgia 30114
If to Escrow Agent:
John G. Grubb, Jr.
909 Eagles Landing Parkway
Suite 140-225
Stockbridge, Georgia 30281
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<PAGE>
9.11 Exhibits. All Exhibits and the Special Stipulations to this Agreement
--------
are a part of the Agreement and are incorporated in it by reference.
9.12 Time Limit. Upon Seller's signing this Agreement, it shall be deemed
----------
an offer by Seller to Purchaser and shall remain open for acceptance until 5:00
p.m. on December 11, 1998 (the "deadline"). If this Agreement has not been
signed by Purchaser and returned to Seller by the deadline, the offer shall be
deemed automatically revoked and the Agreement ineffective with no further
action by Seller required.
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<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals as
of the day and year first above written.
SELLER:
BRIGHT-SASSER CANTON, L.L.C.
By: __________________________________
Matt Sasser
Date: _____________________
PURCHASER:
CHEROKEE ORGANIZING GROUP, INC. D/B/A
CHEROKEE BANKING, N.A. (proposed)
By: _________________________________
Title: _______________________
[SEAL]
Date: _____________________
-9-
<PAGE>
SPECIAL STIPULATIONS
If there is any conflict between these Special Stipulations and any other
provision of the Agreement, these Special Stipulations shall supersede such
other provision and control. Any capitalized terms that are not defined in
these Special Stipulations shall have the same meaning as in the body of the
Agreement.
1. Site Work and Landscaping. Seller shall deliver the Property to
-------------------------
Purchaser rough graded. At Purchaser's cost, Seller shall be responsible for
the design and installation of the landscaping and the irrigation system for the
Property. Within 14 days of the date that Purchaser and Seller approve the
building elevations and site development plans, Seller will provide Purchaser
with drawings and a price (the "Price") for the landscaping and irrigation
system for the Property, which drawings and Price shall be subject to
Purchaser's approval. Seller shall contract for the performance of such work
and shall cooperate with Purchaser in sequencing such work, so that it does not
delay or hinder Purchaser's construction on the Property. After installation of
the landscaping and irrigation system, Seller shall be responsible for
maintaining the landscaping and the irrigation system at Purchaser's cost, which
cost will be based on a contract for such services, which contract will be
submitted to Purchaser at the same time as the drawings and price mentioned
above. If Purchaser subsequently transfers the Property, the Seller shall
remain responsible for the landscape maintenance of the Property, and
Purchaser's transferee shall be liable for the cost of such maintenance, unless
Seller notifies Purchaser or its transferee to the contrary.
At closing, in addition to the Purchase Price, Purchaser shall pay the Price,
which amount will be held in escrow by John G. Grubb, Jr. ("JG"), as escrow
agent. JG will release the escrowed amount to or for Seller's benefit only upon
satisfactory completion of the work as certified in writing by the landscape
architect, and JG may rely upon any such certification in releasing funds under
this Contract and shall have no duty to make an independent determination as to
the completion of the work. If the landscape architect determines that the work
to be performed by Seller is either incomplete or, not performed in accordance
with the approved plans and drawings, Purchaser shall notify Seller of the
problem(s) and request that Seller cure the problem(s). Seller shall have a
reasonable time to cure the problem(s). If Seller does not begin the cure
within 15 days of receipt of Purchaser's notice or if at any time Seller
discontinues performance of its work for 3 consecutive business days (not
including days of inclement weather or other work stoppages beyond the
reasonable control of Seller), Purchaser may take over and complete the
performance of the work and use any funds remaining in escrow for that purpose
and Seller remaining liable for any deficiency. In such case, upon Purchaser
providing JG with substantiation of its costs for completion, JG shall promptly
release to Purchaser an amount equal to such costs and pay the remainder (if
any) to Purchaser. Except for intentional misconduct or gross negligence, JG
shall not be liable to either party for any act or omission in his capacity as
escrow agent.
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<PAGE>
2. Survival. Section 1.3, section 4.10, section 5.1, and Special
--------
Stipulation #1 shall survive the Closing and the execution and delivery of the
deed from Seller to Purchaser.
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<PAGE>
EXHIBIT "A"
-----------
[Map of Property location not reprinted]
<PAGE>
EXHIBIT "B"
-----------
- --------------------------------------------------------------------------------
After recording, return to:
RIVERSTONE DEVELOPMENT
DECLARATION OF RESTRICTIVE COVENANTS
THIS Declaration of Restrictive Covenants is made and entered into
_____________, 1998, by Bright-Sasser Canton, L.L.C., a Georgia limited
liability company ("Declarant").
W I T N E S S E T H:
WHEREAS, Declarant is the owner of the Property described in the attached
EXHIBIT A; and
WHEREAS, Declarant intends to develop the Property, but also anticipates
that portions of the Property will be sold and developed separately; and
WHEREAS, Declarant desires that the Property be developed in a uniform
manner, and Declarant desires to establish certain restrictions, covenants,
requirements, and conditions with respect to the development, operation,
management, and use of the Property.
NOW, THEREFORE, for and in consideration of the benefits accruing to the
Property (and each portion of the Property that may be subsequently conveyed)
from the restrictions, covenants, requirements, and conditions created by this
Declaration, Declarant hereby submits and subjects the Property to the
restrictions, covenants, requirements, and conditions set forth in this
instrument.
1. Definitions. The following capitalized terms shall have the following
meanings when used in this Declaration:
(a) "Declarant" means Bright-Sasser Canton, L.L.C., a Georgia limited
liability company, and its successors and assigns.
(b) "Declaration" means this Riverstone Development Declaration of
Restrictive Covenants, as it may be amended from time to time.
(c) "Effective Date" means the date that this Declaration is executed
by Declarant.
(d) "Improvements" means any improvement to the Property or any
Parcel, including buildings (both the main portion and all projections or
extensions), canopies, parking areas, access ways, sidewalks, loading areas,
outside platforms and docks, fences, walls, hedges, trees, shrubs, mass
plantings and other landscaping, poles, posts, bases, signs, and any and all
<PAGE>
structures of any type or kind located, placed, erected, or maintained on the
Property or any Parcel.
(e) "Including" (which need not be capitalized to have this meaning)
means "including (but not limited to)" and "include" means "include (without
limitation)," unless otherwise specifically stated.
(f) "Law" or "Laws" means all federal, state, or local laws,
statutes, ordinances, building codes, rules, and regulations relating to the
Property, any Parcel, any Owner, or the matters contained in this Declaration
and includes any future amendments to or substitutions for any such Law.
(g) "Owner" means each owner of any Parcel, and "Owners" means all
such Owners.
(h) "Parcel" means any part of the Property (but less than all of the
Property) that is subsequently transferred by Declarant, and "Parcels" means
all such Parcels.
(i) "Public Body" means any federal, state, or local governmental
entity, agency, or administrative body having jurisdiction over the Property or
any Parcel.
(j) "Restrictions" means the restrictive covenants set forth in this
Declaration.
(k) "Riverstone" means the Riverstone, Development, a multi-use
development being undertaken by Declarant, which includes development of the
Property.
(1) "Shopping Center" means, collectively, all shopping centers
within Riverstone, including Riverstone Plaza and Riverstone Main Street.
2. Establishment of Restrictions. After the execution and recording of
-----------------------------
this Declaration, the Property (and each and every Parcel) shall be transferred,
held, developed, used, and occupied subject to the Restrictions and other
requirements and provisions of this Declaration. Declarant intends that the
Restrictions and such requirements shall be covenants running with the land and
shall inure to the benefit of and bind the heirs, executors, legal
representatives, successors, and assigns of Declarant and all Owners. Unless
otherwise stated, each Owner shall be responsible to conform his Parcel to the
Restrictions and any other requirements of this Declaration. Any Owner shall be
bound by this Declaration only as to the Parcel or Parcels owned by such Owner.
In addition, an owner shall be bound by this Declaration only during the period
he is the fee simple owner of his Parcel, except as to obligations, liabilities,
or responsibilities that arise or accrue during that period. Declarant does not
intend that this Declaration create any rights or privileges in and for the
benefit of the general public, and it shall not be construed to do so.
3. Purpose of Restrictions. The purpose of this Declaration and the
-----------------------
Restrictions is to insure the development and use of the Property (and each and
every Parcel) in accordance with the requirements and criteria in this
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<PAGE>
Declaration; to protect all Owners and tenants of Owners against construction,
development, and use that does not conform to the requirements of this
Declaration; to encourage the erection of attractive Improvements at appropriate
locations; to control the use of the Property and each Parcel; and, in general,
to insure and provide for high quality Improvements of the Property.
4. Parking. Each Owner shall provide paved, off-street parking and
-------
access lanes for his Parcel sufficient to accommodate the vehicular traffic of
the Parcel, including the vehicles of employees, customers, and invitees and
other vehicles used in the business conducted on the Parcel. All parking areas
on a Parcel and access to the Parcel shall conform to all applicable Laws
without any variances.
5. Signs. No signs or other advertising devices shall be installed or
-----
permitted on any Parcel except to the extent specifically permitted by this
Declaration. No window, door, or special event signs shall be installed except
as permitted by Declarant in its sole discretion. No signs may be erected on
the Property without the prior consent of Declarant. The design of all signs to
be installed on any Parcel are also subject to Declarant's prior written
approval. Before beginning construction or installation of any sign on his
Parcel, an Owner shall submit detailed plans and specifications for the sign to
Declarant for its approval, which plans and specifications shall include the
materials to be used and the contents, size, construction, color, face type,
location, and set-back for the sign. During or after installation or
construction, Declarant may inspect all signs. If a sign has not been approved
by Declarant or the sign that is being or has been constructed or installed is
different than the design approved by Declarant, Declarant may in its sole
discretion remove the sign, and, if it does so, the Owner of the Parcel on which
the sign was located shall promptly reimburse Declarant on demand for the costs
Declarant incurs in such removal. Without Declarant's prior approval, there
shall be no pennants, banners, streamers, sign trailers, spinners, balloons, or
the like used on any Parcel or attached to any Improvement. Without Declarant's
prior approval, no neon tubing shall be attached to the exterior of any
Improvement, unless it is in an approved building sign.
Each Owner shall keep all signs on his Parcel well maintained and in good
working order and lighted from dusk until at least 12:00 midnight.
Additional signage requirements are as follows:
(a) Content. With the exception of directional signs, parking signs,
-------
and signs advertising a Parcel for sale or lease, the content or wording on all
signs located on a Parcel or its Improvements shall be restricted to setting
forth the building or company name and the company emblem, logo, or trade name.
Slogans, mottos, or other commentary shall not be allowed on any sign, and,
unless otherwise required by law, underwriters' and sign fabricators' labels and
permits shall be located so as to be inconspicuous. All wiring, ballasting
starters, and equipment for all signs shall be concealed from view, unless
otherwise required by law.
(b) Lighting. Signs may be illuminated so long as none of the
--------
following illuminating methods are used: moving, flashing, scintillating, or
-3-
<PAGE>
blinking signs; painted iridescent signs; Da-Lite or Da-Glo fluorescent plastic
signs; signs utilizing exposed lighting tubes or exposed neon lighted tubes,
unless contained in an open channel letter.
(c) Freestanding Signs. There shall be allowed only one freestanding
------------------
sign on each Parcel, which shall be a monument type sign; provided, however,
such limitation shall not apply to a directional sign for a drive-in window or a
menu panel used in connection with a drive-in window, but any such directional
sign and menu panel must otherwise conform with this Declaration. The
freestanding monument sign shall be on a base of the same or similar quality,
color, materials, and texture as the primary masonry materials used in the
exterior finish of the Improvements constructed on the Parcel. Signs indicating
that the Property is for sale or lease are not subject to these specific
provisions regarding freestanding signs. The permissible size of the
freestanding sign will vary depending on the square footage of the primary
building constructed on the Parcel as follows: (1) if the building has less than
50,000 square feet, the sign shall not exceed 5 feet in height (measured from
ground level to the top of the sign), and no sign face shall exceed 30 square
feet in size; and (2) if the building has 50,000 square feet or more, the sign
shall not exceed 8 feet in height (measured from ground level to the top of the
sign), and no sign face shall exceed 35 square feet in size.
(d) Signs Attached to Improvements. There shall be no signs painted
------------------------------
on any Improvements. There shall be no more than two signs attached to the
exterior of the major Improvement on a Parcel. The letters of all signs
attached to Improvements shall be individually cut and mounted letters and shall
be either internally lighted or floodlighted, but any such floodlighting must
emanate from ground level or below, and all floodlight fixtures and wiring must
be either screened from view or below ground level. The sign letters shall not
exceed 2 feet in height, and, unless Declarant approves otherwise, no letter
shall be closer than 2 feet from the end of the building on which the letters
are mounted or attached. No signs, stickers, advertising materials, or other
materials shall be attached to the glass of any windows or doors of any
Improvement.
(e) Method of Approval. Before beginning the installation of any
------------------
sign, an Owner shall submit to Declarant for Declarant's approval three sets of
shop drawings for the sign. In addition to containing all of the information
set forth above, the shop drawings shall include construction details, colors,
and finishes. The proposed location of the signs shall be indicated on the shop
drawings. The location of the union and fabricators' labels on the signs must
also be indicated.
Within 30 days after Declarant's receipt of plans containing the
information and detail required by this section, Declarant shall either approve
or reject the plans in writing. If written approval or rejection is not given
by Declarant within that 30-day period, the plans shall be deemed approved so
far as they are consistent with the other provisions of this Declaration. If
Declarant rejects plans, Declarant shall note the reason or reasons for the
rejection on the plans or otherwise communicate the reasons for rejection to the
Owner.
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<PAGE>
(f) Compliance with Requirements. The Owner intending to install a sign
----------------------------
on his Parcel shall be solely responsible for complying with all applicable
Laws, including any sign ordinances, and Declarant's approval of an Owner's sign
plans shall not be deemed a warranty or representation by Owner that such plans
comply with the applicable Laws. The Owner intending to install a sign shall be
solely responsible for obtaining and paying for all necessary licenses and
permits relating to the sign to be installed.
6. Use of a Parcel. Declarant must approve the initial use and any
---------------
change in the use of a Parcel, which approval shall not be unreasonably withheld
or delayed. Without Declarant's prior consent, which consent may be granted or
withheld in Declarant's sole discretion, no Owner may use all or any part of his
Parcel for a commercial motion picture facility or movie theatre.
7. Subdividing. Without Declarant's prior written consent, which consent
-----------
may be granted or withheld in Declarant's sole discretion, an Owner may not
subdivide his Parcel.
8. Improvement Plans.
-----------------
(a) General. Before any Improvement is constructed or altered on his
-------
Parcel, the Owner must submit to Declarant for its written approval all
architectural plans, specifications, and elevations, the exterior building and
site plans for any such construction or alteration and landscaping plans
(collectively, the "Plans"). Among other things, the submitted Plans must show
the location, materials for, and color of each proposed Improvement, the
boundary lines of the Parcel, the location of drive lanes, parking areas, and
spaces, building setback distances, the location of outside lighting fixture,
and the materials, colors, and height of fences or other dividers (if any)
between the Parcel and the adjoining Property. If Declarant fails to approve or
disapprove of the submitted Plans within 30 days after receipt of a full set of
the Plans, the Plans shall be deemed approved to the extent they are consistent
with the requirements of this Declaration. Declarant's approval or disapproval
of submitted Plans shall be based on a variety of criteria, including the
following: (1) Conformity of the Plans to the requirements of this Declaration;
(2) the adequacy of site dimensions; (3) conformity and harmony of external
materials and design with existing and proposed neighboring Improvements and
adjacent common areas; (4) the effect of the Improvements on neighboring sites;
(5) the relation of topography, grade, and finished ground elevations of the
Parcel to that of neighboring Parcels; (6) the absence of metal exterior siding
on the proposed Improvements; (7) one primary building on the Parcel; and (8)
the proper location of all utilities.
(b) Specific Requirements. No building will exceed one story in
---------------------
height without the approval of Declarant. The outside lighting system for the
Parcel shall be designed to produce a minimum maintained lighting intensity,
measured at grade, of 3-foot candles over the entire Parcel. The lighting
fixtures shall be the VLAL-Series pole-mounted fixtures by Nu-Art Lighting &
Mfg. Co. (or a comparable fixture approved by Declarant), mounted on 30 - 40
foot round, tapered steel poles. The poles and luminaries are to be dark
bronze. The lamps are to be metal halide. Exterior finish material will be
predominantly face brick manufactured by Boral (field brick is
-5-
<PAGE>
"Georgetown" and accent brick is "Bayshore"), but the field brick and accent
brick may be reversed with Declarant's approval. The mortar color for use with
the brick shall be Flamingo C-105 (manufactured by Giant). All utilities must be
located underground. Storm water drainage shall be implemented by the use of
catch basins and underground storm lines. No open ditches will be permitted. All
run-off from restaurant service areas shall be collected in a storm drain before
entering any driveway. No on-site septic system or sanitary sewer treatment
facility will be permitted on any Parcel. There must be a ten-foot landscape
buffer along roadways as measured from the right-of-way line to the interior
curb of the Parcel, and the parking area of the Parcel must be screened along
adjacent roadways. The landscaping and irrigation plan for the Parcel must
comply with the requirements of section 8 and include irrigation and tree
plantings along adjacent roadways.
(c) Covenant Not to Sue. Each Owner covenants not to bring any action
-------------------
or suit against Declarant either in law or equity arising out of Declarant's
approval, disapproval, or failure to approve any Plans submitted for approval
pursuant to this Declaration.
8. Landscaping. The Plans as they relate to landscaping (the "Landscape
-----------
Plans") must contain both a planting plan and an automatic underground
irrigation plan, which Landscape Plans must conform to the following
specifications:
(a) Planting Plan. This plan shall contain a full description of the
-------------
plants to be used in the landscaping of the Parcel, including common name,
botanical name, type, size or caliper, whether root balls or container, and the
type of sod or seed. The plan shall also specify the type of mulch to be used
and the planting details of the plants, including depth and soil mix. The
following requirements shall apply to any such plan:
(1) All peripheral road frontages (state roads and roads within
Riverstone) shall be planted with Pin Oak (quercus palustris) of 7-inch caliper
(measured one foot above the root ball) with a minimum height of 25 feet, a
maximum height of 30 feet, a minimum spread of 12 feet on 60-foot centers, and a
straight trunk and center leader. All Willow Oaks to be used in Riverstone
shall be purchased from a single source to be designated by Declarant.
(2) All road rights-of-way adjacent to any Parcel and a strip with a
minimum width of 10 feet (as measured from the right-of-way line to the interior
curb of the Parcel) shall be sodded with Kentucky 31 Fescue Sod, and the Owner
shall irrigate and maintain that sod. In those areas, the Owner must use a 3-
foot berm or hedge planting to screen all parking areas.
(3) Annuals shall be planted on either side of each driveway from a
peripheral road.
(4) All internal drive frontages shall be planted with Red Maple
(Autumn Flame), having a minimum caliper of 3 inches, a minimum height of 14
feet on 50-foot centers, and a straight trunk and central leader.
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<PAGE>
(5) Each building to be located on a Parcel shall have a landscaped
area on each side of the building (including the front and back of the building)
with a width of at least 5 feet and a length of at least 50% of the building
side.
(6) Each parking area to be located on a Parcel shall contain islands
planted with evergreen ground cover or sod and a sufficient number of shade
trees (Red Maple -Autumn Flame) to maintain a ratio of one tree for every 20
parking spaces. At the time of planting, each tree shall have a minimum caliper
of 3 inches and a minimum height of 14 feet and a straight trunk and central
leader.
(7) All storage or service areas that are visible from peripheral or
interior roads or from Shopping Center parking lots shall be completely screened
from view by an evergreen hedge at least 6 feet in height at the time of
planting. Any chain link fence visible from a peripheral road shall be planted
with a hedge or screen on the road side at least equal to the height of the
fence at time of planting.
(8) All trees to be planted pursuant to the Landscape Plans shall be
dug up and shipped with a wire ball, suitable for planting as a street tree,
and, when planted, shall be properly wrapped and guyed.
(b) Automatic Underground Irrigation Plan. This plan shall detail the
-------------------------------------
complete underground irrigation system for all planted areas of the Parcel,
which system shall provide 100% coverage of all landscaped areas on the Parcel.
(c) Additional Requirements. Both the planting plan and the
-----------------------
irrigation plan for each Parcel shall be subject to the following additional
requirements: each such plan shall be prepared by a landscape architect
experienced in commercial landscaping; each such plan shall contain an outline
of maintenance procedures for the landscaping or irrigation (as the case may
be), specifying the respective duties of all parties to be involved in such
maintenance. Maintenance procedures shall include planting schedules (including
schedules for seasonal flowers) and shall specify the material, soil mix, and
time for planting.
9. Construction. All construction on any Parcel shall comply with all
------------
applicable Laws. Construction activities on any Parcel shall not:
(a) cause any unreasonable increase in the cost of constructing
Improvements upon another Owner's Parcel;
(b) unreasonably interfere with construction being performed on any
other Parcel;
(c) unreasonably interfere with the use, occupancy, or enjoyment of any
other Parcel by the Owner or occupants of such other Parcel; or
(d) cause any building or building signage located on any other Parcel to
be in violation of any applicable Law.
-7-
<PAGE>
10. Maintenance Provided by Riverstone Association. To insure a high
----------------------------------------------
quality appearance along the roads within and adjacent to Riverstone
(specifically, S.R.5, S.R.140, and Riverstone Parkway), the Declarant shall have
the right to form an Association whose purposes shall be:
(a) the maintenance of landscaping and irrigation in parkway road medians;
(b) the maintenance of the Riverstone entrance signs including lighting,
landscaping, and irrigation;
(c) the maintenance and repair of Riverstone information and directional
signs.
Each Owner agrees to join the Association and for items (a), (b), and (c)
the annual assessment applicable to the Owner's Parcel shall be determined by
the Association, based upon actual and estimated costs and expenses and
apportioned on a per acre basis with each Parcel being apportioned such share of
the total cost as the total acreage of the Parcel bears to the total acreage
within Riverstone (approximately 500 acres). In no case, however, shall the
annual assessment for an Owner exceed $200.00 per acre during the first three
years after the Effective Date and shall not increase by more than 3.0% per year
after that.
Each Owner shall pay his share of estimated Association expenses for the
work outlined in (a), (b), and (c) above annually and in advance. After the
first full calendar year of operation, the estimated annual Association expenses
shall be based upon the previous year's actual expenses. A 3.0% management
charge shall be allowed as an expense.
On or before the 90th day following the end of each calendar year during
the term of this Declaration, the Association shall send to each Owner a
statement of each Owner's share of the Association's expenses for the preceding
calendar year together with a good faith estimate for the amount of the annual
payment for the forthcoming year. The statement for the prior year shall be
reasonably detailed and certified as true and correct by an officer of the
Association. Each Owner shall pay the good faith estimate within 60 days of his
receipt of the estimate. The Association's estimate shall not exceed 103% of
each Owner's share of actual Association expenses for the preceding calendar
year unless a greater estimate is, in each Owner's sole discretion, supported by
documentation satisfactory to the Owner and approved by the Owner. If an
Owner's share of actual Association expenses exceeds the estimated amount paid
by each Owner for the preceding calendar year, the excess amount shall be paid
by the Owner to the Association within 90 days after the receipt of the
statement relating to the preceding year from the Association. If the estimated
amount paid by an Owner for the preceding calendar year exceeds the Owner's
share of actual Association expenses, the Association shall pay the excess
amount to the Owner simultaneously with delivery by the Association to the Owner
of the statement for the preceding calendar year. Each Owner's share of
Association expenses for a partial calendar year shall be prorated on a per diem
basis for such partial calendar year.
-8-
<PAGE>
An Owner shall have the right to audit the Association's books and records
to verify the Association's calculation of Association expenses and the Owner's
share. If the Association erred in its favor, the Association shall immediately
refund the overcharge to each owner upon demand.
11. Road Lighting. The Declarant shall cause the roads within Riverstone
-------------
to be lighted with poles being located approximately 200 feet apart on both
sides of the roads. The lighting will use high pressure sodium fixtures. The
Declarant intends to have the system installed and maintained by the Georgia
Power Company ("GPC"). Each Owner agrees to pay GPC (or any alternative or
subsequent supplier) for the charges for the lights located in and along the
right-of-way in front of the Owner's Parcel, and, if permitted by GPC, the Owner
will be billed directly by GPC for such charges. The Declarant will be
responsible for paying those charges for lights located along the right-of-way
that do not abut any other Owner's Parcel.
12. Maintenance. Each Owner shall maintain his Parcel and the
-----------
Improvements on it and keep them in a neat and orderly condition and free of
trash, debris, pests, and unsafe or unsanitary conditions, in compliance with
all applicable Laws, and in compliance with this Declaration. The minimum
standard of maintenance shall be comparable to the standard of maintenance
followed in other first-class developments of comparable size in the
metropolitan Atlanta, Georgia, area. All Improvements shall be repaired or
replaced with materials at least equal to the quality of the original materials
being repaired or replaced and maintain the architectural and aesthetic harmony
and integrity of the Property and Parcels as a whole. No Owner shall cause or
permit a nuisance to exist on his Parcel. Each Owner shall be responsible to
landscape, plant, and irrigate his Parcel and trim, cut, mow, water, and
regularly fertilize all exterior areas of his Parcel (including adjacent road
rights-of-way) not covered by Improvements and paving.
Each Owner shall maintain and keep in good repair all paved surfaces of his
Parcel and shall immediately repair pot holes or other defects in the paving.
Each Owner shall resurface all paved areas of the Property at least once every
10 years unless such obligation is waived in writing by Declarant. Each Owner
shall regularly sweep, light, stripe (where appropriate), and clean all paved
and parking areas of his Parcel and, as soon as reasonably practical, remove all
ice and snow that may be found at any time upon those areas.
From time to time at reasonable hours, Declarant or any authorized agent of
Declarant may enter upon and inspect any Parcel to insure that each Improvement
and the maintenance of the Parcel comply with the provisions of this
Declaration. If an Owner fails to perform his maintenance obligations,
Declarant has the right (but not the obligation) to perform such maintenance at
the Owner's expense, and the Owner shall promptly reimburse Declarant upon
demand for any such expenses incurred by Declarant. If such expenses are not
promptly reimbursed, in addition to whatever other remedies that Declarant may
have, Declarant may lien the Parcel.
13. Damage or Destruction of Building Improvements. If any building
----------------------------------------------
Improvement, including building signage, is damaged or destroyed by fire or
other hazard (the "Event"), the Owner upon whose Parcel the Improvement is
-9-
<PAGE>
located shall immediately remove the debris resulting from such Event and
promptly begin the repair or restoration of the damaged or destroyed Improvement
or, if the Owner decides not to repair or restore or cannot repair or restore
for any reason, increase the landscaping and sodding of the Parcel so the Parcel
does not detract from the rest of the Property.
14. Loading Spaces. Delivery vehicles to a Parcel must be loaded and
--------------
unloaded on and from the Parcel. Each Owner shall provide sufficient loading
and unloading spaces and other necessary Improvements to permit all loading and
unloading to be done on and from his Parcel.
15. Refuse. Each Owner shall store all trash and garbage in adequate
------
containers, shall locate such containers so they are not readily visible from
the parking area for the Parcel, shall arrange for regular removal of such trash
or garbage, and shall be responsible for cleaning, sweeping, and maintaining the
area where trash and garbage is stored. No Owner or tenant of any Parcel shall
permit or allow any junk, scrap, rubbish, trash, refuse, or litter to remain on
the Parcel so as to detract from the neat and well-ordered appearance of the
Parcel or constitute a fire hazard. All refuse areas for each Parcel shall be
screened by a permanent masonry wall enclosure constructed to match the masonry
finish on the main Improvements of the Parcel, which wall shall have a metal
gate that shall not be visible from the street or streets abutting the Parcel.
16. Enforcement. Declarant may enforce the requirements and Restrictions
-----------
in this Declaration by a proceeding at law or in equity against any person or
persons violating or attempting to violate or circumvent those requirements and
Restrictions, and, in such a proceeding, Declarant may request a temporary
restraining order and injunction to restrain and enjoin violations and may seek
damages for violations. The remedies given to Declarant in this section are
distinct and cumulative remedies, and the exercise of any such remedy shall not
prevent Declarant from exercising any other right or remedy it may have.
Declarant's failure, however long continued, to enforce any right, reservation,
Restriction, or condition contained in this Declaration shall not be deemed a
waiver of such right, reservation, Restriction, or condition and shall not bar
or affect any other right or remedy of Declarant contained in this Declaration.
The two-year statute of limitations period of O.C.G.A. 9-3-29 shall apply with
respect to any breach of any Restriction. If Declarant prevails in any such
action, it may recover its reasonable attorney's fees and other litigation
expenses actually incurred in connection with such action.
17. No Temporary Structures. No temporary Improvement, including
-----------------------
trailers, campers, tents, and similar structures, shall be placed upon any
portion of any Parcel at any time, except, during construction of any
Improvements on the Parcel, the general contractor being used for such
construction may erect a temporary structure for its use during construction,
which structure must be promptly removed upon substantial completion of
construction or if construction is not continuously pursued.
18. Mechanical Units. Any exterior mechanical units, including roof
----------------
units, must be screened.
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<PAGE>
19. Duration. The Restrictions and every other provision of this
--------
Declaration shall continue in full force and effect for 20 years from the
Effective Date, after which time, the Declaration shall be automatically
extended for successive periods of 20 years each, unless Declarant records a
Notice of Termination of Declaration before the expiration of the 20-year
period, in which event the Declaration shall terminate at the end of the 20-year
period. If any Law prohibits any Restriction or this Declaration from being
enforceable for more than 20 years or beyond any other stated period, Declarant
is hereby granted a power-of-attorney coupled with an interest to re-record this
Declaration at any time and from time to time for the purpose of extending its
enforceability, which power Declarant may or may not exercise in its sole
discretion. Declarant may terminate, extend, modify, amend, or waive any of the
Restrictions or any provision, covenant, or condition contained in this
Declaration as to the whole Property or any Parcel. No such termination,
extension, modification, waiver, or amendment shall be effective until a proper
instrument in writing has been duly executed and recorded in the Office of the
Clerk of the Superior Court of Cherokee County, Georgia. Declarant shall
provide each Owner with a copy of any such termination, extension, modification,
waiver, or amendment.
20. Assignment. Declarant may assign any and all of the rights, remedies,
----------
powers, obligations, and reservations of Declarant contained in this Declaration
to any other person, corporation, association, partnership, or other entity
(collectively, a "Transferee") to whom Declarant conveys any of the Property to
be benefited by the Restrictions and this Declaration. To the extent of such
assignment, the Transferee shall have the same rights, remedies, powers, and
obligations as are given to Declarant in this Declaration.
21. Constructive Notice. Every person who subsequently owns or acquires
-------------------
any right, title, estate, or interest in the Property or any Parcel is and
shall be conclusively deemed to have consented and agreed to every requirement,
covenant, condition, and Restriction contained in this Declaration, even if
this Declaration is not referenced in the instrument by which such person
acquires an interest in the Property or the Parcel.
22. Headings. The headings or titles to the sections of this Declaration
--------
are for reference purposes only and shall have no effect upon the construction
or interpretation of any section.
23. Separability. If a court shall hold any part of this Declaration or
------------
the application of any part to any person or circumstances invalid, the
remainder of this Declaration or the application of the remainder of this
Declaration to such persons or circumstances shall not be affected by such
holding and shall remain in full force and effect.
24. Conflict. Notwithstanding any provision to the contrary, if there is
--------
a conflict, ambiguity, or other inconsistency between any of the terms and
provisions of this Declaration and any Law, the terms and provisions which are
more restrictive shall be deemed controlling.
25. Notices to Declarant and Owners.
-------------------------------
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<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 1st day of January, 1999, by and among
CHEROKEE BANK, N.A. (Proposed) (the "Bank"), a proposed national bank; CHEROKEE
BANKING COMPANY, a bank holding company incorporated under the laws of the State
of Georgia (the "Company") (collectively, the Bank and the Company are referred
to hereafter as the "Employer"), and DENNIS W. BURNETTE, a resident of the State
of Georgia (the "Employee").
RECITALS:
The Employer desires to employ the Employee as the President and Chief
Executive Officer of the Bank and of the Company and the Employee desires to
accept such employment.
In consideration of the above premises and the mutual agreements
hereinafter set forth, the parties hereby agree as follows:
1. DEFINITIONS. Whenever used in this Agreement, the following terms and their
-----------
variant forms shall have the meaning set forth below:
1.1 "AGREEMENT" shall mean this Agreement and any exhibits incorporated
---------
herein together with any amendments hereto made in the manner described in this
Agreement.
1.2 "AFFILIATE" shall mean any business entity which controls the Company, is
---------
controlled by or is under common control with the Company.
1.3 "AREA" shall mean the geographic area within the boundaries of Cherokee
----
and Pickens Counties, Georgia. It is the express intent of the parties that the
Area as defined herein is the area where the Employee performs or performed
services on behalf of the Employer under this Agreement as of, or within a
reasonable time prior to, the termination of the Employee's employment
hereunder.
1.4 "BUSINESS OF THE EMPLOYER" shall mean the business conducted by the
------------------------
Employer, which is commercial banking.
1.5 "CAUSE" shall mean:
-----
1.5.1 With respect to termination by the Employer:
(a) A material breach of the terms of this Agreement by the Employee,
including, without limitation, persistent failure by the Employee to
follow reasonable written instructions or policies in a satisfactory
manner as determined by the Board of Directors of either the Bank or the
Company in its sole discretion, which level of unsatisfactory performance
remains uncured for a period of thirty (30) days following the delivery
of written notice of such breach to the Employee by the Employer. Such
notice shall (i) specifically identify the duties that the Board of
Directors of either the Bank or the Company believes Employee has failed
to perform, (ii) state the facts upon which such board of directors made
such determination, (iii) specifically identify those steps required
<PAGE>
to cure the unsatisfactory performance, and (iv) be approved by a
resolution passed by a majority of the directors of such board of
directors then in office;
(b) Conduct by the Employee that amounts to fraud, dishonesty or
willful misconduct in the performance of his duties and responsibilities
hereunder;
(c) The conviction of the Employee of a felony;
(d) Conduct by the Employee that amounts to gross and willful
insubordination or inattention to his duties and responsibilities
hereunder; or
(e) Conduct by the Employee that results in removal from his position
as an officer or employee of the Bank or of the Company pursuant to a
written order by any regulatory agency with authority or jurisdiction
over the Bank or Company, as applicable.
1.5.2 With respect to termination by the Employee, a material
diminution in the powers, responsibilities or duties of the Employee
hereunder or a material breach of the terms of this Agreement by the
Employer, which remains uncured after the expiration of thirty (30) days
following the delivery of written notice of such breach to the Employer by
the Employee.
1.6 "COMPANY INFORMATION" means Confidential Information and Trade Secrets.
-------------------
1.7 "CONFIDENTIAL INFORMATION" means data and information relating to the
------------------------
business of the Employer (which does not rise to the status of a Trade Secret)
which is or has been disclosed to the Employee or of which the Employee became
aware as a consequence of or through the Employee's relationship to the Employer
and which has value to the Employer and is not generally known to its
competitors. Confidential Information shall not include any data or information
that has been voluntarily disclosed to the public by the Employer (except where
such public disclosure has been made by the Employee without authorization) or
that has been independently developed and disclosed by others, or that otherwise
enters the public domain through lawful means.
1.8 "EFFECTIVE DATE" shall mean the date on which the Employer and the
--------------
Employee execute the Agreement.
1.9 "PERMANENT DISABILITY" shall mean the total inability of the Employee to
--------------------
perform his duties under this Agreement for the duration of the short-term
disability period under the Employer's policy then in effect as certified by a
physician chosen by the Employer and reasonably acceptable to the Employee.
1.10 "TERM" shall mean that initial three calendar-year period commencing on
----
January 1, 1999 (the "Beginning Date") and successive calendar years thereafter,
unless this Agreement is terminated earlier, as provided for in Section 3 below.
The Term shall not renew as of any successive calendar year following the
initial three calendar-year period if either the Employer or the Employee gives
notice to the other no less than sixty (60) days prior to January 1 of that
calendar year of the intent to allow the Agreement to expire as of the last day
of the immediately preceding calendar year.
1.11 "TRADE SECRETS" means Employer information including, but not limited
-------------
to, technical or nontechnical data, formulas, patterns, compilations, programs,
devices, methods, techniques, drawings, processes, financial data, financial
plans, product plans or lists of actual or potential customers or
-2-
<PAGE>
suppliers which (a) derives economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by,
other persons who can obtain economic value from its disclosure or use; and (b)
is the subject of efforts that are reasonable under the circumstances to
maintain its secrecy.
2. DUTIES.
------
2.1 POSITION. The Employee is employed initially as the President and Chief
--------
Executive Officer of the Bank and of the Company and, subject to the direction
of the Board of Directors of the Bank or of the Company, as applicable, or their
designee(s), shall perform and discharge well and faithfully the duties normally
associated with the Employee's position, and in addition, any other duties which
shall reasonably be assigned to him from time to time by the Bank or the Company
in connection with the conduct of its business.
2.2 FULL-TIME STATUS. The Employee shall: (a) devote substantially all of
----------------
his time, energy and skill during regular business hours to the performance of
the duties of his employment (reasonable vacations and reasonable absences due
to illness excepted) and faithfully and industriously perform such duties; (b)
diligently follow and implement all management policies and decisions
communicated to him by the Board of Directors of either the Bank or the Company;
and (c) timely prepare and forward to the Board of Directors of either the Bank
or the Company all reports and accounting as may be requested of the Employee.
2.3 PERMITTED ACTIVITIES. The Employee shall devote his entire business
--------------------
time, attention and energies to the Business of the Employer and shall not
during the Term be engaged (whether or not during normal business hours) in any
other business or professional activity, whether or not such activity is pursued
for gain, profit or other pecuniary advantage; but this shall not be construed
as preventing the Employee from (a) investing his personal assets in businesses
which (subject to clause (b) below) are not in competition with the Business of
the Employer and which will not require any services on the part of the Employee
in their operation or affairs and in which his participation is solely that of
an investor, (b) purchasing securities in any corporation whose securities are
regularly traded provided that such purchase shall not result in him
collectively owning beneficially at any time five percent (5%) or more of the
equity securities of any business in competition with the Business of the
Employer; and (c) participating in civic and professional affairs and
organizations and conferences, preparing or publishing papers or books or
teaching so long as such activities do not materially interfere with the
performance of his duties hereunder; provided, however, that the provisions of
this Section 2.3 do not prohibit the Employee's completion of consulting
assignments that originated prior to December 31, 1998, which Employee
contemplates having contemplated by February 28, 1999.
3. TERM AND TERMINATION.
--------------------
3.1 TERM. Except as provided in Section 3.2, this Agreement shall remain in
----
effect for the Term unless the application for the Bank's charter is denied by
the Office of the Comptroller of the Currency ("OCC"), in which event the
Agreement shall terminate on the date upon which such application is denied by
the OCC and all available appeals have been exhausted by the Employer. In the
event the application for charter is denied by the OCC, the Employer shall have
no further obligation to the Employee.
3.2 TERMINATION. During the Term, the employment of the Employee under this
-----------
Agreement may be terminated only as follows:
-3-
<PAGE>
3.2.1 By the Employer or the Employee in the event that the Company
and the Bank abandon their organizational efforts, in which event the
Employer shall have no further obligation to the Employee.
3.2.2 By the Employer:
(a) For Cause, upon written notice to the Employee pursuant to
Section 1.5.1 hereof, which notice has been approved by a resolution
passed by a majority of the directors then in office of either the
Board of Directors of the Bank or the Company, in which event the
Employer shall have no further obligation to the Employee except for
the payment of any amounts due and owing under Section 4 hereof on
the effective date of termination;
(b) Without Cause at any time, provided that the Employer shall
give the Employee thirty (30) days' prior written notice of its
intent to terminate, in which event the Employer shall be required
to pay Employee severance at a rate equal to his rate of Base Salary
(defined below) then in effect for a period of twelve (12) months
following the effective date of termination, to be paid, in the
Employee's discretion (i) as a lump sum payment within thirty (30)
days of the effective date of termination, or (ii) in equal monthly
installments over a period not to exceed twelve (12) months; or
(c) Upon the Permanent Disability of Employee at any time, provided
that the Employer shall give the Employee thirty (30) days' prior
written notice of its intent to terminate, in which event the
Employer shall have no further obligation to the Employee except for
the payment of any amounts due and owing under Section 4 hereof on
the effective date of termination.
3.2.3 By the Employee:
(a) For Cause, in which event the Employer shall be required pay
Employee severance at a rate equal to his rate of Base Salary
(defined below) then in effect for a period of twelve (12) months
following the effective date of termination, to be paid, in the
Employee's discretion (i) as a lump sum payment within thirty (30)
days of the effective date of termination, or (ii) in equal monthly
installments over a period not to exceed twelve (12) months; or
(b) Without Cause or upon the Permanent Disability of the Employee,
provided that the Employee shall give the Employer sixty (60) days'
prior written notice of his intent to terminate, in which event the
Employer shall have no further obligation to the Employee except
future payment of any amounts due and owing under Section 4 hereof
on the effective date of the termination.
3.2.4 At any time upon mutual, written agreement of the parties, in
which event the Employer shall have no further obligation to the
Employee except for the payment of any amounts due and owing under
Section 4 hereof on the effective date of termination unless otherwise
set forth in the written agreement.
-4-
<PAGE>
3.2.5 Notwithstanding anything in this Agreement to the contrary, the
Term shall end automatically upon the Employee's death, in which event
the Employer shall have no further obligation to the Employee except for
the payment of any amounts due and owing under Section 4 on the effective
date of termination.
3.2.6 In the event of a "change in control" (as defined below), the
Employee may elect (a) to negotiate a new employment agreement with the
acquiring party, or (b) to terminate his employment and receive a lump
sum payment equal to two (2) times his Base Salary then in effect in
full and final settlement of all amounts due under this Agreement;
provided, however, that any action taken with the consent of the
Employee or any isolated, insubstantial and inadvertent action not taken
in bad faith and which is promptly remedied after notice given by the
Employee shall not give rise to Employee's rights under this Section
3.2.6. For purposes of this Section, the term "change in control" shall
mean: the acquisition by any person, entity or "group," within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), of (i) beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act) of twenty-five
percent (25%) or more of the then outstanding voting securities of the
Company or the Bank (including an acquisition by merger), or (ii) all or
substantially all of the assets of the Company or the Bank, in each case
other than an acquisition of voting securities or assets of the Bank by
an entity controlled by or under common control (as "control" is defined
for purposes of the Exchange Act) with the Company.
3.2.7 In the event the Employer issues a notice that the original Term
shall not be renewed for its first one-year renewal period or, when
applicable, that any extended Term shall not be renewed by the
immediately succeeding one-year renewal period, all in accordance with
Section 1.10 above, for any reason other than Cause or the Employee's
death or Permanent Disability, the Employer shall be required to pay
Employee severance at a rate equal to his rate of Base Salary (defined
below) then in effect for a period of twelve (12) months following the
effective date of termination, to be paid, in the Employee's discretion
(i) as a lump sum payment within thirty (30) days of the effective date
of termination, or (ii) in equal monthly installments over a period not
to exceed twelve (12) months.
4. COMPENSATION. During the Term, the Employee shall receive the following
------------
salary and benefits:
4.1 BASE SALARY. The Employee shall be compensated at a base rate of $90,000
-----------
annually until the opening of the Bank for business and $120,000 subsequent to
the opening of the Bank for business (the "Base Salary"). Base Salary shall be
payable in accordance with the Employer's normal payroll practices. Following
the initial three calendar-year period of this Agreement, the Employer will
review the Employee's job performance, Base Salary and other compensation
annually following the end of each fiscal year, with the first review occurring
in 2002; provided, however, that the Employee will receive no change in Base
Salary before the Employer's review in 2002.
4.2 INCENTIVE COMPENSATION. The Employee shall be entitled to receive a
----------------------
performance bonus in accordance with the following terms:
(a) Beginning with the 2000 calendar year and each subsequent calendar
year thereafter, the Board of Directors of the Bank may establish within
ninety (90) days after the beginning of such calendar year pre-established
performance measures, as determined in its sole discretion,
-5-
<PAGE>
which, if established, will serve as the basis for determining the
Executive's bonus compensation for that calendar year. The Employer shall pay
the Employee a cash bonus equal to the amount determined in accordance with
any performance measures so established.
(b) The following conditions must be satisfied as further conditions to
any commitment by the Board of Directors of the Bank to pay a bonus to the
Employee pursuant to this Section 4.2:
(i) the Board of Directors of the Bank shall consider, and document
its findings in the minutes of the meeting wherein the issue
was considered, the Employee's performance in light of the
status of the Bank's internal controls, loan documentation,
credit underwriting, interest rate exposure, asset growth,
asset quality, earnings, and such other performance goals and
objectives established by the Board of Directors of the Bank;
(ii) the overall condition of the Bank must be "satisfactory" in the
opinion of the OCC as set forth in the most current OCC Report
of Supervisory Activity provided to the Board of Directors of
the Bank and the Uniform Financial Institution Rating of the
Bank shall not be less than a "2"; and
(iii) the Bank shall be "well capitalized" as defined under
regulations promulgated by the OCC pursuant to the Federal
Deposit Insurance Corporation Improvement Act of 1991.
Any bonus which becomes payable pursuant to this Section 4.2 shall be paid in
a lump sum in cash within thirty (30) days after the close of the calendar year
for which it is payable.
4.3 STOCK OPTIONS. The Company will grant to the Employee a nonqualified
-------------
option to purchase, at a per share purchase price of $10.00, 30,000 shares of
the Company's common stock. The option will become vested and exercisable in
equal increments of 6,000 shares each, commencing on the first anniversary of
the option grant date and continuing for the next four successive anniversaries
until the option is fully vested and exercisable. No unvested portion of the
option shall become vested following the Employee's termination of employment,
regardless of the reason. The option shall expire generally upon the earlier of
ninety (90) days following termination of employment or upon the tenth (10/th/)
anniversary of the option grant date.
4.4 HEALTH INSURANCE. The Employer shall reimburse the Employee for his
----------------
current cost of premium payments paid by the Employee for the Employee's
individual medical and dental insurance covering the Employee and his spouse
until the first to occur of the following (i) such time as the Employee becomes
eligible for coverage under the Bank's existing medical and dental insurance
plans or (ii) such time as the Employer abandons its organizational efforts.
4.5 AUTOMOBILE ALLOWANCE. Beginning as of the date the Bank opens for
--------------------
business, the Employer will provide the Employee with a monthly automobile
allowance equal to $600. In lieu of an automobile allowance prior to the Bank
opening for business, the Employer shall reimburse the Employee for business
mileage at the IRS-approved rate, but not to exceed $600 per month.
4.6 BUSINESS EXPENSES; MEMBERSHIPS. The Employer specifically agrees to
------------------------------
reimburse the Employee for reasonable business (including travel) expenses
incurred by him in the performance of his duties hereunder, as approved from
time to time by the Board of Directors of either the Bank or the
-6-
<PAGE>
Company; provided, however, that the Employee shall, as a condition of
reimbursement, submit verification of the nature and amount of such expenses in
accordance with reimbursement policies from time to time adopted by the Employer
and in sufficient detail to comply with rules and regulations promulgated by the
Internal Revenue Service. The Employer shall reimburse the Employee for Rotary
Club membership dues and initiation fees and membership dues with a mutually
agreed upon golf facility.
4.7 VACATION. The Employee shall be entitled to two (2) weeks of vacation
--------
during the 1999 calendar year and three (3) weeks of vacation during each
subsequent calendar year, during which time his compensation shall be paid in
full.
4.8 BENEFITS. In addition to the benefits specifically described herein, the
--------
Employee shall be entitled to such benefits as may be available from time to
time for management employees of the Employer. All such benefits shall be
awarded and administered in accordance with the Employer's standard policies and
practices. Such benefits may include, by way of example only, profit-sharing
plans, retirement or investment funds, dental, health, life and disability
insurance benefits and such other benefits as the Employer deems appropriate.
4.9 WITHHOLDING. The Employer may deduct from each payment of compensation
-----------
hereunder all amounts required to be deducted and withheld in accordance with
applicable federal and state income, FICA and other withholding requirements.
5. COMPANY INFORMATION.
-------------------
5.1 OWNERSHIP OF INFORMATION. All Company Information received or developed
------------------------
by the Employee while employed by the Employer will remain the sole and
exclusive property of the Employer.
5.2 OBLIGATIONS OF THE EMPLOYEE. The Employee agrees (a) to hold Company
---------------------------
Information in strictest confidence, and (b) not to use, duplicate, reproduce,
distribute, disclose or otherwise disseminate Company Information or any
physical embodiments thereof and may in no event take any action causing or fail
to take any action necessary in order to prevent any Company Information from
losing its character or ceasing to qualify as Confidential Information or a
Trade Secret. In the event that the Employee is required by law to disclose any
Company Information, the Employee will not make such disclosure unless (and then
only to the extent that) the Employee has been advised by independent legal
counsel that such disclosure is required by law and then only after prior
written notice is given to the Company when the Employee becomes aware that such
disclosure has been requested and is required by law. This Section 5 shall
survive for a period of two (2) years following termination of this Agreement
for any reason with respect to Confidential Information, and shall survive
termination of this Agreement for any reason for so long as is permitted by the
then-current Georgia Trade Secrets Act of 1990, O.C.G.A. (S)(S) 10-1-760-10-1-
767, with respect to Trade Secrets.
5.3 DELIVERY UPON REQUEST OR TERMINATION. Upon request by the Employer, and
------------------------------------
in any event upon termination of his employment with the Employer, the Employee
will promptly deliver to the Employer all property belonging to the Employer,
including, without limitation, all Company Information then in his possession or
control.
6. NON-COMPETITION. The Employee agrees that during his employment by the
---------------
Employer hereunder and, in the event of the termination of his employment for
any reason other than pursuant to Sections
-7-
<PAGE>
3.2.3(a) and 3.2.6, for a period of twelve (12) months thereafter, he will not
(except on behalf of or with the prior written consent of the Employer), within
the Area, either directly or indirectly, on his own behalf or in the service or
on behalf of others, as a principal, partner, officer, director, manager,
supervisor, administrator, consultant, executive employee or in any other
capacity which involves duties and responsibilities similar to those undertaken
for the Employer engage in any business which is the same as or essentially the
same as the Business of the Employer.
7. NON-SOLICITATION OF CUSTOMERS. The Employee agrees that during his
-----------------------------
employment by the Employer hereunder and for a period of twelve (12) months
thereafter, he will not (except on behalf of or with the prior written consent
of the Employer), within the Area, on his own behalf or in the service or on
behalf of others, solicit, divert or appropriate or attempt to solicit, divert
or appropriate, directly or by assisting others, any business from any of the
Employer's customers, including actively sought prospective customers, with whom
the Employee has or had material contact during the last two (2) years of his
employment, for purposes of providing products or services that are competitive
with those provided by the Employer.
8. NON-SOLICITATION OF EMPLOYEES. The Employee agrees that during his
-----------------------------
employment by the Employer hereunder and for a period of twelve (12) months
thereafter, he will not, within the Area, on his own behalf or in the service or
on behalf of others, solicit, recruit or hire away or attempt to solicit,
recruit or hire away, directly or by assisting others, any employee of the
Employer or its Affiliates, whether or not such employee is a full-time employee
or a temporary employee of the Employer or its Affiliates and whether or not
such employment is pursuant to written agreement and whether or not such
employment is for a determined period or is at will.
9. REMEDIES. The Employee agrees that the covenants contained in Sections 5
--------
through 8 of this Agreement are of the essence of this Agreement; that each of
the covenants is reasonable and necessary to protect the business, interests and
properties of the Employer; and that irreparable loss and damage will be
suffered by the Employer should he breach any of the covenants. Therefore, the
Employee agrees and consents that, in addition to all the remedies provided by
law or in equity, the Employer shall be entitled to a temporary restraining
order and temporary and permanent injunctions to prevent a breach or
contemplated breach of any of the covenants. The Employer and the Employee
agree that all remedies available to the Employer or the Employee, as
applicable, shall be cumulative.
10. SEVERABILITY. The parties agree that each of the provisions included in
------------
this Agreement is separate, distinct and severable from the other provisions of
this Agreement and that the invalidity or unenforceability of any Agreement
provision shall not affect the validity or enforceability of any other provision
of this Agreement. Further, if any provision of this Agreement is ruled invalid
or unenforceable by a court of competent jurisdiction because of a conflict
between the provision and any applicable law or public policy, the provision
shall be redrawn to make the provision consistent with and valid and enforceable
under the law or public policy.
11. NO SET-OFF BY THE EMPLOYEE. The existence of any claim, demand, action or
--------------------------
cause of action by the Employee against the Employer, or any Affiliate of the
Employer, whether predicated upon this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Employer of any of its rights
hereunder.
12. NOTICE. All notices and other communications required or permitted under
------
this Agreement shall be in writing and, if mailed by prepaid first-class mail or
certified mail, return receipt requested, shall be deemed to have been received
on the earlier of the date shown on the receipt or three (3) business
-8-
<PAGE>
days after the postmarked date thereof. In addition, notices hereunder may be
delivered by hand, facsimile transmission or overnight courier, in which event
the notice shall be deemed effective when delivered or transmitted. All notices
and other communications under this Agreement shall be given to the parties
hereto at the following addresses:
(i) If to the Employer, to it at:
Cherokee Bank, N.A.
Post Office Box 1314
Canton, Georgia 30114
(ii) If to the Employee, to him at:
Dennis W. Burnette
656 Big Canoe
Big Canoe, Georgia 30143
13. ASSIGNMENT. Neither party hereto may assign or delegate this Agreement or
----------
any of its rights and obligations hereunder without the written consent of the
other party hereto.
14. WAIVER. A waiver by the Employer or the Employee of any breach of this
------
Agreement by the other shall not be effective unless in writing, and no waiver
shall operate or be construed as a waiver of the same or another breach on a
subsequent occasion.
15. ARBITRATION. Any controversy or claim arising out of or relating to this
-----------
contract, or the breach thereof, shall be settled by binding arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. Judgment upon the award rendered by the arbitrator may be entered
only in the State Court of Cherokee County or the federal court for the Northern
District of Georgia. The Employer and the Employee agree to share equally the
fees and expenses associated with the arbitration proceedings; provided,
however, that each party will pay for and bear the cost of its own experts,
evidence and counsel's fees, except that in the discretion of the arbitrator,
any award may include the cost of a party's counsel if the arbitrator expressly
determines that the party against whom the award is entered engaged in
arbitration in bad faith or as a delaying tactic.
16. ATTORNEYS' FEES. In the event that the parties have complied with this
---------------
Agreement with respect to arbitration of disputes and litigation ensues between
the parties concerning the enforcement of an arbitration award, the party
prevailing in such litigation shall be entitled to receive from the other party
all reasonable costs and expenses, including without limitation attorneys' fees,
incurred by the prevailing party in connection with such litigation, and the
other party shall pay such costs and expenses to the prevailing party promptly
upon demand by the prevailing party.
17. APPLICABLE LAW. This Agreement shall be construed and enforced under and
--------------
in accordance with the laws of the State of Georgia.
18. INTERPRETATION. Words importing any gender include all genders. Words
--------------
importing the singular form shall include the plural and vice versa. The terms
"herein", "hereunder", "hereby", "hereto", "hereof" and any similar terms refer
to this Agreement. Any captions, titles or headings preceding the
-9-
<PAGE>
text of any article, section or subsection herein are solely for convenience of
reference and shall not constitute part of this Agreement or affect its meaning,
construction or effect.
19. ENTIRE AGREEMENT. This Agreement embodies the entire and final agreement
----------------
of the parties on the subject matter stated in the Agreement. No amendment or
modification of this Agreement shall be valid or binding upon the Employer or
the Employee unless made in writing and signed by both parties. All prior
understandings and agreements relating to the subject matter of this Agreement
are hereby expressly terminated.
20. RIGHTS OF THIRD PARTIES. Nothing herein expressed is intended to or shall
-----------------------
be construed to confer upon or give to any person, firm or other entity, other
than the parties hereto and their permitted assigns, any rights or remedies
under or by reason of this Agreement.
21. SURVIVAL. The obligations of the Employee pursuant to Sections 5, 6, 7, 8
--------
and 9 shall survive the termination of the employment of the Employee hereunder
for the period designated under each of those respective sections.
22. JOINT AND SEVERAL. The obligations of the Bank and the Company to Employee
-----------------
hereunder shall be joint and several.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
-10-
<PAGE>
IN WITNESS WHEREOF, the Employer and the Employee have executed and delivered
this Agreement as of the date first shown above.
THE BANK:
CHEROKEE BANK, N.A.
By: /s/ Donald F. Stevens
------------------------------
Print Name: _________________________
Title: Chairman of the Board
-----------------------------
THE COMPANY:
CHEROKEE BANKING COMPANY
By: /s/ Donald F. Stevens
------------------------------
Print Name: _________________________
Title: Chairman of the Board
-----------------------------
THE EMPLOYEE:
/s/ Dennis W. Burnette
-------------------------------------
DENNIS W. BURNETTE
-11-
<PAGE>
EXHIBIT 10.5
WARRANT AGREEMENT
THIS AGREEMENT is made and entered into as of this ____ day of
_____________, 1999, by and between CHEROKEE BANKING COMPANY, a Georgia
corporation (the "Company"), and _________________________ ("Warrant Holder").
W I T N E S S E T H
-------------------
WHEREAS, Warrant Holder has served as an organizer in the formation of the
Company and the formation and establishment of Cherokee Bank, NA (the "Bank"), a
wholly-owned subsidiary of the Company; and
WHEREAS, Warrant Holder has purchased ________ shares of the Company's
common stock, no par value (the "Common Stock"), at a price of $10.00 per share;
and
WHEREAS, Warrant Holder will provide services to the Company as a director
of the Company; and
WHEREAS, the Company, in recognition of the financial risk undertaken by
Warrant Holder in organizing the Company and the Bank, desires to provide
Warrant Holder with the right to acquire at least the same number of shares of
the Company's Common Stock as Warrant Holder purchased in the Company's initial
offering of Common Stock, including any additional shares purchased specifically
to attain the minimum subscription requirements of the initial offering.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Warrant. Subject to the terms, restrictions, limitations and
----------------
conditions stated herein, the Company hereby grants to Warrant Holder a warrant
(the "Warrant") to purchase all or any part of an aggregate of _______________
(_____) shares of the Common Stock, subject to adjustment in accordance with
Section 7 hereof.
2. Term.
----
(a) The term for the exercise of the Warrant begins at 9:00 a.m.,
Eastern Time, on the first anniversary of the date that the Company first
issues its common stock (the "Issue Date") and ends at 5:00 p.m., Eastern
Time, on the earlier of the tenth anniversary of the Issue Date or 90 days
after Warrant Holder ceases to serve as a director of the Company (the
"Expiration Time"). The Warrant will vest at the rate of 1/3 per year
beginning on the first anniversary of the Issue Date. On each subsequent
anniversary of
<PAGE>
the Issue Date, an additional 1/3 of the Warrant shall vest. The vested
portion of the Warrant may be exercised in whole, or from time to time in
part, at any time prior to the Expiration Time.
(b) Notwithstanding any other provision of this Agreement, if the
Bank's capital falls below the minimum requirements as determined by the
primary federal regulator of the Company or the Bank (the "Regulator"), the
Regulator may direct the Company to require the Warrant Holder to exercise
or forfeit his or her Warrant. The Company will notify the Warrant Holder
within 45 days from the date the Regulator notifies the Company in writing
that the Warrant Holder must exercise or forfeit this Warrant. The Company
will cancel the Warrant if not exercised within 21 days of the Company's
notification to the Warrant Holder. The Company agrees to comply with any
Regulator request that the Company invoke its right to require the Warrant
Holder to exercise or forfeit his or her Warrant under the circumstances
stated above.
3. Purchase Price. The price per share to be paid by Warrant Holder for
--------------
the shares of Common Stock subject to this Warrant shall be $10.00, subject to
adjustment as set forth in Section 6 hereof (such price, as adjusted,
hereinafter called the "Purchase Price").
4. Exercise of Warrant. The Warrant may be exercised by Warrant Holder by
-------------------
delivery to the Company, at the address of the Company set forth under Section
10(a) hereof or such other address as to which the Company advises Warrant
Holder pursuant to Section 10(a) hereof, of the following:
(a) Written notice of exercise specifying the number of shares of
Common Stock with respect to which the Warrant is being exercised; and
(b) A cashier's or certified check payable to the Company for the
full amount of the aggregate Purchase Price for the number of shares as to
which the Warrant is being exercised.
5. Issuance of Shares. Upon receipt of the items set forth in Section 4,
------------------
and subject to the terms hereof, the Company shall cause to be delivered to
Warrant Holder stock certificates for the number of shares specified in the
notice to exercise, such share or shares to be registered under the name of
Warrant Holder. Notwithstanding the foregoing, the Company shall not be required
to issue or deliver any certificate for shares of the Common Stock purchased
upon exercise of the Warrant or any portion thereof prior to the fulfillment of
the following conditions:
(a) The admission of such shares for listing on all stock exchanges
on which the Common Stock is then listed;
(b) The completion of any registration or other qualification of such
shares which the Company shall deem necessary or advisable under any
federal or state law or under the rulings or regulations of the Securities
and Exchange Commission or any other governmental regulatory body;
-2-
<PAGE>
(c) The obtaining of any approval or other clearance from any federal
or state governmental agency or body, which the Company shall determine to
be necessary or advisable; or
(d) The lapse of such reasonable period of time following the
exercise of the Warrant as the Company from time to time may establish for
reasons of administrative convenience.
The Company shall have no obligation to obtain the fulfillment of these
conditions; provided, however, Warrant Holder shall have one full calendar year
after these conditions have been fulfilled to exercise his or her warrants
granted herein, notwithstanding any other provision herein.
6. Antidilution, Etc.
------------------
(a) If, prior to the Expiration Time, the Company shall subdivide its
outstanding shares of Common Stock into a greater number of shares, or
declare and pay a dividend of its Common Stock payable in additional shares
of its Common Stock, the Purchase Price as then in effect shall be
proportionately reduced, and the number of shares of Common Stock then
subject to exercise under the Warrant (and not previously exercised) shall
be proportionately increased.
(b) If, prior to the Expiration Time, the Company shall combine its
outstanding shares of the Common Stock into a smaller number of shares, the
Purchase Price, as then in effect, shall be proportionately increased, and
the number of shares of Common Stock then subject to exercise under the
Warrant (and not previously exercised), shall be proportionately reduced.
7. Reorganization, Reclassification, Consolidation or Merger. If, prior
---------------------------------------------------------
to the Expiration Time, there shall be any reorganization or reclassification of
the Common Stock (other than a subdivision or combination of shares provided for
in Section 6 hereof), or any consolidation or merger of the Company with another
entity, Warrant Holder shall thereafter be entitled to receive, during the term
hereof and upon payment of the Purchase Price, the number of shares of stock or
other securities or property of the Company or of the successor entity (or its
parent company) resulting from such consolidation or merger, as the case may be,
to which a holder of the Common Stock, deliverable upon the exercise of this
Warrant, would have been entitled upon such reorganization, reclassification,
consolidation or merger; and in any case, appropriate adjustment (as determined
by the Board of Directors of the Company in its sole discretion) shall be made
in the application of the provisions herein set forth with respect to the rights
and interest thereafter of Warrant Holder to the end that the provisions set
forth herein (including the adjustment of the Purchase Price and the number of
shares issuable upon the exercise of this Warrant) shall thereafter be
applicable, as near as may reasonably be practicable, in relation to any shares
or other property thereafter deliverable upon the exercise hereof.
8. Notice of Adjustments. Upon any adjustment provided for in Section 6
---------------------
or Section 7 hereof, the Company, within thirty (30) days thereafter, shall give
written notice thereof to Warrant Holder at the address set forth under Section
10(a) hereof or such other address as
-3-
<PAGE>
Warrant Holder may advise the Company pursuant to Section 10(a) hereof, which
notice shall state the Warrant Price as adjusted and the increased or decreased
number of shares purchasable upon the exercise of this Warrant, setting forth in
reasonable detail the method of calculation of each.
9. Transfer and Assignment.
-----------------------
(a) Neither this Warrant nor any rights hereunder are assignable or
transferable by Warrant Holder otherwise than by will or under the laws of
descent and distribution. During Warrant Holder's lifetime, this Warrant
is exercisable only by Warrant Holder (or by Warrant Holder's guardian or
legal representative, should one be appointed). More particularly, but
without limiting the generality of the foregoing, this Warrant may not be
assigned, transferred (except as aforesaid), pledged or hypothecated in any
way (whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process. Any attempted assignment,
transfer, pledge, hypothecation or other disposition of this Warrant shall
be null and void and without legal effect.
(b) Shares of Common Stock acquired by exercise of the Warrant
granted hereby may not be transferred or sold unless the transfer is exempt
from further regulatory approval or otherwise permissible under applicable
law, including state and federal securities laws, and will bear a legend to
this effect.
10. Miscellaneous.
-------------
(a) All notices, requests, demands and other communications required
or permitted hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand, telegram or facsimile transmission, or
if mailed, by postage prepaid first class mail, on the third business day
after mailing, to the following address (or at such other address as a
party may notify the other hereunder):
To the Company:
Cherokee Banking Company
P. O. Box 1314
1275 Riverstone Parkway
Canton, Georgia 30114
Attention: Dennis W. Burnette,
President and Chief Executive Officer
To Warrant Holder:
________________________________________
________________________________________
________________________________________
-4-
<PAGE>
(b) The Company covenants that it has reserved and will keep
available, solely for the purpose of issue upon the exercise hereof, a
sufficient number of shares of Common Stock to permit the exercise hereof
in full.
(c) No holder of this Warrant, as such, shall be entitled to vote or
receive dividends with respect to the shares of Common Stock subject hereto
or be deemed to be a shareholder of the Company for any purpose until such
Common Stock has been issued.
(d) This Warrant may be amended only by an instrument in writing
executed by the party against whom enforcement of amendment is sought.
(e) This Warrant may be executed in counterparts, each of which shall
be deemed an original, but all of which shall constitute one and the same
instrument.
(f) This Warrant shall be governed by and construed and enforced in
accordance with the laws of the State of Georgia.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officers and its corporate seal to be affixed hereto, and
Warrant Holder has executed this Warrant under seal, all as of the day and year
first above written.
CHEROKEE BANKING COMPANY
By:_______________________________________
Dennis W. Burnette
President and Chief Executive Officer
WARRANT HOLDER
____________________________________(SEAL)
-5-
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF CHEROKEE BANKING COMPANY
The sole subsidiary of Cherokee Banking Company will be Cherokee Bank,
N.A., being organized under the laws of the United States. This subsidiary will
be wholly owned by Cherokee Banking Company.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the incorporation by reference of our report dated
January 6, 1999, relating to the financial statements of Cherokee Banking
Company, in the Registration Statement on Form SB-2 and prospectus, and to the
reference to our firm therein under the caption "Experts."
Porter Keadle Moore, LLP
Atlanta, Georgia
February 1, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CHEROKEE BANKING COMPANY AS OF AND FOR THE PERIOD FROM
INCEPTION (OCTOBER 9, 1998) TO DECEMBER 31, 1998 AND IS QUALIFIED IN IT
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> OCT-09-1998
<PERIOD-END> DEC-31-1998
<CASH> 9,000
<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> 19,000
<DEPOSITS> 0
<SHORT-TERM> 60,000
<LIABILITIES-OTHER> 0
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> (14,000)
<TOTAL-LIABILITIES-AND-EQUITY> 19,000
<INTEREST-LOAN> 0
<INTEREST-INVEST> 0
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 0
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 0
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 41,000
<INCOME-PRETAX> (41,000)
<INCOME-PRE-EXTRAORDINARY> (41,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (41,000)
<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
</TABLE>
<PAGE>
EXHIBIT 99.1
FINAL SUBSCRIPTION LETTER
Cherokee Banking Company
P. O. Box 1314
Canton, Georgia 30114
Ladies and Gentlemen:
I have previously subscribed to purchase __________ shares of Cherokee
Banking Company's common stock.
I have received a copy of Cherokee Banking Company's final prospectus,
dated _______________, 1999. I understand that my purchase of Cherokee Banking
Company's common stock involves significant risk, as described under "Risk
Factors" in the final prospectus. I also understand that no federal or state
agency has made any finding or determination regarding the fairness of Cherokee
Banking Company's offering of common stock, the accuracy or adequacy of the
final prospectus, or any recommendation or endorsement concerning an investment
in the common stock.
I have enclosed my check in the amount of $10.00 multiplied by the number
of shares listed above. My check is made payable to: "The Bankers Bank -
Escrow Account for Cherokee Banking Company." Your receipt of my check will
convert my prior preliminary subscription agreement into a final subscription
agreement.
I UNDERSTAND THAT WHEN CHEROKEE BANKING COMPANY RECEIVES THIS LETTER AND MY
CHECK, THIS SUBSCRIPTION WILL BE IRREVOCABLE UNTIL THE OFFERING IS CLOSED.
-------------------------------
Print Name
-------------------------------
Signature
-------------------------------
Date
<PAGE>
EXHIBIT 99.2
FINAL SUBSCRIPTION AGREEMENT
Cherokee Banking Company
P.O. Box 1314
Canton, GA 30114
Ladies and Gentlemen:
I hereby subscribe to purchase the number of shares of Cherokee Banking
Company's common stock indicated below.
I have received a copy of Cherokee Banking Company's final prospectus,
dated _______________, 1999. I understand that my purchase of Cherokee Banking
Company's common stock involves significant risk, as described under "Risk
Factors" in the final prospectus. I also understand that no federal or state
agency has made any finding or determination regarding the fairness of Cherokee
Banking Company's offering of common stock, the accuracy or adequacy of the
final prospectus, or any recommendation or endorsement concerning an investment
in the common stock.
I enclose my check in the amount of $10.00 multiplied by the number of
shares I wish to buy. My check is made payable to "The Bankers Bank Escrow
Account for Cherokee Banking Company."
WHEN CHEROKEE BANKING COMPANY RECEIVES THIS AGREEMENT AND MY CHECK, THIS
SUBSCRIPTION WILL BE FINAL AND BINDING AND WILL BE IRREVOCABLE UNTIL THE
OFFERING IS CLOSED.
Number of Shares
(minimum 100 shares):
--------
Total Subscription Price
(at $10.00 per share): $
--------
-------------------------------------
Please PRINT or TYPE exact name(s) in
----- ----
which the shares should be registered
(Over)
<PAGE>
SUBSTITUTE W-9
Under the penalties of perjury, I certify that: (1) 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 UNDERREPORTING INTEREST OR DIVIDENDS ON YOUR TAX
RETURN.
- ----------------------------- ---------------------------------------------
Date Signature(s)*
- ----------------------------- ---------------------------------------------
Area Code and Telephone No. Please indicate the form of ownership desired
for the shares (individual), joint tenants
with right of survivorship, tenants in
common, trust, corporation, partnership
custodian, etc.)
- ----------------------------- ---------------------------------------------
Social Security or Federal Street Address
Taxpayer Identification No.
---------------------------------------------
City/State/Zip Code
TO BE COMPLETED BY CHEROKEE BANKING COMPANY
Accepted as of ______________________, 1999, as to __________ shares.
CHEROKEE BANKING COMPANY
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.
